Q3 2024 Sysco Corp Earnings Call

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Speaker Change: Welcome to Cisco's third quarter fiscal year 2024 conference call.

Speaker Change: As a reminder, today's call is being recorded and we will now begin with opening remarks and introductions.

Speaker Change: I would now like to turn the call over to Kevin Kim Vice President of Investor Relations. Please go ahead.

Speaker Change: Okay.

Kevin J. Kim: Good morning, everyone and welcome to Cisco's third quarter fiscal year 2024 earnings call on today's call, we have Kevin Hurricanes, our president and Chief Executive Officer, and Kenny Chang, our Chief Financial Officer.

Kevin J. Kim: Before we begin please note that statements made during this presentation that state the companys or managements intentions.

Kevin J. Kim: <unk> 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 is not.

Kevin J. Kim: <unk> two risk factors contained in our annual report on Form 10-K for the year ended July one 2023, subsequent SEC filings and in the news release issued earlier this morning.

Kevin J. Kim: Copies of these materials can be found in the investors section at Sysco Dot com.

Kevin J. Kim: non-GAAP financial measures are included in the 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.

Kevin J. Kim: The discussion today, unless otherwise stated all results are compared to the same quarter in the prior year.

Kevin J. Kim: To ensure 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 Hurricane.

Kevin P. Hourican: Before I begin our call today I'd like to take a moment to acknowledge an extraordinary event that happened during our third quarter.

Kevin P. Hourican: As you may have seen on Friday March one.

Kevin P. Hourican: Our Cisco truck was involved in an accident on the Clark Memorial Bridge in Louisville, Kentucky.

Kevin P. Hourican: After the accident the Cisco truck was hanging precariously over the Ohio River.

Kevin P. Hourican: The Cisco colleague was inside that truck staring down at the river not knowing or for truck would fall into the river before she was rescued.

Speaker Change: I bring this topic up to take a moment and recognize the Louisville fire department for their heroic efforts.

Speaker Change: I, especially want to thank Bryce carbon the firefighter that risked his life to rescue our colleague from her truck that day.

Speaker Change: The heroes of the Louisville Fire Department acted with efficiency skill encourage to rescue with Cisco family member.

Speaker Change: We're thankful for their successful efforts and for all of that first responders do every day to protect our communities.

Speaker Change: I want to be very clear business results matter.

Speaker Change: The fact that the Louisville fire Department save the life of the <unk>.

Speaker Change: Member of our family deserves praise and pause.

Speaker Change: Now on to matters of business results and outcomes.

Speaker Change: Like to start with restaurant traffic data.

Speaker Change: Much has been written over the past few weeks as select restaurant names and select foodservice suppliers have announced their performance results.

Speaker Change: As you have heard in those communications and observes through credit card transaction data foot traffic to restaurants is down year over year.

Speaker Change: As we have previously indicated January restaurant traffic came out of the gate with a slow start.

Speaker Change: <unk> high single digits to prior year due to a host of factors.

Speaker Change: February and March foot traffic improved to down low single digits, but still posted a headwind for distributor case volume growth.

Speaker Change: While the trend of the quarter was one of sequential improvement we had expected a stronger recovery throughout the quarter.

Speaker Change: It is our belief that restaurant menu prices have impacted foot traffic and this is something that needs to be addressed more broadly by the industry.

Speaker Change: The industry needs to take actions to improve affordability for consumers.

Speaker Change: At Sysco, we will be focused on helping our local restaurant customers by taking the following actions.

Speaker Change: Securing the best possible cost from our suppliers in sharing in those savings with our end customers, introducing new and improved sysco brand alternatives to save restaurants time and money.

Speaker Change: Introducing menu alternatives that bring lower cost food options to restaurant operators. So that they can provide value offerings to their end consumers and.

Operator: Please stand by. Your program is about to begin. If you need assistance during today's program, please press star zero. Welcome to Sysco's third quarter fiscal year 2024 conference call. As a reminder, today's call is being recorded. We will now 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 Change: And lastly, providing restaurant operators with even more ready now and pre cut offerings to help them lower their labor costs, while food costs have moderated year over year restaurants are still facing significantly elevated labor costs.

Speaker Change: So with restaurant foot traffic data as context, I'll segue into Cisco specific business outcomes with a brief highlight of the quarter on slide five.

Kevin J. Kim: Good morning, everyone, and welcome to Sysco's third quarter fiscal year 2024 earnings call. On today's call, we have Kevin Hourican, our President and Chief Executive Officer, and Kenny Cheung, our Chief Financial Officer.

Speaker Change: We were able to convert negative foot traffic for the quarter and two positive two 7% enterprise sales growth with U S. S volumes growing two 9%.

Kevin J. Kim: Before we begin, please note that statements made during this presentation that state the company's or management's intentions, beliefs, expectations, or predictions of the future are forward-looking statements within the meaning of the Private Security Litigation Reform Act, and actual results could differ materially. 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 is not limited to risk factors contained in our annual report on Form 10-K for the year ended July 1st, 2023, subsequent SEC filings, and in the news release issued earlier this morning.

Speaker Change: Both of these figures were greater than the food away from home industry, which declined year over year in case volumes.

Speaker Change: Cisco is two 9% case growth enabled a profitable market share increase for the quarter in the U S.

Speaker Change: As I have stated previously larger broadline players are winning in the market due to size and scale advantages in sysco specialty platform is delivering outsized growth versus the specialty channel.

Speaker Change: Our local case growth was 0.4% for the quarter stronger than the overall market. However, it is an area that must improve.

Kevin J. Kim: A copy of these materials can be found in the investor section at sysco.com. Non-GAAP financial measures are included in the 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. During the discussion today, unless otherwise stated, all results are compared to the same quarter in the prior year.

Speaker Change: We're focused on making the necessary progress I will speak more to this topic in a moment.

Speaker Change: For the quarter, we increased adjusted operating income by eight 4% and adjusted EPS by six 7%.

Speaker Change: All figures were consistent with our expectations for the quarter and are well above the S&P 500 average profit growth for the quarter.

Speaker Change: As we have said many times, we have levers we can pull in our P&L, if and when volume is softer than expected.

Kevin J. Kim: To ensure 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 Hourican.

Speaker Change: I am proud of our team for taking strong actions in the quarter to manage expenses and deliver strong gross profit margins the.

Kevin P. Hourican: Before I begin our call today, I'd like to take a moment to acknowledge an extraordinary event that happened during our third quarter. As you may have seen, on Friday, March 1st, a Sysco truck was involved in an accident on the Clark Memorial Bridge in Louisville, Kentucky. After the accident, the Sysco truck was hanging precariously over the Ohio River.

Speaker Change: The agility and accountability of the leadership team enabled us to deliver our profit objectives for the quarter. Despite softer sales in case volumes.

Speaker Change: I'd like to pivot now to give you a brief update on our two biggest areas of focus local case growth and overall expense management with supply chain productivity.

Kevin P. Hourican: A Sysco colleague was inside that truck, staring down at the river, not knowing if her truck would fall into the river before she was rescued. I bring this topic up to take a moment and recognize the Louisville Fire Department for their heroic effort. I especially want to thank Bryce Carden, the firefighter that risked his life to rescue our colleague from her truck that day. The heroes of the Louisville Fire Department acted with efficiency, skill, and courage to rescue a Sysco family member.

Speaker Change: Starting with local case growth earlier this year I highlighted four actions, we are taking to improve our performance as seen on slide eight.

Speaker Change: I cautioned at the time that these actions will take time to impact the business, but we are confident in their impact.

Speaker Change: First sales force hiring.

Speaker Change: We plan to hire a net increase of approximately 400 sales professionals by the end of this year and we are meaningfully on track to hit that hiring targets.

Kevin P. Hourican: We are thankful for their successful efforts and for all that first responders do every day to protect our community. I want to be very clear, business results matter, but the fact that the Louisville Fire Department saved the life of a member of our family deserves praise and applause.

Speaker Change: The quality of the new hires to date has been strong and we are actively focused on skills development training for the new cohort. We believe this new sales staff will positively impact our 2025 growth trends.

Speaker Change: Second focus area performance management.

Speaker Change: Our sales consultants have responded to the sales leadership coaching and have increased their visit frequency to Cisco customers for the remainder of fiscal 2024 and entering fiscal 2025, we are increasing the focus of our sales staff on prospecting net new customers and a slower traffic environment, we need to incur.

Kevin P. Hourican: Now on to matters of business results and outcomes. I'd like to start with restaurant foot traffic data. Much has been written over the past few weeks as select restaurant names and select food service suppliers have announced their performance results. As you have heard in those communications and observed through credit card transaction data, foot traffic to restaurants is down year over year. As we have previously indicated, January restaurant traffic came out of the gate with a slow start, down high single digits from the prior year due to a host effect.

Speaker Change: <unk> the number of customers that we service.

Speaker Change: Third focus area sales compensation we.

Speaker Change: We are two quarters live with an updated compensation model and the feedback from our SCS has been positive.

Speaker Change: Our top performers are seeing their earnings growth and our extended team has ample opportunities to increase their earnings.

Kevin P. Hourican: February and March foot traffic improved to down low single digits but still posted a headwind for distributor case volume. While the trend of the quarter was one of sequential improvement, we had expected a stronger recovery throughout the quarter. It is our belief that restaurant menu prices have impacted foot traffic, and this is something that needs to be addressed more broadly by the industry. The industry needs to take steps to improve affordability for end consumers.

Speaker Change: Importantly retention data for our SCS is at or above historical high water Mark levels.

Speaker Change: Our updated compensation program better aligns the incentives of our sales teams with the P&L of Cisco.

Speaker Change: Fourth focus area total team selling.

Speaker Change: When a physical customer buys from broad line, plus one or more of our specialty businesses.

Speaker Change: Cisco wins and the customer wins to why.

Kevin P. Hourican: At Sysco, we will be focused on helping our local restaurant customers by taking the following action. Securing the best possible cost from our suppliers and sharing in those savings with our end customers; introducing new and improved Sysco brand alternatives to save restaurants time and money. Introducing menu alternatives that bring lower-cost food options to restaurant operators so that they can provide value offerings to their end consumers. And lastly, providing restaurant operators with even more ready-to-eat and pre-cut offerings to help them lower their labor costs. While food costs have moderated year-over-year, restaurants are still facing significantly elevated labor costs.

Speaker Change: We removed one or more competitors from the account and we are able to get more cases on a Cisco truck as a result, we can increase delivery frequency increased sales colleague coverage and invest in the customer from a buy more save more perspective.

Speaker Change: Cisco has extensive produce protein and now equipment and supplies specialty businesses are unmatched in the industry, we intend to better leverage this competitive differentiation in years to come domestically and internationally.

Speaker Change: In summary, we are confident in our ability to profitably grow our local business and we are working on the right things to deliver that growth consistently. This work is a top priority and we will receive the necessary focus and attention from our entire team.

Kevin P. Hourican: So with restaurant foot traffic data as context, I will segue into Sysco's specific business outcomes with a brief highlight of the quarter on slide five. We were able to convert negative foot traffic for the quarter into positive 2.7% enterprise sales growth, with USFS volumes growing 2.9%. Both of these figures were greater than the food away from home industry, which declined year over year in case volume.

Speaker Change: Let's transition to our supply chain and overall expense management at Cisco as seen on slide number nine.

Speaker Change: I am very pleased with the progress we are making on both fronts.

Speaker Change: Retention is greatly improving especially within our driver population. This is resulting in better productivity fewer accidents reduced product shrink and improved customer service outcomes labor.

Kevin P. Hourican: Sysco's 2.9% case growth enabled a profitable market share increase for the quarter in the U.S. As I have stated previously, larger broadband players are winning in the market due to size and scale advantages, and Sysco's specialty platform is delivering outsized growth versus the specialty channel. Our local case growth was 0.4% for the quarter, stronger than the overall market; however, it is an area that must improve. We're focused on making the necessary changes. I'll speak more about this topic in a moment.

Speaker Change: Labor productivity is improving within our warehouse and driver populations. Both departments delivered the highest productivity rates over the past few years in March.

Speaker Change: Lastly, our transportation metrics are improving as we have increased pieces per truck optimized our routing metrics and improved on time arrival rates.

Speaker Change: All told these supply chain improvements are helping us lower our cost to serve and increase our net promoter scores.

Speaker Change: Even more impressive is the work we're doing in our global support center to reduce our SG&A expenses as we delivered a year over year five 5% reduction in SG&A in the quarter.

Kevin P. Hourican: For the quarter, we increased adjusted operating income by 8.4% and adjusted EPS by 6.7%. Both figures were consistent with our expectations for the quarter and are well above the S&P 500 average profit growth for the quarter. As we have said many times, we have levers we can pull in our P&L if and when volume is softer than expected.

Speaker Change: We displayed strong discipline and management agility by leading through a softer than anticipated customer environment.

