Performance Food Group Company Aktie

Good day, and welcome to PFG's Fiscal Year Q3 2026 Earnings Conference Call. I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you, and good morning. We're here with Scott McPherson, PFG's CEO; and Patrick Hatcher, PFG's 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 website at 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 statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. With that, I'd now like to turn the call over to Scott.

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 U.S. 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 has 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 underpin our projections. All 3 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 Foodservice segment. Strong sales execution combined with disciplined margin management translated into high single-digit EBITDA growth in our Foodservice 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 and 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 multiyear outperformance within the independent restaurant space. We continue 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 CustomerFirst. Since highlighting this technology at our Investor Day, we have deployed multiple AI agents that provide our customers and salespeople, a digital partner with researching items, recipes and products to place the optimal order. CustomerFirst is not only a powerful tool for our restaurant business but will become our digital solution for all 3 operating segments, demonstrating the cross-company collaboration that defines our PFG One 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 is our pipeline of new chain business, which is robust and should provide a lift to our foodservice volume performance in fiscal 2027.

Before turning from the Foodservice segment, a few comments on Cheney Brothers. In the third quarter, we continued to see strong sales growth from Cheney, particularly with independents where cases grew north of 6% as did the 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 continuation 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 2 quarters, we have discussed adding 2 meaningful pieces of business with Love's and RaceTrac. While exciting in these types of large customer wins also bring potential execution risk. I'm proud to say that Core-Mark 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, Core-Mark'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 Core-Mark. Core-Mark 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 Love's and RaceTrac 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 2 pieces of business. We believe the outlook for our Convenience segment is bright, and we continue to resonate with customers looking through 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 U.S. 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 and 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 segment's 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 3 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 growth. This performance was possible because of our diversification efforts and share gains across the U.S. 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 3-year targets laid out last May.

I'll now turn the call over to Patrick, who will review our financial performance and outlook. Patrick?

Thank you, Scott, and good morning. Today, I will review our third quarter financial results, provide color on our financial position, I'll review our tightened guidance for 2026.

PFG's total net sales grew 6.4% in the third quarter, with growth in all 3 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 Love's and RaceTrac 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. Foodservice 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 the 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 3-year plan.

In the third quarter of 2026, PFG 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 $0.27, while adjusted diluted earnings per share was $0.80, 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 9 months of 2026, PFG 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 9 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 9 months of 2026, we generated $806 million of free cash flow, up $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 9-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 an average cost of $83.11 per share. We will continue to be opportunistic around share repurchase where our priority remains debt reduction and investing in our growth.

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 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 billion to $68.25 billion range. We now expect full year adjusted EBITDA in a range of $1.9 billion to $1.93 billion compared to the previously stated $1.875 billion and $1.975 billion in 2026.

Our results keep us on track to achieve the 3-year projections we announced at Investor Day with sales in the range of $73 billion to $75 billion and adjusted EBITDA between $2.3 billion 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 Instructions] And our first question comes from Edward Kelly with Wells Fargo.

And nice quarter, good to see such strong top line momentum in the business. What I wanted to ask about that, though, is that you did trim the Q4 guidance. At the midpoint, I think you had an acquisition that came into the quarter, so presumably maybe there's some help there. But can you just talk about the offsets that you're seeing in Q4 to drive a slightly more conservative view?

Yes. Ed, this is Patrick. I'll take that and maybe Scott will add something on the acquisition if he wants to. But really, we gave the full year guidance. You're talking about the implied Q4 and how we're looking at it as we exit Q3 with a really strong top line momentum and a nice EBITDA increase of 6.6% at the top end of our guidance. So we're feeling really confident about the things that are -- we have line of sight of controllables. As we mentioned in our comments, really strong momentum. We are seeing positive improvement at Cheney, although there will be some pressure there during the quarter. And we're obviously seeing improvement in Specialty.

Outside of our control are things like the macro environment. Obviously, there's some pressure from fuel that we experienced a little in Q3. We expect some of that pressure in Q4 as well. So really very confident about Q4. There are some pressures on the numbers, as I mentioned. And then we're looking really towards '27 where we see a really nice setup, and we'll obviously give you guys much more color to that in August.

This is Scott. Yes, just real quick on the acquisition. We did have an acquisition that came in late in the third quarter, some that we've been really excited about. Cashway is a distributor -- in a broad line foodservice distributor in Cerny, Nebraska, 3 facilities that really cover Nebraska and the Dakotas. So again, kind of giving us a little more presence facing West. And a great family company, great culture. I think they're really excited to be a part of PFG, and we're excited to have them in the fold.

Great. And then maybe just a follow-up. And Patrick, you kind of hinted at this a little bit, but Cheney had some drags as we think about fiscal '26. I was hoping maybe you could talk about what that drag was, again, in Q3? And then I don't know if you can sort of summarize like what the drag has been for the year. I mean, I think the math would say it could be $30 million, something like that. Can you get all of that back next year? Because I think you have talked about you expect Cheney to be a pretty strong contributor in '27.

No, a really good question, Ed. So from a Cheney standpoint, the first thing I'd say that we're really happy about it is we mentioned their top line. And Cheney has done a great job continuing to grow independent cases, continuing to grow share across Florida and the Carolinas. I think their sales culture is fantastic. And like I said, I think they're set up for the balance of this year and '27 from that perspective is great.

Over the last couple of quarters with the opening of the new facility, we certainly saw some expense drag. And we mentioned that, that will carry on into the fourth quarter. But really, we have great line of sight to get those things under control. The rollout of that facility has gone very well. We've transitioned 3 of our 4 phases of customers into there. And so again, we feel like their setup for '27 is great and really looking forward to their contributions, both top and bottom line going forward.

And we'll move next to Lauren Silberman with Deutsche Bank.

Congrats on the quarter. A couple of follow-ups and then one question. But just on Q4, are you able to quantify the net impact of fuel costs that you're embedding for the quarter? I know there's some offset that surcharges but not fully figure out it's like basically accounts for the $20 million to $30 million down in the implied Q4.

Yes, Lauren, good question. Obviously, as we exited Q3, we saw the impact of fuel come in. You're going to get much more detail in the Q on this, but that gross impact for Q3 for that month was 7.3%, and that's not just because of higher fuel prices, that's also because of new customers, miles driven. Now because of the timing of surcharges, we weren't able to adjust the surcharge in March, but that was adjusted in April and again adjusted in May.

So we do have some headwind in Q4, but it's not material. It's something we're working through, obviously. It's just we called it out as a headwind because it is one, but it's one of a few things that we embedded into our guidance, and that's why we gave the range we did.

And then on the Cheney expense drag, what exactly is driving these higher expenses? I guess I'm just trying to understand whether these expenses roll forward into fiscal '27 just within the base or some of them come off?

Yes. So there's a couple of things that I would outline there. One of them, and it's the primary one, Lauren, is the new facility in Florence. So if you think about right now, we have customers that we are shifting from other buildings into that facility. So we had to hire and staff that facility for all of that inbound volume and at the same time, we're still -- before we transition those customers, we're still servicing them in our existing facilities. So it's kind of double headcount to service that volume. And that's obviously continued over the course of 4 or 5 periods. So certainly been impactful from an expense standpoint.

The other thing that drops off in expense, and we've talked about our synergy kind of flow. And at the end of Q3, of this year really at the end of the second year of the anniversary of Cheney, we have a nice pickup in synergy and that will continue on through year 3 and beyond. So definitely have a couple of things that will be good momentum from the Cheney expense standpoint.

Great. And then on the independent case side, there's obviously a lot of different dynamics and noise throughout the quarter. Any color you could provide on the cadence you saw as you move through the quarter? And anything you can share on what you've seen into April thoughts on the fourth quarter?

Sure. So as I think about Q3, really, January was a great month. And towards the end of January, first of February, you saw pretty material weather impacts. So if I look at the average of January, February, that's kind of what we saw in March and saw that continue into April. So we've been pretty consistent over the last couple of months. And like I said, if we took the January, February average, that kind of equals what we saw in March and April.

And we'll now move back to Kelly Bania with BMO Capital.

Scott, just to clarify one point on the Cheney expenses. Did your view of the impact of those to the fourth quarter change since you reported last quarter? Or did that -- is that just coming in line as you expected, as it still is an impact into the fourth quarter?

Thanks for the question, Kelly. There was a little more spillover into the fourth quarter than we probably anticipated a few months ago. And really, that's because we had kind of 4 waves of customer transition that were shifting business from existing buildings into that new facility. We've completed 3 of those waves, and that fourth wave will take place here in the next couple of weeks. And that's really what shifted is, we thought we were going to have all 4 of those waves completed in the third quarter. But really just we had a little weather impact when we started opening that building that pushed it back a couple of weeks.

And then we've just taken our time to make sure we do a great job servicing those customers we shift over. And really happy to say that we've seen sales growth in that new building on a same-store basis since day 1. So all those customers that we shifted in there have continued to grow. So really positive results that we've seen out of the transition.

Okay. That's very helpful. And Scott, you made the comment about fiscal '27 and looking for an acceleration in sales and profit growth there. You mentioned, I guess, we covered kind of cycling some of these expense headwinds and also the synergies, but you also mentioned some new chain business, I believe it's foodservice. So I was wondering if you could kind of help maybe bucket some dollars around how we should think about what that might look like in the coming quarters? And then also, I believe the procurement savings target should maybe start to build. Is that a factor we should think about being impactful in fiscal '27 as well?

No. Appreciate the questions, Kelly. You touched on a lot of the key drivers that we think about in the setup for '27 right there in your question. When I think about Foodservice, I would just say that the continued momentum in independent case growth, we did say in our prepared remarks that we have a really nice chain pipeline that we think is going to help us keep that chain growth positive for next year. Convenience has always, obviously had a great year from a market share gain standpoint, and obviously has some carryover into next year.

And then Specialty, if you look at Specialty over the last 3 quarters, they've improved their growth 3 quarters in a row, and we feel like they have a really nice pipeline as well. So that kind of hits the top half of the income statement. I'd say the margin setup is really good, too. And you talked about procurement synergy, I'd say, really how we feel about mix and how we feel about those procurement synergies, that really helps the margin profile as well. And then clearly, we'll have some spring back on Cheney expenses and then just overall efficiency of adding that volume. And I think the setup is really nice for next year.

And we'll move next to Mark Carden with UBS.

So to start, I know it's pretty much impossible to predict the duration of the Middle East conflict. But if we see higher oil prices continue at their current level for an extended period of time, how much of an impact would you expect for it to have on your product inflation outlook over, call it, the next few quarters?

Let me -- I'll take a stab at this, Mark, and I'll let Patrick fill in the blanks. But I would say we've talked about how we handle fuel surcharges and fuel inflation and I think we've got a really good plan around that. Our fuel surcharges mitigate a lot of that impact. But certainly, there is going to be a little bit of headwind in Q4. Obviously, can't anticipate whether fuel prices go up significantly or down over that period of time and beyond. But we think we've got a good setup around fuel surcharges.

As far as other product inflation, we haven't seen any material impacts to date other than there's been a little noise around, we'll call it, petroleum-based products. So we certainly sell some products that are petroleum based in containers and packaging that we sell. And then obviously, I think the longer duration, I think everybody would anticipate that at some point, you're going to see inflation tick up. What we've seen in recent months is across the third quarter, we saw inflation tick up a little bit period by period, and we've seen inflation tick up a little bit as we started this quarter. So -- but we feel like we're really well positioned to navigate that right now.

Yes, Mark, just a little more color. Just as Scott too, we manage a very large basket of commodities. As he mentioned, maybe some of the petroleum base might see a little bit of impact here, really hard to say. And as you opened up with your question, it's very hard to predict this. But as you know, over -- if you followed us for any period of time, which I know you have, we're able to manage through a variety of markets. And right now, we're seeing, as Scott mentioned, a slight tick up on inflation, but I just want to add a little more color there. We started January very low, below 1%, and we finished in March at 2%. I'm thus talking about foodservice inflation. So while we've seen a slight uptick, it's still well within that low single-digit area that -- and we managed it very well.

Makes sense. And then a follow-up on Cashway. Just how does its mix of business compared to the base foodservice business? Does it lead any more or less heavily towards independents? And then just more broadly, how is your traction going on building out some of your independent business organically at less than flat markets?

No, really good question. So Cashway, I would say, their food service business is very much in line with what we see across broad line. They have a really nice independent mix. They also have some broadline national customers. And then the one thing that's a little unique about them is they have a segment of their business that does have some convenient sales. So they sell some snacks, some candy, a little bit of cigarette and tobacco as well. So very diversified mix that fits really well into our overall portfolio.

And then as far as out West, we've talked a lot about, we've continued to add capacity, California and Oregon and Arizona and Colorado. And actually, the West is our fastest-growing region by a fair amount, doing exceptionally well in the West, really proud of that region and their ability to gain share in that market.

We will move next to John Heinbockel with Guggenheim.

Scott, 2 quick questions on local -- independent case growth. One, is there still an opportunity to reduce the loss rate, the account loss rate where it is today? And then if you look at the pickup in lines per account, where is that concentrated? Is there -- are you gaining some traction with COP versus where you might have been?

No. Really good questions, John. As far as loss rate, I would say we've been fairly consistent over a number of quarters. Is there an opportunity to improve that? Absolutely. We're always focused on improving that. And it's something that we spend a lot of time focused on. I mean, turning customers is obviously not the goal here. But I'd say, overall, that's been fairly balanced, and we haven't seen any big shift there. As far as the lines per drop, certainly that was kind of the headliner of our penetration in this quarter. Really nice to see lines per drop, cases per do increase in a nice fashion.

As far as what that's being driven by, one of the things that has been really positive, it continues to be driven by our brands. And I would say that if you asked all of our sales reps out in the field, what their biggest lever is, brands is going to be one of those top 1 or 2 things. And then to your point, we actually have had really nice performance in center of the plate. Our protein strategy, continued to work to drive that as well as seafood. And so seeing some really nice performance in center of the plate. But brands is probably where I'd say the focus and the real growth has been.

And on Cheney, where are they now with -- now that they've got South Carolina open in terms of capacity, meaning I don't think they'll need to open another facility for a while. Where are they with that? And then if you took synergy out and just looked at Cheney kind of apples-to-apples, does it outgrow the rest of Foodservice because of the economic growth in its markets?

That's a good question. So capacity-wise, I'll hit that 1 first. So we're essentially taking volume out of a facility that I would say was 90% full that's now going to be more like 50% or 60%. So we're going to have 3 facilities that have 40% or 50% available capacity. Maybe one of them is not quite that high, but 3 facilities that have a lot of capacity, really which creates a whole network that has capacity across the network. So really well positioned to continue to grow.

