Aramark (NYSE:ARMK) Q2 2022 Earnings Conference Call May 10, 2022 8:30 AM ET Company Participants John Zillmer - CEO Thomas Ondrof - EVP and CFO Felise Kissell - VP of IR and Corporate Affairs Conference Call Participants Kevin McVeigh - Credit Suisse Stephen Grambling - Goldman Sachs Ian Zaffino - Oppenheimer Andy Wittmann - Baird Heather Balsky - Bank of America Andrew Steinerman - JPMorgan Toni Kaplan - Morgan Stanley Shlomo Rosenbaum - Stifel Jaafar Mestari - BNP Paribas Faiza Alwy - Deutsche Bank Harry ...

Financial Performance - Revenue for the three months ended December 31, 2021, was $3,948.26 million, compared to $2,743.79 million for the same period in 2020, representing an increase of 44.0%[8] - Operating income for the three months ended December 31, 2021, was $140.25 million, a significant recovery from an operating loss of $20.47 million in the same period of the previous year[8] - Net income attributable to Aramark stockholders for the three months ended December 31, 2021, was $42.61 million, compared to a net loss of $81.24 million in the same period in 2020[8] - Basic earnings per share for the three months ended December 31, 2021, was $0.17, recovering from a loss per share of $0.32 in the same period of the previous year[8] - Comprehensive income attributable to Aramark stockholders for the three months ended December 31, 2021, was $60.36 million, compared to a comprehensive loss of $(47.14) million in the same period in 2020[10] - The company reported a net income of $42,707 thousand for the three months ended December 31, 2021, compared to a net loss of $(81,380) thousand for the same period in the previous year[23] - The company’s Covenant Adjusted EBITDA for the twelve-month period ended December 31, 2021, was $1,042.8 million, compared to $1,453.8 million for the Amendment Adjusted Period[99] Cash Flow and Investments - Cash flows used in operating activities for the three months ended December 31, 2021, were $(503.39) million, compared to $(115.17) million for the same period in 2020[13] - Net cash used in investing activities for the three months ended December 31, 2021, was $(177.65) million, compared to $(90.78) million in the same period of the previous year[13] - Net cash provided by financing activities for the three months ended December 31, 2021, was $564.96 million, a significant increase compared to $(1,148.16) million in the same period in 2020[13] - The company paid cash dividends of approximately $28.2 million during the three months ended December 31, 2021, compared to $27.9 million in the same period in 2021[52] - Cash flows used in investing activities increased due to acquisitions of certain businesses and equity method investments during the three-month period of fiscal 2022[96] Segment Performance - The FSS United States segment generated $2,425.4 million in revenue for the three months ended December 31, 2021, compared to $1,445.8 million for the same period in 2021, indicating a year-over-year growth of approximately 67.8%[48] - The FSS International segment reported revenue of $873.2 million, an increase from $694.5 million year-over-year, reflecting growth in international operations[63] - The Uniform segment achieved revenue of $649.7 million, up from $603.5 million, indicating a positive trend in this business area[63] - Operating income for the FSS United States segment was $99.0 million, compared to a loss of $14.8 million in the prior year, showcasing improved profitability[64] Debt and Equity - The total stockholders' equity as of December 31, 2021, was $2,784.46 million, an increase from $2,722.87 million at the beginning of the period[15] - Long-term borrowings net totaled $7,981.6 million as of December 31, 2021, an increase from $7,393.4 million on October 1, 2021[35] - The fair value of the company's debt was $8,194.2 million as of December 31, 2021, compared to a carrying value of $8,034.4 million[68] - The company has no significant debt maturities due until 2025, providing flexibility to manage the impact of COVID-19[92] Operational Challenges and Adjustments - The company continues to adapt its business model in response to COVID-19, focusing on flexible operations and diversifying service offerings[73] - The impact of COVID-19 has led to a deterioration in revenue and operating income, but improvements were noted in the first quarter of fiscal 2022 as restrictions eased[73] - The company expects ongoing challenges related to supply chain disruptions and inflation, which may affect future performance[74] Tax and Regulatory Matters - The company expects to utilize deferred tax assets based on future taxable income, resulting in a tax benefit of approximately $8.5 million during the three months ended December 31, 2021[52] - The effective tax rate for the three-month period was recorded at 9.6%, compared to 32.7% in the prior year[84] - The company incurred $46.9 million in governmental labor-related tax credits due to the COVID-19 pandemic, net of labor charges, for the Amendment Adjusted Period ended December 31, 2021[102] Miscellaneous - The company recorded approximately $12.2 million of labor-related tax credits in the FSS International segment during the three months ended December 31, 2021[30] - The company recorded a reserve of approximately $19.3 million related to a dispute with a client, indicating potential liability exposure[61] - The company granted 1.1 million Time-Based Options (TBOs) with a weighted average fair value of $13.26 per share during the three months ended December 31, 2021[56]

