Q1 2024 Aramark Earnings Call

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Operator: Good morning and welcome to Aramark's first quarter 2024 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 this conference is being recorded for rebroadcast and that all participants are in a listen-only mode.

Kevin: Good morning, and welcome to the <unk> first quarter 2024 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. This conference is being recorded for rebroadcast and that all participants are in a listen only mode. We will conduct a.

Operator: We will open the conference call for questions at the conclusion of the company's remarks. I will now turn the call over to Felise Kissell, Senior Vice President, Investor Relations and Corporate Development. Ms. Kissell, please proceed.

Kevin: We will open the conference call for questions at the conclusion of the company's remarks, I will now turn the call over fleece yourselves Senior Vice President Investor Relations and corporate development. Mr. Zhao. Please proceed.

Felise Glantz Kissell: Thank you and welcome to Aramark's first quarter fiscal 2024 earnings conference call on webcast. This morning we will be hearing from our Chief Executive Officer, John Zillmer, as well as our Chief Financial Officer, Jim Tarangelo, who started in this role in January. We at Aramark are excited for Jim's birthday.

Zhao: Thank you and welcome to Aramark 's first quarter fiscal 'twenty 'twenty four earnings conference call and webcast. This morning, we will be hearing from our Chief Executive Officer, John Zillmer as well as our Chief Financial Officer, Jim Tarantula.

Jim Tarantula: Darted in this role in January we had aramark are excited for Jim's appointment as.

Felise Glantz Kissell: 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 making comments that are forward-looking. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of our annual report on Form 10-K and our other SEC filings.

Jim Tarantula: 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 making comments that are forward looking and actual results may differ materially from those expressed or implied as a result of various risks uncertainties.

Jim Tarantula: And important factors, including those discussed in the risk factors MD&A and other sections of our annual report on Form 10-K, and our other SEC filings.

Felise Glantz Kissell: Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in this morning's press release as well as on our website. With that, I'll now turn the call over to you.

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

Jim Tarantula: With that I'll now turn the call over to John.

John J. Zillmer: Good morning, and thanks for joining us. Before we get started, I first want to acknowledge our team in Chile, as they are dealing with devastating wildfires near Santiago. Although our operations are not affected, scores of our employees have been impacted. We're working with our leadership team on the ground to ensure everyone's safety, and we'll be coordinating a thorough response with the appropriate relief organization. Now to the quarter. I am really pleased with our great start to the new fiscal year, generating broad-based revenue and AOI growth with solid margin improvement across the business. The strong performance resulted in record revenue for both the FFS US and international segments, along with record first quarter profit in International. Our growth-focused strategies are working, and we're seeing favorable margin trends driven by the prior year's new contract maturities, scale efficiencies in our purchasing, and tight SG&A cost management, which has been helped by moderating inflation. We're extremely encouraged by what we are seeing in the business, and Jim will be reviewing it in greater detail shortly. We're excited to have Jim as Aramark's newly appointed CFO. As you know, Jim is a 20-year veteran of the company with a proven track record, and he's worked closely with Tom over the past four years.

John J. Zillmer: Good morning, and thanks for joining us before we get started I first want to acknowledge our team in Chile as they are dealing with devastating wildfires near Santiago, Although our operations are not affected scores of our employees have been impacted we are working with our leadership team on the ground to ensure everyone's safety and we'll be coordinating.

John J. Zillmer: They're all responsible with the appropriate relief organizations.

John J. Zillmer: Now to the quarter.

John J. Zillmer: I'm really pleased with our great start to the new fiscal year generating broad based revenue and NOI growth with solid margin improvement across the business with strong performance resulted in record revenue for both the FSS U S and international segments, along with record first quarter profit in international.

John J. Zillmer: Our growth focus strategies are working and we're seeing favorable margin trends driven by prior year's new contract maturities scale efficiencies in our purchasing and tight SG&A cost management.

John J. Zillmer: And which has been helped by moderating inflation, we're extremely encouraged by what we're seeing in the business and Jim will be reviewing in greater detail shortly.

John J. Zillmer: We're excited to have Jim as Aramark newly appointed CFO as you know Jim has a 20 year veteran of the company with a proven track record and has worked closely with Tom over the past four years.

John J. Zillmer: His depth of knowledge about the company across the board and across borders, having served as CFO for the international segment, is a tremendous asset in his new role. Tom is also joining us today as he continues to serve as a trusted partner and strategic advisor to help ensure a seamless transition over the next few months. Tom leaves a strong legacy that is both broad and deep, focused on accelerating that new business, optimizing supply chain economics, containing above-unit costs, and instilling a value-creating mindset throughout the organization. Our top-line momentum continued in the first quarter with year-over-year organic revenue growth of 13%, which was driven by especially strong base business growth. Net new business and pricing. A combination of higher sales volume and pricing contributed to the favorable trends that are positively driving the top line.

John J. Zillmer: That knowledge about the company across the board and across borders having served as CFO for our international segment is a tremendous asset in his new role.

John J. Zillmer: Tom is also joining us today as he continues to serve as a trusted partner and strategic advisor to help ensure a seamless transition over the next few months Tom.

John J. Zillmer: Tom leaves a strong legacy that is both broad and deep focus on accelerating net new business optimizing supply chain economics containing above unit cost and instilling a value creating mindset throughout the organization.

John J. Zillmer: Our top line momentum continued in the first quarter with year over year organic revenue growth of 13%, which was driven by especially strong base business growth base business growth.

John J. Zillmer: Net new business and pricing.

Combination of higher sales volume and pricing contributed to the favorable trends that are positively driving the top line.

John J. Zillmer: The US segment increased organic revenue 10% compared to the prior year, starting with collegiate hospitality, which experienced strong performance in residential dining, retail, and catering, as well as improved pricing with the start of the academic year. We're having early success with our recently launched Eat to Excel health and wellness program, which is focused on providing student athletes with a balanced nutrition regimen to support peak competitive performance personalized to each athlete's training schedule, goals, and biometrics. The dietary recommendation is fully integrated with our collegiate hospitality dining program and is easily accessible through a digital app. Sports and Entertainment demonstrated strong per capita spending and high attendance levels for the NFL and NCAA regular season, along with more concert events. Our culinary team had great success partnering with well-known NFL mom Donna Kelsey during the holidays at Lincoln Financial Field and Arrowhead Stadium, adding the famous cookies she makes for her sons in support of the Eagles Autism Foundation and Kansas City-based Operation Breakthrough. A win for everyone involved.

John J. Zillmer: The U S segment increased organic revenue, 10% compared to the prior year, starting with collegiate hospitality, which experienced strong performance in residential dining retail and catering as well as improved pricing with the start of the academic year. We're having early success with our recently launched <unk> health and wellness program, which is focused on providing.

John J. Zillmer: Student athletes with a balanced nutrition regimen to support competitive performance personalized to each athlete's training schedule goals and biometrics. The dietary recommendation is fully integrated with our collegiate hospitality dining program and is easily accessible through a digital app.

John J. Zillmer: Sports and entertainment demonstrated strong per capita spending and higher attendance levels from the NFL and NCAA regular seasons, along with more concert events.

John J. Zillmer: Our culinary team had great success, partnering with well known NFL mom Dana Kelsey during the holidays at Lincoln financial field in Arrowhead Stadium, adding the famous cookies. She makes her sons and support of the Eagles Autism Foundation, and Kansas City based operation breakthrough a win for everyone involved I.

John J. Zillmer: I also want to congratulate the Kansas City Chiefs for reaching this weekend's Super Bowl. Workplace experience benefited from the emergence of significant new client wins and strong-based business growth, as our services provide a compelling solution for employers, with revenue in this business now fully recovered from pre-COVID levels. International organic revenues increased 21% year-over-year. Performance was driven by consistently strong net new business, combined with an active events calendar in Europe, particularly in the U.K. and Germany, continued strength in education in Canada, and greater mining activity in Chile. New business wins at this early stage in the fiscal year have been broad-based across the company. This includes adding Tulane University and Collegiate Hospitality, expanding our services for the European Central Bank in Germany, and more locally, being awarded the Philadelphia Zoo, among others.

John J. Zillmer: I also want to congratulate the Kansas City Chiefs for reaching because weekend Super Bowl.

John J. Zillmer: And workplace experience benefited from the startup of a significant new client wins and strong base business growth as our services provide a compelling solution for employers with revenue in this business now fully recovered from pre COVID-19 levels.

John J. Zillmer: International organic revenues increased 21% year over year performance was driven by consistently strong net new business combined with an active events calendar in Europe, particularly in the UK and Germany continued strength in education in Canada, and greater mining activity in Chile.

John J. Zillmer: New business wins at this early stage in the fiscal year have been broad based across the company. This includes adding Talaian University and collegiate hospitality expanding our services for the European Central Bank in Germany, and more locally being awarded the Philadelphia Zoo among others. We believe our new business pipeline is robust and we continue to see a high return.

John J. Zillmer: We believe our new business pipeline is robust, and we continue to see high retention levels across the client portfolio. Now, let me turn to the global supply chain. Our overall focus continues to be growing and leveraging spend to generate value for the enterprise, while also providing quality products and services to clients and our customers. We've seen inflation moderating over the past quarter, and while some areas of the globe are slower to show this trend, overall inflation is running better than originally expected, and the first quarter benefited from this tailwind in improved product costs.

John J. Zillmer: <unk> levels across the client portfolio.

John J. Zillmer: Now, let me turn to global supply chain. Our overall focus continues to be growing and leveraging spend to generate value for the enterprise, while also providing quality products and services to clients and our and our customers' we've seen inflation moderating over the past quarter and while some areas of the globe are slower to show this trend.

