ARMK - Earnings call transcript Q1 2019

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Operator

Good morning and welcome to Aramark’s First Quarter 2019 Earnings Results Conference Call. My name is Christine 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. [Operator Instructions] I will now turn the call over to Kate Pearlman, Vice President of Investor Relations. Kate, please proceed.

Kate Pearlman

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

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

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

non-GAAP U.S. in of be reconciliation financial Additionally, A discussing press morning’s our this can we GAAP as website. release as certain will on measures. well to be items these found

Eric, Before our wanted call the over I I results. quarter to Avendra includes to first mention AmeriPride turn and that

reconciliation. deck over detailed net refer call to Please for income. that, the turn quarter to anniversary Also, continue of adjusted will impacted our the AmeriPride definitions and the to will when the earnings next income revenues Eric. X-year separately lap are the to We rule slide operating adjusted I at we of to changes appendix for accounting closing the by the With track deal. changes results and will

Eric Foss

reflected the that a report transform the morning pleased revenue good and good to this am continue performance start We we we and strong morning. reported to Kate growth saw XXXX and as is Thanks, business. I earnings off to in broad-based as everyone.

base currency momentum legacy business business with driven let me solid grew highlights. income operating business XX% was as wins strong of by growth. base up as a both new payment. AmeriPride currency basis. providing growth earnings XX% our start a the basis by in year X% inclusion financial on quarter, from revenue by a well prior captures $X.XX and client $XXX a the synergy Adjusted business million, constant results was one-time X% few increase as per the well as Revenue share, So a and driven Adjusted at on constant Avendra and

$X.XX Looking are forward, our of per which we outlook full reflects full adjusted the now to to year divestiture. raising technology EPS the impact $X.XX share, healthcare

another our revenue expect to performance business. growth and the X% by legacy AOI mid improvement X% strong of We year driven in continue of on to legacy business single-digit

our customers, lie as a expect that we purpose-driven and top above We and company or the to us also that unwavering minutes take our at a where about half our I to that $X.XX year allow our the would earnings communities few that, like to sets finish continue employees what company ensuring to per delivers continued speak we a of to range shareholders, live apart to commitment us the in while business This ahead. deliver With opportunities performance, commitment promising Aramark share. capture is to value the will the great work. are

growth. focused strong execution deliver and consistently to starts clear ability which our is strategy, Our financial disciplined by accelerating performance of driven with

sports, business leisure, industry the grew and all quarter corrections, As across was just results grew education. in by X%, mentioned, broad-based legacy The U.S. our X% legacy and driven strong in that I and business segments. business

South segment And international across growth delivered with our America China. Our top growth very uniform line legacy this Europe, segment strong solid X% of XX% showed growth quarter. Canada, and

health, scores ever overall trend improve We rise to deliver and convenience our the And satisfaction that to personalization. to consumer continue options our also menus like consumer on and quality, innovating we the see changing are appeal appetites. we metric experience customer to across continue key

not our Brands our They Today’s hall we’ve looking appeal designed variety and a experience Matter and pizza, for enhance is well. we great launched is concept; around premium Harvest looking Simple signature of recently strategy As a with which offerings like Table, food local of Spoon, wide just menus, are healthy new options healthy for while great our centered food. customers. too. brand consumer foodie to expanding And as food freshness, to

refreshing to own brands solutions friction improve are These are designed are consumers as technology well. order and only our to as the payment our City, that not as reduced private but well also speed by engage of service, label our the coffee process. and drive quality These powered customer Provisions store Java Demand. and We convenience on shop, brand loyalty in technologies

to employees We continue innovate responsibilities that free up enable their technology fulfill to to will focus delighting customers. our on should more and on accurately, their them which frontline in turn quickly more

key you leading customer to the scores mentioned indicator DC are with few have win across continue I of as a A sectors. new Oakland Athletics, the highlights before, recent confirmed contracts is industry new which business growth As to satisfaction convention we center. include

with this and the We Football for that official e-commerce Broncos the concessionaire multi-year league. Aramark our expanding new merchandize and the retail provider with are and alliance of announced also a makes relationships Denver agreement new American

we to addition both focused expenses. top unit continuing deliver reducing to by line growth driving and unit are In above on in productivity

of a of discussed still us have key execute we and December in productivity food of we capture both in lot initiatives. a we to have front as labor runway As against number

during which those half the initiatives of to continue momentum productivity saw quarter food, the labor this XXXX. results we us second gave and SG&A from benefit Our

of and of to a strategy million to is leg $XX AmeriPride on integrations expect vendor least this optimize The portfolio, our our at capture third in now track synergies in year. are we

duplicate expanded overhead two the enterprise. the process reduce optimize footprint to expenses purchasing down companies. In drive the continue our consolidating across physical have have to procurement to we business, begun and We of leverage worked costs uniform our of the

remain forward, about we’ve I a these our strengthen how competitive continued as to position encouraged two result of Looking transactions.

level and performance more And really company, meaningful mission who essence Aramark, critical starts It’s with our purpose. purpose enriching people, the a updates of commitments four like of philanthropic nourishing focused form our it efforts. is performance I’d we at stakeholders. really high is to morning, on around is a planet with around our fuels any and our that lives. are our our few and all to purpose Ps: products, provide that you our while in success This Now our

chefs, trained by by than the XXXX, the Americans been on culinary a hosting of of our nutritional our these our chain supports health planet. preserving XX% commitment by of Life with our goal more across new also which menus. deforestation hundreds of the variety Our announced XX American climate-healthy plant-based resulting These menus helped Along lines, content is business. emissions by in focused for XXXX. workshops. enhancing gas to groundbreaking our XX greenhouse initiative Healthy our in plant-based recently supply Heart recipes X,XXX we improving We’ve address of lower We’ve to Association,

soy year. transition we that will first step sourced sustainably to our in palm this and As initiative, oils complete a

diverse greatest asset fostering at people all indeed where Aramark can a and from succeed and and we inclusive priority are people committed backgrounds are thrive. workplace, first Our our our to and

