CHEF - Earnings call 3 2023 | The Chefs' Warehouse, Inc.

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Operator

Greetings, and welcome to the Chefs' Warehouse Third Quarter 2023 Earnings Conference Call.

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary and Chief Government Relations Officer. Please go ahead.

Alexandros Aldous

Thank you, operator. everyone. morning, Good today's CEO; on Chris Founder, Pappas, With Jim call Leddy, and and our Chairman me are CFO. By now, XXXX quarter our to you should earnings have press access third release. Relations found under also at can be the It Investor section. www.chefswarehouse.com Throughout this presenting measures, well and among earnings including, income as EBITDA share. will both historical estimated estimated EBITDA per non-GAAP and adjusted and net financial others, adjusted call, conference we be as historical and adjusted differently in These and calculated measurements are may used measures accordance calculated titled GAAP with similarly by not in companies. financial non-GAAP be other most reconciliations comparable today's non-GAAP Quantitative our financial of release. financial measures in to appear their directly measures GAAP press

our I of statements from forward-looking financial not future we our are will that performance. guarantees of statements, today These are cause to Before them. remind not and regarding everyone and should uncertainties forward-looking risks materially need you our we formal estimated performance, discussion that reliance results part could put remarks, on Such undue include therefore, begin what subject statements to actual expect. numerous to statements including differ

Chris are the in we going these on risks and XX-Q, reports discussed available on Form mentioned annual Today, of today's XX-K over a that, quarterly With I are detail. release. Form are go which provide in SEC Some website. Chris? open to business results our call on update call for questions. Others report will to our are in up over quarter third Pappas. and Then the the we will turn

Christopher Pappas

XXXX for our quarter call. thank earnings all you you, and joining Alex, Thank third

improved due of holiday summer more travel. out typical expected trends softer the within of observed higher-than-anticipated environment quarter, demand the July seasonal as the Xth improved a July third The activity placement quarter of the and pricing primarily August, the business and emerge. than overseas season, Coming to sequentially following

were Jim net center-of-the-plate 'XX customer X.X% which in in approximately basis of Gross decreased in points. quarter basis decreased detail profit year-over-year. were than unique the X.X% growth driven the profit will compared the organic of XXXX, margins placement XX.X%, margins in quarter. margins X.X%. Organic by the moments. a decreased growth growth XX of the third XX.X% year, the over our approximately and touch highlights in includes provide product year we and we growth prior sequential across expect move our remain growth grow trend to recent quarter on a gross as with from focused markets, September, continue as moved third quarter. high international for improvement categories, saw quality organic I continue this few and to placement Warehouse quarter delivering new would third across fourth acquisition, the significant the we and and As customers acquisitions during growth the highest we to service integrate growth Chefs' and volume to into strong providing growth drive XXX up case basis points gross third year. the specialty markets. X.X% category of and was across domestic in pounds as teams compared We thank into as A customer higher quarter of we the sales. of our gross our more Specialty prior profit margins in few like on sales organically center category to approximately Gross play points margins while specialty XX

as organic operating costs over past associated expansion, significant months. costs operating call, elevated investments near-term expense highlighted quarter increases growth-related to have facilitate higher XX level significant growth of relate we last the These years. transition facility made acquisition-related our well associated few in cost expenses with future over insurance to the and we the growth with our the have with acquisitions the as infrastructure capacity second made During we associated primarily

trends. Our costs investment our warehouse remain and to in line core historical sales expenses with growth-related expectations distribution and these excluding related operations, our

near-term We expect the the of move into to and XXXX elevated impact expense lessen we XXXX. as

operating cost I expect few XXXX. and These of reduction leverage would aimed half operational into efforts list While highlight in not work XXXX. open consolidation of and impactful to our a underway, at to to currently expected efficiency-related first XXXX facility California processing like and a anticipated the of and protein the the projects contributing include complete plants opening multiple Northern of in streams more we

