Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the UniFirst Corp.

Second Quarter Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions]

to Mr. conference like President to now CEO, and would turn over the the I Sintros. Steven go Please ahead.

Steven Sintros

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

but Chief Shane you will welcome UniFirst be a The mode results Corporation's first, review listen-only Vice today for like to to O'Connor, until call on our second me We would a is President Joining prepared disclaimer. we call and our Financial conference fiscal Officer. to XXXX. remarks, Executive brief complete quarter year

This trends may current anticipate, forward-looking words risks call from identify financial future contain differ conference certain statements. results reflect estimate, may anticipated forward-looking factors. The These the views of events future those statements Company's statements performance. forward-looking intend to optimistic, to uncertainties. expressions that are believe, that subject and with expect, Actual respect materially on similar and risk and a depending and variety indicate events future

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

We fueled top-line experiencing efforts our the performance mitigate are we’ve to by that cost the pressures ongoing in which was our with pleased been our quarter strong business. partially in

our I want customers. who always, always each XX,XXX to deliver continue As for to over thank partners team our other and

making we We our technology advancing are infrastructure progress and also are with pleased initiatives. the

making focused services growth As industry-leading ensure investments have to are and as we well on our years long-term as we business for we be to to come. profitability, continue in designed accelerate discussed, providing

Louis is and our Missouri, with to and service we announce long-term of making and UniFirst of the Clean XX, family. I of headquartered the Arkansas, previously providers the independent that closed largest Kansas workwear team officially Clean Oklahoma. program their Illinois, welcome announced March XXXX, on States locations Missouri, Uniform and customers purchase theme happy am one Clean successfully servicing the with facility into the uniform in St. in in and Consistent Founded United investments,

has reputation for for quality highly serve Over foundation that business all customers we combination provide will enhanced We service a to years, strong an a companies believe with deliver Clean the respected the two the us built of service a in focus. markets the together. experience customer with for a market-leading that

Clean strategic Due patient to be it, as to businesses that most the the two impacts customers. in of as transformation, the minimize its will reputation we leadership risks the technology and well brings strong on assets, are and in of the service and and where our its Clean’s complexities with we integration employees valuable

that Currently, double an two details Clean the shortly next regarding shortly. margin than expect is We be to believe of have able we operating on performance Shane over XXXX impact provide fiscal bring the will to the to business as our EBITDA at companies together. more that three results operating the we we XX%. years, will approximately Clean more

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

our impact have transformational to get could of operating out related better costs these investors excluding quarters last The a several we the performance results, our that projects. reconciled of so these of these initiatives perspective

these no SEC operating in longer a Securities new from excluding recent the providing results Exchange guidance provided forward comment regarding a Based financial are Commission on by disclosure going and adjusted to going we modifying SEC letter and be measures non-GAAP our comment costs. the and

overall line results that system our making our generally continue to impact CRM in they can these With good on clearly deploying are to profitability. initiative of quantification cost, We so new and understand investors our respect progress with the we provide will schedule. however systems internal in are our disclosure project, having

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

initiative Over Oracle the design transform our our designed focused to we capabilities, supply Cloud chain and our fiscal a remainder overall the procurement XXXX, ERP foundation of efficiency. and as continue project. well for growth of will will global implementation technology provide new on ERP of be The be also phase multi-year as an to

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

continue fiscal be As through will the market watching conditions the dynamic we XXXX, go closely. to we

higher During quarter, to level what significant stable. market interest our have a the will where and customers not that been and customer the operating environment we be see impact When and a did rates change overall remain base seen. to the on have the our

regardless in cycles our execute next years, ability the of different our in resilient proved Over cycle to business against plan. our brings, the in what we many has economic are confident

We are as pleased team the with deliver which as solid performances sales, both our retention. well in execution new to continues of account customer

of growth related we cost price increases sharing year with strong prior from reflects environment. have revenue the from work the as to years, adjustments to customers throughout inflationary the trend the impact we Continuing also the experienced

