Aramark

Good morning and welcome to Aramark's first quarter fiscal 2025 earnings results conference call. My name is Tanya and I will 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 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 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 the company's 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 filing. 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 our 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 review our first quarter results and share our financial expectations for the remainder of the fiscal year. Before we begin, I want to acknowledge our friends, partners, shareholders, and other stakeholders who have been impacted by the devastating wildfires in the Los Angeles area. We hope your families and loved ones are safe. While Aramark's operations were not largely affected, our hearts go out to all these communities, and we are currently working with relief organizations to lend assistance wherever we can. Turning to our performance in the quarter, we remain committed to our strategic priorities. First, our ability to drive strong, profitable, top-line growth through a combination of base business and net new business. In the first quarter, we achieved record global FSS revenue for any quarter in Aramark's history. Second, our focus on accelerating AOI growth from increased volume, supply chain efficiency, and cost discipline. Global FSS also reached record AOI profitability compared to any previous first quarter. And third, our efforts in leveraging our capital structure capabilities. Most recently, we initiated our oversubscribed debt refinancing to extend maturities and purchased Aramark shares as part of the company's $500 million share repurchase program announced in November. These proactive measures come on the heels of Moody's upgrading Aramark's credit rating, which we believe is a testament to the strength of our current financial profile and the significant value-creating opportunities that lie ahead. Aramark's organic revenue grew 5% in the first quarter to $4.6 billion, with the food service business up over 6% as a result of strong-based business and net new business. We expect revenue growth to accelerate, particularly in the second half of the year, given our great start in fiscal 25 in both new account wins and client retention. Across the organization, we're focused, motivated, and incentivized to achieve net new of 4% to 5%. with retention levels above 95%, and I firmly believe these objectives will be accomplished this year and beyond. Moving to the business segments, FSS-US increased organic revenue 3% to $3.3 billion in the first quarter, reflecting the portfolio changes in facilities now behind us. Facilities would have experienced growth in the quarter without these changes. The food service business increased 5%, driven by higher participation rates and workplace experience, meal plan optimization and collegiate hospitality, additional micro market and vending services and refreshments, and strong new business wins in corrections. I'd like to take this opportunity to congratulate Aramark clients, the Kansas City Chiefs and the Philadelphia Eagles for advancing to the Super Bowl. We're proud to have had six of our NFL teams reach the playoffs, providing the opportunity for additional high-profile sold-out games. Our new business pipeline remains significant, including in first-time outsourcing, and as I mentioned, we are already off to a great start this fiscal year. New additions just added to the client portfolio include the opening of Walmart's new state-of-the-art headquarters, General Dynamics, WPP, and the Indianapolis Zoo. We're also excited about retaining Arizona State University, our largest collegiate hospitality client, and expanding our services to now include athletics. In the next few months, we'll be expanding our culinary capabilities through our partnership with Michelin-starred chef Daniel Bouloud and our LifeWorks brand, focused on corporate catering, special events, conferences, and much more. Chef Bouloud recently opened La Tete d'Or restaurant in New York City, where we have an ownership interest. The restaurant has been extremely well received with accolades in the press and a waitlist often exceeding 1,000 guests per night. International had another great quarter of organic revenue growth, increasing 10% to $1.3 billion year over year. All geographic regions contributed to this strong performance with the UK, Canada, Chile, and Ireland leading the way. I want to commend our teams in Spain for effectively managing through the severe flooding that occurred in the Valencia region during the quarter and helping our clients successfully resume operations at site locations. Our focus on cross-border growth and collaboration provided an opportunity for Aramark Korea to expand its presence in the defense sector as the food service partner for CADEX24, a government-hosted event with nearly 10,000 attendees. UK colleagues joined the Aramark Korea team on site to speak on best practices in private outsourcing within defense and government services. Our integrated strategy of presenting a united front, a team that collaborates across borders, has led to substantial growth potential in this area and across the broader portfolio. We were once again named the most innovative company in Chile within the managed services category in a study conducted by education and consulting institutions. highlighting our abilities to develop new customized products and services. Chile experienced high single-digit organic revenue growth year over year, continuing to build upon our established reputation in the marketplace. Additional new business wins awarded in the first quarter within international included further expanding our partnership with Walmart, now in Chile, Toyota in Argentina, Home Plus in Korea, and Aldi within Europe, among many other new client wins. collectively providing us the ability to build additional scale in the countries we serve. And you'll recall we previously announced an expanded partnership with FC Barcelona in November, and we're pleased to share that that work is underway. Now for an update on supply chain. At the end of the first quarter, we expanded Aramark's global supply chain footprint and increased our purchasing scale with the acquisition of Quantum Cost Consultancy Group. Quantum has managed spend of nearly half a billion dollars with operations in countries including Spain, Portugal, Germany, and the Netherlands. Quantum's addition to our portfolio provides many highly advantageous opportunities to globally serve the whole hotel industry as well as several other hospitality categories within restaurants, entertainment, senior living, and education. Our managed services and GPOs total spend now exceeds $20.25 billion and we are extremely excited about further leveraging our extensive and differentiated capabilities. Inflation remains favorable across our global portfolio, and we continue to expect inflation levels in the 2% to 3% range as we move through fiscal 25. We believe that the flexibility of our business model in menu creation, combined with our supply chain size and scale, provides us with the ability to effectively manage market, environment, and government policy changes. This includes the fact that the vast majority of our products used in the United States are domestically sourced and we're highly selective and maintain strict protocols for suppliers. Before turning the call over to Jim, I'd like to welcome back Rick Dreiling to Aramark's Board of Directors. Rick's addition increases the size of our board to 11. As many of you know, Rick is the former executive chairman and CEO at Dollar Tree, served as chairman and CEO of Dollar General, and currently sits on the board of Lowe's. Rick brings over 50 years of retail industry experience at all operating levels and will add significant value to the board. On behalf of all of us at Aramark, we're excited for Rick's return to the Aramark board. I'll now turn the call over to Jim for a financial review of the business.

