US Foods Holding Corp.

Earlier this year, we successfully launched two pilot markets, and the early results are positive, with much stronger independent case growth. We have four additional markets planned for later this year, and Pronto is now on track to generate nearly $700 million of annualized sales this year. Turning to slide nine, our profit pillar. Our proven operational playbook, merchandising excellence work, and team-based selling approach increased adjusted gross profit by 8% in the second quarter to $1.7 billion. We also continue to make progress on growing our private label brands, which grew approximately 100 basis points year-over-year to more than 52% penetration with independent customers. Our continued focus on private label penetration represents a pathway to profitable growth for U.S. foods. These high-quality, innovative products enable competitive pricing for our customers while also improving our margins. Great companies are constantly adapting and looking for ways to become more efficient, continuously driving productivity and reinvesting a portion of those savings to fuel future growth. As we continue to identify ways to become more efficient and take steps to streamline our corporate and field interactions, We took additional cost actions this quarter. We now expect to achieve $80 million in expense savings in 2024 and $120 million on an annualized run rate. These changes underscore our commitment to achieving our 3% to 5% annual productivity target while more effectively serving our customers. Finally, as we announced during our investor day, given the lack of synergies, we believe focused investment under new ownership. We are still in the process of exploring strategic alternatives and will provide updates as appropriate. Throughout the process, we remain fully committed to supporting the Chef's Store business, our associates, and our customers. Before I hand it over to Dirk, I would like to acknowledge one of our drivers, Jason Buck, who works in our Knoxville Distribution Center. One of our cultural beliefs at U.S. Foods is deliver excellence, and Jason embodies this belief every day. Jason joined U.S. Foods in 2004 and has been named Driver of the Year twice. He also runs our weekly driver skills course with all new drivers and plays a lead role on our local safety team. Importantly, Jason's efforts contributed to the distribution center exceeding its on-time service metrics during the deployment of our card routing platform. I thank Jason for all he does to deliver excellent service to our customers and ensure a safe work environment for our Knoxville associates. As we approach Labor Day, I also want to thank all our associates for their hard work, their commitment to our safety culture, their relentless focus on providing superior customer service, and for making U.S. Foods a great place to work. Let me now turn the call over to Dirk to discuss our second quarter results in more detail in our 2024 guidance.

