HF Foods Group Inc. Q2 FY2025 earnings call

• Continued momentum in second quarter with highest net revenue and gross profit ever; net revenue up 4.1% y/y, gross profit up 5.1% y/y, adjusted EBITDA up 31.1% y/y. - Disciplined execution against strategic initiatives amid macro challenges like tariffs, inflation, and consumer spending shifts. - Digital transformation initiative reached milestone with new ERP application deployed on May 1, next phase is rationalizing sales force. - Strategic facility enhancements ongoing: nearing completion of Charlotte distribution center renovations, making progress on Atlanta facility project with cold-storage expansion to double capacity. - M&A remains core pillar of growth strategy, evaluating opportunities to expand geographic footprint, capture synergies, broaden customer base.

Net revenue for the second quarter increased 4.1% year-over-year to $314.9 million. Gross profit increased 5.1% to $55.1 million. Adjusted EBITDA increased 31.1% year-over-year to $13.8 million. The increase in net revenue was primarily attributable to volume increases and improved pricing in meat, poultry and seafood categories. Gross profit margin increased 13 basis points to 17.5% due to increase in volume and improved pricing during the quarter.

• Full year 2025 expected to be low single digit growth, likely around 2-2.5%. - Long-term organic growth opportunity of $200-300 million over 3-5 years within existing accounts with cross-selling. - Goal to hit 5% EBITDA margin over the next 3-5 years through strategic investments and initiatives.

• Tariffs and persistent inflationary pressures. - Shifts in consumer spending behaviors, including lower foot traffic and exit velocity, especially impacting buffet restaurants due to immigration policy. - Uncertainty in tariff rates, such as potential changes for Indian frozen seafood imports.

Q: Bill Kirk asked about how Asian specialty as a subsegment fared in the tougher backdrop and market share.

A: Xi Lin responded that lower foot traffic was market specific, impacting buffet restaurants in markets with heavy agricultural presence due to immigration policy changes, more so than tariff impacts.

Q: Daniel Harriman asked about prioritizing strategic projects and funding.

A: Xi Lin said organic growth investment addresses capacity constraints with $200-300 million organic growth opportunity over 3-5 years, M&A prioritizes first-generation operators in existing markets, with majority of capital likely from cash generation but some M&A may need outside capital.

Q: Todd Brooks asked about tariff impacts and ERP efficiency.

A: Xi Lin discussed tariff pass-through and inventory management, mentioned ERP implementation is starting to drive efficiencies with goal to hit 5% EBITDA margin over 3-5 years.