US Foods Holding (USFD) 5 May 202020 Q1 Earnings call transcript

Thank you for standing by, and welcome to the US Foods First Quarter Earnings Review Conference Call. [Operator Instructions]

I'd now like to hand the conference over to your speaker today, Melissa Napier, SVP, Treasurer and Investor Relations. Thank you. Please go ahead.

you. Thank everyone. morning, Good first XXXX our call. quarter to earnings fiscal Welcome

Satriano, call and Joining today's Pietro our me on CFO. are CEO; our Dirk Locascio,

May mid-March On our on and the the through X, Since by our both the for pre-COVID customers towards commentary post-COVID the our the a disrupted call, XXXX quarter, COVID-XX we of Foodservice. discussing first week focus extending actions both strengthen ended acquisition We'll in virus. were taken the business end Smart significantly for the XXXX. time business earnings and Group hospitality trends restaurant, be of provide of seen spread also to and today's education frame, operations and update of Food recently will our an liquidity

our which the issued volume and few limit remarks page one QX slides for our your firm conclude. the slides, QX well can your QX presentation prepare, prepared Investor on website, name, typically information question. include be earnings Please our as first morning. as trend accessed along earlier Relations We'll that the of yourself weeks your after release with Today's provide questions of we take this to

financial in and we unless exclude we're which otherwise organic today's XXXX. same During and contributions call fiscal Group, comparing full our from of Food acquired results in year results stated, call, XXXX. to today's references quarter fiscal year the period the to September Also during

and cause X-K with these statements April statements. Please results in review for or from factors, in information In on those Form differ our materially factors actual made XX, today's expressed forward-looking our implied which filed potential further historical considered the addition during Form to could to on SEC statements. those XXXX information, our XX-K call the certain risk are XXXX

our earnings in measures. non-GAAP website. on on appendices press our to the the posted GAAP comparable well as we are today's measures included certain call, to as refer the All in financial During financial reconciliations to will slides schedules most the presentation release,

the now to over Pietro. I'll turn call

morning, you, Thank Melissa, everyone. and good

our Welcome has since earnings industry. dramatic had country our and first call to our impact first on such and COVID-XX quarter our a call

time spend our COVID-XX of we'll business to most and response said, impact of challenge. this the Melissa reviewing our the As on unprecedented

do a country, our play this to But to this our in to of before meals would and you thanks, Thank maintaining to associates have all have thank tried suffered workers role COVID-XX of devastating during I the day. need, In every to can our then the who we the care fortunate a health those I less the all vital encourage staff, to thank so, our on like take and you customers first, are whom do lines, to day of who food every time provide moment we supply fighting losses you to to do outbreak who front their same. and part many period. say the

provides for the today. agenda X discussion Slide of outline our an

our response and COVID-XX, at provided your mentioned, slides standard will the to our review. quarterly for of trends be end on we Melissa focus but As presentation recent our have the

ensure and guiding principles guiding has and of our three our success what these the and our three safe, outbreak, response health Ultimately, formed conserving liquidity. principles: our helping by long-term company. additional keeping the associates Since generating customers, are been will cash

stabilized orders. last XX% as to and many have second just with the was enacted states X in rapidly in January began the volumes the Case and line begun now brief recover Volumes week Slide minus for March. a starting our EBITDA performance at February March stay-at-home to over the quarter. overview and outbreak to quarter prior go in for the expectations case Let's to growth of decline COVID-XX few of very first weeks.

Our of line gross we the end recover and which expect a timing our with the of product margin as to implemented in to costs customer result rate to impacted mix, we the volumes. a actions lastly do of at change as volumes less actions negatively But in was return. the results. reduced more number our bring of in resulted QX quarter, first impact And these

$XXX customers. impact booked quarter, In the collectible our we outstanding COVID-XX would expectation ability first from based accounts from to also that incremental an million the on collect reserve balances

delivery. volume to in both now includes recent falling hitting part type this under shows reopening Moving attribute advantage pickup restaurants the volume greater a and like weeks. in improved CARES would loans and of of and about and taking The restaurants including XX%, by to trends Act, restaurants, of restaurants yellow close of We to as SBA payments middle number April. from to consumers' talk accounts, independents March curbside which both the a factors, end the Page X, customer result After bank volume consumers stimulus has for of line I to chains. for

we and type Looking with customers, forward, a we see this expressing share gain do see some concern opportunities the of sector. viability of in and as smaller prospects them with distributors some to customer our approaching us

as as areas volumes across the preventative in of quickly postponement Our decline shown result have orange, healthcare country's less more case we procedures expect to hospitals to the in hospitals other the begun reinstate business. impacted has procedures. been of volume, a recover this volume of and and do of most these elective than The

virtual blue to the hardest hit standstill. one have hospitality, surprisingly, the Not customer of and travel has been as come types gatherings line a large

will take expect it recover. We to longer type customer particular for this that

right what reported roughly stores the across the observed with which these line data. customer made types varied section am Lastly, by grocery in for are providing retailers, opportunities our with industry the baseline and over volume, restaurant have additional pleased XX trends grocery some signing in progress is we partnership growth the with These in wheelhouse. we've in I as agreements of third-party

out, our to we can saying dining long to According social normal, back do with industry the or consumers to they some are no of point consumers eating Technomic, by Moving activity to X, one look promising distancing recovery get to exactly after and most the to resilience about while the Slide our of returns conducted signs knows when how industry. restrictions research the out is lifted. XX% to forward consumer ultimate

