Aramark

Good morning and welcome to Aramark's 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 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 after 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 earnings conference call and webcast. This morning, we will be hearing from Aramark CEO John Zilmer, as well as CFO Jim Tarangelo. As always, there are accompanying slides for this call that can be viewed through the webcast and are also available on the IR website for easy access. Our notice regarding forward-looking statements is included in our press release. 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 SEC filings. We will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in our press release and IR website. With that, I will now turn the call over to John.

Good morning, everyone. Thank you all for joining us. On today's call, Jim and I will be providing a detailed review of Aramark's earnings results released this morning and sharing our expectations for the business in fiscal 25. Every quarter this past fiscal year, we reached new highs in our financial performance, which resulted in us raising our full-year outlook throughout fiscal 24 and ultimately achieving record revenue and AOI profitability for any year in global food and support services history. This is a testament to what our teams are capable of, raising the bar every single day and challenging ourselves across the organization to deliver for our stakeholders. For fiscal 24, this mindset led to year-over-year organic revenue growth of 10%, adjusted operating income increasing 20%, and adjusted EPS rising by 35% on a constant currency basis. I truly believe the best is yet to come in recognizing our full potential. We also announced this morning that the Board approved a new $500 million share repurchase program, clearly demonstrating our continued confidence in the business and the significant growth opportunities ahead. Our strong and predictable cash flow provides us considerable financial flexibility To first, strategically invest to drive growth, focus on building upon our prominent client portfolio. Second, to pay down debt with a clear line of sight to reducing leverage to around 3x by the end of this fiscal year. Third, issue a quarterly dividend, which was just increased by 11%. And fourth, initiate a share buyback program to repurchase Aramark shares, highlighting our capital structure capabilities. These actions reflect our ongoing commitment to maximizing shareholder value and further positioning the business on a firm foundation to deliver great results. Once again, we experienced significant annualized gross new business wins in fiscal 24, totaling more than $1.4 billion and representing nearly 9% of prior year revenue, the best year ever for global FSS. Retention for the total company was impacted by recently exiting some lower margin facility services accounts, most notably Chicago Public Schools, as a result of a policy change driven by political considerations. And while I'm not pleased with the effect this had on our overall retention number of 93.2%, we see this as a unique occurrence. Our core food service businesses in both the United States and international achieved retention of 95.2%, in the fiscal year. Our new business pipeline across the organization remains substantial, including in first-time outsourcing, and we are already off to a great start this fiscal year with several large opportunities leaking into fiscal 2025. In just the first six weeks, we've added clients such as Broward Health Medical and MasterCard. I have strong confidence in the company's ability to achieve net new of 4% to 5% with retention levels above 95% in fiscal 25 and beyond. Turning to the business segments, FSS-US grew organic revenues 7% in fiscal 24, primarily from record-based business volume and pricing. In the fourth quarter, organic revenue in the segment increased 4% as pricing began to normalize with improving inflation, particularly in education. strong per capita spending, and high fan attendance levels continued in sports and entertainment, along with increased participation rates in workplace experience and retail expansion in corrections, more than offset facilities, which I referenced earlier. New clients added in the fourth quarter included SAP America in workplace experience, House of Blues in Guinness locations in sports and entertainment, and Palantir now in refreshments, as well as our Senior Life Plus business partnering with Asbury Communities to provide dining and hospitality services in continuing care retirement communities. Destinations also began operations at Adventures on the Gorge, which encompasses more than 70,000 acres in West Virginia. Corrections continued to expand the portfolio in the fourth quarter with our Into Work program, a key differentiator as a second chance employer, offering training, certification, internships, and scholarships. IntoWork recently had a record graduating class from its warehouse and supply chain program, and in total now has more than 6,000 graduates. In the U.S., we just launched Hospitality IQ, a hub for AI-powered business applications to enhance the guest experience, empower our operators, and further drive our clients' business objectives. These platforms include our award-winning Mosaic AI supply chain platform, which allows clients to receive real-time, actionable supply chain data customized to their specific locations. Culinary Copilot, an AI-powered resource that provides real-time menu recommendations. And Aramark Connected, which creates a frictionless, unified guest experience, leveraging multiple autonomous services that are open around the clock. This offering is particularly appealing to clients in education, healthcare, and workplace experience. Hospitality IQ represents another step forward in Aramark's mission to provide innovative and practical solutions for clients with strong financial benefits. Now on to international. Momentum in international continued with organic revenue increasing 17% in fiscal 24, as the team has been extraordinarily successful in collaborating to deliver on our strategic priorities in the countries we serve outside the U.S. from partnering across borders to sharing best practices to thoughtfully building scale. These actions led to strong base business growth, high retention, and significant new business. In the fourth quarter, international's organic revenue increase of 16% included contribution from all geographic regions across the portfolio, with the UK, Germany, Canada, and Chile leading the country-specific performance. Aramark is proud of our long-standing European sports and entertainment presence with the Bundesliga in Germany and La Liga in Spain, and more recently, as I shared on my last call, just entering the English Premier League as we become the Everton Football Club's official global food and experiences partner for their new stadium opening in a few months. We are now also pleased to announce the continuation and expansion of our relationship with one of the most powerful global brands in sports, FC Barcelona. Through a dynamic long-term partnership, Aramark will be the exclusive food and beverage and hospitality partner for the renovated 105,000-seat Camp Nou Stadium, scheduled to reopen later this year. Additional new clients awarded in the fourth quarter within international included Allied Irish Bank in Ireland, BBVA España in Spain, and BP Gulf of Mexico in our offshore business, among many others. Moving to global supply chain. Global supply chain continues to grow, leverage, and optimize our spend by providing a high standard of products, services, economics, analytical insights, and sustainability solutions for our clients. Our global GPOs are aggressively expanding with double digit organic net new growth across all our GPO channels, contributing to the $1 billion in new spend this past fiscal year, with total spend reaching $20 billion. This momentum comes from wins in hospitality, senior living, wellness, and entertainment. We also launched Avendra International in the fourth quarter to enhance our service capabilities in the international marketplace, a key area of focus for us. To accelerate our success, we continue to selectively pursue acquisition opportunities to complement our organic efforts and enhance our potential in targeted areas. A word on inflation. Inflation continues to be favorable across our global portfolio. Europe, North America, and Asia are all showing continued improvement, with only Latin America lagging behind. We expect this overall trend to continue with the business returning to historic inflation levels in the 2% to 3% range as we move through fiscal 25. Lastly, we're focused on optimizing our balance sheet and leveraging our financial flexibility, as I mentioned in the beginning of my remarks. As part of this strategy, we recently completed the sale of a remaining ownership stake in the San Antonio Spurs NBA franchise for approximately $100 million and used the proceeds for debt repayment. 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 more accomplishments and the recognitions we received in the fourth quarter. As a new academic year began Aramark volunteers work together with local organizations to assemble and deliver backpacks filled with school supplies to students in need across 30 communities in the US, Ireland and Chile. Second, the company was highlighted as one of America's most admired workplaces 2025 by Newsweek with fostering innovation and professional growth as key considerations. We were also named as the best place to work in healthcare by the industry-leading publication, Modern Healthcare, taking the number two spot. And finally, a number of Aramark leaders received prominent recognition for our commitment to people and the planet for environmental sustainability, DEI efforts, and building local communities. This included our head of sustainability, Alan Horowitz, as a featured speaker during UN Climate Week. I'm proud of what we've accomplished this past year at Aramark. and know we have tremendous runway going forward. I'll now turn the call over to Jim.