Q1 2022 Aramark Earnings Call

Okay.

Speaker 1: Good morning and welcome to Aramark's first quarter 22 earnings results conference call. My name is Kevin and I'll be your operator for today's call. At this time I'd like to inform you that this conference is being recorded for rebroadcast and that all participant lines are in a listen-only mode. We will open the conference call for questions.

Good morning, and welcome to <unk> first quarter 'twenty two earnings results Conference call. My name is Kevin and I'll be your operator for today's call at this time I'd like to inform you that this conference is being recorded for rebroadcast and that all participant lines are in a listen only mode. We will open the conference call for questions at the conclusion of the Companys remarks, I will now turn the call over to Felipe to sell Vice President Investor Relations Corporate Affairs.

Speaker 1: I will now turn the call over to Felipe Cassell, Vice President Investor Relations, Corporate Affairs. Please

Please proceed.

Speaker 2: Thank you and welcome to Aramark's first quarter fiscal 2022 earnings conference call and webcast. I hope all of you are doing well. This morning we will be hearing from our chief executive officer.

Thank you and welcome to your remarks first quarter fiscal 2022 earnings conference call and webcast.

All of you are doing well.

Morning, we will be hearing from our Chief Executive Officer, John Zillmer as well.

<unk> <unk>, our Chief Financial Officer, Tom contrast.

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

Comments that are forward looking and actual results may differ materially from those expressed or implied as a result of various risks uncertainties and important factors.

Speaker 2: including those discussed in the risk factors, DNA and other sections of our annual report.

<unk> those discussed.

Factors MD&A and other sections of our annual report on Form 10-K , and other SEC filings.

Speaker 2: Additionally, we will be discussing certain non-GAAP financial...

Additionally, we will be discussing certain non-GAAP financial measures.

Speaker 2: A reconciliation of these items to US GAAP can be found in this morning's press release as well as on our website.

A reconciliation of these items to U S. GAAP can be found in this morning's press release as well as on our website.

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

Speaker 3: Thanks, please, and it's good to be with all of you again. In December , we had the opportunity to come together in person at our analyst day to provide an overview of the state of our business, highlight our value creating strategies, and introduce our long-term performance goals through 2025, as well as the actions we're taking to achieve them. As we review our first quarter results this morning, we're exceptionally pleased to see the significant progress that we've made in both our performance and ability to achieve our financial target.

Thanks, Felicia and it's good to be with all of you again.

December we had the opportunity to come together in person at our analyst day to provide an overview of the state of our business and highlight our value, creating strategies and introduce our long term performance goals through 2025.

As well as the actions, we're taking to achieve them.

As we review our first quarter results. This morning, we're exceptionally pleased to see the significant progress that we've made in both our performance and ability to achieve our financial targets.

Speaker 3: Fiscal 2022 has already begun with great enthusiasm across the organization that's building on the momentum created last year which included record net new business.

Fiscal 2022 has already begun with great enthusiasm across the organization. That's building on the momentum created last year, which included record net new business.

Speaker 3: Most notably, we're off to an impressive start in net new business driven by strong retention rates and newly awarded contracts. Just last week we announced the largest client win in AeroMark's history with Merlin Entertainment, a global leader in location-based family entertainment, and one of the world's largest attraction operators.

Most notably we're off to an impressive start and net new business driven by strong retention rates and newly awarded contracts just last week, we announced the largest client win in <unk> history with Merlin entertainments, a global leader in location based family Entertainment.

One of the world's largest attraction operators.

Speaker 3: We will be providing services from our line that span seven locations in the UK and US. This is a differentiated self-op conversion that represents a unique growth opportunity for Aremark outside our historical portfolio to serve a new dynamic type of client. And we believe our experience, expertise, and scale, positions the partnership for strong success.

We will be providing services from airline that spend seven locations in the U K and U S. This is a differentiated self op conversion that represents a unique growth opportunity for aramark outside of our historical portfolio to serve a new dynamic type of client and we believe our experience expertise and scale.

<unk> is the partnership for strong success.

Speaker 3: We've already begun to work closely with their team and will begin operations next month in the UK.

We've already begun to work closely with our team and we will begin operations next month in the U K.

Speaker 3: Additional new business wins were broad-based, with particular strength in facilities, as well as launching Wal-Mart in Chile within our international segment. Our sales progress is off to a strong start to the year, and our pipeline continues to expand.

Additional new business wins were broad based with particular strength in facilities as well as launching Walmart in Chile within our international segment.

Our sales progress is off to a strong start to the year and our pipeline continues to expand.

Speaker 3: In the quarter, we also embarked on two strategic partnerships with innovative businesses that align with our mission and service offering.

In the quarter, we also embarked on two strategic partnerships with innovative businesses that align with our mission and service offerings.

Speaker 3: The first is with Patient Engagement Advisors, or PEA, which adds a technology and service platform to our healthcare portfolio that assists our clients by providing continual care, both pre and post discharge for patients.

As with patient engagement advisors, or PPA, which adds a technology and service platform to our health care portfolio that assist our clients by providing continual care, both pre and post discharge for patients extending our services beyond the four walls of the hospital. This added capability enables us to better serve and evolve.

Speaker 3: extending our services beyond the four walls of the hospital. This added capability enables us to better serve an evolving healthcare industry by working in close partnership with our clients to customize care, remove non-core tasks, connect with the community, and improve the healthcare system's financial viability and network integrity.

<unk> healthcare industry by working in close partnership with our clients to customize care remove noncore tasks connect with the community and improve the health care systems financial viability and network integrity.

Speaker 3: The second, Star Restaurant organization, based in our hometown of Philadelphia, is one of the largest multi-concept restaurant groups in the United States. Our exclusive agreement is designed to provide unique hospitality experiences for clients, while enabling new growth opportunities by implementing Star's creative concepts and brands across our business.

Star restaurant organization based in our hometown of Philadelphia is one of the largest multi concept restaurant groups in the United States. Our exclusive agreement is designed to provide unique hospitality experiences for clients, while enabling new growth opportunities by implementing starz creative concepts and brands across our business.

Speaker 3: Turning now to Aramark's performance in the first quarter, organic revenue increased 41% year over year and reflected sequential quarterly improvement that reached 92% of pre-COVID fiscal 19 levels.

Turning now to <unk> performance in the first quarter organic revenue increased 41% year over year and reflected sequential quarterly improvement that reached 92% of pre COVID-19 fiscal 19 levels.

Speaker 3: the quarter reflected on going recovery in all segments, with our teams across the globe continuing to manage through various stages of COVID, especially the Omicron variant, and our ability to adapt to dynamic situation.

The quarter reflected ongoing recovery in all segments with our teams across the globe continuing to manage through various stages of COVID-19 , especially the only the omicron variant and our ability to adapt to a dynamic situations.

Speaker 3: Organic revenue in US food and facilities increased 61% year over year. Key drivers across each sector included education kicking off the academic year with nearly all clients holding in-person learning while managing through some COVID-related delays in specific geography.

Organic revenue in U S food and facilities increased 61% year over year.

Key drivers across each sector included education kicking off that kind of a gear with nearly all clients holding in person learning, while managing through some COVID-19 related delays in specific geographies.

Speaker 3: In higher ed, students largely resided on campus with meal plans intact.

And higher Ed students largely resided on campus with meal plans intact building on our relationship with Purdue University, We opened the Purdue Memorial student Union that serves thousands of visitors daily.

Speaker 3: Building on a relationship with Purdue University, we opened the Purdue Memorial Student Union that serves thousands of visitors daily.

Speaker 3: We played an integral role in redesigning the facility then included creating a culinary concept in collaboration with alumnus and former NFL quarterback Drew Grease. Already becoming a marquee destination on campus.

Played an integral role in redesigning the facility that included creating a culinary concept in collaboration with alumnus and former NFL quarterback drew Brees already becoming a mark key destination on campus.

Speaker 3: In K-12, we continue to benefit from the universal government sponsored program.

In K through 12, we continued to benefit from the Universal government sponsored programs education.

Speaker 3: Education is currently gearing up for the upcoming new business selling season that typically begins in the spring and we remain confident in the next academic cycle. Sports leisure and corrections.

Education is currently gearing up for the upcoming new business selling season that typically begins in the spring and we remain confident in the next academic cycle.

Sports leisure and corrections demonstrated improved performance.

Speaker 3: and entertainment experience double digit per capita spending growth, enabled by technology and concept innovation.

<unk> Entertainment experienced double digit per capita spending growth enabled by technology and concept innovation climb.

Speaker 3: Client participation in the MLB playoffs early in the quarter, as well as strong levels of fan attendance throughout the NFL's regular season contributed to year-over-year growth.

