VSTS 10-K & 10-Q changes, risk factors and insider trading

Risks Related to Our Business Operations

Unfavorable economic conditions may arise during times of national and international economic downturns, or may be attributed to government shutdowns, implementation of new or increased tariffs and ongoing changes in U.S. and foreign government trade policies (including potential modifications to existing trade agreements and retaliatory measures by foreign governments), inflationary or deflationary pressures, natural disasters, calamities, public health crises, political unrestunrest, terrorist acts and global conflicts. Unfavorable economic conditions may also contribute to supply chain disruptions, geopolitical events, global energy shortages, major central bank policy actions including interest rate increases, public health crises or other factors. Unfavorable economic conditions could adversely affect the demand for our products and services. For example, in the early stages of the COVID-19 pandemic, we were negatively affected by reduced employment levels at our customers’ locations and declining levels of business and customer spending. In addition, adverse economic conditions, including increases in labor costs, labor shortages, higher materials and other costs, supply chain disruptions, inflation and other economic factors could increase our costs of selling and providing the products and services we offer, which in turn could have a material adverse impact on our business, financial condition or results of operations. Moreover, the impact of inflation on various areas of our business, including labor and product costs, has affected our business, financial condition and results of operations, and we may not be able to mitigate any future impacts of inflation by increases in pricing for our goods and services. We are unable to predict any future trends in the rate of inflation, and if (and to the extent that) we are unable to recover higher costs in the event of future increases in inflation, such increases in inflation could adversely affect our business, financial condition or results of operations.

Our success depends on our ability to retain our current customers, renew our existing customer contracts and obtain new business on commercially favorable terms. Our ability to do so generally depends on a variety of factors, including the quality, price and responsiveness of our services, as well as our ability to market these services effectively and differentiate ourself from our competitors. In addition, customers are increasingly focused on and requiring us to set targets and meet standards related to environmental sustainability matters, such as greenhouse gas emissions, packaging, waste and wastewater. When we renew existing customer contracts, it is often on terms that are less favorable or less profitable for us than the then-current contract terms. In addition, weWe typically incur substantial start-up and operating costs and experience lower profit margin and operating cash flows in connection with the establishment of new business, and in periods with higher rates of new business, we have experienced and expect to continue to experience negative impact to our profit margin and our cash flows. In recent quarters, we have experienced rental revenue declines resulting from lost business in excess of new business, as well as declines in rental revenue related to existing business. There can be no assurance that we will be able to obtain new business, renew existing customer contracts at the samecurrent or higher levels of pricing or that our current customers will not turn to competitors, cease operations, elect to in-source or terminate contracts with us. These risks may be exacerbated by current economic conditions due to, among other things, increased cost pressure at our customers, tight labor markets and heightened competition in a contracted marketplace. The failure to renew a significant number of our existing contracts, including on the same or more favorable terms, could have a material adverse effect on our business, financial condition or results of operations, and the failure to obtain new business could have an adverse impact on our growth and financial results.

NaturalWe disasters,may globalnot calamities,successfully climateexecute change,or politicalachieve unrestthe expected benefits of our restructuring plan and other adversemeasures incidentswe beyondmay take in the future, and our controlefforts couldmay adversely affect our business, financial condition or results of operations.

Insolvency or business disruption experienced by suppliers could make it difficult for us to source the items we need to run our business. Political and economic stability in the countries in which foreign suppliers are located, the financial stability of suppliers, suppliers’ failure to meet our standards, labor problems experienced by our suppliers, the availability of raw materials and labor to suppliers, cybersecurity issues, currency exchange rates, transport availability and cost, tariffs, inflation and other factors relating to the suppliers and the countries in which they are located are beyond our control. Certain of our raw materials and products are currently and may in the future be limited to a single supplier, and if such a supplier faces any difficulty in supplying the materials or products, we may not be able to find an alternative supplier in a timely manner or at all. Current global supply chain disruptions caused by the current macroeconomic environment, recovery from the COVID-19 pandemic and the Russia/Ukraineongoing military conflict in Ukraine have resulted, and may continue to result, in delivery delays as well as lower fill rates and higher substitution rates for a wide-range of products. We do not have direct operations in the Middle EastEast, but the recent conflictsconflict in Israel and escalatingthe potential for re-escalation of tensions in the regionregion, may disrupt global markets and impact our supply chain. While we have continued to modify our business model in response to the current environment, including proactively managing inflation and global supply chain disruption, through supply chain initiatives and by implementing pricing, including temporary fees, as appropriate, to cover incremental costs, there is no guarantee that we will be able to continue to do so successfully or on comparable terms in the future if supply chain disruptions continue or worsen.