Thank you Dave. Good morning everyone. Second quarter results were largely consistent with our expectations with continued top line growth and further margin expansions leading to record adjusted EBITDA and adjusted EBITDA margin. We deliver this record profitability through our balanced approach to draw Starting on slide 11, second quarter net sales increased 7.7% and $9.7 billion, driven by total case volume growth of 5.2% and food cost inflation of 2.9%, while mixed was a headwind of 40 basis points. We drove case growth faster than the market and captured share gains in the second quarter, including our 13th consecutive quarter of market share gains with independent restaurants. Our independent restaurant volume grew 5.7%, including 250 basis points from acquisitions. Healthcare growth remained strong at 6%. Hospitality growth improved 2.1% as we successfully onboarded new business. Adjusted EBITDA grew 13.2% from the prior year to a quarterly record $489 million from a combination of profitable volume growth, strong gross profit gains, and discipline expense management. In addition to strong EBITDA dollar growth, our adjusted EBITDA margin expanded by 25 basis points to an all-time high of 5% as adjusted gross profit dollars grew over 200 basis points faster than adjusted OpEx dollars. Finally, adjusted EPS increased 17.7% to 93 cents. We continue to grow adjusted EPS at a faster rate than adjusted EBITDA and expect that trend to continue while deploying more of our strong free cash flow to our repurchases. Turning to slide 12, we once again expanded adjusted gross profit per case faster than adjusted operating expense per case, resulting in further adjusted EBITDA for case improvement. Adjusted gross profit per case grew by 22 cents or nearly 3% over prior year, primarily driven by our cost of goods sold initiatives and discipline pricing. The COGS initiatives delivered $50 million for the first six months. For the full year, we expect approximately $70 million in savings. We are well on track to achieve over $220 million in COGS savings from 2022 through the end of this year from our strategic vendor management work. Adjusted operating expense per case increased 4 cents, or less than 1%, driven primarily by increased labor costs, partially offset by continued distribution productivity improvement from routing efficiency gains, turnover reduction, and process standardization, as well as actions to streamline administrative processes and costs. Growing our GP per case five and a half times faster than our OpEx per case led to a record adjusted EBITDA per case of $2.27, up 16 cents, or 7.6% from the prior year. We continue to drive strong leverage throughout the P&L with a combination of profitable volume growth and continued progress on gross margin and operating expense initiatives. We expect continued adjusted EBITDA for case expansion as we execute our initiatives while also consistently meeting our customers' needs. Moving on to slide 13. We have generated strong cash flow here today, including $621 million of operating cash flow and $467 million of free cash flow, driven by increased profitability and disciplined working capital management. However, this was lower than the prior year as we had more working capital benefit in the first half of 2023 due to the inventory reduction benefits from the replenishment optimization initiative that Bill Hancock discussed during our investor day. Excluding the working capital impact, operating cash flow is modestly above the prior year. Our durable stream of cash flow enables us to invest in the business and return capital to shareholders. We invested $156 million in cash capex for the first six months, mainly focused on projects to support growth, including information technology, property and equipment, as well as maintenance of our distribution facilities. On June 1st, 2024, the Board authorized a new $1 billion share repurchase program. Under this new authorization, we repurchased $21 million in June 2024. In the third quarter to date, through August 7th, we have repurchased approximately $61 million. We have approximately $918 million remaining in the authorization. Since the inception of our buyback program in November 2022, We have repurchased 10 million shares for a total cost of $425 million. Rounding out capital deployment, we have completed three acquisitions over the past 18 months and will continue to be opportunistic in selectively pursuing a creative token M&A. We are currently focused on integrating these acquisitions and will lean in on more share repurchase for the remainder of 2024. Turning to slide 14. we remain well within our two to three times not leveraged target with a strong balance sheet as we ended the quarter at 2.6 times levered, which is a 0.4 term reduction from the same period last year. This includes paying $220 million for IWC and $41 million for share repurchases in the second quarter, which were both funded through operating cash flow. We're also pleased to report two positive developments related to our credit ratings. Our corporate credit rating was upgraded one notch by Moody's to VA2, and S&P revised their outlook on U.S. foods to positive, each reflecting the continued execution of our long-range plan and expectation that the initiatives outlined in our investor day will drive further earnings growth and credit metric improvement. Now, turning to guidance on slide 15. Given our strong first half of the year and outlook for the remainder of 2024, we are reiterating our fiscal year 2024 net sales, adjusted EBITDA, and adjusted diluted EPS guidance. Moving to modeling assumptions. For 2024, we continue to expect total case growth of 4 to 6%. We are updating our sales inflation assumption to a range of 1 to 2%. Despite the operating environment, we continue to grow top line, gain share, expand our margins, and deploy our strong free cash flow against our capital allocation priorities. We are well positioned to deliver on our 2024 financial targets and remain committed to our new three-year long-range plan. With that, I'll now pass it back to Dave for his closing remarks.

Thanks, Dirk. We continue to execute our strategy, gain market share, and improve profitability. We delivered double-digit adjusted EBITDA growth and record adjusted EBITDA margin of 5% while gaining share in our highest margin customer types. Our strong business model serving independent restaurants, healthcare, and hospitality, which are among the fastest growing and most profitable customer types in the food service industry, combined with the execution of our strategic initiatives, supports our ambition to be the undisputed best in our industry. And we have a long runway of profitable growth in front of us, including delivering our 2025 to 2027 growth algorithm, which includes a 10% adjusted EBITDA growth caper. We remain laser focused on improving the business to generate profitable growth while executing our capital deployment priorities. And with that, Kerry, please open up the line for questions.