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?

Thank you, Chris, and good morning, everyone. In this quarter's results, you'll find some reclassifications within our income statement that are in response to an SEC comment letter. These reclassifications have been included in all periods presented in our current press release and 10Q and will be reflected prospectively in our future filings. We have reclassified our food processing costs, previously included in operating expenses, to cost of sales and have split our historical presentation of operating expenses between selling general and administrative expenses, and other operating expenses. These reclassifications have no impact on the company's net income, cash flows, or EBITDA. 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. Our net sales for the quarter ended September 25, 2020 decreased approximately 36% to $254 million from $396.8 million in the third quarter of 2019. The decrease in net sales was the result of a decline in organic sales of approximately 44.9%, as well as the contribution of sales from acquisitions, which added approximately 8.9% to sales growth for the quarter. Net inflation was 2.1% in the third quarter, consisting of 1.6% inflation in our specialty category and inflation of 2.7% in our center of the plate category versus the prior year quarter. Gross profit decreased 37.6% to $60.6 million for the third quarter of 2020 versus $97.2 million for the third quarter of 2019. Gross profit margins decreased approximately 63 basis points to 23.9%. Changes in product mix due to both customer mix and menu adjustment during the COVID period was the primary driver of slightly lower gross profit margin versus the prior year quarter. The primary driver of net specialty inflation was above average price increases in chocolate and cheese categories, partially offset by deflation in the dairy and specialty pastry categories. Inflation in the center of the plate category was driven by higher pricing across most beef categories, as well as product mix changes attributed to growth in our direct-to-consumer business, as well as other premium cut sales in our Allen Brothers division. Total operating expense decreased approximately 16.2% to $72.6 million for the third quarter of 2020, from $86.6 million for the third quarter of 2019. Lower costs associated with compensation and benefits as well as general administration related costs were the primary driver of the decrease in operating expense in the quarter. On an adjusted basis, operating expenses decreased 13.4% year over year. Excluding the impact of acquisitions, adjusted operating expenses decreased approximately 27.5% versus the prior year quarter. As a percentage of net sales, adjusted operating expenses were 25.8% for the third quarter of 2020 compared to 19.1% for the third quarter of 2019. As mentioned earlier, sales volumes increased sequentially from August into September. As such, September operating expense on an adjusted basis represented approximately 24.6% of net sales for the month. Operating loss for the third quarter of 2020 was 11.9 million, compared to operating income of 10.6 million for the third quarter of 2019. The decrease in operating income was primarily driven by lower gross profit offset in part by lower operating expense. Income tax benefit was $5.2 million for the third quarter of 2020 compared to expense of $1.7 million for the third quarter of 2019. Our gap net loss was $11.4 million or $0.31 loss per diluted share for the third quarter of 2020 compared to net income of $4.4 million or $0.15 profit per diluted share for the third quarter of 2019. On a non-GAAP basis, we had negative adjusted EBITDA of 4.9 million for the third quarter of 2020 compared to positive adjusted EBITDA of 21.6 million for the prior year third quarter. Adjusted net loss with 13.7 million or 38 cents loss per diluted share for the third quarter of 2020 compared to adjusted net income of 6.8 million or $0.23 profit per diluted share for the prior year third quarter. Turning to the balance sheet and update on our liquidity, as of October 23, 2020, we had total liquidity of $237.3 million, comprised of $193 million in cash and $44.3 million of availability under our ABL facility. As of October 23, net debt, inclusive of all cash and cash equivalents, was approximately 209.1 million. At this time, due to the continued uncertainty regarding both the pace of broader economic recovery and the lifting of in-room dining restrictions across our key markets, we will not be providing guidance for 2020. We hope to provide more color as we gain more clarity on the length of the economic downturn and the pace of reopenings. Thank you, and at this point, we will open it up to questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first question has come from the line of Peter Sala of BTIG. Please proceed with your questions.

Great. Thank you. First, Chris, I just wanted to say I'm sorry to hear about your loss. I just wanted to ask about the sales trajectory. It was encouraging to see that the September sales numbers were approaching, you know, call it 70% in October, a little bit above that. Can you give us a sense of what level you need to get to profitability? Were you profitable in October, or were you just shy of that level?

Yeah, I'll let Jim take the first part of that, and then I'll opine on the rest.

