Good morning, welcome to UNFI's third quarter fiscal 2023 earnings conference call. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question-and-answer session. To ask a question, you'll need to press star, followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Steve Bloomquist, Vice President, Investor Relations. Thank you. Please go ahead, sir. Good morning, everyone. Thank you for joining us on UNFI's third quarter fiscal 2023 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 John Howard, our Chief Financial Officer. Sandy and John will provide a strategy and 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. Lastly, 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 at the end of our earnings presentation. I'd ask you to turn to slide 6 of our presentation as I turn the call over to Sandy. Thanks, Steve, and good morning, everyone. We appreciate you joining us for our third quarter call. As you saw in our release, we reported a quarter that was below our expectations. Today, we're going to address the drivers of these results and our plan to improve profitability in both the short run and in the longer term as we strive to advance our growth and improvement agenda. Our business performance is driven by revenue growth and margins. The top line is growing. We're making continued progress, adding new customers and increasing business with existing customers. While we won't lose our focus on continuing to pursue this proven top-line strategy and providing a differentiated customer experience, profitability and forecasting are where we have fallen short this year and where a great deal of our attention remains focused. Before I jump into our quarterly results, I want to step back for a minute to provide some context. Prior to my arrival as CEO in August 2021, the company had completed the largest acquisition in its history, just ahead of the onset of the pandemic. While it was a massive undertaking to complete this transaction, the UNFI SUPERVALU combination created an unmatched industry platform and a company with significant potential competitive advantages. There remains significant work to fully capture the full opportunity for long-term value creation. In the meantime, the combination has created a complex infrastructure, partially related to the predecessor companies' respective long history of M&A, which limits our ability to understand the recent volatility within our business real time. We've been working to remedy these issues, but our progress has been unable thus far to match the quickly changing conditions. The pandemic drove vast operational complexities, including a supply chain crisis and a highly volatile macroeconomy, which we're still managing through today. Just a couple of months after my arrival, bill rates collapsed as Omicron hit and the holiday season ramped, significantly pressuring our supply chain as supplier out-of-stocks approached record levels and warehouse worker and driver vacancies increased significantly. We invested to support our customers during this crisis. As a result, we've created significant goodwill with our customers, having helped them through a highly uncertain time. The nature of the crisis required significant operational and managerial bandwidth, which slowed our progress on the other key priorities within the unification of business platforms that are critical as we emerge from this challenging period. Importantly, we continue to get validation from our customers and our top-line results that we're making the right strategic decisions and are actively building upon our customer and supplier value propositions. Our pipeline remains strong. Our high-margin service business continues to grow, and our private brands business continues to help our customers more effectively compete. We now need to accelerate our efforts to combine our unmatched market offerings with a more efficient, dynamic, and digital-oriented operating model so that we can more adeptly anticipate and more efficiently respond to changing market conditions. I remain confident in our ability to do this and strongly believe that the combination of our growing top line and our focus on turning around and improving efficiency and profitability will prove beneficial to our shareholders over time. Now, turning to the quarter, I want to express our deep disappointment in our results. We faced several obstacles which impacted our results and exacerbated the legacy issues I just discussed. While we remain optimistic about our future trajectory, we continue to operate in a challenging environment, which is evident in our third quarter results. The worst impacts of the pandemic on our business are receding, but the fallout has created significant volatility, which has been difficult for us to anticipate. Inflation is moderating, but it remains high in some categories and deflationary in others. Consumers are adopting smaller basket sizes and more value-oriented items, and at the same time, supply chain performance is improving, but operating costs remain structurally higher. We again grew sales broadly across our wholesale business. However, both adjusted EBITDA and adjusted EPS declined compared to last year and were well below our expectations. This lower profitability was the result of several things. First, we continued to experience a rapidly changing and volatile external environment, which weighed on volumes as price players, namely mass merchants, made some share gains. This led to weaker than anticipated sales and margin dollars, primarily in our natural business, which tends to be at higher price points and more sensitive to macroeconomic fluctuations. Separately, we saw a significant and unexpected slowing in the wholesale commodity