Earnings Call Transcript - USFD Q4 2025

Operator, Operator

Hello, and thank you for joining us. My name is Tiffany, and I will be your conference operator today. I would like to welcome everyone to the US Foods Holding Corp. Q4 '25 Earnings Call. I will now turn the call over to Michael Neese, Senior Vice President, Investor Relations. Michael, please proceed.

Michael Neese, Senior Vice President, Investor Relations

Thank you, Tiffany. Good morning, everyone, and welcome to US Foods Fourth Quarter and Full Year Fiscal 2025 Earnings Call. On today's call, we have Dave Flitman, our CEO; and Dirk Locascio, our CFO. We will take your questions after our prepared remarks conclude. Please limit yourself to one question and one follow-up. Our earnings release issued earlier this morning and today's presentation can be found on the Investor Relations page of our website at ir.usfoods.com. During today's call, and unless otherwise stated, we're comparing our fourth quarter and full year 2025 results for the same period in fiscal year 2024. In addition to historical information, certain statements made during today's call are considered forward-looking statements. Please review the risk factors in our Form 10-K for a detailed discussion of the potential factors that could cause our actual results to differ materially from those anticipated in forward-looking statements. Lastly, during today's call, we will refer to certain non-GAAP financial measures. All reconciliations to the most comparable GAAP financial measures are included in the schedules on our earnings press release as well as in the appendices to the presentation slides posted on our website. We are not providing reconciliations to forward-looking non-GAAP financial measures. Thank you. I'd like to turn the call over to Dave.

