Q4 2025 Performance Food Group Co Earnings Call

Speaker #1: If you need assistance during your conference today, please press star zero. Good day and welcome to PFG's fiscal year Q4 2025 earnings conference call.

Speaker #1: If you would like to ask a question at the conclusion of prepared remarks, please press the star key followed by the number one on your telephone keypad at any time.

Speaker #1: I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for PFG. Please go ahead, sir.

Speaker #2: Thank you and good morning. We're here with George Holm, PFG's CEO, Patrick Hatcher, PFG's CFO, and Scott McPherson, PFG's COO. We issued a press release this morning regarding our 2025 fiscal fourth quarter results, which can be found in the investor relations section of our website at pfgc.com.

Bill Marshall: Thank you and good morning. We are here with George Holm, PFG's CEO, Patrick Hatcher, PFG's CFO, and Scott McPherson, PFG's COO. We issued a press release this morning regarding our 2025 fiscal fourth quarter results, which can be found in the Investor Relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the results in the same period in fiscal 2024. Any reference to 2025, 2026, or specific quarters refers to our fiscal calendar unless otherwise stated. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results.

Speaker #2: During our call today, unless otherwise stated, we are comparing results to the results in the same period and fiscal 2024. Any reference to 2025, 2026, or specific quarters refers to our fiscal calendar unless otherwise stated.

Speaker #2: The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release.

Speaker #2: Our remarks on this call, and in the earnings release, contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections.

Bill Marshall: Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. With that, I would like to turn the call over to George.

Speaker #2: With that, I'd like to turn the call over to George.

Speaker #3: Thanks, Bill. Good morning, everyone, and thank you for joining our call today. I'm excited to review our company's progress through fiscal 2025 and provide our current thoughts on the industry and external environment.

George Holm: Thanks, Bill. Good morning, everyone, and thank you for joining our call today. I am excited to review our company's progress through fiscal 2025 and provide our current thoughts on the industry and external environment. PFG finished the fiscal year with excellent results and momentum to set us up for a strong 2026. While the food away from home industry is still not quite operating at a level we would like, our company has executed our strategy to take market share and win new business while improving our margins. In 2025, we grew our top line and have now exceeded the $63 billion mark. Importantly, we grew our bottom line even faster through a combination of improving business mix and diligent focus on our gross and operating margins.

Speaker #3: PFG finished the fiscal year with excellent results and momentum to set us up for a strong 2026. While the food away from home industry is still not quite operating, at a level we would like, our company has executed our strategy to take market share and win new business while improving our margins.

Speaker #3: In 2025, we grew our top line and have now exceeded the $63 billion mark. Importantly, we grew our bottom line even faster through a combination of improving business mix and diligent focus on our growth and operating margins.

Speaker #3: As we highlighted at our investor day in May, PFG has carved out a unique niche in the food away from home market. Our range of capabilities allow our associates to aggressively pursue new business anywhere the consumer's purchased food away from home.

George Holm: As we highlighted at our Investor Day in May, PFG has carved out a unique niche in the food away from home market. Our range of capabilities allow our associates to aggressively pursue new business anywhere that consumers purchase food away from home, with little restriction on where we can grow. At the same time, there is still ample white space for us to grow into over time, which we believe provides a runway of strong top and bottom line performance for many years to come. We would not be in this position without the collaboration across our three segments: foodservice, convenience, and specialty. At Investor Day, we described our PFG One strategy, which is focused on capturing top and bottom line opportunities across the entire PFG platform. As we closed out the fiscal year, all our business units were contributing to our performance through a volatile market.

Speaker #3: With little restriction on where we can grow, at the same time, there is still ample white space for us to grow into over time.

Speaker #3: Which we believe provides a runway of strong top and bottom line performance for many years to come. We would not be in this position without the collaboration across our three segments.

Speaker #3: Food service, convenience, and specialty. At investor day, we described our PFG One strategy, which is focused on capturing top and bottom line opportunities across the entire PFG platform.

Speaker #3: As we closed out the fiscal year, all our business units were contributing to our performance. Through a volatile market, each business gained momentum. We're excited about PFG's potential in 2026 as we expect to propel our results to new highs.

George Holm: Each business gained momentum. We are excited about PFG's potential in 2026, as we expect to propel our results to new highs. In a moment, Patrick will provide a detailed review of our financial outlook. We are often asked how we were able to outperform and win market share at such a consistent clip. The simple answer is it starts with our 43,000 dedicated associates. We hire the best in the industry and give them the autonomy to build and grow business. In the fourth quarter, we continue to hire foodservice sales reps at a very aggressive rate, ending the year with an 8.8% increase compared to prior year. We are not slowing down this important investment in our business. As I mentioned earlier, the industry backdrop has room to improve, and I am confident that we will see better trends in the future.

Speaker #3: In a moment, Patrick will provide a detailed review of our financial outlook. We are often asked how we were able to outperform and win market share at such a consistent clip.

Speaker #3: The simple answer is, it starts with our 43,000 dedicated associates. We hire the best in the industry and give them the autonomy to build and grow business.

Speaker #3: In the fourth quarter, we continue to hire food service sales reps at a very aggressive rate, ending the year with an 8.8% increase compared to the prior year.

Speaker #3: We are not slowing down this important investment in our business. As I mentioned earlier, the industry backdrop has room to improve, and I'm confident that we will see better trends in the future.

Speaker #3: The investments we are making in our people now will enable us to significantly accelerate growth as the industry finds its footing. Our efforts are producing results.

George Holm: The investments we are making in our people now will enable us to significantly accelerate growth as the industry finds its footing. Our efforts are producing results. As you know, our organization targets 6% independent restaurant case growth or better. While we were not quite at that level in 2025, I am proud of what we are able to achieve. For the full year, we grew organic independent cases by 4.6% despite facing several difficult periods. If we exclude just the February result, which was heavily impacted by severe weather, our independent case growth would have been 5%. In the fourth quarter, our independent cases were up 5.9% organically, with consistent results in each of the final three months of the fiscal year. This is encouraging as we enter 2026, and we believe we will be right around the 6% growth level for the full year.

Speaker #3: As you know, organization targets 6% independent restaurant case growth or better. While we were not quite at that level, in 2025, I am proud of what we're able to achieve.

Speaker #3: For the full year we grew organic independent cases by 4.6%, despite facing several difficult periods. If we exclude just the February result, which was heavily impacted by severe weather, our independent case growth would have been 5%.

Speaker #3: In the fourth quarter, our independent cases were up 5.9% organically, with consistent results in each of the final three months of the fiscal year.

Speaker #3: This is encouraging as we enter 2026 and we believe we'll be right around the 6% growth level for the full year. We have also seen success growing our chain business profitably.

George Holm: We have also seen success growing our chain business profitably. Over the past several years, we have shifted our portfolio of chain restaurants towards high-performing customers who are growing. We are excited to have partnered with several new accounts through the year, generating 2.2% case growth over the full year and 4.5% case growth in the fourth quarter. We still have a robust pipeline of potential new accounts that the team is working diligently to secure, which will provide additional growth. Overall, our foodservice segment had an outstanding 2025, and we believe it is poised to produce an even better 2026. Despite several casual chains experiencing sales declines, we also closed the year strong in our convenience and specialty segments. Both organizations executed their strategic plans and saw sequential improvement into the end of the year.

Speaker #3: Over the past several years, we have shifted our portfolio of chain restaurant towards high-performing customers who are growing. We are excited to have partnered with several new accounts through the year generating $2.2% case growth over the full year and $4.5% case growth in the fourth quarter.

Speaker #3: We still have a robust pipeline of potential new accounts that the team is working diligently to secure, which will provide additional growth. Overall, our food service segment had an outstanding 2025, and we believe it is poised to produce an even better 2026.

Speaker #3: Despite several casual change experiencing sales declines. We also closed the year strong and our convenience and specialty segments. Both organizations executed their strategic plans and saw sequential improvement into the end of the year.

Speaker #3: In convenience, the total industry continues to see mid-single-digit sales declines across many of the key categories. By adding new accounts, broadening our food service offerings, and partnering with strong customers, convenience produced positive case growth in each of the four quarters, with a stronger performance in the second half of the fiscal year.

George Holm: In convenience, the total industry continues to see mid-single-digit sales declines across many of the key categories. By adding new accounts, broadening our foodservice offerings, and partnering with strong customers, convenience produced positive case growth in each of the four quarters, with a stronger performance in the second half of the fiscal year. It is hard to overstate what an accomplishment this is in the current environment. A strong focus on procurement opportunities and cost management generated double-digit profit growth for the convenience segment over the full year. Even with a very difficult fourth quarter comparison, convenience grew adjusted EBITDA and is entering 2026 with a great deal of momentum. Our specialty business faced historically high prices across the candy and snack industry, high competition in the theater channel, and financial struggles for several customers in 2025.

Speaker #3: It's hard to overstate what an accomplishment this is in the current environment. A strong focus on procurement opportunities and cost management generate a double-digit profit growth for the convenience segment over the full year.

Speaker #3: Even with a very difficult fourth quarter comparison, convenience grew adjusted EBITDA and is entering 2026 with a great deal of momentum. Our specialty business faced historically high prices across the candy and snack industry.

Speaker #3: A high competition in the theater channel and financial struggles for several customers in 2025. The organization rose to the occasion by securing new business, identifying efficiency gains, and fostering collaboration across our broader organization.

George Holm: The organization rose to the occasion by securing new business, identifying efficiency gains, and fostering collaboration across our broader organization. These concerted efforts led to continuous improvement throughout the fiscal year. As we enter fiscal 2026, our financial position is strong, and we are continuing to execute our balanced capital allocation plan, bringing our balance sheet back within our target range over the next several quarters. We will also continue to look at disciplined M&A, where we have a track record of delivering sustainable growth across our three business segments. Before I turn the call over to Scott, I want to take a moment to address U.S. Foods' statements from last week. PFG's board has a track record of regularly evaluating a range of potential paths to generate shareholder value.

Speaker #3: These concerted efforts led to continuous improvement throughout the fiscal year. As we enter fiscal 2026, our financial position is strong, and we are continuing to execute our balanced capital allocation plan.

Speaker #3: Bringing our balance sheet back within our target range over the next several quarters. We will also continue to look at disciplined M&A where we have a track record of delivering sustainable growth across our three business segments.

Speaker #3: Before I turn the call over to Scott, I want to take a moment to address U.S. food statements from last week. PFG's board has a track record of regularly evaluating a range of potential paths to generate shareholder value.

Speaker #3: We are committed to taking actions that are in the best interests of PFG shareholders and we will continue to focus on ways to deliver further growth and value creation.

George Holm: We are committed to taking actions that are in the best interests of PFG shareholders, and we will continue to focus on ways to deliver further growth and value creation. The outreach from U.S. Foods was a request for information sharing to explore regulatory considerations and potential synergies related to a possible business combination. We have a clear strategy in place to effectively build upon the company's position as a leading North American food and foodservice distributor in the food away from home market. We are executing at a high level, continuing to make progress on our three-year plan, and advancing toward the targets we outlined at Investor Day in May. We are doing this by aggressively pursuing new business and capitalizing on additional opportunities in the market while continuing to invest in our people. We expect to be well-positioned to accelerate growth.

Speaker #3: The outreach from U.S. foods was a request for information sharing to explore regulatory considerations and potential synergies related to a possible business combination. We have a clear strategy in place to effectively build upon the company's position as a leading North American food and food service distributor.

Speaker #3: In the food away from home market, we are executing at a high level, continuing to make progress on our three-year plan and advancing toward the targets we outlined at Investor Day in May.

Speaker #3: We're doing this by aggressively pursuing new business and capitalizing on additional opportunities in the market while continuing to invest est in our people. We expect to be well-positioned to accelerate growth.

Speaker #3: PFG is building a formidable organization that is set up to grow and win for many years to come. Because of the successful execution of our strategy and our confidence in the path forward, any transaction would need to clear a high bar on all fronts.

George Holm: PFG is building a formidable organization that is set up to grow and win for many years to come. Because of the successful execution of our strategy and our confidence in the path forward, any transaction would need to clear a high bar on all fronts: value and speed and certainty to completion, taking into consideration associated risks, including regulatory synergy and integration risks. After careful consideration, the PFG board determined that there was no basis to engage in the information sharing requested by U.S. Foods. We have demonstrated PFG's powerful value proposition across our three business segments, have strong momentum underway, and have conviction in the value-creating potential of our strategy.

