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Operator: Greetings and welcome to The Chefs’ Warehouse Fourth Quarter 2022 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.

Alex Aldous: Thank you, operator. Good morning. everyone. With me on today’s call are Chris Pappas, Founder, Chairman and CEO; and Jim Leddy, our CFO. By now you should have access to our fourth 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 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 discussing 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.

Chris Pappas: Thank you, Alex, and thank you all for joining our fourth quarter 2022 earnings call. Fourth quarter business activity continued the return to our normal seasonality. Heading into the year-end period, celebrations and event-related business continued to build upon emerging third quarter trends. We are extremely proud of our team’s execution during the fourth quarter, especially their ability to overcome challenging weather across our markets in mid to late December. Our people continue to drive the Chefs’ Warehouse high quality product and high touch service model to our 40,000 plus customers and we are grateful to each and every one of them for contributing to a strong performance rounding out 2022. A few highlights from the fourth quarter, as compared to the fourth quarter of 2021 include, 22.7% organic growth in net sales.

Specialty sales were up 34.2% organically over the prior year, which was driven by unique customer growth of approximately 18.9%, placement growth of 14.5% and specialty case growth of 19.1%. Organic pounds and center-of-the-plate were approximately 15.2% higher than the prior year fourth quarter. Gross profit margins increased approximately 116 basis points. Gross margin in the specialty category decreased 91 basis point as compared to the fourth quarter of 2021, while gross margin in the center-of-the-plate category increased a 133 basis points year-over-year. Jim will provide more detail on gross profit margins in a few moments. As previously announced during the fourth quarter, we are excited to enter the dynamic markets within the United Arab Emirates, Qatar and Oman with our acquisitions of Chef Middle East.

We look forward to supporting Steve Pyle and the CME team, as we expand our capacity in the region, grow categorically and leverage our combined strength over the months and years to come. In addition to our expansion outside North America, during the quarter, we added a few key components to our east coast markets with the addition of the Guaranteed Fresh Produce Company and Downey’s seafood, Guaranteed Fresh is a specialty produce company located in Cape Cod of New England serving primarily independent restaurant. We anticipate building their operations into our New Bedford Massachusetts Produce and Specialty Operation in the coming months. Downey’s seafood is a fresh seafood processing company located near our flagship Chefs’ Warehouse facility in the Bronx, New York.

Adding fresh seafood in the New York Metro market provides us with another key step in building out our growing center-of-the-plate capabilities, as we continue to add categories and customers in these key markets. In the Southern New Jersey and Philadelphia market, we recently signed a lease for a 175,000 square foot facility. This new building will consolidate service to the Greater Philly area and the Southern and Central New Jersey part of our business. Once fully operational this will allow for a more efficient distribution model in the region and will provide additional capacity for growth in our New York Metro area and Mid-Atlantic markets going forward. Our new facility in Florida is substantially complete and we expect to move in by the end of the first quarter of 2023.

2022 was a stellar year for our company for our people and for our customers and supplier partners. During the pandemic years of 2020 and 2021, our teams continue to execute at a high level to ensure that we brought the highest quality products to the market and maintained a high-touch delivery for our customers. We kept the balance sheet strong. We got ahead of the labor constraints associated with the snapback in demand and we restarted investment in talent and capital deployment to build out our L.A. and Florida expansion facilities. In 2022, we started the process of mining these investments and our teams delivered strong organic growth complemented by adding key acquisitions to multiple domestic markets as well as our foray into the global specialty food distribution arena.

As we continue to grow, Chefs will remain the most unique food service partner to upscale independent establishment in the world’s top artisanal food producers. We will continue to enhance our business model as a family of brands and companies laser-focused on the high-end with an unmatched hybrid sell and service model. We will continue to make investments in facilities and market expansion, operational technology and our customer-facing digital platform to provide improving efficiency for all CW stakeholders. Our people remain our greatest asset and source of our differentiation from the rest of the food service industry. We are focused on adding, retaining and developing the best culinary and operational talent in the markets we serve. Our teams have never been more excited to drive Chefs’ Warehouse growth into 2023 and beyond.

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?

