HF Foods (HFFG) - 2023 Q2 - Quarterly Report

Financial Performance - Net revenue for Q2 2023 was $292.3 million, a decrease of $7.3 million or 2.4% compared to Q2 2022[117]. - Net loss for Q2 2023 was $1.56 million, a decline of $6.05 million or 134.7% compared to a net income of $4.49 million in Q2 2022[117]. - Adjusted EBITDA for Q2 2023 was $6.94 million, down $6.98 million or 50.1% from $13.92 million in Q2 2022[117]. - Gross profit for Q2 2023 was $50.67 million, down $1.9 million or 3.6% from $52.57 million in Q2 2022[125]. - Net loss attributable to HF Foods Group Inc. was $0.9 million for the three months ended June 30, 2023, compared to net income of $4.6 million in the same period in 2022, a decrease of $5.4 million, or 118.6%[132]. - Adjusted EBITDA for the three months ended June 30, 2023, was $6.9 million, a decrease of $7.0 million, or 50.1%, compared to $13.9 million for the same period in 2022[135]. - Net loss attributable to HF Foods Group Inc. was $6.8 million for the six months ended June 30, 2023, compared to net income of $7.7 million in the same period in 2022, a decrease of $14.5 million, or 188.3%[145]. - Adjusted EBITDA for the six months ended June 30, 2023, was $12.2 million, a decrease of $19.6 million, or 61.7%, compared to $31.8 million for the same period in 2022[148]. Revenue and Expenses - Cost of revenue for Q2 2023 was $241.6 million, a decrease of $5.43 million or 2.2% compared to Q2 2022[125]. - Distribution, selling, and administrative expenses increased by $6.4 million or 14.0% to $52.2 million in Q2 2023 compared to Q2 2022[125]. - Distribution, selling, and administrative expenses increased by $18.9 million, or 21.9%, to $105.2 million for the six months ended June 30, 2023, primarily due to higher payroll and professional fees[142]. - The company experienced a $7.0 million decrease in Meat and Poultry revenue due to deflationary pricing in poultry[126]. Cash Flow and Debt - As of June 30, 2023, the company had cash of approximately $14.9 million and access to an additional $57.8 million through a $100.0 million line of credit[149]. - Net cash provided by operating activities decreased by $4.9 million, or 36.1%, to $8.7 million for the six months ended June 30, 2023, primarily due to a net loss and timing of working capital outlays[156][157]. - Net cash used in investing activities decreased by $47.1 million, or 96.9%, primarily due to prior acquisitions in the same period of 2022[158]. - Net cash used in financing activities decreased by $55.6 million, or 142.4%, resulting in a net cash outflow of $16.6 million for the six months ended June 30, 2023[159]. - The company has an amortizing IRS contract with J.P. Morgan Chase Bank for a notional amount of $120.0 million, expiring in March 2028, to hedge floating rate loan exposure[151]. - As of June 30, 2023, 26.2% of the company's total debt, amounting to $42.2 million, was floating rate debt without hedging[163]. Market and Operational Insights - The company aims to leverage its distribution network to meet the increasing demand for Asian American restaurant cuisine[116]. - HF Group completed the acquisition of Sealand Food, Inc. on April 29, 2022, enhancing its position in the frozen seafood market[115]. - Average diesel fuel prices decreased by 28.7% in Q2 2023 compared to the same period in 2022, although future prices remain unpredictable[164]. - The company believes it has sufficient funds to meet working capital and debt obligations for the next twelve months, but potential shortfalls could arise from various factors[153]. - The company has no off-balance sheet arrangements that could materially affect its financial position as of June 30, 2023[155]. - The company does not actively hedge diesel fuel price fluctuations but seeks to minimize risks through delivery route optimization[165]. Interest and Financial Costs - Interest expense increased by $1.3 million or 83.8% to $2.85 million in Q2 2023 compared to Q2 2022[125]. - Interest expense for the three months ended June 30, 2023, increased by $1.3 million, or 83.8%, due to a higher interest-rate environment[130].