Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net revenue increased by 3.4% to $302.3 million compared to the prior year quarter.
- Gross profit increased by 3.6% to $52.5 million, with gross profit margins slightly improving to 17.4%.
- Distribution, selling, and administrative expenses decreased by approximately 4.6%, improving operational efficiency.
- Adjusted EBITDA increased by 26.4% to $10.6 million, indicating strong operational performance.
- Successful implementation of a modern ERP system at one of the California distribution centers, enhancing operational efficiency.
Negative Points
- Revenue was negatively impacted by a $3.1 million loss due to the exit from the chicken processing business.
- Gross margins on wholesale sales are lower than retail sales, which may affect overall profitability in the short term.
- Total interest expense increased to $3.1 million from $2.8 million in the prior year quarter.
- The company faced a $3.9 million SEC settlement, impacting net income.
- The fair value of interest rate swaps resulted in a $2.5 million negative impact.
Q & A Highlights
Q: Can you provide more details on the financial impact of exiting the chicken processing business?
A: (CFO, Cong Yao) The exit from the chicken processing business resulted in a $3.1 million offset to revenue during the second quarter. Despite this, we saw a 3.4% increase in net revenue to $302.3 million, driven by product cost inflation in the chicken category and improved pricing in seafood.
Q: How has the centralized purchasing program impacted your margins?
A: (President and COO, Xi Lin) The centralized purchasing program, particularly in the seafood category, has significantly improved our margins. We have also expanded this program to include chicken, which has helped us manage cost volatility and expand our margin on a per pound basis compared to the same period last year.
Q: What progress have you made with your ERP system implementation?
A: (President and COO, Xi Lin) We recently completed the implementation of our modern ERP solution at one of our California distribution centers. This will streamline operations, improve data accuracy, and enhance overall efficiency. We expect to complete the ERP implementation across all distribution centers by the end of 2024.
Q: Can you elaborate on the improvements in your fleet and transportation operations?
A: (President and COO, Xi Lin) We have implemented a unified fleet telematics system across all our trucks, which allows us to track and monitor fleet performance effectively. This has helped us reduce fleet idle times and lower our distribution costs. We are also centralizing our inbound freight program to improve margins.
Q: What are your plans for facility upgrades and expansions?
A: (President and COO, Xi Lin) We are renovating our Charlotte, North Carolina facility, which will enhance our distribution operations on the East Coast. Additionally, we are finalizing the lease for a new facility in Atlanta, which will double our capacity in that market. The Charlotte facility is expected to be operational by early 2025, and the Atlanta facility by early 2026.
Q: How did the SEC settlement impact your financials?
A: (CFO, Cong Yao) The SEC settlement resulted in a $3.9 million expense, but it is now fully behind us. This will significantly lower our professional fees starting in the third quarter, contributing to improved financial performance.
Q: What are your future plans for M&A activities?
A: (President and COO, Xi Lin) We continue to explore M&A opportunities for geographic expansion, focusing on targets that will allow us to realize meaningful synergies and drive growth.
Q: Can you provide more details on your financial performance for the second quarter?
A: (CFO, Cong Yao) Net revenue increased by 3.4% to $302.3 million, and gross profit increased by 3.6% to $52.5 million. Operating income improved to $2.6 million from a loss of $1.6 million in the prior year quarter. Adjusted EBITDA increased by 26.4% to $10.6 million.
Q: How are you managing distribution, selling, and administrative expenses?
A: (CFO, Cong Yao) These expenses decreased by approximately 4.6% to $49.8 million, primarily due to lower professional fees. As a percentage of net revenues, these expenses decreased to 16.5% from 17.9% in the prior year period.
Q: What are your key focus areas for operational improvements?
A: (President and COO, Xi Lin) We are focused on inventory and working capital management, reducing costs in transportation and logistics, and enhancing operational efficiencies in our distribution centers. These initiatives are guided by our commitment to long-term growth and success.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