Jim Leddy: 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 December 30, 2022 increased approximately 41.8% to $791.3 million from $558.3 million in the fourth quarter of 2021. The growth in net sales was a result of an increase in organic sales of approximately 22.7% as well as the contribution of sales from acquisitions, which added approximately 19.1% to sales growth for the quarter. Approximately, 6% of year-over-year sales was due to the 14-week fiscal quarter in 2022 versus a 13-week fourth quarter in 2021. Net inflation was 7.1% in the fourth quarter consisting of 14.1% inflation in our specialty category and year-over-year inflation of 0.4% in our center-of-the-plate category versus the prior year quarter.

Gross profit increased 49% to $187.3 million for the fourth quarter of 2022 versus $125.7 million for the fourth quarter of 2021. Gross profit margins increased approximately 116 basis points to 23.7%. While year-over-year inflation was broad-based across most specialty categories average pricing was up moderately at approximately 2% versus the third quarter of 2022. In aggregate center-of-the-plate pricing was essentially flat versus the prior year quarter. Selling, general and administrative expenses increased approximately 40.4% to $153.4 million for the fourth quarter of 2022 from $109.2 million for the fourth quarter of 2021. The primary drivers of higher expenses were higher compensation and benefits costs, facility costs and distribution costs associated with year-over-year volume growth.

Adjusted operating expenses increased 43.7% versus the prior year fourth quarter. As a percentage of net sales, adjusted operating expenses were 17.3% for the fourth quarter of 2022 compared to 17.1% for the fourth quarter of 2021. Operating income for the fourth quarter of 2022 was $29.8 million compared to $15.8 million for the fourth 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 $4.3 million for the fourth quarter of 2022, compared to $3.2 million for the fourth quarter of 2021. Please note that our fourth quarter effective tax rate was 78.6% due to the non-deductibility for tax purposes of the $14.1 million debt extinguishment loss associated with the refinancing of a portion of our $200 million convertible notes due in 2024.

Our GAAP net income was $1.2 million or $0.03 per diluted share for the fourth quarter of 2022 compared to net income of $8.4 million or $0.22 per diluted share for the fourth quarter of 2021. On a non-GAAP basis, we had adjusted EBITDA of $50.1 million for the fourth quarter of 2022, compared to $30.2 million for the fourth quarter of the prior year. Adjusted net income was $18.8 million or $0.48 per diluted share for the fourth quarter of 2022, compared to $10.2 million or $0.26 per diluted share for the prior year fourth quarter. Turning to the balance sheet and an update on our liquidity. During the fourth quarter, we completed the issuance of $287.5 million convertible notes maturing in December of 2028. The proceeds of the notes were used to repay approximately a $158 million of the $200 million convertible notes maturing in December of 2024, pay fees and expenses associated with the transaction and we retained approximately $120 million in cash on the balance sheet.

Interest expense for the fourth quarter of 2022 was $24.3 million, compared to $4.2 million in the fourth quarter of 2021. The increase was driven primarily by the $14.1 million loss on debt extinguishment, higher levels of outstanding debt balances and higher floating interest rates versus the prior year period. At the end of the fourth quarter we had a total liquidity of $294.6 million comprised of $158.8 million in cash and $135.8 million of availability under our ABL facility. As of December 30, 2022, net debt was approximately $507.1 million, inclusive of all cash and cash equivalents. Turning to our full year guidance for 2023 based on the current trends in the business, we are providing our full year guidance as follows. We estimate that net sales for the full year of 2023 will be in the range of $2.85 billion to $2.95 billion; gross profit to be between $684 million and $708 million and adjusted EBITDA to be between $180 million and $190 million.

Our full year estimated diluted share count is approximately 45.2 million shares. We currently expect our senior unsecured convertible notes to be dilutive 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?

Operator: Thank you. We will now be conducting a question-and-answer session. Our first question is from the line of Kelly Bania with BMO Capital. Please go ahead.

Kelly Bania: Hi, good morning, and congrats on a great year. Just first housekeeping question for the model. The 6% top line impact from the extra week, did that impact both organic and acquired sales by the same magnitude? And do you have an estimate on just the overall profit impact to EBITDA for the fourth quarter from the extra week?

