US Foods Holding Corp. (USFD) Earnings Call Transcript & Summary

Good morning, and thank you for joining us. My name is Jeff Bernstein, and I'm the restaurant and foodservice distribution analyst here at Barclays. I want to welcome all on the webcast to my first fireside chat on day 1 of our Sixth Annual Barclays Eat, Sleep, Play conference, with a focus on restaurants and foodservice distribution as well as gaming, lodging and leisure. The event is virtual in 2020, with fingers crossed in person in 2021. At this point, I'd love to introduce our first presenting company, US Foods. With us this morning from Illinois, we have Dirk Locascio, the CFO; and also, Melissa Napier, SVP, Treasurer and IR; and Scott Einberger, Director of Investor Relations.

Good morning, Jeff. Good morning, everyone.

[indiscernible] a background for those not familiar, US Foods is a leader in U.S. foodservice distribution, supplying 300,000-plus restaurants from 70-plus broadline centers, and with 75 or slightly more than that, cash and carry stores. And just looking back to the last full year, US Foods produced revenues of $26 billion, although that's not fully representative of food group and smart foodservice acquisitions. Before I begin, I just wanted to mention or highlight that US Foods did publish an 8-K earlier this morning with some color specific to the current fourth quarter. Case volumes tracking down 18% to 20%. Similar, it seems, in our view, to the down 15% to 20% that management provided through, I believe, the October 24 date when they reported their third quarter. It does seem like in the graph in the 8-K that restaurants seemingly eased a little bit through November. And secondly, there was guidance for current 4Q EBITDA to be similar to the third quarter. Third quarter was $209 million. For the fourth quarter, consensus was more north of $250 million, so a little disconnect versus expectation now. So I figured I would start with that and offer it up to Dirk just to offer any kind of contextual color, whether or not maybe these recent trends change our outlook on the timing and trajectory of the ultimate industry recovery or maybe perhaps The Street mismodeled from an EBITDA perspective relative to what you guys were thinking internally. I'll turn it over to Dirk, and then we can begin the fireside after that.

Sure. Thank you, Jeff, and good morning, everyone. I appreciate that, and we thought if we're going to be here this morning and talk about this, it would be helpful to give some updated thinking. We know a number of things have changed since we would have talked at our earnings call in the third quarter, namely a lot more temporary restrictions on indoor dining. And that's really the main thing that's changed. And I think even when you talked about consensus when that was all built many of those, just like our own assumed continued improvements, just like we had seen throughout the third quarter. So that's really the main difference with the indoor dining, we view it as a temporary slow in the recovery. It doesn't change our outlook over time at all. It's really, again, more near term. And I think as we've been said on the third quarter, we didn't view the recovery to likely be linear. And this is one of the things we've all learned to do is adapt during this COVID time. And I think for this near term, just we're -- we and more importantly our customers are adapting during this time, but again, doesn't change the outlook. Really, from an EBITDA perspective, sort of -- let me start with a case volume perspective, as you said, overall case is pretty similar at that 18% to 20%. Restaurants, we have seen in more recent weeks, as you noted, some slowing attributed to indoor dining restrictions that have become more widespread, given the significant increase in COVID cases across the country really. And that's muting some, we are continuing to see the onboarding as we expected of some new larger customers. And again, we would expect that similar to what we saw in the summer. If you remember, when we talked about our Q3 earnings call, some of those states that had spikes in the summer, we did see temporary reductions in case volumes. And then as those COVID cases got back to lower, we saw those cases are recovered to at or better in many cases than they were prior. And there's no reason to believe that, that isn't the case here as we look ahead. I think that the other thing that just with these temporary reductions in indoor dining, like I said, just the near-term trend slows a bit. And also with these added restrictions, also some of the holiday events and parties that normally help in the fourth quarter, just not surprisingly, have an impact on the quarter. So again, not unexpected and not a change in the overall, but those do contribute to cases being really quite similar in Q3 versus -- sorry, Q4 versus Q3. As far as the other areas, GP, not a whole lot else to discuss beyond really what we talked about in the third quarter. The comments I've made around some of the negative near-term impacts on mix and freight can continue in place in the fourth quarter because of some of those -- because of the reductions in holiday parties and that, we don't get likely some of the mix benefit that we do normally in a given year. But again, not surprising given the restrictions and don't view that as anything permanent. From an OpEx perspective, completed, as we talked about in our third quarter earnings call, the $180 million reductions across the second quarter and the third quarter. Most of those savings did show up in the third quarter run rate. So we did expect and are seeing, as expected, some increase in that in the fourth quarter. Also, though, in the fourth quarter, you do have some offsets to that as some of the temporary actions that we had in place early in Q3, like furloughs have now been reverted back to the norm as well as just some other things, smaller things like some health care costs that people delayed going till later in the year. So some shifts. So it's again, nothing substantial, but just things that move back and forth throughout the quarter. So not positive that COVID cases are increasing across the country, but I think the positive is with some of the vaccine news and the positive trajectory we're seeing there from a number of providers, I think, again, make us positive as it pertains to the recovery and overall, the resilience of this industry and the ability to recover there. So I just thought it was helpful to give some insight on our current thinking for the quarter, and why it was similar. And again, the main thing different from coming out of Q3 earnings, again, for us, consensus, et cetera, is really the trajectory in the near term of the volume recovery, more than anything else.

