US Foods Holding Corp. Q3 FY2024 earnings call

• Hurricane Impact and Associate Efforts: Thoughts with those impacted by Hurricanes Helene and Milton, highlighting associate Josh Hoge's efforts in North Carolina.
• Financial Results: Delivered 13% adjusted EBITDA growth, 21% adjusted EPS growth, with solid case growth and margin expansion despite a challenging macro environment.
• Strategic Pillars:
  • Culture: Focus on safety, injury/accident rates 21% better than prior year, disaster relief donations.
  • Service: Descartes Routing technology live in 15 markets, MOXē platform enhanced with food cost calculator feature.
  • Growth: Pronto small truck delivery service live in 40 markets, new product launches like Fall Scoop.
  • Profit: Strategic vendor management work expected to deliver over $230M in cost of goods savings, adjusted gross profit per case grew by $0.24

Third quarter net sales increased 6.8% to $9.7 billion, driven by total case volume growth of 3.8% and food cost inflation and mixed impact of 3%. Adjusted EBITDA were $455 million, up 13.2% from the prior year with an adjusted EBITDA margin expansion to 4.7%. Independent restaurant volume grew 4.1%, healthcare growth was 5.7%, and hospitality growth accelerated to 3%. Private label penetration in independent restaurants is running at roughly 52%.

• Net sales expected in range of $37.7 billion to $38 billion.
• Adjusted EBITDA expected in range of $1.72 billion to $1.74 billion.
• Adjusted diluted EPS expected in range of $3.05 to $3.15.
• Total case growth expected 4% to 4.5%, sales inflation 2% to 2.5%, interest expenses $310 million to $320 million, depreciation $435 million to $445 million.

• Macro environment challenges.
• Weather impacts, particularly in the Southeast, affecting business.
• Potential factors causing actual results to differ from forward-looking statements.

Q: Could you talk a little bit more about sort of private label penetration, where that's tracking and just what you continue to see there on both, especially on the independent side?

A: Yes, we're excited about our private label brands. We've had continued increase in penetration there, particularly with our independent restaurants. We're running roughly 52%. I see no near-term ceiling.

Q: Maybe talk about just independent health as well, right? It sounded like sort of some of the uplift you've seen recently after the weather impact was similar for independent and changes that, if I understood that correctly, but could you talk about that customer and how do you sort of expect the trend for this quarter and into early next year?

A: Yes, we're encouraged by what we've seen. The foot traffic challenges began in the second quarter. Importantly, our market share gains actually accelerated. We had hurricanes, and once cleared, we're seeing more than 100 basis point acceleration in case growth Q: Can you talk to salesforce growth or expansion is running what about now, 5% or so? And maybe talk about productivity of recent cohorts. And then I think you're still, right, all of your, is all of the case growth coming from new accounts, do you -- are there any green shoots with regard to drop size?

A: Yes, we're running in that mid-single digit as we expected to for the year. The lifeblood of our growth has been new account generation. We're excited about that. But we're also managing loss. Well, penetration has been a challenge with the foot traffic. We've seen some green shoots over the last three weeks Q: I wanted to just ask a little bit about the COGS initiative. It sounds like that initiative continued to go quite well. I think you may be slightly exceeded your goals for this last three year plan, but can you just talk about the confidence in the plan there over the next three years, how vendors are reacting to your strategy there and working with you and just how volume dependent the savings could be there in the coming years and just a little bit more detail on that as you look to 2025?

A: Yes, very confident in what we said we would deliver the new long range plan. We do this in a highly collaborative manner with our vendors. They want that volume growth and are more than willing to engage with us. We just had our annual vendor report forum, and there's a lot of excitement coming out of our vendor community about our future Q: Good morning. And thanks for taking our questions. I wanted to just ask a little bit about the COGS initiative. It sounds like that initiative continued to go quite well. I think you may be slightly exceeded your goals for this last three year plan, but can you just talk about the confidence in the plan there over the next three years, how vendors are reacting to your strategy there and working with you and just how volume dependent the savings could be there in the coming years and just a little bit more detail on that as you look to 2025?

A: Yes, very confident in what we said we would deliver the new long range plan. We do this in a highly collaborative manner with our vendors. They want that volume growth and are more than willing to engage with us. We just had our annual vendor report forum, and there's a lot of excitement coming out of our vendor community about our future Q: Great. Thanks for taking the question. My first was just a clarification. I just want to make sure I have the trend right in terms of the near term and the cadence. So in the third quarter, organic independent case codes were 2.4. You're saying that that would have been roughly 3.4 without the impact of the hurricanes. Has the trend improved 100 basis points since that? So basically, you're running 4.4 in October. Is that the right way to think about it?

A: What it means is instead of the 2.4, after we got past the first couple of weeks of October with the storm impacts, it's been 100 basis points higher than what we had in Q2. So back to that mid-3 Q: Thank you. Good morning. I just wanted to ask you to drill into the Pronto business a little. So it's a $700 million annualized run rate budget for this year. Obviously, it's still growing and maturing. Could you give us a sense of how much that is incremental, given it was in existence last year, but I'm sure less mature and so on, so we could maybe figure out the growth rate. Also, if you want to speak to your expectations going forward.

A: I'd say, yes, 20% or so of it is incremental, it is a supplement to our existing. And we've talked about that being sort of an opportunity for up to a $1 billion or around $1 billion. But I'll tell you, that is really the penetration piece that we've talked about that Dave mentioned that has moved, just moved from two markets to six markets. It's contemplated pretty conservatively in there. So with the early positive results we're seeing there, I think there's a lot of runway probably potentially north of the $1 billion there Q: Hi, great, thank you. I wanted to revisit the underlying assumption of local case volumes, which I think was 2% on a market level. And you guys thought that you would do 5% to 8%, in other words, outperforming kind of the base. So I wanted to ask a couple of questions. One, do you still feel good about that 2%, especially for what we've learned this week? What are the really important macro factors that we should look at that could potentially drive a return to 2% local growth? And as we think about your outperformance is getting back to 5% to 8% type of growth, does that happen regardless of the baseline assumption or should we just focus on 2.5x to 4x to market as we think about our own assumptions over the next couple of years?

A: Yes, back in June, we had a core base assumption of about 2% market growth over time. And again, that wasn't aimed at any quarter or any particular year, but we thought over the three year period of time, that was a reasonable assumption. And so yes, I'm confident in the 5% to 8% range. I'm confident in our ability to do that, even if the market's a little bit size, we're in that 1% to 2% range and market growth, I'm confident of that