RIDGEFIELD, Conn., Oct. 26, 2022 (GLOBE NEWSWIRE) — The Chefs’ Warehouse, Inc. (NASDAQ: CHEF) (the “Company” or “Chefs’”), a premier distributor of specialty food products in the United States and Canada, today reported financial results for its third quarter ended September 23, 2022.

Financial highlights for the


third


quarter of


2022


:

• Net sales increased 36.7% to $661.9 million for the third quarter of 2022 from $484.3 million for the third quarter of 2021.
• GAAP net income was $8.3 million, or $0.21 per diluted share, for the third quarter of 2022 compared to $3.5 million, or $0.09 per diluted share, in the third quarter of 2021.
• Adjusted net income per share
  
  ¹
  
  was $0.41 for the third quarter of 2022 compared to $0.12 for the third quarter of 2021.
• Adjusted EBITDA
  
  ¹
  
  was $41.0 million for the third quarter of 2022 compared to $23.4 million for the third quarter of 2021.

“Customer demand was strong throughout the third quarter and the cadence of business activity returned to seasonal shifts more typical of the pre-pandemic environment. Seasonal September strength due to “return from vacations” was complimented by a moderate increase in “return to office” activity in many of our larger markets,” said Chris Pappas, Chairman and Chief Executive Officer of the Company. “While product cost, in aggregate, remained relatively unchanged versus the second quarter of 2022, pricing continues to be firm in most categories. We continue to see new openings and gradual increases in hotel, catering and event related business.”

Third


Quarter Fiscal


2022


Results

Net sales for the quarter ended September 23, 2022 increased 36.7% to $661.9 million from $484.3 million for the quarter ended September 24, 2021. Organic sales increased $107.2 million, or 22.2% versus the prior year quarter. Sales growth of $70.3 million, or 14.5%, resulted from acquisitions. Organic case count increased approximately 18.3% in the Company’s specialty category with unique customers and placements increases at 25.9% and 42.1%, respectively, compared to the prior year quarter. Organic pounds sold in the Company’s center-of-the-plate category increased approximately 11.6% compared to the prior year quarter. Estimated inflation was 15.0% in the Company’s specialty categories and 2.2% in the center-of-the-plate categories compared to the prior year quarter.

Gross profit increased approximately 43.5% to $157.8 million for the third quarter of 2022 from $110.0 million for the third quarter of 2021. Gross profit margin increased approximately 113 basis points to 23.8% from 22.7%. Gross margin in the Company’s specialty category decreased 133 basis points and gross margin increased 238 basis points in the Company’s center-of-the-plate category compared to the prior year quarter.

Selling, general and administrative expenses increased by approximately 31.0% to $130.3 million for the third quarter of 2022 from $99.4 million for the third quarter of 2021. The increase was primarily due to higher costs associated with compensation and benefits, facility costs and fuel costs to support sales growth in the current quarter. As a percentage of net sales, operating expenses were 19.7% in the third quarter of 2022 compared to 20.5% in the third quarter of 2021.

Other operating expense increased by approximately $5.4 million primarily due to non-cash charges of $4.7 million for changes in the fair value of our contingent earn-out liabilities compared to non-cash credits of $0.1 million in the prior year period.

Operating income for the third quarter of 2022 was $22.1 million compared to $10.4 million for the third quarter of 2021. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling, general and administrative expenses and other operating expenses, as discussed above. As a percentage of net sales, operating income was 3.3% in the third quarter of 2022 as compared to operating income of 2.2% in the third quarter of 2021.

Total interest expense increased to $10.7 million for the third quarter of 2022 compared to $4.2 million for the third quarter of 2021. The increase is primarily due to incurred arrangement and third-party transactions fees of $4.5 million from the refinancing of our term loan. Additionally, we had higher amounts of debt outstanding as a result of our $300.0 million term loan debt refinancing and increasing interest rates on the variable portion of our outstanding debt.

Net income for the third quarter of 2022 was $8.3 million, or $0.21 per diluted share, compared to net income of $3.5 million, or $0.09 per diluted share, for the third quarter of 2021.

Adjusted EBITDA

¹

was $41.0 million for the third quarter of 2022 compared to $23.4 million for the third quarter of 2021. For the third quarter of 2022, adjusted net income

¹

was $16.4 million, or $0.41 per diluted share compared to adjusted net income of $4.5 million, or $0.12 per diluted share for the third quarter of 2021.

