UNF - Earnings call transcript Q3 2020

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Operator

Greetings and welcome to the Third Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Steven Sintros, President and Chief Executive Officer. Please go ahead.

Steven Sintros

morning. good and you Thank I am Chief Officer. President Sintros, UniFirst’s and Executive Steven

that forward-looking call call results complete remarks, on brief for O'Connor, today to President the respect our words differ like on welcome materially risk Corporation’s future and Actual will reflect prepared me is future expect, views company’s to Senior anticipated indicate listen-only may We This and a to This those forward-looking statements our conference disclaimer. quarter variety from The UniFirst of that estimate, events events with to be Joining statements. fiscal year These future Shane performance. trends intend call results a you mode would statements but and expressions Officer. Vice to contain forward-looking factors. first, depending third review and Financial conference anticipate, uncertainties. a certain and may financial XXXX. optimistic, believe, are Chief similar subject risks identify until we

put information, of the and well-being pandemic. without saying and saying out refer individuals be Commission. XX-K factors Form businesses discussion our the and foremost, goes an the the to in company, are company’s priority want of these of those unprecedented with world our many the this is a environment. focus forth and for forth that essential team the continue This impact safety the first times. It in response our in well top by each taking sincerely thoughts our of company as please safety our they continuing adapt the ensuring start impacted partners our our this to our challenges partners, during to of as coronavirus time businesses dealing that value-added for quarter I country the efforts, practical while the continuing recent our virus. risk our XX-Q ever to by third the for of with centered around our thoughts operating all to the in We, Securities are want to tremendous provide continue these and most customers to challenging I filings thank pandemic communities. they as to the of to put changing and Exchange all effort that services our go and other the team and including to more customers, and care ensuring For

the shutdowns quarter, were the primarily of During state of by closures, results non-essential mandated our businesses. customer result most impacted

activity with business higher this In or in addition, dependent of markets the oil reopened. have have we by driven the corresponding Part impact the decline in open who been and wearers we the been that of of service. demand dealing has recently reduction energy and than reductions remained normal customers in

mid-April the quarter, February week, last last fueled the weekly be the operations time our primarily recovery from that weekly in – During customer recovered closures point the been preceding of and were down the peaked the until to weeks week’s disruption. of by about revenues have in From businesses. reopening immediately where This was revenues that causing at Laundry X% in have about run-rate March of the XX% revenue to April point run-rates. pre-pandemic down steadily from revenues steadily Core

primarily restaurants, and services, such increase remains, sanitizers closed businesses as and the in from face protective hand soaps. entertainment of shortfall benefited limited, also have we equipment, that or Of business that the revenue masks schools represented. sale and are hotels, remain personal addition, prominently In

in states to many a are metrics reporting status spread. measure the environment increases fluid can recently many As sure of using the that you virus I remains am the appreciate, of it with you

our communities, assess to be the our on evolving the continues of on assess – result ability financial limited. impact the a on As our the business impact our to its ability impact financial nature to and the pandemic

a quarter result, were respect quarter segment. same million million, First X.X% from guidance overall revenue a third we as third by was customer The With ago. a quarter healthcare consolidated large are As not providing year of sale results, a $XXX.X of direct fiscal a strong for of shortfall decrease revenues remainder large revenues mitigated well over $XX.X in our the to the to the XXXX. as Aid

the X.X% well shortfall operations was laundry our by response as in efforts. our Our and was COVID-XX and consolidated Canadian numerous related U.S. to revenue operating margin as impacted costs

the quarter. to as shortly. well of to programs pandemic. are during months of nature expect we certain revenue commitment results in our appreciation you begin out the service will the fourth Shane and their For temporary to These that to show our decline in of will of compensation for our through on the currently early example, details workers our we financial and programs frontline as phase mitigate the continued they take impact wages instituted dedication team’s all

labor desire Although customers, our our we situation based in during difficult these patient employees our to the our we reduction instituted support some evolving approach. strength on were cost financial times, quarter the containment during in with and and our

pandemic. get our books. this long we cash million on around our business impact continue will in continue term generate our all hand the will flows the quarter, decisions the of run. and to with patient $XXX.X of continue cash with quarter Despite positive employees, no our cash on in we the in we the We debt make free to our of ended the equivalents and and be arms and as In meantime, line support improving to customers to work longer events

deal a related adversity believe to with are the coronavirus we result, facing we that well-positioned we As are to the pandemic.

the We garments many demand nature positioned who we take expect but environments and details businesses, to our is addition, to third would the call clean well highlighted the over are provide pandemic recovery. hygienically In need company the of support in evolving to quarters the uneven economic Like be quarter. will landscape. And our services. the of to I storm the that, company of work weather results our clearly Shane has and the believe turn with we advantage the the the broad essential products economic for and a and like positions of to confident bumpy, ahead

