Chefs' Warehouse, Inc. Q1 FY2022 Earnings Call

Greetings and welcome to The Chef's Warehouse First Quarter 2022 Earnings Conference Call. A question-and-answer session will follow the formal presentation. 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.

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 first 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 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 first quarter results in detail. And then we will open up the call for questions. With that, I will turn the call over to Chris Pappas.

Thank you, Alex. And thank you all for joining our First Quarter 2022 Earnings Call. As expected, 2022 started off with seasonally moderate business activity in January, which was also slightly impacted by the Omicron Variant. Revenue trends grew steadily in February and March across our markets as consumer demand for dining out continued to show strength. Moderately improving labor markets facilitated new customer openings and increased restaurant capacity. This combined with milder winter weather in the northeast contributed to weekly sequential sales improvements heading into quarter end. A few highlights from the first quarter as compared to the first quarter of 2021 include: 62.9% organic growth in net sales, specialty sales were up 70.3% organically over the prior year, which was driven by unique customer growth of approximately 29.4%, placement growth of 41.6%, and specialty case growth of 47.3%. Organic pounds and center-of-the-plate were approximately 26% higher than the prior year first quarter. Gross profit margins increased approximately 191 basis points. Gross margin as a specialty category increased 213 basis points as compared to the first quarter of 2021, while gross margin in the center of the plate category increased 111 basis points year-over-year. Jim will provide more details on gross profit margins in a few moments. In April, our team completed a number of key projects that will contribute to our future growth and profitability in the coming months and years. On the distribution center front, we completed the retrofit of our new 230,000 square foot facility in Southern California. We have begun the process of moving in and expect to be fully operational in May. This facility will combine specialty and produce operations with meat and seafood processing capability within the same footprint. Our new South Florida distribution center will operate with a similar design and we expect to begin operations in the third quarter of this year. On the technology and digital front, we introduced our new chef's warehouse website and mobile app to a select group of customers. And we will go live with a full-scale roll out over the next few weeks. This digital platform provides an improved online experience for customers as well as enhanced data analytics and tools for our teams focused on driving sales and customer satisfaction. I would like to thank our team members, our customers, and our supplier partners who have contributed to a successful start to 2022. All of the Chef's stakeholders have been key players in our ability to navigate the fluid dynamics, coming out of COVID, including supply chain challenges, volatile food inflation, and an ever-evolving labor environment. I'm grateful to all the people who make up Chef's Warehouse and their ability to add key talent and partners while also strengthening our position in the industry. We're proud to announce that we have recently been certified by the renowned independent survey company, Great Place to Work. They are a global authority on workplace culture and deploy a rigorous methodology to gather and evaluate employee feedback focused on identifying companies that have built high trust and high performing cultures. We have never been stronger or more focused or more excited about our future. We look forward to performing as the leading national marketer and distributor of specialty food products to the chef-driven customer base that continues to grow with Chef's Warehouse. With that, I will turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity.