Full Year 2022 Guidance

Based on current trends in the business, we are updating and raising our full year financial guidance as follows:

• Net sales for the full year of 2022 will be in the range of $2.45 billion to $2.55 billion;
• Gross profit to be between $575.0 million and $599.0 million and
• Adjusted EBITDA to be between $145.0 million and $155.0 million
  

Third


Quarter


2022


Earnings Conference Call

The Company will host a conference call to discuss third quarter 2022 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 sensitivity to general economic conditions, including disposable income levels and changes in consumer discretionary spending; our ability to expand our operations in our existing markets and to penetrate new markets through acquisitions; we may not achieve the benefits expected from our acquisitions, which could adversely impact our business and operating results; we may have difficulty managing and facilitating our future growth; conditions beyond our control could materially affect the cost and/or availability of our specialty food products or center-of-the-plate products and/or interrupt our distribution network; our distribution of center-of-the-plate products, like meat, poultry and seafood, involves exposure to price volatility experienced by those products; our business is a low-margin business and our profit margins may be sensitive to inflationary and deflationary pressures; because our foodservice distribution operations are concentrated in certain culinary markets, we are susceptible to economic and other developments, including adverse weather conditions, in these areas; fuel cost volatility may have a material adverse effect on our business, financial condition or results of operations; our ability to raise capital in the future may be limited; we may be unable to obtain debt or other financing, including financing necessary to execute on our acquisition strategy, on favorable terms or at all; interest charged on our outstanding debt may be adversely affected by changes in the method of determining the Secured Overnight Financing Rate (“SOFR”); our business operations and future development could be significantly disrupted if we lose key members of our management team; and significant public health epidemics or pandemics, including COVID-19, may adversely affect our business, results of operations and financial condition. 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 22, 2022 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 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 50,000 products to more than 35,000 customer locations throughout the United States and Canada.

Contact:


Investor Relations

Jim Leddy, CFO, (718) 684-8415

¹

EBITDA, Adjusted EBITDA, adjusted net income (loss) and adjusted net income (loss) per share are non-GAAP measures. Please see the schedules accompanying this earnings release for a reconciliation of EBITDA, Adjusted EBITDA, and adjusted net income (loss) to these measures’ most directly comparable GAAP measure.

THE CHEFS’ WAREHOUSE, INC.



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



(unaudited, in thousands except share amounts and per share data)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 23, 2022			September 24, 2021			September 23, 2022			September 24, 2021
Net sales	$	661,856		$	484,321		$	1,822,063		$	1,187,506
Cost of sales		504,068			374,346			1,390,758			922,710
Gross profit		157,788			109,975			431,305			264,796
Selling, general and administrative expenses		130,255			99,431			364,828			270,034
Other operating expenses (income), net		5,458			105			10,504			(208	)
Operating income (loss)		22,075			10,439			55,973			(5,030	)
Interest expense		10,737			4,191			19,567			13,362
Income (loss) before income taxes		11,338			6,248			36,406			(18,392	)
Provision for income tax expense (benefit)		3,061			2,792			9,829			(5,025	)
Net income (loss)	$	8,277		$	3,456		$	26,577		$	(13,367	)
Net income (loss) per share:
Basic	$	0.22		$	0.09		$	0.72		$	(0.36	)
Diluted	$	0.21		$	0.09		$	0.68		$	(0.36	)
Weighted average common shares outstanding:
Basic		37,120,926			36,875,784			37,047,653			36,701,927
Diluted		42,044,053			37,105,746			41,942,676			36,701,927

THE CHEFS’ WAREHOUSE, INC.



CONDENSED CONSOLIDATED BALANCE SHEETS



AS OF


SEPTEMBER 23, 2022


AND


DECEMBER 24, 2021



(in thousands)

	September 23, 2022				December 24, 2021
	(unaudited)
Cash and cash equivalents	$	145,425			$	115,155
Accounts receivable, net		208,939				172,540
Inventories, net		190,668				144,491
Prepaid expenses and other current assets		46,464				37,774
Total current assets		591,496				469,960
Equipment, leasehold improvements and software, net		158,569				133,622
Operating lease right-of-use assets		135,286				130,701
Goodwill		245,428				221,775
Intangible assets, net		116,112				104,743
Deferred taxes, net		2,259				9,380
Other assets		3,609				3,614
Total assets	$	1,252,759			$	1,073,795
Accounts payable	$	142,963			$	118,284
Accrued liabilities		48,751				35,390
Short-term operating lease liabilities		17,180				15,882
Accrued compensation		21,929				22,321
Current portion of long-term debt		6,067				5,141
Total current liabilities		236,890				197,018
Long-term debt, net of current portion		493,148				394,160
Operating lease liabilities		131,910				127,296
Other liabilities		5,862				5,110
Total liabilities		867,810				723,584
Common stock		383				380
Additional paid in capital		322,505				314,242
Cumulative foreign currency translation adjustment		(2,127	)			(2,022	)
Retained earnings		64,188				37,611
Stockholders’ equity		384,949				350,211
Total liabilities and stockholders’ equity	$	1,252,759			$	1,073,795

