Q1 2025 Aramark Earnings Call
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Tanya: Good morning, and welcome to Aramark's first quarter fiscal 2025 earnings results conference call. My name is Tanya, and I will be your operator for today's call. At this time, I would like to inform you that this conference is being recorded for rebroadcast and that all participants are in a listen-only mode. We will open the conference call for questions at the conclusion of the company's remarks.
Speaker Change: I will now turn the call over to Felise Kissell, Senior Vice President, Investor Relations and Corporate Development. Ms. Kissell, please proceed.
Felise Kissell: Thank you and welcome to Aramark's earnings conference call and webcast.
Speaker Change: This morning we will be hearing from the company's CEO, John Zillmer, as well as CFO, Jim Tarangelo. As always, there are accompanying slides for this call that can be viewed through the webcast and are also available on the IR website for easy access.
Speaker Change: Our notice regarding forward-looking statements is included in our press release.
Speaker Change: During this call, we will be making comments that are forward-looking.
Speaker Change: 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 SEC filings.
Speaker Change: We will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in our press release and our IR website. With that, I will now turn the call over to John.
John Zillmer: Good morning, everyone. Thank you all for joining us. On today's call, Jim and I will review our first quarter results and share our financial expectations for the remainder of the fiscal year.
Speaker Change: Before we begin, I want to acknowledge our friends, partners, shareholders, and other stakeholders who have been impacted by the devastating wildfires in the Los Angeles area. We hope your families and loved ones are safe.
Speaker Change: While Aramark's operations were not largely affected, our hearts go out to all these communities, and we are currently working with relief organizations to lend assistance wherever we can.
Speaker Change: Turning to our performance in the quarter, we remain committed to our strategic priorities. First, our ability to drive strong, profitable, top-line growth through a combination of base business and net new business.
Speaker Change: In the first quarter, we achieved record global FSS revenue for any quarter in Aramark's history.
Speaker Change: Second, our focus on accelerating AOI growth from increased volume, supply chain efficiency, and cost discipline. Global FSS also reached record AOI profitability compared to any previous first quarter.
Speaker Change: And third, our efforts in leveraging our capital structure capabilities. Most recently, we initiated our oversubscribed debt refinancing to extend maturities and purchased Aramark shares as part of the company's $500 million share repurchase program announced in November.
Speaker Change: Aramark's organic revenue grew 5% in the first quarter to $4.6 billion, with the food service business up over 6% as a result of strong-based business and net new business.
Speaker Change: We expect revenue growth to accelerate, particularly in the second half of the year, given our great start in fiscal 25 in both new account wins and client retention.
Speaker Change: Across the organization, we're focused, motivated, and incentivized to achieve net new of 4 to 5%, with retention levels above 95%. And I firmly believe these objectives will be accomplished this year and beyond.
Speaker Change: The food service business increased 5% driven by higher participation rates and workplace experience, meal plan optimization and collegiate hospitality, additional micro market and vending services and refreshments and strong new business wins in corrections.
Speaker Change: Our new business pipeline remains significant, including in first-time outsourcing, and as I mentioned, we are already off to a great start this fiscal year.
Speaker Change: New additions just added to the client portfolio include the opening of Wal-Mart's new state-of-the-art headquarters, General Dynamics, WPP, and the Indianapolis Zoo.
Speaker Change: We're also excited about retaining Arizona State University, our largest collegiate hospitality client, and expanding our services to now include athletics.
Speaker Change: In the next few months, we'll be expanding our culinary capabilities through our partnership with Michelin-starred chef Daniel Boulud and our LifeWorks brand, focused on corporate catering, special events, conferences, and much more. Chef Boulud recently opened La Tête d'Or restaurant in New York City, where we have an ownership interest.
Speaker Change: The restaurant has been extremely well received with accolades in the press and a waitlist often exceeding 1,000 guests per night.
Speaker Change: International had another great quarter of organic revenue growth, increasing 10% to $1.3 billion year-over-year.
Speaker Change: All geographic regions contributed to this strong performance, with the UK, Canada, Chile, and Ireland leading the way.
Speaker Change: I want to commend our teams in Spain for effectively managing through the severe flooding that occurred in the Valencia region during the quarter and helping our clients successfully resume operations at site locations.
Speaker Change: UK colleagues joined the Aramark Korea team on site to speak on best practices in private outsourcing within defense and government services.
