Good morning, ladies and gentlemen. Welcome to Sysco's Third Quarter Fiscal Year 2023 Conference Call. As a reminder, today's call is being recorded. We will begin with opening remarks and introductions. I would like to turn the call over to Kevin Kim, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Sysco's third quarter fiscal year 2023 earnings call. On today's call, we have Kevin Hourican, our President and Chief Executive Officer; Kenny Cheung, our Chief Financial Officer; and Neil Russell, our Chief Administrative 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 2, 2022, 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 be found in the Investors section of our website. 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. If you have follow-up questions, we ask that you please reenter the queue. At this time, I'd like to turn the call over to Kevin Hourican.

Thank you, Kevin, and good morning, everyone. We will start today with a brief review of our financial performance. We will then highlight how we continue to grow share profitably. And as is our custom, we will provide a brief update on select elements of our Recipe for Growth strategy. I will then introduce Kenny Cheung, who joined the team a couple of weeks ago as our Chief Financial Officer. Kenny will share a few thoughts about what attracted him to Sysco and his initial observations. Neil Russell, now on the Chief Administrative Officer role, will provide a detailed update on our third quarter financial results, our balanced approach to capital allocation and lastly he will provide additional commentary around guidance. Our Q3 results, as displayed on Slide number 6 show continued double-digit top and bottom line growth. We grew faster than the overall market profitably, driving case volume growth of 6.1% across our U.S. Foodservice business and total sales growth of 11.7%. Our positive momentum was aided by strong performance from our International division with segment profits nearly doubling year-over-year. Our total company adjusted operating income and adjusted EPS grew approximately 27%, resulting in the highest ever third quarter profit in company history. Importantly, sequential improvements in our supply chain operating expenses resulted in solid operating leverage. I am pleased with the progress that we are making in supply chain productivity and overall expense control. We delivered strong sales growth throughout the quarter despite some industry softness beginning in March. Core traffic to our customers moderated in March, negatively impacting the sales volume in the most important month of the quarter. Third-party data indicates that the overall market volume decelerated through slight growth in March softer than had been expected within the restaurant segment. Additionally, the rate of inflation…

Thank you, Kevin, and good morning, everyone. I am thrilled and honored to serve as the CFO of the world's largest foodservice distribution company. So why Sysco? I am excited to join the company at such an opportunistic and transformational time. Notwithstanding recent market dynamics, the food away from home industry is healthy and growing, currently a $350 billion industry with continued long-term growth tailwinds. Furthermore, one of the most attractive parts of joining this exceptional leadership team is a robust opportunity to build on our leadership position across the global markets we serve. Size and scale matter in this industry and I believe in the bold transformation that is already yielding dividends for our business. Sysco has a long history of generating robust operating cash flows and engaging in prudent M&A while maintaining a strong history of returning cash back to shareholders. It all starts with our purpose, which is to connect the world to share food and care for one another. Combining our purpose with our unwavering culture for operational excellence and compelling investments around technology, products and solutions and supply chain productivity are important actions. We believe these and other actions render structural accretive value, which will compound with our scale and continue our profitable market share growth. In this role, I plan to leverage my background of adding value for large global companies that are customer service centric. My experience also includes driving field labor productivity profitably growing both contracted and short-cycle business and innovating to create value for our customers. Delivering consistent results will come from our industry-leading people, products and solutions. Remaining disciplined with supply chain inventory management and capital allocation will be critical to my role as it is all about maximizing return on invested capital and sustainable growth. Lastly, I understand and appreciate the importance of driving environmental sustainability initiatives with Sysco already on a great path under Neil's leadership. While only here for a few weeks, I am impressed with the bench strength of the financial organization and the passion that my fellow colleagues have for the industry and the company. I look forward to working hand-in-hand with the wider team as we celebrate our Recipe for Growth strategy and further our Number One position. The future is extremely bright. We have a unique opportunity to build on our leader position and to define the future path for the food service and supply chain ecosystem. I look forward to working with you all. I will now turn it over to Neil, who will provide additional financial details.