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 March 25, 2022 increased approximately 82.8% to $512.1 million from $280.2 million in the first quarter of 2021. The growth in net sales was a result of an increase in organic sales of approximately 62.9%, as well as the contribution of sales from acquisitions, which added approximately 19.9% to sales growth for the quarter. Net inflation was 21.7% in the first quarter, consisting of 14.9% inflation in our specialty category and inflation of 28.5% in our center-of-the-plate category versus the prior year quarter. Gross profit increased 99.4% to $117.5 million for the first quarter of 2022 versus $58.9 million for the first quarter of 2021. Gross profit margins increased approximately 191 basis points to 22.9%. Year-over-year inflation was broad-based across all specialty and center-of-the-plate categories. Selling general and administrative expenses increased approximately 37.2% to $110.1 million for the first quarter of 2022 from $80.2 million for the first quarter of 2021. The primary drivers of higher expenses were higher compensation and distribution costs associated with year-over-year volume growth, route expansion, and increased fuel costs. Adjusted operating expenses increased 40.4% versus the prior year first quarter, and as a percentage of net sales, adjusted operating expenses were 18.8% for the first quarter of 2022 compared to 24.4% for the first quarter of 2021. Operating income for the first quarter of 2022 was $6.3 million compared to an operating loss of $20.1 million for the first 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 $0.5 million for the first quarter of 2022 compared to an income tax benefit of $7 million for the first quarter of 2021. Our GAAP net income was $1.4 million or $0.04 income per diluted share for the first quarter of 2022 compared to a net loss of $17.9 million or $0.49 loss per diluted share for the first quarter of 2021. On a non-GAAP basis, we had positive adjusted EBITDA of $21.5 million for the first quarter of 2022 compared to negative adjusted EBITDA of $9.5 million for the prior year first quarter, adjusted net income was $3.6 million or $0.10 income per diluted share for the first quarter of 2022 compared to adjusted net loss of $17.1 million or $0.50 loss per diluted share for the prior year first quarter. Turning to the balance sheet and an update on our liquidity, at the end of the first quarter, we had total liquidity of $205.6 million comprised of $79.4 million in cash and $126.2 million of availability under our ABL facility. As of March 25, 2022, net debt was approximately $319.1 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 financial guidance to be as follows. We estimate that net sales for the full year of 2022 will be in the range of $2.13 billion to $2.3 billion gross profit to be between $500 million and $524 million and adjusted EBITDA to be between $103 million and $112 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. We will now be conducting a question-and-answer session. Our first question is coming from the line of Alex Slagle with Jefferies. Please proceed with your questions.

Thank you. Good morning.

Good morning, Alex.

Just looking at the full-year revenue guidance assumes, I guess the remaining three quarters of the year make up 76% or 77% of the total at the midpoint. Seems a little conservative given how demand trended to start the year. So curious if your assumptions consider some choppiness in the back half or if there's anything one-time in nature that elevated the first quarter, which it doesn't look to be the case?

No. Thanks for the question, Alex. The guidance raise mainly reflects the strength we saw in the first quarter. I think certainly trends right now would be towards the upper end of our guidance. But I think given that it's just the first quarter, we're just a few quarters out of COVID and there seems to be some uncertainty from a macro perspective in the markets and in commentary around the economy, we're just erring a little bit on the conservative side. I would say that recent trends are consistent with what we saw in February and March. So that's really what's reflected in the guidance right now.

Makes sense. And on the labor front, if you could just help us understand where you are in terms of hiring versus where you want to be if there's any measurable level of productivity impact on your margins that you think goes away in the second quarter or third quarter?

The labor market remains difficult, but our team has done an outstanding job to reach our current position. I am cautiously optimistic that the situation is improving and will continue to improve gradually. We have the necessary team to serve our customers, and as Jim mentioned, we typically cannot control or predict global macroeconomic issues. However, business was very strong in March, and April is continuing that trend. We are still hiring, and having a talent officer along with closely working teams ensures that our primary focus is securing the best available talent. I believe our team has excelled in this area, and I anticipate that will continue.

Thank you. Our next question is coming from the line of Peter Saleh with BTIG, please proceed with your questions.

Great. Thanks. And good morning and congrats on a great quarter. I wanted to ask about the business spending. And if you guys have any sense on how that's performing year over year and maybe any sort of regionality that you're seeing along those lines on business spending?

When you say business spending, Peter, you mean businesses outspending in restaurants?

Maybe just more corporate events, call it conferences and dinners out, you guys have any sense on how that's been performing? We had expected that to really start to kick into gear, especially into March.

I believe it's certainly contributing to our successful quarter, but we're still in the early stages. From what we're hearing, customers are beginning to make bookings. For example, there are venues where you can’t secure a wedding on a weekend until 2024, which is a positive indicator. Several months into the pandemic, we anticipated that there would be a cure and an endpoint, leading to significant celebrations, but that hasn't occurred. The situation continues to evolve with recurring waves. Right now, people seem to feel more at ease, given the availability of treatments and how hospitals and doctors are adapting to manage the situation. Hopefully, we won't face a more serious variant, and it appears that life is moving toward normalcy.

We hear that what we're observing is from our country clubs and caterers. People aren't back in the office full time, but it is starting to improve. We are at about 30% to 50%, so we feel extremely optimistic, although cautiously optimistic. The current situation reflects strong demand, with many customers returning and an increase in our customer accounts. The weaker area seems to be the corporate side of business catering, as people are not fully back in the office, but much of that business is shifting to local restaurants, which benefits us. We are prepared for a return to dining and events, and a slower recovery might be better for allowing labor to come back as well. We are seeing positive signs from places like Vegas and Miami, which slowed down but never closed. The hotels appear to be extremely busy, suggesting that things are gaining momentum, and we hope that nothing disrupts this progress.

