The Chefs' Warehouse Inc.

10/30/2024 | Press release | Distributed by Public on 10/30/2024 05:29

The Chefs’ Warehouse Reports Third Quarter 2024 Financial Results

RIDGEFIELD, Conn., Oct. 30, 2024 (GLOBE NEWSWIRE) -- The Chefs' Warehouse, Inc. (NASDAQ: CHEF) (the "Company" or "Chefs'"), a premier distributor of specialty food products in the United States, the Middle East, and Canada, today reported financial results for its third quarter ended September 27, 2024.

Financial highlights for the third quarter of 2024:

  • Net sales increased 5.6% to $931.5 million for the third quarter of 2024 from $881.8 million for the third quarter of 2023.
  • GAAP net income was $14.1 million, or $0.34 per diluted share, for the third quarter of 2024 compared to $7.3 million, or $0.19 per diluted share, in the third quarter of 2023.
  • Adjusted net income per share1 was $0.36 for the third quarter of 2024 compared to $0.33 for the third quarter of 2023.
  • Adjusted EBITDA1 was $54.5 million for the third quarter of 2024 compared to $50.3 million for the third quarter of 2023.

"Business and demand trends improved sequentially through the third quarter. Continued seasonal increase in international travel among the higher income demographic led to a slightly softer season in July and early August. Customer activity accelerated into the latter half of the quarter and momentum in demand continued into October. Our operating divisions across domestic and international markets delivered strong growth in gross profit dollars and margin; as well as continued progress increasing relevance with our customer base with strong year-over-year growth in unique item placements", said Christopher Pappas, Chairman and Chief Executive of the Company. "I would like thank the entire Chefs' Warehouse team for their dedication and commitment to delivering our diverse and high-quality product and service in partnership with our suppliers and customers and the communities we serve."

Third Quarter Fiscal 2024 Results

Net sales for the third quarter of 2024 increased 5.6% to $931.5 million from $881.8 million in the third quarter of 2023. Organic case count increased approximately 3.1% in the Company's specialty category for the third quarter of 2024 with unique customers and placements increases at 4.7% and 10.8% respectively, compared to the third quarter of 2023. Organic pounds sold in the Company's center-of-the-plate category increased approximately 1.0% for the third quarter of 2024 compared to the third quarter of 2023.

Gross profit increased 8.2% to $224.7 million for the third quarter of 2024 from $207.7 million for the third quarter of 2023. The increase in gross profit dollars was primarily as a result of increased sales and price inflation. Gross profit margins increased approximately 58 basis points to 24.1%.

Selling, general and administrative expenses increased by approximately 7.4% to $192.9 million for the third quarter of 2024 from $179.6 million for the third quarter of 2023. The increase was primarily due to higher depreciation and amortization driven by facility investments, and higher costs associated with compensation and benefits, facilities and distribution to support sales growth. As a percentage of net sales, selling, general and administrative expenses were 20.7% in the third quarter of 2024 compared to 20.4% in the third quarter of 2023.

Other operating (income) expenses, net decreased by $2.6 million primarily due non-cash charges of $1.8 million recorded during the third quarter of 2023 for changes in the fair value of our contingent liabilities compared to non-cash credits of $0.1 million recorded during the third quarter of 2024, as well as lower third-party deal costs incurred in connection with business acquisitions and financing arrangements.

Operating income for the third quarter of 2024 was $31.9 million compared to $25.5 million for the third quarter of 2023. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling, general and administrative expense, as discussed above. As a percentage of net sales, operating income was 3.4% in the third quarter of 2024 as compared to 2.9% in the third quarter of 2023.

Net income for the third quarter of 2024 was $14.1 million, or $0.34 per diluted share, compared to $7.3 million, or $0.19 per diluted share, for the third quarter of 2023.

Adjusted EBITDA1 was $54.5 million for the third quarter of 2024 compared to $50.3 million for the third quarter of 2023. For the third quarter of 2024, adjusted net income1 was $15.4 million, or $0.36 per diluted share compared to adjusted net income of $13.7 million, or $0.33 per diluted share for the third quarter of 2023.

