Vestis Corp Q4 FY2024 earnings call

Commercial Progress - National accounts: Won large multiyear deals with a leading national food services company and an expansion award with an existing top 10 customer, with a strong national account pipeline. - Small to medium enterprise: Early results show greater than 10% year-over-year increase in per seller productivity, with one region hitting best-in-class levels. - Route sales: Increased approximately 50% in fiscal 2024 and continued to grow over 50% year-to-date in 2025. ### Efficient Operations - Excess capacity: Approximately 35% underutilized wash capacity, allowing growth without significant CapEx. - Network optimization and merchandise reuse: Expect meaningful cost savings in 2025 from carryover benefits and additional actions. - Cost takeout initiatives: Further improving field operations cost profile and rationalizing back office G&A, with many initiatives executed in Q1 2025. ### Customer Experience - Retention: Fiscal 2024 retention rate improved by 150 basis points to 91.9%, with fourth quarter retention up over 400 basis points. October 2024 retention rate was 93.7%. - Operational initiatives: New on-time delivery notification and measurement system, and a new standard operating procedure for plants to control product shortages, with a 50% reduction in shortage-related service requests at pilot location.

Fourth quarter revenue was $684 million, and full year fiscal 2024 revenue was $2.8 billion. Fourth quarter adjusted EBITDA was $81 million, and full year adjusted EBITDA was $353 million, representing a margin of 12.6%. The Uniforms and Workplace Supplies segments had specific performance details in the call, with Uniforms down 6% year-over-year and Workplace supplies down 3% year-over-year in the fourth quarter, excluding direct sale business impact.

Fiscal 2025 revenue expected to be $2.8 billion to $2.83 billion, adjusted EBITDA $345 million to $360 million (12.3% to 12.7% margin). Core revenue growth expected 1% to 2%, adjusted EBITDA margin expansion 40 basis points. Back half of 2025 expects revenue growth 3% to 4% and EBITDA growth approaching or exceeding 10% as comps are lapped and initiatives take effect.

Risks include market uncertainties impacting pricing, potential challenges in retaining customers fully, and execution risks related to operational initiatives and cost takeout targets.

Q: Elaborate on pricing conversations and comps for 2025 A: Pricing will be positive in 2025 but has headwinds in first half; back half benefits from lapping tough comps. Confidence comes from customer-first focus, service enhancements, and new COO instilling customer service mindset Q: Status of sales force attrition and addition A: Sales force attrited, but new leadership and productivity improvements are seen. Adding new teammates will be based on monitoring existing teammate productivity; ramping time for new teammates is 4-8 weeks depending on experience Q: Progress in new wins, service quality, and pricing A: Seeing progress in new national account wins and lane expansions. Service quality improved with culture revolution, new leadership, and process improvements. Pricing has momentum with tough comps in first half but positive in back half Q: Leverage profile and CapEx in 2025 A: Expect to continue delevering using excess cash, with AR securitization and asset sales providing cash. CapEx focused on 3% of revenues for maintenance and efficiency improvements in plants Q: Retention assumptions and cost initiatives quantification A: Retention improved in 2024 and expected to continue improving in 2025. Cost initiatives include headcount reductions, tight spending controls, and accelerated logistics initiatives with carryover benefits from 2024 Q: Uniforms vs Workplace Supplies performance and frontline employee retention A: Workplace Supplies expected to outpace Uniforms. Frontline employee retention improved with engagement processes, training, new leadership, and regional structure changes Q: Sales force productivity gap and national account success reasons A: Frontline sales productivity in some regions is multiples higher than historical. National account success due to renewed focus on volume's importance for operating leverage, new leadership, and education across the organization on value of National Accounts Q: Pricing vs input costs and customer service branch performance A: Pricing will be positive in back half, balancing price increases with cost takeout. Customer service performance has pockets of outstanding, with improvement across all locations as processes are institutionalized Q: Core revenue growth explanation and tactical selling strategies A: Core revenue growth excludes one-time items, with back half benefiting from lapping comps. Tactical selling strategies focus on competing with competitors' customers and converting nonprogrammers, showing healthy balance of competitive wins and conversions