UNF - Earnings call transcript Q3 2022

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Operator

Greetings, and welcome to the UniFirst Corporation 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].

As a reminder, this conference is being recorded today, Wednesday, June 29, 2022. pleasure and the Chief my Steven over now President Sintros, Executive is to conference turn to It Officer. Please go ahead, sir.

Steven Sintros

good Officer. Thank and and morning. Sintros, Steve you UniFirst's Chief Executive I'm President

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

filings Exchange most discussion For factors the our risk to and recent with Commission. and XX-Q more Form the of Securities in XX-K information, refer please these

as our to our performance growing reflect that our a UniFirst for who third results want Overall, bring other top customers. challenging During environment, customers the can line and our prospective partners, operating I continued to team the quarter, each with providing on of to always XX.X%. deliver face in on a thank value the revenues of quarter consolidated strong always, their as our team selling industry-leading service focused customers well as thousands to businesses.

new execution We year. of which both so delivered with well are the solid sales far as as performances this retention in our account customer has pleased team,

quarter our to also reductions throughout to as The versus price of revenue reflects this more cost to the energy costs. offset adjustments related additions work in year-to-date increases base. the help customer the are strong customers growth with growth and share in This ware related our environment. in impact efforts positive addition, year surging includes In recent inflationary indicating the we

our reminder, discussed forward going a over calls terms we focus on system next overall that going in automation and the focused rollout capabilities investments on prior years and our in in new strong discrete we're efforts the in of be brand, competitive As transform CRM with have chain strategic the to that UniFirst to a are supply of and are ERP wide few the three corporate These critical system, positioning. technology. procurement initiatives company our a initiatives and

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

deliver designed in All long-term returns primary universally solid our our provider long-term industry. of are service of recognized investments stakeholders objective be the our best for components as and to our integral to

we were related respect these project, good deploying system our We direct making continue results in adjusted line of the to to CRM internal for new investments. schedule. with impact progress our With to our costs systems report

our And in Assuming March, laundry ads, our of a core new end series officially our new the featuring approximately national system we we progress through in customers on fiscal employees. of earnings call, by half expected, TV brand last as locations UniFirst have 'XX. the we real of we and as launched discussed

quarter, their challenging our ongoing their that focuses by message deliver at labor customers our supply the on for ongoing environment. for as on deliver will having families. and many their in to them. message companies, is serving costs always focus continues be people the always Our our to increasingly be as of a last our environment And UniFirst, challenged who adjusted to broad well profitability impact chain inflationary disruption Similar

been a expected dependent in also in addition including pressures, have as we as of higher markets, infusing a at customers related accounts than our to national additional number due energy costs levels activity to factors, service account customers, solid our of these sales, pickup ware certain In recently new with merchandize our well additions into investments.

Although overall and ability investment the in through activities, also margin operating these to execute confident related obstacles. Despite this environment, pressures. our is much of we the the growth to is near-term manage to challenges it are contributing in

We our initiatives can to transformational execute costs will service while ability adversely don't continue our areas in we manage levels. impact affect customer or to our on control assuring we

fiscal on always, third As family. will new year. our focus like UniFirst I'd over customers customers And provide to details the that, who into with our employees, the quarter of care bringing turn the of we taking of for remainder Shane the maintain a to for our call our the sharp outlook results and the and

Shane O’Connor

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

key included three of to results attributable $XX.X that financial in third our discussed. of Our costs the million quarter initiatives Steve XXXX fiscal directly

net earnings income initiatives diluted adjusted adjusted operating costs, million was share was was million, per and $X.XX. $XX.X these adjusted Excluding $XX.X income

year being amount number significant This the was company the have the the costs quarter key related in CRM these and of Although were our third the amounts initiative, capitalized. which financial track results not our costs did been a for would to being may XXXX initiatives, in included still specifically less our of in value were primarily have that was direct prior expensed. because

prior result, a As providing comparable quarters to will periods. similar adjusted we this fiscal year year, be the previous amounts for not

of in dollar, the as X.X%. the Our core $XXX quarter Canadian adjusts quarter acquisitions effect laundry for as which XX% up the estimated third Core fluctuations laundry of million, were was growth, from operations revenues well XXXX. organic for the