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

of bringing focus customers UniFirst on the family. maintain will we into new our our employees, always and customers as sharp care taking And a

turn the details quarter more our Shane, call to will provide on I’ll second over results. that, who With

Shane O'Connor

of $XX.X consolidated second operating or a our XX.X% quarter X.X%. up In $XXX.X and million million, million $XXX.X Steve. decreased consolidated from revenues Thanks, XXXX, year $XX.X to million income ago, were from

diluted $X.XX for income or $X.XX million or decreased quarter $XX.X per Net share. the from share diluted million $XX.X to per

and costs directly three $X.X discussed. of respectively, Steve the quarters in to initiatives million results that attributable the XXXX XXXX financial and approximately key Our of million, fiscal $X.X second included

XXXX $X quarter during second fiscal XXXX we of of the of acquisition incurred effect quarters combine addition, decrease net fiscal $XX.X the million and operating by million, second Clean In these and related income approximately EPS $X.X million. $X.X million to on costs respectively, respectively $X.XX million, $X.XX, and of and of The income items by to the $X.X respectively. Uniform XXXX by and

of organic the strong effect the was XX.X%. growth, fluctuations $XXX.X Our efforts over last Canadian Laundry the Laundry Operations as from cost in of the up revenues in well as and organic million, business were Core quarter which year of Core solid that as second incurred adjusts result for estimated dollar the sales for as ongoing the XX.X% XXXX. acquisitions, with growth our environment, well This to the strong our increases share quarter to primarily inflationary pricing was performance the customer rate have customers continued retention. we due

Laundry the The the to of and X.X% and related we acquisition Operations operating were Laundry margin X.X% recorded operating for Clean to XXXX Core our prior key by margin incurred the quarter quarter decrease decreased or and million Core to respectively. $XX.X to initiatives the X.X% $XX.X segment fiscal the combine Core Laundry or second million. for XXXX and in from costs year X.X%

our be segment's of as put support our XXXX of additions on well investments. in items, account energy-dependent our inflationary well to account effects service in with increased markets, operating sales, national wear customers customers, activity our higher new in our levels these merchandize increase by products, certain to resulting the margin continues as merchandize as the solid elevated cost in Excluding at impacted as from costs

casualty expense and Partially lower during claims prior offsetting these compared was to the quarter healthcare headwinds year.

growth to which Revenues was our increased cleanroom delivers increased to of from or North products to from specialized X.X% Garments project segment, services, million operations, in cost of in XX.X%. the nuclear up due increased our increase second and nuclear Energy This prior work decontamination in our XXXX, in in X.X% $XX.X and cleanroom year American operations. Specialty revenues primarily $XX.X strong XXXX. million from quarter and

operating its expectations. top-line seasonally from to was profitability performance. XX.X%, in the The performance segment's increased exceeded our a of both quarter operating margin very result top-line a and normally is from The and XX.X% strong what segment's down primarily strong perspective

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

$XX.X van increased Aid from growth. million prior or to year segment's XX.X% contributing operations with million and revenues First $XX.X the distribution Our in the wholesale to both

reflect expanding results infrastructure an the However, These $X Aid in the and eventually van investment million larger out the business. the business our quarter. segment much loss a support necessary continued had operating to building of during First

cash cash, during sheet million. the not program balance At of equivalents reflect position totaling our additional with under investments no fiscal to short-term current any solid end our debt continued We quarter, common long-term repurchase and stock the we and financial stock and did repurchase quarter. $XXX.X second a

operating by for prior the business. provided of to $XX.X year the year, first due increased Cash activities million, needs to half of primarily in working million compared $XX.X to capital lower the

our of million. of we $XX.X the $X.X We continue period capital acquisition million paid in invest the which expenditures to future with and four during for businesses

XX, cash purchase of of under price This existing March acquisition line $XXX previously reserves Steve Uniform approximately financed availability with of As for closed and announced on our our purchase on an was we aggregate mentioned, million. our Clean credit.

