Earnings call transcript Q1 2023

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Operator

Good day, and welcome to The Chefs' Warehouse First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please

now Mr. Alex would like go to to over conference the Aldous, sir. turn ahead, I General Please Counsel.

Alex Aldous

today's Relations our Founder, also www.chefswarehouse.com operator. are By Jim It now, you, Good can have everyone. be section. XXXX CFO. me Thank under access earnings should to release. morning, Leddy, our at Chris quarter the and Chairman on Pappas, you CEO first Investor and found With call press

will be others earnings we adjusted non-GAAP financial EBITDA Throughout adjusted among call, this and well per estimated presenting measures including historical historical and adjusted conference net income and estimated and share. as EBITDA as both

financial our comparable GAAP These to in may press with measurements directly calculated and non-GAAP their not companies. most appear measures GAAP accordance release. calculated Quantitative reconciliations used financial measures by titled measures of differently today's in are non-GAAP financial be and similarly

our of are our you them. remind performance. put formal of statements not to regarding forward remarks, estimated need today Before and performance future on looking guarantees including undue should forward statements looking discussion we include Such our reliance begin statements, I part not financial that therefore everyone will

and risks results we that expect. These subject to materially from statements are numerous could actual differ cause uncertainties to what

on XX-K of risks quarterly available on website. and SEC Form our reports in are are report today's mentioned annual release. XX-Q, Some on these the in Others are discussed Form which

Today, our detail. we the Then going questions. call up we provide in results over first will quarter are to go update business a open and for

Chris? Chris the turn will With that, I to over Pappas. call

Chris Pappas

of Customer earnings during first events, the was our Alex, in significant coast and you, thank Thank several despite strong joining markets. all west for our demand XXXX, especially weather first XXXX quarter call. you quarter

into and per of to both January customer customer. as continue openings home the from in customer from dining gradually placements higher-end new grow in upscale March, February terms casual and away improved segments trends Revenue to

we enhance In addition in markets completed strategy to continue of as we in to serve. regions the California, expanding share Texas important several our acquisitions our organic growth, growth as we such and market

relevance our via facility and to as of A from synergies Category few the investments, the customers organic with and quarter first XXXX, highlights to improvements. technological first growth compared growth grow XX.X% operational include net in quarter consolidation sales. driving

Specialty which was by unique sales the XX.X%, year, growth case growth XX.X%. of were customer specialty of XX.X% organically up XX.X%, of prior over placement and approximately growth driven

Gross were category margins specialty as in XX XX.X% points. profit pounds Gross higher basis than year-over-year. of margin decreased in quarter year approximately basis margin XX the XX the center-of-the-plate increased in gross approximately XXXX, first to first points the basis Organic center-of-the-plate the the compared while points quarter. prior increased category

margins a profit detail Jim gross will in moments. provide more and on few

of a As of previously weeks of during acquisitions few key first and the XXXX. number closed the quarter announced, first the quarter we in second

In California we late region located the added Northern Valley Mike to our in Specialty Foods business. Hudson Napa January,

Foods. Greenleaf we Additionally, during Produce the & quarter, Specialty acquired second

robust produce a specialty the and Greenleaf in our is enhancing and presence area. with and Bay provide both California located partner Brisbane, Chefs in complementing broader

of addition a the with category in brands us for portfolio growth, these and in platform across cross-selling synergies our The region. of to great provides many opportunities vibrant companies the markets

food Houston. Texas acquisition process Dallas, includes also the Texas. The Houston In distributor division Foods, in roots Austin, deep Hardie’s Company, closed a and of fresh we March, late Fresh in local value with a Harvest premier added acquisition

comes at time of in addition story growth Warehouse the Hardie’s a great Chefs in region. The the

Allen our Brother's and located pace brand state-of-the-art Broadline at Our grow to we new in continues Specialty opened facility operations fast process a recently Dallas.

of force and on a focus Hardie’s Warehouse, accelerate facilities, Brother's uncompromised and unparalleled our the throughout Allen Texas people with and and Chefs' the which will a region. investing growth in and continuous will quality in customers benefit triple Together service, be

invest in both in leadership and expansion challenging markets. manner to we facility allowed by a made continue The talent during our and has decision growth and organic COVID to us very acquired with combined accelerating the platform years controlled across strong local impacted

process During we the Florida. phase move began the first quarter, square our in foot in new XXX,XXX into facility

processing months. we is Our specialty and operational the coming operations business seafood fresh meat and in center-of-the-plate expect for start to both

operations, plant of of our in part are our located state. Florida fully our the seafood this As central and processing Southern region fresh processing consolidating and specialty move, the portions of located in we sales protein operations

facility and and categories acquired new one synergistic growth fold-in room locations add growth to for ample category with will come. capacity to for ample processing operations in key expansion, years customer This provide our with