Welcome, Kenny. And hello, everyone. I will start today with a review of our third quarter financial performance and then discuss our expectations for the full year to go. During my discussion today, unless otherwise stated, all results are compared to the same quarter in the prior fiscal year. As highlighted in our news release issued earlier this morning, and on Slide 14, which is posted on our website, we delivered double-digit year-over-year growth in both top and bottom line results. And we continued our balanced approach to capita allocation all in the midst of an evolving macro backdrop. Let me begin with a summary of our third quarter results. Sales grew 11.7%, with U.S. Foodservice growing at 10.4% and continued positive momentum in our International segment, which grew at 18%. Volumes grew year-over-year and also improved sequentially. The U.S. Foodservice segment, which includes our Broadline, FreshPoint, Italian and other specialty businesses grew 6.1% and local case volumes increased 4.2%. Adjusted gross profit for the third quarter increased 12.8% to $3.4 billion with adjusted gross margin improving 18 basis points to 18.2%. Gross profit dollars per case grew in all four segments, marking the seventh consecutive quarter of such growth. Our gross profit dollar and margin percentage improvement during the third quarter reflected our ability to continue to effectively manage product inflation, which moderated to 4.9% for the total enterprise, down sequentially from 8.3% during the second quarter of this fiscal year. The improvement in gross profit was also driven by incremental progress from our strategic sourcing efforts as well as improved penetration rates from Sysco Brand products. Overall, adjusted operating expenses were $2.7 billion for the quarter or 14.3% of sales, a 32 basis point improvement from the prior year. This quarter included transformation investments of $60 million. Excess…

Thank you, Neil. As we conclude, I'd like to provide a brief summary on Slide Number 24. Our Q3 financial performance reflects another record quarter, delivering adjusted operating income growth of over 27% to $736 million. Our profit leverage improved in the third quarter with gross profit growth outpacing operating expense growth. We expect that performance to continue in the fourth quarter. Industry macro volume trends softened in March, which we expect to continue into Q4. We are also experiencing lower rates of inflation, a trend we expect to continue through Q4. These two factors are partially offset by significantly improving supply chain productivity performance. No one is better prepared to manage a choppy macro landscape than Sysco. Why? Scale matters in this industry? Purchasing scale, logistics route efficiency scale, inventory optimization scale. But even more importantly, customer diversification scale. At Sysco, we serve restaurants up and down the price point spectrum. And also have a large non-restaurant customer base. Many of our sectors are recession-proof, for instance, education and health care. Other segments are still in recovery, travel hospitality and business and industry. Within our restaurant segment, given that we serve all restaurant types, we retain case volume if and when customers trade up or down within restaurant customer segments. At Sysco, we are steadfastly focused on what we can control. We are focused on winning new business and in penetrating additional cases with existing customers. As importantly, we are focused on improving our supply chain efficiency. Food-away-from-home is a healthy long-term market, and we are prepared to be successful regardless of the short-term macro environmental conditions. Lastly, Sysco remains deeply committed to our strong and stable balance sheet, disciplined capital allocation and delivering continued returns to our shareholders. Our status as a Dividend Aristocrat remains a priority and we are proud to carry that distinction going into our 54th year. Sysco is a resilient and diversified company with scale advantages. We are increasing our scale advantages through our Recipe for Growth strategy. We are confident that our work product will deliver strong profit growth and compelling returns for our shareholders. Operator, you can now open the line for questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question will come from Mark Carden at UBS. Please go ahead.

Good morning. Thanks so much for taking the question and congrats on the new position, Kenny. I wanted to dig in a bit more on what you’re seeing in the labor front. I know that recent strikes you experience were quite a bit smaller in nature than the ones that took place in October. But are you expecting industry wage headwinds to intensify much more than you originally expected over the course of the next few quarters? And does this impact how you’re thinking of offsetting cost outs and what’s necessary on that front? Thanks.

