Hydrofarm Holdings Group, Inc. (HYFM) Q2 2021 Earnings Call Transcript

Hydrofarm Holdings Group, Inc. (HYFM -2.75%)
Q2 2021 Earnings Call
Aug 12, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Hydrofarm Holdings Group's second-quarter 2021 earnings conference call. [Operator instructions] Please note that this conference is being recorded today, August 12, 2021.

I would now like to turn the call over to Mr. Fitzhugh Taylor, managing director at ICR, to begin.

Fitzhugh Taylor -- Managing Director, ICR

Thank you, Stacy, 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 second-quarter 2021 earnings release and Form 8-K issued today after market close. 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. 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 what we expect. We refer all of you to our recent SEC filings for more detailed discussions -- 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. 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. With that, I'd like to turn the call over to Bill Toler. Bill?

Bill Toler -- Chairman and Chief Executive Officer

 Thank you, Fitzhugh, and good afternoon, everyone. I'm pleased to report another quarter of strong growth in our business. We enjoyed growth across virtually all of our product lines, all of our geographies, including both new and mature markets. To briefly touch on this, we grew our top line by almost 47% and improved gross profit by over 65% year over year.

More importantly, as our proprietary brands are becoming a larger part of our total sales, we benefited from this favorable sales mix and posted over 127% improvement in adjusted EBITDA and a 430-basis-point increase in adjusted EBITDA margin to a very solid 12.1% in the quarter. We believe this result is evidence of our unique positioning as a leader in manufacturing and distributing differentiated, branded hydroponic equipment supplies in the controlled environment agriculture market. To maintain our momentum going forward, we'll remain focused on our four key growth drivers. First, drive and increase the penetration of our proprietary brands inside of our company.

Again, these are the brands that we own and represent a key growth opportunity for us due to their higher-margin profile. Second, develop strategic relationships to convert more brands into preferred brand status. These are brands that are primarily sold into the hydroponic channel through Hydrofarm. Third, drive our commercial presence by working with our MSOs and large commercial growers.

And lastly, which is what I want to focus most of my comments on today, is our M&A strategy that we believe will continue to create more opportunity to refine our portfolio and improve margin, growth, and innovation. Following our IPO in December of 2020, we began to reconfigure our portfolio to become a brand owner using our established distribution platform to reach customers. In Q2, we took our first steps toward this goal. But this is a multi-quarter process to buy, integrate and build these great businesses.

It's still very early days in our reconfiguration, but the early results are very encouraging. Specifically, our team has been very busy in the last few months adding four impressive businesses to our portfolio since the beginning of the second quarter. In early May, we competed the -- we completed the acquisition of HEAVY 16, a leading manufacturer and supplier of premium plant nutrients. As a trusted brand with a highly respected team and broader awareness, with availability in over 300 retail stores here in the U.S., HEAVY 16 is an excellent business with a strong foundation of highly profitable proprietary nutrient offerings.

In June, we completed the acquisition of another fantastic business, House & Garden. With their own strong product line of plant nutrients, they further strengthen our position in the nutrient category and complement our rapidly expanding portfolio of premium products. In addition, their expansive distribution network reaches 40 states in over 10 countries and gives us a great opportunity to extend our global reach and market penetration. Subsequent to the end of the second quarter, we completed our third acquisition in Aurora Innovations, an Oregon-based supplier of organic soil, grow media, and nutrient products.

Aurora's offerings provide Hydrofarm with its first organic, nutrient, and premium soil brands. In addition, we also gained new domestic manufacturing and distribution capabilities on the East and West Coast in the U.S. and a peat moss harvesting operation in Canada. Lastly, last week, we successfully completed the acquisition of Canadian nutrient distributor and manufacturer, Greenstar Plant Products, a company that we have a long and profitable shared history.

Greenstar's product line includes Grotek, Gaia Green, Earth Safe, and Supergreen plant nutrients, all of which we believe will further strengthen our lineup of high-performance proprietary branded nutrient products. These businesses not only add proprietary offerings into nutrients and grow media categories where we haven't historically had a strong contingent of our own brands, they also provide great recurring revenue at highly profitable rates and have had a positive impact on our P&L almost immediately. Not to mention, they've added valuable manufacturing and distribution capabilities to our business. Let me quickly expand on this with some second-quarter statistics.

