HF Foods (HFFG) Q4 2025 Earnings Call Transcript

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DATE

Monday, March 16, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Felix Lin
• Chief Financial Officer — Paul McGarry
• Operator

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TAKEAWAYS

• Net Revenue -- $1.23 billion, up 2.2%, driven by volume growth and pricing improvements in seafood and meat and poultry, and commodity volume gains, partially offset by declines in other categories.
• Gross Profit -- $207.6 million, up 1.2%, with gross margin slightly declining to 16.9% from 17.1% due to higher costs.
• Adjusted EBITDA -- $45.0 million, rose 6.9%, reflecting operational efficiencies and transformation benefits.
• Distribution, Selling, and Administrative Expenses -- $201.8 million, an increase of $3.7 million, primarily from higher depreciation, occupancy, and one-time transformation costs, partially offset by lower professional fees; remained flat as a percentage of revenue at 16.4%.
• Net Loss -- $38.8 million, improved from prior year’s net loss of $48.5 million, due to lower goodwill impairment and improved operating results, partially offset by no gain on lease guarantee liability and changes in fair value of swaps.
• Goodwill -- No remaining goodwill on the balance sheet following the 2025 impairment; this item will not impact future results.
• Adjusted Net Income -- $16.9 million, up $2.9 million or 20.9%.
• Adjusted Earnings per Share -- $0.32, compared to $0.26 in the prior year; loss per share improved to $0.73 from $0.92.
• ERP Implementation -- Completed across all distribution centers, leading to full remediation of IT general controls–related deficiencies and SKU recategorization.
• Facility Investments -- Charlotte renovation largely complete, operational launch expected in 2026; Atlanta facility’s phase one done and operational as of January 2026; phase two will double cold storage from 10,000 to 20,000 square feet in Atlanta.
• Chicago Warehouse Acquisition -- Finalized to exit a lease early, reduce costs, and enable capacity investment for further growth and consolidation.
• Sales Operations -- Consolidated two call centers into one, aiming for better process control, improved customer service, and cost reductions.
• 2026 Outlook -- Management expects low single-digit growth for both net revenue and adjusted EBITDA, consistent with company strategy and cross-selling ramp-up.
• M&A Strategy -- Remains a core growth pillar, with management describing HF Foods Group (NASDAQ:HFFG) as "the strategic acquirer of choice" in the U.S. Asian specialty foodservice sector.

SUMMARY

Management described completed digital transformation initiatives, including enterprise resource planning and IT controls, as foundational for operational efficiencies and future scalability. The company highlighted a multi-year transformation plan, combining facility upgrades, sales process consolidation, and cross-selling emphasis, to drive organic growth in targeted U.S. regions. HF Foods Group (NASDAQ:HFFG) stated that its acquisition of the Chicago facility was designed to improve operating expenses and unlock new capacity for consolidation and growth. Management guided that ERP-related SKU reclassification will lead to cleaner year-over-year segment metrics after the first half of 2026. The company's leadership directly cited an addressable market of $50 billion and its position as the largest U.S. Asian specialty distributor as a key long-term advantage.

• CFO Paul McGarry noted, following the 2025 impairment, we have no remaining goodwill, so this item will not affect results going forward.
• CEO Felix Lin said, we expect 2026 to be like 2025, with low single-digit growth on the top line as well as the bottom line for both adjusted EBITDA and gross profit.
• Q&A responses indicated some meaningful uptick from a volume standpoint so far in Q1 versus 2025.
• Regarding tariffs, Lin stated, In the past year, even prior to Liberation Day, we had effectively negotiated with a large number of our overseas vendors for them to absorb quite a bit of the tariff impact. and said updates on tariff refunds may be available on the next quarterly call.
• The Atlanta distribution center’s expansion is expected to underpin cross-selling strategies in the Southeast, with Chicago and Midwest investments targeting organic growth from 2027 onward.
• Management continues to assess M&A opportunities, focusing on acquisition targets aligned with its operational platform and Asian specialty market leadership.