Yeah, so in terms of where we're operating right now, it's really month by month, very close to breakeven growth. The cadence through the month was similar to Q2, with September being, you know, very close to breakeven, maybe a little bit of profitability on an adjusted EBITDA basis. So we're at a level now where, you know, based on accruals, we're on either side of breakeven. From a medium to longer-term perspective, you know, we've said that our stated goal is to, you know, get to 75 to 80 percent of either 2019 pro forma for the acquisitions or the midpoint of our implied guidance, you know, which are similar levels, our implied guidance for 2020. And the way that we, you know, view the world right now. Uh, you know, we believe that, um, while the, the near term, uh, with the colder weather, um, and, um, uh, the activity around COVID, uh, may provide, uh, you know, a more conservative view to the next, you know, three to six months. We believe that, uh, as we approach the second half of 2021 and into 2022, we'll be able to, uh, build towards those levels and get back to – it's really about a two-year look right now, 2022 being the focus.

Yeah, and really to add to Jim's comments, you know, the choice right now, you know, if you have a strong balance sheet, which we do, it's, you know, how much do you want to – double down on 22 and 23. I mean, we see as soon as the weather got better or as soon as things opened, the pent-up demand was unbelievable. We're watching the demand in parts like Florida and Texas where things are a little more normalized as far as restaurants. We see tremendous green shoots. So You know, my decision really was to start to invest, you know, keep investing in IT, in digital, keep investing in talent. We have been adding talent that normally is not available to us in the marketplace and really starting to get businesses primed to really, you know, be the beneficiary when the uptick starts to happen. So as painful as it is, For us now, we think there's just tremendous opportunity through M&A, really smart M&A. You know, not everybody, I think, will get through this unfortunate time. So we think, you know, using our balance sheet, using our breadth and depth size and ability to do fold-ins intelligently, I think that that is the right strategy really going into 21 and into 22.

Great, very helpful. Would you just mind giving us a little bit of color or some commentary around what you're seeing in New York City and maybe even San Francisco as some parts of New York are reopened for indoor dining, I guess, at the end of September. Have you seen trends improve in that market as indoor dining reopened?

Yeah, we definitely saw upticks as New York opened. We're looking forward to New York going to 50%. You know, we think that 50% is a huge number. It allows a lot of restaurants to reopen. You know, many customers still are waiting. So, but we did see, you know, a nice uptick. We really see uptick in, well, we're seeing a really uptick in California. Unfortunately, the fires kind of dampened things down, unfortunately. Some of our best performing areas work in California. They're starting to come back. But that definitely was an unfortunate hit to a real uptick that we were seeing until the fires hit. So getting through the fires, again, I think the warmer climates are definitely going to do better. Our customers have pivoted. It's unbelievable. As you say, you walk through New York, and now a lot of it looks like more of a European city with what they've created outside. I think they can push it with the outdoor heaters and the ability to keep people comfortable. I think that's really going to help, and hopefully we get some luck with the weather. I have been pleasantly surprised in cities that have opened up indoors. I know there are some spikes going on right now, which kind of we expected, but we did notice that there was a certain part of the population that was very comfortable. And restaurants were filling up, and that was really encouraging indoors. So I think it's going to be, you know, an up and down, you know, next few months. But I'm encouraged with what I saw.

All right. Thank you very much.

Thank you.

Thank you. Our next question has come from the line of Alex Slagle with Jefferies. Please proceed with your questions.

Thank you. And Chris, my condolences. Had a question maybe on the holidays coming up and if you could provide some context on how to think about these high volume sort of weeks later in the fourth quarter and maybe how significant the large party and banquet holiday business is for your customers and how to think about managing inventory in that kind of environment.

Yeah. Well, inventory, I think, again, I think the worst is over. I think we went through you know, the difficulty of, you know, when March, when everything closed down and, you know, we've been fighting getting through a lot of that inventory, especially the perishable stuff, obviously, you know, we went through in the first few months. But what we're hearing and what we're seeing is the encouraging part is that there are lots of parties booking. They're not the big ones. I think it's going to be more of a season of small gatherings and, you know, And I'm excited to hear that. You know, when you watch the news and you hear about, you know, spikes, you're like, oh, my God, no one's going to want to do anything. But we are seeing more and more small gatherings with our customers. We're seeing a lot of off-premise catering. We're seeing people, you know, people, again, I'm doing this over 35 years. They're social animals. They do want to get together. Right now they're trying to get together safely. So, yeah. A lot of our larger units are able to accommodate them with their party rooms, spreading people out. So I think it's going to be a season. I think it's going to be a longer season. I think it's not going to be the typical holiday season. I think it's going to be an ongoing. I know for me, even friends in our company, people get together differently and And I think that's going to continue throughout the winter, where you see parties of 10 or 20 or 30, depending on what city it is. I think it's going to be a continual long season of small gatherings.

