Q1 2024 HF Foods Group Inc Earnings Call
Joining me on today's call are Peter Zhang HFC, Chief Executive Officer, and Felix when the company's President and Chief operating officer in a moment, we will hear their prepared remarks, we are excited that Cindy I'll join the H F foods as Chief Financial Officer on May 1st and she will be joining us for our next earnings call by now everyone should have access to the earning.
Release for the period ended March 31, 2024 that went out Wednesday may eight at approximately eight a M eastern time.
The press release is accessible on the company's website at investors Dot H F Foods group Dotcom.
Before we begin let me remind everyone that today's discussion contains forward looking statements based on the environment as the company currently see that and as such does include risks and uncertainties. If you refer to HFF, whose earnings release as well as the company's most recent SEC filings you will see a discussion of factors that could cause the company's actual results to differ.
Materially as a result of these forward looking statements. Please remember the company undertakes no obligation to update or revise these forward looking statements in the future. These remarks, the company will make a number of references to non-GAAP financial measures. We believe that these measures provide investors with useful perspective on the underlying growth trends of the business and have included them.
The earnings release, a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures now I will turn the call over to Peter.
Peter: Hello, everyone I would like to welcome CEO of.
Peter: Our Chief Financial Officer.
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Peter: We are starting to have her join us.
Peter: This meeting will be above our 2024 first quarter's financial results.
Peter: Evolution, though of the.
Speaker Change: Over to you for that.
Speaker Change: Thanks Peter.
Speaker Change: Extend a warm welcome to Cindy as well.
Cindy: Im pleased to be speaking with you after we achieve our highest ever recorded net revenues during the first quarter HFF.
Cindy: Alongside a year over year improvements in gross profit net loss and adjusted EBITDA.
Cindy: It is notable that we achieved net revenue growth.
Cindy: Even though we exited our chicken processing businesses and second and third quarter of 2023, demonstrating signs of strength within our core business.
Cindy: Our operational transformation plan is well underway.
Cindy: Speak more about our progress on those key financial metrics.
Cindy: Which are positive indicators of success.
Speaker Change: I'll start with our results for the first quarter ended March 31, 2024 versus the same period in 2023.
Speaker Change: Net revenue for the first quarter increased 0.6% to $295 7 million from $293 9 million in the prior year quarter.
Speaker Change: This increase was primarily driven by product cost inflation and improved pricing in certain categories.
Speaker Change: Partially offset by a $2 7 million loss in revenue, resulting from exit of our chicken processing businesses.
Speaker Change: Gross profit increased by 0.5% to $50 4 million for the quarter compared to $50 2 million in the prior year quarter and gross profit margins were approximately flat at 17, 1%.
Speaker Change: The increase in gross profit was driven by improvement in the seafood category due to successful execution of a centralized purchasing plan.
Speaker Change: Distribution selling and administrative expenses decreased approximately four 6% to $50 5 million for the first quarter of 2024 from $52 9 million for the first quarter of 2023 to reduce expenses were due primarily to lower professional fees and were partially offset by higher payroll and related labor costs.
Speaker Change: Distribution, selling and administrative expenses as a percentage of net revenue decrease of 17, 1% from 18% in the prior year period, primarily due to lower professional fees and increased net revenue and was partially offset by increased head count.
Operating income for the first quarter 2024 was a loss of $0 1 million compared to a loss of $2 8 million for the first quarter of 2023.
Speaker Change: The improvement was driven by the lower distribution selling and administrative expenses.
Speaker Change: Total interest expense slightly decreased to $2 8 million for the first quarter compared to $2 9 million in the prior year quarter.
Speaker Change: Net loss improved to $0 6 million for the first quarter compared to a net loss of $5 8 million for the prior year quarter.
Speaker Change: The improvement was driven by lower distribution selling and administrative costs.
Speaker Change: And higher gross profit and was partially offset by the $4 7 million chain.
Speaker Change: Change in fair value of interest rate swaps.
Speaker Change: Adjusted EBITDA increased approximately 51, 4% to $8 7 million for the first quarter compared to $5 7 million for the prior year quarter.
Speaker Change: The increase in adjusted EBITDA was primarily due to lower distribution selling and administrative expenses.
At the end of the first quarter, we had available capacity of $40 9 million in additional funds through our line of credit we feel good about our current liquidity position.
Speaker Change: As a reminder, we've implemented a comprehensive operational transformation plan to achieve our growth targets and ensure our business is prime for success I'll give you a few updates on our progress and I look forward to continuing to share more in the coming quarters.
Our centralized purchasing initiatives is focused on formalizing national category purchases and we're bringing in new vendors into our ecosystem in order to harness our buying power.
Speaker Change: We continue to make progress in our seafood margin expansion plan and have now expanded the program to select B and poultry products.
Speaker Change: We said previously that we implemented a national fuel savings program to maximize efficiency and reduce fuel costs with launch of our national fuel savings program in March 2024.
Speaker Change: As part of our focus on efficiency and lower operating costs. We have initiated the first phase of our replacement program by placing orders for roughly 25% of our existing fleet, we expect the new trucks to be in service by the end of 2024.
Speaker Change: We're also.
Speaker Change: Really excited about where our digital transformation stance.
Speaker Change: As we are well underway with the implementation of our modern ERP solution.
Speaker Change: This modernization effort not only enhances our operational efficiency, but also strengthens our ability to adapt swiftly to market dynamics.
Speaker Change: We continue to expect to complete implementation by the end of 2024.
Speaker Change: We have recently completed a network and facility optimization study for our distribution network. We have now moved into phase one of our facility upgrade initiatives as well.
Speaker Change: Phase one includes two new state of the art facilities in the southeast region.
Speaker Change: Where we see the highest potential for cross selling and maximizing efficiency opportunities.
Speaker Change: Our goal with both facilities as a dropdown distribution cost for our existing customers and the region as well as substantial organic growth opportunities.
Speaker Change: Im encouraged by the solid groundwork we have made on our transformation plan.
Speaker Change: Yes, we're on track for all of our key focus areas to have the impact of significant growth or cost reduction for years to come.
Speaker Change: We remain committed to meticulously executing our plan in 2024.
Speaker Change: Regarding our M&A growth strategy, we're actively exploring M&A opportunities for geographic expansion of our business and our M&A strategy is focused on targets that will allow us to realize meaningful synergies.
Speaker Change: In closing.
Speaker Change: We offer very strong value as a leader in Asian, food distribution and have positioned <unk> foods as an indispensable partner in delivering premium specialty products that are essential fourth into experiences that customers expect.
Speaker Change: Our primary focus remains on executing our comprehensive transformation plan aimed at enhancing operational efficiencies to deliver a sustainable long term growth so far.
Speaker Change: We successfully established <unk> foods as an enterprise generating over $1 1 billion in annual net revenue.
Speaker Change: We're just getting started we look forward to providing further updates on our next call. Thank you.