US Foods Holding Corp.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. We are asking callers limit their questions to one question and one follow-up. Thank you. I would now like to turn the call over to Mike Neese, SVP of Investor Relations. Please go ahead.

Thank you, Lacey. Good morning, everyone, and welcome to the U.S. Foods first quarter fiscal 2025 earnings call. On today's call, we have Dave Flipman, our 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 this morning and today's presentation can be found on the investor relations page of our website at ir.com. During today's call, unless otherwise stated, we're comparing our first quarter of fiscal year 2025 to the same period in fiscal year 2024. 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 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. Now I'll 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 our key results in the quarter, and then we'll provide an update on ChefStore. Next, I'll highlight several key achievements under our strategic pillars and hand it over to Dirk to review our first quarter financial results and our fiscal 2025 guidance. In the first quarter, we outperformed the industry and again delivered strong profitability with adjusted EBITDA growing more than 9% and adjusted diluted EPS increasing 26% despite the challenging operating environment and severe weather-related headwinds. Our results underscore the strength of our customer value proposition and our team's relentless execution of our strategy. We're delivering consistent share gains with our target customer types, including our 16th consecutive quarter of gains with independent restaurants and 18th consecutive quarter with healthcare. I'm also pleased to announce that our board recently authorized a new $1 billion share repurchase program, which builds upon our two-month buyback of more than 24 million shares, totaling $1.3 billion since late 2022. I'll now take a minute to briefly discuss ChefStore. At our investor day last June, I announced our intent to explore strategic alternatives for our ChefStore business. After multiple conversations with potential buyers, in engaging in active negotiations over the past several months, it became apparent that the current macro environment was not conducive to completing a transaction at an appropriate valuation. For the foreseeable future, we plan to retain and further improve the business. While I still believe the chef store business is not the right long-term strategic fit for our company, our team has worked very hard over the last year to improve the operations and profitability. More specifically, first quarter EBITDA growth was in line with the overall company. And as a reminder, Chef's Store represents less than 5% of our total EBITDA. Earlier, I discussed our strong profitability gains in the first quarter, and now we'll dive a little deeper into our case growth. Total volume increased 1.1%, with independent restaurant case growth of 2.5%. while healthcare and hospitality grew 6.1% and 3.6% respectively. Our healthcare business continues to perform very well. We are the industry leader in healthcare and remain confident in our ability to drive strong growth and continued market share gains this year and beyond. Our independent case growth was impacted by severe weather and multiple storms across the U.S., including the wildfires in L.A. This impact was partially offset as we lapped last year's labor disruptions, translating to a net headwind of approximately 160 basis points to independent restaurant case growth. The broader industry faced similar headwinds with foot traffic, as published by Black Box, down 3% for the first quarter. It hit a low in February, down approximately 6%, but improved in March by nearly 350 basis points. However, We successfully gained share each month in independent restaurants and outperformed the industry. Our organic independent case growth accelerated 450 basis points from February to March, and that momentum carried into April. In fact, over the last three weeks, we delivered our highest cumulative independent case volumes of the year, and our net new independent account generation was the highest of the year in April. We now expect our growth rate to accelerate for the remainder of the quarter and be in line with our updated modeling assumption of two to five percent independent case growth for the full year, which Dirk will discuss shortly. As we look ahead, another topic that's on everyone's mind is the tariff environment and the impact on our industry and the economy. We are monitoring the evolving situation and staying closely connected with our suppliers to source alternative products where appropriate. Imported products account for a small portion of our business, with mid to high single-digit percentage of our purchases likely subject to some level of tariffs. Our customer value proposition remains our focus as we continue to help our customers in their efforts to be more efficient, run more profitably, and optimize their menu offerings, most notably with our private label brands. Turning to slide four. We operate in a large, resilient, and growing industry where restaurants, healthcare, and hospitality, the fastest growing and most profitable customer types, represent a $270 billion addressable market. And food away from home continues to steadily increase, a multi-decade trend that we believe will continue. Our business and industry have proven to be quite stable across macro cycles. As I've mentioned before, Our self-help initiatives are in the early to mid-innings of implementation, and thus U.S. Foods is well positioned despite the slower macro backdrop. If demand softens further, we have various levers that we can pull in addition to those we already have in place. These include reducing discretionary spend, further accelerating productivity, and moderating capital expenditures. Importantly, 80% of our distribution operating expense is variable. and flexes during sustained periods of softer demand. As a reminder, during the great financial crisis, our volume was down just mid-single digits while adjusted EBITDA was essentially flat. We will continue to adjust to the macro environment as appropriate while staying focused on executing our proven playbook. Turning to our focus plan to profitably grow U.S. foods, we are guided by four strategic pillars. and I'll discuss our progress on each over the next several slides. Moving to slide five, our first pillar is culture. Keeping our associates safe is our top priority, and during the first quarter, our injury and accident rates were 12% better than the prior year. We've made strong progress, and over the past two years, our rates have improved by 38%. I'm proud of our team's success, but we will not waver until we reach our goal of zero injuries and accidents. In March, I held my second annual CEO award ceremony to celebrate associates who ignited excellence across U.S. foods. Currently, I'll highlight two winners in particular who exemplify our cultural beliefs and drive our results. Not only are we supporting our associates, we're helping our communities. Last week, we announced an increased strategic investment in support of our Helping Communities Make It program which represents more than a five-fold increase over the last two years. As part of this commitment, we donated $250,000 to Giving Kitchen to provide emergency assistance to food service workers. We're also proud to have renewed our American Red Cross partnership as an annual disaster giving partner. Turning to slide six, our second pillar, service. We continue to make excellent progress improving our on-time delivery and service levels to our customers, and we are currently at our best service levels since 2019. An important element of our service is Operations Quality Composite, or OPSQC, which measures our ability to deliver products to our customers without errors. During the first quarter, our OPSQC metric improved approximately 20% from the prior year, and was our best performance since the first quarter of 2021. We continue to roll out our Descartes routing platform, which is driving delivery efficiency gains and providing better customer service. 