This article first appeared on GuruFocus .
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Net Revenue:Increased 2.8% year-over-year to $323.8 million, a record high for the company.
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Gross Profit:Essentially flat at $55 million, compared to $55.1 million in the prior year quarter.
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Gross Profit Margin:Decreased to 17% from 17.5% in the prior year quarter.
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Adjusted EBITDA:Decreased 2% to $13.6 million, with a margin of 4.2% compared to 4.4% in the prior year quarter.
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Distribution, Selling, and Administrative (DS&A) Expense:Increased 2.4% to $52.2 million, driven by higher fuel costs of approximately $1.4 million.
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Net Income:Attributable to HF Foods was $2.6 million, up from $1.2 million in the prior year quarter.
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Earnings Per Share (EPS):Improved to $0.05, compared to $0.02 in the prior year quarter.
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Adjusted EPS:Was $0.12, flat compared to the prior year quarter.
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Capital Expenditures:Approximately $20.3 million for the first six months of 2026.
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Interest Expense:Totaled $2.9 million for the quarter, compared to $2.8 million in the prior year quarter.
Release Date: August 10, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record quarterly net revenue of $323.8 million, up 2.8% year-over-year, marking the sixth consecutive quarter of growth.
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Strategic acquisition of Searay Foods, a high-margin Canadian seafood distributor, expected to be accretive to margins and EPS from close.
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Refinanced and upsized credit facility to $140 million revolving and $125 million term loans, providing significant liquidity for growth.
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Continued progress on transformation initiatives, including facilities upgrades and digital infrastructure, positioning for long-term efficiency gains.
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Gross profit remained stable at $55 million despite tariff and fuel cost headwinds, supported by volume growth in seafood and commodities.
Negative Points
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Adjusted EBITDA declined 2% year-over-year to $13.6 million, with margin contracting to 4.2% from 4.4%.
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Gross profit margin decreased to 17% from 17.5%, impacted by incremental tariffs and rising input costs.
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Elevated fuel costs added approximately $1.4 million in expenses during the quarter, pressuring DS&A.
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Softer foot traffic in dine-in and buffet restaurants continues to weigh on sales, partially offset by takeout strength.
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Near-term margin pressure expected to persist as the company remains in 'conquest mode' with promotional pricing and capacity expansions not fully operational until late 2026 or 2027.
Q & A Highlights
Q: Regarding the Searay acquisition, what depth and scale does it bring to the seafood category, and what opportunities will it create for HF Foods? A: Felix Lin (President and CEO) explained that Searay provides a platform to open new channels, particularly in retail and wholesale, which are a smaller part of HF's current US business focused on independent restaurants. He highlighted Searay's healthy mix of retail and wholesale channels into Asian specialty grocery stores as a huge opportunity, in addition to its attractive margin profile.
Q: How should we think about the gross margin profile evolution, especially with the Searay acquisition and ongoing tariff headwinds? A: Felix Lin (President and CEO) stated that the focus is on expanding gross profit dollars through market share gains in the Southeast with a higher seafood mix. He noted that rising fuel costs were an unexpected headwind in 2026, but volume growth is expected to offset margin concessions. He highlighted that Searay's gross profit margin is north of 20%, which will provide a nice mix benefit starting in Q4.
Q: Can you update us on the cross-selling initiatives in the Southeast and Midwest, and when will new facilities like Charlotte and Atlanta start contributing to results? A: Felix Lin (President and CEO) said that while additional freezer capacity in the Southeast won't be ready until late 2026 or 2027, they have seen meaningful volume increases in seafood. He noted that the Charlotte facility is fully renovated and awaiting inspection, expecting it to be operational within a week or two. Charlotte is an efficiency play that should improve DS&A in Q4 by cutting distribution routes for the Great Wall Virginia business. In the Midwest, minor capacity improvements are expected to yield meaningful expansion opportunities toward the end of 2026 and into 2027.
Q: Has the trend of takeout strength offsetting dine-in traffic held, and were there any notable changes related to the World Cup? A: Felix Lin (President and CEO) confirmed that the trend of takeout strength offsetting dine-in traffic continued, with no specific impact from the World Cup. He noted that Q2 is typically a higher foot traffic quarter, with a slowdown expected in Q3 due to summer vacations. The takeout improvement offset continued softness in buffet and dining restaurants, consistent with normal seasonality.
Q: Can you unpack the EBITDA beat, given the mention of more aggressive pricing to take share? A: Felix Lin (President and CEO) explained that the company has been on the offensive, running promotional campaigns with key vendors on the West Coast and pushing seafood heavily in the Southeast. This drove meaningful volume gains in seafood, which offset pricing pressure from rising diesel costs and conquest accounts. He expects the rest of 2026 to remain in "conquest mode" before margins normalize in 2027 and beyond.
Q: What are the key financial details and strategic benefits of the Searay acquisition? A: Paul McGarry (Interim CFO) detailed that the aggregate base purchase price is CAD47.9 million (approximately USD35 million), representing roughly 5x Searay's baseline adjusted EBITDA of approximately CAD9.6 million. Searay runs adjusted EBITDA margins in the mid-teens, making the acquisition margin accretive from day one and supporting the consolidated adjusted EBITDA margin target of 4.5% to 5% plus. The transaction is expected to close in August 2026.
Q: What drove the increase in DS&A expenses during the quarter? A: Paul McGarry (Interim CFO) stated that DS&A increased $1.2 million or 2.4% to $52.2 million, driven primarily by higher auto and truck expenses reflecting elevated incremental fuel costs of approximately $1.4 million year over year, along with higher insurance and professional service expenses. This was partially offset by lower personnel expenses as a result of transformation initiatives.
Q: Can you provide details on the recent refinancing and upsized credit facility? A: Paul McGarry (Interim CFO) explained that on July 29, the company closed an amendment to refinance and upsize its credit facility. The asset-based revolving commitments were increased from $125 million to $140 million, and existing term loans of approximately $95 million were refinanced into term loans totaling $125 million. The revolving facility matures in July 2031 and the term loan in July 2036, providing meaningful incremental liquidity for the Searay acquisition and ongoing facilities investments.
Q: What were the main drivers of the increase in net revenue for the quarter? A: Paul McGarry (Interim CFO) reported that net revenue increased 2.8% or $8.9 million to $323.8 million, primarily due to volume growth and improved pricing in seafood, followed by volume growth in commodities, partially offset by price decreases in meat and poultry.
Q: What is the breakdown of the significant CapEx spending in the first half of 2026? A: Paul McGarry (Interim CFO) detailed that CapEx was approximately $20.3 million for the first six months, driven principally by the $12.4 million purchase of the previously leased Chicago distribution center, $2.8 million of solar investment (which will benefit from a 40% investment tax credit refund), $2.1 million of capacity expansion, and $1.4 million of fleet upgrades. Recurring maintenance expenditures were approximately $1.7 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
