United Natural Foods, Inc.

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the UNFI fiscal 2022 fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press star one. Thank you. Steve Blomquist, Vice President, Investor Relations. You may begin your conference.

Good morning, everyone. Thank you for joining us on UNFI's fourth quarter fiscal 2022 earnings conference call. By now, you should have received a copy of the earnings release issued this morning. The press release and earnings presentation, which management will speak to, are available under the investor section of the company's website at unfi.com on the events tab. We've also included a supplemental disclosure file in Microsoft Excel with key financial information. Joining me for today's call are Sandy Douglas, our Chief Executive Officer, John Howard, our Chief Financial Officer, Chris Testa, President of UNFI, Eric Dorn, our Chief Operating Officer, and Kristen Fairmont, SVP of Investor Relations and Transformation Finance. Sandy and John will provide a strategy and business update, after which we'll take your questions. Before we begin, I'd like to remind everyone that comments made by management during today's call may contain forward-looking statements. These forward-looking statements include plans, expectations, estimates, and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward-looking statements. And lastly, I'd like to point out that during today's call, management will refer to certain non-GAAP financial measures. Definitions and reconciliations to the most comparable GAAP financial measures are included in our press release and the end of our earnings presentation. I'd ask you to turn to slide six of our presentation as I turn the call over to Sandy.

