Performance Food pany(US:PFGC)2020-11-08 10:53Financial Data and Key Metrics Changes - EBITDA for Q3 2020 was $59.3 million, exceeding prior year results, driven by strategic priorities and cost leverage [7] - Net income increased to $23 million from $22.5 million year-over-year, with diluted EPS rising to $0.51 from $0.49 [18] - Total sales for the quarter increased by 1.8% to $4.5 billion, with cigarette sales up by 4.2% and non-cigarette sales down by 2.6% [19][20] Business Line Data and Key Metrics Changes - Cigarette revenues increased by 4.2%, while non-cigarette revenues declined by 2.6%, reflecting a shift in consumer buying behavior due to COVID-19 [7][19] - The food category faced pressure due to slow recovery in self-service food and beverages, while general merchandise was impacted by regulatory uncertainty in vapor sales [8] - Candy sales returned to prior-year levels in convenience stores, but non-C-store channels continued to trend below prior year [8] Market Data and Key Metrics Changes - C-store trips were down approximately 10% to 12%, but average transaction values increased by close to 20% [9] - Year-over-year sales to non-C-store customers improved, finishing approximately 10% below prior year after being down over 30% [9] Company Strategy and Development Direction - Core-Mark is focused on differentiation through category management solutions and partnerships, including exclusive agreements with PDI and Skip for technology enhancements [11][12] - The company is on track to complete the rollout of private label products by the end of Q4 2020, aiming to drive sales and margin growth [12] - A comprehensive restructuring of the sales organization is underway to enhance effectiveness and align compensation with growth objectives [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in emerging stronger and more profitable post-COVID, despite ongoing challenges [6] - The company anticipates continued margin pressure in the near term due to sales mix challenges and lower margins in vapor products [20] - Revised guidance for 2020 expects sales between $16.8 billion and $16.9 billion, with adjusted EBITDA projected at $186 million to $190 million [24] Other Important Information - The company plans to resume 401(k) matching in Q4, which will impact costs by approximately $1.5 million [25] - Capital expenditures for 2020 are expected to be around $35 million, with share repurchases planned at approximately $5 million in Q4 [25] Q&A Session Summary Question: Impact of 401(k) matching on expenses - Management confirmed that the $6 million from 401(k) matching will return in 2021, alongside $4 million of annual operating expense savings [30] Question: Customer pipeline and potential wins - Management indicated optimism about sizable customer opportunities in the next 6 to 12 months, though COVID-19 may impact acquisition activities [32] Question: Non-cigarette sales guidance - Management expects non-cigarette sales to decline in the 2% to 4% range, with potential for improvement over the quarter [41] Question: Drivers of cigarette volume volatility - Management noted that the state of the country and consumer behavior during COVID-19 are significant factors affecting cigarette volumes [43] Question: Long-term investment in foodservice programs - Management believes the trend in food is here to stay, with customers likely to invest in food offerings in the long term [44] Question: M&A opportunities - Management confirmed that they are exploring acquisition opportunities and have made progress in partnerships that will benefit customers [50]