Speaker Change: We plan to stay very focused on expense management and gross profit delivery in the quarters and years to come.

Speaker Change: It is important to note that while we are very focused on expense management, we continue to invest where it matters.

Kevin P. Hourican: I'm proud of our team for taking strong actions in the quarter to manage expenses and deliver strong gross profit margins. The agility and accountability of the leadership team enabled us to deliver our profit objectives for the quarter despite softer sales in case bought. I'd like to pivot now to give you a brief update on our two biggest areas of focus, local case growth and overall expense management with supply chain productivity, starting with local case growth.

Speaker Change: Our supply chain capacity expansion projects remain on track and the investments and improvement in our customer facing technology tools continue to advance.

Speaker Change: International continues to be a bright spot for Cisco.

Speaker Change: I recently returned from a trip to Europe, and I am very pleased with the performance of our international business segment and leadership team.

Speaker Change: Our newly formed global operating model is having an impact international.

Speaker Change: The international topline grew four 5% and adjusted operating income grew 63, 4% in the quarter, both figures are better than higher than our U S business.

Kevin P. Hourican: Earlier this year, I highlighted four actions we are taking to improve our performance, as seen on slide 8. I cautioned at the time that these actions would take time to impact the business, but that we were confident in their impact. First, Salesforce hiring.

Speaker Change: As I have said international will be a top and bottomline growth catalyst for years to come at Cisco more.

Kevin P. Hourican: We plan to hire a net increase of approximately 400 sales professionals by the end of this year, and we are meaningfully on track to hit that hiring target. The quality of the new hires to date has been strong, and we are actively focused on skills development training for the new cohort. We believe this new sales staff will positively impact our 2025 growth trend. The second focus area is Performance Management. Our sales consultants have responded to the sales leadership coaching and have increased their visit frequency to Sysco Customs. For the remainder of fiscal 2024 and entering fiscal 2025, we are increasing the focus of our sales staff on prospecting net new customers.

Speaker Change: More importantly, there are no structural impediments internationally that prevent Cisco from delivering higher EBIT as a percentage of sales in each international country.

Speaker Change: Greg Bertrand our global COO has identified many examples of best practices that are being shared across the globe to help each country accelerate profit improvement progress.

Speaker Change: Proof is in the strong profit improvement results that we're delivering.

Speaker Change: At Sysco, we take a long term view in running our business focused upon profitable and disciplined new business returns.

Speaker Change: Despite the softer traffic start to calendar 2020 for.

Speaker Change: Food away from home is a growth industry as seen on slide number 10.

Kevin P. Hourican: In a slower traffic environment, we need to increase the number of customers that we serve. Third focus area, sales compensation. We are two quarters live with an updated compensation model, and the feedback from our sales representatives has been positive. Our top performers are seeing their earnings grow, and our extended team has ample opportunities to increase their earnings. Importantly, retention data for our sales representatives is at or above historical high water mark levels.

Speaker Change: Taking share from the grocery channel for 17 of the past 20 years.

Speaker Change: We believe that is a macro trend that will have staying power for years and decades to come.

Speaker Change: Internationally, the food away from home trend is following a similar pattern to the U S. Business. However that is many years behind from a penetration percentage.

Speaker Change: This fact will be a tailwind as Europe follows the food away from home percentage growth trajectory growing sales across all three day parts.

Speaker Change: Food away from home is a good business a stable business and Cisco has a diversified range of customer types that help us navigate individuals' segment choppiness, including a strong business in health care, hospitality education and business and industry.

Kevin P. Hourican: Our updated compensation program better aligns the incentives of our sales teams with the P&L of Sysco. Fourth focus area, Total Team Sellers. When a Sysco customer buys from Broadline, plus one or more of our specialty businesses, Sysco WIP. And the customer wins, too. Why?

Speaker Change: As I wrap up my prepared remarks, I will echo something I have said previously I'm.

Speaker Change: I am very optimistic about the future of Cisco we are confident in the strategic plan, we are executing against and we have a strong leadership team.

Kevin P. Hourican: We remove one or more competitors from the account, and we are able to get more cases on a Sysco truck. As a result, we can increase delivery frequency, increase sales colleague coverage, and invest in the customer from a buy more, save more perspective. Sysco's extensive produce, protein, and now equipment and supplies specialty businesses are unmatched in the industry. We intend to better leverage this competitive differentiation in years to come, domestically and internationally.

Speaker Change: Business plans don't always materialize the exact way you draw them up on paper this past quarter volume was softer than we anticipated and planned.

Speaker Change: I am proud of our team for acting with agility and delivering strong bottom line growth for the period. Despite this lower restaurant traffic.

Speaker Change: Additionally, we are committed to making progress.

Speaker Change: In local case growth and operations efficiency. These efforts will enable us to deliver solid financial outcomes.

Kevin P. Hourican: In summary, we are confident in our ability to profitably grow our local business, and we are working on the right things to deliver that growth consistently. This work is a top priority and will receive the necessary focus and attention from our entire team. Now, let's transition to our supply chain and overall expense management at Sysco, as seen on slide number nine. I'm very pleased with the progress we are making on both fronts. Retention is greatly improving, especially within our driver population.

Speaker Change: Before I turn it over to Kenny and welcome you to join US in New York City on May 20, <unk> for our next Investor day.

Speaker Change: We will go deeper into each component of our business strategy and Kenny will present, a financial algorithm for <unk> to deliver against for the next three years.

Speaker Change: We look forward to seeing many of you in New York and with that said Kenny over to you.

Kenny K. Cheung: Thank you, Kevin and good morning, everyone, let's start by building upon kevins commentary regarding the quarter.

Kenny K. Cheung: This quarter deliver strong earnings growth in a dynamic volume environment as our teams took appropriate proactive steps and delivered adjusted operating income growth of eight 4%.

Kevin P. Hourican: This is resulting in better productivity, fewer accidents, reduced product shrink, and improved customer service outcomes. Labor productivity is improving within our warehouse and driver population. Both departments delivered the highest productivity rates of the past few years in March.

Kenny K. Cheung: After the soft January start we delivered sequential volume improvements each month during the quarter.

Kevin P. Hourican: Lastly, our transportation metrics are improving as we have increased pieces per truck, optimized our routing metrics, and improved on-time arrivals. All told, these supply chain improvements are helping us lower our cost to serve and increase our net promoter score. Even more impressive is the work we are doing in our Global Support Center to reduce our SG&A expenses, as we delivered a 5.5% year-over-year reduction in SG&A in the quarter. We displayed strong discipline and management agility by leading through a softer-than-anticipated customer environment. We plan to stay very focused on expense management and gross profit delivery in the quarters and years to come.

Kenny K. Cheung: Our team is focused on improving local case volume growth with several factors that provide confidence and improving results for the remainder of FY 'twenty four and enter FY 'twenty five.

Kenny K. Cheung: Turning to margin management continued execution across our operating leverage resulted in improvements to both gross profit dollars and margins and lower structural and variable operating cost. This.

Kenny K. Cheung: This included continued progress with supply chain retention and productivity ending the quarter with our highest monthly productivity rates for the year for both delivery partners and collectors.

Kenny K. Cheung: We are also excited today to announce that we are raising our cost our target for FY 'twenty four.

Kevin P. Hourican: It is important to note that while we are very focused on expense management, we continue to invest where it matters. Our supply chain capacity expansion projects remain on track, and the investments and improvement in our customer-facing technology tools continue to advance. International business continues to be a bright spot for Sysco. I recently returned from a trip to Europe, and I'm very pleased with the performance of our international business segment and leadership team.

Kenny K. Cheung: We now expect to generate more than $120 million of cost out in FY 'twenty four based on incremental actions during the third quarter.

Kenny K. Cheung: This is especially important to offset the softer than expected near term consumer backdrop, while continuing our investments for growth.

Kenny K. Cheung: In addition to the structural cost out our plan. This year also include executing on synergies from our acquisitions this year.

Kevin P. Hourican: Our newly formed global operating model is having an impact. International top line grew 4.5%, and adjusted operating income grew 63.4% in the quarter. Gold figures are better and higher than our U.S. As I have said, international business will be a top and bottom line growth catalyst for years to come at Sysco. More importantly, there are no structural impediments internationally that prevent Sysco from delivering higher EBIT as a percentage of sales in each international country.

Kenny K. Cheung: For example.

Kenny K. Cheung: With the closing of the Edward Don transaction earlier in the fiscal year. We are already realizing early post acquisition synergies that are in line with our expectations with more to come.

Kenny K. Cheung: In total our actions resulted in positive leverage with gross profit growing at a faster rate than operating expenses for the sixth consecutive quarter as we delivered sequential improvement in cost per piece throughout the quarter.

Kenny K. Cheung: Despite the current macro environment, we are confident in our ability to efficiently flex operating expense the volume performance and achieved bottom line results.

Kevin P. Hourican: Greg Bertrand, our global COO, has identified many examples of best practices that are being shared across the globe to help each country accelerate profit improvement progress. The proof is in the strong profit improvement results that we are delivering. At Sysco, we take a long-term view in running our business, focused upon profitable and disciplined business returns, despite the softer traffic start to calendar 2024.

Kenny K. Cheung: Our continued balanced and consistent approach with capital allocation priorities also resulted in $753 million returned back to shareholders via repurchases and dividends.

Kenny K. Cheung: Our Q3 profit performance combined disciplined use of our operational levers.

Kevin P. Hourican: Food away from home is a growth industry, as seen on slide number, taking share from The Grocery Channel for 17 of the past 20 years. We believe that is a macro trend that will have staying power for years and decades. Internationally, the food away from home trend is following a similar pattern to the U.S. business, but it is many years behind in terms of penetration percentage.

Kenny K. Cheung: We remain focused on the long term along with more consistent and normalized demand in future periods.

Kenny K. Cheung: As we navigate through transitory industry trends, our size and scale advantages and operating discipline deliver strong bottom line results. This quarter, while we continue to gain market share.

Kevin P. Hourican: This fact will be a tailwind as Europe follows the food away from home percentage growth trajectory, growing sales across all three day parks. Food away from home is a good business.

Kenny K. Cheung: As the market normalizes, we will be able to use the power of our P&L to continue to deliver accretive results.

Kenny K. Cheung: As we look to finish the year strong we remain focused on delivering our annual EPS guidance, while also executing on planned share repurchases and dividends in Q4.

Kevin P. Hourican: And Sysco has a diversified range of customer types that help us navigate individual segment shopping, including a strong business in healthcare, hospitality, education, and business and industry. As I wrap up my prepared remarks, I will echo something I have said previously. I'm very optimistic about the future of Sysco. We are confident in the strategic plan we are executing against, and we have strong leadership. Business plans don't always materialize the exact way you draw them up on paper. This past quarter, volume was softer than we anticipated in our plan.

Kenny K. Cheung: Now turning to a summary of our reported results for the quarter starting on slide 13.

Kenny K. Cheung: For the third quarter, our enterprise sales grew two 7% driven by U S foodservice growing three 4% and international growing four 5%, partially offset by Sigma decreasing three 5%.

Kenny K. Cheung: Enterprises inflation was one 9%. Additionally, U S. Broadline inflation was one 2% and our international segment was up 4%. We expect this normal rates of inflation in line with historical averages going forward, which bodes well for the industry.

Kevin P. Hourican: I am proud of our team for acting with agility and delivering strong bottom-line growth for the period, despite the slower restaurant traffic. Additionally, we are committed to making progress on local case growth and operations efficiency. These efforts will enable us to deliver solid financial results. Before I turn it over to Kenny, I welcome you to join us in New York City on May 22nd for our next Investor Day. We will go deeper into each component of our business strategy, and Kenny will present a financial algorithm for Sysco to deliver on for the next three years. We look forward to seeing many of you in New York. And with that said, Kenny, over to you.

Kenny K. Cheung: The total U S foodservice volume increased three 9% and local volume increased 0.4%.

Kenny K. Cheung: Additionally, international local volumes were up over 4%, adding to our outsized international growth.

Kenny K. Cheung: As previously outlined we have plans in place to drive more positive consistent local volume performance.

Kenny K. Cheung: Thank you, Kevin, and good morning, everyone. Let's start by building upon Kevin's commentary regarding the quarter. This quarter delivers strong earnings growth in a dynamic volume environment as our teams took appropriate proactive steps and delivered adjusted operating income growth of 8.4%. After the soft January start, we delivered sequential volume improvements each month during the quarter. Our team is focused on improving local case volume growth with several factors that provide confidence in improving results for the remainder of FY24 and into FY25.

Kenny K. Cheung: Please note volume reporting now includes dawn following its first full quarter under Cisco's leadership.

Kenny K. Cheung: One positive impacted U S foodservice volumes by three 7% and local volumes by one 6%.

Kenny K. Cheung: We deliver expansion in both GP dollars and margins as we produced $3 6 billion in gross profit.

Kenny K. Cheung: Profit up five 2% and gross margin improved to 18, 6% an increase of 44 bps.

