Q4 2022 UniFirst Corp Earnings Call

October 19, 2022

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Greetings and welcome to the Uni First Corp, fourth quarter earnings conference call. During the presentation. All participants will be listen only mode. Later, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone if any.

During the conference you need to reach the operator, Please press star Zero. It is now my pleasure to turn the conference over to Steven Suntrust, President and Chief Executive Officer. Please go ahead.

Thank you and good morning.

I'm, Stephen Central's unit first President and Chief Executive Officer, joining me today is Shane Oconnor Executive Vice President and Chief Financial Officer, I'd like to welcome you to <unk> Corporation's Conference call to review, our fourth quarter results for fiscal year 2022.

This call will be on a listen only mode until we complete our prepared remarks, but first a brief disclaimer.

This conference call may contain forward looking statements that reflect the company's current views with respect to future events and financial performance. These forward looking statements are subject to certain risks and uncertainties.

Words anticipate optimistic believe estimate expect intend and similar expressions that indicate future events and trends identify forward looking statements actual future results may differ materially from those anticipated depending on a variety of risk factors for more information. Please refer to the discussion of these risk factors in our most recent 10-K.

K and 10-Q filings with the Securities and Exchange Commission.

We are very excited to be announcing today that we are officially reached another major milestone as a company as we reported just over $2 billion in annual revenues for our fiscal 2022.

Universe has come a long way from our humble beginnings back in 1936 operating out of a single location in Boston, Massachusetts, and we are very we continue to be very excited about our future.

Want to thank our thousands of team partners, who in the face of a challenging operating environment continue to always deliver for each other and our customers. They are the engine that makes universe go and they deserve all the credit for our ability to be celebrating this milestone today.

During the quarter as always our team focused on providing industry, leading service to our customers as well as selling prospective customers on the value that universe can bring to their businesses.

Our fourth quarter results reflect our strong topline performance that allowed us to hit that $2 billion Mark with consolidated revenues growing 11%. We are pleased with the execution of our team, which delivered solid performances in both new account sales as well as customer retention in fiscal 'twenty two.

<unk> the trend from prior quarters. The strong revenue growth also reflects the impact of price adjustments from throughout the year as we continue to work with our customers to sharing cost increases related to the inflationary environment.

And we have discussed in prior calls we continue to be focused on three large initiatives designed to transform the company in terms of our overall capabilities and competitive positioning.

These initiatives are the rollout of our new CRM system.

Wide ERP system and investments in the universe brand as we've talked about over the last few years, we continue to be focused on making good investments in our people our infrastructure and our technologies.

With respect to our CRM systems project, we are making good progress deploying our new system in line with our internal schedule.

As of our fiscal year and over 50% of our U S. Laundry locations have been deployed and we expect the remaining U S locations to be deployed by the end of fiscal 'twenty three.

The deployment of our smaller Canadian and clean room operations will carry into fiscal 'twenty four.

During fiscal 'twenty three we will also be focused on the global design phase of our ERP initiative.

Our new Oracle cloud ERP system project will be a multi year initiative designed to transform our supply chain and procurement capabilities as well as provide an overall technology foundation for growth and efficiency.

And finally as we discussed on prior earnings call during fiscal 'twenty. Two we officially launched our new brand through a series of National TV ads, featuring real unit first customers and employees. Our message focuses on serving people who always deliver for their companies their customers and their families at unit first our ongoing focus will be to always.

Liver for them.

Although some costs related to this brand transformation will extend into fiscal 'twenty three the larger onetime expenditures are mostly behind us.

All of our investments are designed to deliver solid long term returns for unit first stakeholders and are integral components of our primary long term objective to be universally recognized as the best service provider in our industry.

We continue to report results of <unk> adjusted for the direct impact of these costs related to these investments.

Similar to our message last quarter, our adjusted profitability continues to be challenged by the broad impact at the inflationary environment is having on many of our costs as well as the challenging labor environment.

