What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-11 · 128 added, 45 removed, 145 unchanged (54% of the section changed)

24 unchanged sentences

Our transformation is focused on four key areas, each of which we expect will positively impact future growth or cost savings.

The components of our transformation were as follows:

The components of our transformation are as follows:

• Centralized Purchasing:

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.

Now that we’ve rolled out our centralized purchasing program with seafood and poultry products and have yielded positive results with respect to margin expansion for the product categories, we are now focusing on expanding the program to other categories such as commodities.

• Fleet and Transportation:

We have established a national fleet maintenance program.

Within this, we have defined new truck specifications, initiated a replacement program for 50% of our current fleet, implemented a national fuel savings program to maximize efficiency, and plan to outsource domestic inbound freight logistics to a third-party partner to adopt a cohesive national approach to our supply chain.

This is expected to deliver substantial improvements to our transportation system moving forward.

We have established a national fleet maintenance program that standardizes truck specifications across the organization.

As part of this initiative, nearly 50% of our fleet is enrolled in national third-party fleet maintenance provider programs, ensuring consistent preventive maintenance, improved vehicle reliability, and reduced downtime.

We have also launched a fleet replacement program for 50% of our current vehicles, implemented a national fuel savings initiative to maximize operating efficiency, and plan to outsource domestic inbound freight logistics to a third-party provider to create a more cohesive national supply chain.

Collectively, these initiatives are expected to deliver significant improvements in the efficiency, reliability, and overall performance of our transportation network.

• Digital Transformation:

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Financial Overview

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands) 2026 2025 Change

1 unchanged sentence

Income from operations $ 2,817 $ 4,119 $ (1,302)

Net income (loss) $ 1,356 $ (1,530) $ 2,886

Net income $ 2,621 $ 510 $ 2,111

Adjusted EBITDA $ 13,569 $ 13,846 $ (277)

27 unchanged sentences

Results of Operations

Comparison of Three Months Ended March 31, 2026 to Three Months Ended March 31, 2025

The following table sets forth a summary of our consolidated results of operations for the three months ended March 31, 2026 and 2025 .

Comparison of Three Months Ended June 30, 2026 to Three Months Ended June 30, 2025

The following table sets forth a summary of our consolidated results of operations for the three months ended June 30, 2026 and 2025 .

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

Three Months Ended March 31,

Three Months Ended June 30,

($ in thousands) 2026 2025 Change

9 unchanged sentences

Change in fair value of interest rate swap contracts (729) 685 (1,414)

Income before income taxes 2,839 1,031 1,808

Income tax expense 218 521 (303)

Net income and comprehensive income 2,621 510 2,111

net income (loss) attributable to noncontrolling interests 41 (706) 747

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

$ 2,580 $ 1,216 $ 1,364

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,

Net revenue 100.0 % 100.0 %

Cost of revenue 83.0 % 82.5 %

Gross profit 17.0 % 17.5 %

Distribution, selling and administrative expenses 16.1 % 16.2 %

Income from operations

Interest expense 0.9 % 0.9 %

Other income, net

(0.7) % (0.1) %

Change in fair value of interest rate swap contracts (0.2) % 0.2 %

Income before income taxes 0.9 % 0.3 %

Income tax expense 0.1 % 0.2 %

Net income and comprehensive income 0.8 % 0.1 %

net income (loss) attributable to noncontrolling interests — % (0.2) %

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

Net revenue for the three months ended June 30, 2026 increased by $8.9 million, or 2.8%, compared to the same period in 2025.

The increase was primarily due to volume growth and pricing improvement in Seafood followed by volume growth in Commodity, partially offset by price decreases in Meat & Poultry.

Gross profit was $55.0 million for the three months ended June 30, 2026 compared to $55.1 million in the same period in 2025, a decrease of $0.1 million, or 0.2%.

The gross profit decreased across most categories due to additional tariffs effective beginning in the third quarter of 2025.

The decrease was partially offset by the IEEPA tariff refund received during the quarter.

Gross profit margin for the three months ended June 30, 2026 of 17.0% declined compared to 17.5% in the same period in 2025.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses increased by $1.2 million, or 2.4%, to $52.2 million, for the three months ended June 30, 2026.

The increase is primarily due to an increase in auto & truck expense due to higher fuel cost, insurance, and professional services expenses.

The increase is partially offset by lower personnel expenses.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 16.1% for the three months ended June 30, 2026 from 16.2% in the same period in 2025.

