Earnings call transcript: Chefs Warehouse Q1 2025 sees earnings beat, stock rises

The Chefs Warehouse Inc. (CHEF), a specialty food distributor with a market capitalization of $2.21 billion, reported a strong start to 2025 with first-quarter earnings that surpassed Wall Street expectations, leading to a notable rise in its stock price. The company, which maintains a "GOOD" financial health score according to InvestingPro analysis, posted an earnings per share (EPS) of $0.25, exceeding the forecasted $0.20, and achieved revenue of $950.7 million, beating the forecast of $927.34 million. This positive performance resulted in a pre-market stock price increase of 6.23%, with shares trading at $56.60, up from the previous close of $53.28.

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Key Takeaways

• Chefs Warehouse reported a Q1 EPS of $0.25, surpassing the forecast by $0.05.
• Revenue reached $950.7 million, exceeding expectations by $23.36 million.
• The stock price rose by 6.23% in pre-market trading following the earnings announcement.
• Specialty sales grew by 10.7% year-over-year, contributing to overall revenue growth.
• The company continues to expand its digital platform, now used by 58% of domestic specialty customers.

Company Performance

Chefs Warehouse demonstrated robust performance in the first quarter of 2025, with net sales increasing by 8.7% year-over-year. This growth was driven by a 10.7% rise in specialty sales and continued strength in the restaurant sector, particularly in suburban and local markets. The company’s strategic focus on digital expansion and operational efficiency played a significant role in its performance.

Financial Highlights

• Revenue: $950.7 million, up 8.7% year-over-year.
• Earnings per share: $0.25, compared to $0.20 forecasted.
• Gross profit: $226 million, an increase of 7.9%.
• Adjusted EBITDA: $47.5 million.
• Gross profit margin: 23.8%, a slight decrease of 18 basis points.

Earnings vs. Forecast

Chefs Warehouse exceeded earnings expectations with an EPS of $0.25 against a forecast of $0.20, marking a 25% surprise. Revenue also surpassed projections, coming in at $950.7 million compared to the anticipated $927.34 million. This strong performance reflects the company’s effective strategies and market positioning.

Market Reaction

Following the earnings announcement, Chefs Warehouse experienced a 6.23% increase in its stock price during pre-market trading. This rise positions the stock closer to its 52-week high of $66.51, signaling positive investor sentiment. Wall Street analysts remain bullish, with price targets ranging from $66 to $73, suggesting potential upside. The market’s reaction underscores confidence in the company’s growth prospects and strategic initiatives, reflected in its impressive 61% return over the past year.

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Outlook & Guidance

For the full year 2025, Chefs Warehouse forecasts net sales between $3.96 billion and $4.04 billion, with a gross profit range of $954 million to $976 million. The company anticipates an adjusted EBITDA of $234 million to $246 million, maintaining a cautiously optimistic outlook amid potential market challenges.

Executive Commentary

CEO Chris Pappas expressed a positive outlook, stating, "We remain cautiously optimistic," highlighting the company’s adaptability and strategic focus. He also emphasized the importance of digital innovation, saying, "We’re a for-profit business and it’s just not what we do," in reference to maintaining core business values.

Risks and Challenges

• Inflationary pressures, particularly in chocolate and egg categories.
• Potential impacts from a tourism slowdown, although minimal effects observed so far.
• Ongoing supply chain challenges that could affect operational efficiency.
• Market volatility and economic uncertainty that may impact consumer spending.

Q&A

During the earnings call, analysts inquired about the impact of tariffs and the observed trends in restaurant formation. The management reassured minimal concerns regarding tariffs and noted no significant slowdown in restaurant openings, reflecting a stable market environment.

Full transcript - The Chefs Warehouse Inc (CHEF) Q1 2025:

Conference Operator: Greetings, and welcome to the Chef’s Warehouse First Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Alex Alders, General Counsel, Corporate Secretary and Chief Government Relations Officer. Please go ahead, sir.

