- Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to the UniFirst Corp. Fourth Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the conference over to Steven Sintros, President and Chief Executive Officer. Please go ahead.

Steven Sintros

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

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

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

the makes single We Always are our each a are operating we milestone officially and reported to They back about XXXX, come very -- has that our the the from and I who a thousands in this credit humble deserve announcing our very all way Team want go of be Massachusetts, future. for to customers. ability engine our continue location challenging in major a revenues our we of to other we Boston, be that they Deliver very celebrating be today. thank billion Partners UniFirst operating another milestone beginnings just in fiscal to environment continue company for excited as to $X face in XXXX. UniFirst today as over and out reached we annual have our excited for a are of long

the well as always, team focused can the our customers industry-leading as selling on as customers their UniFirst quarter, on providing our businesses. to that During prospective bring service to value

reflect growing with fourth allowed that that Our hit revenues mark consolidated $X a line results performance XX%. billion us strong top quarter to

execution prior environment. pleased are growth in fiscal which to account to quarters, revenue the continue customers reflects both of team, from the the as our with related customer in work also adjustments Continuing performances throughout of cost well delivered the our strong share impact year as the We new solid as from trend 'XX. sales retention with the inflationary increases price to we in

have discussed we transform rollout capabilities brand. and in on CRM of investments corporate-wide new to As terms to and the competitive initiatives in the continue we in designed are three of focused our company prior a our ERP large system, These initiatives system the overall be positioning. calls, UniFirst

new about on project, our talked the systems we've making be with schedule. our our to system progress good we and investments few last infrastructure years, to our With in over CRM are internal our people, making respect line our we As technologies. good deploying in continue focused

fiscal cleanroom over 'XX. to locations of 'XX. As laundry be end deployed our U.S. and deployed the the XX% of will our year-end, and operations remaining deployment carry we fiscal have of fiscal expect U.S. locations Canadian smaller of by been our The into

the initiative. ERP of be design global During our we phase will focused fiscal on 'XX, also

well launched procurement a UniFirst capabilities fiscal our be new featuring supply as national as chain employees. customers 'XX, new brand we efficiency. on through system Our as will transform discussed for Oracle initiative overall project real ERP earnings and multiyear technology TV to prior during And finally, of we series officially calls, ads foundation an provide and designed growth Cloud our and a

on message ongoing always Always customers focus for people for be will and UniFirst, them. At Our to who our Deliver companies, deliver their their focuses families. their serving

this to extend 'XX, behind related will costs some mostly brand into onetime transformation Although us. fiscal expenditures the are larger

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

to as higher well of margins well our activity adjusted by growth-related is merchandise by number our adjusted that markets, driven our put these are continue our as the a energy-dependent of challenging being We environment report cost as item a of customers. our in having both prior higher service is The of be partially challenged year including as continues quarter, to for that the Similar the inflationary account merchandise pickup These our levels national related effect is at by amortization well the being certain our as products, of impact account factors, impact levels direct sales, in costs the investments. higher investments. profitability with environment. customers, inflationary to labor elevated a costs many in last impacting on as to wearer results influenced compared our to on additions largest these the new broad solid message being

market environment look As be fiscal we the 'XX, into closely. we ahead watching will dynamic

our to and will higher change moderate see overall we have environment have the significant hopefully there slow some yet been Although economic demand interest business. in any signs rate that cost,

a Shane Despite to 'XX the our for reflects in plan. through outlook As not manage the momentum on to details environment, and operating we similar result, top operating but continue our we obstacles continued execute conditions further the and the against assuming solid in these fiscal a line overall shortly, as current margin challenges 'XX. will in provide fiscal summary, forecast. are our change economic any

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

certain able confident the improve we operating our UniFirst to family. more always, and to we care And of customers historical levels firmly focus customers also be our our new a believe are maintain As back while margins sharp taking and beyond, ultimately take we'll we of the our to the investment. on employees, bring would details over that provide for a quarter fourth will that the for with for future and fiscal of a call turn and the who I level building to results our to that, like outlook Shane, stronger will time company XXXX. And

Shane O'Connor

$XX.X decreased $XXX.X a income Consolidated $XXX.X quarter million or $XX.X operating Steve. revenues per or share. Thanks, $XX.X for And of $XX.X diluted decreased million XX% in from or to consolidated per $X.XX diluted year XX%. our of million to were $X.XX XXXX from fourth an Net million, income quarter from million the increase million ago. share

