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

Good morning, everyone. Thank you for joining us. My name is Jeff Bernstein, and I'm the restaurant and importantly, foodservice distribution analyst here at Barclays. And along with my partner in crime, Brandt Montour, who covers gaming, lodging and leisure, we wanted to welcome you all to the day 2 of Barclays Ninth Annual Eat, Sleep, Play Conference. On my behalf, we are excited to have 10 restaurant and foodservice distribution companies attending the conference. Just looking back to yesterday, we had Shake Shack, BJ's, First Watch and Texas Roadhouse. Today, we have US Foods, Jack in the Box, Brinker, Kura Sushi, Dutch Bros. and Wingstop. So that's over a 2-day period. We hope you find today a good use of time. Hope to get a chance to chat with many of you in the halls between meetings. But at this point, I'd like to introduce our first presenting company, US Foods. So with us this morning from Rosemont, Illinois. We have Dirk Locascio, who is their CFO, and we have their IR team in the audience. By way of background, for those not familiar, US Foods is a leader in the US foodservice distribution industry. They partner with 250,000 or so restaurants and foodservice operators across 70 broadline locations. They also have 85 Cash & Carry stores. I'm going to kick it off with a handful of questions, but by all means, if there's any interest from the audience in asking the question, I will open it up towards the end and we have mic runners who will come around. But with that said, I wanted to thank US Foods for joining us, and I will join Dirk for some Q&A.

Thanks for having us this morning, Jeff. I'm glad to be here. Happy holiday.

Same to you.

So similar to yesterday, we have started these conversations talking about just the broader consumer backdrop. Your thoughts on the state of the consumer, when you look at macro data, it would seem to imply there's going to be a softening consumer spending environment. I'm just wondering, if you look to your business and ignored all the headlines, how would you size up the health of the consumer at this point in the year and looking at the '24?

Sure. Well, our core customers, they're an agile group, they adapt to many, many situations, and I would expect them to do -- those operators to do that no differently this time around. I think one thing to remember is just the resiliency of our business and our industry and those end customers is if you look at multiple different downturns of past, they tend to be down very low single digits. I mean even in the great recession, I think our volume was down mid-single digit. So a very resilient business, very durable. And I think the other thing that is important in our case is sort of with a U.S.-focused diverse customer base and especially with our focus on gaining share with independent health care and hospitality, we think we're very well positioned, no matter the macro. And we think that we're -- with our -- I'll use as an example, our 10 quarters in a row of independent share gains as well as further share gains in health care and hospitality. That's the thing that we can control, even though we can't control the macros. We're going to adapt. We think we're well positioned for growth no matter the macro and that our end customers will adapt as well.

Understood. And I know in conversations with you and others. Just wondering if you could size up how much you think -- because you brought up the macro, how much do you think your success going into '24 and beyond is really macro-led versus self-help internal initiatives? Because it seems like you more than others have -- and I know you're relatively new CEO, says it pretty regularly that let's focus on what we can control, but we can achieve a lot based on what we can control without or regardless of the macro. Obviously, the macro helps, but how do you think about internally your initiatives and your growth dependent on macro versus internal?

I think as you just alluded to, and as we talk about a lot, so we use control the controllables a lot. We use that internally and externally, and it's not because we want a cute tagline as opposed to really keeping our team focusing on the things that within our four walls we can control. That's been a key driver of the momentum that we've built over these last 2 years and really, I think, shows up in our results and the progress against our long-range plan. And as a result, we've achieved some very good success in these first 2 years, and we have our outlook out there for next year. We feel very good about our ability to achieve the $1.7 billion. I think if there was a sort of a concern in -- out there, it would be if you had a major macro event, but that part we can't control. And the point I come back to is we're going to continue to execute against our plan, and that is really that balance of profitable share gain and margin expansion. And I think as you've seen show up for quarter after quarter, that's where we're going to continue to make progress. We have a long runway to go.