Speaker Change: Our integrated strategy of presenting a united front, a team that collaborates across borders, has led to substantial growth potential in this area and across the broader portfolio.
Speaker Change: We were once again named the most innovative company in Chile within the managed services category in a study conducted by education and consulting institutions, highlighting our abilities to develop new customized products and services.
Speaker Change: Chile experienced high single-digit organic revenue growth year-over-year, continuing to build upon our established reputation in the marketplace.
Speaker Change: Additional new business wins awarded in the first quarter within the International included further expanding our partnership with Walmart, now in Chile, Toyota in Argentina, Home Plus in Korea, and Aldi within Europe, among many other new client wins.
Speaker Change: collectively providing us the ability to build additional scale in the countries we serve. And you'll recall we previously announced an expanded partnership with FC Barcelona in November, and we're pleased to share that that work is underway.
Now for an update on supply chain.
Speaker Change: At the end of the first quarter, we expanded Aramark's global supply chain footprint and increased our purchasing scale with the acquisition of Quantum Cost Consultancy Group. Quantum has managed spend of nearly half a billion dollars with operations in countries including Spain, Portugal, Germany, and the Netherlands.
Speaker Change: Quantum's addition to our portfolio provides many highly advantageous opportunities to globally serve the hotel industry, as well as several other hospitality categories within restaurants, entertainment, senior living, and education.
Speaker Change: Our managed services and GPO total spend now exceeds $20.5 billion, and we are extremely excited about further leveraging our extensive and differentiated capabilities.
Speaker Change: Inflation remains favorable across our global portfolio, and we continue to expect inflation levels in the 2 to 3 percent range as we move through fiscal 25.
Speaker Change: We believe that the flexibility of our business model in menu creation combined with our supply chain size and scale provides us with the ability to effectively manage market environment and government policy changes.
Speaker Change: This includes the fact that the vast majority of our products used in the United States are domestically sourced and are highly selective and maintain strict protocols for suppliers.
Speaker Change: Before turning the call over to Jim, I'd like to welcome back Rick Dreiling to Aramark's Board of Directors. Rick's addition increases the size of our board to 11. As many of you know, Rick is the former Executive Chairman and CEO at Dollar Tree, served as Chairman and CEO of Dollar General, and currently sits on the board of Lowe's.
Speaker Change: I'll now turn the call over to Jim for a financial review of the business.
Jim Tarangelo: Thanks, John, and good morning, everyone. We are off to a great start to the fiscal year on executing our financial and strategic goals.
Jim Tarangelo: These achievements include reporting double-digit AOI and adjusted EPS growth in the first quarter.
Jim Tarangelo: expanding our global supply chain footprint and increasing our purchasing scale with the acquisition of quantum in Europe.
Jim Tarangelo: and further enhancing our financial flexibility by initiating steps to extend our debt maturities as well as returning capital to shareholders and commencing our share repurchase program.
Speaker Change: This is in addition to our efforts around driving top-line growth, which John just reviewed, reflecting the company's continued momentum in the business.
Speaker Change: Now, let's specifically focus on our profitability success in the quarter. Operating income in the first quarter was $217 million, up 30% versus the prior year.
Speaker Change: Adjusted operating income was $258 million, up 13% on a constant currency basis compared to the same period last year.
Speaker Change: AOI margin of 5.6% increased more than 40 basis points year-over-year on a constant currency basis.
Speaker Change: The higher profitability and margin expansion was from higher base business volume combined with the maturity of new business, supply chain efficiencies, and effective middle of the P&L management of costs.
Speaker Change: Results were also strengthened by our ongoing approach to technology, including leveraging automation and AI for speed in capturing the latest menu pricing and adding self-service capabilities, increasing efficiencies for both our clients and Aramark.
Speaker Change: Turning to the business segments, the U.S. reported AOI growth of 13% with an AOI margin improvement of more than 60 basis points compared to the same period last year.
Speaker Change: Education and healthcare had particularly strong quarters driven by revenue drop-through, supply chain productivity, and strong middle-of-the-P&L management of costs.
Speaker Change: On a constant currency basis, the international segment had year-over-year AOI growth of 15 percent and an AOI margin improvement of more than 20 basis points.
Speaker Change: Profitability growth was led by the team's efforts in Chile, Germany, and Canada, which more than offset the impact of severe flooding in the Valencia region of Spain, temporarily affecting client locations, and representing approximately 20 basis points.