The consumable portion of our portfolio has now grown to approximately 69%, up from 67% last year in our product mix. Second, over 68% of our sales now comes from proprietary and preferred, compared to 65% previously. And lastly, these accomplishments are only enhanced because of the dedicated people behind it. They have allowed us to recruit many great new talents into Hydrofarm.

I'd like to take this opportunity to welcome all the new team members from the companies we've acquired to the Hydrofarm family. Together, we can accomplish many great things. To summarize, we consider these businesses to be high-growth, accretive, attractive margin profiles that will be accretive to our overall business. But more importantly, these transactions further solidify our position as the acquirer of choice in this highly fragmented and fast-growing industry.

So while we're off to a good start in the M&A activities, we still have a lot of opportunities available to us, and we'll continue to put our focus behind this strategy going forward. With that, let me shift gears and quickly update you on the investment in our infrastructure. As I've mentioned in the past, our distribution footprint is critical for our ability to better service a larger long-term customer base and stay ahead of growth. When you couple the recent acquisitions in the past six months with the two distribution centers expected to be completed in Q3 of this year, we'll have grown our combined distribution center and manufacturing footprint by approximately 70%.

As we look ahead over the next few months, we'll be moving into two new distribution centers, one in Northern California and one in Southern California. In fact, we moved into Southern California a bit this week. You may remember, we also expanded our Portland, Oregon facility earlier this year. These new facilities are all larger and located in better areas logistically.

Lastly, we're finalizing our plans to add an additional center for distribution in the next six to 12 months. If you'll recall, it was our goal to expand our distribution footprint by about 25% this year. And as you can see, we're well on our way to exceeding that goal. Finally, let me remind you, we are still in the early innings of a long progression to full legalization.

Still, there are over 60% of the U.S. population that resides in the states that does not have access to legal adult-use cannabis. I truly believe the legislation is at a tipping point, and the investments we are making and our infrastructure today will position us to serve the expected surge in adult-use cannabis demand. Before I turn it to John, let me reiterate how excited we are with the long-term growth potential of the CEA industry and the fact that Hydrofarm is uniquely expected to capitalize on that growth.

To that end, we'll continue to grow our organic top line, execute on our proprietary preferred brand strategies, drive our commercial business and capitalize on the many opportunities we have in M&A to build a strong portfolio of proprietary branded offerings. With that, I'll turn it over to John for a little more update on the financial results and an important update on our 2021 guidance. John? 

John Lindeman -- Chief Financial Officer

Thank you, Bill, and good afternoon, everyone. Net sales for the second quarter increased 46.7% to $133.8 million from $91.2 million in the prior-year period. The increase in net sales was dominantly organic, volume-driven growth. Though the two acquisitions completed in the quarter, HEAVY 16 and House & Garden, had a positive impact, as did one notable preferred brand.

Once again, we experienced increased demand throughout all of our end markets and faster growth across our proprietary and preferred brands, which continue to outpace our pure distributed brands. Gross profit during the second quarter also increased by 65.5% to $29.6 million as compared to the year-ago period, while gross profit margin improved by 250 basis points to 22.1%. This was driven primarily due to a favorable mix shift toward proprietary and preferred branded products, which typically carry a higher natural profit margin than pure distributed brands. Selling, general and administrative expense increased to $27.3 million in the second quarter of 2021, compared to $12.8 million in the year-ago period.

The increase in SG&A was primarily due to increased costs associated with the recent acquisition and integration activities, which accounted for approximately 70% of the total increase, while higher costs associated with supporting our public company status and long-term growth strategy made up the difference. Excluding acquisition and integration costs, share-based comp costs, and depreciation and amortization, SG&A was $14.5 million or 10.8% of net sales in the quarter versus 11.1% or 12.1% last year. So on this comparative basis, we realized operating leverage in the quarter once again. Reported net income attributable to common stockholders was $2.3 million or $0.05 per diluted share in the second quarter, compared to $1.9 million or $0.08 per diluted share last year.

