Aramark

Good morning and welcome to Aramark's second quarter fiscal 2023 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 participants are in a listen-only mode. We will open the conference 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 Development. Ms. Cassell, please proceed.

Thank you. and welcome to Aramark's second quarter fiscal 23 earnings conference call and webcast. This morning, we will be hearing from our Chief Executive Officer, John Zilmer, as well as our Chief Financial Officer, Tom Ondra. 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 and our other SEC filings. Additionally, 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. I will now turn the call over to John.

Thanks, Felice, and thanks to all of you for joining us today. Now halfway through the fiscal year, we continue to make progress on our strategic priorities, which have resulted in one, strong business performance, two, positioning the uniformed services spinoff for success, and three, additional balance sheet optimization. This morning, Tom and I will share an update on each of these priorities, as well as a detailed outlook for the full year before opening the line for questions. But first, I want to acknowledge our teams around the globe who embody Aramark service culture every day. Just over a week ago, we held our Aramark Building Community Day, during which thousands of employees across the company volunteered their time, energy, and expertise to over 150 service projects around the world in areas where they live and work. This is just one example of our commitment to reach for remarkable as we continue to deliver on that promise. Aramark's performance starts with our people, and I'm proud of the powerful impact and partnership that we've created with our teams, our clients, and our communities. Now let me comment on our second quarter business performance. After record results last year, new business growth remains strong and the pipeline is robust. This, combined with retention rates that remain above 95%, keep us on pace to deliver annualized net new business in fiscal 23 of 4.5% or more of last year's revenue and is creating solid top-line momentum going into fiscal 24. Net new business in the U.S. segment was broad-based, driven by new wins in healthcare, corrections, and facilities, including the University of Chicago Medical Center, the Missouri DOC, and an expanded relationship with Boeing, as well as strong retention results in collegiate hospitality, that reflect the recent proactive extension of Mississippi State University as an example. With the selling season for education well underway, we anticipate continued momentum with numerous opportunities already in the pipeline. The international segment experienced ongoing success winning bread and butter accounts across the portfolio, particularly in the UK, Canada, Ireland, and South America. Our sales funnel continues to grow across all geographies and retention remains strong. The phased rollout of Merlin is now complete in all locations, and we're looking forward to the upcoming busy season. Uniformed services generated increased new business compared to last year, a sign that the strategic growth plan for the business is being executed. The sales pipeline remains solid, and we expect new business to accelerate as we move into fiscal 24 under the sales leadership of industry veteran Andy Panos, who recently joined AUS and who has nearly 30 years of experience. Many of you know Andy's reputation in the marketplace, and we're thrilled to have him on board for the next phase of this business. In the quarter, the company's organic revenue grew 19% compared to the same period last year, with pricing contributing approximately 6%. Within the US segment, all sectors contributed to organic revenue growth of 19%, led by continued strong per capita spending and concert scheduling activity in our sports and entertainment business, retail and catering in our collegiate hospitality business, as well as a quarter-over-quarter increase of return-to-work practices within business and industry. International organic revenue grew 31% compared to the second quarter last year, driven by solid net new business, pricing initiatives, and base business growth across all geographies. Like the U.S., sports and entertainment and business and industry continue to demonstrate strength, driven by greater in-person activity levels. Our teams are also gearing up for a busy summer concert and event season ahead. Organic revenue in the uniform services segment increased 6% year over year with solid performance in both the U.S. and Canada. Adjacency services grew double digits, and while currently a relatively small portion of the business revenue mix, continues to be a focal point for growth within AUS. On the uniform spinoff, we've continued to make significant progress with respect to the transaction. and are excited for the opportunities ahead for Uniformed Services as an independent, standalone company. We continue to monitor macroeconomic and capital market conditions, as well as the business's momentum, while remaining diligent in completing the operational, regulatory, and financial logistics in order to be in a position to be able to complete the separation by the end of the fiscal year, all with an eye on doing what is right for the business and Aramark shareholders. Lastly, we continue to strengthen our balance sheet, In early April, we completed the sale of our non-controlling 50% equity stake in AIM Services for $535 million. We also recently signed an agreement to sell a portion of our ownership stake in the San Antonio Spurs NBA franchise for approximately $100 million. We expect that that deal will close imminently, subject to certain closing documentation, and we'll continue to work closely with the Spurs as a valued client in the future. Before turning it over to Tom, I would also like to highlight some of our new partnerships as we strive to be one of the most admired employers and trusted hospitality partners. We partnered with the Thurgood Marshall College Fund to launch the Aramark HBCU Emerging Leaders Program, focused on career exploration and professional development for students at historically black colleges and universities. We also formed an equitable alliance with Triple B Hospitality Group, a minority leader in human-centric hospitality, to bring new avenues of value to our workplace experience group clients who want to empower their people and communities to overcome labor challenges and to drive more equitable impact from their businesses. And just last week, we were once again selected as a top 50 employer by Diversity, Inc., even moving up in the rankings, and for the first time, also named as a top company for supplier diversity. I'm extremely proud of the hard work and significant impact that Aramark is making as a unified community to drive inclusion. Tom? Thanks, John, and good morning, everyone.