Client participation in the MLB playoffs early in the quarter as well as strong levels of fan attendance throughout the NFL regular season contributed to year over year growth. We also offer our congratulations to our clients the Cincinnati Bengals on their AFC Championship victory and wish them luck in the Super Bowl on Sunday.

Speaker 3: We also offer our congratulations to our client, the Cincinnati Bengals, on their AFC Championship victory and wish them luck in the Super Bowl on Sunday.

Speaker 3: Leager maintains steady performance in the quarter with a focus on a strong upcoming season. We're excited to showcase re-opening's new renovations and outdoor programs that enable vacationers to explore unique natural landscapes, particularly within our national parks portfolio. Corrections where we continue to expand our efforts to reduce recidivism once again performed above pre-COVID levels.

Leisure maintained steady performance in the quarter with a focus on a strong upcoming season, we're excited to showcase reopening new renovations and outdoor programs that enable vacationers to explore unique natural landscapes, particularly within our national parks portfolio.

Corrections, where we continue to expand our efforts to reduce recidivism once again performed above pre COVID-19 levels.

Speaker 3: B&I continued to experience greater in-person activity while still measured. Clients have implemented increased office safety protocols and we expect additional sales opportunities from higher participation rates, meal subsidies, and customized offerings.

B and I continue to experience greater in person activity, while still measured.

Clients have implemented increased office safety protocols, and we expect additional sales opportunities from higher participation rates meal subsidies and customized offerings.

Speaker 3: Facilities and other group double digits compared to pre-COVID levels due to in-demand services and project oriented add-ons. In addition, strong levels of new account wins contributed to this performance.

Facilities and other grew double digits compared to pre COVID-19 levels due to in demand services and project oriented add ons. In addition, strong levels of new account wins contributed to this performance.

Speaker 3: and healthcare demonstrated year-over-year growth as patient visits and retail activity gradually normalize. This team remains laser-focused on first-class patient and caregiver experience.

And health care demonstrated year over year growth as patient visits and retail activity gradually normalize. This team remains laser focused on first class patient and caregiver experiences.

Speaker 3: FSS International Organic Refinite Grue 28% year over year and reflected notable improvement compared to the previous quarter as European Canada experienced improved activity levels in the sports and entertainment and education business.

FSS International organic revenue grew 28% year over year and reflected a notable improvement compared to the previous quarter as Europe , and Canada experienced improved activity levels in the sports and entertainment and education businesses.

Speaker 3: China, Chile, and Spain continue to outperform pre-COVID levels on a constant currency basis, with double-digit growth in revenues compared to first quarter fiscal 19.

China, Chile, and Spain continue to outperform pre COVID-19 levels on a constant currency basis with double digit growth in revenues compared to first quarter fiscal 19 as.

Speaker 3: As we enter the 22 calendar year, government programs are expected to be reduced or eliminated in various countries, shifting their focus to reopening.

As we enter the 'twenty two calendar year government programs are expected to be reduced or eliminated in various countries shifting their focus to reopening.

Speaker 3: Organic revenue in uniforms increased 7% year over year, reaching 99% to pre-COVID levels in the quarter, with December reflecting the first month higher than pre-COVID levels.

Organic revenue in uniforms increased 7% year over year, reaching 99% of pre COVID-19 levels in the quarter with December reflecting the first month higher than pre COVID-19 levels.

Speaker 3: Kim Scott, who you heard from in December , has led this segment for just 120 days, and the team is already making an impact with a focus on base recovery, value delivery from recent investments, and building out a strategic growth plan to deliver a meaningful step change in organic growth.

Kim Scott, who you heard from in December has led this segment for just 120 days and the team is already making an impact with a focus on base recovery value delivery from recent investments in building out our strategic growth plan to to deliver a meaningful step change in organic growth.

Speaker 3: In supply chain, we are managing through the disruptive environment through pricing initiatives, supplier partnerships to ensure product availability, as well as off-program utilization.

In supply chain, we are managing through the disruptive environment through pricing initiatives supplier partnerships to ensure product availability as well as off program utilization.

Speaker 3: The proactive actions we've taken combined with Aremark scale, deep supplier bench strength, and menu flexibility have helped mitigate issues for our clients and customers.

The proactive actions, we have taken combined with Aramark scale deep supplier bench strength and menu flexibility has helped to mitigate issues for our clients and customers.

Speaker 3: We continue to monitor our supply chain globally to ensure we remain ahead of the curve.

We continue to monitor our supply chain globally to ensure we remain ahead of the curve.

Speaker 3: We are progressively addressing inflation and wage pressures through fixed contract pricing, menu reengineering, and product alternative.

We are progressing we are proactively addressing inflation and wage pressures through fixed contract pricing menu reengineering and product alternatives. We've also just launched a capability that allows field employees to receive their pay immediately at the end of a shift a compelling incentive that it's been effective during this period.

Speaker 3: Two weeks ago, we released our comprehensive Be Well, Do Well impact report that highlights Aramark's key areas of focus for ESG and our path for delivering on our sustainability commitment.

Two weeks ago, we released our comprehensive B, well do well impact report that highlights aramark as key areas of focus for ESG and our path for delivering on our sustainability commitments. We've also built a strong internal model to embed sustainability across our business.

Speaker 3: We've also built a strong internal model to embed sustainability across our business.

Speaker 3: As a company, we took steps to strengthen our governance, resource teams for success, and significantly increase our transparency by providing more information and data than ever before.

As a company we took steps to strengthen our governance resource teams for success and significantly increase our transparency by providing more information and data than ever before.

Speaker 3: aligned with the sustainability accounting standards board, the global reporting initiative, and the task force on climate-related financial disclosure.

Aligned with this with the sustainability accounting standards Board the global reporting initiative and the task force on climate related financial disclosures.

Speaker 3: Diversity, equity and inclusion remains central to our core values at all levels of the organization. And we are proactively pursuing a DEI strategy that will expand opportunities for everyone.

Diversity equity and inclusion remain central to our core values at all levels of the organization.

And we are proactively pursuing a strategy that will expand opportunities for everyone.

Speaker 3: We've built a strong foundation, and I'm excited to continue the progress and impact of our work in 2022 and beyond.

We've built a strong foundation and I'm excited to continue the progress and impact of our work in 2022 and beyond.

Speaker 3: Last week, Fortune Magazine released its list of the world's most admired companies and earmarked ranked in the top 100 globally. More notably, we were first in the diversified outsourcing category, up significantly from sixth place last year.

Last week Fortune magazine released its list of the world's most admired companies and earmarked ranked in the top 100 globally more notably we were first in the diversified outsourcing category up significantly from six place last year.

Speaker 3: In a year that has been both historically challenging and inspiring, this news was especially gratifying. I remain convinced that the team's unwavering commitment to our vision of being the most admired employer and trusted hospitality partner is more than just a catchphrase. It's our way of doing business.

And a year that has been both historically challenging and inspiring this news was especially gratifying.

I remain convinced that the team's unwavering commitment to our vision of being the most admired employer and trusted hospitality partner is more than just a catchphrase, it's our way of doing business.

Speaker 3: Before turning it over to Tom, I would like to highlight the recent election of two new members to Aramark's Board of Directors at our annual meeting last week, Patricia Lopez and Ken Kaverian. Patricia's balance of creative, strategic, and operational skills will add a new perspective to our strategic direction. And Ken's deep expertise of the digital landscape will be a valuable asset to further drive innovation.

Before turning it over to Tom I would like to highlight the recent election of two new members to <unk> Board of directors at our annual meeting last week, Patricia Lopez, and Ken Kaverin, Patricia balance of creative strategic and operational skills will add a new perspective to our strategic direction.

And Ken's deep expertise of the digital landscape will be a valuable asset to further drive innovation.

Speaker 3: We're looking forward to both joining our board and providing a meaningful impact.

We're looking forward to both joining our board and providing a meaningful impact.

Speaker 3: I would also like to thank Irene Estevez, who announced her retirement from our board, for her valued contributions since 2015 and most recently as the Chair of our Finance Committee.

I would also like to thank Irene Esteves, who announced her retirement from our board for her valued contribution since 2015 and most recently as the chair of our Finance Committee.

Speaker 3: I'll now turn the call over to Tom for a detailed financial review of the business.

I'll now turn the call over to Tom for a detailed financial review of the business.

Thanks, John and good morning, everyone.

Speaker 4: At our analyst day, we also shared with confidence that the foundation is set to achieve our outlook for fiscal 2022 and our long-term goals for fiscal 2021.

At our analyst day, we also shared with confidence that the foundation is set to achieve our outlook for fiscal 2022, and our long term goals for fiscal 2025.

Speaker 4: Throughout the first quarter, we executed on our strategies that not only strengthen the current state of the.

Throughout the first quarter, we executed on our strategies that not only strengthen the current state of the business, but positioning the company for future success driven by profitable growth.

