The Chefs' Warehouse, Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights:

• Business activity and demand remained strong in the fourth quarter with healthy demand from upscale casual to higher-end dining customers.
• Continued growth in market share, with organic volume growth, unique item placements, and new customer acquisition.
• In 2025, delivered 9.1% full-year organic revenue growth, exceeding $4 billion in revenue for the first time. Adjusted EBITDA grew ~18%, margin was 6.2%, adjusted EPS grew 29%.
• Acquired Italco Specialty Foods in Colorado, invested in distribution center capacity expansion and facility consolidation, strengthened balance sheet with net debt to adjusted EBITDA approaching 2 times leverage, and returned cash to shareholders via share buyback program.

Segment Performance:

• Specialty: Organic net sales grew 6.4% over the prior year. Specialty case growth was 3.3% (excluding the elimination of the Texas produce process and packaging program, it was 5.4%). Gross margin in the specialty category increased approximately 45 basis points.
• Center of the Plate: Pounds were approximately 2.4% lower than the prior year fourth quarter (excluding the attrition related to the Texas commodity poultry program, center of the plate pounds growth was 7.5% higher). Gross margin in the center of the plate category decreased approximately 50 basis points year over year.

Guidance:

• Estimates for full-year 2026: Net sales in the range of $4.35 billion to $4.45 billion, gross profit between $1.053 billion and $1.076 billion, adjusted EBITDA between $276 million and $286 million.
• Expect fully diluted share count to be between approximately 46 million and 46.7 million shares due to convertible notes maturing in 2028 being dilutive.

Risks:

• Weather impacts such as the extreme winter weather in January and February that temporarily affected sales.
• Uncertainties related to inflation, deflation, tariff noise, and general market uncertainties that could impact the business.

Q: With the extreme winter weather that we saw in January and early February, how have your year-to-date sales tracked versus your expectations?

A: January was very good and strong, the storm impacted February temporarily but February bounced back nicely.

Q: At the midpoint of your guidance, it implies a flat gross margin for the year. Can you talk about some of the drivers of that operating expense leverage?

A: Focused on growing gross profit dollars higher than adjusted OpEx year over year, with product mix and category growth changes affecting margin but expecting good operating leverage.

Q: As you look ahead, what do you think are gonna be some of the bigger challenges or uncertainties to overcome in 2026?

A: Cautiously optimistic, with considerations of inflation, deflation, tariff noise, but diversified portfolio provides a good base.

Q: How much are you focused on keeping dry powder for potential acquisitions?

A: All of the above, keeping dry powder for accretive and strategic acquisitions, strengthening balance sheet, and returning cash to shareholders opportunistically.

Q: Any notable regional variances and performance?

A: Strong performance across regions, with investments in various territories and continued focus on organic growth and market share expansion.

Q: How do you expect the ramp of AI deployment initiatives in 2026?

A: AI is ingrained in daily operations, with focus on using information to improve efficiencies and customer interactions, always in early innings of leveraging technology.

Q: Thoughts on M&A environment heading into 2026?

A: Constantly looking for synergistic M&A deals, cautiously optimistic for good deals that enhance the business.