What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-10 compared with 2025-08-11 · 82 added, 79 removed, 226 unchanged (42% of the section changed)

26 unchanged sentences

• Centralized Purchasing:

We began the roll out of our centralized purchasing program with seafood and poultry products and have yielded positive results with respect to margin expansion for the product category.

We continue the roll out of our centralized purchasing program with seafood and poultry products and have yielded positive results with respect to margin expansion for the product category.

We are now focusing on expanding the program to other categories.

7 unchanged sentences

• Facility Upgrades:

We are reorganizing and upgrading some of our facilities and distribution centers to efficiently streamline costs, and to capitalize on cross-selling opportunities with both new and existing customers.

We continue reorganizing and upgrading some of our facilities and distribution centers to efficiently streamline costs, and to capitalize on cross-selling opportunities with both new and existing customers.

Financial Overview

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

($ in thousands) 2025 2024 Change 2025 2024 Change

Net revenue $ 306,978 $ 298,389 $ 8,589 $ 920,259 $ 896,385 $ 23,874

Income from operations $ 1,120 $ 511 $ 609 $ 6,393 $ 3,051 $ 3,342

Net income (loss) $ (874) $ (3,837) $ 2,963 $ (1,894) $ (4,161) $ 2,267

$ 510 $ 235 $ 275 $ (1,020) $ (324) $ (696)

Adjusted EBITDA $ 11,748 $ 8,305 $ 3,443 $ 35,366 $ 27,568 $ 7,798

27 unchanged sentences

Results of Operations

Comparison of Three Months Ended June 30, 2025 to Three Months Ended June 30, 2024

The following table sets forth a summary of our consolidated results of operations for the three months ended June 30, 2025 and 2024 .

Comparison of Three Months Ended September 30, 2025 to Three Months Ended September 30, 2024

The following table sets forth a summary of our consolidated results of operations for the three months ended September 30, 2025 and 2024 .

The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Three Months Ended June 30,

Three Months Ended September 30,

($ in thousands) 2025 2024 Change

6 unchanged sentences

Interest expense 2,941 2,644 297

Other (income) expense, net

Other income, net

(234) (332) 98

Change in fair value of interest rate swap contracts 47 3,290 (3,243)

Lease guarantee income — (5,433) 5,433

Income before income taxes

1,031 1,834 (803)

Income tax expense

Loss before income taxes

(1,634) (5,091) 3,457

Net income and comprehensive income

net (loss) income attributable to noncontrolling interests

Income tax benefit

(760) (1,254) 494

Net income and comprehensive income attributable to HF Foods Group Inc.

Net loss and comprehensive loss (874) (3,837) 2,963

net income attributable to noncontrolling interests 242 103 139

Net loss and comprehensive loss attributable to HF Foods Group Inc.

$ (1,116) $ (3,940) $ 2,824

The following table sets forth the components of our consolidated results of operations expressed as a percentage of net revenue for the periods indicated:

Three Months Ended June 30,

Three Months Ended September 30,

Net revenue 100.0 % 100.0 %

4 unchanged sentences

Interest expense 1.0 % 0.9 %

Other expense (income), net (0.1) % 1.1 %

Other income, net

(0.1) % (0.1) %

Change in fair value of interest rate swap contracts — % 1.1 %

Lease guarantee income — % (1.8) %

Income before income taxes

Income tax expense

Net income and comprehensive income

net (loss) income attributable to noncontrolling interests

Loss before income taxes

(0.6) % (1.7) %

Net income and comprehensive income attributable to HF Foods Group Inc.

Net revenue for the three months ended June 30, 2025 increased by $12.5 million, or 4.1%, compared to the same period in 2024.

Income tax benefit

(0.2) % (0.4) %

Net loss and comprehensive loss (0.4) % (1.3) %

net income attributable to noncontrolling interests 0.1 % — %

Net loss and comprehensive loss attributable to HF Foods Group Inc.

(0.5) % (1.3) %

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.

The increase was primarily attributable to volume increases and improved pricing in Meat & Poultry and Seafood, offset by a slight decrease in volume within other categories.

