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
fourth quarter and full year ended December 31, 2023.
Fourth Quarter
2023 Highlights vs. Prior Year
Period:
- Net sales decreased to $47.2
million compared to $61.5 million.
- Gross Profit(2) increased to
$8.4 million compared to Gross Loss(2) of $(0.5) million.
Gross Profit Margin(2) increased to 17.9% of net sales compared to
(0.8)%.
- Adjusted Gross Profit(1)(2)
increased to $11.5 million compared to $9.0 million.
Adjusted Gross Profit Margin(1)(2) increased to 24.3% of net sales
compared to 14.7%.
- Net loss(2) improved to
$(15.2) million compared to net loss(2) of
$(35.3) million.
- Adjusted EBITDA(1)(2) increased to
$(0.6) million compared to $(8.4) million.
Fiscal Year
2023 Highlights vs. Prior
Year:
- Net sales decreased to
$226.6 million compared to $344.5 million.
- Gross profit(2) increased to
$37.6 million compared to $29.3 million; Gross Profit
Margin(2) increased to 16.6% of net sales compared to 8.5%.
- Adjusted Gross Profit(1)(2) increased
to $55.0 million compared to $48.2 million; Adjusted
Gross Profit Margin(1)(2) increased to 24.3% of net sales compared
to 14.0%.
- Net loss(2) improved to
$(64.8) million compared to net loss(2) of
$(285.4) million.
- Adjusted EBITDA(1)(2) increased to
$0.3 million compared to $(21.2) million.
- Cash from operating activities was
$7.0 million and Free Cash Flow(1) was $2.8 million.
(1) Adjusted Gross Profit (Loss), 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) In 2023, $1.2 million of certain inventory
charges negatively impacted Gross Profit, Adjusted Gross Profit,
Net Loss, and Adjusted EBITDA; while SG&A, Adjusted SG&A,
Net Loss, and Adjusted EBITDA were positively impacted by $0.7
million of benefits from certain recoveries of accounts receivable
reserves and write-downs. In 2022, $18.5 million of inventory
reserves and related charges negatively impacted Gross Profit,
Adjusted Gross Profit, Net Loss, and Adjusted EBITDA; and accounts
receivable reserves of $2.9 million negatively impacted SG&A,
Adjusted SG&A, Net Loss, and Adjusted EBITDA.
Bill Toler, Chairman and Chief Executive Officer
of Hydrofarm, said, “Successful execution of our restructuring plan
and related cost savings efforts throughout the year enabled us to
deliver positive Adjusted EBITDA(1) and Free Cash Flow(1) in 2023.
Our margins improved as we focused on higher margin products and
enhanced our operational efficiency. Our cash balance grew and our
inventory levels decreased as we managed our working capital
aggressively. Our revenue base became more diverse, with further
penetration into geographies outside of the US/Canada and into
sales channels serving non-cannabis CEA applications, including
food, floral, and lawn & garden. We are well underway with the
second phase of our restructuring strategy, focused primarily on
the durables side of our business, and in conjunction with several
productivity initiatives expect to realize additional cost savings
in 2024. Despite the industry softness, we believe that we have
made significant progress and we are confident in the long-term
fundamentals of our business and the growth opportunities
ahead.”
Fourth Quarter
2023 Financial Results
Net sales in the fourth quarter of 2023
decreased to $47.2 million compared to $61.5 million in the fourth
quarter of 2022, primarily due to a 18.7% decline in volume of
products sold and a 4.5% decrease in price/mix of products sold.
The decrease in volume was primarily related to an oversupply in
the cannabis industry. The reduction in price/mix was mainly due to
lower pricing in durable products, as well as a higher mix of
lower-priced consumables relative to higher-priced durable
products.
The Company initiated a second phase of its
restructuring plan in the third quarter of 2023, primarily to
right-size its U.S. durable equipment manufacturing facilities to
better match the current levels of demand. For the fourth quarter
of 2023, the Company incurred estimated charges of $1.3 million for
the second phase of its restructuring plan, consisting primarily of
non-cash raw material inventory write-downs related to reductions
in facility space.