Another promising last delivery. is spending two in in and estimated XX% growth to takeout the sign from the this mostly close and coming weeks,

our is recovery to trends and be a an potentially and of eventual our while So attitudes those do sector. bumpy, consumer to industry the recovery for likely gradual point

takeout our services customers to have and We've remains numerous through conducted make team-based media, checklists reopen. social constraints various webinars on this topics, value-added help orders navigate principles. to helping on guiding the the our challenging customers and them CARES selling businesses our Act, we Slide social their reopening customers successfully it of on opening distancing, and one our And how X, including we including of Helping activating pivoted period. illustrate implementing create helping

operations and it - helps differentiation with strategy, overwhelmingly available a extension with future To-date, services loyalty U.S. this engagement creates In one-on-one towards current chefs customers taken these customers. customers with only brand. also have XX,XXX feedback. our and have the consultants Foods consults of natural have been and their addition, provided over our We restaurant advantage tremendous challenges, not positive for our believe of these

in procedures first the threat, facilities, safe is to on measures put guiding longer principle. is virus our no Until, and well-being associates In our we keeping our of early health place a the enhancing ensure These before work cleaning to associates measures zones conducting protocols checks deliveries. practicing associates. warehouses, specific facilities, included wellness distancing, within our associate for new and social our entering including assigning instituting

to we low from serve very minimal number continuity customers, and distribution resulted place our continue risk to Nonetheless, These centers. node we early of in a prioritizing put measures business on, COVID health business have could XX over care interruption. network in of to in our cases any also plans ensure

surge quickly we through Lastly, of for retain principle. we structure accounts and and drivers recovery. workforce selectors both volumes an experienced operating of given has the a eventual majority the to line guiding so of conserve costs quickly place third our to bring accomplished in contracting variable some distribution, cash, fixed us dramatically our combination measure expenses, a put added the the furloughs, this retailers In demand. latter our to reduced rightsizing experienced for measures in which reduced temporarily benefit of of with in as and have helping who cost our This volumes,

have I we measures taken turn balance will Dirk, we it who strengthen have to taken to costs to other will our now discussing our over Dirk? and sheet. begin measures the the align current volume to by

you, and morning. Thank good Pietro,

as well. we've activity admin our variable manage Pietro to a We've costs actions managing on heard costs. taken about other of talk working also the distribution and CapEx capital You in taken our selling and steps number and our

our Within furloughed match the sales reduced size our the sales coming selling to over are organization, associates experience we the case we volume lower support force months. likely some and to of

selling team-based which and Our continue this way customers have to important to support position environment. model before, us in is challenging the we that our in technology

pace to We advantage and believe well potential are the actively the take growth monitor future of recovery to will the continue positioned we of opportunities.

compensation actions for level side the our including business, deferring taking temporary cost the implemented freezes salary above temporarily admin place field cost to On inactive and for and admin, structure, annual in we've one reductions manager reduced. at address increases, Board and furloughs merit associates, also and fixed corporate hiring of taken more the put associates

we've significantly spend costs consulting. also such Finally, reduced and as and travel, discretionary marketing

unprecedented to All navigate as we preserve current of situation. are these the actions cash designed

of collecting also balances outstanding balances and More broadly, XX% managing of in pre-COVID all our areas approximately good collected. To capital. accounts cash had management, noncritical spend we've are date, CapEx receivable success paused with we've actively working

and reserve a early on of actively too of losses to the total capital. are the uncollectible million Pietro impact know expected mentioned, and we recorded lower good estimate start, future is customer receivables collection account amount losses to an this working reserve through the as previously of full this is efforts. soon extent $XXX working resulting our it our While

the levels We're our our lower also payable reflect and extended terms. inventory accounts volume temporarily managing down to

inventory we to reinvest resume cadence. As volume payables our to returns, to would accordingly, to increase expect expect, normal and

Foods specific acquisitions, to very slide the volume has the On declines U.S. group that those are case Food business. legacy business seen to discussed Pietro for XX, similar

restrictions, of differencing activities a paused reopen. we've restaurants and travel social integration resumes As result until

achieving we're with quickly expect synergy of to activities. do result activities. in safe restart to that delay As we in delay line a the our pause, targets is Once a integration it for is prepared integration this resume,

