The Chefs' Warehouse, Inc.

Greetings, and welcome to the Chef's Warehouse fourth quarter 2020 earnings conference call. 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 afternoon, 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 fourth 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 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 are going to provide a business update and go over our fourth 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 fourth quarter 2020 earnings call. October and November business trends remained relatively stable at approximately 70% of prior year revenue on a fiscal comparison basis as sequential growth in certain markets was offset by declining outdoor dining and colder weather markets such as the Northeast and Midwest. The surge in COVID related shutdowns in late November and the absence of holiday related events and gatherings drove volume lower towards year end. Despite the increased restrictions, December revenue remained above 60% of prior year and we continue to see the number of total active customers increase sequentially versus the third quarter of 2020. Similar to our previous reporting, I will compare sales and gross margin results of the current quarter sequentially to the third quarter of 2020. Jim will provide the comparison to prior year in his comments later in the core. During the quarter, net sales were 10.9% higher versus the third quarter of 2020. Specialty sales were up 3.3% organically which was driven by an increase in unique customers of approximately 5.4%, higher placements of approximately 2.8%, and an increase in specialty cases of 3.6%. Organic pounds in center of the plate were approximately 8.2% higher than in the third quarter of 2020. Gross profit margins decreased approximately 297 basis points compared to the third quarter. Gross margin and specialty category decreased 460 basis points as compared to the third quarter of 2020, primarily due to COVID related inventory adjustments that Jim will describe later, while gross margin in the center of the plate category decreased 90 basis points. As mentioned in our recent press release during the fourth quarter, we are shifting our Northern California center of the plate brand strategy to leverage our Allen brothers, great steakhouse steaks and world's finest seafood brand. We are extremely excited to bring this premier brand and product line recognized for best in class master butchering and aging methods to our customers. And we look forward to introducing the incredible suite of Allen Brothers products to the entire West Coast culinary community. In conjunction with this, we will discontinue sales under the Del Monte, Port, Seafood, and Bassian Farms trade names. Now to move on to an update on recent business activity. Sales in January were trending at approximately 62% the prior year, despite the worst of winter limiting outdoor dining demand, even in moderate climate markets. Very recently, we see some loosening of restrictions in both indoor and outdoor dining, including major markets like New York, Chicago, and California, and are beginning to see early impacts of that increased capacity. 2020 was by far the most challenging year in our company's 35-year history. No industry was impacted more by the COVID crisis than the hundreds of thousands of independent restaurants and hospitality establishments across our nation. The impact to families, careers, and business owners has been on the scale that is both devastating and immeasurable. Since March 16, 2020, the day the nationwide shutdown of indoor dining was mandated, our primary focus has been on working with our customers to help them continue operating and pivot to new business models, providing flexibility on credit and maintaining the high-touch service and high-quality product model that they have come to depend on us. Supporting our customers, our teams, supplier partners, and the broader industry through coordinated lobbying efforts and delivering our fine dining experience product line to people's homes. Donating food totaling approximately $8 million to charitable organizations and food banks across the country and right-sizing the company and strengthening the balance sheet in order to manage through the volatility and unknown timing and nature of the COVID crisis. Our goal is to emerge from this challenging period in a strong financial and strategic position, enabling us to invest in growth and take advantage of business development opportunities over the next few years. While we pause certain projects during 2020, we continue to invest in both sales and operations talent, enhance our technology infrastructure and digital platform, and expanded category growth in seafood and produce. We will continue our path of investing in growth markets and to that end have restarted the process of building our new LA facility and expect to complete our Florida expansion in the first half of 2022. I would like to thank the entire Chef's Warehouse team along with our customers and supplier partners for their dedication and hard work throughout 2020. Our industry is filled with amazing people of every gender and ethnicity who all love the culinary world. The level of innovation and agility displayed during this period has been inspiring to all of us. At Chef's Warehouse, we look forward to building our industry back together and stronger than ever. 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?