Aramark

Good morning and welcome to Aramark's third quarter 2020 earnings results conference call. My name is Jimmy and I will be your operator for today's call. At this time, I would like to inform you that this conference is being recorded for rebroadcast and that all participants are in a listen-only mode. We will open the conference call for questions at the conclusion of the company's remarks. I will now turn the call over to Felice Cassell, Vice President of Investor Relations and Corporate Affairs. Ms. Cassell, please.

Thank you, and welcome to Aramark's third quarter fiscal 2020 earnings conference call and webcast. I hope those listening are doing well, along with those around you. This morning, we will be hearing from our Chief Executive Officer, John Zilmer, as well as our Chief Financial Officer, Tom Undruff. As a reminder, our notice regarding forward-looking statements is included in our press release this morning. which can be found on our website. During this call, we will be making comments that are forward-looking. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of our annual report on Form 10-K and our other SEC filings. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in this morning's press release as well as on our website. With that, I will now turn the call over to John.

Thank you, Felice, and good morning, everyone. I hope all of you are staying healthy and doing as well as can be expected during these continued unprecedented times I look forward to sharing an update with you today on the current state of the business that reflects the tenacity of our teams, working in close partnership with our clients on the front lines as we navigate the ever-changing environment and seek to further Airmark's position as a key enabler in the broader recovery and beyond. In the third quarter, our actions resulted in improved client retention trends and new business wins, including Purdue University, Manhattan College, Queen's University in Canada, as well as Ford Motor Company, a new business founding partnership. Increased agility in our cost structure has led to an adjusted operating income drop through of 20% and a strengthened balance sheet with over $2.5 billion in cash availability. I'm incredibly proud of our individual team members who have continued to step up in selfless ways to serve clients at countless locations. Their response and ability to adapt in the face of significant adversity is a true testament to their dedication, work ethic, and sense of personal pride. These are the people who make Aramark such a special company, and their drive and commitment motivates me every day. As part of these efforts, we've shipped over 30 million pieces of personal protection products following our shift to certain production lines within uniforms to serve heightened demand from employees, clients, and customers. Safely provided more than 55 million meals to students in nearly 300 school districts across the country. We've opened up 400 pop-up convenience and grocery locations for frontline health care workers. Donated food, supplies, and PP&E to communities in need, including partnering with the Deborah and Leon Black family, the American Red Cross, Robin Hood, and the Marathon to provide more than 400,000 care packages to New York City health care heroes on the front lines. Partnered with the Urban League to provide meals during the summer to community members in several cities across the country, including our hometown in Philadelphia. and recognizing the critical need for health and safety, we developed Eversafe, a comprehensive approach to maintaining a superior hygienic standard that will support the safe reopening and sustainable management of our client locations. In partnership with Jefferson Health, and in accordance with the recommendations of the CDC, WHO, and other leading health organizations, Eversafe features five distinct strategic pillars. Embedding good health and hygiene practices that include carefully designed process standards, PPE, health monitoring, and promoting a culture and environment to sustain healthy practices. Creating appropriate social distancing practices into operations through visual cues, physical alterations, and other service enhancements while maintaining efficient traffic flow. Implementing new and enhanced cleaning, sanitation, and disinfecting procedures that include new processes, equipment, and cleaning agents, as well as careful assessment of high-risk areas that require special attention. employing available and emerging technologies such as artificial intelligence, human-machine interface, infrared, robotics contact tracing, and mobile solutions to further improve the safety and experience of employees and customers. As an example, we've developed and launched quick-eat convenience stores that offer customers a safe and convenient no-touch experience, and expanding and introducing new service offerings and capabilities to best meet evolving consumer dining facilities and other needs. We were also excited to introduce the Eversafe OS web-based service and mobile app, a service designed for small and medium-sized businesses, such as restaurants and retailers, where reopening safely is a critical concern and additional guidance to do so is greatly needed. This valuable resource utilizes the Eversafe proprietary platform to provide trusted information, timely and clear decision-making, and effective and sustainable execution. Activity across our different sectors has been encouraging as we partner closely with clients that are at various stages of operation. Areas within our portfolio have remained relatively stable, namely the facilities and corrections business, as well as the