The Chefs' Warehouse, Inc.

Greetings and welcome to the SHIP WeHouse second quarter of 2022 earnings conference call. At this time, all attendees are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require assistance from the operator, you're welcome to press Start and then 0 on your telephone keypad. As a reminder, this conference is being recorded. But now to hand over to your host, Mr. Alec Elders, General Counsel and Corporate Secretary of the Shakespeare House.

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 second quarter 2022 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 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 second 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 second quarter 2022 earnings call. Late first quarter business strength continued into the second quarter as the combination of strong consumer demand, new customer openings, and increased dining capacity led to consistent growth in revenue trends as we entered the late spring and summer season. Despite sequential deflation in certain center of the plate categories, Overall, pricing remained firm and incremental gains in volume contributed to sales growth during the quarter. Although not back to pre-pandemic levels, moderate improvement in hospitality and event-related business was evident as the quarter progressed. A few highlights from the second quarter as compared to the second quarter of 2021 include a 36% organic growth in net sales, Specialty sales were up 52.2% organically over the prior year, which was driven by unique customer growth of approximately 35.9%. Placement growth of 54.6% and specialty case growth of 34.8%. Organic pounds in the center of the plate business was approximately 14.2% higher than the prior year second quarter. Gross profit margins increased approximately 140 basis points. Gross profit in the specialty category decreased 70 basis points as compared to the second quarter of 21, while gross margin in the center of the plate category increased 230 basis points year over year. Jim will provide more detail on the gross profit margin in a few moments. We are excited to announce the addition of two acquisitions completed during the second quarter and one completed just recently in July. University Foods is a specialty broad-line distribution company located in Southern California. We welcome Dean Trara and his team into the CW family, and we expect to fold their operation into our new Los Angeles Distribution Center in the coming weeks. We are also excited to add Alexis Specialty Foods to our Northwest region. Located in Portland, Oregon, we will combine Alexis with our CW specialty business serving Portland and Seattle and look forward to driving significant growth in these key markets going forward. In Florida, we added Master's Purveyors, a center of the plate distribution company operating out of the Tampa area to our portfolio of categories and brands in the region. Masters was eventually combined with our seafood processing operation to bolster our growth in the central to northern regions of the state, complementing our expanding and high-growth specialty and protein business in South Florida. Each of these acquisitions are important additions to the CW portfolio and facilitate growth in key regions and create operating leverage as we grow into our expanding distribution capacity across our footprint. I would like to express sincere thanks to the entire Chef's Warehouse team for delivering on a great second quarter performance and continuing to provide our customers with the premium product and service they have become accustomed to over our 37 years of operations. 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. 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 June 24, 2022, increased approximately 53.2% to $648.1 million from $423 million in the second quarter of 2021. The growth in net sales was the result of increase in organic sales of approximately 36%, as well as the contribution of sales from acquisitions, which added approximately 17.2% to sales growth for the quarter. Net inflation was 13.6% in the second quarter, consisting of 16.4% inflation in our specialty category and inflation of 10.9% in our center of the plate category versus the prior year quarter. Gross profit increased 62.7% to $156 million for the second quarter of 2022 versus 95.9 million for the second quarter of 2021. Gross profit margins increased approximately 140 basis points to 24.1%. Year-over-year inflation was broad-based across most specialty and center of the plate categories. Selling general and administrative expenses increased approximately 37.8% to 124.5 million for the second quarter of 2022 from $90.4 million for the second quarter of 2021. The primary drivers of higher expenses were higher compensation and distribution costs associated with higher year-over-year volume growth, route expansion, and increased fuel costs. Adjusted operating expenses increased 40.7% versus the prior year's second quarter, and as a percentage of net sales, adjusted operating expenses were 17.1% for the second quarter of 2022, compared to 18.7%, for the second quarter of 2021. Operating income for the second quarter of 2022 was $27.6 million compared to $4.7 million for the second quarter of 2021. The increase in operating income was driven primarily by higher gross profit, partially offset by higher operating costs. Income tax expense was $6.3 million for the second quarter of 2022 compared to income tax benefit of 0.8 million for the second quarter of 2021. Our GAAP net income was 16.9 million or 42 cents income per diluted share for the second quarter of 2022 compared to net income of 1.1 million or 3 cents income per diluted share for the second quarter of 2021. On a non-GAAP basis, we had adjusted EBITDA of 45.3 million for the second quarter of 2022 compared to $17.2 million for the prior year's second quarter. Adjusted net income was $20.9 million, or $0.51 income per diluted share for the second quarter of 2022, compared to $1.5 million, or $0.04 income per diluted share for the prior year's second quarter. Turning to the balance sheet and an update on our liquidity. At the end of the second quarter, we had total liquidity of $210.8 million. comprised of $51.8 million in cash and $159 million of availability under our ABL facility. As of June 24, 2022, net debt was approximately $341.2 million, inclusive of all cash and cash equivalents. Turning to our guidance for 2022, based on the current trends in the business, we are updating and raising our full-year financial guidance as follows. We estimate that net sales for the full year of 2022 will be in the range of $2.375 billion to $2.475 billion, gross profit to be between $553 million and $576 million, and adjusted EBITDA to be between $135 million and $145 million. Our full year estimated diluted share count is approximately 42.5 million shares. We currently expect our senior unsecured convertible notes to be diluted for the full year, and accordingly, those shares that could be issued upon conversion of the notes are included in the fully diluted share count. Thank you, and at this point, we will open it up to questions. Operator?

