Performance Food Gr (NYSE:PFGC) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/293043340
Summary
Performance Food Gr reported a 6.4% increase in total net sales for Q3 2026, driven by strong performance across all segments, especially in convenience with an 8.3% organic case growth.
The company highlighted its strategic focus on leveraging its diversified position in the food-away-from-home market, with technological advancements like the Customer First platform enhancing sales execution.
Future outlook is positive with expectations of continued growth in fiscal 2027, supported by new facility investments, a robust chain business pipeline, and ongoing market share gains in independent and convenience segments.
Operational highlights include significant contributions from acquisitions like Cheney Brothers and the recently added Cashway, which are expected to bolster revenue and profit growth.
Management remains confident in achieving its three-year targets, with tightened guidance for fiscal 2026 adjusted EBITDA and ongoing efforts in procurement synergies and brand strategy execution.
Full Transcript
OPERATOR
Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press star zero and a member of our team will be happy to help you. Good day and welcome to PFG’s fiscal year Q3 2026 earnings conference call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key followed by the number one on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Senior Vice President Investor Relations for PFG. Please go ahead sir.
Bill Marshall (Senior Vice President Investor Relations)
Thank you and good morning. We’re here with Scott McPherson, PFG CEO and Patrick Hatcher, PFG CFO. We issued a press release this morning regarding our 2026 fiscal third quarter results which can be found in the Investor Relations section of our websiteat pfgc.com during our call today. Unless otherwise stated, we are comparing results to the results in the same period in fiscal 2025. Any reference to 2025, 2026 or specific quarters refers to our fiscal calendar. Unless otherwise stated, the results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the Earnings Release. Our remarks on this call and in the Earnings Release contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statement section in today’s earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. With that, I’d now like to turn the call over to Scott.
Scott McPherson (Chief Executive Officer)
Thanks Bill Good morning everyone and thank you for joining our call today. I’m excited to share our results from the third quarter which demonstrate the strength of our strategy, solid execution in the field and building momentum that we expect to continue through the fourth quarter and into fiscal 2027. At our investor Day last May, we laid out the long term vision for the company. Central to this plan is leveraging the diversification of our business across the entire food away from home market. We believe that our broad position across the US Is a unique strength for PFG and will result in many years of sustained growth. The most recent quarter demonstrates the benefits of this strategy. There’s been much discussion about the challenges facing our industry, including soft foot traffic into restaurants, price inflation, major weather events and political disruption. Despite these items, we were able to achieve the high end of our guidance outlined in February, exceeding expectations in several of the metrics that underpinned our projections. All three of our operating segments displayed positive signs of resilience and a strong foundation to grow upon in future quarters. Let’s discuss some of the business highlights from the quarter in each of our businesses. I’ll then turn the call over to Patrick who will review our financial performance and updated outlook for the fiscal year. Starting with our food service segment. Strong sales execution combined with disciplined margin management translated into high single digit EBITDA growth in our food service business excluding Cheney. This performance underscores the durability of our food service model and our ability to grow profitably even in a choppy macro environment. Our ability to gain market share and grow independent cases has been a strength of PFG’s business throughout our history. Consistent with that theme, we are incredibly proud of our sales organization and their independent performance in the third quarter. For the period, independent cases accelerated from the second quarter growing 6.5%, exceeding our stated benchmark of 6%. Our performance was the result of consistent market share gains through the quarter and wallet share gains from existing customers. Net new account growth was approximately 5.4% as account wins continue to drive the majority of our case growth. At the same time, we were pleased to see 100 basis point differential between new account growth and total case growth which indicates positive trends in account penetration within existing accounts. This performance occurred within a backdrop of consistent low single digit foot traffic declines according to black box demonstrating the strong execution of our sales force. Our focus on recruiting, training and incentivizing our sales force is a key factor in our multi year outperformance within the independent restaurant space. We continued to strengthen our talented sales team by providing them with industry leading brands technology that enables great customer engagement and once again we increased our headcount by mid single digits compared to the prior year. Double clicking on technology we continue to see excellent traction from our online ordering platform Customer First. Since highlighting this technology at our investor day, we have deployed multiple AI agents that provide our customers and salespeople a digital partner when researching items, recipes and products to place the optimal order. Customer first is not only a powerful tool for