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SYY Sysco

Participants
Neil Russell Vice President of Investor Relations and Communications and Treasurer
Tom Bené President and Chief Executive Officer
Joel Grade Executive Vice President and Chief Financial Officer
Judah Frommer Credit Suisse
Vincent Sinisi Morgan Stanley
Chris Mandeville Jefferies
John Heinbockel Guggenheim Securities
Edward Kelly Wells Fargo Securities
Karen Short Barclays
Andrew Wolf Loop Capital Markets
Bill Kirk RBC Capital Markets
Marisa Sullivan Bank of America Merrill Lynch
Kelly Bania BMO Capital Markets
Karen Holthouse Goldman Sachs
John Ivankoe JPMorgan Securities
Call transcript
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Operator

Good morning, and welcome to Sysco's Third Quarter Fiscal 2018 Conference Call.

As a reminder, today's call is being recorded.

We will begin today’s call with opening remarks and introductions. I would like to turn the call over to Neil Russell, Vice President of Investor Relations and Communications and Treasurer. Please go ahead.

Neil Russell

Dennis. you, Thank and Earnings everyone, Sysco's Quarter Third Good welcome XXXX Call. Fiscal morning, to

in Tom Chief Joining and today Houston me are Officer; Joel Chief Bené, and Grade, Officer. our Financial Executive President our

state material the Act please the begin, a Private meaning differ beliefs, made presentation management's that Before and forward-looking could the predictions statements in we or of note Company's or of Reform actual are during results Securities statements manner. this Litigation that future expectations the intentions, within

slides found today At and call the corresponding and follow-up. Bené. ask to the limit participant our of about in to SEC of can information news cause one included President includes, to GAAP our like SEC time, their Additional included to are Report in ensure to each to that to found Officer, factors results time Chief Sysco's Annual or to XXXX; Form reconciliation sufficient in forward-looking A IR This our and our financial morning. at limited today this slides. app. our in on X, one be differ that sysco.com and could all year the release Tom to questions, the question we'd in answer are earlier XX-K Investors of presentation To risk I'd July these statements Investors over the these from in in can non-GAAP website. time the Executive the factors copy Non-GAAP but turn this like measures via filings. the comments section at the also ended subsequent presentation materials issued those and of have is in not the is contained measures be end contained Company's filings; measures for The section we

Tom Bené

with some morning, we key our Operations a macroenvironment current our for comments other company’s business along by discuss that followed and Service of with U.S. themes business everyone. to concluding detail. on Food like the will financial and are Neil, more results you, and in, the that segments. Joel drove then the discussion good discussion the quarter Thank of in I’d results our operating start the International

strong deliver This were growth the include results number that quarter, we earnings year able business. are in and key per adverse business of drivers to operating for There gross our impacted despite geographies that the including making of share solid $X.XX. and dollar across multiple the compared we income that investments of adjusted adjusted weather growth, prior results to quarter profit X.X% were continued

macro Retail the to United traffic somewhat generally counts. conditions trends environments, Turning and to the States. be in led sales operators rise Service somewhat at restaurants Food for continue as sectors improved the continue to This favorable Food favorable to spend Services overall the offsetting and for lower

Food see with operate local including the Service they also International which the sector. delivery growth methods. additional growth reach in was markets in continued through increased growth modest innovative We and their we positive concepts mostly Economic customers in as

by from cost product Looking customer grew and at new customers, performance billion acquisition. our inflation sales $XX.X our an results, national growth, accelerating customers driven to X.X% our local addition of the strong

HFM we in UK, Day, have and during a Doerle As Food closed Frozen the Hawaii, strategy are M&A recently we Louisiana. shared in our part in as our Food Investor and Service acquisitions, of on activity Kent focused three

family. into three the and Sysco We talented we are the that excited are about all bringing companies associates

inflation. and of HFM only in results driven product effective management positive However, quarter by Gross X.X% results. third cost the are profit our growth included of grew case ongoing

the from to less in of third somewhat been has and improving cost, inbound continue freight an some we trend impact While face was challenges quarter. the

nearly comprises and new From XX% expense products Additionally, products for our gross the now growing driven efforts quarter. strategic an few across our growth customers’ dollars. cases offered innovative cutting-edge from adjusted progress impacted grew be brand by solutions that breadth operating investments process. of brand, resulted the continued categories perspective, to from by business in profit our multiple expense the interest driven challenges continues revitalization incremental X.X% local in operational and brand tiers a with and ongoing of quarter along of Sysco Sysco the which and

in a occurring in in Some making more investments those associates the chain investment supply Labs. One Sysco ultimately U.S., translate our include that for example experience of investment into the enriching marketing the is customers. in Europe, investments work are continued in technology transformation the and will we

delivered enhance Our make X.X% The and million on it than easier growth further $XXX and year business adjusted XX% EPS growth growth our teams, for the local to strategy Sysco is Labs continue intended disciplined ordering including that meaningfully result higher with tax to to to in to process in our how products offerings prior improvement all customers is our our stable customers. team, grew of business business our of EPS predicated operational $X.XX. of with customers with Overall, an direct income addition from to was receive profitable emphasis to the adjusted us. we as benefits, technology a enhancements and business support operating technology us, with in do the conjunction customers

priorities operating X.X%, make quarterly beginning U.S. operating profit customers. Food X.X% segments, to and X.X%. for continued strides our of focusing the business operations. grew have in satisfying the results Service execution to grew quarter, Transitioning Sales income X.X% adjusted needs with adjusted expenses of gross We and grew on by our grew our the strategic

including XX in acquisition strong business top-line quarter, now the the Broadline local results grown our case U.S. For X.X% was has as consecutive growth HFM of and were quarters. for

continue growth fresh to. performance we overall as to cases into driving grew our able are to growth and growth local translated as new of case from case was healthy solid We continue National see consumers to gross customer improve who positively growth customers The to X.X% local national dollar X.X%. cases. faster of strong growth profit case mix than introduce X.X% concepts are responding customer