Thanks, John, and good morning, everyone. We are off to a great start to the fiscal year on executing our financial and strategic goals. These achievements include reporting double-digit AOI and adjusted EPS growth in the first quarter, expanding our global supply chain footprint and increasing our purchasing scale with the acquisition of Quantum in Europe, and further enhancing our financial flexibility by initiating steps to extend our debt maturities as well as returning capital to shareholders and commencing our share repurchase program. This is in addition to our efforts around driving top-line growth, which John just reviewed, reflecting the company's continued momentum in the business. Now, let's specifically focus on our profitability success in the quarter. Operating income in the first quarter was $217 million, up 30% versus the prior year. Adjusted operating income was $258 million, up 13% on a constant currency basis compared to the same period last year. AOI margin of 5.6% increased more than 40 basis points year over year on a constant currency basis. The higher profitability and margin expansion was from higher base business volume combined with the maturity of new business, supply chain efficiencies, and effective middle of the P&L management of costs. Results were also strengthened by our ongoing approach to technology, including leveraging automation and AI for speed in capturing the latest menu pricing, and adding self-service capabilities, increasing efficiencies for both our clients and Aramark. Turning to the business segments, the U.S. reported AOI growth of 13% with an AOI margin improvement of more than 60 basis points compared to the same period last year. Education and healthcare had particularly strong quarters driven by revenue drop-through, supply chain productivity, and strong middle of the P&L management of costs. On a constant currency basis, the international segment had year-over-year AOI growth of 15% and an AOI margin improvement of more than 20 basis points. Profitability growth was led by the team's efforts in Chile, Germany, and Canada, which more than offset the impact of severe flooding in the Valencia region of Spain, temporarily affecting client locations and representing approximately 20 basis points. Turning to the remainder of the income statement, Interest expense was $76 million, a decrease when compared to the prior year period from lower debt levels. The adjusted tax rate was approximately 25%. Our quarterly performance resulted in GAAP EPS of $0.39 and adjusted EPS of $0.51, an increase of 25% versus the prior year on a constant currency basis. Regarding cash flow, as expected and consistent with our normal first quarter cadence, we experienced a cash outflow due to the natural seasonality of the business, specifically in collegiate hospitality. Our free cash flow is stronger compared to the prior year period, improving 63 million from higher earnings and favorable working capital. As previously mentioned, we acquired Quantum in the first quarter, which among other benefits, provides us an additional GPO presence in Europe to build on our existing business. We also started repurchasing Aramark shares toward the end of the quarter and into the second quarter as part of our 500 million share repurchase program we announced in November. To date, we have repurchased over 645,000 shares at a purchase price of about 25 million. We took steps to extend maturities and further enhance our financial flexibility by issuing a notice to repay our 552 million 2025 U.S. senior notes and to refinance $839 million of 2027 term loans. The transactions are expected to close on February 18th. These debt obligations will be replaced with $1.4 billion of new term loans that will mature in 2030. The actions are leveraged neutral and at comparable interest rates. We will continue to proactively enhance our capital structure given our financial flexibility with a focus on shareholder value creation. At quarter end, the company had over $1.7 billion in cash availability. I'll wrap up with our performance expectations. We are pleased with this start to our fiscal year and our financial results in the quarter. The sales pipeline remains substantial and we are off to a great start in fiscal 25 on new account wins as well as client retention. We continue to expect revenue growth to accelerate in the second half of the fiscal year as we lap the facilities exits and onboard new account wins. With that, we anticipate that the company's revenue growth in the second half will resume to double-digit growth. We remain extremely confident in the full year, and we continue to anticipate performance for fiscal 25 as follows. Organic revenue growth between 7.5% and 9.5%. AOI growth between 15% and 18%, adjusted EPS growth between 23% and 28%, and a leverage ratio of approximately three times by the end of the fiscal year. As previously shared, this includes an extra or 53rd week in the fourth quarter. We are extremely confident in our ability to consistently deliver strong top and bottom line growth, a significant pipeline of new business opportunities, the new account wins in client retention to date, and our high-performing talent to execute on our profitable growth strategies represent the power of Aramark and the excitement of what's ahead. With that, I will turn it back to John. Thank you for your time this morning.