Shane O'Connor

Thanks, Steve.

or diluted from As $XX.X $XX.X XXXX for Steve to mentioned, or $XX.X revenues share. down consolidated Net in third the from were a from million, quarter $X.XX income quarter $XX.X million consolidated million $XXX.X decreased operating ago our share million $X.XX per diluted income $XXX.X of and decreased X.X% per or million to XX.X%. million year

million, fluctuations third quarter revenues operations from X.X%. the Laundry negative adjusts the the XXXX. dollar was organic acquisitions Core estimated were which $XXX.X down Our the X.X% as quarter for Canadian as in for Laundry well effective of Core growth,

was $XX.X clean a healthcare customers During work reductions the direct well for as the with well and our PPE in as workforce a pandemic to The able as as revenues increased remained a sales, on customers’ and quarter, million environment these customer company safe mostly large result the to impacted were maintaining related hygienically offset safety sale to increased was coronavirus our declines focus of open. customer by rental higher closures decline of million who sale structure. in related partially incurred the quarter impact the from patients. and the the Core or large affected employees $XX.X many in million margin related prior revenues related for cost $XX.X and XX.X% costs to including their on by to Laundry decreased X.X% segment’s direct revenues or our million. for year the items, operating profitability A to the cost additional pandemic. $XX.X company The of

related of expense is on months. the This to and because related more lives amortization, our percentage rental in is is merchandise, which of up average of straight Some XX notable as include: is merchandise which significantly service that been that service, a has service estimated merchandise approximately over merchandise line the items was basis amortized a placed revenues. recognized the

new garment our the additions prior expenditures. service the the amortization quarter, were Although amortization of little because period down significantly was in of changed, expense into

was our amount supplies of use. discussed, employees a the during internal safety one and number for sourced significant Steve safety of As priority we our quarter the

Over the as recently less compensation programs employee stated we result, to a subsequent and were These they prices pandemic. in been demand will these significantly incur will the costs higher in prices than certain quarter. also periods expect products last the instituted to normalize high current dramatically have our were We few we months, to during the had than and be we quarter that costs Steve. related additional by incurred prior discussed

will into XXXX. programs of fourth continue the And of quarter these some

As of related primarily to from revenues about locations closed. weekly X% last week, remained pre-pandemic were customer run-rates, that down our

nuclear items partially was offset These XX.X% growth internal million expense expectations and XXXX compensation a in as delivered these million able pandemic, safety items and segment’s a The lower well operations. prior nuclear related the bankruptcy year by XXXX incurred fiscal customers X.X% largely million Revenues due responding for bad year. from incentive costs as from in During to employee cleanroom in as the uncollectible quarter the ago energy revenues. to the the These in was to or X.X% in costs accounts Specialty debt compensation specialized operating including recovery to by period. million increased of amounts activity receivable, higher $X.X costs. their revenues in X.X%. outstanding percentage partially decreased the pay and to supplies. and due sale the decrease for to our of customer balances. $X.X risk segment, partially additional our company’s year paid healthcare, or revised third from This of and This cleanroom recorded decreased in Energy increase XX.X% by to were to a primarily merchandise services increased European costs of $XX.X in prior offset profitability from and direct reserves from use be Garments growth $XX.X and travel-related lower primarily which travel due products quarter decontamination and lower will margin the that offset lower company were due to or quarter,

from in require projects services. segment’s the As vary we have seasonality of timing this can significantly nuclear outages the to mentioned that the and due and past, specialized period-to-period reactor results our

margin Our primarily XX.X%. decreased revenues increase PPE percentage increased offerings. was This in or merchandise million of from cost and prior First safety higher Operating Aid segment’s from due primarily million demand due the a to revenues. for year as X.X% $XX.X to X.X% segment’s $XX.X to increased

sheet Cash the in cash totaling solid We cash, of period continue to comparable $XXX.X our prior quarter and the first at of increase of the XXXX. provided maintain no end third by long-term fiscal debt with an investments financial balance from activities and equivalents short-term million and year. three position quarters million, year the million was of fiscal operating for $X.X a $XXX.X

first expenditures of capital the quarters three fiscal $XX.X For XXXX, million. totaled

continue scrutinize capital to to uncertainty due our to related ongoing expenditures We COVID-XX.