Smart Foodservice April On the we closed acquisition. XX,

XXXX As of cash-and-carry at network rate. in a that stores reminder, a margin is $XX million EBITDA X% adjusted X% Smart to Foodservice generated a XX small-format

reasons carry channel and better leading it’s higher us margin attractive the business rates our of to $XX position cash which this is billion and the that delivered One has is than in business. growth

that us shown that also results with in attractive. delivered customers. The growth have share make margins, CHEF'STORE existing greater growth cash-and-carry opportunity, combined EBITDA more Smart sales Our with the opportunities wallet of attractive Foodservice much future

the cash-and-carry downturns, a the downturns. addition, for customers performs X% business. In April economic our and business our year CHEF'STORE value roughly the economic In case the offering well from of volumes down ago Foodservice Smart delivered versus XX% typically cash-and-carry were locations to XX% during appreciate down more and provide.

actions additional The emerge We above-market recently Moving recovery. a us from liquidity and liquidity length well regardless the COVID. depth this economic was financing Securing believe impact at strong position as surrounding we've competitor positions grow given to important for rates. us post-COVID to the the of uncertainty available of Slide the completed our XX.

possibility second recovery of and time XXXX a entail in XXXX continuing would spent two various these case more includes in depending and slower impacts downturn. COVID. duration both believe the quicker on We've recovery, We've modeled have are the which which through scenarios This bit of and potential across into more gradual a fulsome a or recovery, A XXXX. and recovery of In beginning likely. country a recovery volumes situations, business, understanding entails severity we more to XXXX, liquidity. a choppy ample beginning phased of the quite and the

we've stress test Furthermore, scenario. a downside modeled or also

we of recovery after until that the Our second that recovery as second under liquidity significant weather even half, scenario in in have customer half even no XXXX collections, the slowdown of a to gradual downturn. sufficient extended and modeling this test the only as a well type receivable stress with indicates

net We can transactions estimated number be Slide debt helpful on I you we into to XX, end the April transactions. as to referenced. the completed would provide liquidity see and of that Moving of of recently thought it an XX, these post and view XX,

completed end million billion and of So will $XXX secured of a a term notes loan. the the summarize, offering the of and is that fund offering our forma senior as month. April To a $X view $XXX tomorrow, pro we estimates net equity million here debt liquidity preferred

transaction, including preferred KKR in completing from existing ultimately the overall forms were was is time expected And for determine to to be proceeds and Foodservice the sources Before shareholders. to our option common different the strengthen liquidity best raise, the capital acquisition equity. we used fact position. public that fund of the part investment offerings due evaluated KKR dilutive The over from and to these Smart equity less

$X The facility. On side are of it approximately facility these structure as We debt the facilities. can one to paid receivables credit moving that you other change that now our revolving our relates the to will liquidity left and transactions. to structure completed facility as ABS be page, the We see our billion. the the of change ABL and a back facility capital closed ABL our and result in off

under covenants liquidity better more this flexible to downturn. this are facility our and the preserves our receivables The moving ABL during facility

approximately the had effect recent strength. an gives financing forma April, of cash $X.X liquidity net a end actions business of giving April. liquidity, us position us $XXX estimated the which pro As as estimated the million of additional from the results flexibility to total of in billion end and The billion us operate hand, of amount of allows of we $X.X on of of

return in our liquidity normal amount declines. more and time, Until way cadence. our to decline Over the volume case receivable as meaningful we likely rebounds time, payables balance such as some will a

As even previously. believe is of duration this more crisis to and I regardless or liquidity weather of test mentioned, previously this enough scenario down stress we the I than the spoke that

time. second significant to present an recovery early of March this uncertainty to we guidance recovery COVID-XX coming to expect guidance, our XX, provide COVID-XX, Slide time, XXXX fiscal fiscal what at the update a the have unable the on some to our we're form too surrounding QX do on Moving We like. fiscal XXXX it's this after tell on and on impact results with withdrew XX, At XXXX quarter. looks to due

the recent look what us passes. providing on strength of that call. a Regardless We next when of forward recovery details earnings new position are like, to activities allow to our do to COVID-XX we've financing looks from expected more completed the operate

to industry is While a the occurs. we are as serve this in and needs uncertain, customers' future recovery operate resilient large, well positioned

we operator, for open that, call you. can With Thank questions. now the

[Operator Frommer from Instructions] Your first question comes Judah with Credit Suisse.

