UNF - Earnings call transcript Q1 2025

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Operator

Good day, and thank you for standing by. Welcome to the First Quarter 2025 UniFirst Earnings Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to President and Chief Executive Officer, Stephen Sintros. ahead. go Please

Steven Sintros

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

Joining Shane you today quarter Officer. conference me is to results We'd Chief President call XXXX. like Financial for and fiscal to our welcome review to year Corporation's O'Connor, UniFirst first Executive Vice

listen-only be complete until our prepared This call mode will remarks. on a we

forward-looking with The statements financial reflect the that contain forward-looking first, statements and certain to a brief subject events current are disclaimer. respect views risks This performance. future conference These call may uncertainties. to company's and

believe, The words identify expect, anticipate, results those of expressions similar that Actual factors. on statements. future optimistic, may trends estimate, and depending intend materially from variety anticipated and events differ future indicate a forward-looking risk

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

today, start regarding Corporation. news the to To the call briefly address Cintas I'd like

in with was proposal our stated and our we the unsolicited and our nonbinding determined UniFirst from yesterday, financial the of interest best carefully in the other shareholders advisers, it that independent As legal unanimously its stakeholders. in evaluated release consultation not Cintas press UniFirst, Board and

team continue management that results company will shareholder the the our confident and I remain actions to from price by the execution company's With take the value making The for opportunities. the we'll Board to executing and the creation power In risk, company's feedback this to UniFirst and Board shareholders turn considered strategy that, and value. some voting and the determination, is offer quarter. of business largest future growth create

want our serving first line to recognized always the living being to solid and fiscal are continue were in thank largely each partners I other pleased of vision toward the do hard our team our all the our with people industry, while customers quarter, represent best which a universally and with to as our our start provider We strive the mission results deliver the year in expectations. work. as of sincerely we our for who from service

people and as workforce the our UniFirst who as existing communities that They our prospective serve We team the are partners. hard as up customers they and keeps are own well the do running. our work

structure, Our safety, employees mission enable means to right to their services, our right the and with an safely. our the program their services, those successfully services services by products cleanroom customer all experience. for partner is their and to while organizations businesses structure, other we and customers providing providing and products products enhanced or goal providing have and facility aid is uniforms, job and and team, that first Whether workwear, the to right ensure their do

and 'XX. income adjusted XXXX. First from increase increased were compared X.X%, of X.X% first X.X% million, revenues fiscal Operating and quarter EBITDA of respectively, fiscal the by to $XXX.X quarter

our As quarter, corresponding the retention impacted overall has significantly our from operations. elevated growth market levels, a period which more last impact we a developed, had pricing rates. This challenging laundry inflation emerged environment a our core has discussed on in has has of

improvements indicators the the there's like some through in as Although aspire reasons about we retention experiencing and ultimately leading this to we we positive growth these trends should are not discussed that do we translate last certainly move revenue deliver, rates of quarter, feel to our in are cycle. be as we trends into

bring value organization our well, businesses. During continued UniFirst on prospects can their the to that quarter, selling to perform sales the

ago our net versus compared incremental showing year declined levels some the also From wearer be encouraged quarter, We to weakness continue for this existing on. of to account adds reductions time. currently opportunities large pipeline that are during working by a customers we perspective, the an at

plant we during in progress show quarter income execution the areas adjusted solid with in margin despite of growth. EBITDA to which the These expense higher production care were make quarter operating improvements, to expenses which and as ago. and and areas environmental allowed the costs by compared merchandise in improvements We operational are partially a primarily in offset us were health the enhancement, expenses continue core pleased modest and such legal year to

flows, in also We strong XX.X% improvements year ago. quarter to compared to up see continue a cash operating which same the were

ability customers, with continue customers as focus additional execution operational consistency of we'll is that ongoing on ample products believe to focused to efforts sell to and to as to company, drive in our improved well enhance improve a new productivity. business investments the We customers' retention. As there runway on and our driving experience enhance existing profitability attract our our the

areas and well strategic such as strategic and as significant sourcing pricing, manufacturing to addition, account In continue as profitability opportunities. represent

and enabled of significantly more some going in others, the needle can Although feel on benefits the to focus continue to midterm. will these the through areas our be ERP, forward we near these of move we implementation

of about that be our our benefits Speaking continue business. the ERP are generally excited the lines to project, can on system our with and time track we to project bring

the the to That who results remainder of Shane, turn call quarter will first provide as well our said, our as on outlook fiscal over more I'll details for 'XX.

