Q3 2024 UniFirst Corp Earnings Call

Good day and thank you for standing by. Welcome to the third quarter 2024 UniFirst Earnings conference call.

Operator: Conference call. At this time, all participants are in a listen-only mode.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star-one-one on your telephone. You will then hear an automated message device, and your hand is raised. To withdraw your question, please press star-one-one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Stephen Sintros, President and Chief Executive Officer. Please go ahead.

Operator: After the speaker's presentation, there'll be a question-and-answer session. To ask the question during the session, need to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star-one-one on your telephone. You will then hear an automated message device and your hand is raised.

Operator: Please be advised, today's conference is being recorded.

Steven S. Sintros: Thank you and good morning. I'm Stephen Sintros, UniFirst President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer. I'd like to welcome you to UniFirst Corporation's conference call to review our third quarter results for fiscal year 2020. This call will be in a listen-only mode until we complete our prepared remarks. But first, a brief disclaimer.

To withdraw your question, please press star 1 1 again. Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today, Stephen Sintros, President and Chief Executive Officer. Please go ahead.

Operator: I would like to end the conference over your speaker day.

Steven Sintros: Steven Sintros, President and Chief Executive Officer, please go ahead. Thank you and good morning. I'm Steven Sintros, UniFirst President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer.

Thank you and good morning. I'm Stephen Sintros, UniFirst President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer.

Steven Sintros: I'd like to welcome you to Uni First Corporation's conference call to review our third quarter results for fiscal year 2024. This call will be on a listen-only mode until we complete our prepared remarks, the first with a brief disclaimer. This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements. Actual future results may differ materially from those anticipated, depending on a variety of risk factors.

I'd like to welcome you to UniFirst Corporation's conference call to review our third quarter results for fiscal year 2024.

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

Steven S. Sintros: This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance. Such forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements. However, actual future results may differ materially from those anticipated, depending on a variety of risk factors. For more information, please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission.

This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance.

These forward-looking statements are subject to certain risks and uncertainties.

The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements.

Actual future results may differ materially from those anticipated depending on a variety of risk factors. For more information please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission.

Steven Sintros: For more information, please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission. At Uni First, we are the people who always deliver. We serve the people who do the hard work, as they are the workforce that keeps our communities up and running. They are existing and prospective customers as well as our own Uni First team partners. Our mission is to enable those employees and their organizations by providing the right products and services to do their job successfully and safely. Whether that means providing uniforms, workwear, facility services, first aid and safety, clean room or other products and services, our goal is to partner with our customers to ensure that we structure the right program, products and services for their businesses and their team, all off providing an enhanced customer service experience.

Steven S. Sintros: At UniFirst, we are the people who always deliver. We serve the people who do the hard work as they are the workforce that keeps our communities up and running. They are existing and prospective customers as well as our own UniFirst team partners. Our mission is to enable those employees and their organizations by providing the right products and services to do their job successfully and safely. Whether that means providing uniforms, workwear, facility services, first aid and safety, cleanroom or other products and services, our goal is to partner with our customers to ensure that we structure the right program, products, and services for their businesses and their team, all while providing an enhanced customer service experience.

Speaker Change: At UniFirst, we are the people who always deliver. We serve the people who do the hard work as they are the workforce that keeps our communities up and running.

Speaker Change: They are existing and prospective customers as well as our own UniFirst team partners.

Speaker Change: Our mission is to enable those employees and their organizations by providing the right products and services to do their job successfully and safely.

Speaker Change: Whether that means providing uniforms, workwear, facility services, first aid and safety, clean room or other products and services, our goal is to partner with our customers to ensure that we structure the right program, products and services for their businesses and their team, all while providing an enhanced customer service experience.

Steven Sintros: I want to sincerely thank all of our team partners and our customers as we strive towards our vision of being universally recognized as the best service provider in the industry, all while living our mission.

Steven S. Sintros: I want to sincerely thank all of our team partners and our customers as we strive towards our vision of being universally recognized as the best service provider in the industry, all while living our mission. We are pleased to report the results from our third quarter of 2024, which showed solid growth on the top line and strong improvement on the bottom line. Overall revenues in the third quarter were up 4.6% compared to the third quarter of 2023, and our core laundry operations organic growth totaled 4.7%.

Speaker Change: I want to sincerely thank all of our team partners and our customers as we strive towards our vision of being universally recognized as the best service provider in the industry, all while living our mission.

Steven Sintros: We are pleased to report the results from our 3rd quarter of 2024, which showed solid growth on the top line and strong improvement in our bottom line. Overall, revenues in the 3rd quarter were about 4.6 percent compared to the 3rd quarter of 2023, and our core laundry operations organic growth totaled 4.7 percent. Operating income in EBITDA increased significantly in the quarter compared to a year ago, benefiting from lower cost expended during the quarter related to key initiatives, as well as favorable comparisons to the 3rd quarter of last year related to elevated healthcare and legal cost a year ago.

Speaker Change: We are pleased to report the results from our third quarter of 2024, which showed solid growth on the top line and strong improvement in our bottom line.

Speaker Change: Overall revenues in the third quarter were up 4.6 percent compared to the third quarter of 2023 and our core laundry operations organic growth totaled 4.7 percent.

Steven S. Sintros: Operating income in EBITDA increased significantly in the quarter compared to a year ago, benefiting from lower costs expended during the quarter related to key initiatives, as well as favorable comparisons to the third quarter of last year related to elevated health care and legal costs a year ago.

Speaker Change: Operating income in EBITDA increased significantly in the quarter compared to a year ago, benefiting from lower costs expended during the quarter related to key initiatives, as well as favorable comparisons to the third quarter of last year related to elevated health care and legal costs a year ago.

Steven Sintros: Excluding these benefits, we still have experienced strong operating income and EBITDA growth during the quarter as well as year-to-date. We are also very pleased with the improvement in cash flows from operating activities compared to 2023, which were up 35.2 percent.

Steven S. Sintros: Excluding these benefits, we still experienced strong operating income and EBITDA growth during the quarter as well as year-to-date. We are also very pleased with the improvement in cash flows from operating activities compared to 2023, which was up 35.2%. As a reminder, we've been incurring costs over the last couple of years related to our technology transformation. As expected, the expense we are incurring related to these key initiatives is declining due to activities surrounding the deployment of our CRM largely winding down, and the amounts we are expending on our ERP project now being largely capitalized as we enter the implementation phases of the project.

Speaker Change: Excluding these benefits, we still have experienced strong operating income and EBITDA growth during the quarter, as well as year-to-date.

Speaker Change: We are also very pleased with the improvement in cash flows from operating activities compared to 2023, which were up 35.2%.

Steven Sintros: As a reminder, we've been incurring costs over the last couple of years related to our technology transformation. As expected, the expense we are incurring related to these key initiatives is declining due to activity surrounding the deployment of our CRM largely winding down and the amounts we are expending on our ERP project now being largely capitalized as we enter the implementation phases of the process. During the quarter, our sales organization continued to perform well, selling prospects on the value that UniFirst can bring to their businesses. Overall, we are pleased with the solid organic growth for the quarter, delivering strong results despite a more challenging pricing environment.

Speaker Change: As a reminder, we've been incurring costs over the last couple of years related to our technology transformation.

Speaker Change: As expected, the expense we are incurring related to these key initiatives is declining due to activities surrounding the deployment of our CRM largely winding down and the amounts we are expending on our ERP project now being largely capitalized as we enter the implementation phases of the project.

Steven S. Sintros: During the quarter, our sales organization continued to perform well, selling prospects on the value that UniFirst can bring to their business. Overall, we are pleased with the solid organic growth for the quarter, delivering strong results despite a more challenging pricing environment. Although we would classify our wearer levels as mostly stable, we saw a bit of a decline in our net wearer metrics during the quarter.

Speaker Change: During the quarter, our sales organization continued to perform well, selling prospects on the value that UniFirst can bring to their businesses.

Speaker Change: Overall, we are pleased with the solid organic growth for the quarter, delivering strong results despite a more challenging pricing environment.

Steven Sintros: Although we would classify our wearer levels as mostly stable, we have seen a bit of a decline in our net wearer metrics during the quarter. Our updated full-year guidance, which Shane will discuss shortly, implies core laundry operations organic growth in our fourth quarter to be approximately 3.5 percent at the midpoint of the range.

Speaker Change: Although we would classify our wearer levels as mostly stable, we have seen a bit of a decline in our net wearer metrics during the quarter.

Steven S. Sintros: Our updated full-year guidance, which Shane will discuss shortly, implies core laundry operations organic growth in our fourth quarter to be approximately 3.5% at the midpoint of the range. During the last few quarters, as the market has emerged from a period of significantly elevated inflation levels, we have discussed a more challenging pricing environment and its impact on our sequential organic growth. Although it is too early to be making too many comments about next year, we did want to communicate that, based on these trends, we currently expect organic growth in fiscal 25 to be more modest than in our fourth quarter.

Speaker Change: Our updated full-year guidance, which Shane will discuss shortly, implies core laundry operations organic growth in our fourth quarter to be approximately 3.5 percent at the midpoint of the range.

Steven Sintros: During the last few quarters, as the market has emerged from a period of significantly elevated inflation levels, we have discussed a more challenging pricing environment and its impact on our sequential organic growth rates. Although there was too early to be making too many comments about next year, we did want to communicate that based on these trends, we currently expect organic growth in fiscal 25 to be more modest than our fourth quarter. At the same time, we continued to focus on investments in the business to enhance our ability to track new customers, sell additional products to existing customers, as well as enhance our customers' experience and drive improved retention.

Speaker Change: During the last few quarters, as the market has emerged from a period of significantly elevated inflation levels, we have discussed a more challenging pricing environment and its impact on our sequential organic growth rates.

Speaker Change: Although it was too early to be making too many comments about next year, we did want to communicate that based on these trends, we currently expect organic growth and fiscal 25 to be more modest than our fourth quarter.

Steven S. Sintros: At the same time, we continue to focus on investments in the business to enhance our ability to attract new customers, sell additional products to existing customers, as well as enhance our customers' experience and drive improved retention. Opportunities to win national account customers remain healthy, and we have had very good success adding a number of large programs this year, including a top three account in our first quarter. Although the sale of these accounts can be difficult to predict, we are well positioned to take advantage of opportunities in the market.

Speaker Change: At the same time, we continue to focus on investments in the business to enhance our ability to attract new customers, sell additional products to existing customers, as well as enhance our customers' experience and drive improved retention.

Steven Sintros: Opportunities to win national account customers remain healthy, and we have had very good success adding a number of large programs this year, including a top three account in our first quarter. Although the sale of these accounts can be difficult to predict, we are well positioned to take advantage of opportunities in the market.

Speaker Change: Opportunities to win national account customers remains healthy and we've had very good success adding a number of large programs this year including a top three account in our first quarter.

Speaker Change: Although the sale of these accounts can be difficult to predict, we are well positioned to take advantage of opportunities in the market.

Steven Sintros: In addition to our ongoing efforts to drive growth, we continue to focus on our operating excellence and cost reductions to enhance our margin profile. We are pleased with some of the progress in recent trends in key cost areas such as merchandise, as well as other input costs. Our team continues to be more proficient utilizing and optimizing the capabilities of our new CRM, including leveraging some of clean proprietary technology across all universities. With all efforts focused on deploying standard processes across our local operations and driving productivity. In addition, areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant margin and enhancement opportunities.

Steven S. Sintros: In addition to our ongoing efforts to drive growth, we continue to focus on operating excellence and cost reductions to enhance our margin program. We are pleased with some of the progress and recent trends in key cost areas, such as merchandise, as well as other inputs. Our team continues to be more proficient, utilizing and optimizing the capabilities of our new CRM, including leveraging some of Clean's proprietary technology across all UniFirsts, with all efforts focused on deploying standard processes across our local operations and driving productivity.

Speaker Change: In addition to our ongoing efforts to drive growth, we continue to focus on our operating excellence and cost reductions to enhance our margin profile.

Speaker Change: We are pleased with some of the progress and recent trends in key cost areas such as merchandise as well as other input costs.

Speaker Change: Our team continues to be more proficient utilizing and optimizing the capabilities of our new CRM, including leveraging some of Clean's proprietary technology across all UniFirst, with all efforts focused on deploying standard processes across our local operations and driving productivity.

Steven S. Sintros: In addition, areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant margin enhancement opportunities. Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others we feel can move the needle in the near-to-mid-term. We are also excited about the opening of new facilities this year in New York, Michigan, and Ontario, Canada.

Speaker Change: In addition, areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant margin enhancement opportunities.

Steven Sintros: Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others we feel to move the needle in the near to midterm.

Speaker Change: Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others we feel can move the needle in the near to midterm.

Steven Sintros: We are also excited about the opening of new facilities this year in New York, Michigan, and Ontario, Canada. These projects are good examples of investments designed to not only enhance our service execution and customer experience, but also improve our capacity for growth, operational efficiency, and profitability. We continue to believe strongly in the bright future of our First Aid and Safety division. We continue to make investments in the sales and service infrastructure of the van operations to expand our footprint and assure we can reach existing, universe customers, as well as new prospects in the market that have a strong need for these products and services.

Speaker Change: We are also excited about the opening of new facilities this year in New York, Michigan, and Ontario, Canada.

Steven S. Sintros: These projects are good examples of investments designed to not only enhance our service execution and customer experience but also improve our capacity for growth, operational efficiency, and profitability. We continue to believe strongly in the bright future of our First Aid and Safety Division.

Speaker Change: These projects are good examples of investments designed to not only enhance our service execution and customer experience, but also improve our capacity for growth, operational efficiency, and profitability.

Speaker Change: We continue to believe strongly in the bright future of our First Aid and Safety Division.

Steven S. Sintros: We continue to make investments in the sales and service infrastructure of the van operations to expand our footprint and ensure we can reach existing UniFirst customers as well as new prospects in the market that have a strong need for these products and services. Customers expect solutions to their most pressing issues, and First Aid and Safety are important contributors to these integrated solutions. These investments have delivered the strong growth that we once again achieved in the quarter.

Speaker Change: We continue to make investments in the sales and service infrastructure of the van operations to expand our footprint and ensure we can reach existing UniFirst customers as well as new prospects in the market that have a strong need for these products and services.

Steven Sintros: Customers expect solutions to their most pressing issues, and first aid and safety are important contributors to these integrated solutions. These investments have delivered the strong growth that we once again achieved in the quarter. as we progress, increasing route density and addition to penetrating customers with the full breadth of services that we provide will be critical steps in building the profitability of this segment.

Speaker Change: Customers expect solutions to their most pressing issues and First Aid and Safety are important contributors to these integrated solutions.

Speaker Change: These investments have delivered the strong growth that we once again achieved in the quarter.

Steven S. Sintros: As we progress, increasing route density in addition to penetrating customers with the full breadth of services that we provide will be critical steps in building the profitability of the system. With that, I would like to turn the call over to Shane, who will provide more details on our third quarter, as well as an updated outlook for the remainder of the year. Thanks, Steve.

Speaker Change: As we progress, increasing route density in addition to penetrating customers with the full breadth of services that we provide will be critical steps in building the profitability of this segment.

Shane O'Connor: With that, I would like to turn the follow over to Shane and provide more details on our third quarter as well as the updated outlook for the remainder of the year. Thanks, Steve. In our third quarter of 2024, consolidated revenues for $603.3 million, a 4.6% from $576.7 million a year ago, and consolidated operating income increased to $48.5 million from $33.4 million, or 45.1%. Net income for the quarter increased to $38.1 million, or $2.3% per diluted share, from $24.3 million, or $1.29 per diluted share. Consolidated EBITDA increased to $82.5 million from $64 million in the prior year, or 29%.

