Hydrofarm Holdings Group Inc (HYFM) 2023 Q3 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Hydrofarm Holdings Group third quarter 2023 earnings conference call. At this time, all participants have been placed in a listen only mode and the lines will be opened for your questions following the presentation, please note that this conference is being recorded today, November 9, 2023.

女士們先生們，美好的一天，謝謝你們的支持。歡迎參加 Hydrofarm Holdings Group 2023 年第三季財報電話會議。目前，所有參與者均已處於僅聽模式，演示結束後將開放線路供您提問，請注意，本次會議將於今天（2023 年 11 月 9 日）進行錄製。

I would now like to turn the call over to Anna Kate Heller at ICR, to begin.

首先，我想將電話轉給 ICR 的 Anna Kate Heller。

Thank you, and good afternoon. With me on the call today is Bill Toler, Hydrofarm's Chairman and Chief Executive Officer; and John Lindeman, the company's Chief Financial Officer. By now everyone should have access to our third quarter 2023 earnings release and Form 8-K issued today after market close. These documents are available on the Investors section of Hydrofarm website at hydrofarm.com.

謝謝你，下午好。今天與我一起參加電話會議的是 Hydrofarm 董事長兼執行長 Bill Toler；以及公司財務長約翰林德曼 (John Lindeman)。到目前為止，每個人都應該可以查看我們今天收盤後發布的 2023 年第三季財報和 8-K 表格。這些文件可在 Hydrofarm 網站 Hydrofarm.com 的投資者部分取得。

Before we begin our formal remarks, please note that our discussion today will include forward-looking statements. These forward-looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.

在我們開始正式發言之前，請注意，我們今天的討論將包括前瞻性陳述。這些前瞻性陳述並不是對未來績效的保證，因此，您不應過度依賴它們。

These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from our current expectations. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could cause that impact our future operating results and financial condition.

這些陳述也面臨許多風險和不確定性，可能導致實際結果與我們目前的預期有重大差異。我們建議大家參閱我們最近向 SEC 提交的文件，以更詳細地討論可能影響我們未來經營業績和財務狀況的風險。

Lastly, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP and reconciliations to comparable GAAP measures are available in our earnings release.

最後，在今天的電話會議中，我們將討論非公認會計準則衡量標準，我們相信這些衡量標準有助於評估我們的績效。這些附加資訊的呈現不應被孤立地考慮，也不應作為根據 GAAP 準備的結果的替代品，並且我們的收益發布中提供了與可比較 GAAP 指標的對帳。

With that, I would like to turn the call over to Bill Toler.

說到這裡，我想把電話轉給比爾·托勒。

Thank you, Anna Kate, and good afternoon, everyone. We are pleased that in the third quarter we achieved adjusted EBITDA profitability for the second quarter in a row. The successful execution of our restructuring and related cost savings initiatives has driven significant improvements in our adjusted gross profit, which was also driven by greater emphasis on our own proprietary brands, which typically carry a higher margin.

謝謝安娜凱特，大家下午好。我們很高興第三季我們連續第二季實現調整後 EBITDA 獲利能力。我們的重組和相關成本節約計畫的成功執行推動了我們調整後毛利的顯著改善，這也是由於我們更加重視我們自己的專有品牌，這些品牌通常具有更高的利潤率。

Our quarter end cash balance is the highest it's been since the second quarter of 2021, putting us in a much stronger position as a result of our labor -- laser focus on optimizing our business to drive profitability. We've maintained our dedication to excellent customer service and on-time deliveries, even as we reduce costs. While we've implemented operational changes, our distribution footprint remains customer centric and we maintain our commitment to providing top-notch service.

我們的季末現金餘額是自 2021 年第二季度以來的最高水平，這使我們由於我們的努力而處於更加有利的地位 - 專注於優化我們的業務以提高盈利能力。即使我們降低了成本，我們仍然致力於提供卓越的客戶服務和準時交貨。雖然我們實施了營運變革，但我們的分銷足跡仍然以客戶為中心，並且我們仍然致力於提供一流的服務。

We're glad to report that even at current sales levels, we've achieved significant progress in many areas this quarter, delivering both adjusted positive adjusted EBITDA and strong free cash flow. Our primary focus at Hydrofarm continues to be diversifying our revenue stream and controlling costs, whether it's through rightsizing the company, improving operational efficiency or emphasizing profitability throughout everything we do.