2024 Guidance

We are providing fiscal 2024 full year financial guidance as follows:

  • Net sales in the range of $3.710 billion to $3.775 billion,
  • Gross profit to be between $890.0 million and $906.0 million and
  • Adjusted EBITDA to be between $210.0 million and $219.0 million.

Third Quarter 2024 Earnings Conference Call

The Company will host a conference call to discuss third quarter 2024 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.

1 EBITDA, Adjusted EBITDA, adjusted net income and adjusted net income per share are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of EBITDA, Adjusted EBITDA, adjusted net income and adjusted net income per share to these measures' most directly comparable GAAP measures.

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 success depends to a significant extent upon general economic conditions, including disposable income levels and changes in consumer discretionary spending; the relatively low margins of our business, which are sensitive to inflationary and deflationary pressures and intense competition; the effects of rising costs for and/or decreases in supply of commodities, ingredients, packaging, other raw materials, distribution and labor; crude oil prices and their impact on distribution, packaging and energy costs; our continued ability to promote our brand successfully, to anticipate and respond to new customer demands, and to develop new products and markets to compete effectively; our ability and the ability of our supply chain partners to continue to operate distribution centers and other work locations without material disruption, and to procure ingredients, packaging and other raw materials when needed despite disruptions in the supply chain or labor shortages; risks associated with the expansion of our business; our possible inability to identify new acquisitions or to integrate recent or future acquisitions, or our failure to realize anticipated revenue enhancements, cost savings or other synergies from recent or future acquisitions; other factors that affect the food industry generally, including: recalls if products become adulterated or misbranded, liability if product consumption causes injury, ingredient disclosure and labeling laws and regulations and the possibility that customers could lose confidence in the safety and quality of certain food products; new information or attitudes regarding diet and health or adverse opinions about the health effects of the products we distribute; changes in disposable income levels and consumer purchasing habits; competitors' pricing practices and promotional spending levels; fluctuations in the level of our customers' inventories and credit and other related business risks; and the risks associated with third-party suppliers, including the risk that any failure by one or more of our third-party suppliers to comply with food safety or other laws and regulations may disrupt our supply of raw materials or certain products or injure our reputation; our ability to recruit and retain senior management and a highly skilled and diverse workforce; unanticipated expenses, including, without limitation, litigation or legal settlement expenses; the cost and adequacy of our insurance policies; the impact and effects of public health crises, pandemics and epidemics, such as the outbreak of COVID-19, and the adverse impact thereof on our business, financial condition, and results of operations; significant governmental regulation and any potential failure to comply with such regulations; federal, state, provincial and local tax rules in the United States and the foreign countries in which we operate, including tax reform and legislation; risks relating to our substantial indebtedness; our ability to raise additional capital and/or obtain debt or other financing, on commercially reasonable terms or at all; our ability to meet future cash requirements, including the ability to access financial markets effectively and maintain sufficient liquidity; the effects of currency movements in the jurisdictions in which we operate as compared to the U.S. dollar; changes in the method of determining Secured Overnight Financing Rate ("SOFR"), or the replacement of SOFR with an alternative rate; and the effects of international trade disputes, tariffs, quotas and other import or export restrictions on our international procurement, sales and operations. 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 27, 2024 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, the Middle East 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 70,000 products to more than 44,000 customer locations throughout the United States, the Middle East 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 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023
Net sales $ 931,452 $ 881,825 $ 2,760,644 $ 2,483,290
Cost of sales 706,704 674,127 2,097,458 1,897,440
Gross profit 224,748 207,698 663,186 585,850
Selling, general and administrative expenses 192,894 179,614 578,049 514,793
Other operating (income) expenses, net (28 ) 2,535 3,385 8,269
Operating income 31,882 25,549 81,752 62,788
Interest expense 11,743 11,379 36,677 33,391
Income before income taxes 20,139 14,170 45,075 29,397
Provision for income tax expense 6,041 6,848 13,522 10,807
Net income $ 14,098 $ 7,322 $ 31,553 $ 18,590
Net income per share:
Basic $ 0.37 $ 0.19 $ 0.83 $ 0.49
Diluted $ 0.34 $ 0.19 $ 0.77 $ 0.49
Weighted average common shares outstanding:
Basic 37,863,580 37,692,588 37,868,675 37,611,179
Diluted 45,941,315 45,717,496 45,888,029 39,143,774
THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 27, 2024 AND DECEMBER 29, 2023
(unaudited; in thousands)

