Q2 2022 Performance Food Group Co Earnings Presentation

Speaker 1: results this morning which can be found in the investor relations section of our website at TFGC.com.

Which can be found in the Investor Relations section of our website at <unk> Dot com.

During our call today, unless otherwise stated we're comparing results to the same period in our fiscal 2021 fiscal second quarter. Additionally, occasionally during our call today as noted we are comparing results to the same period in 2020 fiscal second quarter.

Speaker 1: During our call today, unless otherwise stated, we are comparing results to the same period in our fiscal 2021 fiscal second quarter. Additionally, occasionally during our call today, as noted, we are comparing results to the same period in our 2020 fiscal second quarter. The results discussed on this call will include gap and non-gap 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.

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.

Speaker 1: 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 FCC 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.

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.

Speaker 2: Thanks, Bill. Good morning, everyone, and thank you for joining our call today. I'm pleased to be able to share PFG's outstanding second quarter results and discuss their strategic goals and objectives.

Thanks, Bill good morning, everyone and thank you for joining our call today I am pleased to be able to share Pmt's outstanding second quarter results and discuss the strategic goals and objectives.

Speaker 2: We had another active quarter which included the announcement of a new management structure.

We had another active quarter, which included the announcement of a new management structure continued integration of core Mark in the foodservice acquisition in the southeastern U S.

Speaker 2: continued integration of Coremark and the food service acquisition in the southeastern U.S.

Speaker 2: I will address each of these items in turn and provide additional color on the direction of our company and where we are headed.

I will address each of these items in turn and provide additional color on the direction of our company and where we're headed.

Speaker 2: Last quarter, we discussed our vision to transform PFG beyond a traditional food service distributor into a leader across a variety of channels and product offers.

Last quarter, we discussed our vision to transform PFG beyond the traditional foodservice distributor into a leader across a variety of channels and product offerings.

Speaker 2: During the past few months, we have aligned our operating management and report structures with this vision.

During the past few months, we have aligned our operating management and reporting structures with this vision.

Speaker 2: We believe this new structure will increase our speed and agility, capturing new lines of business and our cross-selling capabilities.

We believe this new structure will increase our speed and agility, capturing new lines of business and our cross selling capabilities.

Speaker 2: We have already seen the cross-selling between food service and convenience bear fruit, which I will discuss in more detail.

We are already seeing the cross selling between foodservice and convenience bear fruit, which I will discuss in more detail shortly.

Speaker 2: As you saw in this morning's earning release, we have also realigned our reporting segments to reflect our strategy and management structure. We will now report three segments.

As you saw in this morning's earning release, we have also realigned our reporting segments to reflect our strategy and management structure. We will now report three segments foodservice.

Speaker 2: Food Service, Convenience, and VISTAR. The convenience segment includes all the business that came with E.B. Brown and Coremark acquisition.

<unk> service convenience and Vista the.

The convenience segment includes all of the business that came with eby Brown and core Mark acquisitions.

Speaker 2: The Distart segment will reflect the legacy Distart channels, including theater, then the office coffee, retail value stores and corrections. There were no changes to our-

<unk> segment will reflect the legacy <unk> channels, including theater vending and office coffee retail value stores and correction there were no changes to our foodservice segment.

This new reporting structure, not only aligns our organization with our strategic vision.

Speaker 2: This new reporting structure not only aligns our organization with our strategic vision, but also gives our investors additional financial information.

But it also gives our investors additional financial information.

Speaker 2: and a deeper looking to business trends across different units.

And a deeper looking to business trends across different units.

Speaker 2: One of the units is our combined convenience or distribution operation.

One of the units as our combined convenience store distribution operations.

Speaker 2: This includes the Choirmark Organization which required in September of last year and the EV Brown business which we acquired almost three years.

This includes the core Mark organization, which we acquired in September of last year, and the Eby Brown business, which we acquired almost three years ago.

Speaker 2: Over the past five months, these two entities have worked quickly to come together as united time. In our efforts to build upon their combined strengths in the convinced or space.

Over the past five months. These two entities have worked quickly to come together as United climb in our efforts to build upon their combined strengths in the convenience store space.

Speaker 2: As we discussed in our last earnings call, we're off to a fast start with quick business wins across traditional convenience business as well as food service into convenience.

As we discussed in our last earnings call, we're off to a fast start with quick business wins across traditional convenience business as well as foodservice into convenience.

Speaker 2: Today I can announce that we are in discussions with several additional customers to bring new business in this space. When we announced the Coremark acquisition, we had very high expectations for the value we would create by bringing that business to PFG. I am pleased to say our expectations are being realized and the future looks very bright.

Today I can announce that we are in discussions with several additional customers to bring new business in this space when we announced the core Mark acquisition.

We had very high expectations for the value, we would create by bringing that business to PFG I am pleased to say our expectations are being realized and the future looks very bright.

Speaker 2: This could not be possible without the dedication and hard work of so many talented associates.

This could not be possible without the dedication and hard work of so many talented associates and a strong management team, including those who are new to the organization from core Mark as well as our EBIT colleagues. The two teams have come together to form a cohesive unit and as we had expected have proven to be an excellent.

Speaker 2: including those who are new to the organization from Cornmark, as well as our EBITALIS.

Speaker 2: The two teams have come together to form a cohesive unit, and as we had expected, have proven to be an excellent cultural fit. The integration has gone smoothly, and we're ahead of schedule, and several areas including finance, procurement, HR, and I.

Cultural fit the integration has gone smoothly and we are ahead of schedule in several areas, including finance procurement.

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Speaker 2: The story is very similar to our success with Reinhardt, which we are familiar with. On many occasions you have heard me speak about our excitement with Reinhardt, I'm pleased to say that our enthusiasm remains high. Last quarter we highlighted the pace of independent growth that Reinhardt has experienced.

The story is very similar to our success with Reinhart, which we're familiar with on many occasions you have heard me speak about our excitement with Reinhart I am pleased to say that our enthusiasm remains high last quarter, we highlighted the pace of independent growth that rain Rinehart has experienced which.

Speaker 2: which is continued to outpace the strong results from our legacy performance food service.

Which has continued to outpace the strong results from our legacy performance foodservice business.

Today, I would like to highlight another encouraging aspect of the success with Reinhart.

Speaker 2: Today I would like to highlight another encouraging aspect of the success with Reinhardt. Our success includes services...

Our success in foodservice was driven by many initiatives. However, one of the most important elements of the strategy is growth of our PFG performance brands within the independent segment.

Speaker 2: However, one of the most important elements of the strategy is growth of our PFG performance brands within the independent segments.

Speaker 2: Decycuality brands are important for our customers as they provide a differentiated offering at a reasonable price. It's also important for PFG as it separates us from the competition and comes at a higher margin per case than the national brand.

These high quality brands are important for our customers as they provide a differentiated offering at a reasonable price.

It's also important for PFG as it separates us from the competition that comes at a higher margin per case than the national brands.

Speaker 2: Our performance plans today represent a significant portion of all cases sold to independent rest.

Our performance brands today represent a significant portion of all cases sold to independent restaurants.

Speaker 2: And while we are seeing success across the company, this is another area where Ryan Hart is going faster than the legacy business.

And while we are seeing success across the company.

This is another area, where reinhart is growing faster than the legacy business.

Speaker 2: There's rewarding the CR strategy play out and inspires us to continue along the growth.

It is rewarding to see our strategy play out and inspires us to continue along the growth path.

We also added to our foodservice business with the acquisition of merchants foodservice at the end of the quarter merchant adds to our foodservice scaling reach billions space in the southeastern United States we.

Speaker 2: We also added to our food service business with the acquisition of merchants food service at the end of the quarter. Merchants adds to our food service, scale and reach, fill you space in the Southeast United.

Speaker 2: We are not providing financial details of the transaction, but historically merchants have operated, and a neat dot margin that would be a credo.

We are not providing financial details of the transaction, but historically merchants has operated at an EBITDA margin that would be accretive.

Speaker 2: We are excited to welcome the merchants' associates to the PFG family and look forward to many years.

We are excited to welcome the merchants associates to the PFG family and look forward to many years of success.

Speaker 2: All together, our food service business is executing at a very high level. Our performance in the independent channel continues to drive our overall segment results.

Altogether, our foodservice business is executing at a very high level.

Performance in the independent channel continues to drive our overall segment results in fact, our market share gains in the independent channel accelerated sequentially.

Speaker 2: In fact, our market share gains in the independent channel accelerate it sequentially from the first quarter to the second quarter compared to two years ago. This included strengthen the pizza, cayenne, spanic, and seafood con.

The first quarter to the second quarter compared to two years ago. This included strengthened the pizza Italian Hispanic and seafood concepts. We are very pleased to see our momentum in foodservice continue particularly in independent restaurants.

Speaker 2: We are very pleased to see our momentum and food service continue, particularly in independent rest.

Speaker 2: Finally, let me comment on our Vistar business before turning it over to Jim, who will provide color on our results and to Manchester.

Finally, let me comment on our Vista, our business before turning it over to Jim who will provide color on our results and financial position.

Speaker 2: As you know, this stars channels were some of the hardest hit areas of the past two years, including significant impact at theater and off.

As you know <unk> channels, where some of the hardest hit areas over the past two years, including significant impact theater.

And office costs.

