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

Thank you, and good morning. We're here with George Holm, PFG's CEO; Patrick Hatcher, PFG's CFO; and Scott McPherson, PFG's COO. We issued a press release this morning regarding our 2025 fiscal fourth quarter results, which can be found in the Investor Relations section of our website at pfgc.com. During our call today, unless otherwise stated, we are comparing results to the results in the same period in fiscal 2024. Any reference to 2025, 2026 or specific quarters refers to our fiscal calendar unless otherwise stated. The results discussed on this call will include GAAP and non-GAAP results adjusted for certain items. The reconciliation of these non-GAAP measures to the corresponding GAAP measures can be found at the back of the earnings release. Our remarks on this call and in the earnings release contain forward-looking statements and projections of future results. Please review the cautionary forward-looking statements section in today's earnings release and our SEC filings for various factors that could cause our actual results to differ materially from our forward-looking statements and projections. With that, I'd like to turn the call over to George.

Thanks, Bill. Good morning, everyone, and thank you for joining our call today. I'm excited to review our company's progress through fiscal 2025 and provide our current thoughts on the industry and external environment. PFG finished the fiscal year with excellent results and momentum to set us up for a strong 2026. While the food away-from-home industry is still not quite operating at a level we would like, our company has executed our strategy to take market share and win new business while improving our margins. In 2025, we grew our top line and have now exceeded the $63 billion mark. Importantly, we grew our bottom line even faster through a combination of improving business mix and diligent focus on our gross and operating margins. As we highlighted at our Investor Day in May, PFG has carved out a unique niche in the food away-from-home market. Our range of capabilities allow our associates to aggressively pursue new business anywhere that consumers purchase food away from home with little restriction on where we can grow. At the same time, there is still ample white space for us to grow into over time, which we believe provides a runway of strong top and bottom line performance for many years to come. We would not be in this position without the collaboration across our segments, Foodservice, Convenience and Specialty. At Investor Day, we described our PFG One strategy, which is focused on capturing top and bottom line opportunities across the entire PFG platform. As we closed out the fiscal year, all our business units were contributing to our performance. Through a volatile market, each business gained momentum. We're excited about PFG's potential in 2026 as we expect to propel our results to new highs. In a moment, Patrick will provide a detailed review…

Thank you, George, and good morning, everyone. I'm excited to take you through our recent performance and discuss how we plan to continue our success in 2026. As George mentioned, we had a strong finish to 2025 picking up momentum into the summer months and maintaining strong growth in the early days of fiscal 2026. Despite an imperfect backdrop, our team is executing at a high level, which is reflected in our results and outlook. We plan on building upon this momentum in the months ahead. Let's walk through a number of areas where we've had success due to the strategic actions we've taken. Starting with our Foodservice business, as George described, we were able to accelerate our performance in the quarter through a combination of strong execution and broader market improvement. Restaurant foot traffic has improved month by month. And while it declined year-over-year during the quarter, our Foodservice organization was able to offset this headwind with new accounts and increased penetration into existing accounts driving our nearly 6% organic independent case growth for the quarter. Our commitment to adding high-quality sales force talent is unwavering and a key component to our growth. In Q4, our total organic independent case growth accelerated 250 basis points sequentially, which was faster than the rate of industry foot traffic improvement, showing our consistent ability to take market share. There are several factors underpinning this success. In the quarter, we grew new independent accounts by 5.3%, the highest level in 2025. It is also the first time in 2025 that total organic case growth was greater than new account additions, which translates to increased penetration within existing accounts. We also saw our lines per drop increase in the quarter, which has been a consistent component of our success. Our ability to increase penetration…

