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Item 7. Management’s Discussion and Analysis

2025-12-02 compared with 2024-11-22 · 162 added, 150 removed, 231 unchanged (57% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of Vestis Corporation’s (“Vestis”, the “Company”, “our”, “we” or “us”) financial condition and results of operations for the fiscal years ended September 27, 2024 and September 29, 2023 should be read in conjunction with our audited Consolidated and Combined Financial Statements and the notes to those statements.

For additional information on the year ended September 30, 2022 and year-over-year comparisons to September 29, 2023, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the fiscal year ended September 29, 2023.

The following discussion and analysis of Vestis Corporation’s (“Vestis”, the “Company”, “our”, “we” or “us”) financial condition and results of operations for the fiscal years ended October 3, 2025, referred to as fiscal 2025, and September 27, 2024, referred to as fiscal 2024, should be read in conjunction with our audited Consolidated and Combined Financial Statements and the notes to those statements.

For additional information on fiscal 2023 and year-over-year comparisons to fiscal 2024, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report on Form 10-K for fiscal 2024, filed with the Securities and Exchange Commission (“SEC”) on November 22, 2024.

This discussion contains forward-looking statements, such as our plans, objectives, opinions, expectations, anticipations, intentions, and beliefs, that are based upon our current expectations but that involve risks and uncertainties.

Actual results and the timing of events could differ materially from those anticipated in those forward-looking statements as a result of a number of factors, including those set forth under “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and “Business” sections and elsewhere in this Annual Report on Form 10-K (“Annual Report”).

Actual results and the timing of events could differ materially from those anticipated in those forward-looking statements as a result of a number of factors, including those set forth under “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” the “Business” section and elsewhere in this Annual Report on Form 10-K (“Annual Report”).

All amounts discussed are in thousands of U.S.

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We are a leading provider of uniforms and workplace supplies across the United States and Canada, with over 75 years of experience in the workplace apparel and supplies industry.

We provide a full range of uniform programs, restroom supply services, first aid supplies and safety products, as well as ancillary items such as floor mats, towels, and linens, to more than 300,000 customer locations across the United States and Canada.

We compete with national, regional, and local providers who vary in size, scale, capabilities and product and service offering.

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With approximately 18,150 employees, we operate a network of over 325 facilities including laundry plants, satellite plants, distribution centers and manufacturing plants along with a fleet of service vehicles that support over 3,300 pick-up and delivery routes.

We have two manufacturing facilities in Mexico with approximately 189,000 square feet of manufacturing capacity between both plants that produce approximately 60% of our uniforms and linens products.

We have two manufacturing facilities in Mexico with approximately 189,000 square feet of manufacturing capacity between both plants that produce approximately 60% of our uniforms and linen products.

We source raw materials, finished goods, equipment, and other supplies from a variety of domestic and international suppliers.

We leverage our broad footprint, supply chain, delivery fleet and route logistics capabilities to serve customers on a recurring basis, typically weekly, and primarily through multi-year contracts.

Our full-service uniform offering (“Uniforms”) includes the design, sourcing, manufacturing, customization, personalization, delivery, laundering, sanitization, repair, and replacement of uniforms.

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.

In addition to Uniforms, we also provide workplace supplies (“Workplace Supplies”) including restroom supply services, first aid supplies and safety products, floor mats, towels, and linens.

In addition to uniforms, we also provide workplace supplies including 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.

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Following the separation, certain functions that Aramark provided to us prior to the separation continued to be provided to us by Aramark under a transition services agreement.

As of September 27, 2024 these transition services were no longer being provided.

No such transition services were performed in fiscal 2025, as they ceased on or prior to September 27, 2024.

Basis of Presentation

Consolidated Financial Statements

The Consolidated Financial Statements reflect the historical results of operations, comprehensive income and cash flows for the year ended September 27, 2024 and the financial position as of September 27, 2024 for Vestis.

The Consolidated Financial Statements reflect the financial position, results of operations, comprehensive income and cash flows of the Company as of and for the years ended October 3, 2025 and September 27, 2024.

Combined Financial Statements

The Combined Financial Statements reflect the combined historical results of operations, comprehensive income and cash flows for the years ended September 29, 2023 and September 30, 2022 and the financial position as of September 29, 2023 for Vestis.

The Combined Financial Statements reflect the combined historical results of operations, comprehensive income and cash flows for the year ended September 29, 2023.

The Combined Financial Statements have been derived from Aramark’s historical accounting records and were prepared on a standalone basis in accordance with generally accepted accounting principles in the United States (“U.S.

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The assets, liabilities, revenue, and expenses of Vestis have been reflected in these Combined Financial Statements on a historical cost basis, as included in the Combined Financial Statements of Aramark, using the historical accounting policies applied by Aramark.

Historically, separate financial statements have not been prepared for Vestis and it has not operated as a standalone business from Aramark.

The historical results of operations, financial position and cash flows of Vestis presented in these Combined Financial Statements may not be indicative of what they would have been had we been an independent standalone public company, nor are they necessarily indicative of our future results of operations, financial position, and cash flows.

Our business has historically functioned together with other Aramark businesses.

Prior to the Separation, separate financial statements were not prepared for Vestis and it did not operate as a standalone business from Aramark.

The historical results of operations and cash flows of Vestis presented in these Combined Financial Statements may not be indicative of what they would have been had we been an independent standalone public company, nor are they necessarily indicative of our future results of operations, financial position, and cash flows.

Our business historically functioned together with other Aramark businesses.

Accordingly, we relied on certain of Aramark’s corporate support functions to operate.

The Combined Financial Statements include all revenues and costs directly attributable to us and an allocation of expenses related to certain Aramark corporate functions.

