Q3 2024 Performance Food Group Co Earnings Call

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

Please standby your program is about to begin if you should need audio assistance during our call today. Please press star zero.

Bill Marshall: Thank you and good morning. We're here with George Holm, PFG's CEO, and Patrick Hatcher, PFG's CFO. We issued a press release this morning regarding our 2024 fiscal third quarter results, which can be found in the investor relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the results for the same period in fiscal 2023. The results discussed on this call will include GAP and non-GAP results adjusted for certain items.

Good day and welcome to P. F T 's fiscal year Q3, 2024 earnings Conference call. If you would like to ask a question at the conclusion of our prepared remarks. Please press star followed by the number one on your telephone keypad at any time I would now like to turn the call over to Bill Marshall Vice President Investor Relations for PFG. Please go ahead Sir.

Speaker Change: Thank you and good morning.

Bill Marshall: We're here with George Holm, Pfg's, CEO and Patrick catcher Pfg's CFO, we issued a press release. This morning regarding our 2020 for fiscal third quarter results, which can be found in the Investor Relations section of our website at PFG C Dot com.

During our call today, unless otherwise stated we're comparing results to the results in the same period in fiscal 2023.

Bill Marshall: The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in the back of the earnings release.

Bill Marshall: As a reminder, in the fiscal first quarter of 2023, we updated our segment reporting metrics to adjusted EBITDA from the prior EBITDA metric our remarks on this call and in the earnings release contain forward looking statements and projections of future results. Please review the cautionary forward looking statement section in today's earnings release, and our SEC filings for various.

George L. Holm: 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.

Bill Marshall: The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in the back of the earnings release. As a reminder, in the fiscal first quarter of 2023, we updated our segment reporting metrics to adjusted EBITDA from the prior EBITDA metric. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results. Please review the Cautionary Forward-Looking Statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. Now, I'd like to turn the call over to George. Thanks, Bill.

George L. Holm: Thanks, Bill. Good morning, everyone, and thank you for joining us on our call today. This morning, I'd like to share results from the fiscal third quarter, provide some color on the current business environment, and discuss our plans for the fiscal fourth quarter and beyond. As you know, the calendar year began with challenging weather. In January, a choppy inflationary environment, calendar differences, and early signs of consumer pressure. Nonetheless, I am proud of our organization and how we were able to achieve positive results.

George: Thanks, Bill good morning, everyone and thank you for joining our call today.

George L. Holm: This morning, I'd like to share our results from the fiscal third quarter provide some color on the current business environment and discuss our plans for the fiscal fourth quarter and beyond as you know the calendar year began with a challenging weather.

George L. Holm: In January a choppy inflationary environment calendar differences and early signs of consumer pressure. Nonetheless, I'm proud of our organization and how we were able to achieve positive results. Despite these headwinds in particular, our foodservice business rebounded nicely in February and March producing improved into pending case.

George L. Holm: In particular, our food service business rebounded nicely in February and March, producing improved independent case growth and stable chain performance. Our convenience segment continued to experience difficult top-line trends, though it has remained focused on winning new business and tight operating expense control, helping the bottom line performance. We were encouraged by a sequential month-to-month improvement in C-store trends during the quarter. However, this star also experienced a more challenging top line in the fiscal third quarter after very strong growth in prior quarters.

George L. Holm: Growth and stable chain performance, our convenience segment continued to experience difficult top line trends.

George L. Holm: It has remained focused on winning new business and tight operating expense control, helping the bottom line performance. We are encouraged by the sequential month to month improvement in C store trends during the quarter.

George L. Holm: <unk> also experienced a more challenging topline in the fiscal third quarter after very strong growth in prior quarters.

George L. Holm: We continue to feel very good about how we are positioned in the market, which we believe will produce profitable, long-term growth. We are optimistic about the fiscal fourth quarter and momentum into fiscal 2025, which is reflected in our guidance. Patrick will discuss our guidance in more detail shortly.

George L. Holm: We continue to feel very good about how we're positioned in the market, which we believe will produce profitable long term growth.

George L. Holm: We are optimistic about the fiscal fourth quarter and our momentum into fiscal 2025, which is reflected in our guidance.

George L. Holm: Patrick will discuss our guidance in more detail shortly before turning to Patrick I will provide color on our results discuss our strategy and outline reasons for our optimism.

George L. Holm: Before turning to Patrick, I will provide color on our results, discuss our strategy, and outline reasons for our. Let's review some of the highlights from our most recent quarter and various factors impacting the results. Starting with food service, segment net sales were up 1% in the fiscal third quarter, with similar case volume growth in the period. However, if we walk through the three months of the quarter, it shows a very different picture.

George L. Holm: Let's review some of the highlights from our most recent quarter and various factors impacting the results starting with foodservice segment net sales were up 1% in the fiscal third quarter with similar case volume growth in the period. However, if we walk through the three months of the quarter. It shows a very different picture, we started the quarter with.

George L. Holm: We started the quarter with a low single-digit case decline in January, but we went positive in February and had a strong March, which has continued into physical Q4. Importantly, independent case volume grew in all three months of the quarter, including nearly 6% growth in both February and March. Independent case growth was consistently in the middle single-digit range for each week from the second week of February through the end of the quarter.

George L. Holm: A low single digit case decline.

George L. Holm: January we went positive in February and had a strong March which has continued into fiscal Q4.

George L. Holm: Importantly, independent case volume grew in all three months of the quarter, including nearly 6% growth in both February and March.

George L. Holm: This growth outpaced the total industry, producing steady market share gains. In fact, our data shows nice share performance across both independent and chain restaurant accounts for the quarter, gaining more market share across our food service business in the fiscal third quarter than we did in the fiscal second. I'd like to repeat that because it's so important. Our food service business gained more market share in the third quarter than it did in the second quarter.

George L. Holm: Independent case growth was consistently in the middle single digit range for each week from the second week of February through the end of the quarter. This growth outpaced the total industry producing steady market share gains in fact, our data shows nice share performance across both independent and chain restaurant accounts for the quarter.

George L. Holm: Any more.

George L. Holm: Market share across our foodservice business in the fiscal third quarter than we did in the fiscal second quarter.

George L. Holm: Like to repeat that because it's so important in our foodservice business gained more market share in the third quarter than the second quarter. This is a testament to our sales organization's ability to compete for and win new business. Despite the headwinds facing the restaurant industry.

George L. Holm: This is a testament to our sales organization's ability to compete for and win new business despite the headwinds facing the restaurant industry. Our food service business experienced a deflationary headwind in the first half of the fiscal year, which continued into early calendar 2024. We're pleased to see this flip to modest inflation in both February and March.

George L. Holm: Our foodservice business experienced a deflationary headwind in the first half of the fiscal year, which continued into early calendar 2024, we're pleased to see the split to modest inflation in both February and March.

George L. Holm: This improvement occurred despite persistent deflation in cheese that we are seeing sequential improvement in that important commodity as well given the steady sequential move in most commodities. We continue to expect low single digit foodservice inflation in the fiscal fourth quarter. We expect this to provide a benefit to both the growth.

George L. Holm: <unk> and adjusted EBITDA margins in the period.

George L. Holm: This improvement occurred despite persistent deflation in cheese, though we are seeing sequential improvement in that important commodity as well. Given the steady, sequential move in most commodities, we continue to expect low single-digit food service inflation in the fiscal fourth quarter. We expect this to provide a benefit to both the growth and adjusted EBITDA margins for the period. Turning to our convenience business, as I mentioned at the opening of this call, industry top-line trends remain difficult, which we attribute to higher candy, snack, and tobacco prices in the C Store. Despite some relief in gas prices, same-store sales in the convenience channel remain soft relative to historic trends.

George L. Holm: Turning to our convenience business as I mentioned at the opening of this call industry top line trends remain difficult, which we attribute to higher candy snack and tobacco prices in the C store. Despite some relief on gas prices same store sales in the convenience channel remained soft relative to historic trends.

George L. Holm: On the positive side, our top-line results continue to outpace the total industry in key categories, including food service, snacks, and candy, reflecting new business wins and market share improvements. We are consistently adding new accounts and expanding services to current customers. This new account growth, coupled with the successful launch of several food service programs, gives us confidence that our top line performance with convenience will continue to improve moving forward. We continue to gain traction with our efforts to grow food service and convenience.

George L. Holm: The positive side, our topline results continued to outpace the total industry in key categories, including foodservice snacks, and candy, reflecting new business wins and market share improvement.

George L. Holm: We are consistently adding new accounts and expanding services to current customers. This new account growth coupled with the successful launch of several foodservice programs gives us confidence that our topline performance within <unk> will continue to improve moving forward.

George L. Holm: We continue to gain traction with our efforts to grow foodservice and convenience. This is demonstrated by our recent collaboration with GPS launching a nationwide pizza concept and our progress in selling PFG branded foodservice concepts. These customers. These activities drive value, both PMT and the customers we serve.

George L. Holm: This is demonstrated by our recent collaboration with GPN, launching a nationwide pizza concept, and our progress in selling PFG branded food service concepts to convenience customers. These activities drive value for both PFG and the customers we serve. Despite the challenging top-line result, our convenience organization has continued to execute extremely well. A diligent focus on reducing shrink in the warehouse, coupled with tight labor management, has produced good operating leverage. Looking ahead to the fiscal fourth quarter, we expect sequential improvement in sales and continued operating expenses.

George L. Holm: Despite the challenging topline resolved our convenience organizations continue to execute extremely well a diligent focus on reducing shrink in the warehouse coupled with tight labor management has produced good operating leverage looking ahead to the fiscal fourth quarter, we expect sequential improvement in sales in <unk>.

George L. Holm: Continued operating expense control.

George L. Holm: Turning to Vistar, total case volume was essentially flat in the fiscal third quarter, as growth in the vending, travel, and hospitality channels was offset by declines in theater and office. Segment net sales increased 1.7% in the quarter. As expected, the rate of inflation at this hour continued to decelerate and was up 4.7% in the fiscal third quarter. The rate of deceleration was similar to the rate of decline from the fiscal first quarter to the fiscal second quarter.

George L. Holm: Turning to this star total case volume was essentially flat in the fiscal third quarter as growth in the vending travel and hospitality channels were offset by declines in theater in office supply.

George L. Holm: Segment net sales increased one 7% in the quarter.

George L. Holm: As expected the rate of inflation that just our continued to decelerate and was up four 7% in the fiscal third quarter.

George L. Holm: The rate of deceleration was similar to the rate declines from the fiscal first quarter of the fiscal second quarter.

