Performance Food Group Company Reports First-Quarter Fiscal 2023 Results

RICHMOND, Va.–(BUSINESS WIRE)–Performance Food Group Company (NYSE: PFGC) today announced its first-quarter fiscal 2023 business results.

“Our results in the first quarter were well ahead of our prior, announced, expectations, leading to a strong start to the fiscal year,” said George Holm, PFG’s Chairman & Chief Executive Officer. “All of our operating segments are driving high-quality top-line performance and margin expansion. Within the Foodservice segment, we continue to outperform in the independent restaurant segment, picking up market share and adding new customers to our portfolio. Vistar’s channel improvement continued, producing excellent profit growth compared to the prior year. In Convenience, we have now owned Core-Mark for just over a year and are extremely pleased with the integration and ongoing sales and profit performance. Our business is strong and delivered significant cash flow, which we used to reduce leverage and maintain a healthy balance sheet. Building upon our 1Q23 performance, we are confidently raising our sales and Adjusted EBITDA outlook for both the second quarter and the full fiscal year.”

First-Quarter Fiscal 2023 Financial Summary

Total case volume increased 16.3% for the first quarter of fiscal 2023 compared to the prior year period, including 6.9% independent case growth. Total organic case volume was flat in the first quarter of fiscal 2023 compared to the prior year period. Total organic case volume benefited from a 4.6% increase in organic independent cases, growth in Performance Brands cases, and broad-based growth across Vistar’s channels, offset by declines in our Foodservice Chain business.

Net sales for the first quarter of fiscal 2023 grew 41.7% to $14.7 billion compared to the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark in the first quarter of fiscal 2022 and an increase in selling price per case as a result of inflation. The acquisition of Core-Mark contributed $4.7 billion of net sales for the first quarter of fiscal 2023 compared to $1.6 billion of net sales for the first quarter of fiscal 2022. Overall product cost inflation for the Company was approximately 12.3%.

Gross profit for the first quarter of fiscal 2023 grew 37.9% to $1.6 billion compared to the prior year period. The gross profit increase was primarily attributable the acquisition of Core-Mark and an increase in gross profit per case driven by procurement related gains and growth in the independent channel, partially offset by an increase in the last-in-first-out (“LIFO”) reserve. The Core-Mark acquisition contributed gross profit of $310.2 million in the first quarter of fiscal 2023 compared to gross profit of $89.1 million in the first quarter of fiscal 2022.

Operating expenses rose 26.5% to $1.4 billion in the first quarter of fiscal 2023 compared to the prior year period. The increase in operating expenses was primarily due to the acquisition of Core-Mark, which contributed $249.9 million of operating expenses in the first quarter of fiscal 2023 compared to $78.4 million in the first quarter of fiscal 2022. Operating expenses also increased as a result of increases in personnel expenses, insurance expense, and fuel expense due to higher fuel prices. Depreciation and amortization increased $20.5 million primarily as a result of recent acquisitions.

Net income for the first quarter of fiscal 2023 increased $91.0 million year-over-year to $95.7 million. The increase was primarily a result of the $143.0 million increase in operating profit, partially offset by a $33.4 million increase in income tax expense. The effective tax rate in the first quarter of fiscal 2023 was approximately 26.3% compared to 14.7% in the first quarter of fiscal 2022. The effective tax rate for the first quarter of fiscal 2023 differed from the prior year period due to a decrease in deductible discrete items related to stock-based compensation partially offset by a decrease in other taxable discrete items as a percentage of book income.

For the quarter, Adjusted EBITDA rose 93.1% to $354.7 million compared to the prior year period.

Diluted EPS increased 1966.7% to $0.62 per share in the first quarter of fiscal 2023 compared to the prior year period. Adjusted Diluted EPS increased 151.2% to $1.08 per share in the first quarter of fiscal 2023 compared to the prior year period.

Cash Flow and Capital Spending

In the first quarter of 2023, PFG provided $315.9 million in cash flow from operating activities compared to $31.8 million of cash flow provided by operating activities in the prior year. The increase in cash flows provided by operating activities in fiscal 2023 was largely driven by higher operating income in fiscal 2023 and improvements in working capital.

In the first quarter of fiscal 2023, PFG invested $40.1 million in capital expenditures, an increase of $15.7 million versus the prior year period. In the first quarter of fiscal 2023, PFG delivered free cash flow of $275.8 million compared to free cash flow of $7.4 million in the prior year.¹

First-Quarter Fiscal 2023 Segment Results

In the first quarter of fiscal 2023, the Company changed its measure of segment profit to Adjusted EBITDA as this is the metric reported to the Company’s management for purposes of reviewing operating results and making decisions about allocating resources. Adjusted EBITDA excludes depreciation, amortization, and certain items that we do not consider part of our segments’ core operating results, including stock-based compensation expense, changes in the LIFO reserve, acquisition, integration and reorganization expenses, and gains and losses related to fuel derivatives.

Foodservice

First-quarter net sales for Foodservice increased 15.2% to $7.3 billion compared to the prior year period. This increase in net sales was driven by an increase in selling price per case as a result of inflation. Overall product cost inflation for Foodservice was approximately 13.6% for the first quarter of fiscal 2023. Securing new and expanding business with independent customers resulted in organic independent case growth of approximately 4.6% for the first quarter of fiscal 2023 compared to the prior year period. For the first quarter of fiscal 2023, independent sales as a percentage of total segment sales were 39.8%.