Kenny K. Cheung: This improvement during the third quarter reflected our ability to effectively manage product cost fluctuation through tight margin management, driven by incremental progress from our strategic sourcing efforts disciplined and rational pricing.

Kenny K. Cheung: Turning to margin management, continued execution across our operating levers resulted in improvements to both gross profit dollars and margins and lower structural and bearable operating costs. This included continued progress with supply chain retention and productivity, ending the quarter with our highest monthly productivity rate for the year for both delivery partners and selectors. We are also excited today to announce that we are raising our cost-out target for FY24. We now expect to generate more than $120 million of cost-outs in FY24 based on incremental actions during the third quarter.

Kenny K. Cheung: Increased mix of specialty as well as improved penetration rates from Sysco brand products within local which increased three bps to 46, 5%.

Kenny K. Cheung: Sysco brand continues to offer superior customer value and we expect positive momentum going forward.

Kenny K. Cheung: Overall, adjusted operating expenses were $2 $8 billion for the quarter or 14, 5% of sales expenses.

Kenny K. Cheung: <unk> expenses during the quarter included benefits from continued improvements with retention and productivity. Kevin mentioned earlier. In addition to our benefits from a variable labor planning tool and cost out commitments.

Kenny K. Cheung: This is especially important to offset the softer than expected near-term consumer backdrop while continuing our investments for growth. In addition to the structural costiles, our plans this year also include executing on synergies from acquisitions this year.

Kenny K. Cheung: Based on incremental actions during Q3, we now expect to generate over $120 million of savings in FY 'twenty. Four we recently reduced 500 roles to reduce expenses and fund incremental head count and higher growth areas like specialty.

Kenny K. Cheung: With the closing of the Edward-Don transaction earlier in the fiscal year, we are already realizing early post-acquisition synergies that are in line with our expectations, with more to come. In total, our actions resulted in positive leverage with gross profit growing at a faster rate than operating expenses for the sixth consecutive quarter as we delivered sequential improvement and cost per piece throughout the quarter. Despite the current macro environment, we are confident in our ability to efficiently flex operating expense to volume performance and achieve bottom-line results.

Kenny K. Cheung: The residual savings were also used to offset a softer current macro backdrop, which is a proof point of the agility of our business and dynamic levers across the P&L.

Kenny K. Cheung: These Q3 actions position us well to enter FY 'twenty five if we're delivering incremental cost outs and operating leverage for future years.

Kenny K. Cheung: We continue to be encouraged with the progress of our international segment with adjusted operating income growing 63, 4% for the third quarter.

Kenny K. Cheung: This is a continuation of the robust growth and positive momentum in this segment over the past three years.

Kenny K. Cheung: Our continued balanced and consistent approach with capital allocation priorities also resulted in $753 million returned to shareholders via repurchases and dividends. Our Q3 profit performance combined the disciplined use of our operational levers. We remain focused on the long term, along with more consistent and normalized demand in future periods.

Kenny K. Cheung: Q3, adjusted operating income grew eight 4% to $799 million for the enterprise.

Kenny K. Cheung: For the quarter adjusted EBITDA was $977 million up eight 5%.

Kenny K. Cheung: Turning to the balance sheet on slide 17, we ended the quarter at a 281 times net debt leverage ratio and we are confident we will end the year within our target range.

Kenny K. Cheung: As we navigate through transitory industry trends, our size and skill advantages in operating discipline deliver strong bottom-line results this quarter while we continue to gain market share. As the market normalizes, we will be able to use the power of our P&L to continue to deliver accretive results. As we look to finish the year strong, we remain focused on delivering our annual EPS guidance while also executing on planned share repurchases and dividends in Q4.

Kenny K. Cheung: We ended the quarter with $11 $6 billion in net debt and approximately $3 $1 billion in total liquidity of approximately 96% of our debt is fixed with a floating component offset our cash reserves are.

Kenny K. Cheung: Our debt as well later in our strong investment grade credit rating is a competitive advantage for us.

Kenny K. Cheung: Turning to our cash flow on slide 18 year to date, we generated $1 4 billion in operating cash flow and $864 million and free cash flow the.

Kenny K. Cheung: Now turning to a summary of our reported results for the quarter, starting on slide 13. For the third quarter, our enterprise sales grew 2.7%, driven by U.S. Food Service growing 3.4% and international growing 4.5%, partially offset by Sigma decreasing 3.5%. Enterprise inflation was 1.9%.

Kenny K. Cheung: The decline in free cash flow year to date was driven by timing of working capital and the Easter calendar impact along with a planned step up in cash taxes.

Kenny K. Cheung: Our cash flow is driven by continued strong conversion rates from EBITDA to operating cash and free cash flow and importantly, we remain on track to grow free cash flow for the full year FY 'twenty four.

Kenny K. Cheung: Additionally, U.S. broad line inflation was 1.2%, and our international segment was up 4%. We expect this normal rate of inflation in line with historical averages going forward, which bodes well for the industry. The total U.S. food service volume increased 2.9%, and local volume increased 0.4%.

Kenny K. Cheung: Our strong financial position enabled us to return $753 million to shareholders this quarter via share repurchases and dividends.

Kenny K. Cheung: Turning to FY 'twenty for guidance, we are reiterating adjusted EPS of $4 20.

Kenny K. Cheung: Additionally, international local volumes were up over 4%, adding to our outside international growth. As previously outlined, we have plans in place to drive more positive, consistent local volume performance. Please note, volume reporting now includes Don, following its first full quarter under Sysco's leadership. Don Positive impacted U.S. Food Service volumes by 2.7% and local volumes by 1.6%.

So $4 40.

Kenny K. Cheung: Our guidance at the midpoint assumes approximately 7% EPS growth on a year over year basis, factoring and the softer overall marketplace. We also expect to end the year with net sales to be approximately $79 billion.

Kenny K. Cheung: Additionally, we remain confident in delivering increased free cash flow by year end off of a record performance last year.

Kenny K. Cheung: We also plan to remain diligent with operating discipline for the fiscal year and beyond for the year. We also remain on target to return over $2 $2 $5 billion back to shareholders.

Kenny K. Cheung: We delivered expansion in both GP dollars and margins as we produced $3.6 billion in gross profit, up 5.2%, and gross margin improved to 18.6%, an increase of 44 bits. This improvement during the third quarter reflected our ability to effectively manage product cost fluctuation through tight margin management, driven by incremental progress from our strategic sourcing efforts, and disciplined and rational pricing. Increased mix of specialty, as well as improved penetration rates from Sysco brand products within the local market, which increased three BIPs to 46.5%.

Kenny K. Cheung: Looking ahead to the future fiscal years, we also wanted to highlight and anticipate a step up in our FY 'twenty five tax rate due to the global minimum tax rate rule changes more details will be shared in our Q4 earnings call.

Kenny K. Cheung: Furthermore, we want you to be aware that interest expense will step up from FY 'twenty four to fund our capital allocation priorities, while continuing to operate within our leverage ratio of two five times to 275 times.

Kenny K. Cheung: Looking ahead to Q4 and beyond our focus on high <unk> IC investments back into the business will be balanced and discipline supporting our industry leading margin profile. This includes operational discipline with cost out delivery and margin management. This is in addition to our strong investment in <unk>.

Kenny K. Cheung: The Sysco brand continues to offer superior customer value, and we expect positive momentum going forward. Overall, adjusted operating expenses were $2.8 billion for the quarter, or 14.5% of sales. Expenses during the quarter included benefits from continued improvements in retention and productivity, as Kevin mentioned earlier, in addition to our benefits from a variable labor planning tool and cost outcome. Based on incremental actions during Q3, we now expect to generate over $120 million of savings in FY24. We recently reduced 500 positions to reduce expenses and fund incremental headcount in higher growth areas like special needs.

Kenny K. Cheung: <unk> rated balance sheet, our size and scale advantages are meaningful positions of strength for the long term, we have successfully demonstrated our performance and a variety of operating environments in our company's long history.

Kenny K. Cheung: That remains true today, as we expect to win market share profitably and continue to generate cash with strong conversion rates ultimately, beating our plans to grow and reward our shareholders on the forward.

Kenny K. Cheung: Before I conclude the call I Echo Kevin's invitation to join US for Cisco's Investor Day on May 22nd if you're interested in attending please reach out to Kevin Ken and our Investor Relations team. Please note. This meeting will also be a webcast. We hope you can join either in person or virtually.

Kenny K. Cheung: The residual savings were also used to offset a softer current macro backdrop, which is a proof point of the agility of our business and dynamic levers across the P&L. These Q3 actions position us well to enter FY25 if we're delivering incremental cost outs and operating leverage for future years. We continue to be encouraged by the progress of our international segment, with adjusted operating income growing 63.4% for the third quarter. This is a continuation of the robust growth and positive momentum in this segment over the past three years.

Kenny K. Cheung: Thank you for your time today I'll now pass the call back to Kevin.

Kevin: Thank you Kenny.

Kenny K. Cheung: I'd like to turn to one more important matter before we move to a question and answer session. This morning.

Kenny K. Cheung: As you may have seen earlier today, we announced that Ed Shirley has stepped down as Cisco as chairman of the board for personal health reasons.

Speaker Change: As a result of its decision effective immediately I will serve as chair of the board and Chief Executive Officer.

Kenny K. Cheung: Q3 adjusted operating income increased 8.4% to $799 million for the enterprise. For the quarter, adjusted EBITDA was $977 million, up 8.5%. Turning to the balance sheet on slide 17, we ended the quarter at a 2.81 times net debt leverage ratio, and we are confident we will end the year within our target range. We ended the quarter with $11.6 billion in net debt and approximately $3.1 billion in total liquidity.

Kenny K. Cheung: Im honored by disappointment and I look forward to serving our shareholders our customers and our colleagues and this expanded responsibilities.

Speaker Change: I want to thank the full board for their continued support and guidance.

Kenny K. Cheung: More importantly, I'd like to take a moment to recognize and thank Ed Shirley for his tremendous impact on Cisco over his eight years of exceptional service on our board.

Kenny K. Cheung: When I joined the company in February of 2020 was our executive chair.

Speaker Change: I spent countless hours together building what became a recipe for growth strategy and of course navigating the early insignificant impacts of Covid on the food away from home sector.

Kenny K. Cheung: Approximately 96% of our debt is fixed, but the floating component offsets our cash reserve. Our debt is well-laddered, and our strong investment grade credit rating is a competitive advantage for us. Turning to our cash flow on slide 18, year-to-date, we generated $1.4 billion in operating cash flow and $864 million in free cash flow. The decline in free cash flow year-to-date was driven by timing of working capital and the Easter calendar impact, along with a planned step-up in cash taxes.

Kenny K. Cheung: Edge wisdom guidance and substantial business experience were invaluable to me and those early innings at the company.

Kenny K. Cheung: A year later and transitioned into the independent chair of the board leadership position.

Kenny K. Cheung: He continued to provide substantial and helpful feedback and guidance to me the board and the entire management team from that leadership position.

Kenny K. Cheung: We are a better and more resilient company due to impacts and leadership.

Kenny K. Cheung: Our cash flow is driven by continued strong conversion rates from EBITDA to operating cash and free cash flow. And importantly, we remain on track to grow free cash flow for the full year FY24. Our strong financial position enabled us to return $753 million to shareholders this quarter via share repurchases and dividends. Turning to FY24 guidance, we are reiterating adjusted EPS of $4.20 to $4.40. Our guidance at the midpoint assumes approximately 7% EPS growth on a year-over-year basis. Factoring in the overall software marketplace, we also expect to end the year with net sales of approximately $79 billion.

Speaker Change: On behalf of the entire board I want to thank Ed for his friendship.

Kenny K. Cheung: His mentorship and for his dedication to our company he will be greatly missed.

Speaker Change: With that operator, we are now ready for questions.

Speaker Change: Thank you at this time, if you would like to ask a question. Please press the star and one on your telephone keypad now.

Kenny K. Cheung: You may remove yourself from the queue at any time by pressing star two and once again that is star one if you'd like to ask a question.

Speaker Change: We'll pause for just a moment to allow questions to queue.

Kenny K. Cheung: And it appears we do have our first question from Alex Slagle.

Kenny K. Cheung: With Jefferies.

Speaker Change: Alright. Thanks, Good morning, I guess, maybe just start off again, a bit further on what youre seeing in the industry and the demand environment.

Kenny K. Cheung: Additionally, we remain confident in delivering increased free cash flow by year-end off of a record performance last year. We also plan to remain diligent with operating discipline for the fiscal year and beyond. For the year, we also remain on target to return over $2.25 billion back to shareholders. Looking ahead to the future fiscal years, we also wanted to highlight and anticipate a step up in our FY25 tax rate due to the Global Minimum Tax Rate Rule change.

Kenny K. Cheung: In the.

Kenny K. Cheung: Early April if anything just I mean, it seems like a continuation of soft traffic environment in restaurants.

