ATLANTA — Vestis Corp., a provider of uniforms and workplace supplies, recently shared the results of its third-quarter financial performance ended June 27.
“I’m pleased that our third-quarter results were in line with our expectations and that we generated positive cash flow during the period,” says Jim Barber, president and CEO of Vestis. “Our team has been focused on taking comprehensive actions designed to strengthen our overall results and create long-term shareholder value by unlocking operating leverage through commercial and operational excellence.
“Since I joined the company as CEO (in May), I have been focused on engaging in a thorough review of our business. Vestis has faced challenges, but I am optimistic about the road ahead and confident in the team’s ability to deliver for our key stakeholders.
“Our integrated network of assets gives us scale and reach in an attractive and growing industry.”
THIRD QUARTER 2025 BY THE NUMBERS
Vestis says its third-quarter fiscal 2025 revenue totaled $673.8 million, down $24.4 million (or 3.5%) year over year. The decline compared to the prior year reflects a $18.0 million decrease in rental revenue, a $5.6 million decline in direct sales revenue and a $0.8 million negative impact of foreign exchange on currency.
The decrease in rental revenue was primarily due to a $14.6 million decline from lost business in excess of new business, and a $3.4 million decline in revenue related to existing business.
The decline in direct sales revenue was primarily attributable to a $4.3 million unfavorable impact from the previously anticipated loss of a national account customer. Excluding that, direct sales decreased $1.3 million when compared to the prior year.
Gross profit for the quarter was $182.1 million, compared to $202.5 million in the same quarter of fiscal 2024, a decrease of 10.1%. The decrease is primarily attributable to the decremental margin on lost revenues, unfavorable changes in product mix, and increased merchandise amortization from new installations, which more than offset the incremental margin from new business and a decline in delivery costs.
Selling, general and administrative (SG&A) expenses were $122.3 million in the quarter, or $7.7 million lower than the same period in the prior year. The year-over-year decrease in SG&A was due primarily to a $6.0 million decline in share-based compensation, a $3.6 million decrease in separation-related costs and a $2.6 million reduction in other administrative costs, offset by a $4.5 million increase in selling expenses related to additional field sales personnel.
Interest expense during the quarter was $22.5 million, compared to $29.9 million in the same period a year earlier. The $7.4 million year-over-year decrease in interest expense reflects a decrease in net term loan borrowings resulting from the receipt of net proceeds from establishing the accounts receivable securitization facility during the fiscal fourth quarter of 2024.
Net loss in third-quarter fiscal 2025 was $0.7 million or $(0.01) per diluted share, versus net income of $5.0 million, or $0.04 per diluted share, in the prior year period. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $64.0 million for the quarter compared to $86.9 million in the third quarter of 2024.
CAPITAL ALLOCATION AND FINANCIAL POSITION
Vestis says it invested $14.9 million in property and equipment during third-quarter 2025, the majority of which is related to market center facility improvements.
Net cash provided by operating activities was $22.9 million and free cash flow was $8.0 million, a decrease of $25.8 million and $19.7 million, respectively, from the comparative prior-year periods.
The cash-flow reduction was primarily due to the decrease in earnings, and the current quarter includes the impact of allowable deferred cash tax payments from the first half of fiscal 2025 of $9.6 million.
As of June 27, Vestis had total cash and excess availability under its revolving credit facility of $290 million, compared to $324 million at the end of the third quarter of 2024. Total debt outstanding at the end of third-quarter 2025 was $1.32 billion, including principal bank debt outstanding of $1.17 billion.
The company reports the net leverage ratio was 4.50x at the end of the third quarter of fiscal 2025. Pursuant to the credit agreement, as amended, the net leverage ratio cannot exceed 5.25x for any fiscal quarter ending prior to July 3, 2026.
Have a question or comment? E-mail our editor Matt Poe at [email protected].
