Good morning, everybody. It's loud. Good morning, everybody. I am Bill Kirk, Roth's food, retail, distribution, and beverages analyst. You are here in the consumer track in the blue room, where we're about to hear from HF Foods CEO Felix Lin and CFO Paul McGarry. Before I get started, I'd like to take a moment to thank our sponsors of the conference and our title sponsor of this track. You can see it to the side of me. It is Crowe. Please go outside, visit our sponsor booths between your meetings and sessions. Another point of clarity, if you need Wi-Fi, the network is Roth. You do not need a password for the Wi-Fi. Just be sure to silence your phones. If you need any help with your one-on-one meeting schedule, go upstairs, go see the one-on-one booth right in the hotel lobby. Let's get started. HF Foods is a specialty restaurant distributor focused on Asian specialty accounts. 2025 was a notable year for you in many ways. It was a year of big investment, but also your results stood out in the face of that investment. When I think about 2025, you had tariff pressure, you made those extra investments, yet you still delivered EBITDA growth. 2025, you faced some restaurant traffic pressure industry-wide, yet you still delivered revenue growth. Felix, what I'd like to do is start with 2025. Maybe we can just start with, broadly speaking, how the industry performed, and within that, how Asian specialty concepts performed. Yeah. I think overall, you know, and again, if you pay attention to some of the larger broadliners, the message was pretty consistent in that, you know, there's definitely some lower foot traffic pressure that everyone was dealing with. We weren't exempt from that. But I think given our business, especially how we operate it, you know, from a spot standpoint, right, the buying and selling side of it. Definitely, you mentioned tariff was actually not as big of an impact for us in 2025. In fact, we actually benefit from that because we were able to sell through some low-cost inventory, you know, in the second quarter and third quarter last year. Overall, if you look at our business, because we're largely dealing with independent mom-and-pop businesses, generally when I talk about even in previously, most of our customers do fairly well if there's any sort of potential recession that's kind of coming our way because of the value proposition that our customers offers. It is about value in terms of what customers get from the independent restaurants that we service. Even with tariff and some of the macro challenges, we're still able to grow, you know, into single digits. To your point, notably, EBITDA was up almost 7% year-over-year. 2025 was a decent year for us. Sticking with the broad conversation of restaurant performance, what are you seeing between independent restaurant concepts and chain concepts? Are there any noticeable differences right now between the two groups? It's generally with the margin that you're able to command, chain versus independent. That's why you see some of the larger guys are trying to move their book of business more from the contract commitment chain restaurant to the independent. Again, you know, scale, size matters. If you've got large chain businesses, they try to negotiate terms and just beat you up on margin. What we're seeing is that independent generally will command a higher margin. When I think about 2025, some of the broad restaurant traffic weakness kind of began in February of 2025. We've now lapped that kind of shock to the consumer, what may have caused it. How are you seeing the business as you lap some of the issues that emerged in early 2025? Yeah. I think things have somewhat normalized. Again, 2025, early on, you know, we were just coming off of a very positive Q4 2024. There's definitely some policy changes that drove a little bit of lower foot traffic for our line of business. You have the tariff impact that really wasn't felt until probably Q3, Q4 of last year. That's kind of overall market itself. I think going into 2026 now, you know, again, we're seeing some of the similar pattern. We're still seeing 2026 as a year of perhaps, again, that low- to mid-single-digit% growth opportunity for us with some, you know, probably some more on the pricing side of it. There's probably some competitive pressure. Our focus is shifting a little bit from a year of investment in 2025 - 2026, really executing and focusing on how do we leverage the investment that we made, ramping up volume and getting a higher share of the wallet. Renewing and having a stronger focus on this M&A pipeline that we've been talking about for the last couple of years. Because I think, you know, just given some of the things that we've been dealing with in 2025, most of our competitors are these smaller first-generation operators. They're getting squeezed really, really hard in this macro environment. It just offers that even better opportunity for us to go after maybe looking at deals that's at a much better multiple than what I would have paid a year ago. I wasn't gonna go there this early in the conversation, but since we're on M&A, it sounds like maybe valuation is what has maybe slowed you from pursuing some of these targets. Is that opening up now? Are you seeing more attractive valuations? Are the sellers out there more reasonable about what the value is? Yeah. You know, the pipeline had definitely increased over the last 12 months. You know, some of them we've known for a while. But again, when you're in the spot market, fundamentally, you know, they saw that there was a little bit extra momentum for them with the tariff and then second quarter last year, so things are, you know, kinda quiet down a little bit. But now as they're getting more competitive pressure, that certainly have increased. I think one thing consistently that's been true is that we are the acquirer of choice. Again, all the targets that we've been evaluating, whether it's new or the ones that we kinda reinitiate conversations, it's all