Sysco Q2 2024 Earnings Call Transcript

Presentation

[Operator]

Welcome to Sysco's Second Quarter Fiscal Year 2024 Conference Call. As a reminder, today's call is being recorded. We will begin with opening remarks and introductions. I would now like to turn the call over to Kevin Kim, Vice President of Investor Relations. Please go ahead.

[Kevin Kim, Vice President, Investor Relations at Sysco]

Good morning everyone and welcome to Sysco's second quarter fiscal year 2024 earnings call. On today's call, we have Kevin Hourican, our President and Chief Executive Officer; and Kenny Cheung, our Chief Financial Officer. Before we begin, please note that statements made during this presentation that state the company's or management's intentions, beliefs, expectations or predictions of the future are forward-looking statements within the meaning of the Private Securities Litigation Reform Act, and actual results could differ in a material manner.

Additional information about factors that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes, but is not limited to, risk factors contained in our Annual Report on Form 10-K for the year ended July 1, 2023, subsequent SEC filings, and in the news release issued earlier this morning. A copy of these materials can be found in the Investors section at sysco.com. Non-GAAP financial measures are included in our comments today and in our presentation slides. The reconciliation of these non-GAAP measures to the corresponding GAAP measures is included at the end of the presentation slides and can also be found in the Investors section of our website.

During the discussion today, unless otherwise stated, all results are compared to the same quarter in the prior year. To ensure we have sufficient time to answer all questions, we'd like to ask each participant to limit their time today to one question and one follow-up. Additionally, we want to make the audience aware of Sysco's participation at the CAGNY Investor Conference on February 20 and our Investor Day on May 22 in New York. We hope you can join these events in-person or virtually.

At this time, I'd like to turn the call over to Kevin Hourican.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thanks Kevin and good morning everyone. Thank you for joining our call today. I'm very pleased with Sysco's performance for the quarter. Our company is the market-leader in a growing industry where size and scale matter. This past quarter, we demonstrated that important position of strength by delivering another quarter of double-digit earnings per share growth. Sysco delivered bottom-line growth through a combination of volume growth, disciplined margin management, and expense control.

Our positive momentum from the first half of our fiscal year is expected to continue into the second half, and we remain confident in our full year growth expectations for sales and EPS. This includes 2024 adjusted EPS growth of 7% at the midpoint of our guidance range. Sysco has improved how we leverage our scale through the Recipe for Growth strategy and we continue to deliver industry-leading profitability metrics as well as leverage our industry-leading strong balance sheet. Our confidence in the year has enabled us to increase our capital allocation to shareholders for the year. We are announcing today an increase of our stock buyback target for fiscal year 2024.

We now expect to buy back approximately $1.25 billion of our stock this year, up from our previously communicated $750 million. With the increased stock buyback and our industry-leading dividend yield, we will contribute more than $2.25 billion directly to our shareholders. Sysco's strong balance sheet and free cash flow enable us to make these types of shareholder-friendly decisions while providing ample liquidity to fund the long-term growth of our business. We are, as we say, play from a position of strength. So let's get started with a brief highlight of the quarter on slide number 5. Beginning with the top line, we delivered sales growth of 3.7%, a sequential improvement from Q1, driven by a combination of positive case volume growth and positive product cost inflation.

Importantly, this included a sequential improvement in local case volume growth quarter-over-quarter and year-over-year. We will share more on that later. Turning to the bottom line, we posted over 11% growth in adjusted EPS generating strong operating leverage. This is the fifth consecutive quarter of positive operating leverage and the 11th consecutive quarter of double-digit adjusted EPS growth. Kenny will provide more details in his financial section.

Today, I would like to update you on two topics I highlighted as priorities on our Q1 earnings call: local case volume and supply chain productivity. During the quarter, we sequentially increased our case volume performance, growing our U.S. foodservice segment 3.4% and delivering local case volume growth of 2.9%. We grew our market share profitably through our improvement efforts. Notably, this growth comes with the industry-leading profit margin rates you can expect from Sysco. The rate of volume growth does not include the benefit of Edward Don, which closed in late November, and we remain solidly on track to deliver our growth ambition versus the market this year.

Importantly, the initiatives we outlined to drive local case performance earlier this year began to bear fruit this past quarter. We are focused on improving sales execution. Our efforts are centered around properly serving our local customers in improving our local sales growth. A reminder of our local sales focus areas for fiscal '24. First, we started adding incremental sales headcount in the second quarter and expect to continue hiring in the second half of fiscal year '24 and in the coming years. The incremental headcount is targeted to optimize territory sizes and enhance sales consultant effectiveness, demonstrating focused actions to deliver higher returns.

The benefits from increasing our local salesforce will accrue over time as new colleagues complete their training, move up the productivity curve and settle into their territories. As previously indeed, we continue to expect to see the vast majority of the positive impact from our fiscal year '24 hires impact fiscal year '25 performance. Second, we recently refined our compensation model to further motivate our sales consultants on win, win, win behaviors for Sysco, our customers and our salesforce. We can already see the impact of the compensation change, and we expect the impact of these recent changes to grow over time.

We will continue to optimize our compensation program over time to ensure we are properly rewarding and motivating our sales team. Third, our focus on performance management continues with a hyper focus on customer visit frequency and sales consultant visit quality. These efforts are improving outcomes of our sales visits and can be closely tracked in our CRM tool. Leveraging technology to maximize the effectiveness of each customer visit remains a top priority and I am pleased with the impact of our sales leadership team in the past quarter.

Lastly, total team selling continues to gain traction. Our sales teams across broadline and specialty are working more collaboratively and we are leveraging our data to maximize the time allocation of our selling specialists in produce, protein and ethnic cuisine segments like Italian. All told, these interconnected actions increased our local case performance from Q1 to Q2 by 300 basis points. Importantly, the exit velocity of the quarter was even stronger as our performance improved each month of the quarter. We are confident in our ability to continue to grow local sales, while maintaining the positive momentum we have displayed in national sales.

