K-Bro Linen Q3 2026 Earnings Results & Report

K-Bro Linen EPS Results

• Actual EPS: C$1.00
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A
• EPS Beat Rate: 4 of last 8 quarters

K-Bro Linen Revenue Results

• Actual Revenue: C$160.05 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

K-Bro Linen (TSE:KBL) Inc is a healthcare and hospitality laundry and linen processor in Canada. It operates in major cities across Canada, and has two distribution centers, providing management services and laundry processing of hospitality, healthcare, and specialty linens. The company provides vital products and services that help people heal, travel, live, and play. It helps hospitals and extended care centers care for the young, old, and vulnerable in environmentally responsible ways. It operates through two divisions, which are the Canadian division and the United Kingdom division.

K-Bro Linen Q3 2026 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: Third-quarter revenue rose 2.6% year over year to CAD 160.1 million, while adjusted EBITDA was flat at CAD 33.5 million; adjusted margin declined 0.5 percentage points to 20.9%, primarily due to higher fuel costs.
• Positive Sentiment: Stellar integration is progressing as planned, with about half of anticipated synergies achieved by year-end. The first of four planned seven-day operating conversions is underway, with benefits expected to begin accruing next year.
• Positive Sentiment: Healthcare revenue increased approximately 7%, and K-Bro renewed several U.K. healthcare contracts for three-to-five-year terms, including its largest U.K. customer. Management said renewal pricing was positive and future U.K. price adjustments are tied to an index that better reflects energy costs.
• Negative Sentiment: Hospitality demand was softer than historical levels in Q3, particularly in the U.K., where leisure-related volumes and more aggressive competition weighed on performance. Management expects the weakness to be temporary and said it remains confident in its pipeline.
• Negative Sentiment: Fuel costs remain a significant margin risk: diesel reduced Q3 adjusted EBITDA margin by about 0.7 percentage points, and management estimates a roughly 1% Q4 impact if current prices persist. It also cited a potential combined 1.3–1.4% margin headwind in 2027 from fuel costs and U.K. hedge expirations, before any offsets from price increases.

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to the K-Bro Linen Incorporated third quarter 2026 Results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the Operator. Please note, this call is being recorded on Friday, November 13, 2026. I would now like to turn the conference over to Kristie Plaquin.

[Kristie Plaquin, CFO at K-Bro Linen]

Thank you, operator, and good morning, everyone. Thank you for joining us today, and welcome to our third quarter results conference call. On the line with me today is Linda McCurdy, President and Chief Executive Officer. Before we begin, I'd like to remind everyone that statements made during our prepared remarks at the conference call with reference to management's expectations or predictions of the future are forward-looking statements. All statements made today which are not statements of historical fact are considered to be forward-looking statements. Certain factors or assumptions were applied in drawing a conclusion or making a forecast or projection.

[Operator]

Pardon me, just to make you aware, you are cutting out.

[Kristie Plaquin, CFO at K-Bro Linen]

From those anticipated. Risk factors that affect the results are detailed in the corporation's public filings. Call Linda McCurdy, who will provide her insights and remarks on the quarter.

[Linda McCurdy, President and CEO at K-Bro Linen]

Thank you, Kristie, and good morning to everyone. Thank you for joining us today to review our 2026 third quarter results. I will touch on some of the highlights of the third quarter, and Kristie will provide more details on our financial performance and balance sheet. Overall, we are very pleased with our third quarter results, which were consistent with our expectations. Revenue for the quarter was CAD 160 million, and adjusted EBITDA was CAD 33.5 million. Consolidated total revenue for the third quarter increased by 2.6% compared to 2025, with healthcare revenue having increased by approximately 7% and hospitality revenue by approximately 2%. In the quarter, we were successful at renewing several healthcare customers for three-to-five-year terms. Healthcare revenues represented approximately 55% of consolidated revenue, which is higher compared to approximately 53% in 2025 due to the acquisition of Stellar.

[Linda McCurdy, President and CEO at K-Bro Linen]

Our Stellar integration is progressing as expected, and we continue to anticipate run rate cost synergies will be realized over the contemplated 24-month time horizon. Over the past year, we have implemented various improvements, including planning towards the adoption of seven-day operations at certain facilities, insourcing the maintenance, workflow optimizations, realigning compensation structures, and changing certain roles. Through the end of Q3, we estimate we have achieved approximately half of the anticipated synergies. Amid a more volatile global backdrop, we are pleased with our Q3 results, underscoring our resilient growth model and business performance. As always, our experienced team is focused on disciplined operations. I will now turn the call over to Kristie to discuss our detailed financial results for the quarter, after which I will return to talk about our outlook and answer any questions. Kristie, over to you.