Right. You mentioned the I think the -- I think most people are familiar with the $1.7 billion EBITDA promise for the upcoming 2024. I know in the past, you've kind of broken out where that growth is coming from. Maybe you can just remind us in terms of -- I think you booked it as the categories of market share versus gross margin versus office efficiencies, but how do you prioritize those? And what do you think of the leading candidates to drive that sustained growth going into 2024?

Well, you're right. First of all, our focus and our goal for next year is at or near $1.7 billion, and that would be achieving in the third year of our long-range plan. We feel very good about achieving that. And the actions that we have underway and continuing the momentum in order to achieve that. I'll come back to my comment earlier that, our focus is really a balance of profitable share gain and margin expansion. And that margin expansion comes across both in gross profit improvements and in OpEx improvement. And you've seen really it show up across all 3 pillars, and that's what makes us feel good about the progress. And even though we know we have plenty of opportunity ahead, we've had the 10 quarters in a row of independent share gains. We've had continued share gains with health care and hospitality. So we're going to continue to focus on outgrowing the markets, especially in those target customer types. And then on gross profits, I think you've seen previously, you had a lot of the narrative on any inflation and deflation as that's moderated. You've really seen the benefit of the long-range initiatives that we've talked a lot about show up with our strong gross profit, strong gross profit gains. Key contributors have been around margin managements to align with the environment that we're in. The strategic vendor management cost of goods work, our inbound logistics work. So a number of things there that we've made very good progress and it continued to have work ahead. And then in OpEx, you're really seeing that show up more now just as we're getting past the staffing challenges that we and others were challenged with over the couple of years coming out of COVID. And I'll go back to the third quarter commentary as an example, are within distribution. Our distribution cost per case was below where it was a year ago. And our -- in fact, our delivery productivity was above where it was in 2019, which is encouraging. And on the warehouse, we're not quite there yet, but we are continuing to make progress. And we think that those are 2 areas where our self-help has really come to life. I'll go to delivery for a moment, the routing work that we've talked a lot about. That is some cleanup coming out of COVID, but I think that's an excellent proof point of the cultural change or evolution over these last 4 or 5 years where we've talked a lot about supply chain having that stronger voice at the table. Supply chain and sales working so closely together got us to the point where our cases per mile in the third quarter were the best in the company's history. And what I like about an initiative like that is it really starts with the customer at the center. Because when you're taking miles out of the system, you typically have better on-time experience with customers. And so when we do things like that, we like it when it's got that balanced. And then on the warehouse, we are focusing more on flexible scheduling, where we'll be in half of our markets here by the end of this year and the other half into next year. And that is where it's focused on retention and a better associate experience. And the markets that we've converted, we've seen outsized improvements in our retention there. So we feel very good about the things that we're doing, but we know we have a runway ahead. So balance across each of those areas and give us the confidence in our ability to achieve the $1.7 billion.

Because there are so many initiatives, both top line and margin, is there an incremental initiative in '24 that you're excited about that's kind of we're going to be hearing more about in '24? Or is there some -- one of the components that really has been punching above their weight that you think carries the torch? Like where do you think is the top driver of the -- or something you're most excited about going into '24?

We get that question a lot, and there's not a silver bullet in distribution. It is -- you've heard Dave use this phrase a lot that it's really about improved execution. And so in our case, we think we have a lot of the right elements of strategy and it's really about executing more effectively. And so we've shown that over this year. We think we have plenty of opportunity to continue to get better at that. So I'm excited about that. But I think because just doing the things that we do, doing it more effectively will result in better customer experience, better social experience, more shareholder value creation, just kind of win for all stakeholders. The piece that I think you'll see show up even more next year, you've seen it show this year is just on the distribution productivity as we're past some of the bigger cost increases post-COVID and some of these initiatives that we're doing, get to more full scale, I think you'll see that show up continue through next year. I think the other piece that will show up more and more is some of the indirect spend work that I've talked about that we're starting to see some benefits from. We'll see that continue to ramp up next year and even further in out years. So -- but one thing that I think you should take away is we think that the continued gains for next year and beyond will continue to be a balance across the pillars of share gains, gross profit improvement and operating expense leverage.

