Aramark(ARMK) - 2025 Q3 - Quarterly Results

Executive Summary & Key Highlights This section provides an overview of Aramark's strong third-quarter fiscal 2025 performance and strategic achievements Third Quarter Fiscal 2025 Highlights Aramark reported strong Q3 FY2025 results with record revenue and profitability in Global FSS, driven by growth and high client retention Third Quarter Fiscal 2025 Financial Highlights (YoY Change) | Metric | Change (%) | | :-------------------- | :--------- | | Revenue | +6% | | Organic Revenue | +5% | | Operating Income | +13% | | Adjusted Operating Income (AOI) | +19% | | GAAP EPS | +24% (to $0.27) | | Adjusted EPS | +29% (to $0.40) | - Achieved record revenue for any quarter in Global FSS history and record profitability for a third quarter in Global FSS history[5] - Client retention rate currently exceeds 97% in both the FSS United States and International segments[5] CEO Commentary CEO highlighted major client wins, record retention, supply chain optimization, and disciplined capital allocation - Awarded one of the largest new client wins in company history, specifically within Sports & Entertainment, and achieved record client retention levels now surpassing 97%[3][5] - Supply Chain optimization initiatives, including additional AI-driven technology, have driven significant incremental value for clients and the Company[4] - Continues to advance disciplined capital allocation strategies, benefiting from a strong and flexible balance sheet designed to maximize shareholder returns[4] Third Quarter Fiscal 2025 Financial Results This section details Aramark's consolidated financial performance for Q3 FY2025, including revenue, operating income, and cash flow Consolidated Revenue Performance Consolidated revenue reached $4.6 billion, a 6% year-over-year increase, driven by net new business and base business expansion Consolidated Revenue (Q3 '25 vs Q3 '24) | Segment | Q3 '25 Revenue | Q3 '24 Revenue | Change (%) | Organic Revenue Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | :------------------------- | | FSS United States | $3,247M | $3,144M | 3% | 3% | | FSS International | $1,379M | $1,232M | 12% | 10% | | Total Company | $4,626M | $4,376M | 6% | 5% | - Revenue growth was driven by net new business, base business, and a favorable currency translation effect of approximately $21 million[6] - This was the final quarter where prior year revenue included portfolio exits in Facilities, which are now behind the Company[6] Operating Income and Profitability Operating Income increased 13% to $183 million, with Adjusted Operating Income growing 19% to $230 million, driven by higher revenue and supply chain enhancements Operating Income & Adjusted Operating Income (Q3 '25 vs Q3 '24) | Metric | Q3 '25 | Q3 '24 | Change (%) | | :-------------------------------- | :------ | :------ | :--------- | | Operating Income | $183M | $162M | 13% | | Adjusted Operating Income (AOI) | $230M | $193M | 19% | | Operating Income Margin | 3.9% | 3.7% | +20 bps | | Adjusted Operating Income (AOI) Margin | 5.0% | 4.4% | +60 bps | - Profitability growth was due to Aramark's higher revenue levels, expanded supply chain capabilities, and disciplined above-unit cost management[8] FSS United States Segment Performance FSS United States revenue grew 3%, with profitability improving due to increased base business volume and AI-driven supply chain productivity - Revenue growth was led by Business & Industry (higher participation, new client wins, expanded micro-market/vending), Education (increased meal plan volume, calendar shift), and Sports, Leisure, & Corrections (new business wins, higher per cap spending)[9] - Profitability increased due to higher base business volume, disciplined above-unit cost management, and AI-driven supply chain productivity, which enhanced purchasing decisions[10] FSS International Segment Performance FSS International reported a 12% revenue increase (10% organic), with broad-based growth across most countries and improved supply chain economics - Revenue growth was broad-based across nearly all countries, primarily from ongoing base business growth and net new business performance, with the U.K., Chile, Canada, and Spain driving the increase[9] - Experienced higher base business volume and strengthened supply chain economics from revenue growth, which more than offset labor expenses from additional observed holidays and the prior year's Men's European Football Championships benefit[10][11] Corporate Expenses Corporate expenses decreased year-over-year, primarily due to lower