Hydrofarm Holdings Group Announces Second Quarter 2024 Results
Hydrofarm Holdings Group (Nasdaq: HYFM) reported a net sales decrease of 13.1% to $54.8 million for Q2 2024, down from $63.1 million in Q2 2023. The company also experienced a net loss increase to $23.5 million from $12.9 million. Gross profit margin dropped to 19.8% from 23.0%, and Adjusted EBITDA decreased to $1.7 million from $2.5 million.
Despite declines, Hydrofarm achieved positive Adjusted EBITDA for the fourth time in five quarters, improving Adjusted Gross Profit Margin sequentially. SG&A expenses were reduced by 20% due to restructuring and cost-saving measures. The company completed an asset sale in May 2024, expecting further cost savings and productivity improvements.
As of June 30, 2024, Hydrofarm held $30.3 million in cash and $20 million in borrowing capacity. It reaffirmed its 2024 outlook with expectations of positive Adjusted EBITDA and Free Cash Flow.
Hydrofarm Holdings Group (Nasdaq: HYFM) ha riportato una riduzione delle vendite nette del 13,1% a 54,8 milioni di dollari per il secondo trimestre del 2024, rispetto ai 63,1 milioni di dollari del secondo trimestre del 2023. L'azienda ha inoltre registrato un aumento della perdita netta a 23,5 milioni di dollari, rispetto ai 12,9 milioni di dollari. Il margine di profitto lordo è sceso al 19,8% dal 23,0%, e l'EBITDA rettificato è diminuito a 1,7 milioni di dollari da 2,5 milioni di dollari.
Nonostante le diminuzioni, Hydrofarm ha ottenuto un EBITDA rettificato positivo per la quarta volta in cinque trimestri, migliorando il margine di profitto lordo rettificato in modo sequenziale. Le spese SG&A sono state ridotte del 20% grazie a ristrutturazioni e misure di risparmio. L'azienda ha completato una vendita di beni a maggio 2024, prevedendo ulteriori risparmi sui costi e miglioramenti della produttività.
Al 30 giugno 2024, Hydrofarm deteneva 30,3 milioni di dollari in contante e 20 milioni di dollari di capacità di prestito. Ha confermato le sue previsioni per il 2024 con aspettative di EBITDA rettificato positivo e flusso di cassa libero.
Hydrofarm Holdings Group (Nasdaq: HYFM) reportó una disminución de ventas netas del 13,1% a 54,8 millones de dólares para el segundo trimestre de 2024, frente a los 63,1 millones de dólares en el segundo trimestre de 2023. La compañía también experimentó un aumento en la pérdida neta a 23,5 millones de dólares desde 12,9 millones de dólares. El margen de ganancia bruta cayó al 19,8% desde el 23,0%, y el EBITDA ajustado disminuyó a 1,7 millones de dólares desde 2,5 millones de dólares.
A pesar de las caídas, Hydrofarm logró un EBITDA ajustado positivo por cuarta vez en cinco trimestres, mejorando secuencialmente el margen de ganancia bruta ajustada. Los gastos de SG&A se redujeron en un 20% debido a la reestructuración y las medidas de ahorro de costos. La empresa completó una venta de activos en mayo de 2024, esperando más ahorros en costos y mejoras en la productividad.
Al 30 de junio de 2024, Hydrofarm tenía 30,3 millones de dólares en efectivo y 20 millones de dólares en capacidad de endeudamiento. Reafirmó su perspectiva para 2024 con expectativas de EBITDA ajustado positivo y flujo de efectivo libre.
Hydrofarm Holdings Group (Nasdaq: HYFM)는 2024년 2분기에 순매출 감소가 13.1% 감소한 5,480만 달러를 기록했으며, 이는 2023년 2분기의 6,310만 달러에서 감소한 수치입니다. 이 회사는 또한 순손실 증가가 1,290만 달러에서 2,350만 달러로 증가했습니다. 총 이익률은 23.0%에서 19.8%로 감소하였고, 조정 EBITDA는 250만 달러에서 170만 달러로 줄었습니다.
하락에도 불구하고 Hydrofarm은 5개 분기 중 4번째로 긍정적인 조정 EBITDA를 달성했으며, 조정 총 이익률을 순차적으로 개선했습니다. SG&A 비용은 구조조정 및 비용 절감 조치로 인해 20% 감소했습니다. 이 회사는 2024년 5월 자산 매각을 완료하였으며, 추가적인 비용 절감과 생산성 개선을 기대하고 있습니다.
