Operator
Good day, and welcome to PFG's Fiscal Year Q3 2025 Earnings Conference Call. If you would like to ask a question at the conclusion of the prepared remarks, please press the star key followed by the number 1 on your telephone keypad at any time. I would now like to turn the call over to Bill Marshall, Senior Vice President, Investor Relations for PFG. Please go ahead, sir.
Thank you, and good morning. We're here with George Holm, PFG CEO, Patrick Hatcher, PFG CFO, and Scott McPherson, PFG COO. We issued a press release this morning regarding our 2025 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 2024. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found in the back of the earnings release. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statement section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. Now, I'd like to turn the call over to George.
Thanks, Bill. Good morning, everyone, and thank you for joining our call today. We have a good deal of material to cover this morning. I'm going to provide a high-level overview of the current market conditions and the strategic measures we have prioritized during the volatile time. Scott McPherson will then provide some color around our segment's performance during the third quarter, and Patrick will follow with our financial performance and guidance. The fiscal third quarter provided some challenges to our industry, mainly due to difficult macroeconomic environment and adverse weather in January and February. We saw a decent recovery in March as the weather improved. Still, it appears that the underlying consumer performance remains muted. Interestingly, April results rebounded nicely and we grew our sales and profit through the month. The first week in May was stronger yet, producing a record sales week for food service, convenience, and total company. At PFG, we recognize that we cannot control the external macroeconomic environment. However, we do determine how we approach our markets, customers, associates, and suppliers. We do not know the exact path the economy will take. However, we are prepared for a range of scenarios. First, it is worth reminding you that our company has experienced several difficult periods through our history, including the 08-09 Great Recession and the pandemic in 2020. These experiences provide a playbook for the actions we can take in more difficult times to not only protect our business but align our operations so we will come out strong on the other side. This is exactly what we have done in the past and what we intend to do now. Even in our soft February, our share gains were consistent with our usual performance. At our Investor Day on May 28th, you will hear our detailed strategy that looks to capture both top and bottom line growth by being a diversified food away from home distributor. We have a powerful story and our momentum continues to build and get stronger. I'm excited for what the future holds for PFG and believe we are positioned to capture growth over the long term. Before turning it over to Scott, a few high-level comments on recent trends. As I mentioned at the beginning of my comments, the operating environment has been dynamic, to say the least. When we last reported earnings, I believe we could achieve 6% organic independent case growth for fiscal 2025. Our run rate through January, along with easier year-over-year comparisons for the balance of the fiscal year, made that objective a reasonable target for our organization. However, the challenges we faced in february have made this target harder to reach at the same time as i mentioned earlier we did see a rebound as we entered the fiscal fourth quarter with our organic independent restaurant case growth hitting six percent in april despite the market challenges our broad based structure provides stability to our bottom line results during market challenges we believe that gauging the health of the consumer is difficult at this time however i have the utmost confidence in our company's ability to execute at a high level, capture market share, and deliver revenue and profit results that drive shareholder value. With that, I'll turn it over to Scott McPherson for more details on our segment results in the quarter. Scott?
Thank you, George, and good morning, everyone. As George mentioned, it's been a dynamic year from a trend perspective. We had a strong start to fiscal Q1, and we're progressing well through november however in december and through much of the third quarter we faced disruption including calendar shifts adverse weather conditions in both the current year and last year period comparison and of course a dynamic macroeconomic and consumer backdrop february posed challenges for our industry as we experienced significant weather disruptions and a consumer reacting to economic uncertainty we've seen steady improvement through march and in april we finished the month with solid top and bottom line results while april's outcome is certainly encouraging and shows signs consumer trends are improving we remain hyper focused on what we can control as george said we have a broad and diverse business that has proven resilient and challenging operating environments for us we remain laser focused on our strategic priorities starting with driving growth through our sales associates across all operating segments continuing to leverage our proprietary brands and procurement synergies to expand gross margins and leverage technology to drive efficiency throughout our supply chain now let's take a deeper look into our three operating segments starting with our food service business overall food service growth was strong benefiting from the addition of cheney brothers and jose santiago in the period as george mentioned organic independent case growth took a step back in february growing 3.4 percent over the full third quarter these results reflect steady market share gains with independent customer account growth increasing 3.9 percent year over year and lines growing at 4.3 percent as we continue to broaden our offerings to customers performance brands sold to independent restaurants were 53 percent in the quarter continuing our strong momentum and creating value for our customers with our company-owned brand portfolio as we emphasized last quarter these metrics show that while