inflation, which created some additional unanticipated margin weakness. The changing consumer environment, coupled with reduced government benefits, also weighed on our retail results. In addition, we experienced higher than expected shrink and costs related to operational improvements. We also made further investments in a better customer and supplier experience. While these investments are weighing on our margins still, we're confident these will serve us in the longer term. Key metrics are already improving, including fill rates, which climbed over 1,100 basis points compared to the prior year quarter. These issues, especially the volatile macroeconomic backdrop, continue to challenge our forecasting process, which is a key focus of our capability improvement agenda. We're continuing to devote significant internal and external resources, including working with the Boston Consulting Group and others, to better refine and improve our business disciplines and go-to-market strategies to benefit our customers, suppliers, and UNFI, with a clear focus on raising near-term and longer-term profitability. We have also been focusing on our plans to address our profitability weakness. We're implementing actions which we expect will add over $100 million in annualized operating margin benefits. This projected benefit is expected to help offset margin challenges that we expect in fiscal 2024, including lower procurement gains in the first half and the normalization of incentive compensation accruals. These plans include more rigorous budgeting procedures, administrative structure efficiencies, SKU rationalization, and commercial contract reviews. Our leadership team has just concluded a detailed, itemized budgeting process with the purpose of identifying SG&A savings that could either be reinvested in our transformation work or quickly drop to the bottom line. We plan to remain disciplined and push for further reductions. We're also actively evaluating paths to a more efficient administrative structure, which should reduce SG&A. Importantly, we believe this more streamlined organizational approach will also make us more adaptable, will speed decision-making, and enhance communication and collaboration. On top of this, we are pushing to improve our core gross margin by leveraging a distribution center focus project to better optimize our assortment by thoughtfully and regularly exiting underperforming SKUs. By discontinuing underperforming products, we're able to reconfigure the position of other items within the DC, which we expect will generate both operating and working capital efficiencies. In addition to profitability benefits, this furthers our supply chain network transformation. Our commercial contract review is the fourth element of our near-term plan to drive benefits. We are working towards improving the contract level economics to UNFI in specific situations, which will likely include exiting certain contracts with customers and suppliers. This is a continuation and a re-emphasis of a program put in place prior to the onset of COVID. For those of you who have followed UNFI over the past five years, you may recall in fiscal 2020, we discussed the strategic decision to exit a portion of our military business. Since that time, many aspects of the business have changed, and we're finding additional elements of our commercial contracts that are inconsistent or at least have not kept pace with these changes. As such, we plan to make the changes necessary to better reflect today's operating environment in collaboration with our customers and suppliers. As a part of this work, we have also enhanced ongoing management oversight of the customer and supplier contracting process. As we've been pushing ahead on these near-term programs, we've been simultaneously making progress on our plan to drive sustainable transformation by creating a more streamlined, efficient, and unified company over time.... As I've outlined previously, the plan has four focus areas: supply chain performance and efficiency, collaborating with suppliers and customers to redesign the work that we do together to accelerate profitable growth, upgrading our digital experience, and continuing to modernize and unify our technology. In combination, these four focused efficiency and growth-driving initiatives are expected to position us to drive value-accretive growth for our key stakeholders, including our customers, suppliers, associates, and shareholders. An area of progress includes our supply chain network automation and optimization initiative. We've removed most of the racking in our Centralia, Washington, distribution center in preparation for the first installation of Symbotic's automation technology in our supply chain network. This project, with a projected after-tax IRR greater than 20%, should start delivering significant customer benefits and modest financial benefits in fiscal 2024, with the run rate adjusted EBITDA benefit expected to grow to over $15 million by fiscal 2026. This installation provides a good launchpad for new learnings as we seek to expand automation more broadly within our network. Centralia is our sixth largest DC, comprising nearly 4% of our total distribution center square footage. Concurrently, our project execution team has begun the design and statement of work phases for both the second and third sites, with all locations on track to meet our internal timelines. Importantly, over time, we expect to add even more sites across our 56 distribution center portfolio into the automation and optimization program, all with the goal of improving both the customer experience and UNFI's profitability. Our commercial value creation focus area, targeted towards simplifying and adding greater visibility