James Leddy: Yeah. Hey Kelly thanks for the question. Yeah, the 6% was just overall revenue. So in that was both organic and any acquisitions that we had — that we didn’t have in 2021. So, it’d be a similar mix of that. And then, in terms of the second question, in terms of the impact of profitability, I think the fourth quarter was pretty much how we expected it to play out the first part of December, the holiday season and the event season was just as strong as we had kind of indicated on our third quarter call, where we had more visibility into the bookings et cetera. So that played out. I think what was different was generally in a normal year the 52nd week of the year which is usually the week of Christmas is generally weak.

People are generally celebrating at home. And so we model that in. The 53rd week, we had two weeks of that at the end of the year. And so we did lose a little bit of operating leverage, but it was still a very strong fourth quarter for us. And a good December except for that final 53rd week, which generally falls in the first quarter and is a fairly low-volume week as well.

Kelly Bania: Okay. That’s helpful. And I guess, there was a comment in the release about seasonality and that seems to be maybe getting back to more normal. And I guess, I just wanted to ask about the 2023 outlook and what you’re thinking on seasonality, because the way that we stay at about 85% of the company EBITDA is generally generated in the last three quarters of the year. And just curious if you can comment on all — comment at all on how you think about the seasonality today, if that historical pattern is maybe a good place to base expectation, or if there’s anything that’s really changed with seasonality as particularly with all the recent M&A that’s flowing through?

James Leddy: Yeah. I would say — I’ll let Chris comment as well. In terms of — for your modeling purposes you’re right about 15 or high-teens type of EBITDA is generated in the first quarter because that’s usually our weakest quarter. And then, you have — the second quarter and the fourth quarter are generally our strongest and the third quarter is kind of the middle, and you get that kind of 80% to 85% of our EBITDA generation is in the final three quarters of the year. I’d say the only change, and it’s not going to be a material change to that is that Chef’s Middle East has their strongest periods in the fourth quarter and first quarters. So basically our winter and our first quarter which are the weakest they have their strongest and because of their summer being so extremely hot and people generally leave for a little while there.

Their weakest periods are during our second quarter and our third quarter. So that’s the only change, but I don’t think it materially changes the percentage ranges that you just mentioned.

Kelly Bania: Yeah. Perfect. That’s really helpful.

Chris Pappas: Yeah. And Kelly just a little color, I mean, I think you asked about going — coming into the first quarter which is our weakest quarter, but we actually except for the first week of January which is always one of our work week getting back to after the holidays. And as Jim said, even though we had that extra week in last year’s numbers that week to us it’s almost like a throwaway week, because it’s a week of travel, or it’s a week of regrouping, and it fell in the fourth quarter, so we really didn’t get much out of it. But first quarter going into — the 1st January going into February pretty strong, we’re all looking at how does, this year really start to shape up coming out of 2022 and no big surges of Omicron. And we are really pleased to see that spending continued, and a lot of events finally are happening, a lot of conferences are happening, and business travel is picking up. So we’re very pleased to see how the New Year started.

Kelly Bania: Perfect. That’s helpful. And I just had one more that I wanted to go back to from the third quarter. And I believe Chris maybe it was you that I had made a comment about how the business has changed from a gross profit margin business to a gross profit dollar business. And I thought that was very interesting because I think there are some investors who are just broadly worried about the impact of a lower inflationary environment and how that could impact profitability. And I thought you could just maybe elaborate on that comment and how you’re thinking about that. Obviously, we have your guidance. But just any more color on that topic I think might be helpful.

Chris Pappas: Sure. So the way this industry works is that as prices are going up sometimes you can’t pass along the increase for many reasons as fast as you would like, so there’s sometimes a lag. And then the opposite effect happens on the way down, you try to hold on to price as long as possible. If you have a big shift, if you have a deflationary environment, you’re usually able to capture a little bit more margin. So my comment about look at gross profit in an inflationary environment, look at gross profit dollars versus margin, because that’s really what counts, right is how much gross profit dollars and you get your leverage on your overhead. And I think that’s what we did see during €“ as we’re experiencing inflation, excess inflation, right usually 2% €“ 3% was inflationary times in the same industry, never mind what we’re seeing today.