Speaker 2: I cannot speak highly enough about the effort this organization has put into achieving these results. There are many bright spots at this start, including the areas of retail, corrections, and travel, all of which experienced second quarter 2020 to net sales above 2020 level.

Cannot speak highly enough about the effort. This organization has put.

Into achieving these results there are many bright spots at istar, including the areas of retail corrections and travel all of which experienced second quarter 2022, net sales above 2020 levels.

Speaker 2: We were also very encouraged by the recent trends in the movie theater.

We are also very encouraged by the recent trends in the movie Theater channel.

Speaker 2: While that business is still below levels of two years ago, it experienced significant improvement sequentially, along with a strong box office showing late in the calendar year. While January and February may not see the same level of box office product, we expect the strength to resume in the spring and early summer.

While that business is still below levels of two years ago. It experienced significant improvement sequentially, along with a strong box office showing late in the calendar year.

While January and February may not see the same level of box office product, we expect the strength to resume in the spring and early summer seasons.

Speaker 2: In summary, we have made active in the pursuit of building upon our strength as a food and food service distribution leader. Our underlying path to success is simple.

In summary, we have remained active in the pursuit of building upon our strength as a food and foodservice distribution leader underlying path to success is simple.

Speaker 2: starts with our customers and a relentless focus on helping them.

With our customers and a relentless focus on helping them succeed.

Speaker 2: that has resolved it in significant sales growth, particularly within high margin channels and products.

This has resulted in significant sales growth, particularly within high margin channels and product categories.

Speaker 2: We seek to keep our organization lean and use operating efficiencies to grow ebitast faster than tails and expand our margins.

We seek to keep our organization lean and use operating efficiencies to grow EBITDA faster than sales and expand our margins.

Speaker 2: We then look to reinvest these profits back into the business to produce a sustained cycle of organic growth and for opportunistic M&A. We intend to tightly manage our working capital to generate long-term free cash flow, but the goal of generating high shareholder-repeat-

We then look to reinvest these profits back into the business to produce a sustained cycle of organic growth and for opportunistic M&A, we intend to tightly manage our working capital to generate long term free cash flow with the goal of generating high shareholder return.

Speaker 2: I'll now turn it over to Jim for an update on our fiscal second quarter in financial.

I'll now turn it over to Jim for an update on our fiscal second quarter and financial position.

Thank you George and good morning, everyone. As George mentioned, we are very pleased with all our businesses performed our associates have stepped up to the challenges and they continue to deliver for PFG and our customers.

Speaker 1: Thank you, George. And good morning, everyone. As George mentioned, we are very pleased with how our business has performed. Our associates have stepped up to the challenges. And they continue to deliver for P.S.G. and our customers.

Speaker 1: Organization has thrived during the last two years and we've taken advantage of multiple opportunities.

Organization has thrived during the last two years and we've taken advantage of multiple opportunities.

We have reached the point, where we have turned our attention to producing sizable sales and profit growth.

Speaker 1: We have reached the point where we have turned our attention to producing sizable sales and profit growth.

Speaker 2: Our financial position supports the investments we believe will produce these strong results. Who let me provide an overview of how we stand financially before a quick review of our second quarter results.

Our financial position supports the investments we believe will produce a stronger result.

We provide an overview of how we stand financially before a quick review of our second quarter results.

Speaker 1: I will then finish with our guidance through the third quarter and full year and the assumptions and expectations within those four cases.

I will then finish with our guidance for the third quarter and full year and the assumptions and expectations within those forecasts.

Speaker 1: We ended the quarter with $2.3 billion of total liquidity. Our liquidity position reflects the acquisition of merchants, which we financed with our ABL enclosed on December 31st.

We ended the quarter with $2 $3 billion of total liquidity, our liquidity position reflects the acquisition of merchants, which we financed with our ABL and closed on December 31.

Speaker 1: Well, there's no financial results from merchants to report on our income statement. The balance sheet in cash flow statement fully reflects the addition of that business in the final days of the fiscal quarter.

While there is no financial results for merchants to report on our income statement the balance sheet and cash flow statements fully reflects the addition of that business in the final days of the fiscal quarter.

Turning to cash flow in the first six months of fiscal 2022, we generated approximately $154 million of operating cash flow.

Speaker 1: Turning to cashflow in the first six months of fiscal 2022, we generated approximately $154 million of operating cash.

Speaker 2: The team continues to do a fantastic job managing our working capital position overall. And the uptick in inventory in the quarter was a planned use of cash. And the results of building consumer packaged goods inventory ahead of anticipated price increase.

The team continues to do a fantastic job managing our working capital position overall and the uptick in inventory in the quarter was a planned use of cash and the result of building consumer packaged goods inventory ahead of anticipated price increases.

Speaker 1: I'll talk more about the CPG procurement activity and the impact on our financial results in the moment.

Talk more about the CPG procurement activity and the impact on our financial results in a moment.

Speaker 3: F.G. invested $68.5 million of capital expenditures over the first six months of the year, resulting in positive free cash flow of $85.3 million.

PFG invested $68 $5 million of capital expenditures over the first six months of the year, resulting in positive free cash flow of $85 3 million.

Speaker 3: And with that, let's quickly review some highlights from our fiscal second quarter business performance.

And with that let's quickly review some highlights from our fiscal second quarter business performance as.

Speaker 3: As George mentioned earlier, we have adjusted our reporting structure to align with management changes made in December . And going forward, we will report these three segments, food service, convenience, and Vistar.

As George mentioned earlier, we have adjusted our reporting structure to align with management changes made in December and going forward. We will report these three segments foodservice convenience and <unk>.

Star.

Speaker 3: Vista are represented the non-convenience channels within the prior Vista segment. While our new segment convenience includes the EV Brown and Cormac operation.

This represents the non convenience channels within the prior Vista our segment, while our new segment convenience includes the eby Brown and core Mark operations.

At an enterprise level net sales increased 87, 6% in the quarter to $12 $8 billion driven by a full quarter of <unk> sales results. In addition to inflation driven pricing and a continued recovery in the business environment.

Speaker 3: At an enterprise level, net sales increased 87.6% on the quarter to $12.8 billion. Driven by a whole quarter of Cormarch sales results in addition to inflation driven pricing, and a continued recovery in the business environment.

Speaker 3: Phone case volume increased approximately 40% in the second quarter. In result, 15.5% excluding the contribution from Kormar.

Total case volume increased approximately 40% in the second quarter and was up 15, 5%, excluding the contribution from core Mark.

As a reminder, the high selling price of tobacco products. In addition to high rates of inflation impact the difference between case volume increases in our topline growth.

Speaker 3: as a reminder of the high selling price of tobacco products in addition to high rates of inflation impact the difference between case volume increases and our top line growth.

Speaker 3: In the case of increased 21% in the fiscal second quarter, as we continue to see solid momentum in our independent business.

Independent cases increased 21% in the fiscal second quarter as we continue to see solid momentum in our independent business.

Speaker 3: Tonal PFG growth profit increased 57.7%.

<unk> gross profit increased 57, 7%.

Speaker 3: compared to the prior year of quarter, including the addition of the Cormor business and the independent case growth, which I just mentioned.

Compared to the prior year quarter, including the addition of the core of our business and the independent case growth, which I just mentioned.

Speaker 3: Kormart contributed $245.2 million to gross profit.

Core Mark contributed $245 2 million to gross profit.

Food cost inflation continued to move higher in the quarter, our weighted food cost inflation was about 12, 5% up sequentially as we continued to experience double digit increases in our foodservice commodities, including seafood meat poultry eggs and grocery.

Speaker 3: Food cost inflation continues to move higher in the quarter. Our weighted food cost inflation was about 12.5%. Up sequentially as we continue to experience double digit increases in our food service commodities, including seafood, meat, poultry, eggs, and groceries.

Speaker 3: The rate of inflation was sequentially higher in the second quarter compared to the first quarter across each business segment. However, this star in convenience inflation remains below that scene in the more commodity heavy food service segment.

The rate of inflation was sequentially higher in the second quarter compared to the first quarter across each business segment. However, this star and convenience inflation remains below that seen in the more commodity heavy foodservice segment.

Speaker 3: With that said, we have continued to successfully pass along these increase.

With that said we have continued to successfully pass along these increases.

Gross profit per case was up over 66 cents in the second quarter compared to the prior year period, including the acquisition of <unk>, which contributed approximately <unk> <unk> per day.

Speaker 3: Gross profit per case was up over 66 cents in the second quarter compared to the prior period, including the acquisition of Cornmark, which contributed approximately 12 cents per case.

We have continued to make progress on the labor front and our efforts to reduce temporary and contract workers as we disclosed in the press release. This morning, our temporary and contract labor costs increased $34 million compared to the prior year period.

Speaker 3: We have continued to make progress in the labor front and our efforts to reduce temporary and contract workers. As we just go on as the refresh release this morning, our temporary contract labor costs increased $34 million compared to the prior year period, an $18 million improvement from the first quarter increase.

And $18 million improvement from the first quarter increase to.

Speaker 3: The $34 million includes both direct contract labor costs and associated travel costs.

The $34 million includes both direct contract labor costs and associated travel costs.

Speaker 3: As we discuss last quarter, we will not see the full benefit of those cost reduction immediately. As a reduction in temporary workers is largely replaced by full-time associates.

As we discussed last quarter, we will not see the full benefit of those cost reductions immediately as a reduction in temporary workers has largely replaced by full time associates.

