Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HF Foods Group Inc achieved its highest ever recorded net revenue during the first quarter of 2024.
- Gross profit increased by 0.5% to $50.4 million for the quarter compared to the prior year, with flat gross profit margins at 17.1%.
- Distribution, selling, and administrative expenses decreased by approximately 4.6%, contributing to a lower operating loss compared to the previous year.
- Net loss improved significantly to $0.6 million for the first quarter compared to a net loss of $5.8 million for the prior year quarter.
- Adjusted EBITDA increased by approximately 51.4% to $8.7 million for the first quarter, indicating strong operational efficiency.
Negative Points
- The company experienced a $2.7 million loss in revenue due to the exit from its chicken processing businesses.
- Despite the overall revenue growth, the increase was primarily driven by product cost inflation rather than volume growth.
- Operating income for the first quarter of 2024 was still a loss of $0.1 million, indicating ongoing challenges in achieving profitability.
- The improvement in net loss was partially offset by a $4.7 million change in the fair value of interest rate swaps, highlighting potential volatility in financial instruments.
- While distribution costs have decreased, the increase in headcount led to higher payroll and related labor costs, which could impact future profitability if not managed effectively.
Q & A Highlights
Q: Can you discuss the financial highlights from HF Foods Group's first quarter of 2024?
A: (Xi Lin - President, Interim CFO, COO) In Q1 2024, HF Foods achieved a net revenue increase of 0.6% year-over-year, reaching $295.7 million. Gross profit also saw a slight increase to $50.4 million. Notably, the net loss improved significantly to $0.6 million from a previous $5.8 million, and adjusted EBITDA increased by 51.4% to $8.7 million.
Q: What were the main drivers behind the revenue growth this quarter?
A: (Xi Lin - President, Interim CFO, COO) The revenue growth was primarily driven by product cost inflation and improved pricing strategies in certain categories. This was partially offset by a $2.7 million loss in revenue due to the exit from our chicken processing businesses.
Q: How has the company's operational efficiency changed this quarter?
A: (Xi Lin - President, Interim CFO, COO) Operational efficiency improved as evidenced by a reduction in distribution, selling, and administrative expenses by about 4.6%. This reduction contributed significantly to the operating income improvements and the overall net loss reduction.
Q: Could you provide an update on the operational transformation plan?
A: (Xi Lin - President, Interim CFO, COO) Our transformation plan is progressing well, with key initiatives like centralized purchasing and a national fuel savings program launched. We're also in the first phase of our fleet replacement program and expect new trucks by end of 2024. Additionally, our digital transformation with a new ERP system is on track for completion by the end of the year.
Q: What strategic moves are being made in terms of mergers and acquisitions?
A: (Xi Lin - President, Interim CFO, COO) We are actively exploring M&A opportunities to expand geographically and enhance our market presence. Our strategy focuses on acquisitions that offer substantial synergies and align with our long-term growth objectives.
Q: How is HF Foods positioning itself in the market for future growth?
A: (Xi Lin - President, Interim CFO, COO) We are positioning ourselves as a leader in Asian food distribution, focusing on delivering premium specialty products and enhancing customer experiences. Our comprehensive transformation plan is aimed at boosting operational efficiencies and ensuring sustainable growth. We've established a strong foundation with over $1.1 billion in annual net revenue and are poised for further expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
