Earnings call transcript Q3 2023

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Operator

Good morning, and welcome to Aramark's Third Quarter Fiscal 2023 Earnings Results Conference Call. My name is Kevin and I'll be your operator for today. 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 for questions at the conclusion of the company's remarks.

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

Felise Kissell

Thank quarter fiscal Chief Financial webcast. to John Zillmer; Aramark's conference Executive Tom as our welcome will and our well from we This you, call morning, Ondrof. Officer, hearing Chief Officer, as XXXX and earnings be third

As our on morning, this be found press our a which reminder, our notice regarding forward-looking release statements is included website. 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 Also discussing reconciliation to GAAP as financial release, website. on press non-GAAP certain well can A US will as this be items these we morning's

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

John Zillmer

to for a strong and will the quarter to reflect which Felise, normalized Tom our joining results, in review on our margins. of growth I momentum morning This thanks organization focus across and Thanks, return today. third us all and you

we've We update the will made spin-off on also Services on significant share Uniform progress the an transaction.

turn on represents that with expect ahead. in we questions. then We all that substantial our just will believe capitalize before and to for the created and year expectations it for line the We performance-driven opportunities quarters one raised to go this fiscal financial opening quarter to has our months that culture

few Vice his of battle the tremendous want I Orobono, Supply Chain our Before cancer. Aramark Senior the to President I results, John into family with a had ago. a loss weeks hard-fought lost acknowledge get

supply the changed Truth a for establishing and with Aramark you and a Aramark, of to to everything way throughout gold first inspiration, standard. in his us and left know a chain succession to total. on so many who for almost dear then team XXXX years solid industry, in doing service of was company many he the true for of capable could XX strong John He visionary true food Aramark focus the a managed was and As a is October plan. a friend returned he

hearts from full Our we John are but have in confidence who heavy, shared. generously those learned so all

& to quarter. over grew organic US, the I period XX% Services the consisting FSS of year-over-year contributed corporate same turn approximately of segments International the XX% will FSS Food more revenue by and than compared reportable Support now Aramark's last growth year. Uniform to Services Global and X%. increased

across FSS, industry continued trends activity Within momentum at XX% client grew business spending favorable segment new & and business, increased Entertainment nearly result per greater Sports sector and by organic locations. led continued Global year-over-year as a strong revenue capita in net from the tenants and of US the return-to-work

as strong organic in International XX% versus in of Spain, in as comparable and mining Europe, performance than robust America. was activity new particularly Germany Performance well sports busy business year. by the driven period last revenue concerts net and increased South more

expanded business to the just to William won last Since active student Public nutrition name XX%. we Mary, a sectors College and was and our been retention University add recently relationship of Hospitality headquarters team contributions maintained our And new micro add country. locations has during and season with above the to Walmart with FSS Schools. continues serve Global across awarded and its and and typical geographies selling broad-based Collegiate others. markets quarter, among Towson B&I, within vending their from few, rates all DC new

portfolio. with education clients UK Canada, and across had the Ridley College ongoing new gained including success the also segment and Kingston in bread-and-butter in International in The higher University wins other

the of customers the and more in business. important that Education the in work our most sector of with Corrections will quarter, detail, Tom developments was review One

in we in not for have sudden country the margins decades. in As this seen said, the past, significant these compressed, the have and businesses inflation due been to artificially

beyond. to recognized will our effect the quarters they've the benefit very fourth fully bring will have margins. strong first closer And 'XX in that to that The outsized quarter more adjustments this recently the partially cumulative our We're service the report us of a clients and in and agreed normalized big price step pleased quarter from fiscal meaningful inflation. of many occur levels and of

ever, normalized to quarter quarter, than is we them. progress The with our inevitably makes and our is this point expect that a meaningful to the and fully at satisfaction seen with in more return The this proceeding will proof and of we've gratifying strength bond service be us margins of spirit confident progress their clients our our achieved. partnership of pace,

by in revenue Services Organic sales, was and of in the third an points. improved that implemented plan basis last that coming surcharge offset by XX the year, actions Uniform leadership success growth and the adjacency of Uniform have to approximately is from We're represented rollback primarily analytics, targeting portfolio underway sales. growth quarter place was partially pricing growth energy and strategic in with Services adjacency analysis in pleased well early signs driven

beyond. build momentum expect next We to underlying year into well and this

to the our progress logistics. related made and operational Regarding the financial regulatory collective spin-off, significant teams have

on the to milestones we at work key macroeconomic complete environment. and subject the market few closing execution based to and capital towards customary expect end of transaction. of our as A We the year, conditions current the spin-off fiscal

company, Uniform's helpful veteran, an uniform expertise, The and Board The Directors relevant and and diverse mix company route-based industry. of over be experience include leadership morning, Officer strategic qualified value. group for industry will will this as independent future and perspectives. strong and two their former highly experience will This impressive Board Just backgrounds also in Cintas, seasoned provide the Holloman, have in to public businesses. to we drive of by announced who chaired similar Operating a industry Uniform's of Board public President mission composed of strong Chief of insight our significant Uniform's the Phillip the team Uniform with decades leaders,