recognition associates diversity dedicated Black the that benefit of have the our I that personal as we to people for related bring commitment my Enterprise each take year by to our last tax careers well for as to service one-time announced contributions, day. their this appreciation morning, And disabled is report reform. once it’s million for this work disabilities. in So by to of will that a I been XX reinvesting recognized we to we am every with to majority like This extend we excellence to again company that employees. a In top as as be and pleased they would opportunity U.S. and received $XX particularly

programs of are programs targeted awards designed as our retirement and employees, also frontline adjustments frontline special training have wage contributions as development our and people. furthering enhance our that for combination benefit employee We programs the and recognition one-time scholarships. include to well wage while leaders These investments of a for

ability promising growth our our going and shareholder value remain and forward. deliver Looking and bright forward, confident greater I in future to

closing, good year another call a over talk the bit for me Steve, will really turn there performance expect confidence. I little in let and be to we of are that before about of So XXXX reasons number which a

services key technologies and First, that off. continued products, consumer are satisfaction innovations improvement in across paying in our the confirm all indicators

our competitive And new differentiated deliver businesses works to consumer. model challenging today’s We across economic on-trend portfolio and meaningful designed in strategic our Brands business we from and are Our to two food great advantaged that and experiences times. deliver bolster resilient synergies. benefit that for acquisitions stint have an good Matter of both position strategy expected

us strong in our increased reinvest while and repayment that have sheet flexibility. debt on and and we flows also continue our through We returns fact consistent business that also the focus to to shareholder delivering financial strengthening strong enable balance cash the

So to the a with that, let Steve quarter look first at for over results. turn me call detailed

Steve Bramlage

Thank you, Eric.

this year There are good the reported are in quarter Our and continue nice hard demonstrate we year morning. beyond to financial about our and results business to expectations. first performance factors start we of base to a the of items these the our provided feel the in achieving a impact full impacting XXXX number trying

also of reported is Additional increase reconciliations further We billion appendix an in the this revenue X%. of are quarter, assistance. for which $X.XX

expected. mentioned, legacy was a we than growth our As bit which X%, stronger broad-based Eric of business delivered

and XX% when AmeriPride Avendra is impacted the there deals, revert that to of lapped Notably, of in including in It difference revenue U.S. are AmeriPride. the term note new joint nearly are the segment AmeriPride from final we organic grew here will Our early transaction in the identifying reconsolidation approximately grew using to related in it from be revenue we benefit and revenue legacy is December Approximately, Europe. favorably that revenue million will X% by Avendra totally X% respectively. X%. our or uniform Avendra respectively. relates to of and higher the legacy businesses have business the $XXX base and quarter a and FSS and revenue number international base transactions separately. net over was lapped venture term XX% and FSS organic no we results while The equivalent Please of we

XXX. increased We Therefore, ASC quarter or approximately also by reported revenue in million our nearly $XX adopted X%. the

saw will points. significantly impact the compress margins change obviously this from and segment segment basis uniform it largest close XXX to Our the

growth. business Base currencies Finally, income currency are $XXX increase We results The of unfavorable million. the for XXXX this accounted that dollar. least the productivity figure on in the primary was realization of track and $XX currency and segments reported generated capture. million progresses. Chilean our remain approximately impacting capture the This the increase and as Canadian will from base synergies synergy is off at is or XX% $XX all of million from strengthening dollar, constant a half About to We rebased M&A a operating peso. as figure. euro the sterling, synergy the X% reminder from U.S. adjusted XX% and year across year this of business

couple park rather received U.S. addition, a segment than $XX payment XXXX, first national the expensed previously in in is contract. This of quarter. quarters. change FSS We payment receive return but it In million this segment did ratably expect of a XXX. employee bit and previously capital. associated the We to year full our pull entirely from invested not a a million expectations, capitalization benefited forward but that later our a profitability Therefore, it does expected we dollars commissions in ASC by with uniform from does in of our

first new increases JV with aforementioned was pro AOI benefited business, year The AmeriPride from full by going of Avendra and benefit the segment to that inclusion Canada expenses is with from are as running ledgers. the personnel X%, from in higher combination in is international incentive startup the several we including costs approximately consolidation, majority the Note payouts. Korea, forma businesses impacted minimum wrap be the and wage X% on of quarter. a now integrated countries, Our a costs by of and China estimate results. and also this associated these

reported results We have impacted a negatively X%. small from will AmeriPride QX. impact in by Currency headwinds

are there figures. our that items significant also Finally, impact two GAAP

and per was HCT Beyond of that’s the GAAP the that is the a to non-cash tax lower than operating income $XXX to year due gain XXXX $XXX million is income benefit a U.S. reform GAAP provision to from related primarily net the operating higher XXXX to XXXX earnings this a from the note $X.XX Adjusted the million of discussion. in from XXXX the income deferred due tax inclusion of wrap recognition that sale. basis. results, primarily prior growth was are EPS for XX% tax of currency with off to is re-measurement base the consistent on adjusted a all improvements share, table. shown AOI deal as improvement and $X.XX, synergies liabilities. in the rebase which the Please is The of constant business,

