Q2 2022 Sysco Corp Earnings Call

Okay.

Good morning, and welcome to Cisco's second quarter fiscal 2022 conference call.

Speaker 1: Good morning and welcome to Cisco's second quarter fiscal 2022 conference call. As a reminder, today's call is being recorded. We will begin with opening remarks and introductions. I would now like to turn the call over to Kevin.

Binder today's call is being recorded we will begin with opening remarks and introductions I would now like to turn the call over to.

Kevin.

Kim Vice President of Investor Relations. Please go ahead.

Speaker 1: Kim, Vice President of Investor Relations, please go ahead.

Speaker 2: Hello and welcome to Cisco's second quarter fiscal 2022 earnings call. On today's call, we have Kevin Hurkin, our president and chief executive officer, and Aaron Ault, our chief financial officer.

Hello, and welcome to Sysco second quarter fiscal 2022 earnings call on today's call, we have Kevin Harrington, our President and Chief Executive Officer, and Aaron All our Chief Financial Officer before we begin. Please note that statements made during this presentation, which state the companys or managements intentions beliefs.

Speaker 2: Before we begin, please note that statements made during this presentation which state the companies or management's intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning.

Expectations or predictions of the future are forward looking statements within the meaning of the private Securities Litigation Reform Act and actual results could differ in a material manner additional information about factors that could cause results to differ from those in the forward looking statements is contained in the company's SEC filings. This includes but.

Speaker 2: of the Private Securities Litigation Reform Act, and actual results could differ in a material manner.

Speaker 2: Additional information about factors that cause results to differ from those in the forward-looking statements is contained in the company's SEC filing.

Speaker 2: This includes but is not limited to risk factors contained in our annual report on Form 10K for the year ended July 3, 2021, subsequent SEC filings, and in the news release issued earlier this morning.

It is not limited to risk factors contained in our annual report on Form 10-K for the year ended July three 2021, subsequent SEC filings and in the news release issued earlier this morning.

Speaker 2: A copy of these materials can be found in the investor section at Cisco.com.

A copy of these materials can be found in the investors section at Sysco Dot com.

Speaker 2: non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures is included at the end of the presentation slides and can be found in the investor section of our website.

non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures is included at the end of the presentation slides and can be found in the investors section of our website.

To ensure that we have sufficient time to answer all questions, we'd like to ask each participant to limit their time today to one question and one follow up.

Speaker 2: To ensure that we have sufficient time to answer all questions, we'd like to ask each participant to limit their time today to one question and one follow-up. At this time, I'd like to turn the call over to Kevin Hart.

At this time I would like to turn the call over to Kevin Hurricane.

Good morning, everyone and thank you for joining.

Speaker 3: Good morning, everyone, and thank you for joining. I will highlight four topics today during our call. First, our financial results for the quarter. Second, I will provide some color on the current state of our business and the COVID environment. Third, I will detail our continued share gains despite a difficult macro environment. And finally, I will outline our approach to the long game with some highlights of our recipe for growth transformation. I'll then turn it over to Aaron to discuss our financial results in more detail.

I will highlight four topics today during our call.

Our financial results for the quarter second I'll provide some color on the current state of our business in the Covid environment.

I will detail our continued share gains despite a difficult macro environment and finally I will outline our approach to the long game with some highlights of our recipe for growth transformation. I'll, then turn it over to Aaron to discuss our financial results in more detail.

So, let's get started with our financial results displayed on slide four.

Speaker 3: So let's get started with our financial results displayed on slide 4.

Earlier. This morning, Sysco reported fiscal second quarter results that were fuelled by substantial topline momentum and an acceleration of market share gains.

Speaker 3: Earlier this morning, Cisco reported fiscal second quarter results that were fueled by substantial top line momentum and an acceleration of market share gains.

Speaker 3: Our sales and volume performance success is a testament to our supply chain strength and the advancement of our recipe for growth.

Our sales and volume performance success is a testament to our supply chain straight in the advancement of our recipe for growth.

Our operating expenses for the period were elevated due to the effects of Covid on our business and as a result, our bottomline results were below our expectations this quarter.

Speaker 3: Our operating expenses for the period were elevated due to the effects of COVID on our business. And as a result, our bottom line results were below our expectations this quarter.

Speaker 3: Key headlines for the quarter include strong sales results in market share gains. We delivered growth of more than 1.2 times the market, which exceeded our expectations for the period.

Key headlines for the quarter include strong sales results and market share gains we delivered growth of more than one two times, the market, which exceeded our expectations for the period we.

Speaker 3: We delivered sales growth of 10.5% versus 2019 and sequential volume improvements throughout the quarter until the Omicron variant impact at our December performance. Moran Omicron in a moment.

We delivered sales growth of 10, 5% versus 2019 and sequential volume improvements throughout the quarter until the omicron variant impacted our December performance Moron omicron in a moment.

Speaker 3: As I mentioned, operational expenses within our supply chain were above expectations due to the challenges that COVID is presenting to our labor environment and our transportation costs. I will detail this complex operating.

As I mentioned operational expenses within our supply chain were above expectations due to the challenges that COVID-19 is presenting to our labor environment and our transportation costs.

Our detailed this complex operating environment in a moment.

But we remain confident these incremental expenses driven by labor costs are near term challenges that will improve over time.

Speaker 3: that we remain competent, these incremental expenses driven by labor costs, are near-term challenges that will improve over time.

Our strong sales results and elevated operating expenses resulted in an adjusted earnings per share of <unk> 57 for the quarter.

Speaker 3: Our strong sales results and elevated operating expenses resulted in an adjusted earnings per share of 57 cents for the quarter.

We further advanced our recipe for growth strategy, which we believe will uniquely position Cisco to win in the marketplace for the long term.

Speaker 3: We further advanced our recipe for ghost strategy, which we believe will uniquely positions this go to win in the marketplace for the long term.

Speaker 3: Cisco's strength of income statement and balance sheet have enabled us to continue advancing our strategy during a difficult operating environment.

Cisco strength of income statement and balance sheet have enabled us to continue advancing our strategy during a difficult operating environment.

Speaker 3: That strategic and economic reality will enable Cisco to outperform the market for quarters and years to come. Topic two for today.

That strategic and economic reality will enable Cisco to outperform the market for quarters and years to come.

I'll take two for today, an update on the state of the business.

Speaker 3: As I mentioned a moment ago, COVID continues to negatively impact supply chains across the globe, and the effect was elevated in Q2 relative to our first quarter.

As I mentioned, a moment ago Covid continues to negatively impact supply chain across the globe and the effect. It was elevated in Q2 relative to our first quarter.

Speaker 3: The impact is being felt in product availability shortages from our suppliers and higher than anticipated labor and transportation costs.

The impact is being felt in product availability shortages from our suppliers and higher than anticipated labor and transportation costs.

Speaker 3: I would like to further explain some of the labor cost pressures that we are addressing.

To further explain some of the labor cost pressures that we are addressing.

At Sysco, we have hired thousands of new associates over the past quarter to support the recovery of our industry, which is coming faster and stronger than had been anticipated.

Speaker 3: At Cisco, we have hired thousands of new associates over the past quarter to support the recovery of our industry, which is coming faster and stronger than had been anticipated. We are also winning market share across our business sectors, which adds to our hiring needs.

We are also winning market share across our business sectors, which adds to our hiring needs.

As a result of our hiring and an industry wide higher rate of associate turnover, we have a higher ratio of new associates and our labor population than we had originally planned.

Speaker 3: As a result of our hiring and an industry-wide higher rate of associate turnover, we have a higher ratio of new associates in our labor population than we had originally planned.

Speaker 3: A higher population of less experienced associates has a direct and negative impact on our supply chain productivity.

A higher population of less experienced associates has a direct negative impact on our supply chain productivity.

The punch line is that our tenured associates perform at a much higher rate of productivity than new associates with that said, we are confident that we can and will move our newer associates up the productivity curve over time.

Speaker 3: The punchline is that our tenured associates perform at a much higher rate of productivity than new associates. With that said, we are confident that we can and will move our newer associates up the productivity curve over time. We have also incurred higher than planned expenses as COVID-related illnesses accelerated in the quarter and have continued into January .

We have also incurred higher than planned expenses as COVID-19 related illnesses accelerated in the quarter.

Into January .

To provide a sense of the magnitude of this disruption nearly 10% of our U S workforce tested positive for Covid during the month of January and we're out for a minimum of several days.

Speaker 3: To provide a sense of the magnitude of this disruption, nearly 10% of our US workforce tested positive for COVID during the month of January , and were out for a minimum of several days.

Speaker 3: To cover these absences, we invested in overtime and supplemental third-party resources to ensure that we properly supported our customers.

To cover these absences, we invested in overtime and supplemental third party resources to ensure that we properly supported our customers.

Speaker 3: At Cisco, we cannot let our healthcare, education, hospitality, and important restaurant partners go without food because of these labor challenges caused by COVID.

At Sysco, we cannot let our healthcare education hospitality and important restaurant partners go without food because of these labor challenges caused by Covid.

Our customer centric approach to ensure that we can ship on time and in full will benefit our relationship with our customers for the long term positively impacting retention and growth.

Speaker 3: Our customer-centric approach to ensure that we can shift on time in info will benefit our relationship with our customers for the long term, positively impacting retention and growth.

Speaker 3: We are confident that our service performance is stronger than the industry as measured by our net promoter's court. In fact, our NPS performance versus the market expanded in the quarter.

We are confident that our service performance is stronger than the industry as measured by our net promoter score in fact, our NPS performance versus the market expanded in the quarter.

Speaker 3: Lastly, as I mentioned, Omicron negatively impacted our top line performance, starting the weekend after Thanksgiving. Our business in Europe was impacted first, with the reintroduction of major restrictions on our customers.

Lastly, as I mentioned omicron negatively impacted our topline performance starting the weekend after Thanksgiving our business in Europe was impacted first with the reintroduction of major restrictions on our customers.

Our sales and volume performances in December were impacted by those restrictions most notably in the UK, France and Canada for example, restaurants and the majority of Canada began closing for on premise dining at the end of the second quarter with restrictions slowly starting to ease in February .

Speaker 3: Our sales and volume performances in December were impacted by those restrictions, most notably in the UK, France and Canada. For example, restaurants in the majority of Canada began closing for on-premise dining at the end of the second quarter, with restrictions slowly starting to ease in February .

Speaker 3: These types of restrictions impact our customers' performance in order in patterns. As a result, we expect the top line impact from Omicron to continue into the third quarter. The speed of the return to pre-Omicron volume levels is uncertain, but we are seeing signs of progress in Europe as restrictions.

These types of restrictions impacted our customers' performance and ordering patterns. As a result, we expect the top line impact from omicron to continue into the third quarter. The speed of the returned to pre omicron volume levels is uncertain, but we are seeing signs of progress in Europe .

As restrictions have begun easing.

Speaker 3: I would like to highlight again that Cisco's sequentially improved sales and volume performance every month compared to 2019 levels until the impact of Omicron began being felt Thanksgiving weekend and we are confident that we will get back to that growth pattern as Omicron receives.

I would like to highlight again that Cisco has sequentially improved sales and volume performance every month compared to 2019 levels until the impact of Omicron began being felt Thanksgiving weekend and we are confident that we will get back to that growth pattern is omicron receipts.

Topic, III, let's turn to our market share performance highlighted on slide five.

Speaker 3: Topic 3. Let's turn to our market share performance highlighted on slide five.

Despite the challenges presented by Omicron at the end of the quarter as you can see on slide five sysco delivered exceptional growth versus the market in the second quarter. As a result, we are now confident we will exceed our one two times the market growth target for the full fiscal year.

Speaker 3: Despite the challenges presented by Omicron at the end of the quarter, as you can see on slide five, Cisco delivered exceptional growth versus the market in the second quarter. As a result, we are now confident we will exceed our 1.2 times the market growth target for the full fiscal year.

Speaker 3: Our performance versus the market expanded this quarter. Furthermore, looking back over the last three quarters, we are beginning to pull ahead of the end.

Our performance versus the market expanded this quarter. Furthermore, looking back over the last three quarters. We are beginning to pull ahead of the industry.

The next slide from NPD shows how over the last two years, we have consistently increased the percentage of customers that purchased exclusively from Cisco.

Speaker 3: The next slide from NPD shows how over the last two years, we have consistently increased the percentage of customers that purchased exclusively from Cisco. This compares to the data line that shows the percentage of customers not yet buying from Cisco. You can see that the data line is steadily declining.

This compares to the dotted line that shows the percentage of customers not yet buying from Cisco you can see that the dotted line is steadily declining.

These slides are just two more proof points that our team is winning in the marketplace and that our strategy is working.

Speaker 3: These slides are just two more proof points that our team is winning in the marketplace and that our strategy is work.

Speaker 3: Lastly, topic four. I will highlight examples in our business transformation and how that progress will enable consistent, profitable growth. Today, I will give an update on two of our growth initiatives. Just go your-

Lastly, topic for our height examples highlight examples in our business transformation and how that progress will enable consistent profitable growth.

Today, I will give an update on two of our growth initiatives Cisco your way into our Italian cuisine program.

Speaker 3: As a reminder, Cisco Your Way is a new service model that we are piloting to better serve what we call restaurant dense neighborhood.

As a reminder, Cisco your way as a new service model that we are piloting to better serve what we call restaurants dense neighborhoods.