As closing Middle on month pleased East of joined family we of a our our and we are Chefs' companies since aspect integration. with six are every brands,

for culture, shared the solid to growth approach plan Our vision provided and roadmap region. go-to-market our has transition, in a a

the expectation both performance significant continues and to economically. region our growth CME's and exceeded display demographically has

forward we currently of Dubai, in success phase design to are and in We continued and planned look to expansion facility growth the our come.

service and plus evolving team for I for growth would providing quality warehouse for Chefs' of dedication our drive like an Warehouse. high the that members ever and their to to excellence X,XXX everyone model, thank and platform high-touch Chefs' each commitment

be at This the certified our our heart for our at excited operation talent work are the to are the of place we result in and to place year the by efforts customers is a continuous and second who of to a great supplier of Our epicenter company. beyond partners, we row. as

expectation choice. we environment, workplace excel actions in talent surpass and true a training team employer investing path, in is development, as aim it benefits, Whether of members our our to and and career our employee around

for I'll turn on detailed Jim? quarter that, more With discuss to over to our it an and liquidity. update Jim financial the information

Jim Leddy

our an sheet good Thank provide quarter and I'll on balance the morning, comparison liquidity. quarter and our a update current versus operating you, now year of Chris, everyone. and results prior provide

in XX.X% the million $XXX.X approximately an million XX.X% from the XX.X%, increased first organic Our a in acquisitions of of XX, approximately increase quarter. the well quarter $XXX.X growth quarter for was to sales in sales to sales net sales added the growth XXXX. for A which contribution net as result ended of from approximately XXXX, March as of sales

first quarter. of Net in the in X.X% category inflation quarter our inflation versus and in X.X% center-of-the-plate consisting X.X% year our was specialty of the category prior inflation

Gross versus million XX increased Gross of profit the increased basis margins year $XXX.X approximately for points profit quarter to XX.X% to the first $XXX.X million for quarter. prior XXXX XX.X%.

grow Warehouse. driving in us as allows growth, dollar scale has inflation continued moderate, gross aggregate to price at we Chefs' profit focused operating which leverage on we remain As to improve

driver administrative higher $XXX.X from higher quarter higher growth. for the increased $XXX.X to XX.X% year-over-year expenses XXXX. and benefit the general roughly of for and Selling, compensation first costs, were associated The costs volume primary million million quarter expenses with and facility costs of of first distribution XXXX

XX.X% quarter basis, first of for On to increased versus prior expenses XXXX of adjusted XX.X% and of an expenses the percentage were for quarter, the operating as XX% a XXXX. adjusted the sales, quarter compared first year operating net first

higher operating of the by $X.X first operating million was for in Operating compared income costs. to million the quarter offset XXXX primarily was higher The income gross XXXX. increase by quarter driven of first $XX.X partially profit for

of $X.X quarter first for XXXX. the relatively was tax versus Income expense first of XXXX, million quarter unchanged the

for to income Our $X.X XXXX, per diluted million quarter per compared of income $X.XX quarter unchanged the or for of share or $X.XX net XXXX. $X.X diluted the first was GAAP share first net million of

million to $X.X $X.XX first On $XX.X for of quarter. income diluted $X.XX XXXX, for had million per prior for adjusted the prior the of quarter net or the was or basis, share per million, compared the the a non-GAAP XXXX, diluted quarter year. we year for EBITDA first million first $X.X compared share quarter $XX.X first of of to Adjusted

Turning of quarter, balance of the on million sheet facility. liquidity. our million $XXX.X total availability million $XX.X our of to and the in of we cash comprised $XXX.X first At liquidity ABL had end and under the update

was and XX, inclusive cash million cash all of approximately of As net March debt equivalents. $XXX XXXX,

are of the current guidance of billion our the full for net will Based as sales providing in our to year to XXXX for that We billion. year range the full follows. guidance full $X.X Turning on in business, estimate $X.X year trends be the we XXXX.

