US Foods at 2025 dbAccess Conference: Strategic Growth Insights

US Foods Holding Corp (NYSE:USFD) presented a strategic overview at the 2025 dbAccess Global Consumer Conference on Thursday, 05 June 2025. The company highlighted its resilience and growth strategies amidst macroeconomic challenges. While CEO Dave Flippman emphasized a customer-centric approach, CFO Dirk Locascio discussed financial targets and self-help initiatives, expressing confidence in achieving long-term growth.

Key Takeaways

• US Foods aims for 5% sales growth, 10% EBITDA growth, and 20% EPS growth despite economic headwinds.
• Focused on market share gains in independent restaurants, healthcare, and hospitality.
• Emphasizing automation and technology with platforms like Moxie and Vitals.
• Expanding private label products and the Pronto program to boost profitability.
• Exploring tuck-in acquisitions and maintaining a balanced capital allocation strategy.

Financial Results

• Long-term targets include 5% sales growth, 10% EBITDA growth, and 20% EPS growth.
• Initiatives to reduce cost of goods aim to save $260 million over three years.
• Private label sales reached $1 billion, with a record 35% penetration.
• The Pronto program is on a $730 million run rate, targeting $1 billion soon.
• Expecting the highest EBITDA and margins in company history this year, with over 5% margins expected next year.

Operational Updates

• US Foods has gained market share in independent restaurants for 16 consecutive quarters and in healthcare for 18 quarters.
• Salesforce headcount increased by 6% in 2023, with a future target of 4-6% growth.
• Leveraging the Moxie platform for e-commerce and Vitals in healthcare.
• A new semi-automated facility is being opened, and flexible scheduling is implemented for workforce optimization.
• The Pronto program is active in 40 markets, with expansion plans underway.

Future Outlook

• Continued focus on achieving long-term growth targets through self-help initiatives.
• Expanding the Pronto program and exploring further automation opportunities.
• Simplifying operations and aligning the organization to deliver results.

Q&A Highlights

• Restaurant foot traffic is improving but remains down, with May foot traffic down 1%.
• Market share gains are driven by data, strong sales force, and technology platforms.
• The competitive landscape is fragmented, with US Foods focusing on service and cost efficiency.
• M&A strategy targets smaller, local competitors to enhance market density and synergies.
• Capital allocation priorities include business investment, maintaining leverage, M&A, and share repurchases.

Readers are encouraged to refer to the full transcript for a detailed account of the conference call.

Full transcript - 2025 dbAccess Global Consumer Conference:

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Alright. Thank you, everybody. Hi. I’m Lauren Silberman. I’m the equity research analyst here at Deutsche Bank covering restaurants and food distributors.

Today, I’m thrilled to be here with US Foods. With us today, we have CEO Dave Flippman and CFO Dirk Locascio. Dave, Dirk, thank you very much for being here.

Dave Flippman, CEO, US Foods: Thank you, Lauren. Thank you for having us.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: I’m gonna start with a high level question. Dave, you joined US Foods about two and a half years ago. Dirk, you’ve been here about fifteen years. A lot has happened over the past few years in what has been a very challenging backdrop. Hi.

I’m What’s been most surprising to you over the last few years? What do you see as the biggest changes in the organization, both Dave and Dirk?

Dave Flippman, CEO, US Foods: Yeah. Sure. Well, thanks again for having us, Lauren. And as you said, I’ve been here two and a half years. You know, what I inherited was a a very customer focused organization that was largely focused on the right things.

If I brought a couple of things to the company here, I think one of them has been simplification. If anything, it felt like we were trying to do too much, which led, in my my view, to ineffective execution. And so we simplified the agenda. I think we’ve been ruthless about prioritization. You know, what are the key needle moving activities to help strengthen the organization, but importantly, help strengthen our focus on the customer?

And so we’ve done a number of things around that. You know, we’ll I’m sure we’ll talk about it. We’ve had opportunities across all portions of the P and l. I think not the surprise, but the thing that I feel best about is I inherited an organization that was extremely focused on the customer. And in my experience, in this industry and others, if you have that, it’s really something to highlight.

It’s it’s a thing of beauty. But if you don’t have that, it’s very, very difficult to create it culturally in an organization. And I’m blessed to have inherited an organization that was largely focused on the customer and their success.