Understood. Thank you for the color and the update this morning. As I just look back and I look at that US Foods case volume chart that you published this morning, it seemed like through much of the third quarter, things were relatively stable in terms of a sales volume perspective. But I know you guys talked about in your last call that EBITDA trends improved each month of the third quarter. And then with these cost savings kicking in, I was surprised, I guess, you would now expect going forward that if sales remain at these levels in the coming months that we should just assume relatively flat lining EBITDA perspective sequentially quarter-to-quarter. Is that fair to assume with this type of case volume down, high teens, that EBITDA for whatever long this lasts should kind of hold steady and not see any further sequential improvement?

I guess it's steady here. I think that as you start to see, I would -- again, we don't know exactly, but be surprised if we don't see some reversion to people being able to dine out again in the near to midterm. I think the other thing that -- to remember is, for us, the fourth quarter typically is a -- in absolute cases, a lower-case volume quarter than the third quarter. So even if cases decline a little bit less, the absolute cases that are driving the EBITDA are not all that different. But overall, as far as where we are in the fourth quarter, with savings and that, again, you can have some things that move around from quarter-to-quarter a little bit. But as far as the core business, I would expect this to be the base and then would expect to continue to grow from here as we see volume recover. And then the benefits to come with that from mix, logistics, et cetera, that we've talked a lot about.

Understood. I look forward to getting past the discussion on weekly and monthly sales and moving on to some bigger picture topics.

So do I.

Yes. So with that, as we've had a handful of questions just on the broader foodservice distribution industry, I think, a lot of investors we talk to look at the segment as somewhat of an ongoing roll-up type story, a market share type story with the big 3 publicly traded players still having relatively small market share. So I'm just wondering, as you look out, where do you see market share for US Foods or the big 3, however you want to look at it over the next number of years? And maybe specific to acquisitions, what are you looking for? And maybe what are the inhibitors? Just trying to get your thoughts on a trajectory of market share off of these relatively low levels over the next number of years in terms of broader industry backdrop.

