Q1 2025 The Chefs' Warehouse Inc Earnings Call
[music].
Greetings and welcome to the chefs warehouse fourth quarter 2025 earnings conference call.
As a reminder, this conference is being recorded.
I would now like to turn the call over to your host Alex Aldous General Counsel, corporate Secretary and Chief Government Relations Officer. Please.
Speaker Change: Please go ahead Sir.
Speaker Change: Thank you operator, and 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 first quarter 2025 earnings press release. It can also be found at www dot chefs warehouse dot com under the Investor Relations section.
Speaker Change: Throughout this conference call, we will be presenting non-GAAP financial measures, including among others historical and estimated EBITDA and.
Speaker Change: Adjusted EBITDA as well as historical adjusted net income adjusted earnings per share adjusted operating expenses adjusted operating expenses as a percentage of net sales and as a percentage of gross profit net debt leverage and free cash flow.
Speaker Change: These measures are not calculated in accordance with GAAP and may be calculated differently than similarly, titled non-GAAP financial measures used by other companies.
Speaker Change: Quantitative reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures.
Speaker Change: In today's press release, and first quarter 2025 earnings presentation.
Speaker Change: Before 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.
Speaker Change: Such forward looking statements are not guarantees of future performance.
Speaker Change: And therefore, you should not put undue reliance on them.
Speaker Change: Statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.
Speaker Change: Some of these risks are mentioned in today's release.
Speaker Change: These are discussed in our annual report on Form 10-K, and quarterly reports on Form 10-Q, which are available on the SEC website.
Speaker Change: Today, we are going to provide a business update and go over our first quarter results in detail for a portion of our discussion. This morning, we will refer to a few slides posted on the chefs warehouse website under the Investor Relations section titled first quarter 2025 earnings presentation.
Speaker Change: Please note that these slides are disclosed at this time for illustration purposes only then.
Speaker Change: Then we will open up the call for questions with that I will turn the call over to Chris Pappas Chris.
Chris Pappas: Thank you Alex and thank you all for joining our first quarter 2025 earnings call.
Chris Pappas: First quarter of 2025 business activity displayed typical seasonal cadence as revenue trends coming out of January increased steadily into February and March.
Chris Pappas: During the quarter, our business units international and domestic delivered strong growth in unique item placements solid operating leverage versus the prior year first quarter.
Chris Pappas: As we entered the second quarter revenue bills. During the first few weeks of April continued to display typical seasonality.
Chris Pappas: I would like to thank all our steps warehouse teams from sales and operations to all the supporting functions for delivering a great start to 2025.
Chris Pappas: I would also like to recognize our customer and supplier partners for their support and confidence in our people quality and diversity of products.
Chris Pappas: In our high touch flexible distribution platform.
Chris Pappas: Now please refer to slide three of the presentation a few highlights from the first quarter include.
Eight 7% growth in net sales.
Chris Pappas: Specialty sales were up 10, 7% over the prior year, which was driven by unique customer growth of approximately four 5%.
Chris Pappas: Placement growth of seven 7% and specialty case growth of five 7% pounds at the center of the plate, where approximately one 3% lower than the prior year first quarter. During the first quarter, we commenced attrition of certain low margin noncore customer business that had an impact.
Chris Pappas: <unk>, 7% lower year over year sales versus prior year quarter.
Chris Pappas: Primary driver would be a terrific attrition was a high volume low dollar commodity poultry program acquired with an acquisition.
Chris Pappas: Excluding this attrition total center of the plate pounds grew growth was 3% higher than prior year first quarter gross profit margins decreased approximately 18 basis points.
Chris Pappas: Gross margin in the specialty category increased approximately six basis points as compared to the first quarter of 2024, while gross margins in the center of the plate category decreased approximately 83 basis points of year over year.
Chris Pappas: Jim will provide more detail on gross profit and margins in a few moments now please refer to slide four.
Chris Pappas: One provides first quarter 2025, trailing 12 month update to gross profit dollars per route as compared to full year 2024 and 2019.
Chris Pappas: Chart, two provides first quarter 'twenty five trailing 12 month adjusted operating expense as a percentage of gross profit dollars improvements by 36 basis points versus full year, 2024, and 127 basis points versus 2019.
Chris Pappas: First quarter 2025, trailing 12 month adjusted EBITDA per employee increased 1% versus full year of 2024, and 19, 19% versus 2019.
Chris Pappas: Now please refer to slide five the charge here display the progression of customer orders coming via our digital platform, which include orders coming via mobile and website.
Chris Pappas: As of the first quarter of 'twenty, five approximately 58% of our customers ordering through our domestic specialty locations are online versus 56% at year end 2024, and 48% a year end 2023.
