Q4 2023 Vestis Earnings Conference Call

November 29, 2023

Operator: At this time all participants have been placed on a listen only mode, and the floor will be opened for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star Q. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Valerie Haertel, Vice President of Investor Relations.

If you would like to ask a question at that time. Please press star one on your telephone keypad.

If at any point. Your question has been answered you may remove yourself from the queue by pressing star Q.

So others can hear your questions clearly, we ask that you pick up your handset for best sound quality.

Operator: So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Valerie Haertel, Vice President of Investor Relations.

Lastly, if you should require operator assistance, please press star zero.

I would now like to turn the call over to Valerie Haertel, Vice President of Investor Relations.

Okay.

Valerie Haertel: Thank you Chelsea and good morning, everyone. We appreciate your participation in Vestis Corporation's, fourth quarter and fiscal 2023 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 IR section of the vestis.com website, access to the replay and materials related to todays discussion are also available on the Investor Relations website. Before we begin I would like to remind you that this call may contain forward looking statements, and as such, as within the private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans and prospects. 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 at 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.

Valerie Haertel: As a reminder, a telephonic replay of this call will be available on the IR section of the vestis.com website, access to the replay and materials related to todays discussion are also available on the Investor Relations website. Before we begin I would like to remind you that this call may contain forward looking statements, and as such, as within the private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans and prospects. 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 at 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.

Of divested Dot com website access to the replay and materials related to todays discussion are also available on the industrial relations website.

Before we begin I would like to remind you that this call may contain forward looking statements.

Valerie Haertel: Before we begin I would like to remind you that this call may contain forward looking statements, and as such, as within the private Securities Litigation Reform Act of 1995. These include remarks about management's future expectations, beliefs, estimates, plans and prospects. 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 at 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.

Valerie Haertel: Before we begin I would like to remind you that this call may contain forward looking statements, and as such, as within the private Securities Litigation Reform Act of 1995.

And as such.

As within the private Securities Litigation Reform Act of 1995.

Valerie Haertel: These include remarks about management's future expectations, beliefs, estimates, plans and prospects. 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 at 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.

These include remarks about management's future expectations beliefs estimates.

Plans and prospects 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 securities and exchange can.

Valerie Haertel: Such risks and other factors are set forth in our periodic and current reports filed at 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.

Mission, we do not undertake any duty to update them with that I would like to turn the call over to Ken.

Kim Scott: Thank you Valerie good morning, and thank you for joining <unk> first earnings call as a Standalone public company, we completed our spin off from Aramark on September 30, and achievement that was only made possible. Thanks to the hard work of our 20000 dedicated teammates I'd like to thank the destination for their unwavering commitment to our customers. Andrew each other as we work together to deliver this tremendous outcome. Every day, our outstanding teammates, bringing our purpose to life inside the company delivering uniforms and supplies that empower people to do good work and good things for others. While at work. We are doing important work work that makes a positive difference in the lives of so many. Turning now to our best as result, we delivered strong financial performance in 2023 with revenue growth of 5% and adjusted EBITA margin of 14, 3% an increase of more than 40 basis points. As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance against our strategic initiatives that are focused on high quality growth and efficient operation. We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum as our strategic plan gains traction and operating leverage begins to emerge we. We are pleased to share our outlook for fiscal year 2020 for a revenue growth rate of four to four 5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million and public company costs in the period. As a result, we will maintain our FY2023 EBITDA margin at 14, 3% while absorbing these go forward public company costs.

Kim Scott: Thank you Valerie, good morning, and thank you for joining Vestis's first earnings call as a standalone public company. We completed our spin-off from Aramark on September 30, an achievement that was only made possible thanks to the hard work of our 20,000 dedicated teammates. I'd like to thank the Vestis nation for their unwavering commitment to our customers and to each other as we work together to deliver this tremendous outcome. Every day, our outstanding teammates, bringing our purpose to life inside the company, delivering uniforms and supplies that empower people to do good work and good things for others while at work. We are doing important work, work that makes a positive difference in the lives of so many. Turning now to our Vestis results, we delivered strong financial performance in 2023, with revenue growth of 5% and adjusted EBITA margin of 14, 3%, an increase of more than 40 basis points. As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance, against our strategic initiatives that are focused on high quality growth and efficient operation. We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum, as our strategic plan gains traction and operating leverage begins to emerge. We are pleased to share our outlook for fiscal year 2024, our revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million dollars in public company costs in the period.

Kim Scott: Thank you Valerie, good morning, and thank you for joining Vestis's first earnings call as a standalone public company.

Kim Scott: We completed our spin-off from Aramark on September 30, an achievement that was only made possible thanks to the hard work of our 20,000 dedicated teammates. I'd like to thank the Vestis nation for their unwavering commitment to our customers and to each other as we work together to deliver this tremendous outcome. Every day, our outstanding teammates, bringing our purpose to life inside the company, delivering uniforms and supplies that empower people to do good work and good things for others while at work. We are doing important work, work that makes a positive difference in the lives of so many. Turning now to our Vestis results, we delivered strong financial performance in 2023, with revenue growth of 5% and adjusted EBITA margin of 14, 3%, an increase of more than 40 basis points. As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance, against our strategic initiatives that are focused on high quality growth and efficient operation. We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum, as our strategic plan gains traction and operating leverage begins to emerge. We are pleased to share our outlook for fiscal year 2024, our revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million dollars in public company costs in the period.

Andrew each other as we work together to deliver this tremendous outcome.

Every day, our outstanding teammates, bringing our purpose to life inside the company delivering uniforms and supplies that empower people to do good work and good things for others. While at work. We are doing important work work that makes a positive difference in the lives of so many.

Kim Scott: Every day, our outstanding teammates, bringing our purpose to life inside the company, delivering uniforms and supplies that empower people to do good work and good things for others while at work. We are doing important work, work that makes a positive difference in the lives of so many. Turning now to our Vestis results, we delivered strong financial performance in 2023, with revenue growth of 5% and adjusted EBITA margin of 14, 3%, an increase of more than 40 basis points. As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance, against our strategic initiatives that are focused on high quality growth and efficient operation. We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum, as our strategic plan gains traction and operating leverage begins to emerge. We are pleased to share our outlook for fiscal year 2024, our revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million dollars in public company costs in the period.

Turning now to our best as result, we delivered strong financial performance in 2023 with revenue growth of 5% and adjusted EBITA margin of 14, 3% an increase of more than 40 basis points.

Kim Scott: Turning now to our Vestis results, we delivered strong financial performance in 2023, with revenue growth of 5% and adjusted EBITA margin of 14, 3%, an increase of more than 40 basis points. As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance, against our strategic initiatives that are focused on high quality growth and efficient operation. We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum, as our strategic plan gains traction and operating leverage begins to emerge. We are pleased to share our outlook for fiscal year 2024, our revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million dollars in public company costs in the period.

As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance against our strategic initiatives that are focused on high quality growth and efficient operation.

We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum as our strategic plan gains traction and operating leverage begins to emerge we.

Kim Scott: We saw continued positive performance trends throughout the year and we have entered 2024 with great momentum, as our strategic plan gains traction and operating leverage begins to emerge. We are pleased to share our outlook for fiscal year 2024, our revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million dollars in public company costs in the period.

We are pleased to share our outlook for fiscal year 2020 for a revenue growth rate of four to four 5%, which is well above our historical norms of approximately 2%.

Kim Scott: We are pleased to share our outlook for fiscal year 2024, our revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%. And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million dollars in public company costs in the period.

And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 million to $18 million and public company costs in the period.

As a result, we will maintain our FY2023 EBITDA margin at 14, 3% while absorbing these go forward public company costs.

Kim Scott: As a result, we will maintain our FY2023 EBITDA margin at 14, 3% while absorbing these go forward public company costs. Throughout 2023, we continue to establish a strong foundation for profitable growth through the advancement of our strategic initiatives that we outlined at divest this analyst day back in September. As a reminder, our strategic imperatives include the delivery of high quality growth. Fishing operations. Disciplined capital allocation and a performance driven culture. We are pleased with the progress we're making against these imperatives. Our top line results reflect our strategy to grow with existing customers through cross selling workplace supplies and as you can see in our results, we delivered 9% growth across workplace supplies in 2023. We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value added services and products to our customers. With sales activity, taking place across 96% of our routes in 2023. This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver topline growth while also improving our revenue mix. And we will exit a relationship with a large direct sale customer and FY 'twenty, four and through FY 'twenty five and <unk>. Proving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets. We discussed in September at Analyst day and. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network. Our focus on efficient operations has contributed to our margin expansion and it is establishing the foundation for a more disciplined and modernized operating environment that will serve us well in the years ahead.

Kim Scott: As a result, we will maintain our FY 2023 EBITDA margin at 14.3% while absorbing these go forward public company costs. Throughout 2023, we continue to establish a strong foundation for profitable growth, through the advancement of our strategic initiatives that we outlined at the Vestis analyst day back in September. As a reminder, our strategic imperatives include the delivery of high quality growth, efficient operations, disciplined capital allocation and a performance-driven culture. We are pleased with the progress we're making against these imperatives. Our top line results reflect our strategy to grow with existing customers through cross-selling workplace supplies and as you can see in our results, we delivered 9% growth across workplace supplies in 2023. We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value added services and products to our customers. With sales activity, taking place across 96% of our routes in 2023. This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver top-line growth while also improving our revenue mix. To that end we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

Throughout 2023, we continue to establish a strong foundation for profitable growth through the advancement of our strategic initiatives that we outlined at divest this analyst day back in September.

Kim Scott: As a reminder, our strategic imperatives include the delivery of high quality growth, efficient operations, disciplined capital allocation and a performance-driven culture. We are pleased with the progress we're making against these imperatives. Our top line results reflect our strategy to grow with existing customers through cross-selling workplace supplies and as you can see in our results, we delivered 9% growth across workplace supplies in 2023. We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value added services and products to our customers. With sales activity, taking place across 96% of our routes in 2023. This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver top-line growth while also improving our revenue mix. To that end we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

As a reminder, our strategic imperatives include the delivery of high quality growth.

Fishing operations.

Disciplined capital allocation and a performance driven culture. We are pleased with the progress we're making against these imperatives.

Kim Scott: Our top line results reflect our strategy to grow with existing customers through cross-selling workplace supplies and as you can see in our results, we delivered 9% growth across workplace supplies in 2023. We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value added services and products to our customers. With sales activity, taking place across 96% of our routes in 2023. This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver top-line growth while also improving our revenue mix. To that end we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

Our top line results reflect our strategy to grow with existing customers through cross selling workplace supplies and as you can see in our results, we delivered 9% growth across workplace supplies in 2023.

Kim Scott: We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value added services and products to our customers. With sales activity, taking place across 96% of our routes in 2023. This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver top-line growth while also improving our revenue mix. To that end we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value added services and products to our customers.

With sales activity, taking place across 96% of our routes in 2023.

Kim Scott: This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver top-line growth while also improving our revenue mix. To that end we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue aiding in our delivery of margin expansion. We will continue to deliver topline growth while also improving our revenue mix.

Kim Scott: To that end we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis. We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

And we will exit a relationship with a large direct sale customer and FY 'twenty, four and through FY 'twenty five and <unk>.

Proving our consolidated margin by approximately three basis points on a fully annualized basis.

Kim Scott: We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets we discussed in September Analyst day. And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

We will continue to focus our energy and our resources on high quality growth, including our key micro vertical targets. We discussed in September at Analyst day and.

And we remain focused on optimizing our revenue mix to support density and operating leverage across our network.

Kim Scott: Our focus on efficient operations has contributed to our margin expansion and it is establishing the foundation for a more disciplined and modernized operating environment that will serve us well in the years ahead. Our team has activated our plan to optimize our network to reduce empty miles and lower fuel costs. Simply by serving the right customers from the single most efficient locations. This will also allow us to leverage latent capacity at our existing locations and taken together, we believe we have $30 million to $50 million of potential cost savings or re deployable capacity that will be unlocked across our system over the next five years. This is a tremendous opportunity to leverage the assets, we already have in our system and it gives us confidence that we can accelerate growth without a significant capital outlay. In FY2023 we successfully completed more than 20 last mile optimization events across our network in support of this initiative. We also organized our team for success in FY2023 in support of our strategy, which has resulted in lowering operating cross costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 'twenty four as a standalone public company. While maintaining our FY2023 adjusted EBITA margin level of approximately 14, 3%. We are also progressing our efforts to improve the rigor applied against merchandise management or inventory reuse as we call it which will reduce the amortization cost on our garments overtime. Before I turn the call over to Rick I would be remiss, if I didn't touch on the incredible culture. We are building here at <unk>.

Kim Scott: Our focus on efficient operations has contributed to our market expansion and it is establishing the foundation for a more disciplined and modernized operating environment that will serve us well in the years ahead. Our team has activated our plans to optimize our network to reduce empty miles and lower fuel costs, simply by serving the right customers from the single most efficient locations. This will also allow us to leverage latent capacity at our existing locations and taken together, we believe we have $30 million to $50 million dollars of potential cost savings or re-deployable capacity that will be unlocked across our system over the next five years. This is a tremendous opportunity to leverage the assets, we already have in our system and it gives us confidence that we can accelerate growth without a significant capital outlay. In FY 2023 we successfully completed more than 20 last mile optimization events across our network in support of this initiative. We also organized our team for success in FY 2023, in support of our strategy, which has resulted in lowering operating costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 adjusted EBITA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management, or inventory reuse as we call it, which will reduce amortization cost on our garments overtime.

Our focus on efficient operations has contributed to our margin expansion and it is establishing the foundation for a more disciplined and modernized operating environment that will serve us well in the years ahead.

Kim Scott: Our team has activated our plans to optimize our network to reduce empty miles and lower fuel costs, simply by serving the right customers from the single most efficient locations. This will also allow us to leverage latent capacity at our existing locations and taken together, we believe we have $30 million to $50 million dollars of potential cost savings or re-deployable capacity that will be unlocked across our system over the next five years. This is a tremendous opportunity to leverage the assets, we already have in our system and it gives us confidence that we can accelerate growth without a significant capital outlay. In FY 2023 we successfully completed more than 20 last mile optimization events across our network in support of this initiative. We also organized our team for success in FY 2023, in support of our strategy, which has resulted in lowering operating costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 adjusted EBITA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management, or inventory reuse as we call it, which will reduce amortization cost on our garments overtime.

Kim Scott: Our team has activated our plans to optimize our network to reduce empty miles and lower fuel costs, simply by serving the right customers from the single most efficient locations.

Our team has activated our plan to optimize our network to reduce empty miles and lower fuel costs.

Simply by serving the right customers from the single most efficient locations.

Kim Scott: This will also allow us to leverage latent capacity at our existing locations and taken together, we believe we have $30 million to $50 million dollars of potential cost savings or re-deployable capacity that will be unlocked across our system over the next five years. This is a tremendous opportunity to leverage the assets, we already have in our system and it gives us confidence that we can accelerate growth without a significant capital outlay. In FY 2023 we successfully completed more than 20 last mile optimization events across our network in support of this initiative. We also organized our team for success in FY 2023, in support of our strategy, which has resulted in lowering operating costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 adjusted EBITA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management, or inventory reuse as we call it, which will reduce amortization cost on our garments overtime.

This will also allow us to leverage latent capacity at our existing locations and taken together, we believe we have $30 million to $50 million of potential cost savings or re deployable capacity that will be unlocked across our system over the next five years.

This is a tremendous opportunity to leverage the assets, we already have in our system and it gives us confidence that we can accelerate growth without a significant capital outlay.

Kim Scott: This is a tremendous opportunity to leverage the assets, we already have in our system and it gives us confidence that we can accelerate growth without a significant capital outlay. In FY 2023 we successfully completed more than 20 last mile optimization events across our network in support of this initiative. We also organized our team for success in FY 2023, in support of our strategy, which has resulted in lowering operating costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 adjusted EBITA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management, or inventory reuse as we call it, which will reduce amortization cost on our garments overtime.

In FY2023 we successfully completed more than 20 last mile optimization events across our network in support of this initiative.

We also organized our team for success in FY2023 in support of our strategy, which has resulted in lowering operating cross costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 'twenty four as a standalone public company.

Kim Scott: We also organized our team for success in FY 2023, in support of our strategy, which has resulted in lowering operating costs across the company. This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 adjusted EBITA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management, or inventory reuse as we call it, which will reduce amortization cost on our garments overtime.

Kim Scott: We also organized our team for success in FY 2023, in support of our strategy, which has resulted in lowering operating costs across the company.

Kim Scott: This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 adjusted EBITA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management, or inventory reuse as we call it, which will reduce amortization cost on our garments overtime.

While maintaining our FY2023 adjusted EBITA margin level of approximately 14, 3%.

We are also progressing our efforts to improve the rigor applied against merchandise management or inventory reuse as we call it which will reduce the amortization cost on our garments overtime.

Kim Scott: Before I turn the call over to Rick I would be remiss, if I didn't touch on the incredible culture. We are building here at <unk>. Inspire to come to work every day surrounded by our exceptional teammates they were highly engaged to deliver against our plan. Who are committed to serving our customers with excellence and every interaction and who are embracing change while growing and advancing themselves. Each day as we teach them, new and better ways to do things across our business. I couldnt be more proud of this team and all of that we are accomplishing together blazing new trails that lead to growth and margin expansion, while building the best brand and uniting around our shared purpose as an organization. Looking ahead to 2024, we are well positioned to deliver healthy revenue growth and margin expansion bad on a normalized basis is already within the long term target range that we provided at analyst day. We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity and as Rick will share we will deliver healthy and stable cash flows that will allow us to delever, while continuing to invest in our business. I believe our opportunity ahead is significant and our pathway to value creation is clear I'll now turn things over to Rick before we take your questions. Thanks, Kim and good morning, everyone before we dive into fiscal 2023 results. Just a quick reminder of the accounting basis for our reporting.

Kim Scott: Before I turn the call over to Rick, I would be remiss, if I didn't touch on the incredible culture we are building here at Vestis. I'm so inspired to come to work every day, surrounded by our exceptional teammates who are highly engaged to deliver against our plan, who are committed to serving our customers with excellence in every interaction and who are embracing change while growing and advancing themselves each day as we teach them, new and better ways to do things across our business. I couldn't be more proud of this team and all of that we are accomplishing together, blazing new trails that lead to growth and market expansion, while building the Vestis brand and uniting around our shared purpose as an organization. Looking ahead to 2024, we are well positioned to deliver healthy revenue growth and margin expansion that, on a normalized basis, is already within the long term target range that we provided at analyst day. We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity and as Rick will share, we will deliver healthy and stable cash flows that will allow us to delever, while continuing to invest in our business. I believe our opportunity ahead is significant and our pathway to value creation is clear. I'll now turn things over to Rick before we take your questions.

