HF Foods Group Inc. (HFFG Quick QuoteHFFG - Free Report) reported breakeven earnings per share in the second quarter of 2024 against the year-ago period’s loss of 2 cents.

Revenues in Detail

HF Foods registered revenues of $302.3 million in the second quarter, up 3.4% year over year.

Per management, the uptick primarily resulted from product cost inflation, volume increases and improved pricing in certain categories, such as chicken and seafood. However, this was partially offset by deflation in commodities, such as cooking oils, and the $3.1 million loss in revenues resulting from the exit of the company’s chicken processing businesses in 2023.

HF Foods Gross Margin

In the quarter under review, HF Foods’ gross profit increased 3.6% to $52.5 million. The gross margin expanded 10 basis points (bps) to 17.4%.

Operating Expenses Analysis

Distribution, selling and administrative expenses declined 4.6% to $49.8 million, primarily due to a decrease of $5.5 million in professional fees. However, this was partially offset by higher payroll and related labor costs.

Profitability

Income from operations in the second quarter totaled $2.6 million against an operating loss of $1.6 million in the year-ago period.

In the second quarter, HF Foods’ net income was $0.2 million against a net loss of $1.6 million year over year. The improvement was primarily driven by an increase in the company’s operating income of $4.2 million and the $5.3 million reversal of the lease guarantee liability. However, this was partially offset by the SEC settlement of $3.9 million, the decrease of the gain related to the fair value of interest rate swap contracts of $2.5 million and the increase of income tax expense of $1.4 million.

Adjusted EBITDA during the reported quarter was $10.6 million, up 26.4% from the year-ago quarter. This primarily resulted from the increase in income from operations.

Liquidity & Debt Management

HF Foods exited second-quarter 2024 with cash of $13.9 million compared with $18.2 million at the first-quarter end.

Total debt (including the current portion) at the end of second-quarter 2024 was $111.4 million compared with $112.8 million at the first-quarter end.

Cumulative net cash used in operating activities at the end of second-quarter 2024 was $0.02 million against cumulative net cash provided by operating activities of $8.7 million a year ago.

Our Take

HF Foods exited the second quarter of 2024 with encouraging top-line and bottom-line results. The increase in volume and improved pricing in certain categories during the quarter were promising. The gross margin expansion bodes well.

However, deflation in commodities during the reported quarter was discouraging.