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The Chefs' Warehouse(CHEF) - 2025 Q2 - Quarterly Results

Executive Summary This section provides a high-level overview of the company, CEO commentary on performance, and key financial highlights for the second quarter of fiscal 2025 Company Overview The Chefs' Warehouse, Inc. is a premier distributor of specialty food products across the United States, the Middle East, and Canada, serving high-end culinary establishments - The Chefs' Warehouse, Inc. (NASDAQ: CHEF) is a premier distributor of specialty food products in the United States, the Middle East, and Canada1 CEO Commentary CEO Christopher Pappas noted typical seasonality with improved revenue and profitability, strong unit volume, unique item placement growth, and effective pricing. The company also achieved its fourth consecutive 'Great Place to Work' certification - Second quarter business activity displayed typical seasonality as revenue and profitability improved across the network3 - Operating divisions delivered strong unit volume and unique item placement growth and managed pricing effectively3 - Chefs' Warehouse achieved the 'Great Place to Work' certification for the fourth consecutive year, recognizing its unique culture and focus on people3 Second Quarter Fiscal 2025 Financial Highlights The company reported significant year-over-year increases in net sales, GAAP net income, adjusted net income per share, and adjusted EBITDA for the second quarter of 2025 Second Quarter Fiscal 2025 Key Financial Highlights (YoY) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :----------------------------- | :---------- | :---------- | :--------- | | Net sales | $1,034.9 million | $954.7 million | 8.4% | | GAAP net income | $21.2 million | $15.5 million | 36.8% | | GAAP diluted EPS | $0.49 | $0.37 | 32.4% | | Adjusted net income per share | $0.52 | $0.40 | 30.0% | | Adjusted EBITDA | $65.4 million | $56.2 million | 16.4% | Second Quarter Fiscal 2025 Detailed Financial Results This section presents a comprehensive analysis of the company's financial performance for the second quarter of fiscal 2025, covering net sales, gross profit, operating expenses, and profitability metrics Net Sales Net sales for Q2 2025 increased by 8.4% year-over-year, driven by organic case count growth in the specialty category, despite a decrease in center-of-the-plate organic pounds due to the exit of a non-core poultry program Net Sales (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------- | :---------- | :---------- | :--------- | | Net sales | $1,034.9 million | $954.7 million | 8.4% | - Organic case count in the specialty category increased approximately 3.5%, with unique customer and placement increases of 3.6% and 8.7% respectively4 - Organic pounds sold in the center-of-the-plate category decreased approximately 4.0% primarily due to the exit of a non-core commodity poultry program4 Gross Profit Gross profit increased by 11.1% year-over-year, with gross profit margins improving by 59 basis points to 24.6%, primarily driven by increased sales and price inflation across both specialty and center-of-the-plate categories Gross Profit (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--------- | :---------- | :---------- | :--------- | | Gross profit | $254.3 million | $229.0 million | 11.1% | | Gross profit margins | 24.6% | 24.01% | +59 bps | - Gross profit margins increased 59 basis points in the Company's specialty category and increased 56 basis points in the center-of-the-plate category5 Selling, General and Administrative Expenses (SG&A) SG&A expenses rose by 9.7% in Q2 2025, primarily due to higher compensation and benefits supporting sales growth, increased depreciation from facility and fleet investments, and higher self-insurance costs. As a percentage of net sales, SG&A slightly increased SG&A Expenses (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :------------------------------------ | :---------- | :---------- | :--------- | | SG&A expenses | $213.8 million | $194.8 million | 9.7% | | SG&A as a percentage of net sales | 20.7% | 20.4% | +0.3% | - The increase was primarily due to higher costs associated with compensation and benefits to support sales growth, higher depreciation driven by facility and fleet investments and higher self-insurance costs6 Operating Income Operating income for Q2 2025 increased by $6.3 million, driven by higher gross profit, partially offset by increased SG&A expenses. Operating income as a percentage of net sales improved to 3.9% Operating Income (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change ($) | | :--------------- | :---------- | :---------- | :--------- | | Operating income | $40.2 million | $33.9 million | $6.3 million | | As % of net sales | 3.9% | 3.6% | +0.3% | Net Income and EPS GAAP net income and diluted EPS saw substantial increases in Q2 2025 compared to the prior year, supported by improved operating performance