Gross profit increased to $8.4 million, or
17.9% of net sales, during the fourth quarter of 2023, compared to
a Gross Loss of $(0.5) million, or (0.8)% of net sales, in the
prior year period. The increase in gross profit and gross profit
margin was primarily due to lower restructuring charges, a higher
proportion of proprietary brand products sold, lower freight costs
and improved productivity compared to the fourth quarter of 2022.
Adjusted Gross Profit(1) increased to $11.5 million, or 24.3%
of net sales, compared to $9.0 million, or 14.7% of net sales,
in the prior year period. Adjusted Gross Profit(1) and Adjusted
Gross Profit Margin(1) increased primarily due to a higher
proportion of proprietary brand products sold, lower freight costs
and improved productivity. This margin improvement was aided by the
restructuring plan and the related cost saving initiatives.
Selling, general and administrative (“SG&A”)
expense was $19.9 million, compared to $26.2 million in
the prior year period, and Adjusted SG&A(1) was
$12.0 million, compared to $17.4 million in the prior
year period. The decrease in SG&A and Adjusted SG&A(1) was
primarily due to a reduction in compensation costs from headcount,
accounts receivable reserves, and professional fees, which was
aided by the Company's restructuring plan and related cost saving
initiatives.
Net loss was $(15.2) million, or $(0.33)
per diluted share, compared to a net loss of $(35.3) million,
or $(0.78) per diluted share, in the prior year period. The
improvement was primarily due to higher gross profit, lower
SG&A expenses, and lower income tax expense.
Adjusted EBITDA(1) was $(0.6) million, compared
to $(8.4) million in the prior year period. The improvement related
to lower Adjusted SG&A(1) and higher Adjusted Gross Profit(1).
Balance Sheet, Liquidity and Cash
Flow
As of December 31, 2023, the Company had
$30.3 million in cash and approximately $22 million of
available borrowing capacity on its Revolving Credit Facility. The
Company ended the fourth quarter with $122.5 million in principal
balance on its Term Loan outstanding, $9.7 million in finance
leases, and $0.2 million in other debt outstanding. During 2023,
the Company maintained a zero balance on its Revolving Credit
Facility and was in compliance with debt covenants as of
December 31, 2023.
The Company had a net cash usage from operating
activities of $(1.6) million and invested $0.2 million in capital
expenditures, yielding negative Free Cash Flow(1) of $(1.7) million
for the three months ended December 31, 2023.
For the full year 2023, the Company generated
cash flow from operating activities of $7.0 million and invested
$4.2 million in capital expenditures, yielding positive Free Cash
Flow(1) of $2.8 million.
Full Year 2024 Outlook
The Company is providing the following outlook for
the full fiscal year 2024:
- 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 is predicated on several
assumptions, including:
- Improved year-over-year Adjusted
Gross Profit Margin(1) resulting primarily from (i) cost savings
associated with restructuring and related productivity initiatives
and (ii) an expectation of minimal non-restructuring inventory
reserves or related charges.
- Reduced year-over-year Adjusted
SG&A(1) expense resulting primarily from (i) full year benefit
of headcount reductions completed in 2023 and (ii) further
reductions in professional fees, facilities and insurance
expenses.
- Reduction in inventory and net
working capital helping to generate positive Free Cash Flow(1) for
the full year.
- Capital expenditures of
approximately $4.0 million to $5.0 million.
(1) Adjusted Gross Profit (Loss) , 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
The Company will host a conference call to
discuss financial results for the fourth quarter 2023 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.
