RIDGEFIELD, Conn., Nov. 01, 2023 (GLOBE NEWSWIRE) -- The Chefs’ Warehouse, Inc. (NASDAQ: CHEF) (the “Company” or “Chefs’”), a premier distributor of specialty food products in the United States, Middle East, and Canada, today reported financial results for its third quarter ended September 29, 2023.
Financial highlights for the thirdquarter of 2023:
“Third quarter business activity improved sequentially within the quarter, following a softer than expected July and August primarily due to the placement of the 4th holiday and observed higher than anticipated overseas travel. Coming out of the summer season, the demand and pricing environment improved as more typical seasonal trends emerged”, said Christopher Pappas, Chairman and Chief Executive of the Company. “As we moved into September, we saw significant sequential improvement in gross profit margins across our markets and we expect this trend to continue as we move into the fourth quarter and new year. I would like to thank our teams across Chefs’ Warehouse for delivering strong growth in customer acquisition, placement growth and volume growth during the quarter. We remain focused on providing our customers with the highest-quality product and high-touch service as we continue to grow categories, integrate our recent acquisitions, and drive organic growth across domestic and international markets.”
ThirdQuarter Fiscal 2023Results
Net sales for the third fiscal quarter of 2023 which ended September 29, 2023 increased 33.2% to $881.8 million from $661.9 million for the third fiscal quarter of 2022 which ended September 23, 2022. Organic sales increased $46.9 million, or 7.1% versus the prior year quarter. Sales growth of $172.9 million, or 26.1%, resulted from acquisitions. Organic case count increased approximately 9.1% in the Company’s specialty category with unique customers and placements increases at 10.8% and 14.2%, respectively, compared to the prior year quarter. Organic pounds sold in the Company’s center-of-the-plate category increased approximately 6.6% compared to the prior year quarter. Estimated inflation was 1.6% in the Company’s specialty categories and 3.1% in the center-of-the-plate categories compared to the prior year quarter.
Gross profit increased approximately 31.6% to $207.7 million for the third quarter of 2023 from $157.8 million for the third quarter of 2022. Gross profit margin decreased approximately 29 basis points to 23.6% from 23.8%. Gross margin in the Company’s specialty category decreased 84 basis points and gross margin decreased 104 basis points in the Company’s center-of-the-plate category compared to the prior year quarter.
Selling, general and administrative expenses increased by approximately 37.9% to $179.6 million for the third quarter of 2023 from $130.3 million for the third quarter of 2022. The increase was primarily due to higher costs associated with compensation and benefits, facility costs and distribution costs to support sales growth in the current quarter. As a percentage of net sales, operating expenses were 20.4% in the third quarter of 2023 compared to 19.7% in the third quarter of 2022.
Operating income for the third quarter of 2023 was $25.5 million compared to $22.1 million for the third quarter of 2022. The increase in operating income was driven primarily by higher gross profit and lower other operating costs, partially offset by higher selling, general and administrative expense, as discussed above. As a percentage of net sales, operating income was 2.9% in the third quarter of 2023 as compared to operating income of 3.3% in the third quarter of 2022.
Income tax expense was $6.8 million for the third quarter of 2023 compared to $3.1 million for the third quarter of 2022. The higher effective tax rate in the third quarter of 2023 was primarily driven by a $2.1 million charge in the current period for return-to-provision adjustments related to prior year returns.
Net income for the third quarter of 2023 was $7.3 million, or $0.19 per diluted share, compared to net income of $8.3 million, or $0.21 per diluted share, for the third quarter of 2022.
Adjusted EBITDA1 was $50.3 million for the third quarter of 2023 compared to $41.0 million for the third quarter of 2022. For the third quarter of 2023, adjusted net income1 was $13.7 million, or $0.33 per diluted share compared to adjusted net income of $16.4 million, or $0.41 per diluted share for the third quarter of 2022.