INDUSTRY GLOSSARY

• ERP (Enterprise Resource Planning): Company-wide software system integrating supply chain, sales, finance, and inventory operations to enhance process efficiency.
• SKU (Stock Keeping Unit): Unique identifier for each product or item in inventory management, critical for sales tracking and reporting.
• DS&A (Distribution, Selling, and Administrative expenses): Cost category encompassing logistics, sales, marketing, facilities, and corporate overhead expenses.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain non-recurring or non-operating items, used for operational performance analysis.
• IEEPA tariffs: Import duties imposed under the International Emergency Economic Powers Act, referenced in relation to imported goods and supply chain costs.

Full Conference Call Transcript

Felix Lin: Hello, everyone. Welcome to HF Foods Group Inc.’s 2025 earnings call. I will provide a business update, and Paul will speak to our 2025 financial results. Then we will open up the line for Q&A. It is no secret that 2025 brought headwinds for the broader foodservice industry in terms of tariff pressure and lower foot traffic. But against this backdrop, we drove meaningful, continuous momentum for our business. Net revenue increased 2.2% year-over-year to $1.23 billion, and gross profit increased 1.2% to $207.6 million. Also notably, adjusted EBITDA increased 6.9% year-over-year. We made meaningful progress on our long-term transformation plan with respect to sales operations, digital infrastructure, and facilities upgrades.

On sales operations, we have consolidated two sales call center operations into one as of late December 2025. This consolidation provides us better control over the overall sales process, improves customer service while maintaining the distinct connection we have with our customers through our understanding of their business language and product needs. This will reduce costs while further strengthening our competitive positioning. On digital transformation, we completed the full ERP implementation across all of our distribution centers. The new system will enable us to achieve higher levels of purchasing and operational efficiencies over time.

I would like to note that as part of this implementation, we re-categorized many of our SKUs, which drives some variability in our year-over-year sales by category. You will see clean comparisons once we lap the implementation in the second half of 2026. I am also happy to announce that with the implementation of the new ERP system, we have fully remediated IT general controls-related deficiencies as of year-end 2025. This is a significant milestone. On facilities, the renovation of our Charlotte location is largely complete with final permits imminent. We expect Charlotte to be operational in 2026, which will shorten our seafood distribution routes in the Southeast.

Phase one construction of our new state-of-the-art Atlanta DC has been completed, becoming operational in January 2026. We plan to kick off phase two cold storage capacity expansion in Atlanta to launch in 2026. Once complete, our cold storage capacity in the Atlanta market will have almost doubled, expanding from 10,000 square feet to 20,000 square feet. We see cross-selling as a major organic growth playbook and expect the Atlanta facility to be a cornerstone of our cross-selling strategy in the Southeast in the future. Between the Southeast and Midwest, there is several hundred million dollars’ worth of organic growth opportunity as we continue to invest and expand capacity. In September, we announced the acquisition of our Chicago warehouse.

This strategic acquisition advances HF Foods Group Inc.’s ongoing transformation plan to improve operational efficiency, reduce costs, and strengthen organic growth through cross-selling opportunities. Acquiring the facility enables us to exit the lease agreement early, improve operating expense, and invest to grow additional capacity and drive consolidation opportunities. These exciting infrastructure investments reflect our ongoing commitment to optimizing our distribution network and creating a stronger foundation for sustainable growth. Based on current trends, we expect 2026 to be like 2025, with low single-digit growth on the top line as well as the bottom line for both adjusted EBITDA and gross profit.

This also reflects our strategy to ramp up cross-selling opportunities over time, focusing on increasing our share of customers’ wallet size and combating competitive pricing pressure in the short term. While we continue to navigate macro headwinds, including tariff pressures and shifts in consumer spending behaviors, our transformation initiatives are paving the way for continued growth and improvement. We remain extremely confident in our long-term growth strategy and are committed to our capital investment plans as we continue our growth momentum in 2026 and beyond. M&A remains a core pillar of our growth strategy.

HF Foods Group Inc. is the only scale foodservice provider in the Asian market in the United States, and we believe we are the strategic acquirer of choice within our space. We are focused on expanding our geographic footprint in high-potential markets, capturing operational synergy, broadening our customer base, and enhancing our product and service capabilities. We remain disciplined but optimistic about M&A opportunities in 2026 and are actively evaluating opportunities for potential sellers who understand our unique position. We believe our proven abilities to successfully navigate the tariff landscape position us uniquely to identify and execute attractive tuck-in acquisitions that will benefit from our operational expertise and scale. I want to emphasize the significant runway ahead of us.