And to your point, absent synergies, which are going to be a nice tailwind for Cheney, they're certainly in one of the fastest-growing markets in the country. And I think as a broad liner with a great reputation, a really good presence in that market with capacity available. Are they going to outgrow the rest of the country? I'm not sure. I hope they do, but I think they're going to have a really nice growth future ahead of them.

And we'll move next to Alex Slagle with Jefferies.

A follow-up on Cheney. I know the synergies aren't really expected until year 2 or '30, but as you've had some more time to evaluate the business, see how it pairs up against PFG. I mean do you see any incremental opportunities there? And also curious on the private label Cheney in your latest thoughts?

Yes. I would say that the 1 thing that is, I think, clearly, an opportunity has been around brands. Cheney has actually established some of their own really solid brands. their brand performance has been, obviously, brand percentage sales is a lot less than what we see across the rest of Broadline. But they do have some really strong brands. And one of those brands we've actually taken into the rest of Broadline. I do think there's a great opportunity in brands. I think that procurement piece around brands is going to be a really nice part of the synergy. But we've also found some other, I'd say, core competencies that Cheney has that we think will help the broader business.

And that's really 1 of the big reasons when we approach acquisitions that we take our time in that first year and try and -- we try not to jump in and make big changes. And that's the way we've approached this. And maybe we don't generate as much EBITDA in the first year. But in the long run, I think it positions us really well. And we feel like the future of Cheney in the setup for 2017 and beyond is really strong.

Great. Also wanted to ask on inbound logistics opportunities and just sort of how that's come together and maybe potential offsets for some of the higher freight and inbound costs that you've had?

Really, really good question. We talked at Investor Day about redistribution and that we continue to grow our redistribution network. And that network has performed really well this year. That allows us -- and I would highlight the West. We've opened up a facility in the West to help us get our brands to all of those centers in the West. And now that I see how those distribution centers that are aided by are growing, it just makes me very bullish on what we can do around redistribution.

And then I would say just the broader inbound landscape, we certainly think that's an opportunity. It's 1 that we are really starting to focus on more and more every day is just being more efficient in getting goods to our buildings. So it's a great call out. It's something that we are paying a lot of attention to. It's something that Ready helps us with, but certainly more opportunity ahead.

And we'll move next to Jeffrey Bernstein with Barclays.

My first question is just on the underlying consumer ex the weather, noise, which you talked about in Jan-Feb, but you noted the ongoing negative foot traffic for the restaurant industry. Can you just talk specifically about maybe the impact from what a spike in gas could have on your business? I mean it doesn't seem like it's had much, but maybe how have your segment has been impacted in the past. It would seem like the convenience store segment might be the most vulnerable as it kind of ties in with gas stations and whatnot. So any color you could provide in terms of that underlying consumer behavior ex the weather that you've seen in recent months and what you might expect as we close out the fiscal year?

Yes. Thanks for the question, Jeff. So when I think about the restaurant consumer in particular, we've seen our independents, obviously, with our share gain, it's been really nice, but we've seen that independent restaurant hold up exceptionally well through that foot traffic pressure. We've certainly seen a little downdraft on the chains. And so we've seen the chains feel a little more of that headwind with foot traffic. So when it comes to those 2 classes, I'd say right now, independents tend to be outperforming the chains.

When I think about just overall fuel impact, I think it really comes down to discretionary income. In the restaurant space, certainly, if fuel prices continue to climb higher, that can impact discretionary income. When I get to the convenience store space, my history would tell me that as price goes up, there's actually an environment where trips actually go up. So your convenience store consumer that's getting gas, they may even not be filling the tank every time they go in.

And so we've actually seen trips tick up over the last few months in convenience stores. There is an inflection point there, though. I think at some point when fuel price would get pretty high, then you see it really be a discretionary income issue. Right now, I think the consumer has been very resilient across convenience, across foodservice. And so we anticipate they'll continue to perform that way and we're looking forward to the fourth quarter.

Got it. My follow-up, just on the comment you made about the independent. I mean, your case growth is very strong at the 7% range, and you've seen confidence sustaining that in the fiscal fourth quarter. I think you said April was similar to recent months, and I assume that for in that range. But just wondering, who do you think you're taking share from, whether it's the large national peers or perhaps the big 3 or taking from the rest of the industry, which has kind of been the investment thesis behind the foodservice distribution segment more broadly?

Yes. I think from who we're taking it from, pretty hard for us to tell. I think from my perspective, it's -- we're really focused on gaining share in each and every customer that we service, and we saw that in the penetration numbers. So some of that is certainly coming from specialty players, some of that might be coming from bigger competitors or even smaller. So really hard for me to tell there.

And I think for us, it's really focusing in on our brands, focusing in on the core competency that we have. And I'd call out one other thing that I think has really helped us gain share, and that's our tech stack around customer-facing ordering. I called that out in the prepared remarks. And I think our relationship with our customer, both the physical relationship with our rep and the digital relationship we have with them in CustomerFirst has really helped our penetration. It's helped us gain share, and we see that as being a big lever to pull in the future.

And we'll move next to Brian Harbour with Morgan Stanley.

Scott, I guess, just following up on that. kind of the prior comments on convenience stores. What does penetration there look like lately? I guess if you sort of separate out the new customer wins, which has certainly helped. How would you describe that in the Convenience segment?

It's a really good question. Convenience is a little different than, I would say, traditional Foodservice because in Convenience, you really have kind of a primary supplier. So you don't really share between -- like in foodservice, you might have 2 or 3 broadliners in an account and Convenience, you normally have a primary supplier that is doing the broad, vast majority of the goods now where you might have penetration is in foodservice. You might have an external vendor there. And that's really where we've done a great job of penetrating in our Convenience segment.

But if I go back, really for the last couple of years, our Convenience segment on a same-store basis has greatly outperformed the industry. And I think a lot of that is the tools that we bring to our customers around product mix, how to set your store, how to grow foodservice. I think our customer-facing technology and convenience has really helped us outperform the market.

Okay. Got it. What would -- you said you've actually -- it seems like done a little bit better with chains, notwithstanding the fact that they have had a tougher traffic quarter as an industry. I mean, what -- anything you'd call out that's helping there? Or is some of the specific segments you cover? I think some of the segments where you're big actually have been a little bit tougher recently, but what would you attribute kind of the chain success to?

Well, I think it's really 2 things. One of those is we've partnered what I'd say, with a couple of the more progressive foodservice players in the space. So those are people that are continuing to grow, and that's really helped us on a, call it, same-store basis. And the other one has just been share gain. We've done a really nice job, had a really nice pipeline in the chain space. We see that continuing into 2027. So I think our ability to resonate with those chain customers and be a great partner has really helped us.

We'll move next to Peter Saleh with BTIG.

I'm curious if you guys give us a little bit more color on strength and weakness made by cuisine, more specifically on that Italian segment, if you're seeing any sort of major changes at all? And then I have a follow-up.

Sure. When talking about the Italian segment, obviously, if you look at some of the publicly reporting chains, pizza and Italian has been -- the growth has been a little muted as of late. When I look internally at the company, we continue to grow share in pizza and Italian and I think everybody knows that's a really big, strong part of our business. It's interesting, one of the places we're growing it is really outside of traditional pizza and Italian locations. We're growing pizza and Italian in bar and grill. We have -- that's been pretty prevalent as of late. We're growing that in our Convenience segment, both coming from foodservice and from our Convenience from Core-Mark.

So we're holding our own in pizza and Italian although it's a segment that's been a little more challenged. Where we're seeing really nice growth is, I'd say, some of these other specialty segments. We've seen really nice growth in our Asian segment, continue to see market share gains in our Hispanic segment. And then I called it out, but 1 of the biggest share gain areas we have in food service right now is sales into Convenience. And so the share gains we have there have been very significant. And so that's also been a big driver for us as well.

Great. And then just curious, there's been a lot of discussion in the industry around GLP-1s and the impact. Just curious if you guys have any thoughts on that, if you're seeing any sort of impact? Does it seem to be? Or if you're seeing any sort of changes in behavior among the restaurants and what they're purchasing that would indicate there's any sort of change in behavior?

Yes. Really good question. We follow the statistics a lot on GLP-1 and eating behavior. And I think certainly in the first year that's somebody is on those, there could be a tick down in their consumption across just food in general, and that's not just restaurant convenience, that's across grocery and all channels. But what we're seeing really is there's a little bit of compression on snack and candy in the first year, but then that consumer seems to bounce right back and go back into those snack and candy items. In the restaurant space, there's certainly a focus on protein, a focus on fiber. We are seeing demand for smaller portions in some places. We see more to-go containers, so we're selling more containers.

So really, that -- I think there's been some behavior shift, I think that's one of the reasons the independent restaurant has done so well as they're able to react to those things, change menus, change pricing fairly rapidly. And I think they've been able to react to that behavior really well.

And I'll move next to Danilo Gargiulo with Bernstein.

I would like to ask a couple of strategic questions. So the first 1 is on your M&A pipeline and potential future. So in your framework, you're highlighting pursuing transformational opportunities. And recently, we've seen 2 major players acquire cash-and-carry business and provide a more vertical integration through the customer life cycle. So kind of wondering if this is a strategy that you will be entertaining? Why or why not?

Well, I would say, first off, we spent a lot of time in our Investor Day outlining our M&A strategy. And certainly, our M&A strategy is really focused around broadline food service. And I think Cashway is a great example of that. And Cheney was a great example of that. And we see that we continue to have a pipeline of opportunity in that broadline food service. There's some -- probably some tangential things around foodservice that we continue to look at whether that being in the protein space, the seafood space. So we certainly see opportunity in that broadline food service space.

In Convenience and in Specialty, we made a small acquisition last year in the Convenience space. Certainly, we'll continue to look at opportunities there. But at the end of the day, our core focus is broadline foodservice, and we think that's the field that we want to play in.

Great. And then on the strength that you're seeing on the chain business, I was wondering if you can expand a little bit what is causing the incremental focus on the chain business and whether you think this is a strategic fit for you given that it will be a potentially lower margin business?

No, I wouldn't say there's been any strategic shift. The chain business has been an important part of our portfolio for a long time. Our independent to chain mix, we're about 40% or so independent, about 60% chain. So again, a really balanced portfolio. We are consistently growing independents faster than we are growing chains in foodservice and that's obviously been a calling card of ours. But certainly, when a big portion of your sales are chain, we are just as focused on growing that as well.

So I wouldn't say there's been any shift in focus. I would say that we are resonating with the customer base in both those segments and are able to gain share. So really happy with how our sales force is performing in both those areas.

And we'll move next to Karen Holthouse with Citi.

A couple on the convenience side of things. Some of the packaged group companies have started to talk about understanding pushback to inflation in the grocery aisle and you proactively actually decreasing prices on some things. Are you seeing anything similar play out on more of the single-serve convenience side of things?

No, we've not seen any deflationary noise at all as far as the Convenience segment. And I would say, historically, we don't see actual price deflation. What we see happen in the Convenience segment is we would actually see manufacturers discount, so they would discount at point of sale. It really has no impact on us or our margins, but they would go out and run promotional activity in the field that would lower the end cost of goods to the consumer. And so we have seen that activity probably tick up a little bit. It wouldn't surprise me if that continues to go on, but really doesn't have any impact to us from a revenue or profit standpoint.

And then just looking out over our call it the next 6 to 12 months, is there anything that should be on our radar for incremental new customers that might be onboarded specific to Convenience side?

Specific to Convenience. We called out in the prepared remarks. I mean, obviously, we will lap the Love's and RaceTrac next year. We have a really nice pipeline. We've picked up or haven't picked up, but we have a couple of other customers that we will onboard. And we do have a couple of customers that we will off-board in the course of the next, call it, 6 to 12 months. We have had some competitive reaction and our competitors have put a little pressure on the competitive market, but I would say, overall, the setup for Convenience for 2027 is really strong.

Their pipeline is really strong. And these customer shifts that I'm talking about are much smaller in magnitude than then a Love's or a RaceTrac. So their setup is really good.

[Operator Instructions] And we'll take our next question from Jacob Aiken-Phillips with Melius Research.

I was just curious if you could talk about the pipeline or just conversations you're having on the Convenience segment with potential customers? And then how much of your Foodservice capabilities or your broader Q1 abilities impacts those conversations?

No, that's a really good question, Jacob. And I said in the prepared remarks, I think the Foodservice -- I mean, the Convenience segments, I guess, core competency around foodservice over the past 3 years has increased dramatically. The product mix that we offer in our opcos, the turnkey solutions we offer in our opcos. And then I would say the knowledge of that organization just around food, has certainly been a big feather in our cap as far as customer interaction. At the end of the day, I mean, we've got to be a great partner. We've got to be a really efficient distributor and we've got to be able to supply the full basket of goods.

But I think having that core competency around foodservice has certainly helped in their negotiations on new chains and account wounds.

And then a question on Cheney, and don't worry, it's a top line question. Just thoughts on putting PFG private label into Cheney or taking some much Cheney in private label where you think the opportunities are there? And how we should think about that going forward?

Well, I see it going both ways. We have already taken a couple of Cheney's private labels and started to roll those out across the broader PFG organization. And we are just really -- we've been evaluating the labels that we would put into the Cheney organization as well. So I think we're really well positioned to do that. I would just take a step back and say, I think we talked about during the acquisition, Cheney's brand penetration was in that 15% to 20% range. We just had a record brand penetration in the, we'll call it, legacy Foodservice segment at 4%.

And so combined, we're now -- if we were going to reset a target we'd be right at 50% in brand cases to independents. And that's a number that I think we can grow. And I think Cheney will be a big portion of that growth.

At this time, this concludes our question-and-answer session. I will now turn the meeting back to Bill Marshall.

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

Thank you. This concludes today's meeting. We appreciate your time and participation. You may now disconnect.

Good day, everyone, and welcome to PFG's Fiscal Year Q2 2026 Earnings Conference Call. [Operator Instructions]

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

Thank you, and good morning. We're here with Scott McPherson, PFG's CEO; and Patrick Hatcher, PFG's CFO. We issued a press release this morning regarding our 2026 fiscal second 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 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 statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections.

With that, I'd now like to turn the call over to Scott.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. Before jumping into our second quarter results, I would like to recognize George Holm. As we announced in December, after nearly 25 years with Performance Food Group, George has retired from his role as CEO. Over his career, George built an impeccable reputation as an industry leader, a visionary and an agent of growth. Since PFG's IPO in 2015, sales have more than quadrupled to over $60 billion, and the market cap of PFG has increased sevenfold, much of which can be attributed to the vision and influence George has had on the company.

More importantly, because of George's stewardship, PFG is defined by more than just financial results. It is a place where people want to work, where customers and suppliers want to do business and a preferred partner for strategic M&A. There's a reason that PFG is often the first and sometimes only call from prospective acquisition opportunities. Many of you have had the opportunity to meet with George and experience his knowledge and insight firsthand. On behalf of our entire organization, I would like to share my heartfelt thanks to George for everything he has done for the many thousands of people who have crossed his path.