George L. Holm: As we have discussed on prior calls, we expect inflation to settle in at a low single-digit year-over-year rate as we close fiscal 2024 and hold steady in that range going forward. This starts with high exposure to consumer packaged goods products. Support Consistent Inflation in this range. As we look ahead to the fiscal fourth quarter, we anticipate better volume, sales, and profit performance at Fistar due to improving fill rates in the vending channel and better growth in the value chain.

George L. Holm: As we've discussed on prior calls we expect inflation to settle in at a low single digit year over year rate as we close fiscal 2024 and hold steady in that range going forward.

George L. Holm: This starts high exposure to consumer packaged goods products support consistent inflation in this range as we look ahead to the fiscal fourth quarter, we anticipate better volume sales and profit performance at <unk> due to improving fill rates in the vending channel and better growth in the value channel.

George L. Holm: This is a direct result of new and expanding business opportunities. Before turning to Patrick, who will discuss our results and specific drivers of our performance and then provide more color on our guidance for fiscal 2024 and beyond, I want to summarize our fiscal third quarter and leave you with a few thoughts on the future. The fiscal third quarter was certainly challenging for our industry and organization, primarily due to January's inclement weather conditions and some calendar changes.

George L. Holm: This is a direct result of new and expanding business opportunities.

George L. Holm: Before turning to Patrick who will discuss our results and specific drivers of our performance and then provide more color on our guidance for fiscal 2024 and beyond I want to summarize our fiscal third quarter and leave you with a few thoughts on the future.

George L. Holm: The fiscal third quarter was certainly challenging for our industry an organization, primarily due to january's inclement weather conditions in some calendar differences.

George L. Holm: However, we are encouraged by more recent trends. Additionally, we have line of sight to new business wins in each of our three operating segments, which we expect will provide a tailwind to top-line performance in the months ahead. A more stable and stable environment also bodes well for the future. For our food service business, this means a return to more normal rates of low single-digit inflation, which provides visibility towards improving gross margin. For convenience and discard, lower levels of absolute inflation should ease pressure on the end consumer.

Patrick: However, we are encouraged by more recent trends. Additionally, we have line of sight to new business wins in each of our three operating segments, which we expect will provide a tailwind to topline performance in the months ahead.

George L. Holm: A more stable inflationary environment also bodes well for the future.

George L. Holm: In our foodservice business. This means a return to more normal rates of low single digit inflation, which provides visibility towards improving gross margins for convenience of historic low levels of absolute inflation should ease pressure on the end consumer.

George L. Holm: Over the long term, PFG's position as a leader in the food-away-from-home market provides diversification across a range of profitable and growing channels and markets with significant white space. We are confident that our investment in PFG's core initiatives and our associates will enable us to achieve long-term profitable growth, which we believe will result in positive shareholder returns. We appreciate your interest in Performance Food Group. With that, I will turn it over to Patrick, who will provide more detail on our financial performance and outlook. Thank you, George.

George L. Holm: Over the long term pft's position as a leader in the food away from home market provides diversification across a range of profitable and growing channels and markets with significant white space we.

George L. Holm: We are confident that our investment in <unk> core initiatives and our associates will enable us to achieve long term profitable growth, which we believe will result in positive shareholder returns. We appreciate your interest in performance food group with that I will turn it over to Patrick who will provide more detail on our financial performance.

George L. Holm: Vince.

Patrick: Outlook Patrick.

Patrick Hatcher: Thank you, George, and good morning, everyone. As George mentioned, there are certainly headwinds to overcome in the fiscal third quarter of 2024. However, our strong financial footing and market position produced a solid profit result that we expect to build on in the fiscal fourth quarter and into fiscal 2025. This morning, I will review a few highlights from our most recent quarter, then spend most of my time discussing our financial position, priorities for the months ahead, and provide some additional detail on our guidance. I will then be happy to take any questions you have during the Q&A portion of the call.

Patrick: Thank you George and good morning, everyone. As George mentioned, there are certainly headwinds to overcome in fiscal third quarter of 2024, However, our strong financial footing and market position.

Patrick Hatcher: The solid profit result that we expect to build from in the fiscal fourth quarter and into fiscal 2025.

Patrick Hatcher: This morning, I will review a few highlights from our most recent quarter then spend most of my time discussing our financial position.

Patrick Hatcher: <unk> for the months ahead.

Patrick Hatcher: And provide some additional detail on our guidance.

Patrick Hatcher: Well then be happy to take any questions you have during the Q&A portion of the call.

Patrick Hatcher: As you saw in our press release this morning, PFG delivered solid profit and cash flow results during the fiscal third quarter. This was possible because of our company's focus on driving sales into the most profitable channels and a disciplined focus on cost control. We'll also continue to invest in future growth initiatives. As we mentioned last quarter, we started the calendar year facing a difficult January due to bad weather throughout the month.

Patrick Hatcher: As you saw in our press release. This morning, PFG delivered solid profit and cash flow results during the fiscal third quarter.

Patrick Hatcher: This was possible because of our company's focus on driving sales into the most profitable channels and a disciplined focus on cost control, while also continuing to invest behind future growth initiatives.

Patrick Hatcher: As we mentioned last quarter, we started the calendar year facing a difficult January due to bad weather throughout the month. This resulted in a slight case decline for our total business in the fiscal third quarter of 2024.

Patrick Hatcher: This resulted in a slight case decline for our total business in the fiscal third quarter of 2024. PFG generated total net sales of about $13.9 billion, or a 0.6% increase year over year. Trends improved in February and March, which allowed us to finish the quarter on solid footing. For the full third quarter, organic independent restaurant case growth was 4.3%, including nearly 6% growth in both February and March. We continue to gain market share in the independent restaurant channel across a broad range of geographies and concepts, highlighting our favorable position in this important area of our business. For the full three-month period, chain restaurant cases were essentially flat, which we were very pleased with given the impact of a tough January.

Patrick Hatcher: <unk> generated total net sales of about $13 9 billion.

Patrick Hatcher: Or <unk>, 6% increase year over year.

Patrick Hatcher: Trends improved in February and March, which allowed us to finish the quarter on solid footing.

Patrick Hatcher: For the full third quarter organic independent restaurant case growth was four 3%.

Patrick Hatcher: <unk> nearly 6% growth in both February and March.

Patrick Hatcher: We continue to gain market share in the independent restaurant channel across a broad range of geographies and concepts highlighting our favorable position in this important area of our business.

Patrick Hatcher: Over the full three month period chain restaurant cases were essentially flat, which we were very pleased with given the impact of a tough January.

Patrick Hatcher: We recently onboarded a new chain business, which has helped accelerate growth in the fiscal fourth quarter and into fiscal 2025. Total PFG gross profit increased 3.8% in the fiscal third quarter to $1.6 billion. Once again, our business benefited from positive mixed shifts in the period. Importantly, our food service segment experienced inflation in the quarter after two consecutive quarters of deflationary pressure.

Patrick Hatcher: We recently on boarded new chain business, which should help accelerate growth in the fiscal fourth quarter and into fiscal 2025.

Patrick Hatcher: <unk> gross profit increased three 8% in the fiscal third quarter to $1 6 billion.

Patrick Hatcher: Once again, our business benefited from positive mix shift in the period importantly, our foodservice segment experienced inflation in the quarter after two consecutive quarters of deflationary pressure.

Patrick Hatcher: The resumption of inflation in several key commodities gives us confidence in improving profit conditions going forward, which I will touch upon when I review our guidance. On a consolidated basis, inflation was slightly higher in the fiscal third quarter compared to the fiscal second quarter, 3.6% year over year. Higher inflation in food service was offset by decelerating inflation in both Conveance and Vistar, which was in line with our model, as George mentioned. Vistar inflation was squarely in the mid-single-digit range, while convenience inflation moderated slightly to just below 7% for the fiscal third quarter.

Patrick Hatcher: The resumption of inflation in several key commodities gives us confidence in improving profit conditions going forward, which I will touch upon when I review our guidance.

Patrick Hatcher: On a total company consolidated basis inflation was slightly higher than the fiscal third quarter compared to the fiscal second quarter up three 6% year over year.

Patrick Hatcher: Higher inflation in foodservice was offset by decelerating inflation in both convenience and Vista, which was in line with our model.

Patrick Hatcher: As George mentioned this.

Patrick Hatcher: Mr inflation was squarely in the mid single digit range, while convenience inflation moderated slightly to just below 7% for the fiscal third quarter.

Patrick Hatcher: Based on our experience, it's not uncommon for convenience inflation to remain slightly more elevated due to consistent price increases in the tobacco space. I will touch upon tobacco inflation and its impact on our results in a moment. The gross profit per case was up $0.27 in the third quarter as compared to the prior year's period. We expect our gross profit per case to benefit from inflation in food service. This is an important component to our bottom-line results and helps support our growth through targeted investments in our workforce and technology.

Patrick Hatcher: On our experience, it's not a comment for convenience inflation to remain slightly more elevated due to consistent price increases in the tobacco space I.

Patrick Hatcher: I will touch upon tobacco inflation and its impact on our results in a moment.

Patrick Hatcher: Gross profit per case was up 27 cents in the third quarter as compared to the prior year's period, we expect our gross profit per case the benefit from inflation in foodservice. This is an important component to our bottom line results and help support our growth through targeted investments in our workforce and technology.

Patrick Hatcher: In the third quarter of fiscal 2024, PFG reported net income of $70.4 million, down 12.3% year over year. Adjusted EBITDA increased 1.9% to approximately $321 million, just above the midpoint of the guidance we announced last quarter. Deluded earnings per share in the fiscal third quarter was $0.45, a decrease of 11.8%, while adjusted diluted earnings per share was $0.80, a 3.6% decline year-over-year. Our effective tax rate of 27.3% in the fiscal third quarter was down compared to the 28.1% rate in last year's comparable period, mainly due to lower foreign taxes as a percentage of income, slightly offset by an increase in non-deductible expenses and state taxes as a percent of income.

Patrick Hatcher: In the third quarter of fiscal 2020 for PFG reported net income of $78 4 million down 12, 3% year over year.

Patrick Hatcher: Adjusted EBITDA increased one 9% to approximately $321 million.

Patrick Hatcher: Just above the midpoint of the guidance, we announced last quarter.

Patrick Hatcher: Diluted earnings per share in the fiscal third quarter was 45.

Patrick Hatcher: A decrease of 11, 8%, while adjusted diluted earnings per share was <unk> 80.

Patrick Hatcher: A three 6% decline year over year.

Patrick Hatcher: Our effective tax rate of 27, 3% in the fiscal third quarter was down compared to the 28, 1% rate in last year's comparable period.

Patrick Hatcher: Can we do to lower foreign taxes as a percentage of income slightly offset by an increase in non deductible expenses and state taxes as a percent of income.

