Opens an advanced 190,000 square foot distribution center driven by increased market demandPOWDER SPRINGS, Ga., Dec. 18, 2025 (GLOBE NEWSWIRE) -- HF Foods Group (Nasdaq: HFFG) (“HF Foods” or the “Company”), a leading distributor of international foodservice solutions to Asian restaurants and other businesses across the United States, celebrated the opening of its newest distribution center just outside of Atlanta, GA in the City of Powder Springs, GA at a ribbon cutting event at the new facility. “We are ex ...

Core Viewpoint - HF Foods Group (HFFG) is considered undervalued as the market is pricing in potential dilution from a stock sale, while overlooking the company's growth prospects [1] Company Analysis - The investment thesis suggests that investors are not fully accounting for the company's likely performance and growth opportunities [1] - The focus is on long-term investment potential, indicating that the company may have significant upside if growth is realized [1] Industry Context - The analysis is framed within the context of the restaurant, retail, and food manufacturing sectors, highlighting the importance of growth opportunities and valuation metrics in these industries [1]

Core Thesis - HF Foods Group (HFFG) is considered undervalued as the market is pricing in potential dilution from a stock sale, while not fully accounting for the company's growth prospects [1] Company Analysis - The company is likely to experience growth opportunities that are not reflected in its current valuation metrics [1] - The focus is on long-term investment potential, with plans to hold stocks for several years [1] Market Sentiment - Investors may be overly cautious regarding potential stock dilution, leading to a mispricing of the company's true value [1]

Core Insights - HF Foods (HFFG) has struggled to maintain market interest following a strong performance in the first quarter, indicating a potential decline in investor confidence [1] Company Analysis - HF Foods experienced a notable surge in the first quarter, but subsequent performance has not met market expectations, suggesting a loss of momentum [1] Industry Context - The analysis highlights the challenges faced by companies in the food distribution sector, particularly in maintaining consistent growth and investor engagement after initial successes [1]

Core Insights - HF Foods (HFFG) has struggled to maintain market interest following a strong performance in the first quarter, indicating a potential decline in investor confidence [1] Company Analysis - HF Foods experienced a notable surge in the first quarter, but subsequent performance has not met market expectations, suggesting a loss of momentum [1] Industry Context - The analysis highlights the challenges faced by companies in the food distribution sector, particularly in maintaining consistent growth and investor engagement after initial successes [1]

Core Insights - HF Foods Group Inc. reported quarterly earnings of $0.08 per share, missing the Zacks Consensus Estimate of $0.12 per share, but showing an improvement from $0.05 per share a year ago, resulting in an earnings surprise of -33.33% [1] - The company posted revenues of $306.98 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.21% and showing an increase from $298.39 million year-over-year [2] - HF Foods Group shares have declined approximately 25.9% since the beginning of the year, contrasting with the S&P 500's gain of 14.4% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.14 on revenues of $311.8 million, and for the current fiscal year, it is $0.45 on revenues of $1.23 billion [7] - The estimate revisions trend for HF Foods Group was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Food - Miscellaneous industry, to which HF Foods Group belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact HF Foods Group's stock performance [5]