Alex Alders, General Counsel, Corporate Secretary and Chief Government Relations Officer, Chef’s Warehouse: 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 first quarter twenty twenty five earnings press release. It can also be found at www.chefswarehouse.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 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. These measures are not calculated in accordance with GAAP and may be calculated differently in similarly titled non GAAP financial measures used by other companies. Quantitative reconciliations of our non GAAP financial measures to their most directly comparable GAAP financial measures appear in today’s press release and first quarter twenty twenty five earnings presentation. 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. Such forward looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

These statements are subject to numerous and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today’s release. Others are discussed in our annual report on Form 10 ks and quarterly reports on Form 10 Q, which are available on the SEC website. 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 Chef’s Warehouse website under the Investor Relations section titled First Quarter twenty twenty five Earnings Presentation.

Please note that these slides are disclosed at this time for illustration purposes only. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Thank you, Alex, and thank you all for joining our first quarter twenty twenty five earnings call. First quarter of twenty twenty five business activity displayed typical seasonal cadence as revenue trends coming out of January increased steadily into February and March. 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. As we entered the second quarter, revenue builds during the April continued to display typical seasonality. I would like to thank all our Chefs’ Warehouse teams from sales and operations to all the supporting functions for delivering a great start ’25.

I would also like to recognize our customer and supplier partners for their support and confidence in our people, quality and diversity of products and our high touch flexible distribution platform. Now please refer to Slide three of the presentation. A few highlights from the first quarter include 8.7% growth in net sales. Specialty sales were up 10.7% over the prior year, which was driven by unique customer growth of approximately 4.5%, placement growth of 7.7% and specialty case growth of 5.7%. Pounds in center of the plate were approximately 1.3% lower than the prior year first quarter.

During the first quarter, we commenced attrition of certain low margin non core customer business that had an impact of 0.7% lower year over year sales versus prior year quarter. Percent lower higher than

prior year first quarter. Gross profit margins decreased approximately 18 basis points. Gross margin in the specialty category increased approximately six basis points as compared to the first quarter of twenty twenty four, while gross margins in the center of the plate category decreased approximately 83 basis points year over year. Jim will provide more detail on gross profit and margins in a few moments. Now please refer to Slide four.

Chart one provides first quarter twenty twenty five trailing twelve month update to gross profit dollars per route as compared to full year 2024 and 2019. Chart two provides first quarter twenty twenty five trailing twelve month adjusted operating expense as a percentage of gross profit dollars improvements by 36 basis points versus full year 2024 and 01/1927 basis points versus 2019. First quarter ’20 ’20 ’5 trailing twelve month adjusted EBITDA per employee increased 1% versus full year of 2024 and nineteen percent versus 2019. Now please refer to slide five. The charts here display the progression of customer orders coming via our digital platform, which include orders coming via mobile and website.

As of the first quarter of twenty twenty five, approximately 58% of our customers ordering through our domestic specialty locations are online versus 56% at year end 2024 and forty eight percent at year end twenty twenty three. Investments in our digital platform contribute to improve 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. In addition, we continue to expand our digital footprint within Chefs’ Warehouse, bringing Chefs’ Warehouse Middle East and Hardee’s online during the last few months. 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, CFO, Chef’s Warehouse: 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 refer to Slide six. Our net sales for the quarter ended 03/28/2025 increased approximately 8.7% to $950,700,000 from $874,500,000 in the first quarter of twenty twenty four. Net inflation was 5.2% in the first quarter, consisting of 4.8% inflation in our specialty category and 5.9% 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 and egg category products remained elevated versus prior year with double digit year over year inflation. Specialty product cross sell growth in Texas, as we combine our legacy specialty and protein sales with our Hardee’s produce operation. Average revenue per case in Hardee’s increased approximately 12% versus the first quarter of twenty twenty four as the mix of lower volume, higher revenue cases increased. Excluding the impact of the Texas cross sell growth, aggregate specialty inflation was approximately 3.1% and overall inflation for the company was approximately 3%.

