ARMK - Earnings call transcript Q1 2018

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Operator

Good morning and welcome to Aramark's First Quarter 2018 Earnings Results Conference 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 prepared remarks. In order to accommodate all participants in the question queue, please initially limit yourself to one question and one follow-up. I will now turn the call over to Kate Pearlman, Vice President of Investor Relations. proceed. please Kate,

Kate Pearlman

welcome results and conference to call Thank the to first operating for XXXX. quarter review you Aramark's of fiscal

www.aramark.com, me on Chief included press which that Financial our Foss, slide in Eric I would Executive our Bramlage, today regarding our earnings remind President be and Officer. Executive deck. can with you to our and Chief on Steve Officer; morning, forward-looking our President release Vice notice website, this like and our found and Here Chairman, are statements is

those During Form this or be MD&A, Factors, may making XX-K filings. XXXX. are important result on that sections discussed differ other expectations Annual comments SEC and Report including risks, as results implied and our for our in call, we various the Actual expressed other will forward-looking and of including Risk those our of a materially from uncertainties, fiscal factors

financial GAAP this these certain turn of measures. the I discussing reconciliation be will release, press call website. morning's be we'll can on With as well that, to non-GAAP Additionally, our A Eric. as U.S. found over to items in

Eric J. Foss

the decline broad currency based a in a a Thanks, start on report that was on $X.XX to good $XXX a segments. constant basis, constant X% Total increase pleased primarily as quarter, X%, I'm X% to was basis. all growth operating income. this Kate, across is due a company were that three from with down year billion off last reflected earnings morning income sales Uniform and Adjusted organic XXXX up to currency reporting we results per share to everyone. strong in reported Adjusted quarterly solid morning. in the

States income education, segment, leisure, driven corrections United facilities. Turning the grew industry, growth operating based and organic our X% to States sports, across business and by revenue performance broad adjusted by of the growth to base offset slightly multiple was productivity $XXX in with more capability investments were technology investments. well as down associated as new by onboarding and than as United accounts, million improvements

strong driven of organic adjusted delivered constant emerging base across Our X% quarter markets. revenue driven International Europe, in the improved largely X% gains. basis income by growth a growth on operating segment productivity currency as well International as by

in a Canadian were team. segment. reclassified majority release responsibilities this leadership noted As our morning's our This the operations International shift a of into reflects on in

Brent driven Uniforms with International drive growth. pricing Adjusted update the results in Brent Chief how great by of Officer that as asked our in I'd our I've will we oversee contract As to looking Operating well. International Revenue results Franks, lapped year and he extensions. associated has solid strategy. Canada. our executing improved seeing against XX% to we're net delivering provide in focused the Canadian operations forward X% business operating I'm million been $XX proactive regarding With prior new like to declined income an to actions as

last top X% accelerating imperative first three Our growth geographies. was the years. quarter strongest top and broad-based across is our quarter line and were sectors pleased growth deliver line in to The in we the growth

base and Our strong growth rates. growth very improving by performance, was driven strong business new retention business

We improved also drive overall to consumer indicators strong we as of continue continue future growth to opportunities see satisfaction. leading

to critical consumer we're make our of dimensions: convenience Innovation satisfaction to design as sure our fresh we keep number component flavors, concepts it improved all success fact, to across convenient healthy options partners. for through rotations, has quality, personalization. seasonal and options evolve on-trend and remains integral celebrity creative restaurant recipes chef consumer with ensure four offering In continue an quality, and the menu of developed promotions, our our pop-up a health, we

to test customers individual We strive as order to wait of our the which We're reduce facilitates down ordering, we spend time technology around consumer-facing kiosk amount continuing cuts customization. also easily evolve to continue times in our on thinking and line.

only plant-based wellness to train over an also initiative service. that reach that improves our ingredients. also top by using on-trend approach, campaign our help solutions satisfaction Healthy mobile mind. for checkout complements priority convenience, And powered deliver our as consumers, artificial consumer And providing solutions but and launching Life and the them promotes of designed habits. with trainer automated we're working of the to good help eating greatly remains remain a powered create for their client X,XXX these it speed our committed are intelligence with Heart chefs Health to and We and us not a technology meals nutritional consumers the goals. we're in by American the Association This meet

operations, from hosting the highlights client. recent is some to the privilege past Bank this had Stadium, of Sunday, U.S. at the which home new we Super Turning Bowl our Vikings the Minnesota of

as exclusive NFL's partner serve also Minneapolis. We throughout over the retail XXX merchandise at locations

join fans we And the of million Philadelphia the in Service the Aramark their on our X client, and victory. weeklong Our hard-fought during Philadelphia served Stars guests with longstanding congratulating Eagles, City over festivities.

encouraged key mid-XXs retention confident rates. growing will we deliver that new of We a new at least sectors. driven by strong client remain net pipeline business growth and across forward, year, organic remain Looking by I this X% opportunities a consistent number revenue of

well new by improvements productivity, driven we labor quarter reductions our onboarding base improvement, productivity the continue the costs. several of by offset SG&A to wins. startup were primarily second costs associated strategic activating to in with These Turning as account as in objective, drive productivity