Patrick Hatcher: Our financial position remains very strong, and we are generating significant cash flow through a combination of operational performance and Diligent Working Capital Management. Of the first nine months of fiscal 2024, PFG generated operating cash flow of $956.7 million, a nearly $300 million increase compared to the first nine months of last year. Free cash flow increased to $712.3 million over the first nine months of the fiscal year, up from $480 million last year.

Patrick Hatcher: Our financial position remains very strong.

Patrick Hatcher: And we are generating significant cash flow through a combination of operational performance.

Patrick Hatcher: And diligent working capital management.

Patrick Hatcher: Over the first nine months of fiscal 2020 for PFG generate operating cash flow of $956 7 million.

Patrick Hatcher: A nearly $300 million increase compared to the first nine months of last year.

Patrick Hatcher: Free cash flow increased to $712 3 million or.

Patrick Hatcher: Over the first nine months of the fiscal year up from $480 million last year we.

Patrick Hatcher: We expect to deploy our cash flow and value-creating activities, including capital expenditures, to expand our capacity and support our growth. For the first nine months of fiscal 2024, PFG invested $244.4 million in CapEx. After capital expenditures, our remaining priorities for capital deployment are unchanged and include M&A, leverage reduction, and share repurchase. We evaluate these decisions based upon the value we believe each would create for our shareholders and strategically deploy capital in support of this view.

Patrick Hatcher: We expect to deploy our cash flow and value, creating activities, including capital expenditures to expand our capacity and support our growth over.

Patrick Hatcher: Over the first nine months of fiscal 2020 for PFG invested $244 $4 million in Capex.

Patrick Hatcher: Yes.

Patrick Hatcher: After capital expenditures are remaining priorities for capital deployment are unchanged and include M&A leverage reduction and share repurchases. We evaluate these decisions based upon the value. We believe each will create for our shareholders and strategically deploy capital towards this view.

Patrick Hatcher: Our share repurchase program takes several factors into consideration, including the relative value of our stock, as well as the valuation compared to historic levels. While we did not repurchase any shares in the fiscal third quarter, we believe that our repurchase authorization, which had about $211 million remaining as of March, is an important component of our capital allocation plan. We also continue to look at strategic M&A as another avenue to create shareholder value. We're proud of PFG's track record of completing and integrating acquisitions throughout our history.

Patrick Hatcher: Our share repurchase program take several factors into consideration, including the relative value of our stock as well as the valuation compared to historic levels.

Patrick Hatcher: While we did not repurchase any shares in the fiscal third quarter, we believe that our repurchase authorization, which had about $211 million remaining as of March.

Patrick Hatcher: <unk> component of our capital allocation plan.

Patrick Hatcher: We also continue to look at strategic M&A as another avenue to create shareholder value.

Patrick Hatcher: Router Pfg's track record of completing and integrating acquisitions throughout our history.

Patrick Hatcher: The team is continuously working to identify interesting opportunities while remaining disciplined on price and strategic fit. Finally, we continue to focus on maintaining a healthy balance sheet. We closed the fiscal third quarter below the midpoint of our two and a half to three and a half times net debt to adjusted EBITDA target and feel very comfortable in this range. Earlier this month, we called $275 million of our outstanding 2025 notes, utilizing our ABL facility to take advantage of relative rate efficiency. In total, at the close of the fiscal third quarter of 2024, 86% of our total outstanding debt was at a fixed rate, including interest rate swap contracts.

Patrick Hatcher: Team is continuously working to identify interesting opportunities, while remaining disciplined on price and strategic fit.

Patrick Hatcher: Finally, we continue to focus on maintaining a healthy balance sheet, we closed the fiscal third quarter below the midpoint of our two five to three five times net debt to adjusted EBITDA target I feel very comfortable in this range earlier. This month, we call it $275 million of our outstanding 2025 notes utilizing our ABL facility.

Patrick Hatcher: <unk> advantage or relative rate efficiencies.

Patrick Hatcher: In total at the close of the fiscal third quarter of 2024, 86% of our total outstanding debt was at a fixed rate, including interest rate swap contracts.

Patrick Hatcher: We believe that our current level of debt provides ample flexibility to fund our ongoing operations while leaving room for the capital allocation priorities that I just highlighted. I'll finish up with an update on our guidance and some factors impacting our outlook. For the fiscal fourth quarter of 2024, we expect net sales to be in the range of $15 to $15.4 billion and adjusted EBITDA to be in a range of $430 to $450 million.

Patrick Hatcher: We believe that our current level of debt provides ample flexibility to fund our ongoing operations, while leaving room for capital allocation priorities that I just highlighted.

Patrick Hatcher: I'll finish up with an update on our guidance and some factors impacting our outlook.

Patrick Hatcher: For the fiscal fourth quarter of 2024, we expect net sales to be in the range of 15% to $15 4 billion.

Patrick Hatcher: And adjusted EBITDA to be in a range of $430 million to $450 million.

Patrick Hatcher: On the top line, our sales guidance for the fourth quarter suggests a full-year net sales result of $58.1 to $58.5 billion. This is below the $59-$60 billion range we had provided last quarter and largely reflects the top line softness experienced in the fiscal third quarter.

Patrick Hatcher: On the top line our sales guidance for the fourth quarter suggests a full year net sales result of $58 one to $58 5 billion.

Patrick Hatcher: This is below our 59% to $60 billion range, we had provided last quarter and largely reflects the topline softness experienced in the fiscal third quarter.

Patrick Hatcher: However, despite the top line challenges, we are tightening and raising the bottom end of our full year adjusted EBITDA guidance to a range of $1.48 to $1.5 billion compared to the prior $1.45 to $1.5 billion range. As you can see, we expect strong profit growth acceleration in the fiscal fourth quarter. We are confident in our projections due to the line of sight on several key items.

Patrick Hatcher: However, despite the top line challenges, we are tightening and raising the bottom end of our full year adjusted EBITDA guidance to a range of $1 48 to $1 5 billion.

Patrick Hatcher: Compared to the prior $1 45 to one $5 billion range.

Patrick Hatcher: You can see we expect strong profit growth acceleration in the fiscal fourth quarter. We are confident in our projections due to a line of sight on several key items.

Patrick Hatcher: First, as mentioned earlier, we are onboarding new business in all three segments, which should drive profitable top-line case sales in the coming months. Second, the resumption of low single-digit inflation in food service compared to deflation in the first half of the year is expected to result in higher gross profit per case. As a reminder, deflationary pressures were felt more heavily in our independent restaurant case business due to the product mix and pricing structure in that business, which is largely based on a percent market.

Patrick Hatcher: First as mentioned earlier, we are onboarding, new business in all three segments, which should drive profitable topline case sales in the coming months.

Patrick Hatcher: Second the resumption of low single digit inflation in foodservice compared to deflation in the first half of the year is expected to result in higher gross profit per case.

Patrick Hatcher: As a reminder, deflationary pressures are felt more heavily in our independent restaurant case business due to product mix and pricing structure in that business, which is largely based on a percent markup.

Patrick Hatcher: Positive inflation should help our profit performance over the next several quarters with a benefit from both year-over-year gains as well as stronger mixed shifts. Finally, several tobacco suppliers have announced price increases on their products, which we expect to result in favorable inventory holding gains in the fiscal fourth quarter of our convenience cycle.

Patrick Hatcher: Positive inflation should help our profit performance over the next several quarters with a benefit from both year over year gains as well as stronger mix shift.

Patrick Hatcher: Finally, several tobacco suppliers have announced price increases on their products, which we expect to result in favorable inventory holding gains in the fiscal fourth quarter of our convenience segment.

Patrick Hatcher: Taken together, we believe our fiscal fourth-quarter profit growth rate will accelerate nicely over the coming month. This should also provide a tailwind into fiscal 2025. We are currently reviewing our fiscal 2025 targets and expect to provide an update on our August earnings call in line with our normal cadence. With that said, our strong adjusted EBITDA result over the past two years, coupled with the tailwinds I just mentioned, should put us comfortably within the $1.5 to $1.7 billion adjusted EBITDA range that we set as a three-year target at our June 2022 Investor Day.

Patrick Hatcher: Taken together, we believe our fiscal fourth quarter profit growth rate will accelerate nicely over the coming months.

Patrick Hatcher: This should also provide a tailwind into fiscal 2025.

Patrick Hatcher: Currently reviewing our fiscal 2025 targets and expect to provide an update on our August earnings call in line with our normal cadence.

Patrick Hatcher: With that said our strong adjusted EBITDA results over the past two years, coupled with the tailwind as I just mentioned should put us comfortably within the one five to $1 7 billion adjusted EBITDA range that we set as a three year target at our June 2022 Investor day.

Patrick Hatcher: As we've previously noted, our expectation is to be close to the $1.5 billion adjusted EBITDA level in fiscal 2024 and expect solid growth in fiscal 2025. To summarize, we are pleased with how we are operating as a company and believe that the industry challenges seen in the fiscal third quarter will prove to be temporary. We expect results to accelerate in the fiscal fourth quarter and into fiscal 2025, underpinned by specific items that are in our forecast model. Thank you for your time today. We appreciate your interest in Performance Food Group, and with that, we'd be happy to answer your questions.

Patrick Hatcher: As we've previously noted our expectation is to be close to the $1 5 billion adjusted EBITDA level in fiscal 2024, and expect solid growth in fiscal 2025.

Patrick Hatcher: To summarize we are pleased with how we are operating as a company and believe that the industry challenges seen in the fiscal third quarter will prove to be temporary we expect results to accelerate in the fiscal fourth quarter and into fiscal 2025 underpinned by specific items that are in our forecast model. Thank.

Speaker Change: Thank you for your time today, we appreciate your interest in performance food group and with that we'd be happy to take your questions.

Operator: At this time, if you would like to ask a question, please press star 1 on your telephone keypad. You may withdraw your question at any time by pressing star 2. Again, that is star and 1. We will take our first question from Mark Carden with UPS. Please go ahead.

Speaker Change: At this time I would like to ask a question. Please press star one on your telephone keypad you may withdraw your question at any time that pressing star two.

Operator: That is star and one where we will take our first question from Mark Carden with UBS. Please go ahead.

Mark David Carden: Good morning. Thanks so much for taking the questions.

Mark David Carden: Good morning, Thanks, so much for taking the questions to start you noted your market share growth accelerated relative to <unk> and it sounds like you guys, whether it's some of the macro headwinds better relative to the industry as a whole.

George L. Holm: To start, you noted your market share growth accelerated relative to 2Q, and it sounds like you guys weathered some of the macro headwinds a bit better relative to the industry as a whole. Do any initiatives jump out at you in terms of driving the stronger relative performance? In your mind, what was most important in driving that improvement?

