Aramark

Good morning and welcome to Aramark's fourth quarter and full year fiscal 2022 Earnings Results conference call. My name is Livia 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 on 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. Cosell, 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 Dillmer, as well as our Chief Financial Officer, Tom Ondra. As a point of reference, there will be accompanying slides for this call that can be viewed through the webcast. These slides will be made available following our prepared remarks also for easy reference. 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 and DNA 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 U.S. 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 Don.

Thanks, please. And thanks to all of you for joining us. This morning, Tom and I will review our fourth quarter performance and briefly recap our progress throughout fiscal 22. We'll also preview the year ahead that is anticipated to build upon the strong momentum the business has established over the past couple of years. And finally, we will provide an update on the previously announced uniformed services spinoff transaction, which is expected to occur in the second half of fiscal 23. As I think about the past year, I am incredibly proud of our teams across the globe who have embodied the client-focused, profitable growth culture we set out to establish. Despite a challenging and complex operating environment, we were able to demonstrate significant value for clients and deliver on our strategic priorities. Our ability to achieve the highest annual revenue in Aramark's history, combined with a second consecutive year of record net new business, is a testament to the exceptional talent embedded throughout our organization. Aramark's strong growth performance was broad-based, coming from multiple lines of business and geographies, as well as from clients both large and small. Annualized gross new business wins exceeded $1.6 billion, representing 10% of pre-COVID fiscal 19 revenues, and retention rates were once again above 95% as we sustained a step-change improvement. and client retention. Collectively, this resulted in $790 million of net new business, which is more than 50% higher than fiscal 21 and over eight and a half times greater than the company's historical five-year average between fiscal 16 through fiscal 20. This exceptional level of net new business represents nearly 5% of our pre-COVID fiscal 19 revenues, already at the top end of the 4% to 5% range provided in our endless day financial algorithms. Again, our growth extended across all segments during the fiscal year. Our U.S. food and facilities segment delivered over $400 million of net new business, more than 40% higher than fiscal 21 and about 20 times higher than fiscal 19, driven by strong retention and significant gross new business wins, particularly in facilities, healthcare, and corrections. International also reached a new milestone with nearly $300 million of net new business, more than double last year. There have been significant wins across the portfolio, ranging in size from small startup operations to large multi-site accounts like Merlin, which you may recall was the largest win in the company's history, awarded earlier this year. Even excluding Merlin, net new business performance reflected a record result for the international segment, a testament to our growth strategies and consistent success of our team. Uniform Services continued its strong growth momentum with net new business more than 25% higher than fiscal 21, and retention rates maintained a significant improvement from last year. The continuous investment in the Uniform sales force and ongoing focus on customer experience have driven sustainable success in new business wins and vertical sales opportunities. Across the portfolio, we capitalized on greater first-time outsourcing opportunities, with over 45% of our wins coming from sell-off conversions, including six of our top ten largest wins this year in the U.S. alone. With our robust pipeline and commitment to drive profitable growth, I remain confident in our ability to achieve our growth targets and drive our business to even greater heights. I'd now like to review Aramark's financial performance in the fourth quarter. Despite unprecedented global inflation levels, our teams remain focused on providing high-quality service while simultaneously working closely with clients to mitigate costs and implement pricing increases. In the quarter, pricing contributed more than 6% to revenue growth. Moreover, we are leveraging our robust supply chain to gain real-time insights for effective pricing strategies tailored to specific clients, sectors, and geographies. The pricing environment is something we will continue to actively monitor and address as appropriate. Our results in the fourth quarter continued to build, both on the top and bottom line, reflecting record-level net growth, pricing, and effective cost management through ongoing base recovery. Organic revenue grew 26% year-over-year, reaching 113% of pre-COVID levels, and the AOI margin increased nearly 140 basis points. on a constant currency basis compared to the fourth quarter last year. Within U.S. food and facilities, organic revenue rose 26% year over year with contribution from all sectors. Education experienced its typical seasonal slowdown in the summer months and is now off to a strong start in the new academic year as we welcome back students and educators in both collegiate hospitality and student nutrition at the end of our fiscal fourth quarter. Our teams have introduced new concepts, including innovative culinary offerings, technological advances, and enhanced dining spaces. Where appropriate and possible, we've worked closely with clients to implement additional pricing actions for board plans and on-campus retail outlets. Sports, leisure, and corrections continued its positive performance trajectory. Sports and entertainment maintained high attendance levels with better than historic per capita spending across event categories. I also want to take this opportunity to congratulate our clients, the Philadelphia Phillies and Houston Astros, for both reaching the World Series. Destinations had greater guest activity year over year despite unforeseen weather and fire challenges at certain sites, and corrections reported growth led by record-level new business wins during the year. Our workplace experience group showed progress as return to office continued across the portfolio, particularly in September. We were providing clients with solution-oriented services customized to their specific needs, with the transition back to P&L contracts occurring as volumes increase. Healthcare Plus recorded increased patient and retail activity, as well as benefited from the contribution of a significantly higher net growth from newly awarded client contracts, improved retention rates, and success in providing additional services to existing clients. Facilities and other drove performance through ongoing demand in core business offerings at existing client locations and had a strong level of new wins throughout the year, largely from self-op conversions. International organic revenue grew 39% compared to the fourth quarter last year, driven by higher per capita spending at sports and entertainment venues, particularly in Europe, and increased B&I activity across the portfolio. Similar to the U.S., education internationally was largely closed in the summer, and resumed activity at high levels with the start of the fall semester. And another year of consistent net growth in international continued to drive strong results, creating additional scale across geographies. Organic revenue in the uniformed services segment increased 8% year over year, driven by both recurring rentals and adjacency services. Kim and the team remain focused on building upon their momentum and executing on strategic growth initiatives across the estimated $40 billion market in North America. We're making progress on the planned tax-free spin-off of this business into an independent company, and we'll be sharing further details in the new year regarding this strategic transaction. I also want to reiterate that we expect to be able to complete the transaction under the terms of our existing debt agreements, and we believe that with our prudent capital structure strategy in place, which Tom will review, both companies will be positioned for great success. Lastly, I'd like to spend a moment sharing some recent initiatives focused on one of our core goals, contributing to the greater good, with our focus on people and planet. First, last month, we submitted our proposed greenhouse gas reduction targets for validation by the Science-Based Target Initiative. Next, in partnership with the Humane Society, we announced our commitment that by 2025, at least 44% of our residential dining menu offerings will be plant-based. Third, we find the Pacific Coast food waste commitment as an extension of our existing pledge to reduce food waste by 50% by 2030. And finally, I want to commend the passion exhibited by thousands of Aramark teams who worked around the world on a recent Aramark Building Community Day, which consisted of service projects to reduce inequity, support and grow local communities, and protect the planet. Our people truly are the cornerstone of everything we do, and this day of impact, among many, It's just one example that speaks volumes of the special culture we have created. I will now turn the call over to Tom for a detailed financial review of the business.