That makes sense. And then if there's any silver linings of this crisis, I mean, you mentioned you're picking up some strong talent on the sales side. Is there anything else you'd highlight or maybe breakthrough discussions with new customers that you previously couldn't get to?

Sure. So I think just like, you know, restaurants, the trend was already starting for more pickup, you know, takeout, off-premise catering. I think COVID has kind of compressed, you know, what might have taken five years, you know, into a few months. So obviously takeout will be tremendous this winter. And I think the trend that the industry was consolidating, I think that will really be consolidated over the next, you know, say two, three years versus seven to ten years. We did a small acquisition in Florida. We think that that trend will continue. We think there will be many opportunities to get talent. Our specialty is really supplying either wealthy suburban areas that have lots of restaurants, lots of catering, obviously the cities. I think the cities will take longer to come back. At the same time, I think that we'll be able to fill a lot of the vacuum of less volume with these tuck-in acquisitions. So I think that will be accelerated throughout 21 and 22.

Hey, Alex, I would just add that I think we've been really pleased with the level of new account openings that we've seen over the last six months. I think as we mentioned in our prepared remarks earlier, thousands of new account openings. Obviously, the level of demand is not there, but as we build the business back, especially in the second half of 21, we feel that that sets us up for good growth.

Yeah, and what's really driving the new account openings is that our ability to continue to service customers the way they need. I think a lot of our competitors, especially smaller competitors, did not have the ability to keep the trucks on the road. and service to customers the way they needed it, you know, not just once a week but multiple times a week. So I think our ability to put enough product on the truck, you know, combining all the categories that we've been adding has really been the, you know, given us that tailwind to penetrate and grab market share with all these new customers coming on board. That's great. Thank you. Thank you.

Thank you. Our next question has come from the line of Nicole Miller with Piper Jaffray. Please proceed with your questions.

Thank you and good morning, Chris. Very, very, very sorry for your loss. Thank you for sharing that. Thank you. Just two questions for me this morning. When you think about the improvement, you know, sequentially from this quarter to last quarter, and I like that comparison, by the way, or even in October to September, Could you just rank where the improvement or the delta is coming from? And I'm tempted to say, hey, more capacity in the accounts that are open, but there's probably more behind the momentum. I'm thinking about accounts just in general coming back online. Maybe there's new accounts, obviously capacity. Maybe there's other items. Could you just rank where the improvement is coming from?

Sure. Again, we saw unbelievable you know, demand in the outskirts of a lot of our major cities. So, you know, that continued even after summer, which shows that, you know, many people are hunkered down. They did not go back to, you know, to their city apartments, but they continue to go out in their neighborhood. They continue to take out. They continue to, you know, I think there wasn't a golf course that didn't have a record year this year. You know, golf courses have big catering facilities, so they're able to space people out, great outdoor dining, which I think continues. So that really continued to accelerate. As the city started to open, you know, I think everybody really forgets how decimated our major cities were. Even going to 25% is a big uptick. So where we see cities going at 50%, where we saw Florida remove restrictions, obviously there's tremendous upticks in those markets. And we think that will continue throughout the winter. Again, I think the warmer states are going to have a better winter season. And I think that as we get through, and who knows where the balancing act goes with the cities, giving our customers 50% allows many, many, many hundreds, maybe thousands of customers who still have not opened waiting for that 50% to open up. And that's really the uptick that we're looking for. But we did get part of that going into September and October.

Okay, excellent. And then It's been fascinating. The last few months I've received a lot of inbound commentary from a lot of our peers and partners in New York saying, hey, I found Chef's Warehouse. Very pleased to find you and a good experience. So how big is BTC and can this be a real opportunity?

Yeah, I mean, we are investing in it right now. Obviously, it's a completely different model. You know, the big upticks come when the weather gets cold and people would rather get delivery. So I think it's a wait and see. You know, we do have more of a digital team right now that is focused to try to accelerate that business again in the winter months. But really the big uptick we saw was with our online premium proteins. So Allen Brothers was really continue to accelerate and is having a phenomenal year with their online ability to send, mostly it's FedEx and UPS. And we expect that really to continue throughout the rest of the year as people fill up their freezers again. And really the discovery that you can buy such a great high quality steakhouse type of steak and seafood I think that trend will continue, and we're looking to add on to that.

Great. Thanks again.

Thank you. Thank you. Our next question has come from the line of Kelly Bania of BMO Capital Markets. Please proceed with your questions.

Hi. Good morning, and I also just want to – express my condolences to you and your family, Chris.

Thank you, Kelly. You had a great life.