Shane F. OConnor: In our third quarter of 2024, consolidated revenues were $603.3 million, a 4.6% increase from $576.7 million a year ago, and consolidated operating income increased to $48.5 million from $33.4 million, or 45.1%. Net income for the quarter increased to $38.1 million, or $2.03 per diluted share, from $24.3 million, or $1.29 per diluted share. Consolidated EBITDA increased to $82.5 million from $64 million in the prior year, or 29%. Our financial results in the third quarters of fiscal 2024 and 2023 included approximately $3.9 million and $8.4 million, respectively, of costs directly attributable to our key initiatives.

Speaker Change: With that, I would like to turn the call over to Shane, who will provide more details on our third quarter, as well as the updated outlook for the remainder of the year.

Shane F. OConnor: In addition, we incurred costs related to the acquisition of clean uniforms during the third quarter of fiscal 2023 of approximately $0.7 million. The effect of these items on the third quarters of fiscal 2024 and 2023 combined to decrease both operating income and EBITDA by $3.9 million and $9.1 million, respectively. Net income increased by $2.9 million and $6.8 million, respectively, and EPS by $0.16 and $0.37, respectively. Our effective tax rate in the quarter was 22.9% compared to 27.2% in the prior year.

Shane F. OConnor: Thanks, Steve.

Shane F. OConnor: In our third quarter of 2024, consolidated revenues were $603.3 million.

Shane F. OConnor: a 4.6% from $576.7 million a year ago. And consolidated operating income increased to $48.5 million from $33.4 million, or 45.1%.

Shane F. OConnor: Net income for the quarter increased to $38.1 million, or $2.03 per diluted share, from $24.3 million, or $1.29 per diluted share.

Shane F. OConnor: Consolidated EBITDA increased to $82.5 million from $64 million in the prior year or 29%.

Shane O'Connor: Our financial results in the third quarter of fiscal 2024 and 2023 included approximately $3.9 million and $8.4 million, respectively, of cost directly attributable to our key initiatives. In addition, we incurred costs related to the acquisition of clean uniform during the third quarter of fiscal 2023 of approximately $0.7 million. The effect of these items on the third quarter fiscal 2024 and 2023, combined to decrease both operating income and EBITDA by $3.9 million and $9.1 million, respectively. Net income by $2.9 million and $6.8 million respectively, and EPS by $0.16 and 37 times respectively. Our effective tax rate in the quarter was 22.9%, compared to 27.2% in the prior year.

Shane F. OConnor: Our financial results in the third quarters of fiscal 2024 and 2023 included approximately $3.9 million and $8.4 million, respectively, of costs directly attributable to our key initiatives.

Shane F. OConnor: In addition, we incurred costs related to the acquisition of clean uniform during the third quarter of fiscal 2023 of approximately $0.7 million.

Shane F. OConnor: The effect of these items on the third quarters of fiscal 2024 and 2023 combined to decrease both operating income and EBITDA by $3.9 million and $9.1 million, respectively.

Shane F. OConnor: Net income by $2.9M and $6.8M respectively, and EPS by $0.16 and $0.37 respectively.

Shane F. OConnor: Our effective tax rate in the quarter was 22.9% compared to 27.2% in the prior year.

Shane O'Connor: As a reminder, our tax rate can move from period to period based on discrete events, including adjustments to our tax reserves and excess tax benefits and deficiencies associated with employee share-based payments. Our core laundry operations revenues for the quarter were $528.5 million, at 5.3% from the third quarter of 2023. Core laundry organic growth, which adjusts for the estimated effective acquisitions, as well as fluctuations in the Canadian dollar, was 4.7%. This solid organic growth rate was primarily the result of solid new account sales, including a large national account we installed in our first fiscal quarter of 2024, and the impact of pricing efforts over the last year.

Shane F. OConnor: As a reminder, our tax rate can move from period to period based on discrete events, including adjustments to our tax reserves and excess tax benefits and deficiencies associated with employee share-based payments. Our core laundry operations revenues for the quarter were $528.5 million, up 5.3% from the third quarter of 2023. Core laundry organic growth, which adjusts for the estimated effect of acquisitions, as well as fluctuations in the Canadian dollar, was 4.7%. This solid organic growth rate was primarily the result of solid new account sales, including a large national account we installed in our first fiscal quarter of 2024 and the impact of pricing efforts over the last year. Core Laundry operating margin increased to 7% for the quarter, or $36.9 million from 4.2% in the prior year, or $21 million, and the segment's EBITDA margin increased to 13.1% from 9.9%.

Shane F. OConnor: As a reminder, our tax rate can move from period to period based on discrete events including adjustments to our tax reserves and excess tax benefits and deficiencies associated with employee share-based payments.

Shane F. OConnor: Our core laundry operations revenues for the quarter were $528.5 million, up 5.3% from the third quarter of 2023.

Shane F. OConnor: Core laundry organic growth, which adjusts for the estimated effect of acquisitions, as well as fluctuations in the Canadian dollar, was 4.7%.

Shane F. OConnor: This solid organic growth rate was primarily the result of solid new account sales, including a large national account we installed in our first fiscal quarter of 2024, and the impact of pricing efforts over the last year.

Shane O'Connor: Core laundry operating margin increased to 7% for the quarter, or $36.9 million, from 4.2% in the prior year, or $21 million. And the segment's EBITDA margin increased to 13.1% from 9.9%. The cost we incurred related to our key initiatives in the clean acquisition were recorded to the core laundry operations segment, and combined to decrease both the core laundry operating and EBITDA margins for the third quarter of fiscal 2024 and 2023 by 0.7% and 1.8% respectively. and Eba Dow Margin Comparison benefited from elevated expense in the prior year related to high healthcare claims and costs incurred related to a legal matter.

Shane F. OConnor: Core Laundry operating margin increased to 7% for the quarter, or $36.9 million, from 4.2% in prior year, or $21 million.

Shane F. OConnor: And the segment's EBITDA margin increased to 13.1% from 9.9%.

Shane F. OConnor: The costs we incurred related to our key initiatives and the clean acquisition were recorded in the core laundry operations segment and combined to decrease both the core laundry operating and EBITDA margins for the third quarter of fiscal 2024 and 2023 by 0.7% and 1.8%, respectively. However, segments operating in EBITDA margin comparisons benefited from elevated expenses in the prior year related to high health care claims and costs incurred related to a legal matter.

Shane F. OConnor: The costs we incurred related to our key initiatives and the clean acquisition were recorded to the core laundry operations segment.

Shane F. OConnor: and combined to decrease both the core laundry operating and EBITDA margins for the third quarter of fiscal 2024 and 2023 by 0.7% and 1.8% respectively.

Shane F. OConnor: Segments operating in EBITDA margin comparisons benefited from elevated expense in the prior year related to high health care claims and costs incurred related to a legal matter.

Shane F. OConnor: Excluding these items, our segment's operating results also reflected favorable trends in merchandise, payroll, and other operating input costs. Energy costs in both the third quarter of 2024 and 2023 were 4.3% of revenue. Revenues from our specialty garment segment, which delivers specialized nuclear decontamination and cleanroom products and services, decreased to $47.6 million from $49.4 million in the prior year, or $3.7 billion.

Shane O'Connor: Excluding these items, our segments' operating results also reflected favorable trends in merchandise, payroll, and other operating input costs. Energy costs in both the third quarter of 2024 and 2023 were 4.3% of revenues.

Shane F. OConnor: Excluding these items, our segment's operating results also reflected favorable trends in merchandise, payroll, and other operating input costs.

Shane F. OConnor: Energy costs in both the third quarter of 2024 and 2023 were 4.3% of revenues.

Shane O'Connor: Revenues from our specialty garment segment, which delivers specialized nuclear decontamination in clean room products and services, decreased to $47.6 million from $49.4 million in the prior year, or 3.7%. At the same time, the segment's operating margin decreased to 23.9% from 25.2%. This performance was due to a decline in revenues and profitability in the segments North American nuclear business. As we mentioned in the past, the segments' results can vary significantly from period to period due to seasonality, as well as the timing and profitability of nuclear reactor outages and project. Our first aid segments revenues increased to $27.3 million from 25.5 million in prior year, or 6.9%, due to strong growth in our band operations.

Shane F. OConnor: Revenues from our specialty garment segment, which delivers specialized nuclear decontamination and cleanroom products and services, decreased to $47.6 million from $49.4 million in prior year, or 3.7%.

Shane F. OConnor: At the same time, the segment's operating margin decreased to 23.9% from 25.2%. This performance was due to a decline in revenues and profitability in the segment's North American nuclear business. As we mentioned in the past, the segment's results can vary significantly from period to period due to seasonality, as well as the timing and profitability of nuclear reactor outages and projects. Our first aid segment's revenues increased to $27.3 million from $25.5 million in the prior year, or 6.9%, due to strong growth in our van operation. The segment had a nominal operating profit of $0.1 million during the quarter, as its results continue to reflect the investments we are making in our first aid van.

Shane F. OConnor: At the same time, the segment's operating margin decreased to 23.9% from 25.2%.

Shane F. OConnor: This performance was due to a decline in revenues and profitability in the segment's North American nuclear business.

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

Shane F. OConnor: Our first aid segment's revenues increased to $27.3 million from $25.5 million in prior year, or 6.9%, due to strong growth in our van operations.

Shane O'Connor: Segment had a nominal operating profit of $0.1 million during the quarter, as the segment's results continued to reflect the investments we are making in our first aid band business.

Shane F. OConnor: Segment had a nominal operating profit of 0.1 million dollars during the quarter as the segment's results continue to reflect the investments we are making in our first aid van business.

Shane O'Connor: At the end of our third fiscal quarter, we continue to reflect a solid balance sheet and financial position with no long-term debt and cash cash equivalent to short-term investments totaling $125.4 million. In the first nine months of fiscal 2024, we saw significant improvement in our cash flow from operating activities, which increased 35.2% to $193 million. Primarily due to improved profitability and lower working capital needs of the business. We also continue to invest in our future with capital expenditures of $121.9 million and repurchase $16 million worth of common stock.

Shane F. OConnor: At the end of our third fiscal quarter, we continue to have a solid balance sheet and financial position with no long-term debt and cash, cash equivalents, and short-term investments totaling $125.4 million. In the first nine months of fiscal 2024, we saw a significant improvement in our cash flow from operating activities, which increased 35.2% to $193 million, primarily due to improved profitability and lower working capital needs of the business. We also continue to invest in our future with capital expenditures of $121.9 million and repurchase $16 million worth of common stuff.

Shane F. OConnor: At the end of our third fiscal quarter, we continue to reflect a solid balance sheet and financial position with no long-term debt and cash, cash equivalents, and short-term investments totaling $125.4 million.

Shane F. OConnor: In the first nine months of fiscal 2024, we saw significant improvement in our cash flow from operating activities, which increased 35.2% to $193 million, primarily due to improved profitability and lower working capital needs of the business.

Shane F. OConnor: We also continue to invest in our future with capital expenditures of $121.9 million and repurchase $16 million worth of common stock.

Shane O'Connor: I'd like to take this opportunity to provide an update on our outlook. We continue to expect our revenues for fiscal 2024 to be between $2.415 billion and $2.425 billion. However, we now expect that our diluted earnings per share will be between $7.17 and $7.49. Our outlook for fiscal 2024 includes an extra week of operations in our fourth fiscal quarter compared to 2023 due to the timing of our fiscal calendar. This outlook also assumes core laundry operations organic growth at the midpoint of the range will be 4.5%. Core laundry operations operating in EBITDA margin at the midpoint of the range will be 6.6% and 12.7%, respectively.

Shane F. OConnor: I'd like to take this opportunity to provide an update on our outlook. We continue to expect our revenues for fiscal 2024 to be between $2.415 billion and $2.425 billion. However, we now expect that diluted earnings per share will be between $7.17 and $7.49.

Shane F. OConnor: I'd like to take this opportunity to provide an update on our outlook. We continue to expect our revenues for fiscal 2024 to be between $2.415 billion and $2.425 billion.

Shane F. OConnor: However, we now expect that our diluted earnings per share will be between $7.17 and $7.49.

Shane F. OConnor: Our outlook for fiscal 2024 includes an extra week of operations in our fourth fiscal quarter compared to 2023 due to the timing of our fiscal calendar. This outlook also assumes Core Laundry Operations organic growth at the midpoint of the range will be 4.5%, and Gore Laundry Operations operating an EBITDA margin at the midpoint of the range would be 6.6% and 12.7%, respectively.

Shane F. OConnor: Our outlook for fiscal 2024 includes an extra week of operations in our fourth fiscal quarter compared to 2023 due to the timing of our fiscal calendar.

Shane F. OConnor: This outlook also assumes Core Laundry Operations organic growth at the midpoint of the range will be 4.5%.

Shane F. OConnor: Gore Laundry operations operating an EBITDA margin at the midpoint of the range would be 6.6% and 12.7% respectively.

Shane O'Connor: In estimated $12 million of costs directly attributable to our key initiatives that will be expensed in fiscal 2024 and will decrease both the core laundry operations operating in EBITDA margins by 0.6%. In effective tax rate of 24.5%. In no future share buybacks or unexpected significantly adverse economic developments.

Operator: An estimate of $12 million of costs directly attributable to our key initiatives that will be expensed in fiscal 2024 and will decrease both the core laundry operations operating in EBITDA margins by 0.6%, an effective tax rate of 24.5%, and no future share buybacks or unexpected, significantly adverse economic developments. This concludes our prepared remarks, and we would now be happy to answer any questions that you might have. Thank you, ladies and gentlemen.

Shane F. OConnor: An estimate of $12 million of costs directly attributable to our key initiatives that will be expensed in fiscal 2024 and will decrease both the core laundry operations operating in EBITDA margins by 0.6%.

Shane F. OConnor: an effective tax rate of 24.5% and no future share buybacks or unexpected significantly adverse economic developments.

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

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

Operator: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue. Please press star 1-1 again. We'll pause for a moment while we compile our queue in a roster.

Operator: If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question hasn't been answered and you wish to unmute yourself from the queue, please press star 1-1 again.

Speaker Change: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1 1 on your telephone. If your question has been answered and you wish to unmute yourself from the queue, please press star 1 1 again. We'll pause for a moment while we compile our Q&A roster.

Ronan Kennedy: Our first question comes from Matt Patenayak with Barclays. Your line is open.

Operator: We'll pause for a moment while we compile our Q&A roster. Our first question comes from Manapat Nayak with Barclays. Your line is open. Hi, good morning. This is Ronan Kennedy. I'm from MNOT.

Speaker Change: Our first question comes from Manapat Nayak with Barclays. Your line is open.

Ronan Kennedy: Good morning, this is Ronan Kennedy on from Matt. Thank you for taking my questions. Can I just get some further context to the things you talked about, the challenging pricing environment, so the dynamics that play, whether that's inflation, moderation, new winds coming on at lower pricing, and then also some further context around the lower wear metrics and kind of the drivers of some potential weakness there.

Steven S. Sintros: Thank you for taking my questions. Can I just get some further context on the things you talked about, the challenging pricing environment, the dynamics at play, whether that's inflation moderation, new winds coming on at lower prices, and then also some further context around the lower wearer metrics and kind of the drivers of some potential weakness there. Sure, let me hit those one at a time.

Speaker Change: Hi, good morning. This is Ronan Kennedy. I'm from MNOW. Thank you for taking my questions. Can I just get some further context to the things you talked about, the challenging pricing environment, so the dynamics at play, whether that's inflation moderation, new winds coming on at lower pricing, and then also...

Speaker Change: some further context around the lower wearer metrics and kind of the drivers of some potential weakness there.

Steven Sintros: Sure, let me hit those one at a time.

Steven S. Sintros: I think when we talk about the more challenging pricing environment, it's primarily inflation emerging from this inflationary period, right? I think of it in terms of how we manage our vendors, and after multiple years of higher costs, we're putting more programs out to bid with our vendors, and I think you're just seeing some of that in the marketplace. And that's leading to somewhat of a more challenging pricing environment, which probably isn't surprising. From a new account perspective, I wouldn't say there's really been a significant change.