Financial Data and Key Metrics Changes - Organic revenue increased by 41% year-over-year, reaching 92% of pre-COVID fiscal 2019 levels, compared to 65% at the same time last year [9][19] - Adjusted operating income improved by $176 million year-over-year, resulting in a constant currency adjusted operating income (AOI) margin of 4.3% [22] - Adjusted EPS was $0.22 compared to an adjusted loss per share of $0.31 last year [22] Business Line Data and Key Metrics Changes - U.S. Food & Facilities organic revenue increased by 61% year-over-year, driven by strong performance in education and sports sectors [9][10] - FSS International organic revenue grew by 28% year-over-year, with notable improvements in Europe and Canada [13] - Uniforms organic revenue increased by 7% year-over-year, reaching 99% of pre-COVID levels [14] Market Data and Key Metrics Changes - The company reported strong retention rates and newly awarded contracts, including a significant win with Merlin Entertainments [6][30] - The sports and leisure sectors experienced double-digit per capita spending growth, aided by technology and concept innovation [11] - International markets, particularly China, Chile, and Spain, outperformed pre-COVID levels with double-digit revenue growth [13] Company Strategy and Development Direction - The company aims to achieve long-term performance goals through 2025, focusing on profitable growth and expanding its service offerings [5][19] - Strategic partnerships were formed with Patient Engagement Advisors and Starr Restaurant Organization to enhance service capabilities [7][8] - The company is committed to sustainability and diversity, equity, and inclusion initiatives, as highlighted in their recent impact report [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of COVID-impacted volumes throughout the year, anticipating an incremental margin of 15% to 20% on returning volumes [21] - The company maintains its fiscal 2022 outlook of organic revenue growth between 23% and 27% and expects to achieve a margin of 5% to 5.5% [25] - Management noted that inflation and wage pressures are being addressed through various initiatives, including fixed contract pricing and menu reengineering [15][21] Other Important Information - The company announced the election of two new members to its Board of Directors, enhancing its strategic direction [17] - The company has a strong cash position with over $1.4 billion in cash availability and no debt maturities until 2025 [23] Q&A Session Summary Question: Can you provide more details on the new business, particularly the Merlin contract? - The Merlin contract is the largest account ever sold by the company, but specific revenue figures cannot be disclosed. It represents a significant growth opportunity in the amusement park sector [30] Question: What is the AOI drag from the new business? - The AOI drag varies based on the complexity and size of the contracts won, with larger contracts typically having a larger drag [33] Question: How has the Omicron variant impacted business trends? - There was a slight impact at the end of the quarter, but it was negligible and did not significantly change the outlook [36] Question: How do you expect the three segments to contribute to organic revenue growth? - International is expected to lead in contributions, followed by the U.S. and then the AUS business, which is recovering at a slower pace [41] Question: What is the visibility on the Merlin contract? - The company had a clear understanding of the opportunity but did not disclose it during the Investor Day as the contract was not yet signed [65] Question: Have there been changes in the competitive landscape due to COVID? - The competitive environment remains balanced, with no significant market share shifts observed among major players [71]

Financial Performance - In fiscal 2021, Aramark generated $12.1 billion in revenue, with an operating income of $191.4 million and a net loss of $90.8 million attributable to stockholders[10]. - In fiscal 2021, the Uniform segment generated $2,420.5 million in revenue, accounting for 20% of total revenue[24]. - Approximately two-thirds of Food and Support Services revenue was derived from profit and loss contracts in fiscal 2021[20]. - In fiscal 2021, approximately one-third of Food and Support Services revenue was derived from client interest contracts[20]. - Approximately 24% of the company's revenue was generated outside of the United States during fiscal 2021[48]. - Approximately 15% of the company's revenue in fiscal 2021 was derived from government contracts, making it vulnerable to changes in government spending policies[59]. Business Segments - The Food and Support Services United States segment accounted for $6,809.3 million, or 56% of total revenue, while the Food and Support Services International segment contributed $2,866.2 million, or 24% of total revenue[14]. - The company serves over 1,460 educational institutions, providing a range of food-related managed service solutions[15]. - The company is positioned