Earnings call transcript Q3 2023

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Operator

Greetings and welcome to the UniFirst Corp Third 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]

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

Steven Sintros

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

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

company's forward-looking forward-looking estimate, contain The with statements forward-looking to may current call that the and These views optimistic, expect, to reflect performance. certain conference expressions identify similar statements statements. indicate events future believe, This and words anticipate, uncertainties. respect events that future trends subject intend, risks financial and are and

from results anticipated, of may a variety materially factors. future on differ risk depending those Actual

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

line quarter company. with number of our our in We excited to investment of key in a and performance strong are about be continue areas pleased top the

want of I as best who customers for service we XX,XXX in our team our other thank to recognized always always, As deliver our continue each towards strive industry. our as being and to universally vision over partners, provider the

primarily by the in a legal very compared one expenses impacted claims related Laundry higher to significantly to well forecasted, by negatively quarter as in were healthcare driven Profits we our quarter Core expectations our matter. large operations in the as than claim had

the Core the being operation cost, margins of inflationary by which by impact these are the continue the environment. higher items Laundry pressured discrete the to addition quarter, operational in In to impacted be of

And execute our our on manage into a costs levels. new our customers control, areas our on always our care customers We transformational to ability while of family. we employees, assuring taking will the bringing customer sharp can or service initiatives focus we as affect maintain UniFirst don't impact adversely continue we and to in

from revenues record Our consolidated impacted profits profits Specialty were segment. Garments by and our positively

reminder, operations. a made is segment of and cleanroom nuclear As Garments both our our Specialty up

division move growth profitability, to and show we forward. continue expect continues cleanroom as Our which to steady we

over on the more customers. impact projects results as of we've division's large as can activity very mentioned be our volatile years, with nuclear the As well swings in based some certain

very primarily customers. its being like that efforts days early also of of would its acquisition I closed Clean's the been our people to on and constructive assets, important initial focused report Clean Uniform most recently retaining with have

to continue what the companies believe about and strength will combined we markets excited to able serve of together. the the We achieve be quality Clean we to and be in the business continue

quarter, it, as last that complexities are and be and where well patient strategic in due we our from the service of to brings as discussed integration we reputation strong two businesses. As with of transformation, the Clean leadership technology the will the we

and two competitive designed of We on system new the the system. company capabilities initiatives to rollout of terms technology the a also and in with transform large corporate-wide ERP our positioning. to focused pleased progress our of initiatives overall and be These are continue CRM

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

related our so to projects. operating transformational could a year, we of as results, until large impact reconciled these of out our a performance, better of brand these largely quarter the addition initiatives in the this perspective second investors completed transformation up had Just excluding get reminder, of these to our cost

longer modified provided non-GAAP from recent the providing are comment comment SEC results, in letter, adjusted measures by guidance we no operating SEC these financial SEC costs. Based a disclosure the regarding on new the and excluding and our

We that costs, will on the are so initiative can investors our and having of clearly impact continue understand to profitability. however they provide quantification overall these disclosure results and

the have also In will cost forward, in of valuable to incurred begun we this addition, We that related we will closing intangibles the be incurring the result our the disclose we trends and EBITDA is be be increase in segment. To as by this results, integration we any a assist as we operating that in to disclosing or non-cash significant move Clean also to further direct amortization will acquisition. quarter especially understanding Clean of acquisition. believe incurring due investors

good deploying systems project, line schedule. are in system with CRM new we our progress internal our to our respect making With

the As with of track XXX% Core nearly locations a our today, we end on by Laundry of deployed XXXX. continue having to fiscal of US be

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

position Overall, future investments how about the we will to success. be for continue company these excited

near We we have to all experiencing. that -- the can on very also remain manage maintain margin been and challenges we focused term in the cost doing

our call on that, more provide -- who quarter to With details to Shane over like the I'd third call results. turn will

Shane O'Connor

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

financial Uniform incurring non-cash will result be begin the in to of X.X%. year will our Clean due EBITDA intangibles acquisition, Consolidated EBITDA amortization $XX compared in discussed, including the discussion or performance. the Steve to million of the a to we as that we prior $XX.X in increased increase As million,

our financial three million and to XXXX attributable key XXXX and and quarters ERP, fiscal $XX.X initiatives. approximately costs the the in third of respectively, CRM, initiatives results Our directly included million, of branding $X.X