Speaker #3: Value and speed and certainty to completion. Taking into consideration associated risks, including regulatory synergy and integration risks. After careful consideration, the PFG board determined that there was no basis to engage in the information sharing requested by U.S.

Speaker #3: foods. We have demonstrated PFG's powerful value proposition across our three business segments. Have strong momentum underway and have conviction in the value creating potential of our strategy.

Speaker #3: That is all we have to share today on this subject and when we get to Q&A, we'd ask that you keep questions focused on our results and outlook.

George Holm: That is all we have to share today on this subject, and when we get to Q&A, we would ask that you keep questions focused on our results and outlook. I would like to conclude my remarks by highlighting how proud I am of our team's efforts throughout the year and how excited I am about what lies ahead in 2026 and beyond. With that, I will turn it over to Scott. Scott?

Speaker #3: I'd like to conclude my remarks by highlighting how proud I am of our team's efforts throughout the year and how excited I am about what lies ahead in 2026 and beyond.

Speaker #3: With that, I'll turn it over to Scott. Scott? Thank you, George, and good morning, everyone. I'm excited to take you through our recent performance and discuss how we plan to continue our success in 2026.

Scott McPherson: Thank you, George, and good morning, everyone. I am excited to take you through our recent performance and discuss how we plan to continue our success in 2026. As George mentioned, we had a strong finish to 2025, picking up momentum into the summer months and maintaining strong growth in the early days of fiscal 2026. Despite an imperfect backdrop, our team is executing at a high level, which is reflected in our results and outlook. We plan on building upon this momentum in the months ahead. Let's walk through a number of areas where we have had success due to the strategic actions we have taken. Starting with our foodservice business, as George described, we were able to accelerate our performance in the quarter through a combination of strong execution and broader market improvement.

Speaker #3: As George mentioned, we had a strong finish to 2025, picking up momentum into the summer months and maintaining strong growth in the early days of fiscal 2026.

Speaker #3: Despite an imperfect backdrop, our team has executed at a high level, which is reflected in our results and outlook. We plan on building upon this momentum in the months ahead.

Speaker #3: Let's walk through a number of areas where we've had success due to the strategic actions we've taken. Starting with our food service business, as George described, we were able to accelerate our performance in the quarter through a combination of strong execution and broader market improvement.

Speaker #3: Restaurant foot traffic has improved month by month. While it declined year over year, during the quarter, our food service organization was able to offset this headwind with new accounts and increased penetration into existing accounts, driving our nearly 6% organic independent case growth for the quarter.

Scott McPherson: Restaurant foot traffic has improved month by month, and while it declined year over year during the quarter, our foodservice organization was able to offset this headwind with new accounts and increased penetration into existing accounts, driving our nearly 6% organic independent case growth for the quarter. Our commitment to adding high-quality salesforce talent is unwavering and a key component to our growth. In Q4, our total organic independent case growth accelerated 250 basis points sequentially, which was faster than the rate of industry foot traffic improvement, showing our consistent ability to take market share. There are several factors underpinning this success. In the quarter, we grew new independent accounts by 5.3%, the highest level in 2025. It is also the first time in 2025 that total organic case growth was greater than new account additions, which translates to increased penetration within existing accounts.

Speaker #3: Our commitment to adding high-quality sales force talent is unwavering, and a key component to our growth. In Q4, our total organic independent case growth accelerated $250 basis points sequentially, which was faster than the rate of industry foot traffic improvement.

Speaker #3: Showing our consistent ability to take market share, there are several factors underpinning this success. In the quarter, we grew new independent accounts by 5.3%, the highest level in 2025.

Speaker #3: It is also the first time in 2025 that total organic case growth was greater than new account additions, which translates to increased penetration within existing accounts.

Speaker #3: We also saw our lines for drop increase in the quarter, which has been a consistent component of our success. Our ability to increase penetration and grow lines for drop, despite industry-wide foot traffic declines, is a very positive sign for our long-term growth potential.

Scott McPherson: We also saw our lines per drop increase in the quarter, which has been a consistent component of our success. Our ability to increase penetration and grow lines per drop despite industry-wide foot traffic declines is a very positive sign for our long-term growth potential. We believe that the industry will continue to recover, at which point PFG will be very well positioned to accelerate total case growth. In addition, our chain business performed extremely well in the quarter. While our independent business and its contributions to profitability often get the headlines, our chain business continues to be a valuable contributor to our overall performance. Over the past few years, we have slowly transformed our chain business portfolio to align with our goal of faster and more profitable growth.

Speaker #3: We believe that the industry will continue to recover at which point PFG will be very well positioned to accelerate total case growth. In addition, our chain business performed extremely well in the quarter.

Speaker #3: While our independent business and its contributions to profitability often get the headlines, our chain business continues to be a valuable contributor to our overall performance.

Speaker #3: Over the past few years, we have slowly transformed our chain business portfolio to align with our goal of faster and more profitable growth. The results of these actions are apparent in our fourth quarter, as we not only saw case and volume growth but also higher margin contribution.

Scott McPherson: The results of these actions are apparent in our fourth quarter, as we not only saw case and volume growth but higher margin contribution. This success was achieved by winning new chain business with strong and growing partners, supported by long-term contracts that are beneficial to both PFG and our customers. We are also seeing positive signs from some of our legacy chain accounts, particularly in the casual dining space. While some casual dining chains continue to struggle, there is a subset that has seen success by creating a value proposition to attract foot traffic from consumers who are increasingly selective in their restaurant choices. We are thrilled to be partnering with several of these chains and are excited to see their growth in the months ahead.

Speaker #3: This success was achieved by winning new chain business with strong and growing partners supported by long-term contracts that are beneficial to both PFG and our customers.

Speaker #3: We are also seeing positive signs from some of our legacy chain accounts, particularly in the casual dining space. While some casual dining chains continue to struggle, there is a subset that is seeing success by creating a value proposition to attract foot traffic from consumers who are increasingly selective in their restaurant choices.

Speaker #3: We are thrilled to be partnering with several of these chains and are excited to see their growth in the months ahead. Overall, our food service organization is seeing accelerating results in both independent and chain business with higher profit contribution, setting the stage for a strong 2026.

Scott McPherson: Overall, our foodservice organization is seeing accelerating results in both independent and chain business with higher profit contribution, setting the stage for a strong 2026. Turning to our convenience segment, while the backdrop for the total C-store industry remains consistently difficult, our organization was able to outperform and finish 2025 in a strong position. In fact, through 2025, our convenience segment sales growth accelerated in each of the four quarters. Core-Mark continues to grow case volume while facing an environment of total industry case declines. In key areas like foodservice and snacks, Core-Mark saw cases up low single digits despite low to mid-single digit total industry category decline. This is through a combination of increased foodservice programs to existing customers and new account wins. I point you to our Investor Day presentation for more details on some of these key initiatives.

Speaker #3: Turning to our convenience segment, while the backdrop for the total C store industry remains consistently difficult, our organization was able to outperform and finish 2025 in a strong position.

Speaker #3: In fact, through 2025, our convenience segment sales growth accelerated in each of the four quarters. From our continues to grow case volume, while facing an environment of total industry case declines, in key areas like food service and snacks, Qormark saw cases up, low single digits, despite low to mid-single-digit total industry category decline.

Speaker #3: This is through a combination of increased food service programs to existing customers and new account wins. I point you to our investor day presentation for more details on some of these key initiatives.

Speaker #3: Looking ahead, we are even more excited about what's in store. As we discussed briefly on our third quarter call, Qormark has signed agreements with several new customers representing over a thousand additional stores.

Scott McPherson: Looking ahead, we are even more excited about what is in store. As we discussed briefly on our third quarter call, Core-Mark has signed agreements with several new customers representing over 1,000 additional stores. We will be onboarding these stores through our fiscal 2026 second and third quarters. While there will be startup costs associated with onboarding this new business, we expect a nice contribution to our sales and profit growth in the second half of fiscal 2026. Finishing up our segment commentary with specialty, both net sales and adjusted EBITDA growth for the specialty segment saw a nice acceleration in the fourth quarter. Total net sales for Vistar increased 4.1% in the quarter, an excellent recovery. Notably, the vending, office coffee services, retail, and value channels all experienced an upswing in sales performance during the quarter.

Speaker #3: We will be onboarding these stores through our fiscal 2026 second and third quarters. While there will be startup costs associated with onboarding this new business, we expect a nice contribution to our sales and profit growth in the second half of fiscal 2026.

Speaker #3: Finishing up our segment commentary with specialty, both net sales and adjusted EBITDA growth for the specialty segment saw a nice acceleration in the fourth quarter.

Speaker #3: Total net sales for specialty increased 4.1% in the quarter and excellent recovery. Notably, the vending office coffee services retail and value channels all experienced an upswing in sales performance during the quarter.

Speaker #3: Our e-commerce platform, while still small, continues to grow at a double-digit clip. We have very high expectations for this area of the business over the long term.

Scott McPherson: Our e-commerce platform, while still small, also continues to grow at a double-digit clip. We have very high expectations for this area of the business over the long term. Overall, we are very optimistic about the future of Vistar despite some of the persistent growth hurdles and believe 2026 will build on this momentum. In summary, all three of PFG's operating segments accelerated their growth in the final quarter of the year and are well-positioned entering 2026. I will now turn it over to Patrick Hatcher, who will review our financial performance and outlook. Patrick?

Speaker #3: Overall, we are very optimistic about the future of specialty, despite some of the persistent growth hurdles and believe 2026 will build on this momentum.

Speaker #3: In summary, all three of PFG's operating segments accelerated their growth in the final quarter of the year and are well positioned entering 2026. I'll now turn it over to Patrick, who will review our financial performance and outlook.

Speaker #3: Patrick?

Speaker #4: Thank you, Scott, and good

Patrick Hatcher: Thank you, Scott, and good morning, everyone. This morning, I will review our financial results from our fourth quarter and full year, provide color on our financial position, and review the guidance we announced for 2026. We are pleased with our 2025 performance, ending the period in a strong financial position with momentum into 2026. In fiscal 2025, we achieved net sales above the midpoint of the long-term target range we announced in 2022, with adjusted EBITDA above the high end of the target range. The financial priorities we outlined at our Investor Day in May support our operating strategy and new three-year sales and adjusted EBITDA targets. We are focused on translating our profit into strong and stable cash flow, which we then look to deploy in value-creating investments and cash return to shareholders.

Speaker #2: morning, everyone. This morning, I will review our financial results from our fourth quarter and full year, provide color on our financial position, and review the guidance we announced for 2026.

Speaker #2: We are pleased with our 2025 performance ending the period in a strong financial position with momentum into 2026. In fiscal 2025, we achieved net sales above the midpoint of a long-term target range we announced in 2022.

Speaker #2: With adjusted EBITDA above the high end of the target range. The financial priorities we outlined at our investor day in May support our operating strategy and new three-year sales and adjusted EBITDA targets.

Speaker #2: We are focused on translating our profit into strong and stable cash flow. Which we then looked to deploy in value-creating investments and cash return to shareholders.

Speaker #2: We believe that these initiatives have put us on a path to deliver strong returns over the next three years. Some financial highlights from the quarter and year.

Patrick Hatcher: We believe that these initiatives have put us on a path to deliver strong returns over the next three years. Some financial highlights from the quarter and year. PFG's total net sales grew 11.5% in the fourth quarter as strong underlying trends in all three of our operating segments were boosted by the addition of Jose Santiago and Cheney Brothers. As a reminder, we will begin lapping the Jose Santiago acquisition in the first quarter of 2026. We have one more quarter of incremental acquisition contribution from Cheney Brothers, and we'll begin lapping these results in the second week of the second quarter. Total company cost inflation was about 4.3% for the fourth quarter, a slight sequential slowdown from the third quarter.

Speaker #2: PFG's total net sales grew 11.5% in the fourth quarter, as strong underlying trends in all three of our operating segments were boosted by the addition of Jose Santiago and Chaney Brothers.

