Q4 2021 Chefs' Warehouse Inc Earnings Call

February 9, 2022

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Greetings and welcome to the chefs warehouse fourth quarter 2021 earnings Conference call. As a reminder, this conference is being recorded I would now like to turn the conference over to your host Alex Aldous General Counsel Corporate Secretary and Chief Government Relations Officer. Please go ahead Sir.

Thank you operator, good morning, everyone with me on today's call are Chris Pappas, founder, Chairman and CEO and Jim Leddy, our CFO by now you should have access to our fourth quarter 2021 earnings press release. It can also be found at www dot chefs warehouse dot com under the Investor Relations section.

Throughout this conference call, we will be presenting non-GAAP financial measures, including among others historical and estimated EBITDA and adjusted EBITDA as well as both historical and estimated adjusted net income and adjusted earnings per share.

These measurements are not calculated in accordance with GAAP and may be calculated differently than similarly, titled non-GAAP financial measures used by other companies.

Detailed reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release.

We begin our formal remarks I need to remind everyone that part of our discussion today will include forward looking statements, including statements regarding our estimated financial performance such forward looking statements are not guarantees of future performance and therefore, you should not put undue reliance on them.

Statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Some of these risks are mentioned in todays release, others are discussed in our annual report on Form 10-K , and quarterly reports on Form 10-Q , which are available on the SEC website.

Today, we're going to provide a business update and go over our fourth quarter results in detail and then we will open up the call for questions with that I will turn the call over to Chris Pappas grips.

Thank you Alex and thank you all for joining our fourth quarter 2021 earnings call.

<unk> trends were strong in the fourth quarter as we saw continued growth in.

Consumer confidence and dining out across our markets.

Sales and business activity grew steadily holiday customer traffic drove sequential volume increases.

With pre Covid periods.

Even with the reduction in larger corporate parties and events.

Similar to our previous reporting our comparable sales and gross margin results of the current quarter sequentially to the third.

Third quarter of 2021.

Jim will provide.

The comparison to prior year in his comments later in the call.

During the quarter.

Net sales increased approximately 15, 3% versus the third quarter of 2021.

<unk> sales increased approximately 12% sequentially versus third quarter of 2021.

With average unique customers, increasing four 5% and.

We saw higher placements of approximately 7%.

Specialty cases increased 9% versus the third quarter of 2021, well center of the plate pounds sold were approximately five 6% higher.

Sequentially versus the third quarter of 2021.

Excluding the impact of acquisitions.

Gross profit margins were 22, 5% in the fourth quarter compared to 22, 7% in the third quarter of 2021.

Total gross profit dollars increased 14, 3%.

As the third quarter.

Jim will provide more detail on gross margin of inflation in a few minutes.

On December 27, 2021, we closed the purchase of capital Seaboard.

Premier provider of produce and seafood.

Their growing customer base in the mid Atlantic region.

We are excited to have Larry Quinn and his entire team joined the <unk> family of companies and brands.

Moving forward, we will look to leverage capital is high touch and high quality business model to both complement and enhance our specialty and protein presence in this key market.

Regarding recent business activity.

This is the case across most of it most of the food industry.

January is seasonally the weakest month of the year in terms of revenue generation and business activity.

While we experienced little observed impact on sales in the fourth quarter due to the emergence of the arm recurrent bollinger variant.

Did appear customer traffic was somewhat impacted the first few weeks of January .

However, our performance to date.

In line with our expectations and is reflected in our full year 2022 guidance.

2021 was the year that reinforced the resiliency and importance of the food away from home industry.

The reopening of our larger market during the summer of 2021, followed by steady growth in profitability. During the second half of the year displayed the continued strength in consumer demand for dining out.

Catered events virtually all forms of social interaction associated with the culinary experience.

Customers provide.

While the labor and supply chain dynamics coming out of the reopening we're certainly a challenge.

We are incredibly proud of the entire chefs warehouse team for coming together and developing commercial operational and delivery solutions.

That allowed us to provide the high touch high quality and premium product service levels, our customers have become accustomed to.

We look forward to continued growth, while providing the finest ingredients to current and future customers.

The coming generations of chefs in 2022 and beyond.

With that I'll turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity Jim.

Thank you, Chris and good morning, everyone I'll now provide a comparison of our current quarter operating results versus the prior year quarter and provide an update on our balance sheet and liquidity.

