US Foods Holding Corp.

a question during this time simply press star followed by the number one on your telephone keypad and if you'd like to withdraw your question simply press star one again thank you i would now like to turn the call over to mike nice senior vice president and head of investor relations mike the floor is yours thank you greg good morning everyone and welcome to the us food's fourth quarter and full year fiscal 2024 earnings call on today's call we have dave flittman ceo

and Dirk LoCascio, 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 and 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 fourth quarter and full year 2024 results to the same period in 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 forward-looking statements. Lastly, during today's call, we will refer to certain non-GAAP financial measures. All reconciliation 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-debt financial measures. With that, thank you, and I'll turn the call over to Dave. Thanks, Mike.

Good morning, everyone, and thank you for joining us today. Before we turn to today's agenda, I want to take a moment to acknowledge the devastating fires in the Los Angeles area. Our thoughts are with everyone impacted by this tragedy. I'm relieved to share that all of our associates in the LA area are safe. We eagerly supported the critical work of first responders, including Cal Fire, by providing food and hydration, and we are very thankful for their brave and tireless efforts. Now let's turn to today's agenda. I'll start by recapping our 2022 to 2024 long-range plan. Then I'll share highlights from 2024, including the significant progress our team made executing our strategy. I'll then hand it over to Dirk to review our fourth quarter and full year 2024 financial results, as well as our fiscal 2025 guidance. We delivered another strong quarter, which resulted in record 2024 full-year earnings of $1.74 billion, capping off the final year of our long-range plan. We are proud to have overachieved our original commitment, which was all underpinned by the focused execution of our strategy. The fact that we didn't get there exactly the way we originally planned three years ago demonstrates our ability to adjust to any macro environment and our team's relentless focus on controlling the controllables to ensure we reached our target. During the past three years, we accelerated our work on key initiatives, including delivering consistent share gains with our three target customer types, driving more than $230 million in cost of goods savings, extending our technology leadership position, reducing net leverage, ending 2024 at 2.8 times within our two to three times target range, and expanding adjusted EBITDA margin by 100 basis points to 4.6%. I am equally excited about starting our new long-range plan, continuing to execute our strategic initiatives to drive sustained growth and return capital to shareholders. Our future is bright, and our current momentum gives us confidence in achieving a 5% sales taker, a 10% adjusted EBITDA taker, at least 20 basis points of annual adjusted EBITDA margin expansion, and a 20% adjusted diluted EPS figure through 2027. I am highly confident in our ability to continue to outpace industry volume growth over the long term and expand margins through our extensive portfolio of self-help initiatives while driving long-term value creation for our shareholders. As we turn the page on our momentous chapter for U.S. Foods, I thank our 30,000 associates for their extraordinary effort, dedication, and sharp focus to deliver excellence and help our customers make it every day. This next chapter will be even more exciting. Turning to slide four, our strong fourth quarter results finished the year in which we achieved record adjusted EBITDA of $1.74 billion while we expanded adjusted EBITDA margin by 22 basis points. We also delivered record adjusted EPS of $3.15 which was 20% growth, and we grew adjusted EPS 8 percentage points faster than we grew adjusted EBITDA. Importantly, we deployed our strong cash flow through our $220 million acquisition of IWC and nearly $1 billion of share repurchases in 2024. Let's turn to the broader macro environment. Chain restaurant foot traffic, as published by Black Box, was down a little less than 2% for the fourth quarter, and while still negative, it showed sequential improvement from the third quarter. Independent restaurant industry volume per circana was down less than 1% in the fourth quarter, and in line with last quarter's year-over-year results. Our ability to outperform the market was again demonstrated in the fourth quarter, as we posted a 3.2% increase in total independent case volume and our 15th consecutive quarter of share gains with independent restaurants. Also, case volumes in healthcare and hospitality, which together comprise more than 25% of our sales, grew 4.7% and 2.4% respectively. We continue to gain share in both customer types, and in fact, We just posted our 17th consecutive quarter of share gains in healthcare. These two high-growth customer types are an important part of our differentiated go-to-market strategy. The fourth quarter was noisy due to the impact of the devastating hurricanes that hit near the end of the third quarter and early in the fourth quarter, affecting industry volumes, specifically in the southeast, where we have a larger portion of our independent business. In addition to storms, the election and a holiday calendar shift also impacted restaurant foot traffic. These impacts translated to an estimated 150 to 200 basis point headwind to our independent and hospitality case growth. Despite these external factors, we continue to capture possible market share, grow volumes, and expand our margins. And in the fourth quarter, We improved our share gains with independent restaurants compared to the prior year, and we also grew our new independent accounts at the fastest rate of the year in December. Moving to slide five, let's take a look at some of the key achievements in 2024 that our team delivered under our four strategic pillars. 