US Foods(US:USFD)2024-08-08 17:54Financial 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]