Hydrofarm Holdings Group Inc (HYFM) 2025 Q2 法說會逐字稿

All sides on hold. We appreciate your patience, and we ask that you please continue to stand by. Please stand by. Your program is about to begin.

各方暫停談判。感謝您的耐心等待，請繼續保持聯繫。請稍候。您的程式即將開始。

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Hydrofarm Holdings Group second quarter 2025 earnings conference call. (Operator Instructions) Please note that this conference is being recorded today, August 12, 2025.

各位女士、先生，大家好，感謝你們的耐心等待。歡迎參加 Hydrofarm Holdings Group 2025 年第二季財報電話會議。（操作員說明）請注意，本次會議正在錄製，時間是2025年8月12日。

I would now like to turn the call over to John Di Domenico at ICR to begin.

現在我將把電話交給 ICR 的 John Di Domenico 開始。

Thank you, and good morning. With me on the call today is John Lindeman, Hydrofarm's Chief Executive Officer; and Kevin O'Brien, the company's Chief Financial Officer. By now, everyone should have access to our second quarter 2025 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 Hydrofarm's website at www.hydrofarm.com. Before we begin our formal remarks, please note that our discussion today will include forward-looking statements.

謝謝，早安。今天和我一起參加電話會議的有 Hydrofarm 的執行長 John Lindeman 和公司的財務長 Kevin O'Brien。現在，所有人都應該可以查閱我們今天早上發布的 2025 年第二季財報和 8-K 表格，以及可供參考的投資人簡報。這些文件可在Hydrofarm公司網站www.hydrofarm.com的投資者關係欄位中查閱。在我們正式發言之前，請注意，我們今天的討論將包含前瞻性陳述。

These forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from our current expectations.

這些前瞻性陳述並非對未來績效的保證，因此，您不應過度依賴它們。這些聲明也受到許多風險和不確定因素的影響，實際結果可能與我們目前的預期有重大差異。

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. Lastly, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance.

有關可能影響我們未來經營業績和財務狀況的風險的更詳細討論，請各位參閱我們最近向美國證券交易委員會提交的文件。最後，在今天的電話會議中，我們將討論非GAAP指標，我們認為這些指標對於評估我們的表現是有用的。

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.

不應孤立地看待這些補充信息，也不應將其視為按照公認會計準則編制的結果的替代品，有關與可比公認會計準則指標的調節表可在我們的盈利報告中查閱。

With that, I would like to turn the call over to John Lindeman.

接下來，我將把電話交給約翰·林德曼。

Thank you, John, and good morning, everyone. During the second quarter, we delivered our 12th consecutive quarter of year-over-year adjusted SG&A savings with a nearly 16% reduction in expenses compared to 2024. These substantial savings helped drive a small sequential improvement in adjusted EBITDA compared to the first quarter of this year despite the tariff environment.

謝謝你，約翰，大家早安。第二季度，我們連續第 12 個季度實現了同比調整後的銷售、一般及行政費用節省，與 2024 年相比，支出減少了近 16%。儘管面臨關稅環境，但這些可觀的節省仍幫助推動了調整後 EBITDA 與今年第一季相比的小幅環比增長。

Our disciplined approach to working capital management and inventory optimization also allowed us to deliver positive free cash flow for the quarter. We also took a significant step in the quarter with the initiation of a new restructuring plan to enhance our focus on higher-margin brands and to further optimize our distribution and manufacturing network.

我們採取的嚴謹的營運資金管理和庫存優化措施，也使我們能夠在本季實現正的自由現金流。本季度，我們還採取了一項重要舉措，啟動了一項新的重組計劃，以加強我們對高利潤品牌的關注，並進一步優化我們的分銷和製造網絡。

We expect this initiative over the next several quarters to drive higher-quality revenue streams and improve our level of profitability. Second quarter sales and sales mix came in softer than anticipated as industry headwinds continue to impact our top line performance, in particular, on the durable side of our business.

我們預計這項措施將在未來幾季帶來更高品質的收入來源，並提高我們的獲利水準。第二季銷售額和銷售組合均低於預期，因為產業逆風持續影響我們的營收表現，尤其是在我們耐用品業務方面。

There continues to be oversupply of challenges in the market, consolidation across the retail customer base and minimal real progress made by the government on rescheduling and safer banking. These dynamics have led to inconsistent demand, most notably on the lighting and durables side of our business, which is heavily weighted towards proprietary brands. With that said, there are several positives to call out from our performance within the quarter.