Mark David Carden: Initiatives jump out at you in terms of driving the stronger relative performance.

George L. Holm: What in your mind, what's most important in driving the improvement there.

George L. Holm: Well, it would definitely be new accounts. We still have seen a difficult penetration market out there.

Speaker Change: Well it would be definitely new accounts.

George L. Holm: We still have seen a difficult penetration.

George L. Holm: It's the existing accounts, as I guess, in aggregate, just aren't doing the business that they were doing before. I would also note, too, with the quarter, that if you took a two-year stack on our independent, it would have been a 13% growth, so we were north of eight two years ago and then 4.3 this year or last year in this year. But it's definitely new businesses driving our growth.

George L. Holm: Market out there.

George L. Holm: The existing accounts.

George L. Holm: I guess in aggregate just arent doing the business that they were doing before I would also note two within a quarter that if you took a two year stack on our independent it would've been a 13% growth.

George L. Holm: So we were.

George L. Holm: North of eight.

George L. Holm: Two years ago, and then four three this year or last year and this year.

George L. Holm: But it's definitely new business is thriving.

George L. Holm: Our growth.

George L. Holm: Okay, great. That's helpful. And then, just overall, have you seen much of a shift in distributor price competition, just given some of the broader challenges others in the industry have been calling out?

Speaker Change: Okay. Great. That's helpful. And then just overall have you seen much of a shift in distributor price competition, just given some of the broader challenges other than the industry had been calling out.

George L. Holm: I think that our industry has always been very competitive; there are a lot of players. And I think when growth is hard to come by, I think that you tend to get a market that's a little bit more competitive. But we really haven't seen that much of a change.

Speaker Change: Well I think that our industry has always been very competitive there's a lot of players in it.

George L. Holm: And I think when growth is hard to come by.

George L. Holm: You tend to get a market, that's a little bit more competitive, but we really haven't seen that much of a change.

Mark David Carden: Great. Much and good luck.

Speaker Change: Great question Good luck.

Mark David Carden: Thanks.

Operator: Thank you. We'll take our next question from Jake Bartlett with Truist Securities. Please go ahead.

Mark David Carden: Thank you we'll take our next question from Jake Bartlett with <unk> Securities. Please go ahead.

Jake Rowland Bartlett: Great, thanks for taking the question. You know, mine was on the environment out there, and you gave guidance for the third quarter after the weather in January, so presumably that was kind of incorporated, so it seems like the sales miss was more due to the environment. You talked about an improvement since, so I'm wondering whether, you know, the competitive, or not competitive, whether the consumer environment has gotten any better, you know, is that driving any, you know, accelerating trends, or is it just that your customers, and your pipeline, and your actions are driving that improvement? Trying to get a sense as to the trajectory of the consumer right now, and your customers.

Jake Rowland Bartlett: Great. Thanks for taking the question was on the environment out there.

Jake Rowland Bartlett: Gave guidance for the third quarter after.

Jake Rowland Bartlett: The weather in January so presumably that was kind of incorporated so it seems like the sales mix was more due to the environment and you talked about an improvement so I'm.

Jake Rowland Bartlett: Wondering whether the competitive <unk>.

Jake Rowland Bartlett: Whether the consumer environment has gotten any better or is that driving.

Jake Rowland Bartlett: Any accelerating trends or is it just that your.

Jake Rowland Bartlett: Your new customers.

Jake Rowland Bartlett: Pipeline and your actions are driving that improvement and trying to get a sense as to the trajectory of the consumer right now in Europe your customer business.

Jake Rowland Bartlett: So the softness for the quarter as.

George L. Holm: Well, the softness for the quarter is because, you know, it's almost entirely a January story. January was really difficult.

Jake Rowland Bartlett: It's almost entirely of January story January was was really difficult.

George L. Holm: I would say, if you looked at our customer base, QSR is definitely softening. It's a fairly large part of our business. Definitely casual dining. I mean, there are winners in both, but casual dining is very soft. And we're finding the independent restauranteur to be doing okay. I wouldn't say great, but I would say okay.

George L. Holm: I would say if you looked at our customer base.

George L. Holm: <unk> has definitely softened.

George L. Holm: As a fairly large part of our business.

George L. Holm: Definitely casual dining I mean, there's winners in both but casual dining is very soft.

George L. Holm: And we're finding the independent restaurant sure to be doing okay, I wouldn't say, great, but I would say, okay, but there are many more of them than there were before so it's the new accounts.

George L. Holm: But there are many more of them than there were before. So it's the new accounts and our ability to continue to run in that 6-7% growth in new customers sold. But I don't see a really bad environment out there. I just think that we've got some stressed consumers that are probably at the lower income level.

George L. Holm: Our ability to continue to.

George L. Holm: Run in that 67% growth in new customers sold.

George L. Holm: But I don't see a really bad environment out there I just think that.

George L. Holm:

George L. Holm: We've got some stress consumers that are probably at the lower income level.

Jake Rowland Bartlett: Great. And my second question is about margins. You know, you beat on margins a little bit in the third quarter. The question is, you know, what was the driver of that? Was it gross profits and inflation being a little stronger than expected, or was it productivity improvements that helped in the third quarter? And, you know, as Patrick and I listed, I think the three drivers for improving, you know, a solid fourth quarter, improving productivity wasn't one of them. I'm wondering what the trajectory is there on just your operating costs, your leverage, and how you're making what kind of progress you're making there and bringing down costs.

Speaker Change: Got it great.

Speaker Change: And my second question is on margins.

Jake Rowland Bartlett: <unk>.

Jake Rowland Bartlett: On margins a little bit in the third quarter.

Jake Rowland Bartlett: <unk> is what was the driver of that was that the gross profits in the inflation being a little stronger than expected or was what's it about.

Jake Rowland Bartlett: Productivity improvements that helped in the third quarter, and we think as Patrick as you've listed.

Jake Rowland Bartlett: Three drivers for improving solid fourth quarter.

Jake Rowland Bartlett: Proving productivity wasn't one of them I'm wondering what the trajectory is there on just your operating costs.

Jake Rowland Bartlett: Your leverage and how you are what kind of progress youre, making there in bringing down costs, yes.

George L. Holm: Yeah, well, as far as margin, particularly gross profit per case, that's a function of mix, as we continue to grow at a faster rate and be independent than we do. The chain business, as far as productivity goes, I would assume you're speaking warehouse and delivery productivity or operational productivity.

Speaker Change: Yes, well as far as margin, particularly gross profit per case, that's a function of mix.

George L. Holm: As we continue to grow at a faster rate than independent and we do.

George L. Holm: We continue to improve. We're not back to 2019 levels, but we do like the improvement that we're seeing. And then when you get to both our convenience business and our customized business, they're really doing well from a productivity standpoint. You know, actually better than 2019.

George L. Holm: The chain business as far as productivity goes I would assume you are speaking warehouse and delivery productivity or operational productivity, we continue to improve.

George L. Holm: Back to 2019 levels, but we do like the improvement that we're seeing and then when you get to both our convenience business and our customized business there.

George L. Holm: We're really doing well from a productivity standpoint.

George L. Holm:

George L. Holm: Doing actually better than 2019 numbers.

Patrick Hatcher: Jake, I was just going to add, I mean, it's a good point that we didn't call that out specifically as one of the things that are going to drive our Q4 results, but as George mentioned in his comments, we do expect operational efficiency, certainly in convenience, and all the best businesses to continue to perform as they've been performing and to improve.

George L. Holm: Okay.

Speaker Change: Jamie I was just going to add.

Patrick Hatcher: It's a good point that we didn't call that out specifically as one of the things Erica and drive our Q4 results but.

Patrick Hatcher: As George mentioned in his comments, we do expect operational efficiencies, certainly and convenience and all the businesses to continue to performance they've been performing and to improve.

Jake Rowland Bartlett: I appreciate it. Thank you.

Speaker Change: Great I appreciate it thank you.

Operator: Thank you. We'll take our next question from Edward Kelly with Wells Fargo. Please go ahead.

Jake Rowland Bartlett: Thank you and we'll take our next question from Edward Kelly with Wells Fargo. Please go ahead.

Edward Joseph Kelly: Hi, good morning, everyone. I wanted to start with just Q4 and, you know, maybe a bit more detail and a level of confidence. So EBITDA is up 14% at the midpoint. Can you talk a little bit more about the bridge?

Edward Joseph Kelly: Hi, good morning, everyone.

Edward Joseph Kelly: I wanted to start with just Q4.

Edward Joseph Kelly: I guess, maybe a bit more detail and level of confidence so EBITDA is up 14% at the midpoint.

Patrick Hatcher: Patrick, when you gave those few factors, I don't know if they were listed in order of magnitude. I'm curious about the size of any tobacco gain, for instance. And then, you know, within the guidance, do you really just need trends in April to hold, or are you expecting any improvement in that regard? And as it relates to 25 with all this, I mean, if you do this number, doesn't this speak well about, you know, how you're thinking about, you know, 25, particularly the first sort of three quarters of the year? Or are there other things to consider?

Edward Joseph Kelly: Can you talk a little bit more about the bridge Patrick when you gave those few factors I don't know if they were listed in order of magnitude I'm curious about the <unk>.

Patrick Hatcher: Size of it.

Patrick Hatcher: If any tobacco gain for instance, and then within the guidance.

Patrick Hatcher: Really just need trends in April to hold.

Patrick Hatcher: Or are you expecting any improvement.

Patrick Hatcher: In that regard as it relates to 'twenty five but all of that I mean, if you do this number.

Patrick Hatcher: Doesn't.

Patrick Hatcher: Speak well about like how you are thinking about.

Patrick Hatcher: 25, particularly the first three quarters of the year.

Patrick Hatcher: Or are there other puts and takes to consider.

Patrick Hatcher: Yeah, thanks. I'll start.

Patrick Hatcher: Yes, Thanks, Ed ill start Im surcharge will add some comments.

Speaker Change: I mean to your last point on 25, let's just start there I mean thats.

Patrick Hatcher: I'm sure George will add some comments. I mean, to your last point on 25, let's just start there. I mean, that's exactly right. As we've mentioned in the call, the guidance for 24 is really saying we're going to be close to the top end of our range on EBITDA, which is the bottom end of the range on the three-year guide. So that puts us comfortable within that three-year guide. So we do feel really good about where we're ending this year and then what that means for next year.

Patrick Hatcher: Actually Ryan we've mentioned in the call like the guidance for 'twenty four is really we're saying we're going to be close to the.

Patrick Hatcher: Top end of our range on EBITDA, which is the bottom end of the range on the three year guide so that puts us comfortable within that three year guide so.