We technologies of our in be continue investments capabilities early parts year. that and the tend to also heavier the in

the implementation momentum the in the calendar productivity unit the complete by building we end and in year. U.S. Ariba of of initiatives to expect Our are

further local beginning continues this hiring to spend. purchasing labor agency our for to spend. to beginning are us source shift reminder, which food our And productivity, is suppliers, our managers enforces us compliance to optimize our to pay demand-driven labor. As model that Kronos centralized system our is down drive a leverage With allow which reliance frontline regard reduce on with labor preferred scheduling, to overtime a our will help and our to

improved are leverage. control yielding above on our efforts operating Finally, unit SG&A cost

confident that in target expand and the Looking basis half our margin abates, year established we we three-year compression Investor improvement forward, we operating as point margins of will adjusted our XXX will the that Day. attain the back start-up that remain the at XXXX

workplace. also Turning a attracting strategic for announce We again by the to been admired objective, we've company. to Fortune's company Enterprise recognized talent, diversity, our third a once I'm pleased top were best XX Black as that named most diverse our Business for the which is a promote real and inclusive reflection And and Group wellness to with Employers National commitment Lifestyles to award. health foster Health a recognized Healthy Best the of efforts our on

minutes strategic with giving portfolio around the is objective fourth you a of spend achieving Our integration me update Avendra let on AmeriPride. And you all and optimization. an couple

engaged plans. so to Aramark. running of planning, XX, the As be ground on for in thrilled had the acquisition on January our each executing on to of we teams these you're one could aware, hit We welcoming these against to closed of acquisition AmeriPride integration day XX. experienced we begin ready we December and Avendra closed intensive the in We're talented and acquisitions,

compelling the across they that and sustainable expect synergies competitive for present opportunities deliver our these transactions of to position strategic We and value businesses create portfolio our enhance will that shareholders.

employees. be tax legislation shareholders, and to reform passage significant Finally, majority the Aramark, accelerate will benefits savings The our provides for our the recent tax of cash deleveraging. used of

however, we increases. workforce. enhance exploring to education, are well planning as We're reinvest wage also our training, Additionally, to opportunities in as employee targeted

members as warm outlook and us to the we continue who $X.XX to for great And our truly XXX,XXX outlook more free We view by expect accretive it's in tirelessly the again outlook AmeriPride. an well the joining full-year day want of truly a as both Aramark. incorporates exciting benefits every range as work Steve is important closing, world Avendra a a reform, from In the also in transactions to cash experience. the flow full-year $X.XX. note expected we anticipated near-term XXXX are This of to dilution now at transactions. tax deliver to few minutes. offer $X.XX the I to the new adjusted this provide customer members year. thank EPS welcome our to time the this team across to to of increasing once personally expect to the that will a team $X.XX be detailed related But

Our we're clients. base growing, new leveraging to operations and are our to attract right win

consumer Our service, new service, U.S. are as from employees our for improve customer synergies value. tax alike And further compelling will shareholder benefit tremendous enhanced to capture that acquisitions with employee, of recent the as and represent the opportunities client And leading menus our satisfaction. reform. shareholders and technology drive a will and expand well Avendra AmeriPride edge improved and driving opportunity our solutions obsession

call forward business a we momentum our to With let to future turn at look So success. solid the look Steve that, more over detailed our results. have for we and me

Stephen P. Bramlage Jr.

Thanks, morning, Eric, and everyone. good

by with pricing we $XX a sales was increase U.S. X.XX% acquisition. extension begin Avendra with sales an million operating X% basis, late prior prior Organic due revenue me of AOI was This to on the tailwinds therefore the in favorable nearly growth benefit a impact related company from margin closed days. quarter, our to costs X% versus $XXX quarter. the Adjusted quarter points $X.XX currency basis associated first Let a year was due the the mind of on decline on grew Because roughly dollar Sales XX that income reconciliation. compression Uniforms. or contract the of in with which basis acquisition there This in quarter. there weakening revenue actions year material basket broadly in and the lapping was the for the represents to decreased the the X% start-up quarter very against to a service margins GAAP currencies. constant modest in X%. Keep constant was basis million from no QX billion in currency strong in proactive a currency due were of largely to

achieving slight lower XXX day – X, lower improvement X% as share On AOI. expense Investor our rate our or unchanged. tax a slide a Eric the constant Day around adjusted more and mentioned, in As from $X.XX commitment EPS point a margin offset our increased adjusted basis interest decline investment than remains currency to target basis on

from prior impact to material no the share quarter due was largely year in dilution repurchases. there Finally,

$X.XX a EPS As Eric range year to mentioned, $X.XX for $X.XX the $X.XX. adjusted of our by increasing outlook we're to to