as a top 3 provider in North America for food and facilities services and holds the 2 position in uniform services[8]. - The company has a long-standing relationship with Sysco, which distributed approximately 50% of its food and non-food products in the US and Canada in fiscal 2021[17]. - The company operates a network of over 350 laundry plants and approximately 3,400 pick-up and delivery routes for its uniform rental business[26]. Workforce and Employment - The company employs approximately 248,300 individuals and serves millions of consumers across various sectors including education, healthcare, and sports[8]. - The company had approximately 248,300 employees as of October 1, 2021, an increase from approximately 247,900 employees in fiscal 2020[31]. - The company hired 59,000 new employees in fiscal 2021, a 25.5% increase from 47,000 in fiscal 2020, despite a 15% decrease in applicant flow[33]. - Approximately 42,000 employees in the United States and Canada were covered by about 650 collective bargaining agreements as of October 1, 2021[32]. - Approximately 42,000 employees in the United States and Canada are represented by unions, which may increase costs and affect operational flexibility[53]. COVID-19 Impact - The ongoing impact of COVID-19 has led to a deterioration in revenues and operating income, with the company focusing on cost discipline and liquidity management[13]. - The ongoing COVID-19 pandemic has materially impacted the company's operations, with expectations of continued adverse effects on business and financial condition[39]. - The company continues to adapt its business model in response to COVID-19, focusing on flexible operations and diversifying its service offerings[13]. - The company anticipates ongoing challenges related to supply chain disruptions and inflation impacting food supply and labor costs[13]. - The company has renegotiated client contracts during the COVID-19 pandemic to modify financial terms and increase profitability[46]. Competition and Market Challenges - The company faces significant competition from both large national firms and smaller local competitors in the Food and Support Services and Uniform segments[29]. - Economic downturns have historically reduced demand for the company's services, impacting revenue and profitability[41]. - The company may face increased competition from local and regional service providers, which could pressure pricing and profitability[45]. - The company has faced challenges in retaining clients and renewing contracts on favorable terms, which could adversely affect business operations[43]. Environmental and Safety Commitments - The company aims to reduce greenhouse gas emissions by 15% from its 2019 baseline by the end of 2025 in the United States[30]. - The company is committed to a "zero harm" culture, emphasizing employee safety through its global safety management system[33]. - Food safety is a top priority for the company, and any issues could adversely impact its reputation and revenue[62]. - The company is subject to numerous food safety regulations, and non-compliance could result in significant liabilities and reputational harm[57]. - The company may incur significant liabilities related to hazardous materials and environmental compliance, which could affect its financial condition[62]. Financial Risks and Liabilities - As of October 1, 2021, the company's outstanding indebtedness was $7,452.3 million, with additional availability of $1,091.6 million under revolving credit facilities and $400.0 million under the receivables facility[65]. - The company's leverage may expose it to increased interest rates, as certain borrowings are at variable rates, making it more difficult to make payments on its indebtedness[66]. - The company’s ability to raise additional capital may be limited due to its high leverage, affecting its operational flexibility[66]. - The company has pledged a significant portion of its assets as collateral under the senior secured credit agreement, which may affect its ability to repay borrowings if financial performance deteriorates[68]. - The company is exposed to interest rate changes and manages this risk through the use of variable-rate and fixed-rate debt, as well as interest rate swaps[144]. Governance and Diversity - As of October 1, 2021, 36% of the board of directors and 50% of the CEO's direct reports were female, with a focus on increasing diversity in leadership roles[33]. - The company has established internal controls to maintain compliance with various laws and regulations, including those related to health and safety, labor, and environmental protection[34]. - The company has 11 active employee resource groups supporting diverse communities, with 78 local hubs across the United States[33]. Strategic Initiatives - The company is evaluating acquisitions and joint ventures to enhance competitiveness, but faces risks related to integration and financing of these acquisitions[52]. - The Frontline Education Program provides eligible hourly associates with full tuition coverage for college degrees at leading universities in the United States[33]. - The company launched the Employee Stock Purchase Plan (ESPP) in 2021, allowing eligible employees to purchase discounted stock through payroll deductions[33].

