Greetings, and welcome to the UniFirst Corp third quarter earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer 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 an operator, please press star 0. I would now like to turn the conference over to Steven Sintros, President and CEO. 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. We'd like to welcome you to the UniFirst Corporation conference call to review our third quarter results for fiscal year 2023. 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 Form 10-K and 10-Q filings with the Securities and Exchange Commission. We are pleased with our strong top-line performance in the quarter and continue to be excited about a number of key areas of investment in our company. As always, I want to thank our over 14,000 team partners, who continue to always deliver for each other and our customers as we strive towards our vision of being universally recognized as the best service provider in our industry. Profits in the quarter, compared to our expectations in our Core Laundry Operations, were negatively impacted by significantly higher healthcare claims than we had forecasted, driven primarily by one very large claim, as well as expenses in the quarter related to a legal matter. In addition to the impact of these discrete items in the quarter, the margins of the Core Laundry Operations continue to be pressured by higher operational costs, which are being impacted by the inflationary environment. We will continue to manage costs in areas we can control, while assuring we don't impact our 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 into the UniFirst family. Our consolidated profits were positively impacted by record revenues and profits from our Specialty Garments segment. As a reminder, our Specialty Garments segment is made up of both our nuclear and cleanroom operations. Our cleanroom division continues to show steady growth and profitability, which we expect to continue as we move forward. As we have mentioned over the years, our nuclear division's results can be more volatile based on the impact of certain projects, as well as swings in activity with some very large customers. I would also like to report that the early days of our recently closed acquisition of Clean Uniform have been very constructive, with initial efforts being focused primarily on retaining Clean's most important assets, its people and its customers. We continue to be excited about the strength and quality of the Clean business and what we continue to believe the combined companies will be able to achieve in the markets we serve together. As we discussed last quarter, due to the strong leadership and service reputation that Clean brings with it, as well as the complexities of where we are from our technology transformation, we will be strategic and patient in the integration of the two businesses. We also continue to be focused on and pleased with the progress of our two large technology initiatives designed to transform the company in terms of overall capabilities and competitive positioning, excuse me. These initiatives are the rollout of our new CRM system and a corporate-wide ERP system. As we have discussed, we continue to be focused on making long-term investments in our business, designed to accelerate growth and profitability, as well as ensure we are providing industry-leading services for years to come. Just as a reminder, up until the second quarter of this year, we had reconciled the impact of these initiatives, in addition to our largely completed brand transformation, out of our operating results, so investors could get a better perspective of our performance, excluding these costs related to these large transformational projects. Based on new guidance provided by the SEC regarding non-GAAP financial measures and a comment from the SEC in a recent SEC comment letter, we modified our disclosure and are no longer providing adjusted operating results excluding these costs. We will, however, continue to provide disclosure and quantification of these initiative costs so investors can clearly understand the impact that they are having on our overall results and profitability. We will also be disclosing any significant direct costs that we incurred or will be incurring related to the closing and integration of the Clean acquisition. To further assist investors in understanding trends in our operating results, we have also begun this quarter to disclose EBITDA by segment. We believe this is especially valuable as we move forward due to the increase in non-cash intangibles amortization that we will be incurring as a result of the Clean acquisition. With respect to our CRM systems project, we are making good progress deploying our new system in line with our internal schedule. As of today, we continue to be on track with having nearly 100% of our U.S. Core Laundry locations deployed by the end of fiscal 2023. Over the remainder of fiscal 2023, we will also continue to be focused on the global design phase of our ERP project. The implementation of our new Oracle Cloud system will be a multi-year initiative designed to transform our overall supply chain and procurement capabilities, as well as provide an overall technological foundation for growth and efficiency. Overall, we continue to be excited about how these investments will position the company for future success. We also remain very focused in the near term on doing all we can to manage the margin and cost challenges that we have been experiencing. With that, turn the call over to Shane, who will provide more details on our third quarter results. Thanks, Steve. In our third quarter of 2023, consolidated revenues were $576.7 million, up 12.7% from $511.5 million a year ago. Consolidated