John J. Zillmer: Overall inflation is running better than originally expected in the first quarter benefited from this tailwind in improved product costs. We believe the current supply chain landscape presents enormous opportunities and we are actively seeking to take further advantage of this potential working closely with our manufacturing and distribution partners.

John J. Zillmer: We believe the current supply chain landscape presents enormous opportunities, and we are actively seeking to take further advantage of this potential, working closely with our manufacturing and distribution partners. Last week, we released our Be Well, Do Well progress report, highlighting our commitments to responsible business practices, specifically on people, which includes enabling equity and well-being for millions; on the planet, including promoting planetary health on our path to net zero; and on governance by assuring robust ethics and compliance in everything we do. We're proud of our efforts in these areas and encourage you to review this in-depth update. Before turning the call over to Jim, I'd also like to welcome Brian DelGaccio as our newest member of Aramark's Board of Directors, following our annual meeting last week. Brian is currently Executive Vice President and Chief Financial Officer of Republic Services, a company I know well from my time at Allied Ways.

John J. Zillmer: Last week, we released our B well do well progress report highlighting our commitments on responsible business practices, specifically on people, which includes enabling equity and well being familiar ones on the planet, including including.

John J. Zillmer: Including promoting planetary health on our path to net zero and on governance by assuring robust ethics and compliance in everything we do.

John J. Zillmer: We're proud of our efforts in these areas and encourage you to review this in depth update.

Speaker Change: Before turning the call over to Jim I would also like to welcome Brian Delguercio as our newest member of Aramark 's Board of directors. Following our annual meeting last week, Brian is currently executive Vice President and Chief Financial Officer of Republic Services, a company I know well from my time at Allied waste Brian.

John J. Zillmer: Brian's extensive executive experience will provide valued perspectives, particularly in strategic planning and M&A. I want to also thank Art Winkleblack for his immense contributions to our board. Art announced his retirement and did not stand for re-election.

Speaker Change: Brian has extensive executive experiences will provide valued perspectives, particularly in strategic planning and M&A.

Jim Tarantula: I want to also thank art Winkle black for his immense contributions to our board art announced his retirement and did not stand for reelection.

Jim Tarangelo: On behalf of all of us at Aramark, we're extremely grateful for Art's service to the company. Jim, Thanks, John, and good morning, everyone. I wanted to start by thanking Tom for his tremendous leadership and partnership over the past four years. Combined, we have over 50 years of industry experience, and it's been a real pleasure and privilege to be on this transformational journey. We look forward to continuing to have you as a strategic advisor and wish you well as you transition toward a full retirement. We are off to a terrific start in Fiscal 20.

Jim Tarantula: On behalf of all of Us at Aramark, we're extremely grateful for our service to the company.

Jim Tarantula: Jim.

Jim Tarantula: Thanks, John and good morning, everyone.

Jim Tarantula: I wanted to start by thanking Tom for his tremendous leadership and partnership over the past four years.

Jim Tarantula: Combined we have over 50 years of industry experience and it's been a real pleasure and privilege to be on this transformational journey with you.

Jim Tarantula: We look forward to continuing to have you as a strategic adviser and wish you well as you transition towards a full retirement in may.

Jim Tarantula: We are off to a terrific start in fiscal 'twenty for the company generated strong financial performance with broad based revenue and profit growth.

Jim Tarangelo: The company generated strong financial performance. Broad-Based Revenue and Profit In the first quarter, Aramark reported consolidated revenue of $4.4 billion, representing organic growth of 13% versus the prior year, driven by strong base business growth through a combination of volume and price, as well as the contribution from net. Both the U.S. and international segments reported double-digit top-line growth. Operating income in the first quarter was $167 million, up 10% versus the prior year.

Jim Tarantula: In the first quarter Aramark reported consolidated revenue of $4 4 billion, representing organic growth of 13% versus the prior year period.

Jim Tarantula: Given by strong base business growth through a combination of volume and pricing.

Jim Tarantula: As well as the contribution from net new business.

Jim Tarantula: Both the U S and international segments reported double digit top line growth in the quarter.

Jim Tarantula: Operating income in the first quarter was $167 million up 10% versus the prior year.

Jim Tarantula: Adjusted operating income was $231 million up 28% on a constant currency basis.

Jim Tarantula: Compared to the same quarter last year.

Jim Tarantula: Our margin was five 2% increased 64 basis points year over year on a constant currency basis.

Jim Tarangelo: Adjusted operating income was $231 million, up 28% on a constant currency basis compared to the same quarter last year. AOA margin was 5.2%, which increased 64 basis points year-over-year on a constant-currency basis. The higher profitability was from leveraging higher sales volumes and discipline cost management at both unit level P&L and SG&A as well as supply chain. We also did experience favorable inflation trends overall, which benefited us. Our results were aided by our innovative yet practical approach to technology.

Jim Tarantula: The higher profitability western leveraging higher sales volume.

Jim Tarantula: Disciplined cost management at both unit level, P&L, and SG&A as well as supply chain efficiencies.

Jim Tarantula: We also did experienced favorable inflation trends overall, which benefited the quarter.

Jim Tarantula: Our results were aided by our innovative yet practical approach to technology.

Jim Tarantula: We continue to leverage technology, including most recently utilizing AI throughout our supply chain to aggregate spend more effectively and get better pricing from our suppliers and manufacturers.

Jim Tarangelo: We continue to leverage technology, including most recently utilizing AI, throughout our supply chain to aggregate spend more effectively and can get better pricing from our suppliers and manufacturers. Turning to the business segment, The U.S. reported ALI growth of 19%, with an ALI margin improvement of almost 50%, compared to the same period last year. Education, BNI, Sports, Leisure, and Corrections all had particularly strong quarters, joined by effectively leveraging higher revenue, especially in our collegiate hospitality and corrections from our ability to recover the price inflation lag we've previously on a constant currency basis. The International segment had year-over-year AOI growth of 37% and AOI margin improvement of 54 basis points, led by the team's efforts in the UK and Germany. Turning to the remainder of the, Interest expense in the quarter benefited from the $1.5 billion debt. Associated with the proceeds from the Uniformed Services Spending, the $1.5 billion debt repayment will result in interest expense savings of about $100 million in fiscal 2014, compared to the prior year. Our adjusted tax rate was approximately $26,000.

Jim Tarantula: Turning to the business segments. The U S reported AOI growth of 19% with an OE margin improvement of almost 50 basis points compared to the same period last year edgy.

Jim Tarantula: Education.

Jim Tarantula: And sports leisure and corrections, all had particularly strong quarters, driven by effectively leveraging higher revenue.

Jim Tarantula: Especially in our collegiate hospitality and corrections businesses.

Jim Tarantula: From our ability to recover the price inflation lag we've previously discussed.

Jim Tarantula: On a constant currency basis.

Jim Tarantula: The international segment had year over year growth of 37%.

Jim Tarantula: The margin improvement of 54 basis points.

Jim Tarantula: Led by the team's efforts in the UK, Germany and Canada.

Jim Tarantula: Turning to the remainder of the income statement interest expense in the quarter benefited from the $1 5 billion debt repayment associated with the proceeds from the uniform services spin transaction.

Jim Tarantula: The $1 5 billion debt repayment.

Jim Tarantula: <unk> and interest expense savings of about $100 million in fiscal 'twenty four compared to the prior year.

Jim Tarantula: Our adjusted tax rate was approximately 26%.

Jim Tarantula: Quarterly performance resulted in GAAP EPS of <unk> 11.

Jim Tarantula: Which included expenses related to the completion of this spin and adjusted EPS of <unk> 41, an increase of 33% versus the prior year on a constant currency basis.

Jim Tarantula: Regarding cash flow as expected and consistent with our normal first quarter cadence, we experienced a cash outflow due to the natural seasonality of the business, specifically in collegiate hospitality and sports and entertainment.

Jim Tarantula: This increased moderately compared to the first quarter last year due to a higher use of working capital as a result of the strong growth of the business.

Jim Tarangelo: The quarterly performance resulted in GAAP EPS of 11.., which included expenses related to the completion of the..., and adjusted EPS of 41 cents, an increase of 33% versus the prior year. Costing Currency Bank Regarding cash flow, as expected and consistent with our normal first quarter cadence, we experienced a cash outflow due to the natural seasonality of the business, specifically in collegiate hospitality. This increased moderately compared to the first quarter last year due to a higher use of working capital as a result of the strong growth of the business and increased Capital Expenditure, which is consistent with historic bubbles as a percentage of risk. In addition, we also had the one-time impact of cash taxes paid on our gain on shale.

Jim Tarantula: And increased capital expenditures, which is consistent with historic levels as a percentage of revenue.

Jim Tarantula: In addition, we also had the onetime impact of cash taxes paid on.

Jim Tarantula: Our gain on sale from <unk>.

Jim Tarantula: We've taken several strategic and proactive steps to strengthen our balance sheet.

Jim Tarantula: Resulting in a reduction of our net debt position.

Jim Tarantula: By more than $2 2 billion compared to the end of the prior year period.

This includes debt repayments of $1 5 billion from the spin proceeds.

Jim Tarantula: And another $630 million from divesting, our noncontrolling interest in <unk> and the San Antonio Spurs.

Jim Tarantula: We continue to expect our leverage to be at approximately three five times for fiscal 'twenty four.

Jim Tarantula: And our debt repayments combined with improved business performance.

Jim Tarantula: On the right path.

Jim Tarantula: To achieve this goal.

Jim Tarantula: This would represent the lowest leverage aramark has experienced since 2017.

Jim Tarantula: At quarter end the company had over $1 billion in cash availability, we will continue to opportunistically enhance our capital structure given her financial flexibility.