brands previously the in gross positively growth. mentioned dollar Sysco also to Additionally, profit the growth contributed

cost, our due the increased a operating new up X.X% business, to expense sales both result to as for prior transportation and year-over-year adjusted selling in cost specifically a expense quarter associates our organizations, Turning warehouse local was growth of accelerate debt and our strong an of chain investment effort increased by of weather supply driven ramp a attention combination our to comparisons our ongoing to bad in continuation for cost the very in and year. marketing impacts

results quarter sales shipping strong growing for Food negative and days. despite had International quarter operations, cost growing winter expenses with gross XX.X%, operating storms was profit businesses and sales had operating strong XX.X%. due that for to across XX% the income parts we Service impact to growing Canadian on growing adjusted XX.X%, Moving a and Top-line growth European reduced of the our adjusted

our Additionally, supply we unique The continue mid the a for adapt profit customer provide including as our the enabling success continued impacting our of position France friends. growth and Sysco customers’ service in also Europe and product make us to of perspective, transformation French announced to cost high-single-digits for growing marketplace business the integration to in to gross we acute recently inflation investments continued well businesses in European multi-temperature to chain merger the a well capabilities to become across segments. to allowing as to experience these Brakes to across better quarter. access new needs offer Davigel two will us new From

positive across capabilities the new the as facilities investing in such doing modernization performance ultimately with timing the local are In sequential were experience to and Sysco Sysco, to the addition, loyalty with customers. business in Despite shifts which for will related growth case we enrich European various existing income improvement of solutions mentioned, top-line being results our and the accelerated largely improved calendar are customer for the and to our operating implemented business. of technology international lead investments business which

by against future our focus across international platform growth. to continue in as necessary leveraging a for our on long-term capabilities plans the position business investing and We executing

the top-line and growth sales growth Finally, up with SYGMA nearly of quarter continued during X%. piece X.X%

including third-party in are However, top-line and issues the level business, In on driver the specifically service customers. high expenses to we transportation struggle due of the solid with the expenses our growth encouraged meet to inbound by we are summary, to challenges growth. business of invest trade increased our to spend expectations trajectory continues continuing our and fundamentals future while

we of As of year we are on plan, remain approach initial to income $XXX high-end achieve million range that million confident to to track target. improvement adjusted the conclusion the operating $XXX I our three

this we Investor plan. including laid to confident Additionally, our Day deliver a ability part as of in financial we new the remain during out targets three year plan our

to We for and the associates I’d lay that that foundation future growth. for investments continue Sysco they doing doing on of training to dedicated will distributor execute our make improve in to like for which and customers. experience operational technology necessary with all And our the thank our customer strategies, people, of will Sysco business the and customers’ for ultimately also choice our making are us our

Financial call I Joel the Officer. Now would Grade, like our turn over Chief to to

Joel Grade

Good Thank everyone. Tom. morning, you,

some income we positive Sysco growth Adjusted growth, challenges this ongoing quarter. third and investments are and continued quarter. pleased impacts top-line strong saw while Sales case mentioned Tom earlier, continued as from reflect the growth. profit with As the we results with for operating gross were inflation fundamental brand

However, share adjusted operating leading X.X% earnings leverage additional we with are tax to of and the to adjusted of $X.XX. benefits, growth income able generate operating per

continue XX we fiscal of cash first we to in XXXX. addition, weeks $XXX generate as flow free million In the meaningful posted

X.X% income the grew adjusted resulted profit growth XX.X% As X.X%, sales of adjusted while grew expense X.X%, $X.XX for share. of and operating per for earnings adjusted grew our to an X.X%, growth in quarterly which share results, quarter, gross per third operating

business, in sales we business, X.X% third increasing third For driven a of our the including both foreign all of dairy translation inflation experienced Sysco was cost fiscal X.X%. meat, by of the With across saw we In produce. product benefit few International our our inflation Broadline currency approximately U.S. UK. in combination segments inflation categories to of quarter quarter. and the exchange and experienced XXXX, a

profit quarter, by During we had growth penetration. Sysco gross and brand the improved X.X% driven volume overall of growth

X.X% costs trends operating supply and both adverse investment the increased in announced trade bad were The the which and our Tom related not improved grew earlier, operations. for expense as quarters. transportation, selling U.S. quarter. and organization have headwind costs, increase previous our in increased previously a driven in in warehouse Adjusted was fuel by expenses significant somewhat partly to As of weather expense chain and debt mentioned were expense largely as

investments transformation Additionally, in we businesses. our and International continue make to integration in

points basis pre-tax expect this quarter achieved operating profit We growth as leverage trend quarter, this the a operating of we growth. gross dollar adjusted improve expense to the in XX we saw continue and fourth During to gap outpaced quarter.

defined for lower XXXX XX sales, and for quarter compared deferred benefit additional As tax it fiscal by fiscal our quarter was operations our third XXXX $XXX to was from declined benefit from for million relief of fiscal roughly million from flow results XXXX to CapEx of derisk option tax stock Hurricane defined our $X.X second using was constitution $XX taxes, by the Harvey Net relates weeks the or benefit $XXX flow due plan, the a a retirement driven year. to from fiscal impacted a last X.X% quarter plan. first retirement fund which and billion deductible which tax exercises contribution was of million tax Free the XXXX. $XXX of XX the million credits. of Cash cash about first benefits weeks to the of rates, from payment and for were

for first year. higher weeks was million, cash However, was million compared flow to same free XXXX period the fiscal $XX $XXX the of XX which last

updates. Now to would like to I business three transition

following our regarding tax rate First, tax reform. new effective

rate will for a reminder, XX%. July fiscal XXXX for to U.S. we XXXX way beyond year the Over be is the to will statutory rates fell U.S. our to expect XX%. be that of XX% and tax due fiscal XX% effective range in from rate fiscal our our time, statutory our June, As and