XX% expecting modest adjusted amortization are sustainable transactions a to partly from fiscal this cost more synergy short-term $XX $X.XX million, than of $XX approximately The offset dilutive acquisitions year. of interest expected $X.XX to expected price $X.XX offset dilution approximately rate, due the the are and We related lower to be million, acquired tax or benefit will the EPS by purchase the expense approximately the incremental capture. to EBITDA to which of

are integration, in closing As we're the in process to amortization price expecting October the year. the purchase the of appraisals. expectations based albeit schedule with line estimate communicated we half the accounting just based our the assumptions second synergies original These realizing to in that is had a on of dates. final change we're Note on that slightly beginning subject with delayed the still begin

We year, On the a GAAP reform is in the a re-measurement outlook a effect were expected and earnings certain the booked AOI Also we incur non-cash will due one-time are negative because we results significant decrease balances will change. anticipate XXXX, of to the the and quarter we year quarter's rate tax fiscal to of we taxed we the and first approximately enjoy quarter the due tax of pay in favorably full gain any prior rate year. any and transition which blended please rates, prior in which quarter XX% full the experienced planning Also first impacts tax as in the deductions. XXXX a deferred as in will are this XX% our not our to year $XXX overseas be our the the legacy of at in subject XX% XXXX, modestly calendar did did our slightly will first timing Again out estimated rates tax we that for GAAP full compares calendar. material lower fiscal liabilities In note fourth in by decrease in as tax-related that at offset that effective of the provisional a tax time to side, efforts. cash XXXX have fiscal higher rate original not again the rate million tax, that fiscal of the current to our year phase year. one to

once EPS new our benefit versus our benefit expectations corporate adjusted However, due we the is clearly expect full prospectively rate XX% results. phased environment former to into than to more by the

business These AmeriPride outlook Avendra of fiscal Finally, updated let impact our me the been XXXX. for include turn to acquisitions. assumptions and to the have the

just mentioned continue to least growth we consistent quarter, the communicated last organic year. Eric we X% As revenue and with to what for be expect at

We EPS of the $X.XX range $X.XX on year; the in are rates. to $X.XX an to this current expecting to generate expectation to currency FX also this year $X.XX benefit the in based adjusted company includes of

be for the purchase be As related expense we've of expected Interest EPS intend of and significant integration fiscal for debt no synergy therefore clear, appraisals accounting to million we time let that pace approximately have narrow range. financing. results get investments the capture, XXXX. our to adjusted and and $XXX we the the And we we this at in legacy also next long-term the note the have more clarity seven no maturities on is once And me inclusive from outlook change maturities again and expected of do years. now business extended acquisition the

cash transactions As debt. are of down majority we to free committed the paying using we announced we to indicated the aggressively our when flow

be We year. X.X end by of leverage this to below expect our the turns

the be cash now outlook the acquisitions year. of free flow our For over year. the flow to reform that certainly tax we're We expect free both in maintaining $XXX of for and will impact the million accretive cash

as the gain into insights As of the of the to as pace our investments understanding more integration outlook. provide will specifics, well and specific synergy the capture, reform continuing better refine we tax we a

capital to approximately anticipate to our will X.X% also spending invest capabilities. sales be and continue We growth continue in as of that we

half first our Turning the expectations for XXXX. to of

expect to growth. generate will that continue we We strong revenue

in the Also the we margin versus heavily considering of to quarter quarter year. second headwind revenue due when one first shift the the the that cadence service growth the note half a timing. half point of and please do expansion sequentially to towards However, about we weighted in day first our continue expect calendar be expect to second

earnings the performance per be to regard to with are prior second in Specifically we share our flat quarter, year. the adjusted to expecting

back deals going bring support integration. Our will be margins our remarks invest synergy of both drop through profits and too aggressively quarter benefit we we some and second on certainly to resources to little a squeezed will any the advance Eric in be in to now early closing the substantial I us the to it's for of quarter. as Realistically, over turn in Q&A. the for call

Eric J. Foss

for Thanks, operator, be. Steve. up And any to questions ready think the lines may there open we're I that

Operator

you. Thank

begin now answer question will We the and session.

- Credit question We from Suisse. taking questions. have Suisse Credit a Anj Thanks morning. (USA) Anjaneya Singh Securities my K. from Hi, LLC good Singh for

Eric J. Foss

Singh Suisse LLC - Thank K. (USA) Good morning. Anjaneya Credit you. First one. Securities

in in for business, growth detail or to about segments little whether could an first those to and a retention, nice one, It if new contributed saw this about you but is you was bit equal the you had you which seems possible the any benefit the base contributors frame Thanks. U.S. business the and disproportional those within speak from ones were one factors? of organic wondering improvement it for So, quarter? I more

Eric J. Foss

Eric. Sure. It's

at was line the us, and three least for headline top the think for balanced I broad-based. the growth quarter, So relative strong, to things,

let So dimensions. the apart balanced broad-based break me and

of geography that with I is both saw and fact growth. think, all we and sectors line the business is consistent

some look quarter strong leisure had in Education lines the at business And had healthcare a that facilities, business. and really sports, the you grew, a U.S. if in contributing. to separate quarter. business B&I, all strong multiple our We by business, technology hospitality even healthcare I as very corrections, of So growth. saw we contribute business, our pressures offset

