K-Bro Linen Inc (KBRLF) Q4 2024 Earnings Call Highlights: Record Revenue and Strategic Growth

GuruFocus News

Sat, Mar 22, 2025, 1:01 AM 4 min read

Revenue: $374 million for 2024, a 16% increase compared to 2023.
Adjusted EBITDA: $72.1 million for 2024, a 24.2% increase from $58 million in 2023.
EBITDA: $69 million for 2024, a 21.5% increase from $56.8 million in 2023.
Net Earnings: Increased by $1.1 million to $18.7 million in 2024, a 6.3% increase from 2023.
Healthcare Revenue: Increased by 6% in 2024.
Hospitality Revenue: Increased by 30% in 2024.
Adjusted EBITDA Margin: Increased to 19.3% in 2024 from 18.1% in 2023.
EBITDA Margin: Increased to 18.5% in 2024 from 17.7% in 2023.
Net Working Capital: $54.1 million at December 31, 2024, compared to $41.4 million at December 31, 2023.
Debt: Increased to $123.8 million in 2024 from $70.2 million in 2023.
Debt-to-EBITDA Ratio: Approximately 2.2 times, excluding leases.
Distributable Cash Flow: $9.8 million for Q4 2024.
Payout Ratio: 32.5% for Q4 2024.

Warning! GuruFocus has detected 3 Warning Sign with KBRLF.

Release Date: March 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

K-Bro Linen Inc (KBRLF) reported record revenue of $374 million and adjusted EBITDA of $72.1 million for 2024, reflecting a 16% increase in consolidated revenue compared to 2023.
The company achieved a 30% increase in Hospitality revenue and a 6% increase in Healthcare revenue, demonstrating strong performance across both segments.
Strategic acquisitions, such as Shortridge, have contributed significantly to growth, with the UK division's adjusted EBITDA margin increasing from 15.7% in 2023 to 19.8% in 2024.
K-Bro Linen Inc (KBRLF) maintains a strong balance sheet with ample liquidity, including an undrawn balance of $46.2 million on its operating line and a debt-to-EBITDA ratio of 2.2 times.
The company is focused on sustainable practices and has a positive outlook for 2025, with expectations of steady growth in both Healthcare and Hospitality segments.

Negative Points

Net earnings as a percentage of revenue decreased by 0.5% to 5% in 2024 from 5.5% in 2023, indicating a slight decline in profitability.
Wages and benefits increased by $18.8 million, impacting overall costs, although they decreased as a percentage of revenue.
The Canadian division experienced a slight decrease in EBITDA margin from 18.5% in 2023 to 18.1% in 2024, primarily due to higher syndication and transition costs.
Corporate costs increased by $4.8 million, driven by transition and transaction costs related to acquisitions and credit facility syndication.
The company faces potential uncertainties related to geopolitical and trade landscapes, although no immediate impacts are expected.

Q & A Highlights

Q: Linda, could you provide your view on the potential impact of geopolitical situations on the Hospitality side of the business in Canada and the UK? A: Linda McCurdy, President and CEO, mentioned that while it's challenging to predict, there is potential upside with a weaker Canadian dollar and increased travel into Canada and the UK. However, consumer confidence has declined, and they remain cautiously optimistic, waiting for confirmation from hospitality partners regarding higher bookings.

Q: What would be the impact of dropping the carbon tax in Canada on K-Bro Linen? A: Kristie Plaquin, CFO, stated that dropping the carbon tax would positively impact the company, potentially increasing the margin by around 0.5%.

Q: Can you remind us about the hedges in the UK and their impact on 2025 and 2026? A: Kristie Plaquin explained that a new two-year hedge was entered into as of January 1, 2025, which is expected to positively impact the margin by about 0.5% on a consolidated basis.

Q: Is there anything impacting Healthcare organic growth in Canada, and do you expect it to increase in the coming year? A: Linda McCurdy noted that nothing significant stands out impacting Healthcare organic growth in Canada. They are comfortable with mid-single-digit growth but see potential for upside.

Q: Are there any contracts up for renewal or competing opportunities for K-Bro Linen? A: Linda McCurdy mentioned that for 2025 and 2026, there are not many renewals, and nothing material on a singular contract basis. The first major renewal opportunity would be in 2027, with annual opportunities around $10 million.

Q: Will pricing help margins on a year-over-year basis in 2025? A: Linda McCurdy indicated that most of the significant price increases are already reflected in 2024, with a heavier impact in the latter half. Going forward, they expect more typical CPI increases rather than large annualization effects.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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