HF Foods (US:HFFG)2025-11-10 21:28Financial Performance - Net revenue for the three months ended September 30, 2025, increased by $8.6 million, or 2.9%, compared to the same period in 2024, primarily due to volume increases and improved pricing in Meat & Poultry and Seafood [127]. - Gross profit was $50.4 million for the three months ended September 30, 2025, compared to $50.2 million in the same period in 2024, an increase of $0.2 million, or 0.5% [128]. - Net revenue for the nine months ended September 30, 2025, increased by $23.9 million, or 2.7%, compared to the same period in 2024, primarily due to volume growth and improved pricing in key categories [137]. - Gross profit for the nine months ended September 30, 2025, was $156.5 million, an increase of $3.5 million, or 2.3%, with a gross profit margin slightly decreasing to 17.0% from 17.1% in the same period in 2024 [138]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $35.4 million, an increase of $7.8 million compared to $27.6 million for the same period in 2024 [115]. - Income from operations for the three months ended September 30, 2025, was $1.1 million, an increase of $0.6 million compared to $0.5 million in the same period in 2024 [124]. Expenses and Losses - Distribution, selling and administrative expenses decreased by $0.4 million, or 0.7%, to $49.3 million for the three months ended September 30, 2025, with expenses as a percentage of net revenue decreasing to 16.1% from 16.6% [129]. - Distribution, selling, and administrative expenses were $150.1 million for the nine months ended September 30, 2025, slightly increasing from $150.0 million in 2024, with expenses as a percentage of net revenue decreasing to 16.3% [139]. - Net loss attributable to HF Foods Group, Inc. was $1.1 million for the three months ended September 30, 2025, compared to a net loss of $3.9 million for the same period in 2024, reflecting an improvement driven by increased income from operations [132]. - Net loss attributable to HF Foods Group Inc. was $1.5 million for the nine months ended September 30, 2025, compared to a net loss of $4.6 million in the same period in 2024, an improvement of $3.1 million [142]. Cash Flow and Financing - As of September 30, 2025, the company had cash of approximately $12.3 million and access to $49.8 million in additional funds through its line of credit [145]. - Net cash provided by operating activities increased by $0.3 million to $4.5 million for the nine months ended September 30, 2025 [152]. - Net cash used in investing activities increased by $0.4 million primarily due to increased capital project spending [153]. - Net cash provided by financing activities increased by $1.8 million to $3.2 million during the nine months ended September 30, 2025, due to higher net proceeds from line of credit activity [154]. Operational Changes and Strategies - 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 [114]. - The company acquired two frozen seafood suppliers in 2022, expanding its distribution network across several states, enhancing its market presence [112]. Goodwill and Fair Value - The company recorded a goodwill impairment charge of $46.3 million in Q4 2024 due to a decline in stock price, indicating impairment as of December 31, 2024 [156]. - The fair value assessment utilized a combination of discounted cash flow (DCF) and market approaches, with equal weighting, to estimate the reporting unit's fair value [157]. - A 100 basis point increase in the discount rate assumption could decrease the fair value of the reporting unit by approximately $11.6 million, indicating sensitivity to key assumptions [159]. - As of September 30, 2025, the company determined no events would likely reduce the fair value of the reporting unit below its carrying value, despite a decrease in share price attributed to market reactions [160]. Debt and Interest - Interest expense for the three months ended September 30, 2025, was $2.9 million, slightly up from $2.6 million in the same period in 2024 [130]. - Interest expense decreased by $0.2 million, or 2.7%, for the nine months ended September 30, 2025, primarily due to a decrease in the average daily mortgage-secured term loan balance [140]. - The company's aggregate floating rate debt outstanding as of September 30, 2025, was $69.3 million, representing 39.7% of total debt, with a potential $0.7 million change in interest expense for a 1% rate change [164]. Market Conditions - Average diesel fuel prices increased by 1.8% in Q3 2025 compared to Q3 2024, impacting operating costs and consumer spending behavior [165]. - The company does not actively hedge diesel fuel price fluctuations but aims to minimize risk through delivery route optimization and fleet utilization improvements [166].