Chris Pappas: Investments in our digital platform contributed to improved profitability over time as our teams drive online order adoption growth enhancements to customer facing functionality and real time data analytics supporting our sales team.
Chris Pappas: In addition, we continued to expand our digital footprint within chefs warehouse, bringing chefs warehouse middle East and Hardee's online during the last few months.
Chris Pappas: 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.
Jim Leddy: 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. Please.
Jim Leddy: Please refer to slide six our net sales for the quarter ended March 28, 2025 increased approximately eight 7% to $950 7 million from $874 5 million in the first quarter of 2024 net inflation was five 2% in the first quarter assisting.
Jim Leddy: Four 8% inflation in our specialty category and five 9% inflation in our center of the plate category versus the prior year quarter reported inflation was impacted by two primary factors in the first quarter versus the prior year quarter prices in chocolate in AG category products remained elevated.
Jim Leddy: Prior year with double digit year over year inflation.
Jim Leddy: Specialty product cross sell growth in Texas, as we combined our legacy specialty and protein sales with our hardee's produce operation.
Jim Leddy: Average revenue per case, and Hardie has increased approximately 12% versus the first quarter of 2024 as the mix of lower volume higher revenue cases increased excluding.
Jim Leddy: Excluding the impact of the Texas Cross sell growth aggregate specialty inflation was approximately three 1% and overall inflation for the company was approximately 3%.
Jim Leddy: Gross profit increased seven 9% to $226 million for the first quarter of 2025 versus $209 4 million for the first quarter of 2024 gross profit margins decreased approximately 18 basis points to 23, 8%.
Jim Leddy: Selling general and administrative expenses increased approximately six 5% to $202 8 million for the first quarter of 2025 from $190 3 million for the first quarter of 2024. The increase was primarily due to higher costs associated with compensation and benefits facilities and.
Jim Leddy: <unk> to support sales growth and higher depreciation driven by facility investments.
Jim Leddy: Adjusted operating expenses increased five 5% versus the prior year first quarter and as a percentage of net sales adjusted operating expenses were 18, 8% for the first quarter of 2025.
Jim Leddy: Operating income for the first quarter of 2025 was $22 7 million compared to $16 million for the first quarter of 2024. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling general and administrative administration expenses versus the prior year quarter.
Jim Leddy: Our GAAP net income was $10 3 million or <unk> 25 cents per diluted share for the first quarter of 2025 compared to net income of $1 9 million or <unk> <unk> per diluted share for the first quarter of 2024.
Jim Leddy: On a non-GAAP basis, we had adjusted EBITDA of $47 5 million for the first quarter of 2025 compared to $40 2 million for the prior year first quarter.
Jim Leddy: Adjusted net income was $10 2 million or 25 cents per diluted share for the first quarter of 2025 compared to $5 9 million or <unk> 15 per diluted share for the prior year first quarter.
Jim Leddy: Turning to the balance sheet and an update on our liquidity. Please refer to slide seven at.
Jim Leddy: At the end of the first quarter, we had total liquidity of $278 9 million comprised of $116 5 million in cash and $162 4 million of availability under our ABL facility.
Jim Leddy: As of March 28, 2025, total net debt was approximately $535 2 million inclusive of all cash and cash equivalents.
Jim Leddy: Net debt to adjusted EBITDA was approximately two four times.
Jim Leddy: Turning to our full year guidance for 2025 based on the current trends in the business, we are providing our full year financial guidance as follows.
Jim Leddy: We estimate that net sales for the full year of 2025 will be in the range of $3 96 billion to 4.04 billion gross profit to be between $954 million and $976 million and adjusted EBITDA to be between $234 million and $246 million.
Jim Leddy: Please note for the full year 2025, we expect the convertible notes maturing in 2028 to be dilutive and therefore, we expect the fully diluted share count to be approximately 46, 3% to 47 million shares.
Jim Leddy: Thank you and at this point, we will open it up to questions operator.
Jim Leddy: Thank you.
Jim Leddy: Ladies and gentlemen, we will now begin the question and answer session.
Jim Leddy: If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is it the question queue.
Jim Leddy: Press Star two if you'd like to remove your question from the queue.
Jim Leddy: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keith.
Jim Leddy: Ladies and gentlemen, we will wait for a moment, while we poll for questions.
Jim Leddy: The first question comes from the line of Alex Slagle from Jefferies. Please go ahead.
Alex Slagle: Thanks, Good morning Congrats.
Jim Leddy: Congrats on the quarter.
Jim Leddy: I did ask a little bit more on the tariffs and inputs I know we discussed it before but just as it becomes.
Jim Leddy: More real I think.
Jim Leddy: Maybe you can give some comfort there can you talk about the flexibility you have.