我們很高興地報告，即使按照目前的銷售水平，本季度我們在許多領域都取得了重大進展，實現了調整後的正調整 EBITDA 和強勁的自由現金流。 Hydrofarm 的主要重點仍然是實現收入來源多元化和控製成本，無論是透過公司規模調整、提高營運效率或是在我們所做的一切工作中強調獲利能力。

I'll start by highlighting a few positives on the top and bottom line in Q3, our proprietary nutrient business, which is one of our highest margin product lines, again delivered a strong performance. We saw excellent results in numerous key proprietary brands, which contributed nicely to this quarter's margin expansion.

首先，我將強調第三季營收和利潤的一些正面因素，我們的專有營養品業務是我們利潤率最高的產品線之一，再次表現強勁。我們看到許多主要自有品牌取得了出色的業績，這為本季的利潤率擴張做出了很好的貢獻。

Our proprietary brand nutrient sales grew over 20% versus third quarter of last year. In large part to our great brands, including House & Garden, Protect and HEAVY 16. We also continue to enhance the diversity of our revenue streams, so with a growing proportion of sales originating from customers outside of the US and Canada.

我們的自有品牌營養品銷售額比去年第三季成長了 20% 以上。這在很大程度上歸功於我們的偉大品牌，包括 House & Garden、Protect 和 HEAVY 16。我們也繼續增強收入來源的多樣性，因此來自美國和加拿大以外客戶的銷售比例不斷增加。

Additionally, we observed an uptick in sales year to date versus last year from non-cannabis CEA applications, including food, floor, lawn and garden, making our progress in diversifying our revenue sources. I'm pleased to announce that our restructuring and related cost savings actions have been successful as evidenced by our strong year-over-year improvement adjusted gross margin and adjusted SG&A, as well as positive adjusted EBITDA for the second quarter in a row.

此外，我們觀察到，今年迄今為止，非大麻 CEA 應用（包括食品、地板、草坪和花園）的銷售額與去年相比有所上升，這使得我們在收入來源多元化方面取得了進展。我很高興地宣布，我們的重組和相關成本節約行動取得了成功，調整後毛利率和調整後銷售及一般管理費用同比強勁改善，以及連續第二季度調整後EBITDA 為正值就證明了這一點。

We still have work to do, but these improvements demonstrate significant progress given the current industry backdrop, we initiated a second phase of restructuring focused primarily on our durables business, which John will talk about more in a moment.

我們還有工作要做，但這些改進表明在當前的行業背景下取得了重大進展，我們啟動了第二階段的重組，主要關注我們的耐用品業務，約翰稍後將詳細討論這一點。

We will continue to control what we can by driving improved brand mix, distribution center and manufacturing productivity and reducing SG&A. I am encouraged by our team's disciplined execution during the quarter, achieving adjusted EBITDA profitability of these lower sales rates and adjusted gross margin improvement that we saw in third quarter versus last year is a testament to the success of our recent actions, which has put us in a stronger position heading into 2024 and beyond.

我們將繼續透過推動改進品牌組合、分銷中心和製造生產力以及減少銷售管理費用來控制我們所能做到的。我對我們團隊在本季度的嚴格執行感到鼓舞，實現了這些較低銷售率的調整後EBITDA 盈利能力，以及我們在第三季度看到的與去年相比調整後毛利率的改善，這證明了我們最近行動的成功，這使我們進入 2024 年及以後，將處於更有利的地位。

We are seeing positive momentum from a regulatory standpoint, and we remain confident the industry will return to growth. Several potential catalysts on the horizon for the cannabis industry. The first is the possibility of now the SAFE [herb] Banking Act and federally -- federal descheduling or rescheduling, which could inject new life into the industry by attracting renewed investment from both institutional and retail players.

從監管的角度來看，我們看到了積極的勢頭，我們仍然有信心該行業將恢復成長。大麻產業即將出現的幾種潛在催化劑。第一個是現在《安全銀行法》和聯邦重新安排或重新安排的可能性，這可以透過吸引機構和零售參與者的新投資為該行業注入新的活力。

Another notable catalysts lies in the US states where adult use cannabis has been approved, but there's been a slow start for now these states are starting to position themselves for significant growth. And Ohio is a recent addition to the list having just legalized adult use cannabis on November 7, making it the 24th state to do so.

另一個值得注意的催化劑在於美國各州已批准成人使用大麻，但目前起步緩慢，這些州正開始為顯著成長做好準備。俄亥俄州最近也加入了該名單，該州剛剛在 11 月 7 日將成人使用大麻合法化，成為第 24 個這樣做的州。

We are hopeful the Ohio state legislator will follow the will of the people and approve this met measure. Being the seventh most populated state in the US this is certainly significant and it actually pushes the total US adult use population to over 50%, for the first time.

