Q3 2025 US Foods Holding Corp Earnings Call
Speaker #3: Ladies and gentlemen , thank you for standing by . My name is Abby , and I will be your conference operator today . At this time , I would like to welcome everyone to the US Foods Holding Corp Corporation .
Speaker #3: Third quarter 2020 Earnings call . All lines have been placed on mute to prevent any background noise . After the speakers remarks , there will be a question and answer session .
Speaker #3: If you would like to ask a question during that time , simply press star , followed by the number one on your telephone keypad .
Speaker #3: If you would like to withdraw your question , press star one . A second time . Thank you and I will now turn the conference over to Mike Nease , Senior Vice president of investor Relations .
Speaker #3: You may begin .
Speaker #4: Thank you . Abby . Good morning , everyone , and welcome to US foods . Third quarter fiscal 2025 Earnings Call . On today's call , we have David Flitman , our CEO and Dirk Locascio our CFO .
Speaker #4: We will take your questions after our prepared remarks . Conclude , please limit yourself to one question and one follow up . Our earnings release issued earlier this morning in today's presentation can be found on the IR page of our website at IR com .
Speaker #4: During today's call . And unless otherwise stated , we're comparing our third quarter of fiscal year 2025 to the same period in fiscal year 2024 .
Speaker #4: 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 forward looking statements .
Speaker #4: Lastly , 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 on our press release , as well as in the presentation slides posted on our website .
Speaker #4: We are not providing reconciliations to forward looking non-GAAP financial measures . Thank you . I'd like to turn the call over to Dave .
Speaker #4: Thanks , Mike . Good morning , everyone , and thank you for joining us . Let's turn .
Speaker #5: To today's agenda . I'll start with our third quarter and first nine months results . I'll then hand it over to Dirk to review our third quarter financial results .
Speaker #5: And our updated fiscal 2025 guidance . Turning to slide three . We delivered strong financial results for both the third quarter and year to date .
Speaker #5: Our performance aligns with our long range plan algorithm . Underscoring the strength of our execution . For the first nine months , we delivered 4.4% net sales growth , 10.9% adjusted EBITDA growth , 29 basis points of adjusted EBITDA margin expansion , and 26.7% adjusted EPs growth .
Speaker #5: These results reflect our team's focus on and ability to consistently deliver sustainable growth , which is a testament to our operational rigor and long term value creation .
Speaker #5: I thank our associates for their commitment to our customer success and to serving them with excellence . Moving to slide four , we delivered a double digit adjusted EBITDA increase this quarter alongside a notable acceleration in independent case growth .
Speaker #5: These results demonstrate our continued ability to deliver earnings growth through consistent share gains and margin expansion . Now that we're a quarter of the way into our three year long range plan , I'm even more confident in achieving our algorithm .
Speaker #5: We're focused on delivering long term shareholder value and disciplined capital allocation , investing for growth while executing share repurchases and targeted tech and M&A .
Speaker #5: Today, we announced an agreement to acquire Chautauqua’s, an independent food distributor based in Las Vegas with a strong market share in casinos and independent restaurants.
Speaker #5: This is our fifth acquisition in two and a half years , and aligns perfectly with our tech and M&A strategy . Now let's turn to our case growth and the industry backdrop .
Speaker #5: We gained share with independent restaurants . Again this quarter as case volume grew 3.9% in line with our full year guidance range of 2 to 5% .
Speaker #5: Notably , we gained share each month of the third quarter . Independent case growth accelerated by 120 basis points from Q2 to Q3 , reflecting strong momentum and outperforming the broader market .
Speaker #5: We exited the quarter on a high note as we grew approximately 4% on an organic basis . In September , and that momentum carried through October .
Speaker #5: During the third quarter , we achieved our strongest performance of the year in net new independent account wins , which grew approximately 4.4% over the prior year .
Speaker #5: This was our highest net new account growth rate since the second quarter of 2023 , and we expect this momentum will continue . Additionally , healthcare and hospitality are helping to drive our overall volume growth , with 3.9% and 2.4% case growth , respectively .
Speaker #5: We have new business wins in both customer types coming on board throughout the fourth quarter , supporting further growth . We continue to gain market share with our target customer .
Speaker #5: Types of independent restaurants , healthcare and hospitality . This is our 18th consecutive quarter of market share gains with independent restaurants and the 20th consecutive quarter with healthcare .
Speaker #5: Turning to our chain business volume declined by 2.4% . A 160 basis points sequential improvement over the second quarter that acceleration was ahead of restaurant industry foot traffic as reported by Black Box , which improved roughly 60 basis points but was still down half a percent in the third quarter .
Speaker #5: Turning to our strategy , we are guided by our four strategic pillars , and I will discuss progress on each over the next several slides .
Speaker #5: Moving to slide five , our first pillar is culture . We remain committed to achieving zero injuries and accidents for our associates in the third quarter .
Speaker #5: Our injury and accident rates improved by 16% compared to the same period last year . And over the past two years , we have improved our safety performance by 35% .
Speaker #5: There is still work to be done and we will keep pushing forward to ensure every associate goes home safely every day . We're proud to announce a new partnership between US foods and hiring our heroes .
Speaker #5: A nationwide initiative of the US Chamber of Commerce Foundation dedicated to connecting , transitioning , service members , veterans and military spouses with meaningful career opportunities .
Speaker #5: This partnership will accelerate military hiring and reflects our deep commitment to honoring military service and strengthening our workforce with a talent , leadership , and dedication that veterans and military families bring to companies like US foods .
Speaker #5: Turning to slide six . Our second pillar service . We remain focused on providing reliable , on time deliveries . That customers can count on .
Speaker #5: Our commitment to service excellence is reinforced by our flagship Moxxie e-commerce platform , which enables us to deliver a transparent , best in class experience tailored to the evolving needs of our customers .
Speaker #5: Broadly , we are deploying AI across our business to enhance the experience of both our customers and our associates . This includes within Moxxie , where this quarter we launched AI powered search , a significant upgrade that's already delivering measurable results .
Speaker #5: Customers are finding products faster and more intuitively, leading to a 3% higher conversion rate of products added to their cart and purchased, resulting in approximately 1.3 million incremental cases on an annualized basis.
Speaker #5: Importantly , this upgrade is also improving seller productivity by surfacing more relevant and higher quality search results . Turning to supply chain , we are improving routing productivity through the Descartes rollout across our distribution network .
Speaker #5: We are now live or actively deploying in all markets in Q3 , we achieved a 2.3% improvement in cases per mile compared to last year .