John. To conclude, we feel incredible momentum across the business and believe deeply in the ability of our teams around the globe to reach and go well beyond the financial targets we've set for ourselves. I continue to firmly believe the best still lies ahead. Thank you to our employees for their tireless commitment to these goals, which I'm confident we'll achieve together. An operator will now turn, will now open the call for questions.

Thank you. We will now begin the question and answer session. If you have a question, please press star then 11 on your touchtone telephone. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. In order to accommodate participants in the question queue, please limit yourself to one question and one follow-up. To remove yourself from the queue, please press star, one, one. Our first question will come from Ian Zuffino of Oppenheimer. Ian, your line is open.

Thank you very much. Thanks for the color here. Thanks for the guide. You know, I really enjoyed the discussion about the new wins. Maybe you could also talk about, you know, I've seen out there the athletics business at Nebraska. You know, maybe give us some color on that. That seems like it's a really big one. Any details you could provide would be really helpful.

Thanks. Thanks, Ian. That's excuse me. That's not really ours to announce. We're excited about the opportunity and we expect to hear very soon and have that confirmed. I think the Board of Regents is meeting this week. So it's an exciting opportunity. As you know, the NCAA athletics business for us continues to grow rapidly. Arizona State just awarded us their athletics business as well. So it's an area that we're particularly focused on and excited about the growth potential.

Okay, great. And then as a follow-up, I guess I just have two more, and one's relatively quick, is can you tell us how much of a drag the facility's exits were to the top line? And then also, how do you think about inflation here, you know, tariffs? How are you preparing for, you know, that potential or at least that risk? Thanks.

Yeah, I'll start, and John will comment as well. The facility's exit had about a 2% impact on the results. In terms of inflation, we're running about 2% to 3%, closer to 3% globally, about 2.5% in the U.S. I'll let John comment on tariffs.

Yeah, certainly. Certainly, this is a situation we have anticipated and modeled very carefully. We think the overall impact of tariffs, as they're currently announced, would be roughly 30 bps in terms of our increased costs That's before any actions taken to either moderate, either through pricing or menu engineering and the like. So we think we've managed through the effects of these kinds of things in the past. We don't see it as having a material impact on the total company. Over 85% of the product that we buy is sourced locally in-country, and so we see the impact of tariffs as fairly de minimis.

Okay, thank you very much.

Lizzy, your line is open.

