UNF - Earnings call transcript Q4 2020

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Operator

Greetings, everyone. And welcome to the Fourth Quarter Earnings Call.

During the presentation, all participants will be in a listen-only mode. Later we will have a question-and-answer session. [Operator Instructions] And it is now my pleasure to turn the call over to Steven Sintros, President and Chief Executive Officer. ahead. go Please

Steven Sintros

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

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

refer with country of the foremost, This all to virus. for continue and to the that the dealing world XXXX our information, the please no like safety are deal impact XX-Q we the has and been as and with head XXXX, factors I Form be to this XX-K well-being to most saying more continues discussion pandemic. and filings risk of the Securities and an Commission. a year Exchange in start of thoughts impact For of the by fiscal the our want these recent certainly fiscal company other unprecedented and those into our and first with time,

short the last full company our reported just $X.XXX billion, $X.XXX revenues fiscal which year’s billion. came up XXXX, of of of For year

of from operating our week, related therefore, which XXXX year, income well even However, million, a by X.X%. in impact was as CRM basis XX-week on year the fiscal extra in reminder, fiscal to Full the grew XXXX was and positive as settlement fiscal $XXX.X gain XXXX project. revenues systems down fiscal XXXX, as a week related for million fiscal million $XXX to the an included both a work $XX.X

we would you overall of year. affected our well bottom on year expect, as our and results related second the the As economic closures line that efforts. headwinds the activity, pleased reduced half to top during results pandemic-induced over Overall, with the customer given faced as are were we pandemic by response our costs and the

to are and these on clean be products economic the in as shortly, recovery. They challenging they deliver We essential businesses, many storm Like are work to put need the few details our flows landscape. the services to of and to our confident results quarterly let profits to ability continue we has of comments. speaks our but well take hygienically outlook, this services. weather a expect eventual company’s generating and more the ensuring care highlighted Our well Shane customers. will and way. ahead demand me again position provide evolving our our and our of the near-term our as provide The the for each we but nature other company believe and quarters we strong support advantage partners thank the and that positions bumpy, sincerely an to garments and environments uneven taking continue I for times. every forth resiliency want our to pandemic team truly that products of value to the clearly they tremendous effort and solid of forth put cash and provide to company, customers during the continue

base. to market we as facing full new advantage provide products offset for gowns well hand quarter, the as of overall the we coats us to and programs, services. have our service and clean take opportunities the in programs masks, demand or some focus sanitizer Increased within customer During reduction are activity continued headwinds On for demand rental to for call helped increased continues be hygienically our mostly on very medical decline wearers Part in this reopening markets oil been of the energy of by slow July in for dependent that have additional since that and in and services. we the demand the note, by driven in of customers to business impact and of corresponding offset the earnings impact service. reductions

continue and early billings overall than experienced weekly lower the X% As pre-COVID result, levels a March. to be approximately February our in

take we the fiscal absent recover. being of XXXX, showing our -- -- anticipate in position advantage year. half do the not until That year-over-year into second said, activity, a we of today near-term exist the dramatic economy sales to will of fiscal fiscal economic head to resources more that recovery economic the opportunities of market to continues growth and we As as continue

As or people, investments we our making our talked over have the year in we focused and to infrastructure continue last on good be about technologies. two our

recognized industry. our and sheet, XXXX allows challenges, our solid all long-term returns as of deliver These deployment designed investments UniFirst are system. Certain ongoing put in investments. continue to top-line in our new balance our the to as margins our near-term. components the cash provider long-term pressure to including us continue these position our Despite will best integral stakeholders healthy objective of the the investments will in All making for CRM be cash scheduled planned on primary investments to flows service fiscal our to strong universally

our Shane, feel our keeping turn fourth success. long-term to to strongly with results I’d on that, to of to quarter. the our like will that schedule our And company call of these improvements are the over we provide However, details critical who

