HF Foods Group Inc. Q2 FY2024 earnings call

• Peter Zhang mentioned pleasure with final settlement of legacy SEC matters and management's focus on short-term and long-term plans to drive shareholder value.
• Felix Lin highlighted progress on key financial metrics like net revenue, gross profit, adjusted EBITDA. He discussed the comprehensive operational transformation plan: - Centralized purchasing program: Piloted with seafood in 2023, expanded to majority of seafood category buys in Q2 2024, seafood margin grew significantly. Expanded to portion of chicken buys in H1 2024, shifted chicken breast and leg meat purchases from spot buys to contract commitments, and aims to expand to other categories like grain and cooking oil. - ERP system: Implementing new ERP system across distribution centers, completed at one California DC in Q2 2024, expect progress beyond 2024. - Fleet and transportation: Implemented unified fleet telematics system, working to reduce fleet idle times, and centralizing inbound freight program. - Facility upgrade: Renovating Charlotte, NC facility, close to finalizing lease for new Atlanta facility.

For the second quarter ended June 30, 2024, net revenue increased 3.4% to $302.3 million from $292.3 million in the prior year quarter. The increase was driven by product cost inflation in the chicken category and improved pricing in seafood, partially offset by the $3.1 million loss in revenue from discontinued chicken processing businesses. Gross profit increased by 3.6% to $52.5 million, with gross profit margins slightly rising to 17.4% from 17.3%. Distribution, selling, and administrative expenses decreased approximately 4.6% to $49.8 million, and operating income improved to $2.6 million from a loss of $1.6 million in the prior year quarter. Net income was $0.2 million compared to a net loss of $1.6 million prior year. Adjusted EBITDA increased approximately 26.4% to $10.6 million. Revenue contribution: The discontinued chicken processing businesses in 2023 had a $3.1 million offset to revenue in Q2 2024.

• Continue to actively work on expanding the centralized purchasing program to include other key product categories such as grain and cooking oil.
• Expect to complete implementation of new ERP system across all distribution centers by the end of 2024.
• Anticipate demonstrating more significant progress beyond 2024 with the ongoing ERP implementation plan.
• Look to expand the new Atlanta facility's utilization through a multi-phase approach earlier than originally planned.

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