Vestis Q1 2026 Vestis Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Vestis Corp Earnings Call
Speaker #2: Welcome to the Vestis Corporation fiscal first quarter call. At this placed in a listen-only mode and the 2026 earnings conference floor will be open for your presentation.
Operator: Welcome to the Vestis Corporation Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. To enable others to hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Stefan Neely with Vallum Advisors. Please go ahead.
Operator: Welcome to the Vestis Corporation Fiscal First Quarter 2026 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star two. To enable others to hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. I would now like to turn the call over to Stefan Neely with Vallum Advisors. Please go ahead.
Speaker #2: question at that time, please press star one on your telephone If you would like to ask a keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star questions following the two.
Speaker #2: To enable others to hear your questions clearly, we ask that you pick up your handset for quality. Lastly, if you should require operator assistance, zero.
Speaker #2: I would now like to turn the call over to Stefan Neely with Vellum Advisors.
Speaker #2: Go ahead. Thank you, operator, and thank you all. Please go ahead.
Stefan Neely: Thank you, operator, and thank you all for joining us on the call this morning. Leading the call with me today is Jim Barber, President and Chief Executive Officer, and Adam Bowen, Interim Chief Financial Officer. Also with us on the call today is Bill Seward, Chief Operating Officer. Jim and Adam will provide prepared remarks, and then we will open the line for questions. Before I turn the call over to Jim, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for civil litigation for such forward-looking statements. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risk described in our periodic reports filed with the Securities and Exchange Commission.
Stefan Neely: Thank you, operator, and thank you all for joining us on the call this morning. Leading the call with me today is Jim Barber, President and Chief Executive Officer, and Adam Bowen, Interim Chief Financial Officer. Also with us on the call today is Bill Seward, Chief Operating Officer. Jim and Adam will provide prepared remarks, and then we will open the line for questions. Before I turn the call over to Jim, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for civil litigation for such forward-looking statements. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risk described in our periodic reports filed with the Securities and Exchange Commission.
Speaker #3: morning. Leading the call with me today is Jim for joining us on the call this Barber, president and chief executive officer, and Adam Bowen, Also with us on the call today is Bill Seward, chief operating officer.
Speaker #3: Jim and Adam will provide prepared remarks and then we will open the line for questions. Before I turn the call over to Jim, I want to remind everyone that today's discussion contains forward-looking statements about future business and interim chief financial officer.
Speaker #3: forward-looking statements. Actual results may differ significantly from those projected in today's forward-looking private securities litigation reform act of statements, due to various risks and 1995 provides a safe uncertainties, including the risks described in our periodic reports filed with the securities and exchange commission.
Speaker #3: Except as required by law, we undertake no obligation to update our forward-looking call will include the discussion of certain non-GAAP financial measures, statements. financial expectations.
Stefan Neely: Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release and corresponding supplemental materials, which are available at ir.vestis.com. With that, I'd like to turn the call over to Jim.
Stefan Neely: Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release and corresponding supplemental materials, which are available at ir.vestis.com. With that, I'd like to turn the call over to Jim.
Speaker #3: GAAP financial measure is included in Further, this The reconciliation of these measures to the closest and corresponding supplemental materials which are available at ir dot vestis dot com.
Speaker #3: To our quarterly ordinance press release. With that, I'd like to turn the call over to Jim.
Jim Barber: Thank you, Stefan, and good morning, everyone. Thanks for joining us. We started fiscal 2026 with disciplined execution and a clear focus on our business transformation framework. I want to walk you through what we've accomplished in Q1 across our 3 pillars: operational excellence, commercial excellence, and network and asset optimization. Before that, I want to briefly touch on the financial performance for the quarter. Adjusted EBITDA was $70 million, improving sequentially from fiscal Q4 2025, which represented a low point in our profitability. This improvement is exactly what we set out to achieve with our transformation, reflecting early, tangible progress from actions to bend the cost curve and drive better utilization of our people and our network. Now turning to the first pillar of our business transformation, operational excellence.
Jim Barber: Thank you, Stefan, and good morning, everyone. Thanks for joining us. We started fiscal 2026 with disciplined execution and a clear focus on our business transformation framework. I want to walk you through what we've accomplished in Q1 across our 3 pillars: operational excellence, commercial excellence, and network and asset optimization. Before that, I want to briefly touch on the financial performance for the quarter. Adjusted EBITDA was $70 million, improving sequentially from fiscal Q4 2025, which represented a low point in our profitability. This improvement is exactly what we set out to achieve with our transformation, reflecting early, tangible progress from actions to bend the cost curve and drive better utilization of our people and our network. Now turning to the first pillar of our business transformation, operational excellence.
Speaker #4: everyone. excellence, and network and asset Thanks for joining optimization. Before that, I want to briefly touch on the financial performance for the quarter. Adjusted EBITDA was $70 million, Operational excellence, commercial improving sequentially from fiscal Q4 2025, which profitability.
Speaker #4: us. We started fiscal 2026 with disciplined execution and a clear focus on our business transformation Thank you, Stefan, and good morning, framework. I want to walk you through what we've accomplished in the first quarter across our three pillars.
Speaker #4: This improvement is exactly what we set out to achieve with our transformation, reflecting early, tangible progress from what represented a low point in our actions to bend the cost curve and drive better utilization of our people and our network.
Speaker #4: Now, turning to the first pillar of our business transformation—operational excellence—in an asset-intensive business like ours. In a route-based business, excellence starts with the runs reliably every day.
Jim Barber: In a route-based, asset-intensive business like ours, operational excellence starts with the basics: consistent service and a network that runs reliably every day. When we execute well in our plants, we improve productivity, enhance service quality, and unlock operating leverage across our network. In Q1, we made progress in the leading indicators that matter most to our customers. On-time delivery improved 300 basis points versus Q1 of 2025. Plant productivity improved 7%, and customer complaints declined 12% year-over-year, and our average weekly loss business in Q1 declined 15% from Q4. These are not just statistics. They are leading indicators of operational efficiency and profitability. We expect the benefits to show up in the customer retention, lower cost per pound, and stronger operating leverage.
Jim Barber: In a route-based, asset-intensive business like ours, operational excellence starts with the basics: consistent service and a network that runs reliably every day. When we execute well in our plants, we improve productivity, enhance service quality, and unlock operating leverage across our network. In Q1, we made progress in the leading indicators that matter most to our customers. On-time delivery improved 300 basis points versus Q1 of 2025. Plant productivity improved 7%, and customer complaints declined 12% year-over-year, and our average weekly loss business in Q1 declined 15% from Q4. These are not just statistics. They are leading indicators of operational efficiency and profitability. We expect the benefits to show up in the customer retention, lower cost per pound, and stronger operating leverage.
Speaker #4: When we execute well in our plants, we improve productivity and unlock operating leverage across our basics network. In the first quarter, we made progress in the leading indicators that matter most to our customers: consistent service and a network that works.
Speaker #4: On-time delivery improved 300 basis points versus the first quarter of 2025. Plant productivity improved 7%, and customer complaints declined 12% year over year, and our average weekly lost business in Q1 declined 15% from not just statistics.
Speaker #4: They are leading indicators of operational efficiency and the fourth quarter. customer attention, lower cost These are profitability. leverage. This is the kind of progress We expect to benefit to show up in the that builds momentum, because when the network runs better, we can serve per pound, and stronger operating forward, operating leverage is going to be our the first quarter, we saw a customers more reliably and create capacity for the right two-cent improvement in cost per pound 2025, which translates to over fiscal Q1 roughly $10 million in adjusted levels.
Jim Barber: This is the kind of progress that builds momentum because when the network runs better, we can serve customers more reliably and create capacity for the right growth. Going forward, operating leverage is going to be our primary scorecard for value creation. In the first quarter, we saw a $0.02 improvement in cost per pound over fiscal Q1 2025, which translates to roughly $10 million in adjusted EBITDA at our current volume and mix levels. We expect to see continued improvement in this trend throughout the year. And let me be clear. This is not a one-quarter effort. This is about building repeatable processes and a culture of accountability that produces better performance quarter after quarter.
Jim Barber: This is the kind of progress that builds momentum because when the network runs better, we can serve customers more reliably and create capacity for the right growth. Going forward, operating leverage is going to be our primary scorecard for value creation. In the first quarter, we saw a $0.02 improvement in cost per pound over fiscal Q1 2025, which translates to roughly $10 million in adjusted EBITDA at our current volume and mix levels. We expect to see continued improvement in this trend throughout the year. And let me be clear. This is not a one-quarter effort. This is about building repeatable processes and a culture of accountability that produces better performance quarter after quarter.
Speaker #4: We expect to see continued improvement in this trend throughout the primary scorecard for value creation. clear. This is not a one-quarter In effort. This is about building repeatable processes and a culture of EBITDA at our current volume and mix performance quarter after year.
Speaker #4: And let me be priorities, I've asked Bill Seward, our chief operating officer, to join us context on our operational quarter. Given our operational your questions after the conclusion of remarks.