Kim Scott: Before I turn the call over to Rick, I would be remiss, if I didn't touch on the incredible culture we are building here at Vestis.

Before I turn the call over to Rick I would be remiss, if I didn't touch on the incredible culture. We are building here at <unk>.

Kim Scott: I'm so inspired to come to work every day, surrounded by our exceptional teammates who are highly engaged to deliver against our plan, who are committed to serving our customers with excellence in every interaction and who are embracing change while growing and advancing themselves each day as we teach them, new and better ways to do things across our business. I couldn't be more proud of this team and all of that we are accomplishing together, blazing new trails that lead to growth and market expansion, while building the Vestis brand and uniting around our shared purpose as an organization. Looking ahead to 2024, we are well positioned to deliver healthy revenue growth and margin expansion that, on a normalized basis, is already within the long term target range that we provided at analyst day. We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity and as Rick will share, we will deliver healthy and stable cash flows that will allow us to delever, while continuing to invest in our business. I believe our opportunity ahead is significant and our pathway to value creation is clear. I'll now turn things over to Rick before we take your questions.

Inspire to come to work every day surrounded by our exceptional teammates they were highly engaged to deliver against our plan.

Who are committed to serving our customers with excellence and every interaction and who are embracing change while growing and advancing themselves. Each day as we teach them, new and better ways to do things across our business.

Kim Scott: I couldn't be more proud of this team and all of that we are accomplishing together, blazing new trails that lead to growth and market expansion, while building the Vestis brand and uniting around our shared purpose as an organization. Looking ahead to 2024, we are well positioned to deliver healthy revenue growth and margin expansion that, on a normalized basis, is already within the long term target range that we provided at analyst day. We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity and as Rick will share, we will deliver healthy and stable cash flows that will allow us to delever, while continuing to invest in our business. I believe our opportunity ahead is significant and our pathway to value creation is clear. I'll now turn things over to Rick before we take your questions.

I couldnt be more proud of this team and all of that we are accomplishing together blazing new trails that lead to growth and margin expansion, while building the best brand and uniting around our shared purpose as an organization.

Looking ahead to 2024, we are well positioned to deliver healthy revenue growth and margin expansion bad on a normalized basis is already within the long term target range that we provided at analyst day.

Kim Scott: We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity and as Rick will share, we will deliver healthy and stable cash flows that will allow us to delever, while continuing to invest in our business. I believe our opportunity ahead is significant and our pathway to value creation is clear. I'll now turn things over to Rick before we take your questions.

We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity and as Rick will share we will deliver healthy and stable cash flows that will allow us to delever, while continuing to invest in our business.

I believe our opportunity ahead is significant and our pathway to value creation is clear I'll now turn things over to Rick before we take your questions.

Kim Scott: I'll now turn things over to Rick before we take your questions.

Thanks, Kim and good morning, everyone before we dive into fiscal 2023 results. Just a quick reminder of the accounting basis for our reporting.

Kim Scott: Thanks, Kim and good morning, everyone before we dive into fiscal 2023 results. Just a quick reminder of the accounting basis for our reporting. Fiscal 'twenty, two and 'twenty three results are prepared on a carve out basis asbestos did not operate as an independent company. These results are different than the segment results reported by Aramark as they include certain allocation of Aramark corporate expenses additional accounting adjustments and previously eliminated revenue from services provided to earmark. The allocated cost do not fully reflect the additional costs associated with providing these services as an independent company and I'll come back to that when we look at the actual estimates of public costs in a moment. So with that level setting, let's move on to more details on fiscal 2023. Revenue for fiscal 'twenty, three was $2 8 billion up approximately 5% from fiscal 'twenty two.

Rick Dillon: Thanks, Kim and good morning everyone, before we dive into fiscal 2023 results, just a quick reminder of the accounting basis for our reporting. Fiscal 2022 and 2023 results are prepared on a carve out basis as Vestis did not operate as an independent company. These results are different than the segment results reported by Aramark, as they include certain allocation of Aramark corporate expenses, additional accounting adjustments, and previously eliminated revenue from services provided to Aramark. The allocated cost, do not fully reflect the additional costs associated with providing these services as an independent company and I'll come back to that when we look at the actual estimates of public costs in a moment.

Rick Dillon: Thanks, Kim and good morning everyone, before we dive into fiscal 2023 results, just a quick reminder of the accounting basis for our reporting.

Rick Dillon: Fiscal 2022 and 2023 results are prepared on a carve out basis as Vestis did not operate as an independent company. These results are different than the segment results reported by Aramark, as they include certain allocation of Aramark corporate expenses, additional accounting adjustments, and previously eliminated revenue from services provided to Aramark. The allocated cost, do not fully reflect the additional costs associated with providing these services as an independent company and I'll come back to that when we look at the actual estimates of public costs in a moment.

Fiscal 'twenty, two and 'twenty three results are prepared on a carve out basis asbestos did not operate as an independent company.

These results are different than the segment results reported by Aramark as they include certain allocation of Aramark corporate expenses additional accounting adjustments and previously eliminated revenue from services provided to earmark.

Rick Dillon: The allocated cost, do not fully reflect the additional costs associated with providing these services as an independent company and I'll come back to that when we look at the actual estimates of public costs in a moment. So with that level setting, let's move on to more details on fiscal 2023.

The allocated cost do not fully reflect the additional costs associated with providing these services as an independent company and I'll come back to that when we look at the actual estimates of public costs in a moment.

So with that level setting, let's move on to more details on fiscal 2023.

Rick Dillon: So with that level setting, let's move on to more details on fiscal 2023.

Revenue for fiscal 'twenty, three was $2 8 billion up approximately 5% from fiscal 'twenty two.

Kim Scott: Revenue for fiscal 'twenty, three was $2 8 billion up approximately 5% from fiscal 'twenty two. Workplace supplies were up approximately 9% year over year, while uniform revenue was essentially flat. Our results reflect our focus on expanding our relationships with existing customers and the strategic shift in our approach to new business. Both years include $26 million in revenue from a temporary energy fee that was implemented late in the second quarter of fiscal 'twenty two. <unk> through the end of the second quarter of fiscal 'twenty three. Currency negatively impacted growth by 60 basis points in the year. From a segment perspective U S sales were up five 2% and Canadian sales were up four 1% the. The mix of growth between uniforms and workplace supplies with consistent with our consolidated growth across both segments. Moving on to adjusted EBITDA for the year. Adjusted EBITDA was $404 million in fiscal 'twenty three. The increase of approximately 8% compared to the prior year. With the U S up approximately 9% and Canada down 13% the. The operating leverage from sales volume pricing actions and $15 million of structural cost reductions were partially offset by increases in cost of services and other SG&A expenses. Cost of services increased by 3% half of the increase is associated with higher merchandise amortization costs from increases in circulating inventory during fiscal 2022 to support demand recovery post COVID-19. The other half is attributable to increased labor and energy costs year over year. While energy costs remain elevated throughout the year. Did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million and structural costs associated with establishing the leadership team and corporate functions needed for a public company. From a segment perspective U S profitability was driven by operating leverage on revenue growth a favorable mix towards workplace supplies as well as momentum in our operating efficiency initiatives.

Rick Dillon: Revenue for fiscal 2023 was $2.8 billion, up approximately 5% from fiscal 2022. Workplace supplies were up approximately 9% year over year, while uniform revenue was essentially flat. Our results reflect our focus on expanding our relationships with existing customers and the strategic shift in our approach to new business. Both years include $26 million in revenue from a temporary energy fee that was implemented late in the second quarter of fiscal 2022 and continued through the end of the second quarter of fiscal 2023. Currency negatively impacted growth by 60 basis points in the year. From a segment perspective U.S. sales were up 5.2% and Canadian sales were up 4.1% the. The mix of growth between uniforms and workplace supplies was consistent with our consolidated growth across both segments. Moving on to adjusted EBITDA for the year. Adjusted EBITDA was $404 million in fiscal 2023, an increase of approximately 8% compared to the prior year, with the U.S. up approximately 9% and Canada down 13%. The operating leverage from sales volume, pricing actions and $15 million in structural cost reductions, were partially offset by increases in cost of services and other SG&A expenses. Cost of services increased by 3%, half of the increase is associated with higher merchandise amortization costs, from increases in circulating inventory during fiscal 2022, to support demand recovery post COVID. The other half is attributable to increased labor and energy costs year over year, while energy costs remain elevated throughout the year, we did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company.

Workplace supplies were up approximately 9% year over year, while uniform revenue was essentially flat.

Our results reflect our focus on expanding our relationships with existing customers and the strategic shift in our approach to new business.

Rick Dillon: Both years include $26 million in revenue from a temporary energy fee that was implemented late in the second quarter of fiscal 2022 and continued through the end of the second quarter of fiscal 2023. Currency negatively impacted growth by 60 basis points in the year. From a segment perspective U.S. sales were up 5.2% and Canadian sales were up 4.1% the. The mix of growth between uniforms and workplace supplies was consistent with our consolidated growth across both segments. Moving on to adjusted EBITDA for the year. Adjusted EBITDA was $404 million in fiscal 2023, an increase of approximately 8% compared to the prior year, with the U.S. up approximately 9% and Canada down 13%. The operating leverage from sales volume, pricing actions and $15 million in structural cost reductions, were partially offset by increases in cost of services and other SG&A expenses. Cost of services increased by 3%, half of the increase is associated with higher merchandise amortization costs, from increases in circulating inventory during fiscal 2022, to support demand recovery post COVID. The other half is attributable to increased labor and energy costs year over year, while energy costs remain elevated throughout the year, we did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company.

Both years include $26 million in revenue from a temporary energy fee that was implemented late in the second quarter of fiscal 'twenty two.

<unk> through the end of the second quarter of fiscal 'twenty three.

Currency negatively impacted growth by 60 basis points in the year.

From a segment perspective U S sales were up five 2% and Canadian sales were up four 1% the.

Rick Dillon: From a segment perspective U.S. sales were up 5.2% and Canadian sales were up 4.1% the. The mix of growth between uniforms and workplace supplies was consistent with our consolidated growth across both segments. Moving on to adjusted EBITDA for the year. Adjusted EBITDA was $404 million in fiscal 2023, an increase of approximately 8% compared to the prior year, with the U.S. up approximately 9% and Canada down 13%. The operating leverage from sales volume, pricing actions and $15 million in structural cost reductions, were partially offset by increases in cost of services and other SG&A expenses. Cost of services increased by 3%, half of the increase is associated with higher merchandise amortization costs, from increases in circulating inventory during fiscal 2022, to support demand recovery post COVID. The other half is attributable to increased labor and energy costs year over year, while energy costs remain elevated throughout the year, we did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company.

The mix of growth between uniforms and workplace supplies with consistent with our consolidated growth across both segments.

Moving on to adjusted EBITDA for the year.

Adjusted EBITDA was $404 million in fiscal 'twenty three.

Rick Dillon: Adjusted EBITDA was $404 million in fiscal 2023, an increase of approximately 8% compared to the prior year, with the U.S. up approximately 9% and Canada down 13%. The operating leverage from sales volume, pricing actions and $15 million in structural cost reductions, were partially offset by increases in cost of services and other SG&A expenses. Cost of services increased by 3%, half of the increase is associated with higher merchandise amortization costs, from increases in circulating inventory during fiscal 2022, to support demand recovery post COVID. The other half is attributable to increased labor and energy costs year over year, while energy costs remain elevated throughout the year, we did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company.

The increase of approximately 8% compared to the prior year.

With the U S up approximately 9% and Canada down 13% the.

The operating leverage from sales volume pricing actions and $15 million of structural cost reductions were partially offset by increases in cost of services and other SG&A expenses.

Rick Dillon: Cost of services increased by 3%, half of the increase is associated with higher merchandise amortization costs, from increases in circulating inventory during fiscal 2022, to support demand recovery post COVID. The other half is attributable to increased labor and energy costs year over year, while energy costs remain elevated throughout the year, we did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company.

Cost of services increased by 3% half of the increase is associated with higher merchandise amortization costs from increases in circulating inventory during fiscal 2022 to support demand recovery post COVID-19.

Rick Dillon: The other half is attributable to increased labor and energy costs year over year, while energy costs remain elevated throughout the year, we did see some moderation starting in the back half of the year. SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company.

The other half is attributable to increased labor and energy costs year over year.

While energy costs remain elevated throughout the year.

Did see some moderation starting in the back half of the year.

SG&A expense includes an incremental $12 million and structural costs associated with establishing the leadership team and corporate functions needed for a public company.

Kim Scott: From a segment perspective U S profitability was driven by operating leverage on revenue growth a favorable mix towards workplace supplies as well as momentum in our operating efficiency initiatives. The decline in profitability in Canada is attributable to prior year waves of Steve and a gain on a property sale that did not repeat in the current year. In addition investments in rental merchandise inventory to support corporate demand recovery more than offset the benefits from operating leverage on revenue growth pricing actions and the impact of operating efficiencies during the year. Overall, adjusted EBITDA margins expanded 42 basis points in fiscal 2023 to 14, 3% after absorbing $12 million and incremental public company costs. So, let's look closer at public company costs. As noted our results include the $12 million in permanent structural cost and we expect to incur an additional $15 million to $18 million in fiscal 'twenty four while completing the build out of our corporate structures and our IP infrastructure, that's inclusive of TSA cost as. As we are completing our separation activities during 'twenty four we will utilize the transition services agreement with Aramark to provide monthly grid support. To support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 'twenty four. So all in we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run rate will be about 20% to $25 million starting. And as we enter 2025 post TSA. Moving on to liquidity. We generated $257 million in cash from operations during fiscal 2003, an increase of approximately $24 million. The increase was primarily attributable to higher rental merchandize adds in the prior year as compared to the current year and lower year over year growth in receivables attributable to timing. Actual investment and in service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023. Additionally, we saw a use of cash for accounts payable during the year, driven primarily by timing of payables heading into the spin transaction.

Rick Dillon: From a segment perspective, U.S. profitability was driven by operating leverage on revenue growth, a favorable mix towards workplace supplies, as well as momentum in our operating efficiency initiatives. The decline in profitability in Canada is attributable to prior year (inaudible) and a gain on a property sale that did not repeat in the current year. In addition investments in rental merchandise inventory to support COVID demand recovery, more than offset the benefits from operating leverage on revenue growth, pricing actions and the impact of operating efficiencies during the year. Overall, adjusted EBITDA margins expanded 42 basis points in fiscal 2023 to 14.3%, after absorbing $12 million in incremental public company costs. So, let's look closer at public company costs. As noted, our results include the $12 million in permanent structural cost, and we expect to incur an additional $15 million to $18 million in fiscal 2024 while completing the build out of our corporate structures and our IP infrastructure, that's inclusive of TSA costs. As we are completing our separation activities during 2024, we will utilize the transition services agreement with Aramark to provide monthly grid support. This support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 2024. So all in, we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run-rate will be about $20 to $25 million starting as we enter 2025 post TSA. Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

From a segment perspective U S profitability was driven by operating leverage on revenue growth a favorable mix towards workplace supplies as well as momentum in our operating efficiency initiatives.

The decline in profitability in Canada is attributable to prior year waves of Steve and a gain on a property sale that did not repeat in the current year.

In addition investments in rental merchandise inventory to support corporate demand recovery more than offset the benefits from operating leverage on revenue growth pricing actions and the impact of operating efficiencies during the year.

Rick Dillon: In addition investments in rental merchandise inventory to support COVID demand recovery, more than offset the benefits from operating leverage on revenue growth, pricing actions and the impact of operating efficiencies during the year. Overall, adjusted EBITDA margins expanded 42 basis points in fiscal 2023 to 14.3%, after absorbing $12 million in incremental public company costs. So, let's look closer at public company costs. As noted, our results include the $12 million in permanent structural cost, and we expect to incur an additional $15 million to $18 million in fiscal 2024 while completing the build out of our corporate structures and our IP infrastructure, that's inclusive of TSA costs. As we are completing our separation activities during 2024, we will utilize the transition services agreement with Aramark to provide monthly grid support. This support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 2024. So all in, we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run-rate will be about $20 to $25 million starting as we enter 2025 post TSA. Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

Rick Dillon: Overall, adjusted EBITDA margins expanded 42 basis points in fiscal 2023 to 14.3%, after absorbing $12 million in incremental public company costs. So, let's look closer at public company costs. As noted, our results include the $12 million in permanent structural cost, and we expect to incur an additional $15 million to $18 million in fiscal 2024 while completing the build out of our corporate structures and our IP infrastructure, that's inclusive of TSA costs. As we are completing our separation activities during 2024, we will utilize the transition services agreement with Aramark to provide monthly grid support. This support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 2024. So all in, we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run-rate will be about $20 to $25 million starting as we enter 2025 post TSA. Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

Overall, adjusted EBITDA margins expanded 42 basis points in fiscal 2023 to 14, 3% after absorbing $12 million and incremental public company costs.

Rick Dillon: As noted, our results include the $12 million in permanent structural cost, and we expect to incur an additional $15 million to $18 million in fiscal 2024 while completing the build out of our corporate structures and our IP infrastructure, that's inclusive of TSA costs. As we are completing our separation activities during 2024, we will utilize the transition services agreement with Aramark to provide monthly grid support. This support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 2024. So all in, we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run-rate will be about $20 to $25 million starting as we enter 2025 post TSA. Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

So, let's look closer at public company costs.

As noted our results include the $12 million in permanent structural cost and we expect to incur an additional $15 million to $18 million in fiscal 'twenty four while completing the build out of our corporate structures and our IP infrastructure, that's inclusive of TSA cost as.

Rick Dillon: As we are completing our separation activities during 2024, we will utilize the transition services agreement with Aramark to provide monthly grid support. This support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 2024. So all in, we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run-rate will be about $20 to $25 million starting as we enter 2025 post TSA. Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

As we are completing our separation activities during 'twenty four we will utilize the transition services agreement with Aramark to provide monthly grid support.

To support will decline throughout the year as we stand up our own functions. There will however be some periods of overlap in costs, but we expect to be fully operational by the end of fiscal 'twenty four.

So all in we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run rate will be about 20% to $25 million starting.

Rick Dillon: So all in, we expect to see public company costs and TSA payments in the range of $27 million to $30 million for 2024, while our permanent structural cost run-rate will be about $20 to $25 million starting as we enter 2025 post TSA. Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

And as we enter 2025 post TSA.

