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Date

Thursday, May 7, 2026 at 9:00 a.m. ET

Call participants

  • Chief Executive Officer — David E. Flitman
  • Chief Financial Officer — Dirk J. Locascio

Takeaways

  • Net Sales -- $9.6 billion, up 2.8%, driven by total case volume growth of 1.4% and food cost inflation and mix of 1.4%, with total case growth excluding Freshway divestiture at 1.6%.
  • Independent Restaurant Volume -- Increased 4.6%, including a 20 basis point contribution from acquisitions.
  • Adjusted EBITDA -- $413 million, representing 6.2% growth, with headwinds from weather and fuel lowering growth by about four percentage points.
  • Adjusted Diluted EPS -- $0.78, a 14.7% increase, reflecting growth meaningfully faster than adjusted EBITDA.
  • Gross Profit Per Case -- Rose by $0.23 (2.9%) due to self-help initiatives, notably in cost of goods sold management.
  • Adjusted Operating Expenses Per Case -- Up $0.14 (2.3%), with $0.04 driven half by fuel and half by weather-related impacts.
  • Adjusted EPS Guidance -- 2026 full-year adjusted diluted EPS growth expected between 18% and 24%, including the impact of a 53rd week.
  • Adjusted EBITDA Guidance -- On track for 9%-13% growth in 2026, with Q2 guidance revised to mid- to upper-single digits due to ongoing fuel and macro headwinds.
  • Case Growth With Target Customers -- Marked the 20th quarter of independent restaurant share gains and the 22nd with health care customers; hospitality case growth reached 5%, and health care 3.7%.
  • April Independent Case Growth -- Held steady with Q1 levels, signaling durable trends post-weather disruptions.
  • Private Label Penetration -- Maintained at 54% for core independent restaurant customers, with 25% of such customers above 70% penetration and 45% above 60%.
  • Pronto Program Expansion -- Launched in its 47th market, with Pronto Next Day live in 26 markets and a 2027 revenue target affirmed at $1.5 billion.
  • AI-Driven MenuIQ Adoption -- 15% of independent customers using MenuIQ within two months of launch, double initial expectations.
  • Warehouse and Selector Productivity -- Improved 3% year over year, supported by the expanded roll-out of UMOS in 70 markets.
  • Indirect Spend Procurement Savings -- On track for more than $75 million in annual savings, up from $45 million the year prior, with cumulative savings targeted above $100 million by 2027.
  • Dividend and Buyback Activity -- 1.4 million shares repurchased for $125 million; $1 billion remains authorized for buybacks.
  • Net Leverage -- Ended the quarter at 2.6x, with no long-term maturities until 2028 and leverage below large public peers.
  • Fuel Cost Recovery -- Approximately one-third of forecasted 2026 fuel gallons are locked into fixed-price contracts, and 30%-40% of fuel cost increases are typically passed through surcharges with a one-month lag.
  • Employee Safety -- Injury and accident rates improved by 12% from the prior year and 45% over three years, with 80% of safer center-ride equipment rollout complete.
  • Sales Compensation Plan Transition -- Rollout to 100% variable pay will begin companywide next month, with phased adoption over two to three years for full seller transition.

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Risks

  • Locascio stated, "If fuel remains at these elevated levels and macro uncertainty persists into the second half of the year, we believe we will be at the lower end of our full-year guidance range."
  • Operating cash flow of $294 million was below prior year, attributed to less working capital benefit in the current period.
  • Storms caused nearly double the number of distribution center closure days compared to last year, increasing operating costs and causing irreversible demand loss during closures.

Summary

US Foods Holding Corp. (USFD 5.62%) reported continued profitable growth, highlighted by a 14.7% rise in adjusted diluted EPS and ongoing share gains with independent restaurant, health care, and hospitality customers. Management emphasized strong momentum in case growth, advancing digital and AI-powered platforms, and the expansion of the Pronto delivery model, which together are driving operational and top-line improvement. The company began the deployment of the 100% variable seller compensation structure and saw rapid adoption of MenuIQ, both signaling structural shifts expected to accelerate future performance. Liquidity remains robust, with cash deployment aligned to strategic investments and shareholder returns, and the outlook for 2026 was reaffirmed despite short-term profitability pressures linked to weather disruptions and elevated fuel costs.

  • Flitman described the sales pipeline for tuck-in M&A as "extremely strong right now," with no strategic shift due to competitor activity.
  • April’s pace in independent case growth remained consistent, confirming post-storm demand resilience.
  • Signature, a new technology-driven service suite, targets hospitality clients, modeled after the successful Vitals health care customer program.
  • Improved penetration in categories such as COP and produce contributed to wallet share gains, supported by new facility investments like the Stock Yards expansion.
  • Locascio reiterated that, "2% to 3% cost inflation is what we like over time," with the business able to perform amid varying inflation environments.

Industry glossary

  • MOXY platform: US Foods Holding Corp.’s digital platform integrating AI tools for customer-facing solutions.
  • MenuIQ: An AI-based tool allowing restaurant operators to manage menu profitability and track costs in real time.
  • Ops QC (Operations Quality Composite): An internal metric tracking order accuracy and delivery service quality.
  • UMOS (US Foods Market Operating System): Proprietary supply chain process standardization and continuous improvement system used to drive productivity gains.
  • Pronto: Small truck delivery service offering flexible, frequent deliveries, and smaller order sizes for independent customers.
  • Pronto Next Day: Extension of Pronto delivery, bringing next-day service to existing independent restaurant customers.
  • Signature: Newly launched hospitality-focused solution suite, integrating technology and service processes for hotel, catering, and event customers.
  • COP (Center-of-the-Plate): Industry term referring to main protein items (meat, poultry, seafood) that are the center focus of a meal.
  • Vitals: US Foods Holding Corp.’s program for health care customers, providing bundled solutions similar to the new Signature program.