Jim Barber: Given our operational priorities, I've asked Bill Seward, our Chief Operating Officer, to join us today, and he's prepared to provide additional context on our operational execution and key priorities in response to your questions after the conclusion of our prepared remarks. Moving on to the second pillar, which is commercial excellence. In the Q1, we advanced the decision support tools we need to execute our strategy and improve revenue quality. This work lays the foundation for stronger commercial engagement, a more favorable product mix, a strategic pricing model, and better customer penetration. We've also begun strengthening local customer engagement, including the introduction of market development representatives to help deepen relationships and expand penetration over time.
Jim Barber: Given our operational priorities, I've asked Bill Seward, our Chief Operating Officer, to join us today, and he's prepared to provide additional context on our operational execution and key priorities in response to your questions after the conclusion of our prepared remarks. Moving on to the second pillar, which is commercial excellence. In the Q1, we advanced the decision support tools we need to execute our strategy and improve revenue quality. This work lays the foundation for stronger commercial engagement, a more favorable product mix, a strategic pricing model, and better customer penetration. We've also begun strengthening local customer engagement, including the introduction of market development representatives to help deepen relationships and expand penetration over time.
Speaker #4: Moving on to the second pillar, accountability that produces better. In the first quarter, we advanced a decision, which is commercial excellence. Support tools we need to execute our strategy and improve revenue formation for stronger commercial execution are key priorities in response to engagement, a more favorable product mix, a strategic pricing model, and better customer penetration.
Speaker #4: Introduction of market development: we've also begun strengthening local quality representatives to help deepen relationships and expand penetration. This work lays the foundation for our prepared customer engagement, including helping our team make informed decisions on mix, pricing, and how we serve customers. Shifting the organization to a growing value approach brings more discipline to how we create value for Vestas.
Jim Barber: This approach brings more discipline to how we grow and how we create value, helping our team make informed decisions on mix, pricing, and how we serve customers, shifting the organization to growing value for Vestis. The third pillar is network and asset optimization. During Q1, we undertook market studies and analyzed where we see the best opportunities to grow profitably and serve customers reliably over time. In addition, we are actively marketing several non-core properties for sale as part of optimizing our asset footprint, and we intend to use those proceeds from any non-core property sales to repay debt. Stepping back, the key takeaway from Q1 is that we're improving operating consistency while building the analytical foundation required to make better commercial and network decisions. That is how we expect to unlock the operating leverage that's embedded in this business.
Jim Barber: This approach brings more discipline to how we grow and how we create value, helping our team make informed decisions on mix, pricing, and how we serve customers, shifting the organization to growing value for Vestis. The third pillar is network and asset optimization. During Q1, we undertook market studies and analyzed where we see the best opportunities to grow profitably and serve customers reliably over time. In addition, we are actively marketing several non-core properties for sale as part of optimizing our asset footprint, and we intend to use those proceeds from any non-core property sales to repay debt. Stepping back, the key takeaway from Q1 is that we're improving operating consistency while building the analytical foundation required to make better commercial and network decisions. That is how we expect to unlock the operating leverage that's embedded in this business.
Speaker #4: The over time. third pillar is network and asset This optimization. During the first quarter, we undertook market studies and analyzed grow and how we where we see the best opportunities to grow profitably and serve customers reliably over time.
Speaker #4: marketing several non-core properties for In addition, we are actively footprint. And we intend to use debt. Stepping back, the key takeaway from the first quarter is that we're improving operating consistency while sale as part of optimizing our asset building the analytical foundation decisions.
Speaker #4: That is how we expect to unlock the operating leverage that's embedded in this those proceeds from any non-core business. We've also taken steps to connect deeper with the decision-makers driving actions across our business.
Jim Barber: We've also taken steps to connect deeper with the decision makers driving actions across our business. For the first time since going public, we've assembled a comprehensive training program delivered in person here in our corporate office to educate our key leaders on operating leverage. As we look to Q2, we are beginning to advance pricing and product mix strategies, building directly on the operational progress already underway. We'll continue to manage the business through the lens of cost per pound because that's where the operating leverage will show up most clearly, with every penny of improvement in cost per pound being worth approximately $5 million of Adjusted EBITDA on our current total volume and mix levels. And while we're encouraged, I'll emphasize this: we are still early in the transformation. We're laying the foundation now so we can drive more consistent value creation over time.
Jim Barber: We've also taken steps to connect deeper with the decision makers driving actions across our business. For the first time since going public, we've assembled a comprehensive training program delivered in person here in our corporate office to educate our key leaders on operating leverage. As we look to Q2, we are beginning to advance pricing and product mix strategies, building directly on the operational progress already underway. We'll continue to manage the business through the lens of cost per pound because that's where the operating leverage will show up most clearly, with every penny of improvement in cost per pound being worth approximately $5 million of Adjusted EBITDA on our current total volume and mix levels. And while we're encouraged, I'll emphasize this: we are still early in the transformation. We're laying the foundation now so we can drive more consistent value creation over time.
Speaker #4: For the assembled a comprehensive training program delivered in person here in our corporate office, to educate our first time since going public, we've key leaders on operating leverage.
Speaker #4: Second quarter, we are beginning to—as we look to the advance pricing and product mix, property sales to repay strategies, building directly on the operational progress already underway—make better commercial and network progress required.
Speaker #4: We'll continue to manage the business through the lens of cost per pound, because that's where the operating leverage will show up most clearly, with every penny of improvement in cost per pound being worth approximately $5 million of adjusted EBITDA on our current total volume and mix. Emphasize this.
Speaker #4: We are levels. still early in the And while we're encouraged, I'll transformation. We're laying the foundation now so we can drive more consistent value To wrap up, I'm pleased with the progress forward, we're managing Vestas as a pennies business.
Jim Barber: To wrap up, I'm pleased with the progress we've made in the first quarter. Going forward, we're managing Vestis as a pennies business. The compounding effect of small, disciplined decisions on mix, pricing, delivery, plant, and SG&A is how we build sustainable, profitable growth and shareholder value. When we get that right, it allows us to not only improve financial performance but to grow the business and create jobs in a way that is durable and supported by the economics. That's the standard, and that's the focus of our entire team. With that, I'll turn it over to Adam to walk through the financials.
Jim Barber: To wrap up, I'm pleased with the progress we've made in the first quarter. Going forward, we're managing Vestis as a pennies business. The compounding effect of small, disciplined decisions on mix, pricing, delivery, plant, and SG&A is how we build sustainable, profitable growth and shareholder value. When we get that right, it allows us to not only improve financial performance but to grow the business and create jobs in a way that is durable and supported by the economics. That's the standard, and that's the focus of our entire team. With that, I'll turn it over to Adam to walk through the financials.
Speaker #4: The compounding effect of small, disciplined decisions on mix, and SG&A is how we build sustainable, profitable growth we've made in the first quarter. creation over time.
Speaker #4: pricing, delivery, plant, When we get that right, it allows us to not only improve financial performance, but to grow the business and create jobs, in a way that is durable and supported by the economics.
Speaker #4: That's the standard, Adam, to walk through the—
Speaker #5: Thank you, Jim. And good morning, everyone. Revenue for the first and that's the focus of our entire
Adam Bowen: Thank you, Jim, and good morning, everyone. Revenue for Q1 was $663.4 million, a decline of $20.4 million or 3% versus Q1 of fiscal 2025. Rental revenue declined $17.9 million, and direct sales declined $2.7 million, offset by a $0.2 million benefit from the positive impact of foreign exchange on currency related to our Canadian business. Importantly, while revenue was down, total volume was flat when measured by pounds processed through our market centers. However, the product mix of those pounds has shifted meaningfully year-over-year. To measure volume, we calculate the weight in pounds of uniforms and workplace supplies processed by our plants at a category and subcategory level.
Adam Bowen: Thank you, Jim, and good morning, everyone. Revenue for Q1 was $663.4 million, a decline of $20.4 million or 3% versus Q1 of fiscal 2025. Rental revenue declined $17.9 million, and direct sales declined $2.7 million, offset by a $0.2 million benefit from the positive impact of foreign exchange on currency related to our Canadian business. Importantly, while revenue was down, total volume was flat when measured by pounds processed through our market centers. However, the product mix of those pounds has shifted meaningfully year-over-year. To measure volume, we calculate the weight in pounds of uniforms and workplace supplies processed by our plants at a category and subcategory level.
Speaker #5: quarter was
Speaker #5: 20.4 million or 3% versus the first quarter of fiscal 2025. Rental revenue team. declined 17.9
Speaker #5: million, and direct sales declined financials. $663.4 million. million benefit from a positive impact of foreign exchange on currency related to our Canadian A decline of With that, I'll turn it over to business.
Speaker #5: Importantly, while revenue was down, total volume was flat when measured by pounds processed through our 2.7 million, offset by a 0.2 market centers. However, the meaningfully year over year.
Speaker #5: To measure volume, we calculate the weight in pounds of uniforms and workplace supplies processed by our plants at a category and subcategory level. Approximately 95% of our total revenue is related to products that are reflected in the volume of pounds processed.