on AUS term is a banking and in million loan of approximately credit finalizing consisting partners, $XXX through billion $X.X facility. financing in revolving $X.X terms billion

the business, refinancing. attractive attributes cash anticipated rates to the interest recent the to flow Uniform of most are Given be comparable Aramark's

path With all to is maintaining continue for delevering transfer Aramark, the eye expected net to these with both total $X.X proceeds, SpinCo Aramark leverage billion to and a approximately AUS. for company, neutral of an

hires review as in meet for next Uniforms opportunity you potential will Kim and which be of strategic value phase from operating also benefits webcast creation. strategic and September team Finally, morning This will great executives, XX, a available via the host businesses of to we'll with leaders plan for strong an the within and Day and more including her City York industry, to the both in the you New Analyst soon. about details exceptional will of team new independent share of We're the the excited companies. be

as call highly impact Do through partners, initiatives, turning and few Well client's, accomplishments a our the plan. initiatives to positively remain reflecting important ESG the our globe. and highlight in commitment like Tom, to to well planet the Be our DEI ongoing shareholders I'd people Well. Before us key our as These across to to related

First, our we've taken another efforts. step forward sustainability in

to goals and reduce to from commitments. net Initiative of These received our we according zero month, our Science-Based targets existing our last Targets the their footprint ESG confirmation complement carbon Just standard. follow

once Equality recognition Also, score Index proud as to on I'm Place our Disability XXX% recent and perfect for the Best Work again. of the Disability Inclusion,

We tremendous has I and continue proud to company be be could has on welcoming focused a diversity focus of not for achieve. be our Tom? and our a will been equity to inclusion continue able to that people on a our across differentiator outcomes. led has become for top We what culture key to team priority the inclusive that more And creating us. organization. the believe

Tom Ondrof

Thanks, John, good everyone. and morning

Our performance third across portfolio. in top bottom reflected quarter momentum continued the line and strong the

billion of net and reported by As in from recovery representing strong consolidated business, the excess revenue year-over-year of of organic pricing business. period more X% as Aramark new continued well base than underpinned contributions $X.X the in mentioned, as XX%, John growth

of on margin compared the points increased year. XX higher than quarter, to was XX Operating basis operating X.X% the income of income was points year-over-year, was basis margin in higher million QX last AOI $XXX second constant basis XX% currency $XXX similar quarter more same has a Adjusted than typically levels. million. and which

not As given included basis total of a of is our sale XX the reminder, the to contributed AIM AOI beginning Services which non-controlling at company margin stake points April. XX historically to

unit about profitability supply management. well from higher quarter segments year-over-year leverage the chain prior maturing all operating higher and as Across by from was improved driven as the and of economics new disciplined business revenue years in cost

currency and Organic led on new AOI respectively activity as from pricing base in return-to-work revenue business, basis. growth sector. business the Organic business and well net per & Sports notably by actions, industry and was revenue higher strong Entertainment Global most in XX% constant capita as and XX% year-over-year contributions coming and increased growth FSS spending from a in business

Global basis a compared nearly to AOI sequential compared basis and XXX versus to quarter. XX year. basis approximately last a points points QX organic AOI revenue to year second XX compared the reflecting XX XX% FSS sequentially second up and point the X% quarter. was points AOI the constant increased grew basis On margin currency increased last to Services improvement Uniform margin nearly quarter XX.X%, third basis

initial mix and points to in by expansion more As earlier sales well year was impacted a the versus third energy the revenue organizational early rollback an restructuring including year. significant basis initiatives revenue strategy benefits the the the including segment's from related the as by in as due margin savings during on add-on John a adjacency driven in The XX of last mentioned, efficiency year. services period surcharge focused quarter growth put implementing balanced to prior was

a supply believe Across continues this business. opportunity we normalization the for contributor chain to profitability will growing to be a the key and future significant be year portfolio,

a food have a periodic XX% including Collegiate Corrections. company generally few our experienced Meal account I of Student These lag a services inflation for year businesses total in our once Nutrition, revenues. Plan, a businesses and before, of recovering Hospitality to John due roughly and more pricing, As mentioned

implemented teams which QX. our with past to hard be worked the during much few actions lines across business of significant will quarters, the the pricing have customers Over attain

the At over seen we've moderate inflation the quarter. time, same

While our to rolling inflation feel recover coupled which and during we cost precise next cannot QX gives of price inflection seasonality, expected further benefit year-end normal year. us our path in margin lag, going the forward, with this good we upward obviously into control the ability about confidence

interest income was Turning $XXX expense repayment million of $XXX reflecting of quarter and approximately was the the tax the to XX%. statement. in remainder rate debt adjusted Net million the

which $X.XX, of sale the of Our share investments $X.XX. and net gain equity included adjusted on in quarterly EPS performance resulted earnings per of

a year-over-year adjusted year On currency period $X.XX compared was to representing the constant basis, of increase EPS last a the $X.XX in XX%. same quarter in

net cash was regard is cash the And with consistent provided With by quarter, a million was typical to operating flow business. of flow, $XX use the which of cash $XX free in activities million. the seasonality

