Hydrofarm Holdings Group Inc (HYFM) 2024 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Hydrofarm Holdings Group First Quarter 2024 earnings conference call. (Operator Instructions) Please note that this conference is being recorded today, May 14, 2024. I would now like to turn the call over to Anna Kate Heller of ICR. Please go ahead.

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 2024 年第一季財報電話會議。（操作員說明）請注意，本次會議將於今天（2024 年 5 月 14 日）錄製。我現在想將電話轉給 ICR 的 Anna Kate Heller。請繼續。

Thank you and good morning. 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.

謝謝你，早安。今天與我一起參加電話會議的是 Hydrofarm 董事長兼執行長 Bill Toler 和公司財務長 John Lindeman。

By now everyone should have access to our first quarter 2024 earnings release and Form 8-K issued this morning as well as an investor presentation available for reference. These documents are available on the Investors section of hydrocarbons website at www.hydrofarm.com.

現在，每個人都應該可以存取我們今天早上發布的 2024 年第一季財報和 8-K 表格，以及可供參考的投資者簡報。這些文件可在碳氫化合物網站 www.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 and 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能保證未來的業績，因此，您不應過分依賴它們。

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 impact our future operating results and financial condition.

這些陳述也受到許多風險和不確定性的影響，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 morning, everyone. I am pleased to report that in our first quarter, we delivered better results in many key profitability metrics, including adjusted gross profit margin, adjusted EBITDA adjusted EBITDA margin and free cash flow. In addition, March 2024 marked the fifth consecutive month of sequential net sales growth for Hydrofarm. That's the longest string of sequential monthly growth we have seen since our IPO in 2020.

謝謝安娜凱特，大家早安。我很高興地向大家報告，第一季度，我們在許多關鍵獲利指標上取得了更好的成果，包括調整後毛利率、調整後 EBITDA 調整後 EBITDA 利潤率和自由現金流。此外，2024 年 3 月標誌著 Hydrofarm 淨銷售額連續第五個月實現季比成長。這是自 2020 年 IPO 以來我們看到的最長的連續月度增長。

Second, we have now increased our adjusted gross profit margin on a year-over-year basis across the last five consecutive quarters. And we've achieved adjusted positive adjusted EBITDA in three of the past four quarters, demonstrating our ability to continue to operate profitably during the industry downturn. While we are far from satisfied with the $2.7 million of positive adjusted EBITDA that we have reported over the last 12 months it is clear that our cost savings and restructuring actions are making a difference and when sales begin to increase, this volume will make an even larger impact on our bottom line.

其次，我們在過去連續五個季度中調整後的毛利率年增。我們在過去四個季度中的三個季度實現了調整後的正調整 EBITDA，這表明我們有能力在行業低迷時期繼續盈利。雖然我們對過去 12 個月報告的 270 萬美元的正調整 EBITDA 還遠遠不夠滿意，但很明顯，我們的成本節約和重組行動正在發揮作用，當銷售額開始增加時，這一數量將與對我們的底線影響更大。

Our biggest opportunity is to continue to find new and unique ways to drive profitable growth. To accomplish that, we are innovating and expanding our brands to address growers' needs. For example, at the end of Q1, we launched a new and improved photo bio-LED light design, specifically for commercial growing applications that offers 10% more light output, 47% less weight in the fixture and increased efficacy, all at a 20% lower price than comparable models.

我們最大的機會是繼續尋找新的、獨特的方法來推動獲利成長。為了實現這一目標，我們正在創新和擴展我們的品牌，以滿足種植者的需求。例如，在第一季末，我們推出了新的改良型光生物 LED 燈設計，專門針對商業生長應用，光輸出增加 10%，燈具重量減輕 47%，效率提高，所有這些都以 20價格比同類型號低%。

While we are still in the early innings of this product innovation, we did see year-on-year growth on the photo bio brand in Q1. Second, we continued to diversify our revenue stream by driving sales in our non-cannabis markets and broadening our geographic reach. In Q1, our non-cannabis and non-North American revenue sources increased to an estimated 32% of sales, representing approximately a 360 basis points increase from the prior year.

