US Foods(US:USFD)2024-02-15 19:50Financial Data and Key Metrics Changes - The company achieved record full year 2023 adjusted EBITDA of $1.56 billion, driven by strong case growth and market share gains, with an adjusted EBITDA margin expansion of 53 basis points [19][25] - Net sales grew by 4.5% to $35.6 billion, with total case volume increasing by 4.4%, including a 6.9% rise in independent restaurant case volume [20][19] - Adjusted diluted EPS increased by 23% to $2.63, reflecting strong operational execution [25][19] Business Line Data and Key Metrics Changes - Independent restaurant case volume grew by 6.9%, healthcare volumes increased by 7.2%, and hospitality volumes rose by 8.9% [20] - Adjusted gross profit increased by 9% to $6.1 billion, with adjusted gross profit per case rising by 4.5% [25][28] - The company reported a 5% improvement in routing effectiveness through its Descartes routing pilot [12] Market Data and Key Metrics Changes - The company maintained its market share in January, with strong performance in independent restaurants, healthcare, and hospitality sectors [55] - The company expects to continue gaining market share with independent restaurants for 11 consecutive quarters [20] Company Strategy and Development Direction - The company focuses on four strategic pillars: culture, service, growth, and profit, aiming for sustainable improvements and growth [1][2] - The company is committed to enhancing its digital platforms, MOXe and VITALS, to drive growth and improve customer experience [10][14] - The company plans to expand its differentiated small truck delivery model, Pronto, into additional markets [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving double-digit adjusted EPS growth and continued market outperformance due to strong operational execution and strategic initiatives [32][19] - The company anticipates slight inflation of 0.5% to 1.5% in 2024, with a focus on maintaining operational discipline [50][91] - Management highlighted the importance of ongoing productivity improvements and cost management to enhance margins [25][40] Other Important Information - The company reduced its net leverage to 2.8x, down 0.7 turns from 2022, and plans to maintain a target leverage range between 2.5x and 3x for 2024 [29] - The company donated over $13 million in food and supplies to hunger relief efforts in 2023, equivalent to approximately 5 million meals [11] Q&A Session All Questions and Answers Question: Capital allocation strategy with strong free cash flow - Management indicated that with strong cash flow, the focus will be on share repurchases and opportunistic M&A, rather than significant debt paydown [34] Question: Case growth outlook amidst weather disruptions - Management reported a recovery in volumes post-labor disruption and weather events, maintaining confidence in the 4% to 6% case growth target for the year [35][55] Question: Impact of headcount growth on case growth - Management expects case growth to outpace headcount growth by 30% to 50%, with a focus on independent restaurants as the most profitable segment [38] Question: Sales compensation changes and industry trends - Management confirmed that recent changes to sales compensation were well received and aimed at incentivizing sellers for profitable growth [59][89] Question: Productivity and operational efficiency improvements - Management highlighted ongoing efforts in supply chain productivity and routing efficiencies, with expectations for continued improvements in 2024 [61][87]