Vestis Corporation (NYSE:VSTS) Q2 2024 Earnings Call Transcript May 4, 2024
Vestis Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to the Vestis Corporation Fiscal Second Quarter 2024 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions] I would now like to turn the call over to Bryan Johnson, Chief Accounting Officer. Please begin.
Bryan Johnson: Thank you, and good morning, everyone. We appreciate your participation in Vestis Corporation’s fiscal second quarter 2024 earnings call. With me here today are our President and CEO, Kim Scott; and our CFO, Rick Dillon. As a reminder, a telephonic replay of this call will be available on the Investor Relations section of the vestis.com website shortly after the completion of the call. Also, access to the materials discussed on today’s call are available on the Vestis website under the Investor Relations section. Before we begin, I would like to remind you that this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include remarks about management’s future expectations, beliefs, estimates, plans and prospects.
A corporate office with staff members wearing company branded uniforms.
Such statements are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from those indicated or implied by such statements. Such risks and other factors are set forth in our periodic and current reports filed with the Securities and Exchange Commission. We do not undertake any duty to update them. With that, I would like to turn the call over to Kim.
Kimberly Scott: Thank you, Bryan. Good morning, everyone, and thank you for joining our fiscal second quarter 2024 earnings call. Before I discuss our results, I’d like to thank our 20,000 dedicated teammates for the hard work they do each day to contribute to making a positive difference for Vestis’ customers, shareholders and the communities we serve. We continue to bring our brand purpose to life here at Vestis following our spin-off in October, by delivering uniforms and workplace supplies that empower people to do good work and good things for others while at work. The underlying health of Vestis is strong, and we continue to position the company well for long-term success. With the spin and transition to a stand-alone public company now behind us, we are able to fully apply our resources against advancing our strategic plan and driving growth across the business.
Operating trends are improving with strong free cash flow, demonstrating cost performance, improvement in managing working capital and the resiliency of our model in support of strengthening our balance sheet over time. Now turning to our results. In the second quarter, we delivered lower-than-expected revenue growth of 0.9% or 2.8% on an underlying basis when normalized for last year’s temporary energy fee. An adjusted EBITDA margin of 12.4%, which is 90 basis points lower than the second quarter last year and includes the absorption of incremental public company costs. Lower than planned revenue growth impacted our performance in the quarter and will also impact our performance in the back half of the year. While we delivered 8% growth in new business wins and customer penetration through route sales, we did not accelerate our ramp to the levels required to offset rollover losses from FY ’23.
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