Vestis Corporation ((VSTS)) has held its Q1 earnings call. Read on for the main highlights of the call.
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During its latest earnings call, Vestis Corporation presented a balanced view of its financial performance, showcasing both areas of progress and challenges. The company highlighted improvements in sales productivity and customer retention, along with a robust pipeline of national accounts. However, these positives were tempered by a year-over-year revenue decline, a decrease in EBITDA margin, and reduced cash flow from operations.
Revenue and EBITDA in Line with Expectations
In the first quarter, Vestis Corporation reported revenue of $684 million, remaining flat sequentially from Q4 2024. The adjusted EBITDA was $81.2 million, marking a slight 1% increase from the previous quarter. While these figures met expectations, they highlight the company’s struggle with year-over-year growth.
Strong National Account Pipeline
Vestis Corporation reported significant wins in its national account pipeline, particularly with a large restaurant customer that will see Vestis more than triple its recurring revenue. This pipeline is the strongest it has been for the company, positioning it well for future growth.
Improvement in Sales Team Productivity
The company reported a 20% improvement in field sales productivity year-over-year, with some regions achieving a remarkable 40% increase. The resumption of sales hiring resulted in a positive net change in sales headcount as of January, further supporting the company’s growth objectives.
Customer Retention Improvement
Vestis Corporation achieved a customer retention rate of 92.9%, representing a 30 basis points increase year-over-year and a 280 basis points improvement from the fourth quarter. This enhancement in retention underscores the company’s focus on maintaining strong customer relationships.
Revenue Decline Year-Over-Year
Despite sequential stability in revenue, Vestis experienced a 4.7% decline in revenue compared to the first quarter of fiscal 2024. On a constant-currency basis, this decline was 4.5%, indicating challenges in maintaining growth in a volatile currency environment.
Decrease in EBITDA Margin
The company’s EBITDA margin for Q1 stood at 11.9%, down 180 basis points year-over-year. This decrease reflects ongoing pressure on profitability despite operational improvements.
Negative Currency Impact
The unfavorable exchange rate movement of the Canadian dollar negatively impacted Vestis’s revenue. This currency fluctuation poses a challenge to the company’s financial performance in international markets.
Lower Cash Flow from Operations
Vestis reported a significant drop in cash flow from operations, amounting to approximately $4 million in Q1, down from $52 million in the same quarter last year. This decrease highlights the need for improved cash management strategies.
Forward-Looking Guidance
Looking ahead, Vestis Corporation provided detailed guidance for fiscal 2025. The company expects revenue growth of 3% to 4% and EBITDA growth approaching or exceeding 10% in the second half, driven by new sales headcount, national account wins, and pricing actions. Vestis also aims to optimize logistics and merchandise reuse to achieve cost savings and maintain a net debt-to-EBITDA ratio of 3.8 times, with a target to lower it to between 1.5 to 2.5 times by the end of fiscal 2026.
In summary, Vestis Corporation’s earnings call reflected a cautious optimism as the company navigates challenges and leverages opportunities. While facing a revenue decline and lower cash flow, Vestis remains committed to strategic growth initiatives, improved sales productivity, and maintaining strong customer retention. Investors will be keenly watching how these efforts translate into financial performance in the coming quarters.