Great. Good morning, Mark. This is Kevin. Thanks for the question. I’ll start just, acknowledging the strike situation and then directly answer your question. I just want to thank our operations team, first and foremost, for the agility that they displayed. During the unanticipated strikes in the most recent quarter, within 24 hours to 48 hours, we were up to full shipping capacity, able to support our customers and communicate effectively with our customers, which is not an easy task given the amount of business that we do on any given day at Sysco. Point two for me is, Sysco pays above market wage rates, and we provide extremely compelling benefits to our associates. That has not changed, and that will not change. We will be a leader in wage and benefits. For example, drivers can make more than a $100,000 a year at Sysco. It’s a good paying job. Unfortunately, as you know, Mark, you indicated there were some strikes in the most recent quarter and the one that impacted our Q2 for up in Boston. These are things we’re working through. We will continue to be fair to our colleagues and also manage our P&L for the long term during our discussions with our labor partners. Our goal is to have a solid relationship with all of our labor partners and to treat our colleagues with respect and the dignity that they deserve, and we’re committed to doing that. As it relates to wage, we’ll talk about that more in August when we provide our fiscal 2024 guidance. I want to be clear that the type of increases that we’re experiencing are not game changing. I know that restaurant names and retail names have talked about double-digit plus type annual wage increases. We are not experiencing that at Sysco. And that’s something we’ll provide you with more clarity and specificity about on our August call.

Great. And then as a quick follow-up to that. You’ve referenced improvements in overall labor productivity. At this stage, how close do you think you are to getting back to normalized labor productivity levels, both from the selector front and the driver front, and then how much of an impact do you think you’re seeing date from the new academies?

Yes, Mark, thanks for the follow-up. We are really pleased with the rate of progress that we made in Q3 from a supply chain productivity perspective. I like to start at the start, which is we are fully staffed. So we are a fully staffed network. We’re beginning to experience improved retention because over time rates have come down and obviously that flows through positively to our P&L. The types of things that we have done to drive that behavior in action is, as you mentioned, the academies for having a meaningful impact on reducing turnover for our new hires, improving productivity for our new hires. We have fully implemented engineered labor standards in our transportation division. We’ve always had that for warehousing, and we now have it for transportation, which allows us to provide our colleagues with proper coaching and recognition when they’re doing well and to help a new person or a person who’s not at the level of productivity and throughput [ph] that we desire to understand how they can individually improve. We’re improving how we flex our labor to match the volume for any given day in any given week, which allows us to, again, hit the desired productivity. And we’re really pleased with the exit velocity of our productivity in March, and we anticipate in our Q4 of this year that we will make continued progress. As I mentioned on the earnings call transcript, we’re still at an elevated level of cost versus our historical norm. And therefore there’s still progress to be made, and that progress will carry into 2024. We anticipate supply chain costs as a percent of sales will come down year-over-year, and we’ll provide you more clarity and specifics behind that on our guide that we will provide you in August. Neil has one comment to add to that. Neil, over to you.

Hey, Mark. Good morning. It’s Neil. Hope you’re doing well. Listen, just a quick follow on here. You heard in my prepared comments a comment about productivity costs. So as you know, over the last several quarters, there are a couple of cost categories that were impacting the business that we’ve made great progress on. And one of which of course is directly related to your question. First of all, we had in our cost basis what we called snapback costs those types of costs that were related to the hiring of a large wave of new colleagues as we improved and increased the volume in our business. And those costs originally as high as nearly $70 million in a quarter came down to $30 million, came down to $20 million to $10 million. Those were eliminated last quarter. And now similarly, productivity costs, which you really should think about is excess overtime associated with the staffing and productivity in the business to the point of your question were $40 million, then they were $20 million. Those also now are down to zero. So having made progress on both the snapback costs and productivity costs being eliminated if you will is really good signals of progress to Kevin’s point.

Great. Thanks so much. Good luck guys.

Thank you, Mark.

Your next question comes from John Heinbockel at Guggenheim. Please go ahead.

Hey, Kevin. I wanted to start real quick with so Sysco Your Way, if you could sort of frame the most – the newest markets that you’ve entered, how they’re performing, right, versus some of the earlier ones, right, getting better at executing this? And then I think in the past, you thought that was $1 billion opportunity. Do you still think that’s true or is it bigger than you thought perhaps?

