Chefs' Warehouse Q2 2025 Earnings Report

Chefs' Warehouse EPS Results

• Actual EPS: $0.52
• Consensus EPS: $0.45
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $0.40

Chefs' Warehouse Revenue Results

• Actual Revenue: $1.03 billion
• Expected Revenue: $1.01 billion
• Beat/Miss: Beat by +$24.43 million
• YoY Revenue Growth: +8.40%

Chefs' Warehouse Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 8:30AM ET

Chefs' Warehouse (NASDAQ:CHEF), together with its subsidiaries, distributes specialty food and center-of-the-plate products in the United States, the Middle East, and Canada. The company's product portfolio includes specialty food products, such as artisan charcuterie, specialty cheeses, unique oils and vinegars, truffles, caviar, chocolate, and pastry products; and center-of-the-plate products consisting of custom cut beef, seafood, and hormone-free poultry, as well as broadline food products comprising cooking oils, butter, eggs, milk, and flour. The company serves menu-driven independent restaurants, fine dining establishments, country clubs, hotels, caterers, culinary schools, bakeries, patisseries, chocolatiers, cruise lines, casinos, and specialty food stores. It markets its center-of-the-plate products directly to consumers through a mail and e-commerce platform. The Chefs' Warehouse, Inc. was founded in 1985 and is headquartered in Ridgefield, Connecticut.

Chefs' Warehouse Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Second quarter net sales grew 8.4% to $1.035 billion with adjusted EBITDA rising to $65.4 million, up from $56.2 million in Q2 2024.
• Positive Sentiment: Gross profit margin expanded by 59 basis points to 24.6%, driven by margin gains in both specialty (+59 bps) and center of the plate (+56 bps) categories.
• Negative Sentiment: Integration of Texas Hardee’s operations included eliminating non-core protein and produce programs, which will compress reported case and pound volumes in the near term.
• Positive Sentiment: Term loan repricing reduced the interest spread from SOFR+3.5% to SOFR+3%, and share repurchases totaled approximately $27 million to date under the $100 million buyback authorization.
• Positive Sentiment: Full year 2025 guidance was raised to net sales of $4.00–4.06 billion, gross profit of $964–979 million, and adjusted EBITDA of $240–250 million.

Presentation

[Operator]

Greetings, and welcome to The Chef's Warehouse Second Quarter twenty twenty five Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Elders, General Counsel, Corporate Secretary and Chief Government Relations Officer. Please go ahead, sir.

[Alexandros Aldous, General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer at The Chefs' Warehouse]

Thank you, operator. Good morning, everyone. With me on today's call are Chris Pappas, Founder, Chairman and CEO and Jim Leddy, our CFO. By now, you should have access to our second quarter twenty twenty five earnings press release. It can also be found at www.chefswarehouse.com under the Investor Relations section.

[Alexandros Aldous, General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer at The Chefs' Warehouse]

Throughout this conference call, we will be presenting non GAAP financial measures, including, among others, historical and estimated EBITDA and adjusted EBITDA as well as historical adjusted net income, adjusted earnings per share, adjusted operating expenses, adjusted operating expenses as a percentage of net sales and as a percentage of gross profit, net debt leverage and free cash flow. These measures are not calculated in accordance with GAAP and may be calculated differently and similarly titled non GAAP financial measures used by other companies. Quantitative reconciliations of our non GAAP financial measures to their most directly comparable GAAP financial measures appear in today's press release and second quarter twenty twenty five earnings presentation. Before we begin our formal remarks, I need to remind everyone that part of our discussion today will include forward looking statements, including statements regarding our estimated financial performance. Such forward looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them.

[Alexandros Aldous, General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer at The Chefs' Warehouse]

These statements are subject to numerous and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's release. Others are discussed in our annual report on Form 10 ks and quarterly reports on Form 10 Q, which are available on the SEC website. Today, we are going to provide a business update and go over our second quarter results in detail. For a portion of our discussion this morning, we will refer to a few slides posted on The Chefs' Warehouse website under the Investor Relations section titled Second Quarter twenty twenty five Earnings Presentation.