Adam Bowen: Approximately 95% of our total revenue is related to products that are reflected in the volume of pounds processed. Looking closer at our volume, we processed 2% less in uniforms on a pound basis but increased our linen volume by 7% in Q1 2026 when compared to the prior year. For Vestis, linen is a subcategory of workplace supplies, and we saw meaningful shifts in other workplace supply subcategories towards more linen-adjacent products such as towels and aprons, which are significantly more costly for us to process than a uniform. While our revenue dollar mix has only shifted 1% to workplace supplies from uniforms year over year, our volume product mix has shifted more dramatically, representing a lowering of revenue quality and a limiting of top-line operating leverage despite stable overall throughput.
Adam Bowen: Approximately 95% of our total revenue is related to products that are reflected in the volume of pounds processed. Looking closer at our volume, we processed 2% less in uniforms on a pound basis but increased our linen volume by 7% in Q1 2026 when compared to the prior year. For Vestis, linen is a subcategory of workplace supplies, and we saw meaningful shifts in other workplace supply subcategories towards more linen-adjacent products such as towels and aprons, which are significantly more costly for us to process than a uniform. While our revenue dollar mix has only shifted 1% to workplace supplies from uniforms year over year, our volume product mix has shifted more dramatically, representing a lowering of revenue quality and a limiting of top-line operating leverage despite stable overall throughput.
Speaker #5: Looking closer at our volume, we process 2% less in uniforms on a pound basis, but increased our linen volume by 7% in the first quarter. Product mix of those pounds has shifted in Q1 2026 when compared to the prior year.
Speaker #5: For workplace supplies. And we supply subcategories Vestas, linen is a subcategory of towards more linen-adjacent products such are significantly more costly for us saw meaningful shifts in other workplace to process than a dollar mix has only shifted 1% to workplace supplies from uniforms year over year, our volume product mix has shifted more uniform.
Speaker #5: Quality and a limiting of top-line operating leverage despite stable overall throughput, as towels and aprons. The shift in our product mix has negatively impacted revenue per pound. While our revenue declined 3%, which equates to roughly $20 million, the amount of our year-over-year decline in revenue per pound is 0.04.
Adam Bowen: The shift in our product mix has negatively impacted revenue per pound by $0.04 or 3%, which equates to roughly $20 million or the total amount of our year-over-year decline in revenue. Quite simply, Vestis has not experienced a diminishment in sales volumes, but the pounds we processed in Q1 2026 carried lower revenue quality and thus lower revenue per pound than the prior year, which, when combined with other commercial practices that were in place prior to the beginning of our strategic business transformation, has negatively impacted total revenue. Improving our revenue quality and revenue per pound is directly aligned with the commercial excellence priorities Jim discussed earlier. Our revenue focus is to drive a more favorable product mix, supported by stronger decision support tools and a more strategic approach to pricing and customer penetration over time.
Adam Bowen: The shift in our product mix has negatively impacted revenue per pound by $0.04 or 3%, which equates to roughly $20 million or the total amount of our year-over-year decline in revenue. Quite simply, Vestis has not experienced a diminishment in sales volumes, but the pounds we processed in Q1 2026 carried lower revenue quality and thus lower revenue per pound than the prior year, which, when combined with other commercial practices that were in place prior to the beginning of our strategic business transformation, has negatively impacted total revenue. Improving our revenue quality and revenue per pound is directly aligned with the commercial excellence priorities Jim discussed earlier. Our revenue focus is to drive a more favorable product mix, supported by stronger decision support tools and a more strategic approach to pricing and customer penetration over time.
Speaker #5: Quite simply, Vestis has not experienced a diminishment in sales first quarter of 2026 volumes. But the pounds we process in the quarter carried lower revenue quality and thus lower revenue per pound than the prior year, which, when combined with other commercial practices that were in place prior to the beginning of our strategic business, impacted total revenue.
Speaker #5: Improving our revenue quality and revenue per transformation has negatively impacted pound; it is directly aligned with the commercial excellence priorities Jim discussed earlier. Our revenue focus mix is supported by a stronger strategic approach to pricing and customer decision support tools, and more penetration over time.
Speaker #5: As we continue to execute these initiatives year-over-year quarterly changes in revenue to narrow in line with our full-year revenue guidance. Our cost of service was throughout the year, we expect the combination of lower merchandise and delivery costs.
Adam Bowen: As we continue to execute these initiatives throughout the year, we expect the year-over-year quarterly changes in revenue to narrow in line with our full-year revenue guidance. Our cost of service was down $3 million year over year on a combination of lower merchandise and delivery costs. Even though plant costs were up year over year related to shifts in product volume mix that I discussed previously, we saw a 3.7% improvement in our average weekly plant cost in December when compared to November, a financial improvement tied to the plant productivity gains Jim mentioned in his remarks. SG&A was down approximately $0.9 million over the same period on a reported or growth basis.
Adam Bowen: As we continue to execute these initiatives throughout the year, we expect the year-over-year quarterly changes in revenue to narrow in line with our full-year revenue guidance. Our cost of service was down $3 million year over year on a combination of lower merchandise and delivery costs. Even though plant costs were up year over year related to shifts in product volume mix that I discussed previously, we saw a 3.7% improvement in our average weekly plant cost in December when compared to November, a financial improvement tied to the plant productivity gains Jim mentioned in his remarks. SG&A was down approximately $0.9 million over the same period on a reported or growth basis.
Speaker #5: plant costs were up year over year, I discussed previously, we saw down $3 million year over year on a a 3.7% Even though improvement in our average weekly plant November, a financial related to shifts in product volume mix that improvement tied to the plant productivity gains remarks.
Speaker #5: SG&A was down period on a reported or growth first quarter of 2026, basis. by approximately $7.8 SG&A expenses were impacted million in third-party support However, in the related to our strategic business costs and $5.5 million in severance transformation.
Adam Bowen: However, in Q1 2026, SG&A expenses were impacted by approximately $7.8 million in third-party support costs and $5.5 million in severance related to our strategic business transformation. When adjusted for these items, SG&A was down approximately $14 million or 12% year-over-year as we have taken aggressive action to improve our total operating expenses. Our cost per pound improved by $0.02 compared to the prior year, with costs measured as those operating expenses directly impacting Adjusted EBITDA. At our current volume and product mix levels, $0.02 per pound equates to roughly $10 million in Adjusted EBITDA, the amount of cost offset we saw against our revenue decline of $20 million year-over-year.
Adam Bowen: However, in Q1 2026, SG&A expenses were impacted by approximately $7.8 million in third-party support costs and $5.5 million in severance related to our strategic business transformation. When adjusted for these items, SG&A was down approximately $14 million or 12% year-over-year as we have taken aggressive action to improve our total operating expenses. Our cost per pound improved by $0.02 compared to the prior year, with costs measured as those operating expenses directly impacting Adjusted EBITDA. At our current volume and product mix levels, $0.02 per pound equates to roughly $10 million in Adjusted EBITDA, the amount of cost offset we saw against our revenue decline of $20 million year-over-year.
Speaker #5: When adjusted for these items, SG&A was down approximately $14 million, or 12% year over year, as we have taken aggressive action to improve our total operating cost per pound improved by 2 cents compared to the prior year, with approximately 0.9 million over the same costs measured as those operating EBITDA.
Speaker #5: At our current volume and product mix levels, 2 cents per pound equates to roughly expenses directly impacting adjusted amount of cost offset we saw against our revenue decline of $20 million year over year.
Speaker #5: First quarter adjusted EBITDA was $70.4 million. Expenses representing an adjusted EBITDA margin of 11.9% in the prior year. First quarter adjusted EBITDA margin is higher by 150 basis points than our fiscal fourth quarter 2025, driven by 10.6% compared to lower cost per pound of $10 million in adjusted EBITDA, or approximately 1 cent on consistent $81.2 million overall volume and revenue per pound when quarters.
Adam Bowen: Q1 adjusted EBITDA was $70.4 million, representing an adjusted EBITDA margin of 10.6% compared to $81.2 million or 11.9% in the prior year. Q1 adjusted EBITDA margin is higher by 150 basis points than our fiscal Q4 2025, driven by a lower cost per pound of approximately $0.01 on consistent overall volume and revenue per pound when comparing the two quarters. Our Q1 standalone effective tax rate was 25.3%. We expect our full-year 2026 effective tax rate to be in the range of 25% to 30%. Now moving on to cash flow in our balance sheet.
Adam Bowen: Q1 adjusted EBITDA was $70.4 million, representing an adjusted EBITDA margin of 10.6% compared to $81.2 million or 11.9% in the prior year. Q1 adjusted EBITDA margin is higher by 150 basis points than our fiscal Q4 2025, driven by a lower cost per pound of approximately $0.01 on consistent overall volume and revenue per pound when comparing the two quarters. Our Q1 standalone effective tax rate was 25.3%. We expect our full-year 2026 effective tax rate to be in the range of 25% to 30%. Now moving on to cash flow in our balance sheet.