The largest item impacting our margins compared to the prior year as higher merchandise amortization that is being influenced both by the inflationary effects on the cost of our products as well as higher levels of merchandise being put in service with our customers.

These higher levels are partially being driven by a number of growth related factors, including a pickup in activity in our energy dependent markets solid new account sales elevated wearer additions at our customers as well as certain national account investments.

As we look ahead into fiscal 'twenty, three we will be watching the dynamic market environment closely.

Although there have been some signs that the higher interest rate environment will slow overall economic demand and hopefully moderate cost we've yet to see any significant change in our business.

As a result, we are not assuming any change to the current economic conditions in our forecast.

Shane will provide further details shortly but in summary, our outlook for fiscal 'twenty three reflect solid continued momentum on the topline and a similar operating margin as fiscal 'twenty two.

Despite the challenges in the overall operating environment, we continue to manage through these obstacles and execute against our plan. We will continue to manage costs in areas. We can control, while assuring we don't impact the ability to execute on our transformational initiatives are adversely affect our customer service levels.

As always we maintain a sharp focus on taking care of our employees, our customers and bring new customers to the unit first family.

And while we are confident that we will ultimately be able to improve our operating margins back to more historical levels and beyond we also firmly believe that building a stronger company for the future will take a certain level of time and investment.

And with that I would like to turn the call over to Shane who will provide the details of our results for the fourth quarter and our outlook for fiscal 2023.

Thanks, Steve.

Consolidated revenues in our fourth quarter of 2022 were $516 4 million, an increase of 11% from $465 3 million a year ago.

And consolidated operating income decreased to $33 3 million from $44 9 million or 26%.

Net income for the quarter decreased to $26 $2 million or $1 39 per diluted share from $34 6 million or $1 82 per diluted share.

Our financial results in the fourth quarter of fiscal 2022 included $9 1 million of costs directly attributable to our three key initiatives that Steve discussed.

Excluding these initiatives cost adjusted operating income was $42 3 million.

Adjusted net income was $33 7 million and adjusted diluted earnings per share was $1 79.

Although our financial results in the prior year May have included direct costs related to these key initiatives. The company did not specifically track the amounts that were being expense. This was because the amount with less significant value in a number of costs were still being capitalized.

As a result similar to previous quarters. This fiscal year, we will not be providing adjusted amounts for the prior year comparable periods.

Our core laundry operations revenues for the quarter were $458 6 million, an increase of 10, 5% from the fourth quarter of 2021.

Core laundry organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar was nine 9%.

Our organic growth rates continue to benefit from solid sales performance and improved customer retention in fiscal 2022, as well as efforts to share with our customers. The inflationary cost increases that we have been experiencing in our business.

Core laundry operating margin decreased to six 3% for the quarter or 20 $29 million from 10, 1% in prior year or $41 8 million.

The costs, we incurred during the quarter related to our key initiatives were recorded to the core laundry operations segment and excluding these costs. The segment's adjusted operating margin was eight 3%.

As Steve discussed merchandise amortization continues to be the most significant item impacting our adjusted operating margin in the quarter.

In addition, our operating results were also impacted by higher energy costs as a percentage of revenues as well as increased input and labor cost due to the current inflationary environment.

These cost increases were partially offset by lower healthcare and payroll related costs as a percentage of revenues.

Energy cost increased to five 3% of revenues in the fourth quarter of 2022 up from four 2% a year ago.

Revenues from our specialty garments segment, which delivers specialized nuclear decontamination and clean room products and services were $36 7 million for the fourth quarter of fiscal 2022, and an increase of eight 3% over 2021 segue.

Segment's top line growth was primarily driven by its clean room operations.

Segment operating income during the quarter was $4 million relatively consistent with prior year.

As we mentioned in the past this segment's results can vary significantly from period to period due to seasonality as well as the timing and profitability of nuclear reactor outages and projects.

Our first aid segment's revenues in the fourth quarter of 2022 increased to $21 2 million from $16 $3 million with a book with both the wholesale and Dan operations contributing to this growth.