Sure. So I think that as we've seen in more recent years, I would expect us to continue to see some consolidation of share, some of that may come through M&A, some of that may come through just share gains from the larger distributors. I think because as you pointed out, the largest 3 really still only have 30%, 40%, so a relatively small portion of the overall value and market share. And I think the value that we can bring is also different than a lot of the smaller providers, whether it be from just the scale and the benefits that we offer for larger customers. There's the consistency of one provider to deal with across the country. There are other things in our value-added services, et cetera. And so we'd expect to continue to focus on that. I think for us, we're happy with the 2 acquisitions we've done in more recent years with Food Group and Smart. And our focus really on that front is about successfully integrating those. As I've talked a lot about Food Group, really filled in that blank spot we had in the Northwest, and that was the main blank spot we had. And Smart, which is a strong, very profitable business that we see a lot of growth opportunity in, it's about really continuing to expand that and integrate it with our core business. So that focus, along with organic market share gains. We talked a lot about this since we really increased our focus since the middle of the year about gaining share. The thing, internally, we talk about is we can't control, just like some of the things we talked about today, what happens with COVID in the near term. But the thing we can do is we can take those actions on the controllables and those things also around working with customers and potential customers to help us gain share over time. And we've seen that happen in these recent months on both smaller and larger customers, as evidenced by the 800, for example, of new customers in the large space. So it's really about continuing to gain share organically as we bring our differentiation to market as well as integrating these 2 acquisitions successfully.

Understood. And as we work through the pandemic, there's been lots of talk of independent restaurants, so the smaller guys and the smaller distributors as well. And it would seem like both would be more challenged relative to the larger restaurant chains or relative to the larger foodservice distributors and presumably being more closures, which would present more of a market share opportunity. So just wondering have you seen evidence of such in either the restaurant industry or in the foodservice distribution industry in terms of the past -- the very difficult past 6 or 9 months and whether there's been significant closures of already on either front.

So from a restaurant-to-operator perspective, we've seen, as Pietro has talked about prior, we view the likely estimate at this point for us, just in the kind of mid-single digits as far as closures permanently. You see some -- it's harder to tell exactly because we are seeing some that are choosing to close temporarily. But the other thing that they're doing is operators, we all know that being a restaurant is a tough business in any environment. And they're learning to be more resilient and adapt, whether it's labor staffing, investing in more capabilities to do more delivery and carryout that it may not get them to the levels they were before, but it allows their business just to continue to survive and be cash flow positive in some cases. Also, the demand going into this, just from a consumer perspective for independence was very strong. So over time, even if you have some closures, it doesn't mean the demand likely goes away as opposed to returning over time as people eat there. So expect independents to remain strong over the longer term. It could look a little different with the specific operators over that time, but feel very good about independents over time and the -- sort of the gains that they've made in recent years continuing. Distributors also, surprisingly, as we talked about on our earnings call, have been pretty resilient. There's been only one larger one that declared bankruptcy earlier in the year. There's one or two that we know that have taken some capital infusions. But otherwise, they've held up fairly well. There are in certain markets, some that as they work through there as they've pared back staffing and service on that, that's provided some opportunities for our teams to target those customers in order to gain share and again, get them to talk to us about the value that we can bring in different and would continue to expect that over time.

Understood. And then, obviously, with COVID, it seems like it's been just having an accelerating effect on maybe changes that we're already going on in the industry. So if I was just look back, again, perhaps COVID accelerating the structural changes that have been going on for the past couple of years, I'm just wondering if you can maybe talk about what's been the most significant or transformative change for you during this crisis, maybe both positive and negative whether you want to talk about for US Food specifically or for the broader industry in terms of what maybe COVID has accelerated from a structural industry standpoint.

Sure. I think for us, the main thing is our strategy has been resilient, relevant. So we take the opportunities to tweak some things here and there, but it's not a lot of wholesale change. But really, another thing is we've learned to do more with less and learn to do it differently. So a couple of examples that I've talked about is with the integration of Food Group for a while right when COVID had hit, we paused on the integration of all the system conversions and then force ourselves to think differently about how we could do it and so what that's resulted in is not only us being able to reengage and having converted now 2 markets over to the system, but finding a more effective way of doing it than what we found in the "old way" we were doing it, and we will do that going forward no matter if there are travel restrictions or not as we go ahead. Other things around engaging with customers. So certain things that we thought had to be in person that we can expand our reach in helping customers, whether it be with our restaurant operations consultants engaging with customers, webinars on different areas of how operators can be more effective, et cetera. Each of those things have allowed us to expand that reach and help customers more. And then probably the last thing I would think about is just some of the team up across. So for example, that I've used before of credit and sales working together with our customers for very effective results, and that's increasing the amount of team work between those groups as we go ahead. So just finding things like that and also finding more customers willing to consider adopting some of the tools that we have. So ChowNow is one Pietro has talked a lot about around helping operators tap more in this environment. And so it's those things along with just being more agile. And so taking less time to bring things to market and testing. So it's a concept that's been in place for many years, especially in the IT space, is adopting that more broadly across our business to be able to test and explore different and better ways of operating.