Shane O'Connor

one Thanks, last fiscal our $XXX.X to prior had were timing XXXX week million, $XXX.X calendar. million quarter to XXXX a due XX.X% the quarter operations our in fourth Fourth ago. compared of Steve. of Revenues of down year of year from

of million in million the extra for in from to diluted impact the the decreased quarter period diluted X.X%. share share. $X.XX $X.XX or prior decreased $XX million million week year Operating income $XX.X XXXX, for revenues income per from the the to and per decreased $XX.X net fourth quarter Excluding or $XX.X

Laundry adjusts operations the negative that revenues seeing closures was XXXX, the after weekly had to well run was revenues were been effect fluctuations acquisitions, rate of our down basis reopening Canadian X.X%. Our fourth spoke a Core quarter week we indicated impact their to fourth Core our as extra businesses the down for the the COVID-related organic XXXX. in July, $XXX.X as the in which had million, of estimated of quarter growth, that dollar from we XX.X% Laundry year-over-year customers When X%. in on our and temporary we last X% related in weekly approximately recoveries for

moderate. impact Steve re-openings cautioned had However, margin we the profitability time, responding reductions, recently incurred started casualty well well quarter operating revenues to to pandemic, Laundry our that and prior The wearer the or being or as with million the by are Since as the that was higher our in of million. largely we stable as those recoveries year have in markets. Core to weekly cost from our energy claims as mentioned, for from decline dependent relatively benefits offset customer service remained we revenues items, decreased including also quarter. in any rental seeing the as X.X% affected expense from segment’s additional XX.X% costs higher on many by $XX.X $XX.X structure, headwinds

items are decreased in X.X%. investments Garments in the XXXX our our Specialty including during energy also profitability year from in delivers quarter we year costs X.X% quarter XXXX, partially continued was were million from room to lower In quarter the year. costs making prior revenues initiative. which by clean reflects to Energy of products and and nuclear of extra $XX.X fourth XX.X%. These travel-related Revenues from segment’s to down projects, the strategic CRM from compared in margin quarter. the the of decontamination the increased or offset X.X% decrease The addition, specialized $XX.X operating fourth our capabilities X.X% primarily prior in due period. week decreased in services million segment, and to This prior and our

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

receivable fiscal maintain continued and sheet which equivalents We a to year and with investments offset $XXX.X short-term impact increase provided in XXXX, at for is of of the CapEx lower the working totaled a in In Cash operating no million. the capital million primarily by solid to million, by financial year. million XXXX. cash, and XXXX slight our position, quarter $XXX.X balance cash lower long-term in totaled flows and fourth prior needs, including merchandise $XXX.X $XXX.X accounts cash end of fiscal the profitability activities service. totaling debt on reduced additions our over was

We to uncertainties our future, ongoing while in continued pandemic. surrounding the the balancing invest

we fees, internal costs capitalized license project, million labor third-party year, consulting $X.X the related of million capitalized our During consisted to ongoing which $XX.X of CRM and costs.

the not August the any had during As to XXXX, quarter $XX.X primarily we under previously XX, due The repurchase the authorization, to company shares to project. its related share of repurchase announced COVID-XX. CRM did uncertainty capitalized related million

total million common stock August under authorization. shares we $XX.X XX, XXXX, of repurchased the total had As a of of a XXX,XXX for of

continued and will the surrounding the and XXXX at expect we revenues As -- quarter a $X.XX providing we a our $XXX will XXXX due $XXX our diluted per of towards million, share time. to earnings the first be COVID pandemic, between uncertainty million $X.XX. be COVID-XX for guidance We to look currently XXXX, between surrounding QX be only and this

midpoint assumes to from of organic be X.X% our a organic topline adjustments rate in certain XXXX. pandemic, continuing of impacts a first the the will fiscal of timing negative Laundry Along also growth headwind range. Our of at Core guidance quarter the annual with the growth pricing the the

