PFGC - Earnings call transcript Q2 2020 | Performance Food Group Company

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Operator

Good day, and welcome to PFG's Fiscal Year Q2 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Bill Marshall, Vice President, Investor Relations for PFG. Please go ahead, sir.

Bill Marshall

Thank you, Lori and good morning. with PFG's morning Hope, and this CFO. PFG's here George CEO; Holm, Jim We're

press release. our these be results back release quarter a items. measures and issued We regarding can for adjusted to half call include the certain this of the non-GAAP this GAAP results and reconciliation XXXX the results morning. measures in found The of at discussed The will earnings GAAP non-GAAP first second fiscal corresponding

the in Investor section can find release You earnings website our pfgc.com. Relations at our of

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

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

George Holm

our you Thanks, joining President's southern where and we're for hosting you our call with leadership Bill. everyone Annual from Good We're joining Florida field morning, the organization. thank today. Meeting

For days, we level our am the and discussed the past success entire thrilled the across excitement of few vision I with for organization. have

As how new and provide through our legacy including growing busy we acquisitions, Today and these on channels initiatives Eby-Brown Reinhart. have an territories expanding while update company will been business has into our progressed.

forward on by start second a quick our and to providing strategy vision highlights acquisition. CAGNY look the conference But we into detail I'd business Reinhart in some to like quarter the also speaking at before of where for We more a update couple results provide weeks reviewing first our PSG.

we questions. more our outlook discuss to take financial your annual then in Jim happy detail. finally, And then be and will will results

second the pleased a of our turn quarter strong share After the fiscal growth EBITDA start results. that Let's continued XXXX. year in our we're to sales and to to

increase increased X.X% cases, by in X.X% in brands. Total the Eby-Brown a case volume performance driven independent growth acquisition, by and

the to quarter in which case mid-single that expectations. was growth our continued are for line independent pleased with digit We the our range,

objectives We be legacy level believe will of independent we able business. term growth our achieve case our with this long to in

Reinhart's As the we in growth mid-single to our but be legacy we term will independent look the case over ahead, accelerate to level business. line in be more of digit expect time short range with below

We continue of to profit independent remains of our a health term driver continue believe and to restaurants the growth. will overall key strong long be

end As the we acquisition of calendar closed the in or quarter December XXXX the transaction late Reinhart completing fiscal two. by our

channel the independent the to the increases rate to run excited our platform, market billion $XX organization the associates We're add PFG's taking many companies. Foodservice billion. in The distribution brings approximately Reinhart to welcome Reinhart net PFG to business family particularly in revenue talented Reinhart of scale annual density. $X and our sales division annual transaction over and

this we our share time, we go the efficiency, PFG improve customer focus best and cultural and practices. fit expect about at to sales a Over level. reduce Both the organizations also success Reinhart. between as network mileage opportunities to create market excited on We're with additional

and operations Reinhart's also the face time more offerings. should operating reduce of density enable private brand and combined enhance to differentiated increase future our label able will be increased with associates company's will we of that sales combined believe customers We depth expense. The

strengthen increase and believe education merits base, other will and our also providers, business combined shareholder that Reinhart value the over term. independent healthcare strategic diverse end brings customer these a restaurants, We attractive long including markets.

Each like going our goes associate great transaction, calls, beyond While companies been colleagues. and integration are just and who completion one during pleased made the to the very serve is of these two bringing are the over quarter to from with we a has we above progress together. well we month customers that highlight and these

the Foodservice, from Ohio. joining time associates past experience new of in Reinhart. a our of has supervisor supervisor Hayes and He of is John Columbus, been has the trainer, years years. one recognize the PFG eight including for shuttle out XX to a family as like we'd and based driver lead Today driver,

all acquisition Reinhart's When key the Columbus PFG met John the and was market. efforts announced PFG. are quick Reinhart drivers to to drivers in his of customers that ensured His tune have contact in customers and with with and transition

Columbus important ensure of His two transition. the areas. Whenever attitude positive smooth take of to why are work PFG, win success that in significant level together, commitment continue Reinhart and reason and of companies to place a overall amount size needs the enthusiasm, to and we come there's to Dayton

quarter and It to in in is going confidence our to put of like our future results. personally success company. stories great. like all us second on hard John to the over Jim, With thank day who every make I'm this the things work detail to that associates more give company our that, you turn I'd give who’ll

