Chefs' Warehouse, Inc. Q1 FY2025 earnings call

• First quarter 2025 business activity had typical seasonal cadence with revenue increasing from January to March. - Business units (international and domestic) delivered strong growth in unique item placements and solid operating leverage. - Commenced attrition of certain low margin non-core customer business. - Digital platform investments led to 58% of domestic specialty location customers ordering online as of Q1 2025, up from 56% at year end 2024 and 48% at year end 2023. - Adjusted operating expenses as a percentage of gross profit dollars improved by 36 basis points versus full year 2024 and 127 basis points versus 2019. - Adjusted EBITDA per employee increased 1% versus full year 2024 and 19% versus 2019.

Net sales for the quarter ended March 28, 2025 increased approximately 8.7% to $950.7 million from $874.5 million in the first quarter of 2024. Specialty sales were up 10.7% over the prior year, driven by unique customer growth of approximately 4.5%, placement growth of 7.7% and specialty case growth of 5.7%. Center of the plate pounds were approximately 1.3% lower than the prior first quarter, but excluding attrition of low margin non-core customer business, total center of the plate pounds grew 3% higher than prior year first quarter. Gross profit increased 7.9% to $226 million for the first quarter of 2025 versus $209.4 million for the first quarter of 2024. Gross profit margins decreased approximately 18 basis points to 23.8%. Specialty gross margin increased approximately 6 basis points while center of the plate gross margins decreased approximately 83 basis points year-over-year.

• Estimates net sales for full year 2025 will be in the range of $3.96 billion to $4.04 billion. - Gross profit expected to be between $954 million and $976 million. - Adjusted EBITDA to be between $234 million and $246 million. - Expect convertible notes maturing in 2028 to be dilutive, with fully diluted share count approximately 46.3 million to 47 million shares.

• Tariff uncertainties that could impact costs and pass-through to customers. - Potential economic slowdown impacts on demand, especially in heavy tourist spots. - Tourism slowdown in certain areas (e.g., Vegas during the week) could impact sales. - Tariffs potentially affecting facility growth plans and materials costs, requiring more disciplined and efficient planning.

Q: Asked about tariffs and inputs, specifically flexibility and impact on business.

A: Chris Pappas said tariffs are a small percentage of overall business, suppliers may eat some costs, and there are many alternative sources for products.

Q: Asked about demand environment, especially impact of stock market volatility on upscale end.

A: Chris Pappas said April trends were steady, not seeing major impact, with diverse customer base and better insulation from economic slowdown.

Q: Asked about international travel impact on sales.

A: Chris Pappas said not seeing major panic, with modest slowdown in some tourist spots but strong business in suburbs and local restaurants.

Q: Asked about new restaurant formation slowdown due to tariff uncertainty.

A: Chris Pappas said not seeing slowdown, with new restaurants opening in areas of population growth.

Q: Asked about Chefs' Middle East performance.

A: Chris Pappas said business is performing great with continued growth and new facility opened at end of December.

Q: Asked about relative performance within customer segments (fine dining vs upscale casual).

A: Chris Pappas said restaurant business has adjustments but no major slowdown seen.

Q: Asked about gross profit dollars per case, especially between product categories.

A: Jim Leddy said there was good gross profit dollar growth, with specialty seeing growth in gross profit dollars per case and center of plate excluding attrition also having good growth.

Q: Asked about impact of non-core customer exits on center of plate gross margin.

A: Jim Leddy said it was due to product mix and price changes versus prior year, with sequential inflation being manageable.

Q: Asked about tourism impact and business shift from urban to suburbs.

A: Chris Pappas said there has been a rebalancing with more people eating locally even in cities.

Q: Asked about guidance conservatism.

A: Chris Pappas said guidance is generally not changed materially after first quarter, with lower end slightly raised due to first quarter strength and macroeconomic uncertainty.

Q: Asked about non-core exit timing and inclusion in guidance.

A: Jim Leddy and Chris Pappas said the non-core exit was factored into guidance, with experience in repurposing routes and rebuilding business after such exits.