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

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

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

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

Core of X.X%. as fluctuations Operations for as dollar the adjusts million, the which effect XX.X% the was Laundry Laundry for estimated XXXX. quarter revenues in Canadian organic quarter increase of well Core from an growth, $XXX.X of the fourth Our were acquisitions

operating costs performance for incurred adjusted improved the excluding well in decreased Laundry the rates in retention our margin XXXX, fiscal to related solid we or margin growth The as continue share from prior segment's to organic inflationary to during Laundry XX.X% million. with to customers efforts the Our and X.X%. customer have quarter quarter operating our business. in was Core initiatives the sales million recorded key that our experiencing increases benefit the or Core these $XX $XX.X were we segment to as and X.X% costs, cost from Operations year been

to be item As Steve merchandise our margin operating impacting most adjusted quarter. amortization discussed, in significant the the continues

nuclear cost quarter its line a the of fourth partially X.X% well and from ago. our of the Garments of up which In lower specialized an revenues $X were costs Specialty addition, delivers of revenues. the energy products payroll-related segment, was Segment's operating increased and quarter Energy XXXX, from growth cleanroom and to year. by of and fourth during by our inflationary for revenues percentage higher operating These in environment. of impacted with X.X% decontamination Revenues XXXX, Segment's costs a fiscal the as increases as primarily also were million, X.X% consistent year top driven operations. prior as percentage income to a quarter cleanroom costs million offset $XX.X XXXX. increase relatively as were due services, costs over input current was labor results increased healthcare by

timing well outages results can segment's to As the nuclear period profitability and we've period reactor of as significantly in this the due projects. seasonality to past, mentioned vary from as and

revenues quarter contributing this fourth Our of van in $XX.X increased the First growth. the operations segment's XXXX with from million and million $XX.X to wholesale both Aid to

However, in the investment the segment quarter to continued segment's was van income during operating our the due nominal business.

which of normal our sheet was the maintain the including capital and with short-term of Cash year position initiative key activities a our as cash, profitability, million capital of debt was financial businesses working fiscal In by as a decrease the million continue end $XXX.X XXXX, investments acquisition provided the $XX.X of XX to year. XXXX. of due million, the million. decrease We than balance needs future from fiscal of for a and $XX.X to and $XXX.X to total long-term This we reduced cash costs at prior solid the totaling business. heavier expenditures for and no impact totaling equivalents paid in invest continue million $XXX.X we well operating primarily

$X.XXX for we outlook B and repurchase assumes our of XXXX, XX,XXX Stock $X.XX a $X in our transaction. under be for During shares at fiscal take opportunity to top the is midpoint privately This of revenue negotiated and like repurchased of full Common the provide announced and our I'd guidance program of quarter we At will revenues Class shares anticipate line X.X%. for this billion growth previously million million X.X% billion. stock growth the Laundry to organic range $X between fourth stock this to XX,XXX XXXX. also year fiscal be common repurchased Core time,

This that guidance three $X.XX share of directly initiatives. $X.XX. $XX further fiscal For earnings attributable expect includes year million be XXXX, the key in costs fiscal expect that between to to we our we incur per and diluted our will

continued are we costs, margin well will elevated Excluding modeling indirect the the of from these costs key Operations' we our amortization, Core merchandise Based reflects making additional as fiscal Laundry as environment, assumption This X.X%. XXXX. costs, the our compared in incurring energy midpoint of our initiatives operating margin capabilities. investments operating strengthening the levels revenues pressure are at energy overall higher are the of related XXXX prices, costs adjusted investment on X.X% is energy adjusted inflationary transitionary to we current in to be current in X.X% range

Next tax be is year's effective to XX%. rate assumed

the forecast be to Our expected is outages are relative Specialty project relatively Garments and down approximately the of due to to and flat work. segment's to revenues its timing operating income compared profitability primarily planned XXXX, be however, X%,

XX% Our approximately to segment's up First Aid revenues be XXXX. to are expected compared

out segment's a However, for a in to operations. to to once support brand our relatively as building marginal footprint expected geographic profitability national the in the investments this of we result is be continue XXXX again make infrastructure

shares current might in current We level remarks be million. we our expenditures environment. you capital prepared concludes no XXXX $XXX any deterioration happy and approximate expect questions will in common the This economic assumes to our and answer have. that now that our would And of outstanding our guidance

Operator

with Please [Operator Instructions] first from Andrew ahead. Steinerman The JPMorgan. go question comes