Shane O’Connor

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

believe a company's acquisition share-based of costs impacting refined is EBITDA and to other more and provide view of company's more wholesome indication migrated capacity will cash and a income before as the non-GAAP more to and We defined net comparability. items prior the profitability that future better the for quarter, is meaningful interest, depreciation this generate we metric taxes, measure flows. amortization, compensation further income that adjusted As is believe discussed company adjusted an in expense, the

from initiative prior not company key the in the $XX increased $XX.X million does or items EBITDA costs X.X%. for year separately. adjust EBITDA but incur, adjusted provide we the adjusted million Consolidated will to those visibility to The metric

in and results financial million, approximately of key fiscal quarters $X.X directly effect items of quarter respectively, and of the fiscal respectively, the XXXX and first million income respectively. to adjusted XXXX, EPS and Net and $X.X initiatives. of $X.X cost Our The decreased on included $X.X by million respectively. $X.X these by our and by million and attributable EBITDA million, operating XXXX $X.X XXXX, million, and first $X.XX $X.XX, diluted income

was The XXXX. first growth for as estimated of $XXX.X adjusts were was revenues and Laundry EBITDA quarter the Operations from an increased X.X% quarter increase growth, to $XX from which quarter million, organic X.X% for the sales XX.X%. Core solid of organic acquisitions in prior increased fluctuations segment's result the or Laundry over new primarily of Core as efforts also million, the last million X% pricing margin to the of effect XX.X% operating year. or for the Laundry dollar, rate $XX.X adjusted from year Our margin the Canadian account in X.X%. the Core well and

health fiscal of merchandise offset adjusted a as quarter and a and environmental and legal recorded higher in other as costs revenues, segment our which the EBITDA and Costs related Operations of respectively. first XXXX X.X% to initiatives Segment's and Core XX% XXXX, costs lower first operating Laundry from Core benefited quarter were operating comparisons Laundry and margins decreased key by of of and partially we for adjusted revenues. X.X%, the to were by margin percentage and care, selling EBITDA the percentage incurred input operating

Revenues revenues. in operating from the X.X% X.X%, increased prior costs segment, year million our Energy the decontamination Garments first was specialized products million $XX.X in nuclear or quarter XXXX and of delivers cleanroom from and services, of which XX.X%. and $XX.X segment's margin Specialty were to

Cleanroom a European Strong in were operating business. partially decline by offset results from operations our slight our nuclear

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

and to XXXX, with long-term position solid cash, from activities, financial capital operating in see and debt XX.X% short-term continue $XX.X segment's van improved in the no reflect months In increased Van making our nominal $X.X to to million had million the million equivalents first which the end our lower or solid balance working profitability double-digit continue to of of primarily of $XXX to $XX.X totaling First during increased the business. the quarter operations. Segment we [ to X.X%, revenues segment's ] by growth operating $XX.X in prior first sheet Our million. we Aid driven Aid continue and year cash we needs due from cash income and million a the in results At investments are of reflect X fiscal our quarter, flows improvement the First business. fiscal as investments a

like to take $X.XXX of common for invest capital between acquired paid expect for our At billion. worth we expenditures future stock of in we businesses to billion our million $XX.X million. of first a revenues XXXX and with an time, $X.X which $X.XXX this X aid repurchased to small total on continue our opportunity to this I'd provide update We be outlook. fiscal and $X.X million.

XXXX. per attributable will earnings in initiatives outlook estimated we continues $XX anticipate share to diluted This of between key costs expect include to our continue expensed and to directly be $X.XX. We million fiscal an to that $X.XX be

Canadian recent dollar, exchange Although in guidance outlook been to decline will there's the uncertainty this the $X.XX, assumes rate the the of remainder the due a with over foreign value currency of fluctuate Canadian of the consistent year. a our original constant in how

our largely revenue all that other Aside quarter range last into the from one out remain now quarter of tightening we the assumptions detailed unchanged. year,

not fiscal our of and reminder, remarks. the share include broader or buybacks impact compared significant changes in week prepared one a guidance economic does operations concludes environment. to This or fiscal XXXX As of XXXX, regulatory future the less any includes

results we for remind our focus Before first today and you like open that call our is financial to outlook. all questions, quarter I'd XXXX the

the As questions. commenting a now call be on result, can further we for open Cintas. Liz, won't we