Full Conference Call Transcript

David E. Flitman, our CEO, and Dirk J. Locascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up. Our earnings release issued earlier this morning and today’s presentation can be found on the Investor Relations page of our website at ir.usgoods.com. During today’s call, unless otherwise stated, we are comparing our first quarter fiscal year 2026 results to the same period in fiscal year 2025. In addition to historical information, certain statements made during today’s call are considered forward-looking statements.

Please review the risk factors in our Form 10-Ks for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in forward-looking statements. 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 to our earnings press release, as well as in the presentation slides posted on our website. We are not providing reconciliations to forward-looking non-GAAP financial measures. Thank you, and I will turn the call over to David E. Flitman.

David E. Flitman: Thanks, Michael D. Neese. Good morning, everyone, and thank you for joining us. Before we begin, I want to thank our dedicated team of 30,000 associates for their unwavering commitment to serving our customers, which was clearly evident in the first quarter. Through their hard work, despite significant weather-related challenges and increased macro uncertainty related to the war in the Middle East, we again accelerated our case growth and made further progress on our self-help initiatives. Perhaps more than any other quarter during my tenure, this performance reflects our ability to win in any environment.

I will move now to highlights from the first quarter followed by an overview of our performance and the progress we have made in executing our strategy, all of which position us for further growth in 2026. Dirk J. Locascio will then review our first quarter financial results in more detail and provide an update on our 2026 guidance. Starting on Slide 3, during the first quarter we delivered strong results amid headwinds from severe weather, the conflict in the Middle East, and rising fuel costs, with consumer sentiment declining to an all-time low in March, all of which impacted our industry.

Importantly, we accelerated year-over-year and sequential organic independent restaurant case growth by more than 300 basis points and 70 basis points, respectively. We posted 15% adjusted diluted EPS growth despite a deteriorating macro environment that persisted well beyond early February, when we provided our first quarter guidance. We delivered strong case growth with our target customer types. The first quarter marks our 20th consecutive quarter of market share gains with independent restaurants, and 22nd consecutive quarter with health care. We achieved our strongest organic independent case growth in more than two years at 4.4%. This achievement reflects the continued momentum we are building by winning new business and bringing increased value to our customers.

Case growth started out strong before storms hit a significant portion of the country beginning in late January and persisted for much of the quarter. Despite these challenges, we again posted profitable growth by focusing on what we can control. We grew adjusted gross profit 50 basis points faster than adjusted operating expenses, increased adjusted EBITDA 6%, and delivered 15% adjusted EPS growth. The winter storms and higher fuel costs impacted our P&L with nearly twice as many distribution center closure days this year compared to the first quarter of last year. Adjusting for these external impacts, we believe our adjusted EBITDA growth would have been approximately 10%.

Importantly, our April independent case growth remained strong and was in line with our first quarter. We are focused on executing our strategy with discipline and underscoring the strength of our business model, the significant momentum we have built over the past several years, and our ability to win in any environment. Let us now take a look at our progress within each of our strategic pillars. Starting with Slide 4, our first pillar is culture. Keeping our people safe is paramount. During the first quarter, we improved injury and accident rates by 12% compared to the prior year and 45% over the past three years. While we are making steady progress, our ultimate goal is zero injuries.

As part of our commitment to safety, we continue to replace our EnRide powered industrial equipment with safer center-ride models to greatly reduce the risk of one of our most serious injury types. We have completed 80% of that rollout and remain on track to finish by year-end. Beyond improving safety, we continue to invest in the business, focusing on developing our people and strengthening our capabilities. During the first quarter, we brought together more than 500 leaders for our Sales Leadership Academy, a multi-day workshop focused on strengthening critical leadership skills, building high-performing sales teams, and preparing them for the rollout of our new seller compensation plan.

Feedback was very positive and reinforced the value of this continued investment in the development of our associates. Moving to Slide 5, our service pillar. To enhance our customer experience and the value we provide, we continue to advance our digital capabilities and drive operational excellence across the business. We have embedded new AI capabilities into our MOXY platform that empower our customers and help them run their business more efficiently. We recently launched MenuIQ, an AI-powered tool that helps restaurant operators better manage food costs and gives them real-time visibility into menu profitability. MenuIQ is built the way operators work, bringing together essential capabilities that make menu management intuitive and actionable.

Operators can upload recipes and automatically calculate food costs, monitor which menu items drive margins, and identify underperforming dishes. Recently, a chef at one of our independent restaurant customers shared their experience. He said MenuIQ is easy to use and super fast. He can cost out new menu items and try ingredient swaps in a few minutes on his phone—something that used to take hours juggling spreadsheets. Customer adoption has been strong. In just two months since launch, 15% of our independent customers are using MenuIQ, which is double our early expectations. AI remains an important opportunity for us, and we continue to expand the use of our proprietary and third-party tools.