Speaker #5: Our UMass deployment is delivering value across our safety , service and profitability . Key results we continue to make meaningful progress on our operations , quality composite , which measures our ability to deliver products to our customers without errors with performance improving by 24% compared to the prior year .
Speaker #5: These results reflect our commitment to improving our customer service experience . Turning to slide seven . Growth . We are accelerating profitable growth and expanding market share across our target customer types .
Speaker #5: A key driver of this growth is our Pronto small truck delivery service . The pronto program has now expected to deliver approximately $950 million in sales this year , and more than a $1 billion run rate by year end .
Speaker #5: Pronto legacy is now live in 46 markets , with plans to expand into three more markets next year . Significant growth opportunity remains as we add more trucks to many of these markets .
Speaker #5: In parallel , we expanded pronto penetration to more than 20 markets , deepening our share of wallet with current customers . This initiative doubled , delivered a double digit percent uplift in overall case growth among participating customers during the third quarter .
Speaker #5: Given the success of pronto , we plan to make our largest annual investment in the program in 2026 to fuel future growth . In addition to pronto , we continue to invest in the business to support growth and drive operational efficiencies as we discussed last quarter , we began limited shipping from our first new semi-automated facility in Aurora , Illinois , and we continue to ramp up volume served out of this facility to date , we have transitioned approximately 50% of the volume out of our former facility into Aurora and expect to be fully operational over the next several months .
Speaker #5: We will leverage our early learnings and use these insights to help guide our approach as we plan and execute future Semi-automation rollouts in select distribution centers .
Speaker #5: In August , we held our food fanatics Live show , which was our largest customer event ever . We hosted more than 3500 customers and prospects over two days , showcasing each area of our customer value proposition .
Speaker #5: We expect more than $150 million in potential new customer wins coming out of this event , with nearly half of that realized to date .
Speaker #5: Additionally , we're in the process of onboarding more than $100 million of annualized new business wins in healthcare and hospitality by leveraging our expertise differentiated model and unique digital capabilities .
Speaker #5: Our tools and technology , like our vitals program , which is our proprietary technology suite that helps healthcare operators solve some of their biggest challenges , are easy to use and generate real results .
Speaker #5: For example , this year we're on track to complete approximately 4500 individual customer interactions , leveraging tools within vitals , which helps our customers save 5% of their total costs on average .
Speaker #5: Looking ahead , we believe that we will further accelerate our profitable growth and share gain momentum through two important changes one to our seller's compensation structure and one to our team based selling approach .
Speaker #5: Starting with sales compensation in January of 2024 , we returned to a 5050 split between base salary and variable compensation for our local sellers , reinstating the structure we had in place prior to Covid .
Speaker #5: Otherwise , the core sales compensation framework has remained largely unchanged for the past eight years . Over the past year , we've conducted a thoughtful review of our sales compensation model through the lens of further accelerating growth .
Speaker #5: While fueling seller success . We are excited to announce that we will be transitioning to a 100% variable compensation structure for our local sellers .
Speaker #5: The new incentive structure will continue to be based on gross profit , dollar growth with their total compensation uncapped . Additionally , the new compensation model will reward sellers for accelerating independent case growth .
Speaker #5: Private label penetration and pronto volume growth . We're conducting pilots in several markets during the fourth quarter , and we will use those learnings to inform our full deployment in early 2026 .
Speaker #5: We believe these changes will accelerate profitable volume growth while creating greater earnings potential for our sales force . In parallel , we streamlined our team based selling model to better reflect what customers value most from US foods and where we truly differentiate quality products .
Speaker #5: Excellent service and industry leading technology . As part of this change , we've transitioned individuals in some sales support roles into customer facing seller positions , bringing our expertise closer to the customer .
Speaker #5: Initial feedback from our sales team has been positive on both the compensation change and the role realignment . Moving to slide eight , our profit pillar , our consistently strong execution resulted in adjusted gross profit growth in the third quarter and across the first nine months of the year .
Speaker #5: Third quarter adjusted gross profit reached $1.8 billion , a 6.4% increase over the prior year . This growth was fueled by increased volume , improved cost of goods and inventory management .
Speaker #5: Our strategic vendor management initiative is now on track to deliver more than $120 million in cost of goods savings for 2025 . These results reflect our disciplined approach to sourcing and supplier partnerships as we realize these benefits , we're reinvesting a portion of the savings to fuel growth by supporting innovation , expanding customer relationships , and strengthening our competitive position in the market .
Speaker #5: Private label penetration among our core independent restaurant customers grew again this quarter and was over 53% . By helping customers offset inflationary pressures with lower costs .
Speaker #5: Our private label offerings continue to strengthen loyalty and differentiate US foods in a highly competitive market . We are also improving operating expense productivity through Umas and our enterprise routing initiatives , including market led routing and our Descartes deployment .
Speaker #5: These initiatives help support our ongoing commitment to driving 3 to 5% annual productivity . Well into the future . In summary , I am pleased with the progress we made in the first nine months against the four pillars of our strategy and remain confident in our ability to deliver on our long range growth algorithm .
Speaker #5: Before I pass it to Dirk , I want to recognize one of our outstanding associates , a veteran of the US Marine Corps , Kevin Connelly , as warehouse manager at our Albany , New York distribution center .
Speaker #5: Kevin has been instrumental in driving operational excellence since stepping into the role nearly a year ago . He has led improvements in cross-functional communication and execution across sales , inventory replenishment and operations by elevating key frontline delivery deliverables of operational quality , composite and inventory accuracy .
Speaker #5: Kevin and his team have successfully reduced errors and delivered year over year improvement in shrink , a testament to disciplined leadership and a commitment to continuous improvement as a result , the team successfully reduced errors per thousand and delivered a significant improvement in inventory management within the Albany facility .
Speaker #5: As Veterans Day approaches next week, we pause to honor and recognize the members of our team who have served in the U.S. Armed Forces.
Speaker #5: We are incredibly grateful for your selfless service and your personal sacrifice for our country . Thank you . Kevin , and thank you to every veteran , past and present .
Speaker #5: Your courage and dedication inspire us all . Let me now turn the call over to Dirk to discuss our third quarter results and our updated 2025 guidance .
Speaker #5: Thanks , Dave .
Speaker #4: And good morning .
Speaker #5: Everyone . This quarter we delivered a combination of .
Speaker #6: Top line growth and margin expansion . Once again demonstrating the power of our strategy and execution . Our unwavering commitment to continuous improvement and operational excellence continues to advance the service experience we provide to our customers while improving our overall financial performance .