Patrick Hatcher: And again, we'll give you much more detail in our August call. And then, in terms of the things that I unpacked and how we're going to hit these numbers in Q4, yeah, I would say I wouldn't necessarily put them in terms of order of magnitude. I would put them in terms of order of like P&L.

Patrick Hatcher: We do feel really good about where we're ending this year and then what that means for next year and again, we will give you much more detail in our August call.

Patrick Hatcher: And then in terms of the things that I am Pak and <unk>.

Patrick Hatcher: How we're going to hit these numbers in Q4.

Patrick Hatcher: Yes, I would say I wouldn't necessarily put them in terms of order of magnitude in terms of the order of like piano I really wanted to start with the fast start with the fact that we have a lot of new business coming on.

Patrick Hatcher: I mean, I really wanted to start with the fact that we have a lot of new business coming in. And it's not just in one segment, but it's across all three segments. We've already onboarded a lot of the new food service business in the last couple weeks. We expect to onboard the convenience business a little later in May. And then Bistar has new business coming in June. So, I'm really pleased with our sales development efforts across all the segments.

Patrick Hatcher: Not just in one segment, but it's across all three segments have already onboard a lot of the new foodservice business. The last couple of weeks, we expect to onboard the convenience business.

Patrick Hatcher: A little later in May and then star has new business coming on in June So really pleased with our sales development efforts across all the segments.

Patrick Hatcher: And then, you know, it's really important, obviously, the fact that we've been looking at two quarters of deflation previously. And then in the third quarter, we saw that deflation in food service moved to very moderate inflation. But we've continued to see that modest improvement in inflation, and we continue to believe that that's what's going to happen for the rest of the quarter, which will, as we've noted, really help our GP per case.

Patrick Hatcher: And then.

Patrick Hatcher: Really important obviously, the fact that we've been looking at two quarters previously of deflation and then in the third quarter, we saw that deflation in foodservice move to very moderate inflation, but we've continued to see that modest improvement in inflation and we'd continue to leave that that's what's going to happen for the rest of the quarter, which as we can.

Patrick Hatcher: And also, the mix of our business is really improving as well. And then, finally, just the cigarette price increases. The way I think about that, it's largely in line with what we saw last year. So, but we just call that out because it will help our bottom line as we get those inventory gains.

Patrick Hatcher: Noted.

Patrick Hatcher: Helping arent GP per case and also the mix of our business is really improving as well and then finally, just the cigarette price increases the way I think about that it's largely in line with what we saw last year.

Patrick Hatcher: But we just call that out because it will help our bottom line as we get those inventory gains.

George L. Holm: Yeah, I'll add a few to that without getting too long-winded here, but he mentioned inventory gains. You know, we overcame about $60 million last year of inventory gains that were higher than this year. And as we get into the fourth quarter, we don't have that to overcome anymore.

Speaker Change: Yes, I'll add a few to that without getting too long winded here, but he mentioned inventory gains.

George L. Holm: We overcame about $60 million last year of inventory gains that were above.

George L. Holm: So that's a positive for us. I would also say the calendar, where we got a benefit in the fiscal second quarter with additional delivery days, which meant a lot, you know, at the end of the calendar quarter. And it affected January the opposite way. And then when you get to Q4, we started out with the week after Easter, which is typically our slowest week of Q4. Yet we still had a good April top and bottom line. And we don't have any calendar issues to deal with for the rest of the year. So that's very helpful, the new business, as Patrick mentioned. A big help.

George L. Holm: We're above this year and as we get into the fourth quarter, we don't have that to overcome any more so that's a positive for us.

George L. Holm: I would also say the calendar.

George L. Holm: We got benefit in fiscal second quarter.

George L. Holm: With additional delivery day.

George L. Holm: Which meant a lot at the end of the calendar quarter and it effective January the opposite way and.

George L. Holm: And then when you get to Q4, we started out with the week after Easter, which is typically our slowest week of Q4, yet we still had.

George L. Holm: A good April top and bottom line and we don't have any calendar issues to deal with for the rest of the year. So that's very helpful to new business.

Speaker Change: Patrick mentioned.

George L. Holm: Count then.

George L. Holm: Then, you know, last year we were running close to 10% additional salespeople, so we were carrying a pretty good expense there. We lapped that. We're up about five and a half percent right now, and they were starting to get good productivity out of the new ones. And we won't have that additional sales expense as we go through the fourth quarter that we have handled for most of the year. And I'll stress with Coramark, the additional business they're bringing on will also be a big help.

George L. Holm: Last year, we were running close to 10% additional salespeople. So we're carrying a pretty good expense there.

George L. Holm: And.

George L. Holm: We lapped that we're up about five 5% right now and salespeople were starting to get good productivity out of the new ones and we won't have that additional sales expenses. We go through the fourth quarter that we that.

George L. Holm: That we've handled for most of the year.

George L. Holm: And now stressed with with core Mark the additional business that we're bringing on will also be a big help. So we have a lot of things that have gone in a positive direction for US right now and that's what gives us confidence for the fourth quarter and really into next year, which will give some good communication on our August call.

George L. Holm: So we have a lot of things that are going in a positive direction for us right now. And that's what gives us confidence through the fourth quarter and really into next year, which, you know, we'll get some good communication on our August call around what our guidance will be for the first quarter of next year, and then the total.

George L. Holm: And what our guidance will be for first quarter of next year and the total year.

Speaker Change: Just maybe I could just ask a quick follow up.

Edward Joseph Kelly: Just maybe I could just ask a quick follow-up, it's sort of related to this, I guess, but, you know, you're generating really good cash flow, leverage is in a good spot. Your stock's probably trading at like eight times EBITDA on what you're probably going to end up, you know, earning next year. I think you may end up, you know, M&A usually a bit higher than that, Like, how are you thinking about the appetite for stock buybacks versus, you know, versus M&A at this point? Yeah, Ed. You know

George L. Holm: Related to this I guess, but.

Edward Joseph Kelly: You are generating really good cash flow leverage is in a good spot.

Edward Joseph Kelly: Your stock's, probably trading at like eight times EBITDA on what Youre, probably going to end up.

Ed: <unk> next year I think you may end up M&A, usually a bit higher than that right.

Edward Joseph Kelly: Are you thinking about appetite for stock buyback.

Edward Joseph Kelly: Versus.

Ed: First is that versus M&A at this point.

Patrick Hatcher: Yeah Ed, you know when we've talked about our capital allocation strategy we've always said number one is to invest in capacity and we've done a really good job and we have a lot of new buildings or additional buildings expansions coming online and you can see what we've done in terms of our investments there and I'm just going to go through these in obviously reduced leverage is one of them and we continue to perform well there and the other two pieces are M&A and we continue to look at opportunities and then the share repurchase we view is incredibly important but as I mentioned we didn't buy anything this quarter but we still have 211 million in the repurchase program available to us and we'll continue to use that in junction with all the other priorities I just laid out so we just look at them very strategically and and deploy that capital accordingly.

Ed: Yes, Ed.

Patrick Hatcher: Yes, we've talked about our capital allocation strategy. We've always said number one is to invest in capacity and we've done a really good job and we have a lot of <unk>.

Patrick Hatcher: New buildings are additional building expansions coming online and you can see what we've done in terms of our investments there.

Patrick Hatcher: I'm just going to go through this and obviously reduce leverage thats one of them and we continue to perform well there and the other two pieces, our M&A and we continue to look at opportunities and then the share repurchase we view is incredibly important but as I mentioned, we didn't buy anything this quarter, but we still have $211 million.

Patrick Hatcher: The repurchase program available to us and we'll continue to use that.

Patrick Hatcher: In conjunction with all the other priorities I just laid out so we just look at them very strategically and deploy that capital accordingly.

Patrick Hatcher: Yes.

Speaker Change: Thanks, guys.

Operator: Thank you. We'll take our next question from Alex Slagle with Jeffries. Please go ahead.

Patrick Hatcher: Thank you we'll take our next question from Alex Slagle with Jefferies. Please go ahead.

Alexander Russell Slagle: Hey, good morning. Thanks for all the color this morning.

Alexander Russell Slagle: Hey, good morning, Thanks for all the color.

Alexander Russell Slagle: This morning.

Alexander Russell Slagle: I just want to circle back on Jake's question a little bit, just the revenue drivers during the quarter across your different businesses and like what the biggest headwind that you experienced in February and March was that kind of kept a lid on the top line. It seemed like the independents and restaurants overall bounced back solidly, and pricing firmed up. So it appeared to be more of a sluggish recovery for Vistar and convenience cases. And although I guess the pricing was about as you expected, perhaps you can flush that out a bit more into what surprised you.

Alexander Russell Slagle: I just wanted to circle back on Jack.

Alexander Russell Slagle: <unk> question, a little bit just the revenue drivers during the quarter across your different businesses and like what's the biggest headwind that we experienced in February and March was that kind of kept a lid on the topline I mean like.

Alexander Russell Slagle: The independent restaurants, overall bounce back solidly and pricing firmed up suddenly appeared to be more of a sluggish recovery in nexstar and can be in cases, and although I guess the pricing was about as you expected, but perhaps a bit less.

Alexander Russell Slagle: That out.

Alexander Russell Slagle: A bit more what surprise.

George L. Holm: Yeah, I would say in food service that it wasn't so much the improvement that we had in February and March; we weren't exactly real pleased with how we did in February and March. It was just getting past January.

Speaker Change: Yes, I would say in foodservice that.

George L. Holm: And, you know, we think we're going to continue to improve from a food service standpoint. I think at Vistar and Convenience, the level of inflation that they dealt with was higher and lasted longer. And I think there's an adjustment for their customer base. When, you know, they go to a micro market or go to a vending machine or go into a convenience store, there are some pretty significant price increases.

George L. Holm: It wasn't so much the improvement that we had in February and March we weren't exactly we were pleased with how we did in February March It was just getting past January.

George L. Holm: And we think we're going to continue to improve from a foodservice standpoint, I think in Vista and convenience.

George L. Holm: The level of inflation, they dealt with was higher and lasted longer.

George L. Holm: And I think there is an adjustment for their customer base.

George L. Holm: They go to a micro market or go to a vending machine or go into a convenience store, there's been some pretty significant price increases and I think they need to adjust I think they will adjust.

George L. Holm: And I think they need to adjust. I think they will adjust, and we are seeing, you know, same store sales declines or what we look at as a penetration number. We were at 6.6 for the quarter for convenience.

George L. Holm: And we.

George L. Holm: We are seeing same store sales declines of what we look at it as a penetration number we were at $6 six for the quarter for convenience.