市場挑戰依然過多，零售客戶群不斷整合，而政府在債務重整和更安全的銀行服務方面幾乎沒有任何實質進展。這些動態導致了需求的不穩定，尤其是在我們業務的照明和耐用品方面，而這些業務又嚴重依賴自有品牌。儘管如此，本季我們的業績中也有幾個值得稱道的正面面向。

To start, we saw solid year-on-year performances on a relative basis from several of our proprietary consumable brands in the nutrients and grow media categories. And while the lighting and durables side of the business overall was very soft in Q2, we did see strong performance from our SunBlaster brand behind early results from our innovative and award-winning Nano and Halo plant lights.

首先，我們看到，我們旗下幾個自有品牌的營養液和生長介質類別的消費品，其年比表現相當穩健。雖然第二季照明和耐用品業務整體表現疲軟，但我們的 SunBlaster 品牌憑藉著創新且屢獲殊榮的 Nano 和 Halo 植物燈的早期成果，實現了強勁的成長。

As part of this initiative to drive high-quality sales, we also have additional new branded products launching later this year. During the quarter, we also experienced positive performance in some of our newer distributed brands. Our team is excited to work with our distributed brand partners who are committed to aligning closely with us and investing behind their brands to support growth and deliver strong margin and cash flow characteristics.

作為推動高品質銷售的舉措之一，我們也將在今年稍後推出更多新的品牌產品。本季度，我們一些較新的分銷品牌也取得了積極的業績。我們的團隊很高興能與我們的分銷品牌合作夥伴合作，他們致力於與我們緊密合作，並投資於他們的品牌，以支持成長並實現強勁的利潤率和現金流特徵。

However, we are becoming increasingly selective and in our restructuring program announced today, we took the step to rationalize several distributed brands that do not fit those characteristics. We saw further progress in our noncannabis and non-US Canadian sales mix during the quarter.

然而，我們正變得越來越挑剔，在今天宣布的重組計劃中，我們採取措施對一些不符合這些特點的分銷品牌進行合理化調整。本季度，我們在非大麻產品和非美國加拿大地區的銷售組合方面取得了進一步進展。

Our international sales, in particular, performed well, improving year-on-year with nice results in select European and Asian countries. We remain on pace to improve upon the full year metric we achieved last year and continue to seek ways to diversify our revenue streams. Under our fully integrated ERP system, we have begun to realize improved working capital management, which helped to deliver positive free cash flow.

我們的國際銷售業績尤其出色，年成長，在部分歐洲和亞洲國家取得了不錯的成績。我們仍有望在去年全年指標的基礎上有所改進，並將繼續尋求實現收入來源多元化的方法。借助我們完全整合的ERP系統，我們已經開始實現營運資金管理的改善，這有助於實現正的自由現金流。

Managing our free cash flow and our overall financial position remains a key area of focus for us, and we remain on pace to deliver positive free cash flow for the last nine months of 2025. We have made it clear that our top strategic priority is to drive diverse, high-quality revenue streams. After positive momentum in the first quarter of this year, which saw our proprietary brand sales mix improved to 55%, our mix softened in the second quarter due in large part to poor industry demand levels in the durables category.

管理我們的自由現金流和整體財務狀況仍然是我們關注的重點領域，我們仍有望在 2025 年最後九個月實現正自由現金流。我們已明確表示，我們的首要策略重點是推動多元化、高品質的收入來源。今年第一季度，我們的自有品牌銷售佔比提升至 55%，發展動能良好。但第二季度，由於耐用品產業需求疲軟，我們的自有品牌銷售佔比下降。

Behind our restructuring initiatives and select planned investments in the second half, we still expect to improve our proprietary mix and adjusted gross profit margin for the full year. Last quarter, we indicated that we would conduct a thorough review of our product portfolio and distribution network to better align with estimated sales demand in the current industry and tariff environment.