[Kristie Plaquin, CFO at K-Bro Linen]

Thank you, Linda. The information we are discussing is still highlighted in our 2026 quarter earnings press release issued yesterday and detailed supplemental financial information can be found on our Investor Relations website under the heading Financials. K-Bro's consolidated revenue for Q3 2026 increased year-over-year by 2.6% to CAD 160.1 million. In Canadian dollars, quarterly revenue from both the Canadian and the U.K. divisions were roughly equal, with Canada at 48.3%, U.K. at 51.7%. The increase in consolidated revenue is primarily due to the acquisition of Stellar Mayan in June, as well as the impact of price increases implemented when you consider year-to-date revenues. Consolidated adjusted EBITDA in the third quarter of 2026 was CAD 33.5 million, which was flat year-over-year. Consolidated adjusted margin decreased half a percent year-over-year to 20.9%, largely due to higher fuel costs.

[Kristie Plaquin, CFO at K-Bro Linen]

2026, particularly in the U.K., we faced significant volatility in energy costs due to current geopolitical issues. This risk has been mitigated by hedges we have in place for both diesel and natural gas, of which the U.K. hedges expire at the end of 2026. For Q3 2026, the impact of adjusted EBITDA in diesel prices was a decrease of 0.7%. For the Canadian division, adjusted EBITDA margin in the third quarter slightly decreased to 22.4% in 2026 compared to 22.8% in 2025, related again to higher fuel costs. For the U.K. division, the adjusted EBITDA margin in the third quarter decreased by 0.7% to 19.6% in 2026. The decrease is again related primarily to higher fuel costs.

[Operator]

Pardon me, you are cutting out.

[Kristie Plaquin, CFO at K-Bro Linen]

Adjusted net earnings in the third quarter [inaudible].

[Operator]

Please stand by. We seem to be experiencing technical difficulties.

[Linda McCurdy, President and CEO at K-Bro Linen]

Kristie?

[Kristie Plaquin, CFO at K-Bro Linen]

Yes.

[Linda McCurdy, President and CEO at K-Bro Linen]

You are really cutting out.

[Kristie Plaquin, CFO at K-Bro Linen]

Okay.

[Linda McCurdy, President and CEO at K-Bro Linen]

Operator?

[Operator]

Yes.

[Linda McCurdy, President and CEO at K-Bro Linen]

Okay. We're on mute, right?

[Operator]

No, you are live.

[Linda McCurdy, President and CEO at K-Bro Linen]

Okay. Kristie, do you want to start back to adjusted net earnings?

[Kristie Plaquin, CFO at K-Bro Linen]

Sure.

[Linda McCurdy, President and CEO at K-Bro Linen]

Sorry.

[Kristie Plaquin, CFO at K-Bro Linen]

Sure. Sorry. I believe it's my phone. I'll try again. Adjusted net earnings increased in the third quarter of 2026 to CAD 13 million from CAD 12 million in 2025, and included adjusted items of CAD 2.5 million. The adjusting items in the quarter include transaction costs, transition costs, and the fair value adjustment of derivative financial instruments, non-recurring losses, and intangible asset amortization related to the acquisition of Stellar Mayan. K-Bro has strong cash flow generation profile and a disciplined approach to capital allocation, which allows us to both invest in growing the business and return capital to shareholders. Distributable cash flow for Q3 2026 was CAD 21.6 million, and our payout ratio was 18.1%. Our trailing 12-month payout ratio is 26.4%. The company paid out CAD 0.3 per share in dividends during the quarter for total consideration of CAD 3.9 million.

[Kristie Plaquin, CFO at K-Bro Linen]

For the nine months ended September 30, 2026, K-Bro has repurchased and canceled approximately 67,000 common shares under the NCIB. Post-acquisition debt and leverage levels have been consistent with our expectations. We have a strong balance sheet with ample undrawn capacity on our syndicated revolving credit facility, with an operating line of CAD 175 million and an amortizing term loan of CAD 134.3 million, with a further CAD 50 million accordion available for growth purposes. At the end of the third quarter of 2026, we had an undrawn balance of close to CAD 76 million on our operating line without taking into account the accordion, which reinforces our strong liquidity. This represents a pro forma debt-to-EBITDA ratio, excluding leases, of just under 2.5x. Debt to total capitalization for the period ended September 30 was 45.3%, and total debt net of cash was CAD 211.7 million.