and a lower effective tax rate GAAP Net Income and Diluted EPS (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :---------------- | :---------- | :---------- | :--------- | | Net income | $21.2 million | $15.5 million | 36.8% | | Diluted EPS | $0.49 | $0.37 | 32.4% | | Effective tax rate | 28.0% | 30.0% | -2.0% | Adjusted EBITDA and Adjusted Net Income Adjusted EBITDA increased by 16.4% and adjusted net income per diluted share grew by 30.0% in Q2 2025, reflecting strong operational performance when excluding certain non-GAAP adjustments Adjusted EBITDA and Adjusted Net Income (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Adjusted EBITDA | $65.4 million | $56.2 million | 16.4% | | Adjusted net income | $22.5 million | $17.0 million | 32.4% | | Adjusted net income per diluted share | $0.52 | $0.40 | 30.0% | Fiscal 2025 Guidance The company provided full-year fiscal 2025 financial guidance, projecting net sales between $4.0 billion and $4.06 billion, gross profit between $964 million and $979 million, and adjusted EBITDA between $240 million and $250 million Fiscal 2025 Full Year Guidance | Metric | Range (Low) | Range (High) | | :---------------- | :------------ | :------------- | | Net sales | $4.0 billion | $4.06 billion | | Gross profit | $964 million | $979 million | | Adjusted EBITDA | $240 million | $250 million | Non-GAAP Financial Measures The company utilizes non-GAAP financial measures such as EBITDA, Adjusted EBITDA, adjusted net income, and adjusted net income per share to offer additional metrics for evaluating operations and forecasted results, believing they provide a more comprehensive understanding of core operating performance when considered alongside GAAP results - EBITDA, adjusted EBITDA, adjusted net income, and adjusted net income per share are non-GAAP measures used to evaluate operations and forecasted results11 - These measures provide a comparative assessment of operating performance relative to GAAP, isolating the effects of items that vary without correlation to core operating performance11 - Non-GAAP financial measures should only be used as supplemental measures of operating performance and may not be comparable to similarly titled measures of other companies13 Forward-Looking Statements This section highlights various risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including general economic conditions, intense competition, rising costs, supply chain disruptions, acquisition integration challenges, and regulatory changes - Statements in this press release that are not historical facts are 'forward-looking statements' involving risks and uncertainties, and actual results may differ materially14 - Key risks include general economic conditions, low margins sensitive to inflationary/deflationary pressures, intense competition, rising costs for commodities, labor, and distribution, and the ability to integrate acquisitions14 - Other factors such as product recalls, health concerns, regulatory changes, and information technology system failures also pose significant risks14 About The Chefs' Warehouse The Chefs' Warehouse, Inc. is a leading distributor of over 88,000 specialty food products to more than 50,000 customer locations across the United States, the Middle East, and Canada, primarily serving high-end culinary establishments - The Chefs' Warehouse, Inc. is a premier distributor of specialty food products in the United States, the Middle East and Canada16 - The company focuses on serving the specific needs of chefs who own and/or operate leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, and other culinary businesses16 - It carries and distributes more than 88,000 products to over 50,000 customer locations16 Financial Statements This section includes the company's condensed consolidated statements of operations, balance sheets, and cash flows, providing a detailed view of its financial position and performance Condensed Consolidated Statements of Operations The condensed consolidated statements of operations demonstrate significant year-over-year growth in net sales, gross profit, operating income, and net income for both the thirteen and twenty-six weeks ended June 27, 2025 Condensed Consolidated Statements of Operations (Thirteen Weeks Ended) | Metric | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net sales | $1,034,906 | $954,704 | | Gross profit | $254,339 | $229,002 | | Selling, general and administrative expenses | $213,750 | $194,834 | | Operating income | $40,216 | $33,867 | | Net income | $21,241 | $15,524 | | Diluted Net income per share | $0.49 | $0.37 | Condensed Consolidated Statements of Operations (Twenty-Six Weeks Ended) | Metric | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net sales | $1,985,654 | $1,829,192 | | Gross profit | $480,334 | $438,438 | | Selling, general and administrative expenses | $416,513 | $385,155 | | Operating income | $62,951 | $49,870 | | Net income | $31,529 | $17,455 | | Diluted Net income per share | $0.74 | $0.44 | Condensed Consolidated Balance Sheets The balance sheet as of June 27, 2025, shows an increase in total assets, primarily driven by growth in property and equipment and inventories, with a corresponding increase in total liabilities and stockholders' equity compared to December 27, 2024 Condensed Consolidated Balance Sheets (As of) | Asset/Liability/Equity | June 27, 2025 (in thousands) | December 27, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :------------------------------- | | Cash and cash equivalents | $96,866 | $114,655 | | Total current assets | $883,447 | $868,043 | | Property and equipment, net | $310,792 | $275,781 | | Total assets | $1,907,254 | $1,858,691 | | Total current liabilities | $439,871 | $425,396 | | Long-term debt, net of current portion | $690,223 | $688,744 | | Total liabilities | $1,349,536 | $1,321,045 | | Stockholders' equity | $557,718 | $537,646 | | Total liabilities and stockholders' equity | $1,907,254 | $1,858,691 | Condensed Consolidated Statements of Cash Flows For the twenty-six weeks ended June 27, 2025, net cash provided by operating activities increased, while net cash used in investing activities decreased, and net cash used in financing activities significantly increased, resulting in a net decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Twenty-Six Weeks Ended) | Cash Flow Activity | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $64,069 | $60,226 | | Net cash used in investing activities | $(22,325) | $(33,438) | | Net cash used in financing activities | $(59,645) | $(38,363) | | Net change in cash and cash equivalents | $(17,789) | $(11,538) | | Cash and cash equivalents at end of period | $96,866 | $38,340 | Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP net income to various non-GAAP financial measures, including EBITDA, Adjusted EBITDA, and Adjusted Net Income, for both quarterly and year-to-date periods Reconciliation of Net Income to EBITDA and Adjusted EBITDA This section provides a detailed reconciliation of GAAP net income to EBITDA and Adjusted EBITDA for both the thirteen and twenty-six weeks, outlining specific adjustments for non-cash items like stock compensation, other operating expenses, duplicate rent, and moving expenses Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Thirteen Weeks Ended) | Metric | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :--------------------------- | | Net income | $21,241 | $15,524 | | EBITDA | $59,313 | $49,575 | | Adjustments (total) | $6,134 | $6,605 | | Adjusted EBITDA | $65,447 | $56,180 | Reconciliation of Net Income to EBITDA and Adjusted EBITDA (Twenty-Six Weeks Ended) | Metric | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :-------------------------- | :--------------------------- | :--------------------------- | | Net income | $31,529 | $17,455 | | EBITDA | $100,386 | $80,983 | | Adjustments (total) | $12,544 | $15,357 | | Adjusted EBITDA | $112,930 | $96,340 | Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income Per Share This reconciliation details the adjustments from GAAP net income to adjusted net income and adjusted net income per share, including other operating expenses, duplicate rent, moving expenses, debt modification costs, and their corresponding tax effects for both the thirteen and twenty-six week periods Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income Per Share (Thirteen Weeks Ended) | Metric | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net income | $21,241 | $15,524 | | Total adjustments | $1,291 | $1,489 | | Adjusted net income | $22,532 | $17,013 | | Diluted adjusted net income per common share | $0.52 | $0.40 | Reconciliation of Net Income to Adjusted Net Income and Adjusted Net Income Per Share (Twenty-Six Weeks Ended) | Metric | June 27, 2025 (in thousands) | June 28, 2024 (in thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net income | $31,529 | $17,455 | | Total adjustments | $1,176 | $5,421 | | Adjusted net income | $32,705 | $22,876 | | Diluted adjusted net income per common share | $0.76 | $0.55 | Reconciliation of Adjusted EBITDA Guidance for Fiscal 2025 This section reconciles the fiscal 2025 adjusted EBITDA guidance from projected net income, incorporating adjustments for income tax expense, depreciation and amortization, interest expense, stock compensation, duplicate rent, and other operating expenses Reconciliation of Adjusted EBITDA Guidance for Fiscal 2025 | Metric | Low-End Guidance (in thousands) | High-End Guidance (in thousands) | | :-------------------------- | :------------------------------ | :------------------------------- | | Net income | $75,500 | $77,500 | | Provision for income tax expense | $28,000 | $30,000 | | Depreciation and amortization | $74,000 | $76,000 | | Interest expense | $42,000 | $44,000 | | EBITDA | $219,500 | $227,500 | | Adjustments (total) | $20,500 | $22,500 | | Adjusted EBITDA | $240,000 | $250,000 |