Aramark (NYSE:ARMK) Q4 2021 Earnings Conference Call November 16, 2021 8:30 AM ET Company Participants Felise Kissell - Vice President of Investor Relations & Corporate Affairs John Zillmer - Chief Executive Officer Tom Ondrof - Chief Financial Officer Conference Call Participants Kevin McVeigh - Credit Suisse Neil Tyler - Redburn Toni Kaplan - Morgan Stanley Ian Zaffino - Oppenheimer Andrew Steinerman - JPMorgan Ashish Sabadra - RBC Capital Markets James Ainley - Citigroup Steven Grambling - Goldman Sachs ...

Financial Performance - Revenue for the three months ended July 2, 2021, was $2,981,220, compared to $2,152,253 for the same period in 2020, representing a 38.4% increase[8] - Operating income for the three months ended July 2, 2021, was $74,246, a significant improvement from an operating loss of $327,597 in the same period of the previous year[8] - Net income attributable to Aramark stockholders for the three months ended July 2, 2021, was $32,557, compared to a net loss of $256,440 for the same period in 2020[8] - For the nine months ended July 2, 2021, revenue was $8,544,701, down from $10,137,409 in the same period in 2020, reflecting a decrease of 15.7%[9] - The company reported a net loss of $126,262 attributable to Aramark stockholders for the nine months ended July 2, 2021, compared to a net loss of $312,939 for the same period in 2020, indicating a 59.7% improvement[9] - Comprehensive income attributable to Aramark stockholders for the three months ended July 2, 2021, was $67,423, compared to a comprehensive loss of $260,354 in the same period of 2020[10] - Net income for the three months ended July 2, 2021, was $32,562 thousand, compared to a net loss of $(256,308) thousand for the same period in 2020[29] - Comprehensive income for the three months ended July 2, 2021, was $67,428 thousand, while comprehensive loss for the same period in 2020 was $(260,222) thousand[29] Cash Flow and Investments - Net cash provided by operating activities was $233.8 million, compared to a net cash used of $74.8 million in the prior year, indicating a positive turnaround[14] - Cash and cash equivalents at the end of the period were $483.4 million, down from $2.4 billion at the end of the previous year, reflecting a decrease of 80%[14] - Total cash used in investing activities was $503.2 million, an increase from $251.3 million in the prior year, highlighting increased investment activity[14] - Payments of long-term borrowings were $2.2 billion, significantly higher than $970.6 million in the prior year, reflecting a strategy to reduce debt[14] - The company made capital contributions from the issuance of common stock totaling $10.5 million during the period, reflecting ongoing capital raising efforts[18] - Cash provided by operating activities was $233.8 million during the nine month period of fiscal 2021, a $308.6 million increase compared to the prior year[135] - The net cash flows used in investing activities were higher during the nine month period of fiscal 2021 due to the acquisition of Next Level Hospitality for $226.2 million[137] Debt and Financing - Proceeds from long-term borrowings amounted to $898.4 million, a decrease from $3.2 billion in the previous year, indicating a reduction in reliance on debt financing[14] - The Company had total borrowings of $7.6 billion, with $103.6 million under the revolving credit facility and $483.4 million in cash and cash equivalents[54][56] - The Company repaid $780.0 million of outstanding borrowings under the U.S. revolving credit facility during the nine month period of fiscal 2021[132] - The Company redeemed $500.0 million of 4.750% Senior Notes due 2026, incurring $16.0 million in charges related to the redemption[60] - The Company entered into Amendment No. 11 to the Credit Agreement, extending the maturity date for various loans and increasing commitments under the 2018 Tranche Revolving Facility by approximately $200.0 million[61] Segment Performance - The FSS United States segment generated $1,649.6 million in revenue for the three months ended July 2, 2021, compared to $1,067.6 million in the same period of 2020, showing a 54.3% increase[79] - The Company’s revenue from the Education segment was $434.2 million for the three months ended July 2, 2021, compared to $207.1 million for the same period in 2020, reflecting a significant recovery[79] - The FSS International segment generated revenue of $728.5 million for the three months ended July 2, 2021, compared to $517.1 million in the same period of 2020, marking an increase of approximately 40.7%[96] - The FSS United States segment reported revenue