Next, I would like to provide an update on the progress we've been making within our supply chain. We continue to improve the performance of our supply chain by focusing on operational excellence. Chart 9 displays our year-over-year operating profit improvement, driven by positive operating leverage, with gross profits growing at a faster rate than operating expenses. Our supply chain employees continue to move up the productivity curve due to improved colleague training and significantly improved levels of retention, especially within the driver position.

With improved retention comes improved outputs across the supply chain, lowering hiring expenses, lower training expenses, improved productivity, lower levels of product shrink, improved safety metrics and improved service levels to our customers. Each of these elements positively impact our P&L and the improvement drops straight to the bottom line. We are extremely focused on continuing to improve colleague retention and productivity within our supply chain.

Lastly, we continue to improve the rigor and discipline in our colleague staffing efforts. This includes better matching our hours worked to the volume of cases shipped and the difficult work of flexing down our staffing during lower volume periods. We will continue to refine our engineered labor standards that drive our staffing models, and we will increase the agility with which we match our staffing to our volume. Our Q2 results display a continuation of quarter-over-quarter progress in productivity gains, and we remain disciplined and focused on continuing that rate of improvement. These efforts will benefit the P&L in fiscal '24 and will carry into '25 and beyond.

We are bullish on our ability to continue to lower our cost to serve while simultaneously improving customer service levels. As I lift up from these two topics, improving sales effectiveness and improving our supply chain productivity, I would also like to communicate that we remain on track with our Recipe for Growth business transformation. Our digital efforts continue to advance. Our merchant teams continue to improve our product assortment, especially in Sysco brand. We are excited about the integration with Edward Don and how we can profitably grow our Equipment and Supplies business.

We remain very pleased with the performance of our Greco Italian platform, and I am proud of our international business leaders for the compelling performance produced year-to-date from our International segment. At our Investor Day in May, we will dive deeper into each of our Recipe for Growth pillars. Foodservice distribution is a space for size and scale matters, logistics scale, cold storage scale in both warehousing and transportation, technology scale, and salesforce expertise and scale. We believe that no one is better positioned than Sysco to leverage global scale advantages in order to better serve customers and profitably grow the business.

I am very pleased that fiscal '24 is off to a strong start, as we are profitably growing our market share and continuing a track record of delivering compelling top and bottom-line growth. For the remainder of fiscal '24, we remain hyper-focused on the execution elements I highlighted today as well as advancing our Recipe for Growth strategy. We are confident that these efforts will enable Sysco to deliver our financial plan.

I'll now turn it over to Kenny, who will provide a more detailed review of our financial performance. Kenny, over to you.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Thank you, Kevin and good morning everyone. I'm going to build upon Kevin's commentary with a couple of points. First, we have positive momentum as Q2 marked another milestone with record topline and bottom-line performance. Future results included sales and volume growth, along with strong cost of goods sold performance, resulting in adjusted gross profit dollar growth and margin expansion. Positive operating leverage was also driven by gross profit growing at a faster rate than operating expenses, demonstrating our disciplined margin management, which rendered adjusted EPS growth of over 11%.

Second, we are excited about our first half performance and confident in our positive momentum for the remainder of the year. Therefore, we are increasing our share repurchases expectations from $750 million to $1.25 billion for FY '24 versus the prior guidance. This will increase expected total shareholder returns, including dividends and share repurchases to approximately $2.25 billion for FY '24. This is in addition to our continued reinvestment into the business, including M&A, such as the addition of BIX and Edward Don earlier this year.

Capital allocation is a competitive advantage for Sysco as the strength of our balance sheet and free cash flow generation allows us to invest for growth and reward our shareholders at the same time. Now, turning to a summary of our reported results for the quarter starting on slide 13; for the second quarter, our enterprise sales grew 3.7%, with U.S. foodservice growing 3.2%, international growing 9.6%, and SYGMA decreasing 1%, driven by planned exit of customers that did not meet our disciplined profit thresholds. This planned exit along with strong supply chain productivity improvement helped more than double our SYGMA profits this quarter, another prime example of our ROIC focus in action.

Enterprise inflation was 1.1%. Additionally, U.S. broadline inflation was slightly positive and our International segment was up 6.6%, all aligned with our expectations. Total U.S. foodservice volume increased 3.4% and local volume was up 2.9%, a 300 bps sequential improvement from Q1. Please note volume reporting includes slight benefits from the acquisition of BIX Produce. Our volume reporting does not include our Edward Don or Specialty Meat business based on their unique product attributes.

We produced $3.5 billion in gross profit, up 4.9%. Adjusted gross margin improved to 18.2%, an increase of 21 bps. Our gross profit dollar and margin percentage improvement reflected our ability to effectively manage product cost fluctuations driven by incremental progress from our strategic sourcing efforts and disciplined pricing. Penetration rates of Sysco brand products increased 22 bps to 46.9% in U.S. local and was essentially flat at 36.8% in U.S. broadline. Overall, adjusted operating expense were $2.8 billion for the quarter or 14.4% of sales as we achieved another quarter of positive operating leverage.

The strong management of expenses during the quarter was due to the positive impact of the variable labor planning tool and supply chain efficiencies that Kevin mentioned, and benefits from our previously announced $100 million of cost-out commitments. We are on track to achieve this commitment for FY '24 and the planning process for delivering incremental costs for future periods has already begun. Additionally, with the successful closure of our BIX and Edward Don acquisition, we are on pace to realize both top and bottom line synergies. Adjusted operating income growth of 7.6% in U.S. FS, coupled with outsized profit contributions from our international and SYGMA segments, contributed to bottom line performance.

Positive momentum continued in our International segment, with adjusted operating income growing 30.1% during the quarter. Our international results are a continuation of the robust growth and positive momentum in this segment over the past three years. The Recipe for Growth playbook is yielding dividends in the U.S. and internationally. In total, Q2 adjusted operating income was $745 million, up 9.2% and adjusted EBITDA was $927 million, up 11.6%.

Turning to the balance sheet, which remains strong; we ended the quarter at 2.75 times net-debt-leverage ratio. This is in line with our target range of 2.5 to 2.75 times net-debt-leverage ratio. Our planned increase to the share repurchase program is already in action with an accelerated share repurchase program that was executed in early January. We ended the quarter with $11.2 billion in net debt that is well laddered and over $3.4 billion in total liquidity. Approximately 96% of our debt is fixed with the floating component offset by our cash reserves.