The Combined Financial Statements for fiscal 2023 include all revenues and costs directly attributable to us and an allocation of expenses related to certain Aramark corporate functions.

These expenses have been allocated to us on the basis of direct usage where identifiable, with the remainder allocated on a pro rata basis of revenues, headcount or other drivers.

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However, the allocations may not be indicative of the actual expense that would have been incurred had we operated as an independent, standalone public entity, nor are they indicative of our future expenses.

The Combined Financial Statements include assets and liabilities that have been determined to be specifically identifiable or otherwise attributable to us.

Our cash flows within the United States segment were transferred to Aramark regularly as part of Aramark’s centralized cash management program.

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The cash and cash equivalents held by Aramark at the corporate level were not specifically identifiable to us and therefore were not allocated to any of the periods presented.

Only cash amounts specifically attributable to us are reflected in the Combined Balance Sheets.

Transfers of cash, both to and from Aramark’s central cash management system, are reflected as a

component of “Net parent investment” on the Combined Balance Sheets and in “Net cash used in financing activities” on the accompanying Combined Statements of Cash Flows.

Aramark’s long-term borrowings and related interest expense, exclusive of certain financing lease obligations, have not been attributed to us for any of the periods presented because the borrowings are neither directly attributable to us nor are we the primary legal obligor of such borrowings.

However, as of September 29, 2023 , we incurred indebtedness in an aggregate principal amount of $1,500 million, which have been included in the Combined Financial Statements (see Note 4.

Borrowings to our Combined Financial Statements).

Transfers of cash, both to and from Aramark’s central cash management system, are reflected in “Net cash used in financing activities” on the accompanying Combined Statement of Cash Flows for the year ended September 29, 2023.

All intercompany transactions and balances within Vestis have been eliminated.

Transactions between us and Aramark have been included in these Combined Financial Statements and are considered related party transactions (see Note 15.

Related Party Transactions and Parent Company Investment to our Combined Financial Statements).

The “Provision for Income Taxes” in the Combined Statements of Income has been calculated as if we filed a separate tax return and were operating as a standalone company.

Therefore, income tax expense, cash tax payments and items of current and deferred income taxes may not be reflective of our actual tax balances prior to or subsequent to the distribution.

For certain historical transactions between us and Aramark since the Separation, see Note 15.

Related Party Transactions and Parent Company Investment in the Notes to Consolidated and Combined Financial Statements.

The “Provision for Income Taxes” in the Combined Statements of Income for fiscal 2023 has been calculated as if we filed a separate tax return and were operating as a standalone company.

Therefore, income tax expense, cash tax payments and items of current and deferred income taxes may not be reflective of our actual tax balances prior to or subsequent to the Separation.

Sources of Revenue

We generate and recognize over 94% of our total revenue from route servicing contracts on both Uniforms, which we generally manufacture, and Workplace Supplies, such as mats, towels, and linens that are procured from third-party suppliers.

We generate and recognize revenue from route servicing contracts on both uniforms, which we generally manufacture, and workplace supplies, such as mats, towels, and linens that are procured from third-party suppliers.

In fiscal 2025, total revenue from such route servicing contracts was 95% of our total revenue.

Revenue from these contracts represent a single-performance obligation and are recognized over time as services are performed based on the nature of services provided and contractual rates (output method).

We generate the remaining revenue primarily from the direct sale of uniforms to customers, with such revenue being recognized when the related performance obligation is satisfied, typically upon the transfer of control of the promised product to the customer.

Revenue is recognized in an amount that reflects the consideration we expect to be entitled to in exchange for the services or products described above and is presented net of sales and other taxes we collect on behalf of governmental authorities.

Costs and Expenses

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Depreciation and amortization expense reflects the cost of investments in our manufacturing plants, processing facilities, distribution centers and technology capabilities, and the amortization of intangible assets related to acquisitions.

More specifically, depreciation expense is related to processing operation assets such as washers, dryers, steam tunnels and related equipment, distribution centers and related product handling and storage equipment, company-owned and financed delivery vehicles, information technologies and other assets for which we expect to receive an economic benefit for greater than one year.

More specifically, depreciation expense is related to processing operational assets such as washers, dryers, steam tunnels and related equipment, distribution centers and related product handling and storage equipment, company-owned and financed delivery vehicles, information technologies and other assets for which we expect to receive an economic benefit for greater than one year.

The cost of these investments is depreciated on a straight-line basis over 3 to 40 years based upon the estimated useful life of the asset.

Selling, general and administrative expenses include costs attributable to our sales team and the administrative functions required to support our customers and our team members.

Interest Expense is comprised of interest expense incurred under our Credit Agreement and interest expense recognized on financing leases.

Other income, net is primarily comprised of fees incurred for our accounts receivable securitization facility and our share of the financial results for our equity method investment.

Provision for Income Taxes

The Provision for Income Taxes represents federal, foreign, state, and local income taxes.

Our effective tax rate differs from the statutory United States income tax rate due to the effect of state and local income taxes, the tax rate in Canada where we have operations, change to deferred taxes on foreign investments, tax credits, and certain nondeductible expenses.

Interest Expense, which is net of interest income, primarily consists of interest expense incurred under our Credit Agreement and interest expense recognized on financing leases.

Other Expense (net of other income), is primarily comprised of fees incurred for our accounts receivable securitization facility, and prior to its sale in fiscal 2025, our share of the financial results of an equity method investment.

(Benefit)/Provision for Income Taxes

The (Benefit)/Provision for Income Taxes represents federal, foreign, state, and local income taxes.

Our effective tax rate differs from the statutory United States income tax rate due to the effect of state and local income taxes, the tax rate in Canada where we have operations, changes to deferred taxes on foreign investments, tax credits, and certain nondeductible expenses.