to consolidate operations, increased utilizing for more growth. with operating and an platform future labor expect trucks, efficient We capacity technology routes optimized and force

continue process digital to support capabilities This added expect customer efficiencies adds our and in sales recently have to and our our improving online ordering platform. to We operations. our grow products protein to

acquired We to recently to the reduce distribution recently in in to capability. and transition integration expect and regions expect expanded Southern forward, we have see costs and where other growth leveraging going we fast-growing Philadelphia capacity California, growth added organic begin Florida, our

companies, has cross-platform going for in and X we have investments grow capacity driving primary model, the Our unique in leverage and of integration the through overall forward recently operating changed. growth selling, of we not strategy acquired cross-category pillars includes Centered growth our the scale. made which as future

allocation over capital few adapting As are the as target to X% our X% we years, average next to models follows. growth organic we

the free gradually expenditures higher to facilitate revenue of to conversion. years flow X% over cash X to capital reduce next We approximately expect

We $XXX net repurchase Directors our a of are leverage share authorized year-end targeting X-year and of shares. to Board debt up has Xx X.Xx program million to XXXX by

will time via the flow free loan repurchase, We frame. million allocate XXXX, in maturing year-end depend if $XXX currently ultimate cash the on amendment market to towards success underway, $XX is by generation our ability which repurchase are targeting expanding repurchase and million over to to share our XXXX. in our term conditions any, The total cash

turn discuss and financial an With In on for over terms expect potential may detailed allocation advantage it I'll Jim? this the growth acquired Jim capital we opportunities our quarter forward, that, that to within update of present take targeted information of accretive to liquidity. going to themselves X-year framework. more

James Leddy

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

X.X% inflation category quarter. approximately year net of growth center-of-the-plate increased sales profit for a of $XXX.X Gross XX.X% increase season for XXXX, of quarter versus from of the $XXX.X Our of the quarter third The in the million X.X% to the inflation sales third approximately was $XXX.X the sales decreased our impacted XX.X% the quarter. quarter X.X% in increased consisting quarter September of XX.X% specialty season versus from basis the which XXXX. in Net as approximately for margins inflation organic XXXX. in XXXX. growth million the our to to category third net weaker-than-expected million points approximately prior for XXXX as contribution added in profit result of XX.X%. the and to profit as in X.X% million an to well was compared dollar by Gross and quarter, margin growth sales ended summer in Gross $XXX.X of strong sales a XX acquisitions, were primarily quarter during summer the third XX,

versus million impact was month $X.X provision the of from and by $XXX.X of a driven primarily quarter quarter and to our of third million amortization, the the XXXX higher primarily mentioned, the driven certain of The The quarter. third tax XXXX. third The of quarter third a general of expenses for higher compared charge higher XXXX. versus income rate Operating higher and administrative for as by Selling, return year-over-year for the quarter driven selling, expense margins was the effective XXXX the increased highest the third to for and administration year million an basis, tax XXXX year-to-date income increase tax quarter the Income the in for to other XXXX. and prior approximately facility was in third quarter the the prior of current September benefits compared drivers the lower gross quarter. were in primarily On expense compared million acquisitions was percentage the compensation partially $XX.X for quarter associated XXXX of for by to through costs improved Chris XX.X% expenses $X.X third expenses, XXXX quarter third of of adjusted by margins third higher third million profit expenses profit costs, higher volume gross million operating XX.X% were and operating million operating and adjusted of to And XXXX. moved growth in As net quarter, of operating increased the to year returns. general adjustments we sales, offset prior $XX.X $X.X XXXX. quarter period for with related $XXX.X were and year XX.X% expenses higher XX.X% depreciation and expenses distribution for as acquisitions. primary