Dirk Locascio, CFO, US Foods: I think I’d add to that is really just seeing, as Dave pointed out, the narrowing of focus, so doing fewer things and focus on doing them better. And that really then ties into the focus on execution and performance culture. And, you know, you’ve seen that show up in our financial results, but also just as much I think one thing I get probably more excited than anything is just our safety results because that is one when you think about a culture and a healthy culture and that performance coming to life where the goal is to send more of our associates home safely every night. And we’ve, you know, roughly, you know, halved our incident rate over the last few years, and that’s just one example of that. So that performance culture continues and is only gonna continue to make US Foods stronger and a better environment for our associates, our customers, our investors.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. I’ll start with move to the consumer. Your business has been very resilient through cycles. Can you just talk about what you’re seeing in the consumer environment, how you’re assessing the state of the consumer, any signs of green juice, and how that kind of all flows through?

Dave Flippman, CEO, US Foods: Yeah. I’d start with just a little context around the industry. The industry is extremely resilient. I think that’s been proven over many macro cycles. Point back to the great recession and just speaking on behalf of the company, you know, our volumes were down mid single digits, and our EBITDA was flat during the great recession.

I I think that speaks to the strength of the industry, but more importantly, the resilience of our business model. To your point, you know, consumers have been under pressure in The US for a long time now. It started with COVID, just inflationary pressures that have continued. I think the best evidence of that is eight consecutive quarters of declining foot traffic in the restaurant space. But to your point, the consumer is resilient, and I think, you know, it will rebound.

More recently, we’ve seen some incremental improvement from the first quarter from really March where foot traffic was down a couple points. April rebounded slightly to down one and a half, and most recent data we just got from Black Box says May was down 1%. So while we’re seeing sequential improvement, I think it’s important to point out that we’re we’re not back to where we need to be yet, but it is encouraging to see just a sixty day trend.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. So last year, you set out some long term targets. As a reminder, 5% sales growth, 10% EBITDA, about 20% EPS growth. As we talked about, industry traffic has been pressured over the last several quarters. What’s your confidence in achieving the guide both this year, the next couple of years, if industry traffic remains pressured?

Dave Flippman, CEO, US Foods: Yeah. Great question. And our confidence is high. It it remains high. And we say this a lot, you know, regardless of the macro, we’re gonna execute.

I think it speaks to underlying how much self help that we’ve demonstrated and that we continue to have. We say we’re in the early to mid innings of this self help and improvement story. I think the best evidence of that is the most recent quarter where not only the foot traffic being a challenge and actually down as much as it’s been in the last two years, you overlay a bunch of weather things that happened in the first quarter, and we essentially delivered our new algorithm. You know, we continue to take market share in our target customer types. So when things rebound, it’s going be a nice tailwind for us.

But we basically deliver the new algorithm every quarter of last year, including the first quarter of this year, and that really is what informs our confidence in the future.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Can you talk about some of those self help initiatives? Like, what visibility do you have into the portfolio of opportunities?

Dave Flippman, CEO, US Foods: Yeah. We’ve got great visibility, and that, again, informs our our confidence, and I kinda tag team this with Dirk. You know, it starts with the top line. You know, we’ve taken market share with independent restaurants, which, by the way, is the most profitable segment of the food service industry for sixteen consecutive quarters, eighteen consecutive quarters in health care, and that momentum just continues to build. So as I said earlier, you know, in a in a down foot traffic environment like we’ve experienced, our ability to control the controllables, It starts with can’t control the macro.

What we can control is our ability to take competitive market share, our team is focused on that, has been for a long time and is doing a great job. We have a lot of gross profit help. It starts with our cost of goods work. Dirk’s got a very long term perspective on that, but we’ve committed to $260,000,000 over the next three years. It was informed by several cycles of doing this work historically in the company.

And then we’ve got a lot of fixed cost productivity work. Three to 5% is our target, which will largely offset inflation in normal times. And Dirk’s on point for a lot of that work, so I’ll flip it over to him. And

Dirk Locascio, CFO, US Foods: Sure. Maybe just to to start with, though, I think back to your question you asked, Dave, just respond also on the the confidence. And what gives us that confidence is the fact that we have these self help initiatives all through the p and l. So it’s not a what do we do to make this quarter, what do we do to make the next quarter versus and we’ve got them laid out over the next several years. And as we know, as things we have we have quite a bit of visibility, and it’s managed in that way as something initiative a may be delivering.

And as that’s reaching maturity, then there’s other things that are ramping up. So we have a lot of visibility where the team manages it to be able to understand what’s what’s happening and coming forward. And as Dave mentioned in in so gross profit, you know, the three good examples, cost of goods that he mentioned, and to the $260,000,000 over the three years, we have a lot of confidence in that coming off of the 230 last time. This will be roughly the fourth time we’ve done it in my fifteen years there, and it’s one where Dave Bowen team, my peer who who leads and really architects a lot of that, Some of it is you repeat. Some of that is you continue to evolve, and this is really a lot of it is partnering with our vendors to bring dual growth to both us and the vendors.