Speaker #2: As a reminder, we will begin lapping the Jose Santiago acquisition in the first quarter of 2026. We have one more quarter of incremental acquisition contribution from Chaney Brothers.

Speaker #2: And we'll begin lapping these results in the second week of the second quarter. Total company cost inflation was about 4.3% for the fourth quarter, a slight sequential slowdown from the third quarter.

Speaker #2: The main driver of the lower inflation was in the food service area which experienced product cost inflation of $2.5% in the quarter, more than a point lower than the third quarter.

Patrick Hatcher: The main driver of the lower inflation was in the foodservice area, which experienced product cost inflation of 2.5% in the quarter, more than a point lower than the third quarter. The deceleration in foodservice inflation was largely the result of lower year-over-year increases in poultry and dairy, somewhat offset by cost increases in other proteins, including beef and seafood. Specialty segment cost inflation was up 3.3% year over year, and convenience costs increased 6.5%. We are closely watching product cost inflation. At this time, we are continuing to model low single to mid-single digit inflation in 2026. As a reminder, we source the majority of our inventory from domestic suppliers and therefore do not expect a material impact from tariff increases. Still, we are remaining vigilant and in close communication with suppliers and customers to be able to adjust if necessary as the situation evolves.

Speaker #2: The deceleration in food service inflation was largely the result of lower year-over-year increases in poultry and dairy somewhat offset by cost increases in other proteins including beef and seafood.

Speaker #2: Specialty segment cost inflation was up 3.3% year-over-year, and convenience costs increased 6.5%. We are closely watching product cost inflation. At this time, we are continuing to model low single to mid-single-digit inflation in 2026.

Speaker #2: As a reminder, we sourced the majority of our inventory from domestic suppliers and therefore do not expect a material impact from tariff increases. Still, we are remaining vigilant and in close communication with suppliers and customers to be able to adjust if necessary as the situation evolves.

Speaker #2: We have historically been able to manage price swings, including both inflation and deflation, and expect to use a similar playbook going forward. Moving down the P&L, total company gross profit increased 14.6% in the fourth quarter, representing a gross profit per case increase of $0.17 as compared to the prior year's period.

Patrick Hatcher: We have historically been able to manage price swings, including both inflation and deflation, and expect to use a similar playbook going forward. Moving down the P&L, total company gross profit increased 14.6% in the fourth quarter, representing a gross profit per case increase of $0.17 as compared to the prior year's period. In the fourth quarter of 2025, PFG reported net income of $131.5 million. Adjusted EBITDA increased 19.9% to $546.9 million, topping our previously stated guidance range. All three operating segments contributed to our strong adjusted EBITDA performance. In particular, Specialty saw a nice rebound to 9% segment adjusted EBITDA growth in the period. We are also particularly pleased with the Convenience segment profit performance, which saw adjusted EBITDA growth of 4.8% in the quarter.

Speaker #2: In the fourth quarter of 2025, PFG reported net income of $131.5 million. Adjusted EBITDA increased 19.9% to $546.9 million, topping our previously stated guidance range.

Speaker #2: All three operating segments contributed to our strong adjusted EBITDA performance. In particular, specialty saw a nice rebound to 9% segment-adjusted EBITDA growth in the period.

Speaker #2: We are also particularly pleased with the convenience segment profit performance, which saw adjusted EBITDA growth of 4.8% in the quarter. This result was despite a difficult year-over-year comparison due to both a strong underlying performance and a large accrual true-up in the prior year period.

Patrick Hatcher: This result was despite a difficult year-over-year comparison due to both a strong underlying performance and a large accrual true-up in the prior year period. Over the full year, the Convenience segment increased adjusted EBITDA margins by 20 basis points. Diluted earnings per share in the fiscal fourth quarter was $0.84, while adjusted diluted earnings per share was $1.55, representing a 6.9% increase year over year. Our effective tax rate was 25.6% in the fourth quarter. Our quarterly tax rate benefited from an increase in stock-based compensation and income tax credits. At this time, we expect our 2026 tax rate to be closer to our historical range. Turning to our financial position and cash flow performance, in fiscal 2025, PFG generated $1.2 billion of operating cash flow. We invested $506 million on capital expenditures during 2025, resulting in free cash flow of about $704 million.

Speaker #2: Over the full year, the convenience segment increased adjusted EBITDA margins by 20 basis points. Diluted earnings per share in the fiscal fourth quarter was $0.84, 4, while adjusted diluted earnings per share was $1.55, representing a 6.9% increase year-over-year.

Speaker #2: Our effective tax rate was 25.6% in the fourth quarter. Our quarterly tax rate benefited from the increase in stock-based compensation and income tax credits.

Speaker #2: At this time, we expect our 2026 tax rate to be closer to our historical range. Turning to our financial position and cash flow performance.

Speaker #2: In fiscal 2025, PFG generated $1.2 billion of operating cash flow. We invested $56 million in capital expenditures during 2025, resulting in free cash flow of about $740 million.

Speaker #2: As we described last quarter, our capital expenditure level has increased due to investments to support capacity expansion at Chaney Brothers. We are currently expecting a full year CapEx number in fiscal 2026 in line with our long-term outlook of 70 basis points on total net sales as we continue to invest in growth projects including warehouse expansions and increasing our fleet.

Patrick Hatcher: As we described last quarter, our capital expenditure level has increased due to investments to support capacity expansion at Cheney Brothers. We are currently expecting a full-year CapEx number in fiscal 2026, in line with our long-term outlook of 70 basis points on total net sales, as we continue to invest in growth projects, including warehouse expansions and increasing our fleet. These are high-return projects that will support our long-term growth goals. During the fourth quarter, we also repurchased about 177,000 shares of our stock at an average cost of $75.39 per share for a total of $13.4 million. While share repurchases are a key component of our capital allocation strategy, we are currently prioritizing debt reduction. As you heard us discuss, our capital allocation strategy focuses on four key levers: capital expenditures, leverage reduction, share repurchases, and M&A.

Speaker #2: These are high-return projects that will support our long-term growth goals. During the fourth quarter, we also repurchased about 177,000 shares of our stock at an average cost of $75.39 per share, for a total of $13.4 million.

Speaker #2: While share repurchases are a key component of our capital allocation strategy, we are currently prioritizing debt reduction. As you heard us discuss, our capital allocation strategy focuses on four key levers.

Speaker #2: Capital expenditures, leverage reduction, share repurchases, and M&A. Most of our capital spend is directed towards infrastructure to support our growth through warehouse capacity expansion and increased fleet.

Patrick Hatcher: Most of our capital spend is directed towards infrastructure to support our growth through warehouse capacity expansion and increased fleet. At the same time, our strong balance sheet enables us to explore new investment opportunities. We will continue to take various marketplace conditions into account when determining our capital deployment. As George Holm said earlier, we will maintain our balanced capital allocation strategy to best position the company to capitalize on opportunities in the market and drive shareholder value. The M&A pipeline remains robust, and we continue to evaluate strategic M&A. PFG has a history of successful acquisitions to drive growth and shareholder value, and we expect that to continue. At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance, today we announced guidance for the first quarter and full year 2026.

Speaker #2: At the same time, our strong balance sheet enables us to explore new investment opportunities. We will continue to take various marketplace conditions into account when determining our capital deployment.

Speaker #2: As George said earlier, we will maintain our balanced capital allocation strategy to best position the company to capitalize on opportunities in the market and drive shareholder value.

Speaker #2: The M&A pipeline remains robust. And we continue to evaluate strategic M&A. PFG has a history of successful acquisitions to drive growth in shareholder value and we expect that to continue.

Speaker #2: At the same time, we will apply our typical high standards and robust due diligence to evaluate high-quality acquisition opportunities. Turning to our guidance, today we announced guidance for the first quarter and full year 2026.

Speaker #2: For the first quarter, we expect net sales to be in a range of $16.6 to $16.9 billion. And adjusted EBITDA between $465 and $485 million.

Patrick Hatcher: For the first quarter, we expect net sales to be in a range of $16.6 to $16.9 billion and adjusted EBITDA between $465 and $485 million. For the full fiscal year, we project net sales between $67 and $68 billion and adjusted EBITDA between $1.9 and $2 billion. As previously mentioned, the first fiscal quarter will include the incremental results from Cheney Brothers, which we will begin lapping during the second week of the second quarter in fiscal 2026. These targets are aligned with our three-year projections we announced at Investor Day, with sales in the range of $73 to $75 billion and adjusted EBITDA between $2.3 and $2.5 billion in fiscal 2028. When building your models, keep in mind that fiscal 2027 will include a 53rd week. To summarize, PFG closed our 2025 with strong results and solid momentum into 2026.

Speaker #2: For the full fiscal year, we project net sales between $67 billion and $68 billion, and adjusted EBITDA between $1.9 billion and $2 billion. As previously mentioned, the first fiscal quarter will include the incremental results from Chaney Brothers.

Speaker #2: Which we will begin lapping during the second week of the second quarter in fiscal 26. These targets are aligned with our three-year projections we announced at investor day, with sales in the range of $73 to $75 billion and adjusted EBITDA between $2.3 and $2.5 billion in fiscal 2028.

Speaker #2: When building your models, keep in mind that fiscal 2027 will include a 53rd week. To summarize, PFG closed our 2025 with strong results and solid momentum into 2026.

Speaker #2: All three of our operating segments are performing well and contributing to our overall results. We are in a solid financial position, supporting our growth investments and capital return to our shareholders.

Patrick Hatcher: All three of our operating segments are performing well and contributing to our overall result. We are in a solid financial position, supporting our growth investments and capital return to our shareholders. We are excited about the future and believe we are well-positioned to continue to win business within the U.S. food away from home market. Thank you for your time today. We appreciate your interest in Performance Food Group Company. With that, George Holm, Scott McPherson, and I would be happy to take your questions.

Speaker #2: We are excited about the future and believe we are well positioned to continue to win business within the U.S. food away from home market.

Speaker #2: Thank you for your time today. We appreciate your interest in Performance Food Group. And with that, George, Scott, and I would be happy to take your questions.

Speaker #1: At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two.

Operator: At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. Our first question comes from Mark Carden with UBS. Your line is open. Please go ahead.

Speaker #1: Once again, that is star one to ask a question. Our first question comes from Mark Cardin with UBS. Your line is open, please go ahead.

Speaker #5: Good morning. Thanks so much for taking the questions. So to start, it sounds like the overall industry backdrop continues to slowly improve. How are you feeling about July and August to date?

Mark Carden: Morning. Thanks so much for taking the questions. To start, it sounds like the overall industry backdrop continues to slowly improve. How are you feeling about your July and August to date? As you think about your guidance for the year ahead, what kind of industry traffic backdrop are you building it on?

Speaker #5: And as you think about your guidance for the year ahead, what kind of industry traffic backdrop are you building it on?

Speaker #3: Well, so far, this is George. So far, July in the first couple of weeks of August, we have seen an uptick. Primarily in our independent food service business.

George Holm: Well, so far, this is George Holm. So far, July and the first couple of weeks of August, we have seen an uptick, primarily in our independent foodservice business. I am going to have Scott McPherson kind of comment on the other channels. I guess when you just go to our prepared remarks, I think there is a lot of confidence around here that we will be able to achieve that 6% number this year, but we are off to a start that gives us that type of confidence.

Speaker #3: I'm going to have Scott kind of comment on the other channels. I guess when you just go to our prepared remarks, I think there's a lot of confidence around here that we'll be able to achieve that 6% number this year.

Speaker #3: But we are off to a start that gives us that type of confidence.

Speaker #4: Yeah, I think the other comment I'd make there is if you look at black box results over the quarter, they continue to improve over the fourth quarter.

Scott McPherson: Yeah, I think the other comment I'd make there is if you look at black box results over the quarter, they continue to improve over the fourth quarter. We actually saw our first positive result in July. So really positive trends around traffic and restaurant. Looking at the other two segments, the convenience segment continues to be pressured. But what gives us a lot of confidence in convenience is we continue to grow share and outperform there. We talked about in the remarks a couple of really nice wins that we will add on over the next couple of quarters that will really contribute to our growth and profitability and convenience.

Speaker #4: And we actually saw our first positive result in July. So really, you know, really positive trends around traffic in restaurant. Looking at the other two segments, you know, the convenience segment continues to be pressured.