[Kristie Plaquin, CFO at K-Bro Linen]

I will now turn things back over to Linda for additional commentary. Linda?

[Linda McCurdy, President and CEO at K-Bro Linen]

Great, Kristie. Thank you so much. Again, I would just like to emphasize that we are very pleased with our third quarter results, and we see a positive outlook in the context of an evolving macro landscape. We are the largest healthcare and hospitality laundry and linen processor in Canada, and one of the largest in the U.K., with coast-to-coast national geographic footprints in each country. We are able to deliver industry-leading service to healthcare and hospitality customers from our network of strategically located facilities. Our services are essential to the continuity of our customers' operations. We have a highly experienced team, and we are focused on disciplined operational performance. We are a valued partner to our healthcare and hospitality customers. As an essential service provider, we have strong customer contract retention with five-year average retention rates of 97%.

[Linda McCurdy, President and CEO at K-Bro Linen]

In Q3, we were successful in renewing several healthcare contracts for three-to-five-year terms, including our largest customer in the U.K., which represents approximately 3% of consolidated revenues. For the hospitality segment, we expect solid activity will continue long term, reflecting historical seasonal trends. However, while we expect solid activity levels to continue, there has been recent competitive market dynamics and softness in volumes amid the evolving macro landscape, particularly in the U.K. Going forward, we expect combined adjusted EBITDA margins will remain at similar levels to seasonally adjusted combined historical margins. In line with our expectations, due to the lower EBITDA margin profile of Stellar, the consolidated U.K. divisional adjusted margins will be lower than seasonally adjusted historical margins. We continue to monitor the volatile energy pricing environment and the impact of diesel on our margins. In the U.K., 50% of our diesel usage is hedged and 50% floating.

[Linda McCurdy, President and CEO at K-Bro Linen]

In Canada, our diesel usage is floating. As Kristie mentioned, our Q3 2026 adjusted EBITDA margins were negatively impacted by approximately 0.7% due to prevailing diesel rates. During the month of September, we saw further large diesel rate increases. If current diesel prices were to continue, we anticipate the consolidated adjusted EBITDA margins would be negatively impacted by 1% for Q4 of 2026, relative to historical margins. We are excited about our outlook and focused on completing the Stellar integration, pursuing organic growth opportunities, and potential M&A opportunities. Strategic acquisitions of high-quality operators continue to be an important contributor to our overall growth profile. We are pleased with the early contribution of our recent acquisitions and believe they will further enhance our growth profile.

[Linda McCurdy, President and CEO at K-Bro Linen]

We evaluate potential strategic acquisitions that may complement our platform, and we look to leverage our strong liquidity position, balance sheet, and access to capital to execute on these opportunities should and when they arise. Putting people first, being dependable partners, and embracing environmental stewardship have always been part of our culture. We believe long-term value creation is guided by strong governance, disciplined operations, commitment to a sustainable future, and effective enterprise-wide risk management. We continue to embed sustainability practices across our business, including aligning practices within Stellar. By the end of the year, we will publish our fourth annual sustainability report, which provides further details on our progress across environmental, social, and governance topics. I will now open up the mic for any questions that you would have as it relates to our third quarter results.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. We have our first question from Michael Glen with Raymond James.

[Michael Glen, Analyst at Raymond James]

Hey, good morning. Linda, I am just hoping that you can give some more insight into the cost pressure. You are talking about diesel. I am just not clear. We have the hedges rolling off in the U.K. too. Are you able to give some indication about, say, both of those items together, the natural gas and the diesel, how they may impact 2027 margins in total?

[Linda McCurdy, President and CEO at K-Bro Linen]

Yeah. Kristie, actually, I am going to pass that over to you.

[Kristie Plaquin, CFO at K-Bro Linen]

Yeah, absolutely. I seem to be having an issue this morning. So overall, I guess in terms of diesel, should the current rates prevail, we would expect that the impact we are seeing next year and the disclosure we have provided related to the impact for Q4, which is 1%, would carry forward into 2027, acknowledging that some of that impact would already be reflected because we would have already experienced some of the higher gas prices in 2026. On top of that, we will have our U.K. hedges roll off for both natural gas and for diesel.

[Kristie Plaquin, CFO at K-Bro Linen]

As we have disclosed previously, about half of our diesel is hedged in the U.K. for 2026. Given that, we would expect margins to be negatively impacted as a result of that rolling off, given the about Q3. Now we have paid about a 1% impact to negative impact to the margins in [inaudible].

