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The Chefs' Warehouse(CHEF) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q1 2022 increased approximately 82.8% to $512.1 million from $280.2 million in Q1 2021, driven by a 62.9% increase in organic sales and a 19.9% contribution from acquisitions [12][15] - Gross profit increased 99.4% to $117.5 million, with gross profit margins rising approximately 191 basis points to 22.9% [13][15] - Adjusted EBITDA for Q1 2022 was $21.5 million compared to a negative adjusted EBITDA of $9.5 million in Q1 2021 [15] Business Line Data and Key Metrics Changes - Specialty sales grew 70.3% organically year-over-year, with unique customer growth of approximately 29.4% and placement growth of 41.6% [7] - Organic pounds and center-of-the-plate sales were approximately 26% higher than the prior year [7] Market Data and Key Metrics Changes - Net inflation was 21.7% in Q1 2022, with 14.9% inflation in the specialty category and 28.5% in the center-of-the-plate category [13] - The company noted that the labor market is improving, facilitating new customer openings and increased restaurant capacity [6] Company Strategy and Development Direction - The company is focused on becoming a leading national marketer and distributor of specialty food products, with plans to enhance its distribution capabilities through new facilities in Southern California and South Florida [8][10] - The introduction of a new digital platform aims to improve customer experience and drive sales [9] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recovery from COVID-19, noting strong demand trends in March and April [6][18] - The company is prepared for potential challenges in the labor market and inflation, with strategies in place to manage costs and maintain profitability [35][39] Other Important Information - The company has been certified as a great place to work, indicating a strong workplace culture [10] - Total liquidity at the end of Q1 2022 was $205.6 million, with net debt approximately $319.1 million [15][16] Q&A Session Summary Question: Concerns about revenue guidance being conservative - Management indicated that the guidance reflects strength seen in Q1 but is cautious due to macroeconomic uncertainties [18] Question: Labor market conditions and hiring - Management noted ongoing challenges in the labor market but expressed optimism about gradual improvements [19] Question: Business spending trends - Management observed an increase in bookings for corporate events, indicating a recovery in business spending [22][24] Question: Inflation trends and product costs - Management reported mixed inflation trends, with some categories experiencing price increases while others showed signs of stabilization [31][33] Question: Consumer pushback on pricing - Management noted that while some consumers are sensitive to price increases, demand for high-quality dining experiences remains strong [39] Question: M&A landscape and deal opportunities - Management described the M&A environment as competitive but emphasized a disciplined approach to acquisitions [46][48] Question: Expectations for returning to 2019 volume levels - Management indicated that they are on track to meet or exceed pre-pandemic volume levels by the end of the year [52] Question: Impact of diesel costs on operations - Management has factored in increased diesel prices into their guidance and is adapting pricing strategies to mitigate impacts [54] Question: Savings from new facilities - Management expects significant savings from the new Southern California facility through improved operational efficiencies [56][59]