Foreign Currency Fluctuations

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Our fiscal year is the 52- or 53-week period which ends on the Friday nearest to September 30th.

The fiscal years ended September 27, 2024, September 29, 2023 and September 30, 2022 were each 52-week periods.

The fiscal year ended October 3, 2025, referred to as fiscal 2025, consisted of 53 weeks.

The fiscal year ended September 27, 2024 (referred to as fiscal 2024) and the fiscal year ended September 29, 2023 (referred to as fiscal 2023) were both 52-week periods.

Key Trends Affecting Our Results of Operations

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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, the duration and severity of the ongoing volatility and disruption of global financial markets and our ability to effectively hire and retain personnel.

The impact on our longer-term operational

and financial performance will depend on future developments, including our response and governmental response to inflation, 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.

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See “Risk Factors—Operational Risks—Unfavorable economic conditions have in the past adversely affected, are currently affecting and in the future could adversely affect our business, financial condition or results of operations.”

Restructuring Plan

During the first quarter of fiscal 2026, we approved and initiated a formal multi-year business transformation and restructuring plan (the “Plan”) to support the Company’s initiatives to make the Company more agile, efficient and customer focused.

Developed in collaboration with leading third-party advisors, the Plan is structured around three strategic priorities:

Commercial Excellence, Operational Excellence and Asset and Network Optimization.

These priorities establish a clear framework for near-term performance improvement and long-term value creation through disciplined execution, continuous improvement and a relentless focus on serving customers.

• Commercial Excellence.

Executing commercial initiatives to improve customer retention, enhance profitability, and support a return to sustainable growth.

Vestis is expanding product offerings and deploying new processes, tools and systems designed to strengthen customer segmentation, optimize strategic pricing and reinforce commercial discipline.

• Operational Excellence.

Implementing a standardized operating framework across its facilities and business units and streamlining the Company’s organizational structure in order to improve operating leverage, simplify execution, modernize core processes and systems and create a more scalable and efficient cost structure.

• Asset & Network Optimization.

Rationalizing network redundancies, reallocating equipment to higher-utilization markets, and making targeted capital investments to improve reliability and asset performance.

Plan implementation has recently begun and is expected to generate annual operating cost savings of at least $75 million by the end of fiscal 2026 and to also enhance revenue.

Currently we anticipate that the Plan will be substantially complete by the end of fiscal 2027 and we estimate costs of the Plan to be in the range of $25 million to $30 million, with approximately $20 million related to third-party consulting and support, and up to $10 million in severance and related costs.

The estimate of the charges that the Company expects to incur in connection with the Plan, and the timing thereof, are subject to a number of assumptions and actual amounts may differ materially from estimates.

In addition, the Company may incur other charges not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of the Plan.

Results of Operations

Fiscal 2025 Compared to Fiscal 2024

The following table presents an overview of our results on a combined basis with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).

The following table presents an overview of our results on a consolidated basis with the amount of and percentage change between periods for the fiscal years 2025 and 2024 (dollars in thousands).

Fiscal Year Ended Change Change

September 27, 2024 September 29, 2023 $ %

October 3, 2025 September 27, 2024 $ %

Revenue $ 2,734,839 $ 2,805,820 $ (70,981) (2.5 %)

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Operating Income 64,431 157,951 (93,520) (59.2 %)

Gain on Sale of Equity Investment, net — (51,831) 51,831 (100.0 %)

Loss (Gain) on Sale of Equity Investment, net 2,784 — 2,784 (100.0 %)

Interest Expense, net 92,264 126,563 (34,299) (27.1 %)

Other (Income), net (642) (2,099) 1,457 (69.4 %)

Income Before Income Taxes 32,030 269,730 (237,700) (88.1 %)

Provision for Income Taxes 11,060 56,572 (45,512) (80.4 %)

Net Income $ 20,970 $ 213,158 $ (192,188) (90.2 %)

Other Expense (Income), net 13,689 (642) 14,331 (2232.2 %)

(Loss) Income Before Income Taxes (44,306) 32,030 (76,336) (238.3 %)

(Benefit) Provision for Income Taxes (4,083) 11,060 (15,143) (136.9 %)

Net (Loss) Income $ (40,223) $ 20,970 $ (61,193) (291.8 %)

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(1) Exclusive of depreciation and amortization

Consolidated revenue of $2,805.8 million decreased $19.5 million or 0.7% in fiscal 2024 compared to the prior fiscal year.

Temporary energy fees of $26.7 million recorded during fiscal 2023 that did not repeat during fiscal 2024 accounted for approximately 100 basis points of the decrease.

Sales volume growth and the net effect of pricing actions contributed approximately $220 million and $59 million, respectively, with approximately 680 basis points of the volume growth coming from new customer sales.

The sales growth was partially offset by the impact on revenue from customer losses along with lower year-over-year direct sales.

There was a negligible impact to revenue growth from the change in foreign currency rates year-over-year.

Customer retention 1 improved from 90.4% in fiscal 2023 to 91.9% in fiscal 2024.

Cost of services provided increased $19.7 million, or 1.0%, in fiscal 2024 compared to the prior fiscal year primarily due to an increase in labor costs of $20.2 million, rental merchandise in service costs of $6.3 million, and vehicle costs of $6.2 million partially offset by $12.2 million of lower energy costs linked primarily to lower energy rates as well as productivity savings from route optimization efforts.

Selling, general and administrative expenses increased $16.6 million, or 3.3%, in fiscal 2024 compared to the prior fiscal year.

The increase was primarily due to approximately $18 million of incremental public company and standalone costs, a prior fiscal year $6.8 million gain on sale of land, $13.0 million of incremental bad debt expense, and $5.1 million of increased insurance costs.