And for those that have been tracking you for a little while, that $1.7 billion number was put out there a couple of years ago, and it is now for the year that begins in 30 days or so. When do you set up the next -- or how do you think about the long-term algorithm behind that? Is there a point in time where you would disclose plans for '25, '26, '27, or how do we think about the algorithm behind that?

Yes. Well, that's where you have to join us for our Investor Day next June. So we'll talk more specifically about our '24 guidance and some more color around that in our Q4 earnings call. But then in our Investor Day next year, we will set up more of the algorithm beyond 2024. I think before then, though, the important thing is we believe we have still significant opportunity for earnings growth and again, coming across the balance of each of those areas of share gain and margin expansion. So stay tuned.

Yes. No, I think the last time you had put out an out year was for long-term EBITDA maybe in the 6% to 7% growth range. Is there any -- I mean -- is that a number that needs to get refreshed? Or is that a reasonable -- I mean, because we've had not the best 3 years kind of reach up to this number. Is that a far-fetched idea or has the industry change meaningfully? Or is that not out of the realm of what the business should be able to generate in future years?

Well, I don't want to spoil the Investor Day for next year. But what I'll tell you is we still think there's plenty of growth ahead. And we don't think that where we are in 2024 is by any stretch, anywhere near a ceiling there. There I think -- the back to the point, though, you made about our current long-range plan being put out at the beginning of '22 and now we'll be at the near the end of the second year is I think really what we've tried to do is keep ourselves very, very focused on executing against that strategy, progress against those initiatives, improving the execution against those. And I don't expect that to really change over the course of the next year. As you would expect, we ebb and flow a little bit in -- as things don't always go the way you expect, but we are executing against the plan, and I expect that to be what really drives again to the $1.7 billion next year.

And I feel like -- you mentioned Dave is the new CEO. I mean it's been 11 months now, but you having been the steady state over a much longer period of time. What would you say has been Dave's biggest first year contribution? Obviously, he comes in different team, different style. Like what do you think has been his biggest contribution in the first year that gives you that confidence over the next few?

Well, a few things that really stick out. One is, I think, Dave, he's very thoughtful. I think as you've seen him on the LRP in that, he's not a change for the sake of change. So he took the requisite amount of time upfront to really understand the strategy, understand the business. And you've heard him say even he had the ability to change the plan, and he didn't. He felt like we were focusing on the right things. But where he really has brought a lot of focus is around the execution. I mean that's his background. He's done that well in a lot of other places, and he really has brought the organization together and that increased focus on executing more effectively. It's showing up in supply chain. I mean he talked about our safety results in the third quarter. That's a personal passion of his, and it's really shown up and he inspires others and pushes others in a very good, healthy way. And you're seeing that show up. So that's -- it's not a particular area. But when you do that across the entire baseline, it becomes pretty powerful as we go ahead.

Right. And I think I just figured it out while you were talking LRP as the long range plan.

Sorry, long-range plan.

I guess, I was just making sure. Yes. And lastly, from a bigger picture standpoint before diving into some of the more specifics, I mean you sit in a lot of these investor meetings today in weeks and months past. What do you think is the question you get most that you say, you know what, that's a misunderstanding? Or you just think that The Street doesn't properly reflect or appreciate a certain aspect of your business?

I would say the main one that we continue to focus is people oftentimes don't appreciate how resilient our business is and they will put us in categories with other much more discretionary businesses. And I bring people back to -- in many -- we've looked at multiple inflation-induced recessions in the last 30 or 40 years. They tend to impact overall demand by maybe 1 point or 2. Even if you look at the Great Recession, I mentioned, our volume was down mid-single digits and earnings held up quite well. So it's a resilient business in our case because we're U.S. only, that makes it even more resilient. And we serve a very diverse base of customers. So we try to remind people of that. And then the thing that we believe is a further advantage for us is, back to the comments earlier on self-help and the things that we're doing that despite the macro, despite the backdrop and the resiliency of the overall industry, the things that we're doing to drive our overall business we think position us very well.