憑藉我們的重組計劃和下半年的部分投資，我們仍然期望全年能夠改善我們的自有產品組合和調整後的毛利率。上個季度，我們表示將對我們的產品組合和分銷網絡進行全面審查，以更好地適應當前行業和關稅環境下的預期銷售需求。

In Q2, we completed that process and as a result, initiated our new 2025 restructuring plan. This plan further streamlines our product portfolio and our manufacturing and distribution footprint. These actions include a large reduction in the number of SKUs and distributed brands that we will carry going forward.

第二季度，我們完成了這個過程，並因此啟動了新的 2025 年重組計畫。該計劃進一步精簡了我們的產品組合以及生產和分銷佈局。這些措施包括大幅減少我們今後將銷售的 SKU 數量和分銷品牌數量。

By trimming these underperforming products, we reduced our purchasing and warehousing complexity, reduce our space and personnel requirements, limit our working capital investment and enable our sales team to focus their efforts on higher value brands. We estimate these actions collectively will result in annual cost savings in excess of $3 million plus incremental improvements in working capital.

透過削減這些表現不佳的產品，我們降低了採購和倉儲的複雜性，減少了空間和人員需求，限制了營運資金投入，並使我們的銷售團隊能夠將精力集中在更高價值的品牌上。我們估計這些措施加起來每年可節省成本超過 300 萬美元，並逐步改善營運資金狀況。

And importantly, we expect approximately one-third of the total benefit to start showing through in the second half of 2025. Our strong history of impactful restructuring and cost-saving measures gives us confidence that we will, over time, realize these benefits.

更重要的是，我們預計總效益的大約三分之一將在 2025 年下半年開始顯現。我們過往在重組和節省成本方面取得的顯著成效，使我們有信心，隨著時間的推移，我們將實現這些收益。

In the second half of 2025, we also plan to invest more in marketing behind new innovations, improve our brand websites and further refine our internal CRM capabilities. All of these actions are oriented to drive higher-quality revenue streams. I would like to give an update on the ongoing uncertain tariff environment.

2025 年下半年，我們也計劃加大對新創新產品行銷的投入，改善我們的品牌網站，並進一步完善我們的內部客戶關係管理能力。所有這些舉措都是為了推動更高品質的收入來源。我想就目前不確定的關稅環境作個最新情況報告。

As a reminder, our primary tariff exposure is in our durables business as we source certain lighting and equipment products from China. We typically maintain larger inventory positions in products sourced from overseas. And as such, we have not yet realized a dramatic impact from tariffs outside of approximately $300,000 of incremental costs year-to-date.

再次提醒，我們面臨的主要關稅風險來自耐用品業務，因為我們從中國採購某些照明和設備產品。我們通常會對從海外採購的產品保持較大的庫存水準。因此，除了今年迄今約 30 萬美元的額外成本外，我們尚未感受到關稅帶來的重大影響。

We are managing our business to minimize the impacts from tariffs and are carefully purchasing from vendors abroad in situations where the incremental tariff costs can either be shared with our suppliers or passed on to customers in a limited manner. In addition, we have and will continue to enact pricing actions when necessary and where possible in an effort to preserve our margins.

我們正在管理業務，以盡量減少關稅的影響，並且在可以與供應商分擔或以有限的方式轉嫁給客戶的情況下，謹慎地從國外供應商採購。此外，我們已經並將繼續在必要時和可能的情況下採取價格措施，以努力保持我們的利潤率。

With all of that said, it's important to note that the largest part of our business is our consumables portfolio and this business is mainly sourced from within the US and Canada, albeit there is a portion sourced from other countries. We are increasingly focused on our proprietary consumables business. And with tariffs primarily affecting durables, it is logical for us to maintain that focus. We are executing what is within our control.

綜上所述，值得注意的是，我們業務的最大部分是耗材組合，而這項業務主要來自美國和加拿大，儘管也有一部分來自其他國家。我們越來越重視自主研發的耗材業務。由於關稅主要影響耐用品，因此我們繼續關注耐用品是合乎邏輯的。我們正在執行我們所能做的事情。

We believe that by concentrating our efforts on a more optimized product portfolio and manufacturing and distribution footprint, we are positioned much better to drive diverse, high-quality revenue streams, improve profit margins and strengthen our financial position.

我們相信，透過專注優化產品組合、生產和分銷佈局，我們能夠更好地推動多元化、高品質的收入來源，提高利潤率，並增強我們的財務實力。

With that, I'll hand it over to Kevin to further discuss the details of our second quarter financial results and our new 2025 restructuring plan.