Gross profit was $55.1 million for three months ended June 30, 2025 compared to $52.5 million in the same period in 2024 , an increase of $2.7 million, or 5.1%.

The increase was primarily attributable to an increase in volume and improved pricing in Meat & Poultry and Seafood during the quarter.

Gross profit margin for the three months ended June 30, 2025 of 17.5% remained consistent compared to 17.4% in the same period in 2024 .

Gross profit was $50.4 million for 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%.

The increase was primarily attributable to an increase in volume and improved pricing during the quarter.

Gross profit margin for the three months ended September 30, 2025 of 16.4% remained relatively consistent compared to 16.8% in the same period in 2024 due to an increased proportion of sales from lower margin products, particularly Seafood .

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses increased by $1.2 million, or 2.4%, to $51.0 million, for the three months ended June 30, 2025.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.2% for the three months ended June 30, 2025 from 16.5% in the same period in 2024, primarily due to increased net revenue and lower professional fees, partially offset by increased payroll, rental and other expenses.

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 .

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.1% for the three months ended September 30, 2025 from 16.6% in the same period in 2024, primarily due to increased net revenue and lower personnel, professional and insurance costs, partially offset by increased rental, occupancy and other expenses.

Interest Expense

Interest expense for the three months ended June 30, 2025 of $2.8 million decreased slightly compared to $3.1 million for the three months ended June 30, 2024.

Average floating interest rates on our floating-rate debt for the three months ended June 30, 2025 decreased by approximately 1.0% on our line of credit and 1.0% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2024.

Our average daily line of credit balance increased by $2.8 million, or 4.9%, to $53.6 million for the three months ended June 30, 2025 from $56.4 million for the three months ended June 30, 2024, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5 million, or 4.9%, to $99.2 million for the three months ended June 30, 2025 from $104.2 million for the three months ended June 30, 2024.

Income Tax Expense

Income tax expense was $521 thousand for the three months ended June 30, 2025, compared to an income tax expense of $1.6 million for the three months ended June 30, 2024, primarily due to discrete tax expense items related to the SEC settlement and stock-based compensation shortfalls that impacted the tax provision for the period ended June 30, 2024.

Net Income Attributable to HF Foods Group, Inc.

Net income attributable to HF Foods Group, Inc.

was $1.2 million for the three months ended June 30, 2025 , compared to net income of $17.0 thousand for the three months ended June 30, 2024.

The improvement was primarily driven by an increase in income from operations of $1.5 million compared to the prior year period;

however, the prior year’s results included a one time gain from lease guarantee income offset by an SEC settlement, which did not recur in the current year, thereby partially offsetting the year-over-year improvement.

Interest expense for the three months ended September 30, 2025 of $2.9 million increased slightly compared to $2.6 million for the three months ended September 30, 2024.

Average floating interest rates on our floating-rate debt for the three months ended September 30, 2025 decreased by approximately 1.0% on our line of credit and 1.0% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2024.

Our average daily line of credit balance decreased by $0.2 million, or 0.3%, to $61.5 million for the three months ended September 30, 2025 from $61.7 million for the three months ended September 30, 2024, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5.1 million, or 5.0%, to $97.9 million for the three months ended September 30, 2025 from $103.0 million for the three months ended September 30, 2024.

Income Tax Benefit

Income tax benefit was $0.8 million for the three months ended September 30, 2025, compared to an income tax benefit of $1.3 million for the three months ended September 30, 2024, primarily due to a decrease in loss before income taxes.

Net Loss Attributable to HF Foods Group, Inc.

Net loss attributable to HF Foods Group, Inc.

was $1.1 million for the three months ended September 30, 2025, compared to net loss of $3.9 million for the three months ended September 30, 2024.

The improvement was primarily driven by an increase in income from operations of $0.6 million compared to the prior year period and a decrease in change in fair value of interest rate swap contracts by $3.2 million compared to 2024.