It's great to hear. Chris, in your prepared remarks, you mentioned a modest improvement in labor and an increase in restaurant openings. Can you provide more details on that? Where are you seeing these restaurant openings? Is it widespread or more concentrated in certain regions? It would also be helpful to know the extent of this trend. Thank you.

Sure. I think it is broad-based. I think many restaurants, depending on where they were and the type of restaurants really never open. So finally, we're starting to see many of those restaurants starting to open from March of 2020 and tremendous amount of green shoots. As I think I said, over a year or so ago, any good location is going to be taken by a good operator, especially if they can get a deal where they don't have to build a whole infrastructure of restaurants, mainly cosmetic. We're starting to see a lot of those leases turn a lot of those restaurants start to open, and just the book of openings coming from our thousands of customers that we have, it just shows optimism. It shows that they expect business to continue to improve. And I think it's spread out, Peter. I think the places that are still probably the slowest to come back is the midtowns of some of the major cities where they still don't have the volume, but thank God for New York. The theater industry pulls so many people in. We're hearing about tourists coming back again. A lot of our clients in the theater district are doing record numbers, more than 2019, which shows you the demand is there for people to get back and start enjoying themselves in the cities. So, I think it's pretty spread out.

Great. Thank you very much. I'll pass it along.

Thank you.

Thank you. Our next question is coming from the line of Andrew Wolf with CLK. Please proceed with your questions.

Thanks. And good morning as well. Can we talk about some of the inflation trends out there both in terms of product costs? Maybe you can talk about and by your two major divisions, and also labor. Any signs of normalization, maybe even sequentially, like it looks like maybe the beef market sequentially stopped inflating, any just how you're feeling about, Jim, you alluded to with the slightly conservative guidance, how are you feeling about those trends as you create guidance and think about the business.

Yes, certainly. When we reported in February, we mentioned that we anticipated, on average, moderate deflation compared to the price environment in the third and fourth quarters of 2021. In the first quarter, the prices we observed for center-of-the-plate items were down about 4% compared to the fourth quarter, which aligned with our expectations. However, in our markets, specialty produce prices increased by about 4% sequentially. Therefore, the price and inflation environment in the first quarter was very similar to what we experienced in the third and fourth quarters. We anticipate that prices will remain elevated, which is reflected in our guidance. Nonetheless, there is still potential for moderate deflation in the second half of the year. If that scenario does not materialize, we believe we will continue to generate the necessary gross profit dollar growth to operate the business successfully. Ultimately, our guidance adjustment takes into account the sequential changes from the fourth quarter to the first quarter, with little change in our assumptions for the latter part of the year.

Thank you. What about the labor side?

I'll expand on that, Andy. We expected some moderate deflation, but predicting that is tricky. We have seen some relief in certain protein prices. However, I am starting to lean towards the belief that we might not see much relief overall. Despite potential improvements in trucking logistics, factors like the war and other global issues make me think that inflation will persist, and we won't get significant breaks. As Jim mentioned, our team is prepared to handle whatever challenges arise. Our pricing strategies and algorithms are set, and the team is vigilant in managing inflation. On the labor front, the situation varies by market. Some areas are recovering well and attracting good employees, while others face challenges for different reasons. It's a competitive environment, and we're fortunate to see more people returning to the workforce, but it remains a challenge.

Great. Thank you.

Thank you.

Thank you. Our next question is coming from the line of Fred Wightman with Wolfe Research. Please proceed with your questions.

Hey guys, maybe just to follow up on that inflation commentary from a second ago. Are you concerned about push back either from restaurant operators or consumers? I understand that there's a little bit of relief from the proteins side, but some of that specialty inflation is continuing. Chris, it also seems like you're expecting that to go away. So do you think or are you seeing or feeling any push back, I guess ultimately from the consumer about those prices?