Moving on to liquidity.

Rick Dillon: Moving on to liquidity, we generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandize adds in the prior year, as compared to the current year, and lower year over year growth in receivables attributable to timing. The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

We generated $257 million in cash from operations during fiscal 2003, an increase of approximately $24 million.

The increase was primarily attributable to higher rental merchandize adds in the prior year as compared to the current year and lower year over year growth in receivables attributable to timing.

Actual investment and in service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

Rick Dillon: The actual investment and in-service inventory, but the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023.

Kim Scott: Additionally, we saw a use of cash for accounts payable during the year, driven primarily by timing of payables heading into the spin transaction. Capex was 78 million for fiscal 'twenty, three up slightly from 2022, and just under 3% of our total revenue. Free cash flow was $190 million up $27 million from the prior year. We entered into a $1 8 billion credit agreement on September 29, as a part of the spin transaction. The facility includes a $300 million revolver and two term loans on the last day of fiscal 'twenty three just before the completion of the spin we drew on the the two term loans totaling $1 5 billion. $800 million maturing in two years and $700 million maturing in five years, the revolving credit facility was undrawn at the end of fiscal 'twenty three. We ended fiscal 'twenty, three with $36 million in cash on hand, and a net debt to EBITDA leverage ratio of 395 times Max. Maximum leverage under our credit facility is five five times dropping to four 5% in March of 2025, we continue to target an optimal leverage ratio of one five to two five by fiscal 'twenty six. We are mobilizing to refinance the two year loan in the second quarter of fiscal 'twenty four. We believe our available cash future cash generation from operations existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announce. Just earlier today. I will close with a few more details on our 2020 for guidance.

Rick Dillon: Additionally, we saw a use of cash for accounts payable during the year, driven primarily by timing of payables heading into the spin transaction. Capex was $78 million for fiscal 2023, up slightly from 2022, and just under 3% of our total revenue. Free cash flow was $190 million, up $27 million from the prior year. We entered into a $1.8 billion dollar credit agreement on September 29, as a part of the spin transaction. The facility includes a $300 million dollars revolver and two term loans. On the last day of fiscal 2023, just before the completion of the spin, we drew on the two term loans, totaling $1.5 billion, $800 million maturing in two years and $700 million maturing in five years, the revolving credit facility was undrawn as of the end of fiscal 2023. We ended fiscal 2023 with $36 million in cash on hand, and a net debt to EBITDA leverage ratio of 3.95 times. Maximum leverage under our credit facility is 5.2 times, dropping to 4.5% in March of 2025. We continue to target an optimal leverage ratio of 1.5 to 2.5 by fiscal 2026. We are mobilizing to refinance the two year loan in the second quarter of fiscal 2024. We believe our available cash, future cash generation from operations, existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy, reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announced earlier today.

Rick Dillon: Additionally, we saw a use of cash for accounts payable during the year, driven primarily by timing of payables heading into the spin transaction.

Additionally, we saw a use of cash for accounts payable during the year, driven primarily by timing of payables heading into the spin transaction.

Capex was 78 million for fiscal 'twenty, three up slightly from 2022, and just under 3% of our total revenue.

Rick Dillon: Capex was $78 million for fiscal 2023, up slightly from 2022, and just under 3% of our total revenue. Free cash flow was $190 million, up $27 million from the prior year.

Free cash flow was $190 million up $27 million from the prior year.

Rick Dillon: We entered into a $1.8 billion dollar credit agreement on September 29, as a part of the spin transaction. The facility includes a $300 million dollars revolver and two term loans. On the last day of fiscal 2023, just before the completion of the spin, we drew on the two term loans, totaling $1.5 billion, $800 million maturing in two years and $700 million maturing in five years, the revolving credit facility was undrawn as of the end of fiscal 2023. We ended fiscal 2023 with $36 million in cash on hand, and a net debt to EBITDA leverage ratio of 3.95 times. Maximum leverage under our credit facility is 5.2 times, dropping to 4.5% in March of 2025. We continue to target an optimal leverage ratio of 1.5 to 2.5 by fiscal 2026. We are mobilizing to refinance the two year loan in the second quarter of fiscal 2024. We believe our available cash, future cash generation from operations, existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy, reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announced earlier today.

Rick Dillon: We entered into a $1.8 billion dollar credit agreement on September 29, as a part of the spin transaction. The facility includes a $300 million dollars revolver and two term loans.

We entered into a $1 8 billion credit agreement on September 29, as a part of the spin transaction.

The facility includes a $300 million revolver and two term loans on the last day of fiscal 'twenty three just before the completion of the spin we drew on the the two term loans totaling $1 5 billion.

Rick Dillon: On the last day of fiscal 2023, just before the completion of the spin, we drew on the two term loans, totaling $1.5 billion, $800 million maturing in two years and $700 million maturing in five years, the revolving credit facility was undrawn as of the end of fiscal 2023. We ended fiscal 2023 with $36 million in cash on hand, and a net debt to EBITDA leverage ratio of 3.95 times. Maximum leverage under our credit facility is 5.2 times, dropping to 4.5% in March of 2025. We continue to target an optimal leverage ratio of 1.5 to 2.5 by fiscal 2026. We are mobilizing to refinance the two year loan in the second quarter of fiscal 2024. We believe our available cash, future cash generation from operations, existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy, reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announced earlier today.

$800 million maturing in two years and $700 million maturing in five years, the revolving credit facility was undrawn at the end of fiscal 'twenty three.

We ended fiscal 'twenty, three with $36 million in cash on hand, and a net debt to EBITDA leverage ratio of 395 times Max.

Rick Dillon: We ended fiscal 2023 with $36 million in cash on hand, and a net debt to EBITDA leverage ratio of 3.95 times. Maximum leverage under our credit facility is 5.2 times, dropping to 4.5% in March of 2025. We continue to target an optimal leverage ratio of 1.5 to 2.5 by fiscal 2026. We are mobilizing to refinance the two year loan in the second quarter of fiscal 2024. We believe our available cash, future cash generation from operations, existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy, reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announced earlier today.

Maximum leverage under our credit facility is five five times dropping to four 5% in March of 2025, we continue to target an optimal leverage ratio of one five to two five by fiscal 'twenty six.

We are mobilizing to refinance the two year loan in the second quarter of fiscal 'twenty four.

Rick Dillon: We are mobilizing to refinance the two year loan in the second quarter of fiscal 2024. We believe our available cash, future cash generation from operations, existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy, reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announced earlier today.

We believe our available cash future cash generation from operations existing credit facilities and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy reduce our leverage and return capital to shareholders in the form of a sustained quarterly dividend as announce.

Just earlier today.

Kim Scott: I will close with a few more details on our 2020 for guidance. As Kim noted, we expect revenues to grow between 4% and four 5%. When normalized for the $26 million impact of the temporary energy fee in 2023 or 'twenty four guidance represents a five to five 5% growth in revenue. Our adjusted EBITDA margin guidance. Saar being an incremental $15 million to $18 million or 50 to 60 basis points of incremental public company cost in 2000. 24. Depreciation and amortization expense is expected to be $130 million to $140 million interest expense is expected to be $115 million to $120 million. We expect capex will be approximately 3% of revenue and our effective tax rate will be approximately $26 million. We estimate we will spend $25 million in fiscal 'twenty four on one time spin related costs that are not included in our adjusted margin guidance. This includes approximately $15 million and costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next. Two years with an incremental $10 million of expenses expected in fiscal 'twenty five. Finally, we expect free cash flow conversion to be greater than or equal to 100% of net income to support the pay down of debt and our quarterly dividend.

Rick Dillon: I will close with a few more details on our 2024 guidance. As Kim noted, we expect revenues to grow between 4% and 4.5%. When normalized for the $26 million dollar impact of the temporary energy fee in 2023 our 2024 guidance represents a 5 to 5.5% growth in revenue. Our adjusted EBITDA margin guidance, is absorbing an incremental $15 million to $18 million or 50 to 60 basis points of incremental public company cost in 2024. Depreciation and amortization expense is expected to be $130 to $140 million dollars, interest expense is expected to be $115 million to $120 million. We expect capex will be approximately 3% of revenue and our effective tax rate will be approximately $26 million. We estimate we will spend $25 million in fiscal 2024 on one time spin related costs that are not included in our adjusted margin guidance. This includes approximately $15 million in costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next two years, with an incremental $10 million of expenses expected in fiscal 2025.

I will close with a few more details on our 2020 for guidance.

As Kim noted, we expect revenues to grow between 4% and four 5%.

When normalized for the $26 million impact of the temporary energy fee in 2023 or 'twenty four guidance represents a five to five 5% growth in revenue.

Rick Dillon: Our adjusted EBITDA margin guidance, is absorbing an incremental $15 million to $18 million or 50 to 60 basis points of incremental public company cost in 2024. Depreciation and amortization expense is expected to be $130 to $140 million dollars, interest expense is expected to be $115 million to $120 million. We expect capex will be approximately 3% of revenue and our effective tax rate will be approximately $26 million. We estimate we will spend $25 million in fiscal 2024 on one time spin related costs that are not included in our adjusted margin guidance. This includes approximately $15 million in costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next two years, with an incremental $10 million of expenses expected in fiscal 2025.

Our adjusted EBITDA margin guidance.

Saar being an incremental $15 million to $18 million or 50 to 60 basis points of incremental public company cost in 2000. 24.

24.

Depreciation and amortization expense is expected to be $130 million to $140 million interest expense is expected to be $115 million to $120 million. We expect capex will be approximately 3% of revenue and our effective tax rate will be approximately $26 million.

Rick Dillon: We expect capex will be approximately 3% of revenue and our effective tax rate will be approximately $26 million. We estimate we will spend $25 million in fiscal 2024 on one time spin related costs that are not included in our adjusted margin guidance. This includes approximately $15 million in costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next two years, with an incremental $10 million of expenses expected in fiscal 2025.

We estimate we will spend $25 million in fiscal 'twenty four on one time spin related costs that are not included in our adjusted margin guidance. This includes approximately $15 million and costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next.

Rick Dillon: This includes approximately $15 million in costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next two years, with an incremental $10 million of expenses expected in fiscal 2025.

Two years with an incremental $10 million of expenses expected in fiscal 'twenty five.

Kim Scott: Finally, we expect free cash flow conversion to be greater than or equal to 100% of net income to support the pay down of debt and our quarterly dividend. So that concludes our prepared remarks, operator, I will turn it back to you to open the lines for questions. The floor is now open for questions. At this time, if you ask a question or comment please press star one on your telephone keypad. If at any point your question answered you may remove yourself from the queue by pressing star Q. Again, we ask that you pick up your handset. Yes. Optimal sound quality. Our first question will come from Stephanie Miller with Jefferies.

Kim Scott: Finally, we expect free cash flow conversion to be greater than, or equal to 100% of net income to support the pay down of debt and our quarterly dividend. So that concludes our prepared remarks, operator, I will turn it back to you to open the lines for questions.

Finally, we expect free cash flow conversion to be greater than or equal to 100% of net income to support the pay down of debt and our quarterly dividend.

So that concludes our prepared remarks, operator, I will turn it back to you to open the lines for questions.

Operator: The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star Q. Again, we ask that you pick up your handset while posing your question to provide optimal sound quality. Our first question will come from Stephanie Moore with Jefferies.

The floor is now open for questions.

At this time, if you ask a question or comment please press star one on your telephone keypad.

If at any point your question answered you may remove yourself from the queue by pressing star Q.

Again, we ask that you pick up your handset.

Yes.

Optimal sound quality.

Our first question will come from Stephanie Miller with Jefferies.

Operator: Our first question will come from Stephanie Moore with Jefferies.

Stephanie Moore: Hi, Good morning, Thank you for the question. Hey, Stephanie good morning, good morning good. Good morning. Maybe just starting with the guidance for fiscal 2024. Incremental color that you provided. Wrapping up the fuel surcharge, but could you break out as you think about. The components of that organic growth guidance or the revenue growth guidance in terms of what you would expect roughly from cross. Cross sell new business won. I think you know that people are walking away from that customer in 2023. Both puts and takes would be helpful. Thanks.

Stephanie Moore: Hi, Good morning, Thank you for the question.

Hey, Stephanie good morning, good morning good.

Stephanie Moore: Hey, Stephanie good morning, good morning good. Good morning. Maybe just starting with the guidance for fiscal 2024. Incremental color that you provided. Wrapping up the fuel surcharge, but could you break out as you think about. The components of that organic growth guidance or the revenue growth guidance in terms of what you would expect roughly from cross. Cross sell new business won. I think you know that people are walking away from that customer in 2023. Both puts and takes would be helpful. Thanks.

Kim Scott: Hey, Stephanie good morning.

Stephanie Moore: good morning good. Good morning. Maybe just starting with the guidance for fiscal 2024. Incremental color that you provided. Wrapping up the fuel surcharge, but could you break out as you think about. The components of that organic growth guidance or the revenue growth guidance in terms of what you would expect roughly from cross. Cross sell new business won. I think you know that people are walking away from that customer in 2023. Both puts and takes would be helpful. Thanks.

Rick Dillon: Good morning.

Good morning.

Stephanie Moore: Good morning. Maybe just starting with the guidance for fiscal 2024. I appreciate the incremental color that you provided in terms of the lapping of the fuel surcharge. But could you kind of break out as you think about the components of that organic growth guidance, or the revenue growth guidance in terms of what you would expect roughly from pricing, cross sell, new business wins. As well as I think you noted you were walking away from that customer in 2023. So those puts and takes would be helpful. Thanks.

Maybe just starting with the guidance for fiscal 2024.

Incremental color that you provided.

Wrapping up the fuel surcharge, but could you break out as you think about.

The components of that organic growth guidance or the revenue growth guidance in terms of what you would expect roughly from cross.

Cross sell new business won.

I think you know that people are walking away from that customer in 2023.

Both puts and takes would be helpful. Thanks.

Okay.

Kim Scott: Thanks for the question Stephanie So we do expect a. Hey, Ben towards volume in FY 'twenty four as we talked about in analyst day. This is not at pricing based strategy growth strategy. Our aim here as we grow the business in FY 'twenty four and beyond really is to drive volume in the base through cross selling so we expect healthy growth coming from cross selling as part of our strategy around workplace supplies, we will take pricing appropriately. As we offset in things like inflation and we also take value based pricing as Rick referenced earlier as he was giving his discussion around the future for 'twenty four but we will also continue to protect and grow customers that as you noted we will also exit strategically at times customers that we will see some erosion in the base. At times as we exit some of these. Lower margin customers, while also growing new customers in our micro verticals, so it'll be a balance quite. Quite frankly of cross selling new business, and the micro verticals and modest pricing. Greg anything that you would add to that the. Waiting we're leaning towards the impact of cross selling so you see that same overweight workplace supplies versus uniforms yep. Got it that's helpful on that. A follow up to that question as we think about. Execute your strategy that you outlined at the analyst day, particularly.

Kim Scott: Thanks for the question Stephanie. So we do expect a bend towards volume in FY '24, as we talked about in analyst day. This is not at pricing based strategy, growth strategy. So our aim here as we grow the business in FY 2024 and beyond really is to drive volume in the base through cross selling, so we expect healthy growth coming from cross selling as part of our strategy around workplace supplies. We will take pricing appropriately, as we offset in things like inflation and we also take value-based pricing as Rick referenced earlier as he was giving his discussion around the future for 2024. But we will also continue to protect and grow customers, but as you noted, we will also exit strategically at times customers. So we'll see some erosion in the base at times as we exit some of these lower margin customers, while also growing new customers in our micro verticals. So it'll be a balance quite frankly of cross selling, new business in the micro verticals and modest pricing. Rick anything that you would add to that? the. Waiting we're leaning towards the impact of cross selling so you see that same overweight workplace supplies versus uniforms yep.

Kim Scott: Thanks for the question Stephanie. So we do expect a bend towards volume in FY '24, as we talked about in analyst day. This is not at pricing based strategy, growth strategy.

Hey, Ben towards volume in FY 'twenty four as we talked about in analyst day. This is not at pricing based strategy growth strategy.

Kim Scott: So our aim here as we grow the business in FY 2024 and beyond really is to drive volume in the base through cross selling, so we expect healthy growth coming from cross selling as part of our strategy around workplace supplies. We will take pricing appropriately, as we offset in things like inflation and we also take value-based pricing as Rick referenced earlier as he was giving his discussion around the future for 2024. But we will also continue to protect and grow customers, but as you noted, we will also exit strategically at times customers. So we'll see some erosion in the base at times as we exit some of these lower margin customers, while also growing new customers in our micro verticals. So it'll be a balance quite frankly of cross selling, new business in the micro verticals and modest pricing. Rick anything that you would add to that?

Our aim here as we grow the business in FY 'twenty four and beyond really is to drive volume in the base through cross selling so we expect healthy growth coming from cross selling as part of our strategy around workplace supplies, we will take pricing appropriately.

Kim Scott: We will take pricing appropriately, as we offset in things like inflation and we also take value-based pricing as Rick referenced earlier as he was giving his discussion around the future for 2024. But we will also continue to protect and grow customers, but as you noted, we will also exit strategically at times customers. So we'll see some erosion in the base at times as we exit some of these lower margin customers, while also growing new customers in our micro verticals. So it'll be a balance quite frankly of cross selling, new business in the micro verticals and modest pricing. Rick anything that you would add to that?

As we offset in things like inflation and we also take value based pricing as Rick referenced earlier as he was giving his discussion around the future for 'twenty four but we will also continue to protect and grow customers that as you noted we will also exit strategically at times customers that we will see some erosion in the base.

At times as we exit some of these.

Kim Scott: So we'll see some erosion in the base at times as we exit some of these lower margin customers, while also growing new customers in our micro verticals. So it'll be a balance quite frankly of cross selling, new business in the micro verticals and modest pricing. Rick anything that you would add to that?

Lower margin customers, while also growing new customers in our micro verticals, so it'll be a balance quite.

Quite frankly of cross selling new business, and the micro verticals and modest pricing.

Greg anything that you would add to that the.

Waiting we're leaning towards the impact of cross selling so you see that same overweight workplace supplies versus uniforms yep.

Rick Dillon: No, we're waiting, we're waiting towards the impact of cross selling, so you see that same overweight of workplace supplies versus uniforms.

Stephanie Moore: Got it, that's helpful and then, just to as a follow up to that question. As we think about you execute your strategy that you outlined at the analyst day, particularly with some of those micro verticals talked about. Should we expect to see the uniform business, maybe accelerate a bit versus what we saw in fiscal 2023. Clearly, this is making really nice progress on the workplace supply, but in uniforms, just a little bit lighter. Should we think about uniforms kind of stepping up a bit going forward, or kind of continued to be out shadowed by the workplace supply? thanks

Got it that's helpful on that.