2024년 6월 30일 기준으로 Hydrofarm은 3,030만 달러의 현금과 2,000만 달러의 차입 능력을 보유하고 있습니다. 회사는 긍정적인 조정 EBITDA 및 자유 현금 흐름에 대한 기대와 함께 2024년 전망을 재확인했습니다.
Hydrofarm Holdings Group (Nasdaq: HYFM) a rapporté une diminution des ventes nettes de 13,1% à 54,8 millions de dollars pour le deuxième trimestre 2024, contre 63,1 millions de dollars au deuxième trimestre 2023. L'entreprise a également connu une augmentation de la perte nette à 23,5 millions de dollars par rapport à 12,9 millions de dollars. La marge brute a chuté à 19,8% contre 23,0%, et l'EBITDA ajusté a diminué à 1,7 million de dollars contre 2,5 millions de dollars.
Malgré ces baisses, Hydrofarm a atteint un EBITDA ajusté positif pour la quatrième fois en cinq trimestres, améliorant séquentiellement la marge brute ajustée. Les frais SG&A ont été réduits de 20% grâce à la restructuration et aux mesures d'économies. L'entreprise a complété une vente d'actifs en mai 2024, s'attendant à d'autres économies de coûts et améliorations de productivité.
Au 30 juin 2024, Hydrofarm détenait 30,3 millions de dollars en liquidités et 20 millions de dollars de capacité d'emprunt. Elle a réaffirmé ses prévisions pour 2024 avec des attentes d'EBITDA ajusté positif et de flux de trésorerie libre.
Hydrofarm Holdings Group (Nasdaq: HYFM) berichtete von einem Rückgang des Nettoumsatzes um 13,1% auf 54,8 Millionen US-Dollar im 2. Quartal 2024, verglichen mit 63,1 Millionen US-Dollar im 2. Quartal 2023. Das Unternehmen verzeichnete zudem einen Anstieg des Nettoverlusts auf 23,5 Millionen US-Dollar, im Vergleich zu 12,9 Millionen US-Dollar. Die Bruttogewinnmarge fiel auf 19,8% von 23,0%, und das bereinigte EBITDA verringerte sich auf 1,7 Millionen US-Dollar von 2,5 Millionen US-Dollar.
Trotz der Rückgänge erzielte Hydrofarm zum vierten Mal in fünf Quartalen ein positives bereinigtes EBITDA und verbesserte sequenziell die bereinigte Bruttogewinnmarge. Die SG&A-Ausgaben wurden aufgrund von Umstrukturierungen und Kostensenkungsmaßnahmen um 20% gesenkt. Das Unternehmen schloss im Mai 2024 einen Vermögensverkauf ab, in der Erwartung, weitere Kosteneinsparungen und Produktivitätsverbesserungen zu erreichen.
Zum 30. Juni 2024 hielt Hydrofarm 30,3 Millionen US-Dollar in bar und hatte eine Kreditwürdigkeit von 20 Millionen US-Dollar. Es bestätigte seinen Ausblick für 2024 mit Erwartungen an ein positives bereinigtes EBITDA und freien Cashflow.
- Achieved positive Adjusted EBITDA for fourth time in five quarters.
- Reduced SG&A expenses by 20% due to restructuring.
- Completed IGE asset sale, expecting further cost savings and productivity improvements.
- Held $30.3 million in cash and $20 million in borrowing capacity as of June 30, 2024.
- Reaffirmed 2024 outlook with expectations of positive Adjusted EBITDA and Free Cash Flow.
- Net sales decreased by 13.1% to $54.8 million.
- Gross profit margin decreased to 19.8% from 23.0%.
- Net loss increased to $23.5 million from $12.9 million.
Insights
Hydrofarm's Q2 2024 results show mixed signals. While net sales decreased by
However, the increased net loss of
The hydroponics industry continues to face headwinds, as evidenced by Hydrofarm's
Hydrofarm's strategic focus on higher-margin proprietary brands and operational efficiency improvements are prudent moves in this challenging environment. The company's ability to maintain profitability and generate positive cash flow amid industry softness is commendable. The exclusive supply agreement resulting from the IGE Asset Sale could prove beneficial, potentially lowering fixed costs and improving profitability on future sales of proprietary IGE products.
