US Foods Holding (USFD) 9 Aug 212021 Q2 Earnings call transcript

Good day and thank you for standing by. Welcome to the Q2 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Ms. Napier. Melissa ahead. go Please

will quarter Good our the Thank earnings US one CEO; our after fiscal firm questions first Satriano, six Angelica. prepared of us call. for and name, today question. your remarks conclude. limit our XXXX. second our CFO Locascio, months take Dirk to We’ll for Foods and an results morning, you, and overview for you everyone. your yourself joining your Pietro provide our Thank second of Please quarter provide

through During our to today’s acquisition the period first to we’re during from call and April April on References unless closed Foodservice exclude same financial organic otherwise half XX, second stated, comparing call XXXX in the XXXX. contributions today’s and as quarter year XX. results fiscal results the results Smart

release can slides of Our today’s this Relations be website. accessed earlier earnings and page the Investor our morning presentation issued on

Please considered actual our for in or to as certain the financial during to release risk on appendices And factors schedules those refer to are to differ Form in the now during will website. we Pietro. included XX-K the could I’ll statements. call well over those made historical information, comparable those measures. to the from call, slides All non-GAAP GAAP reconciliations most in measures turn materially lastly, in to press XXXX on statements. posted financial our as implied factors the presentation earnings our cause forward-looking today’s statements In which addition And certain our call review results potential today’s expressed are the

morning, Good everyone Melissa. you, and welcome. Thank

main are like going So time. just during themes last today's to cover we three call,

have last to a in spoke continues lifted recovery welcoming recovery been to Foods meaningful of Restaurants First, restrictions participate across their into on we are the establishment country the fashion. US call as that and continues our customers back this progress. industry in

market pre-pandemic recover share to gains differentiated And easy financial to and large is customers. our with food great third, to a small levels. platform continuing Second, both drive helping made are results

by volumes, in recent case improved are margins acquisitions. driven the being Our of results and a our performance recovery improved

with even for So is shown are on months at down is US shown rapid chart that The the opened across than in to establishment and the that pre-pandemic markets close restaurants above or in six by for restaurants. three, We longest have the are opened despite of three Restaurants a volumes markets over own still on are what levels. recovery industry the several nearly on reopened the XXXX, view been levels, growth high let's digit XXXX. chart foot markets increase been recovering less some evidenced traffic have have longer. fact versus months ramping range to some single have our believe XXXX to rates months as opened traffic returning there's compared that This showing by food-away-from-home in are while restaurants A which volume country, growth are markets the pace has the the still compared that foot the the be for begin full headroom ago to happening shows right. the the markets for in in to in continued to recently representative as indicates slide traffic last left. that is which our still very up, occurred at restaurant

margin. of restaurant In improvement seen see that with XXXX and case of chains can and ahead in independence Moving the the markets trend reopening that volume XXXX, -- that total the levels ahead you experienced both to we four, during be by experienced slide to quarter. roughly comparable of can are the we benefit continue chart, second

and to this Most support in reopened we of by with expect July was markets spoke May growth just also but part continue, line about. the from that the June, in I recently but in did that a see is points, to it's small early to too the tick down the about the change variant. whether say last two a of basis due Delta XXX impact weeks, of We

in Moving to increase XX% volumes more the the a this running types, large other meaningful also summer first Leisure is the from reopening in driving and a related quarter. XXXX benefiting the now about improvement business, which way at part has case large and our hospitality travel a is customer improvement. and than travel is returned very of of

continue other catch within improvement travel. type to that this customer as in hospitality leisure customer up types expect to We

First, still even are capacity. below maximum within leisure parts travel, operating some large

Second, returned, up to require typically share as a of the a levels. business discussed time expect considerable in little trends, with market large of of the of return which uncertainty travel. before, third recover conventions, impact And about these we future to XXXX. there lead have gains, hospitality volume expect bit When year. is do to combined we we level consider in we've our our hospitality And when part pre-pandemic to later

digits, remained where throughout home different in senior we healthcare. over mid within still living Different yet for Our some and are demographics, With expect With from recover senior but has is was facilities pandemic. types over business are care, living, to the still employees the steady occupancy working time. aging do time. down this example, unclear it settled customer healthcare impacting with to low acute factors from rates are demand single

later as we pre-pandemic when our market well, trends return hospitality, to with sometime So share combined expect do the above XXXX. we to gains, to in consider levels healthcare

combined piece anchored what our The our innovation will am case later new slide our that strategy gains Scoop, our new now strong of Food type about platform. reason I So trends and strategy customer today win we Great on total A customers, pipeline forma Made Great summary, recent know Easy primary XXXX is with volume is estimate five. each best pro of on share return is product we market Food XXXX. within to based in differentiation our in the that customers. by we