Speaker 4: the company for future success driven by profit.

As John mentioned organic revenue in the quarter reached 92% of pre Covid fiscal 19 levels compared to 65% at this time last year with meaningful improvement across all segments.

Speaker 4: While this year-over-year performance reflected a continued steady recovery in pre-COVID-based revenues, it was also driven by the impact of pricing pass-through and the initial contributions from last year's record net new

While this year over year performance reflected a continued steady recovery in pre Covid based revenues was also driven by the impact of pricing pass through and the initial contributions from last year's record net new business.

We began operations at those new client sites.

Speaker 4: consistent with what we discussed regarding our COVID index last week.

Consistent with what we discussed regarding our Covid index last quarter.

Speaker 4: The vast majority of our operations have components of the business that have already approached or exceeded pre-COVID organic revenue.

The majority of our operations have components of the business that have already approached or exceeded pre COVID-19 organic revenue levels. However, a few select areas within the portfolio portfolio continued to be slower to recover specifically white collar business and industry.

Speaker 4: However, a few select areas within the portfolio continue to be slower to recover, specifically white-collar business and industry, retail and commercial.

Retailer catering in higher education and health care.

Speaker 4: conference and convention centers, concerts, and select events within the Sports Leisure

Conference in convention centers concerts, and select events within the sports leisure and corrections sector.

Speaker 4: from hospitality clients and Canadian operations in our uniform.

And some hospitality clients in Canadian operations in our uniform segment.

Speaker 4: We anticipate these remaining volumes still impacted by COVID will continue to recover throughout the course of this year and beyond.

We anticipate these remaining volumes still impacted by Covid will continue to recover throughout the course of this year and beyond.

Speaker 4: As previously discussed, in many cases the company has brought back operating and above unit support costs in advance of full revenue recovery.

As previously discussed in many cases the company has brought back operating and above unit support costs in advance of full revenue recovery.

Speaker 4: We anticipate that as COVID-impacted volumes recover, this transitional impact on profitability will unwind.

We anticipate that as Covid impacted volumes recover this transitional impact on profitability will unwind with an expected incremental margin of 15% to 20% on the returning volumes.

Speaker 4: an expected incremental margin of 15 to 20 percent on the returning volume.

Speaker 4: As revenues improved during the quarter, we continued to control what we could control by effectively leveraging our variable cost-based operating model and proactively addressing inflation and wage pressures through supply chain initiatives.

As revenues improved during the quarter, we continued to control what we could control by effectively leveraging our variable cost based operating model and proactively addressing inflation and wage pressures through supply chain initiatives ongoing efforts to drive operating efficiencies and lastly through account pricing.

Speaker 4: As a result, adjusted operating income improved by $176 million year-over-year, resulting in a constant...

As a result, adjusted operating income improved by $176 million year over year, resulting in a constant currency AOI margin of four 3%.

Speaker 4: KOI margin was somewhat affected by the start up of new accounts and off program supply chain actions. As the year progresses we

<unk> margin was somewhat affected by the startup of new accounts and off program supply chain actions.

As the year progresses, we expect that the global supply chain environment will ease.

Speaker 4: Our collective actions resulted in an adjusted EPS of $0.22 compared to an adjusted loss per share of $0.31.

Our collective actions resulted in adjusted EPS of <unk> 22, compared to an adjusted loss per share of <unk> 31 last year.

Speaker 4: gap basis, Aramark reported consolidated revenue of $3.9 billion.

On a GAAP basis, Aramark reported consolidated revenue of $3 9 billion.

Speaker 4: operating income of 140 million and diluted earnings per share of rest.

Operating income of $140 million and diluted earnings per share of <unk> 17.

Speaker 4: These results included a $92 million revenue contribution from the next level hospitality acquisition that continues to be excluded from our organic revenue.

These results included a $92 million revenue contribution from the next level hospitality acquisition.

Continues to be excluded from our organic revenue metric until we lap the acquisition in Q3 of this year.

Now turning to cash flow.

Speaker 4: In the quarter, net cash used in operating activities was $503 million, and free cash flow was a use of $569 million.

In the quarter net cash used in operating activities was $503 million and free cash flow was a use of $569 million at.

At quarter end, we had over $1 4 billion in cash availability and no.

Speaker 4: and no debt maturities due until 2025 with the exception of the AR facility.

Debt maturities due until 2025 with the exception of the AAR facility, which supports our seasonal working capital needs.

As expected the first quarter saw the return of our normal seasonal cash outflow driven by our use of working capital in the higher education business in.

Speaker 4: the first quarter saw the return of our normal seasonal cash outflow, determined by a use of work.

Speaker 4: In addition, working capital was also impacted by increased accounts.

In addition, working capital was also impacted by increased accounts receivable due to the improving pre COVID-19 base revenue and record level of new account openings.

Speaker 4: the improving pre-COVID base revenue and record level new.

Speaker 4: Compared to prior year, cash flow results in the quarter also included higher incentive compensation payments associated with exceeding our fiscal 21 targets and a scheduled deferred FICA payment of $64 million that we had previewed in our outlook during last year's Q4 earnings call.

Compared to prior year cash flow results in the quarter also included higher incentive compensation payments associated with exceeding our fiscal 'twenty one targets.

And our scheduled deferred FICA payment of $64 million that we had previewed in our outlook during last year's Q4 earnings call.

Consistent with previous quarters.

Participated in the appropriate country specific government assistant programs.

Where we received approximately $25 million in labor credits that offset cost incur globally.

Speaker 4: Moving to the new calendar year, these government programs are expected to be reduced or

As we move into the new calendar year. These government programs are expected to be reduced or eliminated in various countries.

Speaker 4: Looking ahead, our capital allocation priorities will continue to balance potential debt repayment opportunities with a disciplined use of capital investment to facilitate

Looking ahead, our capital allocation priorities will continue to balance potential debt repayment opportunities with a disciplined use of capital investment to facilitate new business wins and drive results and existing client locations.

We will also remain up.

Speaker 4: opportunistic in pursuing select accretive M&A that advances our profit.

Opportunistic in pursuing select accretive M&A that advances our profitable growth agenda.

Speaker 4: Lastly, we remain committed to our quarterly dividend, as noted by the Board's approval last week, of our upcoming quarterly dividend of 11 cents per share. So let me conclude with our outlook for Fiscal 22. The first quarter reflected a solid start to the fiscal year.

Lastly, we remain committed to our quarterly dividend as noted by the Board's approval last week of our upcoming quarterly dividend of <unk> 11 per share.

So let me conclude with our outlook for fiscal 'twenty two.

The first quarter reflected a solid start to the year and we are extremely encouraged by the upward trends of the business that included organic revenue improvement cost discipline.

Cash management and notable new client wins.

Speaker 4: Based on our current view of the business, we maintain our previously stated full year fiscal 22 outlook of organic revenue growth between 23 and 27%. AOI margin of between five and.

Just on our current view of the business, we maintain our previously stated full year fiscal 'twenty outlook.

Organic revenue growth between 23 and 27%.

AOI margin of between five and five 5%.

Free cash flow between $300 million and $400 million.

Speaker 4: annualized net new business in a range of 550 to 650 million, which would represent at the midpoint, 5% of prior year revenues and 3.7% of fiscal 19 revenues. At all levels of the organization,

And annualized net new business in a range of $550 to $650 million, which would represent at the midpoint, 5% of prior year revenues and three 7% in fiscal 19 revenues.

At all levels of the organization, we wake up every day with and everyone's sales mindset and.

And our commitment to reach $20 billion plus in revenue deliver 7% plus margins and.

Speaker 4: and a leverage ratio below three and a half times, all by 2025.

And our leverage ratio below three five times all by 2025.

Foundation is set and we couldnt be more excited.

John .

Speaker 3: Thank you, Tom. With fiscal 22 just underway, I'm extremely pleased with our performance as we begin the new year and confidence in our ability to execute on the numerous opportunities ahead. As a company, we've implemented a number of meaningful initiatives across the businesses and have continued to build upon last year's momentum, which included record net new business.

Thank you Tom with fiscal 'twenty, two just underway I'm extremely pleased with our performance. So if it would be as we begin the new year and confidence in our ability to execute on the numerous numerous opportunities ahead as a company we have implemented a number of meaningful initiatives across the businesses and have continued to build upon last year's momentum which incur.

We did record net new business, our belief in our remarks with success has never been stronger and I'm immensely grateful for the exceptional teams around the globe, who make it happen each and every day. Thank.

Speaker 3: Our belief in Aramark's success has never been stronger, and I'm immensely grateful for the exceptional teams around the globe who make it happen each and every day.

Speaker 3: Thank you everyone and operator will now open the call for questions.

