Aramark

Good morning, and welcome to Aramark's fourth quarter and full year 2020 earnings results conference call. My name is Victor, 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 listen-only mode. We will open the conference call for questions at the conclusion of the company remarks. I will now turn the call over to Felice Cassell. Vice President of Investor Relations and Corporate Affairs. Ms. Cassell, please proceed.

Thank you, and welcome to Aramark's fourth quarter and fiscal year 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 Androff. 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 and 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. So with that, I will now turn the call over to John. John?

Thank you, Felice. Good morning, everyone, and thank you for joining us. I hope you and your families are staying safe and healthy. Today I plan to review the current state of the business, reflect on the impactful actions we've undertaken since my return to the company, as well as provide an initial view of the year ahead, collectively driven by our commitment to unlock Aramark's significant growth potential. I remain incredibly proud of our teams on the front line around the globe for their passion, resilience, and ability to provide innovative solutions to serve clients in their greatest time of need. Their heroic actions and extraordinary work ignited our ability to quickly adapt and ensure continuity of service. As a result, I truly believe we're a stronger organization today with a more clearly defined purpose. I would also add that our employees have a true and profound ownership mentality that meaningfully benefits Aramark and our customers. Our business transformation strategies over the past year, and most notably since COVID, have resulted in leadership and organizational change that advance the execution of our initiatives, strengthened client and supplier relationships, a renewed entrepreneurial spirit with a growth mindset. We've made investments in accelerating growth, effective management of our flexible business model across a diverse portfolio that led to an adjusted operating income drop through of 22% on a constant currency basis over the second half of the fiscal year while continuing to invest in growth resources and delivered positive cash flow since the bond issuance in April, resulting in our ability to maintain ample cash availability at quarter end. The company's agile platform contributed to improved sequential quarter-over-quarter performance. The business exhibited encouraging revenue trends across all segments compared to the third quarter as we navigated the challenging environment. We mobilized to share experiences across businesses and geographies. Cross-functional teams were established that included leaders in operations, technology, marketing, and new business sales, to leverage best practices in order to anticipate client and consumer needs, and to innovate and implement solutions. This business interconnectivity has proven exceedingly advantageous. I'd now like to turn to the performance by business segment in the quarter. U.S. food and facilities drove solid improvement compared to the third quarter driven by key factors in each business sector. Education demonstrated progress in the fourth quarter as most clients employed various in-person and hybrid learning models. In higher education, we are currently serving approximately 90% of client locations in some manner with a meal participation rate at 70% of prior year levels, while experiencing lower retail and catering volumes. In K-12, we're actively participating in the universal government-sponsored meal programs that provide all students free meals in their school. in addition to offering meal delivery and pickup solutions. This program was just extended through the end of the 2021 school year. Sports leisure and corrections reflected quarter-over-quarter improvement, although stadium attendance remained sparse. Sports and entertainment is reactivating as professional sports leagues begin to include fans in limited capacity based on local jurisdiction. Leisure typically at its peak during the summer months, reflected increased activity with modified operations, and corrections remained stable. While additional business and industry client locations opened throughout the fourth quarter, companies remained measured in their return-to-work strategies, with decisions driven largely by need and corporate culture, as well as local regulatory restrictions. As previously stated, we expect B&I to have a longer recovery tailwind, We've developed innovative offerings that include delivery solutions as well as enhanced capabilities to drive higher capture rates in our locations. Performance in facilities and others showed resilience as clients requested more frequent and comprehensive services as locations reopened. We are pursuing extensive cross-selling opportunities in this area as hygienic safety is a top priority. Our healthcare-based business remained stable with signs of strengthening performance as elective procedures increased and visitor restrictions began to ease. Going forward, we anticipate a significant new business pipeline as healthcare systems evaluate the benefits of self-op conversion. Over the course of the quarter, we invested in our healthcare sales capabilities to capitalize on