ongoing year the we due that and during benefit sales efforts performance have to with rates to as been solid the operating increased from seeing organic And most customer compared the increases this segment. continue Our our as operation cost ongoing supply The to business of in of retention, costs, pandemic, large chain was normalization operating due activity improved laundry our well well revenues during to in continued to our adjusted or share cost depressed the national Core has growth costs, inflationary $XX.X energy effect quarter merchandize the customers margin quarter increased margin disruption, recorded to in quarter year, our million. of XX.X% The percentage the incurred our were X.X%. a key prior the X.X% we decreased million prior core from related as the margin excluding operating item for related laundry $XX.X levels environment. initiatives reinvestment some or to our the the segment's these significant to adjusted which impacting year markets. in as amortization was account merchandize from the as

from costs the the inflationary increased employment the was During prior as a to increase in well cleanroom also by and in costs revenues from in a million our operating X.X% million primarily operating This the the $XX.X percentage products as in services, third higher labor the impacted from prior labor and landscape. from XX.X%, input merchandize, increased due energy Specialty and as XX.X energy higher or to percentage to due Garments to due as cleanroom up Energy X.X% primarily margin challenging and year. costs environment margin costs of operations. quarter, segment, revenues. adjusted XXXX, increased decontamination nuclear X.X%. quarter to which year, Segment's decreased our Revenues and of of revenues was delivers specialized of to growth XX.X%

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

$XX.X $XX.X million due segment's XX.X%, the revenues year, line the segment's business. strong first distribution in or to to Our primarily increased from prior aid performance from top wholesale million

quarter However, its to the segment's business in income company's investment van into aid was new during continued due the to the primarily geographies. initiative operating expand first nominal

financial third with at of XXXX. sheet a balance cash no maintain $XXX.X debt our solid totaling end investments short-term quarter long-term We million continue fiscal and cash, and and to the of equivalents position

primarily by supply of needs cash first reduced than due initiative activities the working capital normal profitability, months needs key impact ongoing to XXXX, as business. accounts as as were For by has our supply our including receivable impacted the the working disruption. of operating been to provided capital Contributing of inventory costs, higher heavier chain balances nine well as well these elevated

defer continue million years with of our In and period. service Act. In coming three in and payments paid businesses pandemic million. of addition, an has we were sheet able the to our we from of paid invest to the as additional for prior million we $XX.X capital XX future also in $XX.X first of XXXX, during CARES continues balance we rental which of that part quarters expenditures increased $XX.X impacted the normalize, total merchandize acquisition as the a out FICA to Also, totaling XXXX, position

share take million quarter of now XXXX expect program. announced our this the be like we Core share At earnings of a midpoint assumes an XX million earnings XX% for our during between $X.XX. adjusted will tax year that and $X we that an expensed be stock and full under XXXX guidance. fiscal our following to directly also now is attributable this key outlook. Please $X.XXX previously revised billion XXXX, of of assumptions margin guidance fiscal repurchased the our will to operations During effective a repurchase $X.XX our the common operating range for at to per XXXX diluted for shares be time, further between fiscal costs on initiatives includes the year. regarding now the We of This fiscal per third laundry I'd will X.X%. total update expect $XX.X and XX,XXX of opportunity estimate note revenues rate billion. our provide

adjusted not unexpected per our be future between expected answer happy significantly share $X.XX. have. Adjusted is you any prepared rate remarks. for questions concludes is This adverse economic share developments. include impact the does that XXXX now And to $X.XX or XX.X%. and Our we of be tax earnings any might diluted would other buybacks to fiscal And guidance

Operator

[Operator Thank Instructions]. you.

Baird. Our sir. first question Please ahead, with from is go Wittmann Andrew

Andrew Wittmann

guys. morning, Good Great.

Steven Sintros

Good morning.

Andrew Wittmann

in you bit the little this You services' guys. prepared a really a injection and big number the quarter. the That's talked in obviously remarks million merchandize $XX about on for

there. You It somebody you national like maybe investment. sounds about talked redressed account

a happy You of if helpful. new to you talked rental about more But about account a there the for give obviously time? You're still energy that talk just because is bit of new how color programmers lot Steve, little just But the That's to account about amount first could it. program sales? particularly could with Is maybe asking a no and this economy. you market? there's the of good new convert patch. I'm uncertainty all sales, in the much of business are

so your stocks programmers? through positive And be I'd in curious said the you more thoughts any comment could period, maybe And if time recent been no there's on period [ph], recent changes you reporting but that? which in the have add to if on

Steven Sintros

Sure.