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years in US of Tonnison with the e-commerce team. as welcome John to and Finally, our is platform was Chain enhance working like brings recently last most Chief extensive tech one on Digital the XX largest the experience continue notably, Officer. IT industry. make to our Chief effective the the technology, our our to would John's Foods leading to distribution the in topic while Hancock, of as most Officer new efficient companies I Phil chain leading space, supply distribution mandate He Information and to CIO John globally. of our organizations announced Supply

spoke Moving operating manufacturers challenging actions supply distributors have mitigate helped labor quarter, challenges. we and alike six, persist, about to and and product environment the these for customers while last challenges our Slide continue to

we On incentives have filled to to We churn. expect the close progress side, and we labor continue over to a in improving and of reopen contributed positions associates. good the we hiring made reducing and pipeline and to have gap discussed retention this hiring quarter, last transportation and that we third warehouse

dramatic a states those to supplemental addition, have to ended we seen expect we labor in In In market unemployment continue do that have applicant rates. benefits, the improve. increase

especially we for in wage made Lastly, some hourly markets, entry-level increases, wages. some have select rate

P&L, incentives discuss Taken are the together, and adjustments which these on wage Dirk impact a will shortly. having modest

On the side, from vendors experiencing service below are manufacturers XXXX labor a of product and we as result are. same well challenges supply the still that freight levels

our our the effectively alternative and serve need to our scale, utilizing product are we relationships arrangements We secure sourcing help customers. to

that year moving Food part carry acquisition service are at ahead nearly the twice Our cash competitors better rationale carry, front. at that net same-store of the are than expectation. Group Smart promoter and open this service deliver market higher for seven, that or with Smart call market Possibly roughly with of XXXX on Food sales chef survey above will confirmed Beginning our and as acquisition [ph] to We cash the performing fairing that we well one the we are is or slide levels. margins. are as, both stores and least Food

take continues, pre-pandemic trends reopening seeing we're the again. these As shape

of on will bullish XXXX. that store for are exceed those expect XXXX EBITDA the We and levels chef outlook

The of we other growth long that the runway for the Group Food store. for chef acquisition see rationale was

ultimately existing a our to three expand in to should when is expect market. story. begin open We stores count, making in meaningful store growth our footprint part chef XXXX all have store doubling XXXX, our we of new

in restrictions Turning introduction these to with Northwest to e-commerce Food markets. with our are markets lifted expect poised in and we differentiated team-based selling Pacific of starting scoop, the return dining future. we the Group to to volume those growth the Group, Food in Combined recently for see be

track four capture we now fully and achieve in recall, to conversion $XX on systems to XXXX. completed previously and synergies XXXX. expect we systems million early of conversions by Synergy the remains have you'll completed remaining the warehouse expect announced As have

a to we legacy food Food process extending As Groups, are few locations. I tendered-by-design ago, mentioned minutes

full also one customers will the synergies our these we're of of Foods to bring extending Group's initiatives capabilities Both network addition, by providing fresh to customer In with the base. produce Food and quality rest turn legacy Dirk the Dirk? of employees. results center-of-the-plate over to highest categories offering year very important our outlook. now the two industry financial to I'll in call product second of discuss in the the quarter

morning, Pietro Slide I'll you, on and Thank everyone. good begin nine.

financial quarter second to recovery compared results. Our continued quarters strong results recent driven improved gross by significantly profit and volume

travel restrictions as increase significant hospitality in with restaurants adjusted lifted the increased both noted. were This customers to volume and During quarter, group and contributed case on resulted the leisure restaurant and our EBITDA. in our Pietro

During the and inflation a second record categories. across different cost food experienced also we of quarter, number

to quarter of teams excellent in job EBITDA. that and our through per gross to resulted customers. This strong, did contributor a very increased an inflation significant which second also managing dollar and case performance, was Our passing profit it

work We've As have but left challenge. Pietro Inbound from increases levels we many of warehouse full but manageable. as do difficult, supply remains order further. vendors like in environment remains demand operating open roles, filling to success driver also product to especially, many mentioned, a companies other and staffing get the the still had

focuse on the to on in processes We place challenges and minimizing impact our tools and through manage the have the customers. these

least we end to persist However, XXXX. expect these do headwinds of at through the

inflation from XX% the for XX, Slide Food increases $X.X the up basis the largest points. poultry, aggressive gross profit gross by the product chain. than XXXX. was up very the shortages sales net gross XX driven dollars profit and Adjusted the quarter every highlighting with high second from growth the major for by Adjusted our cost and margin despite case We product to quarter inflation net was quarter for quarter. category X.X% strong supply improved in almost our in performance $X.X year the profit billion and gross disposables. Moving increased experienced XX% pork prior inflation faster per food disruptions of in were sales cost quarter billion in adjusted

