HF Foods Group Inc.

Good afternoon ladies and gentlemen and welcome to the HO Foods Group's third quarter 2025 earnings call. All participants will be in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please key in star and then zero on your telephone keypad. Please note that this event is being recorded. I will now hand over to Madeline Kittle of ICR. Please go ahead.

Welcome to HF Foods Group third quarter 2025 earnings conference call. Joining me today on today's call are Felix Lin, the company's president and chief executive officer, and Paul McGarry, the company's interim 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' 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 these measures provide investors with a useful perspective on the underlying growth trends of the business and have included in the earnings release a full reconciliation of non-GAAP financial measures. to the most comparable gap measures. Now, I will turn the call over to Felix.

Hello, everyone. Welcome to HFU's third quarter 2025 earnings call. I'll provide a business update, and Paul will speak to our third quarter financial results. Then we'll open up the line for Q&A. I am pleased to announce that we continue our momentum in the third quarter of 2025. Net revenue increased 2.9% year-over-year to $307 million. and gross profit increased 0.5% to $50.4 million. Also notably, adjusted EBITDA increased 41.5% year-over-year to $11.7 million. Our results reflect our continued discipline, execution against our strategic initiatives, and showcase the resilience of our business model. Despite ongoing macro challenges, including tariff pressures and shifts in consumer spending behaviors, Our transformation initiatives are paving the way for continued growth and improvement throughout the business. Our third quarter performance demonstrates the strength of our operational focus and strategic positioning. We have been actively diversifying our supplier base and exploring alternative sourcing strategies to ensure continuity and cost effectiveness in our supply chain. Our strategic inventory management and proactive pricing actions have allowed us to effectively navigate the changing environment while delivering solid net revenue growth and significant adjusted EBITDA growth. We are encouraged by our strong performance in third quarter and a solid foundation we've built. While we have seen some lower foot traffic consistent with broader industry trends, this was offset by strong volume in select markets and pricing actions we have taken. Based on our current trend, we expect Q4 results to be similar to what we achieved in Q3. We remain extremely confident in our long-term growth strategy and are committed to our capital investment in growing our capacity as we continue building momentum for the rest of the year and into 2026. Our digital transformation initiative continues to deliver on its promise. We reach a major milestone on May 1st. with a successful deployment of a new modern ERP application across our entire network. All of our locations are now operating on a single unified ERP platform that will help us to achieve breakthrough levels of efficiency, visibility, and control across our operations, unlocking the full potential of our centralized purchasing capabilities over time. I am pleased to report that the ERP system is running smoothly as planned. The next phase of this program is focused on rationalizing our sales force. With our operations unified on a single system, we now plan to restructure our sales operation, which will reduce costs over time and further strengthen our competitive positioning. We expect initiatives to kick off in the second half of Q4 2025 and run through the first part of Q1 2026, providing efficiencies in our sales operations We're consolidating two sales operations into one, which we believe provides us better control over the overall sales process and provides improved customer service. This represents the final key piece to our business integration transformation. Our strategic facility enhancement initiatives continue to advance across multiple regions, positioning us for sustained growth. Renovation at our Charlotte Distribution Center are largely complete. with the final permits imminent. Our state-of-the-art Atlanta facility project, which we expect will create meaningful organic growth opportunities through expanded cross-selling capabilities, is on track for completion later this year. The cold storage capacity expansion in Atlanta is expected to double our capacity in the region and enable us to significantly increase frozen seafood sales to our existing customer base along the eastern seaboard. meaningfully expanding our southeast presence. In the quarter, we announced the acquisition of our Chicago warehouse. This strategic acquisition advances HF's ongoing transformation plan to improve operational efficiency, reduce facility costs, and strengthen organic growth through cross-selling opportunities. Acquiring the facility enabled us to exit the lease agreement early. improve operating expenses, and invest in facility to grow additional capacity and drive consolidation opportunities. These exciting infrastructure investments reflect our ongoing commitment to optimizing our distribution network and creating a stronger foundation for sustainable growth. M&A remains a core pillar of our growth strategy. HS Foods is the only scale food service provider in the Asian specialty market in the United States. and we believe we are the strategic acquirer of choice within our space. We are focused on expanding our geographic footprint in high potential markets, capturing operational synergies, broadening our customer base, and enhancing our product and service capabilities. We remain disciplined but optimistic about M&A opportunities in 2025 and beyond. We're actively evaluating opportunities, and we believe our proven ability to successfully navigate the terror landscape positions us uniquely to identify and execute attractive tuck-in acquisitions that will benefit from an operational expertise and scale. Before I turn the call over, I'd like to welcome Paul McGarry, who is joining us on the first earnings call as interim CFO of HF Foods. Paul has been a key member of our finance team as our vice president, corporate controller, and brings extensive finance experience and deep knowledge of HF Foods business operations. We're grateful for his seamless leadership during this executive transition. Now over to you, Paul.