# HF Foods Group Inc.: Form 10-Q for the period ended Jun 30, 2025

- Company: [HF Foods Group Inc.](/companies/hffg.md) (CIK 1680873)
- Form: 10-Q
- Filed: 2025-08-11
- Accepted by EDGAR: Aug 11, 2025, 20:24 ET
- Period: 2025-06-30
- Accession: 0001628280-25-039583
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1680873/000162828025039583/hffg-20250630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1680873/000162828025039583/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-04-01 to 2025-06-30 | $314.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2025-01-01 to 2025-06-30 | $613.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-04-01 to 2025-06-30 | $259.7m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2025-01-01 to 2025-06-30 | $507.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2025-04-01 to 2025-06-30 | $55.1m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2025-01-01 to 2025-06-30 | $106.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2025-04-01 to 2025-06-30 | $51.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2025-01-01 to 2025-06-30 | $100.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-04-01 to 2025-06-30 | $4.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2025-01-01 to 2025-06-30 | $5.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2025-04-01 to 2025-06-30 | $2.8m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2025-01-01 to 2025-06-30 | $5.4m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2025-04-01 to 2025-06-30 | $521.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2025-01-01 to 2025-06-30 | −$411.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-04-01 to 2025-06-30 | $1.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2025-01-01 to 2025-06-30 | −$429.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-04-01 to 2025-06-30 | $0.02 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2025-01-01 to 2025-06-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-04-01 to 2025-06-30 | $0.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2025-01-01 to 2025-06-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-04-01 to 2025-06-30 | 53,414,715 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2025-01-01 to 2025-06-30 | 52,853,982 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2025-01-01 to 2025-06-30 | $10.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2025-01-01 to 2025-06-30 | $6.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-06-30 | $15.7m | us-gaap:Cash |
| Current assets | at 2025-06-30 | $202.2m | us-gaap:AssetsCurrent |
| Total assets | at 2025-06-30 | $593.5m | us-gaap:Assets |
| Current liabilities | at 2025-06-30 | $169.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-06-30 | $352.4m | us-gaap:Liabilities |
| Long-term debt | at 2025-06-30 | $100.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-06-30 | $5.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-06-30 | $239.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 33,582 characters.

### CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q for HF Foods Group Inc. (“HF Foods”, the “Company,” “we,” “us,” or “our”) contains forward-looking statements. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected. Factors that could cause or contribute to such differences include those discussed in this Quarterly Report on Form 10-Q, and in particular, the risks discussed under the caption “Risk Factors” in Item 1A and those discussed in other documents we file with the Securities and Exchange Commission (the “SEC”). We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. Except as otherwise required by law, we undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise.

### Overview

We market and distribute Asian specialty food products, seafood, fresh produce, frozen and dry food, and non-food products primarily to Asian restaurants and other foodservice customers throughout the United States. HF Foods was formed through a merger between two complementary market leaders, HF Foods Group Inc. and B&R Global. In 2022, HF Foods acquired two frozen seafood suppliers, expanding its distribution network in Illinois, Texas and along the eastern seaboard, from Massachusetts to Florida, as well as Pennsylvania, West Virginia, Ohio, Kentucky, and Tennessee.

We aim to supply the increasing demand for Asian American restaurant cuisine, leveraging our nationwide network of distribution centers and our strong relations with growers and suppliers of fresh, high-quality specialty restaurant food products and supplies primarily in North America, South America and Asia. Capitalizing on our deep understanding of the Asian culture, we have become a trusted partner serving Asian restaurants and other foodservice customers throughout the United States. We are dedicated to serving the vast array of Asian restaurants in need of high-quality and specialized food ingredients at competitive prices.

### Transformation Plan

To position the business for long-term success, we have initiated a comprehensive, operational transformation plan in an effort to drive growth and cost savings. 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 are as follows:

- **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 are now focusing on expanding the program to other categories.
- **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.
- **Digital Transformation:** We have completed the implementation of a modern ERP solution across all of our distribution centers. The Company expects this solution to deliver enhanced operational efficiency and responsiveness, streamlined processes, and greater data driven decision-making.
- **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.