for that tax effective opportunities. anticipate and XXXX, fiscal we work lower various as we However, continue rate will be our to slightly through initiatives

lower Sysco plant. to ongoing from a savings annual those of in the our the regarding our associates increasing invested portion We’ve savings by XX-K contributions taxes. Second,

our to We continued best of to do how in our priorities. savings utilize an We to opportunity will regard with our strengthen the we competitive to our consistent balance the evaluate reinvest business this is and with and allocations advantage. options further so capital believe

financial including as we X.X% into and Based we for In that fiscal are year year Finally, spend fiscal X.X% to on I somewhat move of anticipate have XXXX finishing year we forecasted achieve confident planned from plan track investment previously regarding our forecasted. fiscal income XXXX case the year deliver growth remain fiscal growth, of to compared to adjusted the CapEx, previously XXXX customers strong $XXX in $XXX summary, to lower than three and objectives excluding Brakes. current levels, Q&A. sales XXXX. fiscal on improved spend we good successful. year profit million now cost the are we Fundamentals million while high-end management, operating XXXX our solid business for local improved expect dollar of to of help our of to we to range gross be as Operator, ready fiscal continuing remains

Operator

from is line of question with Suisse. Judah ahead. Please Credit Frommer the first go your And Instructions] [Operator

Judah Frommer

question. my taking for Thanks guys. Hi,

based with and plan help confusion only bit tax whether in there reform? has three I anything with three-year reform isn’t EPS, on been good There could restated on plan be us second is but is think, year that that little you of what a just would out helpful? for it’s CAGNY the maybe if tax First and disclosure, the reinvestment. what out the that

Joel Grade

Judah, Joel, question. thanks it’s Yes, your for

I really to your Just sure properly. am understanding question make

asking tax a on ultimately benefit the three the year of new are You plan reform.

so the benefit that to $X.XX this EPS At I $X.XX am on about of we see of continues be how before. to And CAGNY, view which we that’s little our line, what talked answering.

of continued guidance So it. and that’s current current given our that’s that’s – we’ve view our

Judah Frommer

Okay.

tax dollars? of would So, potential include reinvestment operating any income guidance, reform like that the

Joel Grade

where you is increased answer say it income would slightly to I we’ve this the it – I create the question the mean, impacts areas But that in invested next three-year benefits we a considers the related net which those factor over have tax wasn’t capital if reform. years thereof. the plan to three laid operating the in way. recall of out your income doesn’t Yes, level investment, directly

Judah Frommer

maybe of way before just about let’s same competing larger Okay. ago? players, of That’s attractiveness landscape And three, the are there, independent in kind and helpful. business up bumping opportunity competitors is more for any was, the the against public say when there terms you six, quickly, than all months three independent the just talking of there

Tom Bené

Judah, competitive. traded time Hey, seeing newer guys don’t the say, that think Tom. continues the for this as a there long look, is either that to be business very or anything are this from I’d we publicly regional even I talk are is bigger we players out there.

have that I or is that always Sysco to business. new an everybody to so, us upon that attractive containing I to this think everyone about is things to come knows continue space and participate else they’ll from continue space But coming anything different do and that’s wouldn’t this lately. there differentiates in it’s they say earn to and

Judah Frommer

lot a Thanks Okay. and good luck.

Tom Bené

Thanks.

Operator

Sinisi question with go of next Vincent line the from Morgan ahead. Please Your is Stanley.

Vincent Sinisi

my Hey, question. much. Thanks Good very guys. morning great. taking for Thanks

to was quarter. freight. about ask it said It this to hear the you wanted Just improved that somewhat current thing

give if constrained. capacity to us mean, certainly the you is some color on, can still Just our I wonder understanding

on rates quarters? we more – it the quo was holding couple when more just you are So as next on you negotiating what perspective us there color and freight kind doing little the status go then a are of, give a from things you forward are are

Tom Bené

Tom. Hey, it’s Vini,

be that, I there to somewhat hearing continues obviously and environment freight the everyone know is look, seeing So, challenging out that.

we’ve second and to the needed here quarters do able work been with the be I we the with carriers think especially and that few fourth is in last the last to our of couple the obviously situation is we or our things challenges. to work quarter freight The creates we talked suppliers improve over to and year. calendar have about able quarter point driver this road obviously a there ran that just been challenges is the There more on capacity pressure everybody. into there both for

probably last I in also teams that But that saw combination second of of at nice the as that of our in pressure our or a will ensuring calendar and think job bit we year working various be too the was a there with of quarter. doing little we some impact QX needed think I softening as and getting partners And were loads the part candidly of expected carrier our coverage out working the of help to our that’s suppliers that we soften with agreements. the there. some end

As but It’s but continue up year sit. hopefully, and think QX we thing. forward, it or us saw for this it. of more manage relates going impacting think manage we QX where will knock last It’s anybody’s mean, everything guess. from I we what hard of it’s still the to us a on lot are I – to doing too we calendar it’s we forward, I us, little in at end of can going to that we see call a to

Vincent Sinisi

Thanks, maybe that, zones quick we terms of there? of Okay. just then, the a follow-up integration you Tom. on little the Brakes, specifically, all a on kind update in can fundamental of kind and progress And are temperatures where more just

Tom Bené

Sure.

