Q4 2023 Chefs' Warehouse Inc Earnings Call
Participants
Alexandros Aldous; Gen Councel, Chief Government Relations Officer, Corporate Secretary & Chief Administration Officer; Chefs Warehouse, Inc.
Christopher Pappas; Chairman, President & CEO; Chefs Warehouse, Inc.
James Leddy; CFO; Chefs Warehouse, Inc.
Alexander Slagle; Analyst; Jefferies
Todd Brooks; Analyst; Benchmark Compnay
Mark Carden; Analyst; UBS Investment Bank
Kelly Bania; Analyst; BMO Capital Markets Equity Research
Andrew Wolf; Analyst; CL King
Peter Saleh; Analyst; BTIG
Ben Klieve; Analyst; Lake Street Capital Markets
Presentation
Operator
Greetings, and welcome to The Chefs' Warehouse fourth quarter of 2023 earnings conference call. As a reminder, this conference is being recorded.
I'd now like to turn the conference over to your host, Alex Aldous, General Counsel, Corporate Secretary and Chief Government Relations Officer. Please go.
Alexandros Aldous
Yes.Thank you, operator, and 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 2020 free earnings press release. It can also be found at w. w. w. dot Chefs' Warehouse.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 than 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. Such forward-looking statements are not guarantees of future performance and therefore, you should not put undue reliance. These statements are subject to numerous risks and uncertainties that could cause actual results differ materially from what some of these risks are mentioned.
In today's release. Those are discussed in our annual report on Form 10K and quarterly reports on Form 10Q, which are available on the SEC web. 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 Papa.
Chris?
Christopher Pappas
Thank you, Alex, and thank you all for joining our fourth quarter 2023 earnings call. Business activity coming out of September strengthened into the fourth quarter at seasonal customer demand and volume trends progressed through November and December to close out 2023. Price inflation continued to moderate in our Chefs' Warehouse teams across our North American, our international markets delivered strong organic growth and margin improvement as we move into 2024. I would like to thank all of our CDW teammates for their dedication and passion. They have for our mission to discover and deliver the finest Specialty Foods fresh produce center-of-the-plate protein, inspire the culinary creativity and feed the success of our customer. Why are partners as we strive for excellence and impeccable service. As a reminder, we are comparing the fourth quarter of 2023, a 13 week fiscal quarter for the fourth quarter of 2022 a 14-week fiscal quarter. And as such, we will present certain results both as reported and on a pro rata 13-week comparison.
A few highlights from the fourth quarter on a pro rata basis include 11.3% organic growth in net sales. Specialty sales were up 11.2% organically over the prior year, which was driven by unique customer growth of approximately 12.4%, placement growth of 6.5% and specialty case growth at 11.3% organic pounds. In center-of-the-plate, we're approximately 8.4% higher in the prior year. Fourth quarter gross profit margin increased approximately 38 basis points. Gross margin in the specialty category decreased 76 basis points as compared to the fourth quarter 2022, while gross margin in the center of the plate category increased 71 basis points year over year. Specialty gross profit margins were lower, primarily due to the addition of Hardy, excluding Hardy's specialty gross profit margin increased approximately 35 basis points versus the prior year quarter. Jim will provide more details on gross profit and margin in a few months.
During the fourth quarter, we completed multiple steps as part of our ongoing focus. I'm harvesting our investments in warehouse and distribution capacity and recent acquisitions. These projects involve both consolidation of distribution center routes and operations in certain markets as well as further integration of acquired sales teams, distribution and cross-selling with our existing specialty and protein businesses in key markets across our network.