Weighted average diluted shares outstanding were approximately 42 million for the second-quarter 2021, and approximately, 20.9 million for the prior-year pre-IPO period. Similar to last quarter, we have calculated pro forma adjusted net income and applied pro forma weighted average diluted shares outstanding as if the IPO had occurred at the beginning of January 2021 -- 2020, rather, which is the earliest comparison period. On this basis, pro forma adjusted net income for the quarter was approximately $12.5 million or $0.30 per pro forma diluted share, compared to a profit of $4 million or $0.12 per pro forma diluted share in the year-ago period. Lastly, adjusted EBITDA more than doubled to $16.2 million or 12.1% of net sales for the second quarter of 2021 from $7.1 million or 7.8% of net sales last year.

Moving on to our balance sheet and overall liquidity position. As of June 30, 2021, we had $195.4 million in cash, cash equivalents, and restricted cash; $50 million of available borrowing capacity under our existing credit agreement; and only $1.7 million in an aggregate amount of debt outstanding. And while a portion of the proceeds were received prior to the quarter end, and therefore, included in the $195.4 million number mentioned earlier, on July 19, subsequent to the end of the quarter, we completed the redemption of the outstanding investor warrants, raising approximately $54.8 million in net proceeds. As Bill noted earlier, we also completed the acquisition of Aurora and Greenstar Plant Products subsequent to the quarter, which resulted in a combined cash outlay of approximately $218 million.

As a result of these transactions and as noted in today's press release, we are currently evaluating various debt financing options to continue to fuel our M&A strategy and overall continued growth. We will update you on our debt financing plans as soon as practical. Lastly, based on the continued strength in our overall business, as well as our acquisition activities to date, we are now updating our 2021 outlook. We're now expecting total company net sales growth of 45% to 50% for the 12-month period ending December 2021 and adjusted EBITDA of $55 million to $62 million for the same period.

Please note that this outlook only captures partial year contributions of the four acquisitions completed between May and early August. On a pro forma combined full-year basis, had we owned the acquisitions for the full year, the company would expect to generate between $565 million and $590 million of net sales, and approximately, $80 million to $90 million of adjusted EBITDA. In closing, we remain excited about our long-term growth prospects and continued margin enhancement via internal initiatives, as well as our M&A strategy. We see these initiatives already making an impact on our business even as we begin lapping strong comparables from last year's third and fourth quarter.

Lastly, I would also like to extend my welcome to all the new talents who have joined us in the past several months as we now look forward to jointly executing our growth opportunities together. This concludes our prepared remarks, and we're now happy to answer any questions you might have. Operator, do you want to open up the lines? 

Questions & Answers:

Operator

[Operator instructions] Your first question comes from Andrew Carter with Stifel.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Hey, thanks. Good afternoon, guys. I guess the first thing --

Bill Toler -- Chairman and Chief Executive Officer

Hey, Andrew.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Hey. Appreciate the guidance update today. And maybe I'm not sure if I had the acquisition contribution right in the quarter. But for the second half, I'm getting kind of -- at the midpoint, kind of 5% kind of underlying organic growth.

So I guess, could you kind of talk about kind of that step-down and maybe what you're seeing through this first? I guess we're six weeks into the quarter. Anything you can help us with there? I'll stop there.

Bill Toler -- Chairman and Chief Executive Officer

Yeah. As we've been saying, as you start lapping the plus-60% growth numbers from Q3 and Q4 of last year, the percent changes are obviously going to get a little tighter. I think your 5% is way conservative there. And part of the challenge for us is, when an M&A comes in like a HEAVY 16 or a House & Garden and it's fully incremental to us and we never distributed it before, it's easier to capture that.

When an M&A like Greenstar or Aurora comes in, where we already distributed the brand, that essentially is really organic to our company. So it's not the same sort of -- it's harder to tease that apart, right? We might pick up some sales outside of stuff that we didn't distribute for them before, but it's very difficult to pull all that apart. But I think your 5% number is very conservative there. As far as how the quarter is progressing, we're pleased with where we sit as of Q3.

