CHEF - NASDAQ

Greetings, and welcome to the Chefs' Warehouse Second Quarter 2024 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 second quarter 2024 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 second quarter results in detail. Then we will open up the call for questions. With that, I will turn the call over to Chris Pappas. Chris?

Thank you, Alex, and thank you all for joining our second quarter 2024 earnings call. Second quarter customer demand and pricing displayed typical seasonality as revenue and profitability continued to build as expected, moving from a solid first quarter into seasonally stronger second quarter months. Our operating divisions across domestic and international markets delivered strong unique customer and item placement growth and manage pricing effectively, while providing our customers with high-quality product and high-value service. We are extremely proud of all our teams from sales, sourcing, pricing, operations and support functions coming together to deliver value to our customers, leveraging our diverse and broad supply chain, value-add processing and culinary expertise to assist our customers with managing menu development as well as product and labor-related costs. A few highlights from the second quarter include, 7.2% organic growth in net sales. Specialty sales were up 7.5% organically over the prior year, which was driven by unique customer growth of approximately 8.2%, placement growth of 11.3%, and specialty case growth of 4.7%. Excluding prior year low-margin customer attrition in Hardies total specialty cases grew approximately 5.5% year-over-year in the second quarter. Organic pounds in center-of-the-plate were approximately 2.9% higher than the prior year second quarter. Gross profit margins increased approximately 35 basis points. Gross margin in the specialty category increased approximately 50 basis points as compared to the second quarter of 2023, while gross margin in the center-of-the-plate category were essentially flat year-over-year. Jim will provide more detail on gross profit and margins in a few moments. We remain focused on making progress towards our five-year goals, which include 2028 revenue of approximately $4.6 billion to $5 billion and adjusted EBITDA of $300 million to $350 million. It is important to highlight the key investments we have put in place to provide our teams with the market footprint, product categories, infrastructure and investment and sales force necessary to grow towards achieving these targets. Regarding infrastructure, since 2019, we have added approximately 1 million square feet of distribution capacity, excluding acquisitions or approximately a 60% increase to the 2019 baseline. These include investments in future growth in high-value markets such as the expansion of our distribution centers in Dubai, Seattle, Southern California and Florida. This also includes facility expansion to create future operating synergies, such as our recently completed protein processing facility in Northern California. During the second quarter we initiated processing operations and completed the first phase of a multiple facility consolidation with the move of our Brisbane processing and distribution operation. We expect to complete the next move during the third quarter with a focus on completing the full consolidation during the first quarter of 2025. We expect to provide route, labor and technology-driven efficiencies with room for future growth in the region. Regarding our investments in sales and our unique go-to-market strategy since year-end 2021, we have increased our sales force excluding acquisitions by approximately 10% per year. Over the same timeframe and certain of our high-growth investment markets such as Florida the Middle East and California, we have grown our sales force by approximately 20% to 25% per year on average. In addition, we continue to invest in category expertise and digital and pricing tools across our markets to support our sales and operating teams' execution, and growing market share via unique item penetration new customer acquisition and improved gross profit dollars per delivery. Our investments in acquisitions categories infrastructure and sales teams, have given us the marketing and distribution footprint required for growth towards our 2028 goals. We feel we have a balanced portfolio of high-growth markets supported by ample capacity, maturing sales teams with our unique go-to-market strategy complemented by more mature markets focused on category expansion and continued above-average industry growth. For the past 40 years, we have developed a moat in our niche of the food service industry by investing