HF Foods (US:HFFG)2024-03-26 20:50Financial Performance - Net revenue for 2023 was $1,148.5 million, a decrease of $22.0 million or 1.9% compared to 2022, primarily due to deflationary pricing in frozen seafood and poultry [193]. - Gross profit for 2023 was $204.0 million, down $1.5 million or 0.7% from 2022, with a gross profit margin of 17.8%, an increase from 17.6% in the prior year [193][199]. - Net loss attributable to HF Foods Group Inc. was $2.2 million in 2023, compared to net income of $0.5 million in 2022, a decrease of $2.6 million [196][203]. - For the year ended December 31, 2023, the company reported an Adjusted EBITDA of $44.6 million, a 11.1% increase from $40.1 million in 2022, reflecting a change of $4.5 million [204]. Expenses and Costs - Distribution, selling and administrative expenses were $195.1 million in 2023, consistent with 2022, but as a percentage of net revenue, they increased to 17.0% from 16.7% [193][200]. - Interest expense rose by $4.0 million or 53.9% in 2023, primarily due to a higher interest-rate environment [201]. - Legal settlements received in 2023 totaled $10.0 million, which partially offset increases in payroll and insurance costs [193][200]. - The company recognized an impairment expense of $1.2 million for machinery used in operations during the year ended December 31, 2023 [231]. - An additional impairment expense of $0.4 million was recognized for acquired developed technology attributable to Syncglobal, Inc. in the year ended December 31, 2022 [231]. Cash Flow and Financing - The net cash provided by operating activities decreased by $15.5 million, or 49%, to $15.8 million for the year ended December 31, 2023, primarily due to the timing of working capital outlays [214]. - The net cash used in financing activities was $23.3 million for the year ended December 31, 2023, a decrease of $52.3 million compared to the previous year [216]. - As of December 31, 2023, the company had cash of approximately $15.2 million and access to an additional $37.6 million through a $100.0 million line of credit [206]. - Management believes that cash flow generated from operations is sufficient to meet normal working capital needs for at least the next twelve months [207]. Investments and Acquisitions - The company exited its low-margin chicken processing businesses in the second half of 2023 to refocus on its core business [196]. - The Sealand Acquisition contributed to increased seafood revenue, providing a full year of revenue in 2023 compared to a partial year in 2022 [198]. - The net cash used in investing activities significantly decreased by $49.3 million, or 97%, primarily due to reduced acquisition payments compared to 2022 [215]. Debt and Interest Rate Management - The company is party to an interest rate swap contract with a notional amount of $120.0 million, expiring in March 2028, to hedge floating rate loan exposure [208]. - As of December 31, 2023, the company's aggregate floating rate debt's outstanding principal balance was $60.8 million, representing 35.2% of total debt [234]. - A hypothetical 1% change in the applicable rate would result in an approximate $0.6 million change in annual interest expense on floating rate debt [234]. Operational Efficiency - The company operates 18 distribution centers covering approximately 95% of the contiguous United States, serving around 15,000 Asian restaurants [185]. - Average diesel fuel prices in 2023 decreased by 15.5% compared to 2022, positively impacting the company's cost structure [235]. - The company does not actively hedge diesel fuel price fluctuations but minimizes risk through delivery route optimization and fleet utilization improvement [236].