Earnings call transcript: HF Foods Q3 2025 shows mixed results

HF Foods Group (HFFG) reported its third-quarter earnings on November 10, 2025, revealing a mixed financial performance. The company posted an earnings per share (EPS) of $0.08, falling short of the forecasted $0.09, representing an EPS surprise of -11.11%. However, revenue slightly exceeded expectations, reaching $307 million against a forecast of $306.19 million. Despite the revenue beat, the company's stock saw a 1.26% decline, closing at $2.38, as investors reacted to the EPS miss.

Key Takeaways

• HF Foods reported an EPS of $0.08, missing the forecast by $0.01.
• Revenue surpassed expectations, totaling $307 million.
• Stock price fell by 1.26%, reflecting concerns over profitability.
• Strategic expansions and digital initiatives are underway.
• The company faces industry challenges, including tariff pressures.

Company Performance

HF Foods Group demonstrated a solid revenue performance, with a 2.9% year-over-year increase to $307 million. The company also made significant strides in improving its net loss, which decreased to $0.9 million from $3.8 million in the previous year. Adjusted net income rose to $4.3 million from $2.2 million, reflecting better cost management and operational efficiency. However, the EPS miss highlights ongoing challenges in achieving profitability.

Financial Highlights

• Revenue: $307 million, up 2.9% year-over-year
• Earnings per share: $0.08, down from the forecasted $0.09
• Gross profit: $50.4 million, up 0.5%
• Adjusted EBITDA: Increased 41.5% to $11.7 million
• Net loss: Improved to $0.9 million from $3.8 million

Earnings vs. Forecast

HF Foods' EPS of $0.08 fell short of the $0.09 forecast, resulting in an 11.11% negative surprise. However, revenue slightly surpassed expectations by 0.26%, indicating robust sales despite profitability issues. The EPS miss, while not substantial, aligns with the company's historical struggles with profitability.

Market Reaction

Following the earnings report, HF Foods' stock decreased by 1.26%, closing at $2.38. This decline places the stock near its 52-week low of $1.70, reflecting investor concerns over the company's ability to achieve profitability. The stock's movement is consistent with broader market trends, where similar pressures are affecting sector performance.

Outlook & Guidance

Looking forward, HF Foods anticipates fourth-quarter results to mirror Q3, with maintenance capital expenditures expected between $10 million and $15 million annually. The company projects incremental volume gains in 2026, particularly in frozen seafood, and expects full capacity utilization within 2-3 years.

Executive Commentary

CEO Felix Lin emphasized the company's strategic investments, stating, "2025 is a year of strategic investment for HF." Lin also highlighted HF Foods' position as "the strategic acquirer of choice within our space," underscoring the company's focus on geographic expansion and operational synergies.

Risks and Challenges

• Tariff pressures and shifting consumer spending behaviors pose ongoing challenges.
• Potential government shutdowns could impact specific markets like Virginia.
• The company must manage its expansions and digital transformation effectively to ensure future growth.
• Industry trends of lower foot traffic may affect sales volumes.
• Macro-economic conditions could impact profitability and stock performance.

Q&A

During the earnings call, analysts inquired about the capacity expansion in Atlanta, which aims to double cold storage. Questions also focused on the sales force restructuring, aimed at improving efficiency without losing customer understanding, and the potential impact of a government shutdown on specific markets.

Full transcript - Hf Foods Group Inc (HFFG) Q3 2025:

Conference Operator: Good afternoon, ladies and gentlemen, and welcome to the HF Foods Group's Third Quarter 2025 earnings call. All participants will be in listen-only mode. The question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please key in star and then zero on your telephone keypad. Please note that this event is being recorded. I will now hand over to Madeline Kettle of ICR. Please go ahead.

Madeline Kettle, Investor Relations (ICR), ICR: Welcome to HF Foods Group Third Quarter 2025 earnings conference call. Joining me today on today's call are Felix Lin, the company's President and Chief Executive Officer, and Paul McGarry, the company's Interim Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on management's current beliefs and expectations about future events, which are subject to several known and unknown risks and uncertainties. If you refer to HF Foods' earnings release, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from those expressed or implied by these forward-looking statements. The company undertakes no obligation to update or revise these forward-looking statements in the future. In these remarks, the company will make several references to non-GAAP financial measures, including adjusted EBITDA and non-GAAP diluted earnings per share.