through moved we fiscal the our related As to into expenditures revenue capital we of the the year, will we reminder to taking recoveries continue that consideration our continue see. of growth timing evaluate

consisted $X.X related to and costs the consulting third-party have During project. this of capitalized a to we quarter capitalized internal first fiscal In CRM million capitalized our total of the quarter, of year, three license fees, ongoing our costs. we million project, related which labor $X.X

quarter the million fiscal additional The of due under this a repurchased COVID-XX. since program. of not for to the XX,XXX our repurchase third XXXX, shares announced total quarter related any early in previously we company $X.X common has repurchased to shares uncertainty fiscal During stock of stock

of XXXX, XX, stock And any program. we $XX.X total our of under remarks. the happy that now XXX,XXX million have. May may of questions we be This a have of for prepared shares to repurchased a answer you total concludes As common would

Operator

line ahead. question the Instructions] from Our Please JPMorgan. go first [Operator Steinerman you. of Thank comes with Andrew

Andrew Steinerman

Hi.

So, April on peak from means obviously, that what if willing had that year-over-year? how I of basis in just a minus would heard was narrowed last you to week a sense tell and you year-over-year little pre-pandemic those from levels, you us can say period kind be of X% us give declines that year-over-year

Steven Sintros

into say that in that front Andrew. question would looking we it good me. came the in I X% have the at don’t would as been quarter specifically of pre-pandemic, we have X.X%, quarter. Yes, number call I growth

quarter, the the firm And so that give we to are late hard a pre but you get real quarter the when – the month if down probably few quarter, say, from the to into X% it of say or fair down last down that run-rate going in a so. you to week-by-week level year-over-year, of should the number, it’s probably down the it’s X% weeks pandemic I was

Andrew Steinerman

X%, year-over-year?

Steven Sintros

that. the the similar probably like or or quarter, look XX.X% judgments like that. when peak in earlier in when you like that Yes something XX% something can year-over-year And we make down you meant XX% were

Andrew Steinerman

Okay, thank you.

Steven Sintros

you. Thank

Operator

go of Our Baird. next Andrew the ahead. Please Wittmann comes question with from line

Andrew Wittmann

leveling fine. you of that that You question Are identified getting from pace all think are kind a week. is The you in any pace kind lot companies business recovery, down of expecting is what more here, the it slowed to rate? of seeing down off continue teens new seem – are I expect a down the and this reopening you rate happening X of this V-shape you and has of do the certainly last to

Steven Sintros

interesting. it’s Yes,

last since of at some a would say. pausing a we ago, recovery a efforts – the unclear might X recovery, bit expect pretty with longer our businesses that of sort some steady been last And little whether the we leveling those do their it I one little and of think you and reopening we the weeks maybe remain that had some been If whether It’s it’s those ask term point. whether fallout. lower different, weeks we week lowest We whether that’s have have week critical the mass these X week week, are receiving me closed re-openings, question only hitting steady of had or re-openings from would this started. of slow ago I states

I it’s a of both. think mix

were capacity. some And that of are optimistic be seeing We that would close in thought were in of with are some the in particularly that staying think southern little you are able remain phases in – to you claims. states able a now in state the many come where reopening pause rise contact And plans customers they closed. more they the back the in process, seeing I

So, X were time of little a or we I weeks we think maybe today ago. were uncertain X even than what we more we thought are bit maybe or in

Andrew Wittmann

stops But that, wondering that’s that not just negatively of been normal Inside to employers you of a that can that has continuing I add there? obviously kind helpful. say the That’s as trend add doing accounts are inside of and the mentioned employees about adjusting are new shed Are open or surprise. how they specifically? what you trending of are stops am are business, to

Steven Sintros

Yes.

because we to customers closed. there is think seeing I think tracking it every certainly we credits mean, of are I some are track that. your were and I when related week, you that

So they was are week doing reopening customer I reopening decent would that. evaluate they who levels some we it time or week during seeing and and have of are. bringing they employees, to a and if is a most trying you then at $X,XXX closed say, or back half they reopen, like only are are the a we at $X,XXX are that

they trying to I as can think patient are are. like as they be we

normal bit our I think hold long disruption think depending the reopenings and people revenues quite to people decisions wait-and-see demand think and that’s and I how sure higher are the employment taking is reasonably now. further levels part be So, bag, will for a caution there are than those reductions or just the able like are services a – at the just on it’s a products approach like we continues right well but at for levels, looking to make compared but meaning mixed have held I that of

Andrew Wittmann

given that markedly largest do are I with just do in hear want end a some questions that questions performance of peers? than what’s revenues the recognize was I think a sector your more bit are reported more have your May. company two to have maybe might two is market, I is this your in believe you or in answers first following but it. tricky my to. you updates share better the the that the answer, up And Got is quarter of to wondering think here little versus this their people in you that of taking overall sense of mix market And the I that reflection you your

