Vestis Corp.

Overview Key strengths Key risks Second largest provider of uniform and workplace supplies in the U.S. Highly fragmented and competitive industry with available substitutes to its uniform rental services. Demonstrated good earnings to cash flow conversion. Lagging operating efficiency relative to top competitor, Cintas. Long-standing client relationships with diverse end markets. Subject to economic cyclicality, with demand tied to employment levels and revenue concentrated in the U.S. Vestis' S&P Global Ratings-adjusted free operating cash flow (FOCF) of $171.5 million in fiscal 2024 (ended Sept. 27, 2024), which excludes the benefit of sold receivables, was higher than our initial forecast due to efficient working capital management. Over the past year, the company demonstrated a proactive approach to reduce its debt burden,

...Solid cash flow generation and a conservative financial policy supports deleveraging to below 4x by fiscal 2026. Vestis' S&P Global Ratings-adjusted free operating cash flow (FOCF) of $171.5 million in fiscal 2024 (ended Sept. 27, 2024), which excludes the benefit of sold receivables, was higher than our initial forecast due to efficient working capital management. Over the past year, the company demonstrated a proactive approach to reduce its debt burden, reflected by its voluntary pre-payments of its term loans. Although its leverage remains above our downside threshold of 4x, we anticipate a steady improvement with S&P Global Ratings-adjusted debt to EBITDA declining to about 3.6x by the...

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