US Foods Holding Corp. (NYSE:USFD) Q3 2023 Earnings Call Transcript

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US Foods Holding Corp. (NYSE:USFD) Q3 2023 Earnings Call Transcript November 9, 2023

US Foods Holding Corp. beats earnings expectations. Reported EPS is $0.7, expectations were $0.69.

Operator: Good day, everyone, and welcome to the US Foods Third Quarter 2023 Quarterly Earnings Call. Today’s call is being recorded. And I would now like to turn the conference over to Mike Neese, Senior Vice President of Investor Relations. Please go ahead, sir.

Mike Neese: Thank you, Lisa. Good morning, everyone, and welcome to the US Foods third quarter fiscal 2023 earnings call. On today’s call, we have Dave Flitman, CEO; and Dirk 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 slides can be found on the Investor Relations page at our website at ir.usfoods.com. During today’s call, unless otherwise stated, we are comparing our third quarter results to the same period in fiscal year 2022. In addition to historical information, certain statements made during today’s call are considered forward-looking statements. Please review the risk factors in our 2022 Form 10-K for a detailed discussion of these potential factors that could cause our actual results to differ materially from those anticipated in those statements.

We are excited to announce that we will host an Investor Day here in the Chicago area on June 5th of next year, where we will outline our strategy and the key drivers of our new long-range plan beyond 2024, along with our cash flow generation and capital deployment plan. More details will be sent in the following months. 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 presentation slides posted on our website, except that we are not providing reconciliation to forward-looking non-GAAP financial measures. Now, I’d like to turn over the call over to Dave.

David Flitman: Thanks, Mike. Good morning, everyone, and thank you for joining us today. Before jumping into our Q3 highlights, I want to officially welcome Mike Neese as our new Senior Vice President of Investor Relations. Mike brings 25 years of Investor Relations experience to US Foods, including time with Performance Food Group and Builders FirstSource. I’m thrilled to team up with him one more time. Additionally, Martha Ha joined US Foods in late September as Executive Vice President and General Counsel. With more than 30 years of experience, Martha is a seasoned business advisor with exceptional expertise in corporate governance, commercial and M&A transactions and leading high performing teams. I look forward to Martha’s many contributions to the company.

And now, let’s turn to today’s agenda. I’ll start by sharing highlights for the quarter and our progress against our strategy and long-range plan before I hand it over to Dirk to review our financial results and updated fiscal 2023 guidance. In the third quarter, we continue to make significant progress against our long-range plan broadly across the business. We are improving the safety of our associates, growing our independent cases, while accelerating market share gains, enhancing our margins, driving increased cash flow, and meaningfully reducing our net leverage. Our strong third quarter and year-to-date performance are a result of our continued growth and market share gains on our target customer types, accelerating operational efficiencies, and the dedication of our 29,000 associates.

I am proud of their relentless focus on delivering best-in-class service to our customers and executing strategic initiatives under our long-range plan. Building on our differentiated team-based selling model, industry-leading digital innovation and continuing momentum, our team delivered strong case volume growth. Each of our target customer types, independent restaurants, healthcare and hospitality, had year-over-year market share gains. Importantly, we accelerated our independent share gains and exclusive brand penetration sequentially, resulting in our 10th consecutive quarter of year-over-year share gains in this important customer type. We demonstrated profitable growth and margin expansion during the quarter with meaningful improvement in operating leverage.

We delivered adjusted EBITDA growth of 15% and expanded our adjusted EBITDA margin by 50 basis points. Finally, we accelerated cash flow generation, allowing us to invest more in the business, paydown debt, repurchase shares, and execute tuck-in M&A. Turning to Slide 4. Our strategy guides how we operate and what we focus on to win at US Foods under our four pillars of culture, service, growth and profit. We continue to reap benefits from the inclusion of our four regional Presidents on my Executive Leadership team. We are communicating better and aligning our teams more effectively to ensure faster execution. One important example is a recent decision I made to further streamline the organization and address feedback from the field by having our local sales teams report into the Regional Presidents versus a centralized corporate commercial function.