The cash expenditures, revenues which at cash capital, availability. and by was $X end improvement lower over working At levels. $XX income by still had flow year-over-year billion partially X% driven Aramark net in of is results capital favorable million offset year-to-date, than free historical quarter stronger higher

ownership in Net our in position cash AIM the sale our $XXX million the approximately included Antonio Services San activities investing of stake from Spurs proceeds equity in and provided portion a XX% NBA by franchise. of combined

with took debt proactive maturity by billion XXXX another XXXX. step also company's refinancing June to loan the balance more to sheet B in a forward than We strengthening extend our of $X.X big years the five term

outcome neutral, a the maintaining expense just that debt run adding net with pleased to comparable leverage attractive of is $X of the million quarter are at and floating in fixed completed We rate ratio. per terms was transaction a interest while

We flexibility. structure will opportunistic in capital financial be to and enhancing continue our

up So, with XXXX. current outlook let me our finish for fiscal

FSS Global -- compared greater and to previously. anticipated We Services to our than near growth comprised to XX% remaining compared revenue growth near to update XX% our This last are growth expected at be raising in XX% approximately around XX% X.X%. Uniform organic of is

and This We're Services Global approximately growth lifting previously. expected X% approximately XX% to XX% previously growth anticipated to previously. to of our AOI approximately compared from be comprised to compared X% also XX% at is XX% FSS Uniform raised to approximately

Uniform $XX transaction spin-off. expect before We million approximately and million and to the around to with payment in anticipated quarter $XXX the $XXX be $XXX cash to charges million completed million associated fees of free the the continue related flow flow first payment restructuring impact cash of to FICA

specific at items, fiscal expect at projected times. end flow of $XXX these be ratio year continues than less After four million. we finally, the our be to to the approximately And cash free leverage

I'm The and quarter pleased continues ahead many building. strongly the companies. with transaction on the and opportunities both are our spin-off performance we momentum the in in believe we pace for

across the a delivering to on with business continue controlled and can be resolved profit. growing teams what our Our focus globe to sharp control the clients great and service

John? for Thanks time. your

John Zillmer

I'm our the confident and cash year in strong laser-focused and pleased extremely delivering this we're our to is historically results. quarter remain Thank you, margin Tom. fourth close our with on strong. and free ability The quarter highest flow period, performance

most about to in and company the coming trusted to the ourselves said and drive the our into bar months. I growth line high ahead bottom quarter, last admired in Aramark done to confident team and fiscal we job accomplish further have as beyond. opportunities a for quarter with I'm XXXX As lot set and And being a get on and a I'm focus the employer hospitality top fourth the excited well partner. success a the

now open for line will we questions. the Operator,

Operator

Thank you.

We question from first Bernstein. Our comes now begin [Operator question-and-answer with Martin Instructions] will session. the Harry

is open. Your line

Harry Martin

Three Good from Hi. me. questions you’re Hope everyone. well. morning,

acceleration, first organically. XXXX the certainly versus I one, XX% international if look that you think The on growth organic over sequentially

markets. business? new has that the much there wins in is But driving and acceleration inflation success those gains, what's market from been share you how continued think dimension I and of international in in some can that

the quite ramp-up The second business new a about comments is have you contributing made of wins question few margins. to I

specific two cost Day. maturity wins level So wondered that vintage about Investor if and terms of little some the And be a in on with contract could you inflection is accretive of some in XXXX commentary at inflation? of to you and that level give more next I in that the to even Are those to are bit XXXX to the accelerated the to contracts starting a margins spoke ramping lot to from XX months? more there six three-year hit group starting the come

final very if much. where going reduce then they're the just Aramark sort and up of have you question the early see seat. on stake on comments that with any future? shareholders your Ridge the in the the wondered the of And looking major in is, give you disclosure to that and relationship Board Mantle I Thanks

John Zillmer

the This is John. XXD I'll answer the question first. on

I of form the think First for itself. all, speaks

explicit have with and described. intentions indicate great invested team XXD for does be that continue down. very general be to respect their the were will term, they the fund to will or Ridge but think were I The the think also I been partners, what winding are. his Paul at long the fact XXD Mantle Ridge as the Mantle partner thought

further and think to for itself I comment would form So the think speaks they any I have that. on

new course been And midsized account rapidly of the pleased accounts with and more wins of lot couple would we're characterize a years. what with bread-and-butter But We've over most performance to They sales international those of the last very growth, to they've nicely. the and have had I as profitability grown accounts. in group. very ramp of international respect the

retention remain well as in high So as rates international domestic.

that and we're in that the year-over-year has really contributed year-over-year seeing line. had well. significantly Sports sector the to season. as So Entertainment we've concert & the That impact performance strong in Plus growth growth

on individual Tom leave you to So answer I'll the it to ramp-up. account

Tom Ondrof

maturity business Yeah. we much to new along -- expect. is as The continues very move our

Purdue. mind Some back that won bigger accounts comes XXXX of we've to the Corning in

Of maturity course, ramp. continue efficiency and Merlin their

key us we've before forward, it's expect we forward I significant forward. as as think consistent that overall, where lot. to really then mentioned move don't to a but years is just many nothing for And times just there's deliver net where We going continued don't the growth any a number fairly move so linear. years continue jump there's we have then a and

very we're would we up that is expect moving it. So as with maturity and pleased

Harry Martin

very much. Okay. Thanks

John Zillmer

Harry. Thanks,

Operator

Our Andrew with next question JPMorgan. comes from Steinerman

is open. line Your

Andrew Steinerman

two It's questions. Andrew Hi.