to our pricing and procurement practices, is also making steady progress. Our upstream and downstream relationships are complex and include a multitude of elements such as payment terms, cash discounts, volume rebates, and promotional dollars. We have a team reviewing and analyzing each of these areas and many more to assess that agreed-upon terms accurately reflect today's business environment and win-win-win outcomes for customers, suppliers, and UNFI. As a part of this focus on driving long-term continuous improvement, we're also evaluating paths to streamline and focus us on strategically important areas of our business, while continuing to optimize our capital allocation strategy to reflect the evolving needs of our business. All avenues to support our strategic priorities and create shareholder value are being considered. Customers continue to tell us we're on the right path and have the products, services, and insights they need to be successful. We are facing challenges in the near term, some of which are related to the broader macro and industry fundamentals, but we believe we have a well-thought-out plan to help offset these challenges, to strengthen the competitive position of the company for our customers, and to improve the structural profitability of UNFI. We're doing this work as we also invest in our network and new capabilities to help build on our competitive advantages and maximize future profitability. We hope the actions we're taking convey how we're working towards significant improvements. These past two quarters have been disappointing and frustrating for all of us who own this company, employee and non-employee shareholders alike. All of us at UNFI are committed and accountable for turning this around and for driving value, creating growth. Every action is being considered as we work to couple our strong market position and steadily rising revenue and improved profitability. Our management team, made up of experienced and knowledgeable industry leaders, alongside leaders with new skills and knowledge and experiences, are all focused on taking decisive action to improve the long-term health of our company. We're optimistic about the sustainable value creation that lies ahead. With that, I will turn it over to John. Thank you, Sandy. Good morning, everyone. As Sandy noted, this quarter's results were below our expectations, and our focus remains on driving sustainable profitability improvement. Today, I will focus on the drivers of this financial performance, our balance sheet and capital structure, and our updated outlook for the year. With that, let's review our results. Turning to slide eight, net sales grew by 3.7% in the third quarter and totaled more than $7.5 billion, reflecting continued customer demand for our products, as well as elevated but moderating inflation. Wholesale sales grew by 4%, including inflation, net of elasticity of about 8%. Sales grew across our three primary channels, with Supernatural growing the largest at 12%. This includes incremental volume from new customers added over the last year, additional categories and new store openings in Supernatural, and increased item and category penetration with existing customers. This was partially offset by a slightly steeper decline in unit volumes relative to prior quarters, but was in line with NielsenIQ's total US food volume changes, which is representative of performance for the grocery industry. Retail sales declined slightly compared to last year's third quarter, primarily driven by lower customer counts and a decline in items per transaction, partly offset by higher average unit retail. Some of this activity was driven from lower EBT levels as pandemic-related benefits expired during the period, as well as some share shifts to mass merchants, as Sandy noted. Flipping to slide nine, adjusted EBITDA for the third quarter totaled $159 million, compared to $196 million last year. The biggest contributor to the year-over-year decline was our gross profit rate prior to the LIFO charge in both years, which declined by more than 100 basis points and led to a gross profit decline of about $50 million. As we discussed on our last call, we expected to see our year-over-year gross profit rate decline, given the procurement gains we're cycling from last year. Relative to our expectations at the end of Q2, the decline was greater than anticipated, largely due to the impact of the volatile macroeconomic backdrop. This contributed to unexpected channel shift, weakening core margins, especially in our natural business, an unexpected reduction in commodity inflation, and softer results in our retail operations. We also experienced higher levels of shrink. The workstream Sandy outlined addressed most of the issues and are expected to result in higher levels of future profitability and should gradually benefit our results in the short and long term. Our operating costs as a percentage of sales were down about 60 basis points from last year's third quarter. This includes an approximate $35 million or 50 basis points net year-over-year benefit from reversing previously accrued incentive compensation expense that will not get paid this year due to underperformance. We don't expect to pay any employee bonuses this year, as projected results are below our threshold targets for fiscal 2023 adjusted EBITDA, which more closely aligned with our original annual guidance. Excluding the $20 million incentive compensation benefit in the third quarter and the $15 million expense in last year's third quarter, operating expenses were 13.1% of sales in Q3, compared to 13.2% last year. This slight improvement was a result of higher sales, expense management, and increased efficiency in our DCs, with some