Interest Expense

Interest expense for the three months ended June 30, 2026 of $2.9 million increased slightly compared to $2.8 million for the three months ended June 30, 2025.

Average floating interest rates on our floating-rate debt for the three months ended June 30, 2026 decreased by approximately 0.3% on our line of credit and 0.7% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2025.

Our average daily line of credit balance increased by $12.1 million, or 22.6%, to $65.7 million for the three months ended June 30, 2026 from $53.6 million for the three months ended June 30, 2025, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $8.2 million, or 8.3%, to $91.0 million for the three months ended June 30, 2026 from $99.2 million for the three months ended June 30, 2025.

Income Tax Expense

Income tax expense was $0.2 million for the three months ended June 30, 2026, compared to an income tax expense of $0.5 million for the three months ended June 30, 2025.

The decrease in income tax expense was primarily due to investment tax credits recognized during the period, partially offset by higher income before income taxes.

Net Income Attributable to HF Foods Group, Inc.

Net income attributable to HF Foods Group, Inc.

was $2.6 million for the three months ended June 30, 2026, compared to net income of $1.2 million for the three months ended June 30, 2025.

The improvement was primarily driven by recognition of $1.8 million employee retention credit including interest, the IEEPA tariff refund of $1.1 million, and a positive change in fair value of

interest rate swap contracts by $1.4 million compared to 2025.

These favorable variances were partially offset by $1.3 million decrease in income from operations and $0.7 million year-over-year change in net income attributable to noncontrolling interests.

EBITDA and Adjusted EBITDA

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

Three Months Ended June 30,

($ in thousands) 2026 2025 Change

Net income $ 2,621 $ 510 $ 2,111

Interest expense, net

2,216 2,775 (559)

Income tax expense 218 521 (303)

Depreciation and amortization 7,460 7,262 198

EBITDA 12,515 11,068 1,447

Change in fair value of interest rate swap contracts (729) 685 (1,414)

Stock-based compensation expense 587 625 (38)

Business transformation costs (1)

110 629 (519)

Other non-routine expense (2)

Executive transition and organizational redesign (3)

311 829 (518)

Adjusted EBITDA $ 13,569 $ 13,846 $ (277)

_________________

(1) Represents costs associated with the launch and continued implementation of strategic projects including supply chain management improvements and technology infrastructure initiatives.

(2) Includes legal and consulting expenses incurred in connection with various corporate projects and other strategic initiatives.

(3) Includes severance and related expenses for the Company’s transition of executive officers and organizational redesign.

Results of Operations

Comparison of Six Months Ended June 30, 2026 to Six Months Ended June 30, 2025

The following table sets forth a summary of our consolidated results of operations for the six months ended June 30, 2026 and 2025.

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,

($ in thousands) 2026 2025 Change

Net revenue $ 635,783 $ 613,281 $ 22,502

Cost of revenue 530,209 507,190 23,019

Gross profit 105,574 106,091 (517)

Distribution, selling and administrative expenses 101,720 100,818 902

Income from operations 3,854 5,273 (1,419)

Interest expense 5,728 5,426 302

Other income, net (4,100) (591) (3,509)

Change in fair value of interest rate swap contracts (1,572) 1,869 (3,441)

Income (loss) before income taxes 3,798 (1,431) 5,229

Income tax benefit (179) (411) 232

(397) (932) 535

Net income (loss) and comprehensive income (loss) 3,977 (1,020) 4,997

net income attributable to noncontrolling interests 131 115 16

net income (loss) attributable to noncontrolling interests 172 (591) 763

Net income (loss) and comprehensive income (loss) attributable to HF Foods Group Inc.

1 unchanged sentence

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 March 31,

Six Months Ended June 30,

Net revenue 100.0 % 100.0 %

5 unchanged sentences

Other income, net (0.6) % (0.1) %

(0.6) % (0.1) %

Change in fair value of interest rate swap contracts (0.2) % 0.3 %

1 unchanged sentence

Income tax benefit — % (0.1) %

(0.1) % (0.3) %

Net income (loss) and comprehensive income (loss) 0.5 % — %

net income attributable to noncontrolling interests — % — %

net income (loss) attributable to noncontrolling interests — % (0.1) %

Net income (loss) and comprehensive income (loss) attributable to HF Foods Group Inc.

0.4 % (0.5) %

Net revenue for the three months ended March 31, 2026 increased by $13.6 million, or 4.5%, compared to the same period in 2025.