Speaker 3: However, over time, we should realize savings from these initiatives as full-time worker productivity improves.

However overtime.

Should realized savings from these initiatives as full time worker productivity improves.

Speaker 3: We remain optimistic that the labor situation is headed in the right direction, and we expect to be in a much better position by the end of the fiscal year.

We remain optimistic that the labor situation is headed in the right direction and we expect to be in a much better position by the end of the fiscal year.

In the second quarter PFG as reported net income of $8 $4 million adjusted EBITDA increased 52, 6% to $241 1 million.

Speaker 3: In the second quarter, PFG had reported net income of $8.4 million. Adjusted EBITDA increased 52.6% to $241.1 million.

Speaker 3: Deluted earnings per share was five cents in the second quarter, while adjusted deluted earnings per share was 57 cents, and increased to 62.9% year over year.

Diluted earnings per share was <unk> <unk> in the second quarter, while adjusted diluted earnings per share was <unk> 57.

An increase of 62, 9% year over year.

Speaker 3: Let's close with our outlook for the remainder of fiscal 2022.

Let's close with our outlook for the remainder of fiscal 2022.

Speaker 3: As we have discussed, we had a very strong second quarter. It was net sales coming in at the high end of our expectation. And adjusted even better the-

As we have discussed we had a very strong second quarter with net sales coming in at the high end of our expectations.

And adjusted EBITDA better than anticipated.

Speaker 3: The Better Than Forecast, a Jeff Set, EBITDA was a result of strong underlying business fundamentals, a slightly better than expected labor market, and procurement gains in several consumer package goods categories.

The better than forecast adjusted EBITDA was a result of strong underlying business fundamentals.

Slightly better than expected labor market and procurement gains and several consumer packaged goods categories.

Speaker 3: We are increasing our full year outlook to incorporate the better business trends.

We are increasing our full year outlook to incorporate the better business trends.

We expect third quarter net sales to be in a range of $12 nine to $13 1 billion.

Speaker 3: We expect third quarter net sales to be an arrange of $12.9 to $13.1 billion.

Speaker 3: Adjusted EBITDA for the third quarter has anticipated to be within a $220 to $230 million range.

Adjusted EBITDA for the third quarter is anticipated to be within a $220 million to $230 million range.

Speaker 3: For the full year, 2022, we look for total net sales to be in a 50 to $51 billion rate.

For the full year 2022, we look for total net sales to be at a $50 billion to $51 billion range.

Speaker 3: A $500 million increase for my prior outlook. For just a debudal we anticipate a $970 to $990 million range. An increase of $30 million on both the bottom and the top end compared to our prior guide.

A $500 million increase from our prior outlook for adjusted EBITDA, We anticipate a $970 to $990 million range.

An increase of $30 million on both the bottom and the top end compared to our prior guidance.

Speaker 3: Our guidance assumes a slow but steady improvement in the labor market and efficiency gains from full-time workers to accelerate in the fourth quarter of the fiscal year.

Our guidance assumes a slow but steady improvement in the labor market and efficiency gains from full time workers to accelerate in the fourth quarter of the fiscal year.

Speaker 3: We have also included a small benefit for the six months we will own merchants in the fiscal year.

We have also included a small benefit for the six months, we will own merchants in the fiscal year.

In summary, we are extremely pleased with the first half of our fiscal year, we posted a strong quarter, which has fueled optimism for the back half of the year.

Speaker 3: In summary, we are extremely pleased with the first half of our fiscal year. We posted a strong quarter, which is fueled optimism for the back half of the year. This is reflected in the increase to our full-year guidance ranges, both on the top line, as well as profit.

This is reflected in the increase to our full year guidance ranges both on the top line as well as profit.

Speaker 3: Our company is positioned to build upon our momentum driven by our constant focus on our existing customer base while adding high-profit new accounts across channels.

Our company is positioned to build upon our momentum driven by our constant focus on our existing customer base.

Adding high profit new accounts across channels.

Speaker 3: The Cornmark integration has proceeded very well, both culturally and from a business perspective.

The core Mark integration has proceeded very well, both culturally and from a business perspective.

Speaker 3: We expect these initiatives to reduce sales growth ahead of the industry average and long-term margin expansion.

We expect these initiatives to produce sales drove ahead of the industry average and long term margin expansion.

Speaker 3: Our balance sheet is strong, which we believe gives our company the flexibility to invest in value creating projects to drive organic growth.

Our balance sheet is strong, which we believe gives our company the flexibility to invest in value, creating projects to drive organic growth.

Speaker 3: Associates across our organization have been working tirelessly to improve business results and at the same time They're making PFG a fantastic place to work through their dedication to each other and those we serve

Associates across our organization have been working tirelessly to improve business results and at the same time, they're making PFG a fantastic place to work through their dedication to each other and those we serve.

Speaker 3: We appreciate your interest in performance food group. And with that, we'd be happy to take your question.

We appreciate your interest and performance food group and with that we'd be happy to take your questions.

Speaker 1: At this time, if you'd like to ask a question, please press star one now on your telephone keypad to withdraw yourself from the queue you may press the pound key. Once again, that is star one to ask a question. We'll take a question. I'm gonna say something new to you. I'm work just a few? times about for you.

At this time, if you would like to ask a question. Please press star one now on your telephone keypad to withdraw yourself from the queue. You May press. The pound can you once again that is star one to ask a question.

We'll take a question.

From Mark Carden of UBS.

Speaker 1: Good morning. Thanks a lot for taking my questions. So overall, it sounds like your efforts to grow your workforce are progressing quite nicely. When you think about your more permanent workforce, are you expecting structural wage pressure to see any steeper than what you may have expected three months ago, or you started to see some stabilization there?

Good morning, Thanks, a lot for taking my questions. So overall it sounds like your efforts to grow your workforce are progressing quite nicely. When you think about your more permanent workforce are you expecting structural wage pressures to be any different than what you may have expected three months ago are you starting to see some stabilization there.

Speaker 3: Yeah, this is Jim. No, I don't expect him to be any steeper than we saw three months ago. We've done a whole lot of work.

Yeah. This is Jim no I don't expect them to be any steeper than we saw three months ago, we've done a whole lot of work.

Speaker 3: I'd say appropriate work to get wages right, market by market, and make sure that we've done what we need to do to be able to recruit the right people. I really think now it's about given the new folks that we've brought into our workforce time to learn the process, be trained, and start to see some good solid productivity improvements. So we feel good about where we're headed. We've got good work to do, and I think those things will all pay off.

And I'd say appropriate work to get wages right market by market and make sure that we've done what we need to do to be able to recruit the right people I really think now it's about given the new folks that we brought into our workforce time to learn the process be trained and start to see some good solid productivity improvements. So we feel good about where we're headed.

We've got good work to do.

I think those things will pay off.

Great and then as a follow up how impactful is omicron bent to your business and how does it compare to what you saw at Delta and then related to that how has it impacted your staffing both <unk> and <unk> to date.

Speaker 1: Great. And when it's a follow up, how impactful is on the Chrome did your business? And how does it compare to what you saw with Delta? And then related to that, how has it impacted your staffing both in 2Q and 3Q today?

Speaker 2: Yeah, I would say that through the Delta period of time.

Yes, I would say that through the <unk>.

To the Delta period of time.

Speaker 2: It probably had maybe a little less impact on labor.

It probably had maybe a little less impact on labor.

Speaker 2: and maybe a little bit less impact as well on the marketplace. But the on the crown is so quick.

And.

Maybe a little bit less impact as well.

The marketplace, but the omnicom is so quick.

Speaker 2: And what we saw was a good deal of asymptism because of sickness, but fortunately, they were getting back faster also than before.

And what we saw was.

Good deal of SPT isn't because of sickness, but fortunately they were getting back faster also than before.

Speaker 2: And that helped to alleviate it. Also, it helped that it came in January , which is a lower volume time of year anyway. So, it helped that it came in January , which is a lower volume time of year anyway.

And.

That helped to alleviate it also it helps it it came in January which is a lower volume times of the year anyway.

Great. Thanks, so much guys.

We will take our next question from Alex Slagle of Jefferies.

Speaker 1: We'll take our next question from Alex Sleggle of Jeffery.

Speaker 2: Thanks, good morning, great to see you. Things come together so open, whether it's the horn.

Thanks, Good morning, great to see things coming together.

And weathering the storm.

Speaker 2: It's curious if you could provide some more color on how the food service sales have been the convenience channel of trended recently more broadly and for you directly as we've kind of been progressed through this amacron and emerge back to normalcy in some parts.

Was curious if you could provide some more color on how the foodservice sales within the convenience channel trended recently more broadly for you directly is and we've kind of progressed through this.

Ron and emerge back to normalcy in some parts.

Speaker 2: Well, we've seen a good surge in our from service business and the convenience just really led by a couple of accounts. We still have a good bit of work to do.

Well, we've seen a good surge in our foodservice business and the convenience.

<unk> really led by by a couple of accounts, we still have a good bit of work to do.

I did.

Speaker 2: here from Scott McPherson that runs our convenience area that actually January was the highest increase in non tobacco sales for Cornmark that he can remember and he's been there close to 30 years so it's going well we just have a lot of work to do to get it where we where we need to go

Hear from Scott Macpherson that runs our our convenience area that actually January was the highest increase in non tobacco sales for core mark that he can remember.