And I feel like a lot of people look at the foodservice distribution category is 3 big players, which there are, but then there are thousands of mom-and-pops who compete hard and well. The big 3, I feel like it's often talked about as an M&A roll-up type story, tuck-in acquisition. There's so much market share to be had. I feel like the numbers that get touted are sub 40% between the big 3 in terms of market share. 5, 10 years from now, is there a reason why that can't be materially higher. I feel like 10 years ago, it was, "Oh, it's going to be materially higher and perhaps that maybe we're just overly simplistically looking at it from a sales standpoint and maybe there's a reason why it has to stay at that level. But do you believe there's any reason why we can't be looking at many years from now in that sub-40 sub-50. Is there -- would that not be a reasonable aspiration or a reasonable target?

I think it's very reasonable to assume that we continue to see some continued consolidation in that case. As you pointed out, it still remains very fragmented with the 3 largest only having roughly 40% of the share. And we think that's a lot of opportunity. And in our case -- but the organic growth focus that we have, especially targeted at the independent health care and hospitality, where we think we can make the biggest impact in helping our customers and they also are the ones where they're relatively profitable for us. So it's attractive on both fronts. And then -- as you've heard Dave say, we don't need to do M&A. We don't have any large white space areas, et cetera. We're going to be opportunistic. It's the right transactions and the right place for the right value and really focused on local density. So whether it be Renzi, which we're very happy with in upstate New York, Saladino's that we talked about on our last quarter call, which increases the density in Central California. Those are the kinds of things that fit well as well as others where they increase the local density and potentially avoid capital for us going forward. We're going to be very thoughtful on how we pursue those.

And I feel like when people think about -- you bring up your customer opportunity. I think many people think of the industry as adding new accounts or through M&A. It would seem like the greatest opportunity in our view would be with grow share with existing since your trucks are already stopping there, if you can drop off an extra case with an existing account. That will be a very profitable piece of business to add. So just wondering if you could frame for everybody in terms of what you share, your current penetration, how do you think about your business between chains and independents? What mix of each of those customers you think you have already, whether there's a broad brush number you can share along those lines? And maybe how the margins compare between them because I know oftentimes, we get lost between how wide of a range the margins could be and why you'd focus on one business versus the other.

Sure. So you're right. We agree that increasing penetration or same-store sales for our existing customers is an opportunity. In the more recent quarters, we've seen within independents specifically that the bulk of the growth has come from net new customers and to a lesser extent with existing. But over time, both of those remain a focus for us, and we think it is an opportunity for the reason that you said. And then in health care and hospitality, we've seen still the majority coming from net new, but we've seen a little more coming there from same-store penetration increases. And I'll use one example where we've really focused a lot in the last few years. And we've -- it's been an innate fact in produce. So we've done some things around process, around quality of product, et cetera, to increase. And as a result, produce has been our fastest-growing category and independents for the last few quarters and years. And that's an area where proteins and produce when you do them well, you can gain share in those categories, but they also have some halo effect. So back to the point of -- that's feedback we've heard from customers. And so, therefore, it's an area that we've invested in to make sure we can serve those customers more effectively. And overall, from a profitability and margin perspective with different customer types, you're right. So you do with many independents, you have less share of wallet. There are still some independents where we have a very high share of wallet. It depends compared to, say, health care, hospitality change, you have typically a pretty high share of wallet there. And what we see is a lot of times, if you have a higher share of wallet, you're typically trading off a little lower margin per case for that density increase there. And so that's how we think of the economics overall. And went from an experience with the customer, especially with some of our digital capabilities, the more that they can consolidate their categories with us and into their -- it makes it easier for them to access information to understand their business, et cetera. So we see it kind of as a win-win for both, and that will remain a focus for us.