We are building momentum as we apply these capabilities to enhance the customer experience while driving productivity and more effective execution across the business. We are also thrilled to introduce Signature, our new differentiated solution for hospitality customers, which provides similar value that our highly successful Vitals program does for our health care customers. Importantly, Signature goes deeper than just our customers’ ordering relationship with us. It is a comprehensive suite of industry-leading products, smart technology, and support, designed to help our hospitality customers solve some of their biggest challenges: managing labor and staffing, identifying cost savings opportunities, and improving menu profitability for high-volume events such as catering and banquets.

In addition to providing the right tools and resources to help our customers “Make It,” we are building a best-in-class supply chain to ensure customers get the products they ordered on time and in full. A key driver of service level improvement is our focus on Operations Quality Composite, or Ops QC, which measures how well we deliver accurate, error-free orders to customers, enhancing the quality of service that our customers experience. We made strong progress with Ops QC in the first quarter, improving by 21% and building upon the 20% improvement we achieved last year. In fact, Q1 represented our best performance since 2019.

In summary, we continue to enhance our value proposition to help our customers Make It while executing our self-help initiatives to drive sustainable improvement in our operations and generate annual productivity gains. Now let us turn to our growth pillar on Slide 6. Pronto, our small truck delivery service, is a powerful competitive differentiator and strong contributor to our growth strategy. Through Pronto, we offer our customers more convenience and flexibility including smaller order sizes, more frequent deliveries, and fill-in orders, which enables us to more effectively compete with local specialty distributors.

We continue to expand the reach of Pronto and have recently gone live in our 47th market, and Pronto Next Day—which extends the Pronto service to existing independent customers—is now live in 26 markets with plans to add approximately 10 more this year. The overall Pronto program is growing at strong double-digit rates and remains on track to generate $1.5 billion in sales in 2027, demonstrating this model’s success and Pronto’s role as a key long-term growth driver. Another expected driver of our long-term growth is our new seller compensation plan, which will go live across the company next month.

As a reminder, our local sales force will transition from their current 50/50 fixed and variable compensation plan to a fully variable plan. We are committed to ensuring a smooth transition for our sellers and our business. As we have previously discussed, it may take two to three years for the majority of our local sales force to fully transition to 100% variable compensation. Doing this well, rather than adhering to a strict timeline, is the right approach to fully support our sellers through this important change that we believe will unlock future growth. The new compensation structure will create better alignment to our business strategy, enhance the earning potential of our sellers, and fuel future case growth.

I am pleased with the progress we are making toward our launch, and our sellers and sales leaders remain excited about the opportunity ahead. Let us now move to our profit pillar on Slide 7. Our team effectively managed this challenging quarter through the disciplined execution of our self-help initiatives, resulting in consistent profitable growth and margin expansion. Adjusted gross profit was $1.7 billion, up 4.4% from the prior year and driven by volume growth and improved cost of goods sold. We continue to make progress with our strategic vendor management work aimed at generating additional cost of goods savings. As we realize these benefits, we are reinvesting a portion of those savings to help accelerate growth.

We continue to expect to deliver at least $300 million in cost of goods savings over our three-year long-range plan ending in 2027, which is up from our original $260 million commitment. We also remain focused on growing our private label brands. Our penetration remains strong and stood at 54% with our core independent restaurant customers. Private label remains a meaningful growth opportunity as it benefits both our customers and US Foods Holding Corp. by offering more cost-effective products and supporting stronger margins. In addition to improving gross profit, we are offsetting operating expense inflation by accelerating productivity, simplifying administrative processes, and capturing savings on indirect spend procurement.

In the first quarter, we delivered a 3% improvement in year-over-year warehouse and selector productivity driven in part through our US Foods Market operating system, or UMOS for short. UMOS is our supply chain process standardization and continuous improvement platform to operate more effectively. It is a key enabler of our annual productivity improvement goal of 3% to 5%. UMOS is now live in 70 markets, and we expect to finish deployment by the middle of this year. Indirect spend remains an important lever in our expense management efforts, and we continue to generate strong results.

This year, we expect to deliver more than $75 million in savings, up from $45 million last year, and we remain on track for more than $100 million of savings in 2027. Before I hand it over to Dirk J. Locascio, I will take a moment to acknowledge our exceptional associates who consistently deliver excellence. May holds special significance for us. It marks the tenth anniversary of the US Foods Holding Corp. IPO and it is also National Military Appreciation Month. On May 26, 2016, US Foods Holding Corp. debuted on the New York Stock Exchange with an initial public offering at $23 per share.

We have come a long way over the last ten years, transforming into the strong and resilient company we are today. I extend my sincere gratitude to our 30,000 associates for their dedication and hard work. I will also highlight an associate who achieved an extraordinary milestone. Jaden Falkumbang, a night selector in our Sacramento distribution center, is taking the “every case matters” mentality to the next level, selecting more than 1 million cases without a single error since June 2023. Each and every case he selects reflects his commitment to accuracy and his pride in ensuring our customers receive exactly what they ordered, every time. Thank you, Jaden, for your commitment to delivering excellence to our customers.

With this being National Military Appreciation Month, I am incredibly grateful for our 1,500 veteran associates and the unique expertise they bring to our company. At US Foods Holding Corp., we highly value the skills gained through military experience, and I am proud that we are on track with our Mission 2030 commitment to hire 3,000 military veterans by the end of the decade. As Memorial Day soon approaches, we remember all the courageous men and women who have made the ultimate sacrifice to defend our freedom. To all our active military and veteran associates, customers, partners, and investors: thank you for your unwavering dedication and steadfast commitment to our great nation.

Now let me turn the call over to Dirk J. Locascio to discuss our first quarter results and our 2026 guidance.