We operate primarily in the United States and Canada. During fiscal 2024,2025, approximately 91% of our revenue was generated in the United States and approximately 9% of our revenue was generated in Canada. In addition, we operate manufacturing plants and a distribution center in Mexico that collectively employ approximately 2,1001,900 personnel as of SeptemberOctober 27,3, 2024.2025. Our international operations are subject to risks that are different from those we face in the United States, including the requirement to comply with changing or conflicting national and local regulatory requirements and laws, as well as cybersecurity, data protection and supply chain laws; potential difficulties in staffing and labor disputes; managing and obtaining support and distribution for local operations; credit risk or financial condition of local customers; potential imposition of restrictions on investments; potentially adverse tax consequences, including imposition or increase of withholding, value-added tax (“VAT”) and other taxes on remittances and other payments by subsidiaries; foreign exchange controls; local political and social conditions; and the ability to comply with the terms of government assistance programs.

We believe much of our future growth and success depends on the continued availability, service and well-being of entry level personnel. We have had and may continue to have difficulty in hiring and retaining qualified personnel, particularly at the entry level. We will continue to have significant requirements to hire such personnel. At timestimes, when the United States or other geographic regions experience reduced levels of unemployment or a general scarcity of labor as has been seen in recent periods, there may be a shortage of qualified workers at all levels. Given that our workforce requires large numbers of entry level and skilled workers and managers, a general difficulty finding sufficient employees or mismatches between the labor markets and our skill requirements can compromise our ability in certain areas of our businesses to continue to provide quality service or compete for new business. We are also impacted by the costs and other effects of compliance with U.S. and international regulations affecting our workforce. These regulations are increasingly focused on employment issues, including wage and hour, healthcare, immigration, retirement and other employee benefits and workplace practices. Compliance and claims of non-compliance with these regulations could result in liability and expense to us. Competition for labor has at times resulted in wage increases in the past and future competition could substantially increase our labor costs. Due to the labor-intensive nature of our businesses, a shortage of labor or increases in wage levels in excess of normal levels could have a material adverse effect on our business, financial condition or results of operations.

AsApproximately of September 27, 2024, approximately 10,80010,750 of our employees were represented by labor unions and covered by over 200 collective bargaining agreements with various terms and dates of expiration. There can be no assurance that any current or future issues with our employees will be resolved or that we will not encounter future strikes, work stoppages or other disputes with labor unions or our employees. A work stoppage or other limitations on our operations and facilities for any reason could have an adverse effect on our business, financial condition or results of operations.

Additionally, we may be under examination by the taxing authorities for historical tax positions, and we regularly assess the likelihood of adverse outcomes resulting from these audits. While we believe that our current tax (benefits)/ provisions are appropriate, there can be no assurance that these items will be settled for the amounts accrued, that additional tax exposures will not be identified in the future or that additional tax reserves will not be necessary for any such exposure. Any increase in the amount of taxation incurred as a result of challenges to our tax filing positions could result in a material adverse effect on our business, consolidated results of operations and consolidated financial condition.

We are increasingly utilizing information technology systems, includingsome withof respectwhich are managed by third parties, to process, summarize, transmit, and store electronic information that is critical to operating our business efficiently and effectively. Our information systems and infrastructure are used to support our operations and manage key business processes, including, but not limited to, administrative functions, financial and operational data, ordering, point-of-sale processing and payment and the management of our supply chain, to enhance the efficiency of our business and to improve the overall experience of our customers. WeIn the ordinary course of business, we directly or indirectly maintain confidential, proprietary and personal information about, or on behalf of, our potential, current and former customers, employees and other third parties in these systems or engage third parties in connection with storage and processing of this information.parties. Such information includesmay include employee, customercustomer, and third-party data, including credit card numbers, social security numbers, healthcare informationsupplier and other third-party data that may contain personal information, personal health information, and/or personal credit information.