in and developing the talent and expertise to sell the world's finest chefs, to be logistically nimble and best-in-class to manage just-in-time service and to manage price and margins in a volatile world. We have built a culture and strategy, designed to be the unique Foodservice Solution Company, focused on serving quality culinary-driven operators. With that, I'll 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 June 28 2024, increased approximately 8.3% to $954.7 million from $881.8 million in the second quarter of 2023. The growth in net sales was a result of an increase in organic sales of approximately 7.2% as well as the contribution of sales from acquisitions, which added approximately 1.1% to sales growth for the quarter. Net inflation was 3.3% in the second quarter, consisting of 2.7% inflation in our specialty category and inflation of 4.3% in our center-of-the-plate category versus the prior year quarter. Gross profit increased 9.9% to $229 million, for the second quarter of 2024 versus $208.4 million for the second quarter of 2023. Gross profit margins increased approximately 35 basis points to 24%, and our procurement sales pricing and operating teams delivered strong gross profit dollar growth across categories during the quarter. Selling, general and administrative expenses increased approximately 8.8% to $194.8 million for the second quarter of 2024, from $179 million for the second quarter of 2023. The increase was primarily due to higher depreciation and amortization, driven by acquisitions and facility investments and costs associated with compensation, facility costs and distribution costs to support sales growth in the current quarter. Adjusted operating expenses increased 9.8% versus the prior year's second quarter. And as a percentage of net sales, adjusted operating expenses were 18.1% for the second quarter of 2024. Operating income for the second quarter of 2024 was $33.9 million, compared to $25.3 million for the second quarter of 2023. The increase in operating income was driven primarily by higher gross profit, partially offset by higher selling, general and administrative expenses versus the prior year quarter. Income tax expense was $6.7 million for the second quarter of 2024, compared to $3.5 million expense for the second quarter of 2023. Our GAAP net income was $15.5 million or $0.37 per diluted share for the second quarter of 2024, compared to net income of $9.9 million or $0.25 per diluted share for the second quarter of 2023. On a non-GAAP basis, we had adjusted EBITDA of $56.2 million for the second quarter of 2024, compared to $51.1 million for the prior year second quarter. Adjusted net income was $17 million, or $0.40 per diluted share for the second quarter of 2024, compared to $14.4 million or $0.35 per diluted share for the prior year second quarter. Turning to the balance sheet and an update on our liquidity. At the end of the second quarter, we had total liquidity of $208.3 million comprised of $38.3 million in cash and $170 million of availability under our ABL facility. During the second quarter, we continued to make progress towards achieving our year-end 2025 capital allocation goals of 2.5 times to 3 times net debt leverage and repurchasing $25 million to $100 million of equivalent outstanding shares. As of June 28, 2024 year-to-date, we have repurchased $10 million of our outstanding common shares resulting in a reduction of approximately 264,000 shares outstanding and repaid $14.5 million of outstanding debt. June 28, 2024, total net debt was approximately $661 million inclusive of all cash and cash equivalents and net debt to adjusted EBITDA was approximately 3.2 times as compared to approximately 3.3 times as of the first quarter of 2024. 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 $3.665 billion to $3.785 billion gross profit to be between $874 million and $902 million and adjusted EBITDA to be between $208 million and $219 million. Please note for the third quarter of 2024, we expect both convertible notes maturing in December of this year and those maturing in 2028 to be dilutive for reporting purposes, and therefore, we expect the fully diluted share count to be approximately 45.9 million shares. For the fourth quarter and for the full year of 2024, we expect the remaining convertible notes maturing in 2028 to be dilutive, and therefore we expect the fully diluted share count to be approximately 45 million shares for the fourth quarter and full year reporting periods. Thank you. And at this point we'll open it up to questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] The first question we have is from Alex Slagle of Jefferies. Please go ahead.

