Executive Summary

Q1 FY2025 net sales rose 4.2% year over year to $7.871B, driven by ~2% wholesale unit volume growth, while GAAP EPS improved to $(0.35) and Adjusted EPS to $0.16; gross margin rate compressed to 13.2% and operating expenses leveraged to 12.9% of sales .
Adjusted EBITDA increased 14.5% to $134M, marking the fifth consecutive quarter of sequential improvement, supported by Lean-driven efficiency gains and lower-than-expected costs in the receivables monetization facility .
Management raised FY2025 guidance across net sales, EPS/Adjusted EPS, Adjusted EBITDA, and free cash flow (now “> $100M”), while maintaining capital and cloud implementation expenditures at ~$300M; cadence implies slightly back-half weighted EBITDA .
Free cash flow improved by ~$170M year over year, though remained $(159)M due to working capital timing and a strategic ~$70M reduction in receivables monetization; net leverage rose to 4.2x on typical seasonal build and net debt of ~$2.23B .
Stock reaction catalysts: evidence of sustained volume growth in Natural/Specialty, successful rollout of supplier go-to-market programs, Lean daily management scaling, and execution on DC closures/asset sales to fund deleveraging .

What Went Well and What Went Wrong

What Went Well

Adjusted EBITDA grew ~15% YoY to $134M, the fifth consecutive quarter of sequential improvement, reflecting Lean execution and OpEx leverage; CEO: “we drove adjusted EBITDA growth of nearly 15%… fifth consecutive quarter of sequentially improving adjusted EBITDA” .
Volume strength continued into Q2, with wholesale volumes up ~2% and Natural/Specialty outperformance; CEO: “Volume gains in the quarter were about 2%… positive trend continue into Q2” .
Raised FY2025 guidance across most metrics (net sales $30.6–$31.0B; Adjusted EPS $0.40–$0.80; Adjusted EBITDA $530–$580M; FCF >$100M), citing operating momentum and Lean-driven efficiencies .

What Went Wrong

Gross margin rate fell to 13.2%, down ~40 bps YoY (ex-LIFO 13.3%), driven by lower product margins and mix; wholesale margin declined ~40 bps from Q1 last year; retail margins pressured by promotional investments to drive traffic .
Free cash flow still negative at $(159)M due to working capital timing and a strategic reduction of receivables monetization (~$70M); seasonal inventory build raised net debt and leverage to 4.2x .
Conventional volumes remain softer and ongoing DC optimization (Fort Wayne closure pending) creates near-term revenue/mix headwinds despite long-term efficiency benefits .

Financial Results

Headline Financials vs Prior Periods and Estimates

Metric	Q3 2024	Q4 2024	Q1 2025	vs Estimates
Net Sales ($USD Millions)	$7,498	$8,155	$7,871	N/A (SPGI unavailable)
GAAP EPS ($)	$(0.34)	$(0.63)	$(0.35)	N/A (SPGI unavailable)
Adjusted EPS ($)	$0.10	$0.01	$0.16	N/A (SPGI unavailable)
Gross Margin (%)	13.6%	13.7%	13.2%	N/A
Operating Expenses (% of Sales)	13.2%	13.2%	12.9%	N/A
Adjusted EBITDA ($USD Millions)	$130	$143	$134	N/A

Note: SPGI estimates could not be retrieved due to a daily request limit; comparisons to consensus are unavailable. Values above are from company documents.

