The Chefs' Warehouse, Inc. Q2 FY2026 earnings call

Overall Q2 2026 Performance

• Strong double-digit growth in both revenue and profitability, with continued momentum into July 2026, expecting double-digit top-line growth to open Q3 2026
• Organic net sales grew 12.2% year-over-year; total unique customers grew 3.6% year-over-year, or 4.9% when excluding the impact of Middle East conflict
• Gross profit per route and adjusted EBITDA per employee both improved year-over-year, driven by operational efficiency gains
• Total adjusted EBITDA reached $88.1 million in Q2 2026, up from $65.4 million in Q2 2025; GAAP diluted EPS hit $0.76, up from $0.49 year-over-year
• The company ended the quarter with $321.1 million in total liquidity, repaid $30 million of ABL debt, and held a net debt to adjusted EBITDA leverage ratio of 1.6x, within the target range

Strategic Growth Initiatives

• Continue expanding distribution capacity across high-potential markets including New England, Texas, Las Vegas, and the Midwest, with potential entry into additional new markets
• Deploy AI-based technology across all core functions including sales, pricing, procurement, inventory management, logistics, and customer experience, building on the company's existing data and analytics platform to provide real-time insights for teams
• Leverage a differentiated, culinary-focused business model built on deep product expertise, relationship-driven sales to high-end dining customers, and a flexible distribution network, which acts as a sustainable competitive moat that is difficult for competitors to replicate
• Pursue tuck-in acquisitions for accretive growth, while prioritizing organic expansion that currently delivers higher ROI

Capital Allocation Strategy

• Average annual capital expenditure is expected to equal approximately 1% of total revenue going forward
• Capital is prioritized for: 1) distribution center development and fleet expansion to support growth; 2) AI and other technology improvements; 3) enhanced sales force training and data utilization; 4) dynamic pricing and sourcing initiatives
• Maintain a strong balance sheet with a target net debt to adjusted EBITDA leverage range of 1.5x to 2.5x
• Increase share repurchase activity as long as leverage remains within the target range, while retaining dry powder for tuck-in M&A opportunities
• Expect free cash flow conversion to hold between 40% and 60% of adjusted EBITDA

Chefs' Warehouse reports two core product segments: Specialty and Center of the Plate. For Q2 2026: 1. Specialty segment: Organic net sales grew 10% year-over-year, driven by 7.2% unique product placement growth, 6% specialty case growth, and 4% net price inflation. Gross margin increased 47 basis points year-over-year. 2. Center of the plate segment: Pounds sold grew 8.8% year-over-year, with 6.4% net price inflation. Gross margin increased 75 basis points year-over-year. Total company net sales for Q2 2026 were $1.169 billion, an increase of 12.9% from $1.035 billion in Q2 2025, with 12.2% from organic growth and 0.7% from acquisition contributions. Total gross profit increased 15.2% to $292.9 million from $254.3 million, with total gross margin expanding 49 basis points to 25.1%. Middle East operations, the company's only reported regional segment, operated at approximately 94% of prior year levels through May and June 2026, entering the seasonally slower summer period. Produce, a smaller sub-segment, represents approximately 14% of total company revenue and saw high year-over-year price inflation driven by logistics and fuel costs.

• Full year 2026 guidance was upwardly revised: net sales are expected in the range of $4.5 billion to $4.6 billion, gross profit between $1.102 billion and $1.125 billion, and adjusted EBITDA between $305 million and $315 million. Full year 2026 adjusted EBITDA margin is projected at approximately 6.8%, a 70 basis point improvement year-over-year.
• The company updated its long-term financial targets, extending the prior 2023-2028 target framework out to full year 2030. The updated targets are: annual total revenue growth of 7% to 10% (with 7-9% organic growth, and ~1% annual average contribution from acquisitions), reaching $6 billion to $6.5 billion in 2030 total revenue; adjusted EBITDA of $450 million to $520 million; and adjusted EBITDA margin of 7.5% to 8%.
• Management built conservatism into both 2026 full year guidance and the 2030 long-term targets to account for unforeseen volatility, indicating there is potential for upside performance against the stated ranges.
• The second half of 2026 is expected to see slightly slower year-over-year top-line growth than the first half, driven primarily by conservatism around Middle East tourism recovery and lapping a 2025 acquisition that added 70 basis points of growth in the year-ago period.

• Geopolitical conflict in the Middle East has negatively impacted local customer growth and created logistics challenges for regional operations, including longer lead times and higher costs from required routing changes. Uncertainty around the recovery of tourism in the region for Q4 2026 led management to build conservatism into forward guidance.
• Volatility in fuel and diesel costs creates upward pressure on logistics and product prices, though management notes that strong current growth has offset this impact so far.
• The highly competitive specialty food distribution landscape requires sustained investment to maintain market share gains.
• Hiring and training an effective sales force requires long-term investment, and mis-hires create capital drag that can pressure margins.
• Unforeseen economic, public health, or geopolitical shocks could disrupt operations and growth trajectories, which is why management builds risk adjustment into all forward guidance.

Q: What is driving the strong, faster-than-expected U.S. demand growth, and why did you raise your long-term organic growth target from 4-7% to 7-10%? / A: Strong growth comes from years of investment in sales team building, expanded distribution capacity, new category additions, and cross-selling capabilities. Many new hires brought on post-COVID have now matured, allowing the business to leverage its 40-year-old model at scale. The long-term target was raised to align with actual performance over the past two years, when organic growth outperformed the original 4-7% target by 200-300 basis points. The new range includes built-in conservatism, reflecting management's risk-adjusted outlook rather than peak performance expectations.

Q: EBITDA margin has improved faster than expected, and your new 2030 target of 7.5-8% is a new frontier for the business. What is the trajectory for margin improvements, and how sustainable is this progress? / A: Management has always stated that once the business gained scale after investments in infrastructure and expansion, EBITDA margins would rise, and this is now starting to play out. New facilities are initially built with extra capacity for future growth, which creates near-term overhead drag; as they fill up, operating leverage flows to margin. The 2030 target is risk-adjusted, and there is potential for upside: core parts of the business already hold EBITDA margins over 10%, and there is no hard cap on long-term margin as scale grows. The long tail of specialty products creates higher upfront overhead but is difficult for competitors to replicate, creating a lasting moat that supports future margin gains.

Q: What is the source of recent gross margin gains, and is there more upside to gross margin from current levels? / A: Gross margin improvements have come from multiple factors, rather than a single driver. As new markets like Texas mature, logistics efficiencies improve: small volume operations rely on more expensive less-than-truckload shipping and carry more forecast error for perishable inventory, but volume growth eliminates these headwinds. The company has also invested heavily in scaling its pricing and procurement teams, and leveraging new technology and scale to improve collaboration between commercial teams, which has driven better margin management. Product mix and inflation also impact quarterly gross margin, and further operational leverage across the entire platform should support continued incremental gains.

Q: Do you need to ramp up sales force hiring to hit the higher organic growth targets, or will you generate more growth per existing salesperson? / A: Management's ongoing instruction is to hire any strong, high-potential sales talent, as the business never has enough trained staff to support double-digit growth, and it takes multiple years to train new hires. The company has revamped its hiring process to focus on slow hiring and careful selection to avoid capital drag from mis-hires, and invests heavily in ongoing training through Chefs' Warehouse University. Mature salespeople are becoming more productive every year, and the business needs a deep bench of trained staff to sustain current growth rates. (1982 characters total)