Jim Leddy: And again, that's the latest on what you're thinking now on that front.
Jim Leddy: We think they should be.
Jim Leddy: Oh.
Jim Leddy: A terrorist feedstocks.
Jim Leddy: Good morning, Alex.
Jim Leddy: Obviously, we've been getting ready for this.
Speaker Change: I don't think anybody has clarity really where it's going to affect.
Speaker Change: Where it will end up but it's still a small percentage a lot of the products even though.
Speaker Change: We import a lot of specialty foods, it's still a small percentage of our overall business. So.
Speaker Change: I think that you know I mean, we always pass it on some of the suppliers I think.
Speaker Change: If it really sticks are probably going to eat some of it and there'll be some pass on you got to remember.
Speaker Change: The freight as well as part of the cost so that's not getting tariff. So I think we feel we're okay.
Speaker Change: <unk>.
Speaker Change: Our up our category management team has gotten ahead in all suppliers want to sell products, so they're finding a way to.
Speaker Change: Make sure that their market share.
Speaker Change: Stay safe pretty steady and we have many alternative sources for a lot of our products I think we've prided ourselves.
Speaker Change: Especially after.
Speaker Change: Financial crashes and 911 really diversify our supply chain. That's why we buy from so many different places and obviously, we buy a tremendous amount in the in the U S. We have a lot of artisan producers producing products for us.
Speaker Change: Mimic our south American and European supply so.
Speaker Change: I am pretty comfortable where we are.
Speaker Change: Great and a follow up your commentary on the demand environment seems pretty earn at least year trends seem pretty steady and I know there's been some stock market volatility.
Speaker Change: Kind of curious if theres any sense. This is impacting demand at all on the upscale and from what you've heard or seen.
Speaker Change: We.
Speaker Change: I think we said in our opening remarks April April was.
Speaker Change: We expected.
Speaker Change: You know it's.
Speaker Change: From our chairs.
Speaker Change: We haven't we haven't really seen anything.
Speaker Change: Maybe a few spots around the country that depend on maybe more seasonal tourism.
Speaker Change: But.
Speaker Change: Look at a good restaurant and try to get to see their business seems strong.
Speaker Change: Whether it's whether it's improving in all of our clubs or opening all of our outdoor cafes are opening so I think our diversity.
Speaker Change: In our customer base and what we focus on.
Speaker Change: I would like to think that we're in we're in better shape for any sort of economic slowdown than maybe the overall market again, if you go from $5 $6 for meal, that's a tremendous increase.
Speaker Change: If you're a if.
Speaker Change: If your entree goes from $26 to $28.
Speaker Change: I don't think a lot of people are going to use that as a reason not to go to a good a good a good meal. So.
Speaker Change: I'm hopeful.
Speaker Change: 40 years of experience in this business serving this type of clientele that we're a little more insulated.
Speaker Change: Thanks for the color.
Alex Slagle: Thanks, Alex.
Speaker Change: Thank you. The next question comes from the line of Mark Carden from UBS. Please go ahead.
Mark Carden: Good morning, Thanks, so much for taking the questions and nice quarter guys.
Speaker Change: Thanks to start.
Speaker Change: We've seen some reports that international travel into the U S has come down a bit would you expect for this to be a material headwind to your sales if it's sustained.
Speaker Change: Or does it tend to be a pretty modest factor.
Speaker Change: Yes, I'm trying to think of the last time, we had an.
Speaker Change: An environment like this but.
Speaker Change: Obviously tourism.
Speaker Change: A big part of a lot of a lot of the major cities I guess around the country, but.
Speaker Change: I don't see a panic.
Speaker Change: Of our hearing from any of our clientele.
Speaker Change: Again, a modest slowdown here or there I guess.
Speaker Change: <unk>, the very best restaurants.
Speaker Change: There is.
Speaker Change: We do so much business in the suburbs.
Speaker Change: Local restaurants that really don't depend on tourism.
Speaker Change: There's still so much there's so much action around stadiums.
Speaker Change: Our sports and entertainment that bring people into.
Speaker Change: To eat.
Speaker Change: In a lot of the major cities of our cruise ship business seems really solid.
Speaker Change: So.
Speaker Change: As of today, we don't we're not really seeing anything or hearing anything from our clients.
Speaker Change: Great. That's helpful. And then I know everything remains pretty fluid on the tariff front, but do you see much risk for tariffs, having an impact on your facility growth plans just your expansion activities get any tougher from an RFP standpoint, and just given the potential impacts on materials costs.
Speaker Change: I think.
Speaker Change: For the immediate future.
Speaker Change: For the projects that we have in place right now.
Speaker Change: We've got we've moderated our capex.
Speaker Change: Versus the prior years.
Speaker Change: <unk> 22, and 'twenty three.