George L. Holm: It's huge, and it's not something that that channel has experienced before. And I just think it's time. Our food service is growing well there, so that'll, you know, help to alleviate some of that. And I think the same with Vistar. This is the first time that we've ever had sales growth issues with Vistar. They've got, you know, nice new business coming in. We just have a lot of confidence in that top line coming back. Now, obviously, tobacco it's not going to. That's going to be a continual decline, but we expect that.

George L. Holm: It's huge and it's not something that channels experienced before and.

George L. Holm: I just think it's it's time.

George L. Holm: Foodservice is growing well there that will help to alleviate some of that.

George L. Holm: And I think the same with <unk> is the first time that we've ever had sales growth issues is this star they've got.

George L. Holm: Nice new business coming in.

George L. Holm: We just have a lot of confidence in that top line coming back, obviously tobacco or it's not going to that's going to be it continue will decline, but we expect that.

Patrick Hatcher: And Alex, I'll just add, just on Vistar, just to give you a little bit more of a detailed example, I mean, just, except just looking at this information, I mean, when you think about Vistar and their business in theaters, the box office revenue is down, you know, it's only comping at 78% versus prior year, and it's 60% versus 2019, so there's a lot going on in Vistar services, a lot of different channels, some are performing really well, some are having some struggles like theater, so it's a pretty mixed bag there.

George L. Holm: And Alex Auto side, just on <unk>, just to give you a little bit more of a detailed example, I mean just access is look in this information.

Patrick Hatcher: When you think about based on their business in theaters the box office revenue is down.

Patrick Hatcher: It's only comping at 78% versus prior year and at 60% versus 2019, so there's a lot going on this our services a lot of different channels.

Patrick Hatcher: Performing really well and some are having some struggles like theater so.

Patrick Hatcher: It's a mixed bag there.

Patrick Hatcher: That makes sense. Yeah, and on convenience, I mean, what was the case group that you talked about where the food and food service side was down? What did that look like if you included it?

Speaker Change: That makes sense, yes convene.

Patrick Hatcher: Convenience I mean, what was the.

Speaker Change: Case growth.

Speaker Change: Can you talk about the food and foodservice side was down what does that look like if you included.

Speaker Change: That could surface.

Speaker Change: I guess related to convenience that was not in that category.

Patrick Hatcher: Well, yes, foodservice and the food area itself combined were down, but foodservice was actually up and I would say that if you took that with the performance foodservice. So I'm going to give you what I think because I didn't look at that specifically.

George L. Holm: Yeah, food service and the food area itself combined, or down, the food service was actually up. And I would say that if you compared that with the performance food service, so I'm going to give you what I think because I didn't look at that specifically. But I would say it's probably mid single digit. It's been doing well. And matter of fact, last week, we set a new record.

George L. Holm: But I would say, it's probably mid single digit.

George L. Holm: It's been doing well.

George L. Holm: Back last week.

George L. Holm: We set a record for the number of convenience stores that we sold foodservice too.

George L. Holm: Actually did with our pizza business our Hispanic business, both actually had.

George L. Holm: The most counts we've ever sold last week.

George L. Holm: It is encouraging.

Alexander Russell Slagle: Congratulations on that. Thanks.

Speaker Change: Congrats on that thanks.

Speaker Change: Very encouraging.

Operator: Thank you. We'll take our next question from Kelly Bania with BMO Capital. Please go ahead.

Alexander Russell Slagle: Thank you we'll take our next question from Kelly Bania with BMO capital. Please go ahead.

Kelly Ann Bania: Good morning. Thanks for taking our questions. I guess I just wanted to dive in a little bit more into the levers that you're able to pull on margins or expenses to support the bottom line. I guess I think some of or at least some of the new business wins were already in your plan, and inflation seems to be, I think, playing out largely as expected. So just how are you able to kind of maintain the bottom line outlook despite the top line coming in where it is? Yeah, as far as the levers to be pulled.

Operator: Okay.

Kelly Ann Bania: Good morning, Thanks for taking my question.

Kelly Ann Bania: Yes.

Kelly Ann Bania: I wanted to dive in a little bit more into the levers that you're able to pull on margins our expenses to support the bottom line I guess.

Kelly Ann Bania: I think some of them are at least some of the new business wins were already in your plan and inflation.

Kelly Ann Bania: Playing out largely as expected.

Kelly Ann Bania: Just how are you able to kind of maintain the.

Kelly Ann Bania: Our bottom line outlook to site.

Kelly Ann Bania: The top line.

Kelly Ann Bania: Coming in where it is.

George L. Holm: Yeah, as far as levers to be pulled, I think right now with our food service area, we've done a good job getting our margins up in both independent and national. We're pretty pleased right now. And I think most of what you'll see in gains from us will be just changes in the mix of business. And as far as expenses are concerned, it took us a while to get our workforce back to where it was pre-COVID. And we just, at this point, don't have any levers that we want to pull from an expense standpoint; we want to continue to build our warehouse and delivery crew and continue to build our sales.

Kelly Ann Bania: Yes, as far as the levers to be pulled I think right now with our foodservice area.

George L. Holm: We've done a good job getting our margins up in both independent and National and we're pretty pleased right now and I think most of what Youll see gains from us will be just changes in mix of business.

George L. Holm: And as far as expenses that it took us a while to get our workforce back to where it was pre COVID-19.

George L. Holm: And we just at this point don't have any leverage that we want to pull from an expense standpoint, we want to continue to build our warehouse and delivery crew and continue to build our sales force.

Operator: Thank you. We'll take our next question from Lauren Silberman with Deutsche Bank. Please go ahead.

George L. Holm: Thank you we'll take our next question from Lauren Silberman with Deutsche Bank. Please go ahead.

Lauren Danielle Silberman: Hey guys, thanks so much. So first, I just wanted to ask about the chain side of the business returning to the flat. How much of this is a function of new business wins versus any signs of underlying improvement in chain traffic? Well, I

Lauren Danielle Silberman: Hey, guys. Thanks, so much so first I just wanted to ask about the port side of the business regarding what how much of it is a function of more global brands versus any signs of underlying <unk>.

George L. Holm: Well, I think I kind of mentioned that earlier, but it's worth talking about again. I think if you look at the chain.

Lauren Danielle Silberman: Okay.

Lauren Danielle Silberman: Well I think I kind of mentioned that earlier, but it's worth talking about again I think if you looked at the change.

George L. Holm: If you look at them in aggregate, it is definitely slow. Now, we happen to have some that have been slow for a long time, but we have some that are doing real well. In aggregate, no, we don't see any strengthening in the chain business. You're going to see better numbers come from us in the chain business, but that's because of new accounts, not because of our existing account base.

George L. Holm: If you look at them in aggregate. It is definitely slow now we happen to have some that have been slow for a long time.

George L. Holm: But we have some that are doing real well in aggregate no. We don't see any strengthening in the chain business youre going to see better numbers come from us in the chain business, but thats because of the new accounts not become because of our existing account base.

Lauren Danielle Silberman: helpful. Another one on this Vistar, can you expand on the competitive dynamics within that segment, specifically, and whether you're seeing any changes and becoming a bit more promotional or competitive than you're used to?

George L. Holm: Helpful.

George L. Holm: Another one on just the start.

Lauren Danielle Silberman: Can you expand on the competitive dynamics in that segment.

Lauren Danielle Silberman: And whether youre seeing any changes in it becoming a bit more.

Lauren Danielle Silberman: Promotional or better than you're used to.

Patrick Hatcher: Yeah, thanks, Lauren. You know, it's obviously a very competitive environment. And because Vistar plays in so many different channels, they do have a lot of different competitions. As far as promotions go, I mean, that's, you know, again, they do a lot of rk with CPG. So most of the promotional activity is going to come from the manufacturer, if that's if I'm understanding your question correctly. But as far as how they go to market every day, they compete across the board and through all their channels. But I just want to make sure I answered your question.

Speaker Change: Yeah. Thanks Lauren.

Patrick Hatcher: Yes, it's obviously, a very competitive environment and because of this our plays in so many different channels.

Patrick Hatcher: Do you have a lot of different competitions as far as promotional I mean, thats again, they do a lot of.

Patrick Hatcher: Work with CPG. So most of the promotional activity is going to come from the manufacturer. If that's if I'm understanding your question correctly, but as far as how they go to market every day they compete across the board in all of their channels.

Patrick Hatcher: Make sure I answered your question.

Lauren Danielle Silberman: Yeah, I'm just trying to even from like other food service distributor players in the space, if it's getting a bit more competitive in terms of shared

Patrick Hatcher: Yes.

Patrick Hatcher: From like other food service distributor players in this space.

Lauren Danielle Silberman: Getting a bit more competitive in terms of share gain.

George L. Holm: I would say yes, but I would say that's only in the theatre category.

Lauren Danielle Silberman: I would say, yes, but I would say thats only in the theater category.

Lauren Danielle Silberman: Okay, this is super helpful. Thank you, guys.

Speaker Change: Okay Super helpful. Thank you guys.

Lauren Danielle Silberman: Thanks.

Operator: Thank you. We'll take our next question from Jeffrey Bernstein with Barclays. Please go ahead.

Lauren Danielle Silberman: Okay.

Lauren Danielle Silberman: Thank you we'll take our next question from Jeffrey Bernstein with Barclays. Please go ahead.

Jeffrey Andrew Bernstein: Great. Thank you very much.

Operator: Yes.

Jeffrey Andrew Bernstein: Great. Thank you very much.

Jeffrey Andrew Bernstein: Two questions. The first one just on the new business George I think you mentioned you're on boarding in all three segments, which.

George L. Holm: Two questions. The first one, just on the new business, George. I think you mentioned you're onboarding in all three segments, which I'm just wondering if there's been any change in your strategy of late to achieve whether you're winning this business from your larger peers or smaller competitors. You mentioned independence. You're up six to 7%. I'm just wondering how sustainable that is. But just more broadly, in terms of the onboarding and all three segments, how you're going about doing that, whether there's any changes you've implemented on your end to achieve Yeah, well, it's very different.

Jeffrey Andrew Bernstein: It seems quite encouraging I'm, just wondering if theres been any change in your strategy of late to achieve.

George L. Holm: Whether you're winning this business from here.

George L. Holm: Larger peers or smaller competitors.

George L. Holm: I think you mentioned independent share up 6% to 7% I'm just wondering how sustainable that is but just more broadly in terms of the the onboarding in all three segments how.

George L. Holm: How are you going about doing that whether there is any changes you've implemented on yearend to achieve.

George L. Holm: Yeah, well, it's very different competitors that we've been able to get that business from because, you know, we have different competitor sets and the different businesses that we're in. I would say that there's no change in our strategy whatsoever. I think we're comfortable in that, you know, mid-single digit to higher as far as independent case growth goes. It's nice to see a little inflation to go along with it.

George L. Holm: Yes, well its very different competitors.