雖然我們仍處於該產品創新的早期階段，但我們確實看到第一季照片生物品牌的同比增長。其次，我們透過推動非大麻市場的銷售和擴大我們的地理覆蓋範圍，繼續實現收入來源多元化。第一季度，我們的非大麻和非北美收入來源估計增加至銷售額的 32%，比前一年增加約 360 個基點。

In addition to our diversification strategies, the regulatory environment is finally getting better for U.S. cannabis growers. It's improved and will help drive US sales drive sales in the industry in the future. Recently, we all read that the rig will propose the reclassification of marijuana from a Schedule one to a Schedule three drug, a significant step in the process to legalize cannabis in the US.

除了我們的多元化策略外，美國大麻種植者的監管環境終於變得更好。它得到了改進，將有助於推動美國的銷售，從而推動未來該行業的銷售。最近，我們都讀到，該組織將提議將大麻從附表一藥物重新分類為附表三藥物，這是美國大麻合法化進程中的重要一步。

Separately in April, we learned that the Florida Supreme Court will allow the state's voters to decide on the November ballot, whether legalize adult use marijuana or not in the state of Florida. These are good signs for our industry while the financial metrics we just reported are central to this earnings call. I want to share a broader view where I believe the beginning the beginning of a turn in the industry.

另外，我們在 4 月獲悉，佛羅裡達州最高法院將允許該州選民在 11 月的投票中決定佛羅裡達州是否允許成人使用大麻合法化。這些對我們的產業來說是個好兆頭，而我們剛剛報告的財務指標是本次財報電話會議的核心。我想分享一個更廣泛的觀點，我相信這個觀點是產業轉變的開始。

I mentioned the five consecutive months of sequential sales growth. That's encouraging, but we're also seeing recent stabilization in our core U.S. business. Some of this is driven by innovation, like the previously mentioned photodiode LED lights and some of it's simply that supply and demand are rebalancing across the country.

我提到了連續五個月的銷售環比成長。這是令人鼓舞的，但我們也看到我們的核心美國業務最近趨於穩定。其中一些是由創新驅動的，例如前面提到的光電二極體 LED 燈，還有一些只是因為全國範圍內的供需正在重新平衡。

Proprietary brands, including grow check Group's organic guy, Agri and photo bio grew Q 1 compared to the prior year, coupled with slight improvement in demand with our tight control on costs, including our adjusted SG&A being 24% lower in Q1 this year versus last and we are well positioned for continued improvement in profitability as volume returns.

專有品牌，包括grow check Group的有機產品、Agri和photo bio，第一季與去年相比有所增長，加上我們嚴格控製成本，需求略有改善，包括今年第一季度調整後的SG&A比去年低24%隨著銷售量的回升，我們已經做好了獲利能力持續改善的準備。

We are reaffirming our full year guidance for net sales, adjusted EBITDA and free cash flow as we remain focused on our brands, diversification of revenue and improved mix and controlling and reducing costs.

我們重申對淨銷售額、調整後 EBITDA 和自由現金流的全年指導，因為我們仍然專注於我們的品牌、收入多元化、改進組合以及控制和降低成本。

With that, I'll turn it over to John to further discuss the details of Q1 and our outlook for 2024. John?

接下來，我將把它交給 John，進一步討論第一季的細節以及我們對 2024 年的展望。約翰？

Thanks, Bill, and good morning, everyone. Net sales for the first quarter were $54.2 million, down 12.9% year over year, driven primarily by a 12.6% decrease in volume mix. The decrease in volume mix was mainly related to oversupply in the cannabis industry. Additionally, pricing was relatively flat in Q1 as we lapped the price concessions made in the first quarter of 2023.

謝謝比爾，大家早安。第一季淨銷售額為 5,420 萬美元，年減 12.9%，主要是由於銷量組合下降 12.6%。銷量下降主要與大麻產業供應過剩有關。此外，由於我們放棄了 2023 年第一季的價格優惠，第一季的定價相對持平。

In the first quarter, consumable products represented approximately 76% of our sales compared to 72% in the first quarter of 2023. This higher mix of consumables was led by a year-over-year sales increase in grow media products, including our own proprietary reach, organics and Guy green brands. During the quarter, we maintained a strong mix of proprietary brands at approximately 57% of our total net sales, relatively consistent to the same period last year.