Also, Jim Sturgell, our EVP and Chief Commercial Officer, has informed me of his decision to retire effective December 1. Jim has been a trusted leader and voice on my Executive Leadership team. During his more than 31 years with the company, Jim has made countless contributions to propel our company forward. I want to thank him for his steadfast leadership and his many contributions to our company and our people. After much thought and careful consideration, given Jim’s pending retirement, I’ve decided to not backfill Jim’s role. Instead, we have restructured our commercial team to create even greater collaboration, a more streamlined structure, and the platform for accelerated execution of our strategy. As a result, Randy Taylor, our EVP of Field Operations, has taken on additional responsibilities for sales excellence and marketing.

In addition, Dave Poe has been promoted to EVP, Chief Merchant reporting to me. Dave is a seasoned foodservice veteran with more than 25 years of merchandising experience within distribution. In Dave’s expanded role, he will continue to be responsible for ensuring the US Foods product value proposition exceeds our customer expectations, that we are competitive on cost of goods, and that we have the right product portfolio through his leadership of our merchandising function. In addition to the organization changes we are making, we continue to place increased emphasis on accelerating profitable growth, and we want to ensure that we reward our sellers for delivering on that growth. We are currently working on some likely revisions to our territory manager sales compensation plan, which will even more closely link their compensation to the key elements of our profitable growth plan.

We will share more about any potential modifications during our fourth quarter call. We are also accelerating our investment in our local selling capacity. In fact, we increased our local seller headcount each month in the third quarter. We plan to continue those additions in the low-to-mid single digits into 2024 and beyond, which has already been contemplated in our long-range plan. We will be more focused than ever on profitable growth with the right tools and support processes to ensure our sales teams are successful. Collectively, these changes will ensure better alignment between the field and corporate teams while reducing handoffs and creating additional organization efficiencies. Most importantly, they will further propel our company with the right focus on serving and supporting our customers and driving profitable organic growth.

Turning to Slide 5. I’ll now briefly discuss our third quarter progress against our culture and service pillars, and then Dirk will talk about the growth and profit pillars a bit later. The safety and wellbeing of our associates is paramount at US Foods and is critical to our success. Since day one, I have stressed the importance of improving our performance to provide an even safer operating environment for all of our associates. Our strong results have been driven by our actions to execute more effectively on fewer, but more impactful initiatives, while reinforcing safety as a personal value. One example is our safety leadership training where we will provide behavior-based safety process training to approximately 1,300 operation leaders by the end of this year.

This example, combined with other initiatives, has led to steady improvement in our safety performance. Our results improved in the third quarter compared to both the second quarter of this year, as well as the third quarter of last year. In fact, the third quarter was our best safety result since the first quarter of 2021 with our injury and accident frequency rates both better than the prior year by 25% to 30%. However, there is more work to be done and we won’t rest until we are zero accidents and injuries. Turning to the responsible portion of our cultural pillar, through our recently published Fall Scoop, we rolled out a new climate conscious product innovation category within our Serve Good portfolio. Serve Good features products that meet our sustainability criteria, including products that are responsibly sourced or contribute to waste reduction.

When asked, nearly two-thirds of our customers say that it is important to them to make sustainable choices that limit their impact on the environment. One example is our newly unveiled Monogram Carbon-Negative Cutlery that utilizes greenhouse gas derived biomaterial to create a negative carbon footprint. These climate conscious innovative products aim to support our plan to reduce greenhouse gas emissions. We are excited to have nearly 1,000 products in our Serve Good portfolio, which spans multiple product categories. Additionally, we are focused on winning center-of-the-plate proteins and fresh produce, and over the last several years, we have upgraded our assortment in these key product categories. Importantly, our fresh produce category is our fastest-growing category year-to-date, and we estimate we have captured approximately 400 basis points of market share over the last two years within our target customer types of independent restaurants, healthcare, and hospitality.

I am proud of our sustainable and healthy offerings that will ensure we continue to meet our customer’s current and evolving needs. Moving to Slide 6. We continue to focus on best-in-class delivery, specifically on time and in full service levels to our customers. We continue to improve our customer service levels for product availability, and we are essentially now at pre-COVID levels. On-time service to customers is also a key focus area for us and our new routing system pilot as part of the broader routing optimization work we have had underway is a prime example of how we can further improve service. We launched a Descartes routing pilot in our first market. We continue to learn from this pilot and intend to pilot a second location before year-end with national implementation planned for 2024.