Full Year 2023 Guidance
Based on current trends in the business, the Company is providing full year financial guidance as follows:
Update regarding Chefs’ Warehouse Capital Allocation plans for 2024 and 2025
ThirdQuarter 2023Earnings Conference Call
The Company will host a conference call to discuss third quarter 2023 financial results today at 8:30 a.m. EDT. Hosting the call will be Chris Pappas, chairman and chief executive officer, and Jim Leddy, chief financial officer. The conference call will be webcast live from the Company’s investor relations website at http://investors.chefswarehouse.com. An online archive of the webcast will be available on the Company’s investor relations website.
Forward-Looking Statements
Statements in this press release regarding the Company’s business that are not historical facts are “forward-looking statements” that involve risks and uncertainties and are based on current expectations and management estimates; actual results may differ materially. The risks and uncertainties which could impact these statements include, but are not limited to the following: our sensitivity to general economic conditions, including disposable income levels and changes in consumer discretionary spending; our ability to expand our operations in our existing markets and to penetrate new markets through acquisitions; we may not achieve the benefits expected from our acquisitions, which could adversely impact our business and operating results; we may have difficulty managing and facilitating our future growth; conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network; our distribution of center-of-the-plate products, like meat, poultry and seafood, involves exposure to price volatility experienced by those products; our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures; because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas; fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations; our ability to raise capital in the future may be limited; we may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all; interest charged on our outstanding debt may be adversely affected by changes in the method of determining the Secured Overnight Financing Rate (“SOFR”); our business operations and future development could be significantly disrupted if we lose key members of our management team; and significant public health epidemics or pandemics, including COVID-19, may adversely affect our business, results of operations and financial condition. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. A more detailed description of these and other risk factors is contained in the Company’s most recent annual report on Form 10-K filed with the SEC on February 28, 2023 and other reports filed by the Company with the SEC since that date. The Company is not undertaking to update any information until required by applicable laws. Any projections of future results of operations are based on a number of assumptions, many of which are outside the Company’s control and should not be construed in any manner as a guarantee that such results will in fact occur. These projections are subject to change and could differ materially from final reported results. The Company may from time to time update these publicly announced projections, but it is not obligated to do so.
About The Chefs’ Warehouse
The Chefs’ Warehouse, Inc. (http://www.chefswarehouse.com) is a premier distributor of specialty food products in the United States and Canada focused on serving the specific needs of chefs who own and/or operate some of the nation’s leading menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolateries, cruise lines, casinos and specialty food stores. The Chefs’ Warehouse, Inc. carries and distributes more than 55,000 products to more than 40,000 customer locations throughout the United States and Canada.