Steven Sintros

have think new was making high happening, the mix are down I expect, is It’s performance. as that’s certainly to resiliency other impressed relates reason business. of restaurants as the as better and a would there think the sales that some, fact out still to the you team a – industry. and issue, continue some although just as by for but mix activity so I have mix activity but of there Sales not those participants and hospitality really in our some We I quarter. our Yes, it sell do been we that on, isn’t there exposure it’s decisions. of the situation the to the customers

Andrew Wittmann

And in helpful. into a that had of adjusted. things quarter you lot bit some. dig to lot that’s there there Okay, frankly but little margins you my not and report mentioned was AR, cost not and a of question structure, a the called more, tries the out there the in in at last press GAAP really you adjustments then that I mean release mean guys in were the to be I

so is I operating decremental And way, in us similarly or to based margins guess the margin the some way think actually is, you simple be quarter future indicative how be incremental the is the helpful that asking, line? what on you like is to performance do question the drop-through or to could it to question maybe of Either context? think this give see would ask happening what I the answer

Steven Sintros

question understand important we it. and It’s Yes. an

difficult think one to it’s a I answer.

I I at very think quarter as indicative. look itself. this wouldn’t

the to the partially what to or short you merchandise. said question respect on with based we that’s because probably think said, the I what answer

was merchandise. quarter rebound down revenues. for for put started was in some it our now in far significantly, that more to to the sure, Just than but demand down, The garments perspective, the

look a quarter, at merchandise on to you from if a just compared of our in had of a impact terms cash sort cash we merchandise, perspective the would of So snapshot decline. the as benefit revenue

are some, get there’s with moving We being parts to too fully the here Now we expect line Shane quarter. we comments, second but revenues that’s forward. rest expecting, just of in moved When the as I the would number you and the there to of we many really unwind in are recovering expect in some into later come on example moving but in of just, really broadly P&L merchandise do for you the high will forward. of a his headcount say quarter, reductions is in call, part alluded the month cost the the to wouldn’t did quarter the

So felt mean and back would but quick business I quarter, fourth as quick some hiring the of the those were we recovered. in impact you as people markets where in those of did felt weren’t some know are be really reductions, more – has we the

pieces. moving a – is there of a So lot of lot

We good other things benefits some travel also like and and the in received from cost energy things. quarter cost

depends baked on I in know would so the forward. on be so. going fully to answer but a margin of but would with goes more fall right, it’s now. flavor. it than And had kind I because and so we with forecast a to parts hopefully where very quarter goes balance not answer, unusual a put on gives indicative that moving the just you like say on benefits, out some There what of We would the it’s think to moving many cost recovery, too not the is on short say to on right better, situation employment what lot

Andrew Wittmann

Thanks.

Operator

with Blair. of question the comes Our ahead. William Instructions] [Operator go line Please next Cushman Sam from

Sam Cushman

what be the separating the made Quick of at first, just levels maybe. question X% pre-COVID kind levels? comment that by compared areas on would guys. Maybe you geography to reopened helpful. comment have are In service Hey, that

Steven Sintros

to really I have similar back or did think before. asking you that don’t the of had We is that Yes, businesses what bring compared they the before, much what question they are how capacity have how much to reopened, – breakdown. revenues

we employment, near but level. I reduction seeing think have many full opened at are higher

you So metric broken – in that the you are asking way have are that that for we their. don’t of out kind

to because we by can’t geographically diverse pretty geography you at the up across across would what lot country, a about expect. really asked it industries, are you closely You our revenue look and of match

request and we they service in the re-closures of earlier to been in see back pause small whereas pausing has the came have level, it of businesses or we the on, think or for example, for I the recovery some – great slower, the to some will seen recovery. some quicker. closures weren’t but was are and deeper cancel continuing Southern I Northeast, them states were now, But say of are steady closures and

what of much at geographically far were what the looking I to the of you So, as it’s sort the compared core broader really across looking country, the give before. virus how but reopened is would answer expect impact capacity you can’t for you as of

Sam Cushman

in quarter But here. still the luck next helpful, commentary. appreciate And the good

Steven Sintros

you. Thank

Operator

we And have no further questions.

Steven Sintros

Well, to participating fourth for speaking thank call. great look will in have day. results we be the our in reporting of again a and you quarter. We with forward you fall you everyone Thank when the

Operator

does for your for conclude call and your please the lines. disconnect you conference ask thank We participation today. you that That

UniFirst (UNF) 1 Jul 202020 Q3 Earnings call transcript