ARMK - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to Aramark’s Second Quarter 2020 Earnings Results Conference Call. My name is [Cherie], and I will be your operator for today’s call. At this time, I would like to inform you that this conference is being recorded for rebroadcast, and that all participants are in a listen-only mode.

We will open the conference call for questions at the conclusion of the company’s remarks.

I will now turn the call over to Felise Kissell, Vice President, Investor Relations and Corporate Affairs. Ms. proceed. please Kissell,

Felise Kissell

our welcome Ondrof. conference and are second fiscal Chief hearing quarter okay. as John Thank as well and to webcast. earnings our from be will call morning, Officer, listening Executive Certainly XXXX Officer, This Zillmer; Tom you, Financial we Aramark’s Chief hope doing those

on our this morning, which As a forward regarding release notice looking statements be press found our reminder our is website. included in can

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

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

to now With will that, John. I turn call the over

John Zillmer

good Felise, you, everyone. and Thank morning

First from has hope here. all go continue to and a given critical healthy. with safe environment, you and on and current foremost are play some key Aramark we will operating the where I like in call the a a observations the open role enabler share I and your played and reflections would and few families thoughts to mission of as broader recovery

crisis our critical board imagined company. front Aramark of as team a to also will emerge would When I quarterly management well as our a and center review October amid never returned I ahead actions taking proactive in I performance, stronger global and Aramark be to with the are even us. mission an to we position as

frontlines hygienic uniforms, have worked pandemic, at and other facility and our the the facilities and food, services. During providing safe hospitals, on tirelessly schools, teams

truly at few serve heroes And Our back these in shared ways countless are a employees have past individuals weeks heroes to this helping clients team stepped us up period. with to unimaginable get I working among locations. members as acute

business navigate while today, sustainable has ultimately flourish the As that to build we Aramark is challenging us. decisive environment review pandemic organization minded the behind actions particularly taken will can growth review when pursuing pass a to this

in potential maintain Our are world-class leverage financial to strong business to and rooted forces to deep impactful of and and of our with a business. liquidity ability influential strategies unlock portfolio the diversified an to partners leaders flexibility, long-term join network economic the and flexible

of to balances. billion provide strong differ to taking timely amendment an our bolster the the company already cash To flexibility company’s as $X.X upsized that and already well notes adapt end, sheet, recently offering further we as to challenging agreement credit to We financial available proactive of environment our are to steps position. an and the current to existing improve financial balance additional and strong senior announced

significant Our certain cash our proactive measure executive the temporary expenses. to of well is directors, our similar reduction including revolver salaries executives, as other a officers, general the as as fee the reductions named prominent other for retainer of drawdown and companies, precautionary on to corporate

perspective, adapt to plans strength as expenditures the Aramark business the capital company actions underway compromising working to and as and the his differ optimize know over Tom I to share appropriate, long-term. well without capital as in

sporting continues closures from and March of actions began these We schools, events impact cancellations governmental the degrees through today. and necessary and varying line are managing top of for colleges, through businesses, in

operation. In variable To education, we districts, cost operating bottom flexing in across helping the hundreds simultaneously hit in some that manufacturing focused as XX sectors and of K-XX business over serving as structure. closed, our students on to the and pharmaceutical are highly schools line well are meals hard impact as schools mitigate areas remain while capacity, are we million such industry nurse

in return, represent currently are that baseball for late fall. major determining are most the schedule bridged and with league the appropriate in their close a until timeline us that season We including could for playing leagues sports important professional touch potential upcoming

in business leisure our of properties, are Peak Powell, Yosemite And in reduced Canal Lake some Our with an Lake and operation larger Pikes including Denali closed. currently attendance. and

Denali the from stable relatively clients is accessed September, safety by this Alaska-bound with typically and assist to Corrections a period well-being largely we supporting remains cruise peak ships as of June and population.

admirably roles well service, critical as in other, food the other that and facilities, PP&E industries. frontline for healthcare, and and in are hospitals essential in demand managing as teams includes Our uniforms cleaning, care supplying

country, scale deep At aid hospital services. cleaning necessities were municipal facility state, facilities as across expertise grab of and on hospital a We’ve additional doctors, well temporary home. and pop-up large one-stop event hygienic in nurses, at way emergency for operations shop cities. serve opened and grocery other onsite meals And have field staff our to as their uniforms, we to businesses, essential the facilities healthcare mobilized stores as relief to several hundreds safe providing and

pandemic are we strength we Healthcare, international, stages our China diverse to operate response commitment respective through specifically region, based business has been our operations. largely awarded of primarily the demonstrated their verticals across of our XX in on clients. In managing and to different In new this in at our in recovered. the countries opportunities the We’ve Asia, where

teams government predominantly and conditions down in and with in continued Healthcare slow adapting Canada in a America region. changing other Spain in and businesses. are of essential result most operations as and that Europe, Latin to quickly Germany, lesser affected we have mandated a have shutdowns been Operations to extent direct In our seen a

protocols specific deferrals, appropriate programs tax government in programs employee Broadly, business support, complying are loans, country expect the for with reimbursement these and to we once are or participate formalized.

how to and I and been earlier, by the mentioned individual humbled a discussing our to team company members. I’m those I As response. pandemic Aramark’s has contributing moment wanted the spend proud efforts of

the our Recently, we heroes is of with Hood joining to join foster American hospitality honored Black Mayor’s forces and that Debra the the world-class epicenter the pandemic Family, and portfolio and New Red York effective spirit beyond. to partners the an Cross at supporting Healthcare We’ve platform City. and Leon Fund, the and influential in were created throughout Robin a