Your line is open.

just see kind accelerated chains? we independents and question could volumes from off only all the bottom if chain the offset your of the closures not customers, my any taking but for struggle store, for seeing terms are recovery you Thanks potentially with as continue color. Maybe you that out, are of from the those to of their what level could independents your in faster of versus in start between recovery seeing customers we independent

Judah. thanks, So

most of - volume minimal from those chains There speed generally, and the the which much independent there terms in with between resilience and bit difference but very declined. restaurants both the a little more was line were of with QSR other. weeks, the the each in during So declines was volumes sector, last six

to closures. expect And it's some say, premature we do

closures both where the side. will XX% the side knows think independent chain order the I of closures know for on XX%. be don't NRA will exactly and that anyone closures side, there I on And or has corporate called the the on be. corporate

chains have that, thrive. I we - sector ability an and both think believe recovers, independents this both So both ultimately, as to

to sales thought force rationalized Dirk that extent. I was And the I some that, heard say Okay.

the talked sales about their others leveraging as your competitors of size and pull selling have public think of kind force right have salespeople kind now. accounts necessarily new back don't into and of I existing

market kind the can top of to may selling this? to approach technology So the all continue others on build pulling while share approach and through of you back allowing maybe just us make remind you some team-based sure be that's between you

Yes.

to to team-based to the the our force did the sales things, direct with as not the our force e-commerce lower, And you're we existing customers. and sector behind and better small profitably put Jud, but So recovers. support selling, smaller model We force. team-based not that's some as adjustments and ensure to to grow of selling, right-size sales the team, side number way that because, is customers right, sales size direct of closures. the again, expect customers best of a the our acquire believe new talent we a forward wanted continues. And We of some due or the we the platform, services, combination both strong value-added make

comes name Your [indiscernible]. participant and company question your from state Caller, next please name.

open. Your Instructions] line [Operator is

was little you've perishables quarters? - guess, becoming if the America. of if Bank with to Reuter, bit could if that regard a talk William I just could subsequent those of any I challenges Thanks. inventory in write-downs be experienced about future wondering And you and there stale?

Dirk. is This

losses to not through where yes, quite let's date. results the volumes overall managing of and So managed they categories, from some as the across had perishable week-to-week as say the now sort quite actively limited with we of a are. And really, actively we've we've go each forward meaningful is are of that that driver

centers in order a of in done incur space. that moving losses the and have of And partnerships distribution minimize retail combination and that things with various to things in around finding our others

That’s levels? any you for headcount Great. remains talk reductions quantifying further And be me. it. be required to could you thus Can about if at expect have there if that reductions And going one Thank follow-up you. are that then you lower maybe implemented? demand just far

taken talked rest the of so primarily Pietro about a talked and the but the where sales we've it done of organization handled we've - from haven't temporary what and meaningful a taken furloughs of far, amount, specific environment organization the portions we date, the were some admin. We've through actions is on So reflect we've number to steps we about to in.

evolve, with through an the handling to far the admin actions, being we're as long really ongoing as really smart just to managing that so that, permanent and as environment costs continue specifically environment manage in basis, short-term those continues And on ongoing we'll and in. from our term

The whose company information is next and your name. Caller, [indiscernible]. participants question from please state comes name

open. Your [Operator line Instructions] is

two data at the have like points, line presumably out - I seems - one, Barclays. looking the the like week just it And the from granularity. there, provide flattened restaurant wondering Bernstein the appreciate looks but yellow improvement at or to Jeff is March out questions, X, more down the industry, specific like one just is and the you than last what looks I can XX%. of This it’s for maybe but Slide you trough down kind a saw stalled it of XX, XX% from maybe I'm

you'd upside just surprised I'm for So further wondering of late. timeframe anticipate or further here that whether gains by and lack the from the of meaningful you’re whether

assumption had models I what have that Just follow-up. one coming And sales then wondering restaurant line? your maybe for for you months in

So I won't flattening. put too think week, you in I is much the emphasis on just see which one what

become adept And business with more business steady we takeout is at participating from think mentioned, that restaurants and delivery in and consumers I and in incremental and chains more independents. see continue increase that restaurants, as channel. to both that both interested as - is coming a I business

are steadily planning coming they're all reopen. I open yellow that the that to And line see customers we lifted. weeks know our upwards. as all are in shelter to they over field our the continue from having orders more restaurants the get trend more with with over And you'll place salespeople weeks, and conversation then as to And coming continue think the that

believe perhaps about I comments And remarks Great. distributor your made some in then from of market share smaller potential your you prepared opportunities competitors.

commentary of have Just those in periods to the competitors. the terms the wondering, of take past in opportunity or challenges, rate from to take share? and whatnot any What you've they're those in the the smaller facing independents of survival if seen qualitative in accounts of have of you you challenge opportunity in terms terms

Yes.

it's we’ve unlike what through past. the - are in we think really is I going anything seen

And for So are imagine, customers ability the it’s as regional But out hard to are their some profitably to mentioned, really you as would by us example, strength sheet, regional stressed whom who our can or having use concerned and given we're there predictor. are as crisis. the this expect customers existing you balance of that our players players significantly more gain to being smaller, for there, the conversations I scale smaller a with have path share. local

perhaps be Again, to because ability an from liquidity capitalized able of of something that anticipate not to as have needs inventory well quickly perspective, have customers, our the do. we might respond we the who's to the not competitor

this a I players of why perhaps some capitalized So, the would come players think you industry. are more than other larger expect to there well scale stronger of the number the reasons in out of

then Understood. clarify. to lastly, just And

month that that mentioned I very through I so middle Dirk, you X.X you think, comfortable going know you with the very when you're levels no of 'XX. of currently. however got you a look of assumption, slide, your assuming billion presumed ballpark to end north get a even I'm 'XX burn of or or rate seems that mentioned burn years the or amount week $X.X like sales or trying by you current through on It to that recovery? feel liquidity roughly wondering would a confident And just month. it. $XXX rate at at a on a if Just million these imply cash fair seem that's with cash

comments my that confidence about reiterate frame. over just time the I'll Sure.