A few highlights are in Florida. We completed the consolidation of three facilities into our new distribution center located in Opal. We now have meat and seafood processing specialty and protein distribution operating under one roof. We have significant room to grow over the years to come. We initiated operations in our new distribution center located in southern user of the service, Philadelphia and Pennsylvania markets. This facility provides expanded capacity in the region as well as creates additional room for growth in the New York Metro and mid-Atlantic markets in Dallas and Austin, Texas. We have begun the process of cross selling our specialty and Allen Brothers protein distribution with heart is facilitated by a combined sales force and route consolidation in the initial stages. We have reduced facility related costs in Houston, and we are working on future distribution plans in the state's largest market. Our expansion in Dubai continues to progress, and we anticipate commencing operations out of the additional capacity and the second half of this year, our consolidation of protein processing in Northern California, it is on track to begin a phase and move starting in the second quarter of 2024 and progressing through the end of the year. For 2024 and beyond, we expect to leverage our expanding infrastructure further integrating recent acquisitions was strengthening the balance sheet, focusing on free cash flow generation in delivering our two year capital allocation plan. As we enter the next phase of our growth, we expect Chefs' Warehouse to remain rooted in our DNA as the leading specialty food marketer and distributor distributor, clearly upscale casual and higher-end dining establishments in the markets we serve. With that I'll turn it over to Jim to discuss more detailed financial information for the quarter and an update on our liquidity.
Jam?
James 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 provided an update on our balance sheet and liquidity. Our net sales for the quarter ended December 29, 2023 increased approximately 29.3% to $950.5 million from $734.8 million in the fourth quarter of 2022, which represents a prorated 13-week net sales for the fourth quarter of 2022. Net sales on a reported basis 13 weeks compared to 14 weeks increased 20.1%. The pro rata growth in net sales was the result of an increase in organic sales of approximately 11.3%, as well as the contribution of sales from acquisitions, which added approximately 18% to the sales growth for the quarter. Net inflation was 1.8% in the fourth quarter, consisting of 0.6% inflation in our specialty category and inflation of 3.4% in our center of the plate category versus the prior year quarter.
Gross profit increased 31.4% to $228.6 million for the fourth quarter of 2023 versus a prorated $173.9 million for the fourth quarter of 2022. On a reported basis, comparing 13 weeks to 14 weeks, gross profit increased 22%. Gross profit margins increased approximately 38 basis points to 24.1%. As mentioned on our third quarter call, gross profit dollar growth and margin trends improved significantly coming out of the softer summer months. These trends continued as the quarter progressed into the holiday season. And our teams across our regions, including sales operations, procurement and all the supporting functions, delivered a strong margin performance while providing the premium quality product and service our customers have come to expect from the Chefs' Warehouse.
Selling, general and administrative expenses increased approximately 23.8%, $190 million for the fourth quarter of 2023 from $153.4 million for the fourth quarter of 2022. The increase was primarily due to higher costs associated with compensation, including benefits, facility costs and distribution costs to support sales growth in the current quarter. On a pro rata basis, adjusted operating expenses increased 33% versus the prior year fourth quarter. And as a percentage of net sales, adjusted operating expenses were 17.8% for the fourth quarter of 2023 compared to 17.3% for the fourth quarter of 2022. Operating income for the fourth quarter of 2023 was $38.2 million compared to $29.8 million for the fourth quarter of 2022. The increase in operating income was driven primarily by higher gross profit and lower other operating expenses, partially offset by higher selling general and administrative expenses versus the prior year quarter. Income tax expense was $10.1 million for the fourth quarter of 2023 compared to $4.3 million expense for the fourth quarter of 2022. Our GAAP net income was $16 million or $0.38 per diluted share for the fourth quarter of 2023 compared to net income of $1.2 million or $0.03 per diluted share for the fourth quarter of 2022. On a non-GAAP basis, we had adjusted EBITDA of $59 million for the fourth quarter of 2023 compared to $50.1 million for the prior year fourth quarter. Adjusted net income was $20.2 million or $0.47 per diluted share for the fourth quarter of 2023 compared to $18.2 million or $0.46 per diluted share for the prior year fourth quarter.
