Greetings, and welcome to the UniFirst Corp Fourth Quarter Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Later, we will conduct a Q&A session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach the operator, please press star zero. It is now my pleasure to turn the conference over to Steven Sintros, President and Chief Executive Officer. Please go ahead. Thank you, and good morning. I'm Steven Sintros, UniFirst President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer. I'd like to welcome you to UniFirst Corporation's conference call to review our fourth quarter results for fiscal year 2022. This call will be on a listen-only mode until we complete our prepared remarks, but first, a brief disclaimer. This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements. Actual future results may differ materially from those anticipated, depending on a variety of risk factors. For more information, please refer to the discussion of these risk factors in our most recent 10-K and 10-Q filings with the Securities and Exchange Commission. We are very excited to be announcing today that we have officially reached another major milestone as a company as we reported just over $2 billion in annual revenues for our fiscal 2022. UniFirst has come a long way from our humble beginnings back in 1936, operating out of a single location in Boston, Massachusetts, and we continue to be very excited about our future. I wanna thank our thousands of team partners who, in the face of a challenging operating environment, continue to always deliver for each other and our customers. They are the engine that makes UniFirst Go, and they deserve all the credit for our ability to be celebrating this milestone today. During the quarter, as always, our team focused on providing industry-leading service to our customers, as well as selling prospective customers on the value that UniFirst can bring to their businesses. Our fourth quarter results reflect a strong top-line performance that allowed us to hit that $2 billion mark, with consolidated revenues growing 11%. We are pleased with the execution of our team, which delivered solid performances in both new account sales as well as customer retention in fiscal 2022. Continuing the trend from prior quarters, the strong revenue growth also reflects the impact of price adjustments from throughout the year as we continue to work with our customers to share in cost increases related to the inflationary environment. As we have discussed in prior calls, we continue to be focused on three large initiatives designed to transform the company in terms of our overall capabilities and competitive positioning. These initiatives are the rollout of our new CRM system, a corporate-wide ERP system, and investments in the UniFirst brand. As we have talked about over the last few years, we continue to be focused on making good investments in our people, our infrastructure, and our technologies. With respect to our CRM systems project, we are making good progress deploying our new system in line with our internal schedule. As of our fiscal year-end, over 50% of our U.S. laundry locations have been deployed, and we expect the remaining U.S. locations to be deployed by the end of fiscal 2023. The deployment of our smaller Canadian and clean room operations will carry into fiscal 2024. During fiscal 2023, we will also be focused on the global design phase of our ERP initiative. Our new Oracle Cloud ERP system project will be a multi-year initiative designed to transform our supply chain and procurement capabilities, as well as provide an overall technology foundation for growth and efficiency. Finally, as we discussed on prior earnings call, during fiscal 2022, we officially launched our new brand through a series of national TV ads featuring real UniFirst customers and employees. Our message focuses on serving people who always deliver for their companies, their customers, and their families. At UniFirst, our ongoing focus will be to always deliver for them. Although some costs related to this brand transformation will extend into fiscal 2023, the larger one-time expenditures are mostly behind us. All of our investments are designed to deliver solid long-term returns for UniFirst stakeholders and are integral components of our primary long-term objective to be universally recognized as the best service provider in our industry. We continue to report results adjusted for the direct impact of these costs related to these investments. Similar to our message last quarter, our adjusted profitability continues to be challenged by the broad impact that the inflationary environment is having on many of our costs, as well as the challenging labor environment. The largest item impacting our margins compared to the prior year is higher merchandise amortization that is being influenced both by the inflationary effect on the cost of our products, as well as higher levels of merchandise being put in service with our customers. These higher levels are partially being driven by a number of growth-related factors, including a pickup in activity in our energy-dependent markets, solid new account sales, elevated wearer additions at our customers, as well as certain national account investments. As we look ahead into fiscal 2023, we'll be watching the dynamic market environment closely. Although there have been some signs that the higher interest rate environment will slow overall economic demand and hopefully moderate cost, we have yet to see any significant change in our business. As a result, we are not assuming any change to the current economic conditions in our forecast. Shane will provide further details shortly, but in summary, our outlook for fiscal 2023 reflects solid continued momentum on the top line and a similar operating margin as fiscal 2022. Despite the challenges in the overall operating