improving throughput. Within our retail segment, adjusted EBITDA increased $4 million compared to last year's third quarter, including a $7 million benefit from the change in incentive compensation. We continued to experience operating cost increases, including higher employee-related costs, utilities, and new store startup costs. Our GAAP EPS for Q3 was $0.12, which included a roughly $0.55 pre-tax LIFO charge. Our adjusted EPS totaled $0.54, compared to $1.10 in last year's third quarter. This decline is primarily attributable to the lower adjusted EBITDA compared to last year. Moving to slide 10, we finished the quarter with total outstanding net debt of just over $2 billion, a $46 million decrease compared to last quarter, driven by $65 million of free cash flow generation. This brings our outstanding net debt to the lowest level since the SUPERVALU acquisition nearly five years ago. The decline in year-over-year adjusted EBITDA drove our net debt to adjusted EBITDA leverage ratio to 2.7x, compared to 2.6x at the end of the second quarter. Turning to slide 11, let's move to our updated expectations for the fiscal year. Given our performance year to date and expected trends in the fourth quarter, we are maintaining the midpoint of our outlook for sales, and we're lowering our outlook midpoints for adjusted EBITDA and adjusted EPS. We continue to expect full year sales to be in the range of $30.1 billion-$30.5 billion. Adjusted EBITDA is now expected to be in the range of $610 million-$650 million, with adjusted EPS in the range of $1.80-$2.30 per share. These revised expectations include an assumption that procurement gain opportunities continue to decline as a result of the macroeconomic and competitive environment. We expect supplier promotional activity to remain below pre-pandemic levels. It also reflects our assumption that the broader operating environment will remain challenging, with share shift continuing to pressure independence. Additionally, while some of the near term cost actions Sandy described in his remarks may have some benefit in the fourth quarter, we would expect this benefit to be limited, with the majority of benefits impacting fiscal 2024. Turning to the summary on slide 12, we believe we are taking the appropriate near term actions to address the volatile environment and operating margin challenges to position ourselves for longer term success. Our long-term plan will take time. This is why we've created a detailed plan to improve operations, so we can better serve our customers and more efficiently bring them the goods and services they need to successfully compete in their markets. We strongly believe the actions we are taking will create meaningful, long-term value for our shareholders and will significantly outweigh the recent volatility we've experienced. Operator, please open the lines for questions. Thank you. As a reminder to ask a question, please press star followed by the number one on your telephone keypad. Our first question comes from Mark Carden from UBS. Please go ahead. Your line is open. Hi, this is Isabel Thompson on from Mark Carden. Thank you for taking our question. Maybe to start, you did call out some more challenges cycling procurement gains in the third quarter. How did these shake out relative to your expectations, and how can we think about these impacting the fourth quarter? Sure, I'll take that. I appreciate the question. This is John. Broadly, with the way we forecasted that and what we're expecting, there still continues to be softness within the forward buy and the opportunities that are presented, as well as the magnitude of those opportunities when they do come through. We were reasonably close within Q3 on a net basis. Some of that softness that we started seeing it towards the end of Q3 as we extended it through the rest of the year is one of the contributing factors to bringing that guidance down for the rest of this year. That's helpful. Thank you. And with the $100 million in near-term cost outs, do you see much of that risk of cutting into some of the revenue-driving initiatives? Or do you simply have enough room to, you know, trim back excess expenses elsewhere? Yeah, This is Sandy. Good morning. We view the $100 million of short-term action as principally a fiscal 24 impact to help address some of the margin weakness that we'll be cycling in the first part of the year, and with very little impact in the rest of fiscal 23. Thank you. Our next question comes from Leah Jordan from Goldman Sachs. Please go ahead. Your line is open. Thank you. Good morning. I was seeing if you could talk about vendor promotions a little bit more. How did they track versus your expectations in the quarter? Does your guidance bake in any sequential improvement into 4Q? Sure. This is John. I'll take that one, Leah. Good to hear from you. Yeah, promotions, they're still well below pre-pandemic levels, again, both in the% of the items and in the magnitude of the discount. We are anticipating that trend is gonna continue as we move through the rest of our fiscal 2023. We'll see how the macroeconomic develops to see if there's an opportunity for some tailwinds as we move through the rest of 2023 and into 2024. Yeah, I'll just add that what I hear from suppliers is a generally constructive outlook to try to resuscitate unit movement in the market. We have an expectation that promotions will continue to grow. So far, as John said, that's been a kind of a slow lag. Okay. Thank you. On my follow-up, I wanted to see if you can give more detail on your capital allocation priorities. Also curious how you're thinking about the timeline of getting back to below 2.5x leverage and balancing that with all the investments you have in tech and automation