Speaker 3: Through this program, we are providing our customers with enhanced bubbles of service and sales support. We are very pleased with the success of the pilot locations and we will be expanding the program to net new neighborhoods in the spring of 2022.

Through this program, we are providing our customers with enhanced levels of service and sales support.

We're very pleased with the success of the pilot locations and we will be expanding the program to net new neighborhoods in the spring of 2022.

In addition to Cisco year way I would like to provide an update on our Italian cuisine platform work.

Speaker 3: In addition to Cisco Your Way, I would like to provide an update on our Italian cuisine platform work. As a reminder, Italian is one of the largest cuisine segments and Cisco historically under penetrated with this important customer segment.

As a reminder, Italian is one of the largest within segments and Sysco historically underpenetrated with this important customer segment we.

Speaker 3: We did not have enough of the moral sortment, and we lacked the go-to-market selling strategy to win.

We did not have an optimal assortment and we lap the go to market selling strategy to win.

Our Greco acquisition has changed that capability in a meaningful way.

Speaker 3: Our Greco acquisition has changed that capability in a meaningful way. First off, Greco is off to a great start and is exceeding our year one top and bottom line expectation.

First off Greco is off to a great start and is exceeding our year, one top and bottom line expectations.

We are really pleased with the Greco business and the great work that they are doing.

Speaker 3: We are really pleased with the Greco business and the great work that they are doing.

Speaker 3: As importantly, we are leveraging the Greco product disortment in selling prowess and bringing the best selling items to Cisco houses across the country. More on that, to Duke horse.

As importantly, we are leveraging the graco product assortment and selling prowess and bringing the best selling items to Cisco houses across the country more on that in due course when.

Speaker 3: Winning in the specialty sectors like Italian is a priority for our recipe for growth strategy.

Winning in this specialty sectors like Italian is a priority for our recipe for growth strategy.

Turning to slide seven in summary for the quarter, we are winning as a company in the marketplace. We are growing our business with new and existing customers. Our year to date growth is exceeding our one two times the industry target for the year and is being driven by our supply chain strength in our recipe for growth strategy.

Speaker 3: Turning to slide seven, in summary for the quarter, we are winning as a company in the marketplace. We are growing our business with new and existing customers. Our year-to-date growth is exceeding our 1.2 times the industry target for the year, and it's being driven by our supply chain strength and our recipe for growth strategy.

Speaker 3: We also returned over 650 million of cash to our shareholders during the quarter. We are confident that the impact of our initiatives will grow over time, enabling us to consistently outperform the market at large.

We also returned over $650 million of cash to our shareholders during the quarter.

We are confident that the impact of our initiatives will grow over time, enabling us to consistently outperform the market at large.

Speaker 3: As I wrap up my prepared remarks, I want to thank all of our associates at Cisco. These past two years have been challenging. We continue to lead the industry from a service perspective and make deliveries to our customers regardless of the COVID condition.

As I wrap up my prepared remarks, I want to thank all of our associates at Cisco.

Past two years have been challenging we continue to lead the industry from a service perspective, and make deliveries to our customers regardless of the COVID-19 conditions.

I am proud of our sales operations and global support center teams for their persistence and customer focus that they have displayed.

Speaker 3: I am proud of our sales, operations, and global support center teams for the persistence and customer focus that they have displayed. I really want to thank them for their tenacity, and I'll use another word endurance. I am honored to serve these associates and work by their side.

Really want to thank them for their tenacity and are used in other words endurance I am honored to serve these associates can work by their side.

Speaker 3: I would also like to welcome the recently appointed members of our Board of Directors, Ali Debash, Joe Golder, and Allison Kenny Paul. Together, they bring deep industry experience, a modern-skilled inventory, including finance, consumer, and digital and strategy capability.

I'd also like to welcome. The recently appointed members of our board of Directors Ali Dupage, Jill Golder, and Alison Kenny Paul.

Together, they bring deep industry experience, a modern skills inventory, including finance consumer and digital strategy capabilities.

Speaker 3: Our three new board members will be extremely valuable to Cisco and our transformation for years.

Our three new board members will be extremely valuable to Cisco and our transformation for years to come.

I will now turn it over to Aaron who will provide additional financial details before we open it up for questions.

Speaker 3: I'll now turn it over to Aaron, who provide additional financial details before we open it up for questions.

Speaker 3: Thank you, Kevin. Good morning. Here are our second quarter fiscal 2022 financial headlines. As seen on slide nine.

Thank you Kevin good morning.

Our second quarter fiscal 2022 financial headlines.

As seen on slide nine.

Speaker 3: Sales growth of 41.2% compared to last year, also up 10.5% versus fiscal 2019, leading to our highest Q2 sales ever.

Sales growth of 41, 2% compared to last year also up 10, 5% versus fiscal 2019, leading to our highest Q2 sales ever.

Good management of our product cost inflation recording the highest gross profit in absolute dollar terms for any Q2 at Cisco.

Speaker 3: Good management for our product cost inflation, recording the highest-grace profit in absolute dollar terms for any Q2 at fiscal.

Speaker 3: a doubling of adjusted operating income and a 62.9% increase in adjusted EBITDA compared to last year, notwithstanding a cost environment which worsens during the quarter.

A doubling of adjusted operating income and a 62, 9% increase in adjusted EBITDA compared to last year, notwithstanding a cost environment, which worsened during the quarter.

Continued investment against our long term recipe for growth with $44 million of operating expense investments against our strategic investments, creating momentum with our commercial capabilities.

Speaker 3: Continued investment against our long-term recipe for growth with $44 million of operating expense investments against our strategic investments, creating momentum with our commercial capability.

Speaker 3: proactive action on the COVID-generated labor and safety environment in which we are operating, with 73 million dollars in transitory snapback operating investments such as recruiting costs, hiring marketing, vaccination promotion, contract labor, and fine on and retention bonuses on the quarter.

Proactive action on the Covid generated labor and safety environments in which we are operating with $73 million in transitory snapback operating investments such as recruiting costs hiring marketing vaccination promotion contract labor and sign on and retention bonuses in the quarter.

And while the magnitude was greater than we could foresee last quarter, we experienced productivity challenges and much higher overtime costs in the quarter, resulting from the pandemic related workforce transition and our prioritization of customer service.

Speaker 3: And while the magnitude was greater than we could foresee last quarter, we experienced productivity challenges and much higher overtime costs in the quarter, resulting from the pandemic-related workforce transition in our prioritization of customer service.

Speaker 3: With respect to our capital allocation, we refinanced elements of our long-term debt during the quarter. And we returned $657 million of cash to Sheryl.

With respect to our capital allocation, we refinanced elements of our long term debt during the quarter and we returned $657 million of cash to shareholders.

With those headlines on the table, let's turn to some details on the financials for the quarter and some thoughts on our outlook.

Speaker 3: With those headlines on the table, let's turn to some details on the financials of the quarter and some thoughts on our outlook.

Second quarter sales were $16 3 billion.

Speaker 3: Second quarter sales were $16.3 billion, an increase for 41.2% from fiscal 2021, and a 10.5% increase from fiscal 2019.

An increase of 41, 2% from fiscal 2021, and a 10, 5% increase for fiscal 2019.

Speaker 3: In the United States, fails in our largest segment, US Food Service, showed excellent progress up 45.1% versus fiscal 2021, and up 14% versus fiscal 2019, reflecting the pre-Thanksgiving and pre-Omicron resurgence in volumes and fails.

In the United States sales in our largest segment U S. Foodservice showed excellent progress up 45, 1% versus fiscal 2021, and up 14% versus fiscal 2019, reflecting the pre Thanksgiving and pre omicron resurgence in volumes and sales.

Speaker 3: Local case volume within the subset of USFS are US broadly in operations, increased 17.6% while total case volume within US broadly in operations increased 22.5%.

Local case volume within a subset of USF, our U S. Broadline operations increased 17, 6%, while total case volume within U S. Broadline operations increased 22, 5%.

Speaker 3: Figma sales were up 16.5% versus fiscal 2021, and up 15.3% versus fiscal 2019. Even with the large customer rationalization, we disclosed earlier, which we expect will be complete on a comparable basis following Q3.

SYGMA sales were up 16, 5% versus fiscal 2021, and up 15, 3% versus fiscal 2019, even with the large customer rationalization, we disclosed earlier, which we expect will be complete on a comparable basis following Q3.

International sales were up 43% versus fiscal 2021 and down approximately 3% versus fiscal 2019 sales.

Speaker 3: International sales were up 43% versus fiscal 2021, and down to approximately 3% versus fiscal 2019.

Speaker 3: Sales trends were accelerating nicely in our international segment before the onset of Omicron and restrictions in our key international markets, such as the UK. And we are watching post lockdown trends carefully.

Sales trends were accelerating nicely in our international segment before the onset of <unk> and restrictions in our key international markets such as the U K and we are watching post lockdown trends carefully.

Speaker 3: Foreign exchange rates had a positive impact of 0.3% on Cisco's sales results. We continue to monitor the impact on our customers and on our business, as international restrictions are starting to ease, including in Ireland and the UK. Inflation continued to be a factor during the quarter, at approximately 14.6% in our US broadline business.

Foreign exchange rates had a positive impact of <unk>, 3% on Cisco sales results. We continue to monitor the impact on our customers and our business is international restrictions are starting to ease, including in Ireland and the U K in.

Inflation continued to be a factor during the quarter at approximately 14, 6% in our U S Broadline business.

Speaker 3: First profit for the enterprise was approximately $3 billion in the second quarter, increasing 37.8% versus the second quarter at fiscal 2021, and also exceeding gross profit in fiscal 2019 by 4%.

Gross profit for the enterprise was approximately $3 billion in the second quarter, increasing 37, 8% versus the second quarter of fiscal 2021, and also exceeding gross profit in fiscal 2019 by 4%.

Speaker 3: The increase in growth profit was driven by year over year improvements in volume versus CICCOL 21 and compared to the same quarter in both CICCOL 2021 and CICCOL 2019 increases in growth profit dollars per case across all four of our reporting segments as we successfully managed increased costs for our product suppliers while addressing some but not all of our increased operating costs.

The increase in gross profit was driven by year over year improvements in volume versus fiscal 'twenty, one and compared to the same quarter in both fiscal 2021 and fiscal 2019 increases in gross profit dollars per case across all four of our reporting segments. As we successfully managed increased costs from our product suppliers, while addressing some but not all.

Our increased operating costs.

Speaker 3: Gross margin rate was 17.7% during the quarter with the margin rate math impacted by product inflation. Of course, it is gross profit dollars that count in an inflationary environment.

Gross margin rate was 17, 7% during the quarter with the margin rate math impacted by product inflation.

Of course, it is gross profit dollars that counts in an inflationary environment.

Speaker 3: Turning back to the enterprise, adjusted operating expense came in at $2.4 billion with a combination of planned and unexpected expense increases from the prior year, really driven by four things.

Turning back to the enterprise adjusted operating expense came in at $2 4 billion with a.

Nation of planned and unexpected expense increases from the prior year really driven by four things.

Speaker 3: First, the increased variable cross associated with significantly increased volume.

First the increased variable cost associated with significantly increased volumes.

Speaker 3: Second, as you can see in slide 10, more than $73 million of one time and short term transitory expenses associated with the SNAP back, which we expected to climb in the third quarter.

Second as you can see on slide 10, more than $73 million of one time and short term transitory expenses associated with the snapback, which we expect to decline in the third quarter.

Speaker 3: While we have increased wages and select locations, those increases are not material, and have the opportunity to be offset by productivity and cost-out improvements going forward.

While we have increased wages in select locations those increases are not material and have the opportunity to be offset by productivity and cost out improvements going forward.

Speaker 3: Third, $44 million of purposeful operating expense investments against our recipe for growth initiatives. Like personalization, digital sales tools, and assortment capabilities, which remain on track to be elevated for the rest of the year.

Third $44 million of purposeful operating expense investments against our recipe for growth initiatives like personalization digital sales tools and assortment capabilities, which remain on track to be elevated for the rest of the year.

Speaker 3: and fourth, the productivity expense challenges Kevin referenced earlier, including ramp up time associated with new higher productivity in our warehouses and trucks, elevated over time and third party labor support in the face of staff, absolutely.

And fourth the productivity expense challenges, Kevin referenced earlier, including ramp up time associated with new higher productivity in our warehouses and trucks elevated overtime and third party labor support in the face of staff absences.

I want to emphasize that the management team at Cisco has been aggressive in pursuing the root cause of the cost increases while the transformation continues unabated. The team has also pushed hard to identify and action incremental profit opportunities and cost reduction initiatives, which should help the company in the back half and beyond as the environment stabilizes.

Speaker 3: I want to emphasize that the management team in Cisco has been aggressive in pursuing the root cause of the cost increases. While the transformation continues unabated, the team has also pushed hard to identify an action incremental profit opportunities and cost-production initiatives, which should help the company in the back half and beyond as the environment stabilizes.

Together, the snapback investments in the transformation costs totaled approximately $116 million of operating expenses this quarter and negatively impacted our adjusted EPS by approximately <unk> 17.

Speaker 3: Together, the SNAP Act investments in the transformation cost totaled approximately $116 million of operating expenses this quarter and negatively impacted our adjusted EPS by approximately 17 cents.

