Aramark

Good morning and welcome to RMARC's fourth quarter and full year fiscal 2021 earnings results conference call. My name is Paul 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, Investor Relations and Corporate Affairs. Ms. Cassell, please proceed.

Thank you, and welcome to Aramark's earnings conference call and webcast. I hope all of you are doing well. This morning, we will be hearing from our Chief Executive Officer, John Zilmer, as well as our Chief Financial Officer, Tom Andros. As a point of reference, there are accompanying slides for this call that will be viewed through the webcast. These specific slides collectively will be made available following our prepared remarks for easy access. Additionally, 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. 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 our website. So with that, I will now turn the call over to John.

Thanks, Felice, and it's good to be with all of you. Today I'll provide a strategic overview of our fourth quarter performance, recap our progress throughout fiscal 21 that included record levels of net new business. and share an initial view of the year ahead that we expect will build on the strong foundation for growth we've experienced this year. Our teams across the globe are committed to reaching for remarkable for our stakeholders driven by service, innovation, and growth. Over the course of the year, we executed on our strategic initiatives despite a challenging and complex operating environment. The cultural transformation in the business combined with our renewed close partnerships with clients and suppliers not only allowed us to navigate this unprecedented period, but also put us in a position to win and further increase performance levels across the business. In every one of our segments, we have made great progress. Among the highlights I'm most proud of, this year we meaningfully accelerated Aramark's growth trajectory by adding senior leadership talent and making organizational changes that significantly bolstered our industry and line of business expertise. including sales leadership in many key roles, by investing in growth-oriented areas of the business, by enhancing sales training and development programs, by further aligning our compensation approach with Aramark's strategic objectives, including net new business, which now represents 40% of the company's bonus incentive plan across the organization, by strengthening client and supplier relationships, and enhancing our operating infrastructure. I'd like to take a moment to discuss our strong fiscal 21 net new business performance, which we attribute to the ownership mindset we've been cultivating, our ongoing focus on innovation, and the scale of our platform. Our annualized gross new business wins sold nearly $1.25 billion, the highest in company history, representing 7.7% of pre-COVID revenue. This performance was broad-based across segments with particularly strong contribution from the education, and facilities in other sectors within FSS US. In higher education business specifically, we added a record number of new clients that further strengthens the portfolio of our largest business. Our new business wins extended across lines of business, geographies, and client size. In the United States, average annualized revenue for our new business wins was $3.4 million, emphasizing the breadth and depth of our ability to source clients large to small. our international segment continued to experience a broad-based, steady growth trajectory across all countries, specifically led by industries such as mining, education, healthcare, and BNI. Uniform's added to this performance, reflective of the investments we've made in growing this business. Our teams across the company are hard at work onboarding these new clients. We continue to benefit from greater first-time outsourcing activity, representing approximately 40% of wins globally, and nearly half of all wins within the FSS US segment derived from self-op conversions. Our strength in talent and new capabilities provide further differentiation in the marketplace and reflect how well we've adapted to the new normal. In fiscal 21, we also improved retention rates to 95.5%, 150 basis points better than our historical five-year average. We are targeting retention rates to ultimately reach 97%. Accordingly, the magnitude of new business wins, combined with significant improved retention rates, allowed us to achieve record annualized net new business performance. As examples of our progress, the annualized revenue of our net new business was over $500 million, five times higher than the average of the previous five years. The FSS US segment reported a notable improvement with record high net new business of nearly $300 million. following negative net new results in three of the prior five years, and international increased net new business to approximately 150 million, over 30% higher than its historical average. Each segment reached important milestones by increasing retention rates more than 100 basis points, led by uniforms with an improvement of 180 basis points. Collectively, this level of annualized net new business represents 3.1% of our pre-COVID level of revenue. Together with our typical base business growth, typically one to 2%, we are well on our way to our mid single digit growth goals. I'd now like to review Aramark's organic revenue performance by reportable segment in the fourth quarter that in total increased 37% year over year and reached 87% of pre-COVID levels. FSS US reported an organic revenue increase of 58% compared to the fourth quarter last year. as we implemented many of our newly created programs across sectors. We welcomed students and educators back to in-person learning at the start of the school year in both K through 12 and in higher education. Fans largely returned to stadiums at full capacity for Major League Baseball, and the National Football League season is underway. Our leisure business benefited from ongoing activity at national parks, and corrections had already returned to pre-COVID levels. BNI clients began to implement greater in-person return to work activity, although at a measured pace. At Aramark, we are fully back in our offices here in Philadelphia as of October 18th. Facilities continued serving clients with in-demand services, ensuring locations were ready and safe for increased in-person activity, and healthcare gradually improved as patient care began to normalize with a higher level of voluntary procedures, routine medical appointments, and hospital visitation. International organic revenue grew 21% year-over-year, driven by stronger performance in Canada and Europe. Sports and entertainment and education in our international geographies reported improved business activity with the pace of reopenings behind the U.S. Organic revenue in the uniform segment grew 5% in the quarter, driven by rentals and adjacency services, with hospitality clients experiencing increased levels of activity. Key areas of focus in Uniforms include higher growth rates in recurring business, customer density optimization, merchandise management, and enhanced back office utilization. As you saw from our announcement a few weeks ago, we're extremely excited to have Kim Scott join as President and CEO of Aramark Uniforms Services. I am confident that Kim's leadership and extensive commercial experience positions her well to accelerate profitable growth in this segment while simultaneously enhancing our employee and customer experiences. I look forward to Kim's meaningful contributions to the business as a member of our executive leadership team reporting to me. I also want to take this opportunity to thank Brad Drummond for his many years of service as he retires from Aramark. Now, I'd like to provide some perspective on a few relevant broader topics important to our business that have been top of mind in capturing the headlines for what seems like months. namely navigating a dynamic global supply chain and tight labor market. While we have seen supply chain disruptions in the food service industry, our scale, proactive management, deep bench of suppliers, and menu flexibility has helped us mitigate much of this for our clients. Our overall focus remains on leveraging spend, optimizing supplier relationships, and assuring availability of in-demand products, and honoring our commitments to sustainability and local diverse suppliers all of which will position us to continue to effectively weather this storm. We are also actively monitoring the markets for inflationary pressures and buying opportunities, relying on our use of fixed contract pricing and the ability to pass on market-driven pricing to moderate any near-term impact on the business. We are currently in active deployment of our new field ordering technology for our managed services business, which will streamline our operators' buying activities and ensure alignment with optimized supply chain programs. On the labor side, we continue to effectively adapt to the environment. We've been implementing strategies to mitigate labor costs led by disciplined scheduling protocols and efficient resource management aligned with demand, as well as leveraging technology in this area. We're also able to benefit from our scale by utilizing our flexible operating model, full employee base, and leveraging client locations in adjacent geographies. Additionally, I'm pleased to announce that we've taken a big step in our goal of reducing our environmental impact and carbon footprint by committing to establish a definitive target for our greenhouse gas emissions. When we finalize our goal, it will be a science-based target submitted through the Science-Based Targets Initiative, or SBTI. As you likely know, SBTI is a joint effort between the UN Global Compact, the World Wildlife Federation, and other international environmental auditing groups. This is important news for Aramark as we deepen our commitment to transparency in our environmental stewardship. I would also like to take this opportunity to commend the community service and passion exhibited by the Aramark teams globally. Our most recent Building Community Day consisted of thousands of team members leading nearly 80 virtual and in-person projects taking place in six different countries. I am extremely proud of our commitment to making a positive impact on people and planet. And now Tom will provide a detailed financial review of the business. Tom.