Hydrofarm Holdings Group, Inc. · NASDAQ:HYFM

Hydrofarm — Debt Investor Presentation (October 2021)

35 slides from Hydrofarm's debt investor presentation, Oct 26, 2021

  1. Slide 1: Lender presentation October 2021

    Lender presentation October 2021 These materials are not to be printed, downloaded or distributed .

  2. Slide 2: Disclaimer: Special Notice for Private-Side Materials

    126.108.108 109.110.106 169.169.169 169.169.169 1 Disclaimer Special Notice for Private - Side, Subject to Cleansing Information Materials SPECIAL NOTICE REGARDING MATERIAL NON - PUBLIC INFORMATION THIS DOCUMENT MAY CONTAIN MATERIAL NON - PUBLIC INFORMATION CONCERNING THE BORROWER OR ITS RELATED PAR

  3. Slide 3: Today's agenda and presenters

    126.108.108 109.110.106 169.169.169 169.169.169 2 Today’s agenda and presenters 1 Business/transaction update 2 Hydrofarm overview 3 Key credit highlights 4 Financial over view Bill Toler Chairman & Chief Executive Officer John Lindeman Chief Financial Officer These materials are not to be printed,

  4. Slide 4: Business/transaction update

    Business/transaction update These materials are not to be printed, downloaded or distributed .

  5. Slide 5: Preliminary Estimates for Q3 2021

    126.108.108 109.110.106 169.169.169 169.169.169 4 Preliminary Estimates for Q3 2021 Source : Management estimates; Note: Adj . EBITDA is a non - GAAP measure, see reconciliation to the nearest GAAP measure at the end of this presentation Preliminary results remain subject to the completion of normal

  6. Slide 6: Revised/Updated Full Year 2021 Outlook

    126.108.108 109.110.106 169.169.169 169.169.169 5 Revised/Updated Full Year 2021 Outlook Source : Management estimates; Note: Adj . EBITDA is a non - GAAP measure, see reconciliation to the nearest GAAP measure at the end of this presentation; With respect to projected fiscal year 2021 Adjusted EBIT

  7. Slide 7: Transaction overview

    126.108.108 109.110.106 169.169.169 169.169.169 6 Transaction overview The $125MM Term Loan B facility is projected to fund near - term spend and allow for ample liquidity based on current model IGE acquisition Capital expenditures Prior acquisition related earn out and deferred tax payment Fund ear

  8. Slide 8: Hydrofarm overview

    Hydrofarm overview These materials are not to be printed, downloaded or distributed .

  9. Slide 9: Enabling growers, farmers and cultivators to achieve higher yields

    126.108.108 109.110.106 169.169.169 169.169.169 8 Enabling growers, farmers and cultivators to achieve higher yields and greater quality, consistency, efficiency and sustainability at their farms Bringing innovative solutions, preferred brands and gold standard service to the rapidly expanding and c

  10. Slide 10: Introduction to Controlled Environment Agriculture

    126.108.108 109.110.106 169.169.169 169.169.169 9 Introduction to Controlled Environment Agriculture The growing, farming and cultivation of cannabis, flowers, fruits, plants, vegetables, grains and herbs in controlled environment settings that allow end users to control key farming variables, inclu

  11. Slide 11: Hydrofarm serves a critical role as a leading solutions provider to the CEA supply chain

    126.108.108 109.110.106 169.169.169 169.169.169 10 Hydrofarm serves a critical role as a leading solutions provider to the complex CEA supply chain Specialty hydroponic retailers Garden centers / retail eCommerce Greenhouse/commercial distributors Brands from ~400 suppliers Over 2,000 B2B customers

  12. Slide 12: Hydrofarm is well-positioned for the future – key credit highlights

    126.108.108 109.110.106 169.169.169 169.169.169 11 Hydrofarm is well - positioned for the future – key credit highlights IMPRESSIVE GROWTH ALGORITHM +15 - year track record of 19% revenue CAGR with a goal to achieve mid - teens+ organic topline growth WINNING PLATFORM Supply chain excellence with ju

