US Foods Holding Corp. Q3 FY2025 earnings call

Culture: Remains committed to zero injuries/accidents, with injury and accident rates improving 16% Y/Y over past quarter and 35% over past 2 years. New partnership with Hiring our Heroes. ### Service: Focused on reliable on-time deliveries, using MOXe e-commerce platform and deploying AI. Launched AI-powered search on MOXe, resulting in 3% higher conversion rate and 1.3 million incremental cases annualized. ### Supply Chain: Improving routing productivity, achieved 2.3% improvement in cases per mile Y/Y. UMOS deployment delivering value in safety, service, profitability. Operations quality composite improved 24% Y/Y. ### Growth: Pronto small truck delivery service expected to deliver ~$950M in sales this year and over $1B run rate by year-end. Expanded Pronto penetration to over 20 markets. Plan to make largest annual investment in Pronto in 2026. Food Fanatic Live show had potential new customer wins of over $150M. ### Profit Growth: Adjusted gross profit growth in Q3 and YTD. Strategic vendor management on track for >$120M cost of goods savings in 2025. Private label penetration among core independent restaurant customers over 53%. Operating expense productivity improved through UMOS and enterprise routing initiatives.

For the third quarter, net sales increased 4.8% to $10.2 billion, driven by case volume growth of 1.1% and food cost inflation and mix impact of 3.7%. Independent restaurant volume growth accelerated 120 basis points from the second quarter, increasing 3.9% year-over-year, which includes 40 basis points of M&A. Health care performed well, growing 3.9% and hospitality was up 2.4%. Chain restaurant volume improved 160 basis points sequentially, but remained down 2.4% compared to prior year. Adjusted EBITDA of $505 million increased 11% through a combination of volume growth, gross profit improvement and operating expense productivity. Adjusted diluted EPS increased 26% to $1.07 per share.

Given year-to-date performance and outlook, updated 2025 guidance: Total case volume growth tightened to 1%-2% from 1%-3%. Net sales growth expected in range of 4%-5%. Adjusted EBITDA growth projected at 10%-12%. Adjusted diluted EPS growth increased to 24%-26%.

Potential impacts from lower restaurant foot traffic, dynamic macro environment, government shutdowns which can impact business, especially for segments over-indexed with government business.

Q: Edward Kelly asked about overall total case growth and sales force compensation change.

A: David Flitman responded on case growth noting momentum with independent restaurants despite macro challenges and on sales comp change stating robust plan in place with high confidence in execution.

Q: John Heinbockel asked about team-based selling change.

A: David Flitman said majority of those in roles transitioned to customer-facing seller roles with onetime bump effect in seller headcount.

Q: Lauren Silberman asked about sales comp model impact and confidence in hitting long-term algo.

A: Dirk Locascio said flow through expected similar to today and David Flitman reaffirmed confidence in hitting long-term plan.

Q: Kelly Bania asked about strategic vendor management reinvestment.

A: David Flitman and Dirk Locascio discussed reinvesting productivity gains into growth.

Q: Jeffrey Bernstein asked about implications of performance food discussions.

A: David Flitman said no impact on business seen.

Q: Jacob Aiken-Phillips asked about sales comp rollout.

A: David Flitman said phasing with piloting in Q4 and planned date certain for move.

Q: Brian Harbour asked about M&A contribution and AI uses.

A: Dirk Locascio said M&A impact around 30-40 basis points and AI used broadly in sales growth, productivity, etc.

Q: Mark Carden asked about Shetakis acquisition and hospitality growth.

A: David Flitman said Shetakis fits model and Dirk Locascio said strong pipeline in health care and hospitality.

Q: Jake Bartlett asked about independent restaurant growth.

A: David Flitman and Dirk Locascio discussed independent case growth strength and momentum.

Q: Peter Saleh asked about credit side of independent restaurants.

A: Dirk Locascio said team managing credit effectively with balance of data and local team communication.

Q: Danilo Gargiulo asked about semi-automated warehouse and Pronto investment.

A: Dirk Locascio said semi-automated warehouse progress ongoing and David Flitman said Pronto investment in trucks and markets with proven model