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

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

was remaining of XXXX million we quarter, equivalents. approximately and debt loan XXXX. and as net September maturing the in total During $XXX.X all million $XXX cash The cash our million, was XX, on prepaid $XX of term inclusive balance

year full range of adjusted for financial Turning are We million million to $X.XX Based XXXX $XXX in of be XXXX. the million. million in follows. we billion to estimate sales profit $XXX providing to business, billion, to net the be full trends gross and between $XXX year $XXX will our as between and full guidance EBITDA guidance and the the our be $X.XXX current on for year

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

fully reporting the issued the And accordingly, those Thank to diluted purposes, For shares And included senior for full questions. be at in up we notes notes share the you. our could it we'll unsecured year. this expect are Operator? count. of open dilutive to convertible upon conversion that currently point, be

Operator

is we [Operator Instructions] The from first Jefferies. of Alex have Slagle question

Alexander Slagle

The on guidance. the question

the August trends the were outlook? gross sounds when under of beginning EBITDA XQ like Just curious the was profit we August, the of much the the from at change guide pressure last spoke in It how change some October. dynamics and volatility this And I in and I August a certain and in in getting EBITDA reduction still in shifts seasonality through proteins longer, the continued guess, of from the September was before source guess, guide? the the better versus little

James Leddy

Definitely, August Thanks, the benefit we offset a as and mentioned price that. Alex, July product really question. than get weaker for Yes. as were expected. essentially of It's We as the inflation the bit both. didn't of mentioned, you mix and little

the third we had insurance the renewals. to Florida, renewals quarter. growth gross our building We're we is in So and exponentially. second to the leverage impact expenses.And piece didn't get profit expense rates -- up We California, our expected really have generate gone the the on during those insurance offset dollar of

that in growth-related remarks. And elevated prepared flowed we the through expenses our about so talked we

XX on to adjustment impact points guidance. it about on elevated another to impact to then That's points the So basis of XX basically expenses. was XX basis the the summer the the of XX the growth and

Alexander Slagle

perhaps the sales Got providing leverage options this any previously and provided your modest to versus from out how growth, other more capital I there some buyback the there's in EBITDA longer-term historical sales targets M&A? allocation for growth room is in now it. impact earlier I incorporated views converts. on and And view your year? with longer-term the and on XX% And shift the mean, which, if does that X% you think, implications levels with outlook

James Leddy

Yes.

to rates of kind we're -- optimistic. we've always think over better think XX now pretty with integrate. Alex, taking, I especially pause going a the we're bought The lot game I so I said, say, a high. We would shifted months, has again, past that little that

these all buildings. have We new

so an that unexpected have to the buildings we that companies thought right so again. a really that become bottom much that some more was to improve We that we those. line right have more on unless lap of fell that now always the something kind integrate have was that sense. application better finance opportunistic.So growth, We organic our until there systems, much continue attractive transformative and There's our focus capital drive bought to makes in were of or Makes is rates deal now were overwhelming sense. just that ways

Operator

The of question Carden we Mark from next have UBS. is

Mark Carden

inflation, how categories I with quarter? lingering on wanted your out? with any take there's played get to start if just this off the any And issues cadence particular

James Leddy

out Thanks for expected, by of kind of the effect. throughout we has question, the the kind year played Mark. Inflation base more as driven

versus certain gone last But think been of in I we've year.We've seen saw And have year. we've some that from we warehouses. our the expect the or story of XX,XXX trend before, X.X% categories products to quarter. you prices continue. overall, through in the to gone really deflation we've said X% a as Obviously, X% disinflation in crazy quarter first kind this X%, we it's

has slightly but inflation really in categories last certain year. -- But inflation So that an were basis, deflation inflationary, with disinflation deflationary. there's that aggregate obviously year, overshot been on this products are

Mark Carden

Okay. to current the economic few to adding backdrop, your expecting of or over existing accounts place business? new of see you the take quarters expanding then from And penetration your next just more growth are given Great. from

Christopher Pappas

seen healthy of to very open pipeline customers I a So our both. really they restaurants, do, mean right? good Restauranteurs what I business. continuing that's think it's are restaurants. open we've new