THE CHEFS’ WAREHOUSE, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS



FOR THE


THIRTY-NINE WEEKS ENDED


SEPTEMBER 23, 2022


AND


SEPTEMBER 24, 2021



(unaudited, in thousands)

	September 23, 2022				September 24, 2021
Cash flows from operating activities:
Net income (loss)	$	26,577			$	(13,367	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		17,667				16,270
Amortization of intangible assets		10,289				9,778
Provision (benefit) for allowance for doubtful accounts		3,138				(744	)
Non-cash operating lease expense		1,329				505
Deferred income tax provision (benefit)		7,121				(4,855	)
Amortization of deferred financing fees		1,621				1,832
Loss on debt extinguishment		142				—
Stock compensation		9,081				8,448
Change in fair value of contingent earn-out liabilities		8,358				(1,359	)
Intangible asset impairment		—				597
Loss on asset disposal		17				257
Changes in assets and liabilities, net of acquisitions:
Accounts receivable		(25,402	)			(51,582	)
Inventories		(40,519	)			(49,148	)
Prepaid expenses and other current assets		(9,848	)			(3,304	)
Accounts payable, accrued liabilities and accrued compensation		21,938				60,443
Other liabilities
Other assets and liabilities		238				(101	)
Net cash provided by (used in) operating activities		31,747				(26,330	)
Cash flows from investing activities:
Capital expenditures		(31,666	)			(17,872	)
Cash paid for acquisitions		(62,007	)			(7,280	)
Proceeds from asset disposals		—				—
Net cash used in investing activities		(93,673	)			(25,152	)
Cash flows from financing activities:
Payment of debt, finance lease and other financing obligations		(171,434	)			(35,918	)
Proceeds from debt issuance		300,000				51,750
Payment of deferred financing fees		(11,258	)			(1,450	)
Proceeds from exercise of stock options		69				—
Surrender of shares to pay withholding taxes		(2,584	)			(1,792	)
Cash paid for contingent earn-out liabilities		(2,538	)			(83	)
Payments under asset based loan facility		(20,000	)			(20,000	)
Net cash provided by (used in) financing activities		92,255				(7,493	)
Effect of foreign currency translation on cash and cash equivalents		(59	)			(89	)
Net change in cash and cash equivalents		30,270				(59,064	)
Cash and cash equivalents at beginning of period		115,155				193,281
Cash and cash equivalents at end of period	$	145,425			$	134,217

THE CHEFS’ WAREHOUSE, INC.



RECONCILIATION OF GAAP NET INCOME (LOSS) PER COMMON SHARE



(unaudited; in thousands except share amounts and per share data)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 23, 2022			September 24, 2021			September 23, 2022			September 24, 2021
Numerator:
Net income (loss)	$	8,277		$	3,456		$	26,577		$	(13,367	)
Add effect of dilutive securities:
Interest on convertible notes, net of tax		683			—			2,048			—
Net income (loss) available to common shareholders	$	8,960		$	3,456		$	28,625		$	(13,367	)
Denominator:
Weighted average basic common shares outstanding		37,120,926			36,875,784			37,047,653			36,701,927
Dilutive effect of unvested common shares		316,358			229,962			304,391			—
Dilutive effect of options and warrants		81,789			—			65,652			—
Dilutive effect of convertible notes		4,524,980			—			4,524,980			—
Weighted average diluted common shares outstanding		42,044,053			37,105,746			41,942,676			36,701,927
Net income (loss) per share:
Basic	$	0.22		$	0.09		$	0.72		$	(0.36	)
Diluted	$	0.21		$	0.09		$	0.68		$	(0.36	)

THE CHEFS’ WAREHOUSE, INC.



RECONCILIATION OF EBITDA AND ADJUSTED EBITDA TO NET INCOME (LOSS)



(unaudited; in thousands)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 23, 2022			September 24, 2021			September 23, 2022			September 24, 2021
Net income (loss)	$	8,277		$	3,456		$	26,577		$	(13,367	)
Interest expense		10,737			4,191			19,567			13,362
Depreciation		5,912			5,610			17,667			16,270
Amortization		3,470			3,135			10,289			9,778
Provision for income tax expense (benefit)		3,061			2,792			9,829			(5,025	)
EBITDA (1)		31,457			19,184			83,929			21,018
Adjustments:
Stock compensation (2)		3,099			2,710			9,081			8,448
Other operating expenses (income), net (3)		5,458			105			10,504			(208	)
Duplicate rent (4)		991			935			4,277			2,324
Payroll tax credit (5)		—			—			—			(1,418	)
Moving expenses (6)		—			452			—			890
Adjusted EBITDA (1)	$	41,005		$	23,386		$	107,791		$	31,054