I'm also thrilled that George will continue to play an important role for PFG. As Executive Chair of our Board, he will be heavily involved in the pursuit of strategic M&A opportunities, maintain his connection to key customers and be active in PFG's overarching strategy. Following an industry icon like George comes with great responsibility, and I'm excited to take the helm and lead PFG through our next chapter.

George and I have worked together closely for the past 4 years, developed a powerful friendship and collaborated on the vision for PFG. As I look ahead, I'm excited to lead this organization, and I'm extremely confident in our ability to continue to drive growth and EBITDA performance by executing on our strategic priorities.

In May, we outlined our 3-year strategic vision, which the company and I are deeply committed to delivering. More specifically, this is a road map grounded by a balance of continued revenue growth and market share gains, gross margin enhancement initiatives and improving operating leverage. The organization is off to a solid start in achieving our 3-year plan and have strategies in place to give us a high level of confidence we will deliver.

Let's now turn to our results for the second quarter of our fiscal 2026. Despite a difficult macro environment, I'm proud of our organization's ability to overcome the challenges in the final months of the calendar year. The quarter saw declining foot traffic, the impact of the government shutdown and softer sales per location across our segments. Despite the challenging backdrop, our company was able to post solid revenue and profit performance within our previously stated guidance range.

Breaking it down by segment, let's begin with Foodservice. Our organization delivered 5.3% organic independent case growth, driven by a 5.8% independent account growth. During the quarter, we gained share across independent, regional and national business, largely consistent with our gains in prior quarters. Share gains were broad-based across a range of concepts, with particular strength in chicken, burger, barbecue and seafood restaurants.

To elaborate further, after a strong start to October, volume trends moderated soon after the government shutdown took effect. We did see some recovery once the shutdown was lifted, and we finished the calendar year with case growth in December roughly in line with the November results. According to Black Box data, industry-wide foot traffic decelerated through the quarter, with December traffic down 3.5%. Our chain restaurant business followed a similar glide path, reflecting consistent industry pressures.

Our total chain restaurant volume grew by low single digits year-over-year as new business we've onboarded over the past several quarters offset the softer traffic environment. We attribute our consistent market share outperformance in part to our efforts behind growing, training and supporting the best sales force in the foodservice industry. Our efforts in this area are proven out in the independent restaurant space. We continued to hire new associates during the period, ending December with nearly 6% more salespeople than we had at the end of calendar 2024.

As we have discussed on past calls, we do not have a corporate-wide hiring mandate, nor do we require artificial hiring goals. Instead, we emphasize the importance of expanding our sales force as a key driver of volume and market share growth, while empowering our local operating companies to hire according to their specific needs. We still believe a rate of hiring at or above 6% makes sense for the long-term support of our growth rate, but expect this number to fluctuate in any given period.

I want to take a moment to discuss the integration of Cheney Brothers. As we discussed last quarter, we are pleased with the work being done at Cheney and expect this company to be a significant contributor to PFG's revenue and profit growth long into the future. That said, we have been very consistent in our messaging around synergy timing and when we expect the financial performance of Cheney to accelerate. When we made the acquisition, Cheney was making meaningful investments in its infrastructure to support growth.

More specifically, the addition of a new 350,000 square foot facility in Florence, South Carolina and a new 42,000 square foot facility in St. Cloud, Florida to expand its manufacturing capabilities. These investments, along with other integration costs, have had a short-term impact on Cheney's performance and our overall P&L. Despite this activity, Cheney continues to grow independent cases at a rate consistent with the rest of our foodservice operating companies, gained share in its distribution markets and provide its customer base with great service.

To close out my comments on Cheney, I want to remind you that we anticipate the majority of the synergies to start flowing through the income statement late in year 2 through year 3 after the close of the acquisition. Profit performance for Cheney should begin accelerating accordingly.

All in, our Foodservice segment had a solid second quarter, growing volume through market share gains, new business wins and expansion of our private brand portfolio. We faced two meaningful EBITDA hurdles in the quarter that are likely to persist into Q3 with my earlier comments on Cheney and the impact of cheese and poultry deflation. Despite the challenges, we remain confident in our strategy and expect our results to accelerate as we move through our fourth quarter, setting us up for a strong fiscal 2027.

Turning to the Convenience segment. On our prior earnings calls, we disclosed the addition of sizable new business wins for Core-Mark. In the final weeks of September, we successfully onboarded over 500 Love's stores, contributing nicely to our second quarter results. Also joining the Core-Mark fold in December were over 600 RaceTrac locations, which we successfully integrated into our network, setting the segment up for a strong finish to fiscal 2026.

Let's look at the Convenience segment's performance during the second quarter. Net sales increased 6.1%, benefiting from market share gains and the onboarding of the new accounts just discussed. Our data shows a mid-single-digit industry decline in the key convenience categories as persistent inflation continues to weigh on the channel.

Core-Mark's positive volume results reflect the company's strong share gain outperformance and execution during the period. Convenience segment sales were driven by low single-digit dollar growth from food, Foodservice and related products and mid-teen noncombustible nicotine product sales growth. Cigarette sales were flattish in the period. As a reminder, the mix shift away from cigarettes towards other nicotine categories and growth in food, Foodservice and related products causes a revenue headwind, but is nicely accretive to our gross margins. This dynamic is a consistent secular tailwind for our profit growth, which we expect to gain momentum over time.

Moving on to profit. In the second quarter, our Convenience segment adjusted EBITDA increased 13.4% as a result of strong cost discipline and operating efficiencies in addition to business from Love's and RaceTrac. Once again, our great team at Core-Mark showed remarkable resilience and the ability to drive profit growth despite a challenging backdrop.

Turning to Specialty. Trends in the second quarter were broadly similar to the first quarter, with a modest improvement in top line trends, coupled with nice productivity gains, which produced segment adjusted EBITDA margin expansion. Sales growth was tempered by another difficult quarter in theater, which was down over 30%, representing an approximate $50 million drag on overall sales. Outside of theater, Specialty performed well, growing sales at a high single to low double-digit rate in the vending, office coffee, retail, campus and travel channels. Proactive management of operating expenses produced nearly 7% segment adjusted EBITDA growth in the quarter, representing 40 basis points of margin expansion.

Closing out my remarks, it's certainly been a dynamic operating environment to take over as PFG's CEO. That said, I'm inspired by our organization's ability to consistently gain share across our business segments, operate safely while delivering exceptional customer service and enhance our operating leverage, driving sustained growth in EBITDA dollars and margins for our shareholders. Our diversification seeks to provide consistent performance in a range of economic scenarios, and our strong pipeline of new potential business should result in consistent long-term revenue and profit growth for PFG.

I'll now turn it over to Patrick, who will review our financial performance and outlook. Patrick?

Thank you, Scott, and good morning. Today, I will review our financial results from our second quarter, provide color on our financial position and review our updated guidance for 2026. To echo Scott's comments, despite challenges in the quarter, we are very pleased with our progress through the first 6 months of 2026.

Through December, we continue to make progress on our financial position, as our strong cash flow was used to invest behind our business to drive growth and reduce leverage. We believe that the investments we are making today will pay off nicely as we execute our strategy. In a moment, I will provide additional color on our financial position and capital allocation priorities.

First, let's review our results for the second quarter. PFG's total net sales grew 5.2% in the second quarter, with growth in all 3 operating segments, in particular strength in Foodservice and Convenience. Total company cases increased 3.4% during the quarter, highlighted by a 5.3% organic independent restaurant case growth and a 6.3% organic case gain in our Convenience segment. As a reminder, having fully lapped the Cheney Brothers acquisition, as of the second week of the second quarter, Cheney was reported as part of our organic business for the vast majority of the period.

As Scott mentioned, in our Convenience business, we are very pleased with the contribution from the addition of Love's and are looking forward to the benefit of the RaceTrac business, which started onboarding late in the second quarter. These businesses are expected to deliver incremental sales and profit dollars over the next several quarters.

Total company cost inflation was approximately 4.5% for the quarter, just slightly higher than what we experienced in the prior quarter. With that said, there were some items moving around within our cost basket. Foodservice inflation of 1.8% was below recent trends, with notable deflation in the cheese and poultry categories somewhat offset by higher inflation in beef. Specialty segment cost inflation was 5.4% year-over-year, about 140 basis points higher than the prior quarter, mainly the result of candy and hot drink price inflation. Convenience cost inflation increased 7.4%, again, slightly higher than the prior quarter due to inflation in tobacco and candy. As Scott mentioned, the inflation impact on the Convenience segment sales growth is offset by the revenue mix shift away from cigarettes.

The inflationary environment has been volatile over the past several years, but as a company, we have demonstrated our ability to handle a range of outcomes. We continue to model inflation rates remaining in the low single to mid-single-digit range throughout 2026.

Moving down the P&L. Total company gross profit increased 7.6% in the second quarter, representing a gross profit per case increase of $0.20 as compared to the prior year's period. We are very pleased with our gross profit results, which shows our organization's resilience and long-term growth opportunity.

In the second quarter of 2026, PFG reported net income of $61.7 million, a 45.5% increase year-over-year. Adjusted EBITDA increased 6.7% to $451 million, with all 3 operating segments contributing to our adjusted EBITDA growth. Diluted earnings per share in the fiscal second quarter was $0.39, while adjusted diluted earnings per share was $0.98, flat year-over-year. Our EPS was impacted by several below-the-line items, including higher interest expense and effective tax rate in the period. Our interest expense increased due to higher finance lease costs, offsetting lower debt balances and more favorable interest rates. Looking ahead, we anticipate a very modest sequential decline in the net interest expense.

Our effective tax rate was 28.8% in the second quarter, an increase from 25.2% last year. The increase in our quarterly effective tax rate was due to a decrease in deductible items related to stock-based compensation and an increase in foreign taxes as a percentage of income, partially offset by an increase in tax credits. We continue to expect our 2026 tax rate to be close to our historical average.

Turning to our financial position and cash flow performance. In the first 6 months of 2026, PFG generated $456 million of operating cash flow, an increase of $77 million compared to the same period last year. We invested about $192 million in capital expenditures during the first 6 months. We continue to anticipate full year 2026 CapEx to be approximately 70 basis points of net revenue, in line with our long-term target. Our investments in CapEx are primarily focused on maintaining and supporting growth within our infrastructure and high-return projects that we believe will support our long-term growth goals.

In the first half of 2026, we generated about $264 million of free cash flow, up nearly $89 million compared to last year. We did not repurchase any shares under our share repurchase program in the quarter. We will be opportunistic around share repurchase, but our priority remains debt reduction.

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 third quarter of 2026 and updated our range for the full year. For the third quarter, we expect net sales to be in the range of $16 billion to $16.3 billion and adjusted EBITDA between $390 million and $410 million. These ranges include continued deflation in cheese and poultry, the investment in our business, including onboarding of new capacity at Cheney, and a continuation of a difficult backdrop for our Specialty segment. We have also contemplated the impact of the recent winter storms in our outlook for the third quarter.

For the full fiscal year, our sales target is now a range of $67.25 billion to $68.25 billion. We now expect full year adjusted EBITDA in a range of $1.875 billion to $1.975 billion for 2026. The adjustments in our full year projections are largely a flow-through of the more difficult second quarter period. Our results keep us on track to achieve the 3-year projections we announced at Investor Day, with sales in the range of $73 billion to $75 billion and adjusted EBITDA between $2.3 billion and $2.5 billion in fiscal 2028.

To summarize, we are pleased with our progress despite a difficult operating environment in the second quarter. We are in a solid financial position, which supports our growth investments and capital return to our shareholders and expect strong execution in the second half of the year. 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 Instructions] We'll take our first question from Mark Carden with UBS.

So to start, on organic independent case growth, you started the quarter with some solid momentum, called out the shutdown. Any additional color you can add on performance by month? And then you also just called out some of the recent weather headwinds and impact to guidance. How has January lined up relative to your initial expectations? And do you still see a path to that 6% organic independent case growth for the full year?

Mark, this is Scott. Great questions. And as you talked about, in Q2, we started the quarter in October, fairly strong. That was the strongest period of the quarter. And then obviously, the shutdown certainly had an impact the longer it carried on. We saw in November and December months relatively equivalent, definitely some choppiness week to week. And then as we moved into January, we saw a really nice rebound, nice performance in January. And then certainly, as you know, the start of February has been materially impacted by weather last week, really, a good portion of the country was impacted. And this week, a little more isolated to the eastern half and the Southeast. But certainly had an impact and something we factored into guidance.

When I look at the big picture, we're very optimistic about the full year. And I think you called out the 6% target. That's always what we aspire to. That's kind of how our sales organization is geared as we want to be 6% or above, so we're certainly fighting to get there.

Great. And then on the sales force front, have you guys seen much of an impact on either new hiring or retention on the back of some of the earlier uncertainty relating to US Foods discussions perhaps earlier in the quarter? And then just how did the pace of your sales force growth compared to recent quarters?

That's a great question. Really, what I look at when I think about sales force hiring and performance is really market share. And as I look at the sales force's market share performance, not just over the last couple of quarters, but over the last 5 or 6 quarters, we've been very consistent in our independent market share gains.

As far as actual headcount, we've been right at that 6% range for the first 2 quarters of this year. I'm totally comfortable at that level to see them continue to grow share, to demonstrate through new account acquisition. We were at 5.8% net new account gains this quarter, same last quarter.

But at the end of the day -- and I talked about this in my comments -- we are decentralized around that hiring. We certainly have OpCos that are hiring in the double-digit range and some that are probably below that 6% range. And we really leave that up to them. But what I use as my gauge is really anchoring back to market share. So I feel really good about where we're at right now and the availability of talent.

We'll hear next from Alex Slagle with Jefferies.

Just wonder if you could dissect the dynamics at play for the Foodservice business in the second quarter? It seemed like really strong independent growth, and independent mix sales jumped a lot, but the OpEx was elevated and you called out the Cheney investments and the cheese and poultry deflation. But maybe you could kind of talk a little bit more about how impactful that was, kind of the cadence of the investments behind Cheney and how that maybe differed from expectations or if that was sort of similar to what you expected?

Yes. Let me just start off with Cheney. I want to take a step back and just -- that acquisition is something that we pursued for a long time. It's been a great acquisition to date. It's a great cultural fit. It fills in a geography that is really strategic for us. So we're really happy with the progress of the acquisition.

As we -- as I called out in my remarks, we knew going in that we were going to make some material investments in their infrastructure. We have a brand-new building that is just completed. We just started receiving product this week. It will start shipping probably over the next 3 to 4 weeks. So certainly, there are some costs related to that. We also opened a new manufacturing facility for them. So overall, I would say their costs are running a little bit higher than we anticipated.

