Q4 2024 UniFirst Corp Earnings Call

In This Article:

Participants

Steven Sintros; President and CEO; UniFirst Corporation

Shane F. O’Connor; EVP and CFO; UniFirst Corporation

Ronan Kennedy; Analyst; Barclays

Kartik Mehta; Analyst; Northcoast Research

Luke McFadden; Analyst; William Blair

Josh Chan; Analyst; UBS

Andrew Steinerman; Analyst; JP Morgan

Andrew Wittmann; Analyst; R.W. Baird

Presentation

Operator

Good day. And thank you for standing by. Welcome to the fourth quarter 2024 UniFirst earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Steven Sintros, President and Chief Executive Officer. Please go ahead.

Steven Sintros

Thank you and good morning. I'm Steve Sintros, UniFirst's President and Chief Executive Officer. Joining me today is Shane F. O’Connor, Executive Vice President and Chief Financial Officer. Would like to welcome you to UniFirst Corporation conference call to review our fourth quarter results for fiscal year 2024.
This call will be on a listen-only mode until we complete our prepared remarks. But first 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. 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.
I'm pleased to report that we closed the year with a strong fourth quarter that modestly exceeded our expectations in both top and bottom line performance. We accomplished a lot as a team in fiscal '24 that will help strengthen our company as we move forward, continuing to grow our company as well as advancing our technology and other organizational initiatives.
I want to sincerely thank all of our team partners who continue to always deliver for each other 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 of serving the people who do the hard work.
We serve the people who do the hard work as they are the workforce that keeps our communities up and running. They are our existing and prospective customers as well as our own universe 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 while providing an enhanced customer service experience.
Shane will provide the details of our quarter shortly, but a quick recap of our full fiscal year. Our full year revenues came in at a record $2.427 billion, an increase of 8.7% from fiscal 2023. Our full year revenue growth benefited from an extra week of operations as well as a full year of revenues from our March 2023 acquisition of Clean Uniform.
Our core laundry operations, organic growth for fiscal '24 was a very solid 4.6%. Operating income and adjusted EBITDA increased significantly for the full year compared to fiscal '23 benefiting partially from lower cost expended during the year related to our key initiatives. Excluding these benefits, we still experience strong operating income and adjusted EBITDA growth for the full year. The result of solid growth as well as moderating cost trends in key areas.
We are also pleased with the improvement in our cash flows from operating activities for the full year which grew 36.8% compared to fiscal 2023. 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 declined during the current year due to activities surrounding the deployment of our CRM largely winding down and the amounts we are spending 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 and the value that universe can bring their businesses. Overall, we are pleased with the organic growth for the quarter despite a more challenging pricing environment.
Although we would classify our existing customer wearer levels as mostly stable, we have continued to see a sequential decline in our net wearer metrics indicating a less robust hiring environment. As we discussed last quarter, as the market emerged from a period of significantly elevated inflation levels the more challenging pricing environment and its corresponding impact on our retention rates has impacted our sequential revenue trends which will impact growth rates in fiscal '25.
Shane will provide more detail on our guidance for fiscal '25 shortly. But we currently expect organic growth in our core laundry operations to be between 1.3% and 2.3% in 2025. Although these are not the growth rates, we ultimately aspire to deliver. We do feel there are reasons to be positive about some of the trends we were recently experiencing.
We finished fiscal '24 with a strong year in new account sales and many of our leading indicators would suggest that we are poised to have an improved performance in fiscal '25 from a revenue trend and retention perspective.
For example, we were renewing contracts at improved rates. Our NPS scores which is a newer program from us have been steadily increasing throughout the year and we feel as good from a service staffing perspective as we have in the last couple of years.
In addition, our teams are becoming more and more comfortable with our new systems and taking advantage of their benefits. As a company, 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.
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 recent progress in this area and the related trends in key costs such as merchan merchandise and as well as other input costs.
As I mentioned, 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 universe. 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 enhancement opportunities. Although some of these benefits going forward will be no more significantly enabled through the implementation of ERP, we continue to focus on these areas and others that we feel can move the needle in the near to mid term.
We continue to believe strongly in the bright future of our first aid and safety division. We finished fiscal 2024 with this segment exceeding $100 million for the first time and we expect double digit growth again in fiscal 2025.
We continue to make investments in sales and service infrastructure on 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 is an important contributor to these integrated solutions.
These investments have delivered strong growth that we once again achieved in the quarter. As we continue to improve route density as well as penetrate our customers with the full breadth of services that we provide, we expect the profitability of this segment to steadily improve.
And last but certainly not least. We are thrilled to welcome Kelly Rooney to our senior leadership team and the role of Chief Operating Officer. Kelly brings significant experience working in route based business to business services coming out of a long career in the waste industry.
The role of COO is new to UniFirst, but one that we feel strongly can help us enhance service and operational execution, especially given how well we feel Kelly's experiences translate to where we are on our journey as a company. Her experience and ability to affect positive change will be critical as we continue to evolve. Alongside her deep operational experience, her talent and passion for empowering workforces to succeed fits like a glove with our culture and our promise to always deliver for our customers and our employees.
With that. I'd like to turn the call over to Shane, who will provide more details on our fourth quarter results as well as our outlook for fiscal 2025.

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