Our systems and the systems of our vendors and other third parties are subject to damage or interruption from power outages, computer or telecommunication failures, computerstate viruses,or federal infrastructure failures, natural disasters and other catastrophic events andevents, implementation delays or difficulties, as well as usagehuman errors by our employees or third-party service providers. These systems are also vulnerable to an increasing threat of rapidly evolving cyber-based attacks, including malicious software, attemptsdenial toof denyservice access to systems or networks,attacks, attempts to gain unauthorized access to data, including throughsocial phishingengineering emails,that attempts to fraudulently induce employees or others to improperly disclose confidential information, the exploitation of software and operating vulnerabilities and physical device tampering/skimming at card reader units. The techniquesTechniques used to obtain unauthorized access, disable or degrade service or sabotage systems changeevolve frequently,rapidly, and may be difficult to detect for a long time and often are not recognized until after anthey attackare isalready launcheddeployed, orpotentially occurs.allowing them to persist within our systems and the systems of third parties for extended periods of time. As a result, we and suchour thirdthird-party partiesvendors may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, we or such third parties may decide to upgrade existing information technology systems from time to time to support the needs of our business and growth strategy and the risk of system disruption is increased when significant system changes are undertaken.

We are subject to numerousdata privacy, handling, and protection laws and regulations in the United States and internationally aswhere wellwe asdo business. We also have contractual obligations and other security standards, each designed to protect the personal information of customers, employees and other third parties that we directly or indirectly collect and maintain. These laws and regulations areand evolvingcontractual obligations continue to match changesevolve in an effort to keep pace with cyber-attacks and protection programs, which require us to routinely review and amend the legal framework we have in place.

Cybersecurity related laws, regulations and obligations are increasing in complexity and number, change frequently and may be inconsistent across the various jurisdictions in which we operate. Additionally, the federal government and some states have adopted, are considering or in the future may adopt similar data protection laws. Our systems and the systems maintained or used by third parties and service providers to process data on our behalf may not be able to satisfy these changing legal and regulatory requirements,requirements or may require significant additional investments or time to do so. If we fail to comply with these laws or regulations, we could be subject to significant litigation, monetary damages, regulatory enforcement actions or fines in one or more jurisdictions and we could experience a material adverse effect on our results of operations, financial condition and business.

During the normal course of business, we have experienced and expect to continue to experience cyber-based attacks and other attempts to compromise our information systems,systems. althoughWhile none,we tobelieve that prior compromises of our knowledge,systems hashave hadnot had, in the aggregate, a material adverse effectimpact on our business, financial condition or results of operations.operations, we may expect events of this nature to continue as cyber-based attacks become more sophisticated and more frequent. Any damage to, or compromise or breach of, our systems or the systems of our vendors could impair our ability to conduct our business, result in transaction errors, result in corruption or loss of accounting or other data, which could cause delays in our financial reporting, and result in a violation of applicable privacy and other laws, significant legal and financial exposure, reputational damage, adverse publicity and a loss of confidence in our security measures. Any such event could cause us to incur substantial costs, including costs associated with systems remediation, customer protection, litigation, lost revenue or the failure to retain or attract customers following an attack. The failure to properly respond to any such event could also result in similar exposure to liability. The occurrence of some or all of the foregoing could have a material adverse effect on our results of operations, financial condition, business and reputation.

We have debtsignificant obligationsindebtedness that could adversely affect our business and profitability and our ability to meet other obligations.