Speaker Change: Turning to the remainder of the income statement, interest expense was $76 million, a decrease when compared to the prior year period from lower debt levels. The adjusted tax rate was approximately 25 percent.
Speaker Change: Our quarterly performance resulted in gap EPS of $0.39 and adjusted EPS of $0.51, an increase of 25% versus the prior year on a constant currency basis.
Speaker Change: Regarding cash flow, as expected and consistent with our normal first quarter cadence, we experience a cash outflow due to the natural seasonality of the business, specifically in collegiate hospitality.
Speaker Change: Our free cash flow is stronger compared to the prior year period, improving $63 million from higher earnings and favorable working capital.
Speaker Change: As previously mentioned, we acquired Quantum in the first quarter, which among other benefits, provides us an additional GPO presence in Europe to build on our existing business.
Speaker Change: We also started repurchasing Aramark shares toward the end of the quarter and into the second quarter as part of our $500 million share repurchase program we announced in November.
Speaker Change: To date, we have repurchased over 645,000 shares at a purchase price of about $25 million.
Speaker Change: We took steps to extend maturities and further enhance our financial flexibility by issuing a notice to repay our 552 million 2025 U.S. senior notes and to refinance 839 million of 2027 term loans.
The transactions are expected to close on February 18th.
Speaker Change: These debt obligations will be replaced with $1.4 billion of new term loans that will mature in 2030. The actions are leverage neutral and at comparable interest rates.
Speaker Change: At quarter end, the company had over $1.7 billion in cash availability.
I'll wrap up with our performance expectations.
Speaker Change: We are pleased with the start to our fiscal year and our financial results in the quarter.
Speaker Change: The sales pipeline remains substantial and we are off to a great start in Fiscal 25 on new account wins as well as client retention.
Speaker Change: We continue to expect revenue growth to accelerate in the second half of the fiscal year as we lap the facilities exits and onboard new account wins.
Speaker Change: With that, we anticipate that the company's revenue growth in the second half will resume to double-digit growth.
Speaker Change: We remain extremely confident in the full year, and we continue to anticipate performance for FY 25 as follows.
Organic revenue growth between 7.5 and 9.5 percent.
AOI growth between 15% and 18%.
Speaker Change: adjusted EPS growth between 23 and 28 percent and a leverage ratio of approximately three times by the end of the fiscal year.
Speaker Change: As previously shared, this includes an extra or 53rd week in the fourth quarter.
Speaker Change: We are extremely confident in our ability to consistently deliver strong top and bottom line growth, a significant pipeline of new business opportunities,
Speaker Change: The new account wins and client retention to date and our high-performing talent to execute on our profitable growth strategies Represent the power of Aramark and the excitement of what's ahead
John Zillmer: With that, I will turn it back to John. Thank you for your time this morning.
John Zillmer: To conclude, we feel incredible momentum across the business and believe deeply in the ability of our teams around the globe to reach and go well beyond the financial targets we've set for ourselves.
Speaker Change: I continue to firmly believe the best still lies ahead. Thank you to our employees for their tireless commitment to these goals, which I'm confident we'll achieve together. An operator will now open the call for questions.
Speaker Change: 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 11.
Speaker Change: Our first question will come from Ian Zaffino of Oppenheimer. Ian, your line is open.
Ian Zaffino: Thank you very much. Thanks for the color here. Thanks for the guide.
Speaker Change: You know, I really enjoyed the discussion about the new winds.
Ian Zaffino: Maybe you could also talk about, you know, I've seen out there the athletics business at Nebraska. You know, maybe give us some color on that. That seems like it's a really big one. Any details you could provide would be really helpful. Thanks.
Speaker Change: Thanks, Anne. That's, excuse me, that's not really ours to announce. We're excited about the opportunity.
Ian Zaffino: And we expect to hear very soon and have that confirmed. I think the Board of Regents is meeting this week.
Ian Zaffino: So it's an exciting opportunity. As you know, the NCAA athletics business for us continues to grow rapidly. Arizona State just awarded us their athletics business as well, so it's an area that we're particularly focused on and excited about the growth potential.
Speaker Change: Okay, great. And then, as a follow-up, I guess I just have two more, and one's relatively quick, is can you tell us how much of a drag the facility's exits were to the top line? And then also, how do you think about inflation here, you know, tariffs, how are you preparing for, you know, that potential, or at least that risk thing?