is a to for impact well midpoint quarter remains modeling to down is the energy the of demand and the the markets rate full of on XXXX, as operating that be Although, costs the want related energy Core caution are XX%. fiscal that this Based quarter’s our on time the quarter margin prices, on of fiscal visibility the we At which the first year’s be will growth serve. year current dependent COVID-XX revenues of will Laundry our expect from the be effective in did we we comparable oil energy based impact the X.X%. showing pandemic, X.X%. at prior range the limited, of tax X.X% as challenge approximately we for

a maintain stock invest to despite in our continue approach As based our managing impact rate a economic events, of and uncertainty, as on the compensation we we strategic the benefits. tax including will capabilities XXXX long-term initiatives, fluctuate can discrete reminder, our towards business. the In

training an to million labor we expect costs, the locations capitalize of $XX year. expect handheld the continuing and the and successfully be the to capabilities to second costs, support Throughout We these deployment start $XX on related progress we time, teams. the fees, support CRM and we to that labor update will internal we our well related transition million deploy approximately in to will we project our and pleased as between be the systems a lower related costs, deployment continued now XXXX, At and this from our expenses capitalized support implementation including we million build will million as believe number of $X $XX fiscal related we systems are hardware activities to half on-site initiative. For this of resources that to will deployment as of with In year, in XXXX. which this this to initiative the to consulting broader capitalize project, devices includes a system, license increasing through progress development system. capitalized project. costs teams, internal as Costs result we will that piloting

have. would deployment prepared answer will more that happy update you the questions now year. our to and remarks these We concludes we you costs as throughout related any be on This may we move

Operator

of question first Baird. Andrew ahead. the Our comes Instructions] go Please from [Operator Wittmann line with

Andrew Wittmann

morning, guys. Good Great.

Steven Sintros

morning. Good

Andrew Wittmann

here. we yeah, the last with I quantify large one-time-ish highlighting? if was like detail start, a of maybe should guess I gave was in I little the quarter will and it margins that were start quarter you costs reported costs a of that of guys that you restructuring wondering this didn’t quarter were any in were that then. kind number carryover worth bit there one-time

Steven Sintros

over probably pandemic. warrant last -- quarter The had costs larger of that two first Andy, well, quarter the we that our that those that incurred the had sort quarter fourth related to some impacted talking actually items had there of during employee margins quarter fact in all, some we Yeah. a programs, talked additional to our the quarter. we Last instituted were the compensation about did about of the carry responding number individually. on impact mentioned we last had costs and and temporary quarter to fourth

spoke to to had related The become that did those cost pandemic did in of was incur immediately the incur talked challenge internal the we But increased, items bit after become fourth adjust At we started had in quarter that use internal some elevated the cost, related prices related to PPE those an significantly those started carried as the additional costs in quarter we about to has items it for more sourcing us. related as Those costs about and time, other the items into operating costs that incurred to additional and the the item little and during costs and to costs continued quarter the costs similar quarter well. we those normalize. normalize. a point prior products We this PPE. related had to a the use although for that incremental to those fact third

Andrew Wittmann

with, Got the for fiscal is affecting now I to is the on as with being of it. numbers well? that new going or employees, thing -- kind normal Has supplementary adjusted first the ‘XX that guess, be COVID your the pay

Shane O'Connor

but There’s it’s the of now of a more to its we Yeah. have of into a kind sort quarter, and it programs fourth run compensation of levels. carryover nominal most this course Andy, adjusted more back bit traditional little has quarter. in and

Andrew Wittmann

live just live and and in on be piloting fact here $XX appreciate amount up gave of And what total some recognized will you you are the the you that you -- capitalized by Sticking just getting million this clearly, burden of means fiscal ‘XX detail of that closer P&L? it more I you on are the to curious the Do judging it. Got CRM that guess Steve, you will given to to of fully are then margins, with the capitalizing one, like, sounds in costs be annualized million, as to be the the the quarter that expect, depreciation mean, in that I you you capitalizing that going this. year? I and for go I am for will an kind then be $XX