David Flitman, CEO

Thanks, Mike. Good morning, everyone, and thank you for joining us. Let's turn to today's agenda. I'll start by providing highlights from 2025, including our team's strong execution during the first year of our 2025 to 2027 long-range plan. I'll then hand it over to Dirk to review our fourth quarter and full year financial results and provide our fiscal 2026 guidance. Starting on Slide 3. Our 2025 earnings exceeded the long-range plan we outlined at our June 2024 Investor Day. We delivered these strong results despite a softer macro environment by continuing to focus on controlling the controllables, something that we have been doing well for the past several years. These include capturing incremental market share across our target customer types, and executing our operational excellence and productivity initiatives. For the year, we grew adjusted EBITDA 11% to a record of more than $1.9 billion and expanded EBITDA margin by 30 basis points. At the same time, we delivered record adjusted earnings per share of $3.98. Our adjusted EPS growth of 26% led the industry and was more than twice our double-digit adjusted EBITDA growth rate. Now that we are one-third of the way through our long-range plan, I remain highly confident that we'll reach our 2027 goals. Highlights of our 2025 results driven by the continued progress of our operational excellence and margin initiatives include: delivering share gains across independent restaurants, health care and hospitality, our three target customer types; growing adjusted gross profit dollars 190 basis points faster than adjusted operating expenses; driving more than $150 million in cost of goods savings; expanding adjusted EBITDA margin by 30 basis points to a record 4.9%; extending our technology leadership position through new embedded AI capabilities; and executing our capital allocation strategy by repurchasing approximately $930 million of our shares and completing two small tuck-in acquisitions for more than $130 million. In short, 2025 was a strong start to our new long-range plan. Through the extraordinary dedication and focus of our 30,000 associates, we continue to execute our strategy, serve our customers well, capture profitable market share and strengthen margins. The momentum we carried into 2026 is a testament to their tireless efforts to deliver excellence to our customers. Let's turn to broader industry trends. Chain restaurant foot traffic as published by Black Box was down 2.8% for the fourth quarter and decelerated 230 basis points from the third quarter. Our chain business was down approximately 3.4%. Headwinds from the government shutdown, winter storms in December and a challenged lower income and younger demographic affected industry demand. We were not immune to these events as they impacted the volume acceleration we were seeing coming out of the third quarter. While these headwinds created short-term pressure, we remain confident in continuing to grow the top line and capture profitable market share in what remains a highly fragmented industry. Despite fourth quarter foot traffic being the slowest of the year, we grew independent restaurant case volume 4.1% and which accelerated from the third quarter and resulted in our 19th consecutive quarter of share gains. In the fourth quarter, we delivered our strongest net new independent account growth of the year, increasing approximately 4.7% over the prior year. This marks our best performance since the second quarter of 2023. Healthcare and Hospitality, which together comprised more than 25% of our sales, grew 2.9% and 3.1%, respectively, in the fourth quarter. We continue to gain share in both customer types. And in fact, we just posted our 21st consecutive quarter of share gains in health care. Our 2026 case growth was strong in January until the widespread storms and weather-related closures at the end of the month and beginning of February. Although the weather meaningfully impacted the industry's case volume, we were encouraged by our start to the year and are optimistic volume will recover as the weather moderates. Turning to Slide 4. Let's review some of the key achievements our team delivered under our four strategic pillars in 2025. Our first pillar is culture. The safety of our associates is and always will be paramount. Our injury and accident frequency rates improved 16% from the prior year on top of our 20% improvement in 2024. I'm very proud of our team for these results, but we will not rest until we reach our goal of zero injuries and accidents. Supporting our commitment to safety is the continued rollout of the center ride powered industrial equipment across our distribution centers. We are more than 60% through this deployment and expect to fully complete the rollout by the end of this year, dramatically reducing the potential for one of our most serious injury types. Finally, we also donated more than $12.5 million to hunger relief, culinary education and disaster relief efforts last year. This contribution included more than 5 million pounds of food and supply donations, the equivalent of approximately 4 million meals. Turning to our service pillar. We are striving to differentiate our customer service platform and provide a best-in-class delivery experience. We made strong progress with our operations quality composite, which measures our ability to deliver products to our customers without errors with performance improving by 15% for the full year. These results reflect our ongoing commitment to improving our customer service experience, and we expect further improvement in 2026. We remain excited about our ability to improve routing efficiency through our enterprise routing initiatives, including market-led routing and Descartes. In 2025, we completed the deployment of Descartes across our distribution network and achieved an approximately 2% improvement in cases per mile across our broad line deliveries compared to the prior year. And while we are pleased with this early success, more opportunities remain to further increase our routing productivity. Also in 2025, we made significant advancements in our MOXe platform, including additional AI capabilities. One example is the launch of our new AI-driven ordering feature, which enables customers and sellers to upload photos, PDFs and even handwritten notes directly into MOXe and seamlessly translate them into an order, saving them both time and effort. Now let's turn to our growth