As long as you can capture those dollars, the margin becomes a little less important. So of course, you would like to €“ if you were at 25% and you can keep 25% you’re making a lot of money because it’s not really costing you more to move that box now that it went from $30 to $40. And I think that’s where we’re seeing since we’re really not a contract company. We don’t go out with long-term contracts to customers and get locked into a certain dollar per box. It’s a different part of the industry. It’s huge. It’s a gazillion billion-dollar industry servicing a lot of the chains and doing a per box kind of contract. That’s not who Chefs is, right? We service mostly the independents and our prices move. So in a deflationary environment, if we started to see some deflation I think you would see the opposite of what’s happening now, you’d probably see margins going up and keeping those gross profit dollars kind of where they are right now.

So we’re making 25% and now we’re making 24%. I mean that we’re making 27% on a less expensive box, that’s kind of our hedge to keep our profitability kind of equal.

Kelly Bania: Very helpful. Thank you very much.

Chris Pappas: Thanks, Kelly.

Operator: Thank you. Our next question is from the line of Alex Slagle with Jefferies. Please go ahead.

Alex Slagle: Thanks. Good morning, guys.

Chris Pappas: Hey, Alex.

Alex Slagle: Wondering if you could just follow up on previous questions comment a little bit more on the demand environment and what you’ve observed to start the year out from a high-level perspective. I mean it seems like the underlying traffic trends in the industry are holding up fairly well but it’s hard to read through kind of all the weather and the Omicron lap, crosscurrents and can you just offer a little bit more perspective there and maybe what you’re hearing from customers, whether it’s a sense of optimism or are they getting more cautious as they look out ahead?

Jim Leddy: I think it’s where you are in what markets you’re in. We’re very pleased at what we’ve seen. So I think the better weather in parts of the country where we usually have really cold weather, I always say, it can’t hurt. But what we really realized, a major snowstorm is very disruptive to the numbers obviously. But January is January. It’s people going back — kids going back to school, and people really busy with a lot of other obligations. So even with good weather, it’s not a great — it’s not going to be a great quarter compared to the rest of the year, right? There’s not as much celebratory events going on. I mean, there are all conferences. You just had Valentine’s Day. But we always say the first quarter, is the first quarter, but we are very pleased so far what we’re seeing.

The consumer, the business traveler is spending. So we’re optimistic that that does continue. I know in the press, there’s all this back and forth, are we going into recession or are we? And we are blessed, with I would say, we service the top 10% of the earners in the world or the corporates that are traveling and entertaining. So, we’re not seeing anything as of this point, any change in behavior. So I think the good weather can’t hurt. But January, February no matter what it is, it’s not like it’s the second quarter or the fourth quarter.

Alex Slagle: Okay. And on the food cost and inflation, I mean it looks like your two and three -year stacked inflation levels have been very consistent all through 2022. And curious, if the current cost levels are holding into the first quarter? And if you have a best guess on, what the year-over-year inflation might look like, here in the first quarter the outlook for the year?

Jim Leddy: Well, as you can see that throughout 2022, the year-over-year has just got sequentially lower. We started out the Q1, with 22% year-over-year aggregate inflation. And I think, we’re reporting 7%, I think sequentially versus the third quarter, inflation was low single digits somewhere between 2% and 4%. So I think, what we’re starting to see is, that the deflation in center-of-the-plate has kind of leveled off. I know that prime prices have come down, but that’s more seasonal. Coming out of the holiday season, when prime prices are high generally, you go into January and February, they come down and they follow more of a seasonal pattern. And certain parts of the specialty categories, have been extremely inflated like eggs, and certain dairy products.

Those have started to somewhat normalize. They’re still much higher than they were in say, 2019. So I think, you’re — what you’re starting to see is, prices starting to level off. And when you compare the year-over-year, you just — you’re comparing to higher prices. So naturally, you would expect the year-over-year to start to moderate.

Alex Slagle: Okay. Thanks.

Operator: Thank you. Our next question is from the line of Peter Saleh with BTIG. Please go ahead.

Peter Saleh: Great. Thanks. And congrats on a great year. I wanted to ask about new restaurant formation or development, and what you saw during calendar 2022. And just if you could, talk a little bit about your expectations for 2023, and maybe how your growth is coming to be? Is it more from existing customers, further penetration, or are you seeing just a lot more development that you’re able to pick up a lot of new business.

