Vestis Corp

Previous wording

The following discussion and analysis of Vestis Corporation’s (“Vestis”, the “Company”, “our”, “we” or “us”) financial condition and results of operations for the three and nine months ended June 27, 2025 and June 28, 2024 should be read in conjunction with our audited Consolidated and Combined Financial Statements and the notes to those statements for the fiscal year ended September 27, 2024 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on November 22, 2024.

Current wording

The following discussion and analysis of Vestis Corporation’s (“Vestis”, the “Company”, “our”, “we” or “us”) financial condition and results of operations for the three months ended January 2, 2026 and December 27, 2024 should be read in conjunction with our audited Consolidated and Combined Financial Statements and the notes to those statements for the fiscal year ended October 3, 2025 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on December 2, 2025.

Previous wording

Our full-service uniform offering (“Uniforms”) includes the design, sourcing, manufacturing, customization, personalization, delivery, laundering, sanitization, repair, and replacement of uniforms. Our uniform options include shirts, pants, outerwear, gowns, scrubs, high visibility garments, particulate-free garments, and flame-resistant garments, along with shoes and accessories. We service our customers on a recurring rental basis, typically weekly, delivering clean uniforms while, during the same visit, picking up worn uniforms for inspection, cleaning and repair or replacement. In addition to our weekly, recurring customer contracts, we offer customized uniforms through direct sales agreements, typically for large, regional, or national companies.

Current wording

Our full-service uniform offering includes the design, sourcing, manufacturing, customization, personalization, delivery, laundering, sanitization, repair, and replacement of uniforms. Our uniform options include shirts, pants, outerwear, gowns, scrubs, high visibility garments, particulate-free garments, and flame-resistant garments, along with shoes and accessories. We service our customers on a recurring rental basis, typically weekly, delivering clean uniforms while, during the same visit, picking up worn uniforms for inspection, cleaning and repair or replacement. In addition to our weekly, recurring customer contracts, we offer customized uniforms through direct sales agreements, typically for large, regional, or national companies.

Previous wording

In addition to Uniforms, we also provide workplace supplies (“Workplace Supplies”) including managed restroom supply services, first aid supplies and safety products, floor mats, towels, and linens. Similar to our uniform offering, on a recurring rental basis, generally weekly, we pick up used and soiled floor mats, towels and linens, replacing them with clean products. We also restock restroom supplies, first aid supplies and safety products as needed.

Current wording

In addition to uniforms, we also provide workplace supplies including managed restroom supply services, first aid supplies and safety products, floor mats, towels, and linens. Similar to our uniform offering, on a recurring rental basis, generally weekly, we pick up used and soiled floor mats, towels and linens, replacing them with clean products. We also restock restroom supplies, first aid supplies and safety products as needed.

Previous wording

Our fiscal year is the 52- or 53-week period which ends on the Friday nearest to September 30th. The fiscal year ended September 27, 2024 is a 52-week period and the fiscal year ending October 3, 2025 is a 53-week period.

Current wording

Our fiscal year is the 52- or 53-week period which ends on the Friday nearest to September 30th. The fiscal year ended October 3, 2025, referred to as fiscal 2025, was a 53-week period and the fiscal year ending October 2, 2026, referred to as fiscal 2026, is a 52-week period.

Previous wording

Global events, including ongoing geopolitical events, have adversely affected global economies, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. While we do not have direct operations in Russia and Ukraine or in Israel, conflicts in those regions further disrupted global supply chains and heightened volatility and disruption of global financial markets. The ongoing volatility and disruption of financial markets caused by these global events, as well as other current global economic factors, triggered inflation in labor and energy costs and has driven significant changes in foreign currencies. We are also evaluating the potential effects that current trade discussions between the US, Canada, and Mexico may have on the results of our operations. The impact on our longer-term operational and financial performance will depend on future developments, including our response and governmental response to inflation, tariffs, the duration and severity of the ongoing volatility and disruption of global financial markets and our ability to effectively hire and retain personnel. Some of these future developments are outside of our control and are highly uncertain.

Current wording

Global events, including ongoing geopolitical events, have adversely affected global economies, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. While we do not have direct operations in Russia and Ukraine or in Israel, conflicts in those regions further disrupted global supply chains and heightened volatility and disruption of global financial markets. The ongoing volatility and disruption of financial markets caused by these global events, as well as other current global economic factors, triggered inflation in labor and energy costs and has driven significant changes in foreign currencies. The impact on our longer-term operational and financial performance will depend on future developments, including our response and governmental response to inflation, tariffs, the duration and severity of the ongoing volatility and disruption of global financial markets and our ability to effectively hire and retain personnel. Some of these future developments are outside of our control and are highly uncertain.