Gross profit increased 7.9% to $226,000,000 for the first quarter of twenty twenty five versus $209,400,000 for the first quarter of twenty twenty four. Gross profit margins decreased approximately 18 basis points to 23.8%. Selling, general and administrative expenses increased approximately 6.5% to $202,800,000 for the first quarter of twenty twenty five from $190,300,000 for the first quarter of twenty twenty four. The increase was primarily due to higher costs associated with compensation and benefits, facilities and distribution to support sales growth and higher depreciation driven by facility investments. Adjusted operating expenses increased 5.5% versus the prior year first quarter and as a percentage of net sales, adjusted operating expenses were 18.8% for the first quarter of twenty twenty five.

Operating income for the first quarter of twenty twenty five was $22,700,000 compared to $16,000,000 for the first quarter of twenty twenty four. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling, general and administration expenses versus the prior year quarter. Our GAAP net income was $10,300,000 or $0.25 per diluted share for the first quarter of twenty twenty five compared to net income of $1,900,000 or $05 per diluted share for the first quarter of twenty twenty four. On a non GAAP basis, we had adjusted EBITDA of $47,500,000 for the first quarter of twenty twenty five compared to $40,200,000 for the prior year first quarter. Adjusted net income was $10,200,000 or $0.25 per diluted share for the first quarter of twenty twenty five compared to $5,900,000 or $0.15 per diluted share for the prior year first quarter.

Turning to the balance sheet and an update on our liquidity. Please refer to slide seven. At the end of the first quarter, we had total liquidity of $278,900,000 comprised of $116,500,000 in cash and $162,400,000 of availability under our ABL facility. As of 03/28/2025, total net debt was approximately $535,200,000 inclusive of all cash and cash equivalents and net debt to adjusted EBITDA was approximately 2.4 times. 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. We estimate that net sales for the full year of 2025 will be in the range of $3,960,000,000 to $4,040,000,000 gross profit to be between $954,000,000 and $976,000,000 and adjusted EBITDA to be between $234,000,000 and $246,000,000 Please note for the full year 2025, we expect the convertible notes maturing in 2028 to be dilutive, and therefore, we expect the fully dilutive share count to be approximately 46,300,000.0 to 47,000,000 shares. Thank you. And at this point, we will open it up to questions. Operator?

Conference Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. Session. first

question comes from the line of Alex Slagle from Jefferies. Please go ahead.

Alex Slagle, Analyst, Jefferies: Thanks. Good morning. Congrats on the quarter. I wanted to ask a little bit more on the tariffs and inputs. I know we’ve discussed it before, but just as it becomes more real, think, maybe you can give some comfort there, kind of talk about the flexibility you have, just to give us the latest on what you’re thinking on that front.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: We think there should be a tariff peace talk. Good morning, Alex. Obviously, we’ve been getting ready for this and I don’t think anybody has clarity really where it’s going to affect where it will end up. But it’s still a small percentage. A lot of the products, even though we import a lot of specialty foods, it’s still a small percentage of our overall business.

So I think that I mean, we always pass it on. Some of the suppliers, I think, if it really sticks, are probably going to eat some of it and there’ll be some pass on. You got to remember, the freight as well is part of the cost, that’s not getting tariffs. So I think we feel we’re okay. Our category management team has gotten ahead and all suppliers want to sell products, so they’re finding a way to make sure that their market share stays pretty steady.

And we have many alternative sources for a lot of our products. I think we pride ourselves on especially after financial crashes and nineeleven, really diversify our supply chain. That’s why we buy from so many different places. And obviously, we buy a tremendous amount in The U. S.

We have a lot of artisan producers producing products for us that kind of mimic our South American and European supplies. So I’m pretty comfortable where we are.

Alex Slagle, Analyst, Jefferies: Great. And a follow-up, your commentary on the demand environment seemed pretty or at least your trends seem pretty steady and I know there’s been some stock market volatility and kind of curious if there’s any sense this is impacting demand at all on the upscale end or from what you’ve heard or seen?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: I think we say in our opening remarks, April was what we expected. From our chairs, we haven’t really seen anything, maybe a few spots around the country that depend on maybe more seasonal tourism. But look at a good restaurant and try to get a seat. Their business seems strong. Weather is improving.

