Q1 2024 US Foods Holding Corp Earnings Call
Krista: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the US Foods first quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
Thank you for standing by my name is Krista and I will be your conference operator today at this time I would like to welcome everyone to the U S Foods first quarter 2024 earnings conference call. All lines had been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session.
Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to Mike Neese, Senior Vice President of Investor Relations. Mike, you may begin.
Mike: If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad and if you liked to withdraw that question again press Star one. Thank you I will now turn the conference over to Mike Nice Senior Vice President of Investor Relations, Mike You may begin.
Michael D. Neese: Thank you Sir good morning, everyone.
Michael D. Neese: Thank you, Krista. Good morning, everyone, and welcome to the US Foods first quarter fiscal 2024 earnings call. On today's call, we have Dave Flitman, our CEO, and Dirk Locascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up.
Michael D. Neese: To the U S food first quarter of fiscal 2024 of these calls.
Michael D. Neese: On today's call, we update equipment, our CEO <unk>.
Michael D. Neese: We will take your questions. After our prepared remarks conclude please.
Michael D. Neese: Please limit yourself to one question.
Michael D. Neese: Ah Ridge release issued earlier this morning, and today's presentation can be found on the Investor Relations page of our web site at I R. Dot U S foods Dot com.
Michael D. Neese: Our earnings release issued earlier this morning and today's presentation can be found on the investor relations page of our website at ir.usfoods.com. During today's call, unless otherwise stated, we're comparing our first quarter 2024 to the same period in our first quarter fiscal year 2023. In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our Form 10-K for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in those statements.
Michael D. Neese: During today's call unless otherwise stated we're comparing our first quarter of 2024 to the same period in the first quarter of fiscal year 2023.
Michael D. Neese: In addition to historical information certain statements made during today's call Arkansas forward looking statements. Please.
Michael D. Neese: Please review the risk factors in her Form 10-K for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated and those statements.
Michael D. Neese: During today's call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules of our earnings press release, as well as in the presentation slides posted on our website. We are not providing reconciliations to forward-looking, non-GAAP financial measures.
Michael D. Neese: During today's call, we will refer to certain nausea financial measures.
Michael D. Neese: Conciliations to the most comparable get financial measures are included in the schedules our earliest press release.
Michael D. Neese: As well as in the presentation signs posted on our website.
Michael D. Neese: We are not providing reconciliations to forward looking non-GAAP financial measures.
Michael D. Neese: Finally, we're excited to host our Investor Day on June 5th at our headquarters in Rosemont. If you're interested in attending, please reach out to us in Investor Relations. Thank you. And I'd like to turn the call over to Dave. Thanks, Mike.
Michael D. Neese: Finally, we're excited to host or Investor day on June 5th at our headquarters in Rosen.
Michael D. Neese: If you're interested in today, please reach out to us and Investor Relations.
Speaker Change: Thank you and I'd like to turn the call over to the day. Thanks, Mike Good morning, everyone and thank you for joining us.
David E. Flitman: Thanks Mike. Good morning everyone, and thank you for joining us.
David E. Flitman: Let's turn to today's agenda. I'll start by sharing the progress we've made executing our strategy and several key achievements from the first quarter, which set us up for a strong year ahead. I will then hand it over to Dirk to review our first quarter financial results and our fiscal 2024 guide. Following a slower start to the year due to adverse weather and labor disruptions, our first quarter earnings came in as expected.
Michael D. Neese: Let's turn to today's agenda.
Michael D. Neese: I'll start by sharing the progress we've made executing our strategy in several key achievements from the first quarter, which set us up for a strong year ago.
Speaker Change: I will then hand, it over to <unk> to review, our first quarter financial results and our fiscal 2024 guidance.
Speaker Change: Following a slower start to the year due to adverse weather and labor disruptions, our first quarter earnings came in as expected.
David E. Flitman: The continued execution of our strategy and long-range plan resulted in an adjusted EBITDA of $356 million, representing approximately 6% growth. As we highlighted in February, adjusted EBITDA was negatively impacted by approximately $20 million from increased costs to serve our customers and volume headwinds from labor disruption and weather-related issues in January. Of the $20 million impact, approximately $15 million was incremental operating expense to support the business during the labor disruption.
Speaker Change: The continued execution of our strategy in long range plan resolve within adjusted EBITDA of $356 million, representing approximately 6% growth.
Speaker Change: As we highlighted in February.
Speaker Change: Trusted EBITDA was negatively impacted by approximately $20 million from increased cost to serve our customers and volume headwinds from labour disruption.
Michael D. Neese: Weather related issues in January.
Michael D. Neese: Oh, the $20 million impact approximately $15 million was incremental operating expense to support the business during the labour disruption.
Michael D. Neese: Excluding this negative impact our underlying adjusted EBITDA growth was approximately 12%.
David E. Flitman: Excluding this negative impact, our underlying adjusted EBITDA growth was approximately 12%, and we remain confident in achieving our full-year guidance. This performance demonstrates the strength of our business model, the commitment of our 30,000 hardworking associates, and our ability to win in any environment. Total case growth was 4.2% for the quarter, with share gains continuing in target customer types, and our independent case volume grew 4.6%. In fact, for independent restaurants, our share gains accelerated from the fourth quarter to the first quarter as we grew share for the 12th consecutive quarter.
Michael D. Neese: Remain confident in achieving our full year guidance.
Michael D. Neese: This performance demonstrates the strength of our business model.
Michael D. Neese: A commitment of our 30000 hard working associates.
Michael D. Neese: Really to win.
Michael D. Neese: Any environment.
Michael D. Neese: Total keystroke was 4.2% for the quarter, what's your games continuing in private customer types and are independent case volume grew 4.6%.
Michael D. Neese: In fact for independent restaurants or share gains accelerated from the fourth quarter to the first quarter as we grew share for the 12th consecutive quarter.
Michael D. Neese: In early April we closed on our previously announced acquisition Iwc food service and we're excited to have them on our team.
David E. Flitman: In early April, we closed on our previously announced acquisition of IWC Food Service, and we are excited to have them on our team. As a result of deploying capital towards our increasing M&A strategy, we did not purchase a significant number of shares in the first quarter.
Michael D. Neese: As a result of deploying capital towards our cutting M&A strategy.
Michael D. Neese: Did not purchase a significant number of shares in the first quarter. However.
David E. Flitman: However, we do plan to lean in on share repurchases more aggressively through the balance of this year. Furthermore, despite a slight year-over-year decrease in restaurant foot traffic, broadliners increased their volume within the overall food service distribution channel, as measured by Cercana, underscoring the resilience of our industry. Our team captured profitable market share with our target customer types and improved profitability as we remain focused on controlling the outcomes that we can control. Furthermore, we continue to identify cost savings, including streamlining administrative processes and costs.
Michael D. Neese: We do plan to lean in on share repurchases more aggressively through the balance of this year.
Michael D. Neese: Despite a slight year over year decrease in restaurant foot traffic Rottweilers increase their volume within the overall food service distribution channel as measured by <unk>.
Michael D. Neese: Underscoring the resilience of our industry.
Michael D. Neese: Our team captured profitable market share with our target customer types and improve profitability as we remain focused on controlling the outcomes that we can control.
Michael D. Neese: Furthermore, we continue to identify cost savings, including streamlining administrative processes and costs.
David E. Flitman: More specifically, cost actions we have taken to date are expected to generate more than $55 million in expense savings for 2024 and $75 million on an annualized run rate. We are pursuing additional operating expense and cost of goods actions to drive further savings in 2025 and beyond. I have confidence in our ability to drive growth and profitability well into the future. We are controlling what we can control to generate long-term shareholder value.
Michael D. Neese: More specifically cost actions, we have taken to date are expected to generate more than $55 million in expense savings for 2024.
Michael D. Neese: $75 million on an annualized run rates.
Michael D. Neese: We are pursuing additional operating expense and cost of goods actions to drive further savings in 2025 and beyond.
Michael D. Neese: I have confidence in our ability to drive growth and profitability well into the future.
Michael D. Neese: We are controlling what we can control to generate long term shareholder value.
Michael D. Neese: Turning to slide for as a reminder, our teams work is guided by four strategic colors, and I will discuss our progress on each of them over the next few slides.
David E. Flitman: Turning to slide four, as a reminder, our team's work is guided by four strategic pillars, and I will discuss our progress on each of them over the next few slides. Moving to slide five, our first pillar is culture.
Michael D. Neese: Moving to slide five our first tour as culture.
Michael D. Neese: Keeping our associates safe as a key part of our culture and during the first quarter or injury, an accident rates were 30% better than the prior year and importantly, these results were our best since 2020.
David E. Flitman: Keeping our associates safe is a key part of our culture, and during the first quarter, our injury and accident rates were 30% better than the prior year. Additionally, these results were our best since 2020. Despite our recent success, there is still significant room for improvement to reach our goal of zero injury. We're excited about our Spring Scoop, where we launch 26 new products to help our customers offer high-quality, innovative, and labor-saving products on their menus.
Michael D. Neese: Despite our recent success there are still significant room for improvement to reach our goal of zero Anders.
Michael D. Neese: We are excited about our spring Scoop, where we launched 26, new products to help our customers offer high quality innovative and labor saving products on their menus.
David E. Flitman: As part of this scoop, we introduced ServeU, including 20 new products within a portfolio of more than 3,000 products of delicious, plant-forward, gluten-free, and clean labels, such as our Chef's Line Organic Purple Rice and Quinoa Blend.
Michael D. Neese: As part of this group, we introduced serve you, including 20, new products within a portfolio of more than 3000 products of delicious plant forward gluten free and clean labels.
Michael D. Neese: Such as our chefs line organic purple rice and quinoa blend.
Michael D. Neese: Importantly, since the introduction of our popular Scoop program 12 years ago, nearly 75% of the products that have been launched are still sold today.
David E. Flitman: Importantly, since the introduction of our popular SCOOP program 12 years ago, nearly 75% of the products that have been launched are still sold today. Finally, we're increasing our commitment to three strategic community giving areas: Hunger Relief, Culinary Education, and Disaster Relief.
Michael D. Neese: Finally, we are increasing our commitment to three strategic community, giving areas under release culinary education and disaster relief.
David E. Flitman: Our increased investment of $2 million in 2024 is part of our Helping Communities Make It program, which provides nourishment and opportunity to the communities we serve and builds on our 2023 investment of more than $12 million. Turning to slide six, our second pillar, service. Providing best-in-class delivery and a high-quality service experience to our customers is essential to our growth and our overall success. The investments we are making in operational rigor and modernizing our technology platforms continue to pay off.