Jim Tarangelo: We've taken several strategic and proactive steps to strengthen our balance, resulting in a reduction of our net debt position by more than $2.2 billion compared to the end of the prior year period. This includes debt repayments of $1.5 billion from the Spend Program and another $630 million from divesting our non-controlling interest in the San Antonio Spurs.

Jim Tarantula: This includes evaluating additional shareholder returns as our leverage ratio comes down.

I'll wrap up with our performance expectations for this fiscal year.

Jim Tarantula: We are highly encouraged by what we saw in the first quarter and the continued strength of the business around organic revenue growth.

Jim Tarantula: Supply chain initiatives and cost discipline combined with inflation moderating.

Jim Tarantula: As a result, we are updating our fiscal 'twenty four outlook for both <unk> and adjusted EPS growth to reflect these favorable profitability trends.

Jim Tarantula: And reaffirming our expectations for organic revenue growth in our leverage targets.

Jim Tarangelo: We continue to expect our leverage to be at approximately 3.5 times for Fiscal 2015, and our debt repayments, combined with improved business performance, have us on the right path. This would represent the lowest leverage Aramark has experienced. At quarter end, the company had over $1 billion in cash availability. We will continue to opportunistically enhance our capital structure given our financial flexibility. This includes evaluating additional shareholder returns as our leverage ratio... I'll wrap up with our performance expectations for this fiscal year. We are highly encouraged by what we saw in the first quarter and the continued strength of the business around organic revenue growth, Supply Chain Initiatives, and Cost, combined with inflation models.

Jim Tarantula: With that we expect organic revenue growth between 7% to 9%.

AOI growth between 17 and 20%.

Jim Tarantula: Adjusted EPS growth between 30% and 35%.

Jim Tarantula: And a leverage ratio of approximately three five times by the end of the fiscal year as I mentioned.

Jim Tarantula: I'm very pleased with our financial results this quarter.

Jim Tarantula: We are confident in the momentum that continues to build across the business.

Jim Tarantula: I've had the honor to be at Aramark for 20 years of my career.

Jim Tarantula: I clearly see in the air market today, the unwavering commitment to serve our clients.

Jim Tarantula: The energy and focus of our growth teams to win profitable new business and.

Jim Tarantula: And our collective ability to achieve strong sustainable performance.

Jim Tarantula: Our strategy is working and producing great results.

Jim Tarantula: Thank you for the time this morning, and with that I'll turn it back to John.

John J. Zillmer: Thank you Tim with fiscal 'twenty four now underway. We look ahead with great confidence in the work. We've done has centered on building a consistent and sustainable business focused on providing valued hospitality services to our clients. The foundation is set for continued success and we expect our momentum to carry through this year and beyond.

Jim Tarangelo: As a result, we are updating our fiscal 24 outlook for both AOI and adjusted EPS to reflect these favorable profitabilities and reaffirming our expectations for organic revenue growth and our leverage. With that, we expect organic revenue growth between 7% and 9%. AOI growth between 17 and 20, adjusted EPS growth between 30 and 35, and a leverage ratio of approximately 3.5. At the end of the fiscal year, as I am, I'm very pleased with the financial results this quarter. We are confident in the momentum that continues to build across the business. I've had the honor to be at Aramark for 20 years of my career.

Couldn't be more excited about what's to come.

Speaker Change: And operator, we'll now open the call for questions. 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 youre using a speakerphone you may need to pick up the handset first before pressing the numbers in order to accommodate participants in the question queue. Please limit yourself to one question and one follow up to remove yourself from the queue. Please press star one again.

Speaker Change: We will pause for a moment, while we compile the Q&A roster.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Our first question comes from Lizzie Dove with Goldman Sachs. Your line is open.

Jim Tarangelo: I clearly see in the Aramark of today the unwavering commitment to serve our clients, the energy and focus of our growth teams to win profitable new business, and our collective ability to achieve strong, sustainable growth. Our strategy is working, and I'll turn it back to Jaafar.

Lizzie Dove: Hi, Good morning, Thank you for taking the question.

Lizzie Dove: Lastly, I just wanted to wish Jim Congratulations on the appointment to CFO and this is certainly a great set of results to start with that one.

Lizzie Dove: My question to me is that you really outperformed pretty much across the board I would point out organic revenue coming in much higher than expected, particularly on the international side and then of course your guidance range being adjusted to the higher end and I'm curious what drove the outperformance in these areas and if you can just provide some more details and call it that.

Jaafar Mestari: Thank you, Jim. With Fiscal 24 now underway, we look ahead with great confidence. The work we've done has centered on building a consistent and sustainable business focused on providing valued hospitality services to our clients. The foundation is set for continued success, and we expect our momentum to carry through this year and beyond. I couldn't be more excited about what's to come, and the operator will now open the call for questions. Thank you. We will now begin the question-and-answer session. If you have a question, please press star, then 1-1 on your touchtone phone. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers.

Speaker Change: Sure, Thanks, Lindsay and I appreciate it.

Speaker Change: I think if you think of that the main drivers of the margin performance right. It's really the underlying levers we've talked about scale and SGA SG&A supply chain efficiencies.

Speaker Change: We're seeing good results in the middle of the P&L with food and labor cost. So I think really primarily the over performance. If you think about the 67 bps 50 bps coming from the underlying performance and then I think inflation moderating probably delivered a little bit of the upside.

Operator: In order to accommodate participants in the question queue, please limit yourself to one question and one follow-up. To remove yourself from the queue, please press star, 1-1 again. We will pause for a moment while we compile our Q&A roster. Our first question comes from Lizzie Dove with Goldman Sachs. Your line is open.

Speaker Change: Perfect. Thanks, so much.

Speaker Change: Thank you. Our next question comes from Harry Martin with Bernstein. Your line is open.

Speaker Change: Hi.

Harry Martin: Good morning, everyone. Thanks for taking my question I guess my last question on the guidance you did 13% organic growth in the fourth quarter and kept the.

Lizzie Dove: Hi, good morning; thank you for taking the question. Firstly, I just wanted to wish Jim a big congratulations on the appointment to CFO, and this is certainly a great set of results to start with. One main question for me is that you really outperformed pretty much across the board. I'd point out organic revenue coming in much higher than expected, particularly on the international side, and then, of course, your guidance range being adjusted to the higher end. I'm curious what drove the outperformance in these areas, so if you can just provide some more details and color there, sure. Thanks, Lizzie, and I appreciate it.

Guide at 7% to 9% to hit the bottom end of that range would be quite a slowdown.

Harry Martin: I wondered why you didn't change that guidance.

Harry Martin: Your expectations are for the rest of the year on organic growth.

Speaker Change: And then I guess a question.

Harry Martin:

Harry Martin: Jim.

Jim Tarantula: In the presentation and the revenues by segment, you'll now, including FM services within the healthcare line line was.

Jim Tarantula: Weakness down in Q1, I assume that is related to the next level.

Jim Tarangelo: Yeah, I think if you think about the main drivers of margin performance, right, it's really the underlying levers we've talked about. Scale and SG&A, supply chain efficiencies, we're seeing good results at the middle of the P&L with food and labor costs. So I think really primarily the overperformance, if you think about the 67 BPS, sort of 50 BPS coming from the underlying performance. And then I think inflation moderating probably delivered a little bit of the upside. Perfect. Thanks so much.

Jim Tarantula: Could you just add a little bit of detail on the underlying trend in the healthcare market how long.

Jim Tarantula: Next level headwind could loss, thanks very much.

Speaker Change: Sure well I'll kick it off on the revenue outlook.

Speaker Change: You are encouraged by what we saw in the first quarter and the trends, we're seeing with revenue, particularly strong base business growth. It's still early in the year to make the call on revenue as you know the timing of new and loss could affect how do we think about revenues going forward.

Speaker Change: As inflation.

Speaker Change: Moderates, obviously price can moderate having an effect on the top line.

Harry Martin: Our next question comes from Harry Martin with Bernstein. Your line is open. Good morning, everyone.

Speaker Change: As well and then the base business trends that we've seen they were very strong in the first quarter I think it's early to see if those are still sustainable so with that and some seasonality. That's why you see a decline in revenue for the third of the growth through the remainder of the year and we'll continue to keep folks posted without how that progresses.

Jim Tarangelo: Thanks for taking my question. I guess I'll ask the obvious question on the guidance. You did 13% organic growth in the first quarter and kept the guidance at 7% to 9%. I mean, to hit the bottom end of that range would be quite a slowdown.

Speaker Change: Okay.

Speaker Change: Yes with respect we've now have our <unk>.

Speaker Change: Reclassified how we show her house.

Jim Tarangelo: So I wondered why you didn't change that guidance and what your expectations are for the rest of the year on organic growth. And then I guess a question for Jim: in the presentation, in the revenues by segment, you're now including FM services within the healthcare line, and that line was the spot of weakness in Q1. I assume that was related to the next level portfolio actions, but can you just add a little bit of detail on the underlying trend in the healthcare market and how long that next level headwind could last for? Thanks very much. Sure, we'll do it. I'll kick it off.

Speaker Change: Health care revenue.

Speaker Change: And with that you can see.

Speaker Change: Previously discussed some pruning and optimization of our portfolio within next level is.

Speaker Change: A key driver for why you see the revenues being moderately down in that segment.

Speaker Change: Yeah, and I'll, just add that Thats still thats a segment that we have a very strong level of confidence in going forward and growth opportunity in that segment.

Speaker Change: <unk> robust.

Speaker Change: And so we see this as really kind of a temporary restructuring and re portfolio re optimization of the portfolio.

Speaker Change: Turning back to significant growth going forward.