George L. Holm: Being able to get that business from because we have different competitors sets in the different businesses that we're in.

George L. Holm:

Speaker Change: I would say.

George L. Holm: There is no change in our strategy whatsoever, I think we're comfortable.

George L. Holm: In that.

George L. Holm: Mid single digit to higher as far as independent case growth goes nicely a little bit of inflation to go along with it and I think we'll always be opportunistic in the national account area.

George L. Holm: And I think we'll always be opportunistic in the national count area if there's somebody that we're the right geographic fit for and we feel it's a good culture fit. And, you know, we can be profitable with it, we'll, you know, we're always going to be looking for that type of business.

George L. Holm: Somebody that we're the right geographic fit for and we feel Thats, a good culture fit and.

George L. Holm: We can be profitable with it.

George L. Holm: Always going to be looking for that type of business.

George L. Holm: understood, and then just on the mention of M&A and shareholder value creation. How are discussions with targets going? I'm wondering whether... slowing macro that you might be embarking on now for the industry, not necessarily for yourself, but for the industry, whether that helps or hurts in those discussions. Obviously, you have a big opportunity on the West Coast; just wondering how that plays out in this type of environment versus others. Thank you.

Speaker Change: Understood and then just on the menu.

George L. Holm: As I mentioned of M&A and shareholder value creation.

George L. Holm: How are discussions with targets going I'm wondering whether.

George L. Holm: Slowing macro that.

George L. Holm: It might be embarking on now for the industry not necessarily for yourself, but for the industry, whether that helps or hurts in those discussions obviously you have a big opportunity on the West Coast. Just wondering how that plays out in this type of environment versus others. Thank you.

George L. Holm: Yeah, we're, you know, we're always very active from an M&A standpoint; we're always talking to several people. We try to make sure that we're talking to people that are a really good fit and that we're not, you know, just spending time on something that isn't going to materialize. But it is a very important part of what we have going on for our next fiscal year and I think probably a big part of the next three-year numbers that we put out when we get through the three-year period we projected from our and how that affects it. I don't know that it really affects it that much. I think most of the M&A that we've been able to get done is more about it just being the right time for the person that's selling.

George L. Holm: Yes.

George L. Holm: We're always very active from an M&A standpoint, and we're always talking to several people.

George L. Holm: We try to make sure that we're talking to the people that are really good fit and that we're not just spending time on something that.

George L. Holm: It isn't going to materialize, but it is a very important part of what we have.

George L. Holm: I have gone on for our next fiscal year, and I think probably a big part of the next three year numbers.

George L. Holm: That we put out when we get through this three year period, we projected from our Investor day.

George L. Holm: As far as the marketplace and how that affects it.

George L. Holm: Note that it really affects it that much you mean to values either there or it isn't.

George L. Holm: I think most of the M&A that we've.

George L. Holm: Been able to get done is more.

George L. Holm: That is just being the right time for the for the <unk>.

George L. Holm: Person at selling.

Jeffrey Andrew Bernstein: Just to clarify, so when you guys report your fiscal fourth quarter, is it likely that you will then give... a 3-Year Forward Outlook, so Fiscal 25 would be the first year, and I think, George, your comment was that M&A would play a bigger part over the next few years than perhaps it has over the past few years.

Speaker Change: Understood just to clarify so when you guys report your fiscal fourth quarter.

Jeffrey Andrew Bernstein: Is it likely that you will then give.

Jeffrey Andrew Bernstein: Three year forward outlook for fiscal 'twenty five would be the first year and I think George your comment was that M&A would play a bigger part over the next few years than perhaps it has over the past.

George L. Holm: Yeah, we planned to have an Investor Day that would be three years after the last Investor Day and give three-year numbers at that point. So what we'll be giving Come August will be what we project versus our three-year projection that we gave before. We'll tighten that number and then what our guidance would be for fiscal 2020.

George: Yes, we plan to have an investor day would be three years. After the last Investor day, and give three year numbers at that point, so what will be giving.

George L. Holm: Come August will be what we project versus our three year projection that we gave before.

George L. Holm: We will tighten that number and then what our guidance would be for fiscal 2025.

Jeffrey Andrew Bernstein: understood. Thank you.

Speaker Change: Understood. Thank you.

Operator: Thank you. We'll take our next question from John Heinbockel with Guggenheim. Please go ahead.

Jeffrey Andrew Bernstein: Thank you we'll take our next question from John <unk> with Guggenheim. Please go ahead.

John Edward Heinbockel: George wanted to drill down on the Salesforce expansion, right? So maybe talk to that maturation. I don't know how many of those are coming off non-compete. Maybe have a thought on that.

John Edward Heinbockel: George I wanted to drill down on the.

John Edward Heinbockel: The sales force expansion right, so maybe talk to.

John Edward Heinbockel: That maturation I don't know how many of those are coming off non competes.

George L. Holm: And then there is a rule of thumb, right, when you think about the accounts that they used to call on? You know, can they successfully move over a quarter, a third, 50%? I'm not sure what the number is of the accounts they used to call on. So your visibility into that is limited. Let me, I guess the last piece of that is, I guess it sounds like you think because of the sheer size of the sales force that you've onboarded, that, you know, six to 7% independent case growth is, even in this environment, very achievable.

John Edward Heinbockel: You have a thought on that and then is there a rule of thumb.

George L. Holm: When you think about the accounts that they used to call on.

George L. Holm: Can they can they successfully move over a quarter of third 50% I'm not sure. What the number is of the accounts they used to call on you or your visibility into that.

George L. Holm: And I guess the last piece of that is I guess it sounds like you think.

George L. Holm: Because of the sheer size of the sales force that you on boarded.

George L. Holm: 6% to 7% independent case growth is even in this environment.

George L. Holm: Is very achievable.

George L. Holm: Yeah, well, we have, you know, several that are, and it's geographically widespread that are coming off non-compete. But I tell you, we have every possibility that could happen with that. We have people that come to us, and we put them in a different area because they'll compete, and when the year ends, they don't want to go back to where they were before because they're doing so well. We have people that don't do very well during that year, and we put them back into an area that doesn't do well that year, and we put them back where they were, and they don't do well there. So it really is all over the board.

Speaker Change: Yes, well we have.

George L. Holm: Several there and geographically widespread that are coming off not compete.

George L. Holm: I'll tell you we have every possibility that could happen with that we have people that come to us and we put them in a different area.

George L. Holm: Because they will compete and when the year ends they don't want to go back to where they were before because they are doing so well we have people that don't do.

George L. Holm: Very well during that year, and we put them back into an area that they know and they do really well and we have people that.

George L. Holm: Don't do well that year, and we put them back where they were and they don't do well there.

George L. Holm: So it really is all over the board.

George L. Holm: We like to have kind of a good rhythm of bringing people in so that we can train them properly. We brought a lot more in over a period of time as we were trying to catch up from pandemic times when we weren't hiring very many. And I would say that it was a success for us. We hired more people, so we had more people that didn't make it, but it didn't affect our turnover number. They've been very consistent for the last several years.

George L. Holm: We like to have kind of a good cadence of bringing people in so that we can train properly.

George L. Holm: <unk>.

George L. Holm: We brought a lot more in over a period of time as we were trying to catch up from pandemic times Werent hiring very many.

George L. Holm: And I would say is it was success for us I would say that.

George L. Holm: We hired more people. So we had more people that didn't make it but it didn't affect our turnover numbers they've been very consistent for the last several years.

George L. Holm: So I think going into this Q4 with 5.5% more people will be good for us. I would hope that we get back up closer to that six or 7% number as we get into the next fiscal year.

George L. Holm: So I think going into this Q4 with five 5% more people will be good for us.

George L. Holm: Hope that.

George L. Holm: Can we get back up closer to that six or 7% number as we get into next fiscal year.

John Edward Heinbockel: Okay, maybe switching gears, right. So if you look at the onboarding of new business, right, so you said all three segments are benefiting. How do you size the three versus each other?

Speaker Change: Okay maybe.

Speaker Change: Switching gears right. So if you look at the Onboarding of new business right.

George L. Holm: Right? I know C-Stores can be more lumpy. Is that the biggest of the three? And then how would you assess the three to five year RFP outlook for C-Stores? Right? Because I would think you should win a disproportionate amount of those that come up, given your food service expertise. We better. Yeah, I would say convenience is the bigger one for what we have coming in from a top line standpoint.

John Edward Heinbockel: So you said all three segments are benefiting.

George L. Holm: How do you size the three versus each other.

George L. Holm: Brian I know C stores can be more lumpy is that the biggest of the three.

George L. Holm: And then how would you assess the three to five year RFP outlook for C stores right because I would think you should win a disproportionate amount of.

George L. Holm: Those that come up right given the foodservice expertise.

George L. Holm: With that or.

George L. Holm: Yes.

George L. Holm: Yes.

George L. Holm: I would think conveniences is the bigger one for what we have coming in from a top line standpoint, but.

George L. Holm: Uh huh.

George L. Holm: I would actually say that the food service is bigger when you look at the amount of gross profit dollars it generates. nt, and I'll give you this number of the business. We brought in this month from a food service standpoint will add between 1.2 and 1.3% to our. That's just the numbers.

George L. Holm: I would actually say that the foodservice bigger when you look at the amount of gross profit dollars that generates because it doesn't have that tobacco component and I'll give you. This number of the businesses. We brought in this month from a foodservice standpoint, we'll add beats.

George L. Holm: Between one two and one 3% to our total foodservice growth that gives you a good feel.

George L. Holm: It's just this month.

George L. Holm: That's what we brought in this month.

George L. Holm: That's what we brought on this month, yes.

Speaker Change: Thank you.

John Edward Heinbockel: Thank you. We'll take our next question from Andrew Wolf with CL King. Please go ahead.

George L. Holm: Thank you we'll take our next question from Andrew Wolf with C. L. King. Please go ahead.

Operator: Thank you, good morning. I just wanted to remind you that there were some questions around the competitive environment in the industry and food service. I wanted to kind of parse it, you know, versus gaining new customers. First of all, you know, on the chain side, see the last Maybe even five years. You know, pricing and service, that kind of balance has gotten more rational. Has there been any change there? Looking for any changes in the competitive environment, do you think that rationality is still in place, not just with you, I'm sure you are, but just in general in the market?

Andrew Paul Wolf: Thanks, and good morning, I just wanted to revisit there were some questions around the competitive environment in the industry in foodservice I wanted to kind of parse it versus getting new customers.

Operator: First of all the chain side.

Operator: Okay.

Operator: Maybe even five years pricing and service that kind of balance has gotten more rational.

Operator: There have been any change there looking for any changes in the competitive environment do you think that.