could account as So new that programmers XX% consistent of quarter and have XX% as products programmers who not uniforms we I far this as buys direct program. recent remaining far no versus remains no a no doesn't wins rental -- as in from someone that uniform we've to the who or period new competitive willing convert where so about someone account am other and talked say come competitive just to but probably it's our year, ratio sales, programmers well, more sales the service full maybe be before, a uniforms well. again, into as program And about

consistent. that ratio remains So reasonably

existing far always for infusions, about service accounts. redress we and cycle reinvestment as just that the As of thirds in the said of customers, our normal put merchandize merchandize into our we've two is

which are be chunk the that can year a adding you is positive. So toward still which a or we wares trending obviously there's merchandize can very couple to needing that is some causing accounts record there are reinvestment relates And and from of existing reinvestment cyclical a new perspective. of account is been redress in accounts in But rise, to mentioned has a trend positive. reinvestment large when sales, which accounts, national which

other freight of things merchandize. that So remarks I amount in of would impacting I by right, of of the there's number it's good like also you would kind prepared merchandize, of investments and being the as and fair a a say impacted higher activity. But the raw costs merchandize the and cost trends higher our said of material view positive growth cost

factors. our of to it's in different like So, there things really mixed for said merchandize there some a on we positive growth being those are sure tied remarks, in But activities. bag all

Andrew Wittmann

-- year-over-year about the comment labor merchandize maybe those margin quantify as Could your on you you maybe if and well, talk Shane, headwind to could? from

Shane O’Connor

earlier information call as in in influencing increase a that What result, are detail Yes. look year, a is, related merchandize in we're Andy, that but well. the that to that a those costs that from a that guess reason is there environment. in chain as my not when factors I continues I'm I included primary and than and normalized this as you obviously that some quarter. that the of I indicated at And to say, basis are And other influencing to perspective XXX headwind supply my lot in take our it's the things is costs. from. talked seeing just costs level are get know elevated. was that will But merchandize costs about causing prepared the to the not to costs comparability a I of ongoing as though, past, merchandize related that. my did at is item that amortization, least the that somewhat level not it's disruption it's of I've opinion, be prior provided Steve out in I'm is a going more there and disruption, into just be granularity, a that incurring the are points. more And about are lot to remarks in which To that, of headwind it energy but valuable Merchandize point, is the largest

Andrew Wittmann

Okay.

Shane O’Connor

primary our lesser out, and items energy. for impacting those a that The extent labor two but to headwinds merchandize I were and the us, input which that other areas also costs, called be were quarter, than would

Steven Sintros

increased staffing just on side, we one a some up a in to with heads. get talked Obviously, staffing staffed or comment, And been To and turnover higher I the feet now, challenge little place trying a now. a comes our little as better a from of a fiscal place has heavy actually quarter right We we're result extent, coming Andy, other last closer bit bit to the under maybe our And better on the think year. we're bit. labor right staff perspective. about throughout even a us hiring feel a

a little that little So there's quarter some of positives there. But the a that did in we the labor probably good of a a reflect But situation. still to kind little which is bit than cause think, bit ability bring news bit from people sure. heads, does, for a but we're a volatile higher miss in, a it projected bad news maybe environment I it's improved

Andrew Wittmann

all this helpful. really is Okay,

I'm that sure make on here. to a more wanted just bit understanding little merchandize the So cost

XX amortizes like today's you seeing in that elevated amortization average been you cost for expect that, the in faster we for of think around an should period anything or way service. merchandize Was put there these rental the to because that while work? stick have of here that's costs we've kind a that months I of generally than accounting merchandize the

Steven Sintros

Yes.

-- XX significantly proxy that have putting still life. that average the talked XX we a been of different for changed, into still into products that On the months types put is that is And service. lives months about merchandize average, we've So The average of at that good the we useful life service all for that. we've hasn't being right?

Andrew Wittmann

it. Got

it any up. follow If Thanks, there. guess others, I'll I'll I guys. I leave have Okay.

Steven Sintros

Thanks, Andy.

Operator

Please Northcoast with Research. Mehta go ahead. Kartik from is question next Our

Unidentified Analyst

large Mehta. or of line you all. Boyle considering between energy, morning, you forward? seeing like actually This any And continually environment pricing also, you. kind things with the of seeing momentum with impact [ph] these ceiling any are just is on pricing here questions, or of questioning small Jack up, Kartik impacting differences that behalf going Thank kind and Keeping might pricing with Good any businesses? kind pushback how same of going maybe of changes, diesel, all be gas, here are any merchandize, just pricing the

Steven Sintros

the answer Good ceiling, a -- I know that environment. say there's I yet. whether I'm questions, we obviously the price and very to relevant not sure important wouldn't guess to question the

work trying their own continue to We about. from as costs. higher to through the They're we've process talked costs. time are as Look, always to with pushback time there's customers dealing manage all

customers goes, and it's what we to as appropriate. even Yes, a contracts this larger typically on I and be work to accounts with be what of And pushback been at those them naturally, will The challenging. customers I challenge. working through done can have circular larger some been and somewhat customers can be would us working more our inflation But So the what seen this are point. with prescriptive larger more with as call can't well time. with we more the haven't refined sort think continue open tremendous But have of done.

would I different accounts all the sure, for we're exploring on little efforts but avenues. say So a it's larger on

Unidentified Analyst

Great. Thank you. I That's all got.