So replacement. of coming natural up just that X% average to through XX% We sorts of drives all leases different for about reasons. attrition the

now. new focus been businesses protein So produce a the we the always with We're openings.But we've We're business. heavily there's those in need the into yes, business developing. that major

markets new plan and that's we're we've markets that in that to that's years. have to we And the market because way And reason growth do continue we continue. growth, where entered. grow the the are And I we all that we to get cross-selling and we do tailwind, our really our really be that cross-selling, our is our kind big think have going go didn't the for think categories that's think I'm there'll XX we pretty outperforming I history business eventually, to the that pop. that's industry-leading And into confident those market really, that introducing continue all a of almost categories.

Operator

Peter of BTIG. question is next we Saleh have The from

Peter Saleh

with bit this an us I where that just then brand, East, of was hoping on the CapEx, little acquired specifically, brand looks of Chef put could and that capital that with Can for you and is kind the capital how acquisitions, of understanding square more and you of Hardie's need an how stand you guidance just updated update my can your give made acquisitions?And integration Greenleaf us Middle acquisitions into additional expansion. larger you when that those a you you it was much forward? earlier can year. on you With the going in on some of those give maybe update for

Christopher Pappas

Sure, Peter.

a that a were Chef be we I knew they Jim we think East, constrained to expansion. And opine company. I'll great that. part when the It to little off yes, part on But the and was how value. use bit the space. assess I'll of was start let bought great and backwards fund flow, Middle then it's free we throws to cash on that of going plan money That

So And think business is that already I being that's built. usual. addition as

to great company a that over of So much It it in the continue complements own we that's letting to probably brand in prosper.Greenleaf, great years, way And run you of Francisco, run our to to Northern integrating them Chefs' now in go continue XX business continue businesses a and grow combine second Francisco. that when we acquisition, to they slowly. with them different for known we're kind and right that just market the kind business, largest all to San we expect San market California. we've a

have can again, So that They companies a of we get clients have. sell. don't that chef the lot other crossover

a small of a Steady great So we the we're continue Texas, more into customers as more next business. over had those hopefully introducing and grow XX very footprint. of years more that's vice kind And where versa. an was to entry Hardie's products Eddie to a and and

huge other. Allen We still We're base. I'd management almost Another first Texas great company, that the still teams in to Texas. a know We're accessing to starting their the inning. all And Brothers, one, we're each slowly over opened integrate say of footprint getting throughout year. customer past up

Â– Allen opening So compared lots that is single to finally that more starting which Chefs is day get penetrate Brothers Hardie's to expected. the to And Hardie's better CW to plant to open as is it's say up the the of customers business, and other more and to proteins glad of premium markets our and than to traction, customers more CW the pretty starting doing as small every well more and sell It's starting customers. the customers. type

back So faster state, and excited big right, why Texas the Hardie's, we Texas. to bought a it of we're goes about to access growth long-term very in such

James Leddy

And CapEx and on question guidance. the just the Pete, I'll add

spending project money generates. allocation that capital CapEx out cash funding announced on the our XXXX We're is also of the So the already it. guidance in We're we current CapEx the underway. is that CME plan -- and It's in is earlier. flow it

to on wanted so I And that. just comment

Peter Saleh

a I maybe guys And a certain income consumer seeing higher-end little you starting and that of or in alcohol. maybe numbers? your higher Great. their some mean cheaper bit sales evidence that follow-up. the pretty good. any consumer entrees and heard just manage the degree to are numbers a check We've evidence cheaper is trade then your with down to Are

there are down. any if that trading actually see consumers to trying evidence Just was