We have approximately $1,162.5$1,168.5 million of borrowings outstanding as of SeptemberOctober 27,3, 20242025 under our senior secured credit agreement (the “Credit Agreement”), and we may incur additional indebtedness in the future. This significant amount of debt could potentially have important consequences to us and our debt and equity investors, including:

The historical information about Vestis in this 10-K for the fiscal yearsyear ended September 29, 2023 and September 30, 2022 refers to Vestis as operated by and integrated with Aramark. The historical financial information of Vestis included in this 10-K for the fiscal yearsyear ended September 29, 2023 and September 30, 2022 is derived from the Combined Financial Statements and accounting records of Aramark. Accordingly, the historical financial information included in this 10-K for thesethis periodsperiod does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

•Generally, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, have historically been satisfied as part of the corporate-wide cash management policies of Aramark. Following the completion of the Separation, our results of operations and cash flows mayhave bebeen more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly.

We arehave repositioningrepositioned our brand to remove the Aramark name, which could adversely affect our ability to attract and maintain customers.

We have historically marketed our products and services using the “Aramark” name and logo, which is a globally recognized brand with a strong reputation for high-quality products and services. Following the Separation, subject to limited exceptions, we are repositioningrepositioned our brand and update,updated, as applicable, our products and services using the “Vestis” name or other names and marks and removinghave discontinued using the “Aramark” name and logo on our products and discontinuing its use in connection with our service offerings. These new names and brands may not benefit from the same recognition and association with product quality as the Aramark name, which could adversely affect our ability to attract and maintain our customers, who may prefer to use products with a more established brand identity.

•as long as the Board of Directors is classified, our directors can be removed by stockholders only for cause;

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 SeptemberOctober 27,3, 20242025, referred to as fiscal 2025, and September 29,27, 20232024, 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 thefiscal year ended September 30, 20222023 and year-over-year comparisons to Septemberfiscal 29, 2023,2024, 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”) foron theNovember fiscal22, year ended September 29, 2023.2024.

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 StatementsStatements,” andthe “Business” sectionssection and elsewhere in this Annual Report on Form 10-K (“Annual Report”).

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 locationsaccounts (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 19,60018,150 employees, we operate a network of over 350325 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 linenslinen products. We source raw materials, finished goods, equipment, and other supplies from a variety of domestic and international suppliers. We leverage our broad footprint, supply chain, delivery fleet and route logistics capabilities to serve customers on a recurring basis, typically weekly, and primarily through multi-year contracts.

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

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. AsNo of September 27, 2024 thesesuch transition services were noperformed longerin beingfiscal provided.2025, as they ceased on or prior to September 27, 2024.

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

The Combined Financial Statements reflect the combined historical results of operations, comprehensive income and cash flows for the yearsyear ended September 29, 2023 and September 30, 2022 and the financial position as of September 29, 2023 for Vestis.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. Historically,Prior to the Separation, separate financial statements havewere not been prepared for Vestis and it hasdid not operatedoperate as a standalone business from Aramark. The historical results of operations, financial positionoperations and cash flows of Vestis presented in these Combined Financial Statements may not be indicative of what they would have been had we been an independent standalone public company, nor are they necessarily indicative of our future results of operations, financial position, and cash flows.

Our business has historically functioned together with other Aramark businesses. 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. Only cash amounts specifically attributable to us are reflected in the Combined Balance Sheets. Transfers of cash, both to and from Aramark’s central cash management system, are reflected as a component of “Net parent investment” on the Combined Balance Sheets and in “Net cash used in financing activities” on the accompanying Combined StatementsStatement of Cash Flows.Flows for the year ended September 29, 2023.

All intercompany transactions and balances within Vestis have been eliminated. TransactionsFor certain historical transactions between us and Aramark havesince beenthe includedSeparation, in these Combined Financial Statements and are considered related party transactions (see Note 15. Related Party Transactions and Parent Company Investment in the Notes to ourConsolidated and Combined Financial Statements).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 distribution.Separation.

We generate and recognize over 94% of our total revenue from route servicing contracts on both Uniforms,uniforms, which we generally manufacture, and Workplaceworkplace Supplies,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.

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 operationoperational 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.