All our clubs are opening. All our outdoor cafes are opening. So I think our diversity in our customer base and what we focus on, I would like to think that we’re in better shape for any sort of economic slowdown than maybe the overall market. Again, if you go from $5 to $6 for a meal, that’s a tremendous increase. If your entree goes from $26 to $28 I don’t think a lot of people are going to use that as a reason not to go to a good meal.

So I’m hopeful like for our forty years of experience in this business serving this type of clientele that we’re a little more insulated.

Alex Slagle, Analyst, Jefferies: Thanks for the color.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Thanks, Alex.

Conference Operator: Thank you. The next question comes from the line of Mark Carlin from UBS. Please go ahead.

Mark Carlin, Analyst, UBS: Good morning. Thanks so much for taking the questions and nice quarter guys. Thanks. To start, 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 or does it tend to be a pretty modest factor?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: I’m trying to think of the last time we had an environment like this, but obviously tourism is a big part of a lot of the major cities, I guess, around the country. But I don’t see a panic hearing from any of our clientele. Again, a modest slowdown here or there. I guess, besides the very best restaurants, we do so much business in the suburbs and local restaurants that really don’t depend on tourism. There’s still so much action around stadiums and sports and entertainment that bring people into to eat in a lot of the major cities.

Our cruise ship business seems really solid. So as of today, we’re not really seeing anything or hearing anything from our clients.

Mark Carlin, Analyst, UBS: 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 do your expansion activities get any tougher from an ROIC standpoint and just given the potential impacts on materials costs?

Jim Leddy, CFO, Chef’s Warehouse: I think for the immediate future, for the projects that we have in place right now, we’ve got we’ve moderated our CapEx versus the prior years 2022 and 2023. So we have a couple of projects that are underway right now. We don’t see really any impact to those. ’s our project in the Northwest, we expect to complete at the end of the year or early twenty twenty six. And our New Jersey Philadelphia project, we expect to complete sometime towards the end of the summer of this year.

In terms of going forward, we’re making plans right now. We haven’t really seen any kind of impacts at this time. So I think that’s still TBD.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Yes. But this reminds me kind of COVID, it made us smarter. We had to do less with more. And I think in planning for the next, next stage, we’re looking at more technology, ways to actually build smaller buildings and make them more efficient. And the same way we look at our SKU rationalization plans to really space is so expensive, labor is so expensive that finding new ways to service our clients, but have a better handle on the cost of inventory.

We always say we are the company that said yes. And now we’re the company that says, let’s look at it. We’d like to, but it’s going to cost more to do it this way. And our clients have been working with us. They understand the environment.

So I think it just makes us more disciplined and it forces you to be smarter because the costs have gone up. So have to do less with more is the way we’ve looked at it. And using technology really and all the AI we have and the experience in the company, we’re just going to find a way to have that ROI work for us in these new buildings.

Mark Carlin, Analyst, UBS: Great. Thanks so much. Good luck, guys.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Thank you.

Conference Operator: The next question comes from the line of Peter Sale from BTIG. Please go ahead.

Peter Sale, Analyst, BTIG: Great. Thanks for taking the question and congrats on the quarter. Just another question on the overall environment. Are you guys seeing any slowdown in new restaurant formation given the tariff uncertainty in the overall market? I know you need a fair amount of new restaurant formation or need to add some significant amount of gross new restaurants every year to continue this growth pace.

Just curious if you’re seeing any sort of slowdown on construction and new restaurant formation.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Thanks, Peter. No, not really. We always say restaurateurs open restaurants, a lot of new buildings, lot of new developments, especially in areas that you have population growth. When you look at West Palm and you look at parts of Texas and places where the population is growing, you got lots of new customers. I always think sometimes the data that comes out for the independent restaurants, I don’t think the data is accurate enough to say what’s happening with a lot of the independents.