Thank you very much, sir. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press start and 1. on your telephone keypad. A confirmation tone will indicate if the line is in the question queue. You may press star then two if you'd like to remove yourself from the question queue. For participants making use of speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we ask that you limit yourself to one question and one follow-up. You may rejoin the queue for additional questions if time allows. We'll pause a moment. The first question comes from Alex Slagle of Jefferies.

Thank you. Good morning. Congrats. Hey, Alex. Question on the guidance. I guess typically, you know, you earn 40, 42% of your full year EBITDA in the first half of the year. But I guess if we look at the full year guide, the midpoint of 140 million, it's closer to 48% this year. So just trying to understand if this is a reflection of some conservatism in the back half, just given unknowns, the macro economy or effects of moderating food costs or something you're seeing out there or just a reflection of an unusually strong first half, perhaps with some tailwinds that you think will be hard to replicate going forward.

Thanks for the question, Alex. No, the guidance really reflects the three acquisitions that we just announced, at least about five months of those, as we completed two of them in late second quarter, and we completed one just the other day in July. So the $50 million bump in revenue and the $5 million bump in EBITDA since we last guided in June reflects about a little more than half the pro rata addition of the acquisitions. And the rest was just really additional trending that we've seen. I think we're starting to return to kind of more normal seasonality than we have in the past two years. So July and August are generally slower business months than May and June. And if you look at us historically, the third quarter is generally a little bit slower than the second quarter. The second quarter is usually our second strongest quarter of the year, next to the fourth quarter. So it's a little bit turning back to normal seasonality, and then just adjusting for the acquisitions.

Got it. And just following up on your leverage targets, I think you had last said 3.6 times is the target for the end of 22 and EBITDA moving higher. Does this change or any thoughts on leverage targets?

Net debt leverage, we don't have a specific target. I think right now, We sit a little bit below, on a trailing 12-month basis, we sit a little bit below three times, probably 2.8 times or so. I think, you know, we're very comfortable operating the company with a three or four handle on net debt leverage. So we feel pretty good about the balance sheet right now, and we expect to continue to strengthen it as we grow. All right. Thank you. Thank you.

The next question comes from Peter Sala of BTIG.

Great. Thanks and congrats on the quarter. I wanted to ask if you could just give us a little bit more color on trends throughout the quarter. I mean, I think you guys have raised guidance. This is the third time so far this year. And just trying to understand if there's any way to tease out how maybe the how seasonality has come back and maybe, I guess, third quarter might be a little bit lighter than second quarter. Is there a way to tease out that it's seasonality and not some broader-based slowdown in the economy?

Yeah, well, the cadence during the quarter, thanks for the question, Peter. The cadence during the quarter was really driven by pricing remaining firm. We saw a little bit of sequential deflation in center of the plate, but we saw a little bit of sequential versus Q1 inflation in specialty. So they kind of evened out, meaning that pricing remained firm. And it was really the first quarter that we're back to over 100% of volume from 2019. So incremental volume build, as Chris mentioned in our prepared remarks, continued firm pricing, good margin management, by our teams. And then if you look back at us historically, Q3 is always seasonally a little weaker than Q2. That's just the normal cadence of the industry and of the business. So that's not to be unexpected.