Steven Sintros: I think when we talk about the more challenging pricing environment, it's primarily emerging from this inflationary period. I think about it from how we're managing our vendors, and after multiple years of higher costs, we're putting more programs out to bid with our vendors. I think you're just seeing some of that in general in the marketplace, and that's leading to somewhat of a more challenging pricing environment, which probably isn't surprising. From a new account perspective, I wouldn't say there's really been a significant change. We've talked about over the years; a new account acquisition is often a competitive situation, but I wouldn't say there's any significant change in that pricing environment over the last few quarters.

Speaker Change: Emerging from this inflationary period, right? I think about it from how we're managing our vendors and after multiple years of higher costs

Speaker Change: We're putting more programs out to bid.

Speaker Change: with our vendors, and I think you're just seeing some of that in general in the marketplace, and that's leading to somewhat of a more challenging pricing environment, which probably isn't surprising.

Speaker Change: From a new account perspective, I wouldn't say there's really been a significant change.

Steven S. Sintros: We've talked about over the years that new account acquisition is often a competitive situation, but I wouldn't say there's been any significant change in that pricing environment over the last few quarters. And as far as the ads versus reductions, I don't want to overestimate that, but we've been talking about, if you go back over the last couple of years, a year ago, we were getting some more pull from ad In the last couple of quarters, we have been saying it's been mostly stable. And although, again, as I said in my prepared remarks, I would still say it's mostly stable.

Speaker Change: We've talked about, over the years, new account acquisition is often a competitive situation. But I wouldn't say there's any significant change in that pricing environment over the last few quarters.

Steven Sintros: As far as the ads versus reductions, I don't want to overestimate that, but we had been talking about, if you go back over the last couple of years, a year ago, we were getting some more pull from ad versus reductions in the last couple quarters. We had been saying it's been mostly stable, and although, again, as I said in my AppAPair remarks, I would still say it's mostly stable. We have seen a little bit of weakening there during the quarter. It didn't have a significant impact, but wanted to mention it just as we think it may be a precursor of a little bit weaker hiring environment.

Speaker Change: And as far as the ads versus reductions, I don't want to overestimate that, but we've been talking about, if you go back over the last couple of years, a year ago we were getting some more pull from ad versus reductions.

Speaker Change: In the last couple quarters, we have been saying it's...

Speaker Change: been mostly stable. And although, again, as I said in my prepared remarks, I would still say it's mostly stable. We have seen a little bit of weakening there during the quarter.

Steven S. Sintros: We have seen a little bit of weakening there during the quarter. It didn't have a significant impact, but we wanted to mention it just as we think it may be a precursor to a slightly weaker hiring environment. Thank you for that.

Speaker Change: It didn't have a significant impact, but wanted to mention it just as we think it may be a precursor of a little bit weaker hiring environment.

Ronan Kennedy: Thank you for that.

Steven S. Sintros: Yeah, that leads into my next question. That's what you've talked about on prior or the most recent calls: there is kind of a cautious tone out there with respect to hiring, but not seeing broad calls for reductions. Can you just kind of characterize or comment on the demand environment and how that informed your outlook for 4Q? You know, obviously, that was within the full-year guide, but what are your comments on the expectation for more modest growth in 2025?

Steven Sintros: That leads into my next question. That's what you've talked about on the prior or the most recent calls: is kind of a cautious tone out there with respect to hiring, but not seeing broad calls for reductions. Can you just kind of characterize our comment on the demand environment and how that informed your outlook for 4Q? Obviously, that was within the full year guide, but your comments on the expectation for more modest growth in 25?

Speaker Change: Thank you for that. Yeah, that leads into my next question. That's what you've talked about on the prior or the most recent calls is kind of a cautious tone out there with respect to hiring, but not seeing.

Speaker Change: broad calls for reductions. Can you just kind of characterize or comment on the demand environment and how that informed your outlook for 4Q? You know, obviously, that was within the full-year guide, but your comments on the expectation for more modest growth in 2025?

Steven Sintros: Sure. I don't think we're overbuilding in any impact from softer ads reductions or sort of overall demand over the next quarter or even into 25. Although, I'd say that context as we look toward next year, we don't expect to be getting a significant pull from higher wearer levels, but we're also not building in at this point, nor do we typically a more significant pullback in wearer levels, and we're really not seeing that yet.

Steven S. Sintros: Sure, I don't think we're overbuilding in any impact from softer advertising reductions or sort of overall demand over the next quarter or even into 25. Although I'd say that in that context as we look toward next year, we don't expect to be getting a significant pull from higher wear levels. But we're also not building in at this point, nor do we typically see a more significant pullback in wear levels. And we're really not seeing that yet.

Speaker Change: Sure, I don't think we're over...

Speaker Change: building in any impact from softer ads reductions or sort of overall demand over the next quarter or even into 2025. Although I'd say that that context as we look toward next year, you know, we don't expect to be getting a significant pull from higher wearer levels. But we're also not building in at this point, nor do we typically, you know, a more significant pullback in wearer levels. And we're really not seeing that yet. We're just seeing somewhat of a downtick.

Steven Sintros: We're just seeing somewhat of a downtick. The only thing I will say there is a little bit less hiring in the market does have some advantages. We're seeing less turnover in our own employees, and we're seeing less turnover in our customers' employees, which also does lead to a little bit of a better ability to manage merchandise costs with your customer when you're not dealing with sort of high turnover of employees within our customers.

Steven S. Sintros: We're just seeing somewhat of a downtick. The only thing I will say there is that a little bit less hiring in the market does have some advantages. We're seeing less turnover in our own employees, and we're seeing less turnover in our customers' employees, which also does lead to a little bit of a better ability to manage merchandise costs with your customers when you're not dealing with sort of high turnover of employees within our customers. That's very helpful.

Speaker Change: The only thing I will say there is a little bit less hiring in the market does have some advantages. We're seeing less turnover in our own employees, and we're seeing less turnover in our customers' employees.

Speaker Change: which also does lead to a little bit of a better ability to manage merchandise costs with your customer when you're not dealing with sort of high turnover of employees within our customer base.

Ronan Kennedy: from her face. That's very helpful.

Steven S. Sintros: And if I may just sneak in a third question, please, are there any end markets where you are seeing particular weakness or strength for that matter? No, it's really around the edges.

Ronan Kennedy: Thank you.

Ronan Kennedy: And if I may just sneak in a third, please, are there any end markets where you are seeing particular weakness or strength, for that matter? No, it's really around the edges. I wouldn't, I wouldn't say you know in the past we talked about oil or manufacturing. I wouldn't say there is any one area that it is sort of outweated in what we're seeing.

Speaker Change: That's very helpful. Thank you. And then if I may just...

Speaker Change: Sneak in a third, please. Are there any end markets where you are seeing particular weakness or strength for that matter? No, it's really around the edges. I wouldn't I wouldn't say, you know in the past we've talked about oil or manufacturing I wouldn't say there is any one area that it is sort of outweighed in what we're seeing

Steven S. Sintros: I wouldn't I wouldn't say, you know, in the past, we've talked about oil or manufacturing; I wouldn't say there is any one area that it is sort of outweighed by. Thank you. Appreciate it. Thank you. One moment for our next question. Our next question comes from Andrew Wittmann with Barrett. Your line is open. Great, thanks.

Ronan Kennedy: Thank you. I appreciate it.

Operator: Thank you. One moment for our next question.

Speaker Change: Thank you. Appreciate it. Thank you.

Andrew Wittmann: Our next question comes from Andrew Wittmann with Beard. Your line is open. Great. Thanks and good morning, guys.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Andrew Wittmann with Barrett. Your line is open.

Shane F. OConnor: Good morning, guys. I had a couple of questions here just to understand, quarter a little bit better than I'll go a little bit broader picture but I guess maybe could you could you just help remind us on the year-over-year margin comparison you mentioned that last year's health care costs and legal costs were elevated so that was kind of a known easy margin comp but but you went on to say that you know you actually had leverage in these other areas so just to level set a little bit can you help us quantify or understand what you think the unusual amount of health care or legal costs were in the prior year so we can understand maybe what the underlying benefit from merchandise labor those things were energy would be another thing to comment on in that as well, Yeah, I'll take that, Andy.

Andrew Wittmann: I've had a couple of questions here just to understand the quarter a little bit better than I'll go a little bit broader picture but I guess maybe could you could you just help remind us on the year over your margin comparison you mentioned that last year's health care costs and legal costs were elevated so that was kind of a known easy margin comp but but you would understand that you know you actually have leverage in these other areas so just to level set a little bit can you help us quantify or understand what you think the unusual amount of health care or legal costs were in the prior year so we can understand maybe what the underlying benefits from merchandise labor those things were energy would be another thing to come and done in that as well. Yeah, I'll take that Andy when you take a look at our comparison in our core year over year the comparison is about 170 basis points so last year in our third quarter as I had mentioned as you you just mentioned health care claims ran high and as a result we had corresponding high expense related to that as well as that reserve those two items when we compare with this year account for about a hundred basis points of that point the other items that I had mentioned which were the favorable trends in our merchandise our payrolls and other operating input costs account for that 70 basis points of difference and really those three factors are contributing equally to the the favorable favorable cost. Okay, that's super helpful I guess you guys always know I asked that question so you would ask about energy yeah I've spoken to that energy was 4.3% of revenues in both quarters so that was a consistent comparison I guess just I mean given that 70 basis points for these other factors it's a pretty good leverage I guess I look at the fourth quarter margin guidance you guys beat by a lot here I got to think that you came in a little bit better than your plan obviously you did because you raised the guidance but you didn't really pass through any the margin benefits that you saw in the fiscal third quarter to change in your fiscal fourth quarter margin outlook so I just was wondering if you could give the thought process behind that if you're being conservative or if there's an offset somewhere else in the P&L that would suggest that this margin benefit you saw in the quarter you're going to come 14.

Andrew John Wittmann: Great, thanks. Good morning, guys. I just had a couple of questions here just to understand.

Andrew John Wittmann: quarter a little bit better than I'll go a little bit.

Andrew John Wittmann: broader picture, but

Andrew John Wittmann: I guess maybe, could you just help remind us

Andrew John Wittmann: On the year-over-year margin comparison, you mentioned that last year's health care costs and legal costs were elevated, so that was kind of a known easy margin comp, but you went on to say that you actually had leverage in these other areas. So just to level set a little bit, can you help us?

Andrew John Wittmann: quantify or understand what you think the unusual amount of health care or legal costs were in the prior year so we can understand.

Andrew John Wittmann: Maybe what the underlying benefit from merchandise, labor, those things were. Energy would be another thing to comment on in that as well.

Shane F. OConnor: When you take a look at our comparison in our core year over year, the comparison is about 170 basis points. So last year in our third quarter, as I had mentioned, and you just mentioned, healthcare claims ran high, and as a result, we had corresponding high expenses related to that, as well as that reserve.

Andrew John Wittmann: Yeah, I'll take that, Andy. When you take a look at our comparison in our core year-over-year, the comparison is about 170 basis points.

Speaker Change: So last year in our third quarter, as I had mentioned, as you just mentioned, health care claims

Speaker Change: ran high, and as a result, we had corresponding high expense related to that, as well as that reserve. Those two items, when we compare with this year, account for about 100 basis points of that, about a point.

Shane F. OConnor: Those two items, when we compare them with this year, account for about 100 basis points of that. The other items that I had mentioned, which were the favorable trends in our merchandise, our payrolls, and other operating input costs, account for that 70 basis points of difference. And really, those three factors are contributing equally to the favorable trends. Okay, that's super helpful.

Speaker Change: The other items that I had mentioned, which were the favorable trends in our merchandise, our payrolls, and other operating input costs account for that 70 basis points of difference.

Speaker Change: And really, those three factors are contributing equally to the favorable comp.

Shane F. OConnor: I guess you guys always know when I ask that question, so thank you for being ready for it. Actually, you had asked about energy. Energy, yeah. Hadn't spoken to that yet.

Speaker Change: Okay, that's super helpful. I guess you guys always know when I ask that question, so thanks for being ready for it.

Shane F. OConnor: Energy was 4.3% of revenues in both quarters, so that was consistent. I guess just, I mean... Given that 70 racist points is for these other factors, still pretty good leverage, I guess. I look at the fourth quarter margin guidance. You guys beat by a lot here. I gotta think that you came in a little bit better than your plan, obviously you did because you raised the guidance, but you didn't really pass through any of the margin benefits that you saw in the fiscal third quarter to change your fiscal fourth quarter margin outlook.

Speaker Change: You had asked about energy. Energy, yeah. Spoken to that. Energy was 4.3% of revenues in both quarters, so that was a consistent comparison.

Speaker Change: That's helpful. I guess just, I mean...

Speaker Change: Given that 70 basis points is for these other factors, it's still pretty good leverage, I guess.

Speaker Change: I look at the fourth quarter margin guidance. You guys beat by a lot here. I got to think that you came in a little bit better than your plan. Obviously you did because you raised the guidance, but you didn't really pass through any of the margin benefits that you saw in the fiscal third quarter to.

Shane F. OConnor: So I just was wondering if you could give the thought process behind that if you're being conservative or if there's an offset somewhere else in the P&L, would suggest that this margin benefit that you saw in the quarter is going to come through. When we take a look at our outperformance in the third quarter, some of that was informed by the performance in our specialty garments, as well as our first aid business.

Speaker Change: a change in your fiscal fourth quarter margin outlook. So I just was wondering if you could give the thought process behind that. If you're being conservative or if there's an offset somewhere else in the P&L, it would suggest that this margin benefit you saw in the quarter is going to come through in 4Q.

Shane O'Connor: Yeah, when we take a look at our outperformance in the third quarter, some of that was informed by the performance in our specialty garments as well as our first aid business.

Speaker Change: When we take a look at our outperformance in the third quarter, some of that was informed by the performance in our specialty garments as well as our first aid business.

Shane O'Connor: As we've mentioned, specialty garments is usually seasonal and has a down quarter. So, sequentially, obviously, that performance would be a headwind. So, we weren't expecting that; the benefit that we saw in the third quarter to carry over. Cor Laundries did contribute some of that, but again, when we talk about things like our merchandise or our payrolls, some of that was actually anticipated; those merchandise trends that we've been talking about. We've sort of been receiving as we've gone throughout the year, and that favorable trend continued into the third quarter. A lot of that was anticipated to carry forward into the fourth.

Shane F. OConnor: As we've mentioned, specialty garments are usually seasonal and have a down fourth quarter, so sequentially, obviously, that performance would be a headwind. We weren't expecting the benefit that we saw in the third quarter to carry over.

Speaker Change: As we've mentioned, Specialty Garments is usually seasonal and has a down quarter, so sequentially, obviously, that performance would be a headwind. So we weren't expecting the benefit that we saw in the third quarter to carry over.

Shane F. OConnor: Core laundries did contribute some of that, but again, when we talk about things like our merchandise or our payrolls, some of that was actually anticipated, those merchandise trends that we've been talking about. We've sort of been receiving them as we've gone throughout the year, and that favorable trend continued into the third quarter. A lot of that was anticipated to carry forward into the fourth. Our other operating input costs that trended favorably in the quarter, some of that we were pleased to see, and some of that we believe relates to some of the sourcing, and as Steve mentioned, we are putting more things out to bid. But they do tend to be variable from quarter to quarter as well.

Speaker Change: Gourlandry did contribute some of that.

Speaker Change: But, again, when we talk about things like our merchandise or our payrolls, some of that was actually anticipated. Those merchandise trends that we've been talking about, we've sort of been receiving as we've gone throughout the year, and that favorable trend continued into the third quarter. A lot of that was anticipated to carry forward into the fourth. Our other operating input costs...

Shane O'Connor: Our other operating input costs that trend is favorable in the quarter. Some of that, you know, we were pleased to see, and some of that, we believe, relates to some of the sourcing. As David mentioned, we are putting more things out to bid, but they do tend to be variable from quarter to quarter as well. So, some of the favorability that we saw in the third quarter, we were cautious as it relates to the forecast for the fourth, just to make sure that they weren't being influenced by timing.

