HF Foods Group Inc. (NASDAQ:HFFG) Q1 2024 Earnings Call Transcript May 10, 2024

HF Foods Group Inc. isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Anna Heller: Hello, everyone. Welcome to HF Foods Group’s First Quarter 2024 Earnings Conference Call. Joining me on today’s call are Peter Zhang, HF Foods’ Chief Executive Officer, and Felix Lin, the Company’s President and Chief Operating Officer. In a moment, we'll hear their prepared remarks. We are excited that Cindy Yao joined HF Foods as Chief Financial Officer on May 1st and she will be joining us for the next earnings call. By now, everyone should have access to the earnings release for the period ended March 31, 2024 that went out Wednesday, May 8 at approximately 8:00 AM Eastern time. The press release is accessible on the Company’s website at investors.hffoodsgroup.com. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as the company currently sees it, and as such, does include risks and uncertainties.

If you refer to HF Foods’ 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. In 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 in 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 Zhang: Hello, everyone. I would like to welcome Cindy Yao as our Chief Financial Officer. Cindy has over 30 years of financial and accounting leadership, her experience will be invaluable to our team. We are excited to have her join us. Felix Lin will speak about our 2024 first quarter’s financial results and the operational update. Now over to you, Felix.

Felix Lin: Thanks, Peter, and I’d like to extend a warm welcome to Cindy as well. I am pleased to be speaking with you after we achieved our highest ever recorded net revenue during a first quarter at HF Foods, alongside year-over-year improvements in gross profit, net loss, and adjusted EBITDA. It is notable that we achieved net revenue growth even though we exited our chicken processing businesses in the second and third quarters of 2023, demonstrating signs of strength within our core business. Our operational transformation plan is well underway, and I will speak more about our progress on these key financial metrics which are positive indicators of success. I’ll start with our results for the first quarter ended March 31st, 2024, versus the same period in 2023: Net revenue for the first quarter increased 0.6% to $295.7 million, from $293.9 million in the prior year quarter.

This increase was primarily driven by product cost inflation and improved pricing in certain categories, partially offset by the $2.7 million loss in revenue resulting from the exit of our chicken processing businesses. 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%. The increase in gross profit was driven by improvement in the Seafood category due to successful execution of a centralized purchasing plan. Distribution, selling, and administrative expenses decreased approximately 4.6% to $50.5 million for the first quarter of 2024 from $52.9 million for the first quarter of 2023. The reduced expenses were due primarily to lower professional fees and were partially offset by higher payroll and related labor costs.

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