Performance Food Group Company

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Good day, and welcome to PFG's fiscal year Q3 2026 earnings conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press the 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, Senior Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you, and good morning. We're here with Scott McPherson, PFG's CEO, and Patrick Hatcher, PFG's CFO. We issued a press release this morning regarding our 2026 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 2025. Any reference to 2025, 2026, or specific quarters refers to our fiscal calendar, unless otherwise stated. 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 at the back of the earnings release. 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. With that, I'd now like to turn the call over to Scott.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. I'm excited to share our results from the third quarter, which demonstrate the strength of our strategy, solid execution in the field, and building momentum that we expect to continue through the fourth quarter and into fiscal 2027. At our investor day last May, we laid out the long-term vision for the company. Central to this plan is leveraging the diversification of our business across the entire food away from home market. We believe that our broad position across the U.S. is a unique strength for PFG and will result in many years of sustained growth. The most recent quarter demonstrates the benefits of this strategy. There's been much discussion about the challenges facing our industry, including soft foot traffic into restaurants, price inflation, major weather events, and political disruption. Despite these items, we were able to achieve the high end of our guidance outlined in February, exceeding expectations in several of the metrics that underpinned our projections. All three of our operating segments displayed positive signs of resilience and a strong foundation to grow upon in future quarters. Let's discuss some of the business highlights from the quarter in each of our businesses. I'll then turn the call over to Patrick who will review our financial performance and updated outlook for the fiscal year. Starting with our food service segment, strong sales execution combined with disciplined margin management translated into high single-digit EBITDA growth in our food service business, excluding Cheney. This performance underscores the durability of our food service model and our ability to grow profitably even in a choppy macro environment. Our ability to gain market share and grow independent cases has been a strength of PFG's business throughout our history. Consistent with that theme, we are incredibly proud of our sales organization and their independent performance in the third quarter. For the period, independent cases accelerated from the second quarter, growing 6.5%, exceeding our stated benchmark of 6%. Our performance was the result of consistent market share gains through the quarter and wallet share gains from existing customers. Net new account growth was approximately 5.4% as account wins continue to drive the majority of our case growth. At the same time, we were pleased to see 100 basis point differential between new account growth and total case growth, which indicates positive trends in account penetration within existing accounts. This performance occurred within a backdrop of consistent low single-digit foot traffic declines, according to Black Box, demonstrating the strong execution of our sales force. Our focus on recruiting, training, and incentivizing our sales force is a key factor and our multi-year outperformance within the independent restaurant space. We continued to strengthen our talent and sales team by providing them with industry-leading brands, technology that enables great customer engagement, and once again, we increased our headcount by mid-single digits compared to the prior year. Double-clicking on technology, we continue to see excellent traction from our online ordering platform, Customer First. Since highlighting this technology at our investor day, we have deployed multiple AI agents that provide our customers and salespeople a digital partner when researching items, recipes, and products to place the optimal order. Customer first is not only a powerful tool for our restaurant business, but will become our digital solution for all three operating segments, demonstrating the cross-company collaboration that defines our PFG1 initiative. Turning to our chain business, we saw case volume increase in the third quarter. This was particularly impressive given the difficult backdrop that chains have experienced and reflect our efforts to partner with growth concepts. Also encouraging was our pipeline of new chain business, which is robust and should provide a lift to our food service volume performance in fiscal 2027. Before turning from the food service segment, a few comments on Chaney Brothers. In the third quarter, we continue to see strong sales growth from Cheney, particularly with independents where cases grew north of 6%, as did his sales headcount. Their growth culture remains vibrant and their brand portfolio is growing, providing additional sales and margin opportunities ahead. Critical to continuing this growth are the investments we have made and their physical infrastructure discussed last quarter. The headline investment is our recently opened state-of-the-art broad-line distribution facility in Florence, South Carolina, which started shipping to existing and new customers towards the end of the second quarter. This new facility will not only provide room to grow in the Carolinas, but will also free up capacity in other facilities in the Southeast. We are making investments today that will pay dividends in future periods. These activities did cause higher than anticipated expenses in the fiscal second and third quarters, and we have embedded a continuation of some cost items in our fourth quarter outlook. As we move through the fourth quarter and into fiscal 2027, we are confident Cheney will become a significant contributor to our revenue and profit growth moving forward. Turning to our convenience segment results, I'm extremely proud of how our Cormark associates have risen to the occasion and led our company in revenue and EBITDA growth. For the past two quarters, we have discussed adding two meaningful pieces of business with loves and racetrack. While exciting, these types of large customer wins also bring potential execution risk. I'm proud to say that Cormark has done a great job onboarding these customers and continues to work tirelessly to execute while building strong and lasting partnerships with these iconic convenience retailers. The results speak for themselves. Convenience delivered 8.3% organic case growth an 8.7% total revenue growth in the quarter, and an outstanding 34.1% adjusted EBITDA performance. While the top line performance is certainly impressive, Cormark's ability to deliver on volume increases of this magnitude exemplifies the commitment this organization has to its customers. As I said at the onset of the call, PFG aspires to be the leader in the food away from home space, and this diversification has played a significant role in the success we are seeing with Cormark. Cormark has leveraged the broader enterprise to develop food expertise, expanding its food and brand portfolio, providing customers with a differentiated offer. That, coupled with great customer-facing technology, strong supply chain execution, and a focus on building lasting partnerships, has resulted in significant market share wins for the segment. Looking ahead, the addition of LUVs and Racetrack will continue to be an incremental benefit to our convenience performance through mid-fiscal 2027. We have visibility into additional customer wins and some offsetting losses, though not nearly the size of either of these two pieces of business. We believe the outlet for our convenience segment is bright, and we continue to resonate with customers looking for a partner to help them drive their business performance. Finishing with our specialty segment, this is a unique asset within the PFT portfolio, as there is no pure play competitor that has the reach of Vistar in the candy, snack, and beverage markets. As a result, we are able to pursue a range of business opportunities for long-term growth. An example of this is the continued expansion into the e-commerce fulfillment space. While still a relatively small channel for us, our ability to ship direct to businesses and consumers across the U.S. makes Vistar an attractive partner for a wide array of businesses and manufacturers trying to reach their end consumer. Vistar also continues to benefit from growth in other emerging channels, including specialty grocery, in campus retail and is currently pursuing additional avenues that we are confident will fuel future growth. During the quarter, growth across most of Specialty's channels drove solid top line performance. Case growth of 1.1% produced a 5.3% revenue increase year over year. During the quarter, Specialty saw difficult margin comparisons, including lapping higher prior year inventory gains. Expenses in the third quarter were also elevated due to shipping and fuel costs, resulting in negative EBITDA performance in the quarter compared to the prior year period. Despite a challenging quarter, the specialty segments' attractive overall margins and prospects for continued revenue performance give us a high degree of confidence in their long-term profit opportunities. To summarize, all three of our operating segments contributed nicely to our top-line growth, allowing us to achieve sales results at the top end of the guidance we laid out in February. Our adjusted EBITDA came in above the high end of our guidance range, even as we invested in our business to support future growth. This performance was possible because of our diversification efforts and share gains across the US food away from home market. I'm excited for the final months of fiscal 2026 and expect a nice acceleration in fiscal 2027, putting us well on track to achieve our three-year targets laid out last May. I'll now turn the call over to Patrick, who will review our financial performance and outlook. Patrick?