And the other thing that we're taking them through right now is they transition into being part of a public company is the integration costs to our benefits, to our payroll, to our financial mapping. So again, really happy with the acquisition. Certainly, expenses are a little bit higher than we anticipated.

And then just you kind of asked about the overall cadence in Foodservice. As you pointed out, really happy with our market share growth, both in independent and chain. From a margin standpoint, as we continue to grow that independent market share, that mix really helps our margin. So that's performed really well.

And then I think from an OpEx standpoint in the core Foodservice ex Cheney, we have leverage, but I'd say, definitely, there's some opportunity in leveraging OpEx in that area as well. But really pretty happy with how the core Foodservice segment performed. And then we talked about the deflation in those 2 couple of categories did have an impact on margins for sure. We over-indexed in those 2 categories. So really, summing it all up, Cheney and the deflation were really at the end of the day, really, the miss in the quarter that would have gotten us to the upper half of guidance.

Okay. And then I guess along the same lines, at least in terms of the improving mix with Convenience EBITDA margin opportunity I wanted to ask about -- I mean it's expanded nicely, and some of that is the Foodservice growth and some other mix items. But I mean the Foodservice penetration actually still seems to have a long way to go. Kind of curious what that could mean over time for the overall Convenience EBITDA margins as we look out a few years and we continue to grow that portion of your business there?

It's a great call out, Alex. There's a lot of things going on in the Convenience segment that really, I think, help our margin profile over time. You certainly called out Foodservice, and I agree with you, there's a long runway ahead. We continue to grow Foodservice in the high single-digit, low double-digit range, both in our Convenience segment and our Foodservice segment into Convenience. So kind of hitting that from two ends. So that's performing really well.

When you look at the macro of Convenience though, one of the things that's, I think, really encouraging is what's happening in the noncombustible space. So noncombustible nicotine, oral nicotine and other forms of nicotine that aren't combustible are growing at a rapid pace. Those have a nicer margin profile than combustible cigarettes. So as we see that migration, there's a natural benefit to our margins in mix. So that's been a great progression, and I think that's going to continue for a long time. So we feel really good about how we're set up in Convenience from a margin standpoint.

We'll hear next from John Heinbockel with Guggenheim.

Scott, maybe you can touch on some of the self-help that you referenced back at the Investor Day, particularly strategic procurement. Where are we in that journey? And then maybe as a related question for Patrick. Just the impact of deflation on margin comes from where? I don't know if that's mix or inventory gains? Or how does that flow through?

Yes. So I'll take the first half of that and let Patrick tackle the second. So John, we, at Investor Day, talked about procurement opportunities. And we've done a lot of work on that. And certainly, in the clean room environment that we had over the last few months, that allowed us to really dig into our own side of the procurement ledger. And really, at the end of the day, it gave us that much more confidence that we're going to be able to get to that top end of the $100 million to $125 million of procurement synergies over our 3-year plan.

The cadence of that, I'd say it's fairly linear. I think we're starting to capture some of that in the back half of this year. We'll definitely see capture in year 2, in year 3 and get us to that end number. So we feel really confident about that.

Yes. And John, thanks for the question. I'll jump in here. Yes. So where we're going to see the impact from the deflation is largely going to be in margin, but it could also be a little bit of inventory gains. I mean you have to remember, we have a very large basket of commodity goods that are constantly moving around. We called out cheese and poultry because our expectations for the quarter were higher than what we actually saw come through with the inflation. So that's the reason we called it out. And it's because we also over-indexed in those 2 commodities versus the rest of the basket.

All right. Maybe a follow-up for Scott. I know as part of the U.S. food process, right, there was some chain business that has sort of gotten tabled. Does that come back? When does that come back? And how material is that?

Yes. I think as George mentioned on prior earnings call, we had 2 or 3 folks in the pipeline. I'd say fairly material pieces of business that we felt like we had a really good shot at picking up. And as we said, we felt like they were on the fence. Most of those, what they do in that situation is they will renew for the short term, and that's what happened with a couple of these. They signed 1-year extensions on their agreements.

So we're certainly still in dialogue, but I would just step back and say, overall, in the Foodservice space, we feel really good about our pipeline, both independent and chain in the convenience space. Obviously, they're performing exceptionally well from a market share standpoint. And I'd even step back and look at Specialty and say, we definitely called out the headwind in theater. That's been certainly a challenge. That challenge will really persist for us in the next quarter. That's when we lap at the end of this next -- or I guess, this third quarter that we're in, we lap a pretty material loss in theater.

And -- but the rest of the Specialty segments are really performing pretty well. When I look at vending and retail, our e-commerce platform, we're starting to see some momentum there. So I feel really good as we get into Q4 that you're going to start to see some nice performance out of the Specialty from a growth standpoint.

We'll move now to Jeffrey Bernstein with Barclays.

Great. Thank you very much. My first question is just on the M&A topic. Scott, you mentioned the pipeline is robust. Just wondering whether there's any change in Performance as specific interest? It seems like you're still working hard on the Cheney integration, maybe costs are coming a little higher than you thought. So just wondering if there's any change to the approach to that M&A, maybe with George stepping back, how we kind of prioritize that process? And then I had one follow-up.

Yes. I would say, overall, really no change to our approach to M&A. I mean, George and I have collaborated on M&A for the last 4 years. We'll continue to collaborate moving forward on that. We certainly are looking at things in our pipeline.

To your point, Cheney I think has progressed really well. We're really excited about what that's going to bring. And we called out early on that the synergies that we'll see in Cheney really come at the end of year 2 and year 3. And that's really the way we approach M&A. We try not to make any drastic changes in those first couple of years to really let them acclimate to the organization. We try and learn what we can from them as well. And we think that just makes for a much better long-term approach to M&A, and that's paid off with Reinhart, it's paid off with Core-Mark, and it's certainly going to pay off for Cheney.

Understood. And then just a follow-up on the independent organic case growth. I know you talked about always targeting kind of that 6% type range. It's going to be a little bit more of a fight to get there in the fiscal third quarter. So I'm wondering if you could share any kind of current run rate or your expectation for that third quarter?

And there was a passing mention on the weather, I was expecting to hear something more material. I was wondering whether you could quantify how much potentially that weather impact has had on sales, which were modest, was below Street expectations for the third quarter, but EBITDA, which was well below? Just trying to gauge the primary driver of that EBITDA shortfall weather, whether weather had a more outsized impact or whether it's primarily Cheney.

Well, I'll talk to the cadence of the quarter, and Patrick might want to fill in a couple of things here. We actually started January off really nicely. I would say it was, call it, a rebound from where we were at in December. It picked up nicely in January. And then certainly, last week's weather was impactful. And I think going into this week, certainly having an impact as well. And that's certainly something that we took into consideration when we talked about our guide for the third quarter and the full year. Patrick, anything you want to...

Yes. Just a couple of comments on the guidance for Q3. Really, what we have embedded in that guidance in the EBITDA is we do expect to see some continuation of the OpEx challenges that we've had to Cheney that we saw in Q2 will continue in Q3. We also are seeing that deflation impact from cheese and poultry continue into Q3.

Scott touched on Specialty. And then obviously, the weather, we contemplate that. We've had bad weather last year, 2 years ago during this quarter. It is our smaller quarter. It's very hard to obviously nail down weather, but we have recently experienced 2 weeks of impact from weather. And as Scott mentioned, we did see a nice uptick in independent cases as we entered this quarter. And we have the Convenience with their new RaceTrac customer being for the full quarter. So we have some tailwinds as well. And that's really kind of how we built out the guidance for the quarter.

We'll turn next to Edward Kelly with Wells Fargo.

Yes. Good morning, everyone. I'm sure George is listening. If he is, he will be missed. And Scott, just wanted to say congratulations. I wanted to follow up on the cost side for you. As it pertains to some of the higher-than-expected costs related to Cheney, I would think that the weather disruption probably adds some added cost too. I'm curious, as we think about when the business normalizes and we look out into the next fiscal year, are there tailwinds associated with lapping this type of stuff? Just kind of curious as to how sort of like onetime in nature some of this stuff is?

No. It's a great question, Ed. And certainly, as we talked about Cheney, the major investment in a facility, that's a 350,000 square foot facility that we're staffing and have been staffing over the last couple of months, and that won't be fully online until probably 2 months from now. So you've definitely got some expense involved with that.

And then as you called out, certainly, weather creates some expense challenges. As I look at the 3-year guidance, I think that's really where we contemplated what those tailwinds look like. And certainly, our synergies in Cheney, we expect to come in year 2 and really into year 3. And that's going to be a nice contributor to our 3-year guidance, and we feel really strong about delivering that.

All right. And then just a follow-up for you, and it pertains to the 3-year guide that you referenced, Scott. There's been concern about disinflation, you mentioned it on the call today. I guess, first, what's embedded in that 3-year guide in terms of like an inflation outlook? If Foodservice is just sort of like plotting along at 1% to 2%, is there any issue with hitting the 3-year guidance if it's a low level of inflation? Just kind of curious as to how you contemplated all that in that outlook?

Yes. This is Patrick. It's a great question. And as we think about the 3-year guidance and inflation, we embedded into our models what we thought would be a consistent number. And we've always said where we are right now is pretty good. We're calling out the deflation this quarter just because, as I mentioned, our expectations were cheese and poultry specifically were going to not be as deflationary as they are. So yes, when we think about the 3-year guidance, we have a lot of confidence in hitting that guidance. We're very much on track if you look at where we're projecting this full year guidance to be. And then as we enter next year, we have just a lot of confidence in executing our strategy, continuing to take market share and then everything else that we've talked about.

We'll move now to Kelly Bania with BMO Capital Markets.

All right. Good morning. This is Ben Wood on behalf of Kelly Bania. Could you provide any more detail on the monthly cadence of volume trends you saw in Convenience? Some of the industry data we look at suggest that sales trends really accelerated into December and through year-end. Is that consistent with what you guys saw? And if so, how are you thinking about the possibility of some of those key categories in Convenience inflecting positive going forward?

Yes, it's a great question. As I look back over the full second quarter, those results were, I would say, fairly consistent with what we've seen historically, which was kind of low to mid-single-digit declines in a number of categories.

To your point, though, as we exited the second quarter in December and maybe even into January, I think one of the things that we benefit from in the Convenience segment is when you get fuel pricing that drops down in some markets into the $2 range, that certainly helps car travel and people being out on the road.

Obviously, we were really propelled by new account wins. But even taking that away, we continue to gain share in our Convenience segment, both at the chain level, the regional level. So our segment is performing well. And to your point, I think there are some signs of improved performance in traffic and Convenience.

Great. And then just kind of following up on that. In light of the announcement yesterday from Pepsi to pretty majorly lower price in some of their key snack brands, do you expect others to follow suit? And is there a possibility that some of the snack and convenience categories might become deflationary off of this? And how does that impact your different businesses?

I wouldn't want to make predictions on whether other snack categories would become deflationary. That would be -- I've been in this space for 30 years. I've never seen those categories become deflationary. Yesterday's announcement was very interesting. What I have since heard is that, that's primarily just on the big bag. So right now, we don't see that as being a big impact on our Convenience segment. Certainly, that could change and pass along to some other SKUs. But I don't see that becoming an industry trend, just based on my historical experience.

We'll move now to Lauren Silberman with Deutsche Bank.

So I wanted to go back on the OpEx side. Can you help us understand how core underlying OpEx is growing ex Cheney? I guess I'm trying to understand how much of the growth of investments in the core business sales force versus some of the noise of Cheney with the new facilities coming online?

No, it's a great question, Lauren. I would say, and I think I said a little earlier in the call, I would say there's certainly always opportunity in getting more expense leverage across all of our segments. I would say, in the core Foodservice segment, quarter-over-quarter, our expense performance was fairly consistent. We are certainly seeing leverage as a percent of gross profit dollars in our expenses. So we feel good about how the core is performing. Certainly, opportunities to improve. But the bulk of our miss in OpEx from what we anticipated was really just the overrun we saw in Cheney.

Okay. I guess, in the back half of the year, any way to frame how we should be thinking about that growth now that it's in the full segment year-over-year clean? And I guess is the overrun more of a pull forward of expenses or higher overall expenses?

No, I think it was really situational just to Cheney. And as I talked about, with new buildings coming on, some of the things that we're doing to get them to be part of our overall public organization has certainly added some cost to them. So we expect that to continue a little bit into the third quarter, as we called out. But in the long run, we're a company that's really focused on getting OpEx leverage across all our segments. And we feel very comfortable that in our full year, we'll get that in a position that we feel really comfortable with. And that was all obviously contemplated in our guidance for the full year.

Okay. And then if I could just go on the promotional environment, can you talk about what you're seeing amongst competitors? Any changes in the promotional environment? Especially as one of your big competitors seems to be building some momentum. And then there's just the moving pieces of product inflation and how different peers react.

Certainly. What I said earlier and what I consistently look at is market share gains. And I think we have performed exceptionally well this quarter, last quarter. And now as I look back for a number of quarters, our market share gains have been very consistent across the independent space, across the chain space as well. So from that perspective, I feel good about how we're performing. That's really my focus.

As far as the competitive environment, I would say it's always competitive. I wouldn't say that I saw anything different this quarter or last quarter than I've seen from prior quarters.

We'll move next to Brian Harbour with Morgan Stanley.

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Brian, we can't hear you.

Yes, your line is difficult. Are you able to pick up a handset?

Can you hear me now?

Yes.

Perfect.

Okay. Great. On your deflation comments, can you remind us how those products get marked up? And I guess, for -- like cheese, for example, I mean, how much is this sort of like category -- if you think about pizza in contrast to chicken, I would think that that's -- demand is still very good there. Could you just elaborate on that?

Yes. So just -- I'll try to keep this high level, but we're going to -- if we take our independent customers, we're going to have a markup on cost, and our salespeople are the ones that determine that in a deflationary environment. And what's happening with these 2 commodities is there's this oversupply. There's a lot of supply, lot of capacity came out with cheese. And so it's at a very low point. and same thing with poultry, they're able to increase their supply significantly. They do this from time to time, and they go oversupply and then they go undersupply. So again, it's really just our over-indexing because of our customer base in those 2 commodities that we called this out.

Yes. Okay. Understood. And then just in Convenience. I guess I would assume that there's sort of secular pressure on snack foods, that it's not just the inflation that's happened there, but sort of preferences. I think we're seeing that in grocery stores. So how much -- do you think that -- do you agree with that? And do you think that the convenience stores are sort of committed to replacing some of those products with perhaps healthier options or more on-trend options? Do you think that's happening fast enough, such that it sort of improves sales in that segment versus what you've been seeing?