Previous wording

Our financial performance and the sustained decrease in our share price during the quarter ended June 27, 2025 created a triggering event causing us to perform a quantitative goodwill impairment test for both reporting units as of June 27, 2025. While no impairment of goodwill was recognized as of the testing date, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units within either of our segments, we may be required to record future impairment charges for goodwill.

Current wording

Our financial performance and a prolonged decrease in our stock price during fiscal 2025 resulted in a triggering event for a goodwill impairment test for both of our reporting units in fiscal 2025. While no impairment of goodwill was recognized in fiscal 2025, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units within either of our segments, we may be required to record future impairment charges for goodwill.

Previous wording

Cost of services provided decreased $4.1 million, or 0.8%, for the three months ended June 27, 2025 compared to the three months ended June 28, 2024. The decrease was primarily driven by a of $7.1 million reduction in delivery costs, and a $4.3 million decline in direct sales merchandise costs on lower direct sales revenue. These decreases were partially offset by a $4.9 million increase in rental merchandise amortization, and a $2.5 million increase in plant operating costs.

Current wording

Cost of services provided decreased $3.0 million, or 0.6%, for the three months ended January 2, 2026 compared to the three months ended December 27, 2024. The decrease was primarily driven by a $5.0 million decline in merchandise costs and a $1.3 million reduction in delivery costs. These decreases were partially offset by a $3.7 million increase in plant operating costs.

Previous wording

Selling, general and administrative expenses ("SG&A") decreased $7.7 million, or 6.0%, for the three months ended June 27, 2025 compared to the three months ended June 28, 2024. The decrease in SG&A was primarily due to a decrease in share-based compensation of $6.0 million, a decrease in separation-related charges of $3.6 million and a $2.6 million reduction in other administrative costs, offset by an increase in selling costs of $4.5 million.

Current wording

Selling, general and administrative expenses ("SG&A") decreased $0.9 million, or 0.8%, for the three months ended January 2, 2026 compared to the three months ended December 27, 2024. The decrease in SG&A was primarily driven by headcount reductions and other cost savings measures, a $3.3 million decrease in separation-related charges, as well as a $2.8 million decrease in share-based compensation, which were partially offset by transformation costs of $7.8 million.

Previous wording

Operating income of $25.0 million decreased from $37.5 million, or 33.5%, for the three months ended June 27, 2025 compared to the three months ended June 28, 2024 from the impact of changes in revenue and costs noted above.

Current wording

Operating income of $16.6 million decreased from $30.4 million, or 45.5%, for the three months ended January 2, 2026 compared to the three months ended December 27, 2024 from the impact of changes in revenue and costs noted above.

Previous wording

Interest expense, net, decreased $7.4 million for the three months ended June 27, 2025 compared to the three months ended June 28, 2024 primarily due to lower average outstanding debt as a result of entering into the A/R Facility on August 2, 2024.

Current wording

Interest expense, net, decreased $0.9 million for the three months ended January 2, 2026 compared to the three months ended December 27, 2024 primarily due to lower interest rates.

Previous wording

Other expense, net of other income, increased $3.7 million for the three months ended June 27, 2025 compared to the three months ended June 28, 2024 primarily due to a loss on sale of accounts receivable for the A/R Facility of $3.2 million, as these costs were not incurred during the three months ended June 28, 2024.

Current wording

Other expense, net of other income, decreased $0.7 million for the three months ended January 2, 2026 compared to the three months ended December 27, 2024 primarily due to a decrease in A/R Facility fees of $0.5 million.

Previous wording

Net loss of $0.7 million for the three months ended June 27, 2025 represented a decrease of $5.7 million, or 113.4%, compared to net income of $5.0 million for the three months ended June 28, 2024, due to the impact of changes to revenue and expenses noted above.

Current wording

Net loss of $6.4 million for the three months ended January 2, 2026 represented a decrease of $7.2 million, or 868.1%, compared to net income of $0.8 million for the three months ended December 27, 2024, due to the impact of changes to revenue and expenses noted above.

Previous wording

Segment operating income of $40.7 million for the three months ended June 27, 2025 decreased $23.8 million, or 36.9%, compared to the three months ended June 28, 2024, primarily driven bythe decrease in revenue during the three months ended June 27, 2025, as described above.

Current wording

Segment operating income of $36.2 million for the three months ended January 2, 2026 decreased $21.8 million, or 37.6%, compared to the three months ended December 27, 2024, primarily driven bythe decrease in revenue during the three months ended January 2, 2026, as described above.

