Vestis Corporation (VSTS) Q2 2025 Earnings Report

Vestis delivered a softer Q2 2025 performance with revenue of $665.3 million, down 5.7% YoY and 2.7% sequentially, amid margin compression tied to a fixed-cost structure and lower volume from existing customers. Management attributed the quarter’s revenue decline primarily to lower ads over stops and seasonal reductions in workplace-supplies demand, with L&R (lost and replacement) revenue also contributing to volatility. Despite the top-line softness, Vestis disclosed disciplined actions including improved customer service to reduce credits, strength in new customer acquisition, and a broader effort to improve forecasting. New CEO Jim Barber is slated to take the helm on June 2, 2025, signaling a leadership transition aimed at accelerating a turnaround in the attractive uniform and workplace supplies market. The company refined its guidance to a quarterly basis, guiding Q3 revenue of $674–$682 million and at least $63 million in adjusted EBITDA, while suspending full-year free cash flow guidance and dividends until deleveraging progresses.

Key profitability and liquidity metrics highlight the ongoing margin pressures: gross margin at 26.3% (vs. Q1 2025’s higher level by ~130 basis points) and GAAP operating income of -$8.6 million against revenue, with a net loss of -$27.8 million ($-0.21 per share). On an adjusted basis, EBITDA was $63 million (9.4% margin), excluding a one-time bad-debt adjustment. The quarter reflected modest operating cash flow of $6.7 million and negative free cash flow of $6.9 million driven by working capital needs (notably a $30 million inventory build to support new installations).

The near-term investment thesis centers on a successful leadership transition, the strengthening of frontline sales execution, continued new-business wins, and covenant relief to support deleveraging. Management underscored that the strong balance sheet and liquidity (roughly $293 million available; undrawn revolver of $264 million; cash of ~$29 million) provide flexibility to drive the turnaround, while a dividend pause and capex discipline are designed to accelerate debt reduction. The sustainability of the improvement in weekly revenue (three consecutive months of progress) and the momentum in new and recurring revenue will be the critical indicators for investors going into Q3 and beyond.