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

Other income,Expense (net of other income), is primarily comprised of fees incurred for our accounts receivable securitization facilityfacility, and prior to its sale in fiscal 2025, our share of the financial results forof ouran 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, changechanges to deferred taxes on foreign investments, tax credits, and certain nondeductible expenses.

Our fiscal year is the 52- or 53-week period which ends on the Friday nearest to September 30th. The fiscal yearsyear ended October 3, 2025, referred to as fiscal 2025, consisted of 53 weeks. The fiscal year ended September 27, 2024,2024 (referred to as fiscal 2024) and the fiscal year ended September 29, 2023 and(referred Septemberto 30,as 2022fiscal 2023) were eachboth 52-week periods.

The following table presents an overview of our results on a combinedconsolidated basis with the amount of and percentage change between periods for the fiscal years 20242025 and 20232024 (dollars in thousands).

Interest Expense, net, increaseddecreased $124.5$34.3 million in fiscal 20242025 fromcompared with the prior fiscal yearyear, due primarily due to thelower issuanceaverage 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 our$1,331.2 termmillion. loanThe debtweighted onaverage Septemberinterest 29,rate 2023,in andfiscal subsequently2025 partiallywas refinanced6.79% oncompared Februarywith 22,7.65% in fiscal 2024. Prior to September 29, 2023, the Company had no debt obligations. Interest expense in fiscal 2024 also included a $3.9 million non-cash expense for the write-off of unamortized debt issuance costs associated with the extinguishment of ouran $800 million Term Loan A-1 as a result of theits aforementionedrefinancing refinancing.in fiscal 2024.

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

The following table presents an overview of the results for our United States reportable segment resultsfor fiscal 2025 and fiscal 2024, with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).

Segment operating income of $264.7$154.0 million in fiscal 20242025 decreased 12.9%41.8% compared to the prior fiscal year, primarily 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.

The following table presents an overview of our results for the Canada reportable segment resultsfor fiscal 2025 and fiscal 2024 with the amount of and percentage change between periods for the fiscal years 2024 and 2023 (dollars in thousands).

Segment operating income of $8.2$9.0 million decreasedincreased 40.5%9.7% in fiscal 20242025 compared to the prior fiscal year primarily driven by:year.

There have been no material changes to the risk factors disclosed in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended October 3, 2025 filed with the SEC on December 2, 2025, except as follows:supplemented by the risk factors disclosed in Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2026 filed with the SEC on May 12, 2026.

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 sixnine months ended AprilJuly 3, 2026 and MarchJune 28,27, 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.

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 ahad materialan impact, and may continuecould in the future to adverselymaterially 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 increasedrecent increases in energy costscosts, duringwe implemented an energy surcharge, starting in 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. In addition, while we have attempted to pass increased costs on to our customers, where permissible, including through our recent energy surcharge, there can be no assurance that we will be able to fully recover our costs or continue to do so in the future.

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$35 million to $35$40 million, with approximately $25$15 million related to third-party consulting and support, and up to $10$25 million in severance and related costs. During the secondthird quarter of fiscal 2026, the Company recognized $9.3$6.1 million of third-party consulting fees and $1.0$1.6 million of severance costs related to the Company's business transformation. For the sixnine months ended AprilJuly 3, 2026, the Company recognized $17.1$23.2 million of third-party consulting fees and $6.5$8.0 million of severance costs related to the business transformation.

Results of Operations Three Months Ended AprilJuly 3, 2026 compared with MarchJune 28,27, 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 AprilJuly 3, 2026 and MarchJune 28,27, 2025 (dollars in thousands).

______________________ (1)Exclusive of depreciation and amortization Consolidated revenue of $659.4$661.7 million decreased $5.8$12.1 million, or 0.9%,1.8%, for the three months ended AprilJuly 3, 2026 compared to the three months ended MarchJune 28,27, 2025. The decline in revenue compared to the prior year reflects aan $10.5$18.3 million decline in uniforms offset by a $4.7$6.1 million increase in workplace suppliessupplies. Net volumes decreased 4.5% versus prior year, partially offset by strategic pricing improvements. Volume declines resulted, in part, from targeted reductions in unprofitable sales volume resulting from sales product mix shifting which occurred prior to the commencement of the Plan. ConsolidatedQuarter over quarter, consolidated revenue was positivelynot materially impacted by $2.7fluctuations million from the impact ofin foreign exchange on currency related to our Canadian business.rates.

