Value investing

Hispanica Delights (HISP) Gains Momentum in Fiscal Q1

The appetite for ethnic food in the United States is on the rise thanks to the growing diversity of the population and the sophistication levels of palates. Hispanics currently comprise about 18% of the United States' population, and that share is growing. At the same time, 90% of 25 to 34 year olds have prepared ethnic foods at home over the past month compared to 68% of adults over the age of 65, according to Mintel Research.

Hispanica International Delights of America Inc. (OTCQB: HISP), a diversified food and beverage company focused on the Hispanic and ethnic food industry, recently published a shareholders’ update outlining its progress during its fiscal first quarter.

In this article, we will look at the company’s progress in the space and why investors may want to consider the early-stage company for their portfolios.

Improving Financials

Hispanica Delights has achieved significant revenue growth during the first quarter, as well as dramatically improved its balance sheet through new financing agreements.

The company’s revenue increased about 400% to $649,411 during the first quarter after it acquired Energy Source Distributors (ESD) and began shipping two proprietary product lines – Gran Nevada and Tropic Max Plantain Chips – from its warehouse in Northern California. Gross margins came in at about 23%, but management plans to expand those in the future by expanding its exclusive brands rather than simply acting as a distributor.

On its balance sheet, the company closed on a $7.5 million credit facility with TCA Global Credit Master Fund LP in July 2016. This funding has helped significantly improve the company’s balance sheet, which has $115,783 in cash and equivalents and total assets of over $1 million. So far, the company has borrowed only $650,000 from the credit facility, which leaves it with healthy working capital that can be deployed to make additional acquisitions.

Expansion Plans

Hispanica Delights plans to grow revenue by expanding distribution channels and introducing new exclusive brands into its portfolio.

The company plans to expand its distribution through a second strategic acquisition that will give it a major footprint in one of the five largest U.S. markets. In addition, management plans to bring on industry veterans and consultants to jumpstart organic growth in distribution. The company has already added over 1,400 retailers to its distribution network, while it plans to soon surpass the 2,000 mark on its way to over 5,000 retail locations in the coming months.

The company plans to monetize these distribution channels and improve its gross margins by expanding the number of brands that it handles on an exclusive basis. These kinds of agreements have much higher profit margins than distributing generic products since there’s less price competition from other distributors. Management hopes that these efforts will help it achieve a positive cash flow in addition to accelerating revenue growth.

Looking Ahead

Hispanica International Delights of America Inc. (OTCQB: HISP) has experienced significant revenue growth over the past few months and is on track to continue that growth moving into 2017. Management plans to grow existing operations, expand its proprietary portfolio of products, and move forward with its next strategic acquisition. Management believes this will help the company expand revenue and reach profitability more quickly than it had anticipated.

For more information, visit the company’s website at www.hispanicadelights.com.