US Foods Holding Corp. Price & Performance (USFD)

At this time, I would like to welcome everyone to today's U. S. Foods Holding Corporation Q4 twenty twenty four 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. I would now like to turn the call over to Mike Nies, Senior Vice President and Head of Investor Relations. Mike? Floor is yours. Thank you, Greg.

Good morning, everyone, and welcome to the U. S. Foods Fourth Quarter and Full Year Fiscal twenty twenty four Earnings Call. On today's call, we have Dave Lippmann, CEO and Dirk Lecosio, CFO.

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 and today's presentation can be found on the Investor Relations page of our website at ir..usfoods.com US. During today's call, unless otherwise stated, we're comparing our fourth quarter and full year 2024 results to the same period in fiscal year twenty twenty three. 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 ks for a detailed discussion of the potential factors that could cause our actual results to differ materially, from those anticipated in forward looking statements. 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 earnings press release as well as in the presentation slides posted on our website. We are now providing reconciliations to forward looking non GAAP financial measures. With that, thank you, and I'll turn the call over to Dave. Thanks, Mike. Good morning, everyone, and thank you for joining us today. Before we turn to today's agenda, I want to take a moment to acknowledge the devastating fires in the Los Angeles area.

Our thoughts are with everyone impacted by this tragedy. I'm relieved to share that all of our associates in the LA area are safe. We eagerly supported the critical work of first responders including CAL FIRE, by providing food and hydration and we are very thankful for their brave and tireless efforts.

Now let's turn to today's agenda.

I'll start by recapping our 2022 to 2024 long range plan. Then I'll share highlights from 2024 including the significant progress our team made executing our strategy. I'll then hand it over to Dirk to review our fourth quarter and full year 2024 financial results as well as our fiscal twenty twenty five guidance.

Delivered another strong quarter, which resulted in record 2024 full year earnings of $1,740,000,000 capping off the final year of our long range plan.

We are proud to have overachieved our original commitment which was all underpinned by the focused execution of our strategy. The fact that we didn't get there exactly the way we originally planned three years ago demonstrates our ability to adjust to any macro environment and our team's relentless focus on controlling the controllables. To ensure we reach our target. During the past three years, we accelerated our work on key initiatives including delivering consistent share gains with our three target customer types, driving more than $230,000,000 in cost of goods savings extending our technology leadership position reducing net leverage, ending 2024 at 2.8 times within our two to three times target range, and expanding adjusted EBITDA margin by 100 basis points to 4.6%.

I am equally excited about starting our new long range plan, continuing to execute our strategic initiatives to drive sustained growth, and return capital to shareholders. Our future is bright and our current momentum gives us gives us confidence in achieving a 5% sales CAGR a 10% adjusted EBITDA CAGR at least 20 basis points of annual adjusted EBITDA margin expansion, and a 20% adjusted diluted EPS figure, through 2027 In I am highly confident in our ability to continue to outpace industry volume growth over the long term and expand margins through our extensive portfolio of self help initiatives while driving long term value creation for our shareholders. As we turn the page on a momentous chapter for U. S. Foods, I thank our 30,000 associates for their extraordinary effort.

Dedication, and sharp focus to deliver excellence and help our customers make it. Every day. This next chapter will be even more exciting. Turning to Slide four.

Our strong fourth quarter results finished a year in which we achieved record adjusted EBITDA of $1,740,000,000 while we expanded adjusted EBITDA margin by 22 basis points. We also delivered record adjusted EPS of $3.15 which was 20% growth and we grew adjusted EPS eight percentage points faster than we grew adjusted EBITDA. Importantly, we deployed our strong cash flow through our $220,000,000 acquisition of IWC and nearly $1,000,000,000 of share repurchases in 2024. Let's turn to the broader macro environment. Chain restaurant foot traffic as published by Black Box was down a little less than 2% for the fourth quarter and while still negative, it shows sequential improvement from the third quarter. Independent restaurant industry volume per Sarcana was down less than 1% in the fourth quarter and in line with last quarter's year over year results. Our ability to outperform the market was again demonstrated as we posted a 3.2% increase in total independent case volume and our fifteenth consecutive quarter of share gains independent restaurants.

Also, case volumes in Healthcare and Hospitality, which together comprise more than 25% of our sales, grew 4.72.4% respectively.

We continue to gain share in both customer types In fact, we just posted our seventeenth consecutive quarter of share gains in healthcare.

These two high growth customer types are an important part of our differentiated to market strategy.

The fourth quarter was noisy. Due to the impact of the devastating hurricanes that hit near the end of the third quarter and early in the fourth quarter. Affecting industry volumes, specifically in US [indiscernible] where we have a larger portion of our independent business, In addition to storms, the election and holiday calendar shift also impacted restaurant foot traffic. These impacts translated to an estimated 150 basis points to 200 basis point headwind to our independent and hospitality case growth. Despite these external factors, we continue to capture profitable market share, grow volumes and expand our margins. And in the fourth quarter, we improved our share gains with independent restaurants compared to the prior year and we also grew our new independent accounts at the fastest rate of the year in December. Moving to Slide five. Let's take a look at some of the key achievements in 2024 that our team delivered under four strategic pillars. 2024 was another strong year for U. S. US. As I reflect on my two years here, I am now even more confident in delivering our new long range plan and our ability to consistently gain profitable market share, our three target customer types of independent restaurants healthcare and hospitality, the three most profitable segments of the foodservice industry.