[Alexandros Aldous, General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer at The Chefs' Warehouse]

Please note that these slides are disclosed at this time for illustration purposes only. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Thank you, Alex, and thank you all for joining our second quarter twenty twenty five earnings call. Second quarter business activity displayed typical seasonality as revenue and profitability improved across our network. Our operating divisions domestic and international delivered strong unit volume and unique item placement growth and managed pricing effectively while providing our customers with high quality product and high value service during the quarter. I'd like to thank all the Chefs' Warehouse teams from sales procurement operations to all the supporting functions for their dedication and contribution to a strong second quarter and 2025. During the second quarter, Chefs' Warehouse achieved the Great Place to Work certification for the fourth consecutive year.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

We view this certification as recognition of our unique culture and our focus on people as our greatest asset in dynamic and competitive food away from home industry. All of us at Chefs' Warehouse recognize and give thanks to our customers and supplier partners as support and confidence in our people, quality and diversity of products, a high touch, flexible distribution platforms continues to drive our company forward. As discussed on our first quarter call, as part of the process of integrating our Hardee's operation in Texas with our legacy CW specialty and protein operations, we have taken a number of actions to merge our cultures streamline operations and drive both top line and bottom line improvements as we make progress creating the Chefs warehouse model in Texas. This has included the attrition of a non core commodity protein program during the first quarter and the subsequent elimination of a non core specialty produce processing and packaging program earlier in the second quarter. These actions are aimed at creating distribution capacity specialty category and customer growth, operating cost efficiency and improved profitability as we continue to scale in the Lone Star state.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

As such, given these noncore programs were high in case and pounds volumes, we will present price and volume metrics as reported and also excluding the impact of these changes to present more representative year over year price inflation and volume change for our business overall. With that, please refer to slide three of the presentation. Few highlights from the second quarter include 8.4% growth in net sales. Specialty sales were up 8.7% over the prior year, which was driven by unique customer growth of approximately 3.6%, placement growth of 8.7% and reported specialty case growth of 3.5%. Excluding the elimination of the Texas produce processing and packaging program, specialty case growth was 5.8 versus the prior year quarter.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Pounds in center of the plate were approximately 4% lower than the prior year second quarter. Excluding the attrition related to the Texas commodity protein program, Center of the Plate pounds growth was 5.8% higher than prior year second quarter. Gross profit margins increased approximately 59 basis points. Gross margin in the specialty category increased approximately 59 basis points as compared to the 2024, while gross margin in the center of the plate category increased approximately 56 basis points year over year. Jim will provide more details on gross profit and margins in a few moments.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Now please refer to slide four for an update on certain of our operating metric improvements. In summary, chart one shows continued improvement in gross profit dollars per route. Second quarter twenty twenty five trailing twelve months was 2.8% higher versus full year 2024 and thirty six point two percent higher than 2019. Chart two shows second quarter twenty twenty five trailing twelve month adjusted operating expense as a percentage of gross profit dollars improvement by 69 basis points versus full year 2024 and one hundred 60 basis points versus 2019. Second quarter twenty twenty five trailing twelve month adjusted EBITDA per employee increased 7% versus full year of 2024 and twenty six percent versus 2019.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

With that, I'll turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity. Jim?

[James Leddy, CFO at The Chefs' Warehouse]

Thank you, Chris. Good morning, everyone. I'll now provide a comparison of our current quarter operating results versus the prior year quarter and provide an update on our balance sheet and liquidity. Please refer to slide five. Our net sales for the quarter ended 06/27/2025 increased approximately 8.4% to $1,035,000,000 from $954,700,000 in the second quarter of twenty twenty four.