However, the segment's operating income was nominal during the quarter due to our continued investment in the segment's van business.

We continue to maintain a solid balance sheet and financial position with no long term debt and cash cash equivalents and short term investments totaling $376 4 million at the end of fiscal 2022.

Cash provided by operating activities for the year was $122 6 million.

A decrease of $89 $7 million from the prior year. This decrease was primarily due to reduced profitability, including the impact of our key initiatives cost as well as heavier than normal working capital needs of the business.

In fiscal 2022, we continue to invest in our future capital expenditures totaling $144 $3 million and the acquisition of 13 businesses for which we paid a total of $44 2 million.

During the fourth quarter of fiscal 2022, we repurchased 47775 shares of common stock for $8 million under our previously announced stock repurchase program and also repurchased 35714 shares of class B common stock for 6 million.

In a privately negotiated transaction.

I'd like to take this opportunity to provide our outlook for fiscal 2023.

At this time, we anticipate our full year revenues will be between two one and $4 5 billion and $2. One 6 billion. This.

This top line guidance assumes core laundry revenue growth at the midpoint of the range is seven 7% and organic growth to be eight 3%.

For fiscal 2023, we further expect that our diluted earnings per share will be between $5 50 and $5 90.

This guidance includes $40 million of costs that we expect to incur in the fiscal year directly attributable to our three key initiatives.

Excluding these transition area investment costs, our core laundry operations adjusted operating margin assumption at the midpoint of the range is eight 1%.

This adjusted operating margin reflects continued pressure from the current inflationary environment higher levels of merchandise amortization elevated energy costs indirect costs, we are incurring related to our key initiatives as well as additional investments we are making in strengthening our overall capabilities.

Based on the current energy prices, we are modeling that energy costs will be four 7% of revenues in fiscal 2023 compared to four 9% in 2022.

Next year's effective tax rate is assumed to be 25%.

Our specialty garments revenues are forecast to be relatively flat compared to 2022. However, the segment's operating income is expected to be down approximately 5%, primarily due to the timing and relative profitability of its planned outages and project work.

Our first aid segment's revenues are expected to be up approximately 18% compared to 2022. However, this segment's profitability is once again expected to be relatively marginal in 2023 as a result of the investments we continue to make in building out the infrastructure to support a national.

Vic footprint for our brand operations.

We expect that our capital expenditures in 2023 will approximate $140 million.

And our guidance assumes our current level of outstanding common shares and no deterioration in the current economic environment.

This concludes our prepared remarks, and we would now be happy to answer any questions that you might have.

Thank you.

I would like to register a question or comment. Please press the one followed by the four on your telephone.

You'll hear us retail prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three one moment. Please.

The first question comes from Andrew <unk> of Jpmorgan. Please go ahead.

Hi, Good morning, it's Andrew I wanted to ask you.

Two questions one would you be willing to quantify for us the merchandise amortization drag in the fourth quarter and assumed and 'twenty three.

I have a second question you were very good at going go over the key initiatives.

What's driving.

Fiscal year 'twenty three spend could you just tell us how much spec.

Spend there should be a meeting in terms of investments in the key initiatives past 'twenty three.

So let me let me start with the key initiatives and I will turn the merchandise over to Shane.

From a key initiative standpoint, as I talked about.

About two thirds of the key initiative cost this year will be related to completing or mostly completing our CRM systems rollout.

Lot of that will fall off as we get into 'twenty four.

The other large chunk of 23 initiative cost is related to ERP system as we get to 'twenty four.

ERP system will transition more from the design phase into a build an implementation phase where more costs will likely be capitalized in 'twenty four 'twenty three.

So I'm getting ahead of myself, a little bit, but there'll probably be some less.

Correct cost.

Initiative costs that are growing through the P&L. In 2024, then 23. So we do expect in short for 'twenty three to be the high watermark of initiative costs going through the P&L, although in 'twenty four four and 'twenty five as we continue to work through our excuse me our ERP there will be <unk>.