Michael D. Neese: Our increased investment of $2 million in 2024 is part of our helping communities make it program.
Michael D. Neese: Which provides nourishment an opportunity to the communities, we serve and builds on our 2023 investment of more than $12 million.
Michael D. Neese: Turning to slide six our second pillar service.
Michael D. Neese: Providing best in class delivery and a high quality service experience to our customers is essential to our growth.
Michael D. Neese: And our overall success.
Michael D. Neese: The investments, we are making an operational rigor and modernizing our technology platforms continued to pay off.
Michael D. Neese: We exited the first quarter quite pleased with the progress that we made on both on time delivery and service level customers, which continued to shovel year over year and sequential improvement.
David E. Flitman: We actually did the first quarter quite pleased with the progress that we made on both on-time delivery and service level to customers, which continued to show year-over-year and sequential improvements. We also recently completed an 18-month initiative in our replenishment organization.
Michael D. Neese: We also recently completed an 18 month initiatives and a replenishment organization.
Michael D. Neese: This program standardized and improve the processes and technology, we used as we strive to deliver best in class service levels to our customers.
David E. Flitman: This program standardized and improved the processes and technology we use as we strive to deliver best-in-class service levels to our customers. This work resulted in our delivered-as-ordered net promoter score improving by 7 percentage points while yielding $15 million in annualized operating expense savings and $120 million in working capital reduction. We continue to build on the routing efficiency gains that we delivered in 2023, and we remain focused on driving further improvement in on-time delivery. In fact, our cases per mile were a company record in February and March.
Michael D. Neese: This work resulted in our delivered as ordered net promoter score improving by seven percentage points, while yielding $15 million, an annualized operating expense savings and $120 million and working capital reduction.
Michael D. Neese: We continue to build on the routing efficiency gains that we delivered 2023 and we remain focused on driving further improvement in on time deliveries in.
Michael D. Neese: In fact, our cases per mile where a company record in February and March.
David E. Flitman: Furthermore, our routing initiative delivered a 4% improvement in cases per mile during the quarter compared to the first quarter of 2023, a two-year stack improvement of 12%. Our team's focus on this important work is making a difference for our customers and for U.S. foods. Taking this work a step further, we extended our Descartes routing deployment to four additional markets during the first quarter, building upon the two markets we piloted late last year that are now fully deployed.
Michael D. Neese: Furthermore, a rounding initiative delivered a 4% improvement in cases per mile during the quarter compared to the first quarter of 2023, and a two year stack improvement at 12%.
Michael D. Neese: Our team's focus on this important work is making a difference for our customers and for U S foods.
Michael D. Neese: Taking this work a step further.
Michael D. Neese: We extended our Descartes rounding deployment to for additional markets during the first quarter.
Michael D. Neese: Building upon the two markets, we piloted late last year that are now fully deployed.
Michael D. Neese: In the market for the card is live we're compounding further everything's in a rounding effectiveness.
David E. Flitman: In a market where Descartes is live, we are compounding further gains in our routing effectiveness. For example, in deployed markets, we are already seeing this technology produce an incremental 2% improvement in cases per mile, which we expect will continue to accelerate. We are confident that we have the right plan in place to successfully implement this technology across the company by mid-2025, and we continue to further transform our customer experience through our differentiated MOXIE digital solutions platform. Moxie has been fully integrated with our independent restaurant business.
Michael D. Neese: For example.
Michael D. Neese: Markets, we're already seeing this technology produce an incremental 2% improvement in cases per mile, which we expect will continue to accelerate.
Michael D. Neese: We are confident that we have the right plan in place to successfully implement this technology across the company by mid 2025.
Michael D. Neese: And we continued to further transform our customer experience through our differentiated moxie digital solutions platform.
Michael D. Neese: <unk> has been fully embedded with our independent restaurant business.
David E. Flitman: As customers move to MOXIE, they buy 10% more, are more profitable, and stick with us longer. We have migrated over 65% of our national chain business to Moxie, with full deployment anticipated in the second half of 2024. Moxie also has a new Spanish translation feature, further enhancing the user experience.
Michael D. Neese: His customers moved to maxi they by 10% more.
Michael D. Neese: Are more profitable and stick with this longer.
Michael D. Neese: We have migrated over 65% of our national chain business with full deployment anticipated in the second half of 2024.
Michael D. Neese: Mark C. Also has a new Spanish translation feature further enhancing the user experience.
Michael D. Neese: We're excited to share the moxie roadmap and growth plans for this digital platform during our upcoming Investor day.
David E. Flitman: We're excited to share the MOXIE roadmap and growth plans for this digital platform during our upcoming Investor Day. Now, let's now turn to our growth pillar on slide seven. We remain focused on accelerating profitable growth and gaining market share with our target customer type. We are on track to achieve our one and a half times market growth goal for restaurants for the full year.
Michael D. Neese: Let's now turn to our growth pillar on slide seven.
Michael D. Neese: We remain focused on accelerating profitable growth and gaining market share with our target customer types.
Michael D. Neese: We are on track to achieve our one and a half times Margaret growth goal for restaurants for the full year driven.
Michael D. Neese: Driven by faster growth within independence.
David E. Flitman: Our 4.6% independent case growth resulted in an acceleration of share gains from the fourth quarter, again marking our 12th consecutive quarter of market share gains. Our Pronto small truck delivery service is a true competitive differentiator and continues to gain traction with our customers.
Michael D. Neese: Or $4, 6% independent case growth resulted in an acceleration of share gains from the fourth quarter.
Michael D. Neese: Again, marking are 12 consecutive quarter of market share gains.
Michael D. Neese: Our pronto small truck delivery service is a true competitive differentiator and continues to gain traction with our customers.
Michael D. Neese: Through this platform, we are able to offer our customers significant benefits, including flexibility of delivery, which allows us to compete with local and specialty competitors.
David E. Flitman: Through this platform, we're able to offer our customers significant benefits, including flexibility of delivery, which allows us to compete with local and specialty competitors. At the end of the first quarter, we were live in 36 markets and expect to add five additional markets in 2024. Pronto is on track to deliver approximately $600 million of annualized sales this year with plenty of runway ahead. We have also recently launched what we are calling Pronto Penetration in two markets, which for the first time extends the Pronto service to existing independent customers who will be able to order on non-routed dates.
Michael D. Neese: At the end of the first quarter, we were alive and 36 markets and expect to add five additional markets in 2024.
Michael D. Neese: <unk> is on track to deliver approximately $600 million of annualized sales this year with plenty of runway ahead.
Michael D. Neese: We also recently launched what we're calling pronto penetration into markets.
Michael D. Neese: Which for the first time extend the pronto service to existing independent customers, who will be able to order on nonrhotic dates.
David E. Flitman: Once fully implemented, this new offering is expected to further increase our share of wallet with our existing customer base. Last quarter, I provided you with an update on our sales compensation plan. As you recall, the variable components of our plan are now more meaningful for our sellers. While it's only been one quarter, our plan is working as designed.
Michael D. Neese: Once fully implemented this new offering is expected to further increase our share of wallet with our existing customer base.
Michael D. Neese: Last quarter I provided you with an update on our sales compensation plan.
Michael D. Neese: As you'll recall the variable components of our plan are now more meaningful for ourselves.
Michael D. Neese: Well, it's only been one quarter our plan is working as designed.
David E. Flitman: Many of our sellers are exceeding their targets and receiving higher compensation for that profitable growth. For example, one of our sellers in South Carolina grew cases 50% faster than the fourth quarter, exceeded his target, and earned a 10% compensation increase. And for those who are not growing as fast with our new targets, we believe they will rebound in the quarters ahead. Turning to slide 8, our profit pillar.
Michael D. Neese: Many of our sellers are exceeding their targets and receiving higher compensation for that profitable growth for.
Michael D. Neese: For example, one.
Michael D. Neese: One of our sellers in South Carolina grew cases, 50% faster than the fourth quarter exceeded his target entered a 10% compensation increase.
Michael D. Neese: And for those who are not growing as fast with our new targets. We believe they will rebound in the quarters ahead.
Michael D. Neese: Turning to slide eight or profit pillar.
David E. Flitman: Adjusted gross profit grew nearly 7% in the first quarter to $1.5 billion. We drove further progress on initiatives such as cost of goods sold by collaborating with additional vendors. In total, we have addressed 60% of our COGS, which has translated into approximately $120 million in savings over the past 12 months. We have initiated the work to address the remaining 40% of our spend this year. We also continue to make progress on growing our independent restaurant private label brands, which increased 90 basis points year-over-year to over 52%. Increasing private label penetration remains a significant opportunity for U.S. foods.
Michael D. Neese: Adjusted gross profit grew nearly 7% in the first quarter to one $5 billion.
Michael D. Neese: We drove further progress on initiatives such as cost of goods sold by collaborating with additional vendors.
Michael D. Neese: In total we have addressed 60 per cent of our Cox, which is translated into approximately $120 million in savings over the past 12 months.
Michael D. Neese: We have initiated the work to address the remaining 40% of our <unk> this year.
Michael D. Neese: We're also continued to make progress on growing our independent restaurant private label brands, which increased 90 basis points year over year to over 52%.
Michael D. Neese: Increasing private label penetration remains a significant opportunity for U S foods.
David E. Flitman: We believe we can increase customer value through our innovative and high-quality products at a competitive price while also improving our margins. Finally, our delivery productivity improved 4% over the prior year, and we continue to improve our overall supply chain productivity through turnover reduction, flexible scheduling, and process standardization. The 4% delivery productivity is in line with our goal of 3-5% annual gains to offset wage inflation. This productivity improvement is additive to the operating expense reduction I spoke about earlier.
Michael D. Neese: We believe we can.
Michael D. Neese: Customer value to our innovative and high quality products at a competitive price while also improving our margins.
Michael D. Neese: Finally, our delivery productivity improve 4% over the prior year and we continue to improve our overall supply chain productivity through turnover reduction flexible scheduling and process standardization.
Michael D. Neese: The 4% delivery productivity is in line with our goal of 3% to 5% annual gains to offset wage inflation.
Michael D. Neese: This productivity improvement is additive to the operating expense reduction I spoke about earlier.
Michael D. Neese: Before I hand, it over to <unk> I would like to acknowledge too recent winners of our first ever C E O of awards.