our restaurant business but but will become our digital solution for all three operating segments demonstrating the cross company collaboration that defines our PFG1 initiative. Turning to our chain business, we saw case volume increase in the third quarter. This was particularly impressive given the difficult backdrop that chains have experienced and reflect our efforts to partner with growth concepts. Also encouraging was our pipeline of new chain business which is robust and should provide a lift to our food service volume performance in fiscal 2027. Before turning from the food service segment, a few comments on Cheney Brothers in the third quarter, we continue to see strong sales growth from Cheney, particularly with independents where cases grew north of 6% as did his sales headcount. Their growth culture remains vibrant and their brand portfolio is growing, providing additional sales and margin opportunities ahead. Critical to continuing this growth are the investments we have made in their physical infrastructure discussed last quarter. The headline investment is our recently opened state of the art Broadline distribution facility in Florence, South Carolina which started shipping to existing and new customers towards the end of the second quarter. This new facility will not only provide room to grow in the Carolinas, but will also free up capacity in other facilities in the Southeast. We are making investments today that will pay dividends in future periods. These activities did cause higher than anticipated expenses in the fiscal second and third quarters and we have embedded a contin of some cost Items in our fourth quarter outlook. As we move through the fourth quarter and into fiscal 2027, we are confident Cheney will become a significant contributor to our revenue and profit growth moving forward. Turning to our convenience segment results, I’m extremely proud of how our core Mark Associates have risen to the occasion and led our company in revenue and EBITDA growth. For the past two quarters, we have discussed adding two meaningful pieces of business with Loves and Racetrack. While exciting, these types of large customer wins also bring potential execution risk. I’m proud to say that Cormark has done a great job onboarding these customers and continues to work tirelessly to execute while building strong and lasting partnerships with these iconic convenience retailers. The results speak for themselves. Convenience delivered 8.3% organic case growth and 8.7% total revenue growth in the quarter and an outstanding 34.1% adjusted EBITDA performance. While the top line performance is certainly impressive, Cormark’s ability to deliver on volume increases of this magnitude exemplifies the commitment this organization has to its customers. As I said at the onset of the call, PFG aspires to be the leader in the food away from home space and this diversification has played a significant role in the success we are seeing with Palmer. Cormark has leveraged the broader enterprise to develop food expertise, expanding its food and brand portfolio, providing customers with a differentiated offer that, coupled with great customer facing technology, strong supply chain execution and a focus on building lasting partnerships has resulted in significant market share wins for the segment. Looking ahead, the addition of Loves and Racetrack will continue to be an incremental benefit to our convenience performance through mid fiscal 2027. We have visibility into additional customer wins and some offsetting losses. Though not nearly the size of either of these two pieces of business, we believe the outlook for a convenience segment is bright and we continue to resonate with customers looking for a partner to help them drive their business performance, finishing with our specialty segment. This is a unique asset within the PFG portfolio as there is no pure play competitor that has the reach of Vistar in the candy, snack and beverage market. As a result, we are able to pursue a range of business opportunities for long term growth. An example of this is the continued expansion into the E Commerce fulfillment space. While still a relatively small channel for us, our ability to ship direct to businesses and consumers across the US Makes Vistar an attractive partner for a wide array of businesses and manufacturers trying to reach their end. Consumer Vistar also continues to benefit from growth in other emerging channels including specialty grocery stores in campus retail and is currently pursuing additional avenues that we are confident will fuel future growth. During the quarter. Growth across most of Specialty’s channels drove solid top line performance. Case growth of 1.1% produced a 5.3% revenue increase year over year. During the quarter, Specialty saw difficult margin comparisons including lapping higher prior year inventory gains. Expenses in the third quarter were also elevated due to shipping and fuel costs resulting in negative EBITDA performance in the quarter compared to the prior year period. Despite a challenging quarter, the Specialty segments attractive overall margins and prospects for continued revenue performance give us a high degree of confidence in their long term profit opportunities. To summarize, all three of our operating segments contributed nicely to our top line growth allowing us to achieve sales results at the top end of the guidance we laid out in February. Our adjusted EBITDA came in above the high end of our guidance range even as we invested in our business to support future future growth. This performance was possible because of our diversification efforts and share gains across the US Food away from Home market I’m excited for the final months of fiscal 2026 and expect a nice acceleration in fiscal 2027 putting us well on track to achieve our three year targets laid out last May. I’ll now turn the call over to Patrick, who will review our financial performance and outlook.
