The Chefs' Warehouse(US:CHEF)2024-10-30 14:34Financial Data and Key Metrics Changes - Net sales for Q3 2024 increased approximately 5.6% to $931.5 million from $881.8 million in Q3 2023 [18] - Gross profit increased 8.2% to $224.7 million for Q3 2024 compared to $207.7 million for Q3 2023 [19] - GAAP net income was $14.1 million or $0.34 per diluted share for Q3 2024, compared to net income of $7.3 million or $0.19 per diluted share for Q3 2023 [23] - Adjusted EBITDA for Q3 2024 was $54.5 million compared to $50.3 million for Q3 2023 [23] - Gross profit margins increased approximately 58 basis points to 24.1% [20] Business Line Data and Key Metrics Changes - Specialty sales were up 7.5% organically over the prior year, driven by unique customer growth of approximately 4.7% and placement growth of 10.8% [10] - Organic pounds in center-of-the-plate were approximately 1% higher than the prior year [10] - Gross margin in the specialty category increased approximately 50 basis points compared to Q3 2023 [11] Market Data and Key Metrics Changes - Net inflation was 3.2% in Q3 2024, with 4.3% inflation in the specialty category and 1.4% in the center-of-the-plate category [19] - The company experienced a slight softening in demand during July, attributed to seasonal factors and Hurricane Beryl, which impacted revenue growth by approximately 1% [18][32] Company Strategy and Development Direction - The company is focused on achieving targeted financial goals by year-end 2028, with a growth and capital allocation plan in place [12] - Ongoing integration of specialty produce and protein businesses in Texas aims to improve operational efficiency and cross-selling opportunities [16] - The company has engaged a global consulting firm to assist in driving top-line and bottom-line improvements [12][58] Management's Comments on Operating Environment and Future Outlook - Management noted that customer activity accelerated into the latter half of Q3 and continued into October, indicating positive momentum [9] - The company is adapting to a new environment where customers tend to book last minute, impacting holiday planning [60] - Management expressed confidence in the ability to take market share despite a competitive environment and ongoing inflationary pressures [40][72] Other Important Information - Total liquidity at the end of Q3 was $221.3 million, comprised of $50.7 million in cash and $170.6 million available under the ABL facility [24] - The company has repurchased $10 million of its outstanding common shares year-to-date, resulting in a reduction of approximately 264,000 shares outstanding [26] Q&A Session Summary Question: Trends in customer traffic and softness in Q3 - Management acknowledged a slight dip in July but noted strong gross profit dollar growth and market share gains in the latter half of the quarter [31][32] Question: Salesperson hiring environment - The company continues to hire and build a strong sales team, emphasizing the importance of training and relationship management [33] Question: Impact of Hardee's on EBITDA margin - Hardee's is expected to dilute overall EBITDA margins by about 20 to 25 basis points, with improvements anticipated as integration progresses [37] Question: Churn levels and customer acquisition - Management reported that new customer acquisition is helping offset some softness, with core customers performing well [39] Question: Cadence of sales growth in September and October - Management indicated that trends improved through the quarter, with positive momentum continuing into October [42] Question: Customer usage in mature vs. new markets - In mature markets, customers utilize a broader range of products, while new markets are still developing their offerings [66] Question: Margin expansion and acquisitions - The margin expansion targets are based on organic growth, with acquisitions not modeled into the financials [68]