David E. Flitman: Before I hand it over to Dirk, I would like to acknowledge two recent winners of our first ever CEO award. Mark Schuster, Warehouse Manager, and Timothy Gephardt, State Warehouse Supervisor, at our Culinary Equipment and Supply Business in Allentown, Pennsylvania. This distribution center celebrated 11 years of injury-free operations last year. During that time, they nearly doubled the number of cases shipped while improving productivity by approximately 50 percent. Mark and Tim made safety a top priority through regular training programs and team huddles to ensure that the entire team took personal accountability for safety.
Michael D. Neese: Mark Schuster warehouse manager and Timothy Gephardt date warehouse supervisor at our culinary equipment and supplies business in Allentown, Pennsylvania.
Michael D. Neese: This distribution center celebrated at 11 years of injury free operations last year.
Michael D. Neese: That time.
Michael D. Neese: Nearly doubled the case of shifts while improving productivity by approximately 50%.
Michael D. Neese: Mark and Tim make safety, a top priority for regular training programs and team huddles to ensure that the entire team to personal accountability for safety.
David E. Flitman: Thanks, Mark and Tim, for your outstanding leadership. As we approach Memorial Day, I want to thank all of our veterans for their service, including our associates who have served our great country. On this Memorial Day, we pay tribute to those who have served our country and made the ultimate sacrifice. Each day, we have the privilege to enjoy our freedom because of their fearless service. As you spend time with your loved ones on this holiday, please join me in remembering the heroes who courageously gave their lives for our country and for our freedom.
Speaker Change: Thanks, Mark and Tim for your outstanding leadership.
Speaker Change: As we approached Memorial day, I want to thank all of our veterans for their service, including our associates, who have served our great country.
Speaker Change: On this memorial day, we pay tribute to those who have served our country and made the ultimate sacrifice.
Speaker Change: Each day, we have the privilege to enjoy our freedom because of their fearless service.
Speaker Change: As you spend time with your loved ones on this holiday. Please join me in remembering the heroes, who courageously gave their lives for our country.
Speaker Change: And for our freedom.
Speaker Change: Let me now turn the call over to Dirk to discuss our first quarter results in our 2024 guidance.
Dirk J. Locascio: Let me now turn the call over to Dirk to discuss our first quarter results and our 2024 guidance. Thank you, Dave. And good morning, everyone.
Dirk: Thank you day and good morning, everyone.
Dirk: Our performance for the first quarter was consistent with our expectations as we executed well despite the challenging start to the year, highlighting our strong financial discipline and staying focused on what we can control.
Dirk J. Locascio: Our performance for the first quarter was consistent with our expectations as we executed well despite the challenging start to the year, highlighting our strong financial discipline and staying focused on what we can contribute. Starting on slide 10, first quarter net sales increased 4.8% to $8.9 billion, given by total case volume growth of 4.2% and food cost inflation of 1.5%, mixed with a headwind of nearly 90 feet.
Dirk: Starting on slide 10, first quarter net sales increased 4.8% to $8 $9 billion, driven by total case volume growth of 4.2% and food cost inflation of 1.5%.
Dirk: Mix of the headwind of nearly 90 basis points.
Dirk: Independent restaurant volume increased 2.46% overall in 2.9% organic.
Dirk J. Locascio: Independent restaurant volume increased 4.6% overall and 2.9% organically. Healthcare and Hospitality Group revenue increased 6.4% and 0.9%, respectively. Healthcare growth remains strong, while hospitality growth was less than we expected due to softer same-store sales and a tougher compare versus a strong prior year. We expect hospitality growth to accelerate through the second quarter and the second half of this year as we onboard new customers. Adjusted EBITDA grew 5.6% from the prior
Dirk: Healthcare hospitality from six 4% and 9% respectively.
Dirk: Healthcare growth remains strong hospitality growth was less than we expected due to software same store sales and a tougher compare versus a strong prior year.
Dirk: We expect hospitality to accelerate through the second quarter and the second half of this year as we are more of new customers.
Dirk: Adjusted EBITDA for five 6% from the prior year to $356 million.
Dirk J. Locascio: This was slightly above the high end of our guidance, driven by a combination of profitable volume growth, strong Gross Profit Gains, and Solid Expense Management. Adjusted EBITDA margin remained largely unchanged at 4% despite the headwind of incremental costs to serve our customers during the January labor dispute. Absent these costs, plus the volume headwinds from labor and weather, which altogether total approximately $20 million, we estimate that our adjusted EBITDA growth rate over the prior year would have been approximately 12%, and adjusted EBITDA margin would have increased approximately 20%. Turning to slide 11.
Dirk: This was slightly above the high end of our guidance driven by a combination of profitable volume growth strong gross profit gains and solid expense management.
Dirk: Adjusted EBITDA margin remained largely unchanged a 4% despite the headwind of incremental costs to serve our customers during the January labor construction.
Dirk: Absent these costs plus the volume headwinds from labor and weather, which altogether total approximately $20 million, we estimate that our adjusted EBITDA growth rate over the prior year would have been approximately 12% and adjusted EBITDA margin would have increased approximately 20 basis points.
Dirk: Turning to slide 11, we.
Dirk J. Locascio: We increased adjusted EBITDA per case again this quarter, despite incurring higher incremental costs related to the labor disruption. Adjusted gross profit per case growth continued at a strong 17 percent improvement over the prior year, driven by our cost of goods sold initiative and disciplined pricing. On an annualized basis, this improvement would result in more than $100 million in incremental gross product. Adjusted operating expense per case increased $0.15, with more than $0.07 related to incremental expenses from the labor disruption. Adjusted EBITDA for a case was $1.75, up two cents from the prior year. Excluding the incremental costs, adjusted EBITDA per case would have been a $0.09 improvement over the prior years.
Dirk: We increase adjusted EBITDA per case again this quarter, despite incurring higher incremental costs related to the labour disruption.
Dirk: Adjusted gross profit per case growth continued as strong 17 cent improvement over prior year, driven by our cost of goods sold initiative and disciplined pricing.
Dirk: An annualized basis. This improvement would result in more than $100 million in incremental gross profit.
Dirk: Ah just up adjusted operating expense per case increased 15 cents with more than seven cents related to incremental expenses from the labour disruption.
Dirk: Adjusted EBITDA per case was $1.75 of <unk> from the prior year.
Dirk: Excluding the incremental costs adjusted EBITDA per case would've been a nice improvement over prior year.
Dirk: We are focused on driving further operating leverage improvement and growing adjusted EBITDA per case by continuing to execute on initiatives that are within our control.
Dirk J. Locascio: We are focused on driving further operating leverage improvement and growing adjusted EBITDA per case by continuing to execute on initiatives that are within our control. For example, we are making steady progress with our cost of goods sold optimization work. Improving Supply Chain Productivity and streamlining administrative processes and headcount, as they've noted, as well as increased indirect spend management savings as more initiatives in this area are deployed. Moving on to slide 12, we continue to generate strong operating cash flow driven by earnings and effective working capital management.
Dirk: We are making steady progress with our cost of goods sold optimization works.
Dirk: Having supply chain productivity and streamlining administrative processes and head count as Dave noted as well as increase indirect spend management savings is more initiatives in this area are deployed.
Dirk: Moving on to Slide 12, we continue to generate strong operating cash flow driven by earnings and effective working capital management.
Dirk: Operating cash flow for the quarter was $139 million, which is driven by strong profitability.
Dirk J. Locascio: Operating cash flow for the quarter was $139 million, which was driven by strong profitability. However, this was lower than the prior year as we had more working capital benefit in the first quarter of 2023 from extending payables with certain suppliers. Absent of the working capital impact, operating cash flow was modestly above the prior year.
Dirk: However, this was lower than prior year as we have more working capital benefit in the first quarter of 2023 from extending payables with certain suppliers.
Dirk: The working capital impact operating cash flow was modestly above prior year.
Dirk: We continue to actively manage working capital and expect to drive further improvements in 2024 from initiatives targeted inventory and payables.
Dirk J. Locascio: We continue to actively manage working capital and expect to drive further improvements in 2024 from initiatives targeting inventory and payable. We expect operating cash flow growth over 2023 for the full year. We will continue to invest in the business for growth and remain focused on our capital allocation priorities to maintain that leverage within our target range of 2.5 to three times return capital to shareholders via share buybacks and opportunistically pursue a creative tuck in A.
Dirk: We expect operating cash flow growth over 2023 for the full year.
Dirk: We will continue to invest in the business for growth and.
Dirk: And remain focused on our capital allocation priorities to maintain that leverage within our target range of 2.5 to three times.
Dirk: Return capital to shareholders via share buybacks and Opportunistically pursue accretive tucking day.
Dirk: We repurchased $13 million shares during the first quarter.
Dirk J. Locascio: We repurchased $13 million of shares during the first quarter, but repurchases were muted as we were in the process of acquiring IWC. We're excited to welcome the IWC team to US Foods as we close on the acquisition in April for a price of approximately $220 million dollars, which was funded through operating cash. Turning to slide 13, we ended the quarter with net leverage at 2.8 times, which is a 0.4 term reduction versus the same period last year and consistent with where we ended 2023. In February, we successfully repriced our term loan to 2028 and reduced the interest rate margins by 50 basis points.
Dirk: Repurchases were muted as we are in the process of acquiring iwc.
Speaker Change: We're excited to welcome the Iwc team to use foods as we closed on the acquisition in April.
Speaker Change: The price of approximately $220 million, which responded through operating cashbox.
Speaker Change: Turning to slide 13, we ended the quarter with net leverage at 2.8 times, which is a 0.4 term reduction versus the same period last year and consistent with where we ended 2023.
Speaker Change: In February we successfully repriced our term loan through 2028 and reduce the interest rate margins by 50 basis points.
Dirk J. Locascio: As a reminder, we do not have any debt maturities until 2020. Now, turning to guidance on slide 14. Given our performance for the first quarter, and I'll look for the balance of the year, we are reaffirming our fiscal year 2024 guidance. We continue to expect Adjusted EBITDA to be in the range of $1.69 to $1.74 billion and Adjusted Diluted EPS between $3 and $3.25. The macro remains a little softer than many had anticipated going into the year, but as you heard from Dave, we continue to outpace the growing broad line distribution channel.
Speaker Change: As a reminder, we do not have any debt maturities until 2026.
Speaker Change: Now trying to guidance on slide 14.
Speaker Change: Given our performance or the first quarter and I'll look for the balance of the year, we are reaffirming our fiscal year 2024 guidance.