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

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

were fiscal X.X% And and to Core Core related Laundry from combined the Laundry $XX.X from to Clean million segment X.X% initiatives of year acquisition operating million. for XXXX and and EBITDA and third Operations or Core margin $XX to prior decreased to for quarter segment's margin the operating in X.X% we X.X% decreased or by margins the X.X% Laundry our XXXX respectively. to recorded the and decrease the EBITDA key the quarter incurred Cost XX.X%.

we prior legal impacted and quarter EBITDA million of care a segment's year and these approximately costs in million. health approximately items, related high incurred $X also margins which the by claims to $X.X were Excluding the operating exceeded matter by expense,

form purchase costs margins for environment. by in impacted of further addition, segment's the inflationary be In the which XXXX, third amortization. by of operating energy X.X% the noncash higher XXXX. down the to accounting and notably most merchandise operating these continue headwinds to which revenues preliminary The in percentage of of intangibles pressured revenues, other were from quarter, X.X% Clean quarter Partially a as offsetting acquisition margin, the costs recent elevated lower Uniform the are being during in decreased impacted

closed The a XXXX, $X acquisition March XXth, Uniform, operating Laundry Operations and the nominal segment's loss previously EBITDA. the for of announced of quarter which million $XX the Core revenue, million Clean operating to approximately results approximately contributed to on

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

margin operating performance operating Segment's line XX.X% from and both XX.X% from exceeded to increased the Segment's primarily top and performance. strong top result profitability our line its very a of strong expectations. was perspective

Our First million increased revenues year in $XX.X $XX.X XX.X%. or million segment's Aid prior from to

larger the loss First what foundation the expanding be and a operating reflect an we million continue had business. van investment our segment of $X.X quarter. for These eventually a much building to business during the results to Aid expect in However,

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

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

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

of $XXX will large purchase believe million million. significant Uniform be capital million expenditures a advancing that being now Clean throughout $XXX the our most facility projects of to $XXX year we a been We the the due for The and year. number acquisition price for have between

$X.XX as provide to top on business. be consolidated outlook. between result our primarily time, Garments our full Specialty At a billion in revenues like of an the this opportunity I'd this $X.XX the performance and billion year strong take expect line update to will we

Operations per the to of which continue the reduced current currently and modest of share experience range revenue year XX.X% for cost continue $X.XX, We the expectations in the earnings of from operating impact the diluted X.X% at reflects and between pressures and quarter. to midpoint and be EBITDA respectively. Core the of to we our $X.XX Resulting Laundry more expect remainder margins

Garments in to The attributable of impact X.X% an as business combined year strong million by as operating Specialty the key margin and and related of quarter $XX EBITDA improved $X costs remainder our acquisition profitability assumptions initiatives EPS costs, well estimate the in $X.XX. which Clean expectations of directly and decrease by Laundry Core million Operations of to the the current the of and the for

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

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

Operator

Please [Operator Instructions] with from Wittmann line Baird. Our first question ahead. go the is of coming Andy

Andrew Wittmann

Thanks morning, guys. for taking Great. Yeah. questions. my Good

Steven Sintros

Good morning.

Andrew Wittmann

you're mean a on sounds quarter healthcare, step-up the up guess here. a $X That's a level. it's into want is more just for like just little I insignificant. big bit more margins dig million self-insured to It I the I not to high pretty really

happen, the that that in So would that really, like have things Is the bear to related episodic has when you there here, healthcare arose you things Or quarter? expect the during that just changed to that anything cost Steve, the circumstances would this? costs this unfortunate remain high is plan period.

Steven Sintros

really Yes. then I pretty was at years, six sort some would to the healthcare couple a declined costs There pandemic. say last the eight of to the that. And just healthcare over When seen the of bounce of quarters predictable. flattening it's you unfortunate we circumstances. really during last look costs after back

to well, up was that, of answer until a last, claim changes we've circumstances. step-up. maybe which the this be was claim honest, the This really one think, so dollars, there's trends your largest was, over And it plan primarily we've by the that million would driven ever, or in seen a or like in point in that indicate seen question, nothing couple to the we anything quarter extraordinary

Andrew Wittmann

Got it.