The increase was primarily due to volume growth and pricing improvement in Seafood followed by volume growth for Commodity.

Gross profit was $50.5 million for three months ended March 31, 2026 compared to $51.0 million in the same period in 2025, a decrease of $0.4 million, or 0.8%.

The decrease was primarily due to increased sales in lower margin products like Seafood and an uptick in landed costs.

Gross profit margin for the three months ended March 31, 2026 of 16.2% declined compared to 17.1% in the same period in 2025.

Net revenue for the six months ended June 30, 2026 increased by $22.5 million, or 3.7%, compared to the same period in 2025.

T he increase was primarily attributable to volume growth and improved pricing in Seafood and Commodity, partially offset by price decrease in Meat & Poultry and volume decreases in Asian Specialty.

Gross profit was $105.6 million for the six months ended June 30, 2026 compared to $106.1 million in the same period in 2025 , an decrease of $0.5 million, or 0.5% .

The gross profit decreased across most categories primarily due to additional tariff effective beginning the third quarter 2025.

The decrease was offset by the IEEPA tariff refund received during the current quarter.

Gross profit margin for the six months ended June 30, 2026 decreased slightly to 16.6% compared to 17.3% in the same period in 2025.

Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses decreased by $0.3 million, or 0.6%, to $49.5 million, for the three months ended March 31, 2026.

Distribution, selling and administrative expenses as a percentage of net revenue decreased to 15.9% for the three months ended March 31, 2026 from 16.7% in the same period in 2025, primarily due to increased net revenue and lower professional fees and bad debt expenses, partially offset by increased depreciation and auto & truck expenses.

Distribution, selling and administrative expenses of $101.7 million for the six months ended June 30, 2026 increased by $0.9 million, or 0.9%, in 2026 compared to $100.8 million in 2025, mainly due to increases in auto & truck expenses of $2.0 million and insurance expense of $0.4 million partially offset by a reduction in personnel expense of $0.8 million and professional expenses of $0.6 million.

Distribution, selling and administrative expenses as a percentage of net revenue decreased slightly to 16.0% in 2026 compared to 16.4% in 2025.

Interest Expense

Interest expense for the three months ended March 31, 2026 of $2.8 million increased slightly compared to $2.6 million for the three months ended March 31, 2025.

Average floating interest rates on our floating-rate debt for the three months ended March 31, 2026 decreased by approximately 0.6% on our line of credit and 0.6% on the JPMorgan Chase mortgage-secured term loan, compared to the same period in 2025.

Our average daily line of credit balance increased by $8.0 million, or 16.4%, to $56.7 million for the three months ended March 31, 2026 from $48.7 million for the three months ended March 31, 2025, and our average daily JPMorgan Chase mortgage-secured term loan balance decreased by $6.7 million, or 6.7%, to $93.7 million for the three months ended March 31, 2026 from $100.4 million for the three months ended March 31, 2025.

Interest expense for the six months ended June 30, 2026 increased slightly to $5.73 million, compared to $5.43 million for the six months ended June 30, 2025, an increase of $0.30 million or 5.6%.

The increase was driven by an increase in our average daily line of credit balance of $10.1 million, partially offset by a decrease in our average daily JPMorgan Chase mortgage-secured term loan balance of $7.5 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, 2026 decreased by approximately 0.5% on the line of credit and 0.7% on the JPMorgan Chase mortgage-secured term loan, compared to 2025.

Our average daily line of credit balance was $61.3 million for the six months ended June 30, 2026, up from $51.2 million for the six months ended June 30, 2025, while our average daily JPMorgan Chase mortgage-secured term loan balance decreased to $92.3 million for the six months ended June 30, 2026 from $99.8 million for the six months ended June 30, 2025.

Income Tax Benefit

Income tax benefit was $0.4 million for the three months ended March 31, 2026, compared to an income tax benefit of $0.9 million for the three months ended March 31, 2025, primarily due to an increase in income before income taxes, partially offset by investment tax credits.

Net Income Attributable to HF Foods Group, Inc.

Income tax benefit was $0.2 million for the six months ended June 30, 2026, compared to an income tax benefit of $0.4 million for the six months ended June 30, 2025.

The change was primarily due to higher income before income taxes and discrete tax expense items related to stock-based compensation shortfalls and the remeasurement of deferred tax assets associated with executive compensation, partially offset by investment tax credits recognized during the period.