Kenny K. Cheung: Perhaps the more divergence between the operators that are finding ways to be successful highlighting value versus maybe caught flat footed. So interested in kind of in your view.

Kenny K. Cheung: Given such broad exposure and what you've seen if any divergence between chains and independents are full service limited service.

Kenny K. Cheung: And then maybe just a little bit on given your strength in private label and all the offerings you have what that means for cisco's opportunity to gain more share in this kind of environment.

Kenny K. Cheung: More details will be shared in our Q4 earnings call. Furthermore, we want you to be aware that interest expense will step up from FY24 to fund our capital allocation priorities while continuing to operate within our leverage ratio of 2.5 times to 2.75 times. Looking ahead to Q4 and beyond, our focus on high ROIC investments back into the business will be balanced and disciplined, supporting our industry-leading margin profile. This includes operational discipline with cost of delivery and margin management.

Kenny K. Cheung: Okay. Good morning, Alex It's Kevin that's a good question and a loaded question, so I'm going to try to unpack it to a couple of points just start with the headline which is traffic to restaurants down year over year in the quarter, starting with that tough January start and sequentially improving throughout the quarter. It is important to note that traffic is what drivers.

Kenny K. Cheung: Distributor case volume shipments not the same store sales that they post and their revenues traffic is the more important metrics for us Cisco did gained shares in total versus the food away from home sector in aggregate in the quarter, but the volume was less than what we had anticipated. Therefore, the actions that we took in.

Kenny K. Cheung: This is in addition to our strong investment grade rated balance. Our size and scale advantages are meaningful positions of strength for the long term. We have successfully demonstrated our performance and a variety of operating environments in our company's long history. That remains true today as we expect to win market share profitably and continue to generate cash with strong conversion rates, ultimately meeting our plans to grow and reward our shareholders on the fold.

Kenny K. Cheung: <unk> spoke about and we're pleased that we delivered our profit expectations for the quarter in spite of those overall market conditions, what we're seeing in the aggregate data tied to what your second part of your question was.

Kenny K. Cheung: Performance divergence by type of restaurant, operator, it's more based on income strata than restaurant type.

Kenny K. Cheung: Customers that serve risk.

Kenny K. Cheung: Before I conclude the call, I echo Kevin's invitation to join us for Sysco's Investor Day on May 22nd. If you are interested in attending, please reach out to Kevin Kim and our Investor Relations team. Please note, this meeting will also be webcast. We hope you can join either in person or virtually. Thank you for your time today. I'll now pass the call back to Kevin.

Kenny K. Cheung: Our restaurant highest white tablecloth, although we're down to <unk>, our hardest hit sector right. Now is <unk> you can look at our Sigma volumes, our Sigma volumes were down roughly three 5% for the quarter, which is an indication of that point.

Kevin: Those that are succeeding or those that either have a differentiated value prop <unk>, great product offering into our digital app, that's rewarding loyalty and great operators can be successful regardless of environmental conditions as evidenced by the quarter that we just posted an overall softer environment, but yet we were able to deliver our profit expectations and take share.

Kevin P. Hourican: I'd like to turn to one more important matter before we move to our question and answer session this evening. As you may have seen earlier today, we announced that Ed Shirley has stepped down as Sysco's Chairman of the Board for Personal Health. As a result of Ed's decision, effective immediately, I will serve as chair of the board and chief executive officer. I am honored by this appointment, and I look forward to serving our shareholders, our customers, and our colleagues in this expanded role. I want to thank the full board for their continued support and guidance.

Kevin P. Hourican: Profitably during the quarter, what we're specifically doing about that.

Kevin P. Hourican: We're working hard to lower food cost to restaurants. So they can in fact lower <unk>.

Kevin P. Hourican: And new prices I do want to be clear about that I believe restaurants need to lower menu prices.

Kevin P. Hourican: With our negotiations with our suppliers, we need to work hard to create value by lowering cost inbound to Cisco and then share pass on those savings to our end consumers and we're fully prepared to do that and to execute that with efficiency.

Kevin P. Hourican: More importantly, I'd like to take a moment to recognize and thank Ed Shirley for his tremendous impact on Sysco over his eight years of exceptional service on our board. When I joined the company in February of 2020, Ed was our executive chairperson. Ed and I spent countless hours together building what became our recipe for growth strategy and, of course, navigating the early and significant impacts of COVID on the food away from home sector.

Kevin P. Hourican: Number one number two is we can provide sysco brand offering at an even more extensive level. We did make progress in local case penetration with Sysco brand and we think we can accelerate that we're doing a new packaging overhaul. If we're doing our brand tier brand hierarchy overhaul.

Kevin P. Hourican: That work takes time, but we are bullish on sysco brand, especially within the local segment and as I said in my prepared remarks, my last comment I'll toss to Kenny for any comments you'd like to make on April.

Kevin P. Hourican: Ed's wisdom, guidance, and substantial business experience were invaluable to me in those early innings at the company. Roughly a year later, Ed transitioned into the independent chair of the board leadership position. He continued to provide substantial and helpful feedback and guidance to me, the board, and the entire management team from that leadership position. We are a better and more resilient company due to his impact and leadership. On behalf of the entire board, I want to thank Ed for his friendship, his mentorship, and for his dedication to our company. He will be greatly missed. With that, Operator, we are now ready for questions.

Kevin P. Hourican: We can provide our customers with value added solutions with our specialty protein business with our specialty produce business. We can do a lot of the back office cutting preparing staging your product delivered to the restaurant, which takes labor out of the kitchen, because while food costs have moderated labor costs at restaurants have not moderated and we.

Kevin P. Hourican: We're seeing upticks from our customers ordering we call value added services products, which tend to come at a higher margin for Cisco. So it's good for our P&L, but it really helps the restaurant take labor cost out of their model. So Kenny I will talk to you for any come on in April sure. Thanks, Kevin Hi, Alex This is Kenny.

Kevin P. Hourican: The growth rates from March is carrying into April. So if you take a step back and bifurcate Q3 performance as Kevin noted January was negative growth, mostly driven by weather.

Operator: Thank you. At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad now. You may remove yourself from the queue at any time by pressing star 2, and once again that is star and 1 if you'd like to ask a question. We'll pause for just a moment to allow questions to queue. And it appears we do have our first question from Alex Slagle.

Alexander Russell Slagle: Alright, and March were positive with sequential improvement so that growth from March is carrying into April.

Alexander Russell Slagle: As I mentioned in his prepared remarks, we have initiatives in place to improve volume and we have cost levers in place as well to further enhanced profit margins as a company. We are confident we can operate in any environment as recruitment in Q3 and this year as we had this inflation deflation to inflationary.

Alexander Russell Slagle: All right, thanks. Good morning.

Alexander Russell Slagle: What we're seeing at a spot moment so overall.

Alexander Russell Slagle: Softer macro backdrop, we are so confident with our guidance.

Alexander Russell Slagle: Thanks, and then a follow up on the private label and you mentioned the opportunity in local but it would seem like there is still some opportunity on the national side, I know I know theres some differences there but.

Alexander Russell Slagle: Yes, maybe just start off, dig in a bit further on what you're seeing in the industry and the demand environment and in early April. If anything, just I mean, it seems like a continuation of the soft traffic environment and restaurants, perhaps some more divergence between the operators that are finding ways to be successful highlighting value versus maybe caught a bit flat footed. So, interested in kind of your view, given such broad exposure, what you've seen, if there is any divergence between chains and independence, or full service, limited service, and, And maybe just a little bit on giving your strength in private label and all the offerings you have, what that means for Sysco's opportunity to gain more share in this kind of environment.

Alexander Russell Slagle: Kind of curious how you described the opportunity in terms of maybe the magnitude and the timeframe, where maybe you could get some private label gains in that side of your business.

Alexander Russell Slagle: They can start to move the needle.

Speaker Change: Yes, Alex Good question. The primary focus is in local because it's where the end restaurant operator.

Kevin P. Hourican: Okay, good morning, Alex. It's Kevin.

Kevin: <unk>, even more value from Cisco, where we can provide them a tremendous value for their menu at great quality and we are very focused on making continued progress there national trickier. It's more complicated as you know large large restaurants changed negotiated directly with suppliers for proprietary products that are on their menu that are unique to them.

Kevin P. Hourican: That's a good question and a loaded question. So I'm going to try to unpack it to a couple of points. Just to start with the headline, which is, you know, traffic to restaurants down year over year in the quarter, starting with that, you know, tough January start and sequentially improving throughout the quarter. You know, it's important to note that traffic is what drives distributor case volume shipments, not the same store sales that, you know, they post in their revenues.

Kevin P. Hourican: So, you know, traffic is the more important of metrics for us. Sysco did gain share in total versus the fruit away from home sector in aggregate in the quarter, but the volume was less than what we had anticipated.

Kevin P. Hourican: And then we provided distribution cold storage Tri temperature truck delivery on time and in full service for them and so it's a little bit different model, we can make progress on national it'll be a slower growing and you won't see step change increases in penetration in national for the reasons that I. Just described with that said we have a change management.

Kevin P. Hourican: Therefore, the actions that we took and spoke about, and we're pleased that we delivered our profit expectations for the quarter in spite of those overall market conditions. Now, what we're seeing in the aggregate data tied to your second part of your question was, you know, performance divergence by type of restaurant operator, but it's more based on income strata than, you know, restaurant type.

Kevin P. Hourican: <unk>, which can help supervised or we can provide options to those large national customers to really step choice you have your vendor direct program that you can negotiate this is a program Cisco can offer you that is comparable or better and we work to provide that penetration opportunities. So we can make progress on national the bigger focus is.

Kevin P. Hourican: We have customers that serve, you know, the highest-end white tablecloth restaurants all the way down to QSR. Our hardest-hit sector right now is QSR. You can look at our Sigma volumes.

Kevin P. Hourican: The local customer I think one thing to add on that pieces as Kevin said, we will make further progress I think it's important to call out that we are continuing to improve profitability by leveraging strategic sourcing on both Cisco private label and <unk> brands, which is one of the reasons why <unk> I would like to leverage from sales to gross profit.

Kevin P. Hourican: Our Sigma volumes were down roughly three and a half percent for the quarter, which is an indication of that point. And those that are succeeding are those that either have a differentiated value proposition and or a great product offering and or a digital app that's rewarding loyalty. And, you know, great operators can be successful regardless of environmental conditions, as evidenced by the quarter that we just posted in an overall softer environment.

Kevin P. Hourican: And Victoria, our Chief merchant is going to talk more about the sysco brand evolution at our Investor day.

Kevin P. Hourican: On May 20 <unk>.

Speaker Change: Alex Thank you for the questions lets go ahead, great. Thanks.

Kevin P. Hourican: But yet, you know, we were able to deliver our profit expectations and take share profitably during the quarter. What we're specifically doing about that is we're working hard to lower food costs for restaurants so they can, in fact, lower menu prices. I do want to be clear about that.

Speaker Change: Thank you.

Kevin P. Hourican: And we have our next question from John <unk> with Guggenheim Securities.

Kevin P. Hourican: Kevin start with.

Kevin P. Hourican: The expansion of the sales force that looks like a 5% or so growth rate.

Kevin P. Hourican: How do you look at that as a catch up versus something Thats sustainable and then your thought on what that.

Kevin P. Hourican: I believe restaurants need to lower menu prices. It starts with our negotiations with our suppliers. We need to work hard to create value by lowering costs inbound to Cisco and then pass on those savings to our end consumers. And we're fully prepared to do that and to execute that with efficiency, number one.

Kevin P. Hourican: This thought right could you take that and maybe multiply by 1% and a half to get local case growth I'm not sure if that still applies but.

Kevin P. Hourican: How do you think that works through the P&L and I guess you'd say, it's almost all going to be new accounts not not existing growth.

Kevin P. Hourican: Number two is we can provide Cisco brand offerings at an even more expensive level. We did make progress in local case penetration with the Cisco brand, and we think we can accelerate that. We're doing a new packaging overhaul. We're doing a brand tier, and brand hierarchy overhaul. That work takes time.

Speaker Change: Yes, John I. Appreciate the question, let's start with you I did today for the first time actually size the price from a head count growth perspective in fiscal 'twenty four to be crystal clear for everyone is listen I mean, thats a net number so theres enforce churn that occurs within that population and this is a net increase in our head count by year end of 400, we're on.

Kevin P. Hourican: But we're bullish on the Cisco brand, especially within the local segment. And as I said in my prepared remarks, my last comment, and I'll toss it to Kenny for any comments he'd like to make on April. You know, we can provide our customers with value-added solutions with our specialty protein business and our specialty produce business. We can do a lot of the back office cutting, preparing, and staging of product delivered to the restaurant, which takes the labor out of the kitchen.

Kenny: <unk> to be able to hit that target.

Kenny: It's the start John of what will be continued forward progress on hiring today I'm not going to.