Dirk J. Locascio: Thank you, David E. Flitman, and good morning, everyone. Our first quarter performance reflects our continued focus on controlling the controllables, driving profitable volume growth, and delivering on our self-help initiatives. We again grew adjusted EBITDA, expanded margins, and grew adjusted diluted EPS meaningfully faster than adjusted EBITDA. We also generated significant operating cash flow and remained disciplined with our capital allocation priorities—investing in the business to support growth and repurchasing shares while maintaining a strong balance sheet. Starting on Slide 9 and our financial results, first quarter net sales increased 2.8% to $9.6 billion, driven by total case volume growth of 1.4% and food cost inflation and mix of 1.4%.

Excluding the Freshway divestiture, which we completed in the first quarter of last year, total case growth was 1.6%. Our independent restaurant volume accelerated again and grew 4.6%, including 20 basis points from acquisitions. Health care grew 3.7%, and hospitality grew 5%. Our chain restaurant volume was down 2.3%, largely in line with industry foot traffic trends as reported by Black Box. Turning to our financial results, first quarter adjusted EBITDA grew 6.2% to $413 million, driven by volume growth with our target customer types and ongoing progress on our self-help initiatives to improve gross profit and enhance operational efficiency.

We estimate that the combined net impact from weather and higher fuel costs reduced our adjusted EBITDA growth by approximately four percentage points. Finally, adjusted diluted EPS increased by 14.7% to $0.78. We again grew adjusted EPS meaningfully faster than adjusted EBITDA, and expect this trend to continue, supported by earnings growth and deploying our strong cash flow towards share repurchases. Turning to Slide 10, we drove operating leverage gains as we again grew gross profit per case faster than adjusted operating expenses per case, resulting in healthy adjusted EBITDA per case growth. Adjusted gross profit per case maintained its strong and steady growth trajectory and increased $0.23, or 2.9%, compared to the prior year.

This was primarily driven by our self-help initiatives, including our cost of goods sold work. Adjusted operating expenses per case increased $0.14, or 2.3%, with $0.04 related to incremental expenses from weather and higher fuel. We remain focused on offsetting a portion of operating cost inflation by driving efficiencies through supply chain productivity gains, indirect spend procurement savings, and administrative process streamlining. First quarter adjusted EBITDA per case increased by $0.08 to $1.98 as we grew adjusted gross profit per case 60 basis points faster than adjusted OpEx per case.

Moving to Slide 11, we continue to generate strong cash flow and deploy capital with our capital allocation priorities—namely funding strong capital investment to maintain our business, support growth, and drive attractive returns; returning capital to shareholders through share repurchases; maintaining a strong balance sheet, with net leverage remaining well within our long-term target range; and pursuing accretive tuck-in M&A. Operating cash flow in the first quarter was $294 million. Cash flow was below prior year due to less working capital benefit in the current year. Excluding the working capital impact, operating cash flow was above prior year. We expect our full-year operating cash flow to grow this year versus 2025.

During the first quarter, we invested $98 million in cash CapEx to support our business, enable organic growth, enhance our capacity, and further strengthen our technology leadership. We also repurchased 1.4 million shares for $125 million and have $1 billion remaining on our share repurchase authorizations. We ended the quarter at 2.6x net leverage. Our debt structure is strong, and our leverage is the lowest among our large public peers. In addition, we have no long-term debt maturities until 2028. Now turning to guidance on Slide 12, we are reaffirming our 2026 guidance based on the strength of our business and outlook for the balance of the year.

We continue to expect adjusted EBITDA growth to be in the range of 9% to 13% and adjusted diluted EPS growth to be between 18% and 24%, which includes the impact of a 53rd week. Given the macro uncertainty, OpEx timing shifts, and higher fuel costs—which we believe will remain elevated in the near term—we expect second quarter adjusted EBITDA growth will be mid- to upper-single digits. If fuel remains at these elevated levels and macro uncertainty persists into the second half of the year, we believe we will be at the lower end of our full-year guidance range. Absent those pressures, we expect growth to be in line with our long-term algorithm.

As a reminder and specific to fuel, we typically recover 30% to 40% of fuel cost increases through surcharges, although this recovery process tends to lag fuel price changes by about a month. Additionally, we have approximately one-third of our expected 2026 fuel gallons locked into fixed-price contracts at lower-than-current market prices. Fuel costs do impact our business and industry; however, I am confident we can effectively manage through this likely transitory period of higher costs with our self-help initiatives. We are executing our plan. We are accelerating independent case volume, driving profitable growth, and prudently allocating capital to drive shareholder returns.

I remain encouraged by our first quarter progress and confident in our ability to deliver results within our guidance range this year while continuing to position the business for double-digit EPS growth over time and advance our long-range plan. Now let me turn the call back to David E. Flitman.

David E. Flitman: Thanks, Dirk J. Locascio. As we look ahead, I remain highly confident in our ability to deliver our long-term growth algorithm. Even in a quarter shaped by external headwinds, we accelerated independent case growth, continued to gain share with our target customer types, expanded EBITDA margin, and delivered double-digit adjusted EPS growth. This performance speaks to the strength and resiliency of our team and our business model, the quality of our execution, and the value we continue to bring to our customers. We operate in a large, fragmented, and resilient industry, and we remain focused on the most attractive and profitable customer types within independent restaurants, health care, and hospitality.

