United Natural Foods Q3 2025 Earnings Report

United Natural Foods EPS Results

• Actual EPS: $0.44
• Consensus EPS: $0.22
• Beat/Miss: Beat by +$0.22
• One Year Ago EPS: $0.10

United Natural Foods Revenue Results

• Actual Revenue: $8.06 billion
• Expected Revenue: $7.78 billion
• Beat/Miss: Beat by +$275.41 million
• YoY Revenue Growth: +7.50%

United Natural Foods Announcement Details

• Quarter: Q3 2025
• Date: 6/10/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, June 10, 2025
• Conference Call Time: 8:30AM ET

United Natural Foods (NYSE:UNFI), together with its subsidiaries, distributes natural, organic, specialty, produce, and conventional grocery and non-food products in the United States and Canada. It operates in two segments, Wholesale and Retail. The company offers grocery and general merchandise, produce, perishables and frozen foods, wellness and personal care items, and bulk and foodservice products. It also provides nuts, dried fruit, seeds, trail mixes, granola, natural and organic snack items, and confections under the Woodstock Farms Manufacturing name; organic, non-GMO project verified, and specialty food and non-food items under the Blue Marble brand name; pet food under the WILD HARVEST brand name; and various products under the ESSENTIAL EVERYDAY, SHOPPERS VALUE, Field Day, EQUALINE, CULINARY CIRCLE, and STONE RIDGE CREAMERY brand names. In addition, the company provides home, health and beauty care, and pharmacy products, as well as private label products through a network of Cub Foods and Shoppers retail grocery stores; and retail store support, pricing strategy, shelf and planogram management, advertising, couponing, ecommerce, consumer convenience, store design, equipment sourcing, electronic payments processing, network and data hosting, point-of-sale hardware and software, automation tools, sustainability, and administrative back-office solution services. Further, it offers consumer and trade marketing programs, and programs to support suppliers in understanding its markets. The company serves chains, independent retailers, and supernatural chains, as well as foodservice, ecommerce, conventional military business, and other sales customers. United Natural Foods, Inc. was founded in 1976 and is headquartered in Providence, Rhode Island.

United Natural Foods Q3 2025 Earnings Call Transcript

Key Takeaways

• IT security breach: UNFI detected unauthorized activity on its systems June 5, has shut down and is rebuilding networks, creating potential near-term service disruptions and remediation costs.
• Sales outperformance: Q3 net sales rose 7.5% to $8.1 billion, driven by a 12% increase in natural products and 3% in conventional, with unit volumes up ~4% versus industry benchmarks.
• Margin expansion: Adjusted EBITDA grew 21% to $157 million and the margin rate climbed 25 bps to 2.0%—the highest level in two years—on disciplined cost management and operational gains.
• Cash flow & deleveraging: Q3 free cash flow reached $190 million (up $70 million YoY), reducing net leverage by 1.3 turns to 3.3× and targeting ~2.5× leverage by end of FY26.
• Network rationalization: UNFI agreed to exit its Key Food deal and close the Allentown DC, incurring a $53 million termination fee to eliminate an unprofitable relationship and optimize its Northeast footprint.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the UNFI Third Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

[Operator]

Thank you. And I would now like to turn the conference over to Steve Blumquist, Vice President of Investor Relations. Steve, you may begin.

[Steve Bloomquist, VP - IR at United Natural Foods]

Good morning, everyone, and thank you for joining us on UNFI's third quarter fiscal twenty twenty five earnings conference call. By now, you should have received a copy of the earnings release issued this morning. The press release and earnings presentation, which management will speak to, are available under the Investors section of the company's website at www.unfi.com. We've also included a supplemental disclosure file in Microsoft Excel with key financial information. Joining me for today's call are Sandy Douglas, our Chief Executive Officer and Matteo Tarditi, our President and Chief Financial Officer.

[Steve Bloomquist, VP - IR at United Natural Foods]

Sandy and Matteo will provide a business update, after which we'll take your questions. Before we begin, I'd like to remind everyone that comments made by management during today's call may contain forward looking statements. These forward looking statements include plans, expectations, estimates and projections that might involve significant risks and uncertainties. These risks are discussed in the company's earnings release and SEC filings. Actual results may differ materially from the results discussed in these forward looking statements.

[Steve Bloomquist, VP - IR at United Natural Foods]

I'd like to point out that during today's call, management will refer to certain non GAAP financial measures. Definitions and reconciliations to the most comparable GAAP financial measures are included in our press release and the end of our earnings presentation. I now ask you to turn to Slide six of our presentation as I turn the call over to Sandy.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Thanks, Steve, and thank you everyone for joining us this morning. Before discussing our Q3 performance, I'd like to comment on the IT systems security update we provided yesterday morning. As we disclosed yesterday, the company became aware of unauthorized activity on certain of our IT systems on June 5. We promptly activated our incident response plan, implemented containment measures and are working to assess, mitigate and remediate the incident with the assistance of party cybersecurity professionals. Pursuant to our business continuity plans, we have implemented workarounds for certain operations in order to continue servicing our customers where possible and we're continuing to safely bring our systems back online and restore broad based customer service as soon as possible.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Our entire company is focused on serving our customers. Our core values of transparency and doing the right thing serve us well as we manage through this incident and our core principles of our daily operations. We believe we are managing the incident capably with a very strong team of inside and outside professionals, including specialized experts. We will continue to keep our customers, suppliers and associates regularly updated on our progress and next steps. Now let me turn to Q3's results.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