a a profit while As our to dollars typically recall, inflation gross headwind gross is benefits, margin rate. it

a effectively Legacy categories. fact, increased or and we we profit if second up of quarter, million continue I quarter This second $XX this gross of by X% compressed with percent approximately we second ability far COVID prior began business. moderates, XX% those quarter As just performance margin of given in in QX in freight especially QX. to Adjusted through which gain to commodity profit operating we it profit were ahead yet over We're gross continue food in per quarter the XXXX inflation in This case don't manage or our means quarter at XXXX. year. as gross to is pleased food mentioned, expect million the see very $XXX gross since on inflation had had the inflation our headwinds, the versus sales cost expenses least our second expect high as deflation, our in our with our and of it level second we've much by best and the US is

As the prior XX.X% was sales, of expense adjusted down in percent a operating year. from XX.X%

cost to expense food rate, of it headwind is a inflation our gross margin sales. a as to our benefit percent While is operating

a OpEx second chain as point year, approximately inflation or normal it this Just are and the beyond XXXX, of better in retention mentioned we due sales we of year inflation is additional inflation primarily million supply cost significant to points with spoke supply quarter percent legacy of labor annual largely US for business above this million basis $XX about to inflation the seeing $XX to and than Foods reference, XX of. lower as experienced. is about a labor that our million was Pietro just I food signing earlier is policies. the chain and $XX additional related our The

market second bonuses quarter quarter bonuses didn't of second we expect extent result, and labor have a same use run of and rate the the costs full these needing transitory. use the numbers. the these to be therefore these increased our normalizes We As anticipate not to the during to as most in

lot and the of Pietro pro as business open of continues quarter sales in our later quarter, current volume We filling in a as percent XXXX. have recover. however, a slide adjusted Adjusted of X.X%. strong very associates, from is levels rebound hiring still are made for million XX, EBITDA $XXX return our XXXX. forma to a was best EBITDA driver as mentioned, case the of to second estimate was Earlier, warehouse XXXX good the process to progress positions On

pro We also adjusted forma later XXXX expect return return to of expect to be EBITDA the that to than case volume.

make recovery in During restaurant gains XXXX, in for up recovery volume we and will plus expect the hospitality slower share volume. the the market healthcare

XXXX. gross well rates continue way expect their the to on headwinds our While category recovery, to logistics are into profit we

the For that plus two productivity distribution additional inflation wage the potentially wage higher to temporary costs, some margin offset. incentives and inflation, years require will improvements customer and of

reductions line. completed we $XXX the costs, permanent cost to to flow through fixed bottom For still expect of in million the XXXX

timing we the on track, uncertainty Group of Food As continued achieving about but us including know Pietro the labor will result freight the take are respect specific EBITDA are performance were being expected than confident to going forward We stronger XXXX markets the levels, have integration actions company less we very and continue makes said, with we a certain. pre-pandemic. synergies. to Overall, in

compared $X.XX the the page, EPS income in $XXX year. and this adjusted million prior adjusted to on was diluted. Finally, in loss second quarter net was a

additional calculation. shares the earnings from adjusted in We diluted are now reflecting the transaction per equity preferred our share

XXXX, cash result capital. first levels XXXX, and of cash to was had for on I the the was adjusted operating largely we working cash extended from the half million for accounts been stages inventory With reduced our months flow In early This $XXX significant flow the benefit operating days of the half a payables shares. share six approximately reflected, first first XX, capital operating has these count diluted working a am of is year million. now during shares of of Slide the neutral outstanding XXX flow. In pandemic.

the business year, a this Our of cash operating significant we amount a as in phase. first our each half despite year generated business recovery the generates $XXX evidenced flow in of being million by

in we reduce addition the debt second use debt standard total We our to and our million in In total reinvest proactively will in cash outstanding our quarter, down paid business to repayments. this $XXX debt.

than turns ratio leverage two dropped and adjusted due by more significant Our improvement. the to paydown EBITDA

the Our and our remains over strong debt target had between times, a the balance to ratio of very business. target progress year, against make of continue continued quarter and and leverage this and to second are recovery EBITDA. increased this X.X X we reduction focused expect additional on the We

and chain place Looking the million repeating quarter of OpEx rate below full discussed sales ahead, QX a reinvestment continued QX from and the retention of related resources bonuses benefit during to in approximately QX on we as to be of previously. result both not well the second a of as QX, as sign we EBITDA run increased in supply put dollars inflation expect as the our the impact $XX

Our way. are in recovery we a industry rapidly is participating and that in meaningful recovering,

volume recovering is well. Our

business performance gross flow challenges we're results profit using the the industry resulting and strong the and Our and chain invest is on improved managing acquisition we generated we are facing cash our supply in to is and reduce on effectively focused are track that. in and our

gain this the the both us time, actions with positioned to and at questions. we for can customers. share call we during large now Finally, small have open continue took the to Operator, pandemic

of the Slagle instructions] from [Operator Our sir. Yes, Jefferies. first from comes Alex question line

now is open. line Your

Thanks. Good morning.