Good morning. Hi, guys. I wanted to ask on the case growth opportunity for the back half and maybe if you could just talk to some of the drivers and pipeline visibility you have that give you confidence being able to continue driving the organic case growth like you have recently. I know consumer demand in the restaurant industry more broadly seems to have gotten a bit choppier. So I just wanted to get your thoughts and things that give you confidence into the back half.

Sure. Yeah. So Andy [ph], I mean again I think that our clientele had a pretty strong second quarter. And I think when you look at last year, as well as you came into the summertime, it was a little choppy last year. I think what we're -- it's too early to see but I think it's kind of becoming more of a typical summer where a lot of people from the US travel. And last year we saw it like come roaring back again in September. So forecasting -- we're looking at bookings, we're looking at hotel bookings, we're looking at conferences, we're looking at corporate events, we're looking at -- talking to our customers. We see a pretty normal type of third fourth quarter as last year -- hopefully coming together. And we've invested so much in what we call the hybrid sale. We put lots of teams out there. We're cross-selling. We're putting more and more trained salespeople out in the street. We've added the capacity in the warehouses. So I think it's what we're expecting. We've invested in it. And obviously it could be up or down a little bit, but we feel pretty good about where we've invested and boots on the ground and our product mix which I think is the most unique in the industry. And we continue to see new openings and I think that's where we're winning a lot. I always say restauranteurs open restaurants. People that are in the hotel business want to build hotels. And I think what you're seeing more and more is -- I'm reading some of the reports where headcounts are down in restaurants 2%, 3% depending on your sector but we also have so many openings. So I think where Chef is winning is we're winning in the openings and that could be making up for any, sort of, headwinds in customer counts.

Yes, Alex, I'll just add that we're reporting first half of the year. New customer acquisition close to 10% just under 10%. Item placement growth double digits 11% to 12% and that's been making up for a little bit of the moderation that Chris mentioned that you're seeing in terms of demand or volume especially during the summer. And so some of the investments that we've made in those areas and category growth in sales force and some of the tools we're giving them are paying off.

Got it. And Jim a follow-up if you could provide any color around potential cadence of the margin leverage we have in the back half. I know the 3Q lapse there were some unique headwinds and some timing dynamics at play as you roll off like the increase from some of the new facilities now.

Yes. The guidance implies obviously in the first half of the year our organic growth was closer to 8%, but the full year guidance implies kind of 6% to 7% organic revenue growth. So we had already built in a deceleration a moderate deceleration in the back half of the year in terms of organic revenue growth. But that's really driven by the comparisons because if you remember last summer we really had a margin issue driven by the protein markets. It wasn't a volume issue. We had really good year-over-year volume and revenue growth. And so we're comping to a little bit of a tougher comp in the back half of the year. But that's really just driven by last year's cadence versus this year.

Okay. Thanks for the help.

The next question we have is from Mark Carden of UBS. Please go ahead.

Good morning. Thanks so much taking my questions. So I want to dig in a bit more on sales your customers are holding up pretty well overall. I know last quarter you talked about some pressure at some of your casual customers. Does it remain pretty constrained to this customer segment? Or are you seeing it creep into a broader swath of your customers' restaurants?

Yes. I'm trying to recall really what you're referencing to. But again our customer base is extremely diverse. We purposely hire trained large teams to go after different types of business caterers, upscale fast casual, hotels, cruise ships all the way up to what I call super fine dining. So we purposely have the diverse clientele to kind of balance out anything that -- any headwinds in certain sectors. And as you can see the second quarter was pretty good. We felt our customer base did pretty well in an environment that we see a lot of the numbers coming out of QSR and some of the lower-priced restaurant groups. So we think our customers are pretty -- they're savvy. They understand how to -- where they have to promote, give a little bit more value. And on the higher end, I think that it is -- it's -- I think it's bifurcated. You have certain sectors that have slowed down a little bit. You see a lot of the reports coming out of other distributors and the restaurant reports and other parts of our clientele have accelerated. So I think that balanced attack is helping us put up pretty good numbers.

Great. And then inflation appears to be pretty healthy. Any unusual dynamics to call out on that front? And just how are you thinking about it now for the balance of the year?

Not really anything to call out. I mean if you look at the first quarter and second quarter together, roughly 3% type of average inflation. I would say, there's a couple of categories on the specialty side that are driving probably the difference between kind of 2% and 3%. I mean, I think everybody is aware of what's happened with olive oil and some categories like chocolate driven by weather in different parts of the world. So excluding those, you're kind of in that normal kind of 2% to 3% range. And we don't really expect anything materially different at this point going forward.

Great. Thanks so much and good luck, guys.

Thanks.

The next question we have is from Todd Brooks of The Benchmark Company. Please go ahead.

Hey, Todd.

Hey, guys. Congrats on the results in the quarter. A couple of quick questions for you. If you look across your customer base, just wondering what you're seeing as far as geographic disparities and performance. If you look at the California market, I don't know if some of that angst that we're hearing about broadly in the category has crept into the fine dining end of the sector there. And then we also hear that Florida remains a challenged market. So just wondering, if you look across the base, maybe strong versus weaker markets, and thoughts on that.