I think there's a number of sort of overall factors that are going on in the industry that have caused things to change trajectory a little bit, but we think it's primarily isolated situation in a couple of places, and we're already starting to see things bounce back to the levels that we had been seeing back earlier in Q2. So overall, we feel good. I think you're a little tight on the 5%, for sure. And again, we've got that difficulty of peeling apart these brands that are already ours.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Fair enough. And I guess the second question -- I appreciate the update on the portfolio transformation. A big aspect of the story has been the inventory demand, 95 days. But through the acquisitions, you bought a lot of higher-margin businesses that were -- now you don't have to have that margin sitting there in inventory anymore.

Can you kind of give us an update on kind of the -- how the working capital demands have changed for the business? Because obviously, there's more capital intensity on the capex side. Thanks.

Bill Toler -- Chairman and Chief Executive Officer

Yeah. On the -- working capital has been interesting for the whole industry as everybody has struggled to get reliable supply from all over the world, right? Most of the soil and grow media suppliers are behind. Many of the equipment suppliers in China are behind. Their lead times have been extending from what used to be six or eight weeks to now whatever -- up to several months.

So we've taken the strategy of lean into inventory, leverage the balance sheet toward inventory to be able to service the customers, right? And we didn't have a whole lot of control on a lot of the M&As, as to what their inventories are level -- what their inventory levels were. A couple of them were higher, a couple of them were lower. So it's not exactly a normalized time to evaluate inventory days. I think with the worldwide supply chain still being a bit altered from all the challenges over the last 18 months, we're still coming to what I would call to be a normalized level.

John, you want to add to that?

John Lindeman -- Chief Financial Officer

Yeah, sure. I'll just chime in as well. Andrew, you're right. I mean, with the pickup of four manufacturing businesses, there is going to be a little bit of an incremental spend behind it.

You see that to some extent in our call-out in the press release of a step-up in the capex that we're intending for this year to $8 million, $10 million. But with respect to inventory and inventory turns, I think we might see a step-up, a tick or two, just in terms of a couple of days relative to maybe what you've seen historically, really to enable sort of that raw material component of the overall manufacturing process, which we really didn't have in our -- present in our business before.

Andrew Carter -- Stifel Financial Corp. -- Analyst

Thanks. I'll pass it on.

John Lindeman -- Chief Financial Officer

Thanks, Andrew.

Operator

Your next question, Jon Andersen with William Blair.

Jon Andersen -- William Blair & Company -- Analyst

Hey, good afternoon, and congratulations on the quarter and the acquisitions.

Bill Toler -- Chairman and Chief Executive Officer

Thanks, Jon.

John Lindeman -- Chief Financial Officer

Thank you.

Jon Andersen -- William Blair & Company -- Analyst

Question on the acquisitions themselves. Your -- you handpicked certain businesses and brands herein and made a series of acquisitions since the start of the second quarter. How should we think kind of in aggregate about the growth rate of these businesses going forward? Is the right way to think about it, these were brands that you saw as particularly attractive with higher-than-average growth rates in the marketplace. Thus, you wanted to own them and make them proprietary? And then the second part of this acquisition question is, as you take on more proprietary brands or own brands, do you need to also maybe invest more in innovation and demand-generation activities relative to doing business in a preferred or distributed way? I know there's a lot there.

Appreciate it.

Bill Toler -- Chairman and Chief Executive Officer

That's all right. Thanks. Yes, to answer your last question first, we are investing in innovation and marketing at the same time when we're buying businesses, right? It's a lot quicker payback to drive innovation on your own products than it is to go out and buy companies all the time. So we're doing both.

We're dialing up our marketing efforts, frankly, to levels that we've never seen before. And historically, we weren't a huge marketing company. And still, as a percent of sales, it's still going to be a fairly small number. But we believe strongly -- I mean, my whole history, John's whole history, many of our leaders' histories have been around brand building through innovation and marketing.

So yes, that's a key part what we're doing. As to how we targeted the businesses that we've acquired, frankly, we had a profile of -- we always wanted to get more into consumable categories. We didn't have brand representation in grow media or nutrients. So that was a target.