[James Leddy, CFO at The Chefs' Warehouse]

Net inflation was 7.2% in the second quarter, consisting of 5% inflation in our specialty category and 10.8% inflation in our center of the plate category versus the prior year quarter. Reported inflation was impacted by two primary factors in the second quarter versus the prior year quarter. Center of the plate inflation was impacted by the commodity poultry program attrition in 2025. Excluding this attrition impact, net inflation in center of the plate category was 4.1% versus the reported 10.8. Continued growth in specialty cross sell as we further integrate CW and Hardee's results in elevated reported specialty second quarter inflation.

[James Leddy, CFO at The Chefs' Warehouse]

Excluding this impact, specialty inflation was approximately 2.3% and overall inflation for the company was approximately 3% versus the prior year quarter. Gross profit increased 11.1% to $254,300,000 for the 2025 versus $229,000,000 for the 2024. Gross profit margins increased approximately 59 basis points to 24.6. Selling, general and administrative expenses increased approximately 9.7% to $213,800,000 for the 2025 from $194,800,000 for the 2024. The increase was primarily due to higher costs associated with compensation and benefits to support sales growth, higher depreciation driven by facility and fleet investments and higher self insurance related costs.

[James Leddy, CFO at The Chefs' Warehouse]

Adjusted operating expenses increased 9.3% versus the prior year second quarter and as a percentage of net sales, adjusted operating expenses were 18.25% for the 2025. Operating income for the 2025 was $40,200,000 compared to $33,900,000 for the 2024. The increase in operating income was driven primarily offset by higher selling, general and administrative expenses versus the prior year quarter. Our GAAP net income was $21,200,000 or $0.49 per diluted share for the 2025 compared to net income of $15,500,000 or $0.37 per diluted share for the 2024. On a non GAAP basis, we had adjusted EBITDA of $65,400,000 for the 2025 compared to $56,200,000 for the prior year second quarter.

[James Leddy, CFO at The Chefs' Warehouse]

Adjusted net income was $22,500,000 or $0.52 per diluted share for the 2025 compared to $17,000,000 or $0.40 per diluted share for the prior year second quarter. Turning to the balance sheet and an update on our liquidity. Please refer to slide number six. At the end of the second quarter, we had total liquidity of $260,300,000 comprised of $96,900,000 in cash and $163,400,000 of availability under our ABL facility. During the second quarter, we repriced our 253,500,000.0 term loan maturing in 2029, reducing the coupon from term SOFR plus a fixed spread of 3.5% to term SOFR plus a fixed spread of 3%.

[James Leddy, CFO at The Chefs' Warehouse]

In addition, during the quarter, we repurchased approximately 160,000 shares under our $100,000,000 authorized buyback program. To date, repurchases total approximately $27,000,000 of equivalent shares, inclusive of shares repurchased in 2024 and 2025. As of 06/27/2025, total net debt was approximately 5 and $44,100,000 inclusive of all cash and cash equivalents, and net debt to adjusted EBITDA was approximately 2.3 times. Turning to our full year guidance for 2025. Based on the current trends in the business, we are raising our full year guidance as follows.

[James Leddy, CFO at The Chefs' Warehouse]

We estimate the net sales for full year 2025 will be in the range of $4,000,000,000 to $4,060,000,000 gross profit to be between $964,000,000 and $979,000,000 and adjusted EBITDA to be between $240,000,000 and $250,000,000 Please note for the full year 2025, we expect the convertible notes maturing in 2028 to be dilutive and therefore we expect the fully diluted share count to be approximately 46,000,000 to 47,000,000 shares. Thank you. And at this point, we will open it up to questions. Operator?