Operator

question line Andrew from Instructions] [Operator will first Baird. the come with of Our Wittmann

Andrew J. Wittmann

ask Great. I the Yes. to have question.

that to extent it's the can, you comment but to welcome important. You're

offering today opportunity I and $XXX premium all stock have in their where to clearly the is million upside not least, as at this at probably to your cost a some The to outlined synergy wanted some offer for ask And so outlined is time. revenue synergies. they that could it. substantial would and I Cintas mention performance. be their is The $XXX they with mean, obviously

obviously shareholders Your company. basis There's controlling in a have sure, outside. I'm the the factors, least from at lower other

when seems are that financials like being the table decision to the offer at Board. it, company's look on by just there's considered you pass been the the than and But that's it on more your

other the has of saying So if in noncontrolling be on the pass of for comfortable that, to in some that it right your benefit you reasons Board I'm would discussing your shareholders. decided

Steven Sintros

Yes. Appreciate question, Andrew. the

basically opportunities. the determination, our going go the from factors I the several considered from at we company's we value end making the and that some to offer and determined risk, the commented, company's think of shareholders it including And and price we we're was which execution, says the feedback unanimously largest not interest future of our best Board back to shareholders business of in that growth the other in stakeholders. and day, UniFirst our in what

the to all opportunity. really that's So we about say have

Andrew J. Wittmann

to mentioned as Okay. Felt did bit script just an this to retention. on revenue challenging to update -- just line, the the the of drill we'd well. on about drill and talked quarter. you least. reasons of for some one in Obviously, And thought have But positive. important little reasons you're to be pricing positive. some try bit I positivity you you seeing on of how reasons little in the if the I to comments go the a that last could you you at that's did your some including say impacted mentioned you like a was be -- it want

causing little into could more leading You bit to of or a be are little maybe. indicators talked optimistic the large the about other bit some of are a accounts. drill that Maybe things you some more that

Steven Sintros

rates. been them that about more continue in about quarter, renewal some which to metrics are positive internal see larger contract continue and little retention of talked area continue we samples program, metrics other that I our a emerge, last continues Sure. see internal contract NPS and that to leading to some our I and to towards get of talked improving. specifically and have trends rules and indicators we think we consistently measure

customer results revenue we seeing So can price in in and move a that better call we we a direction. coming think start better out the trends start in feel that, the like to of it, cycle bit that retention we're and should area

On mentioned as well. side, that the I you sales know

a We that area like feel robust continue a of in lot well opportunity. have and to we're We pipeline. executing seeing

Operator

Barclays. comes Our from question next Manav Patnaik with

Ronan Kennedy

This Manav. is Ronan on for Kennedy

Just on guidance And sequential question the balancing as we Andy's for follow-up environment, revenue the impact How year? into and to the challenging those the exit about contemplated should think impact the think trends? about on sequential the there, revenue how corresponding a of in pricing should retention we 'XX. remainder What's trends.

Steven Sintros

What would we guidance, we be say to consistent. Yes. think quarterly is going I But that's don't give mostly really Ronan.

kind still into the idea being year. providing I of remainder of end that the group momentum be the would in of for continue we through we're created more one not And the to the as go think guidance some but we've upcoming update heading by the year, quarter quarters, quarterly 'XX. we'll

Shane O’Connor

in to Ronan, the growth core we that be with of you was that about the X.X%. we're in the organic that take organic sort year, can the going into a Right, going is was forecasting relatively first line had was year. quarter, one the at growth thing for the our the add look to rate said X.X%. that growth expectation laundries I When organic

So whether experience in throughout lumpiness of give probably there's more will an some that the indication year. that you

Ronan Kennedy

terms and currently you of to I company innings. a enhanced for transformation, growth a And we lot potential to potential in Understood. not alluded see service, in as you're Where both to value the in holistically? And in initiatives you there's the growth to, to, also aspire journey can guess, can opportunity the please future know then I organic at understand follow-up, holistically transaction this creation. execution, of when transaction, levels Cintas and you help points, are you that margins? us consideration as growth journey of inflection in your a where considered you -- you operational are, expect of your