We will continue to run our proven playbook—investing in the business to improve our customers’ experience and accelerate growth, driving productivity and operational excellence, and deploying capital with discipline. I am confident we will continue to win in the marketplace and drive shareholder value for many years to come. We will now open the call for questions.

Operator: Your first question comes from the line of Jeffrey Andrew Bernstein of Barclays. Please go ahead.

Jeffrey Andrew Bernstein: Great. Good morning. Thanks. This is Pratek on for Jeff. David E. Flitman, a question about the elevated gas prices. You talked about how you expect it to potentially impact your profitability, but I just wanted to ask about how you are thinking about it from the top-line perspective. Perhaps restaurant customers may pull back on orders as their foot traffic declines further. Anything you can help us understand there?

David E. Flitman: Thanks for the question, and please pass along our best to Jeff on his pending retirement. It has been a pleasure working with him. Twenty-five years is a long time in any industry, and we appreciate his dedication and support over that long period. I think the headwinds related to fuel are just another pressure point on the consumer. As we mentioned, consumer sentiment dipped in March to record lows. But really, that is nothing new for this industry, and that is why I finished my comments with resiliency. People want to go out and have a good time and enjoy their families and have a meal out every once in a while.

I think that speaks to the resiliency of the industry. I point back to the Great Recession where volumes were down mid-single digits. We would love to see the tailwinds come back—that will happen—but again, we are two and a half years into a declining foot traffic environment. The macro uncertainty right now is just another pressure point. I would point you back to our results here. Even given the macro and the weather, we delivered very strong results, expanded margins, and accelerated growth—importantly across our three targeted customer types. Given all those headwinds, I feel really good about our ability to control the outcomes going forward, just as I always have.

As I said in my opening, this quarter speaks to that resiliency in our business model and our commitment to deliver in any environment. So we are feeling good about our momentum. We would love to have foot traffic bounce back in a stronger macro—it is going to happen—but we are not concerned about the timing of it.

Jeffrey Andrew Bernstein: Got it. I appreciate that color. And, Dirk J. Locascio, just a quick one on the inflation outlook. Obviously moderation in the first quarter to about 1%, easing from the fourth quarter. How are you thinking about the cadence of the rest of the year? Are there any particular drivers that we should be aware of that could change things materially?

Dirk J. Locascio: Good morning. Our outlook for the year of roughly 1.5% inflation and mix is still our best estimate. As you pointed out, things moderated as they ended last year and then further into the first quarter. The movement from quarter to quarter tends to still be primarily protein and commodity related. The underlying grocery is pretty stable. So that has not really changed from what we were looking at a quarter ago.

Operator: Your next question comes from the line of Edward Joseph Kelly with Wells Fargo. Please go ahead.

Edward Joseph Kelly: Okay, great. Thanks. Could we first dig in on the guidance a little bit more? As you think about Q2, how are you thinking about some of the headwinds persisting around the way that you guided the second quarter, specifically related to fuel? And then for the full year, what could get you to the low end or to the high end? Could you speak to what that means from a traffic standpoint and a fuel standpoint?

Dirk J. Locascio: Good morning, Ed. For the second quarter, we assume that fuel remains elevated. We saw it really spike earlier in April, and then it moderated a bit, but it is still elevated. We assume it stays around where it is now. If we see it spike further, that would put an additional headwind on the business for the quarter, but we do not assume it gets significantly better for the quarter. As we go through the year, that is why I gave the comments about how we think about the range. If we see fuel moderate back to where it was more quickly and we see the macro strengthen a bit, that would propel us to the higher end.

If fuel remains quite elevated for the year and the macro is weak, then that would be the lower end of the range. Outside of those factors, which can influence the outcomes, we still feel very good about our core performance and the self-help initiatives that we have talked about and ultimately achieving the algorithm in a normalized environment.

Edward Joseph Kelly: Thanks. And taking a step back, David E. Flitman, could you talk a little bit about M&A and the pipeline? You have a large competitor doing a big cash-and-carry deal. Does that change the way you think about anything strategically? And could you talk about the pipeline generally? We have not seen much from the company in the last year or so. How is that shaping up?

David E. Flitman: I appreciate the question, Ed. Our strategy around M&A has not changed. To answer your question directly about the JETRO transaction, that does not change at all the way we think about it. We are aimed at driving tuck-in acquisitions. As a reminder, we did Chitakis in the fourth quarter in Las Vegas. We have done five tuck-ins of scale in the past two and a half years or so, and that remains the opportunity for us. I love our footprint. We have scale in all the major MSAs.

This is really about driving further productivity within our markets, taking miles out of our distribution network, and finding the right companies that fit our culture—with very strong management teams and good brand recognition locally, with a high mix of independent restaurants. Those are the key elements that we look for. That is really driving our pipeline activity, and the pipeline remains extremely strong right now. We are active in several conversations, and as we always like to say, you never know when something is going to pop out of that. You cannot really control the timing, but we are very active as we have been.

Operator: Your next question comes from the line of Lauren Danielle Silberman of Deutsche Bank. Please go ahead.

Lauren Danielle Silberman: Hi. Thank you very much. I want to start with a follow-up on the expense side. In Q1, how much did weather impact expenses versus fuel? And can you help us understand what percentage of the business you implement surcharges for? I think you mentioned 30% to 40% of fuel costs are covered, but I believe you have a higher mix of contract business. I would have thought that number was higher. Help us understand the dynamics.