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Financial Data and Key Metrics Changes - Net revenue increased by 2.9% year over year to $307 million, up from $298.4 million in the prior year quarter [11] - Gross profit rose by 0.5% to $50.4 million, compared to $50.2 million in the prior year quarter [11] - Adjusted EBITDA surged by 41.5% year over year to $11.7 million, compared to $8.3 million in the prior year quarter [12] - Net loss improved to $0.9 million from a loss of $3.8 million in the third quarter of 2024 [12] - Adjusted net income increased to $4.3 million, compared to $2.2 million in the prior year period [13] Business Line Data and Key Metrics Changes - The increase in net revenue was primarily driven by volume increases and improved pricing in the meat, poultry, and seafood categories [11] - Gross profit margin remained relatively consistent at 16.4%, compared to 16.8% in the same period in 2024, due to a higher proportion of sales from lower-margin products, particularly seafood [12] Market Data and Key Metrics Changes - The company experienced lower foot traffic consistent with broader industry trends, but this was offset by strong volume in select markets and pricing actions taken [5] - Specific markets, such as Salt Lake City, showed effective product rationalization leading to better business performance [22] Company Strategy and Development Direction - The company is focused on diversifying its supplier base and exploring alternative sourcing strategies to ensure continuity and cost-effectiveness in its supply chain [5] - Strategic facility enhancements are underway, including the renovation of the Charlotte Distribution Center and the expansion of cold storage capacity in Atlanta, which is expected to double capacity in the region [8] - M&A remains a core pillar of the company's growth strategy, with a focus on expanding geographic footprint and capturing operational synergies [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth strategy despite ongoing macro challenges, including tariff pressures and shifts in consumer spending behaviors [4] - The company anticipates Q4 results to be similar to Q3, with a strong foundation built for future growth [5] - The digital transformation initiative is expected to enhance operational efficiency and customer service through a unified ERP platform [6] Other Important Information - The company announced the acquisition of a Chicago warehouse, which is expected to improve operational efficiency and reduce facility costs [8] - The strategic acquisition is part of the ongoing transformation plan to strengthen organic growth through cross-selling opportunities [8] Q&A Session Summary Question: Capacity increases for 2026 - Management indicated that the cold storage capacity in Atlanta will effectively double, moving from a 100,000 sq ft warehouse to approximately 190,000 sq ft [18] Question: Cost savings from restructuring the Salesforce - Management emphasized that the restructuring aims for efficiency while maintaining customer understanding and service quality, with normalization expected by mid-Q1 2026 [19][20] Question: Monthly cadence and government shutdown impact - Management noted that Q3 followed the trend of Q2, with some impact from tariffs and government shutdowns affecting specific markets like Virginia [21] Question: Maintenance CapEx and organic growth outlook - Management stated that typical maintenance CapEx fluctuates between $10-$15 million annually, with potential increases due to strategic acquisitions [27] - Organic growth is expected to ramp up in 2026, particularly in the frozen seafood segment in the Southeast market [29]

Financial Performance - Net revenue for the three months ended September 30, 2025, increased by $8.6 million, or 2.9%, compared to the same period in 2024, primarily due to volume increases and improved pricing in Meat & Poultry and Seafood [127]. - Gross profit was $50.4 million for the three months ended September 30, 2025, compared to $50.2 million in the same period in 2024, an increase of $0.2 million, or 0.5% [128]. - Net revenue for the nine months ended September 30, 2025, increased by $23.9 million, or 2.7%, compared to the same period in 2024, primarily due to volume growth and improved pricing in key categories [137]. - Gross profit for the nine months ended September 30, 2025, was $156.5 million, an increase of $3.5 million, or 2.3%, with a gross profit margin slightly decreasing to 17.0% from 17.1% in the same period in 2024 [138]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $35.4 million, an increase of $7.8 million compared to $27.6 million for the same period in 2024 [115]. - Income from operations for the three months ended September 30, 2025, was $1.1 million, an increase of $0.6 million compared to $0.5 million in the same period in 2024 [124]. Expenses and Losses - Distribution, selling and administrative expenses decreased by $0.4 million, or 0.7%, to $49.3 million for the three months ended September 30, 2025, with expenses as a percentage of net revenue decreasing to 16.1% from 16.6% [129]. - Distribution, selling, and administrative expenses were $150.1 million for the nine months ended September 30, 2025, slightly increasing from $150.0 million in 2024, with expenses as a percentage of net revenue decreasing to 16.3% [139]. - Net loss attributable to HF Foods Group, Inc. was $1.1 million for the three months ended September 30, 2025, compared to a net loss of $3.9 million for the same period in 2024, reflecting an improvement driven by increased income from operations [132]. - Net loss attributable to HF Foods Group Inc. was $1.5 million for the nine months ended September 30, 2025, compared to a net loss of $4.6 million in the same period in 2024, an improvement of $3.1 million [142]. Cash Flow and Financing - As of September 30, 2025, the company had cash of approximately $12.3 million and access to $49.8 million in additional funds through its line of credit [145]. - Net cash provided by operating activities increased by $0.3 million to $4.5 million for the nine months ended September 30, 2025 [152]. - Net cash used in investing activities increased by $0.4 million primarily due to increased capital project spending [153]. - Net cash provided by financing activities increased by $1.8 million to $3.2 million during the nine months ended September 30, 2025, due to higher net proceeds from line of credit activity [154]. Operational Changes and Strategies - The company has initiated a comprehensive operational transformation plan focused on centralized purchasing, fleet and transportation improvements, digital transformation, and facility upgrades to drive growth and cost savings [114]. - The company acquired two frozen seafood suppliers in 2022, expanding its distribution network across several states, enhancing its market presence [112]. Goodwill and Fair Value - The company recorded a goodwill impairment charge of $46.3 million in Q4 2024 due to a decline in stock price, indicating impairment as of December 31, 2024 [156]. - The fair value assessment utilized a combination of discounted cash flow (DCF) and market approaches, with equal weighting, to estimate the reporting unit's fair value [157]. - A 100 basis point increase in the discount rate assumption could decrease the fair value of the reporting unit by approximately $11.6 million, indicating sensitivity to key assumptions [159]. - As of September 30, 2025, the company determined no events would likely reduce the fair value of the reporting unit below its carrying value, despite a decrease in share price attributed to market reactions [160]. Debt and Interest - Interest expense for the three months ended September 30, 2025, was $2.9 million, slightly up from $2.6 million in the same period in 2024 [130]. - Interest expense decreased by $0.2 million, or 2.7%, for the nine months ended September 30, 2025, primarily due to a decrease in the average daily mortgage-secured term loan balance [140]. - The company's aggregate floating rate debt outstanding as of September 30, 2025, was $69.3 million, representing 39.7% of total debt, with a potential $0.7 million change in interest expense for a 1% rate change [164]. Market Conditions - Average diesel fuel prices increased by 1.8% in Q3 2025 compared to Q3 2024, impacting operating costs and consumer spending behavior [165]. - The company does not actively hedge diesel fuel price fluctuations but aims to minimize risk through delivery route optimization and fleet utilization improvements [166].