Good morning, John. Thank you for the question. We’re really pleased with the performance of Sysco Your Way. Specifically as we roll out additional new neighborhoods, we’re not seeing a diminishing of the impact as each individual neighborhood comes on. I think you’ve heard me talk about that before as the Hawthorne effect. When you launch a pilot, it does great, but then when you attempt to scale it and it diminishes over time. We are not seeing that at all. Each and every neighborhood that we launch comes out of the gate strong and actually sequentially improves month-over-month and quarter-over-quarter. And the lie that happens is twofold. Again, remember, the truck is there literally every day, twice per day. The sales rep is walking the beat, as we call it, every day. And we win new customers on a sequential basis because we’re showing up every day and knocking on the door and saying, do you need anything? Do you need anything? And then within existing customers, we can win categories that they perhaps were buying from a specialty distributor, like a specialty house or a premium protein house and a dairy house. We’re gaining that specialty business and putting it on our truck, and then we’re winning new doors within the neighborhood. So each additional neighborhood that we launched we’re pleased most impressively. We’re now live in five countries and the model is scaling in every country that we’ve launched it in. Most recently, we’ve launched it in Stockholm, Sweden. And right out of the gate, the results have been really strong. So internationally it’s working, domestically it’s working. We anticipate that yes, John, it will exceed – we’ll be on target versus the $1 billion that we have quoted. And there’s the potential for upside, not prepared today to talk about what level of upside, but we’re really pleased with the performance. We’re also pleased with the performance of Sysco Perks, which is our loyalty program. If I may, I do get a lot of questions. Kevin, what’s the difference between Sysco Your Way and Perks? I’m kind of confused. I want to be really clear. Sysco Your Way is about the neighborhood, and it’s a couple of streets, in a town that have 50 plus restaurants on those one or two streets, and it’s about providing next level of service to those specific neighborhoods. Perks is the opposite of that. It’s a customer who’s not in one of those neighborhoods. That’s one of our best customers. It’s an invitation only program. We invite customers in and we provide them with white glove [ph] service, marketing services and culinary engagements. And that program as well, which is now more than 11,000 customers enrolled, is exceeding our expectations.

And then one quick follow-up. You mentioned that the comp change that you’re testing, I think that relates to the sales consultants, right, that side of the business. And is that, I assume that is some form of hybrid commission, right? Because I don’t think you’re going to full commission, but some hybrid, is that fair? And then what do you think the greatest impact is on the business?

John, thank you for the follow-up. And you’re directionally accurate on where we’re headed. So, for everyone else who’s listening, go back to pre-COVID. The Sysco sales consultant was on a full commissioned model. During COVID because the business dropped significantly, we did the right thing for our sales consultants to retain them, and we converted to a base plus bonus model where they earn a livable wage through a base pay, and then they have opportunities to make money through bonus criteria. And that criteria can change quarter-over-quarter to have behavior that we desire to see from that population. For a while it was Sysco brand and then we were focused on helping our customers engage with Sysco Shop. And John, yes, where we’re headed for this coming fiscal year is to put even more incentive in front of the sales consultants for them to profitably grow their business. And the more cases they get put onto a Sysco truck, the more they make and obviously the more Sysco makes as a result. So we’re going to keep the base pay component of what we have because we like that element. It drives retention and quality of life for our associates with ups and downs that occur in business. But we want to put even more, put a more incentive in front of them to drive growth profitably. And what we anticipate the action and reaction from that John will be is real hunger on our sales force to go out and win business, penetrate more lines with existing customers and win new business. So we’re testing it, as I mentioned, the results are preliminarily positive and then we work on the communication plan and change management plan for our 5,000 plus associates in the sales ranks within the U.S. and we expect it to be very well received, because as I mentioned in my prepared remarks, this feedback came directly from our sales results, excuse me, from our sales consultants. Gave me more motivation and incentive to go out and win and go out and sell. And we’re going to be doing exactly that.

Thank you.

Thank you, John.

[Operator Instructions] Your next question will come from Joshua Long at Stephens. Please go ahead.

Great. Thank you for taking the question. Was hopeful we could dig into some of the digital tools that you called out, Kevin, sounds like strength and Sysco Shop and then also your sales associate PRM tool are performing well. Just curious what you could share in terms of the learnings that you’ve seen to date where you might lean into going forward, to the extent you could share that? And then also just, how does those tools and others that you have help you manage the pace of inflation? You mentioned being really important, but how do you use those tools to really navigate this current environment from a pricing and just cost management perspective?