Speaker #4: But, you know, what gives us a lot of confidence in convenience is we continue to grow share and outperform there. And we talked about in the remarks, a couple of really nice wins that we'll add on over the next couple of quarters.

Speaker #4: That will really contribute to our growth and profitability and convenience. And then when I think about the specialty segment, you know, we've got a couple of channels that are still pressured.

Scott McPherson: When I think about the specialty segment, we have a couple of channels that are still pressured, but overall, we had a really nice fourth quarter, have a lot of momentum in our e-commerce space and a couple of our other segments. The return to work really helps us across all three of our segments. So I feel really good about the landscape.

Speaker #4: But overall, we had a really nice fourth quarter. You know, we have a lot of momentum in our e-commerce space and a couple of our other segments.

Speaker #4: The return to work really helps us across all three of our segments. So, you know, it feels really good about the landscape.

Speaker #2: And Mark, this is Patrick. I'll just add on to the last part of your question around our outlook. Obviously, we're really confident in our full-year numbers.

Patrick Hatcher: this is Patrick Hatcher. I will just add on to the last part of your question around our outlook. Obviously, we are really confident in our full-year numbers. We obviously use a range, and that range is based on current economic trends and how we are performing. That is how we built that outlook for it. We definitely have some confidence in those numbers.

Speaker #2: We obviously use a range and that range is based on kind of current economic trends. And how we're performing. And then that's kind of how we built that outlook for it.

Speaker #2: But we're definitely have some confidence in those numbers.

Speaker #5: That's great. Thanks. And then my follow-up, a a two-part question just on sales force. First, just with one of your larger competitors, moving past some of its sales force issues from a year ago, are you seeing any changes in the availability of quality talent?

Mark Carden: That's great. Thanks. My follow-up, a two-part question just on Salesforce. First, with one of your larger competitors moving past some of its Salesforce issues from a year ago, are you seeing any changes in the availability of quality talent? Second, any anticipated changes in your pace of hiring over the course of the year ahead with the improving traffic backdrop?

Speaker #5: And then second, any anticipated changes in your pace of hiring over the course of the year ahead with the improving traffic backdrop?

Speaker #4: Yeah, Mark, this is Scott. You know, clearly in the fourth quarter, we saw great availability of talent. The fourth quarter was actually our strongest hiring quarter of the year.

Scott McPherson: Yeah, Mark, this is Scott. Clearly in the fourth quarter, we saw great availability of talent. Fourth quarter was actually our strongest hiring quarter of the year. For the year, we finished in the high 8% range as far as new salespeople that we've hired over the course of the year. We're a decentralized company. We allow our opcos to make those decisions. We have some that are hiring at a clip greater than 8% or 9% and some that are a little lower than that. When we look at that, we got 6% case growth. I feel really good about that momentum. Even with that, we had really good leverage in the foodservice space. We feel really good about the landscape of hiring. We've got great talent available to us and feel like we're a great place for them to land.

Speaker #4: And for the year, we finished in the high 8% range as far as new salespeople that we've hired over the course of the year.

Speaker #4: We're a decentralized company. We allow our opcos to make those decisions. You know, we have some that are hiring at a clip greater than 8% or 9%, and some that are a little lower than that.

Speaker #4: But when we look at that, you know, we got 6% case growth, feel really good about that momentum. And even with that, you know, we had really good leverage in the food service space.

Speaker #4: So, you know, we feel really good about the landscape of hiring. We've got great talent available to us. I feel like we're a great place for them to land.

Speaker #5: Yeah, I'll make a couple of other comments there. I mean, on paper, it looks like we're, you know, we're hiring... You know, I guess beyond the pace that we typically do.

George Holm: Yeah, I will make a couple other comments there. On paper, it looks like we are hiring, I guess beyond the pace that we typically do. The restaurant business has been challenged for quite a while. Where we get our numbers as far as market share and the best information we can get shows that in our foodservice business, about 82% of our business is restaurants, where the rest of the industry is about 57%. We are really dependent on the growth of restaurants. I think when you go through as many quarters as we went through where it was challenged, you end up spending a lot of time on defense. We like to go out and aggressively pursue business.

Speaker #5: The restaurant business has been challenged for quite a while. Where we get our numbers as far as market share and the best information we can get shows that in our food service business, we're about 82% of our business is restaurants.

Speaker #5: Where the rest of the industry is about 57%. So, you know, we're really dependent on the growth of restaurants. I think when you go through as many quarters as we went through where it was challenged, you end up spending a lot of time on defense when, you know, we like to go out and aggressively pursue business.

Speaker #5: So for us, to get that people count up, to get our salespeople in a position where they voluntarily take some territory splits, and we got the people to let that happen, has been very good for us.

George Holm: So for us to get that people count up, to get our salespeople in a position where they voluntarily take some territory splits and we got the people to let that happen has been very good for us. We will probably, down the road, come down a little bit. As Scott says, it is their decisions. I would suspect that that is what will happen. But having what our average salesperson does, a week in business, come down has been good for us. We look back all the way back to that COVID period, and we were not hiring, and we did not realize the level to which our people were improving until the rebound from COVID. Then you wake up one day and the average person is doing probably more business than what you would want to have to put out consistent growth.

Speaker #5: We'll probably, you know, down the road, come down a little bit like Scott says, it's their decisions. I would suspect that that's what will happen.

Speaker #5: But having what our average salesperson does, week in business come down, has been good for us. We look back all the way back to that COVID period, and we weren't hiring and we didn't realize the level to which our people were improving.

Speaker #5: Until the rebound from COVID. And then you wake up one day, and the average person is doing probably more business than what you would want to have to put out consistent growth.

Speaker #5: I mean, there's only so many hours in a day for them. And when we have our calls with our people, Scott ends every call, every single call, encouraging our people to add salespeople.

George Holm: There are only so many hours in a day for them. When we have our calls with our people, Scott ends every call, every single call, encouraging our people to add salespeople. For the most part, that is what they are doing. Some of them are in a little different position. They have already done that. But we are getting good response from our people. An 8.8 number for us today, it is a big expense to hand, but it is the right move for us to make.

Speaker #5: And for the most part, that's what they're doing. Some of them are a little different position. They've already done that. But we're getting good response from our people.

Speaker #5: And an 8.8 number for us today is a big expense to hand, but it's the right move for us to make. Makes sense. Thanks so much for that, guys.

Mark Carden: Makes sense. Thanks so much for that, guys.

Speaker #2: Thanks, Mark.

Patrick Hatcher: Thanks, Mark.

Speaker #1: And we'll go next to Kelly Baniya with BMO Capital. Your line is open; please go ahead.

Operator: We will go next to Kelly Bania with BMO Capital. Your line is open. Please go ahead.

Speaker #6: Good Good morning. Just wanted to talk about the procurement savings target that you outlined at the analyst day. And how much progress there does that contribute to the fiscal 26 outlook specifically?

Kelly Bania: Good morning. I just wanted to talk about the procurement savings target that you outlined at the analyst day and how much progress there does that contribute to the fiscal 2026 outlook specifically?

Speaker #4: Hi, hi Kelly, this is Scott. So we talk a lot about that at Investor Day. We feel really good about our progress. And just to take a step back, you know, we are always constantly working with our vendors.

Scott McPherson: Hi, Kelly. This is Scott. We talk a lot about that at Investor Day, and we feel really good about our progress. To take a step back, we are always constantly working with our vendors and working on procurement opportunities. As we looked at the landscape, we made the acquisitions of Cheney Brothers and Jose Santiago, and we continue to do a much better job working together between our segments. We saw an opportunity to create win-win scenarios with our vendors, which is what we're doing today. I think as I look at the spread over our three-year guidance, I think that spread of procurement synergy will be pretty balanced. We're well on pace in this first year to achieve that.

Speaker #4: And working on, you know, procurement opportunities. You know, but as we looked at the landscape, we made the acquisitions of Chaney Brothers and Jose Santiago and we continue to do a much better job working together between our segments.

Speaker #4: You know, we saw an opportunity to create, you know, win-win scenarios with our vendors, which is what we're doing today. I think as I look at the spread over our three-year guidance, I think that that spread of procurement synergy will be pretty balanced.

Speaker #4: And we're well on pace in this first year to achieve that.

Speaker #6: Okay, that's helpful. And I just wanted to also ask a couple of questions about convenience. Obviously, the broader restaurant traffic is really improving here, but the convenience division remains kind of pressured.

Kelly Bania: Okay. That's helpful. I just wanted to also ask a couple of questions about convenience. Obviously, the broader restaurant traffic is really improving here, but the convenience division remains kind of pressured. Obviously, you have some new business wins. I am just curious, maybe, Scott, what do you think needs to happen here? It looked like maybe easier comparisons were starting to help in the industry. When do you think that will start to turn, if at all? Is that in your outlook? What do you think the operators need to do? Just any color on the foodservice kind of sales and where that's tracking in that division?

Speaker #6: Obviously, you have some new business wins. But I was just curious maybe, Scott, what do you think needs to happen here? It looks like maybe easier comparisons were starting to help in the industry.

Speaker #6: But just when do you think that will start to turn, if at all? Is that in your outlook? What do you think the operators need to do?

Speaker #6: And just any color on the food service kind of sales and where that's tracking in that division?

Speaker #4: Sure, Kelly. When I look at the landscape of convenience overall, you know, one of the things that really hurt convenience was, you know, the work from home.

Scott McPherson: Sure, Kelly. When I look at the landscape of convenience overall, one of the things that really hurt convenience was the work from home. As we have seen that increase, and I have seen nationally numbers where people are back in the office three and a half days a week, a lot of people are four and five. You think about that commuter traffic, that morning traffic that is getting coffee and breakfast. That was a big part of where convenience lost. I think the macro is improving a little bit. We have talked a little bit about the illicit vape issue in the country. I think that this administration is looking a little more favorable on that, meaning that they are going to enforce it. That is a big upside for our convenience segment as well.

Speaker #4: And as we've seen that increase, you know, I see nationally numbers where people are back in the office three and a half days a week. You know, a lot of people are four and five.

Speaker #4: You think about that commuter traffic that morning, you know, traffic that's getting coffee and breakfast. That was a big part of where convenience lost.

Speaker #4: And so, you know, definitely I think the macro is improving a little bit. We've talked a little bit about the illicit vape issue in the country.

Speaker #4: And I think that this administration is looking a little more favorable on that. Meaning that they're going to enforce it. That's a big upside for our convenience segment as well.

Speaker #4: And then I think the other thing that gives me, you know, great confidence is we continue to grow share. And, you know, not just the big customer wins that we've talked about, but, you know, our street folks are out there our independent performance is getting better.

Scott McPherson: I think the other thing that gives me great confidence is we continue to grow share. Not just the big customer wins that we have talked about, but our street folks are out there. Our independent performance is getting better. I think we are going to fare well, even if the macro remains pretty challenging.

Speaker #4: And so I think we're going to fare well even if the macro remains pretty challenged.

Speaker #2: Yeah, and Kelly, to that last point on the outlook, we really didn't plan for the macro to improve. Really what's in the outlook as far as convenience goes is just the excellent business wins that Scott talked about earlier in his remarks.

Patrick Hatcher: Yeah. Kelly, to that last point on the outlook, we really did not plan for the macro to improve. What is in the outlook as far as convenience goes is just the excellent business wins that Scott talked about earlier in his remarks. As you look at how they finished up Q4, they have a lot of momentum. They are executing extremely well. It is really more of that than say that the macro is going to improve as far as the outlook goes.

Speaker #2: And just as you look at how they finished up Q4, they have just a lot of momentum. They're executing extremely well. So it's really more that than, say, that the macro is going to improve as far as the outlook goes.

Speaker #6: Thank you.

Kelly Bania: Thank you.

Speaker #1: We'll go next to Lauren Silverman with Deutsche Bank. Your line is open; please go ahead.

Operator: will go next to Lauren Silberman with Deutsche Bank. Your line is open. Please go ahead.

Speaker #7: Thanks so much. And congrats! I wanted to just ask on the independent case growth side, the independent account growth, the 5.3%, did that growth compound over time as presumably new accounts come in with smaller basket sizes and then build?