be to to and be million $XXX million, million. $XXX adjusted and $XXX EBITDA million and profit $XXX between between Gross

updated guidance, our Regarding following from make please purposes. modeling note of the

the for remaining quarters Similarly, same we million quarter interest the $XX.X to $XX of million amortization three per expense approximately currently approximately on over expect quarter period. XXXX to and average be expect We average. per depreciation

non margin second consistent pandemic return guidance performance expenses we of currently build pattern the While of the by in fourth with of uneven the demand recorded a XXXX, XXXX, quarter combined insurance not that nature EBITDA core provide we quarter, expect to self quarter with XXXX and fourth due note adjusted to more our in years. pre quarter do to back related the please

Our full XX.X year count share is million shares. estimated diluted approximately

For conversion upon count fully currently the full to of notes our reporting diluted for for those notes issued and full the convertible purposes, the the senior included be be year, we dilutive that are unsecured shares in could expect year. accordingly, share

questions. at will And it this up to you. open Operator? point, Thank we

Operator

session. begin and Please Alex go from now question come the Instructions] with answer will question Slagle [Operator will the ahead. And Jefferies. We first

Alex Slagle

strategy. how good bit congratulations. on these I talk synergies fit very opportunities, wonder the if good your fit the Chefs. more the great growth you ask acquisition, look these I for mean, I outside, like from a Hey, wanted to and could into acquisitions morning, on really

came could sales verse trends? thoughts quarter the the much XQ how upside background XQ date curious Just and the on to these how EBITDA you guide on if provide increase separately, these any of contributed in the maybe and about, transactions

Chris Pappas

Yes. one. up. the break take beginning Sure. of it that I'll We'll

produce know selling ago on Francisco end them, XX they specialty. done it region. of growing Ironically, this eventually was San got produce this high is they've for think Greenleaf more us, side-by-side I as they buy XX the They've over into So, to a traded first kind years job. with in the been when San the And tried more reputation we we in Their best Francisco, marvelous side, group. to company years. and

them. the So And opportunity Group. join we've always Chefs have to them the admired

a build Warehouse in is and As out, they Seafood there whole our over us Allen plus XXX have business Brother's Steak between we business. million for area, which very Chefs' our a Bay that's business big

to the still all do downtown Sacramento. come the back. Bay go We way we really reach, whole Francisco's hasn't Tahoe Area. Our San to

the but that's job has to team San all our Monterey. where the management out Tahoe like from really reaching great said, way done Silicon to we've Obispo So a – Luis taking I time, people and are, everywhere been down to Valley

lot a with to the we we And our don't being and produce. start now of start their specialty grow to help sell really Greenleaf. able them overlap, our think can items. to synergize that we of We So, that think customers proteins lot a could

long-term, Vegas, brand. LA And love lot I see down could of into and with Francisco we the we're like other We mean, expansion. Las our category the a Arizona, San doing -- brand extending

environment mean, I we're I So other selling it very similar don't creates more know and to a markets. information. doing in dynamic Jim, much what And it's how

Jim Leddy

you Hardie's to all? at Did comment want on

Chris Pappas

you Once San do to with Yes. Hardie's. I'll and go back Francisco

Jim Leddy

Sure. Yes.

the tuck-ins combination in small of Greenleaf Hardie's XX% to about added revenue overall of So and and quarter, completed that top year-over-year kind other our the line the added growth. incremental first we about the

our growth. that is growth. top XX%. additional an think XX% M&A year-over-year and line now guidance of to of XX% was About X% So, prior XX% organic XX% to I Its

XX% now basis growth. last QX growth, wrapped and of incremental year organic of the that from X% full about a XX%t incremental QX and adds is and M&A from M&A combination XX% recent the and on year of So,

for kind the from adjusted of growth terms in it's of X% or year. to X% about going X% XX-XX. EBITDA So contribution, And organic

the is year. to incremental from the is and our the from then that XX% organic the from So our M&A is remainder guidance, incremental XX% and saw QX about growth adjusted additional in prior some of updated that contribution includes of about guidance and EBITDA we strength for the adjustment

Chris Pappas

our faster opportunities phenomenal The We've now. now. We is job. expectations. think growing So, been right been massive our really next doing has for That Texas, biggest something than team have looking there our again switching years. CW, growth hub Hardie's while that business our at is Texas Dallas over is major is to a a of XX the a few we've quite built acquisition years the to one