The conference call can be accessed live over the
phone by dialing 1-877-451-6152. The conference call will also be
webcast live and archived on the corporate website at
www.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 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
ContactAnna Kate Heller / ICRir@hydrofarm.com
Hydrofarm Holdings Group,
Inc.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except
share and per share
amounts)(Unaudited) |
|
|
|
|
|
|
|
Three months ended December 31, |
|
Twelve months ended December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net sales |
|
$ |
47,184 |
|
|
$ |
61,461 |
|
|
$ |
226,581 |
|
|
$ |
344,501 |
|
Cost of goods sold |
|
|
38,735 |
|
|
|
61,934 |
|
|
|
188,969 |
|
|
|
315,165 |
|
Gross profit (loss) |
|
|
8,449 |
|
|
|
(473 |
) |
|
|
37,612 |
|
|
|
29,336 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
19,872 |
|
|
|
26,197 |
|
|
|
87,314 |
|
|
|
118,604 |
|
Impairments |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
192,328 |
|
Loss from operations |
|
|
(11,423 |
) |
|
|
(26,670 |
) |
|
|
(49,702 |
) |
|
|
(281,596 |
) |
Interest expense |
|
|
(4,019 |
) |
|
|
(3,095 |
) |
|
|
(15,442 |
) |
|
|
(10,958 |
) |
Other income (expense), net |
|
|
96 |
|
|
|
(275 |
) |
|
|
118 |
|
|
|
696 |
|
Loss before tax |
|
|
(15,346 |
) |
|
|
(30,040 |
) |
|
|
(65,026 |
) |
|
|
(291,858 |
) |
Income tax benefit (expense) |
|
|
131 |
|
|
|
(5,228 |
) |
|
|
213 |
|
|
|
6,443 |
|
Net loss |
|
$ |
(15,215 |
) |
|
$ |
(35,268 |
) |
|
$ |
(64,813 |
) |
|
$ |
(285,415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.33 |
) |
|
$ |
(0.78 |
) |
|
$ |
(1.42 |
) |
|
$ |
(6.35 |
) |
Diluted |
|
$ |
(0.33 |
) |
|
$ |
(0.78 |
) |
|
$ |
(1.42 |
) |
|
$ |
(6.35 |
) |
Weighted-average shares of common stock outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
|
45,661,950 |
|
|
|
45,175,161 |
|
|
|
45,508,363 |
|
|
|
44,974,856 |
|
Diluted |
|
|
45,661,950 |
|
|
|
45,175,161 |
|
|
|
45,508,363 |
|
|
|
44,974,856 |
|
|
|
|
|
|
|
|
|
|
Hydrofarm Holdings Group, Inc.CONDENSED
CONSOLIDATED BALANCE SHEETS(In thousands, except
share and per share
amounts)(Unaudited) |
|
|
|
|
|
December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
30,312 |
|
|
$ |
21,291 |
|
Accounts receivable, net |
|
|
16,890 |
|
|
|
17,227 |
|
Inventories |
|
|
75,354 |
|
|
|
111,398 |
|
Prepaid expenses and other current assets |
|
|
5,510 |
|
|
|
5,032 |
|
Total current assets |
|
|
128,066 |
|
|
|
154,948 |
|
Property, plant and equipment, net |
|
|
47,360 |
|
|
|
51,135 |
|
Operating lease right-of-use assets |
|
|
54,494 |
|
|
|
65,265 |
|
Intangible assets, net |
|
|
275,881 |
|
|
|
300,366 |
|
Other assets |
|
|
1,842 |
|
|
|
1,845 |
|
Total assets |
|
$ |
507,643 |
|
|
$ |
573,559 |
|