Lauren Silberman: Thanks so much. Congrats. I wanted to just ask on the independent case growth side, the independent account growth, the 5.3%. Does that growth compound over time as presumably new accounts come in with smaller basket sizes and then build? Can you just talk about that dynamic as you've seen such a strong new account growth and how that translates to increased penetration in future quarters?

Speaker #7: Can you just talk about that dynamic as you've seen such strong new account growth and how that translates to increased penetration in future quarters?

Speaker #4: We look real

George Holm: We look real close at the average customer within our new business versus existing business. There is not much difference. It is certainly less, but it is not much less. That is a tribute to our salespeople. When they pick up an account, they get a big piece of that business right away. The other thing that has been a positive for us is that we have been growing our lines all through this tough period of time. So far, this fiscal year and really most of the last quarter, we have been seeing our sales grow as fast as our lines have grown, which before we have seen that because they were not buying as much of the product that we sold to them both years. That has been a real positive for us as well.

Speaker #3: close at the average customer within our new business versus existing business. And there's not much difference. I mean, it's certainly less, but it's not much less.

Speaker #3: That's a tribute to our salespeople when they pick up an account. They, you know, they get a big piece of that business right away.

Speaker #3: The other thing that's been a positive for us is that we've been growing our lines all through this tough period of time. But so far this fiscal year, and really most of the last quarter, we've been seeing our sales grow as fast as our lines have grown, which before we weren't seeing that because they weren't buying as much of the product that we sold to them both years.

Speaker #3: So that's been a real positive for us as well. And then by further beefing up our salespeople, what we found, and this is normal, I think, in any environment that gets really competitive, and the actual channel isn't growing, you know, people get more aggressive.

George Holm: By further beefing up our salespeople, what we found, and this is normal, I think, in any environment that gets really competitive and the actual channel is not growing, people get more aggressive. By having the people out there and having our existing people calling on new accounts as we do some splits of the territories, what we found is we are not losing accounts at the rate we were before. We feel like we have always been good with that, but when we have single-digit reductions in accounts from the previous year in an industry that has got the kind of turnover that we have, that is a good sign for us. We have been able to get that accomplished.

Speaker #3: And by having the people out there and having our existing people calling on new accounts as we do some splits of the territories, you know, what we found is we're not losing accounts at the rate we were before.

Speaker #3: I mean, we feel like we've always been good with that, but when we have single-digit reductions in accounts from the previous year in an industry that's got the kind of turnover that we have, that's a good sign for us.

Speaker #3: And we've been able to get that accomplished.

Speaker #7: Great. Thanks. And then if I could just shift and ask about what you're seeing in the M&A landscape. How your pipeline looks willingness or potential targets to make deals come to the table.

Lauren Silberman: Great. Thanks. If I could just shift and ask about what you are seeing in the M&A landscape, how your pipeline looks, willingness of potential targets to make deals come to the table, and anything you are considering for 2026, how we should think about that.

Speaker #7: And anything you're considering. For 26 or how we should think about that.

Speaker #3: We feel good about what we have going on right now. We have some nice conversations. Some that are actionable. Nothing that I would call in our history, that I would call significant in size.

George Holm: We feel good about what we have going on right now. We have some nice conversations, some that are actionable, nothing that I would call in our history that I would call significant in size. But it's a great market today. I mean, there's a great amount of activity.

Speaker #3: But it's a great market today. I mean, there's a great amount of activity.

Speaker #2: Yeah, Lauren, just going back to investor day, we talked a lot about our strategy and I'd say our strategy hasn't changed.

Patrick Hatcher: Yeah, Lauren, just going back to Investor Day, we talked a lot about our strategy. I'd say our strategy hasn't changed.

Speaker #7: Great, thank you guys.

Lauren Silberman: Great. Thank you, guys.

Speaker #1: We'll go next to Edward Kelly with Wells Fargo. Your line is open; please go ahead.

Operator: will go next to Edward Kelly with Wells Fargo. Your line is open. Please go ahead.

Speaker #2: Hi, good morning everyone. Nice quarter. George, I wanted to, you know, ask you to maybe just kind of like take a step back on the industry, you've got more I think experience here than probably anybody.

Mark Carden: Hi. Good morning, everyone. Nice quarter. George, I wanted to ask you to maybe just kind of take a step back on the industry. You have more, I think, experience here than probably anybody. Things have gotten better. But if we look out, we have tariff pricing that is starting to come in. That is followed by a large refund cycle. I am just kind of curious as to whether you think some of the volatility that we have seen continues. Is your confidence really just around your own ability to execute against that? Any color on bigger picture and how you are thinking about this backdrop would be helpful.

Speaker #2: Things have gotten better. But if we look out, we have tariff pricing that's starting to come in. That's followed by a large refund cycle.

Speaker #2: I'm just kind of curious as to whether you think some of the volatility that we've seen continues, and is your confidence really just around your own ability to execute against that?

Speaker #2: But just any color on, you know, bigger picture and how you're thinking about this backdrop would be helpful.

Speaker #3: Well, the improvement's nice to see, but it's still negative. You know, we got mixed today, with a couple of chains that announced.

George Holm: The improvement is nice to see, but it is still negative. You know, we got mixed today, with a couple of chains that announced real mixed results. We have a lot of casual dining and a lot of them that are really suffering, but there is a couple that have made one a good comeback, one an incredible comeback. So it can still be done out there. But for us to rely on the industry to grow right now, I would not want to do that. I think a lot of it is around pricing. Our customers are dealing with a lot of increased costs, and they have had to pass that on. I think that is one of the things that keeps the industry a little lid on it.

Speaker #3: Real mixed results. We have a lot of casual dining and a lot of them that are really suffering, but there's a couple that have made one a good comeback, one an incredible comeback.

Speaker #3: So it can still be done out there. But for us to rely on the industry to grow right now, I would not want to do that.

Speaker #3: I think a lot of it is around pricing. You know, our customers are dealing with a lot of increased costs. And, you know, they've had to pass that on.

Speaker #3: And I think that's one of the things that, you know, keeps the industry a little lit on it. If it stays as it is now, with what we got going on, I've got a high level of confidence that we'll be in that 6% number or better.

George Holm: If it stays as it is now with what we got going on, I have got a high level of confidence that we will be in that 6% number or better because that is what we are doing today. I mean, it could get worse, I guess, but I do not think so. I think that we are going to continue to see just a little better all the time. I do not see a big jump. I do not see it in convenience either. We are very, very large in candy and snacks as an organization. Those prices are up significantly, and it looks like there will be more and more states that are going to take that out of the snap card. So I think that is going to impact us.

Speaker #3: Because that's what we're doing today. And I just, I mean, it could get worse, I guess. But I don't think so. I think that we're going to continue to see just a little better all the time.

Speaker #3: But I don't see a big jump. And I don't see it in convenience either. We're very, very large in candy and snacks as an organization.

Speaker #3: Those prices are up significantly and, you know, it looks like there'll be more and more states that are going to take that out of the snack card.

Speaker #3: So, I think that's going to impact us. But if you just throw it all in a bucket and look at it in its entirety, I think that we're in the right channels, Ed, and I think it's going to go real well for us.

George Holm: But if you just throw it all in a bucket and look at it in entirety, I think that we are in the right channels, Ed, and I think it is going to go real well for us.

Speaker #2: Great. And then I just wanted to follow up. Maybe for Scott, maybe for Patrick, I'm not sure. But on the convenience side, you have some new customer wins coming in.

Mark Carden: Great. I just wanted to follow up, maybe for Scott McPherson, maybe for Patrick Hatcher, I am not sure. On the convenience side, you have some new customer wins coming in. How significant in size is that? You mentioned some startup costs early on. I am kind of curious as to how you are thinking about the cadence of EBITDA growth in convenience as the year progresses. What is a good target in terms of EBITDA growth in that business for the year?

Speaker #2: How significant in size is that? And then you mentioned some startup costs sort of early on. So I'm kind of curious as to how you're thinking about the cadence of EBITDA growth in convenience.

Speaker #2: As the year progresses and, you know, what's a good target in terms of EBITDA growth in that business for the year?

Speaker #4: Yeah, Ed, this is Scott. So obviously we've called out that, you know, one of those chains will roll on starting September. The other one, December.

Scott McPherson: Ed, this is Scott. We have called out that one of those chains will roll on starting September, the other one December. So it kind of gives you a timing. They will probably roll on over a handful of weeks. We are obviously for the September one, we are hiring right now. So we are obviously investing in labor and fleet and some facility modification to prepare for all of that. We feel like we are in a great position there. But obviously, in this, probably Q2, I think our profits will be a little bit moderated just because of the investment that we are making. But I think they will normalize into Q3 and Q4. We are not going to give a specific target on EBITDA growth for convenience, but feel really good about their performance in the quarter in 2025 and also into 2026.

Speaker #4: So it kind of gives you a timing, you know, they'll probably roll on over a handful of weeks. We're obviously for the September one, we're hiring right now.

Speaker #4: So we're obviously investing in labor and fleet and some facility modification. To prepare for all of that. So, you know, we feel like we're in a great position there.

Speaker #4: But obviously, you know, in this, you know, probably Q2, I think our profits will be a little bit moderated just because of the investment that we're making.

Speaker #4: But I think they'll normalize into Q3 and Q4. You know, we're not going to give a specific target on EBITDA growth for convenience, but, you know, we feel really good about their performance in the quarter.

Speaker #4: In 2025 and also into 2026, feel really good about how they're going to perform.

Scott McPherson: Feel really good about how they are going to perform.

Speaker #2: Great, thanks guys.

Mark Carden: Great. Thanks, guys.

Speaker #1: We'll go next to Alex Slegal with Jeffries. Your line is open, please go ahead.

Operator: We'll go next to Alexander Slagle with Jefferies. Your line is open. Please go ahead.

Speaker #8: Thanks and congrats! I guess just more on the EBITDA margins, which are sort of record across basically all the divisions. We've talked about it a little bit, but maybe you could touch on some of the incremental drivers we haven't discussed yet.

Alexander Slagle: Thanks, and congrats. I guess just more on the EBITDA margins, which are sort of record across basically all the divisions. We have talked a little bit of it, but maybe you could touch on some of the incremental drivers we have not touched so far yet. It is a big role. Sales mix is continuing. We talked a little bit about procurement wins. I do not know if there are any inventory holding gains near term that we saw, but you could kind of touch on some of the other pieces, the profitability.

Speaker #8: Several sales mixes continuing, talked a little bit about procurement wins. I don't know if there's any inventory holding gains near term that we saw, but you could kind of touch on some of the other pieces.

Speaker #8: The profitability.

Speaker #4: Yeah, I'll start there and maybe Patrick will tag on to this. When I think about margins, you know, across the three segments, you know, mix is probably the number one theme.

Scott McPherson: Yeah, I will start there, and maybe Patrick will tag on to this. When I think about margins across the three segments, mix is probably the number one theme. We had really nice mixed performance in the foodservice segment. Obviously, with our 6% independent case growth, that really helps margins. In the food or in the convenience space, it is really about the commodities that we are selling, much more in the foodservice, snack, and candy area where we are seeing nice growth, nice profit growth. So really, it is kind of a commodity mix shift there and very similar in the specialty segment as well. So mix across all three segments was really good. The other thing I would say is we had really nice OpEx leverage across all three segments as well. So all of them are performing well from an operating standpoint.

Speaker #4: We had really nice, you know, mixed performance in the food service segment. Obviously, with our 6% independent case growth, that really helps margins. In the food, or in the convenience space, it's really about the commodities that we're selling.

Speaker #4: You know, we’re seeing much more in the food service snack and candy area, where we’re seeing nice growth and nice profit growth. So really, it’s kind of a commodity mix shift there.

Speaker #4: And very similar in the specialty segment as well. So, mixed across all three segments was really good. The other thing I’d say is we had really nice OpEx leverage across all three segments as well.

Speaker #4: So all of them are performing well from an operating standpoint. Warehouse transportation, hiring, you know, has been really good. Retention of employees, you know, overtime safety, you know, feel really good about that landscape.

Scott McPherson: Warehouse transportation, hiring has been really good. The retention of employees, overtime, safety, feel really good about that landscape. You mentioned the procurement savings. As I mentioned earlier, we feel like that is definitely a part of it and feel good about the pathway that we are on there. Patrick, I do not know if you want to.