Andrew Steinerman

morning. It's Hi, Andrew. good

Steven Sintros

morning. Good

Andrew Steinerman

question. Two fourth then questions. to merchandise a for in be One, have quarter would and in you drag I 'XX? second us the the assumed quantify willing amortization And

the going the year should were 'XX? initiatives in how Could past You much be fiscal driving key us and spend. tell spend very over in terms what's of you key investments and good initiatives 'XX there at just meaning

Steven Sintros

'XX. CRM From Shane. So be the we with A I'll and as the systems turn cost initiatives the of key rollout. into related standpoint, merchandise our year two-thirds start key key about over of I fall initiative get lot let as talked off or mostly about, that a this to to me completing will initiative then completing will

The 'XX other ERP initiative is to system. large cost related of chunk

implementation to phase get system transition into costs will As will in we 'XX and a phase more from than design the more 'XX. the capitalized be build 'XX, ERP where likely

through getting the costs I'm bit, myself So than little growing be of direct probably but P&L ahead some XXXX a there'll 'XX. are in cost that less initiative

'XX and for there to to short, in me, sort excuse as expect, we levels that through Andrew. makes to -- do be will through work our Hopefully, the we the initiative. although 'XX, initiative 'XX So sense, higher of our continue going costs of related P&L high in be watermark of that capitalization ERP,

Andrew Steinerman

Yes. Sure.

Steven Sintros

it to merchandise. turn I'll Shane And the on

Shane O'Connor

Yes.

as exceeded So as as actual a Yes, my it fourth merchandise into I largest the the seeing. the there points. amount drag quarter to at compare point we headwind about ramps our a when it's as meaningful of margin. XXX amortization my the into comments, is amortization. expected just we're to our I disruption carving are will drag that that is headwind As quarter, yes, some well year, my Again, I continuing that, the a relates take say about And the merchandise don't XXXX. that So is that headwind [technical when merchandise year, that to fourth as quarter throughout that prior significant And amortization. both impact to XXXX. lot see What the we difficulty] the look merchandise comments into that that right? amortization related carrying it's out we look his had my think look in point energy can you I was a to merchandise as still during articulated incurring for it prepared from next of Steve was And were basis year, in the things time. at

Andrew Steinerman

you. Thank Okay.

Steven Sintros

on Andrew, A couple there, comments merchandise. quick the other of

combination last more talked As it's lived time service, are and impacted, my really to higher flame-resistant it's about, placed of as lower older said merchandise some as the well off in a in that longer months. for that of FR the area prepared in garments I of much being our of placed some remarks, cost particularly in related pandemic XX that Shane being service tranches merchandise dropping the represented being as

So that you're 'XX. of going build some on during just natural still having

Andrew Steinerman

Right. just when follow-up. laundry in by quick system Steve, And of guess CRM place the of -- for you if all the end one I you 'XX mind, don't 'XX. just I think about being U.S. And

system that you as a benefits go from the about talk Just CRM we year expect the new out?

Steven Sintros

Yes.

Obviously, continued our customers. of the it's of think team, I for about automation merchandise we've starting and actually more merchandise of always we're see and already the little drivers, one to improvement things to the shorter to talked Maybe is a it on ties hours the some more controls. back provide intangible benefit. route ability to transparency

So the efficiency day improved route as has route a quite bit deploy. the of we

many taking Now on expect from some learning the of really old their full there's a really start have system. we to of, year they and help change But being once offset, and the under lot going that's sort system benefits. of a advantage our going in cases, that new of that belt of

Andrew Steinerman

Appreciate thank you. it. Okay,

Steven Sintros

Thank you.

Operator

Please ahead. Wittmann next go question from Thank of Baird. Andy The you. comes

AndyWittmann

there's gave but a to pick that I in you you cash great. being here, the of guess flow what year. You a a of if cash about couple just a give to just you this investment 'XX, drawdown free range reasons you'll bit here, the working flow? year about maybe capital the things. us in maybe little talk behind if expecting, be than Yes, of And Good could components of I Could working morning, kind next the kind expect higher us able wanted capital talk normal? net you're up past 'XX guys. on

might range get for So cash reasonable your free 'XX of of what be? I flow just sense wanted to a

Shane O'Connor

Yes.

sheet. a those a into merchandise business. you of and reflected needs to our you foremost, amortization significant service. capital So amount we balance see as guess, in XXXX, and when been those, And products our look the merchandise we And on expectations, into at adjustment We've our clearly, we service, investment the take put working first about more look for XXXX, ramping. had the can talking our in as I relate

