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DATE
May 11, 2026 at 4:30 p.m. ET
CALL PARTICIPANTS
- Chief Executive Officer — Felix Lin
- Chief Financial Officer — Paul McGarry
TAKEAWAYS
- Net Revenue -- $312 million, up 4.5% year over year, with growth primarily attributed to higher volume and improved seafood pricing.
- Gross Profit -- $50.5 million, down 0.8% year over year, reflecting a higher mix of lower-margin seafood sales and increased landed costs.
- Gross Profit Margin -- 16.2%, decreased from 17.1% in the comparable quarter, cited as due to shifts in sales mix and cost pressures.
- DS&A Expenses -- $49.5 million, reduced by $300 thousand, with lower professional fees and bad debt expense offset by higher auto/truck expenses and depreciation; DS&A as a percentage of revenue fell to 15.9% from 16.7%.
- Adjusted EBITDA -- $10.1 million, reflecting 3.8% year-over-year growth.
- Interest Expense -- $2.8 million, up from $2.6 million in the prior-year quarter.
- Net Income Attributable -- $1.2 million, compared to a net loss of $1.6 million in the year-ago period, with improvements driven by revenue growth, cost controls, and a gain on asset sale.
- Adjusted Net Income Attributable -- $3.4 million, a $100 thousand decrease year over year.
- Earnings Per Share -- 20¢, improved from a 3¢ loss; Adjusted EPS was 6¢ versus 7¢ previously.
- Sales Operation Consolidation -- Two call centers unified to one team by late December 2025, resulting in efficiency gains and lower DS&A spend on sales commissions.
- ERP Implementation -- Complete, now enabling procurement consolidation across distribution centers and route optimization; significant SKU recategorization undertaken.
- Facility Upgrades -- Chicago facility acquired and expanded; Charlotte facility expansion nearly complete pending permits; Atlanta freezer expansion to double cold storage capacity to 20,000 square feet expected operational within 2026.
- Cross-Selling Strategy -- Infrastructure investments in Southeast and Midwest target several hundred million dollars in organic growth, leveraging expanded distribution network and capacity.
- Ongoing Cost Mitigation -- Actions taken include owned rather than leased facilities, lower professional fees, and sales operation efficiency, especially to counter higher fuel and COGS.
- M&A Activity -- Increased inbound M&A interest as smaller competitors face operational and cost pressures; company sees this as an opportunity to enhance geographic presence and operational synergies.
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RISKS
- Elevated Cost Pressures -- CEO Lin stated, "Based on current trends, we do expect some short-term pressure due to increased cost of goods sold and outbound distribution costs related to rising fuel costs, which we are taking actions to mitigate."
- Gross Margin Contraction -- CFO McGarry said, "Gross profit margin decreased to 16.2% for the quarter compared to 17.1% in the prior-year quarter," citing higher seafood mix and landed costs as key drivers.
SUMMARY
HF Foods Group (HFFG +0.53%) reported revenue and adjusted EBITDA growth amid a challenging input cost environment driven by tariffs and rising fuel prices. Management completed major digital and operational transformation initiatives, including ERP roll-out and salesforce consolidation, setting the stage for efficiency improvements. Facility upgrades in Chicago, Charlotte, and Atlanta directly support the company's cross-selling strategy, expanding access to higher-margin categories like frozen seafood. Volume growth and pricing contributed to improved net income and EPS, although adjusted net earnings were down slightly due to product mix and expenses. Cost mitigation and targeting further operational gains remain in focus as management anticipates continued near-term margin pressure.
- CEO Lin noted a "significant runway" in the $50 billion addressable market, with company revenue just over $1 billion, referring to HF Foods Group as the strategic acquirer of choice in the Asian specialty space.
- Management reported that outbound M&A activity is accelerating as smaller operators are pressured by increased input and fuel costs, suggesting acquisition opportunities could rise in 2026.
- Facility investment in the Southeast and Midwest underpins management's view of "several hundred million dollars worth of organic growth opportunity" from capacity expansion.
- Leadership confirmed that, while demand and volume trends are holding, cost visibility remains constrained by ongoing market price pressures in both seafood and distribution.
INDUSTRY GLOSSARY
- DS&A: Distribution, Selling, and Administrative expenses; core operational costs crucial for profitability analysis in food distribution.
- ERP: Enterprise Resource Planning system; integrated digital infrastructure for managing procurement, logistics, and data optimization.
- SKU: Stock-keeping unit; a unique identifier for each distinct product or service that can be purchased.
- Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, adjusted for non-recurring items or management-defined metrics.
Full Conference Call Transcript
Felix Lin: I will provide a business update, and Paul will speak to our first quarter financial results. Then we will open the line for Q&A. As we mentioned on our last call, 2025 brought headwinds for the broader foodservice industry in terms of tariff pressure and lower foot traffic. We saw many of these pressures continue, particularly with the added pressure from rising fuel prices. But against this backdrop, we drove meaningful, continuous momentum for our business. Net revenue increased 4.5% year over year to $312 million due to higher volume, and gross profit decreased slightly to $50.5 million driven by a higher mix of seafood during the quarter. Also notably, Adjusted EBITDA increased 3.8% year over year to $10.1 million.