And he has been there close to 30 years, so it's going well.

We just have a lot of work to do to get it where we where we need to go.

Speaker 4: Okay, and with the core mark, I mean anything surprising you about the integration and the business that you've had some more time to see them gel together with the legacy businesses and see it in action. I know your initial thoughts were fairly positive, but curious if you learned anything new or got any more color on.

Okay.

The core Mark I mean anything surprising about the integration and the business that as you add some more time to see them gel together with.

The legacy businesses see at match and I know your initial thoughts were fairly positive, but curious if you've learned anything new.

And any more color on that.

Speaker 2: Well, culturally they're doing really well. The two companies that have come together with very few issues. And then unlike with Reinhardt, where there were probably more different to a certain more product difference.

So culturally they're doing really well the two companies have come together.

With very few issues and then unlike with Reinhart, where there were covering more differences certainly more product differences.

Speaker 2: We've been able to get the integration around HR finance.

We've been able to do.

The integration around HR and finance.

Speaker 2: the chairmen faster than we were able to do that with Reinhart. We really needed to take a little bit more care. So we're very pleased and we're also very pleased just with the staffing and the management at Cornmark.

Procurement faster than we were able to do that with reinhart will be.

Really needed to take a little bit more care. So we're very pleased and we're also very pleased just with the staffing and the management.

At core Mark.

Got it.

Yes.

Speaker 4: follow for just a little weather on the productivity commentary that you provide earlier. Yeah, I know that.

Forget whether on the productivity.

Commentary that you provided earlier.

Yes.

Speaker 4: Definitely a pressure. I don't know if you have anything on the magnitude of that. It's how we should think about that. It's worth it.

Definitely pressure I don't know if you have anything on the magnitude of that impact how we should think about that as well.

Sure.

Building out our models.

Speaker 3: I think it probably is anyone would expect when you bring a large number of new people into the supply chain. We follow a lot of process. There's good discipline. We want everybody to work safe and be productive. And I think it's learning the processes is what I'm talking about that takes some time. We are right on track. I would say that I'm really pleased with our supply chain leadership all the way down to supervisors on the dock and our truck drivers are doing.

I think it would probably be as anyone would expect when you when you bring a large number of new people into the supply chain. There as we follow a lot of processors. Good discipline, we want everybody to work safe and be productive and I think it is learning the process is what I'm talking about that takes some time.

We are right on track I would say that I'm really pleased with how our supply chain leadership, all the way down the supervisors on the dock and our truck drivers of billings.

Speaker 3: It's, I think the magnitude comment would be more about time that we're on track and that was all contemplated and the guidance was provided.

It's.

I think the magnitude comment would be more about time that we are on track and that was all contemplated in the guidance we provided.

Adam Thank you very much.

Speaker 1: We'll take on next question from Edward Kelly of Wells Fargo.

We'll take our next question from Edward Kelly of Wells Fargo.

Speaker 2: Hi, morning. George Jim Bell, everybody. Gratz, when I, you know, really saw a quarter here, I wanted to ask you first just a follow-up on the labor cost side. You know, this is...

Hi, Good morning, George Jim Bye everybody.

Perhaps on a.

A really solid quarter here I wanted to ask you first just a follow up on on the labor cost side.

This is the labor inflation generally right is something that I think we've heard a lot of concern about from the investor base.

Speaker 2: Labor inflation generally writes something that I think, you know, we've heard a lot of concern about from the investor base.

Speaker 2: We heard from one of your big competitors yesterday that, you know, they just don't believe underlying labor inflation is going to be that bad, but that doesn't really seem the job would sort of like.

From one of your big competitors yesterday that.

They just don't believe underlying labor inflation is going to be that bad but that.

Doesn't seem to Jive with sort of like what you.

Speaker 2: hear about warehouse worker pay, driver pay, et cetera. So in my question for you is, you know, what are you seeing if we sort of like, you know, forget about the temporary cost, but underneath of that, like what are you seeing from a wage inflation standpoint in your workforce? How does that compare to, you know, what it has been historically and where do you see that going? Like is this a headwind that we should be concerned about?

Here about warehouse worker pay tracker pay et cetera, So and my question for you is what are you seeing if we sort of like forget about the temporary cost but underneath of that like what are you seeing from a wage inflation standpoint.

Your workforce, how does that compare to what it has been historically and where do you see that going like is this a headwind that we should be concerned about.

Speaker 3: Yeah, so Ed, thanks for the question. We have set all along that some of us would be structural and some of the increase would be transitory. We've never thought it would all eventually go away. And clearly that's going to be the case. We think it's manageable. We think we've found...

Yes.

So ed Thanks for the question, we have said all along that some of this would be structural and some of the increase would be transitory. We've never thought it will eventually go away.

And clearly that's that's going to be the case, we think it's manageable.

We think we found the right balance.

Speaker 3: and how we pay our folks and our supply chain.

And how we pay our folks in our supply chain.

Speaker 3: You know, I think the best way to quantify it for you is

I think the best way to to quantify for you is.

Speaker 3: How we feel about it has been specifically quantified in our guidance, and that's what informed our guidance. I'm not a spot where I'd put out a number right now, but...

How we feel about it has been specifically quantified in our guidance and that's what informed our guidance.

Spot, where I would put out a number right now but.

Speaker 3: I think we've seen most of it and we've absorbed it. But at the end of the day, we're going to keep up with where we need to be to make sure we're able to recruit, hire and retain good solid folks to work for PFG. And we're doing that right now.

I think we've seen most of it and we've absorbed it but at the end of the day, we're going to keep up with where we need to be to make sure we're able to recruit hire and retain.

Good solid folks to work for PFG, and we're doing that right now.

Speaker 2: Okay, and then I wanted to ask you about, you know, still rates and where you stand, you know, currently with still rates, particularly as...

Okay, and then I wanted to ask you about.

Fill rates and where you stand currently with fill rates, particularly as we look to getting into what I think we all hope will be a very strong sort of spring summer period.

Speaker 2: you know, we look to getting into what, you know, I think we all hope will be a very strong sort of spring summer period. Do you think the industry will remain challenged during this period? And do you think that you're in a position where you can continue to accelerate share gain during this period if the opportunity arises?

Do you think the industry will remain challenged during this period and do you think that year in a position.

Where you can continue to accelerate share gains during this period, if the opportunity arises.

Speaker 3: Yeah, this George, of course, we always think we can continue to increase our share.

Yes. This is George of course, we always think we can continue to.

Increase our share.

Speaker 2: We're seeing in the food service part of our business, the inbound filerates continue to get better.

We're seeing in the foodservice part of our business to inbound fill rates continue to get better.

Speaker 2: And it's been great to see we're doing particularly well the center of the plate. And we're well into the 90%.

It's been great to see we're doing particularly well with center of the plate.

We're well into the 90%.

For inbound Phil.

Speaker 2: When you get to our convenience business and our business and more with CPG companies, I guess I would say, we're not seeing much in the way of improvement yet. And all we can give for guidance with that is what we're being told and what we're being told is that it will gradually get better, but it's gonna be around for a while. So, if you set shoes to for a while and givezek? with that kuru then don't forget the

Fill rates when you get to our convenience business in our <unk> business.

More with CPG.

Companies I guess I would say.

We're not seeing much in the way of improvement yet.

All we can give for guidance with that is what we're being told and what will be and told us that it will gradually get better, but it's going to be around for a while.

The shortages.

Speaker 2: I guess that was really kind of asking George about your outbound rates. Where you stand from a labor perspective and if we're going to have a good strong spring summer, are you ready? Are you more ready than others? I guess that's really where I was kind of asking.

I guess that was really kind of asking Georgia about your outbound rates and where you stand from a labor perspective.

Aspect, there and if we're going to have a good strong spring summer are you ready.

Are you more ready than others.

That's really where I was kind of asking.

Speaker 5: Okay, yeah, as far as our outbound fill rates, you know, they continue to improve.

Yes, as far as our outbound fill rates they continue to improve.

Speaker 5: a little hard to track in our convenience to just our business because

A little hard to track and our convenience store business because.

Speaker 5: you know, customers will continue to order the same items.

Customers will continue to order the same items.

Speaker 5: that aren't available. So it's hard to tell, but our food service is definitely improving. And as far as from a labor standpoint to be ready, we continue to hire, we continue to train.

That arent available so.

It's hard to tell but our foodservice is definitely improving and as far as from a labor standpoint to be ready we continue to hire we continue to train.

Speaker 5: We continue to see the turnover reduce, I guess more the churn reduced than the turnover. We don't really have an issue with longer-term employees. It was more around churn.

We continue to see the turnover reduce.

I guess more of the churn reduced in the turnover, we don't really have an issue with with longer term employees. It was more around churn.

Speaker 5: And the biggest thing that we see is continued reduction in our dependency on

And the biggest thing that we see is continued.

A reduction in our.

Dependency on temporary workers.

Speaker 5: That's been tough. You don't get the same commitment and quality from a temporary employee that you get from a full-time person.

That's been tough you don't get the same.

<unk>.

In quality from a temporary employee that you get from a full time person.

Alright, thanks, guys.

Thanks, Ed.

Speaker 1: We'll take our next question from Jeffrey Bernstein of Work.

We'll take our next question from Jeffrey Bernstein of Barclays.