largely inbound for us. That's been very positive. Again, we're just gonna be disciplined, go through and evaluate the number of options we have, you know, and make sure that the next one or two acquisitions, you know, checks all the boxes here for us. Okay. Let's talk about some of the investments you made in 2025 and how that sets you up for 2026. In the Southeast, you recently opened a new facility to add capacity. What is the opportunity you see in the Southeast, and how do you unlock that opportunity? Yes. Southeast is probably one of the largest, you know, market for us in general. This is a long-term play, the fact that we are putting in investment. We double our ambient space square footage there, you know, between last year and this year. We still have a little bit minor investment that we got to make this year, you know, in terms of the cold storage. That's kind of phase two that's launching here in the next few months. It's really kind of the first step of really going after cross-selling opportunities. Because today in the Southeast, we largely only focus on, you know, anything outside frozen products because of historically limited cold storage capacity. That'll be step one, and then as we expand and go on the offense here in the Southeast, then we'll kinda move into the Midwest region. That's a complete opposite where we have sufficient cold storage capacity, but not enough ambient space. When we talk about $200 million-$300 million organic growth opportunity over the next several years, a good bit of it will come from both the cold storage frozen product in the Southeast and the ambient products in the Midwest. As you bring that cold storage to the Southeast and those seafood options to the Southeast, I imagine as you're trying to cross-sell, those customers are already buying seafood from someone. How do you dislodge that seafood relationship and say HF Foods is the right person to handle your seafood needs? Yeah. I mean, first of all, you know, again, if you look at our overall, the industry that we're in, right? It's a $50 billion addressable market, and there's over 94,000 independent restaurants. Today, HF serves a little bit over 15,000. We have access to about 16% of the market share. If you look at frozen product, frozen seafood as a product category of our business, it's over a $400 million business today. It's a little bit over 1/3 of our overall business. Within our space, we're by far the largest service provider that sells frozen seafood. From a scale standpoint, there's no way some of these other guys that they can compete with us. We're just two months into the year, and I'll say that, you know, it's been fairly positive from a new account acquisition standpoint. Again, it's probably mid-single digit actual number of account growth here for us just in the first couple of months for the Atlanta market itself. That's before adding seafood. Correct. If you think about you're adding capacity, but for years you've done very little to kinda market yourself, right? The marketing spend's been effectively zero 'cause you didn't have extra capacity to use. Now with the added capacity, what are your marketing plans to tell people about your capabilities in the region? Yeah. We're going you know, again, going on offense all different channels. You're right. You know, we've been in business for 30 years now, and over the last 30 years, we've spent a whopping $0 in marketing. Because again, it's all about reputation, word of mouth. The business always has naturally come to us. It's been in our experience, every time we expanded our footprint, we're able to fill the shelf and do business there. With active investment that we made in 2025, again, we wanna do things a little bit differently. We are going after whether it's our traditional core business or even market ourselves as a more broad Asian specialty service provider. It's going into Asian groceries as well or even some other adjacent ethnic groups. There's some marketing effort now, that's happening specifically, you know, aimed at account acquisitions. Another big area that you refined in late 2025 was the sales force. Can you talk about the changes you made to your sales force, what the benefits are to those changes, and how you protect as you're going through that, you know, process, how you protect what is a unique asset for you in your sales force? Yeah. You know, again, no different than a lot of other industries, relationships matter for our business. Historically we had two different call center operations that one we had controlled directly and have expanded over time, and one that was outsourced. We brought the third-party outsourced call center, you know, into our the one that we control. We've expanded that. The key there is, again, when you're trying to go on the offense, you wanna make sure you have a sales force that is incentivized. You have full control over promotion campaigns, pricing. And all of that. It's more of a, again, more of a medium and long-term play change that we have to make. In the short term, of course, there's gonna be a learning curve as we go through. One of the value propositions we have for our customer is the number of SKUs that we have to offer, right? We carry over 20,000 SKUs in our product portfolio. Getting this new sales team to understand the pricing, understand the product, it's gonna take a little bit of time. But so far, you know, they've been doing very well. We're just two months into this transition, and that specifically is for our Southeast market. Again, complements as part of our offensive play, strategy here that we want to execute over the next couple of years. Another part to handle the complexity of the number of SKUs is you implemented a new ERP system. Were there any disruptions as you put the new ERP system in place? Now that you're on the other side of it, what are the benefits of having the new system? Yeah. You know, again, anyone that's been through a system implementation understands how complicated