So a lot of it’s for chains that you have so many new places opening since COVID that I think that affects sometimes the numbers of how many people are going in and out of the same restaurants. I think there’s just so many that the business is getting more and more spread out. And for us, really, that’s a tailwind. We benefit from new restaurants. So it’s kind of a tailwind and we really haven’t seen a slowdown.

I think the only place that maybe has a little slowdown is those heavy, heavy tourist spots, kind of like Vegas maybe during the week. I think they’ve been a little quiet and then the weekends are still boomed. But right now, in April, we haven’t seen anything.

Peter Sale, Analyst, BTIG: Great. And then just lastly, Chef Middle East, could you guys provide an update there? I believe last year at this time there was some weather, some flooding. Just curious how that business is performing. Thanks.

Jim Leddy, CFO, Chef’s Warehouse: Yes. The business is performing great. We continue to see growth. I think we provided some of the demographic statistics at our Investor Day in terms of the number of hotels that are slated to come online between now and 02/1930. So it continues to perform.

We opened our new facility at the December And the team continues to grow, and they’re performing better than our expectations.

Peter Sale, Analyst, BTIG: Thank you very much.

Conference Operator: Thanks, Peter. The next question comes from the line of Andrew Wolf from C. L. King and Associates. Please go ahead.

Andrew Wolf, Analyst, C.L. King and Associates: Hi, good morning.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Hey, Andy. Good morning.

Andrew Wolf, Analyst, C.L. King and Associates: Wanted to ask if you might be able to comment on the relative performance within your customer segments. For example, how you’re understanding is like fine dining or like tablecloth versus maybe upscale casual. I think, Chris, you mentioned the country clubs are opening well. I asked that because I think Black Box had the fine dining not doing that great. Mean, yeah, white tablecloth.

And I know it’s not the bit may not be the biggest segment within chefs, but I’m just trying to see how things queue up with some of the public information out there. Obviously, your performance speaks for itself.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Yeah. I think you just have to look at the numbers. I get 100 calls a week. I’m actually a concierge to get people reservations, and I keep reminding them that’s not what I do. It’s still really hard to get into any good restaurant.

There’s seasonality, I haven’t seen that BlackRock comment, but there’s always people complaining and there’s always the restaurant business, everybody wants to go to a good new restaurant. So there’s always someone that’s losing a few covers a night. But I think behavior, I expect it to change somewhat. Again, I always wanted to be in the wine business. I’m a wine lover, but I’m kind of glad I’m not at this point because I think that’s where some of the slowdown is on the spend of beverage.

In past slowdowns, what we experienced is our business always did pretty well. Maybe the mix changes a little bit. I always say people go to a skirt steak versus filet mignon, and then they go to a glass of wine versus a bottle. Right now, you have mocktails growing like crazy, so they’re taking the place for people that are choosing not to drink versus drinking a martini. So there’s always a lot of adjustments in the industry, but we haven’t really seen anything, Andy.

Andrew Wolf, Analyst, C.L. King and Associates: Got it. And the other question, maybe it’s more for Jim, I’m not sure, but just could you comment on your gross profit dollars per case? The trend obviously was up, but maybe between the two main product categories?

Jim Leddy, CFO, Chef’s Warehouse: Yes. I mean, I think we’re really pleased with just under 8% year over year gross profit dollar growth, and we got good operating leverage on that growth. The one thing is we called out in the on the specialty side, we continue to grow gross profit dollars per case, and you see that on the chart. But the one thing was on the attrition from a big non core customer that we kind of called out in our prepared remarks. So excluding that, we had not only good pretty good pounds growth, but we had about 7% year over year gross profit dollar growth, revenue per pound on our center of the plate.

And that contributed to that overall gross profit dollar growth. So just excluding that attrition, really good gross profit dollar growth per unit and overall for both categories.

Andrew Wolf, Analyst, C.L. King and Associates: Good. All right.

