VSTS earnings analysis
What we found in VSTS's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Vestis delivered a mixed third quarter: revenue fell 1.8% year over year to $661.7 million and volumes declined 4.5%, but operating income rose 49.2% to $37.2 million as cost reductions lifted operating margin to approximately 5.6%. EPS improved to $0.08 and free cash flow reached $47.0 million, while nine-month operating cash flow increased to $160.9 million and debt declined to $1,097.5 million. The key offset is continued volume contraction and execution risk around the transformation plan, which carries estimated costs of $35 million-$40 million.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue remained pressured by lower volumes
- Q3 revenue was $661.7 million, down $12.1 million or 1.8% year over year, but increased approximately 0.4% from $659 million in Q2 fiscal 2026. Net volumes declined 4.5% year over year, partly reflecting targeted reductions in unprofitable volume.
- Margins and operating income improved materially
- Gross margin increased to approximately 28.0% from 26.3% in the prior quarter and 27.0% a year earlier. Operating margin rose to approximately 5.6% from 4.1% sequentially and 3.7% year over year, a 49.2% increase in operating income to $37.2 million.
- Returned to positive quarterly earnings
- Diluted EPS was $0.08, versus $0.02 in Q2 fiscal 2026 and a $(0.01) loss in the prior-year quarter. Net income improved to $11.0 million from a $0.7 million loss year over year.
- U.S. profitability offset Canada weakness
- The United States segment generated $600.7 million of revenue and $55.5 million of operating income, with operating margin expanding 260 basis points to 9.2%. Canada revenue increased 0.7% to $60.9 million, although operating income declined 6.7% to $2.3 million.
- Cash generation strengthened sharply
- Free cash flow was $47.0 million in Q3, compared with $46 million in Q2 and $8 million in the prior-year quarter. Nine-month operating cash flow was $160.9 million versus $33.3 million a year earlier, supported by a $79.0 million favorable change in operating assets and liabilities.
- Debt reduction improved liquidity
- Total principal debt declined to $1,097.5 million from $1,168.5 million at October 3, 2025, while cash was $57.7 million and revolver availability was $294.2 million. The company paid $168.0 million of long-term borrowings during the first nine months.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Volume and uniform revenue contraction
- Consolidated revenue declined 1.8% year over year to $661.7 million, with net volumes down 4.5% and uniform revenue down $18.3 million. Targeted removal of unprofitable volume may improve economics but creates continued top-line and customer-retention risk.
- Transformation execution and cost risk
- The transformation plan requires estimated costs of $35 million-$40 million, including $23.2 million of third-party consulting costs and $8.0 million of severance costs through nine months. Management cautions that actual charges may differ materially from estimates and unanticipated costs may arise.
- Leverage and covenant constraints
- The company had $1,097.5 million of total principal debt and must maintain a maximum net leverage ratio of 5.00x for the quarter ended July 3, 2026, tightening to 4.75x in Q4 and 4.50x thereafter. Dividends and share repurchases remain restricted until specified leverage and compliance conditions are met.
- No material formal risk-factor changes
- The filing states there were no material changes to the risk factors disclosed in the October 3, 2025 10-K and the April 3, 2026 10-Q. Accordingly, no new formal risk-factor update was identified in this filing.
What they reported.
What the company itself reported, taken out of the document.
- Earnings per share
- $0.08
- Gross margin
- 28.0%
- Operating margin
- 5.6%
- Segment
- United States: Q3 revenue $600.7 million, down 2.0% year over year; segment operating income $55.5 million, up 36.5%, with margin rising to 9.2% from 6.6%.
- Segment
- Canada: Q3 revenue $60.9 million, up 0.7% year over year; segment operating income $2.3 million, down 6.7%, with margin declining to 3.9% from 4.2%.
What they said about what is next.
No numeric revenue or EPS guidance was provided in the 10-Q; outlook commentary relates to the transformation plan, which is expected to generate at least $75 million of annual operating cost savings by the end of fiscal 2026, with estimated plan costs of $35 million-$40 million and substantial completion expected by the end of fiscal 2027. Fiscal 2026 revenue, Adjusted EBITDA and FCF guidance was provided separately in the August 11, 2026 8-K/earnings release.
The filing reads about the same as the one before it.
What came before.
- 10-Q · May 12, 2026
- Vestis Corporation reported a slight revenue decline of 0.9% year-over-year in Q2 2026, totaling $659.4 million, while achieving a positive EPS of $0.02 compared to the previous year's loss. Significant cost savings in…
- 10-Q · February 10, 2026
- Vestis reported quarterly revenue of $663.388 million, down $20.392 million (‑2.98%) versus the prior-year quarter, and recorded an operating loss reduction to $16.578 million (operating margin 2.50%). The company swung…
- 10-K · December 2, 2025
- Vestis (VSTS) is a large, recurring-revenue uniform rentals and workplace supplies provider that reported fiscal 2025 revenue of approximately $2.7 billion, operating income of $64.4 million (2.4% of revenue) and a net…
- 10-K · November 22, 2024
- Vestis Corporation reported total revenue of approximately $2.8 billion for fiscal year 2024, with a notable reliance on its rental business, comprising 94% of revenues. Despite challenges with decreasing margins and…
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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