No, it's a great question. There's a lot to unpack there. The first thing I'd say is just looking at product inflation. If you look at snack and candy, I guess, since pre-COVID until today, those are 2 of the categories that had the highest inflationary increases of any consumable product that's out there. So certainly, I think that price elevation had an impact on demand.

And so Frito's response, like I said, has surprised me a little bit because I do think the consumer is catching up. And so as we talked about, we've seen a little heightened demand over the last couple of periods in Convenience. As far as the mix of products, I think the one real opportunity for us is really in Foodservice. I think the convenience store more and more is becoming a relevant option for high-quality food options. And as we think about consumer behavior changing, they want fresher, they want healthier. And convenience stores have an opportunity to fill that need, and we feel that we're somebody that can certainly fill that.

As far as consumer packaged goods and that mix changing, there's been a shift in general to more healthier options in convenience. And to your point, I think could this kind of dynamic accelerate it? Certainly, it could. But I think as we all know, it takes consumer packaged companies a while to get products to market. So I don't see anything dramatically happening quickly.

We'll move next to Peter Saleh with BTIG.

Great. I did want to come back to maybe Jeff's question on the forward guide. Can you just talk a little bit about maybe what's embedded from a macro perspective going forward? I mean we do have some much higher tax refunds coming through that should benefit this quarter and maybe into the first calendar half of the year. Have you embedded any of that into your guide? Have you thought about that? I know you said January was a pretty good month, February, I guess, starting off pretty slow. But I think the quarter is really defined by how March performed. So any thoughts on that would be helpful.

Yes. Peter, that is a really good question. I spent a lot of time looking into the tax refunds, the no taxes on tips or over time, they're going to start coming through. And other tailwinds, honestly, I mean, what's the World Cup going to do, all these things as we go through Q3 and Q4.

We did not embed those in our guidance mainly because it's very hard to know what that flow-through is going to be, but we do know that putting more money in the consumers' pocket, especially the folks that are maybe on the lower end, we'll see how much of that goes into the market and how much they use that for discretionary spend into restaurants. But we do know that's a very positive thing. And then we know that the World Cup should also be another tailwind, but we didn't put that in the guidance.

Great. I appreciate that. Can you also comment, I think last quarter, George commented that there could be some changes to the SNAP benefits, and that could have an impact. Have you seen any change on that front and any impact to date?

And there's some recently contemplated changes as well. But no, I can't say that we have seen any material impact on any of the changes or contemplate the changes in SNAP at this point.

We'll move now to Karen Holthouse with Citi.

I wanted to dig into Florida a little bit and just kind of excluding Cheney Brothers or noise from that, your sense of just the underlying health of that market. I think we're hearing some confirms around travel tourism, particularly international tourism around theme parks and whatnot being down pretty materially. And then just a snowbird season has gotten underway. Any risk that Canadians are avoiding the market this year?

No, I think it's a great question. And certainly, we have our finger on that pulse pretty closely. The one thing that I would say that I've been very pleased about with Cheney is their independent share gain. They continue to grow independent share at a rate consistent with the rest of our business.

And definitely, we've been following very closely the travel patterns, and I saw the recent theme park attendance. So I do think there's been a little bit of a slowdown with international travel and the Canadian travel in the marketplace. But I'll tell you, we have a ton of confidence in Florida overall. I mean that's been a state that's been growing consistently for a number of years. And I feel like that they're poised for a big rebound in that state. But we're performing really pretty well in the state, all things considered.

And then 1 quick follow-up that just prior to the bigger weather events that we saw in the last week or so. Anything to comment in terms of geographic performance in the quarter to date?

It's a really good question. We had called out on prior earnings calls that we saw some slowness in the Midwest, and we'd also called out areas where we had fringe travel from Canada. But as I think back to last quarter, the start of this quarter, particularly the start of this quarter, January, which -- January isn't the bellwether month because it's a smaller month. But really saw pretty consistent performance across the map. I didn't see any markets that had any material lulls or surges.

[Operator Instructions] We'll turn next to Danilo Gargiulo with Bernstein.

Great. Scott, once again, congratulations on your new role. And I want to ask a more strategic question to begin with. So as you're embarking in this new role, how would you like your era to be remembered for? In other words, where do you see incremental opportunities for Performance going forward?

Really appreciate the question. I think it's a great question. One of the reasons that I'm at Performance Food Group, it's one of the reasons that, as I was running Core-Mark, that we decided to merge with them is culturally, I truly foundationally believe in what George and Performance Food Group were doing as a company. So as I've worked with George over the last 4 years, I would say that we very much align in how we look at the business. I think fundamentally, we're both believers in driving growth, both organically and through M&A. I think we both pay particular attention to margin and how mix can help and drive margin. Culture is very important to me.

And then I'd say if there's anything that maybe is a little different is I probably have a little slant towards how are we going to leverage technology, how are we going to leverage that to be more efficient as a company. But outside of that, I'd say, George and I, our approach to the business is very consistent. And my priority for this company is to continue to drive that top line growth, but make sure that everything that we do allows it to flow to the bottom line, and that we do it with a great culture and make sure there's a great place for people to work.

Okay. Great. And you mentioned margin in your answer. And earlier, you also talked about the discovery that you really had with the -- during the process of a potential merger with US Foods on the procurement side. So I'm wondering, over what time frame do you expect Performance to potentially starting to close some of the margin gap versus peers? Absent obviously, the mix impact that is going to be favoring you over time? And what are some of the low-hanging fruit that you think you could capture without impacting the case growth?

No, another great question. I would say that the work we did in the clean room was just validation. We felt like when we sat down and put together our strategy for Investor Day, this is a company, as I called out in my prior remarks, that's grown dramatically over the last 10 years. And so we felt like as we sit down with our vendors and partner with our vendors that there's an opportunity to create cost of goods benefits, to create logistics benefits, just through our size and scale and creating efficiency with our vendor partners. So I think the clean room exercise was just a further validation that, that opportunity exists and that we have a clear line of sight to go capture it. And the second -- I'm sorry, the second part of your question?

What is the right time frame for the closure of the margin gap?

Yes. I think I've called that out a little bit. We really incorporated that procurement synergy into our 3-year guide. And as I look at the cadence of that, I would say that we're in the early innings. We're in the first couple of quarters of that. But we felt like and still feel like that's going to flow fairly consistently year-to-year. So I think my thinking there is unchanged.

As there are no further questions in queue at this time, I would like to turn the call back over to Bill Marshall for any additional or closing comments.

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

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation, and you may disconnect.

Good day, and welcome to PFG's Fiscal Year Q1 2026 Earnings Conference Call. [Operator Instructions]

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

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 2026 fiscal first 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 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 statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections.

With that, I'd now like to turn the call over to George.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. Performance Food Group is off to a great start in fiscal 2026, building upon the momentum when we saw exiting 2025. All three of our operating segments are contributing nicely to our profit performance, and we are seeing a nice combination of revenue performance and margin expansion.

This morning, Scott, Patrick, and I will share an update on our company's progress and provide our thoughts on the industry and external environment.

We finished our first quarter with excellent results, including double-digit top line growth, acceleration in our independent restaurant case volume and gross margin expansion. Our diversified approach to the food-away-from-home market continues to pay off as we are seeing broad-based market share gains. Our success is a direct result of our team's ability to execute in the current market environment.

Within our Foodservice business, independent case growth exceeded 6%, propelled by market share wins and increases in customer penetration. We have continued to see case performance in our independent business gain momentum since early in the calendar year. Also, during the final weeks of the quarter, Core-Mark began shipping to Love's Travel Stops. The first of two large new account wins that we are onboarding in the Convenience space during the fiscal year. Scott will share more details on our progress in the Convenience segment in a moment.

Our Specialty segment continues to navigate the economic backdrop by driving efficiencies through the business leading to double-digit adjusted EBITDA growth in the quarter. We are seeing pockets of strength in our Specialty business, including vending, office coffee, campus, retail and e-commerce fulfillment channels.

Our teams are capitalizing on our PFG 1 approach, which encourages collaboration across our business segments to drive revenue and profit growth. We believe we are in the early stages of this initiative, but have already begun to see the benefits due to market share wins, sales growth and margin expansion. We are investing in our people and technology to support our growth profile.

In the first quarter, our Foodservice salesforce head count increased about 6% compared to the prior year. We are committed to adding talented salesforce head count. The slight deceleration from the fourth quarter to the first quarter was due to normal fluctuation in hiring across the organization.

We continue to attract high-caliber sales associates and believe this will be an important contributor to our growth in the years ahead.

Before turning it over to Scott, who will provide more detail on our results. I'd like to reinforce how pleased I am with our organization and the efforts from our 43,000 associates. Their hard work and dedication directly reflect our company's success. Our diversified structure across the entire food-away-from-home market is well designed to succeed, and I'm excited for the future with PFG.

With that, I'll turn it over to Scott. Scott?

Thank you, George, and good morning, everyone. Let's jump in and review some highlights of our first quarter results. As George mentioned, we are very pleased with our start to the fiscal year and are seeing contribution across the organization due to our team's solid execution.

Starting with Foodservice, the segment built upon its momentum by accelerating independent case growth compared to Q4 and maintaining chain case growth in the low single digits. Total Foodservice cases were up 15.6% in the quarter, including incremental sales from Cheney Brothers, which we began lapping in early October.

On an organic basis, Foodservice cases grew 5.1%, fueled by 6.3% organic independent case growth. Our independent case growth was driven by a 5.8% increase in new customers year-over-year and an increase in customer penetration. We were encouraged to see our lines for drop increase in the quarter, which is a key driver of long-term profitability.

Our chain business grew cases 4.4% in the quarter as we continue to benefit from new account wins that were onboarded last year. Our pipeline of potential new chain business remains robust. In total, sales for our Foodservice segment increased 18.8% in the quarter, with organic top line growth increasing 7.7%.

Shifting to margins, positive mix shift, low single-digit inflation and procurement efficiencies drove gross margin expansion. Cost inflation during the first quarter was 2.5%, roughly in line with the fourth quarter and a modest deceleration from what we experienced over the full year of fiscal 2025. Double-digit inflation in beef was largely offset by lower poultry and cheese prices in the period.

Taking a look back at the quarter, the balance of growth, margin expansion and operational execution led to very strong segment adjusted EBITDA growth of 18.1%. Excluding the contribution from Cheney Brothers, our Foodservice segment adjusted EBITDA was up by low double digits. We could not be more pleased with the performance of our largest segment. We are optimistic that these results will continue through the fiscal year as we remain laser-focused on capturing profitable market share wins and continuing to execute operationally.

Turning to Convenience. During the quarter, our Convenience segment saw a 3.5% sales growth on a modest volume increase and the benefit of inflation. Once again, our Core-Mark business outperformed the industry, delivering strong relative volume performance in many key categories, including Foodservice, snacks, and health and beauty care. Core-Mark is also seeing sizable growth in the non-combustible nicotine space led by the popularity of oral nicotine products. Core-Mark is just beginning to see the positive impact from the onboarding of one of two recent chain account wins, which George mentioned earlier.

In mid-September, Core-Mark began shipping to hundreds of additional Love's Travel centers, and in December, will begin delivering to RaceTrac locations nationwide.

I'd like to thank our Convenience associates who manage this onboarding process, which has gone extremely well to date, positioning us to build upon our partnership with these two industry-leading retailers.

We believe these wins, coupled with a strong pipeline will continue to fuel top and bottom line performance in the quarters ahead. The Core-Mark organization has been working diligently to win new business, increase efficiency and produce strong bottom line results.

In fiscal 2025, our Convenience segment saw these efforts translate into double-digit adjusted EBITDA growth. With the new business wins that have just started to roll in, we believe fiscal 2026 will deliver another year of excellent sales and profit performance.

We recently passed the 4-year anniversary of PFG's acquisition of Core-Mark, which has provided PFG's shareholders an impressive return with significant growth potential in the years ahead.

I'll finish our segment commentary with Specialty. Similar to our Convenience segment, Specialty has been impacted by a slower industry backdrop, partially due to persistently high price points in the candy and snack categories. While this continues to impact sales growth for Specialty, the segment's ability to improve operating leverage resulted in an outstanding profit performance in the quarter.

During the first quarter, Specialty's net sales declined 0.7% due to a challenging quarter for theater and value. However, as George mentioned, there were some bright spots, including vending, office coffee, campus, retail and our growing e-commerce channel. We are also very encouraged by the pipeline of new business opportunities for Specialty and expect to onboard several new accounts in the back half of the fiscal year.

Specialty is unique in the food distribution industry, which positions us to efficiently deliver to a broad range of channels and customers, which in aggregate, provide the company with a very strong return. This, along with our focus on operating efficiencies led to 13% adjusted EBITDA growth for the segment in the quarter. We expect to see improvements in volume performance over the next several quarters, blazing the path for continued contributions to PFG's EBITDA growth.

To summarize, we're extremely pleased with all three of our operating segments, each of which contributed to our strong first quarter results. Our diversification provides consistent performance in a range of economic scenarios and our strong pipeline of potential new business should result in consistent long-term revenue and profit growth for PFG.

I'll now turn it over to Patrick, who will review our financial performance and outlook. Patrick?

Thank you, Scott, and good morning. Today, I will review our financial results from our first quarter, provide color on our financial position. I'll review our updated guidance for 2026.

To echo both George and Scott, we are very pleased with our start to fiscal 2026, which helped us maintain our solid financial position. In the quarter, we achieved net sales above the top end of our guidance range we announced in August and adjusted EBITDA at the upper end of the guidance range.

As a result of the strong performance, we are raising our sales guidance for the full year and reiterating our adjusted EBITDA targets, which we have a high degree of confidence in. We also remain on track to achieve the 3-year sales and adjusted EBITDA targets announced at our Investor Day in May.

Before I give more details on our outlook, let me highlight our financial results for the quarter. PFG's total net sales grew 10.8% in the first quarter due to strong underlying trends in our three operating segments and the addition of Cheney Brothers. As a reminder, we started lapping the José Santiago acquisition at the beginning of the first quarter and closed on the Cheney Brother acquisition in the second week of October last year. This means that Cheney will be organic for 12 of the 13 weeks of the second quarter.

Total company cost inflation was about 4.4% for the quarter, which is slightly higher than what we experienced in the prior quarter. Foodservice inflation of 2.5% was in line with the prior quarter and roughly in line with our model. While certain commodities have been volatile, headline inflation in the Foodservice space remains in the low single digits, which we view as a normal level for our business.

Specialty segment cost inflation was up 3.8% year-over-year, about 50 basis points higher than the fourth quarter, mainly the result of candy price inflation.

Convenience cost inflation increased 6.8%, again, slightly higher than the prior quarter. As we have demonstrated over the past few years, our company is well equipped to handle a range of inflationary scenarios. The current inflationary environment has been consistent with our modeling, which has rates remaining in the low to mid-single-digit range throughout 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.