Speaker Change: that trended favorable in the quarter. Some of that, you know, we were pleased to see, and some of that, we believe, relates to some of the sourcing. And as Steve had mentioned, we are putting more things out to bid.

Shane F. OConnor: So some of the favorability that we saw in the third quarter, we were cautious as it relates to the forecast for the fourth, just to make sure that they weren't being influenced by timing. Okay, I appreciate that. And then, maybe, Steve, I have one for you here.

Speaker Change: but they do tend to be variable from quarter to quarter as well. So some of the favorability that we saw in the third quarter, we were cautious as it relates to the forecast for the fourth, just to make sure that they weren't being influenced by timing items.

Andrew Wittmann: I appreciate that.

Andrew Wittmann: And then, I guess, maybe Steve, one for you here. I guess you just wanted to dig into some of your comments on the national accounts that you had in your prepared remarks. You mentioned that you installed in your account this before. I think by my calculation, it's around 50 basis points of revenue just for that large account. You said top three; I think it's just said in the script.

Speaker Change: Okay, I appreciate that. And then I guess maybe Steve, one for you here.

Steven S. Sintros: I guess I just wanted to dig into some of your comments on the national accounts that you had in your prepared remarks. You mentioned that you installed a large national account in your fiscal first quarter of 24. I think you guys kind of talked about this before; I think, by my calculation, around 50 basis points of revenue just for that large account. You said top three, which I think is what you said in the script.

Speaker Change: I guess I just wanted to dig into some of your comments on the national accounts that you had in your prepared remarks. You mentioned that you installed in your fiscal first quarter of 24 a large national account. I think you guys kind of talked about this before, I think by my calculation.

Speaker Change: It's around 50 basis points of revenue just for that large account. He said top three, I think is what you said in the script.

Steven S. Sintros: But it sounded like you had other comments on national accounts. Maybe you were talking about the pipeline. So I just wanted you to clarify, were your comments on the national account business referring retroactively to things that you've already won, or were the comments about your enthusiasm or your positivity on the national accounts looking at what you've got out in terms of bids or quotes for these national accounts, maybe the number of those, or stuff that you've won that hasn't yet been installed?

Steven Sintros: But it's kind of like you had other comments on national accounts; maybe you talk about the pipeline. So, I just wanted you to clarify: were your comments on the national account business referring retroactively to things that you've already won, or are the comments about your enthusiasm or your positivity on the national accounts looking at what you've got out in terms of bids or quotes for these national accounts, maybe the number of those, or stuff that you've won that hasn't yet been installed?

Speaker Change: It sounded like you had other comments on national accounts, maybe you talked about the pipeline. So I just wanted you to clarify.

Speaker Change: for your comments on the national account business.

Speaker Change: [inaudible]

Speaker Change: or stuff that you've won that hasn't yet been installed.

Steven Sintros: And maybe if you wanted to talk even more broadly, what you're seeing going on in the national accounts is more of them changing hands today, and what's the competitive dynamic around that. Thank you. I think the comments was a little bit of all of the above, right? So, we definitely have had good success during this year. And again, wanted to highlight that account from earlier in the year, because that account being installed early in the year, really right at the beginning of our last or fiscal year, will provide a difficult comp on growth as we head into next year.

Steven S. Sintros: And maybe if you wanted to talk even more broadly, what you're seeing going on in the national accounts, are more of them changing hands today? And what's the competitive dynamic around that? Thank you. Yeah, so I think the comments covered a little bit of all of the above, right?

Speaker Change: And maybe if you wanted to talk even more broadly, what you're seeing going on in the national accounts, are more of them changing hands today?

Speaker Change: and what's the competitive dynamic around that.

Speaker Change: Thank you. So I think the comments was a little bit of all of the above, right? So we definitely have had good success during this year and again wanted to highlight that account from earlier in the year.

Steven S. Sintros: So we definitely have had good success this year, and again, wanted to highlight that account from earlier in the year because that account being installed early in the year, really right at the beginning of this fiscal year, will provide a difficult comparison on growth as we head into next year. But the commentary was also around what we are seeing is good opportunities materializing in the market. I guess I would say the pipeline.

Speaker Change: because that account...

Speaker Change: being installed early in the year, really right at the beginning of this fiscal year, will provide a difficult comp on growth as we head into next year. But the commentary was also around what we are seeing is good opportunities materializing in the market.

Steven Sintros: But the commentary was also around what we are seeing as good opportunities materializing in the market. You know, I guess I would say the pipeline. It wasn't really specifically about accounts that we've signed that have yet to install, but it's just more about the activity. And yeah, we probably are seeing, on balance, maybe a few more programs out there and available with some opportunities. Probably falling into the category of folks, you know, again, coming through an inflationary time and looking for opportunities. Good.

Steven S. Sintros: It wasn't really specifically about accounts that we've signed that have yet to be installed, but it's just more about the activity. Yeah, we probably are seeing, on balance, maybe a few more programs out there and available with some opportunities, probably falling into the category of folks, again, coming through an inflationary time and looking for opportunities. Okay, I'll leave it there. Thanks, guys, and have a good day. Thanks, Andy.

Speaker Change: You know, I guess I would say the pipeline. It wasn't really specifically about accounts that we've signed.

Speaker Change: that have yet to install, but it's just more about the activity. And, yeah, we probably are seeing, on balance, maybe a few more programs out there and available.

Speaker Change: with some opportunities, probably falling into the category of folks, you know, again, coming through an inflationary time and looking for opportunities.

Andrew Wittmann: I'll leave it there. Thanks, guys, and have a good day.

Speaker Change: Okay I'll leave it there. Thanks guys and have a good day. Thanks Andy.

Kartik Mehta: Our next question comes from Kartik Mehta with North Coast Research Alliance Open.

Operator: Our next question comes from Kartik Mehta with North Coast Research. Your line is open. Good morning.

Speaker Change: Our next question comes from Kartik Mehta with North Coast Research. Your line is open.

Kartik Mehta: Good morning. Steve, I just wanted to go back to your comments on pricing and just understand a little bit. I know during the inflationary series you were getting more than normal pricing today. Hey, is the competition increase that you're not getting pricing increases, or are you getting price increases in their model? We certainly continue to get price, right? But I think when you think about pricing increases and you think about the environment, we're consistently going through a cycle where we're renewing accounts and going through annual escalators. And so in general, as you go through those cycles, yeah, it's a balance between getting more price from your customers appropriately based on the profile of the customer, also trying to secure renewals in the face of potentially competition.

Steven S. Sintros: Steve, I just wanted to go back to your comments on pricing and understand a little bit. I know during the inflationary period, you were getting a little bit more than normal prices. Today, is the competition increasing so that you're not getting price increases, or are you getting price increases, and they're modest? We certainly continue to get price increases, right? But I think when you think about price increases and you think about the environment, we're consistently going through a cycle where we're renewing accounts and going through annual escalators.

Kartik Mehta: Good morning. Steve, I just wanted to go back to your comments on pricing and just understand a little bit, I know during the inflationary period, you were getting a little bit more than normal pricing. Today, is the competition increase that you're not getting price increases or are you getting price increases and they're modest?

Steve: We certainly continue to get price, right? But I think when you think about price increases and you think about the environment, we're consistently going through a cycle where we're renewing accounts.

Steven S. Sintros: And so in general, as you go through those cycles, Yeah, it's a balance between getting more price from your customers appropriately based on the profile of the customer, also trying to secure renewals in the face of potentially competition. And again, I think just customers out there looking at all costs. I mean, we've all gone through years of sort of mounting costs in many, many areas.

Steve: and going through annual escalators. And so in general, as you go through those cycles,

Speaker Change: Yeah, it's a balance between

Speaker Change: getting more price from your customers appropriately based on the profile of the customer, also trying to secure renewals in the face of potentially competition. And again, I think just customers out there,

Steven Sintros: And again, I think just customers out there looking at all costs. I mean, we've all gone through years of sort of mounting costs in many, many areas. And I think there's just more activity out there right now. And continuing to develop and maintain relationships with our customers and show the value of the service is really a big focus to make sure we can secure renewals at appropriate price and going forward. But it's really just more activity out there in the market. And we need to look at new large accounts or new enterprise accounts. Are you seeing more opportunities there as well?

Speaker Change: looking at all costs. I mean, we've all gone through years of sort of mounting costs in many, many areas. And I think there's just more activity out there right now. And, you know,

Steven S. Sintros: And I think there's just more activity out there right now. And, you know, continuing to develop and maintain relationships with our customers and show the value of the service is really a big focus to make sure we can secure, you know, renewals at appropriate prices going forward. But there's really just more activity out there in the market, and we need to look at the kind of new large accounts or new enterprise accounts.

Speaker Change: continuing to develop and maintain relationships with our customers and show the value of the service is really a big focus to make sure we can secure you know renewals at appropriate pricing going forward but it's really just more activity out there in the market.

Speaker Change: And we need to look at some kind of new large accounts or new enterprise accounts.

Steven S. Sintros: But are you seeing more opportunity there as well? And could that result in greater price competition? I know new accounts have always been competitive, but I'm wondering if that environment changes at all as companies kind of try to look for ways to curtail costs. Yeah, no, I think I think we are in a unique cycle right now.

Steven Sintros: Could that result in greater price competition? I know new accounts have always been something competitive. I'm wondering if that environment changes at all as companies trying to look for tailing costs.

Speaker Change: Are you seeing more opportunity there as well and could that result in greater price competition? I know new accounts have always been something.

Speaker Change: competitive. I'm wondering if that environment changes at all as companies kind of try to look more for tailing costs.

Steven S. Sintros: I think coming off of inflation at the levels that were experienced over the last couple of years. I mean, if you think about it, we went through COVID, which was a cycle where, in general, customers were very happy if their service providers were able to show up and service them, which I think we did a great job of during that cycle. And then you hit a period where costs really escalated very significantly.

Steven Sintros: Yeah, no, I think I think we are in a unique cycle right now. I think coming off of inflation at the levels that were experienced over the last couple of years. I mean, if you think about it, we went through COVID, which was a cycle where, in general, customers were very happy if their service providers were able to show up and service them, which I think we did a great job up through that cycle. And then you hit a period where cost really escalated very significantly. And now, as things are settling down in both areas, I think yes, I think you are entering a period of elevated competition and focus by customers on cost.

Speaker Change: Yeah, no, I think we are in a unique cycle right now. I think coming off of...

Speaker Change: inflation at the levels that were experienced over the last couple of years. I mean, if you think about it, we went through COVID, which was a cycle where

Speaker Change: In general, customers were very happy if their service providers were able to show up and service them, which I think we did a great job of through that cycle. And then you hit a period where cost really escalated very significantly.

Steven S. Sintros: And now as things are settling down in both areas, I think yes, I think you are entering a period of elevated competition and focus by customers on cost. And that does provide sales opportunities, and we're probably seeing some of that as well, but it does provide some other challenges in those other areas. And just one last one, on your FY25 comment, when you say modest growth, would you anticipate a kind of growth similar to what you're going to see in the fourth quarter, or would you define it a little bit differently?

Speaker Change: and now as things are settling down in in both areas I think yes I think you are entering a period of elevated competition and focus by customers on cost and that does provide sales opportunities and we're probably seeing some of that as well but it does provide some other challenges in in those other areas.

Steven Sintros: And that does provide sales opportunities. And we're probably seeing some of that as well, but it does provide some other challenges in those other areas.

Steven Sintros: In just one last one on your F blog. If I have quite a few comments, we see modest growth. Would you anticipate can it grow similar to what you're going to see in a quarter? Or would you define it a little bit differently? I think in the prepared remarks, I said that we expect growth next year to be more modest than our fourth quarter. And again, we do want to highlight that it's early to be giving that outlook. And we just in the nature of transparency, want to make sure we're communicating that trend. And obviously, there's a lot that can happen between now and then and over the course of fiscal 25, which is part of the reason I mentioned opportunities for national accounts.

Speaker Change: And just one last one. On your FY25 comment, when you say modest growth, would you anticipate kind of growth similar to what you're going to see in the fourth quarter, or would you define it a little bit differently?

Steven S. Sintros: I think in the prepared remarks I said that we expect growth next year to be more modest than our fourth quarter and again we do want to highlight that it's early to be giving that outlook and we just in the in the nature of transparency want to make sure we're communicating that trend and obviously there's a lot that can happen between now and then and over the course of fiscal 25 which is part of the reason I mentioned opportunities for national accounts that you know could could materialize and other things that could impact that trajectory but just based on the the tough annualization of a higher pricing environment as well as the account we installed early last year those comps are tougher heading into the year. Thank you so much.

Speaker Change: I think in the prepared remarks, I said that we expect growth next year to be more modest than our fourth quarter. And again, we do want to highlight that it's early to be giving that outlook.

Speaker Change: And we just, in the nature of transparency, want to make sure we're communicating that trend. And obviously there's a lot that can happen between now and then and over the course of Fiscal 25, which is part of the reason I mentioned opportunities for national accounts.

Steven Sintros: That, you know, could could materialize and other things that could impact that trajectory, but just based on the top annualization of a higher pricing environment, as well as the account we installed early last year. Those prompts are tougher heading into the here.

Speaker Change: that, you know, could materialize and other things that could impact that trajectory. But just based on the tough annualization of a higher pricing environment, as well as the account we installed early last year, those comps are tougher heading into the year.

Kartik Mehta: Thank you so much. I really appreciate it.

Speaker Change: Thank you so much. I really appreciate it.

Steven S. Sintros: I really appreciate it. Thank you. Our next question comes from Luke McFadden with William Blair. Your line is open. Hi, good morning. This is Luke McFadden on for Timothy Mulrooney and William Blair.

Luke McFadden: Our next question comes from Luke McFadden with William Blair. Your line is open. Hi, good morning.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Luke McFadden with William Blair. Your line is open.

Operator: Thanks for taking our questions today. We wanted to ask, with the one-year anniversary of the Clean Acquisition... We're curious whether the business has met expectations relative to when you first closed the deal. Were there any surprises that were positive or negative relating to the business operations or the integration process? Yeah, good question. No, we've been very happy, and I would say virtually everything has met our expectations. We talked a year ago about how we were going to be patient on some of the more complex aspects of the integration due to the technology work that we're doing more broadly as a company.

Luke McFadden: This is Luke McFadden on for Tim O'Roonion, William Blair. Thanks for taking our questions today.

Speaker Change: Hi, good morning. This is Luke McFadden on for Timothy Mulrooney and William Blair. Thanks for taking our questions today.

Steven Sintros: I wanted to ask, with the one year anniversary of the Clean acquisition, we're curious that the one you first closed the deal. Were there any surprises at a positive or negative relating to the business operations or the integration process? Yeah, good question. No, we've been very happy, and I would say virtually everything has met our expectations. We talked a year ago how we're going to be patient on some of the more complex aspects of the integration due to the technology work that we're doing more broadly as a company. So some of those facilities continue to run separately from some of our facilities, and there's still integration activities to come.

Benjamin Luke McFadden: I wanted to ask, with the one-year anniversary of the Clean Acquisition...

Benjamin Luke McFadden: We're curious if the business has met expectations relative to when you first closed the deal. Were there any surprises, either positive or negative, relating to the business operations or the integration process?

Speaker Change: Yeah, good question. No, we've been very happy and I would say...

Speaker Change: Virtually everything has met our expectations.

Speaker Change: We talked a year ago how we're going to be patient on some of the more complex aspects of the integration due to the technology work that we're doing more broadly as a company.

Operator: So, some of those facilities continue to run separately from some of our facilities, and there's still integration activities to come. But our expectations in the first year were to kind of pick off that a little bit more low-hanging fruit type synergies of purchasing power and supply chain and some other areas, as well as make sure that we're maintaining the employees and the customers that are all very important assets from that acquisition.