Sorry the static. about

for one quarter see about middle the that fourth The AOI my X.X% did fourth is for of the first the quarter. are X.X% I like Tom is I the what range I correct margins math implied implied up then that the fourth of increases Aramark the underlying into with point? fourth input cost price does Education in in you got feel secondly, with the talked at this then areas the quarter? quarter, about Is And caught inflation

Tom Ondrof

trust caught we than your increases, I'll I are Andrew. Yeah. And on margin math price think better the then on fully It's up. the usually don't mine.

it's to think it I -- be journey. continues a

over K-XX away and journey the then direction, months in next but on of As big these the hard and higher And July at XX the side in a They've think in to last there's September teams ed to a fast. John chipping X that. been I still higher mentioned into And right it businesses the keep inflation made it's Corrections, three step big get more for or ed. thereabout come is year.

Operator

you. Thank

Heather of Our comes from next with Bank Balsky America. question

line open. Your is

Heather Balsky

my taking question. for you Thank for Two questions Hi. you.

I about Uniform. the First You may planned you talked but $X.X billion, can what the, for talk be for EBITDA business? underlying backing all of into Uniforms kind the leverage I about think guess, that's we're

with terms change end, thinking So is environment sort margin what are a what low just is? regards can at topic with or And to on you up you're seeing there? with in help leverage end you'll of the this then us in ratio Thanks. separately the of that you still view pricing there midterm your there inflationary goal the

Tom Ondrof

is On the will out four the to leverage companies split ideally. roughly parity at times come the here idea

underlying the EBITDA that's off the for to you math AUS. that's I think that work get -- of So can

are us. flow the past two years , yes, we're in mean On to I the tracking. the two the for over think margin There I adjustments margin mid-term

I AIM as before XX company divestiture course was roughly which is basis to points of the total the One about said margin. of

if putting in the XXXX the also be years two company other now were the public cost couple FY And a you together from AUS would factor. a companies for

So to forward. XXXX the getting that had the those the Day. mentioned lower the end about feel margin we with moving the should and good we Analyst ramping inflation of about just range. towards really pretty Post we adjustments -- step and I progress that And on we Day into comfortable up. range feel were trending we that two before in We'll still Analyst with we're that talked indicated through then

Heather Balsky

you. Thank Great.

Operator

comes next Zaffino Oppenheimer. from with Ian The question

is line Your open.

Ian Zaffino

Congratulations see and guide. quarter, firstly, on the great great to a

As how means and far guide return as your now buy-side or what Does we of now that at And accelerate should least pre-COVID return get the about you were the how return your the on cadence margins? we Thanks. think pre-COVID? when you to thought should thinking back? to as this going about to be back pathway sell-side

Tom Ondrof

just I significant margin the and this and Again of The And really Yes. pace -- like predict we've points. can't confidence margin. up we have will lot progression a we what progress. We're get basis to quarter the We margin of will said again timing had will of happen. through XX and year will that. inflation XXXX it in this

We expect quite that you update it XXXX bit on we'll in into November. forward a and to move outlook

guidance the I'm out the margin the standpoint so loathe pace just -- a will front -- from inflation speak given and at continue to but we continue in in with to a margin step uncertainties But fairly this a it I point So of way. whatnot. linear to and progress

sight, see have significantly quarters continue the progress the we and overall margin made we've what to in progress the again forward and we the and in progress But ahead. we the business going

Ian Zaffino

is also pretty on And that then here. the it Understood. spend, Board seems stacked Okay. the

you What us great You've these appointments. attracting Can seeing had that? or driving members really tell are maybe of some Thanks. that's really there? them some what's additions

John Zillmer

Sure.

NewCo who process between build than and add could dynamic I the a a very we Board months to more Winkleblack, significant the be and selection ago began and Art to the to to that what high-energy year think we me value Nom very have Board AUS was it assembled a for Gov over SpinCo. work our and wanted dynamic Chair, many

several targeted see would exists opportunity a able we be frankly we very And that at to thought we of and so AUS potential team And of what have based them were as on they and we significantly the that the the great. in attract who future strong business place. individuals management all

were think terrific employees creation forward the work to move them very and the it just be with all of eager for value and in Board. an shareholders, in would what saw Kim great participate a to to the opportunity as for and I business a opportunity for

we're We've very very with appointments. by of excited perspectives. diverse relevant yeah, executives very got a people, So, group and viewpoints of the all great experience, seasoned

very And excited so are we about it.