Speaker Change: So we have a couple of projects that are underway right now, we don't see really any impact to those.
Speaker Change: That's a project in the northwest we expect to complete at the end of the year or early 'twenty, six and our New Jersey, Philadelphia project, we expect.
Speaker Change: To complete sometime towards the end of the summer of this year.
Speaker Change: In terms of going forward.
Speaker Change: We're making plans right now we haven't really seen any.
Speaker Change: Kind of impacts at this time, so I think that's still TBD.
Speaker Change: Just remind me kind of COVID-19. It made us smarter, we have to do less with more and I think in planning for the next next stage, we're looking at more technology.
Speaker Change: Ways to actually build smaller buildings and make them more efficient and the same same same way we look at our our.
Speaker Change: SKU rationalization plans.
Speaker Change: Two really.
Speaker Change: Space is so expensive labor so expensive that.
Speaker Change: Finding new ways to service our clients.
Speaker Change: A better handle on the cost of inventory, we always say we are a company that said, yes, and now with a company that says let's look at it we'd like to but it's going to cost more to do it this way.
Speaker Change: And our clients have been working with us they understand the environment. So.
Speaker Change: I think it just makes us more disciplined.
Speaker Change: Smart and it forces you to be smarter because the costs have gone up so you have to do less with more as the way we've looked at it and using technology really in all the AI, we have and the experience in the company.
Speaker Change: We're just going to find a way to have that I don't know.
Speaker Change: That ROI work for us in these new buildings.
Speaker Change: Great. Thanks, so much good luck guys.
Speaker Change: Thank you.
Speaker Change: The next question comes from the line of beta Sally from BP.
Speaker Change: Please go ahead.
Speaker Change: Great. Thanks for taking my question and congrats on the quarter.
Speaker Change: And just another question on the overall environment.
Speaker Change: Are you guys seeing any slowdown in new restaurant formation given the.
Speaker Change: Tariff uncertainty in the overall market I know you need a fair amount of new restaurant formation or need to add some.
Speaker Change: Significant amount of gross new.
Restaurants every year to continue this growth pace. So just just curious have you seen any sort of slowdown on the construction of new restaurant formation.
Peter: Thanks Peter.
Peter: No no not really we always say restaurant towards open restaurants, a lot of new buildings, a lot of new development, especially in.
Peter: No.
Peter: Areas that population growth right. So when you look at West Palm and you look up parts of Texas.
Peter: Places, where the population is growing you know you've got lots of new customers I think I always think sometime is the data that comes out of.
Peter: For the independent restaurants, I don't think the data.
Peter: As you know.
Peter: As accurate enough to say, what's happening with a lot of the independent so a lot of it has to change.
Peter: You have so many new places opening since COVID-19 that I think that effect, sometimes the numbers of.
Peter: How many people are calling in and out of out of the same restaurants, I think theres just so many that the breadth of the business is getting more and more spread out.
Peter: For us really that's that's a tailwind.
Peter: We benefit from from new restaurants so.
Peter: It's a it's kind of a tailwind and we we really haven't seen a slowdown I think the only place that maybe.
Peter: Has a little slowdown is.
Peter: Those heavy heavy tourist spots.
Peter: Like Vegas, maybe during the week.
Peter: I think they've been a little quiet and then the weekends.
Peter: Still boom, but.
Peter: Right now no.
Peter: In April we haven't seen anything.
Peter: Yes.
Peter: Great and then just lastly.
Speaker Change: The middle East could you guys provide an update there I believe last.
Peter: Last year at this time, there was some weather some flooding.
Peter: Just curious how that business is performing.
Peter: Yes.
Peter: The business is performing.
Peter: Right.
Peter: Continue to see.
Peter: Growth.
Speaker Change: I think we provided some of the demographic statistics et cetera Investor day.
Speaker Change: In terms of the number of hotels that are slated to come online between now and 2030.
Speaker Change: So that continues to.
Speaker Change: To perform we opened our new facility at the end of December of last year.
Speaker Change: And the team is continues to grow.
Speaker Change: And they are performing better than our expectations.
Speaker Change: Yeah.
Speaker Change: Thank you very much.
Speaker Change: Thanks Peter.
Speaker Change: The next question comes from the line of Andrew Wolf from CL King <unk> Associates. Please go ahead.
Andrew Wolf: Hi, good morning.
Speaker Change: Hey, Andy Good morning ask if you might be able to comment on the.
Andrew Wolf: The relative performance within your customer segments for example.
Speaker Change: Your understanding is like.
Speaker Change: Fine dining or like table cloth versus maybe.
Speaker Change: Scale casual I think Chris you mentioned, the country clubs or opening well.
Speaker Change: I asked that because I think black box has a fine dining.