Speaker Change: So some of those facilities continue to run separately from some of our facilities, and there's still integration activities to come.

Steven Sintros: But our expectations in the first year were to be able to kind of pick off that a little bit more low-hanging crude-type synergies of purchasing power and supply chain and some other areas, as well as make sure that we're maintaining the employees and the customers that all are very important assets from that acquisition. And we've been very successful doing that. And I know it's not the largest piece of our overall business, but it has performed ahead of where we thought it would coming into the year.

Speaker Change: But our expectations in the first year were to be able to kind of pick off that a little bit more low-hanging fruit type synergies of purchasing power and supply chain and some other areas, as well as make sure that we're maintaining the employees and the customers.

Operator: And we've been very successful doing that. And I know it's not the largest piece of our overall business, but it has performed ahead of where we thought it would in the future. Great, very helpful. And then just kind of sticking with, you know, kind of inorganic growth here.

Speaker Change: that all are very important assets from that acquisition, and we've been very successful doing that. And I know it's not the largest piece of our overall business, but it has performed ahead of where we thought it would coming into the year.

Luke McFadden: Very, very helpful. And then just kind of sticking with kind of an organic growth here.

Speaker Change: Great, very helpful. And then just kind of sticking with, you know, kind of inorganic growth here, how are you seeing the shape of the M&A environment from where you sit today and how would you characterize your appetite for acquisitions maybe as we move through the end of the year here and into 2025?

Luke McFadden: How are you seeing the shape of the M&A environment from where you said today, and how would you characterize your appetite for acquisitions? Maybe as we move through the end of the year here and into 2025? Yeah, certainly the appetite is still strong. I think, as we've talked about over the years, I would say that the activity right now is a little spotty. We see some interest, but I wouldn't say there's an overwhelming amount of activity out there right now. But you know, the clean acquisition materialized somewhat out of nowhere very quickly, you know, several months before we did that deal.

Steven S. Sintros: How are you seeing the shape of the M&A environment from where you sit today? And how would you characterize your appetite for acquisitions, maybe as we move through the end of the year here and into 2025? Yeah, certainly the appetite is still strong.

Steven S. Sintros: I think, as we've talked about over the years, I would say that the activity right now is a little spotty. We see some interest, but I wouldn't say there's an overwhelming amount of activity out there right now. But, you know, the clean acquisition materialized somewhat out of nowhere very quickly, several months before we did that deal.

Speaker Change: Yeah, certainly the appetite is still strong. I think as we've talked about over the years, I would say that the activity right now is a little spotty.

Speaker Change: We see some interest, but I wouldn't say there's an overwhelming amount of activity out there right now.

Speaker Change: The clean acquisition materialized somewhat out of nowhere very quickly several months before we did that deal. So we continue to develop and keep the relationships in the marketplace and certainly have an appetite. I talk about our cash flows improving and the healthy balance sheet. We certainly are interested for good assets as they become available.

Steven S. Sintros: So we continue to, you know, develop and keep relationships in the marketplace and certainly have an appetite. I talked about our cash flows improving and our healthy balance sheet. We certainly are interested in good assets as they come. Great, thanks so much. Thank you. Our next question comes from Andrew Steinerman with J.P. Morgan. Your line is open. Hi, it's Andrew.

Steven Sintros: So we continue to, you know, develop and keep the relationships in the marketplace and certainly have an appetite. I talked about our cash flows improving and the healthy balance sheet. We certainly are interested in good assets as they come available.

Luke McFadden: Great. Thanks so much.

Speaker Change: Great, thanks so much. Thank you.

Andrew Steinerman: Our next question comes from Andrew Starnerman; which AP Morgan, your line is open. Hi, Andrew. Two questions. One on merchandise amazement. One on customer service. Merchandise amazement. Could you just quantify that a little bit for the third quarter? I know thinking back to the second quarter, it was like flat, so maybe slightly up. It just sounds like we're really at an inflection point in merchandise amazement, being a tailwind. Would you characterize it that way?

Speaker Change: Our next question comes from Andrew Steinerman with J.P. Morgan. Your line is open.

Operator: Two questions, one on merchandise amortization and one on customer service. Merchandise amortization, could you just quantify that a little bit for the third quarter? I know, thinking back to the second quarter, it was like flat, so maybe slightly up.

Andrew Charles Steinerman: Hi, it's Andrew. Two questions, one on merchandise amortization, one on customer service. Merchandise amortization, could you just quantify that a little bit for the third quarter? I know, thinking back to the second quarter, it was like flat, so maybe slightly up. It just sounds like we're really at an inflection point.

Shane F. OConnor: It just sounds like we're really at an inflection point in merchandise amortization being a tailwind. Would you characterize it that way? My second question is about customer service. I know it's long been your goal and your vision to become the best service provider, and in your prepared remarks, you talked about an enhanced customer service experience. How do you measure customer service experience? Is it NPS?

Andrew Charles Steinerman: and Merchandise Amortization being a tailwind, would you characterize it that way? My second question is about customer service. I know it's long been your goal and your vision to become the best service provider, and in your prepared remarks you talked about enhanced customer service experience. How do you measure customer service experience? Is it NPS? Is it a client retention score? Where are you?

Andrew Steinerman: My second question is about customer service. I know it's long been your goal and your vision to become the best service provider, and you prepared remarks you talked about. Enhance customer service experience. How do you measure customer service experience? Like, is it NPS? Is it a client retention score? Like, where are you currently on that service experience journey? Yes, so Andrew, as it relates to the merchandise, you're right. Earlier in the year, when we were talking about the impact of merchandise on our operating income, it was relatively flat. As we've gone through the year, you know, the benefit that we've seen there has continued to expand; it's still relatively nominal.

Steven S. Sintros: Is it a client retention score? Where are you currently on that service experience journey?

Andrew Charles Steinerman: currently on that service experience journey.

Shane F. OConnor: So, Andrew, as it relates to merchandise, you're right. Earlier in the year when we were talking about the impact of merchandise on our operating income, it was relatively flat. As we've gone through the year, you know, the benefit that we've seen there has continued to expand. But it's still relatively nominal.

Andrew Charles Steinerman: Yes, so Andrew, as it relates to the merchandise, you're right, earlier in the year when we were talking about the impact of merchandise on our operating income,

Andrew Charles Steinerman: It was relatively flat as we've gone through the year.

Shane F. OConnor: The impact on the quarter was a favorable benefit of about 20 to 30 basis points. Yeah, as I had mentioned, aside from that health care claims expense comparison and the legal, the other items, the benefit from those other items was equally shared, accounting for that 70% basis. Yeah, I'll take the customer service question, Andrew. In terms of how we measure ourselves, you know, retention has always been a key factor. And over the last year, we have introduced, for the first time, a more formal NPS program with our customers. And I would say it's growing in terms of responses and so on. But we're not at the point yet where we'd be communicating results.

Speaker Change: You know, the benefit that we've seen there has continued to expand. It's still relatively nominal. The impact on the corridor was a favorable benefit of about 20 to 30 basis points.

Shane O'Connor: The impact on the quarter was a favorable benefit of about 20 to 30 basis points. As I had mentioned, aside from that healthcare claims expense comparison and the legal, the other items, the benefit from those other items were equally shared, accounting for that 70 basis point comparison.

Speaker Change: Okay.

Speaker Change: Yeah, as I had mentioned, aside from that health care claims expense comparison and the legal, the other items, the benefit from those other items were equally shared accounting for that 70 basis points.

Steven Sintros: Yeah, I'll take the customer service question, Andrew. In terms of how we measure ourselves, you know, retention has always been a key factor, and over the last year we have introduced, for the first time, a more formal NPS program with our customers, and I would say it's growing in terms of responses and so on, so we're not at the point yet where we'd be communicating results. But we've been pleased with the early, the early results that we've been getting, and I think that lines up with our feeling that overall in the market, we have a pretty good service reputation.

Speaker Change: Comparison.

Speaker Change: Yeah, I'll take the customer service question, Andrew.

Speaker Change: In terms of how we measure ourselves

Speaker Change: retention has always been a key factor and over the last year we have introduced

Speaker Change: for the first time, a more formal NPS program with our customers. And I would say it's growing in terms of responses and so on, so we're not at the point yet where we'd be communicating results. But we've been pleased with the early results that we've been getting, and I think that lines up with our feeling that overall in the market we have a pretty good service reputation.

Steven S. Sintros: But we've been pleased with the early results that we've been getting, and I think that lines up with our feeling that, overall, in the market, we have a pretty good service reputation. But that being said, and as we've talked about before, with over 250 locations out there, the goal is really consistency location by location, state to state, coast to coast, to really get to the point where, as we go out to bid for services, that reputation is differentiated and that, you know, our retention can match. And a lot of the investments we're making in, whether it's facilities, technology, and people, are all designed around, So again, I think it's.

Steven Sintros: But that being said, and as we've talked about before, with over 250 locations out there, the goal is really consistency location by location, state to state, coast to coast, to really get to the point where, as we go out to bid for services, that reputation is differentiated and that, you know, our retention can match. And a lot of investments we're making in whether it's facilities, technology, and people are all designed around, you know, really enhancing that outcome. So again, I think it's always been a focus of the company, but as we invest in technology in some additional ways to measure true customer satisfaction, it's becoming an even bigger focus.

Speaker Change: But that being said and as we've talked about before, with over 250 locations out there, the goal is really consistency location by location.

Speaker Change: state to state, coast to coast.

Speaker Change: to really get to the point where, as we go out to bid for services, that that reputation is differentiated and that, you know, our retention can match. And a lot of investments we're making in, whether it's facilities, technology, and people, are all designed around, you know, really enhancing that outcome.

Steven S. Sintros: It's always been a focus of the company, but as we invest in technology and some additional ways to measure true customer satisfaction, it's becoming an even bigger focus. Thank you very much. Thank you. Our next question comes from Josh Chan with UBS. Your line is open.

Speaker Change: So, again, I think it's always been a focus of the company, but as we invest in technology and some additional ways to measure true customer satisfaction, it's becoming an even bigger focus.

Joshua Chan: Our next question comes from Josh Chan with UBS. Your line is open. Hi, good morning, Steven. Thanks for taking my questions.

Speaker Change: Our next question comes from Josh Chan with UBS. Your line is open.

Operator: Hi, good morning, Steve and Shane. Thanks for taking my questions. On retention levels, are you successful at maintaining your typical retention rates now even though you might have to concede some on price, or is retention starting to dip below your normal level? Yeah, I would say, as we've said in the last couple quarters, it has ticked up, and I think a lot of it is around the pricing environment and the more competitive nature.

Joshua Chan: On retention levels, are you successful at maintaining your typical retention rates now even though you might have to concede some on price, or is retention starting to dip below your normal levels? Yeah, I would say we've said it's been the last couple quarters. It has picked up, and I think a lot of it is around the pricing environment and the more competitive nature. I don't want to overestimate that, but I think, yeah, I would have to say it's up a bit as well. Lost accounts, I should say, compared to maybe our, not as much our historical, but I would say we went through a cycle where we really saw improved results in that area.

Joshua K. Chan: Hi, good morning Stephen and Shane. Thanks for taking my questions. On retention levels, are you successful at maintaining your typical retention rates now even though you might have to concede some on price or is retention starting to dip below your normal levels?

Speaker Change: the pricing environment and the more competitive

Operator: I don't want to overestimate that, but I think, yeah, I would have to say it's up a bit as well. Lost accounts, I should say, compared to maybe our, not as much our historical, but I would say we went through a cycle where we really saw improved results in that area. But again, I think the environment we're in right now is, on balance, a bit more competitive based on some of the factors I mentioned. I appreciate that color.

Speaker Change: I don't want to overestimate that, but I think, yeah, I would have to say it's up a bit as well. Lost accounts, I should say, compared to maybe our

Speaker Change: Not as much our historical, but I would say we went through a cycle where we really saw improved results in that area. But again, I think the environment we're in right now is on balance a bit more competitive based on some of the factors I mentioned earlier.

Steven Sintros: But again, I think the environment we're in right now is, on balance, a bit more competitive based on some of the factors I mentioned earlier.

Steven Sintros: All right, I appreciate that color. And I guess looking forward, how should we think about margin expansion in the face of slower growth? Is there any way that you can kind of fall apart or quantify that for us going forward?

Steven S. Sintros: And then, I guess looking forward, how should we think about margin expansion in the face of slower growth? Is there any way that you can kind of ballpark or quantify that for us going forward? Yeah, I think at this point, looking into next year, we're really not in a position to make additional comments about margins or the results going forward. But I think, as I mentioned in our prepared remarks and as Shane mentioned, we are pleased with some of the cost trends.

Speaker Change: Alright, I appreciate that color. And then I guess looking forward, you know, how should we think about margin expansion in the face of slower growth? Is there any way that you can kind of ballpark or quantify that for us going forward?

Steven Sintros: Yeah, I think at this point, looking into next year, we're really not in a position to make additional comments about margins or the results going forward. I think, as I mentioned, and I prepared remarks, and as Shane mentioned, we are pleased with some of the trends of cost. Someone mentioned before sort of hitting the inflection point on merchandise, which is somewhat cyclical, but also we're doing a number of things from a sourcing perspective and an operational execution perspective that we continue will focus on to drive cost improvements, particularly if growth is going to be slow.

Speaker Change: Yeah, I think at this point, looking into next year, we're really not in a position to make additional comments about margins or the results going forward. I think, as I mentioned in our prepared remarks and as Shane mentioned, we are pleased with some of the trends of cost. Someone mentioned before, sort of hitting the inflection point on merchandise.

Steven S. Sintros: Someone mentioned before, sort of hitting the inflection point on merchandise, which is somewhat cyclical, but we're doing a number of things from a sourcing perspective and an operational execution perspective that we continue to focus on to drive cost improvements, particularly if growth is going to be slower. Okay, yeah, thank you.

Speaker Change: which is somewhat cyclical, but also we're doing a number of things from a sourcing perspective and an operational execution perspective that we continue to focus on to drive cost improvements, particularly if growth is going to be slower.

Joshua Chan: Okay, thank you.

Steven S. Sintros: And then maybe just one more technical question, your comment that fiscal 25 growth could be more modest than the fourth quarter, is that inclusive of lapping the extra week this year? Yeah, everything we're talking about there is sort of apples to apples, sort of excluding the extra, the impact of the extra. Thank you for the call and thanks for your time. And I'm not showing any further requests at this time.

Joshua Chan: And then maybe we'll just one more question. You're common that the fiscal 25 growth could be more modest than the fourth quarter. Is that inclusive of lapping the extra week this year, or that out there? Yeah, everything we're talking about there is sort of apples to apples, sort of excluding the extra, the impact of the extra week. Okay, perfect.

Speaker Change: Okay, yeah, thank you. And then maybe just one more technical question. Your comment that the fiscal 25 growth could be more modest than the fourth quarter, is that inclusive of lapping the extra week this year or is that outside of that?

Speaker Change: Yeah, everything we're talking about there is sort of apples to apples, sort of excluding the impact of the extra week.

Operator: Thank you for the question.

Speaker Change: Thank you for the call and thanks for your time. Thank you.

Operator: And I'm not showing any further questions at the time.

Operator: I'd like to turn the call back over to Steve for any closing remarks. Okay. I'd just like to thank everyone for joining us today to review our results. We look forward to speaking with everyone again in October when we expect to report our fourth quarter, as well as provide our outlook for fiscal 2020. Thank you, and have a great day. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Steven Sintros: I'd like to turn the club back over to Steve for any closing remarks. Great, I'd just like to thank everyone for joining us today to review our results. We look forward to speaking with everyone again in October, when we expect to report our fourth quarter as well as provide our outlook for fiscal 25. Thank you, and have a great day.

Speaker Change: And I'm not showing any further requests at this time. I'd like to turn the call back over to Steve for any closing remarks.