Patrick Hatcher (Chief Financial Officer)
Patrick thank you Scott and good morning. Today. I will review our third quarter financial results, provide color on our financial position and review our tightened guidance for 2026. Performance Food Group’s total net sales grew 6.4% in the third quarter with growth in all three operating segments and particular strength in convenience. Total company cases increased 4.4% during the quarter, highlighted by a 6.5% organic independent restaurant case growth and an 8.3% organic case gain for our convenience segment. We are very pleased with the contribution from the addition of the loves and racetrack business which accounted for the majority of the growth in convenience. Total company cost inflation was approximately 4.5% for the quarter, in line with what we experienced in the prior quarter. Food Service inflation of 1.5% was slightly below recent trends with continued deflation in the cheese, poultry and egg categories somewhat offset by higher inflation in beef. At the same time, while cheese and poultry remained deflationary on a year over year basis, we did not see the dramatic declines we experienced during the fiscal second quarter and as a result these items were less impactful to our overall financial results. Specialty segment cost inflation was up 5.1% year over year, about 25 basis points lower than the prior quarter, mainly the result of candy and hot drink price inflation. Convenience cost inflation increased 7.9%, slightly higher than the prior quarter due to inflation in tobacco and candy. The inflationary environment has been active over the past several years, but as a company we have demonstrated our ability to handle a range of outcomes. We expect the inflation rate to remain in the low to mid single digit range for the remainder of fiscal 2026. Moving down the P&L total company Gross profit increased 6.4% in third quarter, representing a gross profit per case increase of $0.20 as compared to the prior year’s period. This improvement was driven by strong mix execution of our procurement initiatives outlined at our investor day and continued execution of our brand strategy. We are very pleased with our gross profit results which demonstrate our ability to execute on our priorities outlined in our three year plan. In the third quarter of 2026, Performance Food Group reported net income of $41.7 million, a 28.5% decrease year over year due to an increase in operating expenses. Adjusted EBITDA increased 6.6% to $410.6 million. Diluted earnings per share in the fiscal third quarter was 27 cents, while adjusted diluted earnings per share was 80 cents, an increase of 1.3% year over year, our EPS was impacted by below the line items including higher interest and depreciation expense. Our effective tax rate was 25.4% in the third quarter, a slight decrease from 25.8% last year. We expect our full year 2026 tax rate to be close to our historical range of around 27%. Turning to our financial position, Cash Flow performance in the first nine months of 2026 Performance Food Group generated over $1 billion of operating cash flow, an increase of approximately $245 million compared to the same period last year. We invested approximately $266 million in capital expenditures during the first nine months of 2026. We have been diligent around new capital projects and expect full year 2026 CAPEX to be below our long term target of 70 basis points of net revenue. The organization is striking a good balance of investing in infrastructure and high return projects to support our long term growth while maintaining excellent free cash flow performance. In the first nine months of 2026 we generated $806 million of free cash flow of $312 million compared to last year. We are extremely pleased with our cash flow performance. We are fully committed to investing back into our business to support our growth and as you can see from our nine month results, we are generating significant cash flow to fund this investment. During the quarter we repurchased a total of $1.2 million of our stock at average cost of $83.11 per share. We will continue to be opportunistic around share repurchase, but our priority remains debt reduction and investing in our growth. The M and A pipeline remains robust and we continue to evaluate strategic M and A Performance Food Group 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 tightened the guidance range for fiscal 2026. For the full fiscal year, our sales target is now a range of 67.7 billion to $68 billion compared to the previously stated 67.25 to $68.25 billion range. We now expect full year adjusted EBITDA in a range of 1.9 to $1.93 billion compared to the previously stated 1.875 and $1.975 billion in 2026. Our results keep us on track to achieve the three year projections we announced at Investor day with sales in the range of 73 to 75. $5 billion and adjusted EBITDA between 2.3 and $2.5 billion in fiscal 2028. To summarize, we are very pleased with our progress despite a challenging business environment in the third quarter. We are in a solid financial position which supports our growth, investments and capital return to our shareholders and expect strong execution to finish the year, setting the stage for a strong fiscal 2027. Thank you for your time today. We appreciate your interest in Performance Food Group. And with that, Scott and I would be happy to take your questions.
OPERATOR
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