Vincent Sinisi

a lot. Thanks

Tom Bené

had So, think market we also and the spent were the was into nine a the UK last, as in that months, you what acquisition we model at bearings Sysco of approach acquisition, fair things so, our lot going and the it, straight And acquired least first about say in months in happening market are and on getting Brexit. just you on a we with the UK what there. what in know, year over of If amount the about XX Brakes business we reinforcing to time now of the the call or we’re I’d

grow what here what similar focused in we what on this is, sustainably with to business, things on more we do place need kind in are focus customers. of this that time So U.S. done a with last the spent to local we’ve year

need is And and is in that acquired. supply that not necessarily the in way way about not chain which this so had is here U.S. the specifically, and there what to Europe business learned common we make all the over multi-temperature area, that certainly we transformation investments we the the but that operate ground in of time UK, in and we’ve talked in are always we’ve

across and dry in all So also chilled have one investments to going And a lastly, we multi-temperature, that three and we means, we investing make there. being place we and place operate needed facility we international we putting this to in of the that’s one with on going we some had oversee truck think to an could able and have way business I’d provide structural temperature there. sense are better didn’t we get markets. is, We’ve some are countries there that all Europe, a the lot about over specifically to are on frozen, which what the things segment technology to that’s resources a And in some is to of in ongoing are that in make. from making the investment in say, of efforts capability have each needed perspective we sure

important continue acquired. those the believe exists markets to value a position and you hear you we ultimately to believe businesses it’s we – and well to there. in making is and us for We those start that get the investments obviously number future we So it of to are the ourselves it’s for in really been see

Vincent Sinisi

Best luck helpful guys. of That’s right. color. All

Tom Bené

Thanks.

Operator

Your go is the with ahead. of Chris line from Jefferies. next Mandeville question Please

Chris Mandeville

understand you new how and evaluating my some goals but, apologize correctly are or go-forward might I possibly three-year final XXXX the basis if the if still clarity tax confident million it and to outlook, it’s here, things numbers? open didn’t use on a over EBIT you taking could EBIT million on adjusting I for three-year line is your Joel, thanks I $XXX get on $XXX leaving growing remain reform Hey, in question. effectively you to

Joel Grade

only are be we plan. again. lack on No, targets clarification of this, adjusting to three-year there for is our ask our you clear, just should not next Yes, it

out is plan as million targets $XXX our next three-year for million Investor Day. talked to at $XXX Our we

had are the certainly options We they are are what are. is we investing what said to simply but evaluate that, our for – we continuing again, targets

Chris Mandeville

Okay.

how but in And how could affected timing end U.S. then, target to bit, weather just shift and/or Easter on insights yourselves? So same, a nonetheless during the And the trended any discuss have may And then, cases any may okay. the have willingness quarter-to-day is trends? quarter?

Tom Bené

you U.S. just just on what the am weather you trends talking in – Are Chris, about how just missing pieces I share are or affected general? saying.

Chris Mandeville

quarter, discuss just Easter overall in quarter see so, and weather and cadence quarter-to-day terms the Yes, to throughout case of if how impacted you this trends? the it’s willingness then,

Tom Bené

Okay.

is whole aware corridor. the through, also talk we impacts, International let’s we U.S. pretty say, some in the U.S., some what happened actually, certainly weather as specifically, both eastern Northeast, the of in around had in So, in of our and but the businesses everyone

So saw our on we certainly some volume. impacts that for weather

as The about small other went look, volume the would we work XX that last got quarter, basis the last shift bit that we QX. New went gone a did probably because the our about holiday, think a we what did not at thing had Year’s a about end have happened on, little of talk point that QX, year think back into in we shift the hit of around meaning, also quarter that took that that impact, prior a into we in we QX, – and in business place of QX that impact

across for a we those landscape. of some restaurants an talked whether say, good about speaking, and quarter. market in and believe to pretty numerous the generally But, Food segments of position, has the been we’ve sales opportunity in volume to in that choppiness given restaurant as good overall be I’d the of to lot times, segments continue it’s Service opportunity about things for business us or of we slightly plenty because operators. fundamentals the impacted other that numbers you the trends. continue industry our share feel we for our But these saw there So weather, believe grow our is kind that this March feel There

Chris Mandeville

ability And weather restaurants benefit the as is there to many the quantify any that Easter call out? real impact and/or

Tom Bené

don’t lose those as I we – this going not it’s it’s I get that all shipping don’t go it, easily year-over-year I the it get you usually this necessarily know, We days to back certainly many when know we believe you think impacts. because easy quantify so we – That’s because weather, not twice we last like, hey, business, in week didn’t happens. to out am out week. of how

So, but I a more you those in think with is, It XXXX. year out. this to the reality have lose year – our days, and affected year year we little fiscal deal just in be fiscal in

Joel Grade

think, quantified Chris, we trying I and to both we that perspective an the it. here, try But that oversell acknowledging had are to not are point so I simply I deal, big mean, and not impacted. some that we we we something like fact overly from Tom’s it’s a were areas to volume haven’t said, from probably expensive,

Chris Mandeville

Okay, thanks guys.

Operator

Heinbockel of Guggenheim line next Securities. Please question the Your from is John ahead. with go

John Heinbockel

on So, the do an MAs, local timing impact X% when on they you do in to those like in investment BPS secondly, much growth? of the growth that something folks, quarter? given be you that, then contributed case that make onboarding how that? the And SG&A to or think the XX start think Could

Tom Bené

for Thanks question. morning. the Good

that about, asking making But going you big sales think as place these important addition of making the and say are and to or are to are impact. marketing in you organization an organization one was somewhat what important expense planned associates and would a that number some putting as in investments about investments investment the So, I’d technology key we that. we we of think three-year and them. areas the I that support am plan we’ve is, in of I believe it’s that say, are the why knowing there to what the was both of were and impacts, part not we done committed we a three numbers we percentage that you really this exact went that to committed to give pretty about Certainly, that investment needed U.S. a strategy. the of when into specifically we’ve and get business to this is

So, something long up and how will think is takes planned to about speed. timing, MAs it we it that From fully you how will a it if think. long and to get continue these up

still folks to better probably appropriate. getting we really the We’ve better three the in much past. programs up and a in ramped these are impacting had What marketplace. we’ve process gotten I think, still the is quarters business while got in and guys to trained. get It four than place takes

done after So We’d or organization. I’d say, the so around with of I wouldn’t suggest selling it we’re have quarter. this probably another investment quarter

paying obviously our we The are cases. shipping if the other times, have two talk when areas do and depot our fixed drivers this, in are with and we is, there. some Often expenses not Joel cost around we were are warehouse – about times weather impacts even we’ve our got

in the and a we And had consistent why and dealing we expense. good the not We of more have year. really favorable bad maybe that year was year last year-over-year. our say, had was expense. of we huge was a out we in out. thing also is it’s do this up expenses issue, prior year I’d we our are stood operating and we a some debt versus history, incremental Fuel that had know last and year part what debt had less but bad then this of called And obviously with So impacts is fuel and operating just the associated with that like we

John Heinbockel

And the on then a follow-up just MAs. as

wrong. am I if me correct So,

And Is growth? points too local went case much? of pickup, growth that in in MAs. X% guys you couple maybe I to to that flat Or like from can think kind these is once add mature of that that basis fully up would about XXX kind are a something that right?

