Execution Version AMENDMENT NO. 2 (this "Amendment"), dated as of May 1, 2025, among VESTIS CORPORATION, a Delaware corporation (the "U.S. Borrower"), CANADIAN LINEN AND UNIFORM SERVICE CORP., a corporation organized under the laws of Canada (the "Canadian Borrower" and, together with the U.S. Borrower, the "Borrowers"), each Subsidiary Guarantor party hereto, each Lender party hereto, and JPMORGAN CHASE BANK, N.A., as administrative agent for the Lenders and collateral agent for the Secured Parties (in suc ...

Company Overview - Vestis Corporation (NYSE: VSTS) has reported stable and predictable revenue growth and has been operating in the same industry for over 75 years, indicating a strong foundation and potential for future growth [1] Industry Insights - The accumulated know-how from over 75 years of operation is expected to accelerate revenue growth in the future, showcasing the importance of experience in the industry [1] Investment Strategy - The focus is on small and medium-cap companies in Europe, the United States, and South America, with an emphasis on mature industries such as mining, oil and gas, and real estate [1] - The investment strategy includes M&A deals, deep value investments, and dividend investing, targeting an internal rate of return of approximately 5%-7% [1]

Core Viewpoint - Vestis (VSTS) has experienced significant selling pressure, declining 17.2% over the past four weeks, but is now positioned for a potential trend reversal as it is in oversold territory, with analysts expecting better earnings than previously predicted [1]. Group 1: Stock Performance and Technical Indicators - VSTS shares have been under heavy selling pressure, indicated by an RSI reading of 23.35, suggesting that the stock may soon reverse its trend [5]. - The Relative Strength Index (RSI) is a momentum oscillator that helps identify oversold stocks, with a reading below 30 typically indicating oversold conditions [2]. - Stocks oscillate between overbought and oversold states, and the RSI can help investors identify potential entry points for a rebound [3]. Group 2: Earnings Estimates and Analyst Consensus - There is strong agreement among sell-side analysts regarding an increase in earnings estimates for VSTS, with the consensus EPS estimate rising by 6.1% over the last 30 days [6]. - An upward trend in earnings estimate revisions is generally associated with price appreciation in the near term [6]. - VSTS holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate trends and EPS surprises, indicating a strong potential for a turnaround [7].