A follow up to that question as we think about.

Execute your strategy that you outlined at the analyst day, particularly.

Michael vertical that you talked about.

Should be.

The uniform business, maybe accelerate a bit versus what we thought fiscal 2023.

Stephanie Moore: Clearly, this is making really nice progress on the workplace supply, but in uniforms, just a little bit lighter. Should we think about uniforms kind of stepping up a bit going forward, or kind of continued to be out shadowed by the workplace supply? thanks

Clearly, making really nice progress on the workplace supply.

Just a little bit lighter should we think about you don't Guam.

Going forward or.

It'll be out shadowed by the workplace.

Kim Scott: Yes, you should expect that he will continue to see momentum in workplace supplies, and a more muted uniforms number but that is also driven by some of these decisions that we're making to strategically exit some of our direct sale business, which will have an impact on the uniforms number. So just keep that in mind, we are definitely still growing our uniforms business, we're targeting those micro verticals as well as other verticals, and our sales team is actually, our sales team that is driving new business is actually quite productive and performing very well. We are just purposely, at times exiting some business and also overshadowing that with the workplace supplies. And so I would expect that you should see a muted uniforms growth rate again in FY '24 but that is a very purposeful decision to grow, very strategically under high quality verticals and exiting some underperforming business.

Kim Scott: So just keep that in mind, we are definitely still growing our uniforms business, we're targeting those micro verticals as well as other verticals, and our sales team is actually, our sales team that is driving new business is actually quite productive and performing very well. We are just purposely, at times exiting some business and also overshadowing that with the workplace supplies. And so I would expect that you should see a muted uniforms growth rate again in FY '24 but that is a very purposeful decision to grow, very strategically under high quality verticals and exiting some underperforming business.

Definitely still growing our uniforms business, we're targeting those micro verticals as well as other verticals and our sales team is actually our sales team that is driving new business is actually quite productive and performing very well. We are just purposely at times exiting some business and also overshadowing that with the workplace supplies and so I would expect.

Kim Scott: We are just purposely, at times exiting some business and also overshadowing that with the workplace supplies. And so I would expect that you should see a muted uniforms growth rate again in FY '24 but that is a very purposeful decision to grow, very strategically under high quality verticals and exiting some underperforming business.

You should see a muted uniforms growth rate again in FY 'twenty four but that is a very purposeful decision to grow very strategically under high quality verticals and exiting some underperforming business.

Stephanie Moore: Got it well thank you so much.

Thank you. Thank you.

Kim Scott: Thank you.

Rick Dillon: Thank you.

Operator: Our next question will come from Andy Wittmann with Baird.

Andy Wittma: Oh, great. Thanks for taking my question, good morning. I guess, I don't know, maybe you can comment on the size of the direct sale customer here, that's giving you the three basis points of margin, just so we can kind of have better context around the magnitude of that headwind.

Yes.

Maybe you can comment on the <unk>.

As a direct sale customer here.

What's giving you the three basis points of margin just so we can get that done.

It's around.

The magnitude of that headwind.

Kim Scott: Yeah, sure I'd be happy to, and Andy it's great great to hear from you, so thanks for joining us today. The customer that we're referring to is on an annualized basis about $26 million dollars in revenue. So it's a significant size customer for us, and we will see that customer transition out and so about half of that will hit the FY '24 year, and about half of that will hit in FY '25. So about $13 million in this year and $13 million in the year to come. And at the macro level, that'll have about a 222 basis point impact on the uniforms growth rate on a fully annualized basis, about 92 bps on our total consolidated Vestis revenue.

<unk> customer for us and we will see that customer transition out and about.

Kim Scott: So it's a significant size customer for us, and we will see that customer transition out and so about half of that will hit the FY '24 year, and about half of that will hit in FY '25. So about $13 million in this year and $13 million in the year to come. And at the macro level, that'll have about a 222 basis point impact on the uniforms growth rate on a fully annualized basis, about 92 bps on our total consolidated Vestis revenue.

About half of that will hit the FY 'twenty for ear and about half of that will hit in FY 'twenty five to about $13 million in this year and $13 million in the year to come.

At the macro level that'll have about 222 basis point impact on the uniforms growth rate on a fully annualized basis about 92 bps on.

Kim Scott: And at the macro level, that'll have about a 222 basis point impact on the uniforms growth rate on a fully annualized basis, about 92 bps on our total consolidated Vestis revenue.

Our total consolidated <unk> revenue.

Andy Wittman: Got it, that's very helpful. I was just wondering. Do you guys anticipate, as you get into reporting your own results as opposed to the carve out here, do you expect that you'll be giving an EPS measure in your guidance as well like in adjusted EPS measure or do you expect that, we're just going to work on GAAP for now and go that way?

Dissipate as you get into.

Reporting your own results as opposed to the carve out here do you expect that you'll be.

Giving.

On EPS measure in your guidance as well like in adjusted EPS measure measure or do you expect that it's going to work on that for now.

So that way yes.

Kim Scott: Yes, we absolutely will and I will let Rick provide some more color here in a moment, but we actually discussed that as we were preparing for our first earnings, and we made a decision, given that we adjust pun out not to report that in this particular full year results for FY '24 as we were still a part of Aramark. But we will in the future be discussing and sharing information related to EPS. Rick anything that you'd like to add there?

Kim Scott: But we will in the future be discussing and sharing information related to EPS. Rick anything that you'd like to add there?

Kim Scott: But we will in the future be discussing and sharing information related to EPS.

Chairing information related to EPS are Rick anything that you'd like to add there.

Kim Scott: Rick anything that you'd like to add there?

Rick Dillon: Yes. Fiscal '23. So we will report it for 2024, guard against quarter for '24. The 2023 numbers as Kim said, there were no shares outstanding. And so you'd be reporting an EPS on a pro forma number, so it's got to be very, not indicative, as I said about the carve out. On a go forward basis, we have a share count we'll note the dilution impact and we will start reporting the adjusted EPS for the quarter. To your point, Andy, you can of course get there with what we provided but you will see us reporting that.

Fiscal 'twenty three so we will reported 24 guard against quarter for 'twenty for the.

'twenty three numbers.

As Ken said there were no shares outstanding until you would be reporting a GPS on a pro forma number so it's got to be very not indicative as I said.

About the carve out on a go forward basis, we have a share count will note the dilution impact and we will start reporting.

Rick Dillon: On a go forward basis, we have a share count we'll note the dilution impact and we will start reporting the adjusted EPS for the quarter. To your point, Andy, you can of course get there with what we provided but you will see us reporting that.

The.

Adjusted EPS for the quarter to your point, Andy It could of course get there with what we provided but you will see us report that.

Andy Wittman: That makes a lot of sense. Presumably that adjusted EPS is on the same, includes the same adjusted, adjustments as the EBITDA, Im guessing and then. Okay. Okay And then, so then just to follow up on that here, just related to the free cash flow conversion here when you say greater than 100% of net income. In this context, however, you mean this in terms of GAAP net income is that correct?

Andy Wittman: That makes a lot of sense. Presumably that adjusted EPS is on the same, includes the same adjusted, adjustments as the EBITDA, Im guessing and then. Okay. Okay

Presumably that adjusted EPS is.

On the same includes the same adjusted adjustments as the EBITDA Im guessing and then.

Andy Wittman: And then, so then just to follow up on that here, just related to the free cash flow conversion here when you say greater than 100% of net income. In this context, however, you mean this in terms of GAAP net income is that correct?

Okay. Okay and then so then just to follow up on that here just related to the free cash flow conversion here when you say greater than 100% of net income in this context. However, you mean, that's in terms of GAAP net income is that correct.

Rick Dillon: Correct Okay.

Andrew J. Wittmann: Okay, so then I guess. Going back to my last question, there's a lot that you're doing to kind of move the margin profile, in a lot of different ways. As you look here, over the past three months or so, what are the kind of key initiatives, where you're really focused on today that your employees are feeling in terms of, how they're going to talk to the customers or changes that they are seeing in the route, or on the plant. What are the real things that today that you're working on?

Andrew J. Wittmann: Okay, so then I guess. Going back to my last question, there's a lot that you're doing to kind of move the margin profile, in a lot of different ways.

Okay. So then I guess.

Going back to my last question.

Yes.

There's a lot that you're doing.

To kind of.

Move the margin profile.

Andrew J. Wittmann: As you look here, over the past three months or so, what are the kind of key initiatives, where you're really focused on today that your employees are feeling in terms of, how they're going to talk to the customers or changes that they are seeing in the route, or on the plant. What are the real things that today that you're working on?

A lot of different ways as you look here over the past three months or so what are the kind of key initiatives, where you're really focused on today.

But your.

Your employees are feeling in terms of how theyre going to talking to the customers or changes that they are seeing in the route or on the plant what are the what are the real things that today that you're working on.

Kim Scott: Thanks for taking the I appreciate that question, so cross selling debase as a very attractive margin accretive activity. So we are hyper focused on growing share of wallet with existing customers and we've already incurred that fixed cost we already have route drivers serving them plan. Assets tied to those customer locations. So one of the single most important areas of focus that our whole team has rallied around is cross selling existing customers. So that we can capture share of wallet and leverage fixed assets and get that flow through on that revenue and I would say our team is fully mobilized as I mentioned when I was speaking earlier. We had selling activity on 96% of our routes. With you guys during analyst day that we were not less. Leveraging our fantastic frontline teammates to sell our customers to cross sell our customers when I joined the company a couple of years ago to be able to share now that we have 96% of our routes containing sales activity has tremendous momentum. And that does take the entire organization coming together, so service managers frontline teammates general managers out in market centers as well as sales teammates supporting them in marketing with collateral. So that is a full on team effort that everyone is mobilized around. The other really very large initiative that requires the whole company to move in the same direction is our building etcetera of logistics excellence. So this notion of rerouting customers and in conducting flow optimization across these market centers requires a tremendous amount of collaboration between facilities as we are reroute.

Kim Scott: Thanks Andy, I appreciate that question. So cross selling the base is a very attractive margin accretive activity. So we are hyper focused on growing share of wallet with existing customers, and we've already incurred that fixed cost, we already have route drivers serving them plants assets tied to those customer locations. So one of the single most important areas of focus that our whole team is rallied around, is cross selling existing customers, so that we can capture share of wallet and leverage fixed assets, and get that flow through on that revenue. And I would say our team is fully mobilized as I mentioned when I was speaking earlier, we had selling activity on 96% of our routes. I shared with you guys, during analyst day that we were not leveraging our fantastic frontline teammates, to sell our customers, to cross sell our customers when I joined the company a couple of years ago. So to be able to share now that we have 96% of our routes containing sales activity is tremendous momentum. And that does take the entire organization coming together, so service managers, frontline teammates, general managers out in market centers as well as sales teammates supporting them in marketing with collateral. So that is a full-on team effort that everyone is mobilized around.

Assets tied to those customer locations. So one of the single most important areas of focus that our whole team has rallied around is cross selling existing customers. So that we can capture share of wallet and leverage fixed assets and get that flow through on that revenue and I would say our team is fully mobilized as I mentioned when I was speaking earlier.

Kim Scott: So one of the single most important areas of focus that our whole team is rallied around, is cross selling existing customers, so that we can capture share of wallet and leverage fixed assets, and get that flow through on that revenue. And I would say our team is fully mobilized as I mentioned when I was speaking earlier, we had selling activity on 96% of our routes. I shared with you guys, during analyst day that we were not leveraging our fantastic frontline teammates, to sell our customers, to cross sell our customers when I joined the company a couple of years ago. So to be able to share now that we have 96% of our routes containing sales activity is tremendous momentum. And that does take the entire organization coming together, so service managers, frontline teammates, general managers out in market centers as well as sales teammates supporting them in marketing with collateral. So that is a full-on team effort that everyone is mobilized around.

We had selling activity on 96% of our routes.

With you guys during analyst day that we were not less.

Kim Scott: I shared with you guys, during analyst day that we were not leveraging our fantastic frontline teammates, to sell our customers, to cross sell our customers when I joined the company a couple of years ago. So to be able to share now that we have 96% of our routes containing sales activity is tremendous momentum. And that does take the entire organization coming together, so service managers, frontline teammates, general managers out in market centers as well as sales teammates supporting them in marketing with collateral. So that is a full-on team effort that everyone is mobilized around.

Leveraging our fantastic frontline teammates to sell our customers to cross sell our customers when I joined the company a couple of years ago to be able to share now that we have 96% of our routes containing sales activity has tremendous momentum.

And that does take the entire organization coming together, so service managers frontline teammates general managers out in market centers as well as sales teammates supporting them in marketing with collateral. So that is a full on team effort that everyone is mobilized around.

Kim Scott: And that does take the entire organization coming together, so service managers, frontline teammates, general managers out in market centers as well as sales teammates supporting them in marketing with collateral. So that is a full-on team effort that everyone is mobilized around.

The other really very large initiative that requires the whole company to move in the same direction is our building etcetera of logistics excellence. So this notion of rerouting customers and in conducting flow optimization across these market centers requires a tremendous amount of collaboration between facilities as we are reroute.

Kim Scott: The other really very large initiative that requires the whole company to move in the same direction is our building a center of logistics excellence. So this notion of re-routing customers and conducting flow optimization across these market centers, requires a tremendous amount of collaboration between facilities as we are re-routing customers. We're working very diligently to ensure that is a seamless and invisible process for the customer. And so it requires all hands on deck out in the field working together, not just to you remap it from a logistics perspective, using great technology and tools, but it is also a large change management undertaking that requires all of us to work together to get that done. And so if I had to really choose two key areas of focus for us, I would say it is cross selling workplace supplier to existing customers and leveraging those fixed assets and optimizing our network from a logistics perspective.

Kim Scott: We're working very diligently to ensure that is a seamless and invisible process for the customer. And so it requires all hands on deck out in the field working together, not just to you remap it from a logistics perspective, using great technology and tools, but it is also a large change management undertaking that requires all of us to work together to get that done. And so if I had to really choose two key areas of focus for us, I would say it is cross selling workplace supplier to existing customers and leveraging those fixed assets and optimizing our network from a logistics perspective.

The customers, we're working very diligently to ensure that as a seamless invisible process for the customer until it requires all hands on deck out in the field working together not just to you remap it from a logistics.

Perspective, using great technology and tools, but it is also a large change management undertaking that requires all of us to work together to get that done.

Kim Scott: And so if I had to really choose two key areas of focus for us, I would say it is cross selling workplace supplier to existing customers and leveraging those fixed assets and optimizing our network from a logistics perspective.

If I had to really achieve two key areas of focus for us I would say it is cross selling workplace supplier to existing customers and leveraging those fixed assets and optimizing our network from a logistics perspective.

Andrew J. Wittmann: Thank you very much.

Kim Scott: You bet. Thanks for your question.

Operator: Our next question will come from Andrew Steinerman with J P. Morgan.

Andrew Steinerman: Hi, Hi Andrew, How are you doing Andrew?Good good could you could you please comment on recent trends in AD. Net new client revenue retention.

Andrew Steinerman: Hi, Hi Andrew, How are you doing

Andrew Steinerman: Hi,

Kim Scott: Hi Andrew, How are you doing Andrew?

Our current ratio.

Andrew Steinerman: Andrew?Good good could you could you please comment on recent trends in AD. Net new client revenue retention.

Andrew Steinerman:

Andrew Steinerman: Andrew? Good good could you could you please comment on recent trends in AD. Net new client revenue retention.

Andrew Steinerman: Andrew?

Andrew Steinerman: Good good, could you please comment on recent trends in adstocks, net new and the client revenue retention.

Good good could you could you please comment on recent trends in AD.

Net new client revenue retention.

Kim Scott: Adstocks, net new and what was the last one?

Andrew Steinerman: Retention

Kim Scott: Got it. So obviously, we continue to focus on creating an amazing customer experience, and we talk a lot about some of the things that we're doing to enhance that experience. From training our frontline teammates and our territory managers with playbooks around how to do a great job taking care of the customer. To also providing our route drivers, our frontline teammates with tools to let them know when there is an opportunity to improve with the customer and then also there to launching our customer portal, which we're getting great feedback on. So we feel really good about the momentum around protecting and growing our customer base. We are seeing really really great feedback from our customers around these initiatives. Also we feel very very good about the establishment of our service excellence culture across the company. We also continue to deliver retention rates at or above 90% as we stated in our form 10. So we continue to emphasize that greatly.

So obviously, we continue to focus on creating an amazing customer experience and we talked a lot about <unk>.

One of the things that we're doing to enhance that experience from training our frontline teammates in our territory managers with playbooks around how to do a great job taking care of the customer.

<unk> also providing our route drivers our frontline teammates with tools to let them know when there is an opportunity to improve with the customer and then also there to launching our customer portal, which we're getting great feedback on so we feel really good about the momentum around protecting and growing our customer base. We are seeing really really great feedback from our <unk>.

Kim Scott: To also providing our route drivers, our frontline teammates with tools to let them know when there is an opportunity to improve with the customer and then also there to launching our customer portal, which we're getting great feedback on. So we feel really good about the momentum around protecting and growing our customer base. We are seeing really really great feedback from our customers around these initiatives. Also we feel very very good about the establishment of our service excellence culture across the company. We also continue to deliver retention rates at or above 90% as we stated in our form 10. So we continue to emphasize that greatly.

Kim Scott: We are seeing really really great feedback from our customers around these initiatives. Also we feel very very good about the establishment of our service excellence culture across the company. We also continue to deliver retention rates at or above 90% as we stated in our form 10. So we continue to emphasize that greatly.

Customers around these initiatives that said, we feel very very good about the establishment of our service excellence culture across the company. We also continue to deliver retention rates at or above 90% as we stated in our form 10. So we continue to emphasize that greatly.

Andrew Steinerman: And the adtocks and net new?

Kim Scott: Adstocks and Net new. We haven't given out those metrics specifically, but we obviously continue to add new business. We're pleased with the progress that we're seeing from our frontline sales team to do that, and we continue to see growth in our business. (inaudible)

Growth in our business.

We're not really having that question earlier.

Yeah.

Andrew Steinerman: Have adstocks held up?

<unk> add stops.

Rick Dillon: Have adstocks held up?