Aramark XXX,XXX of providing delivery assembly procurement to products shelf food employees at are packages the personal boroughs through stable care and up five across for and services staff hospitals to June.

other have honor continue the As outbreak of and workers we week. communities and philanthropic may part country. to supplies and yesterday, we seen program, local of the around And resources national to our organizations have as the fund for of food provide pounds over nurses’ to donated part and to week hospital food healthcare you American Red the Cross hard coronavirus work national incredible are sacrifices XXX,XXX supporting their

manufacture medical masks, to and healthcare gowns millions other Uniforms has certain shifted providers scrubs, critical industries. for production of and lines

where pharmaceutical, Our the and their industries products Aramark are medical other U.S. the shipping vital healthcare, biotech, rely these to device, perform applies in clients to on employees across jobs.

As we working been new look operations. our our to define across have to future, teams normal the the

have plans, engagement all including models for delivery environments. developed safest, comprehensive ensure We new designed the service reopening hygienic to most and customer

and for stable and chain customers. supply operators, clients, frontline unaffected remains diverse largely Our

enormously supply We’re now uniforms which to replenishment is our just particularly and mentioned. on focused address helping PPE as I assisting team

invaluable with points appropriate strong suppliers mitigate markets key and has any and been this volatility. monitoring our during preferred commitment future potential to strategic In entry seeking closely period. commodity relationships We’re to

and we the this need recognize having of helping our on across focused While nation, the communities also on is hardship many immediate employees.

multiple have fully that NOL under response ultimately offering in the Aramark back support team the growth to every ahead. employee addition to service targeted that intent measures Aramark to government retention see service. reactivate Act is business to tax modifications and payroll our identify opportunities In to can, be and we the carry other where will stimulus the credits, of and us benefits as for expects we provide stimulus including affairs pursue CARES working multiple tax help opportunities to pandemic deferral,

While Jack we Donovan, the of roles, March. sharpen XX Executive in return leadership strength also largest various appointed Sports Entertainment. Jack Aramark environment, complexities the with spent current President organizational is continued of who one hospitality bench Education forward leadership Chief industry of Officer look Growth that Education, our Higher the Higher of respected have a are previously and includes we of holding to Education, have President impact managing also veteran years it President our as We businesses. and and He Group the Jack’s to President including and Corporation. of served on Vice Univar Corrections and of will

passionate the be and business perform with strengthened our board that in has in right quickly fully through place Aramark team, challenging recovery. our we strongly flexible periods to confident to while employee seasoned am most the I the ensuring even and talent combined executive manage resize with will prepared our people

financial review detailed will that, Tom? now the With a provide Tom of business.

Tom Ondrof

We've ago, world expect has When to where team company both be professionally. many had Thank a And the for personally the proud is couldn't adjustments you, few didn't more John. around I the I months today. the of to Aramark and certainly all world responded. make John, joined like be I how it

preliminary announced diversification of the on in Our model was April flexibility in-line It to a and results cost business. is variable performance the the quarter of second with XX. testament the

enhanced agreement further greater increased secured liquidity debt after to was that and with for our structure amended capital provide strong recent and credit end actions Our covenant the quarter flexibility. the

to organic growth revenue X.X% in revenue was estimated quarter, XXX across or compared driven million an underlying the COVID-XX. prior business related to year, there impact While overall an by the XXX million, fell the

attributable organic X.X% segment, or throughout to prior net year. dining as growth estimated an primarily all through was compared gains Facilities XXX impact by of of detailed to Food pricing to The in offset was solid much underlying decline the revenue and an the This facilities had across decrease COVID-XX. and an unfavorable U.S. the U.S. business business of million, slightly million and XXX impact new businesses. related John

In offsetting markets. XX business XX million, prior decreased revenue price in the with across to or specifically quarter, as the much the the compared new emerging and International for of net most organic dealt regions China. strong estimated growth, the COVID-XX reduced revenue notably team’s multiple X.X% by in virus million, account increases our an period year, retention,

the was year-over-year estimated The a year. in to impacted last year, Uniform by the from X%, late about Additionally, quarter an $XX fiscal performance segments top [indiscernible] of resilience COVID-XX. on in million favorably the Europe line prior million in exit the showed overcoming custodial compared growing non-core XX impact quarter accounts strategic

in with the momentum virus. portfolio, helped the and sales positive combined investment revenue of impact from the year client mitigate diversified resources The our earlier segments the

demand aid increased environment. First as in current perform clean, for and the and continue the quarter safe, restroom well in to the healthy services workspaces

impact limited labor, in or the our income on fully the unit with the COVID-XX. prior other to compared [down] variable was cost. basis, goods flex cost an to downturn the hourly to quarter operating currency million due XX% Adjusted attributable components namely, quickly the XX to constant was This of direct of year, XX million a sold, P&L, of estimated and ability

I of the just of been actually included throughout half remains QX or We incentive want quarter, When COVID-XX. say given and fund to the get note to from bigger This to truing the year. a the potential of provided with based generated business estimate appropriate significantly the COVID-XX the these if at provisions payout, that and of funding clarity, were QX compensation end plans in current we up QX level an equity expect provisions of the needed benefit the impact in reduced same. impact our get to first

based quarter reduce by the chronic expenses. into So, while of quarter we field compensation it renegotiations portion to incentive the and to semi reductions end be at took other including costs, offset will contracts, compensation the and actions a and April equity lower the repeat, of general significant corporate the expense salary variable of management adjustments, won't of and in