Understood. And you mentioned doing more with less, which seems like the theme in recent months. So as we think about future profitability, when sales ultimately do recover to prior full strength, and hopefully, they do, would seemed like there's upside to maybe prior for the restaurant margins or for you guys operating or EBITDA margin. Just wondering if you could talk a little bit about, again, if and when sales return to full strength, where you see the potential upside to your historic margins, in essence, effectively doing more with less.

Sure. I think the main area is the cost savings that we've talked about. We've taken, as I talked before, a very balanced approach to the cost. One thing we've focused on not doing is reducing in areas that really inhibit our ability to be successful and grow in the future. So to that balance to make sure that we're still serving the customer very well. And in fact, in some cases, that means in the near term, investing a little extra. So for example, in the fourth quarter with COVID cases up, we're investing a little extra in supply chain costs to make sure we have the right staffing there as in different markets to be able to serve those customers as we look ahead. But I think that out of the $180 million of cost savings, we would expect the majority of that to stick over the longer term. We expect to invest a portion of that likely over time as volume recovers, namely in sales resources, again, to ensure we continue to grow. But that -- with those savings, we would expect that to improve EBITDA margins over time. We think that gross profit, some of the things on mix and freights, revert over time again as business recovers. And then the other thing, just from an overall, it's not a margin, but EBITDA dollars, the market share gains that we've talked a lot about in the new business that we've talked about more recently are things that we think, again, help the growth of the business over the mid- to longer term as we see that recovery.

And if we would kind of zoom into more recent trends for a moment, if your case volumes were to stabilize here, the down high-teens for the next quarter or 2, for whatever reason that is, is it fair to assume that doing more with less strategy would kick in where EBITDA could actually grow because, again, it's more about the cost savings that continue to build? Or is there, for some reason, if the sales remain down at these levels, it's hard to effectively do more with less and that you'd really need to get sales back to their former levels before you could really see the acceleration in the -- perhaps the EBITDA margin?

Jeff, I think that's a hard one to answer because I don't know that probably we or others in the industry would expect over the mid- to -- even midterm to stay in this down 18% to 20%. Because I think if that were the case, you'd probably think of some different structural ways to operate as a business. And that you'd likely otherwise, if that's not the case, endure some quarters where these savings would help for sure, as you see there, and will help with the EBITDA, but what you wouldn't want to do is make other significant permanent reductions if it meant that it was harming the business for the near or midterm.

Yes. As we are now in the month of December, you already calendar year-end company, not that we're looking for any guidance on '21 because obviously, visibility is somewhat lacking. But directionally, how should we think about the business? So how do you think about the business as you lap the challenges of 2020? Maybe one of the biggest puts and takes to consider if we were building our models from scratch just because, again, going into '21, lapping the unusual nature of 2020, is there anything you'd highlight or anything that we should consider as we think about the tremendous peaks and troughs that we're going to be modeling against as we look at '21?

Jump to '22. Yes. That is a hard thing as we go to '21 because, as you noted, there were -- we and others, a number of temporary actions taken especially in the earlier parts of the year and even into the -- as I said earlier, in the early parts of the third quarter. So in many ways, the compares to 2019 will be helpful. And also, I think you've been looking back in many ways still to 2019 because that's a baseline of more normal. And I think a lot of the actual timing is harder to predict. But I think the fact of, again, if we assume that the news on the vaccine is anywhere near as positive as they've talked about, you begin to hopefully get to a place where you see that recovery coming, starting at least in the first half of the year and continuing through 2021. And so it's hard to tell what the exact number looks like. However, that bodes well, I think, for the trajectory of improvement to resume as we collectively march back to where we were in 2019 and then grow from there.

