Aramark

Good morning and welcome to Aramark's first quarter 22 earnings results conference call. My name is Kevin and I'll be your operator for today's call. At this time, I'd like to inform you that this conference is being recorded for rebroadcast and that all participant lines 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 Phyllis Cassell, Vice President, Investor Relations, Corporate Affairs. Ms. Cassell, please proceed.

Thank you and welcome to Aramark's first quarter fiscal 2022 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 Zillmer, 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 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.

Thanks, Felice, and it's good to be with all of you again. In December, we had the opportunity to come together in person at our Analyst Day to provide an overview of the state of our business, highlight our value-creating strategies, and introduce our long-term performance goals through 2025. as well as the actions we're taking to achieve them. As we review our first quarter results this morning, we're exceptionally pleased to see the significant progress that we've made in both our performance and ability to achieve our financial targets. Fiscal 2022 has already begun with great enthusiasm across the organization that's building on the momentum created last year, which included record net new business. Most notably, we're off to an impressive start in net new business driven by strong retention rates and newly awarded contracts. Just last week, we announced the largest client win in Aramark's history with Merlin Entertainments, a global leader in location-based family entertainment and one of the world's largest attraction operators. We will be providing services for Merlin that span seven locations in the UK and U.S., This is a differentiated self-op conversion that represents a unique growth opportunity for Aramark outside our historical portfolio to serve a new dynamic type of client. And we believe our experience, expertise, and scale positions the partnership for strong success. We've already begun to work closely with our team and will begin operations next month in the UK. Additional new business wins were broad-based, with particular strength in facilities, as well as launching Walmart in Chile within our international segment. Our sales progress is off to a strong start to the year, and our pipeline continues to expand. In the quarter, we also embarked on two strategic partnerships with innovative businesses that align with our mission and service offerings. The first is with Patient Engagement Advisors, or PEA, which adds a technology and service platform to our healthcare portfolio that assists our clients by providing continual care, both pre- and post-discharge for patients, extending our services beyond the four walls of the hospital. This added capability enables us to better serve an evolving healthcare industry by working in close partnership with our clients to customize care, remove non-core tasks, connect with the community, and improve the healthcare system's financial viability and network integrity. The second, Star Restaurant Organization, based in our hometown of Philadelphia, is one of the largest multi-concept restaurant groups in the United States. Our exclusive agreement is designed to provide unique hospitality experiences for clients while enabling new growth opportunities by implementing Star's creative concepts and brands across our business. Turning now to Aramark's performance in the first quarter, organic revenue increased 41% year over year and reflected sequential quarterly improvement that reached 92% of pre-COVID fiscal 19 levels. The quarter reflected ongoing recovery in all segments, with our teams across the globe continuing to manage through various stages of COVID, especially the Omicron variant and our ability to adapt to dynamic situations. Organic revenue in U.S. food and facilities increased 61% year over year. Key drivers across each sector included education kicking off the academic year with nearly all clients holding in-person learning, while managing through some COVID-related delays in specific geographies. In higher ed, students largely resided on campus with meal plans intact. Building on our relationship with Purdue University, we opened the Purdue Memorial Student Union that serves thousands of visitors daily. We played an integral role in redesigning the facility that included creating a culinary concept in collaboration with alumnus and former NFL quarterback Drew Brees, already becoming a marquee destination on campus. In K through 12, we continue to benefit from the universal government sponsored programs. Education is currently gearing up for the upcoming new business selling season that typically begins in the spring and we remain confident in the next academic cycle. Sports leisure and corrections demonstrated improved performance. Sports and entertainment experienced double-digit per capita spending growth enabled by technology and concept innovation. Client participation in the MLB playoffs early in the quarter as well as strong levels of fan attendance throughout the NFL regular season contributed to year-over-year growth. We also