Good morning, Josh. Thank you for the question. And it’s two parts, so I’ll address it as such. On the digital side, just can’t thank our digital team and our business team enough for the progress that we’re making in our digital tools. So big shout out to our Sysco technology teams. Let me just break it down into the two most impactful pieces that are helpful to the customer. And then I’m going to answer the inflation question through the third prong, which is pricing technology. For digital, Sysco Shop is our ordering platform. We discontinue to make meaningful progress in the usability of that tool. Improved navigation, there are categories of product that we sell, like supplies and equipment, which is a very high margin category for us that was really difficult for our customers to shop in the past. They had to go to a separate website called Supplies on the Fly, and we’re increasing significantly the accessibility of those high margin categories and products, improving the search results, improving the navigation capability of the website. But here’s where it’s most powerful. Non-intrusive popups to our customer to help them make good choices in their order that they place. For example, they forgot to put into that order an item that we know they order regularly. There’ll be a dialogue box that pops up at multiple places throughout their shopping experience to remind them of that. And they have to interact with it in order to be able to proceed forward in a non-intrusive way. We're providing them with suggestions on things that they should be buying that we know based on the cuisine that they are in and the products we're buying that should be riding on a Sysco truck, and we're integrating that with pricing.…

Yes. Thanks Kevin. Hey, Josh. Just a couple of headlines for you; the impact of these things that Kevin has been describing, so gross profit dollars growing at a pace faster than expenses now for two quarters in a row is the end result of the improvement in these tools and processes that Kevin was describing and there's one other tool in the toolbox that is helpful for that gross profit dollar growth, and that of course is Sysco brand, which has performed very well for us recently. Now at 36% of what we sell to our local customers and about 46% – I'm sorry, 46% of what we sell to our local customers, 36% what we sell overall. A very powerful tool in the toolbox of managing fluctuations and inflation and the power of the gross profit dollar growth, so all those things combined are leading to that improved progress of that leverage that we speak of.

Thank you.

Your next question comes from John Ivankoe at J.P. Morgan. Please go ahead.

Hi. Its related questions or points I suppose. First, what is the nature of the customer type slowdown that you saw in March into April? Is it full-service independent restaurants or local customers, which I think is one of your highest profit customers? So if you don't mind addressing that? And then secondly, the slowdown in inflation, if you could talk about what cost categories it's happening in? I mean are these categories that are most likely sold to street accounts? Or is there a cost plus a dollar component to that or cost plus percent component to that? Just wanted to get some more clarity of what's happening beneath the surface on inflation. Thank you.

Okay. John, its Kevin. I'll start, and I'll toss to Neil for additional comment. Just a little more color on what we experienced in March, and obviously that's built into how we described our expectations for Q4 and now for the full year. March restaurant traffic did slow down in March; I think that's pretty well understood. Restaurant names, credit card data purchasing, et cetera, did convey a slowdown in March's traffic. Now also to be clear, January and February were benefited by a pretty large year-over-year tailwind tied to Omicron. But again the March traffic was a bit slower than what had been expected. And we are expecting that to continue into our Q4. Now we expect Sysco to outperform versus the market. We're going to win share profitably, and we are committed to delivering on our growth targets. It's just a more overarching comment about traffic. No notable callouts marked on trade down. I know that's often a question within sectors and within segments of our book. The traffic that we experienced was kind of across the board, across our restaurant names that we cover. Specific to inflation I would like to provide a little more color in that regard. The number, the print for the quarter was 4.9%, as Neil said in his prepared remarks. The quarter started a bit higher than what we expected and it ended a bit lower than we expected. So mathematically, what that means is the rate of disinflation in March was steeper than we had anticipated. Now we're prepared to manage that. As I mentioned a second ago in answering Josh's question, for the long-term of this industry, lower inflation is a good thing. I want to be really clear about that. This time last year, we were dealing with 15%…

Thanks Kevin. Just a little bit of color commentary around some of those points. At any given point in time that some categories that are inflationary, like currently for us dairy, some that are deflationary like for us currently poultry and some that have swung as Kevin just talked about. So beef, which was recently deflationary is now becoming inflationary for us. And it was the pace of disinflation, particularly in March that changed a bit, and we ended as Kevin said the quarter at about 5% for the total quarter in terms of inflation. The local customer market is fairly efficient in terms of how you pass this through. And on the chain or multiunit side, you have longer visibility with the contracts that we have with those types of customers. Put all of this together and you still expect low-single digit inflation for the fourth quarter, which as Kevin indicated, if you were to look over a 20-year time horizon would actually be the preferred rate of inflation for both us and our customers. So that's where we think we are right now back to Kevin for any last point.

