Performance Food pany(PFGC) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net sales increased by 87.6% to $12.8 billion in Q2 2022, driven by Core-Mark's full quarter sales results and inflation-driven pricing [26] - Total case volume increased approximately 40% in Q2 2022, with a 15.5% increase excluding Core-Mark's contribution [26] - Gross profit increased by 57.7% compared to the prior year quarter, with Core-Mark contributing $245.2 million to gross profit [27] - Adjusted EBITDA increased by 52.6% to $241.1 million, with diluted earnings per share at $0.05 and adjusted diluted earnings per share at $0.57, a 62.9% year-over-year increase [31][32] Business Line Data and Key Metrics Changes - The company has realigned its reporting segments into three: Foodservice, Convenience, and Vistar, to better reflect its strategic vision [9] - Independent cases increased by 21% in Q2 2022, showing solid momentum in the independent business [27] - The Foodservice segment continues to drive overall segment results, with market share gains in the independent channel accelerating sequentially [16] Market Data and Key Metrics Changes - Vistar's channels, particularly retail, corrections, and travel, experienced net sales above 2020 levels, although theater and office coffee channels are still recovering [18] - The company reported strong performance in independent restaurants, particularly in pizza, Italian, Hispanic, and seafood concepts [16] Company Strategy and Development Direction - The company aims to transform from a traditional Foodservice distributor to a leader across various channels and product offerings, enhancing speed and agility in capturing new business [7] - The integration of Core-Mark and Eby-Brown is progressing well, with expectations of significant value creation from these acquisitions [11] - The company is focused on maintaining a lean organization to grow EBITDA faster than sales and expand margins, while reinvesting profits for sustained organic growth and opportunistic M&A [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the labor situation improving by the end of the fiscal year, with expectations of better productivity from full-time workers [30] - The company anticipates third-quarter net sales in the range of $12.9 billion to $13.1 billion and adjusted EBITDA between $220 million and $230 million [33] - The company is increasing its full-year outlook for net sales to $50 billion to $51 billion, reflecting better business trends [33] Other Important Information - The company ended the quarter with $2.3 billion in total liquidity, reflecting the acquisition of Merchants [23] - Food cost inflation was about 12.5%, with double-digit increases in Foodservice commodities [28] Q&A Session Summary Question: Expectations on structural wage pressures - Management does not expect structural wage pressures to be steeper than previously anticipated, focusing on training and productivity improvements [39] Question: Impact of Omicron on business - Omicron had a significant impact on absenteeism but recovery was quicker than before, with a good performance in January [40] Question: Trends in Foodservice sales within Convenience - There has been a surge in Foodservice business within Convenience, with notable increases in non-tobacco sales [44] Question: Labor cost inflation concerns - Management believes labor inflation is manageable and has absorbed most of the increases, focusing on recruitment and retention [52] Question: Current fill rates and industry challenges - Inbound fill rates are improving, particularly in Foodservice, while challenges remain in Convenience and Vistar [53] Question: Market share gains and growth opportunities - The company has gained market share primarily in the independent segment, with a focus on growing that area further [60] Question: Pricing power and inflation management - The company has successfully passed on inflation costs in the independent area, while facing challenges in the chain business [75] Question: Technology and digital investments - The company is evaluating its technology and digital sales tools, considering future investments in these areas [104]