Turning to the balance sheet and an update on our liquidity. At the end of the fourth quarter, we had total liquidity of $221.9 million comprised of $49.9 million in cash and $172 million of availability under our ABL facility. Total net debt was approximately $662.5 million, inclusive of all cash and cash equivalents and net debt to adjusted EBITDA was approximately 3.4 times as compared to approximately 3.6 times as of the end of the third quarter of 2023.
Turning to our full year guidance for 2024, based on the current trends in the business, we are providing our full year financial guidance as follows. We estimate that net sales for the full year of 2024 will be in the range of $3.625 billion, $3.775 billion, gross profit to be between $865 million and $900 million dollars and adjusted EBITDA to be between $205 million and $218 million dollars. Our full year estimated diluted share count is approximately $44.9 million shares for reporting purposes. We currently expect our senior unsecured convertible notes maturing in 2028 to be dilutive for the full year and accordingly, so shares that could be issued upon conversion of the notes are included in our fully diluted share count.
Thank you.
And at this point we will open it up to questions. Operator?
Question and Answer Session
Operator
Thank you.
Before we start the Q&A, we just want to remind everyone that a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Investor Relations section of the Company's website and in today's press release.
Thank you. We will now be conducting the question and answer session. If you'd like to ask a question, please press star and one on your telephone keypad. Confirmation tone will indicate that your line is in the question queue. You may press star two to leave the question queue.
First question comes from Segal of Jefferies. Please go ahead.
Alexander Slagle
All right. Thank you.And thanks for the question.
I wanted to ask about the outlook for 24 and maybe I guess, first, if you can provide some expectations on the magnitude of impact related to acquisitions that are rolling over into 24, get a sense for the cadence, what that looks like?
I'm assuming no other transactions?
James Leddy
Well, hey, Alex, good morning.
Thanks for the question.
Yes, in terms of the acquisition wrap impact, yes, we had sized that and previously right around 2.5% to 3%.
Alexander Slagle
Okay, great.
James Leddy
And then may I get in terms of the outlook for 24, 2024. Was that the first part of your question?
Alexander Slagle
Yes.
James Leddy
And well, we started off with January on a pretty good month. Obviously, there was some weather impact that we saw in some of our markets, but we actually have January's relative. So we had the worst month of the industry through some really in for our company, the time to entire industry. But actually our teams executed very well during the month and we had a pretty good January and it feels like a of the usual build coming out of January into February is taking place. So one.
So right now, we're sticking with our guidance and on and go from there.
Alexander Slagle
and kind of the expectation for the elevated operating expenses kind of continuing to the first half?
As we think about the typical first quarter second quarter Cadence EBITDA in at first quarter is usually only 14%, 15% of your annual EBITDA. Are we kind of getting back to that sort of normal seasonal cadence or are the OpEx expenses? Should we expect that to be more elevated?
James Leddy
Yes, we are we wrap the, um, the increased rent from Florida and some kind of midway through the year. And then we'll wrap the impact of the additional New Jersey rent kind of in the third quarter. So there are some elevated expenses continuing in the first half of the year. But the percentages in terms of EBITDA are returning to more normal than they have the past three or four years for sure.
Alexander Slagle
Great. Thanks for that. I'll pass it along.
James Leddy
Thank you.
Operator
Question comes from Todd Brooks Benchmark Company. Please go ahead.
Todd Brooks
Sorry, thanks for the questions and congrats on the Q4 results. A couple of quick couple of quick questions for you. One on I know as part of the new two year capital allocation plan. You guys did put a share repurchase in place and did some work with your lending partners too be able to execute against that just not much evidence of it in what the full quarter share count was, but were you active on the plan at all in the fourth quarter?
James Leddy
No, we actually put it into place well through the fourth quarter from about almost halfway through. And I know we hadn't executed any of it as of the end of the fourth quarter.
Todd Brooks
Okay.
But I think and your full year guidance, what you pointed to for fully diluted, the 44 nine, does that imply some repurchase anticipated over the course of 24?