Previous wording

Segment operating income margin decreased approximately 350 basis points from 10.1% for the three months ended June 28, 2024 to approximately 6.6% for the three months ended June 27, 2025.

Current wording

Segment operating income margin decreased approximately 330 basis points from 9.3% for the three months ended December 27, 2024 to approximately 6.0% for the three months ended January 2, 2026.

Previous wording

Canada revenue of $60.5 million decreased $0.9 million, or 1.5%, for thethree months ended June 27, 2025 compared to thethree months ended June 28, 2024. As reported, the decline in revenue compared to the prior year reflects a $0.8 million decline in uniforms and a $0.1 million decline in workplace supplies. Canada revenue for the three months ended June 27, 2025 was negatively impacted by $0.8 million related to the effects of fluctuations in foreign exchange rates on currency. Excluding the effects of fluctuations in foreign exchange rates on currency, rental revenue decline by $0.2 million offset by a $0.1 million increase in direct sales.

Current wording

Canada revenue of $60.5 million decreased $1.6 million, or 2.5%, for thethree months ended January 2, 2026 compared to thethree months ended December 27, 2024. The decline in revenue compared to the prior year reflects a $1.1 million decline in uniforms and a $0.5 million decline in workplace supplies on consistent total overall volume levels measured as pounds processed in our plants. The decline in revenue is attributable to a product mix shift towards more workplace supplies, which includes linen, that brings lower overall revenue per pound when compared to uniforms. Canada revenue was positively impacted by $0.2 million from the impact of foreign exchange on currency.

Previous wording

Segment operating income margin increased approximately 210 basis points from 2.1% for the three months ended June 28, 2024, to approximately 4.2% for the three months ended June 27, 2025.

Current wording

Segment operating income margin increased approximately 50 basis points from 3.1% for the three months ended December 27, 2024, to approximately 3.6% for the three months ended January 2, 2026.

Previous wording

As part of our capital structure, we entered into a Credit Agreement on September 29, 2023 (the "Credit Agreement"). The Credit Agreement included senior secured term loan facilities consisting of term loan A-1 tranche due September 2025 in the amount of $800 million ("Term Loan A-1"), term loan A-2 tranche due September 2028 in the amount of $700 million ("Term Loan A-2") and a revolving credit facility. On February 22, 2024, we entered into Amendment No. 1 to our Credit Agreement and refinanced our Term Loan A-1 with an $800 million Term Loan B-1 due February 2031 ("Term Loan B-1"). The Term Loan B-1 requires$2.0 million of principal payments each quarter until the maturity date, at which point the remaining unpaid principal amount is due. The Term Loan B-1 interest rate for fiscal 2024 is at the Secured Overnight Financing Rate ("SOFR") plus 225 basis points and will adjust to SOFR plus 200 basis points should the Company reach 3.30x Net Leverage as defined in the Credit Agreement.

Current wording

As part of our capital structure, we entered into a Credit Agreement on September 29, 2023 (the "Credit Agreement"). The Credit Agreement included senior secured term loan facilities consisting of term loan A-1 tranche due September 2025 in the amount of $800 million ("Term Loan A-1"), term loan A-2 tranche due September 2028 in the amount of $700 million ("Term Loan A-2") and a revolving credit facility. On February 22, 2024, we entered into Amendment No. 1 to our Credit Agreement and refinanced our Term Loan A-1 ("Term Loan A-1") with an $800 million Term Loan B-1 due February 2031 ("Term Loan B-1"). The Term Loan B-1 requires$2.0 million of principal payments each quarter until the maturity date, at which point the remaining unpaid principal amount is due.

Previous wording

On August 2, 2024, Vestis Services, LLC (“Vestis Services”) and certain other subsidiaries of the Company entered into a three-year$250.0 million accounts receivable securitization facility (the “A/R Facility”). Under the A/R Facility, Vestis Services and certain other wholly-owned subsidiaries of the Company transfer accounts receivable and certain related assets to VS Financing, LLC, a bankruptcy remote special purpose entity formed as a wholly-owned subsidiary of Vestis Services ("SPE"), who in turn, may sell the receivables to one or more financial institutions ("Purchasers"). The net proceeds of the A/R Facility were used to repay a portion of the outstanding borrowings under the existing term loans. The A/R Facility is scheduled to terminate on August 2, 2027, unless terminated earlier pursuant to its terms. As of June 27, 2025 and September 27, 2024, the total value of accounts receivable sold from the SPE to the Purchasers under the A/R Facility and derecognized from the Company's Consolidated Balance Sheet was$211.9 million and $229.0 million, respectively.

