Release Date: November 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vestis Corp (VSTS, Financial) delivered solid fourth quarter financial results, with revenue of $684 million and full-year revenue of $2.8 billion, meeting expectations.
- The company achieved an adjusted EBITDA of $353 million for the full year, surpassing the guidance range of 12% to 12.4% with a margin of 12.6%.
- Vestis Corp (VSTS) has a strong national account pipeline, with recent major wins, including a large multiyear deal with a leading national food services company.
- The company has seen a greater than 10% year-over-year increase in per seller productivity in field sales, indicating improved sales capabilities.
- Vestis Corp (VSTS) has a significant opportunity to grow volumes without substantial capital expenditure, with approximately 35% underutilized wash capacity in its current plant footprint.
Negative Points
- Fourth quarter revenue decreased by 4% year-over-year, impacted by lost business despite volume growth.
- The company faced a 57% decremental margin on lost business, affecting overall profitability.
- Incremental public company costs impacted margins, with $5 million in the fourth quarter and $18 million for the full year.
- Vestis Corp (VSTS) experienced net customer losses that reduced fourth quarter revenues by approximately 900 basis points.
- The company is still working on improving service quality and customer experience, with ongoing initiatives to address on-time delivery and product shortages.
Q & A Highlights
Q: Can you elaborate on the status of your pricing conversations and what gives you confidence that the pricing environment is firming up after FY24?
A: Kim Scott, President and CEO, explained that pricing will be a positive contributor in FY25. While there are headwinds in the first half of the year, improvements in service and a customer-first focus are boosting confidence in maintaining and increasing prices. The new COO has instilled a customer service mindset, which supports the ability to hold and take price.
Q: How far along are you with your network densification strategies, and what are the plans for 2025?
A: Kim Scott noted that the logistics optimization program is mature and ongoing, with continuous efforts to optimize routes and address footprint inefficiencies. The company plans to accelerate these efforts in 2025, with carryover benefits from 2024 and new initiatives, ensuring this program remains a permanent part of operations.
Q: Can you provide an update on the sales force attrition and the plan to add new salespeople?
A: Kim Scott stated that the company is monitoring productivity levels and will add new salespeople as needed. The ramp-up time for new hires varies from four to eight weeks, depending on their experience. The focus is on improving productivity with existing teammates and reducing turnover before expanding the sales team.
Q: What progress have you made in addressing challenges like new wins not ramping as expected and service quality issues?
A: Kim Scott highlighted significant progress with national account wins and improvements in service quality. The company has implemented a customer-first culture, improved operating procedures, and introduced new initiatives like on-time delivery notifications. These efforts have led to better retention and service quality.
Q: What are the expectations for deleveraging in 2025, and what progress has been made with the AR securitization?
A: Rick Dillon, CFO, mentioned that excess cash will continue to be used for deleveraging. The AR securitization provided $233 million in operating cash benefits, and the sale of a Japanese joint venture added $35 million for debt reduction. The company remains focused on managing its balance sheet and achieving its leverage targets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
