Yahoo Finance The Chefs' Warehouse Inc (CHEF) Q1 2024 Earnings Call Transcript Highlights: Robust Growth and ...
Net Sales: Increased by 21.5% to $874.5 million from $719.6 million in Q1 2023.
Organic Sales Growth: Approximately 8.8%.
Acquisition Sales Contribution: Added approximately 12.7% to sales growth.
Net Inflation: 2.7% overall; 1.2% in specialty category, 4.6% in center-of-the-plate category.
Gross Profit: Increased 23.4% to $209.4 million.
Gross Profit Margin: Increased by approximately 37 basis points to 23.9%.
SG&A Expenses: Rose by 21.9% to $190.3 million.
Operating Income: $16 million, up from $11.9 million in Q1 2023.
Net Income: $1.9 million or $0.05 per diluted share.
Adjusted EBITDA: $40.2 million, up from $32.8 million in Q1 2023.
Adjusted Net Income: $5.9 million or $0.15 per diluted share.
Total Liquidity: $204 million, including $42 million in cash and $162 million available under ABL facility.
Net Debt: Approximately $662 million.
Net Debt to Adjusted EBITDA Ratio: Approximately 3.3 times.
Full-Year Net Sales Guidance for 2024: Estimated between $3.64 billion and $3.785 billion.
Full-Year Gross Profit Guidance for 2024: Estimated between $867 million and $902 million.
Full-Year Adjusted EBITDA Guidance for 2024: Estimated between $207 million and $219 million.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Net sales for the quarter increased by 21.5% to $874.5 million, driven by both organic growth and acquisitions.
Gross profit increased by 23.4% to $209.4 million, with gross profit margins improving by approximately 37 basis points to 23.9%.
Adjusted EBITDA increased to $40.2 million for the quarter, up from $32.8 million in the prior year.
Successful consolidation of operations, such as the integration of seafood facilities in Massachusetts, aimed at reducing overhead and improving efficiency.
Strong customer and supplier relationships, contributing to robust organic growth and operational performance.
Negative Points
Selling, general, and administrative expenses increased by 21.9% to $190.3 million, primarily due to higher costs associated with acquisitions and facility investments.
Net inflation was reported at 2.7% for the quarter, indicating ongoing cost pressures in certain categories.
The company is still working through the integration and consolidation processes, which are expected to continue affecting operations into 2025.
Total net debt stood at approximately $662 million, with a net debt to adjusted EBITDA ratio of about 3.3 times.
Despite strong sales growth, there are ongoing concerns about macroeconomic conditions and their potential impact on the business.
Q & A Highlights
Q: Can you discuss the drivers behind the strong gross profit and first quarter gross margin, and to what extent these are sustainable? A: James Leddy, CFO, noted that the focus on gross profit dollar growth and margin improvement began in summer 2023. Enhancements in digital tools and data for sales reps, while maintaining strong sales relationships, have been key. Chris Pappas, CEO, added that investments in facilities, systems, and people, particularly in business development and sales, have differentiated their market approach, focusing on high-end and upscale casual dining.
Q: Are there any changes in the competitive landscape or pressures to lower menu prices among your customers? A: Chris Pappas, CEO, mentioned that he hasnt seen restaurants lowering prices but noted variations in promotional activities like extended happy hours. He highlighted that despite economic fluctuations, their focus remains on being the preferred partner for high-end independent restaurants, which tend to be more insulated from economic downturns.
Q: How is the Middle East business performing amid regional turmoil, and are there any challenges? A: Chris Pappas, CEO, stated that the business in the Middle East has been performing well, with the main challenge being a recent severe storm that temporarily affected business. He emphasized the strength of the management team in the region and the ongoing expansion to meet increasing demand.
Q: What are your expectations for organic growth sustainability, and how does it compare to acquisition benefits for this year? A: James Leddy, CFO, explained that most acquisition-related growth occurred in the past quarter, with organic growth expected to slightly decline from the current rate but remain within the long-term target range. He noted that future organic growth will partly depend on inflation trends.
Q: Can you provide an update on the protein market and your expectations for price volatility? A: Chris Pappas, CEO, discussed the unpredictability of the protein market, influenced by retail demand. He mentioned that while they dont take major positions on inventory due to price volatility, they adapt to market conditions and customer preferences, which has helped maintain steady demand across various protein products.
Q: How are facility expansions progressing, and what are the expectations for cost savings and efficiencies? A: James Leddy, CFO, reported that facility consolidations are on track, with significant cost savings and efficiencies expected to materialize mainly in 2025. He highlighted ongoing consolidations in Northern California, Florida, and Texas, aimed at improving operational efficiency and reducing costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
