HF Foods (US:HFFG)2024-08-09 20:06Financial Performance - Net revenue for the three months ended June 30, 2024, was $302,342, an increase of $10,030 compared to $292,312 in 2023, representing a growth of approximately 3.4%[81] - Net income for the three months ended June 30, 2024, was $235, a significant improvement of $1,795 compared to a loss of $1,560 in 2023[81] - Adjusted EBITDA for the three months ended June 30, 2024, was $10,561, up by $2,204 from $8,357 in 2023, reflecting a growth of approximately 26.4%[81] - Net revenue for the six months ended June 30, 2024 increased by $11.8 million, or 2.0%, compared to the same period in 2023, driven by product cost inflation and improved pricing[104] - Gross profit for the six months ended June 30, 2024 was $102.9 million, an increase of $2.1 million, or 2.0%, with a gross profit margin remaining flat at 17.2%[105] - Net loss attributable to HF Foods Group Inc. was $0.7 million for the six months ended June 30, 2024, an improvement of $6.1 million compared to a net loss of $6.8 million for the same period in 2023[109] - For the six months ended June 30, 2024, the company reported an EBITDA of $20,313,000, a significant increase of 114.4% compared to $9,470,000 for the same period in 2023[111] - Adjusted EBITDA for the same period was $19,263,000, up 36.5% from $14,106,000 in the prior year[111] Operational Efficiency - The company has initiated a comprehensive operational transformation plan focused on centralized purchasing, fleet and transportation improvements, digital transformation, and facility upgrades to drive growth and cost savings[80] - The centralized purchasing program has already yielded positive results in margin expansion for seafood products, with plans to expand to other categories[80] - The company aims to enhance operational efficiency through the implementation of a modern ERP solution across all distribution centers[80] - Distribution, selling, and administrative expenses decreased by $2,403 to $49,840 for the three months ended June 30, 2024, compared to $52,243 in 2023[89] - Distribution, selling and administrative expenses for the six months ended June 30, 2024 decreased to $100.3 million from $105.2 million, with expenses as a percentage of net revenue decreasing to 16.8%[106] Revenue and Cost Analysis - The cost of revenue increased by $8,231 to $249,877 for the three months ended June 30, 2024, compared to $241,646 in 2023[89] - Gross profit for the three months ended June 30, 2024 was $52.5 million, an increase of $1.8 million, or 3.6%, with a gross profit margin of 17.4%[94] - Distribution, selling and administrative expenses decreased by $2.4 million, or 4.6%, for the three months ended June 30, 2024, resulting in a decrease in expenses as a percentage of net revenue to 16.5%[95] Debt and Financial Obligations - Interest expense for the three months ended June 30, 2024 was $3.1 million, consistent with the previous year, while average daily line of credit balance increased by $19.2 million, or 51.7%[96] - Income tax expense for the three months ended June 30, 2024 was $1.6 million, compared to $0.2 million for the same period in 2023, primarily due to discrete tax items[97] - As of June 30, 2024, the company's floating rate debt was $68.6 million, representing 38.5% of total debt[124] - A 1% change in the applicable rate would result in an approximate $0.7 million change in annual interest expense on floating rate debt[124] Cash Flow and Investments - The net cash used in operating activities was $(17,000) for the six months ended June 30, 2024, a decrease of $8,749,000 compared to $8,732,000 provided in the same period in 2023[116] - The company had cash of approximately $14.0 million and access to an additional $29.9 million through a $100.0 million line of credit as of June 30, 2024[112] - Net cash used in investing activities increased by $4.8 million primarily due to increased capital project spending in the six months ended June 30, 2024[118] Market and Strategic Focus - The company acquired two frozen seafood suppliers in 2022, expanding its distribution network across multiple states including Illinois, Texas, and along the eastern seaboard[78] - The company is focused on serving the increasing demand for Asian American restaurant cuisine, leveraging its nationwide distribution network and strong supplier relationships[79] Regulatory and Risk Management - The company incurred a civil monetary penalty of $3.9 million as part of an SEC settlement, which was paid during the three months ended June 30, 2024[114] - Average diesel fuel prices decreased by 1.6% in the second quarter of 2024 compared to the same period in 2023, although future prices remain unpredictable[125] - The company does not actively hedge diesel fuel price fluctuations but seeks to minimize risks through delivery route optimization and fleet utilization improvements[126]