Speaker #5: Our first quarter standalone effective tax rate was 25.3%. We expect our full-year 2026 effective tax rate to be in the range of 25% to balance sheet.
Speaker #5: During the quarter, we generated $38 million in operating cash flow and $28 million in free cash flow, including a 12.7 million benefit from working capital improvements, largely driven by more positively impacting our supply chain functions, 2026 free cash flow guidance was neutral to the impacts of working inventory.
Adam Bowen: During the quarter, we generated $38 million in operating cash flow and $28 million in free cash flow, including a $12.7 million benefit from working capital improvements, largely driven by more disciplined steps taken within our procurement and supply chain functions, positively impacting our inventory. As a reminder, our fiscal 2026 free cash flow guidance was neutral to the impacts of working capital. When excluding working capital improvements, our Q1 2026 free cash flow would have been $15.6 million, in line with our full-year guidance of $50 million to $60 million spread evenly throughout the year.
Adam Bowen: During the quarter, we generated $38 million in operating cash flow and $28 million in free cash flow, including a $12.7 million benefit from working capital improvements, largely driven by more disciplined steps taken within our procurement and supply chain functions, positively impacting our inventory. As a reminder, our fiscal 2026 free cash flow guidance was neutral to the impacts of working capital. When excluding working capital improvements, our Q1 2026 free cash flow would have been $15.6 million, in line with our full-year guidance of $50 million to $60 million spread evenly throughout the year.
Speaker #5: 2026 free cash flow would have capital. been 15.6 million. capital improvements, our first quarter When excluding working $50 million to $60 million, spread evenly throughout the disciplined steps taken within our procurement and year.
Adam Bowen: Our first quarter capital investments were $9.4 million, below our baseline target of $15 million per quarter due to longer lead times for industrial laundry equipment investments we are making in our plants, which we expect will come in future quarters throughout fiscal 2026. Our strong operating cash flow of $38 million in the first quarter of fiscal 2026 represents a $33.9 million increase in operating cash flow year-over-year and a $39 million increase in free cash flow over the same period. Improvements in working capital management are attributable to $27 million in cash flow improvements year-over-year. Looking at how our strategic business transformation impacted free cash flow, during the first quarter of 2026, we spent $9 million in cash for third-party expenses and $5.6 million in cash for severance.
Adam Bowen: Our first quarter capital investments were $9.4 million, below our baseline target of $15 million per quarter due to longer lead times for industrial laundry equipment investments we are making in our plants, which we expect will come in future quarters throughout fiscal 2026. Our strong operating cash flow of $38 million in the first quarter of fiscal 2026 represents a $33.9 million increase in operating cash flow year-over-year and a $39 million increase in free cash flow over the same period. Improvements in working capital management are attributable to $27 million in cash flow improvements year-over-year. Looking at how our strategic business transformation impacted free cash flow, during the first quarter of 2026, we spent $9 million in cash for third-party expenses and $5.6 million in cash for severance.
Speaker #5: were $9.4 million, below Our first quarter capital investments per quarter due to longer lead times we expect will come in future As a reminder, our fiscal our baseline target of $15 million investments we are making in our plants, which for industrial laundry equipment 2026.
Speaker #5: Our strong operating cash flow of $38 million in Q1 2026 represents a $33.9 million increase in operating cash flow year over year, and a $39 million increase in free cash flow over the same period.
Speaker #5: Improvements in working capital management are attributable to quarters throughout fiscal, $27 million in cash flow improvements year over year, million in the first quarter of fiscal. Strategic business transformation impacted free cash flow. During the first quarter of 2026, we spent $9 million in cash for third-party expenses and $5.6 million in cash for severance.
Adam Bowen: Excluding those transformation-related cash expenditures, adjusted free cash flow was $43 million, which reflects the strong cash generative capabilities of our business. On the balance sheet, at the end of Q1, net debt was $1.29 billion, and our principal bank debt outstanding was $1.16 billion, including $19 million on our revolving credit facility, which declined $7 million from Q4 of fiscal 2025. Our liquidity position is strong, with no debt maturities until 2028 and $317 million of available liquidity, including $275 million of undrawn revolver capacity and $42 million of cash on hand. Our capital allocation strategy is to maintain a strong balance sheet and allocate capital toward high-return opportunities with a firm focus on delevering.
Adam Bowen: Excluding those transformation-related cash expenditures, adjusted free cash flow was $43 million, which reflects the strong cash generative capabilities of our business. On the balance sheet, at the end of Q1, net debt was $1.29 billion, and our principal bank debt outstanding was $1.16 billion, including $19 million on our revolving credit facility, which declined $7 million from Q4 of fiscal 2025. Our liquidity position is strong, with no debt maturities until 2028 and $317 million of available liquidity, including $275 million of undrawn revolver capacity and $42 million of cash on hand. Our capital allocation strategy is to maintain a strong balance sheet and allocate capital toward high-return opportunities with a firm focus on delevering.
Speaker #5: cash flow was $43 million. Which reflects the strong cash generative capabilities of our cash expenditures, adjusted free business. On the balance sheet, at the end of $1.29 Excluding those transformation-related billion.
Speaker #5: And our principal bank debt outstanding the first quarter, net debt was was $1.16
Speaker #1: Which declined the fourth quarter of fiscal 2025 . Our strong position no debt , with
Speaker #1: Which declined the fourth quarter of fiscal 2025 . Our strong
Speaker #1: Liquidity, capital allocation—our team maintains a sheet on our revolving credit facility, balance, and strong allocation toward high-return opportunities, with a firm focus on delivering and maintaining prudent working capital.
Speaker #1: is and 2028 $317 million of available liquidity 200 with no maturities 2028 until maturities including liquidity , , $317 million of available including revolver billion, including $19 million capacity $42 million of cash on $275 million of undrawn hand and .
Adam Bowen: Our prudent balance sheet management and working capital actions are providing a stronger foundation from which to support our business. As Jim discussed, we are actively marketing several non-core properties for sale, all in various stages of the real estate disposition process. We intend to use the proceeds from any non-core property sales to repay debt, and we anticipate delevering actions taking place in the fiscal Q2, our current operating quarter. Today, we are reaffirming our outlook for fiscal 2026. We continue to expect that revenue for the year will be between flat to down 2% as compared to fiscal 2025 revenue on a 52-week basis.
Adam Bowen: Our prudent balance sheet management and working capital actions are providing a stronger foundation from which to support our business. As Jim discussed, we are actively marketing several non-core properties for sale, all in various stages of the real estate disposition process. We intend to use the proceeds from any non-core property sales to repay debt, and we anticipate delevering actions taking place in the fiscal Q2, our current operating quarter. Today, we are reaffirming our outlook for fiscal 2026. We continue to expect that revenue for the year will be between flat to down 2% as compared to fiscal 2025 revenue on a 52-week basis.
Speaker #1: providing a Actions are stronger which to foundation from our business Jen . As discussed . We are actively marketing sale , all in various stages of the disposition process .
Speaker #1: We use the real non-core estate, and we are delivering to repay place debt. Our several second quarter actions quarter in the anticipate.
Speaker #1: Today, we are intending to reaffirm that we are operating for support sheet debt. Continuing revenue for the year will be flat to down as we look to 2025.
Adam Bowen: We also continue to expect that Adjusted EBITDA for the full year 2026 will be in a range of $285 million to $315 million, with 5% successive quarterly improvements beginning with Q2. Additionally, we continue to expect fiscal 2026 free cash flow to be in the range of $50 million to $60 million, assuming capital expenditures are generally consistent with 2025. As it relates to our free cash flow guidance for the year, we continue to expect working capital to be generally flat on a full-year basis. With that, operator, please open the line for questions.
Adam Bowen: We also continue to expect that Adjusted EBITDA for the full year 2026 will be in a range of $285 million to $315 million, with 5% successive quarterly improvements beginning with Q2. Additionally, we continue to expect fiscal 2026 free cash flow to be in the range of $50 million to $60 million, assuming capital expenditures are generally consistent with 2025. As it relates to our free cash flow guidance for the year, we continue to expect working capital to be generally flat on a full-year basis. With that, operator, please open the line for questions.
Speaker #1: Revenue on balance fiscal 2026 . basis a fiscal also expect that compared to full year a range We of $285 million and between $315 million , with 5% successive quarterly improvements with the the second quarter .
Speaker #1: Additionally, we continue to expect 2026 free cash flow to be in the 52-week range. Capital expenditures are generally consistent with 2025. As it relates to flow, 2026 will be in cash beginning. We continue to be on a generally flat full-year basis for capital to that.
Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Manav Patnaik with Barclays. Please go ahead. Your line is open.
Operator: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star one on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star two. Again, we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you. Our first question is coming from Manav Patnaik with Barclays. Please go ahead. Your line is open.
Speaker #1: With fiscal Assuming year . questions .
Speaker #2: The .
Speaker #2: open for now Thank . this time , if you have a At question or comment , press star one on your keypad please telephone .