It does seem like you've made a conscious effort, while chains are still an important component within your restaurant focus. More importantly is the independents, which it seems like you're making a conscious push more towards that. Can you just talk about the -- whether it's the strategy behind that? I know you talked a lot about ramp up in hiring of salespeople specifically to focus on those independents. Actually, I've heard your peers make similar mentions. So obviously, it's no secret that those are great target accounts. But how do you think about your focus on the independents and the labor additions you're making to go after that business?

Sure. As we've talked a lot about, I've talked a lot about independent health care and hospitality are our key focus areas. But as you pointed out, it doesn't mean we're not interested in serving chains. It's about being opportunistic and the right chains for the right fit. And a big reason for our focus on the independent health care and hospitality is we think we can make a bigger impact with those customers and really helping them with their business in addition to them being more profitable for us as well. So again, a win for both. The increases in sales rep hiring for independents is really not a ramp as opposed to we've been hiring and we're going to continue to hire. If I use the last few quarters as an example of 6%-ish independent case growth, as you'd expect, you want to make sure you keep your route sizes manageable. So we're going to add sellers in order to continue to support that growth. So I don't expect that to be a ramp as opposed to continued growth there. And on the chains, as you pointed out, it's not that we're not interested in serving chains. It's a matter of what are the right customers in the right locations and they fit well. And I can think of some chain customers that we have that are really excellent customers and excellent partners, and they fit very well within the routes, their assortment doesn't look all that different than a lot of independents and so it's just being thoughtful. But it is difficult in today's world to really increase the focus on chains just given the profitability and the impacts on capacity and what we think is the right call in order to outsize that focus on share gains with the other 3.

And I feel like there's not a ton of data that we get on the foodservice distribution industry. I know you guys get NPD and other third-party data with a lot more granularity. But you often talk about a growth rate relative to the industry. So I know it's been for your desirable restaurants, it's 1.5x the restaurant industry. How can we assess that from the outside? Or does that 1.5x become greater if the industry is stronger and it becomes a little more challenged if the industry is weaker? Like how does that flex or how do we validate that in any scenario?

Sure. Well, you will sometimes hear us talk about the one source we use for our internal understanding that's far more granular and when we talk externally with the 1.5x that's using Technomic's outlooks for the year. And the reason we do that is because Technomic data is more accessible to investors to the broader public. And this year, in fact, I think the last Technomic update actually called for both independents and overall restaurants to be negative. It's kind of hard to talk about 1.5x [ from us ] really significantly and they're a negative number. But I think what the important part of that is, is we're significantly outgrowing the market. And you see with independents as an example, if let's say it's kind of flat to down using their data, and we're growing at 6%, I think that's a great proof point of our differentiated service model, whether it be the technology, the people service model, the innovative and unique products and how it's really coming to life. And then back to the execution point, as we continue to execute more effectively and consistently across markets, we still think there's further opportunity there.

Yes. I feel like there's a lot of focus on the profitability side of the business. No surprise there. And historically, it was give us 2% to 3% commodity inflation and you'd love it. You could pass that through to the customers, it's not too jolting, too high. It's not deflation. The past couple of years have been a whipsaw of tremendous inflation and then there was a concern that you wouldn't be able to pass that through. It seems like you were able to do that pretty effectively. And then it's now been rapid disinflation, not deflation, but disinflation. And yet the past couple of quarters have actually been maybe modest deflation. So it's been all over the map, but I've been impressed by your conversations about that, that is too much of a concern -- not that it's too much of a concern, but investors spend a lot of time focused on tremendous inflation, deflation. Things like you're proving that it's not as relevant to drive your gross profit in any scenario. So just whether that's actually true and how you can continue to do that and why investors should not be as concerned by the level of inflation or deflation and your ability to manage through it?

