HF Foods Reports Strong Second Quarter 2021 Financial Results

Net Revenue up 85.1% to $193.5 Million With Net Income Attributable to the Company of $3.6 Million and a 249.2% Increase in Adjusted EBITDA to $11.9 Million

Greensboro, North Carolina, UNITED STATES

CITY OF INDUSTRY, Calif., Aug. 09, 2021 (GLOBE NEWSWIRE) -- 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, reported strong financial results for the second quarter ended June 30, 2021.

Second Quarter 2021 Financial Summary

  • Net revenue increased 85.1% to $193.5 million compared to $104.6 million in the second quarter of 2020.
  • Gross profit increased 70.5% to $35.1 million, or 18.2% of net revenue, from $20.6 million, or 19.7% of net revenue, in the second quarter of 2020.
  • Net income attributable to the Company increased to $3.6 million, or $0.07 per diluted share, compared to a net loss of $4.1 million, or $(0.08) per diluted share, in the second quarter of 2020.
  • Adjusted EBITDA increased 249.2% to $11.9 million compared to $3.4 million in the second quarter of 2020.

Management Commentary

“The momentum of our business at the start of the year only strengthened in the second quarter,” said Peter Zhang, CEO of HF Foods. “We experienced strong growth across most financial metrics both on a year-over-year and sequential basis due to improving market conditions and the proactive actions we took last year to right-size our business during the pandemic. In fact, during the second quarter our business performed at 93% of pre-COVID levels and has continued to remain stable since then.

“We remain optimistic on the long-term prospects of our business. Although we continue to face intermittent government restrictions on our customers' operations, we believe that our sales volume will increase over time as the effects of the COVID-19 pandemic dissipate and consumer demand for food away from home continues to increase. As the market leader in servicing the Asian/Chinese restaurant sector, we believe we are well-positioned for long-term success. The fragmented nature of the Asian/Chinese food service industry and the current environment create opportunities for a company like HF Foods, which has the necessary industry expertise and deep understanding of our unique customer base.”

Second Quarter 2021 Results

Revenue for the second quarter of 2021 increased 85.1% to $193.5 million compared to $104.6 million in the second quarter of 2020 due to a strong market recovery, particularly since the second quarter last year reflected the height of the pandemic-related business restrictions.

Gross profit in the second quarter of 2021 was $35.1 million (18.2% of net revenue), a 70.5% increase from $20.6 million (19.7% of net revenue) in the same year-ago quarter. The increase was due to the increase in revenue.

Distribution, selling and administrative expenses in the second quarter of 2021 increased to $29.9 million from $25.1 million in the second quarter of 2021. The increase was primarily attributable to salary, wage and fuel cost increases due to the strong revenue growth.

As a result, net income attributable to the company in the second quarter of 2021 improved to $3.6 million, or $0.07 per diluted share, compared to a net loss of $4.1million, or $(0.08) per diluted share, in the second quarter of 2020.

Adjusted EBITDA for the second quarter of 2021 increased 249.2% to $11.9 million, compared to $3.4 million in the second quarter of 2020. The increase was due to the strong revenue growth.


As of June 30, 2021, HF Foods had $13.4 million in cash and access to over $80 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:

 For the Three months ended June 30, Changes 
 2021  2020  Amount % 
Net income (loss)$3,505,039  $(4,314,190) 7,819,229  181.2 %
Interest expense709,342  324,319  385,023  118.7 %
Income tax provision (benefit)1,377,098  (1,489,305) 2,866,403  192.5 %
Depreciation & Amortization4,259,434  4,335,932  (76,498) (1.8)%
EBITDA9,850,913  (1,143,244) 10,994,157  961.7 %
Unrealized change in fair value of interest rate swap contracts112,256  1,264,254  (1,151,998) (91.1)%
COVID-19 bad debt reserve (recovery)  1,886,781  (1,886,781) (100.0)%
Non-recurring expenses*1,957,857  1,405,671  552,186  39.3 %
Adjusted EBITDA$11,921,026  $3,413,462  8,507,564  249.2 %
Percentage of revenue6.2
% 3.3
% 2.9% 88.7 %

Forward-Looking Statements

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, 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
Cody Slach
Tel 1-949-574-3860