environment, we continue to manage through these obstacles and execute against our plan. We will continue to manage costs in areas we can control while assuring that we don't impact the ability to execute on our transformational initiatives or adversely affect our customer service levels. As always, we maintain a sharp focus on taking care of our employees, our customers, and bringing new customers to the UniFirst family. While we are confident that we ultimately be able to improve our operating margins back to more historical levels and beyond, we also firmly believe that building a stronger company for the future will take a certain level of time and investment. With that, I would like to turn the call over to Shane, who will provide the details of our results for the fourth quarter and our outlook for fiscal 2023. Thanks Steve. Consolidated revenues in our fourth quarter of 2022 were $516.4 million, an increase of 11% from $465.3 million a year ago, and consolidated operating income decreased to $33.3 million from $44.9 million, or 26%. Net income for the quarter decreased to $26.2 million, or $1.39 per diluted share from $34.6 million, or $1.82 per diluted share. Our financial results in the fourth quarter of fiscal 2022 included $9.1 million of costs directly attributable to our three key initiatives that Steve discussed. Excluding these initiative costs, adjusted operating income was $42.3 million. Adjusted net income was $33.7 million, and adjusted diluted earnings per share was $1.79. Although our financial results in the prior year may have included direct costs related to these key initiatives, the company did not specifically track the amounts that were being expensed. This was because the amount was less significant in value and a number of costs were still being capitalized. As a result, similar to previous quarters this fiscal year, we will not be providing adjusted amounts for the prior year comparable periods. Our Core Laundry Operations revenues for the quarter were $458.6 million, an increase of 10.5% from the fourth quarter of 2021. Core Laundry organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 9.9%. Our organic growth rates continue to benefit from solid sales performance and improved customer retention in fiscal 2022, as well as efforts to share with our customers the inflationary cost increases that we have been experiencing in our business. Core Laundry operating margin decreased to 6.3% for the quarter, or $29 million from 10.1% in prior year or $41.8 million. The costs we incurred during the quarter related to our key initiatives were recorded to the Core Laundry Operations segment, and excluding these costs, the segment's adjusted operating margin was 8.3%. As Steven discussed, merchandise amortization continues to be the most significant item impacting our adjusted operating margin in the quarter. In addition, our operating results were also impacted by higher energy costs as a percentage of revenues, as well as increased input and labor costs due to the current inflationary environment. These cost increases were partially offset by lower healthcare and payroll-related costs as a percentage of revenues. Energy costs increased to 5.3% of revenues in the fourth quarter of 2022, up from 4.2% a year ago. Revenues from our Specialty Garment s segment, which delivers specialized nuclear decontamination and cleanroom products and services, were $36.7 million for the fourth quarter of fiscal 2022, an increase of 8.3% over 2021. Segment's top line growth was primarily driven by its cleanroom operations. Segment's operating income during the quarter was $4 million, relatively consistent with prior year. As we've mentioned in the past, this segment's results can vary significantly from period to period due to seasonality, as well as the timing and profitability of nuclear reactor outages and projects. Our First Aid segment's revenues in the fourth quarter of 2022 increased to $21.2 million from $16.3 million, with both the wholesale and VAN operations contributing to this growth. However, the segment's operating income was nominal during the quarter due to our continued investment in the segment's VAN business. We continue to maintain a solid balance sheet and financial position with no long-term debt and cash equivalents, and short-term investments totaling $376.4 million at the end of fiscal 2022. Cash provided by operating activities for the year was $122.6 million, a decrease of $89.7 million from the prior year. This decrease was primarily due to reduced profitability, including the impact of our key initiative costs, as well as heavier than normal working capital needs of the business. In fiscal 2022, we continued to invest in our future, capital expenditures totaling $144.3 million, and the acquisition of 13 businesses for which we paid a total of $44.2 million. During the fourth quarter of fiscal 2022, we repurchased 47,775 shares of common stock for $8 million under our previously announced stock repurchase program, and also repurchased 35,714 shares of Class B Common Stock for $6 million in a privately negotiated transaction. I'd like to take this opportunity to provide our outlook for fiscal 2023. At this time, we anticipate our full year revenues will be between $2.145 billion and $2.16 billion. This top-line guidance assumes Core Laundry revenue growth at the midpoint of the range is 7.7% and organic growth to be 8.3%. For fiscal 2023, we further expect that our diluted earnings per share will be between $5.50 and $5.90. This guidance includes $40 million of costs that we expect to incur in the fiscal year directly attributable to our three key initiatives. Excluding these transitory investment costs, our Core Laundry Operations adjusted operating margin assumption at the midpoint of the range is 8.1%. This adjusted operating margin reflects continued