Thank you, Steve, and good morning, everyone. We appreciate you joining us for today's year-end call. Let me start by saying I'm proud of our team's work as we capped a year of improving operational performance, driving share gains and strong financial results. We broadly exceeded our prior outlook expectations with adjusted EBITDA and adjusted EPS surpassing the respective midpoints of our outlook. Net leverage also fell slightly more than expected to under 2.6 times, and we ended the year with approximately $1.7 billion of liquidity. We achieved these results despite a challenging industry backdrop. Food-at-home inflation remains in the double digits, driving consumers to buy fewer items, fill rates continue to be pressured, and labor market tightness persists. Delivering these results in the face of such a complex environment is a testament to the agility of our team and the strategic value of our business. As we enter the second year of our Fuel the Future strategy, we remain focused on driving operational improvement to optimize the value of our scaled and diversified platform across the $140 billion addressable market that we're pursuing in our core business. Notably, this market also continues to grow. According to McKinsey, U.S. grocery sales are expected to grow in an average annual rate of 4% from 2021 through 2026, with independent grocers expected to grow in line with the expectation for the overall market. Our Fuel the Future strategy is designed to drive above-market growth over a long-run basis, and continuous improvement by harnessing our competitive advantages to create value for all stakeholders. For our customers and suppliers, we are creating a one-stop shop for procurement, distribution, and services. This, in turn, will help us expand the opportunities we can offer to our associates as our business grows and evolves, while also enabling us to better support our communities and planet through our ambitious ESG agenda. Importantly, we believe our focus in these four areas will enable us to create enduring value for our shareholders. Our scale remains a significant competitive advantage. As the largest grocery wholesaler in North America, distributing approximately 260,000 unique SKUs from around 12,000 suppliers to over 30,000 customer locations, we can procure product and administer promotions in a highly efficient manner, which makes UNFI a valuable partner for both suppliers and customers. This scale is complemented by our unmatched distribution network, composed of 56 strategically located distribution centers across the United States and Canada. Our network has the capability to support our growth and enhances our adaptability as market shifts occur. We also see meaningful opportunity to benefit from increased efficiency and growth enablement across this portfolio by strengthening best practices, employing technology and investing in automation. This is a significant focus of our 2023 investment program and a driver of the agreement that we just announced was symbolic as an automation technology leader. We look forward to working with the company to help streamline and improve operations across strategic assets within our distribution network. We believe this will help us better serve our customers and enhance our long-term profitability. Our deep scale and geographic footprint across North America also enable us to amass a vast amount of product and channel data. We're working to harness this data to help our customers and suppliers better understand their served markets, and develop relevant and targeted strategies to grow their businesses. By becoming a stronger partner to our customers and suppliers, the value of working with UNFI increases. We believe diversification is one of our strengths as well. Our broad array of suppliers and products, including UNFI's own brands, ensures we have the right items and solutions to meet the needs of each of our customers and their unique go-to-market strategies. This is especially important as the macroeconomic backdrop and consumer preferences continue to evolve. Our broad customer base also allows us to meet consumers where they prefer to shop. As we've seen over the past few years, these preferences can quickly evolve, and our diversified customer base enables greater stability and resiliency for our business. And finally, I believe a key differentiator is the talent that UNFI has at all levels of the organization. Our industry leadership position enables us to attract and retain key talent, even in this challenging operating environment. such as the one we experienced in fiscal 2022. Over this past year, we've recruited senior leaders in areas where we see the great opportunity to drive value. And we have a great mix of experienced food industry veterans combined with strong functional leaders to drive the next chapter of UNFI's growth. And as we detailed last year as part of our Fuel the Future strategy, We're extremely focused on enhancing engagement with our associates across the company. We achieved progress on this front in fiscal 2022 as our engagement scores improved during the year. Turning to slide 7, the progress we're making under our Fuel the Future strategy is evident in our fiscal 2022 results and our expectations for fiscal 2023. A key goal of this strategy is to bring ever greater value to our customers and suppliers, which we expect will drive new customer wins and increase sales across our existing customer base. As we've highlighted previously, our cross-selling capabilities are critical to our ability to deliver on this goal. Cross-selling has more than doubled since 2020 and contributed over a billion dollars of sales in fiscal 2022. Our plans for fiscal 2023 also include investments in training necessary to develop a world-class sales force with a goal of empowering our people to offer the highest levels of expertise and service that makes partnering with UNFI a simple and highly value-additive decision. Importantly, as we make these investments, we're remaining highly disciplined in managing our expenses. We plan to fund these investments primarily by streamlining and redeploying funds from lower return uses within our existing expense base. This will enable us to preserve and expand our margins even as we make these elevated investments. We began this process in 2022 and have accelerated it within our fiscal 2023 plan. In conjunction with these investments, we're also prioritizing focus on our services platform. which encompasses professional services, our own brands, and innovation. As we announced in July, we've established a new internal organization that is now solely focused on growing this platform. This integral component of our strategy will enable us to deliver insights and solutions to our customers and suppliers that will help them maximize the value of their own businesses while also offering significant margin accretion potential to our business. Today, this platform contributes over 22% of our adjusted EBITDA before corporate allocations, and we expect this number will continue to grow. Flipping to slide A, another important aspect of our growth strategy is our focus on enhancing efficiency and responsiveness, which is key to improving our business relationship with our customers and suppliers and helps us to optimize our margins. During fiscal 2023, we expect a significant portion of our planned capital expenditures to be focused on initiatives to increase efficiency. Our plan includes investments to drive distribution center automation, as well as to modernize and unify our enterprise resource planning and financial systems. Importantly, all approved projects have attractive projected returns above our cost of capital and are expected to enhance our long-term margin profile. The steps we're taking in 2023 build on our fiscal 2022 achievements and will serve as the launch pad for our reinvigorated investment strategy and elevated long-term growth trajectory. In closing, let me reiterate how pleased and proud I am of how we finished fiscal 2022. We've demonstrated our ability to take share in a $140 billion addressable market with upside from our services platform and plan to grow share within this market by continually looking for better ways to meet the needs of our many constituents. Our management team is highly focused on getting better across every operational dimension. Our customers, suppliers, and associates all benefit when we grow and improve. And as we improve, We expect this to create the flywheel effect I described last quarter in which the business will expand and gain market share, which will further enhance our competitive advantages while improving our free cash flow generation and investment capabilities and in turn create incremental shareholder value. I look forward to reporting on our progress as 2023 unfolds. With that, I'll turn the call over to John for detail on our financial results, capital allocation strategy, and outlook.