Kenny: <unk> disclosed the hiring target for fiscal 'twenty, five but again, that's something that we can talk about at our Investor day, and we do intend to talk about at our Investor Day for Q4, and frankly for all of fiscal 'twenty 'twenty. Four this is an investment as in.

Kenny: Below water investment I mean, the expense greater than the revenue and profit that they are contributing but we are confident that will continue in Q4, it's an investment in Q4, they will positively impact our fiscal 2025 financial outcomes with a positive return on investment and again, we will talk more about the <unk>.

Kevin P. Hourican: Because while food costs have moderated, labor costs at restaurants have not moderated, and we're seeing upticks from our customers ordering what we call value-added services products, which tend to come at a higher margin for Cisco. So it's good for our P&L, but it really helps the restaurants take labor costs out of their models. So, Kenny, I'll toss it to you for any comment on April. Sure.

Kenny K. Cheung: The growth rate from March is carrying into April. So if you take a step back and bifurcate Q3 performance, as Kevin noted, January was negative growth, mostly driven by weather. February and March were positive, with sequential improvement, so that growth rate from March is carrying into April. As Kevin mentioned in his prepared remarks, we have initiatives in place to improve volume, and we have cost levers in place as well to further enhance profit margins.

Kenny K. Cheung: <unk> of that and how it contributes to our sales growth targets at our Investor day.

Speaker Change: Okay, and then maybe as a follow up you talked about affordability.

Kenny K. Cheung: Can you maybe speak to your thoughts on.

Kenny K. Cheung: Elasticity and how do you work with I know you talked about private brand and getting your costs down, but obviously you can take your cost down and you have to get your customers to pass that through to their end customer.

Kenny K. Cheung: As a company, we are confident we can operate in any environment, as we've proven in Q3 and this year, as we had this inflation, deflation, and inflationary pressures, which is what we're seeing at the moment. So overall, with the software macro backdrop, we are still confident with our guidance.

Kenny K. Cheung: Your confidence in that occurring and then when you think about elasticity.

Kenny K. Cheung: Your your customers.

Kenny K. Cheung: How do you how do you assess that right and what has to be done with affordability to move the needle.

Speaker Change: Yes, it's a really good question and I will impact the first part second part first part.

Kenny K. Cheung: Thanks. And then a follow up on the private label, and you mentioned the opportunity and the local, but it would seem like there's still some opportunity on the national side. I know, I know there are some differences there.

Kenny K. Cheung: Listen, we admire and respect trust, our customers and I want to be clear they are running their business to the best of their abilities, but what we are seeing John is we are in fact, providing more value year over year and restaurant operators and we're not seeing that show up on menu prices.

Kenny K. Cheung: That's the main point and I believe that menu prices need to come down for foot traffic to grow and I believe restaurant operators are going to become more aware of that reality as time progresses, because as you know benefiting from those menu price increases at this point in time can be fair to the restaurant operator their overall operating costs have gone up their labor costs are up significantly.

Alexander Russell Slagle: But I'm kind of curious how you would describe the opportunity in terms of maybe the magnitude or the timeframe of where maybe you could get some private label gains on that side of your business that could start to move the needle.

Kevin P. Hourican: Yeah, Alex, good question. The primary focus is local because it's where the end restaurant operator sees even more value from Sysco, where we can provide them tremendous value for their menu at great quality, and we are very focused on making continued progress there. National is trickier. It's more complicated.

Kevin P. Hourican: Over the last three years and some of that menu price taking has been necessary to offset that wage increase, especially in a state like California. So you understand how dynamic that is in there, making the best choices for their individual business P&L, while we need to focus on at Cisco is what we can control what we can control is the price of oil.

Kevin P. Hourican: As you know, large, large restaurant chains negotiate directly with suppliers for proprietary products that are on their menus that are unique to them, and then we provide distribution, cold storage, tri-temperature truck delivery on time and in full service for them. So it's a little bit different model.

Kevin P. Hourican: Pay for the product that we purchase and the prices that we offer that product to our customers. So that we can provide value to them. So they will choose Cisco and choose us.

Kevin P. Hourican: We can make progress on National, but it'll be slower going, and you won't see step change increases in penetration on National for the reasons that I just described. With that said, we have a change management function, which Kenny helped supervise. We can provide options to those large national customers so they at least have choice. You know, you have your vendor direct program that you can negotiate. This is a program Sysco can offer you that's comparable or better, and we work to provide that penetration opportunity. So we can make progress on National. The bigger focus is on the local customer.

Kevin P. Hourican: At an increased rate overtime because value.

Kevin P. Hourican: Does matter meaningfully and this environmental condition, which segue to the second part of your question, which is price elasticity.

Kevin P. Hourican: We've gotten much better at this over the last few years tied to our strategic pricing software.

Kevin P. Hourican: It is very robust we know at the customer level elasticity at the item level and we price accordingly, John what we're seeing to serve some color perspective, and this will not shock you restaurant operators need for really sharp prices on their key commodities is in.

Kevin P. Hourican: I think one thing to add to that piece is, as Kevin said, we will make further progress. I think it's important to call out that we are continuing to improve profitability by leveraging strategic sourcing on both Sysco private label and non-Sysco brands, which is one of the reasons why Alex you're seeing a nice leverage from sales to gross profit.

Kevin P. Hourican: <unk> right now so a tremendous focus on let's call. It their top 10 items and we need to be right on price on those top 10 items and it's intense out there right now the need for a restaurant operators to lower their costs for those highest volume skus. So we need to be sharp there, we need to be sharp and we need to be right on price on those items that means relative to the market.

Kenny K. Cheung: And Victoria, our Chief Merchant, is going to talk more about the Sysco brand evolution at our Investor Day on May 22nd. Alex, thank you for the questions.

Kevin J. Kim: And we have our next question from John Heinbockel with Guggenheim Securities.

Kevin J. Kim: Additive.

Kevin J. Kim: And what that means is there's a long tail of product and the long tail product is more inelastic.

John Edward Heinbockel: Kevin, start with the expansion of the sales force. That looks like a 5% or so growth rate. How do you look at that as a catch-up versus something that's sustainable? And then your thought on what that, you know, there's this thought, right, that you take that and maybe multiply by a percent and a half to get local case growth. I'm not sure if that still applies, but how do you think that works in the P&L? And I guess you'd say it's almost all going to be new accounts, not existing growth.

John Edward Heinbockel: And we will never take advantage, but we have an opportunity to be a little higher in price, perhaps on some of those inelastic skus to fund the sharper prices in the commodity space and that's something that we're working on that's something that we leverage our technology to deploy the <unk>.

John Edward Heinbockel: Thing that we need to get better at from a pricing perspective is the ability to react in the moment at the individual customer level.

John Edward Heinbockel: If we have a competitor in the account who wants to win business from our customer we need to enable our sales reps to make timely decisions to respond in the moment and that's something we're working to improve upon and I am confident we can improve in that regard.

Kevin P. Hourican: Yeah, John, I appreciate the question. Let's start with you.

Kevin P. Hourican: I did today for the first time actually size the prize from a headcount growth perspective in fiscal 24. To be crystal clear for everyone who's listening, that's a net number. So there's, of course, a turn that occurs within that population, and this is a net increase in our headcount by year end of 400. We're on track to be able to hit, you know, that target.

Speaker Change: Thank you.

Speaker Change: Thank you John.

Kevin P. Hourican: And we now have our next question from Mark Carden with UBS.

Kevin P. Hourican: It's the start, John, of what will be continued forward progress on hiring. Today I'm not going to, you know, disclose the hiring target for fiscal 25, but again, that's something that we can talk about at our investor day, and we do intend to talk about at our investor day. For Q4 and, frankly, for all of fiscal 2024, this is an investment as in, you know, a below-water investment. I mean the expense is greater than the revenue and profit that they're contributing, but we are confident, and that will continue in Q4.

Speaker Change: Good morning. Thanks, so much for taking my questions I wanted to start with one thats building a bit on the last question. How is the broader distributor pricing backdrop benefited some of the industry headwinds that took place in <unk> are you seeing competitors being much more aggressive with upfronts in this environment. There is still that the concern obviously about avoiding a race to the bottom.

John: What are you seeing on that front.

John: Hey, Mark I think it starts with the restaurant operator, the restaurant operator is looking for value right now because of their P&L. The labor cost point that I mentioned, so we're seeing increased activity of what I'll call price shopping.

Kevin P. Hourican: It's an investment in Q4. It will positively impact our fiscal 2025 financial outcomes with a positive return on investment, and again, we'll talk more about the impact of that and how it contributes to our sales growth targets at our investor day.

Kevin P. Hourican: The goodness of digital penetration.

Kevin P. Hourican: Also creates an environment, where it's easier for in restaurant customer to be able to shop for price. So we've moved our digital order placement from 35% to over 80% over the last couple of years and that is in aggregate terrific thing for Cisco They buy more they buy categories they'd never shopped from before we can provide them personalized offers we can provide them personally.

John Edward Heinbockel: Okay, and maybe as a follow-up, you know, you talked about affordability. Unknown Speaker: You speak to your thoughts on elasticity and how you work with I know you talked about private label and getting your costs down, but obviously, you can take your costs down, but you have to get your customers to pass that through to their end customers, your confidence in that happening, and then you know when you think about elasticity, you know for your customers. How do you assess that, right, and what has to be done with affordability to move the needle? That's a really good question.

Speaker Change: <unk> pricing by competitors have ordering web sites too and it's easier now for a customer to be able to rate shop across distributors and they need to because of their labor costs that I mentioned, so it's less activity from our competitive set it's more customer driven we've seen an increase in price shopping I'm sure. That's very clear very straightforward to you.

John Edward Heinbockel: And as specifically as I mentioned in answer to John's question on commodities. So it's an aggressive market right now from a commodities perspective, if youre not right on price, you'll lose that business and we need to be appropriately priced in that regard and thats something given our purchasing scale.

Kevin P. Hourican: That's a really good question. I'll unpack the first part, second part, first part.

Kevin P. Hourican: Listen, we admire, respect, trust our customers, and I want to be clear; they are running their business to the best of their abilities. But what we are seeing, John, is we are, in fact, providing more value year over year to end restaurant operators, and we're not seeing that show up on menu prices. That's the main point.

Kevin P. Hourican: We at Sysco.

Kevin P. Hourican: To drive the best possible purchasing cost and we can be credible and relevant from a price perspective to our customers in that regard you mentioned upfront monies in your question I want to be clear, there's upper moneys are not a bad thing upfront monies if they enable us to secure a large customer win for a dedicated period of time with many.

Kevin P. Hourican: And I believe that menu prices need to come down for foot traffic to grow. And I believe restaurant operators are going to become more aware of that reality as time progresses because they're, as you know, benefiting from those menu price increases at this point in time. To be fair to the restaurant operator, their overall operating costs have gone up. Their labor costs have gone up significantly over the last three years, and some of that menu price taking has been necessary to offset that wage increase, especially in a state like California. So you understand how dynamic that is, and they're making the best choices for their individual business P&L. What we need to focus on at Sysco is what we can control.

Kevin P. Hourican: Volume guarantees our finance team Underwrites every single one of those deals I approve personally the bigger deals those are good deals.

Kevin P. Hourican: So I don't want you to infer that increase in upfront monies as actually a bad thing.

Kevin P. Hourican: Tend to be a good thing and we have not to answer. Your question specifically has seen an increase in that activity in the marketplace Mark back to you. If you have a follow up.

Speaker Change: Got it that's helpful. And then as my follow up just to meet some of the industry slowdown have you seen any changes the M&A backdrop any more opportunities happening up just for consolidation.

Kevin P. Hourican: What we can control is the price we pay for the product that we purchase and the prices that we offer that product to our customers so that we can provide value to them so they will choose Sysco and choose us at an increased rate over time because value does matter meaningfully in this environmental condition, which segues to the second part of your question, which is price elasticity. We've gotten much better at this over the last few years, thanks to our strategic pricing software. It is very robust and easy to use.

Kevin P. Hourican: Based on some of the smaller players may be running at some challenges.

Kevin P. Hourican: Yes, so in terms of in terms of M&A.

Kevin P. Hourican: We're doing a Cisco is a couple of things so number one.

Kevin P. Hourican: We are focused very hard on the integration by the way the Edward Don integration is underway and the synergies are being realized on both from a go to market standpoint, as well as from a back office purchase standpoint, So right now our priority is to focus on integrating and realizing synergies that we have in our portfolio today in terms.

Kevin P. Hourican: We know at the customer level, elasticity at the item level, and we price accordingly. John, what we're seeing, just sort of, from some color perspective, and this will not shock you, restaurant operators' need for really sharp prices on their key commodities is intense right now. So tremendous focus on, let's call it their top 10 items. And we need to be right on price on those top 10 items. And it's intense out there right now, the need for restaurant operators to lower their costs for those highest volume SKUs.

Kevin P. Hourican: The backdrop on how we think about M&A from a more of a macro standpoint, we have a robust pipeline we have extremely robust right now.

