Good morning. My name is Claire, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter Earnings Call. [Operator Instructions] After the speakers remarks there’ll be a question-and-answer session. [Operator Instructions] Thank you. Ms. Melissa Napier, you may begin your conference.

Thank you, and good morning, everyone. Welcome to our third quarter fiscal 2018 conference call. Joining me today are Pietro Satriano, our CEO; and Dirk Locascio, our CFO. Pietro and Dirk will provide an update on our third quarter fiscal ‘18 results. We’ll take your questions after our prepared remarks conclude. [Operator Instructions] During today’s call and unless otherwise stated, we’re comparing our third quarter results to the same period in fiscal year 2017. Our earnings release issued earlier this morning and today’s presentation slides can be accessed on the Investor Relations page of our website. In addition to historical information, certain statements made during today’s call are considered forward-looking statements. Please review the risk factors in our latest Form 10-K filed with the SEC for these potential factors, which could cause our actual results to differ materially from those expressed or implied in those statements. Lastly, I’d like to point out that during today’s call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules on our earnings press release. I’ll now turn the call over to Pietro.

Thanks, Melissa. Good morning, everyone, and thanks for joining us today. I’d like to begin on Page 2 with the 3 takeaways that sum up this quarter’s results. First, we reported year-on-year EBITDA growth of 6%, an improvement over the 4.4% we reported in the first half of the year. And the gap between gross profit per case and operating expense per case was the highest so far this year. This was driven by strong gross profit performance, which, in part, was a result of continued success growing private brands as well as improved freight results. Second, volume overall and with independent restaurants in particular, is beginning to turn. And third, integration planning work on the SGA acquisition is going well. And we believe we’re on track for a closing around the end of the first quarter. Let me go to Page 3 for a more detailed discussion on volume. And let’s start with independent restaurants. As you can see from the green line on the left and the bar chart on the right, organic growth with independent restaurants in the third quarter ticked up to 3.1%, up from 2.7% in the second quarter. And when we factor in the impact of Hurricane Florence, which was felt mostly in the Carolinas, a part of the country where we are overindexed in terms of market share, we estimate that third quarter organic growth was more like 3.3%. The industry outlook for independent restaurants continues to be strong. According to industry sources, the restaurant count is up year-on-year. And more importantly, shipments to the segment continues to be -- to grow at a healthy clip. And as I will cover in a minute, we continue to make progress on improving our service levels. As a result, we continue to expect to exit…

Thanks, Pietro, and good morning. As Pietro said, we delivered a solid quarter with adjusted EBITDA up 6% and adjusted diluted EPS up 41% over the prior year’s third quarter. Organic case growth continued to sequentially improve for the quarter. And we also improved our operating leverage for the 11th quarter in a row as gross profit per case grew more than OpEx per case. The $0.10 per case improvement in Q3 was also our largest expansion of operating leverage year-to-date. These results were achieved despite the impact of Hurricane Florence, which impacted 4 of our largest distribution centers and many customers in the Southeast. On Slide 7, third quarter net sales were $6.2 billion and 80 basis points below the prior year. We experienced 10 basis points of year-on-year deflation, which was fully offset by product mix gains and as mentioned, the 80 basis point case decline. On Slide 8, you can see we continued to deliver strong gross profit results. For the third quarter, gross profit was $1.1 billion, which was a 0.9% increase over the prior year period on a GAAP basis. Adjusted gross profit was up $24 million or 2.2%. And as a percent of sales, gross profit on a GAAP basis was 18% and 17.9% on an adjusted basis. This is 30 basis points higher than prior year on a GAAP basis and 60 basis points higher on an adjusted basis. Our gross profit rate per case expansion was strong again this quarter, up $0.19 per case, driven by initiatives, such as private brand penetration, product sourcing and freight optimization. Although the third-party freight market capacity remains tight, our freight income performance improved versus the prior year, the first time this occurred in 4 quarters, thanks for the significant work we have done with vendors…

Thanks, Dirk. So just in summary, takeaways for the quarter, outlook for the industry is positive and we continue to make very good progress on operating margins, steady progress on volume and very good progress on planning for the integration of the SGA Food Group. Before we open up to questions, I do want to take a moment to thank our 25,000 colleagues at US Foods for everything they do to serve our customers and to deliver on our grand promise every day as well as I’d like to say to the 3,000 associates of the SGA Food Group that we really look forward to welcoming them into the fold early next year. We’ll now take the first question.