next and modest of that. test no As through after the very year even you it's of that point out, a stress improvement scenario middle

that also just impact is cash exactly makes a in working looks from predictable. which little then and as less capital, And recovery a important uncertainty working capital like there's what the

I sharing capital managing the or commented across during liquidity we But not am this earlier, working cash really number good quite and about I are prudently our reasons. downturn I operation very So specific period. as that a burn these feel for

with Casella question Carla next comes Your from JPMorgan.

open. is line Your

I'm see wondering the mix could and a if where you After you've do customers, do COVID, think overall lot of you term, longer added go? retail grocery-type. shifting that

So this is Pietro.

there think of - take advantage been anticipate. with retail we've opportunities two the or I is that able business to

those provided The were been it, helps first one keep additional perishable I is available capacity that for that stressed capacity in time. to it retailers inventory business while wasn't access we've us place. provided additional said, experienced as additional volume good and baseline workforce surge some call - at for And has the because, necessarily our workforce -

I good don't said and place. we've and in for about that profile restaurant, of feels which serve. is products wheelhouse expect business a in past in the looks types the like all but the talked right be up section more of we to it be that over grocery terms there's of store, our stay the judicious place of grocerants, of of we'll where that business the that, long-term, what the in some a sure will fit. that about Having And right

that associated - allow us profile as which from where away of we business. the accelerate these that relationships we some And of our home. new to will formed margin an that's have The to grocery ability that that store, these part extension with see of penetrate we food anticipate

is? if the be? a continuing is and I'm Give business that big can just bidding sense that on that how that - for wondering market business to saturated you're for how grow

that big grocerant-type second the that part, business, how is? about talking You're

yes. Exactly,

we see There's no position estimates early the an opportunity how but point, to accelerate I size little hard our to think is, to kind do that at say. a good this in price it's real of bit It's sector. Exactly the of big say.

of when you're the set competitive dramatically at the looking And that Okay. business? part different

little It bit. a is

some the us. you've opportunity crisis an mix provides a they heard think competitors allowed It that of I little be done of things competitors. is shaken a I up right? other relationships which our and has just space, to for recent interested in formed, bit, And be new serve what think by also also different

comes John question with Guggenheim. Your next from Heinbockel

open. is line Your

inquiries of channel Pietro this it too pretty at your in independent challenge have meaning you to yet And are chain. seen is a significant some you incoming point, competitors? see early pickup scale or from agnostic,

take have it? capacity you get much you pretty - You business take lot can because a where of

Is mean customers, from Do competitors inquiries you John? that or competitors?

customers from to who inquiries - No want scale, competitors? leave challenge

made I that's we what thought point thought. have. my actually remarks. Yes, in that I Yes I prepared

some they've say competitors imagine. just of think seen it's whether and are some But expressed to not. about would those them, concerns distributors well-founded you hard some the or I serve who We or just of what have concerns

smaller And when the we believe we be are the of our look quarter, the some some so, customers of again we have second we to the and for will because, some pipeline believe of on at we about of competitors. there able scale bring viability concern

it you, network And agnostic this the and agnostic? trial idea of agnostic both for works but warehouse a point run right being so or of as chains, independents to kind - that supplies in New at York fairly you

to independents independents there's didn't chains, we I landscape that evolves the answer continue Look, obviously, Sorry, for Thanks - and know opportunistic. as be reminder. and the very from are I consumer between a for be, resilient think out flexible there's independents. But for second part. perspective, we'll a many, a there preference mindset I bunch independents. always and lot of to about concern going

more just be I potentially then a expect think You independents I little to the as do more chains, as be the have the the crisis to But to which quickly capacity to chain see mean we the relatively we the gap - business. that bit telling. they and they've margin into the a of recovered definitely profile we favorable. side would the industry result fact as the chains from independents of with the look - the continue shrinks of some I curbside gone is between continues how think, - I at things, in say makes attractive that it's especially if us. this chains, narrows

did And of with as well the in that business of selective on. very bring opportunistic years. the - kind we We're of said we're about the some kind and done few we've we last always pruning

have in the quarter, we that of a business. chains on that that we bringing fact, will regional number are In board help second

that it's mid-XXs? right, look lastly your to average Would for know And than average, much right just more kind then So that seem your but good at - else there's And leave right, in you consolidate probably customer, of go, just no can business market somebody if look the is existing at someone environment? to an and you in easier, entirely. share I with wallet, right? share where

be would a or that So bigger opportunity no?