接下來，我將把發言權交給凱文，讓他進一步討論我們第二季的財務表現和新的 2025 年重組計劃的細節。

Thanks, John, and good morning, everyone. Net sales for the second quarter were $39.2 million, down 28.4% year-over-year, driven primarily by a 27.9% decline in volume mix and a 0.4% decline in pricing. The declines were primarily related to industry oversupply. While we were successful at driving improvements in our higher-margin proprietary brands during the first quarter, continued industry headwinds and lower performance in our durable lighting and equipment products led to a decline in Q2.

謝謝你，約翰，大家早安。第二季淨銷售額為 3,920 萬美元，年減 28.4%，主要原因是銷量下降 27.9% 和價格下降 0.4%。下跌的主要原因是產業供應過剩。雖然我們在第一季成功地推動了高利潤自有品牌的改進，但持續的行業逆風以及耐用照明和設備產品業績的下降導致第二季業績下滑。

We are focused on improving our proprietary brand mix in the second half of 2025 and are planning increased investments behind our key brands, along with executing our restructuring plan, as John discussed earlier.

我們計劃在 2025 年下半年改善我們的自有品牌組合，並計劃加大對主要品牌的投資，同時執行我們的重組計劃，正如約翰之前所討論的那樣。

Consumable products outperformed durable products on a relative basis. And as a result, our consumables mix ticked up to approximately 80% of sales in the second quarter. Gross profit in the second quarter was $2.8 million or 7.1% of net sales compared to $10.9 million or 19.8% of net sales in the year ago period.

從相對角度來看，消耗品的表現優於耐用品。因此，第二季我們的消耗品銷售額佔比上升至約 80%。第二季毛利為 280 萬美元，佔淨銷售額的 7.1%，而去年同期毛利為 1,090 萬美元，佔淨銷售額的 19.8%。

Second quarter 2025 gross profit was negatively impacted by $3.3 million of restructuring charges we incurred during the quarter related to noncash inventory write-downs. Adjusted gross profit was $7.5 million or 19.2% of net sales compared to $13.3 million or 24.4% of net sales last year.

2025 年第二季毛利受到 330 萬美元重組費用的負面影響，該費用與我們在該季度發生的非現金存貨減損有關。調整後的毛利為 750 萬美元，佔淨銷售額的 19.2%，而去年同期為 1,330 萬美元，佔淨銷售額的 24.4%。

The decrease was due to lower net sales and a decline in proprietary brand sales mix. As John said, we continue to expect improvement in adjusted gross profit margins for the full year 2025 as we improve our mix and reduce costs. I'll now provide further detail on our new restructuring plan and cost-saving initiatives.

下降的原因是淨銷售額減少和自有品牌銷售佔比下降。正如約翰所說，隨著我們改進產品組合和降低成本，我們預計 2025 年全年調整後的毛利率將繼續提高。接下來，我將詳細介紹我們的新重整計畫和成本節約措施。

In response to the prolonged industry headwinds as well as the evolving tariff situation, during the second quarter, we initiated a restructuring plan to narrow and optimize the size and scope of our product portfolio and related footprint. The restructuring plan entails rationalizing over one-third of SKUs and brands in our product portfolio across the US.

為應對持續的行業逆風以及不斷變化的關稅形勢，我們在第二季度啟動了重組計劃，以縮小和優化我們的產品組合及相關業務規模和範圍。重組計劃包括對我們在美國的產品組合中超過三分之一的 SKU 和品牌進行合理化調整。

and in Canada, where our portfolio is much larger given the nature of our Garden Center business. The restructuring is intended to simplify our offering and optimize how we manage our inventory as one operating segment. In connection with the product portfolio optimization, we are reducing our footprint, including in our distribution center and manufacturing facilities.

在加拿大，由於我們園藝中心業務的性質，我們的投資組合要大得多。此次重組旨在簡化我們的產品和服務，並優化我們作為一個營運部門的庫存管理方式。為了優化產品組合，我們正在減少我們的佔地面積，包括我們的配送中心和製造工廠。

We estimate annual cost savings in excess of $3 million and working capital benefits from the restructuring, primarily from a reduction in inventory. We also believe this restructuring will improve efficiency, tighten our focus on our key proprietary brands and help deliver improved profitability.