Then we wanted to find sort of the best available quality products that we thought had a role in the marketplace and play different roles in the marketplaces, and these brands all kind of fit together like that. And so then -- and then, of course, the third opportunity has to be that these brands are willing and interested to sell at a particular time. And so those three things all came together on these first four businesses, and we feel very good about the portfolio that we've built. We've been heavily consumable-oriented so far.

It doesn't mean we wouldn't look at a capital-type business or a durable-type business. That could be in our future as well. But right now, we're pleased to get our consumable side and our consumable brand portfolio built up.

Jon Andersen -- William Blair & Company -- Analyst

Super helpful. One quick follow-up. I think at the time of the IPO, you had eight distribution centers across North America. Could you -- and I can't recall how many manufacturing facilities, but could you refresh those numbers today with the acquisitions, what the manufacturing and DC footprint look like? And why the investments -- or what kind of investments it may take?

Bill Toler -- Chairman and Chief Executive Officer

Yes. On the DC side, eight was the number at the IPO. It is still eight. We've enlarged one, Portland, Oregon.

And we're enlarging two more, Southern Cal and Northern Cal. And we are looking for another facility or looking to open a facility in the Southeast, Southwest type of area to cover the demand down there. The two in Canada are still the two in Canada for now. As far as manufacturing, we did some, what I would call, light assembly work in one of our facilities in the U.S.

But really, our manufacturing acquisitions have been the HEAVY, the House, the Aurora and the Greenstar. So now it gives us a cadre of four nutrient plants, two soil plants, a couple of worm-casting facilities, and a peat-manufacturing facility up in Canada.

Jon Andersen -- William Blair & Company -- Analyst

Thanks so much.

Bill Toler -- Chairman and Chief Executive Officer

Yup.

Operator

Next question, Peter Grom with UBS.

Peter Grom -- UBS -- Analyst

Hey, good afternoon, everyone. I hope you guys are doing well. So I just wanted to follow up -- I had a follow-up to Andrew's question because I think it's pretty important. But could you maybe help us tease out what M&A contributed to the top line in both the quarter and in your guidance, I mean, at least directionally? Because I think last quarter, the math implied like a 26% to 36% organic revenue growth rate.

So I think investors are trying to understand how much of a slowdown versus last quarter is actually embedded in this guidance, if at all?

John Lindeman -- Chief Financial Officer

Yeah, no. Let me chime in on that. Yes, with respect to Q2, the quarter we just completed, we had top-line growth, as we mentioned, just using round numbers, around 47%. I think I'd tell you about 900 basis points, so about 9% of that 47% was M&A growth.

So contribution from House & Garden, HEAVY 16 in the quarter. As we think about our guidance -- or maybe as you should think about our guidance of 45% to 50% year over year, which is an update from our prior quarter guidance, really inside of that is roughly 25% to 35% year-over-year growth, again, this is annual guidance, year-over-year growth for what I would maybe call our legacy business, and approximately, 15% to 20% of M&A growth. And I think if you kind of walk through the press releases for each of the acquisitions that we've completed up to this point, and I think in maybe all of those press releases, we may have had a 2021 full-year estimate. Obviously, we don't own these businesses for the full year.

But I think if you work that math, it should roughly tell you and walk you through exactly what I just explained. And by the way, I think I would just comment, too, that that 25% to 35% year-over-year growth is pretty comparable to kind of what we called last quarter as well.

Peter Grom -- UBS -- Analyst

OK. That's incredibly helpful. And then I had a bit of a longer-term question on the margin opportunity. I think most that are listening this call, as the press releases had kind of come out this quarter, I would say I have been surprised at how high the implied EBITDA margins were in some of the assets you've acquired.

And then in the release tonight, the pro forma EBITDA margin in the mid-teens. Is it far greater than, I think, most anticipated, particularly when we think about 2022? So given you still have room for future acquisitions and likely operational efficiencies, I guess, how should investors really think about the long-term margin opportunity for this business? And how quickly can you get there given what you've delivered so far?