Speaker Change: We continue to expect adjusted EBITDA to be in the range of 1.692 $1.74 billion and adjusted diluted EPS between $3 and $3.20.
Speaker Change: The macro remains a little softer than we have many anticipated going into the year <unk>.
Speaker Change: As you heard from Dave we continued to outpace the growing broadline distribution channels.
Dirk J. Locascio: Our industry is resilient, and US Foods is well-positioned for above-market growth with our differentiation, diverse customer base, and customer-focused strategy to drive shared gain. As a result, we continue to expect our full-year case volume growth to be within our guidance range of four to six months. In addition to continued volume growth, we have the right strategies in place and are expanding gross margins through initiatives such as cost of goods management and driving OPEX productivity through improved routing, administrative process streamlining, and indirect spend management. With that, I'll pass it back to Dave for his closing remarks. Thanks, Dirk.
Speaker Change: Our industry is resilience and U S foods as well positioned for above market growth with our differentiation diverse customer base and customer focused strategy drive share gains as.
Speaker Change: As a result, we continue to expect our full year case volume growth to be within our guidance range of 4% to 6%.
Speaker Change: In addition in addition to continued volume growth we have the right strategies in place and are expanding gross margins through initiatives, such as cost of goods management and driving opex productivity to improve routing.
Speaker Change: Administrative process streamlining and indirect spend management.
Speaker Change: With that I'll pass it back today first closing remarks. Thanks, Dirk looking ahead, we remain intensely focused on executing our strategy and we will maintain our disciplined approach to capital deployment to drive long term shareholder value.
David E. Flitman: Looking ahead, we remain intensely focused on executing our strategy and will maintain our disciplined approach to capital deployment to drive long-term shareholder value. We see tremendous opportunities ahead as we focus on what we can control and continue to deliver on our commitments, regardless of the operating environment. Our future is promising, and I am highly confident in our ability to continue to outpace industry growth over the long term and to leverage that growth effectively for the bottom line.
Dirk: We see tremendous opportunities ahead, as we focus on what we can control and continue to deliver on our commitment regardless of the operating environment.
Dirk: Our future is promising and I'm highly confident in our ability to continue to outpace industry growth over the long term and to leverage that growth effectively to the bottom line.
David E. Flitman: Finally, we are excited about our upcoming Investor Day on June 5th, where we will share our new long-range plan targets and why we believe we have the right strategy and the best associates in the business to execute that plan.
Dirk: Finally.
Dirk: We are excited about our upcoming Investor day on June 5th.
Dirk: We will share our new long range plan targets and why we believe we have the right strategy and the best associates in the business to execute that plan <unk>.
Krista: We hope you can join us here at our company headquarters or via the webcam. With that, Krista, please open up the call for questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Dirk: We hope you can join US here at our company headquarters will be the webcast.
Speaker Change: With that person please open up the call for questions.
Speaker Change: Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask you a question in our list via a loudspeaker on your device. Please pick up your hands.
Krista: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure your phone is not on mute when asking your question.
Speaker Change: And in sharing your phone is not on mute.
Speaker Change: Been asking your question and please limit your question to one question and one follow up. Your next question comes on the line as Alex <unk> with Jeffrey. Please go ahead.
Krista: And please limit your question to one question and one follow-up. Your next question comes from a line of Alex Slagle with Jeffreys. Please go ahead. Thanks. Good morning. Yes, question.
Alex: Thanks. Good morning, Yes question more on the macro just high level I mean in some segments. The management teams companies cut various ratchet it down their growth expectations because of this after traffic environment.
Alex: Trying to figure out if this impacted your internal targets to certain degrees and maybe you could talk to send that the incremental upsets. The ear thing that allow you to reiterate your outlook.
Speaker Change: Yeah. Thanks, Good morning, Alex.
David E. Flitman: Yeah, thanks. Good morning, Alex.
Speaker Change: Look I think it's well documented that there have been some foot traffic challenges in industry, but as I continued to say to you all and I say to our team internally.
Speaker Change: We have so much opportunity to continue to focus on the things, we can control like gaming profitable market share.
David E. Flitman: So look, I think it's well documented that there have been some foot traffic challenges in the industry. But as I continue to say to you all, and I say to our team internally, you know, we have so much opportunity to continue to focus on the things we can control, like gaining profitable market share. And look, I couldn't be more pleased or proud of our team for the performance in the first quarter. Obviously, the well-documented weather situation was out there.
Speaker Change: And look I couldn't be more pleased are proud of our team on the performance in the first quarter, obviously, the well documented weather situation was out there on top of that we had a labour disruption that lasted for the majority of the month of January is still we outperformed the market accelerated share games and so that is what gives me confidence in our ability to continue to outpace the market.
David E. Flitman: On top of that, we had a labor disruption that lasted for the majority of the month of January. And still, we outperformed the market and accelerated share gains. And so that is what gives me confidence in our ability to continue to outpace market growth, regardless of what's going on in the world around us. And then, secondly, you heard a lot this morning from both me and Dirk about our continued work around self-help.
Speaker Change: Both regardless of what's going on around US and then secondly, you heard a lot. This morning for both me and Dirk about our continued work.
David E. Flitman: And again, with all the distractions we had in January, our team's ability to stay focused and put up the productivity numbers that we talked about this morning just gives me great confidence that that momentum will continue. We have a strong pipeline of initiatives, as you heard, and we're continuing to stay focused.
Speaker Change: Around self-help and there's so much of that going on and again with all distraction with added January.
Speaker Change: Our team's ability to stay focused and put up the productivity numbers that we talked about here. This morning. This gives me great confidence that momentum will continue we have a strong pipeline of initiatives and hurt and we're continuing to stay focused.
Speaker Change: Congrats on the progress.
Speaker Change: Thanks, a lot of.
Speaker Change: Your next question comes from the line of John Heinbach, All with Google Home Securities. Please go ahead.
David E. Flitman: Your next question comes from the line of John Heinbockel with Google Heim Securities. Please go ahead.
John Edward Heinbockel: Hey, guys wanted to start with because a lot of noise right, a new unusual amount of noise in the first quarter, where where do you think the.
David E. Flitman: Hey, guys, I want to start with a lot of noise, right? An unusual amount of noise in the first quarter. Where do you think the trend line on independent case growth is? I know it was the organic piece, right?
John Edward Heinbockel: The trend line, an independent case growth is that was it I.
John Edward Heinbockel: I know it was organic deep fried so that was two nine impacted by weather and strike do you think we're.
David E. Flitman: So that was 2-9 impacted by weather and strike. You think we're 4-5, and wherever we are, is all of that coming from new account growth, right? And so penetration, you know, for everybody, right? It's kind of stalled out. Is that kind of where we are composition-wise?
Speaker Change: Four to five and wherever we are.
Speaker Change: All of that coming from new account growth.
Speaker Change: Right and so penetration.
Speaker Change: For everybody I, just kind of stalled out.
Speaker Change: That kind of where we are composition wise.
David E. Flitman: Yeah, I think in that mid-single-digit range, John, kind of how you framed it, it's probably the right trajectory. You know, we were relatively flattish in January, year over year, which I thought was a win for the team, given the challenges that we had, and then it accelerated from there. You know, as we flipped into the second quarter, it's roughly on par with, you know, the way we exited the first quarter. And so, yeah, the foot traffic's a challenge, but our ability to generate new business is key to our success.
Speaker Change: Yeah, I think in that mid single digit range, John kind of how you frame. It is probably the right trajectory we were relatively flattish in January a year over year, which I thought was a win for the team given the challenges that we had and then has accelerated from there.
Speaker Change: As we flipped into the second quarter is roughly on par with the way we exited the first quarter.
Speaker Change: So yeah the.
Speaker Change: Traffic's, a challenge, but our ability to generate new business is key to our success.
David E. Flitman: Penetration is a challenge just with the foot traffic piece of it, but we also have an opportunity to sure up lost business, which hasn't been a problem for us, but there's always an opportunity to do a better job there. So that combination of net new account generation, that difference between new accounts and shoring up lost business is where our team stays focused, and obviously, we continue to look for every penetration opportunity we can. You heard me talk this morning about the pronto penetration opportunity. That's new for us.
Speaker Change: Penetrations, a challenge just with the foot traffic piece of it but we also have an opportunity to sure up lost business, which hasn't been a problem for us, but there's always opportunity to do a better job. There. So that combination of net new account generation that difference between two accounts.
Speaker Change: Sharing up the lost is where our team stays focused and obviously continue to look for every penetration opportunity. We we can you heard me talk this morning about the pronto penetration.
David E. Flitman: We're excited about taking that offering to our existing customer base, and we think that's going to mean good things on the penetration front as we ramp that up across the company. I think, John, the other thing that shows through in our first quarter results with our 1.4% organic total case growth, which is faster than the industry and others, is really, I think it highlights the diverse mix of customers that we have. And so it's about our target customer types and overall smart, profitable growth.
Speaker Change: Penetration opportunity that's new for US we're excited about it to take that offering to our existing customer base.
Speaker Change: We think that's gonna be good things on the penetration front wrap that up across the company Hey, John the other thing that shows through our first quarter results with our 1.4% organic total case growth which is.
John Edward Heinbockel: And the industry and others is really I think it highlights a diverse mix of customers that we have and so it's about my target customer types in that overall smart profitable growth.
David E. Flitman: Maybe the follow-up, right? I think you maybe sized for the first time the 60% of the product base that you've gone through 120 million savings. So when you think about the next 40%, I assume that it's not as productive as the first 60%, which may be wrong, and then you'll go back around again. So when you think about, on a go-forward basis, You know, in aggregate, is there a lot more than 120 million to go, you know, over a multi-year period, or or no, do you think? Well, I think you're thinking about it right.
John Edward Heinbockel: Maybe it's the follow up right the.
John Edward Heinbockel: Maybe size for the first time, the 60% of the.
John Edward Heinbockel: Chronic base that you've gone through 120 million savings.
John Edward Heinbockel: Do you think about the next 40 per cent I assume that's not as productive as the first 60, which may be wrong and then you'll go back around again. So when you think about on a go forward basis.
John Edward Heinbockel: Is that in aggregate is there a lot more than $120 million.
John Edward Heinbockel: To go over a multiyear period or or no do you think.
David E. Flitman: Well, I think you're thinking about it right, the 40% won't likely be as large as the 60, just to size that a little bit for you, John. But there is a lot to do going forward, and to your point about cycling back, I think there'll be more momentum than we've had on the existing side. And look, the beauty is, in a month, we're going to lay all this out for you at our Investor Day on June 5th and talk about that contribution and where it comes from over the next three years.