Thank you everyone and operator, we will now open the call for questions.

Speaker 1: Thank you. We will now begin the question and answer session. If you have a question, please press star, then one on your touch-tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you're using a speakerphone, you may need to pick up the handset first before pressing any numbers. In order to accommodate participants in the question queue, please limit yourself to one question and one follow-up. Our first question comes from Ian. Our first question comes from Ian.

Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound sign with the hash key if youre using a speakerphone you may need to pick up the handset first before pressing any numbers in order to accommodate participants in the question queue. Please limit yourself to one question and one follow up.

Our first question comes from Ian Zaffino with Oppenheimer.

Speaker 5: Thank you very much. Very good quarter here. Again, another quarter of good, good on new business here. Can we just get a little bit more color on some of the new business? I think I don't know if Merlin was the biggest that you had, maybe you could kind of explain.

Thank you very much.

Good quarter here.

Again.

Another quarter of good new business here can we just get a little bit more color on some of the new business I think I don't know, Maryland was the biggest.

That you had maybe you could kind of explain how.

Speaker 5: how you got that, what the process was, and then also if I was to put kind of pencil to paper here, I think you said maybe $140 million in revenues. Is this sort of like the level we're talking about for that win, and how should we basically be modeling it?

You got that.

Process Wise and then also buys the put pencil to paper here.

I think the assembly was maybe $140 million of revenues is this sort of like the level, we're talking about for that win.

How should we think should be modeling that.

Okay.

Speaker 3: Terrific. Thank you very much, Anne, for the question. You know, first of all, this was a process that was undertaken over the course of the last year. Merlin has been evaluating self-op conversion. They've previously operated all this business themselves. They went through a very disciplined process, including a number of different competitors, and we were gratified to be selected as their provider of choice.

Terrific. Thank you very much for the question.

First of all this was a process that was undertaken over the course of the last year Merlin has been a valid had been evaluating.

Self op conversion.

Previously operated all of this business themselves.

They went through a very disciplined process, including a number of different competitors.

And we were gratified to be selected as their provider of choice.

Speaker 3: It is the largest account that we've, the single largest account we've ever sold, but we've agreed with them not to disclose the size and scale, but what we can say is that the largest account we had ever previously sold with Yosemite National Park and the revenues disclosed at that time were $140 million. So, you know, from a, you know, from a, all they were bad and the vast assets had to be worth off name on time to say you know we're all nothing, you're me.

It is the largest account that we have a single largest account we've ever sold but we've agreed with them not to disclose.

The size and scale, but what we can say is that the largest account we had ever previously sold with Yosemite National Park and the revenues disclosed at that time were $140 million so from a.

From a disclosure perspective.

Speaker 3: That's as far as we're going to go with respect to the size of the account, but it is significant. It's a very exciting win.

That's as far as we're going to go with respect to the size of the account.

But.

It is significant it's a very exciting when it does represent a new vertical opportunity for us the amusement park business around the world itself is primarily self operated.

Speaker 3: It does represent a new vertical opportunity for us, the amusement park business.

Speaker 3: around the world is self is primarily self-operated and we see that as a potential opportunity for continued growth in the future. So it's an exciting win. The team both domestically and internationally work together very closely to make this happen and that we're excited to get started.

And we see that as a potential opportunity for continued growth in the future. So it's an exciting win the team both domestically and internationally worked together very closely to make this happen and we're excited to get started.

Speaker 5: Okay, thank you. And if I could just ask a few more on the new business side, maybe one question for Tom would be, what is the AOI drag from the new business? Maybe you could quantify it.

Okay. Thank you and if I could just ask.

A few more on the new business side.

Maybe one question for Tom would be what is the drag from the new business, maybe you could quantify it and then maybe for <unk>.

Speaker 5: and then maybe for John , when we think about the environment we're in with inflation labor shortages.

John when we think about the environment, we're in with inflation labor shortages.

Speaker 5: Has there been increased discussion as far as self-op conversions? Have we seen that yet? Do we expect that to accelerate? And how should we kind of be mapping that out going forward? Thanks.

Has there been.

Increased discussion as far as self op conversions have we seen that yet we expect that to accelerate.

And how should we kind of mapping that out going forward. Thanks.

Speaker 3: So thanks, I'll talk about the self-op conversion process first. And that we are seeing an accelerating trend of organizations in multiple.

So thanks, I'll talk about the self op conversion process first.

Yes, we are seeing an accelerating trend of organizations in multiple segments of our business.

Speaker 3: segments of our business, continue to evaluate self-op conversion opportunities and that's happening in higher education and healthcare in case we're 12 and in some very nontraditional markets as we just discussed.

Continue to evaluate and self op conversion opportunities and thats happening in higher education, and healthcare and K through 12, and some very non traditional markets as we just discussed.

Speaker 3: and also in the facility sector. So we see it as a fairly broad-based phenomenon.

And also in the facilities sector. So we see it as a fairly broad based phenomenon.

Speaker 3: As you know, last year about 50% of our business wins were self-op conversion.

As you know last year about 50% of our business wins were self op conversion.

Speaker 3: wins that's up from a kind of a normalized level of around 30% on an annualized basis. So we see that trend continuing with an expansion of potential opportunities and the one that we're very well positioned to take advantage of. Yeah, and on your first question.

<unk>, that's up from a kind of a normalized level of around 30% on an annualized basis. So we see that trend continuing with an expansion of potential opportunities.

And the one that we're very well positioned to take advantage of.

Yes, and on your first question the AOR drag on new business.

Speaker 4: It really depends on the type of contract and the complexity of the size of the account that we win. The bigger.

It depends on the type of contract and the complexity of the size of the accounts that we win.

The bigger.

Speaker 4: and more complex P&L-oriented contract. We'll have a larger drag.

And more complex P&L oriented contract will have a larger drag.

Speaker 4: and a sort of small cost plus contract will virtually have no drag. So it really just depends on the mix of business that we're winning.

And it sort of small cost plus contract will virtually have no drag.

Really just depends on the mix of business that we're winning.

Generally as we've talked about in the analyst day in.

In Q4.

Speaker 4: It's a majority of over a couple of two-three years for a lot of these contracts. And then it's just to begin.

Charities over a couple two three years for a lot of these contracts.

And then it just again depends on the mix.

Thank you. Our next question comes from Toni Kaplan with Morgan Stanley .

Speaker 6: Hey guys, this is Jeff on Fertone. Can you help us out with recent trends in the business and any impact you've seen from Omicron? Mainly did you see any notable fall off December and then into January from the level of sales you were doing earlier in the quarter and if there was a decline has that since recovered, just has everything about that.

Hey, guys. This is Jeff on for Tony can you help us out with recent trends in the business and any impact you've seen from omicron, mainly did you see any notable falloff in December and then into January from the level of sales you were doing earlier in the quarter and if there was a decline has that since recovered just how should we think about that.

Speaker 4: So a slight impact at the end of the quarter, really negligible. Same thing as we moved into January , I think, the month.

Slight impact.

At the end of the quarter really negligible.

Same thing as we moved into January I think.

The month.

Was about as we expected maybe maybe just a touch off but nothing of note.

Speaker 4: touch off, but nothing of note, you know, given our

Given our.

Reflected in our guidance for the for the year being unchanged.

Speaker 4: And you know, as we move into these weeks, it's sort of a week by week basis, but we...

And.

As we move into these these weeks it sort of week by week basis.

But we don't see anything significantly changed our outlook or really what were what we expected through December and January to any great degree enough to call out.

Speaker 4: changed our outlook or really what we expect in three to separate.

Speaker 6: Okay, got it. And then in your remarks, you mentioned using pricing pass through as a driver in the quarter. So I was hoping for some more color around that. Are there particular geographies or verticals where you're trying to push more price than others and just to clarify, are these price increases largely in line with your cost increases or are you pricing intentionally beyond those increases? How should we think about that?

Okay got it and then in your remarks, you mentioned using pricing pass through as a driver in the quarter. So I was hoping for some more color around that are there particular geographies or verticals, where you're trying to push more price than others and just to clarify are these price increases largely in line with.

Your cost increases or are you pricing intentionally beyond those increases how should we think about that.

Speaker 3: Yeah, I think you should think about the pricing pass through as inflation or cost recovery mechanisms, you know, our

Yeah, I think you should think about the pricing pass through as inflation or cost recovery mechanisms.

Speaker 3: Our primary driver for growth is New Italian, New customers, you know, increasing participation. So we're not trying to build margin by pricing, by pricing pass through, we're trying to recover our costs. So.

Our primary driver for growth as new account wins new customers.

Increasing participations, so we're not trying to build margin by price by pricing pass through we're trying to recover our cost so.

Speaker 3: You know that there is a little bit of a lag and some of the businesses as we have.