The increases were partially offset by the prior year $7.7 million impairment of operating lease right-of-use assets and other costs, a $9.0 million decrease in selling payroll costs, and a $8.6 million decrease in separation and rebranding costs.

Excluding a $51.6 million increase from the 53rd week in fiscal 2025, consolidated revenue decreased $122.6 million or 4.4% in fiscal 2025 compared to the prior fiscal year.

The decline in revenue compared to the prior year reflects a $105.6 million decline in uniforms and a $17.0 million decline in workplace supplies.

Consolidated revenue for fiscal 2025 was negatively impacted by $7.1 million related to the effects of fluctuations in foreign exchange rates on currency.

In addition to the impact of effects of fluctuations in foreign exchange rates on currency, rental revenue declined $89.0 million and direct sales declined $26.5 million.

The $89.0 million decline in rental revenue was primarily due to a $69.9 million decline from lost business in excess of new business, a $13.9 million decline in revenue associated with inventory recovery charges, and a $5.2 million decline in revenue associated with our first aid supply business.

The decline in direct sales revenue of $26.5 million was primarily attributable to a $15.6 million unfavorable impact from the loss of a national account customer.

Excluding a $37.9 million increase from the 53rd week in fiscal 2025, Cost of services provided decreased by $17.7 million, or 0.9%, compared to the prior fiscal year.

The decrease was primarily driven by a $15.6 million reduction in delivery costs, and an $18.4 million decline in direct sales merchandise costs on lower direct sales revenue.

These decreases were partially offset by a $10.1 million increase in rental merchandise amortization.

Excluding a $7.2 million increase from the 53rd week in fiscal 2025, Selling, general and administrative expenses decreased $7.2 million, or 1.4%, compared to the prior fiscal year.

The decrease is primarily driven by the impact of headcount reductions and other cost savings measures, offset by an increase of $21.6 million in bad debt expense and a $13.9 million increase in severance charges.

The severance charges were primarily related to the departure of certain former executives in the first half of the year and a reduction in the sales force that occurred in the fourth quarter of fiscal 2025.

Operating income of $64.4 million decreased 59.2% in fiscal 2025 compared to the prior fiscal year from the impact of changes in revenue and costs noted above.

Gain on Sale of Equity Investments, net, decreased $51.8 million in fiscal 2024 from the prior fiscal year.

The Company sold its equity investment in Sanikleen, a Japanese linen supply company, in fiscal 2023.

Interest Expense, net, increased $124.5 million in fiscal 2024 from the prior fiscal year primarily due to the issuance of our term loan debt on September 29, 2023, and subsequently partially refinanced on February 22, 2024.

Prior to September 29, 2023, the Company had no debt obligations.

Interest expense in fiscal 2024 also included a $3.9 million

non-cash expense for the write-off of unamortized debt issuance costs associated with the extinguishment of our $800 million Term Loan A-1 as a result of the aforementioned refinancing.

Other Income, net, decreased $1.5 million, in fiscal 2024 from the prior fiscal year primarily as a result of expenses from the Company’s Accounts Receivable Securitization Facility, which was entered on August 2, 2024.

The provision for income taxes for fiscal 2024 was recorded at an effective rate of 34.5% compared to an effective rate of 21.0% in fiscal 2023.

The higher effective tax rate was primarily due to the non-taxable gain on the sale of our equity investment in Sanikleen in fiscal 2023, change in deferred tax on foreign investments in fiscal 2024, and the impact of tax adjustments on the lower year-over-year earnings.

Net income of $21.0 million in fiscal 2024 represented a decrease of $192.2 million, or 90.2% compared to the prior fiscal year from the impact of changes to revenue, operating costs, interest expense, and income taxes noted above.

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(1) Customer retention is equal to lost annualized recurring revenue for the period reported divided by total company annualized recurring revenue for the trailing 52 weeks.

This metric takes the full annualized impact of a lost customer in the period it is reported.

Retention is a leading indicator, in that the financial impact from the lost business will be realized over the 12 months after the billings cease for the lost customer.

Interest Expense, net, decreased $34.3 million in fiscal 2025 compared with the prior fiscal year, due primarily to lower average outstanding debt during fiscal 2025, and lower interest rates.

The average debt in fiscal 2025 was $1,165.5 million compared with average debt in fiscal 2024 of $1,331.2 million.

The weighted average interest rate in fiscal 2025 was 6.79% compared with 7.65% in fiscal 2024.

Interest expense in fiscal 2024 also included a $3.9 million non-cash

expense for the write-off of unamortized debt issuance costs associated with the extinguishment of an $800 million Term Loan A-1 as a result of its refinancing in fiscal 2024.

Other expense, net of other income, decreased $14.3 million, in fiscal 2025 from the prior fiscal year primarily due to a loss on sale of accounts receivable for the A/R Facility of $11.9 million, as the A/R Facility was entered into on August 2, 2024, approximately two months before the end of the prior fiscal year.

Other expense, net of other income, was also negatively impacted by a $2.6 million decrease in income from the equity method investment, which was due to the sale of the equity investment in the first quarter of fiscal year 2025.

The benefit for income taxes for fiscal 2025 was recorded as a benefit at an effective rate of 9.2% in fiscal 2025 compared to an expense with an effective rate of 34.5% in fiscal 2024.

The Company’s effective rate for fiscal 2025 differed from the U.S.

statutory rate primarily due to our consolidated pre-tax book loss relative to the impacts of state taxes, permanent book/tax differences consisting mainly of nondeductible executive compensation and meals and entertainment, share-based compensation, federal tax credits, and our international operations in jurisdictions with higher income tax rates.

The Company’s effective rate for fiscal 2024 differed from the U.S.

statutory rate primarily due to our consolidated pre-tax book income relative to the impacts of state taxes, permanent book/tax differences consisting mainly of nondeductible executive compensation and meals and entertainment, and our international operations in jurisdictions with higher income tax rates.