Kevin P. Hourican: Given the lens of our OSB, we will keep a close eye out for accretive opportunities, but the snap moment as I mentioned, we are focused on integrating and realizing synergies as we expect these M&A opportunities that we have in our portfolio will be enterprise accretive from a multiple standpoint.

Kevin P. Hourican: So we need to be sharp, and we need to be right on price on those items. That means, relative to the market, competitive. And what that means is there's a long tail of products, and the long tail of products is more inelastic.

Speaker Change: Great. Thanks, so much good luck guys.

John: Thanks Mark.

Kevin P. Hourican: And just a reminder that was star one for any questions <unk> comments and our next question comes from Jake Bartlett with <unk> Securities.

Speaker Change: Great. Thanks for taking the question my first just a clarification on the comments on April trends, there's a big calendar shift of Easter and spring break.

Kevin P. Hourican: And we will never take advantage of it, but we have an opportunity to be a little higher in price, perhaps on some of those inelastic skews to fund sharper prices in the commodity space. And that's something that we're working on. That's something that we leverage our technology to deploy. The thing that we need to get better at from a pricing perspective is the ability to react in the moment at that individual customer level.

Kevin P. Hourican: You mentioned I think the kind of similar growth rate for both months. So that to me would imply kind of underlying deceleration in April I, just want to clarify what the what the message is there whether the comments are kind of adjusted for those calendar shifts.

Speaker Change: And then my real question is really about the non local case growth.

Kevin P. Hourican: If we have a competitor in the account who wants to win business, you know, from our customer, we need to enable our sales reps to make timely decisions to respond in the moment. And that's something we're working to improve upon. And I'm confident we can improve in that regard.

Kevin P. Hourican: Not specifically given but it looks like it implies an acceleration. The question is what is driving that non local case growth with the builders the drivers of that and what your expectations are in the next couple of quarters, whether you think that that momentum will continue and potentially offset some of the headwinds that we might be seeing in India.

Mark David Carden: And we now have our next question from Mark Carden with UBS.

Mark David Carden: Good morning, thanks so much for taking my questions. I want to start with one that's building a bit on the last question.

Mark David Carden: Pendants.

Mark David Carden: Okay.

Mark David Carden: Okay.

Mark David Carden: I'll take the first part this is Kenny so just to clarify there is no deceleration into April as the growth rate from March is carrying into April so just to be very clear.

Kevin P. Hourican: How has the broader distributor pricing backdrop been amid some of the industry headwinds that have placed in 3Q? Are you seeing competitors being much more aggressive with up fronts in this environment? There's still the, you know, the concern obviously about avoiding a race to the bottom. Just what are you seeing on that front?

Kevin P. Hourican: We're not seeing a deceleration in the market right now is similar to the exit velocity of Q3 and with that said as Kevin mentioned, we do have access in place to stimulate volume growth further subsequent periods Kevin.

Kevin P. Hourican: Hey Mark, I think it starts with the restaurant operator. The restaurant operator is looking for value right now because of their P&L, the labor cost point that I mentioned. So we're seeing increased activity of what I'll call price shopping. The goodness of digital penetration also creates an environment where it's easier for an end restaurant customer to be able to shop for price. So we've moved our digital order placement from 35% to over 80% over the last couple of years, and that is, in aggregate, a terrific thing for Sysco.

Kevin P. Hourican: And I think the second part of your question is outside of local what else do you see going on we've had a tremendous amount of success in our corporate national CMU business over the last few years and we continue to win net new business profitably in national sales, including new customer wins signed in the quarter.

Kevin P. Hourican: Three that begin shipping at the end of Q4 and into fiscal 2025, and one other call. It is our SYGMA business, which I mentioned earlier down three five in the most recent quarter. We're now lapping week 53 of our customer exit from a year ago. There was an unprofitable customer that wasn't willing to partner with Cisco to.

Kevin P. Hourican: They buy more, they buy categories they've never shopped from before, we can provide them personalized offers, we can provide them personalized pricing, you know, but competitors have ordering websites, too, and it's easier now for a customer to be able to rate a shop across distributors, and they need to because of their labor costs that I mentioned. So there's less activity from our competitive set, it's more customer-driven, and we've seen an increase in price shopping. I'm sure that's very clear and very straightforward to you.

Kevin P. Hourican: Fair and appropriate margin profile and we exited that business. We are now lapping that which will positively impact SYGMA as growth rates in Q4, and we have signed some net new profitable business and Sigma which will contribute positively to Sigma in Q4 and into 2025 as well sorry on Sigma one piece to add is Sigma is down on a sales basis. However.

Kevin P. Hourican: And it's specifically, as I mentioned in the answer to John's question, about commodities. So it's an aggressive market right now from a commodities perspective. If you're not right on price, you'll lose that business, and we need to be appropriately priced in that regard, and that's something given our purchasing scale. We at Sysco can drive the best possible purchasing cost, and we can be credible and relevant from a price perspective to our customers in that regard.

Kevin P. Hourican: Year to date, the profit margins are up 20% year on year. So we've done a nice job.

Kevin P. Hourican: Really focusing hard on supply chain productivity and once volume comes in as Kevin talked about the new deals. We are signing of inking that should flow through flow nicely down to the bottom line.

Kevin P. Hourican: You mentioned upfront monies in your question. I wanna be clear, upfront monies are not a bad thing. Upfront monies can be useful if they enable you to secure a large customer win for a dedicated period of time with minimum volume guarantees. Our finance team underwrites every single one of those deals. I personally approve of the bigger deals. Those are good deals. So I don't want you to infer that an increase in upfront monies is actually a bad thing. They tend to be a good thing. And we have not, to answer your question specifically, seen an increase in that activity in the marketplace. Mark, I will come back to you if you have a follow-up. Got it. That's great.

Speaker Change: Just if I'm still on just a follow up question.

Speaker Change: Is Easter a negative for you or how does how does the calendar shift just to make sure I understand how the calendar shift would impact Cisco as a whole.

Kevin P. Hourican: Yes, I don't think were going to get into specific commentary about Easter. There is movable holidays. Easter is one of them I think it can move six weeks in any calendar year, but kenny's commentary was much more macro than that just one event. It was in Q3. There was a notable step up from a very tough January into more positive.

Mark David Carden: Got it, that's helpful. And then, as my follow-up question, just amidst some of the industry slowdown, have you seen any changes to the M&A backdrop? Any more opportunities opening up just for consolidation across the space as some of the smaller players may be running some challenges?

Mark David Carden: February stepped up more positive into March and we're seeing the trend of that improvement will continue.

Mark David Carden: And we have to take further actions in Q4 to drive a step up from Q3.

Mark David Carden: We're prepared to do that through the things that I've talked about on today's call. We're confident.

Kevin P. Hourican: Yeah, so in terms of M&A, you know, what we're doing at Sysco is a couple of things, right? So number one, we are focused very hard on the integration. By the way, the Edward-Don integration is underway, and the synergies are being realized both from a go-to-market standpoint as well as from a back-office purchase standpoint. So right now, our priority is to focus on integrating and realizing synergies that we have in our portfolio today.

Kevin P. Hourican: With focusing our sales reps on the new customer acquisitions in Q4 that we can improve our market share capture and to be clear, we took a profitable market share. We grew profitably versus the market in Q3, and we believe we can step up that performance in Q4, and we're focused on doing so.

Speaker Change: Great. Thank you I appreciate it thank you.

Kevin P. Hourican: And we have our next question from Edward Kelly with Wells Fargo.

Kevin P. Hourican: In terms of the backdrop and how we think about M&A from a more of a macro standpoint, we have a robust pipeline. We have extremely robust pipelines right now. Given the lens of ROIC, we will keep a close eye out for accretive opportunities. But at this moment, as I mentioned, we are focused on integrating and realizing synergies as we expect these M&A opportunities that we have in our portfolio will be enterprise accretive from a multiple standpoint.

Speaker Change: Hi, good morning, guys.

Speaker Change: Wanted to ask a question about.

Kevin P. Hourican: The backdrop and the expectation and how we should be thinking about the go forward.

Kevin P. Hourican: Kevin.

Kevin P. Hourican: I will definitely seems to have changed a bit about the backdrop.

Kevin P. Hourican: Kenny you mentioned transitory.

Kevin P. Hourican: I think in your remarks.

Kevin P. Hourican: And if you look at Q4 guidance you have a 20 range out there that's a pretty big range I think for you guys. So it does suggest some uncertainty, but I guess, what I'm curious about is how you are thinking about.

Mark David Carden: Great. Thanks so much. Good luck, guys. Thanks Mark.

Jake Rowland Bartlett: And just a reminder, that was Star 1 for any questions and or comments. And our next question comes from Jake Bartlett with Truist Securities.

Jake Rowland Bartlett: The duration of what we are seeing today what <unk>.

Jake Rowland Bartlett: Great, thanks for taking the question. My first question was for clarification on the comments on April trends. You know there's a big calendar shift of Easter and some spring break. You mentioned I think that kind of similar growth rate for both months, so that, to me, would imply a kind of underlying deceleration in April. I just want to clarify what the message is there, whether the comments are kind of adjusted for those calendar shifts.

Jake Rowland Bartlett: Specific adjustments that youre, making that allow you to get to your goals.

Speaker Change: How do you think thats going to actually impact.

Speaker Change: Next year.

Jake Rowland Bartlett: Yeah. Good morning, Ed, It's Kevin I'll start, yes, Q3 from a volume and traffic to restaurants perspective was a softer macro than we had anticipated it was negative for the industry food away from home in total volume of cases by the food distributor network in aggregate was negative in the quarter and that's not what we would.

Jake Rowland Bartlett: And then my real question is really about the non-local case growth. And you know it's not specifically given, but it looks like it implies an acceleration. The question is what is driving that non-local case growth, you know, the builders or the drivers of that, and you know what your expectations are for the next couple quarters, whether you think that that momentum will continue and potentially offset some of the headwinds that we might be seeing in that.

Jake Rowland Bartlett: <unk> anticipated for the quarter. So that's one that you heard is tied to that fact based the overall macro in Q3 was softer than we had anticipated.

Jake Rowland Bartlett: We need to take share in order to be able to grow at the rate that we desire to grow out and the good news is we can do that and we can do that by focusing on net new customer prospecting. We can do that by further penetrating our specialty businesses, which have large opportunity to grow respective market share and we have the teams really folk.

Kenny K. Cheung: Okay, I'll take the first part. This is Kenny.

Kenny K. Cheung: So, just to clarify, there is no deceleration into April. The growth rate from March is carrying into April. So, just to be very clear, we're not seeing a deceleration in the market right now. It's similar to the exit velocity of Q3. And with that said, as Kevin mentioned, we do have actions in place to stimulate volume growth further in subsequent periods. Kevin, back to you.

Kenny: <unk> in that regard.

Kevin: I think we will defer comment on fiscal 'twenty five until or May.

Kenny K. Cheung: Investor Day.

Kevin: But we are confident in our ability to deliver against the guidance for the year and for that Kenny I'll toss to you to comment on <unk> question about the guidance range for the year for the fourth quarter.

Kevin: So based on our current expectation and with three quarters under our belts.

Kevin P. Hourican: Yeah, and I think the second part of your question is, you know, outside of local, what else do you see going on? You know, we've had a tremendous amount of success in our corporate national CMU business over the last few years, and we continue to win net new business profitably in national sales, including new customer wins signed in the quarter, Q3, that begin shipping at the end of Q4 and into fiscal 2025.

Kevin P. Hourican: We are more confident at the midpoint of our guidance range and why is that three reasons. One is our confidence is guided by data we partner with third party suppliers.

Kevin P. Hourican: <unk> and we have a lot of data if we have a lot of volume running through our shop, each and every day. That's point number one number two it gives me confidence in our guidance is the fact that we have.

Kevin P. Hourican: And one other callout is our Sigma business, which I mentioned earlier, down 3.5 in the most recent quarter. We're now lapping week 53 of a customer exit from a year ago. That was an unprofitable customer that wasn't willing to partner with Sysco on a fair and appropriate margin profile, and we exited that business.

Kevin P. Hourican: Dynamic levers in our P&L as you can see in Q3, our GP grew faster than expenses and faster than sales, which means that you can leverage on both the GP line as well as the operating expense line, we talked about a lot of levers on the GP you have strategic sourcing you have sysco brand penetration within local you have.

Kevin P. Hourican: We are now lapping that, which will positively impact Sigma's growth rates in Q4. And we've signed some net new profitable business in Sigma, which will contribute positively to Sigma in Q4 and into 2025 as well. Sorry, on Sigma, one piece to add is that Sigma is down on a sales basis. However, year-to-date, the profit margins are up 20% year-on-year. So, we've done a nice job, really focusing hard on supply chain productivity. And once volume comes in, as Kevin talked about, the new deals we are signing and inking, that should flow nicely down to the bottom.