operating income decreased to $33.4 million from $33.7 million, or 0.9%. Net income for the quarter decreased to $24.3 million, or $1.29 per diluted share, from $25.1 million, or $1.33 per diluted share. As Steve discussed, due to the increase in non-cash intangibles amortization that we will be incurring as a result of the Clean Uniform acquisition, we will begin including EBITDA in the discussion of our financial performance. Consolidated EBITDA increased to $64 million, compared to $60.3 million in the prior year, or 6.3%. Our financial results in the third quarters of fiscal 2023 and 2022 included approximately $8.4 million and $11.4 million, respectively, of costs directly attributable to our three key initiatives: the CRM, ERP, and branding initiatives. In addition, we incurred costs related to the acquisition of Clean Uniform during the third quarter of fiscal 2023 of approximately $0.7 million. The effect of these items on the third quarter of fiscal 2023 and 2022 combined to decrease operating income and EBITDA by $9.1 million and $11.4 million, respectively, net income by $6.8 million and $8.4 million, respectively, and EPS by $0.37 and $0.44, respectively. Our Core Laundry Operations revenues for the quarter were $501.7 million, up 11.5% from the third quarter of 2022. Core Laundry organic growth, which adjusts for the estimated effect of acquisitions as well as fluctuations in the Canadian dollar, was 7.8%. This strong organic growth rate was primarily the result of strong pricing efforts over the last year to share with our customers the cost increases that we have incurred in our business due to the ongoing inflationary environment, as well as continued solid sales performance. Core Laundry operating margin decreased to 4.2% for the quarter, or $21 million, from 5.9% in prior year, or $26.4 million, and the segment's EBITDA margin decreased to 9.9% from 11.4%. The costs we incurred related to our key initiatives and the Clean acquisition were recorded to the Core Laundry Operations segment and combined to decrease the Core Laundry operating and EBITDA margins for the third quarter of fiscal 2023 and 2022 by 1.8% and 2.2%, respectively. Excluding these items, the segment's operating and EBITDA margins were also impacted by high healthcare claims expense, which exceeded prior year by approximately $4 million, and costs we incurred in the quarter related to a legal matter of approximately $1.3 million. Margins continued to be pressured by higher merchandise and other operating costs as a% of revenues, which are being impacted by the inflationary environment. The preliminary purchase accounting for the recent Clean Uniform acquisition further impacted the segment's operating margin, most notably in the form of elevated non-cash intangibles amortization. Partially offsetting these headwinds were lower energy costs during the quarter, which decreased to 4.3% of revenues in the third quarter of 2023, down from 5.2% in 2022. The previously announced acquisition of Clean Uniform, which closed on March 13th, 2023, contributed to the Core Laundry Operations operating results for the quarter, approximately $20 million of revenue, a nominal operating loss, and approximately $3 million to the segment's EBITDA. Revenues from our Specialty Garments segment, which delivers specialized nuclear decontamination and clean room products and services, increased to $49.4 million from $41.2 million in the prior year, or 19.9%. This increase was primarily due to strong growth in our cleanroom operations and increased project work in our North American nuclear operations. Segment's operating margin increased to 25.2% from 17.4%, primarily the result of its strong top-line performance. Segment's operating performance from both a top-line and profitability perspective was very strong and exceeded our expectations. Our First Aid segment's revenues increased to $25.5 million from $20.3 million in prior year, or 25.8%. However, the segment had an operating loss of $0.1 million during the quarter. These results continue to reflect our investment in expanding the First Aid van business and building a foundation for what we expect to eventually be a much larger business. At the end of our third fiscal quarter, we continued to reflect a solid balance sheet and financial position, with no long-term debt and cash equivalents, and short-term investments totaling $69.3 million. We did not repurchase any additional common stock under our current stock repurchase program during the quarter. Cash provided by operating activities for the first 3/4 of the year increased to $142.8 million, compared to $88.8 million in the prior year, primarily due to lower working capital needs of the business. We continued to invest in our future with capital expenditures during this period of $124.1 million and the acquisition of five businesses, for which we paid $306.2 million, the most significant being the Clean Uniform acquisition for a purchase price of $300 million. We now believe that our capital expenditures for the year will be between $155 million and $160 million, due to a number of large facility projects we have been advancing throughout the year. I'd like to take this opportunity to provide an update on our outlook. At this time, we expect our full year consolidated revenues will be between $2.22 billion and $2.23 billion, primarily as a result of the strong top-line performance in the Specialty Garments business. We continue to expect diluted earnings per share to be between $5.02 and $5.37, which currently reflects reduced Core Laundry operations, operating and EBITDA margins at the midpoint of the range of 4.7% and 10.5%, respectively, resulting from more modest revenue expectations for the remainder of the year and the impact of the cost pressures we continue to experience in our current quarter. The impact of the strong profitability in the Specialty Garments business in the current quarter, as well as improved expectations for the remainder of the year, and an estimate of $37 million of costs directly attributable to our key initiatives, and $3 million of Clean-related acquisition costs, which combined to decrease the Core Laundry operations' operating and EBITDA margin assumptions by 2.1%, and EPS by $1.60. Our revised guidance now assumes an effective tax rate for fiscal 2023 of 25.75% and does not assume any future share buybacks or unexpected, significantly adverse economic developments. This concludes our prepared remarks. We would now be happy to answer any questions that you might have. If you would like to register for a question, 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 1 followed by the three. Once again, please press one, four to register for a question. Our first question is coming from the line of Andrew Wittmann with Baird. Please go ahead. Yeah, great. Thanks for taking my questions. Good morning, guys. Good morning. I guess I just want to dig into the margins a little bit more here. That's a really big step up for the quarter on healthcare. $4 million is not insignificant. It sounds like it's more of I mean, you guys self-insure up to a pretty high level, so when things, episodic things happen, you have to bear that cost in the period. Is there anything related to the plan here, Steve, that has changed that you would expect that the healthcare card costs would remain high like this? Really, is this just unfortunate circumstances that arose during the quarter? I would say it's really unfortunate circumstances. When you look at just, the last couple of years, healthcare costs declined during the pandemic. There was some bounce back after that. We really, over the last six to, you know, six to eight quarters, sort of seen a flattening of the healthcare costs, pretty predictable. This quarter, driven primarily by one claim that was, over a couple million dollars, which was, to be honest, the largest claim we've seen in the last. W ell, maybe ever. It was really, to answer your question, we think extraordinary circumstances. There's nothing in the trends we've seen up until this point or in the plan changes or anything like that would indicate, a step up. Got it. Okay. I mean, I guess the other way of kind of digging into the margins here is if you think about the benefit that you had from fuel, it kind of offsets the same amount that you had penalizing you, I guess, on the healthcare. But margins were down a decent amount year-over-year. You talked about kind of other items. You mentioned merchandise. I guess maybe if you could just give a little bit more commentary on other things in the P&L, maybe their magnitudes. I always ask about labor and merchandise in particular, but maybe if you could talk about those and any other factors that you think might be worth calling out inside the P&L. Sure. I can give some additional commentary on that. Aside from, to your point, the two items that we called out, the health and the legal matter, were largely offset by the benefit that we were seeing in energy year-over-year. The largest item outside of that impacting our margins are the item that we've sort of been talking about for a number of quarters, and that would be our merchandise expense. In the quarter, we saw about a point of headwind related to merchandise. Clean and their profitability, I had mentioned the fact that there was a nominal loss related to their operating results in our operating income, was about 30 basis points as well. Outside of that, right, like, there were just a number of areas that we saw some cost headwinds as a percentage of revenues. Across a number of different payroll areas, obviously, the effect of the challenging wage environment over the last year. Inflation also impacting some of those other cost areas, probably most notably in the costs that we're incurring related to the running of our processing facilities. Those really are the most significant items that are impacting the margin in the quarter. Just to add to that, Andrew, many of those were anticipated. Part of the way we certainly look at the breakdown of the quarter is what did we anticipate and what didn't we? For the most part, the health, excuse me, the energy benefit was anticipated. Most of the merchandise headwind was anticipated, although it was a bit higher than we had built in. Shane mentioned a number of these other areas that maybe were a little bit more unanticipated or higher than we expected. I didn't want to give you the impression that the merchandise headwind, which was the largest piece, was largely unanticipated, because for the most part, the core merchandise amortization was within our expectations. That makes sense. I guess just final one on this. What is the net, Shane, I know your purchase accounting is probably not totally complete, but last quarter, you had an estimate about what the intangible amortization was going to be in that. Can you just talk about what the quarterly impact is as it stands currently from the intangible amortization related to Clean, so that we have that? Yeah. If you take a look at the impact of the on my EBITDA related to the Clean acquisition, it was about $3 million. The operating loss was nominal, so the depreciation and amortization was just a little over $3 million, and about $2.3 million of that was intangibles amortization. Okay. Just to follow up on that, Andy, that's obviously not a full quarter based on where we acquired, so it'll be a little higher than that in the fourth quarter. Yeah. you sort of. [crosstalk]The full quarterly run rate prep of more like... Sorry. Go ahead. Oh, no, I was just going to say, you had sort of prefaced your question with it, but I will caution, we are still early in the purchase accounting process, so we will be refining those over the next 3/4. The fully loaded quarterly run rate should be closer to, like, $3 million on a before Clean versus after Clean run rate for the intangible amort. Is that about the right way to think about it? Take the $2.3 partial quarter up a little bit. Yep, that's about. Yep, I think you're in the ballpark. Yep. Okay. All right, I will leave it there for now and yield the floor. Thanks for the color here, guys. Thank you. Thank you. Our next question is coming from the line of Tim Mulrooney with William Blair. Please go ahead. Hey, guys, this is Sam Karlov on for Tim. Thanks for taking my question. Sure. Can you talk about what you're seeing in regard to customer behavior? Have you seen any pockets of strength or weakness begin to emerge across any particular geographies or end markets? I think it's been a pretty stable environment across our employee base. I didn't talk a lot about sales in the quarter, but the sales environment has still been pretty productive for us. From a wearer level, we still see sort of what we had talked about last quarter, pretty good stability. So we're not seeing nothing to speak of by geography or industry that I would say are particularly positive, nor negative at this point, based on your question. Okay, thanks. Then a follow-up. In terms of pricing, can you just remind us where pricing is at today, relative to historical standards? Does it remain elevated, related to historical levels? Yeah, I would say absolutely. You know, the pricing that we've had to work through, and our competitors as well, in the market, would say that pricing is up some over the last 2 years. As we've talked about before, it continues to be a very competitive industry. Competition for new accounts is still very strong. Overall, yes, the market is still accepting some pricing. Although, you know, as we've said before, I think as some of the inflationary factors start to moderate, that may become a bit more challenging. Based on, you know, our commentary, we're still seeing on the input side, you know, the impact of that inflation. I think the pricing environment is still productive, and I would say pricing is certainly elevated as an overall customer base compared to a couple of years ago, for sure. Okay, thanks. Thank you. Our next question is coming from the line of Andrew Steinerman with JP Morgan. Please go ahead. This, this might be an old question, but separate from pricing, could you just remind us about the fuel surcharge? I do think UniFirst charges a fuel surcharge when, you know, gas is up and stops when it's down. Just remind us, when did the fuel surcharge go into effect? Has it sunsetted now? You know, what's that kind of, you know, revenue impact? 'Cause, you know, once you sunset that's a, you know, that's a drag. To give you some color there, Andrew, about, I guess it was a little over a year ago now, when fuel sort of spiked to almost $5 a gallon nationally, we did put in an incremental fuel charge, which has been partially rolled back during the course of this year as fuels moderated. Fuel still remains elevated from a few years ago, so we maintain a portion of that. It has caused some portion of the, say, organic revenue decline. I'd be hesitant to kind of quantify it totally because there's a number of things, obviously, that impact pricing over time. That's the timing of when it went in, and we have seen some rollback. Right. Could you just mention, like, when was some of the... You said it went in around a year ago. When was some of the rollback? Is it at a certain time? It was believe during our second quarter, primarily. Okay, thank you. Thank you. Our next question is coming from the line of Kartik Mehta with Northcoast Research. Please go ahead. Yeah. Hey, good morning. Steve, maybe just on attrition. You know, we're starting to see some bankruptcies increase on the SMB side, I'm wondering, as you look at your customer base, what you're seeing from an attrition standpoint today versus maybe a year ago? We have seen a tick up in our, what we consider overall lost accounts, over the last several months. You know, sort of digging into that detail a little bit, I can't say definitively here, whether it's been because of more out of businesses or so on. As we do business with many small businesses, it's still the biggest portion of our customer base. Out of business situations has always been a decent% of our attrition. You could probably make that connection, but we have seen some tick up in attrition over the last few months. What about, from a add stop metric, just job openings? It seems like there are a lot of job openings, it also seems as though companies have maybe pulled back a little bit on the hiring. You know, if you kind of look at what you see in terms of job openings at your customers, versus what you're seeing in terms of add stop metrics. Yeah, we would still view that as pretty stable. I'm not sure I would say that there's a dramatic difference from 3 months ago on what we're seeing there. We are hearing a little bit more anecdotally, some caution from our customers, but I still believe, and you see this in some of the job numbers, that because of the difficulty hiring in the last, you know, year to 18 months, people have been hesitant to ratchet back on those blue-collar employees that wear our uniforms, and so we're still seeing reasonably healthy wearer levels. Perfect. Kartik. The only thing I was gonna add as it relates to the, our customer retention. During the pandemic, and even the couple of