Mark Carlin, Analyst, UBS: Thank you.

Jim Leddy, CFO, Chef’s Warehouse: Thanks.

Conference Operator: Thank you. The next question comes from the line of Kelly Bania from BMO Capital Markets. Please go ahead.

Kelly Bania, Analyst, BMO Capital Markets: Hi, good morning, Chris and Jim. Thanks for taking our questions. Good morning Jim. I actually just wanted to follow-up on that point how the attrition the non core customer exits, how that impacted the center of plate gross margin, and I guess we should assume that kind of flows through for the next couple of quarters, but just helping us kind of model here the gross margin impact of that attrition and if there’s any more planned attrition for the year that we should think about modeling?

Jim Leddy, CFO, Chef’s Warehouse: Well, it’s a commodity poultry program, a few million pounds of commodity programs. The biggest impact is on our reported volume growth. So we’ll continue to kind of call it out because it has an impact on the overall reported volume growth. But from a margin perspective, the biggest impact on year over year margin has been the fact that prices are six or 7% higher than they were in the first quarter of twenty twenty four and then product mix changes. So it was really just a combination of we sold a greater volume of higher dollar center of the plate products and cases versus last year.

And obviously, when you have that kind of inflation, price inflation, you’re going to give up some margin to manage the customers’ expectations and still get the gross profit dollar growth that you need. And so we’re very pleased with our center of plates contribution to that overall 7.9% 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 a little bit of volatility in February, sequential pricing in both specialty and center of the plate has been within pretty tight ranges. I mean, chocolate and eggs have been a little bit all over the place and very volatile at very high price levels.

But other than that, really hasn’t been a sequential problem in the first quarter. So, it’ll impact the year over year reporting, but really those are the two factors, just product mix and price changes versus last year.

Kelly Bania, Analyst, BMO Capital Markets: Okay, very helpful. I wanted to also just follow-up on the tourism question. It sounds like you’re definitely not seeing any impact there, maybe pockets. But just curious if you can give some numbers or share some anecdotes about how much the business has changed maybe versus pre COVID where you’ve had some business shift outside of the more dense urban markets into the suburbs. How does that shift look from pre COVID to today?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Oh, I think there was such a As you know, I mean, I know some industries, the banking wants people back in the office five days a week. I don’t know if that’s really happening, but we saw a boom that maybe people are going back in more, but there’s definitely more people working one to two days not commuting and eating more local where they live, even in the cities. You live downtown, your office is uptown, you still see some demographic changes. So it’s hard to really throw a dart at it, Kelly, but it’s definitely rebalanced the business somewhat. There is still that boom in the cities when you have big events, shows, obviously conventions, but the suburban restaurants, would say many maybe are not doing the COVID numbers because nobody was going into the cities, but it definitely has changed the landscape.

Kelly Bania, Analyst, BMO Capital Markets: Okay, that is helpful. Maybe just another one here on the guidance. Obviously, Q1 was strong here on the top line. If you look at your guidance, it would kind of imply 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.

Is that conservatism? Do you want to just be conservative planning in this environment or anything else that we should be thinking about?

Jim Leddy, CFO, Chef’s Warehouse: Yeah, Kelly, we generally don’t change our guidance materially after the first quarter. Just in general, you look back, just because you’re through a quarter and you got three quarters of the year left. So that’s just a little bit of our normal practice. We did bring up very slightly the lower end just to reflect the strength of the first quarter. And I think there’s obviously some uncertainty around the macroeconomic environment given the tariff situation and the volatility around that.

So it’s also comparison driven. So if we had a very strong second half of the year in 2024. So if you look at our full year guidance, the growth level is lower than the first quarter year over year. And just driven by comps and the fact that we’re usually a little conservative coming out of the first quarter.

Kelly Bania, Analyst, BMO Capital Markets: Makes sense. Thank you.

Jim Leddy, CFO, Chef’s Warehouse: Thank you.

Conference Operator: Thank you. The next question comes from the line of Todd Brooks from The Benchmark Company. Please go ahead.