Hydrofarm's restructuring and cost-saving initiatives are yielding significant results. The
However, the decrease in Gross Profit Margin and Adjusted Gross Profit Margin due to lower productivity in select manufacturing facilities is a concern. This suggests that while cost-cutting measures are effective, there may be operational challenges in maintaining efficiency across all facilities. The company's focus on inventory reduction and working capital management to generate positive Free Cash Flow is a sound strategy in the current market conditions.
Restructuring and Cost Savings Initiatives Continue to Yield Substantial Expense Reductions
Reaffirms 2024 Outlook on Key Metrics
SHOEMAKERSVILLE, Pa., Aug. 08, 2024 (GLOBE NEWSWIRE) -- Hydrofarm Holdings Group, Inc. (“Hydrofarm” or the “Company”) (Nasdaq: HYFM), a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, today announced financial results for its second quarter ended June 30, 2024.
Second Quarter 2024 Highlights vs. Prior Year Period:
- Net sales decreased to
$54.8 million compared to$63.1 million . - Gross Profit Margin decreased to
19.8% of net sales compared to23.0% . - Adjusted Gross Profit Margin(1) decreased to
24.4% of net sales compared to27.0% . - Net loss increased to
$23.5 million compared to$12.9 million . - Adjusted EBITDA(1) decreased to
$1.7 million compared to$2.5 million . - Cash from operating activities and Free Cash Flow(1) were
$3.8 million and$3.4 million , respectively. - Completed the previously announced IGE Asset Sale(2) in May 2024.
(1) Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted SG&A, Adjusted SG&A as a percent of net sales, Adjusted EBITDA, and Free Cash Flow are non-GAAP measures. For reconciliations of non-GAAP to GAAP measures see the “Reconciliation of Non-GAAP Measures” accompanying the release.
(2) Asset Sale references the sale of assets related to the production of the Company’s Innovative Growers Equipment (“IGE”) branded durable equipment products.
Bill Toler, Chairman and Chief Executive Officer of Hydrofarm, said, “In the second quarter we delivered positive Adjusted EBITDA(1) for the fourth time in the last five quarters, illustrating the effectiveness of our restructuring plan and related cost savings efforts. We also increased our Adjusted Gross Profit Margin(1) on a sequential basis, as we continue to strategically focus on higher margin proprietary brands and enhancing our operational efficiency. Year to date, we delivered
Second Quarter 2024 Financial Results
Net sales in the second quarter of 2024 decreased
Gross profit decreased to
Selling, general and administrative (“SG&A”) expense was
Net loss increased to
Adjusted EBITDA(1) decreased to
Balance Sheet, Liquidity and Cash Flow
As of June 30, 2024, the Company had
The Company had net cash from operating activities of
Reaffirms Full Year 2024 Outlook on Key Metrics
The Company is reaffirming its full year 2024 outlook on its key metrics:
- Net sales to decrease low to high teens in percentage terms.
- Adjusted EBITDA(1) that is positive.
- Free Cash Flow(1) that is positive.
Hydrofarm’s 2024 outlook also reaffirms the following assumptions, consistent with previous expectations:
- Improved year-over-year Adjusted Gross Profit Margin(1) resulting primarily from (i) cost savings associated with restructuring actions and related productivity initiatives and (ii) an expectation of minimal non-restructuring inventory reserves or related charges, consistent with previous expectations.
- Reduced year-over-year Adjusted SG&A(1) expense resulting primarily from (i) full year benefit of headcount reductions completed in 2023 and (ii) reductions in professional fees, facilities and insurance expenses, consistent with previous expectations.
- Reduction in inventory and net working capital helping to generate positive Free Cash Flow(1) for the full year.
Hydrofarm’s 2024 outlook also includes the following updated assumption:
- Capital expenditures of
$3.5 million to$4.5 million , compared to the prior expectation of$4.0 million to$5.0 million .
(1) Adjusted Gross Profit, Adjusted Gross Profit Margin, Adjusted SG&A, Adjusted SG&A as a percent of net sales, Adjusted EBITDA, and Free Cash Flow are non-GAAP measures. For reconciliations of non-GAAP to GAAP measures see the “Reconciliation of Non-GAAP Measures” accompanying the release.
Conference Call and Presentation
The Company will host a conference call to discuss financial results for the second quarter 2024 today at 8:30 a.m. Eastern Time. Bill Toler, Chairman and Chief Executive Officer, and John Lindeman, Chief Financial Officer, will host the call. An investor presentation is also available for reference on the Hydrofarm investor relations website.