Moving down the P&L. Total company gross profit increased 14.3% in the first quarter, representing a gross profit per case increase of $0.32 as compared to the prior year's period.

In the first quarter of 2026, PFG reported net income of $93.6 million, and adjusted EBITDA increased 16.6% to $480.1 million with all three operating segments contributing to our strong performance.

Diluted earnings per share for the fiscal first quarter was $0.60, while adjusted diluted earnings per share was $1.18, representing a 1.7% increase year-over-year. Our effective tax rate was 23% in the first quarter. At this time, we continue to expect our 2026 tax rate to be closer to our historical range.

Turning to our financial position and cash flow performance. In the first quarter of 2026, PFG used $145.2 million of operating cash flow to invest in working capital to take advantage of favorable inventory buys. We invested about $79 million in capital expenditures during the quarter. We continue to anticipate full year 2026 CapEx to be approximately 70 basis points of net revenue, in line with our long-term target.

Our investments in CapEx are primarily focused on maintaining and supporting growth within our infrastructure and high-return projects that we believe will support our long-term growth goals. We did not repurchase any shares in the quarter.

Looking ahead, we will continue to prioritize debt reduction. 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 second quarter of 2026 and updated our range for the full year. For the second quarter, we expect net sales to be in the range of $16.4 billion to $16.7 billion and adjusted EBITDA between $450 million and $470 million.

For the full fiscal year, we are increasing our sales target and now project net sales of between $67.5 billion and $68.5 billion. This new range represents a $500 million increase to the top and bottom end of the previously announced range. We are reiterating our full year adjusted EBITDA range and continue to expect results between $1.9 billion and $2 billion in 2026.

We have a high degree of confidence in our adjusted EBITDA range. Our results keep us on track to achieve the 3-year projections we announced at Investor Day, with sales in the range of $73 billion to $75 billion and adjusted EBITDA between $2.3 billion and $2.5 billion in fiscal 2028.

To summarize, PFG began fiscal 2026 with strong results. All three of our operating segments are performing well, contributing to our overall results. We are in a solid financial position which supports 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 food-away-from-home market.

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.

[Operator Instructions] We'll take our first question from Mark Carden with UBS.

So, to start, you guys posted another quarter of solid top line results against what's been a pretty uneven backdrop in the restaurant channel. Just curious, how did your independent case growth progress by month? How is it trending quarter-to-date? And then related, is it simply the strength that you've seen to date that led you to bring up the top of your guidance? Or are you any more optimistic about the go-forward as well?

Well, we saw consistent growth through Q1. We had a very strong October. The last few weeks, kind of since, the shutdown, we've seen a little softening. And as far as our confidence to raise it, we have some additional new business coming in primarily in the Convenience area. We've got some business in the national count within our Foodservice area that we thought we had kind of over the hump to come with us and they want to sit on the fence until it's determined what happens in our clean room. But you add all that together, and we have real good confidence in bringing up that annual sales growth number.

Got it. That's helpful. And then, you talked about the slight deceleration on sales force hiring, but it seems to be in line with normalized fluctuations. Just curious, does the heavy commission focus that you guys have ever make it any more difficult to attract talent if the environment remains challenging over an extended period of time? Any impacts from just any uncertainty related to U.S. or what you're seeing with Cisco having passed through some of the hiring challenges in the past?

Well, first off, I'd say that I think our commission structure has been a great tool to attract great talent and people that want to grow their business. When I think about the hiring pace, we came out of last quarter at 8.8%. That's pretty rich. We feel really comfortable in that 6% to 8% range. This quarter, we were at 6%. So, if you look at the two-quarter stack being at 7.5%, we feel really good about that hiring pace.

The other thing I'd say is if you just look at how we're structured from a decentralized state, we really rely on our OpCo presidents to make those hiring decisions. And George and I don't go out there and say, you've got to hire at a pace of 6% or 7% or 8%. We really let those folks make those decisions. Clearly, they're finding great talent on the street, and we've been able to continue to hire at that pace in that 6% to 8% range.

I would also add that we're very committed to having a commissioned sales force. But we also have a structure in place where we compensate them above the commission for a period of time, to make sure that we keep good people. And once we realize that someone's talented that they'll put in the effort, that they're committed to getting on commission, then we become very patient people.

Our next question comes from Alex Slagle with Jefferies.

You talked about some of the big chain business wins in Convenience. I imagine that remains a big needle mover there. But just kind of curious if you could fill us in on progress you're making, some of the smaller chains and independents just in terms of sort of winning new accounts and finding ways to accelerate the penetration of the Foodservice programs to those customers and how we should kind of think about that through the course of the year?

Yes, Alex. When I think about Convenience in particular, we're really happy with what they've done from a growth standpoint. And we're specifically talking about those two big accounts just because they're sizable. But our Convenience segment has done a great job picking up regional accounts as well. And I think through Service, everything you hear in the Convenience industry did today, we just returned from the big Convenience show, and there's so much focus on Foodservice.

And if you look across the Convenience landscape, the chains and the customers that are performing well are the ones that are deeply ingrained in Foodservices. So, we think that's a huge competitive advantage for us. We think that was a prevailing reason in us getting some of these big and regional chain wins, and we expect that to continue.

Got it. And then, on the guidance. Can you ballpark interest expense and depreciation at all just to help us calibrate our models. It seems like these were a bit higher than I expected in the quarter, but any help there would be appreciated.

Yes, Alex, I'll take that. I mean, what I would do is take this quarter and use that as a strong run rate. I mean again, we continue to invest in the business. So, we've added some new buildings that are increasing depreciation. We continue to add fleet, but continues to increase deflation. And obviously, as you saw in the quarter, we invested a lot in inventory. So, maybe a little more borrowing than normal, but that should come down a slight bit. But I think if you take this quarter as a run rate, that will be a good indicator of the future quarters.

We will move next with Edward Kelly with Wells Fargo.

I wanted to dig in on the Foodservice EBITDA growth for the quarter. If you look at EBITDA growth relative to revenue growth, they were a bit more similar, which is not typically the case for you. It seems like OpEx per case was a little high. I'm just kind of curious as to what's happened with the OpEx side of the business within Foodservice that maybe prevented you from delivering a little bit better organic EBITDA growth in the quarter. And how we should think about that relationship moving forward the rest of this year?

Yes. Ed, we've invested a good bit in brick-and-mortar for one. And in these new distribution centers, you tend not to be as efficient in the early going. And obviously, you got a little bit more expense. We've had higher expense in our acquisitions, particularly in Florida, because we're investing, and we're investing heavily, and we're doing that during their slow time of the year.

We're just so satisfied with these acquisitions and with the talent that we received, we're going to make sure they have the capacity available. We also are in the midst of a big freezer addition at our Jose Santiago building.

With that, I'll turn it to Patrick too, to see if you have some other comments.

Yes. Just to touch a little bit more on that, Ed. One, again, if you look at all three segments, actually, we saw a really nice OpEx leverage organically, specifically to Foodservice, George already mentioned. If you take out Cheney, there was OpEx leverage. Cheney, just again, it's their slowest quarter. It's similar to Foodservices Q3. So they reduced some leverage there. And then as George mentioned, we're taking on some additional expenses. But those are really the reasons why you saw that this quarter.

Okay. Great. And then, I wanted to follow up on a response that you made on independent case volume momentum. October seemed good, especially at the start, but I think your compare was easier maybe with weather. It sounds like recently, there's been a little bit of slowing there. Could you just talk a bit specifically about independent case momentum for the industry, what you're seeing there in terms of like real time, I guess? And then, how are you feeling about sustaining a 6% or a better rate in Q2?

Ed, this is Scott. So, I think you hit it as we came out of Q1 and started into Q2. It continued to be strong over the first few weeks. But then we did have a little bit of choppiness over the last few weeks when we think about kind of lapping some of the weather from last year. So, it's a little tough to get a read on it right now. I wouldn't set a target for this quarter as far as independent case growth. Well, I would say is, we still feel good about the full year targeting 6%. And what's really driving that for us is just our independent account wins. As we mentioned, those are up 5.8%, and that's really what's driving our case growth.

Our next question comes from John Heinbockel with Guggenheim.

Can you guys parse out the 5.8%, that's a net growth in new accounts. When we think about sort of the gross wins, I don't think you've ever had real elevated losses, but the wins, the losses. How does that kind of shake out? Or how has it shaken out here? And then, you talked about the lines per drop. We were waiting for a long time, right, for penetration to pick up. Is it possible we're at the early stages of that and what may be driving that?

John, this is Scott. First off, I would say we don't call out a gross number. So you're right, the 5.8% is net. I would say that our customer churn hasn't really changed materially. So, we feel that our reps are out there doing a great job retaining customers, and really happy with the 5.8%. The penetration now has been a couple of quarters. So we're really optimistic about that. If the macro gets better, that really positions us exceptionally well. And so, that's something we're focused on.

And for us, I think the differentiator out there has been our area managers. It's been our folks that are in front of our customers, working with them every day, growing those lines for drop, and that's been critical.

Yes. What I'd like to add, John, this is George. We continue to see SKUs grow faster than our penetration number into independent customers. So that tells me that they're probably in aggregate, running same-store sales declines still.

And as far as lost business, we spent a lot of years working hard to get that number to single digit. And it's a rare month that we don't come in with single-digit loss in accounts. And I think when you look at the percentage of accounts that don't make it in our difficult industry, I think, we're doing a good job of making sure we don't lose accounts. So we always, and I mean always, have a nice spread between our lost business and our new business.

And then maybe as a follow-up. I know you guys have targeted the $100 million to $125 million of COGS savings. Just remind us maybe the cadence of that. I don't think it was quite linear. And then, when you look longer term, right, is there still, because you guys have now right been breaking out segment margins. And I know customized is a drag. But when you think about the opportunity beyond the next 3 years, would still seem fairly substantial, correct?

Well, John, on the COGS savings, yes, at Investor Day, we laid it out. And I think the way to think about it is just, we always are doing work here. So this wasn't something new. I've given you guys a target was maybe something we haven't done in the past. But, we look at that as being pretty evenly spread over the 3 years, and each year pretty evenly spread over the quarters. We're actively working on those savings, and we're seeing some good opportunities out there.

We will move next with Kelly Bania with BMO Capital.

I wanted to just follow up on the Specialty segment. The profitability was quite strong there despite what seems like a pretty still soft candy snack consumer backdrop. So, just curious if you can add more color on what drove your ability to achieve that? How much more that could continue if that backdrop remains soft there?

Yes. I mean, we've made real good progress with most of the channels. If you look at the margin aspect, our theater business has been down fairly substantially. A couple of account losses plus the theater industry is not very robust at this point. That is our lowest margin business that we have within our Specialty business.

And then, the value area has also been slow, and that is our lowest gross profit per case. So, our improvement is somewhat expense control, but it's also really led by just a change in mix of business, which has been a real positive for us.

And as Scott mentioned, we've got a real good sales fund when we've got some nice business coming in the back half of the year. So, we're feeling really good with Specialty.

Now, if you look at inflation and you look at pre-COVID and you look at today, candy and snacks are way up close to the top as far as price increases. And it may appear that those are very discretionary purchases and not real price sensitive, but that's not the case. The big consumer of those products is very price sensitive. And they just got to get used to higher prices, and I think we'll see some comeback in that. When you look at the things that our Specialty area has been up against, they're doing exceptionally well.

That's very helpful. Also just wanted to ask, it seems like a growing number of complaints regarding the state of the consumer, particularly with younger consumers. And just curious if you could talk a little bit more about if you would agree with that as you look at your kind of diverse channels and customers that you serve, if you see that and if there's anything that you are doing to kind of help that either with private label or other promotional activity with vendors that you're working on to help those end customers?

Kelly, this is Scott. Certainly, we've heard that same message around the younger generation consumer. I wouldn't say that we've seen that specifically in our business. If I look across our chain segments, I mean, obviously, QSR remains highly pressured. I think that low-income consumer continues to struggle. I think for the last year, you've seen some of these fast casual concepts, I'd call them the high flyers that we're seeing double-digit same-store comps. They've kind of come back or normalized. And we've also seen some others sprout up. And I think really, right now, what we're seeing is that value proposition is what's really making the day for concepts.

If they've got a really good value proposition that resonates, they're seeing reasonable same-store sales comps. For us, I think you hit it right on the head. We're focused on brands. We think that, that's the best value we can bring to our customers. We've seen our brand share grow with independents and chains. And so that's been -- I wouldn't say it's a positive for us. We'd like to see more store traffic and a more robust consumer, but we feel like we're in a really good position.

Our next question comes from Lauren Silberman with Deutsche Bank.

I want to start, if you could just clarify, are you guys seeing disruption in your salesforce or the ability to track new customers, because of the news of the deal? Just trying to understand and how much is seasonality versus influx of new hires and what's going on there?

Well, we've just -- this is George. We just had a couple of large events, which we have at the same time of the year every year. One is what we call Circle of Excellence, where we honor our top salespeople and sales management with most of our OpCo presidents at that event. And then, we do a food-centric where it's more customer focused, and we have some large particularly independent customers from around the country come. And we have every Opco President that's present at that.

And what I would say is that morale is extremely high, particularly with the sales force. The only negative being some national accounts, like I said, sitting on the fence. And we're consistent with our people or as transparent as we possibly can be. And I don't really think that we're experiencing disruption. It doesn't seem to affect our hiring right now. It hasn't had any negative impact on our turnover.

And I'll turn it over to Scott. He's a little closer to it than I am, but that's why I see it right now.

No. I think I'm totally aligned with George's comments. We have -- we've seen great availability of reps on the street. Hiring at 6% versus last quarter at 8.8%, like I said earlier, that doesn't concern me at all. We kind of bounce back and forth between that range of 6% and 8%. There may have been a handful of reps here and there that took a pause, because they were waiting to see what happened. But I would say, overall, I think I just look at our results, our independent case growth, our new account growth, and that gives me great confidence that our Opco presidents and our area managers are focused on the right things, and we continue to grow share and grow our independent business.

Great. On the OpEx side, what seems like some incremental investments in Cheney, should we assume some pressure on that line over the next few quarters? Or is this the bigger investment in this quarter, a bit more onetime? I know there's some seasonality, but just trying to understand the magnitude and how that is based?

Yes, do you want me to...

Yes. I'll take it real quick. And then you can add to it. I think that the seasonality change will help a lot in Florida. We have also seen the international traveler and Canadian travelers just haven't shown up in Florida like they typically do. But I think a lot of this will alleviate itself as we get into season. And they're very, very focused company and a great morale there as well. And we just feel like it's just a company that's going to flourish. Go ahead, I'll turn it to you.