  13. Slide 13: Hydrofarm services a large and rapidly growing market

    126.108.108 109.110.106 169.169.169 169.169.169 12 ~ $10bn ~ $18bn 2020 2026E Hydrofarm services a large and rapidly growing market Source: Industry reports Our total addressable market ~$1tn Commercial agriculture, food & related industries ~$48bn Consumer gardening & growing ~$65B Global CEA Marke

  14. Slide 14: Progress since our initial public offering in Q4 2020

    126.108.108 109.110.106 169.169.169 169.169.169 13 Progress since our initial public offering in Q4 2020 Source: Company information Note: Note: All financials shown are as reported and exclude pro forma impact from recently completed acquisitions unless oth erw ise stated ; 1 Adj. EBITDA margin is

  15. Slide 15: Four recent acquisitions highlight Hydrofarm's accretive brand acquisition strategy

    126.108.108 109.110.106 169.169.169 169.169.169 14 Four recent acquisitions highlight Hydrofarm’s accretive brand acquisition strategy Overview & rationale Select products Effective line of nutrient products Targets professional growers Strong revenue growth and impressive margins State - of - the -

  16. Slide 16: We have seen success across all growth strategies year to date

    126.108.108 109.110.106 169.169.169 169.169.169 15 Innovation via R&D Increase brand coverage Marketing initiatives Relationship model National network Access to key end markets Supply chain excellence Build commercial DMI program Securing customer success Acquire leading brands Add tech & capabilit

  17. Slide 17: Key credit highlights

    Key credit highlights These materials are not to be printed, downloaded or distributed .

  18. Slide 18: Continued acceleration in cannabis market growth from legislative changes

    126.108.108 109.110.106 169.169.169 169.169.169 17 We expect continued acceleration in cannabis market growth resulting from state legislative changes and increasing popular support TX MT CA ID NV AZ OR IL NM CO WY MN SD IA ND UT KS NE WA WI OK MI MO NY PA FL IN AL GA AR LA NC VA TN KY OH MS ME SC M

  19. Slide 19: End-to-end category coverage through proprietary and preferred brands

    126.108.108 109.110.106 169.169.169 169.169.169 18 Preferred Proprietary End - to - end category coverage through innovative, well - recognized proprietary and preferred brands Distributed Preferred Proprietary Proprietary & Self- manufactured Significant margin benefit Lighting Equipment Durables (

  20. Slide 20: Our robust infrastructure positions us to capitalize on rapidly growing markets

    126.108.108 109.110.106 169.169.169 169.169.169 19 Distribution centers New Hudson, MI Fairless Hills, PA Portland, OR Petaluma, CA Denver, CO Fontana, CA Langley, BC Cambridge, ON Distribution footprint can reach ~90% of U.S population in <48 hours Serve >2k wholesale customers across multiple chan

  21. Slide 21: History of strong top line growth and margin expansion over the last 6 quarters

    126.108.108 109.110.106 169.169.169 169.169.169 20 $67mm $91mm $97mm $87mm $111mm $134mm Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 History of strong top line growth and margin expansion over the last 6 quarters Net sales Quarterly net sales $30mm $163mm $225mm $342mm $429mm 2005 2010 2015 2020

  22. Slide 22: Significant EBITDA and margin growth in 1H 2020 and 1H 2021

    126.108.108 109.110.106 169.169.169 169.169.169 21 Significant EBITDA and margin growth in 1H 2020 and 1H 2021, with potential for material and sustainable margin upside 6 $9mm $26mm 1H 2020 1H 2021 6 % % margin 11 % Adj. EBITDA and margin ▪ Drive growth in our margin advantaged proprietary and pref

  23. Slide 23: Hydrofarm can serve as the preferred acquirer in the industry

    126.108.108 109.110.106 169.169.169 169.169.169 22 Hydrofarm can serve as the preferred acquirer in the industry Hydrofarm is positioned as the acquirer of choice in a fragmented industry We think about M&A in three main categories Acquire leading brands and brand manufacturers 1 Consolidation of in

  24. Slide 24: Strong leadership team with relevant public company experience

    126.108.108 109.110.106 169.169.169 169.169.169 23 Strong leadership team with relevant public company experience 8 Bill Toler Chairman & Chief Executive Officer Joined in 2019 Prior experience Renah Persofsky Vice Chair & Lead Director, Aphria Joined in 2020 Terence Fitch President Joined in 2019 P

  25. Slide 25: Financial overview

    Financial overview These materials are not to be printed, downloaded or distributed .