Yes. Sorry for the three-part answer to this question, John, but it's just really important for everyone to understand. And as that is happening, as cost is becoming more efficient and therefore our ability to provide value to our customers passes through at a lower rate of inflation, aka disinflation. Simultaneous to that we are taking meaningful costs out of our current supply chain. We are driving improvement in efficiency, and it's those things that need to happen in concert, and I am pleased with the rate of improvement we are making within our supply chain. And again, the performance you see is for the full quarter in our numbers. I'm really pleased with the exit velocity in March of our supply chain productivity that we measure everything, pieces per labor hour, pieces per truck, we literally measure everything. And our exit rate in supply chain, productivity and efficiency in March was really strong. So as our inflation rate begins to decline aka disinflation, we're bringing costs down at exactly the same time.

Thank you.

Thank you, John.

Your next question comes from Jeffrey Bernstein at Barclays. Please go ahead.

Great. Thank you. One follow-up on that last question; the March slowdown that you anticipate continuing through the fiscal fourth quarter, I think you had noted in the release and in your comments that Sysco sales perhaps were maybe stronger or more stable through the quarter. I'm just wondering what do you what there is an opportunity to accelerate market share gains in what's likely a slowdown, presumably again scale matters and you've got more options to mitigate. So I'm just wondering if is an opportunity for greater market share gains in an environment like that? And then I had one follow-up.

Okay. Jeff, this is Kevin. I'll answer the first question and then toss Steve for the follow-up. So we're bullish on Sysco's ability to win in the market for the long term. We are playing the long game, as I said in my prepared remarks. The recipe for growth strategy is all about better serving our customers in growing our business profitably and enabling Sysco to do so at a rate that is faster than the overall market rate of growth, and we're on track to be able to do that for our third consecutive year. Specifically, Jeff, what we will double down on during a period of time that would be a slower macro is initiatives and strategies that we know are working. So push even harder and work even faster on Sysco Your Way, engage our Sysco Perks customers with the benefits that are available to them because we have proven that a Sysco Perks member who engages with one of Sysco's programs and that would be an example, a culinary service, buys more from Sysco on an ongoing basis. The work we're doing with our website. It's moved faster, improve it even more. Spanish language version of our website is going live soon. Just double down on our ability to advance forward our strategy because our strategy is working, and our strategy is winning in the marketplace. Italian, as an example, we've doubled our market share in Italian over the past year, in large part through the Greco and Sons acquisition, but remember the Greco acquisition was about taking that platform nationwide not just cultivating it within its existing geographies. We're making meaningful progress in being able to advance that Italian platform by opening new physical geographies, most recently out in California through an acquisition we did in L.A., and we're going to flip that acquisition to the Greco model and meaningfully grow that business. So Jeff, we're all about profitable growth and doing so responsibly. And we do believe there's an opportunity, not just in our Q4, but as we head into fiscal 2024 to lead the industry from a profitable growth perspective. Toss, back to you for your follow-up.

Yes. In fact, perfect. I think you ended it with thoughts around fiscal 2024. Just wondering, I mean, I know back in the day, you had given guidance, which culminated in fiscal 2024. I know it was built off of fiscal 2019, I think it was for EPS growth, 30% plus, which at the time equated to 460 or more. I know it hasn't been mentioned of late and we had a reduction in fiscal 2023 guidance last quarter and the most recent slowdown now you're talking about the lower end of that range, closer to $4, I guess. Just wondering whether there is any still relevance to that prior target, whether you see further acceleration of efficiencies or whatnot? Or maybe throw it to Kenny. Just wondering what can you bring to the table in terms of a greater skill set to help to achieve those prior earnings targets? Thank you.

Yes, Jeff. Appreciate the question. This is Kevin. I'll start and then I'm going to toss to Kenny for a comment. Just to be clear, we're going to provide our guidance for 2024 at our August call. We are confident in our plans at Sysco to continue to advance our recipe for growth. The strategy is working and what we are confident in or some; let's call it, macro comments. We are confident we can grow our business profitably faster than the industry. We are confident we can continue to make improvements in our supply chain efficiency. Things have important that we'll provide you with more color on in August because we're deep in the throes of our fiscal planning process as we speak. And that work will happen over the next couple of months is what level of inflation will we assume for fiscal 2024, what level of market growth will we assume for 2024 and then what more from an efficiency cost out structural perspective, will we specifically be able to account for and book on our plans for 2024. So we need to put all that together to provide a reasonable guide for next year. That will come in August. And Kenny, I toss to you for additional comments.