Current wording

On August 2, 2024, Vestis Services, LLC (“Vestis Services”) and certain other subsidiaries of the Company entered into a three-year$250.0 million accounts receivable securitization facility (the “A/R Facility”). Under the A/R Facility, Vestis Services and certain other wholly-owned subsidiaries of the Company transfer accounts receivable and certain related assets to VS Financing, LLC, a bankruptcy remote special purpose entity formed as a wholly-owned subsidiary of Vestis Services ("SPE"), who in turn, may sell the receivables to one or more financial institutions ("Purchasers"). The net proceeds of the A/R Facility were used to repay a portion of the outstanding borrowings under the existing term loans. The A/R Facility is scheduled to terminate on August 2, 2027, unless terminated earlier pursuant to its terms. As of January 2, 2026 and October 3, 2025, the total value of accounts receivable sold from the SPE to the Purchasers under the A/R Facility and derecognized from the Company's Condensed Consolidated Balance Sheet was$217.2 million and $202.5 million, respectively.

Previous wording

As of June 27, 2025, we had approximately $23.7 million of cash and cash equivalents and$266.3 million of availability for borrowing under our Revolving Credit Facility. As of June 27, 2025, we had $1,170.5 million of total principal debt compared to $1,162.5 million as of September 27, 2024. The servicing of this debt will be supported by cash flows from our operations.

Current wording

As of January 2, 2026, we had approximately $41.5 million of cash and cash equivalents and$275.2 million of availability under our revolving credit facility. As of January 2, 2026, we had $1,161.5 million of total principal debt compared to $1,168.5 million as of October 3, 2025. The servicing of this debt will be supported by cash flows from our operations.

Previous wording

Reference to the Consolidated Statements of Cash Flows will facilitate an understanding of the discussion that follows.

Current wording

Reference to the Condensed Consolidated Statements of Cash Flows will facilitate an understanding of the discussion that follows.

Previous wording

Net cash provided by operating activities was $33.3 million for the nine months ended June 27, 2025 and $176.2 million for the nine months ended June 28, 2024. The decrease in net cash provided by operating activities of $142.9 million was due in part to the net loss for the nine months ended June 27, 2025 of $27.7 million compared to net income for the nine months ended June 28, 2024 of $23.3 million, as discussed in "Results of Operations" above.

Current wording

Net cash provided by operating activities was $37.7 million for the three months ended January 2, 2026 and $3.8 million for the three months ended December 27, 2024. The increase in net cash provided by operating activities of $33.9 million was due, in part, to the change in operating assets and liabilities of $41.0 million, when comparing the three months ended January 2, 2026 to the three months ended December 27, 2024, partially offset by

Previous wording

Net cash used in investing activities of $5.5 million for the nine months ended June 27, 2025 was $45.3 million lower relative to the nine months ended June 28, 2024 primarily due to $36.8 million of net proceeds from the sale of an equity investment, proceeds from the disposal of property and equipment of $5.4 million, and $7.7 million lower year-over-year purchases of property and equipment. This activity was partially offset by cash outflow of $4.6 million associated with a tuck-in acquisition completed during the first quarter of fiscal 2025.

Current wording

Net cash used in investing activities was $9.1 million for the three months ended January 2, 2026 compared to net cash provided by investing activities of $17.9 million for the three months ended December 27, 2024. The decrease of $27.0 million was primarily due to net proceeds from the sale of an equity investment during the first quarter of fiscal 2025 of $36.8 million, partially offset by $5.3 million lower year-over-year purchases of property and equipment and lower acquisition-related investments of $4.6 million. The acquisition-related investment in the first quarter of fiscal 2025 was related to a tuck-in acquisition.

Previous wording

During the nine months ended June 27, 2025, cash used in financing activities was primarily impacted by the following:

Current wording

During the three months ended January 2, 2026, cash used in financing activities was primarily impacted by the following:

Previous wording

•proceeds from long-term borrowings, net of repayments, of $8.0 million;

Current wording

•proceeds from long-term borrowings of $48.0 million;

Previous wording

•payments related to finance leases of $22.6 million;

Current wording

•payments related to finance leases of $9.2 million.

Previous wording

During the nine months ended June 28, 2024, cash used in financing activities was primarily impacted by the following:

Current wording

During the three months ended December 27, 2024, cash used in financing activities was primarily impacted by the following:

Previous wording

•payments for long-term borrowings, net of proceeds, of $81.5 million;

Current wording

•payments for long-term borrowings of $20.0 million;

Previous wording

•payments related to finance leases of $25.6 million; and

Current wording

•payments related to finance leases of $8.3 million; and

Previous wording

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. There have not been material changes to our cash requirements since our Annual Report on Form 10-K for the fiscal year ended September 27, 2024 filed with the SEC on November 22, 2024. Additional information regarding our obligations under debt and lease arrangements are provided in Note 4. "Borrowings" and Note 7. "Leases" to the Consolidated Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q.