Financial Performance - Net revenue for Q3 2025 increased by 2.9% to $307.0 million compared to $298.4 million in the prior year[4] - Gross profit was $50.4 million, slightly up from $50.2 million in the same period last year, with a gross profit margin of 16.4%[5][6] - Net loss decreased by 77.2% to $0.9 million for Q3 2025, compared to a net loss of $3.8 million in Q3 2024[8] - Adjusted EBITDA rose by 41.5% to $11.7 million, up from $8.3 million in the prior year[9] - For the nine months ended September 30, 2025, the net loss was $1,894,000, a decrease of 54.4% compared to a net loss of $4,161,000 in the same period of 2024[20] - EBITDA for the nine months ended September 30, 2025, was $26,535,000, an increase of 8.2% from $24,532,000 in 2024[26] - Adjusted EBITDA for the nine months ended September 30, 2025, was $35,366,000, reflecting a 28.3% increase from $27,568,000 in 2024[26] - Non-GAAP net income attributable to HF Foods Group Inc. for the nine months ended September 30, 2025, was $14,204,000, up 81.1% from $7,838,000 in 2024[27] - The company reported a non-GAAP diluted earnings per share of $0.27 for the nine months ended September 30, 2025, compared to $0.15 in 2024, representing an 80% increase[27] Cash Flow and Expenses - Cash provided by operating activities for the nine months ended September 30, 2025, was $4.5 million, compared to $4.2 million in the prior year[10] - The company reported a net cash provided by operating activities of $4,483,000 for the nine months ended September 30, 2025, compared to $4,225,000 in 2024[20] - Cash at the end of the period was $12,328,000, an increase from $11,445,000 at the end of September 2024[20] - Distribution, selling, and administrative expenses decreased by 0.7% to $49.3 million, representing 16.1% of net revenue[7] - Interest expense, net for the nine months ended September 30, 2025, was $8,331,000, a slight decrease from $8,597,000 in 2024[26] - The net cash used in investing activities for the nine months ended September 30, 2025, was $9,862,000, compared to $9,423,000 in 2024[20] - The company incurred business transformation costs of $2,458,000 for the nine months ended September 30, 2025, compared to $1,180,000 in 2024[27] Strategic Outlook - Management expressed confidence in long-term strategic plans, including evaluating M&A opportunities for geographical expansion[3] - The increase in net revenue was primarily driven by volume increases and improved pricing in Meat & Poultry and Seafood[4] - The company aims to leverage its market leadership in Asian specialty distribution to drive sustained growth and long-term value for shareholders[3] Liquidity - The company had cash of $12.3 million and access to approximately $49.8 million in additional funds through a line of credit as of September 30, 2025[10]