Ian Zaffino

you Okay. much. Thank very

John Zillmer

you. Thank

Operator

Our with next Kaplan question comes Stanley. from Toni Morgan

Your line is open.

Toni Kaplan

quarter you I just much. the and from could I given you've Education of wins Anything the well? new on the or hoping give versus of the was quarters gross some terms Thanks maybe pipeline? past the also the quarter additional different focus Also on business in on know incrementally as new very color in business last pipeline. strength

John Zillmer

Yeah.

it's active all think and season still in selling very businesses. underway a the I been

We robust pipeline lots both domestically have and a of internationally. opportunities with very

another performance. So strong about feel very we year of net good new

quite them. accounts awarded been And signed not have operating think specific and yet the them yet contracts of haven't many so been we're I individually

So yet some working while those of hesitant this a processes. we'll be at naming little names bit we're stage, about through more

But solid third very another a yes new performance. good of feel we business year about -- very and strong net

terms we've both headquarters in significant domestically corporate of higher their education So Walmart addition great wins had a internationally. also in and and

pleased, activity. results very the and very pipeline pleased, with the with of I'm level so And

leadership you a as each results senior know, the with basis, we monthly business team, of review on As these units. a

we about and organization. for overall results the very there the is focus The feel there. is momentum the So good

Toni Kaplan

geographies strength you different Thanks. international, there. UK maybe And I a regions, Any quarter the maybe about, is about guess thinking the challenge how talk little different could or across Great. bit faring? strong hoping very call to areas? the out

John Zillmer

and good all got performance, leading that sectors geographies year-over-year. significant all Yes. -- strength actually to across would say, I we've

been say, been terrific, strong obviously the performance call-outs, And Entertainment robust. Europe very & Canada very results been Germany. has in mining Spain specific and in has Sports in that's season strong particular as concert I strong in season and in in Chile well. would So in The

wouldn't and broad-based very below it's any being region So, characterize I expectations. our as

So we're very international. with pleased, the results from overall

Toni Kaplan

lot. a Thanks

Operator

Thanks.

Rosenbaum Stifel. question next with Shlomo from comes Our

open. line is Your

Shlomo Rosenbaum

the Thank down very deflating, items of just you and on Can even not a questions. taking bit for the have talk staple inflating have you a more really Can in much that of about to some I deflating? then, that Hi. of slowdown food -- the gross staple that you are package? margin focus of A want inflation that things a should been is And the as much, of were food expecting lot see deflating. continues? the kind items And in little about currently? inflation, to kind wage is but deflation. impacting actual this strong how Is slowing really been forward, margin of more what this part or this see, at this kind benefit going time? Is a point offsetting of if than still we you the

John Zillmer

keep off Yes. are have mind, chain is moderating commodities though higher all I benefiting say, year-over-year, and a certainly there supply in is it perspective. that even first us is year-over-year. would certain come that from of that significantly still it But

expectations. of impacts a little through running home index, the recovering are original that a still from away -- Food the we little higher inflation. pricing so than And

significant to breaking the on And a working an overall, result we're margin will pressures that. recover impact having doubt impact progress, are the down see be we net-net enhanced inflationary total commodities to no certain the still the in food continue moving if an it. about of trend there business, forward, as and side. while So, Making

exact it, prices few well. when as weeks, inflation affect of just all the you on higher the oil food be as And which back transportation, see, flows it could item of it's cost energy to up So, the course an through. to price impact last can the hard the shoot again, begin timing predict over

position that. the very pleased, will will. moderating with in improve, pathway, a but it if that see precise We're we to We So, call really you a and trend. not continue -- anticipate to

moderating to perspective, pressures labor improve continues very labor inflation are in a From slowly. labor and we availability seeing as

overall and it over so the to pressures both very And inflation the XX cost course ability moderates. in of food we feel wage next months our recover comfortable as

for expectations As think pricing day And we're we're every client of results working success. the quarter to customer and middle fourth and locations forward optimize year. P&L the and in still our looking into having our I Tom significant said, the the next to still managing still the ramp

Operator

Our with Redburn. next from question Neil comes Tyler

line is Your open.

Neil Tyler

you. A Tom. me morning. Good morning, couple Good from John. Thank Yes. please. morning, Good left

adjustments the question. first price achieved and might around significantly? the in the Firstly, there been adjustments immediate of it's if you've That's terms structural in is the anything negotiations that declined -- during that, that of in part price those the costs Education Corrections altered structure the different contracts that mean more

And retention? any effect on I'd is have the negatively, but appreciate either. your I'm these -- on than thoughts negotiations might thinking second knock-on positively any more

on wrong but things, So you. the not concert year? know international. as not the a question season about a number activities of in high strong? Germany sort that strong in the of abnormally sort smaller of is entertainment sort we scheme that of number in strength it's cast off big sort I wary of base? comments just the wanting next relating just to and of in for then and of the And think Spain Should to slightly a especially unusually your Thank

