HF Foods (HFFG) - 2024 Q3 - Quarterly Report

Financial Performance - Net revenue for the three months ended September 30, 2024, was $298,389, an increase of$16,936 compared to $281,453 for the same period in 2023, representing a growth of approximately 6$8,305, a decrease of $1,792 from$10,097 in the same period of 2023[103] - The net loss for the three months ended September 30, 2024, was $(3,837), compared to a net income of$1,974 for the same period in 2023, reflecting a decline of $5,811[111] - Gross profit for the three months ended September 30, 2024, was$50,163, a slight decrease of $762 from$50,925 in the same period of 2023[111] - Net revenue for the nine months ended September 30, 2024 increased by $28.8 million, or 3.3$153.0 million, an increase of $1.3 million, or 0.8$4.6 million for the nine months ended September 30, 2024, compared to a net loss of $4.9 million for the same period in 2023[129] Expenses and Costs - Distribution, selling, and administrative expenses increased to$49,652 for the three months ended September 30, 2024, up from $48,841 in the same period of 2023, an increase of$811[111] - Distribution, selling and administrative expenses increased by $0.8 million, or 1.7$150.0 million for the nine months ended September 30, 2024, from $154.0 million in the prior year[126] - Interest expense for the nine months ended September 30, 2024 increased by$0.2 million, or 2.0%, primarily due to an increase in the average daily line of credit balance[127] Operational Initiatives - The company has initiated a comprehensive operational transformation plan focused on centralized purchasing, fleet and transportation improvements, digital transformation, and facility upgrades[102] - The company aims to expand its distribution network, having acquired two frozen seafood suppliers in 2022, enhancing its reach in multiple states including Illinois and Texas[100] - The company is implementing a modern ERP solution across all distribution centers to enhance operational efficiency and data-driven decision-making[102] - The centralized purchasing program has yielded positive results in margin expansion for seafood products, with plans to expand to other categories[102] Cash Flow and Liquidity - The net cash used in operating activities for the nine months ended September 30, 2024, was $(3,299,000), a decrease of$23,923,000 compared to $20,624,000 for the same period in 2023[138] - The company’s liquidity is influenced by economic conditions and competitive pricing in the foodservice distribution industry, which may affect future cash flow[136] - The company’s net cash provided by financing activities was$8,935,000 for the nine months ended September 30, 2024, a decrease of $37,000,000 compared to$(28,018,000) for the same period in 2023[141] Risks and Challenges - The company is focused on addressing risks such as low margins in the foodservice distribution industry and potential disruptions in global supply chains[98] - The company performed a quantitative goodwill impairment assessment as of September 30, 2024, concluding that the estimated fair value exceeded carrying value by approximately 1% or $5 million[144] - The company has floating rate debt of$69.1 million, representing 39% of total debt, with a potential $0.7 million change in interest expense per year for a 1% change in applicable rates[156] - The company has no off-balance sheet arrangements that are likely to have a material effect on its financial position as of September 30, 2024[137] Fuel Costs - In Q3 2024, average diesel fuel prices decreased by 14.6% compared to Q3 2023[157] - The company currently has adequate supplies of diesel fuel, but future availability and pricing remain unpredictable[157] - Diesel fuel price fluctuations are influenced by external factors such as geopolitical developments and supply and demand dynamics[157] - Increased diesel fuel costs could raise the company's cost of goods sold and operating expenses[157] - The company does not actively hedge against diesel fuel price fluctuations[158] - Fuel cost risk is minimized through delivery route optimization and fleet utilization improvements[158]