along with buybacks. Yeah, sure. I'll start that, and capital allocation is still a primary focus of ours. The way we think about that is, you know, we think about where can we invest that cash, and we've got the opportunities to invest and grow and for the business, as well as to drive those transformational improvements that we've talked about before. Those both require investments. Then, of course, the other priority is, of course, continuing to improve our debt to EBITDA leverage. That's gonna be challenged a little bit in the foreseeable future, given the trends in our business. The way we think about that is we're gonna continue to make the right short- and long-term investment decisions, looking for the right returns for the shareholder, as it relates to those transformation and other investments to run and grow the business and drive the efficiencies. As I mentioned, to continue to focus on debt reduction and improving that debt to EBITDA leverage. Great. Thank you. Our next question comes from Scott Mushkin from R5 Capital. Please go ahead. Your line is open. Hey, guys. Thanks for taking my questions. A decent amount to unpack here. I guess I wanted to start off with retail. You know, obviously, the business is underperforming. It's underperforming the market quite a bit. You know, there were thoughts originally when the merger took place that it would be sold. Can you just give us a little bit of an update on where your head is strategically on retail, and then also maybe how you improve the business? Yeah, thanks, Scott. I'll take that. You're right, we had a weak quarter in retail this quarter. We've been seeing some sequential, top-line resistance, and we've got a new management team in there that's taking decisive action to resuscitate the Cub brand. The Cub brand is still the market leader in the Twin Cities, and I think our intermediate assessment here is we needed to get more focus from a value standpoint and on a fresh category perspective, and the team's taken action to do that. On the broader question of capital allocation, obviously, we don't have anything that we would publicly say about that other than, it's our general focus and a part of our thinking in every aspect of the company to make sure that our uses of capital are generating the highest level of return and focus. Those are independent answers. We have a strong plan to resuscitate Cub. It is not a weak asset. It just had a quarter or two of subpar performance, and we're taking action to address that. I wanted to, you know, obviously, move on to distribution here, and I guess I wanted to maybe frame a little bit better, you know, what's cyclical in the business, and you think will kind of ebb as we get into next year, and that's depressing EBITDA versus kind of the, I'll call it systemic, but I guess UNFI specific challenges that are pressuring EBITDA? Sure. It's a good question, and obviously a very important one to us as well. You know, broadly, there are a lot of environmental factors that are impacting short-term P&Ls. Last year, in fiscal 2022, we saw a big upswing in value that we got as inflation took hold, and our inventory was valued lower than the market price, and we strategically forward bought, and it was a tremendous source of margin expansion. Obviously, we've been down the back end of that this year, and it surprised us in Q2. As John answered earlier, it was less of a surprise. It's weaker than we thought it would be since that estimate, but the broader driver now is a set of factors that involve just sort of market slowdown, the consumer, retrenching to value. There's been some market share shifts to large retailers. In a couple of cases, in very specific senses, we've had commodities deflate, which causes another very short term and hopefully non-recurring P&L issue, as prices in the market have to go down faster than the cost basis in our DCs. There's a lot of moving parts, as you say. Inside of UNFI, there are also some sustainable capability opportunities. I use the word turnaround from a capability standpoint. I view the sales, pro services, and brands proposition in this company to be really strong. The scale of the company, the potential to create value for suppliers and customers is as high as I've ever seen it, and I say it every quarter. The flip side is the capability, call it people, processes, and systems to execute, to run a supply chain, to sell customers, to drive value for shareholders is a turnaround opportunity of large proportion. I'll give you one final example: shrink. Shrink is all things that affect inventory from the time we take it in and pay for it until we deliver it and it's paid for by a customer, and any variance in that process can be called shrink. Our shrink, which I view as a 100% a measure of our capability, I mean, there's some aspects of it that are externally driven, but I think of it as owned, is running at an all-time high. We see it, while it's challenging and complex, and there's retail components with cold fridge, there's components in DC with labor, there's all kinds of aspects with customers on credits, and we are working on that end-to-end process fiercely. We have a team in place. We have created metrics and dashboards, and I believe we have our arms around the problem, but we are still at the head of solving the problem. If you go back two years, 40 basis points less on a run rate basis. While our success at mitigating that is going to take time and is capability-based, there is a lot of opportunity inside the company to improve, and there's a lot of market share outside the company to earn that has nothing to do with the economic environment. Net, net, we think we have controllables that can drive the value of this company