The conference call can be accessed live over the phone by dialing 1-800-267-6316 and entering the conference ID: HYFMQ2. The conference call will also be webcast live and archived on the Company’s investor relations website at https://investors.hydrofarm.com/ under the “News & Events” section.
About Hydrofarm Holdings Group, Inc.
Hydrofarm is a leading independent manufacturer and distributor of branded hydroponics equipment and supplies for controlled environment agriculture, including grow lights, climate control solutions, growing media and nutrients, as well as a broad portfolio of innovative and proprietary branded products. For over 40 years, Hydrofarm has helped growers make growing easier and more productive. The Company’s mission is to empower growers, farmers and cultivators with products that enable greater quality, efficiency, consistency and speed in their grow projects.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release, other than statements of historical fact, which address activities, events and developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, information regarding the future economic performance and financial condition of the Company, the plans and objectives of the Company’s management, and the Company’s assumptions regarding such performance and plans are “forward-looking statements” within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as “guidance,” “outlook,” “projected,” “believe,” “target,” “predict,” “estimate,” “forecast,” “strategy,” “may,” “goal,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely,” “will,” “should” or other similar words or phrases. Actual results could differ materially from the forward-looking information in this release due to a variety of factors, including, but not limited to:
The market in which we operate has been substantially adversely impacted by industry conditions, including oversupply and decreasing prices of the products the Company’s end customers sell, which, in turn, have materially adversely impacted the Company’s sales and other results of operations and which may continue to do so in the future; If industry conditions worsen or are sustained for a lengthy period, we could be forced to take additional impairment charges and/or inventory and accounts receivable reserves, which could be substantial, and, ultimately, we may face liquidity challenges; Although equity financing may be available, the Company’s current stock prices are at depressed levels and any such financing would be dilutive; Interruptions in the Company’s supply chain could adversely impact expected sales growth and operations; We may be unable to meet the continued listing standards of Nasdaq; Our restructuring activities may increase our expenses and cash expenditures, and may not have the intended cost saving effects; The highly competitive nature of the Company’s markets could adversely affect its ability to maintain or grow revenues; Certain of the Company’s products may be purchased for use in new or emerging industries or segments, including the cannabis industry, and/or be subject to varying, inconsistent, and rapidly changing laws, regulations, administrative and enforcement approaches, and consumer perceptions and, among other things, such laws, regulations, approaches and perceptions may adversely impact the market for the Company’s products; The market for the Company’s products has been impacted by conditions impacting its customers, including related crop prices and other factors impacting growers; Compliance with environmental and other public health regulations or changes in such regulations or regulatory enforcement priorities could increase the Company’s costs of doing business or limit the Company’s ability to market all of its products; Damage to the Company’s reputation or the reputation of its products or products it markets on behalf of third parties could have an adverse effect on its business; If the Company is unable to effectively execute its e-commerce business, its reputation and operating results may be harmed; The Company’s operations may be impaired if its information technology systems fail to perform adequately or if it is the subject of a data breach or cyber-attack; The Company may not be able to adequately protect its intellectual property and other proprietary rights that are material to the Company’s business; Acquisitions, other strategic alliances and investments could result in operating and integration difficulties, dilution and other harmful consequences that may adversely impact the Company’s business and results of operations. Additional detailed information concerning a number of the important factors that could cause actual results to differ materially from the forward-looking information contained in this release is readily available in the Company’s annual, quarterly and other reports. The Company disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements contained in this release, or to make corrections to reflect future events or developments.