### Financial Overview

*($ in thousands)*

|  | Three Months Ended June 30, 2025 | 2024 | Change | Six Months Ended June 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net revenue | $314,853 | $302,342 | $12,511 | $613,281 | $597,996 | $15,285 |
| Net income (loss) | $510 | $235 | $275 | $(1,020) | $(324) | $(696) |
| Adjusted EBITDA | $13,845 | $10,561 | $3,284 | $23,618 | $19,263 | $4,355 |

For additional information on our non-GAAP financial measures, EBITDA and Adjusted EBITDA, see the section entitled “EBITDA and Adjusted EBITDA” below.

### How to Assess HF Foods’ Performance

In assessing our performance, we consider a variety of performance and financial measures, including principal growth in net revenue, gross profit, distribution, selling and administrative expenses, as well as certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA. The key measures that we use to evaluate the performance of our business are set forth below:

### Net Revenue

Net revenue is equal to gross sales minus sales returns, sales incentives that we offer to our customers, such as rebates and discounts that are offsets to gross sales; and certain other adjustments. Our net revenue is driven by changes in number of customers and average customer order amount, product inflation that is reflected in the pricing of our products and mix of products sold.

### Gross Profit

Gross profit is equal to net revenue minus cost of revenue. Cost of revenue primarily includes inventory costs (net of supplier consideration), inbound freight, customs clearance fees and other miscellaneous expenses. Cost of revenue generally changes as we incur higher or lower costs from suppliers and as the customer and product mix changes.

### Distribution, Selling and Administrative Expenses

Distribution, selling and administrative expenses consist primarily of salaries, stock-based compensation and benefits for employees and contract laborers, trucking and fuel expenses, utilities, maintenance and repair expenses, insurance expenses, depreciation and amortization expenses, selling and marketing expenses, professional fees and other operating expenses.

### EBITDA and Adjusted EBITDA

Discussion of our results includes certain non-GAAP financial measures, including EBITDA and Adjusted EBITDA, that we believe provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial performance with other companies in the same industry, many of which present similar non-GAAP financial measures to investors. We present EBITDA and Adjusted EBITDA in order to provide supplemental information that we consider relevant for the readers of our condensed consolidated financial statements included elsewhere in this report, and such information is not meant to replace or supersede GAAP measures.

Management uses EBITDA to measure operating performance, defined as net income before interest expense, interest income, income taxes, and depreciation and amortization. In addition, management uses Adjusted EBITDA, defined as net income before interest expense, interest income, income taxes, and depreciation and amortization, further adjusted to exclude certain unusual, non-cash, or non-recurring expenses. Management believes that Adjusted EBITDA is less susceptible to variances in actual performance resulting from non-recurring expenses, and other non-cash charges and is more reflective of other factors that affect our operating performance.

The definition of EBITDA and Adjusted EBITDA may not be the same as similarly titled measures used by other companies in the industry. EBITDA and Adjusted EBITDA are not defined under GAAP and are subject to important limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of HF Foods’ results as reported under GAAP. For example, Adjusted EBITDA:

- excludes certain tax payments that may represent a reduction in cash available;
- does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
- does not reflect changes in, or cash requirements for, our working capital needs; and
- does not reflect the significant interest expense, or the cash requirements, necessary to service our debt.

For additional information on EBITDA and Adjusted EBITDA and a reconciliation to their most directly comparable U.S. GAAP financial measures, see “*Results of Operations — EBITDA and Adjusted EBITDA”* below.

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

*($ in thousands)*

|  | Three Months Ended June 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Net revenue | $314,853 | $302,342 | $12,511 |
| Cost of revenue | 259,721 | 249,877 | 9,844 |
| Gross profit | 55,132 | 52,465 | 2,667 |
| Distribution, selling and administrative expenses | 51,013 | 49,840 | 1,173 |
| Income from operations | 4,119 | 2,625 | 1,494 |
| Interest expense | 2,817 | 3,119 | (302) |
| Other (income) expense, net | (414) | 3,466 | (3,880) |
| Change in fair value of interest rate swap contracts | 685 | (361) | 1,046 |
| Lease guarantee income | — | (5,433) | 5,433 |
| Income before income taxes | 1,031 | 1,834 | (803) |
| Income tax expense | 521 | 1,599 | (1,078) |
| Net income and comprehensive income | 510 | 235 | 275 |
| Less: net (loss) income attributable to noncontrolling interests | (706) | 218 | (924) |
| Net income and comprehensive income attributable to HF Foods Group Inc. | $1,216 | $17 | $1,199 |