healthcare sector. We expect resilience in these areas, largely driven by the gradual return of elective healthcare procedures, as well as more frequent and comprehensive facility cleaning. Education was impacted from the accelerated summer shutdown as discussed on the prior earnings call. Throughout the third quarter, we continue to operate across most locations, offering extended and expanded meal programs, as well as modified retail operations. We are actively engaged in conversations with our education partners about how they will return to school. At this time, we are encouraged by the various commitments we are seeing from our higher ed and K-12 clients for their return in the fall. Tom will provide added insight on the most current trends. Sports and entertainment reflected the continued suspension of professional sports leagues and postponement of concerts and events. Sports has begun to proceed with the Major League Baseball, NHL, and NBA playing without fans as an interim solution. The NFL is taking measures in an effort to include fans in some capacity based on local jurisdiction as they kick off their season in the coming weeks. We're actively engaged with our NFL clients to help bring fans safely back to the stadiums as appropriate. Leisure activity has increased as national parks recently reopened across the country with modified and enhanced operations to meet the safety and hygiene standards required in today's environment. Demand at many of these locations has been better than expected as our national parks provide an appealing vacation destination that allows for social distancing and the freedom that comes with the outdoors. In business and industry, operations have been industry and geographic dependent. Our B&I portfolio represents approximately 20% pure white collar, 20% pure blue collar, and a 60% hybrid of the two. Many client locations continued operations in some capacity. In recent weeks, we're starting to see previously shuttered locations return a portion of their workforce. We expect this business to have a longer recovery tailwind while identifying opportunities for higher capture rates. Uniforms has demonstrated resilience Quickly bouncing back from April Tross, solution-oriented services, including PP&E that I mentioned earlier, have been in high demand as customers require hygienic products for safety. International operations are at various stages of response depending on geography. China has largely recovered, and we continue to have new client wins, particularly in health care, due to our efforts on the front lines. China drove double-digit organic revenue growth in the third quarter, an incredible achievement from the team that reinforces the value of our services in this environment. Europe and Canada are exhibiting encouraging activation trends across various lines of business while balancing country-specific government mandates. While we are experiencing a delayed impact in South America, we did just win a new extractive services client in Chile. Our international team is sharing best practices across regions that include implementing Eversafe as a new offering solution. During this time, we've not compromised our long-term growth mindset that contributed to our recent new business wins that I mentioned earlier. We look forward to working closely with our new partners on enhanced dining experiences and safer, more efficient facilities. Looking ahead, we have a robust new business pipeline and believe we are well-positioned to capture future opportunities, particularly those that are self-operated. Aramark's balance sheet remains strong with ample liquidity following our proactive actions to draw down the billion-dollar revolver and subsequently issue an upsized $1.5 billion debt offering. At the end of the third quarter, we had over $2.5 billion in cash availability. Our disappointment in our ability to be cash flow positive since the bond issuance in late April. Tom will provide more detail on our impressive cash flow trends. As we navigate the current environment and focus on our long-term strategy, we've made changes to the organization that has created a fit-for-purpose business to best support our field associates and clients. This includes action we have taken to restructure and realign resources to allow us to emerge stronger when the pandemic is behind us. Before turning the call over to Tom, I want to highlight a crucial topic that is deeply personal to me, diversity, equality, and inclusion for all. As a company, this has always been one of Aramark's core values, and we've been consistently recognized for it as a top 50 company for diversity, a best place to work for LGBTQ equality, a best place to work for disability inclusion, and a top 50 employer for equal opportunity. but there is always an opportunity to do more, and that starts with reflection, education, and action. With that, I am proud to announce that we've formed an Executive Diversity Council that will provide strategic focus to advance diversity, equality, and inclusion among Aramark employees, client partners, customers, suppliers, and the communities we serve. We've also named Ash Hansen to the newly created role of Chief Diversity and Sustainability Officer. Ash has been with Aramark for 18 years, contributing in a variety of leadership roles across the organization, including diversity and inclusion, talent management, organizational development, and human resources. We look forward to developing and executing impactful plans that will reduce inequality, support and grow our communities, and drive our sustainability strategies for generations to come. I will now pass it over to Tom for a more detailed financial review of the business.