Kim Scott: Haven't had helped out this amendment, we don't actually use the metric of add staff and I think it's also important to note on your question around net new that we actually are communicating and we're shifting away from that net new metric that we were using at aramark as well because it doesn't reflect growth in our base and so that in the net new metric. The discrete metric around customers, who are with you and. Does that leave and are no longer customers and it does not reflect the growth in our base, which is our key focus area and so youre going to see a shift away from the conversation around that data and talking about that and thats right and youre going to hear us talk more about macro level growth. Includes cross selling and adding products and services to existing customers and thats not reflected in that net new number.

Kim Scott: The discrete metric around customers, who are with you and. Does that leave and are no longer customers and it does not reflect the growth in our base, which is our key focus area and so youre going to see a shift away from the conversation around that data and talking about that and thats right and youre going to hear us talk more about macro level growth. Includes cross selling and adding products and services to existing customers and thats not reflected in that net new number.

The discrete metric around customers, who are with you and.

Does that leave and are no longer customers and it does not reflect the growth in our base, which is our key focus area and so youre going to see a shift away from the conversation around that data and talking about that and thats right and youre going to hear us talk more about macro level growth.

Includes cross selling and adding products and services to existing customers and thats not reflected in that net new number.

Kim Scott: Includes cross selling and adding products and services to existing customers and thats not reflected in that net new number.

Andrew Steinerman: Okay.

Thank you.

Operator: Thank you. Our next question comes from Shlomo Rosenbaum with Stifel.

Comes from Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum: Hi, Good morning, Thank you for taking my questions. You've been focused a lot on the efforts to improve the cross sell and you talked about 96% of the routes are selling now. Where do you think you are in terms of making the shift in the culture to a more sales oriented culture and selling across the base. Do you think like you really humming along, do you think you are like 50% there, because it's a significant change from the way that the company had operated for literally decades. And maybe you could talk about, where you are now and how long do you think it would take to really be, you know kind of firing on all cylinders?

You've been focused a lot on the efforts to improve the cross sell and you talked about 96% of the routes are selling now.

Or do you think you are in terms of making the shift in the culture to a more sales oriented culture and selling across the base do you think like you really humming along do you think you are like 50% there because it's a significant change from the way that the company has operated for literally decades, and maybe you could talk about.

Shlomo Rosenbaum: Do you think like you really humming along, do you think you are like 50% there, because it's a significant change from the way that the company had operated for literally decades. And maybe you could talk about, where you are now and how long do you think it would take to really be, you know kind of firing on all cylinders?

You are now and how long do you think it would take to really be you know kind of firing on all cylinders.

Kim Scott: So I think we still have work to do, I am pleased with the way the team has embraced the, everyone sales culture and mindset that we're working to create Shlomo. But I think your question is a really important question that we are constantly focused on here, because it is a massive culture shift to move a company to a mindset of growth. And that is the opportunity that we found when we came here, when I joined a couple of years ago, it was very clear that that obsession with growth was not present in this organization. So I think that we've made great strides, as evidenced by 96% of our routes, adding sales activity and teammates beyond dedicated sales teammates helping to sell and grow our business, particularly harvesting the base and capturing share of wallet with existing customers. But I would tell you that I think that we have a long way to go, which is encouraging because we're seeing great results, well above our historical norms. You can see that reflected in our guidance as we're projecting 4% to 4.5% growth, when historically this business was growing at a meager 2% or so. And you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears. So I'm pleased with where we are but I think we can do so much better and so we continue to bring tools and resources and really encourage and arm the team with the right tools that they need to get out there and grow the business. So I would say, I don't want to gauge at 50%, but I'd say we are maybe halfway there, maybe honestly. And that excites me, so I don't say that as a criticism, I say that as we're doing a great job, I'm pleased with the progress and there is so much more yet to come. But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

Kim Scott: And that is the opportunity that we found when we came here, when I joined a couple of years ago, it was very clear that that obsession with growth was not present in this organization. So I think that we've made great strides, as evidenced by 96% of our routes, adding sales activity and teammates beyond dedicated sales teammates helping to sell and grow our business, particularly harvesting the base and capturing share of wallet with existing customers. But I would tell you that I think that we have a long way to go, which is encouraging because we're seeing great results, well above our historical norms. You can see that reflected in our guidance as we're projecting 4% to 4.5% growth, when historically this business was growing at a meager 2% or so. And you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears. So I'm pleased with where we are but I think we can do so much better and so we continue to bring tools and resources and really encourage and arm the team with the right tools that they need to get out there and grow the business. So I would say, I don't want to gauge at 50%, but I'd say we are maybe halfway there, maybe honestly. And that excites me, so I don't say that as a criticism, I say that as we're doing a great job, I'm pleased with the progress and there is so much more yet to come. But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

And that is the opportunity that we found when we came here to win a couple of years ago. It was very clear that that obsession with growth was not present in this organization. So I think that we've made great strides as evidenced by 96% of our routes, adding sales activity and teammates beyond dedicated sales teammates helping to sell into.

Kim Scott: So I think that we've made great strides, as evidenced by 96% of our routes, adding sales activity and teammates beyond dedicated sales teammates helping to sell and grow our business, particularly harvesting the base and capturing share of wallet with existing customers. But I would tell you that I think that we have a long way to go, which is encouraging because we're seeing great results, well above our historical norms. You can see that reflected in our guidance as we're projecting 4% to 4.5% growth, when historically this business was growing at a meager 2% or so. And you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears. So I'm pleased with where we are but I think we can do so much better and so we continue to bring tools and resources and really encourage and arm the team with the right tools that they need to get out there and grow the business. So I would say, I don't want to gauge at 50%, but I'd say we are maybe halfway there, maybe honestly. And that excites me, so I don't say that as a criticism, I say that as we're doing a great job, I'm pleased with the progress and there is so much more yet to come. But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

Our business, particularly harvesting the base and capturing share of wallet with existing customers, but I would tell you that I think that we have a long way to go which is encouraging because we're seeing great results well above our historical norms, you can see that reflected in our guidance as we're projecting 4% four 5% growth. When historically this business was growing at a meager 2%.

Kim Scott: But I would tell you that I think that we have a long way to go, which is encouraging because we're seeing great results, well above our historical norms. You can see that reflected in our guidance as we're projecting 4% to 4.5% growth, when historically this business was growing at a meager 2% or so. And you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears. So I'm pleased with where we are but I think we can do so much better and so we continue to bring tools and resources and really encourage and arm the team with the right tools that they need to get out there and grow the business. So I would say, I don't want to gauge at 50%, but I'd say we are maybe halfway there, maybe honestly. And that excites me, so I don't say that as a criticism, I say that as we're doing a great job, I'm pleased with the progress and there is so much more yet to come. But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

Kim Scott: And you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears. So I'm pleased with where we are but I think we can do so much better and so we continue to bring tools and resources and really encourage and arm the team with the right tools that they need to get out there and grow the business. So I would say, I don't want to gauge at 50%, but I'd say we are maybe halfway there, maybe honestly. And that excites me, so I don't say that as a criticism, I say that as we're doing a great job, I'm pleased with the progress and there is so much more yet to come. But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

Or so and you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears.

I'm pleased with where we are but I think we can do so much better and so we continue to bring tools and resources.

And really encourage an arm the team with the right tools that they need to get out there and grow the business. So I would say I don't want to gauge it at 50%, but I would say we are maybe halfway there maybe honestly and that excites me. So I don't see that as a criticism I would say that is we're doing a great job I'm pleased with the progress and there is so much more yet to come.

Kim Scott: So I would say, I don't want to gauge at 50%, but I'd say we are maybe halfway there, maybe honestly. And that excites me, so I don't say that as a criticism, I say that as we're doing a great job, I'm pleased with the progress and there is so much more yet to come. But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

But our teammates are responding well, they're excited they're proud to be a part of growing this business I think are recognizing now the latent potential that is untapped that hasnt been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

Kim Scott: But our teammates are responding well, they're excited, they're proud to be a part of growing this business, I think are recognizing now the latent potential that is untapped that hasn't been unleashed here and people are pretty fired up about bringing that to life. So more to come on the culture front.

Shlomo Rosenbaum: Great, thank you. And then maybe this one is for Rick, can you talk a little bit more about the sequential margin improvement? You know, obviously is a pretty good cadence over here and, can you talk about what changed from like June to September? and, is this going to be like a consistent going forward? Obviously I understand the TSA and the additional public company costs, but maybe you could talk about if there are some key items that drove that margin expansion? and then maybe if theres a few other ones that we should be looking towards for the next several quarters and over the year?

Obviously is a pretty good cadence over here and can you talk about what changed from June to September and.

Is this going to be like a consistent going forward, obviously I understand the TSA and the additional public company costs, but maybe you could talk about if there are some key items that drove margin expansion and then maybe if theres a few other ones that we should be looking towards for the next several quarters and over the year.

Shlomo Rosenbaum: Obviously I understand the TSA and the additional public company costs, but maybe you could talk about if there are some key items that drove that margin expansion? and then maybe if theres a few other ones that we should be looking towards for the next several quarters and over the year?

Rick Dillon: So from a quarterly progression, Q3 to Q4, there were quite a few moving pieces driving that activity. And so you have, in our fourth quarter, you have all types of things around benefits, around customer closeouts, around contest that kind of drive that Q4 increase in profitability. It is a normal cadence if you go back and look the last two, three years, we see that normal Q1, Q2, Q3, Q4 glide path, and so we expect to see that going forward, in terms to your question about how you should be thinking about it, we of course are guiding the quarters. We did include in the earnings release, the quarterly history, so you can go and take a look at that. But the movement from Q3 to Q4 reflects also the having a full quarter of our cost out actions reflected in our results as well.

Quarterly progression.

Q3 to Q4, there were quite a few moving pieces.

Driving that activity.

So you have in our fourth quarter, you have all types of things around benefits around.

Customer closeouts around content.

That kind of drive.

Rick Dillon: is a normal cadence if you go back and look the last two, three years, we see that normal Q1, Q2, Q3, Q4 glide path, and so we expect to see that going forward, in terms to your question about how you should be thinking about it, we of course are guiding the quarters. We did include in the earnings release, the quarterly history, so you can go and take a look at that. But the movement from Q3 to Q4 reflects also the having a full quarter of our cost out actions reflected in our results as well.

Q4.

Increase in profitability.

It is a normal cadence if you go back and look the last two three years, we see that normal.

Q1, Q2, Q3, Q4 glide path and so we expect to see that going forward in terms of your question.

About how you should be thinking about it we of course.

Rick Dillon: We did include in the earnings release, the quarterly history, so you can go and take a look at that. But the movement from Q3 to Q4 reflects also the having a full quarter of our cost out actions reflected in our results as well.

Guiding the quarters.

We did include in the earnings release, the quarterly history.

So you can go and take a look at back.

The movement from Q3 Q4 reflects also the having a full quarter of our cost out actions.

And reflected in our results as well.

Shlomo Rosenbaum: Great. Thank you.

Operator: Thank you. As a reminder, that is star one to ask a question. And our next question will come from Oliver Davis With Redburn Atlantic.

Operator: As a reminder, that is star one to ask a question. And our next question will come from. Oliver. With Blackberry.

And our next question will come from.

Oliver.

With Blackberry.

Oliver Davies: Yes, good morning, guys.

Kim Scott: Good morning.

Oliver Davis: Just one from me, on margin can you just talk about sort of the current cost inflation you're seeing, I guess across labor, materials and fleet and sort of how you see that evolving into 2024?

Kim Scott: Sure I'll start and then I'll kick it over to Rick for some more detail. But from a labor perspective, and we talked a little bit about this in the past, we actually have pretty good predictability around labor, because we have a unionized workforce and so the CBA negotiations, the collective bargaining agreement negotiations are very predictable for us. And we have history as a guide to determine where we think those negotiations will land and what that will equate to in terms of increased wages. And so we anticipate about 5% wage inflation across the five year period. 5% on an annualized basis across the five year period, as we as we look at our strategic plan. And thats actually fairly predictable for us and that has played through over the last couple of years. So that's what we're assuming in FY '24 as we put this guidance forward. We're seeing muted energy cost, I'll let Rick have a touch on that here in a bit, but we are seeing muted energy costs and generally a very predictable supply chain forecasting activity, because we're purchasing inventory in advance. And then we're issuing it over a period, as we grow new business and amortizing that over a couple of years. So we have pretty good forecasting capabilities and it relates to all of our key cost drivers in the business. We're not seeing anything surprising or unusual as we move through, kind of building out the FY '24 plan. Rick anything that you would want to add there?

Unionized workforce in say the CBA negotiations the collective bargaining agreement negotiations are very predictable for us and we have history as a guide to determine where we think those negotiations will land and what that will equate to in terms of increased wages and so we anticipate about 5% wage inflation across the five year period.

Kim Scott: And we have history as a guide to determine where we think those negotiations will land and what that will equate to in terms of increased wages. And so we anticipate about 5% wage inflation across the five year period. 5% on an annualized basis across the five year period, as we as we look at our strategic plan. And thats actually fairly predictable for us and that has played through over the last couple of years. So that's what we're assuming in FY '24 as we put this guidance forward. We're seeing muted energy cost, I'll let Rick have a touch on that here in a bit, but we are seeing muted energy costs and generally a very predictable supply chain forecasting activity, because we're purchasing inventory in advance. And then we're issuing it over a period, as we grow new business and amortizing that over a couple of years. So we have pretty good forecasting capabilities and it relates to all of our key cost drivers in the business. We're not seeing anything surprising or unusual as we move through, kind of building out the FY '24 plan. Rick anything that you would want to add there?

5% on an annualized basis across the five year period as we as we look at our strategic plan and Thats actually fairly predictable for us and that has played through over the last couple of years.

Kim Scott: And thats actually fairly predictable for us and that has played through over the last couple of years. So that's what we're assuming in FY '24 as we put this guidance forward. We're seeing muted energy cost, I'll let Rick have a touch on that here in a bit, but we are seeing muted energy costs and generally a very predictable supply chain forecasting activity, because we're purchasing inventory in advance. And then we're issuing it over a period, as we grow new business and amortizing that over a couple of years. So we have pretty good forecasting capabilities and it relates to all of our key cost drivers in the business. We're not seeing anything surprising or unusual as we move through, kind of building out the FY '24 plan. Rick anything that you would want to add there?

That's what we're assuming in FY 'twenty for us we put that guidance forward.

We're seeing muted energy cost I'll, let <unk> touch on that here in a bit, but we are seeing needed energy cost.

Generally a very predictable supply chain forecasting activity, because we're purchasing inventory in advance and then we're issuing handover.

Kim Scott: And then we're issuing it over a period, as we grow new business and amortizing that over a couple of years. So we have pretty good forecasting capabilities and it relates to all of our key cost drivers in the business. We're not seeing anything surprising or unusual as we move through, kind of building out the FY '24 plan. Rick anything that you would want to add there?

Period, as we grow new business and amortizing that over a couple of years. So we have pretty good forecasting capabilities as it relates to all of our key cost drivers in the business.

We're not seeing anything surprising or unusual as we move through kind of building out the FY 'twenty four plan a Rick anything that you would want to add there.

Rick Dillon: On the energy costs, as I noted we did see a moderation, that's moderation relative to 2022 which was kind of at some of the peak highs. So when you looked at our energy for 2023, we obviously saw high energy costs in the first half, we saw those costs year over year, kind of moderate in the back half. The view forward is a bit choppy and so in our guidance, we assumed we stay elevated, so kind of at that on average for 2023. And our position to take whatever actions, we need to, should we see, should we see another spike. So we haven't forecasted we continue to get better, which you saw us talking about, you see it actually in the Q4 result. But we kind of took that average cost and assumed we'd hold that line during the year. We monitor energy costs, on any given week the forward view is up or down depending on economic factors.

The moderation that's moderation relative to 2022.

What's kind of some of the peak high so when you looked at our energy.

For 2023.

We obviously saw high energy cost in the first half we saw those costs year over year kind of moderate in the back half.

The view forward is a bit choppy.

Rick Dillon: The view forward is a bit choppy and so in our guidance, we assumed we stay elevated, so kind of at that on average for 2023. And our position to take whatever actions, we need to, should we see, should we see another spike. So we haven't forecasted we continue to get better, which you saw us talking about, you see it actually in the Q4 result. But we kind of took that average cost and assumed we'd hold that line during the year. We monitor energy costs, on any given week the forward view is up or down depending on economic factors.

And so in our guidance, we assumed we stay elevated.

Kind of effect on average for 2023.

And our position to take whatever actions, we need to should we see should we see another spike so we havent forecast as we can.

Rick Dillon: So we haven't forecasted we continue to get better, which you saw us talking about, you see it actually in the Q4 result. But we kind of took that average cost and assumed we'd hold that line during the year. We monitor energy costs, on any given week the forward view is up or down depending on economic factors.

Do you get better, which you saw us talking about <unk> actually in the Q4 result.

But we kind of took.

Average cost of food.

<unk>.

Hold that line.

During the year.

We monitor energy costs.

On any given week the forward view of it.

Up or down depending on economic.

Economic factors.

Oliver Davis: Great. Thanks.

Operator: Thank you. Our next question comes from. With Mark. Please.

Kim Scott: Thank you.

Operator: Our next question comes from Manav Patnaik with Barclays.

Our next question comes from.

With Mark.

Please.

Nate Kennedy Barclays: Hi, Good morning this is Nate Kennedy on for Manav. Thank you for taking the questions. I guess as a follow up to that, on the assumptions for wage and energy inflation. How would you characterize the macro environment and the demand backdrop now, anything to call out demand-wise within your key verticals versus in terms of stronger or weaker demand? And then. Rick just touched on the expectations for energy etcetera, what are you assuming from a broader macro outlook standpoint for 2024?

Thank you for taking the questions I guess as a follow up to that.

On the assumptions for wage and energy inflation, how would you characterize the macro environment and the demand backdrop now anything to call out the man wise within your key verticals versus in terms of stronger or weaker demand.

Nate Kennedy Barclays: And then. Rick just touched on the expectations for energy etcetera, what are you assuming from a broader macro outlook standpoint for 2024?

And then.

Rick just touched on the expectations for energy et cetera, what are you assuming from a broader macro outlook standpoint for 'twenty four.

Kim Scott: So from a demand perspective, we've been very focused on cross selling existing customers in products and services that they are currently self serving for themselves today, for us there is plenty of demand that can be created. We are seeing in our retention numbers, as we look at customer trends, we are seeing some closures of business. We're seeing sale of businesses taking place in that business changing hands and that's held pretty stable, so nothing erratic to report there as it relates to kind of customer behavior. We're pretty well diversified as you guys know across many different end markets. So we feel pretty comfortable that we're insulated around any kind of one particular segment or industry that might be declining. And if we continue to harvest our share of wallet with existing customers, there is plenty of space here, regardless of what might be happening from a macro environment perspective. I mean, you guys will recall, I'm sure in analyst day, we sized this market out at a $48 billion dollar market across all of the products and services that we offer. So there is a lot of room to find places to grow, as were looking at various trends across the in sectors, so we feel pretty good about that from a macro perspective. We feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macro economic perspective related to these drivers, whether that be energy or labor or other supply chain costs related to our formats. We think we've got a good view of that so, we see a pretty steady path forward for us through FY '24 with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offsets any of the headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

In products and services that they are currently self serving for themselves today.