Cost of services provided decreased $4.2$15.4 million, or 0.9%,3.1%, for the three months ended AprilJuly 3, 2026 compared to the three months ended MarchJune 28,27, 2025. The decrease was primarily driven by a $5.1$9.4 million decline in merchandise costs andcosts, a $4.3$3.9 million reduction in delivery costs. These decreases were offset by a $5.2 million increase in plant operating costs.cost and lower delivery costs of $1.5 million.

Depreciation and amortization expense of $34.6$33.3 million for the three months ended AprilJuly 3, 2026 decreased $1.3$1.6 million, or 3.7%,4.5%, compared to the three months ended MarchJune 28,27, 2025.

Selling, general and administrative expenses ("SG&A") decreased $35.6$7.4 million, or 24.1%,6.1%, for the three months ended AprilJuly 3, 2026 compared to the three months ended MarchJune 28,27, 2025. The decrease in SG&A was primarily driven by headcount reductions and other cost savings measures resulting from the Plan,Plan a(including $16.2an $11.8 million decrease in thesalaries, Company'swages badand debtrelated expense,employee costs), a $3.3$2.0 million decrease in separation-related charges, and a $4.6$2.7 million decrease in share-based compensation,advertising and a $7 million decrease in severance related costs, which were partially offset by $9.3$6.1 million of third-party consulting costs related to the Company's business transformation.transformation, Thea decrease$5.4 million increase in theshare-based badcompensation debt allowance was primarily due toand a $15$1.2 million chargeincrease toin theseverance Company'srelated allowancecosts, Operating income of $37.2 million increased by $12.3 million, or 49.2%, for credit losses in the three months ended MarchJuly 28,3, 2026 compared to the three months ended June 27, 2025 basedfrom onthe updated estimatesimpact of collectability. The remaining improvementchanges in badrevenue debtand expensecosts ofnoted $1.2 million was attributable to improvements in accounts receivable related to certain working capital initiatives.above.

Interest expense, net, decreased $1.3$2.4 million for the three months ended AprilJuly 3, 2026 compared to the three months ended MarchJune 28,27, 2025 primarily due to lower borrowings and lower interest rates.borrowings.

Other expense, net of other income (which consists primarily of A/R Facility fees), decreased $0.1$0.4 million for the three months ended AprilJuly 3, 2026 compared to the three months ended MarchJune 28,27, 2025.

The provision for income taxes for the three months ended AprilJuly 3, 2026 was recorded at an effective rate of (3.4)%23.0% compared to an effective rate of 18.6%9.7% for the three months ended MarchJune 28,27, 2025. The lowerhigher effective tax rate was due to the impact of changes in year over year earnings.earnings and discrete items such as provision to return impacts recognized in each period.

Net income of $2.6$11.0 million for the three months ended AprilJuly 3, 2026 represented an improvement of $30.4$11.7 million, or 109.3%,1734.0%, compared to a net loss of $27.8$0.7 million for the three months ended MarchJune 28,27, 2025, primarily due to the reduced operating expenses as noted above.

Results of Operations SixNine Months Ended AprilJuly 3, 2026 compared with MarchJune 28,27, 2025

The following table presents an overview of our results along with the amount of and percentage change between periods for the sixnine months ended AprilJuly 3, 2026 and MarchJune 28,27, 2025 (dollars in thousands).

______________________ (1)Exclusive of depreciation and amortization Consolidated revenue of $1,322.8$1,984.5 million decreased $26.2$38.3 million, or 1.9%, for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025. The decline in revenue compared to the prior year reflects a $29.7$47.9 million decline in uniforms offset by a $3.5$9.6 million increase in workplace supplies,supplies. Net volumes decreased 2.0% versus prior year, partially offset by strategic pricing improvements. Volume declines resulted, in part, from targeted reductions in unprofitable sales volume resulting from sales product mix shifting which occurred prior to the commencement of the Plan on 0.8% lower overall volume levels measured as pounds processed in our plants.Plan. Consolidated revenue was positively impacted by $2.9 million from the impact of foreign exchange on currency related to our Canadian operations.