I hate to say with a frog boiling in water. I mean, I dine out every day, so I monitor; sometimes I'm amazed when I get the check. But again, our customers, they're very resourceful. We're still not back to full menu, a lot of it is because they don't have the labor, a lot of it is the supply chains, and a lot of it is because of the massive inflation. Restaurateurs again are very creative to survive, so you're seeing more pasta, you're seeing more stews. Where you might see three different cuts of meat on a menu, you might see one or two maybe with a hamburger. So maybe you won't see a strip and a Rib-Eye, very expensive things, we're seeing different dishes with maybe it's pasta with different types of clams and scallops and products that are available. So it's definitely influencing menus and restaurants are trying to be competitive and keep prices where they think are affordable to keep the traffic in. And then we have our high-end and one of the reasons I've always loved this business for almost 40 years is that I always thought there were consumers that were willing to spend, whether it's business people or affluent business people or consumers or travelers or celebratory meals and that market seems to be really strong and they're passing on the prices and it doesn't seem like there's a lot of push back because you can't get a seat in one of the great restaurants still, so I'm pleasantly don't want to say surprised because we've been doing this so long, but it gives me a little more confidence knowing that those consumers are out there and have been for almost 40 years and people are still willing to pay for a great experience and a great meal and demand for great ingredients is as high as ever.

It makes sense. Maybe I can follow up on your comments about labor and staffing. If we consider the one-time costs associated with hiring inefficiencies that the industry has faced, and given that the labor market is tightening, do you believe that the situation is improving and that the labor pool is expanding? Do you think some of those inefficiencies will diminish, or do you see any structural changes in the onboarding process?

I think it was challenging before the pandemic and now it's just gotten worse. These are demanding jobs, whether it's in the restaurant, in the kitchen, or on our end, driving trucks and working night shifts. They've always been difficult roles. We are all paying more for the same work, which I believe has contributed to this situation. It's starting to resemble other parts of the world where such roles are seen as permanent, and the perception that they are just temporary jobs is changing. People are working as waitstaff or on night shifts full-time and need to earn a reasonable income with certain benefits to support themselves, especially in the city. I'm hopeful that the recent pay increases will lead to greater job stability, as we're seeing fewer employees quitting and more showing up, which is reducing turnover that can be quite costly. Training new hires is a significant expense for us. So, I’m cautiously optimistic that people are returning to these roles due to better pay. However, we are also exploring the globe for high-quality products that require less labor. Even before the pandemic hit in 2020, labor was an issue for us while searching for premium products to meet the standards of our chef-driven restaurants. These items, which require less labor, are highly valuable and profitable for us, and we will continue to ensure our manufacturers and producers can provide these for our customers.

It makes sense. Thanks, guys.

Thank you.

Thank you. Our next question is coming from the line of Ben Klieve with Lake Street Capital. Please proceed with your questions.

Thanks for taking my questions and congratulations on another really good quarter here. Just one question from me about how you're assessing the M&A landscape today, especially how it's evolved over the past few quarters here as inflation has increased and maybe the higher quality available businesses have been acquired. So can you talk about how the quality of the businesses available to you in the M&A world has evolved and then also how multiples have maybe evolved here as inflation has become a more material event, maybe being offset here by the opportunities with the world kind of returning back to normal?

Sure. The pipeline was quite active before the pandemic, and I believe it has become even more active since there has been a significant backlog with fewer deals completed. In 2020, we made several acquisitions, and I am optimistic that the trend will continue into 2021 and 2022. We are disciplined with the multiples we pay; our focus is not on being the largest but ensuring a good cultural fit. We would consider paying more for a high-quality growing business, but many of our acquisitions involve companies that require modernization, whether in facilities or systems, and often are in need of revitalization. There are many family-run businesses where there is no successor interested in continuing the operations. We often decline deals that we feel are overpriced, and there is substantial capital in the market seeking investments, which increases competition for certain deals. Despite this, our current philosophy is to refrain from making new acquisitions since we have established a strong foundation for organic growth. However, we are interested in acquiring businesses in new territories as it can expedite our entry into those markets.

