Announces Closing of Senior Secured Term Loan Facility
Commercial Benching, Racking and LED Lighting Systems Manufacturer Further Diversifies Hydrofarm’s Portfolio of Controlled Environment Agriculture Products
“We are excited for IGE to officially join the
“Our success in the indoor growing market is rooted in our premium quality products and high level of service to our customers,” said
The acquisition of IGE marks the fifth and latest in a succession of acquisitions made by
Senior Secured Term Loan
The Company also announced that it has entered into a new
Preliminary Third Quarter 2021 Financial Results and Updated Full Year 2021 Guidance
The Company also announced the following preliminary unaudited financial results for its third quarter ended
- The Company estimates that net sales will range between
$121.0 million to$124.0 million , as compared to$96.7 million for the three months endedSeptember 30, 2020 , an increase of approximately 27% calculated using the midpoint of the range. We now estimate that the year-over-year increase was driven entirely by M&A growth. - Net income is expected to range between
$13.3 million and$18.3 million , as compared to net income of$2.7 million for the three months endedSeptember 30, 2020 . - Adjusted EBITDA is estimated to be between
$14.4 million to$16.4 million , as compared to$7.4 million for the three months endedSeptember 30, 2020 , an increase of approximately 108% calculated using the midpoint of the range.
The expected increase in year-over-year Adjusted EBITDA is due primarily to (i) anticipated higher sales of proprietary brands which represented a higher proportion of total sales in the Q3 2021 period due to the Company’s four completed acquisitions of proprietary branded product companies and (ii) anticipated higher gross profit and gross profit margin in the third quarter of 2021 primarily resulting from the aforementioned mix change to higher margin proprietary brands. Those increases were partially offset by higher selling, general and administrative expenses as Company further built-out its growth platform versus same period in the prior year.
Preliminary results remain subject to the completion of normal quarter-end accounting procedures and adjustments and are subject to change. In particular, certain items arising from our recent acquisitions impacting net income, but not impacting net sales or Adjusted EBITDA, remain open, including contingent consideration calculations and income taxes and therefore these amounts could vary materially from current estimates (impacting net income but not net sales or Adjusted EBITDA).
In light of the Company’s recent performance, developments in the industry and acquisition activities, the Company is providing the following updated outlook for the full fiscal year 2021:
- Net sales growth between 37% and 43% or approximately
$470.0 million to$490.0 million . - Adjusted EBITDA(1) of
$47.0 million to$53.0 million , or approximately 10% to 11% of net sales for the full fiscal year, up from approximately 6% in the prior year.
(1) Adjusted EBITDA is a non-GAAP measure. For reconciliations of GAAP to non-GAAP measures see the” Reconciliation of Non-GAAP Measures” accompanying this release.
The Company’s 2021 outlook incudes the following updated assumptions:
- Partial period contributions from the following acquisitions:
- Heavy 16 – May through December
- House & Garden – June through December
- Aurora Innovations – July through December
- Greenstar – August through December
- IGE – November through December (2 full months; assumes
Nov 1 st close)
- Full-year organic growth of approximately 18% to 23% and M&A growth of approximately 19% to 20%; organic growth is heavily weighted toward the first half of fiscal 2021 and M&A growth is heavily weighted toward the second half of fiscal 2021.
Since the Company has recently completed four acquisitions with the closing of one additional acquisition pending in Q4 2021 (with only a partial year contribution from each acquisition embedded within the outlook above), the Company estimates that on a pro forma full year basis as if all five acquisitions had occurred on January 1, 2021, the Company would have expected to generate between approximately
With respect to projected fiscal year 2021 Adjusted EBITDA, a quantitative reconciliation is not available without unreasonable effort due to the variability, complexity and low visibility with respect to certain items, including, but not limited to, stock-based compensation and employer payroll taxes, uncertainties caused by the global COVID-19 pandemic, changes to the regulatory landscape, and certain potential future transaction expenses, which are excluded from Adjusted EBITDA. We expect the variability of these items to have a potentially unpredictable, and potentially significant, impact on our future GAAP financial results.
Full third quarter results will be discussed during the upcoming
Investors interested in participating in the live call can dial 201-389-0879 or listen to a simultaneous, live webcast available on the Investors section of the Company’s website at www.hydrofarm.com under the “Investors” section.
Non-GAAP Financial Presentation
The Company reports its financial results in accordance with
The Company defines Adjusted EBITDA as net income (loss) excluding interest expense, income taxes, depreciation and amortization, share-based compensation, employer payroll taxes on share-based compensation and other unusual and/or infrequent costs (i.e., impairment, restructuring and other expenses, acquisition-related expenses, loss on debt extinguishment, distribution center exit costs and other expense, net), which the Company does not consider in its evaluation of ongoing operating performance.
The reconciliation below is to preliminary net income and management has not completed its review of all items which are components of net income; therefore, actual results could differ significantly. The following table reconciles the preliminary Adjusted EBITDA range of
Range | |||||
Three Months Ended | |||||
(in millions) | |||||
| |||||
Interest expense | 0.1 | 0.1 | |||
Income tax benefit | (17.5 | ) | (20.5 | ) | |
Depreciation and amortization | 4.9 | 4.9 | |||
Distribution center exit costs and other | 0.3 | 0.3 | |||
Impairment, restructuring and other | 0.2 | 0.2 | |||
Acquisition expenses | 10.6 | 10.6 | |||
Other expense, net | 0.1 | 0.1 | |||
Stock-based compensation | 1.3 | 1.3 | |||
Loss on debt extinguishment | - | 0.0 | |||
Investor warrant solicitation fees | 1.1 | 1.1 | |||
| |||||
The following table reconciles Adjusted EBITDA to the net income of
Three Months Ended | ||
(in millions) | ||
Net Income | ||
Interest expense | 2.5 | |
Income tax expense | 0.1 | |
Depreciation and amortization | 1.5 | |
Distribution center exit costs and other | 0.0 | |
Impairment, restructuring and other | 0.2 | |
Acquisition expenses | 0.0 | |
Other expense, net | 0.2 | |
Stock-based compensation | 0.2 | |
Loss on debt extinguishment | 0.0 | |
Investor warrant solicitation fees | 0.0 | |
Adjusted EBITDA | ||
About
About
Based in
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
The ongoing COVID-19 pandemic could have a material adverse effect on the Company’s business, results of operation, financial condition and/or cash flows; Interruptions in the Company's supply chain, whether due to COVID-19 or otherwise could adversely impact expected sales growth and operations; 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 may be 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.
Investor Relations:
ICR
ir@hydrofarm.com
Media Contacts:
513-505-2334
lgallagher@hydrofarm.com
Source:
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