US Foods(USFD)2024-11-07 18:53Financial 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 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 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 38 billion, adjusted EBITDA of 1.74 billion, and adjusted diluted EPS of 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 160 million in Q4, with 1 billion share repurchase program [9][27] - The company issued 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 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 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]