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 and certain third-party deal costs incurred in connection with our acquisitions or financing arrangements.
4. Represents duplicate rent and occupancy costs for our Los Angeles, CA, Richmond, CA, and Miami, FL facilities.
5. Represents a payroll tax credit earned in accordance with the Employee Retention Credit under the CARES Act.
6. Represents moving expenses for the consolidation of certain facilities in New England.

THE CHEFS’ WAREHOUSE, INC.



RECONCILIATION OF ADJUSTED NET INCOME (LOSS) TO NET INCOME (LOSS)



(unaudited; in thousands except share amounts and per share data)

	Thirteen Weeks Ended								Thirty-Nine Weeks Ended
	September 23, 2022				September 24, 2021				September 23, 2022				September 24, 2021
Net income (loss)	$	8,277			$	3,456			$	26,577			$	(13,367	)
Adjustments to reconcile net income (loss) to adjusted net income (loss) (1):
Other operating expenses (income), net (2)		5,458				105				10,504				(208	)
Duplicate rent (3)		991				935				4,277				2,324
Moving expenses (4)		—				452				—				890
Debt modification and extinguishment expenses (5)		4,640				—				4,709				—
Payroll tax credit (6)		—				—				—				(1,418	)
Tax effect of adjustments (7)		(2,994	)			(418	)			(5,262	)			(445	)
Total adjustments		8,095				1,074				14,228				1,143
Adjusted net income (loss)	$	16,372			$	4,530			$	40,805			$	(12,224	)
Diluted adjusted net income (loss) per common share	$	0.41			$	0.12			$	1.02			$	(0.33	)
Diluted shares outstanding – adjusted		42,135,106				37,105,746				41,942,676				36,701,927

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 and certain third-party deal costs incurred in connection with our acquisitions or financing arrangements.

3. Represents duplicate rent and occupancy costs for our Los Angeles, CA, Richmond, CA, and Miami, FL facilities.

4. Represents moving expenses for the consolidation of certain facilities in New England.

5. Represents interest expenses incurred in connection with third party fees and the write-off of certain deferred financing fees in connection with amendments made to our term loan and asset-based loan facility.

6. Represents a payroll tax credit earned in accordance with the Employee Retention Credit under the CARES Act.

7. Represents the tax effect of items 2 through 6 above.

THE CHEFS’ WAREHOUSE, INC.



RECONCILIATION OF ADJUSTED NET INCOME (LOSS) PER SHARE



(unaudited; in thousands except share amounts and per share data)

	Thirteen Weeks Ended						Thirty-Nine Weeks Ended
	September 23, 2022			September 24, 2021			September 23, 2022			September 24, 2021
Numerator:
Adjusted net income (loss)	$	16,372		$	4,530		$	40,805		$	(12,224	)
Add effect of dilutive securities:
Interest on convertible notes, net of tax		719			—			2,048			—
Adjusted net income (loss) available to common shareholders	$	17,091		$	4,530		$	42,853		$	(12,224	)
Denominator:
Weighted average basic common shares outstanding		37,120,926			36,875,784			37,047,653			36,701,927
Dilutive effect of unvested common shares		316,358			229,962			304,391			—
Dilutive effect of options and warrants		81,789			—			65,652			—
Dilutive effect of convertible notes		4,616,033			—			4,524,980			—
Weighted average diluted common shares outstanding		42,135,106			37,105,746			41,942,676			36,701,927
Adjusted net income (loss) per share:
Diluted	$	0.41		$	0.12		$	1.02		$	(0.33	)

THE CHEFS’ WAREHOUSE, INC.



RECONCILIATION OF ADJUSTED EBITDA GUIDANCE FOR FISCAL 2022



(unaudited; in thousands)

	Low-End Guidance			High-End Guidance
Net Income:	$	39,100		$	46,400
Provision for income tax expense		14,400			17,100
Depreciation & amortization		38,000			38,000
Interest expense		25,500			25,500
EBITDA (1)		117,000			127,000
Adjustments:
Stock compensation (2)		12,000			12,000
Duplicate rent (3)		5,300			5,300
Other operating expenses (4)		10,700			10,700
Adjusted EBITDA (1)	$	145,000		$	155,000

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, non-cash charges related to asset disposals and certain third-party deal costs incurred in connection with our acquisitions or financing arrangements.