share-based compensation expenses - Corporate expenses decreased from lower share-based compensation expense[11] Cash Flow and Capital Structure Net cash from operating activities was $77 million, with free cash flow at ($34) million, consistent with seasonal patterns, while the company managed its capital structure through debt repayment and share repurchases Third Quarter Cash Flow (in millions) | Metric | Q3 '25 | | :-------------------------------- | :------ | | Net cash provided by operating activities | $77 | | Free Cash Flow | ($34) | - Repaid approximately $62 million of Term Loan B due June 2030 and repurchased approximately $31 million of common stock in Q3 2025, with nearly 4 million shares repurchased for approximately $140 million since November 2024[13] - At quarter-end, Aramark had over $1.4 billion in cash availability[13] - Capital allocation commitment includes investing in growth, repaying debt (target ~3.0x leverage by end of fiscal 2025), paying quarterly dividends, and opportunistic share repurchases[14] Dividend Declaration Aramark's Board of Directors approved a quarterly dividend of 10.5 cents per share of common stock, payable on August 20, 2025 - Aramark's Board of Directors approved a quarterly dividend of 10.5 cents per share of common stock, payable on August 20, 2025, to stockholders of record on August 6, 2025[15] Business Outlook and Strategic Direction This section outlines Aramark's current business momentum, client performance, and financial projections for fiscal year 2025 Business Momentum and Client Performance Aramark is experiencing strong business momentum with high client retention and is on track to meet or exceed its net new business target for fiscal 2025 - Gaining strong business momentum from prominent new client wins, expanded base business volume, and client retention rates currently exceeding 97% across both FSS US and International[16] - On pace to achieve the high end of its 4% to 5% net new business target for fiscal 2025, with the ability to potentially surpass it[16] - Q4 revenue is expected to benefit from ongoing base business expansion and net new business across all sectors in FSS United States and every geography in FSS International[16] Fiscal Year 2025 Outlook Aramark projects strong growth in organic revenue, adjusted operating income, and adjusted EPS for fiscal year 2025, alongside a reduced leverage ratio Fiscal Year 2025 Outlook (Year-over-year Growth) | Metric | FY24 Reference Point | FY25 Outlook (YoY Growth) | | :-------------------------- | :------------------- | :------------------------ | | Organic Revenue | $17,401M | +7.5% to +9.5% | | Adjusted Operating Income | $882M | +15% to +18% | | Adjusted EPS | $1.55 | +23% to +28% | | Leverage Ratio | 3.4x | ~3.0x | - The fiscal 2025 outlook reflects management's current assumptions regarding numerous evolving factors and the expected timing of commencing operations from new business, including certain large clients[18][19] - Fiscal 2025 is a 53-week year, with an expected benefit of ~2% to Organic Revenue and Adjusted Operating Income[20] Corporate Information This section provides details on Aramark's upcoming conference call and an overview of the company's global operations and mission Conference Call Details Aramark scheduled a conference call for August 5, 2025, at 8:30 a.m. ET to discuss its earnings and outlook - A conference call is scheduled for 8:30 a.m. ET on August 5, 2025, to discuss earnings and outlook, accessible on www.aramark.com[21](index=21&type=chunk) About Aramark Aramark is a global provider of food and facilities management services, operating in 16 countries with a commitment to hospitality and stakeholder value - Aramark (NYSE: ARMK) provides food and facilities management services to leading educational institutions, Fortune 500 companies, sports teams, healthcare providers, and municipalities in 16 countries[22] - The company operates with a hospitality culture, striving to do great things for employees, partners, communities, and the planet[22] Non-GAAP Financial Measures and Reconciliations This section defines Aramark's non-GAAP financial measures and explains the adjustments made for reconciliation purposes Definitions of Non-GAAP Measures This section defines key non-GAAP financial measures used by Aramark for evaluating operating profitability and cash operating costs - Key non-GAAP measures defined include Adjusted Revenue (Organic), Adjusted Operating Income (Constant Currency), Adjusted Net Income (Constant Currency), Adjusted EPS (Constant Currency), Covenant