Speaker #6: These results reflect our focus on creating long term value for our shareholders and building a more resilient , customer centric business . Moving to our third quarter performance on slide ten .
Speaker #6: Net sales increased 4.8% to $10.2 billion , driven by case volume growth of 1.1% and food cost inflation and mix impact of 3.7% .
Speaker #6: If you exclude the fresh way , divestiture impact , total case growth was approximately 1.6% . Independent restaurant volume growth accelerated 120 basis points from the second quarter , increasing 3.9% year over year , which includes 40 basis points of M&A .
Speaker #6: Healthcare performed well , growing 3.9% and hospitality was up 2.4% . We lapped some larger wins in hospitality from the prior year and continue to see growth , supported by a strong pipeline .
Speaker #6: Our chain restaurant volume improved 160 basis points sequentially , but remained down 2.4% compared to prior year , primarily due to the strategic exit that we discussed last quarter , partially offset by the recent onboarding of new business wins .
Speaker #6: Shifting to our financial performance , we delivered earnings growth and drove margin expansion . Again this quarter . Adjusted EBITDA of $505 million increased 11% through a combination of volume growth , gross profit improvement , and operating expense , productivity result , adjusted EBITDA margin expanded by 28 basis points .
Speaker #6: Finally , adjusted diluted EPs increased 26% to $1.07 per share . We expect to continue growing adjusted EPs at a meaningfully faster rate than adjusted EBITDA through a combination of earnings growth and share repurchases .
Speaker #6: Turning to slide 11 . Our focus on driving continuous improvement resulted in another strong quarter of operating leverage gains . Adjusted gross profit per case , improved $0.41 , or 5.2% , compared to the prior year .
Speaker #6: This was driven by our progress on various gross profit initiatives, including strategic vendor management and inventory loss reductions that Dave addressed earlier.
Speaker #6: Our inventory management initiative is on track to generate $35 million in savings for the full year . This initiative focuses on reducing losses from product that can't be sold due to damage or spoilage through improvements in process and insights .
Speaker #6: We've made strong progress and expect to drive additional savings in 2026 . Adjusted operating expense per case increased $0.22 , or 3.8% . We are offsetting a portion of operating cost inflation by driving productivity improvement in both operations and administration through eliminating waste and supply chain and instituting greater process discipline across the business .
Speaker #6: Both gross profit and operating expense include an approximate seven cent per case year over year increase related to the food Fanatics live show versus these amounts being spread out across quarters in the prior year .
Speaker #6: Our third quarter and year to date performance demonstrates our ability to drive meaningful leverage through the PNL and deliver consistent financial results in a dynamic environment .
Speaker #6: As a result of the strong execution of our strategy , adjusted EBITDA per case increased $0.21 , or 9.9% , to $2.33 . Turning to cash flow and capital allocation on slide 12 , our robust operating cash flow , combined with our strong balance sheet , enables us to deliver on our capital allocation priorities .
Speaker #6: Year to date, operating cash flow increased by $185 million to nearly $1.1 billion, driven by earnings growth and a reduction in tax payments.
Speaker #6: We continue to fund strong capital investment , which ensures the vitality of our business , promotes healthy growth and generates attractive returns . And we remain focused on our capital allocation priorities to net maintain net leverage within our target range of 2 to 3 times .
Speaker #6: Return capital to shareholders via share buybacks and opportunistically pursue a creative tuck in M&A . During the third quarter , we repurchased approximately $335 million of shares .
Speaker #6: And to date , in 2025 , we have bought 7.6 million shares for over $600 million . And have $467 million remaining on our $1 billion share repurchase authorization .
Speaker #6: We ended the quarter at 2.6 times net leverage . Our debt structure is strong and we have no long term debt maturities until 2028 .
Speaker #6: And finally , subsequent to quarter end , we signed a definitive agreement to acquire Chautauqua's , an independent food distributor in Las Vegas .
Speaker #6: Now , turning to our guidance and modeling assumptions on slide 13 . Given our year to date performance and outlook for the remainder of this year , we are updating our fiscal Year 2020 guidance .
Speaker #6: Given the continued lower restaurant foot traffic and dynamic macro environment , we are tightening our total case volume growth to 1 to 2% from 1 to 3% .
Speaker #6: We now expect net sales growth to be in the range of 4 to 5% , due to our solid progress this year and our ability to deliver profitable growth and enhance margins .
Speaker #6: We are now projecting adjusted EBITDA growth of 10 to 12% . We are increasing the low and high end of our guidance for adjusted diluted EPs , and we now expect adjusted diluted EPs growth of 24 to 26% .
Speaker #6: I am pleased with the progress we've made this year in executing across our business . We are growing our top line , gaining share , expanding margins and deploying our strong cash flow toward our capital priorities .
Speaker #6: Our disciplined approach to strategic investment , operational efficiency and shareholder returns positions us well for sustained success , and we remain fully committed to achieving the financial targets outlined in our long range plan .
Speaker #6: With that , I'll now pass it back to Dave for his closing remarks .
Speaker #5: Thanks , Dirk . Our third quarter and year to date results are strong . We're accelerating independent case growth , sharpening our focus on productivity and operational excellence to better serve our customers and consistently delivering top and bottom line growth .
Speaker #5: We have a clear ambition to become the undisputed best in our industry . We have the right strategy and the right initiatives in place , and we will continue to execute with disciplined and purpose in support of our customers .
Speaker #5: Our associates and our shareholders . Our most important differentiator , however , remains our strong and highly talented team . I couldn't be more pleased or proud of how our 30,000 associates embrace our ambition .
Speaker #5: In my 40 plus year career , I've not witnessed a level of alignment , dedication and passion that our associates bring each and every day to help our customers make it their commitment to our success is the heartbeat of our company and the foundation of everything we're building for the future .
Speaker #5: Before we move to Q&A , I do not have any new information to share regarding a potential combination with PFG . We will not be taking any questions on that subject today .
Speaker #5: Let me finish by underscoring how highly confident I remain in our stand alone future and ability to deliver our long range plan and financial algorithm , which , as a reminder , is a 5% sales kegger , 10% adjusted EBITDA kegger , at least 20 basis points of annual adjusted EBITDA margin expansion and a 20% adjusted EPs kegger through 2027 .
Speaker #5: And we will remain disciplined as we execute our capital allocation strategy , which will enable us to be a consistent double digit earnings compounder for many years to come .
Speaker #5: With that , Abby , please open up the line for questions .
Speaker #3: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.
Speaker #3: If you would like to withdraw your question , press star one . A second time . If you're called upon to ask your question and are listening via speakerphone on your device , please pick up your handset and ensure that your phone is not on mute .
