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“We are making meaningful progress on our comprehensive transformation plan, which positions HF Foods to capture the significant growth opportunities in the Asian foodservice market,” said Felix Lin, Interim Chief Executive Officer, President, and Chief Operating Officer. “Our strategic investments in facility upgrades and supply chain enhancements are addressing capacity constraints while building the foundation for sustained growth. 2025 will be a year focused on strengthening our operational infrastructure and digital capabilities, and we remain committed to driving margin improvement through targeted efficiency initiatives. The strong loyalty of our customers, combined with favorable demographic trends driving increased demand for Asian cuisine, reinforces our confidence in our market position. With our exceptional leadership team and best-in-class network of general managers, suppliers, and customers, we remain confident that we are well-positioned to create long-term value for our stakeholders.”

Net revenue was $298.4 million for the third quarter of 2024 compared to $281.5 million in the prior year period, an increase of $16.9 million, or 6.0%. The increase was primarily attributable to product cost inflation, volume increases and improved pricing in certain categories, such as chicken and seafood. The increase was partially offset by deflation in commodities, such as cooking oils, and the $2.7 million loss in revenue resulting from the exit of the Company’s chicken processing businesses in 2023.

Distribution, selling and administrative expenses increased by $0.8 million to $49.7 million, primarily due to increases of $1.0 million each in both auto expenses and insurance costs, partially offset by a decrease of $1.6 million in professional fees. Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.6% from 17.4% in the prior year period primarily due to increased net revenue and lower professional fees, partially offset by increased rental and insurance costs.

Net loss of $3.8 million was realized in the third quarter compared to net income of $2.0 million in the prior year period. The decrease in income was primarily driven by a non-cash expense related to the change in fair value of interest rate swap contracts of $5.3 million and increases of $1.0 million each in both auto expenses and insurance costs partially offset by the income tax benefit of $1.2 million.

Net revenue was $896.4 million for the nine months ended September 30, 2024 compared to $867.6 million in the prior year, an increase of $28.8 million, or 3.3%. The increase was primarily attributable to product cost inflation and improved pricing in certain categories, partially offset by the $13.3 million loss in revenue resulting from the exit of the Company’s chicken processing businesses in 2023.

Distribution, selling and administrative expenses decreased by $4.0 million to $150.0 million, primarily due to a decrease in professional fees of $10.0 million, partially offset by an increase of $3.6 million in payroll and related labor costs and an increase of $2.0 million in insurance costs. Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.7% for the nine months ended September 30, 2024 from 17.8% in the same period in 2023, primarily due to lower professional fees and increased net revenue, partially offset by increased payroll and related labor costs and insurance costs.

Net loss of $4.2 million was realized compared to a net loss of $5.4 million in the prior year. The improvement was primarily driven by the increase in our income from operations of $5.3 million and the $5.2 million reversal of the lease guarantee liability. The improvement was partially offset by the SEC settlement of $3.9 million, the increase in income tax expense of $2.2 million and the loss of $3.1 million resulting from the change in fair value of interest rate swap contracts.

Cash used in operating activities was $3.3 million for the nine months ended September 30, 2024, compared to cash provided by operating activities of $20.6 million in the prior year. The decrease in cash flow from operating activities was primarily due to the timing of working capital outlays and the $3.9 million SEC settlement payment. As of September 30, 2024, the Company had a cash balance of $11.4 million and access to approximately $27.3 million in additional funds through its $100.0 million line of credit, subject to a borrowing base calculation.

HF Foods Group Inc. is a leading marketer and distributor of fresh produce, frozen and dry food, and non-food products to primarily Asian restaurants and other foodservice customers throughout the United States. HF Foods aims to supply the increasing demand for Asian American restaurant cuisine, leveraging its nationwide network of distribution centers and its strong relations with growers and suppliers of fresh, high-quality specialty restaurant food products and supplies in the US, South America, and Asia. Headquartered in Las Vegas, Nevada, HF Foods trades on Nasdaq under the symbol “HFFG”. For more information, please visit www.hffoodsgroup.com.

All statements in this news release other than statements of historical facts are, or may be deemed to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as “aims,” “continues,” “expects,” “plans,” “will,” 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, risks relating to our ability to consummate our operational transformation plan as anticipated, risks relating to the impact of our operational plan on our sales and efficiencies, risks relating to the impact of demographic trends on demand for the products we distribute, statements of assumption underlying any of the foregoing, and other factors including those disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 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.

Discussion of our results includes certain non-GAAP financial measures, including EBITDA, adjusted EBITDA and non-GAAP net income (loss) attributable to HF Foods Group Inc., that we believe provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial performance with other companies in the same industry, many of which present similar non-GAAP financial measures to investors. The definitions of EBITDA, adjusted EBITDA and non-GAAP net income (loss) attributable to HF Foods Group Inc. may not be the same as similarly titled measures used by other companies in the industry. EBITDA, adjusted EBITDA and non-GAAP net income (loss) attributable to HF Foods Group Inc. are not defined under GAAP and are subject to important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our financial results as reported under GAAP.

