Aramark

Good morning and welcome to Aramark's fourth quarter and full year fiscal 2025 earning 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 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 our 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, MDNA, 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.

Thanks, Felice, and thanks to all of you for joining us. On today's call, Jim and I will review our fourth quarter and full year results, including the strategic, financial, and operational milestones accomplished in fiscal 25. We've built upon our historically strong, consistent performance and advanced a number of initiatives that position us well for the years ahead, which will be discussed in more detail. First and foremost, we take delivering on our commitments very seriously, and it's important to understand that as we onboard an unprecedented level of new business, we took the appropriate time to work closely with certain large clients in preparing for a seamless transition to Aramark becoming their new hospitality partner. In some cases, this led to a shift in the timing of new account openings, which impacted revenue in the fourth quarter. With many of these sites now up and running, we are well positioned for strong revenue performance in the quarters ahead. We are more resolved than ever to meet and even exceed the high yet very attainable bar we set for ourselves. This past year has represented many consequential firsts for the company, all of which contribute to the strong growth trajectory for the businesses, including annualized gross new wins of $1.6 billion, which is 12% higher than fiscal 24 and reflects the largest contract awarded in FSS U.S. history and the second largest globally. An industry-leading client retention rate of 96.3%, with many lines of business and countries in the portfolio above this retention level, all combined resulting in net new of 5.6%. over $1 billion of new purchasing spend added for a second consecutive year in our supply chain GPO network, and lastly, achieving a leverage ratio of 3.25 times, a number we haven't seen since prior to when Aramark went private in 2007. Our new business pipeline across the organization is significant, including first-time outsourcing opportunities, and we are already off to another strong start at this early stage of the fiscal year. This includes adding Blue Origin, Pennsylvania's Easton Public Schools, the Welsh Rugby Union, as well as expanding our services for Airbus. I have great confidence in the company's continued ability to achieve net new of 4% to 5% of prior year revenue, with retention levels exceeding 95% in fiscal 26 and beyond. And when we over deliver on this metric, we reward our teams appropriately. as was the case particularly in the fourth quarter, reflected in additional incentive-based compensation from net new business, an objective representing 40% of the company's incentive plan for leaders across the organization. Moving to our results in the quarter, Aramark's organic revenue increased 14%, largely from net new business and base business growth. Excluding the 53rd week, organic revenue was toward the higher end of our long-term growth model. FSSUS grew organic revenue 14% in the fourth quarter. Again, excluding the 53rd week, organic revenue was up mid-single digits, led by workplace experience and refreshments continuing its pace of record net new business, collegiate hospitality with strong retention rates, meal plan optimization success, and benefiting from higher student enrollments, particularly from our portfolio of academic institutions in the popular South and Southeast. And healthcare reporting its best performance in over two years our healthcare plus business was recently named number one in best places to work by modern healthcare for our commitment to a people first culture and operational excellence across the industry. While we are encouraged with our roster of high performing teams as well, we were encouraged with the with our roster of high performing teams. as the MLB playoffs approached, the outcome was not what we anticipated with the majority of our teams ultimately falling out of playoff contention. We've now entered the NFL, NBA, and NHL seasons where fan attendance has been strong to date, leveraging our expertise in professional sports, Aramark's collegiate sports business is experiencing double-digit revenue growth, with per capita rates up 14% year over year, driven by increased concession spending and expanded premium services. I also want to commend our employees in the destinations business, who worked closely with the National Park Service to assist during and following the devastating Dragon Bravo fire in the Grand Canyon's north rim. We had been operating the historic Grand Canyon Lodge, which was severely damaged. While it's still early, we are supporting the recovery and rebuilding efforts in the region and are optimistic about what's ahead for the visitor experience at the North Rim. We continue to expand our enterprise-wide capabilities and collaboration, which resulted in our new multi-year agreement with the University of Pennsylvania Health System, the largest contract win ever in the US from one of the most prestigious medical systems in the world. We're proud to put our understanding of sophisticated and complex healthcare systems to work in new settings. We will be providing patients and retail food, environmental services, and patient transportation alongside an integrated call center to support these operations at sites across a nearly 4,000 bed, seven hospital system. Among our many technologies offered at Penn Medicine will be an AI-driven patient menu platform that configures patient meals based on diagnosis and dietary requirements, in addition to proven robotic applications for both environmental services and meal preparation. Our proprietary AWICS platform will be used to map staffing and other needs, as well as our Quick Eats micro markets and mobile ordering platforms. We look forward to launching operations early in calendar 26, and are working closely with Penn Medicine to identify other opportunities to further grow the partnership. Additional clients added to the US portfolio in the fourth quarter included Chicago's DePaul University and Collegiate Hospitality, where we'll begin operating next semester. Discover, following the acquisition by Capital One, also a client, as well as expanding our hospitality services into top tier law firms within workplace experience. Now to international. Once again, international delivered consistent double-digit organic revenue growth, increasing 14% in the fourth quarter with approximately 3% growth coming from the 53rd week, led by substantial new business, high retention, and strong base business growth. All geographic regions contributed to this performance with particular strength in the UK, Canada, Ireland, Spain, and Latin America. Toward the end of the quarter, International experienced its highest revenue ever for a single one-day event when the NFL's Pittsburgh Steelers played the Minnesota Vikings at Croke Park Stadium in Dublin, Ireland, all Aramark clients. We also just had great success at Olympic Stadium in Berlin, Germany, with another NFL matchup as the league's fan base continues to quickly grow in Europe. International was awarded new clients in the fourth quarter across sectors and geographies. This included expanding our growing presence in the UEFA Champions League and Bundesliga with the addition of Bayer Leverkusen football club in Germany, the healthcare network of Hospital Italiano in Argentina, energy exploration and developer ENAP in Chile, and mining leader IAM Gold in Canada. Looking forward, we expect international to maintain its strong business momentum delivering on a growth agenda focused on culture, team, capabilities, and process. Turning to global supply chain, Avendra International added another $1 billion of new purchasing spend in its GPO network this past fiscal year, primarily from travel and leisure, healthcare, senior living, and education. The supply chain team is also leveraging enhanced technology capabilities to optimize client compliance and contract productivity. We're making the appropriate investments to build upon our strong analytics and client mobile chatbot platforms. These powerful tools put the answers our frontline clients need in the palm of their hand and continue to deliver back-end efficiencies in our supply chain operations. We are now deploying these solutions globally. We are expanding our international footprint and supply chain and the quantum acquisition has fit well into the portfolio, contributing accretive growth to both Europe and Latin America. Inflation levels have been as expected and we currently estimate inflation around the 3% range heading into the new fiscal year as we continue to effectively manage the broader macro environment. Our teams are closely monitoring any changes in the marketplace and will leverage our extensive capabilities to support our clients. Before turning the call over to Jim, I want to reiterate that our teams across the company are hard at work and focused on accelerating performance, and we are already seeing success entering the new fiscal year in leveraging enterprise-wide capabilities, starting operations for a record number of new clients, maintaining our client retention momentum, optimizing global supply chain strategies, and lastly, pursuing substantial growth opportunities. Jim?