Tom Bené

is I not the certainly quantify in analyze opportunity enables to going am I us John, talked believe try to that. don’t past, ability we’ve the focus resources. what to the as better to these – we that,

added now much place that just have in resources surgical We put in might right focus we past, we the in and are the on right more things. we them are So and the hope approach.

our certainly them adding that and our where about. – three areas. so, not areas the And is we built it it have year – something we that we accelerate opportunity, We’ve it’s we plan. it’s will not certainly that believe But everywhere not think of in into by it’s in something growth those new

in numbers points all. a But incremental MAs, certainly with couple it’s the sales we’ve can’t couple growth. going drive of percentage if we in quantify So hadn’t embedded shared I percentage you necessarily that’s to

Joel Grade

And I it’s I call, and were of and people Hey, very are we give talked trajectory here. you perspective points year had, into as I’ll at the we – conversations million corporate of in hey because that some is, remain going of we what just may this around, target, job investment plan, given to heading of recall, expense will stuck this, we Joel. from been will drive saving ultimately lot – a you’ve questions $XXX little part dollars $XXX data things one operations just firm continue even long-term this reinvesting of Maybe in you we some I thing the an of constant consistent We benefits. the three-year about a that our accelerated so, outperform about good are side this, what the terms and then number. actually can million corporate of expense we’ve the dollars second we are think we are maybe here and some a on one, very then is, what two those it’s getting to of, – are other of and perspective from John, little one if done it’s that into and that Number of – we lot a this would talking somewhat that. how on add is to included you remain an and on to

rest costs. with the seeing the some I give those on a of of other call So, we’ve of perspective, I just to But, as I the very both there of are and relates some bit consistent is to again get a effect other to here. think in book- think cases people what and about wanted little of talked the you you what it

John Heinbockel

Thank you.

Operator

Please of Your line next ahead. the Securities. go Wells Edward question with Fargo is Kelly from

Edward J. Kelly

Hi, morning, guys. and thanks my Good taking question. for

Tom Bené

Good morning, Ed.

Edward Kelly

business the things or you what obviously customer I think an about from there or segment and hard slowing update are about you has a whether not, it’s the seeing to a can been, down independent I some may concern you very be Tom, on local business channel just Hey, perspective? ask from track. that There just, demand from

are seeing you there what just about forward? the demand So on expectation is and what side going your talk

Tom Bené

Sure.

seen said. So, a look, from we really big change haven’t what we

these to wasn’t consumer of and off restaurant I much folks, for dynamics think continue capable more are this a you we to and the They it’s all very They if whether also reasons growing that are is out important the this happening things changing that – model segment the space of there. are flexing about, there the delivery business available kind talked that’s of their think out technology and out to believe those or there. we’ve about, their

things are lot So in happening that of that there are space.

we We feel them with numbers runway continue about that at are they impacting from that there these there. still are some. is product there cost inflation is we obviously folks see our cost dealing some our facing, Clearly, good to and pressures and think least

continue we’ve happening for and area, restaurant we challenges forward feel the with and straight said think position, can our There industry the quarters would grow as always grown our XX some good believe all as room kind what them we generally to the we’ve local earlier, be we this and – we’ve as that micro we change. in are markets, now business out it’s is go in share talked there I’ve to we is plenty Some given talked the us are of there we – labor and here. a for certainly like feel labor to But growth kind I going about. impacting call for of challenge deliver you growth that of

These think start three five get are they about. some or traction. – get more we’ve they that traction. be emerging concepts units are about out as folks talked and starting these So add they to as that of can are as to the then There continue these

So we independent that some good of pretty the seeing are segment growth market. within

Edward Kelly

the a begin quickly that the on we through? normalize shine cost Service follow-up within see just expect to in you when I about to got cost the Can growth side. Food talk should and U.S. business Okay. bit a underlying true EBIT

Tom Bené

little we cost. top-line more start get to back as see into get think, I to should XXXX, versus balanced a year us you fiscal

plan focused about we said you top-line, into growth investments XXXX. fiscal next very plan. businesses Joel are that plan are I them. I across our and we we should you as talked our purposely what new three-year deliver had in plan some expect You plan, know, expense We’ve our think as these we profit, our expect delivered and base we we’ll year that get three-year But between should fiscal year as are get committed our XXXX, our what We’ve through that’s on and for have and think we that that year executing – that to in the communicated built. I And our gross very think we gap we into we said, had should just we we exceeded you first business, as three those in numbers.

Joel Grade

we without we feel – again And present that. that to quite and deliver able do honestly, NAV about to certainly wouldn’t certainly ability happening, be our that good feel we gap

that’s think way this. I certainly about to So the think

Edward Kelly

guys. thanks Great,

Tom Bené

you. Thank

Operator

the next Karen is from question Please line Short Barclays. Your go of ahead. with

Karen Short

thanks. Hey,

profit your operating Just quick on a goals. question

three you and still the Can just to where update planning for are at now? an high-end give are this then you be stated years, You us you XXXX.

Tom Bené

at essentially million are through we XX Yes, Sure. through, $XXX quarters.

Karen Short

Okay.