We use non-GAAP financial measures to supplement our GAAP financial results. Management uses EBITDA, defined as net income (loss) before interest expense, interest income, income taxes, and depreciation and amortization to measure operating performance. In addition, management uses Adjusted EBITDA, defined as net income (loss) before interest expense, interest income, income taxes, and depreciation and amortization, further adjusted to exclude certain unusual, non-cash, or non-recurring expenses. We believe that Adjusted EBITDA is less susceptible to variances in actual performance resulting from non-recurring expenses, and other non-cash charges, provides useful information for our investors and is more reflective of other factors that affect our operating performance.

We believe non-GAAP net income (loss) attributable to HF Foods Group Inc. is a useful measure of operating performance because it excludes certain items not reflective of our core operating performance. Non-GAAP net income (loss) attributable to HF Foods Group Inc. is defined as net income (loss) attributable to HF Foods Group Inc. adjusted for amortization of intangibles, change in fair value of interest rate swaps, stock based compensation, transaction related costs, transformational project costs and certain unusual, non-cash, or non-recurring expenses. We believe that non-GAAP net income (loss) attributable to HF Foods Group Inc. facilitates period-over-period comparisons and provides additional clarity for investors to better evaluate our operating results. We present EBITDA, adjusted EBITDA, non-GAAP net income (loss) attributable to HF Foods Group Inc. in order to provide supplemental information that we consider 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. Reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures are included in the schedules attached to this press release.



	September 30, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash	$	11,445	$	15,232
Accounts receivable, net	51,954		47,832
Inventories	119,508		105,618
Other current assets	10,012		10,145
TOTAL CURRENT ASSETS	192,919		178,827
Property and equipment, net	146,073		133,136
Operating lease right-of-use assets	14,981		12,714
Long-term investments	2,374		2,388
Customer relationships, net	139,257		147,181
Trademarks, trade names and other intangibles, net	26,339		30,625
Goodwill	85,118		85,118

Other long-term assets	5,689		6,531
TOTAL ASSETS	$	612,750	$	596,520
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Checks issued not presented for payment	$	12,018	$	4,494
Line of credit	66,911		58,564
Accounts payable	51,640		52,014
Current portion of long-term debt, net	5,410		5,450
Current portion of obligations under finance leases	3,301		1,749
Current portion of obligations under operating leases	4,147		3,706
Accrued expenses and other liabilities	19,684		17,287
TOTAL CURRENT LIABILITIES	163,111		143,264
Long-term debt, net of current portion	104,658		108,711

Obligations under finance leases, non-current	17,726		11,229
Obligations under operating leases, non-current	11,180		9,414
Deferred tax liabilities	27,853		29,028
Other long-term liabilities	2,612		6,891
TOTAL LIABILITIES	327,140		308,537
Commitments and contingencies
SHAREHOLDERS’ EQUITY:
Preferred stock	—		—
Common stock	5		5
Treasury stock	(7,750)		(7,750)
Additional paid-in capital	604,110		603,094
Accumulated deficit	(313,305)		(308,688)
TOTAL SHAREHOLDERS’ EQUITY ATTRIBUTABLE TO HF FOODS GROUP INC.	283,060		286,661
Noncontrolling interests	2,550		1,322
TOTAL SHAREHOLDERS’ EQUITY	285,610		287,983
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	612,750	$	596,520


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023


Net revenue	$	298,389	$	281,453	$	896,385	$	867,620



Cost of revenue	248,226		230,528		743,346		715,857

Gross profit	50,163		50,925		153,039		151,763

Distribution, selling and administrative expenses	49,652		48,841		149,988		154,013
Income (loss) from operations	511		2,084		3,051		(2,250)

Other expenses (income):

Interest expense	2,644		2,715		8,597		8,430
Other expense (income), net	(332)		(490)		3,040		(845)
Change in fair value of interest rate swap contracts	3,290		(1,984)		959		(2,094)
Lease guarantee income	—		(95)		(5,548)		(305)
Total Other expenses (income), net	5,602		146		7,048		5,186
(Loss) income before income taxes	(5,091)		1,938		(3,997)		(7,436)

Income tax (benefit) expense	(1,254)		(36)		164		(2,053)
Net (loss) income	(3,837)		1,974		(4,161)		(5,383)
Less: net income (loss) attributable to noncontrolling interests	103		90		456		(484)
Net (loss) income attributable to HF Foods Group Inc.	$	(3,940)	$	1,884	$	(4,617)	$	(4,899)

(Loss) earnings per common share - basic	$	(0.07)	$	0.03	$	(0.09)	$	(0.09)
(Loss) earnings per common share - diluted	$	(0.07)	$	0.03	$	(0.09)	$	(0.09)