And so we have a lot of confidence in that, our continued private label penetration, and the mix from growing faster with independent health care and hospitality. So those are three big contributors there that will you know, the things that we’re doing will continue to to gain benefits. And on the productivity, it really spans across supply chain, admin, and indirect, which is non people spends like sanitation, maintenance, things like that, and aggregating and going after that spend on which we haven’t really done previously. That’s more than $1,000,000,000 pool of spend that we’re targeting 60,000,000 of savings. We got 30,000,000 last year.

And, again, a lot of confidence in achieving that. And, really, when you if I go to supply chain as just a couple of examples in there, the routing work that we’ve been doing is a great one that not only does it drive productivity, but it’s a better experience for the customer, for our associates, and, you know, some other sort of things across each of those. But, again, that portfolio and the way we manage it gives us a lot of confidence and a lot of visibility as to what’s coming.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: No shortage of opportunities.

Dirk Locascio, CFO, US Foods: No shortage of opportunities. Exactly right.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Starting with just on the market share piece of what you’ve talked about, it’s an important indicator of the successful execution of the strategy and kind of the control of controllables. What’s driving the market share gains? Why do you think customers are coming to you, and what differentiates you?

Dave Flippman, CEO, US Foods: Yeah. We’ve got a a lot of differentiators. Let me just talk about our focus in the restaurant space. So just from a process standpoint, you know, our team for several years now has been using the the Surcana, formerly NPD data, to help target market share gain opportunities at the local market level. That is very granular information.

So it gives us reinforcement on where we’re taking share, but more importantly, where the opportunities are at the local market level. And our team has embraced that. Our sales organization is focused on it, making sure we’ve got the right assortment to support whatever subsegment of the customer where we’ve got those opportunities. So I like to say we’ve got a little machine working on that now for four or five years that’s really gaining traction and focus. But you wrap that around our go to market strategy.

So we go to market with a strong sales force that continues to grow. We couple that with some resources for them, including product specialists, culinary specialists, chefs, and importantly, restaurant operations consultants that we’ve built an organization around. And a lot of those folks have previously been restaurant operators. So they really understand the back office challenges, what needs to happen in the kitchen from a productivity standpoint, how to maximize menu productivity, all that sort of stuff. And importantly for us, it helps us get multiple relationships into a customer and not just dependent upon one.

You know, you couple that with our ecommerce platform, our Moxie platform, which we’re very excited about. Launched that almost three years ago. It’ll be three years this fall. And we’ve been the industry leader in ecommerce for the for a very long time. Moxie really brought that all together in a in a one stop, easy to use application.

So no matter what the customer needs to do to interact with US Foods, they can do it in that application from ordering product to actually seeing visibility into our inventory and whether the product is in stock, filling out credit applications, paying their bills, tracking their deliveries, all very easily. The important part of that is the more entangled the customer gets into our ecosystem, the greater opportunities we have to market to them, particularly our brands through that digital tool, and the more challenging it becomes for them to leave, the more comfortable that they get utilizing that tool. And the second benefit, and probably equally as importantly, that self help for the customer frees up our sales force to go market the next great products to that customer. Importantly, go find the next customer and not get tied up in the day to day, you know, mundane activities that are very, very important for the customer, but don’t drive the most productivity for our sales force. So we’ve got a lot of that.

And then flipping over to health care and hospitality, similar focus in terms of how we we target share. But importantly, we’ve got an analogous technology in health care. It’s called Vitals. It’s unique to the industry. We’ve built that ourselves over multiple years, continue to make it better.

It gives health care providers insights into their patient feeding costs, importantly, nutritionals. If you think about a large scaled health care provider, it’s a one stop shop for them to look at optimizing their entire network. We couple that with a long history of having really good health care professionals on our our staff, including dietitians and nutritionists that help support that growth. And importantly, in both health care and hospitality, we’ve got long standing relationships with some of the larger GPOs in the industry, and we found through the years ways to make that a very win win partnership. It’s worked for us.

Many of these relationships are multi decade, so they’re long standing. We figured out the best way to work together. And the last thing I’ll say to that is is we’ve locked up all of those relationships at least until 2030. So we’ve got really good momentum, strong focus, strong team wrapped in a technology portfolio that really enables our success.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. There’s been a lot of discussion on the Salesforce and growing the Salesforce, you and your peers. Like, what’s the right level to grow your Salesforce? Why not grow it even faster? And then how does that ultimately translate to case growth?

Dave Flippman, CEO, US Foods: Yeah. For so for us, we’ve been quite public that, you know, low to mid single digits, so think about four to 6%. It’s just the right sweet spot for us, and our competitors may have different views of that. In 2023, we grew our Salesforce headcount by six percent. Last year, we grew it by an additional 5%.