John Edward Heinbockel: Well I think you're thinking about it right the 40% won't likely be as large as the as the sixties just the size that a little bit for Ya, John but there is a lot to do going forward and to your point around cycling back I think there'll be existing moment more momentum than we've had an existing site.
John Edward Heinbockel: Look the beauty is in a month, we're going to lay all this out for you and our Investor day on June 5th and talk about that contribution that where it comes from over the next three year time horizon.
Speaker Change: Thank you.
Speaker Change: Thank you.
John Edward Heinbockel: Your next question comes from the line of Brian Harper with Morgan Stanley. Please go ahead.
David E. Flitman: Your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.
Brian Harper: Yeah good morning.
David E. Flitman: Yeah, thanks. Good morning. I'm sure he'll talk about this next month too, but just, you know, what's the source of some of the additional cost savings opportunities that you mentioned in your comments, Dave? What should I point to?
Brian Harper: Sure I'll talk about this next month's too, but just you.
Brian Harper: What what's the source of some of the additional kind of cost savings opportunities that you mentioned in your comments Dave.
David E. Flitman: Well, two, I'd point to one that I commented on and the other one I didn't, but the work that we've done around replenishment, you know, with $15 million in expense reduction, that's been an ongoing piece of work. I think there's likely still more to come there as we ramp up technology in that part of the business. And so, we're excited about that.
Dave: Well too I 0.21, I commented on and the other one I didn't but the work that we've done around replenishment deal with $15 million in expense reduction that's been an ongoing piece of work I think there's like we still more to come there as we ramp up technology.
Brian Harper: And in that part of the business and so we're excited about that the teams worked hard to achieve the numbers that I spoke about.
David E. Flitman: The team's worked hard to achieve the numbers that I spoke about. But importantly, also, Brian, you know, you've heard me talk over the course of the last year about shifting our focus and our resources back into the field, giving the responsibility to the P&L owners, and unwinding a bit of this centralization that has been done throughout the company over a number of years. And with that move back to the field, there will be efficiency gains.
Brian Harper: But importantly also Brian you've heard me talk over the course of the last year about shifting our focus and a resource back into the field.
Brian Harper: Given the responsibility to the <unk> owners and unwinding a bit of decentralization that has been done over the company over a number of years and with that move back to the field comes efficiency gains.
David E. Flitman: You know, and I'm a firm believer that the folks that own the P&L are going to determine whether they need the headcount and whether it's adding value or not. You've seen some of that initially pop out from the work that we've done here, particularly over the last six months. And there's likely more to come on that journey as well.
Brian Harper: And I'm a firm believer that the folks to phone the P&L, Oregon determine whether they need to head count, whether it's adding value or not you've seen some of that initially pop out from the work that we've done here are particularly over the last six months.
Brian Harper: And there's like even more to come on that journey as well.
Speaker Change: Okay. Thanks.
David E. Flitman: Just on the healthcare and hospitality side too. How quickly do you expect some of this new business to pick up on the hospitality side? You know, is health care sort of outsized still? Or do you think, you know, a similar pace can sustain? How do those pieces sort of factor into your case growth outlook for the year? Yeah.
Brian Harper: Health care hospitality side too.
Brian Harper: You know how.
Speaker Change: How quickly do you expect some of this new business to pick up on the hospitality side, you know it is health care sort of.
Brian Harper: Sighs still or do you think you know a similar pace can sustain how did those pieces sorta factor into your case growth outlook for the year.
David E. Flitman: Yeah, I think, you know, let me take hospitality first. You know, we're a little over-indexed in our hospitality mix around lodging. I think that was challenged a bit with same-store sales and foot traffic, even during spring break. You know, we didn't see the uplift that you normally see. I think there's probably some more international travel that happened this spring break versus prior years coming out of COVID and things like that going on.
Speaker Change: Yeah, I think let me take hospitality first you know, we're a little overindexed.
Speaker Change: Overindexed in our hospitality mix around lodging.
Speaker Change: I think that was challenge the bit with the same store sales and foot traffic even in spring break we didn't see the uplift to that you normally see I think there's probably some more international travel. This happened this spring break versus prior years coming out of Covid and things like that going on but look we've got line of sight to a very strong pipeline and not just in health care and hospitality, but also.
David E. Flitman: But look, we've got line of sight to a very strong pipeline, and not just in healthcare and hospitality but also in our independent business. And we're in the process of ramping up that business here in the second quarter. And that's what I pointed out when I shared the confidence in the earlier question about the momentum continuing here. Really good progress, lots of momentum, strong pipeline that we expect to convert, you know, in the second quarter and beyond.
Speaker Change: Are independent business and we're in the process of ramping up that business here in the second quarter and that's that's what I point too when I when I shared the confidence in the earlier question about the momentum continually here.
Speaker Change: Really good progress lots of momentum strong pipeline that we expect to convert.
Speaker Change: Second quarter and beyond here.
Speaker Change: Your next question comes from the line of Edward Kelly with Wells Fargo. Please go ahead.
David E. Flitman: Your next question comes from the line of Edward Kelly with Wells Fargo. Please go ahead.
David E. Flitman: Yeah, good morning everyone. A nice quarter in a tough environment. I wanted to ask you about the spread between gross profit per case and operating expenses per case. Slightly negative in Q1, which is obviously uncharacteristic for you, and there was the strike issue. Maybe ease out, you know, the Q1 performance a bit more. And then what I'm really interested in is looking ahead. You know, there's obviously a ton of self-help that you've been talking about, mixed benefits, inflation.
Edward Joseph Kelly: Yeah, good morning, everyone nice corner, a tough environment.
Edward Joseph Kelly: To ask you about the spread between gross profit vacation opex per case slightly negative and coupon, which is obviously uncharacteristic for you and there was a strike issue.
Edward Joseph Kelly: Maybe.
Edward Joseph Kelly: Q1 performance, you know a bit more than what I'm really interested in is looking ahead. You know, there's obviously a ton of self-help that you've been talking about mixed benefits inflation's coming back can you just maybe talk about how do you see that spread evolving and what's a realistic target for the remainder of the year.
Speaker Change: Mmm I think I just wanted to add a stir and so overall, we do not gonna give us specific number but we do expect to continue to have a healthy spread that's part of our balanced growth strategy I think the the overall inflation, although it's it's picked up some it's still pretty modest at.
Dirk J. Locascio: Good morning, guys. This is Dirk.
Dirk J. Locascio: So overall, you know, we're not going to give a specific number, but we do expect to continue to have that healthy spread as part of our balanced growth strategy. I think overall inflation, although it's picked up some, is still pretty modest at one and a half percent for the first quarter. So, as you've heard me say a number of times, when it's like that, it's going to be a small contributor, but it's not going to be the key thing you hear us talk about driving overall growth.
Edward Joseph Kelly: One 5% of the first quarter so.
Edward Joseph Kelly: You've heard me, saying for times, when it's like that it's going to be a small contributor, but it's not going to be the key thing you hear us talk about driving the overall growth.
Edward Joseph Kelly: I expect to continue Dah improvement in G. P expect continued productivity to offset a good portion of inflation and each of those impacts really to come from the things that we're doing within our four walls on a different activities initiatives, but we do continue to expect adjusted EBITDA per case to continue to increase.
Dirk J. Locascio: I expect continued improvement in GP, and continued productivity to offset a good portion of inflation, and each of those impacts really to come from the things that we're doing within our four walls with the different activities and initiatives. But we do continue to expect adjusted EBITDA per case to continue to increase.
Speaker Change: Maybe just a quick follow up but I wanted to ask you about M&A real quick you know it looks like you had about a 2.8% benefit and of course I'm emanates.
Dirk J. Locascio: Maybe just a quick follow up. I wanted to ask you about M&A real quick. You know, it looks like you had about a 2.8% benefit in the quarter from M&A. IWC comes in, you know, in Q2. So I guess that's going to ramp up. But the guidance, I think, includes a 2% benefit from M&A. So maybe, you know, could you just talk about how that's going? And then from a pipeline standpoint, like how are you; you've done a few deals. So how are you thinking about, you know, the outlook from here? I did note that it looks like M&A is kind of below share repo on the priority list on that slide, I think.
Speaker Change: W. C comes in you know in queue too. So I guess, that's gonna rant, but the guy didn't say thank includes a two per cent benefit and EM.
Speaker Change: From M&A. So maybe you know could you just talk about how that.
Speaker Change: <unk> from a pipeline standpoint.
Speaker Change: Like How're you you've done a few deal. So how are you thinking about you know the album from here I didn't know that it looks like M&A is kinda below shat recall on a priority list on that side I think.
Dirk J. Locascio: Why don't I start with just the overall M&A?
Speaker Change: Sure why don't I start with just the overall M&A and so yes, I'd have receive will come in and so we'll have a couple of months of overlap, but Randy will roll off later in the second quarter. So it really will be one on one off over the period and then Saturday us through most of the rest of the year.
Dirk J. Locascio: Yes, IWC will come in, so we'll have a couple of months of overlap, but Renzi will roll off later in the second quarter. So it really will be one-on, one-off over the period, and then Saladino will be through most of the rest of the year. So I think overall, I expect it to be pretty similar, and I think, as Dave talked about with our organic case growth, we get past some of the January challenges and some of the things that he talked about in our pipeline, and that's why we feel so good about reiterating our guidance on volume.
Speaker Change: Overall.
Speaker Change: Expect it to be pretty similar and I think that they've talked about with our organic case growth.
Speaker Change: Past some of the January challenges and some of the things that you talked about in our pipeline.
Speaker Change: That's why we feel so good about our reiterating our guidance on violent.
Dirk J. Locascio: Yeah, on the pipeline, it remains strong. We'll give a little bit more color on that at Investor Day here coming up on June 5. But I will just reinforce a couple points that I've always said around M&A. First,
Speaker Change: On the on the pipeline and remains strong.
Speaker Change: Well, we have a little bit more color on that as an investor day here come coming up on June 5th, but I will just just reinforce a couple points that I've always sat around M&A first of all I think it can be as creative add to the business for the right deals with the right management teams at the right time, but we don't need to do any of them.