第一季度，消耗品約占我們銷售額的 76%，而 2023 年第一季為 72%。這種更高的消耗品組合是由生長介質產品的銷售同比增長帶動的，包括我們自己的專有產品、有機產品和蓋伊綠色品牌。本季度，我們保持了強大的自有品牌組合，約佔總淨銷售額的 57%，與去年同期相對穩定。

Gross profit in the first quarter was $10.9 million compared to $11.4 million in the year ago period. Adjusted gross profit was $12.7 million or 23.4% of net sales compared to $14.1 million or 22.6% of net sales. This 80 basis points increase is primarily the result of improved productivity inside our manufacturing plants. This marked our fifth consecutive quarter of year-over-year adjusted gross margin expansion from while we are pleased with our progress we do feel there's some opportunity to further improve upon this metric as we track across the remainder of 2024.

第一季毛利為 1,090 萬美元，去年同期毛利為 1,140 萬美元。調整後毛利為 1,270 萬美元，佔淨銷售額的 23.4%，而調整後毛利為 1,410 萬美元，佔淨銷售額的 22.6%。這 80 個基點的成長主要是由於我們製造工廠內部生產力的提升。這標誌著我們連續第五個季度實現同比調整後毛利率擴張，雖然我們對我們的進展感到滿意，但我們確實認為，在我們追蹤 2024 年剩餘時間時，有機會進一步改進這一指標。

Now a quick update on our restructuring plan. As we previously mentioned, our second phase of restructuring was largely focused on rightsizing our manufacturing footprint, particularly with respect to durable equipment products. We announced today the signing of an agreement in which we are selling the manufacturing equipment and on-site inventory related to our IGE-branded products for approximately $8.7 million in cash.

現在快速更新我們的重組計劃。正如我們之前提到的，我們的第二階段重組主要集中在調整我們的製造足跡，特別是在耐用設備產品方面。我們今天宣布簽署一項協議，以約 870 萬美元現金出售與我們的 IGE 品牌產品相關的製造設備和現場庫存。

As part of the transaction, we will no longer be responsible for carrying the heavy manufacturing, labor and overhead costs for the investment in costly steel aluminum necessary to build our high-quality IG products. Instead post transaction, our new exclusive co manufacture will produce our IG products, helping us to variabilize our cost structure and ultimately improve our profit margin profile on this product set.

作為交易的一部分，我們將不再負責承擔生產高品質中空玻璃產品所需的昂貴鋼鋁投資所需的繁重製造、勞動力和間接費用。交易後，我們新的獨家聯合製造商將生產我們的 IG 產品，幫助我們改變成本結構，並最終改善我們在該產品系列上的利潤率狀況。

We are excited about the prospects for both Hydroform and our new exclusive co manufacturer with whom we expect to enjoy a close relationship going forward. We expect the transaction to close in the second quarter.

我們對 Hydroform 和我們新的獨家合作製造商的前景感到興奮，我們希望與他們保持密切的合作關係。我們預計交易將於第二季完成。

Now let me move on to our selling, general and administrative expense, which we dramatically reduced from the prior year period. In the first quarter, our SG&A expense was $19.6 million compared to $24.4 million. Adjusted SG&A expenses were $12.3 million, nearly a 24% reduction when compared to $16.2 million in the first quarter of '23. This was primarily due to a reduction in facility expenses, professional fees, insurance costs and headcount. It is worth noting that much of this reduction is due to the cost we took out as part of our restructuring actions in the first half of 2023.

現在讓我談談我們的銷售、一般和管理費用，這些費用比去年同期大幅減少。第一季度，我們的 SG&A 費用為 1,960 萬美元，去年同期為 2,440 萬美元。調整後的 SG&A 費用為 1,230 萬美元，與 2023 年第一季的 1,620 萬美元相比減少了近 24%。這主要是由於設施費用、專業費用、保險費用和員工人數的減少。值得注意的是，這一減少很大程度上是由於我們在 2023 年上半年重組行動中扣除了成本。

Adjusted EBITDA was $0.3 million in the first quarter compared to a loss of $2.1 million in the prior year period and the $2.4 million improvement and the 400 basis points expansion in adjusted EBITDA margin, it was driven by our improved adjusted gross profit margins and our reduced adjusted SG&A expenses.

第一季調整後EBITDA 為30 萬美元，而去年同期為虧損210 萬美元，調整後EBITDA 利潤率提高了240 萬美元，且擴大了400 個基點，這是由於我們調整後毛利率的提高和我們的調整後的銷售及行政費用。

We continue to demonstrate our ability to generate positive adjusted EBITDA, which is a testament to the effectiveness of our restructuring and cost-saving initiatives, along with our focus on proprietary brand sales mix.