[Operator Instructions] Your first question comes from the line of Marisa Sullivan from BoA Merrill Lynch.

I just wanted to start with the sales outlook implied by your annual guidance for the fourth quarter. It’s a pretty wide range. And the low end would imply a bit of a deceleration. Is that just deflation? Or are there other factors that you are accounting for in the implied 4Q sales guide?

The 4Q -- this is Dirk. In the sales guide, [indiscernible] deflation. The outlook, as Pietro talked about, contemplates the -- exiting the year at 4% independent case growth, actually in the year at 2% health care and hospitality year and roughly flat with all others, so consistent with what we talked about here.

And then on the transition to centralized replenishment for the DCs that have been -- that are further along the transition, are you seeing the ramp as you expected? And are things starting to normalize there? Or has it been a little bit different than your expectations?

Definitely things are stable and normalized. And we are what I would call in an optimization mode. Most regions have been past the deployment for at least a couple of quarters, if not longer. And so now what we are focused on is, as I talked about, items -- particular items where we’re having issues or selected markets we’re having issues, we’re long beyond the phase where we’re optimizing regions. And the team and the complements are really -- it’s about optimizing selected markets and selected items, as I said.

Your second question comes from the line of Kelly Bania from BMO Capital. Your line is now open.

Just wanted to ask about fuel and wage costs, what you called out as still a headwind into 2019. So just want to give you opportunity to talk about what you’re doing to offset those and how you think about 2019 because I think there’s expectations that you won’t it be able to get back to your mid-term guidance there. So maybe just give you the opportunity to talk a little about the puts and takes into 2019.

So as we’re mitigating it, it’s a combination of the different initiatives we’ve talked about. So our day-over-day routing is a key one, where that improves the customer service, but it also takes a lot of miles out of the system, so it helps with wages and with fuel costs. So there are initiatives like that. We’re also looking for other opportunities just across supply chain and the business to continue to offset that. But I think as you take that into 2019, ultimately our strategy for growth remains the same as we discussed at Investor Day. And as I just mentioned, expecting to exit the year with 4% IND growth, health care and hospitality at 2% by the end of the year and all other flat. We also continue to expect to grow gross profit dollars faster than OpEx as we’ve done. And so ultimately, the core initiatives and drivers that we talked about remain in place. However, as you called out the macro backdrop, fuel and wages has become much more of a headwind than existed. So while we’re not going provide adjusted EBITDA guidance at this time, what we do anticipate is that our 2019 adjusted EBITDA growth will be at least as good as our 2018 organic growth rate. And so I mentioned organic because SGA and any limited tuck-in acquisitions that we do will be incremental to that organic growth comment. And we’ll give full guidance in February.

And the all other category still seems a pretty far away from approaching flat and maybe still a little bit weaker in the quarter than you expected. Can you just talk about how you get to flat and the visibility you have in that category, if there’s anything else surprising you in the all other category?

Sure. I think there’s really three things that help with that. One is the onboarding of new customers through our pipeline, which pipeline remains solid and we continue to onboard customers. And you can have something that moves a little bit. But ultimately, that pipeline remains solid. We also, as we get to the end of the quarter, we lap some more of the exits that Pietro talked about from prior year. And then finally, the third piece there is same-store sales or comps for our larger customers. That’s the one that’s probably a little bit less visibility because it’s more around what the trends are on those individual concepts. And as Pietro comment, in the third quarter, we did see some softer same-store comps at some of our larger customers. So what I’d say is the pieces that we can control more of, we feel very good about. And those are continuing to move in the right direction.

Your next question comes from the line of John Ivankoe. Your line is now open.

Look, first, just a clarification. I’ve heard you a few times talk about exit rates for the fourth quarter of 4%, 2% and 0%. And since those are such important headline numbers, how different do you think those three categories will actually be in the fourth quarter? In other words, what the printed fourth quarter is as opposed to the exit rates? And I’m sorry for such a specific question for that.