Hi there. Thank you for taking the question. I just wanted to dive in a bit more on your guidance about the acceleration to double-digit growth in the second half, understanding most of that's probably weighted to 4Q, given you're lapping the facilities exits by then. You have the 53rd week. But maybe just some help on the cadence through the year, how much of a bump we might get in 2Q and 3Q versus kind of where we are now.

Sure. I'll take that. And you're right. So as we lap the facilities exits, that will be a big driver of the revenue growth. acceleration in the second half of the year. The onboarding of new business, we're off to a really strong start with our newest strong start with the retention. So we have a good visibility into what those revenues will look like for the second half of the year. And then there's a 53rd week, which again, we talked about about 2% for the full year. Obviously, that would be more like 4% in the second half. So those are the main drivers of the revenue acceleration.

Yeah, and I'll just reiterate that we're very excited about the level of activity in terms of new account sales and the very high levels of retention that we're achieving and feel very confident in reaffirming our numbers for the full year and very excited about the level of new account activity.

Got it. That's helpful. Thank you. maybe too early to ask this question. I know you do have guidance out there for 26 at least on the operating margin kind of side of things, but just I guess as you think about lapping the 53rd week impact in 2026 on the organic growth side of things, like how do you think about the outlook there and what kind of might offset some of that potential headwind?

If you look at the run rate, the guy this year is 7.5% to 9.5%, so roughly 2% or so coming from the 53rd week. We're in that zone of 5% to 8% organic growth rate, and that's consistent with the growth model we've described, and that's the run rate that we will be at in the second half of the year and carrying us into fiscal 26. Again, we're confident about our positioning for 26.

Got it. Thanks so much.

Thank you. And I'm sure our next question comes from the line of Andrew Steinemann from J.P. Morgan. Please go ahead.

Hi, Jim. This is very similar to the last question. I just want to make sure I'm understanding what you're saying about double-digit revenue growth in the second half of the year, the fiscal year. Is that both for third and fourth quarter double-digit revenue growth, or is it really just driven by fourth quarter? And I didn't catch, if you're counting the extra week, in saying double-digit REVI growth? Are we talking about double-digit REVI growth on a same-day basis in the second half of the year?

Yeah. Hi, Andrew. Yes, again, I'm not going to break out the quarters. Andrew, the 53rd week is embedded in that double-digit growth. The 7.5% to 9.5%, as I said, includes that 53rd week, which on an annual basis is 2%. So it will be more pronounced, obviously, in that fourth quarter. So, yes, the fourth quarter growth, because of the 53rd week, will be higher than the third quarter. But what we're providing is sort of double-digit growth for the second half of the year. We'll continue to update you as the year continues.

Okay. If I can, I'm just going to ask one more. What was base revenue growth in the quarter and what drove it in the first quarter?

Yeah, so in the first quarter, about 2% to 3%. of the growth was from price, the remainder was from volume and net news. We don't break out anything other than that.

Okay, thanks. Thank you. And I show our next question comes from the line of Tony Kaplan from Morgan Stanley. Please go ahead.

Thanks so much. Sounds like you have a strong new business pipeline and you mentioned the first time outsourcing had been very positive as well. I was wondering, outsourcing's been a strong trend for some time. I guess directionally, have you seen outsourcing accelerate or be sort of similar to recent quarters? Just wanted to understand directionally what's going on there and why you think that that has continued for so long, and if you think it'll continue for a lot longer. Thanks.

Yeah, thanks, Sunny. First of all, we are seeing it be very... very similar to the prior to the prior year in terms of the level of outsourcing and the level of first time outsourcing. We're seeing it across a range of industries and in, in a range of geographies. So it continues to be a very supportive trend as it has for the last, for the last 24 months. So we don't see any sign of it slowing down. And some of these opportunities are new different verticals that are coming to market. And we see it as a, continued tailwind, certainly for the balance of this year and going into 26 as well.

Thank you. And I show our next question comes from the line of Shlomo Rosenbaum from CFO. Please go ahead.

Hi, thank you very much. Hey, John, for my first question, I just want to focus a little bit more on the education business. Growth was, I think it was 2.6% in the quarter. And on a historical basis, it's kind of light. In the commentary last quarter, the school calendar started a week later, so I just kind of thought that we would see a stronger first quarter. If you can just give us a little bit of color as to the underlying growth of what is going on in education and what we can expect, and then I'll have a follow-up.