Jim Hope

And Thank everyone. morning, you, good George.

organic net were was EBITDA sales growth case the volume quarter nicely. the X.X% in prior with the quarter period. quarter. second strong, and X.X% year Our results Underlying case to increased growing second for Total compared second

in primarily restaurant the sales fiscal sales independent to growth XX.X% in due Vistar XXXX to the for and quarter improved channel. compared billion. particularly to increase the net period prior of Foodservice, case in Net sales in Eby-Brown The $X.X growth year second was and

in acquisition net million $X.X was also higher of of approximately for to excise inflation price selling increase billion and per The including attributable to a to related sales the quarter, net as Eby-Brown result mix. contributed sales taxes. case, $XXX.X The

plate year the Gross second second quarter meats for and the Overall period compared to quarter, poultry. the cost in center X% increased of cheese, XX.X% fiscal XXXX in food prior million. profit $XXX.X inflation was as the of items, such to approximately especially

growth specifically customer recent channels as increase products mix from The and strong profit to case restaurant gross Vistar’s an was independent led improved channel. by of the well channels in as and acquisitions

the sales versus as due the year driven prior was to XX.X% for addition Gross compared period. margin second case by profit the for sales. XX.X% gross The which quarter, margin of the the second net quarter Gross lower percentage Eby-Brown, to has margins profit was in prior decline tobacco year per of up period. $X.XX was a

rose $XXX.X the compared volume expenses expenses was to by due the to the resulting Operating of operating Eby-Brown, on and second the operational year quarter primarily in acquisition prior increase The case to million XX.X% variable increase period. in and impact expenses. in

in of year the period. $XXX.X adjusted Operating to a second in to EBITDA expenses also increases as XX.X% and increased XX.X% expenses. increased quarter EBITDA in second prior compared the the quarter million to rose result million $XXX.X personnel

primarily $XX.X was million increase The of X.X% interest profit. the issued quarter the the the result increase income expense, additional second $XX.X result Net for was increase declined million. the offset of million to in in by finance expense primarily acquisition. debt year-over-year operating partially help the interest The in to decline Reinhart $X.X

quarter to over quarter rate XX.X% second increased in was to Diluted in fiscal second diluted adjusted the X.X% $X.XX period. over approximately the tax And prior share to $X.XX the XX.X% EPS XXXX. second period. of prior X.X% the year quarter EPS declined compared Effective in the per

for non-GAAP of excludes periods. Please expense. adjusted effect release EPS GAAP earnings EPS reconciliation press to restated intangible and now this diluted diluted morning's amortization note prior PFGs adjusted of see that asset for definition Please the

two quarter channels. acquisition the increase $X.X year was and second and the prior for our billion. by period the to of sales Net This our XXX.X% sales of office corrections, to results for driven Vistar turn growth vending to segments coffee Let's Eby-Brown segments. compared increased in

in quarter Second profit quarter EBITDA for the dollar versus of Eby-Brown. growth $XX.X Vistar year was period. million XX% the to of by Gross XX.X% increased acquisition the prior fueled

growth of Our billion. Foodservice segment sales X.X%, net generated to quarter fiscal second $X.X

focus and EBITDA centric second strategic technology customer The X.X% in investments the and people in growth quarter. drove of

PFG $XXX.X operating of six activities, $XX.X million in In the prior Turning year increase million XXXX period. cash versus to an generated from cash fiscal our flow. the of first months flow

was and in largely from The working by capital. improvement driven cash in operating higher flow income improvements operating activities