Tom Bené

think we place. So in good are we a

Karen Short

be the fourth specific Is the you the lot should would in quarter than look be we Well, the the quarter, were at you the there achieved seems guess, anything need larger fourth fourth is quarter, year. just about that this get lot quarter delivered that – as so think bigger I in I if had like a XXX-ish there definitely about? a year, past? be way million quarter this fourth percent have to in each will you to mean, it I

Tom Bené

mean, I agree. I Yes,

certainly but, good feel a continue typically as there number us think, QX one, it. it’s to is seasonality, smaller being I obviously, just, QX a a being quarter typically big we some so, again it’s typically Two, and strong quarter certainly for a anticipate about quarter general, but in well. as continue about. certainly to couple there, numbers to just larger say some we one. shattering certainly comparison we do we get expect – expense nothing continue expect areas But some positives – talked on I’d We – those and

Karen Short

of help of of general. freight, then, freight in terms obviously, had kind to I guess, Okay, plan you pass in a some headwinds, easier to also in get it on did but said, you I thanks. guess, mitigate And is place this or unchanged? that the quarter

Tom Bené

takes for Hey, this I us it as time the it but way moves to easier, takes of even go the normal inflation and products, little I so cost on, think of of up become primarily and customers, if Karen. you X.X% comes what’s contract think you works, the landing or it mean, isn’t products a about just The the customers okay? up Yes, to already have in another inflation if – it. the look, that’s really about independent the think so it part of further. cost

time, you customers, along. a way us cycle that the on independents, from contract harder, ultimately along. a that more as impacts in contract can to but have able you actually So, And freight hit more of pass pass given the pass little we those customer, and along that are it’s to we the the some

well. So, as extent. the answer is, helping longwinded that’s yes some certainly to And

Karen Short

should than quarter better for sequentially, guess I But in shouldn’t third that context be it? you fourth then

Tom Bené

you of season what season nervous is, maybe think, on little we is new still I hoping freight Things third to there I produce, had big all in we freight out, road. mean, are summer a is of of movement be seems season. country the said there continuation should is are say of better. the a that’s and Having kinds would necessarily the we this what lot about in summer kicks I expect like that, a quarter. a

what So, we year. are will last that relative we time QX a tell. little in of saw nervous to about But,

Joel Grade

right. one assumption But are have $XXX thing hit clear, I our market. to to that, be improved just – mean, freight on ability to to I’d million in $XXX we based an the not banking add the That million to

Karen Short

that. wasn’t I requiring Right.

any really within before growth, same-door how asked been hard coming that last organic Okay, and same-store and but more local do this versus have to guess, sales it’s insight sales it’s into from I new you’ve do, you doors? question, much just know the case I or

Tom Bené

asking buying as what would do how much coming about in that’s we is you business penetration, that think Well, so our is customers manage lost. business business, we well we’ve call from are what or more as is current new

can be on suggest sales. are know, every Our a But that and concept highly are market we would in that’s Karen, that variable, going every on market. getting you positive, little every and penetration what’s different more as customer which depending numbers bit

continue has customers across a pretty the feel said the as and that doing lot So, business, everybody that but a got everybody customers take is I good in well. to concept, about about good space. with them winning not we to Not of it’s many feel these we hard But, we the do earlier, are succeeding. of business

Karen Short

Great. much. Thanks very

Operator

Markets. Your the with ahead. Wolf next Capital is of from question Andrew go line Loop Please

Andrew Wolf

Thanks.

Just the getting it’ sequentially wanted lot s you about gross consolidated to ask basis. a on margin., better a

the it what or think pricing, efficient inflation that distributors to of ascribe the a would improvement there? little for or is you more – making max for a So drove give us mainly less markets sense

Joel Grade

really and there there speaking, wasn’t – Andy that let all I a mean, change on Yes, significant the it say would broadly chime first I’ll in inflation of here. I start of Tom inflation I’ll to I much from mean, comment, perspective.

again, that I in we margins. continue to solid ultimately think drives, see what improvement

talk and about mix be We margin. growth, our to contributor always, positive to continued brand into a growth local that’s a good case our certainly overall of strong continue again, and so continued

those we’ve margin there. that improvement contract doesn’t last translates some just overtime suggest Tom that made, regarding to to dramatic cost the I about well. this freight. conversation point customers as ultimately the pass some in particularly that – ability had that along of But think variability Again, that the talked the of as we some shift

I allow But through pricing caused kind to of area. So, those utilization when well it’s revenue our technologies management, mathematically really things macro it. swing couple our with I with continue in wouldn’t been continued that us think of general, the sort overall just see, any to you just again, technology the there do improve and has that’s of enhancements in to

Andrew Wolf

wanted up the side business where still it’s follow-up real down, a if International this the quarters three but I I Okay. first just you substantially bit. for the of quarter are on quickly could, to

be just I First I just the want calendar driven profit your to it what fiscal wanted am heard make implication I calendar to heard harmonization the really this make I – sure improvement? what Just is – I what’s the that to better sure for at Brakes? right. And operating get you internationally, explanation, mainly QX, am increase the of by trying should a in quarter’s

Joel Grade

in drivers is you first to QX this mean, business anticipated main movements. our about in some that about in the I second the quarter better one quarter what certainly again, talked to and there of over and would of of of the the terms we’ve that that is, in talked mind, few some International We and negative percentages year impacts, last this improvement some get the for a half being small so But But, of so, one, the say the mean, quarter. smaller half we’ve quarters. see started dollars. in of is bigger that was calendarization on number Andy, element I of based so I keep I Well, think dollar certainly

that’s again as think, fourth of I that see – more well. you’ll some and in anticipated the quarter have as So, we

what suggest continue But work pick as of are up done the and anticipated, underlying announce to of a that but that, of which that’s operations lot that’s to up not But, in is seeing we gives little some we’ll certainly here QX. being the there we more obviously to half some think, picked recovering I you year us calendar So certainly again, impacts first that. and all there.

Andrew Wolf

That’s Thanks. helpful.