that could be. We spent, you know, almost two years planning for that. Really 2025, you know, end of 2024 and most of 2025 was just executing. Literally, I think it was 16 sites within a nine-month period, and we had zero days of disruption on that. From an execution standpoint, I think the team had done a very, very good job. Even if you look at our financials right now, it's really gonna be second half of 2026 when you have true year-over-year comparison because we rationalize a lot of the SKUs and we bucket them from that standpoint. Over time, we do expect that that's gonna enable us to, one, maybe buy better because from a data standpoint there's over 15 distribution businesses we can figure out, again, consolidate a lot of the purchasing. Then it also enable us from a operations standpoint to look at some efficiency plays, you know, from a route optimization all the time. That will all come into play starting in 2026. Okay. As we enter what you've called this next phase, you mentioned the Southeast, and then after that, the Midwest. It's the inverse opportunity, it sounds like, in the Midwest. When does that opportunity start to materialize? Yeah. Midwest will likely. Again, you know, we just acquired our Chicago facility in the last couple of months. Again, very minimal investment that's going in there because it's a facility that we currently operate out of. That's gonna come into play probably second half of 2026, and then we're gonna pivot to other Midwest regions. I wanna go back to the whole M&A. I mean, again, as more targets are coming in, we're evaluating them. You know, part of this, the organic and inorganic side of it goes hand in hand, and it complements each other very, very well. In some situations, we might have a target that fits in a geographic region, offer additional capacity. It might change what our organic investment plan is. Again, that's all part of calculus as we look at what makes sense here for 2026. Another program you're piloting is an e-commerce program. I know it's still in that pilot phase, but what are you seeing in excitement or interest in the program, and what are you learning from it in terms of what types of products people are excited about or want to be part of the e-commerce program? Yeah. Look, e-commerce is gonna be a huge part of our future for a couple of reasons, right? One, it potentially provides an incremental revenue stream in terms of different type of products. Our core business is focused on food service and inventory that we sell to independent restaurants. The e-commerce side could be other specialty product that we sell to actual end consumers. We piloted that at two locations, one in North Carolina and one in our Florida location. In the first few months into this, I think that's been very positive. Again, the margin profile for that kind of product and of the platform is completely different. We're looking to potentially expand from that. At the same time, we're also evaluating opportunities. Maybe it's a way to partner with someone, you know, from a technology standpoint that really understands the e-commerce platform itself. Certainly there's been a lot of interest out there because, one, the strongest value proposition for us, that HF that can offer, it is the access to, again, over 15,000 accounts nationally. You think about if you want to introduce new products, you know, this is the direct channel that you can start in the U.S. side of it. We also have an increased number of international vendors now that's coming directly to HF and say, "We want to start and initiate, you know, product offering in the U.S. Would you guys be interested in partnering with us?" All of that just kind of ties together. It's been very good. You touched on this at the beginning. I heard you recently say that no one larger or smaller than us is better prepared to capture these opportunities. Why is that? Why is there no one out there larger or no one out there smaller in a better position to capture what opportunities you see? Yeah. If you look at the competitive landscape, right, you know, we don't compete with the larger guys, because one, fundamentally, they don't understand the culture side of the business, yeah, and the products that's required. If you look at our portfolio, again, over 20,000 SKUs, over nearly 50% of it, 10,000 or so, it's in Asian specialty, even though they only make up 25% of my revenue. Having an understanding of what your customers actually want and demand. That's a key, right? In some cases, we actually even sell small volumes of specialty product to the big three, you know, in some instances. Culture matters, connection matters, the customer stickiness. That's our moat versus the larger guys. Yet we have this national footprint, you know, coast-to-coast coverage. You know, we service 95% economy in the U.S. The only player nationally that have that kind of coverage here. Then the smaller guys, again, you know, there's only a handful of competitors, they're mostly regional. That's over $100 million top-line business. Most of them, it's in that $30 million, $40 million, $50 million, up to $70 million, $80 million top-line revenue. As long as we're able to behave as a billion-dollar business from a scale standpoint, there's no way that these guys can be more competitive than we can, both from a pricing, service, and offering, all that standpoint. That's why in the last couple of years, and, you know, our assumptions were confirmed as we evaluate these kind of M&A targets. You look at what their margin profile is. It's very different, which also gets me excited because as we look at bringing these targets into the portfolio, right, again, over the next three, four, five years, that's how much of a pipeline there is. You realize that there's a synergy there, and from a margin expansion standpoint, it could be overnight just by taking over the purchasing side of it without changing anything that we do. So that just complements in terms of what we wanna do. Fundamentally, how