On August 7, 2024, Vestis Corp (VSTS, Financial) released its 8-K filing for the third quarter of fiscal 2024. Vestis Corp, a provider of uniform rentals and workplace supplies across the United States and Canada, reported a revenue of $698 million, a 1.6% decrease year-over-year, missing the analyst estimate of $709.11 million. The company also reported an adjusted EBITDA of $87 million, representing 12.4% of revenue.
Company Overview
Vestis Corp is a leading provider of uniform rentals and workplace supplies across the United States and Canada. The company offers a range of products including uniforms, mats, towels, linens, restroom supplies, first-aid supplies, and safety products. Vestis serves a diverse customer base, from small family-owned businesses to large corporations and national franchises.
Performance and Challenges
Vestis Corp's Q3 2024 revenue decreased by 1.6% compared to the same period last year, or 1.4% excluding the impact of foreign exchange. The decline in revenue was primarily due to lost business and higher public company costs, which outweighed the positive impact from new volume growth and pricing. The adjusted EBITDA margin also declined by 260 basis points, including a 100 basis point impact from higher public company costs.
Financial Achievements
Despite the challenges, Vestis Corp reported several financial achievements. The company generated $176 million in operating cash flow year-to-date, a 22.4% increase year-over-year. Free cash flow also increased by 22.6% to $125 million. Additionally, Vestis entered into a $250 million accounts receivable securitization facility, which is expected to reduce net leverage and net debt significantly.
Key Financial Metrics
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenue | $698.2 million | $709.4 million | -1.6% |
| Operating Income | $37.5 million | $66.3 million | -43.4% |
| Net Income | $5.0 million | $48.9 million | -89.9% |
| Adjusted EBITDA | $86.8 million | $106.3 million | -18.3% |
| Adjusted EBITDA Margin | 12.4% | 15.0% | -260 bps |
Balance Sheet and Cash Flow
Vestis Corp's net cash provided by operating activities for the nine months ended June 28, 2024, increased by 22.4% to $176.2 million. Free cash flow for the same period increased by 22.6% to $125.4 million. The company's total principal debt outstanding was $1.42 billion as of June 28, 2024, representing a $17 million reduction in the quarter.
Management Commentary
“I’m pleased we are on track to deliver our commitments in the second half and remain energized by the value creation opportunities ahead for Vestis,” said Kim Scott, President and CEO. “We continue to demonstrate the health of our business as we leverage our strong cash flows and effectively manage our balance sheet to reduce our net debt. We’ve also taken decisive actions to ensure we are well positioned and mobilized to accelerate our performance.”
Analysis
Vestis Corp's Q3 2024 results highlight both the challenges and opportunities facing the company. While revenue and adjusted EBITDA declined year-over-year, the company's strong cash flow generation and strategic initiatives, such as the accounts receivable securitization facility, position it well for future growth. The decline in revenue and adjusted EBITDA margin underscores the importance of managing costs and driving new business to offset lost contracts and higher public company expenses.
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Explore the complete 8-K earnings release (here) from Vestis Corp for further details.
