Aramark

Good morning and welcome to RMARC's third quarter 2021 earnings results conference call. My name is Paul and I'll 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 the 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 Solis Cassell, Vice President, Investor Relations and Corporate Affairs. Ms. Cassell, please proceed.

Thank you, and welcome to Aramark's third quarter fiscal 2021 earnings conference call and webcast. I hope those listening are doing well. 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 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 turn the call over to John.

Thanks, Felice, and thanks to all of you for joining us today. This morning, I'll provide a strategic review of the business, as well as highlight the significant opportunities ahead that we believe will contribute to Aramark's strong and profitable growth trajectory. In the third quarter, revenues improved as the quarter progressed, led by an accelerated pace of client reopenings in the United States, particularly within our sports and entertainment and leisure portfolios. This upward momentum continues largely due to our team's dedication to serving clients and focusing on our growth agenda. Our ongoing commitment to be a trusted partner has led to significant new year-to-date business and high levels of client retention that exceed 96%. The selling season in higher education just finished, and we achieved a record number of new account wins driven by historically high closure rates. a testament to our investment in leadership, sales resources, and training. In the past few months alone, we've added numerous higher ed institutions to the client portfolio, including the University of South Carolina Beaufort and St. Peter's University. And we are in the process of finalizing additional contracts that are preparing to begin operations for the fall semester. We are also extremely proud to announce we've added five historically black college and university clients this year, including North Carolina Central University and Elizabeth City State University. We continue to expand and extend our current partnerships and are pleased to announce that we have finalized a 10 year contract with the University of North Carolina at Chapel Hill extending a 20 year partnership. Beyond higher education, new business wins occurred throughout the organization, including our B&I sector, adding Walmart's headquarters, and our sports and entertainment business, gaining the athletics programs for the University of Arizona and Virginia Tech, just to name a few. And in K-12, we now provide food service to the Fort Worth Independent School District, a significant self-hawk conversion. We are seeing greater first-time outsourcing activity with nearly half of our wins in the U.S. segment coming from self-op conversions this fiscal year, up from historical levels of approximately one-third. In our international segment, we proceeded to win broad-based new business across all geographies that most recently includes the addition of the University of Toronto, Mississauga. We're pleased with our overall sale progress to date, and there are additional significant opportunities in our pipeline that we expect to close in the coming months, as well as into our new fiscal year. Turning now to Aramark's performance in the third quarter, organic revenue increased 34% year over year and reflected ongoing sequential quarterly improvement. AOI margins grew to 3.6% in the quarter, driven by cost discipline and scalable operating efficiencies. In reviewing the quarter by business segment, U.S. food and facilities drove an organic revenue increase of 52% year over year, resulting in solid sequential quarterly revenue improvement. Education began notably recovering before the final bell of the academic year. The team is aggressively preparing for the upcoming fall semester when we expect essentially all clients to return to in-person learning. K-12 continues to benefit from universal government-sponsored meal programs that are extended through June of 2022. In higher ed, we're providing additional meal flexibility, new offerings, and digital innovation. This includes the launch of Food Lab that features rotational menu concepts, unique product introductions, and seasonal events, in addition to premiering Restaurant Row in partnership with local restaurant entrepreneurs. Sports leisure and corrections demonstrated significant improvement, especially at the end of the quarter. The NBA steadily increased fan counts throughout the playoffs, and all of our Major League Baseball clients moved to full capacity by July 1st, aside from the Toronto Blue Jays, who just returned home last week, permitting partial fan attendance. Leisure kicked off the recreational season, that typically begins in late May, with strong visitor frequency following record reservation demand. Corrections has already returned to pre-COVID levels. The sector has experienced highly encouraging trends as many return to typical summer activities, attending baseball games, concerts, and the national parks. In the coming months, we are also gearing up for full capacity expected throughout our NFL portfolio. Business and industry experience an uptick in activity throughout the quarter as companies execute return to work strategies, we expect a