Contact:Investor Relations Jim Leddy, CFO, (718) 684-8415
THE CHEFS’ WAREHOUSE, INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited; in thousands except share amounts and per share data) | |||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||
September 29, 2023 | September 23, 2022 | September 29, 2023 | September 23, 2022 | ||||||||
Net sales | $ | 881,825 | $ | 661,856 | $ | 2,483,290 | $ | 1,822,063 | |||
Cost of sales | 674,127 | 504,068 | 1,897,440 | 1,390,758 | |||||||
Gross profit | 207,698 | 157,788 | 585,850 | 431,305 | |||||||
Selling, general and administrative expenses | 179,614 | 130,255 | 514,793 | 364,828 | |||||||
Other operating expenses, net | 2,535 | 5,458 | 8,269 | 10,504 | |||||||
Operating income | 25,549 | 22,075 | 62,788 | 55,973 | |||||||
Interest expense | 11,379 | 10,737 | 33,391 | 19,567 | |||||||
Income before income taxes | 14,170 | 11,338 | 29,397 | 36,406 | |||||||
Provision for income tax expense | 6,848 | 3,061 | 10,807 | 9,829 | |||||||
Net income | $ | 7,322 | $ | 8,277 | $ | 18,590 | $ | 26,577 | |||
Net income per share: | |||||||||||
Basic | $ | 0.19 | $ | 0.22 | $ | 0.49 | $ | 0.72 | |||
Diluted | $ | 0.19 | $ | 0.21 | $ | 0.49 | $ | 0.68 | |||
Weighted average common shares outstanding: | |||||||||||
Basic | 37,692,588 | 37,120,926 | 37,611,179 | 37,047,653 | |||||||
Diluted | 45,717,496 | 42,044,053 | 39,143,774 | 41,942,676 | |||||||
THE CHEFS’ WAREHOUSE, INC.CONDENSED CONSOLIDATED BALANCE SHEETSAS OF SEPTEMBER 29, 2023AND DECEMBER 30, 2022(unaudited; in thousands) | |||||||
September 29, 2023 | December 30, 2022 | ||||||
Cash and cash equivalents | $ | 33,058 | $ | 158,800 | |||
Accounts receivable, net | 316,138 | 260,167 | |||||
Inventories, net | 312,222 | 245,693 | |||||
Prepaid expenses and other current assets | 60,199 | 56,200 | |||||
Total current assets | 721,617 | 720,860 | |||||
Property and equipment, net | 208,927 | 185,728 | |||||
Operating lease right-of-use assets | 177,092 | 156,629 | |||||
Goodwill | 344,526 | 287,120 | |||||
Intangible assets, net | 199,618 | 155,703 | |||||
Other assets | 6,262 | 3,256 | |||||
Total assets | $ | 1,658,042 | $ | 1,509,296 | |||
Accounts payable | $ | 209,299 | $ | 163,397 | |||
Accrued liabilities | 75,437 | 54,325 | |||||
Short-term operating lease liabilities | 22,765 | 19,428 | |||||
Accrued compensation | 30,747 | 34,167 | |||||
Current portion of long-term debt | 11,970 | 12,428 | |||||
Total current liabilities | 350,218 | 283,745 | |||||
Long-term debt, net of current portion | 689,207 | 653,504 | |||||
Operating lease liabilities | 171,207 | 151,406 | |||||
Deferred taxes, net | 9,317 | 6,098 | |||||
Other liabilities | 3,311 | 13,034 | |||||
Total liabilities | 1,223,260 | 1,107,787 | |||||
Common stock | 397 | 386 | |||||
Additional paid in capital | 352,576 | 337,947 | |||||
Cumulative foreign currency translation adjustment | (2,142 | ) | (2,185 | ) | |||
Retained earnings | 83,951 | 65,361 | |||||
Stockholders’ equity | 434,782 | 401,509 | |||||
Total liabilities and stockholders’ equity | $ | 1,658,042 | $ | 1,509,296 | |||
THE CHEFS’ WAREHOUSE, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTY-NINE WEEKS ENDEDSEPTEMBER 29, 2023AND SEPTEMBER 23, 2022(unaudited; in thousands) | |||||||
September 29, 2023 | September 23, 2022 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 18,590 | $ | 26,577 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 24,167 | 17,667 | |||||
Amortization of intangible assets | 16,924 | 10,289 | |||||
Provision for allowance for doubtful accounts | 5,216 | 3,138 | |||||
Non-cash operating lease expense | 2,663 | 1,329 | |||||