Bill Toler -- Chairman and Chief Executive Officer

Yeah. Thank you. We've -- last year was a six. This year's pro forma, we just gave you is 15.2.

And we think we are well on our way to having a solid mid-teens kind of business here for the foreseeable future with upside. I mean we now own four nutrient plants. We just hired a leader of manufacturing to help us think about productivity and optimization. We are getting scale out of our distribution centers.

We've been growing and -- the growing challenges of becoming a new public company, we've spent a lot of money to do all of that. So we think there's -- we haven't even gotten to the productivity side of business. We're just trying to capture all the growth that's out there. And that's what's exciting for us is that we're showing the kind of mid-teens type of profitability with incredible upside to go.

So it's become a -- I don't think -- I won't say it's a surprise to us. I think it happened quicker than we might have thought nine months ago or eight months ago when we did the IPO. But we clearly saw and felt like we could get to the mid-teens. We just didn't want to -- all you guys to get ahead of us and try and run us out there too fast.

But -- so we're pleased with where it looks right now and think that we can keep going from here, both on the top line and the bottom line.

Peter Grom -- UBS -- Analyst

Great. Well, congrats again, and best of luck.

Bill Toler -- Chairman and Chief Executive Officer

Thank you.

John Lindeman -- Chief Financial Officer

Thanks.

Operator

[Operator instructions] Next question comes from Kevin Marek with Deutsche Bank.

Kevin Marek -- Deutsche Bank -- Analyst

Hi. Good afternoon, guys. 

Bill Toler -- Chairman and Chief Executive Officer

Hey, Kevin. 

Kevin Marek -- Deutsche Bank -- Analyst

Maybe just another deal question. Sitting here after the four deals completed in a matter of months, is there a point at which you need to slow down and ensure the deals you've done are performing well and are effectively a part of the Hydrofarm entity? Or do you have the bandwidth to kind of continue to go after deals?

Bill Toler -- Chairman and Chief Executive Officer

Yeah, very fair question. We talk a lot about this, right? It's particularly a bandwidth question around the financial integration. Many times, we're buying family businesses that aren't up to the sophistication that we are. We've been able to put in external resources, internal resources.

We've been hiring and adding things there. We aren't going to keep the pace of one a month. I'll promise you that. That's a bit aggressive.

But also you can't time M&A when it becomes available, right? And we want to become aggressive, but not overly aggressive to do things. So you can expect us to stay on this track to doing more and more and more. But yes, I think that the one-a-month pace is a little quick. And we've been able to absorb it so far and getting everything filed on time and feeling comfortable that we've got the right informations and numbers.

But it will slow some, but we're still going to become an acquirer of choice and a person that rolls up this business and rolls up this industry, hopefully quite successfully.

Kevin Marek -- Deutsche Bank -- Analyst

Understood. That's helpful. Thank you. 

Bill Toler -- Chairman and Chief Executive Officer

Sure.

Kevin Marek -- Deutsche Bank -- Analyst

Maybe just one more. Realizing it's a bit early to be talking about '22, but just thinking about your guidance, some of the comp issues in the back half of this year, I'm curious if you have any first blush thoughts about the industry or company growth prospects in '22 given some of those dynamics, legalizations that are taking time to play out, etc.

Bill Toler -- Chairman and Chief Executive Officer

Yeah. You know, It's been interesting to watch because that number I quoted, the 60% of people that can't buy today, well, a year ago, that number was over 70%. So a bunch of legislation has happened, but not much implementation has happened. So it's tricky to get ahead of this because the states have been very unpredictable in implementing, right? And if we had a clear path on what New York, New Jersey, Virginia, Connecticut were going to do, it'd be easier to know.

But right now, they're all sort of playing politics with each other and not really sure where it's going. And so we're cagey there. So we don't have a number yet. This is only halfway through our year, as you know.

And so we're really focused on getting the M&As integrated, continue to drive innovation and organic growth. And we'll be out later this fall with -- or in the fall with sort of our look for '22.