we cannot control the industry backdrop, we can arm our organization with the products and resources to provide our customer base a differentiated value proposition. Shifting to our chain restaurant business, we grew cases by 1.5% in the quarter, an excellent result given the current backdrop. The growth for our chain business was boosted by the onboarding of new business, which has been ongoing since the second quarter and continues into the fourth quarter we expect these new business wins to boost fourth quarter results providing incremental case growth and favorable profit profile versus our legacy chain business sales and margins were helped by pricing inflation in the quarter current inflation rates and food service remain in a range that we consider very manageable we are closely watching the broad commodities market and preparing for any increases driven by recent tariff considerations we have not experienced any disruption from tariff actions to date, we continue to assess our exposure, which is currently not looked at as material. However, we are working closely with our suppliers and customers on contingency plans in the event inflation moves meaningfully higher. One inflation strategy we are focused on is positioning our high-quality company-owned brands as the best value proposition for our customers. Again, our sales force continues to win new accounts and gain share despite the difficult operating environment. We have steadily increased our Salesforce head count through the year, the tracking talent from across the food service landscape. Fiscal year to date, our food service sales force head count increased by 250 associates or 8% year-over-year. This is roughly the pace of hiring we anticipate for the balance of the year, assuming we continue to see positive signs from the consumer. From a profit perspective, the food service segment continues to experience positive margin momentum, driven by favorable mix shift, profitable chain business growth, and procurement synergies. These factors, in addition to the contributions of Cheney Brothers and Jose Santiago, drove 29 percent segment adjusted EBITDA growth in the quarter, translating to 25 basis points of margin expansion. Turning to our convenience segment, the narrative for the convenience industry has remained consistent throughout the fiscal year. Despite a challenging volume backdrop, Cormark continues to win new business, take market share, and expand within existing customers through new offerings, particularly in food service. In the third quarter, the convenience segment volume grew by approximately 1%, well above the industry performance. Through the full fiscal year of the convenience industry, key categories including snacks, candy, and health and beauty have declined at a mid-single-digit rate, while most other key categories are down low single digits over the same time frame hallmark has grown each of these areas by low single digits except candy which is flat more recently we remain cautiously optimistic about sales performance in april which was notably better than recent periods while too early to call it a trend it is certainly a positive indicator we are very excited about our pipeline of new business and convenience we have found that our proposition as a consolidated convenience and food service distributor provides a competitive advantage and it's been one of the key reasons that we continue to add new accounts at a fast pace we will expand more on this topic at our investor day finishing up our segment commentary with specialty formerly known as our vista segment total net sales for specialty were roughly flat in the third quarter on a low single digit volume decline in the period as expected the third quarter was difficult for both theater and value channels due to a lack of content and competitive activity in the theater and consumer challenges for the value segment. On the positive side, we've seen stabilization in our vending and office coffee business, benefiting from the return to office trend. Our small parcel business has improved as we build upon our small but rapidly growing e-commerce business, something you'll hear more about at our investor day. In conclusion, total PFT operating companies weathered a difficult backdrop from a competitive positioning standpoint we grew share across all three segments we have continued to make progress in our mix and margins and are performing well operationally we feel good about our positioning to drive growth and deliver on our customer value proposition i'll now turn the call over to patrick who will review our financial performance and outlook patrick thank you scott this morning i will review our financial results from our third quarter, provide some color on our financial position, or review our guidance for the balance of the year.
Before jumping into our results for the quarter, we have two housekeeping items to address. First, as noted in our press release, our Vistar segment has been renamed as specialty to align our naming conventions across the three operating segments. We did not add or remove any operations from this segment in our financial reporting. It is simply a name change. As we always do, we will continue to assess our segment reporting structure to align with how we operate the business. On that front, also noted in our earnings press release, during the fiscal third quarter, we moved a few small items from corporate and all other into the food service segment. These changes are immaterial to our results and are reflected in both the current and year-ago periods for comparability. As you've already heard from George and Scott, it is a dynamic time for our industry and the broad economic landscape. For this reason, we believe it is as important as ever to maintain a strong financial position. We believe that our balance sheet and cash flow not only insulate us from external shocks, but also allow us to take advantage of market dislocation. As George describes, supporting our associates, customers, and vendors through difficult times has allowed us to build upon the strong foundation of our business position. This was only possible because we had the financial resources to invest behind our organization. In the first three quarters of our fiscal year, we have used our balance sheet and cash flow to finance growth initiatives, including two attractive acquisitions, Chaney Brothers and Jose Santiago, and over $300 million in capital projects. We believe that these initiatives put us in a strong position to thrive in a range of operating environments. Let's review our third quarter business results. PFG total net sales grew 10.5% in the quarter due to the addition of Jose Santiago and Cheney Brothers as well as volume growth and net price realization. Our total independent restaurant cases grew 20% in the quarter or 3.4% on an organic basis. Organic independent case growth was lower than we had hoped entering the quarter. However, as Scott detailed, the underlying metrics including market share, new account growth, and lines per account reflect strong execution. While it is still early, our April results improved noticeably. Total company cost inflation was about 4.9% for the third quarter, an uptick from our prior period but steady year to date. Food service product cost inflation was 3.7 percent in the quarter, while specialty cost inflation was 2.8 percent year-over-year, and convenience increased 6.7 percent. We are closely watching input cost inflation, particularly with the implementation of tariffs, and have not yet seen an impact from tariffs. Importantly, we source the majority of our inventory from domestic suppliers. At the same time, we believe we are well-positioned in the event of an acceleration in inflation and are maintaining close communication with customers and suppliers. We have a proven track record of managing inflation and expect to navigate the current market using a similar playbook. Total company gross profit increased 16.2% in the fiscal third quarter, representing a gross profit per case increase of $0.39 in the quarter as compared to the prior year's period. Strong operating expense control and productivity efforts produce adjusted EBITDA growth for the food service, specialty, and convenience segments. In particular, our specialty segment, despite a difficult top-line environment, produced 6.9% adjusted EBITDA growth. In the third quarter of 2025, PFG reported net income of $58.3 million. Adjusted EBITDA increased 20.1% to $385.1 million. Diluted earnings per share in the fiscal third quarter was $0.37, while adjusted diluted earnings per share was $0.79. Our effective tax rate was 25.8% in the third quarter. We anticipate a higher tax rate in the fourth quarter, closer to our historical range. Turning to our financial position and cash flow performance, in the first nine months of fiscal 2025, PFG generated $827.1 million of operating cash flow. After $332.7 million of capital expenditures, PFG delivered free cash flow of about $494 million. Diligent working capital management and our operating results contributed to the strong cash flow result through the fiscal year as we described last quarter our capital spending levels for our legacy business have remained fairly steady over the first three quarters of the fiscal year at a run rate of approximately 100 million dollars per quarter the increase we experienced in the third quarter was largely related to the addition of capital expense to support cheney and jose santiago businesses as expected. We anticipate an increase to our capital expenditures in the fourth quarter, which is typical for our company. While we remain committed to capital investment in capacity and fleet to support our growth, we are closely following the external landscape and will take appropriate steps to adjust our spending if necessary. At this time, however, we feel good about the level of investment we are undertaking. During the third quarter, we began to pay down debt through reduction in the outstanding balance of our ABL facility, in line with our stated near-term objective of reducing debt. During the quarter, we also repurchased about 138,000 shares of our stock at an average cost of $76.82 per share for a total of $10.6 million. While we are prioritizing debt reduction, we also take various marketplace conditions into account when determining our capital allocation strategy. This means that we have and expect to continue to opportunistically repurchase our shares during market downturns. This is supported by our financial position and cash flow. The M&A pipeline is robust, and we continue to evaluate strategic M&A. As always, we will apply our high standards and due diligence process in the evaluation of these acquisition opportunities. Turning to our guidance for fiscal 2025, today we are narrowing our sales and adjusted EBITDA guidance, primarily flowing through the results from the third quarter. We now expect net sales to be in a $63 to $63.5 billion range, adjusting the top end of the range by $500 million and leaving the bottom end unchanged. Our adjusted EBITDA guidance for the full year is now a range of $1.725 to $1.75 billion, narrowing the upper end by $50 million. As we enter the final months of the fiscal year, we feel confident in these targets and each of these ranges suggest full year 2025 results in line or above the three-year plan we set at our investor day in 2022. In a few weeks, we will provide more color around our successful execution of the long-term plan and discuss our vision for the next three years. To summarize, PFG successfully navigated a difficult environment in the third quarter and is prepared to maintain strong growth in a range of economic scenarios. Our financial position is strong, and we have a balanced capital allocation plan to generate long-term shareholder returns. We're excited about what the future holds and are investing capital to sustain our growth. Thank you for your time today. We appreciate your interest in Performance 2 group. And with that, George, Scott, and I would be happy to take your questions.
Operator
Thank you. And at this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question. And your first question comes from the line of Mark Carden with UBS. Please go ahead. Your line is open.
Hi, this is Matthew Rothway on for Mark Carden. Thanks for taking our question. Glad to hear that trends are improving a little bit of late, although it sounds like maybe still a little weak in the independent channel. I was curious if you could help us understand a little bit more what you're seeing with consumer demand and behavior.