That.

There is a little bit of a lag in some of the businesses as we have.

Speaker 3: pricing that's you know particularly in contracts on the correction side where the pricing is fixed and you get an inflation

<unk> that's <unk>.

Particularly in contracts on the correction side, where the pricing is fixed and you get an inflation.

Speaker 3: adjustment on an annual annualized basis so there might be a slight lag there. Obviously in higher education, the pricing on board plans is set the previous year. So there are lags on pricing pass through in higher education.

Adjustments on an annual annualized basis, so there might be a slight lag there, obviously, a higher education and the pricing on board plans to set the previous year. So there is there is there are lags on pricing pass through in higher education, but thats basically all built into our plan and our expectations for the balance of the year, we don't see it as having a significant.

Speaker 3: But that's basically all built into our plan and our expectations for the balance of the year. We don't see it as having a significant drag on earnings.

You can drag on earnings.

Speaker 3: through the balance of the year and expect to recover the impact of inflationary pressure.

Through the balance through the balance of the year and expect to recover the impact of inflationary pressure.

Thank you. Our next question comes from Andrew <unk> with Jpmorgan.

Speaker 5: Hi, Tom, could you give us some color by the three segments when thinking about the 22 organic guide of 23 to 27 percent?

Hi, Tom could you give us some color by the <unk> bench when thinking about the 22 organic guide of 23% to 27%.

Speaker 5: Andrew, in terms of the contribution from each, or how they're trending against what we expected? Yeah. How will the three segments contribute to 23 to 27 percent organic revia growth for

Andrew in terms of that.

Contribution from each or how is that trending against what we expected.

The three segments contribute to 23% to 27% organic revenue growth for the year.

Well I think we expect international continue on.

Speaker 4: Well, I think we expect international continue on, you know, in a strong form. They've had the most consistent year-on-year net growth of the three segments, so they'll be contributing strongly. The U.S. is picking up the pace.

Strong for them they can.

Most consistent year on year net growth of the three segments.

Bill.

It would be contributing strongly.

S is.

Is picking up the pace quite nicely.

Last year, and so that'll continue to.

<unk> into the year and then.

The U S business.

Speaker 4: has had a good restart with their sales process over the last 18 months.

<unk> has had.

Good restart with their sales process over the last 18 months and.

Speaker 4: You know, probably will contribute a little slower than the other two, but again, they're picking up some good momentum and good pace. So we expect all three to contribute probably slightly led by Internet.

Probably will contribute a little slower than the other two but again they are picking up some good momentum and good pace. So we expect all three to contribute.

Probably slightly led by international.

Speaker 4: And those price increases that you mentioned, I assume those weren't contemplated when you first gave this guidance of 23 to 27% organic. So would it be more recent price increases sort of help the overall organic revy growth trajectory for the year? We did anticipate it, in place it really was in our budget cycle through August .

And those price increases that you mentioned.

I assume those werent contemplated.

When you first gave this guidance of 23% to 27% organic so would it be more recent price increases sort of help.

Overall organic revenue growth trajectory for the year.

We did anticipate it inflation really was.

Budget cycle through August we had pretty good visibility into what we thought inflation would be it's tracking slightly ahead. So that ultimately if we execute right will could provide a bit of a tailwind on the topline, but not not significantly over what we anticipated as we start.

Speaker 4: what we thought inflation would be, it's tracking slightly ahead. So that ultimately, if we execute right, we could provide a bit of a tailwind on the top line, but not significantly over what we anticipate.

The year.

Speaker 5: unless it's prolonged throughout the balance of the year. I understand. Thank you very much. I appreciate it.

Faith prolong unless it's prolonged throughout the balance of the year.

Again, thank you very much I appreciate it.

Our next question comes from Richard Clarke with Bernstein.

Speaker 7: Hi, good morning. Thanks for taking my question. So just first one of the 92% recovery you talk about, whether you could break that down between where you are in light-for-light volumes, how much bigger your footprint is than the comparative period, and maybe where your pricing is relative to the comparative period, please.

Hi, good morning, Thanks for taking my question.

One of the 92% recovery you talk about whether you could break that down between where you are in like for like volumes, how much bigger your footprint is.

Then the comparative period, and maybe where your pricing is relative to.

To the comparative period.

Speaker 4: Yeah, if you break back the base on the base and try to get to the COVID base, if you will, I think we're in the mid-80s there. And then if you build up...

Yes, if you break back debate on the base and try to get to the Covid days.

If you will.

I think we are in the mid eighties, there and then if you build up.

Probably.

Solid year of net growth in there.

As opposed to two since we were.

Restarting that growth engine.

Speaker 4: maybe your plus of pricing. So you build up at 85 to 92 and then you've got the net level next level on top of that. So I...

Maybe a year plus of pricing. So you build up that 85% to 92% and then you've got the.

Next level on top of that.

So I think Thats generally where we are on the base.

Compared to amounts reported.

Speaker 7: Okay, that makes sense. And then just a question on cash flow. I noticed you've drawn down all of the revolver in the quarter. You normally do draw down something in the first quarter, but this normally looks a bit more sort of sized to get to about $250 million of cash, and here you've gone way beyond that. So just maybe any commentary on why draw down all of it. And especially given your CAPEX seemed very low in the quarter, I can't find a quarter at all in your history where you only spent $82 million. So is there some CAPEX to come maybe? Is that why you've drawn it down so much of it?

Okay that makes sense and then just a question on the cash flow I noticed you've drawn down all of the revolver and.

In the quarter, you only do draw down something in the first quarter.

Illumina looks a bit more sort of size to get to about $250 million of cash and Haven gone way beyond that so just maybe any commentary on why draw down all of it and especially given your capex is very low in the quarter.

Find the quarter. According your history, where you only spent $82 million. So is there some capex to come maybe is that why you're drawing it down.

So much of it.

Speaker 4: Well, it's a working capital need as a really, the business continues to restart in essence, sort of repopulating the balance sheet.

Well it was a working capital need is really the business continues to restart in essence sort of repopulating the balance sheet.

As you can see.

It was up.

Speaker 4: normally is, but even so, it's more than historical because of the continued.

As it normally is but.

Even so more than historical because of the continued recovery of the Covid base.

Speaker 4: And then on AP, I think just add a little more color, you know, that was accounts payable.

And then on AP I think just to add a little more color that was accounts payable was was kept very tight in the quarter.

Speaker 4: kept very tight in the quarter as we dealt with some off supplier.

Dealt with some off supplier.

Programs.

Speaker 4: Distributors just keeping that tight to ensure that the continuity of supply chain and the delivery

Distributors.

Just keeping that tight to ensure the continuity of supply chain and the deliveries.

Speaker 4: So we had those two effects in there. And like we said, we paid the FERGFike a payment of $64 million and then against a prior

We had those two effects in there and like we said we paid.

FERC FICA payment of $64 million and then.

Against a prior normal base 19 also had higher incentive payments in the quarter.

Okay.

Speaker 4: At any color you could just add on it the very the low capex number in the quarter It's surely timing. We don't see it being anything that's uh different. Um Then it then we're expecting for the full year still probably in and around the three and a half percent of revenue mark Uh, you know on a normalized revenue basis for the year. So I think that's just uh, You know, let's look back on the full year Uh, and I think we'll we'll be there the opportunities are in front of us and and we're we're happy to spend capex for

And any color you could just add on that.

Low capex number in the quarter.

Purely timing, we don't see it being anything thats different.

We're expecting for the full year is still probably in and around the three 5% of revenue Mark.

On a normalized revenue basis for the year. So I think that's just.

Let's look back out on the full year and I think we'll be there the opportunities are in front of us and we're happy to spend capex for for long term contracts.

Okay makes sense, thanks very much.

Our next question comes from Shlomo Rosenbaum of Stifel.

Speaker 6: Hi, good morning. Thank you for taking my questions. Hey, John , just to start, can you talk a little bit about the success you're talking about? New contract wins, and you had this Berlin Entertainment's win, which sounds really like a fantastic win. Are the wins from the outsourcing trend accelerating? Do you think it's company-specific efforts from all the sales resources you put in or do you think it's some kind of combination of both? How should we think about that?

Hi, Good morning, Thank you for taking my questions.

John just to start can you talk a little bit about the success, you're talking about new contract wins you had this ruling entertainments win which sounds really like a fantastic win are the wins from the outsourcing trend accelerating do you think it's company specific efforts from all the sales.

Resources, you put in or do you think it has some kind of combination of both how should we think about that.

Speaker 3: Yeah, I think, well, we are seeing accelerating opportunities, I think, and we are, we are.

Yes, I think.

We are seeing accelerating opportunities I think.

And we are we are.