greater proportion of clients to be in person post Labor Day. Many clients are offering food services as an added incentive to further attract employees back to the workplace that includes adopting subsidized pricing or offering complimentary meals. And we've recently implemented our artificial intelligence and touchless payment technologies in many of our client locations to create speed of service and compelling grab and go options. Facilities and other has outperformed pre-COVID levels driven by more frequent and comprehensive services. The facilities business had great success in vertical sales, extensively expanding its offerings to existing client locations. Healthcare steadily improved, largely reflecting increased retail activity as visitor restrictions eased. The business is expected to greatly benefit from heightened demand and elective procedures that had been delayed due to COVID. Our acquisition of Next Level Hospitality officially closed on June 4th and has already contributed over $23 million in revenue, which we believe is indicative of the growth opportunities for it ahead. International continues to effectively manage through various stages of geographic recovery as a team exhibits ongoing agility and responsiveness in addressing real-time client needs. Organic revenue increased 28% year-over-year, with areas such as China already surpassing pre-COVID levels, and Chile operating at high capacity driven by mining services given the very high demand for copper. From serving world leaders and delegations at the NATO summit in June to the athletes at the Olympic and Paralympic villages, it is a privilege to provide clients the support that they need. Uniforms continues to make progress in its strategies to optimize new sales resources, in addition to implementing the ABS rollout currently underway. Organic revenue increased 5% in the third quarter compared to last year, as most base volumes rebounded. We have seen a slower recovery in our hospitality business, approximately 20% of pre-COVID revenues, and the Canadian market where government-imposed restrictions were still in place throughout the quarter. Adjacency services, including first aid and restroom management, once again drove double-digit growth, and we continue to see a significant opportunity to expand these offerings. Retention rates have improved 300 basis points, and customer satisfaction scores increased to 10% higher than pre-COVID levels, a reflection of the transformative actions underway. In supply chain, our team has been effectively managing through market and category needs, working in close collaboration with our clients and supplier partners. This includes leveraging our significant purchasing scale and a broad bench of cross-channel partners. We're also deliberate in our menu design, given the inflationary environment, and apply flexibility on menu alternatives as appropriate. While it's not our preference, we are able contractually to pass on increases in supply chain pricing. Supply chain's overall focus remains to optimize spend, ensure availability of innovative products, honor our commitments around local and diverse suppliers, and stay true to our sustainability efforts. On the labor side, we're confident in our ability to appropriately navigate the current marketplace. We have a strong talent acquisition team and compelling programs in place designed to attract top-tier talent, including our newly instituted employee stock purchase program, all featured in our recently launched Aramark Careers website designed to create an optimal candidate experience. Aramark is consistently recognized as an employer of choice and highlighted as one of the world's most admired companies by Fortune. We've been successfully implementing strategies to mitigate labor costs led by discipline scheduling protocols and efficient resource management aligned with demand, as well as differentiation through innovative technology. We're also able to benefit from our scale by utilizing our full employee base and leveraging client locations in adjacent geographies. Lastly, I'm extremely proud of our Be Well, Do Well commitment that continues to make important strides to reduce inequity and improve the health of those across the globe. Through our Healthy for Life initiative, we were honored to have recently been recognized by the American Heart Association with a reward for meritorious achievement based on our efforts to promote better nutrition and lifestyle. We are also appreciative to just be named as one of the best companies for multicultural women by Sarah Mount, as well as one of the best places to work for disability inclusion, with a score of 100% on the Disability Equity Index for the fifth consecutive year, a reflection of our dedication to create equity and increase access to opportunities for our team. Before turning it over to Tom, I want to take a moment to thank our board member, Calvin Darden, for his many contributions to Aramark following his retirement announced a few weeks ago. Cal closely partnered with me to create our Executive Diversity Council that is focused on leveraging diversity, equity, and inclusion to elevate our culture, drive business outcomes, and advance positive social impact. We wish Cal the best. Now, Tom will provide a detailed financial review of the business.