Our strong investment-grade credit rating is a competitive advantage as evidenced by our team successfully issuing approximately $1 billion of new debt in November. We are committed to our capital allocation strategy as seen on slide 19, which includes a balanced approach with three elements: First, investing in the business for profitable and consistent growth; second, maintaining our investment-grade credit rating; and third, returning cash to shareholders, through dividends and share repurchases.

Turning to our first half cash flow; we generated $856 million in operating cash flow and $527 million in free cash flow, growing 70% and 141%, respectively. This growth includes continued strong conversion rates from EBITDA to operating cash and free cash flow, and we remain on track to grow free cash flow for full year FY '24. Our strong financial position enabled us to return $353 million to shareholders via share repurchases and dividends this quarter. Looking forward to fiscal year 2024 guidance, we are reiterating the net sales growth of mid-single digits to approximately $80 billion. Adjusted EPS is expected to grow to $4.20 to $4.40. This represents a 7% growth at the midpoint.

Additionally, we expect positive operating leverage with gross profit growing at a faster rate than opex for the year. We continue to expect slightly positive rates of industry volume growth and inflation. This includes Sysco's U.S. broadline remaining inflationary in the second half of the fiscal year. Our planned top line also includes benefits from M&A activity consistent with previous disclosures for an average annual contribution of 50 basis points to 100 basis points of growth.

We will continue to opportunistically evaluate accretive acquisitions, but the remainder of FY '24 will focus on integration efforts, capturing synergies for accretive acquisitions like Don and returning excess cash back to shareholders through share repurchases and dividends. For the second half and over the long-term, we expect to win market share, profitably and consistently. Our efforts will also focus on strong cash generation with conversion rates, ultimately feeding our plans to grow and reward our shareholders.

Thank you for your time today. With that, operator, we are now ready for questions.

Questions and Answers

[Operator]

[Operator Instructions] Our first question comes from Jeff Bernstein with Barclays. Please go ahead.

[Jeffrey Bernstein, Analyst at Barclays Capital]

Great. Thank you very much. I had one question and then one follow-up. The question on the U.S. local case volume, the 2.9%. It's nice return to growth on a one-year basis and like you said a sequential acceleration on a two-year basis. Just wondering if you could talk about your level of confidence in sustaining that accelerating growth, maybe prioritize the most important drivers of that momentum. I think you mentioned that momentum actually built each month of the fiscal second quarter, and therefore, a strong exit rate. So I'm just wondering if you could provide some context, especially as someone was talking about maybe a slowdown that has been seen across much of the industry in January. Any thoughts there would be great. Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Good morning, Jeff. Thank you for the question. This is Kevin. We're confident in our ability to continue to improve in local sales. As you just said, the 2.9% is an average -- weighted average, obviously, across the three months. And sequentially, the quarter improved each and every ones of those months. So we are confident in our ability to continue to make progress in local case volume growth. And at the historic profitability metrics that Sysco industry-leading will continue to produce. So it's profitable local case growth.

The biggest drivers, I'd say the performance management on the sales consultant side is the most immediate lever. The compensation change would be the second most impactful measure and total team selling followed up by the increased SC headcount would be the third and the fourth of the four things I said on the call, if I ranked them from an impact perspective. As it relates to the second half of your question on January, there has been a slowdown in January.

I would describe it more as a blip, a bump in the road, if you will. There's a couple of factors driving the January. Week one of January had a calendar unfavorability tied to a holiday and where it fell historically cold weather. I hate the W word. I never used the W word, but there was some extraordinary weather in January, which made it awfully difficult to make deliveries to customers in large swaths of the United States. That's backed up by the credit card data from the major banks that consumption that food-away-from-home was down in January.

Jeff, I'm not overly concerned about that. It's the lowest volume month of the year that there's going to be a blip or a bump you'd want it to be in that month. So, goes March, so goes the quarter. And we've got levers that we can pull on the year to go, and I toss to Kenny for any additional comment in that regard.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Hey Jeff, good morning. On January, I agree with Kevin, what we're seeing right now. While volume has been slightly impacted we have the ability to flex labor and mitigate the impact of lower volume with our labor planning tool that we talked about, and that is in conjunction with the disciplined engineering labor standards that we've implemented. However, weather also impacts over time, productivity, customer returns, delivery costs, which we will mitigate throughout the fiscal year with levers in our P&L. Therefore, the full year guidance remains intact.

In terms -- Kevin talked a bit about local in the U.S., one comment is local international. As we know, international is roughly 20% of our business. And we've replicated some of the RFG, Recipe for Growth playbook there. And we are seeing nice growth from our Canadian business and our European business, which is both up roughly 80% and it's really driven by new customers, penetration, and customer retention. So, we are excited and we continue to invest and capture growth with pace and discipline.

[Jeffrey Bernstein, Analyst at Barclays Capital]

Got it. And just my follow-up on the fiscal '24 guidance. I know from a very high level, you reiterated the mid-single-digit topline and the 5% to 10% EPS growth, I think you called out 7% at the midpoint. I'm wondering if you could share anything that might have surprised you on the positive or negative side in the first half of the year, especially because I think you said 7% at the midpoint. You've also talked about in the first half of the year, double digit and 11 consecutive quarters of double-digit EPS growth. So what potential incremental challenges are you seeing in the second half, especially as you've got an incremental $500 million bump in share repurchase to come? So, just wondering your thoughts on the back half of the year EPS growth relative to the recent momentum you've had. Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Okay. So, let me unpack to questions, what surprised me and what are some takeaways in the first half of the year. I think the biggest thing is Sysco has proven we can manage the business under various different environments. As you remember, Q1 was slightly deflationary in the U.S. Q2 was slightly positive in -- for the U.S. And in both quarters in the first half, we delivered operating margin expansion of roughly 26 bps and also GP margin dollar expansion and GP margin expansion of 28 bps.

