Hf Foods Group Q1 2025 Earnings Call Transcript

Key Takeaways

  • Net revenue grew 0.9% year-over-year and adjusted EBITDA rose 12.3% to $9.8 million despite one fewer selling day, demonstrating strong operational momentum.
  • The company completed its new ERP rollout across all locations and launched an e-commerce platform in key regions, aiming to boost efficiency, margin expansion, and data-driven decision making.
  • Strategic facility upgrades, including Charlotte DC renovations by Q2 and a new Atlanta distribution center, are on track to enhance cross-selling capabilities and drive organic growth.
  • HF Foods maintains a disciplined M&A strategy, targeting geographic expansion, operational synergies, and broader product offerings to leverage its position in the Asian specialty market.
  • Despite operational gains, GAAP net loss widened to $1.5 million from $0.6 million, primarily due to an approximately $3.2 million unfavorable fair-value adjustment on interest rate swaps.
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Earnings Conference Call
Hf Foods Group Q1 2025
00:00 / 00:00

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Hello, everyone. Welcome to HF Foods Group First Quarter twenty twenty five Earnings Conference Call. Joining me today on today's call are Felix Lin, the company's President and Chief Executive Officer and Cindy Yao, the company's chief financial officer. By now, Evern should have access to the earnings release for the period ending 03/31/2025 that went out on Monday, May 12, at approximately 04:05PM 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 management's current beliefs and expectations about future events, which are subject to several known and unknown 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 from those expressed or implied by these forward looking statements. The company undertakes no obligation to update or revise these forward looking statements in the future. In these remarks, the company will make several references to non GAAP financial measures, including adjusted EBITDA. We believe that these measures provide investors with a 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 Felix.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

Hello, everyone. Welcome to HFO's first quarter earnings call. I'll provide a business update, and Cindy will speak about our first quarter of twenty twenty five financial results. Following a strong finish to 2024, I am pleased to report that we have carried our momentum into the first quarter twenty twenty five. Net revenue increased 0.9% year over year despite one fewer day of operations in the first quarter twenty twenty five.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

Adjusted EBITDA increased 12.3% year over year to 9,800,000.0. It is also worth noting, like many others in the food service space, we saw a relatively slow February driven mainly by macro uncertainty, which was then offset by a very strong March. So far, we have seen this momentum carry through into April, which give us confidence in our 2025 performance. Our results in the first quarter reflect continued disciplined execution against our strategic initiatives even amid a dynamic and uncertain macro environment characterized by new tariffs, persistent inflationary pressures, and shifts in consumer spending behaviors. Delivering positive net revenue growth and significant adjusted EBITDA growth under these conditions demonstrates the resilience of our business model and strength of our operational focus.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

The industry continues to face macro headwinds, particularly the uncertainty as a result of new tariff policies and related supply chain disruption. In response to the evolving tariff landscape, we have been actively diversifying our supplier base and exploring alternative sourcing strategies to ensure continuity and cost effectiveness in our supply chain. We are encouraged by our performance in the first quarter and the solid foundation we've built. We remain extremely optimistic in our long term plan, and we aim to continue the momentum we've built for the rest of the year. Our digital transformation initiative reached a major milestone on May 1 when we successfully completed the implementation of a new ERP application across our entire network.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

All of our locations are now operating on a single modern ERP platform. This unified system will help us to achieve breakthrough levels of efficiency, visibility, and control across our operations, unlocking the full potential of our centralized purchasing capabilities and enabling more data driven decision making throughout the organization. In parallel with the ERP rollout, we launched our new ecommerce platform at our Utah, North Carolina, and Florida DCs. This new platform, which is designed specifically for food service customers and distributors, will enable restaurant employees and owners to directly purchase HF Foods authentic high quality specialty products using the same delivery infrastructure already serving their restaurants. This model leverages HF Foods established global network of suppliers and robust distribution infrastructure to offer a cost efficient value added channel in a seamless digital experience.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