International terms similar now leverage assembly? So, the such of part and seasonal can U.S. think to operations we modeling of in

Joel Grade

a would heading saw it’s mind, some we yes, fair we’ve next certainly to you much out year, anticipate this of quarter where that. into certainly it we say, comment, more I year, are the Obviously, I that’s stuff in again to see going our think that called out, fiscal smoothing Yes, Andy. one starting keep similar. go But in

Andrew Wolf

Thank you.

Operator

Your next Bill RBC line of ahead. question is go from with Capital. Please the Kirk

Bill Kirk

question International. on I you. have Thank another

top-line I be what impact on have it in currency the think the did and will segment the profitability in period? that Q on tomorrow, for but

Joel Grade

you Yes, front and you to last going certainly right and don’t have itself. me – for are now what, the segment know to that in I the have have you’ll of Q to wait

the have whole, of a specifically as on until was impact enterprise similar about on exchange impacts you’ll profit little wait for gross terms tomorrow. about overall but the net for contributed the the a OpEx foreign that our from segment there an and enterprise, minimal top-line. end over impact, day, bottom-line, but to at X.X% – fairly that of had the It As in

Bill Kirk

International maybe to for What case idea. And segment were get same Okay. cases another way in to growth the were the – the what XQ?

Joel Grade

our the business Canadian International or our U.S. Yes, so in call they out same – break we that’s are in as volume businesses. our what not our we actually all cases in something metrics not or

we again, don’t there actually across those so, volume metrics businesses. is And have, different

would I segment. that metric get for – volume call We what harmonized haven’t

Bill Kirk

all Okay. Thank me. you. for That’s

Operator

Marisa question next the America Please Sullivan of of with go Lynch. ahead. Merrill from Bank is Your line

Marisa Sullivan

Good into morning. fourth quarter if expectations exactly sure moving you the into of am half what this but the I then so Thanks for not stated inflation year? for taking the my calendar is questions. your back far, and

Joel Grade

call what don’t we’ve little is, our consistent out the I forward three few move that plan we know expectations really again I at, pretty as are today Yes, were, I is I’d laid look up, I’d think is dramatic Day But our next over say, think we with we are that where slightly our that certainly, there. where out necessarily anything year the view. and here way maybe I’d below at at our Investor months. expectation it’s

Marisa Sullivan

this there Got to prepared out into in fourth challenges, there was think that some related is or call was you weather there just to it. continue And quarter? else your remarks, anything I the operational mentioned might

Tom Bené

talked impacts about, weather-related primarily we the I What had. that Marisa, was,

impact was quarter. transportation for an us also of the challenges, fuel, And the in ongoing some obviously

lot those to Obviously, are weather I think, but, continue, have fuel problems. don’t ones. going we So obviously we the hoping a is of

Joel Grade

and think thing start-up I’d QX mentioned, those or mostly cost outsize of operational on this we of negative as add The and liked. other of we we I quickly a a – have – we impact this staffing of contract side, our some have of is, as a Yes, the as this mitigated still when things, kind did do year that we we’ve better the I mentioned in business, up little of one – in had mean, we not only taken on I bit time of some bit the overall new re-ramp would impact volume on metrics. of weather given and

now QX of and be in so, of And shape that good well. do that little think we as we in forward. certainly, a will bit going mitigated was that kind there should And that’s

Marisa Sullivan

Thanks helpful. Great. That’s so much.

Operator

Bania Kelly BMO Capital. line go of is with next ahead. from Your the question Please

Kelly Bania

taking questions. for Thanks morning. good Hi, my

ask you understand versus and some maybe of a to maybe wanted are of little again, terms that of accelerate operating growth bit and of momentum of quarter and expenses. the maybe in that that – outside how different the expenses? things this Just of to your is like operating last Can control us operating out things much the maybe way maybe some expenses MA quarter, you a and have technology, on investments some of the help direct your more

Joel Grade

the built big and knowing it’s that I’m were that remember kind probably of these And, to ago Kelly, at in some point. out the the it’s areas. quantify we of each these what’s business those happening into this X.X of three in years a – year not important would make Yes, to I I going investments areas planned not quarter plan you like many of we part laid talked to about think again, thing specific these in each we expenses is, again, would say, expenses of level But of U.S. needed

look, new real on think, those and challenges about was and I up other the and we of whether debt these weather real, the one. of volume or just side, then transportation some of customers, warehousing some bad sales operational talked it’s the where ramp the are are we’ve without and expense certainly the the the expense got impacts

the when would in to that that improved. investment we gets more more areas. business are MAs, customers are big with continuing those that efficient, on organization with certainly And sales we make this talk and making effective include experience about our work selling how technology doing So, I and to us have

just these talked were planned. It see of earlier, start selling the in of fiscal the So, and we should first to to relates But most are areas. those big I part XXXX. focus I side this think, said mitigate earlier, we year as as those of the

Tom Bené

the just these of this we next we’ve good here some while the part the certainly Kelly, as next about as good seeing talked are we still about feel my feel we is did of – of we seeing Investor one this well talked, – to But again, this about and Again, it. we part I And plan our mean, gap – I Yes, again, OpEx continue – three improve. spreads GP again, that some plan at plan, about at. and I both year out out three year continues last just again, for of laid of better headed of expect certainly, Day last then, all comments, this path are we point those part remind between one. just of making prepared talk you, I into anticipate we as there and the where as investments, some three-year you as obviously,

Kelly Bania

that’s Thank another just in one terms maybe Okay. helpful. And freight. of then, you,

that or of surcharges performance better couple of little level a do mentioned peak we terms point at here? a in doing going do that you for quarter, is we’ve also, come in we the think where of years a to quarter, You impact be this are last back get fuel kind something either but or And freight hit this industry? the what to on of