Steve: Great. I'd just like to thank everyone for joining us today to review our results. We look forward to speaking with everyone again in October when we expect to report our fourth quarter, as well as provide our outlook for fiscal 25. Thank you and have a great day. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.

Operator: Ladies and gentlemen, so that concludes today's presentation. You may now disconnect and have a wonderful day.

Operator: Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by. Welcome to the third quarter 2024 UniFirst Earnings conference call. At this time, all participants are in a listen only mode.

Speaker Change: www.universityatbuffalo.com

Andrew Steinerman: Andrew Steinerman, Andrew Steinerman, Andrew Steinerman. Andrew Steinerman, Andrew Steinerman, Andrew Steinerman. Good day and thank you for standing by.

Operator: Welcome to the third quarter of 2024 UniFirst earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. So ask a question during the session, lead to press star 1-1 on your telephone. You'll then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Speaker Change: Good day and thank you for standing by. Welcome to the third quarter 2024 UniFirst Earnings conference call.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message device, and your hand is raised. To withdraw your question, please press star 11 again.

Speaker Change: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star-one-one on your telephone. You will then hear an automated message device when your hand is raised.

Operator: Please be advised that they've conference being recorded.

Speaker Change: To withdraw your question, please press star 11 again. Please be advised, today's conference is being recorded. I would like to hand the conference over to your speaker today, Stephen Sintros, President and Chief Executive Officer. Please go ahead.

Operator: I would like to end the conference of your speaker day.

Steven Sintros: Steven Sintros, President and Chief Executive Officer, please go ahead. Thank you and good morning. I'm Steven Sintros, Unifers President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer.

Steven S. Sintros: Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Stephen Sintros, President and Chief Executive Officer. Please go ahead.

Speaker Change: Thank you and good morning. I'm Stephen Sintros, UniFirst President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer.

Steven Sintros: I'd like to welcome you to Unifers Corporation's conference call to review our third quarter results for fiscal year 2024.

Steven S. Sintros: Thank you and good morning. I'm Stephen Sintros, UniFirst President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer. I'd like to welcome you to UniFirst Corporation's conference call to review our third quarter results for fiscal year 2020. This call will be in a listen-only mode until we complete our prepared remarks. But first, a brief disclaimer.

Speaker Change: I'd like to welcome you to UniFirst Corporation's conference call to review our third quarter results for fiscal year 2024.

Steven Sintros: This call will be on a listen-only mode until we complete our prepared remarks, the first brief disclaimer. This conference call may contain four looking statements that reflect the company's current views with respect to future events and financial performance. These four looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends, identify four looking statements. Actual future results may differ materially from those anticipated, depending on a variety of risk factors.

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

Steven S. Sintros: This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance. Such forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements. However, actual future results may differ materially from those anticipated, depending on a variety of risk factors. For more information, please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission.

Speaker Change: This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance.

Speaker Change: These forward-looking statements are subject to certain risks and uncertainties.

Speaker Change: The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements.

Speaker Change: Actual future results may differ materially from those anticipated depending on a variety of risk factors. For more information please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission.

Steven Sintros: For more information, please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission. At Unifers, we are the people who always deliver. We serve the people who do the hard work, as they are the workforce that keeps our communities up and running. They are existing and prospective customers as well as our own Unifers Team Park. Partners. Our mission is to enable those employees and their organizations by providing the right products and services to do their job successfully and safely. Whether that means providing uniforms, workwear, facility services, first aid and safety, clean room, or other products and services, our goal is to partner with our customers to ensure that we structure the right program, products, and services for their businesses and their team, all while providing an enhanced customer service experience.

Steven S. Sintros: At UniFirst, we are the people who always deliver. We serve the people who do the hard work, as they are the workforce that keeps our communities up and running. They are existing and prospective customers as well as our own UniFirst team partners. Our mission is to enable those employees and their organizations by providing the right products and services to do their job successfully and safely. Whether that means providing uniforms, workwear, facility services, first aid and safety, cleanroom or other products and services, our goal is to partner with our customers to ensure that we structure the right program, products, and services for their businesses and their team, all while providing an enhanced customer service experience. I want to sincerely thank all of our team partners and our customers as we strive towards our vision of being universally recognized as the best service provider in the industry, all while living our mission.

Speaker Change: At UniFirst, we are the people who always deliver. We serve the people who do the hard work as they are the workforce that keeps our communities up and running.

Speaker Change: They are existing and prospective customers as well as our own UniFirst team partners.

Speaker Change: Our mission is to enable those employees and their organizations by providing the right products and services to do their job successfully and safely.

Speaker Change: Whether that means providing uniforms, workwear, facility services, first aid and safety, clean room or other products and services, our goal is to partner with our customers to ensure that we structure the right program, products and services for their businesses and their team, all while providing an enhanced customer service experience.

Steven Sintros: I want to sincerely thank all of our team partners and our customers as we strive towards our vision of being universally recognized as the best service provider in the industry, all while living our mission.

Speaker Change: I want to sincerely thank all of our team partners and our customers as we strive towards our vision of being universally recognized as the best service provider in the industry, all while living our mission.

Steven Sintros: We are pleased to report the results from our third quarter of 2024, which showed solid growth in the top line and strong improvement in our bottom line. Overall revenues in the third quarter were 4.6 percent compared to the third quarter of 2023, and our core laundry operations organic growth total 4.7 percent. Operating income in Ita increased significantly in the quarter compared to a year ago, benefiting from lower cost expended during the quarter related to key initiatives, as well as favorable comparisons to the third quarter of last year related to elevated healthcare and legal cost a year ago.

Steven S. Sintros: We are pleased to report the results from our third quarter of 2024, which showed solid growth on the top line and strong improvement in our bottom line. Overall revenues in the third quarter were up 4.6% compared to the third quarter of 2023, and our core laundry operations organic growth totaled 4.7%. Operating income in EBITDA increased significantly in the quarter compared to a year ago, benefiting from lower costs expended during the quarter related to key initiatives, as well as favorable comparisons to the third quarter of last year related to elevated health care and legal costs a year ago.

Speaker Change: We are pleased to report the results from our third quarter of 2024, which showed solid growth on the top line and strong improvement in our bottom line.

Speaker Change: Overall revenues in the third quarter were up 4.6 percent compared to the third quarter of 2023 and our core laundry operations organic growth totaled 4.7 percent.

Speaker Change: Operating income in EBITDA increased significantly in the quarter compared to a year ago, benefiting from lower costs expended during the quarter related to key initiatives, as well as favorable comparisons to the third quarter of last year related to elevated health care and legal costs a year ago.

Steven Sintros: Excluding these benefits, we still have experienced strong operating income and EBITDA growth during the quarter as well as year-to-date.

Steven S. Sintros: Excluding these benefits, we still experienced strong operating income and EBITDA growth during the quarter as well as year-to-date. We are also very pleased with the improvement in cash flows from operating activities compared to 2023, which was up 35.2%. As a reminder, we've been incurring costs over the last couple of years related to our technology transformation. As expected, the expense we are incurring related to these key initiatives is declining due to activities surrounding the deployment of our CRM largely winding down, and the amounts we are expending on our ERP project now being largely capitalized as we enter the implementation phases of the project. During the quarter, our sales organization continued to perform well, selling prospects on the value that UniFirst can bring to their business.

Speaker Change: Excluding these benefits, we still have experienced strong operating income and EBITDA growth during the quarter as well as year-to-date.

Steven Sintros: We are also very pleased with the improvement in cash flows from operating activities compared to 2023, which were up 35.2 percent.

Speaker Change: We are also very pleased with the improvement in cash flows from operating activities compared to 2023, which were up 35.2%.

Steven Sintros: As a reminder, we have been incurring costs over the last couple of years related to our technology transformation. As expected, the expense we are incurring related to these key initiatives is declining due to activities surrounding the deployment of our CRM largely winding down and the amounts we are expending on our ERP project, now being largely capitalized as we enter the implementation phases of the project. During the quarter, our sales organization continued to perform well, selling prospects on the value that Unit First can bring to their businesses. Overall, we are pleased with the solid organic growth for the quarter, delivering strong results despite a more challenging pricing environment.

Speaker Change: As a reminder, we've been incurring costs over the last couple of years related to our technology transformation.

Speaker Change: As expected, the expense we are incurring related to these key initiatives is declining due to activities surrounding the deployment of our CRM largely winding down and the amounts we are expending on our ERP project now being largely capitalized as we enter the implementation phases of the project.

Speaker Change: During the quarter, our sales organization continued to perform well, selling prospects on the value that UniFirst can bring to their businesses.

Steven S. Sintros: Overall, we are pleased with the solid organic growth for the quarter, delivering strong results despite a more challenging pricing environment. Although we would classify our wearer levels as mostly stable, our updated full-year guidance, which Shane will discuss shortly, implies Core Laundry Operations' organic growth in our fourth quarter to be approximately 3.5% at the midpoint of the scale. During the last few quarters, as the market has emerged from a period of significantly elevated inflation levels, we have discussed a more challenging pricing environment and its impact on our sequential organic growth.

Speaker Change: Overall, we are pleased with the solid organic growth for the quarter, delivering strong results despite a more challenging pricing environment.

Steven Sintros: Although we would classify our wear levels as mostly stable, we have seen a bit of a decline in our net wearer metrics during the quarter. Our updated full-year guidance, which Shane will discuss shortly, implies core laundry operations organic growth in our fourth quarter to be approximately 3.5 percent at the midpoint of the range. During the last few quarters, as the market has emerged from a period of significantly elevated inflation levels, we have discussed a more challenging pricing environment and its impact on our sequential organic growth rates.

Speaker Change: Although we would classify our wearer levels as mostly stable, we have seen a bit of a decline in our net wearer metrics during the quarter.

Speaker Change: Our updated full-year guidance, which Shane will discuss shortly, implies core laundry operations organic growth in our fourth quarter to be approximately 3.5 percent at the midpoint of the range.

Speaker Change: During the last few quarters, as the market has emerged from a period of significantly elevated inflation levels, we have discussed a more challenging pricing environment and its impact on our sequential organic growth rates.

Steven Sintros: Although there was too early to be making too many comments about next year, we did want to communicate that based on these trends, we currently expect organic growth in fiscal 25 to be more modest than our fourth quarter. At the same time, we continue to focus on investments in the business to enhance our ability to track new customers, sell additional products to existing customers, as well as enhance our customers' experience and drive improved retention. Opportunities to win national account customers remain healthy, and we have had very good success adding a number of large programs this year, including a top three account in our first quarter.

Steven S. Sintros: Although it is too early to be making too many comments about next year, we did want to communicate that, based on these trends, we currently expect organic growth in fiscal 25 to be more modest than in our fourth quarter.

Speaker Change: Although it was too early to be making too many comments about next year, we did want to communicate that based on these trends, we currently expect organic growth in fiscal 25 to be more modest than our fourth quarter.

Steven S. Sintros: At the same time, we continue to focus on investments in the business to enhance our ability to attract new customers, sell additional products to existing customers, as well as enhance our customers' experience and drive improved retention. Opportunities to win national account customers remain healthy, and we have had very good success adding a number of large programs this year, including a top three account in our first quarter. Although the sale of these accounts can be difficult to predict, we are well positioned to take advantage of opportunities in the market.

Speaker Change: At the same time, we continue to focus on investments in the business to enhance our ability to attract new customers, sell additional products to existing customers, as well as enhance our customers' experience and drive improved retention.

Speaker Change: Opportunities to win national account customers remains healthy and we've had very good success adding a number of large programs this year including a top three account in our first quarter.

Steven Sintros: Although the sale of these accounts can be difficult to predict, we are well positioned to take advantage of opportunities in the market.

Speaker Change: Although the sale of these accounts can be difficult to predict, we are well positioned to take advantage of opportunities in the market.

Steven Sintros: In addition to our ongoing efforts to drive growth, we continue to focus on our operating excellence and cost reductions to enhance our margin profile. We are pleased with some of the progress in recent trends in key cost areas such as merchandise, as well as other input costs. Our team continues to be more proficient utilizing and optimizing the capabilities of our employees, providing some of clean, proprietary technology across all UniFirst, with all efforts focused on deploying standard processes across our local operations and driving productivity. In addition, areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant margin and enhancement opportunities.

Steven S. Sintros: In addition to our ongoing efforts to drive growth, we continue to focus on operating excellence and cost reductions to enhance our margin program. We are pleased with some of the progress and recent trends in key cost areas, such as merchandise, as well as other inputs. Our team continues to be more proficient, utilizing and optimizing the capabilities of our new CRM, including leveraging some of Clean's proprietary technology across all UniFirsts, with all efforts focused on deploying standard processes across our local operations and driving productivity.

Speaker Change: In addition to our ongoing efforts to drive growth, we continue to focus on our operating excellence and cost reductions to enhance our margin profile.

Speaker Change: We are pleased with some of the progress and recent trends in key cost areas, such as merchandise, as well as other input costs.

Speaker Change: Our team continues to be more proficient, utilizing and optimizing the capabilities of our new CRM, including leveraging some of Clean's proprietary technology across all UniFirsts, with all efforts focused on deploying standard processes across our local operations and driving productivity.

Speaker Change: In addition, areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant margin enhancement opportunities.

Steven Sintros: Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others we feel can move the needle in the near to midterm.

Speaker Change: Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others we feel can move the needle in the near to midterm.

Steven Sintros: We are also excited about the opening of new facilities this year in New York, Michigan, and Ontario, Canada. These projects are good examples of investments designed to not only enhance our service execution and customer experience, but also improve our capacity for growth, operational efficiency, and profitability. We continue to believe strongly in the bright future of our first aid and safety division. We continue to make investments in the sales and service infrastructure of the VAN operations to expand our footprint and assure we can reach existing UniFirst customers as well as new prospects in the market that have a strong need for these products and services.

Steven S. Sintros: In addition, areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant margin enhancement opportunities. Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others we feel can move the needle in the near to mid-term. We are also excited about the opening of new facilities this year in New York, Michigan, and Ontario, Canada.

Speaker Change: We are also excited about the opening of new facilities this year in New York, Michigan, and Ontario, Canada.

Steven S. Sintros: These projects are good examples of investments designed to not only enhance our service execution and customer experience but also improve our capacity for growth, operational efficiency, and profitability. We continue to believe strongly in the bright future of our First Aid and Safety Division. We continue to make investments in the sales and service infrastructure of the van operations to expand our footprint and ensure we can reach existing UniFirst customers as well as new prospects in the market that have a strong need for these products and services. Customers expect solutions to their most pressing issues, and First Aid and Safety are important contributors to these integrated solutions.

Speaker Change: These projects are good examples of investments designed to not only enhance our service execution and customer experience, but also improve our capacity for growth, operational efficiency, and profitability.

Speaker Change: We continue to believe strongly in the bright future of our First Aid and Safety Division.

Speaker Change: We continue to make investments in the sales and service infrastructure of the van operations to expand our footprint and ensure we can reach existing UniFirst customers as well as new prospects in the market that have a strong need for these products and services.

Steven Sintros: Customers expect solutions to their most pressing issues, and first aid and safety are important contributors to these integrated solutions. These investments have delivered the strong growth that we once again achieved in the quarter.

Speaker Change: Customers expect solutions to their most pressing issues and First Aid and Safety are important contributors to these integrated solutions.

Steven S. Sintros: These investments have delivered the strong growth that we once again achieved in the quarter. As we progress, increasing route density, in addition to penetrating customers with the full breadth of services that we provide, will be critical steps in building the profitability of the system. With that, I would like to turn the call over to Shane, who will provide more details on our third quarter, as well as an updated outlook for the remainder of the year. Thanks, Steve.

Steven Sintros: As we progress, increasing route density and addition to penetrating customers with the full breadth of services that we provide will be critical steps in building the profitability of this segment.

Speaker Change: These investments have delivered the strong growth that we once again achieved in the quarter.