There's a reasons, many growth, are there. wealth. a And anybody population they like lot For companies People Chefs' move there. of of Warehouse. really isn't obviously, moving have lot there

opened going we we're Brother's So, where exponentially. and Allen that steaks now our we facility cutting grow business to think is

need we of with bigger They little a something touch reach. growth, put Houston to and obviously our for kind Austin accelerate San every looking looking and platform and Hardie's were gave us we to Antonio we're another So because size. that in facility at market

I'm and So they lot – us for that. say, most looking I they people would the had a gave is important thing the of and routes

all So cities great the accelerate with specialty can and we plan. think expansion major really And selling to their for introduction, major more think and going Allen the into our Brother's. out growth we accounts, I work of it's

excited have we're Hardie's to the So team. really

they And of growth process. another element give too. do us They

as to think exponentially in So they – a labor, is lot solutions, we customers. environment we continue where that the having will do type grow, grow partner division you business we more a a today's have lot a of boutique well. better And especially that a very of challenged. think of major hospitality to much On become

Alex Slagle

if a if into helpful. was through That's traffic what through April it saw talk and gradual a the how customer very any thoughts just quarter changed? commentary. pretty you. it your of It across trends sounds could on base from trends Thank it like looked the into But follow-up, you trended about build you some underlying anything's like And the April? March

Jim Leddy

Yes.

kind was little as quarter a maybe bit expected. than first expected, of The stronger

higher certain strongest off little and January you and January that's think had a out events But couldn't did gradual actually quarter, coming but of for fourth we good February. build I March cliff month you're and have our expected. kind in February your and weather the months in were early fall the of a Northern and normal. we December There -- where in January some into bit think certain were deliver. I We a as to significant strength, Obviously, February very northwest regions late markets. in was California and pretty we it days

build and overall month. being some customer that, was the other It that month. materially be business a week. calendar week the noise to around being decent in impact has different vacations and a really seasonally. school pretty strength us the continues didn't April But seemed terms of demand. of April to good But a been Easter with than There different a

Alex Slagle

you. Thank

Operator

Peter come question next Saleh Please from The BTIG. will with ahead. go

Peter Saleh

another on congrats and morning Good great quarter. Great.

dining with you and this Darden I do Given you with the care any guys over just guys was the Darden? your is Ruth. -- what curious news at morning of if buying comment business if to Ruth relationship division fine

Chris Pappas

did buy Darden today? I'm Who Yes. sorry.

Peter Saleh

Hospitality. Ruth's

Jim Leddy

Ruth's Chris.

Chris Pappas

they Didn't Oh, Ruth's that. bought about hear Chris?

Jim Leddy

Yes, morning. we didn't hear that this

Peter Saleh

mean, to we That before care was don't a bit you guys else. guys came you on know If not, can move I I something comment. on. just if to

Chris Pappas

Yes. focus But with I thousands of smaller groups say, again Ruth. really great Again, do mean, don't and our North around restaurants more much is business. we America. independent

By focus, we XXXX what that really with with we again, do business our is we're best. doors accident, probably Darden, doing market it's our business, Darden. in over do we people knocking business So and target. do but on real we again not with the everybody. growth We'll sales, do focus But not

Peter Saleh

Understood.

on that then inflation you go if the And I just potentially just, bit the deflation thoughts among moderating have here, quarter. overall basis the for that there's little an again, that inflation impact remind moderated for on us noticed impacts Okay. I a the year? of your gross can how has concern on think forward could still investors rest and/or your just a Any some margin? And margins. inflation X.X%

be Just thoughts any Thank you. would there helpful?

Chris Pappas

Yes, sure Peter. Yes.

and a this to and industry quarter. XX% low-to-mid has from the we then throughout inflation last XX% single kind Obviously, kind expected. year expected of the down of of out played digits way I think think lot I that moderating

the the of expect to base XXXX year-over-years. continue to drive We effect

into We We prices And deflation expect sequentially. continued specialty seasonality. sequential moderation from some were center-of-the-play on prices but saw QX QX, flat normal that's fairly

think just normal more out it I rest And see year. of returning So, to how we'll inflation the we're plays that the dynamics.

impacts our to dollars and above profit adjusted and our affects there's growing to again There's margins? deflation on focus Product we gross of prepared once margins. how remarks, going seasonality inflation So OpEx. profit gross the it terms many In mix, our back

And a managing so, basis, with dollars nice given of full gap implies guidance have growth and our comments look you full XXXX. on have our cadence basis, we OpEx gross us year that year a our on a regarding the effectively. at to especially rate and profit efficiently And

Peter Saleh

Great. Thank you very much.