Higher levels of capitalization related to that initiative, hopefully that sort of makes sense, Andrew yes sure.

I'll turn it to Shane on the on the merchandize, yes.

So as it relates to the merchandise drag for both the fourth quarter as well as as we look into 2023.

Yes, when I take a look at the fourth quarter carving out the actual amount related to merchandise amortization I don't think it is meaningful when I compare Eric.

Prior year, just some of the disruption that we were still incurring at that point in time.

What I will say is that as you can see from my comments my energy drag during that quarter was about 110 basis points and my merchandise amortization.

Headwind exceeded that right. So it wasn't significant.

Okay.

As we look into next year.

Merchandise amortization.

As the largest headwind that we're seeing and the expected headwind there is about a point to our margin.

Again, a lot of the things that Steve had articulated in his in his prepared comments are continuing to impact our merchandise amortization and as that ramped throughout the year.

Yes, it's carrying into 2023, Okay couple of other quick some quick comments there Andrew on the merchandize as Shane talked about it's really being impacted as I said it in my prepared remarks, it's a combination of higher cost of merchandise and more being placed in service as well as some of the older tranches related.

Two the pandemic time that are dropping off that represented much lower merchandize being placed in service, particularly for some of our longer lives garments in the fr or flame resistant area that last 24 months. So you just still having some of that natural build going on during 2003 right.

If you don't mind I'm, just Steve I would just ask one quick follow up.

When you think about 'twenty for the CRM system being in place for all of US launching by the end of 'twenty three.

Talk about the benefits that you expect from the new CRM system as we go a year out.

Yes, I think one of the things we've always talked about it actually ties back to merchandise is continued improvement of merchandize controls. Obviously, we're already starting to see some of the benefit maybe it's a little more intangible on our team shorter hours for the route drivers.

More ability to provide automation and transparency to the customers. So the the route efficiency of the route day has improved quite a bit as we deploy now some of thats being offset that theres a lot of learning and change going on going from our old system, but we expect that to really help once they have sort of in many cases a full year.

Year of the new system under their belt and really start taking advantage of the benefits. Okay. Thank you appreciate it.

Thank you.

The next question comes from Andy Wittman of Baird. Please go ahead.

Great. Good morning, guys, I guess I wanted to talk about.

Cash flow a little bit here.

A couple of things could you just talk about.

The reasons behind the working capital investment.

Last year in 'twenty, two being higher than normal and if you expect in.

'twenty three if you could just give us kind of the net of what you're expecting maybe a range on free cash flow you gave us kind of the components here, but.

Maybe that's a working capital drawdown that you'd be able to pick up next year. So wanted to just get your sense of what a reasonable range of free cash flow for 2003 might be.

Yes.

Yes, so as we look into 2023, our expectations clearly in 2022, we had a significant amount of working capital needs for the business and when you take a look at those those relate to.

I guess first and foremost our merchandise and service we've been talking about our merchandise amortization ramping and as we put more products into service you can see the adjustment in the investment reflected on our balance sheet.

During 2023.

Our expectation around that is that it will be more normalized and less significant than it was in 2022.

We also have elevated accounts receivable balances.

And some of that relates to the deployment of our system as we continue to work through some of that change management etcetera.

And then there were one of the things that I had mentioned last quarter was we had deferred some.

FICA payments.

Under some of the stimulus related to the pandemic that we had to pay back last year.

So again, our expectations coming into 2023 is that theres going to be.

Significantly that's working capital needs of the business compared to 2022.

Not necessarily forecasting that there is going to be a draw down which is going to result in a cash.

Cash infusion.

But when we take a look at our expectations around free cash flow, it's probably around $75 million.

And Thats, obviously still being impacted by the investment in our initiatives and our current profitability as well as the elevated capital expenditures that were expecting.

As we advance some of these initiatives.

And there's another FICA payments coming here in the next couple of months to Shane sorry.

Sorry.

The second half of that payment is expected in December of this year, yes.

And how much was that again.

It's a little over $12 million.

Yes.

