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.

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 discussed in our Annual Report on Form 10-K and quarterly reports on Form 10-Q, which are available on the SEC website. Today, we are going to provide a business update and go over our fourth quarter results in detail. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris.

Thank you, Alex, and thank you all for joining our fourth quarter 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 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 restaurants. 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 parts 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 continued 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 establishments and 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?

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 $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 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.

Thank you. We will now begin the question-and-answer session. Our first question comes from Kelly Bania with BMO Capital. Please go ahead.

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?

Thank you for the question, Kelly. The 6% was overall revenue, which included both organic growth and acquisitions that were not present in 2021. It will have a similar mix. Regarding your second question about profitability, the fourth quarter played out as we expected. The early part of December, which included the holiday and event seasons, was strong, consistent with what we indicated during our third-quarter call when we had better visibility into bookings. However, typically, the 52nd week of the year, which usually falls during the Christmas period, is weak since people tend to celebrate at home. We accounted for that in our modeling. The 53rd week gave us two weeks at the year's end, which meant we lost some operating leverage, but overall, it was a strong fourth quarter. December was good, except for that final 53rd week, which typically occurs in the first quarter and tends to be low-volume.

That's helpful. I noticed a comment in the release about seasonality possibly returning to normal. I wanted to ask about the outlook for 2023 and your thoughts on seasonality, especially considering that typically around 85% of the company’s EBITDA is generated during the last three quarters of the year. I'm curious if you could share your perspective on seasonality today, whether the historical pattern is a reliable basis for expectations, or if there have been any significant changes to seasonality, particularly with all the recent mergers and acquisitions taking place.

I would say Chris can provide additional insights. For your modeling purposes, you can expect about 15% or high-teens EBITDA in the first quarter since it is usually our weakest quarter. The second and fourth quarters are typically our strongest, while the third quarter falls in between. In fact, 80% to 85% of our EBITDA is generated in the last three quarters of the year. One thing to note is that Chef's Middle East experiences their strongest periods in the fourth and first quarters, which correspond to our weaker quarters. Their summer climate is extremely hot, which leads to a drop in activity during our second and third quarters. This detail doesn't materially alter the percentage ranges you mentioned.

Yeah. Perfect. That's really helpful.

Sure. Kelly, to provide some insights, you mentioned our first quarter, which tends to be our weakest. However, aside from the first week of January, which is always challenging as we return from the holidays, we’re seeing positive trends. Although last year we had an extra week in the numbers, we considered that week somewhat inconsequential as it was mainly about travel and regrouping, falling in the fourth quarter, so we didn't gain much from it. As we moved into January and February, we observed a strong start to the year. We're all monitoring how this year unfolds post-2022 without significant Omicron surges. It’s encouraging to see continuous spending, many events and conferences taking place, and an uptick in business travel. Overall, we're very pleased with how the New Year has kicked off.

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.

Sure. So the way this industry works is that as prices go 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 looking at gross profit in an inflationary environment, look at gross profit dollars versus margin, because that's really what counts, right? It's 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 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, we're making 27% on a less expensive box, that's kind of our hedge to keep our profitability kind of equal.

Very helpful. Thank you very much.

Thanks, Kelly.

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

Thanks. Good morning, guys.

Hey, Alex.

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 laps, 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?

It depends on the markets you're in, and we're pleased with what we've seen. Improved weather in areas that usually experience colder conditions should be beneficial. However, significant snowstorms can disrupt our numbers. January is a busy month as schools resume and people juggle various commitments, which means even good weather might not lead to exceptional results for the quarter compared to other times of the year. While there are some events like conferences and Valentine's Day, the first quarter typically functions as just that. Nonetheless, we are satisfied with what we've observed so far. The consumer and business travelers continue to spend, which gives us optimism for the future. There’s a lot of discussion in the press about a potential recession, but we cater to the top earners and corporate travelers, and we haven’t noticed any behavioral changes as of now. Good weather is a plus, but January and February tend to be less impactful compared to the second and fourth quarters.

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?

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 what you're starting to see is, prices starting to level off. And when you compare year-over-year, you're just comparing to higher prices. So naturally, you would expect the year-over-year to start to moderate.

Okay. Thanks.