of that at share it's Day has will around Yes. to our around I increase you're our we big opportunity us. economic time, make that consolidate it right, for which for wallet, of And Investor I wallet. to mean an think of there the some I distributors of think to share lower do presents and and the have restaurants our they an period it’s distribution number think be opportunity is a for that for said If XX%. demand them I average,

And example. perspective. again, I give well-positioned an you I'll think an from we are inventory

We economics favorable ChowNow, takeout economics of in way Grubhub it to compared customers were traditionally or very the puts positioned. which the have relationship the with this those business, exclusive are DoorDash,

the not through who And open had interest stayed really who those been who customers - was the we've of were amount higher. on roof. were of percent the versus has ChowNow And the significantly

wallet of you're again, think our referring didn't us position customers perhaps So, well offering to make I share that think, to. needed, those gains that kinds they

with Fargo. Wells question from Edward next Kelly comes Your

line open. is Your

accounts just what million. down $XXX First the we've you than seen more peers. I It's uncollectible is, at the right question for have on

how any kind just different I'm curious how there's account and base, it's of So then risk assess you calculated, here? your about if would from something

take I'll Dirk, it's Ed, that.

$XXX bad million, that's estimate you debt total specifically for our So expected losses. reserve increased to pre-COVID of related we AR. noted, And our to best as

little were we of together our that conservative along so, quite credit so, estimate and have to full trending working customers. as and order collection we with our our actually more a sales And teams favorably far in losses closely reflect so current

our XX% we've And so of balances to-date. pre-COVID about got already collected

our And ultimately, the are and not better collections the in would quarters seeing our initial AR. estimates compared in that our deterioration hope would we and do what So balances post-COVID come in that if product able our in any monitoring we and estimates. to be to historical really pre saw than post-COVID original end collections reserve exceed future

of think we’re overachieve to that. full losses expectation and it of as working So

things know Okay, we trough cost reopen, kind this the to does you've quarters, got and volumes? in cost then what are you've good. few come and that any guidance able like change this QX drop But next component then the next a like how And of do business, to lower deal QX take to very over as over it's we think be after offset sizes that, then to about difficult at the the give of few variable how point. just about I the as quarters a structure reopening think which been to given larger, smaller that back - the And out will things with? start

costs start of out. percentage to that the So We've quite our to costs. we try variable variable high Ed like take really a if on with managed actively

of in call So XX% volumes, cost the relative XX% it reductions to taking out. roughly variable early

So there you're a there portion out. going that fully to not take is in

putting good and effectively in back declined, volume expect as process on manage managing really and place to it's up. we way then the So would

that. smartly think adding And distribution, well its us back back I cost costs across and like. with as the with quite that comes aligned volume those variable So the positions selling

think that people we're is side, and in so do that we the tried away to - the really, the we've furloughs way smart we've critical on tried what those business be done not reductions really taking the just to admin from I functions. is

those as volume we'll areas back recovers. in And bringing then those folks reinvest of again, back

better volume would is, as minimize our that So, make expect the best increase to we're to back noise customers really because we doing to sure also trying results deliveries, both would expect cetera. up, and to get want seeing I effectively, increasing up, I as an really the is that our continue volume et back what inventory, serve we're from to

industry. maybe you just understand distributor Pietro Okay. us work trying of assume Could mindset of you run probably. help who just to today, down they're privately the I is a last half over then And inventories would about this just question, to you guess, had had a other but and the look hard, know group, generate I you side recovery this What this? for to cash. of think sort if we take if is as of this like - for does

I to large think you that thoughts of if one what unknowns it's for actually obviously I competitive mean size, have lot right, now. the set there's that, guys? any the How going could actually remain? a know But that's to much whatsoever? thing a is there don't obviously of timing, right difficult but opportunity, figure it you out

to no, good you that's Ed, one it's And as it's a Yes said answer. hard question.

is number I a that one on of think planning. on distributor depends and generational kind it dimensions, depends succession of where

just few they good just do then have is, - of over from M&A Some years. the in not our the we just how last are. And them place. And one capitalized not. other succession know that plans activity well Others

been a Some which whose up sheet balance that have expect. of set names in heard others you'd less - stress. how is potential popping they've managed in been of very keeps terms conservative and so, And there's terms what players have their have we've been of

to the of it's being two the the hard quantify of decisions made. and So timing mix

From we those [indiscernible] ability to that our are needs is and we gain a us best market there we're what perspective those ensuring share respond for as alternative customer perspective, customers. - the do seen to from

Bania next question Our BMO with from Capital. Kelly comes

Your line is open.