[Linda McCurdy, President and CEO at K-Bro Linen]

Kristie, you are going to have to just repeat the last few sentences.

[Kristie Plaquin, CFO at K-Bro Linen]

Oh, I am very sorry. I clearly am having a significant phone issue today. Apologies. To summarize, natural gas would be about a negative impact of about 1%, Michael, and the diesel impact would continue into 2027 with a further 0.3% or 0.4% impact as the hedge rolls off.

[Michael Glen, Analyst at Raymond James]

Okay. So in aggregate, call it like 1.3%. As things stand today-

[Kristie Plaquin, CFO at K-Bro Linen]

Correct.

[Michael Glen, Analyst at Raymond James]

-if we're looking at margins, what we're forecasting for margins at the end of this year consolidated, we should be thinking about a 1.3% or 1.4% cost headwind associated with these two items.

[Kristie Plaquin, CFO at K-Bro Linen]

Correct.

[Michael Glen, Analyst at Raymond James]

Okay.

[Linda McCurdy, President and CEO at K-Bro Linen]

Recognizing that that does Michael, I would also caveat that that doesn't include price increases, Kristie, correct?

[Kristie Plaquin, CFO at K-Bro Linen]

Correct. That's at a point in time. To the extent we are successful, which we believe we will be successful to pass some of those on, that will be mitigated throughout the year. But just specifically from a cost perspective, that would be the impact.

[Michael Glen, Analyst at Raymond James]

Okay. On the renewals in the healthcare that were indicated, are you able to say whether or not you were able to pick up any incremental volume with those awards, Linda?

[Linda McCurdy, President and CEO at K-Bro Linen]

I would say that the incremental volume, Michael, will come from conversion to reusable. I would say that we have been able to secure price increases that have covered the cost increases. So we are very happy with the renewals. Not to get into too much detail for competitive reasons, but I would say the renewals from a pricing perspective have been positive.

[Michael Glen, Analyst at Raymond James]

Okay. Then just my last one, the competitive dynamic that you described, that is really specific to the hospitality in the U.K. Can you say that that is regionally? Is it concentrated, say, at Fishers or one of the regions as well?

[Linda McCurdy, President and CEO at K-Bro Linen]

I would say most of the impact has been in the north. Yeah.

[Michael Glen, Analyst at Raymond James]

Okay. Thank you.

[Operator]

We have our next question from Ahmed Abdullah with National Bank of Canada.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Yeah. Hi, good morning. Thanks for taking my question. On the healthcare renewals, I presume that those renewals were primarily in the U.K., given the duration you quoted, which is the three to five years. Were you able to kind of negotiate to preserve profitability and perhaps improve protection against energy and labor inflation in those new contracts?

[Linda McCurdy, President and CEO at K-Bro Linen]

So, answer to the two-part question is yes. The renewals have been in the U.K. on the healthcare front. From a price increase going forward, it is tied to the national textile index, which weights natural gas and diesel more appropriately to the cost structure of a laundry. So, I would say there is just less risk of increased costs not being passed on appropriately. So, just the mechanisms are a little bit different in the U.K.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Okay. That is helpful. Just touching on the synergies, I apologize if it was mentioned during the prepared remarks, but I could barely hear part of the section. You mentioned a 40% capture so far. Where do we stand today? When do you expect the first seven-day conversions to begin meaningfully contributing to that run rate?

[Linda McCurdy, President and CEO at K-Bro Linen]

I would say that we anticipate that half of the synergies have been achieved by the end of the year. The first conversion to seven-day working is live now of one of the four plants. I would say we are working through the operating issues that go along with that. I would say the benefits will start accruing at the beginning of next year, and it is work in progress. But the first transition has happened. The next three, one will be in December, two will be in the new year.

[Ahmed Abdullah, Analyst at National Bank of Canada]

Okay. That is helpful. Just finally, any updates on the Canadian kind of outsourcing pipeline? Any updates on the healthcare contract in Vancouver renewal or Ontario?

[Linda McCurdy, President and CEO at K-Bro Linen]

In terms of the West, work in progress. The contract does not expire until April of 2027. We feel very well-positioned. Nothing new to report there other than things continue to move in a positive direction. I would say as it relates to other outsourcing opportunities, we remain confident that over the next one to three years, there will continue to be additional opportunities.

[Ahmed Abdullah, Analyst at National Bank of Canada]

All right. Thanks for the color. I will pass the line.

[Operator]

We have our next question from Cheryl Zhang with TD Cowen.

[Cheryl Zhang, Analyst at TD Cowen]

Hey, good morning, Linda and Kristie. Great to hear from you.