Our net sales for the quarter ended December 24th 2021 increased approximately 98, 2% to $558 3 million from $281 7 million in the fourth quarter of 2020.

The increase in net sales was the result of an increase in organic sales was approximately 89, 5% as well as the contribution of sales from acquisitions, which added approximately eight 7% to sales growth for the quarter.

Net inflation was 27% in the fourth quarter, consisting of 12, 5% inflation in our specialty category and inflation of 29, 2% in our center of the plate category versus the prior year quarter.

Please note. Please note that on average center of the plate prices were only three 5% higher sequentially versus the third quarter of 2021.

Gross profit increased 113, 5% to $125 7 million for the fourth quarter of 2021 versus $58 9 million for the fourth quarter of 2020.

Gross profit margins increased approximately 161 basis points to 22, 5%.

Year over year inflation was broad based across all specialty and center of the plate categories.

Selling general and administrative expenses increased approximately 31, 7% to $109 2 million for the fourth quarter of 2021 from $82 9 million for the fourth quarter of 2020.

The primary drivers of higher expenses were higher compensation and distribution costs associated with year over year volume growth in route expansion.

Adjusted operating expenses increased 37, 6% versus the prior year fourth quarter and as a percentage of net sales adjusted operating expenses were 17, 2% for the fourth quarter of 2021 compared to 24, 6% for the fourth quarter of 2020.

Other operating expense decreased by approximately $23 7 million due to the impairment of the del Monte investing and trademarks in the prior year period.

Operating income for the fourth quarter of 2021 was $15 8 million compared to an operating loss was $48 3 million for the fourth quarter of 2020.

The increase in operating income was driven primarily by higher gross profit, partially offset by higher higher operating costs.

Income tax expense was $3 2 million for the fourth quarter of 2021 compared to income tax benefit of $16 6 million for the fourth quarter of 2020.

Our GAAP net income was $8 4 million or 22 since income per diluted share for the fourth quarter of 2021 compared to a net loss of $37 1 million or $1 <unk> loss per diluted share for the fourth quarter of 2020.

On a non-GAAP on a non-GAAP basis, we had positive adjusted EBITDA of $30 2 million for the fourth quarter of 2021 compared to negative adjusted EBITDA of $10 5 million for the prior year fourth quarter.

Adjusted net income was $10 2 million or <unk> 26 cents income per diluted share for the fourth quarter of 2021 compared to adjusted net loss of 19 million or <unk> 52 cents loss per diluted share for the prior year fourth quarter.

Turning to the balance sheet and an update on our liquidity at the end of the fourth quarter. We had total liquidity of $224 6 million comprised of $115 2 million in cash and $109 4 million of availability under our ABL facility.

And net debt as of December 24, 2021 was approximately $279 million inclusive of all cash and cash equivalents.

Turning to our guidance for 2022 based on the current trends in the business, we are providing financial guidance to be as follows we.

We estimate that net sales for the full year of 2022 will be in the range of $2 1 billion to $2 2 billion.

Gross profit to be between $494 million and $517 million and adjusted EBITDA to be between $99 million and $111 million.

Our full year estimated diluted share count is approximately $42 5 million shares. We currently expect our senior unsecured convertible notes to be dilutive for the full year and accordingly, those shares that could be issued upon conversion of the notes are included in the fully diluted share count.

Thank you and at this point, we will open it up to questions operator.

At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.

Disciplined using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Our first question is from Alex Slagle with Jefferies. Please proceed with your question.

Thanks, Good morning.

Congrats on a good quarter.

Just wanted to get.

Kind of curious on in terms of what you've seen.

Trends in staging a recovery in recent weeks and how your customers are looking at their staffing coming back I mean, it sounds like the impact from Crown was not that dramatic in early January trends generally in line with your expectations.

Just any more color there on the most recent weeks and then in terms of the guidance how to think about the cadence.

The.

The sales and EBITDA ramp with the slope should look like through the year.

Yes, thanks for the question Alex.

Yes, I mean January in general Q1.

We normally plan very conservatively anyway, if you look back in history we.

Make 80% to 90% of our full year adjusted EBITDA.

From between Q2 and Q4.

So as Chris mentioned in his prepared remarks, the seasonality of Q1 for us is pretty dramatic.

And youre coming off the busiest month of the year in December .

And as we mentioned we had a very strong Q4, we saw trends that were very similar to pre COVID-19 periods.