So, again, I think first half was a really good proof point that under any circumstance, Sysco has the levers on the P&L to drive positive and consistent growth and being able to drive quality of earnings on the cash flow side. So, that's about more in the first half. In terms of the full year guidance, let me just provide a bit more color. So, we do expect overall this year, lower overall market volume growth versus 2023. However, continued market share gains from our company, profitable growth at Sysco.

Inflation, as I mentioned on the last earnings call, Q2 came in slightly positive aligned with our expectation. In the back half, we are still -- remain consistent with what we said on both the first earnings call that we had at the end of last year and the previous 90 days ago. We expect that the back half to be slightly positive on inflation. We still have two quarters ago, but I believe that Q2 slight positive inflation provides us comfort around our original assumptions. In terms of -- on the expense side of the house, disciplined expense management, our team has already directed an effort to reduce the structural expense by $100 million. We are on pace and we've begun building additional pipeline for future periods.

In terms of working your way down to the P&L on the tax rate side, it's 24.5%, no change. There's a slight step up on interest expense of roughly $20 million attached to the $500 million of additional share repurchase. If you net it to impact together, so Jeff, I think your question is what is the accretion on EPS? There is a net accretion of roughly $0.05 or so net of the interest expense increase coupled with the retirement of the shares. So that is the $0.05 impact that you can expect for the fiscal year. With that said, with all the intra-working variables, we are reiterating and reconfirming our full year guide of $4.20 to $4.40 with the midpoint of 7% growth versus last year.

[Jeffrey Bernstein, Analyst at Barclays Capital]

Thank you.

[Operator]

The next question comes from Mark Carden with UBS. Please go ahead.

[Mark Carden, Analyst at UBS Group]

Good morning. Thanks so much for taking the question. So I wanted to dig into your salesforce additions to-date. I know you said it's going to be a bit of a ramp, but how is the initial progress going relative to your expectations? And then how are competitor hires having? Are they having much of an impact on your ability to really find enough high-quality salespeople? Thanks.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Good morning, Mark. We're really pleased with the progress that we're making. And those efforts began in Q2 I want to be clear about this. So in the early innings, we haven't quoted publicly the exact number of people we're hiring, but it's a significant number. We are not having a challenge with hiring and filling our classes. They are roster classes that we fill, and we put them through a very, very robust industry-leading training program.

As it relates to competitive forces and the impact on our ability to hire, we're not having challenges filling the positions. That's my answer. We don't just go to a competitor, if you will. That is a source of talent. We also go to restaurants. We go to culinary schools. We're looking for people that are foodie-centric, that are good at selling, have a passion for this industry. We can train them on our tools.

We can train them on our selling systems and process, and we can train them to skill them up to be what they are, which is the best in the industry, and that's from our Net Promoter Score. So we're not having a difficult time filling our classes. We're really pleased with the first cohorts. We are on track to be able to hit the targeted hiring rate. And as I said before, that positively impacts 2025 from a growth perspective. Mark, back to you if you have any follow-up.

[Mark Carden, Analyst at UBS Group]

Great. And then my follow-up is going to be related to M&A. You guys closed on Edward Don about two months ago. How is that early integration gone relative to your expectations? And then in December, you guys announced a small acquisition with Ready Chef in Ireland. Was that one simply a situation where the economics were just too good to pass up or does it signal a shift in strategy that you guys might be more open to international bolt-on or even larger scale M&A there?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Hey, Mark, I appreciate the question. Let me just start with Edward Don, which is the significant transaction that we've done this fiscal year. I want to be really clear on the numbers that we quoted today. So one month of sales and profit are in the numbers that we described, but from a volume perspective because I know that's a question some may have, we have not included Edward Don volume in our case growth figures at this time. So the growth in cases of 3.4% in total and 2.9% in local is pure Sysco, not including Don. I just want to be really clear about that.

As it relates to the early innings, I was just up in Chicago last week. Had a great day with Steve Don and his leadership team and our leaders talking about the synergy capabilities between the two companies, we can purchase better together, buying product at a better and more affordable cost. We can target joint customers more effectively. So we have large national sales, restaurant customers or hospitality customers of Sysco that aren't currently customers of Don and vice versa. Don has some really big customers that Sysco's not the foodservice distributor, so we can sell together in a joint proposition.

And then there's this huge opportunity longer term to take that equipment and sales, product, category and have it shoppable on Sysco's digital platforms, deliverable on either a Don truck or perhaps someday to a local small mom-and-pop customer on a Sysco truck. And we're really excited not just about the $1.3 billion in profitable top line we acquired through Don, we're very excited about how we can grow that business meaningfully for years to come. And I know Steve Don and his team are equally as excited.

As it relates to Ready Chef in Ireland, just keep in context, it's a much smaller country. So the size of that acquisition is actually compelling for the country that it's in. And what it was, was a fresh point like entity. So to be crystal clear, in Ireland, we did not have a fresh cut bespoke produce business and purchasing Ready Chef gives us what I'll call from our U.S. perspective, that FreshPoint capability. We're running the Sysco play. That's the headline. It's not a change in strategy.

Our strategy is in each of the major countries that we compete within, we will run the Sysco play, which is to be the leader in broadline into bolt-on specialty capabilities over time, so we can sell around the room for the customers that we serve and do so profitably. So we're excited about that acquisition in Ireland. Our leadership team in Ireland is top-notch, and I am very confident in their ability to profitably grow the business, better serve customers and increase penetration with existing customers within Ireland.

[Mark Carden, Analyst at UBS Group]

Make sense. Thanks so much. Good luck guys.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thank you.

[Operator]

The next question comes from John Heinbockel with Guggenheim Securities.

[John Heinbockel, Analyst at Guggenheim Partners]

So Kevin, can you talk about visit frequency and quality of visit, right? Those two -- how you think about KPIs on each of those? And when you think about how that will move the sales needle, what are you looking? You're looking for a certain amount of year-over-year growth in frequency, how do you quantify quality?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

John, great question. And for the quarter that we just completed, this is the biggest reason for our improvement from what was flat in Q1 to up 2.9% in Q2 is from what I call performance management, which is visit frequency, visit quality. The comp change poorly helped, but it was early innings and that will have a bigger impact in a year to go and the incremental SCs will impact 2025.