Adjusted EBITDA, and Free Cash Flow[25][33] - These measures are used as supplemental indicators of operating profitability and cash operating costs, enabling better comparisons of historical results and evaluation of performance trends[34] - Non-GAAP metrics are not measurements of financial performance under GAAP and should not be considered in isolation or as substitutes for GAAP results[34] Explanatory Notes to Non-GAAP Adjustments This section details the specific adjustments made to reconcile GAAP to non-GAAP financial measures, including amortization, severance, and spin-off related charges - Adjustments include Amortization of Acquisition-Related Intangible Assets, Severance and Other Charges, Spin-off Related Charges, Gains, Losses and Settlements impacting comparability, Effect of Debt Repayments and Refinancings on Interest Expense, net, and Tax Impact of Adjustments to Adjusted Net Income[35][39] - The Effect of Currency Translation adjustment eliminates the impact of currency fluctuations by presenting periods on a constant currency basis[40] Forward-Looking Statements Disclaimer This section serves as a disclaimer, noting that the press release contains forward-looking statements subject to risks and uncertainties - The press release contains forward-looking statements reflecting current expectations, which are subject to risks and uncertainties that may cause actual results or outcomes to differ materially[42] - Readers are cautioned not to place undue reliance on forward-looking statements, and a comprehensive list of risk factors is available in the Company's SEC filings[43] Condensed Consolidated Financial Statements This section presents Aramark's unaudited condensed consolidated financial statements, including statements of income, balance sheets, and cash flows Condensed Consolidated Statements of Income This section presents the unaudited condensed consolidated statements of income for the three and nine months ended June 27, 2025, and June 28, 2024 Condensed Consolidated Statements of Income (Three Months Ended) | Metric | June 27, 2025 (in Thousands) | June 28, 2024 (in Thousands) | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Revenue | $4,626,451 | $4,376,076 | | Total costs and expenses | $4,443,864 | $4,214,397 | | Operating income | $182,587 | $161,679 | | Net income attributable to Aramark stockholders | $71,783 | $58,126 | | Diluted Earnings per share | $0.27 | $0.22 | Condensed Consolidated Statements of Income (Nine Months Ended) | Metric | June 27, 2025 (in Thousands) | June 28, 2024 (in Thousands) | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Revenue | $13,457,835 | $12,983,754 | | Total costs and expenses | $12,883,809 | $12,496,039 | | Operating income | $574,026 | $487,715 | | Net income attributable to Aramark stockholders | $239,256 | $140,111 | | Diluted Earnings per share | $0.90 | $0.53 | Condensed Consolidated Balance Sheets This section provides the unaudited condensed consolidated balance sheets as of June 27, 2025, and September 27, 2024, outlining assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in Thousands) | Item | June 27, 2025 | September 27, 2024 | | :-------------------------------- | :------------ | :----------------- | | Assets: | | | | Total current assets | $3,528,537 | $3,406,562 | | Property and Equipment, net | $1,702,075 | $1,573,193 | | Goodwill | $4,852,720 | $4,677,201 | | Total Assets | $13,283,678 | $12,674,371 | | Liabilities and Stockholders' Equity: | | | | Total current liabilities | $2,737,997 | $4,214,210 | | Long-Term Borrowings | $6,253,834 | $4,307,171 | | Total Stockholders' Equity | $3,084,131 | $3,038,974 | | Total Liabilities and Stockholders' Equity | $13,283,678 | $12,674,371 | Condensed Consolidated Statements of Cash Flows This section presents the unaudited condensed consolidated statements of cash flows for the nine months ended June 27, 2025, and June 28, 2024 Condensed Consolidated Statements of Cash Flows (Nine Months Ended, in Thousands) | Activity | June 27, 2025 | June 28, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net cash used in operating activities | ($254,527) | ($295,101) | | Net cash used in investing activities | ($614,178) | ($379,404) | | Net cash provided by (used in) financing activities | $679,377 | ($800,564) | | Decrease in cash and cash equivalents and restricted cash | ($174,909) | ($1,476,838) | | Cash and cash equivalents and restricted cash, end of period | $557,704 | $495,529 | Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP to non-GAAP financial measures, including