We expected January to be fairly fairly weak as it as it normally is in and Thats reflected in our full year guidance.

As Chris mentioned.

Recent recent trends.

Our our.

<unk> as we normally expect through.

The first quarter.

Obviously, you've seen some weather in different parts of the country, but we usually factored that into our guidance.

Okay.

What you've seen from customers in terms of acceptance into higher menu pricing I mean, any any push back there or is it sort.

Sort of in line with tablets looked recently.

Really no changes, we haven't seen a lot of changes in.

Customer.

Dynamics, our activity I would just say that we saw the normal kind of sees.

Seasonality impact that you see in January and generally trends start to improve as you get into February towards Valentine's Day and then.

As the weather starts to improve going into March.

You start to see trends.

Getting better as well.

Great.

Thanks, a lot.

Yeah.

Yes.

Just the customer the customer feedback.

I was just on the West coast, obviously, the weather is better.

A lot of optimism.

We've seen the worst of it.

You know all of that.

Pent up demand at some point.

We unleashed right so.

Just the.

The conversations have started of the bookings and the parties.

All of the events.

Suburbs have been doing phenomenal so it's really the city's getting back to normality.

No.

The cruise ships.

Those are the last two pieces for.

A full comeback but.

I was very excited to see the optimism.

That's great. Thank you.

Thank you.

Our next question is from Fred Wightman with Wolfe Research. Please proceed with your question.

Hey, guys. Thanks for the question, maybe just to follow up on the last line of questioning I mean are you guys back to that same sort of pre omicron run rate just in terms of versus 2019 levels or are you still.

Below that December trend.

Well Im not sure what you mean by below the December trend as I've mentioned.

The first quarter has affected seasonally and so we're seeing very similar trends as we saw in 2019 and although we've stopped.

Kind of officially reporting our percentages.

2019 were still trending above.

2019 as prices have remained firm and volume is starting to build back.

Still missing obviously, the travel related and hospitality related volume.

As we mentioned when we provided our guidance earlier in the year, we don't expect that to be fully back until the end of 'twenty two and into 'twenty three so theres a lot of upside in the future from that business coming back as we havent even modeled that in.

Our guidance for 2002.

Okay, but just for the restaurant in case recovery I think you guys had talked about that happening in the <unk> of this year is that still a realistic timeframe.

Yes, we expect to get back to 2019 volume levels.

By <unk> the end of <unk> of 22, correct. Okay. Perfect and then can you just sort of walk us through the high end versus the low end of the gross margin outlook for the year is that just sort of inflation that gets you. There is there something else.

That drives the.

The high end versus low end.

Well actually with our guidance.

We pretty much average out to an expectation of about 23, 5% gross profit margin.

When you compare that to.

<unk>.

Margins in 2019 adjusted for the processing cost of course.

The biggest the biggest factor there has been the extreme inflation.

Lowering gross profit margin, but also lowering our adjusted Opex.

And we're getting the gross profit dollar growth because we're managing gross profit margins in a way that we get the appropriate gross profit dollar growth to drive EBIT growth.

So that's that's the main impact in our guidance related to gross profit margins.

Great. Thank you.

Our next question is from Peter Saleh with <unk>. Please proceed with your question.

Okay, great. Thank you and congrats on a great quarter.

Jim I wanted to ask on the inflation it seems like inflation was.

A little hotter this quarter than it was even in the third quarter.

You guys get a sense that we've peaked here on inflation or is there more to come unemployment. How do you guys modeling. This as we go onto a <unk> answer the balance of 2022.

Yes. Thanks for the question Peter Yes, I mean, it was mainly in the center of the plate products that we saw.

Slightly higher inflation, I mean, we reported 18% inflation in Q3 and about 20% inflation on average between the two categories specialty and center of the plate in Q4 the way we've modeled it is we have said this before we.

We think prices are going to remain firm, especially through the first half of the year.

Obviously, the labor situation the supply chain situation the logistics situations haven't really changed that much and I think the outlook is is that they don't really start to change until until the back half of the year obviously.

We can't predict that with surgical.

Surgical accuracy, obviously, but.

But that's how we've modeled and so in our guidance as we said at ICR.

Modeled in on average very moderate deflation, but that would really be driven by the comps get much better from a year over year perspective in the second half of the year.

We're still in the first half of 'twenty, two we're still lapping.

The Dean.

The inflation dynamics caused by the pandemic and it gets easier in the back half of the year.

Great and then just on.