Thanks.
Speaker Change: Yeah, I'll start and John will comment as well. The facilities actually had about a 2% impact.
Speaker Change: You know, we think the overall impact of tariffs as they're currently announced...
Speaker Change: would be roughly 30 bps in terms of our increased cost.
Speaker Change: We've managed through the effects of these kinds of things in the past, we don't see it as having a material impact on the
Speaker Change: The product that we buy is sourced locally in-country, and so we see the impact of tariffs as fairly de minimis.
Okay, thank you very much.
Thank you. Thank you. Bye-bye. Thank you. Thank you.
Lizzie, your line is open.
Hi there, thank you for taking the question.
Speaker Change: I just wanted to dive in a bit more on your guidance about the acceleration to double-digit growth in the second half. Understanding most of that's probably weighted to 4Q given, you know, you're lapping the facilities exits by then, you have the 53rd week, but maybe just some help on the cadence through the year, how much of a bump we might get in 2Q and 3Q versus kind of where we are now.
Speaker Change: Surely, I'll take that. And you're right. So as we lapse the facility exits, that will be a big driver of the revenue growth.
Speaker Change: acceleration in the second half of the year. The onboarding of new business, we're off to a really strong start with our new, a strong start with the retention, so we have good visibility.
Speaker Change: into what those revenues will look like for the second half of the year. And then there's a 53rd week, which again we talked about, about 2% for the full year. Obviously that would be more like 4% in the second half. So those are the main drivers of the revenue acceleration.
Speaker Change: Yeah, and I'll just reiterate that we're very excited about the level of activity in terms of new account sales and the very high levels of retention that we're achieving.
Speaker Change: and feel very confident in reaffirming our numbers for the full year and very excited about the level of new account activity.
Got it, that's helpful, thank you.
Speaker Change: may be too early to ask this question. I know you do have guidance out there for 26 at least on the operating margin kind of side of things, but just, I guess, as you think about lapping.
Speaker Change: the 53rd week impact in 2026 on the organic growth side of things like how do you think about the outlook there and what kind of might offset some of that potential headwind?
Speaker Change: If you look at the run rate, the guy this year is 7.5% to 9.5%, so roughly 2% or so.
Speaker Change: coming from the 53rd week, we're in that zone of five to eight percent organic growth rate, right? And that's the consistent with the growth model we've described and that's the run rate that we will be at in the second half of the year and carrying us into fiscal 26. Again, we're confident about our positioning for 26.
Got it. Thanks so much.
Speaker Change: Thank you. And I'm sure our next question comes from the line of Andrew Spineman from J.P. Morgan. Please go ahead.
Andrew Spineman: Hi Jim, this is very similar to the last question. I just want to make sure I understand what you're saying about double-digit.
Andrew Spineman: in saying double-digit revenue growth. Are we talking about double-digit revenue growth on a same-day basis in the second half of the year?
Speaker Change: Yeah, hi, Andrew. Yes, again, I'm not going to break out the quarters. Andrew, the 53rd week is embedded in that double-digit growth, the 7.5% to 9.5%, as I said.
Speaker Change: North double digit growth for the second half of the year. We'll continue to update you as the year continues.
Speaker Change: Okay, if I can, I'm just gonna ask one more. What was base revenue growth in the quarter and what drove it?
in the first quarter.
Speaker Change: Yeah, so in the first quarter, about 2% to 3% of the growth was from price. The remainder was from volume and net news. We don't break out, anything other than that. Okay, thanks.
Speaker Change: Thank you. And I show our next question comes from the line of Tony Kaplan from Morgan Stanley. Please go ahead.
Speaker Change: Thanks so much. Sounds like you have a strong new business pipeline and you mentioned the
first time outsourcing had been
Speaker Change: very positive as well. I was wondering, outsourcing has been a strong trend for some time. I guess directionally, have you seen outsourcing accelerate or
I've been...
Speaker Change: sort of similar to recent quarters. Just wanted to understand directionally what's going on there and why you think that that has continued for so long and if you think it'll continue for a lot longer. Thanks.
Speaker Change: Yeah, thanks Tony. You know, first of all, we are seeing it be very
Speaker Change: Very similar to the prior year in terms of the level of outsourcing and the level of first-time outsourcing. We're seeing it across a range of industries.
Speaker Change: and in a range of geographies. So it continues to be a very supportive trend.