Are you seeing any trade down or trade out any shifts in cuisine types from consumers any additional color would be great yeah i'll take that this is scott um so first off you know talking about just independent demand and our independent independent case volume as we talked about you know if you think about the quarter you know we had uh you know the beginning of the quarter was pretty strong we were mid single digit in january obviously february was the big you know setback for everybody in the quarter and then March kind of back to that mid-single-digit range. And as George mentioned, you know, we were up to 6% in April. So I feel really good about how that's progressing. When I think about, you know, any trade down, we really didn't see, you know, obviously on a same-store basis, restaurants were pretty flat. We performed well from a penetration and growing account standpoint, which really is what drove our independent volume. And, you know, and I'd say the last piece is from a segment standpoint. You know, our Mexican segment did really well, and also our convenience segment did really well from a food service standpoint.
And I know we've been repeating ourselves some, but I think it's important to stress that February was the month that really changed our quarter. But when we track our business, We track it closely by what our new business is and our lost business and our penetration. And virtually all of the difference in February was penetration. And it wasn't just in our independent. It was in the chain business. And also it was in convenience. And it just showed that, you know, people weren't out there. We didn't see it in our specialty business or our Vistar business. And a lot of that is kind of logical. People are at work when these weather issues happened. If they were able to get to work, they didn't go out to lunch. They hit the micro market. They hit the vending. And it was actually a positive for that part of our business. But it was all about February.
And then as a follow-up question, just curious to get your outlook on food inflation as we go through the year here. It sounds like maybe a little early for any tariff-related inflation, but would you see any opportunities for pre-buys if you do start to see inflation, particularly with your specialty and convenience segment?
Yeah, Matthew, this is Patrick. I'll start with Aaron. Maybe Scott wants to add a little more detail. But when it comes to how we're looking at inflation, again, as we reported, very much in line for Q3, very similar to what we saw in Q2. with, you know, a little bit of an uptick in food service. But Vistar and Convenience especially are staying pretty close to where they've been. And as we look into Q4, we're at least modeling that that will be very similar, that food service will be in that mid-single digits, and Vistar will be very similar to what they were in Q3, and Convenience also around 7%.
You know, it's too early to really understand what's going on with tariffs, to be honest with you and and as far as the opportunity to pre-buy uh we'll just have to look at that that's really going to be um as more information becomes available yeah the only tag onto that i would have is when we think about tariffs you know i would say that first off our biggest concern with tariffs is just the macro environment you know and and consumer share wallet and if you know if automotive or some of those industries have big impacts how does that affect the food away from home space. When it comes to cost of goods and our actual cost of goods, you know, very minor impact. We import less than 10% of our goods, and especially with Mexico and Canada, with the USMCA, it sounds like there's not going to be much of a tariff impact there. And that really minimizes what we think the impact will be to us domestically.
Operator
Thank you. And your next question comes from the line of Edward Kelly with Wells Fargo. Please go ahead. Your line is open.
Yeah. Hi. Good morning. And thanks for all the color. I wanted to follow up on organic independent case growth trends. I mean, it sounds like a pretty robust recovery in April, especially off probably what was a pretty rough February and maybe even a better end of April, you know, sort of like early May. Just curious, George, to the extent that you think that that's a good run rate for the business currently, you know, are there things that we need to consider maybe around comparisons there? And then given that, you know, the Q4 guidance at the midpoint did come down by $10 million, I guess, despite, you know, the strong start. So is that just incremental conservatism on, you know, your part? Or is there anything?
Well, we're going to be real cautious around the macro environment. What we are seeing now is a real positive, but there's been some calendar differences. These are two really good weeks for us all the time, the week before Cinco de Mayo and Mother's Day week. This week so far, we are having a really strong week. And last week was our first week that we had ever done, exceeded $1.300.000 million in sales. and like I said, this week is better. I don't know that we can take a victory lap around it yet. We'll just have to see what comes up in the month of June, and I look at what is a good run rate. If you go back and you look at this quarter, we just ended our fiscal third quarter. If the market was down about 3%, which seems to be what people think, we would have been well above our 6% target, I guess. I don't think that the market is necessarily any stronger today than it was just a matter of a few weeks ago because we don't see it in our national accounts. We've seen a nice uptick in our independent, but the national account looks a lot like April. The other thing I would like to mention as far as total case with performance, you know, we are very, very large in the casual dining area. You know, we have one that's doing exceptional right now. We have another one that's doing okay. But for the most part, they are really struggling. And we've been able to overcome that with other business and obviously with some growth from independent. So from a top-line standpoint, we feel real good going into next fiscal year. and then in our convenience business, which I'll have Scott comment, but we have had some real good wins there, and we are expecting to see much greater growth next fiscal year than we're seeing this fiscal year. Now, I'll turn it over to Scott for a minute.
Yeah, just to reflect a little more on the convenience piece that George mentioned, you know, first off, as I said in the prepared remarks, you know, the macro there has been tough. A lot of the center store categories have been down mid-single digits, and our convenience segment has outperformed that consistently quarter over quarter. And then we've talked a lot about, you know, pipeline opportunities and the selling cycle and convenience being a little slower, but, you know, have felt really good about, you know, our positioning. And over the last few weeks, we've, you know, we've had three or four big wins. Those are, you know, wins that will roll on over the course of the next, well, through the balance of the calendar year. But as George said, I think, you know, convenience is really well positioned. We'll see some more growth out of them into next year. And, you know, operationally, they've done a great job and margin-wise as well.
Then maybe just a, you know, a follow-up as it pertains to, you know, the middle part of the P&L. Gross profit dollar growth, despite, You know, weaker case volumes were, I think, better than most for modeling. I mean, I don't know about you guys. And it seems like SG&A was maybe a little bit higher. But I'm just curious how SG&A played out relative to your expectations. Was there, you know, anything, you know, within that that came in unexpectedly higher? And is there anything there that maybe translates into Q4?
Well, you know, February was our difficult sales month. It was also a difficult expense month. We shipped a lot of product out that turned around and came back. And, you know, that impacts your payroll, but it impacts your shrink. It's just really difficult to go through a period like that. But that is behind us. And the other thing we've continued to do, Scott mentioned that we have 8% more salespeople. And we've just made the decision that we're looking at that the way we always look at it. And even though it's a slow market for us to back off from continuing to move forward there, it's just going to hurt us in the future. So we're living with, you know, if you look at just from a percentage standpoint, when you're growing your people 8% and you're growing your cases 3.4, looking backwards, that's going to cost you some money. And we're willing to spend that money, and we think we're making the right decision there. Makes sense.
Operator
Thank you. And your next question comes from the line of Alex Slagle with Jeffries. Please go ahead. Your line is open.
All right. Thanks. Good morning. I think you talked about convenience trends in April, underlying trends maybe improving, and maybe kind of clarify that and whether that had to do with fuel cost moderating. if that's starting to be any kind of tailwind. I know it's been challenging. And then on convenience, I know the 4Q lap is really tough. Maybe some color on how we should think about that dynamic as we go through modeling and trying to see whether that can grow year over year.
Yeah, I wouldn't say, Alex, that we've seen any improvement in the industry itself. We just have a little better penetration and we've got some nice new business coming on. So that's what gives us the confidence. We are certainly hopeful that the industry itself is going to improve, but that's not something that we've seen at this point.
Yeah, and I'll just add on the Q4 convenience, thanks for pointing that out. But I think, you know, if if they didn't have that lap from prior year and a half, you're seeing close to double digit or double digit EBITDA growth in the fourth quarter. So we're still very happy with the trends that Comedianz has been able to deliver on the bottom lines. And I'll continue to the fourth quarter, except for that comp that he brought up.
OK. And then with the restaurants, were there any changes between kind of underlying volume dynamics and the chains versus independents worth calling out? I think you touched on it. I didn't catch that.
Well, we're certainly seeing, once again, this is just the last few weeks, but we're seeing the independent doing better. I don't know that that reflects on the industry or reflects on our customer base. Unfortunately, we haven't seen any real improvement in casual dining. We do have some QSR business that has been doing fairly well. Any comments beyond that, Scott? I think that probably covers it. No, I think that covers it.
Operator
Thank you. And your next question comes from the line of John Heinbuckle with Guggenheim. Please go ahead. Your line is open.
I wanted to start with cases per account or cases per line, rather. Right? So if lines were up 4% or so, and I think you said comp locations flat. So is that right? that cases per line down four, drop size kind of flattish. And are we seeing an inflection in drop size, right? Because I think you were down, but now it looks like, you know, April and go forward, you might actually be up.
It's another one of those. Yeah, it's another one of those, John, that it's February.
And in the month of February, we didn't see that much of a decline in lines, but we saw a big decline in cases per order okay but i mean you know point being have we seen now a sort of an inflection in drop size right because if drop size can now increase right because lines per lines per account or you know up whatever three or four cases you know per line are flat or we're down slightly are we now seeing an inflection there in um in drop size Yeah, John, as you pointed out, clearly our lines are up per account, but our drop sizes
remain relatively flat. So when you think about our growth, almost 100% of our independent growth is driven by new accounts and driven by lines per order. And that's really what's getting us there. It's really the new account growth so that the stops aren't getting bigger right now.
And one last thing for Scott Wright, when you think about the opportunity on the convenience side, I'm curious, you know, what percent of your base has now adopted, you know, all of your prepared or most of your prepared food programs, right? Pizza, chicken, et cetera. And then do you think you're getting a mid to high single digit lift on those accounts that do adopt those programs and prepared food?