Also have line of sight to continued productivity gains of 3% to 5% and further gross margin expansion. Now let's move to some highlights in each of our pillars. Our first pillar is culture. The safety of our associates continues to be and always will remain our number one priority. Our injury and accident frequency rates improved nineteen percent from the prior year on top of our 23% improvement in 2023. These safety results are our best in many years but we still have more work to get to our ultimate goal, of zero. As we look to further reduce associate injuries, the rollout of Center Ride Power Industrial Equipment is a key initiative that is underway the network. We are nearly 50% through this deployment and importantly where this equipment has been already rolled out, we have not had a single injury. In 2024, we donated more than $14,500,000 to support hunger relief, culinary education and disaster relief efforts. This contribution included nearly 7,000,000 pounds of food and supply donations the equivalent of approximately 6,000,000 meals or more than two sixty truckloads of product Turning to our service store, we're striving to differentiate our service platform to our customers to provide a best in class delivery experience.

In 2024, we deployed the cart a leading routing technology in 25 markets resulting in nearly 50% of our routed miles on the system at year end. It enabled us to route more dynamically and drive even greater delivery efficiency while also providing a better customer experience by delivering their orders within a more precise time window. We improved distribution productivity in 2024 by delivering our best cases per mile performance in our company's history. This was driven through our market led routing initiative combined with a more than 2% productivity uplift in markets where We are making continued progress with the rollout of Du Carte and expect to complete it by the end of this year. We are also transforming the experience for our customers through our continued enhancements [indiscernible] that enables customers to easily place orders, manage inventory, and pay their bills. We have been and will continue to be the e commerce leader in our industry. We closed the year at 77% e commerce penetration for our independent customers and 87% for the total company. The 77% is an all time high for our independent customers and represents a 4.5 percentage point improvement versus twenty twenty three and then 11% percentage point improvement versus 2021 US.

Now let's turn to our growth pillar. In 2024, net sales grew 6.4% to $37,900,000,000 through continued market share gains in all three of our target customer types. Our differentiated team based selling model and consistent addition of new seller headcount over time which was up 5% in 2024, remain at the core of our growth plan. We continue to invest in our Hungry for Better program with three to distinct product portfolios of over 4,000 products. Serve you, Serve Good and Serve Local. Hungry for better makes it easy for our customers to help me diners' preferences for delicious on trend meals from clean ingredients that support individual dietary and lifestyle needs to sustainably sourced products. In fact, in 2024, our responsibly sourced serve good portfolio of private label products achieved record breaking sales surpassing $1,000,000,000 for the first time. Pronto, our small truck delivery service continues to grow and is live in 40 markets. We remain excited about this growth opportunity and its ability to reach hard to service customers in desk geography, Pronto provides these previously untapped independent restaurant customers with smaller, more frequent deliveries and later cut off times. In addition, we launched Pronto penetration in the middle of twenty twenty four in two pilot markets and expanded that to six later in the year.

With the goal to launch 15 to 20 more markets in 2025. This service fills in non routine delivery days for our existing independent restaurant customers leading to the potential for further wallet share, for U. S. Foods. In our first two pilot markets, we are seeing an approximate 20% uplift in our overall case growth from customers in the program. As expected, Pronto exited 2024 with approximately $730,000,000 of annualized run rate sales and we expect it to grow double digits this year. Turning to M and A. We completed one tuck in acquisition last year by purchasing IWC Foodservice which serves the Greater Nashville area. More recently, in January, we acquired Jake Spiner Foods in Houston. Our fourth acquisition over the last two years. JAIC's also includes a quality meat cutting US, which will fit in nicely with our stockyards network. With more than $160,000,000 in annual revenue, this acquisition increases our local capacity and expands our presence in South Texas US. Finally, let's move to our profit pillar. Adjusted gross profit grew 7.3% in $20.24 $6,600,000,000 We continue to make additional progress on cost of goods, through our strategic vendor management efforts realizing more than $70,000,000 in savings last year, [indiscernible] We also remain focused on growing our private label brands.

Where our full year penetration was up nearly 50 basis points to 52% with our core independent restaurant customers. Our momentum accelerated throughout the year with penetration nearing 53% by the end of twenty twenty four. And we see no near term ceiling with our ability to further increase our private label brand penetration. Finally, as part of our ongoing goal of achieving 3% to 5% annual productivity improvement, we made significant progress in 2024 to streamline administrative processes and costs and achieved $120,000,000 in annualized operating expense savings. [indiscernible] we are nearing the conclusion of exploring the sale of this business and expect that we will have more to say about that by the end of this quarter or early in the second quarter. We remain fully committed to supporting the business our associates US our customers throughout the process. As we have previously said, in the event of a sale, we would expect to deploy the majority of the proceeds to repurchasing shares. Before I hand it over to Dirk, I would like to recognize two associates who have gone above and beyond during the wildfires that raged across California. Two of our associates, Danny Moore and Paul Wheeler, dedicated their personal time to serving the approximately 10,000 firefighters in the area.