Speaker Change: And some of these opportunities are new, different verticals that are coming to market and we see it as a continued tailwind, certainly for the balance of this year and going into 26 as well.
Thank you.
Speaker Change: And I show our next question comes from the line of Shlomo Rosenbaum from CFO. Please go ahead
Speaker Change: Hi, thank you very much. Hey John, for my first question I just want to focus a little bit more on the education business.
Growth was, I think it was 2.6% in the quarter.
Speaker Change: And on a historical basis, it's kind of light. In the commentary last quarter, the school calendar started a week later.
Speaker Change: So I just kind of thought that we would see a stronger first quarter. Maybe you can just give us a little bit of color as to the underlying growth as of what is going on in education and what we can expect, and then I'll have a follow-up.
Yeah, so I'll start.
Speaker Change: So there was some moderate benefit in the first quarter from timing and higher ed.
Speaker Change: sector. I think what you're seeing is really the timing of net new, so I'd expect the growth to accelerate in both our K-12 and collegiate hospitality business for the remainder of the year. So I think that's the timing that you're seeing sort of the growth being a little bit lower than...
Speaker Change: the historical norm. So, you know, we're very confident that will accelerate in the second half of the year.
Speaker Change: Yeah, and we aren't, we weren't seeing any underlying trend with respect to overall enrollment. Yeah, you know they, that continues to be very supportive in collegiate hospitality. The universities that we serve continue to have good enrollment growth.
Speaker Change: But again, we're very excited about collegiate hospitality. As you know, Arizona State was our largest.
Speaker Change: Collegiate Hospitality account. It was out for bid for the first time in 20 years.
Speaker Change: multiple other components of new business associated with that account including athletics. So we expect significant growth and in higher ed this year.
Speaker Change: Okay, great. And then, just to follow up, can you talk a little bit more about the quantum acquisition? You know, it was...
Speaker Change: What kind of revenue run rate is there? How should we expect it to add in fiscal year 25? And I'm just trying, part of this is really a modeling question because the FX headwind increased to revenue by about 105 million from last quarter. I'm just wondering how much is that going to be offset by this GPO acquisition and maybe if there's any commentary on profits and how we should think about that.
Speaker Change: Again, with the GPO business, remember that the revenues, while we manage quite a significant amount of spend.
Speaker Change: The first year as we integrate, I would not expect a significant source or change in profitability based on that deal, and it won't affect.
are overall of exposure.
Speaker Change: The long-term value of adding that additional spend is the ability to negotiate new and better deals for our existing accounts, for our existing customers.
Speaker Change: as well as to leverage the overall volume discounts that we receive as a result of the total purchasing spend globally. So it's accretive to earnings, very good margin after the first year, but not a significant driver of revenues.
Thank you.
Speaker Change: And I'm sure our next question comes from the line of Neal Tyler from Red Barn Atlantic. Please go ahead.
Thank you, yeah, good morning John, Jim.
Neal Tyler: Just a question on margins, please. I wonder if you could help me understand, you've framed in the past the different contributors to the margin improvement that you expect this year. I wonder if you could shed any light on whether the mix of those is any different in the quarter. And within that question, in the international business,
Speaker Change: Obviously the margin progress was a little bit less than in the US. I heard you mention in your prepared remarks that there was a 20 basis point impact of flooding, but I didn't know whether that was margin or growth. But is there also a...
Speaker Change: an impact from the faster rate of organic growth still holding back the margin progress in the international business? So it's a long-winded question, lots of aspects to it, but if you could talk a little bit around that, that'd be really appreciated. Thanks.
Speaker Change: So again, margin overall, right? We've made very good progress advancing margins at the company four, six last year, five, one.
in fiscal 24. So 50 basis points last year.
Speaker Change: This first quarter we're reporting 40 basis points. We like the consistency in what we're generating with margin accretion.
Speaker Change: The sources of that margin increase has been very consistent. Again, it confirms that our model is working. Supply chain efficiencies and scale.
Speaker Change: and the benefits from that really drove, continue to drive what we saw in Q1, along with maturity of new business and good management of what I call middle of the P&L food and labor costs.
Speaker Change: In terms of the international margin, you're correct, the 20 basis points or so.
Speaker Change: had 20 basis points of headwinds or so from the flooding in Valencia, so if you adjust for that, you're back to that sort of 40 to 50.