Kevin P. Hourican: <unk> centralized pricing tool. We also have a growth from our specialty business, which we saw this quarter. So GP leverage that we see and then we're also very excited with the fact that we increased our structural SG&A cost takeout from 100 million to $120 million and the good news is as the <unk>.

Kevin P. Hourican: It normalizes as volume materializes that volume will slow down nicely and accrete slipped down to the bottom line and as these costs are structural and then will not creep back in.

Kenny K. Cheung: If I'm still on, just to follow up on a question, is Easter a negative for you, or how does the calendar shift impact you, just to make sure I understand how the calendar shift would impact Sysco as a whole?

Kevin P. Hourican: And one that we try not to do three part answers, but as we think about where else can the sources of value come from as we go from 24% to 25, there is more to be gained with supply chain productivity. We're not done there's still gas in the tank on productivity improvement, we're really pleased with our performance in supply chain in March It was the best performance in years.

Kevin P. Hourican: Yeah, I don't think we're going to get into specific comments here, but you know, about Easter, you know, there are movable holidays; Easter is one of them, I think it can move six weeks in any calendar year, but Kenny's commentary was much more macro than that, just one event: it was in Q3, there was a notable step up from a very tough January into a more positive February, February stepped up And we have to take further actions in Q4 to drive a step up from Q4.

Kevin P. Hourican: And we're seeing that carry into Q4 and that can and will carry into 2025, so supply chain productivity will continue to be a beneficial contribution.

Kevin P. Hourican: Going forward and then local case growth, we can accelerate local case growth relative to our total company case growth and that's something we're very focused on for fiscal 'twenty five and we will talk about the how we're going to do that at Investor day.

Kevin P. Hourican: And we're prepared to do that through the things that I talked about on today's call. We're confident that by focusing our sales reps on new customer acquisitions in Q4, we can improve our market share capture. And to be clear, we took profitable market share, and we grew profitably versus the market in Q3. And we believe we can step up that performance in Q4, and we're focused on doing so.

Speaker Change: Great. Thank you I'll.

Speaker Change: Let somebody else. Thank you Matt good question.

Speaker Change: Yes, Thanks Ed.

Kevin P. Hourican: And we now have our next question from Kelly Bania with BMO capital markets.

Speaker Change: Hi, good morning, Thanks for.

Speaker Change: Our question.

Kevin P. Hourican: Kevin You noted a couple of times.

Kevin P. Hourican: The need for restaurants to lower their menu prices.

Kevin P. Hourican: Just curious if you can elaborate on any any context, you are hearing from them about their willingness to do so.

Edward Joseph Kelly: And we have our next question from Edward Kelly with Wells Fargo.

Edward Joseph Kelly: And can you also tie in what you're seeing in California in particular in light of the recent wage dynamics there.

Kevin P. Hourican: Hi, good morning, guys. I wanted to ask a question about Unknown Attendee, Sysco Corp., and if you look at Q4 guidance, you have a 20-cent range out there. That's a pretty big range, I think, for you guys, so it does suggest some uncertainty. But I guess what I'm curious about is, you know, how you're thinking about the duration of what, you know, we are seeing today. What specific adjustments that you know you're making that allow you to get, you know, to your goals? How do you think that's going to actually impact next year?

Kevin P. Hourican: Are you seeing are you seeing restaurants.

Kevin P. Hourican: Pass along those higher costs in terms of menu pricing, how is California impacting the total.

Kevin P. Hourican: Volumes across the industry.

Speaker Change: Yeah, Kelly, it's a good question I. Appreciate the question, we tend not to get into conversations with our customers about the prices. They should charge their end consumers I was just making an observation on what we see in the data just being backed based traffic down for the quarter cases shipped in aggregate.

Kevin P. Hourican: By the food away from home industry is down year over year for the quarter and sales up at restaurants. So it's just pure math, the only way that those dynamics could be true at the same time is for menu prices to be up significantly on a year over year basis and research indicates we do a lot of consumer research that consumers are getting.

Kevin P. Hourican: Yeah, good morning, Ed. It's Kevin. I'll start.

Kevin: With the increases in menu prices, but it's not for us to tell our customers what to do with how they run their business on US is what we can control. We can provide them value. We can provide them value in sysco brand. We can provide them value by a smaller portion size. We can provide them value by doing value added cut services to take labor out of their kitchen and Thats what.

Kevin P. Hourican: Yeah, Q3 from a volume and traffic to restaurants perspective was a softer macro than we had anticipated. It was negative for the industry. Food away from home in total volume of cases by the food distributor network in aggregate was negative in the quarter. And that's not what we would have anticipated for the quarter. So the tone that you heard is tied to that fact. The overall macro environment in Q3 was softer than we had anticipated.

Kevin P. Hourican: So that means we need to take share in order to be able to grow at the rate that we desire to grow at. And the good news is, we can do that. We can do that by focusing on new customer prospecting. We can do that by further penetrating our specialty businesses, which have a large opportunity to grow their respective market share. And we have teams really focused on that regard. I think we'll defer comment on fiscal 25 until our May investor date, but we are confident in our ability to deliver against the guidance for the year. And on that, Kenny, I'll toss it to you to comment on Ed's question about the guidance range for the year and for the fourth quarter.

Kevin P. Hourican: We focus on we tend to focus on what we can control and help be a solution oriented company for our customers for the second part of your question about California, It's too soon to tell.

Kenny: The largest past.

Kenny: We are not seeing a negative impact to our business in California to discretely and specifically answer that part of your question I think what.

Kenny: What I've read and what I'm sure you've read his new door count openings will be muted in this state versus historical 10 year average tied to concerns that these are most of these are national chain operators. As you know the law does not impact mom and Pops, it's a national chain Walt.

Kenny K. Cheung: Hi, it's Kenny. So based on our current expectation, and with three quarters under our belt, you know, we are more confident at the midpoint of our guidance range. And why is that? There are three reasons. One of our confidence guidelines is guided by data. We partner with third parties, suppliers, you know, institutions, and we have a lot of data; we have a lot of volume running through our shop each and every day. That's point number one.

Kenny: And you've seen those companies announced that theyre going to reduce the number of new door openings, we're seeing plenty of growth in other states the south.

Kenny K. Cheung: In particular, we're seeing lots of new doors starts in the south and a lot of population moving from California, frankly to other states.

Kenny K. Cheung: Smart restaurant operators tend to follow the puck, where it's going.

Kenny K. Cheung: And focus their new door growth.

Kenny K. Cheung: Kelly back to you if you have a follow up.

Kenny K. Cheung: Number two, what gives me confidence in our guidance is the fact that we have a ton of dynamic levers in our P&L. As you can see in Q3, our GP grew faster than expenses and faster than sales, which means that you're getting leverage on both the GP line, as well as the operating expense line. And the good news is, as the market normalizes, as volume materializes, that volume will flow down nicely and increasingly down to the bottom line. And as these costs are structural, they will not creep back in.

Speaker Change: Thanks, that's helpful.

Kenny K. Cheung: I guess can you also just talk about how mix or trade down is impacting kind of net pricing or what.

Kenny K. Cheung: What youre seeing.

Kenny K. Cheung: On the sequential basis relative to last quarter in terms of.

Kenny K. Cheung: Price points, among the different by customer cohort.

Speaker Change: Yes, I think the notable call out that I provided today as it <unk> in our book of business is soft versus the others and I would point you to the Sigma data that we shared today to give that illustration, we are not seeing meaningful trades down within concepts to lower cost proteins. As an example, that's something actually we think is appropriate.

Kenny K. Cheung: And should occur and it's something that we can do and we can help our customers do that so that they can provide value to the customer who is coming into that restaurant and that's something our sales force the largest in the industry works with customers on we work with them on portion size, we will work with them alternative proteins, we work with them to provide.

Kenny K. Cheung: And just to add one, we try not to do three-part answers, but as we think about where else sources of value can come from as we go from 24 into 25, there's more to be gained with supply chain productivity. We're not done.

Kenny K. Cheung: Alternative Sysco brand cuttings as I mentioned earlier that can help them save money. So we're not seeing a trade down within restaurant concepts, it's more about that lower income consumer being pinched right now and thats showing up in the sales results.

Kevin P. Hourican: There's still gas in the tank for productivity improvement. We're really pleased with our performance in the supply chain in March. It was the best performance in years, and we're seeing that carry into Q4, and that can and will carry into 2025. So supply chain productivity will continue to be a beneficial contribution going forward. And then local case growth, we can accelerate local case growth relative to our total company case growth, and that's something we're very focused on for fiscal 25, and we'll talk about how we're going to do that on investor day.

Speaker Change: Thank you.

Kevin P. Hourican: And our next question comes from Jeffrey Bernstein with Barclays.

Speaker Change: Great. Thank you very much.

Speaker Change: My first question is just on the cost savings that you've talked about it.

Kevin P. Hourican: It sounds like were up to $120 million or more for this fiscal year.

Kevin P. Hourican: We were able to increase it by $20 million pretty quickly when you saw sales, perhaps a little more challenged.

Speaker Change: Thank you mentioned 500 roles were eliminated and yet youre still able to invest and what sounds like accelerating the salesforce. So just to clarify.

Edward Joseph Kelly: Great, thank you. I'll yield and let someone else ask a question. Thank you, Ed.

Kelly Ann Bania: And now we have our next question from Kelly Bania with BMO Capital Markets.

Speaker Change: All of these incremental cost savings are back of house with no customer impact.

Kevin P. Hourican: Hi, good morning. Thanks for taking our questions. Kevin, you noted a couple of times the need for restaurants to lower their menu prices. I'm just curious if you can elaborate on any context you're hearing from them about their willingness to do so. And can you also tie in just what you're seeing in California, in particular, in light of the recent wage dynamics there? Are you seeing restaurants pass along those higher costs in terms of menu pricing? How is California impacting total volumes across the industry?

Kelly Ann Bania: If that's the case, what's the future opportunity for cost savings in the supply chain of sales remain challenged I'm wondering if you have any order of magnitude in terms of the potential incremental cost savings going into next year. If you were to see these sales challenges persist.

Kevin: Hey, Jeff I'll take that one so first things first when you caught us all we are very proud of our leadership team taking proactive actions given the softer macro backdrop and the good news is we have a lot of levers in our P&L in particular to your question around the $120 million of cost out let me give a bit more color as I.

Kevin P. Hourican: Last quarter. It was roughly $100 million, that's increased by $20 million to $120 million to $120 million for FY 'twenty four if you double click on the P&L Jeff.

Kelly Ann Bania: Yeah, Kelly, it's a good question. I appreciate the question. You know, we tend not to get into conversations with our customers about the prices they should charge their end consumers. I was just making an observation on what we see in the data, just being fact-based, you know, traffic down for the quarter, cases shipped in aggregate by the food away from home industry down year over year for the quarter, and sales up at restaurants. So it's just pure math.

Kelly Ann Bania: If you look at GSP or corporate operating expense of that was $220 million for Q3 and that was down 6% year on year, you would look at it quarter over quarter between Q2 to Q3. It was down 8%. So the cost is coming out of the P&L and you are correct.

Kevin P. Hourican: The only way that those dynamics could be true at the same time is for menu prices to be up significantly on a year over year basis. And research indicates that we do a lot of consumer research that consumers are getting smaller with the increases in menu prices, but it's not for us to tell our end customers what to do with how they run their business. What's on us is what we can control; we can provide them value; we can provide them value in the Sysco brand; we can provide them value by reducing portion size; we can provide them value by doing value-added cut services to take labor out of their kitchen. And that's what we focus on; we tend to focus on what we can control and help be a solution-oriented company, you know, for our customers.

Kelly Ann Bania: Does include most recent 500 elimination.

Kevin P. Hourican: Positions, which is predominantly on the corporate side, so that is correct.

Kevin P. Hourican: We did not impact client facing roles in our U S.

Kevin P. Hourican: Business.

Kevin P. Hourican: In terms of.

Kevin P. Hourican: Outer periods, what are some of the areas of opportunities there's more room to go as a company. We continue to have a pipeline of initiatives and savings I'll give you a couple of examples but just to put color on it last quarter, meaning Q3, we rolled out the full implementation of Canada Sure Service Center under under my word and that has yield.

Kevin P. Hourican: It could have savings for our company and if you think about just pure SG&A, yes, part of its head count, but we have a big bucket that what I call third party indirect sourcing and we are making good strides on that one as well.

Kevin P. Hourican: So the second part of your question about California, it's too soon to tell with the new law just passed. We are not seeing a negative impact on our business in California to discreetly and specifically answer that part of your question. I think what, you know, what I've read and what I'm sure you've read is new door count openings will be muted in the state versus the historical 10-year average tied to concerns that these are mostly, these are national chain operators. As you know, the law does not impact mom and pops.

Kevin P. Hourican: Vendor consolidation and rate reduction as well so theres still a lot of room to go as Kevin mentioned early on supply chain side.