James Leddy
And now what it really implies is that we expect to cash settle the 2024 converts to $39 million that mature at the end of 2024. And so we don't expect them to be fully dilutive for the entire year. So the previous estimate, you know, $45.7 million. So you just pretty much take out that number of 900,000 shares associated with the 2024 converts, and that gets you to the [$44.9 million].
Todd Brooks
Great.
Thanks, Jim. And then another one, Chris, I'd love to hear I'm just looking at the unique customer growth and it seems to be accelerating nicely on a year-over-year basis over the past several quarters. What are the drivers there? And what's the tail to and the ability for chef to go out and add new customers to the fold as you look into 24?
Thanks.
Christopher Pappas
Yes, a great question, Todd. Yes, again, we know, we continue to hire and train new sales of salespeople to the team, and that's been our engine driver for almost 40 years now. So as much as we are using digital to grow awareness and take more and more of our of our orders. The actual orders are coming in from customers, which is freeing up the sales team to go out and continue to open more customers. And it really is the it's such an important part of our growth because you know of natural attrition for various reasons as sticky as our customer bases. I mean, we've had customers account for over 30 years and you've got to have new customers constantly coming in. It's just the nature of who we sell. We sell to independent restaurants. And as they as they mature, their leases sometimes mature out and of many other reasons why there's turnover, but, you know, let's face it, customers love new restaurants and restaurant tours like to open new restaurants. And we feel that that's where we're winning. You know, most of the customers that are opening in the territories that we sell, I think Shep is the dominant partner, and I think that's what's driving that number.
Todd Brooks
Great.
Thanks.
Christopher Pappas
Yes.
Operator
Our next question comes from Mark Carden of UBS. Please go ahead.
Mark Carden
Great.
Good morning, thanks so much for taking the questions. So to start, it sounds like sales got stronger sequentially as the quarter progressed, reflecting some seasonality.
Just to clarify, did you guys also see the rate of growth picked up in each month when you adjust out the extra week.
And then any specific callouts with respect to demand and the amount of trade down, you're seeing? Is it more or less than you guys might have expected?
Thanks so much.
James Leddy
Thanks, Mark. I know the cadence in the quarter, I think as you pointed out, was pretty typical of a normal season. You know, prior to the the many years that COVID volatility impacted seasonality we talked about on our Q3 call, we saw strength in demand and margin in September coming out of the weaker summer months. I think October and November were kind of very typical, October and November from a seasonal perspective. And then December was I think the 1 December, the three weeks between Thanksgiving and Christmas that you really saw the corporate parties come back, the level of events come back to pre-COVID levels. I you know, I think in 22, you saw a little bit of that, but it wasn't completely back. And so I think those were three very strong weeks. And that I think I think that that really helped the quarter and get back to what we would call the normal fourth quarter.
Mark Carden
Got it. That's helpful.
And then you guys mentioned that inflation moderated in 4Q do you think it's bottomed out at this point? And just how do you see it shaping up in 24 at this point?
James Leddy
You know, I would say we don't really predict inflation. But what we expect right now and what we see is on in aggregate, I mean, we have 70,000 products going through our distribution centers. Some are inflationary, some are deflationary. But in aggregate, what we've seen so far in the beginning of the year is kind of a continuation of what we saw in the fourth quarter, which was you know moderate kind of low to mid-single digit type of a sequential and year-over-year inflation, you know, with a little bit of a mix on certain products, you know right now you have of things that are cocoa based like chocolate. You have olive oil affected by droughts, and we have a couple of daily dairy products that are inflationary. But but overall, you're kind of seeing moderate inflation so far this year, and we kind of expect that to continue.
Mark Carden
Great.
Thanks so much. Good luck, guys.
James Leddy
Thank you.
Operator
Our next question comes from Kelly Bania of BMO Capital Markets. Please go ahead.