Todd Brooks, Analyst, Benchmark Company: Hey, thanks and good morning to you both.

Jim Leddy, CFO, Chef’s Warehouse: Good morning.

Andrew Wolf, Analyst, C.L. King and Associates: Thanks.

Todd Brooks, Analyst, Benchmark Company: Quick question, Chris. You talked about the normal April seasonality and kind of reopening.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Todd, can’t hear you.

Todd Brooks, Analyst, Benchmark Company: Can you hear me now?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Yeah, much better.

Todd Brooks, Analyst, Benchmark Company: Yeah, sorry about that. Chris, you talked about normal April seasonality, clubs reopening, outdoor dining reopening. Just wondering as you’re talking to customers and looking at kind of that May window and obviously this is a big season for a lot of restaurants with moms, dads and grads. So just wondering if there’s any sort of booking activity going on into that May timeframe that you’re getting kind of confidence in continuing activity when you talk to the clients?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Yeah, again, I haven’t really heard any doom and gloom. I think most of our clientele is pretty confident. I think the only kind of noise I’m hearing is maybe some slowdowns in like Las Vegas, but comparing year to year comps, obviously coming out of COVID when nobody was traveling and then you couldn’t get a room and then everybody was going to places out loud Vegas. So I’m thinking maybe it’s more normality at this point, that there’s a lot of choices. Think it’s the only place I hear a lot of noise is people that had a business boom, boom, coming out of COVID and they kind of expected it to stay, kind of like when I hear some from areas of Florida, our business in Florida is doing great, couldn’t be happier with it and the growth.

But you hear people still complain that 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 that was not a pace that could continue, right? People like choices. People go other places now.

We remain cautiously optimistic. Again, this is not a new business. We’ve been serving this type of clientele for forty years, actually exactly forty year anniversary. And there’s spots that do slow down and there’s other spots that kind of pick up, so it kind of gives us a balance. I would say maybe you’re giving up, maybe if you’re a family on a budget and you’re gonna cut back a little bit but you still book that cruise vacation for your family, you’re probably gonna go on that, unless you lose your job, you’re gonna go on that vacation or you’re gonna go on that birthday or anniversary event or you’re gonna have that bar mitzvah or wedding or christening party.

I remain cautiously optimistic.

Todd Brooks, Analyst, Benchmark Company: Perfect, thanks. And then Jim, follow-up question. You spoke to the inflation levels during the quarter and that there’s an element of that that was impacted from just the Hardee’s business really getting, in Chris’ parlance chefitized and starting to cross sell more specialty product. Is there a way from a modeling standpoint that you could level set assumptions for 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?

Jim Leddy, CFO, Chef’s Warehouse: Yes, I would just kind of range around what we talked about in our prepared remarks. If you exclude the Hardee’s 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, 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, a pretty tight range, but at much higher levels than a year ago.

And then everybody’s aware of what’s happening with egg prices. They’re down pretty significantly from where they were in the fourth quarter and last year, but they’re still at an elevated level and they’re pretty volatile. So that’s all within that 3%. So once again, just think you exclude those two things and you’re in that 2% to 3% range that we tend to model when we forecast out. And really, no real commentary beyond that.

Todd Brooks, Analyst, Benchmark Company: Okay, perfect. Thank you both.

Conference Operator: Thanks. We take the next question from the line of Ben Klieve from Lake Street Capital Markets. Please go ahead.

Alex Alders, General Counsel, Corporate Secretary and Chief Government Relations Officer, Chef’s Warehouse0: All right, thanks for taking my questions. I’m curious about the non core exit that you have noted here. And specifically, I’m wondering about when that was decided to be exited and when that exit was first included in your guidance? If today is the first day or if that was included back when you first announced at ICR?

Jim Leddy, CFO, Chef’s Warehouse: Yes. It’s a program that we knew we would attrit out of at some point. So we factored it into the range of our guidance. We didn’t it’s a kind of program that is not typical for us. We inherited it with an acquisition.