With Danny supporting the Pacific Palisades fire, and Paul supporting the Eaton fire, both were on-site daily to coordinate the delivery of over 75 truckloads of product and work in the kitchens preparing food for first responders. Both have made incredible personal sacrifices being away from their families and I thank them and all of our associates for their service to support those who are on the front line [indiscernible] Let me now turn the call over to Dirk, to discuss our fourth quarter results and our 2025 guidance.

Thank you, Dave, and good morning, everyone. Our fourth quarter performance finished off strong 2024. We continue to execute our strategy of driving healthy, balanced growth through the P and L. Which resulted in margin expansion and double digit earnings growth. Turning to Slide seven.

Fourth quarter net sales increased 6.2% to $9,500,000,000 driven by total case volume growth of 3.5%, and food cost inflation and mix impact of 2.7%. Our independent restaurant volume were 3.2% including 140 basis points from acquisitions.

Healthcare growth remained strong at 4.7% and hospitality grew 2.4%. As Dave mentioned earlier, industry case volumes were impacted by storms, The election timing of the holiday seasons, Despite the noise in the quarter, we continue to focus on the outcomes that we can control and we again drove healthy share gains in all three of our target customer types.

We remain encouraged that 2025 will produce a stronger macro backdrop than 2024 and when combined with our focus on share gains, will enable us to accelerate organic case growth January growth rates in independent cases although significantly impacted by weather and the California fires, showed signs of strengthening over Q4.

Fourth quarter adjusted EBITDA grew 13.7% from the prior year $441,000,000 through a balance of profitable volume growth gross profit gains, and operating expense productivity. Our actions to drive profitable growth resulted in 30 basis points of adjusted EBITDA margin expansion to 4.6%.

Importantly, adjusted gross profit dollars grew two forty basis points faster than adjusted operating expense dollars.

Finally, adjusted diluted EPS increased 31.3% to $0.84 We again grew adjusted EPS significantly faster than adjusted EBITDA and we expect this to continue as we execute our share repurchase plan on top of strong adjusted EBITDA growth. Zooming out to the full year, we delivered record profitability as we grew adjusted EBITDA by 11.7% to $1,740,000,000 expanded adjusted EBITDA margin by 22 basis points to 4.6% and increased adjusted diluted EPS by 19.8% to $3.15 despite the macro challenges that persisted throughout 2024.

Our results are a testament to the focused execution of our self help initiatives and our ability to control the controls. This performance gives us confidence that we have the strategy and initiatives in place to achieve our new long range plan. [indiscernible] Moving on to Slide eight, we continue to drive significant gains in operating leverage. Again grew adjusted gross profit per case faster than adjusted operating expense per case. In the fourth quarter, adjusted gross profit per case grew by $0.28 3.6% compared to the prior year while adjusted operating expense per case increased by $0.08 or 1.4%. Fourth quarter adjusted EBITDA per case was $2.12 up $0.19 from the prior year as we grew adjusted gross profit per case, 3.5 times fast, as US adjusted operating expense per case. The full year result was very similar as we increased adjusted EBITDA per case $0.14 to $2.07 We continue to drive gross profit gains and offset a significant portion of operating expense inflation with supply chain productivity improvement and other efficiency gains.

Including streamlining administrative processes and costs and realizing indirect procurement spend savings. Specific to indirect spend, we achieved more than $30,000,000 in savings for full year 2024 above the $20,000,000 estimate I discussed on the last earnings call. And we remain on track for $60,000,000 by 2027. Our fourth quarter and full year results demonstrate our ability to drive strong leverage through the P and L we expect to maintain an operational discipline in 2025 Turning to Slide nine.

We are growing our business in a responsible and sustainable way to drive earnings, cash flow, and improved return on invested capital.

Over the past three years, we delivered significant profit growth from a balance of top line growth, and EBITDA margin expansion. Including an 18% adjusted EBITDA CAGR and a 27% adjusted diluted EPS CAGR as a result we increased ROIC by 1,300 basis points 31%. Turning to Slide 10.

Our strong cash flow combined with our healthy leverage profile enables us to deliver on our capital allocation priorities of investing in the business for growth, returning capital to shareholders, and executing accretive type in M and A. We ended the year at 2.8x net leverage, within our 2x to 3x target range.

Our net leverage remains in line with 2023 even with repurchasing 16,400,000.0 shares for $958,000,000 and closing on the $220,000,000 acquisition of IWC twenty twenty four, we invested $341,000,000 in cash CapEx as we continue to focus on projects to enable organic growth including expanding our fleet, investing in capacity as well as enhancing our technology lead. So far in 2025, we completed the acquisition of J. X. Feiner Foods for $92,000,000,000 and repurchased $23,000,000 of shares. We are disciplined in our capital deployment and we remain committed to returning capital to shareholders. We expect to return to more meaningful share repurchases in the second quarter and balance of the year. And we'll adjust based on future tuck in M and A opportunities.

As a reminder, we expect to generate more than $4,000,000,000 of cash flow over our new long range plan period of 2025 through 2027. And expect to deploy approximately half of these proceeds for $2,000,000,000 towards share repurchases Additionally, we expect to reduce net leverage due to earnings growth.

Moving on to Slide 11 and our guidance and We expect to grow total company net sales 4% to 6% compared to prior year driven by total case growth of 2% to 4% which includes faster independent restaurant case growth of 4% to 7%.

The lower end of our range assumes a slower macro environment We expect a normal inflationary environment with sales inflation and mix impact of approximately 2%.