Christopher Pappas

I in we're not mean business. Yes. alcohol the

that. on we I So think comment don't really can

mass XX usually usually that's economy less bit saw yes, the expensively, historically, I'd bit what could slows some, people -- overall little we probably food past seen But little -- I probably is drinks why from right? a years when almost little the bit. say see over a the down the summer. a we side, market I've the mean Over over the

think summer our then down from rain our summers lots we a travel, outdoor as us the heat. So customers' a very We had than was this that We're different say, customer so things hurt I busy. was We shut we'd I'd is were We Europe, summer. and customer.What different not Canada. of smoke kept the cafes, hearing busy and like. much, had on. most had as right? going we're during the lot in It was X,XXX we which of

So And it started we was I a say, sales started really funky into September, would we of it summer. more, then came into strong. in as to coming going normalization October, see and

sit, think where We're our We are the So is pretty going we bookings. fourth pretty about hearing We good. from think pipeline business most into we lots lots doing parties, looks well. of of think quarter of good. customers the

be So so overall, would are back doing a I customers But pretty well. people surprised. wouldn't are bit, cutting say, little our

Operator

question The next have Company. from Benchmark of is we Todd Brooks

Todd Brooks

First, part that years, new the efficiencies or growth next just of these of the facilities Jim, out for you've of added. Chris couple on algorithm the getting

X% growth where historically about tuck-in think how see the you've and does we organic capacity even acquisitions at added. be X% growth that here growth from of acquisition? plan You've digestion a end new through to talked of XX% Or X% little be to building than acquisition, that through about bit and valuable do I this we may lower the that you from think acquisition? imply they a X% X% volume new can kind we're period If of

Christopher Pappas

Yes, tough that's one. a

know, things As can we change.

into say, that much to really to to some greater kind and open driving push revenue acquisitions build.It overhead digesting focused driving the we today, that this volume bottom new doesn't in smart again, can't mean our we're environment, more we're fold-ins about say, continuing the talking of new done the would I months these and start EBITDA customers the XX the to to warehouses line. facilities lowering on customers we volume we've in same and and past, more into the all do So adds

of is for work, rather put grow us we to capital to mid- drive right salespeople message more capital unbelievable to really deal a makes pushing and which the more our more really organically. at, now high and hiring our organically. the allocate think and to we're to maybe the probably now single-digit growth, the I there's good is organic that job Unless capital would best growth sense shareholders, right is phenomenal allocation

we're think going to it I the So lies right now. where play ball

Todd Brooks

to over And I about working business drive on years. acquisitions would really That's next couple with then think you us digestion been guess the towards If X you're how years? of not margins and pace muting improvement and leverage really the for helpful. Jim, the you EBITDA what's acquired of digestion. about to focus margin we're working through want EBITDA of integration last as the talked

James Leddy

Yes.

kind the and that we call. think reiterated I X-to-X-year laid plan X-to-X-year the we on of out, QX

that's if on based big think done. target of Hardie's, with XX company a basis on the to a in XX year.So play midpoint acquisitions X%. is I our margin amount think we've still core a basis significant this over the I us Chris And on towards of and EBITDA diluted that, guidance, back improving the year a which by business as going points X% mentioned, integrating Adding years. is focus lower X that full with we're revenue next towards of or exclude mid-Xs you our produce

target between is So organic the build we've going in the in. we've to to out, plan to most I grow. the that profitable invested margins $X organic EBITDA think line some capacity into adjusted continue to more and laid growth moderate the allocation top I we've We're And infrastructure. at facilities, X% but investments M&A going We're -- our definitely, and significant a of growth capital pace. continue are the think billion EBITDA plus growth, made that

work laid it's we'll opportunities think Chris that think And within -- framework the materially capital mentioned, I I don't changed. allocation out. that as we've M&A take advantage So accretive of

kind to at capital flow, we're fact our the and our returning allowing investment conditions cash allocating sheet cash those generating market -- over well couple some aligns more years we're and free So of our et cetera. to mining cycle, to investments that value strengthening on potentially of balance start market shareholders, going with the depending I think the peak next some more of conditions,