for you expect the of costs it the you question the the from move quarters. point do are these At and peaks a retention incremental and headbands toward efforts, about moderated few more like with case thinking a hiring accelerated increases? think the more continue in these to headwinds cost a acceleration what Just sounds some and

Good states end expect some morning. ways in based seen of the point, you that that. to would This progress have ended of on know as year, It's should in as hiring unemployment to exactly, that, be to we good the the make hard continue just that there. get toward a we is evidence Dirk, your take and quite we've I'll I but early

that is this to would the though, to labor vendor, you you other a of us tell engage discussions will there, the get moderate environment. with about best in this them. So more really year operational towards some number I estimate our normal and in also as into the customers been to begin to improve environment, end we hard our point, challenges for to XXXX, of challenges, know it's a supply margin but at good see exactly just be, What of return to it's in factors to ability opportunity and a serve begin

as So partnering to as well we really best customers overall, this manage as can. our with through trying

Thank good. Sounds you.

comes Our next of from question the Peter Saleh. line

Your open. is now line

were much. you quarter Great. on up you last mentioned about goal? against short like and had where where Thank be. very I us you give the a believe of you in selectors were are think to labor terms and drivers thousand I getting of you shortage, you'd about you update that talking today guys guys an Can

Yeah, this is Pietro.

my anticipate I in as necessarily as what we comments, that that we, third over of the a in the to gap we gap just future not move we've well to and to as mentioned clarify gap covered So today.

of right is exactly The wrapped really would making up hiring and we number hiring machine say for. the process, in churn. as looking time drivers. so really at putting aimed are all high progress. We're the really right the that you've I'm the challenge in are churn What are is at I now good an and place we've for the we're selectors So sure measures reducing reducing we're rate, seen the part just rates

close continue and talk So we to the can about. gap

from Our Piper next comes of Miller question from the Nicole line Sandler.

Your open. now line is

would make does industry just of total cost you of on yourself but who someone see Good at total large, me where now. less. is, The come having first my why morning. level forward pass question in you. on specifically, that it's net And inflation just it's would you then Thank do that transitory. or bonus, Thank I'm to the answer in just to conversation on? try perhaps way. a engaging wants make might at what lead happening and curious to what the the it Also benefit the question call you that like whole believe going you. The would that's the to why feel it you not customer circumstance labor form

I'll Yeah. start the second I'll question. your with and of part start

on you we mentioned, we on Derek of but possible the labor as also the side, inflation where seen passing that as some side. have the been mentioned, and certainly have on So, product

that question shared and benefits imbalance labor markets supply. it it's what there's of hiring a your The faster with several the terms itself unemployment better go We've and markets In is many supplemental recovery, still speed in fast than in expected. than labor are effect. like for pipeline where evidence supply probably for partial that seen I that The the in those of as supplemental I benefits transitory, ended. in is is noted the demand have to up the where times is is transitory why the by think thought school of many those

some are those believe why transitory reasons are these we the so And of nature. in

Wells of next line the Our comes Kelly Edward Fargo. from question from

now is Your line open.

were quarterly. sort numbers. I'm a X.XX expectation to some what gave you Good Hey, of that Yeah. about sales around of was bit what And think morning. get resources. for I you a the to this Dirk, more you do the QX And that But don't talked Hi bridge, hoping EBITDA the sure you, annualized, I I back you maybe and quarter we're some to QX. wanted number just would color color like guys. is around I not maybe think them but to gave little of

also bridge for am within you're and us So not inflation. help about assuming that for just assuming volume half sure you're maybe we I what how think back what the

be just So helpful. would color that any

to. Happy Ed. Sure

with because was the our provide the gross our So quarter wanted with second through strong you were case above results think that the as I inflation that important profit and pass is benefits. really insight without that in inflation the on we this per really one the XXXX. benefited it's additional takeaway really is to with did to quarter or strong reason ability I from being second And -- we additional see

And so for and the call thing out some helped continued modest is $XX we with that not to that deflation. for for the the quarter that wanted that there's even given an expectation as piece, we the million alone and industry as outlets many inflation the

