K-Bro Linen Inc.

K-Bro reported Q3 2025 revenue of $156 million and adjusted EBITDA of $33.5 million, up 49.3% and 45.9%, respectively, from Q3 2024. Consolidated EBITDA was $32 million, up 40.2% from $22.8 million, and net earnings were $8.9 million versus $8.1 million last year. Adjusted EBITDA margin was 21.5% versus 22.0%, and EBITDA margin was 20.5% versus 21.9%. By segment, healthcare revenue increased 66.8% and hospitality revenue increased 33.6%; Canadian adjusted EBITDA margin was 22.8% versus 20.8%, while U.K. adjusted EBITDA margin was 20.3% versus 24.3%. Distributable cash was $19.6 million and payout ratio was just under 20%; the company paid $0.3 per share in dividends, or $3.9 million total. Net working capital was $95.7 million at September 30, 2025, and total debt net of cash fell to $220.3 million from $228.3 million. Management expects combined adjusted EBITDA margins to remain near seasonally adjusted historical levels, with U.K. margins lower than historical levels due to Stellar’s lower margin profile. Kristie Plaquin said a 25% to 26% tax rate is a reasonable modeling assumption. For CapEx, she said the remaining balance of the non-Stellar ongoing capital is probably in the $2 million range over the rest of 2025, with ongoing 2026 CapEx spread fairly evenly across the year; for Stellar Mayan CapEx, about [GBP 4 million] had been committed, with [GBP 3 million] likely in Q4, some spilling into Q1, the balance within Q1, and the remaining [GBP 1 million] in Q2 2026.

Linda McCurdy framed the quarter as evidence that K-Bro is successfully scaling into a national platform in both Canada and the U.K., with the Stellar Mayan acquisition giving the company a broader footprint and more geographic diversification. She emphasized that integration is still early but progressing well, with a 24-month synergy horizon, and said the company is using the acquisition to deepen its healthcare offering and expand hospitality opportunities in the London market. Her tone was upbeat and confident, while still noting that U.K. margins will remain below historical levels because of Stellar’s lower margin profile.

Kristie Plaquin focused on the bridge from revenue growth to profitability and cash generation. She cited adjusted EBITDA of $33.5 million, net earnings of $8.9 million, distributable cash of $19.6 million, and a payout ratio just under 20%, along with a dividend of $0.3 per share. She also highlighted a strong balance sheet, with $175 million operating line capacity, a $134.3 million term loan, a $50 million accordion, about $54 million undrawn on the operating line, and pro forma debt-to-EBITDA of about 2.7x excluding leases; total debt net of cash declined to $220.3 million. On costs, she noted higher wages, linens, delivery, materials, and occupancy tied largely to Stellar Mayan, while Canadian margin improvement came from labor efficiencies and the carbon tax removal.

Analysts focused heavily on whether Stellar Mayan’s higher cost structure can be improved and how long that might take. Linda said the U.K. wages-and-benefits ratio should improve over time through shift changes, eliminating costly night shifts, CapEx-driven efficiency gains, and price increases at renewal, but likely not fully return to the old percentage; she said prior Fishers improvements took up to 24 months. Questions also covered Canadian organic growth, where Linda said mid-single-digit growth is a reasonable expectation, possibly slightly higher, and that she expects that pace to continue through 2026. On CapEx and working capital, Kristie said the remaining non-Stellar capital spend is about $2 million for 2025, 2026 CapEx should be even across quarters, working capital should follow historical trends, and the tax rate should be modeled at 25% to 26%.