We've not gone public with the numbers, the targets, John. But we have a very specific target of the number of visits that need to happen per week per SC, and we can track it. We can track it through the CRM. And we were not where we needed to be. COVID had a disruption in a lot of things in life, and one of them was SCs were doing more of that work from a home office than we would have liked. We kind of ripped that band-aid off and made it really clear on what our expectations are of visit frequency. That's the will [Phonetic] side of the job, will.

Get out there, pound the street, be in front of our customers. This is a relationship business. We're being in front of the customer every week matters, and we have moved the needle meaningfully in the last quarter on the number of visits being completed per week for our SCs. Point two, though, that you brought up is that's only worthwhile if it's a quality visit. So how do we measure quality? We have visits with a purpose. And in our CRM tool, it will prompt our SCs with jobs to be done that day, introduce the Sysco brand case, win back the case that was lost over the last X period of time. Sell a category you've not sold before.

Those are just three examples of jobs to be done. The CRM data-rich understands what's being purchased, what should be purchased. And it essentially prompts the SCs with things to sell. And how do I measure quality? I measure quality by close rate against those jobs to be done and we can track it. We have a scorecard that ranks every one of our sales people from top to bottom, and then we do performance managing against the quality side of the visit. Recognize the top performers, coach the movable middle and hold accountable those that aren't getting the job done and everything in between. John, back to you for any follow-up.

[John Heinbockel, Analyst at Guggenheim Partners]

The follow-up would be, right, so you talked about growing GP dollars above SG&A. So if you take the U.S., right, the delta was 200 basis points this quarter. I mean what's your thought as to the right general level? And lately, it was gross margin-driven, right, gross profit driven as opposed to SG&A. We now shifted back, right, to an environment where it's more SG&A-driven than gross profit.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

So, here's my -- how we think about it. It's both, right? It is the gross profit line and the operating income line. If you look at Q2, you can see that our topline growth was 4%. If you just do the math, the cost of goods, if you will, between sales and gross profit was up 3%. So, you had a nice leverage driven by strategic sourcing, our partnership with suppliers driven by mix of business, growth in specialty, local brand Sysco penetration. And as a result, GP actually grew 5%. So, we had a nice leverage between sales and GP.

Now to your point on SG&A, we're working extremely hard, driving productivity out. The good news is, is the $100 million of cost out that we talked about at the beginning of the year, that is being seen through the P&L and we're working through a pipeline that's going to render success for us in outer period. And that is -- and you can see GP growing, call it, 5%, and then net earnings growing close to double-digit versus the prior year. So, you're getting the leverage, John, on both the cost of good line and the opex line and we have initiatives pegged to both sides of the house.

[John Heinbockel, Analyst at Guggenheim Partners]

Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thanks John.

[Operator]

The next question comes from Edward Kelly with Wells Fargo.

[Edward Kelly, Analyst at Wells Fargo & Company]

Hi, guys. Good morning. Nice quarter. I wanted to just follow-up on the case line growth. I mean the Q2 result was clearly an inflection around what's the last quarter and the last couple of quarters. Can you maybe just help us understand how we should be thinking about the back half of the year from here? So, you talked about January off to a slower start. I don't think industry growth is all that spectacular at the moment. I'm just trying to make sure that we're in the right place from an expectation standpoint, just given how strong Q2 was? And then just a clarification on Edward Don, I know it's not in the case volume numbers currently. Does that mean it will not be going forward as well?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Yeah, Ed, good question. Thank you. We're confident in our ability to profitably grow the local business and not kind of regress back to the mean on where we were in Q1. That's one of the main messages from today's call. We've built momentum local performance, very strong. Exit velocity was strong.

Unfortunately, the industry as I did a speed bump, I talked about the W word, which I hate talking about. There's also a two-year stack thing going on in January where because of very, very strong growth a year ago tied to the prior year being Omicron. There's a two-year stack phenomenon on January that normalizes itself by mid-February, which we'll get through. And as you know, March is the most important month.

But we're not going to quote a number on today's call vis-a-vis what you should expect from a local case volume growth other than what we are seeing and what we predict is built into the guidance for the year, and we're confident in our ability to deliver the midpoint of the guide that we point out today. Kenny toss it to you for any additional comment.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Yes. On local growth, as Kevin said, our assumptions are baked into the guidance. We are always focused on profitable growth. That's really important for our company. And you can see that's the reason why that the cash conversion and operating leverage was so strong in Q2. In terms of Edward Don, so in our volume number, just to clarify, BIX is in our volume number year-over-year, it's immaterial. From a Don side, it is in our total sales number, just not in the volume number given the different product attributes.

[Edward Kelly, Analyst at Wells Fargo & Company]

Right. And that's going to be the case going forward. And I'm just curious as to why Edward Don is not included in volume?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

I mean -- this is Kevin. We don't include SSMG in our volumes because the business is measured through pounds. And just getting to a common denominator is difficult. The way Don measures their business is today not the same as how we measure the business cases versus pallets versus eaches. And we want to make sure that we get that right before we include it in our metrics, and that's something that we're working on Ed as a part of our integration planning.

[Edward Kelly, Analyst at Wells Fargo & Company]

Right. Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thank you, Ed. Have a good day.

[Operator]

The next question comes from Joshua Long with Stephens.

[Joshua Long, Analyst at Stephens]

Great. Thank you taking my question. Was curious if you could further contextualize the strength of the local case growth in terms of the opportunity to further penetrate kind of existing consumers and then also execute against new customer wins, which I know has been a target and a goal over the last couple of calls that we've talked about

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Yeah, Josh, thanks. On the existing customers, I'll bridge back. I didn't talk a lot today on the prepared remarks about our Recipe for Growth. I was trying to really keep it narrow and focused on drive local case performance through selling effectiveness and supply chain. We're really pleased with our Recipe for Growth strategy and the impact of our growth programs on our business. And I'd point you to Sysco Your Way and Perks as two very, very important programs that are increasing penetration with existing customers. They're continuing to do well. At our Investor Day in May we're going to talk about the longer-term plans for those two growth programs.