David E. Flitman: Around M&A, first of all, you know, I think it can be a creative add-on to the business for the right deals with the right management teams at the right time. But we don't need to do any of that. And so we're not going to force anything, and we're not going to overpay, and we have evidence of that in the three deals that we've done. And to your point about share repurchases, look, we've done three deals here in less than 12 months. We've got some integration work ahead of us, so you'll likely see us take a breath around M&A for a little bit.
Speaker Change: And so we're not going to force anything that we're not gonna overpaid and we haven't seen the three deals that we dumped into your point around share repurchases look we've done three deals here in less than 12 months. We've got some integration work ahead of us you'll likely see us take a breath around M&A here for a little bit and.
Speaker Change: And harder to share repurchases as the year progresses, as we said in script.
Speaker Change: Alright, thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of <unk> Securities. Please go ahead.
David E. Flitman: Your next question comes from the line of Jake Bartlett with Truist Securities. Please go ahead.
David E. Flitman: Great, thanks for taking the question. You know, my first choice is the channels and the organic growth within them.
Speaker Change: Great. Thanks for taking the question you know my <unk>.
Speaker Change: First is on on the channels and the organic growth within them. So you've given the overall case with an independent organic but how does the head with the acquisition impact healthcare hospitality and chain and then building on that chain.
Dirk J. Locascio: So you've given, you know, overall case growth and independent organic growth, but how do acquisitions impact health care hospitality and chain? And then building on that, you know, chain case growth accelerated pretty meaningfully. If it's not acquisitions, you know, what is driving that pretty strong acceleration? Thanks.
Speaker Change: Change case with accelerated pretty meaningfully if it's not acquisition <unk>, what is driving that that that prescribed acceleration. Thanks.
Speaker Change: <unk>.
Dirk J. Locascio: Good morning, Jake. So healthcare and hospitality, the acquisitions had very little impact on either of those from a growth rate perspective. Chains did have a much more significant impact, and that's primarily, as you may remember from our discussions before around saladinos, which has a stronger chain base of the business. Black Fox indicated for the first quarter. So really not too different from a trend there.
Speaker Change: I've been wanting Jake the health care and hospitality the acquisitions had very little impact.
Speaker Change: To either of those from appropriate perspective change I did have a much more significant impact and that's primarily as you may remember from our discussions before around <unk>, which hasn't had a stronger chain base of the business. So we talked about 3.7% overall chain growth, but organic was down around 4% so very similar.
Speaker Change: <unk>.
Speaker Change: Black box indicated for the first quarter.
Speaker Change: Not too different from a trend there.
Dirk J. Locascio: Okay, so you said organic was down 4%? Just maybe repeat that. Chains are down 4%, which is pretty much right in line with the stock market. Got it. Great.
Speaker Change: Okay. You said organic was was down four per cent just need me to repeat that 8%, which is pretty much right in line with the stock box data what's required.
Speaker Change: Got it great and then my other question was just about the size of your of your sales force and you know I believe you're you're growing your sales force you slower than you two largest peers and so.
David E. Flitman: And then my other question was just about the size of your sales force. And, you know, I believe you're growing your sales force, you know, slower than your two largest peers. And so I'm wondering what your thoughts are on, you know, how that might impact your share gains going forward. How much of the share gains do you think has been driven by investments in your sales force? And, you know, could that become a headwind as your, you know, larger competitors, I believe, are, you know, adding to their sales force quicker? So first of all, I'll take the second part.
Speaker Change: What your thoughts are on you'll have that might impact your share gains going forward how much of the shared games do you think has been in <unk>.
Speaker Change: Driven by investments in your sales force in you know could that become a headwind is your.
Speaker Change: Larger competitors I believe or are you, adding to their salesforce quicker.
Speaker Change: So so first of all I'll take the second part of your question No I don't think it'll be a headwind objects.
David E. Flitman: I'll take the second part of your question. No, I don't think it'll be a headwind at all, Jake.
David E. Flitman: We reiterated last call, and I'll say it again, we believe low to mid-single digit addition to our sales force on an ongoing basis is the right number. We've got that built into our algorithm and the productivity around that, and the time it takes new hires to ramp up. I think I'd point to a couple of things, maybe relative to others.
Speaker Change: We reiterated last call and I'll say it again, we believe low to mid single digits addition to our sales force on an ongoing basis is the right number we've got that built into our algorithm and the productivity around that time.
Speaker Change: Time, it takes new hires to ramp I think that I would point to a couple of things maybe relative to others first of all our digital platform and the efficiency gains a desk enables for our sales force.
David E. Flitman: First of all, our digital platform and the efficiency gains that that enables our sales force and the focus it allows them to have on the customer in selling our great products and penetrating that business, and importantly, helping our customers solve problems. So I would point to Moxie and the advent of that as a real productivity help for our sales force. And the other one is our team-based selling, which we've been doing longer than others, and for a very long time. That's part and parcel to how we go to market.
Speaker Change: Focus it allows them to have one of the customer and selling our great products and penetrating that business and importantly, helping our customer solve problems. So I would point of moxie and they had been a that is a real productivity help for our sales force.
Speaker Change: And the other one is our team based selling which we've been at longer than others and for a very long time, that's part and parcel to how we go to market and that also affords our territory manager some efficiency gains because of the help and support that they get from the specialist in the restaurant operation consultants on a day to day basis in front of the customer so feel really good about it.
David E. Flitman: And that also affords our territory managers some efficiency gains because of the help and support that they get from the specialists and the restaurant operation consultants on a day-to-day basis in front of the customer. So I feel really good about it.
David E. Flitman: I don't think there'll be any headwinds at all in our ability to drive growth based on our algorithm.
Speaker Change: I don't think it will be any headwind at all in our ability to drive growth based on our algorithm.
Speaker Change: Great. Thank you so much.
David E. Flitman: Great! Thank you so much.
David E. Flitman: Your next question comes from the line of Kelly Bania with BMO Capital Markets. Please go ahead.
Speaker Change: Thank you Yeah. Your next question comes from the line is Kelly Danielle with BMO capital markets and you just go ahead.
Edward Joseph Kelly: Hi, good morning, and thanks for taking our questions and got some good corner here.
David E. Flitman: Hi, good morning, and thanks for taking our questions and congratulations on a good quarter here. I just wanted to ask you gave some of the figures here on the PRONTO initiative that were interesting. With the numbers that you disclosed here, I'm assuming this is really impacting independence. Is that initiative kind of driving a low to mid-single-digit lift for independence? Correct my math if I'm wrong there, but can you just talk a little bit more about how that's working, if that's new accounts, increased wallet share, and how that impacts the P&L? Yeah, so first of all, we've been ramping up Cronk over the last 18 to 20 months.
Edward Joseph Kelly: You just wanted to ask.
Edward Joseph Kelly: Some of the figures here on the pronto initiatives that were or interesting with the numbers that you disclosed here I'm. Assuming this is really impacting independent is that.
Edward Joseph Kelly: They should've kind of driving a low to mid single digit lift for independent correct me if I'm wrong, there, but can you just talk a little bit more about how that's working if that's new account increased wallet chair.
Edward Joseph Kelly: And how that impacts the piano.
David E. Flitman: So first of all, we've been ramping up Pronto over the last 18 to 24 months, and we've progressively gotten increased benefit and felt like it was time to disclose the importance of that business to our total, and that's why we quantified the $600 million we anticipate this year. But I tried to make that distinction, and let me be clear, up until now, Kelly, Pronto was only focused on attracting new customers. We had not deployed it to our existing customer base until we were confident in the model. And we knew that, you know,
Edward Joseph Kelly: So first of all we've been ramping up cross over the last 18 to 24 months and so we've progressively gotten increased benefit and felt like it was time to disclose you know the importance of that business to look to our total and that's why we quantify the $600 million, we anticipate this year, but.
Speaker Change: But I've tried to make that distinction and let me be clear up until now Kelly.
Speaker Change: Pronto was only focused on attracting new customers, we had not deployed that to our existing customer base until we were confident in the model and we knew that we had all the bugs worked out of that model and so now when we when we go to talk to a penetration we are offering that to existing customers on on their <unk>.
Speaker Change: Standard routing days, we we think that will enable us to continue to penetrate those accounts give our customers less reason to go to a specialty in other suppliers.
Speaker Change: To get their needs met so we're excited about not only the ability to continue to attract new customers, who pronto, but now importantly.
Speaker Change: Penetrating our existing customers further so.
Speaker Change: Come on that but we're really excited about the model and what Smith so far.
Speaker Change: Take it.
Speaker Change: Great can I just add one more I guess on on the hospitality if I missed it I apologize, but can you just help us understand the magnitude of.
David E. Flitman: Great. Can I just add one more on the hospitality? If I missed it, I apologize. But can you just help us understand the magnitude of what you expect in terms of new wins coming in over the course of the year? And also, maybe, incorporate what the competition looks like for those
Speaker Change: What you expect in terms of me when it's coming on over the course of the year and also just maybe incorporate what the competition looks like for those contracts the profitability level of those contracts.
David E. Flitman: Good morning, Kelly. Overall, we expect hospitality to meaningfully accelerate, sort of accelerating in Q2, and then we're in the back half of the year. And that a lot of that comes from really visibility to customers that have started to onboard already here in the second quarter and more that we know are coming. And so those numbers will show up as we go over time. And it's the reason that we keep talking a lot about, you know, independents are our core key customers, highly profitable, but also healthcare, hospitality, and others are, those are all valuable customers that are attractive, and profitable; our differentiation shows up.
Speaker Change: Good morning, Kelly. So overall, we expect hospitality to meaningfully accelerates sort of stomach Q2, and then more in the back half of the year and did that a lot of the that comes from really visibility to to customers have started to onboard alrighty here in the second quarter or that we know are coming.
Speaker Change: Those numbers will show up as we go over time.
Speaker Change: It's the reason that we keep talking a lot about.
Speaker Change: Independents are our core key customers are highly profitable, but also helped your hospitality. Another is those are all valuable customers that are attractive profitable or a differentiation shows up and so really our growth in those three target types and then opportunistically. Another customer types are key to grow with a reputation to be.
David E. Flitman: And so really, our growth in those three target types and then opportunistically and other customer types is key to growth and will continue to be thoughtful. And like I said, that resulted in Unknown Executive, US Foods Holding Corp.
Speaker Change: <unk> like I said that <unk> resulted in coach.
Speaker Change: Stronger than the markets Q1, overall growth rate and stronger than overall from a.
Speaker Change: Customer time, respectively.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.
David E. Flitman: Your next question comes from the line of Jeffrey Bernstein with Barclays. Please go ahead.