Yeah, John, the way I'd answer that is I'd say we're still in the second or third inning as far as food service goes. the number of concepts that we place is growing, you know, significantly, you know, every month, every quarter, we add a lot of turnkey concepts into convenience. But when you think about 50,000 stores that we have, you know, we've got a long, a long runway ahead of us. I think we're getting better at it. Our convenience segment's doing really well there. And to your point, you know, in food service, whether it be coming out of convenience or whether it be coming from PFS into convenience. We're growing in that mid-single to low double-digit range on a pretty consistent basis.
Operator
Thank you. And your next question comes from the line of Kelly Banya with BMO Capital. Please go ahead. Your line is open.
Hi. Good morning. Thanks for taking our question. George, I was just wondering how you are seeing smaller competitors and other competitors react to this environment? Obviously, February was very tough, but it feels like it could remain volatile here. And so just are you seeing others react more with respect to costs and service levels? And is that creating any areas where you can lean into from a market share perspective?
Well, I would say that the market is more competitive than it has been really in quite a while, probably going back to the Great Recession. And I think that's normal when you have volume harder to get. I think things are going to get more competitive. As far as the smaller competitors, if you consider the information that's made as far as how the restaurant part of the industry is doing versus what we see on our CERCANA report, I think it shows that the large distributors are continuing to get a bigger market share than the smaller ones would be getting.
And I guess on that note, just on competition, are you seeing any change in competition for the sales force in terms of the talent you're able to hire, the cost of hiring that talent, any color on that front we're not seeing any change there at all we are we have a great pipeline of sales people that are available that have experience and that's why we're part of why we're continuing to grow our sales force at the rate we're growing it that's very helpful and a last one for me i know you have the analyst day um coming up in a couple of weeks here but um Lots of questions on what that guidance could look like, and just curious if you wanted to give us any bit of a teaser for how to think about your plans for the next several Hey, Kelly.
This is Patrick. I'll just jump in here. We're very excited to see all of you at Investor Day, and we'll be really happy to share the guidance at that time. We don't tease.
Operator
Thank you. And your next question comes from the line of Bryan Harbor with Morgan Stanley. Please go ahead. Roadline is open.
Yeah, thanks. Good morning, guys. George, that comment about competition, I mean, is it sort of like changes in price at the margin? Is that what you're referring to? Or, like, how does that manifest itself?
Well, you know, I think that we're in an industry that's pretty rational, but we all want to grow. And I think that when growth is hard to come by, I think people get more competitive. We're certainly looking closely at our pricing, looking closely at our cost structure all the time. And then I would say that the prepaying or, you know, upfront monies are certainly something that has become more commonplace in our industry. Other than that, I really don't see changes.
With Vistar, I guess, specialty now, did you sort of expect it to be a bit slower quarter there? I guess, you know, and also just as I think about kind of the future growth rate, would, you know, 4Q look similar? Have you seen kind of recovery in that business too? I know the comparison is a little bit different, but could you talk about your expectations there?
Sure, I'll take that. This is Scott. We called out last quarter in our remarks that, you know, we knew we were going to have a pressured quarter for Vistar, you know, particularly in the theater space. You know, Q3 is traditionally not a great, you know, theater quarter. Also, you know, we had some pressure in the value channel as well, which, you know, we expected. As we've moved, you know, into March and into April, similar to the other segments, Theater's had great content. Theater looks like Q4 is going to be really strong content as well. But, you know, beyond theater, you know, Vistar's a very diverse business. We feel really good about the pipeline we have with our e-commerce platform. And then also with return to work, we're starting to see some real signs there in our office coffee and our vending. So we're really optimistic about Vistar. And, you know, they had a couple tough quarters to start the year. obviously had a nice EBITDA quarter this quarter, and we'll start to see some growth out of that segment. So, really, really feel good about where they're headed.
Operator
Thank you. And your next question comes from the line of Jake Bartlett with Truist Securities. Please go ahead. Your line is open.
Great. Thanks for taking the question. I'm sorry to go back to some of the near-term dynamics, but I just want to make sure I understood what's happening in April. And one question is whether spring break shift, you know, along with Easter, it seems like that could have had a pretty big impact. We just want to make sure that that's not, you know, what's partially driving the better April. And also, just looking back at last year, I believe you started the quarter with a fairly solid April. And so the question is what your compares are like in the next couple of months. And then I have another question.
Well, that's part of why we're being cautious. As far as the change in Easter and Easter being later, we're past that Easter for both years is gone. The week after Easter is always a light week for us. So our April, although a good month, was very choppy. And when we did have, we were up against the end of Easter. Those were tough comparisons. I don't think the shift mattered, really. It just all washed out, and I don't think it mattered. And we're in a little different time here, too. I mean, Cinco de Mayo is always a great week for us, and Mother's Day is always close to Cinco de Mayo. And we had a real good week last week, and we didn't expect this week to start out as big as it did, but I think a lot of people didn't bring their product in for Cinco de Mayo until Monday. And those are just all the reasons I think you're bringing up is why we're cautious right now. There has been all year, really, there's been some calendar challenges. And even a small thing, having Valentine's Day on the weekend had a big impact on our sales because you didn't get that extra really good night during in that week.