Kelly Bania
Good morning.Thanks for taking our questions, guys. Wanted to talk about Good morning and wanted to talk about some of the acquisitions. Obviously, several have been flowing in for the last couple of quarters, but maybe can you just talk a little bit more in detail about how they're performing? It seems like there might be some some top line upside coming in from one or more. But correct me if I'm wrong. Maybe just help us understand how how you're finding those acquisitions getting integrated to the broader shift warehouse networks?
James Leddy
Sure. I think things are going very well, Kelly. I think the team has their arms around the acquisitions from the past two years. And you could see from our growth. You know, we we call it hybrid growth. I call it right now as companies become comfortable as part of the with the Chefs' Warehouse family of companies we start to, you know, we sought to share best practices and many, many of the acquisitions we've already put them on our computer systems, so they could start to see you know, other warehouses and what products are available and the sales team starts to melt together. And Tom, I think that's really what's a what's been the driving force behind our continued growth for the past many years. So when we're not at the we're not a we're not anywhere near the finish line of our expectations there. But every day we get better and I think that shows in the numbers we continue to we continue to cross-sell each other's customers, and that's really the focus right? We built these new warehouses and continue to build the warehouse in markets that we have, three, four independent businesses. So we're here in Florida today, and this is one of our newest facilities where you know, we're able to sell proteins and dairy and some produce and all our specialty and dry goods and combine them on the same trucks. And you know, we'll continue to get these synergies and that's what's going to drive the bottom line over the next many years.
Kelly Bania
Thank you. And just wanted to follow up on a couple of more questions. You mentioned the sales force growth there. It seems as though some of the big broadliners are maybe also increasing sales force headcount more than in recent years. And I guess the question is, are you seeing that same dynamic across many of the private specialty competitors that you compete more directly with on a day-to-day basis. And maybe just remind us of the size of your sales force and the growth in head count this year and in coming years that you expect?
James Leddy
Yes, you know, from the street perspective, I think we always see some new people on what we hear from all our all our leaders is, again, everything so expensive today. So you know, we hired when you hire people, the benefits are really expensive.
If you could put them on the road. You know, car expenses are very expensive. So I think our view is, you know, continue to use technology to free to free our team up. And I think that it's going more and more into what I call a team. So I think I've been saying this for the past five, seven years that my vision is there's over 1,000 people in the sales department, you know, with all our companies. So it's quite a big people in sales, but it's really leveraging of them and having them do you know, more calls on new customers, more cost to their existing customers, introducing new products, even as we continue to integrate in all the regions that we have ship warehouse protein businesses.
Now with our other businesses and now produce. So it's really doing more with less. I think that's the key. And I think every company is facing that and is trying to do the same thing, whether you're at one of the giants, a [$70 billion] public companies or you're a small independent in the marketplace, you're going to have to get leverage because everything is more expensive. You know, everything's integrated the last, especially the last five years. So it's so important to get more efficient and larger drops. You have to get the leverage on your overhead.
Kelly Bania
Thank you. And just maybe last one doesn't sound like there's any issues here, but maybe just talk about your ability and cost in getting some of the products that you import over from Europe on in today's market conditions? And just remind us of what percent of your products are coming and from there.
James Leddy
And so there, I mean, there hasn't been really any impact from what's happening in the Red Sea to our US or North American businesses. So logistics prices have obviously come way down since the crazy COVID prices and kind of settled in a in a range that are a little bit higher than before but not not insane. So we haven't really had much difficulty, um, you know, coming from Europe from We don't really disclose the percentage of that comes from Europe. And we have had a little bit of some bonds with our chefs Middle East business with some of the product that comes via the Red Sea, but they've done a great job of mitigating that. And it seems that the on the price impacts are being felt really by by the entire market there and being passed on in and of customers and restaurants are adapting their menus and adjusting just like they would during any kind of some supply chain disruption, but it hasn't been material to date. And the team over there is doing a great job of managing substitutions and working with customers, et cetera. So I would just say overall, the logistics environment hasn't really had a lot of volatility over the last six months or a year that we experienced over the first two or three years post COVID.