Net loss of $40.2 million in fiscal 2025 represented a decrease of $61.2 million, or 291.8% compared to net income of $21.0 million in the prior fiscal year from the impact of changes to revenue, operating costs, interest expense, and income taxes noted above.

Results of Operations—United States Results

Fiscal 2025 Compared to Fiscal 2024

The following table presents an overview of our United States reportable segment results with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).

The following table presents an overview of the results for our United States reportable segment for fiscal 2025 and fiscal 2024, with the amount of and percentage change between periods (dollars in thousands).

Fiscal Year Ended Change Change

September 27, 2024 September 29, 2023 $ %

October 3, 2025 September 27, 2024 $ %

Revenue $ 2,489,376 $ 2,555,922 $ (66,546) (2.6 %)

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Segment Operating Income % 6.2 % 10.4 %

United States revenue decreased 0.8% in fiscal 2024 compared to the prior fiscal year.

Temporary energy fees of $26.7 million recorded during fiscal 2023 did not repeat during fiscal 2024.

Sales volume growth and pricing contributed approximately a combined $260 million increase in revenue with 690 basis points of growth from new customer sales and 200 basis points of growth from net pricing.

A decline in revenue from losing customers is the primary driver of the remaining year over year variance.

Uniforms revenue for fiscal 2024 of approximately $1,038 million decreased approximately $30 million, or 2.8%, relative to fiscal 2023.

Workplace Supplies revenue for fiscal 2024 of approximately $1,518 million increased roughly $11 million, or 0.7%, relative to fiscal 2023.

Segment operating income of $264.7 million in fiscal 2024 decreased 12.9% compared to the prior fiscal year, primarily driven by:

• the nonrecurrence of the $26.0 million temporary energy fee recorded in fiscal 2023;

• incremental production and delivery labor costs of approximately $18.4 million in fiscal 2024;

• higher rental merchandise in service costs of $4.2 million in fiscal year 2024;

• higher bad debt expense of $11.5 million in fiscal year 2024;

• the decreases were partially offset by:

• lower sales wage costs of $9.0 million largely resulting from lower year-over-year headcount;

• year-over-year energy savings of $12.9 million primarily driven by lower rates, as well as our route optimization efforts;

Excluding a $47.0 million increase from the 53rd week in fiscal 2025, United States segment revenue decreased $113.5 million or 4.4% in fiscal 2025 compared to the prior fiscal year.

The decline in revenue compared to the prior year reflects a $98.6 million decline in uniforms and a $14.9 million decline in workplace supplies.

Rental revenue declined $88.3 million and direct sales declined $25.2 million.

The $88.3 million decline in rental revenue was primarily due to a $69.9 million decline from lost business in excess of new business, a $13.2 million decline in revenue associated with inventory recovery charges, and a $5.2 million decline in revenue associated with our first aid supply business.

The decline in direct sales revenue of $25.2 million was primarily attributable to a $15.6 million unfavorable impact from the previously anticipated loss of a national account customer.

Segment operating income of $154.0 million in fiscal 2025 decreased 41.8% compared to the prior fiscal year, driven by the decrease in revenue discussed above, additional costs related to the 53rd week and the increase in bad debts and severance discussed above.

Segment operating income margin decreased approximately 420 basis points from 10.4% in fiscal 2024 to approximately 6.2% in fiscal 2025.

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Fiscal 2025 Compared to Fiscal 2024

The following table presents an overview of our Canada reportable segment results with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).

The following table presents an overview of our results for the Canada reportable segment for fiscal 2025 and fiscal 2024 with the amount of and percentage change between periods (dollars in thousands).

Fiscal Year Ended Change Change

September 27, 2024 September 29, 2023 $ %

October 3, 2025 September 27, 2024 $ %

Revenue $ 245,463 $ 249,898 $ (4,435) (1.8 %)

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Segment Operating Income % 3.6 % 3.3 %

Canada revenue was flat in fiscal 2024 relative to the prior fiscal year.

Revenue was driven by sales volume growth and pricing of approximately $20 million, with pricing accounting for 180 basis points of the growth.

This growth was offset by $18 million lower revenue from lost customers and $2 million lower revenue from foreign currency exchange rates between years.

Uniforms revenue for fiscal 2024 of approximately $97 million decreased roughly $4 million, or 3.5%, relative to fiscal 2023.

Workplace Supplies revenue for fiscal 2024 of approximately $153 million increased roughly $4 million, or 2.3%, relative to fiscal 2023.

Segment operating income of $8.2 million decreased 40.5% in fiscal 2024 compared to the prior fiscal year primarily driven by:

• incremental labor costs of approximately $4.0 million;

• higher rental merchandise in service costs of $2.1 million;

partially offset by:

• year-over-year energy savings of approximately $0.5 million

Segment operating income margin decreased approximately 220 basis points from 5.5% in fiscal 2023 to 3.3% in fiscal 2024.

Excluding a $4.6 million increase from the 53rd week in fiscal 2025, Canada segment revenue decreased $9.1 million or 3.6% in fiscal 2025 compared to the prior fiscal year.

The decline in revenue compared to the prior year reflects a $7.0 million decline in uniforms and a $2.1 million decline in workplace supplies.

Canada segment revenue for fiscal 2025 was negatively impacted by $7.1 million related to the effects of fluctuations in foreign exchange rates on currency.

In addition to the impact of effects of fluctuations in foreign exchange rates on currency, rental revenue declined $0.7 million and direct sales declined $1.3 million.

The $0.7 million decline in rental revenue was due to a $0.7 million decline in revenue associated with inventory recovery charges.