AOI this associated per equates to million the the reduction quarter and the have impact X%. results, currency The a expense about addition benefit EPS. In XX% we which negative Avendra $XX adjusted interest financing, in of minus to higher to AmeriPride an due $X.XX from share or is

know expectations. significant of interest in XXXX adjusted full a year growth for we that EPS there components Now, is our the

debt consistent begin with adjusted starting the that and of concentrated incremental wrap and approximately X%. we shares equate revolving Therefore largely remainder share EPS business combination we the and off the inclusion the realize contribute EPS As reflect raising approximately adjusted as the or Eric synergies still the $XX noted, with companies, the way year grow integrated This our base quarter. is for The we to will X% point to report $X.XX adjusted what XXXX results base to HCT approximately quarter. the AOI adjusted X% that’s first shown acquired let as results expect mid expectation expected actual million we we first AmeriPride growth. the per are for $XXX the to estimates will The to X% with that with to $X.XX growth to pro will Avendra is earnings repurchased of in have X% EPS to single-digits we me another of range and fact Because contribute of for X% proceeds. growth. forma quickly have synergies a million paid by EPS of our to

share. capture business base M&A earnings wrap items: in three growth, and these improvement drive adjusted expect XX% per We XX% approximately synergy to to

our headwinds we adjusted constant X%. expected will from awards interest from compensation operating However, this the Thus, approximately financing are X% dilution count first to would further quarter XX%. to line primarily below impact. headwind expecting transaction of adjusted year a stock-based Higher approximately from a be a is basis growth XX% items. Share this about be X% though by currency the up EPS expense dilute is on EPS

a an in X% to to now expected $X.XX expecting per We are or expect of or to the growth of in earnings top $X.XX currency to year headwinds EPS year reported above the $X.XX at range to $X.XX XX%. in adjusted half of arrive total, share. quarter the the continue $X.XX XX% We finish therefore

around Eric for that mentioned. would to U.S. purposes, Now employee the provide I some details reinvestment program modeling like

From reinvestment will million cash XXXX. in We and is reinvest of XX% $XX one-time the quarter ultimately of XXXX $XXX all incurred of $XX this million, of million reinvestments cash our exclude a the both these nature fourth fiscal be and of we charges one-time benefit flow we non-GAAP will they years. in which tax received be Approximately, over deductible the and are results. will the from therefore will XXXX one-time standpoint,

de-leveraging. these these well into tax absorb of will our existing million as has free tax Hence, figure $XX be XXXX will is benefits million towards investments annually to guidance. and unchanged. flow the We to $XXX in ongoing reform expected The for cash used received company excess from incremental continue

revenue to Our expectation of full our year midpoint X% the range. X% remains approximately

it schedule, prudent implies the the the recent We potential going end more lower government in not the feels the the very second quarter for the of had the quarter multiple revenue we This sports first year on impacted second year fact cautious a half this be next did and expect a to Bowl of we given did quarter uncertainty around consistent year-over-year our our year We including adverse expectations. first bit and year, Midwest business to which half strong and range. to the shutdown. be service Super growth the lines us, weather is last with full of therefore in

will in reconsolidation quarter, our Europe We lapped international being will equal. which second in have all growth else JV fully the also lower

growth, earnings our will with the per year first for as anticipate the share full well. we we consistent finish year growth As of expectations half

the approximately knew previously we the be Eric? growth the in to positive M&A will along we benefits We the therefore the net will $X.XX experience be and we base wrap and lap we we share statement. $X.XX quarter a the reinvesting as synergies drive fully productivity communicated, remains continue As business. that would year-over-year second all to first while and expect in of currently strongest year a quarter true

Eric Foss

With think the open to ready are questions. for Steve. any we Thanks, lines Christine, that I

Operator

[Operator Goldman Instructions] first Grambling Stephen Our Sachs. you. from Thank Please go question is of ahead.

Stephen Grambling

good Hey, morning.

Eric Foss

Good Stephen. Hi. morning,

Stephen Grambling

a base a think missed I what that to base payment, Good And in how year? that how to how margin on guess, guess I related this I but can we evolve as the maybe about business, you little about you maybe follow-up versus on opening to is should morning. throughout should the the related remarks, think and that first expect and going bit elaborate we client expansion forward? and reinvestment I guess then the was

Eric Foss

It’s take turn reinvestment to to other and with and question. will comments you your one-time me Stephen. payment he margin it Eric. add. Well, wants I Sure, can start through Steve over he any let the and

way a margin think followed. QX what is the about we as from think captured to standpoint I saw I in

productivity our journey think continues. I

a acquisition. as runway can have what about continue increased year we think result of Avendra we purchasing see to more scale number we so this And you talked one, I throughout that leverage is the will is see

that chain. kind about have in exists As we the you of attacking supply know, the complexity talked

as cost our labor, on model work about over menus. at reducing labor both do on look is has of got our then trying and zero-based things agency think a kind highest of really sure an also of structures, we simplify labor. And labor making then are about is that talked obsession One food I playing done And time the game and we have to staffing you consistent really contributed. we have budgeting have are the we and consistent the we

from So, think SG&A. saw look contribution the and labor we I you in if quarter, food,

think the our you think I do as the see will you coming of grow in some base quarters. continue unfolds year to see margins. our I will investments us

will reinvestment behind the quarter, are I So thinking reinvestment some second things the to way a you the that anything about and Steve, cycle. frame technology it front of on that’s in would mentioned. larger see we the I we are up how doing think add? But I

Steve Bramlage

Yes.

I think revenue is before thing of only at the highest addressing X% I growth the there X%. are I very second question level, we expecting the mean, would to

X%. to We are obviously that a higher than expecting base improvement X% AOI number of

So, bit the $XXX will that incremental occur continue definitely XXXX our dynamic mathematically, over becomes several will revenue with business million a there. In with we dollars have of to to we where difficult obviously expansion revenue recognition we expectations. track, overall, time to expansion. going margin because base have of number are associated margin margin consistent little have But no

invest the parks. extended in services to of payment, obviously. various so company parks one-time those We time periods over As the national

that some that where us, they And that the money in to change. make back back government us. so someone from invested at owes a our they Ultimately, for a return not park point uncommon it capital of else buy need the us should investment is come government ever to money certain and to the as reaches

to buy back so a the is for money not them And down. in of pay which form it’s uncommon

where bit this fees past to have the relate magnitude. a investment of to happens quite contract we We a of it. have This received against in nothing

expect thought happened. over we That’s out so government what receive get given of And a not this to the couple we I obviously quarters shutdowns money. would in did spread it the etcetera.

that We the quarters. and it income adjusted that expensed have next capital operating bit, it the of will profitability had couple would a little first quarter. pulls And forward so years some we result over of we otherwise in previous as a in all gotten recognize through

Stephen Grambling

one then synergy Avendra we fluctuation And and capture Great. this that is should just maybe from thinking quick be contribution the about year, kind any of capture from synergy all quarterly the and that see do the acquisition? follow-up you

Steve Bramlage

No.

we I capture think is and synergy the referenced Avendra both AmeriPride.

fairly from we there quarter-to-quarter, it but at year, both capture as look the see think is And will I you so consistent deals. synergy

Stephen Grambling

Great. Thank you so much.