AOI to warrant. With now over term, can rate managed and in we improve XX% approximately an ratably conditions which extended the lower place, period, to additional duration to these expect as be over believe we initiatives the to continue near near mitigating through drop XX%

about the to view of detailed me one rate. let broader add by drop-through turning point performance Before AOI segments, a

operate achieve short metric. a business and long will to the perspective not We with to continue term a term

have and grow We cost to business, untouched the including left sales underlying many and management resources. required maintain client

client a or retain by business, in-light investment, will management extra do creation. both carrying capital a we so and return high cost of near new win can contract term cash we value extended or long-term making If

of signed the needs have support as of benefiting clients fact, our efforts outbreak provide example, initial In over this we Europe we're Asia in additional already meet since virus. due from the during an and February, as to new million XX the teams and approach, business to of

related Now and currency of COVID-XX, result on accelerate or primarily XX% growth, as Food negative an resources profit impact turning as and to AOI XX increased Segment basis, performance. an constant million Facilities as education, of estimated million a U.S. longer net business declined to a well XX sales new recovery. investment to

basis, laws, International non-core in from a year AOI XX% or benefit the segments The have currency operations through near XX from labor facilities an Europe. each last specific XX international regulations little more to by higher costs in and to offset driven fell than of term, tend are constant of exit slightly by as The on drop estimated a variable late impact strategic the rates, the labor less a country. the million million COVID-XX

damage impact million well related the for XX of commercial X% AOI X sales, to new and to or by currency facility. initiatives, an offset decreases business costs tornadoes, laundry personnel to related Nashville growth uniforms the COVID-XX, by as on our growth and due from These basis, constant interruption estimated personal related were operations million solid to as AmeriPride nearly profit caused acquisition. a somewhat synergies decreased of underlying to

reduction favorable lower XX the was to as constant through quarter, adjusted down COVID-XX. of expectations attributable from the a year resulting based were million compensation operating on for XX% results equity impact year EPS basis, the of in Corporate Adjusted prior for currency income. a result prior $X.XX a

in XXX capital. For less the month negative year change was free period, a XXX to million prior negative of cash working million flow million due six than XXX

the COVID-XX accrued mainly commissions of accrued declined and quarter end and a bonus payable result and decrease receivable. in by of payable accounts at Accounts expenses, second somewhat the as payroll offset a inventory

cash in year-over-year slightly flow lower second half a Free was seasonality expenditures basis. the with of generating the due negative cash to year, first business, Capital flow. fiscal positive were the in historically on the

In In in and generated on long-term quarter, million to term environment, order of working fiscal capitalize while position growth management exert the will still company to capital flow. second appropriately includes that the in looking opportunities. discipline ourselves positive expenditures current near XXX we cash free cash the prudent capital

be steady neutral Working state. approach once capital is expected to we operating a roughly

are business. from cases very The needs the this expenditure Capital arise business and can in and many retention without stable, opportunities. compromising majority negotiated client to ability defer new the spend significant be

environment, following, a We will any and needs. to maintenance [tuck-in] capital in accretive remain but watchful also should focus In position. took strengthen will our have we second M&A deals highly and for limited supplement be not growth proactive actions immediately the the to we current cash organic opportunities arise. quarter

to As facility to strength covenants and announced X the closely X.X billion actions significant notes secured with work due to we issued sheet provide we drew down give balance billion lenders the conjunction our us fully we times. with in senior credit subsequent XXXX. in additional unsecured successfully March, quarter-end, amend during In issuance, our flexibility. revolver uncertain debt previously These in

September suspends quarter June debt four XXXX covenant the Aramark’s secured the to amendment quarters from for quarter. XXXX senior The

covenant amendment XXXX debt to four covenant from as will latest quarters using effects quarters. intended calculations. the to total needed calendar is secured distorting be COVID-XX prevent the of the Thereafter, This the tested from

operations strategy. We're an on important allocation paying the down stabilize. currently near deleveraging debt part capital in as committed focused our and remain of we to liquidity still is And term the

impacted Let by concluding. earlier. results way me touch are before COVID-XX outlined briefly same on I These our metrics GAAP the largely in

factors, the goodwill near which XXX and net testing our per including unit. growth to by in was In non change impairment pre used Northern specifically GAAP driven million, for Europe charge were reporting by share addition, term tax, and in discount diluted a various the unit, income, rate this operating income, pre-COVID outlook of impacted a earnings cash related reporting

had is impairment the been within the as unit FSS identified testing same reporting having for XX-K. the that possible undergone This segment additional previously XXXX in International

and management guidance fiscal reinforce well-positioned stated ahead, withdraw Finally, base, I XXXX want there our given the we uncertainty determined strong the as and year. the client But an model, is well flexible as team, dynamics, operating is our to geographic have experienced rapidly that belief focused changing market reach, with while diversified company previously to liquidity. for

that demand hygienic toward outsourcing the notwithstanding trend for the ultimately cleaner near food, clear facilities, enhance uniforms safe, We and believe term will the disruption.

focused We on opportunity company's on to John? our and will this deliver strategy remain the on potential. Thanks. fully long-term