John, this is Dirk. So I’d say, for each of those, they will end up a little bit softer. I’d say independents and health care and hospitality, modestly softer in those and they ramp up over the course of the quarter. All other is the one that will be still probably a little more soft than that as that’s the combination of the new business and the exits lapping happen kind of mid to later in the quarter. But we feel good about it.

Okay, it -- sorry, and I think what your point very clearly is that, that 4%, 2% and 0%, at least that 4%, 2% and 0% is what you expect throughout fiscal ‘19 to achieve at least the adjusted EBITDA organic growth that you achieved in ‘18. Is that correct?

We would say that they would be sort of similar to those numbers. And we’ll give those specifics in February. But yes, that’s sort of general indication.

And since yesterday, there’s obviously a lot of news and maybe some surprise around cost of attracting and retaining drivers, cost in attracting warehouse workers, perhaps there’s even some discussion in allusion in terms of what’s happening on the sales side as well. Could you maybe talk about your major buckets of employment within U.S. Foods and particularly what you’re doing from an HR perspective to kind of attract and retain these employees, especially as we go through ‘19? So just looking for some qualitative comments in terms of how you can strengthen your employment pool.

Sure, John, this is Pietro. So on -- you alluded to something on the sales front. We have not seen anything in terms of our ability to attract salespeople. And as we’ve said, part of our performance management efforts has resulted in several intakes of new salespeople, many of them come from the industry, often from the customer side. And we have no issue attracting those folks. And as you know, the compensation for those folks is generally a variable compensation model. And so that’s one big population. The other 2 big populations that you alluded to at the -- or in the first part of your question is around selectors and drivers, right? That accounts for a large part of our employee population base. And those are the 2 populations that have been affected by tight labor market. And that’s resulted in a couple of things. One is, in selected markets, difficult -- a pipeline that’s not as healthy. When the market is so tight, it doesn’t take a big change locally to affect the supply of workers. And the way we’ve mitigated that is by selective adjustments to the what I call the entry-level wage rate. Because most of that population is governed either by a CBA or keyed off a CBA. So it’s at the entry-level where we’ve had to make changes. And then the other way that tight labor market has affected that population of selectors and drivers is in higher turnover. We have -- if you look back this year versus last year and last year versus the year before, we have seen turnover go up. And so there, the focus is on making sure we have better practices in terms of identifying who the right people are and sharing that we have better practices in terms of training and on-boarding. And one of the things we’ve talked a lot about in the last couple of years is our operating model, which combines scale where it matters and kind of local intimacy, where that matters. And what we have found as we’ve dug under some of these turnover issues is that we still do not necessarily have standard hiring and training practices across the system. And that’s what we’re putting in place now. And we’re seeing very good improvements in terms of turnover, which then make us less dependent on the influx of new workers and also get to a higher level of productivity quicker, which obviously impacts the bottom line.

Okay, great. And the follow-up on the sales side, are you guys kind of through the efficiency and effectiveness exercise as your technology has allowed your sales force to become more productive? I mean, when you look at the number of territory managers, have we hit kind of a bottom? Do you think there’s still opportunity to let them become more efficient? Or does it make sense in the near term for you to actually begin to do some net adds?

I would say that the answer is generally yes, we are. You’re not going to see a lot of change in terms of the number of sales reps. The efficiency play was three or four years ago. The effectiveness play was in the last couple of years. Performance management is an ongoing journey. But we would expect to replace those with new reps. And in selected markets where we see an opportunity to grow by adding reps, then we would do that as well.

Your next question comes from the line of John Heinbockel. Your line is now open.

Let me start with two things impacting growth. Number one, when you think about the sequential improvement, right, in gross margin rate, what primarily drove that? Was that largely the move from freight as a negative to a positive and nothing sequentially? Or was there something else? And then secondly, Pietro, where are you on the long-term supply chain opportunity, right, which was a $100 million-plus opportunity? When are we on that? And when does that start to kick in, in a significant way?

I wanted to -- I’ll start the beginning of that. So the step-up is around the freights, as we’ve continued to work that over the course of the year. I’d say largely the improvement over gross profit per case this year has been consistently strong and it’s been many of the same elements that have driven that across private brand, sourcing and, as you just pointed out, a little more on the freight as we got into 3Q. And I feel very good about the progress we’ve made on that front over the course of this year.