[Operator]

Thank you. We will now be conducting a question and answer session. The first question that we have is from Mark Carden of UBS.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

So I want to start on the underlying health at the restaurant level. You continue to see solid growth despite some of the traffic challenges the broader industry continues to face. Your end market demographic, of course, it's a little bit different from the industry. But are you seeing any pockets of weakness or elevated restaurant closures within really any of the channels in which you operate? Or has it been pretty resilient across the board?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Yeah, I mean, I think there's always a little choppiness somewhere. But overall, we're really pleased with what we're seeing and our team's ability to continually take more market share in our markets that we've invested heavily over the past ten years in infrastructure and our salespeople and technology. So I think it's Goldilocks for us. I think overall, our customers doing pretty well and we have a constant new customer base that brings in a lot of volume and our customers that like to use all parts of Chef's Warehouse, all our divisions, which is really our mission right now. We want to be where the chef shops and we're offering more and more categories.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

And I think that we're benefiting from I think our customer base is a little more resilient. So I think it's like the Goldilocks from customers are doing pretty well. We're taking more market share and we continue to harvest our investments.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

Makes sense. And then we continue to see a greater push for return to the office policies really across the country. Have you guys seen much of a corresponding uplift yet on business dining at this stage?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

I think, you know, to me, I think it's I think it's a net add, but it's I I always say you you can't eat the the same meal twice. So if you go into the office, you're not eating locally where you were working or living or getting your food from before. So I think the back to the office is helping with more of the lunch business in the major cities and I think bringing people out more Friday dinners that we were seeing. But I think it's still balanced. To us, commuting to the city, you're taking away cash from your local markets.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

I don't think it's a big thing that we're focused on.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

Got it. Thanks so much. Good luck, guys.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Thank you.

[Operator]

The next question we have is from Alex Lago of Jefferies. Please go ahead.

[Alex Slagle, Equity Research Analyst at Jefferies]

Hey, good morning. Thanks for taking Yes, good morning, Alex. How's the like, the summer travel changes? I mean, to the degree anything has changed, how's that impacting demand? And, yeah, I know the the foreign travel to New York and maybe tourism to some of the other big cities is reportedly down, but kind of curious what you're seeing on that front.

[James Leddy, CFO at The Chefs' Warehouse]

Yes. Thanks for the question, Alex. Yes. I would say that the last couple of years, July especially, maybe a little bit in early August, surprised us a little bit to the downside based on what appeared to be the extreme overtourism happening in Europe. People were spending their restaurant dollars in Lisbon, Paris, and Madrid and not in New York City and San Francisco.

[James Leddy, CFO at The Chefs' Warehouse]

But I think we had a pretty good July this year, coming in really close to what we expected, maybe even a little bit better. So I don't know whether that is changing a little bit. But the summer is July and August are seasonally slow, especially in the big cities. You get the shore business that pumps up, and we are seeing that. But I don't know whether it's a change or whether maybe a little bit of that overtourism is getting a little tired.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Yeah. I think it's getting back to, I call it normality, Alex. I think coming out of COVID, said we probably need four or five years to see what's the new normal. And, you know, the craziness with travel and the Amalfi Coast and Barcelona signs, tourists go home. I think it's getting a little more balanced.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

We were cautiously optimistic going into the summer, and I think we're pretty pleased what we saw. Think from my seat, I was really pleased. I was a little more nervous about June, July. And I think it's coming in pretty strong. So we're cautiously optimistic optimistic that our pretty higher level customer price points, little more insulated.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

And tourism is down for sure, places like Vegas and some other parts that we hear. But other areas, they're up 120%. So I think it's a rebalancing.

[Alex Slagle, Equity Research Analyst at Jefferies]

Got it. And I had a follow-up on the Hardee's planned attrition. Just trying to get an idea of what magnitude we should think about in terms of the headwind on reported case growth in pounds as we look ahead to the third quarter. Just should it be similar to what we saw in the second quarter? And I know you said the specialty attrition, the produce piece had started during the 2Q.

[Alex Slagle, Equity Research Analyst at Jefferies]

So I didn't know if that was early on in the 2Q or midway or just trying to get a feel for that.

[James Leddy, CFO at The Chefs' Warehouse]

Yes. I expect so. The protein, the large commodity poultry program, that kinda started, midway through the first quarter, so the impact was less. We did call it out, when we reported first quarter, but it was less than the impact in the second quarter. So our reported center of plate pounds down 4%, but excluding that program, up almost 6%.