Speaker #2: open for now Thank . this time , if you have a At question or comment , press star one on your keypad please
Speaker #2: If your question has been answered, you may remove yourself from the queue by pressing star two. When you pick up your handset again, we ask that you please provide your quality questions.
Speaker #2: posting your sound . Thank coming Manav Our Patnaik from any point go first question is open
Ronan Kennedy: Hi, good morning. This is Ronan Kennedy. I'm from Manav. Thank you for taking our questions. For the revenue per pound decline of 2.8%, I think it was due to that an element of mix and legacy commercial practices. Can I confirm how we should expect that to trend for the year? And then, you know, I understand there may be a lot, but what would be the most important drivers from a pricing mix action or either commercial initiatives to improve that? And when should we think about, you know, how that could potentially inflect and show in results?
Ronan Kennedy: Hi, good morning. This is Ronan Kennedy. I'm from Manav. Thank you for taking our questions. For the revenue per pound decline of 2.8%, I think it was due to that an element of mix and legacy commercial practices. Can I confirm how we should expect that to trend for the year? And then, you know, I understand there may be a lot, but what would be the most important drivers from a pricing mix action or either commercial initiatives to improve that? And when should we think about, you know, how that could potentially inflect and show in results?
Speaker #2: Barclays... Please open the
Speaker #3: for morning . Kennedy on for Hi . Good Manav . Thank you questions . taking our revenue per For pound the decline Ronin 2.8% .
Speaker #3: It was due, I think, to elements of mix and legacy practices. Can I confirm how that trended? And I understand there may be a lot.
Speaker #3: year ? or either This is improve action that ? When should we think initiatives how that about potentially and show in then an we should
Speaker #3: would be the most But what commercial pricing
Adam Bowen: Yep. Hey, Ronan, it's Adam. Good morning. Thanks for your question. With respect to the remainder of the year, you can expect us on a full-year basis to be flat to down 2% comparing to FY 2025. We're reaffirming that guidance this morning, so generally expect to see kind of consistent trends in revenue per pound throughout the year as we work towards the midpoint of that guidance. And some of the most important levers, which I would let Jim talk to in more detail here, is going to be focusing on shifting that mix, strategic pricing, and a couple other initiatives that he'll dial in in more detail.
Adam Bowen: Yep. Hey, Ronan, it's Adam. Good morning. Thanks for your question. With respect to the remainder of the year, you can expect us on a full-year basis to be flat to down 2% comparing to FY 2025. We're reaffirming that guidance this morning, so generally expect to see kind of consistent trends in revenue per pound throughout the year as we work towards the midpoint of that guidance. And some of the most important levers, which I would let Jim talk to in more detail here, is going to be focusing on shifting that mix, strategic pricing, and a couple other initiatives that he'll dial in in more detail.
Speaker #1: Yeah . With . question
Speaker #1: Adam . of the can ? Good be
Speaker #1: morning . your Hey , Ronan , it's
Speaker #1: Comparing to inflect FY 25 , reaffirming that we're guidance this yourself generally expect morning . to So kind of consistent trends in pound see year as we work our free towards the of that guidance .
Speaker #1: And some of the most levers , which could revenue per let I Jim important talk to midpoint detail here , year , you is going mix focusing on and a couple other pricing initiatives that he'll dial in in more detail .
Speaker #1: And some of the most levers , which could revenue per let I Jim important talk to midpoint detail here , year , you is going mix focusing on and a couple other pricing initiatives that he'll dial in in more detail shifting
Bill Seward: Thanks, Adam. So, look, to Ronan, the plan is to improve revenue per pound throughout this year. A lot of that's gonna be timing-based. We've already started in Q1. We'll continue each quarter to add to that to turn the revenue per pound up, that supports the plan. I would also, though, tell you really quickly, I wouldn't do revenue per pound in isolation. I would do it in concert with cost per pound. It's super important because that's gonna reset the basis of what good revenue per pound looks like in this business, so it will continue to adapt going forward.
Jim Barber: Thanks, Adam. So, look, to Ronan, the plan is to improve revenue per pound throughout this year. A lot of that's gonna be timing-based. We've already started in Q1. We'll continue each quarter to add to that to turn the revenue per pound up, that supports the plan. I would also, though, tell you really quickly, I wouldn't do revenue per pound in isolation. I would do it in concert with cost per pound. It's super important because that's gonna reset the basis of what good revenue per pound looks like in this business, so it will continue to adapt going forward.
Speaker #4: look plan is improve per year , to a this be timing based . We've that's going to in the revenue continue each add
Speaker #4: first quarter . that to turn lot of We'll revenue pound per up . supports the also , really quickly That I would though , tell you wouldn't do pound in So revenue isolation .
Speaker #4: I would do it in concert with cost per important because per that's going to bases of revenue per the it will continue like in this business .
Speaker #4: I would do it in concert with cost per important because per that's going to bases of revenue per the it will continue plan .
Ronan Kennedy: Thank you. Appreciate it. And then on the sequential EBITDA growth assumptions, I believe it was guided to 5% sequential adjusted EBITDA growth for each remaining quarter. And I know you touched on some of these key metrics. How should we expect those, you know, to play out sequentially? And what are, again, the most important operational, commercial underlying assumptions underpinning that sequential progression? And any upside or downside risk to that, please.
Ronan Kennedy: Thank you. Appreciate it. And then on the sequential EBITDA growth assumptions, I believe it was guided to 5% sequential adjusted EBITDA growth for each remaining quarter. And I know you touched on some of these key metrics. How should we expect those, you know, to play out sequentially? And what are, again, the most important operational, commercial underlying assumptions underpinning that sequential progression? And any upside or downside risk to that, please.
Speaker #4: to that
Speaker #4: to that , the Thank
Speaker #4: Totally, super appreciate it.
Speaker #3: you . growth . assumptions , I to 5% sequential adjusted EBITDA growth sequential for each quarter . touched
Speaker #3: And
Speaker #3: these key
Speaker #3: metrics . How do how should the we expect it those then
Speaker #3: out was sequentially ? And most what are operational believe it commercial assumptions again , the . any forward upside or And downside risk to that ?
Speaker #3: important Appreciate you . Okay . Thank .
Adam Bowen: Yeah. Ronan, I can talk a little bit to how that's gonna flow off through the year as far as our guidance goes on Adjusted EBITDA. Remember, for FY 2026, we're guiding to $285 to $315 million in Adjusted EBITDA, so on a full-year basis. So if you plan that out sequentially across the quarters, looking at that 5% sequential improvement, you'll be able to see kind of the differences that are coming through in Adjusted EBITDA through Q2, Q3, Q4 successively. And if you work back to that cost per pound calculation that Jim mentioned, you'll be able to get there. Of course, use Q4 2025 exit rate as your benchmark when you do those differences to be able to get the incremental uplift that we're gonna see throughout the year. And just to be clear, from Q4 to Q1, that's about $5 million.
Adam Bowen: Yeah. Ronan, I can talk a little bit to how that's gonna flow off through the year as far as our guidance goes on Adjusted EBITDA. Remember, for FY 2026, we're guiding to $285 to $315 million in Adjusted EBITDA, so on a full-year basis. So if you plan that out sequentially across the quarters, looking at that 5% sequential improvement, you'll be able to see kind of the differences that are coming through in Adjusted EBITDA through Q2, Q3, Q4 successively. And if you work back to that cost per pound calculation that Jim mentioned, you'll be able to get there. Of course, use Q4 2025 exit rate as your benchmark when you do those differences to be able to get the incremental uplift that we're gonna see throughout the year. And just to be clear, from Q4 to Q1, that's about $5 million.
Speaker #3: progression .
Speaker #3: .
Speaker #1: Ronan , I can Yeah . talk a little EBITDA on flow off EBITDA . Remember , for
Speaker #1: guiding to 285 to 315 adjusted adapt going EBITDA .
Speaker #1: if you basis . So that out sequentially
Speaker #1: that looking at 5% sequential Please improvement , able to to see you'll be kind of the coming differences that are through in adjusted EBITDA through Q2 , Q3 , Q4 successively .
Speaker #1: And back to that cost per pound calculation that work mentioned, you'll be able to get, Jim. Of course, you use Q4 if you rate as your benchmark, 25 exit.
Speaker #1: When you on to be able to
Speaker #1: get incremental the we're going to see uplift that year . And just to , from be clear differences is to about $5 million .
Adam Bowen: And remember, it was $40 million in-year benefit from our transformation, and we saw $5 million of that in Q1, from an improvement in $0.01 per pound between the 2 quarters.
Adam Bowen: And remember, it was $40 million in-year benefit from our transformation, and we saw $5 million of that in Q1, from an improvement in $0.01 per pound between the 2 quarters.
Speaker #1: it was 40 million in year
Speaker #1: it was 40 million in year those from our that's transformation . And we saw Q1 5 million of that improvement do between pound in from an two quarters .
Speaker #1: 40 year ,
Ronan Kennedy: Hey, thank you. Appreciate it.