Our routing improvement initiative, combined with our move to Descartes, will enable us to improve service levels to our customers, while also reducing miles driven and fuel consumption as highlighted by our third-quarter performance where we delivered the best cases per mile in our company’s history. In addition, our flexible scheduling initiative is making solid progress as we have moved from the pilot phase to broader deployment across our network and it is now live in 16 locations. We continue to see significant improvements across our network and especially in our pilots, including year-over-year reduction in turnover that is approximately twice the rate of improvement versus our other locations, 30% improvement in safety and continued improvement in productivity.

We remain on track for half of our locations to be live on flex scheduling by year-end. Finally, we also continue to invest in our market-leading customer-facing digital technology with MOXē. Our agile development has delivered many improvements to make it even faster for customers to place orders and manage their business. Our deployment to local customers is complete and we now have 30% of our national customers on MOXē, with full deployment planned in the first half of next year. In terms of the digital customer experience, we believe we continue to lead the industry. Our Net Promoter Score has been strong since our launch and has improved even further recently. From an e-commerce penetration perspective, we are at 84% for the total company and our locally managed business improved 50 basis points to 73%.

A loading dock filled with dry goods and frozen food being loaded onto a truck.

MOXē is well on its way to being the premier all-in one digital toolset for our customers to order, track deliveries, pay bills, and manage inventory. And as we continue to focus on the customer experience, we further expanded Pronto in the quarter, which is our small truck delivery service focused within targeted dense geographies. Today, Pronto has a presence in 35 markets. I am pleased with our progress and the return on the investments we are making to provide best-in-class service to our customers. Turning to Slide 7. I’ll walk through some third quarter highlights, and Dirk will go into a little more detail later. Total case volume growth was 4% and we drove growth in each of our target customer types again this quarter, with volume increasing nearly 6% for independent restaurants, 8% for healthcare and 6% for hospitality.

Adjusted EBITDA grew double digits and margins further increased. We remain focused on increasing our gross profit per case faster than operating expense per case and accelerating profitable share growth as we did this quarter. Both healthcare and hospitality continued to deliver strong growth, driven in large part by healthy net new business. We remain focused on growing in our target customer types and expect to continue that momentum. I’ve already spoken about several of the good progress points with our customer experience and supply chain, so I won’t be repetitive here. Moving on, we continue to strengthen our capital structure and prudently allocate capital to fuel long-term growth. We further reduced our net leverage to 2.9x and we repurchased more than 700,000 shares for $29 million.

We expect to remain below 3x levered for the remainder of the year with further improvement into next year. Finally, we closed the Renzi acquisition earlier in the third quarter. And this morning, we announced the acquisition of Saladino’s, our second tuck-in acquisition this year. Saladino’s is an independent foodservice distributor in Central California with approximately $600 million in annual revenue that will provide additional scale for us in Central California. We expect to close the transaction by year-end. We have strong momentum as we finish out 2023, and we expect that momentum to carry us into 2024. Before I hand it over to Dirk, I would like to acknowledge the brave men and women who have served in the armed forces. On Veterans Day, this Saturday, we will celebrate our 1,500 associates who have so courageously served our country.

And you can see some of their faces on Slide 8. We are grateful for their service and celebrate them and all veterans on this important day. We are committed to supporting veterans in their transition back to civilian life. They offer skills that are remarkably competitive and transferable to the work we do in food distribution, including drivers, selectors, supervisors and corporate roles. We have an employee resource group dedicated to educating our associates on the value of a veteran, recruiting veterans, supporting and recognizing our US Foods veterans and providing volunteer and community engagement opportunities. I would like to recognize Jennifer Castillo, who is President of the THOSE WHO SERVE Employee Resource Group. Jennifer is a senior manager in merchandising excellence who served in the U.S. Navy and successfully transferred her skills and mass communications to the corporate world.

We thank Jennifer for her efforts in leading this valuable employee resource group and all veterans for their service to our country. And we wish all of those who have made personal sacrifices to protect our freedoms in a very happy Veterans Day. With that, I’ll hand it over to Dirk to go over our financial performance and guidance in further detail.