for a long term, and we're working to activate that as best as we can, thus far, not as successfully. Great. Thanks, Sandy, for all the color. I appreciate it. Our next question comes from Kelly Banya from BMO Capital Markets. Please go ahead. Your line is open. Good morning. This is Ben Wood on for Kelly. Thank you for taking our questions. Just wanted to start and step back and see, can you provide us with any update as to the visibility into what's happening at the gross margin level versus, given the various systems you're working on, how is your insight into puts and takes of gross margin changed or improved from last quarter? Yeah, no, I appreciate the question, Ben. This is John. I'll start. I think the visibility is better and improving. We've put, as we talked about last quarter, we put the best of our FP&A group onto the process. We've changed our process. We've changed the data we're trying to collect through those challenging opportunities that you mentioned. So we're making good progress. And that being said, we're still not where we want to be from a forecasting perspective. We're engaging external parties to assist us with this, looking for more of a driver-based macro view of our forecast. There's still lots of opportunities for us to get better, but we've made good progress in the past few months to bring some visibility and allow us to at least provide the range that we provided today. Great. Thank you. Then, switching gears just a little bit here, can you provide us some more details onto the volume trends? To start, what was, I guess, inflation in wholesale and retail? Then across your channels, how much did new accounts impact volumes versus kind of what was the comp volumes? Then what are you planning for the fourth quarter? Yeah, let me make a general comment, Ben, and then I'll let John punctuate it with a little bit more granular information. What we saw broadly was growth in sales across all of our channels. It was strongest in Supernatural as we have a very strong relationship there, and we're expanding category participation and working very well together. It was less strong in some of the other ones. Now those are sales numbers. Obviously, inflation is playing a important role in the sales momentum. Volume is continued to be negative in most parts of our business, as elasticities are driving down units, and that's the reason why it's such a big focus across the industry to try to address that. Right now, from an elasticity standpoint, and I think my colleagues can correct me if I'm wrong here, but the return to unit growth is not happening in a linear way as inflation comes down. There's some sort of cleaning weakness in units, and that seems to reflect a broader economic issue as consumers try to stretch their shopping budget. Within our channels, I see winners and people who are struggling in virtually everyone. This is still a business of market positioning and execution, and we do business with some of the most innovative and successful retailers in the country, regardless of size. Clearly within our patch, the fastest growth right now is Supernatural because of new categories and their execution, but more to come. John, anything to add? Yeah, the only thing just from an inflation perspective, just to give some numbers and a little color to that question. When we think about inflation for Q3, and this is our inflation, it's gonna, you know, be somewhat similar to what you're seeing externally, but this is the inflation for UNFI. We saw about 8.2% inflation in our third quarter. And just to put a little color around that, we were at 10% for Q2. We're seeing that deceleration of inflation, and as Sandy mentioned, within that number is deflation in certain commodities as well. If you look back to FY 2022, our Q3 inflation was about 8%, but the sequential from Q2 last year to Q3, Q2 was 5.7%. We saw that inflation rising as we moved through Q3, providing that forward buy opportunity as well as commodity inflation, and a tailwind last year. We're just seeing the inverse of that this year with the deceleration of inflation from Q2 to Q3 this year. Great. Thank you. Appreciate all the color. Our next question comes from Andrew Wolf, from C.L. King. Please go ahead, your line is open. Good morning. Thank you. Just wanted to ask on the slide nine, the bridge to the EBITDA last year to this year, the $35 million, positive benefit from the incentive compensation, is that a true up or, you know, a reversal of prior accrual, plus the quarter- It is- You know, not taking the quarter's accrual? Yeah. Okay. It's not taking the quarter accrual as well as a reversal for what was remaining in our bonus accrual, when we finished Q2. It's a combination of those two things. Okay. And it- Would it be linear, like $15 each quarter, maybe $30 of the reversal and $15 of not taking accrual? Yep. That is a perfect rough math for you. Then if you go back to Q3 last year, there was actually an additional AIP expense given the performance of the company. Got it. I guess what's really perplexing me the most is that helps explain some of the sequentially lower EBITDA in Q4. But, you know, the range is pretty wide, but even at the high end, you know, that $35 million doesn't explain all the sequential slowing. Could you just kind of, what's going on with the business or the macro backdrop where, you know, where the Q4 is, you know, projected sequentially, even if we exclude the, take out the accrual, the comp accrual in Q3, why, you know, you're looking for, further sliding in the, in the EBITDA run rate? Yeah, I'll take a shot at that. I think the way that we looked at the fourth quarter was taking a case that reflected the momentum from the third quarter at the low end, as