我們預計，重組每年可節省成本超過 300 萬美元，並帶來營運資金效益，主要來自庫存的減少。我們也相信，此次重組將提高效率，使我們更加專注於核心自有品牌，並有助於提高獲利能力。

Moving on to our selling, general and administrative expense. In the second quarter, our SG&A expense was $16.1 million compared to $18.7 million last year. Adjusted SG&A expenses were $9.8 million, a 16% reduction when compared to $11.6 million last year. This was our 12th consecutive quarter of meaningful year-over-year adjusted SG&A savings. We are now operating well below our pre-IPO quarterly adjusted SG&A levels from 2020, a testament to the effectiveness of our cost savings initiatives.

接下來是銷售、一般及行政費用。第二季度，我們的銷售、一般及行政費用為 1,610 萬美元，去年同期為 1,870 萬美元。經過調整後的銷售、一般及行政費用為 980 萬美元，比去年的 1,160 萬美元減少了 16%。這是我們連續第 12 個季度實現了經調整後的銷售、一般及行政費用同比顯著節省。我們目前的營運成本遠低於 2020 年上市前的季度調整後銷售、一般及行政費用水平，這證明了我們節約成本措施的有效性。

Adjusted EBITDA was a loss of $2.3 million in the second quarter. The decline from the prior year was due to lower net sales and adjusted gross profit margin, partially offset by adjusted SG&A savings. While the year-over-year comparison was unfavorable, we did improve sequentially compared to the first quarter, while also covering incremental tariff costs. Moving on to the balance sheet and overall liquidity position. Our cash balance as of June 30, 2025, was $11 million.

第二季調整後 EBITDA 虧損 230 萬美元。與前一年相比的下降是由於淨銷售額和調整後毛利率下降，部分被調整後的銷售、一般及行政費用節省所抵銷。雖然同比數據不理想，但與第一季相比，我們季比有所改善，同時也彌補了新增關稅成本。接下來分析資產負債表和整體流動性狀況。截至 2025 年 6 月 30 日，我們的現金餘額為 1,100 萬美元。

During the quarter, we made a $4.5 million prepayment on our term loan and ended the second quarter with $114.5 million of principal balance on the term loan and approximately $122.6 million of total debt, inclusive of financial lease liabilities. Our net debt at the end of the second quarter was approximately $111.6 million. As a reminder, our term loan facility has no financial maintenance covenant and does not mature until October 2028.

本季度，我們提前償還了 450 萬美元的定期貸款，第二季末，定期貸款本金餘額為 1.145 億美元，總債務約為 1.226 億美元，其中包括融資租賃負債。第二季末，我們的淨債務約為 1.116 億美元。再次提醒，我們的定期貸款沒有財務維持條款，並且要到 2028 年 10 月才會到期。

We also continue to maintain a 0 balance on our revolving credit facility. As a reminder, in May, we entered into a seventh amendment to our revolving credit facility, which extended the maturity date to June 30, 2027, and reduced the maximum commitment amount to $22 million.

我們的循環信貸額度餘額也持續維持為零。提醒一下，今年 5 月，我們對循環信貸安排進行了第七次修訂，將到期日延長至 2027 年 6 月 30 日，並將最高承諾金額減少至 2,200 萬美元。

With cash on hand and approximately $9 million of availability on our revolving line of credit, we had $20 million of total liquidity as of June 30, 2025. In the second quarter, cash from operating activities was $1.7 million and capital expenditures were $0.3 million, yielding free cash flow of $1.4 million. Working capital benefits helped to deliver sequential improvements in free cash flow. We believe that we will deliver positive free cash flow for the last nine months of 2025.

截至 2025 年 6 月 30 日，我們手頭上有現金，循環信貸額度中約有 900 萬美元可用，總流動資金為 2000 萬美元。第二季度，經營活動產生的現金為 170 萬美元，資本支出為 30 萬美元，自由現金流為 140 萬美元。營運資金的改善有助於實現自由現金流的持續成長。我們相信，在 2025 年最後九個月，我們將實現正的自由現金流。

To close, during the second quarter of 2025. We took significant steps to better position our business for improved performance as we move forward. We are committed to executing our strategic priorities and remain optimistic for an eventual demand turnaround in the industry. Thank you for joining us today, and we look forward to providing another update in November on our third quarter call. We are now happy to answer your questions.