We believe these measures provide investors with a useful perspective on the underlying growth trends of the business and have included in the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Now, I will turn the call over to Felix.

Felix Lin, President and Chief Executive Officer, HF Foods Group: Hello, everyone. Welcome to HF Foods' Third Quarter 2025 earnings call. I'll provide a business update, and Paul will speak to our third quarter financial results. Then we'll open up the line for Q&A. I'm pleased to announce that we continue our momentum in the third quarter of 2025. Net revenue increased 2.9% year over year to $307 million, and gross profit increased 0.5% to $50.4 million. Also, notably, adjusted EBITDA increased 41.5% year over year to $11.7 million. Our results reflect our continued discipline, execution against our strategic initiatives, and showcase the resilience of our business model. Despite ongoing macro challenges, including tariff pressures and shifts in consumer spending behaviors, our transformation initiatives are paving the way for continued growth and improvement throughout the business. Our third quarter performance demonstrates the strength of our operational focus and strategic positioning.

We have been actively diversifying our supplier base and exploring alternative sourcing strategies to ensure continuity and cost-effectiveness in our supply chain. Our strategic inventory management and proactive pricing actions have allowed us to effectively navigate the changing environment while delivering solid net revenue growth and significant adjusted EBITDA growth. We are encouraged by our strong performance in the third quarter and the solid foundation we've built. While we have seen some lower foot traffic consistent with broader industry trends, this was offset by strong volume in select markets and pricing actions we have taken. Based on our current trend, we expect Q4 results to be similar to what we achieved in Q3. We remain extremely confident in our long-term growth strategy and are committed to our capital investment in growing our capacity as we continue building momentum for the rest of the year and into 2026.

Our digital transformation initiative continues to deliver on its promise. We reached a major milestone on May 1st with the successful deployment of a new modern ERP application across our entire network. All of our locations are now operating on a single unified ERP platform that will help us to achieve breakthrough levels of efficiency, visibility, and control across our operations, unlocking the full potential of our centralized purchasing capabilities over time. I am pleased to report that the ERP system is running smoothly as planned. The next phase of this program is focused on rationalizing our sales force. With our operations unified on a single system, we now plan to restructure our sales operation, which will reduce costs over time and further strengthen our competitive positioning.

We expect the initiative to kick off in the second half of Q4 2025 and run through the first part of Q1 2026, providing efficiencies in our sales operations. We're consolidating two sales operations into one, which we believe provides us better control over the overall sales process and provides improved customer service. This represents the final key piece to our business integration transformation. Our strategic facility enhancement initiatives continue to advance across multiple regions, positioning us for sustained growth. Renovation at our Charlotte Distribution Center is largely complete, with the final permits imminent. Our state-of-the-art Atlanta facility project, which we expect will create meaningful organic growth opportunities through expanded cross-selling capabilities, is on track for completion later this year.

The cold storage capacity expansion in Atlanta is expected to double our capacity in the region and enable us to significantly increase frozen seafood sales to our existing customer base along the Eastern Seaboard, meaningfully expanding our Southeast presence. In the quarter, we announced the acquisition of our Chicago warehouse. This strategic acquisition advances HF Foods Group's ongoing transformation plan to improve operational efficiency, reduce facility costs, and strengthen organic growth through cross-selling opportunities. Acquiring the facility enables us to exit the lease agreement early, improve operating expenses, and invest in the facility 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. M&A remains a core pillar of our growth strategy.

HF Foods is the only scale food service provider in the Asian specialty 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 synergies, broadening our customer base, and enhancing our product and service capabilities. We remain disciplined but optimistic about M&A opportunities in 2025 and beyond. We're actively evaluating opportunities, and we believe our proven ability to successfully navigate the tariff landscape positions us uniquely to identify and execute attractive tuck-in acquisitions that will benefit from our operational expertise and scale. Before I turn the call over, I'd like to welcome Paul McGarry, who is joining us on the first earnings call as Interim CFO of HF Foods.

Paul has been a key member of our finance team as our Vice President, Corporate Controller, and brings extensive finance experience and deep knowledge of HF Foods' business operations. We're grateful for his seamless leadership during this executive transition. Now, over to you, Paul.