of $1,649.6 million for the three months ended July 2, 2021, up from $1,067.6 million in the prior year, representing a growth of about 54.4%[96] - The FSS United States segment reported a revenue decline of 21.7% for the nine months ended July 2, 2021, totaling $4,646.4 million compared to $5,937.7 million in the previous year[117] Operational Efficiency and Strategy - The company has indicated a focus on improving operational efficiency and expanding market presence as part of its future growth strategy[8] - The company continues to implement cost mitigation plans while supporting clients, including headcount reductions recognized primarily in the third and fourth quarters of fiscal 2020[110] - The healthcare sector has shown recovery with new client wins in China, particularly in healthcare services, as restrictions ease globally[110] Tax and Regulatory Matters - The Company recorded a net benefit to the Provision for Income Taxes of approximately $3.8 million and $38.1 million during the three and nine month periods ended July 2, 2021, respectively, due to NOLs expected to be carried back to Pre-TCJA tax years at a 35.0% federal income tax rate[84] - The Company had an income tax receivable balance of approximately $3.0 million as of July 2, 2021, reflecting expected remaining proceeds to be refunded for NOLs generated in fiscal 2020[84] Acquisitions - The company completed the acquisition of Next Level Hospitality on June 4, 2021, enhancing its services in the senior living industry[40] - The cash consideration paid for the Next Level acquisition was $226.2 million, with an additional contingent consideration of $78.4 million based on future adjusted EBITDA performance[41] - The preliminary purchase price allocation for the Next Level acquisition includes total assets of $325.4 million and total liabilities of $99.3 million[43] - Revenue and net income from Next Level were not material for the three and nine months ended July 2, 2021, indicating limited immediate impact on overall financial performance[46] Shareholder Returns - The Company paid cash dividends of approximately $83.9 million and $83.1 million to its stockholders during the nine months ended July 2, 2021 and June 26, 2020, respectively[85] - The Company declared a $0.11 dividend per share of common stock on August 9, 2021, payable on September 8, 2021[85] - The Company repurchased 0.3 million shares of its common stock for $6.5 million during the second quarter of fiscal 2020 under the fiscal 2019 share repurchase program[86] Miscellaneous - The company operates in three reportable segments: FSS United States, FSS International, and Uniform[24] - The company has a global footprint in 18 countries, with the core market being the United States[24] - The company adopted new accounting standards related to income taxes and credit losses, which did not have a material impact on the financial statements[25][26] - The company is currently evaluating the impact of new accounting standards related to LIBOR discontinuation and equity securities[26]

Aramark (NYSE:ARMK) Q3 2021 Earnings Conference Call August 10, 2021 8:30 AM ET Company Participants Felise Kissell - Vice President, Investor Relations and Corporate Affairs John Zillmer - Chief Executive Officer Tom Ondrof - Chief Financial Officer Conference Call Participants Jaafar Mestari - Exane BNP Paribas Gary Bisbee - BofA Securities, Inc. Shlomo Rosenbaum - Stifel Ian Zaffino - Oppenheimer & Co. Jeffrey Goldstein - Morgan Stanley Andrew Steinerman - J.P. Morgan Andrew Wittmann - Robert W. Baird & ...

Q3 Summary - Increased business activity led to client reopenings[5] - Sequential quarterly improvement across all business segments[5] - Higher profitability resulted from rebounding sales and cost management[5] - Aramark repaid $500 million in debt and extended maturities on $2.6 billion of borrowings[5] - Increased revolver capacity by over $200 million[5] - Cash availability of approximately $1.9 billion at quarter-end[5, 9] Organic Revenue Trends - Q3 organic revenue reached 73% of pre-COVID levels[6] - FSS United States segment was led by Leisure and Sports & Entertainment businesses[6] - FSS International balanced strong healthcare performance in China and mining in Chile[6] - Uniform & Career Apparel adjacency services delivered double-digit growth[6, 24] Fiscal 2021 Outlook - Continued organic revenue improvement, reaching 80% to 85% of 2019 levels[28] - Adjusted Operating Income (AOI) margin is expected to be in the range of 4.5% to 5.0%[28] - Free Cash Flow outlook raised to generating $150 million to $250 million for fiscal 2021[28]