Yes. I'll just add a couple more things. One, as George mentioned, there's a little reduction in leverage in the first quarter. And again, they're 1 year in. And so we've been also doing a lot of integration, but the integration that happened early on is usually around IT, HR. So, sometimes that can add some additional expenses.

But when I look at how they performed in the first quarter, it was very much in line with our expectations, and it's very similar to prior year. So, we do expect that as we go a little further out, we'll start to see the synergies. As we've said, we'll really see the bulk of the synergies at the end of year 2. But we're doing a lot of integration work as we speak. So, it should dissipate as we go through the year most importantly, is what George said, though, as we get out of -- into the high season, it will definitely help.

Great. Just a final follow-up. The independent sales growth that you're seeing in October, understand started strong, a little bit slower with the government shut down. We've heard a bit of a range in restaurant world. I guess, are you guys still running in the mid-single digits? It's just hard to understand what's going on with the magnitude of a step down, particularly for the independents.

Yes. We're still running in that mid-single-digit range. Like we said, we've seen some volatility as of late, but we're still running in that range.

Our next question comes from Jeff Bernstein with Barclays.

Thanks. This is [ Pratik ] on for Jeff. You've talked about taking share for a while now. And I believe you mentioned that some of the segments like QSR and fast casual have been a bit more challenged of late. So, just wanted to unpack where you're seeing strength, what particular segments of the industry. ?And are your share gains coming from your larger peers or smaller operators? Or is it all of the above?

Well, I'll start with the last comment. We don't have a good method of knowing where our share gains come from. We have a tool report that we use that shows how we did and how the rest of the market does. So, we don't really know how anybody specifically does. So, I don't know that we can really comment that, on that.

But just to give you an idea where it's slower and where it's done better. the shutdown, of course, has affected our Virginia and Maryland company the most, and both of those were on extremely good growth rates going into that. Not much anywhere else. The international tourism, it's been the upper Midwest, where we've seen -- I mean, I'm sorry, the Upper New England area, where we've seen the total market slow. But actually, our companies there have been gaining significant share. So, it hasn't had much of an impact on us.

And of course, Florida and then Vegas has been affected quite a bit, and we do very little business in Vegas so that hasn't had much impact. Where we've seen market slowness the most has been the Midwest, the upper Midwest. And we have markets there where we're negative to last year and gaining share, which is a really unusual situation for us. So that's how I would put it.

But we don't want to overdo this. I mean, we're still running good independent growth. And if the -- I think, if we didn't have the shutdown and the slower business in a couple of markets, we would be just as we were in the first quarter.

That's very helpful. And then Patrick, on the inflation outlook, you reiterated your expectation for low to mid-single digits. Anything that would cause you concern and would maybe push that to the upper end of the range? I know you mentioned some of the Specialty and snacks items that are seeing high degrees of price increases. But anything else on the commodity side or other product lines that may kind of push that to the upper end of the range?

Yes, great question. Honestly, a lot of the candy price increases we've already seen those and other suppliers taking price. On the commodity side, so I would again just reiterate on Convenience, we expect them to be in that 6 plus range, mid-single digits, Specialty a little bit lower, but staying very consistent for the rest of the year. And Foodservice, as we mentioned, is in the low single digits, and we do expect that to continue lots of commodities. And as everyone knows, beef and pork has been pretty high lately and inflationary, but we also over-indexed in cheese, and that's been deflationary.

Poultry has been deflationary. So, the way we look at it, we -- that market basket of commodities should keep us in that low single-digit range.

We will move next with Danilo Gargiulo with Bernstein.

I was wondering if you just take a step back and we look at your very long-term strategy. How do you plan to strengthen your ROIC? And what do you think is a realistic timeline for the ROIC to be increasing by mid-single digits. So what would be the key levers to that?

Yes. Good question. We obviously look at ROIC very closely, too. And as you know, we've recently made some larger acquisitions. We've also been, as George mentioned earlier, we're investing a lot into capital for buildings and fleet. And all those things are really surrounded by growth. So, we've given you, obviously, our projections on EBITDA growth for the year, and we continue to work very closely on driving higher growth on income as well as managing our capital. So I would say, over the balance of this year, we should see improvement in ROIC.

Okay. And then, I want to follow up on the comments that you made on the M&A pipeline remaining robust. And specifically, the evaluation of strategic M&A and in light of the potential synergies that you might be having with a business combination with U.S. food. I was wondering if you can help us understand a little bit better what will you need to see in the data or in the strategic evaluation for the decision to have a positive or maybe a negative outcome? So what are the puts and takes on that?

Yes. On that, the process is ongoing. We've disclosed what we're doing in terms of the clean room. We really don't have an update to share at this time and just would ask that we keep our questions focused on our Q1 results and guidance.

Just adding on to the M&A pipeline. We talked about that. We're very active in the market. We talked about a small acquisition in our Convenience segment. And George and I continue to talk to a number of different people about opportunities primarily in the Foodservice space, but also across our other segments, we're always looking at opportunities. So, I still feel like that pipeline is robust.

And then focusing on the more near term. You mentioned the kind of market fluctuations that you're witnessing as we are in the overall restaurant segment. So, I'm wondering if there are any actions that you might be exploring in the near term to increase the capture rate of independent cases therein the better near term without necessarily compromising the quality of power, which has been extremely strong over the past few years?

Well, I would say, first off, philosophically on the street, we're decentralized. We let our OpCo presidents really drive their market area. And we're really happy with how we prepared our area managers from a training standpoint. I mentioned earlier, I think brands has been our calling card and is a big driver for us, especially in an environment where cost of goods is critical and menu pricing is critical. But I don't see anything philosophically that we're going to change materially in our approach. We believe in the partnership with our customer, and we believe in the strength of our area managers on the street.

[Operator Instructions] We will move next with Karen Holthouse with Citi.

A couple kind of more on the C-store side of things. Thanks for the guidance for mid-single-digit inflation. And I can appreciate that your suppliers are domestic. Have your conversations with them that are getting you to mid-single-digit number contemplated how tariff -- tariff-related inflation and more of like the packaging side of things might ultimately impact that number?

Yes. I think if I understand the question right, I mean, we talked about cost of goods being domestically sourced and not having a big impact there. But to your point, I think there are other inputs that could cause inflation, whether it's packaging, and for us, when we look at the broader picture of inflation, it's not as much cost of goods, it's probably share of wallet. And as we see consumers be pressured, whether it's other SNAP benefits going away or other things that are happening in the market that affect discretionary income, that definitely could have impacts. But to this point, we haven't seen anything material.

Okay. And then is there anything to consider as you're starting to onboard Love's and RaceWay (sic) [ RaceTrac ] in terms of margin profile of those businesses versus the existing business?

So first off, I would say the Love's piece, I do want to just take this opportunity to shout out to our Convenience segment. They onboarded over 600 Love's locations in September in the last couple of weeks. I did just an incredible job, including opening a new facility to help accommodate that. And it's actually RaceTrac. They are also the master -- they're the owner of the franchise RaceWay. So, you were right there, RaceTrac, we rolled out in December. So again, preparing for that, I feel like we're in a great position. And when I think about the margin profile, I would say it's consistent with the rest of our Convenience business.

And then one final one on Convenience margins. I think there was a comment in the prepared remarks about stronger performance in tobacco with growth of oral nicotine. Is that getting you to a point where like tobacco as a share of total Convenience sales is stable or even increasing?

No. I mean, I would say cigarettes, because of taxation are always the revenue driver. When you think from a margin standpoint, oral nicotine and the other alternative nicotines are really accretive to margin, but because of taxation, cigarettes are definitely a revenue driver.

We will take our last question from Peter Saleh with BTIG.

Great. I apologize if you guys covered this already. But just curious if you can comment, I know we've been seeing across the restaurant space that really casual dining has really been outperforming QSR and fast casual. And it seems like fast casual has really taken us a leg down in the most recent quarter or 2. Just curious if you guys can comment on if you're seeing the same thing within your customer base? And any thoughts on why the -- maybe why the customer shifted so much in the past couple of months?

Well, casual dining has been a big part of our business for many years, and we supply a lot of the large casual dining chains. And they're doing better versus the previous year in many instances, but they're doing much worse than they were doing in 2019. So, there's a little bit of the kind of bouncing off the bottom. I think there's some that have done some great marketing. They have their pricing to where their -- at least a similar value to fast casual with a higher touch with the customer. So, I think that's helping them. I don't know that there's a long-term change with what we're seeing today. Just got to watch it and see what happens, but I don't think there's a long-term change.

Thank you. And this concludes our Q&A session. I will now turn the call back to 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. .

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

Good day, and welcome to PFG's Fiscal Year Q4 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for PFG. Please go ahead, sir.

Thank you, and good morning. We're here with George Holm, PFG's CEO; and 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.

Please review the cautionary forward-looking statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections.

With that, I'd like to turn the call over to George.

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. 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. As we highlighted at our Investor Day in May, PFT 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 cooperation across our segments, food service, convenience and specialty.

At Investor Day, we described our PFG 1 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, each business gained momentum. We're 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 continued 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'm confident that we will see better trends in the future. 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're 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 3 months of the fiscal year. This is encouraging as we enter 2026, and we believe we'll be right around 5% growth level for the full year. We have also seen success growing our chain business profitably. 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. 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 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.

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 4 quarters with a stronger performance in the second half of the fiscal year. It's hard to overstate when 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. The organization rolls to the occasion by securing new business, identifying efficiency gains and fostering collaboration across our broader organization [indiscernible] capital allocation plan, bringing our balance sheet back within our target range over the next several quarters. We'll also continue to look at disciplined M&A where we have a track record of delivering sustainable growth across our 3 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. CFC's Board has a track record of regularly evaluating a range of potential paths to generate shareholder value. We are committed to taking actions that are in the best interest of PFT shareholders, and we will continue to focus on ways to deliver further growth and value creation. The outreach from US 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 gross on our 3-year plan and advancing toward the targets we outlined at Investor Day in May. We're doing this by aggressively pursuing new business and capitalizing on additional opportunities in the market while continuing to vest in our people. We expect to be well positioned to accelerate growth. 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 3 business segments have strong momentum underway and have conviction in the value-creating potential of our strategy. 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. 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.

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. 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've had success due to the strategic actions we've 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, 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 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, showing our consistent ability to take market share 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. 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 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 gets 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.

The results of these actions are apparent in our fourth quarter as we not only saw a case in 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.

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 4 quarters. Permar 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 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.

Looking ahead, we are even more excited about what's 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 20,262nd and third quarters. While there will be start-up 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 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. 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 specialty despite some of the persistent growth hurdles and believe 2026 will build on this momentum.

In summary, all 3 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. Patrick?

Thank you, Scott, and good morning, everyone. This morning, I will review our financial results for 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 3-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. We believe that these initiatives have put us on a path to deliver strong returns over the next 3 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 3 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 1 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. 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 1 point lower than the third quarter. 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.

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. 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 3 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. 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. 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 and 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 4 key levers: 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. 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 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. For the first quarter, we expect net sales to be in the range of $16.6 billion to $16.9 billion and adjusted EBITDA between $465 million and $485 million. For the full fiscal year, we project net sales between $7 billion and $8 billion and adjusted EBITDA between $1.9 billion 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 '26. These targets are aligned with our 3-year projections we announced at Investor Day with sales in the range of $73 million to $75 billion and adjusted EBITDA between $2.3 and 5 billion in fiscal 2028. When building your models, keep in mind that fiscal 2027 will include a 53rd week.

To summarize, PSG closed our 2025 with strong results and solid momentum into 2026. All 3 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. 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. And with that, George, Scott and I would be happy to take your questions.

[Operator Instructions] Our first question comes from Mark Carden with UBS.

So to start, it sounds like the overall industry backdrop continues to slowly improve. How are you feeling about your July and August to date and as you think about your guidance for the year ahead, what kind of industry traffic backdrop are you building it on?

Well, this is George. So far, July and the first couple of weeks of August, we have seen an uptick primarily in our independent foodservice business. 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 hit that 6% number this year, but we are off to a start that gives us that type of confidence.

Yes. I think the other comment I'd make there is if you look at Black Box results over the quarter, they continued to improve over the fourth quarter and we actually saw our first positive result in July. So really positive trends around traffic and restaurant. Looking at the other 2 segments, the convenience segment continues to be pressured. But what gives us a lot of confidence and convenience as 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. that will really contribute to our growth and profitability and convenience. And then when I think about Specialty segment, we've got 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 in a couple of our other segments. The return to work really helps us across all 3 of our segments. So we feel really good about.

And Mark, this is Patrick. I'll just add on to the last part of your question around how our outlook. Obviously, we're really confident in our full year numbers. We obviously use a range, and that range is based on kind of current economic trends and how we're performing. And then -- and that's kind of how we've built that outlook for it, but we definitely have some confidence in those numbers.

That's great. And then just my follow-up, a 2-part question just on sales force. First, just with one of your larger competitors moving past some of the sales force issues from a year ago. Are you seeing any changes in the availability of quality talent? And then second, any anticipated changes in your pace of hiring over the course of the year ahead with the improving traffic backdrop?

Yes, 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. And for the year, we finished in the high 8% range as far as new sales people 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. But when we look at that, we got 6% case growth, I feel really good about that momentum. And even with that, we have really good leverage in the Foodservice space. So 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.

Yes, I'll make a couple of other comments there. I mean, on paper, it looks like we're 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, we're about 82% of our business is restaurants, where the rest of the industry is about 57%. So 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 we like to go out and aggressively pursue business.

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'll probably down the road come down a little bit, like Scott says, it's their decisions. I would suspect that that's what will happen. But having what our average salesperson does a week and business come down has been good for us. When you look back all the way back to that coded period, and we weren't hiring and we didn't realize the level to which our people were improving until the rebound from COVID. And then you wake up 1 day and the average person is doing probably more business than what you would want to have to put out consist.

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. And for the most part, that's what they're doing. Some of them are in a little different position. They've already done that. But we're getting good response from our people and an 8.8% number for us today, it's a big expense to hand but it is the right move for us to make.

And we'll go next to Kelly Bania with BMO Capital.

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, this is Scott. So we talked a lot about that at Investor Day. We feel really good about our progress. And just to take a step back, we are always constantly working with our vendors and working on procurement opportunities. But 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 3-year guidance, I think that spread of procurement synergy will be pretty balanced. And we're well on pace in the first year to achieve that.

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. 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 even Harrison were starting to help in the industry but just when you think that will start to turn, if at all, is that in your outlook? What do you think the operators need to do? And just any color on food service kind of sales and where that's tracking in that division?

Sure, Kelly. When I look at the landscape of convenience overall, one of the things that really her convenience was the work from home. And as we've seen that increase, and I see nationally numbers where people are back in the office, 3.5 days a week, a lot of people are -- you think about that commuter traffic that morning traffic that's getting coffee and breakfast, that was a big part of where convenience lost. And so definitely, I think the macro is improving a little bit. .

