The Chefs’ Warehouse Reports Fourth Quarter 2023 Financial Results

RIDGEFIELD, Conn., Feb. 14, 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 fourth quarter ended December 29, 2023. The fiscal quarter ended December 29, 2023 consisted of 13 weeks as compared to the fiscal quarter ended December 30, 2022, which consisted of 14 weeks.

Financial highlights for the fourth quarter of 2023:

• Net sales increased 20.1% to $950.5 million for the fourth quarter of 2023 from $791.3 million for the fourth quarter of 2022. On a pro-rated basis, comparing 13-week to 13-week basis, net sales increased 29.3%.
• GAAP net income was $16.0 million, or $0.38 per diluted share, for the fourth quarter of 2023 compared to $1.2 million, or $0.03 per diluted share, in the fourth quarter of 2022.
• Adjusted net income per share¹ was $0.47 for the fourth quarter of 2023 compared to $0.46 for the fourth quarter of 2022.
• Adjusted EBITDA¹ was $59.0 million for the fourth quarter of 2023 compared to $50.1 million for the fourth quarter of 2022.
  
  

“Business activity coming out of September strengthened into the fourth quarter as seasonal customer demand and volume trends progressed through November and December to close-out 2023. Price inflation continued to moderate, and our Chefs’ Warehouse Teams across our North American and International Markets delivered strong organic growth and margin improvement,” said Christopher Pappas, Chairman and Chief Executive of the Company. “As we move into 2024, I would like to thank all our CW teammates for the dedication and passion they have for our mission - to discover and deliver the finest specialty foods, fresh produce, and center-of-plate proteins that inspire the culinary creativity and feed the success of our customer and supplier partners, as we strive for excellence and impeccable service.”

Fourth Quarter Fiscal 2023 Results

Net sales on a reported basis, 13 weeks compared to 14 weeks, increased 20.1% to $950.5 million from $791.3 million in the fourth quarter of 2022. The incremental 53^rd week of the fiscal year ended December 30, 2022 negatively impacted the year-on-year growth by approximately 9.2%. The growth in net sales was the result of an increase in organic sales of approximately 11.3% as well as the contribution of sales from acquisitions, which added approximately 18.0% to sales growth for the quarter, partially offset by the impact of the 53^rd week. Organic case count increased approximately 11.3% in the Company’s specialty category with unique customers and placement increases at 12.4% and 6.5% respectively, compared to the prior year quarter. Organic pounds sold in the Company’s center-of-the-plate category increased approximately 8.4% compared to the prior year quarter. On a reported basis, comparing 13 weeks to 14 weeks, case count in the specialty category increased approximately 3.3% and pounds sold in the center-of-the-plate category increased approximately 0.6% from the prior year quarter.

Gross profit on a reported basis, comparing 13 weeks to 14 weeks, increased 22.0% to $228.6 million for the fourth quarter of 2023 from $187.3 million for the fourth quarter of 2022. Gross profit margins increased approximately 38 basis points to 24.1%. The incremental 53^rd week of the fiscal year ended December 30, 2022 negatively impacted the year-on-year growth by approximately 9.4%.

Selling, general and administrative expenses increased by approximately 23.8% to $190.0 million for the fourth quarter of 2023 from $153.4 million for the fourth quarter of 2022. The increase was primarily due to higher costs associated with compensation, including benefits, facility costs and distribution costs to support sales growth in the current quarter. As a percentage of net sales, selling, general and administrative expenses were 20.0% in the fourth quarter of 2023 compared to 19.4% in the fourth quarter of 2022. The increase is due to near-term costs associated with our investments in facilities and acquisitions.

Other operating expense decreased by approximately $3.7 million primarily due to lower third-party deal costs incurred in connection with financing arrangements.

Operating income for the fourth quarter of 2023 was $38.2 million compared to $29.8 million for the fourth 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 4.0% in the fourth quarter of 2023 as compared to operating income of 3.8% in the fourth quarter of 2022.

Income tax expense was $10.1 million for the fourth quarter of 2023 compared to $4.3 million for the fourth quarter of 2022.

Net income for the fourth quarter of 2023 was $16.0 million, or $0.38 per diluted share, compared to net income of $1.2 million, or $0.03 per diluted share, for the fourth quarter of 2022.

Adjusted EBITDA¹ was $59.0 million for the fourth quarter of 2023 compared to $50.1 million for the fourth quarter of 2022. For the fourth quarter of 2023, adjusted net income¹ was $20.2 million, or $0.47 per diluted share compared to adjusted net income of $18.2 million, or $0.46 per diluted share for the fourth quarter of 2022.

2024 Guidance

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

• Net sales in the range of $3.625 billion to $3.775 billion,
• Gross profit to be between $865.0 million and $900.0 million and
• Adjusted EBITDA to be between $205.0 million and $218.0 million.
  
  

¹EBITDA, 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 measure.

Fourth Quarter 2023 Earnings Conference Call

The Company will host a conference call to discuss fourth 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 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 recent 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 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, 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

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 duplicate rent and occupancy costs for our Richmond, CA, Miami, FL, Portland, OR and Gibbstown NJ facilities.
5. Represents moving expenses for the consolidation and expansion of our Miami, FL facilities.
   
   

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 reconciliation to 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 available to common stockholders 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 available to common stockholders 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 duplicate rent and occupancy costs for our Richmond, CA, Miami, FL, Portland, OR and Gibbstown, NJ facilities.
   
   
4. Represents moving expenses for the consolidation and expansion of our Miami, FL facilities.
   
   
5. Represents interest expense related to write-off of certain deferred financing fees and other third party costs 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 28.5% and 27.5% for fiscal 2023 and 2022, respectively.
   
   

1. We are presenting estimated 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 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.
   
   

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