Yeah, so I'll start. So there was some benefit, but moderate benefit in the first quarter from timing and higher ed sector. I think what you're seeing is really the timing of net new. So I'd expect the growth to accelerate in both our K-12 and collegiate hospitality business for the remainder of the year. So I think that's the timing that you're seeing for the growth being a little bit lower than the historical norm. So we're very confident that will accelerate in the second half of the year.

Yeah, and we weren't seeing any underlying trend with respect to overall enrollment. That continues to be very supportive in collegiate hospitality. The universities that we serve continue to have good enrollment growth. And so, yeah, I think really it's a matter of more timing than anything else with respect to quarter over quarter kind of changes. But again, we're very excited about collegiate hospitality. As you know, Arizona State was our largest collegiate hospitality account. It has, uh, was out for bid for the first time in 20 years and we're excited to have been awarded and retained that business plus, uh, multiple other components of new business, uh, associated with that account, including athletics. Uh, so we'll, we expect significant growth in, in higher ed this year.

Okay, great. And then just to follow up, can you talk a little bit more about the quantum acquisition? Uh, you know, it was, What kind of revenue run rate is there? How should we expect it to add in fiscal year 25? Part of this is really a modeling question because the FX headwind increased to revenue by about $105 million from last quarter. I'm just wondering how much is that going to be offset by this GPO acquisition and maybe if there's any commentary on profits and how we should think about that.

Again, with the GPO business, remember that the revenues, while we manage quite a significant amount of spend, the revenue is very low proportionally to the amount of spend that you take on. So it's really not a significant impact at all in terms of revenue. The first year as we integrate, I would not expect a significant source or change in profitability based on that deal, and it won't affect our overall exposure to the company.

Yeah, the long-term value of adding that additional spend is the ability to negotiate new and better deals for our existing accounts, for our existing customers, as well as to leverage the overall volume discounts that we receive as a result of the total purchasing spend globally. So it's accretive to earnings, very good margin after the first year, but not a significant driver of revenues.

Thank you. And I show our next question comes from the line of Neil Tyler from Redburn Atlantic. Please go ahead.

Thank you. Good morning, John, Jim. Just a question on margins, please. I wonder if you could help me understand. You've framed in the past the different contributors to the margin improvement that you expect this year. I wonder if you could shed any light on whether the mix of those is any different in the quarter. And within that question, in the international business, obviously the margin progress was a little bit less than in the U.S. I think I heard you mention in your prepared remarks that there was a 20 basis point impact of flooding, but I didn't know whether that was margin or growth. But is there also a an impact from the faster rate of organic growth still holding back the margin progress in the international business? So it's a long-winded question, lots of aspects to it, but if we could talk a little bit around that, that would be really appreciated. Thanks.

Sure. Yeah, so again, margin overall, right, we've made very good progress advancing margins at the company, 4.6 last year, 5.1 in fiscal 24, so 50 basis points last year. This first quarter, we're reporting 40 basis points, so we like the consistency of in what we're generating with margin accretion. The sources of that margin accretion has been very consistent. Again, it confirms that our model is working. Supply chain efficiencies and scale and the benefits from that really drove, continue to drive what we saw in Q1, along with maturity of new business and good management of what I call middle of the P&L, food and labor costs. In terms of the international margin, you're correct. The 20 basis points or so had 20 basis points of headwinds or so from the flooding in Valencia. So if you adjust for that, you're back to that sort of 40 to 50 basis point range. The organic growth in the international group is just the opposite, actually. Their growth is helping to advance the margins as we scale. Same thing, scaling supply chain, scaling overhead. So just a bit of an unusual quarter with some headwinds from the flooding.

That's super clear. Thank you very much.

Thank you. And I show our next question comes from the line of Jasper Bibb from Truist Securities. Please go ahead.

Hey, good morning. I wanted to clarify something on the potential 30 basis point margin impact from tariffs you talked about earlier. Would that just be the 10% tariff on China, or would that also include the 25% tariffs on Mexico and Canada that I think have been suspended in the past couple days?

