Vestis (VSTS) Q4 2024 earnings summary

Executive summary

• Fiscal 2024 revenue was $2.81 billion, down 0.7% year-over-year, with Q4 revenue at $684 million; adjusted EBITDA for the year was $353 million (12.6% margin), exceeding guidance but down from prior year.

• Free cash flow for FY24 reached $165 million, with conversion exceeding 100% of net income and 47% of adjusted EBITDA.

• Customer retention improved by 150 bps to 91.9% in FY24, positioning for stronger FY25.

• Commercial momentum is building, with strong national account wins, SME growth, and significant improvements in route sales and customer retention.

• Management is focused on maximizing shareholder value, retaining advisors in response to preliminary acquisition proposals.

Financial highlights

• Q4 revenue declined 4.4% year-over-year, mainly due to net customer losses and the exit of a large direct sale account.

• Adjusted EBITDA for Q4 was $81 million (11.8% margin), down year-over-year.

• Net debt reduced by over $319 million during the year, ending with a net debt-to-EBITDA ratio of 3.6x.

• U.S. revenue was $2.56 billion (down 0.8%), Canada $250 million (flat); Workplace Supplies grew 0.9%, Uniforms declined 2.9%.

• Free cash flow excludes $233 million from A/R securitization and $35 million from AUSJ JV sale post-year-end.

Outlook and guidance

• Fiscal 2025 revenue is expected at $2.8–$2.83 billion, with adjusted EBITDA of $345–$360 million and a margin of 12.3%–12.7%.

• Excluding one-time items, core revenue growth is projected at 1%–2%, with margin expansion of 40 bps.

• Revenue and EBITDA growth are expected to accelerate in the back half of 2025, with 3%–4% revenue growth and EBITDA growth approaching or exceeding 10%.

• Q1 2025 is anticipated to be similar to Q4 2024, with incremental improvement through the year.

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