Thank you, Scott, and good morning. Today I will review our third quarter financial results, provide color on our financial position, and review our tightened guidance for 2026. PFG's total net sales grew 6.4% in the third quarter, with growth in all three operating segments and particular strength and convenience. Total company cases increased 4.4% during the quarter, highlighted by a 6.5% organic independent restaurant case growth and an 8.3% organic case gain for our convenience segment. We are very pleased with the contribution from the addition of the Loves and Racetrack business, which accounted for the majority of the growth in convenience. Total company cost inflation was approximately 4.5% for the quarter, in line with what we experienced in the prior quarter. Food service inflation of 1.5% was slightly below recent trends, with continued deflation in the cheese, poultry, and egg categories, somewhat offset by higher inflation in beef. At the same time, while cheese and poultry remained deflationary on a year-over-year basis, we did not see the dramatic declines we experienced during the fiscal second quarter, and as a result, these items were less impactful to our overall financial results. Specialty segment cost inflation was up 5.1% year over year, about 25 basis points lower than the prior quarter, mainly the result of candy and hot drink price inflation. Convenience cost inflation increased 7.9%, slightly higher than the prior quarter due to inflation in tobacco and candy. The inflationary environment has been active over the past several years, but as a company, we have demonstrated our ability to handle a range of outcomes. we expect the inflation rate to remain in the low to mid single digit range for the remainder of fiscal 2026. Moving down the P&L, total company gross profit increased 6.4% in the third quarter, representing a gross profit per case increase of 20 cents as compared to the prior year's period. This improvement was driven by a strong mix execution of our procurement initiatives outlined at our investor day and continued execution of our brand strategy. We are very pleased with our gross profit results, which demonstrate our ability to execute on our priorities outlined in our three-year plan. In the third quarter of 2026, PFG reported net income of $41.7 million, a 28.5% decrease year-over-year due to an increase in operating expenses. Adjusted EBITDA increased 6.6% to $410.6 million. Diluted earnings per share in the fiscal third quarter was 27 cents, while adjusted diluted earnings per share was 80 cents, an increase of 1.3 percent year over year. Our EPS was impacted by below-the-line items, including higher interest and depreciation expense. Our effective tax rate was 25.4 percent in the third quarter, a slight decrease from 25.8 percent last year. We expect our full year 2026 tax rate to be close to our historical range of around 27%. Turning to our financial position, cash flow performance. In the first nine months of 2026, PFG generated over $1 billion of operating cash flow, an increase of approximately $245 million compared to the same period last year. We invested approximately $266 million in capital expenditures during the first nine months of 2026. We have been diligent around new capital projects and expect full-year 2026 CapEx to be below our long-term target of 70 basis points of net revenue. The organization is striking a good balance of investing in infrastructure and high-return projects to support our long-term growth while maintaining excellent free cash flow performance. In the first nine months of 2026, we generated $806 million of free cash flow, up $312 million compared to last year. We are extremely pleased with our cash flow performance. We are fully committed to investing back into our business to support our growth, and as you can see from our nine-month results, we are generating significant cash flow to fund this investment. During the quarter, we repurchased a total of $1.2 million of our stock at an average cost of $83.11 per share. We will continue to be opportunistic around share repurchase, but our priority remains debt reduction and investing in our growth. The M&A pipeline remains robust, and we continue to evaluate strategic M&A. PFG has a history of successful acquisitions that drive growth and shareholder value, and we expect that to continue. At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance, today we tightened the guidance range for fiscal 2026. For the full fiscal year, our sales target is now a range of $67.7 billion to $68 billion compared to the previously stated $67.25 to $68.25 billion range. We now expect full-year adjusted EBITDA in a range of $1.9 to $1.93 billion compared to the previously stated $1.875 and $1.975 billion in 2026. Our results keep us on track to achieve the three-year projections we announced at Investor Day with sales in the range of $73 to $75 billion and adjusted EBITDA between $2.3 and $2.5 billion in fiscal 2028. To summarize, we are very pleased with our progress despite a challenging business environment in the third quarter. We are in a solid financial position which supports our growth investments and capital return to our shareholders and expect strong execution to finish the year setting the stage for a strong fiscal 2027. Thank you for your time today. We appreciate your interest in Performance Food Group. With that, Scott and I would be happy to take your questions.