[Linda McCurdy, President and CEO at K-Bro Linen]

Good morning, Cheryl.

[Cheryl Zhang, Analyst at TD Cowen]

Good morning. Our first question is on just to double-click on hospitality. I am wondering how the demand trended over the course of Q3 and maybe into early Q4. Are you seeing major differences between the U.K. and Canadian performance? I wonder if you could also elaborate on what you mean by competitive market dynamics. That would be great.

[Linda McCurdy, President and CEO at K-Bro Linen]

Sure. I would say definitely Q3 was a soft quarter relative to our historical experience. I would say it was softer in the U.K. than it was in Canada. There was some hangover in Canada from FIFA, which also impacted Q3. Competitive dynamics in the U.K. on the hospitality front, I would say that we have seen some aggressive behavior by certain market participants. We are very equipped and able to respond given our national platform, and we expect it to be a temporary impact, and are confident in our ability to secure new hospitality business in the U.K. But it certainly has been a little more competitive, but we are well-positioned to withstand the competitive environment.

[Cheryl Zhang, Analyst at TD Cowen]

That is great color. Thank you. Just a follow-up on that. Is the volume softness mostly seen in leisure travel, or are you seeing a bit of both leisure and business?

[Linda McCurdy, President and CEO at K-Bro Linen]

I would say it is more leisure, recognizing that in the U.K., more of our volume is geared towards leisure versus Canada, where we operate mostly in the large cities that have a large business travel component. So, I would say that is why we are more impacted in the U.K.

[Cheryl Zhang, Analyst at TD Cowen]

Okay. Understood. Lastly, before I requeue, are there any notable update or progress that you might share with us in terms of gaining conversion on the reusable linen products in the U.K.?

[Linda McCurdy, President and CEO at K-Bro Linen]

I would say that it takes time. The sales cycle, it just takes time, but we are getting positive responses and feedback from our customers. I wouldn't say there's anything meaningful to date.

[Cheryl Zhang, Analyst at TD Cowen]

Okay, helpful. Thank you. I'll requeue.

[Operator]

Our next question is from Justin Keywood with Stifel.

[Justin Keywood, Analyst at Stifel]

Good morning. Thanks for taking my call. Nice to see the results. It sounds like there's a few kind of tailwinds and headwinds. How should we look at organic growth going into next year? I believe the target has been mid-single digit at one point, although that was at a lower scale in the business. Is that something that could be achievable in the next 12 months or so?

[Linda McCurdy, President and CEO at K-Bro Linen]

Justin, good morning, and thank you for your question. I do. I think that some of the softness we're seeing in Q3 and likely into Q4 will be temporary. We're confident in the pipeline for 2027, especially given the fact that we have a geographic reach across all of the U.K. So I think that this is very temporary, and we feel confident based on the bids that we have out, the outreach we have to our national customers, and some positive feedback that we're seeing. So I think that's a fair enough number.

[Justin Keywood, Analyst at Stifel]

Great. Good to hear. With the B.C. provincial government change, does that impact your outlook for the business as far as the current contract negotiations, but also just provided healthcare is a big focus of the new incumbent government, and there's set to be several new hospital projects, we believe, but interested in your opinion on that.

[Linda McCurdy, President and CEO at K-Bro Linen]

I think that we'll see a much friendlier business environment to operate in. I don't think it'll have a meaningful impact on the existing contracts we have, given the timing of a new government, given the timing of where we're at in the various processes. But I think longer term, who knows what that could look like? I think it is a friendlier business environment, however, Justin.

[Justin Keywood, Analyst at Stifel]

That's great. Thank you for taking my questions.

[Linda McCurdy, President and CEO at K-Bro Linen]

You bet.

[Operator]

There are no further questions at this time. I will now turn the call over to Linda McCurdy for closing remarks.

[Linda McCurdy, President and CEO at K-Bro Linen]

Thank you, everyone, for joining this morning. We do apologize for any of the technical issues and will be available to answer any follow-up questions should they arise. Happy Friday to everyone, and I'll leave it to everyone to be able to go answer their very full inboxes, which I'm sure we all have now. Have a great weekend.

[Operator]

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.

Participants

Executives

• Kristie Plaquin, CFO
• Linda McCurdy, President and CEO

Analysts

• Michael Glen, Analyst at Raymond James
• Ahmed Abdullah, Analyst at National Bank of Canada
• Cheryl Zhang, Analyst at TD Cowen
• Justin Keywood, Analyst at Stifel