[Management View]
Chefs' Warehouse management emphasized strategic expansion in geographic and product categories, addressing protein inflation and customer base resilience. The company is expanding operating capacity in the Middle East and entering the Texas market, reflecting multi-year growth strategies. Robust digital adoption among specialty product customers and the Atalco acquisition position the company for future market share gains.

[Outlook]
Management provided performance guidance with a cautiously optimistic outlook for the holiday quarter, citing strong holiday bookings. Future plans include continued investment in organic market expansion in Texas, Florida, California, and Richmond, VA, with expectations of great ROI and growth.

[Financial Performance]
Year-over-year protein margins were down, but gross profit dollar growth was strong due to effective inflation management. Unique customer growth was impacted by Texas customer attrition and temporary Middle East shutdowns. The Middle East operations showed double-digit growth year-over-year.

[Q&A Highlights]
Question 1: What are you seeing in terms of inflation and beef costs, and how is it impacting margins?
Answer: Elevated inflation was noted year-over-year, with protein prices firm throughout the year. Excluding Texas transition, inflation was around 5% year-over-year. Protein margins were down, but gross profit dollar growth was strong due to strategic pricing management. The company sells high-quality proteins to top restaurants, effectively navigating the inflationary environment.

Question 2: Has the Chef Middle East business started to recover after the temporary step back?
Answer: Unique customer growth was impacted by Texas attrition and Middle East shutdowns during the Qatar conflict. Customers are coming back online, and the business continues to grow nicely. Capacity expansion in Dubai, Qatar, and Oman is driving double-digit growth, with a strong protein program enhancing regional growth.

Question 3: Can you discuss the acceleration in growth between mature and higher growth markets?
Answer: Larger markets have more impact, but smaller markets show higher percentage growth. The company is accelerating growth across categories and smaller markets, executing the vision of being a partner to chefs from casual to fine dining. Natural attrition is 7% to 10%, emphasizing the importance of growing the account and category base.

Question 4: How does the Atalco acquisition align with Chef's philosophy and margin structure?
Answer: Atalco is a high-quality company with a narrow but complementary high-end product catalog. The acquisition is a strategic fit, expanding Chef's presence in Colorado and New Mexico. The company plans to hire salespeople and expand offerings, expecting significant growth over the next ten years.

Question 5: How is digital penetration progressing towards long-term goals?
Answer: Digital tools are enhancing sales force efficiency, supporting the go-to sales strategy. Adoption is over 60% on the specialty side, driving penetration and providing great ROI.

Question 6: Are there any concerns regarding business-related travel impacting results?
Answer: While there are complaints about reduced Canadian travel, domestic tourism remains strong. The Middle East continues to have great tourism, and overall results are positive despite travel noise.

Question 7: What is the outlook for the holiday season based on current trends?
Answer: Management is cautiously optimistic, with strong holiday bookings reported. Despite potential sentiment changes, the outlook for the holiday quarter is positive.

Question 8: How might industry consolidations impact Chef's Warehouse?
Answer: Historically, consolidations have led to customer hedging and new business opportunities for Chef's Warehouse. If a major deal goes through, it could be beneficial as customers seek alternatives.

Question 9: Are there any operational challenges in organic growth initiatives in Texas, Florida, and California?
Answer: While challenges are inherent in service companies, the team is optimistic about growth in these markets. Texas presents significant growth opportunities, and investments in Florida and California are yielding great ROI.

[Sentiment Analysis]
Analysts and management maintained a cautiously optimistic tone, highlighting strategic growth and resilience amid inflation. The sentiment was positive regarding holiday bookings and future growth opportunities.

[Quarterly Comparison]
| Metric | Q3 FY2025 | Q3 FY2024 | YoY Change |
|--------|-----------|-----------|------------|
| Protein Margins | Down | - | - |
| Gross Profit Dollar Growth | Strong | - | - |
| Unique Customer Growth | Impacted | - | - |
| Middle East Growth | Double-digit | - | - |

[Risks and Concerns]
Risks include inflationary pressures, customer attrition, and geopolitical impacts in the Middle East. Concerns about industry consolidations and travel-related impacts were noted, but management remains optimistic about mitigating these risks.

[Final Takeaway]
Chefs' Warehouse is strategically expanding its geographic and product footprint, effectively managing inflationary pressures while maintaining customer base resilience. The company is poised for future growth with strong digital adoption and strategic acquisitions. Despite challenges, management's cautious optimism and strategic focus position the company well for continued success in the upcoming quarters.