US Foods Holding Corp. Q4 FY2024 earnings call

Long-Range Plan Recap: Recapped the 2022-2024 long-range plan and highlighted overachievement of 2024 full year earnings of $1.74 billion. ### 2024 Highlights: Delivered record 2024 full year earnings, overachieved original commitment, accelerated key initiatives including share gains, cost of goods savings, technology leadership, and reduced net leverage. ### Strategic Pillars: - Culture: Safety improved with injury/accident frequency rates down 19%, donated over $14.5 million for hunger relief, etc. - Service: Deployed Descartes routing technology in 25 markets, improved distribution productivity, enhanced MOXe digital solutions. - Growth: Net sales grew 6.4% in 2024, strong market share gains in target customer types, Pronto delivery service grew with 15-20 more markets planned in 2025. - Profit: Adjusted gross profit grew 7.3% in 2024, realized over $70 million in cost of goods savings, private label penetration up nearly 50 basis points to 52% with core independent customers.

Fourth quarter net sales increased 6.2% to $9.5 billion, driven by total case volume growth of 3.5% and food cost inflation and mix impact of 2.7%. Independent restaurant volume grew 3.2%, health care growth was 4.7%, and hospitality grew 2.4%. Fourth quarter adjusted EBITDA grew 13.7% to $441 million, and full year 2024 adjusted EBITDA was $1.74 billion, with adjusted EBITDA margin expanding to 4.6%.

Fiscal 2025 Guidance: - Total company net sales growth 4% to 6%, driven by total case growth 2% to 4% (independent restaurant case growth 4% to 7%). - Adjusted EBITDA growth 8% to 12% and adjusted diluted EPS growth 17% to 23%. - Expect normal inflationary environment with sales inflation and mix impact of approximately 2%.

Risks: - Macro environment factors such as storms, election impact, and holiday calendar shifts affecting industry volumes. - Tariff risks with low to mid-single-digit imports from affected countries potentially impacting costs and pricing.

Q: What percentage of US Foods' offering is imported and how would tariffs affect pricing?

A: The overwhelming majority of products are produced and distributed in the US with low to mid-single-digit importing. Majority of customer agreements are pass-through, and tariffs would be wrapped into inflationary pressures on customers, with the team working to help customers handle costs.

Q: How confident are you in achieving independent case growth targets?

A: Confident as seen in strong fourth quarter performance, improved traffic trends in January, and momentum from new account generation and share gains, expecting foot traffic environment to improve in 2025.

Q: What metrics give confidence in a stronger macro backdrop in 2025?

A: Technomic indicating healthy improvement in 2025 over 2024, stability with election behind, and focus on share gains in target customer types.

Q: Can you expand on the cadence of case growth in 4Q and into January?

A: 4Q saw slower growth due to holiday timing, but January showed acceleration with improved traffic trends, expecting acceleration throughout 2025.

Q: What's the M&A environment outlook for 2025?

A: Pipeline continues to be worked, looking for opportunistic tuck-in acquisitions, with Jakes as a good example of fitting well into the network.

Q: How is the rollout of Descartes and productivity expected in 2025?

A: Descartes expected to be fully rolled out by end of 2025, productivity impact similar to prior year with continued benefits from advanced routing platform.

Q: Are private label brands more or less exposed to tariff-affected countries?

A: Private label brands are about equally exposed to branded products in terms of exposure to affected countries.

Q: Update on MOXe rollout and case count growth?

A: MOXe continues to show case count growth with around 1 to 2 cases per order, expected to continue.

Q: What's the CapEx outlook for 2025?

A: Guided to $375 million to $425 million, a step-up from 2024, for fleet, IT, and capacity building.

Q: Any regional dynamics or cuisine types performing better?

A: Bar and grill area tends to hold up relatively better, but foot traffic pressure has been broad-based.

Q: Sales force headcount trajectory in 2025?

A: Expected to stay in 4%-6% range, with good momentum and thoughtful compensation plan review.

Q: Drivers for private label expansion in 2025?

A: Normalized supply post-COVID, innovative Scoop process with new products, and customer demand for cost-saving solutions.

Q: Integration of recent acquisitions and learnings?

A: Acquisitions are progressing well, with learnings applied across the network, leveraging capabilities like logistics and produce.

Q: Commentary on product cost and mix guidance in 2025?

A: 2% guidance is conservative, with inflation impacting sales dollars more than earnings, and well-positioned to manage inflation.

Q: Margin drivers in 2025 and procurement savings?

A: Procurement savings target $260 million over time, with $120 million in operating expense savings in 2024 carrying forward, and indirect spend savings continuing.

Q: Pronto penetration initiative details and economics?

A: Pronto penetration aimed at existing customers, showing 20% uplift in case growth, with focus on profitability and not cannibalizing existing business.

Q: Acquisition opportunity for independent restaurant case volume?

A: Opportunities in tuck-in acquisitions, with focus on organic growth but tuck-ins as complements, leveraging local market learnings.

Q: ROIC outlook and labor inflation?

A: ROIC expected to continue increasing, with labor inflation seen as coming down, and productivity initiatives in place to manage costs.