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.