[James Leddy, CFO at The Chefs' Warehouse]

So that was a very high volume program, almost 10% of our total pounds for the quarter and for the year. So we'll continue to call that out until we lap it, which with both programs, won't fully lap them until the second half of next year. So we'll continue to just call it out as these are highly transactional, high volume, low dollar, low margin programs that getting rid of them will make us a more profitable company. We're already starting to see some of the benefits and taking some of the cost out and the distribution and operational benefits. So but it will continue to impact the reported volume numbers and price numbers. We'll have to adjust both.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Yeah. Yeah, Alex, I mean, the way we look at it and I think it's the way you should look at it, trying to analyze the strength of the business is just carving out a chunk and we've done this over the last, we've done it over forty years. But since we had a lot of acquisitions over that period of time and I've called out that we're buying companies because we think they're really good companies and they got great people and they give us a territory or category. But there's chunks of it that it's not what Chef Warehouse done and it's a matter of time before we could cycle it out. And did that.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

New England was the best example, I think, with what we saw and happened at Sid Wainer. We shrunk them almost 50% and then we regrew them. And they have the profit levels of a typical chef warehouse. That's what's happening in Texas. It's a small part of our business, so I don't like to spend that much time on it.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

But just to give you the insights, the team is performing there. It's a long term business plan we have there. They're meeting our expectations. They are profitable. They continue to become more profitable.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

And this is a natural shedding of business that doesn't really fit into Chef's Warehouse. So as we continue to grow that market and we look to see our facilities and how to get more of the blend of Chef's Warehouse into Hardee's. Over time, it's gonna look more and more like New England. And I would say now we're probably in the second inning. We were in the first inning. Tremendous upside is coming.

[Alex Slagle, Equity Research Analyst at Jefferies]

That's great. Thanks. And just the specialty cases, that impact, that was sort of the full quarter impact that we saw in the second quarter, so maybe see some more magnitude?

[James Leddy, CFO at The Chefs' Warehouse]

Yes. We exited that program in April. So it covered almost the entire quarter.

[Operator]

The

[Operator]

The next question we have is from Todd Brooks of Benchmark Company. Please go ahead.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Hey, congrats on really strong results even accounting for the Hardee's exits. And I have a question on Hardee's, kind of following up on what Alex was asking about. Is the right way to think about this, it looks like with the pricing benefits from an inflation standpoint, one being just the kind of Hardee's cross sell that you sized, it seems like from a profitability standpoint or a pricing net volume standpoint, it's flattish to slightly positive in specialty and probably a 300 basis point drag from a sales standpoint for center of the plate. Part of that obviously requires the inflation outlook to kind of hold with what you've seen in the first half. So Jim, I was wondering about second half inflation outlook in general.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

And are these the type of drags if we're modeling both case impacts and pricing impacts for the Hardee's exit for the next couple of quarters to frame it up with? Thanks.

[James Leddy, CFO at The Chefs' Warehouse]

I think the best way to answer that is really just to point to the aggregate inflation environment, excluding these product mix changes that are happening because of the transition that Chris just very nicely articulated, Our reported aggregate inflation was 7.2%. But if you exclude the two programs that we're trading out of, it's 3%. And it's 2.3 on the specialty side and 4% on the center of the plate side, the year over year. And so that's the environment that we're seeing for 95% of our business when you're excluding these two programs that are just highly transactional and not part of what we really do. So I would just say that that's what we expect really for the remainder of the year.

[James Leddy, CFO at The Chefs' Warehouse]

I don't think there's anything we see other than potential unforeseen impacts from tariffs that nobody really knows what the impact will be yet. I mean, we've modeled what we think and we think it's going to be at most low single digit impact on aggregate year over year inflation. But I would just mention that sequential inflation has been very moderate. Actually, specialty and produce have been slightly deflationary sequentially versus the first quarter and center of the plate has been slightly inflationary versus the first quarter. So, I think that's the best way to frame how we're thinking about price and inflation for the remainder of the year.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

That's really helpful. Thanks, Trim.