We expect to grow adjusted EBITDA 8% to 12% and adjusted diluted EPS 17% to 23% US.

Our expected double digit earnings growth will be driven by the combination of profitable volume growth, and margin expansion. As a result of adjusted gross profit per case continuing to grow faster than adjusted operating expense.

In closing, I am very pleased with our financial performance we delivered record adjusted EBITDA for 2024, and achieve the long range plan that we presented in early twenty twenty two.

Did this by staying focused on executing our strategy, being agile controlling the controllables during times of macro uncertainties.

I'm excited about the opportunity in front of us we embark on our new long range plan, and we are confident in our ability to achieve it given the momentum we are generating.

I'll now pass it back to Dave for his closing remarks. Thanks Dirk.

You've heard about the great progress that we made last year. We are extremely pleased with how we successfully completed our prior long range plan and are very optimistic about our momentum heading into 2025 and beyond. Ours is very much a self help and execution story with a long runway of top and bottom line growth in front of us. We will continue to run our playbook execute our strategy and effectively deploy capital. I'd like to quickly draw your attention to Slide 12, and what differentiates U. S. Foods versus our competition? We're the only pure play U. S. Focused foodservice distributor with national scale. We have a differentiated value proposition and significant scale with the three most profitable customer types in the industry. Independent restaurants, healthcare and hospitality. We have the industry leading digital ecosystem We're in the early innings of self help initiatives that will drive sustained profitable growth for many years to come. We believe we have the fastest P and L growth algorithm in the US underpinned by accretive capital allocation, which will enable us to grow adjusted EPS faster than adjusted EBITDA over the next several years. And finally, we are accelerating cash flow generation, which will result in more than $4,000,000,000 to over the next three years.

We are much stronger today than we were several years ago. And we are just getting started. We have sustainable competitive advantages outperform the market well into the future and we will continue to drive shareholder value for many years to come. With that, Greg, open up the line for questions. Great. Thanks, Dave. And at this time, I would like to remind everyone in order to ask a Okay. Looks like our first question today comes from the line of Mark Carden with UBS. Mark?

Great. Good morning and thanks so much for taking the questions. So to start, it seems like there's new tariff news every day including today reciprocal tariffs. What percentage of your operating do you import overall? And then if tariffs on food products end up occurring, would you expect to pivot sourcing or with US simply be able to pass through the pricing?

Good morning, Mark, and thanks for the question. I would just point out that majority overwhelming majority of our products are produced and distributed in The United States. We have a low single to mid single digit importing from the various countries that have been mentioned US just recall that the majority of our customer interactions in our agreements are pass through. In nature. Having said all of that, at the heart of our work with our customers is helping them handle inflation. And I would wrap the tariff issue into just more inflationary pressures on our customers. So how we go to market the way our restaurant operation consultants work to help take costs and waste out of the back office of our operators Our SCOOP products our private label brands that end up being cheaper for our US, and help them save time and money in the kitchens. That's at the heart of what we do every day and we'll continue to work hard to help support our customers.

That's great. Thank you. And then as you think about your independent case growth this assumptions in the year ahead, how are you thinking about the balance of new account growth versus penetration growth and how that could progress really throughout the year? Yes. So penetration has been a challenge given the foot traffic challenges really all throughout 2024, especially in the back half of the year. But just over time, the overwhelming majority of our growth comes from new account generation. That's why I pointed out, we had the highest new account generation of the year in December, even with all calendar and foot traffic challenges I am very encouraged. We also had one of our strongest monthly year over year share gains in the month of December. And all that positions us very well for for growth going forward, especially when that foot traffic environment improves, which we expect to happen throughout the course of 2025. All right. Thanks for the question, Mark. And our next question comes from the line of Edward Kelly with Wells Fargo. Ed, please go ahead. Yes. Hi. Good morning, everyone. I wanted to maybe just start with double clicking on the independent case growth.

I mean, you're clearly taking share, there's no doubt about that.

But you're below the 5% to 8% algo, right, that you've kind of talked about. I mean guidance seems to be that because you're talking about the 2% to 4% total organic case growth that see a sharp improvement in the independent side. Could you just maybe talk about the expectation for the year, your your confidence, the visibility, how maybe you think about bridging back to that [indiscernible] And how we should be thinking about the cadence of the year if that occurs? Sure. Well, let me just start by just reframing that 5% to 8% case growth as we did at Investor Day. And recall, the underlying assumption there was a normalized plus 2% foot traffic environment which we did not see in 2024. So I'd start with that. And if you just bridge the performance that we had there in the fourth quarter, that 1.8% organic growth you add the 2% foot traffic back in that 150% to two basis point impact that we had from the storm's weather and calendar That all puts us right in the heart of low to upper fives. Even in that environment. So I'm confident in what we put forward. And then as you heard Dirk comment, we saw some improved traffic trends in January.

And the way kind of we're looking at the month of January, if you take the impact of the strike that we had last year and the weather [indiscernible] offsets completely the weather, which was much more significant this year. So I would call that year over year for U. S. Foods Awash And then underneath that, we saw strengthening from December to January. So as Dirk pointed out, the low end of that range assumes that the foot traffic environment doesn't improve. We're confident that it will. It's just at what rate that happens in 2025. But we've got a lot of confidence based on the underlying momentum that we've seen the share gains that [indiscernible] to put forward that guidance range for the year. Maybe just a follow-up to that.

