The Chefs' Warehouse, Inc.

Greetings and welcome to the Chef's Warehouse Third Quarter 2020 Earnings Conference Call. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Alex Aldis, General Counsel, Corporate Secretary, and Chief Government Relations Officer. Please go ahead, sir.

Thank you, operator. Good morning, everyone. With me on today's call are Chris Pappas, founder, chairman, and CEO, and Jim Letty, our CFO. By now, you should have access to our third quarter 2020 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, in 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 are going to provide a business update and go over our third quarter results in detail. 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 third quarter 2020 earnings call. While early third quarter business trends showed slight improvement sequentially as compared to late second quarter, we experienced more measurable increases in active customer count and revenue during the second half of the quarter. Despite continued significant restrictions on indoor dining capacity in our largest markets, September sales averaged approximately 69 percent of the same period in fiscal 2019, and we saw multiple days of greater than 80 percent of prior year sales during the month. Customer openings across markets continued during the quarter as restrictions eased, and we continued to add new customers across segments. including independent restaurants, cafes, country clubs, retail, and hospitality. In this section of the earnings announcement, I usually compare the sales and gross margin results of the current quarter to the prior year quarter. But based upon the tumultuous time we are in, I felt it would be more appropriate to provide commentary on how we compared versus our sequential quarter. Jim will provide the comparison to prior year and his comments later on. During the quarter, net sales were 26.7% higher versus the second quarter of 2020. Specialty sales were up 63.5% organically over the second quarter, which was driven by an increase in unique customers of approximately 52.6%, higher placements of approximately 67.4%, an increase in specialty cases of 58.1%, Organic pounds in center of the plate were approximately 9.7% higher than in the second quarter of 2020. Gross profit margins increased approximately 210 basis points compared to the second quarter. Gross margin in the specialty category increased 420 basis points as compared to the second quarter of 2020, while gross margin in the center of the plate category decreased 52 basis points. Now to move on to an update on recent business activity. Sales in October are trending at approximately 71 percent of prior year. Hence, up demand for dining at restaurants was evident in certain Midwest and southern markets as capacity percentages were gradually increased. This trend gives us confidence that business will continue to improve over time as indoor dining availability grows in our larger urban markets, such as the Northeast, Mid-Atlantic, and California. Throughout the last six months, in addition to supporting customer openings, transitions, and reinvention, our teams have opened thousands of new customer accounts, targeted growth in suburban markets, grown our Allen Brothers direct-to-consumer business, and have quickly and adeptly adjusted our product lines to meet the changing needs of our chef partners. Menus are adapting to evolving cost structures and guest experiences in restaurants and other segments of the hospitality industry. One example is evident in the move towards grab-and-go for breakfast and lunch while maintaining the highest quality ingredients and service, thus allowing our sales team to bring the full force of their culinary expertise and creativity to help drive evolving trends in food service. I would also like to welcome Harris Seafood to the Chef's Warehouse family of companies. This acquisition supports our growth in fresh seafood in the Southeast and complements our continuing category expansion across Florida. In terms of technology and operation, we completed the consolidation of our Texas operation into our Dallas hub, and we have continued to invest in new technology application and in upgrading and deploying our existing platforms throughout this period of volatility and uncertainty. During the quarter, we completed the integration of our Philadelphia operation onto our ERP platform and operation scanning system, and have commenced our West Coast implementation project with an expected go-live in the first half of 2021. In addition, we executed several enhancements to our digital platforms, including a design fresh of our Chef's Warehouse website, with new customer-focused content as well as internally-focused improvements to drive both sales growth and operational efficiency. Before I turn it over to Jim, I would like to pay tribute to Peter Pappas. mine and John's dear father who passed in early October at the age of 92. Peter founded the Veterans Butter and Egg Company in 1956, the food service business that would form the foundation of the chef's warehouse. Peter's combination of integrity, compassion, and dedication to quality and service are the underlying themes that define the culture of our company as it has grown and evolved over 35 years. We will miss him yet we will look to honor him as our team members continue to provide the highest quality food products and service to our customers that embody the Chef's Warehouse unique specialty food service model. 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?