Steve Bramlage

Stephen. Thanks,

Operator

Thank you.

next question Macquarie Hamzah Capital. is ahead. Our Mazari of from Please go

Hamzah Mazari

it U.S. it high on business is just sort X%, to is FSS are to rates? get of you one of to a it question that just X% for Is need pickup X%. it that how pricing? Just Is about Is rate. you just at it new level curious My at But there is that I base just net morning. looking curious ramp, or of think the business? curious, sort is growth growth broad-based Good retention level, needs things lever to better? know you

Steve Bramlage

our businesses. Sure. mentioned business and in growth again sports the our you corrections our of business, at business talked, in some we if as X% good U.S. quarter, leisure, education. the had first Well, We look and business, industry growth I

on base quarters, So of XX% I Retention was kind of XX%. the both I’d are we would we new rates the and continue area would business. that coming the most around focused the be mid business. to or net look business new hold composition as to say growth say

cost So we our really be inflationary with I’d think lever, business. is to comfortable would the there say, one growth and feel ability one including capture business I lever if base new our

Hamzah Mazari

should is on startup Great. margins, we a in follow-up that Thank mix-wise all about? thinking going And you. there, cost? then on else Anything that be just the international

Eric Foss

us in minimum of in year-over-year negative impact the cost to start-up us costs a several joint a at and role also course digit consolidating we referring that for had Yes, given so that no, but high fairly quarters have actually a weighs was the XX% China us a ultimately that necessarily, Canada of Korea, countries in quarter: do be not will the our but most that put able some pressure that and with to one standpoint number mid-single we’ll positive on to wage we and International play segment get mechanically pricing and start-up cost of significant double-digit on on obviously, back quarter current in all associated go revenue specifically a quarter as fully I’ll handle timing basis forward. I incentive to some of a venture margin increases was then the back margin so to year-over-year on the basis it’s payout flip the as some that from personnel well there expect we

Hamzah Mazari

Great. Thank you.

Operator

you. Thank

question go is Gary Bisbee Bank of next Our ahead. from America. of Please

Gary Bisbee

Yes, guys. morning. Good hi

Eric Foss

morning. Good

Gary Bisbee

the Just systems technology we a you their your that? are to where acquisition, fewer fewer there in know can just you are it be recipes of this to scale behind little all help you. announced line through more of get more done had the all use of categories? Just were talk will start of leveraging then think to the multi-year process the what’s some update scenes about on helpful. the managers with with to Avendra? to or have purchasing more get a and purchasing the and software be drive your to some menu you leveraging bit And Is concept Thank post get purchases working would to you to scale? better that third-party business when take to the I ultimately your also time

Eric Foss

and I this acquisition as kind a of to our and looked things set across were phase as will was of Avendra couple we we power say is, then what different doubt do we us at capture do at there’s so to that suppliers we’re just three make the Well, phase paying, then our year categories, we everybody are well certainly that get synergy I’d in or kind of rationalize we stop I and how we is within leveraging that our think is, purchasing we the no the if make that’s one, think with you we our level look two procurer sure journey look that we’re Gary. for be now from about that, that stop categories a purchasing phase and a the kind how look large kind location simplifying to Sure, of and capture right first before at phase each to the talked for think perspective, sure begin synergy the first existing and we would are of that what $XX think we so, that’s items how leverage right purchases buying, are I million. consistent as I at of of

Steve Bramlage

$XX million.

Eric Foss

space beyond in look of they ahead then, there terms guess, of I final track slightly and a today. hotel and that segments kind play think and on million $XX extend I we’re our largely GPO synergies would in space in really journey reach for the where of look to hospitality of step other opportunities be Avendra are growth in some

Steve Bramlage

Gary existing in the taking synergy, our them productivity Avendra your would question and helping kind contributor compliance menus the already field a people that same synergy and that not be getting to lingo of as million period in in improve business we is the base $XX the that and to that be standard think and to fold pretty system readable we businesses have add so compliance but over advantage of the a contracts, would we the only we expect and part I Yes, to I is, the out capture, thing have of have related already will food three-year ongoing the stuff we under by would operations. buy be our want in that that

Gary Bisbee

I them? mean, on just sense on I a both of us of the the compliance? Thank Or give compliance? are made Can That’s innings? you. a Thank you. Is for purchasing very those, and early true to-date probably helpful guess quite same you you commentary. we progress the bit purchasing

Steve Bramlage

all we of them procurement the So, next the menus Avendra side using our we to and from the the on buy an we FSS expect with rolled would them system start here want I out the we specific and business we on to U.S. synergy management them to synergies, a to to the be from. the are in would is we’re choices to I right get so get majority U.S. a across the menu we’re of the to the be where just is we we and side, really would Avendra titrating stuff the the opportunity year synergies thought, system expect, tool third that them and obviously, on listen standard places will right push this think the specifically over we’ve they’re using the compliance technology, said the SKUs investment quarter give required the out have and is or system planning to two it right menus play fully desired Ariba can of so that businesses buy as deployed business who then which like how

Gary Bisbee

Great. the story, Thank And a the local Adding paper you question contributions from whole just have XXX(k) then or up, all that you. about what’s investment you can bonuses? in workforce telling but on not reduced against, for and doing probably reports managers incentive this? press the some what’s help frame not might us follow-up been what, U.S. discussed the your getting going