Speaker 2: Great. Thank you very much. Two questions. One, just wondering if you could talk a little bit about market share gains, maybe a perspective on performance food versus the industry.

Great. Thank you very much.

Two questions. One just wondering if you could talk a little bit about.

Market share gains.

Maybe your perspective on performance through the rest of the industry.

Speaker 2: stripping out the obvious MNA, but I think you mentioned independence, maybe market share accelerated.

Stripping out the obvious M&A, but I think you mentioned independents, maybe market share accelerated.

Speaker 2: just wondering if there's more from added new accounts or is it further penetrating? Just any accounts.

Wondering is that more from all the new accounts or is it further penetrating existing accounts.

Speaker 5: There are any big differential between changeers and dependents. How do you think about your market share? Why do we think that? Yeah, as far as your goal. Yeah, as far as share, you know, we really only have one reporting that we get. And, you know, that certainly has all the broadliners in it, not much in this specialty area. But we've done what we consider to be a great job of continuing to gain share. And over months where we had gained a good bit of share.

Are there any big differential between changers independence, how do you think about your market share.

Whether it's in recent years as far as your goal as far as share.

Really only have one reporting that we get to that.

That certainly has the broad liners in it not much in the specialty area, but we've done.

What we considered to be a great job of continuing.

<unk> gained share.

And over months, where we had gained.

A good bit of share last year.

Speaker 5: Our independent as really within food service has driven all of our growth. We actually have been running behind the previous year in our chain business.

Our.

Independent is really within foodservice has driven all of our growth we actually.

It had been running behind the previous year.

In our chain business.

Speaker 5: We have a very large funnel in our chain business.

We haven't.

Very large funnel and our chain business.

Speaker 5: but as we're determining what our costs are going to be moving forward, we've been cautious there. Declancially from fiscal Q1 to fiscal Q2, our growth got better for independent, and we're actually in a position now where all of our performance food service, distribution centers are running above two years ago in dependent cases.

But as we're determining kind of what our costs are going to be moving forward. We've been we've been cautious there.

Sequentially from fiscal Q1 to fiscal Q2.

Our growth got better for independent.

And we're actually in a position now where we're at.

All of our.

Performance Foodservice distribution centers are running above two years ago in independent case sales.

Speaker 5: And much above in dollar sales because of the inflation that we're dealing with.

And much above a dollar sales because of the inflation.

We're dealing with.

Speaker 5: understood that's encouraging. And my other question is just, and George, now that you do have three distinct operating segments, I guess investors have to digest that, but how do you think about the long-term opportunity set for each, maybe the growth for each relative to kind of the overall performance, do do for which segments have the greatest opportunity, whether it's M&A or just more organic.

Understood that's encouraging.

And my other question is just.

George now that you do have three distinct operating segments.

I guess investors have to.

Digests that but how do you think about the long term opportunity set for each maybe the growth for each relative to kind of the overall performance food group books, which segments have the greatest opportunity, whether it's M&A or just more organic.

Speaker 5: Well, our greatest opportunity is sits in our largest area, and that's the performance food service, particularly with independent, like I said, with doesn't think to figure out with our...

Well, our greatest opportunity sits in our largest area and thats the performance foodservice, particularly with independent like I said, we've got some things to figure out with this.

Our chain business.

Speaker 5: But our independent continues to do well and we don't see anything that would cause that to slow down. This start has two channels in particular that have not come back yet. And that's theater and office coffee. And I would call our value stores as somewhat challenged as well from a cost to serve.

Our independent continues to do well and we don't see anything that would.

Cause that to slow down.

This star has two channels in particular that have not come back yet and Thats theater in office coffee and I would call a value stores is somewhat challenged as well from a cost to serve.

Speaker 5: standpoint. So great, great future there. I would say our three

Standpoint.

So.

Great great future, there I would say our three.

Speaker 5: retail automated facilities where we do a good bit of retail and we do a good bit of internet fulfillment are doing just fantastic. I mean the improvement has been just great to watch. I feel great about the future with this star and convenience we talk a lot about convenience food service.

Retail automated facilities, where we do a good bit of retail and we do good bit of Internet fulfillment are doing just fantastic and the improvement has been just great to watch so I feel great about the future with Vista.

And convenience, we talk a lot about convenience foodservice.

Speaker 5: And I feel that we're off to a great start and we're going to do well there. But the biggest opportunity is still looking at me as this. I mean, I think we're positioned well for it, where

And I feel that we're.

Off to a great start and we're going to do well there, but the biggest opportunity is still the convenience business I mean I think we're.

We're positioned well for it.

Where.

Speaker 5: You know, it's got good synergies from a procurement standpoint with FISTAAR. And we have a robust funnel there as well. And we have new business that's coming on board.

Scott good synergies from a procurement standpoint with <unk>.

And we have a robust funnel there as well and we have new business that's coming on board.

Speaker 5: in this quarter and in our fiscal fourth quarter. That will be very helpful to the core business of Hork.

In this quarter and in our fiscal fourth quarter.

We will be very helpful to the core business of Clark.

Understood. Thank you very much.

Thanks.

Speaker 2: We'll take our next question from John Heinbachum of Guggenheim.

We will take our next question from John <unk> of Guggenheim.

Speaker 6: Hey, George, I wanted to start by drilling into the Cornmark pipeline, right? The irref...

Hey, George I wanted to start by drilling into the cohort pipeline that you referenced.

Speaker 6: Maybe it was the bulk of that large multi-year contract business, right, as opposed to the independence.

The bulk of that large multiyear contract business.

Opposed to the independents.

Speaker 6: Can you dimensionalize the size of that? For that, it has 5% or 10% to be locations that Kormark served.

Can you dimensionalize the size of that could that add 5% or 10% too low to be location of the core Mark serves.

Speaker 6: And then if it is the large piece, the large multi-year contract accounts, how much roughly, how much would you be giving away in March? Is that, was that margin?

Okay.

If it is the large piece.

A large multiyear contract.

Accounts.

Roughly how much would you be giving away in March.

Or is that margin.

Speaker 6: Pretty close, right? There's a drop size pretty close to an independent...

Pretty close prices to drop size pretty close to an independent.

Speaker 5: Well, yeah, what I would say is that the independent is where we're growing the fastest and by a significant amount. And that's with em both, with an eB and coremark. And eB has been doing that for a couple of years.

Well, yeah, what I would say is that the independent is where we are growing the fastest and.

By a significant amount.

And thats it within both within <unk> and core Mark in EV.

Been doing that for a couple of years.

Speaker 5: Accelerating right now within Cornmark. I give up people a great deal of credit with that. That is

Accelerating right now within core Mark are different people a great deal of credit with that that is.

Our focus.

Speaker 5: then the new business that we have in Kormark that's more sizable one is a little bit under a quarter of a billion a year.

Then the new business that we have in core markets more sizable one is a little bit under a quarter of a $1 billion a year.

A traditional.

Speaker 5: Nick may be a little heavy tobacco and the other one is an excess of 100 million a year and has potential beyond that. It's about a $17 billion business so it takes a lot to move to the needle.

Mix, maybe a little heavy.

Tobacco.

And the other one is in excess of $100 million, a year and has potential beyond that.

So.

It's been about it's about $17 billion business. So it takes a lot to move the needle but those.

Speaker 5: Those two will help us move the needle, but the biggest thing is that we continue to grow that independent.

Those two will help us move the needle, but the biggest thing is that we continue to grow that independent.

Speaker 6: And then secondly, one of the comments, I think you made recently, our last quarter was that you were not as aggressively looking for new business on the food service side because you were concerned about service levels, right? You'd want to disappoint. We've gotten past that where you've ratuted up the aggressive pursuit of new accounts and food services.

And then secondly, one of the comments I think you made.

And we are last quarter was that you were not as aggressively looking for new business on the foodservice side.

Because you are concerned about service levels right you don't want to disappoint, we've gotten past that where you've ratcheted up the aggressive.

Pursuit of new accounts in foodservice.

Speaker 5: Definitely on the independent front.

Definitely on the independent front.

Speaker 5: Like I said, when it comes to the chain, we've got a big pipeline. I would suspect everybody in the industry's got a big pipeline as, you know, with all disappointed customers.

Like I said when it comes to the chain. We've got we've got a big pipeline I would suspect everybody in the industry has got a big pipeline as well.

With all disappointed customers.

Speaker 5: but the independent were, you know, were going to be as aggressive as ever.

But the independent we're we're going to be as aggressive as ever.

Okay. Thank you.

Thanks, John .

Speaker 2: We'll take our next question from Lauren Silverman of Credit Suisse.

We'll take our next question from Lauren Silberman of credit Suisse.

Speaker 7: Thank you guys very much. It was just for some pricing power. Can you talk about your confidence in pricing power and being able to push through the installation and remind us what you're generally comfortable pushing through in a normalized environment and should be seeing more challenging consumer backdrop? What are your expectations in your ability to push price? And then, sorry, related to that prior question follow-up, have you been able to price to cover underlying weight rate increases?

Thank you guys very much.

Pricing power can you talk about your confidence in pricing power and being able to push through the installation and remind us what you're generally comfortable for secondary in a normalized environment and should we see a more challenging consumer backdrop.

Are your expectations and your ability to push price and then sorry related.

Prior question follow up have you been able to price to cover underlying wage rate increases.