For us there is plenty of demand that can be created.

We are seeing in our retention numbers as we look at customer trends, we are seeing the closures that business.

Kim Scott: We're seeing sale of businesses taking place in that business changing hands and that's held pretty stable, so nothing erratic to report there as it relates to kind of customer behavior. We're pretty well diversified as you guys know across many different end markets. So we feel pretty comfortable that we're insulated around any kind of one particular segment or industry that might be declining. And if we continue to harvest our share of wallet with existing customers, there is plenty of space here, regardless of what might be happening from a macro environment perspective. I mean, you guys will recall, I'm sure in analyst day, we sized this market out at a $48 billion dollar market across all of the products and services that we offer. So there is a lot of room to find places to grow, as were looking at various trends across the in sectors, so we feel pretty good about that from a macro perspective. We feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macro economic perspective related to these drivers, whether that be energy or labor or other supply chain costs related to our formats. We think we've got a good view of that so, we see a pretty steady path forward for us through FY '24 with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offsets any of the headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

We're seeing sale of business is taking place in that business changing hands and that's held pretty stable. So nothing erratic to report there as it relates to kind of customer behavior, we're pretty well diversified as you guys know across many different end markets. So we feel pretty comfortable that we're insulated around any kind of one particular segment or industry that might be declining.

Kim Scott: So we feel pretty comfortable that we're insulated around any kind of one particular segment or industry that might be declining. And if we continue to harvest our share of wallet with existing customers, there is plenty of space here, regardless of what might be happening from a macro environment perspective. I mean, you guys will recall, I'm sure in analyst day, we sized this market out at a $48 billion dollar market across all of the products and services that we offer. So there is a lot of room to find places to grow, as were looking at various trends across the in sectors, so we feel pretty good about that from a macro perspective. We feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macro economic perspective related to these drivers, whether that be energy or labor or other supply chain costs related to our formats. We think we've got a good view of that so, we see a pretty steady path forward for us through FY '24 with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offsets any of the headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

And if we continue to harvest our share of wallet with existing customers. There is plenty of space here, regardless of what might be happening from a macro environment perspective, I mean, you guys will recall I'm sure in analyst day, we started this market out of $48 billion market across all of the products and services that we offer. So there is a lot of Ram.

Kim Scott: I mean, you guys will recall, I'm sure in analyst day, we sized this market out at a $48 billion dollar market across all of the products and services that we offer. So there is a lot of room to find places to grow, as were looking at various trends across the in sectors, so we feel pretty good about that from a macro perspective. We feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macro economic perspective related to these drivers, whether that be energy or labor or other supply chain costs related to our formats. We think we've got a good view of that so, we see a pretty steady path forward for us through FY '24 with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offsets any of the headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

To find places to grow as were looking at various trends across the in sectors that we feel pretty good about that from a macro perspective, we feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macro economic perspective related today's drivers whether that be energy.

Kim Scott: We feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macro economic perspective related to these drivers, whether that be energy or labor or other supply chain costs related to our formats. We think we've got a good view of that so, we see a pretty steady path forward for us through FY '24 with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offsets any of the headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

Our labor or other supply chain costs related to our formats. We think we've got a good view of that so we see a pretty steady path forward for us through FY 'twenty four with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans.

Kim Scott: We think we've got a good view of that so, we see a pretty steady path forward for us through FY '24 with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offsets any of the headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

Offsets any of the headwinds through good operational efficiency actions that we're taking.

And also we've demonstrated our ability to price as appropriate as we may see there is inflationary impact emerge Rick anything that you would add there.

Kim Scott: And also we've demonstrated our ability to price as appropriate, as we may see there is inflationary impact emerge Rick anything that you would add there?

Rick Dillon: I think I would just say we haven't assumed in the plan broadly a market downturn. We're certainly not the looming recession right. So all of the things that Kim described it's kind of how we would respond, we're not recession proof, but we do like our mix in that environment of workplace supply, we're less employee-centric, still actually more margin accretive. So we feel good about where we're positioned but we take all the necessary actions as Kim described to preserve profitability should that occur. I mean, we'll be agile and monitor closely what's happening in various end markets. Just our kind of targeted sales activity as it typically been flow where the demand exists.

Rick Dillon: I think I would just say we haven't assumed in the plan broadly a market downturn. We're certainly not the looming recession right.

We're certainly not the looming recession right.

Rick Dillon: So all of the things that Kim described it's kind of how we would respond, we're not recession proof, but we do like our mix in that environment of workplace supply, we're less employee-centric, still actually more margin accretive. So we feel good about where we're positioned but we take all the necessary actions as Kim described to preserve profitability should that occur.

So all of those.

Things that Kim described kind of how we would respond we're not recession proof, but we do like our mix that environment of workplace five or less employee centric.

Still actually more margin accretive so.

Rick Dillon: So we feel good about where we're positioned but we take all the necessary actions as Kim described to preserve profitability should that occur.

So we feel good about where we're positioned but we take all the necessary actions as Kevin described.

Preserve profitability should that occur.

Kim Scott: Yeah, I mean we'll be agile and monitor closely what's happening in various end markets and adjust our kind of targeted sales activity to move and flow where the demand exists.

I mean, we'll be agile and monitor closely what's happening in various end markets.

Just our kind of targeted sales activity as it typically been flow where the demand exists.

Nate Kennedy Barclays: That's very helpful thank you, and then if I may as a follow up. Can you just reconfirm with regards to the progression through the targeted margin expansion up to '28. How we should think about that kind of sequentially year to year? And the Key contributors if it initially will be leveraging that sales growth until you start to see more benefits from the field and the workforce optimization or the operating efficiencies etcetera.

Nate Kennedy Barclays: That's very helpful thank you, and then if I may as a follow up. Can you just reconfirm with regards to the progression through the targeted margin expansion up to '28.

Nate Kennedy Barclays: How we should think about that kind of sequentially year to year? And the Key contributors if it initially will be leveraging that sales growth until you start to see more benefits from the field and the workforce optimization or the operating efficiencies etcetera.

How we should think about that kind of sequentially year to year.

Key contributors initially it will be leveraging that sales growth until you start to see more benefits from the field and the workforce optimization or the operating efficiencies et cetera.

Kim Scott: Yes, so you know as we've talked about before we didn't build this thing as a hockey stick, so there's no massive kind of betting on the comment about two years and assuming that we're going to generate 500 bps of margin in two years. This is a slow and steady wins the race face hit game for us. In FY '24 which is really the first year of our five year plan that we've articulated to the market. As I mentioned earlier, we are ingesting our public company costs, and we're ingesting that very effectively, and we plan for that so we're really pleased to see that we are going to at a minimum hold the line on margin from FY 2023 through FY '24, while absorbing those PubCo costs. But what you'll also see is there are some really good strong underlying performance taking place here with 50 to 60 basis points of margin expansion happening to the underlying business and we're using that to offset the ingestion of that PubCo costs. But if you look at what's happening you can definitely see margin, margin cutting through and you can see operating leverage emerging in the business, as we are taking advantage of cross selling the customer base and leveraging fixed asset. And so we are getting flow through on that revenue, that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about. All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY '28 margin are moving now. So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

We as we've talked about before we didn't build this thing as a hockey stick. So there's no massive kind of betting on the comment about two years and assuming that we're going to generate. 500 bps of margin in two years. This is a slow and steady wins the race face hit game for us. In FY 'twenty, four which is really the first year of our five year plan that we've articulated to the market as I mentioned earlier, we are adjusting our public company costs and we're ingesting that very effectively and we plan for that so we're really pleased to see that we are going to at a minimum hold the line on margin from FY2023 through App. Slide 24, while absorbing those pubco cost, but what you'll also see is there are some really good strong underlying performance taking place here with 50 to 60 basis points of margin expansion happening to the underlying business and we're using that to offset the ingestion of that pepco call, but if you look at what's happening you can definitely see margin margin cutting. And you can see operating leverage emerging in the business as we are taking advantage of cross selling the customer base and leveraging fixed asset and say we are getting flow through on that revenue that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about. All of these things are in motion, so theres not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan all of the initiatives required to get to that FY 'twenty margin are leaving now that we are optimizing flows we are cross selling the customer and it just gets stronger and stronger as we add revenue. Average stopped we just continue to leverage this fixed assets and get the flow through so. You should think about this as a very slow and steady wins the race bank banked hit game and Youre going to continue to see US just turning away in these initiatives and the margin is going to continue to flow in operating leverage will continue to open I'd say youll see again, it's needed in 'twenty four purposely because we're ingesting that type of a cough up at the underlying performance there and Youll see. That just continue to move through 2008.

500 bps of margin in two years. This is a slow and steady wins the race face hit game for us.

In FY 'twenty, four which is really the first year of our five year plan that we've articulated to the market as I mentioned earlier, we are adjusting our public company costs and we're ingesting that very effectively and we plan for that so we're really pleased to see that we are going to at a minimum hold the line on margin from FY2023 through App.

Kim Scott: In FY '24 which is really the first year of our five year plan that we've articulated to the market. As I mentioned earlier, we are ingesting our public company costs, and we're ingesting that very effectively, and we plan for that so we're really pleased to see that we are going to at a minimum hold the line on margin from FY 2023 through FY '24, while absorbing those PubCo costs. But what you'll also see is there are some really good strong underlying performance taking place here with 50 to 60 basis points of margin expansion happening to the underlying business and we're using that to offset the ingestion of that PubCo costs. But if you look at what's happening you can definitely see margin, margin cutting through and you can see operating leverage emerging in the business, as we are taking advantage of cross selling the customer base and leveraging fixed asset. And so we are getting flow through on that revenue, that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about. All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY '28 margin are moving now. So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

Slide 24, while absorbing those pubco cost, but what you'll also see is there are some really good strong underlying performance taking place here with 50 to 60 basis points of margin expansion happening to the underlying business and we're using that to offset the ingestion of that pepco call, but if you look at what's happening you can definitely see margin margin cutting.

Kim Scott: But what you'll also see is there are some really good strong underlying performance taking place here with 50 to 60 basis points of margin expansion happening to the underlying business and we're using that to offset the ingestion of that PubCo costs. But if you look at what's happening you can definitely see margin, margin cutting through and you can see operating leverage emerging in the business, as we are taking advantage of cross selling the customer base and leveraging fixed asset. And so we are getting flow through on that revenue, that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about. All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY '28 margin are moving now. So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

Kim Scott: But if you look at what's happening you can definitely see margin, margin cutting through and you can see operating leverage emerging in the business, as we are taking advantage of cross selling the customer base and leveraging fixed asset. And so we are getting flow through on that revenue, that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about. All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY '28 margin are moving now. So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

And you can see operating leverage emerging in the business as we are taking advantage of cross selling the customer base and leveraging fixed asset and say we are getting flow through on that revenue that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about.

Kim Scott: And so we are getting flow through on that revenue, that revenue is creating margin expansion and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about. All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY '28 margin are moving now. So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

Kim Scott: All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY '28 margin are moving now. So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

All of these things are in motion, so theres not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan all of the initiatives required to get to that FY 'twenty margin are leaving now that we are optimizing flows we are cross selling the customer and it just gets stronger and stronger as we add revenue.

Kim Scott: So we are optimizing flows, we are cross selling the customer and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage this fixed assets and get the flow through. So you should think about this as a very, slow and steady wins the race base hit game. And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

Average stopped we just continue to leverage this fixed assets and get the flow through so.

You should think about this as a very slow and steady wins the race bank banked hit game and Youre going to continue to see US just turning away in these initiatives and the margin is going to continue to flow in operating leverage will continue to open I'd say youll see again, it's needed in 'twenty four purposely because we're ingesting that type of a cough up at the underlying performance there and Youll see.

Kim Scott: And Your'e going to continue to see us just turning away in these initiatives and the margin is going to continue to flow and operating leverage will continue to open. And so you'll see again, it's needed in 2024 purposely, because we're ingesting the pubco costs at the underlying performance there and You'll see that just continue to move through 2028.

That just continue to move through 2008.

Nate Kennedy Barclays: Thank you very much appreciate it.

Kim Scott: Thank you for your question.

Operator: Our last question will come from Scott Schneeberger with Oppenheimer.

Daniel for Scott Schneeberger.: Hi, Good morning, it's Daniel on for Scott, thank you for letting us ask a question here. Just a quick one on the trends you've been seeing in small to medium sized enterprises versus national account. If you could please discuss recent trends there and how you see that develop into next year. Thank you.

Just a quick one on the trends you've been seeing in small to medium sized enterprises national account. If you could please discuss recent trends Darren how are you.

You see that.

Develop into next year. Thank you.

Thanks for your question Scott, It's good to hear from you. We're very focused on both groupings of customers as we've talked about earlier, they both add great values. Our national account customers can really form the backbone of your supply chain and create density, so we got a team out there hunting and harvesting national account customers and those customers, as you note stayed more than 20 years with us, so they're very valuable customers and the lifetime value is great. But we also know small to medium enterprise customers are very margin accretive, and there's great propensity to cross sell the base once you bring those customers into your house. And so we continue to focus very heavily on the experience, in creating an outstanding customer experience with those SME customers. So that we can not only retain them, but we can cross sell the base. We are analyzing recent costs when we're losing customers in that segment in the small to medium enterprise segment. We typically get that data through our inbound call-center, and we're able to tie recent coach to that. I would say trends in the SME space about a quarter of those inbound calls when we're losing customers on the SME side of the business are tied to business closures or they're tied to business sales. And so I find that to be an interesting trend that we're observing and continuing to monitor, as we are seeing transitions taking place with SME businesses. But some of that is related to selling the business, not closing the business and so we're able to bring those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise I would say the trend is great, the SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

Thanks for your question Scott, It's good to hear from you. We're very focused on both groupings of customers as we've talked about earlier, they both add great values.

We're very focused on both groupings of customers as we've talked about earlier at great values.

Our national account customers can really form the backbone of your supply chain and create density, so we got a team out there hunting and harvesting national account customers and those customers, as you note stayed more than 20 years with us, so they're very valuable customers and the lifetime value is great. But we also know small to medium enterprise customers are very margin accretive, and there's great propensity to cross sell the base once you bring those customers into your house. And so we continue to focus very heavily on the experience, in creating an outstanding customer experience with those SME customers. So that we can not only retain them, but we can cross sell the base. We are analyzing recent costs when we're losing customers in that segment in the small to medium enterprise segment. We typically get that data through our inbound call-center, and we're able to tie recent coach to that. I would say trends in the SME space about a quarter of those inbound calls when we're losing customers on the SME side of the business are tied to business closures or they're tied to business sales. And so I find that to be an interesting trend that we're observing and continuing to monitor, as we are seeing transitions taking place with SME businesses. But some of that is related to selling the business, not closing the business and so we're able to bring those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise I would say the trend is great, the SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

Our national account customers can really form the backbone of your supply chain and create density that we got a team out there hunting and harvesting national account customers and those customers. As you noted it stayed more than 20 years with us so they're very valuable customers in the lifetime value is great.

But we also know small to medium enterprise customers are very margin accretive, and there's great propensity to cross sell the base once you bring those customers into your house. And so we continue to focus very heavily on the experience, in creating an outstanding customer experience with those SME customers. So that we can not only retain them, but we can cross sell the base. We are analyzing recent costs when we're losing customers in that segment in the small to medium enterprise segment. We typically get that data through our inbound call-center, and we're able to tie recent coach to that. I would say trends in the SME space about a quarter of those inbound calls when we're losing customers on the SME side of the business are tied to business closures or they're tied to business sales. And so I find that to be an interesting trend that we're observing and continuing to monitor, as we are seeing transitions taking place with SME businesses. But some of that is related to selling the business, not closing the business and so we're able to bring those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise I would say the trend is great, the SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

But we also have noticed small to medium enterprise customers are very margin accretive and there's great propensity to cross sell the base. Once you bring those customers into your house and so we continue to focus very heavily on the experience in creating an outstanding customer experience with those SME customers. So that we can not only retain them, but we can cross sell debate.

So that we can not only retain them, but we can cross sell the base. We are analyzing recent costs when we're losing customers in that segment in the small to medium enterprise segment. We typically get that data through our inbound call-center, and we're able to tie recent coach to that. I would say trends in the SME space about a quarter of those inbound calls when we're losing customers on the SME side of the business are tied to business closures or they're tied to business sales. And so I find that to be an interesting trend that we're observing and continuing to monitor, as we are seeing transitions taking place with SME businesses. But some of that is related to selling the business, not closing the business and so we're able to bring those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise I would say the trend is great, the SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

We are analyzing recent codes when we're losing customers in that segment in the small to medium enterprise segment.

Typically get that data through our inbound call center, and we're able to tie everything coach to that I would say trends in the SME space about a quarter.

I would say trends in the SME space about a quarter of those inbound calls when we're losing customers on the SME side of the business are tied to business closures or they're tied to business sales. And so I find that to be an interesting trend that we're observing and continuing to monitor, as we are seeing transitions taking place with SME businesses. But some of that is related to selling the business, not closing the business and so we're able to bring those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise I would say the trend is great, the SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

<unk> calls when we're losing customers on the SME side of the business are tied to business closures are there tied to new business sales.

By that to be an interesting trend that we're observing and continuing to monitor as we are seeing transition taking place with SME businesses, but some of that is related to selling the business not closing the business is that we're able to read that customers and retain them, but it's an interesting trend that we're keeping an eye on otherwise I would say the trend is great SME.

But some of that is related to selling the business, not closing the business and so we're able to bring those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise I would say the trend is great, the SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

Tumors are very open to outsourcing additional workplace deposits that we are seeing a tremendous response as were our cross selling the existing customer base. We are seeing a tremendous response.

And so we are seeing a tremendous response as we're out cross selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

Of our outsourcing related to these workplace supplies and services that we're very actively focused on I'd say, there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

And so there's a real willingness to give that up and allow others to do that so that our customers can take care of their core business and focus on what matters most to them.

Daniel for Scott Shneeberger: Thank you.

Kim Scott: You bet. Thanks for your question.