Speaker #3: When asking your question . To be able to take as many questions as possible , we ask that you please limit yourself to one question and one follow up .
Speaker #3: Again , it is star one . If you would like to join the queue . And our first question comes from the line of Edward Kelly with Wells Fargo .
Speaker #3: Your line is open .
Speaker #7: Hi . Good morning everyone . Thank you for taking my question . Dave , you're execution in this backdrop has been very strong .
Speaker #7: Obviously . And you're demonstrating share gains . I wanted to ask you about overall total case growth , which still remains somewhat sluggish .
Speaker #7: Full year guidance . There . You know , came down just a touch . So I'm curious if you could maybe talk to us about , you know , some of the incremental pressure that you might be seeing outside of the independent channel where things are going very well and maybe as part of this , could you talk about quarter to date commentary and what you're thinking is in on Q4 ?
Speaker #5: Sure . Let me let me start with independents and just point out , you know , I feel really good about our momentum .
Speaker #5: You know , we just put up the strongest number we have in the last seven quarters , an independent restaurants and a backdrop that remains .
Speaker #5: I would I would describe it as sluggish . You know , we haven't we haven't been anywhere close to historical foot traffic in this industry for most of my tenure here at the company .
Speaker #5: And yet you continue to see us execute very , very well . You know , Dirk commented about the the fresh waste sale and the 50 basis points roughly impact that had on our total case growth right in the middle of our prior range had had we not made that divestiture .
Speaker #5: So underlying momentum is still still very strong for the quarter . You know , I was pleased to see that we gained share each month of the quarter .
Speaker #5: And importantly , you know , finished at the strongest growth rate in September , which is I commented , carried over into October , I'd say , you know , with the government shutdown , you know , some choppiness out there and just just remind everyone that , you know , we are overindexed with government business .
Speaker #5: It shows up in our other category through our GPO relationships . You know , we serve a lot of military bases , and it's not as much just the impact on that volume .
Speaker #5: I think it was it's more about , you know , people not knowing if they're going to get paid and not going out to eat .
Speaker #5: And all the all the things that are impacting the local markets . There up and down the East Coast . But that's going to correct itself .
Speaker #5: And what we're focused on is the same thing . We've been focused on for the last three years is controlling our own destiny through our own initiatives .
Speaker #5: And importantly , taking share consistently , which we continue to do . And I fully expect that that's going to continue .
Speaker #7: Great . And then , you know , along the lines of control of your own destiny . Dave , I was hoping that you could provide a little bit more color around the change in Salesforce compensation .
Speaker #7: I don't think it's unique . You know , that you're going to 100% variable . So but it is a change for your Salesforce .
Speaker #7: Could you just maybe talk about , you know , what a typical salesperson , you know at US foods is going to see here ?
Speaker #7: Well , some people make less money . Some people make more money . You know initially . And how you mitigate any risk associated with potential turnover .
Speaker #5: Very good questions Ed . And let me just tell you , I have high confidence in our ability to execute this transition . As I commented , this isn't something that we just thought about last weekend .
Speaker #5: You know , we've been working on this since the better part of this year . And importantly , just , you know , some inside thinking here I was contemplating this change the day I showed up here , because I think it's the right way to compensate our sellers .
Speaker #5: I want them to be incented , to grow as fast as they possibly can . And importantly , make as much money as they possibly can .
Speaker #5: And if you have the comp plan designed right , the more they make , the better it is for them . And the better it is for growth .
Speaker #5: And you know , for the business and for the company . And so obviously , we'll be thoughtful about the change management process here .
Speaker #5: We've got a very robust plan in place . I'm most excited about . Obviously , you would expect I didn't announce this to our sales force on this call today .
Speaker #5: We've been talking a lot about this internally . And as I commented , people are excited about it and eager , and I believe it's going to help us further accelerate our growth .
Speaker #5: So we'll manage it thoughtfully . We'll manage the transition thoughtfully , which with each individual , we're already having those conversations . And I think it means great things for the future .
Speaker #7: Great . Thank you .
Speaker #5: Thank you .
Speaker #3: And our next question comes from the line of John Heinbockel with Guggenheim . Your line is open .
Speaker #8: Hey , Dave , I wanted to start with the the team based selling change . So how many of those folks ? Because I think it's a that piece is a good size number .
Speaker #8: How many of those are transitioning to this new role ? Is that new role ? Is it customer facing in the sense that they will be actual salespeople from from where they were before ?
Speaker #8: And what does that do if that's relatively true , what does that do to the sort of the growth rate in the sales force going into next year ?
Speaker #5: Yeah , I think the overwhelming majority of those folks that were in those roles have been offered seller roles . Definitely customer facing .
Speaker #5: Ed , they're excited about it . They see the logic behind the change . And importantly , we're retaining all of that expertise inside the company .
Speaker #5: So they're up and running . It'll have a one time , you know , bump effect in terms of our seller headcount . But that's not the way we're thinking about it .
Speaker #5: This is a one time change . Importantly , we're running about 5% plus or minus sales headcount additions through this year . We'll finish in that 5 to 6% range .
Speaker #5: For the full year . And staying consistent with our approach to to mid , low to mid single digit headcount additions . .
Speaker #8: And then the follow up is you talked about the double digit increase in penetration . That's you know , in terms of their I guess their volume , you know , where does that take .
Speaker #8: If you look at where they were on penetration before , where they are afterwards , you know , where does that take you .
Speaker #8: That obviously is a pretty good lift. You know, what's the... and I know you want to make sure that it's totally incremental.
Speaker #8: So what's the gating factor . Right . I know you go you increase markets trucks , etc. but the gating factor on rolling that out .
Speaker #5: Yeah . You're talking about Toronto penetration right .
Speaker #8: Yeah . Yep .
Speaker #5: Yeah . Yeah . So just just as a reminder when we go into a new market we go with a limited number of trucks to prove the model .
Speaker #5: And you know we did enough piloting that we're confident that we're going to maintain the profitability . And importantly not cannibalize our existing broadline business .
Speaker #5: But that's something we have to check, every market, John. And that's why we go in with a relatively small number of trucks.
Speaker #5: That's why I made that comment that we will continue to drive growth through additional trucks in these markets as they make sense . You know , the double digit uplift is exciting .
Speaker #5: But again , it's to a limited number of customers . But importantly for us , it just validates the model market by market .
Speaker #5: And it gives us the confidence to go lean in harder . You know , exiting the year at $1 billion is a significant uptick in where we hope to be .