Q1 YoY Performance

Metric	Q1 2024	Q1 2025	YoY Change
Net Sales ($USD Millions)	$7,552	$7,871	+4.2%
Gross Profit ($USD Millions)	$1,030	$1,038	+0.8%
Gross Margin (%)	13.6%	13.2%	−40 bps
Operating Expenses ($USD Millions)	$1,023	$1,015	−$8M; 12.9% vs 13.5% of sales
Net Loss ($USD Millions)	$(39)	$(21)	+$18M
GAAP EPS ($)	$(0.67)	$(0.35)	+$0.32
Adjusted EPS ($)	$(0.04)	$0.16	+$0.20
Adjusted EBITDA ($USD Millions)	$117	$134	+14.5%

Sales Mix by Channel

Channel ($USD Millions)	Q3 2024	Q4 2024	Q1 2025
Chains	$3,092	$3,425	$3,294
Independent Retailers	$1,816	$1,983	$1,853
Supernatural	$1,734	$1,844	$1,835
Retail	$571	$628	$586
Other	$644	$650	$666
Eliminations	$(359)	$(375)	$(363)
Total Net Sales	$7,498	$8,155	$7,871

KPIs and Balance Sheet/Liquidity

KPI	Q3 2024	Q4 2024	Q1 2025
Free Cash Flow ($USD Millions)	$49	$71	$(159)
Net Cash Provided/Used in Ops ($USD Millions)	$125	$191	$(110)
Capital Expenditures ($USD Millions)	$76	$120	$49
Liquidity ($USD Billions)	~$1.26	~$1.28	~$1.17
Cash and Equivalents ($USD Millions)	$39	$40	$37
Net Debt ($USD Billions)	~$2.13	~$2.06	~$2.23
Net Debt/Adjusted EBITDA (x)	4.6x	4.0x	4.2x

Drivers: Gross margin pressure from mix and lower procurement gains; OpEx leverage via Lean efficiencies; FCF impacted by working capital timing and ~$69–$70M reduction in receivables monetization usage .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($USD Billions)	FY2025	$30.3–$30.8	$30.6–$31.0	Raised
Net Loss ($USD Millions)	FY2025	$(41)–$(3)	$(31)–$(3)	Raised (narrowed loss)
GAAP EPS ($)	FY2025	$(0.65)–$(0.05)	$(0.45)–$(0.05)	Raised
Adjusted EPS ($)	FY2025	$0.20–$0.80	$0.40–$0.80	Raised
Adjusted EBITDA ($USD Millions)	FY2025	$520–$580	$530–$580	Raised bottom end
Capital & Cloud Implementation Expenditures ($USD Millions)	FY2025	~$300	~$300	Maintained
Free Cash Flow ($USD Millions)	FY2025	~ $100	> $100	Raised

Cadence: First-half Adjusted EBITDA growth expected high single-digit to low double-digit YoY; total EBITDA slightly back-half weighted .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Lean/Daily Management	Efficiency initiatives driving sequential EBITDA; shrink reduction focus	Lean practices to manage FCF; headcount down ~4%; throughput gains	Lean daily management pilots (TX, CO) showed +11% fulfillment quality, +5% on-time delivery; cases/hour +5%; decentralization of procurement	Strengthening execution
Network Optimization (DCs)	Plan forming; CapEx shift to usage-based maintenance	Billings/Bismarck closures; Manchester automation plan; additional closures possible	Fort Wayne closure pending; retained majority business; asset sales to delever	Continuing; revenue mix headwinds near-term
Supplier Go-to-Market & Fees	Board-led review; services portfolio emphasized	UMN launch; services margin tailwind; simplified supplier fees (subscription)	Large suppliers seeing volume gains; simplified fees broadly adopted among smaller suppliers	Growing adoption
Promotions/Procurement Gains	Declining procurement gains; promotions below pre-COVID	Margins comparable going forward ex LIFO; promotions not back to pre-pandemic	Wholesale margin down ~40 bps YoY; promotions remain below pre-pandemic; supplier programs partially offset	Still a headwind
Retail (Cub) Strategy	Retail sales pressure; plan to improve performance	New team; franchise collaboration; competitive landscape	Targeted price/promotions drove traffic; retail EBITDA +$1M YoY; turnaround in early innings	Early rebuild
Volume/Segment Trends	Gradually improving volumes	Natural/Organic accelerating; conventional improving slower	Wholesale volumes +~2%; natural continues to outperform	Positive in Natural/Specialty
Deleveraging/FCF	Outlook approaching $100M FCF in FY2025	Reduce leverage to ≤2.5x by FY2027; FY2025 FCF ~$100M	FCF >$100M; Q1 FCF timing headwinds; leverage seasonally up to 4.2x	On track FY; quarterly lumpiness