Segment operating income of $9.0 million increased 9.7% in fiscal 2025 compared to the prior fiscal year.

Segment operating income margin increased approximately 30 basis points from 3.3% in fiscal 2024 to 3.6% in fiscal 2025.

Liquidity and Capital Resources

Historically, our business generated positive cash flows from operations.

For the Combined Statement of Cash Flows during the fiscal years ended September 29, 2023 and September 30, 2022, cash flows within our United States operations were transferred to Aramark regularly as part of Aramark’s centralized cash management program.

This arrangement was used to manage liquidity of Aramark and fund the operations of our business as needed.

This arrangement is not indicative of how we would have funded our operations had we been a standalone company separate from Aramark during the fiscal 2023 and fiscal 2022 periods presented.

Cash transferred to and from Aramark’s cash management accounts are reflected within net parent investment as a component of Aramark’s equity.

The cash and cash equivalents held by Aramark at the corporate level were not specifically identifiable to us and therefore were not allocated to the Combined Balance Sheet as of September 29, 2023.

The majority of our cash and cash equivalents balance, as of September 29, 2023, is from our Canadian operations.

Third-party debt and the related interest expense of Aramark was not been allocated to us for any of the periods presented because Aramark’s borrowings were not directly attributable to our standalone business.

Historically, our business has generated positive cash flows from operations.

For the Combined Statement of Cash Flows for fiscal 2023, cash flows within our United States operations were transferred to Aramark regularly as part of Aramark’s centralized cash management program.

This arrangement was used to manage the liquidity of Aramark and fund the operations of our business as needed.

That arrangement was not indicative of how we would have funded our operations had we been a standalone company separate from Aramark during fiscal 2023.

On September 29, 2023, the Company and certain of its subsidiaries entered into a senior secured credit agreement in the aggregate amount of $1,800 million (the “Credit Agreement”).

The Credit Agreement was initially comprised of an $800 million term loan A-1 due September 29, 2025 (“Term Loan A-1”), a $700 million term loan A-2 due September 29, 2028 (“Term Loan A-2” and, together with the Term Loan A-1, the “Term Loan Facilities”), and a revolving credit facility available for loans in United States dollars and Canadian dollars with aggregate commitments of $300 million and a maturity of September 29, 2028 (the “Revolving Credit Facility”).

The Term Loan A-2 includes $8.75M of principal payments each quarter until the maturity date, in which the remaining unpaid principal amount is due.

On February 22, 2024, the Company amended the Credit Agreement to refinance its Term Loan A-1 with an $800 million term loan B-1 due

February 22, 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 the remaining unpaid principal amount is due.

The Term Loan A-2 requires $8.75M of principal payments each quarter until the maturity date, at which point the remaining unpaid principal amount is due.

On February 22, 2024, the Company amended the Credit Agreement to refinance its Term Loan A-1 with an $800 million term loan B-1 due February 22, 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.

During fiscal 2024, the Company paid principal amounts of $202.5 million and $135.0 million on its Term Loan A-2 and Term Loan B-1.

As a result of these payments, the Company has met its quarterly principal payment obligations through the maturity of both term loans.

The Term Loan A-1 interest rate was, and the Term Loan A-2 interest rate is, the Secured Overnight Financing Rate (“SOFR”), plus a Credit Spread Adjustment of 10 basis points and a margin from 1.50% to 2.50% depending on the Company’s Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement.

The applicable margin on these term loans was 2.25% during fiscal 2024.

The Term Loan A-2 interest rate is, the Secured Overnight Financing Rate (“SOFR”), plus a Credit Spread Adjustment of 10 basis points and a margin from 1.50% to 2.50% depending on the Company’s Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement.

The applicable margin on Term Loan A-2 was 2.33% during fiscal 2025.

The Term Loan B-1 interest rate is SOFR plus a margin from 2.0% to 2.25% depending on the Company’s Consolidated Total Net Leverage Ratio, as defined in the Credit Agreement.

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On September 29, 2023, concurrent with consummation of the Separation, we made a cash distribution of approximately $1,457 million to Aramark.

As of September 27, 2024, we had approximately $31 million of cash and cash equivalents and $295 million of availability for borrowing under the Revolving Credit Facility.

As of October 3, 2025, we had approximately $30 million of cash and cash equivalents and $268.2 million of availability for borrowing under the Revolving Credit Facility.

The table below summarizes our cash activity (in thousands):

Fiscal Year Ended

September 27, 2024 September 29, 2023

October 3, 2025 September 27, 2024

Net cash provided by operating activities $ 64,229 $ 471,788

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Net cash used in financing activities (46,057) (402,975)

Reference to the audited Consolidated and Combined Statements of Cash Flows will facilitate understanding of the discussion that follows.

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

Cash Flows Provided by Operating Activities

Net cash provided by operating activities was $64.2 million and $471.8 million during fiscal 2025 and fiscal 2024, respectively.

The $214.8 million increase in cash flows from operating activities was primarily driven by $390.0 million of incremental cash inflow from improved management of the Company’s operating assets and liabilities, with incremental cash generation from the change in receivables of $239.4 million being the largest as the Company entered its Accounts Receivable Securitization Facility in August 2024, offset by lower year over year net income of $192.2 million.

Other significant changes in cash from operating assets and liabilities were primarily due to:

• Increase in operating cash flows during fiscal 2024 compared to fiscal 2023 due to a greater source of cash from accrued expenses of $88.5 million primarily due to timing of other payments;

• Increase in operating cash flows during fiscal 2024 compared to fiscal 2023 due to a higher source of cash from accounts payable of $54.6 million primarily due to the timing of disbursements.

