Dirk Locascio: Thanks.
David Flitman: Thank you.
Operator: We’ll take our next question from Brian Harbour with Morgan Stanley.
Brian Harbour: Yes. Thanks. Good morning guys. Dirk, just on that comment, would you expect that there is now going to be kind of modest inflation across the business in 4Q and then into early 2024?
Dirk Locascio: Good morning, Brian. Well, I’ll use P10 as a good indicator that at least it’s back into the black or some modest inflation. I think as we see since it’s been more driven by proteins, which can be more volatile, I think that’s the part that’s harder to predict. But I think what’s encouraging is you see the stabilization of proteins, you see still modest inflation in grocery. And so I think that indicates more likelihood of some level of inflation here in the quarter I think that the most important part that I had come back to is what we talked about earlier that even with really modest deflation that our gross profit still remain quite strong. It just, I think, demonstrates the durability we’ve talked a lot about and why we are so bullish in our GP being able to stay strong and an expectation that in future years, we continue to expand further.
Brian Harbour: Yes. Okay. Makes sense. And then OpEx per case, like you talked about in keeping that in check. How would you kind of rank the main drivers of that at this point? Do you think it’s mostly about just kind of continued improvements in productivity. And are you seeing much yet from kind of digital expansion, flex scheduling, et cetera? Like how do we think about which of those drivers might become more important as you go into the subsequent quarters.
Dirk Locascio: Well, I’ll just start with, we’re quite pleased with the performance. As I said in my prepared comments, our best year-over-year per case performance that we’ve had, and that’s really driven by distribution to supply chain costs. And so I think that is a key unlock. I think when you think across other parts, yes, we’ll get some leverage. We’ll continue to take some actions on productivity. But the – I think all the things also what you see when we talk about the improvement as flex scheduling is coming to life as year-over-year productivity continues to improve for delivery and warehouse. All those are translating into per case improvements. And so that gives us good confidence that we are making traction. We still have plenty of runway ahead, but ultimately are pleased with that and see a lot of opportunity remaining.
Operator: All right. And we’ll take our next question from Edward Kelly with Wells Fargo.
Edward Kelly: Hi, guys. Good morning. Nice quarter. Just a follow-up on OpEx per case. Obviously, very good results. But productivity on a worker standpoint, I don’t think it’s back to 2019 levels. You talked about things like the routing, the flex scheduling. How do we think about the growth in OpEx per case going forward on a sustained basis in terms of modeling? And then specifically, as you think about Q4, you look OpEx doesn’t increase very much Q4 versus Q3, which would suggest that it might actually be down year-over-year. I don’t know if that’s too aggressive an assumption, but maybe speak to that as well.
Dirk Locascio: Hi, Ed. So ultimately, I think with distribution and the productivity, so we actually – for the third quarter, our delivery productivity was about 2019. Warehouse isn’t quite there, but it’s making progress. So we’re pretty encouraged. And I think the – whether it’s a flex scheduling, you heard Dave talk about our cases per mile from the routing work we’ve done over the best in the company history. And what I think we each like about the work we’re doing is it’s not all just about taking costs out. It’s about the customer experience, customer service and things that then are taking – are making our company more productive. So it really is a good balance there. I think the – as you look ahead to the fourth quarter, whether it’s sort of in line with prior year, a little bit higher, a little lower.
I think the encouraging part is that we’re seeing very modest levels of increase in per case. And I think that comes back to what you’ve heard us say from the beginning of this year is when if we have inflation, cost inflation of 3% to 5% a year, our goal is to offset as much of all of that as we can. And I think you’re seeing that as we make progress coming more and more to fruition. So our goal remains that from quarter-to-quarter, that could bounce around a little bit. I’ll use an example for OpEx you may end up with a little better performance in the fourth quarter and – but we’re pleased with the progress we’re making.
Edward Kelly: Okay. And then, Dave, just a follow-up for you. You are making some adjustments to the sales compensation model, hiring salespeople. We’re hearing this from competition as well. Obviously, the large players seem to be a bit more focused on gains with higher margin customers. My question for you is can everyone win in that environment, meaning the larger players. And how confident are you in the differentiation of what US Foods is doing that allows you to continue what we’re seeing today in that type of backdrop?
David Flitman: Yes. Great question. I’ll take your second part first. I’m highly confident in the differentiation of our model. And it’s the winning model, I believe we can drive growth effectively and productively with our sales team. But that team-based selling model, as you continue to hear me say is a real differentiator. I see it working every single day for our customers. And we’re going to continue to drive it hard. And I think that’s why you may hear us talk about sales head count growth at a slightly lower level than you hear from some of our competitors. I think that really is a differentiation in our model, and we’ll continue to lean in around that. And the first part of your question, remind me again.
Edward Kelly: Well, it’s just – I guess it really pertains to the idea that the large three players are all sort of investing in salespeople. Is there enough opportunity beyond that everybody can win? If the market looks at this as you versus your other publicly traded players or some game, how inaccurate is that at the end of the day?
David Flitman: I think this is still a very highly fragmented market, as you know. The big three have 40% nominally roughly plus or minus of share. So that’s still very highly fragmented. I think you continue to see us take share collectively from some of the smaller players. When I think about our business relative to others, we still have a relatively small share of the independent market space. So the runway is long, I think, for growth. We all have different models. They all have their pluses and minuses, but I think there’s room for everybody to continue to win in this market.
Dirk Locascio: Hey, guys. One other thing just that I’d highlight that I think is a differentiator in our go-to-market and our focus is with our three customer types that we’re targeting. I mean what you see is it’s not just about the independence. We had 8% growth almost in healthcare. We’re at 6% hospitality. We’ve continued to do that. We continue to have an excellent new business pipeline and converts in healthcare and hospitality. So if you look at how that translates into in those most attractive or key customer types, that led to overall the strongest case growth out of any of the competitors, and we’re pleased that we have with the model we have, the ability to continue to grow at accelerated and gained share in all three of those types leading to overall solid case growth.