Dave. I mean, you've pretty consistently talked about that you can adjust to the macro and controlling the controllables. And I think '24 US proved that But you're exiting the year with a lot of momentum and profit per case. [indiscernible] of the profitability equation. So does the same mentality applies as you're thinking about '25 Guidance US curious as to how you would size the self help opportunity in 2025 versus what we what you accomplished in 2024?

I would say we feel really good about the momentum. And as I pointed out, Ed, and I really believe this, we're in the early innings of all the work that you see us doing. On the top line, continuing to take share, there's a lot more share for us to be had in all three of our targeted customer types I feel really good around the way the team is aligned around our mission there. And the numbers that we're putting US, but there's more to do. And then as you think about the gross profit per case work that we have going on, and our margin improvement work, our strategic vendor management work that $260,000,000 target we've got over the next three years The momentum we're exiting the year with in that area, our exclusive brands, nearing 53% at the end of the year, There's a lot more for us to do and to be had. And then supply chain productivity with all the framing that we've done and the structural improvement work overlaying things like the carte, we're going to just get continued momentum as we roll that out across the rest of this year. Our turnover continues to reduce in both selectors and drivers.

I'm confident that our delivery and outbound productivity will continue to improve throughout the year. So just feel really good about the execution story that we have in front of US. And the way the team is driving the outcomes.

I think the other thing to not forget is the benefit that we have from not just from growth, not just independence, but the strong base. As Dave mentioned, it's more than a quarter of our business in healthcare and hospitality. Which both were growing at a significant rate with healthcare at almost 5% for the fourth quarter hospitality at 2.4%, despite having the same headwinds basically as [indiscernible] And both of those have come out of the gate in January well within our guidance range. So that's a another good growth engine for us as we talk about that Our EBITDA growth and EPS growth come from a balance of top line growth and margin All right. Thanks for the question, Ed. And our next question comes from the line of Jeffrey Bernstein with Barclays. Jeffrey, please go ahead. Great. Thank you very much. My first question is just bigger picture, I think you guys mentioned you're assuming or suggesting a stronger macro backdrop in 2025 versus 2024 US. [indiscernible] metrics gives you that confidence. I know there are some that are concerned that the consumer environment isn't getting much better. Especially around that because you talk about the long term algo for case growth 5% to 8%.

Which assumes positive 2% industry traffic. Definitely a question as to whether or not the industry will ever get back to positive 2% traffic. It just seems like it's year after year, there are always challenges there. So just wondering your kind of broader view on the macro backdrop and the confidence you have in getting back to that 2% positive industry US.

Sure. Good morning, Jeff. It's Dirk. Technomic is one source that we US. It's is calling for a healthy improvement in 2025 over 2024. Also, when you had decline last year, reset a base and not expect further declines again versus some improvement we have likely more some more stability with the election behind So those all give us the optimism that the traffic environment will continue to get better.

It's another thing that's we say focus on that, but the other thing that's not new that you've heard us talk a lot about is things that we can control around the share gains in all three of our target customer type US continue to drive that.

And this self help control the controllables, however you want to talk about it, that is at the heart of how we're thinking about it, whether it's top line growth or bottom line earnings growth. Got it.

My follow-up is just on, Dave, you mentioned the independent customer gains, something about the fastest growth just in the month of December and January is on a strong start. I'm just wondering is there anything that's you view as the key driver of that acceleration? And maybe what's your expectation? Is that sustainable throughout 2025?

Specific to that independent customer gain metric? Thank you.

Yes. Thanks, Jeff. I think the focus that we've had in independence fifteen quarters of share gains running our playbook The way we use the US of data to target customer growth by market, by ZIP code, Our team is on it. You augment that with our continued hiring of sellers Some of them are maturing over the last twelve to eighteen months. We'll continue to hire in that low to mid single digit range as we committed to, as we did the last two years. And it's just continuing to run our playbook. And I remind our team all the time, given our share position, regardless of the macro, there's plenty of volume to be had in the industry and specifically with independent US. And our job is to go get those cases and that's what our team continues to do.

All right. Thanks, Jeff. And our next question comes from the line of Lauren Silverman with Deutsche Bank.

Lauren, please go ahead.

So I wanted to ask if you can expand a bit more on what you saw in terms of cadence in 4Q and into January. It's good to hear growth accelerated in January. I guess, are you in striking distance of the 4% to 7% independent case growth target for the year. Just trying to understand whether the guide implies industry trends improve from here or the magnitude of that? Good morning, Lauren. This is Dirk. So in the fourth quarter, we saw more growth in October, November, like the rest of the industry and peers have talked about is December with the the shift in the holiday timing, you saw slower growth overall. We did see some acceleration in January I think with the weather and the fires made it pretty noisy. So I think for the when you think of the first quarter, just a reminder kind of January and then early February, lower volume periods relative to overall. So our expectation is that we will accelerate throughout the year and have that confidence for the reasons Dave talked about earlier that we we achieved that 4% to 7% independent case growth as well as our overall 2% to 4% case growth.

Great. On that 2% to 4% case growth, I want to confirm what's organic versus whether there's any M and A contribution embedded and just more broadly how you're thinking about the M and A environment That is incorporates anything that we've transacted already. So it would be includes item C and the small contribution from Jake's, which is relatively small as I mentioned. Our pipeline continues to be to be worked and we continue to look for opportunities out there.