我們繼續展示我們產生正調整 EBITDA 的能力，這證明了我們重組和成本節約舉措的有效性，以及我們對自營品牌銷售組合的關注。

Moving on to our balance sheet and overall liquidity position. Our cash balance as of March 31st, 2024 was $24.2 million. We ended the first quarter with $120.5 million of term debt and approximately $130 million of total debt, inclusive of finance lease liabilities. Our net debt at the end of the quarter was approximately $106 million. As a reminder, our term loan facility has no financial maintenance covenant and does not mature until October 2028.

接下來是我們的資產負債表和整體流動性狀況。截至 2024 年 3 月 31 日，我們的現金餘額為 2,420 萬美元。第一季結束時，我們的定期債務為 1.205 億美元，總債務約為 1.3 億美元，其中包括融資租賃負債。本季末我們的淨債務約為 1.06 億美元。提醒一下，我們的定期貸款融資沒有財務維持契約，並且要到 2028 年 10 月才會到期。

We continue to maintain a zero balance on our revolving credit facility. And at this point we have not borrowed against our revolver for nine straight quarters. In the first quarter, reported cash used in operating activities of $2.3 million with capital expenditures of $1.4 million, yielding negative free cash flow of $3.7 million.

我們的循環信貸額度繼續保持零餘額。到目前為止，我們已經連續九個季度沒有用左輪手槍借錢了。第一季度，經營活動使用的現金為 230 萬美元，資本支出為 140 萬美元，自由現金流為負 370 萬美元。

I will remind you that the first quarter is a seasonally low period for our free cash flow, and we achieved a significant nearly $7 million improvement from the prior year period, which we accomplished through positive adjusted EBITDA and disciplined reduction of inventories and working capital. We remain on track to deliver our positive free cash flow guidance for the full year.

我要提醒您的是，第一季是我們自由現金流的季節性低谷時期，我們透過積極調整的 EBITDA 以及嚴格減少庫存和營運資金實現了比去年同期顯著的近 700 萬美元的改善。我們仍有望實現全年積極的自由現金流指引。

With that, let me turn to our full year 2024 outlook. We are reaffirming our 2024 guidance, which includes net sales to decline low to high 10s on a percentage basis, adjusted EBITDA. That is positive for the full year 2024. And lastly, positive free cash flow for the full year, which includes the continued expectation of $4 million to $5 million of capital expenditures.

接下來，讓我談談我們對 2024 年全年的展望。我們重申 2024 年的指導，其中包括淨銷售額按百分比從低到高下降 10 %，調整後的 EBITDA。這對 2024 年全年來說是積極的。最後，全年自由現金流為正，其中包括持續預期 400 萬至 500 萬美元的資本支出。

To wrap up, we remain on the right path and will continue to control what we can. We are operating profitably despite lower sales levels. Our restructuring plan and cost-saving initiatives have proven effective. And as Bill discussed before, there are reasons for optimism on the demand side of our industry.

總而言之，我們仍然走在正確的道路上，並將繼續盡我們所能進行控制。儘管銷售水平較低，但我們仍在獲利。我們的重組計劃和成本節約措施已被證明是有效的。正如比爾之前討論的那樣，我們行業的需求方面有理由保持樂觀。

As we look ahead, we are excited about the future of this business and look forward to continued improvement throughout the year. Thank you all for joining us, and we're now happy to answer your questions. Operator, please open the line.

展望未來，我們對這項業務的未來感到興奮，並期待全年持續改進。感謝大家加入我們，我們現在很高興回答您的問題。接線員，請開通線路。

(Operator Instructions) Peter Grom, UBS.

（操作員說明）Peter Grom，UBS。

Thanks, operator. Good morning, everyone. Hope you're doing well. Maybe just some a couple of quick ones from me. Just first on the guidance from the revenue perspective, maybe first, Bill, can you maybe just remind us I might have misheard you, but you talked about some monthly improvements, some of the best you've seen since the IPO.