Ronan Kennedy: Hey, thank you. Appreciate it.
Adam Bowen: Sure.
Adam Bowen: Sure.
Operator: Thank you. Our next question comes from Stephanie Moore with Jefferies. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Stephanie Moore with Jefferies. Please go ahead. Your line is open.
Speaker #3: it
Speaker #2: Thank you comes Stephanie Moore with Jefferies . Please go Your line is
Stephanie Moore: Hi, good morning. Thank you for the question. Maybe to start, you know, could you comment on what you're seeing from a general macro standpoint or customer demand standpoint? Any slowing or maybe reduction in overall demand that can be pointed to just more of a macro standpoint? That'd be helpful. Thank you.
Stephanie Moore: Hi, good morning. Thank you for the question. Maybe to start, you know, could you comment on what you're seeing from a general macro standpoint or customer demand standpoint? Any slowing or maybe reduction in overall demand that can be pointed to just more of a macro standpoint? That'd be helpful. Thank you.
Speaker #2: Our
Speaker #5: Hi . Good
Speaker #5: for the question .
Speaker #5: comment
Speaker #5: what you're seeing from a general macro standpoint or
Speaker #5: standpoint ? Any or Maybe to maybe
Speaker #5: standpoint ? Any or Maybe to maybe in Sure that can demand be overall pointed to flowing of a standpoint reduction in open question
Speaker #5: standpoint ? Any or Maybe to maybe in Sure that can demand be overall pointed to flowing of a standpoint reduction in open question .
Adam Bowen: Hey, Stephanie. It's Adam. I can comment a little bit there. We're still concentrated in the same key verticals that we've been concentrated in year-over-year, so we've seen no shifting in our macro vertical concentration. We're seeing really no waning in demand. And as I mentioned in, in our remarks, our volume is consistent on a pound basis year-over-year, so we're putting the same amount of work through the network that we put through last year on a per-pound basis. The difference is that mix shifting, which is a part of our commercial excellence aspect of our transformation.
Adam Bowen: Hey, Stephanie. It's Adam. I can comment a little bit there. We're still concentrated in the same key verticals that we've been concentrated in year-over-year, so we've seen no shifting in our macro vertical concentration. We're seeing really no waning in demand. And as I mentioned in, in our remarks, our volume is consistent on a pound basis year-over-year, so we're putting the same amount of work through the network that we put through last year on a per-pound basis. The difference is that mix shifting, which is a part of our commercial excellence aspect of our transformation.
Speaker #1: it's comment Adam I can a little bit
Speaker #1: there . still in the Thanks , year over verticals that we've shifting in our vertical
Speaker #1: We're seeing demand . really no waning in mentioned in our remarks ,
Speaker #1: basis year over concentrated in So we're
Speaker #1: We work through the same that we put macro seen on a per-pound basis. The difference is that volume is shifting, which is—and as I network commercial from excellence last aspect of our transformation we're a part.
Bill Seward: I would add, Stephanie, it's Jim that I think that, you know, as we start out this transformation, the concept of the macro is really secondary in our business right now. It's getting the foundation of this right so we can grow as we need to grow for all the stakeholders. That will outweigh anything macro in this business in the near term, but that's how I kinda think about it.
Jim Barber: I would add, Stephanie, it's Jim that I think that, you know, as we start out this transformation, the concept of the macro is really secondary in our business right now. It's getting the foundation of this right so we can grow as we need to grow for all the stakeholders. That will outweigh anything macro in this business in the near term, but that's how I kinda think about it.
Speaker #4: I would add , it's that I think , you know , as . we start out this Jim transformation
Speaker #4: concept the of macro really Stephanie , business right now . It's getting the it's foundation of this So we can right . secondary in grow as to the for all grow stakeholders outweigh anything macro in this
Stephanie Moore: Absolutely. No, and I think well understood, and that's a good segue into just my follow-up question there. So, you know, maybe, Jim, as you think about, you know, your time the last, I guess it's not been a year, but let's just say 9 months roughly. You know, as you look at just the transformation underway, how would you calibrate your progress thus far? Are you ahead of schedule, in line with schedule? And as you think about the next, let's just say, 12 months, where do you think we should see the biggest change from an operations standpoint? Thanks.
Stephanie Moore: Absolutely. No, and I think well understood, and that's a good segue into just my follow-up question there. So, you know, maybe, Jim, as you think about, you know, your time the last, I guess it's not been a year, but let's just say 9 months roughly. You know, as you look at just the transformation underway, how would you calibrate your progress thus far? Are you ahead of schedule, in line with schedule? And as you think about the next, let's just say, 12 months, where do you think we should see the biggest change from an operations standpoint? Thanks.
Speaker #4: term . But that's of think about mix that will
Speaker #4: . I
Speaker #5: no . through
Speaker #5: And I think we all understood .
Speaker #5: that's a good Absolutely into just my follow question So segue
Speaker #5: that's a good Absolutely into just
Speaker #5: maybe , Jim ,
Speaker #5: your time , the think last near guess it's business in the year , but let's just say nine months , as you
Speaker #5: How about the transformation you have underway? Are you ahead of, in line with, or not quite on schedule? Can you calibrate how far along you are?
Speaker #5: And think next , let's just say 12 months , where do you think we should see the biggest change from an operations roughly , standpoint ?
Bill Seward: So, a couple—I'm gonna bifurcate it 'cause second half, I'm gonna give to, to Bill Seward to talk a little bit about the operations as well. So if depending on what sport you think about, if I'm in baseball, I would say we're in the first inning right now. That's where we are. And we, you know, this is a continual move quarter-over-quarter, and it will be a blend of cost per pound improvement and revenue per pound improvement. There's multiple layers behind it of opportunity in this business, which is why in the opening comments, we made it that it's embedded in this business. The value's there. We just have to unlock it going forward, which we plan to do. So it'll be both of those levers.
Jim Barber: So, a couple—I'm gonna bifurcate it 'cause second half, I'm gonna give to, to Bill Seward to talk a little bit about the operations as well. So if depending on what sport you think about, if I'm in baseball, I would say we're in the first inning right now. That's where we are. And we, you know, this is a continual move quarter-over-quarter, and it will be a blend of cost per pound improvement and revenue per pound improvement. There's multiple layers behind it of opportunity in this business, which is why in the opening comments, we made it that it's embedded in this business. The value's there. We just have to unlock it going forward, which we plan to do. So it'll be both of those levers.
Speaker #5: Thanks how I kind .
Speaker #4: So let me bifurcate it a because second half I'm going
Speaker #4: Bill Seward to talk a little bit about operations as to to well . So depending on what you think sport the baseball I about if would say we're in the first inning right now .
Speaker #4: That's where I'm in we are And we to give know , this is a up continual move quarter over quarter , over it will be a can you blend of cost per pound improvement quarter .
Speaker #4: And revenue per improvement and pound multiple behind it of opportunity in this, which is why in the opening comments we made, business—it's embedded in these layers of the business.
Bill Seward: That's why we're gonna bring operating leverage into the business so we can keep score on that. I'll have Bill talk for a second about one of the service metrics in the operations we put in there on plant production, kinda where we are.
Jim Barber: That's why we're gonna bring operating leverage into the business so we can keep score on that. I'll have Bill talk for a second about one of the service metrics in the operations we put in there on plant production, kinda where we are.
Speaker #4: The value is there . We just have to unlock it . Going forward , which you plan to do . So it'll be both of those levers .
Speaker #4: That's why bring we're going to operating the business , so we can score on keep . And I'll have Bill talk for a second about one of the service metrics in the operations .
Adam Bowen: Yeah. Thanks, Jim. I think the way I think about your question is that the service comes along with the cost and the revenue per piece as well. So what we're seeing is sequentially, month-over-month, since we've kinda leaned into the transformation, that we are getting better outcomes on cost and really importantly for our customers and for our shareholders, our service levels are tracking with that. So, I agree with Jim. Early innings for sure.
Bill Seward: Yeah. Thanks, Jim. I think the way I think about your question is that the service comes along with the cost and the revenue per piece as well. So what we're seeing is sequentially, month-over-month, since we've kinda leaned into the transformation, that we are getting better outcomes on cost and really importantly for our customers and for our shareholders, our service levels are tracking with that. So, I agree with Jim. Early innings for sure.
Speaker #4: We've put on plant in there production , kind of where we are . that
Speaker #1: Jim . I Yeah . Thanks , think the question is that about your the service way I think comes along with the cost and the revenue per piece as well .
Speaker #1: what we're seeing So sequentially is month over month , since we've kind of leaned into the transformation that we are getting better outcomes on cost and really importantly for our for for our shareholders , our levels are tracking with that .
Speaker #1: customers and
Speaker #1: So I agree with . Early Jim innings for sure service
Operator: Thank you. Our next question comes from Tim Mulrooney with William Blair. Please go ahead. Your line is open.
Operator: Thank you. Our next question comes from Tim Mulrooney with William Blair. Please go ahead. Your line is open.