Speaker 5: Well, with this, what I would call excessive inflation, we've done a great job of passing that on in the independent area.

Well.

With this what I would call excessive inflation, we've done a great job.

Passing that on in the independent area.

And.

Speaker 5: Surprisingly so we're not comfortable with this type of inflation and we don't like to see that for our customers

Surprisingly so we're not comfortable with this type of inflation and we don't like to see that for our customers.

Speaker 5: We just don't. It's a lot for them to deal with, and we continue to encourage them to raise their menu prices, and most are doing that. They're also pretty true just to how they price and specials they run and what items to use. So that part of our business has gone well. When you get to the chain business.

We just don't.

It's a lot for them to deal with and we continue to encourage them to raise their menu prices and most are doing that they are also pretty shrewd as to how they price and specials they've run.

And what items to use so that part of our business has gone well.

When you get to the chain business.

A lot of its fee based.

Speaker 5: We certainly have seen secret labor's high. As Jim mentioned, some of it's transitory, but some of it is not.

We certainly have seen.

The secret that labor is high.

As Jim mentioned some of it's transitory, but some of it is not.

Speaker 5: So we've had parts of our business there where

So we've had parts of our business there were.

Speaker 5: We've been able to get that through, even when we were under a contract and we've had some that have been extremely resistant.

We've been able to get that through even when we were under contract and we've had some that have been extremely resistant.

Speaker 5: And that's just our job to manage our way through that.

And.

That's just our job to manage our way through that.

Speaker 5: But that story has an end to you. It's one of the things that makes me feel real good about where we situate it today, because that part of our business, that national chain business is tough.

But that story has in India, it's one of the things that.

Makes me feel real good about where we're situated today because that part of our business that national chain business.

Speaker 5: and distribution centers where that's all we do. We are really having a tough go and we've been able to overcome that as a company. And I do feel that labor is gonna get back to a done.

Tough.

And distribution centers, where that's all we do we are really having a tough go and we've been able to overcome that as a company and I do feel that labor is going to get back to.

The more normal state.

Speaker 5: you know, once we get through this past, this last variant.

Once we get through this past this last variant.

Speaker 5: and high hopes that we'll be able to reach agreement with our customers as to what's fair.

High hopes that we'll be able to reach agreement with our customers as to what's fair.

Speaker 7: And then you called out an increase in food service for a stop to per case, driven by favorable mixed shifts, independent and private labels. Can you talk about where your mix is with performance brand and how you think about the biggest opportunities to increase that going forward? Is it awareness, expanding the portfolio's options? Or is it primarily just growing independent cases? I think that's not so.

Great. Thank you for that and then you call that an increase in service gross profit per case, driven by a favorable mix shift in the pattern.

Private label can you talk about where your mix is with performance Brad How you think about the biggest opportunities to increase that going forward as awareness expanding portfolio of option for the pro.

Primarily this growing independent.

Yes.

Right.

Speaker 5: Within our independent, we've had several weeks where we've gone over 50% our brand.

Within our independent lease had several weeks, where we've gone over 50% our brand.

Speaker 5: You know, it's something we always wanted to get to and quite frankly, I didn't think we'd get there by now. And then a bright spot looked at his Reinhart, where we adopted many of their brands and kind of learned going through this process where those brands fit and where we need to get in legacy performance brands to.

It's something we always wanted to get to and quite frankly, I will admit I didn't think we'd get there by now and then a bright spot with it is reinhart when we adopt it.

Many of their brands and we've kind of learned going through this process, where those brands fit.

And where we need to get in legacy performance brands to.

Speaker 5: to get us where we need to be, maybe from a quality standpoint or from a pricing standpoint. And, you know, we've left that for our Reinhardt people in the field to make those decisions with, you know, a lot of direction from us. And I guess I would say a lot of code.

To get us, where we need to be maybe from a quality standpoint or from a pricing standpoint.

We've left that for our Reinhart people in the field to to make those decisions with a lot of direction from us and I guess I would say a lot of coaxing.

Speaker 5: But they're very close to 50% their brand. And between their brand and our brand, okay. Which I guess I should say both our brands now. That's one of the encouraging things with merchants as we bring them on board. Because they do use the same brand portfolio that Ryan Hart has. They will remember the same procurement group. And we've already been through this. And I think that will be...

But they are very close to 50% of their brand.

And between their brand and our brand, Okay, which I guess I should say both our brands now that's one of the encouraging things with merchants as we bring them on board because they do use the same brand portfolio that Reinhardt has they will remember the same procurement group.

And we've already been through this and I think that will be.

Speaker 5: effective quicker with them than we were with Reinhardt, albeit it'd be much smaller. But we are in a position today where Reinhardt is growing their independent business faster than performance. And.

Effective quicker with them than we were with reinhart, albeit much smaller, but we are in a position today, where reinhart is growing their independent business.

Faster than performance.

And.

Doing extremely well against two years ago.

Speaker 5: And their brands, I just continue to see us grow that combination of those two brand portfolios.

And.

Their brands.

I just can see continue to see us grow that the combination of those two brand portfolios.

Speaker 7: Great. And just the final question on the merchant and just your broader appetite for growth for food service acquisition in 22 as you think forward, whether you're seeing increased activity and interest in M&A.

Great and just a final question.

And just your broader appetite for growth for future acquisitions in 'twenty two.

Or whether you are seeing increased activity and interest.

And M&A.

Speaker 5: Well, you know, we always say the same thing that we're opportunistic. We're pretty serious about paying down debt right now.

Well, we always say the same thing that we're opportunistic.

We're pretty serious about paying down debt right now.

Speaker 5: We're like any company we've got certain ones that are prized, right? And if one of those became...

We're like any company, we've got certain ones that are priced right.

<unk>.

If one of those became available we wouldn't hesitate.

Speaker 5: But right now, we're pretty focused on paying down debt.

But right now, we're we're pretty focused on paying down debt.

Great. Thank you guys.

Thanks.

Speaker 2: We'll take our next question from Jake Bartlett of Truist Security.

We'll take our next question from Jake Bartlett of <unk> Securities.

Speaker 5: Great, thanks for here in the question. My name is, it's just back on Omokron. In restaurant, mostly talked about an impact as to the celebration in December into January . So I'm wondering about your case growth and specifically maybe independence. Did you see the same sort of thing with the work there?

Great. Thanks for taking my question.

Just back on <unk>.

In restaurants.

Most have talked about impacted deceleration in December and into January .

Wondering about more case growth.

The remaining independents.

The same sort of thing was the was there.

Speaker 2: You know, slow down in December into January . Perhaps you're not seen as much just with share things, but in commentary that I just vacatons the impact on the top line from home.

This slowdown.

In December into January perhaps youre, not seeing as much just share gains, but any commentary on just the cadence and the impact on the top line.

From AUM across.

Speaker 5: Yeah, you know, we're trying to figure that out hatchetly. You know, we certainly saw it in chains even in December , which we didn't see as an independent, we were pleased with the January we had. It was certainly a little bit softer and independent and a good bit softer in the chain business. We don't know how much was weather, how much was on the ground.

Yes, we're trying to figure that out actually.

We certainly saw it in chains, even in December , which we didn't see as an independent.

We were pleased with the with the January we had it was certainly a little bit softer in independent and a good bit softer.

And the chain business.

We don't know how much was weather how much was <unk>.

<unk>.

Speaker 5: It certainly gave us a chance to give a better level of service.

It certainly gave us a.

Chances to give a better level of service.

Speaker 5: And I guess I would say get caught up and let our people work a little bit less. But it wasn't a big difference. I mean, we were really pleased with our results, both top and bottom line in the month of January .

<unk>.

I guess I would say get caught up in.

Let our people work a little bit less.

It wasn't a big difference and we were really pleased.

With our results both top and bottom line in the month of January .

Speaker 3: Great, definitely helpful. And then also, in terms of the cost, you've broken out the impact of the temporary workers, but I'm wondering what else would other costs might be temporary in the business right now but that you eventually will laugh. That would include sign on and attention bonuses, maybe overtime costs, recruiting costs. And what else is in the cost structure right now that maybe might go away?

Great. That's really helpful. And then also just in terms of the costs.

<unk> the.

Is the temporary workers.

I'm wondering what else what other costs might be temporary in the business right now, but that youll eventual lap that would include the sign on and retention bonuses, maybe overtime costs recruiting cost what else is in the cost structure right now that maybe might go away.

Speaker 3: Yeah, I'll give you one that's worthy of thought. And we mentioned it a little bit earlier, but I think you made a very good list there. The one to add would be productivity. That as time goes by and the training kicks in, mostly improvements in productivity. I can't give you a number, I can't quantify it, but I can tell you it will be helpful. And it's probably the most important one to add to your list.

Yes, I'll give you one thats that's worthy of thought and we mentioned it a little bit earlier, but I think you made a very good list there the one that would be the productivity there.

But as time goes by and the training kicks in and we will see improvements in productivity.

I can't give you a number I can't quantify it.

But I can tell you it will be helpful and it's probably the most important one to add to your list.

Speaker 5: Great, great. Thank you. And last question. In terms of the impact of being your processes, your sales systems, obviously you've seen the impacts on Ryan Hartley acceleration of independent sales growth there. And what about the opportunity at CoreMark? What kind of a change in the sales growth just by...

Great Great and last question.

In terms of the impact of being in your processes.