Speaker #4: You know, you mentioned the procurement savings. As I mentioned earlier, we feel like that's definitely a part of it, and we feel good about the pathway that we're on there.

Speaker #4: Patrick, I don't know if you want to.

Speaker #2: Yeah, I'll just touch on a couple of things Alex. One, yeah, we're really pleased with the margin improvement we saw in Q4 and full year fiscal 25.

Patrick Hatcher: Yeah, I will just touch on a couple of things, Alex. One, yeah, we are really pleased with the margin improvement we saw in Q4 and full-year fiscal 2025. And you know, I am looking forward to continuing that in 2026. You brought up inventory gains. Inventory gains were a slight benefit in Q4. But as we look out over 2026, quarter by quarter, we do not expect to see much in terms of inventory gains. That is what we modeled in our guidance, both for Q1 and the full fiscal year.

Speaker #2: And, you know, I'm looking forward to continuing that in 2026. You brought up inventory gains. Inventory gains were a slight benefit in Q4. But as we look out over 2026, quarter by quarter, we don't expect to see much in terms of inventory gains.

Speaker #2: And that's what we modeled in our guidance both for Q1 and the full fiscal year.

Speaker #8: Okay, great. And just a follow-up, you talked about stability in trends. Which I guess you're seeing that continue in, I mean, that comes at the same time it looks like a good deal of uncertainty and variability between the operators and brands lately.

Alexander Slagle: Okay, great. To follow up, you talked about stability in trends, which I guess you are seeing that continue. I mean, that comes at the same time, it looks like a good deal of uncertainty and variability between the operators and brands lately. Maybe you can clarify what you are seeing in terms of the stability.

Speaker #8: So maybe you can kind of clarify what you're seeing in terms of the stability.

Speaker #4: Yeah, Alex, I'd say, you know, first off, I go to black box and just look at traffic. You know, we saw traffic improve sequentially over Q4.

Scott McPherson: Yeah, Alex, I would say, you know, first off, I go to Black Box and just look at traffic. You know, we saw traffic improve sequentially over Q4. Then, as I mentioned, July was really the first positive month. But to your comment, when I look at QSR segment, when I look at Fast Casual segment, it is a little bit the haves and the have-nots. As George mentioned, you know, those that have created a value proposition with, you know, price to value seem to be performing really well. Then we have some other chains that are really struggling in that space. So, you know, that is kind of a blend. We have been very fortunate. As we mentioned, our chain growth was really strong. We have been very fortunate to partner with some of those more progressive restaurateurs out there, and it has really paid off for us.

Speaker #4: And then as I mentioned, July was really the first positive month. But to your comment, when I look at QSR segment, when I look at fast casual segment, it's a little bit the haves and the have-nots.

Speaker #4: As George mentioned, you know, those that have created a value proposition with, you know, price to value, seem to be performing really well. And then we have some other chains that are really struggling in that space.

Speaker #4: So, you know, that's kind of a blend. We've been very fortunate, as we mentioned. Our chain growth was really strong. We've been very fortunate to partner with some of those more progressive restaurateurs out there.

Speaker #4: And it's really paid off for us.

Speaker #3: Yeah, I'd do a call-out for our chain people. Both within our broad line and within our OpCos, they're strictly chain. We gave them a pretty big challenge.

George Holm: I do a call out for our chain people, both within our broad line and within our opcos that are strictly chain. We gave them a pretty big challenge. We have some chains that have really dropped off. We tend to be very loyal to them, and we hang in there and hope that they come back, as we've seen others that have come back. We challenge them to get themselves in a position where they could handle more SKUs than what they are handling today and to go out and get a different type of customer and customers that are in a growth mode. They have been able to do that. It was no small feat. It took some courage to get done what they got done. We are in a real good spot. It was good for Q4.

Speaker #3: We have some chains that have really dropped off, and we tend to be very loyal to them. We hang in there and hope that they come back, as we've seen others that have come back.

Speaker #3: But we challenge them to get themselves in a position where they could handle more SKUs than what they're handling today. And to go out and get a different type of customer and customers that are in a growth mode and they've been able to do that.

Speaker #3: And there's no small feat. That took some courage. To get done what they got done. And we're in a real good spot. It was good for Q4.

Speaker #3: We've got a good bit of time ahead of this where we have some good business in place that does not have sales histories. And there'll be a big contributor for us this year.

George Holm: We have a good bit of time ahead of this where we have some good business in place that does not have sales histories, and they will be a big contributor for us this year.

Speaker #8: That's great. Thank you.

Mark Carden: is great. Thank you.

Speaker #1: We'll go next to Brian Harbor with Morgan Stanley. Your line is open; please go ahead.

Operator: will go next to Brian Harbour with Morgan Stanley. Your line is open. Please go ahead.

Speaker #2: Yeah, thanks. Good morning, guys. Maybe on that topic, not to make this too macro-focused, but I think you have pretty good perspective, right? I would say, and this is sort of a black box comment, but I would say quick service has actually been pretty uninspiring lately.

Mark Carden: Yeah, thanks. Good morning, guys. Maybe on that topic, not to make this too macro-focused, but I think you have a pretty good perspective, right? I would say, and this is sort of a black box comment, but I would say quick service has actually been pretty uninspiring lately. I know it is kind of better quarter over quarter, but it seems like that is the part of the industry that is a little more challenged. So I am curious, I guess, if you, like on the independent side, do you see full service kind of doing better than quick service? Is that sort of similar to what is going on with chains? Do you think this is sort of demographics that explain this? Do you think it is just sort of experiences that are still holding up better?

Speaker #2: I know it's kind of better quarter over quarter, but it seems like that's the part of the industry that's a little more challenged. So I'm curious, I guess if you know, like on the independent side, do you see full service kind of doing better than quick service?

Speaker #2: Is that, you know, sort of similar to what's going on with chains? Do you think this is sort of demographics that explain this? Do you think it's just sort of, you know, experiences that are still holding up better?

Speaker #2: I mean, what would you conclude just kind of looking across your customer base?

Mark Carden: I mean, what would you conclude just kind of looking across your customer base?

Speaker #3: QSR has been interesting

George Holm: QSR has been interesting because where we are doing well, and we are not huge in that category, but we certainly have our share. Where we are doing well, it is actually at the top of the market in the higher-priced QSRs, particularly one in the burger area that is doing great. We have got a couple in chicken that are really, really doing well. I think that what may be here to stay, there is kind of a what is hot. If somebody is resonating with the consumer, everybody knows it very quick because social media is such a big part of what happens in the chain restaurant business. Sometimes it is just an item that will bring somebody up to a different level from where they were before.

Speaker #4: because where we're doing well, and we're not huge in that category, but we certainly have our share. And where we're doing well, it's actually at the top of the market in the higher priced QSRs.

Speaker #4: Particularly, one in the burger area that's doing great. We got a couple in chicken that are really, really doing well. But I think that what may be here to stay, there's kind of a "what is hot."

Speaker #4: And if somebody's resonating with the consumer, everybody knows it very quickly because social media is such a big part of what happens in the chain restaurant business.

Speaker #4: And sometimes it’s just an item that’ll bring somebody up to a different level from where they were before. I would agree that if you want to call it casual dining, family dining, sit-down type restaurants, of late, they appear to be coming back.

George Holm: I would agree that if you want to call it casual dining, family dining, sit-down type restaurants, of late, they appear to be coming back. Not everybody, of course. As I said, social media is a big component here. It seems like people are doing a little less takeout. Delivery seems to still be big, but I do not know that it is growing fast. I think people are wanting to get out again and enjoy themselves. Even with the kind of growth that we are running now in independent, we do not see that kind of growth in our takeout programs. I think people are coming back to the restaurants a bit.

Speaker #4: Not everybody, of course. You know, like I said, social media is a big component here. But it seems like people are doing a little less takeout.

Speaker #4: Delivery seems to still be big, but not, I don't know that it's growing fast. I think people are wanting to get out again and enjoy themselves.

Speaker #4: And even with the kind of growth that we're running now in independent, we don't see that kind of growth in our takeout programs. So I think people are coming back to the restaurants a bit.

Speaker #2: Okay, yeah, thanks. Could you comment maybe just on, you know, the integration of Santiago and Chaney Brothers? You know, is that kind of on track?

Mark Carden: Okay. Yeah, thanks. Could you comment maybe just on integration of Jose Santiago and Cheney Brothers? Is that kind of on track? Is it perhaps ahead of schedule? Could you comment on organic growth in those businesses since you've acquired them?

Speaker #2: Is it perhaps ahead of schedule? You know, could you comment on sort of organic growth in those businesses since you've acquired them?

Speaker #3: Well, we don't do much in the way of integration early with acquisitions because we want them to be the ones that drive what type of integration that we do.

George Holm: We do not do much in the way of integration early with acquisitions because we want them to be the ones that drive what type of integration that we do. There are some obvious things that we get done early on that have to be done. I would say with both of them that it is moving at a pace that we typically do see. It has really been for us. Year three just seems to be the year that we tend to take off. We saw that with Reinhardt. We are seeing it today with Merchants. The legacy Merchants companies are just on fire right now, and it took three years. Cheney and Jose Santiago are both extremely well-managed businesses.

Speaker #3: You know, there are some obvious things that we get done early on that have to be done. But I would say with both of them, it's moving at a pace that we typically do see.

Speaker #3: I mean, it's really been for us, Year 3 just seems to be the year that we tend to take off. We saw that with Reinhart.

Speaker #3: We're seeing it today with merchants. The legacy merchants companies are just on fire right now. And it took three years. Chaney and Jose Santiago are both extremely well-managed businesses.

Speaker #3: I think that after our purchase of Chaney, we saw that market get a lot more competitive, particularly the Florida part of that market. And that's probably, you know, normal in that type of situation.

George Holm: I think that after our purchase of Cheney, we saw that market get a lot more competitive, particularly the Florida part of that market, and that is probably normal in that type of situation. They did not, for a while there, put out kind of the typical type of growth, but now they are back and they are getting that done again. So we are just so confident in those two companies. I cannot speak to any significant amount of integration that we have done at this point.

Speaker #3: And they didn't for a while there put out kind of their historical type of growth, but now they're back, and they're getting that done again.

Speaker #3: So we're just so confident in those two companies. But I can't speak to any significant amount of integration that we've done at this point.

Speaker #1: And we'll take our next question from John Highbuckle with Guggenheim.

Operator: We'll take our next question from John Heinbockel with Guggenheim.

Speaker #4: Hey George, I have a question about your creating sales force capacity. Individual sales person capacity, which is great. How do you want them spending their time?

Scott McPherson: Hey, George. I have a question on your creating Salesforce capacity, individual salesperson capacity, which is great. How do you want them spending their time? I know this is decentralized. I wonder because there is such a big opportunity in lines per account penetration. Are there some opcos that are doing phenomenally well and thus there are best practices? It has been an opportunity that all of you have kind of struggled with. I wonder if the Salesforce capacity is poor penetration, can you guys finally move the needle on lines per item in a significant way? Do you really want them to prioritize new accounts?

Speaker #4: And I know this is decentralized. And I wonder, because there's such a big opportunity, right, in lines per account penetration. You know, are there some opcos that are doing phenomenally well and thus there are best practices?

Speaker #4: Because it's been an opportunity that, you know, all of you have kind of struggled with. So, I wonder, you know, if the sales force capacity is toward penetration?

Speaker #4: Can you guys finally move the needle on lines per item in a significant way, or do you really want them to prioritize new accounts?

Speaker #3: Well, I think, you know, the additional people that we've added, I think is helping our penetration. But I think it'll help it more as we move forward.

George Holm: I think, you know, the additional people that we've added, I think, is helping our penetration, but I think it will help it more as we move forward. Training always. We are going to a lot more online training. But it is very decentralized, and we do a lot of things around best practice, but that is between them or maybe some coaching that comes from Scott or from Steve Broad as to, you know, who to go talk to. But they run their businesses, and I think that things move in trends within our company, and the trend has been to beef it up, to get the more experienced people calling on new accounts, and get our people where they have more time to work on penetration because it is certainly the most difficult part of our business today. You know, people are busy.

Speaker #3: Training is ongoing. We're going to have a lot more online training. However, it is very decentralized, and we do a lot of things around best practices, but that's done informally between them or maybe some coaching that comes from Scott or from Steve Broad regarding who to talk to.