Financial Performance - Revenue for the three months ended December 27, 2024, was $683,780, a decrease of 4.7% compared to $717,923 for the same period in 2023[17]. - Operating income decreased to $30,399, down 36.1% from $47,598 in the prior year[17]. - Net income for the quarter was $832, a significant decline of 93.2% from $12,266 in the same quarter last year[17]. - Earnings per share (EPS) for the quarter was $0.01, compared to $0.09 in the previous year, reflecting a decrease of 88.9%[17]. - Total revenue for the three months ended December 27, 2024, was $683.8 million, a decrease of 4.7% from $717.9 million in the same period in 2023[62]. - Operating income for the same period was $30.40 million, down 36.1% from $47.60 million in the prior year[89]. - Net income for the three months ended December 27, 2024, was $0.8 million, down $11.4 million or 93.2% from $12.3 million in the same period of 2023[126]. Assets and Liabilities - Total current assets increased to $809,589, up 2.6% from $787,389 as of September 27, 2024[15]. - Total liabilities decreased to $1,997,563, down 1.6% from $2,029,336 in the previous quarter[15]. - The company had long-term borrowings, net of current portion, of $1.128 billion as of December 27, 2024, down from $1.148 billion as of September 27, 2024[54]. - The company had $105.0 million of employee sales commissions recorded as assets as of December 27, 2024[65]. - As of December 27, 2024, total principal debt was $1,142.5 million, down from $1,162.5 million as of September 27, 2024[137]. Cash Flow and Investments - Cash and cash equivalents at the end of the period were $18,564, a decrease of 40.0% from $31,010 at the beginning of the period[21]. - Net cash provided by operating activities was $3.8 million for the three months ended December 27, 2024, a decrease of $47.7 million from $51.5 million in the prior year[139]. - Cash flows from investing activities for the three months ended December 27, 2024, were $17.9 million, an increase of $34.8 million compared to the prior year, primarily due to $36.8 million from the sale of equity investments[141]. - Operating cash flows experienced an unfavorable change of approximately $30.0 million due to increased cash use for inventory compared to the previous year[140]. Dividends and Shareholder Returns - The company declared dividends of $0.035 per common share, totaling $4,610 for the quarter[23]. - The company declared a quarterly cash dividend of $4.6 million, or $0.035 per common share, payable on January 6, 2025[104]. Segment Performance - Revenue from the United States for the three months ended December 27, 2024, was $621.7 million, down from $653.2 million in the prior year, representing a decline of 4.8%[62]. - Total segment operating income for the United States was $58.03 million, down 21.7% from $74.08 million in the prior year[89]. - Segment revenue in Canada was $62.1 million, down $2.6 million or 4.0%, impacted by unfavorable foreign currency rates[132]. - Segment operating income in Canada decreased by 58.0% to $1.9 million, with a margin decline from 7.0% to 3.1%[133]. Operational Costs and Expenses - The company recorded severance charges of $4.3 million for the three months ended December 27, 2024, compared to $0.4 million for the same period in 2023[50]. - Operating lease costs for the three months ended December 27, 2024, were $10.989 million, compared to $10.371 million for the same period in 2023[69]. - Share-based compensation expense for the three months ended December 27, 2024, totaled $5,180,000, up from $4,716,000 in the same period last year, indicating an increase of 9.8%[72]. Risk Factors - The company is exposed to foreign currency risk from revenues and profits denominated in foreign currencies, with no financial instruments currently used to manage this risk[153]. - Interest rate risk exists due to fluctuations in interest rates on debt obligations, which could increase servicing costs and reduce profitability[154]. - The company is also exposed to commodity price risk, particularly related to gasoline, diesel, and natural gas, and seeks to manage this through operations and commodity derivative agreements[156].

Core Viewpoint - Vestis (VSTS) has experienced significant selling pressure, resulting in a 17% decline over the past four weeks, but analysts anticipate improved earnings in the near future [1] Group 1: Technical Analysis - The Relative Strength Index (RSI) is a key technical indicator used to determine if a stock is oversold, with a reading below 30 typically indicating oversold conditions [2] - VSTS has an RSI reading of 22.78, suggesting that the heavy selling may be exhausting, indicating a potential bounce back towards equilibrium [5] Group 2: Fundamental Analysis - There is a consensus among sell-side analysts that earnings estimates for VSTS have increased by 3.4% over the last 30 days, which often correlates with price appreciation [6] - VSTS holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [7]

Group 1 - The article discusses Vestis Corp. (NYSE: VSTS) and its recent positive improvements, indicating a potential turnaround in the business [1] - The author has previously rated VSTS as a hold, expressing the need for more evidence of the company's recovery [1] - The author emphasizes a diverse investment approach, incorporating fundamental, technical, and momentum investing strategies [1] Group 2 - The article serves as a platform for tracking investment ideas and connecting with like-minded investors [1]

Group 1 - Vestis (VSTS) reported quarterly earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, but down from $0.22 per share a year ago, representing an earnings surprise of 16.67% [1] - The company posted revenues of $683.78 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.43%, and down from $717.92 million year-over-year [2] - Vestis has surpassed consensus EPS estimates two times over the last four quarters and has topped consensus revenue estimates just once during the same period [2] Group 2 - The stock's immediate price movement will depend on management's commentary during the earnings call and the sustainability of earnings expectations [3][4] - Vestis shares have increased approximately 3.9% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3] - The current consensus EPS estimate for the upcoming quarter is $0.14 on revenues of $696.59 million, and for the current fiscal year, it is $0.66 on revenues of $2.84 billion [7] Group 3 - The Zacks Industry Rank for Uniform and Related is currently in the top 7% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The estimate revisions trend for Vestis is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, suggesting it is expected to perform in line with the market in the near future [6]