Liabilities and stockholders’ equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
12,613 |
|
|
$ |
13,633 |
|
Accrued expenses and other current liabilities |
|
|
9,529 |
|
|
|
13,208 |
|
Deferred revenue |
|
|
3,231 |
|
|
|
3,654 |
|
Current portion of operating lease liabilities |
|
|
8,336 |
|
|
|
9,099 |
|
Current portion of finance lease liabilities |
|
|
954 |
|
|
|
704 |
|
Current portion of long-term debt |
|
|
2,989 |
|
|
|
1,307 |
|
Total current liabilities |
|
|
37,652 |
|
|
|
41,605 |
|
Long-term operating lease liabilities |
|
|
47,506 |
|
|
|
56,299 |
|
Long-term finance lease liabilities |
|
|
8,734 |
|
|
|
1,200 |
|
Long-term debt |
|
|
115,412 |
|
|
|
117,461 |
|
Deferred tax liabilities |
|
|
3,232 |
|
|
|
2,685 |
|
Other long-term liabilities |
|
|
4,497 |
|
|
|
4,428 |
|
Total liabilities |
|
|
217,033 |
|
|
|
223,678 |
|
Commitments and contingencies |
|
|
|
|
Stockholders’ equity |
|
|
|
|
Common stock ($0.0001 par value; 300,000,000 shares authorized;
45,789,890 and 45,197,249 shares issued and outstanding at December
31, 2023 and December 31, 2022, respectively) |
|
|
5 |
|
|
|
5 |
|
Additional paid-in capital |
|
|
787,846 |
|
|
|
783,042 |
|
Accumulated other comprehensive loss |
|
|
(6,497 |
) |
|
|
(7,235 |
) |
Accumulated deficit |
|
|
(490,744 |
) |
|
|
(425,931 |
) |
Total stockholders’ equity |
|
|
290,610 |
|
|
|
349,881 |
|
Total liabilities and stockholders’ equity |
|
$ |
507,643 |
|
|
$ |
573,559 |
|
|
|
|
|
|
|
|
|
|
Hydrofarm Holdings Group,
Inc.RECONCILIATION OF NON-GAAP
MEASURES(In thousands, except share and per share
amounts) (Unaudited) |
|
|
|
|
|
|
|
Three months ended December 31, |
|
Twelve months ended December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of Adjusted Gross Profit: |
|
|
|
|
|
|
|
|
Gross Profit (GAAP) |
|
$ |
8,449 |
|
|
$ |
(473 |
) |
|
$ |
37,612 |
|
|
$ |
29,336 |
|
Depreciation, depletion and amortization |
|
|
1,677 |
|
|
|
1,761 |
|
|
|
6,584 |
|
|
|
6,370 |
|
Restructuring expenses1 |
|
|
1,263 |
|
|
|
7,466 |
|
|
|
10,664 |
|
|
|
7,466 |
|
Acquisition and integration expenses5 |
|
|
— |
|
|
|
280 |
|
|
|
— |
|
|
|
4,772 |
|
Severance and other7 |
|
|
79 |
|
|
|
— |
|
|
|
155 |
|
|
|
238 |
|
Adjusted Gross Profit (Non-GAAP) |
|
$ |
11,468 |
|
|
$ |
9,034 |
|
|
$ |
55,015 |
|
|
$ |
48,182 |
|
|
|
|
|
|
|
|
|
|
As a percent of net sales: |
|
|
|
|
|
|
|
|
Gross Profit Margin (GAAP) |
|
|
17.9 |
% |
|
|
(0.8) |
% |
|
|
16.6 |
% |
|
|
8.5 |
% |
Adjusted Gross Profit Margin (Non-GAAP) |
|
|
24.3 |
% |
|
|
14.7 |
% |
|
|
24.3 |
% |
|
|
14.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit (GAAP) and Adjusted Gross Profit
(Non-GAAP) for the year ended December 31, 2023, were negatively
impacted by $1.2 million of certain inventory charges.
