Executive Summary

Record net revenue $314.9M and gross profit $55.1M; gross margin expanded to 17.5% (+13 bps YoY); Adjusted EBITDA rose 31.1% to $13.8M; GAAP diluted EPS was $0.02; non-GAAP diluted EPS $0.12 .
Mix/pricing strength in Meat & Poultry and Seafood drove the quarter; DS&A leverage to 16.2% of revenue (vs 16.5% YoY); operating income up 56.9% YoY to $4.1M .
ERP rollout completed May 1 across the network; e-commerce platform launched (NC, FL, UT) to extend distribution economics and loyalty without incremental delivery cost, supporting margin and growth initiatives .
Management noted late-Q2 and early-Q3 foot-traffic softness and tariff fluidity (e.g., Indian shrimp rates potentially moving from 25% to 50%); inventory built strategically ahead of possible 2H tariff impacts .
No formal FY guidance; reiterated 3–5% DS&A cash cost-reduction program and long-term goal to reach ~5% EBITDA margin over 3–5 years; M&A focus on tuck-ins; revolver expanded to $125M to fund transformation and inorganic growth .

What Went Well and What Went Wrong

What Went Well

Record net revenue ($314.9M) and gross profit ($55.1M); Adjusted EBITDA grew 31.1% YoY to $13.8M on pricing discipline and category mix in Meat & Poultry and Seafood .
ERP implementation completed across all locations in May, with management citing “breakthrough levels of efficiency” ahead; e-commerce launched to serve restaurant employees on existing delivery routes, adding a margin-accretive channel .
DS&A efficiency: DS&A as % of revenue improved to 16.2% (from 16.5% YoY), aided by lower professional fees despite payroll and rental pressures .

Management quote: “The successful completion of our ERP implementation across our entire network has established a unified platform that will drive breakthrough levels of efficiency and unlock the full potential of our operations.” — Felix Lin (CEO) .

What Went Wrong

Late-Q2/early-Q3 foot-traffic softness, particularly in buffet-heavy markets potentially impacted by immigration policy changes; seasonality expected in Q3 .
Tariff uncertainty remains (e.g., Indian shrimp under review), creating pricing and sourcing complexity; management flagged potential rate increases and is diversifying suppliers and building inventory .
Gross margin improvement modest (+13 bps YoY to 17.5%); broader margin expansion still a multi-year goal amid spot-market purchasing and wholesale mix dynamics .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Millions)	$305.3	$298.4	$314.9
Gross Profit ($USD Millions)	$52.2	$51.0	$55.1
Gross Margin (%)	17.1%	17.1%	17.5%
Income from Operations ($USD Millions)	$(42.2) (incl. $46.3M goodwill impairment)	$1.2	$4.1
Net Income attributable to HF Foods ($USD Millions)	$(43.9)	$(1.6)	$1.2
Diluted EPS ($USD)	$(0.83)	$(0.03)	$0.02
Adjusted EBITDA ($USD Millions)	$14.5	$9.8	$13.8
DS&A (% of Revenue)	15.7%	16.7%	16.2%

Segment/Product Category Breakdown (Q2 2025 vs Q2 2024)

Category	Q2 2024 ($M, %)	Q2 2025 ($M, %)
Seafood	$99.5, 33%	$112.1, 36%
Asian Specialty	$77.5, 26%	$57.1, 18%
Meat & Poultry	$63.8, 20%	$71.8, 23%
Produce	$32.2, 11%	$27.6, 9%
Packaging & Other	$15.6, 5%	$15.0, 4%
Commodity	$13.7, 5%	$31.3, 10%
Total	$302.3, 100%	$314.9, 100%

KPIs and Balance Sheet Highlights

KPI	Q4 2024	Q1 2025	Q2 2025
Cash & Equivalents ($M)	$14.5	$16.1	$15.7
Inventories ($M)	$97.8	$106.0	$127.2
Line of Credit Outstanding ($M)	$57.5	$58.6	$60.8
Total Debt (Principal) ($M)	$108.9	—	$106.2
Operating Cash Flow	FY 2024: $22.6M	Q1 2025: $6.9M	6M 2025: $10.5M
Shares Diluted (avg)	52.74M	52.74M	53.41M

Vs Estimates

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue Consensus	N/A*	N/A*	N/A*
EPS Consensus	N/A*	N/A*	N/A*

*Values retrieved from S&P Global; consensus unavailable for these periods.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Cash DS&A expense reduction target	FY 2025	Reduce cash DS&A by 3%–5% by end-2025	Reiterated 3%–5% by end-2025	Maintained
ERP system deployment	2025	Complete system-wide ERP in 2025	Completed May 1, 2025	Achieved
Atlanta capacity expansion	Through 2026	Phase implementation to double capacity in region	Progressing; expansion to increase frozen seafood sales on Eastern Seaboard	Maintained
Long-term EBITDA margin target	3–5 years	Not quantified previously	Target ~5% EBITDA margin over 3–5 years	New/Clarified
Formal revenue/EPS guidance	2025	No formal guidance	No formal guidance	Maintained