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

 As of
 June 30,
 December 31,
Cash$13,425,792  $9,580,853 
Accounts receivable, net30,308,639  24,857,322 
Accounts receivable - related parties, net1,921,415  1,261,463 
Inventories, net64,061,582  58,535,040 
Advances to suppliers - related parties, net  196,803 
Other current assets3,819,451  4,614,164 
TOTAL CURRENT ASSETS113,536,879  99,045,645 
Property and equipment, net134,755,748  136,869,085 
Operating lease right-of-use assets16,326,011  931,630 
Long-term investments2,425,625  2,377,164 
Intangible assets, net170,352,500  175,797,650 
Goodwill68,511,941  68,511,941 
Deferred tax assets59,079  57,478 
Other long-term assets1,253,212  694,490 
TOTAL ASSETS$507,220,995  $484,285,083 
Bank overdraft$15,018,435  $14,839,747 
Line of credit19,111,822  18,279,062 
Accounts payable41,668,144  28,602,570 
Accounts payable - related parties1,956,629  1,572,427 
Current portion of long-term debt, net5,804,100  5,641,259 
Current portion of obligations under finance leases272,648  286,903 
Current portion of obligations under operating leases610,256  308,148 
Accrued expenses and other liabilities5,123,479  6,178,144 
Obligations under interest rate swap contracts393,479  993,516 
TOTAL CURRENT LIABILITIES89,958,992  76,701,776 
Long-term debt, net85,142,465  88,008,803 
Promissory note payable - related party5,500,000  7,000,000 
Obligations under finance leases, non-current630,774  766,885 
Obligations under operating leases, non-current15,930,735  623,482 
Deferred tax liabilities45,078,908  46,382,704 
TOTAL LIABILITIES242,241,874  219,483,650 
Preferred Stock, $0.0001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively   
Common Stock, $0.0001 par value, 100,000,000 shares authorized, 51,913,411 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively5,191  5,191 
Additional paid-in capital583,723,206  587,579,093 
Accumulated deficit(322,030,870) (327,150,398)
Non-controlling interests3,281,594  4,367,547 
TOTAL SHAREHOLDERS’ EQUITY264,979,121  264,801,433 

HF Foods Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

 For the Three Months Ended June 30, For the Six Months Ended June 30,
 2021 2020 2021 2020
Net revenue - third parties$190,460,529  $101,105,691  $347,451,896  $271,814,931 
Net revenue - related parties3,085,707  3,454,405  5,476,168  8,548,501 
TOTAL NET REVENUE193,546,236  104,560,096  352,928,064  280,363,432 
Cost of revenue - third parties154,919,694  80,707,172  282,559,053  222,666,532 
Cost of revenue - related parties3,492,238  3,240,140  5,805,116  8,109,071 
TOTAL COST OF REVENUE158,411,932  83,947,312  288,364,169  230,775,603 
GROSS PROFIT35,134,304  20,612,784  64,563,895  49,587,829 
DISTRIBUTION, SELLING AND ADMINISTRATIVE EXPENSES29,903,759  25,092,568  58,031,254  54,499,161 
INCOME (LOSS) FROM OPERATIONS5,230,545  (4,479,784) 6,532,641  (4,911,332)
Other Income (Expenses)       
Interest income  132    263 
Interest expense(709,342) (324,319) (1,451,483) (2,275,888)
Goodwill impairment loss      (338,191,407)
Other income473,190  264,730  912,749  670,380 
Change in fair value of interest rate swap contracts(112,256) (1,264,254) 1,318,636  (1,264,254)
Total Other Income (Expenses), net(348,408) (1,323,711) 779,902  (341,060,906)
INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT)4,882,137  (5,803,495) 7,312,543  (345,972,238)
PROVISION (BENEFIT) FOR INCOME TAXES1,377,098  (1,489,305) 1,984,305  (1,971,516)
NET INCOME (LOSS)3,505,039  (4,314,190) 5,328,238  (344,000,722)
Less: net income (loss) attributable to non-controlling interests(91,557) (255,287) 208,710  (57,877)
NET INCOME (LOSS) ATTRIBUTABLE TO HF FOODS GROUP INC.$3,596,596  $(4,058,903) $5,119,528  $(343,942,845)
Earnings (loss) per common share - basic and diluted$0.07  $(0.08) $0.10  $(6.60)
Weighted average shares - basic and diluted51,913,411