As you saw in this morning's earnings release, we achieved another solid quarter driven by the strength of our customer base and disciplined execution of our multi year strategic plan. Our results reflect sales growth above the industry benchmark and adjusted EBITDA growth that was meaningfully higher than our sales growth leading to our highest adjusted EBITDA margin rate in two years. As part of our strategic plan, we expect to continue driving consistent annual margin expansion. This trajectory reflects our continued focus on creating value for customers and suppliers while also systematically improving processes, implementing technology to enhance customer service and strengthening operational efficiency. The third quarter was another quarter of year over year improvement in free cash flow which is now well ahead of our original expectations year to date.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

This has enabled us to reduce net leverage by 1.3 turns compared to last year's third quarter. Based on our third quarter and year to date outperformance, we are tracking ahead of the three year fiscal twenty twenty seven financial objectives that we set last year. This gives us even more confidence that we will create long term sustainable value for our customers, suppliers, associates and shareholders. This performance demonstrates that our new more focused and efficient product centered wholesale structure is helping us better understand and meet both our customers and suppliers' unique needs in a highly dynamic market. In some cases, we've supported customers with existing and new market expansions through our well scaled distribution capabilities.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

In other instances, we are serving new business in incremental categories for a period as retailers reconfigure their supply network. Our strong top line performance this quarter reflects the continued success of our winning customers and UNFI's ability to support their strategies across a variety of unique circumstances. We also recognize that both our customers and suppliers are navigating a dynamic macroeconomic environment and we're focused on helping them plan for different scenarios, find product alternatives where needed and remain as competitive as possible. At the start of fiscal year twenty twenty five, I also shared that we would sharpen our focus on building win win relationships with suppliers and customers, which has largely driven profitable growth. Importantly, this process includes taking the right steps to adjust or exit relationships that are not mutually beneficial.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Recently, we came to a mutual agreement with Key Food to end our Northeastern distribution agreement and help them transition to another wholesaler that we believe will better fit their needs. This enables UNFI to exit an unprofitable relationship and further optimize our Northeast DC network by ceasing operations at our Allentown facility. Importantly, this will allow us to continue to more efficiently and effectively service our customers and accelerate progress towards achieving our three year financial objectives. Next, I want to focus on our strategic objective, which is to become a more efficient and effective company for our customers and suppliers, which in turn is helping us accelerate free cash flow and strengthen our balance sheet. One year ago, during our Q3 fiscal twenty twenty four call, I outlined four foundational initiatives under this objective.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

One, intensify our network optimization. to focus and reduce annual capital spending. to optimize our cost structure. And to increase working capital efficiency. We've made significant progress on all four initiatives and we see continuing opportunity to enhance our performance going forward.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

A good example of the progress we're making in improving execution and reducing waste is through the further implementation of lean daily management. With lean processes now being used in 20 of our 52 distribution centers, we are steadily improving safety, quality, delivering and cost and we continue to see significant opportunity for further improvement. Additionally, we've made progress to increase working capital efficiency by reducing our inventory days on hand back to pre COVID levels while also continuing to improve controllable fill rates. Fiscal year to date, we've reduced days on hand by over three days compared to the prior year and we've steadily improved fill rates over the last few quarters. While we're making real progress, we remain focused on continuing to drive fill rate improvements across our network.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

We said a year ago that we expected to generate up to $100,000,000 in free cash flow during fiscal twenty twenty five and that we would use these funds to reduce debt. One year later, we've surpassed our original target and further improved our balance sheet. And as reflected in our guidance, we expect to generate free cash flow over 50% higher than our initial outlook for the full year. By consistently executing these elements of our multi year strategic plan and continuing to identify more areas for improvement, we see significant opportunity to accelerate achievement of the three year fiscal twenty twenty five to fiscal twenty twenty seven financial objectives that we set at the end of last year. We believe that our improving execution, adjusted EBITDA and free cash flow outperformance to date along with our network optimization proceeds will lower net leverage to nearly 2.5 turns by the end of fiscal twenty twenty six, which would be about a year earlier than our previous expectations.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

After we finalize our fiscal twenty twenty six budgeting process this summer, we plan to update our long term financial objectives and provide a more in-depth review this fall. In summary, we have work to do to manage the current disruption in our environment and we are very focused on doing so in a transparent, principled and customer focused manner. Above all else, we remain committed to becoming the most efficient, effective and value creating partner for our stakeholders, which we expect will help to create sustainable long term shareholder value. With that, let me turn over the call to Matteo to discuss our Q3 results and our revised outlook. Matteo?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Thank you, Sandy, and good morning, everyone, and thanks again for joining our third quarter earnings call. As Sandy stated, our operating momentum, execution and performance have continued to accelerate as we completed the third quarter of fiscal twenty twenty five. Our confidence has grown with each passing quarter in executing our multiyear strategy and achieving our longer term financial objectives. Today, I will provide additional insight into our third quarter results, including our sales and adjusted EBITDA growth, free cash flow generation, capital structure and outlook for this fiscal year. With that, let's review our Q3 results.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Turning to Slide eight. Our third quarter sales grew by 7.5% or about $5.00 $6,000,000 to nearly $8,100,000,000 Our gains in the quarter were led by our wholesale natural products business where sales increased by 12% compared to last year's third quarter, primarily reflecting higher sales and category penetration with existing customers. Our wholesale conventional products business was up close to 3%, reflecting new business wins and new categories over the past four quarters. Across our wholesale business, unit volumes were up about 4% compared to last year, which represented another quarter of sequential acceleration and a continuation of the favorable trends we have seen since the end of fiscal twenty twenty four. Unifi's volume again outperformed the key Nielsen industry benchmarks and reflects solid execution by our broad customer base.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