U.S. very, and from perspective, board. strong a So broad-based was the it across very

based. Steve, pricing And on very our strong growth base we very again components as shielding due contracts, both levers, performance. and And strong LLC contracts strong had helpful. and could the well results you of as for speak you escalators and saw at K. to inflation, as three X%-ish to can to you business look Got - about. in relative Okay. pressures? slight spoke offset Suisse any increases way That some of cost Credit have strong growth, your wage the your base (USA) wage But business. you I volume initiatives to and one of pose in margins I that International, they think, plus thoughts the broad AOI I contributed risk the then I new We post is as uptick to you're Thanks. X% have your growth growth considering driven was on all That's Securities tax but optimization would accretive, in well the inflation Singh strong of retention, do base type business the frame business? your in quarter, very P&L and you those as by majority realize the it. and a the reform, the inflation that how would new. Anjaneya very was mitigate

Stephen P. Bramlage Jr.

the ask and if anticipate, I'll we certainly But anything I certainly go have commitments. our he any any with ability financial substantial to add. we against our if on backwards, start wage Sure, anticipate don't don't impact environment Eric changes that in deliver to to has

fact has that's as over business, rights employment from wages of have than pay on different wage us. competitive broad-based had structure so. Aramark in the here. having that bit pass-through coming to different last we has. don't think level we're a every structure, a ensure We've now down we've country, employment else I work inherently in felt day the significantly our as as to geographies Certainly, inflation. inflation. more one are experiencing environment or have people of the with anyone that to contract absolutely renegotiation really wage You of experienced business of are country, that mechanisms third year is we as but level based to as the flexibility clear such the is wage the a have country, correct certainly the have quite the come we We given well to the the third and contract it provides generally the in in that But in our XXX,XXX another

don't in And is We're number the I have. a is think I type good so, inflation there in global a to think And X% recover number environment. XXXX big on do using. a basis, to change the of be our still fiscal that inflation well-positioned still we year-over-year a pretty

Eric J. Foss

productivity. at The to only us talking seeing is, tell quarters I count of if solid you labor metrics, labor want prepared add scheduling standardizing thing model the emphasize allows that about look I that about. actions. that the we productivity how overtime really increases flex, mentioned And very are labor comments targeted. flex of out big the manage and agency. reduce base our the allowing head I my which about in-unit to I last performance in targeted of and we to one We're importance demand-driven talked wage broad-based in productivity a you we been couple the has would of improvement to drivers would word including QX, of you that

labor productivity if at positive the last of quarters, us. on couple been perspective what's quite you from it's a So happened for really look

Anjaneya much. Okay, to Singh think wage K. it. I (USA) to comfortable Securities Suisse So LLC we so with ability offset Credit any Thanks our - increases. got point, very feel Steve's

Operator

We a Toni question from Kaplan from Stanley. have Morgan

Toni M. Kaplan

morning. Good Hi.

Eric J. Foss

Toni. Morning,

Toni M. Kaplan

the call the at the the the growth explaining of I does the why in quarter believe, that that not or the X% Did this to keeping between and it for year, in terms year, growth growth, just guess, was the I Thanks. rest end XQ the the since, best you growth timing mentioned number XQ, so basically, the of outlook? a days? XXXX. strength XQ the raise contribute given the Organic And XQ imply is decel of of difference XQ just by in just

Stephen P. Bramlage Jr.

modest first day I'll part between was some the make and the service the as the referring that answer reflects not let the into out there year. a go however. of it Eric difference second the I benefit to a first quarter you is that would day and to The service I as basis in On year-over-year first us. was characterize commentary. quarter significant very X% quarter,

Eric J. Foss

relative least to guidance. the beginning the outlook, our be think the continues of was year, X% And at the to again, guidance it our year I full at

never and/or go that look at the I encouraging opportunities. as come make business rest we right to year, those think way. decision will new pipeline look of actually what I Toni, can decision Obviously, and the to now, the when our will is a continues market predict whether

But we'll to line continue how performs felt rest of the monitor top quarter. business great year. So certainly we new results the the in the about the

Toni M. Kaplan

with And AmeriPride one the these be in target might there the revenue entity. industry at a follow-up then on sometimes just acquisitions reduction great. the because ask acquisition. large wanted Okay, uniform I in to

wondering a if what normal from attrition. AmeriPride are disruption would was on sort before, what there reduction of expectations just doing just your some based So be there or

you. find just expectations that? Thank out around So your to wanted

Eric J. Foss

very, still it's early. Well, Sure. very

as caveat would as ongoing happened with I line with pleased what we're finished you well as out the of seeing the year what's AmeriPride, both the the prior tell as January. So top to through momentum the way we're approval, discussions they that is were pretty deal

broad at don't any So than the see business. we out across them of what we time coming Uniform this in point growth certainly see slower

the the only look focused head making and our will customers down is synergy model on of Bill team on keeping working plans their and through sure and have I job done think, integration like, service marketplace, but very intact. a head focused those keeping importantly what future and good not the their

far I So, think, so positive. everything seen is we've

Toni M. Kaplan

you. Thank Great.