Got you. I think many investors think of growth in terms -- or from your perspective, of adding new accounts or potentially acquiring other distributors. We tend to think often the bigger opportunity is to share of wallet with existing customers, which I know you alluded to before. So maybe you can offer some color in terms of where you think your current penetration is with the customers you have, whether it be chains or independents. And how should we think about the long-term opportunity to grow that mix? Or is it really that it's hard to get much higher than where it is today just because typical customers want to have a diversified supplier base? How do you think about your penetration with existing chains and independents from -- is it 1/3? Or is it half? Or where could it go in terms of their usage of distribution?

Sure. I'll actually talk about them separately, if that's all right, because they operate a little differently because when you think about larger customers, so whether it's large health care and hospitality or even large chain, typically, they are -- if they're a customer, someone they're buying -- when they're buying from us, they're buying a very, very high percentage of their purchases from us. And so that's part of they get some benefit also on pricing because of that and that helps with the scale on that. And in those cases, they don't want to deal with multiple providers because, again, that means across multiple geographies and multiple properties, et cetera, they have to do things multiple times. So there's many benefits, some scale in that case. So in those customers, there are some opportunities for increased penetration or share of wallet. So there might be a particular category that they may buy from a specialty provider, et cetera, that we're always looking at, but it's a lesser opportunity than when you get to an independents. I think one of our competitors talked about having 30 or roughly 1/3 share of wallet with customers. Ours is very similar on the independents. And so that's where you really do have a lot of opportunity for gaining that share of wallet. That is really helpful from the customers' perspective, again, because it simplifies and then from our economics also, the scale because if you're already serving those customers. And so we're always looking for those opportunities and executing against those opportunities, whether it be from categories we don't have. Also the other place that this comes in is with our private label and certain things that they may buy from us or from someone else, either that we can add value, save them some money, et cetera, on private brands. Those are the things that we see still plenty of opportunity because, as you know, 30% or 1/3 still leaves a lot of opportunity for growth of those existing customers on top of attracting new.

1/3 is a reasonable ballpark for some of the independents. And where would you say when you say chains, you're the large majority. So is that 2/3, or 75%, where you are today, which would make it harder to really push much higher than that? Is that unreasonable to think about that type of percentage with existing large chain accounts?

So it varies, but you can have large customers, many that are at 75% and 80% of purchases from there. So again, it's -- but still, there are large customers, it's still a large portion of our base. So those are all levers that exist in order to grow share and then ultimately grow EBITDA.

Yes. And then you mentioned the cost savings and $100 million in cost saves, which I think were mainly of back of the house. I'm just wondering if you can maybe offer some color on the largest components of those savings and the confidence level that you have that they could be removed with that negatively impacting the customer-facing side of the business. And whether ultimately there is upside to that 180 kind of post-COVID, as you do more with less, so that 180 already contemplates some of the changes you've already implemented, and therefore, we shouldn't think of another leg of COVID-type savings on top of that 180.

So I think the 180 is a good estimate. So the meaning of what we think is the opportunity. There's always things in future, just even in a non-COVID world that we're looking at that would not be included in this, but where it's about just applying continuous improvement and whether it's supply chain productivity, shared services, all those kinds of things that are really ongoing. But as far as the near-term impacts from COVID, I think, the 180 is a good estimate. As you may remember, we took some actions earlier in Q2. Some of those were aligning the sales force and some others to the lower volume and then follow that up later in Q2 and then early beginning of Q3 with some admin and back office savings. So those have been in place, the majority of the 180 is headcount. There are some other things that are nonheadcount, such as whether it's travel improvements in our safety results, the drive insurance savings, et cetera. But we would expect, again, those 2 to stick and flow through with the caveat I mentioned earlier that, over time, investing a portion of that back, namely in sales, just again, as is growth. One of the things that we've talked about a lot historically is that we will continue to invest in sales in markets, where in order to ensure we're not inhibiting our growth and enabling our teams to grow, and that hasn't changed.