Thank you. If you'd like to ask a question, press star one on your keypad. To leave the queue at any time, press star two. Once again, that is star one to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. Thank you. And our first question comes from Edward Kelly with Wells Fargo. Please go ahead. Your line is now open.

Hi. Good morning, everyone. And, you know, nice quarter. It's William Boschelli, M.D.: : Good to see you know so strong top line momentum in the business, what I wanted to ask about that, though, is that you know you did trim the Q4 guidance at the midpoint I think at an acquisition that came into the quarter so presumably maybe there's some help there, but can you just talk about you know the offsets. William Boschelli, M.D.: : You know that you know you're seeing in Q4 to drive you know slightly more conservative view.

Yeah, this is Patrick. I'll take that and maybe Scott will add something on the acquisition if he wants to. But really, we gave the full year guidance. You're talking about the implied Q4. And how we're looking at it is we exit Q3 with really strong top line momentum and a nice EBITDA increase of 6.6%, the top end of our guidance. So we're feeling really confident about the things that we have line of sight of, controllables. As we mentioned in our comments, You know, really strong momentum. We are seeing positive improvement at Chaney, although there will be some pressure there during the quarter, and we're obviously improvement in specialty outside of our controller. Things like the macro environment. Obviously there's some pressure from fuel that we experienced a little in Q3. We expect some of that pressure in Q4 as well, so really very confident about Q4. There are some pressures on the numbers as I mentioned, And then we're looking really towards 27 where we see a really nice setup. And we'll obviously give you guys much more color that in August.

Hi, this is Scott. Yeah, just real quick on the acquisition. We did have an acquisition that came in late in the third quarter. You know, it's something that we've been really excited about. Cashway is a distributor in a broad line food service distributor in Kearney, Nebraska. Patrick DePauw, Three facilities that really cover nebraska and the dakotas so you know again kind of giving us a little more presence facing West. Patrick DePauw, And you know great family company great culture, I think they're really excited excited to be a part of pfg and we're excited to have them in the in the full.

TAB, Mark McIntyre, Great and then you know, maybe just to follow up, and you know Patrick you kind of hinted at this a little bit by. You know, Chaney, you know, had some drags, you know, as we think about, you know, fiscal 26. I was hoping maybe you could talk about, you know, what that drag was, you know, again, in Q3. And then I don't know if you can sort of summarize, like, what, you know, the drag has been for the year. I mean, I think the math would say it could be $30 million, something like that. Um, do you get all of that back, you know, next year? Um, you know, because I think you have talked about, you expect Cheney to be a pretty strong contributor in 27.

No, really good question, Ed. Uh, so from a Cheney standpoint, you know, the first thing I'd say, you know, that we're really happy about is, is we mentioned their top line and Cheney's done a great job continuing to grow independent cases, continuing to grow shirt and share across Florida and the Carolinas. I think their sales culture is fantastic. And like I said, I think they're set up for the balance of this year and 27 from that perspective is great. Over the last couple of quarters with the opening of the new facility, we certainly saw some expense drag. And we mentioned that that will carry on into the fourth quarter. But really, we have great line of sight to get those things under control. The rollout of that facility has gone very well. We've transitioned three of our four phases of customers into there. And so again, we feel like their setup for 27 is great and really looking forward to their contributions, both top and bottom line going forward.

Great, thank you.

Thank you. And we'll move next to Lauren Silberman with Deutsche Bank. Please go ahead, your line is now open.