New categories also strengthen our offerings and allow us to grow more in what we call the hybrid model, which we've been doing very successfully with adding all these protein divisions now and produce. We're in a great position because we're not forced to do any deals, but I think it is the wild west for the next few years. I think you'll see tremendous amount of deals getting done, and I think we'll do a lot of good smart deals; we'll do fold-ins with the new facilities we have that gives us the capacity. Those are highly accretive, so I think you'll see us very active in that market, and I think there are some new territories that give us great opportunities that we've been looking at. And optimistically, I think we will get deals done there, but we are remaining very, very disciplined on how we go about it.

Got it, that's all interesting color. Thank you for that. That does it for me. Again, congratulations on a great quarter and we will get back in queue here.

Thank you.

Thank you. Our next question is coming from the line of Kelly Bania with BMO Capital Markets. Please proceed with your question.

Hi. Good morning. Thanks for taking our questions. Chris and Jim, just curious as you're sitting here today, how you think about that expectation to get back to 2019 volume levels. I think the plan was around by Q4, just curious if that is accelerated a little bit here or you still want to keep that timeline for volume to get back to '19 levels?

Thanks for the question, Kelly. Yeah, we're definitely on the path to meet it and exceed it I think as I mentioned earlier, we're trending towards the higher end of our guidance while we're being a little conservative in our update. I think currently we're around 95% of 2019 pro forma for the acquisitions in terms of aggregate volume. Obviously, some markets are higher, some markets are lower, but it's averaging out to that. And then when you add in the inflation versus 2019, you can get a sense of how we're trending overall. But I would say that we are slightly accelerated pace versus our original estimate to get there by the end of the year.

Perfect. That makes a lot of sense. And a lot of questions about labor, but I guess just another question there. When you speak to your core customers, do you have a sense for the extent to which labor is still a constraint on their volume and how you see that progressing?

Yeah. Again, you got a lot of mixed answers. I speak to sometimes a few hundred customers a month and a year. Not a problem. We're firing on all cylinders. We got labor. And we're going back to full capacity and 7 days and everything we've done. And then depending on other parts of the country, we hear that they're only opening for lunch, so many days to give staff a break because they're going full tilt at night and just too many hours and they don't want to have a staff that's not proper for that restaurant. So I still think it's mixed. But again, our high volume, our high-volume restaurants seem to be able to attract labor and are doing big numbers again. So I think it's a little bit all over the place, Kelly.

Okay. That's helpful. And just questions on fuel. Obviously, a lot of questions. Several weeks ago, just about diesel costs. And can you just remind us how that's impacting you? How what you're planning for the rest of the year. To the extent to which you're passing that on to your customers?

Yes. Certainly. When we were planning and setting our guidance for 2022, we had already anticipated a significant increase in diesel prices, as we do annually. However, the actual increase has surpassed our expectations. Fortunately, we accounted for a considerable portion of this in our guidance. Our operating and commercial teams are focused on generating the necessary gross profit growth to counterbalance the input cost impacts we are experiencing. While we cannot entirely mitigate short-term spikes like the one we witnessed recently, we can adjust our pricing and delivery models in each region to address the ongoing increases. Our main focus is on medium and long-term strategies, ensuring that we plan effectively. Additionally, as we phase out a significant number of our trucks coming off leases and our own older trucks, we are replacing them with new, more fuel-efficient models that are 25% to 30% more efficient. This will have a medium to long-term impact, but we expect to see benefits over the next few months and years.

Okay. That's helpful. And just lastly, in terms of the Southern California facility, can you just elaborate a little bit more on the savings you expect there and maybe how many more facilities over the next several years could look like the format of the Southern California structure?

I'll let Jim talk about savings, but really, this is the quadruple of our business in Southern California, so we've been highly restrained because we're getting by because we had room in our Vegas facility where we can store products and we had the trucks going back and forth every day. So it really helped us get through this period of being out of space. So these facilities, we're going to open these two. We have another one, it can open probably next year in Northern California, but that's really for consolidating our processing for protein. But Kelly, I've always wanted to build facilities like those. And finally now we got two coming on almost at the same time. We'll measure the savings of sharing the trucks, right? So we have all our categories and these new buildings, so the hope is that we will cut down on our trucking expense will need fewer trucks. One truck being able to go to a lot of customers with more categories, so we can start eliminating some of those trucks that some customers we are port trucks going to a day and sharing management. I think that's going to be a big savings. So you don't need five facilities or managers right now in some markets we have five facilities. So I think that's really where the savings comes in cutting down on fuel, cutting down on truck expense, cutting down on manpower, and cutting down on higher paid management that you would have in multiple facilities. So that's really the exciting part of this. And also being able to satisfy customers and add obviously more dollars to the truck, which should be a much more profitable model.