Thank you, Scott, and good morning, everyone. This morning, I will review our financial results for our fourth quarter and full year, provide color on our financial position and review the guidance we announced for 2026. We are pleased with our 2025 performance, ending the period in a strong financial position with momentum into 2026. In fiscal 2025, we achieved net sales above the midpoint of the long-term target range we announced in 2022 with adjusted EBITDA above the high end of the target range. The financial priorities we outlined at our Investor Day in May support our operating strategy and new 3-year sales and adjusted EBITDA targets. We are focused on translating our profit into strong and stable cash flow, which we then look to deploy in value- creating investments and cash return to shareholders. We believe that these initiatives have put us on a path to deliver strong returns over the next 3 years. Some financial highlights from the quarter and year. PFG's total net sales grew 11.5% in the fourth quarter as strong underlying trends in all 3 of our operating segments were boosted by the addition of José Santiago and Cheney Brothers. As a reminder, we will begin lapping the José Santiago acquisition in the first quarter of 2026. We have one more quarter of incremental acquisition contribution from Cheney Brothers and we'll begin lapping these results in the second week of the second quarter. Total company cost inflation was about 4.3% for the fourth quarter, a slight sequential slowdown from the third quarter. The main driver of the lower inflation was in the foodservice area, which experienced product cost inflation of 2.5% in the quarter, more than 1 point lower than the third quarter. The deceleration in foodservice inflation was largely the result of lower…

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

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

Well, this is George. So far, July and the first couple of weeks of August, we have seen an uptick primarily in our independent Foodservice business. I'm going to have Scott kind of comment on the other channels. I guess when you just go to our prepared remarks, I think there's a lot of confidence around here that we'll be able to achieve that 6% number this year, but we are off to a start that gives us that type of confidence.

Yes. I think the other comment I'd make there is if you look at Black Box results over the quarter, they continued to improve over the fourth quarter and we actually saw our first positive result in July. So really positive trends around traffic and restaurant. Looking at the other 2 segments, Convenience segment continues to be pressured. But what gives us a lot of confidence in Convenience is we continue to grow share and outperform there. And we talked about in the remarks a couple of really nice wins that we'll add on over the next couple of quarters that will really contribute to our growth and profitability in Convenience. And then when I think about Specialty segment, we've got a couple of channels that are still pressured. But overall, we had a really nice fourth quarter, have a lot of momentum in our e-commerce space and a couple of our other segments. The return to work really helps us across all 3 of our segments. So we feel really good about the landscape.

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

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

Yes, Mark, this is Scott. Clearly, in the fourth quarter, we saw great availability of talent. Fourth quarter was actually our strongest hiring quarter of the year. And for the year, we finished in the high 8% range as far as new sales people that we've hired over the course of the year. We're a decentralized company. We allow our opcos to make those decisions. We have some that are hiring at a clip greater than 8 % or 9% and some that are a little lower than that. But when we look at that, we got 6% case growth, I feel really good about that momentum. And even with that, we have really good leverage in the Foodservice space. So we feel really good about the landscape of hiring. We've got great talent available to us and feel like we're a great place for them to land.

Yes, I'll make a couple of other comments there. I mean, on paper, it looks like we're hiring, I guess, beyond the pace that we typically do. The restaurant business has been challenged for quite a while where we get our numbers as far as market share and the best information we can get shows that in our Foodservice business, where about 82% of our business is restaurants, where the rest of the industry is about 57%. So we're really dependent on the growth of restaurants. I think when you go through as many quarters as we went through where it was challenged, you end up spending a lot of time on defense when we like to go out and aggressively pursue business. So for us to get that people count up to get our salespeople in a position where they voluntarily take some territory splits, and we got the people to let that happen has been very good for us. We'll probably down the road come down a little bit, like Scott says, it's their decisions. I would suspect that that's what will happen. But having what our average salesperson does [ a week and ] business come down has been good for us. When you look back all the way back to that COVID period, and we weren't hiring and we didn't realize the level to which our people were improving until the rebound from COVID. And then you wake up one day and the average person is doing probably more business than what you would want to have to put out consistent growth. I mean there's only so many hours in a day for them. And when we have our calls with our people, Scott ends every call, every single call encouraging our people to add salespeople. And for the most part, that's what they're doing. Some of them are in a little different position. They've already done that. But we're getting good response from our people and an 8.8% number for us today, it's a big expense to handle, but it is the right move for us to make.