Steve Bramlage

and business of here a us there’s of Yes. to are may so for XXX,XXX I lot those very reinvest the this chance level opportunity retirement company very press they period of company, trying this pleased reinvestments to pleased do has it’s domestic paid we do philanthropic so the normally to we address in contributions of we’re around appropriate or it’s to employ, of story different there management the the within result the that that opportunity us the to earned kind Well, will people the coverage we a to will think to sure, cash some that cash able news business relates money, some a in and with a from would beyond bonuses workforce them, windfall recognize activities reform above know, from our U.S. for been have that at in it XXXX couple cover good obviously, different in related you have of were to community perspective a stakeholders and the we’re clearly, folks payments have in we the for this company good as for we’re tax time to allow then a o related as the reinvest there’s pay of what to make in variety very us. extra and ways the and some those some contributions, will listen,

Gary Bisbee

you. Thank

Operator

you. Thank

is question go JPMorgan. ahead. Andrew Steinerman next Our of Please from

Andrew Steinerman

I down year uniform the with is, for margins versus the Page reflect will margins reason help make rest slide why of year XX.XX% was down is the Hi, then, think be if for is this the quarter XX.XX% that confirm of because I it’s but XXXX margin you rest the Andrew. year looking a change at it’s XXXX, ago the release yet? accounting look want Page doesn’t just it year-ago and the or of deck, down of uniform press I’m correctly the so first of AmeriPride just me first at XXX think XX helping of are to quarter the year-over-year please, about me XX sure margins quarter the

Eric Foss

really revenue going and so underlying on to will So, I think legacy then margins first business our driven changes Andrew some accounting legacy revenue going are margins you of expected Steve say, okay? capture, me So, as our is all, a margins, is of the recognition X% AmeriPride I that of had that AmeriPride��s reported growth other synergy question, let business the I again, improve start to margins, the solid by the referenced about the their you so Steve uniform relative more comment think, want would on the be I’ll and continued reconcile side are Steve, let but which lower thing your little the to growth, changes to.

Steve Bramlage

revenue points is Yes. the a number quarter ASC would will driving so the we compression, or the XXX no just think AOI basis margin that a with current to have it’s in in reported year I change margin comparable of will almost year recognition forma more because line related uniform additions that the in million margins add so lower of have Uniform synergies restate overall back you’re from to XXX, million and I report $XX of going we primarily do number there $XXX adding for is not quarters. base second dilutive in, revenue going Listen, we we forward where expansion a literally so that the there as prior think, comparable get year to majority mechanically, I Uniform of for to expect, we’re recognition four impact the we is or think you’ll numbers until XXX that up margin little revenue that’s to standpoint, deal, and but therefore the the pro revenue gradually quarter and business tick then I improves bit AmeriPride of, in and the lap

Andrew Steinerman

you. Thank Thank you.

Operator

you. Thank

is question ahead. Morgan Toni go next from Please Our Stanley. Kaplan of

Toni Kaplan

Thank you. Good morning.

Eric Foss

Good morning.

Toni Kaplan

inflation on cost what about know inflation and pass and the foodservices go I you’re through the higher prices? majority us inflation to to with one through update with clients talk on passing so you these regard you Can is avenue if side? started how wage seeing to labor you’re for of able can renegotiations on have through renegotiating

Eric Foss

Eric. it’s Toni, Yes,

we’ve feel the dealt accordingly. any seen managing worse two-thirds something have our and gets away is we this mid-X% over as I you we have at ability ability think creep then contract something inflation and, the a types, know consistent so lot with time, we’ve good and doing very discipline comfortable last inflation both seeing inflation, contract or in think so year, based other we months in our deal I of obviously, a labor process and of have up I point and that and which say, with at saw to are very successful as we range so with any our combination the don’t as on remainder we look have we I would price are we and to passed right about it one-third inflation that food plans that we of the types what into inflation that of I through the incorporated through it see that to last think the of year, XX the been see getting

Steve Bramlage

Yes.

or with and the We food and of over so also the better don’t in much that’s I have run necessarily think getting here pretty point that on probably think disclosed visibility experience really and it’s good labor, we year. be getting that’s kind we’re so the the for so pretty for it’s that this the don’t of XXXX actual rest at rate exited year, today all-in X% worse material would so I X% X.X% the it’s

Toni Kaplan

the And the Thank strong I by early? momentum did just XQ like divestiture thanks. you Just the you but expansion quarter you. of it finalizing etcetera. feel want that to the felt Great, the then thoughts did were it’s too range? X% guidance with wanted by range ended continue shouldn’t HCT you expect little to on margin range pretty bit growth the you Did on talked where a your in consider hear into to more? core you about up attributed this EPS to raised the and Or know how I conservative? raising you we be

Steve Bramlage

Sure.

rest thought further a we feel being than so be sure other we existing good of broadly and our QX expect for absorbed subject event communication currency is was a to Investor certainly the number that and to higher tried to year raise I had range the the prudent us for ultimately in and now. on that clear it HCT and the here within the we a print will range a top to we we directed, be to refinance, going it’s what year, is there being beyond optically up we to to raise thing it the most squarely we range the final making we that have a year, quarter be how $X.XX focused of have keep of currency than more thought every reasons $X.XX it’s like and doubt touch at money so at the the all ended in but Day the it would is think no stronger the commitment through touch as we past, very do we we think I had in were the we’re changes Day, that’s early for we prior from that $X.XX continue was went felt in vis-à-vis I of what and the evaluate So I get right allocation that to mechanical so we’ve half will we as

Toni Kaplan

Thank you.

