US Foods Holding (USFD) Q2 2020 Earnings Call Transcript

US Foods Holding (USFD -0.50%)
Q2 2020 Earnings Call
Aug 04, 2020, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Thank you for standing by, and welcome to the US Foods second-quarter performance review. [Operator instructions] I would now like to hand the conference over to your speaker today, Melissa Napier. Thank you. Please go ahead, ma'am.

Melissa Napier -- Senior Vice President, Investor Relations and Treasury

Thank you, Vincent, and good morning, everyone. Welcome to our second-quarter fiscal 2020 earnings call. Joining me on today's call are Pietro Satriano, our CEO; and Dirk Locascio, our CFO. Pietro and Dirk will provide an update on our results for the second quarter and the first six months of fiscal 2020.

We'll take your questions after our prepared remarks conclude. [Operator instructions] During today's call and unless otherwise stated, we're comparing our second-quarter results to the same period in fiscal year 2019. Our earnings release issued earlier this morning, and today's presentation slides can be accessed on the investor relations page of our website. Also during today's call, references to organic financial results exclude contributions from the food group, which we acquired in September of 2019, and from smart food service, which we acquired in April of 2020.

In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our 2019 Form 10-K and last quarter's 10-Q filed with the SEC for these potential factors, which could cause our actual results to differ materially from those expressed or implied in those statements. And lastly, during today's call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules on our earnings press release as well as in the appendices to the presentation slides posted on our website.

Pietro, I'll now turn the call over to you to get us started.

Pietro Satriano -- Chief Executive Officer

Thanks, Melissa, and good morning, everyone. COVID-19 continues to have a significant impact on our industry and our company. And as I did last time, I want to begin by thanking all our associates for the exemplary fashion in which they have continued to help our customers make it, especially amid this challenging environment. There are three topics we will cover today.

The industry, our position in the industry and second-quarter results. As summarized on Page 2, here are the main takeaways for today. First, a perspective on the industry. We believe that despite the impact of COVID-19, the prospects for our industry remained very good.

Based on what we saw in the markets that we opened earlier, we believe volumes will ultimately recover close to pre-COVID levels, and both gross profit and operating costs are trending in a way that all bodes well for a return to profitability close to pre-COVID levels. Second, a reminder of our advantaged position. Our nationwide scale and differentiated value proposition remain as relevant as ever, providing customers with the innovative products, technology and business tools, as well as the expert support needed to navigate this uncertain environment. And third, a recap of the quarter.

Given the environment, I would characterize our performance for the quarter as solid and promising, with margins and profitability improving sequentially throughout the quarter. In addition, we continue to make good progress in reducing our cost structure to be in line with current volumes, and lastly, our focus on collections result in reversing a significant part of the uncollectible account reserve we took at the end of the first quarter. Let's now take a deeper dive on the industry and move to Slide 4. Here, we show recent volume trends for sales to restaurants for both the industry and for US Foods and why we are optimistic about an eventual recovery.

On the left-hand side, you can see NPD data on transactions at restaurants. This is a good proxy for restaurant sales. As you can see, transactions recovered quickly from their low in March. And by June, transactions were about 15% lower than a year ago, which is where the industry has since leveled off.

However, it is important to note that the industry is still far from fully reopened. According to NPD, only 78% of restaurants are in geographies that permit on-premise dining. And even when permitted to reopen dining rooms, capacity is at a fraction of what it could be. This recovery illustrates that consumers want to get back to eating from restaurants, and this bodes well for restaurant demand post-COVID.

The question does remain despite a robust recovery during the quarter, will the restaurant industry continue its recovery. Here, we turn to our own sales to independent restaurants, a key determinant of the health of the restaurant industry. On the right-hand side, we have grouped our roughly 60 markets and two cohorts organized by date of reopening or restriction lifting. At the end of June, our sales to independent restaurants in markets that opened the earliest, shown by the green line, were only off 10 to 12% versus prior year, and this is packed despite the fact that restaurants still had seating restrictions in many areas.

This compares to markets in later phases, shown in blue and red, whose variance to prior year was greater anywhere from 20 to 30% at the end of June. Again, this shows us that once consumers feel safe, they will return to restaurants, and it's what gives us the confidence that when markets do fully reopen, we will see a recovery in volume close to pre-COVID levels. Lastly, in both industry and our own trends, we have seen QSR chains recover to a greater degree than full service restaurants. The QSR model is more oriented to office consumption that is favored in the current environment.

Having said that, full service restaurants, which includes many independents, have shown a remarkable ability to adapt. A year ago, only 19% of full-service traffic was for off-premise consumption. In June, even though dining rooms were reopening in many parts of the country, 55% of traffic was off-premise. Not only does this highlight the resiliency of restaurants, it also shows that consumers still very much want the many diversity that full-service restaurants offer.

Let's now go to Page 5 to cover our volume across all customer types. Continuing with sales to restaurants, which includes independents and chains on this chart and as shown by the yellow line, you can see that this line very much follows the pattern we saw for the industry data on the prior page but at a slightly lower level. This is because we are slightly underweighted with QSR. Given how well chains and QSR have held up in the current environment, we have put some additional focus on targeting those customer types and we've had good success so far.

In the second and third quarter of this year, we are onboarding over $500 million of new business, several times the amount of similar business that we on-boarded in the same time period last year. This business is at a good contribution margin. Our success demonstrates two things. First, a desire by many multi geography customers to put their trust in large-scale distributors like US Foods.

And secondly, our own ability to quickly pivot to a segment experiencing more favorable tailwinds. Let's now go to healthcare, which is represented by the orange line, and which shows that volume has partially recovered as the pace of elective surgeries have picked up through the middle of the quarter and stay-at-home restrictions began to ease. We believe with absolute certainty that this segment will ultimately recover to pre-COVID levels as healthcare facilities return to a more normal operations in the future. Hospitality, which for us is the smaller between healthcare and hospitality in our portfolio, is showing a modest recovery, thanks to summer travel.

We expect this part of our industry will take longer to recover to pre-COVID levels as consumers potentially travel less and businesses place greater reliance on virtual work. Some of the decreases in healthcare, hospitality and education have been made up by an added emphasis on retail, where a few significant large partnerships have led to meaningful volume. As mentioned in previous calls, while these volumes may not be as margin accretive as some of the lost volume, they do operate at a very low cost to serve and do provide some baseloading for underutilized facilities. This is yet another example of our ability to pivot to those customers with more favorable tailwinds.