This outperformance also reflects our consistent new business wins as retailers continue to recognize the value of working with a well scale wholesale partner able to provide the differentiated products and services to help them compete in a highly dynamic marketplace. During the quarter, new business additions of this nature accounted for about half of our volume growth. Inflation was about 1.5%, largely unchanged sequentially and about 05% lower than last year's third quarter. The remainder of our sales increase came from product mix, which had an additional 200 basis points. Total sales in our retail business were up slightly compared to last year.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

On an ID basis or same store sales basis, sales were up 1.5%, reflecting sequential improvement across our store base. Moving to Slide nine, let's review profitability drivers in the quarter. Overall, our wholesale business continues to be the main source of growth. Wholesale gross profit dollars, net of modestly higher operating costs, were up a combined $33,000,000 partially the result of higher volumes. However, our consolidated gross margin rate, excluding LIFO, declined 30 basis points compared to the prior year period to 13.4% of net sales.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

This was driven by a lower wholesale margin rate as well as a continued mix shift toward wholesale. Retail gross margin rate was flat to last year. In wholesale, our gross margin rate declined about 20 basis points versus last year's third quarter, largely due to a continuing shift in customer and product mix. These impacts were partially offset by innovation and efficiency initiatives, including the value adding supplier go to market programs that we have spoken about in the past and lower shrink expense. More than offsetting this decline in gross margin rate was continued solid operating expense management, which compared to last year declined by approximately 50 basis points as a percentage of net sales.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

This improvement reflects the leveraging impact from higher sales, our focused efforts on improving processes and removing waste, as well as the operational benefits from the customer and business mix shift affecting our gross margin rate. As Sandy mentioned, we're now executing lean daily management in 20 of our distribution centers and we're happy with the progress we're seeing. Across the DCs where lean is beyond the ramp up stage, we have seen injury rates decline significantly, out of stocks improved by about 75%, shrink decreased and throughput improved. And we're really just getting started. In fiscal twenty twenty six, we will be focused on value stream mapping to accelerate the systematic identification of waste, improvement opportunities and additional areas where we can bring value to our customers and suppliers.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

These actions, along with other strategic initiatives undertaken over the past several quarters, drove adjusted EBITDA growth of 21% compared to the prior year quarter to $157,000,000 Importantly, our adjusted EBITDA rate increased to 2%, the highest in two years and 25 basis points higher than last year third quarter. Our adjusted EBITDA combined with some benefits on below the line items led to strong adjusted EPS growth with adjusted EPS in the quarter of $0.44 compared to $0.10 in last year's third quarter. Turning to Slide 10, our improved profitability and continued focus on deploying lean principles helped drive $190,000,000 in free cash flow in the quarter, which was approximately $70,000,000 more than last year's third quarter. Year to date, we have generated approximately $150,000,000 of free cash flow, bringing our trailing twelve month free cash flow to about $224,000,000 We've used this free cash flow to reduce our net debt to under 1,930,000,000 and lower our net leverage to 3.3 turns, which is about 0.4 turns less than last quarter and 1.3 turns below a year ago. As Sandy stated, we now expect it to be close to our original three year leverage target of 2.5 turns or less, about a year earlier than previously planned.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Based on our continued confidence in our free cash flow generation and robust liquidity position of nearly $1,500,000,000 early in our fiscal fourth quarter, we made a voluntary $100,000,000 prepayment on our term loan that will save us approximately $1,000,000 in interest expense each quarter going forward. Also subsequent to quarter end, in late May, we closed on the sale of our billings distribution center and used the net proceeds of approximately $13,000,000 after customary fees and expenses to reduce debt. We're continuing to market facilities in Bismarck and Fort Wayne and have a letter of understanding from a potential buyer for the largest building at the Fort Wayne Complex. Looking at Slide 11, we are reiterating most of our outlook metrics with the exception of GAAP net income and GAAP EPS, which have been updated to reflect the cost and charges of our key food agreement. We are otherwise maintaining our outlook for net sales, adjusted EBITDA, free cash flow and capital investments.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

With one quarter remaining and strong performance to date in fiscal twenty twenty five, we would have raised our key non GAAP financial outlook metrics, if not for the unauthorized activity on certain of our IT systems. As we detail in our disclosure on this event, we're still working to assess the impact. Otherwise, our underlying business momentum has been accelerating as we have been executing our strategic plan and focus on driving increasing value for our customers and suppliers. And as a reminder, fiscal twenty twenty four was a fifty three week year with the extra week falling in last year's fourth quarter. For the balance of the year, which includes only seven more weeks, we expect moderate impacts from tariffs.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

This is informed by our cross functional tariff task force, which monitors for potential impacts, works to identify product alternatives, pressure test scenarios, and puts processes in place to maintain connectivity with suppliers and minimize disruptions to our customers. We continue to manage the situation closely. Flipping to Slide 12, we had another solid quarter and remain confident in the future trajectory for UNFI. We believe we have the right work streams in place to add value for our customers and suppliers, while making UNFI a more efficient and effective partner to their businesses. Our efficiency initiatives and lean management programs are generating improvements to our business, while our volume trends reflect successful execution by our customers and the differentiated value that Unifi brings to our industry.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

We seek to earn the trust that our partners place in us every day. We believe that our operational rigor and customer and supplier value creation focus will serve us well as we finish fiscal twenty twenty five and beyond. With that, operator, please open the line for questions.

[Operator]

Thank you. And we will now begin the question and answer you. Your question comes from Bill Kirk with ROTH Capital. Please go ahead.