22

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, 2025 | 2024 |
| --- | ---: | ---: |
| Net revenue | 100.0% | 100.0% |
| Cost of revenue | 82.5% | 82.6% |
| Gross profit | 17.5% | 17.4% |
| Distribution, selling and administrative expenses | 16.2% | 16.5% |
| Income from operations | 1.3% | 0.9% |
| Interest expense | 0.9% | 1.0% |
| Other expense (income), net | (0.1)% | 1.1% |
| Change in fair value of interest rate swap contracts | 0.2% | (0.1)% |
| Lease guarantee income | —% | (1.8)% |
| Income before income taxes | 0.3% | 0.7% |
| Income tax expense | 0.2% | 0.5% |
| Net income and comprehensive income | 0.1% | 0.2% |
| Less: net (loss) income attributable to noncontrolling interests | (0.2)% | 0.1% |
| Net income and comprehensive income attributable to HF Foods Group Inc. | 0.3% | 0.1% |

### Net Revenue

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. 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

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.

### 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.

### 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.

### EBITDA and Adjusted EBITDA

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

*($ in thousands)*

|  | Three Months Ended June 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Net income | $510 | $235 | $275 |
| Interest expense, net | 2,775 | 3,119 | (344) |
| Income tax expense | 521 | 1,599 | (1,078) |
| Depreciation and amortization | 7,261 | 6,590 | 671 |
| EBITDA | 11,067 | 11,543 | (476) |
| Lease guarantee income | — | (5,433) | 5,433 |
| Change in fair value of interest rate swap contracts | 685 | (361) | 1,046 |
| Stock-based compensation expense | 625 | 522 | 103 |
| SEC settlement | — | 3,900 | (3,900) |
| Business transformation costs (1) | 629 | 130 | 499 |
| Other non-routine expense (2) | 10 | 260 | (250) |
| Executive transition and organizational redesign (3) | 829 | — | 829 |
| Adjusted EBITDA | $13,845 | $10,561 | $3,284 |

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

(2) Includes contested proxy and related legal and consulting costs and facility closure costs.

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

*($ in thousands)*

|  | Six Months Ended June 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Net revenue | $613,281 | $597,996 | $15,285 |
| Cost of revenue | 507,190 | 495,120 | 12,070 |
| Gross profit | 106,091 | 102,876 | 3,215 |
| Distribution, selling and administrative expenses | 100,818 | 100,336 | 482 |
| Income from operations | 5,273 | 2,540 | 2,733 |
| Interest expense | 5,426 | 5,953 | (527) |
| Other expense (income), net | (591) | 3,372 | (3,963) |
| Change in fair value of interest rate swap contracts | 1,869 | (2,331) | 4,200 |
| Lease guarantee income | — | (5,548) | 5,548 |
| Income (loss) before income taxes | (1,431) | 1,094 | (2,525) |
| Income tax expense (benefit) | (411) | 1,418 | (1,829) |
| Net loss and comprehensive loss | (1,020) | (324) | (696) |
| Less: net income (loss) attributable to noncontrolling interests | (591) | 353 | (944) |
| Net loss and comprehensive loss attributable to HF Foods Group Inc. | $(429) | $(677) | $248 |

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, 2025 | 2024 |
| --- | ---: | ---: |
| Net revenue | 100.0% | 100.0% |
| Cost of revenue | 82.7% | 82.8% |
| Gross profit | 17.3% | 17.2% |
| Distribution, selling and administrative expenses | 16.4% | 16.8% |
| Income from operations | 0.9% | 0.4% |
| Interest expense | 0.9% | 1.0% |
| Other expense (income), net | (0.1)% | 0.6% |
| Change in fair value of interest rate swap contracts | 0.3% | (0.4)% |
| Lease guarantee income | —% | (0.9)% |
| Income (loss) before income taxes | (0.2)% | 0.1% |
| Income tax expense (benefit) | (0.1)% | 0.2% |
| Net loss and comprehensive loss | (0.1)% | (0.1)% |
| Less: net income (loss) attributable to noncontrolling interests | (0.1)% | 0.1% |
| Net loss and comprehensive loss attributable to HF Foods Group Inc. | —% | (0.2)% |

25

### Net Revenue

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. 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

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%. 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.