pillar. In 2025, net sales grew 4.1% to $39.4 billion through continued market share gains. Our go-to-market strategy and consistent addition of new seller headcount, which was up nearly 7% in 2025, remain at the core of our growth plan. Pronto, our small truck delivery service continues to expand and is now live in 46 markets with plans to launch in 10 to 15 additional markets in 2026. We also see excellent traction from Pronto next day, formerly known as Pronto Penetration, which we introduced in mid-2024. This service is already live in 24 markets and we expect to add approximately 10 markets in 2026. Last year, Pronto generated over $1 billion in sales, underscoring its importance as a long-term growth driver. Additionally, we remain focused on enhancing our center of plate protein and fresh produce offerings. Several years ago, we upgraded our assortment and focus on quality in these key product categories. Last year, we grew our fresh produce and center of plate categories with independent restaurants approximately 150 basis points faster than the industry and nearly 400 basis points faster over the past 2 years. Moving now to our sales compensation change. As we discussed last quarter, we are transitioning to a 100% variable compensation structure for our local sales force, which we believe will be an additional long-term growth driver and enable higher earnings potential for our sellers. For context, currently, a seller enters our company at a 100% base salary. From there, we execute a click-down process at a pace specific to each individual that moves them to a 50-50 fixed and variable mix over time. Moving forward, we will transition our sellers to our new 100% variable commission plan following a similar individualized click-down process. We believe that managing this transition well is more important than getting everyone to full commission by a date certain. As a result, while we plan to launch the new compensation plan in the middle of this year, it may take us 2 to 3 years to get the majority of our sales force to the 100% variable commission structure. We strongly believe this thoughtful transition plan will enable us to effectively and fully support each of our sellers through this important change. We are currently piloting the plan in several areas across the company and feedback thus far has been very positive. And recently, through our sales leadership academy, we have trained all of our frontline sales leaders on the design and execution of the new compensation structure. Our sales leaders have given us great feedback and are excited for the launch of our new plan. Finally, we are highly confident the new compensation structure will drive stronger alignment to our business objectives and unleash our world-class sales force to help us further accelerate long-term growth. Finally, let's move to our profit pillar. Our strong execution and margin initiatives resulted in adjusted EBITDA margin expanding by 30 basis points to a record 4.9%. We continue to drive gross profit gains and offset a portion of operating expense inflation with supply chain and other productivity improvements. I'd like to highlight four key drivers of our industry-leading margin expansion. We continue to make progress on cost of goods through our strategic vendor management efforts, realizing more than $150 million in savings last year. Our execution and our win-win collaboration with suppliers are delivering more than we expected. We now believe we can deliver at least $300 million of cost of goods savings over our 3-year plan, compared to our original $260 million goal laid out at our 2024 Investor Day. We also remain focused on growing our private label brands where our full year penetration was up approximately 90 basis points to nearly 54% with our core independent restaurant customers. Private label growth remains a significant opportunity for US Foods as we have ample room to drive penetration higher. Our enhanced inventory management process to eliminate waste resulted in an approximately $40 million gross profit benefit up from our prior $35 million estimate. We believe there is more to do in this area and expect to generate additional savings in 2026. Furthermore, we achieved approximately $45 million in indirect cost savings in 2025. This is another area where our initiatives are delivering greater benefits than we had originally anticipated. Based on the progress we've seen, we now expect to generate over $100 million in indirect savings by 2027. Finally, for 2025, we accelerated our overall operating expense productivity gains as we make progress towards our 3% to 5% annual improvement goal. We remain committed to building a foundation that not only drives efficiency today but also positions us for sustained growth and value creation in the years ahead. Turning to Slide 5. As you can see, we are consistently driving sales growth, expanding margins and delivering double-digit earnings growth. When combined with our capital allocation framework, we are compounding that earnings growth to an industry-leading adjusted EPS growth of more than 20%. We have been and will continue to be prudent stewards of capital, consistently increasing our return on invested capital year after year which also underscores our commitment to creating long-term shareholder value. We remain confident in the earnings power of our operating model, and we believe we are well positioned to compound results for years to come, driving sustainable growth and reinforcing the strength, diversification and resilience of our business model. Before I hand it over to Dirk, I'd like to recognize our inventory adjustments team led by Jason Hall, our Senior Vice President of Transportation and Logistics. Jason led a cross-functional team that worked together to develop a strategy and implement solutions to reduce waste and improve our inventory health. As I alluded to earlier, this team, along with our field teams and our distribution centers across the country delivered more than $40 million in gross profit benefit in 2025. In addition to driving stronger profitability across the business, this team's efforts resulted in better in-stock performance, quality and freshness for our customers to support sales growth. Thank you, Jason and team for your commitment to delivering excellence through this important company-wide initiative. Let me now turn the call over to Dirk to discuss our fourth quarter results and our 2026 guidance.