Steven Sintros

Yes. then investors we mean, years. years things of by only the of investments number sort that's question, a we period has significant will last been with that are that because one investment, I number multiple Ronan. making. technology, ERP. in couple And Great take of think overarching be the talk people, will But of the a I transparent areas we've the over in a of that about things ERP we're as of there it tail long enabled that to sort that the are of a not of areas

our call didn't of kind the development about further over items we're enable to But go And couple kind talk so capabilities of Aid through I all Safety. we investments those direct years in journey the and in better upsell we're additional and And back about you in last First of we're talking making to go in product if on existing sales customers. today. the and

little we accumulate achievable, talked to and continue time getting right? There's 'XX inflection in. things roughly ultimate take is time, a those about teens, about a lot the been mid-single-digit a of I goal, a on take this closer EBITDA confidence which understand of is about, sort and excited points. but investing feel to to late to question, we're bit but growth is sort margins we to we why 'XX which a fiscal as the now will in going the believe going it And We upfront have of or but of sort that in that high haven't that that's we've lot back very to right of

Operator

with Northcoast question Next Mehta comes Research. Kartik from

Kartik Mehta

Or a new pricing hoping customer more maybe changed bit the the been past, little bit little you've for drill and And I'm was that a pricing maybe down pricing. customers on has aggressive. customers? all? the existing I at said are in to wondering And just maybe same trends has new

Steven Sintros

new very couple business, for or we've competitive I are a I I'd about aggressive always it mean been more of for than industry continues. years Kartik, characterize this accounts, less would say I'm ago. new not talked that has before. and sure, the

period, as we increases heavy that were were pricing to cost this this think all and some existing additional with inflationary we where through went to leads trying the recover challenges upon accounts, I for is we renewal it And bit. moderated -- kind of are and I've when really before. inflation's to complex really about talked a goes it's lot " customers a a "Hey, saying, dynamic, it's a back things the of seeing,

customer partnering in good pricing you're you're see you're going drive to experience, If that value with if and the providing your with a you superior to and providing that's your what keep customers. customers, allow going to they're

a existing provide obtain little think ability very And a customer the is think to us different allow to customer at new that dynamic our that customers bit value dynamic. and always our I So pricing. execute high will I than level, to

our is The we lot side of a doing work supply future think and cost excited and working those we're I as perspective of other lot down, the we job as taking. And chain flip coming on for thing we're through cost right say the some more think opportunity that our seeing well. to mature in sourcing there and that core from I'd a you're there's our continue to of a of that, procurement now increases and recover we're experienced expenses capabilities good recover and vendors, increases with some as a

Kartik Mehta

And then just a follow-up.

retention. I that's at in metric. of add-stop you've number I'm talked about how the customers, terms wondering number your ads maybe of of on lesions employees about just know Just or trending?

Steven Sintros

comment Yes, a weaker script that we make little this that, quarter. was the that did in

and said have terms that, of around right? So said this you negative, of had think that we year incrementally gone reductions, I was a but little we quarter, characterized a adds as stable. to not perspective, it right in still give stable Last very hovering would time, sort just even at ago

it's done Yes, of think our negative think weakening I been surveying a customer industry. And as the broadly more some think, gone base. there's on you've a little I bit a I in quarter. existing of of bit little this the seen that's

with but to is our The one a more garments less there's little customers opportunity create turnover. our customers, in employees other seeing as probably that less the a cost little advantages which dynamic are bit perspective, we our from investing revenue with creates turnover at we're deal does less

of I a a we're environment, overreacting I bit one say. would think a to, employment the So there slowdown in but overly that is not

Operator

line comes next UBS. the with of Josh from Our question Chan

Joshua Chan

Could what you very on talk what a you the the little bit guidance narrowing did the in about And that that? drove top slight caused see line? quarter

Steven Sintros

Yes, segue from kind good of last our a question.

top had with one of the the think of felt some we And in Shane kind prudent that quarter end of weakness we wearers the makes experienced to mentioned, little it. down a tighten the I the bit. as year to it into range sense tweak kind was of

Joshua Chan

Okay. but I know kind value kind commenting creation Perfect. opportunities. not Cintas, you of own on And said then and growth comment on you did your you're of

was to if forward UniFirst of may what some absent what can So line look on be can to transaction shareholders about. wondering think you and elaborate what and maybe those I sort of time