Operator

is King. The Andrew Wolf from CL of next have we question

Andrew Paul Wolf

is the but the helpful just than could that answer I frame that I qualitative protein ball was through -- or Chris, the assume EBITDA kind but and of kind how kind in -- business, Hardie's I for you the to of -- for a was -- view they where want years profitable -- strategically they points could sort obviously what And general? Hardie's produce frame But XX than ago getting cross-selling, a mean little the the quarter. the the about on dilutive was would And didn't for in the individual you little to a but of I summer, to that the little guide and more for a you Hardie's whether maybe maybe more what lower is were the appreciate maybe assume this of if it fourth on you. also where many group Are business. have I acquisitions not a but I assume become of expect the last surprise.So Jim, to But going or a you're part kind of so I would margin case, ask of us still anticipated? you basis year. And terms pretty a any insurance you with your summer. crystal went as bridge, the in expectations? like it's nothing just

Christopher Pappas

first, Andy. Yes. Yes. I'll shoot

to for for I costs. tracking took mean, -- it's of is because except to fine. take good the Chef Jersey businesses pressure work an bought headwind New the Maryland extra some space down Jersey business in much got our for I think had into of what off we were desperate on York that But South facility.So expectation. level not building the market, We it's a pretty is with of opportunity Most price kind we that it. when our we I the producing We New summer, when I kind really Pennsylvania, the from think consolidate. of to knew of funky tracking our with expect of mean, business was EBITDA up and built We we parties, we it and businesses.

So there. nothing unexpected

why have to think really explain headwind expectations hit with we this to maybe not year said, Jim -- the going we're I expenses. the high like more is

a Then October during yes, So funkiness pretty little in the bit strong. came strong. coming is back summer. September of

years. diversified. doing really mix well. We've what away -- years base other So we which really base most be fine. been home. to usually extremely than customer selling does doing diversified for think our is we're and believe overall, And our has resistant. that think sell talking call And we proven I upscale and casual, sectors we're food a I better I they mean And know us is for super high-end customer in but from higher-end customer of our people products,

like little I So goldilocks. think a it's

to bit new We've taken the I due that we've companies on. expenses on XX buildings a think little expected than in bought never year. the it's more a

a integration. we So of had lot

little I'm underestimated to the little we summer. that a much think we're businesses. a integration of cost I funkiness with and side the say blessed those the headwind on expectation But of tracking expense to that pretty

James Leddy

the is and we Yes. for an pretty it as in Middle much Hardie's second East terms guidance. even We as and Andy, in impairment but lost. performing your of it well, the reported that I'll We -- Chris just relates to -- noncore Chef Hardie's we took add did report articulated expected. the Greenleaf when question quarter. in that customer

expense in like costs level to the transition where a driver So come the that of little to insurance don't and the risk that companies guidance.It's continue than has bit, primarily change of insure places and in higher insurance literally higher of We as cost that of in 'XX to level 'XX. impacted increases California, expected. integration and expect Florida and really don't but been, want and you, material was higher articulated, we the not us it

expenses them So this we're guidance that's have highlighting impacted growth that why our as year.

Andrew Paul Wolf

And sure that had Is I one Did you the just you September -- I want heard right, the that? to Jim. follow-up, year. gross say margin make rate for best

James Leddy

month our Yes, it profit gross margin the highest Yes. of year. was

Andrew Paul Wolf

sort expectation? kind that of margins back? Or into is the is of can gross of that seasonal snap models something kind bake a that are And we

James Leddy

job the our I higher. As the a in into fourth profit And just that as the But by kind dollar gross of have to did October. great remarks, teams think focusing gone margins driven prepared our And primarily you historically on normalize, season. move markets seen quarter, into the growth. continue mentioned. coming holiday we've summer, of profit as Chris That's gross mentioned we trend seem out of

So the feel can't September. predict coming much better but and out we of it August did future, into obviously,