謝謝，接線生。大家，早安。希望你做得很好。也許只是我的一些快速的。首先是從收入角度的指導，也許首先，比爾，你能否提醒我們，我可能聽錯了，但你談到了一些每月的改進，這是自首次公開募股以來你所看到的最好的一些改進。

So maybe just can you just repeat that for us and then on taking a bigger picture and looking at kind of the reported numbers here, you've had some sequential improvement in sales trends over the last five quarters or so. You started the year kind of at the better end of your top-line guidance range. Can you maybe just help us understand what you're seeing from a top line progression and what you expect from a top line progression from here.

因此，也許您可以以為我們重複一遍，然後從更大的角度看一下這裡報告的數字，在過去五個季度左右的時間裡，您的銷售趨勢已經有了一些連續的改善。今年伊始，您就處於頂線指導範圍的較高端。您能否幫助我們了解您從頂線進展中看到的內容以及您對此處頂線進展的期望。

Is there a reason that it can potentially step back from kind of this low double digit decline we saw in Q4? Or should we expect sequential continued improvement? And I guess within that, are you simply just kind of keeping this range to kind of be cautious given we're still very early in the year?

它有可能從我們在第四季度看到的兩位數的低跌幅中回落嗎？或者我們應該期待連續的持續改進嗎？我想，鑑於我們還處於今年的早期階段，您是否只是保持這個範圍以保持謹慎？

No. Thanks, Peter, and good question. So the first one for clarification. We've seen sequential improvements in revenue really from last October through March of each month had stepped up just a bit October through March. That's five consecutive months there. And that's the longest string of those since our IPO back in the end of 2020, which, of course, you remember some so on that.

不。謝謝，彼得，這是個好問題。所以第一個需要澄清。我們已經看到，從去年 10 月到 3 月，收入確實連續改善，10 月到 3 月每個月的收入都略有上升。這是連續五個月。這是自 2020 年底我們首次公開募股以來最長的一串字串，當然，您還記得一些類似的內容。

Now the other question is around kind of guidance, and we've sort of are at the better end of the range. Now why not move it up there? And what can we expect to see, I think is where you're headed with that when the that we are we are being conservative here.

現在另一個問題是關於指導的類型，我們已經處於範圍的更好一端。現在為什麼不把它移到那裡呢？我認為，當我們在這裡持保守態度時，我們可以期待看到什麼。

It is early in the year on we think things are looking pretty good. But we also had a very large quarter last Q2. So we were lapping up against some big numbers there. And we just don't want to get ahead of ourselves against such an important period here and really May, June, July going through that kind of the core of the of the outdoor season in late spring, early summer stuff. We just really don't want to get ahead of ourselves and train take-up numbers too quickly. We want to see that traction going on for a few more months.

今年年初，我們認為情況看起來相當不錯。但上個季度我們也有一個非常大的季度。所以我們在那裡遇到了一些大數字。我們只是不想在如此重要的時期提前，尤其是五月、六月、七月，經歷春末夏初的戶外季節的核心。我們只是真的不想操之過急，太快地培訓招生人數。我們希望看到這種吸引力還能持續幾個月。

Other things but we are encouraged by recent trends were not overly giddy or optimistic yet, but we do think that things are certainly firming up. As you probably heard for some others and we're seeing some overall sales trends that finished up Q1 and have even starting Q2 that are encouraging for us as we go forward. But much like you suggested, it is early in the year, and we don't want to get ahead of ourselves.

其他事情，但我們對最近的趨勢感到鼓舞，還沒有過於令人眼花繚亂或樂觀，但我們確實認為事情肯定會變得堅挺。正如您可能從其他人那裡聽到的那樣，我們看到一些總體銷售趨勢在第一季結束，甚至從第二季度開始，這對我們的前進是令人鼓舞的。但正如您所建議的那樣，現在還處於年初，我們不想操之過急。

Okay. That's helpful. And then I guess just on the asset sale announced this morning. Can you maybe just remind us how big IG is as part of your kind of revenue mix? And when you talk about kind of the margin improvement as a result of this transaction, is there anything you can kind of share in terms of the magnitude of improvement? I'm just trying to understand and get out of how much you can really move the needle here. Thanks.