Contacts:
Investor Contact
Anna Kate Heller / ICR
ir@hydrofarm.com
Hydrofarm Holdings Group, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except share and per share amounts) | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Net sales | $ | 54,793 | $ | 63,051 | $ | 108,965 | $ | 125,229 | ||||||||
Cost of goods sold | 43,942 | 48,578 | 87,189 | 99,375 | ||||||||||||
Gross profit | 10,851 | 14,473 | 21,776 | 25,854 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 18,659 | 23,468 | 38,280 | 47,899 | ||||||||||||
Loss on asset disposition | 11,520 | — | 11,520 | — | ||||||||||||
Loss from operations | (19,328 | ) | (8,995 | ) | (28,024 | ) | (22,045 | ) | ||||||||
Interest expense | (3,811 | ) | (3,768 | ) | (7,742 | ) | (7,460 | ) | ||||||||
Other income (expense), net | 79 | (420 | ) | 294 | (380 | ) | ||||||||||
Loss before tax | (23,060 | ) | (13,183 | ) | (35,472 | ) | (29,885 | ) | ||||||||
Income tax (expense) benefit | (390 | ) | 318 | (586 | ) | 171 | ||||||||||
Net loss | $ | (23,450 | ) | $ | (12,865 | ) | $ | (36,058 | ) | $ | (29,714 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic | $ | (0.51 | ) | $ | (0.28 | ) | $ | (0.79 | ) | $ | (0.66 | ) | ||||
Diluted | $ | (0.51 | ) | $ | (0.28 | ) | $ | (0.79 | ) | $ | (0.66 | ) | ||||
Weighted-average shares of common stock outstanding: | ||||||||||||||||
Basic | 45,978,941 | 45,412,627 | 45,896,335 | 45,338,636 | ||||||||||||
Diluted | 45,978,941 | 45,412,627 | 45,896,335 | 45,338,636 |
Hydrofarm Holdings Group, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands, except share and per share amounts) | ||||||||
June 30, | December 31, | |||||||
2024 | 2023 | |||||||
Assets | ||||||||
Current assets: | | |||||||
Cash and cash equivalents | $ | 30,314 | $ | 30,312 | ||||
Accounts receivable, net | 18,565 | 16,890 | ||||||
Inventories | 58,719 | 75,354 | ||||||
Prepaid expenses and other current assets | 3,587 | 5,510 | ||||||
Assets held for sale | 470 | — | ||||||
Total current assets | 111,655 | 128,066 | ||||||
Property, plant and equipment, net | 41,111 | 47,360 | ||||||
Operating lease right-of-use assets | 47,472 | 54,494 | ||||||
Intangible assets, net | 261,201 | 275,881 | ||||||
Other assets | 1,919 | 1,842 | ||||||
Total assets | $ | 463,358 | $ | 507,643 | ||||
Liabilities and stockholders’ equity | | | ||||||
Current liabilities: | | |||||||
Accounts payable | $ | 13,801 | $ | 12,613 | ||||
Accrued expenses and other current liabilities | 9,400 | 9,529 | ||||||
Deferred revenue | 2,729 | 3,231 | ||||||
Current portion of operating lease liabilities | 7,538 | 8,336 | ||||||
Current portion of finance lease liabilities | 444 | 954 | ||||||
Current portion of long-term debt | 1,570 | 2,989 | ||||||
Total current liabilities | 35,482 | 37,652 | ||||||
Long-term operating lease liabilities | 42,151 | 47,506 | ||||||
Long-term finance lease liabilities | 8,071 | 8,734 | ||||||
Long-term debt | 114,948 | 115,412 | ||||||
Deferred tax liabilities | 3,232 | 3,232 | ||||||
Other long-term liabilities | 4,465 | 4,497 | ||||||
Total liabilities | 208,349 | 217,033 | ||||||
Commitments and contingencies | | | ||||||
Stockholders’ equity | | | ||||||
Common stock ( | 5 | 5 | ||||||
Additional paid-in capital | 789,373 | 787,846 | ||||||
Accumulated other comprehensive loss | (7,567 | ) | (6,497 | ) | ||||
Accumulated deficit | (526,802 | ) | (490,744 | ) | ||||
Total stockholders’ equity | 255,009 | 290,610 | ||||||
Total liabilities and stockholders’ equity | $ | 463,358 | $ | 507,643 |
Hydrofarm Holdings Group, Inc. RECONCILIATION OF NON-GAAP MEASURES (In thousands, except share and per share amounts) (Unaudited) | ||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Reconciliation of Adjusted Gross Profit: | ||||||||||||||||
Gross Profit (GAAP) | $ | 10,851 | $ | 14,473 | $ | 21,776 | $ | 25,854 | ||||||||
Depreciation, depletion and amortization | 1,608 | 1,826 | 3,257 | 3,281 | ||||||||||||