we saw certain things like deflation start to accelerate in key categories and project that forward, and then taking some of the more top-line-focused actions that we have in the market and anticipating them starting to bite, and that got us to more of the top end. The broader sort of what's going on story in the market is, I think there's a general tightening of the market. We are seeing some share movement from all other to the big discounters and clubs, and they're competing to try to take advantage of the opportunity. We, on the other hand, led by our private brands program as the sort of key focus area, are working to give our customers the best possible weapons to compete on the back end. There's down trading going on as a result of all that. If you saw a return to stronger promotional activity from vendors, you'd start to see us inch higher as sales rebounded a little bit. If you saw everybody sort of dig in for the summer, you'd see performance more near the low end of the range, and there's nothing more significant going on than that. Okay, I just wanted to follow up, Sandy, on the promotional cadence with the vendors. I think you said earlier, it really hasn't shifted much. I'm just, you know, are they content to see their market share shift into different channels, so they're indifferent? Do you expect that there's going to be some change in that promotionality? I was with a lot of them yesterday. We have a big event to raise money for the UNFI Foundation, which is all about food insecurity and a big part of what we do. We got a bunch of vendors together, and we talked about the business. To the vendor, their narrative is they're getting focused on growing units again. I didn't hear one vendor that gave me a different narrative than that. When push came to shove, when we got into the dollars and the specific actions, they're different. There are some that are already in motion. There are others that are really talking about it. They're seeing the share data, and they're seeing the way the market's changing. Of course, when they're hanging around, someone who represents a lot of independents, they're talking about accelerating independent growth. I think it's in their interest and our interest for independents to lead growth in this market because it creates diversity of the channel, and it's good for building brands in different places and in different towns and, merchandising environments. We've got the story. What we hope happens is we get the follow-through. Certainly, that's what people are saying, and we expect that more and more of that will happen as we go forward. Great. Thank you. Our next question comes from Peter Saleh, from BTIG. Please go ahead. Your line is open. Great, thanks. Just a couple questions on my end. First, coming back to the conversation around shrink. You know, it just sounds like we're hearing more and more about shrink lately from many other operators. Just curious, can you just give us a sense of really what's changed over the past, maybe three to six months, that shrink has just gotten more material of an issue? Just trying to understand the dynamic that's going on. You know, Peter, at this stage, there's multiple factors that have impacted the degradation of shrink. At retail, you've heard from others that there's higher instance of theft, and the practice of managing that at the retail store has become highly complex, from a workplace safety as well as managing shrink perspective. Actions being considered or how late we stay open, different local solutions to the problem. I think that's a big part of the retail degradation. Inside of DCs, there's a lot of return to the basic disciplines that drove good DC execution in the past that are part of the solve here. The last couple of years, DC environment has been a get-through-the-day environment. Who can we get to come to work environment? As that settles down and the training manuals are updated and the training disciplines are implemented, we expect to see all kinds of different metrics in DC execution improve. Finally, we're using technology in a new way to track orders and to make sure we drive for higher levels of order accuracy, and in return, speed the offset of credits to customers when we're not accurate, but not over-credit customers, based on historical trends. I just sort of summarized a much more complicated, multifactorial problem, From a management focus standpoint, reducing shrink is our Chief Operating Officer, Erin Horvath, number one priority, and she convenes a cross-functional management team through action planning every week. It's my expectation that, whether it's procurement shrink or lingering PPE inventories or, working through the different types of products that tend to be more shrink sensitive on the procurement side, all the way to DC operations, technology, all the way to execute through retail, that you'll see improvement in those numbers, in the weeks, months, and years to come. Great, thanks. Then just on the consumer side, I think I heard you say consumers retrenching to more value, and maybe you're seeing some smaller basket sizes as well. Can you just elaborate a little bit on some of the detail that you're seeing there? You know, and when did that kind of shift start? Is that a more recent occurrence, or has that been going on for the bulk of this year? I believe it's sort of increasing gradually, but from our perspective, we have had a priority on our private brands program for several years. Last fall, we skilled up the leadership of that group, and this year we have two or three major program initiatives that in the field with our customers around known value items, around reconsidering the price positioning of the product offer. We're actually