Okay, now on the supply chain roadmap, we’re making good progress, John. You may remember at the Investor Day, we talked about a portfolio of initiatives over a multiyear period. The initiatives that we were talking about in the more immediate term were around day-over-day routing. Dirk talked about the progress we’re making there. I think, Dirk, we’re about, what, 1/3 of the way through the country in terms of implementing day-over-day routing? Another couple of initiatives we talked about were new scanning -- voice-activated scanning technology, where that is being piloted in a couple of markets. And in terms of how we variabilize labor, that is at the beginning stages as per what we discussed at the Investor Day. So the team continues to make progress against the roadmap that we articulated back in March.

And then secondly, on the recovery in independent cases, so how broad-based has that been? And there are in commonalities, right, if you think about recovery and whether you’re a primary supplier versus secondary geographic -- the success of your salespeople, in quartiles. Is there -- are there any commonalities or it’s fairly broad-based across all of those things?

I would say it’s fairly broad-based, John. Again, the increment is slow and steady. And the countermeasures, if I can call that, that we put in place with respect to safety stock, optimizing how we do forecast, were also broad-based. So as a result, the improvements are broad-based. But we are dialing in on those particular markets where we haven’t seen the recovery as quickly as we would have liked.

Your next question comes from the line of Edward Kelly.

Dirk, I just wanted to start with maybe just trying to sharpen out what you’re saying about 2019. It sounds, I guess, like you’re saying at a minimum, organic EBITDA growth in line with what you’re going to deliver in 2018. Is that 5%? Is that what you’re talking about? I guess, there was a little bit of M&A this year, so I’m just trying to understand that to start.

So no -- yes, so it’s saying a minimum of 5% organic. And this year, the M&A impact was nominal, so basically to think of the 5% as almost entirely organic case growth. So without giving our full guidance, which we’ll do in February, it’s at least giving an indication that we -- of what we’re thinking about.

And then as we think about gross profit per case next year, I mean, it makes a lot of sense that you would continue to see progress there. But the mix probably won’t be as favorable next year as what it has been this year, given the decline in the all other. So should we expect at least a little bit of moderation in the per case -- on a per case basis relative to where you’re kind of running right now on that line item?

Yes, you should. I think as we’ve talked about it and given at a few conferences this year, it’s ultimately exactly as you pointed out with some of the exits, there is the mix benefit this year that isn’t repeating. So we will continue to expect strong gross profit per case growth and continued gross profit growth in excess of OpEx driving the operating leverage as we’ve seen but not in GP quite as strong as we’ve seen this year.

And then on the OpEx side, as we think about next year, obviously OpEx per case has accelerated in 2018, given the industry issues, particularly around labor. It seems like you are suggesting that, that pressure is peaking. Maybe is that a good way to talk about it? I’m just trying to understand how you’re thinking about like particularly the wage pressure into next year relative to what you’re seeing today.

And I would compare this probably similar to the way we had questions about freight a couple of quarters ago that what we’re assuming as we go into 2019 for wage pressure is we’re assuming that we operate in a similar environment to what we’re operating in today. So we don’t assume it’s going to get better. But we also aren’t assuming it’s going to get significantly worse. And so we’ve tried to take a consistent view of where we are today. And so as a result, becomes a bit of a headwind, just like it has been this year as well as the fuel headwind that with fuel prices continuing to be higher than what they were earlier in this year, and so year-over-year, that, that would likely expect to be a headwind in 2019 as well.

And Pietro, can I just ask you one quick question here? There seems to be a growing narrative in the market around the consultative sort of like team-based sales approach that maybe it’s the right thing to do for the long term and where the market is going. But maybe there’s not enough investment in the everyday sales role today. Can you just maybe talk about that balance and what gives you the confidence that you’ve got the right strategy for now and the future?

So in terms of the balance between the two, the two elements of the selling model, I mean, the first evidence is our customers, as I said, tell us that they like the ability to both rely on a territory manager, as we call our sales rep, every day in terms of the relationship still matters, guiding them in terms of their orders, if not actually placing the orders and being a little bit of a gatekeeper to these resources, which they really value, right. I mean, that’s where they can see the value add that we bring. So I don’t think it’s -- I think it’s time -- the marketplace, the customers are telling us that we’re not ahead of our time. We’re at the right time in doing that. The other part of your question in terms of the numerical balance between the two, which I think is part of your question, which I think John was also asking, we look at our complement of TMs literally market-by-market. We look at their book market-by-market, we look at the growth market-by-market. And that’s what informs market-by-market the decision whether to grow that sales force or to do a little bit more performance management and then replace them with new folks.