Great. That's helpful. My next question is about your margin expectations in the fourth quarter. And if I'm doing the math right, it looks like you're expecting fairly minimal EBITDA margin expansion in the fourth quarter. The question is whether that's just due to the compare, the really strong expansion you had last fourth quarter. But also, if you can talk to some of your productivity measures, how you feel like you're doing in terms of your productivity and efficiencies and just anything we should think about in terms of what you're proactively doing to just protect your margins.
Yeah. First off, the biggest call I'd have on EBITDA margins in the quarter, I think we've talked a little bit about convenience. They had a pretty sizable gain in Q4 of last year. So that's one call out. When I think about margins overall. I'm really pleased with how all three segments are operating from a margin standpoint. It really comes down to a few things. One of those is mix. Across all three segments, I think we've done a great job with mix. Growing independent cases, we've done a really nice job with chain margins and food service as well. And that's really just as we've looked at that portfolio of customers. We've got some great customers that we've onboarded. So I feel really good about how we're progressing margin-wise in food service. Convenience has done well. And a lot of that is just our growth in key categories. I think about food service and some of those categories that drive higher margins. And similarly in Vistar as well, in our specialty segment, some of the segments that are growing tend to be our higher margin segments. The last thing I'll call out around margins is just procurement strategies. We talked a little bit about it last quarter. You know, for the last year, we've been, you know, bringing our three segments together, having them work together on common vendors. We've now got, you know, Cheney and Jose Santiago, and obviously, we're able to look at the deals that, you know, they'd negotiated as standalone and work through some of those opportunities. So, we feel like our procurement opportunity is also a way to continue to keep our margins strong.
Operator
Thank you. And your next question comes from the line of Andrew Wolf with CLK. Please go ahead. Your line is open.
Thanks. I also wanted to circle back with a follow-up on the implied the Q4 guide. So, I understand, you know, to be conservative in this environment, but, you know, it does back into a slowing to take out the acquisitions or actually kind of a maintenance of the Q3 organic EBITDA growth rate. So, you know, there's different explanations. One is conservative. And when you think about conservatism, are you thinking more in terms of can you stay at the 6% case growth organically?
Or is it more, I think you alluded to, George, being very competitive now and maybe some impact in gross profit per case, you know, if you were to come in, you know, you know, somewhere in the middle of your range instead of, you know, what I think people expect might be a little better well you know our guidance is a reflection of how our people are looking at things and they tend to be conservative we want them to be conservative but the competitive nature of the industry may have something to do that they're the ones that are on the front line dealing with that every day but i think we feel with our guidance And we would like to think that we'll be able to stay at at least a 6% independent growth. But as I mentioned earlier, and Scott's mentioned too, we've got to be cautious. We really don't, at this point, know what June is going to be. But right now, we feel good.
Okay, Andrew, I was just going to add real quick. Obviously, we've taken a variety of scenarios, both economic and consumer and backdrop, as George has said. So we feel we're being prudent, but like I had made in my comments, we feel that this range is appropriate. And based on what we've seen to date, we feel good about the guidance that we've given. Got it.
Okay, I thought that was what you were saying. I just wanted to probe it a bit. And, Scott, on convenience, you know, going back to when Cormark was public, you know, a lot of the attributes to when customers was on fresh, consolidated delivery, making their life easier to, you know, from an operational perspective. Is that still the case, or is it now you've got sort of a third thing here with better capabilities and food service? You know, could you just sort of give us – I know you'll probably touch on this quite a little more at the investor day, but a little bit of what's driving the new customer wins there in the convenience side.
No, that's a great question, Andy. And when I think about, you know, the evolution of convenience stores, you're right, and I know you used to cover the space. you know fresh was the calling card you know 10 years ago and as fresh of all fresh really you know morphed into a broader offering you know outside of center stores so that's really you know food away from home and you know i think the consumer expectation got a lot higher it wasn't packaged sandwiches and burritos anymore it became high quality restaurant quality food and convenience stores. And I think, you know, that's the real driver behind, you know, our message to the independent and the chain. And I think that, you know, it's gone a long way for us to pick up new accounts and gain share.
Operator
Thank you. And your next question comes from the line of Jeffrey Bernstein. With Barclays, please go ahead. Your line is open.