Gross Profit (GAAP) and Adjusted Gross Profit
(Non-GAAP) for the three months and year ended December 31, 2022,
were negatively impacted by $0.7 million and $18.5 million,
respectively, of inventory reserves and related charges.
|
|
Three months ended December 31, |
|
Twelve months ended December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of Adjusted SG&A: |
|
|
|
|
|
|
|
|
Selling, general and administrative (GAAP) |
|
$ |
19,872 |
|
|
$ |
26,197 |
|
|
$ |
87,314 |
|
|
$ |
118,604 |
|
Depreciation, depletion and amortization |
|
|
6,233 |
|
|
|
6,551 |
|
|
|
25,491 |
|
|
|
35,157 |
|
Restructuring expenses1 |
|
|
204 |
|
|
|
221 |
|
|
|
605 |
|
|
|
221 |
|
Stock-based compensation2 |
|
|
1,057 |
|
|
|
1,709 |
|
|
|
5,114 |
|
|
|
8,543 |
|
Acquisition and integration expenses5 |
|
|
12 |
|
|
|
300 |
|
|
|
51 |
|
|
|
2,910 |
|
Distribution center exit costs and other6 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,412 |
|
Severance and other7 |
|
|
348 |
|
|
|
— |
|
|
|
1,304 |
|
|
|
986 |
|
Adjusted SG&A (Non-GAAP) |
|
$ |
12,018 |
|
|
$ |
17,416 |
|
|
$ |
54,749 |
|
|
$ |
69,375 |
|
|
|
|
|
|
|
|
|
|
As a percent of net sales: |
|
|
|
|
|
|
|
|
SG&A (GAAP) |
|
|
42.1 |
% |
|
|
42.6 |
% |
|
|
38.5 |
% |
|
|
34.4 |
% |
Adjusted SG&A (Non-GAAP) |
|
|
25.5 |
% |
|
|
28.3 |
% |
|
|
24.2 |
% |
|
|
20.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A (GAAP) and Adjusted SG&A (Non-GAAP)
for the year ended December 31, 2023, were positively impacted by
$0.7 million of benefits from certain recoveries of accounts
receivable reserves and write-downs.
SG&A (GAAP) and Adjusted SG&A (Non-GAAP)
for the three months and year ended December 31, 2022, were
negatively impacted by $1.8 million and $2.9 million, respectively,
of accounts receivable reserves.
|
|
Three months ended December 31, |
|
Twelve months ended December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of Adjusted EBITDA: |
|
|
|
|
|
|
|
|
Net loss (GAAP) |
|
$ |
(15,215 |
) |
|
$ |
(35,268 |
) |
|
|
(64,813 |
) |
|
|
(285,415 |
) |
Interest expense |
|
|
4,019 |
|
|
|
3,095 |
|
|
|
15,442 |
|
|
|
10,958 |
|
Income tax (benefit) expense |
|
|
(131 |
) |
|
|
5,228 |
|
|
|
(213 |
) |
|
|
(6,443 |
) |
Depreciation, depletion and amortization |
|
|
7,910 |
|
|
|
8,312 |
|
|
|
32,075 |
|
|
|
41,527 |
|
Restructuring expenses1 |
|
|
1,467 |
|
|
|
7,687 |
|
|
|
11,269 |
|
|
|
7,687 |
|
Stock-based compensation2 |
|
|
1,057 |
|
|
|
1,709 |
|
|
|
5,114 |
|
|
|
8,543 |
|
Other (income) expense, net3 |
|
|
(96 |
) |
|
|
275 |
|
|
|
(118 |
) |
|
|
(696 |
) |
Impairments4 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
192,328 |
|
Acquisition and integration expenses5 |
|
|
12 |
|
|
|
580 |
|
|
|
51 |
|
|
|
7,682 |
|
Distribution center exit costs and other6 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,412 |
|
Severance and other7 |
|
|
427 |
|
|
|
— |
|
|
|
1,459 |
|
|
|
1,224 |
|
Adjusted EBITDA (Non-GAAP) |
|
$ |
(550 |
) |
|
$ |
(8,382 |
) |
|
$ |
266 |
|
|
$ |
(21,193 |
) |
|
|
|
|
|
|
|
|
|
As a percent of net sales: |
|
|
|
|
|
|
|
|
Net loss (GAAP) |
|
(32.2)% |
|
(57.4)% |
|
(28.6)% |
|
(82.8)% |
Adjusted EBITDA (Non-GAAP) |
|
(1.2)% |
|
(13.6)% |
|
|
0.1 |
% |
|
(6.2)% |
|
|
|
|
|
|
|
|
|
|
|
Net Loss (GAAP) and Adjusted EBITDA (Non-GAAP)
for the year ended December 31, 2023, were negatively impacted by
$1.2 million of certain inventory charges and positively impacted
by $0.7 million of benefits from recoveries of certain accounts
receivable reserves and write-downs.
