To The Moon

• Revenue: $602.2 million, up 1.9% from $590.7 million a year ago.
• Operating Income: Increased to $31.2 million from $27.9 million, up 11.7%.
• Net Income: Increased to $24.5 million or $1.31 per diluted share from $20.5 million or $1.09 per diluted share.
• Adjusted EBITDA: Increased to $68.9 million from $64.8 million, up 6.3%.
• Core Laundry Revenue: $530.4 million, an increase of 1.5% from the prior year.
• Core Laundry Operating Margin: Increased to 4.6% from 0.6% in the prior year.
• Specialty Garments Revenue: Increased to $44.4 million from $43.5 million, up 2.2%.
• First Aid Segment Revenue: Increased to $27.5 million from $24.8 million, up 10.6%.
• Operating Cash Flow: Increased 20.2% to $128.3 million year-to-date.
• Cash and Short-term Investments: Totaling $201 million with no long-term debt.
• Capital Expenditures: $66.1 million.
• Stock Repurchase: $12.5 million worth of common stock.
• Fiscal 2025 Revenue Outlook: Expected between $2.422 billion and $2.432 billion.
• Fiscal 2025 EPS Outlook: Expected between $7.30 and $7.70.

• Warning! GuruFocus has detected 5 Warning Signs with UNF.

Release Date: April 02, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• UniFirst Corp (NYSE:UNF) reported a 1.9% increase in consolidated revenues to $602.2 million, with a 2.3% increase on an organic basis.
• Operating income and adjusted EBITDA increased by 11.7% and 6.3% respectively, compared to the second quarter of fiscal 2024.
• The company saw a 20.2% increase in operating cash flow year-to-date, indicating improved profitability and lower working capital needs.
• UniFirst Corp (NYSE:UNF) reported notable improvements in customer retention and positive trends in revenue-related leading indicators.
• The company is making strategic investments, such as the expansion of its distribution center in Owensboro, Kentucky, to improve speed and efficiency in direct sales.

Negative Points

• Higher healthcare costs partially offset the improvements in operating income and adjusted EBITDA during the quarter.
• Net wear levels for existing customers declined, indicating some incremental weakness compared to the same quarter last year.
• The Specialty Garments segment's operating margin decreased to 16.7% from 22.8% in the prior year, due to seasonality and timing of nuclear reactor outages.
• The First Aid segment experienced a nominal operating loss of $0.5 million, reflecting ongoing investments in the First Aid van business.
• The company faces uncertainty regarding potential impacts from tariffs and the Canadian dollar exchange rate, which are not fully reflected in the current guidance.

Q & A Highlights

Q: Can you elaborate on how UniFirst plans to achieve value creation equivalent to the offer from Cintas on a stand-alone basis? A: Steven Sintros, President and CEO, explained that UniFirst aims to drive top-line growth back to mid-single digits and achieve EBITDA margins in the high teens. The company is on a journey with technology investments that will fully enable these benefits, with full deployment expected by fiscal 2027. The strategy involves steady progress, with larger benefits being back-end loaded.

Q: How should we think about the near-term impacts on margins from strategic initiatives like pricing and procurement? A: Steven Sintros noted that UniFirst is pleased with the first half of the year and aims to maintain momentum. The focus is on driving top-line growth and leveraging leading indicators that suggest positive direction. The company is working on initiatives to improve scalability, executability, and repeatability, which should enhance margins over time.

Q: Is there any impact from tariffs on UniFirst's business, and is this reflected in the guidance? A: Steven Sintros stated that the company has not built in any specific impact from tariffs due to the uncertainty of the situation. Many products are procured from outside the U.S., and while there could be short to mid-term impacts, UniFirst is confident in its ability to pivot and minimize any effects over time.

Q: What factors contributed to the raised EPS guidance, excluding key initiative costs? A: Shane O'Connor, CFO, indicated that the adjustment is primarily due to improvements in core laundry operations. The guidance for other segments remains largely unchanged.

Q: Can you provide more details on the improvement in core laundry margins? A: Steven Sintros highlighted improvements in merchandise and production costs relative to revenues, driven by investments in sourcing, supply chain, and staffing. These improvements are expected to continue, contributing to better margins.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.