Jeffrey Andrew Bernstein: Great. Thank you very much [laughter] My first question, Dave just on the broader restaurant industry.
David E. Flitman: Great. Thank you very much.
David E. Flitman: My first question, Dave, just on the broader restaurant industry. We've talked about how the macro is a little softer than expected at the start of the year, and it seems like it's chains more than independents. But you get a chance to look at all segments. I'm just wondering.
Jeffrey Andrew Bernstein: We've talked about how the Mac was a little softer than expected at the start of the year.
Jeffrey Andrew Bernstein: It seems like it's changed more than independence, but you get a chance to look at all.
Speaker Change: Segments I'm just wondering.
Speaker Change: Big picture, what do you attribute the slowdown.
David E. Flitman: Big picture. To what do you attribute the slowdown? There's been lots of talk about how outsized restaurant industry menu pricing may be hurting, and the lower income consumer may be feeling incremental pressure. Based on your 30,000 foot view, what would you attribute the slowdown?
Speaker Change: There's been lots of talk about outsize restaurant industry menu pricing may be hurting and the lower income consumers may be feeling incremental pressure.
Speaker Change: Based on your 30000 foot view, what would you attribute the the slow down and then I had one follow up.
David E. Flitman: Yeah, this is why I'm not an economist yet, but I'll give you a perspective for sure. I think it is more around the challenges that the consumer has, given what's happened around inflation over the past few years, and they're thoughtful about how they spend their disposable income. And so I think that's really driving a lot of the foot traffic challenges we've seen. Certainly, our customers have experienced inflation over the same period of time, and those challenges persist.
Speaker Change: Yes. This is why I'm not an economist, Jeff, but I'll give you a perspective for sure I I think it is.
Speaker Change: More around the challenges that the consumer has give.
Speaker Change: Given what's happened around inflation over the past few years.
Speaker Change: Thoughtful about how they spend their disposable income.
Speaker Change: So I think that's really driving a lot of the foot traffic challenges, we've seen certainly our customers have experienced inflation over the same period of time in those challenges persist.
David E. Flitman: I really think at the root of it is a consumer issue. I do think, and I believe this, and the Long-Term Trend will continue. I think independents will win over chains, and I think the foot traffic is certainly reflecting that. Not that independents don't have challenges, just as much as they do, but I just think their model is more in line with today's culinary desires and the experiential dining that the consumer is looking for. So we're bullish on independence over the long term and whatever short-term quality it may have.
Speaker Change: At the root of it as a consumer issue I think I do think.
Speaker Change: Believe this.
Speaker Change: Longterm trend will continue I think.
Speaker Change: Dependents will win.
Speaker Change: Over change and I think the foot traffic is certainly reflecting that not that independents don't have challenges just the same they do but I just think that model is more in line with the biggest culinary desires, an experiential dining that the consumers looking for so we're bullish on independence over the long term and whatever short term bumps in the road.
Speaker Change: B, we think we're going.
Speaker Change: Understood and then just makes my follow ups on the <unk>.
David E. Flitman: And then just my follow-up on the broader industry, you know, just the number of doors in America. I feel like during the pandemic, many people talked about losing roughly 10% of the restaurants, or at least having them close. I'm just wondering, where do you think we stand today, relative to that peak before COVID? Do you buy into that 10% reduction? And where do you think we are now relative to that?
Speaker Change: What are industry, you know just the number of doors in America.
Speaker Change: I feel like through the pandemic, many people talked about losing roughly 10% of the restaurants.
Speaker Change: Or at least having them close I'm just wondering what do you think we stand today relative to that peak pre COVID-19 do you buy into that 10% reduction in what do you think we are now relative to that thank you.
David E. Flitman: Thank you. Yeah, I think roughly that number's in line, maybe plus or minus, but, you know, there's been a strong rebound, obviously, from the pandemic and the deaths thereof, but I do still think there's a while it's increased quite a bit.
Speaker Change: I think roughly that numbers in line that'd be plus or minus but there's been a strong rebound obviously from.
Speaker Change: From the pandemic in the depths thereof, but I do still think there's there's while it's increased quite a bit I still think the counselor was still down versus pre pandemic levels, which obviously keeps saying, it's very competitive in the industry and.
Speaker Change: Your customers increasingly challenged to attract folks into the restaurants, but probably.
Speaker Change: Probably still down a little bit from pre pandemic levels.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Mark Cartoon with U P. S. Please go ahead.
David E. Flitman: Thank you. Now your next question comes.
David E. Flitman: Your next question comes from the line of Mark Carden with UBS. Please go ahead. Good morning. Thanks so much for taking the questions. To start, I wanted to touch on Chefs Store. How's this business performing in the current market?
Mark David Carden: Good morning, Thanks, so much for taking the questions to start I wanted to touch on <unk>. How does this business performing in the current macro backdrop have you guys seen demand pick up much just given some of the pressure on the lower end.
Speaker Change: Good morning, Mark So we have seen a chef store returned to case growth, which has been encouraging is just you remember we talked about some of the.
David E. Flitman: Morning, Mark. So we have seen Chef's Tour return to case growth, which has been encouraging, as you remember, we talked about some of the European-related challenges from last year. I would say, you know, overall, the fact that the business is growing again is encouraging, and our focus is to continue to work through and accelerate that growth over time. And we're continuing to add stores, with five stores planned for this year.
Mark: European related challenges from last year, I would say so overall the fact that if the business is back rowing. We are encouraged by that and our focus is to continue to work through and accelerate that growth over time.
Mark: And we're continuing to at stores with five stores plans for this year and it it does play a a niche in the overall market for especially that customer base and you were talking about as well as felons.
David E. Flitman: And it does have a niche in the overall market for especially that customer base that you're talking about as well as Phil. Great, that's helpful. Thanks. And then just on the labor backdrop, are you going to see any impacts in California just given the shift to the $20 minimum wage for QSR workers and really any related wage pressure that might have caused in the state? Unknown Executive, US Foods Holding Corp., Customer volume. I think it's pretty early to tell and really talk much about what that may do to overall demand more broadly.
Speaker Change: Great. That's helpful. Thanks, and then just send that on the Labour backdrop, How're you guys see any impact in California, just given a ship the 20 dollar minimum wage for Q, a star workers and really any related wage pressure that might've cost and the state.
Speaker Change: No not really most of our associates are paid though the well above that but pretty limited impact from from our perspective, I'd say you know from an overall.
Speaker Change: Customer volume it gets pretty early talent really talk much about what that may do to overall demand more broadly.
Speaker Change: Okay, great. Thanks, so much goodbye.
Speaker Change: Thanks, Thanks for.
David E. Flitman: Your next question comes from the line of Peter Saleh with BTIG. Your line is open.
Speaker Change: Your next question comes from the line of Peter <unk>, B T I G you're lying.
Peter: [noise], great. Thanks, and congrats on a good quarter I didn't want to ask you about the increase in the private label penetration can you just talk a little bit about what what drove that this quarter and how much of that you think is attributable to the change in the salesforce compensation that you've indicated I guess earlier this year.
David E. Flitman: Great. Thanks and congrats on a good quarter. I did want to ask about the increase in private label penetration. Can you just talk a little bit about what drove that this quarter and how much of that you think is attributable to the change in the salesforce compensation that you indicated, I guess, earlier this year?
Speaker Change: <unk>.
David E. Flitman: Yeah, I think, Peter, you know, it's a combination of factors, the compensation being one that I think will be a meaningful one for us going forward. So I'm very excited to see that increase. But as we said, you know, coming out of the pandemic, the manufacturers were challenged to supply those products for us. And it's just really been in the last couple of quarters that we've gotten the confidence in Salesforce back to go lean into those products more aggressively than they have over the past few years.
David E. Flitman: Yeah, I think I think Peter.
Speaker Change: Yeah, I think I think Peter <unk>.
Speaker Change: A combination of factors.
Speaker Change: Compensation be one that I think will be a meaningful one for us going forward. So I'm very excited to see that increase.
Speaker Change: But as we said you know coming out of the pandemic. The manufacturers were challenged to supply those products for us and it's just really been over the last couple of quarters that we've gotten the confidence to salesforce back to go leading to those products more aggressively than they have in the past few years and we had a good performance in the fourth quarter excited to see us.
David E. Flitman: And, you know, we had a good performance in the fourth quarter, and I was excited to see our penetration up over 52% in the first quarter. And as I've said before, I don't really see any near-term ceiling for that, and I feel like the momentum will continue to build on our explicit brands.
Speaker Change: Penetration up over 52% in the first quarter and as I've said before I don't really see any near term ceiling for that and I feel like the momentum will continue to build on.
Speaker Change: An octopus with brands.
David E. Flitman: Thank you for that. And then, just on Moxie, you indicated that your customers are buying, I believe, 10% more, but I suspect you have some customers that have been on the platform longer than others. What's the behavior of customers that have been on it longer? Are they buying more, or is that 10% kind of a good figure to use going forward? Thank you. Yeah, I think that's roughly a good idea.
Speaker Change: <unk>. Thank you for that and then just on on Moxie, you indicated their customers or by 10%.
Speaker Change: More but I suspect you have some customers that have been on the platform longer than others. What's the is the behavior of customers that I've been on it longer are they buying more or is it or is that 10 per cent kind of a good figure T has gone forward. Thank you.
David E. Flitman: Yeah, I think that's roughly a good figure to use going forward, and our goal is to get our customers, new customers, onto that platform immediately, if not sooner, once we get into the account, because of all the things that we've talked about here, in terms of benefits both for the customer and for the productivity of our sales force, and so that's why we disclosed that figure. I think that's a solid one to think about going forward.
Speaker Change: Yeah, I think that's roughly the good figure to use going forward and our goal is to get our customers a new customer onto that platform immediately if not sooner once we get into the account because of all the things that we've talked about here in terms of benefits both for the customer and for the productivity of our Salesforce.
Speaker Change: And so that's why we disclose that figure I think that's a that's a solid wanted to think about going forward.
Speaker Change: Thank you very much.
Speaker Change: Thanks, a lot.
David E. Flitman: And your next question comes from Andrew Wolf with CL King. Your line is open.
Speaker Change: And your next question comes from Andrew Wolfe with C. L. King Your line is open.
Andrew Paul Wolf: Okay. Thanks, Good morning, I, just wanted to start with them plenty clarification.
David E. Flitman: Thanks, good morning. Dave, I think you said, or maybe it was Dirk, that cases were flat in January. I just want to make sure, was that with reference to independent organic cases or total cases? Just what is the reference point when we think about when to compare the flat January to?
