Core Viewpoint - Investors in US Foods Holding Corp. (USFD) should closely monitor the stock due to significant movements in the options market, particularly the high implied volatility of the Dec 20, 2024 $22.50 Put option [1] Company Analysis - US Foods is currently rated as Zacks Rank 3 (Hold) within the Food-Miscellaneous industry, which ranks in the bottom 38% of the Zacks Industry Rank [3] - Over the past 60 days, two analysts have raised their earnings estimates for the current quarter, while one has lowered theirs, resulting in a flat Zacks Consensus Estimate of 78 cents per share for the current quarter [3] Options Market Insights - The high implied volatility surrounding US Foods suggests that options traders are anticipating a significant price movement, which could indicate an upcoming event that may lead to a substantial rally or sell-off [2][4] - Seasoned options traders often seek out options with high implied volatility to sell premium, aiming to benefit from the decay of the option's value if the underlying stock does not move as much as expected by expiration [4]

Financial Data and Key Metrics - Adjusted EBITDA grew by 13% YoY, with a 27 basis point expansion in adjusted EBITDA margin to 4.7% [8][22] - Adjusted diluted EPS increased by 21.4% to $0.85, driven by strong free cash flow deployment towards share repurchases [24] - Net sales increased by 6.8% to $9.7 billion, driven by a 3.8% growth in total case volume and a 3% impact from food cost inflation and mix [22] - Free cash flow for the first nine months of the year was $658 million, supported by disciplined working capital management [26] Business Line Performance - Independent restaurant case volume grew by 4.1%, marking the 14th consecutive quarter of market share gains [8][22] - Healthcare volume growth remained strong at 5.7%, while hospitality growth accelerated to 3% [22] - Pronto, the small truck delivery service, is now live in 40 markets and is expected to deliver nearly $700 million in annualized sales this year [16] Market Performance - The Southeast region experienced a nearly 100-basis point headwind to independent volume growth due to hurricane impacts [10] - Excluding the Southeast, organic independent volume growth was modestly higher than the second quarter growth rate [10] - Monthly foot traffic was down approximately 3.5% for the third quarter but improved sequentially throughout the quarter [10] Strategic Initiatives and Competitive Positioning - The company is focused on four strategic pillars: culture, service, growth, and profit [12][14][16][18] - Descartes Routing technology is now live in 15 markets, with plans to expand to 11 more by year-end, improving distribution productivity [14] - The company is actively exploring strategic alternatives for its CHEF'STORE business and has begun discussions with potential buyers [19] Management Commentary on Operating Environment and Outlook - Management highlighted the challenging macro environment and hurricane impacts but expressed confidence in the company's ability to control controllable factors [8] - The company updated its 2024 guidance, expecting net sales of $37.7 billion to $38 billion, adjusted EBITDA of $1.72 billion to $1.74 billion, and adjusted diluted EPS of $3.05 to $3.15 [29] - Management remains confident in achieving the 2025-2027 long-range plan, which includes a 5% sales growth CAGR, 10% adjusted EBITDA growth CAGR, and 20% adjusted diluted EPS growth CAGR [33] Other Important Information - The company repurchased $580 million worth of shares in Q3 and an additional $160 million in Q4, with $238 million remaining under its $1 billion share repurchase program [9][27] - The company issued $500 million in senior notes due 2033 at 5.75% to address debt maturities and capture $9 million in annualized interest savings [28] Q&A Session Summary Question: Private Label Penetration and Independent Restaurant Trends - Private label penetration is at 52%, with strong adoption across customer types, particularly independent restaurants [35] - Independent restaurant case growth accelerated by over 100 basis points after hurricane impacts subsided, with similar improvements in chain and healthcare volumes [36] Question: Guidance and P&L Performance - The company is guiding to the high end of its full-year EBITDA range, driven by strong execution across the P&L, including gross profit expansion and operating expense productivity [38][39] Question: Salesforce Growth and Productivity - Salesforce growth is running in the mid-single digits, with strong new account generation and some green shoots in penetration trends [42] - Warehouse productivity improved by 3.5%, with further gains expected as the company continues to roll out UMass technology [44][45] Question: COGS Initiatives and Vendor Collaboration - The company expects to deliver $230 million in COGS savings from 2022-2024, with strong vendor collaboration supporting future savings [49][50] Question: Healthcare and Hospitality Pipeline - The healthcare and hospitality pipelines remain strong, with $100 million in annualized sales onboarded during the quarter [51][52] Question: Descartes Rollout and Hospitality Demand - The Descartes rollout is progressing well, with half of the company's miles expected to be on the system by year-end [54] - Hospitality demand was impacted by hurricanes but showed improvement as the quarter progressed [55] Question: Case Growth and Share Repurchase Cadence - Total case growth for 2024 is now expected to be 4%-4.5%, with hurricane impacts and softer foot traffic contributing to the adjustment [57][58] - Share repurchases are expected to be front-end loaded, with the company toggling between M&A and buybacks based on opportunities [63][64] Question: Pronto Business and Productivity Gains - Pronto is expected to contribute $700 million in annualized sales, with 20% of that being incremental [78] - Productivity gains are expected to continue within the 3%-5% range, driven by supply chain and administrative efficiencies [71] Question: Salesforce Compensation and Indirect Cost Savings - Salesforce compensation changes have been well-received, with increased variable pay driving desired performance outcomes [73][74] - The company is on track to achieve $60 million in indirect cost savings by 2027 [75] Question: Local Case Volume Assumptions - The company remains confident in its ability to achieve 5%-8% case growth, even if market growth is in the 1%-2% range [85][86]