Restructuring expenses1 | 890 | 720 | 981 | 1,957 | ||||||||||||
Adjusted Gross Profit (Non-GAAP) | $ | 13,349 | $ | 17,019 | $ | 26,014 | $ | 31,092 | ||||||||
As a percent of net sales: | ||||||||||||||||
Gross Profit Margin (GAAP) | 19.8 | % | 23.0 | % | 20.0 | % | 20.6 | % | ||||||||
Adjusted Gross Profit Margin (Non-GAAP) | 24.4 | % | 27.0 | % | 23.9 | % | 24.8 | % |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Reconciliation of Adjusted SG&A: | ||||||||||||||||
Selling, general and administrative (GAAP) | $ | 18,659 | $ | 23,468 | $ | 38,280 | $ | 47,899 | ||||||||
Depreciation, depletion and amortization | 6,168 | 6,424 | 12,404 | 12,976 | ||||||||||||
Restructuring expenses1 | 37 | 68 | 84 | 242 | ||||||||||||
Stock-based compensation2 | 769 | 1,819 | 1,637 | 3,026 | ||||||||||||
Severance and other3 | 61 | 589 | 195 | 884 | ||||||||||||
Adjusted SG&A (Non-GAAP) | $ | 11,624 | $ | 14,568 | $ | 23,960 | $ | 30,771 | ||||||||
As a percent of net sales: | ||||||||||||||||
SG&A (GAAP) | 34.1 | % | 37.2 | % | 35.1 | % | 38.2 | % | ||||||||
Adjusted SG&A (Non-GAAP) | 21.2 | % | 23.1 | % | 22.0 | % | 24.6 | % |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Reconciliation of Adjusted EBITDA: | ||||||||||||||||
Net loss (GAAP) | $ | (23,450 | ) | $ | (12,865 | ) | $ | (36,058 | ) | $ | (29,714 | ) | ||||
Interest expense | 3,811 | 3,768 | 7,742 | 7,460 | ||||||||||||
Income tax expense (benefit) | 390 | (318 | ) | 586 | (171 | ) | ||||||||||
Depreciation, depletion and amortization | 7,776 | 8,250 | 15,661 | 16,257 | ||||||||||||
Restructuring expenses1 | 927 | 788 | 1,065 | 2,199 | ||||||||||||
Stock-based compensation2 | 769 | 1,819 | 1,637 | 3,026 | ||||||||||||
Severance and other3 | 61 | 589 | 195 | 884 | ||||||||||||
Other (income) expense, net4 | (79 | ) | 420 | (294 | ) | 380 | ||||||||||
Loss on asset disposition5 | 11,520 | — | 11,520 | — | ||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 1,725 | $ | 2,451 | $ | 2,054 | $ | 321 | ||||||||
As a percent of net sales: | ||||||||||||||||
Net loss (GAAP) | (42.8) | % | (20.4) | % | (33.1) | % | (23.7) | % | ||||||||
Adjusted EBITDA (Non-GAAP) | 3.1 | % | 3.9 | % | 1.9 | % | 0.3 | % |
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Reconciliation of Free Cash Flow6: | ||||||||||||||||
Net cash from operating activities (GAAP)6: | $ | 3,784 | $ | 9,911 | $ | 1,487 | $ | 961 | ||||||||
Capital expenditures of Property, plant and equipment (GAAP) | (368 | ) | (1,653 | ) | (1,810 | ) | (3,306 | ) | ||||||||
Free Cash Flow (Non-GAAP)6: | $ | 3,416 | $ | 8,258 | $ | (323 | ) | $ | (2,345 | ) | ||||||
Notes to GAAP to Non-GAAP reconciliations presented above (Adjusted Gross Profit, Adjusted SG&A, Adjusted EBITDA, and Free Cash Flow):
- For the three and six months ended June 30, 2024, Restructuring expenses related primarily to manufacturing facility consolidations, and the charges incurred to relocate and terminate certain facilities. For the three and six months ended June 30, 2023, Restructuring expenses related primarily to the relocation and termination of certain facilities in Canada and the closure of the Company’s supply chain management office in China.
- Includes stock-based compensation and related employer payroll taxes on stock-based compensation for the periods presented.
- For the three and six months ended June 30, 2024, Severance and other charges primarily related to estimated legal costs related to certain litigation and severance charges. For the three and six months ended June 30, 2023, Severance and other charges primarily related to workforce reductions and charges in conjunction with a sale-leaseback transaction during the first quarter of 2023.
- Other income, net related primarily to foreign currency exchange rate gains and losses and other non-operating income and expenses. For the three and six months ended June 30, 2023, Other expense, net also included charges from Amendment No. 1 to the Term Loan.