And then the third is our total team selling effort, which is we over-index in broadline. We have meaningful share in broadline, and our share is below industry average in specialty. That's why we are as focused on produce and protein and the ethnic cuisines as we are. We're moving the needle with existing customers on total team selling. As I've mentioned before, what that program is, is each account has a sales consultant generalist, who is the Relationship Manager, who's there every week, but they are not going to be an expert in specialty [Indecipherable] protein. They're not going to be an expert in specialty organic produce, as an example.

And we're doing a better job of identifying which customers have the propensity to buy those categories, linking up that specialist with the sales consultant generalist in doing a joint visit and then compensating them in such a way that they win together when those cases are added to a Sysco truck, regardless if that's a fresh point truck or a Sysco broadline truck. And we're moving the needle with existing customers as measured by penetration and we're pleased with our performance in that regard. But the lifeblood, we call it the oxygen of the business is constantly bringing in new customers. You need that oxygen to breathe.

We're very focused on new. We're very focused on making that a priority of the salesforce. It's embedded within our updated compensation model as a priority. If they win new business, that's profitable and sufficiently large to make it worth our while to be going to those customers. There's a minimum threshold. They get rewarded as a salesforce. That work is hard. Prospecting is hard work. We need to make it a priority. We need to manage it, and I'm really pleased with the progress that's been made this last quarter on increasing the portion of our business that's new business won [Phonetic].

[Joshua Long, Analyst at Stephens]

Great. Thank you for that. And then Kevin, in your prepared comments, you mentioned just the overall improvement in supply chain. It seems like things are perhaps continuing to get back to normal. Your results highlight that. Could you talk about the overall health of the supply chain just broadly as an industry and kind of where some of the pushes and pulls are now that we're a little bit further removed from some of the disruptions that occurred over the last couple of years?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thank you for the follow-up. We're really pleased with our progress of improvement in supply chain. Retention is up overall market, as you just indicated, fewer people are leaving their jobs. There are fewer jobs that are open. So, therefore, just general staffing health in the industry is better. And then specifically at Sysco, we're fully staffed. It doesn't mean we don't have a job opening in a specific site today.

But in aggregate across our network, we are fully staffed that bring down, as Kenny said, our hiring costs, our training costs, shrink improves, damages improve, accidents on the road improve. Everything about the ecosystem improves when we have a more tenured population. We're really pleased with that. The productivity levers that we have are moving up into the right as a result of that.

Oftentimes, I get asked the question, what inning are we in? I think we're up to inning seven now on supply chain kind of recovering to pre-COVID, which means we still have some gas in the tank. And I want to be clear, when we get to inning nine, the game is not over. What happens in inning nine is then we introduce new technology, we introduced productivity improvement programs, etc. We can get beyond, meaning better than 2019 levels of productivity. But I'd say we're in inning seven, we still have room to improve, and we're focused on delivering.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Yeah. One point for me is, as I mentioned earlier, we have the labor planning tool, and we're really matching -- being very agile here on the expense side, matching labor with volume and making sure that's with the backdrop of the Sysco work standards that I talked about earlier in my question in January, the driver academy, our training programs, our engineering labor standards keep getting better and stronger. We improve processes through leveraging, as Kevin said technology. The next wave of productivity improvement is the better have discipline to the standard of work that we're doing. So still room for improvement, but we are pleased with the improvement we made in the supply chain, and that's factored into the '24 guidance.

[Joshua Long, Analyst at Stephens]

Thank you.

[Operator]

The next question comes from Kendall Toscano with Bank of America.

[Kendall Toscano, Analyst at Bank of America Securities]

Hi. Thanks for taking my question. So I was wondering if, as you saw a pretty significant rebound in your local customer business in the second quarter, just kind of what the implications are on gross margin performance given that the local customers are a higher-margin customer segment. And then, I guess, as you enter the back half, as my follow-up, how you would expect the local customer growth to look versus the total company?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Yeah. So I can start. So you are correct. The local customer does come with an attachment rate with a higher GP dollars per case, and there's a margin accretion as well with the local customer, and we are seeing that flow through the P&L, and that's one of the reasons why you're seeing a nice mix between your leverage on GP as well as the leverage down to EBITDA and net earnings. With that said, though, I think we shouldn't overlook the CMU success that we've had in our business. We are also seeing margin expansion.

We are also seeing cost of goods leverage across the portfolio of our CMU business. Again, one may think it's just restaurant but it's not. There's other specialty growth segments that we're winning in the marketplace, that's driving accretion on the margin side. When we talk about strategic sourcing, it is not just for a local customer. It is the size and scale of Sysco, and that benefit skills across both our local customers and CMU. We are renewing, we are winning businesses at a higher margin clip at the current moment. Just to plus up the last point that Kenny made, I've tried to be very clear about this point over the last several quarters. Our success in national sales, and we are clearly succeeding in national sales, growing new customer wins and the profitability of that business, as Kenny just said. There's nothing about the growth in national that hinders our ability to grow local. We do not have supply chain capacity constraints. We do not have hiring constraints. What I said on the last call is we want to keep the play running and working in national, and we want to make meaningful progress in local, and we displayed that this past quarter with a 300 basis point improvement and our intention is to continue to make improvement in local.

[Kendall Toscano, Analyst at Bank of America Securities]

Great. Thanks guys.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thank you Kendall.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Thanks Kendall.

[Operator]

The next question comes from John Ivankoe with J.P. Morgan.

[John Ivankoe, Analyst at J.P. Morgan Chase & Co.]

Hi. Thank you. The question is on inflation. And I'm wondering what kind of indicators you were looking at to sustain inflation through the back half of '24. I mean some PPI Food, for example, metrics might suggest a little bit more deflation than what you're talking about is kind of the first question.

And secondly, there's been at least some chatter -- some grocery stores actually sequentially lowering their pricing as their own commodity costs have been easing. I mean have you seen anywhere in the marketplace in terms of your competitors, maybe on the nationals, but on the local or regionals of different operators that are lowering their price per case to their customers of something that could potentially be influencing the market over time? Thank you.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Hey John, it's Kenny. I'll start. So, on the topic of inflation, you are correct. We are informed by data. We actually have a [Indecipherable] of data. We partner directly with suppliers, third-party strategic partners, institutions and the like. And so we have a rich data set of our own as well, given how much volume goes through our supply chain each and every day across various segments and industries. So, we're -- all that's modeling in right now. Number two, we watch our basket very closely. Now, I've talked about this in the past. But if you think about our commodity basket, we have 12 main commodities. And we don't really over index on anyone in particular. No one commodities more than 15%. So each and every day, we're managing inflation and deflation, right?