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

Just wanted to talk about the procurement savings target that you outlined at the Analyst Day? And how much progress there, does that contribute to the fiscal '26 outlook specifically?

Kelly, this is Scott. So we talked a lot about that at Investor Day. We feel really good about our progress. And just to take a step back, we are always constantly working with our vendors and working on procurement opportunities. But as we looked at the landscape, we made the acquisitions of Cheney Brothers and José Santiago, and we continue to do a much better job working together between our segments. We saw an opportunity to create win-win scenarios with our vendors, which is what we're doing today. I think as I look at the spread over our 3-year guidance, I think that spread of procurement synergy will be pretty balanced. And we're well on pace in this first year to achieve that.

Okay. That's helpful. And I just wanted to also ask a couple of questions about Convenience. Obviously, the broader restaurant traffic is really improving here, but the Convenience division remains kind of pressured. Obviously, you have some new business wins. But I was just curious, maybe, Scott, what do you think needs to happen here? It looks like maybe easier comparisons were starting to help in the industry but just when do you think that will start to turn, if at all, is that in your outlook? What do you think the operators need to do? And just any color on foodservice kind of sales and where that's tracking in that division?

Sure, Kelly. When I look at the landscape of Convenience overall, one of the things that really hurt Convenience was the work from home. And as we've seen that increase, and I see nationally numbers where people are back in the office, 3.5 days a week, a lot of people are 4 and 5, you think about that commuter traffic that morning traffic that's getting coffee and breakfast, that was a big part of where Convenience lost. And so definitely, I think the macro is improving a little bit. We've talked a little bit about the illicit vape issue in the country. And I think that this administration is looking a little more favorable on that, meaning that they're going to enforce it. That's a big upside for our Convenience segment as well. And then I think the other thing that gives me great confidence is we continue to grow share. And not just the big customer wins that we've talked about, but our street folks are out there, our independent performance is getting better. And so I think we're going to fare well even if the macro remains pretty challenged.

Yes. And Kelly, to that last point on the outlook. We really didn't plan for the macro to improve. Really what's in the outlook as far as Convenience goes is just the excellent business wins that Scott talked about earlier in his remarks. And just as you look at how they finished up Q4, they have just a lot of momentum. They're executing extremely well. So it's really more of that than, say, that the macro is going to improve as far as the outlook goes.

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

Congrats. I wanted to just ask on the independent case growth side. The independent account growth of 5.3%, does that growth compound over time as presumably new accounts come in with smaller basket sizes and then build. Can you just talk about that dynamic as you've seen such strong new account growth and how that translates to increased penetration in future quarters?

We look real close at the average customer within our new business versus existing business. And there's not much difference. I mean, it's certainly less, but it's not much less. That's a tribute to our salespeople when they pick up an account, they get a big piece of that business right away. The other thing that's been a positive for us is that we've been growing our lines all through this tough period of time. But so far this fiscal year and really most of the last quarter, we've been seeing our sales grow as fast as our lines have grown, which before [ we've not ] seen that because they weren't buying as much of the product that we sold to them both years. So that's been a real positive for us as well. And then by further beefing up our salespeople, what we found, and this is normal, I think, in any environment, it gets really competitive, and the actual channel isn't growing, people get more aggressive. And by having the people out there and having our existing people calling on new accounts as we do some splits of the territories, what we found is we're not losing accounts at the rate we were before. I mean we feel like we've always been good with that. But when we have single-digit reductions in accounts from the previous year in an industry that's got the kind of turnover that we have, that's a good sign for us. And we've been able to get that accomplished.

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

We feel good about what we have going on right now. We have some nice conversations, some that are actionable. Nothing that I would call in our history that I would call significant in size. But it's a great market today. I mean there's a great amount of activity.