For the $XX.X prior in PFG $XX million versus decrease the year million months, expenditures, first period. capital of six a invested

versus on million, the to expect Reinhart $XX.X increase prior financial cash year our we flow and of of period. impact an free delivered $XXX.X like approximately comment PFG results. briefly I'd million on the

million which full the As previously achieve XXXX. in we run to synergies we've year, fiscal approximately third $XX our in annual disclosed, represents fiscal expect rate

into act expect ramp to to Savings Reinhart's Also, $XX these balance predominantly come will will procurement integrate as target seasonality. a provide the from logistics. and prudently million we across some consistently two first from to fiscal your you with business model, years. fairly wanted to insight opportunities companies our We full and consider operations three

and XQ Reinhart's which footprint, skews over legacy PFG's fourth Northern geographic index XQ. fiscal our and business. underwriting profit fiscal contribution their index more to first quarter and U.S. fiscal compared during Given will quarter in towards

our representing of XX% contribution fiscal March, April from realized is representing first EBITDA fiscal Reinhart's and through is September, their EBITDA quarters. lowest quarter. third approximately fourth through January from our Specifically

increased to contribution Eby-Brown EBITDA adjusted Turning to range growth range XX%. a and guidance. includes our We fiscal our full Reinhart. outlook new be X XX% quarters from of The to from fiscal in XXXX

diluted Reinhart, EBITDA growth XXXX versus in to of range EPS previously $X.XX $X.XX X% projected but XX% is $X.XX XXXX. diluted of guidance to of Eby-Brown announced to including adjusted of X% excluding our updated Fiscal grow fiscal XXXX also EPS XX%. a its XX% XX% to representing adjusted adjusted to compared range to fiscal PFG to

expense. range in from adjusted including case excludes effect future excludes contributions and a following guidance intangible figures of growth Organic amortization of X%, X% Reinhart. based XXXX. for past all to This year guidance noted, full fiscal is and previously the As diluted the on EPS Eby-Brown range assumptions which asset the the

million also range million. $XXX depreciation and be in million of $XXX and $XXX $XXX a million in capital to rate a between million to amortization expenditures approximately expense and an of Interest million a of on $XX PFG $XX XX%. $XXX $XXX and with tax range million approximately in operations and million, of expects range effective

EBITDA consistent In were businesses quarter and We're pleased our results top-line segments. with growth the and solid. summary, strong in both our Vistar fiscal Foodservice the our second for results

will of feel deliver confident another strong growth. year We PFG continue to that

take questions. that, with happy we'd be to And your

Operator

line Thank Heinbockel comes of you. [Operator Securities. from Guggenheim Instructions] question Your the John first of

John Heinbockel

to timing timeframe Hey close to both mid-single it independent in for unit George. too talk case What be of then the growth? of year digits, investment would maybe progression Reinhart's longer Is the a on do get force two month? the great. is the that? than of another two think cadence Can be? to a will Thoughts you And sales you

George Holm

expect what's two investments that involved wouldn't here. degree I don't underestimate I Yeah, some want things need years. it take We about they make a approach people. to the in But certainly And, to expect it I are just some to how to take wouldn't to marketplace. long.

we put grow, well-run we get very that's right line we struggled It's just place, training top right a And company will as of the It's particularly that expected. basically independent. that the what grow to with number feel an in people to there.

have what with the plan we to do until numbers. left we independent to We continue we as to work that what our to that Reinhart reported we've do do customer sales. making is give around exactly always align know And some sure we organic independent growth have their

And be through we out then our once get as quarters, four always have. then growth putting we'll that organic we just

John Heinbockel

in And growth sales X% the the months you are nine to you think X% in or what up high? would that next get not force to sales XX force, their their

George Holm

least high of where situation does significant business, average Probably fairly a ours. We amount X%. a less their at certainly have than person not that sales but do

of level of Kind So adding we feel higher sales weekly people just a equivalent people. themselves. getting to the up of

of kind we're So there.

John Heinbockel

is algorithm, or a is And that lastly. front more which in. your high-single then months implied third reason has of digit. And just we've six us. quarter guide got half below The because, been there for EBITDA potentially second impacted weather Is just only that we're historical in

Jim Hope

John. range that's the we've good today. Yeah, exactly we right about feel Look provided guidance

remarks I an fiscal As Reinhart's is our contribution EBITDA in quarter standpoint from prepared the mentioned QX. smallest

some on year So at seasonality. is the two impact you of QX it always look for stack And Right. us.