Steven Sintros

Thank you.

Operator

ahead. is Tim question next Blair. with William Please go from Our Mulrooney

Tim Mulrooney

power. for taking now of Good because stick we're morning, the with getting a questions Steve. We'll morning, lot pricing my Shane. just here, questions. are Good Thanks around right pricing

how is your you how just to of average? talk can So historical compares pricing your organic versus growth about much volume and right that now

Steven Sintros

growing the well, a reasons. from It portion would fast is which say, do an are was X%, positive, would I very really it's and reductions X. isn't growth. or X% and growing organic for broken number. to we're When look improved a growth. X.X% out And talked in year. and having Ads healthy about, Yes, an lot maybe is it's it's a And were always pricing historical, you there's sales a always a a at of past that I part But if wasn't price, that never that of say that we're good question. having we're there difficult We've we organic estimate. X% the hard of year, good in versus retention what development

are a to we other than, pricing core historical probably be as that certainly levels. the our things. But are is of higher there through organic growth things So healthy work piece that say, causing

Tim Mulrooney

really helpful. That's

help price? have different capture ways ways remind able do And those for more an you. inflationary headwinds? it the other just increase contract surcharges or the offset fuel Is annual the conversations me. you are primarily on to us have is one Just or you up price structural Can you it renewal? to that basis Thank pricing for all you when or is

Steven Sintros

core certainly an also how industry some cases, in to this build the the are which certainly are into our fuel. weeds delivery of rental prices, we There about but some in environment, number there's things. a to, charges, and basis encapsulate annual merchandize There's price relate that charges get on of and discussions extra so. Not customers, there there's

aspects And adjusting pressures. different the are how you as deal specific different them cost there pricing look as we're with would needed. So to of all looking at we at can imagine, of

Tim Mulrooney

you. Very Thank helpful.

Steven Sintros

you. Thank

Operator

[Operator question from ahead. And JPMorgan. Steinerman go Instructions]. with is Andrew Please our next

Andrew Steinerman

what margin X.X% is fourth which to laundry for the quarter got make we operating reported the the just May in different that quarter. sure for margin of than in I fourth course makes core Hi. the quarter, X.X% not my just an wanted math right. core year by much implied I operating

And just any quarter was is which to kind so actual? the fourth third puts go of quarter margin guided, takes the margin, comparing think when could, of you that and just if that over you

Shane O’Connor

quarter that the Merchandize, the And implied that fourth The the some from than factors labor, the impacting and what to are inflationary correct. we're not impacted laundry things third the obviously pressures, be that largely, to Andrew, is going to third as is of perspective. items largely energy, fact costs, the a same. been around the expect are have margin you our the costs a mentioned so in we our for our assumptions the margin the with core fourth. But increasing right? offset quarter quarter operating fourth influencing those X.X%. that of be result And two different Yes, the significantly the largely pricing operations other able quarter, other

Andrew Steinerman

Okay.

Steven Sintros

to continue the merchandize, we more add that that, come thing costs about put talked Andrew, up. will as our in. One I'll nature is we of to Merchandize merchandize

little and fourth So quarter, be the probably the sequentially, One project bit in that there'll a than to quarter in the thing higher quarter. do, we some third will offsetting is of fuel we better do quarter. than the in we've be pricing to a as the costs with reacted adjustments, the higher fuel the bit quarter cost, in some third us little increased more did fourth fourth because will benefiting

Andrew Steinerman

Makes you. sense. Thank

Steven Sintros

you. Thank

Operator

time, have for questions. I'll we the back And return call no closing to further this you remarks. At

Steven Sintros

Thank look to third thank as expect reporting be 'XX. a with October when our day. speaking review joining outlook Okay. our fiscal you results. I'd we fourth always, for to have to quarter us like our forward we to for in quarter great everyone, and performance And again and everyone

Operator

does call your for currently that Have We today. thank all a you that great lines. disconnect for conference participation you day. please the your And ask and conclude

UniFirst (UNF) 29 Jun 222022 Q3 Earnings call transcript