我們希望俄亥俄州立法者能夠遵循人民的意願並批准這項措施。作為美國人口第七多的州，這當然意義重大，它實際上首次將美國成年人使用人口總數推至 50% 以上。

There is increasing momentum in additional states as well, like Pennsylvania, Virginia and Florida, where we believe we may have fully legalize adult-use cannabis on the ballot in the near future, and if successful, expand the industry's reach and present new growth opportunities.

賓州、維吉尼亞州和佛羅裡達州等其他州的勢頭也在增強，我們相信在不久的將來我們可能會在投票中將成人用大麻完全合法化，如果成功，將擴大該行業的影響範圍並帶來新的成長機會。

with that, I'll turn it over to John to further discuss the details of our third quarter financial results and our outlook for 2023. John?

接下來，我將把它交給約翰，進一步討論我們第三季財務業績的細節以及我們對 2023 年的展望。約翰？

Thanks, Bill, and good afternoon, everyone. Net sales for the third quarter were $54.2 million, down 27% year over year, driven primarily by a 22% decrease in sales volume we realized the price mix decline in the quarter, much like we have for the last several quarters, and as we expect for the full year. Our 5% price mix decline in the quarter, primarily due to promotional activity in both durable and consumable products.

謝謝比爾，大家下午好。第三季的淨銷售額為 5,420 萬美元，年減 27%，這主要是由於銷量下降 22%，我們意識到本季度的價格組合下降，就像過去幾個季度一樣，並且隨著我們預計全年。本季我們的價格組合下降了 5%，主要是由於耐用品和消耗品的促銷活動。

Our price mix decline in the period was also driven by a higher mix of lower-priced consumable products relative to higher priced durables. Despite some competitive pricing in the growing media category, we still experienced much stronger top line performance in our consumer products relative to durables. In fact, consumables represented approximately 75% of total sales in the quarter, up from 67% in Q3 last year.

在此期間，我們的價格組合下降也是由於價格較低的消費品相對於價格較高的耐用品的組合較多所致。儘管不斷增長的媒體類別的定價具有競爭力，但相對於耐用品，我們的消費品的營收表現仍然要強得多。事實上，消耗品約佔本季總銷售額的 75%，高於去年第三季的 67%。

Much of this shift was influenced by a broader industry trend of weakness in dermal products. In particular, sales of lighting equipment, commonly used in new expansion projects were newly established grow operations.

這種轉變很大程度上受到皮膚產品疲軟的更廣泛行業趨勢的影響。特別是，新擴建工程中常用的照明設備的銷售是新成立的種植業務。

But this mix change is also a reflection of the demand for several of our higher margin proprietary nutrient brands. As Bill mentioned, our proprietary nutrient brand sales grew double digits in the quarter compared to the same period last year. In an industry environment, which growth is hard to come by, we were really pleased with our Q2 to Q3 top line growth, in our key proprietary nutrient brands.

但這種組合變化也反映了對我們幾個利潤率較高的專有營養品牌的需求。正如比爾所提到的，與去年同期相比，我們的專有營養品品牌銷售額在本季成長了兩位數。在難以實現成長的行業環境中，我們對我們的主要專有營養素品牌的第二季至第三季的營收成長感到非常滿意。

In connection with our strong nutrient performance, our proprietary brands as a whole and Q3 mix slightly higher on a year-over-year basis, remained above 50% of our total sales. In addition to the favorable brand mix, we recognized sales improvements in a few key geographies this quarter. Sales to customers outside of the US and Canada increased over 20% in Q3, which now marks the third consecutive quarter of year-over-year growth.

與我們強勁的營養成分錶現相關，我們的自有品牌整體和第三季的銷量同比略高，仍占我們總銷售額的 50% 以上。除了有利的品牌組合外，我們還發現本季幾個關鍵地區的銷售有所改善。第三季對美國和加拿大以外客戶的銷售額成長了 20% 以上，這標誌著連續第三個季度同比增長。

In addition, during the quarter, we experienced good year-over-year momentum in hydroponic sales to our Canadian customers. And in the US, we experienced some pullback in the quarter in several key western states, namely California, but this was partially offset by relative strength in several states in the Midwest and then the Northeast.

此外，在本季度，我們對加拿大客戶的水耕銷售較去年同期成長動能良好。在美國，本季度我們在幾個關鍵的西部州（即加利福尼亞州）經歷了一些回調，但這被中西部和東北部幾個州的相對強勢所部分抵消。

Gross profit in the third quarter was $3.3 million compared to $5.9 million in the year ago period. Adjusted gross profit was $12.5 million or 23% of net sales in the third quarter compared to $7.8 million or 10.5% of net sales in the year ago period. This strong over 1,200 basis point improvement in adjusted gross margin as a result of continued reduction in inventory charges, improved brand mix, reduced freight costs and improved productivity.

