US Foods Holding Corp.

Thank you, Krista. Good morning, everyone, and welcome to the US Foods first quarter fiscal 2024 earnings call. On today's call, we have Dave Flipman, our CEO, and Dirk LoCascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up. Our earnings release issued earlier this morning in today's presentation can be found on the investor relations page of our website at ir.usfoods.com. During today's call, unless otherwise stated, we're comparing our first quarter 2024 to the same period in our first quarter fiscal year 2023. In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our Form 10-K for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in those statements. 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 presentation slides posted on our website. We are not providing reconciliations to forward-looking non-GAAP financial measures. Finally, we're excited to host our Investor Day on June 5th at our headquarters in Rosemont. If you're interested in attending, please reach out to us in investor relations. Thank you, and I'd like to turn the call over to Dave.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Let's turn to today's agenda. I'll start by sharing the progress we've made executing our strategy and several key achievements from the first quarter which set us up for a strong year ahead. I will then hand it over to Dirk to review our first quarter financial results and our fiscal 2024 guidance. Following a slower start to the year due to adverse weather and labor disruptions, our first quarter earnings came in as expected. The continued execution of our strategy and long-range plan resulted in adjusted EBITDA of $356 million, representing approximately 6% growth. As we highlighted in February, adjusted EBITDA was negatively impacted by approximately $20 million from increased cost to serve our customers and volume headwinds from labor disruption and weather-related issues in January. Of the $20 million impact, approximately $15 million was incremental operating expense to support the business during the labor disruption. Excluding this negative impact, our underlying adjusted EBITDA growth was approximately 12%, and we remain confident in achieving our full-year guidance. This performance demonstrates the strength of our business model, the commitment of our 30,000 hardworking associates, and our ability to win in any environment. Total case growth was 4.2% for the quarter, with share gains continuing in target customer types, and our independent case volume grew 4.6%. In fact, for independent restaurants, our share gains accelerated from the fourth quarter to the first quarter, as we grew share for the 12th consecutive quarter. In early April, we closed on our previously announced acquisition of IWC Food Service, and we are excited to have them on our team. As a result of deploying capital towards our tuck-in M&A strategy, we did not purchase a significant number of shares in the first quarter. However, we do plan to lean in on share repurchases more aggressively through the balance of this year. Despite a slight year-over-year decrease in restaurant foot traffic, Broadliners increased their volume within the overall food service distribution channel as measured by Sercana, underscoring the resilience of our industry. Our team captured profitable market share with our target customer types and improved profitability as we remain focused on controlling the outcomes that we can control. Furthermore, we continue to identify cost savings, including streamlining administrative processes and costs. More specifically, cost actions we have taken to date are expected to generate more than $55 million in expense savings for 2024 and $75 million on an annualized run rate. We are pursuing additional operating expense and cost of goods actions to drive further savings in 2025 and beyond. I have confidence in our ability to drive growth and profitability well into the future. We are controlling what we can control to generate long-term shareholder value. Turning to slide four, as a reminder, our team's work is guided by four strategic pillars, and I will discuss our progress on each of them over the next few slides. Moving to slide five, our first pillar is culture. Keeping our associates safe is a key part of our culture, and during the first quarter, our injury and accident rates were 30% better than the prior year, and importantly, these results were our best since 2020. Despite our recent success, there is still significant room for improvement to reach our goal of zero injuries. We're excited about our spring scoop, where we launched 26 new products to help our customers offer high quality, innovative, and labor-saving products on their menus. As part of this scoop, we introduced ServeU, including 20 new products within a portfolio of more than 3,000 products of delicious, plant-forward, gluten-free, and clean labels, such as our Chef's Line Organic Purple Rice and Quinoa Blend. Importantly, Since the introduction of our Popular Scoop program 12 years ago, nearly 75% of the products that have been launched are still sold today. Finally, we are increasing our commitment to three strategic community giving areas, hunger relief, culinary education, and disaster relief. Our increased investment of $2 million in 2024 is part of our Helping Communities Make It program, which provides nourishment and opportunity to the communities we serve and builds on our 2023 investment of more than $12 million. Turning to slide six, our second pillar, service. Providing best-in-class delivery and a high-quality service experience to our customers is essential to our growth and our overall success. The investments we are making in operational rigor and modernizing our technology platforms continue to pay off. We exited the first quarter quite pleased with the progress that we made on both on-time delivery and service level to customers, which continued to show year-over-year and sequential improvement. We also recently completed an 18-month initiative in our replenishment organization. This program standardized and improved the processes and technology we use as we strive to deliver best-in-class service levels to our customers. This work resulted in our delivered-as-ordered net promoter score improving by 7 percentage points while yielding $15 million in annualized operating expense savings and $120 million in working capital reduction. We continue to build on the routing efficiency gains that we delivered in 2023, and we remain focused on driving further improvement in on-time deliveries. In fact, our cases per mile were a company record in February and March. Furthermore, our routing initiative delivered a 4% improvement in cases per mile during quarter compared to the first quarter of 2023 in a two-year stack improvement of 12%. Our team's focus on this important work is making a difference for our customers and for U.S. foods. Taking this work a step further, we extended our Descartes routing deployment to four additional markets during the first quarter. building upon the two markets we piloted late last year that are now fully deployed. In the markets where Descartes is live, we are compounding further gains in our routing effectiveness. For example, in deployed markets, we are already seeing this technology produce an incremental 2% improvement in cases per mile, which we expect will continue to accelerate. We are confident that we have the right plan in place to successfully implement this technology across the company By mid 2025, and we continue to further transform our customer experience for our differentiated Moxie digital solutions platform. Moxie has been fully embedded with our independent restaurant business. As customers move to Moxie, they buy 10% more. Are more profitable and stick with us longer. We have migrated over 65% of our national chain business, with full deployment anticipated in the second half of 2024. Moxie also has a new Spanish translation feature, further enhancing the user experience. We're excited to share the Moxie roadmap and growth plans for this digital platform during our upcoming Investor Day.

Let's now turn to our growth pillar on slide seven.