In fact, overall volume in July when we exclude hospitality and schools, two segments that were the hardest hit, was down 13% on prior year. Our longer-term prospects for a return to pre-COVID profitability depend not only on volume, which we just discussed, but on gross profit and operating margin. And I'm now on Page 6. Category margins at the customer levels have held fairly constant, which all goes well for margins for volumes as volumes recover over time.

Similarly, on the operating expense side, variable costs, which for us account for about half our operating costs have come down proportionally with volume, except for a slight lag. And as Dirk will discuss, we have adjusted our fixed costs to be more in line with reduced volumes. These trends in gross profit and operating margins, along with the promising signs of the volume recovery we saw in the early markets and our added emphasis on segments with more favorable tailwinds, are what leave us confident that we will ultimately recover close to prior levels of volume and profitability. Moving to Page 7 and the second theme of our presentation today, a reminder of our advantaged position.

As we have said in the past, part of what makes US Foods attractive is our nationwide scale and our differentiated value proposition. We expect these factors to continue to drive future market share gains. I want to spend a minute reminding us of these advantages and how we are evolving our strategy for the current environment. Our nationwide footprint and our scale gave us multiple advantages over the myriad of regional and local competitors.

Our scale gives us significant purchasing power, which results in better gross profit margins, and our footprint and operating model gives us the ability to serve multi-geography customers in a way that is difficult for most competitors to match. And with the uncertainty created by the current environment, we can offer stability and consistency to these multi-geography customers. The fact that we are currently onboarding more chain business at the same time last year is evidence of this. We also continue to evolve our differentiated platform to ensure we continue to be seen as a leader in terms of innovative products, tools and technology and expert resources.

First, let's talk about our exclusive innovative products. Keeping up with trends is seen by operators as no less important in the post-COVID world, with 82% of operators in a recent data essential survey staying as equally or even more important to remain on trend. Our September Scoop, which is about to launch, is already expected in helping operators with today's needs, with a particular focus on takeout and delivery, sanitation and labor-saving products. Second, our tools and technology, especially those that enable restaurants to offer off-premise dining, continue to be in high demand.

In just the last three months, we have doubled the number of customers who utilize the ChowNow platform for takeout and delivery. And third, team-based selling. Our army of specialists and restaurant operations consultants that support our salespeople continue to offer webinars and consultations that are very well received by restaurant operators. Since COVID began, our restaurant operation consultants have conducted roughly 125 webinars with over 20,000 customers and prospects attending virtually.

In sum, our scale gives us an advantaged position, which is further reinforced by our differentiated platform, which continues to evolve to ensure we remain leaders in our industry. I will now turn the call over to Dirk for the third theme of today, our second-quarter results.

Dirk Locascio -- Chief Financial Officer

Thank you, Pietro, and good morning, everyone. Business closures and the actions to promote social distancing due to COVID significantly impact our industry and business in the quarter, as Pietro noted. The highly unusual quarter also met some fairly different results even across the three months, with April seeing large negative impacts as COVID set in and May and June improving significantly. As you heard Pietro also talk about, we, like the industry, experienced a significant improvement in our volume and results as the quarter progressed.

Total case volumes have improved from the trough of down more than 50% overall to down 20 to 25% in more recent weeks. Independent restaurants followed a very similar trajectory. We believe the case volume decline we experienced in late March and April represented the bottom, and we experienced sequential week-to-week improvement in case volume trends throughout the end of the quarter, as you saw in the earlier chart. As case volume trends improved, so did our volume -- our financial results with positive adjusted EBITDA dollars in both May and June.

The rapid decline in case volume at the end of March and early April, especially in restaurants and hospitality, impacted our typical gross margin and operating expense structures, which I will talk more about in more detail on the next slide. We took swift action in the quarter to address both areas of the P&L and believe we are well positioned compared to just a few months ago. I'm happy to report that strong collection efforts from our credit and sales teams resulted in us being able to reverse almost half or $75 million of the reserve for uncollectible accounts that we discussed on our last quarterly call. The additional COVID AR reserve now sits at $95 million, and we're actively working on collecting the remaining pre-COVID balances to further reduce this reserve.

In addition to supporting our existing customers, we're focused on growth with new customers. As you heard Pietro mentioned, we signed an annual run rate of over $500 million in new business, with most of it being national chain restaurant business. And a good portion of this focus in the QSR area, which, as you know, has been performing better in this environment. We said some of this business has already started shipping in the second quarter and other customers are slated to begin shipping in the third quarter.

We will continue to pursue new business that makes sense from a profitability and geographic perspective. Moving to Slide 10. Our net sales were down 29% for the quarter, driven by the lower case volume discussed earlier. Inflation for the quarter was 190 basis points with beef as the largest driver.

Our GAAP gross profit dollar declined 41%, and GAAP gross margin was 14.7% for the second quarter. Our adjusted gross profit dollars declined 37%, and our adjusted gross margin was 16% for the quarter. Gross profit was negatively impacted by several factors that we believe to be temporary. The rapid decline in case volume caused a higher level of inventory write-offs and product donations as well as lower logistics income.

We also experienced a negative impact on gross margin as a result of changes to customer mix, including lower independent restaurants and hospitality and more retail and chain. Our adjusted gross margin was down 190 basis points versus the prior year, with April contributing most significantly to the decrease. As we look at May and June, the decrease was about 100 basis points, with roughly 40 basis points of the decrease coming from the combination of adding the acquisitions into our base and the impact of year-over-year product inflation on sales. The remaining impact was split between inefficiencies in our logistics network from buying in smaller quantities and customer and associated product mix shifts.

As Pietro said, customer margins have remained similar to pre-COVID levels, and we're seeing a rational competitive environment. As case volume recovers, we expect our mix and logistics income will also recover, leading to an overall recovery in gross margin to near pre-COVID levels. On operating expenses, we were able to successfully manage our fixed and variable cost structure to be relatively in line with lower case volumes. In fact, across May and June, adjusted opex as a percent of sales was in line with the prior year, including the roughly 40 basis point benefit from adding the acquisitions into our base and the impact of year-over-year product inflation on sales.

Thus, the Q2 opex basis point increase was due to April. We actively managed variable labor and, in fact, saw warehouse and delivery productivity levels that were meaningfully better than pre-COVID levels. We also took actions during the quarter to address fixed costs through employee furloughs across the business, reductions in discretionary costs and salary reductions. As case volume rebounded, we did add back some fixed costs to match the volume recovery we were seeing.