Okay, and then maybe Steve as my follow up.

Yeah.

Can you talk about.

Price cost dynamics.

Yeah.

When do you feel like.

Youre going to be able to get on the right side is the guidance for the year that you gave here for the core margins the core laundry segment margins as that kind of.

Down a little bit in the front half of the year and then you think in the second half of the year that margins can start comping positively.

I guess I'd like to hear a little bit more about that and any initiatives that you've got going on price, whether it's fuel surcharges or anything like that would just be helpful context for I think for us all to note.

Yes, I think what you said about the trajectory of the margin during the year.

Is somewhat embedded into our forecast.

I think when you look at the environment.

Again, we're forecasting sort of current current status quo.

I think I sort of made this comment in my prepared remarks, you're seeing some signs that certain things may be reducing certain freight costs certain even some raw material cost potentially now some of those may not take hold till later in the year, you think about supply chain buying fabric and things like that that sort of a long long cycle of that.

Before you start to see it in your merchandise amortization, but we're hopeful that that some of that stuff starts to take hold.

Later in the year and you start to see some some turnaround there and from a price environment perspective, I mean, I think we continue to do multiple things you talked about fuel surcharges to try to stay on top of the.

The situation and we'll continue to do that I think our customers have worked with as well through through the environment and it's.

It's just an ongoing.

Ongoing effort as as we work through the dynamic environment right you talked about fuel. It goes down it goes up we're really trying just to evaluate.

What makes sense as we go forward and we build that strategy for $2000 for 'twenty three.

Yes, Andy Andy the only thing that I would add to that is back to your margin question as it relates to the quarters.

We've mentioned this before that.

The profitability of our quarters has some seasonality to it.

With often times, our first quarter being more profitable in our second quarter being.

Our least profitable again back to Steve's comments about the trajectory I would say that that trajectory is the quarterly comparisons to the to the comparable prior year period.

Meaning.

I guess the momentum or the improvement that we're seeing is really the delta between the current.

Or any individual quarter and the prior year comparable.

That makes sense.

Right, you're basically saying the year over year margin change will be.

Potentially more negative in the earlier quarters, and then hopefully turned more positive.

In the second half of the year.

That's kind of what you were just trying to say.

Alright, I think I'm glad you later I am glad you are able to get it.

Yes.

I'll leave it there guys have a good day.

Thank you.

Thank you. The next question comes from Jack Boyle Northcoast. Please go ahead.

Hi, Good morning, everyone. Thank you for taking my questions.

Real quick I have a.

Question here you guys are great on answering.

Some of the.

Seasonal cadence here I just have a question about stabilizing the margins is there in terms of continuing to grow the revenue do you guys believe that is there any type of type of minimal revenue growth that you guys believe that you would need to attain or continue attaining to stabilize the margins or improve them.

Yes, it's a good question I mean, we've obviously been through a period of higher growth year over the last year or so.

Tied to the inflationary environment, but you are right.

You have to continue to keep that top line momentum.

Beyond the periods that that the higher.

<unk> takes hold let's say things slow down a bit and we're back to more of a normal operating environment.

Yes, we still have to be pushing growth toward the mid single digits to to get those margins to recover right youre not going to really be able to do with low single digit growth and improve the margins, but one thing I will say is that there are a number of sort of.

Counter cyclical influences of our cost when the business does slow down like some of the things we're talking about with fuel if we went into.

Somewhat of a slowdown and you have to be careful because no one wants a deep recession right, but obviously, what's going on now is trying to.

Cool the Comed economy appropriately I guess and in some times that can help our costs because I talked about merchandise being placed in service. When you think about how we put merchandise and service with our customers. The more our customers are adding employees. The more garments were putting in service and there's sort of an upfront cost associated.

With that the more turnover there is amongst.

Our customers employee, which a lot of companies are experiencing elevated turnover in this environment.

Theres more merchandise placed in service so.

Yes that being said to answer your real question you do need to maintain some healthy growth to continue to move the margins in the right direction as we move past the true inflationary period, it'll be back to that core of.