Speaker Change: That great.
Speaker Change: White tablecloth.
Speaker Change: I know, it's not may not be the biggest segment within <unk>.
Speaker Change: But I'm just kind of trying to see where.
Speaker Change: How things Q up with some of the public information out there.
Speaker Change: Obviously your performance speaks for itself.
Speaker Change: Yeah.
Speaker Change: I think you just have to look at the numbers I mean.
Speaker Change: I still I.
Speaker Change: Yes.
Speaker Change: I get 100 calls a week.
Speaker Change: Actually a concierge to get people reservations and I keep reminding them that.
Speaker Change: Yes.
Speaker Change: It's really hard to get into.
Any any good restaurant.
Speaker Change: There is seasonality there.
Speaker Change: Yes.
Speaker Change: No what I haven't seen that Blackrock.
Speaker Change: Comment but.
Speaker Change: Theres always people complaining and as always.
Speaker Change: As you know the restaurant business you know everybody wants to go to a good new restaurants. So.
Speaker Change: There is always someone that's losing a few covers.
Speaker Change: Right, but.
Speaker Change: I think behavior I expect it to change somewhat again.
Speaker Change: I just wanted to be in the wine business on one lever, but I'm kind of glad I'm not at this point, because I think that's where.
Speaker Change: Some of the slowdown is on the spend the beverage.
Speaker Change: In past slowdowns, what we experience is our business our business always did pretty well maybe the mix changes a little bit you know I always say people go to a skirt steak versus.
Speaker Change: Filet Mignon.
Speaker Change: And then they go to a glass of wine versus a bottle.
Speaker Change: <unk>.
Speaker Change: Right now.
Speaker Change: <unk> is growing like crazy. So that's taken the place for people that are choosing not to drink versus drinking a martini. So there's always a lot of adjustments.
Speaker Change: And the industry, but.
Speaker Change: We haven't we haven't really seen anything Andy.
Speaker Change: Got it and the other question.
Speaker Change: Maybe it's more for Jim I'm not sure but.
Speaker Change: Could you comment on your gross profit dollars per case the trend obviously was on.
Speaker Change: Maybe between the two.
Speaker Change:
Speaker Change: Our product.
Speaker Change: God categories.
Speaker Change: Oh, Yes, I mean, I think we're really pleased with.
Speaker Change: Just under 8% year over year gross profit dollar growth and we've got good operating leverage on that growth.
Speaker Change: The one thing as we called out in the ER.
Speaker Change: On the specialty side, we continue to grow gross profit dollars per case.
Speaker Change: And you see that on the chart.
Speaker Change: But the one thing was on the.
Speaker Change: On the attrition.
Speaker Change: From a big big non core customer that we kind of called out in our prepared remarks. So excluding that we had we had not only good pretty good pounds growth, but we had.
Speaker Change: About 7% year over year gross gross.
Speaker Change: <unk> dollar growth revenue per per pound in our center of the plate and Thats that contributed to that overall gross profit dollar growth. So.
Speaker Change: Just.
Speaker Change: Excluding that attrition.
Speaker Change: Really good gross profit dollar growth per unit and overall.
Speaker Change: For both categories.
Speaker Change: Okay alright, thank you.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Kelly Bania from BMO capital markets. Please go ahead.
Kelly Bania: Hi, Good morning, Chris and Tim Thanks for taking our questions.
Speaker Change:
Speaker Change: Good morning, Jim I actually just wanted to follow up on on that point.
Speaker Change: And how the attrition.
Speaker Change: The noncore customer X.
Speaker Change: How that impacted the center of plate.
Speaker Change: Margin and I guess, we should assume that kind of flow through for the next couple of quarters, but just how.
Speaker Change: Helping us kind of model here, the gross margin impact of that attrition and if theres any more planned attrition for the year that we should think about modeling.
Speaker Change: Well.
Speaker Change: It was a big it's a big commodity poultry program, a few million pounds of commodity programs. So.
Speaker Change: The biggest impact is on.
Speaker Change: Our reported volume growth. So we'll continue to kind of call it out.
Speaker Change: Because it has it.
Speaker Change: And impact on the overall reported volume growth, but.
Speaker Change: From a margin perspective the biggest.
Speaker Change: Impact on year over year margin.
Speaker Change: <unk> has been the fact that.
Speaker Change: <unk>, six or 7% higher than they were in the first quarter of 2024, and and then product mix changes. So it was really just a combination that we sold.
Speaker Change: A greater volume of higher dollar.
Speaker Change: Center of the plate products in cases.
Speaker Change: Versus last year, and obviously when you have that kind of inflation price inflation youre going to give up some margin.
Speaker Change: To.
Speaker Change: <unk> managed the customers' expectations and still get the gross profit dollar growth that you need.