Dirk J. Locascio: Good morning. Out of the $0.04 in the first quarter we called out, it was about half and half between fuel and weather impacts—so about $0.02 each. Overall, for fuel surcharges, we recover about 30% to 40%. We have them in place for the majority of our customers, contract and non-contract. Those are essentially a grid that is tied to actual fuel costs, and the recovery rate is the math of what is charged versus what the expenditures are for fuel. That process runs every single month.

In the first quarter, as one of our peers talked about as well, fuel really spiked in the last month of the quarter, and because of the one-month delay that is typically in place for surcharges, there was not any offset to it. Going forward, that recovery rate would be at a more normalized level. And, as I mentioned during the call, we also have almost a third of our gallons for this year locked in at a contractual rate below market.

Lauren Danielle Silberman: And is it fair to assume that the Q2 guide embeds a low-single-digit headwind from fuel?

Dirk J. Locascio: Yes, it does. Fuel is roughly a couple of points of headwind within the period.

Lauren Danielle Silberman: On the independent case growth side, really good during the quarter—even a little surprising given the weather headwinds you called out. Can you help us understand why expenses were seemingly more pressured than what the case growth would suggest? And April sounds like it is off to a good start too.

David E. Flitman: Appreciate the question. We are really excited about our continued acceleration of independent case growth. That has not been a flash in the pan; it has been several quarters in a row. We have very good momentum. As you know, net new account generation is the lifeblood of that activity, but I am also pleased— and I have alluded to this in prior calls—that our penetration continues to improve. It was actually the best in Q1 since 2023. With the focus we have had on both net new account generation and penetrating our customers, we also saw lines per customer be the best that it has been in quite some time.

To your question around the expenses opposite the case growth, I would point to the weather. When we gave our guidance in February, we assumed about the same weather impact that we had in Q1 of the prior year. That continued throughout February and even expanded into March with spring storms and tornadoes in the Midwest. As it turns out, we had almost twice as many closure days as we did in the first quarter of last year. On those days, it is pure demand destruction because those cases do not come back, but you still have a lot of costs because you are paying people and operating without the volume coming in. That is really the productivity headwind.

And then even coming out of the storm—particularly in the Southeast, where the cold persisted—you would show up at a customer’s door and they were not open the next day, so you are round-tripping multiple times. It added a significant cost burden to the quarter, completely isolated to those events. Structurally, nothing has changed. We still feel very good about our self-help. Our selector and driver turnover is the lowest it has been since 2019. All those productivity initiatives are still in place—UMOS, as I talked about. We feel really good about the structural things and the things that we can control. We just got hit with some challenges in the quarter.

Operator: Your next question comes from the line of John Edward Heinbockel with Guggenheim. Please go ahead.

John Edward Heinbockel: Hey, David E. Flitman. I want to start on drop size. It looks like that got back to flat. Maybe dig into wallet penetration—where that opportunity is. Are you making headway in COP particularly? And can lines per account improve a lot more in the next six to twelve months to offset the macro?

David E. Flitman: Good morning, John. We feel good about the penetration momentum. It has been a point of focus despite foot traffic challenges, which tend to show up most in penetration. COP is a strength for us and has been for quite some time, and we have seen penetration there, among other categories like produce. We are also excited about the sell acceleration we have had. We have a strong focus on our Stock Yards brand, and we will have a ribbon cutting for our new opening just outside of Charlotte in Lexington, North Carolina next month—a large comprehensive facility that will do all center-of-the-plate, including seafood, beef, and chicken.

We are very excited about it; it will be a great shot in the arm for our team in the Southeast. There is a lot of good momentum, and there is more to come.

John Edward Heinbockel: And secondly, on the compensation changes—while you want to go slow—how are you incentivizing wallet penetration versus net new local case growth? What do you want to initially get out of that transition?

David E. Flitman: I feel really good about all the work Randy Taylor and the team have done across the company preparing for this. We started on this in 2025, so we have been at it for a year. Change management is important. I referenced the training of our sales leaders we held this past quarter. Everyone remains excited. These are individualized conversations as we roll them out, hence the timeline. We are going to look back on this as a meaningful transition point for growth. Stability is important in the sales force. In the first quarter, turnover for our territory managers with five or more years of experience was better than a year ago, which underpins the excitement the sales force has.

Many of our sellers who have been with us more than twenty years experienced a 100% commission plan previously. They are great advocates for the change. We are watching all the key metrics as you would expect. We are launching next month. A key enabler is independent case growth.

Operator: Your next question comes from the line of Mark David Carden of UBS. Please go ahead.

Mark David Carden: To start, are you seeing any shifts on the competitive front? You called out consumer sentiment continuing to fall as the quarter went on. Were upfronts pushed more in the industry as fuel prices climbed to close out the period? Historically in these environments, what have you seen, especially as fuel crosses thresholds?

David E. Flitman: Competitive intensity is always high in this industry. The challenged foot traffic we have had for so long has kept it intense the past couple of years. It ebbs and flows in a given market at any given time. I would not point to any significant pressure directly as a result of fuel, but it is still early. Because it is so competitively intense all the time, it is hard to tease those things out.

Dirk J. Locascio: On upfronts, as David E. Flitman said, nothing really changed as we went through the quarter. Upfronts have increased a bit over the last few years across the industry, but they are still the minority of rebates. As a business, we do not lead with that; we address it more reactively if competitors come in with it. No meaningful changes.

Mark David Carden: As a follow-up, your hospitality business put together some of the strongest organic case growth we have seen recently. What is driving the incremental strength there, and would fuel prices impact it any more than the rest of the business?