assistance to PPP right on there? been? and more has What how are Any help taking ask for how percentage or Thanks bit for questions that been has to percent what your And any I a of independent secure were wanted my just some on just customers operational independents the What the feedback now? for on color. of able your just many independents. all color sector? little

process how think impact country, these state. And independents, just, XX each as restrictions, the these whatever we across in or that capacity could about the what happening is XX opening whether or it's

that of from questions customers they're Just restriction of you're of kind the how Lots but? feedback what on there on hearing dining-in portion. managing kind

with headline and one-on-one agile they're of questions. of these kind nimble That's terms customers helpful help general provide do and think for helpful lot what being why to them, for we're say is, also consultations we the of in would I And seminars Yes, we them. still are learning. us terms we learning. those the of do in these still and They're

received the - have funding, definitely definitely heard to some customers PPP, we of have reopen. receiving and that the some used On

to As percent you payroll know, the PPP a forgivable. is has directed and payroll be be to towards certain towards

But had it's in than they definitely in customers of or we received impact odd workers otherwise back I higher terms percent know an don't wage So PPP. what perhaps it's that, kind some created, incentives more works of to customers bring for of actually at might. reopening. know places, have

the reopen, to planning we weeks. terms closures, in restrictions, our one the I - plan of they - think one, and is imagine, field that what our reopening we've we customers restaurants are look, hear more your terms actually and in to four second would leaders but some and going of your neighborhood to to reopen the And question every in week. week. but you quickly how next The surveyed opening every That's to the it's from there's of third about talk part

they to be strict to or restrictions less are. for Some waiting the little a than are to see -

we there really And I ultimately to week way, hard that don’t opening week next of in recovers. It the is or So a how the is they is get think threshold, after, XX% capacity to just the back - bag, know see want industry representative seems are business. right I mix XX% for - waiting they or manage. what today, because and

of want relatively that months I traffic good to is closer to the think when I us. provides out we business to but and something But normalcy pre-COVID, there get customers be good help of relatively customers every a for way. to our have think look few we not for we that step level a

Thank Okay. That's you. helpful.

then other And I thing would the add.

I am sorry?

that get in one our outcomes a I we we've one to possible, look, of that. really sheet and that part range questions around as to there's likely. our strengthen really motivated was and know those - liquidity. had broad what additional are no is most knows, knows outcomes ourselves, desire of said And balance Sorry no the some which

depends on how health It depends on mindset. public consumer decisions. virus develops, on the a It depends

flexibility So what, to our as respond have the and situation agility posture it has unfolds. utmost to the been utmost to the

the the But help - over guess unfolds, helpful. guess That's in opportunity on looks more Because think and to side market gains just or I the maybe see what what share potentially over-indexed years? like look markets couple some chain smaller of regional you in as distributors us terms that like could would of about that that the think your potential do of I I side? independents. this independent next those maybe

distributors. mean, not take country customers. with both. up larger some Yes, I some is but you'd be break into these surprised I number their they it and a across to always, the regional They the national think and country share into we of smaller allocate distributors have break XX country. business and the I up take concepts, number often mean, opportunity they've that of other - typically a - the

believe in lies stressed. and some there others that And will because believe of be we opportunity, so, those the

profitable share independent the some the some the this equal the of at think of and gains in I chain chain business. business opportunity So point of is and market for I think, some both business

The next with John JPMorgan. Ivankoe question comes from

Your line is open.

hope for I well. everyone is couple me. It’s a just

XX% question. you per and Sysco into an not kind you add that there's of this type don't like share Can XX%, what of XX% of of Firstly, you're talked if remind the - customer. of us the kind currently commonality serving about have crisis there’s to whether first both coming is any market you opportunity through share

overall come through a you some position at customers operator buy were sheet low is you just just a actually was I the you. businesses mean, than I mean distributors integration their you financially zero, balance that zero talked certain and for you Thank of something local a And are - attrition? eventuality number whether different thought if acquiring much stressed in offered at of that I to you could to price. haven't mean, start price secondly, very where terms a reasons. going better the to as or opposed regional to having about point be actually then this companies very in to of if low are

we've about past also in get customers. interesting competitor answer our ours. two talked comparable the of And their how wallet the of talk large is, of think that wallet I to I'll share estimates Okay. the question. at share you there types It's

Within independents, relationship a the who have type you with their tend exclusive to have more distributors. some

are better think We those provide we have they provide to certainty those. cost a some the I ones serve. prefer And and of because that

pricing think And or they typically then of past, for they a the opportunities said will some regional, the reputational I've and others, think, prefer distributors, I bets local local two fresh hedging either are from segments the And of in supply occur. terms I their distributors perspective. I as or think in in those of the

We'll terms that's are like really in well-run and where I good them market don't not, others focus are but stressed, And need of too some our said, to well-capitalized And and those share provide of many gaining share to opportunities. Dirk? will some you be competitors. be. be from