John Zillmer

I'm with you, confident that ability us, shareholders. Thank This a time honored has is is such and Tom. experience, where this seasoned extremely ahead beside service bring team, period, in matters, experience. a opportunity considerable moment even It unlock and industry opportunities extraordinary proven work a an value strong have of significant I'm for all to but to to knowledge consumer the and and an particularly Aramark deep for who

financial demand bench hygiene an From returns, renewed leadership worldwide added with strength and will strengthened for to relationships flexibility, and resolve. with significantly to customer enhance Aramark increased combined expected purpose emerge when normalcy quality

open for Operator, now to I'd call up the questions. like

Operator

Our Suisse. first question you. Instructions] Credit go Thank from McVeigh will come with [Operator Kevin ahead. Please

Kevin McVeigh

so on John, just Great. how where service reopen to appropriate, kind know, of on can can trajectory share you that? and how of ultimately any tough you the You obviously, execution any that forward? environment. and impact Thank going plan sense of with the sense and much of you us cadence the congratulations

John Zillmer

will temperature as checked all their developed serve re-opening’s expect, those they'll every models, implement be developing day. We've you strategies. you believe strategies be go municipalities Certainly, their reopening we thank multiple Kevin, to you Sure, to question. wearing know, be and you with customers several see employees know, and place. ahead develop for a upon states new the they as you reopening know, we'll rapidly to that PP&E business very environment, obviously, beginning appropriate you take our And, participate would well-positioned as

You be hygienic locations model can safe in maintain expect based the needs on conditions. service different the will and to

You shuttered for beginning probably and the maybe can serve expect the longer in will to operations self be term.

And so where orders, go kinds and from maintain periods to application service social opportunities, into situations distancing that and more times see perspective, slotted flexibility. may perspective, exist a mobile facilitate and customers customer both you'll grab of we’ll and are pre-order service

or very the customer or we our these every for to models literally operate. we developing prepared are in higher whether that's new in, have solution actively customize a teams and we been B&I operate education that So, location other businesses engaged

like as soon we're plans, we customers our developed engage as and ready So, we've the to appropriate feel are.

Kevin McVeigh

And Super on you kind us the side, kind cut as where side uniform to, the the the you'd over kind and released know, planning facilities. helpful. model on then, know, some relates manufacturing that uniform what sense longer-term? is a you earlier of currently just Can are, it you PPE opportunities opportunity the of press of you of hygiene also give and

John Zillmer

absolutely. Yes,

an essential care, provide that right You health that environments, know, service, we will. we provide into healthier clean call if like and and know, need play you we environments, services it the think cleaner, we that, you in providing safer safer to uniforms,

operations production manufacturing over manufacture our PP&E switched have in to We Mexican equipment.

As where kinds you capabilities of been know, to pharmaceutical providing manufacturing very and we've historically chip had business those the had clean the sector in room strong sector. a services we

extension logical this a manufacturing increasing And So, our we're that is capability. capacity. of

opportunity constituents capacity. for So, as also short-term we in see other for of organization our in expand as we that both and make term as masks We a literally and can manufacturing longer- we need the forward. a it see going that capability millions customers that

Kevin McVeigh

Makes Stay safe. sense. so a ton much. Thanks of

John Zillmer

Thank you.

Operator

you. Thank

Please ahead. with come go Toni will question next Kaplan Our Morgan Stanley. from

Toni Kaplan

thinking how for Thank hoping the changes COVID-XX. structural talk post you longer you. the could business about term I was you're about

you thinking prepaid we changes mentioned higher So from any the to about from for benefit be just about? of also shift working home Maybe to changes greater a instance, are ed meal plans, on potential enrollments, B&I? shift greater for thinking sort lower how to should And outsourcing. you the structural

to wanted your thoughts. hear just negatives, and positives So,

John Zillmer

Yeah, absolutely.

more predict higher the desire from to our in is We're do more experience little to fall higher a customers will significant to be reopen and believe and the be. and engaged that think will that sure hearing be what appropriate. I there in structural their early education it's make about education changes that I to demand. student

institutions, taken feel educational distance the the like frustrating last that's they for learning that experience educational including You months experiment place they're over been know, students like. don't the I many, would has really think several getting

is go well the a desire to there and to small seeing so, high ahead higher as and institutions. we're And both return in ed that institutions, very sector large as

to and service the I administration's hygienic have in safe safe go way We customize students a the of of serve serve and the a programs the and way. needs to ahead methodologies and to opportunity, think needs in

very, return So, to where can I very operate think can an we we environment effectively.

industry, us social but we people of that world and employees attractive, know, and terms what; return have on will business as making kind seen of I are decision it well beings in that in on an want I a basis into environments. work have respective all think their remains and their many is to of desire experienced impact that know creatures, will work bringing know the get In creatures that to back somewhat do back locations. of think to the to be human home to you be you temporary from how working

all adapt of operate. can the we locations We

a we flexible have very said, I As operating model.

capabilities on ramp So of up downsize can employees methodologies locations. service upsize service and we or individual based to the into develop

have very grow service right of something business will we something we're the it's sure place, the in to, in opportunities sensitive So, and making that the confident we terms that that to diligently we're models are continue. working on

that add of We happen and as always own we offer been now the the well. and self-op mentioned And capabilities, of you of the there's and outsource that recognize ahead as scope well we conversion that historically, to got increases, their do the or when that's that an opportunity conversion potentially element. go op And having can will organization of as this significant more like breadth believe almost think service services a services. event operate more currently self companies both who will food value their scope the

Toni Kaplan

you around And around there's maybe rates as great. that in the you That's a you return can the and business seen if growth you a April? just anything and stance in vaccine, trends I you some recent recoveries Thank sense us of attendance trough that give any maybe of guess, well? the may know, know, like you. variability and expect sports, before particularly Have things