Speaker Change: Okay, great. Thanks very much.

Speaker Change: Our next question comes from Andrew Steinman with Jpmorgan. Your line is open.

Jim Tarangelo: On the revenue outlook, we're very encouraged by what we saw in the first quarter and the trends we're seeing with revenue, particularly strong base business growth. But it's still early in the year to make the call on revenue. As you know, the timing of new and loss could affect how we think about revenues going forward. As inflation moderates, obviously, prices can moderate, having an effect on the top line as well. And then the base business trends that we've seen were very strong in the first quarter, but I think it's early to see if those are still sustainable.

Andrew Steinman: When looking at the fiscal year 'twenty Guide I wanted to know what the implied.

Andrew Steinman: Margin range is I kind of tried to calculate it and it's either <unk> or kind of 30 to 60, depending on how you.

Andrew Steinman: Do the math on revenues and NOI and I also wanted to know if theres been any change of assumption in the food inflation for fiscal 'twenty four margin guide.

Andrew Steinman: Yes, Andrew this is Jim so yeah I.

Jim Tarantula: I think the straight math of the sort of the law.

Jim Tarantula: The high rate of 17% to 20 would be 43 to 47 bps again, that's sort of the straight math if you're at this sort of a lower end of the revenue range and higher end of their profit range I think youre sort of be closer to the 55 to 60 basis points.

Jim Tarangelo: So with that and some seasonality, that's why you see a decline in revenue for growth for the remainder of the year. We're continuing to keep folks posted with how that progresses. On a Yes, with respect. We now have our, we reclassified how we show our health care revenue. And with that, you can see, as we've previously discussed, some pruning and optimization of our portfolio within Next Level is a key driver for why you see the revenues being moderately down in that segment. Yeah, and I'll just add that that's still a segment that we have a very strong level of confidence in going forward, and growth opportunities in that segment remain robust. And so we see this as really kind of a temporary restructuring and re-optimization of the portfolio and then turning back to significant growth going forward. Great, thanks very much.

Jim Tarantula: And then I also asked about is there any change of assumption in food inflation in the 'twenty four margin guide.

Speaker Change: The current guidance reflects how inflation is running today. So the guidance that we provided reflects our current outlook for inflation and it's pretty consistent with how it ran in the first quarter. Okay. Thank you very much.

Speaker Change: Our next question comes from Shlomo Rosenbaum with Stifel. Your line is open.

Shlomo H. Rosenbaum: Hi, Thank you could.

Shlomo H. Rosenbaum: Could you talk a little bit about the pricing trends just.

Shlomo H. Rosenbaum: Maybe give us something.

Shlomo H. Rosenbaum: Paul.

Shlomo H. Rosenbaum: Quantitative to see where things are and just compare it to the last few quarters to see what the trends are there and then also maybe you could give a free cash flow range that we should think about in terms of fiscal year 'twenty four I know that there is.

Andrew Charles Steinerman: Our next question comes from Andrew Steinerman with J.P. Morgan. Your line is open. When looking at the fiscal year 24 guide, I want to know what the implied AOR margin range is.

Shlomo H. Rosenbaum: That seasonality, but this is also the first year without the.

Shlomo H. Rosenbaum: The uniforms business in it and maybe you could give us some guidance on how to think about those items.

Speaker Change: Sure this is <unk>.

Jim Tarangelo: You know, I kind of try to calculate it, and it's either 40 to 50 or kind of 30 to 60, depending on how you do the math on revenues and AOI. And I also want to know if there's been a change of assumption in the food inflation assumption for the fiscal 24 margin guide. Yeah, Andrew, this is Jim.

Speaker Change: John I'll take I'll tackle the pricing question and Jim can tackle free cash flow.

Speaker Change: First of all we're seeing.

Speaker Change: We have largely caught up in terms of pricing, we had the pricing lag in some of the businesses that were.

Jim Tarantula: Contractually bound over the course of the last year, and we've seen that pricing catch up.

Jim Tarantula: We are in very good position from a pricing perspective now.

Jim Tarangelo: So yeah, I think the straight math of the sort of load on the high right at 17 to 20 would be 43 to 47 bps. Again, that's sort of the straight math. If you're at the sort of the lower end of the revenue range and higher into the profit range, I think you're sort of closer to the 55 to 60 basis. And then I also asked, is there a change of assumption in food inflation in the 24-margin? The current guidance reflects how inflation is running today. So the guidance that we provided reflects our current outlook for inflation, and it's pretty consistent with how it ran in the first quarter. Okay, thank you very much.

Jim Tarantula: And that we're able to go ahead and recover our cost increases as a result of that of that pricing.

Jim Tarantula: If in fact, we enter.

Jim Tarantula: Environment, where inflation moderates more aggressively it may put a little bit of pressure on pricing going forward, but we're not seeing that currently so.

Jim Tarantula: So right now, it's a pretty benign pricing environment were able to recover our costs and we've caught up on the pricing lag, which existed last year and say higher education and corrections.

And then on free cash flow, yes, so we had a normal heavy seasonal use as we always do.

Jim Tarantula: First quarter I think some of the drivers there additional working capital again due to the growth of the business.

Shlomo H. Rosenbaum: Our next question comes from Shlomo Rosenbaum with Spiessle. Your line is open. Hi, thank you. Could you talk a little bit about the pricing trends? Just, you know, maybe give us something quantitative to see where things are and just compare it to the last few quarters to see what the trends are there. And then also, maybe you could give us a free cash flow range that we should think about in terms of fiscal year 24. I know that there's that seasonality, but this is also the first year without the, you know, the uniforms business in it.

Jim Tarantula: Bad problem to have capital expenditures up as well driven by the timing of new but still in line with our historic averages.

Jim Tarantula: And then finally cash taxes were up about $35 million in the quarter and as I've noted, we paid our cash taxes on the gain of sale of <unk>.

Jim Tarantula: For the full year again, we're not providing specific guidance on cash flow, we're guiding more toward achieving the leverage of three five.

Jim Tarantula: Times.

John J. Zillmer: And maybe you could give us some guidance on how to think about those items. Sure. This is John.

Jim Tarantula: The $35 million or so in cash taxes, the one time.

Jim Tarantula: Part of that being with the aim gain on sale and then we have about $20 million to $30 million of addition of incremental transaction cash costs from the spin that trailed.

John J. Zillmer: I'll tackle the pricing question, and Jim can tackle free cash flow. First of all, we've largely caught up in terms of pricing. We had a pricing lag in some of the businesses that were contractually bound over the course of the last year, and we've seen that pricing catch up. We feel like we're in a very good position from a pricing perspective now, and that we're able to go ahead and recover our cost increases as a result of that pricing. If, in fact, we enter an environment where inflation moderates more aggressively, it may put a little bit of pressure on pricing going forward, but we're not seeing that currently.

Jim Tarantula: Trailed into fiscal 'twenty four.

Jim Tarantula: Okay.

Jim Tarantula: Our next question comes from Jasper Bibb with <unk> Securities. Your line is open.

Jasper Bibb: Hey, good morning.

Jasper Bibb: Wanted to follow up on the margin upside I guess curious.

Jasper Bibb: There has been any change in what youre seeing in labor cost inflation I think your peers indicated that the growth in labor costs as remaining kind of sticky even if the food costs were coming down so I'm curious if your taxes done somewhere there.

Jim Tarangelo: So right now, it's a pretty benign pricing environment. We're able to recover our costs, and we've caught up on the pricing lag which existed last year in, say, higher education and correction. And on free cash flow, yeah, so we had a normal heavy seasonal use, as we always do in the first quarter.

Speaker Change: Yes, I would I would say that generally we're seeing.

Speaker Change: Labor costs moderate touch.

Speaker Change: As well as food costs.

Speaker Change: Clearly there is less pressure in the labor environment, particularly as it relates to contract workers and the like and the payment of over time, that's one of the one of the benefits running through the P&L as our people are managing the.

Speaker Change: Those middle of the P&L cost structure as there has been significant improvement on the labor side.

Jim Tarangelo: I think some of the drivers there, additional working capital, again, due to the growth of the business, so not a bad problem to have. Capital expenditures were up as well, driven by the timing of new equipment, but still in line with our historic averages. And then finally, cash taxes were up about $35 million in the quarter, and as I noted, we paid our cash taxes on the gain on the sale of AIM.

Speaker Change: There, but overall wage inflation I think.

Speaker Change: Our expectations are probably no different than our competitors somewhere in the in the 5% range would probably be kind of an appropriate estimate.

Speaker Change: On a on a going forward basis.

Speaker Change: Thanks, and then wanted to ask what Youre seeing from a new sales and pipeline perspective has there been any change with respect to the mix of new outsourcing opportunities other than <unk>.

Speaker Change: Wade.

Jim Tarangelo: For the full year, again, we're not providing specific guidance on cash flow. We're, you know, guiding more toward achieving the leverage of three and a half times. I noted the $35 million or so in cash taxes, the one-time part of that being with the AIM gate on sale, and then we have about $20 million to $30 million of incremental transaction cash costs from the spin that trailed into fiscal 24. Thank you. Thank you. The next question comes from Jasper Bibb with Truist Securities. Your line is open. Hey, good morning.

Wade: No I'd say the pipeline continues to be very robust, we're very very pleased with the results to date and have.

Wade: A lot in the pipeline that we're working to close.

Wade: So we're very encouraged by what we're seeing so far.

Speaker Change: No no change in the level of outsourcing activity its still our pipeline is as big as it's ever been so.

Speaker Change: Without without getting into specific opportunities, we're very encouraged.

Speaker Change: I appreciate the detail there thanks for taking the questions guys.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Heather <unk> with Bofa. Your line is open.