### 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.

### 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.

### 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.

### 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. The improvement of $0.2 million was primarily driven by an increase in income from operations of $2.7 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.

### EBITDA and Adjusted EBITDA

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

*($ in thousands)*

|  | Six Months Ended June 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Net loss | $(1,020) | $(324) | $(696) |
| Interest expense, net | 5,384 | 5,953 | (569) |
| Income tax expense (benefit) | (411) | 1,418 | (1,829) |
| Depreciation and amortization | 14,019 | 13,266 | 753 |
| EBITDA | 17,972 | 20,313 | (2,341) |
| Lease guarantee income | — | (5,548) | 5,548 |
| Change in fair value of interest rate swap contracts | 1,869 | (2,331) | 4,200 |
| Stock-based compensation expense | 999 | 1,260 | (261) |
| SEC settlement | — | 3,900 | (3,900) |
| Business transformation costs (1) | 866 | 1,103 | (237) |
| Other non-routine expense (2) | 110 | 566 | (456) |
| Executive transition and organizational redesign (3) | 1,802 | — | 1,802 |
| Adjusted EBITDA | $23,618 | $19,263 | $4,355 |

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

(2) Includes contested proxy and related legal and consulting costs and facility closure costs.

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

### 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. We have funded working capital and other capital requirements primarily by cash flow from operations and bank loans. Cash is required to pay purchase costs for inventory, salaries, fuel and trucking expenses, selling expenses, rental expenses, income taxes, other operating expenses and to service debts.

We believe that our cash flow generated from operations is sufficient to meet our normal working capital needs for at least the next twelve months. 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. Pursuant to the agreement, we will pay the swap counterparty a fixed rate of 4.11% in exchange for floating payments based on CME Term SOFR.

Management believes we have sufficient funds to meet our working capital requirements and debt obligations in the next twelve months. However, there are a number of factors that could potentially arise which might result in shortfalls in anticipated cash flow, such as the demand for our products, economic conditions, competitive pricing in the foodservice distribution industry, and our bank and suppliers being able to provide continued support. 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:

*(In thousands)*

|  | Six Months Ended June 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | $10,468 | $1,941 | $8,527 |
| Net cash used in investing activities | (6,592) | (6,331) | (261) |
| Net cash (used in) provided by financing activities | (2,693) | 3,126 | (5,819) |
| Net increase (decrease) in cash and cash equivalents | $1,183 | $(1,264) | $2,447 |

### 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 increased by $8.5 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.

### 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.

### Critical Accounting Policies and Estimates

We have prepared the financial information in this Quarterly Report in accordance with GAAP. Preparing our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during these reporting periods. We base our estimates and judgments on historical experience and other factors we believe are reasonable under the circumstances. These assumptions form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. 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.

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. The results of the testing as of December 31, 2024, concluded that the estimated fair value of the reporting unit fell short of carrying value, and therefore impairment existed as of that date. A goodwill impairment charge of $46.3 million was recorded during the fourth quarter of the year ended December 31, 2024.

For the December 31, 2024 impairment test, we used a combination of discounted cash flow (“DCF”) model and market approaches, such as public company comparable analysis and comparable acquisitions analysis to determine fair value of the reporting unit. The income approach and market approaches were weighted equally to estimate fair value. The income approach requires detailed forecasts of cash flows, including significant assumptions such as revenue growth rates, gross profit margins, distribution, selling and administrative expenses, among other assumptions, and an estimate of weighted-average cost of capital which we believe approximate the assumptions from a market participant’s perspective. The market approaches are primarily impacted by an enterprise value multiple of EBITDA. These estimates incorporate many uncertain factors which could be impacted by changes in market conditions, interest rates, growth rate, tax rates, costs, customer behavior, regulatory environment and other macroeconomic changes. 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. 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 categorize the fair value determination as Level 3 in the fair value hierarchy due to its use of internal projections and unobservable measurement inputs.

Assumptions used in impairment testing are made at a point in time and require significant judgment; therefore, they are subject to change based on the facts and circumstances present at each impairment test date. Additionally, these assumptions are generally interdependent and do not change in isolation.