We operate in a $50 billion addressable market, and at just over $1 billion in net revenue, we are the largest player in the Asian specialty space. No one, whether larger or smaller competitors, is better positioned than HF Foods Group Inc. to capture this opportunity in the coming years. Now over to you, Paul, our CFO, to walk you through more detail of the financial performance for the year.

Paul McGarry: Thanks, Felix. I will now review our results for the year ended 12/31/2025 versus 2024. Net revenue for the year increased 2.2% to $1.23 billion from $1.20 billion in the prior year. The increase was primarily attributable to volume growth and pricing improvement in seafood and meat and poultry, and volume growth in commodity, partially offset by volume decreases within other categories. Gross profit increased by 1.2% to $207.6 million for the year compared to $205.2 million in 2024. The increase was attributable to an increase in net revenue, partially offset by increased costs. Gross profit margin decreased slightly to 16.9% compared to 17.1% in 2024.

Distribution, selling, and administrative (DS&A) expenses increased by $3.7 million to $201.8 million for the year, primarily due to increases in depreciation, occupancy, and nonrecurring transformation expenses, partially offset by a decrease in professional fees. DS&A expenses as a percentage of net revenue remained relatively consistent at 16.4% in 2025, compared to 16.5% in the prior year. Adjusted EBITDA increased 6.9% to $45.0 million for the year compared to $42.0 million in 2024. Total interest expense increased slightly to $11.5 million in 2025 compared to $11.4 million in the prior year. Net loss attributable to HF Foods Group Inc. was $38.8 million compared to a net loss of $48.5 million in 2024.

The year-over-year improvement was primarily driven by a lower goodwill impairment charge and improved operating results. These favorable items were partially offset by the absence of the prior-year gain on lease guarantee liability termination and by the year-over-year change in fair value of interest rate swaps. Importantly, following the 2025 impairment, we have no remaining goodwill, so this item will not affect results going forward. Adjusted net income attributable to HF Foods Group Inc. increased $2.9 million, or 20.9%, to $16.9 million compared to $14.0 million in the prior-year period. Loss per share improved to $0.73 compared to a loss of $0.92 in the prior-year period. Adjusted earnings per share increased to $0.32 compared to $0.26 in the prior-year period.

To summarize, 2025 was a year of steady progress in a challenging operating environment. We delivered year-over-year growth in net revenue, expanded adjusted EBITDA, and continued to invest in the infrastructure and systems that support more scalable, efficient execution going forward. Importantly, we finished the year having completed our ERP rollout across the network and remediated our IT general control deficiencies while also advancing key facility initiatives like Atlanta and Charlotte and positioning the business for improved operating leverage. As we move into 2026, we remain focused on disciplined execution, driving operational efficiency, supporting organic growth through cross-selling and network optimization, and maintaining prudent capital deployment.

With the transformation foundation now largely in place, we believe we are well positioned to sustain momentum while remaining selective and strategic in pursuing tuck-in M&A that strengthens our footprint and capabilities. I will now hand it back to Felix for closing remarks.

Felix Lin: Thanks, Paul. As we look ahead to 2026 and beyond, I want to emphasize our commitment to the comprehensive transformation initiatives that are reshaping HF Foods Group Inc. 2025 was a year of strategic investment for HF Foods Group Inc., and the investments we are making in our facilities, digital infrastructure, and operations will establish a strong foundation for our next phase of growth. While short-term uncertainties persist, we remain focused on our long-term strategic objectives. Our investments in digital transformation and infrastructure are strategically designed to drive organic growth through cross-selling opportunities while positioning us to complement this expansion with targeted M&A initiatives.