John Zillmer

Yes, it's very dynamic I little to it's would happen a call going with the early respect say return sports. to environment. of a to what's

the leagues to are I the players in protects to working try very get the carefully think that understand, to back both and you way fans. know to operation how a

working through So, ideas various various approaches. they're and their

much really So, to will. that on make it's highly ahead too – operation happen, a early we're might very that you to to and back get but go as everybody call is confident when incentive

that just you effort can't, will I think, know I there take this. significant tell when I so that just be And can't may against timing place.

to With to you that want have comment I you April – don't on? results, anything do Tom, respect

Tom Ondrof

at the take look a I’ll for April. quick flash Yes.

is units the than that state know, you where six that basis I things, far a of to you number play see You think know, and sort looks we think to of in. in that, pockets weeks of probably mentioned, there's, on know, you know, obviously, be, seven sort that I you operating right the know, revenue the around, of larger that's down, but we've roughly XX%,

Toni Kaplan

you. Thank

Operator

Thank you.

question Ian go from comes next Oppenheimer. Zaffino Our with Please ahead.

Ian Zaffino

in John talking Thanks. what you you in actually world? new about call. of to, you wins, know, going you focus broadly know, just discuss good actually Very you also wanted you've how environment, I this doing this new wins could know, surprise know, you about business you business they've you talked kind great. your that, just Thank very about especially Hi, and maybe new on, since winning new if and maybe been this joined, much.

John Zillmer

teams and Well, Thank recognizing to you outset. people you you organization. And, find serve the focused both only not the new first opportunities on, these continuing this of sales effort, but you to present know, you think to existing dedicated Sure. have our know, customers, I significant that know, been or on, to really all, new of from know, grow customers, times kinds challenges, have our been continuing know, you. significant and ways focused

I not investments buckets, against why to remarks Tom And mentioned February, you over action we forces. those growth, if in new sales We're have have successful. since any focus, think cost reducing sales million taken his worth $XXX not That's sold eliminating that we very been internationally, really We're in will. technologies; We've terrific just areas. is we're business effort. which continuing invest of in a not

portion that but other and Significant in Germany wins healthcare significant in in specifically also the sector, of China, countries.

back the will be all this knowing that company the re-energizing you grow to company. we talked that I come announced we're sales about in focus already paradigm, to significant teams So, the in out growth queue we're on and in the higher focused of are, space, creating know, the continuing we joined we've space, to on Domestically, really both or well are our and you the business when about, effort. focused very that got want haven't B&I some in so know, that way wins education October we excited growth that paradigm continuing as as the that the

home. there wins, know, each are person's delaying and you in presentation are some customers we're presentations, very very opportunities that the we obviously a We but example, we're slightly some making opportunity, for of pipeline So, recorded significant video you working a good large was person in not in differing, that and do healthcare the know, on. see submitting,

home this a my So, I submit own in presentation. video for literally recorded to

growth So, to organizations the side. on imperative continue recognize that moving we're forward so doing the and

Ian Zaffino

follow the particularly on then more or color just what a comment really areas the know, as rest areas focus about the give moves then world by maybe blueprint well? as just as if in Asia recovery bit kind that great. that on And, in of of China does Okay, wanted maybe you the recovery, also, Which did actually a far little recovered are think China And see a lagging? what up, still to world you'd And as recovered? discuss having rest maybe Thanks. us mean also is quarantines? is I the know, of past the you

John Zillmer

a you I, question. just got business, Well think I Yeah. more to that's our much application than great right. that's know, And our – particular

You yet sector recovered know, the China there most returned of conditions. pre-COVID significantly. healthcare operate we the to area has in that particularly And and our all, business is first has

rate higher our Wuhan, had several there. occurring pandemic We’re prior the or to beginning operating there at of there a than we in operations

days ran operations XX our all, of seven hours a the a in crisis. during day, First week China

our to operation the did you know to there, the around for serve – blueprint represents a China additions, last the over us there hospital operate extraordinary job including that of Whether, largest crisis, result several couple leaders to an and whether their comment efforts to sell the team a me of it's will world, that recovery for in new a hard course led very business months. significant of really Our of on the responding that.

I do the the conditions parts believe in of are that, you different other very know, than China world. in

a you job great operations say, there performs well crisis, of Aramark extraordinarily but done almost our an in and a and very in leadership responds team that our conditions done China got times throughout are people well, generally adverse history, you our job. hard know, very very, just So, extraordinary and operating, and to always under have see in we've this, that's fantastic

Ian Zaffino

Thank you very much.

John Zillmer

you. Thank

Operator

you. Thank

with ahead. from comes Rosenbaum go please Stifel, Shlomo question next Our

now is line Shlomo. Your open,

Shlomo Rosenbaum

hear now? you can me Sorry,

John Zillmer

are how Shlomo, we you? Yes, can.