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

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

Nice quarter. George, I wanted to ask you to maybe just kind of like take a step back on the industry. You've got more, I think, experience here than probably anybody. Things have gotten better. But if we look out, we have tariff pricing that's starting to come in, that's followed by a large refund cycle. I'm just kind of curious as to whether you think some of the volatility that we've seen continues. And is your confidence really just around your own ability to execute against that. But just any color on bigger picture and how you're thinking about this backdrop would be helpful.

Well, the improvement is nice to see, but it's still negative. We got mixed today with a couple of chains that announced real mixed results. We have a lot of casual dining and a lot of them that are really suffering. But there's a couple that have made, one, a good comeback and one, an incredible comeback. So it can still be done out there. But for us to rely on the industry to grow right now, I would not want to do that. I think a lot of it is around pricing. Our customers are dealing with a lot of increased cost and they've had to pass that on. And I think that's one of the things that keeps the industry a little lid on it. If it stays as it is now with what we got going on, I've got a high level of confidence that we'll be in that 6% number or better because that's what we're doing today. And I just -- I mean, it could get worse, I guess, but I don't think so. I think that we're going to continue to see just a little better all the time, but I don't see a big jump. And I don't see it in Convenience either. We're very, very large in candy and snacks as an organization. Those prices are up significantly and it looks like there'll be more and more states that are going to take that out of the snack card. So I think that's going to impact us. But if you just throw it all in a bucket and look at it in entirety, I think that we're in the right channels, Ed, and I think it's going to go real well for us.

Great. And then I just wanted to follow up maybe for Scott, maybe for Patrick. I'm not sure. But on the Convenience side, you have some new customer wins coming in. How significant in size is that? And then you mentioned some start-up costs sort of early on. So I'm kind of curious as to how you're thinking about the cadence of EBITDA growth in Convenience as the year progresses and what's a good target in terms of EBITDA growth in that business for the year?

Yes. Ed, this is Scott. So obviously, we've called out that one of those chains will roll on starting September, the other one in December. So it kind of gives you a timing. They'll probably roll on over a handful of weeks. We're obviously, from the September one, we're hiring right now. So we're obviously investing in labor and fleet and some facility modification to prepare for all of that. So we feel like we're in a great position there. But obviously, in this probably Q2, I think our profits will be a little bit moderated just because of the investment that we're making, but I think they'll normalize into Q3 and Q4. We're not going to give a specific target on EBITDA growth for Convenience, but we feel really good about their performance in the quarter in 2025 and also into 2026. We feel really good about how they're going to perform.

We'll go next to Alex Slagle with Jefferies.

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

Yes. I'll start there and maybe Patrick will tag on to this. When I think about margins across the 3 segments, mix is probably the #1 theme. We had really nice mixed performance in the Foodservice segment. Obviously, with our 6% independent case growth, that really helps margins. In the Convenience space, it's really about the commodities that we're selling, much more in the foodservice, snack and candy area, we're seeing nice growth -- nice profit growth. So really, it's kind of a commodity mix shift there and very similar in the Specialty segment as well. So mix across all 3 segments was really good. The other thing I'd say is we have really nice OpEx leverage across all 3 segments as well. So all of them are performing well from an operating standpoint, warehouse transportation, hiring has been really good, retention of employees, overtime, safety, feel really good about that landscape. You mentioned the procurement savings, as I mentioned earlier, we feel like that's definitely a part of it and feel good about the pathway that we're on there. Patrick, I don't know if you want to...

Yes. I'll just touch on a couple of things, Alex. One, yes, we're really pleased with the margin improvement we saw in Q4 and full year fiscal '25 and are looking forward to continuing that in '26. You brought up inventory gains. Inventory gains were a slight benefit in Q4. But as we look out over 2026 quarter-by-quarter, but we don't expect to see much in terms of inventory gains, and that's what we modeled in our guidance both for Q1 and the full fiscal year.