最後，預計在 2025 年第二季完成。我們採取了重要措施，以更好地調整業務方向，從而在未來的發展中取得更好的績效。我們致力於執行我們的策略重點，並對產業需求最終好轉保持樂觀。感謝您今天參加我們的電話會議，我們期待在11月份的第三季電話會議上為您提供最新進展。我們現在很樂意回答您的問題。

Operator, please open the line.

接線員，請接通線路。

(Operator Instructions)

（操作說明）

Dmitry Silversteyn, Water Tower Research LLC.

Dmitry Silversteyn，Water Tower Research LLC。

Good morning guys. Thank you for taking my question. I want to revisit the tariff impact you mentioned. We've gotten a little bit more of a clarity here as we ended the second quarter with respect of EU and UK some of the Asian countries where you're trying to grow China tariff deadline has been extended here by another three months while negotiations are going on.

各位早安。感謝您回答我的問題。我想重新探討您提到的關稅影響。隨著第二季結束，我們對歐盟和英國的情況有了更清晰的了解。在試圖拓展中國市場的亞洲國家，關稅期限已延長三個月，談判仍在進行中。

So can you talk a little bit more about sort of what you expect? What you're seeing currently in terms of tariffs? And what you expect to see should these negotiations with China not deliver the results that people expect?

那麼，您能否再詳細談談您的期望呢？您目前看到的關稅狀況​​如何？如果與中國的談判沒有取得人們預期的結果，你希望看到什麼？

Yeah, good morning, Dmitry, thanks for the question. Yes, I mean, look, tariffs are certainly hard to track with the news coming out daily. But given how the size, scope and speed of tariff changes have been occurring, it's certainly hard to predict the exact impact on our gross margin going forward.

是的，早安，德米特里，謝謝你的提問。是的，我的意思是，你看，由於每天都有新的消息發布，關稅確實很難追蹤。但鑑於關稅變化的規模、範圍和速度，很難預測其對我們未來毛利率的確切影響。

I would say thus far in the first half of 2025, I think we've been reasonably successful in covering the incremental cost of tariffs that were incurred on products that mostly for us for were sourced of China during that time period. Going forward in the second half, we'll continue to manage within our control with respect to tariffs.

我認為，截至 2025 年上半年，我們已經相當成功地彌補了在此期間因產品（對我們來說，這些產品大多來自中國）而產生的額外關稅成本。展望下半年，我們將繼續在關稅方面保持可控狀態。

We're doing this by sort of very carefully purchasing from vendors abroad in situations where the incremental tariff costs can be shared or passed on to our customers in a limited manner. We're also continuing to review alternative sourcing arrangements from abroad and domestically.

我們採取的策略是，在能夠有限度地分擔或轉嫁額外關稅成本的情況下，非常謹慎地從國外供應商處採購。我們也持續審查來自國外和國內的其他採購安排。

And we're also focusing our business on proprietary manufacturer brands, which are at least on the manufacturer side, for us, predominantly consumable products that we make here in the US and Canada. These had the smallest exposure to tariffs and related durable products, which are more heavily impacted by industry conditions right now.

而且，我們也將業務重點放在自有品牌上，至少從製造商的角度來看，這些品牌主要是我們在美國和加拿大生產的消耗品。這些產品受關稅及相關耐用產品的影響最小，而這些產品目前受產業狀況的影響更大。

So hopefully, that gives you some broad perspective on sort of how we're thinking about delay in the second half.

希望這能讓您對我們下半年如何考慮延期問題有一個大致的了解。

Yes, it does, John. You kind of segue into my next question, and that's your product portfolio optimization and changes. You talked about growing your proprietary business and kind of weeding out the third-party nonproprietary, I guess, which you distribute for other people. What I will ask there is the reason you are distributing third-party products through your channels. Is it just to expand your portfolio offering?

是的，約翰。你這番話正好引出了我的下一個問題，那就是你的產品組合優化和變化。你談到要發展自己的專有業務，並逐步淘汰第三方非專有產品，我想，就是你為其他人分銷的那些產品。我想問的是，你們為什麼要透過你們的通路分銷第三方產品。只是為了拓展產品組合嗎？

Or is it sort of offering a generic lower cost alternative to your proprietary products? In other words, as you continue to weed out third-party distribution or distributing third-party products, what impact will it have on your portfolio overall and your ability to be kind of a one-stop shop for your customers?