Our key competitive advantages stem from the growing demand for authentic Asian cuisine and our unmatched position as a leading nationwide Asian specialty distributor. We are methodically building the infrastructure, systems, and capabilities needed to fully capitalize on these strategic advantages. As we move forward, we will continue to identify and implement additional efficiency measures while maintaining our commitment to service excellence and sustainable growth. Thank you for your continued support as we execute our strategic transformation. We look forward to sharing our progress with you on our next call. I will now hand over to the operator for live Q&A.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue before pressing the star key. One moment while we poll for questions.

Operator: Our first question comes from the line of Daniel Harriman with Sidoti & Company. Please proceed.

Daniel Harriman: Hey, guys, good afternoon. Thank you for taking my questions, and Paul, congratulations on the official title. Felix, congrats on great execution for the year despite, you know, the noticeable headwinds. I am just curious to start off, moving beyond 2025, can you talk a little bit about the biggest opportunities you see to drive incremental organic growth, particularly around cross-selling and expanding product availability across the customer base? And then secondly, just curious to hear a little bit more about how the operational initiatives implemented in 2025 are beginning to impact the day-to-day execution across the business.

Felix Lin: Hi, Daniel. Appreciate the question. I think the biggest opportunity is going to be around cross-selling with respect to the Southeast. We just moved into our new facility that is effectively twice as big as the older facility in Atlanta, and we started to acquire some new accounts within the region. But I think we are still going through a ramp-up phase here. As I noted earlier, it is going to take a little bit of time to complete ramp-up of the volume and utilize the space, and second phase of our freezer construction is going to start here in 2026.

So likely, it is going to be second half before we see some meaningful incremental frozen seafood volume come into play for the Southeast market for us. And then fast forward, we also announced the acquisition of our Chicago facility, so the investments going in 2026 as well are prepping us for meaningful cross-selling organic growth in the Midwest region in 2027 and beyond.

Operator: Our next question comes from the line of William Kirk with ROTH Capital Partners. Please proceed.

William Kirk: Hey, this is Nick on for Bill. Thanks for taking the questions. First from me, on February traffic, it was weaker last year. Just wondering if you could comment on the year-over-year change you saw this year just lapping that softer comp, and whether you have seen more or less traffic year-to-date would also be helpful. Thank you. Understood. I appreciate that. Second for me on the IEEPA tariffs, do you have an estimate as to what you paid? Are you taking any action to get that money back? And what would you do with that capital if you did manage to get any capital back there? Thank you.

Felix Lin: Yes, sure. So with respect to February and Q1, obviously we are still in the middle of it, but I do see that, again, there has been a lot of good initiatives put in place, specifically even starting in late Q3 in 2025. We have been working with a handful of strategic vendors to run promotional campaigns where the vendors are the ones that are providing initiatives on the table for our customers and our sales team to go out and drive new product growth or push out additional volume. So that has been very impactful for us the second half of 2025, and we are seeing that in the first quarter of the year as well.

So I do see perhaps there is going to be some meaningful uptick from a volume standpoint so far in Q1 versus 2025. On the IEEPA tariffs, I think it is still too early to say exactly how much refund is going to be available. As you might recall, not 100% of the tariffs were part of the IEEPA; there were some other tariff measures that the administration had put in place last year, and it is also a reflection of the industry that we are in. Largely the supplier network, the supply chain itself, is made up of brokers.

In the past year, even prior to Liberation Day, we had effectively negotiated with a large number of our overseas vendors for them to absorb quite a bit of the tariff impact. So we are still assessing the situation and keeping it very, very close. I think in the coming months here, perhaps in the next quarterly earnings call, there might be a little bit more information for us to offer.

Operator: There are no further questions at this time. I would like to turn the call back over to Felix for any closing remarks.

Felix Lin: Overall, I think 2025 was a great year of strategic investment for the Company, and we made some pretty good strides here in terms of our overall three- to five-year transformation plan. We look forward to 2026. 2026 is going to be a continuation of the momentum that we have built on 2025 results. And again, M&A is going to be a huge part of our business, so that is where we are going to spend a lot of our time—thoroughly evaluating all the inbound calls that we have been getting on M&A and making some impact there, and then at the same time continuing to improve our operational efficiency.

We appreciate everyone continuing to follow the HF Foods Group Inc. story and the support, and look forward to updating everyone here in the coming quarters.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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