Selling retention and and making sure we're getting appropriate pricing along the way.

Very good and just as a quick follow up to your merchandize comment. There are you guys seeing any kind of.

Elongation and how long you are having to store that merchandize is there any.

Change in the length of the sales process.

No I would say no I think we continue to work on utilizing our used garments, which is a key part of <unk>.

Improving our profitability and quite frankly, as we move into our ERP systems project. One of the key areas of focus is improved utilization of used inventory across our locations. So but no I wouldn't say, we're seeing a significant change there.

Good thank you.

Thank you.

Thank you as a reminder, via the phone lines you May press. The one followed by the four on your telephone keypad to register a question or comment and the next question comes from Tim Mulrooney William Blair. Please go ahead.

Yes, good morning, Steve good.

Two quick questions for me can you talk about trends in new customer account growth.

I am assuming that add stops with customers is still okay, given the unemployment.

Remained so low, but I'm thinking maybe where you'd start to see signs of macro weakness first might be with new customer leads. So if you could just comment on how that's trended over the last quarter.

Yeah, No I would say new customer wins continues to be to be to be very solid I mean for the full year, we sold more new business than we did in fiscal 'twenty one.

And I think that trend was reasonably consistent.

Over the over the back half of the year. So I wouldn't say, we're seeing a slowdown there.

In a typical environment, where we do start to see economic slowdown it really does show up typically in the wearers first now this environment might be a little different right and this is sort of the dynamic where.

People are expecting a slowdown with the higher interest rates, but hiring is still pretty good unemployment is still very low. So so you are right. We have not seen that real slowdown or pullback in wearer levels that is our normal indicator that that the slowdown is coming but obviously, we're keeping a sharp eye open for it and it's something that.

I'm sure it will be a factor eventually during the year.

One way or another.

Right no. That's helpful. So the way I should think about it normally as you actually do that.

That add stop first but given this type of environment might be different this time.

I'm around so maybe I'll ask you about it again next quarter.

Yes, absolutely when you think about the last 15 years the recession in 2008 2009, we certainly saw it in the wears first I would say the other time, we saw whereas pullback was when energy sort of tanked in 2015 16. After the many years of an energy boom, we saw somewhere pullback pretty.

Quickly so yeah, it's usually our leading indicators.

That's great. Thank you.

Just as my follow up I wanted to ask about.

If labor availability has eased at all in recent months, we've heard from some folks that the labor environment has gotten a touch better while others say, it's just as difficult as it's ever been.

All year, so curious to hear your thoughts as it relates to maybe bolster route drivers in your production plant workers. Thank you.

Yes, great question and I think.

I'd say our experience is very consistent with what I've been sort of.

Reading in the broader economy, which is we are seeing more applicants.

And so we are better staffed today than we were six nine months ago. There's no question on both the route driver and the production side I will say turnover is is not was not really better than the fourth quarter, though turnover continues to be high but we continue to.

Or we're seeing improvement in the ability to fill those positions and find applicants. So I think you're you're it seems very consistent with what I'm seeing from other companies is a little bit of an improvement in the ability to find people.

Okay. That's very helpful. Thank you.

Thank you.

Thank you that was our final question I'll turn the call back over for any closing remarks.

Yes, I'd like to thank everyone for joining us today for our fourth quarter results and we look forward to speaking with you again in January when we expect to be reporting our first quarter performance. Thank you all and have a great day.

Thank you. This does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your lines. Thank you and have a good day.

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Greetings and.

And welcome to the Uni First Corp, fourth quarter earnings conference call. During the presentation, all participants will be in a listen only mode. Later, we will conduct a question and answer session at that time. If you have a question. Please press the one followed by the four on your telephone.

Any time during the conference you need to reach the operator. Please press star Zero. It is now my pleasure to turn the conference over to Steven Suntrust, President and Chief Executive Officer. Please go ahead.

Thank you and good morning.