these multiple opportunities and create another strong platform for growth. International reported sequential quarterly improvement across all regions that reflected the team's tenacity and ability to manage through government-imposed restrictions. Operations remained at various stages of response depending on geography and industry-specific focus. Europe demonstrated improving trends as shutdowns gradually eased in the summer months, and we are currently leveraging past experiences as further government-imposed restrictions are undertaken. Rest of world exhibited resilience. led by China yet again, delivering double-digit revenue growth. The international team continued to win diverse new business in the quarter, including mining in Chile, several healthcare clients in China, as well as manufacturing in Korea and Mexico. This sales momentum in international continues with over $30 million already sold in the first quarter, led by a balanced, efficient, and aligned sales resolve. Uniforms has emerged as a particularly high-demand business with meaningful opportunities ahead. Rentals experienced improving trends in addition to increased client interest and adjacency services, including PP&E. The team remains committed to implement value-enhancing strategies that include increasing our sales resources. We added 150 new members to the sales force just over the past year, with plans to add an additional 100 in fiscal 21. expanding adjacency services, particularly in safety and sanitization, and fully integrating our efficient ABS route accounting system. Over the course of the quarter, we converted to additional markets and expect the remaining operations to largely be on this platform by later this year, creating efficiencies through optimized pricing strategies, enhanced data analytics, and improved service capabilities. In supply chain, we continue to leverage our various spend pools to drive productivity, cost reductions, and efficiency. Our ongoing focus on deepening and strengthening our most strategic supplier partnerships is targeted to deliver not just productivity, but also improvements in program areas such as culinary collaboration and product optimization to ensure client and consumer satisfaction. As we effectively manage the business through this unprecedented period, we remain highly committed to building Aramark's growth paradigm. Such progress is most recently reflected in higher education at Sacramento State University, a prominent self-op conversion that just announced its intention to outsource to Aramark. Looking ahead, our growth opportunities will be driven by leveraging innovation, taking place at a rapid pace to create seamless experiences for clients, particularly through adapted offerings that serve in the new environment. Whether our robotic capabilities New applications in food delivery or autonomous grab-and-go, convenience locations that include quick eats are award-winning new concept. We have developed unique platforms with new and enhanced approaches to serve clients. Technology has also been deployed to advance experiences such as cashless and contact-free payment options, particularly in our sports entertainment business and B&I sector, with strong initial success. In facilities, we just launched Aramark Intelligent Workplace Experience, or AIWX Connect, technology that utilizes real-time digital inputs from building systems, wireless sensors, and occupant feedback to create safer environments and improve building operational performance. We are also applying our proprietary Eversafe platform focused on strategies to create client confidence in reopening and and ongoing management of locations while maintaining strict safety and hygiene protocols. We expect to scale these services as appropriate to reflect the ever-changing needs of our clients. We also continue to add organizational bench strength that most recently includes the appointment of Denise O'Brien in early November to lead sales enablement where she will partner with the businesses to support and drive Aramark's growth priorities, including sales talent acquisition, supporting large account client strategies as well as sales analytics. Denise previously spent 27 years with Aramark in various leadership capacities, from field operations to sales and corporate functional roles. Before I turn the call over to Tom, I want to acknowledge our dedicated team members who continue to support our community and philanthropic efforts despite the challenges of COVID-19. While we were not able to hold our traditional in-person Aramark building community day this fall, Our teams mobilized to donate back-to-school and health supplies to public schools and provided grants to our community partners for pandemic relief, food insecurity, and other projects. I'm extremely proud of this commitment and the positive impact it made in our local communities that complements our deepening partnership with the Urban League. In addition, last week we announced a collaboration with American Corporate Partners, a national nonprofit organization to help returning veterans and and active duty spouses find their post-military careers through one-on-one mentoring, networking, and online career advice. It's an honor to be affiliated with such a commendable cause. I will now turn the call over to Tom for a detailed financial review of the business.