Speaker Change: And so we're very pleased with the.
Speaker Change: Our center replace contribution to that overall seven 9% year over year gross profit dollar growth, but I would say more importantly for our customers and for what we watch is sequential inflation and so during the first quarter really from the beginning of the year other than you know a little bit of volatility in February.
Speaker Change: Sequential pricing in both specialty and center of the plate has been within pretty tight ranges I mean, obviously.
Speaker Change: Chocolate n' eggs have been a little bit all over the place.
Barry: And Barry.
Very volatile at very high price levels, but other than that.
Barry: Inflation really hasn't been a sequential problem in the first quarter. So it will impact the year over year reporting.
Barry: But really those are the two factors just product mix and.
Barry: Price changes versus last year.
Barry: Okay very helpful.
Barry: I wanted to also just follow up on on the tourism question in and.
Barry: It sounds like.
Barry: Definitely not seeing any any impact there and maybe pockets, but just curious if you can give some numbers.
Barry: Or share some anecdotes about how much the business has changed maybe versus pre COVID-19, where you've had some business shipped outside of the more dense urban markets into the suburbs. How does how does that how does that shift of luck from pre COVID-19 to today.
Barry: Oh I think.
Speaker Change: Dave is such a.
Barry: As you know I mean I know.
Barry: Some some industries banking banking once people back in the office five days a week I don't know if thats really happening but.
Barry: We saw a boom that.
Barry: Maybe people are going back and more but there is definitely more people working one to two days.
Barry: Not commuting and eating eating more local where they live.
Barry: Even in the cities you live downtown Europe as Uptown.
Barry: You still see some demographic changes so.
Barry: It's hard it's hard to really.
Barry: Throw a dart at.
Kelly Bania: Kelly, but.
Kelly Bania: It's definitely rebalanced the business somewhat.
Kelly Bania: There is still there.
Kelly Bania: There is still that boom in the cities when you have big events.
Kelly Bania: Shows obviously conventions, but.
Kelly Bania: The suburban restaurants.
Kelly Bania: I'd say.
Kelly Bania: Many maybe are not doing the COVID-19 numbers, because nobody was going into the cities but.
Kelly Bania: It definitely has changed the landscape.
Kelly Bania: Okay that is helpful.
Kelly Bania: Maybe just another one here on the guidance obviously, the Q Q1 was a strong year on the topline.
Kelly Bania: If you look at the guidance it would kind of imply.
Kelly Bania: A little slower growth for the rest of the year I'm, assuming that's conservatism, but maybe you can just talk about how you think about that.
Kelly Bania: Is that conservatism do you want to just be conservative planning in this environment or anything else that we should be thinking about.
Kelly Bania: Yes, Kelly, we generally don't change our guidance materially after the first quarter just in general if you look back just because youre through a quarter and you got three quarters of the.
Kelly Bania: The year left so.
Kelly Bania: So that's just a little bit of our normal practice.
Kelly Bania: Did bring up very slightly the lower end just to reflect the strength of the first quarter.
Kelly Bania: And I think there is obviously some uncertainty around the macroeconomic environment, given the tariff situation and the volatility around that so.
Kelly Bania: It's also comparison driven so if you.
Kelly Bania: We had very strong second half of the year and in 24. So if you look at our full year guidance the growth level is lower than the first quarter year over year, and Thats and Thats, just driven by comps and the fact that we're usually a little conservative coming out of the first quarter.
Kelly Bania: Makes sense. Thank you.
Kelly Bania: Thank you.
Kelly Bania: Thank you the next.
Speaker Change: Question comes from the line of Todd Brooks from the Benchmark Company. Please go ahead.
Todd Brooks: Great. Thanks, and good morning to you both.
Speaker Change: Uh huh.
Chris Pappas: Quick question Chris.
You talked about the normal seasonality.
Chris Pappas: What kind of reopening and Todd we can't.
Speaker Change: We can hear you.
Speaker Change: Can you hear me now.
Speaker Change: Yes, much better yeah, sorry about that.
Speaker Change: Chris you had talked about.
Speaker Change: <unk>.
Speaker Change: At normal April seasonality.
Speaker Change: Clubs reopening outdoor dining reopening just wondering as you're talking to customers and looking at kind of that that May June window, and obviously this is a peak season for <unk>.
Speaker Change: A lot of restaurants with moms dads and grads. So just wondering if theres any sort of booking activity going on into that may timeframe that youre getting kind.
Speaker Change: Confidence in continuing activity when you talk to the clients.
Speaker Change: Yeah.
Speaker Change: Again, I haven't I haven't really heard any.
Speaker Change: Doom and gloom.
Speaker Change: I think I think most of our clientele is.