Speaker #5: And , you know , we'll see what a billion and a half comes along .
Speaker #8: Thank you .
Speaker #5: Thank you .
Speaker #3: And our next question comes from the line of Lauren Silverman with Deutsche Bank . Your line is open . And your line is open .
Speaker #3: Please check your mute button .
Speaker #9: Can you hear me ? Can you hear me now ?
Speaker #5: Yeah . Good morning . Lauren .
Speaker #9: Okay . Sorry about that . So I wanted to start with the sales comp model . How do these changes impact the flow through , given just the more variable construct ?
Speaker #9: And are you contemplating accelerating your pace of sales growth over the next few years with the shift ?
Speaker #5: What was the last part of your question accelerating .
Speaker #9: What are you contemplating? Accelerating the pace of the Salesforce growth above 4% or 5%.
Speaker #6: So morning , Lauren . This is Dirk . I think overall , you know , we still continue to like that low to mid single digit increase rate .
Speaker #6: And that's where we expect to continue to be the flow through our expectation is is very similar to today . So this really wasn't intended to be an increase or decrease in compensation versus more linkage to the compensation with the growth .
Speaker #6: And therefore , as Dave pointed out earlier , as as sellers have that 100% compensation , then it links up more with their growth and the opportunity for them to earn more , all while accelerating growth as our expectation .
Speaker #9: Okay . And then it's nice to see the leverage in the PNL despite the softer top line , one of the top questions we get is your ability to hit the long term algo .
Speaker #9: If the macro backdrop remains challenging , so if we can , you know , current trends persist into 26 . What's your confidence in being able to hit that algo ?
Speaker #5: Well , I think I reaffirmed my confidence several times in my prepared remarks . I couldn't be more confident and I would just point out to those that are concerned , we've been doing it for about ten quarters now in a very soft macro backdrop that continues to remain sluggish .
Speaker #5: We have a tremendous amount of self-help . We've got a very clear strategy . Lauren , and our team is 100% focused on execution .
Speaker #5: Confidence is high .
Speaker #9: Thank you guys .
Speaker #5: Thank you .
Speaker #3: And our next question comes from the line of Kelly Bania with BMO Capital Markets. Your line is open.
Speaker #10: Hi . Good morning . Thanks for taking our questions . I wanted to ask also about the change in the commission structure . It's a pretty significant change .
Speaker #10: And I guess investors historically can be pretty cautious about how disruptive that can be on a near basis . So can you just maybe talk a little bit more about the change management that you're planning to support this , the kind of turnover that you do expect , if you expect some ?
Speaker #10: And what kind of lift can this drive in based in what you've seen from maybe testing this in terms of the productivity of that typical sales rep ?
Speaker #5: Well , I'll take the last part first . Kelly . First of all , we wouldn't be doing it if we didn't have high confidence that it was going to accelerate growth .
Speaker #5: Because you've heard me say many times when you change sales compensation , you have to be really thoughtful about how you do it and what potential unintended consequences you could have .
Speaker #5: And that's why we've been thinking about this for a while . We've been working on it for quite some time , and the change management process is quite robust .
Speaker #5: I do not expect an increase in our turnover . We are we are handling this seller by cellar , giving them good visibility to how they're currently compensated and what the new change will make us .
Speaker #5: Any required behavior changes . You know , we're going to give them a long runway and we're going to be thoughtful about how we bring them into that 100% commission plan .
Speaker #5: The goal here is to ease people into this and make sure they have a chance to perform and understand those expectations . All that's being worked on has been worked on for quite some time already , and we'll be thoughtful about how we roll this out in 2026 .
Speaker #5: So I've got a high degree of confidence , not only in the change , having the right output that we intend , but also our ability to manage this quite well with our sales team .
Speaker #5: And as I said , and I'm not making it up , they're excited .
Speaker #10: Okay . That's helpful . And just on the strategic vendor management , it sounds like that's coming in a little bit better than plan , which is been strong progress on that initiative already .
Speaker #10: But you mentioned kind of reinvesting some of that . Can you just talk about that decision ? The magnitude of that and where we should see the benefits of those reinvestments .
Speaker #5: I'll start and then just add Dirk to pick it up . You know , I would liken that work in that comment around reinvesting to the same thing the same way we think about productivity gains .
Speaker #5: You know , great companies find ways to drive productivity and efficiency , and they take a portion of that . And reinvest it back into growth for the company , whether that's new people , new capabilities , investment in technology , investment in competitiveness , whatever you need to do to make sure that you can compete well , we've got to make our own way .
Speaker #5: Like there's nothing free here . So we continue to invest in growth and find ways to get more efficient and drive better outcomes and win win ways .
Speaker #5: Dirk . What would you add ?
Speaker #6: I think I would add this is not new . We've been talking about this for a number of quarters where it's , you know , as we drive this value , then it does allow us to be thoughtful on how we reinvest in in that growth .
Speaker #6: With the different customers .
Speaker #10: Thank you .
Speaker #3: And our next question comes from the line of Jeffrey Bernstein with Barclays . Your line is open .
Speaker #11: Great . Thank you very much . First question is , Dave , I know you mentioned no update on the performance food discussions .
Speaker #11: Totally appreciate that . Just wondering , as you run your business or business as usual , I'm just wondering whether you're seeing any change in how people look at your business , whether customer behavior perhaps holding off on giving new business until the process settles or perhaps hesitation by salespeople to join , not knowing the future , I could see where there would be some uncertainty .
Speaker #11: I presume . Therefore , a rapid resolution would be the best scenario . But just wondering if there's been any implications on your business as this process unfolds .
Speaker #11: And then I had one follow up .
Speaker #5: Sure . Thanks , Jeff , for the question . And really , there hasn't been any impact . We haven't seen that at the customer level .
Speaker #5: We certainly haven't seen it internally . You know , as we said , going into this , we would maintain our focus on day to day execution .
Speaker #5: Hopefully our results support that . And importantly , we haven't had any challenges attracting new sales talent . You know , I talked about being in that 5 to 6% range for the year .
Speaker #5: And we've been at this for a while now . So we're still having robust incoming new sales classes . And people are excited to be here .
Speaker #11: Understood . And then my follow up is just on the restaurant industry . We've heard from many restaurants over the past week , and they all talk about a slowing trend .
Speaker #11: In October , which you haven't seen , which I'm curious to know why you think that is , but they've talked specifically about the younger age cohort and the lower income and perhaps Hispanic .
Speaker #11: Just wondering whether you see any evidence on any of those specific groups based on your customer demand . And then just write why you perhaps haven't seen any change in trajectory in October .
