The Chefs' Warehouse(CHEF) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q4 2025 increased approximately 10.5% to $1.143 billion from $1.034 billion in Q4 2024, driven by a 9.7% increase in organic sales and a 0.8% contribution from acquisitions [12][15] - Gross profit increased 10.2% to $276.6 million, with gross profit margins decreasing approximately 8 basis points to 24.2% [15] - Adjusted EBITDA for Q4 2025 was $80.3 million, compared to $68.2 million for the prior year [17] - Adjusted net income was $29.9 million or $0.68 per diluted share for Q4 2025, compared to $23.9 million or $0.55 per diluted share for Q4 2024 [17] Business Line Data and Key Metrics Changes - Organic specialty sales grew 6.4% year-over-year, driven by unique placement growth of 4.2% and reported specialty case growth of 3.3% [7] - Excluding the Texas Produce Processing and Packaging Program, specialty case growth was 5.4% compared to the prior year [8] - Pounds in Center of the Plate were approximately 2.4% lower than the prior year, but excluding the Texas Commodity Poultry Program attrition, growth was 7.5% higher [8] Market Data and Key Metrics Changes - Net inflation was 8.3% in Q4 2025, with 3.4% inflation in the specialty category and 16.1% in the center of plate category [13] - Excluding the impact of the Commodity Poultry Program attrition, net inflation in center of the plate was 9.5% [13] Company Strategy and Development Direction - The company aims to continue growing market share and expanding its customer base, focusing on upscale casual to higher-end dining [5][29] - Investments in distribution center capacity expansion and facility consolidation are ongoing, with a focus on operational efficiency and talent acquisition [10][11] - The company is cautiously optimistic about overcoming challenges such as inflation and tariff noise, leveraging a diversified portfolio of suppliers [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong performance of January 2026 despite challenges from winter weather, indicating a strong recovery in February [21] - The company anticipates revenue growth of 6%-8% for 2026, with a focus on maintaining operating expense leverage [37] - Management remains optimistic about the M&A environment, looking for strategic opportunities while maintaining a strong balance sheet [51][52] Other Important Information - The company achieved over $4 billion in revenue for the first time in its history, with a full-year organic revenue growth of 9.1% [10] - Total liquidity at the end of Q4 2025 was $280.5 million, with net debt to adjusted EBITDA at approximately 2.1 times [18] Q&A Session Summary Question: How have year-to-date sales tracked versus expectations given the winter weather? - Management reported that January was strong, and the storm only temporarily impacted the first week of February, with a strong recovery in the second week [21] Question: Can you discuss the drivers of operating expense leverage? - Management indicated that gross profit margins are expected to remain flat, focusing on growing gross profit dollars higher than adjusted operating expenses [23] Question: What are the biggest challenges or uncertainties for 2026? - Management highlighted inflation, tariff noise, and the need for continued growth as key challenges, but expressed cautious optimism due to a diversified customer base [29] Question: What are the capital allocation priorities for 2026? - Management aims to keep dry powder for potential acquisitions while also returning cash to shareholders opportunistically [31] Question: Any notable regional performance variances? - Management reported strong performance across key markets, including California, Texas, and Florida, with ongoing investments in facilities and sales force [41][42] Question: How is the company leveraging AI for dynamic pricing and customer behavior analysis? - Management stated that AI is ingrained in operations, continuously improving insights into customer behavior and operational efficiencies [49] Question: What is the outlook for the M&A environment? - Management remains cautious but optimistic about finding strategic M&A opportunities that align with the company's growth objectives [51][52]