existing X, million. March credit the resulting of accordion which of a increased commitments result the commitment the total of this a we in under agreement, by As credit feature our on aggregate exercised $XXX million agreement acquisition, $XXX

recorded Core the which million, expense an Laundry for of income our revenues of Our expense XXXX. and of regarding amortization in be in current operating the second quarter operations results expenses of will million, in acquisition-related intangible of assumptions the operating a includes the our million million, decrease includes $X purchase-related $XX Clean on to impact $X million $X.X include the which which increase year, $X of acquisition

update the assumptions confirm like results, that as we we accounting to but operating highlight to process. we’ll of would have price using finalize purchase the estimated from if need impact those the necessary Clean’s diligence, due and accounting assumptions on purchase I

provide take $X.XX our assumed this billion. on update includes of we and this impact an billion I'd our like expect year time, $X.XX Clean revenues be outlook now the to the will At which between consolidated opportunity acquisition. full to

operating combined the guidance Core of estimate diluted $XX margin operation’s between will And well $X $X.XX EPS Laundry assumes and of also at million costs revised midpoint Clean-related costs. initiatives, our our attributable to Laundry An the directly key range X.X%. and per assumption of $X.XX. items as million of operating share earnings This X.X% be $X.XX. acquisition These by our margin as two Core by to the decrease of operation’s

in reflects our offset previously which are stronger pressures costs, guidance Our merchandize notably, expected Garments partially most Laundry quarter than Specialty impacting during being operating performance operations, a continued revised our business. the Core by

guidance Our fiscal tax not revised for further economic of share any an XX% or unexpected XXXX does significantly buybacks and assume rate developments. assumes effective future adverse

prepared now our you that would remarks, answer to concludes questions be happy any This we might and have.

Operator

Instructions] [Operator

first proceed. Our Steinerman with Morgan. JP comes Please question from Andrew

Andrew Steinerman

year. if million in of the my just Shane. system initiatives the question of sense ERP down cost meaning Hi, hoping the yet or going quarter. have okay, could Cloud deployment? the a And starting the second initiatives give second you deployment, go And I to into be break key Do the us what get when key the into sense will was as I'm the three a it's Oracle well. half related you also three to will $X.X in then

Shane O'Connor

sure. Yeah,

initiatives start the year. with the I'll the as of the the remainder quarter, the key So for of as breakout expectations for well

two-thirds So, notably system. the of to quarter, the the deployment of for those related that really most costs about project, CRM

in deploying locations locations we've our to deployment. as that that numerous that think spoken have going system I teams and the are supporting our past, are now, we about and we throughout right

year, be take remainder I at of cost incur that a the fiscal CRM the deployment that for remainder year fiscal of year. end the cost to throughout the by will of to year costs deployment the be the the the I'm similar the as supporting well. Largely, assumption throughout look will cost going going about on two-thirds the When the this the related Share be to of lion's we're of -

Our domestic our expectation locations deployed. is be will largely that

one-third we to costs of as CRM in of some Some we our of the related at when locations. to will look the initiatives, But majority cleanroom will in take now, at cost. those time other as majority deploy costs Right you year. place carry XXXX the take this that deployments the point in ERP the the two a into Canadian of continue fiscal this is

ERP ERP initiative, from is when the the majority experience, last very year. full was spent my of quarterly And the again breakout and carrying cost My for year, the over I'm CRM, of quarterly one-third then the supporting expecting some What remainder that very, as remainder the branding we year the similar. for well. of residual

Steven Sintros

Andrew, That'll continue the thing the next Shane, branding The branding is - work mentioned quarters. cost of only I'll add some this to year. having the tale that, to of that couple into over reduce is

Andrew Steinerman

Okay.