Joel Grade

bit morning. little freight a talked we’ve So, about this

too by, of performance is going feel QX probably we and lot happened lot of of think a anybody some in we then of to said call continue. I a to good some with were level think by earlier, our actions gets really it’s as right as hard driven taking. whether has I is if that’s this obviously show to tight, of do I start capacity to who we think what freight challenges, capacity the industry, And driven now, up. that and moving about that it and It’s

been necessary. And work at I at. it’s to so. aren’t the There or so, they to But, and last to workforce better to freight, ways pressure drivers on a is we was got continue look that’s – in Because overnight. from rail are something drivers probably drivers into of not for not obviously of the receive find a to got to move year suppliers. as It’s going freight change all as option. coming great good of we’ve we the the And think lot point option continue been a really one lot

to here everything and But are us hard make call we for a we that. continue can. going on So to it’s sit

there in and and process out our a is to place surcharges, and articulated have for we that fuel surcharge customers. that primarily, approach Regarding fuel

those have fuel process we in as But grow, have to and we to place. do mitigate that plans as all of it. continues So, a recover of some

Operator

is next Goldman with the from Sachs. question Karen go ahead. Your of Please line Holthouse

Karen Holthouse

taking question. you thank for Hi, the

on the inflation commodity Just another side. one

see the and attributed initially grain hurricanes moved, X% a areas? and maybe the Are inflation think of you lot or X%, or sort of now when row starting what up maybe more bit underlying are it it of I little a started that, to move noise a couple to it structural We around protein a in pressure quarters in as produce? to sort to starting view in

Tom Bené

mean, I we would see probably I level anticipated. getting of there. I would us Yes, frankly actually from a produce and some say a perspective, seeing produce I we inflation wouldn’t longer are than really dramatic say, anything that as little little still higher

dairy, meats. and categories there. kind are The produce here of that’s So still main

anything know higher produce a Karen, I structurally we than think, bit probably I would really kind the I that’s really say, of little again, – that But underlying so, And really would and is little there. been don’t call bit that I longer anticipated. I’d a outrageous just

Karen Holthouse

about, up XXXX of or still the Okay. be balanced should like bit plan implied sounds come a below sort And XXXX, of XXXX, potentially of a we it sort into as about during it be then, on this – three-year would a three bit years. think sort throughout little cadence translates the case XXXX little How that pretty current between the balanced two the between to Would year? in previously catch next years? year going is talked it of

Joel Grade

year ability our our sort we’ve are high-end I which Yes, is fact the for of time $XXX just as the I – we last year of just these terms plan. we would objectives year pretty our confident are Day is of in set the terms we’ve say year-over-year first talked the growth very or our in We million. that at things reminder, experiencing been that to a very three of as Investor part being feel is, is, we sort next of achieve to the there million year Karen, so, about plans. we’ve up three mean, next guess, consistent we much, plan of I track And well into in the in three on of are balanced very are feel of the one we plan, that, heading of as it’s $XXX the

made, some of talked into of year Tom so, certainly - this little expense investments coming anticipated with did we’ve suggests some a well, level we year as we that the a anticipate higher this about, And good are over bit about track we where the kind and it’s would general, ramp on bigger we say said a next at. couple. we in being I little of But feel of just where are on

Karen Holthouse

Okay. Thank you.

Operator

of with ahead. JPMorgan. Your John next from question is line go the Ivankoe Please

John Ivankoe

you. Thank great. Hi,

you Just different think two made. I comments of a clarification, that

So, do dollar GP expect in U.S. but corporate you still quarter, OpEx Food correct? with expand on basis, to Service, is fourth the not versus growth that gap expansion in the

Joel Grade

really part. I expand, What is into the an basis, saying was didn’t I that to I on – the overall enterprise was go yes. on second Yes, you expecting

John Ivankoe

especially hear, sales talking would new the you quarter. perhaps optimizing improvement relatively in Okay. so – slow And third sales interpreted did expect would when fourth were force, that – as XXXX, about but force, that you I be quarter kind of as fiscal you beginning that the you

me So, I wrong. correct am if

Joel Grade

I Yes, of know gave John. guidance, don’t that actually kind that we

people. know, does out there guided this you that little been wouldn’t those didn’t QX. we As But necessarily it on – a takes bit dramatic has has in that. again, I as at time anything pointed Tom look for sales of

John Ivankoe

Okay.

Tom Bené

the of all for the that’s John, business. the businesses overall puzzle U.S. and also, one cost And certainly piece

I So, that. anything wouldn’t assume in

John Ivankoe

early very very there is much digital Fair your markets a enough. effectiveness. mean, does can technology? any that I I and point effective mean, specifically more that on finally, that for and and your people? and you with And you is are that efficient important have for sales piloted efficiency force shows mean, comment, certain that customer, you Okay. expect sales in opportunity I important is type of that based what happen there obviously, margin XXXX the

Tom Bené

are see both We feel space solution the business. in customers our we from good of we technology to the and who doing work in us technology order their products continue continue the to about using and to improvement really are number operate

a that space to seen, bit in have to in But, drive as some it’s going like for benefits us we certainly also be the We one customers at and to feel are solutions. we speaking, good where that about talked broadly and long-term. little need will make technology we’ve penetration an more use feel who improved investment we continue

Joel Grade

thing mean, the a that are talked targeted. of though, force is, other sales I we’ve investments as we’ve there reminder made would only the is think in to that our add I I some very just about

technology, to targeted words, actually other necessarily I reflection like the isn’t we very in both from anyway opportunities of force penetrate a based So, again, productivity on say, are where of see as we’ve sales areas we sort increased this would but were here time, made result the anticipating investments market. our in of our over – additional

a that just So, well. to reminder as as

John Ivankoe

Thank you.

Operator

further conference everybody. Well, third And are questions. into to closing call. tuning you for Russell continue remarks. We’d at there thank time, Neil with Please like thank any you A. no quarter this our

As questions is any you always, team the for Relations for may have. attention. Thank Investor that you follow-up your here

Tom Bené

Thank you, everyone.

Joel Grade

Thanks.

Operator

Ladies fiscal does the and gentlemen, conclude call. XXXX conference third and Sysco’s this quarter

may You disconnect. now