The Chefs' Warehouse(CHEF) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q4 2024 increased approximately 8.7% to $1.034 billion from$950.5 million in Q4 2023 [18] - Gross profit increased 9.8% to $251 million for Q4 2024 compared to$228.6 million for Q4 2023 [20] - GAAP net income was $23.9 million or$0.55 per diluted share for Q4 2024, compared to net income of $16 million or$0.38 per diluted share for Q4 2023 [22] - Adjusted EBITDA for Q4 2024 was $68.2 million compared to$59 million for the prior year [22] - Adjusted operating expenses increased 7.7% versus the prior year, with adjusted operating expenses as a percentage of net sales at 17.7% for Q4 2024 [21] Business Line Data and Key Metrics Changes - Specialty sales were up 11.5% over the prior year, driven by unique customer growth of approximately 4.5% and placement growth of 12.3% [11] - Gross margin in the specialty category increased approximately 22 basis points compared to Q4 2023, while gross margin in the center-of-the-plate category decreased approximately seven basis points year-over-year [12] Market Data and Key Metrics Changes - Approximately 56% of customers ordering through domestic specialty locations were online in Q4 2024, up from 48% in 2023 [15] - The company experienced net inflation of 3.8% in Q4 2024, with 5.1% inflation in the specialty category and 1.8% in the center-of-the-plate category [18] Company Strategy and Development Direction - The company aims for continued above-industry-average top-line gross profit dollar and adjusted EBITDA growth over the next four years [16] - Focus on expanding digital platform capabilities to enhance customer experience and drive online order adoption [14] - The company is committed to becoming a complete solution provider in every market, integrating protein and specialty offerings [50] Management's Comments on Operating Environment and Future Outlook - Management noted strong business activity and demand through Q4 2024, with no significant impact from weather events or industry traffic [31] - The outlook for 2025 includes estimated net sales in the range of $3.94 billion to$4.04 billion, with gross profit expected between $951 million and$976 million [26] - Management expressed confidence in navigating potential tariff impacts due to a diverse supplier base and the ability to pass on costs [35] Other Important Information - Total liquidity at the end of Q4 2024 was $261.4 million, comprised of$114.7 million in cash and $146.7 million available under the ABL facility [23] - The company prepaid$14 million principal on its 2029 term loan during the fiscal year 2024 [23] Q&A Session Summary Question: Did you see any impact from the softer industry traffic in December? - Management indicated that the cadence during Q4 was strong, with no significant impacts from weather or demand issues [31] Question: How much exposure do you have to potential tariffs from Mexico, Canada, and Europe? - Management stated that they have a diverse supplier base and can navigate tariff impacts, with a focus on domestic products [35] Question: What are the margin opportunities for 2025? - Management highlighted that operating leverage would improve in the back half of the year, with a goal of 20 to 25 basis points of EBITDA margin improvement [44] Question: What are your expectations for labor availability and inflation in 2025? - Management noted that labor costs have stabilized and they are paying competitive wages to attract talent [62] Question: Can you provide an update on the utilization levels in new locations? - Management did not disclose specific utilization levels but mentioned positive growth in Northern California and Texas [90] Question: What is your CapEx expectation for this year? - Management guided to CapEx of $40 million to$50 million for 2025, with 80% allocated to facility expansion [94]