Steven Sintros

that And as is far project in the early now. on project the ERP, as still ERP very right

work a implementation modules. over that of the we the largely the designing system the remainder also year. expect finalizing in that are design design interface be out number that - But the And our with of systems of and how it's involved – the roadmap will timeline in going other work, and in will will We and we system going business. the of be ancillary the that the be for of coming throughout on to different years. support That'll deployment deployments

haven't this that do Because remainder expect be project. that in this to and is will do place. it going since time, deployment take say roadmap the we point to that definitively at we that working multi-year a finalized be exactly will I when We year can't of

Andrew Steinerman

the time. Understood. Thanks for

Shane O'Connor

you. Thank

Operator

question comes proceed. Wittmann Andy Please from next with Baird. Our

Andy Wittmann

this Yeah. gave to think about to plus revised I've basis Great. my this get an morning, profit the gap Core adjusted I the on guidance items. Thanks of make X.X%. I you got that ask questions right? that Laundry, for about the sure I and be margins guess, wanted the I us to taking guys.

like you quarter, guys X.X% than were that last little it like better we’re think quarter Specialty segment. of sounded and was I you a out despite, bit saying expected the

the whatever been change? happened for have several So the I cost costs guess merchandize been that again and new I of infusions that think incremental by It's the quarter lot in a it's last the question XXXX. - is, redressing, this in reiterated what is and driven merchandize merchants the quarters or

all expect, being would to those I garment base. in close So, else would be that the annualized cost equal

like it there's changed. seems But that's something else

just to margins your little are revised what today? could on costs Steve, of And leaving merchandize bit you the other have maybe, talk the this factors So, a outlook dynamic about today? you

Steven Sintros

jump flows, during Certainly, Sure. the sort economic putting and probably you With in, I'll start then, merchandize in as for in to lot different for of time dipped. merchandize following of of well. as a know were ebbs long Shane particular, in can us amount and right, merchandize pandemic, reasons respect cycles. we really a the

last see merchandize And that to obviously months started to trend continued back up We've or lot of put over XX a the in. so.

so the You’re sell last large did about. accounts but right. year, and We It continue have infusions is to some factors we on. strategic we talked

influence a to are there pieces So, it. continuing number of

as about we I discretely think merchandize, well. this that and but, I’ll impacting piece haven't said the to one as is add - much we as talk inflation probably is inflation,

for merchandize. the paying more but we’re line still think is I in of amount mostly putting units we're in,

that Some comes of from outside vendors.

from manufactured. it comes Some of internally

continues the expect get and be of to garments to amortize I that that the we along, kind we high starting goes cotton like say things that year the don't to and merchandize some that the our with as them. got to things should and want cost to cost moderate then raw which down start although gets put because chain, do to materials, even we to materials supply of relief raw of those as of as Some service we that on goes other procure

costs not of probably going from until those to some year. benefit next get lower We're the

the we impact as of us as continue we've merchandize go. cost well factors talked combination the the So to as about, of

breakdown bit a, piece Shane the is of give other that but biggest we're gap, it's the probably a merchandize a expectations closing and just there's the And prior a you quarter couple little of pieces it's a our can about then point think I seeing. from smaller and

let the in gaps I'll So, Shane there. fill

Shane O'Connor

Yeah.

for year, the current So when our about guidance yeah. we're talking

on of or you sort that the and my transaction-related impact of think the cost you I'm I excluding of that incur, articulated the going spot initiatives think, there. I sort key what to after impact

guidance that a in those take was indicating last with line you when I at after was look of we effects think largely the year. last had I that of sort the items that year, two

I guidance that about lower guidance. Clean to going headwind margin. Right had that last points of my unpacked that that expectation basis that that obviously I year the even when purchase my by quarter, change, a When about still XX XX, was is basis I previous the indicated now I had of points on influenced of my point than approximate assumptions headwind-related accounting to I, acquisition. And earlier. XX being the relates on merchandize about had the some articulated

