Vestis (VSTS) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue was $684 million, flat sequentially but down 4.7% year-over-year, with adjusted EBITDA of $81.2 million, up 1% sequentially but down year-over-year due to prior year one-time items and customer exits.

• Net income dropped 93.2% year-over-year to $0.8 million, with operating income at $30.4 million, down 36.1% year-over-year.

• Customer retention improved to 92.9%, up 30 bps year-over-year and 280 bps sequentially, with strong new business wins and a robust sales hiring pipeline.

• Commercial momentum is building, with higher field sales productivity, national account wins, and reduced customer losses.

• Announced CFO and Chief Legal Officer transitions, with experienced successors appointed.

Financial highlights

• Adjusted EBITDA margin was 11.9%, down 180 bps year-over-year but up 10 bps sequentially.

• Net income for Q1 2025 was $0.8 million, down from $12.3 million in Q1 2024.

• Net cash from operating activities was $3.8 million, down from $51.5 million a year ago, mainly due to higher inventory investments and timing of receivables.

• Net debt at $1.27 billion, with net leverage ratio 3.8x.

• Capex at ~3% of sales, flat year-over-year.

Outlook and guidance

• FY 2025 revenue guidance: $2.8–$2.83 billion; adjusted EBITDA: $345–$360 million; margin 12.3%–12.7%.

• Sequential improvement in revenue and EBITDA anticipated through the year, with strongest performance in Q4.

• Expects 3–4% top-line growth and EBITDA growth approaching or exceeding 10% in the second half of the year.

• Free cash flow conversion expected at ~50% of adjusted EBITDA.

• Targeting net debt to EBITDA of 1.5x–2.5x by end of FY 2026.