So we’re right in that sweet spot. For us, you know, we do a very good job of onboarding sales talent. We put them through a lengthy, rigorous training process that really never ends after the formal process is over. And it’s just how quickly you can absorb that sales talent and make them effective. You know, the way we are thoughtful about that, the work that we put into training those folks, you can overwhelm the system and become very ineffective and just be adding people without the capability that you need.

So we’ve just found that mid single digit kind of our sweet spot.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. I think you’ve talked about that the productivity of your Salesforce may be a little bit higher. What drives that? Is it your technology and the tools that you offer to Salesforce?

Dave Flippman, CEO, US Foods: I think it’s a lot of what I talked about earlier. It’s how we go to market. It’s the team based selling approach where we support our sellers so they have support around them to do a lot of those activities. And then importantly, the the technology is a big help to our Salesforce and their productivity.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great.

Dirk Locascio, CFO, US Foods: We’re gonna ask sometimes, you know, do you view the the technology that’s replacing the human and as opposed to, you know, we look at it as the seller and the technology or partners? And to Dave’s point, the technology can make it easier and more effective for the customer to do what they want, get better information, and yet then the sellers’ interactions with the customers are are far more effective.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. So you guys are the industry leader in the health care segment. What differentiates you? I know you mentioned the Vitals platform, but what makes it a little bit more difficult to enter this space, if anything?

Dave Flippman, CEO, US Foods: Well, you’ve gotta have deep expertise for health care, and that’s why you you couple that technology capability that I spoke about, which is a real differentiator for us, and no one has anything like it. I think it would be very difficult to duplicate with the length and experience that we’ve had the deep health care staff on board. And 18 consecutive quarters of share gains kind of points to just how good our team is and how we go to market and the ability to capture that share. And again, I do think the GPO relationships we have in health care are a big differentiator for us. They bring market access scaled in a way that would be more challenging for a smaller competitor to go after.

Right? And so those all of that, I think, benefits us and and really drives that portfolio of differentiation we have in health care.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. And you guys target really independent health care, hospitality, three very attractive segments. Just talk a little bit about the profitability of the independent health care hospitality and perhaps how that compares to Jane.

Dave Flippman, CEO, US Foods: Yeah. I’ll let Dirk answer that, but I I do wanna say that we’re the only distributor that focuses on those three and has done it for a long time. And importantly, they’re over time, they’re the fastest growing and most profitable segments of all food service. So we’re unique in our model. I think it causes us to be more resilient, and we’ve been at it for a long time.

Dirk, you wanna talk about the profitability?

Dirk Locascio, CFO, US Foods: Sure. So independence, most profitable, followed by health care and hospitality, and then typically chain and other are are below those. And it really is in addition to that, the other attractive part is just our differentiation strategy shows up more on the independent health care and hospitality. It’s harder to do that with chain. Chain, you know, you won’t hear us talk about the the chain is it’s not that it’s bad.

It’s not that we don’t wanna serve it. It’s really about optimizing in the right chains in the right locations for us. And so we have a number of very good chain customer partners that we work with and happy to to do that. But just that in independent health care and hospitality, just the the share gains and the focus, that’s why you’ll see us growing faster than the market there where chains will be much more in line with what broader industry traffic does.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. Private label, you’ve talked about opportunity to increase that private label penetration. What are you doing to expand it? Is it growing assortment, awareness, incentives? Talk about that strategy.

Dave Flippman, CEO, US Foods: Yeah. We’re very excited about private label. Let me just tell you a quick story on that. I think the industry was pressured in private label in general coming out of COVID as things shut down. And as manufacturers recovered, they were much more concerned about getting that capability and supply back up on their brands versus private label.

So it really caused the whole industry to lose momentum. And importantly, you know, anytime you lose that momentum, you lose a little bit of confidence in the Salesforce. So you roll the clock forward over the last eighteen months. Supply has been plentiful again, and we’ve regained that confidence in the Salesforce. And that’s why you see us driving that momentum.

Importantly for us, you know, we’ve got 22 private label brands that we’ve developed through a number of years. It’s underpinned by a strong innovation process that we call Scoop. And twice a year, we want in the spring and the fall, we launch a new portfolio of products. We’ve got culinary experts that have been scouring the globe for for trends. They bring the best around the world into what could be the next emerging trend in in The United States.