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

Yes. Alex, I'd say, first off, I go to Black Box and just look at traffic. We saw traffic improve sequentially over Q4. And then as I mentioned, July was really the first positive month. But to your comment, when I look at QSR segment, when I look at fast casual segment, it's a little bit the haves and the have-nots. As George mentioned, those that have created a value proposition with price to value seem to be performing really well. And then we have some other chains that are really struggling in that space. So that's kind of a blend. We've been very fortunate, as we mentioned, our chain growth was really strong. We've been very fortunate to partner with some of those more progressive [ restaurateurs ] out there, and it's really paid off for us.

Yes, I will call out for our chain people, both within our broad line and within our opcos that are strictly chain. We gave them a pretty big challenge. We have some chains that have really dropped off. And we tend to be very loyal to them, and we hang in there and hope that they come back as we've seen others that have come back. But we challenge them to get themselves in a position where they could handle more SKUs than what they're handling today and to go out and get a different type of customer and customers that are in a growth mode and they've been able to do that and there was no small [ feat ]. That took -- it took some courage to get done what they got done. And we're in a real good spot. It was good for Q4. We've got a good bit of time ahead of this, where we have some good business in place that does not have sales histories and they'll be a big contributor for us this year.

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

Maybe on that topic, not to make this too macro focused, but I think you have a pretty good perspective, right? I would say -- and this is sort of a black box comment, but I would say quick service has actually been pretty uninspiring lately. I know it's kind of better quarter-over-quarter, but it seems like that's the part of the industry that's a little more challenged. So I'm curious, I guess, if you -- like on the independent side, do you see full service kind of doing better than quick service. Is that sort of similar to what's going on with chains? Do you think this is sort of demographics that explain this? Do you think it's just sort of experiences that are still holding up better? I mean what would you conclude just kind of looking across your customer base?

QSR has been interesting because where we're doing well, and we're not huge in that category, but we certainly have our share. And where we're doing well, it's actually at the top of the market in the higher-priced QSRs, particularly one in the burger area that's doing great. We got a couple in chicken that are really, really doing well. But I think that what may be here to stay, there's kind of what is hot and if somebody is resonating with the consumer, everybody knows it very quick because the social media is such a big part of what happens in the chain restaurant business. And sometimes, it's just an item that will bring somebody up to a different level from where they were before. I would agree that, if you want to call it, casual dining, family dining, sit-down type restaurants of late, they appear to be coming back. Not everybody, of course. Like I said, social media is a big component here. But it seems like people are doing a little less takeout. Delivery seems to still be big, but not -- I don't know that it's growing fast. I think people are wanting to get out again and enjoy themselves. And even with the kind of growth that we're running now in independent, we don't see that kind of growth in our takeout programs. So I think people are coming back to the restaurants a bit.

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

Well, we don't do much in the way of integration early with acquisitions because we want them to be the ones that drive what type of integration that we do. There are some obvious things that we get done early on that have to be done. But I would say with both of them that it's moving at a pace that we typically do see. I mean it's really been for us, year 3 just seems to be the year that we tend to take off. We saw that with Reinhart. We're seeing it today with Merchants. The legacy Merchants companies are just on fire right now, and it's up 3 years. Cheney and José Santiago are both extremely well-managed businesses. I think that after our purchase of Cheney, we saw that market get a lot more competitive, particularly the Florida part of that market, and that's probably normal in that type of situation. And they didn't, for a while, they've put out kind of the [ historical ] type of growth, but now they're back and they're getting that done again. So we're just so confident in those 2 companies. But I can't speak to any significant amount of integration that we've done at this point.

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

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

I think the additional people that we've added, I think, is helping our penetration, but I think it will help more as we move forward. Training always, we're going to a lot more online training but it is very decentralized and we do a lot of things around best practice, but that between them or maybe some coaching that comes from Scott or from Steve Broad as to who to go talk to. But they run their businesses. And I think that things move in trends within our company, and the trend has been to beef it up, to get the more experienced people calling on new accounts and get our people where they have more time to work on penetration because it is certainly the most difficult part of our business today. People are busy. A lot of ordering is done online and it's less of an opportunity to penetrate better or to pull SKUs from your competitor. This getting time freed up and getting the real experienced, talented people out there, I think that's where we're headed. And I think that would be in just about every company. I think, Scott, you would look at it that way, too.

