• Net Sales: Increased 6.8% to $9.7 billion.
• Total Case Volume Growth: 3.8% increase.
• Independent Restaurant Volume Growth: 4.1% increase, including 170 basis points from acquisitions.
• Health Care Volume Growth: 5.7% increase.
• Hospitality Volume Growth: 3% increase.
• Adjusted EBITDA: Grew 13.2% to $455 million.
• Adjusted EBITDA Margin: Expanded by 27 basis points to 4.7%.
• Adjusted Diluted EPS: Increased 21.4% to $0.85.
• Share Repurchases: $580 million in the third quarter, with an additional $160 million in the fourth quarter to date.
• Free Cash Flow: $658 million year-to-date.
• Net Leverage: 2.8x, within the target range of 2x to 3x.
• Updated 2024 Guidance: Net sales expected to be $37.7 billion to $38 billion; Adjusted EBITDA range increased to $1.72 billion to $1.74 billion; Adjusted diluted EPS range tightened to $3.05 to $3.15.

• Warning! GuruFocus has detected 5 Warning Sign with USFD.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• US Foods Holding Corp (NYSE:USFD) reported a 13% growth in adjusted EBITDA and a 21% increase in adjusted EPS, demonstrating strong financial performance.
• The company achieved a 3.8% total volume growth and a 4.1% increase in independent restaurant cases, marking the 14th consecutive quarter of market share gains.
• US Foods Holding Corp (NYSE:USFD) executed $580 million in share repurchases this quarter, reflecting confidence in the company's undervaluation and commitment to returning capital to shareholders.
• The company made significant progress in strategic vendor management, realizing over $70 million in cost of goods savings year-to-date, and expects to achieve more than $230 million in savings by the end of the current long-range plan.
• US Foods Holding Corp (NYSE:USFD) continues to enhance its digital platform, MOXe, with new features like a food cost calculator, strengthening its digital leadership and providing valuable insights to customers.

Negative Points

• The company faced challenges from a softer macro environment and adverse weather impacts, which pressured industry case volumes, particularly in the Southeast.
• Despite strong financial results, the company had to adjust its total case growth guidance for 2024 to 4% to 4.5%, down from the previous 4% to 6% range, due to weather and macroeconomic factors.
• US Foods Holding Corp (NYSE:USFD) is still in the early stages of improving warehouse productivity, which has not yet returned to pre-COVID levels.
• The company is actively exploring strategic alternatives for its CHEF'STORE business, indicating potential uncertainty or changes in this segment.
• Foot traffic challenges persisted, impacting penetration and growth, although there were signs of improvement in recent weeks.

Q & A Highlights

Q: Can you talk a little bit more about private label penetration and what you continue to see there, especially on the independent side? A: We are excited about our private label brands, with penetration running roughly at 52%. There's no near-term ceiling, and we continue to see strong adoption across all customer types, particularly independent restaurants. (David Flitman, CEO)

Q: Could you discuss the guidance, particularly why you're guiding to the high end of the full-year EBITDA guide but the lower end of the case growth guide? A: We haven't pulled forward any initiatives. Our performance is due to consistent execution across the P&L, from top-line growth to gross profit expansion and operating expense productivity. We are in the early innings of many initiatives, which gives us confidence in our long-range plan. (David Flitman, CEO; Dirk Locascio, CFO)

Q: Are you seeing improvements in underlying traffic trends outside of the Southeast? A: Yes, we are seeing acceleration in independent case growth across the country. We are encouraged by the consumer gaining confidence, which bodes well for 2025. (David Flitman, CEO)

Q: Can you provide more detail on the cost of goods sold (COGS) initiatives and vendor reactions? A: We are confident in delivering $260 million in savings over the next three years. Our approach is collaborative with vendors, focusing on market share gains across independent restaurants, healthcare, and hospitality. Vendors are willing to engage with us for mutual growth. (David Flitman, CEO)

Q: How is the rollout of Descartes routing technology progressing, and what are the learnings from recent markets? A: The rollout is going well, with significant learnings from pilot markets. We engage customers early to ensure delivery windows are met, which has increased customer confidence. We expect to have half of our miles on Descartes by year-end. (David Flitman, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.