And we'll continue to be opportunistic with the right businesses And Jake's Is A Good Example Of Fit The Network Very Well, Doubled Our Capacity In The Houston area, allowed for continued growth as Dave mentioned.

A very good meat cutting facility that fits well into our network So I would say the environment remains healthy and we continue to work our our pipeline and engage with people. And as you've heard us say plenty of times, the thing you can't determine is when they're ready. And so our but our work continues on that front.

Thank you very much. All right. Thank you, Lauren.

And our next question comes from the line of US John Heinbockel with Guggenheim Partners. John, please go ahead. Hey, guys. I want to start with, can you discuss what you're seeing, you sort of take out weather in calendar trend line, On lines per account, and cases per line. Right? And US, cases per line, right, as we see the macro impact, is it possible could that be down 5% or mid single digit with the bulk of that being macro, Yes. The cases per line has been the challenge, John. I think lines are relatively stable.

Obviously, we continue to look for those penetration opportunities, but it's just particularly in the back half of the year, it's been kind of overwhelmed by the foot traffic challenges. That's where that shows US.

Okay. Maybe a totally different topic. Where are we if you think about the rest of this year, the rollout of Descartes and Umass US, right, rollout on that and then I think last quarter you talked about productivity was up 3.5%.

I don't know what that was for the full year, maybe it was similar. Do you think could that be higher right in 2025 because of the rollout of those programs? Do you think it's about the same?

Good morning, John. It's Derek. I think so what they expect to be fully rolled out by the end of this year, US continues to deploy to more markets, I would say that our expectation is the productivity impact is pretty similar to what it was last year vis your rolling off some older ones that have been lapped and then continue to add new ones. But as we come into 2025, we're still very pleased with the outcomes that both of those are offering. And then for Descartes, the opportunities that it will continue to afford us in the coming years by having a more advanced routing platform for the question, John. And our next question comes from the line of Peter Saleh with BTIG. Peter, Great. Thanks. Just a couple of questions. First, wanted to come back to the conversation around tariffs. I think Dave you mentioned low to mid single digit imports from the countries that may be affected. Just curious if the the private label brands that you guys have, are they more or less exposed to those countries versus the branded? That's my first question.

I'd say it's about equal there, Peter. No US or minus. A relative basis.

Okay. That's very helpful. And then just on the Moxie rollout, I know you gave some metrics there. Are you still seeing the case count growth there? I think maybe several quarters ago you were mentioning about a case and a half or more per order. Just any update on that would be helpful. Thank you.

Yes, Peter, it's relatively the same that case and a half in that one to two cases is where we continue to land with Moxie and we're confident in that and we expect that will Okay. Thank you for the question, Peter.

Our next question comes from the line of Brian Harber with Morgan Stanley. Brian, please go ahead. Yes, thanks. Good morning, guys.

Been mostly kind of new business wins versus penetration. I know the new business wins there can be a little bit lumpier, but, would you expect that rate to kind of continue into this year or anything that affected in 4Q?

Good morning, Brian. This is Dirk. So overall, as we said, quite pleased with the way both are performing. And it's really coming from a combination of new and penetration.

Across that customer base.

And our expectation is we continue to grow at a very healthy rate And as I mentioned, we're growing well within our guidance range for the year. We have differentiation with those customer types just like we do in our go to market with independent restaurants. And the wins can be yes, there can be some chunky pieces, but there also can be smaller that we continue to bring on, on a regular US. So we think we're very well positioned and excited about the growth that comes from those Okay, thanks. Dirk, what's a rough CapEx number for this year and I guess just kind of any changes in The different buckets of that versus 24?

Sure. So we guided to $375,000,000 to $425,000,000 for the year. That's a step up from a little under three fifty in 2024.

And it's really right in line with what we talked about at Investor Day And it's a combination of as a US gets a little bit bigger, its fleet, a little more IT to support some of our initiatives.

It's some of the work around building maintenance capacity. So not a single driver there.

But I think the important part is that and depreciation both are what we have been contemplating and it's really as we step up coming off of a few years of lower investments around the COVID period of getting back to in a healthy way. And what you see is even with that we continue to grow EPS meaningfully faster than adjusted EBITDA. All right. Thank you for the question, Brian.

And our next question comes from the line of Kelly Bania with BMO Capital Markets. Kelly, please go ahead.

Thanks. US a couple of questions from us. Lots of focus on the restaurant traffic and the broader trends there, but anything you're seeing underneath the hood, whether it's cuisine types that are performing, better or income cohort dynamics or even regional dynamics. I'm just curious if there's areas that are stronger that maybe you might be leaning into for growth as we think about 2025?

I wouldn't point to any regional challenges. I think where the foot pressure put traffic pressure has been pretty broad based particularly in the back half of the year. Our strength, we have a lot of strength in the bar and [indiscernible] tends to hold up on a relative basis better than some other segments. But that's really the only thing I would probably point out and mention there.

Okay, that's helpful. And then Dave, I think you mentioned sales force headcount was up 5% in 2024. Is it safe to assume 25% is on a similar trajectory and US color on how you feel about the compensation structure for the team and feedback and how that's going or any changes or things that we should consider on that front?