US Foods (USFD) came out with quarterly earnings of $0.85 per share, beating the Zacks Consensus Estimate of $0.82 per share. This compares to earnings of $0.70 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 3.66%. A quarter ago, it was expected that this company would post earnings of $0.94 per share when it actually produced earnings of $0.93, delivering a surprise of -1.06%.Over the last four quarters, the company has surp ...

Financial Data and Key Metrics Changes - In Q2 2024, net sales increased by 7.7% to $9.7 billion, driven by total case volume growth of 5.2% and food cost inflation of 2.9% [17] - Adjusted EBITDA grew by 13.2% to a record $489 million, with an adjusted EBITDA margin expanding by 25 basis points to an all-time high of 5% [18] - Adjusted EPS increased by 17.7% to $0.93, continuing to grow at a faster rate than adjusted EBITDA [18] Business Line Data and Key Metrics Changes - Independent restaurant volume grew by 5.7%, including 250 basis points from acquisitions, marking the 13th consecutive quarter of market share gains [17] - Healthcare growth remained strong at 6%, while hospitality growth improved to 2.1% due to successful onboarding of new business [18] - Adjusted gross profit increased by 8% to $1.7 billion, with private label brands growing to over 52% penetration with independent customers [13][18] Market Data and Key Metrics Changes - Restaurant foot traffic was down approximately 3% during Q2 2024, impacting overall market dynamics [8] - Despite the headwinds, the company captured profitable market share, particularly in independent restaurants [8] - The company expects to exceed its 1.5 times market growth goal for restaurants for the full year [12] Company Strategy and Development Direction - The company aims to become the undisputed best in the industry, focusing on safety, growth, profitability, and digital leadership [5] - A financial algorithm for 2025 through 2027 was laid out, targeting 5% CAGR in sales, 10% CAGR in adjusted EBITDA, and 20% annual growth in adjusted diluted EPS [6] - The company is committed to deploying over $4 billion of capital, with approximately half allocated for share repurchases [6] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a softer macro environment but expressed confidence in achieving the 2% to 4% organic case volume target for the year [28] - The company remains focused on controlling internal factors to drive growth despite external challenges [28] - Management expects continued strong performance in healthcare and hospitality sectors, with a robust pipeline of new business [30] Other Important Information - The company has authorized a $1 billion share repurchase program, with $21 million repurchased in June and approximately $61 million in Q3 to date [22] - The company is exploring strategic alternatives for CHE'STORE, emphasizing support for the business and its associates during the process [14] Q&A Session Summary Question: Can you elaborate on end demand and customer type evolution? - Management expressed confidence in achieving the 2% to 4% case growth target despite a softer macro environment, noting lower foot traffic but continued growth in healthcare and hospitality [28][30] Question: What adjustments are being made to the business in the current backdrop? - Adjustments include modifications to the TM compensation plan to incentivize aggressive growth and a focus on driving private label brand growth [31] Question: Can you provide insights on market share gains and competition? - Management confirmed 13 consecutive quarters of market share gains, supported by third-party data, and emphasized the ability to generate new accounts despite macro challenges [36][37] Question: How is the company addressing increased promotional activity in the market? - Management acknowledged increased promotional activity but stated it has not hindered their growth, highlighting their own promotional strategies [47] Question: What is the outlook for hospitality growth in the back half of the year? - Management expects continued strengthening in hospitality growth, supported by a strong pipeline of new business [45] Question: Can you provide an update on the MOXe platform adoption? - MOXe is fully rolled out across independent restaurants, with customers buying 10% more on average, and it is aiding in private label penetration [68][69]