好的。這很有幫助。然後我想就在今天早上宣布的資產出售上。您能否提醒我們 IG 在您的收入組合中所佔比重有多大？當您談到此交易帶來的利潤率改善時，您可以分享一下改善幅度嗎？我只是想了解並弄清楚你能在多大程度上真正推動這裡的發展。謝謝。

Yes, sure if you guys, I can jump in on that one. I mean, just in terms of magnitude today, as it sits, our IG products are less than 10% of our total sales somewhere closer to even almost a 5%. And then the intent. So the magnitude is not that dramatic, but we did this because we do think it's a step that can continue to improve the profit margin on those particular products.

是的，當然，如果你們的話，我可以加入其中。我的意思是，就目前的規模而言，我們的 IG 產品佔總銷售額的比例還不到 10%，甚至接近 5%。然後是意圖。因此，幅度並沒有那麼引人注目，但我們這樣做是因為我們確實認為這是可以繼續提高這些特定產品的利潤率的一步。

As you'll recall, in the second half of last year, we did reduce and restructure that facility. The manufacturing facility outside Chicago. We took it down from like roughly 300,000 square feet to 200,000 square feet. We right-sized the staff and made some other improvements in the business but even in spite of those changes, we're still not getting at the kind of volumes we have today.

您可能還記得，去年下半年，我們確實減少並重組了該設施。芝加哥郊外的製造工廠。我們把它的面積從大約 30 萬平方英尺縮小到 20 萬平方英尺。我們調整了員工規模，並對業務進行了一些其他改進，但即使發生了這些變化，我們仍然沒有達到今天的產量。

We're still not getting the profitability we think we should on that business so this step, the step really rectifies that the benefit should show through in the back half of this year.

我們仍然沒有獲得我們認為應該在該業務上獲得的盈利能力，因此這一步，這一步確實糾正了收益應該在今年下半年顯現出來。

Great. Thanks so much and best of luck. I'll pass it on.

偉大的。非常感謝，祝你好運。我會把它傳遞下去。

Thanks, Peter.

謝謝，彼得。

Andrew Carter, Stifel.

安德魯卡特，斯蒂菲爾。

Thank you. Good morning. I guess the first thing I wanted to ask is kind of within the sale of IG, I know that last quarter there was kind of a message either shrink to profitability or grow. I guess heavy picked a firm path as IGE. signal that exactly and has kind of the landscaping or you're thinking about the world changed following Hawthorne's announcement to partner with BFG?

謝謝。早安.我想我想問的第一件事是關於 IG 的出售，我知道上個季度有一種信息，要么盈利能力下降，要么增長。我想 Heavy 選擇了一條堅定的 IGE 道路。確切地表明這一點並且有某種景觀美化，或者您正在考慮霍桑宣布與 BFG 合作後世界發生了變化？

No, not really. I think IG is a step that, as John mentioned, kind of assures more better profitability from that smaller business positions us really more cleanly now as a manufacturer brands in the consumable space and really gets us out of that durable piece. IG was the only durable piece we had that's not an area where we spend a lot of time or have a lot of synergy on.

不，不是真的。我認為 IG 是一個步驟，正如約翰所提到的那樣，可以確保從較小的企業中獲得更好的盈利能力，使我們現在作為消費品領域的製造商品牌更加清晰，並真正讓我們擺脫耐用產品。IG 是我們擁有的唯一耐用的部分，這不是我們花費大量時間或沒有太多協同作用的領域。

So we don't we didn't think being there was a good, good fit and also the previous owner who we sold the assets back to and it's important to recognize we didn't sell that business back to him. We still own the brand. We still have the business should have little or no effect on our revenue through IG and will improve our profit margin.

因此，我們不認為那裡是一個非常非常適合的人，也是我們將資產賣回給的前任所有者，重要的是要認識到我們沒有將該業務賣回給他。我們仍然擁有該品牌。我們仍然擁有的業務應該對我們通過 IG 的收入影響很小或沒有影響，並且會提高我們的利潤率。

So back to your larger question, this does not sort of and cast our direction in terms of either getting smaller, getting bigger. This is really just kind of a tactical step to clean up the portfolio and make us more focused on the consumables where we're now doing 75% of our business in total or so.

回到你更大的問題，這並不能決定我們的方向是變小還是變大。這其實只是一種戰術步驟，目的是清理產品組合，讓我們更專注於消耗品，目前消耗品占我們業務總量的 75% 左右。

We still are looking for options to expand our footprint and to get Canada, where I would call that, that Hydrofarm two data, which were not there yet. So ideas out there include different kinds of combinations, different kinds of ideas. So we're still working on that and know that that is an important step for us to be ready for the industry, which does feel like it's starting to strengthen a bit.