Obviously, we've seen the impact on Reinhart and acceleration of independent sales growth there I'm wondering about the opportunity of core Mark.

A change in the sales growth, we just buy.

Speaker 5: and being under your ownership and your processes, do you think we can expect? Should we expect to have a similar acceleration of growth from that business versus what we saw when it was pre-acquisition, it's one of the opportunities there.

We will be one of your your ownership in your processes do you think what can we expect should we should we expect to kind of a similar one.

Acceleration of growth from that business versus what we saw in <unk> as well.

Pre pre acquisition.

Just wondering the opportunity there.

Speaker 5: Well, you know, they're improving now and I would contend that would have happened whether we merged with them or didn't. I

Well they are improving now.

I would contend that would've happened, whether we merged with them or didn't.

I think that.

Speaker 5: We have a culture where we're really focused on the independent operator in our businesses in general. And I hope that that culture will, will, uh,

We have a culture, where we're really focused on the independent operator.

In our businesses in general and I.

Hope that that culture, we will.

Bill.

Speaker 5: move into them as well, and I'm quite sure it will. We're seeing some real initial success and independent, but I do believe that would have happened anyway. Then when you get to the food service part of it, which sometimes gets lost in the huge volumes that they generate primarily because of tobacco sales.

Move into them as well.

Sure will.

We're seeing some real initial success in independent, but I do believe that would have happened anyway.

Then when you get to the foodservice part of it which sometimes gets lost in the huge volumes that.

That they generate.

Primarily because of tobacco sales.

Speaker 5: We'll have the two sales forces working together closely.

We'll have the two.

Sales forces working together closely.

Speaker 5: without losing sight of the fact that their core business in both of them are the most important, but I think that that from a culture standpoint will help us and I see that already. A big part of food service when you get to convenience is pizza and chicken.

Without losing sight of the fact that their core business and both of them are the most important but I think that.

Is that from a culture standpoint will help us and I see that already a big part of foodservice when you get to conveniences pizza in chicken.

Speaker 5: and Hispanic is pretty big. And that's our strength, it's a company. That's what we do the best in in food service.

And Hispanic is pretty big and Thats, our strength as a company that's what we do the best and in foodservice. So.

Speaker 5: So I think that I would say I don't see any reason that Cornmark wouldn't be able to grow faster than they've grown in the past. They didn't have the tools in food service.

I think that.

I would say I don't see any reason that core mark wouldn't be able to grow faster than the phone in the past they didn't have the tools and foodservice.

Speaker 5: that they're able to get today. And the great part of that is they recognize that. They recognize that in our early conversations. They saw it as a real positive for the companies to be together. So it's not like I've got to say, and we're going to show you how to do this. They know what they're doing. It's just they didn't have those capabilities and the inbound capabilities. And they didn't have the brand. They didn't have the volume and food service really.

They are able to get today and the great part of that is they recognize that they recognize that in our early conversations they saw it as a real positive for the companies to be together. So it's not like I was saying we're going to show you how to do this they know what they're doing.

It's just they didn't have those capabilities in the in the.

Inbound.

Capabilities and they didn't have the brand they didn't have the volume and foodservice really too.

Speaker 5: to have a brand of their own. So it's exciting, I mean, it's great time for Cornmark and for our organization with them.

To have a brand of their own so it's exciting eliminates its great time for core Mark in and for our organization with them.

Great I appreciate it.

Speaker 2: We'll take our next question from Nicole Miller, a Piper Sandler.

We will take our next question from Nicole Miller of Piper Sandler.

Speaker 7: Thank you, good morning. I wanted to ask about sales channels, like by percentage, and the three reporting segments, we can obviously calculate at that level. But if you think about...

Thank you and good morning, I wanted to ask about sales channels by percentage in the three reporting segments. We can.

Calculated at that level.

But if you think about.

Speaker 8: Pre-pandemic and pre-sort these acquisitions you've been discussing today.

Pre pandemic and pre Sandys acquisition do you mind discussing today.

Speaker 8: For example, within 66% food service, it used to be, I think, something like, you know, 30, 40% national chain and...

For example, within 66% foodservice it used to be.

Like 30%, 40% national chain in healthcare hospitality education, 12%.

Speaker 8: health care, hospitality, education, 12%. You know, those metrics, right? The restaurants within food service, national chain independent, and the other business lines, now that they're different, and the recovery hasn't been seen in each channel.

Those metrics right.

The restaurants within foodservice national chain independent.

Other business lines now that they are different and the recovery hasn't been the same in each channel can you give us a little bit of an outline of where those stand today.

Speaker 8: Can you give us a little bit of an outline of where they're staying today?

Speaker 5: Donbuck's different than in the past, other than the addition of cornmark. You know, the independent within food service continues to be a bigger part of our business, but within the independent.

Not much different than in the past other than the addition of core Mark.

The independent within foodservice continues to be a bigger part of our business but.

Within the independent.

Speaker 5: You know, we're still big as some pizza and Italian and actually...

We're still biggest in pizza and Italian and actually.

Speaker 5: You know, we're laughing some pretty big numbers from last year and pizza and we're still running double-digit growth. So it's extremely pleased there.

We're lapping some pretty big numbers from last year, and pizza and we're still running double digit growth. So extremely pleased there.

Speaker 5: And then you know when it comes to...

And then when.

And it comes to.

Speaker 5: Oh, contract feeding and lodging and health care. That's not really what we do when we do some of it.

Contract feeding in lodging and healthcare Thats not really what we do when we do some of it.

Speaker 5: And then we've always been heavy chain as a company and we like to chain restaurant business.

And then we've always been heavy chain as a company and we liked the chain restaurant business.

Speaker 5: And you'll see a bigger emphasis on that again as we have a real feel for where our costs are going to be going forward. But I still see us growing faster and independent than we grow and change. So I hope that answers your question or I guess the best as we can.

And we will you.

Youll see a bigger emphasis on that again.

As we have a real feel for where our costs are going to be going forward, but I still see us growing faster in independent and the growing chain. So I hope that answers your <unk>.

A question or I guess as best as we can.

Speaker 8: Yeah, I think just the fact that it's relatively unchanged because where I'm going is trying to understand growth, growth, profit margin and the idea I think, you know, if we hear you is that

Yes, I think just the fact that it is relatively unchanged because where I'm going is trying to understand gross gross profit margin and the idea I think.

With me here you is that you have.

Speaker 8: You've acquired a lot of gross profit dollars, like massive dollar growth, gross profit percentages down for a number of reasons. Some of the businesses are different, but again, a lot of dollars in areas that aren't competitive for you, so you can have all of the share.

Acquired a lot of gross profit dollars.

<unk> dollar growth gross profit percentage is down for a number of reasons. Some of the businesses are different and again a lot of dollars in areas that arent competitive fragrance you can have.

Have all of the share and you've acquired growth, but how do you think ultimately about reconciling those gross profit dollar and growth opportunities you've brought in against gross profit margin percentage looks like how much is up for grabs to have that gross profit margin.

Speaker 8: And you've acquired growth, but how do you think ultimately about reconciling those gross profit dollar and growth opportunities you've brought in against gross profit margin percentage? Like how much is there up for grabs to have that gross profit margin look more like it?

Look more like it used to historically.

Well.

Speaker 5: You know, we look at things per case, so I get it.

We look at things per case, so I've got a.

Speaker 5: You know, I got to address this, I'll answer it in the way in which you asked it.

Hi.

I got to address this I'm going to answer it in a way in which you asked it.

Speaker 5: You know, we probably, as a management team, don't spend five minutes a week on tobacco, but that's the difference. And you know, you have a...

We probably as a management team don't spend.

Five minutes, a week on tobacco, but that's the difference.

And you have a product thats.

Speaker 5: You know, less than 15% of the cube and, you know, close to 80% of the sales and convenience. Now, that's going to change over time.

Less than 15% of the cube.

Close to 80% of the sales and convenience now thats going to change over time.

Speaker 5: But what I will say is that our either-down margins, we've always grown them.

But what I will say is that our EBITDA margins, we've always grown them.

Speaker 5: Unless M&A took us into an area that was much lower.

Unless M&A took us into an area that was much lower.

And.

Speaker 5: Our growth in that real low margin category is only going to come with new accounts. There's not going to be any organic growth at all.

Our growth in that real low margin category is only going to come with new accounts, there is not going to be any organic growth at all.

Speaker 5: And I guess our commitment would be that excluding that, I mean, we're gonna continue to grow or eat the darn margins.

And I guess, our commitment would be that excluding that I mean, we're going to continue to grow our EBITDA margins.

Speaker 5: And it's a business that we have to have to be in the businesses we're in.

It's a business that we have to have to be in the businesses. We're in.

Speaker 5: But we look at what percentage of the girls' profitability make it to the bottom line and we continue to improve.

But we we look at what percentage of the gross profit dollars to make it to the bottom line and we continue to improve.

Speaker 8: That's fair. Thank you. And then just the last one, it's really helpful to hear about labor, right? And you're talking about moving in the right direction over times down. It sounds like people are coming back, you know, to work permanently, I guess, right in the field. Can you talk about turnover in terms of drivers and flucturs and how that's been trending?

That's fair. Thank you and then just the last one it's really helpful to hear about labor right and you're talking about moving in the right direction overtime is down it sounds like people are coming back in underwear permanently I guess right.

Can you talk about <unk>.