The acquisition, Chris maybe you guys made several acquisitions over the past.

Year can you just talk about.

No.

How are you viewing the market now are you kind of digesting what you've.

Acquired or are you still looking for more and then just lastly on that can you just talk about the margin profile of some of these acquisitions.

What it takes to get them up to.

The company level.

Average EBITDA margin level. Thank you.

Sure.

Every every market that we're in is kind of unique.

Different stage of maturity.

Depending on the facilities.

Capital Seaboard was.

Kind of unique.

Coastal was also Brazil during that period of time.

We're much bigger, but they had a much bigger retail presence, which really is not our focus so.

We thought it was an interesting strategic acquisition to complement.

Our mid Atlantic strategy gave us a lot of expertise.

In produce and seafood to categories that we're trying to build nature.

Nationwide so.

Gave us a great building a good team good leadership, so we're going to leverage that.

Their growth the topline gross profit margins are pretty healthy so.

It's more of a focus is adding in.

Thousands of our specialty items into their.

Distribution and adding more of their protein so for them to make deliveries so synergistically.

It's not going to require more trucks and a lot more people. So that's really where we'll get the leverage.

So taking that business say from 100 something million to $207 million hopefully over the next few years.

We should be able to get the EBITDA uptick really through the synergies.

And the product mix, New England, we made a whole bunch of acquisitions the last two years there.

Getting the buildings right.

<unk> again the transportation.

<unk> expense really our drivers and trucks, especially today with labor going so high and fuel going higher so.

Over the next four or five years as we.

Really figure out leveraging the sales force.

In transportation, we should be able to get the EBITDA uptick synergize in all those businesses now that we have acquired and have such a giant footprint.

New England. So it's really the same in every single market, where you see us building a building acquiring multiple businesses.

It's at 345 year plan really.

Synergize in the sales force and technology, and that's really where we got the EBITDA uptick.

Thank you very much.

Thanks Peter.

Our next question is from Todd Brooks with benchmark. Please proceed with your question.

Hey, good morning, everybody, congrats not only on a great quarter, but kind of powering through.

A challenging year and doing it so well here so congrats on that.

Thank you.

Youre welcome if I could start with just looking at the business and the incremental revenues that we're putting through the income statement now.

Are there any additional claims on SG&A that we need to think about this year or.

Are we starting to see some of that leverage unlock where you get back to that.

Kind of mid twenties range that you saw in the 2018 timeframe.

Yeah.

Yes, thanks for the question Todd.

I think as we talked about when we provided guidance.

We are starting to get the leverage we are modeling in.

Getting back to kind of the mid single digit adjusted EBIT margins that that range that we've talked about getting back to.

We did mention.

A couple of the headwinds that we have in 'twenty two debt that we've modeled into our guidance and that is mainly the the moving into our expanded facilities in southern California and in Florida.

Our.

La <unk> is actually underway now we're moving in within the next.

Month, or two and then we anticipate to move into Florida, a few months after that so.

The additional costs associated with those facilities are really the.

The major headwind that we have.

In 'twenty, two we will lap that in 'twenty, three and combine that with the lapping that and with the growth that we're going to drive through those those facilities hopefully we will get a few fold in acquisitions over the next couple of years into those facilities.

We're going to drive that leverage that you're talking about.

And in the rest of our business as well as as we continue to grow and leveraged our fixed asset base.

We will.

Think you'll really see the uptick in 'twenty three 'twenty four as some of the things that Chris talked about in terms of Synergizes integrating some of these recent acquisitions.

Really start to impact the bottom line.

Okay, great. Thank you and then.

Secondly, I know from a demand side it seems like.

Omicron.

Moderately impactful if at all during the holiday here.

Out of these different spikes, we've seen real.

Spikes in demand I think some of this.

Maybe movement on the part of individuals to think of this is endemic versus pandemic. I guess can you talk about chefs readiness to service another spike in demand post home across if you're expecting to see it in the spring and how well positioned you are to service a spike if it does manifest.

Yeah.

Great question I feel like you might've been with me on my West Coast trip I, just got back Todd.

Todd.

A lot of optimism.

My feeling unless we get really unlucky with some bad mutation.

Changes, what we're seeing as well.

We're seeing a lot of optimism.

In the warmer states the demand is just building.

Right.

We're trying to get ahead of it.

My position is telling the troops.

Start hiring start interviewing.

I think it's going to be an extremely busy.