And that’s really what informs the ingredients and the products that we bring to market through Scoop. It’s been quite successful. I think we highlighted on the last earnings call that we reached $1,000,000,000 in Scoop sales since we launched it about twelve years ago. So exciting and momentum, and I think, you know, the the all time record high quarterly performance of thirty thirty five percent penetration for the company, and importantly, 53% penetration for independents, just underscores that we do have that momentum back again. Last thing I would say is our private label products are first of all, they’re great quality.

It’s important for the customer. They’re tiered in good, better, and best. So depending upon what the customer is looking for, we can direct them to the right part of our portfolio. And you think about all the pressure that the customer has had, consumer has had recently, it really lends itself to our private label focus because not only are they great products, they’re cheaper for our customers, and they’re twice as profitable for the company. We also incent our sellers to sell them, so we pay them a higher percentage of gross profit because of the profitability of those products.

So it really is a win win win for the customer, for the company, and for our sales force.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: It the penetration is obviously higher at the independent side of it. How is that strategy can you leverage in the hospitality health care segment as well?

Dirk Locascio, CFO, US Foods: Yeah. So hospitality penetration is and health care both are a little bit higher than the overall company number, but private label is conducive to all three of those customer types more so than, say, chain. That’s another reason why with independent health care and hospitality that makes it attractive is typically once you’re serving those customer types out of a distribution center, the customers are buying those same products. So the velocity churn with those inventory items is is much faster versus bringing in a lot of proprietary items that you’re serving just those customers for, and that’s part of what contributes to the profitability of those customer types.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. Let’s talk a little bit about the competitive environment. Are you seeing any changes in the competitive environment both with respect to your peers, any promotional intensity, as well as the competitive environment as it relates to Salesforce and talent?

Dave Flippman, CEO, US Foods: Yeah. So, you know, what I what I like to describe for the industry is, you know, given the fragmented nature of it in that our two large competitors and ourselves have less than 40% of market share, it remains a very highly fragmented market. That leads to a number of things, not the least of which is the competitive nature of the landscape. So it’s always competitive. You have to be on your game in terms of service.

You have to be on your game in terms of cost of goods. So you’re making sure that you’re competitive where you need to be. And so that ebbs and flows. Our two large competitors have a different fiscal calendar than we do. So as it gets closer to their year end or maybe some promotional things, it ebbs and flows.

I don’t see anything going on that is abnormal in terms of market competitiveness. It’s always competitive. And then secondly, relative to Salesforce, you know, we get this question a lot. I just like to point out that as we continue to grow our Salesforce, actually competitive sellers is is the minority of who we hire. You know, we have a lot of success where we target competitive hires.

But importantly, the majority comes hopefully with industry experience, but it comes from different areas. You know, a lot of times, there are folks with deep culinary experience like chefs who make great sellers and want a different lifestyle. You know, it’s a grind being a chef in a restaurant. And so they make great sellers. They’re quick to pick up the product line.

They really understand it broadly, food in general. So they they get up learning curve quickly. A lot of times, we have operators. Sometimes they come in as consultants, as I mentioned, oftentimes sales reps who really understand the operations and pressures of the restaurant. Obviously, we have to teach them the the food side of it and the product portfolio.

We find folks in the industry that come from manufacturers who understand broadly how the industry works but never have sold. You know, they a little bit understand the industry, not as much the selling process. So we we’ve got success from all over the place. In terms of competitive reps, you know, that ebbs and flows. We have not had trouble adding talent in any way, shape, or form.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: How does the productivity curve differ if you bring in experience Yeah. Versus those more adjacent in sector?

Dave Flippman, CEO, US Foods: So let’s start with competitive reps. So, typically, they come in with a twelve month noncompete. So you can’t have them call on their old customer base, obviously. So we we put them into a new geography. Oftentimes, because of their experience, they’re able to grow that and and do quite well.

So when a noncompete comes off, you know, they typically have the option. Do you wanna go back to your old territory, or do you wanna stay where you are? Some it’s split, really. Some just love what they’re doing. But even in that situation, they can help us with those legacy customer relationships that they had.

And then if you look at the the other cohorts that I mentioned, just dependent upon their experience and culinary background, it can take them eighteen, twenty four months to get up up to speed. So their productivity ramp is a little bit longer. But we find over the course of time, they’re able to get up to the same as, you know, someone who’s got that deep selling experience in the industry. It take just takes a while longer to get up that curve.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. Gonna go to m and a. So you’ve done a handful of deals over the past couple of years. What are you seeing in the marketplace today, and what do you look for in a potential target?

Dave Flippman, CEO, US Foods: Let me let me take the second part of that, and I’ll let Dirk talk about the other better portion of it. So so we’ve been quite consistent in our m and a strategy, and it really is tuck ins. And what we mean by tuck ins is smaller scale local competitors. I love our footprint. You know, we’re in 70 of the biggest, fastest growing markets in the country.