We haven't really seen a huge disparity across regions. I think we've mentioned -- I think we mentioned on our first quarter call that, we saw some of the higher-end steakhouses are down year-over-year from a traffic perspective where there's a bit of a trade down, where we're selling more high-end burgers versus the maybe the prime steaks, but we're still making good margin on those. So we see different dynamics across our regions. Our international markets are doing really well. And there's a number of domestic markets that are showing strength. Some are showing a little bit more moderation. I don't think there's any specific markets that we would call out as being significantly different. So I would just say that there's pockets of moderation across regions.

Yeah. I mean I'll add a little more color to that. I think that where there is a little bit of softness, I think in everybody reporting in the same-store sales. I think we're seeing the same thing and we're adding so many customers in Southern California where we've added a state-of-the-art facility and more boots on the ground. And I think it's the same in Florida. Florida had great numbers for us. They continue to grow. We started up pretty small. We just opened up our new facility. And I think any sort of softness in same-store sales, we're optimistic that we're making it up because we are winning, and we're adding -- continuing to add customers daily. And I think it's because of our size, too, we're relatively small, I think, to the major players that we're in Florida. And I think that the Chef go-to-market strategy, who we are, what we're selling is making up for any of that softness. And I think we've seen this in our past so many years in business, it's really a pattern that we've done pretty well even when there's some headwinds and some softness in the consumer.

That's great. And my second question and Jim, you pointed to the international markets doing very well. Can you just remind us on the distribution facility expansion timing for CME? And maybe a sense of what the old facility could handle capacity wise? And what it should be able to handle post the expansion being done? Thanks.

Yeah. Thanks for the question, Todd. Yeah. We're doubling the size of the facility. They were actually using a lot of kind of off-campus storage and freezer space which is fairly expensive. And so we'll be -- we'll finish that project probably at the end of the third quarter, early fourth quarter and then do a kind of a phased move through the fourth quarter. So we'll see most of the growth in benefits really coming into 2025 and into 2026. But yeah, we're going from about 100,000 square feet to 200,000 square feet with a lot of room for growth and that market is growing. It's very dynamic. So we're pretty excited about it. And even in their current space, they've been doing really well as they continue to grow in that market.

Okay, great. Thanks guys.

Thanks.

The next question we have is from Peter Saleh of BTIG. Please go ahead.

Great. Thanks. Congrats on the quarter. I did want to ask, it sounds like you guys are continuing to win with new restaurant openings and new restaurant formation. I think you mentioned new customer acquisitions up about 10%. Is there any reason to believe that new restaurant formation will slow or that this trend will slow at all over the coming years? Is there anything that leads you to believe that this trend won't continue?

Yeah. Great question. If I had the crystal ball, I feel a little bit better. But again, I could just go by our history and the world's changed since COVID. I think I remember even coming out of COVID, I said there's going to be an acceleration of openings because they were delayed, right, during COVID. And you see a lot of change in cities. You see the real estate dynamics of trying to reinvent buildings that were offices and trying to change those neighborhoods into more where they can add housing. We see a change in the suburbs where people are working more from home a few days a week. So I think restauranteurs continue to follow the money, and they continue to open restaurants where the traffic patterns seem to be especially with real estate developers a lot of them building restaurants to attract people to those areas, Peter. So I don't think I'm going to see much of a slowdown. I think a lot of the restaurant world is trying to reinvent itself to in a change. There's more takeout. There's more -- what we have seen as a proliferation of different types of restaurants and different types of food away from home. I mean, I continue to believe that people really are too busy to want to cook. Even when they go into the markets, they're buying a lot of prepared foods. And I think more and more of our great chefs, restauranteurs are getting more and more into that business. And I think that's making up for maybe where there is softness in the typical sit-down restaurants that people are used to. The other side of that business has accelerated and it's better food that you could take out or get delivered, or it's food that you could sit down and eat or you could take it home. So we're seeing a tremendous proliferation of new types of outlets for us to sell.