Steven Sintros

fully I Shane will question as of that. kind full certainly guess into it rollout will not will take year? an at deployed I think a a prepared the this the first be part this be I the that to, we being will date referred give on exact at point initiating we be deployment timeline phased point mid-year go of and end XXXX, will to some No, to

numbers fully of Some the depreciated so early of XX% baked of than we somewhat the pacing moving the software, at how sort believe depreciation right? are system have normal period now. There’s time depend investment in some seven it a the years years will pieces. a deployment broader don’t looking over together -- put to probably X% for investments. I The probably on. and depreciation will on goes of longer you average the maybe So right to XX be

we as the more get little we less about will but, give information year, you can a items closer be the devices so like that. handheld Some in discreet

Andrew Wittmann

it. Got

I stood XXXX, if It significant terms particular Okay. give oil us, your profits. that right. one, company’s I the just what particular revenue heading more kind to I recent your I think, margin, a are if revenues in it headwind that that into to remember I you could that’s in thought pushing fully It as probably high energy where today. the for energy bust was end end in like was XX% sounds company’s is in be revenue seeing in the trends this market most there. wondering, percentage of certainly, of overall a you into revenues rebounded heading because was into and could I heading that that and than early energy or market even curious the of of generally ‘XX from as wrong think never decline. am pretty

Steven Sintros

Yeah. Sure.

correct. are You

would on. never versus the industries although, so dip, to I I you maybe frame were indirect particularly and we right. somewhat and seeing West We think in and a to energy into and what additional decline. we we Texas Western I was to But peak think is are these coming probably energy it there as some about last this or geographically we XX% We X% it Canada. after recovery and closer markets. dependent cautious way What markets are when talked say direct recovered, fully always closer are solid a in probably say, probably support at recent when it’s X% peg headwinds

down broken Canadian look And the saying down about levels. from XX have number Our West into regions and teens. And pre-COVID surrounding the the the down Texas two are the we U.S. Straddle, that you in and encompasses that earnings were at regions referenced I is when two double-digits. into X% operations Those we states. call Texas and one regions are

ones that and a parts be so oil continue are of more country that lot you touch economies say, you at look the have but those And there and that impacted. to recovered those better,

the for has company than on example I of Western country. in and in the the operators more And encompasses the impact that region the that parts energy customer as is in I Canada those effect that, think will demand country average parts our closures throw than for our impacted well. for say would significant been trickledown and energy of those the COVID more

impact think level seeing a are the of in just country. gives of those sense of I you parts that the we So

Andrew Wittmann

then last now, the Core seeing quarter, are sequential just businesses that My that re-shutting question at Okay. levels. so the degradation. re-opening wise XQ just is a where for X% versus over this guidance X.X% wondering you down is midpoint here because were at this now looking is was Laundry is compare revenue issue, it I

why Just probably some commentary trend sequential as in… to

Steven Sintros

Yeah.

Andrew Wittmann

revenue what organic it guidance? is the in … is

Steven Sintros

of about price mentioned adjustments comment Yeah. some timing Shane and that. the Andy this annual

annual year. talked summer have closing fair frame of the our about happening a We time the of those in amount in on historically end adjustments fiscal

that that price pushed of were given that During adjustments our the customers annual of those some having, during the challenges height time. out somewhat at of customers help -- further was the we some to our

some there’s So timing first will as the realized we and quarter and in rest later impact pricing impact of into that of the year. some our move be toward

So alluded fundamentals now. you would we of issue kind what of to to. of a be seeing just growth right as is sort of split difference. It’s it degradation, of the some and middle a say sort the timing of issue, down clear in we the comp core terms are or volume, I right

continue given not are really environment, some a to reductions, the seeing business We and seeing we is retention new it’s degradation our really fair but are still we core in the of okay sell business. amount sequential

Andrew Wittmann

Okay. in later chime might guys. you That’s much. good Thank that’s for Thanks now. so I helpful. but

Steven Sintros

you. Thank

Shane O'Connor

Thanks.