Operator

you. Thank

next Bernstein. Our ahead. from is Richard Clarke Please question go of

Richard Clarke

morning. good Hi,

there economic offset making payments expecting specifically of as employee able a see just from for asking benefits you making result during off more satisfaction start and rationale of you payment some company employee employee Let’s you that you’re inflation be maybe the to the retention sort with labor investment payment? those are to pickup of on therefore might this see pickup going Is some forward? the making

Eric Foss

customer and basket of our attract investments. I of ways as the of a deliver make great Eric. we benefit Sure, I a very investments and It’s look are this we to investment if so our is is trying to one focused want million we talent education the sure we obviously, to our be tools would an we’ll line of think in really employees front a three belief sure to that all got they’ve Richard. of the in mean, right talent can and retain say to us it’s really the want to pretty will is finally, provide following experience the and buckers of on kind at those result management simple experience skills they these that be then attract, give $XX help retain to training and so you smart a I teams we’re really able and need really making, the tools skills investment particular it great make

Richard Clarke

must trim of would of is close the as included are the their some again. they’re touch that business the zero be by thanks. imagine XX to to countries of moving just peers low-margin your have I a consider international sort something Okay, want we seen I some in countries doing XX, sort because be exit follow-up, there from you to portfolio, the I get that on could be a margin, profitability of must there in that X.X% list? a understand parts headline some in must there reasonably that’s to mix that the across Maybe

Eric Foss

Richard, it’s Eric.

me a Let of comments. make couple

First think see again, unit so constant pretty very that and revenue took of something good from of the you’ll a any a really, U.S. overall than I grew do on about mid-single with opportunity where talked International for you business sit XXXX, for two that to we in business. all, would contributions a our big at SG&A to for rationalization the the are one our and basis a work of broader sure, that to of underway maybe growth some so, currency countries, the think that as or and a us look really thing a our portfolio we question, challenge I I us make I well pleased action Certainly, us is we few you International are right-sized say you International that. I’d pursue I’ll saw no business there’s frontline say our now, been basis don’t look that’s part right where in International and or UK doubt but International is are think short we on digit business another performed some if is that performance of has our structure at business business, that, years you really the opportunity ago past similar they’ve competitors above and our really remind our is appropriate profits there in

Richard Clarke

Markets XX% right ask $XXX guidance raised flow that that Day, so XX% way the to longer Capital calculated no you’ve can at was cash of quick that free reach therefore, the net you the is not cash about but at very income you’ve what’s mechanical guidance how simply number? the guidance way million? very And I the think one flow just the obviously question If the just net income free

Steve Bramlage

Sure, is Steve. this

for to is that XX% this net obviously, cash of number So integration generate flow have $XXX that’s that’s cash XX% starting in guide longer year not related term mechanically, flow on is adjusted taxes you’re $XXX we reinvestment million million is so consistently income free workforce guide spend divestiture our expectation earlier between some cetera, from million then the our that extra and absorb that, still will expectation generation the million the we from with we so point we’re will related light $XX more how the probably reason the then et expenses money to we’ll fairly on getting cash $XX spending deal HCT flow after more the spending within but and it we’re yield in to this of it raise the investment. changed the the the current year to in that associated this didn’t domestic fiscal year tax feel it’s and prudent to

Richard Clarke

much. very you Thank clear. Very

Steve Bramlage

you. Thank

Operator

you. Thank

question Andrew Robert from Please next Baird. Our Whitman go is ahead. of W.

Andrew Whitman

Great. Thanks Steve.

facility when international you’ve us and And revenue point On been from the venture began? can the of that you starting joint services period consolidation that was how refresh consolidation consolidating? over the much added and just foodservices, the the

Steve Bramlage

$XX million $XX or of either last $XX that about between quarter the to year. the in million quarter reconsolidation we It’s million believe March current the early in I was finalized February current late it

still have kind X quarter. or will go in the months we of second So, so to

Andrew Whitman

the in to that on guess, how some And than quarter have is, you for mean, compare reversal one for accruing the I guess, accrued a more then there quarter, maybe fair you EPS that’s Okay, this if your of wondering, I in ahead of that’s specifically bonus? I’m that Were question that flat? managers, fourth that higher I ‘XX? who things of guidance reversing helpful. of deck to incentive here back mentioned some of is it number in that cost maybe employee because you say And is fourth for didn’t the say you. just in is the bonuses, XXXX? And usual get is for the was Thank just going bonuses

Steve Bramlage

Yes.

with start that, me Let Andy.

So, all. business at to the XXXX reinvestment activity obviously is XXXX not related

there. So, no relationship there is

folks, company did earlier disclosed purposes. relative so in filing the For this that proxy achieve the levels to bonus bonus not for XXXX, the we accrue actually has set for the payments specifically that we company, profitability year and company targets of our target

little bonuses paid we didn’t bit been targets below levels, set. target out the actually out So, paying bonuses make had our we because that or a

So, course, that paid out XXXX timeline. being was in business again, bonuses all existing fully those accrued and our are the normal in

given who on bonuses performance and be will bonus are there any business higher folks year receive based receive target payments in so results on of amount well. based And folks as there than to no who the be always line going

Andrew Whitman

Okay.

then… So

Steve Bramlage

at if that that, just Andrew, incented was After year, yes, any after I going it’s program look performance. in bonus – given to drive say, our to you

different or performance, payments or payments, you’ll And and so I target some as disparate see which see no you’ll see higher some geographies consistent. businesses, you across than think is low pretty

in any difference real given no So, year.

Andrew Whitman

And Okay, then this bonuses that’s is helpful. the XXXX, is accruing tax reform again one? only are really incentive you for bonus or

Steve Bramlage

we in be compensation No, the anything will fully do to normal incremental. XXXX, incentive related we tax reinvestment the for are accruing course proceeds for

Andrew Whitman

That’s you had. Great. all your for time. Thank I

Steve Bramlage

Sure.