And you mentioned firm pricing, you know, holding. At the same time, you discussed that you're starting to see at least some sequential deflation in some items. How long do you think that pricing can hold, and what's the magnitude of the deflation that you guys are seeing? Do you think that continues into the back end of the year?

We anticipated center-of-the-plate pricing having some moderate deflation coming into the year, it's kind of played out that way. It's just being offset by specialty and produce and other prices kind of being a little more firm. I wouldn't say that we have a general expectation that there's going to be considerable significant deflation given, I think, the dynamics that we're seeing in the markets. But, I mean, as you're aware, the the environment is a little more volatile than it has been in the past, so it's a little more difficult to forecast.

Yeah, and we might have been a little bit ahead of ourselves on beef deflation. I mean, we got a little bit of it, but what we're seeing now with obviously all the news about drought and crops and the cost of keeping these cattle fed the cost of fuel, you could see an uptick again depending on demand. It really goes back to if the demand remains strong, it could keep prices up. It's just amazing watching the news every day and you're looking at the overall economy and spend. I think people really do forget that we are still coming out of the pandemic. There's still a lot of demand for travel. And we're starting to see that, you know, a lot of the industry, a lot of our customers last year who probably did better in the summer because nobody was traveling. And this year I think is more normalized. You know, people are traveling, you know, a tremendous amount of people, you know, have the, have the means are, you know, going to Europe or going on trips that were postponed for years. So like Jim says, you know, I think we're starting to see more normalization. And then at the same time, we're starting to see events being planned. You know, we're starting to see a lot of meetings put back on the board. And I think we're, you know, we should continue to benefit, you know, from the reopening, you know, of the world and people getting back into, you know, the meeting mode and business travel and, you know, weddings, you know, happening left and right. So, you know, we obviously have been waiting for this for two years and I think we're finally starting to see it.

Thank you very much, and congrats. I'll pass it along.

Thank you. Thanks, Peter.

The next question comes from Andrew Wolfe of CL King.

Good morning. Follow-up on the deflation. Could you say which categories? I assume it's in beef, and not in poultry, which I think, because of avian flu still going up. And just how do you view that? I mean, I think, Chris, you had been saying, or maybe others, you know, too much beef inflation just, you know, at some point isn't good for the menu prices. So, I mean, I think a lot of people hear deflation and they think it's a negative, but, you know, how do you view it? Let me just ask you that one.

I mean, you know, continuing to go much higher from here, I think, you know, we all start to rethink, you know, what the crystal ball is going to say, how do, how do restaurants deal with it? You know, again, you know, Andy, we've been talking about this for over 11 years. Restauranteurs are, are entrepreneurial, right? To survive. It's a very tough business, you know, labor and rents and everything else coming at them. And they're going to figure out how to, you know, except for maybe steakhouses. And even they, they'll put, they'll figure out, you know, more six ounce versus eight ounce fillets. you know, instead of a 16 or 22 ounce steak, you know, you'll start to see more 14 ounce, you know, obviously you're seeing tons of skirt steak, you know, chicken, you know, chicken for our clientele, you know, obviously our lower casual, it hurts because there's only a certain price point, I guess, they think that their customers will pay before they see a slowdown, but when you go to a regular, you know, CW restaurant, that chicken is, you know, 22 to 30 something dollars on the menu, you know, a dollar, a dollar, a plate cost, uh, they'll figure out a way, you know, how to, how to, uh, earn that back, whether, you know, it's on sides or drinks or, uh, that that's their business. You know, they're, they're out to make a profit, right. Every day. So, uh, um, What I'm seeing is that they're getting more creative. They're figuring out how to recreate menus with less people. And our good customers are thriving. So, you know, after almost two years of, you know, of what we saw and closed downs, this is really exciting to see business back.

Chris, thanks for that color. And I wanted to just follow on also on the three acquisitions you talked about. how would they kind of fit in the strategically between, you know, standalone versus kind of fold in?