US Foods (USFD) came out with quarterly earnings of $0.93 per share, missing the Zacks Consensus Estimate of $0.94 per share. This compares to earnings of $0.79 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of -1.06%. A quarter ago, it was expected that this company would post earnings of $0.53 per share when it actually produced earnings of $0.54, delivering a surprise of 1.89%. Over the last four quarters, the company has sur ...

Financial Data and Key Metrics Changes - First quarter net sales increased by 4.8% to $8.9 billion, driven by total case volume growth of 4.2% and food cost inflation of 1.5% [9] - Adjusted EBITDA grew by 5.6% from the prior year to $356 million, slightly above the high end of guidance, despite a $20 million negative impact from labor disruptions and weather-related issues [149][128] - Adjusted gross profit grew nearly 7% to $1.5 billion, with adjusted EBITDA margin remaining largely unchanged at 4% [125][128] Business Line Data and Key Metrics Changes - Independent restaurant volume increased by 4.6% overall and 2.9% organically, while health care and hospitality grew by 6.4% and 0.9%, respectively [9] - The company achieved a record in cases per mile in February and March, with a 4% improvement in cases per mile compared to Q1 2023 [6] - Private label penetration increased by 90 basis points year-over-year to over 52% [26] Market Data and Key Metrics Changes - Despite a slight year-over-year decrease in restaurant foot traffic, broadliners increased their volume within the overall food service distribution channel, indicating industry resilience [23] - The company expects hospitality to accelerate through Q2 and the second half of the year as new customers are onboarded [9][47] Company Strategy and Development Direction - The company is focused on accelerating profitable growth and gaining market share, aiming for 1.5x market growth for restaurants in 2024 [119] - Continued investments in operational rigor and technology modernization are expected to enhance service levels and delivery efficiency [24][117] - The Pronto small truck delivery service is positioned as a competitive differentiator, with expectations of approximately $600 million in annualized sales [152] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in the macro environment but expressed confidence in the company's ability to control outcomes and gain profitable market share [33][30] - The company remains focused on executing its strategy and maintaining disciplined capital deployment to drive long-term shareholder value [131] - Management expects adjusted EBITDA for fiscal year 2024 to be in the range of $1.69 billion to $1.74 billion, reaffirming guidance despite a softer macro environment [130] Other Important Information - The company repurchased $13 million of shares during the first quarter, with plans to increase share repurchases through the remainder of the year [11][23] - The company is set to host an Investor Day on June 5, where it will share long-range plan targets [3][31] Q&A Session Summary Question: Impact of softer traffic environment on internal targets - Management noted that while there have been challenges, the company has opportunities to focus on controllable factors like gaining profitable market share [33] Question: Growth expectations in health care and hospitality - Management expects hospitality to accelerate in Q2 and the second half of the year, driven by onboarding new customers [47] Question: Size of sales force and impact on share gains - Management believes that a low to mid-single-digit addition to the sales force is appropriate and will not hinder growth [41] Question: Performance of CHEF STORE in the current macro backdrop - CHEF STORE has returned to case growth, and the company plans to continue adding stores [60] Question: Increase in private label penetration - The increase is attributed to a combination of factors, including improved sales force confidence and compensation changes [65] Question: M&A outlook and impact on guidance - Management indicated that while IWC will contribute to growth, they do not need to pursue additional M&A aggressively at this time [145]

Disclaimer Page We report our financial results in accordance with U.S. generally accepted accounting principles ("GAAP"). However, this presentation includes the following non-GAAP financial measures: Adjusted Gross profit, Adjusted Operating expenses, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net income, Adjusted Diluted Earnings Per Share (EPS), Net Debt and Net Leverage Ratio. These non-GAAP financial measures exclude the impact of certain items and, therefore, have not been calculated i ...