Management Commentary

CEO: “All in, we drove adjusted EBITDA growth of nearly 15% compared to the prior year first quarter and delivered our fifth consecutive quarter of sequentially improving adjusted EBITDA dollars” .
CEO: “Our revamped commercial go-to-market program… streamlined 15 to 20 unique fees into one and are now providing suppliers access to our enhanced data and insights” .
CFO: “Our gross margin rate, excluding LIFO, was 13.3%… down about 40 basis points… driven by… business mix… lower procurement gains and ongoing strategic commercial investments… partially offset by… supplier programs and reduced shrink” .
CFO: “Free cash flow in Q1 was a use of about $159 million… reduced by nearly $70 million from the strategic decision to reduce the number of customers under our accounts receivable monetization program” .
CEO: “We have completed the closure of both our Billings and Bismarck distribution centers… decision to close our Fort Wayne… we expect to complete this move early in calendar 2025… we have retained the vast majority of the business” .

Q&A Highlights

Decentralized procurement and accountability: Moving inventory decisions closer to DCs/end customers to improve forecasting/service; compensation alignment under review; inventory days targeted back to pre-COVID levels .
Lean roll-out timeline and impact: Initial pilots showed +11% fulfillment quality, +5% on-time delivery; anticipate 6–12 months to ramp network-wide, targeting MSD/HSD productivity gains and $150M cost-out over ~3 years .
Sales guidance deceleration: Midpoint implies ~1% growth for remaining nine months, balancing Natural strength, modest conventional declines, and DC optimization dynamics .
Gross margin contraction drivers: Customer/product mix, lower procurement gains; offsets from shrink and supplier programs; retail margin investments to drive traffic; retail EBITDA +$1M YoY .
DC closures and deleveraging: Billings/Bismarck closed; Fort Wayne pending; proceeds prioritized for debt reduction; timing disciplined (“not trading time for value”) .

Estimates Context

Wall Street consensus estimates (S&P Global) for Q1 FY2025 EPS and revenue were not retrievable due to SPGI daily request limit; as a result, comparison vs consensus is unavailable in this report. Management’s raise to FY2025 guidance (net sales, EPS/Adjusted EPS, Adjusted EBITDA, FCF) suggests estimate revisions higher at the low end across these metrics .

Key Takeaways for Investors

Natural/Specialty volumes are the core growth engine; watch for continued above-industry growth and channel mix tailwind despite margin trade-offs from customer/product mix .
Lean daily management and decentralized procurement are delivering tangible throughput/productivity improvements; near-term gross margin pressure should be partially offset by shrink reductions and supplier programs .
Guidance raised across key metrics with slightly back-half-weighted EBITDA; monitor execution on DC optimization and cadence of cost savings to sustain sequential EBITDA expansion .
Free cash flow improved sharply YoY but remains lumpy intra-year; strategic reduction of receivables monetization increases reported FCF sensitivity; medium-term deleveraging plan to ≤2.5x by FY2027 intact .
Retail (Cub) is in early-stage turnaround with targeted promotions; small EBITDA improvement indicates operational funding of price investments; continued execution could reduce margin headwinds .
Supplier go-to-market programs and digital/professional services (e.g., UMN) are margin-accretive and gaining adoption, providing structural earnings support beyond distribution economics .
Near-term catalysts: progress on Fort Wayne closure and subsequent real estate disposition, Lean roll-out milestones, sustained Natural/Specialty growth into Q2 holiday season; risks include ongoing margin mix pressure and conventional softness .

Additional Notes

We searched for the Q1 FY2025 8-K Item 2.02 and did not find one; relied on the Q1 press release and the full earnings call transcript for primary disclosure .
Prior quarters reviewed for trend analysis: Q4 FY2024 press release and call; Q3 FY2024 press release .

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