Speaker #3: But they run their businesses, and I think that things move in trends within our company. The trend has been to beef it up, to get the more experienced people calling on new accounts.

Speaker #3: And get our people where they have more time to work on penetration because it is certainly the most difficult part of our business today.

Speaker #3: You know, people are busy. A lot of ordering is done online. And it's less of an opportunity to penetrate better or to pull SKUs from your competitor.

George Holm: A lot of ordering is done online, and it is less of an opportunity to penetrate better or to pull SKUs from your competitor. This getting time freed up and getting the real experienced, talented people out there, I think that is where we are headed. And I think that would be in just about every company. I think, Scott, you would look at it that way too.

Speaker #3: I think getting time freed up and bringing in the truly experienced, talented people out there is where we're headed. I believe that would be the case in just about every company.

Speaker #3: I think, Scott, you would look at it that way, too.

Speaker #4: Agreed.

Scott McPherson: Agreed.

Speaker #3: Yeah.

George Holm: Yeah.

Speaker #4: All right, maybe for Scott. What does the RFP landscape look like on the core market side? Right? Obviously, that comes in over time.

Scott McPherson: All right. Maybe for Scott, what does the RFP landscape look like on the Core-Mark side? Obviously, that comes in over time. But is that now much larger over the next couple of years? I would not think you would lose many of those, particularly new ones, not ones that you have. How do you think about preparing capacity for those wins? You do not want to do two or four ahead of time. Where are you spending with that? I can tell you, John, the most recent wins that we have, we did a great job of participating in capacity. We expanded into two new facilities far in advance of getting those customer wins. Had we not done that, we probably would have had to turn that business away. We are constantly looking at our capacity across the network, where we think new business opportunities may come.

Speaker #4: But does that now, you know, sort of, is that much larger right over the next couple of years? And you know, I wouldn't think you would lose many of those.

Speaker #4: Particularly, you know, new ones, not ones that you have. How do you think about preparing capacity, you know, for those wins? You don't want to do too far ahead of time, but where do you stand with that?

Speaker #3: Well, I can tell you, John, that the most recent wins that we have, we did a great job participating in capacity. We expanded into two new facilities far in advance of getting those customer wins, and had we not done that, we probably would have had to turn that business away.

Speaker #3: So we are constantly looking at, you know, our capacity across the network, where we think new, you know, new business opportunities may come. And we base that on our relationships with customers and, you know, where we think we're going to make the most progress.

Scott McPherson: We base that on our relationships with customers and where we think we are going to make the most progress. To your point, in the convenience landscape, incumbency is pretty powerful. That is why we are so proud that we have gotten what I call a handful of really prominent retailers to choose us as their primary supplier across the country. I feel really good about how the convenience group is performing and how they are servicing their customers.

Speaker #3: And to your point, you know, in the convenience landscape, incumbency is pretty powerful. And so, you know, that's why we're so proud that we've gotten, you know, what I'd call a handful of really prominent retailers to choose us as their primary supplier.

Speaker #3: Across the country. So I feel really good about how the convenience group is performing and how their service and their customers.

Speaker #2: And John, as you know, we've talked about this for several quarters. We continue to invest in CapEx to continue to expand buildings, get new buildings.

Patrick Hatcher: John, as you know, we have talked about this for several quarters. We continue to invest in CapEx to continue to expand buildings, get new buildings across all three segments. Primarily, our focus, as we have said, has been foodservice. As Scott just alluded to, we have done this in convenience and even in specialty as well.

Speaker #2: Across all three segments, and primarily our focus, as we've said, has been food service. But as Scott just alluded to, we have done this in convenience and even in specialty as well.

Speaker #3: Yeah, I want to make a couple of comments there. You know, we're in three different businesses. We certainly don't have any intention of getting any more complicated than we are.

George Holm: Yeah, I want to make a couple of comments there. You know, we are in three different businesses. We certainly do not have any intention of getting any more complicated than we are. It looks complicated, but the people that manage each one of those businesses, they live and die those businesses. When we say our priority is foodservice, it certainly is. I have a tremendous amount of confidence in how Core-Mark is managed today and the same for Vistar. When they need CapEx, it is not like they are fighting for CapEx because we are doing it in another direction. If they have something compelling, we have the confidence in them that they will make good use of it. That is what our people in Core-Mark did. I mean, we put two places in exactly the right places in anticipation of the two pieces of business that we got.

Speaker #3: It looks complicated, but the people that manage each one of those businesses and they live and die those businesses. When we say our priority is food service, it certainly is.

Speaker #3: I have a tremendous amount of confidence in how Core Market is managed today. And the same for Vistar. When they need CapEx, it's not like they're fighting for CapEx because we're doing it in another direction.

Speaker #3: If they have something compelling, we have the confidence in them that they'll make good use of it. And that's what our people in core market did.

Speaker #3: I mean, we put two places in exactly the right places in anticipation of the two pieces of business that we got. So once again, I'll use that word.

George Holm: Once again, I will use that word. That took a lot of courage and a lot of commitment. We have always, in the past, we have also been careful to spend money where we had a tremendous amount of confidence that it was going to get a return. Early on, we replaced almost every Vistar facility. That was our best-run business at the time. Still was extraordinarily well run and the most profitable. Then we have spent a lot of money where we have big broad liners, and we have gotten a great payback from that. Now what we have done is we have gone in the West where we are very subscale, and we have built new buildings. We have done big additions. That is part of why we have 8.8% more people. We are gearing up there.

Speaker #3: That took a lot of courage. And a lot of commitment. We've always, in the past, we've also been careful to spend money where we had a tremendous amount of confidence that it was going to get a return.

Speaker #3: So early on, we replaced almost every Vistar facility. That was our best-run business at the time. Still is extraordinarily well run, and the most profitable.

Speaker #3: Then we spent a lot of money where we have big broadliners, and we've gotten a great payback from that. Now, what we've done is we've gone into the West, where we are very sub-scale, and we've built new buildings.

Speaker #3: We've done big additions. That's part of why we have 8.8% more people. We're gearing up there. I think that we've been so successful with our CapEx that those people have confidence, and we're going to support them.

George Holm: I think that we have been so successful with our CapEx that those people have confidence, and we are going to support them. I made a comment that I think our CapEx is going to get more back to that pretty consistent seven-tenths of a point of sales. If we have opportunities, we will take it higher than that. If we do not have the opportunities, we are not going to throw money away and invest just for the sake of investing. But I feel real good about what we are doing around gaining capacity.

Speaker #3: So, I've made a comment that I think our CapEx is going to get more back to that pretty consistent 7/10 of a point of sales.

Speaker #3: But if we have opportunities, we'll take it higher than that. And if we don't have the opportunities, we're not going to throw money away and invest just for the sake of investing.

Speaker #3: But I feel real good about what we're doing around gaining capacity.

Speaker #2: Thank you.

Scott McPherson: Thank you.

Speaker #1: Our next question comes from Jeffrey Bernstein with Barclays. Your line is open; please go ahead.

Operator: Our next question comes from Jeffrey Bernstein with Barclays. Your line is open. Please go ahead.

Speaker #2: Great, thank you very much. My first question is just a follow-up on the M&A. Obviously, from a macro perspective, it's still somewhat difficult. I would think it's more challenged for your smaller food service distribution peers.

Mark Carden: Great. Thank you very much. My first question is just on following up on the M&A. Obviously, from a macro perspective, still somewhat difficult. I would think it is more challenged for your smaller foodservice distribution peers. I think you mentioned you have a good M&A pipeline, but nothing of significant size. I think that has been a consistent message. So, as an alternative, George, how do you feel about your organic growth specifically as you think about the West Coast, whether you go full speed ahead organic, or do you prefer to wait for the M&A? It seems like it is a difficult dance to decide whether to wait versus just pursue the organic, which will presumably take a little bit more time. How do you think about balancing that? Then I had one follow-up.

Speaker #2: I think you mentioned you have good M&A pipeline, but nothing of significant size and I think that's been a consistent message. So as an alternative George, how do you feel about your organic growth specifically as you think about the West Coast, whether you go full speed ahead organic or do you prefer to wait for the M&A?

Speaker #2: It seems like it's a difficult dance to decide whether to wait versus just pursue the organic, which will presumably take a little bit more time.

Speaker #2: How do you think about balancing that? And then I had one follow-up.

Speaker #3: Well, you know, basically we're betting on organic right now, and I think it's a good bet. Scott, you might want to comment on it as well.

George Holm: Basically, we are betting on organic right now, and I think it's a good bet. Scott McPherson, you might want to comment on it as well. Scott McPherson has been very involved with what we've done in the West, but we feel encouraged.

Speaker #3: But Scott's been very involved with what we've done in the West. We feel encouraged.

Speaker #4: Yeah, I'd say structurally we talked a little bit at Investor Day. You know, one of the big challenges in the West of achieving, you know, broader scale outside of capacity is just our brands.

Scott McPherson: Yeah, I would say structurally, we talked a little bit at Investor Day. One of the big challenges in the West of achieving broader scale outside of capacity is just our brands. That is one of our most powerful tools on the street. Just having that critical mass in the West has been a challenge. We have invested in a redistribution facility in the West that will allow us to take brands much more broadly to those opcos. It is just another lever that we can pull as we kind of march that direction.

Speaker #4: And, you know, that's one of our most powerful tools on the street. And, you know, just having that critical mass in the West has been a challenge.

Speaker #4: So, we have invested in a redistribution facility in the West. That will allow us to take brands much more broadly to those OpCos. So, just to, you know, another lever that we can pull as we kind of march in that direction.

Speaker #2: And probably goes without

George Holm: That probably goes without saying, that doesn't mean that if we had the right opportunity from an M&A standpoint, that we wouldn't take advantage of that. You mentioned smaller ones. If our people were really committed to some type of fold-in, I guess I would be there. I've never found that to be a successful route to go. You tend to not hold on to the right percentage of the business. We like to do acquisitions where we feel we can hold on to all the business and then grow it from there. If you're buying somebody that is a fold-in or, whatever you want to call them, and their SKU base is significantly different, change SKUs, change customers is typically what happens. We don't have a huge appetite for that. Maybe no appetite at all.

Speaker #3: saying, that doesn't mean that if we had the right opportunity from an M&A standpoint that we wouldn't take advantage of that. And you mentioned smaller ones.

Speaker #3: I mean, if our people were really committed to some type of folding, I guess I would be there. But I've never found that to be a successful route to go.

Speaker #3: You tend to not hold on to the right percentage of the business. And, you know, we like to do acquisitions where we feel we can hold on to all the business and then grow it from there.

Speaker #3: And if you're buying somebody that is a fold-in or, you know, whatever you want to call them, and their SKU base is significantly different, change SKUs, change customers is typically what happens.

Speaker #3: So we don't have a huge appetite for that. Maybe no appetite at all.

Speaker #2: Got it. My follow-up is more specific to the first quarter. Looks like your guidance for sales and EBITDA was below at least consensus expectations.

Mark Carden: Got it. My follow-up is more specific to the first quarter. It looks like your guidance for sales and EBITDA was below at least consensus expectations. I am wondering whether we perhaps just mismodeled, or there are some unusuals or noise that are impacting results on your end. I know you still have a favorable benefit from both acquisitions before they get lapped. Is there any segment expected to be below the kind of longer-term run rate or any unusuals we should be aware of for the fiscal first quarter, or perhaps was it just a mismodeling on the street's part? Thank you.

Speaker #2: I'm wondering, whether we perhaps just mismodeled or there's some unusuals or noise that are impacting results on your end. I know you still have a favorable benefit from both acquisitions, before they get lapped.

Speaker #2: But is there any segment expected to be below the kind of longer-term run rate or any unusuals we should be aware of for the fiscal first quarter or perhaps was it just a mismodeling on the streets part?

Speaker #2: Thank you.

Speaker #3: Yeah, no, it's a great question.

Patrick Hatcher: Yeah, it's a great question. I appreciate it. As you look, as you know, the reason we give you the quarterly cadence is exactly for that reason. We want you to understand better the cadence in Q1. A couple of things. We actually have lapped the Jose Santiago, but both for Jose Santiago and Cheney Brothers, which we will lap in the second quarter, this is their slower period of sales.