John Heinbockel

Okay, you. thank

George Holm

people typically stub level seasonality. the months. not a period but growth year, found last up a I acquisitions of I part should a thing mention that's programs. we of necessarily with have reconciliations month But And six have in coming that higher earnings of lot of in it fiscal And that another it

these trying fiscal expect get into do a fiscal year fiscal get programs Reinhart Reinhart, as little when we we fiscal standpoint. up to for a quarter, but next a from standpoint fourth of match weaker ahead get just comparison this for So quarter a year stronger second to we that from

Operator

Your next one question Edward Fargo. Wells of from comes of Kelly

Edward Kelly

Hi, guys. Good morning.

what you you're if I case And George, outlook color maintain now. soft. two at running it for So occurred in about was bit January? to then quarter X% on full Can year more little look X%. your organic And What right you here? a provide seeing growth total a this you're

to So can as you you X%? achieve how to still X% breach that us

George Holm

we December part in which it is Thanksgiving Yeah. being although growth of X.X% of growth out be, between that was real for the we saw A that quality What certainly a weak it good. the less very wanted not week and theatre peak theater, of where the kind and one part there Christmas, of product being typically was going. to is was

value saw was value also of do. weakness some business and with some having us saw the time, chain of of dining weakness that some in also We that same less one our period casual largest And in we more market in customer. that real stores we

growth think that to, did have. the the held the I of obviously, speaks But up quality And well. we extremely earnings

which average we case saw and go but saw than also saw some We independent increased inflation more the we inflation. helped price up us

X.X% cases, in So X% up sales. ended in having we increase a that increase

So, I think lot. that helped us a

We have pipeline. good are The people they that have. two main run confident businesses our that in pipeline a

X% that keep X%. to to elected we So,

seen in pretty unusual January; things of to go the back We holiday period. have kind this of month

We January I be we really get year. related anything try haven't weather but too didn't will last also, weather in not issues, say to it we encouraged with and because had so can

we we But a our too develop. how will years to go when So, we're QX much into how much to get in just think have encouraged but not better the through try month put of fiscal we idea the January. going I things

Edward Kelly

I And also performance. profitability wanted you case to level Okay. ask about

So, you case. well. let's call I seem doing per it gross profit mean, really to be

question, can silly about like ex almost talk Eby-Brown? but it's you So,

which environment generally with in it's of through gross peer it with pass of happening think large What's just impacting then are inflation? what of case? And sort per out, a how all? surprised doing who call There’s competitive profit seeing everybody. I a the How yours you that you're and

George Holm

I case to it difficulty with business had and similar cost we profit and would the probably per that such it mix dairy a through. case. say good is was had came more come lower items that sometimes us it gross when high we've meat, What helped just margin, but of passing which

would than see inflation more think that. it it's that's probably I more And little like was. where is to our in industry. any heavy a growth don’t But bit complicated the than we

Edward Kelly

you. thank Okay,

Operator

question next a line comes Kelly of Our BMO Bania of from Capital.

Kelly Bania

Hi, your and good guess morning, I week George a Jim. only granted Foodservice with core as at in. Reinhart, you now month look

changes much. Just could curious where little out about then you a regions? of competitive a have do pockets bit add see competitors too opportunity if or capacity, see from to are certain their standpoint, you own in And you terms maybe also your any in talk capacity capacity, building

George Holm

just many to being slower now. Well, been past. It seems we that we right process the have in And pipeline things things many than and more in it's would always certainly are like constructed capacity. a the be

capacity, competitors that. we of as don't see too adding far much As

I in the a going a going the win know into a that's also Southeast Denver. then we a and area. There's kind there's facility And area, Midwest a facility. large have large Gulf large competitor of putting large in win

only projects. three are are big those all those three I but So, know,

Kelly Bania

data seems at the just seems Okay, of to we one but lot a a on and healthy From maybe then another to wages. just have pace. stabilized still growing It track. be

on, you that curious what front? Just you're seeing if could on comment

that's their two on turn core in turnover last and your dealing personnel? customers feel impacting you warehouse and I and over year the how investments with with you've delivery also But guess are business labor restaurant your the How and business? dealing made about and or how

Jim Hope

I'll the Jim, second take about it's first labor Kelly, will our I Yeah. half take half about and a George think customers.