Yeah. So I guess I was wondering if you could just talk a little bit more about the talent investments you're making. I assume it's in the sales force, but would just love to hear more about where you're making those. Is that part of the comment about the acquisition? Is there other investments? And just generally talk about the size of the Salesforce now and how you're working to kind of motivate them in this environment. Just any color on those topics would be helpful.

Sure. Well, yeah, it's a very important topic. You know, obviously keeping everybody motivated in an environment like this is of the utmost importance. You know, we continue to add, you know, talent to support our new businesses. So, you know, obviously we're in unprecedented times, but, you know, looking at the pent-up demand, looking where the business was going to change anyway, becoming a complete chef's warehouse. I call it like the four legs of the stool. We had just started to invest in produce. We were accelerating into seafood and more into the specialty proteins with our steak cutting operations. And we see just a tremendous opportunity over the next few years to dominate more in those categories. So adding more talent, doing small acquisitions like we did in Florida, adding talent and sales, especially as Florida comes back, is really going to accelerate our growth into 22 and 23. So we continue to see opportunities throughout the country. We're not bashful. If we think there's talent, we will acquire it. And if we can get the right acquisitions, obviously using our balance sheet, you know, very intelligently, I think that the opportunity has never been greater to really have other companies that we always wanted to join Chef join us. I think we're stronger together coming through this. You know, we're all going to have excess capacity. So, you know, my wish list is to continue to do fold-ins and really smart acquisitions of talent and businesses that make a lot of sense combining with Chef Warehouse and really having that uptick coming into 22 and 23.

Thank you.

Our next question has come from the line of Todd Brooks with CL King and Associates. Please proceed with your questions.

Hey, good morning guys and Chris. I just want to pass my condolences along as well for your dad's passing. Thank you. A few questions this morning. One, I was wondering if you could talk about the specialty distribution industry in general. And I know he's made a great comment about everybody has excess capacity and There's a lot of instances where companies will be stronger together. But as you look at the industry and kind of some of the players that can't deliver the service levels, what are you thinking of as far as survivor bias that will benefit Chef in 22 and 23? Do you expect to see a decent number of competitive closures? Do you expect it to more be competitive impairments that turn some of the competitors into more zombie type distributors going forward?

Yeah. I think the reality of, you know, what has happened is, I mean, it's unprecedented, you know, you know, I think, I don't think there was a business class that said you wake up one day and, you know, all 40, 50,000 of your customers are closed. So I can't imagine being a, a small business right now without the ability to, you know, to access capital. And yeah, you know, how you get through this. I mean, even if you do get through it, you're severely wounded. I think the reality is that they have to merge. You know, the pain is, you know, it's not over. Even if you're doing okay, you know, coming out of this, I think the demands of the customer have changed, just like takeout is, I don't think takeout's going to go away. I mean, it'll subside, but the trend was already there, just like gluten-free was growing and just like more vegan options were growing. I think the trend to consolidate was already there. So labor was going up. The cost of operating insurance was already a burden for small business. So I think that What was going to happen maybe over seven to 10 years is going to get condensed. I think it makes a lot more sense for people to combine and, you know, go after their overhead, their fixed overhead. And for us, it's, you know, boxes on the truck, right? So the more boxes we can unload at a customer, we make more money. And, you know, now that COVID has kind of changed the forecast, you know, especially for the next year, If we can deliver, you know, more expensive boxes, and I think that's why you see us going into more specialty produce and specialty seafood and proteins, those boxes really help cut into the overhead, and especially as the volume, you know, even with the upticks that we see, when the volume upticks, it's not rocket science. We make more money. And I think that trend will continue for us, and I think we will be one of the benefactors We will benefit from this over the next two, three, four, and especially five years as we start to combine our logistics, our ability to have one computer screen, ability to have just-in-time merging of merchandise, which we can start to leverage having less trucks, more products on the trucks. I think the salespeople become more consultants. I've been talking about that for years. I don't see salespeople going away. I see salespeople becoming more of the consultant and more of the order being more online. I think that digital revolution is really going to start to give us the ability to leverage our infrastructure and free up our sales staff, especially ours, which is highly trained. A lot of them have chef backgrounds, and I think it's going to give us the ability to get more market share.