50 markets are live or in active deployment, which represent nearly 70% of our routed miles. And we remain on track to be fully deployed by year end. In the fourth quarter of 2024, we launched a new generative AI automatic order guide for our sellers to make it more efficient for them to create customer proposals and onboard new business. This more efficient process, along with other activities we've taken off our sellers' plates, resulted in an acceleration in net new independent accounts during March and further acceleration in April. We're in the early stages of leveraging proprietary AI tools, and we're excited about the momentum we're building. Let's now turn to our growth pillar on slide seven. We remain focused on accelerating profitable growth and gaining market share with our target customer types. We continue to invest in our Pronto small truck delivery service. Last year, we launched Pronto Penetration in six markets, to further increase our share of wallet with our existing customer base. As a reminder, Pronto Penetration extends our Pronto service to existing independent customers who will be able to order on non-routine delivery days with later cutoff times. In our pilot markets, we saw a sustained 10% to 15% uplift in overall case growth from customers in the program. As a result, we now have Pronto Penetration in 10 markets and plan to be in a total of 20 markets by the end of 2025. We are also continuing to gain new business in healthcare and hospitality. During the quarter, we began onboarding more than $100 million in annualized new business wins across hospitals, senior living, lodging, and recreation facilities. We captured additional share gains during the first quarter in both healthcare and hospitality by leveraging our expertise our differentiated selling model, and our long-term relationships. And we are thrilled to announce that our scoop products surpassed $1 billion in annual sales for the first time in 2024. We just launched our new spring scoop, which features 18 high-quality, innovative, and labor-saving products designed to attract and retain diners and address back-of-house pain points. A great example is our Chef's Line all-natural beef burrito, a trending Mexican beef dish that is projected to grow by more than 100% over the next four years. Turning to slide eight, our profit pillar. Adjusted gross profit grew 5% in the first quarter to $1.6 billion, driven by volume growth, improved cost of goods savings, and increased private label penetration. We made further progress on cost of goods by collaborating with additional vendors, and we remain confident in achieving $260 million of COG savings under our new long-range plan. Total company private label penetration increased 90 basis points to 34%, and core independent restaurant penetration grew by nearly 50 basis points to a quarterly record of more than 53%. Private label growth remains a significant opportunity for foods and helps our customers offset inflationary pressure. Our products offer the competitively priced, high-quality value proposition that our customers are looking for while improving our margins. As a reminder, we do not see a near-term ceiling to our private label growth. We also continue to drive significant improvement in associate retention across our supply chain network. Our annualized selector turnover improved by approximately 20 percentage points and driver turnover improved by low single digits over the prior year, both driven by our initiatives, including flexible scheduling. While there's more to do in this area, this is our best turnover rate for both selectors and drivers in the last five years. We're also seeking ways to identify cost savings and further streamline administrative processes. We removed spans and layers in 2024, and earlier this year, we took steps to reduce complexity, waste, and non-value-added work across the organization and focus resources closer to the customer. More specifically, additional administrative cost actions, we have taken in 2025. This is in addition to the $120 million in annualized operating expense savings actions we took last year. Our focus strategy and our ability to drive improved profitability through controlling what we can control highlight the resilience of our business model and our ability to adjust to any macro environment. I very much appreciate each of our associates for their hard work and dedication supporting our customers and executing our strategy. Before passing it to Dirk, I'll highlight two CEO award-winning associates, both of whom are veterans. Brian Butts, who served in the Army National Guard for eight years, is a market field trainer and was part of a team that led the replacement of our N-Rider forklifts with safer center ride models. His contributions made a positive impact on our safety results, and to date, there has not been a single recorded injury with the new center ride-powered industrial equipment. Thank you, Brian. for not only keeping our associates safe, but keeping our country safe through your military service. I'd also like to acknowledge Philip Sagardoy, Region Margin Manager, who served in the Marines for four years for his contributions as part of our Next Generation Pricing Team. This initiative provides an integrated and agile platform that serves as a single source for local pricing execution and analysis. Thank you, Philip, for your work on this important initiative and for serving our country so bravely. As we approach Memorial Day, I express my deepest gratitude to Brian, Philip, and all of our veterans, including our associates who have served our great nation. U.S. Foods proudly supports those who have sacrificed for our country, from our Those Who Serve employee business resource group to our new partnership with Skill Bridge, which connects transitioning service members with hands-on civilian career experience through innovative internship partnerships. This holiday is a time for reflection, appreciation, and remembrance. As you spend time with family and friends, please join me in honoring the heroes who made the ultimate sacrifice for our country and for our freedom. Let me now turn the call over to Dirk to discuss our first quarter results