Financial Performance - Vestis reported first quarter fiscal 2025 revenue of $683.8 million, a decrease of 4.7% compared to $717.9 million in the first quarter of fiscal 2024[4]. - Adjusted EBITDA for the first quarter fiscal 2025 was $81.2 million, down 17.4% from $98.4 million in the same period last year, but increased 0.9% sequentially from the fourth quarter of fiscal 2024[5]. - The company achieved an operating income of $30 million, reflecting a 2% sequential increase compared to the fourth quarter of fiscal 2024, with an operating margin of 4.4% remaining flat[6]. - Reported revenue for the three months ended December 27, 2024, was $621.7 million, a decrease of 4.8% compared to $653.2 million for the same period in 2023[38]. - Adjusted revenue (organic) for the same period was $621.7 million, reflecting a decline of 4.8% year-over-year[38]. - Operating income (as reported) decreased to $58.0 million from $74.1 million, representing a decline of 21.8%[38]. - Adjusted operating income (non-GAAP) was $63.4 million, down from $80.3 million, indicating a decrease of 21.0%[38]. - Adjusted EBITDA (non-GAAP) for the quarter was $90.6 million, compared to $106.3 million in the prior year, a decline of 14.8%[38]. - Net income (as reported) for the quarter was $0.8 million, significantly lower than $12.3 million in the same quarter last year[38]. - Adjusted net income (non-GAAP) was $18.1 million, down from $28.6 million, reflecting a decrease of 36.5%[38]. - Basic earnings per share for the quarter was $0.01, compared to $0.09 in the prior year[38]. - Adjusted diluted earnings per share was $0.14, down from $0.22 year-over-year[38]. - The company reported an adjusted operating income margin of 10.2% for the quarter, compared to 12.3% in the same period last year[38]. Cash Flow and Debt - Net cash provided by operating activities decreased to $3.8 million from $51.5 million in the comparable period of fiscal 2024, primarily due to lower operating income and timing shifts in accounts receivable collections[6]. - Total principal debt outstanding as of December 27, 2024, was $1.14 billion, resulting in a net leverage ratio of 3.80x, up from 3.62x at the end of fiscal 2024[7]. - Net cash used in financing activities increased from $21,645 million in December 2023 to $34,610 million in December 2024, an increase of approximately 60%[25]. - The company reported a significant increase in cash flows from investing activities, from a net cash outflow of $16,949 million in December 2023 to a net cash inflow of $17,854 million in December 2024[25]. Guidance and Future Outlook - The company reaffirmed its fiscal 2025 revenue guidance in the range of $2.8 billion to $2.83 billion and adjusted EBITDA guidance of $345 million to $360 million[9]. - Vestis anticipates a free cash flow to adjusted EBITDA ratio of approximately 50% for fiscal 2025[10]. - Vestis expects to achieve sequential improvement in results throughout the year, supporting a double-digit EBITDA growth rate heading into fiscal 2026[3]. Leadership Changes - The company is undergoing a transition in its finance leadership, with Rick Dillon leaving and Kelly Janzen appointed as the new CFO effective February 14, 2025[11]. Asset and Equity Changes - Total assets decreased from $2,932,387 million in September 2024 to $2,897,153 million in December 2024, a decline of approximately 1.2%[23]. - Total current liabilities decreased slightly from $456,102 million in September 2024 to $448,696 million in December 2024, a reduction of about 1.0%[23]. - Long-term borrowings decreased from $1,147,733 million in September 2024 to $1,128,444 million in December 2024, a decline of approximately 1.7%[23]. - Total equity decreased from $903,051 million in September 2024 to $899,590 million in December 2024, a decrease of about 0.5%[23]. - The company’s accumulated deficit in retained earnings changed from $2,565 million in September 2024 to $(1,213) million in December 2024, indicating a shift to a deficit position[23]. Non-GAAP Measures - The company emphasizes the importance of non-GAAP financial measures for evaluating operational performance, which may not be directly comparable to other companies[26].