Yeah. Well, I mean, I think you've been hearing me now for years saying that, you know, we're, especially during the pandemic, you know, we made the decision to keep investing in people. So we, uh, we went out and got the best talent possible so we can continue to, uh, to be able to do acquisitions. Right. You know, you always, you always got to remember you need some, you need talent to run these businesses. Right. So, um, You know, we built the new building. Finally, you know, we moved in mostly in Southern California. So that gave us the ability to acquire somebody like University Foods, who will be folding in hopefully shortly. And, you know, there's nothing I like better than a good fold-in because they're the most creative because we're able to, you know, eliminate a lot of the overhead and, hopefully keep the sales and synergize the trucks and the sales teams. And usually that's a great return for us. So University is one. Alexa is another one. It's a competitor up in the Portland, Seattle area. It's a company that is a great business and competes with us. So besides eliminating a competitor, that one, we're going to eventually move into one building and we'll get all the synergies there. Okay, and the latest one, you know, Masters in, I call it Northern Florida, really gives us a great business to leverage our plan. We already have an Allen Brothers Seafood in Orlando, so we're already starting to look for sites to put a facility up that we can combine the two and create a powerhouse Allen Brothers Meat and Seafoods. You know, and that whole Tampa, Orlando area going all the way down, you know, to, you know, eventually probably the cutoff is Naples, where we split off with our other facility coming out of Opelika in Miami. So these are all great. You know, I'm hoping to do many, many more of these strategic fold-ins besides doing, you know, new categories and new markets. But these are really important for us.

Perfect. Thank you for that answer, and I'll yield to the next person.

Thank you. Thanks, Andy. The next question comes from Kelly Bernier of BMO Capital.

Hi, good morning, and congrats on a great quarter.

Thanks, Kelly.

Just wanted to follow up on a little bit of the seasonality topic. your Q4 EBITDA margin is typically the highest. And, you know, this quarter, obviously, at seven, I mean, is there any reason to think that Q4, you know, shouldn't be seven plus or just maybe help us understand some of the puts and takes of the margin dynamics in the back half?

You know, I think with the normal seasonality coming back and if trends continue the way they are that we're seeing them right now, I don't think there is any reason that, you know, we should expect anything different than we've seen in the past. The only thing I would say is that, you know, given some of the uncertainty around the macroeconomic environment, it's a little harder to have the visibility into the fourth quarter that we would normally have at this time of the year. But other than that, you know, assuming that trends continue the way they are right now, I wouldn't expect that it would be much different.

Okay, that's very helpful. And then obviously this year has just come in so strong and maybe there is some uncertainty on the macro front. But as you think about growth drivers next year, you mentioned the case volumes back over 2019 levels, but maybe hospitality still has some room to recover. Can you just help us understand the magnitude of what that might look like if and when it fully recovers?

Yeah, well, you know, again, in a perfect world, we'd stay at the pace that we're seeing of people coming back, you know, to dining out. And we would start to get really the piece that's missing, right? You know, more city business, more business lunch, more events, more especially in the fourth quarter, right, where, you know, it's usually our busiest quarter. Uh, and you get a combination of everything you, you know, you're going to get tourists in, you're going to get a lot of business, uh, meetings and, uh, holiday parties. So, uh, you know, uh, you know, when I look at, you know, where the business is coming from, um, uh, that piece is still missing. You know, we still don't have, you know, that great tourism in, uh, you All of Asia, really, if you go, I just came back from a big swing around the country and visiting a lot of our businesses. And you see casinos really busy, but you still don't see a lot of the Asian tourists that I normally see in my travels. So I think the airlines are limited. They don't have, I guess, the seats or the planes to bring more people. So optimistic that eventually they'll figure that out. You know, the cruise line business is coming back. So I think it's, you know, we're still at least a year away, you know, from any sorts of normality for travel and figuring out really, you know, if you catch COVID, is it five days away? You know, is it two days in the future staying away from work? So, you know, the crystal ball says that there's a lot of upside still to come. So, you know, when I look at the crystal ball, I'm like, well, there's a lot of upside to come and maybe you get a little slow down, uh, uh, in, in, uh, in spending and you still could be a net positive. And, you know, you've heard me say Kelly for, uh, I don't know how many years that, uh, you know, our, our, I think our strength is our, our laser focus on the customer sector that we sell to. Um, you know, we, we really stay on our mat. You know, we focus on, you know, the top, the top restaurants, the top upscale casual restaurants and hotels. And, uh, I have found almost for almost the past 40 years that that customer, that customer, our customers, customer, uh, always seems to, uh, go out to dinner or to have meetings or, or parties. Um, uh, it's, uh, It's been a great customer base for us, and I think that's why we said we wanted to dominate that customer base nationally. We did start to grow out of Metro New York. So you always see a slowdown in a catastrophe like the financial collapse or obviously COVID, but other than something of that magnitude, our sector seems to always do better than the rest of the hospitality sector. You know, we remain cautiously, you know, optimistic and bullish. And with these kind of opportunities to have tuck-ins into our facilities, especially our new facilities, it really gives us a very optimistic roadmap.