At I that tracking larger assumption little assumptions, then, going is - to Energy XX Energy where on Energy, that that my headwind, guess XX And get our my think time, XX basis than to because previous points from based slightly this point heavier of towards to is, basis about I in I additional XX slightly thought with than to were benefit assumption. we Energy - a now. comparison - from in was compared

of that's headwind prior like that point to XX well. a guidance, as sort basis compared So

items three change. really explaining those are that largely So

Andy Wittmann

bit I already installed your much these can live? how guess, detail a XX% but that Okay? get the are being little that for systems more the stepping follow it's talk to thinking offline more some about benefits harvested from Steve, the discussion. a locations on about I of up installed is bit guess, might I been to while back now. that's and that, a CRM fact little you is and helpful margins

live, kind completely phased old yet. some in it isn't the gone the that still locations of it's is being where of know I And where

maybe fiscal this. just much full do you not you as can when you're as page that investment? result not of to So, quarters, the are you about the the and getting turn I are of recognize a it's to talk any, benefit And wrap that going expect But you benefit if the getting year, - how profit next margins the substantially, couple more next even to your benefits today?

Steven Sintros

Even for the the there's we're through when of XX% what midst lot of, we're learning laundries, the adopting you're think a management you system. the still, going look change I we're on in it. about still of right, U.S. Yeah, and still locations at CRM, call I'll though new

think go through kind broadly, of we that I deployment. as

to the net months not there's a done. surrounding because probably in conversion months, up of deployment lot probably lot fact, and six a and is a that's data In and being of work a advantage, training time

efficiency nine say so to seeing benefits the route there We've it control. right? to to system. time about And immediately, on enhanced talked we're stride, merchandize sort six That's and their the locations We've of additional not and hit using effectiveness for talked months takes routes. new drivers our about aren't

Some of that recognized is immediately.

better to, continue back, and we charging Some benefits, year think next benefits making garments resulting of to and year. that But the sure coming the through control for hard as will appropriately in controls soft we versus advance of our those are we we're garments well. merchandize ability are go seeing remainder as into

been deployment. as half year really year, then, And and last on think, as has I a the the so focused a

the new the And will of phase the we kind that think capabilities course think, so. locations that'll sort I an year we next or learned happen of where, optimize through system. the to the go we of of optimization and over

in be for you are opportunities a been immediately new the advantages. system. some start think or working some off over on and can system things. as new there'll coming certain There's you've we improve next there that we're of you're through When lot to there with There's a see of But, optimization that things to put of learnings those anytime so, still improvement. years, the year XX system. So, you the and

still pandemic and to costs. I again, up such inflationary controls, coming because it impact the of ramp the talked of may a be higher And Improvement merchandize depths seeing the we're some of about merchandize we're see off of the seeing hard

continue to margin. has effort recover pricing part some to working that we can of our of angles be to So, where

of about feel to our moving But the deployment in ability of optimize technology are going lot for it we forward. pieces, a do we of So, and sure. good where terms the

Andy Wittmann

there, Okay. guys. I'll leave a lot. Thanks it

Steven Sintros

Andy. Thanks,

Shane O'Connor

Thank you.

Operator

Tim with from Our Blair. next question comes William Please proceed. Mulrooney

Sam Karlov

taking This my on Sam Hi questions. is Tim. guys. Karlov for Thanks for

Steven Sintros

Absolutely.

Sam Karlov

comes XX.X% us that of give from you an of growth surcharge? that fuel from quarter further, And you this idea pricing? if could down much how much how was Can that break your organic of

Shane O'Connor

I Yeah, has couple of really so over as level we a kind this – and couple now. prepared ones meaningful won't we've last we of put in One been in of comments when is our activities energy our not is really last that The got about I that growth. thing factor that kind energy will we mention the remarks, peaked of of into surcharge. say make granular in detail can the did surcharge never and year but years pricing the

bit. whole mentioned take has as still our the some that cost, a still down We Shane to high. come it, of a that was of That as some of particularly and back down energy energy did when we to relatively would we look energy a are customers retaining commitment surcharge came do remains step the a because as small sort fuel

break won't said some how but price I lower new before, this much It accounts ways. in to are be come cases we than we've little you've we than is difficult for other out down it really while. the say further a So, some analysis that continue pricing had push components a To accounts in keeping at honest. any to because, fair in that exactly there, prices

it's that to we environment the there. receptive on. have and been through. customers have work we'll I something we net our price to the work And something continue of opportunities so think continues And still impact And be understanding