Christopher Pappas
Yes, Kelly, just add a little bit a little more insight to that. Again, I think ever since COVID, everybody, our partners in from over 2000 suppliers in 40 countries kind of adapted. You know, everybody keeps more inventory now because the world is in a pretty volatile state, right, with the two wars going on, we've got climate change impacts. So I think everyone's gotten kind of ahead of it, right. So in the U.S., like Jim said, you know, I think everybody was every everybody always anticipate some sort of disruption. So we're kind of way ahead of it in our inventory's fine. The team is all over it. And as Jim said in our in Dubai, which is our major warehouse, they had a great December business was a wood business was strong. And I think any pressure came because of that. It was so strong, the demand was there, and it's an incredible team there that is very seasoned. And you know, there are customers pulling with, you know, something going on with the logistical challenges and they tried to get ahead of it a way before something happens. So I think I think we're good.
Kelly Bania
Thank you very much.
Operator
Thank you, Kelly question comes from Andrew Wolf of CL King. Please go ahead.
Andrew Wolf
Hi, good morning. I wanted to ask about the guidance in terms of the margins, EBITDA margin. So at the midpoint of sales and EBITDA, it's about expands about 10 basis points in 24 from 23 and I'm gross margin at the midpoint is more than that closer to 20. So I from Alex's question, it appears you guys are looking at the first half being sort of heavy on OpEx and then starting to improve. So I just wanted to get the sense, you know, kind of if you could sort of dive a little more into the cadence of margins sort of as a flow for the year, both now how you see it, particularly the OpEx, we're the business deleveraging and I know you not said it well, actually at ICR. You did talk about longer term guidance. Just how you do see the OpEx leverage really being reestablished, you know, isn't going to sort of be and like is it going to get greater and greater once you start to establish it? And is that how you view it and getting getting margins up to that 67% long-term goal?
James Leddy
Yes, thanks, Andy. Um?
Yes, just in terms of the guidance and the cadence through the year, but you know, it's a it's a range. I mean, if you look at our EBITDA guidance, it's $205 million in 2018. And I think the to meet the midpoint of the adjusted EBITDA margin percentages is conservative. I think there's a chance that that could be improved. And we do still have some of the near-term cost headwinds related to the all the growth investments we talked about that at ICR and on our Q3 call. So that's that's mainly in the first half of the year. In the back half of the year.
We'll love.
We expect to get start to get a little a little more leverage. And then it's really about 25 and 26. And I'll just go back to Chris's comments. We are we expect to drive organic volume through this some incredible amount of capacity that we've invested in and added in key growth markets over the next couple of years. It'll it'll begin in 24, but we still have, as I mentioned some of the we haven't wrapped some of the larger rent investments and some of the other growth related costs. But those will dissipate a lot of the transition costs that we've experienced related to the significant amount of M&A we've done over the last two years that will start to decline. And so it's going to be it's going to be gradual combine that with improving adjusted EBITDA margins. As you know, key investments like Hardee's in Texas, which is a key strategic decision to enhance and accelerate our platform for growth in Texas, which is a huge growth market on and you know, they're diluting us initially. So, you know, I think of we're a little bit above 5.6% for the full year of 23. If you excluded the dilutive, the initial dilutive impact of adding Hardee's, we'd be very close to what we delivered in 2022. We'd be around 5.9%.
In 2022, we delivered 6%.
So it's really just about driving the organic volume through these significant capacity investments and then improving the adjusted EBITDA margins over time as we integrate this kind of 15% of our revenue base, it comes at a lower EBITDA margin percentage.
Andrew Wolf
Thanks, Jim.
And just thinking of Hardee's, you know, and I know you had other acquisitions that were similar smaller, I think, but similar, where you're able to margin them up, I think, you know, 300 basis points in the Boston acquisition so um, could you just give us a sense of that? And what is it I think you get is it more rightsizing the business or is it more the cross-sell and I guess it is more the latter, but what percent of the customers, you know, are you kind of is the right goal either based on experience or how you how you're modeling it that you want to cross sell to and what kind of penetration and how does just give us a sense of what it needs to happen for that acquisition to really move the right?
