The Chefs' Warehouse(US:CHEF)2024-05-01 19:24Financial Data and Key Metrics Changes - Net sales for Q1 2024 increased approximately 21.5% to $874.5 million from $719.6 million in Q1 2023, driven by an 8.8% increase in organic sales and a 12.7% contribution from acquisitions [6][10] - Gross profit increased 23.4% to $209.4 million, with gross profit margins rising approximately 37 basis points to 23.9% [67][63] - Adjusted EBITDA for Q1 2024 was $40.2 million compared to $32.8 million in Q1 2023, with adjusted net income at $5.9 million or $0.15 per diluted share [99] Business Line Data and Key Metrics Changes - Specialty sales grew 7% organically, with unique customer growth of approximately 10.1% and placement growth of 12% [93] - Center-of-the-plate organic pounds increased approximately 6.2% compared to the prior year [93] - Gross margin in the specialty category remained unchanged, while the center-of-the-plate category saw a 19 basis point increase [63] Market Data and Key Metrics Changes - Net inflation was reported at 2.7%, with 1.2% inflation in the specialty category and 4.6% in the center-of-the-plate category [97] - The company noted that the competitive landscape remains challenging, with some customers experiencing negative comps while others are gaining market share [129] Company Strategy and Development Direction - The company is focused on organic growth and enhancing its brand as a premier distributor of specialty ingredients and proteins [65] - Ongoing consolidation of operations in Northern California is expected to yield operational efficiencies starting in 2025 [64] - The company is investing in technology and training to improve operational efficiency and labor productivity [131][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about customer resilience amid economic pressures, noting that higher-end consumers may be less affected by inflation [76] - The company anticipates continued growth, with a full-year guidance for net sales between $3.64 billion and $3.785 billion [10] - Management acknowledged potential headwinds from macroeconomic factors but remains confident in the company's strategic investments [128] Other Important Information - The company repurchased $5 million of outstanding shares and reduced its term loan balance by $6.7 million [9] - The company expects to maintain a net debt to adjusted EBITDA ratio of approximately 3.3x [70] Q&A Session All Questions and Answers Question: How is the company navigating the competitive backdrop with respect to pricing? - Management noted that while some customers may be facing pressures, they are gaining new customers and maintaining a strong market position [17][18] Question: What is the outlook for the Middle East business amid regional turmoil? - The company indicated that the Middle East operations have remained largely immune to turmoil, with some sourcing adjustments made [80] Question: How sustainable is the current organic growth rate? - Management expects organic growth to moderate slightly but remains comfortable with guidance that aligns with long-term growth algorithms [126] Question: What are the expectations for inflation in the coming quarters? - Management indicated that inflation has firmed up more than expected, with labor costs expected to remain high [121][141]