offer our congratulations to our client, the Cincinnati Bengals, on their AFC championship victory and wish them luck in the Super Bowl on Sunday. Leisure maintains steady performance in the quarter with a focus on a strong upcoming season. We're excited to showcase reopenings, new renovations, and outdoor programs that enable vacationers to explore unique natural landscapes, particularly within our national parks portfolio. Corrections, where we continue to expand our efforts to reduce recidivism, once again performed above pre-COVID levels. BNI continued to experience greater in-person activity while still measured. Clients have implemented increased office safety protocols and we expect additional sales opportunities from higher participation rates, meal subsidies, and customized offerings. Facilities and other grew double digits compared to pre-COVID levels due to in-demand services and project-oriented add-ons. In addition, strong levels of new account wins contributed to this performance. and healthcare demonstrated year-over-year growth as patient visits and retail activity gradually normalized. This team remains laser-focused on first-class patient and caregiver experiences. FSS international organic revenue grew 28% year-over-year and reflected notable improvement compared to the previous quarter as Europe and Canada experienced improved activity levels in the sports and entertainment and education businesses. China, Chile, and Spain continue to outperform pre-COVID levels on a constant currency basis, with double-digit growth in revenues compared to first quarter fiscal 19. As we enter the 22 calendar year, government programs are expected to be reduced or eliminated in various countries, shifting their focus to reopenings. Organic revenue in uniforms increased 7% year-over-year, reaching 99% to pre-COVID levels in the quarter, with December reflecting the first month higher than pre-COVID levels. Kim Scott, who you heard from in December, has led this segment for just 120 days, and the team is already making an impact with a focus on base recovery, value delivery from recent investments, and building out a strategic growth plan to deliver a meaningful step change in organic growth. In supply chain, we are managing through the disrupted environment through pricing initiatives, supplier partnerships to ensure product availability, as well as off-program utilization. The proactive actions we've taken combined with Aramark scale, deep supplier bench strength, and menu flexibility have helped mitigate issues for our clients and customers. We continue to monitor our supply chain globally to ensure we remain ahead of the curve. We are proactively addressing inflation and wage pressures through fixed contract pricing, menu reengineering, and product alternatives. We've also just launched a capability that allows field employees to receive their pay immediately at the end of a shift, a compelling incentive that has been effective during this period. Two weeks ago, we released our comprehensive Be Well, Do Well impact report that highlights Aramark's key areas of focus for ESG and our path for delivering on our sustainability commitments. We've also built a strong internal model to embed sustainability across our business. As a company, we took steps to strengthen our governance, resource teams for success, and significantly increase our transparency by providing more information and data than ever before. aligned with the Sustainability Accounting Standards Board, the Global Reporting Initiative, and the Task Force on Climate-Related Financial Disclosures. Diversity, equity, and inclusion remain central to our core values at all levels of the organization, and we are proactively pursuing a DEI strategy that will expand opportunities for everyone. We've built a strong foundation, and I'm excited to continue the progress and impact of our work in 2022 and beyond. Last week, Fortune Magazine released its list of the world's most admired companies, and Aramark ranked in the top 100 globally. More notably, we were first in the diversified outsourcing category, up significantly from sixth place last year. In a year that has been both historically challenging and inspiring, this news was especially gratifying. I remain convinced that the team's unwavering commitment to our vision of being the most admired employer and trusted hospitality partner is more than just a catchphrase. It's our way of doing business. Before turning it over to Tom, I would like to highlight the recent election of two new members to Aramark's Board of Directors at our annual meeting last week, Patricia Lopez and Ken Kaverian. Patricia's balance of creative, strategic, and operational skills will add a new perspective to our strategic direction. and Ken's deep expertise of the digital landscape will be a valuable asset to further drive innovation. We're looking forward to both joining our board and providing a meaningful impact. I would also like to thank Irene Estevez, who announced her retirement from our board, for her valued contributions since 2015, and most recently as the chair of our finance committee. I'll now turn the call over to Tom for a detailed financial review of the business.