Your next question comes from the line of Karen Short. Your line is now open.

So I’m actually just looking at your full year guidance for ‘18. What I’m trying to understand is your full year guidance for both case growth and actually EBITDA growth actually implies 4Q gets worse on both of those line items. So I mean, can you maybe give a little color there?

Sure. So, Karen, I’ll take this. From an EBITDA perspective, you do see likely a little bit of deceleration. And that’s the combination of some of the OpEx-related timing changes that I mentioned before as well as last year had a few nonrecurring gains that wouldn’t be there this year. Absent these items, Q4 growth would be above Q3 growth rates. And from a case growth, it is continuing along the path that we’ve talked about of accelerating our growth.

And then I guess, looking to ‘19 because as you look at where you’re at on your total case growth, obviously you need to get case growth growing meaningfully more to get leverage or to not be deleveraging. So can you just provide an update on what case growth you actually need to leverage fixed cost as you look to fiscal ‘19 and beyond?

So ultimately, really almost any case growth that we get begin to deliver leverage, it’s just a matter of how much. So when we think about our longer-term algorithm, and something that I mentioned that was closer to that longer-term algorithm, what we try to balance is some profitable growth. So it’s not growth at all costs, it’s growth with the right customer types that allow us to continue to grow profitably. And that’s really what we’re going to continue to focus on for ‘19. And as we return to case growth, then that will generate the leverage that you’re talking about across the system.

I just had one question regarding SGA. It seems like the timeline in terms of completing the second request is a little more drawn out than, I guess, I would have expected. So maybe any color there. And then since you’ve done some of the pre-integration work, any update on what you think there may be in terms of upside to the synergies?

So in terms of the SGA side, we’ll comment on that next year after their transaction closes. And in terms of the timeline, I think that the timelines are what one would generally expect when you break it down into the media -- post the media announcement, responding to the second request. And that takes us out to -- as I said, our best guess right now is the end of Q1. And bear in mind that it’s not a process that we have tremendous amount control over and we’re engaged with the FTC as we need to be.

Your next question comes from the line of Judah Frommer.

And Dirk, maybe we could just go back to that commentary on 2019 for a second again. When you’re talking about a minimum of 5% organic EBITDA growth, would you say that’s below the level you had anticipated at the Investor Day? And beyond that, is there M&A contemplated in the 9% to 11% growth next year? Obviously, SGA wasn’t contemplated in that.

Sure, thanks. So maybe I’ll start with toward the end, the reminder. So when we talked about our 9% to 11% EBITDA growth for 2019, that contemplated about 200 basis points from the tuck-in M&A, the $200 million of year of spend that we talked about. So that said, the organic was contemplated at about 7% to 9%. And so we’ll give in February the specific numbers. But I think we wanted to, based on some questions we’ve gotten, just at least an indication that we expect next year to be at least as strong as this year with our EBITDA growth. And so to your last and to your point on the tuck-ins, so in some ways, so SGA will replace most of what the tuck-ins would have provided. However, we will continue to look on a limited basis at potential tuck-ins on the broadline for those areas where the organization isn’t as impacted by SGA and/or it helps us with capacity versus capital avoidance, things like that. But we’ll be pretty selective in the way we proceed with those.

And then maybe just broader in the market, I mean, it sounds like you’re seeing independent restaurants doing fine. I mean, within the channel, we’ve heard that whether it’s large chains, mid- or small chains, they might be taking share from independents. Is that not something that you’re seeing?

It’s hard to -- in terms of the share gain, what we do see is we see that food away from home continues to increase at the expense of food at home. We saw an uptake in that earlier this year. And again, we focus a little bit more on the independent restaurants, given that’s at the heart of the strategy and also much more accretive from a EBITDA perspective as we said in the past. And that’s where, when we look at a couple of different sources in terms of the outlook, the historical shipments the last couple of quarters, the outlook remains very consistent and very positive.