Spring summer and hopefully just going to continue to build.

Because of all the pent up demand so.

What we're seeing is people want to get out we're seeing shows booking we're seeing a lot of bookings per DAU.

Events in hospitality, so I think today.

<unk>, just announced that they're getting rid of their mass mandates.

Looking at the requirement for vaccines.

To show them to get into restaurants. So we're really optimistic that big sense of normality is coming back and.

What we're seeing in the warmer states.

People that are starting with traveler again, we're seeing no hold back in spending.

People are.

Taking the increases that we've seen with inflation and thank God, we're seeing we're seeing a lot of our customers doing extremely well. So we're we're cautiously optimistic.

That's correct, Chris Thanks, and then a final one for me and then I'll pass it along if you think of.

Not just your readiness, but you look back through your supply chain I know with the breadth of suppliers that allows you to kind of powered through shortages with.

Substitution and a lot of cases, but just how is the supply chain kind of holding up coming through omicron any.

Any areas of shortages that are even challenging for you guys with the breadth of assortment or what are you seeing as far as your suppliers' ability to get your product in a timely fashion.

I would say because I just spent a few days, but a lot of our suppliers out of food show and.

Again cautiously optimistic that everything is getting.

Much much better.

Theres blips there is always something that we don't see something pops up and something goes up.

510, 15% and we're all scrambling.

Price wise, but.

Overall, a lot of optimism.

They're going to be able to supply us.

Supply chains are going to start to get better.

Obviously, I think there will be some blips, but I think overall there is a lot of optimism.

Okay, great. Thanks to you both.

Thank you.

Our final question is from Kelly Bania with BMO capital. Please proceed with your question.

Hi, good morning, Thanks for taking my questions. A lot has been covered here just wanted to see if you can help us understand as you think about 2021.

Any.

Costs that you would consider temporary transitory.

That maybe can cycle and how youre planning those kind of expenses in 2022 within your guidance.

Yes.

So youre talking about <unk>.

2021 transitory costs not currently are in 'twenty two.

Really both actually.

Okay, well I think the one thing that we've called out is obviously I talked about earlier.

As the expenses related to moving in.

Two our new expanded facilities.

Beyond that.

We've already we've already seen the increases in labor and wages.

Really kind of come across the entire industry, everybody resetting higher that's obviously being passed on as you can see in our adjusted EBITDA margins.

For Q4.

We are able to get to adjusted EBIT margins fairly commensurate with pre COVID-19 periods.

After adjusting for the new acquisitions.

So I think the major transitory costs that we had in 'twenty. One we've talked about earlier, we're in the summer of 'twenty one when we.

Brought in temporary labor and contract labor, which was.

Very good decision on our operators.

On.

Behalf.

To do that we were able to service our customers during the.

During the snapback ramp.

That we saw of demand and in the summer and into the fall.

Obviously, that's behind us.

Labor situation is.

Much more close to normal type of pace. So.

So we don't expect any.

Really changes to the way we've modeled our guidance in terms of operating expenses.

Okay. That's helpful. And then just last one for me.

Any change or update to your outlook.

Thanks, Lisa and I. Thank you.

Called out last month that we need a 5% deflation outlook.

Obviously, a hard hard number to predict but.

Do you still feel comfortable in that range and is that is that a good thing.

You know to bring some of this cost down for your customers.

Well in terms of the way we've modeled it obviously, we can't predict it but.

Our thought process and the guidance was really that we saw some really very extreme inflation, especially in the center of the plate products.

And so thats really based more on some of those categories in the center of the play category.

Coming back down not towards 2019 prices, but.

Coming off in terms of the average prices that we saw in 2021 and some of that deflation is also just driven by the year over year comps getting better in the back half of the year and.

And potentially getting back more towards.

Low single digit year over year inflation, or even possibly low single digit deflation.

As you are comparing to.

The numbers that we saw from the second half of 'twenty, one from an inflation perspective so.

No, we really haven't changed our outlook.

Obviously, we will be able to manage.

Pricing such.

Whether it's an inflationary or deflationary environment I think we've proven that over the last two years.

And I'll just pass it to Chris if he has any additional thoughts I mean Kelly.

The restaurant industry I don't know over the last almost 40 years I've ever seen them take down prices right. So obviously some deflation.

B E.

Great uptick for their bottom line because I.

I don't think anyone is going to drop prices. So I think I think there is a lot of belief from our operators that they will capture.