Steven Sintros

if say and ago, of what it a journey areas that in a that And of in of that through ago. But there's a over do think the isn't terms next sourcing, this technology, runway questions on clearly, of again, that I the advantage think to ability I plan. was opportunity asked chain I supply quarter, lot which we strategic Yes, get I'll we're few we a number here, next to areas these bit is we doing. realized year, to have mean confident there's continue invest years. question and there And investments again, number First was a next these tied we in, in technology, couple couple Aid of take a yes, there's just a areas that into of Safety. them, a and of different the can little XXX% pricing, unlock procurement, the said we're the questions of

Operator

Tim Mulrooney from Our line Blair. next with come question the of William will

Timothy Mulrooney

back-end laundry well core think the bit. year. last little in I segment the thought But that from down guide up for expecting quarter, year-over-year in case laundry the the be to first margins Is loaded? for for pretty pressure it that I business? Is a you're your the core full your expecting the year. held was more

Shane O’Connor

Yes.

is the last the expectation to say think most as quarterly sort of the the in is very the experience. And our What by quarter lowest. quarter, experience quarter quarter. take when our look sometimes is for about Oftentimes, our is that a that at the profitability somewhat the second quarter, the again, quarter timing. first I similar you year of usually I'll unwind is of impacted some the profitability profitable year's is

we first we necessarily been benefits whether saw the timing quarters. the the were to carrying some the related realization, of benefits as Some aren't subsequent our that quarter, we to of and in expense of have to cautious forward those

of some So expectations in sort mirror perspective largely haven't changed, a our year. the I profitability trend will from that last line, they're of and profitability guess

Steven Sintros

one perspective, to incremental year said just you of year. before. amortization margin the relatively the an remember do said you of have looking or the whether that's there. the I to from the of -- were probably clarification flat be if outset the compared we year, income from kind the sort at We EBITDA at And operating depreciation was guidance and question, at beginning that going last of can't

have been So down, but somewhat if the you're year looking at yes, might full EBITDA I margin in guidance operating line. margin, the was think the

Timothy Mulrooney

know ask I not doing wouldn't I that. think -- to a I talking -- Yes. take to my that least at I I And at Andy, about clarification been get it's I'm times be answering a respect I of I on But crack question different of couple like couple But Cintas. should if follow-up, asked ways. job questions in be it's you're the good was a my OI, as going the on look, asked. both. but just it.

if different this way is, help the providing years the you to company to where presumably, at be to to is. the premium Board's down slightly a frame large -- the perspective this reject decision line as true I'm and your curious from a provide go the investors can going to understand regarding a angle. perspective well, there's and the way So to I'm you expect revenue and a what longer-term help some of few maybe targets earnings value do by

That price I'm -- sense? what like you we better I I that understand offer can received that consider to way Does that saying mean, you that make that is why think all be undervaluing company. the

Steven Sintros

I teens, said the growth certainly And far of earlier think, And we year of I perspective, our the with understand high numbers, tied call. lot couple and and right? question. margins the went value beyond answers think into the And your I ago -- the of answers, given execution think is be kind a think I've the hopefully, I feel a I of into to or that. drive to question. opportunity. to From kind without through and mid-single in deferred I evaluating made do goal digits partially what comment I I I there's think back about Board's created a we minutes our that that EBITDA the mean of that that hopefully to I on so a exact pegging few again, particular

Timothy Mulrooney

seen reconciliation that help because item out sneak a executives transition different think that And Can business. what one as go, you table. that noticed not understand typically more is? a and we helpful. in. course high and that I'm digit Yes, going yes, discrete the discrete come teens, costs I've to the in of just If about of that you and us the as kind that called just executive multiple I mid-single sure before non-GAAP reasons. cost I'm normal is

Steven Sintros

well -- That Presidents. one onboarding was new of of senior our Yes. of the as around COO our as operating departure really partially around Vice

Operator

I'd session. to like question-and-answer for back closing Sintros turn to today's concludes the That call Steven remarks.

Steven Sintros

look results. with performance. our Year. in we to New review first joining We again you, like I'd everyone, and for second Thank today our always, quarter to to quarter speaking Happy forward expect thank to Well, April as report you when

Operator

call. This you Thank for concludes today's participating. conference

disconnect. now may You

UniFirst (UNF) 8 Jan 252025 Q1 Earnings call transcript