Speaker #2: you . Our next Mulroney Tim with William Blair . Please go ahead . Your line
Tim Mulrooney: Jim, Adam, Bill. Good morning.
Tim Mulrooney: Jim, Adam, Bill. Good morning.
Adam Bowen: Good morning.
Jim Barber: Good morning.
Bill Seward: Morning. Sticking to some cost KPIs here. So I wanted to ask about that plant productivity metrics, which showed a 7% increase. Looks like you measure it in terms of pounds processed, but pounds processed per what? Per hour? Per day? Can you just help me.
Adam Bowen: Morning.
Tim Mulrooney: Sticking to some cost KPIs here. So I wanted to ask about that plant productivity metrics, which showed a 7% increase. Looks like you measure it in terms of pounds processed, but pounds processed per what? Per hour? Per day? Can you just help me.
Speaker #2: open .
Speaker #6: Jim . Adam . Bill . Good morning .
Speaker #1: Good Good
Speaker #1: Good
Speaker #1: morning .
Speaker #4: .
Speaker #6: Just sticking to . some KPIs here . So wanted to ask about from plant productivity that metric showed I a 7% increase . Looks like you measure it in terms of pounds processed , but pounds processed per watt hour per per day .
Tim Mulrooney: per hour.
Bill Seward: per hour.
Bill Seward: Understand that, say again?
Tim Mulrooney: Understand that, say again?
Tim Mulrooney: I'm sorry to interrupt you. Per operating hour. And, you know, the idea there is that we've had some tools and some technology in place in the past that was kinda underutilized, I would say. We were leaning in on it with really good visibility, daily visibility to what our productivity levels are. And as I mentioned a moment ago, also daily visibility to what our service levels are to make sure that we don't just get the cost, but we maintain service and improve outcomes for our customers at the same time.
Bill Seward: I'm sorry to interrupt you. Per operating hour. And, you know, the idea there is that we've had some tools and some technology in place in the past that was kinda underutilized, I would say. We were leaning in on it with really good visibility, daily visibility to what our productivity levels are. And as I mentioned a moment ago, also daily visibility to what our service levels are to make sure that we don't just get the cost, but we maintain service and improve outcomes for our customers at the same time.
Speaker #6: Can you just help me understand that that that say again .
Speaker #1: sorry to I'm interrupt you per operating hour and you know , the idea the there is that we've had some tools and some the past that was technology in kind of underutilized .
Speaker #1: I would say . We were leaning in on it with , with really good place in visibility daily what our visibility to productivity levels are .
Speaker #1: And as I mentioned a moment ago , daily visibility to what our service levels also are to make sure that we don't just get the cost , but we maintain service and improve outcomes for our customers .
Bill Seward: Got it. So that 7% improvement in plant productivity. Is that directly related then to that $0.02 reduction we see in cost per pound? Can you connect those ideas for me? And can you also talk a little bit about, you know, the things that you're doing that drove those efficiency gains? Like, and I guess where you think you are along this journey, to get that wash alley efficiency up to stuff? So this, Jim, let me put a couple things together for you. So, and I like the line of questioning too 'cause that's kinda where we're going with the whole thing, is that, the first question you asked, was it is it related to the $0.02? And the answer to that.
Tim Mulrooney: Got it. So that 7% improvement in plant productivity. Is that directly related then to that $0.02 reduction we see in cost per pound? Can you connect those ideas for me? And can you also talk a little bit about, you know, the things that you're doing that drove those efficiency gains? Like, and I guess where you think you are along this journey, to get that wash alley efficiency up to stuff?
Speaker #1: same time .
Speaker #6: it . Got So that's 7% improvement in plant cost . Is that productivity directly related then to that two cent reduction see we in cost per pound ?
Speaker #6: Can you ideas Can you connect those a little bit about , you know , the things that you're doing that drove those efficiency gains , like , like , and I guess where do you think you are along this , which journey to get that wash ?
Jim Barber: So this, Jim, let me put a couple things together for you. So, and I like the line of questioning too 'cause that's kinda where we're going with the whole thing, is that, the first question you asked, was it is it related to the $0.02? And the answer to that.
Speaker #6: Ali efficiency up to snuff
Speaker #4: me put a me let couple things together
Speaker #4: for you . And I like the line of questioning too , because that's kind of where we're going with the whole thing . Is that the first question you .
Tim Mulrooney: Yeah.
Tim Mulrooney: Yeah.
Bill Seward: It's no. No, not in Q1. But we also made the point that December is where it started to move forward, and so that's where it started to move, and more impactful going forward. And so even in Q2, it's picked up pace so far. It will show up in the cost per pound going forward. There's no question about that. I think the other piece is that, you know, coming from a longtime UPS background, that we had an army of engineers behind us doing time measurement and working on all these things. Vestis already had some really good technology, in my opinion, in it to actually take each building in the network and define what good looks like, what 100% effective of a building should be.
Jim Barber: It's no. No, not in Q1. But we also made the point that December is where it started to move forward, and so that's where it started to move, and more impactful going forward. And so even in Q2, it's picked up pace so far. It will show up in the cost per pound going forward. There's no question about that. I think the other piece is that, you know, coming from a longtime UPS background, that we had an army of engineers behind us doing time measurement and working on all these things. Vestis already had some really good technology, in my opinion, in it to actually take each building in the network and define what good looks like, what 100% effective of a building should be.
Speaker #4: is So it related to the $0.02 ? And to that is the answer no , not in the first quarter . But we also made the point that it December is where forward so that's where it started to move .
Speaker #4: . And more And impactful going forward . And so even in the second quarter , it's picked up pace . So far . It up in the will show pound cost per going forward .
Speaker #4: There's no question about that think the . other I that , you know , coming from a long time UPS background that we had an army of engineers behind us doing time measurement working on all things these .
Speaker #4: Vestas already had some really good technology , in my opinion . In it to actually take each building in the network and define what good looks what a 100% effective of a building should be .
Bill Seward: They just hadn't quite pulled it together yet to move it into this transformation mode and convert it to cost per pound. That's what's going on. So you will get that. Each step of the way, we'll continue to optimize the buildings, and that opens up more capacity, and it opens up more ability to grow based upon the way they can flow those pounds through the network.
Jim Barber: They just hadn't quite pulled it together yet to move it into this transformation mode and convert it to cost per pound. That's what's going on. So you will get that. Each step of the way, we'll continue to optimize the buildings, and that opens up more capacity, and it opens up more ability to grow based upon the way they can flow those pounds through the network.
Speaker #4: They just hadn't quite pulled it together yet to move it into this transformation mode and convert it to cost per pound . And that's what's going so you will get that in on .
Speaker #4: step of the way . We'll continue to optimize And the buildings . And that opens up more capacity . And and it opens up more ability to grow based upon the way they can flow .
Adam Bowen: And let me add one thing there to what Jim mentioned. The way we're doing cost per pound, if you look in our materials, you'll see that it's those costs directly impacting Adjusted EBITDA, which is essentially operating expenses adjusted for the add-backs for Adjusted EBITDA. So if you take a look at that calculation, you'll be able to see kinda what's driving that cost per pound savings.
Adam Bowen: And let me add one thing there to what Jim mentioned. The way we're doing cost per pound, if you look in our materials, you'll see that it's those costs directly impacting Adjusted EBITDA, which is essentially operating expenses adjusted for the add-backs for Adjusted EBITDA. So if you take a look at that calculation, you'll be able to see kinda what's driving that cost per pound savings.
Speaker #4: pounds through the Those network .
Speaker #7: And let me add one thing there to what Jim mentioned . The way we're doing cost per pound . If you look in our materials , you'll see that it's those costs directly impacting adjusted EBITDA , which is essentially operating expenses adjusted for the add backs for adjusted So if you take a look EBITDA .
Bill Seward: Understood. Very clear. Thank you. Welcome.
Tim Mulrooney: Understood. Very clear. Thank you.
Bill Seward: Welcome.
Speaker #7: calculation , you'll be able to see kind of what's driving that cost per pound savings .
Operator: Thank you. And once again, if you do have a question, you may press Star One on your telephone keypad at this time. We will move next with George Tong with Goldman Sachs. Please go ahead. Your line is open.
Operator: Thank you. And once again, if you do have a question, you may press Star One on your telephone keypad at this time. We will move next with George Tong with Goldman Sachs. Please go ahead. Your line is open.
Speaker #6: Understood . Very clear . Thank you .
Speaker #4: Welcome like , .
Speaker #2: you Thank . And once again , if you do have a question , you may press star one on your telephone keypad . At this time we will move with George Tong with Goldman Sachs .
George Tong: Hi, everyone. This is Deanna on for George. Thank you for taking all our questions. Just wondering, sorry if I missed, a quick confirmation. How much of that $75 million has been realized in Q1, and how should we think about the cadence of cost saving realization over the remainder of the year and what orders and puts and takes there? And I have a follow-up on if you are seeing any increasing tractions in the vendetted market, and how is that growth in white space trending compared to last year? Thank you.