pressure from the current inflationary environment, higher levels of merchandise amortization, elevated energy costs, indirect costs we are incurring related to our key initiatives, as well as additional investments we are making in strengthening our overall capabilities. Based on the current energy prices, we are modeling that energy costs will be 4.7% of revenues in fiscal 2023 compared to 4.9% in 2022. Next year's effective tax rate is assumed to be 25%. Our Specialty Garments revenues are forecast to be relatively flat compared to 2022. However, the segment's operating income is expected to be down approximately 5%, primarily due to the timing and relative profitability of its planned outages and project work. Our First Aid segment's revenues are expected to be up approximately 18% compared to 2022. However, this segment's profitability is once again expected to be relatively marginal in 2023 as a result of the investments we continue to make in building out the infrastructure to support a national geographic footprint for our brand operations. We expect that our capital expenditures in 2023 will approximate $140 million, and our guidance assumes our current level of outstanding common shares and no deterioration in the current economic environment. This concludes our prepared remarks, and we would now be happy to answer any questions that you might have. Thank you. If you would like to register a question or comment, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. One moment, please. The first question comes from Andrew Steinerman of J.P. Morgan. Please go. Hi, good morning. It's Andrew. Good morning. I have two questions. One, would you be willing to quantify for us the merchandise amortization drag in the fourth quarter and assumed in 2023? Then I have a second question. You were very good at going over the key initiatives and, you know, what's driving fiscal year 2023 spend. Could you just tell us how much spend there should be, and meaning in terms of investments in the key initiatives past 2023? Let me start with the key initiatives, and then I'll turn it over to Shane. From a key initiative standpoint, as I talked about 2/3 of the key initiative cost this year will be related to completing or mostly completing our CRM systems rollout. A lot of that will fall off as we get into 2024. The other large chunk of 2023 initiative cost is related to ERP system. As we get to 2024, the ERP system will transition more from the design phase into a build and implementation phase, where more costs will likely be capitalized in 2024 than 2023. I'm getting ahead of myself a little bit, but there'll probably be some less direct cost initiative costs that are going through the P&L in 2024 than 2023. We do expect, in short, for 2023 to be the high watermark of initiative costs going through the P&L, although in 2024 and 2025, as we continue to work through our ERP, there will be higher levels of capitalization related to that initiative. Hopefully that sort of makes sense, Andrew. Yep. Yep, sure. I'll turn it to Shane on the merchandise. Yep. So as it relates to the merchandise drag for both the fourth quarter as well as we look into 2023. Yeah, when I take a look at the fourth quarter, carving out the actual amount related to merchandise amortization, I don't think it's as meaningful when I compare to the prior year, just because some of the disruption that we were still incurring at that point in time. What I will say is that as you can see from my comments, my energy drag during that quarter was about 110 basis points, and my merchandise amortization headwind exceeded that, right? It was a significant item. As we look into next year, my merchandise amortization is the largest headwind that we're seeing, and the expected headwind there is about a point to our margin. Again, a lot of the things that Steven had articulated in his prepared comments are continuing to impact our merchandise amortization. As that ramps throughout the year, it's carrying into 2023. Okay. Thank you. A couple other quick comments there, Andrew, on the merchandise. As Shane talked about, it's really being impacted, and I said it in my prepared remarks, it's a combination of higher cost of merchandise and more being placed in service, as well as some of the older tranches related to the pandemic time, that are dropping off that represented much lower merchandise being placed in service, particularly for some of our longer life garments, in the FR, flame-resistant area, that lasts 24 months. You're just still having some of that natural build going on during 2023. Right. If you don't mind, Steven, I'm just gonna ask one quick follow-up. Sure. When you think about 2024, the CRM system being in place for all of U.S. Laundry by the end of 2023, just talk about the benefits that you expect from the new CRM system as we, you know, go a year out? Yeah. I think one of the things we've always talked about, and it actually ties back to merchandise, is continued improvement of merchandise controls. Obviously, we're already starting to see some of the benefit. Maybe it's a little more intangible on our team, shorter hours for the route drivers, you know, more ability to provide automation and transparency to the customers. So the route efficiency of the route day has improved quite a bit as we deploy. Now some of that's being offset, but there's a lot of learning and change going on from our old system. But we expect that to really help once they have sort of, in many cases, a full year of the new system under their belt and really start taking advantage of the benefits. Okay. Thank you. Appreciate it. Thank you. Thank you. The next question comes from Andy Wittmann of Baird. Please go ahead. Yeah, great. Good morning, guys. I guess I wanted to talk about cash flow a little bit here. A couple things. Could you just talk about