[James Leddy, CFO at The Chefs' Warehouse]

Thank you.

[Operator]

The next question we have is from Peter Sulla of BTIG. Please go ahead.

[Peter Saleh, MD - Restaurants at BTIG]

Great. Thanks and congrats on a good quarter. I wanted to ask about the gross margin. I know there's a lot of moving parts here, but I think gross margin was 50 basis points stronger than what we anticipated. And I think the best number that you guys have posted in about six years.

[Peter Saleh, MD - Restaurants at BTIG]

So just trying to understand, is this the new level of gross margin? Or is there a lot of moving parts here with some of this inflation noise and the Hardee's business? If you could just help us parse that out, that would be helpful.

[James Leddy, CFO at The Chefs' Warehouse]

Yes. Thanks for the question, Pete. Yes, I think you're saying that it's a lot of moving parts is a good way to characterize it. There's the noise from the Hardee's transformation, which are very low margin type of businesses. So that's bringing up a little bit of the year over year.

[James Leddy, CFO at The Chefs' Warehouse]

But I'd say the major part of it is if you were to go to that the waterfall we put out on our 2028 goals and the initiatives under each of those areas in terms of pricing and procurement, our digital platform growth and how that's contributing, our operating units and they're implementing the Select Prime technology to reduce inventory damages and returns etcetera. We're in the early innings a lot of the benefits from those things, but we're starting to see them. And all of those things coming together have started to contribute to the gross profit dollar growth and margin improvement. I will remind you that gross profit margins are an output. In a different inflationary or deflationary environment, if you're as long as you're focusing on gross profit dollars per unit, per pound, per drop, per truck, etcetera, you can get the gross profit dollar growth that you need to drive EBITDA growth, and the margins will move around within a range, and that's pretty typical.

[Peter Saleh, MD - Restaurants at BTIG]

Got it. Okay. And then just I know you mentioned tariffs. Have you is it fair to say that you haven't seen any impact yet from tariffs but are expecting something in the back end of the year?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

No. We we've seen impact. Remember, I mean, he hit the you know, most of what we import is from the EU, and, you know, that was slapped with 10%, you know, months ago. Right? So announcing now it's 15%, and we still don't know what the exclusions are gonna be.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

You know, we're expecting exclusions, you know, products that, you know, don't grow here. You know, you know, We think they're probably not going to get as tariff or tariff. So we definitely saw an increase in certain categories. And like Jim says, you're not tariffing the freight. You're not tariffing a lot of the other input costs that go into the total price.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

So we did see a few points of inflation. So I think we took that hit. And there's probably a little bit more, but we've also had a lot of deflation in product lines. So something like chocolate that went through the roof has come down some. Olive oil went through the roof.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

That price has come down. Produce has been deflationary. You know, the whole bird flu as that thing figures itself out, you have deflation. So, you know, at the end of the day, it's kinda moderate. We're modeling in the moderate inflation sequentially that we're reporting right now. We don't see anything big on the horizon.

[James Leddy, CFO at The Chefs' Warehouse]

I would just add, Pete, that we have a bit of a natural advantage given our business model. We have 130 plus types of olive oils in our distribution centers. So our diversity of product and the amount of SKUs that we carry for each category give us a little bit of an advantage from a substitution and alternative perspective. Just wanted to add that.

[Peter Saleh, MD - Restaurants at BTIG]

Great. Thank you guys very much.

[Operator]

The next question we have is from Kelly Bania of BMO Capital Markets. Please go ahead.

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

Hi. Good morning, Chris and Jim.

[James Leddy, CFO at The Chefs' Warehouse]

Morning, Good

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

morning. Wanted to just ask about your outlook here for the second half. The first half has been quite strong. It seems like the momentum, seasonality the all continues. But I guess the guidance kind of assumes a slowdown in the top line and the EBITDA growth.