Speaker 3: have been very successful in converting those opportunities in particular Merlin and several others that will have the opportunity to talk about here over the course of the year as we close and contract those. So I think you are seeing an accelerating trend of additional outsourcing coming from both traditional businesses as well as some non-traditional segments.

It had been very successful in converting those opportunities in particular Marilyn.

And several others that will have the opportunity to talk about here over the course of the year.

As we close in contract those so I think you are seeing an accelerating trend of additional outsourcing coming from both traditional businesses as well as some non traditional segments and I think our sales organization has just done a fantastic job of capitalizing on those opportunities and convert.

Speaker 3: And I think our sales organization is just on a fantastic job of capitalizing on those opportunities and converting them. So I think we're enjoying significant success and we're just taking advantage of all the opportunities that we have been presented with.

So.

I think we are enjoying significant success.

And we're just taking advantage of all the opportunities that we have been presented with the Merlin Windows, obviously, a very different segment, it's something that.

Speaker 3: The Merlin win is obviously a very different segment. It's something that, you know, it's the first time outsourcer and at first time in the industry, you know, we're very gratified with our ability to go ahead and compete, to go ahead and get that win. So it's very exciting for the organization and it does represent significant further growth opportunity in the future.

It's a first time outsourcer and a first time in the industry.

Were very gratified with our ability to go ahead and compete to go ahead and get that.

When so it is very exciting for the organization.

And it does represent significant further growth opportunity in the future.

Speaker 3: So I think it's a combination of both Shloma and I apologize for the long-winded answer, but I think it's really a combination of both in accelerating outsourcing and just an improved performance of the organization.

So I think it's a combination of both Shlomo.

I apologize for the long winded answer, but I think it's really a combination of both accelerating outsourcing.

Improved performance of the organization.

Speaker 8: Okay, great. And then Tom, can you talk a little bit with the contract when the size of Berlin? Is there a noticeable

Okay, Great and then Tom can you talk a little bit with the contract when the size of the Berlin is there a noticeable impact to margins as you.

Speaker 8: to margins as you ramp that business. Usually when there's a startup of a new customer, there is a depressing impact near-term on margins.

<unk> that business, usually when there is a startup with a new customer there is there is a.

Depressing impact near term on margins should we expect that to be the similar how this is going to work over here and if so how long and then it seems like theres growth opportunities within Merlin.

Speaker 8: Seems like there's growth opportunities within Merlin. Is there some way to dimensionalize that, like what percentage of their business this contract represents and how much is...

Is there some way to dimensionalize that like what percentage of their business is contract represents and so how much is going outsourcing how much is remaining that is still in sourced and how we can think about that.

Speaker 8: Going outsourced and how much is remaining that's still in sourced and how we can think about that.

Speaker 4: Yeah, they're definitely for their opportunity. So we're excited about that, but really can't go any further at the moment.

Yes, there definitely is further opportunities. So so we're excited about that.

I really can't go any further at the moment.

That answer for you.

Speaker 4: It could, and as I said before, provide or create a draft.

It could and as I said before provide.

Or create a drag on margin.

Speaker 4: We're fortunately, and I think very smartly both for Merlin and ourselves, opening it in a phased approach, starting in March. And so that I think that helps mitigate some of that, the headwind that will come from the early days.

We're fortunately and I think very smartly, both for for Maryland, and ourselves opening it in a phased approach.

Starting in March.

So that I think that helps mitigate some of that headwind that.

That will come from the early days.

Speaker 4: contract. So I think we've been thoughtful about how we're approaching it. So there's the impact it's to use your word isn't notice.

The contract.

So I think we've been thoughtful about how we're approaching it so.

<unk>.

<unk> Award is it noticeable.

Speaker 4: But certainly it will put some pressure on us to open it right and effectively and

But certainly it will put some.

Sure on us to open it right and effectively.

And get this off on a good foot.

Speaker 3: And I would just add that our guidance anticipates these wins and the anticipated drag from opening. And keep in mind, this is a phenomenon that as we lap.

Yeah, and I would just add that our guidance anticipates.

These wins and the anticipated drag.

From opening to keep in mind. This is a phenomenon that as we lap year over year as we begin to generate this engine. This engine produces sales results on net new business growth year over year.

Speaker 3: year over year as we begin to generate this engine, as this engine produces sales results on that new business growth year over year. You know, we'll whack those new accounts startups next year and then add another batch. So you'll have this phenomenon in terms of the margin drag, ultimately works its way through the system as you continue to build the new business base on these accounts mature over time. So...

We will lap those new accounts start ups next year, and then add another batch. So you'll have this phenomenon in terms of the margin drag ultimately works its way through the system as you continue to build the new business based on these accounts mature over time so.

Speaker 3: It's an anticipated impact. It's one we're well prepared for in our guidance. Reflects it. Great things.

Yes.

<unk>.

It's an anticipated impact it's one we're well prepared for.

And our guidance reflects it.

Great. Thanks.

Our next question comes from Stephen Grambling with Goldman Sachs.

Speaker 6: Hi, I know you don't like to talk about the specifics on any individual deal, but I'm just going back to Merlin. Can you give a little bit more color on what services are part of that deal? Is that just food and beverage or also retail? Is there room to potentially expand the number of properties that are being serviced and then as a related follow-up? Have you had any conversations with other amusement park operators and what maybe makes this segment more or less likely to outsource now versus history?

Hi, I know you don't like to talk about the specifics on any individual deal, but just going back to Maryland. Just can you give a little bit more color on what services are part of that deal or is that just food and beverage also retail.

Our room to potentially expand the number of properties that are that are being serviced and then as it related follow up have you had any conversations with other amusement park operators and what maybe makes this segment more or less likely to outsource now versus history.

Speaker 3: Yeah, well those are great questions and I would say we are bound by the confidentiality agreement we have with Merlin with respect to their business. We do see significant opportunity to grow with Merlin both geographically through the opportunity to potentially pursue additional park operations in other parts of the world.

Yes, those are great questions.

I would say.

Sure.

We are bound by.

The confidence confidentiality agreement, we have with Merlin with respect to their business, we do see significant opportunity to grow with Merlin both geographically.

Through the through the opportunity to potentially pursue additional park operations in other parts of the world.

Speaker 3: They will continue to operate some of their retail business. That will present a forward opportunity potentially in the future. And the scope of services that we've talked about is with those.

They will continue to operate some of their retail business that presents a forward opportunity potentially in the future.

And.

The scope of services that we've talked about is with those.

Speaker 3: seven facilities in the United States and in the UK. And it's a comprehensive list of services and those facilities primarily food.

Seven facilities in the United States and in the UK.

And it's.

Comprehensive list of services and those facilities primarily food.

Speaker 3: And that's about as far as we can go with respect to the disclosure. I think over time, as Merlin becomes more comfortable with us and we with them, we'll be able to talk about this more openly. Because it's the first time outsourcing opportunity for them, they're very sensitive.

And and that's about as far as we can we can go with respect to the disclosure.

I think over time as Merlin becomes more comfortable with.

With us and we with them, we will be able to talk about this more openly.

This because it's because it's a first time outsourcing opportunity for them they are very sensitive.

Speaker 3: to making sure that their employees are well treated and that

To making sure that their employees are well treated and that.

Speaker 3: you know, and that they're fully informed. So we want to be respectful of their needs, both internally with their employees and with the marketplace.

And that they are fully informed so we want to be respectful of their their needs both internally with our employees and with the marketplace.

Got it thanks, so much.

Thank you.

Our next question comes from <unk> <unk> with RBC capital.

Speaker 9: Hi, this is John Phillian and first she could you just remind us about the margin ramp in the back half of the year and how we should think about Modeling as COVID-19 impacted volume. Thank you

Hi, This is John filling in for Ashish could you just remind us about the margin ramp in the back half of the year and how we should think about modeling that COVID-19 impacted volumes or sorry. Thank you.

Speaker 4: Yeah, we definitely see an acceleration into the back half probably, you know, an exit, you know, in the neighborhood at 6.5%. As we go into fiscal 23, you know, again, what we talked about before with some slight headwinds.

Yes.

We see an acceleration into the back half probably.

That's it.

In the neighborhood of six 5%.

As we go into fiscal 'twenty three.

Again, we talked about before with <unk>.

Some slight headwinds.

Probably impacting Q2, a little bit.

Maybe into Q3 with depending on how long inflation.

Speaker 4: remains at the levels it has been as I said before we baited.

<unk> at the levels. It has been as I said before.

We baked in.

Good bit of inflation into this plan and this outlook.

Speaker 4: plan in this outlook, but if it stays up to this level for the balance of the year that could provide a better.

But if it stays up to this level for the balance of the year that could provide a bit of a.

Speaker 4: headwind and then of course you know better net growth if we if we really continued the pace we've got with the net growth that could be a little bit of a drag but all those things considered in this job

The headwind and then of course better net growth.