the reasons behind the working capital investment this past year in 2022 being higher than normal? And if you expect in 2023, if you could just give us kind of the net of what you're expecting, maybe a range on free cash flow. You gave us kind of the components here, but maybe there's a working capital draw-down that you'll be able to pick up next year. Wanted to just get your sense of what a reasonable range of free cash flow for 2023 might be. As we look into 2023, our expectations, clearly in 2022, we had a significant amount of working capital needs for the business. When you take a look at those relate to, I guess first and foremost, our merchandise in service. We've been talking about our merchandise amortization ramping. As we put more products into service, you can see the adjustment and the investment reflected on our balance sheet. During 2023, our expectation around that is that it will be more normalized and less significant than it was in 2022. We also have elevated accounts receivable balances, and some of that relates to the deployment of our system as we continue to work through some of that change management, etc. One of the things that I had mentioned last quarter was we had deferred some FICA payments under some of the stimulus related to the pandemic that we had to pay back last year. Again, our expectations coming into 2023 is that there's gonna be significantly less working capital needs of the business compared to 2022. Not necessarily forecasting that there's going to be a draw-down, which is going to result in a cash infusion. When we take a look at our expectations around free cash flow, it's probably around $75 million, right? That's obviously still being impacted by the investment in our initiatives and our current profitability, as well as the elevated capital expenditures that we're expecting as we advance some of these initiatives. There's another FICA payment coming here in the next couple of months too, Shane? Is that right? The second half of that payment is expected in December of this year, yes. How much was that again? It's a little over $12 million. Yeah. Okay. Maybe Steven, as my follow-up, can you talk about price-cost dynamics? When do you feel like you're gonna be able to get on the right side? Is the guidance for the year that you gave here for, like, the Core Laundry segment margins, is that kind of down a little bit in the front half of the year, and then you think in the second half of the year that margins can start comping positively? I guess I'd like to hear a little bit more about that and any initiatives that you've got going on price, whether it's fuel surcharges or anything like that, would just be helpful context for, I think, for us all to know. Yeah. I think what you said about the trajectory of the margin during the year is somewhat embedded into our forecast. I think when you look at the environment, again, you know, we're forecasting sort of current status quo. I think, you know, I sorta made this comment in my prepared remarks. We're seeing some signs that certain things may be reducing, certain freight costs, certain even some raw material costs, potentially. Now, some of those may not take hold till later in the year. You think about supply chain, buying fabric and things like that. There's sort of a long cycle of that before you start to see it in your merchandise amortization. We're hopeful that some of that stuff starts to take hold later in the year, and you start to see some turnaround there. From a price environment perspective, I mean, I think we continue to do multiple things. You talked about fuel surcharges to try to stay on top of the situation, and we'll continue to do that. I think our customers have worked with us well through the environment, and it's just an ongoing effort as we work through the dynamic environment, right? You talk about fuel. It goes down, it goes up. We're really trying just to evaluate what makes sense as we go forward, and we build that strategy for 2023. Yeah, Andy, the only thing that I would add to that is, back to your margin question as it relates to the quarters. We've mentioned this before that the profitability of our quarters has some seasonality to it, with oftentimes our first quarter being more profitable and our second quarter being, you know, our least profitable. Again, back to Steven's comment about the trajectory, I would say that trajectory is the quarterly comparisons to the comparable prior year period. Meaning the, I guess, the momentum or the improvement that we're seeing is really the delta between the current or any individual quarter and the prior year comparable, if that makes sense. Right. You're basically saying the year-over-year margin change will be potentially more negative in the earlier quarters, and then hopefully turn more positive, in the second half of the year. I think that's. That's exactly right. Kinda what you were just trying to say. Yeah. Okay. Exactly. All right. I think I'll. I'm glad you were able to get it. I'll leave it there, guys. Have a good day. Thank you. Thank you. Thank you. The next question comes from Jack Boyle, Northcoast Research. Please go. Good morning, everyone. Thank you for taking my questions. Sure. Just real quick, I have a question here. You guys are great on answering some of the seasonal cadence here. Just have a question about stabilizing the margins. Is there, you know, in terms of continuing to grow the revenue, do you guys believe that is there any type of minimal revenue growth that you guys believe that you would need to attain or continue attaining to stabilize the margins or improve them? Yeah, it's a good question. I mean, we've obviously been through a period of higher growth here over the last year or so, tied to the inflationary environment. You're right. You have to continue to keep that top line momentum, say