Okay.

the of margins kind mean from that so about the other offsets same penalizing, had kind benefit into I if I digging of on healthcare. that you of amount the So the here is you guess had you way think the guess, I fuel

down So a amount year-over-year. the margins decent were

So you talked about items. kind of other

ask always you merchandise commentary talk out give things the and You that worth those. maybe if on labor the magnitude. in little And bit you could just a calling more could other I in factors you mentioned if P&L. inside guess about their merchandise maybe and particular, any think might but other about maybe I P&L be

Shane O'Connor

some Sure. that. can Yes, on I give commentary additional

be outside the items the The by called benefit health the Aside point, impacting we out, our item in item two talking we've of the and the are were from seeing energy we expense. a would largely merchandise that that matter to for your number quarters that offset that legal our largest sort of been of year-over-year. and about that margins

about that there income loss profitability, right, were fact in results obviously, their that a that basis merchandise. mentioned well. challenging as over operating the was percentage like Outside headwinds saw payroll areas, was to related our point a the had headwind year. and just of In that, we there environment a a a XX quarter, some saw the their across of nominal Clean revenues last effect of points related the different wage to about I as areas number cost the of of number we of operating

also some we're then processing -- incurring of impacting most running cost our in the costs And the facilities. those inflation areas, or of other probably related that other to notably

in So the those impacting really most significant the the quarter. margin items are that are

Steven Sintros

many to add to just And that, Andy, those anticipated. were of

part, what anticipate look health the benefit was it the most was we? we way was bit although higher a So the part in. excuse anticipated. anticipated, energy the -- of Most merchandise headwind the me, and at we is of breakdown we the For certainly quarter than had did what didn't built of the

And these other largest headwind, higher little our number a bit was the give Shane impression than was or a largely then merchandise areas to the for you the we the amortization core part, unanticipated didn't mentioned expected. piece, within expectations. maybe most was I want merchandise the unanticipated that But of which because, that more were

Andrew Wittmann

I estimate amortization purchase What guess complete, not you what quarterly is had about the just this. sense. know the makes last to final but That I net, we one going that is intangible to currently it as have an probably be talk Can was Shane? what just stands you impact the is in on Clean that. related totally quarter, about amortization that? the so from accounting your intangible

Shane O'Connor

Yes.

loss So about related at was on EBITDA to the, nominal. it if you the $X a or take operating the point million. Clean look was acquisition, my impact three of The

amortization. was So million of depreciation that the amortization intangibles and about little $X.X over $X was a just million and

Steven Sintros

And just on to based That's follow obviously where quarter up on a full that, we acquired. not Andy.

be quarter. fourth it So the in higher little a that will than

Shane O'Connor

of you And had prefaced. sort

Andrew Wittmann

All right.

So the ahead. like, more full quarterly run step-up go sorry, rate

Shane O'Connor

still with say process. I had to we accounting No. going of was your the prefaced are early but will caution, sort it, I you just in question purchase

So we be those next refining will the three quarters. over

Andrew Wittmann

Okay.

for versus partial the right think the fully quarter little closer before loaded be amort. Clean take run run the that So should intangible it, like quarterly on after to up Is to Clean about rate $X X.X bit? a about rate million the way

Steven Sintros

Yeah, that's about it.

Shane O'Connor

Yeah, ballpark. you're in the Yeah.

Andrew Wittmann

now right. here the Okay. for color All I will leave it yield for and there floor. guys. the Thanks

Steven Sintros

Thank you.

Shane O'Connor

you. Thank

Operator

from Our next question ahead. of line William is Tim Mulrooney with go coming Please the Blair.

Sam Karlov

This you to question. guys. for seeing in pockets or behavior? or Have you're begin about for Tim. of weakness taking end geographies Thanks strength on Karlov any is customer Can seen you to what Sam talk emerge particular my across markets? Hey, any regard

Steven Sintros

sales quarter, of last across I think didn't see stable but sales our we for been had the talked about the what in been pretty I wearer level, productive pretty environment us. employee still lot a a has stability. environment sort From we pretty quarter, about talk good a it's base. still

geography nothing of So speak we're I positive point at seeing not based are industry or on negative to would your say particularly question. that this nor by

Sam Karlov

Thanks and follow-up. Okay. a then

to related today pricing, And you standards? terms us can does it relative remain where In historical just pricing at is to elevated historical of remind levels?