James Leddy
Yes. Thanks, Andy. I know every market is unique, right? So you know, obviously, New York is our first business and our our biggest market and our business our biggest business out of one OpCo, right? San Francisco is quite big when you look at all the businesses that we own. So each week, we go through a very, very thoughtful process before we make an acquisition. And as you know, you've been following us for a long time to get our to get the footprint. You know, we've had to it's much more effective unless you're accessing the market next year, which is typical a typical in the distribution business, right? If you're a typical distributor, which we're not where we say we're a marketing company that also distributes, and that's our strength right with over 1,000 of our own vehicles on the streets every day we control most of our own destiny, bringing these wonderful products up to market. So in the case of Texas, you know, since we're talking about it, you know, the thought process of we know Texas is going to be a big market. Obviously, a lot of people have moved to Texas and continue to move to Texas for various reasons. In the past five, six years, more of our customers are opening to Texas. They want us to serve them there. And now we have an Allen Brothers catch up facility, which is doing phenomenal. We have a Chefs' Warehouse, which we put together with some small acquisitions. So just to get enough business to get warehouse moving, we bought some non-core businesses, but that's when we realize what an opportunity it was because there really was nobody, you know, in Texas to buy who was like that. And that's always the great thing is there's nobody like shift really that puts, you know, the amount of June of 2000 orders and vendors from around the world together in one building and has the logistical expertise and the ability to train a sales force, which does take time so really when we looked at Hardee's, they were not Chefs' Warehouse. Their margins weren't their bottom line wasn't anywhere near what it was. But over the next five, 10 years, we continue to it was a great company with changing the way they go to market. We're selling more and more independent restaurants. We're starting to add Chefs' Warehouse products to their trucks and that's really the March. And you've watched us do this year for many years right now. And as we grow as we did in New England, you know, New England was similar. And we bought Sid Wehner, a great company, great people. And so we kind of shrunk their business and rig of where we're growing them more as a chef warehouse with more of our product on their trucks, and they're starting to look more and more like a Chefs' Warehouse, right? They're marching towards the EBITDA margins that we expect our businesses and I think that's what you're going to start to see in Texas and in most markets where we've made these investments. So it's pretty exciting times. And I always look at it as you know, we own a bunch of stadiums and the stadiums are doing great, and you have to add more seats to do more business. And as you're you know, you're adding and building those seats, it costs money. It's a drag on your overall percentage when you look at your capital. But as the stadium seats start to open and you start to fill them, you start to get a great return on your investment, and I think that's the way we look at it.
Andrew Wolf
Okay.
Thank you very much.
Operator
Our next question comes from Peter Saleh of BTIG. Please go ahead.
Peter Saleh
Yes, good morning and thanks for taking the question and congrats on a strong quarter. I didn't want to ask about, I think in the past, we were talking about how some of the less mature markets like Texas or Florida, your customer buys less of their needs from SaaS versus some of the more mature markets like New York City, are you starting to see some evidence now that given the investments you guys have made and from the organic growth that you're and some of these customers are starting to tick up their their purchases from you in terms of their needs, that percentage of that is kind of ticking up. Are you seeing any evidence of that Yes.
James Leddy
Thanks for the question, Peter.