John Lindeman -- Chief Financial Officer

And maybe the only thing I would add to reinforce is just, I mean, for sure, the long-term math in this category is something that we remain very excited about. I mean we're still, we believe, very much in the early innings. We'll get a full-year contribution from acquisitions next year. Hopefully, we'll find a way to get another deal or two done over the next six to 12 months.

And so I think we're going to be quite excited about '22, but no numbers just yet for you.

Kevin Marek -- Deutsche Bank -- Analyst

Got it. No. That's totally fair. Thanks very much.

I'll pass it on.

Bill Toler -- Chairman and Chief Executive Officer

Thanks.

Operator

Next question, Bill Chappell with Truist Securities.

Bill Chappell -- Truist Securities -- Analyst

Thanks. Good afternoon. 

Bill Toler -- Chairman and Chief Executive Officer

Hi, Bill.

Bill Chappell -- Truist Securities -- Analyst

Bill, you kind of alluded there were some kind of not hiccups, but some issues in certain areas in the quarter, kind of implying that maybe revenue could have been even better and things have kind of ramped back up since we've started 3Q. Could you give us a little bit more color on that?

Bill Toler -- Chairman and Chief Executive Officer

Yeah, no. I would say that Q2 was pretty solid. We came into July a little slower than we hoped. But there's all kinds of external factors that are going on.

It's heatwaves in Oregon and big fires in California that caused these little blips. But we think that those are largely going to be a few-week thing and not really matter too much. But we think overall that we're still in a really good spot, and the growth will be there.

Bill Chappell -- Truist Securities -- Analyst

Got it. And then one thing kind of struck is, I think, you said in the release that pricing only added about 3%, 4% to top-line growth. Would you expect -- are you taking pricing with higher costs for your own brands where you would see that to be a much bigger number in the back half?

John Lindeman -- Chief Financial Officer

Yes. I mean, look, Bill, we continue to reassess pricing on a quarterly basis. And obviously, right now, just the overall supply environment, not just for us but the whole industry, and frankly, other industries, is very dynamic. So it's a little hard for us to take too much of a long-game view on it right now.

I think we're trying to manage it quarter to quarter. We've basically taken pricing in each of the last two or three quarters, not with the intent of really lifting margins from a pricing mechanism but really maintaining margins and finding productivity. And our portfolio shift is a way to drive margins. So I think we'll continue to drive in that sort of quarterly cadence from here.

Bill Chappell -- Truist Securities -- Analyst

Got it. And then last one, just on the M&A front. I mean I understand that all the nutrient businesses are different. But is there a point where you've filled out the nutrient side of the portfolio where you don't need more? And do you -- at some point, do you start to get negative reactions from the companies you're not acquiring that are -- you're distributing for?

Bill Toler -- Chairman and Chief Executive Officer

No. It's certainly a conversation we have with them, but all of them know kind of how we fit. I think our share in nutrients, if you add all of our distribution -- our proprietary brands, even our distributed brands, we're probably still only a 15 share. So it's a very large and fragmented category.

So we think we've got some room to go there. But also we want to make sure we have good balance in the portfolio. So if we don't do a nutrient one next, that might make sense. But after that, we'd certainly look at some if they're the right ones and fit a niche or a role that we could expand.

Bill Chappell -- Truist Securities -- Analyst

Got it. Thanks so much for the color. 

Bill Toler -- Chairman and Chief Executive Officer

Thanks, Bill.

Operator

I will now turn the floor over to Bill Toler for closing remarks.

Bill Toler -- Chairman and Chief Executive Officer

Terrific. Thank you, Stacy, and thank you all for being on the call today. We appreciate your interest in Hydrofarm, and look forward to speaking with you down the road. Thanks a lot.

Operator

[Operator signoff]

Duration: 39 minutes

Call participants:

Fitzhugh Taylor -- Managing Director, ICR

Bill Toler -- Chairman and Chief Executive Officer

John Lindeman -- Chief Financial Officer

Andrew Carter -- Stifel Financial Corp. -- Analyst

Jon Andersen -- William Blair & Company -- Analyst

Peter Grom -- UBS -- Analyst

Kevin Marek -- Deutsche Bank -- Analyst

Bill Chappell -- Truist Securities -- Analyst

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