Operator

The next Bania with question Please go will come Kelly Capital from BMO Markets. ahead.

Kelly Bania

that Jim, Good I just about comment to here. Chris morning. growth morning, Good questions. go to profit the we're our on about for focus talking the back Thanks dollar that Jim. gross taking just wanted and

industry away about I on shifted, similar ago bit a towards how the dollars, several inflation think gross particularly focusing you months this maybe profit as a made percentage moderates. comment from little

there's pricing was you've maybe the process kind just changed whole dollars, I managed is that or that consistent that the of you've of or focusing or organization curious just how business? And on always any that changed procedures the kind with support you've if this on compensation anything

Chris Pappas

it's pretty Yes. consistent. Good I question, mean, Kelly.

I we've up think XX% go first of like as inflation you all, overnight. had down, and never

So, passing – a $XX you I we respect And But to territory. were money, to mean, your really of got to but pain customers. of – that a if and I type $XX. and you it's all to making uncharted when in that box lot respect more mean, we how you're inflation much make now you XX% box on on are is want there's competition got

don't leverage overhead. dollars to – make make more a your we and really XX% gross need to on profit You need get

we our of is the city different. a is different, little do every mix business each with a managers, So, little

costly sales It's look of mix at a We of the mix it's profit And focused. So, dollars. we're very incentivize correct. way our a margin, gross and margin it's you're teams. And drop, we gross the deliveries, profit people business of per in of the part loading right? right? and trucks mean delivering. a all the I is Those dollars making involved mix

So, daily on we basis. a do it

constantly that to focus the We just at size our of our the the the and are looking with the sales focus of drop continuously teams and the have align trying business mix and and we're meeting goals. team company

you see right. certain gross So, started margins which start could we categories, more be see shift deflation, to profit again, if the on have to in

could to and prices So, in down, is back come key are give dollars more down, down come coming you the are if start few all a starting not to points prices margin. it to as grab

more focus And margin way saying, when than just the goes a bit is it's little focus So profit in on on the dollars. the up. you're gross more

I that think line get captain same time, much. sneak little too So, a kind at maybe constant it's these to at we run allow too wheel the business, the the departments competition to need to in speeding not into your you're because And bottom business. much of bit the managing a

Kelly Bania

touch Okay. Florida? on And expansion as That's transition making I any guess longer new the of facility some costs might and of build near the of you very that Florida you the be term can kind the in helpful. term out there also, with savings what versus associated

Chris Pappas

Sure. we are Well again, consolidating.

So, maybe year. been a I right has would business now we We time building And say close have delayed. to has space multiple a the small -- the of out ago. ran facilities. long been

a time. So, we've very inefficiently been very operating long for

that facility area now, right We're of going Pompano. processing new we doing to major in down manufacture the in consolidate processing we're consolidate of the that in Miami. meat our Orlando are seafood So to Northern going most into --

warehouses that our facility we're in that facility. overstock to consolidate Into Chefs Miami, going and into

a but more a with, going precise to give but So opportunity efficiently. massive course Jim inefficiencies. have of start of could occupancy even you amount and eliminate the really We'll faster grow I we're more higher lot think to the numbers, to

that And to I up really of it's – quickly cost. think eat we're a it's going to accelerate growth. going lot

Jim Leddy

costs, our Kelly, Chris guidance. just modeled rent mentioned. incremental the Yes, as on year operating the costs into We've short-term and full

meat center-of-the-plate, in it capability of our in we're there's was a shop cut guidance original as in X along it's full a with from already and fish building. same -- this guidance. is in building So, well for LA as [ph] first our and produce there perspective, already And – all there, where facilities specialty the really that

leverage the long term a next lot of the a couple of we build we it's So, to investment years business. drive operating in and as expect

Kelly Bania

more. release, you your might are the openings. Chris, And maybe just thoughts restaurant you a your what one I Wonderful. customer and evolve then, of might environment from in the tighter just how new think hearing And what customers credit mentioned on openings had here? relationships impact about be and new

Chris Pappas

I that's like wait and still a Yes. see. think

up openings. restaurants. mean, customers so many We there's have many core so more opening I

I they're well think So, funded.

