Aramark

Good morning and welcome to Aramark's third quarter fiscal 2024 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 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, Senior Vice President, Investor Relations and Corporate Development. Ms. Cassell, please proceed.

Thank you and welcome to Aramark's third quarter fiscal 2024 earnings conference call and webcast. This morning, we'll be hearing from the company's chief executive officer, John Zilmer, as well as chief financial officer, Jim Tarangelo. 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 FCC 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'll now turn the call over to John.

Good morning, everyone. Thank you all for joining us today. We continue to successfully execute on our strategic vision. I'm pleased to report another strong quarter of results for Aramark. with record revenue and profitability for a third quarter in FSS US, as well as record international revenue and profitability for any quarter. Jim and I will review the key drivers for the outperformance before turning to our financial expectations for the fiscal year with just one quarter to go. Given the substantial growth opportunities ahead and our proven ability to capitalize on them, we're confident that our business momentum will continue into next fiscal year and beyond. Aramark's third quarter revenue growth was broad-based, coming from virtually all lines of business and geographies. Revenue for the quarter was $4.4 billion, with organic growth up 11% year over year, once again led by base business growth from a mix of volume and pricing, as well as contributions from new client wins. The company's multiple operating levers allowed us to scale higher sales volume, manage costs effectively, and achieve supply chain efficiencies. all while benefiting from an inflation tailwind. Our actions contributed to a 22% increase in operating income compared to the prior year, and a 21% year-over-year increase in adjusted operating income on a constant currency basis. Aramark's performance is a testament to the extraordinary talent within this organization, which allows us to provide world-class hospitality services to clients while we focus on our ambitious path forward. Turning now to the business segments, FSS-US grew organic revenue 9% versus the comparable period last year, led by continued record levels of per capita spending and greater event attendance in sports and entertainment, new wins coming on board in business and industry, meal plan initiatives and collegiate hospitality before entering the quieter summer season, and enhanced commissary services and corrections. We saw strength this quarter using our capabilities to deliver higher revenue volumes at prominent events, including professional golf tournaments such as the U.S. Open at Pinehurst and the Travelers' Championship, in addition to serving over 300,000 fans at the Indianapolis 500. We also provided retail merchandise for the Philadelphia Phillies and the New York Mets, both Aramark clients, as they participated in Major League Baseball's London Series. The sales pipeline remains extremely strong across sectors, particularly in first-time outsourcing. New clients include the Tulsa Public Schools, our first entry into Oklahoma for student nutrition, Harding University, and the Southeast Georgia Health System, to name a few. We're in the process of finalizing some sizable new client opportunities, which we are targeting to close this fiscal year. As part of our ongoing efforts to offer a differentiated and innovative client experience, We just entered into a partnership with renowned Michelin-starred chef Daniel Bouloud, which will be focused first on expanding our B&I culinary capabilities in corporate catering, special events, conferences, and more. The collaboration will be branded Cuisine Bouloud New York, with operations primarily from a centralized kitchen located in Manhattan, with services offered throughout the New York metropolitan area and beyond. Lastly, in FSS US, a few weeks back, we brought together the top 1,000 of our senior operating district, regional, and corporate leaders for ongoing leadership development training, educating teams on new initiatives, services, products, equipment, and technology through a partner-sponsor expo, and celebrating excellence in our hospitality culture. This type of collaboration across lines of business and job function is a clear realization of our values and will help propel us into the future. Now to international. Momentum in the international segment continued with organic revenue increasing 16% year over year. All geographies in the portfolio experienced organic revenue growth, led by the UK, Canada, and Spain, as well as Latin America, from net new business, base business volume, and pricing initiatives. Our teams were hard at work, which included successfully driving our increased presence in sports and entertainment, particularly in highly attended and globally recognized events. In Germany, we served approximately 1.6 million visitors during the 2024 Men's European Football Championships, partnering with the majority of the stadiums in the tournament, which are Aramark clients, including for the final match in Berlin. And in Spain, we served over 280,000 fans for the Formula One Grand Prix multi-day race in Barcelona. and we are already working on plans in partnership with the rapidly growing Formula One for upcoming events this summer and into next season. We're thrilled to share that our mark has been selected as Everton Football Club's official global food and experiences partner for the new Everton Stadium at Bramley Moor Dock in Liverpool, England. The approximately 53,000 capacity stadium, which opens ahead of the 2025-26 season, will be one of the most accessible and sustainable stadiums in Europe. This marks the company's first engagement in the English Premier League and expands on our longstanding European sports and entertainment business with La Liga in Spain and the Bundesliga in Germany. We also continue to build scale in other countries within industries we serve, with new client wins coming from mining in Chile, healthcare in China, and government-related services in Ireland. And finally, in international, we recently concluded our International Chef's Cup in Toronto, Canada, which, after a year of in-country competition, recognized our global culinary talent, and celebrated the winning chefs from each country. Our global supply chain team continues to effectively grow, leverage, and optimize Aramark's spend, which contributed to our strong performance in the quarter. By the end of this fiscal year, we expect our managed services global supply chain and GPO network spend to surpass $20 billion. We are pursuing GPO acquisition opportunities to complement the organic growth we are seeing to drive even faster growth and enhance capabilities in key areas. International expansion is of particular interest if we find the right fit. Domestically, we are leveraging our expertise in hospitality to expand and more deeply penetrate adjacent industries such as wellness and entertainment. On the inflation front, we are seeing continued improvement in North America, Europe, and Asia, while Latin America has been a bit stickier. In the third quarter, we reached the low end of the range we originally estimated and expect global inflation in the threes for next quarter as long as these favorable trends continue, with the U.S. already dropping into that range. As always, we're ensuring our supplier contracts are capturing any market opportunities and will transition business appropriately to maximize these benefits. Lastly, we reached an agreement to sell the remaining portion of our ownership stake in the San Antonio Spurs NBA franchise. We anticipate the transaction will close in the fourth quarter subject to NBA approval. We expect to use the proceeds for debt repayment as part of our deleveraging strategy. We continue to work closely with the Spurs as a valued client. Before turning the call over to Jim, I'd like to highlight a few key accomplishments and recognitions we received in the third quarter. First, We were named as one of the 50 most community-minded companies in the United States, often referred to as the Civic 50, by Points of Light, an organization dedicated to accelerating people-powered change. Second, Fair360 highlighted Aramark as a top employer for both diversity and black executives, with 36% of our management racially and ethnically diverse, and 20% of the company's board members being women of color. Lastly, Aramark Canada was recognized as one of the country's greenest employers for 2024 by Mediacorp Canada, highlighting our ongoing commitment to sustainability and the innovative green practices now ingrained in our operations. We believe that the focus on our people and the communities we serve are a key differentiator for the company, which has led to tremendous outcomes. Jim?