Speaker 3: All in, we leveraged our Usted Operating Expense Trucker and delivered expense as a percentage of its sales of 14.7%, which is flat from fiscal 2019 and down 145 basis points from fiscal 2021. Our cost of efforts are meaningfully benefiting our P&L, and we continue to assess and execute against new cost of projects each quarter.

All in we leveraged our adjusted operating expense structure and delivered expense as a percentage of sales of 14, 7%.

Which is flat from fiscal 2019 and down a 145 basis points from fiscal 2021 or.

Our cost out efforts are meaningfully benefiting our P&L and we continue to assess and execute against new cost out projects each quarter.

Speaker 3: Finally, for the second quarter of fiscal 2022, adjusted operating income increased $262 million from last year to $496 million.

Finally for the second quarter of fiscal 2022, adjusted operating income increased $262 million from last year to $496 million.

Speaker 3: This was primarily driven by a 45% improvement in US food service and continued progress on profitability from international, firstly off step by segment.

This was primarily driven by a 45% improvement in U S. Foodservice and continued progress on profitability from international partially offset by Sigma.

The second quarter Sigma operating loss was driven by higher than expected labor costs, which will be offset in future quarters by specific actions already taken by the segment management team.

Speaker 3: The second quarter of Sigma operating loss is driven by higher than expected labor costs, which will be offset in future quarters by specific actions already taken by the Sigma Management.

Adjusted earnings per share increased to 40 to 57 for the second quarter compared to last year.

Speaker 3: Adjust the earnings per share increased to 40 cents to 57 cents for the second quarter compared to last year.

Speaker 3: Now let me show a couple of comments on cash flow in the balance sheet. Cash flow from operations was $377 million on the year-to-date basis driven by our higher income and lower interest, offset by higher tax payments and a significant investment of working capital.

Now, let me share a couple of comments on cash flow and the balance sheet cash.

Cash flow from operations was $377 million on a year to date basis, driven by our higher income and lower interest offset by higher tax payments and a significant investment in working capital.

Speaker 3: Net CAPEX was $175.9 million, somewhat lower than expected, given increased lead times on fleet and equipment. Adjusted free cash flow year to date was $2.01 million.

Net capex was $175 9 million.

Somewhat lower than expected given increased lead times on fleet and equipment adjusted free cash flow year to date was $201 million.

At the end of the second quarter, we had $1 4 billion of cash and cash equivalents on hand.

Speaker 3: At the end of the second quarter, we had 1.4 billion of cash and cash equivalent on hand.

As seen on slide 15, our results this quarter also reflected incremental progress against our capital allocation priorities.

Speaker 3: As seen in slide just in our results this quarter also reflected incremental progress against our capital allocation priorities.

Speaker 3: This included the further strengthening of our balance sheet by successfully refinancing debt during the quarter at longer materities in more attractive rates. Lowering our adjusted interest expense costs going forward.

This included the further strengthening of our balance sheet by successfully refinancing debt during the quarter at longer maturities and more attractive rates lowering our adjusted interest expense costs going forward.

We also commenced our share repurchase program during the second quarter and repurchased approximately $5 7 million shares for a total of $416 million at an average share price of $72 30.

Speaker 3: We also commenced our share of purchase program during the second quarter and repurchased approximately 5.7 million shares for a total of $416 million and an average share price is $72.30. This was in addition to paying our quarterly dividend a 47 cents per share in October . We remain committed to growing our dividend and as previously communicated, planned to next address decisions around our dividend per share during our fiscal Q4.

This was in addition to paying our quarterly dividend of 47 per share in October .

We remain committed to growing our dividend and as previously communicated plan to next address decisions around our dividend per share during our fiscal Q4.

While our track record goes back decades, as you can see on slide 16 over the last seven years cumulatively, we have returned over $12 billion of cash to shareholders.

Speaker 3: While our track record goes back decades, as you can see in slide 16, over the last seven years, cumulatively, we have returned over $12 billion of cash to shareholders.

Let's turn now to look forward.

Speaker 3: Our recipe for growth transformation plan is on track. However, Omicron had a noticeable impact on our December and Q2 results, continuing in the January and now February .

Our recipe for growth transformation plan is on track.

However, <unk> had a noticeable impact on our December and Q2 results continuing into January and now February .

As a result.

We are reaffirming our long term guidance that for fiscal 2020 for Cisco will deliver adjusted EPS growth of at least 30% over our record 2019 EPS of $3 55.

Speaker 3: We are reaffirming our long-term guidance that for fiscal 2024, Cisco will deliver adjusted EPS growth of at least 30% over our record 2019 EPS of $3.55.

Speaker 3: We are updating our view of the back half to reflect the realities of the disruption caused by Omicron and the labor environment.

We are updating our view of the back half to reflect the realities of the disruption caused by omicron and the labor environment.

Speaker 3: We expect to fall below our prior EPS guidance for fiscal year 2022.

We expect to fall below our prior EPS guidance for fiscal year 2022.

Speaker 3: For the full year, we expect adjusted EPS of approximately $3 to $3.10.

For the full year, we expect adjusted EPS of approximately $3 to $3 10.

This translates to adjusted EPS in the back half of about $1 60 to $1 70.

Speaker 3: This translates to a just a DPS in the back half of about $1.60 to $1.70.

In a typical pre COVID-19 fiscal year adjusted EPS for our second half is generally weighted around 40% to Q3 and 60% in Q4 due to normal seasonality of our business.

Speaker 3: In a typical pre-COVID fiscal year, adjusted EPS for our second half is generally weighted around 40% to Q3 and 60% in Q4 to the normal seasonality of our business.

Speaker 3: This year we expect our second half profitability to be weighted even more to the fourth quarter.

This year, we expect our second half profitability to be weighted even more to the fourth quarter.

Speaker 3: We expect a stronger Q4 this year, relative to Q3, as a result of anticipated volume recovery, lower SNAPX expenses, improved operating productivity, and specific actions we are taking to offset home across.

We expect a stronger Q4 this year relative to Q3 as a result of anticipated volume recovery lower snapback expenses improved operating productivity and specific actions, we are taking to offset from a crime.

And offering this perspective, we are assuming no further COVID-19 variant disruptions to our operating environment.

Speaker 3: And offering this perspective, we are assuming no further COVID variants disruptions to our operating environment. With that, let me turn the call back over to Kevin.

With that let me turn the call back over to Kevin for closing remarks.

Speaker 3: Thank you, Ren. As we conclude, I'd like to provide a brief summary.

Thank you Ryan as we conclude I would like to provide a brief summary.

Speaker 3: First, this quarter included substantial top line momentum in an acceleration of our market share gains. We are winning in the marketplace, and we have confidence that we will continue to win share. With that said, Q2 presented challenges from Amikron on both our top and bottom line.

First this quarter included substantial topline momentum and acceleration of our market share gains we are winning in the marketplace and we have confidence that we will continue to win share.

With that said Q2 presented challenges from omicron on both our top and bottom line.

Our sequential volume growth progress stalled post Thanksgiving and that headwind has continued into January .

Speaker 3: Our sequential volume growth progress stalled post Thanksgiving, and that headwind has continued into January . More importantly, COVID related staffing disruptions increased our operating expenses for the quarter. As a result, our bottom line results were below our expectations.

More importantly, COVID-19 related staffing disruptions increased our operating expenses for the quarter as a result, our bottomline results were below our expectations.

Speaker 3: Second, despite the short-term impact of Omicron on our business, we are confident that we will resume our volume improvement as soon as the variant receives. And we can see green shoots of progress in February from a volume perspective.

Despite the short term impact of omicron on our business. We are confident that we will resume our volume improvement as soon as the variant receipts and we can see green shoots of progress in February from a volume perspective.

Speaker 3: As it relates to expenses, we have a management plan to improve our year-to-go operating expense.

As it relates to expenses, we have a management plan to improve our year ago operating expenses.

Speaker 3: We are meaningfully focused on improving associate retention, training, and productivity. These activities are a core competency of Cisco and are experienced field leadership team as a plan to deliver improvement for the remainder of the year.

We are meaningfully focused on improving associate retention training and productivity.

These activities are a core competency of Cisco and our experienced field leadership team has a plan to deliver improvement for the remainder of the year.

Speaker 3: Third, we remain confident in the long-term trajectory at Cisco. And as they're in stated, we are reaffirming our long-term guidance that includes significant sales and EPS growth.

Third we remain confident in the long term trajectory at Cisco and as Eric stated, we are reaffirming our long term guidance that includes significant sales and EPS growth.

Speaker 3: Our recipe for growth transformation is creating capabilities at Cisco that will help us profitably grow for the long term.

Our recipe for growth transformation is creating capabilities at Cisco that will help us profitably grow for the long term.

Speaker 3: The customer first solutions we are developing will enable us to grow our share properly and also enable us to go to be more efficient.

The customer first solutions, we are developing will enable us to grow our share profitably and also enables <unk> to be more efficient.

There are bright days ahead for Cisco on I am proud to be part of the journey. Operator, you can now turn it over for questions.

Speaker 3: There are bright days ahead for Cisco, and I am proud to be part of the journey. Operator, you can now turn it over for questions.

Thank you Sir at this time I would like to remind everyone. If you would like to ask a question simply press Star then the number one on your telephone keypad to withdraw your question press. The pound key you. Your first question comes from the line of Edward Kelly of Wells Fargo.

Speaker 1: Thank you, sir. At this time, I would like to remind everyone if you would like to ask a question simply press star then the number one on your telephone keypad. To withdraw your question, press the pound key. Your first question comes from the line of Edward Kelly of Wells Fargo.

Hi, guys good morning.

Speaker 4: Hi guys, good morning. So Kevin and Aaron, I mean obviously, you know, I'm a con.

So Kevin and I don't I mean, obviously Amazon has been.

Pretty disruptive to your operations more recently, but can you quantify how much additional cost you saw in Q2 related to that is that all in the snapback costs.

Speaker 4: disruptive to your operations more recently. Can you quantify how much additional costs you saw in Q2 related to that? Is that all in the snapback costs that you provided or is it in addition to that? And then how do we think about those costs, snapback, transformation like that in Q3 and then Q4?

That you provided or is in addition to that and then how do we think about.

Those costs snapback transformation like that in Q3, and then Q4 at this point.

Hey, good morning, great questions I'm going to refer you back to our earlier remarks on pieces of that and then provide a couple of additional supplements.

Speaker 3: Good morning, great questions. I'm going to refer you back to our early remarks on pieces of that and then provide a couple of additional supplements.

Speaker 3: You know, what was remarkable to us was the progress we were making up through the Thanksgiving holiday on the top line and indeed against the overall plan. With the onset of Omicron, we start to see the impact on volumes and certainly on our operating expenses.

What was remarkable to US was the progress we were making up through the Thanksgiving holiday on the topline and indeed against the overall plan with the onset of <unk>, we started to see the impact on volumes and certainly on our operating expenses before the quarter, we incurred $73 million in snap back cost, which is the combination of.

Speaker 3: Before the quarter, we incurred $73 million of SNFAC costs, which is the combination of contract labor retention bonuses, synon bonuses, training, vaccination credits,

Contract labor retention bonuses sign on bonuses training vaccination credits et cetera, we also incurred more than $40 $40 million on transformation cost, but whats not in those two numbers that I referenced in the script is $40 million of overtime and other productivity impacts driven by both our response.

Speaker 3: We also incurred more than $40 million on transformation costs.

Speaker 3: But what's not in those two numbers that I referenced in the script is $40 million of overtime and other productivity impacts driven by both our response, ensuring that we're serving the customer, but also then us working with the labor force in transit.

Ensuring that we're serving the customer but also then us working with the labor force in transition.

Yeah, Great that's helpful and then.

Speaker 4: Yep, great, that's helpful. And then Q3, how do we think about, I mean, you gave help us with guidance of Q3, but how do we think about those costs as we're sort of modeling out Q3? And then I guess the other aspect.

Q3, how do we think about I mean, I know you gave.

Helped us with guidance in Q3, but how do we think about.

Those costs as we're sort of modeling out Q3, and then I guess the other aspects until count. This as my follow up is how.

Speaker 4: follow up is you know how do we think about you know where case volumes are running you know now relative to sort of like that you know 5% you know level in the US that you talk about versus 19 and Q2 and and and then you help internationally there as well.

How do we think about.

Our case volumes are running now relative.

Relative to sort of like that 5% level in the U S that you talked about versus <unk> 19 in Q2, and then help internationally there as well why don't I touch the expectations on Opex and toss it to Kevin on volume from an Opex perspective.

Speaker 3: Why don't I touch the expectations on OpExp and Tossit to Kevin on volume from an OpExp perspective?

Speaker 3: What we experienced in December continued into January , as we described in our prepared remarks. And as Kevin alluded to, we're starting to see some green shoots in February , but green shoots does not equal back to pre-omacron run rate. We are anticipating that our SNAP-EQFOS will come down in the back half.

What were experience what we experienced in December continued into into January as we described in our prepared remarks, and as Kevin alluded to we're starting to see some green shoots in February but.

But green shoots does not equal back to back to pre omicron run rate.

We are anticipating that our snap back cost will come down in the back half. We're also anticipating that our supply chain team given our scale will make good progress against productivity in the back half as well, but we have work to do which is why we were purposeful in our remarks in calling out both the seasonal split on our guidance between Q3 and Q3 on a rig.