Dirk Locascio, CFO

Thank you, Dave, and good morning, everyone. Our fourth quarter performance capped off a solid 2025, underscoring the strength and resilience of our business model, profitable growth engine and disciplined capital allocation framework. Starting on Slide 7 in our financial results. Fourth quarter net sales increased 3.3% to $9.8 billion, driven by total case volume growth of 0.8% and food cost inflation and mix impact of 2.5%. Excluding the Freshway divestiture, total case growth was 1.2%. Our independent restaurant volume continues to accelerate and grew 4.1%, including 40 basis points from acquisitions. Healthcare grew 2.9% and hospitality grew 3.1%. Our chain restaurant volume was down 3.4%, primarily driven by slower industry traffic as well as the strategic exit we discussed in the second quarter, largely offset by new business wins. Broadly speaking, our chain volume was in line with the industry. Moving to our financial performance, we again delivered strong earnings growth and margin expansion, driven by continued operating leverage gains. Fourth quarter adjusted EBITDA grew 11% from the prior year to $490 million, driven by continued volume growth with our target customer types, increased gross profit and operating expense productivity. Adjusted gross profit dollars grew 250 basis points faster than adjusted operating expenses. As a result, adjusted EBITDA margin expanded 35 basis points to 5%. Finally, adjusted diluted EPS increased 24% to $1.04, demonstrating our continued ability to grow adjusted EPS significantly faster than adjusted EBITDA. We expect this trend to continue as we deploy our robust and growing cash flow towards share repurchases, which I will talk more about shortly. When we step back and look at the full year, our performance was strong. We grew adjusted EBITDA by 11% to more than $1.9 billion, expanded adjusted EBITDA margin by 30 basis points to 4.9%, and increased adjusted diluted EPS by 26% to $3.98, all while navigating a difficult macro environment. Turning to Slide 8. We continue to drive significant gains in operating leverage, and we again grew adjusted gross profit per case faster than adjusted operating expenses per case. In the fourth quarter, adjusted gross profit per case increased by $0.23 or 2.9% compared to the prior year. We continue to gain leverage through improved cost of goods savings, reduced waste through better inventory management, and increased private label penetration. These focus areas led to success in 2025, and we expect further improvement in these areas for 2026. Adjusted operating expenses per case increased $0.02 or 0.3%. We continue to successfully mitigate a portion of operating cost inflation through disciplined cost management and initiatives focused on driving productivity gains. These include routing enhancements, greater process standardization in our operations, and increased savings through indirect spend procurement. As a result, fourth quarter adjusted EBITDA per case increased by $0.22 to $2.34. Our fourth quarter and full year results demonstrate our ability to drive strong leverage through the P&L. For the full year, we grew adjusted gross profit per case, 180 basis points faster than adjusted OpEx per case, which is above the 100 to 150 basis point annual target that we highlighted as part of our long-range plan. In 2025, our adjusted EBITDA per case increased nearly 10%. Importantly, since 2019, we have increased our adjusted EBITDA per case by $0.65 or approximately 40% through continuous improvement across gross profit and operating expenses. Turning to Slide 9. Our robust and growing cash flow, coupled with our strong balance sheet enables us the financial flexibility to deliver on our capital allocation priorities. In 2025, we generated nearly $1.4 billion in operating cash flow and deployed that capital to fund strong investments in our business, execute share buybacks and pursue accretive tuck-in M&A. As Dave mentioned earlier, we are on track to deliver our 2025 to 2027 financial targets, including generating more than $4 billion of cumulative operating cash flow over that period. Over the past year, we invested $410 million in cash CapEx to support our business and enable organic growth, including enhancing our capacity and strengthening our technology leadership. Additionally, share repurchases and tuck-in M&A remain important components of our capital allocation strategy to drive shareholder value creation. In 2025, we repurchased 11.9 million shares for $934 million and completed two tuck-in acquisitions for $131 million. We have approximately $1.1 billion remaining under share repurchase authorizations. Since 2022, we have repurchased 36.1 million shares for $2.2 billion. Finally, we ended the year at 2.7x net leverage well within our 2x to 3x target range and our leverage profile is the strongest within our industry. I'm also pleased to report another positive development related to our credit rating. Our corporate credit rating was recently upgraded one notch by Moody's to Ba1 based on our continued solid operating performance and credit metric improvement. Moving on to Slide 10 and our guidance and modeling assumptions. Our fiscal year 2026 includes a 53rd week, which is expected to add approximately 1% to total case growth and adjusted EBITDA growth. This assumption is included in the fiscal year 2026 guidance we are providing today. We expect to grow total company net sales by 4% to 6% compared to the prior year driven by total case growth of 2.5% to 4.5%. We are projecting independent case growth of 4% to 7% for the full year. We expect a lower inflationary environment than we had for much of 2025 with sales inflation mix impact of approximately 1.5%. We expect to grow adjusted EBITDA 9% to 13% and adjusted diluted EPS 18% to 24%. The midpoint of our outlook for the full year assumes the macro environment remains largely unchanged. Now let's look at our first quarter outlook. Due to the severe and widespread weather-related issues that impacted the industry in January and February, many of our customers and our distribution centers in impacted areas, experienced closures and other disruptions, particularly in the Southeast, which is our largest region. We have already had approximately 35% more distribution center closure days in 2026 than all of Q1 of last year, which negatively impacts our volume and cost. As a result, we expect first quarter adjusted EBITDA will be upper single-digit growth over the prior year. We fully expect we will achieve our 2026 full year guidance despite the weather-related disruptions we experienced in January and February. Last year, we started with weather-related slower EBITDA growth in Q1 yet we ultimately delivered our full year adjusted EBITDA and EPS targets through strong execution in the remaining quarters, even against a softer macro backdrop. I remain confident in our ability to deliver solid top line performance and double-digit adjusted EBITDA growth. This isn't new for us. Over the past four years, we have consistently delivered strong profitable growth while significantly improving our return on invested capital. While consumer sentiment remains cautious, we are optimistic about 2026. We operate in a resilient industry and continue to run our proven playbook. We are executing our strategy to enhance the customer experience, drive profitable volume growth, improve supply chain productivity, and return capital to shareholders, which enables our continued ability to compound double-digit earnings growth. In closing, I'm encouraged by our financial performance and the progress we've made completing the first year of our long-range plan. I'll now pass it back to Dave for his closing remarks.