Sam Karlov

then And Thanks. helpful. follow-up. That's one

additional updated performance that for of the acquisition. much top-line Uniform from million additional coming second You guidance your your $XX million of growth cleanroom second $XX year about or of sorry growth strong million was from the $XX Clean for the full guidance year? How in $XX versus - updated that the higher expectations quarter includes of with million the to half

Steven Sintros

question. good a It's

I think it of based the through the performance six lot on a estimates of year. or months the is the

to of Garment As some relates it Specialty Shane the mentioned segment.

the that and to, well. two-thirds continues Garment the Specialty Some I first is a But Maybe it strength of of I off contributing the as think year of of to my the probably half bit. it top fair back the of and of half from going I'm amount think it year. head a little

Sam Karlov

That's helpful. Thanks.

Steven Sintros

Thank you.

Operator

Kartik Please Our comes next question from Mehta proceed. Northcoast with Research.

Jack Boyle

morning, This on Jack Boyle morning. Good Good behalf of is Mehta. Kartik everyone.

Steven Sintros

Good morning.

Shane O'Connor

Morning.

Jack Boyle

question Uniform Clean quick a acquisition. Just the regarding

guys You pursue to plan percent you years. Uniform? you three to XX% that? give a Or what Clean are strategy have next to doubling to two saw what in said that maybe on to from maybe more just Could the do margins as little within EBITDA you us color the you planning XX% opportunities

Steven Sintros

Sure.

to us others one I the service, most but look reputation attracted market. they that have presence. the service the a markets in presence don't their we at you is decent in things I some in of the a market, of mentioned, think, that significant Clean, of When that really as we that have

goods. ability of products, integrate together operations, chain to synergize you efficiencies, some optimized on self-manufactured when our the think routes, So, sourcing sales supply about the forces, working

any So, you it's our sort of really acquisition we think industry. when things integrating typical would of with you can think from of in about all the gain what

aren't really our even of is, one a markets. result our markets I these attractive as think some time and said some top key that in to profitability of this, which for the scale of And a markets. density, of we've all more that's long made is really performing

in really Midwest provide strong serve platform that so, UniFirst of and combination of that commonly two really a all the in will the And area. companies the Clean us markets in that

little And still on I this, but deploying. they a going same deploying to don't I deployed we're are think before, we're it's mentioned the so, technology. software I mentioned that ABS time, because as take

that terms bells we have as of to have of through different synergize of ABS will sort well whistles as different companies work the to help trying both that versions it. Now, in put together. But we us and

Jack Boyle

any how was appreciate detail you how extra the area? many much as guys into quantify Maybe Could that. existing unserved as just an some much And to, of footprint that Great. by more had you how you you? go I overlap? or could service that follow-up, in maybe

Steven Sintros

that Yeah, every well. servicing, they're service, as I would market we say that

be example St. which a good within own Louis of XX, So operating Louis, have Greater one is really three we area, plants in XX They their market. miles the Louis, branch. and have would all St. St.

plant is Springfield nearest Our Missouri.

a facility depot will merged example their eventually our in of Louis well that's So be how, good Louis St. into St. operations.

merge and the commonly And those to there's amount But other do together, who that optimize market Kansas Tulsa facility operations different every serve and the operations able some City kind but of to in markets processing we other being markets. like go in direction. it's scale of a has

Jack Boyle

the Very good. for detail. Thank you additional

Steven Sintros

you. Thank

Operator

time. no this further at are Gentlemen questions

Steven Sintros

everyone speaking as our when quarter performance, the well of third joining look review our with to for as be everyone forward Okay, our second expect remainder I'd June, to like reporting thank results, quarter to and for today we in to us XXXX. outlook again we

have great and Thank day. you, a

Operator

thank does you for for That call today. and you conclude a Have the day please ask conference your participation everyone. that great disconnect line. We your

UniFirst (UNF) 29 Mar 232023 Q2 Earnings call transcript