Our cost structure remains flexible, and we're continuing to actively managing costs, targeting to be largely in line with case volumes. This positions us well to manage through this challenging environment. Moving to Page 11. I was very pleased with our team's ability to navigate a difficult operating environment and generate positive adjusted EBITDA for the quarter.

After a difficult April, where we saw negative adjusted EBITDA dollars, the business produced positive adjusted EBITDA dollars in both May and June, with June being the strongest of the quarter as we would expect to continue to see positive EBITDA in the current environment. We believe our margin structure will return close to pre-COVID levels in time, supporting a further recovery in our mid- to long-term earnings power. Second-quarter adjusted EBITDA was $88 million, and year-to-date adjusted EBITDA was $265 million. Second-quarter adjusted diluted earnings per share was a loss of $0.25, and year-to-date was a loss of $010.

As a result of the preferred equity investment that we discussed earlier in the second quarter, our earnings per share calculations are now based on net income or loss available to common shareholders. This new line in the P&L factors in the $5 million preferred dividend for the second quarter. In the second quarter, GAAP net income available to common shareholders was a loss of $97 million for the quarter and a loss of $229 million on a year-to-date basis. Adjusted net income available to common shareholders was a loss of $54 million for the quarter and a loss of $22 million on a year-to-date basis.

I'll note since we're in a net loss for the quarter and year-to-date, the total number of diluted shares outstanding does not reflect the recent preferred equity investment. At such time we return to the net income position, those additional shares will be included in the diluted share count and factor into our adjusted diluted EPS calculation. I'm now on Page 12. Food group and smart food service businesses both performed in line with our expectations given the current operating environment.

Our food group business saw a trend that were very similar to organic business in the quarter. While a number of markets in the Northwest have been slower to reopen, food group markets also have a higher mix of national chain restaurants in the base, and volumes with that chain business have continued to perform well. We've also resumed integration activities, beginning with the facility near Seattle that was first on our original integration time line. We will complete this first warehouse conversion later in August and still expect a $65 million in run rate synergies that we previously communicated.

However, the ramp-up may be longer as a result of reduced volume. The smart food service business help up very well in the quarter with same-store sales down only single digits from the prior year. This is due to two reasons. First and primarily, the cash and carry business model typically performs well in economic downturns as customers turn to the value offering it provides.

And secondly, the cash and carry channel has allowed us to capture some of the spend that is temporarily shifted to food at home. In addition, you may recall, this channel is attractive across economic environments due to its higher profit margins and because of the incremental business we can drive from our existing delivered customers, which allows us to profitably consolidate our share of wallet with those customers. And lastly, all of the smart food service stores remained open through the quarter, and the EBITDA help up extremely well despite the challenging external environment. With respect to our plans for this business, we still expect to double the store counts, and we still anticipate limited integration activities.

In total, the acquisitions contributed approximately 17% of our case volume and approximately 23% of our adjusted EBITDA for the second quarter due primarily to smart food services EBITDA being closer to prior year. Turning to Page 13, I would like to spend a few minutes discussing our current liquidity position. Recall that during the second quarter, we completed a series of financing activities to fund the smart food service acquisition and further strengthen our overall liquidity. As a result of these actions, we're in a very strong cash and total liquidity position.

At the end of the quarter, we had $1.7 billion of cash on hand and total liquidity of approximately $3 billion. During the second quarter, the business was operating cash flow positive primarily but not solely from working capital benefits. In the second half of the year, we do expect some of this benefit to reverse as vendor payments return to a more normal schedule and we rebuild inventory levels to support our customers. Factoring out the working capital reversal I just noted, I would expect our operating cash flow to be positive in the second half of the year.

Our cash and liquidity positions give us an advantage over the smaller distributors in the industry. We are better able to support customer needs and can invest to support faster growth. We are focused on winning new business through organic market share gains and helping our existing customers navigate this difficult operating environments. Operator, with that, we can open it up for questions.

Questions & Answers:

Operator

[Operator instructions] First question comes from the line of Chris Mandeville from Jefferies. Your line is now open. Please ask your question.

Chris Mandeville -- Jefferies -- Analyst

Hey, good morning. Nice quarter. Pietro, can I ask, maybe is there a way whereby you could characterize your ability to take share with independents right now? And then separately, as it relates to that $500 million in new chain business that you're onboarding over the next quarter or two, can you comment on just the level of profitability that you're seeing with those contracts to maybe what you would have otherwise observed six to nine months ago?

Pietro Satriano -- Chief Executive Officer

Sure. So, let's start with the -- your question on independents. Look, I think going back to my second theme around our differentiated value proposition, what we're seeing is that it's as relevant as ever. As long as you meet the, what I would call the, table stakes that customers require in terms of service, the work we have done in terms of evolving our support resources for independent restaurants in terms of helping them navigate these challenging times, I've mentioned 100 webinars have done -- we've done, I think those, for sure over the longer term, will serve us well in terms of in kind of goodwill and equity to gain share.

In the short term, it's a little bit harder to quantify and to assess. Customer mix becomes a little bit more of a driver in the short term. So, as an example, pizza restaurants have done relatively well in the current environment. We're not as heavily weighted in those -- in that segment across the country, and so I would say that the things we have done in the past and we continue to do are what's going to drive market share gains over the future.

In terms of book of business, we've been able to bring on that Dirk and I referred to. The margins are good. Look, I think the -- here's about what I would say, the reason those customers are switching isn't because we are awarding the business at very low margin. That's because, again, our scale and our operating model give these customers the confidence that we will be around for the long term.

And as I've said before, prices tend to find their equilibrium in the large kind of big business. We have seen over the last few years, and I think I've mentioned this, margins slowly creep up in that larger multi-geography business.

Chris Mandeville -- Jefferies -- Analyst

OK. Thank you very much.

Operator

Next question comes from the line of John Ivankoe from JP Morgan. Your line is now open. Please ask your question.

John Ivankoe -- J.P. Morgan -- Analyst

Hi. Thank you. First, a question on competitive market and then a question on fixed costs. At least on the news, there has been some discussion of a Maine's bankruptcy.