我們仍在尋找擴大我們足跡的選項，並獲取加拿大（我稱之為 Hydrofarm 的兩個數據），但這些數據目前還沒有。因此，那裡的想法包括不同類型的組合、不同類型的想法。因此，我們仍在為此努力，並且知道這是我們為該行業做好準備的重要一步，該行業確實開始有所加強。

Got it. And then I guess a second question is the pricing looked pretty decent at least compared to what Hawthorne reported and then kind of GrowGen implied in terms of kind of the promotional activity out there. Would you say where would you say that is right now are you foregoing in the business?

知道了。然後我想第二個問題是，至少與霍桑報告的價格相比，定價看起來相當不錯，然後 GrowGen 在促銷活動方面暗示了這一點。您能說您現在在業務中處於什麼位置嗎？

And I guess when that and within that minus 12 six volume mix decline, was there any portion of that that was purposeful trading out more profitable volume versus lower? I know that there was proprietary outperform, but I'll just stop there.

我猜當在負 12 六成交量混合下降的情況下，是否有任何部分是有目的的交易更多利潤的成交量而不是更低的成交量？我知道有專有的表現優於大盤，但我就到此為止。

No, I don't think of the 12.6%. A lot of it was intentional. I mean, I think it's just sort of continue conditions that we see in the industry. The good news there is obviously those declines have been improving as we've been marching across the calendar year, the last 18 months. So So good news there.

不，我沒想到 12.6%。很多都是故意的。我的意思是，我認為這只是我們在行業中看到的某種持續狀況。好消息是，隨著我們在過去 18 個月的歷年中不斷前進，這些下降顯然正在改善。好消息。

And then the pricing being relatively flat, Andrew, which you called out really relates to price concessions. We made in the first quarter last year and a little bit in the second quarter last year as well on some of our older technology lighting products, which we were really pushing ourselves through during that period of time. So hopefully that all fits Florida.

然後定價相對平坦，安德魯，你所說的這確實與價格優惠有關。我們在去年第一季和去年第二季都取得了一些成果，在一些較舊的技術照明產品上也取得了一些成果，在那段時間我們確實在推動自己完成這些產品。希望這一切都適合佛羅裡達州。

Thanks. I'll pass it on.

謝謝。我會把它傳遞下去。

Thanks, Andrew.

謝謝，安德魯。

Jesse Redman, Water Tower Research.

傑西·雷德曼，水塔研究。

Good morning, guys. Congratulations on the quarter. I had a question if you'd like improving macro. I had a question about the improving macro environment that you referenced, one of the big things going on as potentially finally seeing some political progress, although you're not explicitly impacted by two easy removal.

早上好傢伙。恭喜本季。我有一個問題，你是否想改進宏觀。我有一個關於您提到的改善宏觀環境的問題，正在發生的一件大事可能最終會看到一些政治進展，儘管您沒有受到兩次簡單刪除的明確影響。

Can you talk about how Schedule three may benefit your business and do you expect to see the purse strings loosening that's imminent at some of the bigger MSOs as they start to get more cash flow?

您能否談談附表三如何使您的業務受益？

Yes, I think that there are numbers out there that say they're there could be up to couple of billion dollars that used to be paid in taxes that now can be reinvested back in the industry. And obviously, that's kind of good news for everybody, right? And we ultimately go out and fight for our share of that. So that's the impact that we expect, which is terrific.

是的，我認為有數字表明，過去可能有高達數十億美元的稅收可以重新投資回該行業。顯然，這對每個人來說都是好消息，對吧？我們最終會出去爭取我們的份額。這就是我們所期望的影響，這是非常棒的。

But the reality is this is still a long process, right? It's still now been recommended and there's going to be hearings and there's going to be this is going to be that all this stuff is going to take time.

但現實是這仍然是一個漫長的過程，對嗎？現在仍然有人建議這樣做，並且將會舉行聽證會，所有這些事情都需要時間。

And I think that it's important and to recognize that we're focused on operating today and finding the right solution for our company today. And all those things will happen down the road, we believe, but we're not sitting around waiting for the government to solve our problems or the government to fix our business. We're making sure that we're operating profitably and figuring out the right long-term solution for Hydrofarm as these things get implemented over the next, let's call it 6, 12, 18, 24 months.