Shlomo Rosenbaum

that want know, payments of the start of, then cost Are with And company ending you just on terms semesters in meat, price plans? know, shortages terms for is of and of in of were requirements spiking items. any in of about there any costs you you any early refund like in your general some areas your to to make talked commodity I mid-meal concern prices, a there flow cash or that is couple just about, a some contracts? fixed

John Zillmer

operate Right we the have and not chain any agreements, very solid dislocation seeing are supply purchase we to that Obviously, term respect and in availability. partners. supply under products supply now, the very our we long with

this grocery capacity production not point meat So, us to this in time. one store with situation affecting and respect that's at is

somewhat buy we're and way difference worth, so, And them. between the we the the insulated that general rule by products as we a buy

a not right now disruption, chain So, for significant impact supply us.

clients we dining, of had customers you in to they refunds respect know, with for various their discussions will almost campus how case, handle had in board to plans. respect terms our every With our have and with intent we've

we the know, end close down to worked had very and You semester, the the board of were much plan. pretty to

know, a Aramark we So, future impact. from an impact that and customer expect but negotiation of be to anticipate generally program any we underlying programs, required be them, would there costs would about, that material or a underneath support there having we might don't be see of those with it programs modification you the would refund material that as don't

Shlomo Rosenbaum

item. one And thank other Okay, just then you.

going this efforts to is performance you roll-out the to parts whole business that of route density, the one other the all about, you had to improve Uniforms the pandemic, routing you business talk just Uniforms system you there, with Before still it that the wanted you improve that made of to do during where adds can have the AmeriPride some costs to that? is you progress there quarter, the down that is know, are way program? any thoughts on any to slow over Or according might

John Zillmer

That’s great Shlomo Sure. you. thank question a

and we’ve limiting you going do – a modified locations travel continued know, implementation you people, the matter know through to process to in, of you cross-country because operate. not having implementation to would they you're ahead work know, implementations fact, don’t where expect, we’ve and go the as and you As we you’re

we've done we've what the the plan, locations extend regional installations original into do could base ahead the and a go and tighter of we a in AmeriPride the close capability geographical instead perspective. adopted plan where So, is

progress the to implementation. So, continuing in make we’re

the AmeriPride to but in geographically those are it's from that benefits implementation, operations existing contiguous the to We’re locations. continuing see

we've the So, adopted we’re implementation if a sense. change in still makes that plan, but implementing,

Shlomo Rosenbaum

you. Thank

Operator

Thank you.

Andrew Please question Our from JPMorgan. comes ahead. next go with Steinerman

Andrew Steinerman

revenue Hi, kind to last, six into jump in wanted seen seven Tom. weeks. I you’ve XX% the declines you of know, the or

Like and international could secondly, recent by a then passed that they’ve period? that declines services, know, have U.S. in food And decline weeks Uniforms? already feel the like during declines you do been magnitude revenue you than less make of If largest the average? comment division,

Tom Ondrof

really the that morning, get want Hi Yes. at moment. breakdown good to Andrew. the into Not

to it that. will that just at we’re say pretty looked as still on anecdote know, having steady it’s sorting information. an It You the appears month, out comment the I been throughout

was last steady changed. a a a dining. to including referred obviously, in in of the it much so bubbled as for at know the really balance in right March talk not has has number here up state turn places, we of business sudden much though week were end the You and month, lot Things the of really John of don’t see

pretty cadence. steady month So, I for be would think the the

Andrew Steinerman

Uniform say the than the just declines? services declines and could food And are you less if

Tom Ondrof

They been. have

Andrew Steinerman

you. Okay, thank

Operator

you. Thank

next Our with ahead. from Gary America. of question come Bank Please Bisbee go will

Jay Hanna

for on Hanna Jay Gary is this Hey, today.

John Zillmer

Jay. Hi,

Jay Hanna

of probably question you're I like a back expect distancing to to on going the just using the cafeterias, quick model unit sort with and to be mean heightened more do the that hygiene through regard within flow cost I you to customized guess, structure, basis? this how standards going new Just social a

John Zillmer

we’ll You all, we to ramp know demand. be ramping them of as operations, the customer think first up meet I up

activity. greatly in localities, that system community, weeks various as I differ So, into a wide XX% then not – we that location, range will a facility, you terms stage over several various expectation, rate know, it will, if in go so think of so XX% and, on in as you know, communities, may stage will of they by the and B&I the be of XXX% we the capacity by infection employees initially average to the with start waters, will them in if is or believe, by I take and they test you they back will medical reopening, an you think

board to we’ll consumer as that distancing So, on the to you our increased product expectation standards. that programs the grab-and-go, at and or up and be from come cafeteria pre-packaged can the that initially is grab and meet for they or of designed it they pick-up either stations can know, comes can go ahead the desk ramp lots that be up with demand slowly delivered our social will pick food maintaining service appropriate

will is every a all into they checked we’ll so confident be expectation work, that before be of wearing employees environment. be morning and temperature our all PP&E safe come we’ve appropriate will got they Our

sanitation We’ll days, throughout location. practices also so feel the be comfortable environment a multiple they day in throughout healthy into engaging in every we’re significant hygienic to the times conveying very can coming deep very the so customer

maintain levels. anticipate period cost structure appropriate time we that accordingly operations manage the up up the a So, over of over period ramp scale We’ll our time. and to a

that's will to simplest it by the put different customer. very to So be and probably going it and way customized business I by think be location It’s unit. by

Jay Hanna

in was margin regard down with just decremental you the that to that then, And think gets to level, release deck? and the XX% to Okay. from you spoken what XX% the

John Zillmer

commentary then Yes, shot as a take I’ll and well. he’d can like if Tom add color

June, we manage the the around and XX% you of if in managing You able of continue month know, you we want are have know, as today May but over the to enterprise, this we’re highly – that framework be period know, to said, that that obviously business Tom to metric, not ramp issue, we’ll know, to up being you we’re to, the and managing the grow to we’re sensitive level. begins

have respond being go cost when that the flexibility really the demand out to time that for quickly downturn the because gets continues worse focused we’re enterprise we’ve on rebuild and comes. If and focused additional some able yet to we to reason, haven’t take customer or to ahead on

if to we’re the not company, that said sales necessary there resources, to focused levers touch the the how to and and being we out organization, or that's not the we XX% here, a growth we’re So, the on growth get of to are would that to so earlier, very other down not as very touch relate level. I to company strategy capability careful, disciplined but the can of pull investments take very

Tom, don’t add you know that? I to anything to if want

Tom Ondrof

No, that’s well said.