And on the other hand, I think it was Cheney Brothers that received some private equity capital. So, that's what, I guess, I've read about. I mean could you make some comments even if you don't want to use names just kind of the capitalization of the overall foodservice distributor industry and their ability to kind of recover their own working capital needs as the customers recover? I mean I know you made a comment that you're seeing rational new competition. But are you beginning to see some signs that you actually may have some competitors go away or perhaps consolidate? This is the first question.

And secondly, there were some comments made around fixed cost reductions. I think those were specific to the second quarter around furloughs, and I guess, which had also been in the first quarter as well. How do you identify at any cost on a fixed cost side that could actually be permanent that won't necessarily come back as volumes come back?

Pietro Satriano -- Chief Executive Officer

OK. I'll take the first and let Dirk talk to the second. So, there has been -- there's about half a dozen names, John, in terms of competitors, regional and smaller, that are experiencing some degree of stress. It's hard to know exactly how stressed these competitors are, and most at this point seem to be hanging on.

We don't -- they're all private companies so it's hard to know exactly the degree to know how they're well capitalized. We gave a couple of examples, one that had infusion and one that went through bankruptcy proceedings. Our intent is where we know that those opportunities exist is to really position ourselves favorably with the customers that they serve. That's the most accretive way to gain share, which is to take advantage of those situations.

And the more uncertainty, the more of a roller coaster there is in the short term. Like I said, the prospects for the industry longer term are good, but the more uncertainty there is in the short term, then I think the more that will present other opportunities of that nature. Dirk?

Dirk Locascio -- Chief Financial Officer

Sure. John, so we've -- as you noted, a lot of the cost reductions and cost actions that we've taken to date have been more temporary, and a lot of that is also as we find our way through and see what the recovery looks like and the industry looks like as we work through there. What I would say is, to date, though, we have used some combination of permanent and temporary reductions and continue to use both of these as we ensure our cost structure right size for our business and just we'll continue to evaluate. But like I said, the bulk today have been temporary.

But as I said earlier, aligning our costs with our volumes going forward is important, and we'll continue to be very flexible in order to do that. Thank you.

Operator

Next question comes from the line of Edward Kelly from Wells Fargo. Your line is now open. Please ask your question.

Edward Kelly -- Wells Fargo Securities -- Analyst

Yeah. Hi. Good morning, everybody. I wanted to ask you, Pietro, about the independent customers.

First, it looks like in your slides, I guess, that the trends that your independent customers have maybe stepped back a bit recently with reopening issues. Total case growth, I don't think has so -- is that just new business offsetting that? And then what I really wanted to ask you is, can you tell us what percentage of your pre-COVID customer base is currently ordering product? Just to kind of get a sense as to how many of these guys are still open for business to give us a sense as to how much damage there has been done to date. And then, how critical do you think PPP is, another round here, by the way, to the mix of your customer base remaining stable and good on the other side of all this?

Pietro Satriano -- Chief Executive Officer

OK. I'll try to remember all your questions. Ed, if I miss one, just remind me. So, you're right.

If you look at the right-hand side of Page 4 and even the left-hand side, which is a good proxy for the industry, the growth has slowed and, in some cases, may have stepped back a little bit. And that's really a function of, I think, as cases have spiked in the numbers of parts of the country, governments have gone backwards in terms of the phase of reopening or consumers are treading a little bit more cautiously or staying a little bit on the sidelines. I think the broader point I was trying to make with respect to the restaurant sector is that consumers clearly have -- I think if we had talked a few months ago, we wondered whether consumers were, in fact, going to go back to eat out or to buy from restaurants and bring the food home, and I think we've clearly seen that. There isn't a secular movement to people now cooking at home a lot more than they did before, and I think that's what we think is promising.

So, the consumer will drive the recovery, which then gets to, I think, another part of your question which is the health of the independents. So, our customer count is, I think, roughly in line with what was pre-COVID. So, we've had some new business because there's always some natural level of churn in the industry. And obviously, a lot of the restaurants, even with the off-premise sales, are doing or operating at lower levels of sales than prior year, which is why we're not quite back to prior-year levels.

The count is in line when you look at seasonally adjusted to last year. There are a number of restaurants who are closed. It's actually hard to tell whether they're permanently closed or temporarily close, some of them don't know. When I talk to our field leaders and ask them, they believe that the number of permanent closures today, at this point, is still in the low single digits.

And so, that's the consumer. That's the -- a little bit on the independents. And the third part of your question, Ed, remind me.

Edward Kelly -- Wells Fargo Securities -- Analyst

It was on PPP and another round and that is to your customers.

Pietro Satriano -- Chief Executive Officer

Yeah. Yeah. So, clearly, so PPP, the first time around was a little bit and perfectly designed, but still a benefit to the industry. And we've tried to get a sense of what percent of our customers have benefited from PPP and the new flexible version.

It's pretty high. And obviously, it's a benefit. And there's an added benefit that it provides stimulus to the economy, which drives spending. So, I think to the degree that there is some form of stimulus, whether directly aimed at small business or restaurants or to the consumer, I think that will help us get through the next few months as we await for either to get better control of the virus as a country or a vaccine, which is, I think, when things really return back to pre-COVID levels.

Edward Kelly -- Wells Fargo Securities -- Analyst

OK. Can I just squeeze one more in for Dirk because I just struggle a little bit with this one? But from a cost perspective, you guys did an amazing job of getting costs down. Now you said something on the call around, I think costs sort of as a percentage of sales and maybe May and June were flattish. Have I heard that correctly? Which is kind of surprising, I guess, for your business, given the variable cost component.

So, maybe just help us understand that a little bit more. And then, Dirk, how do we think about SG&A, maybe, I guess, year-over-year growth is the best way to do it in Q3 versus the 20% decline we saw in Q2?

Dirk Locascio -- Chief Financial Officer

Sure, Ed. I think that -- so as I said, you did hear correct, May and June was being in line with the prior year. And I think that for us, it was important in all areas of the business, we went after smartly aligning costs with volume, not making irrational decisions. And as I commented that in May and June, we actually saw improved productivity across the supply chain as the team, whether it's less people on roads, kind of more effective ways of us operating within the distribution centers, etc.

So, for us, that's not going to stop. We're going to continue to focus on that as we move ahead. I think the -- and then SG&A, so we're going to continue similar actions. I think that when we think ahead, you may not be quite at the level of positive year-over-year that you saw in the second quarter, but we do expect it to be, again, meaningfully lower and trying to align our SG&A much more to, again, the lower volumes.