<unk> continued the pace we've got.

The net growth that could be a little bit of a drag but all those things considered in this John was mentioning.

Speaker 4: we factor a lot of that into what the outlook of the guidance we put together, but with the next hit sort of bit.

We factor a lot of that into the outlook and guidance we've put together.

But with an exit sort of mid sixes.

Speaker 4: from the 4.3 and the first quarter sort of that

From the $4 three in the first quarter sort of that trend.

Speaker 9: Great, thank you. And then lastly, just on the performance and uniform, could you just maybe break it down in terms of the new client wins and just what the level of the pricing path through was? Any color additionally on the volumes would be greatly appreciated.

Great. Thank you and then lastly, just on the performance in uniform could you just maybe break it down in terms of new client wins and just what the level of pricing pass through was any color. Additionally on the volumes would be greatly appreciate it.

Okay.

Speaker 4: Yeah, they're COVID-based. They're portion of, I said, mid 80s for the overall company is what we are on the base recovery.

Yes.

There are COVID-19 base.

Their portion of I said mid <unk> for the overall company is where we are.

Base recovery.

Speaker 4: They're obviously much higher. They're not at 100, but not far off. And then they're pricing and net winds bring them back.

There are obviously much higher they're not at 100, but not far off.

And then there are pricing and net wins.

And I'm back actually in December was the first month since COVID-19 hit they've been above pre COVID-19 levels. So.

Speaker 4: COVID hit. They've been above pre-COVID love.

Speaker 4: net winds and pricing took them above that off of a base that was still just slightly below their proof.

Those net wins and pricing took them above that off of a base that was still just slightly below there.

They're there.

Fiscal 19 numbers.

Thank you. Our next question comes from Neil Tyler with Redburn.

Speaker 10: Good morning. A couple of us, please. Firstly, back to the Merlin contract, just very quickly, when you spoke at the capital market in December .

Yes. Good morning, a couple of that please firstly on the back to the Moon and contracts is very quickly.

You spoke at the capital markets day.

In December .

Speaker 10: How good was your visibility on achieving that contract? And I suppose the question really is, you know, to what extent that is already in the net new figure for this year. Second question on B&I, you mentioned the client strategies aimed at persuading employees back to work. Can you give us your insights into the extent which any of those strategies might drag on margins or enhance margins, please?

How.

Good with real visibility on achieving that contracts and I suppose the question really is.

To what extent that is already in the net figure for this year second question on P&I, you mentioned decline strategies aimed at persuading employees back to work.

Can you give us your insights into the extent to which any of those strategies might might.

Drag on margins will enhance margins please.

Speaker 3: Sure, well in the B&I sector we continue to see companies focused on getting their employees back to work. We're seeing an expansion of...

Sure.

And the P&I sector, we continue to see companies focused on.

Getting our employees back to work, we're seeing an expansion of.

Speaker 3: of subsidized offerings and customized offerings in the BNI environment that continue to support.

Of subsidized offerings and customized offerings in the P&I environment that continue to support.

Speaker 3: The return to work strategies with various employers. So many have adopted.

The return to work strategies with various employers so many have adopted.

Speaker 3: significant changes to their former approaches on food service, some subsidizing 100%, some providing free meals, but almost all of our B&I contracts are currently operating on a management fee basis. I think that's probably true of most of the industry, to be honest.

Significant changes to their to their former.

Approaches on on foodservice, some subsidizing, 100% some providing for your pre meals.

But almost all of our P&I contracts are currently operating on a management fee basis, I think that's probably true of most of the industry to be honest.

Speaker 3: And so we continue to see employers providing every opportunity and every incentive to bring employees back into the

And so we continue to see employers, providing every opportunity and every incentive to bring employees back into the.

Speaker 3: back into the office. And so, you know, we're able to provide some very differentiated offerings, you know, implementing things like touchless pay and other opportunities, you know, delivery to work stations. So a lot of different service.

Back into the office and so.

We're able to provide some very differentiated offerings, we're implementing things like.

Touchless PE and other opportunities.

Delivery to workstations, a lot of different service.

Speaker 3: changes in order to accommodate the needs of our of our various clients and BNIs. So I think the business you know while it's slower than the others to recover because of the ramp in timing issue I think ultimately the business has very strong prospects going forward. So we're very pleased with the progress that BNI is making on their return to work.

Changes in order to accommodate the needs of our <unk>.

Various clients and P&I, so I think the business.

While it is slower than the others to recover because of the ramp.

And timing issue I think ultimately the business has.

Very strong prospects going forward. So we're very pleased with the progress at P&I is making on their return to work.

Speaker 3: And, you know, with respect to the Merlin contract visibility, yes, when we were together, we did have a very clear understanding that this would be.

With respect to the Maryland contract visibility, yes, when we were together we did have a very clear understanding that this would be.

Speaker 3: A significant opportunity we were we did not have a signed contract

A significant opportunity we were we did not have a signed contract.

Speaker 3: at that stage and we were still in the process of Merlin working through their own internal discussions and their own internal notifications for their employees. So that's why we didn't disclose it.

That stage and we were still in the process of Merlin working through their own internal discussions and their own internal notifications for their employees. So that's why we didn't disclose it.

Speaker 3: back and in our investor day. So it's a very exciting win. As we've talked about, our net new business goals for this year are a significant step up over our net new business.

Back in <unk>.

Our Investor day, so it's a very exciting win.

As we've talked about.

Our net new business goals for this year are a significant step up over our net new business.

Speaker 3: Disclosed numbers from last year. We have very high expectations

Disclosed numbers from last year, we have very high expectations.

Speaker 3: for this year and we're off to a very strong start for net new business wins both from a retention perspective as well as those new client wins.

For this year and we're off to a very strong start.

For net new business wins, both from a retention perspective, as well as those new client wins.

Speaker 3: We're very pleased with where we are after the first quarter, both domestically and internationally. Thank you.

We're very very pleased with where we are after the first quarter, both domestically and internationally.

Thank you. Our next question comes from Andy Wittmann with Baird.

Speaker 8: Great, hi, good morning. Thanks for taking my questions. John .

Great Hi, good morning, Thanks for taking my questions John .

Speaker 8: It's, well, pictures and catchers are supposed to be reporting in a couple weeks. We have a lockout situation there and obviously the owners and that you know will be figuring that out as time goes on. But I was just kind of curious more about the right way to think about or how you're thinking about the attendance in ball parks for the important baseball season coming up.

It's pitchers and catchers are supposed to be reporting on a couple of weeks, we have a lockout situation there and obviously the owners and you know.

We'll be figuring that out.

Time goes on but I was just kind of curious more about the right way to think about or how youre thinking about.

The attendance and ballparks for the important baseball season coming up.

Speaker 8: Most of the pro-sports leagues have been down, kind of single-digit percentages in attendance. Recently, versus their pre-COVID levels, is that the right way to think about baseball as we get into the summer outdoors season? Or do you think that that business can be at or above pre-COVID levels in terms of attendance?

The pro sports leagues, they've been down kind of single digit percentages in attendance here recently versus.

They are pre COVID-19 levels is that the right way do you think to think about baseball as we get into the summer outdoor season.

Think that that business can be at or above pre COVID-19 levels in terms of attendance.

Speaker 3: Yeah, I have a strong belief that Major League Baseball, if it solves the lockout issue, will come back.

Yes, I have a strong belief that major league baseball if it solves the lockout issue will come back.

Very strongly.

Speaker 3: very strongly for the summer season. And we anticipate and project attendance levels to be at pre-COVID levels in MLB with potentially the exception of the Canadian environment. So it's just hard to say when that will resolve itself. But...

For the summer season, and we anticipate and project attendance levels to be at pre COVID-19 levels and MLB with potentially the exception of the Canadian <unk>.

Environment. So, it's just hard to hard to say when that.

You know when that will resolve itself but.

Speaker 3: You know, we do believe that outdoor events, in particularly, we saw that with the NFL this year, very strong attendance in the NFL teams. So it's, there's a lot of pent-up demand for baseball. We think it will perform well this year. We have very high expectations from both a per capita spending perspective as we implement those new service offerings that we've been able to achieve in football and other venues.

We do believe that outdoor events and particularly we saw that with the NFL. This year very strong attendance in the NFL teams.

So there is a lot of pent up demand for baseball we think it.

We will perform well this year, we have very high expectations from both the per capita spending perspective as we implement those new service offerings that we've been able to achieve in football.

And other venues.

Speaker 3: So, we hope for a strong season, and we hope that the Major League Baseball and the Players' Association work through their issues and resolve it as quickly as possible. As you know, the Labor Secretary yesterday offered to go ahead and engage in a process to help the two sides. Hopefully, that stimulates some further dialogue, and we're looking forward to a very strong baseball season.