[Bill Kirk, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hey, good morning. Just a clarification real quick. Are you reiterating the guidance on the non GAAP elements or simply not updating them? I guess there could be a distinction between the two given the beat and given the comment that you would have raised otherwise. So is it a not update, the non GAAP, or reiterate the non GAAP?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Yes. Hi, Bill. It's Sandy Douglas. Before Matteo answers your question, which he's going to do in a I want to just reiterate for everybody that it's a little bit of the details on our incident management protocol. Last Thursday, we noticed some unauthorized participants in our network.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

And pursuant to our incident management protocol, we went into hyperanalysis and awareness mode. By late afternoon on Friday, early evening, late afternoon, we we saw enough data to suggest that we needed to shut our network completely down and go into hyper analysis mode, which we did, bringing in outside experts and, again, pursuant to our protocols. Once we got to Monday morning, we let the markets know through filing an eight zero one to make sure that we were being fully transparent about what was going on. And as we sit here today, we're a hundred hours into the management of the situation, and we have two focus points. And this is really the whole of company focus here, and that is to understand the situation and then to safely bring back our network, when it's appropriate to do so.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

And then separately work with our customers and suppliers transparently to do everything that we can possibly do to help them manage through the short term difficulty that the situation creates. I would further say that to us, the most important enduring matter here is how we take care of our customers and how we show up for them. And our focus has been on that for the last hundred hours, and that continues to be what we're working on with some progress. But, Matteo, go ahead. I want you to answer his question, but I just wanted to create that context because that sort of sets the backdrop for how we looked at guidance coming into the call.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Thank you, Sandy, and good morning, Neil. So we had a strong and we had a strong performance year to date. We're up 5.5% in sales year to date. We're up 16.3% in EBITDA and generating more than $150,000,000 of free cash flow. And our plan was to increase the guidance, as we mentioned in the remarks.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

However, as you heard from Sandy, we are very focused on the restore of the systems and then the focus on the customers. And with that in mind, we left the guidance alone for now.

[Bill Kirk, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Thank you. And as a follow-up, on Key Foods in the Northeast, the initial thesis was with them as an anchor customer, you could build a large facility with some extra capacity to add additional customers around it. So I guess kind of diverged from that plan? Was the Key Foods as the anchor was different than you thought it would be?

[Bill Kirk, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Or the ability to add scale around Key Foods is maybe different than you thought it would be? What of happened there that kind of went against or away from your initial plan?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Sure, Bill. This is Sandy again. I think the the broader strategic question, which we've been looking at as a part of our three year plan, is around the country, where are there opportunities to optimize our network based on either market or customer profitability? And then we've taken actions, as you know, to make adjustments to our DC footprint around the country. And that doesn't just involve closing DCs, but recently, as you know, we moved from York to Manchester and increased our square footage and automation in the new Manchester distribution facility.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Specifically, to keep food into the Allentown market, we simply found that the combination of operational factors post COVID impacts and the details of that agreement were very difficult. And in collaboration with Keyfood, we determined with them that the best possible scenario for everyone, given the facts at hand and the likely scenarios that emerged, was to exit the relationship in the market. And so we did so in an effort to optimize the results for them and for us, and it was a clear choice that emerged after careful consideration of all the options. Obviously, we had associates in that market, so we make those decisions very carefully.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Maybe to complement your answer, Sandy. So we recorded the third quarter $24,000,000 after impairment charge and about $4,000,000 in severance expense that have impacted our GAAP results. In the fourth quarter, we expect to record a $53,000,000 contract termination fee that will be paid to Key Food over several months and over achievement of milestones, and that will be recorded in the restructuring cost and will impact free cash flow. However, the net net cash impact of the payment is materially lower because as we discontinue our operations at Allentown, we're gonna get some upside from the working capital release as well as the benefits of the expense reduction. So we project a payback period of a year or less.

[Operator]

Your next question comes from the line of Scott Mushkin with R5 Capital. Please go ahead.

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Hey, guys. Thanks for thanks for taking my question. I'm sorry to hear what you're going through. So I guess, off, I wanna make sure I understand getting your network back online. Are you actually currently shipping to customers or no?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Yes. We are on a limited basis, and it depends on the technology platform. Some are in further along on the recovery than others, But we are partnering with customers across the country and across our formats in various short term modes to serve their needs as best as we possibly can. And it's getting increasingly positive each day, but still work in progress.

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Sandy, what do you think, you know, the percentage you normally ship? Is it, like, at 30 or is it over 50?

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Like So problem on it is people, you know, where where are these customers? And then if shelves are gonna shelves you gonna start running there? Or, you know, where where is everything?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Scott, the entire process is very fluid and ongoing. The way I would describe it is each day is better, and we're working in a very customized way by market and by customer to serve the capability that exists. And it's, at this stage, a highly partnering activity. But I wouldn't want to give percentages at this time because it's changing every day. But it's obviously the top priority of the company to serve our customers as best as we possibly can while we're working to, as rapidly and safely as possible, bring our systems back online.

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Are you actively facilitating those customers working with other distributors so their their sales are there? And and so even what's your fiscal and what's your monetary responsibility to those customers? And is there contractual issues where they could actually break contracts?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Yeah. I think the focus right now, and and I think the through line across the network is to help customers meet their needs in whatever way it can be done. And that, in some cases, involves help from other wholesalers. In other cases, it's a lot of very innovative work that our teams have done to help respond as best as our capabilities will allow. But I think that the strategic point in the middle of it is how we work together with customers in a crisis, in some ways, is a defining opportunity for us.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

And any way that we can help them meet their needs, we're doing. And nothing would be offered.