Great. And then just on the investment in the sales team, 10% annual sales growth or sales team growth over the past several years. Given your targets into 2028, are you anticipating to accelerate that or keep that kind of pace of investment in the sales team the same?

Yeah. I mean, I think the pace is what we budgeted and forecasted to spend. We're looking at the dynamics of our business. There's been so much talk about online will replace salespeople, which we think online is making salespeople more efficient and giving them more time to do what we really want them to do is be consultants. And I think I've been beating that drum for the last four or five years that the crystal ball says that online is going to get better and better. Younger people as they come into the industry are going to use a lot of those tools because they're so used to it being on an app and researching. So we are investing in better information, more information, online being a partner to our customer, assisting them in menu development, assisting them and chefs are curious, they're constantly wanting to learn and constantly wanting to invent. So we're trying to be that partner, that's supplying that information. And again, we continue to add people because we see that for what we do, and it might not work for everybody's business, they want to see somebody who is talking to them and we have a tremendous amount of talent that mans the phone still. And obviously, we could chat, if you want to be just online. So we like to give our customers choices and we think that we found a winning balance for now it can always change that really works for our customers and it's driving more volume to all our Chef customers, all our chef OpCos.

Thank you very much.

The next question we have is from Kelly Bania of BMO Capital Markets. Please go ahead.

Hi. Good morning. This is Ben Wood on for Kelly. Thank you for taking our questions. So first we just wanted to dig in a little bit more on the unique customer growth and the placement growth and are there specific regions or markets that are driving that? Or is that fairly consistent throughout your markets? Just hoping you can help us frame how maybe high growth markets are comparing to your mature markets and if those high-growth areas you're investing in how they are tracking against your expectations?

Yes. Thanks for the question, Ben. Yes we always have – like Chris mentioned in his prepared remarks, we always have in our portfolio a mix of more mature markets like the Northeast and other areas that we've been operating for 40 years. And then our newer higher growth investment markets that we've talked about, as we're coming out of our heavy investment cycle like Florida and Southern California, Dubai, Seattle some of our smaller markets like Nashville and Michigan and that are – we're making investments in and we have higher growth. So yes, I mean it's like any portfolio of businesses, where your high-growth markets are going to contribute more to unique customer acquisition, your mature markets, you're growing more through category expansion and growing more relevance with your customers through item penetration, selling more items, as well as growing in the outlying markets call it the higher income suburbs around the major cities and that's how you grow in your mature markets. So we have 54 locations in 32 or 33 operating markets now. So there's always a good balance between your more mature markets and then your high-growth markets. And I think we expect that the big investments that we've made in capacity in infrastructure and sales force that we talked about are going to drive a lot of our growth going forward.

Okay. That's helpful. And then just a follow-up on maybe some of the new restaurant openings you're seeing for your core end customers. Do you guys have an estimate on the pace that you're currently seeing in new restaurant openings? And how does that compare to maybe the current levels? It sounds like Chris has mentioned that it was faster than normal potentially but just wanted to make sure I understood that correctly.

Yes, again, I think our numbers – we're growing in new markets. So for us it's new accounts, right? So I don't think our systems differentiate between a new customer and a new opening. So I think the numbers are a little fuzzy there. So I think Jim said before, we had 10% increase in customer base overall. So part of that are brand new openings, and part of those are a lot of new customers for Chef. But what I could tell you anecdotally what we've seen is a lot of development. When I look at Florida, we see tremendous development in new neighborhoods new buildings and they're all adding restaurants. And restaurants, I think, our -- how developers use as a reason for someone to come look at their buildings. So I just continue to see as especially in the American market, Dubai, we have tremendous amounts of openings constantly. But in the U.S. market, you kind of see still a shifting of where people are choosing to live. I still don't think we're at the -- what anyone would call normal right? I don't know what normal is anymore. People are working hybrid -- are they all going to come back to the office five days a week? So I think restaurant tours and developers are kind of following the where people are migrating to live and they're building restaurants and they're building apartments and they're building homes. And I don't see that slowing down. I mean anything could happen but I think it's at a pretty healthy pace.

Great. Thank you very much.

Thanks, Ben.

