US Foods(US:USFD)2022-08-12 02:58Financial Data and Key Metrics Changes - Net sales for Q2 2022 grew by 15% year-over-year, reaching $8.8 billion [10][35] - Adjusted EBITDA increased by 11% to $368 million, marking the best quarter relative to 2019 since the pandemic began [34][35] - Adjusted diluted EPS rose to $0.67 [35] - Total case volume was flat compared to the prior year, with food cost inflation at 15% [35] Business Line Data and Key Metrics Changes - Independent case volume was flat year-over-year after a significant growth of nearly 80% in the prior year [38] - Hospitality experienced a 35% growth, while Healthcare grew by 2.4% [38] - Chain volume declined by 8.7%, influenced by strategic exits of lower-margin accounts [38][67] Market Data and Key Metrics Changes - Total case volume in Q2 2022 was approximately 6% below 2019 levels, showing a 200 basis point improvement from Q1 [40] - Independent case growth was 4% above 2019, while Healthcare cases were about 7% below and Hospitality was approximately 15% below 2019 [40] Company Strategy and Development Direction - The company is focused on executing its long-range plan, which includes profitable share gains, margin expansion, and operational efficiency improvements [31][30] - US Foods is investing in enhancing customer experience through digital tools and expanding its CHEF'STORE footprint [12][13] - The company aims to reduce its environmental footprint with a goal to cut greenhouse gas emissions by 32.5% by 2032 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the challenging macro environment, including inflation and labor market issues [9][24] - The company is optimistic about the recovery of Healthcare and Hospitality sectors, which are expected to contribute to top-line growth [24][46] - Management reaffirmed guidance for 2022 fiscal adjusted EBITDA and adjusted diluted EPS, despite anticipating higher interest expenses [48] Other Important Information - The company is committed to reducing turnover and improving employee retention through various initiatives, including flexible shift lengths and leadership training [41][74] - US Foods is strategically exiting lower-margin accounts to focus on more profitable customer types [67] Q&A Session Summary Question: Independent case growth acceleration - Management noted that independent restaurant growth is driven by a balanced mix of increasing penetration with existing customers and new customer acquisition, with no significant change in customer behavior trends [55][56] Question: Impact of exiting lower-margin accounts - Management explained that the decision to exit lower-margin accounts is part of a strategy to focus on profitable growth, and they expect case volume to improve in the second half of the year [62][67] Question: Labor turnover and efficiency improvements - Management discussed efforts to reduce turnover through flexible shift lengths and leadership training, emphasizing the importance of strong leadership in retaining employees [74][75] Question: Seasonality in the restaurant industry - Management acknowledged a return to some normalcy in business rhythms but noted that it is still difficult to declare a definitive trend due to ongoing volatility [76][77] Question: Food cost inflation expectations - Management indicated that while food cost inflation has slowed, they do not expect deflation in the near term and are actively managing inflation impacts on demand [78][79] Question: Strategic vendor management - Management expressed confidence in the progress of strategic vendor management initiatives, highlighting productive conversations that have led to mutual wins [100][103]