2024 was another strong year for U.S. Foods. As I reflect on my two years here, I am now even more confident in delivering our new long-range plan and our ability to consistently gain profitable market share in our three target customer types of independent restaurants, healthcare, and hospitality, the three most profitable segments of the food service industry. We also have line of sight to continue productivity gains of 3% to 5% and further gross margin expansion. Now let's move to some highlights in each of our pillars. Our first pillar is culture. The safety of our associates continues to be and always will remain our number one priority. Our injury and accident frequency rates improved 19% from the prior year on top of our 23% improvement in 2023. These safety results are our best in many years, but we still have more work to get to our ultimate goal of zero. As we look to further reduce associate injuries, The rollout of center ride power industrial equipment is a key initiative that is underway across the network. We are nearly 50% through this deployment, and importantly, where this equipment has been already rolled out, we have not had a single injury. In 2024, we donated more than $14.5 million to support hunger relief, culinary education, and disaster relief efforts. This contribution included nearly 7 million pounds of food and supply donations, the equivalent of approximately 6 million meals or more than 260 truckloads of product. Turning to our service pillar, we're striving to differentiate our service platform to our customers to provide a best-in-class delivery experience. In 2024, we deployed Descartes, a leading routing technology, in 25 markets, resulting in nearly 50% of our routed miles on the system at year-end. It enabled us to route more dynamically and drive even greater delivery efficiency, while also providing a better customer experience by delivering their orders within a more precise time window. We improved distribution productivity in 2024 by delivering our best cases per mile performance in our company's history. This was driven for our market-led routing initiative, combined with a more than 2% productivity uplift in markets where Descartes has been deployed. We are making continued progress with the rollout of the card and expect to complete it by the end of this year. We are also transforming the experience for our customers through our continued enhancements to our Moxie digital solutions platform that enables customers to easily place orders, manage inventory, and pay their bills. We have been and will continue to be the e-commerce leader in our industry. We closed the year at 77% e-commerce penetration for our independent customers and 87% for the total company. The 77% is an all-time high for our independent customers and represents a 4.5 percentage point improvement versus 2023 and an 11% percentage point improvement versus 2021. Now let's turn to our growth pillar. In 2024, net sales grew 6.4% to $37.9 billion through continued market share gains in all three of our target customer types. Our differentiated team-based selling model and consistent addition of new seller headcount over time, which was up 5% in 2024, remain at the core of our growth plan. We continue to invest in our Hungry for Better program with three distinct product portfolios of over 4,000 products. Serve you, serve good, and serve local. Hungry for Better makes it easy for our customers to help meet diners' preferences for delicious on-trend meals, from clean ingredients that support individual dietary and lifestyle needs to sustainably sourced products. In fact, in 2024, our responsibly sourced serve good portfolio of private label products achieved record-breaking sales, surpassing $1 billion for the first time. Pronto, our small truck delivery service, continues to grow and is live in 40 markets. We remain excited about this growth opportunity and its ability to reach hard-to-service customers in dense geographies. Pronto provides these previously untapped independent restaurant customers with smaller, more frequent deliveries and later cut-off times. In addition, we launched Pronto Penetration in the middle of 2024 in two pilot markets and expanded that to six later in the year, with the goal to launch 15 to 20 more markets in 2025. This service fills in non-routine delivery days for our existing independent restaurant customers, leading to the potential for further wallet share for U.S. foods. In our first two pilot markets, we are seeing an approximate 20% uplift in our overall case growth from customers in the program. As expected, Pronto exited 2024 with approximately $730 million of annualized run rate sales, and we expect it to grow double digits this year. Turning to M&A, we completed one tuck-in acquisition last year by purchasing IWC Food Service, which serves the greater Nashville area. More recently, in January, we acquired Jake's Finer Foods in Houston, our fourth acquisition over the last two years. Jake's also includes a quality meat cutting facility, which will fit in nicely with our Stockyards network. With more than $160 million in annual revenue, this acquisition increases our local capacity and expands our presence in South Texas. Finally, let's move to our profit pillar. Adjusted gross profit grew 7.3% in 2024 to $6.6 billion. We continue to make additional progress on cost of goods through our strategic vendor management efforts, realizing more than $70 million in savings last year. We also remain focused on growing our private label brands, where our full-year penetration was up nearly 50 basis points to 52% with our core independent restaurant customers. Our momentum accelerated throughout the year with penetration nearing 53% by the end of 2024. And we see no near-term ceiling with our ability to further increase our private label brand penetration. Finally, as part of our ongoing goal of achieving 3% to 5% annual productivity improvement, we made significant progress in 2024 to streamline administrative processes and costs and achieved $120 million in annualized operating expense savings. Regarding ChefStore, we are nearing the conclusion of exploring the sale of this business and expect that we will have more to say about that by the end of this quarter or early in the second quarter. We remain fully committed to supporting the business, our associates, and our customers throughout the process. As we have previously said, in the event of a sale, we would expect to deploy the majority of the proceeds to repurchasing shares. Before I hand it over to Dirk, I would like to recognize two associates who have gone above and beyond during the wildfires that raged across California. Two of our associates, Danny Moore and Paul Wheeler, dedicated their personal time to serving the approximately 10,000 firefighters in the area. With Danny supporting the Pacific Palisades fire and Paul supporting the Eaton fire, both were on-site daily to coordinate the delivery of over 75 truckloads of product and were in the kitchens preparing food for first responders. Both have made incredible personal sacrifices being away from their families and I thank them and all of our associates for their service to support those who are on the front line during this tragedy. Let me now turn the call over to Dirk to discuss our fourth quarter results and our 2025 guidance.