EBITDA and Adjusted EBITDA

The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure:

Three Months Ended June 30,

Three Months Ended September 30,

($ in thousands) 2025 2024 Change

2 unchanged sentences

2,947 2,644 303

Income tax expense

Income tax benefit

(760) (1,254) 494

1 unchanged sentence

EBITDA 8,563 4,219 4,344

Lease guarantee income — (5,433) 5,433

Change in fair value of interest rate swap contracts 47 3,290 (3,243)

Stock-based compensation expense 619 701 (82)

SEC settlement — 3,900 (3,900)

Business transformation costs (1)

1,592 77 1,515

Other non-routine expense (2)

6 unchanged sentences

Results of Operations

Comparison of Six Months Ended June 30, 2025 to Six Months Ended June 30, 2024

The following table sets forth a summary of our consolidated results of operations for the six months ended June 30, 2025 and 2024.

Comparison of Nine Months Ended September 30, 2025 to Nine Months Ended September 30, 2024

The following table sets forth a summary of our consolidated results of operations for the nine months ended September 30, 2025 and 2024.

The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands) 2025 2024 Change

9 unchanged sentences

Lease guarantee income — (5,548) 5,548

Income (loss) before income taxes

Loss before income taxes

(3,065) (3,997) 932

6 unchanged sentences

The following table sets forth the components of our consolidated results of operations expressed as a percentage of net revenue for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

Net revenue 100.0 % 100.0 %

7 unchanged sentences

Lease guarantee income — % (0.6) %

Income (loss) before income taxes

Loss before income taxes

(0.3) % (0.4) %

Income tax expense (benefit)

(0.1) % 0.2 %

Net loss and comprehensive loss (0.2) % (0.4) %

1 unchanged sentence

Net loss and comprehensive loss attributable to HF Foods Group Inc.

Net revenue for the six months ended June 30, 2025 increased by $15.3 million, or 2.6%, compared to the same period in 2024.

(0.2) % (0.5) %

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.

This increase was primarily attributable to volume growth and improved pricing in Commodity, Meat & Poultry and Seafood, partially offset by decrease in volume within other categories.

Gross profit was $106.1 million for the six months ended June 30, 2025 compared to $102.9 million in the same period in 2024 , an increase of $3.2 million, or 3.1% .

Gross profit was $156.5 million for the nine months ended September 30, 2025 compared to $153.0 million in the same period in 2024 , an increase of $3.5 million, or 2.3% .

The gross profit increase was primarily attributable to increased net revenue partially offset by increased costs.

Gross profit margin for the six months ended June 30, 2025 slightly increased to 17.3% compared to 17.2% in the same period in 2024.

Gross profit margin for the nine months ended September 30, 2025 slightly decreased to 17.0% compared to 17.1% in the same period in 2024.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses of $100.8 million for the six months ended June 30, 2025 slightly increased compared to prior year expenses of $100.3 million primarily due to an increase in payroll and related labor costs, partially offset by a decrease in professional fees.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.4% for the six months ended June 30, 2025 from 16.8% in the same period in 2024, primarily due to lower professional fees and increased net revenue, partially offset by increased payroll and related labor costs and insurance costs.

Distribution, selling and administrative expenses of $150.1 million for the nine months ended September 30, 2025 slightly increased compared to prior year expenses of $150.0 million primarily due to an increase in rental, occupancy and delivery expense, partially offset by a decrease in professional and insurance fees and travel and entertainment costs.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.3% for the nine months ended September 30, 2025 from 16.7% in the same period in 2024, primarily due to increased revenue and lower professional fees, partially offset by increased rental, occupancy and delivery costs.

Interest Expense

Interest expense for the six months ended June 30, 2025 decreased by $0.5 million or 8.9% , compared to the six months ended June 30, 2024, primarily due to a decrease in our average daily JPMorgan Chase mortgage-secured term loan balance of $5.1 million, partially offset by an increase in our average daily line of credit balance of $0.6 million combined with a slightly lower interest-rate environment.

Average floating interest rates on our floating-rate debt for the six months ended June 30, 2025 decreased by approximately 1.0% on the line of credit and 1.0% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2024.

Our average daily line of credit balance increased by $0.6 million, or 1.2%, to $51.2 million for the six months ended June 30, 2025 from $50.6 million for the six months ended June 30, 2024, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5.1 million, or 4.9%, to $99.8 million for the six months ended June 30, 2025 from $104.9 million for the six months ended June 30, 2024.