XXXX. that XXXX, was our more it and that During significant it in around expectation less is normalized than be will

balances. We accounts elevated also have receivable

last some work had change relates And of our that deployment to And some I had of then some the management, through there mentioned to we quarter last back that that things to payments had year. continue of deferred pay cetera. were -- FICA was one the to of as system et related of pandemic the that under we stimulus some we the

a going which a that be result forecasting going million, as a to the significantly XXXX investment So being capital our is as in XXXX, probably it's flow, expectations right? down, less compared impacted into initiatives take draw when and $XX some needs necessarily And advance profitability expecting look is the expenditures not our at cash well we infusion. our But around to capital there's again, is these to around of that our still cash current there of coming initiatives. business elevated obviously in we're by be that we to working that's going free expectations as the

AndyWittmann

there's And FICA coming in months here Shane? couple too, the of payment next another

Shane O'Connor

second expected that The yes. half of payment of December year, this in is

AndyWittmann

was how that And much again?

Shane O'Connor

over It's $XX little a million.

AndyWittmann

Yes.

the little talk down margins, like the price, that context to anything as bit whether about you're then for, for got half of to you segment any be all front When And get year and Core for like Can is us that you've would going able that you the think I that like you positively? guess more surcharges bit the the fuel a know. initiatives maybe, second think, on feel or margin like helpful be -- of going and here Steve, I just price cost guidance follow-up. Okay. in my it's gave do for in right about the you little to dynamics? that a margins side, that core to the kind is half on the comping can start year of the year I'd hear then Laundry

Steven Sintros

Yes, the forecast. said I somewhat year the think our of during trajectory the what is margin embedded into about you

costs my you things look some comment I reducing, at I the potentially. material made freight you're And certain we're seeing -- when that think sort status sort again, signs remarks, I quo. certain forecasting think in be -- this of environment, may even current some of certain raw costs, prepared

take amortization. hold buying and and merchandise some not I that, of year, before things sort the long those multiple that it to Now may see supply perspective, cycle there. think and a But that And some like later we fabric later there's of think we're your about continue hold chain, until you of year, in mean, hopeful you that see do to things. to in take a you some of start starts start price to I the in environment stuff turnaround from long,

fuel talked continue to we'll You the about do that. And of try surcharges on to situation. to stay top

have it's it goes dynamic as we talk through I strategy evaluate build an sense well with about just think go environment, the it -- our effort You customers up. we makes what we down, right? ongoing fuel, and to through and forward trying worked as We're 'XX. really us for that the environment just work goes

Shane O'Connor

quarterly first to before profitable of some seasonality more quarter thing being that only mentioned this margin the quarters oftentimes our back being I second to would is, Andy, question our as Yes, in the it profitability profitable least relates again. quarters. it. our that We've your prior the With momentum Back period, has the seeing individual the trajectory our would quarter to that to about add that, trajectory, the current we're between the that -- comparable, Steve's comparable makes year to guess, that quarter the the improvement the the or prior I comment any that if and comparisons year meaning is or sense. to really delta is the say I

AndyWittmann

Right.

in basically second negative then the turn potentially year. quarters the the year-over-year You're saying and of more more will earlier half margin change hopefully the positive be in

-- I think trying just of say. kind what we're to

Shane O'Connor

to were you get able Yes. it. I'm glad

AndyWittmann

leave I'll day. a good Have guys. it there

Shane O'Connor

you. Thank

Operator

ahead. comes Thank The Northcoast. you. go Jack Boyle, next Please question from

Jack Boyle

you Thank my everyone. taking for questions. morning, Good

I Just real here. have quick, a question

on some great answering seasonal cadence here. the You of guys are

a of growth in or time there to Just attaining Is that guys improve the any believe of -- grow that of margins about the type believe or to minimal them? to stabilizing question -- that there revenue do need have is continue you you margins. stabilize terms continuing guys attain would the revenue, -- you