Jim Leddy: Yes. I think, it’s starting to normalize kind of — I think, you see in our numbers, the organic growth, the case growth is kind of — I don’t — I hate to use the word normalized, because I don’t know what normal is anymore. But our really good customers, we were really reviewing this morning. It’s — the good customers, are really doing well right? So, again, if you happen to be in a city that — in an area that just hasn’t come back, unfortunately, you are suffering. But if you are in a good suburb or in Florida or parts of Texas, or even San Francisco a lot of the news is all about how many parts of San Francisco, just haven’t come back, right? People haven’t come back to the office. But €“ so the business has kind of moved around, but we are seeing major openings.

I mean, we’re seeing mega restaurants, high-volume restaurants, some of the highest grossing restaurants now in the country are opening. So the appetite for consumers and businesses to always go to that new place, I think is stronger than ever, especially coming out of COVID, where there wasn’t a lot going on. A lot of them have been delayed and they’re starting to open. I think they are opening as labor is coming back. I mean, it’s not ideal labor situation, but I think there’s enough labor coming back into the market, where we are starting to see a lot of openings. And we’re seeing small openings and neighborhoods, and we’re seeing the big ones where the volume is Las Vegas and Miami and Texas, even New York, and parts of California, it’s starting to drive a lot of our growth.

Peter Saleh: Thank you for that. And then just on the freight cost, I think last year, there was a lot of discussion around freight costs really skyrocketing and there was some waste associated with that. Can you talk a little bit about what you’re seeing on the freight cost and your expectations for 2023? Have those prices really come down significantly?

Jim Leddy: Yeah, they have. They have definitely moderated. I think on the West Coast, they started to come down really midyear last year. It was more from Europe that you’re still seeing in the back half of 2022 you’re still seeing some of the elevated prices. But €“ what we’re seeing now is that freight rates are coming back down towards pre-COVID levels. They’re not completely there, but they definitely have moderated.

Peter Saleh: Thank you very much.

Jim Leddy: Thanks, Peter.

Operator: Thank you. Our next question is from the line of Andrew Wolf with C.L. King. Please go ahead.

Andrew Wolf: Thank you, and good morning. Chris, I think this is for you. I wanted to ask about the small acquisitions you just announced in, I guess, with Sid Wainer, and joining Sid Wainer and Produce from the Cape, and then seafood and the Bronx, could you maybe give us a little description of kind of the strategic €“ not just the purpose, but also the evolution like you’ve done similar acquisitions over the last few years, and particularly in seafood and more late €“ recently in Produce. What are these €“ how are these working out strategically? Are they giving you the kind of synergies you wanted with getting the case on the truck that’s already going to a customer, getting your new customers, expanding your penetration with existing. Is that sort of delivering kind of the impacts you had expected sort of on the deals you’ve done in the last few years?

Chris Pappas: Sure. Great question. I think you’ve often heard me say that, if we could do a tuck-in a day, I would do it, because they’re low risk so accretive because basically what we’re taking is the customer base some of the sales team, and if they have some really expertise obviously, we’re always looking for talent. But eliminating a lot of their trucks and facilities a lot of that drops to the bottom line, even if you lose 20%, 30% of the business. So we continue to hunt for those type of small businesses that we can fold in. So in the case of New England, it’s a great business. It serves an area that we have a lot of overlap. So it’s not farfetched to model and say, we can eliminate many of the duplicate routes and consolidate them.

We can leverage the sales staff, we could take their sales staff, and now give them the 50,000 items that flow through Chefs’ Warehouse for them to sell. So it’s a low-risk acquisition, with a tremendous upside. And so that would be a typical type of folding that we would do in a market, especially if we have the occupancy availability in the facility, and why you see us building all these new buildings to accommodate what we think is going to be a continued consolidation of the industry. The little seafood companies and other companies that we’re acquiring an area like New York, Metro New York, I always said New York is going to be at least a $1 billion business for Chef. We still don’t have an actual Alumbrera the stake in seafood. So I think we’re starting to take the steps of — there’s really nobody large for us to buy.

So when the opportunity comes to acquire really good small businesses, we’ll start to accumulate them and then eventually put them either in a facility we own or build a new one and we’ll consolidate them to give us enough volume where it makes sense to have the staff, the cutters, right, and part of the overhead to really attack a market, I think Allen Brothers stake in seafood in New York is a $0.5 billion business. So it’s kind of the first steps to kind of get going, because right now we’re feeding markets like New York from facilities that are a little outside the area. We have facilities in Maryland. We have facilities now in New England and it works fine. We ship stuff from Chicago that’s more custom cut or from other parts of the country that, where we do have these processing facilities that do something special, but long-term a lot of these markets need their own special processing centers.