Kevin P. Hourican: We saw record level productivity this quarter with that said we are not back in 19 levels, yet and we still have room to go on that front as well in terms of P&L accretion from a cost standpoint.

Kevin P. Hourican: Yes, Jeff This is Kevin I'll add two things to that sales force, we're investing in our sales force and we're investing in specialty as Kenny said in his prepared remarks within the supply chain operations, we will flex our staffing to volume. So if the volume declines we flex staff accordingly, but we're not talking about things like <unk>.

Kevin P. Hourican: It's a national chain law, and you've seen those companies announce that they're going to reduce the number of new door openings. But we're seeing plenty of growth in other states, the South in particular, seeing lots of new door starts in the South and a lot of population moving from California, frankly, to other states, and smart restaurant operators tend to follow the puck where it's going and focus their new door growth elsewhere.

Kevin P. Hourican: We're lowering drivers I mean their business is robust and it's healthy it's growing it's nothing like what we were contending with BEC.

Kevin P. Hourican: Kelly, back to you if you have a follow up.

Kevin P. Hourican: In Covid, it's more about overtime flex it down it's about part time labor flex it down and we're getting very good at flexing our supply chain labor to Metro volume impact and in fact Thats why March was as strong as it was.

Kelly Ann Bania: Thanks, that's helpful. Can you also just talk about how mix or trade down is impacting kind of net pricing or what you're seeing on a sequential basis relative to last quarter in terms of, you know, price points among the different customer cohorts? Yeah, I think the notable call out that I provide

Speaker Change: Understood and then just my follow up.

Kelly Ann Bania: Kevin I know you.

Kelly Ann Bania: Highlight on the slide deck, your 17% market share and I know, we've talked about the big three maybe having still sub 40%.

Kevin P. Hourican: Yeah, I think the notable call-out that I provided today is that QSR in our book of business is soft versus the others, and I point you to the Sigma data that we shared today to give that illustration. We are not seeing meaningful trades down within concepts to lower-cost proteins, for example.

Kevin P. Hourican: So it does seem like the focus is.

Kevin P. Hourican: Finally, I am taking further share from the other 60% I know it doesn't necessarily require M&A.

Kevin P. Hourican: But he.

Kevin P. Hourican: He is talking about the opportunity to take market share.

Kevin P. Hourican: That's something we think is appropriate and should occur, and it's something that we can do, and we can help our customers do that so that they can, in fact, provide value to the customer who's coming into that restaurant. And that's something our salesforce, the largest in the industry, works with customers on. We work with them on portion size. We work with them on alternative proteins. We work with them to provide alternative Sysco brand cuts, as I mentioned earlier, that can help them save money. So we're not seeing a trade-down within restaurant concepts. It's more about that lower-income consumer being pinched right now, and that's showing up in the salesforce.

Speaker Change: I would think that opportunity would accelerate if the competition is struggling I know we've talked about the restaurant industry, perhaps struggling but can you just talk about maybe the other 60% of the foodservice distribution industry and what Youre seeing there in terms of.

Kevin P. Hourican: Your competition and maybe the greatest opportunity you see there to gain share.

Kevin P. Hourican: I think your main point is strong gets stronger when times are tough tougher and yes that is the case and if you look at the time of Covid.

Kevin P. Hourican: We performed extremely well versus the industry at large top and bottomline versus the industry during that period of time and I think that would continue.

Kevin P. Hourican: Softer macro environment.

Speaker Change: I tend to focus more on the vectors of growth. While we are meaningfully focused is in specialty.

Jeffrey Andrew Bernstein: And our next question comes from Jeffrey Bernstein with Barclays.

Jeffrey Andrew Bernstein: Deep most robust specialty offering by far in the industry coast to coast.

Jeffrey Andrew Bernstein: Great, thank you very much. My first question is just about the cost savings that you talked about. Sounds like we're up to $120 million or more for this fiscal year; you were able to increase it by $20 million pretty quickly when you saw sales perhaps a little more challenged. I think you mentioned 500 positions were eliminated, and yet you're still able to invest in what sounds like accelerating the sales force. So just to clarify, sounds like all of these incremental cost savings are back of house with no.

Jeffrey Andrew Bernstein: It is unmatched by anyone in the industry and our market share in specialty is well below our U S. Broadline market market share. So we have the product offering we have the geographic coverage the market share growth opportunity in specialty is substantial and we're making investments in specialty be able to bring that market share capture to life.

Jeffrey Andrew Bernstein: The net 400 sales professionals that I talked about today includes increases in specialty protein and specialty produce sales experts and we are going to talk in more detail about the opportunities in specialty at our Investor day at the end of May.

Jeffrey Andrew Bernstein: Customer Impact. If that's the case, what's the future opportunity for cost savings in the supply chain if sales remain challenged? I'm wondering if there's any order of magnitude in terms of the potential incremental cost savings going into next year if you were to see these sales challenges persist.

Speaker Change: Thank you.

Speaker Change: Thank you Jeff.

Kenny K. Cheung: Hey Jeff, Kenny, I'll take that one. So, first things first, and you caught it, we are very proud of our leadership team taking proactive actions given the software macro backdrop. And the good news is we have a lot of levers in our P&L. In particular, to your question around the 120 million dollars of cost out, let me give you a bit more color. As I mentioned last quarter, it was roughly a hundred million dollars; that has increased by 20 million to 120 million for FY24.

Jeffrey Andrew Bernstein: And we have our next question from Kendall Toscano with Bank of America.

Speaker Change: Hi, Thanks for taking my question.

Kenny K. Cheung: Quick.

Kenny K. Cheung: Some point was on I know you gave the impact from Edward Don.

Speaker Change: But just to make sure I understand what would it have been that.

Kenny K. Cheung: Total case growth on an organic basis was plus <unk>, 2% in local would've been down one point you.

Kenny K. Cheung: If you double-click on the P&L, Jeff, if you look at GSD, or corporate operating expense, that was $220 million for Q3, and that was down 6% year-on-year. If you look at it quarter over quarter, between Q2 and Q3, it was down 8%.

Speaker Change: That's correct that's correct.

Speaker Change: Okay got it that's helpful and then another quick one.

Kenny K. Cheung: Jeff when you talk about lowering menu prices.

Speaker Change: And working with your suppliers on that are there any specific product categories that you would have in mind on that would it be more commodity focused.

Kenny K. Cheung: So the cost is coming out of the P&L. And you are correct, that does include the recent 500 elimination of positions, which is predominantly on the corporate side. So that is correct. We did not impact client-facing roles in our USFS business.

Kenny K. Cheung: Non perishable items.

Kenny K. Cheung: Now the center of plate is what drives the purchase ticket and any restaurants. So we're focused on is providing value.

Kenny K. Cheung: Good better best options alternative proteins portion size Centerplate is what drives any restaurants purchasing cost and then commodities is the place that a customer will go to to help save themselves money in the oil price shock distributor a versus b. So we need to be as I said earlier today right on price on commodities and we can do.

Kenny K. Cheung: In terms of, you know, outer periods, what are some of the areas of opportunities, there's more room to go. As a company, we continue to have a pipeline of initiatives and savings. I'll give you a couple examples just to put some color on it.

Kenny K. Cheung: Last quarter, meaning Q3, we rolled out the full implementation of the Canada Shared Service Centre under my org, and that has yielded creative savings for our company. And if you think about just pure SG&A, yes, part of its headcount, but we have a big bucket, that's what I call third-party indirect sourcing, and we are making good strides on that one as well, via vendor consolidation and rate reduction as well So there's still a lot of room to go.

Kenny K. Cheung: So intelligently by.

Kenny K. Cheung: Leveraging our pricing tool purchasing those commodities at rates that are industry, leading and it's a basket of goods they buy from us and as John Heimbach asked about it's managing the elasticity across that book and Nobody's better positioned to be able to do that work than Cisco.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Kenny K. Cheung: As Kevin mentioned earlier, on the supply chain side, we saw record-level productivity this quarter. With that said, we are not back at 19 levels yet, and we still have room to go on that front as well, in terms of P&L accretion from a cost-benefit perspective.

Speaker Change: And we have reached our allotted time for a question and answer session. Today. This does conclude today's program. Thank you for your participation you may now disconnect.

Kenny K. Cheung: Okay.

Kevin P. Hourican: Yeah, just Kevin. I'll add two things to that. Salesforce. We're investing in our Salesforce platform, and we're investing in specialty, as Kenny said in his prepared remarks. Within supply chain operations, we will flex our staffing to the volume. So if the volume declines, we flex staff accordingly, but we're not talking about things like furloughs and drivers. I mean, the business is robust and healthy, it's growing, and it's nothing like what we were contending with, you know, back in COVID.

Kenny K. Cheung: Yes.

Kevin P. Hourican: Yes.

Kevin P. Hourican: It's more about, you know, overtime, flex it down. It's about, you know, part-time labor, flex it down. And we're getting very good at flexing our supply chain labor to match our volume, and in fact, that's why March was as strong as it was.

Jeffrey Andrew Bernstein: And then just my follow-up. Kevin, I know you, uh..., highlight on the slide deck, you know, your 17% market share. And I know we've talked about the big three, maybe having still sub 40%. So it does seem like the focus is. Primarily, I'm taking further share from the other 60%. I know it doesn't necessarily require M&A, but just if you talk about that opportunity to take market share, I would think that opportunity would accelerate if the competition is struggling.

Jeffrey Andrew Bernstein: Yes.

Jeffrey Andrew Bernstein: [music].

Jeffrey Andrew Bernstein: Hmm.

Jeffrey Andrew Bernstein: I know we've talked about the restaurant industry perhaps struggling, but if you just talk about maybe the other 60% of the food service distribution industry and what you're seeing there in terms of your competition and maybe the greatest opportunity you see there to gain share. I think your main point is, you know, the strong

Jeffrey Andrew Bernstein: Mhm.

Jeffrey Andrew Bernstein: [music].

Jeffrey Andrew Bernstein: Hum.

Jeffrey Andrew Bernstein: Okay.

Kevin P. Hourican: I think your main point is that the strong get stronger when times are tough, and tougher, and yes, that is the case, and if you look at the time of COVID, we performed extremely well versus the industry at large, top and bottom line versus the industry during that period of time, and I think that would continue in a softer macro environment. I tend to focus more on the vectors of growth where we are meaningfully focused is in specialty.

Jeffrey Andrew Bernstein: [music].

Kevin P. Hourican: Okay.

Kevin P. Hourican: Okay.

Kevin P. Hourican: [music].

Kevin P. Hourican: Hum.

Kevin P. Hourican: Okay.

Kevin P. Hourican: Yes.

Kevin P. Hourican: [music].

Kevin P. Hourican: Hum.

Kevin P. Hourican: We have the most robust specialty offering by far in the industry, coast to coast. It is unmatched by anyone in the industry, and our market share and specialty is well below our US broad line market share. So we have the product offering, we have the geographic coverage, the market share growth opportunity for specialty is substantial, and we're making investments in specialty to be able to bring that market share capture to life.

Kevin P. Hourican: Hum.

Kevin P. Hourican: [music].

Kevin P. Hourican: Okay.

Kevin P. Hourican: [music].

Kevin P. Hourican: Okay.

Kevin P. Hourican: [music].

Kevin P. Hourican: The net 400 sales professionals that I talked about today include increases in specialty protein and specialty produce sales experts, and we are going to talk in more detail about the opportunities in specialty at our investor day at the end of the year.

Kendall Belinda Toscano: And we have our next question from Kendall Toscano with Bank of America.

Kendall Belinda Toscano: Hi, thanks for taking my question. Just a quick clarification point: on, I know you gave the impact from Edward Dawn, but just to make sure I understand, would it have been that the total case growth on an organic basis was plus 0.2%, and local would have been down 1.2?

Kenny K. Cheung: That's correct. Your math is correct.

Kendall Belinda Toscano: Okay, I got it. It's helpful.

Kevin P. Hourican: And then another quick one is just when you talk about lowering menu prices and working with your suppliers on that, are there any specific product categories that you would have in mind for that? Would it be more commodities focused or non-perishable items? The center plate is what drives the purchase.

Kevin P. Hourican: Now, the center plate is what drives the purchase ticket at any restaurant. So, you know, what we're focused on is providing value, good, better, best options, alternative proteins, portion size. The center plate is what drives any restaurant's purchasing cost. And then commodities are the place that a customer will go to, to help save themselves money, and they'll price shop, you know, distributor A versus B. So we need to be, as I said earlier today, right on price on commodities.

Kevin P. Hourican: And we can do so intelligently by leveraging our pricing tool, purchasing those commodities at rates that are industry-leading. And it's a basket of goods they buy from us. And as John Heinbockel asked about, it's managing the elasticity across that book. And nobody's better positioned to be able to do that work than Sysco.

Operator: And we have reached our allotted time for our question and answer session today. This does conclude today's program. Thank you for your participation. You may now disconnect.

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