- Loss on asset disposition for the three and six months ended June 30, 2024, relates to the IGE Asset Sale.
- The total gross proceeds associated with the IGE Asset Sale were
$8.7 million , of which the Company estimated and classified$5.0 million in Net cash from operating activities, and$3.7 million in Investing activities, as these cash flows were associated with the sale of inventory and property, plant and equipment, respectively. The cash proceeds classified within Net cash from operating activities were partially offset by$1.3 million cash paid to terminate the associated facility lease and cash transaction costs paid during the period. As a result, the Asset Sale contributed an estimated$3.5 million to Net cash from operating activities and Free Cash Flow during the three and six months ended June 30, 2024. In addition, in connection with the Asset Sale, the Company paid$0.7 million to terminate certain equipment finance leases and classified this cash outflow within Financing activities for the three and six months ended June 30, 2024. In total, the IGE Asset Sale contributed net cash proceeds, after repayment of certain lease liabilities and transaction expenses, of an estimated$6.3 million . In 2023, gross proceeds of$8.6 million received during the three months ended March 31, 2023 from a sale-leaseback of real estate located in Eugene, Oregon, was classified as a Financing activity and is not reflected in Net cash from operating activities or Free Cash Flow in the prior year period.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Management believes that certain non-GAAP financial measures provide investors with additional useful information in evaluating our performance and that excluding certain items that may vary substantially in frequency and magnitude period-to-period from net loss provides useful supplemental measures that assist in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods. These non-GAAP financial measures may be different than similarly titled measures used by other companies.
To supplement our condensed consolidated financial statements which are prepared in accordance with GAAP, we use “Adjusted EBITDA”, “Adjusted Gross Profit”, “Adjusted SG&A”, “Free Cash Flow”, “Net Debt”, and “Liquidity” which are non-GAAP financial measures. We also present certain of these non-GAAP metrics as a percentage of net sales. Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP. There are several limitations related to the use of our non-GAAP financial measures as compared to the closest comparable GAAP measures.
We define Adjusted EBITDA (non-GAAP) as net loss (GAAP) excluding interest expense, income taxes, depreciation, depletion and amortization, stock-based compensation including employer payroll taxes on stock-based compensation, restructuring charges which represent fundamental changes to our operations, and other non-cash, unusual and/or infrequent costs (i.e., impairments, severance, loss on asset disposition, acquisition and integration expenses, distribution center exit costs, and other income/expense, net), which we do not consider in our evaluation of ongoing operating performance.
We define Adjusted EBITDA (non-GAAP) as a percent of net sales as adjusted EBITDA (as defined above) divided by net sales realized in the respective period.
We define Adjusted Gross Profit (non-GAAP) as gross profit (GAAP) excluding depreciation, depletion, and amortization, restructuring charges, and other non-cash, unusual and/or infrequent costs (i.e., severance and other expenses, and acquisition and integration expenses), which we do not consider in our evaluation of ongoing operating performance.
We define Adjusted Gross Profit Margin (non-GAAP) as a percent of net sales as Adjusted Gross Profit (as defined above) divided by net sales realized in the respective period.
We define Adjusted SG&A (non-GAAP) as SG&A (GAAP) excluding depreciation, depletion, and amortization, stock-based compensation including employer payroll taxes on stock-based compensation, restructuring charges, and other non-cash, unusual and/or infrequent costs (i.e., severance and other expenses, acquisition and integration expenses, and distribution center exit costs), which we do not consider in our evaluation of ongoing operating performance.
We define Adjusted SG&A (non-GAAP) as a percent of net sales as Adjusted SG&A (as defined above) divided by net sales realized in the respective period.
We define Free Cash Flow (non-GAAP) as Net cash from (used in) operating activities less capital expenditures for property, plant and equipment. We believe this provides additional insight into the Company’s ability to generate cash and maintain liquidity. However, Free Cash Flow does not represent funds available for investment or other discretionary uses since it does not deduct cash used to service our debt or other cash flows from financing activities. The disclosed year over year improvement in Free Cash Flow represents the current period Free Cash Flow balance less the prior period Free Cash Flow balance.
We define Liquidity as total cash, cash equivalents and restricted cash, if applicable, plus available borrowing capacity on our Revolving Credit Facility.
We define Net Debt as total debt principal outstanding plus finance lease liabilities, less cash, cash equivalents and restricted cash, if applicable.
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