我認為認識到我們現在專注於營運並為我們公司尋找正確的解決方案非常重要。我們相信，所有這些事情都會在未來發生，但我們不會坐等政府解決我們的問題或政府解決我們的業務。我們將確保我們的營運能夠獲利，並為 Hydrofarm 找到正確的長期解決方案，因為這些事情將在接下來的 6、12、18、24 個月內實施。

And my second question is at the state level. We obviously have some good opportunities ahead of us with potentially Florida and maybe Pennsylvania, but this summer we have Ohio rolling out, which is happening more quickly and in a manner that looks like it should be a pretty a pretty good market for most operators.

我的第二個問題是州層級的。顯然，我們在佛羅裡達州和賓夕法尼亞州可能有一些很好的機會，但今年夏天我們在俄亥俄州推出，這種情況發生得更快，而且對於大多數運營商來說，這應該是一個相當不錯的市場。

Can you talk a little bit about Ohio and what that market potentially represents for you?

您能談談俄亥俄州以及該市場對您來說可能代表什麼嗎？

Yes, Ohio has started to show some vibrancy in our and we're growing very nicely on a small base in Ohio just as we are in Florida and some of the other rollouts, states like Missouri and other places. So we are we are seeing that start to pick into the industry, which is really encouraging.

是的，俄亥俄州已經開始展現出一些活力，我們在俄亥俄州的一個小基地上發展得非常好，就像我們在佛羅裡達州和其他一些州、密蘇裡州和其他地方一樣。因此，我們看到人們開始進入這個行業，這確實令人鼓舞。

The other thing we are seeing across the pond, if you will, is with Germany passing 90 million people that are I'm very cannabis friendly and it's a highly consumed product in Germany. We are well positioned over there with all of our brands. We've rolled out. We had a business in Spain that's positioned across all of Europe for a number of years.

如果你願意的話，我們在大洋彼岸看到的另一件事是，德國有超過 9000 萬人對大麻非常友好，大麻在德國是一種高度消費的產品。我們的所有品牌都在那裡處於有利地位。我們已經推出了。我們在西班牙的業務多年來一直遍布整個歐洲。

So we are moving resources and people and assets into Germany to be ready to take advantage of that. And importantly, the way that Germany laws work, it's going to be a very favorable home market. It's not going to be driven by LPs or MSOs are large entities can be driven much more by the at-home grower, which is a terrific thing for a company like ours and brands that people can use at home and know and trust.

因此，我們正在將資源、人員和資產轉移到德國，以便做好利用這一點的準備。重要的是，按照德國法律的運作方式，這將是一個非常有利的國內市場。它不會由 LP 或 MSO 驅動，大型實體可以更多地由家庭種植者驅動，這對於像我們這樣的公司和人們可以在家中使用、了解和信任的品牌來說是一件了不起的事情。

And so we think that while there's some states that are popping here in the US are showing some nice vibrance. We also think that the Germany opportunity really opens us up to a, call it another 100 million consumers if you will, of people that are very cannabis friendly and a culture that we think is going to be right for us to growing.

因此，我們認為，雖然美國的一些州正在湧現，但它們卻表現出了一些良好的活力。我們也認為，德國的機會確實讓我們接觸到了，如果你願意的話，可以稱之為另外一億消費者，他們對大麻非常友好，我們認為這種文化適合我們發展。

Great, I appreciate the comment.

太好了，我很欣賞你的評論。

Thank you, Jesse.

謝謝你，傑西。

Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to Bill Toler for his closing comments. Bill?

謝謝。女士們、先生們，由於沒有其他問題了，我現在將會議交給比爾·托勒（Bill Toler）發表總結評論。帳單？

Thank you, Ryan, and thank you everyone for supporting and following Hydrofarm. We look forward to further updates through the summer and hope everyone's doing well. Thanks so much.

謝謝你，Ryan，也謝謝大家對 Hydrofarm 的支持與關注。我們期待整個夏天的進一步更新，並希望每個人都做得很好。非常感謝。

Thank you. The confidence of Hydrofarm Holdings Group has now concluded. Thank you for your part and you may now disconnect your line.

謝謝。Hydrofarm Holdings Group 的信心現已結束。感謝您的參與，您現在可以斷開線路了。