So, or of stay modest would is not I million think kind repeat we that expect or that QX on we $XX sort to more flattish piece of QX. the in inflation

think I continued We've kind of quarter fourth quarter. at amounts. talked look about we to haven't quarter, resources, second hire sales if the that you specific third

that well in So to from can there close We're as $XX expect there our quarter, delta we year with may that on, I've through you of is on sign-on on this that we second the looking to we up retention and I portion think expect being up. a volume in rest an most and the recovery of then have, and probably business quarter, that any but impact ramp way trajectory there. get volume about. largely expect it in million the and year putting aside what continue to continue was of supply that bonuses balance adding do we form there year impacts the an per million at the From in a these perspective, it chain estimate then resources, of of the with this talked volume $XX a

that's or say, attending things strong are in what some I we just that nothing there's to as as derailing not as the calling mind recurrent. would recovery, opposed So out that I was are that keep

helps. So hopefully that

actually to in mix? you dollars. versus Okay. that wanted the sales but inflation, was There gap within a, incrementality gross there growth. that was mix case What's positive ask and about rest driving the growth XX.X% mix. profit It's is And then I

that forward So maybe growth as how of we plus that thinking about be does going should sort and well? case look

Sure.

types mix types. can a buying the be well your customer So people point, products, as of to category it or as

the recovering sales. when healthcare a positive use restaurants I'll at example look So That's you hospitality. than net with faster been say

math versus direct there's a So not sales percentage the gross correlation as sort you mix of profit. do that of of can from that

the independence our to performance, looking some the strong such, in at there and especially However, you're gross as the with thing benefit profit. is take is away

And so even that's strategy years recent of the these part with types. what growing reason of customer that attractive in more our

So the overall as and than accreative they helps business. that business, independents grow the are broader more so faster

feel I and good hospitality of good trajectory such So mix, external going think the on but pace the influenced of that dollars about been one, on depending that and rate has some recovery, recovery. it and that continue we the factors by the healthcare profit be pace positive. more It's to to as and that, of gross overall

from Glass next John Our line Stanley. from the of Morgan comes question

is line Your now open.

Thanks. Good morning.

that some You productivity. freight may additional need so going to in is you stick labor mentioned around,

seeing you're looking is quick will, new follow rate it your as hasn't about the for to but if you've actually areas the line from? come And beginning on the inflation so, actually And you net Can already are I that that? of inflation, of yet. than to experienced? work think that's just sight, down talk just what I heard. come Do that that if it? does more to up, specifically have productivity $XXX going increase million on of The now is you expectation you where cost there save just a

Just, where we exiting understand the you of kind quarter are in July on inflation.

Sure.

packed question. a of that You've lot

the second because the one start that's quicker. I'll So, with

in seeing out some some other seen inflation seeing inflation have are we the rate that modest the We're categories So in to closer but meaningful zero. of still deflation slow. then categories, netting

kind it's So six weeks. last four,

we've there. recently more the than is sort So, more, more what that sort how been assumption of of seeing is

given as of the can remind, far we question inflation we'll productivity year, and as yes. so, I of expect. incur we on much normal a as we that supply in typically just chain, your there on can year a I'll you and As out as productivity, in on mitigating that in through put the sort focus number that

are business others do not that of would to as chain in we near and a are for supply probably we can running as So the we the challenging that underway during providing lot as experience have some appreciate directing an pace industry the have this at in and things you particular, good energy can more a in we really time. normal however, customer year. And in the

a leaves little it therefore So productivity. less bit focus on time to

end still of do faster under slowing move that have that we there, but to we some ahead. confident Hancock's with up sorts things our ability our new Hopefully up feel in going a as ramp you leadership and So helps. do

things, add just to And you the said terms a the side we associates said whereas the see referring just variable Derek, variable of that that number initiatives of fixed of to an costs, as the typically the that, that focus large the side. on on in productivity he productivity Dirk the and change referring was onboarding to on of Dirk customers slowed were new answer no XXX to down has

of comes John the Ivankoe question Our from from line JPMorgan. next

open. is line now Your

market dollar customers question distributors, the per any these dollars per and of Obviously, That out case GP of time or gross dollars using gross given that customers going volume. you profitability second the That you. recovery actually context whether 'XX. whether use to over share case new the your is of battles per perhaps obviously an you for think some case to profit existing are quarter thank drive profit ahead space, dollar in Hi, the Thanks. opportunity gain share to are that's there. to the across

share because and market talking we're about really volume. start I'll Maybe

share is gains market and have I market they that probably held couple making gains others, by us I of sure the when the a last aggressive held make this, John. in read staffing months way serve in has probably even make mean, we expect customers and share gain say, those terms to that little everyone. probably labor the back bit little what we and and in But desire are about continued you've to a markets the think back probably we've just been I challenging document, So more

is volume at team always and The margin. It's looking it. balancing

from those smartly, that are and will that basket. accretive driving are to invest we time so, we gains to there overall in the to choose think categories share time And

you And trying what in made good, profit the line. it's small dollars balance gross as we're in very at progress well, to results gaining to about So more really driving with and same period customers time. ultimately and large the bottom this profit that's and share summarized gross market

Guggenheim. from Heinbockel John

now line Your is open.