So I think you’ll continue to see us accumulating small businesses, and then consolidating them and getting the leverage and getting the synergies.

Andrew Wolf: Thank you. That was really helpful. The other question I wanted to ask on the cost structure. It did contract year-over-year. Obviously, a lot of inflation in there you would expect that. But to what extent did the extra week with kind of low sales kind of negatively impact operating expense — the expense ratio. I guess, more generally, like how are you feeling about your labor productivity trends and the metrics there as we head into 2023?

Jim Leddy : Yes. Thanks, Andy. Yes, I mean, I think, yes, I think our adjusted operating expense was maybe a couple of basis points higher than the prior year. Part of that was that 53rd week and the lack of leverage on it. Once again, I’d just go back to — it was a very strong quarter and a strong December. It just happened that that fiscal week fell into there. We also had some kind of excess expenses related to our self-insurance programs that are not usual. We’ve had that before. When you have self-insurance programs from a medium to long-term perspective, they’re more economical than full insurance programs, but you have a little more volatility and lumpiness. And we had some of that in the fourth quarter, so you had those two things together.

They were the main reason that our EBITDA margin wasn’t closer to 7% with more closer to 6.5%, and that flowed through mostly on the OpEx side. But overall a very strong quarter, really good top line and a good year — good quarter to round out the year.

Andrew Wolf: Okay. And just on the kind of the metrics side, I mean, how are your operations people kind of — what kind of numbers are you seeing on the metrics in terms of sequential, or however you guys are looking at kind of meeting potatoes, fix per hour type of metrics and that kind of thing? How do you think that’s regressing as your new employees get trained up? And I guess you’re adding new employees from acquisitions who may not know — may not be as productive, I guess, is kind of maybe a little complex. But just overall how are the operations progressing as hopefully the supply chain is continuing to normalize?

Jim Leddy : Yes. I think we’ve been progressing very well. I think you’ve seen a lot of productivity improvement from us and from other companies in the industry throughout the come back out of COVID. Everybody is doing more with less. I know we have a great operations team. We’re constantly implementing new loading and picking and warehouse technology process. We are constantly implementing new loading and picking and warehouse technology process. We are constantly improving our distribution software and technology. And so we have an operations team that travels around the country, educating and implementing our operators on these improvements. We’ve already started to work with our new partners in the Middle East on various pieces of their operations.

And then — Chris talked about the facilities and building new facilities and doing tuck-in acquisitions. We get leverage as we grow by consolidating companies into our facilities, consolidating routes and that allows us to leverage a fixed cost corporate infrastructure as we bring those companies on to our backbone — from a systems perspective, from all of the support functions perspective we get to leverage that as we grow as well.

Andrew Wolf: Got it. Thank you.

Jim Leddy: Thank you, Andy.

Operator: Thank you. Our next question is from the line of Todd Brooks with Benchmark Company. Please go ahead.

Todd Brooks: Hi. Thanks. Good morning to you both and congrats on a strong finish to a good year.

Chris Pappas: Thank you.

Todd Brooks: You’re welcome, Chris. Couple of quick questions. On the M&A side one for Jim and one for Chris. Jim now that you guys announced Guaranteed and Downey’s with the call here. Can you give us a sense for what you’re carrying into Fiscal 2023 as far as incremental revenue growth from acquisitions that have already been completed?

Jim Leddy: Yes. I think the wrap impact of the acquisitions are roughly about $200 million that may not be exact, but that’s kind of a rough number. I think, the full annual impact of all the acquisitions that we did in 2022 that’s including capital seaboard because we did them on the first fiscal day of 2022 was roughly between $400 million and $500 million. So it’s not a little less than half of that.

Todd Brooks: Okay. Great. Thank you. And then Chris just your view on — I always love to hear your take on the M&A pipeline out there. And is there anything changing as far as pace of deals on sticking or maybe magnitude of deals that are in the pipeline now as you’re looking ahead maybe the next 12 months?