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Thanks, Felix. I will now review our results for the third quarter ended September 30, 2025, versus the same period in 2024. Net revenue for the third quarter increased 2.9% to $307 million, from $298.4 million in the prior year quarter. The increase was primarily attributable to volume increases and improved pricing in our meat, poultry, and seafood categories. Gross profit increased by 0.5% to $50.4 million for the quarter, compared to $50.2 million in the prior year quarter. The increase was primarily attributable to an increase in volume and improved pricing during the quarter. Gross profit margin remained relatively consistent at 16.4%, compared to 16.8% in the same period in 2024, due to an increased proportion of sales from lower-margin products, particularly seafood. Distribution, selling, and administrative, or DS&A, expenses decreased by $0.4 million to $49.3 million for the third quarter.

DS&A expenses, as a percentage of net revenue, decreased to 16.1% from 16.6% in the prior year period, primarily due to increased net revenue and lower personal and professional insurance costs, partially offset by increased rental occupancy and other expenses. Income from operations for the third quarter of 2025 increased to $1.1 million, compared to $0.5 million in the prior year quarter. The improvement was driven by the increase in net revenue, gross profit, and decrease in DS&A costs. Adjusted EBITDA increased 41.5% to $11.7 million for the third quarter of 2025, compared to $8.3 million in the prior year quarter. Total interest expense increased slightly to $2.9 million for the third quarter of 2025, compared to $2.6 million in the prior year quarter. Net loss was $0.9 million for the third quarter of 2025, compared to a loss of $3.8 million in the third quarter of 2024.

The improvement was primarily driven by an increase in net revenue, gross margin, and managing certain DS&A costs. Adjusted net income increased to $4.3 million, compared to $2.2 million in the prior year period. Loss per share improved to a loss of $0.02, compared to a loss of $0.07 in the prior year period. Adjusted earnings per share increased to $0.08, compared to $0.04 in the prior year period. In summary, our third quarter results demonstrate the effectiveness of our strategic transformation initiatives and operational discipline in driving meaningful progress across our business. While we continue to navigate macro headwinds, including tariff pressures and shifting consumer patterns, our proactive approach to pricing, inventory management, and operational efficiency has enabled us to deliver growth and build momentum for the future.

These strong results reinforce our confidence in the strategic foundation we've established and position us well as we continue to execute on our growth strategy. I'll now hand it back over to Felix for closing remarks.

Felix Lin, President and Chief Executive Officer, HF Foods Group: Thanks, Paul. As we look ahead to the balance of 2025 and beyond, I want to emphasize our commitment to executing the comprehensive transformation initiatives that are reshaping HF Foods. 2025 is a year of strategic investment for HF, and the investments we're 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're methodically building the infrastructure, systems, and capabilities needed to fully capitalize on these strategic advantages.

As we move forward, we'll 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 it over to the operator for a live Q&A.

Conference Operator: Thank you, sir. Ladies and gentlemen, we will now be conducting the question-and-answer session. Please note, for participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If you'd like to ask a question, please key in star and then one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may key in star and then two to leave the question queue. Our first question comes from Paul Kirk of Roth Capital Partners. Please go ahead.

Paul Kirk, Analyst, Roth Capital Partners: Hi. Hey, everybody. Good afternoon. Felix, you talked about capacity increases for 2026. Between the active projects you laid out, a couple, and I guess the possibility of M&A, how much do you think capacity increases in 2026?

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Hey, Bill. Yes, that's a good question. I mean, capacity-wise, right now, if we think about what we've been communicating, it's limited to the Southeast. Specifically for Atlanta, we talk about cold storage. It's effectively going to double our capacity in the Atlanta market. We're moving from a 100,000 sq ft warehouse to roughly about a 190,000 sq ft warehouse in that market.

Paul Kirk, Analyst, Roth Capital Partners: Okay. Thinking about restructuring of the Salesforce, I know you kind of said it goes from two to one. How much cost savings do you think you can generate through that initiative? Maybe more importantly, how do you balance extracting those efficiencies while not losing the uniqueness that your Salesforce provides?

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Yeah. I think part of the moat that we've been communicating is the fact that, again, we understand our customers, especially in the way they do business, the language, and the product rationalization itself. All of that, again, will remain the same. This is really more of an efficiency play. Over time, we'll have better control over pricing strategy, promotion with our broader program here in the future. Again, this is one of those things that we've been prepping here for the better part of 2025. Really, we're just getting toward the end of execution itself. At the end of the day, again, there might be some level of disruption, but it's going to be expected and planned based on everything that we've been working on internally.