be they two almost a But, making we recall, wages our and as marketplace. job warehouse driver you needed we did good where of very and to ago, the really sure years representing had and important

I I perspective, And labor in labor approach. I expect sweet our the forward from spot. And standpoint. found we're than anything standard think And wage other since then, good from place management unusual rate we've a a cost a typical think coming don't

at half. will second address That's the look the way it I'd then George and

George Holm

With simply of the of wages. two is is course, almost we biggest difficult they're where hit ask something talk always dealing ask on all customers part how with them more to, I and both know the is I they're and used I product. now? it just because my think problem the And everyone is wage ways the right than they're the that's what getting in inflation And to the of answer

it And traffic are that people industry isn't there's price board the around And this, are which because well. I customers menu get restaurant to when think smart in sales to certainly just blatant very the today, there without - growth we increases I very these menu how our for seemed decent the but past a good think being get work price probably industry, increases, growth. across

to. those to it when difficult. customers But when adjustments unfortunately for we're is than a both And end they've on made things aggressively fairly got our think dealing higher for harder our And are. we much of than the I needed they think I And think wage us. it's we of it's I overcome, scale

Kelly Bania

Thank you.

Operator

line of of Our Chris next question the comes from Mandeville Jeffries.

Chris Mandeville

current any I'm EBITDA about of if break good correctly, quarter. you then, the Jim, further morning. price increase? had third guys call X% that to Is Reinhart. And of this guide, down quarter, Hey, a but there ex spoke certain drivers it this increase last recall pretty terms I to ability X% in in the we cigarette

can of as that if contribution in well? that's terms So break the out you case,

Jim Hope

Yeah.

don't frankly question, a the of how of expect that in provided one level or really And prepared provide. question. remarks your thanks two, one the know to detail the for not guidance that to the the is factor price And cigarette we going did half we don't expect On increase. that in. Chris, we're see second we But really

Chris Mandeville

fuel respect follow-up Can gross maybe if just that And I versus us of guess impact the lately. currently my hedged with fair. with as of come are that's to the what profit surcharges then percentage you pricings be remind timing Okay, considerably pretty the just needs and costs, down? would OpEx down your and

Jim Hope

and we job work hedging, you, Look, on is involved staying do it's the not we tell - will pretty of Yeah. in pricing. staying some a diesel top prices And of front material. there it. think to degree a good do of in some I'll doing We and business certainly cost to to

as closely more it on we our to a strictly. that's we not our and an that fuel I very the of we our P&L, something and And see effect that about price business important part manage making right customers. don't I material it's think those And the has results. surcharges manage have the very how sure

George Holm

into of all margin. And that surcharge goes

it goes an Internally, a can away. prices. that So it look always when as we little to fuel offset deceptive at be bit

Chris Mandeville

guys. thanks, Okay,

Operator

Frommer question Judah from Credit line Suisse. the Your comes of next of

Judah Frommer

backing or Hi, Jim. the thanks for deal taking EPS kind from with you new are all couple impacts the at the item, questions. definition Maybe the of earnings of a first housekeeping out gave accretion the first the years the same? for amortization of kind the of Does change just

Jim Hope

the feel transaction deal. good color expectations you about model. same the XXXX for good close We next just we're year we help including mentioned so on XXXX about we'll with very the we sure for month for to do And full quarters. going some integrations deal, fiscal do two as the the following And Reinhart Judah gave your our - as look Yeah, far. a well, you

progressing. actually course current an we around all an year you of expect update math. As businesses focus provide metrics and to fiscal and move for our things on our and update going would how accretion on But we'll the to synergy aren't on capture's results provide

Judah Frommer

Okay.

rate George us help just you is And synergy. the run cost the on dovetailing so can $XX synergies. million with maybe obviously

along Just get or lines? label synergies kind of those at specifically, timeline anything revenue, to else general maybe private

George Holm

will I work have we do some just build. to them to it'll, We like in think see the get to - one things position would we it's of a got way Well, that grow. them those to grow

sales couple will start consistent I different it take for I probably of a said, well-run that couple a think culture. Like I But of quarters a think company. years. pretty to ramp It's a it matter little bit up. it's to to be will very of us just enter a getting type

Judah Frommer

Got it. Thanks.