So there isn’t a geography where I’d point to and say, hey. We’ve got a geographic big void here. But what we do have the opportunity to do is what you’ve seen us do over the last couple of years, which is target a local competitor that helps us with local market density. That immediately does a couple of things. First of all, it gives us scale in that market where we may have been serving it from a greater distance away.

So immediately, we have the uplift of taking miles out of our distribution network, getting synergy and cost benefit from that. Secondly, procurement synergies of a smaller operator to our buying scale tend to be immediate. But what we target is well run, typically family owned businesses that have a large mix of independent restaurants. And that’s what you’ve seen us do over our last four acquisitions. Dirk, do want to take the second part of that?

Dirk Locascio, CFO, US Foods: Yeah. And, I mean, really, it’s we’ve seen market, I’d say, pretty stable on there. Its valuation has been reasonable. It continues to be people wanna be paid fairly for their business, but it’s not been a disconnect. And it’s one where our m and a team, we continue to work our pipeline, and just you don’t know exactly when that phone call is gonna come of it’s their time.

And, I mean, some of these, we’ve had relationships with for more than a decade, and it just it’s the right time when it’s maybe a family, a generational change. They’re ready to to exit the business, etcetera. And, also, often a lot of these operators are are connected to one another. They know one another. So, you know, when we buy a business, our reputation and sort of treating those associates in that business very well is important.

And so in each, what it does, though, to Dave’s point is by targeting the types of businesses that that he alluded to, it really allows us to increase that local density and be closer to the customer and oftentimes allows us to add capacity for less than if we were building it ourselves. So both two examples of, the one we bought in Upstate New York and then we bought outside of, Nashville, Tennessee. Each of those, as you said, allowed us to be much closer to the customer, increase local density, but also both those buildings could be expanded. And we one is done. One is in the process, and so it allows us to add capacity as well to be closer to that customer.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Let’s continue building on the capital allocation side. And you wanna talk about your capital allocation priorities, balancing, investing in the business versus share repurchases and even

Dirk Locascio, CFO, US Foods: Sure. So our four priorities are, first of all, investing in the business for maintenance and growth, maintaining our leverage in our two to three times target range, which we’re we’re well within, as well as tuck in m and a and then returning capital to shareholders via share repurchases. So job one for us is make sure we’re investing in the business, which we have done. We’ve stepped up our CapEx spend over the last few years, and we have good things to invest in. We’re gonna continue to do that.

So sometimes we’ll get the question, well, in order to buy shares, are you starving the business? Absolutely not. We’re investing at record levels for US Foods. And then then you go really to the share repurchases and the tuck in m and a and back to the point of we don’t know exactly when tuck in m and a is gonna come to fruition, so that’s why we like that combo. You can toggle back and forth between them.

And just given where our share price is versus where we would expect it to be a few years out, even compared to where one of our peers traded in the pre COVID time, we believe, again, it’s still undervalued over time, and, therefore, we like that we have that option. And then that becomes accretive from an EPS perspective. So we have we’re growing earnings through top line growth, resulting with our middle of the p and l initiatives to drive very strong adjusted EBITDA growth and then leveraging that to the 20 plus percent EPS growth, so putting that all together for a very strong return.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. On the investing in the business piece, you guys are opening up a new semi auto facility, I think, in a few months. Can you just talk about, like, how you see automation playing a role in this industry? Obviously, this is the first one, but how you’re thinking down the road.

Dave Flippman, CEO, US Foods: Yeah. We’re we’re excited about automation. As you mentioned, this is our first step into that. And I think, importantly, the technology has been around for a long time, maybe not as much in food service, more in retail. So it’s proven technology.

The important part for us and why we chose, you know, this opportunity to invest in the new facility now is that the cost of that technology has gotten more appropriate for an industry now. It’s improved over the last decade or so, and it just made sense for us to do that. We’re excited about it in a in a few ways. First of all, it will help with productivity. I think that’s obvious.

Right? That’s why we would initially do that. But the other important part of it, I think, is it’s going to yield a better customer experience. So if you think about the manual nature of the business that we have here in terms of how product gets selected and loaded and delivered to the customers, automating the upfront portion of that is going to result in more accuracy, a better experience ultimately for our customers in terms of how the product gets there. But also in the intermediate step, it’ll be easier for our drivers because oftentimes, they’ll show up to a customer.

There’ll be a case that’s missing perhaps, or maybe it’s on three pallets deep on the truck and they have to go find that. Obviously, taking the human error element out of it will make it a much more consistent experience overall. So we’re excited about it in a number of ways. Obviously, our first step here, we’ll hopefully start that up this summer. We’ll learn a lot.