Thanks a lot, and that's on the quarter. A couple follow-ups and then one question, but just on Q4, are you able to quantify the net impact of fuel costs that you're embedding for the quarter? I know there's some offsets with surcharges, but not fully. I'm just trying to figure out if, like, basically it counts as a $20 to $30 million dip down in the implied Q4.

Yeah, Lauren, good question. Obviously, as we exited Q3, we saw the impact of fuel come in. You're going to get much more detail in the queue on this, but that gross impact for Q3 for that month was 7.3, and that's not just because of higher fuel prices. That's also because of new customers, miles driven. Now, because of the timing of surcharges, we weren't able to adjust the surcharge in March, but that was adjusted in April and, again, adjusted in May. So we do have some headwind in Q4, but It's not material. It's something we're working through, obviously. It's just we called it out as a headwind because it is one, but it's one of a few things that we embedded into our guidance, and that's why we gave the range we did.

And then on the Cheney expense draft, what exactly is driving these higher expenses? I guess I'm just trying to understand whether these expenses roll forward into fiscal 27 just within the base or some of them come off.

Yeah, so there's a couple of things that I would outline there. One of them, and it's the primary one, Lauren, is the new facility in Florence. So if you think about, you know, right now we have, you know, customers that we are shifting from other buildings into that facility. So, you know, we had to hire and staff that facility for all of that inbound volume. And at the same time, we're still, before we transition those customers, we're still servicing them in our, you know, in our existing facilities. So it's kind of double head count to service that volume. And that's, you know, obviously continued over the course of, you know, four or five periods. So, you know, certainly been impactful from an expense standpoint. The other thing that drops off an expense, and we've talked about our synergy, you know, kind of flow. And at the end of Q3 of this year, or really at the end of the second year of the anniversary of Cheney, we have a nice pickup in synergy. And that will continue on through year three and beyond. So, you know, definitely have a couple things that will be good momentum from the chaining expense standpoint.

Great. And then on the independent case growth side, there's obviously a lot of different dynamics and noise throughout the quarter. Any color you could provide on the cadence you saw as you moved through the quarter and anything you can share on what you've seen into April? Thoughts on the fourth quarter? Thank you.

Sure. So as I think about Q3, really January was a great month. And towards the end of January, first of February, you saw pretty material weather impacts. So if I look at the average of January, February, that's kind of what we saw in March and saw that continue into April. So we've been pretty consistent over the last couple of months. And like I said, if you took the January, February average, that kind of equals what we saw in March and April.

Thank you so much. Appreciate it.

Thank you. And we'll now move next to Kelly Vania with BMO Capital. Please go ahead.

Thanks. Scott, just wanted to clarify one point on the chaining expenses. Did your view of the impact of those to the fourth quarter change since you reported last quarter, or is that just coming in line as you expected? It just still is an impact into the fourth quarter.

Thanks for the question, Kelly. There was a little more spillover into the fourth quarter than we probably anticipated a few months ago, and really that's because we had kind of four waves of customer transition that were shifting business from existing buildings into that new facility. We've completed three of those waves and that fourth wave will take place here in the next couple of weeks. And that's really what shifted is we thought we were going to have all four of those waves completed in the third quarter. But really just we had a little weather impact when we started opening that building that pushed it back a couple weeks. And then we've just taken our time to make sure we do a great job servicing those customers we shift over. And really happy to say that we've seen sales growth, you know, in that new building on a same store basis, you know, since day one. So all those customers that we shifted in there have continued to grow. So really, you know, positive results that we've seen out of the transition.

Okay, that's very helpful. And Scott, you made the comment about fiscal 27 and looking for an acceleration in sales and profit growth there. You mentioned, you know, I guess we covered kind of cycling some of these expense headwinds and also the synergies, but you also mentioned some new chain business, I believe, at food service. So I was wondering if you could kind of help, you know, maybe bucket some dollars around how we should think about what that might look like in the coming quarters. And then also, I believe the procurement savings target should maybe start to build Is that a factor we should think about being impactful in fiscal 27 as well?

No. Appreciate the question, Kelly. You touched on a lot of the key drivers that we think about in the setup for 27 right there in your question. When I think about food service, you know, I would just say the continued momentum and independent case growth. We did say in our prepared remarks that we have a really nice chain pipeline that we think is going to help us keep that chain growth positive for next year. You know, convenience has always obviously had a great year from a market share gain standpoint and obviously has some carryover into next year. And then specialty, you know, if you look at specialty over the last three quarters, you know, they've improved their growth three quarters in a row and we feel like they have a really nice pipeline as well. So that, you know, kind of hits the top half of the income statement. I'd say the margin setup is really good too. And you talked about procurement synergy. I'd say Really how we feel about MIPS and how we feel about those procurement synergies, you know, that really helps the margin profile as well. And then clearly we'll have, you know, some spring back on chaining expenses and then just overall efficiency of adding that volume. And I think this setup is really nice for next year.

Great. Thank you.

Thank you. And we'll move next to Mark Cardin with UBS. Please go ahead. Your line is open.