Okay, very helpful. And just another follow-up on the acquisitions. Just curious as you look at those, how many of those acquisitions really bring net new, you know, customers that you weren't serving or are you serving some of those customers and now you just are able to expand your, you know, line items with those customers or just help us understand a little bit more about what you're seeing there.

Yeah, sure. Well, you know, again, there's always a, you know, you need a good reason, you know, to write a check. So, yeah. We look for a company that either has a customer base that we don't have that gives us access now. The great thing about Chef is there's nobody like us. The bad thing is there's no one exactly like us to go by. It would make my job much easier. So, you know, buying, say, Masters right now in northern Florida gives us a company with a history of, you know, lots of loyal customers up and down, you know, the Gulf coast that, uh, not one of our strengths. So, uh, you know, the, uh, the plan as usual is to, uh, keep those customers happy and expand, leverage that sales force and continue to add to it. And that gives us hundreds of customers now that we can go sell, you know, our thousands of, uh, items that, uh, they don't carry. So, uh, You know, the other acquisitions, one is Synergistic up in Portland. They also give us many, many customers that we could sell our giant portfolio of products to. And I think that's what you're seeing, you know, the many years that we've been putting, you know, I call it more of a national chef warehouse together, is I think we've been able to get that hybrid growth that even before the pandemic where the industry might have been growing 1%, We were able to grow five, six, seven. I think because we've been putting together such great businesses that their portfolios coincide together and we're getting that uptick in the hybrid cell. And that's really what we, you know, our plan is to continue doing that as now we're adding more produce and we're adding more seafood. And, you know, as long as we continue, you know, we have 600 plus in our sales department and, you know, highly trained that we continue to train and add to giving them the knowledge to be able to talk to customers as consultants. I know every distributor says that, but it's extremely hard to do. And I think that our many, many years of investing in our test kitchens and our training kitchens and our trainers and our expertise, I think you're starting to see the payback for all those investments.

Super helpful. And then maybe I can just ask one more on inflation, deflation, and obviously a big topic. But I guess if you think about what's ideal for Chef's Warehouse going forward on the inflation, deflation front, what would that be? And do you think investors should at all worry about that? you know, some more deflation or could that be a positive for chefs? Just help us think through kind of the puts and takes given how much inflation we've had over the last few years.

Yeah. What I am seeing talking to many, many customers, I think you have obviously different types of clientele. So I think on the high end, I see them just, you know, passing along carefully a lot of the costs. in the menu. And then I see a huge amount of customers that are changing the way they do business and changing their menus. So they're not as courageous to continue to raise a lot of their menu costs. Again, they're maybe cutting portions. They're maybe changing the accoutrements on their entrees or different types of specials. So you know, they're, they're, you know, really smart restauranteurs are going to try to lead the customer, right? Like any other business. So, you know, they're going to mix it up. So on a, on a, say on a, on a seafood platter, you know, you might see if lobster is really expensive, you might see a smaller portion and you'll see maybe more shrimp or a scallop or whatever's more affordable, right? This way they can make their GPs. on a dish. You're seeing much more creative drinks. I'm seeing, you know, all different types. I always see more potato as prices go up. You know, potatoes fill you up, and no matter what, it's a lot less expensive than a prime steak. So, again, our customer base is extremely entrepreneurial, and they know their customer base. And I think you'll, you know, if you eat out as much as me, you start to really see, you know, It's a $38 entree where they think that's the spot that as high as they can go. And then you have a $75 steak on a menu on other places I've been eating and you can't get a reservation on Thursday, Friday, Saturday. So I think they're very creative and they're figuring out how to keep their establishments busy.

Thank you. The next question comes from Todd Brooks of The Benchmark Company.