Yeah, that was a modeled percentage of increase in terms of food costs, not margin decrements. So, we thought about a 30-bip increase in food costs to those items that were purchased from Mexico, Canada, and China. As I mentioned, close to 85% of our product is sourced locally, so it's a relatively small impact, generally confined to things like fresh produce in the wintertime in the United States coming from Mexico. So with the freezing for the next 30 days, that impact would be obviously reduced. And again, that impact was prior to us taking any kind of mitigation actions with respect to either menu design or service offering and to our price recovery. So overall, we see the impact of tariffs as they're currently anticipated to be relatively de minimis to the total company financial performance.

That's very clear. Thank you. And then I want to ask about BNI in the U.S. Strength there was notable. Can you just talk about some of the drivers there and then potentially what return to office has meant for both, I guess, participation rates and your new sales pipeline?

Yeah, I would say return to work continues to be a tailwind for the B&I marketplace. We continue to see employers bringing more people back on a full-time basis. And although I think many employers are still struggling to implement those policy changes, but we do see the impact in both daily participation rates and in just the overall revenue growth in the sector. It continues to also be a source of significant new account wins. and we continue to build our capabilities around a range of service offerings that we think will continue to supply additional growth, particularly in the high-end catering markets in cities like New York. And so we're excited about BNI. It's a great business, and we're very pleased with the results to date.

Excellent. Thank you for taking the questions.

Thank you. And I show on that. Next question comes from the line of Josh Chan from UBS. Please go ahead.

Hi. Good morning, John and Jim. The U.S. margins improved quite nicely this quarter. Could you talk about kind of the drivers behind that and whether there are any like one-time-y items within the U.S.?

Thank you. Yeah, definitely no one-time-y items. That is just consistent delivery and execution against the strategy that we've You know that we've outlined its supply chain economics its continued Improved compliance in terms of our purchasing programs its account maturity as new account wins continue to evolve and become more profitable over time And so it's in the middle of the P&L management that Jim talked about so it's really just fundamentally execution of and no extraordinary one-time items included in that margin improvement.

That's great to hear. And what are you seeing on the labor front in terms of availability and inflation? Anything to kind of watch out for there?

No, we see labor availability as being very good. Had significantly improved over the circumstances of last year and the year before. So really no challenges from a labor availability perspective. Overall costs continue to be moderating, and we anticipate labor inflation somewhere in that 4% to 5% range, which we then mitigate by making organizational changes and the like. The great thing about this business is our contracts give us great protections and flexibility in terms of execution. against the business, and so we see labor as being very consistent and very solid and really no significant impact as well this year.

Great. Thanks very much, John, and good luck in the second quarter.

Thank you.

Thank you. And I show our next question comes from the line of Harold Enter from Jefferies. Please go ahead.

Hey, this is Harold Anto on for Stephanie Moore. So I guess on the quantum acquisition, I guess, how much M&A should we expect for the remainder of the year? Would M&A be all focused on the GPO space? Just want to get a sense for your M&A strategy there. And now the vendor having over $20.5 billion of spenders there, the target level of spend, the company is looking to achieve. Just any comments around that would be helpful.

Terrific. There's no target level that we're trying to achieve other than to keep growing it. And we continue to believe in the power of supply chain and the ability to drive earnings as a result of growing the GPO. So we will continue to look at opportunities for M&A. in both the GPO space as well as in our other lines of business where we can do bolt-on acquisitions that make sense from an economic perspective. I don't anticipate that M&A will be a significant driver of our top-line growth. It's really a secondary strategy for us, but we will take advantage when opportunities do present themselves. So we're excited about the quantum acquisition. and believe that that will add significant value, not only through the additional spend that we'll be managing, but through the additional capabilities it brings us in countries to expand our core services as well.

Thank you for the call. And then I guess you also call out, you know, in the U.S., the micro market and vending services as contributors to deliver growth. So just some comments around your strategy and what you're doing there. And I know sports and entertainment has been, you know, a pretty attractive segment for the business in past quarters. So just want to get an idea of how it trended in the quarter and how would you expect it to remain for the rest of the fiscal year?