Operator

The next question we Kelly of Markets. BMO Bania have Capital is from

Kelly Bania

was we're if raising little we a sales summer, because wondering talking back the about we're bit just but outlook. could here I the weaker-than-expected outlook to sales go a of

sales factors? understand help just this just that? you M&A can Maybe just us on other what component you you're Is raising? can of So or elaborate

James Leddy

had growth-related word revenue growth felt, customer it case cliff it, reported -- softer as growth of guidance term The fall I I has We talked seen. the solid. issue growth, that very But we've was been is little up Chris a didn't the us think a we raising for on to our a X% it funky. organic overall, about as related used in and line expense It organic the than main placement think summer growth. expenses.So just the been the we've our near new strong has expected. the double-digit combination

issue. hasn't growth -- of had we've the headwind gross really short organic as couple months summer in our profit well been during margin It's So been that the we the been the expenses. as

Kelly Bania

you amount the And -- math call some we here it's Okay. give insurance, us just help I can pressuring that start -- continue to expenses Jim, see year? maybe work that? of expansion, you much dollar of how much of really Can quantify you of terms some help maybe can with in here, those integration when next into on through those heard you year these facility kind us this is whether out cycle. should How to work

James Leddy

on basis, and much X streams and that the the midpoint few lot number A consolidated past we the the the about, year is from dilution basis or expenses on basis impact into facilities summer the down have Yes. the growth-related full of then or points. X.X% update as XX you will years. the year is of in impact the X will mentioned, Hardie's XX it our our basis next pretty is points. over of fruition Northwest. X And facilities I the the related months already I which about same, -- you We've a facility XX a mentioned XX just mean full X.X%, to to points take it's had consolidating That Florida. is projects or work about of of about in to guide.Chris the come Northeast, being that highlighted of in a XX XX new

number projects of have a making more platform our create underway. we're digital in efficiencies. will investments we The So

we that year, some have additional anticipate that. projects and rent work streams next online will more those offset we'll but So than coming

expect next And be don't a Obviously, the in opportunity the given year so of we more back half this will we've than of that the of year. just what half first leverage half back seen to level. have

Christopher Pappas

Yes.

-- the little it has of a very companies every XX there. a talking Kelly. to million I more, I bit think had underestimated team you integrate short in a period we about like think We're think amount frame travel So time. I right? just travel, of can imagine to And bucks, we few to maybe with

integration. to computer doing have We're up. We set

have the IT team. ops you team, You the have

training. sales have We

it is most lot linger. Florida, can't was insurance caused of to that the it of up expenses. again, undertaking. It's going a opened building. tremendous We is start we we other was costs grow headwind.Some onetime delayed modern But cost a into to a which those buildings, so and then So as That wait off. show to our

say are So you could those onetime.

one I think a differently. be but there accountants little the might might time, argue

of Maryland lot side, expense we another building on integrating York. between those opening expect We So those a and to headwinds all not New did the open had buildings. companies,

one. warehousing got So tight lucky market. kind a finding Commercial is we of

fits your you something filters, grab it. find you if So had kind of that to

we out building the We've be multiple very We're we're in was taken our really overhead. opening COVID to market. It's expense to consolidating heavily that see delayed. Once leader got continue we're plants. the big that's open, a allow amount duplicate of big getting Richmond going So didn't to to Northern building that to was closer up that but a that building. coming, lucky California. in we Due us

of I so because we good to problems are to continuing kind So grow fast. growing, say we hate have

You organic growth is see the healthy. extremely

so when summer, to over. I'm have a hearing kept better summer's them, we Europe. handle it glad are customers don't was in their strange summer. our a really new business in I coming I customers were and headwind. choosing love but All were little I us very And worry expense So from much could supply customers