First-quarter Adjusted EBITDA for Foodservice increased 38.8% to $236.1 million compared to the prior year period. Gross profit contributing to Adjusted EBITDA increased 18.1% in the first quarter of fiscal 2023 compared to the prior year period driven by a favorable shift in the mix of cases sold to independent customers, including more Performance Brands products sold to our independent customers. Operating expenses impacting Foodservice’s Adjusted EBITDA increased 12.7% for the first quarter of fiscal 2023 compared to the prior year period as a result of a recent acquisition, as well as an increase in personnel, insurance, and fuel expenses compared to the prior year period.

Vistar

For the first quarter of fiscal 2023, net sales for Vistar increased 28.8% to $1.1 billion compared to the prior year period. This increase was driven primarily by an increase in selling price per case as a result of inflation, as well as case volume growth.

First-quarter Adjusted EBITDA for Vistar increased 146.4% to $74.4 million versus the prior year period. The increase was the result of a 42.2% increase in gross profit for the first quarter of fiscal 2023 compared to the prior year period, partially offset by an 11.6% increase in operating expenses. The increase is gross profit was driven by procurement related gains and growth in cases sold. Operating expenses impacting Vistar’s Adjusted EBITDA increased primarily as a result of the increased case volume described above, and the resulting impact on variable operational and selling expenses. Operating expenses also increased as a result of increases in personnel expense and fuel expense.

Convenience

First-quarter net sales for Convenience increased 98.2% to $6.3 billion compared to the prior year period. Net sales related to cigarettes for the first quarter of fiscal 2023 was $3.9 billion, including $1.1 billion related to excise taxes, compared to net sales of cigarettes of $2.1 billion, including $586.0 million of excise taxes, for the prior year period. The increase in net sales was primarily attributable to the acquisition of Core-Mark, which contributed $4.7 billion of net sales for the first quarter of fiscal 2023, including $780.2 million related to excise taxes for the first quarter of fiscal 2023, compared to $1.6 billion of net sales, including $283.1 million related to excise taxes for the first quarter of fiscal 2022.

First-quarter Adjusted EBITDA for Convenience increased 236.3% to $105.6 million compared to the prior year period. Gross profit contributing to Convenience’s Adjusted EBITDA increased 142.1% for the first quarter of fiscal 2023 compared to the prior year period and was fueled by the acquisition of Core-Mark, which contributed gross profit of $336.0 million to Adjusted EBITDA in the first quarter of fiscal 2023 compared to gross profit of $97.9 million in the first quarter of fiscal 2022. Operating expenses impacting Convenience’s Adjusted EBITDA increased $180.3 million in the first quarter of fiscal 2023 compared to the prior year, primarily as a result of the acquisition of Core-Mark, which contributed an additional $165.7 million of operating expenses, excluding depreciation and amortization. Operating expenses also increased as a result of increases in personnel expense and fuel expense.

Fiscal 2023 & Long-Term Outlook

For the fiscal second quarter of 2023, PFG now expects net sales to be in a range of $13.6 billion to $13.9 billion. The company had previously expected second quarter net sales to be in a range of $13.5 billion to $13.8 billion. For the fiscal second quarter of 2023, PFG now expects Adjusted EBITDA to be in a range of $260 million to $280 million compared to the prior expectation for a range of $245 million to $265 million.

For the full fiscal year 2023, PFG now expects net sales to be in a range of $57 billion to $59 billion compared to the prior expectation for a range of $56 billion to $58 billion. For the full fiscal year of 2023, PFG now expects Adjusted EBITDA to be in a range of $1.23 billion to $1.33 billion compared to the prior expectation for a range of $1.15 billion to $1.25 billion.

PFG reiterates its 3-year Net Sales and Adjusted EBITDA targets. The company continues to expect to achieve annual net sales of $62 to $64 billion and Adjusted EBITDA between $1.5 and $1.7 billion in fiscal 2025.

PFG’s Adjusted EBITDA outlook excludes the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, but are not limited to, loss on early extinguishment of debt, restructuring charges, certain tax items, and charges associated with non-recurring professional and legal fees associated with acquisitions. PFG’s management cannot estimate on a forward-looking basis the impact of these income and expense items on its reported net income, which could be significant, are difficult to predict and may be highly variable. As a result, PFG does not provide a reconciliation to the closest corresponding GAAP financial measure for its Adjusted EBITDA outlook. Please see the “Forward-Looking Statements” section of this release for a discussion of certain risks to PFG’s outlook.

About Performance Food Group Company

Performance Food Group is an industry leader and one of the largest food and foodservice distribution companies in North America with more than 150 locations in the U.S. and parts of Canada. Founded and headquartered in Richmond, Virginia, PFG and our family of companies market and deliver quality food and related products to over 300,000 locations including independent and chain restaurants; businesses, schools and healthcare facilities; vending and office coffee service distributors; and big box retailers, theaters and convenience stores. PFG’s success as a Fortune 200 company is achieved through our more than 35,000 dedicated associates committed to building strong relationships with the valued customers, suppliers and communities we serve. To learn more about PFG, visit pfgc.com.