[Anayst] (Goldman Sachs): Hi, everyone. This is Deanna on for George. Thank you for taking all our questions. Just wondering, sorry if I missed, a quick confirmation. How much of that $75 million has been realized in Q1, and how should we think about the cadence of cost saving realization over the remainder of the year and what orders and puts and takes there? And I have a follow-up on if you are seeing any increasing tractions in the vendetted market, and how is that growth in white space trending compared to last year? Thank you.
Speaker #2: Please go ahead . Your line is open .
Speaker #8: Hi everyone . This is Anna on for George . Thank you for thank you for taking our questions . Just wondering if . Sorry if I missed a quick confirmation .
Speaker #8: How much of that $75 million has been realized in the first quarter? And how should we think about the cadence of cost-saving realizations over the remainder of the year?
Speaker #8: And what what are some puts and takes there ? And I have a follow up on if you seeing any increase in traction in the market .
Adam Bowen: Yep. Hey, Anna. It's Adam. I'll answer the first part of your question, and then I might get you to repeat your follow-up just to make sure we're giving you the right answer. So on the cadence of how, once it's set, your point about the $75 million. Now, keep in mind, the 75 is a full-year number that's gonna be realized after our transformation in FY 2026. So in FY 2026, it's $40 million in-year, and that $40 million becomes 75 on a full-year basis moving forward. So the way you get to the $40 million is essentially by taking, kind of where we landed in Q1 compared to Q4. That's about a $5 million increment. That's that $0.01 per pound that I mentioned earlier. That gives you $35 million of additional savings to get to 40. That's gonna run off between Q2 and Q4.
Adam Bowen: Yep. Hey, Anna. It's Adam. I'll answer the first part of your question, and then I might get you to repeat your follow-up just to make sure we're giving you the right answer. So on the cadence of how, once it's set, your point about the $75 million. Now, keep in mind, the 75 is a full-year number that's gonna be realized after our transformation in FY 2026. So in FY 2026, it's $40 million in-year, and that $40 million becomes 75 on a full-year basis moving forward. So the way you get to the $40 million is essentially by taking, kind of where we landed in Q1 compared to Q4. That's about a $5 million increment. That's that $0.01 per pound that I mentioned earlier. That gives you $35 million of additional savings to get to 40. That's gonna run off between Q2 and Q4.
Speaker #8: how And is that growth space white Thank last year ? training compared to in you .
Speaker #7: Hey Yes . Anna , it's Adam . answer the I'll first part of your question and then I might get repeat your follow up just to make sure we're giving you the right answer .
Speaker #7: So on the cadence of how to your point about the 75 million , now keep in mind the 75 is a full year number that's going to be realized after our transformation in FY 26 .
Speaker #7: So what FY 26 . It's 40 million in year . And that 40 million becomes you to 75 on a full year basis .
Speaker #7: Moving forward . So the way you get to the 40 million is essentially by taking kind of where we landed in compared to Q1 Q4 , that's about a $5 million increment .
Speaker #7: That's that $0.01 per pound that I mentioned earlier . That gives you a 35 million of additional savings to get to 40 . That's going to run off between Q2 and Q4 .
Adam Bowen: And the way you calculate the way that's gonna phase in, you take the Q2 5% uplift from Q1 and subtract it from our exit rate of $65 million from Q4. That's gonna get you roughly $9 million. And then you'll have $13 million in Q3, and they're approximately, about the same kind of in Q4 is how that's gonna run off. And that's gonna largely.
Adam Bowen: And the way you calculate the way that's gonna phase in, you take the Q2 5% uplift from Q1 and subtract it from our exit rate of $65 million from Q4. That's gonna get you roughly $9 million. And then you'll have $13 million in Q3, and they're approximately, about the same kind of in Q4 is how that's gonna run off. And that's gonna largely.
Speaker #7: And the way you calculate the way that's going to phase in , you take the Q2 5% uplift from Q1 and subtract it from our exit rate of 65 million from Q4 .
Speaker #7: That's going to get you and then 9 million , roughly you'll have 13 million in Q3 . And there approximately about the same kind of in is how that's going to run off .
Stephanie Moore: Perfect. That's super helpful.
[Anayst] (Goldman Sachs): Perfect. That's super helpful.
Adam Bowen: Just so you were clear, that's gonna largely be focused, you know, as we talked about earlier on the call and, and Q&A, on cost per pound savings.
Adam Bowen: Just so you were clear, that's gonna largely be focused, you know, as we talked about earlier on the call and, and Q&A, on cost per pound savings.
Speaker #7: And that's Be
Speaker #7: going to .
Speaker #8: helpful .
Speaker #7: so we're clear , super largely that's going to be focused talked , as we've about earlier on the call in Q&A on cost per pound savings .
Stephanie Moore: Perfect. That's super helpful. Thank you so much. I guess my second question, a second part of the question, is more about if there is any increasing traction in penetrating into the unvended market, like non-programmers market, and how is that growth in the white space trending for you guys?
[Anayst] (Goldman Sachs): Perfect. That's super helpful. Thank you so much. I guess my second question, a second part of the question, is more about if there is any increasing traction in penetrating into the unvended market, like non-programmers market, and how is that growth in the white space trending for you guys?
Speaker #8: Perfect . That's super helpful . Thank you so much . I guess my second a second part of the question is more about if there any is increase in tractions in penetrating into the unblended market .
Adam Bowen: Yeah. Yeah, Anna. Hey, that's a great question. Thank you. We're, we're still roughly, you know, on our new business side, 60/40, with 40% of them being non-programmers, 60% of them being programmers, and haven't seen a dramatic shift there.
Adam Bowen: Yeah. Yeah, Anna. Hey, that's a great question. Thank you. We're, we're still roughly, you know, on our new business side, 60/40, with 40% of them being non-programmers, 60% of them being programmers, and haven't seen a dramatic shift there.
Speaker #8: No programmers market , and how is that growth in the white space ? Training for you guys ?
Speaker #7: Yeah , yeah . Hey , that's a great question . Thank you . We're still roughly , you know , on our new business side , 60 over 40 40% of them being with non-programmers , 60% of them being programmers seen a and haven't dramatic shift .
Bill Seward: But I would add to Adam's responses, Jim, that we mentioned in the prepared remarks that we're introducing market development representatives into our growth model. And very clearly, they'll have more feet closer to the front line where the customers are, and they will be focused on continuing to grow both sides of that growth equation, both non-programmers.
Jim Barber: But I would add to Adam's responses, Jim, that we mentioned in the prepared remarks that we're introducing market development representatives into our growth model. And very clearly, they'll have more feet closer to the front line where the customers are, and they will be focused on continuing to grow both sides of that growth equation, both non-programmers.
Speaker #7: There .
Speaker #4: to would add Adam's response as Jim , that But I in we mentioned the prepared remarks we're that development introducing marked representatives into our growth model and very clearly , they'll have more closer feet the to to the line where front the customers are , and they will be focused on to continuing grow both sides of growth that .
Tim Mulrooney: Mm-hmm.
[Anayst] (Goldman Sachs): Mm-hmm.
Bill Seward: Programmers and those that are already in the industry.
Jim Barber: Programmers and those that are already in the industry.
Stephanie Moore: Got it. Thank you so much.
[Anayst] (Goldman Sachs): Got it. Thank you so much.
Speaker #4: equation Both non-programmers , programmers and those that are already in the industry .
Bill Seward: Mm-hmm.
Jim Barber: Mm-hmm.
Operator: Thank you. This concludes the Q&A portion of today's call. I will now turn the call back to Stefan Neely for closing remarks.
Operator: Thank you. This concludes the Q&A portion of today's call. I will now turn the call back to Stefan Neely for closing remarks.
Speaker #4: .
Speaker #8: Got it . Thank you much
Speaker #8: Thank you so .
Speaker #2: . And . Thank you concludes the this Q&A portion today's of call . I will now back to turn the call Stefan Neely for remarks closing .
Adam Bowen: Thank you, Nikki. Thank you, everyone, for joining us today. We appreciate your time and your interest in Vestis. If you have any questions, please don't hesitate to contact us at ir@vestis.com. We look forward to speaking with you again next quarter. Have a great day.
Stefan Neely: Thank you, Nikki. Thank you, everyone, for joining us today. We appreciate your time and your interest in Vestis. If you have any questions, please don't hesitate to contact us at ir@vestis.com. We look forward to speaking with you again next quarter. Have a great day.
Speaker #4: , Nicki , , everyone for and thank joining us Thank you you today . We appreciate your time and your in Vestas . If you have any interest please don't questions , hesitate to contact .
Speaker #4: us at . We look speaking with I forward to again next a great quarter . Have you day .
Operator: Thank you. This concludes today's Vestis Corporation Fiscal First Quarter 2026 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.
Operator: Thank you. This concludes today's Vestis Corporation Fiscal First Quarter 2026 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.
Speaker #2: . These concludes today's Vestis Corp first fiscal Quarter 2020 Earnings Thank you call Conference . disconnect your at this line Please time and have a day wonderful .