September 27, 2024 December 29, 2023
Cash and cash equivalents $ 50,705 $ 49,878
Accounts receivable, net 334,362 334,015
Inventories 336,289 284,528
Prepaid expenses and other current assets 70,958 62,522
Total current assets 792,314 730,943
Property and equipment, net 269,890 234,793
Operating lease right-of-use assets 181,689 192,307
Goodwill 356,591 356,021
Intangible assets, net 166,635 184,863
Other assets 6,507 6,379
Total assets $ 1,773,626 $ 1,705,306
Accounts payable $ 232,153 $ 200,547
Accrued liabilities 66,153 70,728
Short-term operating lease liabilities 23,045 24,246
Accrued compensation 43,046 37,071
Current portion of long-term debt 64,716 53,185
Total current liabilities 429,113 385,777
Long-term debt, net of current portion 666,558 664,802
Operating lease liabilities 174,991 184,034
Deferred taxes, net 19,829 14,418
Other liabilities 2,790 1,603
Total liabilities 1,293,281 1,250,634
Common stock 396 396
Additional paid in capital 358,647 356,157
Accumulated other comprehensive loss (2,564 ) (1,832 )
Retained earnings 123,866 99,951
Stockholders' equity 480,345 454,672
Total liabilities and stockholders' equity $ 1,773,626 $ 1,705,306
THE CHEFS' WAREHOUSE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2024 AND SEPTEMBER 29, 2023
(unaudited; in thousands)

Thirty-Nine Weeks Ended
September 27, 2024 September 29, 2023
Cash flows from operating activities:
Net income $ 31,553 $ 18,590
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 29,361 24,167
Amortization of intangible assets 18,216 16,924
Provision for allowance for doubtful accounts 8,228 5,216
Deferred income tax provision 5,416 3,018
Loss on debt extinguishment 512 -
Stock compensation 13,177 15,855
Change in fair value of contingent earn-out liabilities (683 ) 2,850
Intangible asset impairment - 1,838
Non-cash interest and other operating activities 3,233 6,040
Loss on asset disposal
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (8,708 ) (27,387 )
Inventories (51,786 ) (56,350 )
Prepaid expenses and other current assets (5,899 ) (3,460 )
Accounts payable, accrued liabilities and accrued compensation 40,938 18,740
Other assets and liabilities (3,501 ) (5,996 )
Net cash provided by operating activities 80,057 20,045
Cash flows from investing activities:
Capital expenditures (41,131 ) (35,130 )
Cash paid for acquisitions (315 ) (120,600 )
Net cash used in investing activities (41,446 ) (155,730 )
Cash flows from financing activities:
Payment of debt and other financing obligations (18,500 ) (30,448 )
Payment of finance leases (5,001 ) (2,996 )
Common stock repurchases (10,004 ) -
Payment of deferred financing fees - (354 )
Proceeds from exercise of stock options 55 55
Surrender of shares to pay withholding taxes (7,377 ) (2,134 )
Cash paid for contingent earn-out liabilities (3,800 ) (3,650 )
Borrowings under asset based loan facility and revolving credit facilities 6,801 50,000
Net cash (used in) provided by financing activities (37,826 ) 10,473
Effect of foreign currency translation on cash and cash equivalents 42 (530 )
Net change in cash and cash equivalents 827 (125,742 )
Cash and cash equivalents at beginning of period 49,878 158,800
Cash and cash equivalents at end of period $ 50,705 $ 33,058
THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF GAAP NET INCOME PER SHARE
(unaudited; in thousands except share amounts and per share data)

Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023
Numerator:
Net income $ 14,098 $ 7,322 $ 31,553 $ 18,590
Add effect of dilutive securities:
Interest on convertible notes, net of tax 1,322 1,369 3,950 403
Net income available to common shareholders $ 15,420 $ 8,691 $ 35,503 $ 18,993
Denominator:
Weighted average basic common shares outstanding 37,863,580 37,692,588 37,868,675 37,611,179
Dilutive effect of unvested common shares 621,999 594,416 570,736 580,675
Dilutive effect of stock options and warrants 62,919 37,675 55,801 54,073
Dilutive effect of convertible notes 7,392,817 7,392,817 7,392,817 897,847
Weighted average diluted common shares outstanding 45,941,315 45,717,496 45,888,029 39,143,774
Net income per share:
Basic $ 0.37 $ 0.19 $ 0.83 $ 0.49
Diluted $ 0.34 $ 0.19 $ 0.77 $ 0.49
THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA
(unaudited; in thousands)

Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023
Net income $ 14,098 $ 7,322 $ 31,553 $ 18,590
Interest expense 11,743 11,379 36,677 33,391
Depreciation and amortization 10,590 8,485 29,361 24,167
Amortization of intangible assets 5,874 6,468 18,216 16,924
Provision for income tax expense 6,041 6,848 13,522 10,807
EBITDA (1) 48,346 40,502 129,329 103,879
Adjustments:
Stock compensation (2) 4,423 5,274 13,177 15,855
Other operating (income) expenses, net (3) (28 ) 2,534 3,385 8,269
Duplicate rent (4) 851 1,959 3,295 6,019
Moving expenses (5) 865 10 1,611 196
Adjusted EBITDA (1) $ 54,457 $ 50,279 $ 150,797 $ 134,218
  1. We are presenting EBITDA and Adjusted EBITDA, which are not measurements determined in accordance with the U.S. generally accepted accounting principles, or GAAP, because we believe these measures provide additional metrics to evaluate our operations and which we believe, when considered with both our GAAP results and the reconciliation to net income, provide a more complete understanding of our business than could be obtained absent this disclosure. We use EBITDA and Adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue and cash flows from operations, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. The use of EBITDA and Adjusted EBITDA as performance measures permits a comparative assessment of our operating performance relative to our performance based upon GAAP results while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.
  2. Represents non-cash stock compensation expense associated with awards of restricted shares of our common stock and stock options to our key employees and our independent directors.
  3. Represents non-cash changes in the fair value of contingent earn-out liabilities related to our acquisitions, non-cash charges related to asset disposals, asset impairments, including intangible asset impairment charges, certain third-party deal costs incurred in connection with our acquisitions or financing arrangements and certain other costs.
  4. Represents rent and occupancy costs expected to be incurred in connection with our facility consolidations while we are unable to use those facilities.
  5. Represents moving expenses for the consolidation and expansion of several of our distribution facilities.

THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF NET INCOME TO ADJUSTED NET INCOME
(unaudited; in thousands except share amounts and per share data)

Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023
Net income $ 14,098 $ 7,322 $ 31,553 $ 18,590
Adjustments to reconcile net income to adjusted net income (1):
Other operating (income) expenses, net (2) (28 ) 2,534 3,385 8,269
Duplicate rent (3) 851 1,959 3,295 6,019
Moving expenses (4) 865 10 1,611 196
Debt modification and extinguishment expenses (5) 146 770 1,287 1,146
Tax effect of adjustments (6) (550 ) 1,112 (2,873 ) (2,476 )
Total adjustments 1,284 6,385 6,705 13,154
Adjusted net income $ 15,382 $ 13,707 $ 38,258 $ 31,744
Diluted adjusted net income per common share $ 0.36 $ 0.33 $ 0.92 $ 0.79
Diluted shares outstanding - adjusted 45,941,315 45,717,496 45,888,029 45,638,744
  1. We are presenting adjusted net income and adjusted net income per share, which are not measurements determined in accordance with U.S. generally accepted accounting principles, or GAAP, because we believe these measures provide additional metrics to evaluate our operations and which we believe, when considered with both our GAAP results and the reconciliations to net income and net income available to common stockholders, provide a more complete understanding of our business than could be obtained absent this disclosure. We use adjusted net income and adjusted net income per share, together with financial measures prepared in accordance with GAAP, such as revenue and cash flows from operations, to assess our historical and prospective operating performance and to enhance our understanding of our core operating performance. The use of adjusted net income and adjusted net income per share as performance measures permits a comparative assessment of our operating performance relative to our performance based upon our GAAP results while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.