And we work to 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. And so it just happened that the attrition started in the first quarter and we had already kind of built it into our guidance. So the timing from those things, can never time them perfectly, but that’s really the cadence.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Yes. I think when we forecast, I mean, don’t know when things actually are going to be bid out and you’re going to give up. We don’t fire customers, but it’s not what we do. Some of these acquisitions we have, they come along with, I call it non core business. So we kind of build in good guy, bad guys.

So you know that something you’re probably going to lose something like this, and then you’re probably going to pick up something else. And that’s why I think Jim does a pretty good job with the team helping build the forecast and the numbers go up and down a little bit, but kind of by the end of the year, they’re kind of evening out with the upside. Usually, when something like this happens, we have more capacity on trucks. So now we’re not adding more routes. We’re just filling up the routes that left a little vacuum.

So it actually starts to become a much more profitable business. We did that in New England. So we have a lot of experience having done this with all the past acquisitions. And we call it shephercising their business and kind of changing it. I mean, one of our business that we bought that was making barely any money and four years later, they got $10,000,000 of EBITDA.

So I think we’re very confident in our strategy and not that we want to fire customers, but I always say we’re a for profit business and it’s just not what we do and maybe they’re better off with a different model. We don’t run someone else’s company, but we know what it costs to run a truck and make a delivery, and numbers have to make sense. So I think it’s going to be it’s a constant thing that we’re going to experience forever.

Alex Alders, General Counsel, Corporate Secretary and Chief Government Relations Officer, Chef’s Warehouse0: And that totally makes sense. I mean, the strategic and financial rationale here is certainly appropriate. Guess, Jim, is it a fair characterization then that maybe some part of this business was included in your initial guidance back in January, February, and now there’s no part of this on a go forward basis that’s included? And so the kind of effective reiteration of guidance that you have today is kind of better than it looks because there’s an exited business now that’s no longer included?

Jim Leddy, CFO, Chef’s Warehouse: I guess, I think Chris really kind of framed it appropriately that when we’re building our guidance, factor in the potential loss of this type of stuff, but also potential gains that we may not have factored into the guidance. So I mean, net net, we raised the bottom end of our top line guidance, which is really just flowing through a little bit of the goodness from Q1. But this like we said, we factored in knowing that this was probably going to go away. Not knowing

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: exactly business. So December, when we’re doing budgets in November for ’25, we don’t know that this will this account will tell us that they don’t want to pay the increase. So But I think we just forecast on, say, 4,000,000,000 of sales, you’re going to have some of this that’s going to happen and you’re going to have some good stuff coming, so balance. So maybe it gets a little squishy in a quarter or so. But like we always say, the Italians always say, you throw everything in a pot and somehow it makes broth.

And that’s kind of our business when you’re selling mostly independents. And then you have to sprinkle in a few of these, I call it, non core customers. And we look at it when we’re buying companies. We’re like, you know what? 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. The way I look at it is if you’ve got clunky, low margin business inside of an acquisition, we model it over four or five years. It’ll 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 at once and then the rebuilding starts and it looks really much, much better over that four year period.

Alex Alders, General Counsel, Corporate Secretary and Chief Government Relations Officer, Chef’s Warehouse0: Got it. That makes perfect sense. I appreciate the color. Congratulations, really good start to the year. I’ll get back in queue.

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Thank you. Thanks, Ben.

Conference Operator: Thank you. Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Chris Pappas for his closing comments. Chris?

Chris Pappas, Founder, Chairman and CEO, Chef’s Warehouse: Yes. Well, we thank everyone for joining us today. We’re really proud of our team in turbulent times with a lot of noise in the air. We think the CW team does a tremendous job in delivering the kind of quarter we’ve delivered and I think our shareholders are proud of them too. So thank you everybody for joining today and look forward to our next call.

Conference Operator: Thank you. Ladies and gentlemen, the conference of The Chef’s Warehouse has now concluded. Thank you for your participation. You may now disconnect your lines.

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