Understood. And as we think about the -- looking through those cost savings to the EBITDA margin, maybe if you could just talk a bit about the core pillars of your EBITDA margin relative to your 2 largest publicly traded peers. I think you're below one, above another, kind of how you think about your performance and whether there's opportunities to close the gap with those above you or whether that's purely just scale and therefore hard to do without those type of volumes. How do you think about your EBITDA positioning, maybe it's different customers or maybe just different strategies, but how you think of your sales versus the other 2 publicly reporting foodservice distributors in terms of EBITDA margin?

Sure. So I'll spend most of the time on the comparison to Sysco, the larger, because PFG was a fairly different business and quite a bit lower. I think our EBITDA margins pre COVID were more than double their EBITDA margins, just it's a very different business and the way we've gone to market. So with Sysco, our historical sort of EBITDA margin has been about 180 to 200 basis points lower than theirs has and really roughly split between gross profit and OpEx. On the gross profit side, we don't believe there's any reason that can't be closed over time that attribute a good portion of that to just because of their longer focus as a company on private brand penetration, some strength in certain categories like produce and center of the plate that we've continued to gain on. So we don't think there's any reason for those. On the cost side, we do attribute about half of that in a rough estimate to scale from their larger size, so leveraging the fixed costs. But the other half, we believe that we can close, and it is -- we believe it's predominantly supply chain and then being just more effective on the supply chain. And so our focus on both those areas of gross profit and cost remains for us. And one of the things we tried to balance for -- in past years and will continue to is the balance of growing EBITDA dollars and EBITDA margin, and we had demonstrated, for a number of years, an ability to do to both in parallel, and would expect to continue that in a post-COVID world.

Understood. And then while the people don't fully understand or maybe unique to you guys in terms of the cash and carry business, just wondering if you could talk about how that's performed during the pandemic and its potential longer-term implications in terms of sales growth and margins relative to your traditional business. And then maybe any overlap we should think about between customers on the delivery side versus on the cash and carry side as cash and carry becomes a bigger piece of your business.

Sure. So excited about this acquisition. This business has held up quite well relative to the broad line during the COVID time frame. And so through the third quarter had seen really kind of mid-single-digit sales declines versus the larger broad line, a little higher recently because, again, in the West and Northwest with some of the restrictions. But again, it's -- we've opened 2 more stores there this year here in the more recent months, and look forward to growing that. As we talked about before, we believe we can at least double that footprint. It's an attractive and profitable business with EBITDA margins meaningfully higher than broadline margins. And this really gives us a larger platform with 70-plus stores to really grow from. So our CHEF'STORE, that we've talked about, was a good base for us, and that's really what impassioned us to move ahead with this because what we did see and have seen is in these markets where we have a CHEF'STORE, you're always watching closely to make sure that if our delivered customers are shopping at CHEF'STORE, that it's not cannibalizing your delivered business. And in fact, what we found is not only are you getting the incremental business from the cash and carry, but their delivered business tends to be up double digits as well. So you're just getting -- that's one way of growing share of wallet. And so that's a positive as we integrate Smart into our core business and incent our sellers just as we have with the CHEF'STOREs, but obviously, at a much larger scale that allows us to really grow scale and share of wallet over time, along with expanding the footprint. So this really is as part of the -- how customers today wants, they want to shop their way. And so when we think of the multichannel approach that this is a way for us to really allow customers to be served their way, whether it's delivery, cash and carry, ability to do the Pronto with our small vehicle deliveries for urban areas, just serving those customers in ways and meet their needs.

Why do you think it is that -- right, so if customers are using you for the cash and carry, that's such a significant increase in their delivery business to be up double digits as well, what's the rationale behind why a customer would presumably use you so much more for delivery if they're also using you for the cash and carry?