Operator

you. Thank

of ahead. is Manav from Please Our Patnaik go next Barclays. question

Manav Patnaik

number? expected. where if you. think strong that and just why I bit you’d trends a the I you than you say so of had Is international And growth Thank is more color better guess, like it could X% us Steve, that led little was top-line was strong? fair that to the give that it said by some

Steve Bramlage

I’ll provide we and had We the year, of year. Eric better comp had tough we had let going people in the little growth the pretty be commentary. to bit that color was and where of thought a we prior do comp we Yes, than I’ll thought. quarter a it’s toughest I think start first good told

quarter better. of I it XX%. an little walk to any don’t a business any grow with is line expectation So, going into bit is

that so to had that change. international new be. was business right, than business JV knew We little have a anticipated, portfolio business, than doing a it’s attendance last performance ended season some and better And up helped of the especially, about re-consolidation, better We NFL really the that what performed and wasn’t a So, sports to a a in the in I U.S. this really business. season we team success as the as attendance, much quarter venues better, down couple winds that expected think extent, say our figures. that’s the had in year-over-year not to quarter function then we sales historically bit good and and the fair it good than a of team that retention and

Eric Foss

of again, And if would and we’ve the if consumer at to at metrics, of rest place, if new stronger that strengthen the those look thing the initiatives things it’s we you beyond front. in year, business some one to really into earlier, I little of a growth done if at and think our I the the the is, innovation is one our was you look than as we And to probably look think well. add the brand if some uptick offering, satisfaction product you mentioned performance that I as broadly you retention put we’ve on business international, was thing went there’s base quarter lever focus, actually receiving did as more look that

the base the did would better characterize went business I So, that we anticipating. into perform than quarter

Manav Patnaik

Got question. And clarification it. just one

in the Uniform, also the benefit in of X% includes the the does that $XX consolidation from international benefit include and the XXX? just growth that So, million XX% JV

Steve Bramlage

Okay.

international does the include business So, the of re-consolidation. benefit

And in X% the the of include re-consolidation. X% the much of because So, absent not Uniform reported the revenue JV be of higher recognition, does improvement the it Uniforms would around is benefit revenue that.

Manav Patnaik

Got guys. Thank you, it.

Operator

you. Thank

is Credit Please of Our go Kevin from next ahead. question McVeigh Suisse.

Kevin McVeigh

you earnings should of color QX recognition about? any incremental there QX gave from kind or think Is impact Great. good that the impact Thanks. Hey new we accounting Steve, that QX on commentary. us the should

Steve Bramlage

Yes, is the yes. answer

we in our is, commissions the X benefit think of change for then we’ll impact $XX of substantial over revenue next First, are $X the that employee to and recognition earnings for year the – benefit we the have to quarters be revenue I Uniform in the business, a segment we a recognizing million of account somewhere how related experience only consistent across each million business. from will

I said benefit quarters So, we up as well. in next million think pretty be of picked couple the should second a that X dollars the of we each quarter consistent in of

Kevin McVeigh

currency EPS the have already? fair to for the would Got headwinds it. if guidance the the headwinds say boost in been the it $X.XX And or currency not then is higher incremental guide were

Steve Bramlage

on way would think Relative to Day, an $X.XX you, or current to about based headwind tell Investor currency the of think rates, that’s easiest $X.XX have I we it. extra I

Kevin McVeigh

thank Okay, you.

Operator

Thank you.

Dolev Dan of Our ahead. Nomura. next from go Please question is

Dan Dolev

Hey.

Eric Foss

Hi, good morning, Dan.

Dan Dolev

not for least, thank but question. hey, taking you Last my

growth, So, haven’t nice main have are but I and Uniform rental growth alluded job that acceleration, is a already you’ve on think don’t that? that the to seen then since that, nice the I if kudos – you I to of so know the XXXX, of driver follow-up, is driver what we kind what

Eric Foss

one, couple of relative to we solid so on Well, bit is sell Uniform I about talk side discipline us are Sure. we one, just seen how a a retention and due to pickup growth seeing on number. of service, things, the the the think you’ve a good little

adjacency categories entering. of that talked we’re these we’ve about Second, some

bigger the services, time. and you if like categories our and first growth. into innovation think of then side And those in food aid that thing on certainly we’ve terms So, and of the mix, as well get lot the restroom a just spent matters about way to we we’re as done the that much business, in helps of starting quality other is a

different in very team just what Our space. has job with a good see it is a you’d quality much consistent Uniform athletic of product, a FlexFit introducing the of done kind

I improved of of are our things out those growth to all think And contributing Uniform business. so momentum

Dan Dolev

opposite. follow-up, helpful. to bit out be Analyst quarter it anything didn’t Thank of today were slow be happened out Thank just said you already, with just on December a that us there organic we the nice some it. or is Got That’s misunderstanding – a at you. the of growth there turns investors Analyst it little Day quick turned the growth you very we from Day, and is And anything – XX then – it in is the but between Is it’s very this at a feedback going guidance? know the addressed EPS to maybe you. getting didn’t

Eric Foss

let start and I’ll I’ll Steve Well, add.

much quarter perspective, an EPS I think anticipated. out played the from pretty as we

there don’t surprises, any I think that, right. were other payment. the referenced But I Steve one was on accessory interest the think than item

business, earnings capture synergy on strong it of we expect materialized. deals expected a that to the think we quarter, strong expected track to and be We relative from all base the I

there’s the on think talked we’ve don’t I EPS was And my side, any one from the the So, that growth surprise about. perspective. upside

So, Steve? I surprise. slower think than we little was quarter, got did growth we which in a anticipate a first pleasant

Steve Bramlage

reaction takeaway a performance agree. base AOI the we’re any would course us over clear the of understand for that we post the we needed do XXXX. of business helping Day, obviously growth was of The us – Investor in I the didn’t would to Yes, people have get liked better job

to of today lot trying clear And as obviously make possible. we a so spent time that as

post was of our point Day. that here think I first share emphasis Investor

Dan Dolev

Nice Thank it. job Got Appreciate you. overall. it.

Operator

Thank you.

question Markets. next of Weber go ahead. from Seth Please is RBC Capital Our

Seth Weber

everybody. good Hey, morning,

Eric Foss

Good morning.