Speaker 3: We're also anticipating that our supply chain team, give our scale, will make good progress against productivity in the back half as well. But we have work to do, which is why we were purposeful in our remarks and calling out both the seasonal splits on our guidance between Q3 and Q3 throughout our results, between Q3 and Q4, the 4060, if you will, and emphasizing that given the continued home-acron environment, notwithstanding the green shoots, and the work we have to do that we expect the updated guidance to be heavily weighted to Q4.

<unk> between Q3 and Q4, the 40 60, if you will and emphasizing that given the continued omicron environment notwithstanding the green shoots and the work we have to do that we expect the updated guidance to be heavily weighted to Q4.

Kevin.

Speaker 3: Thanks, Aaron. Good morning. Thanks for the questions. This doesn't relate to, you know, case volume. You know, one of my comments in the prepared remarks is, you know, we have five consecutive sequential.

Hey, good morning, Thanks for the questions. This is it relates to case volume.

My comments in the prepared remarks, we had five consecutive sequential.

Speaker 3: months of improvement in case volume growth, which continues Q4, a last fiscal year. Again, we were sequentially improving each and every month, taking market shares evidence by

Months of improvement in case volume growth, which continues Q4 of last fiscal year again, we were sequentially improving each and every month, taking market share as evidenced by our slide chart, we're really beginning to pull away from the rest of the market. So winning in aggregate December was impacted January was impacted because of the risk.

Frictions were in place for all of January that we are.

Speaker 3: for all of January . We are beginning to see some signs of progress or green shoots in February as restrictions begin to ease, but we're not fully yet back to the pre-homacron levels. We have 50% restaurant restriction for on-premise dining in Canada. We have mandatory work from home, work orders in France, and in the UK, and in an ignore-the-rn urban locations within the United States, still heavy, heavy work from home, which impacts a part restaurant traffic, as you well know. So we're not quite back to where we were. What we are very confident in is as the restrictions on our customers' fees, vaccine passports and...

Are beginning to see some signs of progress are green shoots in February as restrictions begin to ease, but we're not fully yet back too.

The pre omicron levels, we have 50% restaurant restriction.

On premise dining in Canada, we have mandatory work from home work and orders in France, and in the U K and in northern urban locations.

Our locations within the United States still heavy heavy work from home, which impacts day part restaurant traffic as you well know so we're not quite back to where we were what we are very confident in is as the restrictions on our customers.

Speaker 3: restaurant traffic, as you well know. So we're not quite back to where we were. What we are very confident in is as the restrictions on our customers.

Speaker 3: ease, vaccine passports and things like that. Mask mandates that impact people's psychology tied to going out. As those things ease, we see fast recovery from our customers and we're prepared from an inventory perspective, we're prepared from a staffing perspective, we're prepared from a service level perspective.

Vaccine passports and things like that magic mandates that impact People's psychology tied to going out as those things ease.

We see faster recovery from our customers and we're prepared from an inventory perspective, we're prepared from a staffing perspective, we are prepared from a service level perspective to be able to serve when our customers are ready and we expect to continue to pull away from the market from a growth versus the industry perspective.

Speaker 3: to be able to serve when our customers are ready and we expect to continue to pull away from the market from a growth versus the industry perspective. Thanks to the questions, we appreciate it.

Yeah. Thanks for the questions. We appreciate it.

Thank you.

Speaker 1: Your next question comes from the line of Alex Lagle of Jeffries.

Your next question comes from the line of Alex Slagle of Jefferies.

Thanks, Good morning.

Speaker 2: Boarding, what do you think of the most important changes or improvements you've made as a company just to be better prepared for unexpected surges or events like this? We've been through, I mean, perhaps things that are left obvious to investors that might give confidence that the impact of future events would be less of a headwind, perhaps even more of a sharing opportunity for Cisco.

Good morning, what do you think what do you think are the most important changes or improvements you've made as a company to be better prepared for unexpected surges or events. Like this we've been through I mean, perhaps things that are less obvious to investors that might give us confidence that the impact of future events will be less of a headwind.

And perhaps even more of a share gain opportunity.

Kyle.

Yeah, Great question. Alex This is Kevin just first and foremost inventory management, we have perishable product. So as volume declines we need to be super fast and agile in regards to managing shrink and risk associated with spoilage, we've gotten very good at that and you can see it in our performance results that our inventory management.

Speaker 3: Great question Alex, this is Kevin, just first and foremost, human-dory management.

Speaker 3: We have perishable products, so as volume declines, we need to be super fast and agile in regards to managing shrink and risk associated with spoilage.

Speaker 3: We've gotten very good at that. And you can see it in our performance results that just our inventory management is significantly improved from two years ago.

Is significantly improved from two years ago. When Covid first begin the second is in labor strategy, one of the things that I need to call with full support of our board back in December when Omicron began impacting we were not going to furlough associates arched up.

Speaker 3: COVID first began. The second is in labor strategy. One of the things that I made the call with full support of our board back in December when Amichron began in back and we were not going to furlough associate's hardstop. That would be a penny wise dollar foolish decision.

That would be a penny wise and dollar foolish decision any pennies that we could save from Furloughing staff in December and January when cost us twice as much as we attempted to restock the bench and bring people back off furlough because in todays labor environment, we furlough someone theyre going to get a job in another industry at another company. So we made that very purposeful choice to not furlough.

Speaker 3: Any pennies that we could save from furloughing staff in December and January would cost us twice as much as we attempted to restock the bench and bring people back off furlough because in today's labor environment, we furlough someone, they're going to get a job at another industry at another company. So we made that very purposeful choice to not furlough any staff, not a single person.

Any staff not a single person over that period of time in December and January that will pay dividends for our company.

Speaker 3: Over that period of time, December and January , that will pay dividends for our company. My guests would be smaller, less capitalized companies are not fortunate enough to be able to make those types of decisions.

My guess would be smaller less capitalized companies are not fortunate enough to be able to make those types of decisions. In fact, not only we did not furlough any one we hired thousands of people in our Q2 and have continued hiring December into January at this moment in time, we literally have hundreds of drivers in the passenger seat of a truck getting trained on <unk>.

Speaker 3: In fact, not only did we not furlough anyone, we hired thousands of people in RQ-2 and have continued hiring December into January at...

Speaker 3: This moment in time, we literally have hundreds of drivers in the passenger seat of a truck getting trained on Cisco standards.

Cisco standards, Cisco processes, and they will be ready to be driving their own truck as the volume recovery begins because keep in mind that theres an entire sector that we serve that isn't yet even back in the business sufficiently and thats, what we call business and industry, we had been anticipating that the business and industry sector would have kicked in in January as most companies we're planning.

Speaker 3: Cisco processes and they will be ready to be driving their own truck as the vine recovery begins because keep in mind But there's an entire sector that we serve that isn't yet even back in business sufficiently and that's what we call business and industry We had been anticipating that the business and industry sector would have kicked in in January as most companies were planning a return to work

Our return to work after the holidays that has not occurred as you know and that's future tailwind to the Cisco recovery as business and industry will begin kicking back in here, it's hard to predict when but we will be prepared will be ready to talk to those are just a handful of things that are on the do different from.

Speaker 3: after the holidays that has not occurred, as you know, and that future tailwind to the Cisco recovery as business and industry will begin kicking back in here. It's hard to predict when, but we will be prepared, we'll be ready. So those are just the handful of things that are on the due different from.

Speaker 3: March of 2020 and you've gotten pretty agile at dealing with these curve balls, but back to you if you've ever followed.

March of 2020, and we've gotten pretty agile at dealing with these curve balls, but back to you. If you have a follow up.

Okay. That's helpful follow up just on the Sysco branded product mix and how this impacted by the supply chain challenges versus customer preferences, and how do you see that progressing through the calendar year.

Speaker 2: That's helpful. I follow up on the Cisco branded product next and how is this impacted by the supply chain challenges versus customer preferences and how do you see that progressing through the calendar year?

Speaker 3: We viewed as an opportunity to increase the SCO brand first factual. Our SCO brand, Thorate and Instac is exceeding national brand. That's important. Our ability to keep those.

We view it as an opportunity to increase Sysco brand factual our sysco brand fill rate and in stock is exceeding national brand that is important our ability to keep those very profitable products for Cisco in stock is an important priority for us and the partners that we work with to produce that product are doing well and again sysco brand in aggregate has a higher.

Speaker 3: Very profitable products for Cisco INSDAQ is important priority for us. And the partners that we work with to produce that product, they're doing well. And again, Cisco Brand in aggregate has a higher rate of INSDAQ than national brands. That's point one point two, because of inflation being elevated. And everybody knows it's currently elevated. Cisco Brand has an even bigger punch than it normally would. So we view Cisco Brand as an opportunity to save our customers money with a high quality product.

<unk> bin stock than National brands, that's 0.1, 0.2, because of inflation being elevated and everybody knows. It is currently elevated sysco brand has an even bigger punch than it normally would so we view sysco brand as an opportunity to save our customers money with a high quality product and we are doing a good job with our sales team of introducing customers through products that they.

Speaker 3: And we are doing a good job with our sales team of introducing customers to products that they perhaps have not purchased before. And we did see progress in fact 250 basis points of progress.

Perhaps have not purchased before and we did see progress in fact 250 basis points of progress from Q1 into Q2 on Sysco brand penetration and I would view further tailwind in that regard in the coming years.

Speaker 3: from Q1 into Q2 on fiscal brand penetration and I would view further tailwind in that regard in the coming years.

Got it thanks.

Thanks, Alex.

Your next question comes from the line of John hike in Basel.

Speaker 1: Your next question comes from the line of John Heikenbuckle of Guggenheim Partner.

Guggenheim partners.

Speaker 5: So Kevin, let me start with your thoughts on elevated inflation.

So Kevin let me start with your thoughts on elevated inflation impact on unit demand right food away from home.

Speaker 5: On unit demand right the food away from hall

Speaker 5: And then, you know, if you guys, can you grow faster than that 1.5 goal for 2024? You know, what would it take to do that? And, you know, for example, you know, could you get close to two times?

And then if you guys can grow faster than that one five goal for 2024.

What would it take to do that.

<unk>.

For example, could you get close to two times as the market grew slower and.

Speaker 5: The market grew slower and to get where you want to get to share gains have to play a bigger role. Let's hear it thought out.

To get to where you want to get to share gains have to play a bigger role which result on that.

John Thanks for the questions and tied to inflation.

Speaker 3: John , thanks for the questions. And tied to inflation, you know, it's double digits at this time, as you know, it's been double digit now for longer than any of us in the industry would like. We have not seen yet a reduction in consumer demands tied to that higher inflation. And it's hard to predict, you know, how long that we'll be able to persist, but we're not seeing elasticity of pricing impact consumer purchasing.

Double digit at this time as you know it's been double digit now for longer than any of us in the industry would like we have not seen yet a reduction in consumer demand tied to that higher inflation.

And it's hard to predict how.

How long that will be able to persist, but we're not seeing.

Elasticity of pricing impact consumer purchasing.

And that is a positive that has obviously helped our P&L in the most recent quarter as Aaron said, we increased GP dollars per case in each of our reportable segments. So we're doing a good job of passing through inflation. We're also doing a good job of helping our customers find lower cost alternatives, so menu suggestions narrowing.

Speaker 3: and that is a positive. That has obviously helped our P&O. In the most recent quarter, as Aaron said, we increased G.P. dollars per case in each of our reportable segments.

Speaker 3: So we're doing a good job of passing through inflation. We're also doing a good job of helping our customers find lower cost alternatives. So menu suggestions, narrowing the number of items on the menu so they can increase their profitability, portion size, as you know, optimization so that they can keep their ticket on the menu the same and do so from a lower cost.

The number of items on the menu. So they can increase their profitability portion size as you know optimization. So that they can keep their ticket on the menu the same.

Do so from a lower Cogs to them. So those things are going well protein is even higher than the overall basket of inflation.

Speaker 3: to them. So those things are going well. Protein is even higher than the overall basket of inflation. We need to see progress on supplier availability in protein. It's a priority for Cisco. We are working with our

To see progress on supplier availability and protein, it's a priority for Cisco.

We're working with our supplier partners in the protein category to work on longer range forecast. So they have consistency of purchase volume from Cisco. So they can be efficient in their production and we are working as hard as we can to find additional sources of supply in the protein category, because we need to bring the protein inflation down John Thats the number one focus.

Speaker 3: Supplier partners in the protein category to work on longer range forecasts so that they have consistency or purchase volume from Cisco so that they can be efficient in their production. And we are working as hard as we can to find additional sources of supply in the protein category because we need to bring the protein inflation down. John , that's the number one focus for us from an inflation perspective.

For us from an inflation perspective as it relates to the second half of your question, which is can we grow faster than one five we're pleased to report today that we are exceeding our goal for this year, which was $1. Two prior quarter. We had said we are on track to deliver one two so those words matter, we changed our words from on track to exceed.

Speaker 3: As it relates to the second half of your question, which was, you know, can we go faster than 1.5? We're pleased to report today that we are exceeding our goal for this year, which was 1.2. Prior quarter, we had said we are on track to deliver 1.2. So those words matter. We change our words from on track to exceed. We are confident we will exceed the 1.2 this year.