Sure. Thanks, Kevin. Hi, Jeff. So a few things from my side of the house. We are entering 2024 with momentum. So keep in mind, we will finish this year in Q4 with record sales and operating income, right? So a lot of momentum entering next year. As Kevin mentioned, there's a few themes that you will see as we unveil the new plan in August next earnings call. One is continuing to take care profitably, right? That's very important for all of us, and that's where refer growth comes in. Second is, we will continue to drive operating leverage in our business. Third is making sure that our balance sheet continues to be healthy and robust from a liquidity, cash and leverage standpoint. To your last question around where do I add value and how I think about these things that I just mentioned, right? As I think about my priorities entering, call it, Q4 and 2024 and there's a few thoughts on my mind, right? First of all, I view myself as a business leader with a finance expertise, right? So I'm a very hands-on operational CFO. So where I work directly with the team and deploy capital where it creates value for our stakeholders. I'm of the mind that one of my job – first priority is to make sure that we generate – continue to generate healthy cash inflows from operations, maximize the conversion from EBITDA and operating income and ultimately, continue the high quality of earnings that Sysco has enjoyed throughout the period. The second piece is continue to partner with the team, right, from a go-to-market standpoint, providing world-class service to our customers. Everything starts with our customers, especially as we grow market share, local, Sysco brands, specialty and the like, which accretes margins for our business. And last but not least, as part of my pedigree in my experience, it's all about per operational excellence, driving productivity and rigor with our supply chain and overall business. A penny for our business is huge, given the fact that we have scale and leverage that we talked about. And this comes full circle to my first point where we must generate cash and flow to invest in our business and to create further value on top of the scale advantage that we enjoy.

Thank you.

Thank you, Jeff.

Your next question comes from Kendall Toscano at Bank of America. Please go ahead.

Hi, good morning. Thanks for taking my question. So I wanted to ask about the 2023 guidance. But first, I just wanted to see just a quick follow-up in terms of the local customer channel. So you had talked about some initiatives last quarter to accelerate new customer acquisition in that segment. I was wondering if you had any update on that? And then just in terms of the exit rate for the quarter, you said March for, I guess, the total U.S. Broadline segment was kind of exited at a low or slight growth, I think you said. I guess how does that look for local customers specifically? And can we assume it's still running a bit below the national customers?

Yes. Kendall, this is Kevin. I'll start and then I'll toss to Neil for additional color. So part of it is accidentally there, we got a mixed message between the marketplace which means all businesses and then Sysco specific. So I'll unpack it and make it more clear. The comment about March low growth or slight growth, I believe, were the exact words I used, that's an overall market condition that is restaurant names in aggregate, leveraging third-party data and credit card data. That was that comment. We grew substantially more than that. We grew our local case volume 4% in the most recent quarter and total business 6%, which is that's the answer to the second part of your question. Yes, we are growing our non-restaurant business and our CMU restaurant business. That's the contracted long cycle to use Kenny's terms at a faster rate than local. And the lie is twofold. One, Sysco is the industry leader in the non-restaurant sector and that's business and industry, travel, hospitality. And those businesses remain in meaningful recovery. So that's not a slight on the local business. It's that we're seeing significant rebound in health, in travel. And we're seeing offices reopening. We're seeing more people going back to work on a daily basis. So we're seeing companies extend the number of days per week that you expect their colleagues to be returning to work. So that's – and we've been tremendously successful in our national sales business. We stopped reporting the number, but the last time we reported it, it was $2-plus billion of net new wins for national business. And I want to be really clear about that. We did not buy that business. The contracted margin rates for those wins exceeded our historical standards. The reason why companies are partnering with Sysco is our national scale. Our breadth and reach scale matters in this industry and our ability to ship on time and in full and provide competitive marketplace rates shine through strongly over the last couple of years from a national perspective. So that gives you the color. Our total was 6%. Our local was four [ph] plus that’s the volume and the overall market itself in March with slight growth. Our commentary for the Q4, I'm going to toss to Neil for anything you would like to say about that.