I think it's also -- some of it's share of mind, it's eased then because we've got our -- for our existing business, we have it, all their data in one place. So again, when you think about the difficulty in running a business, they're not managing inventory and purchases from multiple places. So whether it's their receivables terms, their inventory and how it feeds into there at all as part of the same system and operating platform. And over time, we would bring Smart in there. So it really is another way, just like a lot of businesses have talked about in other industries about making it easier for customers. This is a way that we're making it easier for customers.

Got it. Just curious how do the cases from cash and carry flow through to your kind of broader case growth as this becomes a bigger and bigger piece of the business?

Well, I think -- so what -- if you think of today where it stands from an overall sales with -- going into COVID, as we talked about when we bought the business, roughly small single-digit portion of our business, but we would expect again that to, if we can double that over the coming years, it becomes more meaningful. And then, of course, you get the additive effect of delivered customers purchasing more. So in the coming years, it's not going to be the majority of our business, but we do expect that it will become more and more meaningful over time. And again, it's another piece that puts together from a customer perspective of how US Foods can really help you fulfill all your needs, and it's part of that share of wallet discussion that we were talking about earlier. So we see a lot of opportunity with that.

And then the other acquisition, Food Group, seems like we're now just over a year in terms of the acquisition. Just wondering whether you can offer us any update in terms of the progress of the integration. And I think bigger picture, any major learnings from this seemingly sizable acquisition that could help down the road on future acquisitions, trying to kind of make some parallels between Food Group and what could be coming down the line.

Sure. So progressing well, as I mentioned before, with the integrations, took a little pause post COVID when it first set in, now have converted the 2 systems, 2 distribution centers are working on the next ones for the first quarter. And that's full steam ahead, similar with -- from a cost of goods and other synergies. Back same thing is progressing on those, on track for the $10 million of synergies this year that we've talked about. That area of the country in the West Northwest. So Food Group has a strong market share that we look forward to building on and some good capabilities we expect to build on. They've had some impacts because there's been tended to be some more tight indoor dining restrictions and such there in recent months, even before the most recent case, but look forward to continuing to build on that, both from introducing some of the US Foods capabilities that we've done into those markets, but also as we've talked a lot about leveraging, which we've begun in several cases of leveraging some of their produce, logistics, meat, center-of-the-plate capabilities across our broader network, again, not large, large scale yet, but taking some of their best practices into US Foods as well. So other than this pandemic getting in the way, I feel good about what this business is and will be for us and still feel good about the value that it creates over time.

Understood. And just one clarification from earlier, I don't want to make sure to paint a fair picture here. You talked about the fourth quarter, which we're in right now, having EBITDA similar to the third quarter. And we have talked about how sales are relatively stable. Your EBITDA has been relatively stable. But to give you credit, I believe, in the third quarter, there was a pretty sizable gain that you guys had that was more onetime in nature. So if you would have pulled that out, is it fair to assume then that your EBITDA actually did grow sequentially through the fourth quarter, even though the sales had been relatively stable? Is that the way to think about it, that in fact, EBITDA did grow sequentially as we move from the third into the fourth quarter? Or are we thinking about that incorrectly in terms of the onetime gain you had in the third quarter from an asset signal?

So I think you're thinking about it in the right way. The thing that I'm not going to be more specific just because of with the uncertainty in the environment out there right now is, again, difficult to know exactly where things land for the fourth quarter. What we just wanted to indicate really, again, just because of the slowing of the volume because the restrictions, that's where it's at. And I think just reiterating that point that different quarters for us have a different case base. So looking at -- and if you look at sales dollars again, over time, that it really is just a growth rate by itself year-over-year, isn't the only thing there. But still coming back to that points, don't have any change in our optimism for the mid- to longer term for our business and for the overall industry.

Understood. Well, with 2 minutes remaining in the fireside chat, I think, I will probably close it up there. I know we have you throughout the day for small group meetings, so looking forward to that. But otherwise, I did want to very much thank US Foods and specifically, Dirk, Melissa and Scott, for joining us this morning. And sorry, we couldn't do it in person, but look forward to hopefully some better times and one-on-one meetings in the future. So thank you guys very much. Thank you, US Foods, and have a great day.

Thank you, you too. Thanks, everyone.