For example, you could have beef, for example, which is growing close to double-digit, but you can have another commodity that's in a different space. So, Sysco has historically and today managed deflation, inflation day in and day out. And the third point, as I mentioned earlier, Q1 deflation in the U.S.; Q2, slightly positive inflation. On both quarters, we were able to effectively drive positive, consistent and operating leverage to our P&L.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

It's Kevin, I'll just add. You asked about prices to the consumer. In the local business, in particular, it's a very efficient market, John. So, as our COGS come down, yes, the way it works is we then are able to pass through value to our customers. So, unlike a retail store, we're publishing prices in a circular and putting signs on a shelf. For us, it's a dynamic business. The book gets priced weekly, as do our competitors.

And as prices come down, it's an efficient market. And that gets passed through to customers. As Kenny said, though, we didn't maintain profitability ratios on the way up. We can maintain profitability ratios on the way down. That's the value of our pricing tool that we are leveraging extensively to make sure that we are where we need to be.

As it relates to just general confidence in the year-to-go inflation figures, we've got a lot of data at Sysco. We have global data. We have access to a large amount, as Kenny said, across the 12-plus categories. Some are moving up, some are moving down. The one that's going to be the biggest tailwind in the year to go is produce. Produce was substantially deflationary in Q2 because of wild markets the year before due to major flooding in California.

Produce is going to return to more normal, like low levels of inflation, 1% to 2% versus down substantially in Q2. So that's one of the bigger drivers of giving confidence in the year to go. And we said muted inflation, but certainly muted inflation is up from where we were in the first half of the year.

[John Ivankoe, Analyst at J.P. Morgan Chase & Co.]

Very helpful color. Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thanks, John.

[Operator]

The next question comes from Alex Slagle with Jefferies.

[Alex Slagle, Analyst at Jefferies Financial Group]

Hey, thanks. Good morning. I just want to see if you could provide any color on the broader growth rates and health of the various categories you participate in. There are certain specialty categories that are growing particularly well or certain customer types in the industry. Is it the growth has either tailed off or accelerated lately?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Alex, it's Kevin. I'll start and then if Kenny has anything to add, he can jump in. Let me first just talk about like where is the business growing, where is success happening, and then I'll flip back to the customer. But it's okay, I'm going to actually answer it in reverse. Right now, broadline is winning. What I mean by that is distributors.

So broadline distributors are winning. People ask us all the time, Kevin, how can it be true that you plus the other big two are all saying you're taking share? Well, the answer is scale matters in this industry. Size and scale matter, our purchasing scale, our delivery scale, our technology scale. And frankly, all three of the big three are growing faster than the market.

Our growth for the quarter was plus 3.4% and the overall market was very nominal growth. So we meaningfully outgrew versus the market and my suspicion will be as will the other big players in the space. So what does that mean? It means the growth is coming from smaller regional distributors and specialty distributors.

Point two for the Sysco specific thesis is our specialty business is meaningfully performing. So we're winning in broadline in total versus the 60-plus-percent of the business that's not done through the Big 3, that's a very clear point that should be understood. 60% of the business does not happen from the Big 3, where the big players are winning meaningfully in broadline versus that 60%. And then within specialty, Sysco's specialty is outperforming versus specialty. So that's kind of the thesis or the story of why we're outperforming versus the market.

As it relates to the customer side, we're seeing no discernible moves trade up, trade down, trade left, trade right. The best operators are winning. People who have interesting concepts or interesting culinary trends are winning, but we're not seeing trade up or trade down. Since the January blip that I mentioned, it was a robust food-away-from-home market in Q2. And then specifically, December was a robust month as consumers were frequenting food-away-from-home establishments.

[Alex Slagle, Analyst at Jefferies Financial Group]

Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thank you.

[Operator]

The next question comes from Jake Bartlett with Truist Securities.

[Jake Bartlett, Analyst at Truist Securities]

Great. Thank you. Thank you for taking the question. Mine was on the chain business and the growth there has been strong. And maybe if you can just confirm my math on that case growth among the chain business accelerated in the second quarter, maybe kind of what you're doing to drive that acceleration? And then if you can maybe provide an update on the relative profitability. I know the gap between independents and chains has narrowed, if you can give us just maybe a better sense as to how much that's narrowed at this point?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Okay. So I'll start, and I'll toss it to Kenny for any additional comment he may have. Our CMU business, it's half of our business. We're winning meaningfully in that space. And yes, we did accelerate in Q2 versus Q1. We have confidence in our ability to continue to be very successful in CMU. When people hear chain, they think national restaurants. I want to be very clear that is just one portion of that business.

Travel and hospitality is in that space. Healthcare is in that space, education is in that space. And we've had notable and meaningful wins in each of those non-national restaurant sectors. In fact, our focus is in non-national restaurant sectors. The low profit portion of CMU is the national chain restaurant space, mostly in the QSR space. That's the lowest profit business.

We're really focused on within national sales, which customer types can we create a win-win contract relationship with our customers where we can help them achieve their objectives. We can do it at a cost to serve that meets their objectives. And they're willing and want to partner with Sysco on things that are profitable and helpful for Sysco. Like, for example, Sysco brand penetration. With local customers, we have more than 50% of our cases on that truck that are Sysco brand.

And one of the reasons why the profit profile is lower in national is a lower penetration of Sysco brand. So we're looking for partners who want to grow together, who want to win together. And our national sales team has been doing a really good job in that regard, and we expect that momentum to continue. Kenny, any additional comments you'd like to make?

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Yes. I'll say a few things here. So if you think about chain business, right, I'll say ROIC is a lens, how we look at all businesses including chain. On the CMU side, as Kevin mentioned, we did accelerate. You are correct. The math is correct, but we accelerated profitably. That's a really important point here.

