UniFirst Corporation Q1 FY2025 earnings call

• The UniFirst board rejected Centene's unsolicited proposal, confident in current strategy.
• First quarter revenues were $604.9 million, up 1.9% from fiscal 2024. Operating income and adjusted EBITDA increased by 4.5% and 5.9% respectively.
• Market inflation impacted retention rates, but leading indicators show positive trends in contract renewal rates, NPS program, and other internal metrics.
• Solid balance sheet with no long-term debt, cash, cash equivalents, and short-term investments totaling $181 million. Cash from operating activities increased 27.3% to $58.1 million. Capital expenditures were $33.6 million, $6.4 million of common stock repurchased, and 3 small first aid businesses acquired for $2.8 million.

Core Laundry: Revenues were $532.7 million in the first quarter of 2025, an increase of 1.7% from the first quarter of 2024. Core Laundry organic growth (adjusting for acquisitions and Canadian dollar fluctuations) was also 1.7%. Operating margin increased to 8.1% ($43 million) from 8% ($42.1 million) in the prior year, and adjusted EBITDA margin was 14.8% compared to 14.4%. Specialty Garments: Revenues increased to $45.9 million from $44.7 million in the prior year, a 2.9% increase, with an operating margin of 26.5%. First Aid: Revenues increased to $26.2 million from $24.9 million in the prior year, a 5.4% increase, driven by double-digit growth in van operations, with a nominal income of $0.3 million during the quarter.

• Expect revenues for fiscal 2025 to be between $2.425 billion and $2.440 billion.
• Expect diluted earnings per share to be between $6.79 and $7.19.
• Guidance includes an estimated $6 million directly attributable to key initiatives. Assumes constant Canadian exchange rate of $0.74. Fiscal 2025 has one less week of operations compared to fiscal 2024, and guidance doesn't include impact of future share buybacks or significant regulatory/broad economic changes.

• Forward-looking statements subject to risks detailed in Form 10-Ks and 10-Qs.
• Uncertainty in foreign currency fluctuations affecting the outlook.
• Potential impact of regulatory or broader economic environment changes on results.

Q: Could you comment on the rejection of Centene's proposal and other factors considered?

A: The board considered offer price, risk, feedback from large shareholders, and future growth opportunities, and determined the proposal wasn't in the best interest.

Q: What are the reasons for being positive about trends?

A: Internal metrics like contract renewal rates, NPS program, and other leading indicators show improving trends in retention and contract renewals. Robust sales pipeline also contributes.

Q: How to think about sequential revenue trends and exiting into 2026?

A: No quarterly guidance, but expect momentum to build into 2026. Core laundry organic growth in first quarter was 1.7% in line with annual forecast.

Q: How about pricing trends for new and existing customers?

A: New accounts face competitive industry dynamics. Existing customers have complex dynamics with inflation moderation, but superior customer experience helps retain pricing.

Q: What drove the slight guidance narrowing on top line?

A: Tightening the range after one quarter into the year and weakness in wearers experienced.

Q: Can you provide longer-term targets to frame company value?

A: Goal is to drive mid-single digit revenue growth and high teens EBITDA margins through investments in technology, sourcing, etc.