Speaker Change: As we progress, increasing route density in addition to penetrating customers with the full breadth of services that we provide will be critical steps in building the profitability of this segment.

Shane O'Connor: With that, I would like to turn the floor over to Shane and provide more details on our third quarter as well as the updated outlook for the remainder of the year. Thanks, Steve. In our third quarter of 2024, consolidated revenues for $603.3 million, a 4.6% from $576.7 million a year ago, and consolidated operating income increased to $48.5 million from $33.4 million, or 45.1%. Net income for the quarter increased to $38.1 million, or $2.3 per diluted share. From $24.3 million or $1.29 per diluted share. Consolidated EBITDA increased to $82.5 million from $64 million in the prior year, or 29%.

Shane F. OConnor: In our third quarter of 2024, consolidated revenues were $603.3 million, a 4.6% increase from $576.7 million a year ago, and consolidated operating income increased to $48.5 million from $33.4 million, or $45.1. Net income for the quarter increased to $38.1 million, or $2.03 per diluted share, from $24.3 million, or $1.29 per diluted share. Consolidated EBITDA increased to $82.5 million from $64 million in Our financial results in the third quarters of fiscal 2024 and 2023 included approximately $3.9 million and $8.4 million, respectively, of costs directly attributable to our key initiatives.

Speaker Change: With that, I would like to turn the call over to Shane who will provide more details on our third quarter, as well as the updated outlook for the remainder of the year.

Shane F. OConnor: In addition, we incurred costs related to the acquisition of clean uniforms during the third quarter of fiscal 2023 of approximately $0.7 million. The effect of these items on the third quarters of fiscal 2024 and 2023 combined to decrease both operating income and EBITDA by $3.9 million and $9.1 million, respectively. Net income increased by $2.9 million and $6.8 million, respectively, and EPS by $0.16 and $0.37, respectively. Our effective tax rate in the quarter was 22.9% compared to 27.2% in the prior year.

Shane F. OConnor: Thanks, Steve. In our third quarter of 2024, consolidated revenues were $603.3 million, a 4.6% from $576.7 million a year ago, and consolidated operating income increased to $48.5 million from $33.4 million, or 45.1%.

Shane F. OConnor: Net income for the quarter increased to $38.1 million, or $2.03 per diluted share, from $24.3 million, or $1.29 per diluted share.

Shane F. OConnor: Consolidated EBITDA increased to $82.5 million from $64 million in the prior year, or 29%.

Shane O'Connor: Our financial results in the third quarter of fiscal 2024 and 2023 included approximately $3.9 million and $8.4 million, respectively, of cost directly attributable to our key initiatives. In addition, we incurred costs related to the acquisition of clean uniform during the third quarter of fiscal 2023 of approximately $0.7 million. The effect of these items on the third quarters of fiscal 2024 and 2023, combined to decrease both operating income and EBITDA by $3.9 million and $9.1 million, respectively. Net income by $2.9 million and $6.8 million respectively, and EPS by 16 cents and 37 cents respectively. Our effective tax rate in the quarter was 22.9% compared to 27.2% in the prior year.

Shane F. OConnor: Our financial results in the third quarters of fiscal 2024 and 2023 included approximately $3.9 million and $8.4 million, respectively, of costs directly attributable to our key initiatives.

Shane F. OConnor: In addition, we incurred costs related to the acquisition of clean uniform during the third quarter of fiscal 2023 of approximately $0.7 million.

Shane F. OConnor: The effect of these items on the third quarters of fiscal 2024 and 2023 combined to decrease both operating income and EBITDA by $3.9 million and $9.1 million, respectively.

Shane F. OConnor: Net income by $2.9M and $6.8M respectively, and EPS by $0.16 and $0.37 respectively.

Shane F. OConnor: Our effective tax rate in the quarter was 22.9% compared to 27.2% in the prior year.

Shane O'Connor: As a reminder, our tax rates can move from periods to periods based on discrete events, including adjustments to our tax reserves and excess tax benefits and deficiencies associated with employee share-based payments. Our core laundry operations revenues for the quarter were $528.5 million, a 5.3% increase from the third quarter of 2023. Core laundry organic growth, which adjusts for the estimated effective acquisitions, as well as fluctuations in the Canadian dollar, was 4.7%. This solid organic growth rate was primarily the result of solid new account sales, including a large national account we installed in our first fiscal quarter of 2024, and the impact of pricing efforts over the last year.

Shane F. OConnor: As a reminder, our tax rate can move from period to period based on discrete events, including adjustments to our tax reserves and excess tax benefits and deficiencies associated with employee share-based payments. Our core laundry operations revenues for the quarter were $528.5 million, up 5.3% from the third quarter of 2023. Core laundry organic growth, which adjusts for the estimated effect of acquisitions, as well as fluctuations in the Canadian dollar, was 4.7%. This solid organic growth rate was primarily the result of solid new account sales, including a large national account we installed in our first fiscal quarter of 2024 and the impact of pricing efforts over the last year.

Shane F. OConnor: As a reminder, our tax rate can move from period to period based on discrete events including adjustments to our tax reserves and excess tax benefits and deficiencies associated with employee share-based payments.

Shane F. OConnor: Our core laundry operations revenues for the quarter were $528.5 million, up 5.3% from the third quarter of 2023.

Shane F. OConnor: Core laundry organic growth, which adjusts for the estimated effect of acquisitions, as well as fluctuations in the Canadian dollar, was 4.7%.

Shane F. OConnor: This solid organic growth rate was primarily the result of solid new account sales, including a large national account we installed in our first fiscal quarter of 2024, and the impact of pricing efforts over the last year.

Shane O'Connor: Core laundry operating margin increased to 7% for the quarter, or $36.9 million, from 4.2% in the prior year, or $21 million. And the segments EBITDA margin increased to 13.1% from 9.9%. The cost we incurred related to our record to the core laundry operation segment, and combined to decrease both the core laundry operating and EBITDA margins for the third quarter of fiscal 2024 and 2023 by 0.7% and 1.8%, respectively. Segment's operating and EBITDA margin comparisons benefited from elevated expense in the prior year related to high healthcare plans and costs incurred related to a legal matter. Excluding these items, our segment's operating results also reflected favorable trends in merchandise, payroll, and other operating input costs.

Shane F. OConnor: Core Laundry operating margin increased to 7% for the quarter, or $36.9 million from 4.2% in the prior year, or $21 million, and the segment's EBITDA margin increased to 13.1% from 9.9%. The costs we incurred related to our key initiatives and the clean acquisition were recorded in the core laundry operations segment and combined to decrease both the core laundry operating and EBITDA margins for the third quarter of fiscal 2024 and 2023 by 0.7% and 1.8%, respectively.

Shane F. OConnor: Corp Laundry operating margin increased to 7% for the quarter, or $36.9 million, from 4.2% in prior year, or $21 million.

Shane F. OConnor: And the segment's EBITDA margin increased to 13.1% from 9.9%.

Shane F. OConnor: The costs we incurred related to our key initiatives and the clean acquisition were recorded to the core laundry operations segment.

Shane F. OConnor: and combined to decrease both the core laundry operating and EBITDA margins for the third quarter of fiscal 2024 and 2023 by 0.7% and 1.8% respectively.

Shane F. OConnor: Segments operating in EBITDA margin comparisons benefited from elevated expense in the prior year related to high health care claims and costs incurred related to a legal match. Excluding these items, our segment's operating results also reflected favorable trends in merchandise, payroll, and other operating input costs. Energy costs in both the third quarter of 2024 and 2023 were 4.3% of revenue. Revenues from our specialty garment segment, which delivers specialized nuclear decontamination and clean room products and services, decreased to $47.6 million from $49.4 million in the prior year, or $3.7. At the same time, the segment's operating margin decreased to 23.9% from 25.2%.

Shane F. OConnor: Segments operating in EBITDA margin comparisons benefited from elevated expense in the prior year related to high health care claims and costs incurred related to a legal matter.

Shane F. OConnor: Excluding these items, our segment's operating results also reflected favorable trends in merchandise, payroll, and other operating input costs.

Shane O'Connor: Energy costs in both the third quarter of 2024 and 2023 were 4.3% of revenues.

Shane F. OConnor: Energy costs in both the third quarter of 2024 and 2023 were 4.3% of revenues.

Shane O'Connor: Revenue is from our specialty garment segment, which delivers specialized nuclear decontamination in clean room products and services, decreased to $47.6 million from $49.4 million in prior year, or 3.7%. At the same time, the segment's operating margin decreased to 23.9% from 25.2%. This performance was due to a decline in revenues and profitability in the segments North American nuclear business. As we mentioned in the past, the segments' results can vary significantly from period to period due to seasonality, as well as the timing and profitability of nuclear reactor outages and projects. Our first aid segments revenues increased to $27.3 million from $25.5 million in prior year, or 6.9%, due to strong growth in our ban operation.

Shane F. OConnor: Revenues from our specialty garment segment, which delivers specialized nuclear decontamination and clean room products and services, decreased to $47.6 million from $49.4 million in prior year, or 3.7%.

Shane F. OConnor: At the same time, the segment's operating margin decreased to 23.9% from 25.2%.

Shane F. OConnor: This performance was due to a decline in revenues and profitability in the segment's North American nuclear business. As we've mentioned in the past, this segment's results can vary significantly from period to period due to seasonality, as well as the timing and profitability of nuclear reactor outages and projects. Our first aid segment's revenues increased to $27.3 million from $25.5 million in the prior year, or 6.9%, due to strong growth in our van operation. The first aid segment had a nominal operating profit of $0.1 million during the quarter, as its results continue to reflect the investments we are making in our first day of bankruptcy.

Shane F. OConnor: This performance was due to a decline in revenues and profitability in the segment's North American nuclear business.

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

Shane F. OConnor: Our first aid segment's revenues increased to $27.3 million from $25.5 million in prior year, or 6.9%, due to strong growth in our van operations.

Shane O'Connor: Segment had a nominal operating profit of $0.1 million during the quarter, as the segment's results continued to reflect the investments we are making in our first aid ban business.

Shane F. OConnor: Segment had a nominal operating profit of 0.1 million dollars during the quarter as the segment's results continue to reflect the investments we are making in our first aid van business.

Shane O'Connor: At the end of our third fiscal quarter, we continued to reflect a solid balance sheet and financial position with no long-term debt and cash cash equivalent to short-term investments following $125.4 million. In the first nine months of fiscal 2024, we saw significant improvement in our cash flow from operating activities, which increased 35.2% to $193 million, primarily due to improved profitability and lower working capital needs of the business. We also continued to invest in our future with capital expenditures of $121.9 million and repurchased $16 million worth of common stock.

Shane F. OConnor: At the end of our third fiscal quarter, we continue to have a solid balance sheet and financial position with no long-term debt and cash, cash equivalents, and short-term investments totaling $125.4 million. In the first nine months of fiscal 2024, we saw a significant improvement in our cash flow from operating activities, which increased 35.2% to $193 million, primarily due to improved profitability and lower working capital needs of the business. We also continue to invest in our future with capital expenditures of $121.9 million and repurchase $16 million worth of common stock.

Shane F. OConnor: At the end of our third fiscal quarter, we continue to reflect a solid balance sheet and financial position with no long-term debt and cash, cash equivalents, and short-term investments totaling $125.4 million.

Shane F. OConnor: In the first nine months of fiscal 2024, we saw significant improvement in our cash flow from operating activities, which increased 35.2% to $193 million, primarily due to improved profitability and lower working capital needs of the business.

Shane F. OConnor: We also continue to invest in our future with capital expenditures of $121.9 million and repurchase $16 million worth of common stock.

Shane O'Connor: I'd like to take this opportunity to provide an update on our outlook. We continue to expect our revenues for fiscal 2024 to be between $2.415 billion and $2.425 billion. However, we now expect that our diluted earnings per share will be between $7.17 and $7.49. Our outlook for fiscal 2024 includes an extra week of operations in our fourth fiscal quarter compared to 2023 due to the timing of our fiscal calendar. This outlook also assumes core laundry operations organic growth at the midpoint of the range will be 4.5%. Core laundry operations operating in EBITDA margin at the midpoint of the range will be 6.6% and 12.7%, respectively.

Shane F. OConnor: I'd like to take this opportunity to provide an update on our outlook. We continue to expect our revenues for fiscal 2024 to be between $2.415 billion and $2.425 billion. However, we now expect that diluted earnings per share will be between $7.17 and $7.49. Our outlook for fiscal 2024 includes an extra week of operations in our fourth fiscal quarter compared to 2023 due to the timing of our fiscal calendar. This outlook also assumes Core Laundry Operations organic growth at the midpoint of the range will be 4.5%.

Shane F. OConnor: I'd like to take this opportunity to provide an update on our outlook. We continue to expect our revenues for fiscal 2024 to be between $2.415 billion and $2.425 billion.

Shane F. OConnor: However, we now expect that diluted earnings per share will be between $7.17 and $7.49.

Shane F. OConnor: Our outlook for fiscal 2024 includes an extra week of operations in our fourth fiscal quarter compared to 2023 due to the timing of our fiscal calendar.

Shane F. OConnor: This outlook also assumes Core Laundry Operations' organic growth at the midpoint of the range will be 4.5%.

Shane F. OConnor: Gore Laundry operations operating an EBITDA margin at the midpoint of the range would be 6.6% and 12.7%, respectively. An estimate of $12 million of costs directly attributable to our key initiatives that will be expensed in fiscal 2024 and will decrease both the core laundry operations operating in EBITDA margins by 0.6%, an effective tax rate of 24.5%, and no future share buybacks or unexpected, significantly adverse economic developments.

Shane F. OConnor: Gore Laundry operations operating an EBITDA margin at the midpoint of the range would be 6.6% and 12.7% respectively.

Shane O'Connor: In estimate of $12 million of cost directly attributable to our key initiatives that will be expense in fiscal 2024 and will decrease both the core laundry operations operating in EBITDA margins by 0.6%. In effective tax rate of 24.5%, and no future share buybacks or unexpected significantly adverse economic developments.

Shane F. OConnor: An estimate of $12 million of costs directly attributable to our key initiatives that will be expensed in fiscal 2024 and will decrease both the core laundry operations operating in EBITDA margins by 0.6%.

Shane F. OConnor: an effective tax rate of 24.5% and no future share buybacks or unexpected significantly adverse economic developments.

Operator: This concludes our prepared remarks, and we would now be happy to answer any questions that you might have. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question has been answered, you wish to move yourself from the queue. Please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster.

Operator: This concludes our prepared remarks, and we would now be happy to answer any questions that you might have. Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 1-1 on your telephone. If your question hasn't been answered and you wish to unmute yourself from the queue, please press star 1-1 again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Manav Patnaik with Barclays. Your line is open. Hi, good morning. This is Ronan Kennedy. I'm from MNOT.

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

Speaker Change: Thank you, ladies and gentlemen. If you have a question or a comment at this time, please press star 11 on your telephone. If your question hasn't been answered and you wish to unmute yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.

Ronan Kennedy: Our first question comes from Matt Patenayak with Barclays. Your line is open.

Speaker Change: [inaudible]

Speaker Change: Our first question comes from Manapat Nayak with Barclays. Your line is open.

Ronan Kennedy: Good morning, this is Ronan Kennedy on from Matt. Thank you for taking my questions. Can I just get some further context to the things you talked about, the challenging pricing environment, so the dynamics that play, whether that's inflation moderation, new winds coming on at lower pricing, and then also some further context around the lower wear metrics and the drivers of some potential weakness there?

Thank you for taking my questions. Can I just get some further context on the things you talked about, the challenging pricing environment, the dynamics at play, whether that's inflation moderation, new winds coming on at lower prices, and then also some further context around the lower wearer metrics and kind of the drivers of some potential weakness there. Sure, let me hit those one at a time. I think when we talk about the more challenging pricing environment, it's primarily...

Speaker Change: Hi, good morning. This is Ronan Kennedy. I'm from MNOPT. Thank you for taking my questions.

