Performance Food pany(PFGC) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net sales grew by 9.4% in the fiscal second quarter, aided by acquisitions of Jose Santiago and Cheney Brothers, with organic independent cases up 5% [44][45][51] - Adjusted EBITDA increased by 22.5% to $423 million, exceeding guidance [51][52] - Diluted earnings per share was$ 0.27, while adjusted diluted earnings per share improved by 8.9% year-over-year to $0.98 [52] Business Line Data and Key Metrics Changes - Foodservice segment saw strong performance with organic independent case growth of 5%, driven by new account growth and improved margins [30][34] - Convenience segment experienced mid-single-digit growth in foodservice cases, with adjusted EBITDA at 28.5% [36][50] - Vistar segment reported low single-digit case increases, with growth in office coffee services and theater channels [39][40] Market Data and Key Metrics Changes - Organic independent restaurant case volume grew by 5% in the second quarter, up from 4.3% in the first quarter [9][10] - Vistar's total cases grew by 1.4% in the fiscal second quarter, with positive growth in vending and office coffee services [11][39] - Convenience business showed resilience despite industry challenges, with foodservice cases increasing at a mid-single-digit pace [36][50] Company Strategy and Development Direction - The company is focused on targeted acquisitions to drive growth, with successful integration of Jose Santiago and Cheney Brothers [6][15] - A diversification strategy across the food away from home market is emphasized, providing long-term growth opportunities [18] - Continued investment in sales force hiring, with a nearly 7% increase in headcount, is aimed at driving organic growth [34][150] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for the second half of fiscal 2025, anticipating a rebound in independent case growth [10][46] - Challenges in the Vistar segment are acknowledged, but improvements are expected in the latter half of the fiscal year [50][70] - The company is monitoring inflationary pressures, with total company cost inflation at 4.6% for the second quarter [47][101] Other Important Information - The company plans to prioritize debt reduction in the short term while maintaining a robust M&A pipeline [57][138] - Capital expenditures are expected to remain steady at approximately$ 100 million per quarter, with additional investments for growth projects at Cheney Brothers and Jose Santiago [54][56] - The effective tax rate for the second quarter was 25.2%, with expectations for a higher rate in the latter half of the fiscal year [52] Q&A Session Summary Question: Which segments are contributing to the higher sales outlook? - Management noted broad-based growth across all three segments, with independent growth being particularly strong [64][66] Question: Can you elaborate on cost of goods optimization? - Management confirmed that cost of goods optimization has been a focus, with collaborative efforts across segments driving improvements [70][72] Question: Thoughts on underlying momentum in the food service business? - Management indicated that underlying EBITDA growth is strong, with expectations for continued improvement in the second half of the year [75][76] Question: What is the inflation outlook? - Management expects inflation to remain manageable, with foodservice inflation projected in the low to mid-single digits [101][102] Question: How is Cheney Brothers performing post-acquisition? - Cheney Brothers is performing exceptionally well, with aggressive hiring and strong sales growth despite challenges [121][122] Question: What is the current leverage level? - Current leverage is in the high threes, with plans to reduce it back within the target range of 2.5 to 3.5 times [141][136]