Yes. I mean, we're up 6235% last year. I think that 4% to 6% range feels good for US. We've got good momentum around it. Our team does a nice job of onboarding new sellers. And so I think we will we will stay in that range And we thoughtfully did not make any challenges to our compensation plan going into this year.

Because we felt good about the changes we made a year or so ago and that's playing out as we hoped and we'll continue to review it through the course of time and make any tweaks as we need to. Thank you, Kelly. And our next question comes from the line of Alex Leggate with Jefferies. Alex, All right. Thanks. Congrats on the performance this year. Wanted to ask on the private the private label and just environment seems prime to support further expansion here. It sounds like you've seen the momentum climb through 'twenty four. Wondering if you could kind of talk about some of the drivers that could allow that to ramp further in 2025 as you think about the effectiveness of the seller incentives and the kinds of products you're offering or any other industry dynamics that might impact that Yes. I'll just take you back in history a little bit, Alex, there with the pressure of the ourselves and really the industry saw on private label coming out of COVID. We all were challenged with supply for a few years there and it was really in the back half of twenty twenty three when all that started to normalize and then regain the seller confidence.

So we entered 2024 with full supply capability, You overlay that with our innovative SCOOP process where we're launching new products, highly innovative products that again great quality and help our customers save time and money. We do that twice a year in the spring and the fall and those have been quite successful. And most of those products stick once we launch them. So we feel really good about it. And that's why I pointed out earlier that We exited the year with a much stronger momentum than we had for average for the year. And I expect that that will continue. And in challenging times when our customers are feeling those inflationary pressures, Our private label brands are exactly what they need.

And our team's incentive to sell those. And so it's a win win for our customer and for our sales Thanks.

And a follow-up on the acquisitions JAIC's being the newest addition. Maybe an update on kind of where we are with some of the other recent acquisitions, IWC, Ebrenzis, Palladino, just in terms of integrating those businesses and that journey towards kind of getting the productivity and the growth and the synergies that you've been looking for [indiscernible] Good morning, Al. So Dirk, we've been pleased with each of them. They each continue to progress from an integration perspective, both from a process and system and we'll continue that over the course of this year as you probably remember, we've talked about and we do when we buy companies, we do integrate them into our systems over time.

And but each of them continue to largely perform as we expected and we expect the same out of Jake's as we bring it on and are excited about that one as well. Thanks for the question, Alex. Our next question comes from the line of Jake Bartlett with Truist. Jake, please go ahead.

Great. Thanks for taking the question. My first one was on the [indiscernible] You're trending higher than that in the fourth quarter.

It looks to me like some food PPI is remaining elevated So I guess the question is, is that would you view that as kind of conservative, the 2% versus the 2.7% on a blended US? And also maybe there's some mix impact in there that I'm not contemplating. So any commentary there would be helpful. Hi, Jake. And overall, it probably is a little on the conservative side since we don't know exactly how the inflation is going to play out.

And we've used that 2% very similar to how we've talked about it. Previously.

And just as a reminder, if inflation plays out a little bit higher than that, it will be more of an impact on sales than it will on earnings.

Just because when we think about the inflation even in the fourth quarter and very similar to the third quarter is more of that's coming through proteins, so center of the plate. In those cases, it has more of an impact on sales dollars than it does earnings.

So we're well positioned here and we'll continue to work on managing inflation effectively just as we have in the last few years.

Great. And then I had a question some of the margin drivers in 2025. And hopefully you can quantify maybe some of the what you're looking to get with procurement US, just remind us what you think you're going to get there? As well as the corporate cost savings. Any other initiatives maybe that you could quantify for us as we think about the margin build in Sure. Well, I'm not going to get into a lot of specifics on the components. I think on the cost of goods, the $260,000,000 that we talked about, it's relatively balanced across the years. So you can sort of think about that in that way. Gave me the comments and I referenced on the cost savings of the $120,000,000 that we took this year and some of that will carry forward into next year.

And then indirect spend, we achieved the more than $30,000,000 on our way to the dollars I would expect we probably get to another $15,000,000 to 20,000,000 of gains this year incrementally. So it's that plus and the elements of productivity in supply chain that we're targeting in that again 3% US range. So it all contributes and that's why because of the visibility we have to the actions and initiatives that will drive it, which gives us such confidence in achieving the overall earnings outlook that we put forth. Great. Thanks for the questions. Jake, And our next question comes from the line of Andrew Andrew Wolf with CL King. Andrew, please go ahead. Thank you. Good morning.

I wanted to ask a couple questions around the Pronto penetration initiative that you've launched recently. And gave some color on First, could you just clarify, Dave, I believe that's for the entire independent customer base.

Not just the Pronto folks, And US, wanted to ask about the 20% uplift in sales with those who have tried it I assume that's got to be new lines based on the convenience, the having a stock out or whatever. US a little color on whether it's mainly new lines or what's driving that. And also the economics, because I was thinking about it near term, it's a truck delivery. But longer term, you might have chance to consolidate that into a larger purchase. So just kind of get some clarity on how you're thinking about what it is and how the economics can sort it? Sort out if that 20% uplift holds out.

Yes. Thanks, Hany. Hey, let me just take you back to the original launch of Pronto. And for several years, this was aimed at open markets, difficult to reach areas, [indiscernible] overwhelmingly, actually 100% targeting new customers only. And it was just the middle of last year when we started to take what we call pronto penetration to our new customer base. We started that in two markets.

