Summary of HF Foods Group (HFFG) Q2 2026 Earnings Call

1Key Financial Results and Metrics:

Net Revenue: Increased by 2.8% year-over-year to $323.8 million, marking the highest quarterly revenue in company history.

Gross Profit: Remained flat at $55 million, resulting in a gross profit margin of 17%, down from 17.5% in the prior year.

Adjusted EBITDA: Decreased by 2% to $13.6 million, with an adjusted EBITDA margin of 4.2%, down from 4.4% year-over-year.

Net Income: Rose to $2.6 million from $1.2 million in the prior year, primarily due to an employee retention credit and tariff refunds.

Earnings Per Share: Improved to $0.05 from $0.02; adjusted earnings per share remained flat at $0.12.

Capital Expenditures: Approximately $20.3 million for the first half of 2026, driven by facility upgrades and investments in solar energy.

2Strategic Updates and Business Highlights:

Acquisition of Sea Ray Foods: HF Foods announced a definitive agreement to acquire Sea Ray Foods, a Canadian seafood distributor, for approximately CAD 47.9 million (USD 35 million). This acquisition is expected to enhance margins and expand HF Foods' geographic footprint.

Operational Improvements: Continued investments in digital infrastructure and facility upgrades are part of a long-term transformation plan aimed at sustainable growth.

Market Positioning: HF Foods remains the largest player in the Asian specialty food service market in the U.S., with a strong focus on expanding its customer base and operational synergies.

3Forward Guidance and Outlook:

Growth Expectations: The company anticipates that the Sea Ray acquisition will be accretive to margins and earnings per share, with a target consolidated adjusted EBITDA margin of 4.5% to 5% over the next 3-5 years.

Market Opportunities: HF Foods aims to capture a larger share of the $50 billion addressable market, leveraging its unique position in the Asian specialty market.

Operational Efficiency: The company is focused on optimizing its transformation initiatives and expects to see improvements in distribution efficiency and cost control.

4Bad News, Challenges, or Points of Concern:

Rising Costs: Increased fuel costs and tariffs have impacted gross margins, with the company actively managing these pressures.

Flat Gross Profit: Despite revenue growth, gross profit margins declined, indicating challenges in maintaining profitability amidst rising operational costs.

Capacity Constraints: New freezer capacity in the Southeast is delayed, which could hinder growth in that region until late 2026 or 2027.

5Notable Q&A Insights:

Seafood Category Growth: The Sea Ray acquisition is expected to open new channels, particularly in retail and wholesale, enhancing HF Foods' seafood offerings.

Traffic Trends: The company noted that takeout strength has offset declines in dine-in traffic, consistent with seasonal patterns.

Cross-Selling Initiatives: HF Foods is actively pursuing cross-selling opportunities, particularly in the Southeast and Midwest, but significant improvements may not be realized until late 2026. Overall, HF Foods Group reported solid revenue growth and strategic advancements with the acquisition of Sea Ray Foods, while also navigating challenges related to rising costs and margin pressures. The company remains optimistic about its growth trajectory and operational improvements moving forward.