We are confident we will exceed the $1. Two this year, our third year goal of our three year plan, which is fiscal 2024 remains at this time at $1 5 million to our confidence that we can do better than that and we will talk more about that at our investor day, but we like our strategy, it's winning in the marketplace. If you look at the chart in our prepared remarks, you can see the pulling away from the industry than I do.

Speaker 3: our third year goal of our three-year plan, which is fiscal 2024, you know, remains at this time at 1.5, do I have confidence we can do better than that? And we'll talk more about that at an investor day, but we like our strategy. It's winning in the marketplace. If you look at the chart and our prepare remarks, you can see the pulling away from the industry and I don't anticipate that slowing down.

Don't anticipate that slowing down.

Maybe just as a quick follow up.

Speaker 5: And maybe just as a quick follow up, when you think about 24 now, right, versus maybe six months ago.

Do you think about 24 now versus maybe six months ago.

Do you think your thought now revenue will be higher and profit margins lower than you thought six months ago or it's too early to make that call.

Speaker 5: Do you think your thought now is, revenue will be higher and profit margins lower than you thought six months ago, or it's too early to make that.

Yes, good morning, its Aaron I really like your question because like you. We are very focused on the long term and we were purposeful in reaffirming our 2024 guidance. We believe it we can see it and we're going to get there and I would take you back to something I said at our Investor day back in.

Speaker 3: Good morning, Aaron. I really like your question because like you, we are very focused on the long term.

Speaker 3: And we were purposeful in reaffirming our 2024 guidance. We believe it. We can see it.

Speaker 3: Right, and we're going to get there. And I would take you back to something I said in our investor day back in May, which was

May which was the opportunity is everywhere at Cisco or what I would describe it now is progress is everywhere at Cisco and we're going to get through the current volatility driven by omicron I'm quite pleased with what I'm seeing from a disciplined perspective in the business and we are putting all the pieces in place so that by the time, we get to.

Speaker 3: The opportunity is everywhere at Cisco. What I would describe it now is progress is everywhere at Cisco.

Speaker 3: You know, we're going to get through the current volatility driven by Oma Kron. I'm quite pleased with what I'm seeing from a discipline perspective in the business. And we are putting all the pieces.

Speaker 3: So that by this time we get to 2024, we're talking about, we're talking about the upside.

2024, we're talking about we're talking about the upside.

Speaker 3: Right, but for the moment, we have to stay focused on getting to Roma Crown, getting to the quarter, getting to the half, but we are quite confident in the future.

But for the moment, we have to stay focused on getting through <unk> and getting through the quarter getting through the half, but we are quite confident in the future.

Thank you.

Thank you Joe.

Your next question comes from the line of Jake Bartlett of <unk> Securities.

Speaker 1: Your next question comes from the line of Jake Bartlett of Truist Security.

Speaker 6: Great thanks for taking the question. Well, my first was on Omicron and kind of understanding the...

Great. Thanks for taking the question.

Well my first was on <unk> and kind of understanding.

The near term impacts.

Speaker 6: the near-term impacts that they've had on your staffing in demand. But I wonder if there's any longer-term impacts in your view and whether that's pushing out the supply chain disruptions materially to have a longer impact there. And did you see any disruptions, maybe closures, for instance, with some of your independent customers? Anything that might just last longer than as we look at the cases come down sharply.

It had on your on your staffing in demand, but I'm wondering if there's any longer term impacts in your view and whether thats.

<unk> the supply chain disruptions materially heavier a longer impact there and did you see any disruptions maybe closures for instance, with some of your independent customers anything that Mike just last longer than that as we look at the the cases come down sharply here.

Speaker 3: And Jay could say a good question. I'll answer directly as asked and then I'm going to add one point that we believe is on investor's mind tied to this.

Hey, Jacob Good question I'll answer directly is asked and then I'm going to add one point that we believe is on investors' minds tied to this.

Speaker 3: First and foremost, scale matters in this industry, meaningfully. So purchasing scale matters so we can get best possible costs so we can share value with our customers.

First and foremost scale matters in this industry meaningfully so purchasing scale matters. So we can get best possible cost. So we can share value with our customers scale matters from a physicality perspective. So we have more distribution centers in the United States, our primary country than anyone else, which means our last mile delivery is a.

Speaker 3: scale matters from a physicality perspective. So we have more distribution centers.

Speaker 3: in the United States, our primary country than anyone else, which means our last mile delivery is a shorter route, a more dense route than others. And as we continue to grow, Erin and I will make appropriate investments in incremental physical capabilities to put us even closer to the customer, which will lower our cost to serve. And you can see the flywheel that comes from

Short around a more dense routes than others and as we continue to grow Aaron and I will make appropriate investments in incremental physical capabilities to put us even closer to the customer which will lower our cost to serve and you can see the flywheel that comes from the size breadth and scale of Cisco and we believe that will become an increasing strength capability.

Speaker 3: size, breadth, and scale of Cisco. And we believe that will become an increasing strength capability over time. Because of the cast generation of this company and our strong balance, we have the ability to invest in net new facilities to lower that cost to serve last mile delivery. So we believe it will be an increasing...

Overtime because of the cash generation of this company and our strong balance sheet, we have the ability to invest in net new facilities to lower that cost to serve last mile delivery. So we believe it will be increasing strength formula for our company one of the questions that we believe is on investors' minds is Kevin aren't you worried about labor cost everyone. We talk.

Speaker 3: strength, formula for our company. One of the questions that we believe is on investors minds is Kevin, aren't you worried about labor costs? Everyone we talk to is talking about. Labor costs going up. I just wanna be clear on this topic. Labor wage rate.

Two is talking about labor costs going up.

I just wanted to be clear on this topic labor wage rate is immaterial to the cost pressure that we experienced in Q2 I'll repeat that the labor wage rate was immaterial in our Q2, our wage excuse me our operating cost pressure in this past quarter. If you had to single it down to like the biggest thing, whereas the <unk>.

Speaker 3: to the cost, pressure that we experienced in Q2. I'll repeat that. The labor wage rate was immaterial in our Q2.

Speaker 3: Our wage, excuse me, our operating cost pressure in this past quarter, if you had to single it down to the biggest thing, was the percentage of people working for us that are new, tied to the hiring, and there was more turnover that occurred this past summer than is typical in our industry tied to what some people call that great resignation. So we were working feverish.

Percentage of people working for us that are new side to the hiring and there was more <unk>.

Turnover that occurred this past summer than is typical in our industry tied to what some people call that great resignation. So we're working feverishly on improving associate retention improvement training of our associates and improving the productivity of our associates as I mentioned this is our core competence. This is what we do and we are confident we will move up the productivity ladder.

Speaker 3: Improving associate retention, improving the training of our associates, improving the productivity of our associates. As I mentioned, this is our core competence. This is what we do, and we are confident we will move up the productivity ladder.

As Aaron said that'll be more Q4 impactful than Q3, because it takes time as I mentioned earlier I gave a decent piece of color. When you started as a driver in our company you are in the passenger seat for weeks learning Cisco standards learning our customer relations interface because that driver is the face of this company and also of course learning.

Speaker 3: As they're instead that'll be more Q4 impactful than Q3 because it takes time. As I mentioned earlier, I gave a decent piece of color. When you start as a driver or company, you're in the passenger seat.

Speaker 3: for weeks learning Cisco standards, learning our customer relations interface because that driver is the face of this company and also of course.

Speaker 3: learning the challenging type of driving, which is mostly backing up to restaurant locations that our drivers have to do. So those investments we're making will reduce over time, which is why we are confident that we will improve our productivity, which will then begin to flow through to improve the EBIT percent margin. So I just want to be clear, labor rate increase is not something that is causing our current operating cost pressure. As you look to the future, will that change? We do anticipate when we do our annual review process that we will have a nominally higher wage rate increase provided to our associates. They work hard, they deserve to be paid fairly and appropriately. And we have productivity improvement efforts that can help offset those types of increase.

The challenging type of driving which is mostly backing up to restaurant locations that our drivers have to do so those investments, we're making will reduce overtime, which is why we are confident that we will improve our productivity, which will then begin to flow through to improved EBIT percent margin. So I just want to be clear labor rates increase.

Is not something that is causing our current operating cost pressure.

As you look to the future will that change we do anticipate when we do our annual review process that we will have a nominally higher wage rate increase provided to our associates. They work hard and they deserve to be paid fairly and appropriately and we have productivity improvement efforts that can help offset those types of increases.

Great Great. Thank you very much and just really a quick follow up to that.

Speaker 6: Great, great, thank you very much. And you know, just a really quick follow up to that. You know, last week, Brinker, it's talked about, you know, and it's just you can have re-higher rates and see an increase in the re-hiring of former employees. And I'm just wondering whether, I mean, that's something that

Last week Brinker.

You talked about.

Interesting to re hire rates.

An increase in the rehiring of former.

Employees and I'm, just wondering whether that's something that.

I think it's a sign of an improving labor market, but also could really help with productivity is that something that you're measuring or seeing any material change there as people might have left for whatever reason are coming back to Cisco.

Speaker 6: I think it's a sign of an improving labor market, but also could really help with productivity. Is that something that you're measuring or seeing any material change there as people who might have left for whatever reason or coming back as Cisco?

Hey, Jake it's a great question I think I said, a couple of quarter goes quarters ago. We've retired 100% of people that we furloughed back in March from a supply chain perspective. So we've been fully open for business now for a long time and we're growing so we were taking market share we are winning new customers. Our sales are obviously well above 19, our volumes were.

Speaker 3: Yeah, Jake, it's a great question. I think I said a couple of quarters ago. We've rehired 100% of people that we furloughed back, you know, in March from the supply chain perspective. So we've been fully open for business now for a long time. And we're growing. So we were taking market share. We're winning new customers. Our sales are obviously well above 19. Our volumes we anticipate will be back to you and then above 19.

We anticipate we'll be back to you and then above 19.

Speaker 3: and the not too distant future. So we've got the open to higher shingle out there. In fact, we're getting much more effective at...

The not too distant future. So we've got the open to higher shingle out there in fact, we're getting much more effective in recruiting for open positions. Our marketing team is getting more sophisticated on how to target.

Speaker 3: Recruiting for open positions, our marketing team is getting more sophisticated on how to target.

Speaker 3: applicants and we're getting better and better at training them. But

<unk>, and we're getting better and better at training them.

But in the future to specifically answer your question Jake we're actually going to have to go to people from outside this industry to meet the hiring needs and higher demands that we have it's why we formed our driver Academy just a little bit of color around that we're now live in two physical driver Academy locations are first CDL class has graduated from our driver Academy.

Speaker 3: In the future, to specifically answer your question, Jake, we're actually gonna have to go to people from outside this industry to meet the higher needs and higher demands that we have. It's why we formed our driver academy. It's a little bit of a call around that. We're now live in two physical driver academy locations.

Speaker 3: Our first CDL class has graduated from our driver academy. And we think we're gonna have to eat our own cooking pun intended where we're gonna have to find people who aren't today CDL class drivers.

And we think we're going to have to eat our own cooking pun intended where we're going to have to find people who arent today's CDO class drivers teach them. The trade train them and then have them work for a long time for Sysco and again. That's an example of seismic scale matter, we pay people to participate in that program, whereas today. If you were an average person wanting to become a driver and you enter driver's schools.

Speaker 3: Teach them the trade, train them, and then have them work for a long time for Cisco. And again, that's an example of size and scale matter. We pay people to participate in that program, whereas the day if you were an average person wanting to become a driver and you entered driver school, you actually have to pay the driver school. So think about that flip from having to go, from having to pay to attend and lose time working, to we actually pay you to attend the Cisco driver academy, and we're bullish about that in expanding that opportunity across the country. Okay, thank you.

You actually have to pay the driver school, so think about that flipped from having to go from having to pay to attend and lose time working to we actually pay you to attend to the Cisco driver Academy, we're bullish about that and expanding that opportunity across the country. Okay. Thank you for the questions.

<unk>.

Your next question comes from the line of Jeffrey Bernstein of Barclays.

Speaker 1: The next question comes from the line of Jeff Reburn stain of bark lace.

Great. Thank you very much.

Speaker 4: Great, thank you very much. Kevin and Aaron, I think you both mentioned green shoots, I believe that was in reference to just more recent February , early February trends, I'm just trying to assess whether that's more on the sale, so I'm starting to recover, which I know we've heard some talk about, throwing in mid-January, things are getting better, or whether you're referring to more inflation.

Kevin and I are and I think I think you both mentioned.

Green shoots.

I believe that was in reference to just more recent February early February trends I'm, just trying to assess whether that's more on the sales side starting to recover.

Which I know we've heard some talk about floating in mid January things are getting better or whether you were referring to more inflation, because we've seen spot prices, maybe start to ease sequentially on commodities and labor as we've talked about earlier, maybe a little bit easier to do some hiring so just trying to assess what you think comes first as you talk about the green shoots to the fiscal third quarter.

Speaker 4: spot prices may be start to eat sequentially on commodities and maybe as we've talked about earlier maybe a little bit easier to do some hiring so just trying to assess what you think comes first as you talk about the green shoots through the fiscal third quarter.

Good morning, Jeff. Thanks for the question the Green Jude comment that I made was actually tied to cases excuse me case.