And trying to also be -- continue to be flexible as we see volumes up and down with what our structure needs to be in order to support that. So, this is a big focus for us really across all the areas of variable and fixed.

Edward Kelly -- Wells Fargo Securities -- Analyst

Great. Thank you, and a nice job in a tough environment, guys.

Pietro Satriano -- Chief Executive Officer

Thank you, Ed.

Operator

Next question comes from the line of Kelly Bania from BMO Capital. Your line is now open. Please ask your question.

Kelly Bania -- BMO Capital Markets -- Analyst

Hi. Good morning. Thanks for taking our questions. I wanted to see if you can just help us out, understanding what kind of EBITDA margin -- you mentioned EBITDA was -- margin was positive in June.

Just maybe help us understand kind of what level that is at. And I guess, if sales kind of remain at this level for a while, what's the realistic EBITDA margin into Q3 and Q4 at the current run rate?

Dirk Locascio -- Chief Financial Officer

Sure. Kelly, this is Dirk. When we think, as I said, going from negative EBITDA to improvement in May and then further in June, very pleased with the performance on that. And at this point, I'm going to stay away from a number or a margin, and it's not to be cute or evasive, but I think we all know that the environment continues to change almost day by day.

What I will say though is if the environment stays at current levels, we would expect meaningful EBITDA in the back half of the year. So, the thing I just want to be clear is, meaning not just scraping by with positive, and we're going to continue to focus on the levers and the actions that we do around servicing our customers and then around really optimizing our gross margin, our opex as we go to the back half of the year.

Kelly Bania -- BMO Capital Markets -- Analyst

Perfect. And in terms of, I think, market share, I think people are trying to just get a sense of how market share is within your various customer segments. So, just curious if you could talk a little bit about drop size by customer and just to kind of really think about how much is happening at the unit level versus kind of the aggregate level. I don't know if there's any color you can add there.

Pietro Satriano -- Chief Executive Officer

Kelly, it's Pietro. I'm not sure there's a lot of color we can add, and you can probably draw some of your own conclusions, right? So sales are a little bit behind where they were last year. It varies by geography, no surprise. Customer accounts are in line with where we were last year.

We continue to push for new business because, obviously, if customers are operating at a lower level of business, which they are today, then obviously, bringing on new customers helps make up for that. And as Dirk said, we've really worked well in terms of our distribution costs to ensure that those have come down in line. So, whether optimizing the routing or the delivery for current -- today's current reality, it's also helping maintain profitability where it is.

Kelly Bania -- BMO Capital Markets -- Analyst

OK. Thank you very much.

Operator

Next question comes from the line of John Heinbockel from Guggenheim Partners. Your line is now open. Please ask your question.

John Heinbockel -- Guggenheim Partners -- Analyst

So Pietro, two things. On the cost control front, have you done anything that might be more strategic either in the warehouses or in the routing approach, right? That's not just tweaking, but you took this opportunity to do something more substantial that then lives on after a recovery, right, that makes the whole network a lot more productive and low cost than it had been before. Are there any examples of that?

Pietro Satriano -- Chief Executive Officer

Yeah. So, I would say there is an effort under way in the company that we're calling -- we imagine, which is really ensuring that both, A, our value proposition to customers continues to evolve, to be relevant. And B, where there are opportunities to become more operationally effective and efficient, we're looking at those. I'd say it's -- so while there have been some benefits, as Dirk described the environment, some of the benefits have come from reengineering, how we do some of the work.

And we have a whole pipeline of, I want to call my ideas, of projects under way to do that. Some are in line with the supply chain road map we've shared in the past, some are new. And I think, honestly, John, it would be premature to discuss these on a public forum at this point.

John Heinbockel -- Guggenheim Partners -- Analyst

Well, then as a follow-up to that. When you think about longer term and recovery to pre-COVID levels, sales versus profitability, you might naturally say sales have to get to a pre-COVID level before profit margins do. How do you think about those two versus each other? And are we thinking about a two-year process or much longer than that in terms of duration when you kind of put your prognosticating hat on?

Pietro Satriano -- Chief Executive Officer

So I think in terms of prognosis, on the sales side, it's very hard to say. I mean we continue to be surprised by the increases and decreases in the number of cases, and that's obviously impacting what consumers do. I think in terms of the cost side of things, look, we've learned -- I will say, we've learned a lot about how to operate in this environment. I think we can emerge from this being -- so there's the some obvious cost benefits from the lower volume that we moved on quickly.

So, you're not recruiting as much, you don't need as many recruiters. We talked earlier about some of the permanent reductions we made in the sales force as a result of potentially being fewer customers to be -- for us to serve. We've looked at a more efficient model to serving chain customers that we adopted from our food group, something they were further ahead on us, and we've now rolled that out to the company. So, we -- the last few months have really been about the, what I would call, the more obvious opportunities, and we will continue to look at other opportunities to operate in a leaner and more agile fashion as we've learned to do so in this environment.

John Heinbockel -- Guggenheim Partners -- Analyst

OK. Thank you.

Operator

Next question comes from the line of Jeffrey Bernstein from Barclays. Your line is now open. Please ask your question.

Jeffrey Bernstein -- Barclays -- Analyst

Great. Thank you very much. Two questions. Just one, as we think about the new business you talked about, presumably, it's I would assume now taking share from smaller distributors.

I know you mentioned that you didn't necessarily win the business on price, but you want it more on scale and operating model. So, I just wanted to clarify, first and foremost, that I guess you're talking about, I guess, taking share from smaller independent distributors who presumably would otherwise want to retain this business. And just to clarify, it does sound like it's, again, more quick service chain business and therefore, why you didn't reduce the margin meaningfully. This is at a lower margin than presumably your more desired independent business, and then I had a follow-up.

Pietro Satriano -- Chief Executive Officer

Yeah, that's correct. So, in terms of the first part of your question the business that we've acquired has been from smaller, more regional, sometimes local, but I would clarify some more as regional distributors. And yes, the margins are for that chain business, whether it's QSR or chain, tend to be a little lower than the independent business. We're still very focused on the independent business.

It's one where we have an advantage, where we can make a difference, and we can get back to growth over time. But all we're doing is taking advantage and being opportunistic of opportunities that may not have been around a year ago and putting a little bit of additional focus and emphasis and resources on that business, which, again, from a rate perspective, it may not look as attractive, but we're adding EBITDA dollar dollars to bottom line, and it's attractive enough on the rate perspective that it can withstand the test of time.