Weighted average shares - basic	52,726,683		54,142,396		52,490,321		54,005,010
Weighted average shares - diluted	52,726,683		54,513,314		52,490,321		54,005,010

(Unaudited)


	Nine Months Ended September 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(4,161)	$	(5,383)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization expense	19,932		19,551

Asset impairment charges	—		1,200

Provision for credit losses	(40)		56
Deferred tax benefit	(1,175)		(2,467)

Change in fair value of interest rate swap contracts	959		(2,094)
Stock-based compensation	1,961		2,605

Non-cash lease expense	2,955		2,668
Lease guarantee income	(5,548)		(305)
Other non-cash expense	522		168
Changes in operating assets and liabilities:
Accounts receivable	(4,105)		997
Accounts receivable - related parties	23		(115)
Inventories	(13,890)		4,349


Prepaid expenses and other current assets	133		(14,074)

Other long-term assets	734		(2,878)
Accounts payable	(658)		22,618
Accounts payable - related parties	(323)		(1,039)
Operating lease liabilities	(3,015)		(2,511)
Accrued expenses and other liabilities	2,397		(2,722)
Net cash (used in) provided by operating activities	(3,299)		20,624
Cash flows from investing activities:

Purchase of property and equipment	(9,435)		(3,495)
Proceeds from sale of property and equipment	12		900









Net cash used in investing activities	(9,423)		(2,595)
Cash flows from financing activities:
Payments for tax withholding related to vested stock awards	(173)		—
Checks issued not presented for payment	7,524		(15,058)
Proceeds from line of credit	1,120,318		891,510
Repayment of line of credit	(1,112,012)		(896,959)

Repayment of long-term debt	(4,125)		(4,653)

Repayment of obligations under finance leases	(2,597)		(1,974)


Cash distribution to shareholders	—		(884)
Net cash provided by (used in) financing activities	8,935		(28,018)
Net decrease in cash	(3,787)		(9,989)
Cash at beginning of the period	15,232		24,289
Cash at end of the period	$	11,445	$	14,300


	Three Months Ended September 30,
	2024		2023		Change
Net income (loss)	$	(3,837)	$	1,974	$	(5,811)
Interest expense	2,644		2,715		(71)
Income tax expense	(1,254)		(36)		(1,218)
Depreciation and amortization	6,666		6,422		244
EBITDA	4,219		11,075		(6,856)
Lease guarantee income	—		(95)		95
Change in fair value of interest rate swaps	3,290		(1,984)		5,274
Stock-based compensation expense	701		757		(56)

Business transformation costs (1)	77		198		(121)

Other non-routine expense (2)	18		146		(128)

Adjusted EBITDA	$	8,305	$	10,097	$	(1,792)


	Nine Months Ended September 30,
	2024		2023		Change
Net loss	$	(4,161)	$	(5,383)	$	1,222
Interest expense	8,597		8,430		167
Income tax expense (benefit)	164		(2,053)		2,217
Depreciation and amortization	19,932		19,551		381
EBITDA	24,532		20,545		3,987
Lease guarantee income	(5,548)		(305)		(5,243)
Change in fair value of interest rate swaps	959		(2,094)		3,053
Stock-based compensation expense	1,961		2,605		(644)
SEC settlement	3,900		—		3,900

Asset impairment charges	—		1,200		(1,200)
Business transformation costs (1)	1,180		402		778
Other non-routine expense (2)	584		1,850		(1,266)
Adjusted EBITDA	$	27,568	$	24,203	$	3,365


	Three Months Ended September 30,
	2024		2023		Change
Net (loss) income attributable to HF Foods Group Inc.	$	(3,940)	$	1,884	$	(5,824)
Amortization of intangibles	4,070		4,071		(1)
Lease guarantee income	—		(95)		95
Change in fair value of interest rate swaps	3,290		(1,984)		5,274
Stock-based compensation expense	701		757		(56)

Business transformation costs (1)	77		198		(121)

Other non-routine expense (2)	18		146		(128)
Aggregate adjustment for income taxes (3)	(2,006)		137		(2,143)
Non-GAAP net income attributable to HF Foods Group Inc.	$	2,210	$	5,114	$	(2,904)


	Nine Months Ended September 30,
	2024		2023		Change
Net loss attributable to HF Foods Group Inc.	$	(4,617)	$	(4,899)	$	282
Amortization of intangibles	12,210		12,213		(3)
Lease guarantee income	(5,548)		(305)		(5,243)
Change in fair value of interest rate swaps	959		(2,094)		3,053
Stock-based compensation expense	1,961		2,605		(644)
SEC settlement	3,900		—		3,900
Asset impairment charges	—		1,200		(1,200)

Business transformation costs (1)	1,180		402		778
Other non-routine expense (2)	584		1,850		(1,266)


Aggregate adjustment for income taxes (3)	(2,791)		(4,704)		1,913
Non-GAAP net income attributable to HF Foods Group Inc.	$	7,838	$	6,268	$	1,570