The $407.6 million decrease in cash flows from operating activities was primarily due to a $239.4 million incremental cash generation from receivables in fiscal 2024 that was primarily attributable to the A/R Facility that the Company entered into in August 2024.

Also contributing to the reduced cash inflows in fiscal 2025 were lower cash inflows from accounts payable, accruals and other current liabilities during fiscal 2025 of approximately $114.9 million compared to fiscal 2024, as well as the net loss of $40.2 million (a year over year decline of $61.2 million when compared with net income of $21.0 million in the prior year).

The change in accounts payable, accruals and other current liabilities reflect reduced operational spending due to the decrease in revenue and certain cost reduction initiatives.

Cash Flows Used in Investing Activities

Net cash used in investing activities of $73.6 million during fiscal 2024 was $58.9 million higher during fiscal 2024 relative to fiscal 2023 primarily due to cash proceeds of $51.9 million related to the sale of our Sanikleen equity investment and due to $5.9 million lower proceeds from the disposal of assets in fiscal 2024 compared to fiscal 2023.

Net cash used in investing activities of $19.8 million during fiscal 2025 was $53.8 million lower relative to fiscal 2024, primarily due to cash proceeds received of $37.7 million from the sale of the Sanikleen equity investment and lower year-over-year purchases of property and equipment, which were $20.4 million lower in fiscal 2025 compared to fiscal 2024.

These activities were partially offset by cash outflows of $4.6 million associated with a tuck-in acquisition that was completed during the first quarter of fiscal 2025.

Cash Flows Used in Financing Activities

During fiscal 2025, cash used in financing activities was primarily impacted by the following:

• cash proceeds from long-term debt borrowings ($798.0 million);

• principal payments on long-term borrowings ($1,137.5 million) ;

• payments related to finance leases ($30.6 million);

• payments related to debt issuance costs ($11.1 million);

• dividend payments ($13.8 million);

• cash distributions to Aramark ($6.1 million);

During fiscal 2023, cash used in financing activities was impacted by the following:

• cash proceeds from long-term debt borrowings ($1,500.0 million);

• payments related to debt issuance costs ($13.7 million);

• payments related to finance leases ($27.6 million);

• cash distributions to Aramark ($1,688.9 million);

• proceeds from long-term borrowings of $167 million;

• principal payments on long-term borrowings of $161 million;

• payments related to finance leases of $34.5 million;

• dividend payments of $13.8 million.

During fiscal 2024, cash used in financing activities was primarily impacted by the following:

• proceeds from long-term borrowings of $798.0 million;

• principal payments on long-term borrowings of $1,137.5 million;

• payments related to finance leases of $30.6 million;

• dividend payments of $13.8 million

• payments related to debt issuance costs of $11.1 million;

• cash distributions to Aramark of $6.1 million.

Accounts Receivable Securitization Facility

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The future outstanding balance of Receivables that will be sold is expected to vary based on the level of originations and other factors.

The Purchasers benefit from SPE’s guarantee of repayment on Receivables transferred as well as its pledge of additional Receivables as collateral.

The Purchasers benefit from the SPE’s guarantee of repayment on Receivables transferred as well as its pledge of additional Receivables as collateral.

We have agreed to guarantee the performance of the Originators’ respective obligations under the A/R Facility.

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The A/R Facility is scheduled to terminate on August 2, 2027 , unless terminated earlier pursuant to its terms.

As of September 27, 2024, the total value of accounts receivable sold under the A/R Facility and derecognized from the Company's Consolidated Balance Sheet was $229.0 million.

As of October 3, 2025, the total value of accounts receivable sold under the A/R Facility and derecognized from the Company's Consolidated Balance Sheet was $202.5 million.

Refer to Note 16, “ Accounts Receivable Securitization Facility, ” of our Consolidated and Combined Financial Statements for further discussion regarding our accounting for the A/R Facility.

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create restrictions on the payment of dividends or other amounts to the Company from its restricted subsidiaries;

amend material agreements

governing our subordinated debt;

amend material agreements governing our subordinated debt;

repay or repurchase any subordinated debt, except as scheduled or at maturity;

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and fundamentally change our business.

The Credit Agreement contains certain customary affirmative covenants.

Additionally, the Credit Agreement contains certain customary affirmative covenants.

The Credit Agreement also includes customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable at the option of the lenders, if we fail to comply with the terms of the Credit Agreement or if other customary events occur.

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Our continued ability to meet those financial ratios, tests and covenants can be affected by events beyond our control, and there can be no assurance that we will meet those ratios, tests and covenants.

The Credit Agreement requires us to maintain a maximum Consolidated Total Net Leverage Ratio, defined as consolidated total indebtedness over unrestricted cash divided by Covenant Adjusted EBITDA, 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.

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.

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.

The Credit Agreement establishes a minimum Interest Coverage Ratio, defined as Covenant Adjusted EBITDA divided by consolidated interest expense.

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.

Additionally, 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.

At September 27, 2024, we were in compliance with all covenants under the Credit Agreement.

Recent Amendment to Credit Agreement

On May 1, 2025, the Company entered into Amendment No.

2 to its Credit Agreement.

This amendment increased the Consolidated Total Net Leverage Ratio from 4.50x to (i) 5.25x for any fiscal quarter ending prior to July 3, 2026, (ii) 5.00x for the fiscal quarter ending July 3, 2026 and (iii) 4.75x for the fiscal quarter ending October 2, 2026.

Pursuant to this amendment, the Consolidated Total Net Leverage Ratio will remain at 4.50x for the first quarter of fiscal 2027 through maturity.

This amendment also provided a $15 million bad debt expense adjustment to Adjusted EBITDA in the fiscal quarter ended March 28, 2025 for the purposes of determining compliance with the financial covenants.

The principal amounts of both the revolving credit facility commitment and term loan facility remain unchanged following this amendment.