Speaker #2: I appreciate it. So as you look, as you know, the reason we give you the quarterly cadence is exactly for that reason. We want you to understand better the cadence in Q1 and so a couple of things.

Speaker #2: We actually have lapped the Jose Santiago, but both for Jose Santiago and Chaney, which will lap in the second quarter. This is their slower period of sales; the summer months are.

Operator: months are. The quarter of September would be a slower period for them. In fact, for Cheney Brothers, July is similar to what January is for the rest of the foodservice. We wanted to definitely give you that Q1 look to help you understand just that cadence. We really are anchored on the full year, and we feel, like I said before, really confident in our full-year guidance. Again, it is August, so just starting the year. We wanted to give that outlook both for the Q1 and the full year, obviously.

Speaker #2: So, the quarter of September would be a slower period for them. In fact, for Chaney, July is similar to what January is for the rest of food service.

Speaker #2: So we just, we wanted to definitely give you that Q1 look to help you understand just that cadence. But we really are anchored on the full year.

Speaker #2: And we feel like I said before, really confident in our full year guidance. And again, it is August, so just starting the year, but we wanted to give that outlook both for the Q1 and the full year, obviously.

Speaker #3: And also want to remind you, and these are both very positive things, but we needed to keep them take them into account with Q1.

Bill Marshall: I want to remind you, these are both very positive things, but we needed to keep them, take them into account with Q1. One is, we are investing very heavily right now in salespeople. When we do that, we make sure that the compensation to our existing people does not suffer because of that, and that they are totally on board with moving some accounts. We keep that into account, and that is going to taper off some as we get further into the year. Then we have those startup costs. We feel like we are going to have a great year in Core-Mark, but there are very definite startup costs when you are bringing on that amount of business over a fairly short period of time. We want to be able to, day one, service them as if we have always had the business.

Speaker #3: One is, you know, we're investing very heavily right now in salespeople and when we do that, we make sure that the compensation to our existing people doesn't suffer because of that.

Bill Marshall: We have got to get those people trained, ready to go, and go through a period of overstaffing in our Core-Mark opco. Those two things we had to take into consideration, and they are good problems to have.

Operator: Thank you.

George Holm: Our next question comes from Peter Saleh with BTIG. Your line is open. Please go ahead.

Operator: Great. Thanks for taking the questions. A little over a year ago, I think you guys were talking about how the breakfast day part was coming back, particularly, I think, on Mondays and Fridays, expected to come back a little bit stronger. Can you just talk a little bit about what you are seeing? Because it seems like that day part continues to lag, at least from what we see from the restaurant space. Just curious as to your perspective and the go-forward expectations on that day part.

Bill Marshall: I think that Mondays or lunches are, for the most part, back. Friday, I would say no. The other thing that happened is a lot of people did not open back up seven days a week, if that is what they used to do, when COVID came. A lot of them, I know some personally, found that, you know what? I never made any money Sunday night or Monday night. So why was I open? I think that is still having a little bit of a drag because I have seen some of them go back, from five days to six days, not many to seven, at least, in the non-metro, big metro markets. Do you have some comments beyond that, Scott?

Didn't open back up 7 days a week if that's what they used to do. You know, when Co came a lot of them. I know some personally that found that you know what?

You know, I never made any money Sunday night or Monday.

So why was I open? Uh so you know I I think that is still having a little bit of a drag because I have seen some of them go back uh from 5 days to 6 days. Not many to 7, at least uh in the in the non uh Metro you know, big Metro markets.

Operator: I would just to what you said, I think Monday and Friday are still pressured days. If you look nationally, return to work, I think the average is somewhere in the 3.2 to 3.5 range. People tend to make Monday and Friday the days they are not coming in. So those days are still very pressured, and it tends to be that morning day part is still the most pressured, because work hours have also changed a little bit. We see people across the country coming in a little later. So maybe they are having their coffee at home, doing some things at home before they come to the office. Still some pressure there, but certainly has improved. I think that is part of what has helped our independent case growth and helped to some extent, the macro in convenience and specialty.

Bill Marshall: I look at this every day, and I think it's a barometer. You can tell by our sale of coffee into convenience that that morning day part, that the traffic is not back to normal. It's still not at 2019 level.

Would you have some comments beyond that Scott? I I would just to what you said. I think Monday and Friday are still pressured days. And if you look nationally and return to work, I think the average is somewhere in the, you know, 3.2 to 3.5 range. Um, and people tend to to make Monday and Friday the days. They're not coming in so those days are still very pressured and it tends to be that morning Day part is still the most pressured um, because work hours have also changed a little bit and we see people, you know, across the country, coming in a little later. So maybe they're having their coffee at home. Um, doing some things at home before they come to the office, so still some pressure there but certainly is improved and I think that's part of what's helped our independent case growth and and helped you know, to some extent the macro and and convenience and Specialty. I look at

It is every day and it's I think it's a barometer but you can tell by our sale of coffee in the convenience.

That that morning Day, part to the traffic is not back to normal.

It's still not at 2019 levels.

Operator: Thank you. Very helpful. Just a follow-up on the new account growth, this quarter or maybe just this year. Was there anything specific on the type of cuisine or geographies that you were seeing?

Thank you very helpful. Just uh, a follow up on the new account growth. Um, you know, this quarter or maybe just uh this year, was there anything specific on the type of Cuisine or geography that you're seeing?

Bill Marshall: The only thing I would say about type of cuisine and geography, you know, cuisine-wise, we have performed, as we have said on prior calls, really well in the Mexican space, really well in the foodservice and the convenience space. I have had some success in the Asian space as well. Pizza and Italian, we are holding our own and continue to, that is a big part of our business, continue to do well there. So I have really seen it, you know, broadly across the segments.

Really well in the Mexican. Uh space really well in the food service in the convenience space.

Have had some success in the Asian space as well uh and pizza and Italian were holding our own and and continue to, you know, it's a big part of our business continued to do well there. So really seeing it, you know, broadly across the segments

Operator: Thank you very much.

Thank you very much.

George Holm: As a reminder, if you would like to ask a question, you may do so by pressing star one. We will go next to Jake Bartlett with Truist Securities. Your line is open. Please go ahead.

And as a reminder, if you'd like to ask a question, you may do so by pressing *1.

Scott McPherson: Great. Thanks for taking the question. Mine was on EBITDA margin guidance. I think, at the midpoint of the 2026 guidance, there is a little bit of less expansion than you saw in 2025. Then I believe if you are reiterating your three-year targets that you expect a re-acceleration or kind of a widening EBITDA margin expansion in the next two years. So could you just help us understand that dynamic, whether it is being driven purely by investments in the salesforce near-term or some of the convenience investments to bring on those accounts? Any drivers there of the cadence of the EBITDA margin?

We'll go next to Jake. Bartlett with truist Securities. Your line is open. Please go ahead.

Operator: Jake, I will start and see if anyone else wants to contribute. If you look at it, again, we exited 2025 with some really nice margin improvement. As we go into 2026, we do have some investments, as we talked about. We also have some onboarding costs. Then those new accounts that we talked about might have some margin shift as well overall. But we feel really strongly that, again, it is August. We are looking at the numbers. We are very anchored to them. They are strong numbers in terms of growth. I would expect that there is still some room for upside there. But it does have to do with some of the onboarding new customers and the mix shift.

Great, thanks for taking the question. Um, mine was on ibida margin. Um, guidance. I think, you know, at the midpoint of the 26th guidance is a little bit of a less expansion than, than you saw in in 25. And then I believe if you're, you're, you're reiterating your, your 3 year targets that you expect to re-acceleration or, or kind of, um, you know, widening, um, ibida, merging expansion in the next 2 years. So, could you just help us understand that Dynamic? Um, you know, whether it's being driven, you know, purely by, um, investments in the sales force near-term or, um, some of the, of the convenience, um, you know, you know, Investments to to bring on those accounts. Any any drivers there of, the kind of the of the Cadence of the IBA dot margin.

Yeah, Jay call start and see if anyone else wants to contribute. I mean, if you look at it, um, again we we exited 25 with some really nice margin Improvement as we go into 26, we do have some Investments, as we talked about, we also have some onboarding costs. And then those new accounts that we talked about, might have some uh, margin shift as well overall, but we feel really strongly that again, it's August. We're looking at the numbers, we're very anchored to them. They're, they're, they're strong numbers in terms of growth and I would expect that, you know, there's still some room for upside there. But uh, it does have to do with some of the onboarding and new customers and the the mix shift.

Scott McPherson: Okay. To follow up on the comments on recent trends, George, I believe you said that July there was an uptick, but you are also talking about 6% independent organic case growth, similar to the second quarter. Maybe just clarify, or you expect a slight deceleration from July, or maybe the July uptick was not too material? Just trying to understand the cadence of what you are expecting going forward.

Bill Marshall: No, I think we are just being cautious. July and the first two weeks of August are a good bit better than Q4 was, okay? And the two weeks of August are even better than what July was. But we are cautious. You know, it is a bit of a volatile market. But all in all, we feel good. I will make a couple of comments back to the EBITDA margin too. You know, we are bringing on two significant convenience accounts. And the product makeup of convenience is totally different. And that affects us in its entirety. And if you go back to where we started without having convenience, we were less than a 2% EBITDA. And we have reworked this business over several years. If you took out convenience, we were at three and a half, and we still have a substantial chain business.

Okay. And then and then to follow up on the on the comments on, you know, recent Trends and George. I believe you said that July there was an uptick but you're also um, Can talking about 6% independent organic case growth similar to the to the second quarter. So maybe just kind of clarify or or you, you expect it uh, a slight deceleration from July or maybe the July pick wasn't too material. Just trying to understand the, the Cadence of what you're expecting, going forward. You know, I, I think we're just being cautious.

Uh, July in the first 2 weeks of of August.

Are good fit. Better than Q4 was. Okay. And the 2 weeks of August are are even better than what July was.

But were cautious. Um,

you know, it's it's

the market.

But all in all, we feel good. I'll make a couple comments back to the IBA margin too.

Um,

you know, we're bringing on 2, significant convenience accounts.

And the product makeup of convenience is totally different.

Uh,

and that affects,

Us in the entirety. And if you if you go back to to where we, we started

um,

With with uh out having convenience we were less than a 2%. EBA

Bill Marshall: You get outside of our chain. We do not have non-commercial business, which, you know, is for the most part better business. And it is not something that is our focus today or will be anytime in the near future. But if you take out convenience, but you leave all of the corporate overhead in there, we are above three and a half. And that is huge progress for us, particularly with the kind of mix of business that we have. Our big broadliners, of which we have many, they are over five. We do not look at it that close. But we are going to continue to put a bigger portion of our gross profit dollars to the bottom line. But we are not maniacally focused on that. A lot of it is just where our mix of business comes into effect.

And we've reworked this business over several years. If you took out convenience, we were at 3.5, and we still have a substantial change business. You get outside of our chains.

Uh, we don't have a non-commercial business, which you know is, for the most part, better business, and it's not something that is our focus today or will be any time in the near future. But if you take our convenience but you leave all of the corporate overhead in there, we're above 3.5.

And that's huge progress for us, particularly with the kind of of mix of business that we have.

Our big broad liners of which we have many.

Uh, their over 5.

We don't look at it that closely.

But we're going to continue.

Bigger portion of our growth profit dollars to the bottom line.

Bill Marshall: Now, we have always grown it, but we have always had a better mix of business. Can we count on that forever? I am not sure. It just depends on what opportunities lay out there.

But we're not maniacally focused on that. A lot is just where our mix of business comes in. In fact, now we've always grown it, but we've always had a better mix of business.

And we count on that forever. I'm not sure. It just depends on what opportunities lay out there.

Scott McPherson: Great. I really appreciate it.

Operator: Thanks.

Great. I really appreciate it.

All right.

George Holm: This does conclude today's question and answer period. I will now turn the program back over to Bill Marshall for closing remarks.

Patrick Hatcher: Thank you for joining our call today. If you have any follow-up questions, please reach out to Investor Relations.

Bill Marshall for closing remarks.

Thank you for joining our call today. If you have any follow-up questions, please reach out to Investor Relations.

George Holm: This does conclude today's program. Thank you for your participation. You may disconnect at any time.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.