do you get from a $1.2 billion business to $1.3 billion, $1.5 billion, $2 billion or more? Because again, we're in the $50 billion industry. You know, but more specifically, if you look at the 94,000 independent restaurants, that's Asian specifically. Over 2/3 of them, it's what I consider, mostly owned by, you know, ethnic Chinese in the U.S. Again, given our background, how the business was founded, that connection is there. I think we're just in the best position, whether it's versus larger players or the smaller ones, to really capture a lion's share of this. It's a matter of how quickly we can get into it. That's why 2025 was a big year for us in terms of investment. Because you have to make that investment in order to go capture that down the line. The next three to four years is all about now ramping up organically, complement that with very meaningful M&A tuck in. As you get bigger and bigger and bigger, you get more scale, you buy better, you sell better. It's a matter of execution here from here on out for us. You touched on M&A a few times. What if we flip it? What would you say to one of those larger strategic players who aren't doing what you're doing, but would be interested in your $1.2 billion book of business, would be interested in some of the underlying hard assets? What would you say to a strategic that came to you because they need what you have? Yeah, look, I mean, I think we can be. That could be a very interesting conversation. If they want to get into the Asian specialty space, which I think, well, I know they do, because again, some of these guys have been talking about publicly. I think there could be an opportunity for some sort of partnership maybe here down the line, right? There's definitely a lot of synergy here, in terms of what we're good at, what these guys are good at. Again, if any one of the big guys want to get into the Asian space in a meaningful way, I think there's definitely a partnership conversation that could exist with HF. We're getting a little tight on time. Oh, we got a question from the audience. I'll repeat it into the mic. That way we catch it. How do you feel about your ability to raise price in this environment to offset higher fuel costs when restaurant traffic is being squeezed as consumers face 30% higher gas prices? How are you navigating that near-term? How should we think about the impact on margins? The question for the webcast was, with rising fuel prices, how do you think about your ability to raise price given consumer wallets are stretched and fuel has obviously been very inflationary over the last couple weeks? Yeah, look, I mean, we have long-term relationship with most of our customer, right? Again, our customer retention, it's upwards of 90%+, right? When the industry is probably in the 60%-70% range. That's because over time, we've built a very strong relationship with our customers. Again, we're paying very close attention to it. You know, it's not just about what we're willing to do, but also what the competitive landscape is in terms of, you know, the smaller competition that we're dealing with. Going related to that, if you look at what we've done in 2025 when the tariff first hit, we were in very active conversation with our vendors and our suppliers in terms of how do you pass along, how much do you pass along to the customers. In that situation, we've actually effectively close to 100% everything was passed through, right? Now, a portion of it was the vendors took it on, and then the portion of it, the customers took it on. There's a lot of active dialogue that goes on with our customers. I think in the short term, we're not first to kinda jump and say, "Well, there has to be a surcharge, you know, immediately of some sort." Because that's a very foreign thing to independent operators versus some of the chain business that could be written into contract, right? In special times, if there's an uptick in the fuel cost, then there's a short-term surcharge in that. Again, we have a business to run, you know, even though we're public. Of course, there's quarterly, you know, report cards that have to go out. The relationship side of this, what got us here matters over the long haul here. We work very closely with our customers. If it makes sense, then we'll do it. If it doesn't make sense, then we'll just hold back here a little bit. Yeah. I'll round out with one. Felix, you recently bought shares. Paul, you recently bought shares. Christine recently bought shares. When you're making these open market purchases, a year from now when we're sitting here, why will your open market purchases have been worthwhile? Well, some of this is pretty obvious to it. I mean, if anyone's been tracking HF personally, again, I've been buying shares five quarters in a row, right, since I stepped into this role. Of course, we believe in what the long-term trajectory of the business and the plans that we're executing on. Look, it's no secret if you look at our stock performance. It's obviously deteriorated quite a bit, you know, over the last several years. It's largely because, again, we're insider-heavy business. There's not enough public liquidity, you know, from a flow standpoint. From a value standpoint, again, we're in an industry that is extremely tough to get into. There's a lot of stickiness with our business. There's significant runway from an industry, you know, growth standpoint. We're in the best position for that. You know, candidly, we've talked about this publicly in the past, the market value of my assets, it's worth 2x-3x my market caps today. Again, we're a, you know, I think, 2025, we're just a little bit around $45 million EBITDA business, right? So our market cap doesn't make a whole lot of sense. It's not something that, again, we look at every single day. We're trying to execute what the strategy is over the next several years here for us. Well, I think we're up on time. Felix, thank you. Paul, thank you. Thank you for joining us, everybody in the room.