beyond the periods that you know the higher inflation takes hold. Let's say things slow down a bit, and we're back to more of a normal operating environment. Yeah, we still have to be pushing growth towards the mid-single digits to get those margins to recover, right? You're not gonna really be able to do a low single -digits growth and improve the margins. The one thing I will say is that, there are a number of sort of counter-cyclical influences of our costs when the business does slow down. Like some of the things we're talking about with fuel. If we went into, you know, somewhat of a slowdown, and you have to be careful because no one wants a deep recession, right? But obviously, what's going on now is trying to cool the economy appropriately, I guess. Sometimes that can help our costs because I talked about merchandise being placed in service. When you think about how we put merchandise in service with our customers, the more our customers are adding employees, the more garments we're putting in service, and there's sort of an upfront cost associated with that. The more turnover there is among our customers' employees, which a lot of companies are experiencing elevated turnover in this environment, there's more merchandise placed in service. That being said, to answer your real question, you do need to maintain some healthy growth to continue to move the margins in the right direction. As we move past the true inflationary period, it'll be back to that core of selling retention and making sure we're getting appropriate pricing along the way. Very good. Just as a quick follow-up to your merchandise comment there, are you guys seeing any kind of elongation in how long you're having to store that merchandise? Is there any change in the length of the sales process? No, I would say no. I think we continue to work on utilizing our used garments, which is a key part of improving our profitability. Quite frankly, as we move into our ERP systems project, one of the key areas of focus is improved utilization of used inventory across our locations. No, I wouldn't say we're seeing a significant change there. Very good. Thank you. Thank you. Thank you. As a reminder, via the phone lines, you may press the one followed by the four on your telephone keypad to register a question or comment. The next question comes from Tim Mulrooney, William Blair. Please go ahead. Yeah. Good morning, Shane. Steve. Morning. Two quick questions from me. Thanks. Yeah, can you talk about trends in new customer account growth? I'm you know assuming that add stops with customers is still okay given that unemployment you know remains so low. But I'm thinking maybe where you'd start to see signs of macro weakness first might be with new customer leads. If you could just comment on you know how that's trended over the last quarter. Yeah, no, I would say new customer wins continues to be very solid. I mean, for the full year, we sold more new business than we did in fiscal 2021. I think that trend was reasonably consistent over the back half of the year. I wouldn't say we're seeing a slowdown there. In a typical environment where we do start to see economic slowdown, it really does show up typically in the wares first. Now, this environment might be a little different, right? This is sort of the dynamic where people are expecting a slowdown with the higher interest rates, but hiring is still pretty good, unemployment's still very low. You're right. We have not seen that real slowdown or pullback in wearer levels. That is our normal indicator that the slowdown is coming. But obviously we're keeping a sharp eye open for it, and is something that I'm sure will be a factor eventually during the year, one way or another. Right. No, that's helpful. The way I should think about it normally is you actually do see it in that ad stop first, but given this type of environment, it might be different this time around. Maybe I'll ask you about it again next quarter. Yep, absolutely. When you think about the last 15 years, the recession 2008, 2009, we certainly saw it in the wearers first. I would say the other time we saw wearers pull back was when energy sort of tanked in 2015, 2016. After the many years of an energy boom, we saw some wearers pull back pretty quickly. Yeah, it's usually our leading indicator. That's great. Thank you. Just as my follow-up, I wanted to ask about just if labor availability, you know, has eased at all in recent months. We've heard from some folks that the labor environment's gotten a touch better, while others say it's just as difficult as it's ever been, all year. Curious to hear your thoughts as it relates to, you know, maybe both your route drivers and your production plant workers. Thank you. Yeah, no, great question. I think I'd say our experience is very consistent with what I've been sort of reading in the broader economy, which is we are seeing more applicants. We are better staffed today than we were six to nine months ago, there's no question, on both the route driver and the production side. I will say turnover was not really better in the fourth quarter, though. Turnover continues to be high, but we're seeing improvement in the ability to fill those positions and find applicants. I think you're it seems very consistent with what I'm seeing from other companies. There's a little bit of an improvement in the ability to find people. Okay. That's very helpful. Thank you. Thank you. Thank you. That was our final phone question. I'll turn the call back over for any closing remarks. Yeah. I'd like to thank everyone for joining today, for our fourth quarter results, and we look forward to speaking with you again in January when we expect to be reporting our first quarter performance. Thank you all, and have a great day. Thank you. This does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a good day.