John Zillmer

first. Yes. last part the No, I'll take

that, abnormally based wouldn't improved I than I strong. year the and prior say opportunities stronger say, of on would all, First it's customer it's attendance. improved overall

season. some a sporting somewhat events the year and from lag that COVID last had still you was some of So the of impacting of concert

So, the soccer Europe. I would way more both the it's be would characterize seasons back concert the -- really in to and normal

circumstance. just than it want I that to higher year And right. So Yes, do wouldn't prior Tom I so being out that's think call abnormally high as due that. you take to

Tom Ondrof

out. Yes. It's and add whatever. weather or and ebb playoff you mean of that take baseball we're in bad just just And not with it. I that -- comment just call upon each and build it's sort year And Neil that the or going I'll the good to like things flow. these to you

exceptional. I So, it's out an as not would call something that

so language work Pricing to a forward, and really last not escalators the the the where way going Certainly, existing of going there's term. of in negotiations changed we're experience benign half had old contracts an the contract inflation we and and isn't past XX the some that it's the years in when anymore. to of modify client an new year using as middle contracts that particularly

pricing So have where the getting a with just language but we've changed with obviously, retention But contracts, flexibility. more there. language change I'm don't new question exception if efforts, following think not and it's really notable just we're then I and much. to on if anything we've worked retention, had we really And so mid-term renewals it's the contract then contracts, impact for those opportunities,

Neil Tyler

use opportunity I Okay. you to extend able the to whether just contracts. wonder were any

John Zillmer

not to as times use before recover Yeah. the costs would we process the I've look but for and would I said contracts to near-term, yes, at annuities. say, we these -- as negotiation have only taken opportunity add that, I the many extend

year. it wait that's to didn't pushing situation we And to were in bid, we contract a by put want in given were because we profit at pricing cases, to in a get risk, why to the tough many willing appropriate out because

years. life to these average as relationships XX So close long-term at we deals, long-term look contract

towards well. worked the with that for we've very negotiations cost for and these carefully, long-term done through keeping customer as solving as we've eye an it recovery So

with say, say So a of I impact retention proactive renegotiations. included many would no on -- from I those negative a would perspective to extensions

Neil Tyler

Very very much. you great. That's Thank helpful.

John Zillmer

you. Thank

Operator

Carrington Leo Our from next Citi. comes with question

Leo, your open. line is is line Your open.

can open. Carrington your your And ask question. line Leo You is

your moment question. could You our One next for question. ask

Faiza from Bank. comes question next Deutsche Our Alwy with

Your line is open.

Faiza Alwy

Yes. Thank you. Hi.

So about organic FSS. to I increase wanted talk in the guide for

I think X% mix you X.X% the and underlying new guided of it year, volumes. when for around was initially COVID the sort in pricing recovery business growth, of to a

there well. incremental we maybe is guide? are where a increase now, volumes COVID pricing helped that of like sounds It like you sounds It that as primarily has is better recovery just it

various the disaggregating get your wanted So increase factors on helped that to I you, the have just perspective outlook.

Tom Ondrof

November settles. of this would -- that picture But components, -- got we'll At good been original say, I the at a the to recap the Yeah. by the we it. the year quarters if once we'll we've pricing in end year, I'd those And of dust had of through point looking is way than have I'm assumptions thought. higher three say against year, the

about or at of think the the of thought beginning at all we as talked inflation year, beginning longer the we has I year than year. persisted the

slightly I has overperformance. probably been oversized So of pricing the think driver

is And so the strong. less But net recovery better bit overperforming bigger growth expectations. slightly COVID the a been but the the other the has I little pricing think realized driver with two

Faiza Alwy

there? your share? think to sort about, how outsourcing, in sort Understood. see to you know about And your still do evolved talked then, trend has increased you of thinking you market or of I do to both, a you you're but just previously continuing combination how follow-up, Are continuing win think of share?

John Zillmer

total changed huge. kind really of don't The the it's rate is think normal run growing market business. We don't from business. on I addressable are -- we the our in focused beliefs the Yeah, about

And continue self-op this both as wins We competitors conversions. conversion organic trend we self-op continuing well from new to account net see so as that focused delivering year. both be on from new

we competitors. things ultimately market. business it pursue. We the that overall, our So, between the We really look addressable of we don't that drivers that shift being we gross can set at look look and – total manage the closure rates wins, new as terms and opportunity measure at in net and and we the the at we share

to So, new say continue get of would we fair share opportunities. our I

terrific We continue ahead. overall to self-op and conversion opportunities increasing see

the to very performance the to organization relates of yeah, it on with overall as continue growth we'll and So focus pleased we're it.

Faiza Alwy

Great. you much. so Thank

Operator

Our next question comes Citi. from Carrington with Leo

Your line is open.

