US Foods Holding Corp.

Hello, my name is Karen, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the U.S. Foods Holding Corp. Q126 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you'd like to withdraw your question, just press star once again. Thank you. I'd like to turn the call over to Mike Neese, Senior VP of Investor Relations. Please go ahead.

Thank you, Karen. Good morning, everyone, and welcome to U.S. Foods' first quarter fiscal 2026 earnings call. On today's call, we have Dave Flibman, our CEO, and Dirk Lacazio, 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, while that's otherwise needed, we're comparing our first quarter fiscal year 2026 results to the same period in fiscal year 2025. 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. Excuse me. 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. Thank you. I'll turn the call over to Dave.

Thanks, Mike. Good morning, everyone, and thank you for joining us. Before we begin, I want to thank our dedicated team of 30,000 associates for their unwavering commitment to serving our customers, which was clearly evident in the first quarter. Through their hard work, despite the significant weather-related challenges and increased macro uncertainty related to the Iranian war, we again accelerated our case growth and made further progress on our self-help initiatives. Perhaps more than any other quarter during my tenure, this performance reflects our ability to win in any environment. I'll move now to highlights from the first quarter, followed by an overview of our performance and the progress we've made in executing our strategy, all of which positions us for further growth in 2026. DIRP will then review our first quarter financial results in more detail and provide an update to our 2026 guidance. Starting on slide three, during the first quarter, we delivered strong results amid headwinds from severe weather, the conflict in the Middle East, and rising fuel costs, with consumer sentiment declining to an all-time low in March, all of which impacted our industry. Importantly, we accelerated year-over-year and sequential organic independent restaurant case growth by more than 300 basis points and 70 basis points, respectively. We posted 15% adjusted diluted EPS growth despite a deteriorating macro environment that persisted well beyond early February when we provided our first quarter guidance. We delivered strong case growth with our target customer types. The first quarter marks our 20th consecutive quarter of market share gains with independent restaurants and 22nd consecutive quarter with healthcare. We achieved our strongest organic independent case growth in more than two years at 4.4%. This achievement reflects the continued momentum we are building by winning new business and bringing increased value to our customers. Case growth started out strong before storms hit a significant portion of the country beginning in late January and persisted through much of the quarter. Despite these challenges, we again posted profitable growth by focusing on what we can control. And we grew adjusted gross profit 50 basis points faster than adjusted operating expenses increased adjusted EBITDA 6% and delivered 15% adjusted EPS growth. The winter storms and higher fuel costs impacted our P&L with nearly twice as many distribution center closure days this year compared to the first quarter of last year. Adjusting for these external impacts, we believe our adjusted EBITDA growth would have been approximately 10%. Importantly, our April independent case growth remained strong and was in line with our first quarter. We are focused on executing our strategy with discipline and consistency, underscoring the strength of our business model, the significant momentum we've built over the past several years, and our ability to win in any environment. Let's now take a look at our progress within each of our strategic pillars. Starting with slide four, our first pillar is culture. Keeping our people safe is paramount. During the first quarter, we improved injury and accident rates by 12% compared to prior year and 45% over the past three years. While we're making steady progress, our ultimate goal is zero injuries. As part of our commitment to safety, we continue to replace our end-ride powered industrial equipment with safer center-ride models to greatly reduce the risk of one of our most serious injury types. We've completed 80% of that rollout, and we remain on track to finish by year end. Beyond improving safety, we continue to invest in the business, focusing on developing our people and strengthening our capabilities. During the first quarter, we brought together more than 500 leaders for our Sales Leadership Academy, a multi-day workshop focused on strengthening critical leadership skills, building high-performing sales teams, and preparing them for the rollout of our new seller compensation plan. Feedback was very positive and reinforced the value of this continued investment in the development of our associates. Moving to slide five, our service pool. To enhance our customer experience and the value we provide, we continue to advance our digital capabilities and drive operational excellence across the business. We've embedded new AI capabilities into our Moxie platform that empowers our customers and helps them run their business more efficiently. We recently launched MenuIQ, an AI-powered tool that helps restaurant operators better manage food costs and gives them real-time visibility into menu profitability. MenuIQ is built the way operators work, bringing together essential capabilities that make menu management intuitive and actionable. Operators can upload recipes and automatically calculate food costs, monitor which menu items drive margins, and identify underperforming dishes. A chef at one of our independent restaurant customers shared their experience. He said, menu IQ is easy to use and super fast. I can cost out new menu items and try ingredient swaps in a few minutes on my phone, something that used to take hours juggling spreadsheets. Customer adoption has been strong. In just two months since launch, 15% of our independent customers are using menu IQ, which is double our early expectations. AI remains an important opportunity for us, and we continue to expand the use of our proprietary and third-party tools. We are building momentum as we apply these capabilities to enhance the customer experience while driving productivity and more effective execution across the business. We're also thrilled to introduce Signature, our new differentiated solution for hospitality customers, which provides similar value that our highly successful Vitals program does for our healthcare customers. Importantly, Signature goes deeper than just our customer's ordering relationship with us. It's a comprehensive suite of industry-leading products, smart technology and support designed to help our