Net Income (Loss) Attributable to HF Foods Group, Inc.

Net income attributable to HF Foods Group Inc.

was $1.2 million for the three months ended March 31, 2026, compared to net loss of $1.6 million for the three months ended March 31, 2025.

The improvement was primarily driven by gain on sale of Utah building and positive change in fair value of interest rate swap contracts by $2.0 million compared to 2025.

was $3.8 million for the six months ended June 30, 2026, compared to a net loss of $0.4 million for the six months ended June 30, 2025.

The $4.2 million improvement was primarily attributable to a $1.4 million gain on the Utah building sale, recognition of employee retention credit of $1.8 million including interest, the IEEPA tariff refund of $1.1 million, and a $3.4 million favorable year-over-year change in fair value of interest rate swap.

These favorable variances were partially offset by a $1.4 million decrease in operating income, a $0.2 million unfavorable change in income taxes, and a $0.8 million year-over-year change in net income attributable to noncontrolling interests.

EBITDA and Adjusted EBITDA

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

Three Months Ended March 31,

Six Months Ended June 30,

($ in thousands) 2026 2025 Change

3 unchanged sentences

Income tax benefit (179) (411) 232

(397) (932) 535

Depreciation and amortization 14,981 14,019 962

3 unchanged sentences

Business transformation costs (1)

503 866 (363)

Other non-routine (income) expense (2)

5 unchanged sentences

(1) Represents costs associated with the launch and continued implementation of strategic projects including supply chain management improvements and technology infrastructure initiatives.

(2) Includes the gain recognized on the sale of the Utah facility in 2026 and legal and consulting expenses incurred in connection with various corporate projects and other strategic initiatives.

(2) Includes legal and consulting costs related to various corporate projects and other strategic initiatives, for the six months ended June 30, 2026 it includes the gain on the sale of the Utah facility.

(3) Includes severance and related expenses for the Company’s transition of executive officers and organizational redesign.

Liquidity and Capital Resources

As of March 31, 2026, we had cash of approximately $11.1 million, checks issued not presented for payment of $5.0 million and access to approximately $55.2 million in additional funds through our $125.0 million line of credit, subject to a borrowing base calculation.

As of June 30, 2026, we had cash of approximately $18.1 million, checks issued not presented for payment of $5.6 million and access to approximately $39.7 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 March 31, 2026.

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 March 31, 2026, 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 March 31, 2026 and 2025:

Three Months Ended March 31,

As of June 30, 2026, 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 six months ended June 30, 2026 and 2025:

Six Months Ended June 30,

(In thousands) 2026 2025 Change

1 unchanged sentence

Net cash used in investing activities (16,071) (6,592) (9,479)

Net cash used in financing activities (1,749) (1,752) 3

Net cash provided by (used in) financing activities 11,503 (2,693) 14,196

Net increase in cash and cash equivalents $ 9,463 $ 1,183 $ 8,280

1 unchanged sentence

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 $8.3 million primarily due to an increase in non-cash expense add-backs and increases in accounts payable balances, offset by the timing of working capital outlays mainly for inventory purchases and increases in our accounts receivable balances.

Net cash provided by operating activities increased by $3.6 million primarily due to higher income, driven by an increase in other income, and favorable changes in accrued expenses.

These favorable impacts were partially offset by lower non-cash expense add-backs, which reduced the adjustments added back to net income in the determination of operating cash flows.

Investing Activities

Net cash used in investing activities increased by $7.6 million primarily due to increased capital project spend in the three months ended March 31, 2026, partially offset by proceeds from the sale of the Utah property (see Note 4 - Balance Sheet Components for additional information).

Net cash used in investing activities increased by $9.5 million primarily due to increased capital project spending including the purchases of warehouse buildings which were previously leased in the six months ended June 30, 2026, partially offset by proceeds from the sale of the Utah property (see Note 4 - Balance Sheet Components for additional information).

Financing Activities

Net cash used in financing activities remained relatively consistent at $1.7 million during the three months ended March 31, 2026 primarily due to the higher overall net proceeds from line of credit activity, offset by overall lower interest rates as compared to the three months ended March 31, 2025.

Net cash provided by financing activities of $11.5 million during the six months ended June 30, 2026 as compared to $2.7 million net cash used in financing activities for the six months ended June 30, 2025 was primarily due to the higher overall net proceeds from line of credit activity, offset by overall lower interest rates.

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 2025 Annual Report 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 three months ended March 31, 2026.

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