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

So I was just wondering if you can help us understand if that's just conservatism or is there anything to call out specifically that we should think about modeling for the second half?

[James Leddy, CFO at The Chefs' Warehouse]

Thanks, Kelly. Most of it is based on the strength of the second half last year. So as we got into September in the fourth quarter of last year, we had really strong performance. So as we went in, we built our guidance and our plan for this year. We understood that there was going to be a little bit of imbalance between the first half of the year and the second half of the year.

[James Leddy, CFO at The Chefs' Warehouse]

But what I would say is it's really not a commentary on what we expect for the second half or the full year guidance if you take the mid to the top end of the range, which we feel pretty good about. You're talking about a typical type of percent of revenue or percent of EBITDA based comparing the second half to the first half that we would have in a typical Chef's Warehouse here based on seasonality. So I think implies 6% revenue growth in the second half on top line, EBITDA growth of close to 14%. And that gets us to a full year 6.5 to 7%, which is top line growth implied, which is the top end of our medium to long term growth algorithm. So and it implies really strong operating leverage.

[James Leddy, CFO at The Chefs' Warehouse]

I think our operating leverage in the first half was about 200 basis points, and it implies full year similar. So no, I think it's just more about the comp to last year than it is anything about what we expect this year.

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

Okay. That's that's helpful. Fair enough. Also wanted to ask

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

I know there's been a lot of questions about the Hardee's and and and the the planned attrition, but, I guess the placement growth, is one item that I don't think would be negatively impacted by that. It would seem that's indicative of kind of some really strong cross selling and some success with that. Can you elaborate on that and just what you're learning as as you do that cross selling with the Hardee's business in the Texas region?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Yeah. Well, again, so turn the clock back a little bit. We bought Hardee's, great people, great run company, not a chef's warehouse. So we knew that we were going to use it a base to really expand and ultimately build a $500 plus million CW business across Texas. And it was all based on cross selling, right?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

We took a produce provider with lots of routes and we took some specialty businesses. We opened up an Allen Brothers in Texas, which was a tremendous feat by our team to get a greenfield going. And all that is feeding, so CW specialty. So the growth, if I laid out the five year plan, I mean, we have a ten year plan, is to continue to grow Hardee's like a chef's warehouse. So negativity part in dropping certain clientele that lots of volume, but not the kind of business Chef's Warehouse does, right?

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

And then refilling up those routes with more Chef's Warehouse type accounts, more of the independents, more of the higher quality restaurants throughout Texas, all the groups that we serve. So the mix is going to come in waves, Kelly, with protein boxes, produce boxes and specialty and broad line. So it's going to be a little muddy. But again, I think I said earlier, we're probably in the second inning. We've made the business more profitable.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

It continues to become more profitable every day. And the mix is going to be muddy. I don't know if we have a lot more shedding to do of we call it non CW business, right? We've done a lot. So at this point, it's really turning on the faucet.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

We continue to hire salespeople and we're selling more and more of the Chef Warehouse boxes. But the exact numbers, it's gonna be a little muddy.

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

Okay. No. That's helpful. Also, just starting to get the question from more investors just about m and a. Obviously, you've been kind of on pause here for, I believe, about maybe two years.

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

But are you thinking of restarting that? Is there anything in the pipeline? Maybe just help us understand where the thought process is on future m and a at this point.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Yeah. I mean, think we've always been opportunistic, right? Except for CME in The Middle East, there's been nobody really like a chef warehouse to buy. So we're always having to buy someone who we think we can chef a size and maybe gives us a category we need or a territory, right, like Hardee's. It was the way to get into Texas.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

So we're constantly looking at deals. I mean, my desk has 20 deals on it all the time. It's just a matter of valuations. We thought valuations were too high for a while coming out of COVID for the type of businesses that they were. And there's always an outlier.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