Vestis Corporation - Vestis Corporation, spun off from Aramark in late 2023, is equal in size to UniFirst but less than a third of Cintas, making it a potential merger or buyout target [1] - The uniform industry remains fragmented despite years of consolidation, with Cintas as a potential buyer [1] - Several buyout firms have expressed interest in Vestis, but no firm offers are on the table [1] - Insiders have been actively buying Vestis shares in 2024, with nine insiders making 14 purchases, bringing their total holding to over 13% [9] - Institutional ownership of Vestis reached nearly 98% by late December 2024 [9] - Vestis pays a healthy dividend, less than 25% of its earnings, and has a solid balance sheet [20] OPKO Health - OPKO Health has numerous catalysts that could drive its share price up in 2025, including potential approvals for its key therapy, acquisitions, and normalization of its diagnostic business [11] - Analysts are optimistic about OPKO Health, with a consensus "Buy" rating and a projected 90% upside [11] - Insider activity in OPKO Health includes 24 purchases by seven insiders in 2024, making it the second most bought stock for the year [4] - However, the company has issued shares to raise capital, increasing the share count by more than 32%, and the $100 million share repurchase authorization may not be sufficient to offset the dilution [4] Greif, Inc - Greif, Inc is an industrial packaging company with a volatile share price but a solid bottom near $60, reinforced by insider buying at the low end of the range [12] - Insiders buying Greif shares include the CEO, CFO, and several directors [12] - Analysts view Greif as a deep value stock, with a consensus "Moderate Buy" rating and a potential upside of 10% to 20% [13] - Greif pays a dividend yield of 3.57% and has a price target of $78.67 [12] Institutional Activity - Institutions have been net buyers of shares in CQ1, Q2, and Q3 2024, with the largest shareholder being activist hedge fund Corvex Management, which owns more than 13% of the stock [2] - Institutional ownership of Greif is around 50%, with activity in 2024 aligning with buying at the low end and selling at the high end of the range [16] - Institutional activity in Q4 2024 is bullish, suggesting a potential rebound in the stock price [16] Industry Insights - The uniform industry remains fragmented, with Cintas as the industry leader and a potential buyer for Vestis [1] - Cintas is an example of a company capable of sustaining dividend payments, share buybacks, and self-funding growth [10] - Insider activity is significant in companies like Vestis, OPKO Health, and Greif, signaling higher-than-average conviction in the share price outlook [19]

Group 1: Vestis Corporation Overview - Vestis' recent stock rally is driven by optimism regarding its business strength, supported by healthy growth in its customer base [1] - The company is focusing on enhancing workforce productivity, optimizing network logistics, and managing operational costs and merchandise inventory, which is expected to positively impact its performance [1] - Vestis shares increased by 5.1% to close at $16.39, with trading volume significantly higher than normal, contrasting with a 0.2% loss over the past four weeks [4] Group 2: Earnings Estimates and Trends - The consensus EPS estimate for Vestis has been revised 25% lower over the last 30 days, indicating a negative trend in earnings estimate revisions, which typically does not lead to price appreciation [2] - Empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements, highlighting the importance of monitoring these trends [5] Group 3: Industry Context - Vestis operates within the Zacks Uniform and Related industry, which includes UniFirst (UNF), another company in the same sector [6] - UniFirst's consensus EPS estimate remains unchanged at $2.27, reflecting a year-over-year change of -4.6%, and it currently holds a Zacks Rank of 4 (Sell) [3] - UniFirst is expected to report quarterly earnings of $0.12 per share, representing a year-over-year decline of 45.5%, with revenues projected at $686.74 million, down 4.3% from the previous year [7]