Jeffrey Bernstein -- Barclays -- Analyst

Got you. And then, I had a question that was common earlier about the EBITDA margins going forward, and it was very encouraging to hear you talk about meaningful EBITDA in the second half, that it wasn't just necessarily just skating by. So, just wondering, obviously, with the uncertainty, large, we don't expect formal guidance, but can you share anything about maybe what the -- on a factual basis, what the margin percentage was in June and July. Since it sounds like we're talking about the sales remained at those levels, you'd have meaningful EBITDA on in the back half.

Any color on June and July?

Dirk Locascio -- Chief Financial Officer

Yeah. This is Dirk. I'll take that. I think, unfortunately, not a lot more to share.

And again, I think it's -- as I said to I think it was Kelly that asked, it's less about being evasive and more just with the environment, continuing to change. I think as we get through the third quarter and see if the environment stays stable or improving, then that will allow us to have a little more insight as to the go forward. But at this point, just continue to come back with the focus and actions we have around both the gross profit and opex in order to grow and manage the environment we're in, in order to really optimize the EBITDA the best we can in the environment we're in.

Jeffrey Bernstein -- Barclays -- Analyst

Got you. And just my last question, there was mentioned on last quarterly calls from all the big distributors talking about maybe some grocery store distribution opportunities. Those are relationships you were starting to build during the depth of the crisis, and maybe that could lead to more sustained long-term new accounts servicing food retail. Just wondering how that's progressed, if at all, and if it is kind of a big part of the future, kind of where those potential sales and margins lie?

Pietro Satriano -- Chief Executive Officer

Great. So, this is Pietro again. So, the green line on Page 5, which shows the big jump in sales from retail, that comes from a very small number of large grocery retailers, and that's more traditional grocery. And as I said, we were opportunistic about that and provide some good baseline volume for our facilities.

It's margin-accretive, but it is at the lower end. The opportunity we talked in more detail, and pre-COVID was around the home meal replacement part of the grocery store that looks more like a restaurant, right? The deli, the sit-down part of some grocery stores. That's where we see a big opportunity. That's in our sweet spot.

Particular opportunity, we believe, is more with smaller, regional players who don't have the scale to do what some of the larger players do. It's a little bit like restaurants, right? The opportunity is more with the smaller independent in terms of making a difference and driving accretive margin. So, it's no different on the grocery side. That will take some time.

It's a series of business development efforts. We have a couple of markets where we've been extremely well, serving regional grocers in the home meal replacement part of the store, and what we're doing is scaling that playbook across other markets to make some inroads into that business.

Jeffrey Bernstein -- Barclays -- Analyst

Understood. Thank you very much.

Operator

Next question comes from the line of Karru Martinson from Jefferies. Your line is now open. Please ask your question.

Karru Martinson -- Jefferies -- Analyst

Good morning. Just when we look at the strength in independents and the spike in demand, how much of that is being driven by the expansion of outdoor dining? And how should we think about that as we go into the fall and the winter?

Pietro Satriano -- Chief Executive Officer

Sure. So, some of it, for sure, is driven by off-premise, whether it's outdoor dining or takeout or delivery. All of those are contributing. And it has made up some, but not all of the restrictions on indoor dining.

In terms of the impact of weather, obviously, does not impact takeout or delivery. But again, if you look at different parts of the country, July in Florida and Arizona, there's not a lot of outdoor dining going on, right? So some parts, it's a bit of a portfolio across the country. But look, I think the other thing I would say is independent restaurants have proved just very creative and very resilient in being able to take advantage of new opportunities. And so, I think as we move forward into the winter, barring and nationwide lockdown, which, again, I don't expect, but no one really knows for sure.

I will expect for some of that -- a lot of that volume to continue as we go forward.

Karru Martinson -- Jefferies -- Analyst

And then just lastly, you saw a larger regional filed Chapter 11 and going into restructuring. What is the health of those smaller independents out there? Are there acquisition opportunities, or do you feel that this is just a case of putting the sales resources behind it to take that share from them?

Pietro Satriano -- Chief Executive Officer

I think it's more of the latter of taking advantage of those opportunities. I think as I said earlier as well, some of the smaller regionals or independents, but some are decent size. Some over time have carried too much leverage, and they're the ones that are stressed. Others have run more conservative.

So, really, it's really about taking the advantage of the opportunities with -- in terms of serving those customers where uncertainty exists.

Karru Martinson -- Jefferies -- Analyst

Thank you very much. I appreciate it.

Operator

Next question comes from the line of Peter Saleh from BTIG. Your line is now open. Please ask your question.

Peter Saleh -- BTIG -- Analyst

Great. Thanks for taking the question. I just wanted to ask about simplification optimization, if you guys are seeing something like that. We're seeing a lot of that among the larger chains, where they're cutting much of their menu and focus in, one, center or the plate.

Are you seeing something similar to that at the independent restaurants? And how does that impact your product mix at least in the near term?

Pietro Satriano -- Chief Executive Officer

Yeah, so we're seeing it. I think the larger chains did move more quickly, but I think some of the independents are following suit now based on what I hear talking to the field. I think in terms of us, look, it's a good -- at a time of uncertainty, where you're not sure when you'll be forced to go back in terms of restrictions that will forward -- smart way forward the restaurants to run their business, and it allows us to be more responsive, right? All distributors carry thousands of SKUs in their buildings, and that tail is harder to serve. So, to the degree that restaurants simplify their menus, it's good for them in terms of reducing waste, and it's good for us in terms of reducing some supply chain waste in the system.

Peter Saleh -- BTIG -- Analyst

Great. And then, I think you guys alluded to some maybe regional disparities or just some weaknesses as some of the case volumes picked up. Can you guys give us a little bit more color on maybe what you're seeing more recently in some of the larger states as case volumes kind of tick up?

Pietro Satriano -- Chief Executive Officer

Yeah. So, I think what I was referring to is the chart on Page 4 where some states opened earlier. We saw more of a recovery, and I think it's as simple as a fact as those states have one or two weeks longer to recover. If you look at those three lines, on Page 4, they all have a fairly similar pattern.

It's just some states started earlier and got to closer at prior-year levels, and that's across the country. When I look at the market for each of those cohorts, they happen across the country. I think by way of a general theme, some of the larger urban markets have taken longer to reopen, right, New York, Chicago, L.A., some of those big markets have taken longer. And we're seeing that in our numbers, and those are big markets for us.