Speaker #11: If a lot of the restaurants are talking about such . Thank you .
Speaker #5: Yeah , thanks . And don't want to misrepresent anything . I think I used the word sluggish . You know , more recently .
Speaker #5: I think it's related to the government shutdown and some of the uncertainty . You know , we're operating in an environment here for several years now where consumer confidence has been a challenge .
Speaker #5: The knock on effect from the government shutdown certainly impacts consumer confidence . And I think that's that's what we're seeing saying and seeing , you know , broadly certain markets , as I mentioned earlier in a response , you know , up and down the East Coast are more challenged with , you know , the more government headcount in those challenges .
Speaker #5: But again, I just keep coming back to our execution. Our execution is our execution. We have significant ability to take market share, and that's where our team is focused.
Speaker #5: And when the shutdown gets resolved , when the consumer confidence gets back to where it needs to be , we're going to be extremely well positioned because of the work our team has done over the past two , three years .
Speaker #11: Got it . But no change in different cohorts that you've noticed or different segments of the industry . May be seeing a change in trend .
Speaker #5: Well , I think , you know , we've pointed to the low income consumer being pressured for a while . That's that's not a new thought .
Speaker #5: I don't think anything has changed . There . Some of the ethnic challenges , you know , I think that ebbs and flows .
Speaker #5: And for us , you know , it's really a market by market impact . You know , we've seen some of that in some markets , not so much in others , but I would just again , just point back to consumer confidence being challenged .
Speaker #5: Low end consumers have been challenged . No real change in that . And then you overlay the shutdown on all that uncertainty . And yeah , it's a little choppy out there .
Speaker #11: Thank you .
Speaker #5: Thank you .
Speaker #3: And our next question comes from the line of Alex Slagle with Jefferies. Your line is open.
Speaker #10: Thanks . Good morning .
Speaker #12: The comps big I guess just stepping back looking . Here at home . .
Speaker #5: Hey , Alex , you're cutting out . We're having we're having trouble hearing you , Alex . You're cutting out significantly .
Speaker #12: Can you hear me now . ?
Speaker #5: For the moment , yeah .
Speaker #12: All right, so on the role realignment. Going back at your life more broadly around decentralizing portions of your.
Speaker #5: I'm sorry . Alex . We'll have to catch you offline . We just we just can't hear you . I'm sorry . Yeah .
Speaker #5: We'll catch you later .
Speaker #12: Thanks .
Speaker #3: And our next question comes from the line of Jacob Aitken Phillips with Melius Research . Your line is open .
Speaker #13: Hi . Good morning everyone . So I wanted to ask a follow up on the sales compensation change . Like you said , it's slated for 2026 rollout .
Speaker #13: But also that you're working with with all the salespeople . I'm just curious , should we expect it to be more phased throughout 2026 , or is there a date where a large percentage of the sales force will change ?
Speaker #13: Will change over ? I understand you're trying to minimize turnover , but I would expect at least some level , and I'm trying to see if that's more phased or if there's a point in time .
Speaker #5: The phasing is more around the piloting work we're doing in the fourth quarter . That I referred to . We'll do some transition and we'll give visibility into , you know , both methods of payment for some period of time .
Speaker #5: And then , you know , we'll pick a date certain and make the move .
Speaker #13: All right . Got it . And then I guess more broadly , you highlighted like strong progress across vendor management , inventory loss reduction to cart private label a bunch of stuff .
Speaker #13: And a lot of these have transitioned from like you've been building the capabilities to running them . Now . But which of those have the most incremental runway in the next , like 1 to 2 years , and which of them are most insulated from the current restaurant traffic environment ?
Speaker #6: Good morning . This is Derek . I'd say really all of them , almost all of them are insulated . They drive . I mean , they're really part of the self-help focus and story that we have here .
Speaker #6: There are things that we can control and all of them continue to have runway ahead of them . They contribute a different level .
Speaker #6: So strategic vendor management is one of our larger initiatives . So that one we expect to continue to generate incremental value . But each of those that you cited will continue to drive value .
Speaker #6: That's why that portfolio approach we have to things that we're doing to drive , whether it's gross profit gains , market share gains , opex , productivity , it's there's not 2 or 3 things that are driving it .
Speaker #6: There's a managed portfolio . And as different aspects of that come to maturity , then we have other things that are ramping up .
Speaker #6: And that's what really gives us that confidence that Dave alluded to . Again . Yet of our ability to continue to drive earnings growth and achieve our long range plan algorithm that we've outlined .
Speaker #13: Thank you .
Speaker #3: And our next question comes from the line of Brian Harbour with Morgan Stanley . Your line is open .
Speaker #14: Thanks . Morning , guys . Hey , Derek . What's roughly the sort of the M&A contribution as we think about the coming quarter and maybe also just , you know , how are you thinking about kind of inflation in mix .
Speaker #6: M&A has been in that 3040 basis points . I would expect it probably stays around in that level . You have one that rolls off as you get a little later in the quarter .
Speaker #6: But then the other smaller one that we announced today will close at some point in the quarter . And so I think it'll stay around that 30 , 40 basis points of impact inflation .
Speaker #6: You know , we saw it pretty stable . It ticked up a little bit in the quarter right at three . It's been all the categories that you've heard others talk about .
Speaker #6: You know whether beef and other commodity categories. But other than that, grocery stays pretty stable. So, commodities are moving around.
Speaker #6: But I think it's still in that healthy spot of 2 to 3% . And that's where I would expect that it likely continues to stay .
Speaker #14: Okay . Got it . Thanks . What .
Speaker #6: Thanks .
Speaker #14: The the comment about , you know , kind of AI was interesting just how that's driving conversion . What are some other uses of that that you see in the business .
Speaker #6: Well , we're really using it as , as Dave mentioned , as comments , pretty broad based . And I mean , it informs that it informs some of our online recommendations to customers of either products that they haven't bought or others have various aspects of the digital marketing .
Speaker #6: It also informs a lot of the models behind our routing or letting customers know where their truck is , where it's when it's supposed to arrive , and then the thing we've talked a lot about is the order guide for customer , for our sellers , where they can basically pull together the proposal for a customer for local customer in 15 or 20 minutes , for something that used to take them 2 or 3 hours .
Speaker #6: And so what we're applying it broadly for sales growth and productivity . But a big focus on things that have some impact now as opposed to , you know , what's just going to be neat and cool or , you know , deliver value in 5 to 7 years .
Speaker #6: So our team , it's the business team and the digital team and the AI development team that are all working together to really prioritize and bring these things to market and and advance those , those capabilities .