It's -- as you point, it's understandable that people were focused as we were seeing significant amounts of inflation and then what would happen as we came out the other side. But I think as you pointed out that, what's important is that we're able to manage through effectively both on the inflation and the disinflation with significant gross profit per case gains in that environment. And that's really, I think, especially the last few quarters, when you see sequentially very little inflation or deflation and yet our gross profit has continued to be very strong. I think that really shows through the progress of the different long-range plan initiatives that we've done and demonstrates why we believe gross profit is so durable and why even from quarter-to-quarter, it can move around a little bit, but over time that we have opportunity to continue to grow that. And I think back to your point of if you have modest inflation historically, yes, we all like that. It is a modest tailwind. It's not going to be the thing that drives your overall business. And so that's why we understand it. We spend time on it. We make sure as a distributor, you have to have good processes to manage your way through it. But we're going to continue to focus on the things within the LRP that are driving our overall outsized gains there.

And having been through the cycle and the volatility, we've had a number of restaurants over the past day or so talk about how 2024 could finally be a year where maybe we return to a level of modest inflation. Is that reasonable based on what you're seeing in what you're talking to with suppliers, that we could be back to that maybe normal year going into '24? Or is there certain items that just make that hard to forecast or hard to believe it's going to be that stable and low single-digit inflationary environment?

Well, I learned about a year ago that my crystal ball isn't all that great on inflation and deflation. And part of what I think impacts that is that so much of the movement around has been driven by proteins, which just by nature can be a little more volatile. I think the encouraging part is that grocery has been pretty stable at very modest levels of inflation. And so as we move into the balance of this year and into next year, I would expect that proteins will be moving around more as opposed to meaningful changes in grocery. But again, we'll wait and see. And I think the important part is with our process and that we're well positioned to manage through, no matter what the environment is.

I feel like a lot of people listening close to Walmart and talk about their outlook because obviously, they're a large retailer, and they talked about potential for deflation in certain commodity items. Is that something that you'd be surprised if you were to see on your end? Or what would potentially lead to a period of prolonged deflation in any of those particular commodity items or baskets?

Really the places where we've seen sort of in the proteins and around the edge in certain commodity categories where you had spikes in the past year or 2, such as eggs or other things. I haven't been surprised as it has moved around the core, more grocery type of items. That's where I would be surprised if we see deflation versus something stagnating around maybe flattish to maybe some modest inflation through there.

Yes. right. In terms of the cash usage and the alternatives for that and in your leverage levels, I know for a while now it was, let's get down to 3 turns. And I think you said you're now at 2.9. I believe the target is 2.5 to 3. So once you get within a target range, what is the next step? Is it -- is there a reason to believe you're more comfortable if that's even lower? Or is that I believe the right range? And if so, how do you now pivot to other forms of cash usage, whether it's M&A or share repurchase or other things?

Yes. So the last couple of years, we've been very focused on, first of all, making sure we're continuing to invest in the business where we have the right returns, so that will be -- continue to be the top focus. I don't expect a meaningful change in the percent of sales that we spend on CapEx as we look ahead, still likely in that 1.3% or so, including the leases that we have. That has been an important part for us, as you pointed out. Now that we're in the range, I wouldn't expect us to do as much debt paydown going forward, potentially some, but that the reduction in leverage being more from earnings growth. So then that really means opportunistic M&A. And as I said earlier, we're not going to do it for the sake of doing it. So if the right transactions come up, that's fine. Otherwise, I would expect this to likely lean in a little more to share repurchases. As we've made a good progress against our first $500 million authorization with roughly half of it is executed through the early part of the fourth quarter. And as we believe we remain undervalued, we think that's an opportunity for a good use of cash.

Right. And the M&A front, I mean if I look back a few years, you had a couple of sizable acquisitions. Feels like you have a national footprint, but don't be surprised by an acquisition. Where we say, we didn't realize it's not necessarily just geography, but maybe it's segments or whatnot. So when you think about that M&A -- and you've done a couple of more recently, much perhaps smaller transactions. So should we just think of it as more tuck-in on different product lines? Or are there certain holes in your business that you'd say would be an obvious area that you would focus on if the M&A opportunity came up?