第三季毛利為 330 萬美元，去年同期毛利為 590 萬美元。第三季調整後毛利為 1,250 萬美元，佔淨銷售額的 23%，去年同期為 780 萬美元，佔淨銷售額的 10.5%。由於庫存費用持續降低、品牌組合改善、運輸成本降低和生產力提高，調整後毛利率大幅提高了 1,200 個基點。

And while we are relatively pleased with this improvement. I should note that adjusted gross margin would have been another 200 basis points higher, if not for an approximate $1.2 million non-restructuring inventory charge, we took in the quarter.

雖然我們對這項改進感到比較滿意。我應該指出，如果不是我們在本季收取的約 120 萬美元的非重組庫存費用，調整後的毛利率還會高出 200 個基點。

Though we assess inventory values each quarter, we do believe the inventory charge we took in Q3 is a relatively isolated charge. And as you read in the outlook section of our earnings release this afternoon, we still expect minimal additional non-restructuring inventory charges for the remainder of the year.

儘管我們每季都會評估庫存價值，但我們確實相信我們在第三季收取的庫存費用是一項相對獨立的費用。正如您今天下午在我們的收益發布的展望部分中所讀到的那樣，我們仍然預計今年剩餘時間內的額外非重組庫存費用將是最低的。

Given the considerable progress we've made thus far and improving adjusted gross profit margin. We have initiated a second phase of restructuring. Phase 2 is centered on rightsizing elements of our business associated with durable products. And so this has emerged as the most challenged segment during the industry slowdown.

鑑於我們迄今為止的巨大進展以及調整後毛利率的增加。我們已經啟動了第二階段的重組。第二階段的重點是調整我們與耐用產品相關的業務要素。因此，這已成為行業放緩期間最具挑戰性的領域。

In the third quarter, we recorded $7.8 million of restructuring expenses associated with reducing our durable manufacturing footprint and writing down the value of raw material inventory in connection with vacating storage space. And I should note that while we are reducing our manufacturing footprint, we are not eliminating any key manufacturing capabilities.

第三季度，我們記錄了 780 萬美元的重組費用，這些費用與減少耐用製造足跡以及因騰出儲存空間而減記原材料庫存價值有關。我應該指出，雖然我們正在減少製造足跡，但我們並沒有消除任何關鍵的製造能力。

We expect the second phase of the restructuring to result in annual cost savings of approximately $1.5 million, the bulk of which we will begin to realize in fiscal 2024. Our team is working hard to improve the structure of our business. We are optimistic by the progress from phase 1 and look forward to continuing to execute on phase 2 trials for further cost savings in 2024.

我們預計重組的第二階段將每年節省約 150 萬美元的成本，其中大部分將在 2024 財年開始實現。我們的團隊正在努力改善我們的業務結構。我們對第一階段的進展感到樂觀，並期待繼續執行第二階段試驗，以在 2024 年進一步節省成本。

I look forward to providing another update on our restructuring efforts on our year end call. In the new year. Selling general administrative expense was $19.5 million in the third quarter compared to $26.2 million in the year ago period. Adjusted SG&A expenses were $12 million, down from $16.8 million last year and our lowest quarterly total since before going public in late 2020.

我期待在年終電話會議上提供有關我們重組工作的最新資訊。在新的一年裡。第三季銷售一般管理費用為 1,950 萬美元，去年同期為 2,620 萬美元。調整後的 SG&A 費用為 1,200 萬美元，低於去年的 1,680 萬美元，也是我們 2020 年底上市以來的最低季度總額。

The $4.9 million reduction or 29% decrease was primarily due to reductions in headcount, professional fees and lower accounts receivable reserves from early resolved the restructuring plan and related cost saving initiatives. Adjusted EBITDA was $0.5 million in the third quarter compared to a loss of $9 million in the prior year period, representing positive EBITDA for the second quarter in a row.

減少 490 萬美元或減少 29%，主要是由於提前解決重組計劃和相關成本節約措施導致員工人數、專業費用的減少以及應收帳款準備金的減少。第三季調整後 EBITDA 為 50 萬美元，而上年同期虧損 900 萬美元，連續第二季為正 EBITDA。

The $9.5 million increase was driven primarily by our lower adjusted SG&A expenses and higher adjusted gross profit. Where we are also now adjusted EBITDA positive for the nine months year to date through September 30, our ability to generate positive EBITDA and lower sales levels is encouraging, and it's a testament to the effectiveness of the restructuring cost saving initiative.