或者說，它是否提供了一種比貴公司專有產品更經濟實惠的通用替代品？換句話說，隨著你不斷剔除第三方經銷商或分銷第三方產品，這將對你的整體產品組合以及你為客戶提供一站式服務的能力產生什麼影響？

Yeah, look, I appreciate the question, for sure. Look, we historically and continue to have had many great long-term relationships with distributed brand partners. Many of these partners have really helped us form a diverse and broad portfolio of products which we offer. And this is not going to change for us.

是的，我很感謝你的提問。你看，我們過去一直與分銷品牌合作夥伴保持著許多良好的長期合作關係，現在也依然如此。這些合作夥伴中的許多人確實幫助我們形成了多樣化和廣泛的產品組合。這一點對我們來說不會改變。

Our team continues to be excited to establish new partnerships where there's an innovative product with growth potential and the brand partner is willing to offer sort of fair margin and cash flow characteristics. But as we've talked about, the industry remains challenging, and it makes sense for us to reduce the offering where there are significant redundancies to sort of underscore that and or sort of underperforming products.

我們的團隊仍然熱衷於建立新的合作夥伴關係，只要產品具有創新性和成長潛力，並且品牌合作夥伴願意提供相對合理的利潤率和現金流條件。但正如我們之前討論過的，這個行業仍然充滿挑戰，因此，減少存在大量冗餘或表現不佳的產品，對我們來說是有意義的，這也能凸顯這一點。

And we took those steps to make changes in our portfolio as we just reported. We did this just to kind of rehash a little bit, so there's clarity on this. We rationalized over one-third of the SKUs and brands in our product portfolio across both the US.

正如我們剛才報導的那樣，我們採取了這些措施來調整我們的投資組合。我們這樣做只是為了稍微回顧一下，好讓大家對此有更清晰的了解。我們精簡了美國境內產品組合中超過三分之一的 SKU 和品牌。

and in Canada. And although the rationalization of the SKUs and brands were across all the product and brand categories, and I want to be clear, it was across all product and brand categories, the largest proportion of underperforming SKUs and brands that we rationalized were found in the durable products and distributed brand areas.

在加拿大也是如此。雖然 SKU 和品牌的合理化涵蓋了所有產品和品牌類別，而且我想明確地說，是涵蓋了所有產品和品牌類別，但我們合理化的最大比例的業績不佳的 SKU 和品牌出現在耐用品和分銷品牌領域。

And because in general, these are underperforming products that have not been selling well and carrying below average margins, the impact to our net sales is much less than the one-third call out. And from a gross profit margin perspective, we actually expect to see our adjusted gross profit margin improve over time. So again, we expect to continue to have a broad offering across all the product categories as we do today.

而且，由於這些產品總體上表現不佳，銷量不好，利潤率低於平均水平，因此對我們淨銷售額的影響遠小於先前公佈的三分之一。從毛利率的角度來看，我們預計調整後的毛利率會隨著時間的推移而增加。因此，我們預計將繼續像現在一樣，在所有產品類別中提供廣泛的產品。

But frankly, during the go-go times of the industry, I think our portfolio probably came a little bit bloated, and we need to continue to trim in spots that it makes sense.

但坦白說，在產業蓬勃發展的時期，我認為我們的投資組合可能有點臃腫，我們需要繼續在合理的地方進行精簡。

Makes sense, John. Just switching gears here a little bit, talk about the non-cannabis part of your business. From what I understand that your loan and garden focus, you're focused on e-commerce and distribution for that channel is aiding you a little bit here to sort of navigate the difficult times in the cannabis industry. Is there any sort of incremental efforts that you're putting behind growing that part of your business? And is there anything that we should look forward to in the balance of 2025 on that front?