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Ability to and how about their ability to break contracts?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Yeah. I know I know

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Is this a breach?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

From my perspective of all, our contracts with our customers are are highly varied. And as you know, they're confidential and specific. But our focus right now is less about that and more about meeting their needs today, and wouldn't be able to factually answer that question even if I was inclined to disclose it. The focus is making sure we serve the customers and have them be able to do whatever they need to do the best they can in this environment. And then in parallel, our focus is as quickly as possible to address the issues, ensure the systems are safe and bring them back up online.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

As you know, how companies manage situations like this are defining in terms of their relationships, and we view it as that kind of moment. And we have been completely transparent and completely focused on our customers' outcomes from the start.

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

And then then my final one is I know Marks and Spencer's over in The UK still got issues. So, I mean, this could be a month multi month process. Is that how we should look at it? And then a follow-up to my follow ups is that, you know, the if you look at the equity trading, it it it very much appears either someone knew this was gonna happen. And is the SEC involved in that? And then, I guess, also, why did it take you guys so long to report it to the market?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Scott, let me, of all, decline to speculate at all regarding regulatory authorities and the part of your question. But let me remind you the timeline. The company became aware of an unauthorized entrant in our technology on Thursday. Pursuant to our incident management routine, we began hyperanalysis and awareness of diagnosing just how broad that situation was. Because, of course, in many cases, when you initially see that you may be inclined to think it's isolated.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

By late Friday afternoon, we made the decision to lock our systems down, and we filed a eight k on Monday morning before the market opened. So we there is no way that we could have communicated any faster, and there was no trading that I will I don't know. There was no open markets between the time we locked our systems down and the time we

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

I'm I'm actually talking about before the attack. I mean, if you look at the equity, it was dropping. Yeah. Had quantified the FCC. I would.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

I'm confident that we are engaged with all the authorities, including relative to the cyber event reporting all that we know to the FBI. Those are all part of our protocols that we follow strictly.

[Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital]

Okay. I'm taking a bow.

[Operator]

Your next question comes from the line of Mark Carden with UBS. Please go ahead.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

Thanks so much for taking the questions, guys. To start, I'm going to go with a little bit of a follow-up on Bill's question. For Key Food, it was originally expected to be a $1,000,000,000 annualized business. Is this essentially where it landed? And then I know you guys are pretty excited about landing the contract originally.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

Was this situation unique to Key Food? Or does it make you rethink at all how you approach larger contracts?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Thanks. Mark, what I would say relative to the individual customer is that we don't really comment specifically. Obviously, we did today because of the size and scope and the history of the announcement and the connection to Allentown. But the broader question about our approach to overall contract underwriting and analysis, I would say that today, have a very rigorous process that looks at all the factors that go into it because we pursue win win agreements. And our customers deserve that, and our customers do all our customers deserve that we don't have agreements where we're losing money because that hurts everybody.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

So the rigor that Viteo and his team working with our commercial leaders have put into that process is significant, and I've got a lot of confidence in it. I would also say that a whole particularly in the transportation side of the New York area, changed in the COVID period. And so we made the decisions we made based on a very factual analysis of the current situation and at the end of the exploration of all options that we might have been able to pursue to turn that agreement into a positive one. And following all that, we chose to exit because it was the best decision for our shareholders, and I believe that Key Food made the same decision for the same reason for theirs.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

Got it. That makes sense. And then as my follow-up, just on the cyber attack, how has the customer response been so far? And does it impact how you approach resources devoted to both customer retention and new business acquisition in the near to intermediate term? And, like, essentially, does new business go more to the back burner temporarily, or or is it still pretty balanced?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Yeah. That's a that's a great question. What I would say is again, this is anecdotal, in the midst of a crisis response with 30,000 customer rooftops. But the I have daily, personal conversations with about 15 to 20, CEOs of our customers, and the conversations have been extremely constructive and collaborative. Our teams are working very hard for them to make sure that we help them get everything that we can, to manage through.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

My own view is that until we reach a point of, functional equilibrium and and when we're our systems are safe and operating as they should, we have to focus on existing customers and meeting their needs with every ounce of our energy, and that's what we're doing. I would also caution everyone not to make assumptions about the length of the issue, and I don't and I mean that on both sides. One of the things that I have learned is to focus on the facts in front of you and and generally not to speculate, to serve the needs of the process and making sure that we are are safe, we're diligent, we're thorough, and at the same time, in parallel, work very hard to solve the operational opportunities in a given DC with given customers in the coming day. We're doing the same on the back end with our suppliers. And I I believe over time how companies and their customers work together in crises have the opportunity at least to strengthen relationships, but we'll be talking about that after it's over.

[Mark Carden, Director - Equity Research at UBS Investment Bank]

Got it. Thanks so much. Good luck, guys.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Thanks, Thanks,

[Operator]

Mark. Your next question comes from John Heibachel with Guggenheim. Please go ahead.

[John Heinbockel, Senior MD & Equity Research Analyst at Guggenheim Securities]

So maybe for both of you guys, how I know you've been speeding up the rollout of Lean Six Sigma. Right? You did 11 this quarter. How does how does the breach impact that? Right?