That's great. And then my final question, um, you talked about the unprecedented nature of what the industry is going through. And I know early on in the pandemic, uh, when you took a first cut at what door closures might be within the customer base for chef, he kind of talked about maybe a mid teens level, which, um, was normal closures plus maybe an incremental five to seven hundred basis points but now that that the the delays have occurred in reopening dining rooms just do you have updated thoughts that you can share with us on what you're expecting for door closures within uh your customer base maybe what you what you've seen and what you're anticipating yeah i think we said that uh you know normal attrition was anywhere from seven to fourteen percent and we expected that to at least be doubled um

Unfortunately, I think that our projections were pretty accurate. So I think that that's probably, you know, what we're going to see. On the flip side, we're already starting to see the green shoots. So it's a kind of a tale of two cities. You know, it's horrific to see people who invested so much of their life and money, you know, give the keys back. I think that's going to be the very unfortunate part of this, but I think what I've been saying, Todd, is that restauranteurs, people in hospitality, this is what they do. They're not going to go become investment bankers tomorrow or leave for New Zealand. They're going to come back into the industry, and we're starting to hear of customers signing new leases. We're starting to hear customers old friends who are big operators are calling me and saying, what do I think, Chris? Should I take the leap now, sign the lease? The build-out, it's already a restaurant, so the build-out's going to be less. That could be open by mid-21 or the end of 21, going into 22. I think capital is key. I think we are going to get another stimulus. Unfortunately, it didn't happen, so I think that's really going to be the key. I mean, almost positive. I think everybody is that there will be one. It's just when. And I think that we start all over again. You're going to see a lot of new restaurants, you know, after this is done. They might be changing, but, you know, I'm seeing what, you know, where the weather is just the atmosphere, I think, is better in Texas and Florida and even parts of California that didn't have all the unfortunate fires. That pent-up demand, I find it fascinating how much business some of these customers are doing.

That's great. Thanks, Chris.

Thank you. Our last questions of the conference come from Ben Cleave from National Securities Corporation. Please proceed with your questions.

All right. Thanks for taking my questions. And first, I'll reiterate everybody's condolences here. It's never easy. So I wish you, your brother, and the rest of your family well during this time for you all. I've got kind of a two-part question regarding restaurant capacity. So first, to what degree do you see your customers taking advantage of being able to reopen with low capacity restrictions at, say, 25%? And then for those customers that are open, to what degree do you believe that they are getting filled at whatever, you know, that capacity is?

Again, I think it's, you know, it's not a brushstroke kind of answer. I think it goes by territory. 25% really is more of a warm-up, you know. The worst thing is to have a dark restaurant. I mean, you know, you've got to get your staff back, and I think that's why, you know, the restaurant organization that is talking to the, you know, the White House and people, we're trying to get them to understand it's not you just flip the switch on and you open. You know, it's not like, you know, reopening maybe an office and you put the lights on and everybody goes back to their desk. It's kind of like pre-season for a professional sports team. You need pre-season, you need practice, you got to get your players back in, the coaches. So just still going 25% was a major, major step in the right direction for our operators to start to get back to operating their, getting back on the court, as we say in basketball. So 50% is a magic number. 50% allows them to start to do multiple seedings. I mean, even 25% we saw customers start to do some serious business, you know, because customers, I think, are, you know, depends up demand. People are more forgiving. They're more understanding. I find myself going out sometimes at 6 o'clock because I can't get a seat at 8. So you've got 6 o'clock, 8 o'clock, 10 o'clock seating in a lot of places. in a lot of cities, and I think that when we see, when they go to 50, we really see that big jump in volume. And I think it's going to be kind of sloppy for the next few months. I think we'll see up and down. Hopefully these municipalities and mayors understand that shutting down is not a good idea. Maybe push it back to 25%, but don't go shut down. That's a real, real, real punch in the face for our operators. So allowing them just to continue to keep staff on and management and, you know, get back to 50 again when they think the levels are good, I think is a real key to the recovery.

Got it. Perfect. And you actually answered my next question. So thanks for taking my questions, and I'll get back in queue here.

Thank you. Thanks, Ben.

Thank you. There are no further questions at this time. I will now hand the call back over to management for any closing remarks.

Sure. Well, we thank everybody for joining us on this call and, uh, thank you for the condolences, uh, for our, uh, mine and John's dad. Um, he was a unbelievable human being and, uh, so proud to have called him my dad. He was blessed with many, many years and, uh, without his sacrifice and, uh, a few hundred thousand dollars seed money to allow us to start this company, we wouldn't be here. So thank you again. And I want to thank our team. It's been obviously a very challenging environment and we've had Herculean efforts and, you know, our people are on the front line and every day they're putting it out there and having to show up for work and We just can't be more blessed than I can't imagine having a better, more dedicated team. And we thank them for their efforts. And we really look forward to slowly getting back to some sort of normality and, you know, better days in 21 and obviously 22. So thank you and look forward to you joining us on our next call.

Thank you.

This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation and have a great day.