Good morning. Thanks so much for taking the questions. So to start, I know it's pretty much impossible to predict the duration of the Middle East conflict, but if we see higher oil prices continue at their current level for an extended period of time, how much of an impact would you expect for it to have on your product inflation outlook over the next few quarters?

Let me, I'll take a stab at this, Mark, and I'll let Patrick fill in the blanks. But, you know, I would say, you know, we've talked about how we handle fuel surcharges and fuel inflation. And I think we've got a really good plan around that. Our fuel surcharges mitigate a lot of that impact, but certainly, you know, there is going to be a little bit of headwind in Q4. Obviously, can't anticipate, you know, whether fuel prices go up significantly or down, you know, over that period of time and beyond. But we think we've got a good setup around fuel surcharges. As far as other product inflation, you know, we haven't seen any material impacts to date other than There's been a little noise around, you know, we'll call it petroleum-based products. So we certainly sell some products that are petroleum-based and containers and packaging that we sell. You know, and then obviously I think the longer duration, I think everybody would anticipate that, you know, at some point you're going to see, you know, inflation tick up. What we've seen in recent months is, you know, across the third quarter we saw inflation tick up a little bit.

uh period by period and we've seen inflation pick up a little bit as we started this quarter so um but we feel like we're really well positioned to to navigate that right now yeah mark just a little more color just um if scott was getting to we we manage a very large basket of commodities um as he mentions maybe some of the petroleum base might see a little bit of impact here really hard to say and as you opened up with your questions very hard to predict this but uh As you know, if you've followed us for any period of time, which I know you have, we're able to manage through a variety of markets. And right now, we're seeing, as Scott mentioned, a slight tick up on inflation, but that's why a little more color there. We started January very low, below 1%, and we finished in March at 2%. I'm just talking about food service inflation. So While we've seen a slight uptick, it's still well within that low single-digit area, and we manage very well.

Makes sense. Thanks for the color there. And then a follow-up on CashWay. Just how does its mix of business compare to the base food service business? Does it lean any more or less heavily towards independence? And then just more broadly, how's your traction going on building out some of your independent business organically at West and select markets?

No, really good question. You know, so Cashway, I would say their food service business is very much in line with what we see across Broadline. They have a really nice independent mix. They also have some Broadline national customers. And then the one thing that's a little unique about them is they have a segment of their business that does have some convenient sales. So they sell some snacks, some candy, a little bit of cigarette and tobacco as well. So very diversified mix that fits really well into our overall portfolio. And then, you know, as far as out west, you know, we've talked a lot about we've continued to add capacity, California and Oregon and Arizona and Colorado. And actually the west is our fastest growing region by, you know, by a fair amount, doing exceptionally well in the west. Really proud of that region and their ability to gain share in that market.

Great, thanks so much and good luck, guys. Thank you.

Thank you. And I'll move next to John Heimbachel with Guggenheim. Please go ahead, your line is open.

Hey, Scott, two quick questions on local independent case growth. You know, one, is there still an opportunity to reduce the loss rate, the account loss rate from where it is today? And then if you look at the pickup in lines per account, where is that concentrated? are you gaining some traction with COP versus where you might have been?

No, really good questions, John. As far as loss rate, I would say we've been fairly consistent over a number of quarters. Is there an opportunity to improve that? Absolutely. We're always focused on improving that and Uh, you know, it's something that we spend a lot of time focused on. I mean, turning customers is obviously not, you know, not the goal here, but you know, I'd say overall that's been, been fairly balanced and we haven't seen any big shift there. Uh, as far as the, the lines per drop, um, you know, certainly that's, was kind of the headliner of our penetration in this quarter. Uh, really nice to see lines per drop cases per drop increase, uh, in a nice fashion. You know, as far as what that's being driven by, one of the things that has been really positive, it continues to be driven by our brands. And I would say that, you know, if you asked all of our sales reps out in the field what their biggest lever is, brands is going to be one of those top one or two things. And then to your point, we actually have had really nice performance in center of the plate. You know, our protein strategy,

continue to to work to drive that um as well as seafood um and so seeing seeing some really nice performance in center of the plate but brands is probably where i'd say the the focus and the real growth has been and on and on cheney um where where are they now with uh one now that they've got south carolina open in terms of capacity meaning you know i don't think they'll need to open another facility for a while where are they with that and then if you if you took synergy out and just looked at Cheney kind of apples to apples, does it outgrow the rest of food service because of the economic growth in its markets?

That's a good question. So capacity-wise, I'll hit that one first. So we're essentially taking volume out of a facility that I would say was 90% full that's now going to be more like 50 or 60. So we're going to have three facilities that have, you know, 40 or 50% available capacity. Maybe one of them is not quite that high, but three facilities that have a lot of capacity, really, which creates a whole network that has capacity across the network. So really well positioned to continue to grow. And to your point, absent synergies, which are going to be a nice tailwind for Cheney, they're certainly in one of the fastest growing markets in the country. And I think as a broadliner with, you know, a great reputation, a really good presence in that market, you know, with capacity available, you know, are they going to outgrow the rest of the country? I'm not sure. I hope they do. But I think they're going to have a really nice growth future ahead of them. Thank you.