Okay. And if I could just squeeze one in on SGA, given how long the deal is taking to close, is there any concerns of disruption in the business in terms of salespeople leaving, maybe customers thinking about where they should go or aggressiveness in that market in terms of pulling away customers?

Yes. So as you can imagine, given the process we’re in, it’s -- we cannot comment on the performance or what is happening inside of SGA. From a planning perspective, where we get a little bit of insight into the folks there, the leaders there, I can tell you that the folks, who are participating on integration planning, are very energized by the integration and the work that’s going on. And we’ve got to assume that they are going back to as leaders to their folks and helping spread some of that excitement to the folks that they lead every day.

Your next question comes from the line of Vincent Sinisi. Your line is now open.

Wanted to ask about centralized replenishment. Obviously, that’s more used specifically as opposed to industry. I know last quarter, you said kind of the underestimation of the impact that it was the heaviest in 2Q. It appears that, that’s still the case. But maybe just give us a little bit of a sense for kind of the sequential improvement. And then just going forward, is there still, I think, you had 5% of categories left to do? And how do you kind of see that going forward?

So Vinnie, this is Dirk. I’ll start off. As we talked about in Q2, in the first half of the year, we had more markets that had transitioned over the course of late ‘17 or early 2018 and had said that by the mid-year, all the markets have transitioned. And so yes, as we move through that, through the things that -- the learning curve plus all the improvements that Pietro talked about, we’ve seen markets move along that curve largely as we would have expected and then incrementally seem to benefit from the other improvements that Pietro made referenced to. The 4%, 5% that we had last, that was predominantly around produce. And we’ve just continued to chip away at that. And I don’t have the number right in front of me. I think it’s down to just a couple of percent at this point now. So again, these are very small. And I think all the learnings and the things that we’re talking about broadly help with those. And so we continue to see those not have a big impact on the business.

Okay, perfect. And then just a quick follow-up, more just kind of housekeeping or maybe just kind of setting expectations for folks going forward. First, just quickly, expectations for kind of depletion/inflation over the next few quarters. And then secondly, just to go back to -- and we understand that you’ll give the full guidance and range for ‘19 in February. But we get asked all the time about kind of difference between organic and with M&A included. Given that likely SGA will not be closed, will your guidance you give in February, the range for EBITDA, strictly be organic? Do you think you’ll have some initial thoughts on how SGA factors in at that point? Just so that we all know kind of what to likely expect.

Sure, Vinnie. I think when we -- let me start with the inflation/deflation. I think the -- we would expect grocery to continue with a modest inflation that we’ve been seeing, just kind of very modest and consistent. Commodity categories are harder to tell as those have been more volatile over the past year or two. Now just as a reminder, these categories tend to be more fixed up -- fixed markup, so a little less impact on EBITDA when you see inflation/deflation. And the key thing here that we continue to focus on is make sure we effectively manage through this inflation or deflation. So it’s a little more guidance on the grocery. But I think one thing that we know for sure is the experts on the commodities, whatever they predict tend to be off. I think when we think about 2019 in our guidance, yes, the guidance that we would give in February would be around the organic business. And then as Pietro said, would separately provide guidance around SGA and our expected impact of that on the overall business.

Your next question comes from the line of Karen Holthouse.

Dirk, thinking about some of the dynamics particularly with the independent restaurants, could you give us any color? Sort of as you worked through the operational issues last quarter, did you see any impact on customer churn? And sort of where are we now versus where we might have been at, call it, peak operational disruption?

Karen, as we work through that, what we saw is largely that we weren’t losing a lot of customers. What we tended to see more was we were looking losing particular lines. So we look at lines per drop and cases per line. So it’s lines per drop is an indication where if -- so romaine lettuce is my example I would use. If I’m having trouble serving you, that you move that one particular line to somebody else. But then as service improves, we see that tend to come back over time, either just by the sales rep asking for it, potentially some very targeted short-term incentive. But we’ve continued to -- we’ve seen that resurgence as we’ve continued to improve service and worked their way through this. And what I would say is back to the 4% exit rate for the year, we would expect to be back to sort of a solid level of base performance, like we’ve had the last couple of years with our consistent 4% and have really set the stage for us then to continue to improve from there. I think all the things that we’ve talked about, about accelerating the case growth in the future remain in place. And we just had to take in this case a step back before we take a step forward. So we’re still optimistic about our future growth. And just the timing was -- becomes a little bit longer than anticipated.