We performed sensitivity analyses on the key inputs and assumptions used in determining the estimated fair value of our reporting unit by utilizing changes in assumptions that would reasonably likely occur. Assuming all other assumptions and inputs used in the fair value analysis are held constant, for the December 31, 2024 impairment test, a 100 basis point increase in the discount rate assumption, a 1x decrease in the respective EBITDA multiple assumptions, a 25 basis point decrease in the gross profit margin assumption, and a 50 basis point decrease in the revenue growth rate assumption would result in a decrease in the fair value of our reporting unit of approximately $11.6 million, $31.0 million, $7.3 million, and $5.5 million, respectively, which would likely result in further impairment. 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.

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

For a discussion of recent accounting pronouncements, see *Note 2 - Summary of Significant Accounting Policies* to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 3,031 characters.

### Interest Rate Risk

Our debt exposes us to risk of fluctuations in interest rates. Floating rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to changes in market interest rates reflected in the fair value of the debt and to the risk that we may need to refinance maturing debt with new debt at higher rates. We manage our debt portfolio to achieve an overall desired proportion of fixed and floating rate debts and may employ interest rate swaps as a tool from time to time to achieve that position. To manage our interest rate risk exposure, we entered into four interest rate swap contracts to hedge the floating rate term loans. See *Note 7 - Derivative Financial Instruments* to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.

As of June 30, 2025, our aggregate floating rate debt’s outstanding principal balance without hedging was $62.9 million, or 37.7% of total debt, consisting primarily of our revolving line of credit (see *Note 8 - Debt* to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q). Our floating rate debt interest is based on the floating 1-month SOFR plus a predetermined credit adjustment rate plus the bank spread. The remaining 62.3% of our debt is on a fixed rate or a floating rate with hedging. In a hypothetical scenario, a 1% change in the applicable rate would cause the interest expense on our floating rate debt to change by approximately $0.6 million per year.

### Fuel Price Risk

We are also exposed to risks relating to fluctuations in the price and availability of diesel fuel. We require significant quantities of diesel fuel for our vehicle fleet, and the inbound delivery of the products we sell is also dependent upon shipment by diesel-fueled vehicles. Additionally, elevated fuel costs can negatively impact consumer confidence and discretionary spending and thus reduce the frequency and amount spent by consumers for food-away-from-home purchases. We currently are able to obtain adequate supplies of diesel fuel, and average prices in the second quarter of 2025 decreased in comparison to average prices in the same period in 2024, decreasing 7.8% on average. However, it is impossible to predict the future availability or price of diesel fuel. The price and supply of diesel fuel fluctuates based on external factors not within our control, including geopolitical developments, supply and demand for oil and gas, regional production patterns, weather conditions and environmental concerns. Increases in the cost of diesel fuel could increase our cost of goods sold and operating costs to deliver products to our customers.

We do not actively hedge the price fluctuation of diesel fuel in general. Instead, we seek to minimize fuel cost risk through delivery route optimization and fleet utilization improvement.

## Controls and procedures

As filed, 3,130 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report. In connection with this review and the audit of our consolidated financial statements for the year ended December 31, 2024, we identified material weaknesses as were reported previously, which continue to exist as of June 30, 2025. We did not properly design or maintain effective controls over the control environment, risk assessment, control activities, information and communication components and monitoring of the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that as a result of the material weaknesses and control deficiencies as reported in our Annual Report on Form 10-K for the year ended December 31, 2024, our disclosure controls and procedures were not effective as of June 30, 2025. Notwithstanding the weaknesses, our management has concluded that the financial statements included elsewhere in this report present fairly, and in all material respects, our financial position, results of operation and cash flow in conformity with GAAP.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting and Disclosure Controls

Management remains committed to ongoing efforts to address material weaknesses. Although we will continue to implement measures to remedy our internal control deficiencies, there can be no assurance that our efforts will be successful or avoid potential future material weaknesses. In addition, until remediation steps have been completed and operated for a sufficient period of time, and subsequent evaluation of their effectiveness is completed, the material weaknesses previously identified will continue to exist.

Other than the actions taken to continue our material weaknesses remediation efforts, previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 150 characters.

There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Filed Aug 11, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-039583. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.