Chefs Warehouse [CHEF] Conference call transcript for 2022 q1
2022-04-27 11:32:08
Fiscal: 2022 q1
Operator: Greetings and welcome to The Chef's Warehouse First Quarter 2022 Earnings Conference Call. A question-and-answer session will follow the formal presentation [Operator Instructions]. 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.
Alexandros Aldous: 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 2022 earnings press release. It can also be found at wwwchefswarehouse.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 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. 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 risks 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-K and quarterly reports on form 10-Q which are available on the SCC website. Today, we are going to provide a business update and go over our first 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. Chris.
Christopher Pappas: Thank you, Alex. And thank you all for joining our First Quarter 2022 Earnings Call. As expected, 2022 started off with seasonally moderate business activity in January, which was also slightly impacted by the Omicron Variant. Revenue trends grew steadily in February and March across our markets as consumer demand for dining out continue to show strength. Moderately improving labor markets facilitated new customer openings and increased restaurant capacity. This combined with milder winter weather in the northeast contributed to weekly sequential sales improvements heading into quarter end. A few highlights from the first quarter as compared to the first quarter of 2021 include: 62.9% organic growth in net sales, specialty sales were up 70.3% organically over prior year, which was driven by unique customer growth of approximately 29.4%, placement growth of 41.6%, and specialty case growth of 47.3%. Organic pounds and center-of-the-plate were approximately 26% higher than the prior year first quarter. Gross profit margins increased approximately 191 basis points. Gross margin as a specialty category increased 213 basis points as compared to the first-quarter of 2021, while gross margin in the center of the plate category increased 111 basis points year-over-year. Jim will provide more details on gross profit margins in a few moments. In April, our team completed a number of key projects that will contribute to our future growth and profitability in the coming months and years. On the distribution center front, we completed the retrofit of our new 230,000 square foot facility in Southern California. We have begun the process of moving in and expect to be fully operational in May. This facility will combine specialty and produce operations with meat and seafood processing capability within the same footprint. Our new South Florida distribution center will operate with a similar design and we expect to begin operations in the third quarter of this year. On the technology and digital front, we introduced our new chef's warehouse website and mobile app to a select group of customers. And we will go live with a full scale roll out over the next few weeks. This digital platform provides an improved online experience for customers as well as enhanced data analysis -- analytics and tools for our teams focused on driving sales and customer satisfaction. I would like to thank our team members, our customers, and our supplier partners who have contributing to a successful start to 2022. All of the Chef's stakeholders have been key players in our ability to navigate the fluid dynamics, coming out of COVID, including supply chain challenges about volatile food inflation and an ever evolving labor environment. I'm grateful to all the people who make up Chef's Warehouse and their ability to add key talent and partners and at the same time continue to strengthening our position in the industry. We're proud to announce that we have recently been certified by the renowned independent survey company, great place to work. They are global authority on workplace culture and deploy a rigorous methodology to gather and evaluate employee feedback focused on identifying companies who have built high trust and high performing cultures. We have never been strong or more focused or more excited about our future. We look forward to performing as the leading national marketer and distributor of specialty food products to the chef-driven customer base that continues to grow with Chef's Warehouse. With that, I will turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity, Jim.
James 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. Our net sales for the quarter ended March 25, 2022 increased approximately 82.8% to $512.1 million from $280.2 million in the first-quarter of 2021. The growth in net sales was a result of an increase in organic sales of approximately 62.9%, as well as the contribution of sales from acquisitions, which added approximately 19.9% to sales growth for the quarter. Net inflation was 21.7% in the first quarter, consisting of 14.9% inflation in our specialty category, and inflation of 28.5% in our center-of-the-plate category versus the prior year quarter. Gross profit increased 99.4% to $117.5 million for the first quarter of 2022 versus $58.9 million for the first quarter of 2021. Gross profit margins increased approximately 191 basis points to 22.9%. Year-over-year inflation was broad based across all specialty and center-of-the-plate categories. Selling general and administrative expenses increased approximately 37.2% to $110.1 million for the first quarter of 2022, from $80.2 million for the first quarter of 2021, the primary drivers of higher expenses were higher compensation and distribution costs associated with year over year volume growth, route expansion, and increase fuel costs. Adjusted operating expenses increased 40.4% versus the prior year first quarter. And as a percentage of net sales adjusted operating expenses were 18.8% for the first quarter of 2022 compared to 24.4% for the first quarter of 2021. Operating income for the first quarter of 2022 was $6.3 million compared to an operating loss of $20.1 million for the first quarter of 2021. The increase in operating income was driven primarily by higher gross profit, partially offset by higher -- higher operating costs. Income tax expense was $0.5 million for the first quarter of 2022 compared to income tax benefit of $7 million for the first quarter of 2021. Our GAAP net income was $1.4 million or $0.04 income per diluted share for the first quarter of 2022. Compared to a net loss of $17.9 million or $0.49 loss per diluted share for the first quarter of 2021 On a non-GAAP basis, we had positive adjusted EBITDA of $21.5 million for the first quarter of 2022 compared to negative adjusted EBITDA of $9.5 million for the prior year first quarter, adjusted net income was $3.6 million or $0.10 income per diluted share for the first quarter of 2022 compared to adjusted net loss of $17.1 million or $0.50 loss per diluted share for the first -- for the prior year first quarter. Turning to the balance sheet and an update on our liquidity, at the end of the first quarter, we had total liquidity of $205.6 million comprised of $79.4 million in cash and $126.2 million of availability under our ABL facility. As of March 25, 2022, net debt was approximately $319.1 million, inclusive of all cash and cash equivalents. Turning to our guidance for 2022, based on the current trends in the business, we are updating and raising our financial guidance to be as follows. We estimate that net sales for the full year of 2022 will be in the range of $2.13 billion to $2.3 billion gross profit to be between 500 million and 524 million and adjusted EBITDA to be between $103 million and $112 million. Our full year estimated diluted share count is approximately $42.5 million shares. We currently expect our senior unsecured convertible notes to be diluted 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.
Operator: Thank you. We will now be conducting a question-and-answer session [Operator Instructions]. Our first question is coming from the line of Alex Slagle with Jefferies, please proceed with your questions.
Operator: Thank you. Thank you. Our next question is coming from the line of Peter Saleh with BTIG, please proceed with your questions.
Operator: Thank you. Our next question is coming from the line of Andrew Wolf with CLK. Please proceed with your questions.
Operator: Thank you. Our next question is coming from the line of Fred Wightman with Wolfe Research, please proceed with your questions.
Operator: Thank you. Our next question is coming from the line of Ben Klieve with Lake Street Capital, please proceed with your questions.
Operator: Thank you. Our next question is coming from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.
Operator: Thank you. Our next question is coming from the line of Todd Brooks with the Benchmark Company, please proceed with your questions.
Operator: Thank you. There are no further questions at this time. I would now like to turn the call back over to management for any closing comment.
Christopher Pappas: Sure. Well, thank you for everyone joining our earnings call. The team put up a great quarter. Was not easy, but it just shows you the hard work and dedicated team at Chef's, what they could do more with less. So thank you for joining the call and we look forward to our next earnings call. Thank you very much.
Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