Speaker Change: Okay.
Speaker Change: <unk> is pretty confident.
Speaker Change: The only the only kind of noise I'm hearing is maybe it's some slowdowns.
Speaker Change: In Las Vegas.
Speaker Change: Comparing year to year comps, obviously coming out of Covid. When nobody was traveling and then then you couldn't get a room and then everybody was was going to play to that Las Vegas, So I'm thinking maybe it's more normality at this point.
Speaker Change: There's a lot of choices.
Speaker Change: I think it's the only place I hear a lot of noises people that had.
Speaker Change:
Speaker Change: Our business boom boom.
Speaker Change: Coming out of Covid.
Speaker Change: And they kind of expected it to stay kind of like when I hear from areas of Florida.
Speaker Change: Our business in Florida.
Speaker Change: Is doing great couldnt be happier with it and the growth, but you hear people silica Blaine that.
Speaker Change: It's not as busy as last year or the year before and I'm like well, Florida was one of the only places you can go to so.
Speaker Change: Those that was not that it was not a pace that could continue right people like choices people go other places now so.
Speaker Change: We remain cautiously optimistic again this is not a new business. We've been serving this type of clientele for 40 years.
Speaker Change: Actually exactly 40 year anniversary.
Speaker Change: And there are spots that.
Speaker Change: Do slow down and there's other spots that kind of pickup so kind of.
Speaker Change: Gives us a balance.
Speaker Change: I would say, maybe you are giving up.
Speaker Change: Maybe you or.
Speaker Change: If you are a family on a budget and youre going to cut back a little bit, but you still booked at that cruise.
Speaker Change: Vacation for your family.
Speaker Change: You're probably going to go on that unless you lose your job you're going to go on that vacation or.
Speaker Change: Youre going to go on that birthday, our anniversary event or youre going to have that bar mitzvah or wedding or Christine parties. So.
Speaker Change:
Speaker Change: We remain cautiously optimistic.
Speaker Change: Perfect. Thanks, and then Jim a follow up question.
Speaker Change: You spoke to the inflation levels during the corner and that there is now.
Speaker Change: Element of that that was impacted from the hardee's business really getting.
Speaker Change: Christmas Parkland Sherpa ties.
Speaker Change: And starting to cross sell more specialty products is there a way from a modeling standpoint that you could level set of assumptions or where your thoughts are on inflation right now for the balance of the year, either taking into account or backing out the tailwind from this improved cross sell at hardee's.
Speaker Change: Yes, I would I would just kind of a range around.
Speaker Change: What we talked about on our prepared remarks.
Speaker Change: If you exclude the Hardie is cross sell just the increase in their average case price because we're starting to grow the specialty part of the business as we integrate.
Speaker Change: Inflation was around 3% and then within that 3% you still have chocolate prices, which are significantly higher than last year. Once again sequentially for the first quarter. They haven't changed that much they've been trading within a range.
Speaker Change: A pretty tight range, but at much higher levels than a year ago, and then everybody is aware of what's happening with egg prices they're down.
Speaker Change: Pretty significantly from where they were in the fourth quarter and last year, but there is still at an elevated level and they're pretty volatile.
Speaker Change: So that's all within that 3%. So once again I just think you exclude those two things in your in that 2% to 3% range that we tend to model when we forecast out.
Speaker Change: And really.
Speaker Change: No nothing no real commentary beyond that.
Speaker Change: Okay perfect. Thank you both.
Speaker Change: Thanks.
Speaker Change: We take the next question from the line of Ben <unk> from Lake Street Capital markets. Please go ahead.
Ben: Alright, Thanks for taking my questions I'm curious about the noncore exit.
Speaker Change: <unk>.
Speaker Change: You have noted here.
Speaker Change: Specifically I'm wondering about when that was decided to be exited and out and when that exit was first included in your guidance. Today is the first day or if that was included back when you first announced.
Speaker Change: ICR.
Speaker Change: Yes, it's a program that we knew we would trade out of at some point. So we factored it into the range of our guidance.
Speaker Change: We didn't.
Speaker Change: It's the kind of program that is not typical for us we inherited with an acquisition.
Speaker Change: We work to.
Speaker Change: You can make it as profitable as possible, but these kind of programs go out to bid and then you decide whether you can make it profitable or not.
Speaker Change: So it just happened that the attrition started in the first quarter.
Speaker Change: And we had already kind of built it into our guidance.
Speaker Change: And so the timing from those things you can never time them perfectly.
Speaker Change: But that's that's really.
Speaker Change: The cadence and I think when we forecast.
Speaker Change: I mean, you don't know you don't know when things actually.
Speaker Change: I was going to be bid out.
Speaker Change: Youre going to give up and say, we don't we don't fire customers.