focusing on a narrower set of brands to make sure that the value impact is as strong as it possibly can and can be. Our customers are embracing it and implementing it, and we're seeing significant unit improvement. I would say it's in the top five focuses of the company to make sure that our retail customers have the best private program that they can have to compete against the lower private label programs that they're seeing from some of the bigger retailers in the country. Thank you very much. Your last question comes from William Reuter from Bank of America. Please go ahead. Your line is open. Good morning. My first question is, you talked about renegotiating some of your contracts with customers and suppliers to make sure that those are profitable. Do you have a sense for how much unprofitable business there may be today, and what the benefit, once you are able to get better visibility into all of the promotions and dollars that are shifting across those programs? Do you know what that benefit could be? Peter, this is part of a four-part plan that I mentioned in my script about really looking in a much more granular way at our budgeting and how we're using the resources of the company to drive results and value. SKU management, as well as streamlining our administrative structures, and particularly at the senior levels, look at layers and spans of control to try to be as efficient and agile and fast as possible. From a commercial contract review, perspective, it's been my history that in a company like ours that has thousands of those kinds of contracts, there's an opportunity to look at them individually and holistically for compliance, for terms that are no longer relevant, for ways in which both the customer and UNFI on the downstream side or the supplier and UNFI on the upstream side, can work together to make a situation better. I mentioned that that four-part plan has a basket-level opportunity of approximately $100 million, mostly to impact fiscal 2024, to address some of the run rate margin, and forward by issues that we have in fiscal 2024. We'd expect those components to contribute importantly to that. I don't think we'll disclose the individual amounts, they're material opportunities and they're things that'll be good for our customers and our suppliers, 'cause there are things on both sides that can be modernized to make us faster and easier to work with, grow faster, at the same time, more profitable. Great. By the way, my name's Bill or William, not Peter. My second question, the $100 million of cost savings, can you give us some of the buckets of where we're gonna be seeing those come through the P&L? Well, a couple of them will show up in margin, and a couple of them will show up in SG&A. Okay. I was I guess I was wondering if you could share a little more detail on the components, if you've been able to figure those out at this point, or is it still too early? If you're talking about amounts of the items, we won't disclose that. If you were looking at where in the P&L, commercial contract reviews will largely show up in margin. There's some cash flow components there relative to payment terms. There's a piece of that, however, is operating expense, because we'll be looking at order quantities and order frequency. As you can tell, it's a comprehensive opportunity. As the sort of more granular budgeting is across the P&L to make sure that every dollar that we spend is useful against the plan that we have. My experience is that a lot of times when people budget based on last year, the existence of a spend argues for its persistence, we have a process here that we've implemented that generates good relief of those investments that are no longer relevant, that process goes across the P&L. SKU rationalization will improve margin and operating expense, better aligning DC space with the velocity of the SKUs that we carry, and eliminating wasted space and wasted capital. The streamlined administrative structure will come into SG&A mostly. I hope that's helpful. That is helpful. That was kind of exactly what I was getting at. All right. Thank you. Thank you. We are out of time for questions today. I would like to turn the call back over to Sandy Douglas for closing remarks. Thank you, operator, and thanks to everybody for joining us this morning. While our recent results have been challenging, I remain confident in the longer-term outlook and prospects for UNFI. As I said earlier, we're disappointed but not discouraged by the past two quarters and are working to improve profitability and recapture the shareholder value that has been lost. As I stated on our second quarter call, our transformation agenda will be a multiyear journey with the sole goal of improving key capabilities, so we can better serve our customers, suppliers, and associates while being a good steward of the planet and creating value for our shareholders. For our customers and suppliers, we thank you for your continued partnership and the business we do together. For the UNFI associates listening today, our special thanks to each of you for everything that you do for our business, our customers, our communities, and each other. For our shareholders, we know this is a challenging period, but we thank you for the trust you've placed in us, and we are working diligently to deserve that trust. We know we have work to do, and we are doing it, but we are doing it in a disciplined and methodical manner and at a pace that balances urgency with thoughtfulness, an attitude of doing the work that needs to be done in the highest quality manner. We look forward to updating you again after the fourth quarter. This concludes today's conference call. Thank you for your participation. You may now disconnect.