Leo Carrington

be you you. indicate appreciate of firstly comes square of XXXX? about and to you -- or you fade of year into do thinking the sort two to sort in -- it pricing of just CPI, when will sort thinking bridge Thank just the I of of can sort continue growth would price as will think margin But to ask morning. and to levels into that it think QX? more when pricing driver pricing sort the FY the towards end your driver Good end presumably comes importance the year. or a catches of you'll If specifically maybe recovery in fade down the XXXX growth And can on about organic this it a

then maybe, follow-up a just And secondly question on that.

anything in In underlying? this the Is all call taken Is think obviously this specifically good is perhaps there was you've to impact energy as impacts strong best fading sort and out -- or XXXX. was the QX I of of terms the of the actions as that just the margin, Uniform favorable, quarter pretty the away?

Tom Ondrof

coming the on shifting, The you the of two impact management of think team. it's Kim the the No, been I question, place revenue the forward. has of the Yeah. to focus line on business team drive will. I the ability the years, mean, it's is in if AUS underlying. performance

add-on on look lead continue to they the has services, last come the quarters. adjacencies machine. of in the in at sales As the Andy base emphasis selling client and couple build more group Panos to here

Kim momentum beyond Rick and of XXXX have team think top I anticipation spin. focused Bottom the to holding they'll we this And will really the on artificially this deliver line. in as shift on growth into and line, good and year I past So we move again, making the the efficient more the in business optics, think and down start surcharge that that's as move lap energy year-on-year forward.

post month that I the they on think ahead of have a perspective, opportunities talk as and speak then more they the spin. they'll about profit next what them

about and line they're both top that So, bottom going I opportunities know they the have forward. excited

in the of X% terms was mentioned quarter. I In pricing, it

we're typically at last into we We So, will Those able cost roughly quarter as that's margin, where have we're for for next year. were where well. just price but carry benefits not to been lag inflation that I become as that will price the dynamic or But stays that place think cost in pricing downward and recovery confident inflation it that will, quite that and trends recovery. move more back revenue of inflation. sort it revert our a for will apparent numbers. becomes impact. How depends it an that If much into of mean, less of growth to XX important revenue the beyond. the 'XX norm on more forward we we it if puzzle had stays elevated, we I be as going the totally X% to piece and it prominent years, in is

Leo Carrington

Okay. Thanks, Tom. Appreciate it.

Operator

Sabadra Capital next comes RBC question Our Ashish Markets. with from

Your line open. is

Ashish Sabadra

And for XX surcharge. the just basis the is color question. three we pricing the think next the is that about point Uniform quarters? Thanks fronts on the business, business be a trend Maybe level on right on think trending? the would going taking helpful. forward? pricing And How questions. about should then the Any we couple forward? just how that of should quick my side, the how should headwind, it In in those One going was Uniform clarifying for Thanks.

John Zillmer

Yes. eliminated. impact fee all, been I quarter recovery of the the points. in higher would is to -- was say, basis in approximately XX the that's respect year-over-year first bit quarter little a in with impact The fuel this fourth the actually

fourth the quarter. it's in So X% nearly

of So, year. that the in would quarter normalize next starting first

yet, eliminated. anniversary those recovery So now of as fees fuel are there's that lag a little bit a they

as So business recover both rest pricing the in from -- been and the to robust demonstrated recapture they've their their pricing coming has cost margin improving been by costs performance, able and improving of their -- both but improving leverage.

better the expect that's going forward. now fee in that fuel place. no comps that continue So, as I to get just they And anniversary leverage longer recovery pricing would will

Ashish Sabadra

you. color. very Thank That’s helpful

Operator

next comes UBS. Josh Chan from with Our question

line is open. Your

Josh Chan

good another quarter. on Congrats

John Zillmer

Thank you.

Josh Chan

how seem two guess think when moving the margin then I about to when mentioned you dynamics 'XX year? year in we start -- the to you kind next normal when of and of the So favorable your pricing into Tom those compared the seasonality moderating inflation, into should dynamic as have

Tom Ondrof

into move as Again, pricing more true materially is on year the outpacing affected. of the go margin when would to going shape We'll and the be year get inflation sort more granular we'll going not dynamic you XXXX. change but have little we and of November to But still to dynamic a a next shape. around we by as next edges be around look hold through we or not give it's the bit Any still U-shaped large year. the

Josh Chan

Okay. that then to That's on retention environment? underneath more desires we're any to side, to retention continue are kind of very I continues customers anything that now rates. Thank maintain you. you that fair. you strong. guess the past seeing from you around recognizing be that the And Just very mentioned supply-constrained there, retention shop strong

John Zillmer

I based structural would a others years on I mean level say No pretty higher a Yes. perspective. business. impacts of activity of the than rebid are it's kind some normal from to

strong the sector. requirements to rebid very with has K-XX know, you As activity the USDA in respect

in it's So where just there years is you years kind have the retention dependent where upon cycle. of heavier where some and are school lighter districts

But the level is the by and very pipeline activity large, is think strong. and year-over-year I very, very consistent

change degree the industry. see propensity don't of higher So across I for a

just at think level. of I normal kind its it's

targeted list always against of new working so we're a opportunities always And aggressively we and prospects. are pursuing

that And business. some the of are and scheduled grow work list rebids just against target and some aggressively are unscheduled. prospects work to We

– could not would say in identify. change I So I that would a behavior I that customer