Operator: Rationality is still in place not just with you I am sure you are but just in general in the market.

Andrew Paul Wolf: I think it's rational, yes.

Speaker Change: I think it's rational yes.

George L. Holm: And second, for independence, you know, sometimes when things slow down, the distributors start to increase the amount of incentives for switching and, you know, switching to lower the switching costs for independence. How is that trending, I would say?

Andrew Paul Wolf: And second for independents, sometimes.

George L. Holm: Sometimes when things slow.

George L. Holm: Uh huh.

George L. Holm: The distributors start to increase the amount of incentive for switching.

George L. Holm: And switching.

George L. Holm: Switching to lower the switching costs for the independents.

George L. Holm: That training and year over year.

Andrew Paul Wolf: I would say it's trending higher, but it's still not a significant part of the business.

George L. Holm: I would say it's trending higher.

Speaker Change: It's still not it's.

Andrew Paul Wolf: It's still not a significant part of the business though.

George L. Holm: Got it. Thank you.

Speaker Change: Got it thank you and if I can put a third one that's not.

George L. Holm: More internal in the industry.

George L. Holm: How are you seeing your competitors trying to hire away your salespeople.

George L. Holm: And then you said your turnover rates are stable, but yes in terms of.

George L. Holm: More activity more conversations to make sure you can Google et cetera.

Andrew Paul Wolf: And if I can put a third one, it's not about the external environment in the industry, but how are you seeing your competitors trying to hire away your salespeople? You know that I mean, you said your turnover rates are stable, but just in terms of, you know, more activity, more conversations to make sure you keep your people.

George L. Holm: Our lead follow our turnover very closely we follow.

Andrew Paul Wolf: What they do when they leave us.

Andrew Paul Wolf: And very very few go to a competitor.

George L. Holm: We follow our turnover very closely. We follow what they do when they leave us, and very, very few go to a competitor. Most either leave the industry, or they may go into the manufacturing part of it, or it may be retirement. We look at our turnover and how it impacts the customer. So if somebody retires or is promoted, we do consider that to be turnover.

Andrew Paul Wolf: Most either lead the industry or they may go into the manufacturing part of it or it may be a retirement.

George L. Holm: We look at our turnover how it impacts the customer.

George L. Holm: So if somebody retires or has promoted we do consider that to be turnover.

Andrew Paul Wolf: Okay, thank you. That's it for me.

Speaker Change: Okay. Thank you that's it for me.

Andrew Paul Wolf: Yeah.

Speaker Change: Thanks Sandy.

Operator: Thank you. We'll go next to Brian Harbour with Morgan Stanley. Please go ahead.

Andrew Paul Wolf: Thank you we'll go next to Brian Harper with Morgan Stanley. Please go ahead.

Brian James Harbour: Yeah, thanks. Good morning.

Brian James Harbour: Yes, thanks, good morning.

Brian James Harbour: We've talked about this a bit, but maybe I'll kind of ask them more directly about looking at kind of sales in the third and fourth quarter versus your expectations. I mean, it seems like Vistar is the one that's seen probably more of a downshift, and maybe that Is that still true in the fourth quarter, relative to where you were? Is that kind of a fair characterization, and maybe you've seen, you know, the food service side rebounding a little bit faster?

Operator: Yes.

Brian James Harbour: We've talked about this a bit, but maybe kind of asking more directly.

Brian James Harbour: And looking at kind of sales.

Brian James Harbour: And the third and fourth quarter versus your expectation I mean, it seems like <unk> is the one that scene.

Brian James Harbour: Probably more of a down shift and maybe that's still true in the fourth quarter relative to where you where is that.

Brian James Harbour: Kind of a fair characterization and maybe you have seen the foodservice side.

Brian James Harbour: Rebounding a little bit faster.

Speaker Change: You said is very accurate.

Brian James Harbour: Okay.

Brian James Harbour: Yeah.

Brian James Harbour: What you said is very accurate. Also, this is a little more in the weeds, but just, at the segment EBITDA level, you had some favorability in sort of the corporate side relative to last year. I know there was a little bit of M&A in that segment. I don't know if there was any sort of change in the corporate cost base, but could you just elaborate on that a bit?

Brian James Harbour: <unk>.

Brian James Harbour: Also this is a little more in the weeds, but just.

Brian James Harbour: The segment EBITDA level, you had some favorability in sort of the corporate side relative to last year.

Brian James Harbour: I know there was a little bit of M&A in that segment I don't know if there was any sort of changes in the corporate cost base, but could you just elaborate on that a bit.

Patrick Hatcher: Yeah, this is Patrick and Brian. So, yeah, obviously, the three major segments He pointed out, yeah, their EBITDA growth was there. And again, that has a lot to do with January and the softness on the top line, as we've already discussed with this star. But when it comes to specifically the corporate and all other segment, as you point out, there have been some acquisitions there. These are really small companies that bring some capability to the company.

Brian James Harbour: Yeah. This is patrik Brian.

Patrick Hatcher: So yes, so one obviously the three major segments.

Patrick Hatcher: You pointed out yes, there are EBITDA growth wasn't there and again that has a lot to do with January softness on topline and we've already discussed the first star, but when it comes specific corporate all other segment as you pointed out there have been some acquisition acquisitions. There. These are really small companies that bring some capability to the company.

Patrick Hatcher: And in some cases, you know, they're relatively new, so we haven't compared their EBITDA. And then, in addition to that, there has been some cost savings in the corporate line as well. So it's a combination of some of the smaller companies, some of the acquisitions and then a little bit.

Patrick Hatcher: And in some cases.

Patrick Hatcher: They're relatively new so we haven't comped over their EBITDA and then in addition to that there has been some.

Patrick Hatcher: Cost savings in the corporate all other line as well so it's a combination of some of those smaller companies some of the acquisitions and then of all of those savings.

Patrick Hatcher: Some of that would be late coming synergies that existed with Cormark and with Reinhart. We've been very slow in consolidating some of those.

Patrick Hatcher: Some of that would be some of that would be late coming synergies that existed.

Patrick Hatcher: With core Mark and with Reinhart.

Speaker Change: Okay got it but we've been very slow around consolidating some of those functions.

Patrick Hatcher: And once again, as a reminder, that is the star and one for your question. We will take our final question from Peter Saleh with BTIG. Please go ahead.

Patrick Hatcher: And once again as a reminder that is star one for your question.

Patrick Hatcher: Okay.

Peter Mokhlis Saleh: We will take our final question from Peter delay with BTG. Please go ahead.

Operator: Great, thanks, and I appreciate all the color today. I did want to come back to the conversation around the overall environment, particularly in food service. I think you mentioned QSR was definitely softer and casual dining, very soft. So just in your opinion, you know, X weather and calendar shift. Is the environment really that much softer than it was in the prior quarter? Do you feel like this is really confined to the lower-income consumer? Are you seeing any evidence that this is kind of migrating up the income stream in terms of softness? Oh, it's definitely softer.

Peter Mokhlis Saleh: Great. Thanks, and I appreciate all the color today.

Operator: I did want to come back to the conversation around the overall environment, particularly in <unk>.

Operator: Service.

Operator: I think you mentioned Saar was definitely softer than casual dining very soft.

Operator: So just in your opinion ex weather and calendar shifts.

Operator: Is the environment really that much softer than it was in the prior quarter.

Operator: Do you feel like this is really confined to that lower income consumer or are you seeing any evidence that this is kind of migrating up the.

Operator: The income stream.

Operator: In terms of the softness.

Peter Mokhlis Saleh: It was definitely softer than the prior quarter, particularly towards the end of that prior quarter. We saw some, you know, some really, really good activity in late November and the month of December, which was ironic because our best time, and this was not just independent, but it was changed as well, was just before the worst of times, in early January. I think it's rebounded from there. But I would still say that the market is somewhat soft.

Operator: Well its definitely softer than the prior quarter, particularly.

Peter Mokhlis Saleh: Towards the end of that prior quarter.

Peter Mokhlis Saleh: We saw some.

Peter Mokhlis Saleh: Some really really good activity.

Peter Mokhlis Saleh: Late November and the month of December which was ironic because our our best.

Peter Mokhlis Saleh: Time, and this was not just independent but it was changed as well was just before the worst of times.

Peter Mokhlis Saleh: In early January.

Peter Mokhlis Saleh: I think it does lean more towards the lower end. We certainly see that in QSR. We have a couple QSRs that play in the very high end of the QSR area, and they're doing quite well. It's casual dining, you know. Casual dining has suffered for years, you know, and it continues. I mean, there's some doing really well, but for the most part,

Peter Mokhlis Saleh: Think it's rebounded from there, but I would still say that the market is somewhat soft.

Peter Mokhlis Saleh: It does lean more towards the lower end, we certainly see that in <unk>. We have a couple <unk> that play in the very high end of the <unk> area and they are doing quite well.

Peter Mokhlis Saleh:

Peter Mokhlis Saleh: Okay.

Peter Mokhlis Saleh: It's Ken casual dining casual dining suffered.

Peter Mokhlis Saleh: Three years.

Peter Mokhlis Saleh: And it continues I mean, there are some doing really well, but for the most part.

Peter Mokhlis Saleh: It's a tough area.

George L. Holm: And then just on the food service inflation, I think that you're expecting some acceleration in that inflation in the fourth quarter. Can you just help us understand what's driving that? Is that primarily cheese? I see cheese has kind of... moved higher here in the month, you know, in April and May. Is that what's driving it, or is there something else driving that inflation going forward? Thank you. Yeah, we really over index when

Speaker Change: Understood and then just on the foodservice inflation I think you are expecting.

George L. Holm: Some acceleration in that inflation in the fourth quarter can you just help us what's driving that is that primarily cheese ICT this kind of.

George L. Holm: Moving to higher here in the month of April into May is that what's driving or is there something else driving that inflation going forward. Thank you.

George L. Holm: Yeah, we really over-index when it comes to cheese, so that would be the biggest part.

Speaker Change: Yes, we really over index when it comes to cheese that would be the biggest part of it.

Speaker Change: Thank you very much.

Bill Marshall: And there are no further questions at this time. I will turn the call back over to Bill Marshall for any closing remarks.

George L. Holm: Okay.

George L. Holm: And there are no further questions at this time I will turn the call back over to Bill Marshall for any closing remarks.

Bill Marshall: Thank you for joining our call today. If you have any follow-up questions, please contact us in Investor Relations.

Bill Marshall: Thank you for joining our call today, if you have any follow up questions. Please contact us in Investor Relations.

Operator: Thank you, and this does conclude today's program. Thank you for your participation. You may disconnect at any time.

Bill Marshall: Yeah.

Bill Marshall: Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.

Operator: Okay.

Operator: Okay.