Interest expense for the nine months ended September 30, 2025 decreased by $0.2 million or 2.7% , compared to the nine months ended September 30, 2024, primarily due to a decrease in our average daily JPMorgan Chase mortgage-secured term loan balance of $5.1 million, partially offset by an increase in our average daily line of credit balance of $0.3 million combined with a slightly lower interest-rate environment.

Average floating interest rates on our floating-rate debt for the nine months ended September 30, 2025 decreased by approximately 1.0% on the line of credit and 1.0% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2024.

Our average daily line of credit balance increased by $0.3 million, or 0.6%, to $54.6 million for the nine months ended September 30, 2025 from $54.3 million for the nine months ended September 30, 2024, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $5.1 million, or 4.9%, to $99.1 million for the nine months ended September 30, 2025 from $104.2 million for the nine months ended September 30, 2024.

Income Tax Expense (Benefit)

Income tax benefit was $411 thousand for the six months ended June 30, 2025, compared to and income tax expense of $1.4 million for the six months ended June 30, 2024.

The change was primarily driven by an increase in loss before income taxes in the current period, as well as discrete items related to the SEC settlement and stock-based compensation shortfalls that impacted the tax provision for the period ended June 30, 2024.

Income tax benefit was $1.2 million for the nine months ended September 30, 2025, compared to the income tax expense of $0.2 million for the nine months ended September 30, 2024.

The change was primarily driven by the SEC settlement that impacted the tax provision for the period ended September 30, 2024.

Net Loss Attributable to HF Foods Group, Inc.

Net loss attributable to HF Foods Group Inc.

was $0.4 million for the six months ended June 30, 2025 , compared to net loss of $0.7 million for the six months ended June 30, 2024.

was $1.5 million for the nine months ended September 30, 2025, compared to net loss of $4.6 million for the nine months ended September 30, 2024.

The improvement of $3.1 million was primarily driven by an increase in income from operations of $3.3 million compared to the prior year period;

however, the prior year’s results included a one time gain from lease guarantee income offset by an SEC settlement within other expense, which did not recur in the current year, thereby partially offsetting the year-over-year improvement.

EBITDA and Adjusted EBITDA

The following table reconciles EBITDA and Adjusted EBITDA to the most directly comparable GAAP measure:

Six Months Ended June 30,

Nine Months Ended September 30,

($ in thousands) 2025 2024 Change

22 unchanged sentences

Liquidity and Capital Resources

As of June 30, 2025, we had cash of approximately $15.7 million, checks issued not presented for payment of $7.0 million and access to approximately $57.8 million in additional funds through our $125.0 million line of credit, subject to a borrowing base calculation.

As of September 30, 2025, we had cash of approximately $12.3 million, checks issued not presented for payment of $2.1 million and access to approximately $49.8 million in additional funds through our $125.0 million line of credit, subject to a borrowing base calculation.

We have funded working capital and other capital requirements primarily by cash flow from operations and bank loans.

2 unchanged sentences

However, our ability to repay our current obligations will depend on the future realization of our current assets.

Management has considered the historical experience, the economy, the trends in the foodservice distribution industry to determine the expected collectability of accounts receivable and the realization of inventories as of June 30, 2025.

We are party to an amortizing interest rate swap contract with JPMorgan Chase for an initial notional amount of $120.0 million, expiring in March 2028, as a means to partially hedge our existing floating rate loans exposure.

3 unchanged sentences

If the future cash flow from operations and other capital resources is insufficient to fund our liquidity needs, we may have to resort to reducing or delaying our expected capital investment plans, liquidating assets, obtaining additional debt or equity capital, or refinancing all or a portion of our debt.

As of June 30, 2025, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial position, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

The following table summarizes cash flow data for the three months ended June 30, 2025 and 2024:

Six Months Ended June 30,

As of September 30, 2025, we have no off-balance sheet arrangements that currently have or are reasonably likely to have a material effect on our consolidated financial position, changes in financial condition, results of operations, liquidity, capital expenditures or capital resources.