I do expect going through the end of 2025 and certainly midpoint through Q1 2026, everything should get normalized here for us.

Paul Kirk, Analyst, Roth Capital Partners: Okay. If I can sneak one more in, were there any standouts or differential in the monthly cadence in the quarter? When you're looking at the quarter-to-date period, where does that shape up versus kind of how you guided for Q? Have you seen any impact from potential impact from government shutdown?

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Yeah. I mean, Q3 has largely kind of followed the trend that we saw in Q2, right? There's still the impact from tariff in terms of inventory, pricing, and certainly foot traffic. Beginning of Q3, we saw it continue to be a little bit softer, but we bound it nicely toward the end of Q3. As we kind of get into Q4 as well, selected markets, I think there are going to be a little bit of impact from government shutdown. For example, Virginia, where we have a nice frozen seafood business based out of Richmond, Virginia, certainly that market there serves a large government employee population. The shutdown has impacted volume and foot traffic in that selected market. Overall, going through the entirety of 2025, I think the team has done a really good job. Other markets would pick up volume.

One specific market, for example, in Salt Lake City, where not just in 2025, but over the last couple of years, we've been very effective in rationalizing our product and our business mix to kind of get rid of some of the lower-margin business and free up some capacity to drive better business performance. That is probably one of the biggest reasons why we're still able to deliver year-over-year growth for the quarter.

Paul Kirk, Analyst, Roth Capital Partners: Thank you, Felix, and good luck.

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Thank you.

Conference Operator: Our next question comes from Daniel Harriman of Sidoti & Company. Please go ahead.

Daniel Harriman, Analyst, Sidoti & Company: Hey, guys. Good afternoon, and congratulations on the continued progress. Felix, I've got two quick questions, one of which kind of follows up on the previous questions. With 2025 being a year of investment, looking out to 2026 and 2027, how should we think about maintenance CapEx on a sustained basis year over year? Secondly, again, referencing 2025 as a year of investment, can you just talk a little bit more about the timing of the ramp-up and how we should think about organic growth moving forward? Is it going to be—are we going to see some of that in 2026? Or given the external pressures, or is your assumption that we may be needing to look at it a little bit further? Thanks so much, guys.

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Hey, Daniel. Yeah. Addressing your first question regarding CapEx, I think on an annual basis, our typical maintenance CapEx budget probably fluctuates between $10-$15 million a year. On a go-forward basis, that is largely going to be around, again, driving efficiency improvements, cutting costs out within our DC operations. In 2026, I think CapEx might be a little bit higher, just given the fact that we announced the strategic acquisition of our Chicago warehouse. Certainly, as we make more progress trying to drive additional capacity in the Midwest market, there might be newer facility acquisitions on the horizon. For the foreseeable future, I think it is going to be more than the $10-$15 million that we have previously communicated in terms of normal maintenance.

Getting back to the organic growth, I think previously we talked about it's likely going to take about three to four years in terms of ramping up once the capacity is ready. I do believe that 2026 is going to be the first year there will be some incremental volume gain, specifically with respect to frozen seafood in the Atlanta and Southeast market. It is going to take, again, probably a couple of years for us to get there and fully utilize the entire new capacity that's going to come online here at the end of the year. I think the larger cross-selling organic growth opportunity, it's always going to be perhaps in the Midwest market. Certainly, the investment is going to go in as we plan to in 2026, which will pay dividends here potentially 2027 and beyond.

Daniel Harriman, Analyst, Sidoti & Company: Great. That's super helpful. Best of luck in the coming quarter.

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Thank you.

Conference Operator: Ladies and gentlemen, just a final reminder. If you'd like to ask a question, you're welcome to press star and then one on your telephone keypad. With the note for the questions in the question queue, we have reached the end of the Q&A session. I will now hand back to Felix Lin for closing remarks.

Paul McGarry, Interim Chief Financial Officer, HF Foods Group: Again, I'd like to thank everyone for joining the call today. We're pleased with the transformational progress we've made to date and the results we've achieved this quarter. We remain extremely confident in our long-term outlook and invite all of you to continue following the HF story. Thank you, and we look forward to updating you on our next earnings call.

Conference Operator: Thank you. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your line.

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