Heather: Hi, Thank you and I guess I like that.

John J. Zillmer: I wanted to follow up on the margin upside. I'm curious if there's been any change in what you're seeing in labor cost inflation. I think your peers indicated that growth in labor costs was remaining kind of sticky, even if food costs were coming down. So I'm curious if your stack has been similar there. Yeah, I would say that, generally, we're seeing labor costs moderate a touch as well as food costs. You know, clearly, there is less pressure in the labor environment, particularly as it relates to contract workers and the like and the payment of overtime.

Add onto the prior question with regard to your pipeline and just when you think about the different segments or in <unk>.

Heather: You might be seeing the most demand and also kind of how you think about the right next year. Both in terms of the end markets you wanted to add.

Heather: Well, we're very we're seeing very broad based opportunity both domestically and internationally.

Heather: And were really were.

Speaker Change: Yes, we're seeing it across all the businesses, whether it's workplace experience or leisure hospitality.

Speaker Change: Significant opportunities in health care significant opportunities arising in <unk>.

John J. Zillmer: That's one of the benefits running through the P&L as our people are managing the those those middle of the P&L cost structures; there's been significant improvement on the labor side. But overall, wage inflation, I think our expectations are probably no different than our competitors. Somewhere in the 5% range would probably be kind of an appropriate estimate on a going forward basis. Thanks, and then I wanted to ask what you're seeing from a new sales and pipeline perspective, and has there been any change with respect to the mix of new outsourcing opportunities and other takeaways? No, I'd say the pipeline continues to be very robust. We're very, very pleased with the results to date and have a lot in the pipeline that we're working to close, and so we're very encouraged by what we're seeing so far. And there was no change in the level of outsourcing activity.

Speaker Change: In virtually every vertical so it's really.

Speaker Change: We're in the businesses, we want to be and we're focused we have resource to grow all of them.

Speaker Change: And we're seeing opportunity literally in every market that we serve so.

Speaker Change: That's what makes it so encouraging there is no I'm not limited to one particular vertical or another one business or another we've got a range of opportunities that we can pursue and our people are delivering across the board both domestically and internationally and that's what makes the growth story is so exciting.

That's really helpful and I'm going to asking inflation question.

I think a lot of investors are also looking our reading left the key distributors are saying and seeing.

Speaker Change: You don't really report at the same time.

Speaker Change: I'm curious kind of when they talk about pricing for example, etc.

Speaker Change: How we know what we're looking at your food cost should we be thinking about things because presumably you have a different business mix.

John J. Zillmer: It's still, our pipeline is as big as it's ever been. So, you know, without getting into specific opportunities, we're very encouraged. Appreciate the detail there.

Speaker Change: Dan.

Speaker Change: Distributors have in terms about their salt Lake.

Heather Balski: Thanks for taking the questions, guys. Thank you. Our next question comes from Heather Balski with BFA. Your line is open.

Just any kind of color you can provide that.

Speaker Change: Bob kind of interpret what theyre, saying, what it might mean for your business.

Bob: That's a great question and it's one that has that can be a little bit confusing given the given the kind of numbers that may report, which are really focused more on <unk>.

John J. Zillmer: Hi, thank you. I guess I'd like to add on to the prior question with regard to your pipeline. And just when you think about the different segments you're in, where you might be seeing the most demand, and also kind of how you think about the right mix for your business in terms of the end markets you want to be in, Well, we're seeing very broad-based opportunities, both domestically and internationally. And really, we're seeing it across all the businesses, whether it's workplace experience or collegiate hospitality, significant opportunities in health care, significant opportunities arising in virtually every vertical. So it's really, we're in the businesses we want to be in. We're focused, and we're resourced to grow all of them, and we're seeing opportunity literally in every market that we serve. So that's what makes it so encouraging. There is no, I'm not limited to one particular vertical or another, one business or another. We've got a range of opportunities that we can pursue, and our people are delivering across the board, both domestically and internationally, and that's what makes the growth story so exciting. That's really helpful.

Bob: Commodities as opposed to the market basket of products that we buy in our inflation numbers are very specific to the products, we buy from them from our.

Bob: Our clients and our customers want us to serve so.

Bob: Ours are as are we.

Bob: We look at this number literally on a weekly basis, we know exactly what we're paying for goods and services.

Bob: Ross the enterprise by business unit.

Bob: By country so.

Bob: We have a high degree of correlation to what our market basket costs are.

Bob: Distributors do have much more spot kind of exposure to various commodities typically our contract pricing normalizes for that so it's very hard to make a direct comparison between the distributor cost and our costs.

Bob: But I would I would say is you see commodity pricing modulating youll see that eventually transfer into lower prices to our products that we that we buy in and utilized as well so tough to meet the correlation but always have to do to confuse you further.

John J. Zillmer: And I'm going to ask an inflation question, which is, I think a lot of investors are also looking or reading what the food distributors are saying and seeing. You don't necessarily have to report inflation at the same time. I'm curious, kind of when they talk about pricing, for example, center of the plate, how we, you know, we're looking at your food cost, should be thinking about things, because presumably you have a different business mix than the food distributors have in terms of what they're selling. Any kind of color you provide that helps us kind of interpret what they're saying and what it might mean for your business. Yeah, that's a great question, Heather.

Bob: Okay.

Bob: Yes.

Speaker Change: We appreciate the more confusing the better I guess.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Thanks very much.

Speaker Change: Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.

Toni Kaplan: Thanks, so much.

In the past you've had some creative technology initiatives that you've deployed can you talk about where you're focusing on innovation and any AI initiatives in particular.

Toni Kaplan: Yes.

Speaker Change: What a great question and both Jim and I can comment on this it is.

Speaker Change: A very significant initiative inside the company to apply technology to the parts of the business, where we can really benefit both the frontline managers as well as the customer.

John J. Zillmer: And it's one that can be a little bit confusing, given the kind of numbers that they report, which are really focused more on commodities, as opposed to the market basket of products that we buy. And, you know, our inflation numbers are very specific. It's the products we buy that our clients and our customers want us to serve. So, we look at this number literally on a weekly basis; we know exactly what we're paying for goods and services across the enterprise by business unit by, you know, by country. So, we have a high degree of correlation to what our market basket costs are. The distributors do have much more spot kind of exposure to various commodities. Typically, our contract pricing normalizes for that reason, so it's very hard to make a direct comparison between distributor costs and our costs.

Speaker Change: Literally had to report to our board and our board meeting last week on the technology initiatives underway inside the company and some that are the most prevalent as you might expect are things around menu design and menu optimization using AI technologies to go ahead and evaluate customer needs and.

Speaker Change: Optimal menu structures to serve them and we literally have pilots going on in multiple businesses.

Speaker Change: For menu optimization, both from a cost perspective, as well as our customer acceptability perspective, because you can use AI to create the lowest cost menu in the world and guess what nobody will buy it. So you have to have you have to balance both of those objectives and so we are using a large language models.

John J. Zillmer: But I would say, as you see commodity pricing modulating, you'll see that eventually transfer into lower prices for our products that we buy and utilize as well. So, tough to make the correlation, but always happy to confuse you further if that hasn't helped. We appreciate it. The more confusion, the better, I guess.

Speaker Change: AI to go ahead and develop programs that really optimize both for us as well as the consumer and it's very exciting.

Speaker Change: Pilots have shown dramatic results and we're very encouraged by what the possibilities are.

Speaker Change: I'll just add to that we're seeing good opportunities as I mentioned in my script, we're utilizing AI within our supply chain group to harmonize our spend data and AI is enabling really effective and optimizing our matching and aggregation of skus across the board and enables us to negotiate better pricing.

Toni Kaplan: Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open. Thanks so much.

John J. Zillmer: In the past, you've had some creative technology initiatives that you've deployed. Can you talk about where you're focusing on innovation and any AI initiatives in particular? Yeah, that's a great question. And both Jim and I can comment on this.

Speaker Change: Missing with their suppliers and manufacturers.

Speaker Change: Terrific.

Speaker Change: Follow up on competition are you seeing any changes in the market with regard to either the large competitors or even the smaller mid sized competitors.

Jim Tarangelo: It is a very significant initiative inside the company to apply technology to parts of the business where we can really benefit both the frontline managers as well as the customers. And I literally had a report to our board at our board meeting last week on the technology initiatives underway inside the company. And, you know, some that are the most prevalent, as you might expect, are things around menu design and menu optimization, using AI technologies to go ahead and evaluate customer needs sets and optimal menu structures to serve them. And we literally have pilots going on in multiple businesses for menu optimization, both from a cost perspective, as well as a customer acceptability perspective, because you can use AI to create the lowest cost menu in the world. And guess what? Nobody will buy it.

Speaker Change: Thanks.

Speaker Change: Yes, I would say the short answer is no really no change it's always it's always been a very competitive environment.

Speaker Change: We're all pursuing.

Speaker Change: Those those.

Speaker Change: Brand name clients, all the time and the range of competitors continues to evolve and change.

Speaker Change: Still plenty of regional companies out there are smaller organizations positioned against certain businesses in niches that they that they like.

Speaker Change: But overall I'd say I'd say, it's a very disciplined competitive environment really no change to economic structure bidding strategies.

Speaker Change: We are always focused on selling quality and customization.

John J. Zillmer: So you have to have you have to balance both of those objectives. And so we're using the large language models in AI to go ahead and develop programs that really optimize both for us as well as the consumer. And it's very exciting, and the pilots have shown dramatic results. And we're very encouraged by what the possibilities are. Yeah, I'll just add to that. We're seeing good opportunities, as I mentioned in my script. We're utilizing AI within our supply chain group to harmonize our spend data, and AI is enabling really effective and optimizing our matching and aggregation of SKUs across the board and enables us to negotiate better prices with our suppliers and manufacturers.