Thank you. And we'll move next to Alex Slagle with Jefferies. Please go ahead. Your line is now open.

Thanks. Good morning. A follow-up on Cheney. I know the synergies aren't really expected until year two or three, but as you've had some more time to evaluate the business, see how it pairs up against PFG. I mean, do you see any incremental opportunities there? And also curious on the private label at Cheney and your latest thoughts.

yeah i would say that the one thing that is um you know i think clearly an opportunity has been around brands uh cheney has has actually established some of their own really solid brands their brand performance has been obviously you know brand percentage sales is a lot less than what we see across the rest of broadline but they do have some really strong brands and one of those brands we've actually taken into the rest of broadline so I do think there's a great opportunity in brands. I think that procurement piece around brands is going to be a really nice part of the synergy. Um, but we've also found some other, you know, I'd say core competencies that Chaney has that we think will help the broader business. And that's really, you know, one of the big reasons when we approach acquisitions that, you know, we take our time in that first year and try and don't, we try not to jump in and make big changes. Um, And that's the way we've approached this. And, you know, maybe we don't, you know, generate as much EBITDA in the first year, but in the long run, I think it positions us really well. And we feel like the future of Cheney and the setup for 27 and beyond is really strong.

Great. Also wanted to ask on inbound logistics opportunities and just sort of how that's come together and maybe potential offsets for some of the higher freight and inbound costs that you've had.

Really, really good question. You know, we talked at Investor Day about redistribution and that we continue to grow our redistribution network. And that network has performed really well this year. That allows us, and I would highlight the West, you know, we've opened up a facility in the West to help us get our brands to all of those centers in the West. And, you know, now that I see how those distribution centers that are aided by Reedy are growing. It just makes me very bullish on what we can do around redistribution. And then I would say just the broader inbound landscape. We certainly think that's an opportunity. It's one that we are really starting to focus on more and more every day is just being more efficient in getting goods to our buildings. So it's a great call out. It's something that we are paying a lot of attention to. It's something that Reedy helps us with, but certainly more opportunity ahead.

Thank you.

Thank you. And we'll move next to Jeffrey Bernstein with Barclays. Please go ahead. Your line is now open.

Great. Thank you very much. My first question is on the underlying consumer weather noise, which you talked about in Jan Feb. But you noted the ongoing negative foot traffic for the restaurant industry. Can you just talk specifically about maybe the impact from what a spike in gas could have on your business and it doesn't seem like it's had much but maybe however your segment's been impacted in the past it would seem like the convenience store segment might be the most vulnerable as it kind of ties in with with gas stations and whatnot so any color you could provide in terms of that underlying consumer behavior x the weather that you've seen in recent months and what you might expect as we close out the fiscal year

Yeah, thanks for the question, Jeff. So when I think about the restaurant consumer in particular, we've seen our independence, you know, obviously with our share gain, it's been really nice, but we've seen that independent restaurant hold up, you know, exceptionally well. Through that foot traffic pressure, we've certainly seen a little downdraft on the chains. And so we've seen the chains feel a little more of that headwind with foot traffic. So when it comes to those two classes, I'd say right now, independents tend to be outperforming the chains. When I think about just overall fuel impact, I think it really comes down to discretionary income. In the restaurant space, certainly, if fuel prices continue to climb higher, that can impact discretionary income. When I get to the convenience store space, my history would tell me that as price goes up, there's actually an environment where TRIPS ACTUALLY GO UP. SO YOUR CONVENIENCE STORE CONSUMER THAT'S GETTING GAS, THEY MAY NOT BE FILLING THE TANK EVERY TIME THEY GO IN. AND SO WE'VE ACTUALLY SEEN TRIPS TICK UP OVER THE LAST FEW MONTHS IN CONVENIENCE STORES. THERE IS AN INFLATION POINT THERE, THOUGH. I THINK AT SOME POINT WHEN, YOU KNOW, FUEL PRICE WOULD GET, YOU KNOW, PRETTY HIGH, THEN YOU SEE IT REALLY BE A DISCRETIONARY INCOME ISSUE. Right now, I think the consumer's been very resilient across convenience, across food service. And so, you know, we anticipate they'll continue to perform that way. And, you know, we're looking forward to the fourth quarter.

Got it. My follow-up, just on the comment you made about the independent, I mean, your case growth very strong at the 7% range. And you seem confident sustaining that in the fiscal fourth quarter. I think you said April was similar to recent months, and I assume, therefore, in that range. But just wondering, who do you think you're taking share from, whether it's the large national peers or perhaps the big three are taking from the rest of the industry, which has kind of been the investment thesis behind the food service distribution segment more broadly? Thank you.