Steven Sintros

have been of tied to now good to it's get that cool margins. question. going talking mean, low the with top the of environment. higher continue say, really the we're beyond down, things is say, Yes, The do cost went I inflationary deep last fuel, growth improve takes right? single here mid-single recession, those somewhat that a sort what's obviously wants environment. number right, to still through we higher have there be economy trying the appropriately, growth we've line obviously, period influences periods the a one of I the of growth But back towards we're slow business a countercyclical let's be recover, But thing momentum things you operating on to right? going one is to keep slow our of does into the more the to down bit, you're and over we slowdown Yes, you so, a have of or when to You're are the inflation to because to about hold, guess. digits to careful of a not normal pushing some margins no I like and and to able will digits if a that a be say year

think lot about there this placed more employees, the sort associated that. the putting sometimes, turnover customers, And more merchandise in in we're and cost can of costs employees elevated service. companies The customers are our When garments amongst upfront our which in an we experiencing service a because about talked environment, turnover more in how and there's being of adding with service there's -- with is customers' more that merchandise merchandise our our help put you service. I placed are

to being direction. to margins the that along to to appropriate pricing yes, So, maintain continue way. making in will retention inflationary right sure your that as be the past growth real healthy we some getting need of question, true said, period, you and answer And it core do the to selling back move move we're the

Jack Boyle

good. a And store of kind just the merchandise any to seeing as you're to any you the there long follow-up elongation in there. quick Very your Are merchandise? length comment and that Is change how of guys having sales process?

Steven Sintros

I would say, frankly, to of on one of no, systems our improved we part is inventory key our continue And locations. across of ERP move utilization I areas think the utilizing focus key a our our improving used is we profitability. which as work project, garments, of used quite into

significant there. we're So no, -- a wouldn't seeing change but I say

Jack Boyle

Thank good. Very you.

Steven Sintros

Thank you.

Operator

from [Operator question Please you. go And Instructions] of Thank William Tim Mulrooney ahead. comes the Blair. next

Tim Mulrooney

Yes. macro that be remains stops Good trends unemployment where I'm growth? from about still morning But leads. in Shane, Steve. low. is to that assuming customers customer okay Two me. first ad of new I'm start see you'd might quick so new weakness with you questions signs with maybe account talk customer given thinking Can

could over last the on quarter? So comment trended that's if how you just

Steven Sintros

of the year. in customer than new mean say I we very Yes. the new business more back half think 'XX. reasonably wins over the No. did we for was trend continues solid. I And full that be to would year, I fiscal consistent sold

do say wearers does economic where really in I we're to show a there. seeing slowdown it slowdown, a we typical see wouldn't the start environment up So first. In typically

dynamic low. pretty higher Now unemployment And is little are right? but this is where be a of the hiring sort still interest might rates, environment people different, good, with this expecting very the still a is slowdown

seen slowdown But or open and way our real that for it, during indicator So a or in is keeping year sharp the is normal I'm one eventually slowdown will another. wearer pullback sure not eye you're right, be that it's factor we that obviously, we're levels a something have the that coming.

Tim Mulrooney

helpful. that's No, Right.

see time actually it I normally given So around. it But that in stop environment, do different about be this the think it should of ad is first. this type you might way

So ask I'll again -- next you about it maybe quarter.

Steven Sintros

XX wearers years think saw we was time absolutely. in XXXX, we the in when I would 'XX, back first. the sort we of were XXXX, saw years, last pullback in certainly Yes, you other pull say an it some energy quickly. recession after pretty about energy XXXX, When the saw the of many the boom, tanked wearers

So usually yes, our indicator. it's leading

Tim Mulrooney

great. my -- And follow-up, recent I months, year. labor been eased as better, ask has was heard just just it's in some That's to others it's Thank labor while gotten at as all all as wanted that availability environment about ever say you. from touch a if the has folks we've it just difficult

curious it your drivers So you. both to hear route and to as thoughts maybe workers. production your relates plant Thank your

Steven Sintros

economy, which more we I've of reading in Yes. broader No, been is our great question. what with seeing are And I think I'd say applicants. the experience is consistent very sort

staffed turnover months or better were And to though. side. say we we're continue and to so ability really seeing the will find fill no the in route better question Turnover is applicants. ago. -- driver than -- nine we I are the in we continues but and There's high, not both production six, not to on be physicians was fourth improvement those the quarter today

So with There's the a in I other think ability you're -- consistent -- it from improvement seeing what your an I'm find to bit of very little people. seems companies.

Tim Mulrooney

That's very helpful. Thank Okay. you.

Steven Sintros

you. Thank

Operator

our was for any the closing over That question. phone back you. I'll remarks. call Thank turn final

Steven Sintros

performance. and joining first and with we in forward look quarter January Thank all, quarter have everyone our results, for speaking expect you fourth us to a to I'd Yes, reporting when for day. thank today again you our we great like to be

Operator

call for that you day. conference for This please your Thank and the you, conclude have does Thank your you. participation ask We you a good and disconnect lines. today. thank

UniFirst (UNF) 19 Oct 222022 Q4 Earnings call transcript