Operator

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

Tim Mulrooney

morning. good Shane, Steve,

Steven Sintros

Good morning.

Shane O'Connor

Hi.

Tim Mulrooney

if Just labor service first minute. morning. a we availability for a questions to one, couple this levels like and focus I’d My could on

or who millions have been I a of you unemployed. has harder environment, smaller has have higher I your given in smaller this service source spoken in and said are remain et provider should it are I to some programs, levels challenge, guys who pandemic this seen providers, all But to know know period unfavorably? some cetera. there benefits, found easier you your say, some or at You during unemployment the real either What government or that favorably of impacted sourcing labor labor. business

Steven Sintros

six it’s Yeah. the something of It’s with months. an interesting over think the question dealt Tim. I course certainly last And we

impact. government July particular through have through subsidies and primarily been had unemployment around the then in levels of extended the at that some have increased some think levels and lesser I went

was think in greater I June, back July the it timeframe.

still up not mostly this would we that market-by-market to that remain but that this opened a levels time bit. ability broadly, little think hiring our I things I think I would challenges, say, would at there’s have say, staff to point. it’s some and want at service impacted we I

looking and But lot I a forth. challenging, ramp-up been to employees and with of think just cases. I subsidies, somewhat I remote we on we a more not I and candidates it’s It’s with so so sales candidates… work come situations some the you think, employees and challenges in a a to heads some see think I just around together sure getting back have issues dealing little of overall, think environment school of think been the of to reluctance have lot with the childcare and with for government when so

Tim Mulrooney

Right.

Steven Sintros

into issues the deal balancing come more …are desire just the to unemployment subsidies than workforce or to not with. there’s for them

So we we be, customers. able have been support of reasonably it, are staffed to but I to some think, the seeing

Tim Mulrooney

impact Yeah. Certainly a staying I Core color. Okay. Shifting great the slightly, of you. year expect first adjustments that gears negatively quantify pretty mentioned for mean, organic and you Thank would throughout issue I Laundry the can you pricing major would know. to way I carry Is your any segment, in specific quarter. school us or is that to mean, timing first there That’s in quarter? also the timing impact growth the you the is

Steven Sintros

the overall normal. impact that a bit for Yeah. issue It’s timing to more year we more of and expect would the first be a quarter little

in them there expect. overall, times. helping out these aggressive fairly in looking difficult a In to all I for through economy, their I think, would difficult vendors think, the is general you pricing customers as tight assist are and environment

I first issue. quarter a a your more that particular But from is environment. it it’s challenging comp question think So of

Tim Mulrooney

little First it’s speaking of segue maybe little to decline, we bit there challenging helping was I business. a for times, was us. -- good a your which And of Okay. could through surprising a Aid mean a

of to safety you in orders beginning of versus been leveling gauge the pandemic, has orders PP&E of much sustained due increase that the in guess, how stockpiling to have PP&E quantity consistent? in a were orders off larger seen with am or of the kind a I usage? I a in hoping customers For initial

Steven Sintros

to are it question. some Yeah. we PPEs our good segment, Laundry selling but Core just And if our Aid our be also clear, we or That’s Laundry be are from through sanitizer sold our a being Core whether in business, of routes, it masks. First servicing

we sales both have those So some places. in of

Tim Mulrooney

Okay.

Steven Sintros

we the In are significantly, -- the in the seeing weren’t markets we peaked we focused are a and a the improve I sort in cases South. seeing general, and in that masks there, selling as of as, the of I transitioned little the certain country Northeast cases still say, slowdown in on parts probably you And as guess, do primarily I those see most think, any of bit slowdown. when a pandemic again, around will little bit early a of were geographic somewhat the in cases country it’s

of are of it’s So those hygienic and particularly I strong products a part I we will for we think sanitizer to most I and earlier But down say, I’d were on. with other would little down, some for on than think up right hand kind time. probably continue say, now side masks the be type program reasonably be with us the people they and some things

Tim Mulrooney

here. months for color this Okay. Well, all thank several good morning next the the luck you and over

Steven Sintros

Thank you.

