US Foods Holding Corp.

Ladies and gentlemen, thank you for standing by and welcome to the US Foods fourth quarter and fiscal year 2020 conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. And to ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, simply press star 0. With that, I would now like to hand the conference over to our first speaker, Ms. Melissa Nader. Thank you, and please go ahead.

Thank you. Good morning, everyone. Welcome to today's earnings call. I'm joined by Pietro Cetriano, our CEO, and Dirk Lacascio, our CFO. Pietro and Dirk will provide an overview of our results for the fourth quarter and fiscal year 2020. We'll take your questions after our prepared remarks conclude. please provide your name, your firm, and limit yourself to one question. During today's call, and unless otherwise stated, we're comparing our fourth quarter and full fiscal year results to the same period in fiscal year 2019. Please keep in mind that the fourth quarter in fiscal 2020 included 14 weeks versus 13 weeks in 2019, and full fiscal 2020 results included 53 weeks versus 52 weeks in fiscal 2019. References to organic financial results during today's call exclude contributions from Smart Food Service, which we acquired in April 2020. For the food group, our organic financial results reflect contributions from September 14, 2020, which is the one-year anniversary of the completion of the acquisition, through the end of the 2020 fiscal year. Our earnings release issued earlier this morning and today's presentation slides can be accessed on the investor relations page of our website. In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our 2019 Form 10-K and last quarter's 10-Q filed with the SEC for these potential factors, which could cause our actual results to differ materially from those expressed or implied in those statements. Lastly, during today's call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules on our earnings press release, as well as in the appendices to the presentation slides posted on our website. I'll now turn the call over to Pietro.

Thanks, Melissa. Good morning, everyone. I hope everyone's ears off to a good start. I'd like to start by thanking our 26,000 associates. whose commitment to serving and helping our customers during what has been almost an entire year of the pandemic has truly been second to none. The results we are covering today are only possible because of their hard work. I'm going to begin today's remarks on slide two with a brief summary of the three main topics we are going to cover. First, even though we are very pleased with how well our Great Food Made Easy strategy has served us over the years, We continue to develop and enhance our capabilities so that our strategy can have an even greater success over the coming years. Second, we have taken several steps to position the business for our recovery, and we are confident that these actions will allow us to continue to gain market share as the recovery takes shape. And third, the changes we have made to our cost structure and the new business we have won over the last eight months has strengthened the future earnings power of the business. I will cover the first two topics and Dirk will cover the last one. A Great Food Made Easy strategy has proven to be enduring, but this does not mean we are standing still. We are continuing to evolve our capabilities to further improve the customer experience and take advantage of future growth opportunities. Let's start with innovative products, which is at the heart of great food. During COVID, there was a shift in the products that customers rely on the most. Products that travel well and packaging that builds trust with consumers. We adapted our Scoop platform to quickly jump on these trends. And results from our last two Scoop launches have been in line with prior pre-COVID launches. Even with the pandemic, consumer interest for more sustainable, healthier choices continues to grow. That's why the theme of our spring scoop, which launches in two weeks, is Hungry for Better. The lineup features new products underserved good, a growing lineup of sustainable resource products, a range of plant-based meat alternatives for burgers and tacos, and a range of functional foods with ingredients that introduce a healthy twist to some of those favorites. Continuing with the theme of product innovation, as we've mentioned in the past, One of the big benefits of the acquisition of food group is the ability to leverage some unique capabilities in center of the plate and produce. Two categories that drive a higher basket and greater stickiness. Having made good progress on the integration front, we are now beginning to introduce these food group capabilities into legacy U.S. foods markets. And while it will take some time to roll these capabilities out across the country, We are excited about how these capabilities will accelerate the opportunity to grow share of Wallard in those two categories. Moving to technology, which is at the heart of making things easy for customers. The consumer shift to more digital and more off-premise dining has made our technology and e-commerce offerings even more important than they were before. For example, 68% of consumers say they are more likely to purchase takeout than they were pre-COVID. As a result, we are seeing a corresponding increase in demand from operators for applications that help them ride the growth in off-premise dining. Our partnership with Chao Now is a good example. We also continue to invest in our technology platform, having recently improved our product search capabilities and our analytics platform to allow us to drive more targeted pricing and product recommendations to customers and to our sellers. The last set of capabilities on the right that we are evolving is our operating model. One of the key learnings from COVID has been how we can operate more effectively as a company. We've learned to use technology to leverage individual process experts to more quickly adopt best practices across the country. As an example, we recently rolled out a new warehouse pick process in four weeks, something that might have taken us four months in the past. As a result of these learnings, we are refining our operating model. by shifting some responsibilities and resources from our region teams to our centers of excellence. These centers of excellence have responsibility for identifying and deploying best practices across the country. And this shift in resources will result in a more consistent execution. In conjunction with this shift, we will reduce the number of regions from six to four in the second quarter. This does not change the cost savings that we announced in August. It is simply a logical evolution of our operating model. informed by the experiences of the last 12 months, and they end up providing more consistent execution. Also in conjunction with this shift, we are consolidating merchandising and local sales under Andrew Iacobucci. Andrew has been overseeing these two functions on an interim basis for the last 12 months, and so now he becomes our chief commercial officer. Also critical to advancing our strategy has been the capabilities we now have access to as a result of the acquisitions of Food Group and Smart Food Service. So let's move to page four for an update on the business performance and integration, starting with food group. Integration and synergy capture are on track. So far, we have completed two warehouse system conversions, and we expect to have the third completed by early next quarter. The conversions to date have gone very well, and we expect to have the remainder completed in the second half of this year in line with our original plan, despite some of the early delays from COVID. We are also on track to achieve our previously announced $65 million in annualized synergies, and the business is performing in line with expectations. The Smart Food Service business continues to outperform our delivered business, and we continue to be excited about the future growth opportunities in the cash and carry space. You will recall part of the strategic rationale for the acquisition of Smart Food Service is the incremental sale it drives to our delivered business. To help capitalize on this opportunity, we will rebrand all Smart Food Service locations to the U.S. Food Chef Store brand in the first quarter. This rebranding will also facilitate our entry into new geographic markets where U.S. food has an established presence. For 2021, we plan to open three to four stores, primarily in existing Smart Food Service markets. But we do expect the pace of store openings to pick up in future years as we expand the footprint into new geographies. I'm now on slide five, where I would like to close with a quick overview of how we are positioning our business to gain market share as our industry recovers. In prior calls, we talked about the $800 million of annualized new customer wins with larger customers in 2020. We feel good about the 2021 pipeline and our ability to continue to profitably gain market share with larger national customers. To prepare for the expected increase in case volume that we foresee in the coming quarters, we have started to hire warehouse, transportation, and sales associates in anticipation of the recovery. We are also investing in inventory to support our customers while partnering with several of our larger customers to understand the demand curve they are seeing in their business. And lastly, the evolution of our capability and our operating model that I discussed earlier position us to emerge from COVID as a stronger and more effective business. I would now like to turn the call over to Dirk for a discussion of our fourth quarter financial results and how we have strengthened the future earnings power of our business.