Cost of services provided decreased $7.3$22.7 million, or 0.7%,1.5%, for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025. The decrease was primarily driven by a $10.2$19.5 million decline in merchandise costs and a $5.6$7.1 million reduction in delivery costs. These decreases were partially offset by an $8.9$5.0 million increase in plant operating costs.

Depreciation and amortization expense of $68.9$102.2 million for the sixnine months ended AprilJuly 3, 2026 decreased $3.9$5.5 million, or 5.4%,5.1%, compared to the sixnine months ended MarchJune 28,27, 2025.

Selling, general and administrative expenses ("SG&A") decreased $36.5$44.0 million, or 13.6%,11.2%, for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025. The decrease in SG&A was primarily driven by headcount reductions and other cost savings measures, a $17.7$17.2 million decrease in the Company's bad debt expense,expense and headcount reductions and other cost savings measures resulting from the Plan (including a $6.5$25.4 million decrease in salaries, wages and related employee costs), an $11.4 million decrease in advertising and related costs, an $8.5 million decrease in separation-related charges, a $7.4 million decrease in share-based compensation, and a $5.8$4.4 million decrease in severance related costs.costs, and a $2.0 million decrease in share-based compensation. These decreases were partially offset by $17.1$23.2 million of third-party consulting costs related to the Company's business transformation. The decrease in the bad debt allowance was primarily due to a $15 million charge to the Company's allowance for credit losses induring the threesecond monthsquarter endedof March 28,fiscal 2025 based on updated estimates of collectability. The remaining improvement in bad debt expense of $2.7$2.2 million was attributable to improvements in accounts receivable related to certain working capital initiatives. Share-based compensation for the sixnine months ended MarchJune 28,27, 2025 was impacted by the acceleration of awards associated with the departure of certain executives during the period.

Operating income of $43.4$80.6 million increased by $21.5$33.8 million, or 98.6%,72.3% for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025 from the impact of changes in revenue and costs noted above.

Interest expense, net, decreased $2.2$4.5 million for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025 primarily due to lower borrowings and lower interest rates.borrowings.

Other expense, net of other income, decreased $0.8$1.2 million for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025, due, in part, to a decrease in A/R Facility fees of $0.4$1.4 million.

The provision for income taxes for the sixnine months ended AprilJuly 3, 2026 was recorded at an effective rate of 37.3%12.6% compared to an effective rate of 17.3%17.1% for the sixnine months ended MarchJune 28,27, 2025. The higherlower effective tax rate was primarily driven by changes in year-over-year earnings, as well as the impact of permanent tax items, federal tax credits, and discrete tax items recognized in each period.

Net lossincome of $3.8$7.3 million for the sixnine months ended AprilJuly 3, 2026 represented an improvement of $23.2$34.9 million, or 85.9%,126.2%, compared to a net loss of $27.0$27.7 million for the sixnine months ended MarchJune 28,27, 2025, due to the impact of changes to revenue and expenses noted above.

Results of Operations—United States Results Three Months Ended AprilJuly 3, 2026 compared with MarchJune 28,27, 2025

The following table presents an overview of our United States reportable segment results along with the amount of and percentage change between periods for the three months ended AprilJuly 3, 2026 and MarchJune 28,27, 2025 (dollars in thousands).

United States revenue of $598.9$600.7 million decreased $7.2$12.6 million, or 1.2%,2.0%, for the three months ended AprilJuly 3, 2026 compared to the three months ended MarchJune 28,27, 2025 on lower overall volumes.volumes resulting, in part, from targeted reductions in unprofitable sales volume resulting from the Plan. The decline in revenue was driven by a $10.4$17.9 million decline in uniform revenue, offset by a $3.2$5.3 million increase in workplace supplies, resulting from sales product mix shifting which occurred prior to the commencement of the Plan.supplies.