We’ll learn a lot about the technology, its capability. Importantly, I think we’ll learn how to apply it some to our existing facilities, what parts of it could apply, which which parts can’t. So we’re very excited about this journey. We’re just starting.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Do you see potential to retrofit the organization with some of this automation over time, or is it more about the new facilities that you open in the future will have elements of this?

Dave Flippman, CEO, US Foods: Yeah. I I think there’s an opportunity to to do some retrofitting, not at the type of scale you could. So if you think about it, just the the ceiling height, you know, to do full automation has to be much higher. Difficult to do that. But, you know, where we could apply it is is in some expansions.

You know, we could design the expansion portion for that semiautomation. And as I said earlier, I think there are a a few elements of it that could be retrofitted into existing facilities beyond that.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great.

Dave Flippman, CEO, US Foods: We’ll we’ll see.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: During COVID, there’s obviously elevated turnover, and you guys are working through getting back to productivity levels, service levels. Just talk about where you are in that journey today.

Dave Flippman, CEO, US Foods: Yeah. It’s it’s been a journey since COVID, really, really a challenge for the whole industry. But for us, we we’ve done a few things, I think, that has helped ourselves. One of the things we talked about shortly after I joined the organization was flexible scheduling. It’s played out very, very well for us.

It’s it’s more about offering our physical workforce a better work life balance, fully staffing the operation, but giving them some flexibility in terms of when they work and when they don’t three or four day shifts and balancing that across so you make sure you’ve got the right coverage. That really has been a key enabler, I think, to getting us back to basically pre COVID levels of both turnover and productivity. We’re fully there for the drivers. We’re almost there for the warehouse. But importantly, we’ve gotten to the point now where it’s no it’s no longer an issue.

We’ve been staffed for a long time, but it really has helped productivity and also safety, you know, getting that turnover down. So we’re excited about where we are, and I think we’ll continue to make it better.

Dirk Locascio, CFO, US Foods: You know, during these discussions and even with earnings calls and that we talk so much about the p and l and the initiatives and the and the financial results. But on last earnings call, Dave talked about a few just also just to your point, customer service statistics is our customer fill rates, our operations sort of quality measure. Those are all sort of back at the best levels they’ve been at, you know, five, six years. And so those are areas where the service measure, then I talked earlier about safety, those are all things that we’re working just as hard at continuing to improve and improve the experience for our customers, our associates as we are for the p and l results. And pretty pleased with the progress.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. Let’s talk about Pronto, and it’s a program that enables customers, basically, get delivers on nonroutine days, I believe, times. So can you talk about Pronto and then sort of the evolution of Pronto, how you think about that opportunity from here?

Dave Flippman, CEO, US Foods: Yeah. I’ll start. Dirk can chime in here. We’re very excited about Pronto. I I think the thing to point out is we’ve been at this for a very long time.

We’ve been talking about it more recently. But the Pronto journey started more than five years ago, and it was focused on proving out a model going after exclusively new customers. Right? We we had not taken it to our existing customer base until we understood whether that model would work for us. So we’re we’ve taken that pronto we call it pronto legacy into 40 markets.

It’s aimed for urban, you know, hard to reach difficult areas. So these are smaller box trucks with multi temperature zones in them. And really, I think it unlocks our TAM a bit. So we’ve got great products. We can compete with anyone, particularly the specialty suppliers.

And so if you think about a legacy specialty produce supplier or protein supplier, we’ve got all those great products. What we were lacking was the service model to get those products to the customer on a more frequent delivery basis. You know, very difficult in in high urban areas where you’re taking in 53 foot trailers to do that four or five days a week. Right? It just isn’t worth it.

But with Pronto, we’ve proven that model. We’ve we’ve proven the ability to capture share in doing that. And so it’s just about a year ago where we started to take that to our existing customer base. And as we did that, you know, we we ran a pilot in in six or so markets through the course of last summer into the fall. And we were really wanting to make sure of two key things.

One is that we didn’t cannibalize our existing broad line business and just make those deliveries more inefficient, if you will. And then secondly, that we’re able to capture the margin profile that we needed to to justify the increased service. And so through that piloting work, we we’re excited to say that, you know, it’s proven out quite well. Pronto penetration, we call that with existing customers, is now live in 10 markets. And I I think the right way to think about that is twofold.

One is those 40 markets with legacy. I think those are all ripe for Pronto penetration. But beyond that, when we enter a new market with Pronto, we may go live with one or two trucks. The important part is as we scale it across markets, we also have the opportunity to penetrate those markets further with increased volume as we prove the model and grow it there. So very, very excited about what it means in terms of growth.