Deferred income tax provision | 3,018 | 7,121 | |||||
Amortization of deferred financing fees | 3,421 | 1,621 | |||||
Loss on debt extinguishment | — | 142 | |||||
Stock compensation | 15,855 | 9,081 | |||||
Change in fair value of contingent earn-out liabilities | 2,850 | 8,358 | |||||
Intangible asset impairment | 1,838 | — | |||||
Loss on asset disposal | (44 | ) | 17 | ||||
Changes in assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (27,387 | ) | (25,402 | ) | |||
Inventories | (56,350 | ) | (40,519 | ) | |||
Prepaid expenses and other current assets | (3,460 | ) | (9,848 | ) | |||
Accounts payable, accrued liabilities and accrued compensation | 18,740 | 21,938 | |||||
Other assets and liabilities | (5,996 | ) | 238 | ||||
Net cash provided by operating activities | 20,045 | 31,747 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (35,130 | ) | (31,666 | ) | |||
Cash paid for acquisitions | (120,600 | ) | (62,007 | ) | |||
Net cash used in investing activities | (155,730 | ) | (93,673 | ) | |||
Cash flows from financing activities: | |||||||
Payment of debt, finance lease and other financing obligations | (33,444 | ) | (171,434 | ) | |||
Proceeds from debt issuance | — | 300,000 | |||||
Payment of deferred financing fees | (354 | ) | (11,258 | ) | |||
Proceeds from exercise of stock options | 55 | 69 | |||||
Surrender of shares to pay withholding taxes | (2,134 | ) | (2,584 | ) | |||
Cash paid for contingent earn-out liabilities | (3,650 | ) | (2,538 | ) | |||
Borrowings under asset based loan facility | 50,000 | — | |||||
Payments under asset based loan facility | — | (20,000 | ) | ||||
Net cash provided by financing activities | 10,473 | 92,255 | |||||
Effect of foreign currency translation on cash and cash equivalents | (530 | ) | (59 | ) | |||
Net change in cash and cash equivalents | (125,742 | ) | 30,270 | ||||
Cash and cash equivalents at beginning of period | 158,800 | 115,155 | |||||
Cash and cash equivalents at end of period | $ | 33,058 | $ | 145,425 | |||
THE CHEFS’ WAREHOUSE, INC.RECONCILIATION OF GAAP NET INCOME COMMON SHARE(unaudited; in thousands except share amounts and per share data) | |||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||
September 29, 2023 | September 23, 2022 | September 29, 2023 | September 23, 2022 | ||||||||
Numerator: | |||||||||||
Net income | $ | 7,322 | $ | 8,277 | $ | 18,590 | $ | 26,577 | |||
Add effect of dilutive securities: | |||||||||||
Interest on convertible notes, net of tax | 1,369 | 683 | 403 | 2,048 | |||||||
Net income available to common shareholders | $ | 8,691 | $ | 8,960 | $ | 18,993 | $ | 28,625 | |||
Denominator: | |||||||||||
Weighted average basic common shares outstanding | 37,692,588 | 37,120,926 | 37,611,179 | 37,047,653 | |||||||
Dilutive effect of unvested common shares | 594,416 | 316,358 | 580,675 | 304,391 | |||||||
Dilutive effect of options and warrants | 37,675 | 81,789 | 54,073 | 65,652 | |||||||
Dilutive effect of convertible notes | 7,392,817 | 4,524,980 | 897,847 | 4,524,980 | |||||||
Weighted average diluted common shares outstanding | 45,717,496 | 42,044,053 | 39,143,774 | 41,942,676 | |||||||
Net income per share: | |||||||||||
Basic | $ | 0.19 | $ | 0.22 | $ | 0.49 | $ | 0.72 | |||
Diluted | $ | 0.19 | $ | 0.21 | $ | 0.49 | $ | 0.68 | |||
THE CHEFS’ WAREHOUSE, INC.RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME(unaudited; in thousands) | |||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||
September 29, 2023 | September 23, 2022 | September 29, 2023 | September 23, 2022 | ||||||||
Net income | $ | 7,322 | $ | 8,277 | $ | 18,590 | $ | 26,577 | |||
Interest expense | 11,379 | 10,737 | 33,391 | 19,567 | |||||||
Depreciation | 8,485 | 5,912 | 24,167 | 17,667 | |||||||
