CITY OF INDUSTRY, CA – November 10, 2021 – HF Foods Group Inc. (NASDAQ: HFFG), a leading food distributor to Asian restaurants across the Southeast, Pacific and Mountain West regions of the United States (the “Company” or “HF Foods”), reported record financial results for the third quarter ended September 30, 2021.
Third Quarter 2021 Financial Summary
- Net revenue increased 54.0% to $215.5 million compared to $139.9 million in the third quarter of 2020.
- Gross profit increased 66.6% to $41.9 million, or 19.4% of net revenue, from $25.2 million, or 18.0% of net revenue, in the third quarter of 2020.
- Net income attributable to the Company increased significantly to $7.9 million, or $0.15 per diluted share, compared to a net loss of $0.6 million, or $(0.01) per diluted share, in the third quarter of 2020.
- Adjusted EBITDA increased 190.9% to $17.4 million compared to $6.0 million in the third quarter of 2020.
“The strong momentum of our business in the first half of 2021 strengthened in the third quarter,” said Peter Zhang, CEO of HF Foods. “We had remarkable growth across most financial metrics both on a year-over-year and sequential basis due to improving market conditions, and we are reaping the benefits of the proactive actions we took last year to right-size our business during the pandemic. In fact, our net revenue in the third quarter has already surpassed pre-COVID levels to approximately 105% in the month of September and has continued to remain strong into the fourth quarter, and our adjusted EBITDA for the third quarter is more than double the comparable quarter in 2019.
“We remain optimistic about the long-term prospects of our business despite the setback in 2020. Although we will likely continue to face intermittent government restrictions on our restaurant customers’ operations, we believe that our sales volume will maintain its strong momentum as consumers continue to adapt to living with COVID-19.”
Mr. Zhang concluded, “As the market leader in servicing the Asian/Chinese restaurant sector, we believe we are differentiated from our competitors given our extensive footprint, strong vendor and customer relationships, and value-added service offerings, all of which have allowed and will continue to allow us to better serve our customers in these unprecedented conditions. We believe the fragmented nature of the Asian/Chinese food service industry and the current environment create opportunities for a company like HF Foods, which possesses the necessary industry expertise and deep understanding of our unique customer base to further consolidate our market leadership position.”
Third Quarter 2021 Results
Revenue for the third quarter of 2021 increased 54.0%to $215.5 million compared to $139.9 million in the third quarter of 2020 due to a strong market recovery, particularly since the third quarter last year when the country was still at the height of pandemic-related business restrictions.
Gross profit in the third quarter of 2021 was $41.9 million (19.4% of net revenue), a 66.6% increase from $25.2 million (18.0% of net revenue) in the same year-ago quarter. The increase was due to the increase in revenue and better gross margin.
Distribution, selling and administrative (DSA) expenses in the third quarter of 2021 increased to $31.0 million from $25.1 million in the third quarter of 2020. The increase was primarily attributable to salary, wage and fuel cost increases which were necessary to match the increasing sales demand. However, the increase was well below the 54% revenue growth.
As a result, net income attributable to the company in the third quarter of 2021 improved significantly to $7.9 million, or $0.15 per diluted share, compared to a net loss of $0.6 million, or $(0.01) per diluted share, in the third quarter of 2020.
Adjusted EBITDA for the third quarter of 2021 increased 190.9% to $17.4 million compared to $6.0 million in the third quarter of 2020. The increase was due to the strong revenue growth, higher gross margin and prudent cost management.
As of September 30, 2021, HF Foods had $15.5 million in cash and access to over $77 million in additional funds through its $100 million line of credit, subject to a borrowing base calculation.
About HF Foods Group Inc.
HF Foods Group Inc., headquartered in City of Industry, California, is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to primarily Asian/Chinese restaurants and other foodservice customers throughout the Southeast, Pacific and Mountain West regions of the United States. With 13 distribution centers along the U.S. eastern and western seaboards, HF Foods aims to supply the increasing demand for Asian American restaurant cuisine. With an in-house proprietary ordering and inventory control network, more than 10,000 established customers in 21 states, and strong relations with growers and suppliers of food products in the US and China, HF Foods Group is able to offer fresh, high-quality specialty restaurant foods and supplies at economical prices to its large and growing base of customers. For more information, please visit hffoodsgroup.com.
Non-GAAP Financial Measures
Adjusted EBITDA: The Company believes that adjusted EBITDA is a useful performance measure and can be used to facilitate a comparison of the Company’s operating performance on a consistent basis from period to period and to provide for a more complete understanding of factors and trends affecting the business than GAAP measures alone can provide. Management believes that adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that directly affect our operating performance. Management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the Company’s financial performance with that of other companies in the same industry, many of which present similar non-GAAP financial measures to investors. The Company presents adjusted EBITDA in order to provide supplemental information that the Company considers relevant for the readers of our consolidated financial statements included elsewhere in its reports filed with the SEC, including its current Quarterly Report on Form 10Q, and such information is not meant to replace or supersede U.S. GAAP measures.
The following table sets forth of the calculation of adjusted EBITDA and reconciliation to net income (loss), the closest U.S. GAAP measure:
The Company is filing a notification of late filing of its Quarterly Report on Form 10-Q for the third quarter of 2021. The Quarterly Report will be filed within five days of its due date. The filing is delayed because the Company requires additional time to evaluate the status of its previously disclosed, independent investigation and to consider the related impact on the sufficiency of its disclosures. The Company anticipates that its Quarterly Report will present changes in the characterization of certain items shown in previous periodic filings that will result in both total assets and total liabilities on the Company’s balance sheet being reduced by slightly more than $6 million, but that otherwise no material changes in the Company’s statement of financial position, results of operation or cash flows are anticipated.
All statements in this news release other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as “anticipates,” “believes,” “could,” “expects,” “intends,” “may,” “should” and other similar expressions. Although we believe that the expectations reflected in all of our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause the Company’s actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. Such factors include, but are not limited to, unfavorable macroeconomic conditions in the United States, competition in the food service distribution industry, particularly the entry of new competitors into the Chinese/Asian restaurant market niche, increases in fuel costs or commodity prices, disruption of relationships with vendors and increases in product prices, U.S. government tariffs on products imported into the United States, particularly from China, changes in consumer eating and dining out habits, disruption of relationships with or loss of customers, our ability to execute our acquisition strategy, availability of financing to execute our acquisition strategy, failure to retain our senior management and other key personnel, our ability to attract, train and retain employees, changes in and enforcement of immigration laws, failure to comply with various federal, state and local rules and regulations regarding food safety, sanitation, transportation, minimum wage, overtime and other health and safety laws, product recalls, voluntary recalls or withdrawals if any of the products we distribute are alleged to have caused illness, been mislabeled, misbranded or adulterated or to otherwise have violated applicable government regulations, failure to protect our intellectual property rights, any cyber security incident, other technology disruption, or delay in implementing our information technology systems, supply chain disruption, statements of assumption underlying any of the foregoing, the continuing impact of the Covid-19 pandemic, and other factors disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and other filings with the SEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Except as required by law, we undertake no obligation to disclose any revision to these forward-looking statements.
Investor Relations Contact:
Gateway Investor Relations