Speaker Change: And Thats and Thats, what we continue to focus on and frankly, we're seeing our competitors also doing the same thing so.

Speaker Change: Like the environment, we like the opportunity.

Speaker Change: I would say it's been a very consistent.

Speaker Change: Over the course of the last.

Speaker Change: Several years.

Speaker Change: Perfect. Thank you.

Speaker Change: And that you are.

Speaker Change: Our next question comes from Neil Tyler Redburn Atlantic Your line is open.

Speaker Change: Hey, good morning. Thank you a couple from me please.

Speaker Change: Just coming back to the margin.

Speaker Change: Do you think about achieving that.

Speaker Change: The midpoint in the components contributing to that.

Speaker Change: The question is really over the remainder of the do you expect the.

Jim Tarangelo: Terrific! I wanted to follow up on competition. Are you seeing any changes in the market with regard to either the large competitors or even the smaller mid-sized competitors in the space? Yeah, I would say the short answer is no, really no change. It's always been a very competitive environment.

Speaker Change: If you'd like year on yet in terms of the relative contribution of things like price.

Speaker Change: Relation.

Speaker Change: <unk> new volumes.

Speaker Change: The GPO do you expect that contribution to remain consistent all for those components change in terms of the relative importance.

John J. Zillmer: We're all pursuing, you know, those brand name clients all the time, and the range of competitors continues to evolve and change. You know, still plenty of regional companies out there, smaller organizations positioned against certain businesses and niches that they like.

Speaker Change: Im not sure the.

Speaker Change: Last question and then second question on the.

Speaker Change: The base business ramp up.

John J. Zillmer: But overall, I'd say it's a very disciplined, competitive environment, really no change to the economic structure, or bidding strategies. You know, we are always focused on selling quality and customization. And that's, that's what we continue to focus on. And frankly, we're seeing our competitors also doing the same thing. So we like the environment; we like the opportunity.

Speaker Change: And particularly I suppose.

Speaker Change: International.

Speaker Change: I'm.

Speaker Change: Just wondering if you could talk a little bit more about the.

Speaker Change: What's going on there and whether.

Speaker Change: To what extent there is a.

Speaker Change: Sort of acceleration in volumes at relatively recently won contracts that might not be classified as net new.

Speaker Change: Still seeing sort of normalization upwards. Thank you.

John J. Zillmer: And, you know, I would say it's been very consistent over the course of the last, you know, several years. Thank you. Thank you. Our next question comes from Neal Tyler with Redburn Atlantic. Your line is open. Good morning. Thank you.

Speaker Change: Yes, I'll take the first one with respect to the underlying levers. So I think the results we generated in Q1 and the sources of those margins coming from again scale in SG&A supply chain efficiencies.

Jim Tarangelo: Just go back to the margin and the way you think about achieving or hitting the midpoint and the components contributing to that. The question is really over the remainder of the year, do you expect the bridge, if you like, year on year in terms of the relative contribution of things like price versus inflation, ramping new volumes, and the GPO, do you expect that sort of contribution to remain consistent, or for those components, does that change in terms of their relative importance as we move through the year? That's the first question. And then second question, on the basis of business ramp-up, particularly, I suppose, in the international business. Just to, you know, I wonder if you could talk a little bit more about what's going on there and to what extent there is a sort of acceleration in volumes in relatively recently won contracts that might not be classified as sort of net new but are still seeing a sort of normalization upwards. Thank you. Yeah, I'll take the first one with respect to the underlying levers.

Speaker Change: And at the middle of the P&L with food and labor and the continued progression of new business margin maturity I think we expect a similar.

Speaker Change: Mix as we look toward the remainder of the year as I mentioned I think if you look at the core levers drove the majority of the margin improvement in Q1, I sort of round it to about 50 basis points.

Speaker Change: If you look at the midpoint of our guidance at 45 bps Thats pretty consistent with what we're seeing in like I said in Q1, the sort of upside I think generally came from inflation moderating and that's obviously not definitively built and built into the outlook.

Speaker Change: Yes, I would just add I think.

Speaker Change: Im sorry, Didnt mean to interrupt you.

Speaker Change: I was just.

Speaker Change: Going to add on the base business.

Acceleration that we're seeing I think it's a combination of things.

Speaker Change: It's improved volume in existing locations more customers, having returned to work on a full time basis, so youre seeing a ramp.

Speaker Change: Of.

Speaker Change: A improvement improving customer counts and Youre also seeing the ramp up of accounts that we sold over the course of the last couple of years beginning to mature.

Jim Tarangelo: So, you know, I think the results we're generating in Q1 and the sources of those margins coming from, again, scale and SG&A, supply chain efficiencies, discipline at the middle of the P&L with food and labor, and the continued progression of new business, margin, and maturity. I think we expect a similar mix as we look toward the remainder of the year. As I mentioned, I think if you look at the core levers that drove the majority of the margin improvement in Q1, I sort of rounded to about 50 basis points. If you look at the midpoint of our guidance at 45 bps, that's pretty consistent with what we're seeing. And like I said, in Q1, the sort of upside, I think, generally came from inflation moderating, and that's obviously not definitively built into the outlook. Yeah, and I would just add, I think, I'm sorry, didn't mean to interrupt you.

Speaker Change: In terms of the range of offerings as well so.

Speaker Change: It's a combination of both.

Speaker Change: I think we I think we can basically put COVID-19 in the rearview mirror and say that we fully recovered.

Speaker Change: Any of the base business losses that we experienced during Covid and now we're just beginning to really.

Speaker Change: And we'll get back to a steady state.

Speaker Change: And working on volume growth and.

Speaker Change: Improving customer counts.

Speaker Change: Thank you very much that's very helpful.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Ashish <unk> with RBC capital markets. Your line is open.

ashish: Jim Congrats on the appointment and solid results.

ashish: Just wanted to.

ashish: See if you had any thoughts on M&A.

ashish: Thinking of any tuck in acquisition already winning dumps the portfolio you've done some pretty good portfolio rationalization, but anything remaining on that front in terms of non core.

John J. Zillmer: I was just going to add, on the base business acceleration that we're seeing, I think it's a combination of things. It's improved volume in existing locations, more customers having returned to work on a full-time basis, so you're seeing a ramp of improving customer counts. And you're also seeing the ramp-up of accounts that we've sold over the course of the last couple of years beginning to mature in terms of the range of offerings as well. So it's a combination of both.

ashish: Okay.

Yes, I would say this is John.

We're always looking at potential tuck in acquisitions.

John J. Zillmer: Acquisitions to go ahead and build out capabilities sort of the various businesses. We operate we're always open to looking for those kinds of extensions. If you will as we did with union supply.

John J. Zillmer: And nothing nothing.

John J. Zillmer: On the horizon today to talk about.

John J. Zillmer: I think we can basically put COVID in the rearview mirror and say that we've fully recovered any of the base business losses that we experienced during COVID, and now we're just beginning to really get back to a steady state and working on volume growth and improving customer counts. Thank you very much. That's very helpful, very clear. Thank you. The next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open.

John J. Zillmer: And but we're always open and willing to pursue things that.

John J. Zillmer: That may become available if we can do it on an accretive basis. So we don't view M&A as our primary growth driver, it's really a secondary driver and.

John J. Zillmer: And we'll be opportunistic, but we'll be very disciplined.

That's very helpful color.

Speaker Change: I'll give you that.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Josh Chan with UBS. Your line is open.

Joshua K. Chan: Hi, good morning, Thanks for taking my questions.

Ashish Sabadra: Jim, congrats on the appointment and solid results. I just wanted to see if you had any thoughts on M&A, if you're thinking of any token acquisition or anyone in terms of the portfolio. You've done some pretty good portfolio rationalization, but anything remaining on that front in terms of non-core ownership? Thanks.

Joshua K. Chan: I know that on the net new side, you aim at 4% to 5% a year. So I guess with one quarter in how do you feel about that target for this year and what do you see are the biggest opportunities or risks on that front. Thank you.

Speaker Change: Yes, I would say.

Speaker Change: That's absolutely the target that we have established for ourselves. That's also built into our compensation system. So you have the entire management team focused on those initiatives on net new growth.

John J. Zillmer: Yeah, I would say this is John. We're always looking at potential tuck-in acquisitions to go ahead and build out the capabilities of the various businesses we operate. We're always open to looking for those kinds of extensions, if you will, as we did with Union Supply. And nothing, you know, nothing, on the horizon today to talk about, but we're always open and willing to pursue things that may become available if we can do it on an accretive basis. So we don't view M&A as our primary growth driver; it's really a secondary driver, and we'll be opportunistic, but we'll be very disciplined. That's a very helpful color.

Speaker Change: And so the organization is very disciplined and very focused on it.

Speaker Change: We believe obviously in setting those targets that they are achievable and there is nothing thats transpired in the last in the last quarter that would that would cause me to change that target.

Speaker Change: I would say as I said earlier, our opportunities are very robust our pipeline is very large and without getting into specific opportunities.

Speaker Change: I have no no concern around the 4% to 5%.

Speaker Change: Net new number being a challenge.

Speaker Change: Perfect. Thank you for that color and if I can ask one on the corporate expense.

Joshua K. Chan: Solid. All right. Our next question comes from Josh Tan with UBS. Your line is open. Hi, good morning.

Speaker Change: Lowered nicely I'm sure that the spin has to do with that but I guess is the new level of corporate expense, what we should expect going forward.

John J. Zillmer: Thanks for taking my questions. I know that on the net new side, you aim at 4 to 5% a year. So I guess, with one quarter in, how do you feel about that target for this year? And what do you see are the biggest opportunities or risks on that front?