950 萬美元的成長主要是由於我們調整後的 SG&A 費用較低和調整後毛利較高。截至 9 月 30 日的九個月，我們現在調整後的 EBITDA 為正，我們產生正 EBITDA 和較低銷售水平的能力令人鼓舞，這證明了重組成本節約計劃的有效性。

Moving on to our balance sheet overall liquidity position, our cash balance as of September 30, 2023, increased by $5.8 million during the quarter to $32.5 million. And while we ended the quarter with approximately $23 million of term debt approximately $133 million of total debt inclusive of finance lease liabilities. The considerable increase in our cash balance over the last two quarters now has helped to drive our net debt down to approximately $100 million.

轉向我們的資產負債表整體流動性狀況，截至 2023 年 9 月 30 日，我們的現金餘額在本季增加了 580 萬美元，達到 3,250 萬美元。雖然本季末我們的定期債務約為 2,300 萬美元，但包括融資租賃負債在內的總債務約為 1.33 億美元。過去兩季我們的現金餘額大幅增加，幫助我們將淨債務降至約 1 億美元。

As a continued reminder, our term loan facility has no financial maintenance covenants, principal amortizes at only 1% annually, and our debt facility does not mature for another five years and October 2028. We continued to maintain a zero balance revolving credit facility throughout the third quarter.

持續提醒，我們的定期貸款融資沒有財務維持契約，本金每年攤銷率僅為1%，而且我們的債務融資在五年內和2028 年10 月不會到期。我們在整個期間繼續保持零餘額循環信貸融資。第三季。

We had positive free cash flow again this quarter as we generated net cash from operating activities of $7.7 million with capital investments of $0.8 million, yielding positive free cash flow of $6.9 million. We continue to aggressively convert our working capital and cash, helping us to generate positive free cash flow in the full nine month year-to-date period.

本季我們再次實現正自由現金流，因為我們從經營活動中產生了 770 萬美元的淨現金，資本投資為 80 萬美元，產生了 690 萬美元的正自由現金流。我們繼續積極轉換我們的營運資金和現金，幫助我們在今年迄今為止的整個九個月內產生正的自由現金流。

With that, let me turn to our full year 2023 outlook. We are reaffirming expectations of net sales in the range of $230 million to $240 million. Now expect our top-line results to be around the lower end of that range with the strength of our cost-saving efforts and the performance of our proprietary nutrient brands, we are reaffirming modestly positive adjusted EBITDA for the full year.

接下來，讓我談談我們對 2023 年全年的展望。我們重申淨銷售額在 2.3 億至 2.4 億美元之間的預期。現在，憑藉我們節省成本的努力和我們專有營養品品牌的表現，預計我們的頂線業績將在該範圍的下限附近，我們重申全年調整後的 EBITDA 適度為正值。

We also still expect to generate positive free cash flow for the full year. I should note that we did lower our expectation for capital expenditures to $4.5 million to $5.5 million for the full year, down from $7 million to $9 million previously as we slowed our spend in Q3, while we are finalizing our plans for the phase 2 restructuring initiative. With our phase 2 plan now established at the end of Q3, we do expect our CapEx spending to pick up in Q4 and into early next year.

我們也預計全年將產生正的自由現金流。我應該指出的是，由於我們在第三季度放慢了支出，同時我們正在敲定第二階段重組計劃，因此我們確實將全年資本支出預期從之前的700 萬美元降至900 萬美元，降至450 萬美元至550 萬美元。倡議。由於我們的第二階段計劃現已在第三季末制定，我們預計我們的資本支出將在第四季和明年初回升。

In closing, we are encouraged by the improvements in profitability that we achieved through the execution of our cost-saving initiatives. We remain optimistic about the future the industry, and the growth opportunities for Hydrofarm in 2024 and beyond. We look forward to providing further updates next quarter.

最後，我們對透過執行成本節約措施所實現的獲利能力的提高感到鼓舞。我們對產業的未來以及 Hydrofarm 2024 年及以後的成長機會保持樂觀。我們期待下個季度提供進一步的更新。

This concludes our prepared remarks and are now happy to answer your questions. Operator, please open the line for questions.

我們準備好的演講到此結束，現在很高興回答您的問題。接線員，請開通提問線。

Thank you. We will now be conducting a question and answer session. (Operator Instructions)

謝謝。我們現在將進行問答環節。 （操作員說明）

Peter Grom with UBS.

瑞銀集團的彼得‧格羅姆。

Thanks, operator. Good afternoon, guys. I hope you're doing well. So Bill, (multiple speakers) I will ask specifically around your confidence. As you mentioned the industry returning to growth and obviously it's been a tough couple of years here, but you did touch on a lot of positive developments.