Yeah, I think from, you know, who are we taking it from? You know, pretty hard for us to tell. You know, I think from my perspective, it's, you know, we're really focused on gaining share in each and every customer that we service. And we saw that in the penetration numbers. You know, so some of that's certainly coming from specialty players. Some of that might be coming from, you know, bigger competitors or even smaller. So really, really hard for me to tell there. You know, and I think for us, it's really focusing in on our brands, focusing in on the core competency that we have. And, you know, I call out one other thing that I think has really helped us gain share, and that's our tech stack around customer-facing ordering. I called that out in the prepared remarks. And I think our relationship with our customer, both the physical relationship with our rep and the digital relationship we have with them in customer first, has really helped our penetration. It's helped us gain share. And, you know, we see that as being a big lever to pull in the future.

Thank you.

Thank you. And we'll move next to Brian Harbor with Morgan Stanley. Please go ahead. Your line is now open.

Yeah, thanks. Good morning. Scott, I guess just following up on that, kind of the prior comments on convenience stores, what does penetration there look like?

lately i guess you know if you sort of separate out the the new customer ones which have certainly helped how would you describe that in the convenience segment it's a really good question convenience is a little different than i would say you know traditional food service because in convenience you really have kind of a primary supplier so you don't really share between you know like in food service you might have two or three broad liners in an account. And convenience, you normally have a primary supplier that is doing, you know, the broad, you know, vast majority of the goods. Now, where you might have penetration is in food service. You might have an external vendor there. And that's really where we've done a great job of penetrating in our convenience segment. But if I go back, you know, really for the last couple of years, our convenience segment on a same-store basis has greatly outperformed the industry. And I think a lot of that is the tools that we bring to our customers around, you know, product mix, how to set your store, how to grow food service. You know, I think our customer-facing technology and convenience has really helped us outperform the market.

Okay, got it. Thanks. What, you know, what would you, you said you've actually, it seems like done a little bit better with chains, you know, notwithstanding the fact that they have had a tougher traffic quarter as an industry. I mean, anything you call out that's helping there or some of the specific segments you cover? I think some of the segments where you're big actually have been a little bit tougher recently, but what would you attribute kind of the chain success to?

Well, I think it's really two things. You know, one of those is we've partnered, what I'd say, with a couple of the more progressive food service players in the space. So those are people that are continuing to grow, and that's really helped us on a, you know, call it same store basis. And the other one has just been share gain. We've done a really nice job, had a really nice pipeline in the chain space. We see that continuing into 2027. So I think, you know, our ability to resonate with those chain customers and be a great partner has really helped us.

Thank you. We'll move next to Peter Sala with BTIG. Please go ahead. Your line is now open.

Great. Thanks for taking the question. I'm curious if you guys give us a little bit more color on strength and weakness made by cuisine. You know, more specifically on that Italian segment, if you're seeing any sort of major changes at all. And then I have a follow-up. Thanks.

Sure. When we're talking about the Italian segment, obviously, if you look at some of the publicly reporting chains, you know, pizza and Italian has been, you know, the, the growth has been a little muted as of late. Um, when I look internally at the company, uh, we continue to grow share of pizza and Italian. Uh, and I think everybody knows that's a, you know, a really big, strong part of our business. It's interesting. One of the places we're growing it is really outside of traditional pizza and Italian locations. We're growing pizza and Italian in bar and grill. That's been pretty prevalent as of late. We're growing that in our convenience segment, both coming from food service and from our convenience from Cormark. So we're holding our own in pizza and Italian, although it's a segment that's been a little more challenged. Where we're seeing really nice growth is I'd say some of these other specialty segments. We've seen really nice growth in our Asian segment, continue to see market share gains in our Hispanic segment. And then I called it out, but one of the biggest share gain areas we have in food service right now is sales into convenience. And so the share gains we have there have been very significant. And so that's also been a big driver for us as well.

Great. And then just curious, you know, there's been a lot of discussion in the industry around GLP-1s and the impact. I'm curious if you guys have any thoughts on that, if you're seeing any sort of impact that there seems to be, or if you're seeing any sort of changes in behavior among the restaurants and what they're purchasing that would indicate there's any sort of change in behavior.

Yeah, really good question. We follow the statistics, you know, a lot on GLP-1 and eating behavior, and I think certainly in the first year that somebody's on those, there could be a tick down in their consumption across just food in general, and that's not just restaurant convenience, that's across grocery and all channels. But what we're seeing really is, you know, there's a little bit of compression on snack and candy in the first year, but then that consumer James Meeker & seems to bounce right back and go back into those you know snack and candy items in the restaurant space there's certainly a focus on protein focus on fiber. James Meeker & You know, we are seeing in a demand for smaller portions in some places. James Meeker & We see more to go containers so we're selling more containers. James Meeker & You know, so really that I think there's been some behavior shift, I think. That's one of the reasons the independent restaurant is done so well, is they're able to react to those things, change menus, change pricing fairly rapidly. And I think they've been able to react to that behavior really well.

Thank you very much.

Thank you. And we'll move next to Daniella Gargiulo with Bernstein. Please go ahead.

Thank you. I would like to ask a couple of strategic questions. So the first one is on your M&A pipeline and potential future. So in your framework, you're highlighting pursuing transformational opportunities. And recently we've seen two major players acquire cash and carry business and provide a more vertical integration through the customer lifecycle. So Scott, I'm wondering if this is a strategy that you will be entertaining, why or why not?