Speaker Change: basis point range. The organic growth in the ash grove is just the opposite actually. Their growth is helping to advance the margins as we scale. Same thing, scaling supply chain, scaling overhead, so just a bit of an unusual quarter with some headwinds from the flooding.
That's super clear, thank you very much.
Thank you.
Speaker Change: And I show our next question comes from the line of Jasper Bibb from Truist Security, please go ahead
Thank you.
Jasper Bibb: Hey, good morning. I wanted to clarify something on the potential 30 basis point margin impact from tariffs you talked about earlier. Would that just be the 10% tariff on China or would that also include the 25% tariffs on Mexico and Canada that I think have been suspended in the past couple days?
Jasper Bibb: Yeah, that was a modeled percentage of increase in terms of food cost, not margin decrement. So we thought about a 30 BIP increase in food cost to those items that were purchased.
Jasper Bibb: from Mexico, Canada, and China. As I mentioned, close to 85% of our product is sourced locally, so it's a relatively small impact, generally confined to things like fresh produce in the wintertime in the United States coming from Mexico.
Jasper Bibb: and to our price recovery. So, overall, we see the impact of tariffs as they're currently anticipated to be relatively de minimis to the total company financial performance.
Speaker Change: That's very clear. Thank you. And I want to ask about B&I in the U.S. Strength there was notable. Can you just talk about some of the drivers there and then potentially what return to office has meant for both, I guess, participation rates and your new sales pipeline?
Speaker Change: for the B&I marketplace. We continue to see employers bringing more people back on a full-time basis. And although I think many employers are still struggling, many employers are still struggling to implement those policy changes, but we do see the impact in both daily participation rates.
and in the
Speaker Change: Just the overall revenue growth in the sector continues to also be a source of significant new account wins.
Speaker Change: And we continue to build our capabilities around a range of service offerings that we think will continue to supply additional growth, particularly in the high-end catering markets.
Speaker Change: in cities like New York. And so we're excited about B&I. It's a great business, and we're very pleased with the results to date.
Excellent, thank you for taking the questions.
Speaker Change: Thank you. And I show our next question comes from the line of Josh Chan from UBS. Please go ahead.
Josh Chan: Hi, good morning John and Jim. The U.S. margins improved quite nicely this quarter. Could you talk about kind of the drivers behind that and whether there are any like one-timey items within the U.S.? Thank you.
that we've outlined, it's supply chain economics, it's continued.
improved compliance in terms of our purchasing programs.
Josh Chan: It's account maturity as new account wins continue to evolve and become more profitable over time
Jim Tarangelo: And so it's in the middle of the P&L management that Jim talked about. So it's really just fundamentally execution and no extraordinary one-time items included in that margin improvement.
Speaker Change: That's great to hear. And what are you seeing on the labor front in terms of availability and inflation? Any kind of anything to kind of watch out for there?
Speaker Change: No, we see labor availability as being very good. It had significantly improved over the circumstances of last year and the year before.
Speaker Change: You know, the great thing about this business is our contracts give us...
Speaker Change: great protections and flexibility in terms of execution against the business and so we see labor as as being very consistent and very solid and and really no significant impact as well this year.
Speaker Change: Great. Thanks to you all, John, and good luck in the second quarter.
Thank you.
Thank you.
Speaker Change: And I show our next question comes from the line of Harold Antwerp from Jefferies. Please go ahead.
Speaker Change: Hey, this is Harold Anto on for Stephanie Moore. So I guess on the quantum acquisition, I guess, how much M&A should we expect for the remainder of the year? Would M&A be all focus?
Speaker Change: on the GPO space just wouldn't give a sense for your M&A strategy there. And now the vendor have in over $20.5 billion suspense there.
Speaker Change: The target level of spend the company is looking to achieve just in the comments around that would be helpful
Speaker Change: Terrific, you know there's no target level for that we're trying to achieve other than to keep growing it.
Speaker Change: and we continue to believe in the power of supply chain and the ability to drive earnings as a result of growing the GPO.
So we will continue to look at opportunities for M&A.
Speaker Change: in both the GPO space as well as in our other lines of business where we can do bolt-on acquisitions that make sense from an economic perspective.
Speaker Change: Yeah, so we're excited about the quantum acquisition and believe that that will add significant value, not only through the additional spend that we'll be managing, but through the additional capabilities it brings us in countries to expand our core services as well.
Speaker Change: Thank you for the call. And then I guess you also call out, you know, in the U.S., the micro-market and vending services.