I think I'd mentioned on the last call, and I think we're still seeing this -- some of the more rural or suburban markets have recovered more quickly. But I think back to my first point, it really is eventually just a matter of time before all markets kind of return to close to pre-COVID levels.

Peter Saleh -- BTIG -- Analyst

Thank you very much.

Operator

Next question comes from the line of Rebecca Scheuneman from Morningstar. Your line is now open. Please ask your question.

Rebecca Scheuneman -- Morningstar -- Analyst

Good morning. Thank you. So, you talked about how with some of these small independent distributors being stressed that you've been able to win about $500 million in new business -- in new chain business there. Is there also opportunities with these accounts to win some independent business, or are these stressed distributors primarily focused on chains?

Pietro Satriano -- Chief Executive Officer

Absolutely. So, they vary. Some distributors -- so they typically have a broad range of business. The relative size may vary.

But absolutely, we -- what we've done is we've equipped through our CRM platform that fits directly with our sales force on the Street. We directed them where we think the opportunities are. It's just a little harder to say at this point the kind of success we've had because it's one distributor who serves a portion of the market, and customer might come on more slowly, whereas the larger customers tend to come on in a lumpier fashion. So, I think it's just too early to say, but absolutely, the opportunities are across independent and larger chains.

Rebecca Scheuneman -- Morningstar -- Analyst

OK. Great. And also, so as we look at permanent restaurant closures, we're kind of thinking that those will be concentrated more in the independent area. Do you think that there could possibly be kind of a permanent industry shift toward more chain business, or how do you see that playing out?

Pietro Satriano -- Chief Executive Officer

Look, you're seeing that a little bit today, right? And I think as I mentioned in my comments, the segments or customer types that are more equipped for off-premise dining, like fast casual and QSR, have recovered more quickly because that's where consumers felt safer in this environment. But eventually post vaccine, it's hard to say. I don't know that there's any reason why there's a permanent shift to more of a larger chain concept. Some of -- a lot of the -- you've seen the news, right? A lot of these larger chains have closed, and they're not immune from the pressures of this environment.

And like I said, the independents are a fairly resilient bunch, they may close, but they may reopen in a different location under a different name. I think post vaccine, I think I'd be hesitant to say that there's a permanent shift.

Rebecca Scheuneman -- Morningstar -- Analyst

OK. Great. My last question, if I could, it may be a little bit early, but I was wondering if you have a sense as to -- if you look at your education segment, like what percentage of those clients have students returning in the fall?

Pietro Satriano -- Chief Executive Officer

Yeah. So, the education segment has really been a tricky one. The good news for us is it's a minority -- sorry, the education business falls and the all other, when we've talked about all other, and it's the smallest portion of the all others. So, the impact is small for us.

And then, you have to distinguish between college and university and K-12. College and university, I believe about half of colleges are bringing students back and half or not. With K-12, I think, as all parents on this call know, a lot of those decisions are being made literally as we speak. It's too early to call.

What we are doing, again, impact on volume and margin is less material for us. The thing we are very focused on is inventory and making sure that we're in close contact with those customers to make sure that we have an ability to serve them without taking on undue inventory risk.

Rebecca Scheuneman -- Morningstar -- Analyst

OK. Great. Thank you.

Operator

Next question comes from the line of Bryan Hunt from Wells Fargo. Your line is now open. Please ask your question.

Bryan Hunt -- Wells Fargo Securities -- Analyst

Great. Just two questions. One, when I look at cash flow, is there any way you can give us an idea of when you go to make collections, the dollar amount or the number of accounts that just aren't responding as well as how fast do you think AP will normalize on a days basis?

Dirk Locascio -- Chief Financial Officer

Sure. So, it's twofold. One. I think when you look at the -- if we take the second one, to the normalization, we would expect to largely happen over the third quarter.

I think it's -- but that's shorter in term. And then, when you think of the -- can you repeat your first part again, please?

Bryan Hunt -- Wells Fargo Securities -- Analyst

Yeah. When you look at the first part, your collection of bad debt, you all made a big, obviously, reserve in Q1. You reverse part of that in Q2 based on the success of recouping some of that reserves and receivables from customers. When you go to make collections on receivables of that remaining roughly $100 million amount, and I guess $95 million to be exact, how many of that $95 million just aren't responding or have permanently closed?

Dirk Locascio -- Chief Financial Officer

Thank you. It's actually a relatively small number. So, our credit team and our sales team have worked just incredibly closely together for some really good success. And even some of those customers that had -- whether they closed temporarily or operating a limited basis, that they're having a very good communication and openness.

So, it's actually pretty small. So, the bulk of even what's left there has continued to engage with us. And each week, we continue to see that pre-COVID balance go down. And also, those teams are working closely with customers.

It's even for the post-COVID balances to make sure we're managing credit well as we go forward.

Bryan Hunt -- Wells Fargo Securities -- Analyst

And then my last question. You talked about excluding hospitality in schools, and granted July is not a big school month, but your case volume was down about 13% in the month of July. How about when you include hospitality in schools, what's the kind of year-over-year change in tempo? And that's it for me. Best of luck

Pietro Satriano -- Chief Executive Officer

Well, I think if you look kind of the June timing that you would see in there, we've been running at that down 20 to 25% range overall has been pretty consistent in more recent weeks as we ended up the quarter.

Bryan Hunt -- Wells Fargo Securities -- Analyst

Thank you very much. And again, pass it along, stay healthy.

Operator

Next question comes from the line of Judah Frommer from Credit Suisse. Your line is now open. Please ask your question.

Judah Frommer -- Credit Suisse -- Analyst

Yeah. Hi, guys. Thanks for squeezing me in. Just wanted to follow-up quickly on kind of the EBITDA recovery comments.

We do see in the slide that you're talking about return to pre-COVID levels. I did think I heard a couple of times in the comments that we get close to pre-COVID levels. Is that just kind of a timing mismatch until the HR you mentioned, the vaccine. Maybe we're near a COVID level.

But then after that, we're at pre-COVID levels. And then, kind of beyond that, as things really do normalize, maybe again post vaccine. Can you remind us of drivers of EBITDA margin improvement? Obviously, the smart food service business is a higher-margin business. You have synergies in the food group acquisition.

So, anything to think of just longer term to show us that we shouldn't be capping you at your pre-COVID margins?

