Expectations called for roughly $682 million of revenue and $0.10 adjusted EPS. The published Q3 estimates available before the release were about $682.4 million of revenue and $0.10 of EPS, while no dependable public consensus for Adjusted EBITDA was identified.
| Metric | Q3 FY26 | Prior-year Q3 | External expectation / prior standing view |
|---|---|---|---|
| Revenue | $661.7M | $673.8M | ~$682.4M published estimate |
| Adjusted diluted EPS | $0.18 | $0.07 | ~$0.10 published estimate |
| Adjusted EBITDA | $80.9M | $64.0M | ~$78.2M implied by prior sequential outlook |
| Free cash flow | $47.0M | $8.0M | — |
| FY26 Adjusted EBITDA outlook midpoint | $312.5M | — | Previous midpoint: $310.0M |
| FY26 free cash flow outlook midpoint | $165.0M | — | Previous midpoint: $135.0M |
Revenue missed expectations, but the miss was concentrated in volume rather than pricing. Revenue fell 1.8% year over year to $661.7 million, versus the roughly $682 million published estimate, while pounds processed declined 4.5%. Revenue per pound rose 2.9% to $1.42, the first year-over-year increase highlighted in the company’s public-company history, indicating that pricing and mix partly offset the deliberate exit from low-profit volume. (3Q 2026 Revenue Metrics; 3Q Revenue Reconciliation)
Underlying profitability beat the weaker top line. Adjusted EBITDA increased 23% year over year to $80.9 million, with margin expanding to 12.2% from 9.5%. Adjusted operating expenses fell $27.2 million, or 4.5%, while cost per pound stayed flat at $1.24; that lifted operating leverage to $0.18 per pound from $0.14. The result was better than the roughly $78 million fourth-quarter-style sequential run-rate implied by the prior outlook, even though revenue underperformed the published estimate. (Adjusted EBITDA Reconciliation; Cost and Operating Leverage Metrics)
Cash generation was the clearest upside surprise. Free cash flow reached $47.0 million versus $8.0 million a year earlier, or $55.5 million excluding $8.6 million of transformation-related cash payments. Year-to-date adjusted free cash flow reached $155.1 million, allowing Vestis to repay $30 million of debt during the quarter. Net leverage improved to 4.10x from 4.47x at the prior quarter-end, while total liquidity rose to $351.8 million. (Cash Flow Statement; Adjusted Free Cash Flow; Net Leverage Ratio; Total Liquidity)
The guidance change improves the quality of the result rather than changing the growth story. Revenue guidance remains flat to down 2%, so the company is not signaling a top-line recovery yet. But the FY26 Adjusted EBITDA midpoint rose $2.5 million to $312.5 million, and the free cash flow midpoint jumped $30 million to $165 million. The higher outlook reflects cost and cash benefits from the transformation plan, including at least $75 million of expected annualized savings, but it also leaves execution risk because the implied fourth-quarter Adjusted EBITDA requirement is $84 million to $89 million. (Updated Fiscal 2026 Outlook; Strategic Business Transformation Plan Update)
Net read: a modest positive versus expectations, driven by earnings quality and cash flow—not revenue. The revenue miss prevents this from being a broad beat, but stronger-than-expected margin improvement, a large free-cash-flow upgrade, debt repayment, and better operating metrics outweigh the weak volume trend. The filing shows a business becoming more profitable on a smaller revenue base, while the durability of that improvement and a return to revenue growth remain unproven.
Read the original 8-K on SEC EDGAR ↗