We've talked a little bit about the illicit vape issue in the country. 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. And then I think the other thing that gives me great confidence is we continue to grow share. And not just the big customer wins that we've talked about, but our street folks are out there, our independent performance is getting better. And so I think we're going to fare well even if the macro remains pretty challenged.

Yes. And Kelly is a 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. 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 of that than, say, that the macro is going to improve. And as far as the outlook goes. .

We'll go next to Lauren Silberman with Deutsche Bank.

Congrats. I wanted to just ask on the independent case growth side. The independent account growth of 5.3% and 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 strong new account growth and how that translates to increased penetration in future quarters?

We look real 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 that's 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'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've seen that because they weren't buying as much of the product that we sold to them both years. .

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, it gets really competitive, and the actual channel isn't growing, people get more aggressive. And 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're not losing accounts at the rate we were before. 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. And we've been able to get that accomplished.

Great. And then if I could just shift and ask about what you're seeing in the M&A landscape, how your pipeline looks willingness of potential targets to make deals come to the table? And anything you're considering for '26 or how we should think about that?

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.

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

We'll go next to Edward Kelly with Wells Fargo.

Nice quarter. George, I wanted to 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 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. 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 -- but just any color on bigger picture and how you're thinking about this backdrop would be helpful.

Well, the improvement is nice to see, but it's still negative. We got mixed today with a couple of chains that had announced 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 on a good comeback on 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 cost -- and they've had to pass that on. And I think that's one of the things that keeps the industry a little lid 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 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.

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. Those prices are up significantly and it looks like there'll be more and more states that are going to take that out of the Snap card. So I think that's going to impact us. But if you just throw it all in a bucket and look at it in entirety I think that we're in the right channels, Ed, and I think it's going to go real well for us.

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. How significant in size is that? And then you mentioned some start-up 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 as the year progresses and what's a good target in terms of EBITDA growth in that business for the year?

Yes. Ed, this is Scott. So obviously, we've called out that one of those changes will roll on starting September, the other one in December. So it kind of gives you a thing -- they'll probably roll over a handful of weeks -- we're obviously, for the September one, we're hiring right now. So we're obviously investing in labor and fleet and some facility modification to prepare for all of that. So we feel like we're 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're making, but I think they'll normalize into Q3 and 4.

We're not going to give a specific target on EBITDA growth for convenience, but we feel really good about their performance in the quarter in 2025 and also into 2026. We feel really good about how they're going to perform.

We'll go next to Alex Slagle with Jefferies.

Congrats. And I guess just more on the EBITDA margins, which are sort of record across basically all the divisions and we've talked to a little bit of it, but maybe you could touch on some of the incremental drivers we haven't touch to find role sales mix is continuing. You talked a little bit about procurement wins. I don't know if there's any inventory holding gains near term we saw, but you could kind of touch on of the other pieces, the profitability.

Yes. I'll start there and maybe Patrick will tag on to this. When I think about margins across the 3 segments, mix is probably the #1 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 -- in the convenience space, it's really about the commodities that we're selling much more in the food service, snack and [indiscernible] we're seeing nice growth, nice profit growth. So really, it's kind of a commodity mix shift there and very similar in the specialty segment as well.

So mix across all 3 segments was really good. The other thing I'd say is we have really nice OpEx leverage across all 3 segments as well. So all of them are performing well from an operating standpoint, warehouse transportation, hiring has been really good, retention of employees, over time, safety feel really good about that landscape. You mentioned the procurement savings, as I mentioned earlier, we feel like that's definitely a part of it and feel good about the pathway that we're on there. Patrick, [indiscernible]

Yes. I'll just touch on a couple of things, Alex. One, yes, we're really pleased with the margin improvement we saw in Q4 and full year fiscal '20 and are looking forward to continuing that in you brought up inventory gains. Inventory gains were a slight benefit in Q4. But as we look out over 20 quarter-by-quarter, but we don't expect to see much in terms of inventory gains, and that's what we modeled in our guidance both for Q1 and the full fiscal year.

Okay. Great. And just a follow-up. You talked about stability in trends, which I guess you're seeing that continue. And I mean that comes at the same time it looks like a good deal of uncertainty and variability between operators and brands lately. So maybe you can kind of clarify what you're seeing in terms of the stability.

Yes. Alex, I'd say first off, I go to Black Box and just look at traffic. We saw traffic improve sequentially over Q4. And then as I mentioned, July was really the first positive month. But to your comment, when I look at QSR segment, like in fast casual segment, it's a little bit the housing to have not. As George mentioned, those that have created a value proposition with price to value seem to be performing really well. And then we have some other chains that are really struggling in that space.

So 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 restauranteurs out there, and it's really paid off for us.

Yes, I will call out for our chain people. both within our broad line and within our opcos that are strictly changed, we gave them a pretty big challenge. We have some chains that have really dropped off. And 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. 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 and there was no small fees that took -- it took some courage to get done what they got done.

And we're in a real good spot. It was good for Q4. 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 they'll be a big contributor for us this year.

We'll go next to Brian Harbour with Morgan Stanley.

Maybe on that topic, not to make this too macro focus, 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'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 like on the independent side, do you see full service kind of doing better than quick service. Is that sort of similar to what's going on with change? Do you think this is sort of demographics that explain this? Do you think it's just sort of experiences that are still holding up better? I mean what would you conclude just kind of looking across your customer base?

CSR has been interesting 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 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 what is hot and if somebody is resonating with the consumer, everybody knows it very quick because the social media is such a big part of what happens in the chain restaurant business.

And sometimes, it's just an item that will 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. Not everybody, of course, like I said, social media is a big component here. But it seems like people are doing a little less takeout 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. And even with the kind of growth that we're running now and 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.

Okay. Yes. Can you comment maybe just on integration of Santiago and Cheney Brothers. Is that kind of on track? Is it perhaps ahead of schedule? Can you comment on sort of organic growth in those businesses since you've acquired them?

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 there are some obvious things that we get done early on that have to be done. But I would say with both of them that it's moving at a pace that we typically do see 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. We're seeing it today with merchants. The legacy merchants companies are just on fire right now, and it's up 3 years. Cheney and Jose Santiago are both extremely well-managed businesses.

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's probably normal in that type of situation. And they didn't, for a while, they've put out kind of the trial type of growth, but now they're back and they're getting that done again. So we're just so confident in those 2 companies. But I can't speak to any significant amount of integration that we've done at this point.

And we'll take our next question from John Heinbockel with Guggenheim.

George, I have a question on you're creating sales force capacity individual service and capacity, which is great. How do you want them spending their time? I know this is decentralized and I wonder there's such a big opportunity, right, in lines per account penetration. Are there some opcos that are doing phenomenally well and thus, they are best practices because it's been an opportunity that all of you have kind of struggled with. So I wonder if the sales force capacity is toward penetration. Can you guys finally move the needle on [indiscernible] a significant way? Or you really want them to prioritize to accounts?

I think the additional people that we've added, I think is helping our penetration, but I think it will help more as we move forward. Training always, we're going to a lot more online training but it is very decentralized and we do a lot of things around best practice, but that between them or maybe some coaching that comes from Scott or from Steve Broad as to 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.

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 this getting time freed up and getting the real experience talented people out there. I think that's where we're headed. And I think that would be in just about every company. I think, Scott, you will look at it that way.

Agree.

All right. Maybe for Scott, what was the RP landscape look like, right, for -- on the Core-Mark side, right. Obviously, that comes in over time. But does that now sort of that much larger, right, over the next couple of years. And I wouldn't 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 to ahead of time, but where do you stand with that?

Well, I can tell you, John, that the most recent wins that we have, we did a great job anticipating capacity. We expanded into 2 new facilities or in advance of getting those customer wins and had we have not done that, we probably would have had to turn that business away. So we are constantly looking at our capacity across the network where we think new business opportunities may come. And we base that on our relationships with customers and where we think we're going to make the most progress. And to your point, in the convenience landscape, incumbency is pretty powerful. And so that's why we're so proud that we've gotten, what I'd call a handful of really prominent retailers to choose us as their primary supplier across the country. So I feel really good about how the convenience group is performing and how they're servicing their customers.

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 across all 3 segments. And primarily our focus, as we said, has been Foodservice. But as Scott just alluded to, we have done this in convenience and even in specialty as well.

Yes, I want to make a couple of comments there. We're in 3 different businesses. We certainly don't have any intention to getting any more complicated than we are. It looks complicated, but people that manage each one of those businesses may 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. And when they need CapEx, it's not like they're fighting for CapEx because we're doing it in another direction. 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-Mark did. I mean we put 2 places in exactly the right places in anticipation of the 2 pieces of business that we got. So once again, I'll use that word, that it took a lot of courage and a lot of commitment we've always, in the past, we also been careful to spend money where we had a tremendous amount of confidence that it was going to get a return. 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. 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 in the West where we are very subscale, and we've built new buildings. We've done big additions. That's part of why we have 8.8% more people. We're gearing up there. And I think that we've been so successful with our CapEx that those people have confidence and we're working to support them. So I've made a comment that I think our CapEx is going to get more back to that pretty consistent 0.7 point of sales. 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. But I feel real good about what we're doing around gaining capacity.

Our next question comes from Jeffrey Bernstein with Barclays.

My first question is just on following up on the M&A. Obviously, from a macro perspective, still somewhat difficult. I would think it's more challenged for your smaller Foodservice distribution peers. I think you mentioned you have a 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 or organic? Or do you prefer to wait for the M&A? 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? How do you think about balancing that? And then I had one follow-up.

Well, Jeffrey, we are betting on organic right now. And I think it's a good bet. Scott, you might want to comment on it as well. But Scott's been very involved with what we've done in the West, but we feel encouraged.

Yes. I'd say structurally, we talked a little bit at Investor Day. One of the big challenges in the West of eating broader scale outside of capacity is just our brands. And that's one of our most powerful tools on the street and just having that critical mass and the West has been a challenge. 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 another lever that we can pull as we kind of march that direction.

Probably goes without saying that doesn't mean that if we had the right opportunity from an M&A standpoint that we would take advantage of that. And you mentioned smaller ones. I mean if our people were really committed to some type of fold in, I guess I would be there, but 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. And we like to do acquisitions where we feel we can hold on to all the business and then grow it from there. .

And 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 customer is typically what happens. So we don't have a huge appetite for that, maybe no appetite at all.

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

Yes. No, it's a great question. I appreciate it. So as you look. As you know, the reason we gave you the quarterly cadence is exactly for that reason is we want you to understand better the cadence in Q1. And so a couple of things. We actually have lapped the Jose Santiago, but both for Jose Santiago and Cheney, which we'll lap in the second quarter, this is their slower period of sales the summer months are. So the quarter of September would be a slower period for them. In fact, for Cheney July is similar to what January is for the rest of Foodservice.

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, 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.

And also I want to remind you, and these are both very positive things, but we needed to keep them -- take them into account with Q1. One is we're investing very heavily right now in salespeople. And when we do that, we make sure that the compensation to our existing people to suffer because of that and that they're totally on board with moving some accounts. And so we keep that into account, and that's going to taper off some as we get further into the year. And then we had those start-up costs. I mean we feel like we're going to have a great year in Core-Mark, but there's very definite start-up costs when you're bringing on that amount of business over a fairly short period of time.

And we want to be able to day 1 service them as if we've always had the business. So we've got to get those people trained, ready to go and go through a period of overstaffing in our Core-Mark opco. So those 2 things we had to take into consideration and there are good problems to have.

Our next question comes from Peter Saleh with BTIG.

Great. A little over a year ago, I think you guys were talking about how the breakfast daypart 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're seeing? Because it seems like that daypart 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 daypart.

Well, I think that Mondays are lunches are for the most part back Friday, no, I would say no. The other thing that happened is a lot of people didn't open back up 7 days a week, if that's what they used to do when COVID came. And a lot of them, I know some personally that found that, you know what, I never made any money Sunday night or Monday night. So why was that open? So I think that is still having a little bit of a drag because I have seen some of them go back from 5 days to 6 days, not 10 to 7, at least in the nonmetro -- big metro markets. Would you have some comments beyond that, Scott?

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

I look at this every day, and I think it's a barometer but you can tell by our sale of coffee in the convenience that, that morning daypart, the traffic is not back to normal, still not at 2019 levels.

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're seeing?

The only thing I'd say about type of cuisine and geography, cuisine wise, we have performed, as we've said on prior calls, really well in the Mexican space really well in the food service and the convenience space have had some success in the Asian space as well. And Pizza in Italian, we're holding our own and continue to -- that's a big part of our business continue to do well there. So really seeing it broadly across the segments.

We'll go next to Jake Bartlett with Truist Securities.

Mine was on EBITDA margin guidance. I think at the midpoint of the '26 guidance is a little bit of a less expansion than you saw in '25. And then I believe reiterating your 3-year targets that you expect a reacceleration or kind of a widening EBITDA margin expansion the next 2 years. So can you just help us understand that dynamic, whether it's being driven purely by investments in the sales force near term or some of the convenience investments to bring on those accounts. Any drivers there the kind of the cadence of the EBITDA margin?

Yes. Jake, I'll start and see if anyone else wants to contribute. I mean if you look at it, again, 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 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 strong numbers in terms of growth. And I would expect that there's still some room for upside there. but it does have to do with some of the onboarding of new customers and the mix shift.

Okay. And then to follow up on the comments on recent trends and George, I believe you said that July, there was an uptick, but you're also talking about 6% independent organic case growth similar to the second quarter. So maybe just kind of clarify, you expected a slight deceleration from July or maybe the July uptick wasn't too material. I'm just trying to understand the cadence of what you're expecting going forward.

I think we're just being cautious. July and the first 2 weeks of August are could a bit better than Q4 was, okay? And the 2 weeks of August are even better than what July was. But we're cautious. It's been about a market. But all in all, we feel good. I'll make a couple of comments back to the EBITDA margin, too. We're bringing on 2 significant convenience accounts and the product makeup of convenience is totally different. And that affects us in entirety.

And if you go back to where we started with out having convenience, we were less than the 2% EBITDA, 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 chain business, you get outside of our chains. We don't have noncommercial business, which is, for the most part, better business. It's not something that is our focus today will be any time in the near future. But if you take out 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 mix of business that we have are big broad liners of which we have many -- they're over 5 ml.

We don't look at it that close. But we're going to continue to put a bigger portion of our gross profit dollars to the bottom line, but we're not maniacally focused on that. It's just where our mix of business comes in effect. Now we've always grown it, but we've always had a better mix of business. Can we count on that forever. I'm not sure. It just depends on what opportunities lay out there.

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

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