might draw real of get new could these as putting think I little slowdown estate is on slow of them a maybe maybe a more into and – hold most of new where see offices. some to as where in lot funding of their the you is people projects restaurants some of the buildings well a the are that into

So, the been we're last or something interesting happening business. actually, it's year seeing for two, very more that's

more I But what's New increase the opening in spread well people and especially major our Texas and in are in success customers lot Florida. is and restaurants California the are, markets, of a driving where as right? our all out York think

to a driving businesses to week, where new back unfortunately busy, on unfortunately, office where lot not underwater that's not people traveling to they Those where depend days the or our eaten still they're of every four, or the city three in So going a of certain day. markets were. that are volume core companies. living maybe They're are and But to are people but very Chef's' some working they the they're coming a degree.

not have the And that restaurant So of they now, continue I that's to tours restaurants, open do. down. what slow seen as because we think

be seeing we're would But customer our of affect as not the interesting really that's to tightening going a from if credit year now, of see base. it it. now, to So

Kelly Bania

Thank you.

Operator

Wolf question with next Andrew King. from will Please come The C.L. go ahead.

Andrew Wolf

you. Good morning. Thank

their added I To to mean, of added. find value in kind of the that's want world on business an accepting own value Chris, which intriguing the going trend for or But high – a foodservice Idea something, food you kind Houston. revisit what, is least to outsourcing guess their just that of of Hardie's, some preparation is other given asking the could added to work. that, where us right, Chefs little tells about you kind that business bought think is at just of you I you of I really end that's kind differentiation tell and they value So ask service? of some part doing

Chris Pappas

Again, we base. value Yes. has added, a of say customer lot when a their business is broader – it

So, that to where for just are something about And end looking preparing that's think are of of to maybe you're go more a they're Think sell products more serve put for the and at and home it's retailers going market a high food. airline quick. looking sale hubs who if together. to you're grab that

it's think, XXX% your I restaurant not towards So, customer.

-- lot the hotels that everyone of a the Where and is it challenged workforce. with hotels today is and caterers

the think to it's products time, them it's and putting environment cutting are and where them the really it get So fruits long allows hospitality are in workforce. people where a and accelerated the been that an been lost pandemic time, for vegetables hardest we more right? of fresh, it the of and processing, onions, course lot faster, more by during that in without labor. and it's most was So, they peeling hit trend's saves and And chopping, I a obviously coming

and pandemic. it's before everyone the still challenging was, was could it it but than that say it's I better think challenging

change going that's don't think So much. to I

of And just do, that way kind cutting hotels, lot a So, processing of have our butchers, hamburgers a don't job Number have have units the and end it. we're We're think of don't one, right? we're it, band I that's saws. tons same at steak steaks steaks you all for high expertise, better houses. do that right? You we're establishment at we producing experts and most don't restaurants, cutting because trained

think So of it I evolving labor because that a and accelerating shortages. it's industry going now just way, anyway it's and was gradual

for throughout business. we time, Texas. entering when has all very great been is time us Hardie's making to great of that what's takes are I most great footprint us. that's So thing And a market run. mean long friends. people, organization. around It's It's exciting a well the relationship It's really new a the a a

So, that you need to trust. build

the build Chefs And starting we're credit gives of biggest to years. joined staff. we're customers. we're in market need Florida, maybe the specialty in, You thousands history. that foodservice us a we're them that in next access Hardie's someone existing not that all entering Hardie's having visit and – customers to over the the have like give sales think be And support to to going build tremendous success I their department to to And the able to XX:XX for

Andrew Wolf

you behind question, in was Thanks, and That you actually strategy general the focused. between alluded is specialty in and Hardie's well broad as follow-up these let's which Chris. us some synergy – to segue and to and in Can is, cross-selling the my tell sales you strokes which the delivery Allen how – of other examples, acquisitions, are where protein, synergy say customer citing already. delivery getting synergy both the that Brother's or consolidating more

process. the know to love the I be to going. accommodate expensive but what I'd you is. So, in something Well, where future you're is of it's are that, things facilities building there the part working? must this hear field an telling obviously

to hear love it. I'd about

Chris Pappas

a act, is question, So Great little every a market bit Andy. Sure. unique. It's right? balancing

major cities than suburbs Our or more in little unique the are into in cities. distributing more

past over XX years, the some always back, Chefs, I've if go it's what received I So, if of years, think about the been at you look even right. questions XX makes you

restaurant their so areas, So delivering go closets. into seats a major out expensive you Space cities, area, storage that upstairs. most restaurants million $XX space. build their storage do when you lot XXX, not into it's XXX walk two like have downstairs of is a And into with

needed five so or it that Chefs a times late get for So, the knowing And had orders ability to built we they there, that's deliveries. could out week or figure four they our prepare at and model daily really how and original deliveries logistics take we the to lunch.