Steven Sintros

the through couple would Yes. and years. well had that our some the would say, say that work of the up I over is we've absolutely, as pricing market competitors pricing in to last

very it before, a to industry. As we've talked competitive about continues be

is still competition strong. accounts so And very for new

some is overall, But the accepting pricing. market still yes,

start before, challenging. that a to become Although moderate, we've of the said as some inflationary more may bit I factors think as

on But the that the our still impact side, we're on seeing based of input commentary, inflation.

elevated think is I sure. productive. base would of certainly ago So as still compared the say I customer a to an pricing And environment couple pricing overall is years for

Sam Karlov

Okay. Thanks.

Steven Sintros

you. Thank

Operator

ahead. go with Our next line Andrew question the JPMorgan. Steinerman of is coming from Please

Andrew Steinerman

This from down. think it's you when when UniFirst fuel might us the about fuel surcharge? and remind be I stops pricing, an but old up separate is could gas do charges a just question, surcharge

us, a that because now? the surcharge revenue So remind it kind of once effect? sunset did that, just drag. impact go Has sunsetted what's that's And into when you fuel

Steven Sintros

So of year back was guess little a some I which about year put fuel as of give incremental Andrew, $X rolled it fuel spiked an during in this a course to to gallon you sort the partially a ago has moderated. when there, over has color been now charge, almost did We nationally. fuel

Now fuel years remains still a few elevated ago. from

has quantify a revenue there's it over portion hesitant time. But organic number of that to So obviously, decline. of that. be totally a say we I'd maintain the impact caused because things, portion of some of it pricing kind

the of that's when went but some timing rollback. have it in seen and we So

Andrew Steinerman

some you When like year in it of just you went Right. a roll the said could ago? when And certain Is -- of mention was the was time? it at back? around some a

Steven Sintros

quarter I believe during was our second It primarily.

Andrew Steinerman

you. Thank Okay.

Steven Sintros

Thank you.

Operator

coming Please is with Our of Research. ahead. Kartik line the next from Northcoast question Mehta go

Kartik Mehta

Hey, on some you're base, see increase as today customer ago? from on the to your year good versus an maybe and side just morning. I'm a seeing look SMB attrition you attrition. standpoint maybe starting what at We're Steve bankruptcies wondering,

Steven Sintros

accounts -- last tick-up in we a several lost overall our what consider seen over have We the months.

business situations a base still detail on. little so Sort been of of or with the attrition. as because of decent small a portion definitively it's biggest many of more can't digging businesses of business percent of bit do been customer always whether into and out here has I say businesses, But that out it's we our our

last seen have some tick-up months. we make You that over But in the could probably few connection. attrition

Kartik Mehta

from seems like it openings, as back on are bit little have maybe lot the there just seems pulled metric, And though what but add-stop it an also a companies job of hiring. openings, job a about

So you're of customers in terms metrics? if what see terms what job of your kind you seeing you of add-stop at look in at versus openings

Steven Sintros

Yes. seeing not a there. We stable. sure difference months would still we're view pretty what ago that three from I'm that there's dramatic I would as say on

wearer that hearing a job believe little still in of the are some still difficulty We anecdotally last so this But from XX back bit have of some see caution blue those months, I that uniforms numbers and in the you to reasonably more seeing customers. hiring people our healthy year because on ratchet our we're the been collar employees to wear hesitant and levels.

Shane O'Connor

thing our add to relates going The I was it retention. as only to the, customer

During are years our of pandemic the had point the the levels our trended they even sort retention indicating closer the to couple and favorably. that trending customer I time, this we're just retention that sure make of in the were lower to experience maybe not to had preceded retention back levels subsequent in our that we than that that, period At pandemic. is pre-pandemic. want

Kartik Mehta

Okay. Obviously, from And quantify initial maybe just it, received do it's your you That an to if benefits? anticipate you on implementation. expense it's I'm XXX% it's once of the or if benefits. seems level last illogical. where installed, you've And ERP the anticipate? possible benefit one sure But question some side