Taken together, these initiatives represent a strategic leap forward. We're confident they will serve as powerful catalyst for margin expansion, improve service levels for our customers, and long term operational excellence. Our strategic facility enhancement initiatives continue to advance across multiple regions. We're on track to complete renovations at our Charlotte distribution center by the end of q two twenty twenty five. We continue to make steady progress on our Atlanta state of the art facility project, which we expect will create meaningful organic growth opportunities from a cross selling perspective.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

These infrastructure investments reflect our ongoing commitment to optimize our distribution network and creating a stronger foundation for sustainable growth. HF Foods is the only scale food service provider in Asian specialty market in The United States, and we believe we are the strategic acquirer of choice within our space. M and A remains a core pillar of our growth strategy. We're focused on expanding our geographic footprint in high potential markets, capturing operational synergies, broadening our customer base, enhancing our product and service capabilities. We remain disciplined but optimistic about m and a opportunities in 2025 and beyond. Now over to you, Cindy.

Cindy Yao
Cindy Yao
Chief Financial Officer at HF Foods Group

Thanks, Felix. I will now review our results for the first quarter ending 03/31/2025 versus the same period in 2024. Net revenue for the first quarter increased 0.9% to $298,400,000 from $295,700,000 in the prior year quarter. The increase was primarily attributable to volume increases and improved pricing in our commodity, meat, poultry, and seafood categories. Gross profit increased by 1.1% to 51,000,000 for the quarter compared to 50,400,000.0 in the same period in 2024.

Cindy Yao
Cindy Yao
Chief Financial Officer at HF Foods Group

The increase was primarily attributable to an increase in margins in commodities and seafood during the quarter. Gross profit margin of 17.1% remained consistent with the same period in 2024. Distribution, selling, and administrative expenses decreased by 700,000.0 to 49,700,000.0 for the first quarter, primarily due to the company's efforts in reducing professional fees. As mentioned the last quarter, we have identified the strategic cost optimization opportunities across key spending categories and realized some DSA cost benefits during q one. We also finalized our comprehensive plan to reduce cash DSA expenses by three to 5% by the end of twenty twenty five while preserving our core growth initiatives.

Cindy Yao
Cindy Yao
Chief Financial Officer at HF Foods Group

Operating income for the first quarter of twenty twenty five was 1,200,000 compared to operating loss of $100,000 in the prior year quarter. The increase in income was driven by the increase in the net revenue and the decrease in distribution, selling, and administrative expenses. Total interest expense decreased slightly to 2,700,000 for the first quarter of twenty twenty five compared to $2,800,000 in the prior year quarter. Net loss of $1,500,000 increased compared to net loss of $600,000 for the prior year quarter. The increase was primarily driven by an unfavorable change of approximately 3,200,000.0 in the fair market value of interest rate swaps.

Cindy Yao
Cindy Yao
Chief Financial Officer at HF Foods Group

Adjusted EBITDA increased to 9,800,000.0 for the first quarter of twenty twenty five compared to $8,700,000 in the prior year quarter, reflecting a 12.3% increase. This was mainly due to the decrease in DFA expenses along with an increase in gross profit. Thank you, and back over to you, Felix.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

As we look ahead to 2025 and beyond, I wanna emphasize our commitment to executing the comprehensive transformation initiatives that are reshaping Foods. 2025 is a year of strategic investment for HF, and the investments we're making in our facilities, digital infrastructure, and operations will establish a strong foundation for our next phase of growth. While short term uncertainties persist, we remain focused on our long term strategic objectives. Our investments in digital transformation and infrastructure are strategically designed to drive organic growth through cross selling opportunities while positioning us to complement this expansion with targeted m and a initiatives. Our key competitive advantages stem from the growing demand for authentic Asian cuisine and our unmatched position as a leading nationwide Asian specialty distributor.

Felix Lin
Felix Lin
CEO & President at HF Foods Group

We are methodically building the infrastructure, systems, and capabilities needed to fully capitalize on these strategic advantages. As we move forward, we will continue to identify and implement additional efficiency measures while maintaining our commitment to service excellence and sustainable growth. Thank you for your continued support as we execute our strategic transformation. We look forward to sharing our progress with you on our next call.

Analysts
    • Felix Lin
      CEO & President at HF Foods Group
    • Cindy Yao
      Chief Financial Officer at HF Foods Group