Dirk Locascio: Thanks, Dave, and good morning, everyone. Let’s turn to Slide 10. The execution of our strategy is driving sustainable operating leverage improvement as we deliver strong adjusted EBITDA growth again this quarter. Net sales were $9.1 billion in the third quarter, an increase of 2.1% over the prior year, driven by total case volume growth of 4%, partially offset by year-over-year food cost deflation and product mix impact of 1.9%. Our independent customer case growth was nearly 6% for the quarter. Renzi added approximately 80 basis points of growth for our independents. CHEF’STORE volume negatively impacted our total independent cases by about 80 basis points. The system conversion is largely behind us. We are laser focused on driving volumes back into our stores.

We expect CHEF’STORE volume to be flat to modest growth as we exit 2023 and accelerate that growth in 2024. We saw modest year-over-year product cost deflation of approximately 1.3%, which continues to be driven by center-of-the-plate as grocery still show year-over-year inflation in the quarter. We continue to make progress executing our long-range plan initiatives. Our gross profit per case increased 3.6% during the quarter compared to the prior year. Our adjusted gross profit dollars grew 7.7% from the prior year, driven by an increase in total case volume and cost of goods sold optimization. Adjusted gross profit as a percent of sales was up nearly 90 basis points to 17.3%. Our adjusted operating expense per case was only up 1.1% for the quarter which is our best per case year-over-year performance this year.

The 5.2% increase in adjusted OpEx dollars was largely driven by increased volume. Adjusted operating expenses as a percent of net sales were up approximately 40 basis points to 12.9%. We are pleased with our gross profit per case growth exceeding OpEx per case growth as we drive profitability and seek way to be more efficient. All of this led to 15% adjusted EBITDA growth, and we expanded adjusted EBITDA margins by nearly 50 basis points. Finally, adjusted diluted EPS grew 17% to $0.70 per share. We have demonstrated strong leverage through the P&L with operating expense per case growing at about one-thirds of the rate of gross profit per case. And we expect to maintain an operational discipline. Turning to Slide 11 for our growth pillar. Our digital capabilities and unique product portfolio are attracting new customers and driving sales.

In addition, our differentiated service model and focus on operational excellence is leading to profitable growth. With our solid independent case growth, we are on track to significantly exceed our 1.5x goal for restaurant volume growth for the full-year. We drove year-over-year share gains in each of our target customer types, improved our independent private label mix by 140 basis points and continue to develop and convert strong healthcare and hospitality new business pipeline. We are seeing improved mix and margin expansion as we outgrow the industry and focus on more profitable customer types. We are focused on profitable share growth as evidenced by our third quarter gross margin improvement and our 10th consecutive quarter of year-over-year share gains in independents.

As we focus on our digital innovations, MOXē has saved our sellers over 50,000 hours with its new self-service capabilities in addition to the significantly improved customer experience. This frees up hours for our sellers to accelerate growth and help our customers succeed. Next to profit on Slide 12. In addition to profitable growth, we continue to make progress on our initiatives to increase EBITDA margins. We drove further progress on initiatives such as cost of goods sold improvements by working jointly with additional vendors. We remain on track to address a total of 60% of cost of goods by the end of the year. We continue to advance our efforts to drive operational efficiencies as productivity improved year-over-year from both delivery and warehouse.

Now I’ll turn to cash flow. Turning to Slide 13. We continue to increase our cash flow and expect to build upon this as we grow earnings and effectively manage working capital. Our strong cash flow means we will continue reinvesting for growth and further strengthen our capital structure. Our year-to-date operating cash flow was $935 million. We invested approximately $270 million in CapEx and on fleet leases, including projects to expand fleet, enhanced analytic insights and improve technology and supply chain and sales to enable further organic growth. Our ongoing CapEx target is approximately 1.3% of net sales. As a rule of thumb, over time, we spend about one-third of CapEx on fleet, one-third for maintenance and one-third for growth, which included advancing our technology capabilities.

We also paid $142 million for Renzi in the quarter. We will continue to remain opportunistic in selectively pursuing tuck-in M&A like Saladino’s where it makes sense and at reasonable valuations. In addition, we repurchased 727,000 shares in the third quarter for a total of $29 million. And so far in the fourth quarter, we have repurchased an additional $20 million leaving $237 million remaining on our $500 million share repurchase program. Moving to Slide 14. Leveraging our free cash flow and timely debt paydowns, we reduced our leverage from 3.7x to 2.9x over the past 12 months. We are now within our target range of 2.5x to 3x and expect to remain there. In August, we reduced the margin on our term loan due 2028 by 25 basis points. In September, we refinanced the 2025 senior notes by completing a $1 billion offering.