Speaker #14: Thanks .
Speaker #3: And our next question comes from the line of Marc Cardin with UBS . Your line is open .
Speaker #15: Good morning . Thanks for taking the questions . So I want to start with a follow up on the Chautauqua . Hey guys , I want to start off with a follow up on the Chautauqua acquisition .
Speaker #15: Just how does this mix of business compare to some of the other recent purchases you made , like Jake's IWC and Saladino's , and then more broadly , how are you thinking about your approach in pacing to more traditional bolt on M&A ?
Speaker #15: Essentially , while you undergo the clean room exercise ?
Speaker #5: Well , what's your take ? You know , it fits exactly . Our model . It's got a pretty even mix of casino business and independent restaurants .
Speaker #5: And if you think about our footprint in Vegas, that's exactly where we're focused. So we love it from that standpoint. And I just [wanted to discuss our] M&A strategy in general.
Speaker #5: Mark , as you've heard us say , is really a market by market play around tuck in acquisitions really to improve our local market density , take miles out of our routing , and we lean heavily on , you know , our three core target customer types .
Speaker #5: But specifically independent restaurants . And this one fits that exactly . Our pipeline is strong , you know , as we've said , you never can control when one of these things comes out .
Speaker #5: But we continue to have robust conversations in our broadline business . And really focused on on the independent space .
Speaker #15: Okay , great . And then it sounds like some continued good demand in healthcare and hospitality . You called out some nice anticipated wins there .
Speaker #15: How would you consider the pipeline of business to be deviating much from your initial expectations on that front ? And then I guess within hospitality , how is growth progressing between your lodging and lodging segments ?
Speaker #6: Sure . We're quite pleased with the pipeline . There . Our team continues to do a quite nice job of maintaining a strong pipeline , and I think that's really a more of a testament to the value proposition that we can bring to customers .
Speaker #6: And so I'm confident that we'll continue to drive healthy levels of growth in both of those customer types . I think , you know , overall , from a hospitality perspective , lodging has actually been pretty solid for us in the last few months .
Speaker #6: I know there's been some challenges in occupancy , and whether it's Vegas or some other places . So that's still kind of hit or miss across the country , whether it be , you know , a fewer international travelers , etc.
Speaker #6: . But it's holding up well . But at the same time , a big part of the growth there for us continues to be this net new account business that the team has converted .
Speaker #6: And we will continue to convert going forward .
Speaker #15: Great . Thanks so much . Good luck guys .
Speaker #5: Thank you .
Speaker #3: And our next question comes from the line of Jake Bartlett with Truist Securities. Your line is open.
Speaker #16: Great . Thanks for taking the question . Mine was about the market share gains in independents and the all three of the large players are accelerating case growth of independents .
Speaker #16: Seems like there's , you know , an acceleration of market share gains by by the larger players in general . I guess I'm wondering why you think that's happening .
Speaker #16: Is that a trend or are there dynamics in the marketplace where where that is particularly suited for , for market share gains from the larger players and , and whether you'd expect that to to continue or even accelerate from here ?
Speaker #5: I don't think I would point to , you know , any anything different in terms of the market dynamics , Jake , around that ?
Speaker #5: I mean , you know , you go back even to our Investor Day , the big three have consolidated this industry and taken share for a long time .
Speaker #5: Broadly , it ebbs and flows . Importantly for us , we've got 18 consecutive quarters in independent restaurants . It's nothing new for us .
Speaker #5: You know , we've talked in the past about how we use the data to really target by zip code , where the opportunities are our sales force is really embraced , that we make sure we have the right assortment in place before we target a certain type of customer within those markets .
Speaker #5: And so it's, you know, it's our process continuing to mature is what I'd really point to. That's driving our success.
Speaker #5: Nothing. Nothing really new. And I don't really see any changes in the market dynamic there.
Speaker #16: Great . And then , you know , I'm sorry if this was answered before , if it was , I missed it . But independence , you know , case growth or actually just traffic growth for for the chains that we've been following , October has been been pretty pressured .
Speaker #16: I think broadly , but you're talking about in acceleration for your business , one of your competitors , you mentioned the same . And so is independent traffic doing much better than than chain ?
Speaker #16: Is there a kind of outperformance there that’s been accelerating in recent months? Do you think?
Speaker #6: Jake . Good . It's dark . So we didn't talk about acceleration in October . It's really that sort of strength relative to the quarter that we saw in September that carrying through October , I think the Dave made the comment there that , you know , in these last few weeks choppy , I think , is the word he used , which is a good word .
Speaker #6: I've heard a number of others out there use it just with a lot of things happening on kind of together . It's it's harder to get a good solid read .
Speaker #6: But in the meantime our case growth , as you said , held up solid through October . And our team's going to continue to focus on gaining share and and driving top line growth .
Speaker #16: Great . Thank you .
Speaker #3: And our next question comes from the line of Peter Sallah with BTIG. Your line is open.
Speaker #17: Great . Thanks for taking the question . I wanted to ask on the change in the seller's compensation . Do you anticipate that will drive the private label penetration higher and can you just remind us again , the profitability on private label versus branded and how you guys plan to proceed there with that change in sellers compensation ?
Speaker #5: Yeah , I think , you know , private label in general is roughly twice as profitable for the company and for our sellers as manufacturers , brands and importantly , you know , as I commented , we're incenting for growth with independents , with our private label and with pronto in our compensation plan .
Speaker #5: So we do expect an uplift in that . And as you've heard me say many times , I don't see any near-term ceiling to our private label brand penetration opportunity .
Speaker #5: Our sellers embracing that aggressively . I think that's why you've seen our success over the last 18 to 24 months . Importantly , our customers are embracing it because it solves problems for them .
Speaker #5: It helps them deal with inflation in a big way . And these are at at their heart . These are great quality products that our customers are embracing .
Speaker #5: So lots more to come . We're excited about it . And certainly we're incenting our sellers in the right way to to lean into our private label products .
Speaker #17: Okay , great . And I just wanted to follow up on the comments on on October . I know last October there were some storms , so maybe a slightly easier compare .
Speaker #17: But then this year we've got the government shutdown . Any more details you guys can provide on the October trend this year versus last ?
Speaker #5: Not really . Peter , I just point to my comments earlier . You know , we roughly finished at the same growth rate we did in September .
Speaker #5: Not only that , 4% . And you know , a little stronger in the first half , a little choppier in the back half , really driven by the the government shutdown .
Speaker #5: But again, we've got good momentum, and we're focused on gaining share.