謝謝，接線生。下午好，夥計們。我希望你一切都好。因此，比爾（多名發言者）我將專門詢問您的信心。正如您所提到的，該行業正在恢復成長，顯然這幾年是艱難的，但您確實談到了許多積極的發展。

So is this something that you think can actually occur as we look out to 2024 over the next 12 to 18 months, or is kind of the exit rate we're seeing in 4Q, I think the implied guidance is called it mid to high 10s decline. Is that a fair run rate to kind of start the year at? Thanks.

那麼，當我們展望未來 12 到 18 個月的 2024 年時，您認為這種情況是否會實際發生，或者是我們在第四季度看到的退出率，我認為隱含的指導被稱為 10 中高衰退。這是年初的合理運行率嗎？謝謝。

Yes, I think it's -- Hey, Peter. Good question. I think it is a fair rate to start year at, but I think there are a number of signs that are pointing toward growth in probably, let's call it sometime in '24, maybe the back half of '24. There are backlog on our durables bids starting to build a little bit the commercial activities picking up some you're seeing the states that have been woefully slow in rolling out, starting to do some things whether that's seen our New York, New Jersey or Connecticut, there are now all starting to pick-up Maryland has been pretty good in Missouri is getting better.

是的，我想是──嘿，彼得。好問題。我認為從今年開始這是一個公平的利率，但我認為有許多跡象表明可能會在 24 年的某個時候（我們稱之為 24 年的後半段）出現增長。我們的耐用品投標出現了積壓，開始建立一些商業活動，你會看到一些在推出方面進展緩慢的州，開始做一些事情，無論是我們的紐約、新澤西還是康涅狄格州，現在一切都開始回升，馬裡蘭州已經不錯了，密蘇裡州也越來越好。

All those things are starting to turn a bit. I think you're going to see, and we have seen that in addition to the legislative stuff that we talked about, and those things can be a few months away, they can be a few longer than that away, we don't really know at this point. But all that is pointed in the right direction. But as you said it's been elongated, difficult period of time for all of us.

所有這些事情都開始發生一些變化。我想你會看到，我們已經看到，除了我們談到的立法內容之外，這些事情可能需要幾個月的時間，也可能需要更長的時間，我們真的不知道此時就知道了。但這一切都指向正確的方向。但正如你所說，這對我們所有人來說都是一段漫長而艱難的時期。

And so we are hesitant to call anything until we see it. And we're kind of planning as if it's going to run at certain rates, it's running at now and keep getting costs under control, keep managing the mix and keep looking at your assets to find ways to create a more profitable company.

因此，在看到任何東西之前，我們都會猶豫是否要呼叫它。我們的計劃就好像它將以一定的速度運行一樣，它現在正在運行，並不斷控製成本，繼續管理組合併繼續關注您的資產，以找到創建一家更有利可圖的公司的方法。

That's super helpful, Bill. And then I guess just maybe a follow up from a margin perspective and maybe more of a long-term question, right. And it's obviously very encouraging to see two straight quarters of positive EBITDA on a lower sales base.

這非常有幫助，比爾。然後我想這可能只是從利潤角度來看的後續行動，也許更多的是長期問題，對吧。在較低的銷售基礎上連續兩個季度實現正 EBITDA 顯然非常令人鼓舞。

But can you maybe frame in the context of the restructuring you've done, you have to second restructuring today, other cost saves or what really is achievable from a margin perspective, particularly if we start to get some stabilization or growth in the back half of next year, obviously several years ago, you had some more ambitious goals from a profit standpoint, but just you where we are in today, I think it'd be helpful to kind of frame. What's really possible now? And how long do you actually think it can take to get there?

但是，您能否在已經完成的重組的背景下進行框架，您今天必須進行第二次重組，其他成本節省或從利潤角度真正可以實現的目標，特別是如果我們開始在後半段獲得一些穩定或成長明年，顯然是幾年前，從利潤的角度來看，你有一些更雄心勃勃的目標，但就你今天所處的情況而言，我認為這會對框架有所幫助。現在什麼才是真正可能的？您實際上認為需要多長時間才能到達那裡？

Yeah. I'll jump in on that one. Thanks, Peter. Great question. Yeah, I think if you look at some the past three quarters, our adjusted gross profit margin has been running around 24%. I mean, we've had sort of two quarters where it was 23% on quarter was 27%. Frankly, the quarter we just finished, as you saw me call out in our prepared remarks, I think we put up a 23% adjusted gross profit margin, but they are really sort of 200 basis points higher when you take into consideration of the charge that we incurred during the period.