Agree.

All right. Maybe for Scott, what does the RFP landscape look like, right, for -- on the Core-Mark side, right? Obviously, that comes in over time. But is that now sort of that much larger, right, over the next couple of years? And I wouldn't think you would lose many of those, particularly new ones, not ones that you have. How do you think about preparing capacity for those wins? You don't even [indiscernible] ahead of time, but where do you stand with that?

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

And John, as you know, we've talked about this for several quarters. We continue to invest in CapEx to continue to expand buildings, get new buildings across all 3 segments. And primarily our focus, as we said, has been Foodservice. But as Scott just alluded to, we have done this in Convenience and even in Specialty as well.

Yes, I want to make a couple of comments there. We're in 3 different businesses. We certainly don't have any intention of getting any more complicated than we are. It looks complicated, but people that manage each one of those businesses may live and die those businesses. When we say our priority is Foodservice, it certainly is. I have a tremendous amount of confidence in how Core-Mark is managed today and the same for Vistar. And when they need CapEx, it's not like they're fighting for CapEx because we're doing it in another direction. If they have something compelling, we have the confidence in them that they'll make good use of it. And that's what our people in Core-Mark did. I mean we put 2 places in exactly the right places in anticipation of the 2 pieces of business that we got. So once again, I'll use that word, that took a lot of courage and a lot of commitment. We've always -- in the past, we've also been careful to spend money where we had a tremendous amount of confidence that it was going to get a return. So early on, we replaced almost every Vistar facility. That was our best run business at the time, still is extraordinarily well run and the most profitable. Then we spent a lot of money where we have big broadliners and we've gotten a great payback from that. Now what we've done is we've gone in the West where we are very subscale, and we've built new buildings. We've done big additions. That's part of why we have 8.8% more people. We're gearing up there. And I think that we've been so successful with our CapEx that those people have confidence and we're working to support them. So I've made a comment that I think our CapEx is going to get more back to that pretty consistent [indiscernible] point of sales. But if we have opportunities, we'll take it higher than that. If we don't have the opportunities, we're not going to throw money away and invest just for the sake of investing. But I feel real good about what we're doing around gaining capacity.

Our next question comes from Jeffrey Bernstein with Barclays.

My first question is just on following up on the M&A. Obviously, from a macro perspective, still somewhat difficult. I would think it's more challenged for your smaller Foodservice distribution peers. I think you mentioned you have a good M&A pipeline, but nothing of significant size, and I think that's been a consistent message. So as an alternative, George, how do you feel about your organic growth, specifically as you think about the West Coast, whether you go full speed ahead organic? Or do you prefer to wait for the M&A? It seems like it's a difficult dance to decide whether to wait versus just pursue the organic, which will presumably take a little bit more time? How do you think about balancing that? And then I had one follow-up.

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

Yes. I'd say structurally, we talked a little bit at Investor Day. One of the big challenges in the West of achieving broader scale outside of capacity is just our brands. And that's one of our most powerful tools on the street and just having that critical mass in the West has been a challenge. So we have invested in a redistribution facility in the West that will allow us to take brands much more broadly to those opcos. So just another lever that we can pull as we kind of march that direction.

And probably goes without saying that doesn't mean that if we had the right opportunity from an M&A standpoint that we wouldn't take advantage of that. And you mentioned smaller ones. I mean if our people were really committed to some type of fold in, I guess I would be there, but I've never found that to be a successful route to go. You tend to not hold on to the right percentage of the business. And we like to do acquisitions where we feel we can hold on to all the business and then grow it from there. And if you're buying somebody that is a fold-in or whatever you want to call them, and their SKU base is significantly different, change SKUs, change customers is typically what happens. So we don't have a huge appetite for that, maybe no appetite at all.