Speaker Change: Can I just get some further context to the things you talked about, the challenging pricing environment, so the dynamics at play, whether that's inflation moderation, new winds coming on at lower pricing, and then also some further context around the lower wearer metrics and kind of the drivers of some potential weakness there.

Steven Sintros: Sure, let me hit those one at a time. I think when we talk about the more challenging pricing environment, it's primarily emerging from this inflationary period. I think about it from how we're managing our vendors, and after multiple years of higher costs, we're putting more programs out to bid with our vendors. I think you're just seeing some of that in general in the marketplace, and that's leading to somewhat of a more challenging pricing environment, which probably isn't surprising. From a new account perspective, I wouldn't say there's really been a significant change. We've talked about over the years; a new account acquisition is often a competitive situation, but I wouldn't say there's any significant change in that pricing environment over the last few quarters.

Steven Sintros: and as far as the ads versus reductions, I don't want to overestimate that, but we had been talking about if you go back over the last couple of years, a year ago we were getting some more pull from ad versus reductions, and the last couple quarters we had been saying it's been mostly stable, and although again as I said in my prepare remarks, I would still say it's mostly stable, we have seen a little bit of weakening there during the quarter. It didn't have a significant impact, but I wanted to mention it just as we think it may be a precursor of a little bit weaker hiring environment.

Steven Sintros: Thank you for that. Yeah, that leads into my next question. That's what you've talked about on the prior or the most recent calls: is kind of a cautious tone out there with respect to hiring, but not seeing broad calls for reductions. Can you just kind of characterize our comment on the demand environment and how that informed your outlook for 4Q? Obviously, that was within the full year guide, but your comments on the expectation for more modest growth in 25? Sure, I don't think we're overbuilding in any impact from softer ads, reductions, or sort of overall demand over the next quarter or even into 25.

Steven Sintros: Although I'd say that context as we look toward next year, we don't expect to be getting a significant pull from higher wearer levels, but we're also not building in at this point, nor do we typically a more significant pullback in wearer levels. We're really not seeing that yet; we're just seeing somewhat of a down tick. The only thing I will say there is a little bit less hiring in the market does have some advantages. We're seeing less turnover in our own employees, and we're seeing less turnover in our customers' employees, which also does lead to a little bit of a better ability to manage merchandise costs with your customer when you're not dealing with sort of high turnover of employees within our customer base.

Ronan Kennedy: That's very helpful.

Ronan Kennedy: Thank you, and if I may just sneak in a third, please. Are there any end markets where you are seeing particular weakness or strength, for that matter? No, it's really around the edges. I wouldn't say, in the past, we've talked about oil or manufacturing. I wouldn't say there is any one area that is sort of outweighed in what we're seeing.

Operator: Thank you.

Andrew Wittmann: One moment for our next question. Our next question comes from Angie Witten with Beard. Your line is open. Great. Thanks. Good morning, guys. I just had a couple of questions here just to understand a quarter a little bit better than I'll go a little bit broader picture. But I guess maybe, could you just help remind us on the year-over-year margin comparison? You mentioned that last year's healthcare costs and legal costs were elevated. That was kind of a known, easy margin count, but you would not have to say that you actually had leverage in these other areas.

Andrew Wittmann: So just to level set a little bit, can you help us quantify or understand what you think the unusual amounts of healthcare or legal costs were in the prior year so we can understand maybe what the underlying benefit from merchandise labor, those things were. Energy would be another thing to cover done in that as well.

Shane O'Connor: Yeah, I'll take that, Andy. When you take a look at our comparison in our core year-over-year, the comparison is about 170 basis points. So last year, in our third quarter, as I had mentioned, as you just mentioned, healthcare claims ran high, and as a result, we had corresponding high expense related to that, as well as that reserve. Those two items, when we compare with this year, account for about 100 basis points at that point. The other items that I had mentioned, which were the favorable trends in our merchandise, our payrolls, and other operating input costs, account for that 70 basis points of difference.

Shane O'Connor: And really, those three factors are contributing equally to the favorable outcome. Okay, that's super helpful. I guess you guys always know I asked that question, so thank you. You would ask about energy. Yeah, spoken to that. Energy was 4.3% of revenues in both quarters, so that was a consistent comparison. That's helpful. I guess just, I mean, given that 70 basis points for these other factors, it's still pretty good leverage. I guess I look at the fourth quarter margin guidance. You guys beat by a lot here. I got to think that you came in a little bit better than your plan.

Shane O'Connor: Obviously, you did because you raised the guidance, but you didn't really pass through any of the margin benefits that you saw in the fiscal third quarter to change in your fiscal fourth quarter margin outlook. So I just was wondering if you could give the thought process behind that. If you're being conservative or if there's an offset somewhere else in the P&L, it would suggest that the margin benefits you saw in the quarter is going to come to you in four two. Yeah, when we take a look at our out performance in the third quarter, some of that was informed by the performance in our specialty garments as well as our first aid business.

Shane O'Connor: As we've mentioned, specialty garments is usually seasonal and has it down fourth quarter. So sequentially, obviously, that performance would be a headwind. So we weren't expecting that the benefit that we saw in the third quarter to carry over. Core laundry did contribute some of that, but again, when we talk about things like our merchandise or our payrolls, some of that was actually anticipated. Those merchandise trends that we've been talking about. We've sort of been receiving as we've gone throughout the year, and that favorable trend continued into the third quarter. A lot of that was anticipated to carry forward into the fourth.

Shane O'Connor: Our other operating input costs that trended favorable in the quarter. Some of that, we were pleased to see, and some of that we believe relates to some of the sourcing. And as Steve had mentioned, we are putting more things out to bid. But they do tend to be variable from quarter to quarter as well.

Shane O'Connor: So some of the favorability that we saw in the third quarter, we were cautious as it relates to the forecast for the fourth, just to make sure that they weren't being influenced by time.

Andrew Wittmann: I appreciate that, and then I guess maybe Steve, one for you here. I guess I just wanted to dig into some of your comments on the national accounts that you had in your prepared remarks. You mentioned that you installed in your fiscal first quarter of 24 large national kind of you kind of talked about this before. I think by my calculation, it is around 50 basis points of revenue just for that large account. You said top three. I think it's what you said in the script. But it's not like you had other comments on national accounts.

Steven Sintros: Maybe you talk about the pipeline. So I just wanted you to clarify where your comments on the national account business referring retroactively to things that you've already won, or is the comments about your enthusiasm or your positivity on the national accounts looking at what you've got out in terms of, you know, bids or quotes for these national accounts that maybe the number of those or stuff that you've won that hasn't yet been installed. And maybe if you wanted to talk even more broadly, what you're seeing going on in the national accounts is more of them changing hands today, and what's the competitive dynamic around that.

Steven Sintros: Thank you. So I think the comments was a little bit of all of the above, right? So we definitely have had good success during this year. And again, I wanted to highlight that account from earlier in the year because that account being installed early in the year, really right at the beginning of our last of this fiscal year, will provide a difficult comp on growth as we head into next year. But the commentary was also around what we are seeing is good opportunities materializing in the market. You know, I guess I would say the pipeline.

Steven Sintros: It wasn't really specifically about accounts that we've signed that have yet to install, but it's just more about the activity. And yeah, we probably are seeing, on balance, maybe a few more programs out there and available, with some opportunities probably falling into the category of folks, you know, again, coming through an inflationary time and looking for opportunities.

Andrew Wittmann: Good, I'll leave it there. Thanks, guys, and have a good day.

Kartik Mehta: Our next question comes from Cartic Meta with North Coast Research Alliance open.

Kartik Mehta: Good morning. Steve, I just wanted to go back to your comments on pricing and just understand a little bit. I know during the inflationary series, you're getting more than more than all pricing today. Is the competition increase that you're not getting pricing increases, or are you getting price increases in their model? We certainly continue to get price, right? But I think when you think about pricing increases and you think about the environment, we're consistently going through a cycle where we're renewing accounts and going through annual escalators. And so, in general, as you go through those cycles, yeah, it's a balance between getting more price from your customers appropriately based on the profile of the customer, also trying to secure renewals in the face of potentially competition.

Steven Sintros: And again, I think just customers out there looking at all costs. I mean, we've all gone through years of sort of mounting costs in many, many areas. And I think there's just more activity out there right now. And continuing to develop and maintain relationships with our customers and show the value of the service is really a big focus to make sure we can secure renewals at appropriate price and going forward. But it's really just more activity out there. in the market.

Steven Sintros: We need to look at new large accounts or new enterprise accounts. Are you seeing more opportunities there as well? Could that result in greater price competition? I know a new account that has always been something competitive. I'm wondering if that environment changes at all as companies are trying to look for tailing costs.

Steven Sintros: I think we are in a unique cycle right now. I think coming off of inflation at the levels that were experienced over the last couple of years. If you think about it, we went through COVID, which was a cycle where, in general, customers were very happy if their service providers were able to show up and service them. Which I think we did a great job up through that cycle. And then you hit a period where cost really escalated very significantly. And now, as things are settling down in both areas, I think yes, I think you are entering a period of elevated competition and focus by customers on cost.

Steven Sintros: And that does provide sales opportunities. And we're probably seeing some of that as well. But it does provide some other challenges in those other areas.

Steven Sintros: And just one last one on your F spot, five point, five comments. We see modest growth. Would you anticipate kind of growth similar to what you're going to see in the quarter? Or would you define it a little bit differently? I think in the prepared remarks, I said that we expect growth next year to be more modest than our fourth quarter. And again, we do want to highlight that it's early to be giving that outlook. And we just, in the nature of transparency, want to make sure we're communicating that trend. And obviously there's a lot that can happen between now and then, and over the course of fiscal 25, which is part of the reason I mentioned opportunities for national accounts that could materialize and other things that could impact that trajectory.

Steven Sintros: But just based on the top annualization of a higher pricing environment, as well as the account we installed early last year, those comps are tougher heading into the year.

Kartik Mehta: Thank you so much. I really appreciate it.

Luke McFadden: Our next question comes from Luke McFadden with William Blair. Your line is open. Hi, good morning. This is Luke McFadden on for Timil Rooney and William Blair. Thanks for taking our questions today. Wanted to ask with the one year anniversary of the Clean acquisition. We're curious that the business has met expectations relative to when you first close the deal.

Steven Sintros: Were there any surprises that are positive or negative relating to the business operations or the integration process? Yeah, good question. No, we've been very happy, and I would say virtually everything has met our expectations. We talked a year ago how we're going to be patient on some of the more complex aspects of the integration due to the technology work that we're doing more broadly as a company. So some of those facilities continue to run separately from some of our facilities, and there's still integration activities to come. But our expectations in the first year were to be able to kind of pick off that a little bit more low hanging fruit type synergies of purchasing power and supply chain and some other areas, as well as make sure that we're maintaining the employees and the customers that all are very important assets from that acquisition.

Steven Sintros: And we've been very successful doing that, and I know it's not the largest piece of our overall business, but it has performed ahead of where we thought it would coming into.

Luke McFadden: Great, very helpful. And then just kind of sticking with kind of an organic growth here.

Luke McFadden: How are you seeing the shape of the M&A environment from where you said today? And how would you characterize your appetite for acquisitions? Maybe as we move through the end of the year here and into 2025? Yeah, certainly the appetite is still strong. I think, as we've talked about over the years, I would say that the activity right now is a little spotty.

Steven Sintros: We see some interest, but I wouldn't say there's an overwhelming amount of activity out there right now. However, the clean acquisition materialized somewhat out of nowhere very quickly several months before we did that deal. So we continue to develop and keep the relationships in the marketplace and certainly have an appetite. I talk about our cash flows improving and the healthy balance sheet. We certainly are interested for good assets as they come available.

Andrew Steinerman: Our next question comes from Andrew Starnerman: which AP Morganer line is open? Hi, Andrew.

Andrew Steinerman: Two questions. One on merchandise amazement, one on customer service. merchandise amazementization, could you just quantify that a little bit for the third quarter? I know thinking back to the second quarter, it was flat, so maybe slightly up. It just sounds like we're really at an inflection point in merchandise amazementization, being a tailwind. Would you characterize it that way?

Shane O'Connor: My second question is about customer service. I know it's long been your goal and your vision to become the best service provider, and you prepared remarks you talked about, enhance customer service experience. How do you measure customer service experience? Is it NPS? Is it a client retention score? Where are you currently on that service experience journey? Yes, so Andrew, as it relates to the merchandise, you're right. Earlier in the year, when we were talking about the impact of merchandise on our operating income, it was relatively flat. As we've gone through the year, the benefit that we've seen there has continued to expand.

Shane O'Connor: It's still relatively nominal. The impact on the quarter was a favorable benefit of about 20 to 30 basis points. As I had mentioned, aside from that health care claims, expense, comparison, and the legal, the other items, the benefit from those other items were equally shared, accounting for that 70 basis point comparison.

Steven Sintros: I'll take the customer service question, Andrew. In terms of how we measure ourselves, retention has always been a key factor, and over the last year we have introduced, for the first time, a more formal NPS program with our customers. I would say it's growing in terms of responses and so on, so we're not at the point yet where we'd be communicating results, but we've been pleased with the early results that we've been getting, and I think that lines up with our feeling that overall in the market we have a pretty good service reputation. But that being said, and as we've talked about before, with over 250 locations out there, the goal is really consistency location by location, state to state, coast to coast, to really get to the point where as we go out to bid for services that that reputation is differentiated and that our retention can match.

Steven Sintros: A lot of investments we're making in whether it's facilities, technology, and people are all designed around really enhancing that outcome. Again, I think it's always been a focus of the company, but as we invest in technology in some additional ways to measure true customer satisfaction, it's becoming an even bigger.

Operator: Boles.

Joshua Chan: Our next question comes from Josh Chan with UBS. Your line is open. Hi, good morning, Steven. Thanks for picking my questions.

Joshua Chan: On retention levels, are you successful at maintaining your typical retention rates now, even though you might have to concede some on twice, or is retention starting to dip below your normal levels? Yeah, I would say we've said it's been the last couple quarters. It has picked up, and I think a lot of it is around the pricing environment and the more competitive nature. I don't want to overestimate that, but I think, yeah, I would have to say it's up a bit as well. Lost accounts, I should say, compared to maybe are not as much our historical, but I would say we went through a cycle where we really saw improved results in that area.

Steven Sintros: But again, I think the environment we're in right now is, on balance, a bit more competitive based on some of the factors I mentioned earlier.

Joshua Chan: Alright, I appreciate that color.

Steven Sintros: And I guess looking forward, how should we think about margin expansion in the face of solar growth? Is there any way that you can kind of fall apart or quantify that for us going forward? Yeah, I think at this point, looking into next year, we're really not in a position to make additional comments about margins or the results going forward. I think, as I mentioned in our prepared remarks, and as Shane mentioned, we are pleased with some of the trends of cost someone mentioned before, sort of hitting the inflection point on merchandise, which is somewhat cyclical, but also we're doing a number of things from a sourcing perspective and an operational execution perspective that we continue will focus on to drive cost improvements, particularly if growth is going to be slower.

Joshua Chan: Okay, yeah, thank you.

Joshua Chan: And then maybe just one more question. You're comment that the fiscal 25 growth could be more modest than the fourth quarter. Is that inclusive of mapping the extra week this year or that out there? Yeah, everything we're talking about there is sort of apples to apples, sort of excluding the extra, the impact of the extra week. Okay, perfect.

Operator: Thank you for the car line.

Operator: And I'm not showing any further questions at the time.

Steven Sintros: I'd like to turn the call back over to Steve for any closing remarks. Great. I'd just like to thank everyone for joining us today to review our results. We look forward to speaking with everyone again in October, when we expect to report our fourth quarter as well as provide our outlook for fiscal 25.

Operator: Thank you, and have a great day. Well, ladies and gentlemen, so that's including today's presentation.

You may now just connect and have a wonderful day.