K-Bro Linen Inc Q4 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Lessard Derek - TD Securities - Analyst : Yes, good morning, Linda, and Christy, congratulations on a solid quarter and solid year. I wanted to maybe just one thing that stood out to me was the of the higher level of corporate costs in the quarter. Could you just maybe add some color to the jump that we saw there and whether or not this is a sort of a onetime bump and then it settles back to normal levels?

Question: Lessard Derek - TD Securities - Analyst : Yes. Yes. Okay. Absolutely. And you don't I guess that you don't expect that that's not that's nonrecurring?

Question: Lessard Derek - TD Securities - Analyst : Thank you for that. And just maybe on the hospitality side of the hotel occupancy rate recovery, that's the that's pretty much done in Canada and the UK, I'm just curious about your thoughts on the outlook of hospitality.

Question: Lessard Derek - TD Securities - Analyst : Okay. And maybe just switching gears on just looking at your November presentation, it looks like there's about $60 billion of contracts expiring in 2024. Just curious about how you feel around the potential of renewing the contracts? And just in terms of opportunities and any sense of how much RFPs are coming up for renewal, that could be an opportunity for you?

Question: Lessard Derek - TD Securities - Analyst : Okay. Thanks for answering my questions. I'll re-queue.

Question: Michael Glen - Raymond James - Analyst : Hey, good morning, Linda. In terms of the M&A, in terms of the M&A commentary you provided, can you bucket that between what you're seeing in Canada and what you're seeing over in the UK?

Question: Michael Glen - Raymond James - Analyst : But would you say would you say that there Canada is a much more consolidated market. You still see plenty of opportunity in Canada for you to continue with M&A.

Question: Michael Glen - Raymond James - Analyst : Okay. And if we're thinking about margins and overall margins in 2024 versus 2023. Can you and just give some discussion surrounding the headwinds and tailwinds across the buckets like labor, energy and just how we should think about margins in 2024 versus 2023.

Question: Michael Glen - Raymond James - Analyst : And on that utility hedge in the UK, are you able to give a comment as to if you were if you were at market rate on that contract, what the variance would be on your overall EBIT margin EBITDA margin?

Question: Kyle McPhee - Cormark Securities Inc - Analyst : I just wanted to dig in a little bit more on the margin stuff we've already talked about. It seems like there's still some favorable moving parts left for 2024 more pricing gains, correct me if that's not the case, but more pricing gains, the Granby volume consolidation into bill or a payoff from efficiency related CapEx programs a full year without with lessened labor added labor costs. So what does that kind of negative offset within the moving parts that may be preventing you from delivering year-over-year margin gains against much more above that at or above 19 levels.

Question: Kyle McPhee - Cormark Securities Inc - Analyst : Okay. And maybe just on come back on the back of the tuck-ins you did last year in a much stronger competitive position in the market. Can you just speak to how much growth runway there is in that comments for K-Bro.

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : Hi. Thanks for taking my call. Good morning.

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : Yes, the organic growth rate in Q4?

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : Sorry, just to clarify, Q4 organic growth was 20%

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : and if the majority was some price, but it also seems like that's implying that there's pretty good volume where I believe Q4 is typically your seasonally strong quarter. Are there any changes as far as the travel dynamics? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : Okay. And I'm assuming that robust organic growth. What's your expectation for growth in 2024 on an organic basis,

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : And is that largely price or is there a volume expectation in there as well and

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : And then just the adjusted EBITDA target consistent with some 2023 is 18% is that a good target. Is that how you look?

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : And then just finally on the pipeline of M&A, are we going to see more tuck-in acquisitions this year or are there potentially some larger transformational assets out there?

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : And then just a quick question for Christie, if she has the leverage ratio on the quarter on a net debt to EBITDA basis? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : It is 3.5 times.

Question: Justin Keywood - Stifel Nicolaus Canada, Inc. - Analyst : Thanks for taking my questions.

Question: Lessard Derek - TD Securities - Analyst : I just want to hit the open based on your on the latest IAIF. It looks like the Regina facility contract is up for renewal this month, just stuff and maybe give us your thoughts on the upcoming negotiation or the ongoing negotiations and any effect or expectation around an increase in those labor costs.

Question: Lessard Derek - TD Securities - Analyst : Okay. And maybe just one last one for me on the hospital backlog. Just could you characterize sort of the level of health care activities and if there's been any noticeable improvement that perhaps help clearing the elective surgery backlog.

Question: Lessard Derek - TD Securities - Analyst : Okay. And maybe I'll sneak one last one in for Christy. And how should we be thinking about on your working capital in 2024.

Question: Lessard Derek - TD Securities - Analyst : Thanks for taking my questions.

Question: Michael Glen - Raymond James - Analyst : Hey, Tom, I just wanted to follow up on the parent at Linda. Are you just able to give some additional commentary regarding what happened with not being able to meet the earn-out targets.

Question: Michael Glen - Raymond James - Analyst : And then just on the CapEx for 2024 the $15 million to $17 million, can you give some like how does how does the buckets break down for that CapEx spending some rough some rough ideas there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Michael Glen - Raymond James - Analyst : Okay. And after this year, would you say? So should we think about cap and maintenance CapEx being what kind of level after we get past 2024?