We made meaningful progress on our long-term transformation plan with respect to sales operations, digital infrastructure, and facilities upgrades. We consolidated two sales call center operations into one unified team as of late December 2025. This consolidation provides us better control over the overall sales process and improved customer service, while maintaining the distinct connection we have with our customers through our understanding of their business language and product needs. Importantly, this unified approach enables us to maintain consistent pricing strategies across our network, while the efficiency gains are already evident with lower DS&A spend on sales commissions as the new team continues to adapt.
With the ERP implementation completed, we are now actively working on driving operational efficiencies through system and data optimization. The new system positions us to achieve a higher level of purchasing efficiency by consolidating buying across distribution centers and enables operational improvements through enhanced route optimization capabilities. We recategorized a significant number of SKUs as part of system implementation. The next phase of our digital transformation focuses on improving overall customer experience. We are actively developing a customized customer portal that will enable transactional visibility and improve efficiency. On facilities, we successfully completed the acquisition of our previously leased facility in Chicago and are actively expanding cooler and ambient capacity.
This move is part of our broader cross-selling strategy driving organic growth. The Charlotte facility is largely ready and still pending final permits from local government. We expect Charlotte to be fully operational in late second quarter of 2026, which will shorten our seafood distribution routes in the Southeast. We are also kicking off phase two of Atlanta's freezer expansion plan, which will nearly double our cold storage capacity in the Atlanta market from 10 thousand to 20 thousand square feet, where we have historically been limited by cold storage capacity. This will likely be operationally ready by 2026. We see all three facilities upgrades as a cornerstone of our cross-selling strategy in the Southeast and Midwest in the future.
Between the Southeast and Midwest, there is several hundred million dollars worth of organic growth opportunity as we continue to invest in and expand capacity. 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 do expect some short-term pressure due to increased cost of goods sold and outbound distribution costs related to rising fuel costs, which we are taking actions to mitigate. 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 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 2026 and beyond, and we are actively evaluating opportunities from potential sellers who understand our unique position. 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.
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. I will now turn the call over to Paul McGarry, our CFO, to walk you through more details of financial performance for the quarter.
Paul McGarry: Thanks, Felix. I will now review our results for the quarter ended 03/31/2026 versus the same period in 2025. Net revenue for the quarter increased 4.5% to $312 million from $298.4 million in the prior-year quarter. The increase was primarily due to volume growth and improved pricing in seafood, followed by volume growth in commodity, partially offset by volume decreases within other categories. Gross profit slightly decreased 0.8% to $50.5 million for the quarter compared to $51 million in the prior-year quarter. The decrease was primarily due to increased sales in lower-margin products like seafood and an uptick in landed costs. Gross profit margin decreased to 16.2% for the quarter compared to 17.1% in the prior-year quarter.
Distribution, selling, and administrative, or DS&A, expenses decreased by $300 thousand to $49.5 million for the quarter, primarily due to decreases in professional fees and bad debt expense, partially offset by an increase in auto and truck expenses and depreciation. DS&A expenses decreased as a percentage of net revenue to 15.9% for the quarter compared to 16.7% in the prior-year quarter. Adjusted EBITDA increased 3.8% to $10.1 million for the quarter compared to $9.8 million in the prior-year quarter. Total interest expense increased slightly to $2.8 million for the quarter compared to $2.6 million in the prior-year quarter.
Net income attributable to HF Foods Group Inc. was $1.2 million for the quarter compared to a net loss of $1.6 million in the prior-year quarter. The quarter-over-quarter improvement was primarily due to strong revenue growth, along with controlled cost oversight, and a gain on sale of an asset. Adjusted net income attributable to HF Foods Group Inc. decreased $100 thousand to $3.4 million compared to $3.5 million in the prior-year quarter. Earnings per share improved to $0.20 compared to a loss per share of 3¢ in the prior-year quarter. Adjusted earnings per share decreased to 6¢ compared to 7¢ in the prior-year quarter.
Stepping back from the details, the quarter reinforces that the business is progressing in a challenging cost environment. Our focus is now on execution, converting the transformation work we have completed into measurable operational gains, including purchasing discipline, route and warehouse efficiency, and tighter cost control as fuel and other input costs remain elevated. As the systems foundation is now in place, we are moving from implementation to optimization, while continuing to support organic growth through cross-selling and network capacity investments. We will stay disciplined on capital deployment and remain selective on strategic tuck-in opportunities that strengthen the platform. I will now turn the call back over to Felix.
Felix Lin: Thanks, Paul. As we look ahead to the remainder of 2026 and beyond, I want to emphasize our commitment to executing 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 tender 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 open the call for questions. 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 star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions. The first question comes from the line of Aaron Grey with Alliance Global Partners. Please go ahead.
Analyst: Hi. Good evening, and thank you very much for the question. First on gross margin, you had some headwinds given the macro backdrop and rising fuel prices. How should we think about the near- to medium-term impact of that, and potential offsets from your own efficiency gains, particularly with the implementation of your ERP program? Thank you.