Josh Chan

Great. thanks time. your And and thank you for for the color

Operator

Manav Barclays. Our with next question from comes Patnaik

is open. Your line

Ronan Kennedy

on Ronan taking colleague. Condolences passing is the This for your question. Kennedy morning. my for Thank good on you Manav. Hi, of

As being or you of through reminder the I follow-up and et or to in prices contract insight and percentages contracts of how how where management of a expected fee, you've high-level and to and that think a question And that function confidence on can of just the expressed can also Leo's will terms just kind of pricing, value stick sticking, cost we you cetera? it a it's the – provided whether why you are inflation? P&L the on each see stand give in articulate benefits to there service clients, structure, moderation plus then

John Zillmer

had all had the industry. rare I business the would particular operated of the to us was price history a anymore. way get have when as elevated, say based the days coffee pricing to the moved when not gets down, an approach. our an very that unusual back and coffee on impossible coffee on up of based an way the prices except that It's first expectation and particular it's Yes. maybe pricing for to take That's spike some on is commodity sticks that's then Think impact. pricing priced and down prices moved that were commodity may business artificial

basket in. price market really of across the products We

for rare so price move to down, has to the And begun once already consumer the it's a us that for price product. pay

consumer, to not So the I And highly sticky. pricing the to client. you're say is would pricing remember,

-- the So these buried client prices that that user contractual relationship. are end aren't prices paying. consumer-based They're the in is

to be sorry, price respect And going to costs very recover will I'm was very, second... it to pricing that be With all as what we've we'll And discussed. forward to believe able sticky. the continue I we think

Tom Ondrof

types. Contract

John Zillmer

ahead. yes. Go Oh

Tom Ondrof

Yes.

We fully changes continue mean of to And or move I the P&L P&L aren't as back converting the the a reside, to having recovered. primarily running a volumes adequate B&I, towards P&L. that's really driver where volume. still in

So, not XXXX but were in that. move towards quite back we to where to continuing

billing No we're Again, contract, $XXX to now headwind. we're but pun going each them have The on and getting does our previously, it immediate the with its margin client cost dynamic pricing both. and $XX obviously, if we fee does dynamic still to on a minuses. $XXX plus that. inflation have is but The pass-through plus intended an were

on a it prices the margin cost-plus the your up. So fall, goes though margin it the revenue depresses contract even increases revenue. lose When but you

typically a for pricing ebbs down. are lower as that flows plus dynamic on And it and moves the top is and So us. scenario line cost risk up

have our the control have is also will manage and And limits margin, as because to and cost we P&L be component, inflationary believe really us. the can that it typically like, with that that And dynamic components, cost we might sticky. in we we cases. a headwind so just profitability John mentioned, contract we then place don't in that cost-plus the accrues most stay the against pricing through we environment

P&L of that. to an in the to prior we And the pandemic P&L like happy mix format. be to we take move back inflationary to environment, plus So continue had that advantage that to we'd cost

Ronan Kennedy

Appreciate you. Thank it.

Operator

comes with Jefferies. Our last from question [indiscernible]

is line Your open.

Harold Antor

for This morning. Harlan on Good Stephanie is Moore.

size an just from you So quarter? provide business business wins, won the then could and then new provide this your you regionals an in in you competitors? some new us shape any business the win just where in the in understanding idea us them insight wins give that on represented or and on industries the And on of of the what it

Tom Ondrof

third And very continues growth where year year prior source said suffice give typically pandemic. the more growth be a you wins it year it's at but the geographically. And for on it factors it on winning to where us were we on the to net be -- we're of We'll from to John both from. versus pretty the winning where along do moving Yes. broad-based update solid significant continues all year end on of say to to those it where as contribution that as we the we're it's coming and

updates pleased to be continue the with to the growth So engine and we get year-end. when overall, further you give we business within

Harold Antor

revenue could operating my I the for Got and quarter contracts guidance on you for what having pricing of such in question you income on the year? in it. the achieve the last and for or locked with you. -- a the exceed the guess high And help lot Thank and confidence

John Zillmer

fourth as quarter We any into Got improvement continued very continues see that about very And good going exciting strong delivering we year. I fourth about and and feel resolved the for That unexpected it. we're for company. into going see very in Yes. of the year. the inflation continued quarter I really would just results. economic next good think don't the the consequences add discussed. We to quarter for time terms if is results inside and trajectory moderate improvement the an we see the feel we've

going a would has say outlook forward. improving and is opportunity inflation that I So the potential impact

John Zillmer

good quarter. to the We So about very We're I year. going about on fiscal excited third will what's very the thank good opportunity feel of ahead completed spin you end get the the the the summarize of organization. saying and the go feel by business. about inside much your call for We support basically at the

the solid very improving and made performance margin balance of significant performance profit sheet range activities progress growth. We've a around improving

pleased are. we So we're where with

we have We and committed for delivering a work to are shareholders. our of to lot do

very you much thank So everybody.

Operator

for participating. you conference. Thank This concludes today's

now may You disconnect.

Aramark (ARMK) 8 Aug 232023 Q3 Earnings call transcript