David Flitman, CEO

Thanks a lot, Tiffany. We appreciate everybody's time this morning. Our team is focused. We're executing well, and we expect everything to continue that you've come to appreciate about US Foods. Thanks for your time. Have a great week.

Operator, Operator

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Edward Kelly, Analyst

Congratulations on a good quarter and a choppy backdrop. Dave, I wanted to ask you, I mean, things have been all over the place between shutdown and weather certainly seems like Q1 was choppy to date. Could you just maybe, I guess, one, provide a little bit more color on quarter-to-date volumes and kind of what you're seeing? And then if you could parse out sort of like weeks without weather and give us maybe your thoughts on what the underlying momentum of the business. And I'm hoping that you can tie all of this to your outlook for 4% to 7% independent case growth for the year because obviously, that's an acceleration.

David Flitman, CEO

Sure. That's a great question, and I appreciate it. Let me go back to the fourth quarter because I was really encouraged by the momentum we experienced. As I mentioned before, we had good momentum coming out of Q3 until we faced the government shutdown and some challenging weather conditions in December. However, we rebounded strongly in early January, with the first few weeks being even better than our exit from Q4, despite hitting some fluctuations. The positive news is that now that we've moved past the winter weather, we're back to where we were in early January. It has taken some time due to the cold, ice, and snow, but I'm feeling optimistic about the underlying momentum. I also want to highlight that the fourth quarter marked our strongest organic independent case growth in two years. As we've discussed previously, the key indicator of our future growth is the net new independent account generation, which was also the highest in the fourth quarter, just as it was in Q3, making it the best since the second quarter of 2023. I attribute this success to our team's focus on execution and enhancing our capabilities in the marketplace. I'm really optimistic aside from the weather, which is beyond our control and tends to fluctuate, but we are managing the factors we can influence, and we will keep that up in 2026.

Edward Kelly, Analyst

Great. As a follow-up on the inflation guidance, can you discuss your expectations regarding inflation and the key drivers behind it? It seems that this could make it somewhat challenging to grow gross profit per case, but I'm interested in your perspective on that. Additionally, have you made any adjustments on the self-help side given this situation, or do you believe the impact is minimal?

Dirk Locascio, CFO

Ed, it's overall, as we've said many times, you're not going to hear us talk about that as a key driver, our self-help initiatives are the large lion's share of our drivers of gross profits pretty much every quarter. So like the rest of the industry, disinflation had a bit of a negative impact in the fourth quarter. But again, we still put up strong results. I think we are still seeing inflation year-over-year so far in the year. And it's going to be one where you're going to continue to see anything more of an impact on the top line and the bottom line, and we'll manage our way through it just as we have.

John Heinbockel, Analyst

So Dave, you've expanded your sales force by 7%, which is significant for you and at the high end of your projected range. Can you discuss how you view the maturation of that expansion? Will it play a pivotal role in the local case growth for 2026, perhaps towards the end of the year? Is there a timing pattern we should expect later in the year? Additionally, how does the productivity from this 7% expansion factor into your plans? Lastly, when you consider enhancing net account growth, what potential do you see remaining in lost accounts? It seems to me that there's still a low double-digit potential that could be improved.

David Flitman, CEO

Yes, I appreciate the question. To the first part of it, that 7% included some of the internal transfers that we talked about last quarter. So if you back that out, we were right in the middle of our range in that 4% to 5% range in terms of external hires. So we executed exactly what we've been doing. To your point, I believe that the productivity of those sellers, particularly with the number that we've had internally shifted over, will ramp up and have a meaningful impact here in the back half of '26. Not to mention the consistent sales force hiring we've done over the last 3 years. I think you're starting to see that pay off. Every quarter last year, we accelerated organic independent case growth. We continue to accelerate net new. And I expect our growth will continue to accelerate as we go forward here. The second part of your question, sure, we run all parts of NOP. We look at all that. We've talked a lot about the penetration pressure that we've seen, just given the foot traffic lost is an opportunity. I will tell you that loss is fairly stable to improving. It hasn't increased at all. And the opportunity remains here to get that a bit lower. But again, given the pressure in the industry, our focus has really been on this net new, which is at the heart of our growth acceleration, and we're going to keep the team focused there.