And I integration and think such. from think Sure. John, I an -

now much along Foodservice, less and is a and getting around doing with well really going. really which integrate focus effort Food is our Smart that core continuing to Our business integrate to immediate Group

they whether it priority struggle via those I may focus on those completed. if two quite our more, distributors, continuing think integrated entail and just have But transaction excited two top taking other remains to core may and opportunities those again, of it's from as really mid- opportunities. these - strengthen kind to or our business what not well was a the business TBD other around smaller-sized we're that getting really some or of to that

Mandeville question from Jefferies. next with comes Your Chris

is line open. Your

as yourselves to of up of of current with is And just in and you in just general. be the or and with to as lining Dirk, to label terms doing respect realizing frame penetration they I limited might time engage this that overall costs be you capacity I'm while where rate? capacity private you could environment of their it's between constraints your of But as in on XX touch gap customers points wondering able your Saw somewhat best bridge guess, online, QX. basis kind on reduce really, peers continue the could comeback terms to a slide notably penetration? throughout if they're that today. that deck, penetration silver your where

Sure. That's a question. good

think more think to value, opportunity great to our past with where those you rates. for operators to we've are opportunities. to about, us similar term helps I just I so downturns, so just and see your is, the that, And a that a up overall even is who talked to us think, really and time-to-time good them to been tend from we've see for cost running. increasing this And silver way sellers do going penetration in is percentages our continue to operators those lining penetration I and focus a help to point, because use, typical is along have as an on continue it's this from conversion opportunities and to it

just any there you peers? really articulate your penetration on are to Is way today where versus

necessarily all Well, they don't distribute.

where at competitor, below the they our operators per about focus because be recent that conversions. really to try they back up, reason years no to XX faster, compared what because just cetera, looked as can't basis can't why one question been our getting do continued year it tend want we et the to growing our that to hundred as and think, points penetration to and over time, have go And few is we new we've comes a products, there at is penetration level. are in about XXX historically that So points basis that we've larger by to

So lots here. growing for we ahead still see us of of runway

inflation Okay. just then on And the front.

calendar any the some frame realized and expectations you dairy how QX? in So flux the to great what protein up in in the or looking or light way I we're but declines in for mean, square some severe are of inflation where quarter modest is up itself, today now. right really complex

than the that predict volatility the managing or through just center it's the QX. in talk exactly. is to And duration lower center times passing tends and a really contract to through of really that, it trying in as we modest think point, be are of a matter What to the businesses just a it's our benefit It bit being lot was of the some to going hard do of really little a your I a of inflation in through, is, It flight, reps of effectively that when potential it plate, because some through. doing saw set it's where of most been. some to of of we passed be we've

to category alternative that in reps alternative as with have our that, those at et work harder actual its in as by solutions, it's hoping to we source scenario, little But cetera be you And or about working customers, a the inflation see through. going level you this particular also protein itself is portion sizes if break whether individuals so a point. this

Your Scheuneman next question Rebecca comes from Morningstar. with

open. is line Your

thanks squeezing leaders your how go of they morning, know field to but have any and do I doing have you. willing dining Good region consumer early been kind there rooms. in out in. back restaurants you Are sense for it’s check? me their the of Thank reopen have a into

every whether country what not. part a quickly I mean think or there the crisis about was fell I was this very or - volume in of is So remarkable shelter-in-place that declined the

the being was to respond Just what quickly curve. consumers in seem of proposed to flattening very terms

than a then some since rural we’ve areas seen bit think urban areas. what little I more is recover quickly

in are research the longer-term, be I weight and may of out But happens older impact or the of terms populations. that would health some ultimate more industry think what in that But of perhaps than the weeks again on that. willing of months. quickly shows put to the some consumers next too much to trends are more I probably younger few hesitant get the those

your Jefferies. from last Karru with Martinson comes question And

line Your open. is

that care to where old look How third at we one-third the hospitality you notes guys a business my of guys a look it. as you the In seeing mix change? you third are as at mix I we that when and So today guys health other. and talked and chain, had independents

afternoon. Good Sure.

on remaining and we we has what proximity the is more about that's talked been across haven't specifically government, focused of that So two-thirds hospitality education, cetera. et is and our a care third independents chain, across business health

is about there focus And our where about profitably months earlier it's even really on prospects is really profitably. alluded chain, chain of growing it say and where the that's we're makes some about to these to the sense the adding segments. is them for about And making looking Pietro capacity smartly recent fit. those forward in we And that times more new in in I'd that what customers right And those to bringing the cases, they sure business he's a talked that then are as that again target our expect board. from us onboard for coming business

Yes.

I think that's questions. the end with

the a of closing I'll comments, we'll call. So make just then couple and end

in and to the ample in will and play company us a the combination our position strength has of vital that role of continue to, from of want have thanking a strategy, our recover by place emerge our the become country. terrific dramatically agile been that ability So impacted industry and just differentiation associates the to to our leave we do food liquidity who a I in again more close ultimately And leaner and who while ensuring by we industry clearly that been our this crisis. this crisis, supply believe have

please good in a Thank you be and safe. appreciate you. We today, Have of day. tuning all

today's This concludes conference call.

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