I'm, Steven <unk>, President and Chief Executive Officer, joining me today is Shane Oconnor Executive Vice President and Chief Financial Officer, I would like to welcome you to <unk> Corporation's conference call to review, our fourth quarter results for fiscal year 2022.

This call will be on a listen only mode until we complete our prepared remarks, but first a brief disclaimer.

<unk> and 10-Q filings with the Securities and Exchange Commission.

We are very excited to be announcing today that we have officially reached another major milestone as a company as we reported just over $2 billion in annual revenues for our fiscal 2022.

Universe has come a long way from our humble beginnings back in $19 36 operating out of a single location in Boston, Massachusetts, and we are very we continue to be very excited about our future.

Want to thank our thousands of team partners, who in the face of a challenging operating environment continue to always deliver for each other and our customers. They are the engine that makes unit first go and they deserve all the credit for our ability to be celebrating this milestone today.

And we have discussed in prior calls we continue to be focused on three large initiatives designed to transform the company in terms of our overall capabilities and competitive positioning.

These initiatives are the rollout of our new CRM system.

With respect to our CRM systems project, we are making good progress deploying our new system in line with our internal schedule.

As of our fiscal year and over 50% of our U S. Laundry locations have been deployed and we expect the remaining U S locations to be deployed by the end of fiscal 'twenty three.

The deployment of our smaller Canadian and clean room operations will carry into fiscal 'twenty four.

During fiscal 'twenty three we will also be focused on the global design phase of our ERP initiative.

And finally as we discussed on prior earnings call during fiscal 'twenty. Two we officially launched our new brand through a series of National TV ads, featuring real unit first customers and employees. Our message focuses on serving people who always deliver for their companies their customers and their families. At unit first our ongoing focus will be to always do.

Oliver for them.

Although some costs related to this brand transformation will extend into fiscal 'twenty three the larger one time expenditures are mostly behind us.

We continue to report results of <unk> adjusted for the direct impact of these costs related to these investments.

The largest item impacting our margins compared to the prior year as higher merchandise amortization that is being influenced both by the inflationary effect on the cost of our products as well as higher levels of merchandise being put in service with our customers.

As we look ahead into fiscal 'twenty, three we will be watching the dynamic market environment closely.

Although there have been some signs that the higher interest rate environment will slow overall economic demand and hopefully moderate cost we've yet to see any significant change in our business.

As a result, we are not assuming any change to the current economic conditions in our forecast.

Ben will provide further details shortly but in summary, our outlook for fiscal 'twenty three reflect solid continued momentum on the topline and a similar operating margin as fiscal 'twenty two.

As always we maintain a sharp focus on taking care of our employees, our customers and bring new customers to the unit first family.

And with that I would like to turn the call over to Shane who will provide the details of our results for the fourth quarter and our outlook for fiscal 2023.

Thanks, Steve.

Consolidated revenues in our fourth quarter of 2022 were $516 4 million, an increase of 11% from $465 3 million a year ago and consolidated operating income decreased to $33 3 million from $44 9 million.

Or 26%.

Net income for the quarter decreased to $26 $2 million or $1 39 per diluted share from $34 6 million or $1 82 per diluted share.

Our financial results in the fourth quarter of fiscal 2022 included $9 1 million of costs directly attributable to our three key initiatives that Steve discussed.

Excluding these initiatives cost adjusted operating income was $42 3 million.

Adjusted net income was $33 7 million and adjusted diluted earnings per share was $1 79.

As a result similar to previous quarters. This fiscal year, we will not be providing adjusted amounts for the prior year comparable periods.

Our core laundry operations revenues for the quarter were $458 6 million, an increase of 10, 5% from the fourth quarter of 2021.

Core laundry organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar was nine 9%.

Core laundry operating margin decreased to six 3% for the quarter or 20 $29 million.

From 10, 1% in prior year or $41 $8 million the cost we incurred during the quarter related to our key initiatives were recorded to the core laundry operations segment and excluding these costs. The segment's adjusted operating margin was eight 3%.