The Chefs' Warehouse, Inc.

Greetings and welcome to the Chefs' Warehouse Fourth Quarter 2018 Earnings Conference Call. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary, and Chief Government Relations Officer. Please go ahead.

Thank you, Operator. Good afternoon, 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 fourth quarter 2018 earnings press release. It can also be found at www.chefswarehouse.com under the Investor Relations section. 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 both historical and estimated adjusted net income and adjusted earnings per share. These measurements are not calculated in accordance with GAAP and may be calculated differently in 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. 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. These statements are subject to numerous risks 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-K and quarterly reports on Form 10-Q, which are available on the SEC website. Today we're going to provide a business update, go over our fourth quarter results in detail and review our 2019 full year guidance. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Thank you, Alex, and thank you all for joining our fourth quarter 2018 earnings call. Our team delivered solid revenue and gross profit growth in the fourth quarter. We experienced strong year-over-year case growth in specialty and center-of-the-plate pound growth continued to build momentum. I would like to thank the entire Chefs team for producing strong financial results in 2018 while continuing to grow and enhance the Chefs Warehouse brand and service model within our growing customer base and expanding geographical presence. A few highlights from the fourth quarter include 5.4% organic growth in net sales. Specialty sales were up 6.5% organically over the prior year. was driven by unique customer growth of approximately 5.9%, placement growth of 4.4%, specialty case growth of 6.5%, and organic pound growth in center of the plate of 4.9%. Gross margins increased approximately 20 basis points. Gross margins in the specialty category declined 93 basis points as compared to the fourth quarter of 2017, while gross margin in the center of the play category increased 135 basis points year over year. In addition, gross profit dollars grew approximately 11.2% versus prior year fourth quarter. Jim will provide more detail on margins in a few moments. In regards to technology and operations, we continue to focus on improving our service model. During the fourth quarter, we expanded our team that focuses on customer experience, and we implemented several enhancements to our mobile apps, including push messaging, barcode scanning, and multiple account capabilities. These enhancements not only provide improved communication between our sales reps and customers, but also a more efficient ordering process for our customers. Sales through our e-commerce and mobile platforms increased from approximately 8% of total revenue in October 18 to approximately 10% of total revenue in January of 19. Additionally, we have seen a 20% increase in mobile app utilization since our third quarter 2018 reporting. We completed the initial phases of several important technology and process enhancements during the fourth quarter. They include the implementation of off-truck scanning in our Mid-Atlantic Specialty Distribution Center and truck camera technology in our Northeast markets. Adoption in additional markets such as Chicago, Florida, and North California will follow in 2019 with additional sites added in 2020. We also completed testing on an upgraded warehouse management system and process in our San Francisco Center of the Plate facilities and expect to go live in the first quarter of 19. During the fourth quarter, we completed the retrofit of our Houston facility and the expansion of our distribution center in Portland, Oregon. In 19, we plan to complete the build out of our new facility in Dallas and begin expansion projects in Los Angeles and South Florida. 2018 was a great year for Chefs' Warehouse in so many ways. We expanded our footprint as we added depth in the Mid-Atlantic with our purchase of BK specialty foods. We invested in new market expansion with our entry into Texas and continued category expansion in fresh-cut fish with the acquisition of Chicago-based Wabash Seafood during the fourth quarter of 2018. We deepened our relationships with our customers and acquired new customers as we grew both organically and through acquisition. We reached the 75% completion milestone in the final phase of our specialty ERP sales order process implementation, inclusive of two of our largest markets, New York and the Mid-Atlantic, as well as the Ohio Valley. We drove strong financial performance, including year-over-year double-digit revenue growth, gross profit margin improvement, and improved operating leverage despite the industry-wide headwinds in labor and transportation cost inflation. We also generated approximately $57 million in free cash flow as determined by full-year 2018 adjusted EBITDA less capital expenditures, and we strengthened our balance sheet to provide a stronger financial foundation for CW as we continue to grow our business model and geography. Turning to 2019 and beyond, we remain excited about our runway for growth. We remain focused on increasing penetration with our existing customers, increasing the number of unique customers, and establishing new market and product categories. We will also continue to expand our product category offerings, including more fresh seafood and produce. Importantly, we will continue to focus on our team members, providing them with opportunities for growth in category expertise, operations, support functions, and delivery. In addition, we aim to provide them with a technology and service platform to deepen their relationships and enhance our customers' business and experience. With that, I'll turn it over to Jim to discuss more detailed financial information. Jim?