The Chefs' Warehouse, Inc.

Greetings and welcome to the Chefs' Warehouse fourth quarter 2019 earnings conference call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary, and Chief Government Relations Officer. Please go ahead, sir.

Thank you, Operator. Good afternoon, everyone. With me on today's call are Chris Pappas, Founder, Chairman, and CEO in Jim Leddy, our CFO. By now you should have access to our fourth quarter 2019 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 and similarly clearly 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 are going to provide a business update over our fourth quarter results in detail and review our 2020 full year guidance. and 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 2019 earnings call. Fourth quarter top line growth was solid amidst a healthy customer demand environment. As we have seen throughout the second half of 2019, products makes ship continued to drive lower volume metrics and a higher inflation or price component of our organic revenue. While inflation continued to trend higher throughout the year, the fourth quarter price environment was particularly challenging with double-digit spikes in the higher-end center of the plate categories. I would like to thank the entire Chefs team for delivering a strong finish to 2019, and we look forward to continuing our path to future growth A few highlights from the fourth quarter include 4.1% organic growth in net sales. Specialty sales were up 5.3% organically over the prior year, which was driven by unique customer growth of approximately 3.8%. Placement growth of 2.5% and specialty case growth of 2.3%. Organic pounds in center of the plate were approximately 2.1% lower than the prior year quarter, primarily due to a tough comparison to Q4 2018. Specialty product mix changes continued to drive the changes in unit volume and price. Similar to our third quarter reporting, on a year-over-year basis, this represented a shift from higher volume dairy category cases to lower volume higher revenue per case specialty product categories. In addition, specialty case growth compares to a strong 6.5% case growth in the fourth quarter of 2018. The year-over-year decline in center of the plate pounds compares to approximately 5% pounds growth during the fourth quarter of 2018 and continues to cycle through attrition of some higher volume, lower margin placements. Gross profit margins decreased approximately 71 basis points. Gross margins in the specialty category increased 36 basis points as compared to the fourth quarter of 2018, while gross margins in the center of the play category decreased 185 basis points year over year. Just a reminder, center of the play gross margins experienced a 135 basis point increase in the fourth quarter of 2018. Gross profit dollars grew approximately 5.3% versus the prior year quarter. Jim will provide more details on margins in a few moments. During the quarter, our operation teams were focused on implementing enhanced picking, slotting, and loading processes utilizing our inventory scanning platforms. Initial results in our Northeast Distribution Center have produced reductions in damages and returns. Improvements will continue to roll out across our locations throughout 2020. ERP system implementation in southern Jersey, Philadelphia continues during the fourth quarter, and we are on pace to go live in the first quarter. In terms of e-commerce, our team has been focused on developing a role now with value-added tools aimed at assisting our Chef customers with menu design and product selections. We started this off by introducing our online chocolate wizard this past month with additional product line functionality to be added in coming quarters. As of January 2020, we estimate online sales represents approximately 17% of total organic revenue and approximately 21% of all specialty orders were placed on our e-commerce platforms. This includes website, mobile, and electronic order applications linked directly to a certain customer order system. 2019 was a very busy year for the company. In February of last year, we added the Bassian Farms team and brands to our portfolio in the San Francisco Bay Area. We consolidated processing early on and will create additional synergies and opportunities when we consolidate certain operations and distribution centers over the next two years. We also made a significant investment in our newest market, Texas. We completed the build-out of a new distribution center in Dallas, began the process of building the team, and implemented our ERP system. We're excited to bring the Chefs' Warehouse array of both specialty and center-of-the-play products and high-touch service model to both new and existing new customers across the Longhorn State. We initiated the process to further expand in Los Angeles as well. With the design and build-out process underway on the new 230,000-foot distribution center that will co-locate specialty produce as well as center-of-the-plate and fresh seafood processing, we are excited to provide our Southern California team with a platform to drive continued growth in this dynamic market. From a financial perspective, we delivered strong results highlighted by 10% top-line growth and adjusted EBITDA growth of approximately 15%. In addition, we strengthened our capital structure and balance sheet by executing the $150 million five-year convertible note this past November. This transaction helped set the stage for further investment and growth for our company in 2020 and beyond. Finally, we continued to promote and grow our CW team as well is our key industry talent to drive both leadership and execution as we enter the next phase of Chefs' evolution and growth. 2020 marks the 35th year of the Chefs' Warehouse. We started the year off with two acquisitions that we believe will be important pieces to grow our business in New England and add premium brands, categories, and talent to the Chefs' Warehouse team and family of companies going forward. The Sid Weiner & Son Company is our first major foray into produce. Complementing this acquisition in New England with Cambridge Packing Company provides us a scalable platform to grow the produce category in the Northeast as well as expand specialty and center of the plate sales across the region. Our team has never been stronger, more focused, or excited about our future as a leading national marketer and distributor to the chef-driven customer base that continues to grow with Chefs' Warehouse and its family of companies as its partner. With that, I'll turn it over to Jim to discuss more detailed financial information. Jim?