The market was constructive for us. As we move $1 billion from secured to unsecured debt and extended our maturities. Our overall debt structure is in solid shape, we don’t have any maturities until 2026. We remain focused on creating value for shareholders and allocating capital prudently against the four parts of our capital allocation strategy. Now turning to guidance on Slide 15. As a result of our solid year-to-date results and outlook for the full-year, we are raising our full-year adjusted EBITDA range to $1.54 billion to $1.56 billion, and our adjusted diluted EPS range $2.60 to $2.70 per share. We are delivering on our long-range plan, and we are growing adjusted EBITDA and adjusted EBITDA margins. We reduced our leverage within our target range and are deploying capital to deliver strong returns.

We believe we have the right strategies in place to deliver strong profitability this year and into the next several years. I’ll now pass it back to Dave for his closing remarks.

David Flitman: Thanks, Dirk. The continued improvement in our results reflects our team’s hard work over the past few years to build a differentiated platform that positions us to win in any environment. I am pleased with the progress we are making as we execute the four pillars of our strategy, which is driving improved safety, productivity and profitable growth despite the lack of market tailwinds. And we’ll continue to be at the forefront of technology with our MOXē platform and our overall digital strategy. Our focus on continuing to improve our customer value proposition has resulted in strong case growth and consistent market share gains, specifically within independent restaurants, healthcare and hospitality. We are growing our adjusted EBITDA and enhancing our margins.

Our leverage is now below 3x. Even with this tremendous progress, we have a long runway of profitable growth and shareholder returns in front of us. Assuming stable macro backdrop, we believe our long-range plan will lead to further margin expansion over time, and we remain committed to be at or near $1.7 billion of adjusted EBITDA in 2024. And I want to be very clear, this is not the ceiling for future earnings growth. We have a lot more sales and earnings growth potential in 2024 and beyond, and we look forward to highlighting our exciting future at the upcoming Investor Day on June 5. We are just getting started, and we will continue to execute our strategy, gain profitable market share within our target customer types, enhance our margins and strategically deploy capital.

We are in a great position today, and we believe we have sustainable competitive advantages to outperform the market well into the future. It’s an exciting time at US Foods, and we appreciate your interest. With that, Lisa, please open up the line for questions.

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Q&A Session

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Operator: Thank you. [Operator Instructions] We’ll take our first question from John Heinbockel with Guggenheim.

John Heinbockel: Hey. Dave, let me start the sales force investment or the investment you’re making in sales, right. How would you parse that out between the various pieces of team-based selling, right? You’ve got different positions. And then secondly, the org change having those guys report to the Regional VPs, what do you think that will do operationally?

David Flitman: Great. Well, let me take the first question that you asked there, John and good morning. We’re excited about the investments we’re making in the sales force as we’ve been doing that for a while. And we continue to accelerate that investment, and we’ll be at that low-to-mid single digits for a long time to come. It’s mostly TMs. But I’m excited about our team-based selling model, where we have our consultants and specialists as well as our chefs teaming up in front of the customer. We’ll make fractional investments in those other two groups relative to TMs just to continue to make sure they have the support they need in front of the customer. And then in terms of the org changes, really excited about where we’re going.

Jim, his retirement just gave me the opportunity to think about differently how I want to think about the organization and efficiencies. And as you know, any time there’s handoffs between corporate and the field, it creates slower decision-making opportunities for inefficiency, and we just need to continue to move faster. So it’s an opportunity for me to rethink it and moving our local sales organization back into the field where the customer interfaces just make all sorts of sense. So a small change, but I think it will prove meaningful through the course of time.

John Heinbockel: All right. And then my follow-up, the three target types, how would you parse out the case growth between new accounts and drop size, right? And my guess is it’s different independent versus healthcare and hospitality, the composition is different, correct?