約翰，你說得有道理。稍微換個話題，談談你公司非大麻業務的部分吧。據我了解，你們的貸款和園藝業務重點在於電子商務和分銷，這在一定程度上幫助你們度過了大麻行業的艱難時期。您在發展這部分業務方面是否採取了任何漸進式的措施？那麼，在2025年剩餘的時間裡，我們在這一點上有什麼值得期待的事情嗎？

Yeah, sure. As we sort of talked about in the scripted remarks, our international sales have performed well, certainly on a relative basis. And they actually grew in the quarter on a year-over-year perspective with nice results in select European and Asian countries. We continue to press in that area with our team. And we remain on pace to improve upon sort of the full year diversification metric that we've typically reported, which is this noncannabis and non-US.

當然可以。正如我們在事先準備好的演講稿中提到的那樣，我們的國際銷售業績表現良好，當然，從相對角度來看是如此。從去年同期來看，他們本季實際上實現了成長，並在部分歐洲和亞洲國家取得了不錯的成績。我們團隊將繼續在這個領域加大投入。我們仍有望改善我們通常報告的全年多元化指標，即非大麻和非美國業務。

Canadian sales metric. And how are we doing that? We're doing that with the international piece, which I just mentioned. We're doing that with food and floral sales in the US and Canada.

加拿大銷售指標。我們是如何做到這一點的？我們正在對國際部分進行這方面的工作，我剛才提到了這一點。我們正在美國和加拿大開展食品和鮮花銷售業務。

We're doing that with Garden Center in the US and Canada. And we're doing that with e-commerce. We've had some success sort of modifying some of our products to better appeal the noncannabis markets. We've done that in the chiller space.

我們正在美國和加拿大的花園中心進行這項工作。我們正在透過電子商務來實現這一點。我們已經成功地對一些產品進行了改進，使其更能吸引非大麻市場。我們在冷水機領域已經做到了這一點。

We've done that with some of our retainers. We've done that with our some blaster lighting products. And we're continuing to look at some areas in the nutrient category along those lines. So lots of things that we're doing to focus our diversification efforts.

我們已經對部分預留客戶這樣做過了。我們已經在一些爆能照明產品中實現了這一點。我們將繼續沿著這些思路，研究營養成分方面的一些問題。所以我們正在採取許多措施來集中精力實現多元化發展。

Understood. Understood. And then final question. President Trump was recently speaking publicly talking about the fact that he is considering reclassifying cannabis. What have you heard from DC?

明白了。明白了。最後一個問題。川普總統最近公開談到他正在考慮重新對大麻進行分類。你從華盛頓特區那邊聽到了什麼消息？

And what are the chances that, that's actually going to happen as opposed to be talked about again?

而這件事真正發生的可能性有多大，而不是再被拿出來討論呢？

Yeah, I'd just simply say maybe unlike some others, I'm not sure I have a direct line to Trump. But certainly, we've seen the news. The news yesterday, some of the news we saw even the week before at the Wall Street Journal and Fox business. And it certainly sounds like he's privately or his administration perhaps, I should say, is privately considering rescheduling cannabis.

是的，我只想簡單地說，或許與其他人不同，我不確定我是否能直接聯繫到川普。但我們當然都看到新聞了。昨天的新聞，以及我們上週在《華爾街日報》和福斯商業頻道上看到的一些新聞。聽起來他本人，或者更確切地說，他的政府，似乎正在私下考慮重新安排大麻的管制等級。

Look, we're certainly encouraged by these reports and hope the Trump administration sees it through in a positive with a positive outcome. But we'll wait for judgment until we actually see something, there's been a lot of stops and starts in the past in this area.

我們當然對這些報道感到鼓舞，並希望川普政府能積極推動此事，取得正面成果。但我們會等到看到實際結果後再做判斷，過去在這個領域有過很多次停滯不前的情況。

But certainly, the latest development seems really encouraging. And we do think that this would be a positive for the overall industry as it frees up capital and cash flow for a lot of our end users of our products. So we're certainly excited to see a positive outcome here.

但最新的進展確實令人鼓舞。我們認為這對整個行業來說是一個積極的信號，因為它可以為我們產品的許多最終用戶釋放資金和現金流。所以，我們當然很高興看到這裡取得了正面的結果。

Very good job thank you that's all the questions I have for right now.

非常感謝，做得非常好。我現在的問題就這些了。

Thanks Dmitry.

謝謝你，德米特里。

Thank you and this does conclude our Q&A session as well as the conference call thank you all for your participation, and you may disconnect at any time.

謝謝大家，問答環節和電話會議到此結束，感謝各位的參與，您可以隨時斷開連線。