Greetings, and welcome to HF Foods Group Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jon DeDomenico with ICR. Thank you, Jon. You may begin.

Hello, everyone. Welcome to HF Foods Group Inc.'s 2025 Earnings Conference Call. Joining me on today's call are Felix Lin, the company's President and Chief Executive Officer, and Paul McGarry, the company's Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on management's current beliefs and expectations about future events, which are subject to several known and unknown risks and uncertainties. If you refer to HF Foods Group Inc.'s earnings release, as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from those expressed or implied by these forward-looking statements. The company undertakes no obligation to update or revise these forward-looking statements in the future. In these remarks, the company will make several references to non-GAAP financial measures, including adjusted EBITDA and non-GAAP diluted earnings per share. We believe that these measures provide investors with a useful perspective on the underlying growth trend of the business and have included in the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. I will now turn the call over to Felix.

Hello, everyone. Welcome to HF Foods Group Inc.'s 2025 earnings call. I will provide a business update, and Paul will speak to our 2025 financial results. Then we will open up the line for Q&A. It is no secret that 2025 brought headwinds for the broader foodservice industry in terms of tariff pressure and lower foot traffic. But against this backdrop, we drove meaningful continuous momentum for our business. Net revenue increased 2.2% year over year to $1.23 billion, and gross profit increased 1.2% to $207.6 million. Also notably, adjusted EBITDA increased 6.9% year over year. We made meaningful progress on our long-term transformation plan with respect to sales operations, digital infrastructure, and facilities upgrades. On sales operation, we have consolidated two sales call center operations into one as of late December 2025. This consolidation provides us better control over the overall sales process and improved customer service while maintaining the distinct connection we have with our customers through our understanding of their business language and product needs. This will reduce costs while further strengthening our competitive positioning. On digital transformation, we completed the full ERP implementation across all of our distribution centers. The new system will enable us to achieve higher levels of purchasing and operational efficiencies over time. I would like to note that as part of this implementation, we re-categorized many of our SKUs, which drives some variability in our year-over-year sales by category. You will see clean comparisons once we lap the implementation in the second half of 2026. I am also happy to announce that with the implementation of the new ERP system, we have fully remediated IT general controls-related deficiencies as of year-end 2025. This is a significant milestone. On facilities, the renovation of our Charlotte location is largely complete with final permits imminent.…

Thanks, Felix. I will now review our results for the year ended 12/31/2025 versus 2024. Net revenue for the year increased 2.2% to $1.23 billion from $1.20 billion in the prior year. The increase was primarily attributable to volume growth and pricing improvement in seafood and meat and poultry, and volume growth in commodity, partially offset by volume decreases within other categories. Gross profit increased by 1.2% to $207.6 million for the year compared to $205.2 million in 2024. The increase was attributable to an increase in net revenue, partially offset by increased costs. Gross profit margin decreased slightly to 16.9% compared to 17.1% in 2024. Distribution, selling, and administrative, or DS&A, expenses increased by $3.7 million to $201.8 million for the year, primarily due to increases in depreciation, occupancy, and nonrecurring transformation expenses, partially offset by a decrease in professional fees. DS&A expenses as a percentage of net revenue remained relatively consistent at 16.4% in 2025, compared to 16.5% in the prior year. Adjusted EBITDA increased 6.9% to $45 million for the year compared to $42 million in 2024. Total interest expense increased slightly to $11.5 million in 2025 compared to $11.4 million in the prior year. Net loss attributable to HF Foods Group Inc. was $38.8 million compared to a net loss of $48.5 million in 2024. The year-over-year improvement was primarily driven by a lower goodwill impairment charge and improved operating results. These favorable items were partially offset by the absence of the prior year gain on lease guarantee liability termination and by the year-over-year change in fair value of interest rate swaps. Importantly, following the 2025 impairment, we have no remaining goodwill, so this item will not affect results going forward. Adjusted net income attributable to HF Foods Group Inc. increased $2.9 million, or 20.9%, to $16.9 million compared to $14 million in the prior year period. Loss per share improved to $0.73 compared to a loss of $0.92 in the prior year period. Adjusted earnings per share increased to $0.32 compared to $0.26 in the prior year period. To summarize, 2025 was a year of steady progress in a challenging operating environment. We delivered year-over-year growth in net revenue, expanded adjusted EBITDA, and continued to invest in the infrastructure and systems that support more scalable, efficient execution going forward. Importantly, we finished the year having completed our ERP rollout across the network and remediated our IT general control deficiencies while also advancing key facility initiatives like Atlanta and Charlotte and positioning the business for improved operating leverage. As we move into 2026, we remain focused on disciplined execution, driving operational efficiency, supporting organic growth through cross-selling and network optimization, and maintaining prudent capital deployment. With the transformation foundation now largely in place, we believe we are well positioned to sustain momentum while remaining selective and strategic in pursuing tuck-in M&A that strengthens our footprint and capabilities. I will now hand it back to Felix for closing remarks.