Pietro Satriano -- Chief Executive Officer

Sure. Maybe I'll start, Dirk. So, generally, what we've tried to say is longer term, the prospects for the industry, which were an important part for US Foods, a positive, and I've characterized that as close to pre-COVID. Whether it's exactly pre-COVID or how close to pre-COVID, it's really hard to say at this point.

But when you look at the three drivers: the volume and the recovery we've seen in the parts of the country that have been the earliest and our success in some segments with favorable tailwinds, our ability to maintain margins when you normalize for these onetime hits in terms of spoilers and donations and our ability to manage our costs, again, all of that together, we think gets us pretty close to pre COVID exactly how close. It's really hard to say at this point. There's too much that's unknown. But really, what we're trying to convey is our confidence that there's a good path to getting to a profit levels close to pre COVID over the eventual long term.

And a lot of that is probably determined by a vaccine.

Dirk Locascio -- Chief Financial Officer

OK. And then, the only thing I would add on top of that to bet your point on the drivers is as we think about coming from all the areas of the P&L like we've talked about in the past, really over time, I think you still do have a lot of taste preference for the variability in that independents offer and to the point of whether the timing of vaccine and when that recovers, but still believe that a lot of those trends will revert. Also really drive -- continuing to drive gross profit gains through the things like private brands, continued sourcing gains, things like that that we have been, and then on the opex side to drive efficiencies and better ways of operating across both SG&A and our supply chain. So, we don't think at all that it's necessarily where we were pre-COVID in the cap.

It's a matter of whatever the external environment takes in order to get back to there, what we're going to continue to do is operate the business, continue to grow EBITDA dollars and EBITDA margin, just like we have historically. And then, finally, the point that you made that adds on to both the dollars and the EBITDA margin, the most recent acquisition of smart food service, where that adds dollars and then expansion opportunity we have there, where we expect that we can more than double the stores and the fact that it's more profitable than in the broadline businesses as we continue to grow that. And then, the added benefit we get from further market share from those customers as we grow it. So, all in, still significant opportunity on the recovery to grow dollars and margin.

Judah Frommer -- Credit Suisse -- Analyst

OK. Thanks and good luck.

Operator

Next question comes from the line of William Reuter from Bank of America. Your line is now open. Please ask your question.

William Reuter -- Bank of America Merrill Lynch -- Analyst

Thanks for taking the question. I just have two. The first is you mentioned that SG&A in the next quarter will be down, but not as much as we saw in this quarter. But it sounds like most of the costs that you reduced you said were temporary.

So, I guess is there some way you can help us understand what percentage of your SG&A we should be thinking about as being fixed versus variable in the back half of the year?

Dirk Locascio -- Chief Financial Officer

Well, I think the -- let's come back to that. We expect to continue to focus quite a bit on our cost as we have. I think I'll just use maybe an example of something like some of the temporary pay reductions that we put in place, we have to in the second quarter and are not continuing for associates during the third quarter. So, it's a matter of, again, continuing to be smart, but at the same time, want to make sure that we're treating our associates fairly as we go through this but also continuing, like Pietro said, looking at other areas of the business where we can drive efficiency and effectiveness that are temporary and more permanent.

So, I think that and not knowing exactly how the marketplace plays out, which can impact costs, is again why I'm not trying to be vague versus just the fact of just articulating that the positive trajectory we expect to continue if just as hard to estimate the exact levels of the dollars, but positive momentum.

William Reuter -- Bank of America Merrill Lynch -- Analyst

OK. And then, in terms of the education business, can you provide which percent is colleges versus K-12, just in big brush strokes?

Dirk Locascio -- Chief Financial Officer

We're pretty well -- we have a split across the spectrum when you look there. So, we don't have the specific numbers, but it's pretty meaningful across each of the areas from K-12 and college and university.

William Reuter -- Bank of America Merrill Lynch -- Analyst

OK. Thank you very much.

Operator

The next question comes from the line of Carla Casella from JP Morgan. Your line is now open. Please ask your question.

Carla Casella -- J.P. Morgan -- Analyst

Hi. You commented in your prepared remarks that the reopened customers, you're seeing sales down only about 10%. Do you get a sense if that's the true sell-through? Is there some sort of a pantry loading going on there as well?

Pietro Satriano -- Chief Executive Officer

So just to clarify, it was customers that had been reopened the longest, the greatest number of weeks, right, that we mind. And it's hard to tell how much -- there's always a little bit of kind of restocking once you're closed, but I think you could see enough of a trend in terms of year-on-year closing the gap that I think in terms of the spare of your question, a lot of the performance we were seeing relative to prior year was truly sustainable sales more than just pantry loading, which occurred in one week.

Carla Casella -- J.P. Morgan -- Analyst

OK, great. Thank you so much.

Operator

There are no further questions. Please continue.

Pietro Satriano -- Chief Executive Officer

OK. So, maybe I'll say a few words in closing. I want to thank all of you for participating today and for all your questions. I hope the call today leaves you with the three takeaways I started with: first, the outlook for industry remains positive post COVID.

Second, our scale and differentiation present a genuine opportunity market share. And third, the second quarter results both our ability to stay relevant to our customers and to manage our costs in this challenging environment. For all of this, I want to thank our associates who worked tirelessly since the beginning of this crisis. Thank you for tuning in today.

Have a good day, and please stay safe.

Operator

[Operator signoff]

Duration: 72 minutes

Call participants:

Melissa Napier -- Senior Vice President, Investor Relations and Treasury

Pietro Satriano -- Chief Executive Officer

Dirk Locascio -- Chief Financial Officer

Chris Mandeville -- Jefferies -- Analyst

John Ivankoe -- J.P. Morgan -- Analyst

Edward Kelly -- Wells Fargo Securities -- Analyst

Kelly Bania -- BMO Capital Markets -- Analyst

John Heinbockel -- Guggenheim Partners -- Analyst

Jeffrey Bernstein -- Barclays -- Analyst

Karru Martinson -- Jefferies -- Analyst

Peter Saleh -- BTIG -- Analyst

Rebecca Scheuneman -- Morningstar -- Analyst

Bryan Hunt -- Wells Fargo Securities -- Analyst

Judah Frommer -- Credit Suisse -- Analyst

William Reuter -- Bank of America Merrill Lynch -- Analyst

Carla Casella -- J.P. Morgan -- Analyst

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