Seth Weber

wanted your better acquisitions some route deals to Uniform your adjacencies the improve type Just in about Thanks. Uniform they and talk Can what go might traction back with to be in the to frame just this there comments the to size your about the business. you business? density do appetite year maybe

Eric Foss

Seth. pay our delever. I capital is Well, M&A, debt relative think on to strictly down to to Sure, priority

second priority and our first, third So that will near-term. be

those look, our small looked will space. I at to we the we there but material, would have is should M&A I forward, that doubt in think and anything, that very not very, Most have business relative we we anything but I as really go will if to delevering. interest we think be no will anything about be on the say continue, front and would of as continue Uniform focused adjacency you you on think anticipate

Steve Bramlage

not are very bolt-ons I limited significant. would be that agree. would There

Seth Weber

in from just Okay, and you’re Uniforms? the quarter were tariffs out here from you’d tariff thanks. discussion And maybe year material the before. Anything Uniform headwind about on the impact to how margin follow-up then that call for sort margin in of a thinking

Steve Bramlage

talked in impacts we exposure buying not We China from sorry, import, Nothing where China in lockers, on the of material we’ve things specifically, so some got in somewhere about – like we total. some quarter. neighborhood $XX in total, an the earlier call, or million where and we’re hangers to right, but very much it’s

to most think it pressure exposure business, exactly significant But forward don’t seen what’s So, impact our I is obviously we’ve because be but to total that happens most we our I on we thus think remains it of depending could, in going put I of what guess some could any do on Mexico far, our Uniform happen. our source where garments. in terms small of self-manufacturing going relatively had

Eric Foss

And question density, on is your leg. fourth route think our action if Seth plan density route synergy AmeriPride that you about with capture to four-pronged kind of

density we it’s so the capture, but leverage when context synergy we the on, enterprises. route the get how that two is really something in we spending time And of to are across it

Seth Weber

Sure. Makes sense. it. guys. you Appreciate much Thank very

Eric Foss

Yes.

Steve Bramlage

Yes.

Operator

Thank you.

ahead. last of Please question Our Stifel. from is Rosenbaum go Shlomo

Shlomo Rosenbaum

me squeezing for in. you thank Hi,

Eric Foss

good Shlomo. morning, Yes,

Shlomo Rosenbaum

part morning. good Hey return [ph] wasn’t is bringing there taxed. capital payment Steve of that – Is

share – the $X.XX a accorded add add for straight like back back in it’s contribution? So, quarter a you or

Steve Bramlage

on it’s and to that so back overall be will the be income into it add affected, a adjusted just get is extent, will will the straight but the – AOI It effect rolled tax will into a the there margins. it Ultimately, tax to rolled operating not line, – provision.

Shlomo Rosenbaum

the kind about projections the when thing, was that of thing own you Okay. the X-quarter X-quarter thing, of know thinking Xth couple you to in the should were And of of much year, that just just quarters, the of for year next quarter understanding your if out terms how just of be terms in – other in for a you we that expecting working pacing then quarters were year?

Steve Bramlage

was for assumption know I million quarter, going out it’s within know, our have the sure, I three we would do year. whether quarters kind that itself that do. I period essentially was assuming doesn’t of what quarter, now but out, think quarter, $XX don’t Yes, we borne never of the mean, because a government always exactly of quarter, to is

Shlomo Rosenbaum

potential Got how so, share we a high it, offset investment just then going of issues $XX attrition employees is accruing employees. in of of think like or from okay. we terms strategic the investors? Should a versus And the that as that in kind terms or to that and of things – a into the should million think this reinvestment labor level, of to to

Steve Bramlage

of I’ll comment that part me Eric question. do the around front that, the part of last let Let

the very we’re to balanced proceeds. trying be in We’re with what doing

the the the that not listen one-time we So, received. benefit of benefit is totality

benefit we rate, get of about. that Ongoing million workforce talking rate did right, fourth prospectively. inappropriate the what to So, the change in right, we’ve which is organization to in you the just for think quarter a $XXX prudent, in we’re reinvest from reduction us the which statutory largely refund if got tax obviously continue benefit, the felt reform, will

the And million each of that’s cash $XX year. benefit so over

And will and more of deleveraging that direct to so annuity. we for an and exclusively all purposes intents that’s

as be recognize well So, around some employees, need the commentary. make Eric but to I’ll to other let clear as we’re trying balanced I think deleveraging,

Eric Foss

Yes.

simple day, the perspective. at think my it’s the of from really quite I end

end day, at Uniform can You’ve at the end lot me we’re our the of a people the business, heard food business. at day about facilities, look talk you business, the of the in

one And people. so certainly can the investments is best make or into best our the we of

and there’s to went in so XXX(k) buckets tools. special the front-line of wage people lot delivering understand and those for and will and this our attract, labor retain, difficult and to people education and if you us beyond, again families. look a above investment, increases awards are who into that a really work for market, recognition help so attract talent investment, skills investments targeted and that maximize this best appreciation at give our all And are motivate people, one-time their to how incremental Those training, scholarships

working excited And and plain for so on something be announcing motivation behind months we the it and that we’ve been several couldn’t and today. is several, more it’s simple, it, about

Shlomo Rosenbaum

Okay.

Do better I don’t organic in squeeze a certain feel is mind, just is a over on at less company kind the has where in of revenue X%-ish one uptick years? the the point or inflection expectation surprised perform several thing like than I if just there the was to been starting pleasantly If what growth. you you and last Uniform, have we better should

Eric Foss

a expanding to think is into standpoint, the the faster industry. from What actually food business, XXXX, you our prior of look a faster. you went at growing consolidation that than lot I margins saw Uniform facilities and Yes, when if business overall

than that year as average business into latter of expect I look get and our that to part and year, at the you’ll we greater we grow company Uniform this as business, the next would so see happen. I And think

we if you’re end AOI business again, expansion, revenue forward. points at between years going X.X% basis basis would to high you as perform XXXX, So prior how go that’s exactly XX with XX growth, points expect to growth, of that margin look we the to X up single-digit to

Operator

Thank you. I over call will to now turn remarks. Eric Foss back for the closing

Eric Foss

time we a forward call. talking to on Have to Great. you our appreciate day. and in Well, always second Aramark your look interest as and great quarter we

Operator

conference. thank And participating. for This concludes you gentlemen. and you. Thank today’s ladies Thank you,

disconnect. You may now

Aramark (ARMK) 5 Feb 192019 Q1 Earnings call transcript