Steven Sintros

ERP. lot the that technology large of we and Just the one side, mostly of were a between CRM and we've two kind the CRM clarify, to bifurcated made deployed. have we progress on is initiatives

will installed fully over the side. still we be The of it ERP, the sort before and stages, years on in multiple are earlier we're ERP

the relevant probably more is I CRM your think side. So on question

kind optimizing locations would their over on that locations are with what And starting that of changes technology the or so, and terms the year system been and our a as made. have that we've of the in half of comfortable the is, a it, say and CRM new there some deployed the the I last over were new the hit longest to being stride system

distraction. -- training. to of But is be lot a work there's some there deployed. are of locations as lot still newer some done a data a lot of conversions, There's There's

nothing the course this more really been of think benefits. the on there And specifically see a time. But the for so system over start the to I we'll as at next to year, quantify of bit, everyone's more

Kartik Mehta

right. you it. appreciate All both. really Thank I

Steven Sintros

you. Thank

Shane O'Connor

you. Thank

Operator

next Chan [Operator of Please go Instructions] line Our UBS. coming question from the is Josh with ahead.

Joshua Chan

Hi. Good for taking questions. my morning. Shane Steve and thanks

Steven Sintros

Good morning.

Shane O'Connor

Good morning.

Joshua Chan

those you're wondering point production, the in in you costs, could inflation was predict I but the I you trajectory at areas? moderation of realize in Yeah, of you're Hi. can't about labor, healthcare if seeing Are that I material, legal talk inflation wonder morning. seeing. terms the seeing and of inflation. you any Good of what any

Steven Sintros

Yes.

core mentioned about and I cost a think some you down certainly categories the all the it. inflation, are and some you to is still say of break higher. those to that year would when compared occurring you read of I ago, get of moderation there

But freight think vendors raw starting come to seeing chain, business, have cost certain we we're moderation other So slow in experiencing inputs and including still that are their and not costs, supply cost, material of. and I really overseas there use a freight, been it's we're down. see higher labor

right back. not a moderation certainly inflate think And the I it's those probably So have to is of seeing step over We're many term. a last year, now. some experiencing a bit taken right the of they rate same as we're the higher at costs. continue bag still did little but things them of mixed not But

Joshua Chan

a That's that. Thanks Yes. color. for really Right. helpful

the guess moving side. It different could like sounds talk be you as CRM inflation still I margin might but look I get so some we going And guess benefits about XXXX, is headwind from a into to you pieces? a

think how where setting 'XX? So do up you finished in in 'XX you margins about versus

Steven Sintros

Yes.

I will short of made the about to I course I commentary the budgeting very on of as the in now too on our the tide think of we'll stop the right summer, certainly, just focused trajectory. margin process. call making really turning over through and point going be kind heavy we'd kind forecasting many and of we're the predictions probably

the that focus we'll positioned commentary. optimize control inputs of as be we do number make a things have able and that pricing in we're we're to as need do we we're to well what hopeful to continuing to our But try so focused move this And to things point, at not right on, direction. with to and specific

Joshua Chan

I guess, last of Okay. sounds one the more good. And a clarifying question. me for That is then,

I expectations comps Laundry, heard just that revenue in to outlook, the that that there call think, Is if of terms in because tougher Shane, of you modest year-over-year getting or is in a is the I there mentioned Core Core right. revenue more in -- anything Laundry? out

Steven Sintros

that I'll one. Yes, take

I ticked think we some commentary attrition made up a our bit. that had

some of becoming think the terms tougher, comps year-over-year it little I is revenue but there caution trajectory. I the think a in there's of

continue sales strong. be to New

side. don't I it's seeing to attrition. pieces So sales we little on some think just new due in a the But softness it, are of some

Joshua Chan

time. Thanks for the the Okay, for and color perfect. thanks

Steven Sintros

you. Thank

Operator

[Operator time Instructions] to no appears And at further questions. be this there

Steven Sintros

like Thank for We review fiscal day. to great speaking outlook look expect performance to to as further everyone as you results. joining be quarter again a our 'XX. in to today October thank well our for when on us we and you forward providing our with I'd fourth have reporting

Operator

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

UniFirst (UNF) 28 Jun 232023 Q3 Earnings call transcript