Some of that bottom line as prices I think certain.

Labor is not going down.

But I think the supply chain.

So much of the inflation is coming from coming from from Us.

Just the transportation and the increase per case per pound.

At a certain point.

We will get some relief.

I think we will pass some of that along and I think that.

I think the restaurant tours are counting on that so.

Speak to a lot of the.

The operator side I think there are there is optimism that they will be able to capture that.

Sort of deflation to the bottom line, but.

We're seeing a lot of products holding the demand is there.

I don't know what the Crystal ball says.

Overall, but.

We're seeing is not a lot of pushback.

Priced from our customers' customer, which is great news because it has been so much inflation, especially in the.

Hi, and proteins, but high end seems to be.

Really strong the demand.

Sure.

As I said the city states that we have better weather and people are having trouble getting out of there.

Driveways or slipping.

The demand for their high end or the high end products seems extremely strong so.

We're very optimistic.

Yeah.

Kelly.

Yes.

It looks like Kelly has disconnected we have reached the end of the question and answer session. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Thank you.

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Greetings and welcome to the chefs warehouse fourth quarter 2021 earnings Conference call. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host Alex Aldous General Counsel Corporate Secretary and Chief Government Relations Officer. Please go ahead Sir.

These measurements are not calculated in accordance with GAAP and may be calculated differently than similarly, titled non-GAAP financial measures used by other companies.

Entertainer reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release.

Statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect some.

Some of these risks are mentioned in todays release, others are discussed in our annual report on Form 10-K , and quarterly reports on Form 10-Q , which are available on the SEC website.

Today, we're going to provide a business update and go over our fourth quarter results in detail.

And then we will open up the call for questions with that I will turn the call over to Chris Pappas grips.

Thank you Alex and thank you all for joining our fourth quarter 2021 earnings call.

Revenue trends were strong in the fourth quarter as we saw continued growth in consumer confidence and dining out across our markets.

<unk> sales and business activity grew steadily as holiday customer traffic drove sequential volume increases.

<unk> with pre Covid periods.

Even with the reduction in larger corporate parties and events.

<unk> to our previous reporting.

We'll compare sales and gross margin results of the current quarter sequentially.

Third quarter of 2021.

Jim will provide.

The comparison to prior year in his comments later in the call.

During the quarter.

Net sales increased approximately 15, 3% versus the third quarter of 2021.

<unk> sales increased approximately 12% sequentially versus third quarter of 2021.

With average unique customers, increasing four 5% and we.

Saw higher placements of approximately 7%.

Specialty cases increased 9% versus the third quarter of 2021.

Center of the plate pounds sold were approximately five 6% higher sequentially versus the third quarter of 2021, excluding the impact of acquisitions.

Profit margins were 22, 5% in the fourth quarter compared to 22, 7% in the third quarter of 2021.

In total gross profit dollars increased 14, 3% versus the third quarter.

Jim will provide more detail on gross margin of inflation in a few minutes.

On December 27, 2021, we closed the purchase of capital Seaboard, a premier provider of produce and seafood, so theyre growing customer base in the mid Atlantic region.

We are excited to have Larry Quinn and his entire team joined the <unk> family of companies and brands.

Moving forward, we will look to leverage capital is high touch and high quality business model to both complement and enhance our specialty and protein presence in this key market.

Regarding recent business activity.

As is the case across most of the food industry January is seasonally the weakest months of the year in terms of revenue generation and business activity.

While we experienced little observed impact on sales in the fourth quarter due to the emergence of the arm recurrent bollinger variant.

It did appear customer traffic was somewhat impacted the first few weeks of January .

However, our performance to date has been in line with our expectations and is reflected in our full year 2022 guidance.

2021 was the year that reinforced the resiliency and importance of the food away from home industry.

The reopening of our larger market during the summer of 2021.

Road by steady growth in profitability during the second half of the year displayed the continued strength in consumer demand for dining out.

Events virtually all forms of social interaction associated with the culinary experience our customers provide.

While the labor and supply chain dynamics coming out of the reopening we are certainly a challenge.

We're incredibly proud of the entire chefs warehouse team for coming together and developing commercial operational and delivery solutions that allowed us to provide the high touch high quality and premium product service levels, our customers have become accustomed to.

We look forward to continued growth, while providing the finest ingredients to current and future customers and the <unk>.

Coming generations of chefs in 2022 and beyond.