Financial Performance - Net sales increased by 4.8% to $8.9 billion, driven by case volume growth and food cost inflation of 1.5%[3] - Total case volume increased by 4.2%, with independent restaurant case volume rising by 4.6%[3] - Gross profit rose by 4.9% to $1.5 billion, with gross profit as a percentage of net sales at 16.7%[4] - Adjusted EBITDA increased by 5.6% to $356 million, with an adjusted EBITDA margin of 4.0%[6] - Net income available to common shareholders was $82 million, an increase of $7 million compared to the prior year[6] - Adjusted net income for the period was $134 million, up 7.2% from $125 million year-over-year[36] - The company reported a diluted EPS of $0.33, compared to $0.32 in the prior year, marking a 3.1% increase[36] Operating Expenses and Cash Flow - Operating expenses increased by 7.4% to $1.3 billion, primarily due to higher distribution costs and labor costs[5] - Cash flow from operating activities was $139 million, a decrease of $140 million from the prior year[7] - Cash flows from operating activities for the period were $139 million, down from $279 million in the same quarter last year[33] Debt and Liabilities - Net Debt at the end of the quarter was $4.4 billion, with a Net Debt to Adjusted EBITDA ratio of 2.8x[8] - Total Debt as of March 30, 2024, is $4,701 million, a slight decrease from $4,810 million on April 1, 2023[40] - Net Debt as of March 30, 2024, is $4,434 million, compared to $4,518 million on April 1, 2023[40] - Total liabilities rose to $8,565 million, up from $8,438 million at the end of the previous year[28] Assets and Guidance - Total assets increased to $13,390 million as of March 30, 2024, compared to $13,187 million at the end of December 2023[28] - The company reaffirmed its Fiscal Year 2024 guidance, projecting net sales of $37.5 to $38.5 billion and adjusted EBITDA of $1.69 to $1.74 billion[15] Acquisitions and Costs - The company closed the acquisition of IWC Food Service for approximately $220 million, expanding its presence in the Nashville area[10] - The company incurred restructuring costs and asset impairment charges of $13 million during the quarter[36] - The company incurred acquisition and integration related costs of $3 million for the 13 weeks ended March 30, 2024[10] Financial Metrics - Adjusted EBITDA for the trailing twelve months is $1,578 million, up from $1,406 million for the same period last year[40] - The Net Leverage Ratio remains stable at 2.8 as of March 30, 2024, unchanged from December 30, 2023[40] - The company’s financial metrics indicate a positive trend in operational performance with a significant increase in Adjusted EBITDA year-over-year[40] Other Financial Information - The total cash, cash equivalents, and restricted cash as of March 30, 2024, is $267 million[40] - The CEO sign-on bonus was $3 million for the 13 weeks ended April 1, 2023[10] - Adjusted Diluted EPS is calculated using Adjusted net income divided by weighted average diluted shares outstanding[10] - The company’s income tax provision is adjusted for the tax effect of pre-tax items excluded from Adjusted net income[10]

Cautionary Statements Regarding Forward-Looking Information Statements in this presentation which are not historical in nature are "forward-looking statements" within the meaning of the federal securities laws. These statements often include words such as "believe," "expect," "project," "anticipate," "intend," "plan," "outlook," "estimate," "target," "seek," "will," "may," "would," "should," "could," "forecast," "mission," "strive," "more," "goal," or similar expressions (although not all forward-looking st ...