Speaker Change: Yes, that's right, it's sort of a rebase for the spin we're very focused on SG&A, that's an area that I oversee universe.

Speaker Change: Prior role and we work very closely with our functional groups to try to be flat to the prior year. We did have some moderate benefit with some share based comp a few true ups, there and some forfeitures that provided a moderate benefit to the quarter. So, but generally I think that run rate should be fairly consistent.

John J. Zillmer: Yeah, I would say that's absolutely the target that we have established for ourselves. It's also built into our compensation system, so you have the entire management team focused on those initiatives for net new growth. And so the organization is very disciplined and very focused on it. You know, we believe, obviously, in setting those targets that they're achievable. And there's nothing that has transpired in the last quarter that would cause me to change that target.

Speaker Change: Okay, great. Thank you both for the color and the time.

Speaker Change: Thank you.

Speaker Change: The next question comes from Andrew Wittmann with Baird. Your line is open.

Andrew John Wittmann: Okay, great. Thanks for taking my question guys I guess.

Andrew John Wittmann: With the benefit of a few months here since the uniform rental.

Andrew John Wittmann: Business has been separated out John I was just wondering if you'd look at the kind of the corporate structure that supports the business. There is there anything that you are identifying that could result from that youre, making more efficient maybe either now today or as you look at.

Jim Tarangelo: I would say, as I said earlier, our opportunities are very robust. Our pipeline is very large, and without getting into specific opportunities, I have no concern around the 4% to 5% net new number being a challenge. Perfect. Thank you for that color. And if I can ask one on the corporate expense, that was lowered nicely. I'm sure that the spin had to do with that.

Andrew John Wittmann: Sure.

Andrew John Wittmann: And services agreement runs out probably later this calendar year when Theyre probably off your assistance, if theres anything to think about there.

Andrew John Wittmann: Yes.

Andrew John Wittmann: Minor adjustments, we've really rebased the organization already.

Andrew John Wittmann: And we're able to provide those services with a base level of employee that that will probably maintain going forward. So I don't anticipate any <unk>.

Jim Tarangelo: But I guess this new level of corporate expense is what we should expect going forward? Yeah, that's right. It's sort of a rebase for the spin.

Jim Tarangelo: Yeah, we're very focused. On SG&A, that's an area that I oversee and oversaw in my prior role, and we work very closely with the functional groups to try to be flat to the prior year. We did have some moderate benefits with some share-based comp, a few true-ups there, and some forfeitures that provided a moderate benefit to the quarter, but generally, I think that run rate should be fairly consistent. Thank you both for the color and the time.

Andrew John Wittmann: Further restructuring or any significant change I think we're very happy with the level of Resourcing in the organization today, and we expect that we'll be able to absorb additional growth as the organization continues to add net new business and grow both domestically and internationally that we can absorb that growth without having to add.

Andrew John Wittmann: SG&A. So that's why we're very confident in being able to manage that lever.

John J. Zillmer: Thank you. The next question comes from Andrew Wittmann with Bayard. Your line is open. Yeah, great. Thanks for taking my question, guys. I guess with the benefit of a few months since the Unifor rental business has been separated out, John, I was just wondering if you look at the kind of the corporate structure that supports the business, if there's anything that you're identifying that could result in that making you more efficient, maybe either now, today, or as you look at as their transition services agreement runs out probably later this calendar year when they're probably off your systems, if there Yeah, there are minor adjustments.

Andrew John Wittmann: Very aggressively and appropriately going forward, so no anticipated significant change going forward.

Andrew John Wittmann: Okay. That's helpful and then I guess.

Andrew John Wittmann: I wanted to ask on retention and obviously retention.

Andrew John Wittmann: Covid is in the rearview mirror, but one of the good things that happened from covered I guess from a retention point of view is that that kind of spike.

Andrew John Wittmann: I was just wondering if you could address the trends in your retention.

Andrew John Wittmann: <unk> seen here in the last few months.

Andrew John Wittmann: And maybe how that relates to both of those spikes.

Andrew John Wittmann: During the Covid period and versus the historical averages.

Speaker Change: Yes, I would say we are.

Speaker Change: We're basically right on the historical average we expect to be in that range again, this year and really no change to the pattern.

John J. Zillmer: We've really rebased the organization already, and we're able to provide those services with a base level of employees that will probably maintain going forward. So don't anticipate any further restructuring or any significant change.

Speaker Change: And yes during during the first year of Covid retention spike pretty dramatically.

Speaker Change: I think it will settle in in this 96% range.

Speaker Change: And I don't see any real.

Speaker Change: Really any change to that is our expectation that some years will be 96, five some years it might approach 97.

John J. Zillmer: I think we're very happy with the level of resourcing in the organization today, and we expect that we'll be able to absorb additional growth as the organization continues to add net new business and grow both domestically and internationally. We can absorb that growth without having to add any SG&A. So that's why we're very confident in being able to manage that lever, you know, very aggressively and appropriately going forward. So there is no anticipated significant change going forward. Okay, that's helpful.

Speaker Change: But in general I think.

Speaker Change: That level of retention is.

Speaker Change: Certainly achievable.

Speaker Change: Don't see any threat to that.

Speaker Change: Thank you very much.

Speaker Change: Thank you Andrew.

Speaker Change: Our next question comes from Harold anti with Jefferies. Your line is open.

Speaker Change: Okay.

Harold: Hello. This is <unk> on for Stephanie more.

Harold: So June quick question.

John J. Zillmer: And then I guess I wanted to ask about retention, and obviously retention, you know, you said COVID's in the rearview mirror, but one of the good things that happened with COVID, I guess, from a retention point of view, is that that kind of spiked. I was just wondering if you could address the trends in your retention that you've seen here in the last few months and maybe how that relates to those spikes during the COVID period and versus the historical average. Yeah, I would say we're, you know, basically right on the historical average. We expect to be in that range again this year, really no change to the pattern. And yes, during the first year of COVID, retention spiked pretty dramatically.

Harold: Wanted to get an idea.

Harold: Covid is in the rearview, which focus priorities and strategies are for the company looking forward over the next fiscal year.

Harold: And for them.

Harold: Sure.

June: I've worked with John and Tom obviously in implementing.

Speaker Change: Our growth oriented strategy right over the years and it's working right you see what growth can do in the first quarter and we are producing great results. So yes. The strategy is very consistent as I transition into this role I think over the next the next year or so is really about <unk>.

Speaker Change: Execution continuing to drive.

Underlying.

Speaker Change: Levers that we've discussed.

Speaker Change: I think I sort of back to the basics in terms of operational discipline now that COVID-19 and the supply chain disruption is behind us. So there are some opportunities I think with food and labor middle of the P&L without disrupting the high quality service that we deliver to our clients. So that's really the focus for me.

John J. Zillmer: But I think it'll settle in in this 96% range. You know, and I don't see any real, really any change to that, as our expectation is that, some years, it'll be 96 and a half, some years, it might approach 97. But in general, I think that that level of retention is, certainly achievable, and I don't see any threat to that. Thank you very much.

Speaker Change: I am fully committed and very confident in the outlook. We provided for this year and committed to the 26 targets. The company has established.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Faiza <unk> with Deutsche Bank. Your line is open.

Faiza: Yes, hi, thanks, and good morning.

Harold Antar: Thank you, Andrew. Our next question comes from Harold Antar with Jeffries. Your line is open. Hello, this is Harold Antoine with Stephanie Moore.

Faiza: Wanted to follow up around supply chain, so we talked a little bit about inflation in product costs, improving but you made a comment around how the current landscape presents significant opportunities, but wanted to hear a little bit more around your supply chain initiatives beyond just inflation decelerating.

Jim Tarangelo: So, June, quick question. I just want to get an idea, you know, as COVID is in the rearview mirror, of what your focus, priorities, and strategies are for the company looking forward over the next fiscal year and further. So, I've worked with John and Tom, obviously, in implementing our growth-oriented strategy right over the years, and it's working, right? You see what growth can do in the first quarter, and we're producing great results. So, you know, the strategy is very consistent as I transition into this role.

Faiza: Yes.

Faiza: We.

Speaker Change: As you know we have a very robust supply chain organization that includes not only the.

Speaker Change: The core contract foodservice business, but also of Denver, and a number of different gpo's and the vendor family focused on different verticals and different businesses, both domestically and internationally.

Speaker Change: We continue to be very.

Speaker Change: Interested in expanding the size and scope of the Gpo's, both organically through new sales efforts by taking on new customers as well as extending geographies that we serve.

Jim Tarangelo: I think the next year or so is really about execution, continuing to drive the underlying numbers that we've discussed. I think it's sort of back to the basics in terms of operational discipline now that COVID and the supply chain disruption are behind us, so there are some opportunities, I think, with food and labor in the middle of the panel without disrupting the high-quality service that we deliver to our clients. So, that's really the focus for me. You know, I am fully committed and very confident in the outlook we've provided for this year and committed to the 26 targets the company has established. Thank you. The next question comes from Faiza Alwy with Deutsche Bank. Your line is open. Yes, hi, thanks, and good morning.

Speaker Change: And the GPO arena and so it is an important component of our of our future growth and future profitability.

It is.

Speaker Change: It's a terrific organization.

Speaker Change: <unk>, who runs that organization, having taken over for John Romano last year. When he passed away is doing a terrific job is really integrated very efficiently.

Speaker Change: Additionally, and.

And effectively.

Speaker Change: So the leadership of that role.

Speaker Change: So we're very we're very pleased with the overall performance.

Speaker Change: They are hyper focused on optimizing for our frontline managers.