是的。我會加入其中。謝謝，彼得。很好的問題。是的，我想如果你看看過去三個季度，我們調整後的毛利率一直在 24% 左右。我的意思是，我們有兩個季度的成長率為 23%，而上一季的成長率為 27%。坦白說，我們剛剛結束的季度，正如您在我們準備好的演講中看到的那樣，我認為我們調整後的毛利率為23%，但當您考慮到費用時，它們實際上要高出200 個基點我們在這段期間發生的費用。

So I think if we were to get just a little bit of cooperation from the industry and a little bit of growth, I think we could look at something in the 23 to 25, maybe a little bit better than that sort of adjusted gross profit margin. And when we talk about adjusted SG&A, we're kind of running right now around $12 million to $13 million kind of range on an adjusted level, which is down nearly $3.5 million, $4 million from where we began the year.

因此，我認為，如果我們要從行業中獲得一點點合作和一點點增長，我認為我們可以考慮 23 至 25 年的一些東西，也許比那種調整後的毛利率要好一點。當我們談論調整後的 SG&A 時，我們目前的調整水準約為 1,200 萬至 1,300 萬美元，比年初下降了近 350 萬至 400 萬美元。

So as we go into 2024, we're going to get some lap benefit from that. This quite simply from the savings that we've already instituted and already received some benefit from. You also heard from the restructuring effort phase 2 that we're putting in place, we're expecting $1.5 million of additional savings there. So I definitely feel like we've got some more opportunity in front of us with respect to growing the margin at the EBITDA level from here.

因此，當我們進入 2024 年時，我們將從中獲得一些單圈優勢。這很簡單，因為我們已經實行了節約，並且已經從中受益。您還聽說我們正在進行第二階段的重組工作，我們預計將額外節省 150 萬美元。因此，我絕對認為我們面前有更多的機會來提高 EBITDA 水準的利潤率。

Super helpful. Thank you so much. I'll pass it on.

超有幫助。太感謝了。我會把它傳遞下去。

Thanks, Peter.

謝謝，彼得。

Jesse Redmond with Water Tower Research.

傑西雷德蒙與水塔研究中心。

Hi, guys. I had a question on the product side. As we've chatted before, I always enjoy using your products and personally like your rich organic lines and the things that I do in my backyard every season. But I know you've also been working on super proprietary nutrient brands, and I'm just wondering if you had an update there. You could talk a little bit about how those are performing?

嗨，大家好。我有一個關於產品方面的問題。正如我們之前聊過的，我一直喜歡使用你們的產品，我個人喜歡你們豐富的有機產品線以及我每個季節在後院做的事情。但我知道您也一直在研究超級專有營養品牌，我只是想知道您是否有更新。您可以談談這些的表現如何嗎？

Yeah. Thanks, Jesse. And probably the strength of our portfolio and embedded in all this adjusted gross profit progress has really been the proprietary Nutrient brands. I mean, whether it's House & Garden, which honestly over the last three years has been our most consistent business, whether it's HEAVY 16, which had had a tough year last year, but has come back gang busters or finally grow tech, which was a business that we bought out of Canada, it's always been distributed by us in both Canada and the US, has a great presence in Europe as well.

是的。謝謝，傑西。也許我們的產品組合的實力以及所有這些調整後的毛利進步中所體現的確實是專有的營養品牌。我的意思是，無論是House & Garden，老實說，在過去三年裡一直是我們最穩定的業務，無論是HEAVY 16，去年經歷了艱難的一年，但現在已經捲土重來，消滅了黑幫，或者最終發展了科技，這是我們從加拿大收購的企業，一直由我們在加拿大和美國分銷，在歐洲也有很大的影響力。

Grow tech has always done well in the Asian community, and we've really been able to tap back into that market this year. And we've had kind of two quarters in a row of just outstanding growth on that brand as well.

成長技術在亞洲社區一直表現良好，今年我們確實能夠重新進入該市場。我們的品牌也連續兩個季度實現了出色的成長。

But the proprietary nutrients are really the kind of the core of where we're making our money, if you will. And then maybe we're not making a ton of money yet, but it really is driving the higher adjusted gross profit results that we're seeing and it's a been an important part of kind of how this year has held together for us on a slightly above positive adjusted EBITDA and also creating peak free cash flow. So good progress on the nutrients, there really the centerpiece of our entire proprietary branded offering.

但如果你願意的話，專有營養素確實是我們賺錢的核心。也許我們還沒有賺到很多錢，但這確實推動了我們所看到的更高的調整後毛利結果，這是我們今年如何團結一致的重要組成部分略高於調整後的正EBITDA，並創造了自由現金流峰值。在營養成分方面取得如此良好的進展，這確實是我們整個專有品牌產品的核心。

And you see the trends in two terms. I could see this a couple of ways when I'm talking to operators, there's people their contracts have been growing great flower and want to spend more money to get higher THC numbers and more terpenes and maybe a bit more in the premium part of the markets and looking to spend more on that side to create better products, but also we recognize there's a lot of margin pressure.