Towards the end of last year, we extended that pilot to four markets. So this is now for the first time ever aimed at our existing customer base.

And it gives them a chance and actually the lens that opens for us is competing against specialty suppliers. And so many of the products that we're delivering on Pronto Pen are products that our customers are buying some from us, some from competitors, those specialty guys and they're really looking for more frequent deliveries of fresh product.

So think about produce, think about center of the plate items, think about seafood, those sort of things are what typically goes on a Pronto truck. And to your question around the 20% uplift, that is aimed at specifically the customers in those penetration markets that we've opened this up to.

And again, this is in pilot phase. So we've entered a market with one or two US a couple of trucks To test it, and just recall to your question, we were looking at two things as we took this to our existing customer base. One is our ability to maintain the profitability, which is important. And that's linked also with making sure that we don't cannibalize our existing broadband US. That's why we're being thoughtful about the ramp up of Pronto penetration. And so far, we feel good And from a profitability standpoint, it's right in line with our broad line.

Profitability.

Great. Thanks for that.

Color.

If I could just get one housekeeping Question and On the DIRTT, the 4% to 7% independent case growth that's in the plan, If I use the acquisitions and assume it's all for independence, that at least at this juncture what you've announced, seems to add about 1% that number?

To with the organic component be about 1% lower.

So it will be it's not all independence. I think for each of them they tend to be call it half on the independent side. So it'll add probably not quite that much, but it'll definitely be a contributor to it. I think the the bigger sort of improvement as Dave talked about is the continued share gains and then over the course of the year some improvement in the foot traffic environment, but That's going to all lead us to our expectations for the 4% to 7% and ramping that up as the year goes on. For the question, Andy. And our next question comes from the line of John Ivankoe with JPMorgan. John, Hi. The question is on the amount of Broadliners that you might be able to acquire nationally that could drive your independent restaurant case volume US? Is it not to completely put numbers in your head, but could you potentially expand that business 25%, 50%, just give us some kind of sense in terms of how big of an acquisition [indiscernible] to do more tuck in acquisitions is the first question.

And the related ones, for some of the businesses that you've acquired, have you actually learned anything from them? I mean, have you learned anything from the various businesses that you've acquired that's actually made U. S. Foods a better operation both for customers and employees, maybe that surprised you on the positive? [indiscernible] So overall, I think we're not going to as you pointed, I'm not going to get into specific numbers. We think there are a number of opportunities primarily in the tuck in space. That are out there and that is one where you've heard Dave say plenty of times, we don't need to do them. So that's why our focus is on probably a couple of year if the opportunity is more or less in a given year, we'll evaluate that But our primary growth engine is going to be our organic growth, but these are nice complements to add to the business. And to your question on what have we learned what we learned is that the the relationships and the ultimate density in these markets and the way they serve those local US. Has been something that we've been able to then apply a little more broadly And when you think about a bigger basis, so the food group, there's some capabilities around logistics, produce, things like that that we've leveraged across our entire network.

So there are learnings as we go in and we do keep our eyes open for those. Rather than just the U. S. Foods. Thank you. All right. Thank you, John.

And our final question today comes from the line of Jacob Aiken Philip with Melius Research. Jacob, please go ahead.

Hi, good morning, everyone. I wanted to ask about ROIC. You indicated and you showed a significant increase over the last few years.

Kind of slowing a little bit, but just how should we think about ROIC going forward over the next three years with margin expansion kind of a reshuffle of the debt profile Sure. Good morning, Jacob.

Our expectation is ROE continues to increase to your point now with a higher a much, much higher base than just years ago, on a percentage basis or basis points, likely less than been for the last few years. But our expectation and and where our long term US is set up is to continue to drive and improve that over time. And that balance of earnings growth, good earnings growth and a responsible way of deploying capital responsibly is is important to us and it's something you'll continue to see us do.

Great. And then just a quick one on how do you look at labor inflation and labor availability US generally, but also in the context of last year there was some union stuff within the company, but currently there's been some other industry union activity.

Overall from a labor availability and inflation, so we continue to be successful in being fully staffed whether it's supply chain for drivers and selectors or sellers through the organization. So that hasn't been a challenge. Of course, we want to make sure we continue to create an environment that people want to work in and that's an important part for us. I think overall, the inflation sort of that's why we target 3% to 5% productivity because our cost inflation tends to be right in that range. Overall, labor inflation we saw in the last year or so come down where it's sort of closer around that range, which is a positive for everybody given that it had been above that for a few years in a row. So I don't expect 2025 at this point to look very different than that and that's contemplated in our outlook for the year. Thank you for the questions. Jacob, And that does conclude our Q and A session today. So with that, I will now turn the call back over to Dave Flittman for closing remarks. Dave, the floor is yours.

Thank you, Greg, and thanks everybody for joining us US. Let me just finish by thanking our associates again for their hard work over the last three years and the foundation that they've built to strengthen our company and give us a strong launching point for our next three years, which is even more exciting. Thanks for joining us today and have a great Valentine's Day everybody. Thanks Dave.

And again, ladies and gentlemen, that concludes today's call. Thanks for using Thank you all for joining and you may now disconnect. Have a great day everyone.