Faiza Alwy: I wanted to follow up on supply chains. So we talked a little bit about inflation and product costs improving, but you made a comment about how the current landscape presents significant opportunities. So I wanted to hear a little bit more about your supply chain initiative beyond just inflation decelerating. Yeah, it's, you know, we have a very robust supply chain organization that includes not only the core contract food service business but also Avendra and a number of different GPOs in the Avendra family focused on different verticals and different businesses, both domestically and internationally. And we continue to be very interested in expanding the size and scope of the GPOs, both organically through new sales efforts by taking on new customers, as well as extending the geographies that we serve in the GPO arena. And so it is an important component of our future growth and our future profitability. It is, you know, it's a terrific organization. Autumn Bales, who runs that organization, having taken over for John Orobono last year when he passed away, is doing a terrific job.

Speaker Change: Through the right products the right services at the right the right partners, they're very focused on sustainability and all of those efforts that we have from an ESG perspective as well.

Speaker Change: And so we're we're committed to it we believe that we can continue to accelerate the growth of the <unk>.

Speaker Change: Supply chain profitability and that will be an important part of our long term margin improvement going forward.

Speaker Change: Great. Thank you for that and then just one.

Speaker Change: Wanted to clarify or follow up comments.

Speaker Change: Comments, you made on pricing.

Speaker Change: Thank you Sir.

Speaker Change: As inflation moderate pricing will moderate as well.

Speaker Change: Are you starting to get any pushback on pricing or just curious sort of how you are anticipating.

Speaker Change: Pricing going forward to the to the extent inflation moderates. It should we assume that it's really just a moderation in incremental pricing or are you starting to see.

Speaker Change: Some sort of do you have to give back on pricing I guess is the question yes.

Speaker Change: Yes, no we wouldn't we wouldn't be giving back on pricing, but we will see the rate of increase in price may moderate to more closely align with inflation expectations. So as you as you think about last year. For example, we had outsized pricing because of the very high inflation rate, that's kind of what drove.

John J. Zillmer: It's really integrated very efficiently and effectively into the leadership of that role. And so we're very pleased with the overall performance. You know, they are hyper-focused on optimizing for our frontline managers through the right products, the right services, the right partners. They're very focused on sustainability and all those efforts that we have from an ESG perspective as well.

Speaker Change: Our pricing lag if you will or we are pursuing very aggressive price increases to recover cost increases that were beyond the norm.

Speaker Change: I think this industry is likely to go back to a much more normalized.

Speaker Change: I think this industry is likely to go back to a much more normalized.

John J. Zillmer: And so we're committed to it. We believe that we can continue to accelerate the growth of supply chain profitability, and that will be an important part of our long-term margin improvement going forward. Great, thank you for that.

Speaker Change: Reising model, which is really inflation recovery.

Speaker Change: And.

Speaker Change: Without any without any significant future spikes I think you'll just see pricing kind of moderate to around the level of inflation somewhere in that range.

Speaker Change: Great. Thank you so much.

John J. Zillmer: And then just wanted to clarify or, you know, follow up on comments you made on pricing. I think you said that as inflation moderates, prices will moderate as well. Are you starting to get any pushback around pricing or just curious sort of how you're anticipating pricing going forward to the extent inflation moderates? Should we assume that it's really just moderation and incremental pricing, or are you starting to see some sort of, do you have to give back on pricing? I guess that is the question.

Speaker Change: Our last year our <unk>.

Speaker Change: Last question comes from Ian Zaffino with Oppenheimer. Your line is open.

Ian Zaffino: Hi, great.

Ian Zaffino: Thank you very much congratulations Jim welcome aboard.

Ian Zaffino: Very happy to see these numbers here.

Ian Zaffino: So question I guess would be.

This new environment.

Ian Zaffino: How does this impact your ability to win new business to get.

New outsourcing versus competitive wins.

Ian Zaffino: How are we seeing this now I guess as youre getting more confidence in the business, we're seeing inflation coming down pricing seems to be good. It seems that your sales force is really the top.

John J. Zillmer: Yeah, no, we wouldn't, we wouldn't be giving back on pricing, but we'll see the rate of increase in price may moderate to more closely aligned with inflation expectations. So as you think about last year, for example, we had outsized pricing because of the very high inflation rate. That's kind of what drove our pricing lag, if you will; we were pursuing very aggressive price increases to recover cost increases that were beyond the norm. You know, I think I think this industry is likely to go back to a much more normalized pricing model, which is really inflation recovery. And, you know, without any significant future spikes, I think you'll just see prices kind of moderate to around the level of inflation somewhere in that range.

Ian Zaffino: So how do we think about that now going forward as far as what will be the big drivers of growth in those buckets.

Ian Zaffino: How to think about the environment.

Ian Zaffino: Celebrating or decelerating etcetera. Thanks.

Speaker Change: Yes, I think.

Speaker Change: The overall environment as we talked about it still is a tremendous opportunity for US right. There is a significant portion of it. It's a very large market that continues to have.

Speaker Change: A significant portion of that is.

Speaker Change: Currently in sourced so yes, the strategy going forward remains focus on that new and like I said driving the levers that we talked about previously I think with the supply chain disruption behind us and Covid behind us. It just makes driving those levers sort of more important in <unk>.

Faiza Alwy: Great. Thank you so much. Our last question comes from Ian Zaffino with Oppenheimer. Your line is open. Hi, great.

Speaker Change: Us toward.

Speaker Change: The underlying strategy that we've outlined.

Ian Zaffino: Thank you very much. Congratulations, Jim. Welcome aboard! You know, I'm very happy to see these numbers here. So the question I guess would be, you know, in this new environment, how does this impact your ability to win new business, to get new outsourcing versus competitive wins, you know, how are we seeing this now, I guess, as you're getting more confident in the business, we're seeing inflation coming down, you know, pricing seems to be good, it seems like your sales force is really, you know, on top. So, how do we think about that Yeah, I think, you know, the overall environment, as we talked about, still is a tremendous opportunity for us, right? There's a significant portion.

Speaker Change: I'll just add.

Speaker Change: A couple of comments first of all we believe that.

Speaker Change: Achieving the net new numbers is important for the long term success of the organization, we have resource the company we've rebuilt the organization.

Speaker Change: Rebuilt the sales and growth culture.

Speaker Change: And those things those things are in place and are sustainable and will continue to drive our longer our long term performance. So.

Speaker Change: The model really is around retention of our existing customers and maintaining retention at that call it 96% range.

Speaker Change: Net new of 4% to 5% a year and then cost recovery through inflationary pricing.

Speaker Change: Our recovery going forward and that all translates into a very sustainable long term value creating growth model.

Jim Tarangelo: It's a very large market that continues to have a significant portion that is currently insourced. So, you know, the strategy going forward remains focused on net new and, like I said, driving the levers that we talked about previously. I think with the supply chain disruption behind us and COVID behind us, it just makes driving those levers sort of more important and brings us toward, you know, the underlying strategy that we've outlined. Yeah, I think I'll just add a couple of comments.

Speaker Change: We're absolutely committed to it the marketplace certainly can support it.

Speaker Change: The range on the scope of opportunities available to us or are literally limitless.

Speaker Change: Both from a geographic perspective as well as a.

Speaker Change: Conversion perspective, so plenty of self op conversion left in the in all the markets.

Speaker Change: And we're gonna be competing very aggressively to continue the growth of the organization. So we love the business model.

John J. Zillmer: First of all, you know, we believe that achieving the net new numbers is important for the long-term success of the organization. We've restructured the company, we've rebuilt the organization, we've rebuilt the sales and growth culture, and those things are in place and are sustainable and will continue to drive our long-term performance. So, you know, the model really is around retention of our existing customers and maintaining retention at that, you know, call it the 96% range, net new of 4 to 5% a year, and then cost recovery through inflationary pricing recovery going forward.

Speaker Change: We've built an organization that can now take advantage of it is focused on it.

Speaker Change: Compensated on it.

Speaker Change: And.

And we are and we're delivering on those results.

Speaker Change: Okay. Thank you very much that's great color.

Speaker Change: I will now turn the call I will now turn the call back over to Mr. <unk> for any closing remarks.

Speaker Change: Well first of all I would like to say thank you for all of the team members at Aramark, who would have produced terrific results in the first quarter. Thank you for all your hard work and efforts are really proud of the work that the team has done I would also like to thank all of the investment community for their support of the organization.

Speaker Change: And we're looking forward to a good 2024. Thank you very much for your time and attention. This morning.

John J. Zillmer: And that all translates into a very sustainable, long-term, value-creating growth model, and we're absolutely committed to it. The marketplace certainly can support it. The range and the scope of opportunities available to us are literally limitless, both from a geographic perspective as well as from a conversion perspective. So, there is plenty of sell-top conversion left in all the markets, and we're going to be competing very aggressively to continue the growth of the organization. And we love the business model. You know, we've built an organization that can now take advantage of it, is focused on it, is compensated for it, and we're delivering on those results. Okay, thank you very much. That's great, Colin. I will not turn the call back over to Mr. Zillmer for any closing remarks.

Thank you for participating this concludes today's conference you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

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John J. Zillmer: Well, first of all, I would like to say thank you to all of the team members at Aramark who have produced terrific results in the first quarter. Thank you for all your hard work and efforts. I'm really proud of the work that the team has done. And I would also like to thank all of the investment community for their support of the organization. And we're looking forward to a good 2024.

Speaker Change: Yes.

Speaker Change: Okay.

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Operator: Thank you very much for your time and attention this morning. Thank you for participating. This concludes today's conference. You may now disconnect. The phone rings. Sigh.

Speaker Change: Okay.

Speaker Change: Yes.

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