HF Foods Group Inc. Q3 FY2025 earnings call

• Net revenue increased 2.9% year-over-year to $307 million and gross profit increased 0.5% to $50.4 million; adjusted EBITDA increased 41.5% year-over-year to $11.7 million. • Digital transformation initiative reached a major milestone with deployment of a new modern ERP application across the entire network; next phase is rationalizing the sales force. • Strategic facility enhancement initiatives advancing: Charlotte distribution center renovation largely complete, Atlanta facility project on track for completion, cold storage capacity expansion in Atlanta expected to double capacity and expand frozen seafood sales. • Acquired Chicago warehouse to improve operational efficiency, reduce facility costs, and strengthen organic growth through cross-selling opportunities. • M&A remains a core pillar of growth strategy, focused on expanding geographic footprint, capturing synergies, broadening customer base, and enhancing product/service capabilities.

Net revenue for the third quarter of 2025 increased 2.9% year-over-year to $307 million. Gross profit increased 0.5% to $50.4 million. Adjusted EBITDA increased 41.5% year-over-year to $11.7 million. No specific revenue contribution percentages for product segments are provided in the transcript.

• Expect Q4 results to be similar to Q3. • ERP system deployment complete, next phase of sales force rationalization to kick off in second half of Q4 2025 and run through first part of Q1 2026. • Atlanta facility project on track for completion later this year, cold storage expansion to double capacity in the region. • Anticipate CapEx to be higher in 2026 due to strategic acquisitions and capacity expansion projects; organic growth expected to see incremental volume gains in 2026, particularly in frozen seafood in the Atlanta and Southeast market, with full utilization taking a couple of years. • Remain disciplined but optimistic about M&A opportunities in 2025 and beyond.

• Ongoing macro challenges including tariff pressures and shifts in consumer spending behaviors. • Government shutdown impacting volume and foot traffic in selected markets, such as Virginia where there's a frozen seafood business servicing a large government employee population.

Q: How much do you think capacity increases in 2026, specifically mentioning Atlanta?

A: In Atlanta, the cold storage capacity expansion is expected to double the capacity in the region, moving from a 100,000 square feet warehouse to roughly 190,000 square feet.

Q: How much cost savings do you think can be generated through sales force restructuring and how to balance efficiencies with maintaining uniqueness?

A: This is an efficiency play, with better control over pricing strategy and promotion, expecting normalization by end of 2025 and midpoint of Q1 2026, with no loss of the uniqueness as customer understanding and product rationalization remain the same.

Q: Were there any standouts or monthly cadence differentials in the quarter and impact from government shutdown?

A: Q3 followed Q2 trend, with tariffs impacting inventory, pricing, and foot traffic; beginning of Q3 softer but rebounded, government shutdown impacted selected markets like Virginia with frozen seafood business, but other markets picked up volume, e.g., Salt Lake City where product and business mix rationalization helped drive growth.

Q: Thoughts on maintenance CapEx on a sustained basis year-over-year and timing of organic growth ramp-up?

A: Typical maintenance CapEx budget fluctuates between $10 million to $15 million annually; 2026 CapEx may be higher due to strategic acquisitions and capacity expansion. Organic growth likely to see incremental volume gains in 2026, particularly in frozen seafood in Atlanta and Southeast, with full utilization taking a couple of years, and cross-selling organic growth opportunity in Midwest market potentially paying dividends in 2027 and beyond.