Jay Hanna

and Okay, thank luck. good you

John Zillmer

you. Thank

Operator

Thank you.

will next from Please Wittmann Our come question ahead. go Baird. Andrew with

Andrew Wittmann

wanted if working impacts it income Great. them of I some you March all just to, free and us have of of for about a way have been because of going the question. it last unless that maybe needs, Obviously, Thanks kind to year but thinking half what just of flow. a in asked fewer for but the you I help cash to the thinking year talked cash capital be and of characterize be net how the Presumably, is sense I understand free cash source bit range the for had to are in answered, the could that second the impact get of CapEx second taking balance capital? did of question the there's a want little only as but comparison little might I I year missed one terms about bit my that’d be for growth the you half think, are here cash flow guys about year, helpful. you you flows, you it, think maybe about of quarter, how a best most

Tom Ondrof

Yes.

John Zillmer

Tom, want one? you go to ahead and take that

Tom Ondrof

Yes.

quarter particular, on strong and moment. additional environments you flow put As historically not certainly know, cash you the working the pressure capital particularly for us know, at QX in is

AP to balance AR, know, QX slight out strongly. conversion was So, we’re know, between, and tightly coming now grips a you is, to The cash cycle, increase world. with you there managing Right know, managing level – DSOs as needs you in the inventory. everybody

so, steady get neutral to we’re sorry, – but I position. And we moment, the you a feel cash flow, working before, know out balancing that at very as said capital we’re as we like much we’ll, state, to get

negotiating X] degree, to of to you the deferred restarting limited know neutral got what down, a working maybe depends SME and can the at as I think way all with know, capital. CapEx, into looking So, we you comes slightly clients said, and a moderate hard And get from to a we when really know, so be, positive you weak we that that pull you use would expect without and ed can it on be when also – somewhat we’ll [quarter just higher the working compromising you we’ve to to QX, you like again, and got, know, world. QX neutral maintenance historically, operations history then, CapEx, – manage and know, we’re you the with business. go cash

on to the the third for give look moderate quarter. but without clarity expect cash I QX, yet free complete in hard on would a flow the So, you half use

Andrew Wittmann

it Thank you, I’ll leave Okay, there. great.

Operator

Thank you.

Our Manav next from question ahead. come Patnaik Please go with Barclays. will

Unidentified Analyst

so Greg up to but model, calling pick actually is usually been always service but just this labor Hi, maintaining achieve? still, that's the is mean guess know, in. labor up to with or better I when you flexible going visibility of ability on of business the you demand flex to part your into structure, up, hoping as to I’m down, I color same, that you these level know, the start on open the look locations to some get slow

John Zillmer

them maintained question a is, – been active an been great furloughed keep know, that maintain – thing we’ve terrific that's communications is them contact with have approach the our able who Yes, We’ve with – and and you laid-off. the engaged. to are employees to

help looking we were opportunities. in find that you talked additional a employment if employees As place we you about, them know, operation know, having they could so for put frontline for recruitment

the takes employees return we’ll work see call vast under majority know, up as that of expect our the you the place conditions, as to we We up. that ramp

a have like. management the – great place, team technical chefs we’ll team confident Our our employees, skilled XXX% and you I'm know, in leadership

ramp make company and when know, we’ve we to believe be with ongoing love, you to have that demand. ongoing communication they the been relationship up sure very know, the that You and they’ll them that careful the that so we’ll to know comes that and we to meet time return

during right process. ramped a on XXX% for the time. depend There won’t it be at period of basically summer keep time XX, over will our up individual place you many and everybody be a will each callback take furloughed but a it to K of beginning; will education, Again, It the businesses, in the business mind, location with. through our begin model, our higher know,

So, those part as who this process and lives. used very they a groups the are way employees their live this to are is of – the of

get but standards, need we’ll So, appropriate back be have labor to that demand. we that maintain able our we believe the to the we’ll customer meet to people back

Unidentified Analyst

imagine that on then, locations and open, these given be And to Yes, just hygiene a these across I there’s locations. cleanliness focus greater that going makes sense. when

side some wondering the that? Just of about services answer for opportunity potential Thanks. to facility on

John Zillmer

question as Yes, great well. that’s

know, think You we it's a significant opportunity. do very

give customers we to we we've you all sell in place well to our sales developed security about sanitation in with have to for responsibilities, got customers our right of so looking the of of beginning right security standards in an and all their a significant to kind being. put have are demand opportunity. so, customer our operations dialogues all there have, cleaning know, very protocols that and You safety and locations of enhanced know, are be environment Aramark can we will protocols will the our the to who in looking clients to are hygienic we’ve and all the are our deep actively And who models and that a think and and capability, create very and strongest – place that significant sense and for employees strong we

has us. that for as something it do see significant we potential So,

Operator

Thank you.

we now to. question, with next to Please Jefferies. Hamzah Our will Mazari move go