I travel, still it was think. So that revenge

You the of airlines were going. happening look everywhere else, Americans exodus with that everything unbelievable the and was at the all Europe at and airports to going they

just season. year, from what still we into saw kind saw we as the a rest hopefully, we getting And for it you? and normalization was felt it during a continued So felt summer. pretty continues what of September, forecast a it's to the of rebalancing COVID, again it we had, and started we we be and the big October, strong going Kelly, lose into of we

Kelly Bania

fourth quarter. ask one the sorry, I'm -- here. about Can more just I

deceleration kind gross significant guidance margin math if end the seems the in gross I'm a of with pretty a directly. wide Your range imply implying doing to low pretty margin, this

conservatism just seeing there, gross factor gross It is much on trying this the just like point, margins? through So sounds maybe us impact margin encouraging is what Or how in that line leave that in at any there's is if push could very possibility? you're walk some but a to there.

James Leddy

just there. I XX it's to there's think the point mean full probably basis what getting or year guidance. a gap I XX more

So margins stronger profit bit have quarter. gross I generally a little would I difference. I fourth the much quarters there's think don't significant say in there's we anything don't there. think versus the X prior

gross look back we last year year. year last right think half at profit year what And a for margins similar of -- very I our now, us, be year. was very implied will you our our full year guidance, to full expect the the especially if in strong

anything there's specific to call think don't I there. out So

Operator

is next from The we Klieve question Ben of have Lake Street Capital.

Benjamin Klieve

I have a capital couple outlook. your allocation on

if I'm targeted the given that that some spend. regarding be you the longer can no on may projects lower table First, CapEx-related wondering characterize CapEx. were you the considering of

Christopher Pappas

future spending guidance. removed matter next projects It's think of The peak year, the of combination or on projects coming we're in already spend. money I a don't of -- we spend. current recent it's that from kind a of our at the we're the online are

expect to revenue. higher We have, obviously,

percent pretty we revenue, a as feel so about. And of good

this year, had to to in come we're originally forecast X%. X.X% revenue. going closer somewhere think around probably I We of

the we that maybe than cash gradually can allocate share cash So return 'XX to towards we in balance more and up us even expect just X% 'XX. help of will and bring X% level free that repurchase. flow so kind potential towards then And slightly beyond lower down conversion, and sheet that

Benjamin Klieve

one other, That classy about you makes talked sense. problems. Perfect. And

consider just wondering you've into growth been cash to boost the One operational out that capital flow, working historically -- are your had. as there's balance? capital running Or your think rates the to of this levers made free can working your fund kind various you you I'm of you about investment exceptional do can at has changes that any as the of classy lean material problems point? be as cash extract to you

Christopher Pappas

think to our that. added We're with low continual there's reducing us Obviously, of from inventory help levels. XXs. some down on talent And and the opportunity. in mean kind always our always the I DSOs then shrink I management. a brought in pre-pandemic process. we've That's teams work really organization we've

And on work by growth. to be driven so continue capital that.I working would our say the we will

we that. expect grow and even to an above so in XX% year to this long 'XX like what we've pandemic 'XX near kind And that's And average average is to grow guided the or of growth. since nowhere don't of term going over XX% we're XX

of pandemic, coming working been go So of was But out years. capital and we we'll a forward, tailwind bump and our that grown significantly the a obviously, part pandemic. headwind over to flow expect we've expect we next the the since free cash as X during conversion normalize that's the that it's

Operator

Chris time. There would I to questions like Pappas to at comments. back over are for turn further no this closing the floor

Christopher Pappas

think Chef fall. the don't phenomenal We and us into managing thank summertime team Yes. everybody the did on Well, the we for joining earnings our a job less. expect through call. We

efforts, great everybody our thank we for to you. next we in, So all look day. and and their a hard do Thank forward thank everybody listening call. we Have for earnings

Operator

teleconference. you This Thank for concludes joining today's us.

lines. disconnect now may You your

The Chefs' Warehouse, Inc. (CHEF) 1 Nov 232023 Q3 Earnings call transcript