[John Heinbockel, Senior MD & Equity Research Analyst at Guggenheim Securities]

Do you basically you know, whatever whatever you've done in the fourth quarter, that's it, and it slows down temporarily. And then also if you think about shrink, does shrink potentially go up in the short term because volume is down, product is going bad or too early to tell if that happens?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Hey, John. Good morning, and thanks for the question. Let me give a quick recap of where we are in the early lean journey. So we're focusing on three areas. one is decentralization for higher accountability, and these are some of the comments or references that Sandy made on how the new wholesale product oriented organization is performing. Or, for instance, how the decentralized procurement organization is performing on reducing days on hand while supporting a seven and a half percent growth rate.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

The the area is on lean daily management. I'll get there in a on your question on the bridge, and that's where we now have 20 distribution centers out of roughly 50 applying data management, and we see benefits across the safety quality delivery cost sequence. And then the last piece is waste management, which is where we have been able, through a set of actions, to take another 50 basis points of operating expenses out sales. Specifically on your question, so throughput has been improving over the last several quarters. It's up 5% in the third quarter.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

There could be a few days of disruptions, as Sandy say, focusing on restoring our systems and meeting our customers' needs as much and more creative ways as we can. But the underlying momentum is strong. We are getting a lot of engagement from the DCs on applying lean daily management. Sandy and I and the leadership team were visiting Manchester last week, and we saw real time examples of how these things are are working. So we're encouraged by the progress speed bump, you know, related to these cyber incidents, but the underlying momentum is strong and will continue.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

And then relative to our shrink, obviously, as part of the hundred hours reaction plan and process, you know, we've been using widely every single one of these hundred hours. We look at the prioritization of receipts and procurements and inventory and and fresh, you know, because of the the shrink dynamic was very high up on on the list. So we're responding as quickly as we can in the more creative ways that that we can. Again, without speculating, we're not putting, days of recovery to our statements, but we're moving methodically in three.

[John Heinbockel, Senior MD & Equity Research Analyst at Guggenheim Securities]

Maybe following up on that. Just where do you when you look longer term in the sort of the recurring benefit of Lean Six Sigma, so how does that sort of play out? You think you get it in every DC in year one, you refine it. What do you think is the most important longer term contributor there? And we just you think about labor productivity and I may have asked this to you before, do you think you can sustain, say, 3% to 5% labor productivity gains over many, many years as this gets refined? Or is that optimistic?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

I think we can sustain it. Where we see the benefit is clearly in continuing to improve the throughput as part of the in daily management, continuing to expand the reach into our distribution centers with a sequence of SQDC. And then we're excited about the leg that we're gonna add to our lean journey, which is value stream mapping. And value stream mapping is a way to complement our CapEx investment, is a way to complement the problem solving and making solutions more sustainable. So we expect to, again, methodically deploy DSM and start seeing sustainable benefits there.

[John Heinbockel, Senior MD & Equity Research Analyst at Guggenheim Securities]

Thank you.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Thanks, John. Your

[Operator]

next question comes from Leah Jordan with Goldman Sachs. Please go ahead.

[Leah Jordan, Analyst at Goldman Sachs]

Thank you. Good morning. Just given the termination of your relationship with Key Foods, I wanted to see if you could just comment on how you're thinking about the conventional segment longer term. I understand you've been focused on streamlining your contracts to drive profitable growth. But as I see it, driving more volume through your network should create some leverage benefits over the long term.

[Leah Jordan, Analyst at Goldman Sachs]

So how do you balance this kind of streamlining to drive near term profitable improvement versus making sure you don't cut too much to sustain growth longer term?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Leah, this is Sandy. That that's an excellent question. Let me start at the sort of street strategic segmentation that we did a year ago because I think sometimes labels constrain your thinking. We've identified a $90,000,000,000 addressable market that includes natural, organic, specialty, ethnic, really all retailers that are predominantly focused on a differentiation strategy. And we're designing UNFI's product services and programs for that customer base.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

We view that customer base having done a lot of very disciplined and deep analysis to be a growth segment of the food industry going forward. And so with that design and that sort of target, we've assessed our business on a DC by DC basis to evaluate where we are going to see growth, where the profit opportunities exist from a service and program perspective. And, ultimately, as that then goes down and works with individual customers, we'd look for ways to create win wins, and we've had a lot of success on that. As you know, we had provided a year ago a three year sales guide of flat, and this year, year to date, we're way ahead of that because of the success of the segmentation thinking and the work we've done with customers. In the case of Key Food and Allentown, it's a unique situation or or largely unique situation where the customer and the DC are inextricably linked.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

And in that case, there was no way that we could see based on all the work we've done that we could turn that situation into a profitable growth opportunity. And so we made the hard decision to close the DC and we and Tea Food mutually decided to end the relationship. Ultimately, the value gets driven by driving throughput and creating excellent returns against our capital, which tend to be DC driven. And we see opportunities to grow profitably against the $90,000,000,000 addressable segment. But we're in the process of making sure that we align and shape the customer efforts that we're putting into that target market and to the ability to drive profitable growth and significant amounts of free cash flow to deleverage our debt and drive economics for our shareholders.

[Leah Jordan, Analyst at Goldman Sachs]

That makes a lot of sense. Thank you. And just for my follow-up, I wanted to dig into some of the drivers in the quarter a little bit. So putting the recent cyber incident aside, I mean, still had a nice acceleration in your overall business with volume growth. I mean and this is within the backdrop of macro uncertainty, low consumer sentiment.