Many of the things that we're doing across technology, strategic sourcing, all of our initiatives does impact both the local and the CMU side. So it is scaling and I know we say this a lot of time scale and size really matters in the industry. So that's really important. Sometimes, we'll say this -- we all think the compensation plan ties only local. We have many, many things that scales across both local and CMU driving profitability for both sides of the house. That's my first point.

The second point is, again, ROIC cuts both ways. In SYGMA, which is mostly the bigger customers, they were down on volume year-on-year. However, given the supply chain efficiencies and productivity that we're driving and pruning the customer side of the house, we were able to double -- more than double the business on profit, 140% increase there. So that gives you a little bit of color on how we think about productivity as well as some of the other side of ROIC.

[Jake Bartlett, Analyst at Truist Securities]

Great. And I just had a quick follow-up on the comments on the local business on the independent side. Kevin, you mentioned that the industry was robust. Are you seeing generally positive traffic in your -- at your local customers? I'm wondering whether just local traffic has improved in this latest quarter versus the prior quarters?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Yeah. Independent traffic, especially in December was robust. That's my most concise way of describing it. Really healthy, strong. I'd tell you we're strong across food away from home, but independents, in particular, very strong in December.

[Jake Bartlett, Analyst at Truist Securities]

Great. I appreciate it. Thank you.

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Thank you.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Thank you.

[Operator]

The next question comes from Brian Harbour with Morgan Stanley.

[Brian Harbour, Analyst at Morgan Stanley]

Thanks. Yeah, good morning guys. You've discussed this, but maybe I'll ask it in a slightly different way. On operating leverage, you expect it for the full year. Do you expect a little bit less in the second half, maybe as a consequence of ramping up hiring or are some of the cost out sort of an offset to that? How do you think about that in the second half versus the first half?

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Yeah. So you are correct in terms of the second half dynamic and let me explain what that means. So, in the first half of fiscal year 2023, if you recall, we had snapback and excess over-time in the first half of last year. But also recall, throughout the back half of last year, fiscal year '23, those costs subsided, it became zero towards the back half. Also supply chain, productivity, turnover, retention, labor standards, all of those things that we're driving the value that we're seeing today, that started really towards the back half of last year. So, said differently, Brian, we are lapping a more challenging comparison from a comp standpoint. With that said, we are also investing in our business and our stride [Phonetic] is operating leverage here for the full year.

[Brian Harbour, Analyst at Morgan Stanley]

Okay. Thanks. That makes sense. Maybe just on international. I know that's not as big for you, but it is pretty material, right? I think we've seen sort of some varying performance in international markets just restaurant companies have said. Could you comment on how you see that in the second half also kind of how you see the inflationary trend over the next couple of quarters in that business?

[Kevin P. Hourican, President and Chief Executive Officer at Sysco]

Yes, this is Kevin. I'll start, Brian. I appreciate the question on international. I'll talk about just what we're seeing in international, and Kenny can address the inflation part of the question at the end. Yes, the headline here is we're very pleased with international performance.

Rewind tape, I've been here four plus years now. COVID had a very negative impact on international. The shutdowns were earlier. They were deeper, they were longer. They were more punitive and it was a rough go, especially in Europe. We're out of that now. We are clear of that, and we are very pleased with our performance. International is a tailwind for Sysco from a growth perspective and from a profitability improvement contribution perspective.

I'll just call out three examples from a color commentary to give it some texture. Canada is doing incredibly well. Local performance in Canada, greater than 6% case growth. Local performance Canada, greater than 6% case growth, and that's our largest international business. Why is that happening? We're deploying the Sysco play in an even greater way, bringing advanced digital tools to the country, bringing the Recipe for Growth to the country and leveraging an extremely talented team north of the border. So, Canada is doing extremely well.

Great Britain, our second largest international country. We've always had a very good robust and mature CMU business and we were underpenetrated in local. We are meaningfully focused on winning local from a leadership perspective in country, and we are revamping our supply chain and our systems capabilities in Great Britain to be able to better serve local customers in that country, and we're moving them up the profitability curve as a result of increasing penetration with local.

And last but not least, let me talk about France. France has been a problem child for my tenure at Sysco, mostly self-inflicted. I have been very transparent about that over time. And we have turned the corner in France, upward, onward, and better. We're off to a really good start in the first half of the year in France. We have a strong leadership team in place in France, and they're really beginning to -- like I've said a second ago, run the Sysco play.

We've deployed strategic sourcing, AKA PJM, which is our strategic sourcing capability. We're working on introducing Sysco brand product in France, and we're working to increase the product range available and each of those things is working and France is contributing positively this year to our P&L in a way that is beneficial to the overall company. So, those are just some color commentary points and I toss to Kenny for any comments on inflation.

[Kenny Cheung, Executive Vice President and Chief Financial Officer at Sysco]

Yes. Brian. So if you think about the -- earlier in the year, the inflation for international was roughly over 10% and this very quarter that we just had was roughly 6.5%. So we are seeing inflation subsiding a bit throughout the quarter. With that said though, we are excited given the one global operating model that we're operating in right now, and that is driving dividends.

It extends our size, extends our scale, leverage capabilities, tools and best practices. So as Kevin talked about, a lot of that playbook under the one umbrella of global operating model is really creating dividend. So yes, while inflation is pressured, we are seeing the ops us through future sourcing local case growth, technology play, overall, one global operating model. So yes, we are still very optimistic and bullish about the international market as a growth engine for us. As you can see in Q2, we were up 10% on topline and 30% on operating income.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Kevin Kim, Vice President, Investor Relations
• Kevin P. Hourican, President and Chief Executive Officer
• Kenny Cheung, Executive Vice President and Chief Financial Officer

Analysts

• Jeffrey Bernstein, Barclays Capital
• Mark Carden, UBS Group AG
• John Heinbockel, Guggenheim Partners
• Edward Kelly, Wells Fargo & Company
• Joshua Long, Stephens
• Kendall Toscano, Bank of America Securities
• John Ivankoe, J.P. Morgan Chase & Co.
• Alex Slagle, Jefferies Financial Group Inc.
• Jake Bartlett, Truist Securities
• Brian Harbour, Morgan Stanley