Operator: This concludes the Q&A portion of today's call. I would now like to turn the floor over to KIM Scott, President and CEO for closing remarks.

Kim Scott: So thank you for joining our call today and for your interest in Vestis. We're really pleased with our FY 2023 performance and the great progress that we're making against our strategic plan. As an opportunity for us are tremendous as we move forward and our future remains bright so thank you for joining us today.

Operator: Thank you. This concludes today's Vestis Corporation fiscal fourth quarter and full year 2023 earnings conference call. Please disconnect your lines at this time have a wonderful day.

Please disconnect. Your line at this time have a wonderful day.

Operator: At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Valerie Haertel, Vice President of Investor Relations.

Valerie Haertel: Thank you, Chelsea, and good morning, everyone. We appreciate your participation in Vestis Corporation's Fourth Quarter and Fiscal 2023 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 IR section of the vestis.com website. Access to the replay and materials related to today's discussion are also available on the Investor Relations website. Before we begin, I would like to remind you that this call may contain forward-looking statements, and as such, as within the Private Securities Litigation Reform Act of 1995. These, these include remarks about management's future expectations, beliefs, estimates, plans, and prospects.

Valerie Haertel: 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 U.S. Securities and Exchange Commission. We do not undertake any duty to update them. With that, I would like to turn the call over to Kent.

Kim Scott: Thank you, Valerie. Good morning, and thank you for joining Vestis' first earnings call as a standalone public company. We completed our spin-off from Aramark on 30 September, an achievement that was only made possible thanks to the hard work of our 20,000 dedicated teammates. I'd like to thank the Vestis nation for their unwavering commitment to our customers and to each other as we work together to deliver this tremendous outcome. Every day, our outstanding teammates bring our purpose to life inside the company, delivering uniforms and supplies that empower people to do good work and good things for others while at work. We are doing important work, work that makes a positive difference in the lives of so many. Turning now to our Vestis results.

Kim Scott: We delivered strong financial performance in 2023, with revenue growth of 5% and an Adjusted EBITDA margin of 14.3%, an increase of more than 40 basis points. As Rick will touch on in more detail in a moment, we delivered this growth and margin expansion as a result of strong performance against our strategic initiatives that are focused on high-quality growth and efficient operations. We saw continued positive performance trends throughout the year, and we have entered 2024 with great momentum as our strategic plan gains traction and operating leverage begins to emerge. We are pleased to share our outlook for fiscal year 2024, a revenue growth rate of 4% to 4.5%, which is well above our historical norms of approximately 2%.

Kim Scott: And we will deliver 50 to 60 basis points of EBITDA margin expansion, which will be offset by the introduction of $15 to 18 million in public company costs in the period. As a result, we will maintain our FY 2023 EBITDA margin at 14.3% while absorbing these go-forward public company costs. Throughout 2023, we continued to establish a strong foundation for profitable growth through the advancement of our strategic initiatives that we outlined at the Vestis Analyst Day back in September. As a reminder, our strategic imperatives include the delivery of high-quality growth, efficient operations, disciplined capital allocation, and a performance-driven culture. We are pleased with the progress we are making against these imperatives. Our top-line results reflect our strategy to grow with existing customers through cross-selling workplace supplies.

Kim Scott: As you can see in our results, we delivered 9% growth across workplace supplies in 2023. We are grateful to our frontline route service representatives for the work they are doing to support our growth and provide these value-added services and products to our customers, with sales activity taking place across 96% of our routes in 2023. This focus on capturing share of wallet with existing customers and driving up the revenue per stop at a customer location contributes to a higher flow through on revenue, aiding in our delivery of margin expansion. We will continue to deliver top-line growth while also improving our revenue mix. To that end, we will exit a relationship with a large direct sale customer in FY 2024 and through FY 2025, improving our consolidated margin by approximately three basis points on a fully annualized basis.

Kim Scott: We will continue to focus our energy and our resources on high-quality growth, including our key Micro Verticals targets we discussed in September at Analyst Day, and we remain focused on optimizing our revenue mix to support density and operating leverage across our network. Our focus on efficient operations has contributed to our margin expansion, and it is establishing the foundation for a more disciplined and modernized operating environment that will serve us well in the years ahead. Our team has activated our plan to optimize our network, to reduce empty miles and lower fuel costs, simply by serving the right customers from the single most efficient location.

Kim Scott: This will also allow us to leverage latent capacity at our existing locations, and taken together, we believe we have $30 to 50 million of potential cost savings or redeployable capacity that will be unlocked across our system over the next five years. This is a tremendous opportunity to leverage the assets we already have in our system, and it gives us confidence that we can accelerate growth without a significant capital outlay. In FY 2023, we successfully completed more than 20 last mile optimization events across our network in support of this initiative. We also organized our team for success in FY 2023 in support of our strategy, which has resulted in lowering operating costs across the company.

Kim Scott: This proactive initiative has prepared us well to ingest the incoming public company costs as we enter FY 2024 as a standalone public company, while maintaining our FY 2023 Adjusted EBITDA margin level of approximately 14.3%. We are also progressing our efforts to improve the rigor applied against merchandise management or inventory reuse, as we call it, which will reduce the amortization costs on our garments over time. Before I turn the call over to Rick, I would be remiss if I didn't touch on the incredible culture we are building here at Vestis.

Kim Scott: We will continue to advance our strategic initiatives to drive high quality growth and enhance our operational productivity. As Rick will share, we will deliver healthy and stable cash flows that will allow us to delever while continuing to invest in our business. I believe our opportunity ahead is significant and our pathway to value creation is clear. I'll now turn things over to Rick before we take your questions.

Rick Dillon: Thanks, Kim, and good morning, everyone. Before we dive into fiscal 2023 results, just a quick reminder of the accounting basis for our reporting. Fiscal 2022 and 2023 results are prepared on a carve-out basis, as Vestis did not operate as an independent company. These results are different than the segment results reported by Aramark, as they include certain allocations of Aramark corporate expenses, additional accounting adjustments, and previously eliminated revenue from services provided to Aramark. The allocated costs do not fully reflect the additional costs associated with providing these services as an independent company, and I'll come back to that when we look at the actual estimates of public costs in a moment. So with that level setting, let's move on to more details on fiscal 2023. Revenue for fiscal 2023 was $2.8 billion, up approximately 5% from fiscal 2022.

Rick Dillon: Workplace supplies were up approximately 9% year-over-year, while uniform revenue was essentially flat. Our results reflect our focus on expanding our relationships with existing customers and the strategic shift in our approach to new business. Both years include $26 million in revenue from a temporary energy fee that was implemented late in Q2 of fiscal 2022, and continued through the end of Q2 of fiscal 2023. Currency negatively impacted growth by 60 basis points in the year. From a segment perspective, US sales were up 5.2% and Canadian sales were up 4.1%. The mix of growth between uniforms and workplace supplies was consistent with our consolidated growth across both segments. Moving on to adjusted EBITDA for the year.

Rick Dillon: Adjusted EBITDA was $404 million in fiscal 2023, an increase of approximately 8% compared to the prior year, with the US up approximately 9% and Canada down 13%. The operating leverage from sales volume, pricing actions, and $15 million in structural cost reductions were partially offset by increases in cost of services and other SG&A expenses. Cost of services increased by 3%. Half of the increase is associated with higher merchandise amortization costs from increases in circulating inventory during fiscal 2022 to support demand recovery post-COVID. The other half is attributable to increased labor and energy costs year-over-year. While energy costs remained elevated throughout the year, we did see some moderation starting in the back half....

Rick Dillon: SG&A expense includes an incremental $12 million in structural costs associated with establishing the leadership team and corporate functions needed for a public company. From a segment perspective, US profitability was driven by operating leverage on revenue growth, a favorable mix towards workplace supplies, as well as momentum in our operating efficiency initiatives. The decline in profitability in Canada is attributable to prior year waiver of fees and a gain on a property sale that did not repeat in the current year. In addition, investments in rental merchandise inventory to support COVID demand recovery more than offset the benefits from operating leverage on revenue growth, pricing actions, and the impact of operating efficiencies during the year. Overall, Adjusted EBITDA margins expanded 42 basis points in fiscal 2023 to 14.3% after absorbing $12 million in incremental public company costs. So let's look closer at public company costs.

Rick Dillon: As noted, our results include the $12 million in permanent structural costs, and we expect to incur an additional $15 to 18 million in fiscal 2024 while completing the build-out of our corporate structures and our IT infrastructure. That's inclusive of TSA costs. As we are completing our separation activities during 2024, we will utilize a transition services agreement with Aramark to provide monthly bridge support. This support will decline throughout the year as we stand up our own functions. There will, however, be some periods of overlapping costs, but we expect to be fully operational by the end of fiscal 2024. So all in, we expect to see public company costs and TSA payments in the range of $27 to 30 million for 2024, while our permanent structural costs run rate will be about $20 to 25 million starting and as we enter 2025, post TSA.

Rick Dillon: Moving on to liquidity. We generated $257 million in cash from operations during fiscal 2023, an increase of approximately $24 million. The increase is primarily attributable to higher rental merchandise ads in the prior year as compared to the current year, and lower year-over-year growth in receivables attributable to timing. The actual investment in in-service inventory or the cash impact was in fiscal 2022, and the increase in amortization impacted results in 2023. Additionally, we saw a use of cash for accounts payable during the year, driven primarily by timing of payables heading into the spin transaction. CapEx was $78 million for fiscal 2023, up slightly from 2022, and just under 3% of our total revenue. Free cash flow was $190 million, up $27 million from the prior year.

Rick Dillon: We entered into a $1.8 billion credit agreement on 29 September 2023 as a part of the spin transaction. The facility includes a $300 million revolver and two term loans. On the last day of fiscal 2023, just before the completion of the spin, we drew on the two, the two term loans totaling $1.5 billion, $800 million maturing in two years and $700 million maturing in five years. The revolving credit facility was undrawn at the end of fiscal 2023. We ended fiscal 2023 with $36 million in cash on hand and a net debt to EBITDA leverage ratio of 3.95x. Maximum leverage under our credit facility is 5.25x, dropping to 4.5 in March 2025.

Rick Dillon: We continue to target an optimal leverage ratio of 1.5 to 2.5 by fiscal 2026. We are mobilizing to refinance the 2-year loan in Q2 of fiscal 2024. We believe our available cash, future cash generation from operations, existing credit facilities, and access to credit markets provide us ample liquidity and the flexibility needed to execute our strategy, reduce our leverage, and return capital to shareholders in the form of a sustained quarterly dividend, as announced earlier today. I will close with a few more details on our 2024 guidance. As Kim noted, we expect revenues to grow between 4 and 4.5%. When normalized for the $26 million impact of the temporary energy fee in 2023, our 2024 guidance represents a 5 to 5.5% growth in revenue.

Rick Dillon: Our adjusted EBITDA margin guidance has us absorbing an incremental $15 to 18 million or 50 to 60 basis points of incremental public company costs in 2024. Depreciation and amortization expense is expected to be $130 to 140 million. Interest expense is expected to be $115 to 120 million. We expect CapEx will be approximately 3% of revenue, and our effective tax rate will be approximately 26 million. We estimate we will spend $25 million in fiscal 2024 on one-time spin-related costs that are not included in our adjusted margin guidance. This includes approximately $15 million in costs associated with the rebranding of our fleet and signage on our facilities. We expect this process to be completed over the next two years, with an incremental $10 million of expenses expected in fiscal 2025.

Rick Dillon: Finally, we expect free cash flow conversion to be greater than or equal to 100% of net income to support the paydown of debt.

Rick Dillon: Finally, we expect free cash flow conversion to be greater than or equal to 100% of net income to support the paydown of debt.concludes our prepared remarks. Operator, I will turn it back to you to open the lines for questions.

Kim Scott: ... concludes our prepared remarks. Operator, I will turn it back to you to open the lines for questions.

Operator: The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing a question to provide optimal sound quality. Our first question will come from Stephanie Moore with Jefferies.

Stephanie Moore: Hi, good morning. Thank you for the question.

Kim Scott: Hey, Stephanie. Good morning.

Rick Dillon: Good morning.

Stephanie Moore: Morning. Maybe just starting with the guidance for fiscal 2024. Appreciate the incremental color that you provided in terms of the lapping of the fuel surcharge. But could you kind of break out as you think about, you know, the components of that organic growth guidance or the revenue growth guidance in terms of, you know, what you expect roughly from pricing, you know, cross-sell, new business wins, as well as I think you noted you were walking away from a customer in 2023, so those puts and takes would be helpful. Thanks.

Kim Scott: Thanks for your question, Stephanie. So we do expect a bend towards volume in FY 2024. As we talked about in Analyst Day, you know, this is not a pricing-based strategy, growth strategy. So our aim here as we grow the business in FY 2024 and beyond, really, is to drive volume in the base through cross-selling. So we expect healthy growth coming from cross-selling as part of our strategy around workplace supplies. We will take pricing appropriately, as you know, we offset things like inflation, and we also take value-based pricing, as Rick referenced earlier, as he was giving his discussion around the future for 2024. But we will also continue to protect and grow customers. But as you noted, we will also exit strategically at times, customers.

Kim Scott: So we'll see some erosion in the base, at times as we exit some of these, lower margin customers, while also growing new customers in our micro verticals. So it'll be a balance, quite frankly, of cross-selling new business in the micro verticals and modest pricing. Rick, anything that you would add to that?

Rick Dillon: No, and the weighting will lean towards the impact of cross-selling. So you see that same overweight of workplace supplies versus uniforms.

Kim Scott: Yeah.

Stephanie Moore: Got it. No, that's helpful. And then just as a follow-up to that question, as you think about, you know, your strategy, like you outlined at the Analyst Day, particularly with some of those micro verticals that you talked about. You know, should we expect to see, you know, the uniform business maybe accelerate a bit versus what we saw in fiscal 2023? Clearly just making really nice progress on the workplace supplies, but maybe uniforms just a little bit lighter. Should we, should we think about uniforms kind of stepping up a bit, going forward or kinda continue to be outshadowed by the workplace supplies? Thanks.

Kim Scott: Yeah, you should expect that you will continue to see momentum in Workplace Supplies and a more muted uniforms number. But that is also driven by some of these decisions that we're making to strategically exit some of our Direct Sale business, which will have an impact on the uniforms numbers. So just keep that in mind. We are definitely still growing our uniforms business. We're targeting those Micro Verticals as well as other verticals, and our sales team that is driving new business is actually quite productive and performing very well. We are just purposefully, you know, at times exiting some business and also overshadowing that with the Workplace Supplies.

Kim Scott: So, I would expect you should see a muted uniforms growth rate again in FY 2024, but that is a very purposeful decision to grow very strategically under high-quality verticals and exiting some underperforming business.

Stephanie Moore: Got it. Well, thank you so much.

Kim Scott: Thank you.

Rick Dillon: Thank you.

Operator: Our next question will come from Andy Wittmann with Baird.

Andy Wittmann: Oh, great. Thanks for taking my question. Good morning. I guess, I don't know, maybe you can comment on the size of the direct sale customer here, that's giving you the three basis points of margin, just so we can kinda have better context around the magnitude of that headwind.

Andrew Wittmann: Oh, great. Thanks for taking my question. Good morning. I guess, I don't know, maybe you can comment on the size of the direct sale customer here, that's giving you the three basis points of margin, just so we can kinda have better context around the magnitude of that headwind.

Kim Scott: Yeah, sure, I'd be happy to. Andy, it's great, great to hear from you. So thanks for joining us today. The customer that we're referring to is on an annualized basis, about $26 million in revenue, so it's a significant size customer for us. And we will see that customer transition out. So about half of that will hit the FY 2024 year, and about half of that will hit in FY 2025. So about $13 million in this year and $13 million in the year to come. And at the macro level, you know, that'll have about a 222 basis point impact on the uniforms growth rate. On a fully annualized basis, about 92 BPS on our total consolidated Vestis revenue.

Andy Wittmann: Got it. That's super helpful. I was just wondering, do you guys anticipate as you get into reporting your own results as part, as opposed to the carve-out here, right? Do, do you expect that you'll be giving an an EPS measure in your guidance as well, like an adjusted EPS measure or measure? Do you expect that we're just gonna work on GAAP for now and go that way?

Andrew Wittmann: Got it. That's super helpful. I was just wondering, do you guys anticipate as you get into reporting your own results as part, as opposed to the carve-out here, right? Do, do you expect that you'll be giving an an EPS measure in your guidance as well, like an adjusted EPS measure or measure? Do you expect that we're just gonna work on GAAP for now and go that way?

Kim Scott: Yeah, we absolutely will, and I'll let Rick provide some more color here in a moment. But we actually discussed that as we were preparing for our first earnings, and we made the decision, given that we had just spun out, not to report that in this particular full year result for FY 2024, as we were still Aramark, but we will, in the future, be discussing and sharing information related to EPS. Rick, anything that you'd like to add there?

Rick Dillon: Yeah, fiscal 2023.

Kim Scott: Yeah.

Rick Dillon: We will, we will report it.

Kim Scott: For '24.

Rick Dillon: Right, Q1 2024. The 2023 numbers, you know, as Kim said, there were no shares outstanding.

Kim Scott: Right.

Rick Dillon: And so you'd be reporting an EPS on a pro forma number, so it's got to be very not indicative, as I said, about the carve-out. On a go-forward basis, we have a share count, we'll know the dilution impact, and we'll start reporting the adjusted EPS for the quarter. To your point, Andy, you could, of course, get there-

Kim Scott: Mm-hmm.

Rick Dillon: With what we've provided, but you will see us report that.

Andy Wittmann: Okay, that makes a lot of sense. And I presume that adjusted EPS is on the same, includes the same adjustments as the EBITDA, I'm guessing.

Andrew Wittmann: Okay, that makes a lot of sense. And I presume that adjusted EPS is on the same, includes the same adjustments as the EBITDA, I'm guessing.

Rick Dillon: Yeah.

Andy Wittmann: And then, I guess-

Andrew Wittmann: And then, I guess-

Kim Scott: Yep.

Andy Wittmann: Yep. Okay, and then, so then just to follow up on that here, just related to the free cash flow conversion here, when you say greater than 100% of net income, in this context, however, you, you mean this in terms of GAAP net income. Is that correct?

Andrew Wittmann: Yep. Okay, and then, so then just to follow up on that here, just related to the free cash flow conversion here, when you say greater than 100% of net income, in this context, however, you, you mean this in terms of GAAP net income. Is that correct?

Rick Dillon: Correct.