Current wording

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. There have not been material changes to our cash requirements since our Annual Report on Form 10-K for the fiscal year ended October 3, 2025 filed with the SEC on December 2, 2025. Additional information regarding our obligations under debt and lease arrangements are provided in Note 4. Borrowings and Note 6. Leases to the Financial Statements contained elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

Prior to our May 1, 2025 amendment, which is described below, our Credit Agreement required us to maintain a maximum Consolidated Total Net Leverage Ratio, defined as consolidated total indebtedness in excess of unrestricted cash divided by Adjusted EBITDA (as defined in the Credit Agreement), not to exceed 5.25x for any fiscal quarter ending prior to March 31, 2025, and not to exceed 4.50x for any fiscal quarter ending on or after March 31, 2025, subject to certain exceptions. Consolidated total indebtedness is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, disqualified and preferred stock and advances under any receivables facility. Adjusted EBITDA is defined in the Credit Agreement as consolidated net income increased by interest expense, taxes, depreciation and amortization expense, initial public company costs, restructuring charges, write-offs and noncash charges, non-controlling interest expense, net cost savings in connection with any acquisition, disposition, or other permitted investment under the Credit Agreement, share-based compensation expense, non-recurring or unusual gains and losses, reimbursable insurance costs, cash expenses related to earn outs, and insured losses.

Current wording

Prior to our May 1, 2025 amendment, which is described below, our Credit Agreement required us to maintain a maximum Consolidated Total Net Leverage Ratio, defined as consolidated total indebtedness in excess of unrestricted cash divided by Covenant Adjusted EBITDA (as defined in the Credit Agreement), not to exceed 5.25x for any fiscal quarter ending prior to March 31, 2025, and not to exceed 4.50x for any fiscal quarter ending on or after March 31, 2025, subject to certain exceptions. Consolidated total indebtedness is defined in the Credit Agreement as total indebtedness consisting of debt for borrowed money, finance leases, disqualified and preferred stock and advances under any receivables facility. Covenant Adjusted EBITDA is defined in the Credit Agreement as consolidated net income increased by interest expense, taxes, depreciation and amortization expense, initial public company costs, restructuring charges, write-offs and noncash charges, non-controlling interest expense, net cost savings in connection with any acquisition, disposition, or other permitted investment under the Credit Agreement, share-based compensation expense, non-recurring or unusual gains and losses, reimbursable insurance costs, cash expenses related to earn outs, and insured losses.

Previous wording

The Credit Agreement establishes a minimum Interest Coverage Ratio, defined as Adjusted EBITDA (as defined in the Credit Agreement) divided by consolidated interest expense. The minimum Interest Coverage Ratio is required to be at least 2.00x for the term of the Credit Agreement.

Current wording

The Credit Agreement establishes a minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA divided by consolidated interest expense. The minimum Interest Coverage Ratio is required to be at least 2.00x for the term of the Credit Agreement.

Previous wording

Recent Amendment to Credit Agreement

Current wording

Fiscal 2025 Amendment to Credit Agreement

Previous wording

Our significant accounting policies are described in the notes to the audited Consolidated and Combined Financial Statements included in our Annual Report on form 10-K, filed with the SEC on November 22, 2024. For a more complete discussion of the critical accounting policies and estimates that we have identified in the preparation of our Consolidated Financial Statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, filed with the SEC on November 22, 2024. Management believes that there have been no significant changes during thenine months ended June 27, 2025 to the items that we disclosed as our critical accounting policies and estimates in our Annual Report on Form 10-K for the fiscal year ended September 27, 2024.

Current wording

Our significant accounting policies are described in the notes to the audited Consolidated and Combined Financial Statements included in our Annual Report on form 10-K, filed with the SEC on December 2, 2025. For a more complete discussion of the critical accounting policies and estimates that we have identified in the preparation of the Financial Statements, please refer to our Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K, filed with the SEC on December 2, 2025. Management believes that there have been no significant changes during thethree months ended January 2, 2026 to the items that we disclosed as our critical accounting policies and estimates in our Annual Report on Form 10-K for the fiscal year ended October 3, 2025.

Previous wording

In preparing our Consolidated Financial Statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change, and where they can have a material impact on our financial condition and operating performance. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Current wording

In preparing financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are most significant where they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change, and where they can have a material impact on our financial condition and operating performance. If actual results were to differ materially from the estimates made, the reported results could be materially affected.