Yes, yes, absolutely. You know, I couldn't I couldn't be more optimistic than I am right now that things are going as planned. Everything takes a little time, right, you got to get the systems and the warehouse setup. And we're still in the first inning. You know, pledge of Florida in Florida is growing at a very rapid pace. And every day we're selling more and more items to the customers that we had as we start to fill up the warehouse from quarter to quarter is going to be a top four markets over the next five years. And so is Texas. You know, Texas has taken a little longer because we didn't have the facilities. So we're upping operating as a multiple facilities right now as we're starting to figure it out. You know, you've got Australia got San Antonio, you got Dallas who got used and it's a it's a very large place. It's a country in itself. But every day the team is making headway as salespeople start to get comfortable with the thousands of items, even though we hire a lot of chefs who understand food, it's really understanding the you know how to go to market sell against your competition. But the reason we made these investments is we're so encouraged to see the reception we get, we start to enter a market and you're heading on to probably a big long-term growth markets, Texas and Florida. And absolutely, we're starting to sell more items to these customers.
Great.
Peter Saleh
And then just, Tim, are there any calendar shifts or anything that we should be aware of in the first quarter that might be beneficial or detrimental to the business.
And then just on the inflation, you guys said kind of from maybe a low to mid-single digit expectation for this year. Is there any sort of change in the cadence first half versus second half. I know you guys don't like to really forecast out the inflation and just trying to understand if there's anything that we should be thinking about higher or lower in the first half on inflation?
James Leddy
I think speed in terms of the first quarter, there have been no significant calendar shifts, but that really come to mind right now. So nothing to really call out there in terms of inflation, once again on we build it into the range of our guidance with the range of our guidance incorporates, you know, potential variability on volume due to macro demand, which we don't control and due to price, which we don't control as well. But we adapt to as we move through the year, you know whether it's trying to hold price in a deflationary environment or managing the managing the customer and the price in an inflationary environment. So I think of it's just incorporated into that range of the guidance and we adapt and manage as we move along.
Peter Saleh
Great.
Thank you very much.
James Leddy
Thank you.
Operator
Our next question comes from Ben Klieve of Lake Street Capital Markets. Please go ahead.
All right.
Ben Klieve
Thanks for taking my questions and congratulations on wrapping up a really good 2023 on just one question for me. As you look throughout call, I appreciate your comments about kind of focusing on integration of your legacy investments and acquisitions and throughout 24. And my question to you, Jim, is in this context where you're really focusing on what you have already done and integrating these these investments, what remains compelling to you in a potential acquisition that you could potentially still make in 2024. Are there kind of high-level characteristics of an acquisition you're you could look to make in 24? Or is your foot really, but kind of offer up the gas here for the balance of this year?
James Leddy
Yes. Thanks for the question. Again, shifted as being the little guy of all the public companies that we're measured against. We had to acquire to get the footprint. And now the focus has shifted on, you know, we created by the end of the year, we'll probably have 60% more capacity. So our focus is on hyper charging type of charging organic growth. And of course, we're always opportunistic. We've always been opportunistic. So, you know, we're not looking to do anything major in new territory. And we've already stated, you know what our CapEx forecast is going to be. So we're focused on creating more cash. Have you don't pay down some debt and maybe buy back shares. But you know, if there's a great fold-in, which could speed up some of the I'm not we don't want to fill up all our capacity. That's what we build it. We want to grow into it. But you know, some of these little tuck-in acquisitions could be extremely profitable and help us on our march to our our EBITDA goals so, you know, we're always looking people are always calling, but the real focus right now is to drive via the organic growth because we have we finally have, you know, good capacity in a lot of our major markets, like we've said, Florida and Los Angeles, our new processing facilities opening in San Francisco, hopefully in this quarter, and we're going to consolidate a whole bunch of businesses into one state of the art facilities. So we've got a lot of exciting things happening in the next year and two.
Ben Klieve
Very good.
Thanks, Chris. I appreciate that comment on plenty more to talk about.
That's a good place to leave a picture question.
Operator
I'll get back in line here such event and we have reached the end of our question-and-answer session. We'd like to take a further Christian from BNP.
Christopher Pappas
Yes. Well, thank you for everybody for for joining our call. I couldn't I couldn't be prouder of the team at chef and what they're accomplishing. And we look forward to it many, many, great things from the team and look forward to everyone joining our next call. So thank you very much. Have a great day.
Operator
Thank you very much. Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.