As part of this amendment, the Company agreed to limit the aggregate size of its A/R Facility and any other receivables facilities to $250 million and restrict all dividends and share repurchases, in each case until the earlier of (i) any fiscal quarter ending after October 2, 2026 so long as the Company is then in compliance with the financial covenants and (ii) when the Company achieves a net leverage ratio below or equal to 4.50x as of the last day of two consecutive quarters through the end of fiscal 2026.

At October 3, 2025, we were in compliance with all covenants under the Credit Agreement.

Future Liquidity and Contractual Obligations

We primarily rely on cash and recurring cash flow provided by operations to fund our operations.

As of September 27, 2024, we have access to $295 million of borrowing capacity from our Revolving Credit Facility and expect to have access to capital markets for additional funding.

As of October 3, 2025, we have access to $268.2 million of borrowing capacity from our Revolving Credit Facility and expect to have access to capital markets for additional funding.

The cost and availability of debt financing will be influenced by market conditions and our future credit ratings.

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Our ability to fund these needs will depend, in part, on our ability to generate or raise cash in the future, which is subject to general economic, financial, competitive, regulatory, and other factors that are beyond our control.

The following table summarizes our future obligations for long-term borrowings, estimated interest payments, finance leases, future minimum lease payments under noncancelable operating leases, purchase obligations and other liabilities as of September 27, 2024 (dollars in thousands):

Payments Due by Period

Contractual Obligations as of September 27, 2024 Total Less than

Contractual Obligations as of October 3, 2025 Total Less than

1 year 1-3 years 3-5 years More than

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(2) Interest payments on long-term debt includes interest due on outstanding debt obligations under our Credit Agreement.

Payments related to variable debt are based on applicable rates at September 27, 2024 plus the specified margin in the Credit Agreement for each period presented.

Payments related to variable rate debt are based on applicable rates at October 3, 2025 plus the specified margin in the Credit Agreement for each period presented.

(3) Represents purchase commitments for inventory.

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We apply these accounting policies in a consistent manner.

In preparing our Consolidated and Combined 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.

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Examples of qualitative factors include, macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, entity-specific events, events affecting reporting units and sustained changes in our stock price.

If results of the qualitative assessment indicate a more likely than not determination or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value using a discounted cash flow method or market method for each reporting unit with its estimated net book value.

Historically, Vestis represented one reporting unit under Aramark’s structure for fiscal years ended September 29, 2023 and September 30, 2022.

For the fiscal year ended September 27, 2024, Vestis had two reporting units, Unites States and Canada.

If results of the qualitative assessment indicate a more likely than not determination of impairment or if a qualitative assessment is not performed, a quantitative test is performed by comparing the estimated fair value, using a combination of a discounted cash flow method and a market method, for each reporting unit with its estimated net book value.

For the fiscal years ended October 3, 2025 and September 27, 2024, Vestis had two reporting units, Unites States and Canada.

During the fourth quarter of fiscal 2025, we performed the annual impairment test for goodwill using a quantitative testing approach.

Based on our evaluation performed, we determined that the fair value of the reporting units exceeded their respective carrying amount, and therefore, we determined that goodwill was not impaired.

Based on the evaluation performed, we determined that the fair value of the reporting units exceeded their respective carrying amount, and therefore, we determined that goodwill was not impaired.

The determination of fair value for the Vestis reporting units includes assumptions, which are considered Level 3 inputs, that are subject to risk and uncertainty.

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• advice of counsel.

Insurance reserves

The Company’s primary insurance exposures relate to workers' compensation, auto liability and other general liability.

Insurance reserves, as of the balance sheet dates, represent the estimated ultimate cost of reported and unreported claims (incurred but not reported).

Such reserves are estimated through actuarial valuations, with the assistance of third-party actuarial specialists.

Such valuations take into account industry assumptions, adjusted for specific expectations based on the Company’s claims history.

Increases or decreases in the reserves are reflected as components of cost of services (exclusive of depreciation and amortization) and selling and administrative expenses, and are impacted by development of prior claims, higher claims activity and other industry factors in the period in which they become known.

Such estimates require a high degree of judgment especially since Vestis has a relatively short claims history as a stand-alone company.

Changes in such estimates can be material to the consolidated financial statements.

The estimated current portion of such reserves are included in “Accrued expenses and other current liabilities,” while the estimated long-term portion is included in “Other Noncurrent Liabilities” in the consolidated balance sheets.

Allowance for Credit Losses

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In calculating our inventory obsolescence reserve, we analyze historical and projected data regarding customer demand within specific product categories and make assumptions regarding economic conditions within customer specific industries, as well as style and product changes.

Rental merchandise in service is valued at cost less amortization, calculated using the straight-line method.

Rental merchandise in service is valued at cost less accumulated amortization, calculated using the straight-line method.

Rental merchandise in service is amortized over its useful life, which ranges from one to four years.

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Relevant factors in determining the realizability of deferred tax assets include future taxable income, the expected timing of the reversal of temporary differences, tax planning strategies and the expiration dates of the various tax attributes.

Refer to Note 11, “Income Taxes”, of our Consolidated and Combine Financial Statements for further discussion regarding our accounting for income taxes and our uncertain tax positions for financial accounting purposes.

Refer to Note 11, “ Income Taxes, ” of our Consolidated and Combined Financial Statements for further discussion regarding our accounting for income taxes and our uncertain tax positions for financial accounting purposes.

New Accounting Standards Updates

See Note 1 to the audited Consolidated and Combined Financial Statements for a full description of recent accounting standards updates, including the expected dates of adoption.

See Note 1 to the audited Consolidated and Combined Financial Statements for a full description of recent accounting standard updates, including the expected dates of adoption.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis