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Vestis Corp (VSTS)

CIK: 0001967649. SIC: 5190 Wholesale-Miscellaneous Nondurable Goods. Latest 10-K as of: 2025-12-02.

SIC breadcrumb: Wholesale Trade > Wholesale Trade - Nondurable Goods > SIC 5190 Wholesale-Miscellaneous Nondurable Goods

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1967649. Latest filing source: 0001628280-25-054597.

Selected Fundamentals

MetricValueUnitFYFiled
Revenue2,734,839,000USD20252025-12-02
Net income-40,223,000USD20252025-12-02
Assets2,906,900,000USD20252025-12-02

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2025-12-02. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001967649.json. Derived margins are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Missing metrics are omitted rather than fabricated.

Metric20212022202320242025
Revenue2,687,005,0002,825,286,0002,805,820,0002,734,839,000
Net income141,679,000213,158,00020,970,000-40,223,000
Operating income192,243,000217,909,000157,951,00064,431,000
Diluted EPS1.081.630.16-0.31
Assets3,157,124,0002,932,387,0002,906,900,000
Liabilities2,279,764,0002,029,336,0002,041,256,000
Stockholders' equity2,331,985,0002,335,812,000877,360,000903,051,000865,644,000
Cash and cash equivalents36,051,00031,010,00029,748,000
Net margin5.27%7.54%0.75%-1.47%
Operating margin7.15%7.71%5.63%2.36%

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001967649.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

QuarterEnd DateRevenueNet IncomeDiluted EPSMethod
2024-Q22023-12-2912,266,000reported discrete quarter
2024-Q12023-12-29717,923,00012,266,0000.09reported discrete quarter
2024-Q32024-03-295,965,000reported discrete quarter
2024-Q22024-03-29705,368,0000.05reported discrete quarter
2024-Q32024-06-28698,248,0000.04reported discrete quarter
2024-Q42024-09-27684,281,000-2,298,000derived Q4 = FY annual - nine-month YTD
2025-Q12024-12-27683,780,000832,0000.01reported discrete quarter
2025-Q22024-12-27832,000reported discrete quarter
2025-Q22025-03-28665,249,000-0.21reported discrete quarter
2025-Q32025-03-28-27,830,000reported discrete quarter
2025-Q32025-06-27673,799,000-0.01reported discrete quarter
2025-Q42025-10-03712,011,000-12,549,000derived Q4 = FY annual - nine-month YTD
2026-Q22026-01-02-6,391,000reported discrete quarter
2026-Q12026-01-02663,388,000-6,391,000-0.05reported discrete quarter
2026-Q22026-04-03659,437,0000.02reported discrete quarter

Quarterly Charts

Macro Cross-References

Latest quarter (10-Q)

Latest 10-Q source: 0001628280-26-033871.

Extracted between Part I Item 2 and the next Item 3/4 or Part II heading after HTML sanitization. Confidence: high. Filing date: 2026-05-12. Report date: 2026-04-03.

Item 2.    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 three and six months ended April 3, 2026 and March 28, 2025 should be read in conjunction with our audited Consolidated and Combined Financial Statements and the notes to those statements for the fiscal year ended October 3, 2025 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC") on December 2, 2025.

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 “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q.

All amounts discussed are in thousands of U.S. dollars, unless otherwise indicated.

Company Overview

We are a leading provider of uniforms and workplace supplies across the United States and Canada. We provide a full range of uniform programs, managed restroom supply services, first aid supplies and safety products, as well as ancillary items such as floor mats, towels, and linens 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. Primary methods of competition include product quality, service quality and price. Notable competitors of size include Cintas Corporation and UniFirst Corporation, as well as numerous regional and local competitors. Additionally, many businesses perform certain aspects of our product and service offerings in-house rather than outsourcing them to a third party and leveraging the benefits of full-service programs.

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 including managed 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. We also restock restroom supplies, first aid supplies and safety products as needed.

We manage and operate our business in two reportable segments, United States and Canada. Both segments provide uniforms and workplace supplies, as described above, to customers within their specific geographic territories.

Fiscal Year

Our fiscal year is the 52- or 53-week period which ends on the Friday nearest to September 30th. The fiscal year ended October 3, 2025, referred to as fiscal 2025, was a 53-week period and the fiscal year ending October 2, 2026, referred to as fiscal 2026, is a 52-week period.

Key Trends Affecting Our Results of Operations

We serve the uniforms, mats, towels, linens, restroom supplies, first-aid supplies and safety products industry within the United States and Canada. This includes businesses that outsource these services through rental programs or direct purchases, as well as non-programmers, or businesses that maintain these services in-house. We believe that demand in this industry is largely influenced by macro-economic conditions, employment levels, increasing

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standards for workplace hygiene and safety and an ongoing trend of businesses outsourcing non-core, back-end operations. As a result of the diversity of our customers and the wide variety of industries in which they participate, demand for our products and services is not specifically linked to the cyclical nature of any one sector.

Global events, including ongoing geopolitical events, have adversely affected global economies, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. While we do not have direct operations in regions currently experiencing conflict, including the Middle East and Eastern Europe, instability in these regions has contributed to increased volatility in global energy markets and broader economic uncertainty. For example, the ongoing tensions between the United States, Israel and Iran have resulted in disruptions to international shipping through the Strait of Hormuz, a waterway where approximately 20% of the world’s oil supply transits daily. These conditions have resulted in inflationary pressures, particularly in labor and energy costs, as well as fluctuations in foreign currency exchange rates. Elevated energy prices, including fuel and utility costs, could have a material impact, and may continue in the future to adversely impact our cost of operations given our route-based service model and processing facilities. In addition, these global macroeconomic conditions may impact our customer spending decisions. In response to increased energy costs during the second fiscal quarter of 2026, we have implemented an energy surcharge to help mitigate the impact on our operating results.

The extent to which these macroeconomic conditions and geopolitical developments will impact our operational and financial performance will depend on future developments, including the duration and severity of geopolitical instability, such as any ongoing or future closures of the Strait of Hormuz or other reductions or disruptions in global energy supply; governmental responses to inflation and trade policies; and our ability to mitigate cost increases through pricing actions and operational efficiencies. Many of these factors are outside of our control and remain highly uncertain.

On May 1, 2025, we amended our Credit Agreement. As part of the amendment, among other things, we agreed to restrict all dividends and share repurchases until the earlier of (i) any fiscal quarter ending after October 2, 2026 so long as we are then in compliance with the financial covenants and (ii) when we achieve a net leverage ratio below or equal to 4.5x as of the last day of two consecutive quarters through the end of fiscal 2026.

Our financial performance and a prolonged decrease in our stock price during fiscal 2025 resulted in a triggering event for a goodwill impairment test for both of our reporting units in fiscal 2025. While no impairment of goodwill was recognized in fiscal 2025, if our future operating results do not meet current forecasts or if we experience a sustained decline in our market capitalization that is determined to be indicative of a reduction in fair value of one or more of our reporting units within either of our segments, we may be required to record future impairment charges for goodwill.

Transformation and 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.

•Operational Excellence. Implementing a standardized operating framework across our 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.

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•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.

•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 began during the first quarter of fiscal 2026 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 $30 million to $35 million, with approximately $25 million related to third-party consulting and support, and up to $10 million in severance and related costs. During the second quarter of fiscal 2026, the Company recognized $9.3 million of third-party consulting fees and $1.0 million of severance costs related to the Company's business transformation. For the six months ended April 3, 2026, the Company recognized $17.1 million of third-party consulting fees and $6.5 million of severance costs related to the business transformation.

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 Three Months Ended April 3, 2026 compared with March 28, 2025

The following table presents an overview of our results along with the amount of and percentage change between periods for the three months ended April 3, 2026 and March 28, 2025 (dollars in thousands).

Three Months Ended

Change

Change

April 3,

2026

March 28,

2025

$

%

Revenue

$

659,437 

$

665,249 

$

(5,812)

(0.9

%)

Operating Expenses:

Cost of services provided(1)

485,752 

489,991 

(4,239)

(0.9

%)

Depreciation and amortization

34,568 

35,882 

(1,314)

(3.7

%)

Selling, general and administrative expenses

112,338 

147,946 

(35,608)

(24.1

%)

Total Operating Expenses

632,658 

673,819 

(41,161)

(6.1

%)

Operating Income (Loss)

26,779 

(8,570)

35,349 

(412.5

%)

Interest Expense, net

21,065 

22,329 

(1,264)

(5.7

%)

Other Expense (Income), net

3,203 

3,293 

(90)

(2.7

%)

Income (Loss) Before Income Taxes

2,511 

(34,192)

36,703 

(107.3

%)

Provision (Benefit) for Income Taxes

(85)

(6,362)

6,277 

(98.7

%)

Net Income (Loss)

$

2,596 

$

(27,830)

$

30,426 

(109.3

%)

______________________

(1)Exclusive of depreciation and amortization

Consolidated revenue of $659.4 million decreased $5.8 million, or 0.9%, for the three months ended April 3, 2026 compared to the three months ended March 28, 2025. The decline in revenue compared to the prior year

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted between Item 7 and the next Item 7A/8 heading after HTML sanitization. Confidence: high. Filing date: 2025-12-02. Report date: 2025-10-03.

Item 7.    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 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,” the “Business” section and elsewhere in this Annual Report on Form 10-K (“Annual Report”).

All amounts discussed are in thousands of U.S. dollars, except where otherwise indicated.

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Company Overview

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 accounts (based on unique customer identification numbers) 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. Primary methods of competition include product quality, service quality and price. Notable competitors of size include Cintas Corporation and UniFirst Corporation, as well as numerous regional and local competitors. Additionally, many businesses perform certain aspects of our product and service offerings in-house rather than outsourcing them and leveraging the benefits of full-service programs.

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 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 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, 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 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. We also restock restroom supplies, first aid supplies and safety products as needed.

We manage and operate our business in two reportable segments, United States and Canada. Both segments provide uniforms and workplace supplies, as described above, to customers within their specific geographic territories.

Separation from and Relationship with Aramark

On September 30, 2023 (the "Distribution Date"), Aramark completed the previously announced spin-off of Vestis (the "Spin-Off," or the “Separation”). The Separation was completed through a distribution of our outstanding common stock to stockholders of record of Aramark’s common stock as of the close of business on September 20, 2023. Aramark stockholders of record received one share of Vestis common stock for every two shares of common stock, par value $0.01, of Aramark.

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. 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 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.

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Combined Financial Statements

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. GAAP”) and pursuant to the rules and regulations of the SEC. 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. 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 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. We consider these allocations to be a reasonable reflection of the utilization of services or the benefit received. 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.

Our cash flows within the United States segment were transferred to Aramark regularly as part of Aramark’s centralized cash management program. Our cash flows within the Canada segment were reinvested locally. 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. 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. 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 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 that we collect on behalf of governmental authorities.

Costs and Expenses

Our costs and expenses are comprised of cost of services provided (exclusive of depreciation and amortization) (hereafter referred to as “cost of services provided”), depreciation and amortization and selling, general and administrative expenses.

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Cost of services provided includes the costs associated with the recurring pickup, processing and delivery of products to rental customers, the amortized cost of merchandise in service for the rental business, and the cost of products sold to customers through our direct sales offerings.

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 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, 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

The impact from foreign currency translation assumes constant foreign currency exchange rates based on the rates in effect for the prior fiscal year period being used in translation for the comparable current year period. We believe that providing the impact of fluctuations in foreign currency rates on certain financial results can facilitate analysis of period-to-period comparisons of business performance.

Fiscal Year

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

We serve the uniforms, mats, towels, linens, restroom supplies, first-aid supplies and safety products industry within the United States and Canada. This includes businesses that outsource these services through rental programs or direct purchases, as well as non-programmers, or businesses that maintain these services in-house. We believe that demand in this industry is largely influenced by macro-economic conditions, employment levels, increasing standards for workplace hygiene and safety and an ongoing trend of businesses outsourcing non-core, back-end operations. As a result of the diversity of our customers and the wide variety of industries in which they participate, demand for our products and services is not specifically linked to the cyclical nature of any one sector.

Global events, including ongoing geopolitical events, have adversely affected global economies, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. While we do not have direct operations in Russia and Ukraine or in Israel, conflicts in those regions further disrupted global supply chains and heightened volatility and disruption of global financial markets. 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

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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.

We continue to remain principally focused on the safety and well-being of our employees, customers, and everyone we serve, while simultaneously taking timely, proactive measures to adapt to the current environment. We continue to evaluate and react to the effects of a prolonged global disruption, including items such as inflationary pressures on product and energy costs and greater labor challenges. These challenges have continued to impact our business during fiscal 2025. Our actions to mitigate the effects of inflation in fiscal 2024 and fiscal 2025 included operating cost reductions, reductions in discretionary spending and reductions in our non-operational footprint, along with the implementation of targeted and strategic price increases under the terms of our customer contracts. We do not know whether we will be able to mitigate any future impacts of inflation with further increases in pricing for our goods and services. We continue to evaluate and react to take appropriate actions to mitigate the risk in these areas. 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.

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Results of Operations

Fiscal 2025 Compared to Fiscal 2024

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

October 3, 2025

September 27, 2024

$

%

Revenue

$

2,734,839 

$

2,805,820 

$

(70,981)

(2.5

%)

Operating Expenses:

Cost of services provided(1)

2,010,082 

1,989,872 

20,210 

1.0

%

Depreciation and amortization

143,017 

140,781 

2,236 

1.6

%

Selling, general and administrative expenses

517,309 

517,216 

93 

— 

%

Total Operating Expenses

2,670,408 

2,647,869 

22,539 

0.9

%

Operating Income

64,431 

157,951 

(93,520)

(59.2

%)

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 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

%)

______________________

(1)Exclusive of depreciation and amortization

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.

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

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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 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

October 3, 2025

September 27, 2024

$

%

Revenue

$

2,489,376 

$

2,555,922 

$

(66,546)

(2.6

%)

Segment Operating Income

154,011 

264,709 

(110,698)

(41.8

%)

Segment Operating Income %

6.2

%

10.4

%

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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Results of Operations—Canada Results

Fiscal 2025 Compared to Fiscal 2024

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

October 3, 2025

September 27, 2024

$

%

Revenue

$

245,463 

$

249,898 

$

(4,435)

(1.8

%)

Segment Operating Income

8,954 

8,162 

792 

9.7 

%

Segment Operating Income %

3.6

%

3.3

%

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

Overview

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 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-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.

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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. The applicable margin on the Term Loan B-1 was 2.25% during fiscal 2025.

The Company’s obligations under the Credit Facilities are guaranteed by the Company’s existing and future wholly owned domestic material subsidiaries, subject to certain customary exceptions. Borrowings under the Credit Facilities are secured by first priority liens on substantially all the assets of the Company and the guarantors, subject to certain customary exceptions.

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

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

October 3, 2025

September 27, 2024

Net cash provided by operating activities

$

64,229 

$

471,788 

Net cash used in investing activities

(19,817)

(73,636)

Net cash used in financing activities

(46,057)

(402,975)

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 $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 $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:

•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; and

•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;

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•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; and

•cash distributions to Aramark of $6.1 million.

Accounts Receivable Securitization Facility

On August 2, 2024, certain of our subsidiaries entered into a three-year $250 million accounts receivable securitization facility (the “A/R Facility”). Under the A/R Facility, Vestis Services, LLC (“Vestis Services”) and certain other wholly-owned subsidiaries (together with Vestis Services, the “Originators”) transfer accounts receivable and certain related assets (collectively, the “Receivables”) to VS Financing, LLC, a bankruptcy remote special purpose entity (“SPE”) formed as a wholly-owned subsidiary of Vestis Services, who in turn, may sell Receivables to one or more financial institutions party to the facility (“Purchasers”). Transfers of the Receivables from the SPE to the Purchasers are accounted for as a sale of financial assets, and those accounts receivable are derecognized from the consolidated financial statements. Other than collection and administrative responsibilities, the Originators have no continuing involvement in the transferred Receivables. The Receivables, once sold to the SPE, are no longer available to satisfy creditors of any Originator in the event of its bankruptcy. These sales are priced at the face value of the relevant accounts receivable less a fair market value discount. The A/R Facility is structured on a revolving basis under which cash collections from Receivables are used to fund additional purchases of Receivables. 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 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. Neither we (except for the SPE referenced above) nor the Originators guarantees the collectability of the Receivables under the A/R Facility. The Company controls and therefore consolidates the SPE in its consolidated financial statements. The A/R Facility is scheduled to terminate on August 2, 2027, unless terminated earlier pursuant to its terms. 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.

Covenant Compliance

The Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell or dispose of assets; pay dividends, make distributions or repurchase capital stock; engage in certain transactions with affiliates; make investments, loans or advances; create restrictions on the payment of dividends or other amounts to the Company from its restricted subsidiaries; amend material agreements governing our subordinated debt; repay or repurchase any subordinated debt, except as scheduled or at maturity; make certain acquisitions; change our fiscal year; and fundamentally change our business. 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.

Under the Credit Agreement, we are required to satisfy and maintain specified financial ratios and other financial condition tests and covenants. 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.

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. 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.

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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.

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 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. We believe that we will meet known and likely future cash requirements through the combination of cash flows from operating activities, available cash balances, available borrowings under our financing arrangements and access to capital markets.

Our recurring cash needs are primarily directed toward working capital requirements to support ongoing business activities, investments in growth initiatives, capital expenditures, acquisitions, interest payments and repayment of borrowings. 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 October 3, 2025 (dollars in thousands):

Payments Due by Period

Contractual Obligations as of October 3, 2025

Total

Less than

1 year

1-3 years

3-5 years

More than

5 years

Long-term borrowings(1)

1,168,500 

— 

503,500 

— 

665,000 

Estimated interest payments(2)

330,019 

75,227 

150,454 

86,710 

17,628 

Finance lease obligations

191,876 

42,293 

71,906 

71,518 

6,159 

Operating leases

126,262 

27,921 

45,238 

27,384 

25,719 

Purchase obligations(3)

6,200 

6,200 

— 

— 

— 

Other liabilities(4)

7,392 

7,392 

— 

— 

— 

$

1,830,249 

$

159,033 

$

771,098 

$

185,612 

$

714,506 

______________________

(1)Excludes the $12.0 and $1.4 million reduction to long-term borrowings from debt issuance costs and debt discount, respectively.

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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 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.

(4)Includes severance.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in the notes to the audited Consolidated and Combined Financial Statements included in this Annual Report. We have chosen accounting policies that management believes are appropriate to accurately and fairly report our operating results and financial position in conformity with U.S. GAAP. 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, revenues, 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. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require.

Revenue Recognition

We generate and recognize over 95% 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. 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 our remaining revenue primarily from the direct sale of uniforms to customers, with such revenue being recognized when our performance obligation is satisfied, typically upon the transfer of control of the promised product to the customer.

Goodwill

Annually, in our fiscal fourth quarter, we perform an impairment assessment of goodwill at the reporting unit level. This assessment may first consider qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. 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 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 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. The discounted cash flow calculations are dependent on several subjective factors including the timing of future cash flows, the underlying margin projection assumptions, future growth rates and the discount rate. The market method is dependent on several subjective factors including the determination of market multiples and future cash flows. If our assumptions or estimates in our fair value calculations change or if future cash flows, margin projections or future growth rates vary from what was expected, this may impact our impairment analysis and could reduce the underlying cash flows used to estimate fair values and result in a decline in fair value that may trigger future impairment charges.