evolves. combining lot the name of we the of Warehouse, of their these labor, in we we're categories, Over the today, today that kind Fast get as – more of all inflation you time have that's is we warehouse, to efficient. delivery everything forward realized cost as astronomical. of right? where the cost a cost were the Chefs' And realized With

customers maybe hybrid. San today. I you where many, think right. we're XX it a facilities new would it's those years thought mean, We does it run don't I wanted proximity. obviously not Francisco ago, in that a many big separated. our or accept close that have LA everything clients building, it exist what is where kind of separately, do. if they a We process So, like allows market New concentration trucks or York of a And

If next a that of our $X,XXX, with maybe allows restaurants size. the on the a especially it, on will they hundred logistically, go finding savings a delivery customers. that, who have pass do it's a our cost you to the it to don't it delivery. just or efficient groceries on separate is But to servicing of produce, And belief few so few many customer. lowers hundred figure dollars buy lower buy protein of a produce, of way delivery And seat lot to my especially especially hundred and dollars it you is, a independent out a get of daily And pass us over combining to cost way of drop it basis, a to x of could the truck. to $X,XXX $X,XXX, on have years, amount your and

So, it's a win-win.

maybe one we It's high were And X% it's distributors. to digits was pandemic, working? selling mean, years food all overall, all cross-sell. long I think I all organically from cross the us obviously been growing our pandemic, an in accelerated. that before from figured believe but away out you not mid out growing is taking single the it's home, M&A because it's ask, look we very easy. I at growth, before back time, the food mean we've if big our It's you a the to that's of you successfully was coming even the most. how if And And industry now

more lot a be flexible. Our ability to

obviously all safety and we as really safety not nimble the people food everything and best because business food the is manner. protocols the we're still as don't to independents little delivering our important they're and stress they exist, have really of and that So in our who

roots our of operators joined driving most out figuring companies growth that done our it compared and us that accelerated owner keeping to of operators were entrepreneurial owner of lot think how have I in of the is But businesses in a to and really that our competitors. get spirit being the flexibility

Andrew Wolf

Chris, the I'll back color. for thank that you into jump queue.

Chris Pappas

you. Thank

Jim Leddy

Andy. Thanks

Operator

Brooks Company. Todd go Benchmark from The next will question Please ahead. with the come

Todd Brooks

structures or I can Good or deal thanks. discussion just what quick us equity? the you. versus multiples don't level maybe any disclose you or Hey, funding announced, is but guys. acquisitions to questions for and color generally know on Two cash this earn-outs of as there as looking morning acquisition far And on One, you're here, give then activity? upfront

Jim Leddy

Thanks, Todd. Yes.

our some And was over our high file what sorry, will But both cash deferred in of in out, disclosed a six an structured price earn so. So XX-Q, disclosed will that which and the the note multiples that eight sweet I'm other our with payment. your One with the form the are of everything that and kind portion spot upfront. be acquisitions a times with kind week a with will the were or in of earn-out of part next second to of level other question? right at just purchase be in XX-Q. But of or

Todd Brooks

can of this if avenues have funded be if Just access availability you'll liquidity? of additional or existing to out

Jim Leddy

Yes.

So specifically larger these if put was targeted balance we December acquisitions, towards in Hardie's million about Greenleaf. the cash on And really sheet. security and we that of upsized and $XXX two our you convertible recall,

the funded just to cash So in out we the second an price and bolster incremental purchase cash our of that moderate quarter. position ABL our draw in did we

Todd Brooks

at a And was historically fact decent corporate and then to the and folding really I in to that EBITDA acquired of a either a Chef impacting That's work needs to And margins. the or the either acquired we'll the get to properties you times level. property those or really average level had lot great, guided for to you, revenue of gross update company. acquire pleased I know of it with amount isn't Jim. structure margin that the forward very you're guidance

than the there these vertical that Thanks. speak you're margins? Here produce EBITDA that Or of that's higher either that was to here are it Does Chef business something that quality already a at matured distribution? it no companies to guidance. A, buying the core type that change speak to already they've B, specialty does margin within