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

Yes. No, it's a great question. I appreciate it. So as you look -- as you know, the reason we gave you the quarterly cadence is exactly for that reason, as we want you to understand better the cadence in Q1. And so a couple of things. We actually have lapped the José Santiago, but both for José Santiago and Cheney, which we'll lap in the second quarter, this is their slower period of sales, the summer months are. So the quarter of September would be a slower period for them. In fact, for Cheney, July is similar to what January is for the rest of Foodservice. So we just -- we wanted to definitely give you that Q1 look to help you understand just that cadence. But we really are anchored on the full year, and we feel, like I said before, really confident in our full year guidance. And again, it is August, so just starting the year, but we wanted to give that outlook both for the Q1 and the full year, obviously.

And also I want to remind you, and these are both very positive things, but we needed to keep them -- take them into account with Q1. One is we're investing very heavily right now in salespeople. And when we do that, we make sure that the compensation to our existing people doesn't suffer because of that and that they're totally on board with moving some accounts. And so we keep that into account, and that's going to taper off some as we get further into the year. And then we had those start-up costs. I mean we feel like we're going to have a great year in Core-Mark, but there's very definite start-up costs when you're bringing on that amount of business over a fairly short period of time. And we want to be able to day 1 service them as if we've always had the business. So we've got to get those people trained, ready to go and go through a period of overstaffing in our Core-Mark opco. So those 2 things we had to take into consideration and they're good problems to have.

Our next question comes from Peter Saleh with BTIG.

Great. A little over a year ago, I think you guys were talking about how the breakfast daypart was coming back, particularly, I think, on Mondays and Fridays expected to come back a little bit stronger. Can you just talk a little bit about what you're seeing? Because it seems like that daypart continues to lag, at least from what we see from the restaurant space. Just curious as to your perspective and the go-forward expectations on that daypart.

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

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

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

Very helpful. Just a follow-up on the new account growth this quarter or maybe just this year. Was there anything specific on the type of cuisine or geographies that you're seeing?

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

[Operator Instructions] We'll go next to Jake Bartlett with Truist Securities.

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

Yes. Jake, I'll start and see if anyone else wants to contribute. I mean if you look at it, again, we exited '25 with some really nice margin improvement. As we go into '26, we do have some investments, as we talked about. We also have some onboarding costs. And then those new accounts that we talked about might have some margin shift as well overall. But we feel really strongly that, again, it's August. We're looking at the numbers. We're very anchored to them. They're strong numbers in terms of growth. And I would expect that there's still some room for upside there, but it does have to do with some of the onboarding new customers and the mix shift.

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

No, I think we're just being cautious. July and the first 2 weeks of August are a good bit better than Q4 was, okay? And the 2 weeks of August are even better than what July was. But we're cautious. It's been a volatile market. But all in all, we feel good. I'll make a couple of comments back to the EBITDA margin, too. We're bringing on 2 significant Convenience accounts and the product makeup of Convenience is totally different. And that affects us in the entirety. And if you go back to where we started without having Convenience, we were less than a 2% EBITDA, and we've reworked this business over several years. If you took out Convenience, we were at 3.5% and we still have a substantial chain business. You get outside of our chains, we don't have noncommercial business, which is, for the most part, better business, and it's not something that is our focus today or will be any time in the near future. But if you take out Convenience, but you leave all of the corporate overhead in there, we're above 3.5%. And that's huge progress for us, particularly with the kind of mix of business that we have. Our big broad liners of which we have many, they're over 5%. We don't look at it that close. But we're going to continue to put a bigger portion of our gross profit dollars to the bottom line, but we're not maniacally focused on that. A lot of that is just where our mix of business comes in effect. Now we've always grown it, but we've always had a better mix of business. Can we count on that forever? I'm not sure. It just depends on what opportunities lay out there.

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

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

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