Operator

you. (USA), question a Hamzah from from Thank Hamzah Mazari Capital morning. - have Macquarie Good Mazari Inc. Macquarie. We

expect beginning you break of tax impact is or do as the reform see reform, or is question tax your pricing tax your thoughts you're get tougher, just customer you, any impact impact to expect on any at first base you outsourcing indirect revealed on to indirect you of up talk just do if to look competitors, stadium of The business? sort to constructions broad for you not, to the being pick –

Eric J. Foss

Well, again, think, still I early. say I would too it's a little

We competitors closely. watch their companies more it deal in the the will our and it in competitors. large lens a less food benefit percentage outside than our and continue large to they base. have Again, monitor U.S., the two of with I'll Because that U.S. through of facility space a have tax probably of business

significant I But side pretty for reversed, will that part, will is benefit you most real because think here, be think going lots company certainly is I positive a this for companies. our think for to relative see the of who uniform on I to the impact. and

is get this wouldn't something do expect will benefit. it's to and variety to there shareholders I employees into trying to be that customers consumers I to constituents, point, of certainly irrational lead My is competitive if have to answer it any – that But expect to hint not think, that question a at that. to think we you to would – monitor, any I to your of would continue behavior?

Stephen P. Bramlage Jr.

and tending tax think people they're point an of happened of going more as of to mean I rate just playing been are levels, are that, a to add I leveling to seen most in of if the where past. land people they describe maybe that similar would what's I the I industry, effective has view, based on least from very, in field, information very rank I've that not would kind the case at the our Yeah. from

competing is been some about Capital and we've everyone bit been Hamzah the with think, (USA), period them the - same have Mazari we'll that Macquarie time. little for Great. a rate, of already higher a and hindrance around of Inc. spot a at I else I think, of so be

of over. of it cash is cash a your than But ago, guided years have to Historically turn start-up the question, free flow headwind margin. was contracts. million. follow-up couple I or wondering we're a I'll with flow you just you it costs contracts greater tailwind free associated mix know already a Just some specifically if Clearly, headwind. a these $XXX your

how out? curious contracts think and do just So, you impact cash to looking free the about of mix flow

Stephen P. Bramlage Jr.

and not I don't think, change of two going business the to I mean, couple ago. impact legacy transactions, in business, in we as felt overall money it's of mix business capital, in been working put onboard need of how the any any think or to couple receive we been we versus terms much as our directly the I our – significant the within is right, new there's largely the business in is addressing same mix last mix a business be years. years think I

try impact how work are free Thank on to and you. the And so (USA), cash Macquarie Great. synergies deals we'll - what's we as Mazari Inc. through tax Hamzah integration then be spending or investing be to bottom line out. over of in us to next we reform the the will the that's versus on opportunity taking for real Capital flow out. the the that what working And that net quarter

Operator

from Steinerman question Andrew comes from Our JPMorgan. next

Andrew Charles Steinerman

Hi, Eric. growth in Since was year achieved the base year-over-year fiscal for you might base here Aramark it quarter, fiscal a strong think than that year-over-year? XXXX better be in first XXXX growth do

Eric J. Foss

broadly again, that continued digits of convenience, the terms quarter in satisfaction of that of in for I quality, things health, Hi, at would all consumer to be is we will, increase. double indicators, couple us. In we of scores say you occasions or the a couple them mentioned around very has things. for to those look opportunities. rising overall we as percentage – of Andrew. terms And Well, across look a I've earlier leading if satisfaction, on talked two couple a of saw personalization; I encouraging improvement one

think So, offering. I some think most and how how initiatives some base you is, is about off are of place in only our quarter. are indicators, look relative matters And brand consumer. the what identified product off to we these in that what the at around paying put but how to says not we leading We've paying to money some me that we've also performed those and when indicators business

wouldn't and So, right revenue from that we that full half our forecasted now, where growth come again, business base I see right be say I at from about changing would sit our would and would look come of as from would much. of of half that I performance of now composition business new the that year about composition

Andrew Charles Steinerman

you. Thank

Operator

Kevin a question from Deutsche We from McVeigh have Bank.

Kevin McVeigh

I you. you should on had a potentially obviously going round, about how financial most to about – success think in potential recent – think could basis, you've targets revisions we your wonder of those could targets forward? we longer lot term updated please Thank thoughts on a achieving when Great.

Eric J. Foss

Eric. Kevin, Well, it's

Kevin McVeigh

Hey Eric.