We’ve seen a 10% to 15% uplift in cases where Pronto has been successful.

Dirk Locascio, CFO, US Foods: And so I think it’s gonna mean good things here as we scale it. We’ve talked about, you know, Pronto being a helpful contributor to growth. And our expectation is between the Pronto legacy and the Pronto pen that we’ll be talking about, it being a growth enabler for a long time to come. Last year, it did, you know, $730,000,000 of run rate. We’ve talked about a potential billion dollars.

Wouldn’t be surprised if we’re talking about a bigger bigger number in the not too distant future. And Dave said this is something we’re excited about. But the other reason we like it so much is other than the trucks, these products are coming out of our existing distribution centers. So it’s a very capital efficient way to offer that differentiated service to customers.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. I’ll try this one. Assuming my model’s right, you guys are going hit the highest EBITDA and EBITDA margins, I think, in the company’s history this year. You may know better

Dave Flippman, CEO, US Foods: than I hope your model’s right.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Yeah. Me too. But you will be running, I think, north of 5% EBITDA margins next year and over the next couple of years. Is there a limit to the long term margin structure? Anything structural there?

Do you see opportunity for continued expansion?

Dirk Locascio, CFO, US Foods: We don’t see any limits in the, you know, midterm near midterm. So we’ve got a lot of runway ahead. I mean and that’s why we talk about and, you know, we genuinely are excited about the self help. So we do think we still have plenty of opportunity for runway and and not even just in our through our current LRP, but, you know, well beyond that to continue to improve. And, many of these ways, they’re really just just taking waste out of the system that also improves quality, improves social experience, customer experience.

So we’ve we’ve got a lot of opportunity for margin expansion still ahead.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Great. This is a little bit of a longer term one, but just like technology tools, broader systems, investments, what do you see as the most meaningful potential unlocks near term, long term? You have the rollout of Descartes, generative AI, the automated warehouse we talked about.

Dave Flippman, CEO, US Foods: Well, you just pointed to four or five. So I’d I’d like to say there’s just one or two, but there really isn’t. I think, you know, distribution is complicated. Part of what we’ve done here is simplify our journey in the top line and all portions of the p and l. I think the important thing for everybody to take away is that we’ve got a lot of self help in each one of those areas.

We’re still just getting started in many, many ways. And so it really isn’t just one or two key things. I think, you know, we’re blessed to have the focus in on all parts of the p and l, an organization that’s very aligned on what we have to deliver there, and we just continue to ramp up that execution.

Dirk Locascio, CFO, US Foods: It’s also a contributor when we talk about, you know, with the self help and things. It’s not just, hey, Dirk. You need to work harder. You need to work faster. These are tools to enable that both across each of the areas of the business.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: And that sets me up for my final question. Are there any, you know, one to two things that you both wanna leave investors with? Obviously, your stock has reset higher just from a valuation perspective, which is something that we hear. So what do you tell a new investor as to why the right time is now for US Foods?

Dave Flippman, CEO, US Foods: Yeah. Let let me make a couple comments there, and then, obviously, Dirk can come in. But if you wanna take away a few things from our story, first of all, I think it’s the simplicity of our focus. You know, I like to say this. We’re the only US focused foodservice distributor that’s pure play with large national scale.

A lot of our competitors are doing a bunch of things. Ours is a simpler story. And importantly, we’re focused on the three most profitable customer types in the industry, and we’ve been doing it for a long time. Second thing I’d say is, and we’ve talked about it here this morning a lot, we’ve got a long runway of self help initiatives and line of sight for the future that actually spans well beyond, you know, the next three years. I think that leads to the last point is we’re gonna be an earnings compounder for a long time to come that’s gonna span well beyond our three year time horizon.

So with all of that, I’d say it’s not too late. Join us, you know, for this journey. You know, if you if you just have line of sight to what we’ve put out in terms of our EBITDA targets for the next three years, you know, the stock has a lot of room to grow, and we believe that.

Dirk Locascio, CFO, US Foods: And I think the an extremely important point as part of that is that compounding is not from just one thing. It’s we’re growing the top line in a very healthy way. We’re expanding margins, resulting in the roughly 10% EBITDA growth in our algorithm, and then that’s leading the capital allocation is accretive on top of that getting to the 20% EPS growth. So it’s that’s what you know, why we get excited about the sustainability of it, of getting to that industry leading 20% EPS growth over this next three years and beyond.

Lauren Silberman, Equity Research Analyst, Deutsche Bank: Dave, Dirk, thank you very much for being here.

Dave Flippman, CEO, US Foods: Appreciate it. Thank you, Lauren. Thank you.

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