Andrew Paul Wolf: Dave I think you said.
Andrew Paul Wolf: Or maybe it was dark.
Andrew Paul Wolf: Cases, where flat in January I, just wanted to make sure that <unk> was that way.
Andrew Paul Wolf: With reference to.
Andrew Paul Wolf: Independent organic cases or.
Andrew Paul Wolf: Total cases, just what is the reference point when we think about when.
Andrew Paul Wolf: If you compare the flat January too.
David E. Flitman: That was specific to independence, that comment. Overall, we did see some stronger case growth, just more broadly, through the quarter, but that comment was geared to independence.
Andrew Paul Wolf: That was specific to independents that comment overall, we did see some stronger case grow up just more broadly for the order, but that came up was geared to independence.
David E. Flitman: So, more like an organic thing, your typical distribution center, not impacted by anything. And was it all weather, or did any of the labor actions also have an effect on January sales?
Andrew Paul Wolf: So more like an organic thing your typical distribution center not impacted by.
Andrew Paul Wolf: Okay.
Andrew Paul Wolf: And what's it all weather or did any of the labour actions and I'll also have an effect on January sales.
David E. Flitman: As we said, it was a combination of both. That was kind of the net impact of the month of January, where we had labor disruptions for about three weeks of the month overlapping the weather challenges that everyone experienced.
Speaker Change: Yeah, It looks at it and it was a combination of both and that was kind of the net impact in the month of January where we had the labor disruptions for about three weeks of the month overlapping the the weather challenges that everyone experience.
David E. Flitman: Okay, because I thought it was just I wasn't sure. Okay, so it's both monetary impact, and it sells. OK, Dave, on the new cases per mile metric. Is that purely logistical? It sort of falls out from what you're doing in logistics, or does it? Can it sort of help drive sales and marketing, let's say, to increase customer density in other ways, or is it purely logistical, and the sales and marketing people are going to do their own thing?
Speaker Change: Cause like I thought it was just I wasn't sure. Okay. So it was both a monetary impact ended up shelving tax.
David E. Flitman: [inaudible]
Speaker Change: Dave on the new cases per mile metric.
Speaker Change: Is that a cure it purely logistical it <unk> it sort of falls out for what you're doing and logistics or does it.
Speaker Change: Can it sort of.
Andrew Paul Wolf: Drive or you know sales and marketing, let's say to increase customer density in other ways.
Andrew Paul Wolf: Or is it purely.
Andrew Paul Wolf: <unk> and the sales and marketing people are gonna do their own thing.
Andrew Paul Wolf: Not be influenced by this you know getting the.
Andrew Paul Wolf: Logistics costs down.
David E. Flitman: Yeah, at the root of it is, you know, we're helping ourselves in terms of efficiency in getting the products to the customer. But importantly, there is a very positive customer impact. Because as we take miles out of our system to get the products from our distribution centers to the customers, we're more likely to be on time and show up when the customer has requested it. So there's a double benefit there. So it very much impacts the customer in a positive way, and we're excited about continuing that work.
Andrew Paul Wolf: The root of it is we're helping ourselves in terms of efficiency of getting the products to the customer, but importantly, there is a very positive customer impact because of this we take miles out of our system to get the products from our distribution centers to the customers.
Andrew Paul Wolf: We're more likely to be on time and show up when the customers requested it so that there's a there's a double benefit there. So it very much impacts the customer in a positive way.
Andrew Paul Wolf: We're excited about continuing network.
Speaker Change: Okay sounds good thank you.
David E. Flitman: Okay, sounds good. Thank you.
Speaker Change: Thank you.
David E. Flitman: And as a reminder, if you would like to ask a question, please press star one. And your next question comes from the line of Fred Whiteman with Wolf Research. Your line is open.
Speaker Change: As a reminder, if you would like to ask a question. Please press star one.
Speaker Change: And your next question comes from the lineup Fred White men with Wolf Research. Your line is open.
David E. Flitman: Hey guys, good morning. I wanted to come back to the independent case growth numbers. And if we just go back and look at what you guys disclosed for 2Q from last year, you talked about a softer March and April and then some sequential improvement in May and June. So I'm just wondering how we should think about the net impact of some of these headwinds from 1Q. So the weather and the labor that you just touched on are rolling off, but then also facing some of those tougher comparisons on a monthly basis later in the quarter.
Fred White: Hey, guys. Good morning, I I wanted to come back to the independent case gross numbers and if we just go back and look at what you guys disclosed for <unk> from last year.
Fred White: He talked about a softer March and April minutes from sequential improvement in May and June. So I'm just wondering how we should think about the net impact of some of these headwinds from one Q. So the weather and the labor that you just touched on rolling off but then also facing.
Speaker Change: Some of those tougher comparison on a monthly basis later in the quarter.
Speaker Change: I think as you pointed out good morning Fries, that's of the weather and the Labour largely behind US we have a few of the labour impacted markets that have been fully recover and as far as I was lost customers without the minority in those teams are laser focused on getting that back, let's say overall not gonna specifically come up beyond with David where you talked about.
David E. Flitman: I think, as you pointed out, Fred, that the weather and the labor are largely behind us. We have a few of the labor-impacted markets that haven't fully recovered as far as lost customers are concerned, but that's a minority. And those teams are laser focused on getting that back. I would say, you know, overall, I'm not going to specifically comment beyond what Dave did where he talked about April volume being pretty similar to last
Speaker Change: April volume being pretty similar to.
Speaker Change: March or our focus as we get into this you know polka normalize environment without the weather without labor et cetera is.
Speaker Change: Background pays for the strong independent growth that we've generated in continuing to take sure as you heard they said, we accelerated our share gains in Q1, and we don't expect to slow down on that versus continuing to charge ahead.
Speaker Change: Great and then <unk> until I think you guys made a comment that that's 600 million dollar top line contribution currently is there a way to size the potential market for the pronto penetration if that bigger smaller sort of in line with with the core pronto offering.
David E. Flitman: Great. And then on Pronto, I think you guys made a comment that that's a $600 million top line contribution currently. Is there a way to size the potential market for Pronto penetration? Is that bigger, smaller, sort of in line with the core?
David E. Flitman: It's early days. You know, we'll have more to say about that over the course of time. We're just really getting started with that, Fred. So we're excited about it. We think it's got big potential, but it's very early days there.
Speaker Change: It's early days, we'll have more to say about that through the course of time, we're just really getting started with that Fred.
Fred White: So we're excited about it we think it's got a large potential.
Speaker Change: But it is very early days Sir.
Speaker Change: Fair enough. Thanks, a lot.
Speaker Change: Excuse me.
David E. Flitman: And your next question comes from the line of Rahul Crow with J.P. Morgan. Your line is open.
Speaker Change: And your next question comes from the lineup Russell Crowe with J P. Morgan and your line is open.
David E. Flitman: Good morning, guys. Thanks for taking the question. It's on pronto again.
Russell Crowe: Wouldn't want guys. Thanks for taking the question. It's <unk> again like you guys didn't mentioned the ability to compete against speciality in local is that mostly because after delivery window flexibility and we also saw that many I'll put it does succeed here because of that ethnic me to produce and whatnot. So are you considering adding more.
Russell Crowe: Queues for the offering God. He can compete with the current that document.
Speaker Change: I think we've got great product line. It falls on <unk> right on top of the one of the specialty suppliers with this gives us.
David E. Flitman: Like you guys did mention the ability to compete against specialty and local. Is that mostly because of the delivery window flexibility? And we also saw that many operators succeed here because of the ethnic, meat, produce, and whatnot. So are you considering adding more SKUs to the offering, or can you compete with the current assortment?
Speaker Change: Roll is the ability to actually get that product.
Speaker Change: In a more timely fashion, so the customers versus or maybe couple deliveries are standard deliveries per week, we can deliver those products every day now with pronto.
David E. Flitman: I think we've got a great product line that falls right on top of a lot of the specialty suppliers. What this gives us, Roel, is the ability to actually get that product in a more timely fashion to the customers versus our maybe couple of deliveries, our standard deliveries per week. You know, we can deliver those products every day now with pronto, whatever frequency the customer needs them. And obviously, delivering them on the smaller trucks gets us into some of the more urban areas that are more challenging to take a larger vehicle into. So I think there's good upside there and it allows us to compete in a way that we haven't been able to prior to this.
Speaker Change: Whenever frequency the customer needs it and obviously delivering it on a smaller trucks gives us into some of the more urban tight areas that are more challenging to take you know a larger.
Speaker Change: Vehicle into so.
Speaker Change: There's good upside there and allows us to compete in the way that we haven't been able to prior to project.
David E. Flitman: Understandable. That's helpful. Is there a sense of how the profit per case in these deliveries is very different from what you have, or is it very comparable? Unknown Executive, US Foods Holding Corp. Perfect. Thanks, guys.
Speaker Change: I'm not sure that's helpful. Instead of <unk>, the Prophet Park, Kansas and desk.
Speaker Change: In in these daily bodies are being very different from what you have but it's a very comfortable.
Speaker Change: Okay.
Speaker Change: Comparable overall independent margins.
Speaker Change: This case, there's the customers are willing to pay us like premium because of the flexibility, which mitigates are slightly increased to deliver it costs. So it's profitable as attractive and they said what your Paradise up with our larger truck delivery service. It really allows the right service for the right customer.
Speaker Change: Perfect. Thanks, guys.
Speaker Change: [noise] as a reminder, please press star one actually would like to ask a question.
Krista: And as a reminder, please press star 1 if you would like to ask a question. And, with no further questions, I would now like to turn the call back to Mr. Dave Flitman for any additional or closing remarks.
Speaker Change: And with no further questions I would now like to turn the call back to Mister de footman for any additional or closing remarks.
David E. Flitman: Thank you, Krista, and thanks for joining us today. We're excited about the underlying momentum that the business has and certainly the focus of our 30,000 associates on continuing to drive that momentum. We look forward to seeing many of you at our June 5th Investor Day. Have a great week. Thanks a lot.
Speaker Change: Thank you chrystal and thanks for joining US today, we're excited about the underlying momentum that the business has and certainly the focus of our 30000 associate someone to continuing to drive that momentum. We look forward to seeing many of you with our Jesus Investor day have a great week. Thanks a lot.
Krista: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Speaker Change: And ladies and gentlemen. This concludes today's call me. Thank you for your participation you may not that's cute.
Speaker Change: [music].