Segment operating income of $49.8$55.5 million for the three months ended AprilJuly 3, 2026 increased $31.2$14.9 million, or 168.3%,36.5%, compared to the three months ended MarchJune 28,27, 2025, primarily driven by reduced operating expenses, partially offset by a decrease in revenue during the three months ended AprilJuly 3, 2026, as described above.

Segment operating income margin increased approximately 530260 basis points from 3.1%6.6% for the three months ended MarchJune 28,27, 2025 to approximately 8.3%9.2% for the three months ended AprilJuly 3, 2026.

Results of Operations—United States Results SixNine Months Ended AprilJuly 3, 2026 compared with MarchJune 28,27, 2025

The following table presents an overview of our United States reportable segment results along with the amount of and percentage change between periods for the sixnine months ended AprilJuly 3, 2026 and MarchJune 28,27, 2025 (dollars in thousands).

CanadaUnited States revenue of $121.0$1,802.6 million decreased $0.2$38.5 million, or 0.2%,2.1%, for the sixnine months ended AprilJuly 3, 2026 compared to the sixnine months ended MarchJune 28,27, 2025,2025 neton oflower aoverall positivevolumes impactresulting, in part, from targeted reductions in unprofitable sales volume resulting from the impact of foreign exchange on currency of $2.9 million.Plan. The decline in revenue compared to the prior year reflects a $1.1$46.4 million decline in uniforms andoffset by a $0.9$7.9 million increase in workplace supplies.

Segment operating income of $4.1$141.5 million for the sixnine months ended AprilJuly 3, 2026 increased $0.1$24.3 million, or 2.9%,20.7%, compared to the sixnine months ended MarchJune 28,27, 2025.2025, primarily driven by reduced operating expenses, partially offset by a decrease in revenue during the nine months ended July 3, 2026, as described above.

Segment operating income margin increased approximately 10150 basis points from 3.3%6.4% for the sixnine months ended MarchJune 28,27, 2025,2025 to approximately 3.4%7.9% for the sixnine months ended AprilJuly 3, 2026.

As part of our capital structure, we entered into a senior secured credit agreement (as amended by the First Amendment and the Second Amendment described below, the “Credit Agreement”) on September 29, 2023, which initiallywas consistedamended in February 2024 and May 2025 (as amended, the “Credit Agreement”), which currently consists of (i) a term loan A-1 tranche due September 2025 in the amount of $800 million (“Term Loan A-1”), (ii) a term loan A-2 tranche due September 2028 in the amount of $700 million ("Term Loan A-2") and, (iiiii) a $300 million revolving credit facility. On February 22, 2024, we entered into an amendment to our credit agreement (the “First Amendment”) and refinanced our Term Loan A-1 with an $800 million Term Loan B-1 due February 2031 ("Term Loan B-1")., and (iii) a $300 million revolving credit facility. 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. OnUnder Maythe 1,Credit 2025,Agreement, we entered into an amendment to our credit agreement (the “Second Amendment”). As part of the Second Amendment, wehave 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 consolidated total net leverage ratio below or equal to 4.50x as of the last day of two consecutive quarters through the end of fiscal 2026.

The Term Loan B-1 interest rate is at the Secured Overnight Financing Rate (“SOFR”) plus a margin that is between 2.0% and 2.25%, depending on our consolidated total net leverage ratio, as defined in the Credit Agreement. The applicable margin on Term Loan B-1 was 2.25% during the three and six months ended AprilJuly 3, 2026 and MarchJune 28,27, 2025, and will adjust to SOFR plus 200 basis points once we achieve a 3.30x consolidated total net leverage ratio, as defined in the Credit Agreement.

The Term Loan A-2 interest rate is SOFR plus a Credit Spread Adjustment of 10 basis points and a margin that is between 1.5% and 2.50%, depending on our consolidated total net leverage ratio, as defined in the Credit Agreement. The applicable margin on Term Loan A-2 was 2.50% and 2.33% during the three and six months ended AprilJuly 3, 2026, and wasJune 2.25%27, during2025, the three and six months ended March 28, 2025.respectively.