Eric J. Foss

standpoint, it how we to were XXXX. I has model would to think we at with to our Investor through our in framed announced, our is deals we updated and you with but as not back where very strategic out, we the that laid that the focused much we that way is on these us financial Day we'd come Obviously from largely fiscal targets XXXX those two you a about out XXXX go the talk business guidance of sense changed. just want we come only take

will year. So, that take fiscal this late likely more than place

Kevin McVeigh

you dollar is flow that more impact in working the then from great, through, the And to range sounds way sounds there what think us? range cash just is tax about of it but a even it is but going it. for it's wider corporate which amount, if reform, to de-leveraging like bracket you're could Got it's any a a just like still

Stephen P. Bramlage Jr.

would I again a forward. – the point transaction get right, aspect think, quite two we'll There's tax the been is have. we a about obviously phase-in just be up no phasing to generally period, one-to-one there from standpoint a in clear have cash then going view, relationship rate and will that first year – have the through and the think, good well. you accretive to that we've get of Well, prospective should would basis deals that you you assumption on things the probably so from the once through in cash a as bit think expectation, a very we be largely And once I a I that's that with free tax shouldn't to flow modeling expect a change reason a we remind I that ramp change

So I'm talking look our on generation out and fiscal we've just levels ability that beyond have cash tailwinds flow we I the when quite above XXXX optimistic been about beyond that around the previously. inherent

Kevin McVeigh

you. Thank Super.

Operator

from Our from Stephen Grambling Goldman next question comes Sachs.

Stephen Grambling

Hey, morning. good

Eric J. Foss

Good morning.

Stephen Grambling

Good morning.

Stephen Grambling

in your to from top talk how just a of you compression margin are be comments distribution balancing through quarter perhaps them specifically pass And need margins related follow-up, act customers reinvestment, came how they partners' line, this much on some then to of to base seek outlining onboarding, should your may as higher on costs to Could of that we yourself? thinking the margins? and moving and such

Eric J. Foss

Sure. Stephen. me couple Well, let of make statements, a

the to last. I of all, think, first relative

like view think on pretty feel food. of I the be a I or of around most for labor that And where the think, Steve the area, range something is got whether we've us is land. look to tight what magnitude inflationary part, probably focused Stephen, we a eyed pretty for this order going referenced will clear like think earlier environment I X%-ish

of clients costs, a maybe quarter, little have is was it's just for question specific – base really of So first though any the your some by reminder very with services that handled our down what suppliers, a expect on us core I if all directly I productivity so if think, different don't remember we than us. the up you of to these wouldn't relative or different broadly, increased Again distribution your street look and perform at I companies you, saw margin the question and strongly. the for balance, that provide but the negotiating

to both happen you costs quarter. which was that SG&A start-up you education when about by in if in how labor, we going and as heavy That related start-up think was drive investment amount heavy costs, of new lot the saw as we a meant improvement an well So, of that's offset business managed in savings. a the

was pricing to In we addition that mentioned as the costs, a the extent, major And lap a contributor. pricing from first over also around the actions the quarter tended that, start-up drag Uniforms, to lesser then capability the Steve and as have early our to second the part last you years in investments know, quarter skew fact heavier year. several of to those

how worked the mean math reality that's I the of So this year.

Our expectation we'd as to we forward continue is go see base strong improvement. productivity

year in as the margin the you'll improvement unfolds, sequential think structure see I year-over-year.

going really in XXX basis second half, fact we're strong second, drag one, later get seeing base are ago if three opportunities of we confidence from pricing have remember, the perspective the I'd year. not say productivity the things: Uniform be the into finally, it's will then weather a that to real improvement; a And and terms point QX our issue; year so in an in also we provide one-offs target, as you'll some this that of

Does is So, question? answer that your that helpful?

Stephen Grambling

starting follow-up, quick pressure seeing Are activity contracts? space. or in business out acceleration That's resurgence bottoming those in services in years, that Thanks. for you signs of been of had Yeah. to a even of the helpful. One any we're couple among remote hear signs some corporate

Eric J. Foss

believe out I bottomed quarters certainly, ago. ago, Well, while several we a

in time business business stable no of some elevation spot as well on long in the Canada doubt, basis. us. relatively a on term services that between and oil the specifically the change quite ground. remote bode we last There's medium or should happens that price that's activity, the a know, actually in Clearly, in that sustained lag a the whether there prices, you North And if there's the oil what for Gulf been offshore for has of have quarters Sea. the or several So is

get an I'd business, So to should percent. investment part piece where are couple of continue our a that remind of bode if for eventually uptick business. just in we well there, maintain it's the small our of that we relatively or a you,

way So anticipate XXXX. material one I current relative a other fiscal expectations having for or it the our don't to impact

Stephen Grambling

Thanks so much. Fair enough.

Operator

from Andy Baird. comes Wittmann question R. from next W. Our

Andrew John Wittmann

give to wanted easy number? one. of I guess that said to just ones. Canada as great, also just And guess into Hey, You the re-class was start a XXXX, that you that out the was a maybe or reported benefit guess, band could lower, I rate was much detraction of for on you I us that with North curious a structural how as what is quick underlying to hoping fiscal of the America? into rate look just or tax impact to International, Steve, organic growth couple ahead I

Stephen P. Bramlage Jr.