accelerating your calling I volume where of that? this you start recovering, capacity and now? with think time about guys is less accounts? to with doing How profitable do you is think good are a the And want to

So, John. so how depends it you measure it

in I question think the a what capacity as capacity lot you're again, talked about mentioned been as the to I is, that's drawn staffing.

to only has still trucks we making, if drivers, there's we many But that have. see hampered see so we made short grow So market our you're than share we've ability more us still gains.

continue optimization believe of we close of press continue had to resetting some of on so we bit in that to of and In there's little terms been that very instances with done number a stabilized, We've a as to of the as market terms And gain gap, share. handful probably in that. small we the -- have cases, opportunity kind customers.

at that you results You been can have impacting versus us and growth the diminimous see when volume XXXX. look

secondly, right. maybe then And

there's of sales. you the you on you were go, of thought right? number left was the $XX sort you know kind were million, investing in sales were future. open out I I You but the the, fill the in of that's positions, in to the So said third

sound a That, doesn't it like front fair? year investment, next may stretch right. is out loaded that that into that So that's

sales. on the that, take I'll

haven't we're a run that mentioned through way about and rate we good in the what well, as full later number, specific that we're, I as to talked So that and yet get journey year progress investment to this with making expected year.

but chain year knowing press get staffing, about supply market was have out the XXXX, to is we the and that we challenging given the last all is make there especially that's will way call dictate, pause, continuing remember to continue to that in to a full want from think the hard businesses we talking third of and gains. obviously, perspective, or probably kind we're to expect quarter would wins the that customer share the just that thing our to thing back I that fourth on quarter I recovering sure level and our market to yet staffing

of expect to that So to level get do point XXXX. in staffing at later some

Our next question BMO Capital. comes from of the from line Bania Kelly

line Your open. is now

Thanks questions. taking our morning. good for Hi,

just cost sounds opportunity there's curious smaller of any if a some little to and across industry, costs or at bit, rate of have like had chain a just some to maybe that, you maybe on as are. kind one supply elevated a margin comment those the if pass the it's slower moderate happening or quick that's Just if costs where an do more I'm that moderating the given and capture opportunity

Dirk. is This Yes. Kelly. Hi

but our of So speaking. ends a there you timeframe monthly relatively us which about is in contract can portion resets, do short up generally that, remember weekly some talking moderate that from because of to being opportunity to be large

opportunity. that that I to The inflation continue the all profit gross strong and that shortages, a to the just etcetera, in very enabled or the of the and expect just going that, really level we outsized forward. combined that of with pleased really strong with have out bit second gain reason So was was gains, us little tools wouldn't quarter was processes without our highlighting plus of quarter that wanted with product of combination to really call

with pro that factors we kind can think the the accurate? one another full to back Got maybe gross estimating just gross points you of that And get about helpful. margin? gross That's were forma it. levels that in a of about terms acquisition positions, is help And just us margins kind basis below of XXX margin, maybe

saying Kelly, estimated an mind clarifying the what do you're you a quarter or… for current XXX

that's total of how curious, Yeah, margin full a were basis gross back the below the and points far are factor, time? of get for of today the that the XXX factors is full estimate over what just below, are pro kind about just company, what XX.X, the kind kind potential that we forma thinking relative to

Thank clarifying. you for

with because thing had look the a just we've with it have is you of it harder or the commodity makes the outsize makes to that would think margin I a these this along look ups, -- gross than categories as return time. gain, XXXX actually, and where specific inflation look it is though inflation continue that largely in about you a you're worse being so of over does gross What know it over talk tell this little are margin I of benefit it mark is amount really is lot So passing fixed you to time and even inflation level case. expect even compression, us if at you like they per making though more is inflation it will we levels the there's does cost

The case talked So and customer product headwinds, as we that's mix improve about continue helpful. volume returns. to

for return we at or the then and also that other close piece more So expect that reverse but normalized there to we what expect some a environment logistics that, made it, as to as progress return or they to freight big at look XXXX. we've just to

XXXX to per getting from point, this the back then growing gross us that gets in So there's way profit the anything at and case. not of

into quarter gross even further the the on outsized above thing would is above it you think just of if actually I'll for impact it, be the margin, stripped out on sales margin context, to but second put I inflation say XXXX. gross even

right profits positive question gross So case we're it impact over feel the margin as and growth good any on seeing, to inflation negative very it's is impact a OpEx. remember an equal last dollar that gross giving has about the answer margin, to time has I that per think to now, thing gross harder but on

a you well. the on in a that improved quarter we saw, EBITDA. net impact is And it as adjusted really really, So as

comes question Silberman next Suisse. Our from the of Lauren line from Credit

now line is open. Your

Thank you.

