VSTS

• Strategic Transformation Progress • For the second consecutive quarter, Vestas delivered year-over-year adjusted EBITDA growth and improved operating leverage, holding costs per pound flat year-over-year while achieving the first year-over-year increase in revenue per pound ($1.42, up 4 cents / 3%) since becoming a public company. • The company is executing against three core strategic priorities: operational excellence, commercial excellence, and asset and network optimization.

• Operational Excellence • Year-over-year improvements: plant productivity +9%, on-time delivery +80 bps, customer complaints -74 bps, and 6% reduction in low-margin linen concentration. • Vestas entered an outsourcing agreement with a third-party provider to streamline corporate back-office functions (finance, IT, customer service support), expected to generate $10 million in annualized cost savings starting fiscal 2027, with partial benefits realized in Q4 2026. • Year-to-date 2026 transformation cost savings total $30 million, on track to hit the full-year target of $50 million, with $15 million of savings realized in Q3.

• Commercial Excellence • Disciplined strategic pricing, data-driven decision making, and improved customer segmentation drove the positive turn in revenue per pound, after the prior multi-quarter trend of declining revenue per pound. • The company continues to prioritize value over volume, exiting unprofitable business that does not meet return thresholds, with the exited low-quality volume carrying an average revenue per pound of just 55 cents, below the company's $1.24 per pound cost.

• Asset and Network Optimization • A large performance gap remains between the company's highest and lowest-performing market centers, with top-quadrant centers already achieving industry-leading margins while lower-quadrant centers drag on overall results. Closing this gap is the company's largest opportunity for 2027. • Vestas is segmenting 120-125 total market centers into four performance quadrants, with 70% of 2027 plant capital investment earmarked for the lower two quadrants (quadrants 3 and 4) to upgrade operations and move them up one performance quadrant. • The company continues to actively market 11 non-operating properties for sale (estimated total value ~$15 million), with proceeds used to reduce net debt, and is evaluating additional asset dispositions to unlock value and align the footprint with higher-growth markets.

• Organizational and Cultural Updates • Fiscal 2026 is the first year since Vestas became a public company that management incentive bonuses are accrued at a normal run-rate level, to build a performance-aligned, rewards-based culture. Accrued bonuses of $15-$20 million are included in 2026 EBITDA guidance. • The company is expanding its market development representative (MDR) program focused on deepening penetration in the non-national customer segment; current MDRs deliver roughly twice the average weekly revenue of traditional new sales reps, and the company plans to expand the MDR base to 3-4x current levels by 2027.

• Full-year 2026 revenue guidance is maintained at flat to down 2% compared to normalized fiscal 2025 revenue (excluding the 53rd week in 2025).
• Full-year 2026 adjusted EBITDA guidance range is tightened to $310 million to $315 million, with a midpoint of $312.5 million, a $2.5 million increase from the prior guidance midpoint. This implies a Q4 2026 adjusted EBITDA range of $84 million to $89 million.
• Full-year 2026 free cash flow guidance is raised to a range of $160 million to $170 million, from the prior range of $120 million to $150 million, with a new midpoint of $165 million (22% higher than the prior midpoint). The updated guidance assumes $60 million to $70 million in cash capital expenditures and $35 million to $40 million in cash paid for transformation-related expenses.
• The 2026 effective tax rate is expected to be approximately 25%, with a Q4 2026 standalone rate of approximately 30%.
• Management confirms Vestas expects to achieve volume growth in fiscal 2027, and will release detailed 2027 guidance along with full-year 2026 results after completing a bottom-up market-center-by-market-center business plan.

Vestas does not break out financial performance across multiple distinct product segments in this call. The core business metric reported is total revenue and margin across the unified textile/linen service business, with volume tracked by processed pounds. Total Q3 2026 revenue was $662 million, down 1.8% year-over-year (down 0.3% excluding lower 2025 one-time loss/ruin revenue). Processed pounds declined 4.5% year-over-year (22 million pounds) as the company intentionally exited unprofitable, low-margin volume. Linen concentration (by processed pounds) decreased 6% year-over-year, down from a 7% increase in Q1 2026 and 4% increase in Q2 2026, reflecting progress toward a higher-value product mix. Total adjusted EBITDA for Q3 was $80.9 million, representing a 23% year-over-year increase on a covenant-adjusted basis, with an adjusted EBITDA margin of 12.2% (up from 9.8% year-over-year).

• A large performance gap between top and bottom-quartile market centers creates material drag on overall company profitability, and success upgrading lower-performing centers depends on effective capital allocation, leadership placement, and operational changes that may not deliver expected results within the projected timeline.
• Exiting low-quality unprofitable volume creates near-term top-line pressure, and new volume growth from the MDR program and market penetration initiatives may not materialize at the pace or scale management expects.
• Industry consolidation and shifting competitive dynamics could create uncertainty for market positioning, requiring further network reconfiguration or asset dispositions that may not achieve expected valuations or strategic benefits.
• The company's progress on pricing increases and margin expansion is uneven across business segments, with underperformance in the field/non-national customer segment still requiring corrective action that carries execution risk.

Q: What is the outlook for top-line revenue into Q4 2026 and fiscal 2027, and what are the key issues for lower-performing market quadrants? / A: Management expects revenue per pound growth to continue into Q4 2026 and confirms the company will deliver volume growth in 2027. The company has segmented ~125 market centers into four performance quadrants; the top two already deliver industry-leading margins, while the bottom two drag on results. Around 70% of 2027 plant capital investment will go to the lower two quadrants to upgrade operations and move each up one performance level, which is expected to drive material margin improvement overall. Full 2027 guidance will be released with Q4 2026 results after the bottom-up planning process is complete.

Q: What drove the upward revision to full-year 2026 free cash flow guidance, and is the implied Q4 EBITDA run rate sustainable for 2027? / A: The upward revision is driven by better-than-expected working capital management, including stronger collections that pushed DSOs to their lowest level since Vestas went public, and the return to positive net income for the full year. Management said the implied Q4 2026 EBITDA run rate is a stable baseline for thinking about 2027, with only minor seasonal fluctuations expected, and further improvements are targeted for 2027.

Q: How much low-quality volume remains to be exited, and what is the current like-for-like pricing increase trend? / A: Management noted that ~75% of the identified low-quality volume has been retained at corrected pricing, with ~25% exited to date, and purging unprofitable volume will remain an ongoing discipline. Like-for-like pricing increases are progressing well across most segments, but uneven performance in the non-national field segment means full details on overall pricing trends will be shared as part of the 2027 guidance rollout, when segmented results will be disclosed more clearly.

Q: Is annualizing the implied Q4 2026 EBITDA a reasonable starting point for 2027, and what margin level can be expected over the medium term? / A: Management clarified that the midpoint of Q4 2026 EBITDA guidance is $86.5 million, for an exit run-rate of ~$346 million annualized, with an exit margin of ~13% (lower than the 14% some analysts modeled). Final 2027 plans depend on how much capital the company chooses to reinvest in the business, so management prefers to share updated targets after completing quadrant and strategy work, rather than giving a medium-term margin target today.