Earnings Call Themes & Trends

Topic	Q3/Q4 2024 Mentions	Q1 2025 Mentions	Q2 2025 Current Period	Trend
Digital transformation (ERP)	12 of 15 sites live; completion targeted 2025	ERP completed May 1 across entire network	ERP running as planned; next phase: sales force restructuring	Execution progressing; efficiency focus ramps
E-commerce initiative	Planning/pilots	Launch at UT/NC/FL DCs	Platform launched; direct-to-employee channel on existing routes	Scaling early-stage channel
Supply chain & tariffs	Diversified global sourcing; tariff uncertainty	Diversifying suppliers; proactive inventory/pricing	Monitoring Indian shrimp tariff; strategic pre-buys/pricing actions	Active risk management; inventory build
Foot traffic/macro	Lower foot traffic; consumer budget-conscious	Slow Feb, strong Mar; momentum into April	Lower exit velocity end-Q2 into Q3; buffet traffic impacted by immigration policy	Mixed demand; seasonal pullback expected
Facility upgrades (Charlotte, Atlanta)	Charlotte completion by end-Q2 2025; Atlanta phases through 2026	On track; organic growth via cross-selling	Charlotte near completion; Atlanta to double capacity, expand seafood sales	Capacity-led growth thesis
DS&A optimization	Plan to cut cash DS&A 3–5% by end-2025	Realized some benefits; plan reiterated	DS&A % improved to 16.2%; lower professional fees	Incremental efficiency realization
M&A pipeline	Expect to be active in 2025; expanded revolver [$125M]	Strategic acquirer in Asian specialty; disciplined	Tuck-ins prioritized; may consider different capital structure for larger targets	Optionality supported by credit facility

Management Commentary

“We are pleased to report record net revenue and gross profit for HF Foods in the second quarter… The successful completion of our ERP implementation across our entire network has established a unified platform that will drive breakthrough levels of efficiency…” — Felix Lin, CEO .
“Net revenue increased 4.1%… gross margin increased 13 bps to 17.5%… DS&A as a % of revenue decreased to 16.2%… Adjusted EBITDA increased 31.1% to $13.8M… GAAP diluted EPS increased to $0.02; non-GAAP diluted EPS to $0.12.” — Cindy Yao, CFO .
“We see $200–$300M organic growth opportunity over 3–5 years via cross-selling and capacity expansion; tuck-in M&A prioritized; funding largely via internal cash flow, with optionality for larger targets.” — Felix Lin .

Q&A Highlights

Demand/macro: Lower buffet traffic tied to immigration policy changes; broader late-Q2 foot-traffic softness; seasonal Q3 pullback expected .
Tariffs: Strategic pricing/actions supported volumes; monitoring Indian shrimp tariff (25% potentially to 50%); inventory at multi-year highs as preemptive planning .
Growth funding: Organic capacity investments funded largely by cash flow; larger M&A may require alternative capital structure; revolver expanded to $125M provides flexibility .
Pricing vs volume: Majority of Q2 revenue growth attributed to better pricing, with some pull-forward volumes amid tariff concerns .
Margin path from ERP: Efficiency extraction ongoing; long-term ambition to ~5% EBITDA margin over 3–5 years, with cross-selling and centralized purchasing as levers .

Estimates Context

S&P Global consensus estimates for HFFG were unavailable for Q4 2024, Q1 2025, and Q2 2025; as a result, formal beat/miss vs consensus cannot be determined for these periods.*
*Values retrieved from S&P Global.
Qualitatively, Q2 performance showed category-led pricing/mix benefits and DS&A leverage that would typically support upward estimate revisions for Adjusted EBITDA and gross margin trajectory, offset by management’s caution on foot traffic and tariff uncertainty into Q3 .

Key Takeaways for Investors

Execution-led quarter: Record revenue/gross profit and strong Adjusted EBITDA growth signal early returns from ERP and purchasing initiatives; DS&A leverage is beginning to show up in margins .
Near-term caution: Management flagged late-Q2/early-Q3 demand softness and tariff fluidity; expect seasonal Q3 pullback with mix/tariff dynamics influencing volumes/pricing .
Capacity-driven organic growth: Charlotte and Atlanta expansions plus centralized purchasing and e-commerce should enhance cross-selling and margin potential over 2025–2026 .
Balance sheet flexibility: $125M revolver and debt profile support tuck-in M&A and ongoing transformation; operating cash flow improved YTD despite working-capital investments .
Margin roadmap: Long-term target to ~5% EBITDA margin hinges on ERP-enabled efficiencies, sales-force restructuring, and product/category centralization; watch DS&A as % of revenue for proof points .
Inventory positioning: Elevated inventories strategically built ahead of potential tariff changes; monitor working-capital turns and any tariff outcomes (e.g., Indian shrimp) for price/volume effects .
Trade setup: Without published consensus, the narrative catalyst rests on operational milestones (ERP, facility completions), mix/pricing resilience in Seafood/Meat & Poultry, and clarity on tariffs/traffic trends into Q3; weakness on macro could provide entry ahead of capacity-driven 2026 inflection .

HF Foods Group Inc. (HFFG)·Q2 2025 Earnings Summary