We believe that an accounting estimate relating to goodwill impairment is a critical accounting estimate because the assumptions underlying future cash flow estimates are subject to change from time to time and the recognition of an impairment could have a significant impact on our Consolidated and Combined Statements of Income.

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Litigation and Claims

From time to time, we and our subsidiaries are party to various legal actions, proceedings and investigations involving claims incidental to the conduct of our businesses, including actions by customers, employees, government entities and third parties, including under federal, state, international, national, provincial and local employment laws, wage and hour laws, discrimination laws, immigration laws, human health and safety laws, import and export controls and customs laws, environmental laws, false claims or whistleblower statutes, tax codes, antitrust and competition laws, customer protection statutes, procurement regulations, intellectual property laws, supply chain laws, the Foreign Corrupt Practices Act and other anti-corruption laws, lobbying laws, motor carrier safety laws, data privacy and security laws, or claims alleging negligence and/or breach of contractual and other obligations. We consider the measurement of litigation reserves as a critical accounting estimate because of the significant uncertainty in some cases relating to the outcome of potential claims or litigation and the difficulty of predicting the likelihood and range of potential liability involved, coupled with the material impact on our results of operations that could result from litigation or other claims. In determining legal reserves, we consider, among other issues:

•interpretation of contractual rights and obligations;

•the status of government regulatory initiatives, interpretations, and investigations;

•the status of settlement negotiations;

•prior experience with similar types of claims;

•whether there is available insurance; and

•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

We encounter credit loss risks associated with the collection of receivables. We analyze historical experience, current general and specific industry economic conditions, industry concentrations, such as exposure to small and medium-sized businesses, the nonprofit healthcare sector, federal and local governments, and reasonable and supportable forecasts that affect the collectability of the reported amount in estimating credit losses. The accounting estimate related to the allowance for credit losses is a critical accounting estimate because the underlying assumptions used for the allowance can change from time to time and credit losses could potentially have a material impact on our results of operations.

Inventories and Rental Merchandise In Service

We record an inventory obsolescence reserve for obsolete, excess, and slow-moving inventory. 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.

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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. The amortization rates are based on industry experience, intended use of the merchandise, our specific experience, and wear tests performed by us. These factors are critical to determining the amount of rental merchandise in service and related cost of services provided that are presented in the Consolidated and Combined Financial Statements. Material differences may result in the amount and timing of operating income if management makes significant changes to these estimates.

Costs to Obtain a Contract

We defer employee sales commissions earned by our sales force that are considered to be incremental and recoverable costs of obtaining a contract. The deferred costs are amortized using the portfolio approach on a straight-line basis over the average period of benefit, approximately nine years, and are assessed for impairment on a periodic basis.

Income Taxes

Prior to the Separation, our operations were included in Aramark’s U.S. federal and state tax returns for those taxable periods. With respect to such taxable periods, income taxes on our financial statements were calculated on a separate tax return basis. Beginning after the Separation, we file tax returns separate from Aramark, and our deferred taxes and effective tax rates may differ from those of the historical periods.

Judgment is required to determine the annual effective income tax rate, deferred tax assets and liabilities, reserves for unrecognized tax benefits and any valuation allowances recorded against net deferred tax assets. Our effective income tax rate is based on annual income, statutory tax rates and other adjustments in the jurisdictions in which we operate. Our annual effective income tax rate includes the impact of discrete income tax matters including adjustments to reserves for uncertain tax positions. Tax regulations require items to be included in our tax returns at different times than these same items are reflected in our consolidated financial statements. As a result, the effective income tax rate in our consolidated financial statements differs from that reported in our tax returns. Some of these differences are permanent, such as expenses that are not tax deductible, while others are temporary differences, such as amortization and depreciation expenses.

Temporary differences create deferred tax assets and liabilities, which are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We establish valuation allowances for our deferred tax assets when the amount of expected future taxable income is not large enough to utilize the entire deduction or credit. 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 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 standard updates, including the expected dates of adoption.