Kelly, I'll just add that to Chris's point. It's really investment in growth; our Florida facility, L.A, San Francisco, eventually we'll do something in New England and the Mid-Atlantic, but it also gives us the capacity to do fold-in acquisitions as we create that capacity in key markets like L.A. and Southern California, we have a lot more room to do fold-in acquisitions and create synergistic profitability.

Thank you.

Thanks.

Thank you. Our next question is coming from the line of Todd Brooks with the Benchmark Company. Please proceed with your questions.

Hey, good morning, guys. Congrats on a really excellent quarter.

Thanks, Todd.

Thank you, Todd.

Two quick questions for you. One, and this follows up on the M&A discussion earlier, Chris, if you go back to what the historical algorithm was for chef, it was mid-single-digit growth from organic operating acquisitions, mid-single-digit growth from acquisitions to get to that double-digit top line. With where we stand in the recovery and the opportunity to take, I would imagine, a solid amount of share coming out of the recovery. If you look at that algorithm acquisitions, I know are long-tailed and when you get them to the finish line to make central to them. But what do you feel like that organic growth piece looks like for the next couple of years given just emerging from the pandemic and your place in it and how much stronger you are as an operator versus your peers?

It's still early to say, but our plan was always to achieve mid to high single-digit organic growth. If we can maintain that, it represents healthy growth, especially considering the current inflation. We are focusing on case and pound growth, and as we have discussed over the past several years, the industry is poised for consolidation, which the pandemic has likely accelerated. This is why we've emphasized the importance of the talent we are adding. Even during the pandemic, we continued to seek talent because we recognized the need for skilled individuals to manage and grow these businesses. Training this talent is crucial because I believe the opportunities ahead are even greater than I anticipated when I began planning for more national expansion. The pandemic has reset the landscape, leading to further consolidation due to reasons like inflation, healthcare costs, and labor challenges. While there may be some small boutique businesses with high margins, the competitive environment, particularly in labor and real estate, has become increasingly challenging. This trend could actually boost our organic growth as we consolidate categories and drive category growth, which we have observed over the past year. This hybrid approach is what has led to our industry-leading organic growth. I believe the next five years will be fascinating, and I hope the ongoing issues like the war and supply chain challenges start to resolve soon, making for an exciting period ahead.

That's great. And then my follow-up, Chris, I know you're plug-in with a lot of the industry groups and I know it looks like there's one last shot at getting some support out of Congress around the RRF and just actually getting the funding approved for the I think it's almost 180,000 restaurants that got shut out of the first iteration, the fund. Do you think do you think it gets done with where we are in the recovery and on the off chance that it gets approved in the senate? What does that mean for your customer base and those that were shut out if they suddenly have an influx of support when they've fought their way through and they're on the front end of the recovery as well?

That's a great question. When we talk about the food away from home sector, specifically restaurants, it's a large and diverse group of operators. I can honestly say that we are not observing a significant problem within our restaurant-focused clientele, which consists of over 50,000 customers. While many have faced difficulties and some have closed, those that are currently operating appear to be recovering. Our receivables indicate that there doesn't seem to be an issue on our end. I don't want to tempt fate, but it looks like they are getting back on track, despite challenges with labor and the inherent difficulties of the business. However, I am unsure where the additional funding might be directed, as it could cater to a completely different group of customers than those we currently serve.

I was just wondering if it might go into actually accelerating second locations and things like that. More offense.

Well, they're opening like crazy, Todd, so I always get nervous when I see so many openings. We've had a lot of openings coming.

Thank you. There are no further questions at this time. I would now like to turn the call back over to management for any closing comments.

Sure. Well, thank you for everyone joining our earnings call. The team put up a great quarter. It was not easy, but it just shows you the hard work and dedicated team at Chef's, what they could do more with less. So thank you for joining the call and we look forward to our next earnings call. Thank you very much.

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.