Hf Foods Group Q2 Earnings Call Highlights

Key Points

• Record revenue, pressured profitability: Second-quarter revenue rose 2.8% year over year to $323.8 million, but adjusted EBITDA fell 2% to $13.6 million as tariffs, higher fuel costs and softer dine-in traffic narrowed margins.
• Net income benefited from one-time items: Net income increased to $2.6 million, helped by employee retention credits, tariff refunds and favorable interest-rate swap valuation, while adjusted net income and adjusted EPS were essentially unchanged.
• Canadian expansion planned: HF Foods agreed to acquire Searay Foods for approximately $35 million plus potential earn-outs, creating its first Canadian platform and potentially boosting margins and earnings through Searay’s higher-margin seafood business.

Hf Foods Group NASDAQ: HFFG reported record quarterly revenue in the second quarter of 2026, while profitability was pressured by tariffs, higher fuel expenses and softer dine-in traffic. Management also highlighted its pending acquisition of Canadian seafood importer and distributor Searay Foods as a key step in expanding beyond the United States.

Net revenue rose 2.8% from a year earlier to $323.8 million for the quarter ended June 30, marking the company’s highest quarterly revenue on record. The increase reflected volume growth and improved pricing in seafood, as well as volume growth in commodity products, partly offset by lower meat and poultry prices, Chief Financial Officer Paul McGarry said.

“We continued to build momentum in the second quarter, even as tariff pressure, softer foot traffic, and rising fuel costs continued to weigh on the industry,” President and Chief Executive Officer Felix Lin said.

Gross profit was essentially unchanged at $55 million, compared with $55.1 million a year earlier. Gross margin declined to 17.0% from 17.5%, which McGarry attributed primarily to incremental tariffs that took effect beginning in the third quarter of 2025. The company received some refunds related to IEEPA tariffs during the quarter, partially offsetting the pressure.

Adjusted EBITDA declined 2% to $13.6 million, with the adjusted EBITDA margin narrowing to 4.2% from 4.4%. Distribution, selling and administrative expenses increased 2.4% to $52.2 million, driven in part by approximately $1.4 million in higher year-over-year fuel costs, as well as increased insurance and professional-services expenses. Lower personnel costs stemming from transformation initiatives partly offset those increases.

Net Income Increased on Credits, Refunds and Swap Valuation

Net income attributable to HF Foods increased to $2.6 million, or $0.05 per share, from $1.2 million, or $0.02 per share, in the prior-year period. McGarry said the increase was supported by a $1.8 million employee retention credit including interest, about $1.1 million in IEEPA tariff refunds, and a $1.4 million favorable year-over-year change in the fair value of interest-rate swap contracts.

Those benefits were partly offset by a $1.3 million decline in income from operations and a $0.7 million year-over-year change in net income attributable to non-controlling interests. Adjusted net income attributable to HF Foods was essentially flat at $6.4 million, while adjusted earnings per share remained unchanged at $0.12.

The company said it has now posted six consecutive quarters of year-over-year revenue growth. On a trailing 12-month basis, HF Foods generated approximately $1.25 billion in net revenue, according to McGarry.

Searay Acquisition Would Establish Canadian Platform

HF Foods entered into a definitive agreement on July 17 to acquire Searay Foods, a Richmond, British Columbia-based importer and distributor of ethnic and specialty frozen seafood. The transaction, which management expects to close by Aug. 31 subject to customary conditions and regulatory approvals, would be HF Foods’ first acquisition outside the U.S.

The base purchase price is CAD 47.9 million, or approximately $35 million, with sellers also eligible for contingent earn-out payments tied to specific EBITDA targets over two to three years after closing. Consideration will consist of cash and HF Foods common stock.

McGarry said the base purchase price represents roughly five times Searay’s baseline adjusted EBITDA of CAD 9.6 million, or approximately $7 million. Searay operates with adjusted EBITDA margins in the mid-teens, compared with HF Foods’ 4.2% margin in the second quarter. Management expects the acquisition to be accretive to margins and earnings per share from closing and to support its long-term consolidated adjusted EBITDA margin target of 4.5% to 5% or more.

Searay brings six proprietary brands—Searay Foods, Thai Best, Pinoy’s Best, Smart Fish, Diamond Shrimp and Gold Label—to HF Foods’ seafood category, which accounts for about 36% of the company’s net revenue. Lin said Searay has grown revenue at roughly 15% annually since 2019.

Beyond its Canadian footprint, Searay recently established U.S. operations, including a planned direct-import operation in Los Angeles. Lin said HF Foods expects its distribution network, sourcing scale and West Coast infrastructure to help support that effort.

Management also sees an opportunity to broaden its customer channels. While HF Foods has historically focused on independent restaurants in the U.S., Lin said Searay has a more diversified mix that includes retail, wholesale and Asian specialty grocery customers.

Investment, Capacity and Financing Plans

HF Foods spent approximately $20.3 million in capital expenditures during the first six months of 2026. The spending included $12.4 million to purchase its previously leased Chicago distribution center, $2.8 million for solar investments, $2.1 million for capacity expansion and $1.4 million for fleet upgrades. Recurring maintenance spending totaled approximately $1.7 million.

The company expects an investment tax credit refund to reduce the overall cost of its solar investment by 40%, McGarry said.

After the quarter ended, HF Foods refinanced and expanded its credit facilities. The company increased asset-based revolving commitments to $140 million from $125 million and refinanced approximately $95 million of outstanding term loans into $125 million of term loans. The revolving facility matures in July 2031, while the term loan matures in July 2036.

Management said the additional liquidity is intended to support the Searay acquisition, facility investments and potential future tuck-in acquisitions.

On operations, Lin said the company is using promotional campaigns and vendor partnerships to pursue market share, particularly in seafood and in the Southeast. He said seafood volume gains in the second quarter helped offset pricing pressure from higher diesel costs and customer-acquisition efforts. Management expects to remain in that “conquest mode” through 2026, with margins and other factors potentially normalizing in 2027 and beyond.

Lin said construction work at the company’s Charlotte facility has been completed and the site was awaiting inspection. He expects it could become operational within weeks, with distribution-route efficiencies potentially benefiting distribution, selling and administrative expenses in the fourth quarter.

About Hf Foods Group (NASDAQ:HFFG)

HF Foods Group, Inc, together with its subsidiaries, manufactures, imports and distributes a variety of ethnic and specialty food products primarily for retail and foodservice customers in the United States. The company focuses on value‐added fresh and frozen offerings that cater to growing consumer interest in Hispanic and other global cuisines. Its vertically integrated operations include in‐house manufacturing, procurement of specialty ingredients, and third‐party distribution partnerships.

The company's product portfolio spans a broad range of categories, including fresh and frozen tamales, enchiladas, empanadas, tortillas and quesadillas, as well as shelf‐stable salsas, sauces, dips, spreads and snack items.

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