XX% the than we'll but said a year, because us, or that, good guess, annual XX% this like on the touch points less I get, I'd mid-XXs pretty that to a can somewhere even better certainly so to basis the is of range, math. probably less sustainable rate, Canadian an that, structural we've think On another just of business, the than for Canadian around earnings certainly tax It's XXX than do And generally. a billion business XX% depending on is basis. $X.X range in mix our we

the the we're versus significant your obviously, way the underlying in International we what North America quarter change not I and presentation piece old growth International. our so, versus believe the of And U.S. as don't very any re-classed reporting new versus significant. is rate the is there in

exact think be I having same we'd conversation. the

Andrew John Wittmann

to of quarter, costs in, just the this that not helpful, quickly, you margins was there then other are acquisition? of just here, that the the I margins costs integration days And will not maybe only days early weighing in that guess that have early been the are are but you're just if the any discussed that and that acquisitions in items but deals hurt that terms maybe costs, normal those the abate one-time with the associated excluded relative question is tangible wondering previously Okay. guys would owning of on

Stephen P. Bramlage Jr.

from obviously, year fiscally later had any bit talked starting little a in we we we're anticipated. change I I transactions. about the what the when don't there's significant think than mean, first

lost months of we've each one those. So or so three on

and I of So or, internal is to incur what XX work. folks been obviously, that us one think some assumed same whether planning out investment, help months things of resources an of it against versus probably throw would we'll some reality integration-related And the first out the with the the of X external capture tail close integration year have of practical this next like synergy end that's date. we the pushes we'll into October system the them amount start fiscal have

sit, quarter. are one in the thus either far substance, stuff the transactions. where and But to we we of next to no the need relative what kind the of that's there's we've seen work certainly So the over in through efforts I of surprise where integration or planning here any from

Andrew John Wittmann

Okay. much. very Thank you

Operator

Patnaik from Manav from comes question next Our Barclays.

Manav Patnaik

those you My of a guess your yours. are on you weren't expected question I anything expectations? Uniform were aligned maybe did margin necessarily good guys in the you can with where just the X% context comment even our decline. prior Thank from below your come or around quarters and if growth In in first I morning. expectations is and just above guess, as the sitting or

Eric J. Foss

Well, it's Eric.

no, they came the all, of absolutely to margins, relative Uniform First in as expected.

I signaled quarters. think, we've the several last for that

we'll so into year, front. as surprises we lap and of that the second I on surprise, no as certainly get no the certainly begin earlier, mentioned So to half that

to a having in new entered entered as late were spot XXXX relative mean, very business year, I think successful numbers about We the growth, year. some talked you had we we to I than we talked of we XXXX. we a different knew and how last very how

felt get So to we a like to we going start. were good off

have mild was it business there than, planned, certainly that had if we than so – the probably performance on I think, would difference performance strong been on if the been saw think would surprise, a was base stronger performance. have little it I business and of a was we there mild the base any our bit

Manav Patnaik

missing pieces what free I just the by on guidance free a free said cash little it. will far, bit, the in the you really gave what's you've EPS pieces like prevented it's accretion that updated then but maybe the but Got XXXX it am there's from be some guidance, if that moving or cash be to where to I maybe there, something able the flow, flow that And Steve, missing giving interpreting XXXX, understand right from it I you'll so an real like am number just sounds guess, but number? accretive in you cash guide flow I

Stephen P. Bramlage Jr.

the our lot flow earnings included a and the in of we around cash that. adjusted number, some you implications are efforts that if there'll not two obviously will transactions investments make be Well, recall with but associated integration the

capture general the cash we as synergy going so, I full on year to better to walking phase in have continue basis, tax a will to flow we And obviously, to rule. accretion certainly appropriately. situation a because greater be and has in better those XXXX we're need think into be a

items So, XXXX, work of continue we're adjusted are what EPS going to cash outside are XXXX, there get to need some that better. we'll through. to

Manav Patnaik

All right. Thanks, guys.

Stephen P. Bramlage Jr.

Thank you.

Operator

Markets. We have from RBC Gary Bisbee a question Capital from

Gary Bisbee

Hey, guys.

Eric J. Foss

Hi.

Stephen P. Bramlage Jr.

Hey, Gary.

Gary Bisbee

the this the revenues. to is time, quarter a a had opportunity haven't think in hard time I about give I first long you

quarter. So, great I guess to nice it, you I but it's should say something what this about delivered see

Stephen P. Bramlage Jr.

you. Thank

Gary Bisbee

the for ask acquisition. question adjusted me on a you Let the EBITDA

adjust at about I of looking the commentaries. have it the about you think how million. to months sort I think same growing about think of trending would thoughts and So that. some based announced Especially said NTM your now not at should thing. Avendra on full the nicely them, Any number prior number, but was and you deck year, to That it's it's on time four we were how so, we're the $XXX an we LTM later or that? piece, for talked think a Obviously,

Stephen P. Bramlage Jr.

think got the stub I make sure, for for you listen the to Yeah, period. adjustment

You're that correct in regard.

these pleased forecasts of businesses seen have that for we've we're both around what think the with now I them. we EBITDA

three both been post that take got AmeriPride a time for this point doubt don't with to has drop think, through, significant stub our that rule performing. us the here about grain weeks, that. adjustment so what they're but are comment we the general about salt, very, a at of to of EBITDA for as in we so together. enough little I they're far, yet performing certainly with There's consistently but expectations both very Again it's will no improvement expecting at period So, continue. year-over-year terms

Gary Bisbee

the I terms using on in a U.S. just When building of numbers? into it talked Is that is amortization. – level guideline of good reasonable you've a our a would technical question – that And that. depreciation, for Avendra, of depreciation Uniforms be about Uniforms' your guess, sales your using about we think and assumption

Stephen P. Bramlage Jr.