Net Loss (GAAP) and Adjusted EBITDA (Non-GAAP)
for the three months and year ended December 31, 2022, were
negatively impacted by $2.5 million and $21.4 million,
respectively, of inventory and accounts receivable reserves and
related charges.
|
|
Three months ended December 31, |
|
Twelve months ended December 31, |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Reconciliation of Free Cash
Flow8: |
|
|
|
|
|
|
|
|
Net cash (used in) from operating activities
(GAAP)8: |
|
$ |
(1,585 |
) |
|
$ |
6,499 |
|
|
$ |
7,044 |
|
|
$ |
21,989 |
|
Capital expenditures of Property, Plant and Equipment (GAAP) |
|
|
(159 |
) |
|
|
(1,116 |
) |
|
|
(4,215 |
) |
|
|
(8,229 |
) |
Free Cash Flow
(Non-GAAP)8: |
|
$ |
(1,744 |
) |
|
$ |
5,383 |
|
|
$ |
2,829 |
|
|
$ |
13,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to GAAP to Non-GAAP
reconciliations presented above (Adjusted Gross Profit, Adjusted
SG&A, Adjusted EBITDA, and Free Cash Flow):
- For the three
months and year ended December 31, 2023, restructuring
expenses related primarily to non-cash inventory markdowns
associated with manufacturing facility consolidations, and the
charges incurred to relocate and terminate certain facilities in
Canada and the US. During the three months and year ended December
31, 2022, the Company recorded restructuring charges related to the
inventory markdowns of products and brands being removed from our
portfolio, and for the relocation and termination of certain
facilities in Canada.
- Includes
stock-based compensation and related employer payroll taxes on
stock-based compensation for the periods presented.
- Other income
(expense), net related primarily to foreign currency exchange rate
gains and losses and other non-operating income and expenses. For
the year ended December 31, 2023, Other income (expense), net
also included charges from Amendment No. 1 to the Term Loan.
- For the year ended
December 31, 2022, the Company recorded a goodwill impairment
charge of $189.6 million due to market softness in demand in the
U.S. and Canada and a $2.6 million impairment charge associated
with a note receivable that originated in 2019 associated with a
third party independent processor.
- For the three
months and year ended December 31, 2023, acquisition and
integration expenses primarily include charges incurred for certain
potential acquisitions. For the three months and year ended
December 31, 2022, acquisition and integration expenses included
charges related to acquisitions completed in 2021, including
non-cash purchase accounting inventory adjustments, transaction
services and legal fees, as well as the impact of changes in fair
value of contingent consideration.
- For the year ended
December 31, 2022, this related to costs incurred to exit and
relocate distribution centers in California and Pennsylvania
including lease exit costs, transportation, and labor related
costs.
- For the year ended
December 31, 2023, Severance and other charges primarily
related to workforce reductions, charges in conjunction with a
sale-leaseback transaction during the first quarter of 2023 and
estimated legal costs related to certain litigation. For the year
ended December 31, 2022, the charges included severance costs
related to workforce reductions.
- Gross proceeds of
$8.6 million received during the first quarter of 2023 from a
sale-leaseback of real estate located in Eugene, Oregon, was
classified as a financing activity and is not reflected in cash
flows from operating activities or Free Cash Flow.
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, 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.
We define Liquidity as total
cash, cash equivalents and restricted cash, 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.
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