Operator

Instructions]. [Operator

of Your line from comes Bernstein Jeffery next question of Barclays.

Jeffery Bernstein

Thank in restaurant I very remarks, think said much. you Great. remains strong. your health you George, prepared

that people industry, maybe wondering us. for growth. know about Just you can in talk I if lackluster contextualize comp the

both of then traffic I you You health and mentioned or labor significant cost the perspective how industry. you independence casual mentioned, the talking and inflation, as commodities. maybe QSR just challenge versus change do the from wondering you're about versus think a am about And dining.

the assess to your view in restaurant trying Just industry of that context?

George Holm

Well, expect talked is that dining there I But of got industry that you can there is go think particularly inflation. they've is we strong there's but against, lot people do doing some in still well, a what still out headwinds the I some business. like are would reason well. about to think casual The And struggling.

grow keep continuing good find I certainly a their way the top-line wage those there's way to And think to to traffic a industry yet, And accomplishments. steady. And and inflation. is are pretty

for it think I the business. of the well future bodes

Jeffery Bernstein

quarter. Okay, now quarter, the Jim, first of top I to about mentioned commodity guys the from standpoint, end of and you And comfort the range. modestly inflation from X% at guess the then a second X% it's in X% very

talked You to pass of customers. in able along terms to about being

the of think upward an think you that relatively whether trend? two level steady start maybe wondering Just hold steady do is to going or you we're at this or at is past the quarters someplace now you think we're of

and dairy about and same talked meat others thing. about talked you the have know I

higher would to to creep X% outside inflation So range? you continue of that expect X% to

George Holm

with very can certainly between X%. as can do. margins comfortable through. we up have frankly, And And and don't a Well I look think is ball. of any through our passing margin we're see and we results pass crystal you any X% us in range can I the don't it - to

work. I'm what's underestimate And too going definitely commodities it. keep on very it. sales the I we in market. we concerned not on we're can make going to keep our We force it. our in about with won't think But eye tune that

Jeffery Bernstein

you. Thank Understood.

Operator

next comes Our from the question of Marisa of of line Bank Sullivan Securities. America

Marisa Sullivan

for sales questions. about just I for are touch previously few fiscal acquisition weeks done I comments the you growth taking rest of a and and you've what at Reinhart. about Thanks the wanted culture priorities last filling guess on to made Reinhart some Can your year? of the talk guess what you I this kind the just

George Holm

our to learning. sales, type excellent we of years - people and I a there. system of the earnings. people spend the priority same some in talking that say have last And place would on type kind high put The been growth. they haven't a Well had basically certainly same of I sales just guess There's time several

change think I you to bit, the people but a culture little very just And willing. it's are have - the

people have all and get different onboard. more some and now. not are product little here them confident We are approach some get that shattering worked people the with past. them we've And we're of as marketplace we anything the lot that a right changes to And just a in

I be think shape. in we'll good

Marisa Sullivan

or quarter? little of any changes great. where then saw terms the bit And up out from on you follow I this coming penetration parse in you. new growth customer independent color if Can case could Any Thanks. you be additional will a just wins? yeah, And Got growth. just

George Holm

more I probably the say people Yeah. for anything it's normal. about customers industry. most of in new That's our but would us, than that's

penetrating we high turnover as like to certainly see. You got in would restaurants. as a not fairly well We're

to But we can to is it's significantly. that you thing continues to when gone as But able quarter the just overtime the to loss to down I biggest an penetrating, guess but business. be huge continue for seem us, traffic and is improve are you not of down. It that go It's accomplishment. quarter, flat, look at

Marisa Sullivan

Thank you.

Operator

Marshall call Thank no questions. turn I'm time will to I this for you. closing At the showing Bill now comments. any further

Bill Marshall

today. Thank our call you for joining

at If questions please you have contact up any us follow Investor Relations.

Operator

you XXXX year conference for QX, call. earnings PFG's participating fiscal in Thank

You And may now wonderful have disconnect your day. a lines.

Performance Food (PFGC) 5 Feb 202020 Q2 Earnings call transcript