Performance Food Group Company

Please stand by. Your program is about to begin. If you should need audio assistance during your call today, please press star zero. Good day and welcome to PFG's fiscal year Q3 2024 earnings conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press star key followed by the number one on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you and good morning. We're here with George Holm, PFG CEO, and Patrick Hatcher, PFG CFO. We issued a press release this morning regarding our 2024 fiscal third quarter results, which can be found in the investor relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the results in the same period in fiscal 2023. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in the back of the earnings release. As a reminder, in the fiscal first quarter of 2023, we updated our segment reporting metrics to adjusted EBITDA from the prior EBITDA metric. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. Now, I'd like to turn the call over to George.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. This morning, I'd like to share results from the fiscal third quarter, provide some color on the current business environment, and discuss our plans for the fiscal fourth quarter and beyond. As you know, the calendar year began with a challenging weather in January. a choppy inflationary environment, calendar differences, and early signs of consumer pressure. Nonetheless, I am proud of our organization and how we were able to achieve positive results despite these headwinds. In particular, our food service business rebounded nicely in February and March, producing improved independent case growth and stable chain performance. Our convenience segment continued to experience difficult top-line trends, though it has remained focused on winning new business and tight operating expense control, helping the bottom line performance. We were encouraged by a sequential month-to-month improvement in C-Store trends during the quarter. Vistar also experienced a more challenging top line in the fiscal third quarter after very strong growth in prior quarters. We continue to feel very good about how we are positioned in the market, which we believe will produce profitable long-term growth. We were optimistic about the fiscal fourth quarter and a momentum into fiscal 2025, which is reflected in our guidance. Patrick will discuss our guidance in more detail shortly. Before turning to Patrick, I will provide color on our results, discuss our strategy, and outline reasons for our optimism. Let's review some of the highlights from our most recent quarter and various factors impacting the results, starting with food service, Segment net sales were up 1% in the fiscal third quarter, with similar case volume growth in the period. However, if we walk through the three months of the quarter, it shows a very different picture. We started the quarter with a low single-digit case decline in January. We went positive in February and had a strong March, which has continued into fiscal Q4. Importantly, independent case volume grew in all three months of the quarter, including nearly 6% growth in both February and March. Independent case growth was consistently in the middle single-digit range for each week from the second week of February through the end of the quarter. This growth outpaced the total industry, producing steady market share gains. In fact, our data shows nice share performance across both independent and chain restaurant accounts for the quarter, gaining more market share across our food service business in the fiscal third quarter than we did in the fiscal second quarter. I'd like to repeat that because it's so important. Our food service business gained more market share in the third quarter than the second quarter. This is a testament to our sales organization's ability to compete for and win new business despite the headwinds facing the restaurant industry. Our food service business experienced a deflationary headwind in the first half of the fiscal year, which continued into early calendar 2024. We're pleased to see this flip to modest inflation in both February and March. This improvement occurred despite persistent deflation in cheese, though we are seeing sequential improvement in that important commodity as well. Given the steady sequential move in most commodities, we continue to expect low single-digit food service inflation in the fiscal fourth quarter. We expect this to provide a benefit to both the gross and adjusted EBITDA margins in the period. Turning to our convenience business, as I mentioned at the opening of this call, industry top-line trends remain difficult, which we attribute to higher candy, snack, and tobacco prices in the C-store. Despite some relief on gas prices, same-store sales in the convenience channel remain soft relative to historic trends. On the positive side, our top-line results continue to outpace the total industry in key categories, including food service, snacks, and candy, reflecting new business wins and market share improvement. We are consistently adding new accounts and expanding services to current customers. This new account growth, coupled with the successful launch of several food service programs, gives us confidence that our top-line performance with inconvenience will continue to improve moving forward. We continue to gain traction with our efforts to grow food service and convenience. This is demonstrated by our recent collaboration with GPM, launching a nationwide pizza concept and our progress in selling PFG-branded food service concepts to convenience customers. These activities drive value for both PFG and the customers we serve. Despite the challenging top-line result, our convenience organizations continue to execute extremely well. A diligent focus on reducing shrink in the warehouse, coupled with tight labor management, has produced good operating leverage. Looking ahead to the fiscal fourth quarter, we expect sequential improvement in sales and continued operating expense control. Turning to VISTAR, total case volume was essentially flat in the fiscal third quarter, as growth in the vending, travel, and hospitality channels were offset by declines in theater and office supplies. Segment net sales increased 1.7% in the quarter. As expected, the rate of inflation at this start continued to decelerate and was up 4.7% in the fiscal third quarter. The rate of deceleration was similar to the rate declines from the fiscal first quarter to the fiscal second quarter. As we have discussed on prior calls, we expect inflation to settle in at a low single-digit year-over-year rate. as we close fiscal 2024 and hold steady in that range going forward. FISTAR's high exposure to consumer packaged goods products support consistent inflation in this range. As we look ahead to the fiscal fourth quarter, we anticipate better volume, sales and profit performance at FISTAR due to improving fill rates in the vending channel and better growth in the value channel. This is a direct result of new and expanding business opportunities. Before turning to Patrick, who will discuss our results and specific drivers of our performance and then provide more color on our guidance for fiscal 2024 and beyond, I want to summarize our fiscal third quarter and leave you with a few thoughts on the future. The fiscal third quarter was certainly challenging for our industry and organization, primarily due to January's inclement weather conditions and some calendar differences. However, we are encouraged by more recent trends. Additionally, we have line of sight to new business wins in each of our three operating segments, which we expect will provide a tailwind to top-line performance in the months ahead. A more stable inflationary environment also bodes well for the future. In our food service business, this means a return to more normal rates of low single-digit inflation, which provides visibility towards improving gross margins. For convenience in VISTAR, lower levels of absolute inflation should ease pressure on the end consumer. Over the long term, PFG's position as a leader in the food away from home market provides diversification across a range of profitable and growing channels and markets with significant white space. We are confident that our investment in PFG's core initiatives and our associates will enable us to achieve long-term profitable growth, which we believe will result in positive shareholder returns. We appreciate your interest in Performance Food Group. With that, I will turn it over to Patrick, who will provide more detail on our financial performance and outlook. Patrick?