Turnover in terms of drivers in select areas and how that's been trending.

Speaker 3: I think the short answer to that, the clear answer is turnovers improving.

Yes.

The short answer to that the clear answer is turnover is improving.

Speaker 3: It's been a challenge. It's still a challenge. It's left of a challenge, and we expect it to improve across the next six months. I would...

<unk>.

It's been a challenge.

It's still a challenge it's less of a challenge and we expect it to improve across the next six months.

I would say that.

Speaker 3: Back it up from that question a little bit broader. If you think about the factors that drove just a really great...

Backing up from that question, a little bit broader if you think about the factors that drove just a really great.

Speaker 3: quarter for PFG. Clearly, the end of the growth, we've talked a lot about, drove a super strong quarter for us, and we expect that to continue. It's always been important to us, and it'll continue to be important.

Quarter for PFG.

Clearly the independent growth, we've talked a lot about drove a super strong quarter for us and we expect that to continue as it's always been important to us and will continue to be important.

Speaker 3: This star's continued recovery has been very helpful and the progress they're making has really helped.

The stars continued recovery has been very helpful. In the progress Theyre, making has really helped.

Speaker 3: help drive a great quarter in margin improvement and improvements in labor. We're another big area that we talked about and they'll continue to improve across the next six months and as part of the improvements in labor is an improvement in turnover. All of those things are what contributed to the powerful earnings quarter of PFG and the trend.

Helped drive a great quarter and margin improvement and improvements in labor, where another big area that we talked about and they'll continue to improve across the next six months and as part of the improvements in labor as an improvement in turnover all of those things are what contributed to a powerful earnings quarter for PFG and the trend.

Thank you.

Speaker 1: We'll take our next question from Kelly Bonia, a BMO capital.

We'll take our next question from Kelly Bania of BMO capital.

Okay.

Speaker 9: Hi, good morning, thanks for taking our questions.

Hi, good morning, Thanks for taking our questions.

Speaker 9: So many questions. I guess maybe starting with just technology and digital.

So many questions I guess, maybe starting with technology.

Technology and digital.

Speaker 9: Some pretty big investments by some peers in this space. And I guess I always think of PF, particularly food services as more of a people driven organization, but maybe can you just help us understand where you think you are in terms of technology and digital and Salesforce tools on that front? And if you think you need to make any investments there, I mean, the results clearly speak for themselves, but just thinking over the next several years.

Some pretty big investments.

Our peers.

And I guess I always think of Pf, particularly since services of more of a people.

Driven organization, but maybe.

Maybe can you just help us understand where you think you are in terms of technology and digital and Salesforce tools on that front and if you think you need to make any investments, adding the results clearly.

Speak for themselves, but just thinking over the next several years.

Speaker 5: Well, we continue to make investments and we want to make sure that our people have all the tools that they need to address their customer. I do feel that over time the digital will be used by more and more customers. So we're making sure that we have what we need.

But we continue to make investments and we want to make sure that our people.

Have all the tools that they need to address their customer.

I do feel that over time that digital will be used.

Used by more and more customers. So we're making sure that that we have what we need.

Speaker 5: And, you know, we make those investments. And we always talk about the people first.

And we make those investments we always talk about the people first.

We always.

Speaker 5: speak that way to them too, that we're going to give them the tools that they need. But the most important thing is that they're making the calls and that they're committed and they love their customer and that's kind of what we preach.

Speak that way to them to that.

We're going to give them the tools that they need.

But the most important thing is that theyre, making the calls and that they are committed and they love their customer and that's that's kind of what we preach.

Speaker 5: But don't confuse that with us not having the technology that we need who certainly do.

But don't confuse that with us not having the technology that we need we certainly do.

Speaker 9: No, that's helpful. And I guess just as it relates to core, some questions and concerns from some investors, I guess, just in light of.

No that's helpful and I guess, just as it relates to core.

Some questions and concerns from investors I guess just in light.

Yes.

Speaker 9: where sea stores could be in light of the longer term transition to electric vehicles. And just curious how you thought about that as you evaluated coremark and as you think about coremark much longer term.

<unk> stores could be in light of the longer term transition to electric vehicles, and just curious how you thought about.

That as you evaluated core market and as you think about core mark much longer term.

Speaker 5: Well, needless to say, we did a great deal of work, particularly our strategy person who actually came out of Australia. But we did a lot of work around that before doing the acquisition and it just came back that, I mean, it could have an impact, but it could be that it would be nominal that convenience stores are part of people's lives.

Well Needless to say, we did a great deal of work, particularly in our strategy person, who actually came out of Australia.

But we did a lot of work around that before doing the acquisition.

And just came back that I mean.

It could have an impact but if it did it would be nominal that convenience stores are part of People's lives.

Speaker 5: habitual and it's not necessarily fuel that's driving.

It's habitual.

And it's not necessarily fueled that's driving that.

Speaker 9: That's helpful. And then also, I think, did you mention something about value stores being somewhat challenged from a cost of stir, standpoint? Can you clarify what you meant by that?

That's helpful.

And then last one I think.

Did you mentioned something about value stores being somewhat.

<unk> from our cost to serve standpoint can you can you clarify what you meant by that.

Speaker 5: But it's just the part of our business where the labor's had a larger impact, they're smaller deliveries. And we're just addressing that with our customer base and it's going well.

It's just the.

Part of our Vista business, where.

The labor has had a larger impact of smaller deliveries.

<unk>.

We're just addressing that with our customer base and it's going well.

Okay. Thank you.

Speaker 1: And once again, to advocate question, please press Star 1 now on your telephone keypad, Star 1. We'll take a question from Peter Selle of BTIG.

And once again to ask a question. Please press star one now on your telephone Keypad Star one.

We'll take a question from Peter Saleh of BTG.

Speaker 5: Great, thank you and congrats on a great quarter. I just want to ask, I mean, last quarter, you guys had mentioned that the vast majority of not all of your growth was coming from existing customers versus new customers. I think you touched on this earlier, but could you just give us an update and elaborate a little bit more? Is that trend continuing or have you seen a little bit of a shift there and you're getting just more growth from new customers?

Great. Thank you and congrats on a great quarter.

Wanted to ask I mean last quarter, you guys had mentioned that the vast majority if not all of your growth was coming from existing customers versus new customers I think you've touched on this earlier.

But could you just.

Give us an update and elaborate a little bit more.

That trend continuing or have you seen a little bit of a shift there and youre getting just more growth from new customers.

Speaker 5: Yeah, I will do that. Our growth within our customers has continued to be really strong. And the uptick from first quarter to second quarter was almost all driven by new customers, the difference between the two. But we still have just really done a much better job penetrating the accounts. And also, I think that with less counts out there, those that are open are doing more business. So it's a combination of the two.

Yes, I will do that or.

Growth within our customers continue to be really strong.

And the uptick from first quarter to second quarter was almost all driven by new customers. The difference between the two but we still have.

Have just really done a much better job penetrating the accounts and also I think that with less counts out there. Those that are open are doing more business with the combination of the two.

Speaker 5: But going out and pursuing new business is something wouldn't be very aggressive.

But going out and pursuing new business is something we're going to be very aggressive with.

Speaker 5: Thank you very helpful. And just on, come back to inflation, it looks like food inflation commodity.

Thank you very helpful.

Come back to inflation it looks like.

Food inflation commodity inflation was.

Speaker 5: About 140 basis points higher this quarter versus last quarter. We would have expected that to kind of, you know, maybe peak and start to come down. But what are your expectations here on food costs as we go through the balance of this year? Do you feel like we've peaked or are we just going to continue to see these elevated prices for a while? I'm not sure we know.

About 140 basis points higher this quarter versus last quarter.

I would've expected that to kind of maybe you can start to come down but what are your expectations here on food costs as we go through the balance of this year do you feel like we've peaked or are we just going to continue to see these elevated prices for a while.

I'm not sure we know okay.

Speaker 5: Part of our increased inflation is ironically we're growing the fastest in those categories that have the highest rates of inflation.

Part of our increased inflation is ironically, we're we're growing the fastest in those categories that have the highest rates of inflation.

Speaker 5: You know, I think that's labor and even where, I mean, we have suppliers that the product that they sell, they have plenty of it and they can't get it to us because they don't have the packaging they used to get it to us. So, you know, a lot of this is some of its upstream, some of its downstream, but it's just going to take time, but we have seen great improvement in food service. It's very encouraging.

I think thats labor and even where we have suppliers that the product that they sell they have plenty of it and they can't get it to us because they don't have the packaging they used to get it to us.

So a lot of this is some of this upstream some of its downstream, but it's just going to take time, but we have seen great improvement in foodservice.

It's very encouraging.

Great. Thank you very much.

Speaker 1: And this does conclude our question and answer session for today. I'd be happy to return the call to Bill Marshall for any concluding remarks.

And this does conclude our question and answer session for today I'd be happy to return the call to Bill Marshall for any concluding remarks.

Speaker 1: Thank you all for joining our call today. If you have any follow up questions, please contact us at Investor Relations.

Thank you all for joining our call today do you have any follow up questions. Please contact us at Investor Relations.

Speaker 2: This does conclude today's conference. You may now disconnect your lines and everyone, have a great day.

This does conclude today's conference you may now disconnect your lines and everyone have a great day.

Okay.

[music].

Yes.

[music].

Yes.

Yeah.