years subsequent to that, our retention levels had trended favorably. I just want to make sure that we're not indicating that our customer retention levels are lower than they maybe were in the period that preceded the pandemic. At this point in time, our retention is sort of trending back closer to the experience that we had pre-pandemic. Okay, that seems logical. Just one last question on your ERP implementation. Obviously, I'm sure you've received some benefits, but once it's 100% installed, where do you anticipate the initial benefits? Maybe if it's possible to quantify it, if it's from an expense side or you know, the level of a benefit you anticipate. Just to clarify, the two large initiatives on the technology side, we've kind of bifurcated between CRM and ERP. CRM is the one that we have made a lot of progress, and we are mostly deployed. The ERP, we're still in the earlier stages, and it'll be over multiple years before we sort of are fully installed on the ERP side. I think your question is probably more relevant on the CRM side. What I would say there is, you know, as we've deployed the CRM system over our locations over the last,... you know, year and 1/2 or that, you know, the locations that have been on it the longest are starting to kind of hit their stride in terms of optimizing the new system and being comfortable with the new technology and some of the changes that were made. There's still some work to be done as newer locations are deployed. There's a lot of training, there's a lot of data conversions, a lot of, you know, there is some distraction. I think over the course of the next year, as everyone's been on the system for a bit, we'll start to see more of the benefits, but nothing really more there to specifically quantify at this time. All right. Thank you, both. I really appreciate it. Thank you. Thank you. As a reminder, to register for a question, please press the one followed by the four. Our next question is coming from the line of Josh Chan with UBS. Please go ahead. Hi, good morning, Steve and Shane. Thanks for taking my question. Good morning. Good morning. Hi. Yeah, I was wondering if you could talk about the trajectory of inflation that you're seeing. I realize you can't predict the healthcare and legal costs, but, you know, wonder what you're seeing in terms of material, labor, production, inflation. Are you at the point of seeing any moderation in inflation in any of those areas? Yeah, I think when you, when you break down and get to the core of inflation, certainly compared to a year ago, the cost of all those categories you mentioned are still higher. I would say that there is some moderation occurring, and you, and you read about some of it. Certain supply chain, freight costs, you know, overseas freight, some raw material costs we're starting to see come down. I think it's, it's slow, and there still are other vendors and inputs we use that, you know, have been experiencing higher costs in their business, including labor, you know, we're not really seeing a moderation of. I think it's a little bit of a mixed bag right now, but moderation is probably the right term. We're not seeing things continue to inflate at the same rate as they did over the last year, but we're still experiencing some of those higher costs, and many of them certainly have not taken a step back. Right. Yeah, that's a really helpful color. Thanks for that. I guess, as we look into 2024, you know, I guess, could you talk about the different margin moving pieces? You know, it sounds like inflation is still going to be a headwind, but, you know, you might get some benefits from the CRM side. How, how do you think about margins in 2024 setting up versus where you finish in 2023? Yeah, I think certainly we'd probably stop short of really making too many predictions. As you know, over the course of the summer, we'll be going through kind of our heavy budgeting and forecasting process. You know, I will just kind of point to the commentary I made in the call about, you know, we're very focused right now on turning the tide on the margin trajectory. You know, we have a number of things we're focused on, and we're hopeful, with that focus and continuing to try to do what we need to do to optimize pricing, as well as control our inputs, that will be able to move things in the right direction. At this point, we're not positioned to make specific commentary. Okay, that sounds good. I guess the last one from me is more of a clarifying question. I think Shane, you mentioned in the outlook, a more modest revenue expectations in Core Laundry, if I heard that right. Is that just because of the year-over-year comps getting tougher, or is there anything to call out there in terms of revenue in Core Laundry? Yeah, I'll take that one. I think we made some commentary that our attrition had ticked up a bit. I think some of it is the year-over-year comps becoming tougher. I think there's a little caution there in terms of the revenue trajectory. New sales continue to be strong, I don't think it's on the new sales side, we are just seeing a little softness in some pieces of it, some due to attrition. Okay, perfect. Thanks for the color, and thanks for the time. Thank you. As a reminder, please press 1, 4, if you'd like to register for a question. Just one moment, please. At this time, there appears to be no further questions. I'd like to thank everyone for joining us today to review our results. We look forward to speaking with you again in October, when we expect to be reporting on our fourth quarter performance, as well as providing further outlook for our fiscal 2024. Thank you, and have a great day. That does conclude the conference call for today. 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