HF Foods Group Inc. Q4 FY2025 earnings call

Hello, everyone. Welcome to HF Foods 2025 earnings call. Felix Lin provided a business update. They drove meaningful continuous momentum despite headwinds in 2025. Made progress on long-term transformation plan. Consolidated two sales call center operations, completed full ERP implementation across distribution centers, renovated Charlotte location and completed Phase 1 of Atlanta facility, acquired Chicago warehouse. Paul McGarry reviewed 2025 financial results: net revenue increased 2.2% to $1.23 billion, gross profit increased 1.2% to $207.6 million, gross profit margin decreased slightly, DS&A expenses increased, adjusted EBITDA increased 6.9%, net loss decreased, adjusted net income and adjusted earnings per share increased. Felix closed by emphasizing commitment to transformation initiatives, strategic investment, and focus on long-term objectives.

Net revenue increased 2.2% year-over-year to $1.23 billion, gross profit increased 1.2% to $207.6 million, and adjusted EBITDA increased 6.9% year-over-year.

Based on current trends, expect 2026 to be like 2025 with low single-digit growth on top line and bottom line for adjusted EBITDA and gross profit. Reflects strategy to ramp up cross-selling opportunities, focus on increasing customers' wallet size and combat competitive pricing pressure.

Today's discussion contains forward-looking statements subject to several known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.

Q: Hey guys, good afternoon. Thank you for taking my questions. And Paul, congratulations on the official title. Felix, congrats on great execution for the year, despite the noticeable headwinds. But I'm 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.

A: Hi, Daniel. Appreciate the question. Yeah, I think the biggest, you know, opportunity is going to be around cross-selling with respect in the southeast, right? You know, we just moved into our new facility that's effectively twice as big as the older facility in Atlanta. and we start to acquire some new accounts within the region. But I think we're still going through a ramp-up phase here. As I noted earlier, it's going to take a little bit of time to completely ramp up the volume and utilize the space. And second phase of our freezer construction is going to start here in the Q2 of 2026. So likely it's going to be 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 are going in in 2026 as well, prepping us for meaningful cross-selling organic growth in the Midwest region in 2027 and beyond.

Q: 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've seen more or less traffic year-to-date would also be helpful. Thank you.

A: Yeah, sure. So with respect to February and Q1, obviously we're still in the middle of it, but I do see that, again, there's been a lot of good initiatives put in place, specifically even starting in late Q3 and Q4 of 2025. We've been working with a handful of strategic vendors to run promotional campaigns for where the vendors are the one that's kind of 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's been very impactful for us in the second half of 2025, and we're seeing that in the first quarter of the year as well. So I do see perhaps there's going to be some meaningful uptick from a volume standpoint so far in Q1 versus 2025.

Q: 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.

A: Yeah, I think it's still too early to say exactly how much refund is going to be available. As you guys might recall, Not all 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's also a reflection of the industry that we're 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 again, we're 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.