Well, I would say, first off, we spent a lot of time in our investor day outlining, you know, our M&A strategy. And certainly our M&A strategy is really focused around broad line food service. And I think CashWay is a great example of that. I think Chaney was a great example of that. And we see that, you know, we continue to have a pipeline of opportunity in that broad line food service. You know, there's probably some tangential things around food service that, We continue to look at whether that being in the protein space, the seafood space. So we certainly see opportunity in that broad line food service space. In convenience and in specialty, we made a small acquisition last year in the convenience space. Certainly we'll continue to look at opportunities there. But at the end of the day, our core focus is broad line food service. And we think that's the field that we want to play in.

Great, thank you. And then on the strength that you're seeing on the chain business, I was wondering if you can expand a little bit what is causing the incremental focus on the chain business and whether you think this is a strategic fit for you, given that it will be a potentially lower margin business. Thank you.

No, I wouldn't say there's been any strategic shift. The chain business has been an important part of our portfolio for a long time. are independent to chain mix. We're about 40% or so independent, about 60% chain. So again, in a really balanced portfolio, we are consistently growing independence faster than we are growing chains in food service. And that's obviously been a calling card of ours. But certainly when a big portion of your sales are chain, we are just as focused on growing that as well. So I wouldn't say there's been any shift in focus. I would say that we are resonating with the customer base in both those segments and are able to gain share. So I'm really happy with how our sales force is performing in both those areas.

Thank you.

Thank you. And we'll move next to Karen Holthaus with Citi. Please go ahead. Your line is now open.

Great. Thank you for taking the question. A couple on the convenience side of things. Some of the packaged food companies have started to talk about understanding pushback to inflation in the grocery aisle and proactively actually decreasing prices on some things. Are you seeing anything similar play out on more of the single-serve convenience side of things?

No, we've not seen any deflationary noise at all as far as the convenience segment. And I would say historically, we don't see actual price deflation. What we see happen in the convenience segment is we would actually see manufacturers discount. So they would discount at point of sale. It really has no impact on us or our margins. But they would go out and run promotional activity in the field that would lower the end cost of goods to the consumer. And so we have seen that activity probably tick up a little bit. Wouldn't surprise me if that continues to go on, but really doesn't have any impact to us from a revenue or profit standpoint.

And then just looking out over, you know, call up in excess of 12 months, is there anything that should be on our radar for incremental new customers that might be onboarded, specifically the convenience side?

Oh, specific convenience. We called out in the prepared remarks. I mean, obviously we will lap the Loves and Race track next year. We have a really nice pipeline. We've picked up or haven't picked up, but we have a couple other customers that we will onboard. And we do have a couple of customers that we will offboard in the course of the next, you know, call it six to 12 months. We have had some competitive reaction and our competitors have you know, put a little pressure on the competitive market. But I would say overall, the setup for convenience for 2027 is really strong. Their pipeline is really strong. And, you know, these customer shifts that I'm talking about are much smaller in magnitude than a Loves or a Racetrack. So their setup is really good.

All right, great. Thank you.

Thank you. And once again, if you would like to ask a question, please press the star and one on your telephone keypad now. And we'll take our next question from Jacob Aiken Phillips with Milius Research. Please go ahead. Your line is now open.

Hey, good morning. I was just curious if you could talk about the pipeline or just conversations you're having on the convenience segment with potential customers, and then how much of your food service capabilities or your broader PSG1 capabilities impact those conversations?

No, that's a really good question, Jacob. And I said in the prepared remarks, I think the food service, I mean, the convenience segments, I guess, core competency around food service over the past three years has increased dramatically. You know, the product mix that we offer in our opcos, the turnkey solutions we offer in our opcos, and then I would say the knowledge of that organization just around food. has certainly been a big feather in our cap as far as, you know, customer interaction. You know, at the end of the day, I mean, we've got to be a great partner. We've got to be a really efficient distributor. And we've got to be able to supply the full basket of goods. But I think having that core competency around food service has certainly helped in their negotiations on new chains and account wounds.

And then a question on Cheney, and don't worry, it's a top-line question. Just thoughts on putting PFT private label into Cheney or taking some of Cheney's private label, where you think the opportunities are there and how we should think about that going forward?

Well, I see it going both ways. We have already taken a couple of Cheney's private labels and started to roll those out across the broader PFT organization. And we are just really, you know, we've been evaluating the labels that we would, you know, put into the Chaney organization as well. So I think we're really well positioned to do that. You know, I would just take a step back and say, you know, I think we talked about during the acquisition, Chaney's brand penetration was in that, you know, 15 to 20% range. We just, you know, had a record brand penetration in the, we'll call it legacy food service segment at 54%. So combined, we're now, if we were going to reset a target, we'd be right at 50% in brand cases to independence. And that's a number that I think we can grow, and I think Cheney will be a big portion of that growth.

Got it. Thank you.

Thank you. At this time, this concludes our question and answer session. I will now turn the meeting back to Bill Marshall.

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