• Total Net Sales Growth: 9.4% increase in the fiscal second quarter.
• Organic Independent Restaurant Case Volume Growth: 5% in the quarter.
• Adjusted EBITDA Growth: 22.5% increase to $423 million.
• Net Income: $42.4 million for the fiscal second quarter.
• Diluted Earnings Per Share: $0.27; Adjusted diluted EPS: $0.98, an 8.9% improvement year-over-year.
• Operating Cash Flow: $379 million in the first six months of fiscal 2025.
• Free Cash Flow: Approximately $175 million after $204 million in capital expenditures.
• Foodservice Segment Adjusted EBITDA Growth: 29.4% in the quarter.
• Convenience Segment Adjusted EBITDA Growth: 28.5% in the quarter.
• Vistar Segment Case Growth: Low single-digit increases in key channels.
• Fiscal Year 2025 Net Sales Guidance: $63 billion to $64 billion.
• Fiscal Year 2025 Adjusted EBITDA Guidance: $1.725 billion to $1.8 billion.

• Warning! GuruFocus has detected 7 Warning Signs with PFGC.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Performance Food Group Co (NYSE:PFGC) reported a 9.4% increase in total net sales for the fiscal second quarter, driven by both organic growth and contributions from recent acquisitions.
• The company achieved a 5% organic independent restaurant case volume growth, indicating strong performance in its core segment.
• PFGC's Convenience segment showed resilience with positive total volume growth, outpacing the industry in key product categories despite challenges.
• The integration of recent acquisitions, Cheney Brothers and Jose Santiago, is progressing well, contributing positively to both top and bottom lines.
• PFGC's adjusted EBITDA increased by 22.5% to $423 million, surpassing the upper end of their guidance range, showcasing strong operational execution.

Negative Points

• The Vistar segment faced challenges with lower foot traffic and customer-specific issues, impacting its performance despite some positive case growth.
• PFGC's leverage increased due to the Cheney Brothers acquisition, pushing it above the target range, necessitating a focus on debt reduction.
• The company anticipates continued challenges in the Vistar segment for the rest of the fiscal year, despite easier comparisons.
• PFGC's Convenience segment is still facing significant inflationary pressures, particularly in candy and snacks, affecting overall performance.
• The company noted that achieving the 6% independent case growth target for the fiscal year would require some improvement in the macroeconomic environment.

Q & A Highlights

Q: Can you elaborate on which segments are contributing to the higher sales outlook and any signs of stabilization in challenged accounts? A: Scott McPherson, Executive Vice President, Chief Field Operations Officer, noted that independent growth trends are strong, with a 7% increase in headcount and 5% in new accounts. The chain accounts are also rebounding. On the Convenience side, they continue to outperform the macro environment. Patrick Hatcher, CFO, added that Vistar will face challenges but expects growth in several channels.

Q: Could you provide more details on cost of goods optimization and procurement efficiencies? A: Scott McPherson explained that while cost optimization has always been a focus, recent efforts have been more collaborative across segments, helping to drive sales growth and optimize costs.

Q: What is the underlying momentum in the Foodservice business, and how confident are you in achieving 6% independent organic growth for the year? A: George Holm, CEO, acknowledged that achieving 6% growth will require a 7-8% increase in the back half of the year. He expressed confidence based on internal metrics and market information, although some help from the industry is needed. The company is seeing better SKU penetration and expects improvement in the macro backdrop.

Q: Can you discuss the impact of inventory holding gains in the second quarter and expectations for the rest of the year? A: Patrick Hatcher stated that there were some inventory holding gains in Q2, but they were managed and not outsized. For the back half of the year, minimal holding gains are expected, with overall gains being relatively immaterial.

Q: How are you approaching new restaurant formation and customer acquisitions given the current environment? A: George Holm noted that new restaurant formation continues, with many independent restaurants opening. The company is also seeing growth in certain chains. Despite higher build costs and traffic challenges, the outlook for new customer acquisitions remains positive.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.