John Heinbockel, Analyst

You performed exceptionally well on operational expenses per case in the fourth quarter. However, there is still a chance for Descartes to enhance its impact in Yuma next year. What factors contributed to that success in the fourth quarter, and how sustainable do you believe that performance is?

Dirk Locascio, CFO

Yes, we discussed several initiatives in the prepared remarks that are gaining traction, so it's really more of the same. Regarding UMAs, we continue to implement that and are about 80% done across our key markets. We expect to complete the Humos rollout by the middle of this year, which serves as a template for consistency in roles and job functions within our operations, and it has had a significant impact. Specifically, on Descartes, we noted a 2% increase in cases per mile, and we believe there is at least that much opportunity moving forward now that it is fully deployed across the company. Therefore, we are anticipating ongoing benefits from that rollout.

David Flitman, CEO

And John, as we discussed last quarter when operating expenses were a bit higher, there can be fluctuations from year to year that occur from quarter to quarter. So any orders can result in cost variations. If you consider the entirety of 2025, we experienced an increase of $0.10 to $0.11. This demonstrates that we managed to counteract some of our cost inflation through the productivity initiatives that Dave mentioned.

Lauren Silberman, Analyst

Congratulations on a strong quarter. Dave, you mentioned significant growth in net new business this quarter, which is accelerating. Is this growth mainly due to an increase in your headcount or are your existing salespeople expanding their client base? Also, are you noticing any shifts in the competitive landscape? Is there more emphasis on promotions?

David Flitman, CEO

Yes, Lauren, I would say that it's coming from both our existing sales force becoming increasingly productive and our consistent hiring of sellers over the past three years. This productivity continues to ramp up across all cohorts. Our model involves a mid-single-digit headcount increase year after year, effectively implementing route splits when they make sense, and seeding new sellers with business so they can build from that. We compensate sales reps for the business they transition to ensure smooth transitions, after which they develop a new book of business. This model is functioning well for us, and I expect it to persist. Regarding your second question about promotional activity, it tends to fluctuate. We've observed that recent promotional efforts have been particularly concentrated at the QSR level and some chains. However, I don't see a significant change compared to the last quarter. The effects seem similar, and I don't anticipate an increase from here. We’ll monitor foot traffic, but this promotional activity always varies, and I wouldn't highlight anything significant at the moment.

Lauren Silberman, Analyst

Okay. And then just a follow-up on the sales comp change. I believe you mentioned it could take 2 to 3 years to transition everyone to the new structure it sounds a little bit more gradual than I think you were originally communicating. Is that a fair takeaway? And any sort of feedback or attrition that you may be seeing? Anything else that you could share.

David Flitman, CEO

Yes. It's not a change. I'm trying to clarify because there were many questions when we first started discussing this. The reason I mentioned how we bring people into the company with a 100% base is that it takes a long time for most of our sellers to reach the 50-50 commission structure. It's a dynamic situation, as we continuously onboard new sellers while also seeing retirements. This will remain the same going forward. Our approach hasn't changed; it's simply how we operate the business, and I wanted to make that clear. Achieving a 100% commission could take a couple of years for most of our sellers, which is normal for us. It's the same process we've followed for a long time. I'm encouraged by the rollout and the feedback we've received, particularly from our sales leaders over the past few weeks. There's a lot of excitement. I'm also pleased to see that our turnover has improved for all experienced groups since we began discussing this, which is a very positive sign. We'll keep a close eye on this and will be very thoughtful about how we transition each individual over time.

Kelly Bania, Analyst

Congrats on strong year. I wanted to also dive into the outlook for the case growth for this year, the 2.5% to 4.5%, maybe just with a little deeper dive in the customer types and then the cadence. Are those all similar ranges that you outlined kind of as part of your algorithm. Just kind of curious what you're assuming maybe within change, if you're assuming that gets back to flat or slightly positive. And any comments with new business wins in health care and hospitality. And then also within the independent cases in particular, should we expect that to kind of ramp throughout the year because the comparisons are also tougher as you pointed out, they've kind of really improved throughout this entire year. So just wondering if you had any comments on those points.