Thanks, Paul. As we look ahead to 2026 and beyond, I want to emphasize our commitment to the comprehensive transformation initiatives that are reshaping HF Foods Group Inc. 2025 was a year of strategic investment for HF Foods Group Inc., and the investments we are making in our facilities, digital infrastructure, and operations will establish a strong foundation for our next phase of growth. While short-term uncertainties persist, we remain focused on our long-term strategic objectives. Our investments in digital transformation and infrastructure are strategically designed to drive organic growth through cross-selling opportunities while positioning us to complement this expansion with targeted M&A initiatives. Our key competitive advantages stem from the growing demand for authentic Asian cuisine and our unmatched position as a leading nationwide Asian specialty distributor. We are methodically building the infrastructure, systems, and capabilities needed to fully capitalize on these strategic advantages. As we move forward, we will continue to identify and implement additional efficiency measures while maintaining our commitment to service excellence and sustainable growth. Thank you for your continued support as we execute our strategic transformation. We look forward to sharing our progress with you on our next call. I will now hand over to the operator for live Q&A.

Thank you. We will now open for questions. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. One moment while we poll for questions. Our first question comes from the line of Daniel Scott Harriman with Sidoti & Company. Please proceed.

Hey, guys. Good afternoon. Thank you for taking my questions. And Paul, congratulations on the official title. Felix, congratulations on great execution for the year despite, you know, the noticeable headwinds. But I am just curious to start off, moving beyond 2025, can you talk a little bit about the biggest opportunities you see to drive incremental organic growth, particularly around cross-selling and expanding product availability across the customer base? And then secondly, just curious to hear a little bit more about how the operational initiatives implemented in 2025 are beginning to impact the day-to-day execution across the business.

Hi, Daniel. I appreciate the question. I think the biggest opportunity is going to be around cross-selling with respect to the Southeast. We just moved into our new facility that is effectively twice as big as the older facility in Atlanta, and we started to acquire some new accounts within the region. But I think we are still going through a ramp-up phase here. As I noted earlier, it is going to take a little bit of time to complete ramp-up of the volume and utilize the space, and second phase of our freezer construction is going to start here in 2026. So likely, it is going to be the second half before we see some meaningful incremental frozen seafood volume come into play for the Southeast market for us. And then fast forward, we also announced the acquisition of our Chicago facility, so the investments going in in 2026 as well are prepping us for meaningful cross-selling organic growth in the Midwest region in 2027 and beyond.

Thank you. Our next question comes from the line of William Joseph Kirk with ROTH Capital Partners. Please proceed.

Hey, this is Nick on for Bill. Thanks for taking the questions. First from me on February traffic, it was weaker last year. Just wondering if you could comment on the year-over-year change you saw this year just lapping that softer comp, and whether you have seen more or less traffic year to date would also be helpful. Thank you.

Yes, sure. With respect to February and Q1, obviously, we are still in the middle of it, but I do see that there have been a lot of good initiatives put in place, specifically even starting in late Q3 in 2025. We have been working with a handful of strategic vendors to run promotional campaigns where the vendors are the ones that are providing initiatives on the table for our customers and our sales team to go out and drive new product growth or push out additional volume. So that has been very impactful for us in the second half of 2025, and we are seeing that in the first quarter of the year as well. So I do see perhaps there is going to be some meaningful uptick from a volume standpoint so far in Q1 versus 2025.

Understood. I appreciate that. Second for me on the IEPA tariffs, do you have an estimate as to what you paid? Are you taking any action to get that money back? And what would you do with that capital if you did manage to get any capital back there? Thank you.

Yes. I think it is still too early to say exactly how much refund is going to be available. As you might recall, not 100% of the tariffs were part of the IEPA. There were some other tariff measures that the administration had put in place last year, and it is also a reflection of the industry that we are in. Largely, the supplier network, the supply chain itself, is made up of brokers. And in the past year, even prior to Liberation Day, we had really effectively negotiated with a large number of our overseas vendors for them to absorb quite a bit of the tariff impact. So we are still assessing the situation and keeping it very, very close. I think in the coming months here, perhaps in the next quarterly earnings call, there might be a little bit more information for us to offer.

Great. That is it for me. I will pass it on. Thank you.

Thank you. There are no further questions at this time. I would like to turn the call back over to Felix for any closing remarks.

Overall, I think 2025 was a great year of strategic investment for the company, and we made some pretty good strides here in terms of our overall three-to-five-year transformation plan. So we look forward to 2026. 2026 is going to be a continuation of the momentum that we have built on 2025 results. And again, M&A is going to be a huge part of our business, so that is where we are going to spend a lot of our time, thoroughly evaluating all the inbound calls that we have been getting on M&A and making some impact there, and then at the same time, continuing to improve our operational efficiency. We appreciate everyone continuing to follow the HF Foods Group Inc. story and the support, and look forward to updating everyone here in the coming quarters.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.