Speaker 3: Morning, Jeff. Thanks for the question. The GreenTube comment that I made was actually tied to cases, excuse me, case in volume, therefore, and fails beginning to improve. That's what that comment was tied to. As restrictions begin to ease, you know, Canada's just in February has relaxed. They still have a very onerous restriction in place, which is 50% on-prem dining, but it was like literally restaurants were pulled in Canada. In the GTA greater Toronto area and Quebec province,

Volume therefore in sales beginning to improve that's what that comment was tied to as restrictions begin to ease Canada just in February has.

Relaxed they still have a very onerous restriction in place, which is a 50% on prem dining, but it was like literally restaurants were closed in Canada in the GTA Greater Toronto area in Quebec Province.

Speaker 3: You could eat at a restaurant for the month of January . So those restrictions have began easing. In the UK and France, the restrictions have been very heavy. Mandatory work from home, we're seeing restrictions ease there. And the Green Shoot comment was tied to it. Those restrictions ease. We can see a...

You couldn't eat in our restaurants for the month of January so those restrictions I begin easing in the UK and France. The restrictions have been very heavy mandatory work from home, we're seeing restrictions ease there and the green shoot comment was tied to as those restrictions ease we can see a.

Speaker 3: recovery of the business and a return of volume. And then in the US, I didn't give this color commentary. The Southern third of the United States continues to perform very well. The headwind in the US is in the urban centers in the north, and we anticipate recovery being made.

Recovery of the business and a return volume and then in the U S. I didn't give this color commentary that southern third of the United States continues to perform very well.

The headwind in the U S as in the urban centers in the North and we anticipate recovery being.

And those environments as again restrictions in these that's mostly a city mayor decision as the restrictions theyre putting on customers ease.

Speaker 3: And those environments, as again, restrictions in these, that's mostly a city, mayor decision, as the restrictions they're putting on customers, ease. Point two, where else will progress come from? So, we do expect volume in sales to make progress in Q3, certainly into Q4, but operating expenses. We have a plan. We have a management action plan to address our operating expenses.

Two though just like where else will progress come from so we do expect volume in sales to make progress in Q3 into certainly into Q4, but operating expenses. We have a plan we have a management action plan to address our operating expenses to five part plan I'll cover three quickly and then I'll toss to Aaron who will cover two first and foremost it's about retention training and productivity we need to move.

Speaker 3: The five-part plan, I'll cover three quickly, and then I'll toss to Aaron, who will cover two. First and foremost, it's about retention training and productivity. We need to move the new hires up the productivity curve, and we are maniacally focused on improving that new higher productivity. Dr. Tewis, transportation efficiency. There's golden M Hills, we like to say, on ensuring that the trucks are being routed most optimally. There's work we can do, it's pick and shovel work, to ensure that our transportation efficiency is...

The new hires up the productivity curve and we are maniacally focused on improving that new hire productivity opportunities transportation efficiency, There's Goldman <unk> hills, we'd like to say on ensuring that the trucks are being routed most optimally. There's work we can do it's pick and shovel work to ensure that our transportation efficiency is operating at the highest level.

Speaker 3: operating at the highest level. The third is Cisco Brand, the question that came up earlier in today's conversation from Alec.

The third is Sysco brand. The question that came up earlier in today's conversation from Alex.

Speaker 3: We are making progress in Cisco brand. It will be a big focus in the year to go. And we anticipate profit improvement in the year to go tied to increasing penetration of Cisco brand. And I'll toss to Aaron for the two other topics we're addressing here and over to you. Thanks, Kevin. Of equal importance to our progress against COGS. We have opportunities to source better. Our strategic sourcing efforts are gathering steam and we're bullish on where they will take us over time. And of course, being relentless on cost out to promote guys by jumping off into the currency to understand the cost. And start adding your money. And realize the pretty data around that today is

Are making progress in Sysco brand it will be a big focus in the year ago, and we anticipate profit improvement in the year ago tied to increasing penetration of Sysco brand and then I'll toss to Aaron for the two other topics. We are addressing here an overview. Thanks, Kevin of equal importance, our progress against our Cogs, So we have opportunities to source better or.

Strategic sourcing efforts are gathering steam and we're.

Our bullish on where that will take us over time, and then of course being relentless on cost out and accelerating our efforts and frankly, finding new projects, we have a big rollout there from may.

Speaker 3: And frankly, finding new projects. We have a big goal out there from May. We are accelerating their goal, trying to bring the goodness forward, to help us offset what we've been experiencing over the last couple of quarters. I do want to cause out one modeling point, just for clarification. I want to point out to those who work in their models that January is a seasonal low for us, even in the absence of them.

We are accelerating that goal trying to bring the goodness forward to help us offset.

What we've been experiencing over the last couple of quarters I do want to call out one modeling points for clarification I want to point out to those who are working their models that January is a seasonal low for us even in the absence of <unk>.

Speaker 3: And so while the green shoot you're hearing us talk about green shoots, those are largely coming in February and beyond. Understood. And then my

And so while the green shoot Youre hearing us talk about green shoots those are largely coming in February and beyond.

Understood.

And then my follow up I guess it relates to that profitability.

Point, you just made I know for a number of quarters now you guys have referenced.

Speaker 4: You just made, and for a number of quarters now, you guys have referenced improving profitability, starting in the second half of fiscal 22, which we're finally here, seemingly as...

Profitability starting in the second half of fiscal 'twenty, two which we're finally here seemingly is I guess investments ease a little bit profitability improves initiatives on that front I'm, just wondering whether you still see that.

Speaker 4: investments easier a little bit, profitability improves initiatives on that front. Just wondering whether you still see that.

Speaker 4: that thesis intact or whether there's been delays to that. Obviously you reiterated the fiscal 24. So it seems like.

That thesis intact or whether there has been delays to that obviously you reiterated the fiscal 'twenty four so it seems like the.

Speaker 4: The end zone is still at the same spot, but just wondering whether it's concerned that there's more of a hockey stick type recovery or whether you still believe that, you know, starting on the back half of fiscal 22, a lot of the initiatives you put in place are really going to start to bear fruit, putting aside kind of the Omicron variant. I appreciate the question.

Enzo is still at the same spot, but just wondering with this concern that this is more of a hockey stick type recovery or whether you still believe that starting in the back half of fiscal 'twenty. Two a lot of the initiatives you put in place are really going to start to bear fruit, putting aside kind of the omicron variance.

I appreciate the question, let me offer some perspective.

Everything we have said we are going to do we are doing what has changed is the environment in which we're operating.

Speaker 3: Everything we have said we are going to do, we are doing. What has changed is the environments in which we're operating.

Speaker 3: And so while we've got out of the box early, at the end of fiscal 21, working on aggressive cost-code efforts and working on GP sourcing efforts, right? The visibility of those things in the P&L has been impacted by the environments in which we're operating.

And so while we've got out of the box early at the end of fiscal 'twenty, one working on aggressive cost out efforts and working on GP sourcing efforts right. The visibility of those things in the P&L has been impacted by the environment in which we're operating.

Speaker 3: So we do have strong confidence in our long-term guidance. We have visibility to the actions that we had planned to take internally on cost out and gross profit recovery actions. And we aren't back and away from those. And those efforts aren't slowing down if anything they're actually accelerating. So while I'm gonna refribe back to my earlier comments about the backcast guidance and what the short-term environment means for us.

We do have strong confidence in our long term guidance, we have visibility to the actions that we had planned to take internally on cost out and gross profit recovery actions.

<unk>.

We aren't backing away from those and those efforts arent slowing down if anything they are actually accelerating so while I'm going to refer you back to my earlier comments about the back half guidance and what the short term environment means for us, Kevin and I and the entire management team are locked hands and we're going to deliver on fiscal 'twenty four of being.

Speaker 3: Kevin and I and the entire management team are locked hands and we're going to deliver on fiscal 24 of being at or above our all-time ETSI and from fiscal 2019.

At or above our all time EPS side.

From fiscal <unk> fiscal 2019.

Understood. Thank you.

Thank you Jeff.

Speaker 1: Your next question comes from the line of John Glass of Morgan's family.

Your next question comes from the line of John Glass of Morgan Stanley .

Speaker 2: Thanks very much. I wanted to go back to you, the health of your customer base and looking at the difference between your overall broadline case growth and your local case growth. Is it fair to say independent restaurants have been more negatively impacted by the things like you mentioned about staffing shortages, et cetera? And inside of that, is there any growing concern that inflation is impacting their financial health? Is there any negative reads that you're seeing in terms of independent restaurants viability in this inflationary environment or not?

Thanks, very much I wanted to go back to the health of your customer base and looking at the difference between your overall broadline case growth.

Local case growth.

Is it fair to say independent restaurants have been more negatively impacted by this things like you mentioned about staffing shortages et cetera, and inside of that is there any growing concerned that inflation is impacting their financial health is there any negative reads that youre seeing in terms of independent restaurants viability in this inflationary environment or not.

Hey, John It's a really terrific question.

Speaker 3: Hey John , that's a really terrific question. Let me just go back to the health of the customer component. If we go back to the beginning of COVID.

Let me just go back to the health of the customer component. If we go back to the beginning of Covid.

Speaker 3: you know, fast food, QSR, drive through meaningful share winner. And you could see that in our Sigma reportable segment for last year, Sigma had a record year in the top line and in bottom line, in part because Sigma indexes, you know, towards obviously serving that customer type. That was year one of COVID. Year two of COVID, you know, the big winners are the sophisticated restaurant chains that have a digital app that allows, you know, to go ordering, that allows

Fast food <unk> drive through meaningful share winter and you could see that in our SYGMA reportable segment for last year Sigma had a record year in both topline and Bottomline in part because SYGMA index's towards obviously serving that customer type.

That was year one of Covid year, two of Covid. The big winners are the sophisticated.

Restaurant chains that have a digital app that allows us to go ordering that allows paperless.

Speaker 3: paperless contactless payment I meant to say and just frictionless ease of purchase and really loyalty. One of the things we're working on at Cisco is personalization. Well, there are select retailers, there's excuse me restaurants, I won't name the names of them, that are pretty fantastic loyalty programs. That...

Contactless payment I meant to say.

Frictionless ease of purchase and really loyalty one of the things we're working on at Cisco was personalization while there.

There are select retailers or excuse me restaurants, I won't name the names of them that are pretty fantastic loyalty programs.

Speaker 3: prompt their customers to buy more from them and come back to their restaurants more often. Those are the big winners at this point in time. As it relates to Cisco and how we can help the mom and pop, this is the sweet spot of who we are. So we are helping independent restaurants figure out how to connect to delivery partner. We help them with a creation of a mobile version of their venue so that customers can shop remotely and

Prompt their customers to buy more from them and come back to their restaurants more often those are the big winners at this point in time.

As it relates to Cisco and how we can help them mom and pop. This is the sweet spot of who we are so we are helping independent restaurants figure out how to connect to delivery partner, we helped them with a creation of a mobile version of their venue so that customers can shop remotely pick.

Speaker 3: pick up or take out and also we're helping them with things like contactless payment in the restaurant. So we have the largest sales force in the industry and that literally is what they do. They don't just sell food, they consult with mom and pop.

Pickup or takeout and also we are helping them with things like contactless payments in the restaurants. So we have the largest sales force in the industry and that literally is what they do they don't just sell food they consult with mom and pops to help them compete more effectively with some of the larger companies.

Speaker 3: to help them compete more effectively with some of the larger companies. And we believe that we'll earn loyalty to Cisco over time. We believe that will increase Cisco's stickiness. And I refer you back to the chart in our fly deck that talked about the percentage of Cisco customers now buying just from us.

We believe that we'll earn loyalty to Cisco overtime, we believe that will increase Cisco stickiness and I refer you back to the chart in our slide deck that talks about the percentage of Cisco customers now buying just from US and then the percentage of customers that werent previously buying from us in both of those indices are improving.

Speaker 3: And then the percentage of customers that weren't previously buying from us in both of those indices are improving.

Speaker 3: steadily. So, you know, we're confident in the long term of the mom and pop independence. There are

Italy.

So we're confident in the long term of the mom and pop independents. There are many of them out there.

Speaker 3: many of them out there and we can help them succeed. And we believe that Cisco's independent customers are gonna outperform the mom and pop that does not partner with Cisco. In fact, we've got data that shows that, in fact, is the case that our sales reps use that in their selling process. Point two was will inflation more negatively impact mom and pop.

And we can help them and we believe that Cisco is independent customers are going to outperform the mom and pop that does not partner with Cisco in fact, we've got data that shows that in fact is the case in our sales rep to use that in their selling process point, too, which will inflation more negatively impact mom and Pops I would say, yes, but then I would call it.

Speaker 3: I would say yes, but then I would call it back to this isco thesis. And why does the national chain perhaps have more mitigating buffering? Many of them have long-term supplier contracts with expressing and or scales tied to inflation. And the mom and pop has less of that. But that's who we are. We are essentially their purchasing agent.

Back to the Cisco thesis and why does the national chain, perhaps have more mitigating buffering. Many of them have long term supplier contracts with fixed pricing <unk> scale is tied to inflation and the mom and pop has less of that but that should we are we are essentially their purchasing agent.

Speaker 3: We are pushing back hard on cost increases, as I mentioned, and one of the earlier questions from the other John is, you know, what are we doing about this inflation component? We are working aggressively to find alternative suppliers, alternative items.

We are pushing back hard on cost increases as I mentioned in one of the earlier questions from.

The other John .

What are we doing about this inflation component, we are working aggressively to find alternative suppliers alternative items.