David E. Flitman: We have great teams in both health care and hospitality. We are excited about Signature, the analogous capability to Vitals that I mentioned. We are bringing new technology to hospitality, bringing together existing tools and capabilities, and leaning in heavily to our brands. The pipeline for both health care and hospitality remains strong. We expect continued momentum that will carry into the back half of this year and even into 2027.

Operator: Your next question comes from the line of Kelly Ann Bania with BMO Capital. Please go ahead.

Kelly Ann Bania: Good morning. Thanks for taking our questions. David E. Flitman, on the outlook for total case growth this year, is it reasonable to expect the low end of that 2.5% to 4.5% target, or is the mid-3% still on the table for the full year? Can you walk us through expectations by channel to get to that?

David E. Flitman: We remain confident in our case growth guidance for the year. We saw acceleration from Q4 to Q1 despite macro and weather challenges. Underpinning that are our three targeted customer types, where we remain very focused. We feel good about our momentum with independents and have strong pipelines in hospitality and health care. Coming off the first quarter performance, you can expect continued improvement as the year progresses, particularly in the back half.

Kelly Ann Bania: And any color from the sales force and managers during the pilot for the new sales comp plan? Any significant tweaks?

David E. Flitman: We received really good feedback. That is why we ran pilots for quite some time. The sales force was very engaged—seeking to understand the impact on their customers, how they can lean in more, and how they will be compensated. Any changes we made were truly tweaks. There was nothing structural we felt we missed. In the pre-launch work, we are sharing detailed information with markets, sales leaders, and now individuals—what they earn today and what it looks like in the new structure without behavior changes—and giving guidance on what they may need to do differently. The beauty of 100% commission is the simplicity. It is less complicated than our prior plan.

They have clear line of sight to their activities and how they will be rewarded. We feel very good about that.

Operator: Your next question comes from the line of Alexander Russell Slagle with Jefferies. Please go ahead.

Alexander Russell Slagle: Thanks for the question. On the Signature program launch to help hospitality operators, it seems like a big step. Would love to hear the magnitude of this and where it takes you. It seems like a meaningful catalyst to accelerate new customer growth.

David E. Flitman: That is how we are thinking about it, Alex. In many ways, it is a simple launch because it brings together the best of the company and what we have offered to other segments in a way that directly supports hospitality customers. It brings together technology capabilities, links our exclusive brands, and provides training and offerings to customers that impact profitability. From a process standpoint, we are aligning our team behind it. As I mentioned, similar to what Vitals does, Signature will help with labor planning and staffing, cost optimization, and improved satisfaction for hospitality end-customers. It ties together solutions that help customers think about their business holistically.

We would expect similar levels of success for hospitality that Vitals has provided for health care.

Operator: Your next question comes from the line of Jacob Aiken-Phillips with Melius Research. Please go ahead.

Jacob Aiken-Phillips: Hey, this is Sam Barton on for Jacob. Inflation has moderated meaningfully, and you reiterated roughly a point and a half as inflation for the year. How does US Foods Holding Corp. perform across different inflation environments? Is there a level of inflation that is most constructive for the model, and how do the drivers of EBITDA growth change in a low-inflation environment like today versus a higher, more volatile backdrop?

Dirk J. Locascio: Typically, as a business and as an industry, 2% to 3% cost inflation is what we like over time. It provides a small positive to distributors and is manageable for operators to pass through. Being a little above or below that range provides a small positive or negative to the sales line more so than earnings. We are encouraged that the grocery part of the business stays pretty stable with very modest inflation. A lot of the movement from quarter to quarter tends to be around a few commodity categories. Operators have flexibility in menu engineering—focusing on a particular COP category, for example, if that is deflationary or less inflationary than others.

In the current environment, we have effectively passed through costs. Even in periods of high inflation coming out of COVID, a distributor has to have good processes around inflation and deflation, and our expectation is we will continue to operate very well here.

Operator: Your next question comes from the line of Peter Mokhlis Saleh of BTIG. Please go ahead.

Peter Mokhlis Saleh: Thanks for taking the question. Given the noise in the quarter with weather, higher gas prices, and tax refunds, can you give more detail by cuisine or region—any strengths or pockets of weakness that stand out?

David E. Flitman: Starting geographically, I would highlight the obvious where the storms were—we saw challenges there. By cuisine types, our strength in bar and grill remains. Hispanic is doing well. Mid-scale family dining is doing well for us. White tablecloth has held up pretty well through these challenges. Those are areas where our share gains in the quarter outpaced the company average, which is not surprising since they have been focus areas for a while.

Operator: Your next question comes from the line of Brian Harbour with Morgan Stanley. Please go ahead.

Brian Harbour: Thanks. Good morning. On the compensation changes, are all markets going to go next month? I know it could take a couple of years, but can you give a sense of the timing—will some folks transition over a longer time frame?

David E. Flitman: To answer your first question, yes—everyone will go live across the company next month. We have been building this for a long time, starting with the pilots in the fall and the communications we discussed. The timing is driven by the individualized nature of these conversations and any tweaks in roles. We will lean in with pace, but to be clear, everyone will be paid on the new compensation structure beginning next month. We expect it to ramp through time—some limited impact in the back half of this year and then more meaningful impacts into 2027 and 2028. This is a long-term play, and we are going to do it right.

Brian Harbour: With some of the AI-enabled tools, how do you measure success? Are you seeing better penetration with customers that use those? Are salespeople more effective?