Hamzah Mazari

of being get think not right to are investments to environment? that the going Good this sort the COVID turnaround of morning. is Thank are U.S. the given John, you you. mentioned My part alluded first you pushed several question held is how on as and to times, you think, approaching but turnaround know I I think you your the in just there this back, focus anything disruption? I

John Zillmer

don't You so. know, think I

intended make to focused are business, particularly the the investments in growth said. we that we paradigm, continuing on make think is as had the I that to and I

any So, have we reductions adding going taken actions parts to the we've forward. adding organization sales and managers of the those resources, made sales businesses, those not to

not have deferred investments. delayed So, those I we think, you or know,

for marketplace you on and when it our very right, ready timing know, focused we’re if ready going when offense, is will, is on are it. You for the customers when much the

self-op believe such conversion way And will particularly, opportunity positioned theoretical very, exist. respond ourselves a rapidly, can you very in we know, we so, the we’ve that we to that believe

that’s answer, very working organization growth. know, invest know, team for hard, the simple make So, to continued to to well. the leadership long-term in you its continue We’ve we’re as – the you to enhancements

team, on company other Jack to Middleman of throughout he’ll the a – difference the continued background making job, & to the of addition The other inside we’ve Carl Birdwell about of make the we’re Aramark changes And Higher Entertainment appointment International really very to business. both excited leadership and feel strong the of job. on outside a Education Jack appointment we like Allison – organization, Sports that of very as leadership Donovan the and in to focus the

excited that it leadership the very capabilities the and We’re bear. to team about brings

growth the enterprise. So, going continue the we’re to invest of in to

Hamzah Mazari

great. That’s you know, you are still, follow-up current can just a Maybe thinking government out assistance? you’re focus? Is a seeking question, just how you that into liquidity? tie And that you. about Thank

John Zillmer

organization go Sure. positioned to ahead and against making active utilize We that and any our CARES of do very have Act both to sure Act a under working beneficial affairs the to is and employees that the organization. provisions be government would the the company the

with for it as continue our K-XX healthcare. be both organization particularly efforts in relates way we sector productive industry, to USDA can underway to to the relates that the and it know, have as You the a lobby in

can get way ways can they that employees terms legislators that make help the of we And so, recovery. to our working in proactive and understand can sure keep the we’re they that very the help our to trying

So, it. continue on have focus regard we’ll a to active and in that effort underway very do we

Hamzah Mazari

Thank you.

Operator

you. Thank

now RBC Markets. will move Capital We from to Seth Weber

Seth Weber

Hope and going space, know, educational comments a is you I heard try Hi, the the forward. some I second wins – about better of negative know net morning. to – in think here the doing quarter, on the commentary everybody new traction new together tie better I well. but good you just wanted couple some

end turning your call I Thanks. the had think on prior the by of educational you in positive that talked is the still the comps about space? year, expectation

John Zillmer

Yes.

to-date, place very new some and we’ve account the that wins under with we in you that the pipeline to still which about we to announced contracting – new the sales, been some we’re I achieve able have yet feel know respect that of think we you account know, phase. haven't strongly because

positive feel do very comfortable by – we’ll position year-end. that very we you to that know So, a get

rates education, run confident the have so, we across retention – by know, a have rate enterprise, you higher our that we’ll know very year you improved know, that You including end. we’re significantly in positive can

Seth Weber

thanks. Okay,

Tom Ondrof

let John, me add just there.

year. new obvious what flows the Just this that the in way a throughout a because but remember, time what ago worked next is and happened dates being you state potentially, that of at flow really didn’t net or through on the impact a certain referred things year that's ago is business for to on start-up the negative a the as a that of so that, sector the happen into net I product because John especially year is were will new of year are carry education the through, pronounced product it would pipeline know it now the whichever business, then of goes, really

Seth Weber

That heard the anymore it is mentioned was You I driving makes positive I – Thanks. you And then shed I of just surprising times think color macro on what’s challenges? know, sense. that? sort surprised, pricing, can given couple of a kind the of

Tom Ondrof

I on that can touch John.

John Zillmer

Go ahead.

Tom Ondrof

achieve impressed a that focus in a mentioned fresh, is There you know Aramark’s lot ability impressed of the contracts you and the clients. that revenue for this been with in know it, in coming negotiated a call first service I last you know is was and think to on number the the price and time testament of quarter. levels driver consistent they and with clients to that’s with certainly with quarter on have – growth, I the and quite I ability a it’s certainly last that follow-up some to to quarter pricing

with I valid what’s but that’s in it might a a forward, the being even many and difficult sure little is get the serve mean both now in a be point in to of pricing you the we, lot side-by-side contractually, right Your one conjunction are more to going served. potentially, environment, other the topics that clients clients make Aramark, know, and client best – negotiated with

a driver. impressed focus been on big here the to be. we has and pricing continue yes, will I’m So, with it

Seth Weber

Thanks much everybody. Super. very

Operator

Mr. over queue Zillmer further to I no questions showing like I’m time. in this closing turn any you. Thank remarks. would to for the the back at now call

John Zillmer

continuing Again, thank morning. I’m for of with and thank dedication the world to Terrific. their thank dialogue hard this you to like Aramark and you for We work. Take again hard I’d look time around all your again the all to your during excited period. be care. the and joining everybody forward extraordinary this for work you employees leader

Operator

thank Ladies participation. your and participating. Thank today’s conference. gentlemen, you concludes you for for This

You may now disconnect.

Aramark (ARMK) 5 May 202020 Q2 Earnings call transcript