The other thing I would add is a lot of -- as Dirk said awhile, we didn’t so much lose customers as lost over the share. And some customers [indiscernible] I think that was kind of hard to pick out. But a lot about selling is confidence of our sales reps. And as I think I’ve talked about before, we do quarterly flyarounds with the leadership from each region. And I can tell you there’s a lot less discussion about any headwinds or noise from the move to centralized replenishment in the most recent fly-around [indiscernible] and the one before that and the one before that. So the sales force is feeling good about being able to lean in with customers. Our field leadership is feeling good. And that’s why with having put the fixes in place that we talked about and also giving the buyers a little bit of time, right? There’s literally hundreds of new people in their roles, a combination of time and then fixes. We’re seeing the fruits of that and the sales force is gaining confidence. And that’s why we’re confident that the growth rate of independent restaurants will return to historical levels we’ve seen in the last couple of years.

Your last question comes from the line of Ajay Jain.

I had a high-level question. It seems like your independent case growth has actually held up pretty well and it’s also held up pretty well for your competitors. So with everyone in the industry focused on that same customer segment, do you see any risks to your mid-term objectives based on that growth strategy? I’m just trying to figure out if there’s really enough growth out there, where it’s not margin-dilutive to go after independents. Or if it could become an issue of diminishing returns based on customer acquisition costs as you’re all sort of going after the most attractive segment of the market.

Yes, so I would say three things: a, and I guess, I’m just borrowing from my close. Really, the outlook for independent restaurants is very positive as it looks from what competitors are reporting and from what industry analysts are independently saying. So that’s number one. Number two, we hear a lot from the largest three players. But the three of us still only account for maybe third of the industry. It’s still a very highly fragmented industry. So there’s the combination of healthy backdrop and environment in a highly fragmented industry that gives an opportunity for everyone to grow at a healthy clip. And then with respect to your part about margin, there are two just structurally, there’s no customer concentration. There’s limited buyer power, very much unlike what you get with large customers. And I think that, more than anything, is what sustains the attractive margin profile of the independents relative to a very different profile that you see with the larger customers. So our outlook is positive. And we believe a differentiated strategy supports our profitable market share gains over time for really as far as we can see.

And I had one follow-up. I know there’s been a lot of discussion on industry-wide cost pressures with wages and supply chain costs. But on the supplier side, the revenue softness recently comes at a time when restaurant spending is supposedly on the upswing and as independent case growth is in the 3% to 4% range and industry traffic is going up. I’m just wondering why there’s been a disconnect, like incremental softness across the board on the supplier side. Now I know in your case, some of the softness is more health care-related. But can you comment at all on that disconnect between the industry headwinds for suppliers and then the improving traffic trends? Because it doesn’t seem like all of the recent headwinds on the supplier side are cost-driven.

Sure. I assume when you say suppliers, you mean the distributors, correct?

Yes, correct.

So I think for us, you’ve highlighted, that’s what Pietro talked about, the independents and then you commented on the health care and hospitality. I think the other industry piece that’s for us on the all other is what we’ve said plenty of times before is -- so first, I guess, you start with even some of the Black Box data and if you actually look at the underlying traffic is continuing to generally show some negative comps, if you factor out liquor and overall sales dollars. The other piece is concept-by-concept is fairly different. So as we look even across our portfolio, you have some that are growing and some that are going backwards. And so there isn’t necessarily a single trend that we see across that chain. But the same-store comps are a headwind. That is a widespread issue within specifically a number of the chains. And that’s where you see a little bit of the headwind, although we feel very good about our pipeline, both in health care, hospitality and the all other areas. All other does have that headwind of the same-store sales.

Presenters, there are no further questions at the moment. Please continue.

Okay. So, thank you, operator. So just to recap, so on the demand side, we continue to see a very positive outlook for our industry. And as a company, we continue to make good progress against both our short-term and longer-term initiatives. Hopefully, we were able to get to all your questions and appreciate everyone joining us this morning. Thank you.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.