Detailed narrative
Record Revenue Growth Amidst Headwinds
HF Foods reported its highest-ever quarterly revenue of $323.8 million, a 2.8% increase year-over-year. This growth was achieved despite persistent industry challenges🌐 such as tariff pressure🌐, softer foot traffic, and rising fuel costs. The company demonstrated resilience through effective management of pricing and volume, with volume growth in seafood and commodity categories partially offsetting price decreases in meat and poultry.
Strategic Sea Ray Foods Acquisition
The company entered into a definitive agreement to acquire Sea Ray Foods, a leading Canadian importer and distributor of ethnic and specialty frozen seafood, for CAD 47.9 million (approximately $35 million U.S.). This acquisition marks HF Foods' first international expansion, extending its M&A playbook into Canada.
Sea Ray brings six proprietary brands and has demonstrated strong growth, with revenue increasing roughly 15% annually since 2019 and EBITDA margins in the mid-teens.
Financial Impact of Sea Ray Acquisition
The Sea Ray acquisition is expected to be accretive to both margins and EPS from closing, supporting HF Foods' consolidated adjusted EBITDA margin target of 4.5% to 5% plus over the next three to five years. The base purchase price represents approximately 5x Sea Ray's baseline adjusted EBITDA of CAD 9.6 million (approximately $7 million U.S.), reflecting a disciplined approach to M&A by adding a higher-margin business at a mid-single-digit multiple.
Sea Ray's gross profit margin is north of 20%, which will positively impact the consolidated margin profile.
Balance Sheet Strengthening and Liquidity
Post-quarter end, HF Foods refinanced and upsized its credit facility, increasing asset-based revolving commitments from $125 million to $140 million and term loans from $95 million to $125 million. This transaction, maturing in July 2031 for the revolving facility and July 2036 for the term loan, provides significant incremental liquidity to fund growth initiatives, including the Sea Ray acquisition and ongoing facilities investments.
Transformation Plan and Operational Efficiency
HF Foods continues to advance its long-term transformation plan, focusing on sales operations, digital infrastructure, and facilities upgrades. Key capital expenditures in the first six months of FY26 included the $12.4 million purchase of the Chicago distribution center, $2.8 million in solar investments expected to lower operating costs, $2.1 million for capacity expansion, and $1.4 million for fleet upgrades.
These investments aim to build a stronger foundation for sustainable growth and shift the company's focus from implementation to optimization.
M&A Strategy and Market Opportunity
M&A remains a core pillar of HF Foods' growth strategy, with the company positioning itself as the strategic acquirer of choice in the Asian specialty market. The total addressable market is now considered even larger than the previously cited $50 billion in the U.S. alone, with the Canadian expansion through Sea Ray.
The company actively evaluates opportunities to expand geographic footprint, capture operational synergies, broaden its customer base, and enhance product capabilities.