Yeah, I'll start first of all with the sports entertainment business. You know, obviously it's a very important business for us. We were very pleased to have, as I mentioned in the script, six of our NFL teams get to the playoffs and, and excited to have the Superbowl this coming Sunday, uh, for the Eagles and the chiefs. Um, you know, overall sports, uh, had, uh, experienced a very good quarter, although, uh, fewer playoff games for major league baseball than we had, than we had in the prior year. So there's always variability, uh, depending on team performance and the playoff schedules. Uh, and, um, as you know, we, uh, We operate a lot of arenas and have NHL and NBA teams. And what drives the top line in that business is often team performance. So we're very keen supporters of all the teams that we serve, and we're excited about the possibilities. And that business has significant growth potential not only by serving the professional sports teams, But as we talked about with NCAA athletics, those opportunities continue to get bigger and bigger, particularly as alcohol is now approved for sale in many NCAA stadiums. So it's a business we'll continue to focus on. We're excited. We've got a great leadership team in it and lots of runway for growth.

Yeah, just on the convenience retail, refreshment services is a term we use internally. Another really strong quarter for that business that's contributing to the double-digit growth you see in our B&I segments, how we determine externally. So lots of opportunities there, the automated vending machines, cashless experience. So it's been a big focus of growth and a source of good opportunities for the company.

Thank you. And I'm sure our next question comes from the line of Jafar Mestari from BNP Paribas Exane. Please go ahead.

Hi. Good morning, everyone. I've got three, if that's all right. Firstly, just on the H2 momentum, which you've talked about in detail with some good reasons therein. in the ramp-up of new accounts, et cetera. I'm just curious if some of that momentum could start building in the second quarter, or should we expect very similar in Q2 versus Q1, around 5% organic?

Secondly... Yeah, I'll take that as part of it. Go ahead. If you want to ask all three, go ahead.

Go ahead. Thank you. And then just on retention, how's 25 in terms of the amount of business you have up for renewal? How does that compare to an average year? Is it busier or less busy? And lastly on Arizona State University, a very holistic approach there. Everything basically, student nutrition and athletics. Just curious if that's new information to us now that it's been announced. Or was it something you already had in your list of accounts that would ramp up with the year, or did you recently find out you had that extension?

Well, first of all, let's talk about ASU for a minute. We've served ASU for decades, for many, many years, and they were required by the state of Arizona to go ahead and go through a bid process. which has lasted for many, many months. And it is, you know, it's with a lot of pride that we serve that university. We've always done the campus feeding. This new award includes a number of other components on campus, including faculty dining as well as athletics. So the total value of the contract will go up significantly as a result of this new – it's both a retention as well as a new business award. And so, again, very excited that we've retained the business and literally found out yesterday. So we're excited about it. With respect to overall retention, our level of rebid activity is actually lower this year than it was last year. That's a good thing. You'll see that happen in the industry. It just depends on timing of new wins and contract expirations and the like. So some years we've got more rebid activity and some years our competitors do. This year our level of activity is a little bit lower than normal, which we're very pleased with. And we always are working to proactively extend our customer contracts, even when they're not due for rebid. So we're constantly working against that list of customers to go ahead and extend our agreements. So we feel good about our current positioning in terms of the amount of activity, but we also feel very good about our efforts and the quality of the retention team that we have in place. and the work that's being done there. So we feel very good about our overall retention for 2025.

Yeah, and in terms of the revenue outlook in the second quarter, so we're exactly where we expected to be in the first quarter, exactly how we planned with the acceleration in the second half of the year. So it's a bit of an unusual year in terms of the facilities impact. So yeah, the second quarter, I think you'll see a similar impact. And then the third quarter will be the acceleration that I talked about in my earlier comments. But like I said, it's exactly what we expected and exactly how we planned for the revenue cadence this year.

All right. Thank you very much. Thanks.

Thank you. I'm sure no further questions in the queue. At this time, I'd like to turn the call back to Mr. Zillmer for closing remarks.

Again, thank you very much for everybody joining us this morning. We are extraordinarily pleased with the results of the first quarter and looking forward to a very strong year. I want to thank the Aramark employees around the world for all their continued efforts and great work. And I'd also like to thank both the analyst community and our shareholders for their support of the organization. We feel very good about the results we've delivered and will continue to deliver. for all of you. So thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.