Sure. I would expect the transactions that we've talked about to be more indicative of the types of transactions that we could be looking at in the nearer term, where it's more geographic footprint focus, that is increases local density. So whether it be the example of Renzi in Upstate New York, and Saladino's in Central California. So it's that local density, and we also look at other opportunities to avoid our own capital usage instead of buying well-run businesses that are out there. And we like that. And those are the types of transactions that as we've done with these, we expect to fund them out of operating cash flow versus increasing leverage.

So we've got about 5 more minutes, but before I continue down this list, I figured I would see if there's anybody in the audience that had any questions. I'm going to fill the last 4 minutes of them myself. All right, when we think about margins because there's only 3 players, I think people have a pretty good visual in terms of where everyone stands from an EBITDA margin standpoint. And I think that's been a pretty big opportunity that people have often looked at US Food and compared you to certain competitors and said, well, why can't you close that gap? And whether or not you want to be targeting a certain competitor, it seems like a tough thing to do because everybody is moving, has different things. But what do you see over the next few years without front-running your Investor Day, but is there a reason to believe that you couldn't expand those margins? I think people talk about you guys in the mid-4% range on an EBITDA standpoint. Is there a reason why that couldn't be 5.5% or 6.5%? Or maybe there's just something structural or you wouldn't want to get that how you want to reinvest? But how do you think about the margins over the next number of years in terms of the opportunity?

Well, to your point, different competitors take different paths. Our focus has been the balance of profitable volume growth and margin expansion in order to optimize and maximize dollars. That's what I would expect us to continue to do. With that said, we have increased margins. We still see plenty of runway ahead to increase margins. So we'll talk more, as you pointed out at the Investor Day of how we think about [ other ] players, but we definitely see there's plenty of runway. If I go back in the 3 or 4 years leading up to COVID, we expanded margins around 100 basis points. These last few years coming out of COVID since 2019, it's been harder with the inflation than on percentage. It doesn't look like it, but on an EBITDA per case, we're meaningfully above where we were in 2019. So the work we're doing is paying dividends and resulting in that increased profitability, which drives, as you pointed out, the increased cash flow that then we can reinvest in these different capital allocation priorities in order to create more shareholder value.

And then just lastly, I feel like -- well, it was a tumultuous period for everybody through COVID. And I know you had a period of time where there was maybe an activist shareholder, who I think is still high single-digit percentage shareholder in the business. You have a new CEO. There's a couple of new Board members. I was that all coming together? Some people just look from the outside and said, "Oh, that sounds like a lot of disruption or you know what, that's actually been fantastic. I mean how do you think about the synergies and how everyone's kind of working together, if so, for a common goal?

Well, as I look back, having been into the whole thing, I don't know that I could have asked for it to play out any better. Meaning from the situation of -- because we put out the revised long-range plan in the beginning of '22 when we were going through that matter, once we had moved to an interim CEO, we had a very focused area for our teams to work through. So where people can get distracted, we weren't distracted. We kept the team very focused on executing against this plan we'd just put out. So therefore, we were able to do that. When Dave stepped in, as I mentioned earlier, he has looked at the business. We've made some adjustments there. He's brought that increased execution focus. He's really kind of -- we haven't lost a step. We've continued to move ahead and accelerate in a number of areas. And at the same time, the Board members that have come on and the relationships there. If you sat in our Board meetings, you wouldn't know who is who. Everybody got to the point where we are one team, we are focused on the same outcome of making US Foods better than it was. So I think we're well positioned, and we look forward to a bright future for US Foods and value creation for our shareholders.

We look forward to hearing more about that, I guess, in June of '24, but for now all things sound good. But we want to thank Dirk and US Food for joining us at our conference today, and I hope you have a good day of meetings.

All right. Thanks for having us.

Right. Yes. Thanks.