Operator

have Please from we follow-up go a Andrew Wittmann. ahead. And Instructions] [Operator

Andrew Wittmann

get off usually question. don’t of you that two sets is We Good. guys

Steven Sintros

Andy. expected, didn’t We

Andrew Wittmann

curious I in and a a that? be certainly view. long-term customers, the take get where sitting company this a buy maybe It’s am stock as perspective to why some -- you balance like Steve, of on could the like just likely always thought to I guys, sheet has cash, a time challenging somebody big mean, long-term. time your large the thought has advantage a longer the The family didn’t mean, you, you ownership I for take amount of for you a company maybe I any with the term time challenging very quarter. seems would stake. the owner

Steven Sintros

given you With third here. are has respect to look we ceased uncertainty ability valuations forward regardless, in continue confident cash. something had to not if to as continue to evaluate uncertainty. the program you go share continue as And either. as evaluate some been the obviously just But to the perspective, the company the When company’s in will buybacks, will the it’s Certainly, are generate I of to pandemic -- it’s we unduly we right we forward. mean, from at our punished a or we from we stock that stock due go quarter,

certainly, fair a There more a were here feeling is still May amount today, uncertainty. there think, I when is although, maybe sitting back little timeframe of things better April, the uncertain. than in a

in generate merchandise. quarter benefited that now taxes in some to we XXXX. will know, it’s cash lower evaluate some will as We with generate as do bit we cash. paid defer little to during the type something payroll a investments So Obviously, continue we you being during this of able be later more time, cyclical

continue we I Board, continue to we cash and what that. are right, long-term always you evaluating a the But be the the taken have will do and view and will balances those we conversations. So family think look have to like

Andrew Wittmann

broadens quickly what and focused a of expanding result in curious services one -- has is kind which thought uniform Aid have those thing being opportunity decouple your a clearly that this your it with out more been -- I offerings, that abundantly these employee whether don’t grown clear as as The made pretty that. sanitizers appears your can I benefits of business opportunity it think large portion to always think really from will is response for facilities and given experience relatively to business, in company even have disagree was a smaller that. on pandemic the you Thanks kind the or facility potentially of and significantly pandemic? significant set, of I just what has which was offerings that service probably this investing more First

Steven Sintros

separately. them take I a will bit little

roadmap. that the Aid part On strategic side our First is of

relatively do there’s been always of to there. our we Certainly competitor small. our has business Aid a revenues at largest overall and opportunities least First think compared Our percentage as

been more looking than have organically little we have as bit a rapidly grow So that plan business we for as a well in acquisitions, the to past. have

So given that overall of But also environment. the that lot there. out a current in is makes are the opportunities we position that something feel our industry and just the sense

core other soaps, said, products sanitizers, products. our on As that deliver Laundry we routes, far Core as hand like the facility service you bathroom

try area. the in in invested that that be to continue aggressively market and to share continue and of our to We work take

selling particularly more think the our we offering quarter take beyond working have dividends, to accounts, accounts year the able to and products we we of environment with the started on new this personnel advantage I core our paid advantage. those Last are a broad more of is focus whereas getting at certainly build an take route existing into sales appointments to additional on have existed lot opportunities being a resources resources that that existing of during pretty those and challenging, accounts was that with pandemic. height

that So it we feel of is focus in. we can like an area do more

Andrew Wittmann

a Thanks lot. right. All

Steven Sintros

Thank you

Operator

turn are we back it those the you. to all gentlemen will I And have. questions

Steven Sintros

have great again us today results to thank performance. you to report like quarter everyone for you when forward to first and speaking I’d fourth quarter our joining with January a day. Thank expect We to XXXX. Great. for our look review in we

Operator

your for you for disconnect day conclude have may We that you great Ladies your thank your does rest and participation. and Everyone gentlemen line. a of call today. the

UniFirst (UNF) 21 Oct 202020 Q4 Earnings call transcript