Amortization | 6,468 | 3,470 | 16,924 | 10,289 | |||||||
Provision for income tax expense | 6,848 | 3,061 | 10,807 | 9,829 | |||||||
EBITDA (1) | 40,502 | 31,457 | 103,879 | 83,929 | |||||||
Adjustments: | |||||||||||
Stock compensation (2) | 5,274 | 3,099 | 15,855 | 9,081 | |||||||
Other operating expenses, net (3) | 2,534 | 5,458 | 8,269 | 10,504 | |||||||
Duplicate rent (4) | 1,959 | 991 | 6,019 | 4,277 | |||||||
Moving expenses (5) | 10 | — | 196 | — | |||||||
Adjusted EBITDA (1) | $ | 50,279 | $ | 41,005 | $ | 134,218 | $ | 107,791 | |||
THE CHEFS’ WAREHOUSE, INC.RECONCILIATION OF ADJUSTED NET INCOME TO NET INCOME(unaudited; in thousands except share amounts and per share data) | ||||||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||
September 29, 2023 | September 23, 2022 | September 29, 2023 | September 23, 2022 | |||||||||||
Net income | $ | 7,322 | $ | 8,277 | $ | 18,590 | $ | 26,577 | ||||||
Adjustments to reconcile net income to adjusted net income (1): | ||||||||||||||
Other operating expenses, net (2) | 2,534 | 5,458 | 8,269 | 10,504 | ||||||||||
Duplicate rent (3) | 1,959 | 991 | 6,019 | 4,277 | ||||||||||
Moving expenses (4) | 10 | — | 196 | — | ||||||||||
Debt modification and extinguishment expenses (5) | — | 4,640 | — | 4,709 | ||||||||||
Write-off of unamortized deferred financing fees and other third party financing costs (5) | 770 | — | 1,146 | — | ||||||||||
Tax effect of adjustments (6) | 1,112 | (2,994 | ) | (2,476 | ) | (5,262 | ) | |||||||
Total adjustments | 6,385 | 8,095 | 13,154 | 14,228 | ||||||||||
Adjusted net income | $ | 13,707 | $ | 16,372 | $ | 31,744 | $ | 40,805 | ||||||
Diluted adjusted net income per common share | $ | 0.33 | $ | 0.41 | $ | 0.79 | $ | 1.02 | ||||||
Diluted shares outstanding - adjusted | 45,717,496 | 42,135,106 | 45,638,744 | 41,942,676 | ||||||||||
THE CHEFS’ WAREHOUSE, INC.RECONCILIATION OF ADJUSTED NET INCOME PER SHARE(unaudited; in thousands except share amounts and per share data) | |||||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | ||||||||||
September 29, 2023 | September 23, 2022 | September 29, 2023 | September 23, 2022 | ||||||||
Numerator: | |||||||||||
Adjusted net income | $ | 13,707 | $ | 16,372 | $ | 31,744 | $ | 40,805 | |||
Add effect of dilutive securities: | |||||||||||
Interest on convertible notes, net of tax | 1,369 | 719 | 4,106 | 2,048 | |||||||
Adjusted net income available to common shareholders | $ | 15,076 | $ | 17,091 | $ | 35,850 | $ | 42,853 | |||
Denominator: | |||||||||||
Weighted average basic common shares outstanding | 37,692,588 | 37,120,926 | 37,611,179 | 37,047,653 | |||||||
Dilutive effect of unvested common shares | 594,416 | 316,358 | 580,675 | 304,391 | |||||||
Dilutive effect of options and warrants | 37,675 | 81,789 | 54,073 | 65,652 | |||||||
Dilutive effect of convertible notes | 7,392,817 | 4,616,033 | 7,392,817 | 4,524,980 | |||||||
Weighted average diluted common shares outstanding | 45,717,496 | 42,135,106 | 45,638,744 | 41,942,676 | |||||||
Adjusted net income per share: | |||||||||||
Diluted | $ | 0.33 | $ | 0.41 | $ | 0.79 | $ | 1.02 | |||
THE CHEFS’ WAREHOUSE, INC.RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2023(unaudited; in thousands) | |||||
Low-End Guidance | High-End Guidance | ||||
Net Income: | $ | 33,700 | $ | 37,300 | |
Provision for income tax expense | 17,100 | 18,700 | |||
Depreciation & amortization | 55,000 | 56,000 | |||
Interest expense | 46,000 | 46,000 | |||
EBITDA (1) | 151,800 | 158,000 | |||
Adjustments: | |||||
Stock compensation (2) | 21,000 | 21,500 | |||
Duplicate rent (3) | 7,000 | 7,300 | |||
Other operating expenses (4) | 8,000 | 9,000 | |||
Moving expenses (5) | 200 | 200 | |||
Adjusted EBITDA (1) | $ | 188,000 | $ | 196,000 | |
Source: The Chefs' Warehouse, Inc.