[Leah Jordan, Analyst at Goldman Sachs]

So I guess, what are you seeing on consumer behavior? Have there been any big shifts in which categories they're shopping and in channels? And how much do you think just the shift toward more food at home has been a benefit for you this last quarter?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Sure. And I'll take a shot at this and invite the tail to comment as well. I think the distinction I draw, is that the wholesale market is not exactly a mirror image of the retail market. We're in the b to b products and services business, and our growth is driven by the fact that retailers, view us as being helpful to them in a various range of circumstances. And we work hard to be the provider that they look to, to help them grow their business, help them shift their strategy, help them move into new markets, a range of different situations, and our growth reflects that.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Some of it's short term, some of it's long term, but our sales and merchants are busy helping customers regardless of the situation, and we've seen really strong sales results as a part of that. Within the consumer, clearly, what you hear from retailers across the market is there's certainly stress at the bottom end and increasing sort of weariness across the customer base. We're seeing really strong performance in the natural organic and specialty area, But we're also seeing good performance in differentiated ethnic and some other really powerful and good retailers who are doing an excellent job. So it's going to continue to be we use the term dynamic in the script. We think it is.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

We're seeing lots of innovation. And finally, I'd remind you that we credited most of our growth to the quality of our customer base, which is really the truth. It is the biggest driver. We have great customers who are doing incredible things in the market. Matteo, any additions or fractions there relative to that? No.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Thanks, Andy. Let add a couple of insights on the business trends. So if you unpack the 7.5% growth, 400 basis points came from volume, which is the highest growth that we have seen since the volumes turned positive at the end of twenty twenty four. Inflation is is stable at 1.5, and then we picked up about 200 basis points from positive category mix with higher dollars per case. When you think about natural and conventional dynamics, obviously, natural is growing at a faster pace at 12%.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Conventional was up 3% and had slightly positive volumes. And then the last comment is building on some of the iterations that we had in the last call. Even within natural, when you exclude the new business and the largest customer, the underlying performance has grown from 2% in 1Q, 3% into Q, 4% in the third quarter. So we momentum in the natural business at large.

[Leah Jordan, Analyst at Goldman Sachs]

Very helpful. Thank you.

[Operator]

Your next question comes from Edward Kelly with Wells Fargo. Please go ahead.

[Edward Kelly, Managing Director - Equity Research at Wells Fargo]

Hi. Good morning, Good

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

morning, Just a follow-up on the IT issue. Just curious, do you

[Edward Kelly, Managing Director - Equity Research at Wells Fargo]

think there's anything about, you know, UNFI that made it more susceptible to this problem? And bigger picture, of taking a step back, do you think it impacts at all how you're thinking about, you know, spending CapEx, technology, that type of stuff moving forward?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Ah, yes. The in in thinking the answer is no dot dot dot dot dot. But let me answer the question, more thoughtfully than that. We have, like a lot of companies, a significant investment in process around the cyber area. It's highly dynamic, and rapidly growing, and the threat actors out there are always looking for ways to innovate and find new ways to penetrate systems.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

And so whether it's our management routines, our board oversight, risk management that tracks all the way up into our governance structure, we rigorously review and invest in this cyber infrastructure and capability in the company. We use multiple different external benchmarks, to assess ourselves and, really hold nothing back in this area. Having said that, we just got penetrated. So we will be continuing to look at every aspect of our defense, every aspect of how, our tools are working and what may be necessary to bolster it going forward because it's clearly an area that requires a tremendous amount of focus from companies today and will continue. How that affects CapEx going forward?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Ultimately, is a choice, and we have and will continue to prioritize cyber investment. But I don't think it changes the ultimate big picture for UNFI on capital. But I think a company needs to be both high capability and humble when it relates to cybersecurity, and this event is just a demonstrated example of why.

[Edward Kelly, Managing Director - Equity Research at Wells Fargo]

Okay. And just a, you know, follow-up. As we think about, you know, the mitigation efforts that you are taking at the moment, obviously, there's a case volume impact associated with that. But what about from, like, a cost perspective, in terms of, like, trying to run the business with some capacity at this point, is that, you know, is there an added cost associated with doing that? Just curious.

[Edward Kelly, Managing Director - Equity Research at Wells Fargo]

I mean, you know, I know I know you don't have great visibility, but we're all thinking about how we should at least be modeling what's happened so far. I'm curious as though, you know, any impact it might be having on the cost side.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Sure. And, again, what I would say on this one is we're a hundred hours in. At this stage, we are taking action with one well, really two tracks of focus. The is to address the cyber incident to make sure we understand it, that we've taken actions to repair, improve, and then get our systems safely online as fast as possible. And that's one track of work, and we're putting the resources that are necessary, all of them, to bring that to effect as soon as safely as possible.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

And then on the other side, we're using, our resources and our tremendous team of sales and supply chain and procurement to work with suppliers and customers to make their situation as good as we possibly can. Will there be elevated costs as a result of both of those tracks? Yes. Of course, there will be. How much that will be?

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

We don't know at this stage, but we believe we'll be able to manage it. But at this point, we're focused on those two tracks, and it's too early to try to quantify that.

[Edward Kelly, Managing Director - Equity Research at Wells Fargo]

Okay. Thanks, guys.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Thanks, Ben.

[Operator]

Your next question comes from the line of Ben Wood with BMO Capital Markets. Please go ahead.

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

Hi, this is Ben on behalf of California. Thanks for taking our questions. Not to belabor the breach anymore, but just a question going into it, where were you guys on the consolidation and updating of your IT systems? I know out of you know, the the last cycle of inflation, you commented, that you had a lot of systems that impacted your visibility into the business. So so where were you in that process?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Hey, Ben. Good morning. It's Mateo. So over the past couple of years, we have been focused on improving our systems and processes. And as you think about our $300,000,000 CapEx guidance, we always allocate about a to safety and overall DC modernization, about a to technology improvements, and then about a to automation.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

So within within that envelope, we have invested in updating our systems and processes, and with that, increasing capabilities. We continue to modernize our networks. Think about the recent release of the warehouse management systems. Think about some of the inventory management applications that we released. And we continue to look at opportunities to methodically and with discipline consider in ERP.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

But we wanna make sure that it's clear that the fact that we have closed some kind of technology deficit in the last couple of years with a lot of system and process improvement is separate from what happened in the cyber attack.