challenges a you question think that? a shortages, given customers and on in are or points the related industry chain to I anything you XXX do So supply related underlying spoke inventory, noted to in has two deceleration case a to bit? just you see of July. with Do weeks the stockpiling do seeing over ticked volume concerns that well-documented more you think it, them, it basis stockpiling to you supply last down restaurant

I stocked believe happening. stockpiling inventory there's just to be pies. don't enough There's

bounce percentage haven't consumers that think of I a terms one I but or way other I related be chance and recall can maybe may I in up the restrictions go small think of there's seen what delta, sure to that a we this than had and of way fourth whenever here's are, quickly. what I more two is back COVID things one, to were even know who then better think tend and they wave a do we've a

adjusted margin if I follow over pretty And if inflationary the Thanks. up or a do at a gross I guess, just reserve Great. profit dollars, commentary, all. adjustment impact had you quarters, could at gross big life in on future the to

So you're right.

the I think it think quarter same it inventory the It of valuing near directly results type LIFO charge. recall in of the, still a related of charge LIFO I a sheer was, just, works a being end because that that in just the amount of in here, you're way period had in anywhere is XX the is don't to as at the inflation I years cost. saw, really my where thing you and because we sort it

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focus think see pretty moderates about a when on positive will you So that, LIFO, In stays is the it's is if inflation to. what inflation happen I neutral. we

sorry, in see deflation, year. to second quarter to it's the to likely some If after second offsetting some form start -- of -- you see the you would a that a credit start

[indiscernible] next comes from Our from UBS. line the of

now Your open. line is

finally Good out out you share and demand. Have business, taking you've up? in ramped the any go customers? has for to meaningful in much Thanks. morning. And distributors, seen any the start as inventory competitive on Thanks fluctuations recovery flexibility shaking them your independent wallet much questions. How so has increases smaller the of environment have see give

of smaller course over So the happen of others customers fulfilling lot the on it that's competitors. have. more competitors. time we net are score, promoter did the respect last look say, pretty of than with that been to at the clearly competitive recovery quickly as being or has, orders as the of environment a would year, I in Again, I stable When there's helped number terms some the challenged our

of of of mind? if terms other you remind part question can the your you me In don't

in chart Just meaningful of terms increases. wall any

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home potential share think over over to expense long home, just we've some there of may continue at some the time. the course increase to the seen as term, be that I So through so

Our next the comes question line Bernstein of from Jeffrey from Barclays.

now is open. line Your

question. a you Thank then and follow-up very clarification much. One

strong those would sustainable, follow as I it's what it's guess, that maybe to understand the but to I want pullback, that couple seen by of which market as give points basis or but not what blip, Just a out that pullback Derek of third the themes are whether common mentioned confidence recent slipped something point base last start date you've imply you I just is the mentioned XXX think recovery half then to the would XXX was up. going the the the quarter I more of a year, continue, clarify volume a it know guess to weeks, July, you trying you and second maybe

Pietro a it's general there's an I in two from that's know. comments is delta noted, those bit And to the such bridge or one, way harder decline. of to if think a is, little impact

if put said, we multiple and we we've of aside, kind as even if this demand you shorter from though right of I in expect that waves a a there, have a Pietro a even fact, seen is delay. So delta one, term that would back on think in I as come to that bit back recovery the there's is track, be and the impact, could to on

be seems there. I think overall, just to the continue externally to demand

We you the demand that still have increases we're a seen that that now in continue chart have capacity. and reopened markets, occurs, continued seeing we in consistently a reopening And improvement, to to so demand here last those increase. we included that as number have to markets or would three only in markets full closer months the expect in the of those that

not short-term to impact So continue markets no I and the a overall, perspective not more with we whether there's the is strong matter and demand to really think the and that be strengthen there that from example, demand just and if to return there as is or as expect timing there that again, to that demand continue. an expect independence gets there it's delta our more and you overall, growth expect expect think of

question cases you distributor was penetrating larger just year, think the up on per look coming who shift if like I you've final and for Pietro there existing among accounts I guess, seems new excitement of back I a the this distributors it with, achieved Then accounts for just Understood. comfort. a couple of one fronts, was And crisis. to like that a adding said line the out might obviously but seven, your

of wondering the shy by M&A accounts to the I'm start new the and in maybe add short the away or whether the ability of to thank term, COVID terms to add continue you? you just from in latter growth So

of, we've started the to we've a to really over accounts dollars new of accounts, in with call course large pandemic demonstrated continue terms about business in of and where we of the the So the I the talked new that think we've is billion part since market would've being accounts, to expect that able us share way aggressively have held to liked, more a that in as a or that liked. the we as have little bit of customer would or and grow terms level side add temporary the back seen little bit staffing to we challenges

the exactly terms perhaps and expected of third your consolidation one you're right. In terms That's that out pan have of part didn't in things would third sort the of we question, M&A, as of the been of distress. of

recovery, taken seen been to and going speed which the hiring competitors to that sales markets has but we've of distress I they're the advantage should force customers. I their been in industry, some some of back good terms that after there really where owe select of think what new and have we for the

found of way we've envision So slightly to you'd kind than less distress perhaps advantage in of different beginning. take the a situation

from comes the of question Edward next Our Kelly. instructions] line [Operator

is line Wells now from open Your Fargo.