David Flitman: Yes. No, I think that’s right. And on the independent side, let me start with that first. our cases per line are relatively flat, given what you’ve heard broadly about some of the foot traffic, but we are continuing to increase our lines per drop up in the low single digits. So we continue to penetrate those customers both when we get them initially, but also through the course of time, and that’s an exciting opportunity for us to continue to drive in terms of growth. And as I mentioned, in hospitality and healthcare, we’re generating a lot of net new customers and new business. And as we’ve talked in the past, we believe we’ve got a highly differentiated model there. Particularly in healthcare, we’ve got great technology differentiation to help our customers, not only in their back office from a cost productivity standpoint.

But also with our customers and the folks that are seeking the care to help manage their nutritionals to be efficient in how they bring in inventory and to do that automatically. No one else has the capability that we have there. And then the same-store sales, I would say, contribute more that growth to healthcare and hospitality relative to independents. So we’ve got a differentiated model. We’re winning in all those places as we continue to tell you, we’re taking share in all of them. And we’ve got a long runway of growth ahead of us. And I think this really speaks to the power of the differentiated model that we have. We’ve got all these target customer types that many of our competitors don’t have. And I think that will prove to be a very resilient model for us through the course of time.

John Heinbockel: Thank you.

David Flitman: Thank you.

Operator: We’ll take our next question from Kelly Bania with BMO Capital Markets.

Kelly Bania: Good morning. Thanks for taking our questions. Just wanted to touch a little bit more on gross margin, obviously, quite strong. Can you just help us break out maybe the inflation, deflation impact? And then also just talk more broadly about strategic vendor management and your cost of goods initiatives, your reduction initiatives there and what you’re learning as you work through this initiative with your suppliers?

David Flitman: Let me start, and I’ll ask Dirk to fill in the details here. But the point I want to make, Kelly, and I appreciate the question. As we’ve been through periods of large inflation here and now two consecutive quarters of deflation and what you’ve seen us continue to do regardless of what’s going on there is continue to expand our gross margins and particularly our gross margin per case. And as Dirk highlighted, we’re going that at a much faster rate than our operating expense per case is growing. That’s a winning model. We expect that, that will continue. Specific to your SVM question, it’s a piece of work that the company has been doing for quite some time. As we said, we’d be through about 60% of our COGS by the end of this year.

We’re maintaining that. And we’re making very good progress. So that element of the gross margin improvement, along with our penetration of exclusive brands, which we said were up 140 basis points in independents this quarter, along with our work to continue to optimize our freight lanes and improve our mix. That’s the winning formula to continue to expand our gross margins. And as we say, we control our own destiny in that regard, and we’re doing a nice job of it.

Dirk Locascio: Hi, Kelly. The only thing I would add is just to reinforce Dave’s point that inflation, deflation, really a moot point when we think of year-over-year, as he said, it’s been relatively flat to some modest deflation, but those are in categories that aren’t impacting earnings. So the improvement you’re seeing is really all back to our point of control and controllable things that we’re doing in our four walls as opposed to the external marketplace.

Kelly Bania: Great. Thanks. And then just wanted to give you an opportunity to maybe touch a little bit more on the $1.7 billion long-range planned target. And as you get closer to 24 how those different components of that may be working towards reaching that, whether parts of it are ahead or behind or where there’s maybe more opportunity. Just wanted to give you the opportunity to kind of talk through that a little bit more?

Dirk Locascio: Yes, great question. And I’ll just say we’ll say more about our guidance for next year on our fourth quarter call, obviously, but I’m very confident to be at or near that $1.7 billion. And just through the course of time here in my first 10 months, I’ve gained nothing, but increased confidence Kelly. And the momentum and what I love about the way we’re delivering our results is we’ve got great balance across the P&L. We’re working in the right target customer types. We’re delivering the right amount of growth profitably. We’re improving our expense ratios and importantly, driving the outcomes that our customers need. So there’s not one area that’s outsized, I would say, in terms of the impact there. We’ve got great balance. I expect that balance to continue into 2024 and beyond.

Kelly Bania: Thank you.

David Flitman: Thank you.

Operator: We’ll take our next question from Peter Saleh with BTIG.

Peter Saleh: Great. Thanks for taking the question and congrats on the quarter. I wanted to ask maybe first on the independent restaurants. The environment is changing a little bit here. We’re starting to see a couple of quarters now of deflation that you guys are seeing. Restaurants have taken a lot of price, and we’re seeing some more discounting among the larger chains. Are you seeing any change in behavior among your independent restaurants? Or just help us out in terms of their health and their trajectory going forward?

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