David E. Flitman: It is both. For each tool, we have measures in place. At the heart of it are two objectives: deepen relationships and provide more meaningful capability for customers—making it easier to do business with us—and improve our sales force productivity. The MenuIQ example: what used to take hours in spreadsheets is now seamless and quick with AI. Customers can understand menu costs, where profitability comes from or not, and where they may need to make changes. It is powerful, and our salespeople partner with customers on it. It moves quickly, helps customers, and frees up salespeople to drive future growth.

It is hard to point to any single thing behind the acceleration in independent case growth, but it is all working together. The traction you see—importantly in penetration—is part of it.

Operator: Your next question comes from the line of Karen Ann Holthouse with Citi. Please go ahead.

Karen Ann Holthouse: Thanks for taking the question. How are you thinking about the hospitality business as we head into the peak summer travel season? There are moving pieces: last year’s soft inbound international tourism, potential benefit around World Cup games played in the US, and macro factors—gas prices could be a headwind or keep people domestic with a staycation positive for restaurants. How do you think about that for 2Q guidance and the year?

David E. Flitman: At the highest level, hospitality trends tend to follow restaurant traffic. We do not need the macro to improve to control outcomes. Our pipeline in both health care and hospitality remains strong—that is fueling our growth despite macro challenges. We expect to continue to lean into growth and accelerate going forward, driven by share gains. The World Cup could be a nice shot in the arm over the summer, but it will come and go. What structurally changes performance is our ability to continue to win and take market share, and that is what our team is focused on.

Operator: Your next question comes from the line of Danilo Gargiulo of Bernstein. Please go ahead.

Danilo Gargiulo: Thank you. I want to go back to resilient performance through the cycle. Traffic has been elusive for multiple quarters now. Do you think we are entering a phase of permanently low or declining volumes? If that were the case, what would be a reasonable top-line algorithm for US Foods Holding Corp.?

Dirk J. Locascio: Ultimately, our expectation is that we continue to outperform the macro. If you look at how we have grown versus the industry the last few years when traffic has been slower—using Black Box as the proxy—in our three target customer types, especially health care and hospitality, we have outgrown the market. That would be our expectation going forward. Chain and other would perform more like the overall market. Since we do not know exactly what the macro looks like, we continue to focus on share gains and what we can control. We are pleased with the progress and continue to work pipelines hard in each of those.

Danilo Gargiulo: A few quarters ago, you were looking for strategic options for CHEF’STORE and ultimately decided to retain the business. Do you see more revenue synergies from integrating a cash-and-carry business with your delivery business? What are your expectations for the business going forward?

David E. Flitman: I appreciate the question. The way we left it remains my view: fundamentally, we are not the right long-term owner for that business. At the heart of our desire to sell originally was that the synergies from the acquisition have not played out. Most of those assets were purchased west of the Mississippi River and are not in the heart of our broadline markets. If you think about existing customers going into those stores, it becomes more challenging when they are 20 to 30 miles away from core customers and markets. That said, we remain focused and will retain the business as long as we need to. The business has improved dramatically.

One comment: a large competitor announced an acquisition in the space. That does not change how I think about our CHEF’STORE business at all. It will be interesting with the number one broadliner buying the largest cash-and-carry—getting industry attention. The Independent Restaurant Coalition is potentially intervening in the case. It will be interesting to see how that progresses, including the regulatory process over the next while. We are watching that, of course.

Operator: Your next question comes from the line of Analyst with Wolfe Research. Please go ahead.

Analyst: Hi, thanks for taking my question. On Pronto—you just went live in your 47th market. As you make investments in Pronto this year, where do you see the biggest opportunities to accelerate: more trucks in existing markets, new markets, or deepening Next Day penetration with existing customers?

David E. Flitman: Appreciate the question. It is all of the above. Originally, we launched Pronto in markets aimed at identifying and obtaining new customers. We are excited about Pronto Next Day, a fairly new launch for us—now live in 26 markets, with more to come. We also have the opportunity to penetrate existing markets with new trucks, which we continue to do. We are excited about Pronto and fully committed to that $1.5 billion revenue target in 2027.

Operator: Your final question comes from the line of John Ivankoe of JPMorgan. Please go ahead.

John Ivankoe: This is Crystal on for John. On private label, you kept it at 54% with core independents and mentioned it as a growth opportunity. What actions are being taken to grow this mix, and are you happy with the selection, or are there gaps?

David E. Flitman: I am pleased with the progress we have made over the last couple of years with our exclusive brands. We have a great portfolio—more than 22 brands and 10,000 products. Our sales force is leaning into those brands. It saves our customers money and is more profitable for US Foods Holding Corp. The new sales compensation structure will heavily incent our sales force to sell our brands. Structurally, we are lined up to continue that momentum. What excites me most is that we do not have a ceiling on our ability to penetrate with exclusives. Twenty-five percent of our existing independent restaurants are already penetrated at 70% or higher, and 45% are above 60%.

We have a long track record of success and a long runway of further penetration and growth with our brands. You will continue to hear us talk about that momentum.

Operator: I will now turn the call back over to David E. Flitman, CEO, for closing remarks.

David E. Flitman: We appreciate everyone joining us today. We are excited about our momentum. The structural improvement that we are driving in the business will continue, and we are fully committed to achieving our long-term growth algorithm. Have a great day and a great week. Thanks.

Operator: Thank you all for joining. That concludes today’s call. You may now disconnect. Have a great rest of the day.