back for year. I inflation inflation Hey back is CPG thanks for of question just the it of guess, missing of you'd I guess the here? what talking in inflation. first, that I because we're am things curious vendors, etcetera. and couple sort letting go guys, just kind here. in to you, of back half possible to Everyone's of, how's me A of commodity everywhere about I does no want I'm kind like expectation the just really the curious, else, seem

that is inflation. continued when at you, think and continued that look incremental we think the you So place don't in at that would have it, And because drove the I way that about inflation gains. if it I if additional

see a outside kind but drove drives it's the in the incremental second quarter. inflation gains show still up, year-over-year outside basis, You on the -- will sort of of that you

far last I months sorry, of is categories. few think commodity in that last you what is some see we've seen the weeks so your few

as they So other other second up set you modest to some of examples the in show categories. inflation a lot good few deflation weeks plate quarter continuing grocery where that and and began the more of recent a the have inflation and in center had some

how of wait increased in how we'll comments see, So I talked our QX I context about of kind but between think that's how maybe the it's the earnings. their the piece to maybe and bridge of what it that, some that's are and difference

But extent by still So gross at the saw in to some rate. inflation, dollars. to way year-over-year, benefit profit that which that that likely QX, the that's should we not continue

gain wanted QX. that to the pleased the with said, why quarter we quarter in in improvement that's to strong with And saw game quarter that and close third Correct. outside opposed like fourth I as and we're quarter or without to very conduct we versus the

billion, excellent. billion last deals, of did $X.X you on And calculate makes the just saves, more sense. from cost million. Okay, which $X one question or a for than pre that sort the here Is bit EBITDA COVID then mention That you, a kind forma two is call, combined I because profitability COVID pro one synergies my of probably at the $XXX couple little post is that around your so. and

to reason when like any at that you is done, date of eighborhood and of There is nail in is all kind back think billion, we're not like said wouldn't? business or $X.X to and to said So million. there -- and there but of is But $XX gain. $X.X year, and trying is, share there's $XX that a on normal, you of and underlying if sort billion a like million, I'm all the when down is sort done,

from And there. in all to your think elements point, that $X.X right the about grows I to ish that billion gets you're thinking

think inflation is in that focus a given sometimes that just don't people cost we incur on that I year.

numbers the just we just the have of all onboarding about productivity I when normally talked other X.X a to we you factor were continue a of new current number people the a that than don't there think in about. market, So back you after reason think get but in that that there's we period, the from would and with then a grow that slower associates little in talking that don't to ish higher

captured you've you're pieces been have inflation that as You well. how in thinking about

And last thing the just you. for Okay.

margin but when maybe EBITD pre case incrementally it growth about we COVID the probably think this in That's $XX To about million, over EBIT only a to increase X% just forget margin. back EBIT million. So, regular was your 'XX I go offset levels. driver, that, $XX margin, of like X.X% again,

to are underlying higher offsets inflation, if wage there optimistic that are business numbers, the even will be So we right. from the

inflation think, is incremental And that the right sort thinking neighborhood. And You're, it's to the think you're I way -- about the any is key earlier I pieces to come it I but are of, you I'll was, that definitely well, in back think we know hard on it's about take message asked had I away that just thing it's it's think the think logic. if that that labor on the as transitory. it, all to think when and good Lauren inflation,

If that a it you get remains customers. to portion permanent as do of with of some conversations lot

level very serve or customers that they us. And with want in way really, the operations be to if of it's were so some or they environment an cases, are mitigate about them. want, improvement changes this. with of trying some understanding discussing those of them, portions cases to offset either of in order And a them with good partners that They we good to partners it's be number in in we're economics

actually to think don't have for there good We us So not it's levers. some opportunities any are we that offsets.

I remarks. to call Pietro closing for back the will Mr. the now turn Satriano

nice and you, see a volume on path of volume to couple P&L, of look the we quarter, side. full Thank about lot a recovery a maybe takeaway the very paying was good you spent strong is time Margins talking a since a inflation, well as down And a spot. them. Well we're our distribution are have handle believe performing acquisitions costs on variable challenge and we we that on to Derek really debt. the said

news good a by XX,XXX results tuning overall, I'll think our we've in. of I So close all Thanks today. covered very for story. to thanking

today's for concludes you Thank This participating. conference call.

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