Speaker 3: lower cost items that could be substituted to and and again that's what motivates us at Cisco is to serve that mom and pop and We've got a lot of good things happening to help them with their inflation which includes Cisco brand and our mom and pop restaurant customers Love Cisco brand for the fact that it saves them time and saves them money and and we anticipate making progress in that regard

Sure cost items that can be substituted to and again, that's what motivates us at sysco is to serve that mom and pop and we've got a lot of good things happening to help them with their inflation, which include Sysco brand and our mom and pop restaurant customers Love Sysco brand for the fact that it saves them time and saves them money and we anticipate making progress in that regard as well.

Thanks for that and then just on inflation on the comment do you do you think the second quarter here was the peak of inflation as you look into what Youre seeing in the third quarter do you think the rate of inflation begins to cool off or do you not see that yet.

Speaker 2: Thanks for that. And then just on inflation on the comment, do you think the second quarter here was the peak of inflation as you look into what you're seeing in the third quarter? Do you think the rate of inflation begins to cool off or do you not see that yet?

Speaker 3: We are continuing to see elevated levels of inflation, and as much as I would like to call when the down point will be and possible for us to do. And so we are assuming elevated inflation through the rest of the fiscal year, if modestly down in Q4 versus Q3.

We are continuing to see elevated levels of inflation and as much as I would like to call. When the down point will be impossible for us to do until we are assuming elevated inflation through the rest of the fiscal year, if modestly down in Q4 versus Q3.

Thank you.

Thank you John .

Speaker 1: Here next question comes from a line of Mark Carden of UBS.

Your next question comes from the line of Mark Carden of UBS.

Good morning, Thanks, a lot for taking my questions. So not too long ago, you guys noted that you'd seen a 10% increase in local dorser against the 10% decline in overall local tours. Okay. These numbers still largely hold true as the variant.

Speaker 7: Good morning. Thanks a lot for taking my questions. So not too long ago, you guys noted that you'd seen a 10% increase in local doors served against a 10% decline in overall local doors open. These numbers still largely hold true because the variant disruption had much of an impact on the front.

<unk> had much of an impact on this front.

Thanks.

Yes, Mark holding true. So in fact, we're continuing to make progress and we kind of pivoted on how we reported this quarter answer. Your question is yes, it's holding true.

Speaker 3: Yeah Mark, holding true. So in fact, we're continuing to make progress. We kind of pivoted on how we reported this quarter. The answer to your question is yes, it's holding true. This quarter, we chose to provide even more color by putting a chart in our prepared remarks.

This quarter, we chose to provide even more color by putting a chart in our prepared remarks that shows the percent of customers buying unique from us going up and then the percentage of you do not buy from us going down you put those two together and it's resulting in the number of unique doors that we're serving continues to go up and I would say the bankruptcy rate of <unk>.

Speaker 3: that shows the percent of customers buying unique from us going up and then the percent who do not buy from us going down. You put those two together and it's resulting in the number of unique doors that we're serving continues to go up. And I would say the bankruptcy rate of independent customers continues to be lower than what many had predicted. And I think, you know, mom of up operators, they see a light at the end of the tunnel and they're prepared to benefit from, you know, an industry recovery that's still in front of us.

Independent customers continues to be.

Be lower than what many had predicted.

Mom and pop operators, they see a light at the end of the tunnel.

They're prepared to benefit from an industry recovery, that's still in front of us.

Speaker 7: Okay, great. And then thinking more from the food distribution industry perspective, as Omicron impacted the competitive landscape in the sense of, as in the combination of another wave of restrictions, and continued labor pressures, impacted their abilities to stand business.

Okay, Great and then thinking more from the <unk>.

The distribution industry perspective I'll.

Let me kind of impacted the competitive landscape in the center.

The combination of another wave of restrictions.

And continued labor pressures impacted their ability to stay in business.

Speaker 7: Either in the US or internationally and to give up a smaller independent distributors there.

Either in the U S or internationally in thinking about the smaller independent distributors there.

And Mark I. Appreciate the question I would just kind of call back to my answer to one of the previous questions, which is that size and scale matter and have become even more important in this COVID-19 environment supply chain resiliency is the newest buzzword you think about places like World Economic Forum and what our CEO was talking about it used to be supply chain.

Speaker 3: And Mark, appreciate the question. I would just kind of call back to my answer to one of the previous questions, which is that size and scale matter and have become even more important in this COVID environment. Supply chain resiliency is the newest buzzword you think about, you know, place like Rolled Economic Forum and what our CEO is talking about. It used to be supply chain agility and...

<unk>.

Speaker 3: People now are talking about supply chain resilience, that you can weather storms of environmental conditions, political unrest, and then things like this, which is a healthcare tied topic. So.

People now are talking about supply chain resiliency that you can weather storms.

Of environmental conditions political unrest.

When things like this which is a healthcare tied to topics. So.

Speaker 3: Size and scale matter meaningfully when you're talking supply chain resiliency. We have the inventory to be able to support our customers as they recover. Aaron and I have invested to ensure that we have more inventory on hand at the present time than we did pre-COVID. We also are investing in labor, as I mentioned earlier, in some less.

And scale matter meaningfully when youre talking supply chain resiliency, we have the inventory to be able to support our customers as they recover.

And I have invested to ensure that we have more inventory on hand at the present time than we did pre COVID-19 .

We also are investing in labor as I mentioned earlier and some less.

Speaker 3: You know, strong balance sheet and income statement competitors of ours aren't able to do that. They're holding on to get through and we're hiring thousands of people while Amicron is in our midst.

Strong balance sheet and income statement competitors of ours arent able to do that they are holding on to get through and we're hiring thousands of people. While omicron is in our midst that's intentional and yes. It impacted our operating expenses in Q2, but it will position us to be able to serve our customers in a proper way win new business.

Speaker 3: And that's intentional. And yes, it impact that operating expenses in Q2, but it will position us to be able to serve our customers in a proper way, win new business, and then that's business we intend to keep forever. So those are our ambitions. We are confident in our ability to do so. And yes, size and scale matter. Matter, last comment for me is digital before I toss to Aaron.

In the <unk> business, we intend to keep forever.

Those are our ambitions, we are confident in our ability to do so and yes sizing scale metal matter last comment from me is digital before I tasked Erin one of our transformation investments is to improve our digital capabilities. So modern pricing software substantial improvements to our website, we've made substantial improvements to our sales.

Speaker 3: One of our transformation investments is to improve our digital capabilities. So modern pricing software, substantial improvements to our website. We've made substantial improvements to our sales force.

Of course.

Speaker 3: Guiding tool, which we call Salesforce 360, which literally guides the sales rep on what the job to be done is at that restaurant on that given visit. We've made substantial improvements to that tool, which have increased our sales consultants' success rate on penetrating new cases.

Guiding tool, which we call Salesforce 360, which literally guide the sales rep on what the job to be done is at that restaurant on that given visit we've made substantial improvements to that tool, which has increased our sales consultants success rate on penetrating new cases.

Winning new lines of business with existing customers. So those types of investments, which are not immaterial as Aaron quoted on the call today $44 million.

Speaker 3: and winning new lines of business with existing customers. So those types of investments, which are not the material, is Aaron coded on the call today, $44 million worth of investments and those types of capabilities, we're gonna distance ourselves from those that we compete with. Talk to Aaron for additional comments.

They are investments in those types of capabilities.

We're going to distance are distanced ourselves from those that we compete with Costa Aaron for additional comments.

Speaker 3: Kevin Walsh, but I just wanted to ladder back to one of our earlier answers, which is this is why we're confident in our long-term guidance, because we are willing to support the customer now, right? Short-term, and we'll have an impact on profit, but we're doing the right things by the customer when they need us, while investing for the long-term. And this is going to be part of the ecosystem and the algorithm we build to need to exceed that guidance for 2024.

Kevin was but I just wanted to latter back to one of our earlier answers, which is this is why we are confident in our long term guidance because we are willing to support the customer now right.

Short term hit will have an impact on profit, but we're doing the right things by the customer when they need us while investing for the long term and this is going to be part of the ecosystem and the algorithm, we build to meet or exceed that guidance for 2024.

Okay.

Great. Thanks, so much guys.

Thank you Mark.

Your next question comes from the line of Lauren Silberman of Credit Suisse.

Speaker 1: Your next question comes on the line of Lauren Silverman of Credit Suisse.

Thank you for the question just first a follow up on the snapback in transformation cost.

Speaker 8: Thank you for the question. Just first the follow up on the Snapback and Transformation Cots. How much of these costs are going to carry forward in the fiscal 23 cost base? Should we see the full 73 million of Snapbacks fall off?

How much of these costs are going to carry forward in fiscal 'twenty three cost base should we see the fall sort of $73 million of snap backs falloff.

Speaker 8: Disgles second quarter of 23 and really the 44 million of transport.

Fiscal second quarter of 2003, and really the $44 million of transport transformation costs to be in.

Speaker 8: to try to understand how to think about the structural.

Just trying to understand.

How to think about the structural.

Sure Greg Great question of course, I haven't provided you with fiscal 'twenty three guidance Im not going to do so today, we're going to get through the back half of this year and then we're going to work towards the long term guidance that important qualifier aside a couple of observations first is that the snapback costs, we're calling out there transitory short term or one time.

Speaker 3: I haven't provided you with fiscal 23 guidance, so I'm not going to do so today. We're going to get through the back half of this year, and then we're going to work towards the long-term guidance. That important qualifier aside a couple of observations. The first is that the SNAPAC costs were calling out.

Speaker 3: transitory short-term or one-time in nature. And so we do not expect those to be long-term or even medium-term increases for a capital structure. And I want to emphasize something Kevin said earlier, which is wage rate increase.

In nature and so we.

We do not expect those to be long term or even medium term increases to our capital structure and I want to add to our cost structure and what I emphasize I want to emphasize something Kevin said earlier, which is wage rate increase increases are immaterial to our current results and so theres not a those don't include structural changes.

Speaker 3: increases are immaterial to our current results. So there's not a, those don't include structural changes, so to speak.

To speak with respect to our transformation investments, we do we will continue to invest against the transformation and we'll provide more clarity on what that looks like in 2003, when we get to 'twenty three guidance an important caveat, though I think I've said before let me say it again now our trend we will continue to invest in the transformation and in the back half.

Speaker 3: With respect to our transformation investments, we will continue to invest against the transformation. We'll provide more clarity on what that looks like in 23 when we get to 23 guidance. The important caveat though, I think I've said before, let me say it again now, we will continue to invest in the transformation and in the back half, assumed in our guidance is that the transformation, ethics investments will be at or above where they were in Q3.

<unk> assumed in our guidance is that the transformation opex investments will be at or above where they were in Q3 Q2.

Okay.

Speaker 8: Okay, and then separately seeing double digit inflation, you've talked about effectively managing the product inflation. Can you talk with the dynamics between inflation hitting the cost line versus the price that you're pushing through on top line to try and understand the pricing power? Opportunities to reach...

Then separately.

Double digit inflation, you've talked about effectively managing the product inflation can you talk about the dynamics between inflation hitting the Cogs line versus the price that you're pushing through on top line I'm, just trying to understand the pricing power opportunities.

The elevated opex costs I know some are transitory some are permanent so just said more clearly we assume your pricing.

Speaker 8: elevated, OpExCos I know some are transitory, some are permanent. So just said more clearly, we assume you are pricing above the 14.5%.

14, 5% inflation in U S broadline.

Speaker 3: Great question. The math, because our cost for us profit dollars per case is up, we would imply that we are indeed able to pass through and manage our product cost inflation if we...

Great question, the math, because our cost of our gross profit dollars per case is up who would imply that we are indeed able to pass through and manage our product cost inflation. If we were.

Speaker 3: If we weren't past, if that wasn't going up, we would be stable, right? As far as how far we go, it's a choice we have to make in the context of the environment where we're in, as far as how much of the operating cost we pass through on a regular basis. We are committed to supporting the customers and doing the right thing in the short term environment as we focus on the long term guidance. Kevin, anything you wanna add to that?

If we werent past that wasn't going up we would be stable right as far as how far we go it's a choice we have to make in the context of the environment. We're in as far as how much of the operating cost we pass through on a regular basis, we are committed to supporting the customers and doing the right thing and then short term environment as we focus on the long term guide.

Kevin anything you want to add to that yes, just one thing that it really is a good question Lauren I want to be clear on something that might not be obvious outside our company. There are certain customer types, where our transaction with them is purely through the purchase of the food and how much the food costs. So erinn just described that very well and we're doing a good job.

Speaker 3: Yeah, just one thing dad, it really is a good question, Lauren. I want to be clear on something that might not be obvious outside, you know, our company. There are certain customer types where our transaction with them is purely through the purchase of the food and how much the food costs. So Aaron just described that very well. And we're doing a good job in that regard for that customer type. We also have other customers that we transact from a fee per case based on.

In that regard for that customer type. We also have other customers that we transact from a fee per case basis and it's in those contracts that they.

Speaker 3: And it's in those contracts that there are times our provisions for food cost increases, but when our operating cost increase like they did in the most recent quarter, that's where we get pinched. And we are working aggressively on that. In fact, our sigma sector, excuse me, sigma reporting segment, our operating cost increase in sigma in the most recent quarter tied to the same reasons that I described earlier. We've got a plan to meaningfully improve the productivity within sigma as our staffing is improving. And also we are looking at the long-term contracts that we have in those types of deeper case arrangements.