There might be something that's really great and interesting that we haven't seen. So we'd be interested in that. But right now, I think there's small things we can do, some tuck in acquisitions to the facilities that we've built that have lots of capacity because we don't want to eat up all that capacity as soon as we've invested all that money to be able to organically grow the market. So I think the crystal ball would say, there's going to be a few points a year of fold ins, right, to feed our I think we're having tremendous organic growth right now from all our investments. So I think you're going to see a combination of that over the next few years.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

And like Jim said, we feel really good and strong about the plan we put out till 2028, which gets us EBITDA percentage way over 6% and just filling up the capacity that we've had and also finishing a few of the markets that we've entered. While we look at some of the markets to complete us as a national footprint, there's a few markets that we're still looking to get into.

[Kelly Bania, MD - Equity Research at BMO Capital Markets]

Thank you.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Thanks, Kayla.

[Operator]

The last question that we have is from El Niebuhr of Lake Street Capital Markets. Please go ahead.

[Elle Niebuhr, Equity Research Associate at Lake Street Capital Markets]

Hi, guys. Congrats on the quarter. I was wondering if you could touch base on your 2028 goals and relate them to the strong results you've seen in the first half of the year. Are any of the catalysts that you've laid out in your twenty twenty eight goals contributing to the positive results today, or do you still kind of view them as ambitions?

[James Leddy, CFO at The Chefs' Warehouse]

Hey, thanks for the question. Yeah, I think I mentioned earlier when we were talking about the gross profit margin and gross profit dollar improvement that if you go to that if you just go to some of the initiatives we laid out in that waterfall, it's actually in the appendix of the presentation that we posted for today's call on our website. Everything from what our procurement and pricing teams and category management teams are doing predictive demand forecasting, working with our suppliers through issues like tariffs and all of the route consolidation that we're doing. I talked about SelectPrime and that technology process that our operators have implemented to improve our inventory management. And then I can't say enough about our digital growth.

[James Leddy, CFO at The Chefs' Warehouse]

We're at right around 60% of our specialty orders and sales are coming through our digital platform. We have roughly 40% growth in orders versus the prior year. So all of that is contributing as well as the continued progress on acquisition, integration and growth. Our Chefs Middle East business is firing on all pistons and doing really well. We've talked a lot about Texas and some of the things we're doing there.

[James Leddy, CFO at The Chefs' Warehouse]

So we're in the early innings in a lot of those initiatives, but many of them have definitely contributed to the success in the first half.

[Elle Niebuhr, Equity Research Associate at Lake Street Capital Markets]

Great. Thanks. That's it for me. I'll hop back in queue. Congrats again.

[James Leddy, CFO at The Chefs' Warehouse]

Thank you.

[Operator]

Thank you. At this time, there are no further questions. And I would like to turn the call back over to Chris Pappas, CEO, for closing comments.

[Christopher Pappas, Founder, Chairman, CEO & President at The Chefs' Warehouse]

Sure. Well, we thank everyone for joining us today and congratulations again to our team for a great quarter and all their hard work. And as core New Yorkers too, would like to say that our hearts and prayers a are route to devastating nightmare, the insane loss of life that New Yorkers have seen this week with the attack in the office building in New York. Our prayers are out for those families and we look forward for everybody joining us on our next earnings call. Thank you very much.

[Operator]

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.

Participants

Executives

• Alexandros Aldous, General Counsel, Corporate Secretary, Chief Government Relations Officer & Chief Administrative Officer
• Christopher Pappas, Founder, Chairman, CEO & President
• James Leddy, CFO

Analysts

• Mark Carden, Director - Equity Research at UBS Investment Bank
• Alex Slagle, Equity Research Analyst at Jefferies
• Todd Brooks, Equity Research Analyst at The Benchmark Company LLC
• Peter Saleh, MD - Restaurants at BTIG
• Kelly Bania, MD - Equity Research at BMO Capital Markets
• Elle Niebuhr, Equity Research Associate at Lake Street Capital Markets