Hey, Kendall, thanks for your question. As Kevin is talking about here on the industry perspective, we are seeing total growth and albeit, at a slower pace in Sysco outpacing that. It's not as much about the local independent versus the chain or multiunit as much as it is good operators innovating on their menu, offering fresh, local, customizable offerings that map to the end consumer. So I think that's ultimately what we're seeing. As it pertains to the year and the guidance, a few points that we've made that we continue to emphasize, we do expect to grow sales by at least 10% for the year. And as we talked about, we continue to expect a rate of gross profit dollar growth to exceed the expense growth and continue to leverage that. We talked about the inflation that's looking for us to be in that low single-digit range. And as we talked about here today on the call, we'll expect our earnings per share to be about $4 for the full year.

Great. I think that answers all my questions. Thanks again.

Thank you, Kendall.

Your next question comes from Alex Slagle at Jefferies. Please go ahead.

Thank you. Good morning. I wanted to follow-up on the target to grow 1.35 times the market in 2023 and I guess further acceleration ahead and how you're thinking about that ramp relative to previous thoughts? I mean it looked like a pretty strong acceleration in the chart I didn't hear whether you reiterated the 1.5 times for 2024, but just any more color there?

Yes, I'll start and then I'll toss to Kenny for any final or additional comments that he'd like to make about 2024. Alex. I appreciate the question. So what I said on today's prepared remarks is we're on track for our goal for this year. So are consistently growing more than the market, and that's our third consecutive year of doing that. So we're pleased with the progress that we are making. Sysco has been the largest in this industry for a long time. We have had the highest EPS as a percent of sales or EBITDA as a percent of sales in this industry by a wide margin for a long time, and we have become a growth company. We are consistently growing more than the industry, and we are accelerating our rate of progress. So the recipe for growth is the why and the how. And the increased allocation of capital specific to footprint, meaning infrastructure. So that's not an increase in the total capital at Sysco. It's – we said how many buildings do we save that number publicly yet. I didn't want to misspeak. So forgive me for tossing it over to Neil. We have seven physical buildings in flight as we speak. And those buildings are going to increase our fulfillment capacity in high-growth markets, in high rate of success markets for Sysco. In the past, we've called those fold-outs, some of those seven buildings are for our Italian platform to be able to replicate the Greco model in geographies where we don't currently have an Italian platform. So we're bullish on our long-term. As I said, we're playing the long game at Sysco. The recipe for growth is working. Perks, Sysco Your Way, our improved website, our pricing capabilities, the physical infrastructure enhancements that I mentioned Neil was down in California last week looking at Riverside, which is our site that has our first electric trucks. We will be a leader in that space. You can envision a future where Manhattan blocks combustible engines going into Manhattan for delivery. Deliveries must be between midnight and 4 a.m. and need to be on an electric truck. Sysco will be prepared to do that faster than anyone in our industry. So we're pleased with our progress. We're proud that we just posted the most profitable quarter in the company's history. And obviously, the overall market from time-to-time, if there were some curveballs. And I mentioned a few of those at the beginning of today's prepared remarks. As it relates to 2024, Kenny, I'll toss to you for a final word.

Yes. Good morning. So capital allocation strategy is positioned for growth at Sysco. We are positioned for growth, right? Return on invested capital, as I mentioned earlier, is the lens in which we will operate to ensure that we are getting optimized return for where we deploy capital and resources. So just a bit of my thought on capital allocation. We will, first and foremost, invest in business and growth. That's because capital investments as Kevin mentioned, technology, digital tools, fleet, buildings, infrastructure footprint right? This also includes specific for growth as well. So we – right now, Sysco has the luxury given the fact that we are generating robust free cash flow to invest in our company, but also return cash to shareholders as well. So right now, I believe that we are well positioned for growth in 2024, given the healthy balance sheet that we have, that allows us a lot of optionality and flexibility.

Thank you.

Thank you, Alex.

Ladies and gentlemen, unfortunately, we have reached our allotted time for today's conference call, so this will be concluded. We would like to thank everybody for participating, and we would ask you to please disconnect your lines.