Hey, good morning, guys. Congrats on the results on the quarter here. Hey, Todd. Two questions. Chris, three acquisitions closing in relatively short order here. I know you've talked about the environment for M&A being frothy for a long time here and maybe even frothier coming out of the pandemic. pace of closures do you see uh that picking up either a due to getting to more of a normalization in the recovery here or maybe because of the opening of the new facility in the west coast there have been some things in the hopper now that uh fold-ins particularly that now that that facility is up and running um it's getting these deals across the finish line

Yeah, so you're saying, I mean, the question is the pace of us being able to close deals increasing. Yes, correct. Yeah, I think absolutely. I mean, you know, these deals take time. You know, very few are, you know, one month and then you close. So, you know, some have been in talks for years. Some are in talks for six months. So, yeah. like I think you just mentioned, Todd, the pipeline is extremely frothy, you know, and we're really diligent in, you know, choosing, you know, who joins chefs. I would say that, you know, to close one, we look at 20 these days. But the industry, again, was consolidating before COVID. So, you know, the lack of being able to do deals, you know, very few deals got done during COVID. So, You know, you're seeing a backup. You're seeing a lot of the PE-backed roll-ups starting to come to market. But, you know, we kind of, I mean, there's always a surprise. There's always somebody new. But one of the advantages of being in the industry for so long is you kind of know where all the pieces are that really make sense. And I think we are focused on the companies that really, you know, Again, giving you a roadmap from the crystal ball, I continue to see us doing fold-ins, which are unbelievably synergistic. I continue to see us finding companies in territories that we're still not strong in to continue to grow CW as a national platform. And I continue to see new categories and some surprises coming up for sale that are fit into what we do. So after two years of, you know, the COVID closures and openings and starting to finally see that we have light at the end of the tunnel and, you know, you could start to forecast. And I think that's why a lot of these companies are coming to market now, because I think they have enough of a run rate to show that what their real business looks like, even though you have a lot of inflation in and, That's where the tricky part comes out, figuring out what it looks like in a more normalized world. But Jim reminds me every day, I don't think labor is coming down. So that cost is there. I don't know if gas will ever be two bucks a gallon again. So that input is there. Real estate costs for facilities, that's way up. So I think you do have a built-in uptick in the cost of business. And so products will, you know, always be more expensive than they were, I think, pre-COVID overall. I mean, now you've got a crazy war, so that's not helping. So that's really the tricky part, trying to, you know, take a look at a business that's coming up for sale and say, well, what does it look like in a more normalized time and what is the new norms? But the pipeline, I think, is going to remain extremely frothy. And, you know, you just have to be careful and diligent and, you know, do the deals that make the most sense.

Okay, great. Thanks, Chris. My follow-up, and Chris, you talked about this earlier, that Chef continued to invest during the pandemic and made the operation stronger. I know you brought a lot of sales talent. on board during the pandemic from competitors and have kind of ramped them into the operation. Are we starting to see the fruit of it? I mean, you talked as one of the big drivers in the quarter, new customer wins. That investment, how is it manifesting itself? The organic growth is really strong in the quarter. Is this kind of your return on spending that money during the pandemic starting to bear real fruit for the model, both in revenues and margins?

I think so. Besides sales, it's really operations that has really stepped up in a brutally difficult environment for labor and is really carrying us through and allowing us now to get that profit that falls to the bottom line by figuring out how to operate better and get the efficiencies of the crew and doing more with less. So the investments in operations and people and leadership combined with that sales talent that we've been able to acquire. And I still think we're really in the maybe third inning of really seeing the benefits of all the investments that we're making in talent. And now the investments in facilities will start to pay fruit over the next four years. So as we're able to grow in Florida, where we're going to have two new facilities and obviously Southern California, you know, that building, you know, we can quadruple our business or more. We have a new one coming up in San Francisco that we're going to consolidate, make San Francisco. I can keep going on and on around the country. I think, you know, our knowledge of the business, the expertise of the team and the continuing recruiting, you know, we created the office of the talent officer. you know, I think just at the right time, you know, because we obviously as a growing company, we continue to need that talent. So, you know, that focus of really looking for the best of the best, I think is going to pay lots of dividends over the next four or five years.

And then just one final quick follow-up. What's the timing on the new Florida facility coming on later this year?

Six months ago.

Todd, we expect to move in in the back half of the year.

Okay, great. Thanks, guys. Thank you.

Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the conference over to Chris Pappas for closing remarks.

Yep. Well, we thank everybody for joining our call today. Couldn't be prouder of the CW team. They had a great quarter. All their hard work is showing up in the numbers. And we look forward to sharing our next quarter and for you joining us again. So thank you very much.

Thank you. Well, ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect your line.