There are times, our provisions for food cost increases, but when our operating cost increase like they did in the most recent quarter, that's where we get pinched and we are working aggressively on that and in fact, our Sigma sector excuse me Sigma reporting segment.

Our operating cost increased and Sigma in the most recent quarter tied to the same reasons that I described earlier, we've got a plan to meaningfully improve the productivity within SYGMA as our staffing is improving and also we are looking at the long term contracts that we have in those types of fee per case arrangements. So that we have fairness and partnership with the customers that we.

Speaker 3: so that we have fairness.

Speaker 3: and partnership with the customers that we work with in that reporting segment. So I hope that gives you some color where it's

We work with in that reporting segment. So I hope that gives you some color where it's item price. Yes. We can do what you described in an <unk> per case.

Speaker 3: Item price, yes, we can do what you described in an ePer case. It's actually a conversation with our customers and that partnership long-term relationship management that I referenced a second ago.

Actually our conversation with our customers on that.

That partnership long term relationship management that I referenced a second ago.

Thank you guys very much.

Thank you Lauren.

Your next question comes from the line of Brian Mullan of Deutsche Bank.

Speaker 1: Your next question comes on a line of Brian Mullin of Dortje Bank.

Speaker 4: Hey, thank you. Just wondering if you might provide an update where the volume recovery stands at present for some of the non-restaurant sectors in the US, you know, relative to the fiscal 19 level of business, if you could just talk about hospital and health care, you know, Kevin, your reference business and industry as well, the prayer march. Just looking for a sense of magnitude in terms of how much there is to go when we get on the other floor, sitting in the parking line, ordering supplies then to us. So, please! Should you suit those businesses at the flavour.

Hey, Thank you just wondering if you might provide an update where the volume recovery stands at present for some of the non restaurant sectors in the U S relative to the fiscal 19 level of business. If you could just talk about hospitality and health care.

Kevin you referenced business business and industry as well as the prepared remarks, just looking for a sense of magnitude in terms of how much. There is to go when we get back to normal.

Speaker 3: Brian terrific question. I hinted at this a little bit ago. We have two primary sectors that are still down meaningfully. We're not going to quarter percentage, but I'll say down meaningfully. And that's business and industry. And we're the leading.

Yes, Brian terrific question I hinted at this a little bit ago. We have two primary sectors that are still down meaningfully we're not going to quote a percentage, but I will say down meaningfully and thats, a business and industry and we're the leading.

Speaker 3: food provider in that space. So we partner with Food Service Management Companies and we are the primary distributor to those companies for offices catering in the rest. So that sector is still down meaningfully.

Food provider in that space. So we partner with foodservice management companies and we are the primary distributor to those companies for offices catering.

And the rest so that sector is still down meaningfully we had anticipated that that sector was going to really kick in in January and that did not occur. Most companies are still currently working from home and those companies have actually stopped trying to predict when they're going to go back to working from the office, but we do anticipate progress being made in the <unk>.

Speaker 3: We had anticipated that that sector was going to really kick in in January . And that did not occur. Most companies are still currently working from home. Most companies have actually stopped trying to predict when they're going to go back to working from the office, but we do anticipate progress.

Speaker 3: being made in the year to go, better to be slower progress than we thought. On the Optimist longer-term view, it's additional...

Year to go but it will be slower progress than we thought on the optimistic longer term view additional tailwind fuel at Cisco and what we've said is we'd be getting to flat volume to 19.

Speaker 3: tailwind fuel at Cisco. And what we've said is that we'd be getting to flat volume to 19, you know, kind of inclusive of our current business performance and trends that got delayed because of Omicron, as Aaron said very well in his prepared remarks.

Kind of.

<unk> of our current business performance and trends that got delayed because of omicron as Aaron said very well in his prepared remarks.

Speaker 3: But we have tailwind still in front of us on that business and industry. The second is travel and hospitality. Again, we are a very large player in the travel and hospitality space business travel currently down significantly. Leisure travel performing quite well last summer, we anticipate this summer will be a very strong leisure travel summer, but business travel conferences and the like that drives a big portion of that business isn't meaningfully recovered yet and that will also be further tailwind for us into the next.

But we have tailwind still in front of us on that business and industry and the second is travel and hospitality again, we are a very large player in the travel and hospitality space business travel currently down significantly.

Leisure travel performed quite well last summer we anticipate this summer will be a very strong leisure travel summer, but business travel conferences and the like that drives a big portion of that business.

Is it meaningfully recovered yet and that will also be further tailwind for us into the future.

Speaker 4: Okay, thank you. And then as a follow up, just a question on the loyalty program pilots in the US

Okay. Thank you and then as a follow up just a question on the loyalty program pilot in the U S.

Speaker 4: Are there any early learnings you might be able to discuss and then at a high level, could you talk about what you're envisioning for the program? What are some of the longer term benefits if you get it right? And then conversely, what are some of the challenges in terms of getting this done the way you want, driving widespread restaurant customer? What are some of the challenges you might be able to discuss and then at a high level, could you talk about what you're envisioning for the program?

Are there any early learnings you might be able to discuss.

At a high level could you talk about what Youre envisioning for the program what are some of the longer term benefits. If you get it right and then Conversely, what are some of the challenges in terms of getting this done the way you want driving widespread restaurant customer adoption.

Speaker 3: Hey Brian , that's a great question. I love it. Today I chose to focus on Cisco Your Way and Italian cuisine just to keep my prepare for Mark Short. But we've got progress happening in all five elements of our recipe for growth.

Hey, Brian that's a great question I love it today I chose to focus on Cisco Your way in Italian cuisine, just to keep my prepared remarks short, but we've got progress happening on all five elements of our recipe for growth and for sure we're making meaningful progress in personalization it starts with data <unk>.

Speaker 3: And for sure we're making meaningful progress in personalization, it starts with data.

Speaker 3: Treasure troves of data of purchasing patterns and purchasing behavior. And that data is now in the cloud. We've got machine learning and artificial intelligence technology going against that data to provide customers with offers that are unique to them. And those offers are now showing up through our Cisco Shop platform. And the customer almost doesn't even know that it's happening. And that's what's brilliant about.

Her troves of data of purchasing patterns in purchasing behavior and that data is now on the cloud we've got machine learning and artificial intelligence technology going against that data to provide customers with offers that are unique to them and those offers are now showing up through our sysco shop platform.

And the customer doesn't even know that it's happening that's what's brilliant about end of one personalization and when we say <unk> each specific customer getting offer that's unique for them I can assure you. We're the only foodservice distributor that is doing that the second point, though as our sales rep activation, which I mentioned briefly a moment ago. We've got the best trained sales team.

Speaker 3: end of one personalization and we say end of one means each specific customer getting offered that's unique for them. I can assure you we're the only food service distributor that is doing that. The second point though is our sales rep activation which I mentioned briefly a moment ago.

Speaker 3: We've got the best trained sales team in the industry and their experts in food. These are chefs, these are former restaurant owners.

And the industry and they are experts in food. These our chefs. These are former restaurant owners, we're now, though teeing up for them, Hey, as you're heading into the bar and Grill on main Street. This is specifically what they haven't been buying from us Here's an offer specific for you for today only that you can talk to that customer about theres a sample that'll be on the next truck, there's a sysco brand selling.

Speaker 3: We're now though teeing up for them. Hey, as you're heading into the barn grill on Main Street.

Speaker 3: This is specifically what they haven't been buying from us. Here's an offer specific for you for today only that you can talk to that customer about. There's this ample that'll be on the next truck. There's a Cisco brand selling opportunity to save them money. And just the power of that.

To save them money and just the power of that data being provided to our sales reps and also to the customer through Sysco shop. It is going to increase penetration with existing customers, which is the best way to improve profitability for a distributor like us, but it's also going to enable us to win new business.

Speaker 3: being provided to our sales reps and also to the customer through Cisco Shop. It's can increase penetration with existing customers, which is the best way to improve profitability for a distributor like us.

Speaker 3: But it's also going to enable us to win new business as it relates to Cisco Shop. Now being able to provide pricing at the item level for someone even before they have begun ordering from Cisco. That's a first for us.

As it relates to Sysco shop, now being able to provide pricing at the item level for someone even before they have begun ordering from Cisco Thats a first for us tied to your customer adoption question. That's a very good one in the future who will talk to you about our loyalty program. It's called Cisco Perks that is an actual loyalty program.

Speaker 3: tied to your customer adoption question at the very good one.

Speaker 3: in the future. We will talk to you about our loyalty program. It's called Cisco Perks. That is an actual loyalty program that we are enrolling people into. And today I'm not prepared to give an update on that endeavor other than the pilot is going well. And more to come at a future update on the expansion plans of that pilot.

We are enrolling people into and today I'm not prepared to give an update on that endeavor other than the pilot is going well and more to come at a future update on the expansion plans of that pilot.

Thank you.

Thank you Brian .

Your next question comes from the line of Kelly Bania of BMO capital.

Speaker 1: Your next question comes from the line of Calibania of BMO capital.

Hi, good morning, Thanks for fitting us in.

I wanted to just ask about.

Speaker 9: Wanted to just ask about another question on hiring, aside from kind of the near term, illness-related staffing pressures, just curious how much more hiring.

Another question on hiring.

Aside from kind of a near term illness related.

Staffing pressures just curious how much more hiring you need to do by the end of the fiscal year.

Speaker 9: do by the end of the fiscal year. And can you talk about the level of talent you're able to find and just any quantification of that wage rate?

And can you talk about the level of talent Youre able to find and just any any quantification of that wage.

Right figure I think it was.

Speaker 9: Noted as not material, but are we talking low single digit mid single digit digit and any help on that front would be helpful

Noted is not material, but are we talking low single digit mid single digit at any help on that front would be helpful.

Speaker 3: Hey Kelly, thanks. We're not gonna quote a year to go hiring number. That's not something that we're gonna do here and provide it an outlook. Just that reference sheet to the outlook that he provided. As it relates to the wage pressure, we were pretty clear today to talk about that's not actually material. It should not be something that...

Okay. Thanks, Yeah, we're not going to quote a year ago hiring number that's not something that we're going to do Aaron provided an outlook just I'd reference you to the outlook that you provided as it relates to the wage pressure, we were pretty clear to today to talk about that's not actually material and should not be something that.

Speaker 3: It's concerning as it relates to our long-term expense algorithm. We do anticipate the summer that it'll be elevated versus our norm, but it's a amount that will be manageable in our ecosystem. We've got compelling projects that we're working on to improve driver productivity. We're purchasing a piece of material hand in one equipment that we are equipping our drivers to use on their routes that help them with managing their day. And those are the types of things that we're talking about. So again, our expense pressure that we've experienced in the most recent quarter are the things that we described with wage increase not seeing material.

It's concerning as it relates to our long term expense algorithm.

We do anticipate the summer that it will be elevated versus our norm, but it's a amount that will be manageable.

Our ecosystem, we've got compelling projects that we're working on to improve driver productivity, we're purchasing a piece of material handling equipment that we are equipping our drivers to use on their routes that helped them with managing their day and those are the types of things that we're talking about so again our expense pressure that we've experienced in the most recent quarter are the things that we described with.

Wage increase not being material.

Okay Fair enough and then Kevin you talked about this a little bit.

Speaker 9: Okay, fair enough. And then Kevin, you talked about this a little bit in terms of the contract side of the business, but I guess investors are just really wondering how the contract negotiation process is going and just in general the competitive for contracts and how, if at all,

In terms of the contract side of the business, but I guess investors are just really wondering how.

How the contract negotiation process.

And just in general the competitive for contracts and how if at all.

Speaker 9: The cost environment is being kind of factored in to contracts as you're refining those and moving forward.

The.

The cost environment as being kind of factored into contracts as you're as you're refining those and moving forward.

Hey, Kelly, it's a really good question.

Speaker 3: It can relate to a really good question. And, you know, it's obviously, I'm going to keep private between us and our key customers and suppliers, the contract negotiations that we have and the relationship discussions that we have. But I would say the following, we are appreciated even more now than ever before, tied to our size, scale, our ability to ship on time and in full, you can infer what that means, vis-a-vis contracting language, but we are appreciated even more now than ever before. There's a scarcity of supply. There is a...

Obviously, I'm going to keep private between us and our key customers and suppliers. The contract negotiations that we have and the relationship discussions that we have but I would say the following we are appreciated even more now than ever before tied to our size scale, our ability to ship on time and in full.

You can infer what that means vis vis contracting language, but we are appreciate it even more now than ever before there is a scarcity of supply.

There is a.

Speaker 3: lack of ship on time and ship in full capacity on the market right now. And we're not going to quote-unquote take advantage of that. That's not who we are as a company because we look at long-term partnerships and relationships. But we're going to have fair and balanced contracts with the people we do business with. And Cisco has appreciated more now than probably ever before. Hopefully that was clear.

Lack of ship on time and ship in full.

<unk> on the market right now and we're not going to quote unquote take advantage of that that's not who we are as a company because we look at long term partnerships and relationships, but we're going to a fair and balanced contracts with the people, we do business with and Cisco.

Cisco has depreciated more now than probably ever before hopefully that was clear.

Thank you.

Thank you I appreciate the question.

Speaker 1: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.