adjusted operating income, net income, EPS, and free cash flow Reconciliation of Adjusted Consolidated Operating Income Margin This section presents detailed tables reconciling GAAP Operating Income and Revenue to Adjusted Operating Income and Adjusted Revenue (Organic) for the three and nine months ended June 27, 2025, and June 28, 2024 Adjusted Consolidated Operating Income (Q3 '25, in Thousands) | Segment | Operating Income (as reported) | Adjustments | Adjusted Operating Income | | :---------------- | :----------------------------- | :---------- | :------------------------ | | FSS United States | $160,030 | $29,265 | $189,295 | | FSS International | $49,059 | $18,373 | $67,432 | | Corporate | ($26,502) | $0 | ($26,502) | | Total Company | $182,587 | $57,638 | $230,225 | Adjusted Consolidated Operating Income (YTD '25, in Thousands) | Segment | Operating Income (as reported) | Adjustments | Adjusted Operating Income | | :---------------- | :----------------------------- | :---------- | :------------------------ | | FSS United States | $505,434 | $88,446 | $593,880 | | FSS International | $154,297 | $30,140 | $184,437 | | Corporate | ($85,705) | $0 | ($85,705) | | Total Company | $574,026 | $118,586 | $692,612 | Reconciliation of Adjusted Net Income & Adjusted EPS This section provides tables reconciling Net Income Attributable to Aramark Stockholders (GAAP) to Adjusted Net Income and Adjusted EPS for the three and nine months ended June 27, 2025, and June 28, 2024 Adjusted Net Income & EPS (Three Months Ended, in Thousands except per share) | Metric | June 27, 2025 | June 28, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net Income Attributable to Aramark Stockholders | $71,783 | $58,126 | | Total Adjustments (net of tax) | $34,762 | $24,775 | | Adjusted Net Income | $106,545 | $82,901 | | Diluted Weighted Average Shares Outstanding | 265,347 | 266,577 | | Adjusted Earnings Per Share | $0.40 | $0.31 | | Adjusted Earnings Per Share Growth % | 29.1% | - | Adjusted Net Income & EPS (Nine Months Ended, in Thousands except per share) | Metric | June 27, 2025 | June 28, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net Income Attributable to Aramark Stockholders | $239,256 | $140,111 | | Total Adjustments (net of tax) | $96,017 | $128,191 | | Adjusted Net Income | $335,273 | $268,302 | | Diluted Weighted Average Shares Outstanding | 267,180 | 265,387 | | Adjusted Earnings Per Share | $1.25 | $1.01 | | Adjusted Earnings Per Share Growth % | 24.1% | - | Reconciliation of Net Debt to Covenant Adjusted EBITDA This section presents a reconciliation of Net Income Attributable to Aramark Stockholders to Covenant Adjusted EBITDA and calculates the Net Debt to Covenant Adjusted EBITDA ratio for the twelve months ended June 27, 2025, and June 28, 2024 Net Debt to Covenant Adjusted EBITDA (Twelve Months Ended, in Thousands) | Metric | June 27, 2025 | June 28, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net Income from Continuing Operations Attributable to Aramark Stockholders | $361,667 | $248,434 | | Covenant Adjusted EBITDA | $1,452,066 | $1,307,063 | | Total Long-Term Borrowings | $6,294,947 | $5,977,606 | | Less: Cash and cash equivalents and short-term marketable securities | $545,213 | $550,361 | | Net Debt | $5,749,734 | $5,427,245 | | Net Debt/Covenant Adjusted EBITDA | 4.0 | 4.2 | Reconciliation of Free Cash Flow This section provides a reconciliation of Net cash (used in) provided by operating activities to Free Cash Flow for the three, six, and nine months ended June 27, 2025, and June 28, 2024 Free Cash Flow Reconciliation (in Thousands) | Metric | 9 Months Ended June 27, 2025 | 6 Months Ended March 28, 2025 | 3 Months Ended June 27, 2025 | | :------------------------------------------ | :--------------------------- | :---------------------------- | :--------------------------- | | Net cash (used in) provided by operating activities | ($254,527) | ($331,204) | $76,677 | | Net purchases of property and equipment and other | ($342,714) | ($232,486) | ($110,228) | | Free Cash Flow | ($597,241) | ($563,690) | ($33,551) | | Metric | 9 Months Ended June 28, 2024 | 6 Months Ended March 29, 2024 | 3 Months Ended June 28, 2024 | | :------------------------------------------ | :--------------------------- | :---------------------------- | :--------------------------- | | Net cash (used in) provided by operating activities | ($295,101) | ($435,797) | $140,696 | | Net purchases of property and equipment and other | ($270,912) | ($192,243) | ($78,669) | | Free Cash Flow | ($566,013) | ($628,040) | $62,027 |