Speaker Change: Yeah, I'll start first of all with the sports entertainment business, you know, obviously it's a very important business for us We were very pleased to have as I mentioned in our you know in the script
Speaker Change: Six of our NFL teams get to the playoffs and excited to have the Super Bowl this coming Sunday.
Speaker Change: for the Eagles and the Chiefs. You know, overall, sports had experienced a very good quarter, although fewer playoff games for Major League Baseball than we had in the prior year. So there's always variability.
Speaker Change: depending on team performance and playoff schedules. And as you know, we
Speaker Change: We operate a lot of arenas and have NHL and NBA teams.
Speaker Change: And what drives the top line in that business is often team performance. So we're very keen supporters of all the teams that we serve, and we're excited about the possibilities.
Speaker Change: And that business has significant growth potential, not only by serving the professional sports teams.
Speaker Change: NCAA stadiums. So it's a business we'll continue to focus on. We're excited. We've got a great leadership team in it and lots of runway for growth.
Speaker Change: Yeah, just on the convenience retail, refreshment services is a term we use internally. Another really strong quarter for that business, that's contributing to the double-digit growth.
Speaker Change: you see in our B&I segment is how we determine externally. So lots of opportunities are there. You know, the automated vending machines, cashless experience. So it's been a big focus of growth and a source of good opportunities for the company.
Thank you.
Speaker Change: And I'm sure our next question comes from the line of Jafat Mestari from BNP Paribas-Xaine. Please go ahead.
Jafat Mestari: Hi, good morning, everyone. I've got three if that's all right.
Speaker Change: Firstly, just on the H2 momentum, which you've talked about in detail with some good reasons therein.
Speaker Change: in the ramp up of new accounts, et cetera. I'm just curious if some of that momentum could start building in the second quarter or should we expect very similar in Q2 versus Q1 around 5% organic?
Secondly,
Speaker Change: Go ahead, if you want to ask about three, go ahead.
Speaker Change: Just on retention, how's 25 in terms of the amount of business you have up for renewal? How does that compare to an average year? Is it busier or less busy?
Speaker Change: And lastly, on Arizona State University, a very holistic approach there.
Speaker Change: everything basically student nutrition and athletics. Just curious if that's new information to us now that it's been announced or was it something you already had in your list of accounts that would ramp up over the year or did you recently?
and find out you had that extension.
Speaker Change: Well, first of all, let's talk about ASU for a minute. We've served ASU for decades, for many, many years, and they were required by the state of Arizona to go ahead and go through a bid process.
which has lasted for many, many months, and it is...
Speaker Change: It's with a lot of pride that we serve that university. We've always done the campus feeding.
Speaker Change: So the total value of the contract will go up significantly as a result of this new, it's both a retention as well as a new business award.
Speaker Change: And so, again, very excited that we've retained the business and literally found out yesterday. So we're excited about it.
Speaker Change: We've got more rebid activity and some years our competitors do. This year our level of activity is a little bit lower than normal.
Speaker Change: which, you know, we're very pleased with. And we always are working to proactively extend our customer contracts, even when they're not due for rebid. So we're constantly working against that list of customers.
Speaker Change: to go ahead and extend our agreement. So we feel good about our current positioning in terms of the amount of activity, but we also feel very good about our efforts and the quality of the retention team that we have in place.
Speaker Change: and the work that's being done there. So we feel very good about our overall retention for 2025.
Speaker Change: Yeah, and in terms of the revenue outlook in the second quarter, so, you know, we're exactly where we expected to be in the first quarter, exactly how we planned.
Speaker Change: with the acceleration in the second half of the year. So it's a bit of an unusual year in terms of the facility's impact.
Speaker Change: So yeah, the second quarter, I think you'll see a similar impact.
All right, thank you very much, thanks.
Thank you.
Speaker Change: I'm sure no further questions in the queue at this time. I'd like to turn the call back to Mr. Zillmer for closing remarks
Speaker Change: Again, thank you very much for everybody joining us this morning. We are extraordinarily pleased with the results of the first quarter and looking forward to the second quarter.
Speaker Change: to a very strong year. I wanna thank the Aramark employees around the world for all their continued efforts.
Speaker Change: and great work. And I'd also like to thank both the analyst community and our shareholders for their support of the organization. We feel very good about the results we've delivered and we'll continue to deliver for all of you. So thank you very much.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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