Speaker Change: It's not what we do some of these.
Speaker Change: Acquisitions, we have they come along with I'll call. It noncore business. So we kind of build them good guy bad guys. So.
Speaker Change: So that's something you'll probably going to lose something like this and then you're probably going to pick up something else and that's.
Jim Leddy: That's why I think Jim does a pretty good job with the team.
Jim Leddy: Helping build the forecast and the numbers go up and down a little bit but.
Jim Leddy: By the end of the year Theyre kind of evening out with.
Jim Leddy: The upside.
Jim Leddy: Usually when something like this happens we have more capacity on trucks. So now we're not adding more routes were just filling up the routes that that left a little vacuum so I'd actually.
Jim Leddy: Starts to become a much more profitable.
Jim Leddy: Business, we did that in new England. So we have a lot of experience having done this with all the past acquisitions.
Jim Leddy: And we call it <unk> their business and kind of changing it.
Jim Leddy: I mean, one of our business that we bought that was making barely any money in.
Jim Leddy: Four years later.
Jim Leddy: <unk> got $10 million of EBITDA. So I think we're very confident in our strategy and.
Jim Leddy: Not that we want to fire customers, but I always say, we are a for profit business.
Jim Leddy: Not what we do and maybe they are better off with.
Jim Leddy: A different model.
Jim Leddy: Don't run someone else's company, but we know what our cost run a truck.
Jim Leddy: Make a delivery.
Jim Leddy: The numbers have to make sense. So I think it is going to be constant that's a constant thing that we are going to experience forever.
Jim Leddy: And that totally makes sense under the strategic and financial rationale here is certainly appropriate I guess, Jim is is it a fair characterization and then maybe some part of this business was included in your initial guidance back in January February and now there is no part of this on a go forward basis, that's included and so the.
Jim Leddy: Kind of affect the reiteration of guidance.
Jim Leddy: That you have today is kind of better than it looks because theirs.
Jim Leddy: And exited business now thats no longer included.
Jim Leddy: Yeah.
Jim Leddy: I guess I think Chris really kind of framed it appropriately that when we're building our guidance suite, we factor in the potential loss of this type of stuff, but also potential gains that that we may not have factored into the guidance. So I mean net net we raised the bottom end of our topline guidance.
Jim Leddy: Which is really just flowing through a little bit of the goodness from from Q1, but like we said we factored in knowing that this was probably going to go away, but not knowing exactly the business.
Jim Leddy: So.
Jim Leddy: December when we're doing our.
Jim Leddy: Budgets.
Jim Leddy: November 425, we don't know that this will.
Jim Leddy: This account will.
Jim Leddy: Tell us that they don't want to pay the inquiries, so but I think we just forecasts.
Jim Leddy: On say $4 billion of sales youre going to Youre.
Jim Leddy: We're going to have some of this that's going to happen.
Jim Leddy: And youre going to have some good stuff coming so balance so maybe it gets a little squishy.
Jim Leddy: In a quarter or so, but we always say the Italians already say throw everything on our part and somehow it makes broth.
Jim Leddy: And that's kind of our business when you are selling.
Jim Leddy: Mostly independents and then sprinkle in a few of these.
Jim Leddy: Call it noncore customers.
Jim Leddy: And we look at it when we're buying companies, where like you know what.
Jim Leddy: But we know eventually this is going to go away, it's not what we do.
So while we have it we try to figure out the next stage of the strategy.
Jim Leddy: I look at it is if you got clunky low margin business inside of an acquisition.
Jim Leddy: We model that over four or five years.
Jim Leddy: It will go away and those routes are going to be repurposed with more business that we do so it's a little headwind when it goes away. It once and then the rebuilding starts and it looks really much much better over the over that four year period.
Jim Leddy: Got it.
Jim Leddy: Perfect sense I appreciate the color congratulations a really good starting to to the area I'll get back in queue.
Jim Leddy: Thank you thanks.
Jim Leddy: Thank you.
Speaker Change: Ladies and gentlemen, as there are no further questions I will now hand, the conference over to Chris Pappas for closing comments Chris.
Chris Pappas: Well, we thank everyone for joining us today, we're really proud of our team.
Speaker Change: In turbulent times with a lot of noise in the year.
Speaker Change: We think.
Speaker Change: We think the CW team does a tremendous job.
Speaker Change: Delivering.
The kind of quarter, we have delivered in.
Speaker Change: I think our shareholders.
Speaker Change: We're proud of them too. So thank you everybody for joining today and look forward to our next call.
Speaker Change: Thank you, ladies and gentlemen, the conference of the chef warehouse has now concluded. Thank you for your participation you may now disconnect your lines.
Speaker Change: Okay.
Speaker Change: [music].