United Natural Foods, Inc.

hello and welcome to unfi fiscal 2025 first quarter earnings conference call please note that this call is being recorded after the prepared remarks we will be having a question and answer session if you'd like to ask a question during that time please press star and then one on your telephone keypad thank you i'd now like to turn the call over to steve bloomquist head of investor relations You may now begin.

Good morning, everyone, and thank you for joining us on UNFI's first quarter fiscal 2025 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 www.unfi.com. 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, and Matteo Tarditi, our President and Chief Financial Officer. Sandy and Matteo will provide a 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. 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 measures are included in our press release and the end of our earnings presentation. And finally, beginning with the second quarter, we plan to change the sales channels reporting on the face of our press release. To assist with the transition, we will provide the new basis for presentation and historical figures prior to the next earnings call. We believe these changes will give you additional insight and transparency into our multi-year strategy and sales performance. I now ask you to turn to slide six of our presentation as I turn the call over to Sandy.

Thanks, Steve, and thank you, everyone, for joining us this morning. As we shared in our release, we delivered a solid start to fiscal 2025, which included revenue growth of over 4%, primarily resulting from positive volume growth in our wholesale business and improving adjusted EBITDA and free cash flow driven by actions to enhance our capabilities and drive efficiencies across the business. This performance led us to raise our full-year outlook for all financial metrics other than capital spending. Based on the progress updates I'll share momentarily, we also remain confident in our strategy and multi-year plan and our ability to deliver the financial objectives outlined in our October call. which we believe will lead to sustainable shareholder value creation. Now, I'll go into more detail on the progress we made in the quarter, how it's helping the customer experience, and how we're working to become a more efficient partner and value creator for our suppliers and customers. As we discussed on recent calls, we believe UNFI's scale, heritage and natural, organic, and specialty products, and our expanding value-added services offering makes us uniquely suited to help retailers differentiate and compete in a highly dynamic and competitive environment. We can see these points of differentiation supporting many of our customers as they successfully execute their strategies in the marketplace. In the quarter, our customer base contributed to volume growth above the gains reported by Nielsen for the supermarket space and helped strengthen our top line performance and expected trajectory. Volume gains in the quarter were about 2% compared to the prior year, and we've seen this positive trend continue into Q2. Importantly, this performance indicates a solid start to the execution of our strategy, but it also demonstrates strong strategic execution by our over 30,000 store customer base. as we continue to sharpen our focus on providing differentiated products, programs, services, and insights that help them compete effectively. To help extend this performance, we remain focused on strengthening service levels, simplicity, and transparency to our customers and suppliers while increasing efficiency across the business. We know how important it is to deliver on time and full in the important holiday selling season, and the whole company is focused on it. We also continue to roll out our revamped go-to-market program for suppliers, which aims to streamline and simplify their experience and help them accelerate their growth within our diverse retailer network. Several of our large suppliers that have embraced the program have experienced volume gains that surpass their peer group as they've taken advantage of the data and insights we provide in areas such as new item placement or bringing items discontinued during COVID back onto customer sales. We continue to focus on bringing additional suppliers into the program while making sure participants of all sizes have the best experience possible and are able to maximize the value and the growth opportunities that UNFI is making available to them. We will continue to execute our plan to pursue innovation in our offerings, optimize efficiency, and strengthen service levels to help drive even greater value and trust with retailers as well as suppliers. As we focus on becoming more efficient, Mateo's leadership has played a significant role in our progress. He has deep experience in helping turn around and improve businesses, largely through the disciplined implementation and rigorous follow-through of Lean Six Sigma management principles. This is already benefiting UNFI and our financial and operating performance. I'll let him provide more color and details momentarily, but let me talk at a high level about a few of the actions that we've taken to improve the overall customer and supplier experience while removing costs and streamlining the organization. Reducing or eliminating waste is a big part of what we're trying to accomplish over the next three fiscal years. With shrink reduction a big focus over the past five quarters, we brought shrink in line with historic pre-COVID levels, and we're now working to reduce it further, while simultaneously striving to increase the capacity of our network through ensuring that we have the right assortment, which should help drive higher sales for us and for our customers. Decentralizing responsibility and accountability in the organization is another principle of lean, as is the mutual development of key performance indicators that get measured and course corrected in near real time. As Mateo described on our last call, we've begun the process of pushing the lean framework into our distribution centers, where local operators are involved in the process of creating and taking ownership of operational KPIs. These same associates are at the center of problem solving and creating action plans where performance is not meeting expectations. We've piloted the process in two distribution centers and are pleased with the initial results. Next, we'll begin further aligning our organization to deploy this methodology across more of our facilities. Our continued focus on network optimization has also proceeded as planned, and we have completed the closure of both our Billings and Bismarck conventional distribution centers, which we described last quarter. We have retained the vast majority of the business from these DCs, which is now being serviced from nearby more modern UNFI facilities with larger assortments. We are now marketing the real estate. For similar reasons, we made the decision to close our Fort Wayne, Indiana distribution center and transfer that volume to neighboring facilities in Pennsylvania and Illinois, where we expect customers to see assortment and service level benefits. Associates and customers were informed of this in mid-November, and we expect to complete this move early in calendar 2025. Fort Wayne is another owned DC, which will begin marketing at the appropriate time. We will continue to evaluate other similar optimization opportunities. During the quarter, we also moved natural volumes from our York, D.C. into our 50% larger, soon to be automated Manchester, D.C., which we expect will yield service quality and efficiency benefits for our customers, suppliers, and UNFI in the region. We can see the combination of adding value for customers and suppliers to support their sales alongside our efficiency focus, delivering tangible operating and financial improvement. As we have combined above market sales volume with our improving efficiency, we've been able to increase net sales per employee by over 6% compared to the prior period, which is structurally improving profitability and free cash flow generation. This is partially a result of growing sales driven by the success of our customer base and expanding customer relationships, as well as our actions to enhance the responsiveness of our organization and empowering associates deeper in the organization to make real-time improvements. All in, we drove adjusted EBITDA growth of nearly 15% compared to the prior year first quarter and delivered our fifth consecutive quarter of sequentially improving adjusted EBITDA dollars. This progress reflects strong execution against our targets and we will remain focused on executing at higher levels to continue to improve service levels, efficiency, and free cash flow while reducing leverage. As we execute, we become even more confident in our multiyear objectives, long-term trajectory, and in our ability to add value for retailers and suppliers across the food retail ecosystem. We are focused on becoming the most efficient, value-creating, long-term partner for our stakeholders, which in turn creates more opportunities for the approximately 28,000 UNFI associates who serve our customers with dedication every day. Together, we remain confident our plan will drive sustainable shareholder returns. With that, let me turn it over to Mateo to discuss our Q1 results, lean progress, and revised outlook.