  26. Slide 26: Recent financial performance and strategic initiatives support long-term growth strategies

    126.108.108 109.110.106 169.169.169 169.169.169 25 Recent financial performance and strategic initiatives support our long - term growth strategies Focused on maximizing EBITDA growth Reinvest into internal and external (M&A) opportunities Delivering margin enhancement Significant organic and inorga

  27. Slide 27: Significant increase in net sales and adjusted EBITDA

    126.108.108 109.110.106 169.169.169 169.169.169 26 17% 16% 13% 11% 2018A 2019A 2020A TTM June 2021 Source: Company information, management estimates Note : All financials shown are as reported and exclude pro forma impact from recently completed acquisitions unless otherwise state d ; 1 Adj . EBITDA

  28. Slide 28: Cash flow summary

    126.108.108 109.110.106 169.169.169 169.169.169 27 $1 $1 $2 $10 2018A 2019A 2020A 2021E Cash flow summary Capital expenditures ($mm) 1 % % of net sales 2% Free cash flow 1 ($ mm) FCF conversion 2 Source: Company information, management estimates Note : All financials shown are as reported and exclud

  29. Slide 29: YTD income statement summary as of June 2021

    126.108.108 109.110.106 169.169.169 169.169.169 28 $9 $26 2020 YTD 2021 YTD $158 $245 2020 YTD 2021 YTD $29 $53 2020 YTD 2021 YTD YTD income statement summary as of June 2021 Source: Company information Note: All financials shown are as reported and exclude pro forma impact from recently completed a

  30. Slide 30: Hydrofarm's financial policies and capital allocation strategy

    126.108.108 109.110.106 169.169.169 169.169.169 29 Source: Company information Note: 1 Net debt / pro forma TTM adj. EBITDA. Maintain a strong liquidity position supported by a recently upsized $100mm revolver Priorities for cash - use include reinvesting in business, reducing leverage and pursuing

  31. Slide 31: Hydrofarm is uniquely positioned to capitalize on rapid growth in cannabis and CEA

    126.108.108 109.110.106 169.169.169 169.169.169 30 x Category topline momentum with accelerating legislative support and increasing consumer demand x Opportunity to leverage our unique position in the value chain x Unique pure - play “picks and shovels” supplier to the industry without “touching the

  32. Slide 32: Appendix

    Appendix These materials are not to be printed, downloaded or distributed .

  33. Slide 33: Adjusted EBITDA reconciliation

    126.108.108 109.110.106 169.169.169 169.169.169 32 Adjusted EBITDA reconciliation Source: Company information Note: Preliminary Q3'21 estimates illustrate the midpoint of guidance range; 1 Includes consulting, transaction services and legal fees incurred for completed and potential acquisitions; 2 I

  34. Slide 34: Adjusted EBITDA and pro forma adjusted EBITDA reconciliation

    126.108.108 109.110.106 169.169.169 169.169.169 33 Adjusted EBITDA and pro forma adjusted EBITDA reconciliation Source: Company information ; Note: Preliminary Q3'21 estimates illustrate the midpoint of guidance range 1 Includes consulting, transaction services and legal fees incurred for the comple

  35. Slide 35: Adjusted SG&A reconciliation

    126.108.108 109.110.106 169.169.169 169.169.169 34 Adjusted SG&A reconciliation Source: Company information $mm TTM Q2’2021 FY 2020 FY 2019 FY 2018 Net sales 429.3 342.2 235.1 211.8 SG&A 78.0 58.5 43.8 42.2 Stock - based compensation 11.5 9.2 0.2 - Depreciation and amortization 6.1 6.0 6.6 7.0 Acqui

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