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

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?

Yes, I believe things are beginning to return to normal. Our numbers reflect organic growth and case growth, although I'm hesitant to say "normalized" since I'm not sure what that looks like anymore. Our strong customers are performing well, and we reviewed this this morning. If you're in an area that hasn't bounced back, you're likely struggling. However, if you're located in a solid suburb, Florida, parts of Texas, or even San Francisco—despite all the reports about its slow recovery—there is activity. Although many people haven't returned to the office, business dynamics are shifting, and we're witnessing significant openings. Major restaurants, including some of the highest-grossing ones in the nation, are launching. There's a strong consumer and business interest in trying new places, especially as we emerge from COVID when options were limited. Many openings were delayed and are now happening as labor availability improves. While the labor situation isn't ideal, there is enough coming back to support many new establishments. We're seeing both small neighborhood openings and large ones in high-volume areas like Las Vegas, Miami, Texas, New York, and parts of California, all contributing to our growth.

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?

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.

Thank you very much.

Thanks, Peter.

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

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 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?

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 and accretive because basically, what we're taking is the customer base some of the sales team, and if they have some real 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 types 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 far-fetched 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 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 in 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 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 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.

Thank you, that was really helpful. I wanted to ask about the cost structure. It contracted year-over-year, which is expected given the inflation. However, to what extent did the extra week of low sales negatively impact the operating expense ratio? More generally, how do you feel about your labor productivity trends and metrics as we move into 2023?

Yes, thanks, Andy. I think our adjusted operating expense was slightly higher than the previous year, partly due to the 53rd week and the lack of leverage associated with it. It was a very strong quarter and a robust December, but that fiscal week impacted our results. Additionally, we incurred some unusual excess expenses related to our self-insurance programs. Although self-insurance can be more cost-effective in the medium to long term, it comes with some volatility and unpredictability, which we experienced in the fourth quarter. These factors contributed to our EBITDA margin being around 6.5% instead of closer to 7%, primarily affecting the operating expenses. Overall, it was a strong quarter with good revenue and a solid year to finish off.

Okay. In terms of metrics, how are your operations teams performing? What numbers are you seeing regarding sequential metrics or your productivity metrics, such as fix per hour? How do you anticipate this will improve as your new employees receive training? Additionally, with the integration of new employees from acquisitions who may initially be less productive, how are operations evolving as we expect the supply chain to continue normalizing?

Yes, I think we've been making significant progress. There has been a notable improvement in productivity both on our end and across the industry as we recover from COVID. Everyone is becoming more efficient with fewer resources. Our operations team is outstanding, and we continually implement new loading, picking, and warehouse technology. We're enhancing our distribution software and technology as well. Our operations team travels nationwide to educate and help our operators adopt these new improvements. We have also begun collaborating with our new partners in the Middle East on various operational aspects. Additionally, Chris mentioned our ongoing development of facilities and smaller acquisitions. As we grow, we consolidate companies into our facilities and streamline routes, allowing us to optimize our corporate infrastructure as we integrate these companies into our systems and support functions.

Got it. Thank you.

Thank you, Andy.

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

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

Thank you.

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?

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.

Thank you. Chris, I would love to hear your thoughts on the M&A pipeline. Is there any change in the pace or size of deals that you're seeing in the pipeline as you look ahead to the next 12 months?

Yes. As anticipated coming out of COVID, the situation is quite chaotic. You have to be cautious about entering the wrong area where you could get hurt. The industry is likely to keep consolidating for various reasons. The expense of new warehousing is very high, and many businesses are second or even third generation, lacking a clear path for future growth. They prefer to diversify their wealth and are opting to sell. Therefore, we are being very selective about the companies we pursue, ensuring they align with our culture and long-term goals rather than just seeking short-term gains. The market is very volatile, and we must be careful because post-COVID numbers are atypical; some companies show remarkable growth for various reasons, such as inflation. It’s important to see the bigger picture, and fortunately, we have extensive experience with over 40 acquisitions in the last decade. We are being meticulous about who we add to the Chef’s family portfolio.

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?

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' stake 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.

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?

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 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 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 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.

That’s super helpful. Thanks to you both.

Thanks Todd.

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.

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.

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