David Flitman, CEO

Let me start with the IND guidance. The range of 4% to 7% takes into account the additional 1% from the 53rd week, which adjusts it to 3% to 6%. Adding 200 basis points aligns with the algorithm we discussed on Investor Day, which was based on foot traffic reaching approximately 2%. However, we haven’t seen that 2% threshold since introducing the algorithm, as traffic has remained relatively flat or down. This projection is in line with what we committed to. The total case growth reflects developments in healthcare and hospitality. Last quarter, we mentioned onboarding $100 million in both customer segments, and we anticipate completing that onboarding by the end of the first quarter. Additionally, our pipelines for both sectors have never been stronger, so we expect more growth over time. Regarding independent case growth, while the comparisons may become more challenging, we remain optimistic. Our sales team is highly focused, and our leadership is clear on our goals. I credit our team for the positive momentum we've created, and I expect to see an increase in our growth rate moving forward. That is our plan.

Jake Bartlett, Analyst

My first question was on the macro outlook. You mentioned that you expect a similar macro environment than '25, but there's also been a decently strong start to the year, aside from the weather, some tailwinds from tax refunds, for instance. I guess I'm asking about your confidence on '26 and maybe whether you think that there should be some potential upside from kind of that base level.

David Flitman, CEO

Yes. I just want to make one comment here. We've been operating in a very soft macro for the most part of my tenure here, and we've been executing extremely well. And we expect in a flat macro that we will continue to execute well and deliver results that are consistent with what you've come to expect out of U.S. Foods. Any tailwinds that come would be upside to that. And I'll let Dirk put it in a little more context for you.

Dirk Locascio, CFO

Yes. As mentioned in our materials and previous comments, we can provide a range as we typically do, with the midpoint of that range assuming no significant changes. If the environment improves due to factors like refunds or stimulus, that would benefit us and the industry, as well as the end consumer. However, even with the current conditions, we anticipate an acceleration in case growth, largely due to our ability to gain market share, as Dave highlighted.

Mark Carden, Analyst

So to start another one of the compensation shift. Just now that the news has been out there for a few quarters, have you seen any shifts in your ability to attract the kinds of salespeople you'd like to get from an experience standpoint. So by that, do you see a higher proportion of more seasoned salespeople perhaps peaking at the time before? Just any change in composition from the pool?

David Flitman, CEO

Yes, Mark, I would say it's still early. We haven't had a lot of shift in that at this point. And recall that we don't typically hire competitive reps for the majority of our sellers. That's a minority of who we sell. I expect over time that will continue to be the minority of who we hire. But we do expect to be able to attract some experience over time. But really no shift. I think it's early days yet. But again, I would just underscore, we do not have trouble attracting new sellers to the company, continue to bring new ones in, have new cohorts every month.

Rahul Kro, Analyst

Question is on Pronto. In 46 markets now, and about half of them on proton next payer penetration. Can you share what kind of lift in independent case volumes and specifically wallet share increase are you seeing in existing customers or even when you onboard new customers in the markets with Pronto and extend penetration?

Dirk Locascio, CFO

Sure, Rahul. While we haven't provided specific numbers, we are observing a significant increase in both the legacy Pronto and the Pronto Next Day services. We monitor these markets closely to ensure there is no cannibalization of our broadline business. Typically, we have seen double-digit increases in customer engagement. Notably, when we launched the Pronto Next Day service, it typically started with just one or two trucks. This is why we believe that Pronto will remain a key growth driver for US Foods for many years to come.

Unknown Analyst, Analyst

So on the common transition, I'm curious how we should think about seller productivity throughout the 3-year multiyear transition. Would you expect it to dip a little bit towards the beginning and then heightened afterwards? Or should it be more neutral in the acquiring over time?

David Flitman, CEO

Yes, good question, Jacob. I think it will be more about the latter than the former. The reason for that is these conversations are very individualized and tailored. When you make a change like this, some people will perform better right away while others may face challenges. That's what we are working through with each individual, which is why we are taking a very thoughtful and deliberate approach with these pilots. With a sales force of over 3,000 people, it’s important to execute this well and to have those individual conversations to ensure we make the right decisions. Therefore, I do not expect us to backtrack; rather, I expect us to maintain a steady course as we move forward with this implementation.