So we hope for a strong season and we hope.

Major League baseball and the players Association.

Work through their issues.

And and resolve it as quickly as possible as you know that the labor Secretary yesterday offered to go ahead and engage.

And a process to help the two sides hopefully.

Stimulate some further dialogue.

And we're looking forward to a very strong baseball season.

Speaker 8: That's helpful. Thank you for those thoughts. And then, Tom, just for you, you mentioned, I think, in the prepared remarks a couple of times, the labor subsidies that you've been receiving internationally, I guess they are about $25 million. Presumably, those are baked into your margin outlook, but I was just wondering, could you talk about any offsets to those? I mean, early on, a lot of those were just to keep people employed, even if the volumes for whatever they were doing weren't there. How have those volumes recovered?

Okay. That's helpful. Thank you for those thoughts and then Tom just for you.

You mentioned I think in the prepared remarks, a couple of times the labor subsidies that you've been receiving internationally I guess they are about $25 million.

Presumably those are baked into your margin outlook, but I was just wondering.

Could you talk about any offsets to those early on a lot of those were just to keep people employed even if the volumes for whatever they were doing werent there.

Have those volumes recovered.

Speaker 8: enough that they now stand on their own or do you think adjustments need to be made to kind of offset some of the headwinds from those prior subsidies?

Enough that they now stand on their own or do you think adjustments need to be made to kind of offset some of the headwind from those prior subsidies.

Speaker 4: No, it's still the same effect as before, just a lot smaller. So it's still recovering costs for folks.

No. It's still the same effect as before just a lot smaller so it's still recovering costs for folks.

Speaker 4: to keep them employed around the world as those volumes recover. So it's waning, the number is getting smaller and smaller, and as I said, we expect those to be virtually nil.

To keep them employed and around the world.

As those volumes recover so it's waning.

A number is getting smaller and smaller and as I said, we expect those to be.

Actually nil.

As we finish the year here so.

Same concept as before.

Okay, great. Thanks, a lot.

Our next question comes from Hamzah <unk> with Jefferies.

Speaker 11: Hey, good morning. This is actually Ryan Gunning, filling in for Homs. My first question is just around competitive changes. Have you seen any changes in the competitive landscape from COVID in terms of market share shifts among the big three or even regional competitors? And then as part of that, have you seen any change in the role of distributors like Cisco evolving further?

Hey, Good morning. This is actually Ryan gunning filling in for Hamzah. My first question is just around competitive changes have you seen any.

Changes in the competitive landscape from Covid in any in terms of like market share shifts among the big three or even regional competitors and then as part of that have you seen any.

<unk> in the role of distributors like Cisco evolving further.

Speaker 3: Yeah, I would say the competitive environment continues to be...

Yes, I would say the competitive environment continues to be.

Speaker 3: you know, very balanced. I think all of us are working very aggressively to retain our existing clients and working hard to sell new opportunities. You know, I think that I wouldn't, I don't think there is a share shift going on. You know, I don't see significant share transitioning from one player to another, but we are pursuing those new opportunities as contracts come to market very aggressively. But it's nothing that I would say is different from the historical approach.

Very balanced I think all of us are working very aggressively to retain our existing clients and working hard to sell new opportunities.

I think the I.

I Wouldnt I don't think there is a share shift going on.

I don't see significant share transitioning from one.

Player to another but we are pursuing those new opportunities as contracts come to market very aggressively.

Nothing that I would say are different from the historical approach to.

Speaker 3: to doing business. The fact that we're able to capture some of these large self-hop conversions.

Doing business. The fact that we're able to capture some of these large self self op conversions.

Speaker 3: you know, it's significant, but they're also being aggressively pursued by our competitors as well. So, you know, from a distribution perspective,

Significant but they're also being aggressively pursued by our competitors as well so.

From a distribution from a distribution perspective.

Speaker 3: You know, I think the large players in the industry are working very hard to meet the demands of the environment, working very hard to, you know, they have labor issues, they have supply chain issues. They're all working very hard to go ahead and and solve those.

I think the large players in the industry are working very hard to.

To meet the demands of the environment working very hard to.

Have labor issues, they have supply chain issues, they're all working very hard to go ahead and and solve those.

Speaker 3: But I don't see any structural changes in the industry. They continue to serve us well as you know we're partnered with Cisco as our primary supplier in the US, Canada, the UK and Ireland.

But I don't see any structural changes in the industry.

They continue to serve US well as you know we're partnered with Cisco as our primary supplier in the U S, Canada, the UK and Ireland.

Speaker 3: And they've worked very hard to be able to serve the needs that we have to help manage through the supply chain efforts. We also have very strong relationships with alternative suppliers. U.S. Food is our primary supplier for Avendra.

And they've worked very hard to be able to serve the needs that we have.

To help support to help the managed through the supply chain efforts. We also have very strong relationships with alternative suppliers U S food as our primary supplier per vendor.

Speaker 3: you know they work very hard and very diligently so you know I think all in all they're struggling with labor issues with with product

Worked very hard and very diligently so I think all in all there they are struggling with labor issues with with product.

Speaker 3: issues but they're working very hard to go ahead and solve for us. So nothing that really...

Issues, but they are working very hard to go ahead and solve for us so nothing.

Nothing that really.

Speaker 3: that I would really call out as being structural change for that industry.

What I would really call out as being structural change for that industry.

Speaker 11: Great, that's super helpful. And then my follow up just in regards to head count additions, can you talk about how you're thinking about head count additions going forward in 2022 versus last year and how much labor availability has been an issue for you guys?

Great. That's Super helpful. And then my follow up kit.

In regards to head count additions can you talk about how youre thinking about head count additions going forward in 2022 versus last year and how much labor availability has been an issue for you guys.

Speaker 3: Yeah, we, you know, certainly, you know, we live in the same environment as

Yes.

Certainly we live in the same environment as is.

Speaker 3: Every hospitality company, so yes, there has been a labor shortage. We've worked very diligently to close those gaps.

Every hospitality company. So so yes, there has been a labor shortage, we've worked very diligently to close those gaps.

Speaker 3: We've got a very strong talent acquisition organization, and I think that has positioned us.

We've got a very strong talent acquisition organization.

I think that has positioned us extraordinarily well.

Speaker 3: extraordinarily well. I think in large part the labor shortages in our operations have been resolved.

I think in large part the labor shortages in our operations have been resolved.

Speaker 3: and we're operating at pretty normalized levels. We've instituted a number of things to go ahead and make us a more attractive employer, and that we've implemented a number of things like same-day pay, which has impacted our ability to retain and recruit.

And we're operating at pretty normalized levels, we've instituted a number of things to go ahead and make us.

A more attractive employer.

We've implemented a number of things like same day pay which has impacted our ability to retain and recruit.

Speaker 3: people in various industries and higher education and others.

People.

In various industries and higher education and others.

Speaker 3: So our employees who come and work a shift can get paid at the end of that shift. And that's been a very attractive alternative.

So our employees, who come and work a shift and get paid at the end of that shift and that's been a very attractive alternative over 20% of our eligible 26% of our eligible eligible employees have signed up for that.

Speaker 3: Over 26% of our eligible employees have signed up for that program, and so that's been very successful in helping to stimulate additional staffing. So I would say we're in pretty good shape, but we'll continue to be out there acquiring talent as aggressively as possible.

Program.

And so that's been a very.

Very successful in helping to stimulate additional staffing so I would say we're in pretty good shape, but we will continue to be out there acquiring his talents as aggressively as possible.

Speaker 1: Thank you, there are no further questions at this time, but I turn the call back to Mr. Zilmer for any closing remarks.

Thank you there are no further questions at this time I'd like to turn the call back to Mr. Coleman for any closing remarks.

Speaker 3: Thank you very much everybody for joining this morning. We're extraordinarily excited about about 2022. Off to a very strong start from a new business perspective. We're very pleased.

Thank you very much everybody for joining this morning, we're extraordinarily excited about the.

About 2022 off to a very strong start from a new business perspective, we're very pleased.

Speaker 3: And if I would summarize a quarter in this way, it is as we expected. We have...

If I would summarize the quarter and this way. It is it is as we expected we have.

Speaker 3: You know, very high level of confidence going into the balance of the year around our ability to execute against our strategies, and we're looking forward to getting together at the end of the next quarter. So thank you very much.

Very high level of confidence going into the balance of the year.

Around our ability to execute against our strategies and we're looking forward to getting together at the end of the next quarter. So thank you very much.

Speaker 1: Thank you for participating. This concludes today's conference. You may now disconnect and have a wonderful day.

Thank you for participating. This concludes today's conference you may now disconnect and have a wonderful day.

Yeah.

[music].

[music].

[music].