Well.

As per it se business. lot of a there's relates to of you think of if depreciation not nature that Avendra, the

purchase have amortization. price We will

Gary Bisbee

Right.

Stephen P. Bramlage Jr.

minimis asset But run. that of against there's Avendra really business type they based the de depreciation base just on the

of would mothership the than that depreciation. So a kind be lower rate

Gary Bisbee

Okay.

Stephen P. Bramlage Jr.

AmeriPride will not in be radically different what from our we experience business. Uniform

Gary Bisbee

didn't just you pricing. follow-up expect then earlier you from said me, any And a irrational

businesses benefit you're there I is think, after there's business. which margin particularly one tax the tax people What in have a is low with to flow for many and of a – they're new to some managing many us have can up held competing use from with, Thank view a cash some regional in or on why of – if a seen competitive the that the reform? privately their aggressiveness see back how times you. perspective business, that pricing and companies you the to give companies, of lot that private pick compete reasons many when windfall keep don't risk you some either expect on of contract color you you just

Eric J. Foss

terms different out saw based show opportunity comments in XX% before than changes. players what of see north the if at come I do, up Sure, just to there, think what I of we're industry, again the tends Gary. don't by planning have larger business to would certainly the any we're I to reform you'll that the and And of and lot on Well, stand least well majority the my vast that therefore think I pressure. anticipating think we as I this you not a of down seen behavior we think, characterize I tax think to-date about new certainly in what price

end the tend will most for at think part, global large I of with competed, day the get competitors. these the deals our So, to

time will – don't any. I again, anticipate don't so, And tell, but I

Gary Bisbee

you. Thank Great.

Operator

question from Shlomo Rosenbaum Nicolaus. comes Our Stifel, last from

Shlomo H. Rosenbaum

was my Hey, overall – high AR, questions. Hi. was like Thank for Good flow up went much and a expecting up from actually taking are just just step cash AR it we about caused free what significantly just – and going big you little bit reversal that and there? what negative a in coming what's you DSO Could the morning. Steve, on most. big around talk

Stephen P. Bramlage Jr.

quarter the large sports the going And weakest our Sure. couple first I'd and first season the our and and of in flow the school education that is wind directly fourth seasonality higher then that to down were significantly with of you of positive businesses, always to the the that's generally, of just related a in and quarter quarter. baseball cash the start remind flips quarter seasonally be both

so on sales So it first side, via vendor be the – quarter I the positive our significant overall number the with growth, there's negative standpoint, expect a up. as because in greater with transactions. more that receivable higher third last difficult general a rule. right, always would compare had revenue on-boarding you year, which consumption the to to From was of And year little relates in the piece if revenue the a first receivable that, number the this then amount of cash we receivables to also much see year-over-year associated it is buttressed quarter of

our late cycle in significant of very, the vendor payments there we year as a exacerbated year, balance on very the So like. brought rebate December, which the over payments couple capital significant timing a of as last working the on of And the looks sheet their amount on were we capital. weeks a then, working made clients to some their – brought to full way

very It's the the sheet. we on seasonal. with revenue pretty brought it's performance a to think, consistent fact balance that the with significant we've I addition So, combined had overall

Shlomo H. Rosenbaum

noticing just there environment any are more in just time you could been has of for the Got it. change any period bit integration, differences? market, And longer in Uniforms then, or about the business, G&K little the owned you terms has comment there a in out a anything just competitive recently of Cintas

Eric J. Foss

to point phase of the which year, quarter. quarters couple again back the think in first in as industry, and saw marketplace, over pricing a and last what was last – last there is about year of what we've was you the I'll did of we talked I this Well, consolidation the see lot

I as being marketplace and it at we disruptive time environment not think, would as and year project the look we the current was look this anticipate as I at at forward, as ago. this, a

and very it's now it right rational expect think, I would to I remain rational.

Shlomo H. Rosenbaum

Okay. you. Thank

Operator

remarks. We have would no to for time. Foss further Mr. back Eric this to questions I the final at like call turn

Eric J. Foss

you Great. very much. Thank

First joining today. of appreciate Everybody day. all, Thanks. thanks a everybody in time ongoing We Aramark. and interest have us your your to great for

Operator

this you. thank We Ladies gentlemen, participating. conference. and today's for you Thank concludes

may You now disconnect.

Aramark (ARMK) 6 Feb 182018 Q1 Earnings call transcript