Felix Lin: Hey, Aaron. In the short term, the elevated costs, as Paul mentioned, will likely continue to persist for a little bit. We operate very much in a spot market where we buy and sell from a spot standpoint versus contract. On year-over-year comparisons, as we get into the second quarter, we benefited last year from lower-cost inventory as tariffs were implemented, so going forward we saw some of that higher cost coming through in 2025 that has continued into 2026. We think that is going to be here for a little while in Q2 and maybe beyond. Internally, we are doing a lot to mitigate overall cost structure.
For example, converting a leased facility to ownership has cut down our occupancy expense, professional fees have gone lower, and the sales operation consolidation is driving improved operating efficiency. These are actions we are actively working on to ensure there is continued bottom-line improvement year over year.
Analyst: Appreciate the color, Felix. As we think about the headwinds with fuel prices impacting you, these often have an even bigger impact on smaller operators. Is that what you are seeing, and could that positively affect potential M&A targets who may be more inclined to partner with a larger operator like you? Any impact on the broader competitive environment and how that may help potential M&A targets?
Felix Lin: We are definitely seeing the amount of inbound M&A calls tick up over the last several months. Smaller players are being squeezed, whether from elevated inventory costs or now from operating costs with added fuel costs. Over time, we see that as an advantage, similar to what we saw during the pandemic when the operating environment became tougher for smaller, family-owned businesses that, because of the pressure, looked for an exit. That is a positive for us, and we are actively evaluating an increased level of activity and opportunities behind the scenes.
Operator: Thank you. Next question comes from the line of Daniel Hellerman with Sidoti & Company, LLC. Please go ahead.
Analyst: Hey, Felix. Hey, Paul. Thanks for taking my questions, and congrats on a great quarter. Following up on the prior gross margin question, can you talk about Charlotte—your expectations longer term for gross margins and DS&A as Charlotte comes online and some of your distribution routes shorten, maybe even within seafood where the mix was a cause of the gross margin contraction in the quarter? And now that you have Atlanta up and running as a cornerstone of your cross-selling strategy in the Southeast, do you have any proof points to share—new accounts, expanded wallet share, or more SKUs—to help us understand the long-term impact of that facility?
Felix Lin: Both the Charlotte facility and the Atlanta expansion have been center points of our cross-selling strategy. In the Southeast, historically, we have not done a whole lot of frozen seafood business. Given our scale, frozen seafood is the largest product category in our mix at just over $400 million of annual top-line revenue. With shorter routes and improved distribution efficiency, we see significant leverage over smaller competitors, enabling better pricing power as well. We are only a few months into the year. With Atlanta specifically, we have opened a couple of dedicated seafood routes servicing our existing customers. With Charlotte, construction and renovation are largely complete; we have been waiting on permitting from the local government for months.
The latest is that we are expecting, toward Q2 or Q3, for the permit to be approved and to get that facility up and running, which should benefit us in the second half of the year.
Operator: Next question comes from the line of Bill Cook with ROTH Capital Partners. Please go ahead.
Analyst: Good evening, everybody. On higher fuel prices, have you seen any changes in foot traffic as a result—people leaving restaurants in favor of grocery, or switching into buffet-style formats? Are you seeing any behavioral changes due to higher fuel prices?
Felix Lin: Not in a material way. Foot traffic in 2026 has been pretty consistent with 2025. The lower foot traffic is still largely limited to some of the larger buffet restaurants we service nationwide. With elevated fuel prices, we are doing a number of things. Every market is different. In markets where we have significant share—our Salt Lake business has 80%–90% share and we run more rural routes—we are able to pass along a fair amount of the fuel increase. In other locations with high competitive pressure and lower foot traffic, there is a more limited opportunity to pass along the cost.
Analyst: Is it fair to say that April foot traffic would be similar to 1Q?
Felix Lin: I think April has a lot of noise. On a year-over-year comparison, last April we benefited from low-cost inventory due to tariff timing, which gave us a significant margin uptick as we sold through at higher prices. This April we are seeing both increased fuel prices and elevated inventory costs. It is still a bit too early to parse how much of the impact through April and the rest of Q2 is due to tariffs versus elevated fuel costs.
Analyst: Thank you. And on refining the salesforce, where are you in that process, and once fully on the other side, how does the new salesforce help HF Foods Group Inc. drive better customer acquisition or account penetration? What is on the other side of the salesforce refinement?
Felix Lin: From a business stabilization standpoint, that has been largely completed through 2026. The rest of the year is about additional training around new product SKUs we are introducing, specifically cross-selling seafood in the Southeast. We have over 20 thousand SKUs, and historically there has not been significant frozen seafood sales in that region, so there is a learning curve for the salesforce. I expect them to get there in the second half of the year, and we anticipate volume offsets coming from pushing seafood.
Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the floor over to Felix Lin for closing comments.
Felix Lin: First of all, thank you for the continued support and for your attention to HF Foods Group Inc. We are fully committed to our long-term strategic plan and are executing on that plan quarter after quarter. I look forward to updating you on our progress in the quarters ahead. Thank you.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