Great. Thank Thank you very much. My first question is just on the next three-year outlook, and I recognize that's likely to come later this month, but George, just wondering conceptually, how do you get your arms around forecasting the top and bottom line in the next few years when you're battling through the current very cautious dynamic environment? Obviously, visibility is limited. You think there's lots of opportunity for market share, but do you change your thought process in terms of how you guide for the next few years when you're in an environment like this? or are you able to see through that and kind of see what the underlying opportunity is for the business? And then I had one follow-up.
I think the current environment always affects you, right? I mean, a lot of what we do as far as our projections come from our people in the field. And like I said a few minutes ago, they're the ones that are in the heat of the battle every day. But I will also tell you that they're very confident. I think February shook everybody. That's natural. You're trying to figure out how much of it is the consumer, how much of it's the weather, how much of it is just all of the change in rhetoric around tariffs and where we're headed. But I think that we're looking at it the same way we did three years ago. We're trying to gauge. Another thing that's difficult to gauge is some of these smaller acquisitions that you can get that can help things. We have a nice M&A pipeline right now. Not the size of what we've done in the past at this point, but we have a nice group there. And we're just putting all those things together. And in just a few weeks, right? Just a few weeks, we'll have a real good presentation for everybody.
Yeah, and Jeffrey, I'll just add a couple other comments. I mean, you know, as we close out this three-year guidance, as I mentioned, we're well within our sales range and we're exceeding the EBITDA range that we gave three years ago. So what you guys are all going to hear in a few weeks is we're very consistent in our approach and our strategies.
You'll hear some new things, but we feel like the last three years have executed very well and we've hit these numbers and we'll provide you some new numbers and how we're going to execute behind those but we're again we're looking very forward to seeing all of you in New York in a few weeks now we appreciate you coming to New York my follow-up is just on that M&A George Lee just mentioned obviously it's a difficult choppy environment for you you would think it's way more challenged for smaller mid-sized food service distribution peers so I'm just wondering if you could talk about the opportunity I think you mentioned a robust pipeline and I think in your prepared remarks you mentioned taking advantage of market this location. I wasn't sure if that's what you were referring to, but any thoughts in terms of how the current environment helps or hurts the opportunity for you to be more aggressive with M&A versus less? Thank you.
Well, obviously, we've got some focus on paying down debt right now, even though for us, historically, the debt levels we're at today, if you take into account when we were private and when we were public, we're actually at kind of a low level of debt, and we tend to be maybe a little fearless about the amount of debt we have. But paying down debt is important to us, and we feel that we can do some fairly sizable acquisitions and not have the concern around the debt. So if you look at since the purchase of Jose Santiago and of Cheney, had we not bought Cheney, which would have been a terrible thing, But had we not, we would have pretty much paid down the debt from Jose Santiago. So we paid down debt quickly, and we're going to continue to be very opportunistic. And we have acquisitions available to us today that were in good shape from a negotiation standpoint. And they're not real significant, but they will help us from a growth standpoint. And a couple of them we'll probably have in our three-year plan, but probably only a couple. That's a long answer, but that's just kind of where we sit today.
Understood. But nothing that you see of significant size. These are more good opportunities, but not significant to the business. That's correct. Thank you.
Operator
Thank you. And your next question comes from the line of Peter Sala with BTIG. Please go ahead. Your line is open.
Great. Thanks for taking the question. Just two questions. I guess the first one is, are you seeing any changes in independent restaurant formation given tariffs and rising construction costs? We've heard some concern about this. Just curious what you guys are seeing out in the field.
No, I think it's a little too early to tell. I mean, the tariff activity really has just started over the last couple of months. We haven't had any, you know, customers that have hit the pause button that I'm aware of. You know, I think the independent pipeline and the independent restaurant, you know, is still very healthy and vibrant. Obviously, if we look back over the last four months, with the exception of February, you know, it's been pretty strong growth for us. You know, obviously, their same store sales are a little bit pressured right now. But, you know, that's a, you know, that's a vibrant industry, and I think you'll continue to see new restaurants pop up on a regular basis.
And then just, you know, I'm curious if you guys can comment a little bit on, you know, performance or sales performance by geography. We've heard some, you know, some thoughts that some of the areas more heavily related to tourism have seen a bigger decline. Have you guys seen the same, or is it more of a broad-based and more confined to that February time frame?
Yeah, I would say that the Northeast, if you take out when the bad weather times are, is surprisingly doing the best as far as increases go. Florida's been a little bit challenged. many closures there, not just, you know, hurricane-related, but closures in general, you know, restaurants that just haven't been successful. I'd say most of the rest of the country is all fairly similar, but, you know, slight declines, but similar.
Operator
Thank you. And there are no further questions at this time. I will now turn the program back to Bill Marshall for closing remarks.
Thank you for joining our call today. If you have any follow-up questions, please contact us at Investor Relations.
Operator
Thank you. This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.