The next question we have is from Andrew Wolf of C.L. King. Please go ahead.

Hi. Good morning. thank you. I wanted to ask about margins. First the gross margin at Specialty expanded nicely. I think you said 50 bps and I think it was kind of flattish last quarter. Could you just give us a sense of what accounted for the nice increase in the margin? And is it sort of forward buying inflation back or mix or German or just kind of randomness in the inventory management? And sort of a feeling for sustainability?

Yes. Thanks for the question Andy. I think it just goes back to kind of the improvement we started to drive coming out of the summer last year into September in the fourth quarter. But it's also the fruition of a lot of work that our pricing and procurement teams and our sales management teams have been doing around margin management. We've invested in a lot of tools a lot of technology and a lot of focus on margins after we experienced some of that volatility last year. And that's just continued. And so it's everything from reducing errors in inventory management that lead to waste that impact your margins. It's everything from further integration of our acquisitions and driving the cross-sell. Texas is a good example, as we further integrated our sales teams and our inventory with our CW specialty business and Hardie's the produce business, we've been able to improve overall margins there as we're selling more expensive specialty boxes on their trucks, as we're growing relevance with our customers by having the produce category. And then, obviously it's not specialty related but we invested and built an Allen Brothers processing plant in Texas, and we're selling more expensive protein boxes on those trucks through our processing facility there. So it's really a combination of things and a lot of really good work by a lot of our teams coming together and we're just seeing that continue.

Okay. Thanks. That's helpful. Same question, but looking at the kind of adjusted expense ratio it did expand again but by a little less than last quarter. And obviously, with all the new facilities there's a lot of over -- unabsorbed overhead and maybe even some of the variable costs are obviously maybe not optimized yet. But what is the outlook there? I mean are you going to have slow progress? Is that sort of just a slow and steady as the centers fill up? Or are there other parts of the business where maybe labor inflation or other issues are still kind of impacting overall expense leverage?

No, we talked about it earlier when we did the guidance, Andy. If you recall, the operating leverage is weighted to the back half of the year, mainly the fourth quarter. So, we got a modicum this quarter. We expect a little bit more in Q3 but in Q4, is where we expect because we'll fully lap some of the big facility and the expenses -- the operating expenses that are associated with those big facility investments really in the back half of the year and then into 2025. So, similar to our CapEx is more heavily weighted to the first half of the year because we're finishing those projects. Our operating leverage related to the expenses is weighted towards the back half of the year and the guidance implies that. It's really nothing more than that. Obviously, in the fourth quarter, we normally get the most operating leverage just driven by the top line power of the fourth quarter versus really the rest of the year.

Okay, got it. Thank you. That’s it from me.

Thanks Andy.

The next question we have is from Ben Klieve of Lake Street Capital Markets. Please go ahead.

All right. Thanks for taking my questions and congrats on a nice quarter here. Jim I had a follow-up question for you. You noted that you are seeing some customers eating nice burgers instead of nice steaks. And I'm wondering if you can comment a bit on kind of the impact of the beef complex on your business, specifically has the kind of persistent increase in beef prices really flowed through your financials as you would expect? And then as the -- and then also looking forward as the price of beef versus other proteins really just continues to widen, is there anything to call out on a forward-looking outlook specifically related to beef?

Well, I mean I think the first thing I would add is that beef prices in general haven't gone up as much as everybody expected. And actually -- while the year-over-year price inflation we reported was about 4%, really it was very -- it was flat versus the first quarter sequentially and fairly flat versus the back half of last year. So, actually a lot of the middle meats and the middle cuts are actually -- prices have been moderating. And even in the last couple of months, even the higher end has moderated a little bit. So, the year-over-year is a little misleading versus what's happening in the market right now. You're not seeing incredible spikes. And I think a lot of that is driven by the fact that retail demand is lower and that really drives the price of beef.

Thanks, Ben.

Thank you. At this time, there are no further questions. And I would like to hand the call back over to Chris Pappas for any closing comments.

Sure. Well, we hope everybody is having a great summer and we thank everybody for joining us on our call, and we look forward for everyone joining on our next quarter. Thank you very much.

Thank you.