Jim Leddy

it's that's combined points, probably XX They to but are five our average about I'll basis margin, on adjusted slightly – not slightly dilutive original Chris or comment, our because just guidance basis. let EBITDA by just below and Actually a much.

side produced, was a tend higher they be our dilution. on highly the side, on there gross of bit margin to higher EBITDA margin So, not but and perspective, much they average. an off OpEx are And profit little because of

Chris Pappas

mean, right? I we I buy. much Yes. the to And acquire mean them, we mean, get don't Todd, businesses again, really credit I grow for

we're mean, Chef. So, are of long-term lot margins at get accustomed line we're and there's that what to. bottom work synergies propositions. to looking join I a our when They the planning get companies will the

are And healthy. these companies. lines their good bottom are are So, margins and great their

facilities, obviously, get over integrate, they efficiencies to the teams we management But selling, are than cross profitable create back time, today. them make synergies, our in and office more expect

bottom to absolutely it would business the you're think margin I businesses. money right, I EBITDA higher higher So, way is looking the you're more say, at right core the Chefs that or line,

to our we buy it because them what be businesses backwards. us level. Chef and get these continue to we in synergies these bring the improve businesses to core up, So businesses call And continue time up able able to acquire we're do to really get all to make to and

in call time the in it keep think and get that businesses, first businesses the to numbers but the our back momentum these to we're I better seeing and able I producing and and you're just of So innings better. us over carry will is Chef these machine the

Todd Brooks

congrats you both and Thank again. great. Okay,

Chris Pappas

you. Thank

Jim Leddy

Todd. Thanks

Operator

next ahead. Ben will from question Our go come Instructions] [Operator Klieve with Lake Street. Please

Ben Klieve

for and Thanks quarter right. All a my guys. question taking great

the initiations. me from one these in context Just of

been quite about are these You guys I geographically public, intention expand for that your think, the while acquisitions category. and by locations a into have to

in capabilities to future look see acquisitions really of at current be you and your And underserved these kind for well? California, shore with do do you your looking as with or so, maybe expansion? as elsewhere I'm underserved that produce Being Texas such portfolio, you're and Florida that as hand, still curious and now these up think you

Chris Pappas

We're like Again, to foodservice about your not next book the and of to typical always you, where say part not to foodservice is next mean, into opportunistic. nobody The hard type I that Yes. think efficient. your expansion the we're typical we're us. market great really align which I go the nobody market company. like always Chef, We you thing there's you most us is acquire. there's the

to have that a us over that into usually time. clientele the that and we So, take expand some business looking for we're and takes gets

a footprint. business there into have In Texas if look it. to going in Chef, So, was another great fit do at big we're we that California,

know a business synergies that room creative our we most -- do Southern growth. large a It more know bottom the we our into has room has of when And to how what plenty plenty It's for we great we are immediately tuck-in tuck-ins. organic able facility get new California have We to in line. to facility. existing of also

we that interested great So in going we're to fit in, a do platform remain, but businesses seeing I have right think, now.

$X as Texas for at Chefs. look I market a billion Texas,

opportunistic. could the Chef. billion of be of Southern in plenty is I double be business and again California and When will plenty look California to you room $X that room probably billion a triple. at market for region, each to think over $X this Southern business So point. grow California, California, organically, at But a

compared still small market relatively size. the we're So to

Ben Klieve

it. very line. good. Congrats a it. Got I'll Very back very helpful. get Got quarter. on again in good That's

Chris Pappas

you. Thank

Jim Leddy

Thank you.

Operator

Mr. our like for question-and-answer sir. to over remarks. session. turn closing conference the any I concludes This ahead, to back would Please Pappas, Christopher go

Chris Pappas

up think joining for into lot quarter. the busy And - the questions. Thank moving new they've Yes. tremendous and you. we team And great speak look acquisitions next for for thank And was done It And put hard we today. to a I our quarter a Chefs. call. I the Well, very work. congratulate was thankful such to a call great thank a of They We our at very, it facilities. forward job. joining themselves everybody have of really everybody a for team. numbers us thankful we're we that

Operator

concluded. today's for has conference now you The Thank attending presentation.

disconnect. You may now

The Chefs' Warehouse, Inc. (CHEF) 3 May 232023 Q1 Earnings call transcript