hospitality customers solve some of their biggest challenges, managing labor and staffing, identifying cost-savings opportunities, and improving menu profitability for high-volume events such as catering and banquets. In addition to providing the right tools and resources to help our customers make it, we're building a best-in-class supply chain to ensure customers get the products they ordered on time and in full. A key driver of service-level improvement is our focus on operations quality composite, or OPSQC, which measures how well we deliver accurate, error-free orders to customers, enhancing the quality of service that our customers experience. We made strong progress with OpsQC in the first quarter, improving by 21% and building upon the 20% improvement we achieved last year. In fact, Q1 represented our best performance since the first quarter of 2019. In summary, we continue to enhance our customer value proposition to help our customers make it while executing our self-help initiatives to drive sustainable improvement in our operations and generate annual productivity gains. Now, let's turn to our growth pillar on slide six. Pronto, our small truck delivery service, is a powerful competitive differentiator and strong contributor to our growth strategy. Through Pronto, we offer our customers more convenience and flexibility, including smaller order sizes, more frequent deliveries, and fill-in orders, which enables us to more effectively compete with local and specialty distributors. We continue to expand the reach of Pronto and have recently gone live on our 47th market, And Pronto Next Day, which extends the Pronto service to existing independent customers, is now live in 26 markets with plans to add approximately 10 more this year. The overall Pronto program is growing at strong double-digit rates and remains on track to generate $1.5 billion in sales in 2027, demonstrating this model's success and Pronto's role as a key long-term growth driver. Another expected driver of our long-term growth is our new seller compensation plan, which will go live across the company next month. As a reminder, our local sales force will transition from the current 50-50 fixed and variable compensation plan today to a fully variable plan. We are committed to ensuring a smooth transition for our sellers and our business. As we have previously discussed, it may take two to three years for the majority of our local sales force to fully transition to 100% variable compensation. Doing this well, rather than adhering to a strict timeline, is the right approach to fully support our sellers through this important change that we believe will unlock future growth. The new compensation structure will create better alignment to our business strategy, enhance the earning potential of our sellers, and fuel future case growth. I am pleased with the progress we're making towards our launch and our sellers and sales leaders remain excited about the opportunity ahead. Let's now move to our profit pillar on slide seven. Our team effectively managed this challenging quarter through the disciplined execution of our self-help initiatives, resulting in consistent profitable growth and margin expansion. Adjusted gross profit was $1.7 billion, up 4.4% from the prior year, and was driven by volume growth and improved cost of goods sold. We continue to make progress with our strategic vendor management work aimed at generating additional cost of goods savings. As we realize these benefits, we are reinvesting a portion of those savings to help accelerate growth. We continue to expect to deliver at least $300 million in cost of goods savings over our three-year long-range plan ending in 2027, which is up from our original $260 million commitment. We also remain focused on growing our private label brands. Our penetration remains strong and stood at 54% with our core independent restaurant customers. Private label remains a meaningful growth opportunity as it benefits both our customers and U.S. foods by offering more cost-effective products and supporting stronger margins. In addition to improving gross profit, we're offsetting operating expense inflation by accelerating productivity, simplifying administrative processes and capturing savings on indirect spend procurement. In the first quarter, we delivered a 3% improvement in year-over-year warehouse and selector productivity, driven in part through our U.S. Foods Market Operating System, or UMOS for short. UMOS is our supply chain process standardization and continuous improvement platform to operate more effectively. It is a key enabler of our annual productivity improvement goal of 3% to 5%. UMass is now live in 70 markets, and we expect to finish deployment by the middle of this year. Lastly, indirect spend remains an important lever in our expense management efforts, and we continue to generate strong results. This year, we expect to deliver more than $75 million in savings, up from $45 million last year. And we remain on track for more than $100 million of savings in 2027. Before I hand it over to Dirk, I'll take a moment to acknowledge our exceptional associates who consistently deliver excellence. May holds special significance for us as it marks the 10th anniversary of the US Foods IPO, and it is also National Military Appreciation Month. On May 26, 2016, US Foods debuted on the New York Stock Exchange with an initial public offering at $23 per share. We've come a long way over the last 10 years, transforming into the strong and resilient company we are today. I extend my sincere gratitude to our 30,000 associates for their dedication and their hard work. I'll also highlight an associate who achieved an extraordinary accomplishment. Jayden Falkenbang, a Knight Selector in our Sacramento Distribution Center, has taken the every case matters mentality to the next level, selecting more than 1 million cases without a single error since June 2023. Each and every case he selects reflects his commitment to accuracy and his pride in ensuring our customers receive exactly what they order every time. Thank you, Jayden, for your commitment to delivering excellence to our customers. With this being National Military Appreciation Month, I am incredibly grateful for our 1,500 veteran associates and the unique expertise they bring to our company. At U.S. Foods, we highly value the skills gained through military experience and I am proud that we are on track with our mission 2030 commitment to hire 3,000 military veterans by the end of the decade. As Memorial Day soon approaches, we remember all the courageous men and women who have made the ultimate sacrifice to defend our freedom. To all our active military and veteran associates, customers, partners, and investors, thank you for your unwavering dedication and steadfast commitment to our great nation. Now let me turn the call over to Dirk to discuss our first quarter results and our 2026 guidance.