  2. Represents non-cash changes in the fair value of contingent earn-out liabilities related to our acquisitions, non-cash charges related to asset disposals, asset impairments, including intangible asset impairment charges, certain third-party deal costs incurred in connection with our acquisitions or financing arrangements and certain other costs.

  3. Represents rent and occupancy costs expected to be incurred in connection with our facility consolidations while we are unable to use those facilities.

  4. Represents moving expenses for the consolidation and expansion of several of our distribution facilities.

  5. Represents debt modification costs, extinguishment costs and interest expense related to the write-off of certain deferred financing fees related to our credit agreements.

  6. Represents the adjustments to the tax provision values to a normalized annual effective tax rate on adjusted pretax earnings to 30.0% and 26.0% for the third quarters and year-to-date periods of 2024 and 2023, respectively.

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 27, 2024 September 29, 2023 September 27, 2024 September 29, 2023
Numerator:
Adjusted net income $ 15,382 $ 13,707 $ 38,258 $ 31,744
Add effect of dilutive securities:
Interest on convertible notes, net of tax 1,322 1,369 3,950 4,106
Adjusted net income available to common shareholders $ 16,704 $ 15,076 $ 42,208 $ 35,850
Denominator:
Weighted average basic common shares outstanding 37,863,580 37,692,588 37,868,675 37,611,179
Dilutive effect of unvested common shares 621,999 594,416 570,736 580,675
Dilutive effect of stock options and warrants 62,919 37,675 55,801 54,073
Dilutive effect of convertible notes 7,392,817 7,392,817 7,392,817 7,392,817
Weighted average diluted common shares outstanding 45,941,315 45,717,496 45,888,029 45,638,744
Adjusted net income per share:
Diluted $ 0.36 $ 0.33 $ 0.92 $ 0.79
THE CHEFS' WAREHOUSE, INC.
RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2024
(unaudited; in thousands)

Low-End Guidance High-End Guidance
Net Income: $ 52,000 $ 52,500
Provision for income tax expense 21,800 22,300
Depreciation & amortization 62,000 65,000
Interest expense 48,000 52,000
EBITDA (1) 183,800 191,800
Adjustments:
Stock compensation (2) 17,000 18,000
Duplicate rent (3) 4,000 4,000
Other operating expenses (4) 3,500 3,500
Moving expenses (5) 1,700 1,700
Adjusted EBITDA (1) $ 210,000 $ 219,000
  1. We are presenting estimated EBITDA and Adjusted EBITDA for fiscal 2024, which are not measurements determined in accordance with the U.S. generally accepted accounting principles, or GAAP, because we believe these measures provide additional metrics to evaluate our currently estimated results and which we believe, when considered with both our estimated GAAP results and the reconciliation to our estimated net income, provide a more complete understanding of our business than could be obtained absent this disclosure. We use EBITDA and Adjusted EBITDA, together with financial measures prepared in accordance with GAAP, such as revenue and cash flows from operations, to assess our historical and prospective operating performance and to enhance our understanding of our performance relative to our performance based upon GAAP results while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies.

  2. Represents non-cash stock compensation expense associated with awards of restricted shares of our common stock and stock options to our key employees and our independent directors.

  3. Represents rent and occupancy costs expected to be incurred in connection with our facility consolidations while we are unable to use those facilities.

  4. Represents non-cash changes in the fair value of contingent earn-out liabilities related to our acquisitions, non-cash charges related to asset disposals, asset impairments, including intangible asset impairment charges, certain third-party deal costs incurred in connection with our acquisitions or financing arrangements and certain other costs.

  5. Represents moving expenses for the consolidation and expansion of several of our distribution facilities.

Source: The Chefs' Warehouse, Inc.