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

Right. Understood. No. That's that's helpful. And then I just wanna, transition to talking a little bit about service levels.

[Benjamin Wood, VP - Equity Research at BMO Capital Markets]

You guys have provided some some good updates, but I'm curious for the DCs that are on your lean daily management compared to the DCs that are not, how are service levels, customer retentions, new business wins tracking? And then on a related note to that, what about the DCs in the surrounding areas of some of the DCs that you've closed? How is customer retention and service levels there going?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

Ben, great question. Thank you. We see service levels improving and being able to benefit from immediate problem solving at the 20 VCs where we have deployed lean data management. With that said, it doesn't mean that the other 30 or so don't focus on fee rates and service levels and delivery qualities. But the methodology of having teams huddling every morning around the safety quality delivery cost dashboard, seeing the green or the red and being able to jump straight away to the red and acting problem solving is, is very, very powerful.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

So with with that in mind, we've seen shrink benefits, service level benefits, delivery quality benefits. That's why we're encouraged about expanding the program to more and more distribution centers. And to your point, the adjacent DCs that don't have lead data management in place can also learn from the best practices of the others. So there is a formal method of rolling out the LBM, but there are also daily interactions and practice sharing that helps the overall network. Relative to the to the customer retention, when we issued a guidance about a year ago, the the outlook, the three year guidance about a year ago and talked about flat revenues, we had just started the network optimization plans.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

And to date, we have closed four distribution centers, if you include the move of York into Manchester. And, obviously, we announced Allentown this morning. And we could say that our ability to work with customer and find win win path forward has been stronger than we were expecting at the inception of this program, and we are happy with that. Because as Sandy mentioned, our goal when we see low performing distribution centers is to be able to find win win solutions with our customers. And then if not, we need to take different actions.

[Operator]

Your final question comes from William Reuter with Bank of America. Please go ahead.

[William Reuter, Analyst at Bank of America]

Hi. I just, I have two quick ones. So the in terms of the termination fee, with Key Foods, did I hear correctly that that was $53.05 3?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

That is that is correct.

[William Reuter, Analyst at Bank of America]

Okay. And then in terms of capital allocation, you know, you're you've now, you know, sped up your expectation of when you're gonna get to two and a half times leverage now by the end of fiscal year twenty six. How are you thinking about capital allocation when you get to that target? Do you think that you'll change towards more shareholder friendly, either share repurchases, larger dividend? Or, alternatively, do you think you might kind of reduce your leverage target, going forward from that point?

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

It's a great question. So our focus is 100% on converting free cash flow into debt reduction for now. Within that the framework, we talked about investing $300,000,000 in CapEx every year by 1% of our top line. And, again, the envelope is split into safety and PC maintenance, into technology, and a into automation. And then every dollar goes to a debt reduction.

[Giorgio Matteo Tarditi, President & CFO at United Natural Foods]

That is the focus and the mantra through the point of achieving 2.5 turns or less. I think at that point, we'll have a different conversation of where do we see the best shareholder returns. And to your point, the full portfolio of more targeted investments organically in certain areas, thinking about a different buyback policy is all going to be on the table. But for now, the one and only focus is to deleverage, and there is no mistake within the company.

[William Reuter, Analyst at Bank of America]

Got it. Alright. Helpful commentary. Alright. Thanks a lot. And

[Operator]

that concludes our question and answer session. And I will now turn the conference back over to Sandy Douglas for closing comments.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Thank you, operator. As you heard on today's call, we are focused on diligently managing through the cyber incident we announced yesterday morning to rapidly and safely restore our capabilities while helping our customers with short term solutions wherever possible. While this may be a short term instance in the longer picture of our business, we see a defining character moment to show up for our customers in a way that reflects the challenges of the time and the character of the company that we want to be. Bigger picture, we continue to make solid progress towards implementing our multiyear strategy and delivering on our financial commitments both in fiscal twenty twenty five and beyond. We again delivered strong sales, adjusted EBITDA and free cash flow growth compared to last year's third quarter.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

We continue to gather insights and develop plans for how we can deliver even more value for our customers and suppliers, knowing that the learnings from our past will be the drivers of success in our future. We're committed to getting better every day and have embraced lean management as a disciplined approach to becoming more efficient and effective. For our customers and spoke to employers, especially now, we thank you for your continued partnership and the business we do together. For the UNFI associates listening today, our thanks to each of you for everything that you do for our business, our customers, our communities and each other. And for our shareholders, we thank you for the trust you continue to place in us.

[Sandy Douglas, Chief Executive Officer at United Natural Foods]

Thanks again for joining us this morning. I look forward to updating you this fall on our year end call.

[Operator]

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

Participants

Executives

• Steve Bloomquist, VP - IR
• Sandy Douglas, Chief Executive Officer
• Giorgio Matteo Tarditi, President & CFO

Analysts

• Bill Kirk, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC
• Scott Mushkin, Founder, CEO, Managing Partner & Director of Research at R5 Capital
• Mark Carden, Director - Equity Research at UBS Investment Bank
• John Heinbockel, Senior MD & Equity Research Analyst at Guggenheim Securities
• Leah Jordan, Analyst at Goldman Sachs
• Edward Kelly, Managing Director - Equity Research at Wells Fargo
• Benjamin Wood, VP - Equity Research at BMO Capital Markets
• William Reuter, Analyst at Bank of America