你可以從兩個方面看到趨勢。當我與營運商交談時，我可以透過幾種方式看到這一點，有些人的合約一直在開花，並且想要花更多的錢來獲得更高的THC 數量和更多的萜烯，也許還有更多的優質部分市場並希望在這方面投入更多資金以創造更好的產品，但我們也認識到存在很大的利潤壓力。

And one thing I've been hearing in some of the other so calls as people are -- consumers are shifting down and going more towards value lines, which makes we think that providing affordable solutions may be of more interest. Curious where you're seeing the push and pull on that side, if you're seeing people that are looking for more value conscious solutions or if you're also seeing people that are looking for whenever it's going to be to push the plant to its maximum potential?

我在其他一些人的呼籲中聽到一件事——消費者正在向下轉變並更多地轉向價值線，這使我們認為提供負擔得起的解決方案可能更令人感興趣。很好奇你在哪裡看到了這一方面的推拉，如果你看到人們正在尋找更具價值意識的解決方案，或者你是否也看到人們正在尋找何時將工廠推向它的最大潛力？

Yes, I think you're right. There's a wide spectrum of demand curve out there, right? And the margin pressure and the overall kind of glut of product over the last couple of years has caused pricing to drop way down. And so people then the corresponding reaction to that is they want to get cheaper inputs and cheaper cost of goods from growing.

是的，我認為你是對的。需求曲線的範圍很廣，對吧？過去幾年的利潤壓力和整體產品過剩導致價格大幅下跌。因此，人們對此的相應反應是他們希望透過成長獲得更便宜的投入和更便宜的商品成本。

And so we've seen some of that until we've launched is we've launched a House & Garden dry product, which is a real value orientation instead of having a liquids, which of course, you shipped the water and you should there's a dilution factor there.

因此，在我們推出之前，我們已經看到了其中的一些情況，我們推出了房屋和花園乾產品，這是真正的價值導向，而不是液體產品，當然，你運送了水，你應該有一個稀釋因子。

So the dry product really gives people a value oriented way yet still has a high quality House & Garden branding on it. That's one of the things we're doing. And we also offer a range of products, both in our proprietary line and in our undistributed line, whether it's the guy green products, whether it's the M.O.A.B, the mother of all Bloom products.

因此，乾產品確實為人們提供了一種以價值為導向的方式，同時仍具有高品質的房屋和花園品牌。這是我們正在做的事情之一。我們也提供一系列產品，無論是我們的專有產品線或未經銷的產品線，無論是 Guy Green 產品，還是 M.O.A.B（所有 Bloom 產品之母）。

All those that there really are part of our portfolio that enable us to give people value, enable us to get people quality, and it does allow for the folks to get that wide range of things you outlined, which is some multimax terpene, some multimax THC. some just want a consistent product to what they've had before and others play in that price market as well.

所有這些確實是我們產品組合的一部分，使我們能夠為人們提供價值，使我們能夠提高人們的素質，並且它確實使人們能夠獲得您概述的廣泛的東西，其中包括一些 multimax 萜烯，一些 multimax四氫大麻酚。有些人只是想要一個與他們以前擁有的產品一致的產品，而有些人也在這個價格市場上發揮作用。

We begin doing some work on sourcing kind of all the way back to the core raw materials to work with our growers on so that we're able to work with them that gives them the access to the product as they impact perhaps even more mics around. So we're really adjusting our approach to the market and to reflect what each of our growers need. And there's a wide range from out there, as you suggested Jesse.

我們開始做一些工作，一直到核心原料的採購，以便與我們的種植者合作，這樣我們就能夠與他們合作，讓他們能夠獲得產品，因為它們可能會影響周圍更多的麥克風。因此，我們確實正在調整我們的市場策略，以反映每個種植者的需求。正如您向傑西建議的那樣，那裡的範圍很廣。

Great. Thank you, guys. That was helpful.

偉大的。感謝你們。這很有幫助。

I appreciate, appreciate the question.

我很感激，很感激這個問題。

There are no further questions at this time. I would now like to turn the floor back over to Bill Taylor for closing comments.

目前沒有其他問題。我現在想把發言權交還給比爾·泰勒，請他發表結束語。

Great. Thank you all for your interest in Hydrofarm. We appreciate you being on the call and look forward to updating you soon on other activity in the business. Thank you.

偉大的。感謝大家對 Hydrofarm 的關注。我們感謝您接聽電話，並期待盡快向您通報該業務的其他活動的最新情況。謝謝。

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

今天的電話會議到此結束。此時您可以斷開線路。感謝您的參與。