Andy Wittmann: Okay. Okay, so then I guess, stepping back, my last question, you know, there's a lot, Kim, that you're doing to kind of, you know, move the margin profile in a lot of different ways. As you look here over the past three months or so, what are the kind of key initiatives where you're really focused on today, that you know, your employees are feeling in terms of, you know, how they're going to talk to their customers or changes that they're seeing in the routes or in the plan? What are the real things that today that you're working on?

Andrew Wittmann: Okay. Okay, so then I guess, stepping back, my last question, you know, there's a lot, Kim, that you're doing to kind of, you know, move the margin profile in a lot of different ways. As you look here over the past three months or so, what are the kind of key initiatives where you're really focused on today, that you know, your employees are feeling in terms of, you know, how they're going to talk to their customers or changes that they're seeing in the routes or in the plan? What are the real things that today that you're working on?

Kim Scott: Well, thanks, Andy, I appreciate that question. So, you know, cross-selling the base is a very attractive margin accretive activity, so we're hyper-focused on growing share of wallet with existing customers, and we've already incurred that fixed cost. We already have route drivers serving them, plant assets tied to those customer locations. So one of the single most important areas of focus that our whole team is rallied around is cross-selling existing customers so that we can capture share of wallet, leverage fixed assets, and get that flow-through on that revenue. And I would say our team is fully mobilized. As I mentioned, when I was speaking earlier, we had selling activity on 96% of our routes.

Kim Scott: I shared with you guys during Analyst Day, that we were not leveraging our fantastic frontline teammates to sell our customers, to cross-sell our customers when I joined the company a couple of years ago. So to be able to share now that we have 96% of our routes containing sales activity is tremendous momentum. And that does take the entire organization coming together. So service managers, frontline teammates, general managers out in market centers, as well as sales teammates supporting them, and marketing with collateral. So, that is a full-on team effort that everyone is mobilized around. The other really very large initiative that requires the whole company to move in the same direction is our building up a center of logistics excellence.

Kim Scott: So this notion of rerouting customers and conducting flow optimization across these market centers requires a tremendous amount of collaboration between facilities. As we are rerouting customers, we're working very diligently to ensure that is a seamless and invisible process for the customer. So it requires all hands on deck out in the field working together, not just to remap it from a logistics perspective using great technology and tools, but it is also a large change management undertaking that requires all of us to work together to get that done. So if I had to really choose two key areas of focus for us, I would say it is cross-selling workplace supplies to existing customers and leveraging those fixed assets and optimizing our network from a logistics perspective.

Andy Wittmann: Thank you very much.

Andrew Wittmann: Thank you very much.

Kim Scott: You bet. Thanks for your question.

Operator: Our next question will come from Andrew Steinerman with J.P. Morgan.

Andrew Steinerman: Hi, hello-

Kim Scott: Hey, Andrew, how are you?

Andrew Steinerman: Hi.

Kim Scott: How are you doing, Andrew?

Andrew Steinerman: Good, good. Could you, could you please comment on recent trends in add stops, net new, and client revenue retention?

Kim Scott: Add stops, net new, and what was the last one?

Andrew Steinerman: Retention.

Kim Scott: Got it. So obviously, we continue to focus on creating an amazing customer experience, and we talked a lot about some of the things that we're doing to enhance that experience, you know, from training our frontline teammates and our territory managers with playbooks around how to do a great job taking care of the customer, to also providing, you know, our route drivers, our frontline teammates with tools to let them know when there's an opportunity to improve with the customer, and then also to launching our customer portal, which we're getting great feedback on. So we feel really good about the momentum around protecting and growing our customer base. We are seeing really, really great feedback from our customers around these initiatives.

Kim Scott: And so we feel very, very good about the establishment of a service excellence culture across the company. We also continue to deliver retention rates that are above 90%, as we stated in our Form 10. So, we continue to emphasize that greatly.

Andrew Steinerman: And add stops and net new?

Kim Scott: Add stops and net new, so we haven't given out those metrics specifically, but we obviously continue to add new business. We're pleased with the progress that we're seeing from our frontline sales team to do that. And we continue to see growth in our business. We're not really using the-

Andrew Steinerman: Have add stops-

Kim Scott: I'll be quite clear, Andrew-

Andrew Steinerman: Have add stops held up?

Kim Scott: What's that?

Andrew Steinerman: Have add stops held up?

Kim Scott: ... I think it's also important to note on your question around net new, that we actually are communicating and we're shifting away from that net new metric that we were using at Aramark as well, because it doesn't reflect growth in our base. So that net new metric is a discrete metric around customers who are with you, and who then leave and are no longer customers, and it does not reflect the growth in the base, which is our key focus area. So you're gonna see us shift away from the conversation around net new and talking about that metric, and you're gonna hear us talk more about macro level growth, that includes cross-selling and adding products and services to existing customers, and that's not reflected in that net new number.

Oliver Davis: Okay.

Oliver Davies: Okay.

Operator: Thank you.

Kim Scott: Thanks, Andrea.

Operator: Our next question comes from Shlomo Rosenbaum with Stifel.

Shlomo Rosenbaum: Hi, good morning. Thank you for taking my questions. You, you've been focused a lot on the efforts to improve the cross-sell, and you talked about 96% of the routes are selling now. Where do you think you are in terms of, you know, making the shift in the culture to a more sales-oriented culture and selling across the base? Do you think, like, you're really humming along? Do you think you're, like, 50% there? Because it's a significant change from, you know, the way that the company had operated for literally decades. And maybe you could talk about where you are now and how long do you think it would take to really be, you know, kind of firing on all cylinders.

Kim Scott: So I think we still have work to do. I'm pleased with the way the team has embraced the everyone sells culture and mindset that we're working to create, Shlomo. But I think your question is a really important question that we are constantly focused on here because it is a massive culture shift to move a company to a mindset of growth. And that is the opportunity that we found when we came here. You know, I joined a couple of years ago; it was very clear that that obsession with growth was not present in this organization. So I think that we've made great strides, as evidenced by, you know, 96% of our routes having sales activity and teammates beyond dedicated sales teammates helping to sell and grow our business, particularly harvesting the base and capturing share of wallet with existing customers.

Kim Scott: But I would tell you that I think that we have a long way to go, which is encouraging because we're seeing great results well above our historical norms. You can see that reflected in our guidance as we're projecting 4 to 4.5% growth, when historically this business was growing at a meager, you know, 2% or so. And you also know we're shedding some unprofitable business at the same time, so that growth rate is even healthier than it appears. So I'm pleased with where we are, but I think we can do so much better. And so we continue to bring tools and resources, and really encourage and arm the team with the right tools that they need to get out there and grow the business.

Kim Scott: So I'd say I don't want to gauge it at 50%, but I'd say we are maybe halfway there, maybe, honestly. And that excites me, so I don't say that as a criticism. I say that as we're doing a great job, I'm pleased with the progress, and there's so much more yet to come. But our teammates are responding well. They're excited. They're proud to be a part of growing this business. I think they're recognizing now the latent potential that is untapped, that hasn't been unleashed here, and people are pretty fired up about bringing that to life. So, more to come on the culture front.

Shlomo Rosenbaum: Great. Thank you. And then maybe this one is for Rick. Can you talk a little bit more about the sequential margin improvement? You know, obviously, there's a pretty good cadence over here. And can you talk about what changed from, like, June to September? And you know, is this gonna be like a consistent glide forward? Obviously, I understand the TSA and the additional public company costs, but maybe you could talk about if there's some key items that drove that margin expansion, and then maybe if there's a few other ones that we should be looking towards for the next several quarters and over the year.

Rick Dillon: So from a quarterly progression, Q3 to Q4, there were quite a few kind of moving pieces driving that activity. And so, you know, you have, in our fourth quarter, you have all types of things around benefits, around customer closeouts, around contests, that kind of drive that Q4 increase in profitability. And it's a normal cadence. If you go back and look the last two, three years, we see that normal Q1, Q2, Q3, Q4 glide path. And so we expect to see that going forward in terms of your question about how you should be thinking about it. We, of course, aren't guiding the quarters. We did include in the earnings release the quarterly history, so you can go and take a look at that.

Rick Dillon: But the movement from Q3 to Q4 reflects also the having a full quarter of our cost out actions, reflected in our results as well.

Shlomo Rosenbaum: Great. Thank you.

Operator: Thank you. As a reminder, that is star one to ask a question. Our next question will come from Oliver Davis with Redburn Atlantic.

Oliver Davis: Yeah, good morning, guys.

Oliver Davies: Yeah, good morning, guys.

Kim Scott: Good morning.

Oliver Davis: Just one from me. On margin, can you just talk about sort of the current cost inflation you're seeing, I guess, across labor, materials, and fleet, and sort of how you see that evolving into 2024?

Oliver Davies: Just one from me. On margin, can you just talk about sort of the current cost inflation you're seeing, I guess, across labor, materials, and fleet, and sort of how you see that evolving into 2024?

Kim Scott: Sure. I'll start and then I'll kick it over to Rick for some more detail. But from a labor perspective, and we've, we've talked a little bit about this in the past, we actually have pretty good predictability around labor because we have a unionized workforce. And so the CBA negotiations, the collective bargaining agreement negotiations, are very predictable for us, and we have history as a guide to determine what, where we think those negotiations will land and what that will equate to in terms of increased wages. So we anticipate about 5% wage inflation across the five-year period, 5% on an annualized basis across the five-year period as we, as we look at our strategic plan. And that's actually fairly predictable for us, and that has played through over the last couple of years.

Kim Scott: So, that's what we're assuming in FY 2024 as we put this guidance forward. We're seeing muted energy costs. I'll let Rick kind of touch on that here just in a bit, but we're seeing muted energy costs, and generally a very predictable supply chain forecasting activity because we're purchasing inventory in advance, and then we're issuing it over a period as we grow new business and advertising that, you know, over a couple of years. So we have pretty good forecasting capabilities as it relates to all of our key cost drivers in the business, and we're not seeing anything surprising or unusual as we move through kind of building out the FY 2024 plan. Rick, anything that you would want to add there?

Rick Dillon: On the energy costs, as I noted, we did see moderation. That's moderation relative to 2022, which was kind of at some of the peak highs. So when you looked at our energy for 2023, we obviously saw high energy costs in the first half. We saw those costs year over year, kind of moderate in the back half. The view forward is a bit choppy. And so in our guidance, we assumed we stay elevated, so kind of at that on average for 2023, and our position to take whatever actions we need to should we see another spike. So we haven't forecasted we continue to get better, which you saw us talking about. You see it actually in the Q4 results.

Rick Dillon: But we kind of took that average cost and assumed we hold that line during the year. And we monitor energy costs, and you know, on any given week, the forward view is up or down, depending on economic factors.

Andrew Steinerman: Great, thanks.

Oliver Davies: Great, thanks.

Kim Scott: Thank you.

Operator: Our next question comes from Manav Patnaik with Barclays.

Ronan Kennedy: Hi, good morning.

Operator: Good morning.

Ronan Kennedy: This is John Kennedy, for Manav. Hi, good morning. Thank you for taking the questions. I guess as a follow-up to that, on the assumptions for wage and energy inflation, how would you characterize, you know, the macro environment and the demand backdrop now? Anything to call out demand-wise within your eight key verticals versus, you know, in terms of stronger or weaker demand? And then Rick just touched on the expectations for energy, et cetera. What are you assuming from a broader macro outlook standpoint for 2024?

Kim Scott: So from a demand perspective, you know, we've been very focused on cross-selling existing customers, in products and services that they're currently self-serving for themselves today. So there, for us, there's plenty of demand that can be created. We are seeing in our retention numbers as we look at customer trends, we are seeing some closures of business. We're seeing sale of businesses taking place and that business changing hands, and that feels pretty stable. So nothing erratic to report there as it relates to kind of customer behavior. We're pretty well diversified, as you guys know, across many different, end markets. So we feel pretty comfortable that we're insulated around any kind of one particular segment or industry that might be declining.

Kim Scott: And if we continue to harvest share of wallet with existing customers, there's plenty of space here, regardless of what might be happening from a macro environment perspective. I mean, you guys will recall, I'm sure, in Analyst Day, you know, we sized this market out at a $48 billion market across all of the products and services that we offer. So there's a lot of room to find places to grow as we're looking at various trends across the end sectors. So we feel pretty good about that from a macro perspective. We feel good about having a solid understanding of the cost drivers in our business and what we think is happening from a macroeconomic perspective related to those drivers, whether that be energy or labor or other supply chain costs related to our garments.

Kim Scott: We think we've got a good view of that. So, we see a pretty steady path forward for us through FY 2024, with a good understanding of the things that might be headwinds that are facing us. We think we've got great plans to offset any of those headwinds through good operational efficiency actions that we're taking. And also we've demonstrated our ability to price as appropriate as we may see those inflationary impacts emerge. Rick, anything that you would add there?

Rick Dillon: I think I would just say we haven't assumed in the plan broadly, a market downturn.

Kim Scott: Yeah.

Rick Dillon: Or certainly not the looming recession.

Kim Scott: Right.

Rick Dillon: And so all of the things that Kim described is kind of how we would respond to. We're not recession-proof, but we do like our mix in that environment of workplace supply, more or less employee-centric, still actually more margin accretive. So we feel good about where we're positioned, but we take all the necessary actions, as Kim described, to preserve profitability should that occur.

Kim Scott: Yeah. I mean, we'll be agile and monitor closely what's happening in various end markets, and adjust our kind of targeted sales activity, to move and flow where the demand exists.

Ronan Kennedy: That's very helpful. Thank you. And then, if I may, as a follow-up, can you just reconfirm with regards to the progression through the targeted margin expansion out to 28, how we should think about that kind of sequentially year to year? And the key contributors, if it's, you know, initially it would be leveraging that sales growth until you start to see more benefits from the field and the workforce optimization or the operating efficiencies, et cetera.

Kim Scott: ... Yeah. So, you know, as we, as we've talked about before, we did, we didn't build this thing as a hockey stick, so there's no massive kind of betting on the come in about two years and assuming that we're gonna, you know, generate 500 basis points of margin in two years. This is a slow and steady wins the race base hit game for us. In FY 2024, which is really the first year of our five-year plan that we've articulated to the market, as I mentioned earlier, we are ingesting our public company costs, and we're ingesting that very effectively, and we plan for that. So we're really pleased to see that we are going to, at a minimum, hold the line on margin, from FY 2023 through FY 2024 while absorbing those Pub Co costs.

Kim Scott: But what you'll also see is there's some really good, strong underlying performance taking place here with 50 to 60 basis points of margin expansion happening to the underlying business, and we're using that to offset the ingestion of those Pub Co costs. But if you look at what's happening, you can definitely see margin, margin coming through, and you can see operating leverage emerging in the business as we are taking advantage of cross-selling the customer base and leveraging fixed assets. And so we are getting flow-through on that revenue. That revenue is creating margin expansion, and we're also working very steadily around our flow optimization and driving efficiency through these logistics initiatives that we've talked about.

Kim Scott: All of these things are in motion, so there's not new initiatives that need to gain traction or that will start taking place three years from now to help deliver that plan. All of the initiatives required to get to that FY 2028 margin are moving now. So we are optimizing flows, we are cross-selling the customer, and it just gets stronger and stronger as we add revenue to every stop. We just continue to leverage those fixed assets and get the flow through. So, you should think about this as a very, slow and steady wins the race, base hit, base hit game, and you're gonna continue to see us just churning away at these initiatives, and the margin is gonna continue to flow, and the operating leverage will continue to open.

Kim Scott: So you'll see, again, it's muted in 2024 purposely because we're ingesting the Pub Co cost, but the underlying performance is there, and you'll see that just continue to move through 2028.

Andrew Steinerman: Thank you very much. Appreciate it.

Ronan Kennedy: Thank you very much. Appreciate it.

Kim Scott: Yeah. Thank you for your questions.

Operator: Our last question will come from Scott Schneeberger with Oppenheimer.

Scott Schneeberger: Hi, good morning. It's Daniel, not Scott. Thank you for letting us ask a question here. Just a quick one on the trends you've been seeing in small to medium-sized enterprises versus national accounts. If you can please discuss recent trends there and how you see that develop into next year? Thank you.

Daniel Krall: Hi, good morning. It's Daniel, not Scott. Thank you for letting us ask a question here. Just a quick one on the trends you've been seeing in small to medium-sized enterprises versus national accounts. If you can please discuss recent trends there and how you see that develop into next year? Thank you.

Kim Scott: Thanks for your question, Scott. It's good to hear from you. So, we are very focused on both, both groupings of customers. As we've talked about earlier, they both add great value. So our national account customers can really form the backbone of your supply chain and create density. So we've got a team out there hunting and harvesting national account customers, and those customers, as you know, stay more than 20 years with us. So they're very valuable customers, and, and the lifetime value is great. But we also know that small to medium enterprise customers are very margin accretive, and there's great propensity to cross-sell the base once you bring those customers in, into your house.

Kim Scott: We continue to focus very heavily on the experience and creating an outstanding customer experience with those SME customers so that we can not only retain them, but we can cross-sell the base. We are analyzing recent codes when we're losing customers in that segment. In the small to medium enterprise segment, we typically get that data through our inbound call center, and we're able to, you know, tie recent codes to that. I would say trends in the SME space; about a quarter of those inbound calls when we're losing customers on the SME side of the business are tied to business closures or they're tied to business sales. So I find that to be an interesting trend that we're observing and continuing to monitor as we're seeing transitions taking place with SME businesses.

Kim Scott: But some of that is related to selling the business, not closing the business. And so we're able to rent those customers and retain them, but it's an interesting trend that we're keeping an eye on. Otherwise, I would say the trend is great, that SME customers are very open to outsourcing additional workplace supplies. And so we are seeing a tremendous response as we're out cross-selling the existing customer base. We are seeing a tremendous response for outsourcing related to these workplace supplies and services that we're very actively focused on. So there's a real willingness to give that up and allow others to do that, so that our customers can take care of their core business and focus on what matters most to them.

Scott Schneeberger: Thank you.

Daniel Krall: Thank you.

Kim Scott: You bet. Thanks for your question.

Operator: This concludes the Q&A portion of today's call. I would now like to turn the floor over to Kim Scott, President and CEO, for closing remarks.

Kim Scott: So thank you for joining our call today and for your interest in Vestis. We are really pleased with our FY 2023 performance and the great progress that we are making against our strategic plan. And so the opportunities for us are tremendous, as we move forward, and our future remains bright. So thank you for joining us today.

Operator: Thank you. This concludes today's Vestis Corporation fiscal fourth quarter and full year 2023 earnings conference call. Please disconnect your line at this time and have a wonderful day.

Q4 2023 Vestis Earnings Conference Call

Request a DemoDemo

VSTS

Vestis

Earnings