Speaker #17: Thank you .
Speaker #5: Thank you .
Speaker #3: And our next question comes from the line of Karen Holthouse with City. Your line is open.
Speaker #18: Hi . Thanks for taking the questions . Kind of continuing on the theme of the government shutdown , thinking about more on the hospitality side of the business , would would we want to think about , you know , travel disruptions and whatnot ?
Speaker #18: Ultimately , maybe filtering down and hitting that a little bit in the fourth quarter .
Speaker #6: Karen , I think this is that's one where we'll watch like everybody else . What the implications may be . I think , you know , I don't want to diminish the impact of the shutdown , especially on the individuals that are impacted .
Speaker #6: But I think , you know , when you think of for the industry , you know , our expectation would be this gets addressed pretty quickly .
Speaker #6: And so when we think about what our business looks like , you know , going beyond this period of time , you know , again , we continue to feel very good about our ability to gain share and drive growth .
Speaker #6: And, you know, we'll manage through this period as we face some of the same macro challenges as most other businesses.
Speaker #18: And then one other one on the chain side of the business. I know there's a pretty big exit in Tokyo, and then more recently spoke to some businesses coming on board.
Speaker #18: How should we think of the sort of net onboard Offboard evolving through the next couple of quarters for that piece of the business ?
Speaker #6: Well , most of the main business came on second quarter and through the third quarter . So we expect to be , you know , improved here in the the fourth quarter .
Speaker #6: But then it really is going to be dictated more by just the overall traffic within our concepts . And you know , as you probably know , Black Box is a good proxy .
Speaker #6: But really it comes down to more of a chain by chain performance because it's it's quite differentiated across them . So , you know , that's an area where we'll continue to optimize the business .
Speaker #6: But overall the the onboardings that we've talked about previously are playing out as we had expected .
Speaker #18: Okay . Great . Thank you .
Speaker #6: Thanks .
Speaker #3: And as a reminder , it is star one . If you would like to ask a question . And our next question comes from the line of John Ivankoe with JP Morgan .
Speaker #3: Your line is open .
Speaker #19: Hi . Thank you . The question is about independent restaurants . And you know , specifically on the credit side , which , you know , obviously , you know , broad liners and food service distribution are somewhat in the business of issuing , you know , credit even if extremely short term , you know , to your customers .
Speaker #19: So the question was around , you know , the benefit that your sales force being close to customers and maybe even AI to some extent , you know , giving you some data , you know , putting you close to customers that are maybe helping you make more informed credit decisions .
Speaker #19: In some cases , you know , people deserve a little bit more time or more help , especially to open new restaurants and in other cases , that actually might make sense to pull back credit and not extend some terms .
Speaker #19: So , you know , it's not something I don't think we've talked about in some time . But , you know , just with obviously a lot of disruption just going on in various , you know , pockets of economies across the country , how you kind of feel about , you know , the credit side of your business and how it could potentially be an opportunity for you .
Speaker #19: Thank you .
Speaker #6: John , I feel good about where our team is from a credit perspective . You know , we really try to balance the use of what the data and the the tools teach us , tell us , but also , as you pointed out , those sellers and those local teams being close to the customer that communication back and forth between them and our credit teams is is a regular occurrence .
Speaker #6: And to your point , there's not one answer on everything . Sometimes the the answer is they do need more time . Other times you have to have the harder decisions and other times as much as you can do all those things , you still get caught with some of it .
Speaker #6: So our team is really , I think , doing a pretty good job of managing through it and has been because that back to Dave's point on that consumer confidence and some of the challenges out there , they're not new this quarter .
Speaker #6: They've just been different versions . The last couple of years . And our team has has managed pretty effectively through that . And I'm pretty confident that they can going forward .
Speaker #6: But we're definitely not taking our eye off the ball on it .
Speaker #19: Thank .
Speaker #20: You .
Speaker #3: And our final question comes from the line of Danilo Gargiulo with Bernstein . Your line is open .
Speaker #21: Great . Thank you very much for taking the question . I was wondering if you can provide maybe more color on the progress on the semi warehouses and specifically as you're starting shipping out of your automated facility in Aurora , how have your GP per case increased and and stepping back , what is your long term aspiration in terms of automation ?
Speaker #6: Good morning . So you know , it's still pretty early since we're transitioning through there . And you know , as you can imagine with any transition you work through sort of things that work well and some learnings .
Speaker #6: And our team's doing that . But what we are making continue to make progress . So at this point , I'm going to hold off on any commentary on impacts on whether it be gross profits , productivity , etc.
Speaker #6: . But the thing that we remain quite encouraged by is we're learning from it . And , you know , we expect that automation and warehouses will play some meaningful part over time .
Speaker #6: It's just it's almost inevitable and it's just a matter of what do we learn out of it . And how do we continue to find the best ways to leverage it across our network .
Speaker #6: So more to come .
Speaker #21: Okay . Thank you . And then on on the prone to investment , I was wondering if you can make us some or can give some incremental color on your statement of the largest investment in pronto .
Speaker #21: So is it purely in terms of trucks and in terms of markets that you're entering , or are you contemplating some incremental support to increase the amount of penetration ?
Speaker #21: So any color on how pronto could be delivering some step change in penetrating more into independent accounts ? Thank you .
Speaker #5: Yeah , I think , you know , with the work that we've done over the past several years , we've got great confidence in both pronto .
Speaker #5: Legacy . Pronto . Penetration . We've got a lot of work going on to support that business today . So I don't think the investments are more around that .
Speaker #5: It's more trucks and people to drive those trucks . And with the confidence that we've got , you'll see us leaning in pretty hard in that in 2026 , the model is proven .
Speaker #5: It's working our salespeople love it . It's serving our customers in a way that we had a gap . And I think it's proven out by the growth rate .
Speaker #5: So we're bullish about pronto . And we're going to continue to invest in it .
Speaker #6: And it really just it fits so well with our balance . Focus of earnings growth and improvement in return on invested capital . And you know as you've seen probably in our trends , we've made significant improvements in that .
Speaker #6: And progress over recent years . And you know , many of the decisions we make apply with that lens as well . And this is pretty capital light .
Speaker #6: And is a great service for our customers .
Speaker #21: Fantastic . Thank you .
Speaker #3: In that concludes our question and answer session . I will now turn the conference back over to Mr. David Flitman for closing remarks .
Speaker #5: Thanks and thanks , everyone for joining us today . Our team remains focused . We're executing very well in my confidence in our future has never been brighter .
Speaker #5: Have a great day . Appreciate you joining us . Thanks .