Financial Performance - In fiscal year 2023, total net sales reached $35.6 billion, an increase of 4.5% from $34.1 billion in fiscal year 2022[34] - Net sales increased by $1,540 million, or 4.5%, to $35,597 million in fiscal year 2023, driven by a 4.4% increase in total case volume[187] - Gross profit increased by $656 million, or 11.9%, to $6,148 million, with a gross profit margin of 17.3% in fiscal year 2023[168] - Operating income for fiscal year 2023 was $1,017 million, representing an increase from $594 million in fiscal year 2022[171] - Net income available to common shareholders was $499 million, with a net income per share of $2.09 for fiscal year 2023[171] - Free Cash Flow for fiscal year 2023 was $831 million, up from $500 million in fiscal year 2022[180] - Adjusted EBITDA for fiscal year 2023 was $1,559 million, compared to $1,310 million in fiscal year 2022[180] - The company reported a cash flow from operating activities of $1,140 million in fiscal year 2023, an increase from $765 million in fiscal year 2022[180] Sales and Customer Base - Sales to the top 50 customers represented approximately 44% of net sales, with no single customer accounting for more than 2% of total sales[22] - Group purchasing organizations (GPOs) contributed approximately 23% of net sales in fiscal year 2023[23] - Over 80% of sales utilized digital solutions, enhancing customer relationships and increasing product purchases[28] - The GREAT FOOD. MADE EASY.™ strategy focuses on product innovation and customer experience, aiming to drive growth in target customer segments such as independent restaurants and healthcare[26] Acquisitions and Expansion - The company completed the acquisition of Renzi Foodservice for $142 million and Saladino's Foodservice for $56 million, expanding its reach into New York and California[31] - The company completed two acquisitions in 2023: Renzi Bros., Inc. and Saladino's, Inc.[123] Workforce and Labor Relations - As of December 30, 2023, the company employed approximately 30,000 associates, with about 69% being non-exempt hourly workers[49] - The company is party to 57 collective bargaining agreements covering 6,300 associates, which is 21% of the workforce[50] - During fiscal year 2023, 14 collective bargaining agreements covering approximately 1,100 union associates were renegotiated, with 16 agreements covering about 1,200 union associates set for renegotiation in fiscal year 2024[50] - The company emphasizes the importance of technology in enhancing customer relationships and streamlining operations, particularly for Millennials and Generation Z consumers[30] - The company is committed to building a diverse and inclusive workforce, with approximately 6,300 associates being members of local unions associated with the International Brotherhood of Teamsters and other labor organizations[53] Operational Infrastructure - The company operates approximately 250,000 customer locations nationwide, supported by over 70 distribution facilities and a fleet of over 6,500 trucks[19] - The company operates 74 distribution facilities totaling over 20 million square feet, with 57 owned and 17 leased[147] - The company operates 90 cash and carry locations, all of which are leased, totaling over 2 million square feet[147] - The company has 13 broadline support business production facilities, with 9 owned and 4 leased, totaling over 1 million square feet[147] Financial Obligations and Debt - The company had $4.7 billion of indebtedness outstanding as of December 30, 2023[105] - Approximately 30% of the net principal amount of the company's indebtedness accrued interest at variable rates as of December 30, 2023[110] - The company’s ability to make scheduled payments on its debt depends on ongoing financial and operating performance[106] - The agreements governing the company’s indebtedness contain restrictions that may impact its ability to operate and execute its business strategy[108] - A substantial portion of the company's cash flows from operations may be dedicated to the payment of principal and interest on its indebtedness, reducing funds available for other purposes[110] Regulatory and Compliance Risks - The company is subject to significant governmental regulation, which may lead to increased compliance costs and financial obligations[88] - The company is subject to various U.S. federal, state, and local environmental laws and regulations, impacting its operational compliance[47] - The company faces risks from climate change and related regulatory measures, which could increase operational costs and disrupt business[84] - Changes in tax laws and regulations may adversely impact the company's effective tax rate and financial condition[127] Market and Economic Conditions - The U.S. foodservice distribution industry is sensitive to economic conditions, with potential adverse impacts from inflation and supply chain disruptions affecting consumer spending[70] - The company operates in a low-margin business environment, where commodity cost volatility can significantly affect profitability, especially during inflationary periods[71] - Competition is intense, with low barriers to entry, leading to potential loss of customers to distributors offering lower prices or better service[72] - Changes in consumer eating habits, including a shift towards sustainable and locally grown products, may reduce demand for the company's offerings[82] Cybersecurity and Technology - The company has implemented cybersecurity measures, but risks remain regarding potential breaches that could impact operations and financial results[115] - Failure to comply with data privacy regulations could result in substantial fines and reputational damage[120] - The company may incur significant costs related to protecting against or remediating cyberattacks[117] - The company has a comprehensive cybersecurity program aligned with the NIST Cyber Security Framework, focusing on risk management and incident response[139] - The company has not experienced any cybersecurity incidents that materially affected its business strategy or financial condition[142] Shareholder Returns - The company has repurchased 7,396,224 shares at an aggregate price of approximately $294 million under its Share Repurchase Program[157] - As of December 30, 2023, approximately $192 million remains authorized for share repurchases under the program[157] - The company’s Board of Directors has approved a Share Repurchase Program allowing for the repurchase of up to $500 million of its common stock[157] - The company has not paid any dividends on its common stock since it began trading publicly in 2016[154]