Chris Pappas: Yes. I mean, as predicted coming out of COVID, it’s the Wild West. You just have to make sure you don’t walk into that the wrong little town where you get shot in the back. It’s an industry that’s going to keep consolidating for many, many reasons, right? The cost of new warehousing is very expensive. A lot of these businesses are second sometimes third generation and they don’t see where they will continue to grow. So they’d rather diversify their wealth and they’re selling. So it’s just really being very picky for us and companies that fit our culture and fit into our long-term not just our short-term to get a spike. So it’s extremely frothy. You just have to be very careful because coming out of COVID the numbers are a little — they’re not typical where you see a company growing at 2% or 3%.

Some companies have had tremendous growth for many reasons with inflation. So you got to somehow see the forest through the trees. And thank God, we have a tremendous amount of experience having done over 40-plus acquisitions in the last 10 years. And we’re just being very diligent and careful who we bring into the Chef’s family portfolio.

Todd Brooks: That’s great. And then following up on that you’ve owned Chef Middle East now for a number of months. You’ve been through a major event in the region obviously with the World Cup just excitement for maybe what the Chefs’ Warehouse is going to bring to that property as far as revenue synergies and unlocks and what you think that business can be? I think it was kind of at the midpoint maybe around $150 million type of business when you bought it. But what’s that asset worth now that you gain to know it better and what you can bring to bear to really start to grow that business?

Chris Pappas: Yes. Again it was a very bold move for us to buy somebody so far away when we have so much opportunity and so many things to do here in North America, but it really was one of a kind. It was a company that had great pedigree, great management culture that really fit right along with who CW is and an appetite to really grow. We had a great management team that wanted to grow. They were set up for growth and they just needed the backing I call it a partner that believes in their vision. So, they’re not a processor. We think Allen Brothers steak in seafood is going to do great. In that marketplace we think there’s lots of room for them to continue to grow and expand our portfolio of companies. We bring so many new suppliers to them.

We bring a whole company that’s been in this business for so long. So, we think that they do need space. They’re kind of maxing out in their major facilities. So, we’re going to continue to add to their building. And we feel very confident that they will double that business in the not-so-distant future and be a great Chef’s Warehouse.

Todd Brooks: Great. And then one last one and I’ll jump back in the queue. Jim when you provided the initial guidance for fiscal 2023 at during the ICR conference. I think you said when you were contemplating the revenue guidance you were baking in an assumption for deflation of 5%. Given we’ve passed another quarter here, given maybe some of the news out about the herd sizes in the US and what it may mean for beef prices. How are you feeling about that 5% type of deflation? Are you feeling more confident potentially that the setup is there to maybe beat that in fiscal 2023? Thanks.

Chris Pappas: I don’t know. I think Todd in this environment it’s very difficult to predict inflation. I think what we actually said with kind of merged your comments at ICR was that we had risk adjusted our range in case there was kind of that mid-single-digit type of deflation. I think right now where we see January and February playing out I would say that while we’re not changing our guidance we’re definitely trending towards the upper end of the guidance. Definitely too early in the year to update it based on that. But in terms of inflation I’ll just go back to my comments earlier we kind of see it more normalizing as we go through 2023. Now, what that means from the year-over-year comps all that depends on what it’s comparing to in 2022 and you saw higher prices in the first half of 2022 and then kind of moderating in the back half of 2022.

So, the year-over-year numbers will depend on that. I think more than significant changes in current pricing. I think you’ll start to see kind of more mid-single-digit type of sequential or low single-digit type of sequential changes in aggregate. I think there are certain categories like I mentioned earlier like eggs and dairy that dairy products that have recently gone through the roof because of things like the Avian flu I think those types of categories will start to moderate. But in general, I think we’ve seen a resetting higher and you’ll start to see more normal inflation dynamics going forward.

Todd Brooks: That’s super helpful. Thanks to you both.

Chris Pappas: Thanks Todd.

Operator: Thank you. As there are no further questions at this time, I would like to turn the floor back over to Chris Pappas for closing comments.

Chris Pappas: Sure. Well, we thank everybody for joining us on our earnings call. We are very excited about the opportunities in 2023 and couldn’t be prouder of the Chef’s team. They’ve really executed in 2022 and we look forward for them to continue to do great things for our shareholders and for many years into the future. Look forward to talking to you again in our next earnings calls. Thank you.

Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.