Release Date: January 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Vestis Corp (VSTS, Financial) reported Q1 revenue of $684 million, in line with expectations and flat sequentially from Q4 2024.
- Adjusted EBITDA for Q1 was $81.2 million, marking a 1% sequential increase from Q4 2024.
- The company expects new volume growth to exceed lost business in Q2, driven by field sales productivity and national account wins.
- Vestis Corp (VSTS) has resumed hiring for frontline sales, with a positive net change in sales headcount in January 2025.
- Customer retention improved to 92.9% in Q1, up 30 basis points year-over-year and 280 basis points sequentially.
Negative Points
- Q1 revenue was down 4.7% year-over-year, or 4.5% on a constant currency basis, impacted by unfavorable Canadian dollar exchange rates.
- The EBITDA margin decreased by 180 basis points year-over-year to 11.9%.
- Cash flow was negatively impacted by normal seasonality and timing shifts in cash collection into Q2.
- Net debt remains high at $1.27 billion, with a net debt-to-EBITDA ratio of 3.8 times.
- The company faces ongoing challenges from lost business and the rollback of prior year pricing actions.
Q & A Highlights
Q: Can you provide more detail on the pricing strategy for fiscal 2025 and its expected impact?
A: Kim Scott, President, CEO & Director, explained that the company is maintaining higher levels of pricing, which will continue throughout the year. They expect net positive pricing overall for the full year, achieved by improving service performance and training frontline teammates to handle pricing discussions effectively.
Q: What specific cost reduction initiatives have been implemented, and what future efficiency actions are planned?
A: Kim Scott highlighted ongoing logistics optimization, merchandise reuse initiatives, and workforce optimization as key areas of cost reduction. These efforts have not yet fully contributed to quarterly results, with full benefits expected in subsequent quarters. Future plans include further automation and digitization to enhance efficiency.
Q: How are Net Promoter Scores (NPS) trending, and what improvements have been made in customer service?
A: Kim Scott noted that NPS is evaluated annually, but daily service requests are monitored to improve customer experience. Key improvements have been made in on-time delivery and reducing shortages, contributing to better customer satisfaction and cross-selling success.
Q: What are the main drivers of revenue growth, and how is the sales team being expanded?
A: Kim Scott emphasized the importance of volume growth, driven by national account wins, SME sales through a professionalized field team, and improved customer retention. The sales team is being expanded with new hires, supported by enhanced training and recruitment processes.
Q: Can you discuss the macroeconomic environment and any potential impacts from new policies, such as tariffs?
A: Kim Scott stated that the company sees ample market opportunities and is not experiencing a shortage of leads. The business is well-diversified across verticals, insulating it from specific industry downturns. While monitoring policy changes, such as tariffs, Vestis has been proactive in de-risking its supply chain.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