The following table summarizes cash flow data for the nine months ended September 30, 2025 and 2024:

Nine Months Ended September 30,

(In thousands) 2025 2024 Change

1 unchanged sentence

Net cash used in investing activities (9,862) (9,423) (439)

Net cash (used in) provided by financing activities (2,693) 3,126 (5,819)

Net increase (decrease) in cash and cash equivalents

Net cash provided by financing activities

3,240 1,411 1,829

Net decrease in cash and cash equivalents

$ (2,139) $ (3,787) $ 1,648

Operating Activities

Net cash provided by operating activities consists primarily of net income adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and includes the effect of working capital changes.

Net cash provided by operating activities consists primarily of net income (loss) adjusted for non-cash items, including depreciation and amortization, changes in deferred income taxes and others, and includes the effect of working capital changes.

Net cash provided by operating activities increased by $0.3 million primarily due to an increase in non-cash expense add-backs, offset by the timing of working capital outlays mainly for inventory purchases to counter potential tariff increases.

Investing Activities

Net cash used in investing activities increased by $0.3 million primarily due to increased capital project spend in the six months ended June 30, 2025.

Net cash used in investing activities increased by $0.4 million primarily due to increased capital project spend in the nine months ended September 30, 2025.

Financing Activities

Net cash used in financing activities decreased by $5.8 million to $2.7 million during the six months ended June 30, 2025 primarily due to the lower overall net proceeds from line of credit activity for the six months ended June 30, 2025 as compared the six months ended June 30, 2024.

Net cash used in financing activities increased by $1.8 million to $3.2 million during the nine months ended September 30, 2025 primarily due to the higher overall net proceeds from line of credit activity for the nine months ended September 30, 2025 as compared the nine months ended September 30, 2024.

Critical Accounting Policies and Estimates

4 unchanged sentences

Part II, Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the 2024 Annual Report on Form 10-K includes a summary of the critical accounting policies and estimates we believe are the most important to aid in understanding our financial results.

There have been no changes to those critical accounting policies and estimates that have had a material impact on our reported amounts of assets, liabilities, revenue, or expenses during the six months ended June 30, 2025.

Goodwill Impairment

The Company’s annual goodwill impairment assessment is performed as of December 31.

As a result of continued declines in the level of stock price, the Company performed a quantitative goodwill impairment assessment as of December 31, 2024.

7 unchanged sentences

In addition, we considered the reasonableness of the fair value of the reporting unit by assessing the implied enterprise value control premium based on our market capitalization and also considered the lack of liquidity in the Company’s common stock.

The Company’s common stock is fairly thinly traded, with a higher level of internal stockholders than its peers, and no major analyst coverage.

As a result, the implied value from the traded stock price is

based on limited investment public interest.

The Company’s common stock is fairly thinly traded, with a higher level of internal stockholders than its peers, and limited equity analyst coverage.

As a result, the implied value from the traded stock price is based on limited investment public interest.

Our market capitalization is calculated using the number of common shares outstanding and common stock publicly traded price.

We determined that the implied control premium was reasonable which corroborates our fair value estimates.

We determined that the implied control premium was reasonable which

corroborates our fair value estimates.

We categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

5 unchanged sentences

These estimated changes in fair value are not necessarily representative of the actual impairment that would be recorded in the event of a fair value decline.

As of September 30, 2025, the Company determined that there were no events or circumstances that would more likely than not reduce the fair value of the reporting unit below its carrying value.

Management considered the decrease in the Company’s share price around September 30, 2025 and concluded this was primarily attributable to market reactions and higher-than normal trade volumes caused by potential dilution related to the Company’s announcement of a $100 million At the Market (“ATM”) equity offering on September 25, 2025.

We believe that due to the Company’s normally low trading volume, this creates higher volatility and fluctuations in stock price, and such a decline is not considered a sustained decline as of September 30, 2025.

If, in future periods, the financial performance of the reporting unit does not meet forecasted expectations, or a prolonged decline occurs in the market price of our common stock, it may cause a change in the results of the impairment assessment and, as such, could result in further impairment of goodwill.

The Company determined that there were no events or circumstances during the six months ended June 30, 2025 that would more likely than not reduce the fair value of the reporting unit below its carrying value.

Recent Accounting Pronouncements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis