Q3 2025 Aramark Earnings Call

Good morning and welcome to are marks third quarter fiscal 2025 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 of this conference being recorded for rebroadcast. So that all participants are in listen. Only mode, we will open the conference call for questions at the delusion of the company's remarks. I will now turn the call over to Felicia cell senior vice president, investor relations and corporate development Miss Cassell, please proceed.

Thank you and welcome to aramar's earnings conference call and webcast this morning. We will be hearing from our 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.

Our notice regarding forward-looking statements is included in our press release. During the 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 mdna and other sections of our annual report on form, 10K and SEC filings.

We will be discussing certain non-gaap Financial measures a Reconciliation of these items to us. Gaap can be found in our press release and IR website. So with that, I will now turn the call over to John

Thanks Feliz, and thanks to all of you for joining us today.

This morning. Jim and I will review our third quarter performance which reflected record revenue for any quarter in global FSS history along with record profitability in the third quarter resulting in adjusted EPS growth of nearly 30%.

We will then turn to our expectations for the fiscal year with just 1 quarter to go.

since our last earnings call, we have achieved a number of significant milestones for the company including

First, we were recently, awarded 1 of the largest new client wins ever in terms of Revenue, specifically within sports and entertainment. In addition to winning several other high-profile accounts.

Second, we maintained our unprecedented client retention rate now. Exceeding 97% in both FSS us and International.

And lastly, we continue to position ourselves to exit. This fiscal year above our long-term Revenue growth expectations.

In the third quarter, Aramark Revenue grew to 4.6 billion representing, an representing an increase of 6% with slight FX favorability, organic Revenue. Increased more than 5% driven by base business growth and contribution from new client wins.

Facilities account exits affected revenue, as previously disclosed.

Moving to the business segments.

FSS us organic Revenue increased to 3.2 billion or over 3%. In the third quarter, led by strong performance and workplace experience and refreshments from higher participation rates, new client wins and additional micro market and bending services.

Education, which benefited from additional volume and meal plans in a calendar shift within Collegiate. Hospitality

Sports and entertainment from higher per capita, spending and Major League, Baseball, stadiums, and sizable, and sizable, new business in Corrections.

This growth more than offset, the facilities, exits and less activity. At Arenas, primarily from the timing of concerts Revenue growth would have been more than 2% higher, if not for these factors,

The US segment is experiencing strong success from the team, strategic focus and driving vertical. And cross line of business opportunities by leveraging. The synergies across our diverse portfolio, we've locked, we've unlocked additional Revenue growth. A great example of this effort is the partnership between Collegiate hospitality and sports and entertainment within Collegiate Sports. This upcoming college football season. We will be, we will be delivering exceptional food and beverage experiences. Now at 34 Division, 1 stadiums serving, nearly 2 million fans during every home game weekend.

Last week's announcement about our partnership with Das as they moved to Las. Vegas is very exciting taking ballpark Food Service to the next level and represents 1 of the largest wins in the company's history.

Our ability to have Will Gadara, the acclaimed restaurateur and author of "Unreasonable Hospitality," on our team is groundbreaking. Aramark will be taking a minority ownership interest in the Ace franchise, deepening the relationship and underscoring a shared commitment to innovation, hospitality, and building an iconic fan destination in Las Vegas.

Our new sales pipeline remains robust the business. Most recently, we were selected by Howard University, a leader among historically, black colleges and universities to implement a transformative, new campus Vision called, Howard un Howard University. Hospitality.

This collaboration marks a significant step in enhancing the campus experience through culinary Innovation, cultural celebration, and Community empowerment and increases our growing HBCU presence. As we now serve 15 of these historic academic institutions,

Additional new business includes expanding our long-standing partnership with City and workplace experience. The Dorchester school, district and Academy school, district, and student nutrition as well as Market University in facilities.

There is extraordinary momentum within FSS us and we expect to capitalize on the many opportunities ahead.

Once again, International delivered double-digit organic Revenue growth, increasing 10% in the third quarter to 1.4 billion.

Every geography experience growth led by the UK, Chile, Canada and Spain driven by net, new business and based business growth.

Our team in the UK made health and safety history. This quarter by becoming the first food service and hospitality company, to win, the prestigious Royal Society for the prevention of accidents, Sir George Earl trophy, the society's highest honor and a testament to our unwavering standards of excellence.

Aramark UK also received the coveted hotel and Catering industry sector award reflecting our strong leadership, Innovative Workforce, and a Relentless focus on continuous Improvement across client locations.

We recently concluded our International chefs Cup in Shanghai China. Which after a year of in country competition recognized our Global culinary talent and celebrated the winning chefs from each country. Our Aramark chefs from Chile, took top honors.

In the third quarter, Aramark Chile also hosted its annual Innovation Summit featuring some of the industry's most innovative solutions providers and thought leaders over 1,000 attendees across multiple Industries. Experienced the latest Innovation and Hospitality within mining Healthcare and Facilities Management among others more than 100 unique capabilities were presented this year, including nearly 50 technology-driven advancements, focused on enhancing the client experience.

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Our international seasoned, our seasoned international team has been a competitive advantage.

Through aligning strategic through aligning, strategic priorities, partnering across borders, thoughtfully, building scale, and implementing best practices.

Turning now to Global Supply Chain, we're effectively managing the Tariff environment and continue to believe our business model is well insulated from any heightened volatility. If there is a broader Market change, we will Implement sourcing Alternatives where appropriate to benefit both our managed Services business. As well as GPO clients Global inflation remains around, 3% for us as we anticipated.

We're focused on GPO expansion are, and are aggressively pursuing opportunities to build Upon Our double digit growth.

The strategy includes investing in international geographies to increase our current footprint with multinational clients and others.

We recently introduced additional AI driven technology in supply chain with expanded contract, intelligence capabilities.

Beyond clients, spend insights and back office, efficiency tools. We now have automated agents that power our next Generation contract intelligence. These agents enable our sourcing team to instantly synthesize supplier requests. Compare them to contract terms, assess compliance and opportunities, as well as generate responses within seconds. Delivering unmanaged to efficiency and visibility across our Global spend and sourcing process.

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Our supply chain optimization strategies have driven significant incremental incremental value for our clients and the company.

Lastly, we continue to advance our disciplined Capital allocation strategies, which Jim will review in more detail, benefiting from a strong and flexible balance sheet designed to maximize shareholder returns. Our commitment remains focused on Strategic investment in the business to drive and Propel growth.

Ongoing debt, repayment expecting to reach leverage around 3x by the end of this fiscal year, and even lower thereafter.

Paying quarterly dividends.

And utilizing excess cash generation to opportunistically repurchase. Aramark shares.

In summary, I'm proud of what we've achieved at the company and firm and firmly. Believe there is tremendous value. Creating potential in the business going forward.

I'll now turn the call over to Jim.

Thanks John and good morning everyone.

As John mentioned, we had another record-breaking quarter reflecting the commitment to our strategic priorities and focus on operational execution across the organization.

We delivered strong growth in both revenue, and profitability reinforcing the power of our business model, and our ability to consistently create value.

We are well positioned to build upon this business momentum.

Regarding third quarter profit growth, operating income was 183 million up, 13% for a prior year period.

Adjusted operating income was $230 million, up 19% compared to the same period last year.

And aoi margin increased, 60 basis points.

The strong profit growth and margin expansion resulted from higher revenue levels, expanded supply chain capabilities, and disciplined above-unit cost management.

Turning to the business segments, the US reported aoi growth of 16%.

With Ali margins, increasing more than 60 basis points, compared to the same period last year.

Profitability, growth and margin expansion. Were driven by higher based business, volume effective above unit, cost management and supply chain efficiencies, including leveraging, AI driven technology for purchasing compliance and contract productivity.

Profitability growth in the US was led by the education and business and industry sectors.

Aoy growth in the US would have been even higher in the quarter if it not for some additional medical expenses.

The international segment had aoi growth of 11% with margins up slightly year-over-year on a constant currency basis.

Ay growth was a result of higher base business volume and strengthened supply chain economics, which more than offset labor expenses from additional observed holidays, in the quarter, including in China, and the prior benefit from the men's European football championships in Germany.

International aoi growth was led by Chile and Canada.

In addition to leveraging, AI driven technology and supply chain.

We are also continue to integrate AI across our core operations from Dynamic menu, planning to Labor Management, enhancing speed, accuracy and scalability.

Client, Innovation and engagement.

These efforts have delivered greater value to our clients, as well as driving efficiency and profitability throughout the business.

Turning to the remainder of the income statement interest expense, was 86 million in the quarter and the adjusted tax rate was approximately 26%.

Our quarterly performance resulted in GAAP EPS of $0.27.

And adjusted EPS of 40 cents, an increase of nearly 30% versus the prior year.

Demonstrating our focus on profitable growth and operational execution across the organization.

With respect to cash flow.

The company generated a cash inflow from operations in the quarter, consistent with our normal seasonal, business Cadence,

Net cash provided by operating activities. In the third quarter was 77 million and free cash flow was the use of cash of 34 million.

This performance reflected stronger, net income, as well as increased working capital and capital expenditures from growth in the business.

With capex still running at approximately, 3% of Revenue.

As always, we expect to generate a significant significant cash inflow in the fourth quarter.

Is primarily from our Collegiate hospitality and sports and entertainment businesses.

During the third quarter, Aramark proactively repaid, approximately 62 million of terminal B. Due in June 2030,

And repurchase approximately 31 million of its common stock.

Since the authorization of the company's share repurchase program in November 2024,

Aramark has repurchased, nearly 4 million of its shares.

For an aggregate purchase price of approximately 10040 million.

We will continue to proactively enhance our capital structure.

Focusing on optimal returns for shareholders.

At quarter end, the company had over 1.4 billion in cash, availability.

And finally, let me wrap up with our performance expectations for the remainder of fiscal 25.

We are seeing very strong business momentum from our prominent new client wins. To expanding based business. Volume to client retention rates, exceeding 97%.

Across both FSS us and International.

The sales pipeline continues to be broad-based.

And first-time, Outsourcing remains elevated.

Revenue performance in the fourth quarter is expected to benefit from this acceleration.

With ongoing base business expansion and net new business across all sectors in the FSS US segment.

And every geography and FSS International segment.

Additionally, we are pleased with the continued expansion of our profitability and the consistent execution of our key operating levers, including supply chain capabilities,

Operational cost management.

And the majority of new business.

As John mentioned, we are effectively managing the current tariff environment.

With our extensive capabilities and diversified portfolio.

We remain confident in our ability to effectively navigate the broader Marketplace.

With that, we continue to anticipate our previously stated financial performance outlook for fiscal 25.

Based on the expected timing of commencing operations from new business including certain large clients.

as you know, our fourth quarter contains an extra week or a 53rd week,

In summary, we're pleased with the performance this quarter, delivering strong results and securing major business wins.

And maintaining exceptional client retention rates across our portfolio.

These achievements reflect the strength of our operating model and the dedication of our team.

With continued discipline and focus, we remain highly confident in our ability to deliver long-term value for our shareholders.

Thank you for your time this morning. That's John.

Um, I'm immensely grateful for our employees, across the globe, who are creating our accelerated business momentum. Heading into the fourth quarter and Beyond

Thank you, everybody, for your listen, for your participation, and operator will now open the line for questions.

Thank you. We will now begin the question and answer session. If you have a question, please press star, then 1 1, 1 on your touchtone phone. If you're using a speaker phone, you may need to pick up the handset. First before pressing the numbers in order to accommodate, participants in the question Cube, please limit yourself to 1 question and 1, follow-up to remove yourself from the queue. Please press star 1 to 1 again.

1 moment for our first question.

Our first question comes from Ian zafina with Oppenheimer. Your line is open.

Hi great. Uh,

Um, thanks for all the callers. Um,

The revenue acceleration expected in the fourth quarter, maybe help us understand like the sequencing of all these big wins. You know, that have been awarded and and expect to achieve. Um, any other kind of flow or or color, um, you could give us would be helpful. Thank you.

Sure, you bet. Uh, Gemini. Both comment on this. Uh, first off, we're off to a very strong start, uh, to the fourth quarter. Uh, we're very comfortable with the implied ramp, uh, that's projected in the, in the guidance. So, uh, let us just reiterate that we have a very strong belief in our ability to hit the the guidance as we've projected. Uh, and we feel like we're uh in a very good position um, after the start of the fourth quarter. So um there are a number of new contract wins that will be coming online. Uh, school districts, obviously, begin operation in August and in September, uh, the Collegiate operations that we've sold this year, begin operations in August, and September, and contribute significantly to the year-over-year, uh, variance and growth, uh, trajectory. So, uh, you know, I would say and that we're very comfortable giving what we see in the business, what we've been able to achieve with the Run rate in terms of new account sales and net new business, and with the high retention rate, coupled along with normal pricing activity, we

Are very comfortable with the implied ramp, uh, that we've described.

Yeah, John. I'll just uh yeah, Echo that sentiment and again, obviously the the certified and a half percent uh, organic and and the third quarter is prior to the, the 2% lapping of the facilities exit and on top of that, all the items, John just just mentioned. In addition, you know, if you think about the Major League Baseball Outlook, we have a number of teams that are, you know, in the playoff hunt, performing very well. So, you know, we're expecting continued solid performance with respect to our Sports business and base business acceleration as well.

Okay. Thanks and then, if I could just ask 1 more question, just just on the um, events business. Um, what exactly happened were there?

Cancellations, the things just get pushed into the following quarter. And then we we expect a bigger quarter, um, coming up because of events being pushed out, um, or or is this just sort of lost business and how much actually did events. Um, how much of a headwind was that of of the 2%, right? Because I know you're combining facility exits with events. So I was just wondering if you could get this aggregate that for us to thanks. Yeah sure there are a couple of there are a couple of areas that we're that we're affected um particularly in the arena business uh a lower level of concert activity that was uh not projected and a Renovations um in 1 of our facilities particular

The Verizon Center, uh, which was down for renovations and wasn't able to get booked and scheduled during that time period. We'd actually expected it to come up a little bit faster than it did. Um, and then last year, uh, you may remember, we had the DNC at the, uh, in Chicago and so our All-State Arena had significant operations last year. That didn't repeat this year. So, it was just a, a little bit of a drag, not something that we would think was is significant, uh, but, uh, in the long term and really not, uh, pushing it out to the next quarter. It's really just business. That didn't, uh, that we anticipated would would our but did not,

Okay, thank you very much. Get back in you. Thank you.

Thanks.

Our next question comes from Leo Carrington City. Your line is open.

Good morning. Thanks for taking my questions.

Aside, my first asked on the A's contracts. Um,

some press Outlets reported that you could be making XI investment.

If if so, do you see Co investment as potentially?

Increasingly a norm, um, with these types of deals and is that investment reflects in the contract duration, or, or sort of other attributes of, of the quality of that deal.

And then, secondly.

I noticed that you're looking at an acquisition, in the UK of NTA catering, can you outline the appeal of this and potential scale?

And more broadly as you are now deleveraging and and buying back shares is m&a becoming uh increasingly a focus for you in terms of capital allocation thank you.

Yeah, that last, uh, question with respect to Auntie again this, this was a, a relatively small, bolt-on acquisition and uh, or offshore oil, remote, Services capabilities, um, in in the UK. Um,

Which is a proactive deal. We had targeted for many years. In the GPO Space 1 of the larger

Remaining independent gpos, um, in Europe. So, and again, while that deal comes with it was the largest in terms of the consideration. Uh, for for our the m&a spend come to relatively low uh, revenues. So if you sort of exclude, uh, Quantum, I think that, we back basically, the normal track is 150 to maybe 200 million of of m&a. Spend per year is consistent with where we were in Prior years. You want to comment on the other question? Yeah. And I would, and I would just add to that that we don't expect m&a to be a more significant part of our, uh, approach to Growing the business. So our primary approach is organic growth, but we do opportunistically look at opportunities when, uh, when they present themselves in certain segments, uh, to either bolt on additional capabilities or increase, scale in countries, where we're already operating. Uh, so I wouldn't look at m&a as being a, a more significant part of our, uh, Capital strategy, uh, going forward. It should be relatively consistent. You know, with respect to ante is

Jim said, you know, relatively small bolt-on, not material to the company, uh, in, uh, in the in any meaningful way. Obviously brought some additional scale in the North Sea, uh, and we, we remain committed to getting that deal closed. We'll work through the phase 2 process. Um, and if, if remedies are needed, we'll figure that out. But, uh, again, um, even if we

Weren't able to close the transaction. It's not material to the company's operating results or or strategy in the long term.

With respect to the A's. Uh, yes, we did. Uh, make them, uh, a small investment, uh, in equity in the team. That's not our preferred, uh approach, but it's something the team felt strongly about and we were willing to do given the unique nature of the the stadium and the build in Las Vegas.

Uh and so we did make that uh that decision to move forward with a small Equity investment um you know as you know we've had Equity Investments and other teams before the Red Sox being 1 of them, that was probably most significant, the San Antonio Spurs.

Uh, Pittsburgh Penguins at 1 time, so it's not unusual for us to make, uh, Investments and ultimately, monetize those later, we've always done extraordinarily well, uh, when we've monetized those investments in the future, uh, contract is not tied to that Equity investment, uh, and we have flexibility with it. So uh, again, not our normal practice, but when we were, we were pleased to do. Um, because we really believe in this partnership with the A's and in the future of that Las Vegas opportunity.

Thank you very much.

Thank you.

Our next question comes from scholar Rosen bomb its default. Your line is open,

Hi, good morning, thank you for taking my questions. John, can you comment a little bit about how the selling season played out in the education segment? Because we should be pretty much done over there. Was it better than expected as expected? Um, you know, how should we think about the education, uh, Revenue growth going forward? Based on what your seeing over there and then I'll just throw in my my second question. Right now, just retention has been very high and could you just talk is that proactiveness that you guys are doing in terms of uh servicing the customer. Are you having to be more competitive on your pricing? In order to achieve this retention? Is it some kind of combination? Maybe you could talk about that as well?

Uh, sure, uh, well, I think, well, Gemini will both comment on those the, um, first of all, the education selling season, uh, is, uh, still underway. Believe it or not. We still have uh, contracts. We're working to sign and close, uh, with anticipated openings a little bit later this year. So we feel very good about the results. Uh, obviously, uh, feel very strongly about Howard University. We'll be making an announcement soon about another um, significant win, um, and uh, Loyola merrymount and and many, many others. So the team

Had a had, a very good selling season in the higher education sector. And in K through 12, they've had a very successful, net new business year as well. So we feel very good about the overall growth to both segments of the education business. Uh, and both had very strong retention rates as well, so overall very good, net new business results for for education,

Uh, and to continue to build Partnerships and relationships, that that allow us to operate those that business for a long time to come. We don't use pricing as a lever. We don't use investment as a lever, uh, to retain business, we do it on the basis of our performance. Uh and on the basis of our relationships with our customers and we're proud of what we've been able to achieve. It is part and parcel net. New business is part and parcel to the incentive, compensation structure in our company. So all of our people from The Operators and the field all the way to senior leadership are incented to do a great job on net, new which implies retention, um, in the, in the equation. So, um, it's a focus and we're we we feel very good about the results but we're always striving to do better.

Thank you.

Our next question comes from Andrew stardom in the JP Morgan. Your line is open.

Yeah. Hi guys. This is Alex Hess on for Andrew. Just wanted to dive in a little bit more to the the implied fourth quarter organic Revenue acceleration. Which you know, even if you throughout the extra week is still looks like it's something like up 9% year on year at the low end of the guide. Um, and you know, how you what what sort of gives you confidence and sort of, I'm asking you guys to be as specific as possible as it is with respect to the base business, new business and retention drivers of the fourth quarter growth rate. Um, you know, clearly we just exited

A quarter where you guys were doing a bit stronger at the start of the quarter. I think you guys had said up 6 in April, then you guys ended up for the quarter and uh there was some sort of unrealized or unexpected items during the quarter so just trying to see like what sort of visibility you have and sort of you know how you know any sort of specificity you can give us around the the uh the you know what gives you such conviction in the revenue uh that you guys have set out today. Thank you.

Yeah, Alice. Good morning. I I'll I'll start again in terms of just some of the you know like in the math. Right? We're learning about 5 and a half percent organic and and the third quarter, adding to you, you get to about 7 and a half, sort of as your your starting point. Um, as John, you know, mentioned earlier. July was, it was the strongest print we had in terms of uh, where else we saw significant acceleration in the US business you know on on top of that math we have rolling out a number of uh large accounts including Howard University and the education sector Everton over in in the sports and in in the UK

We have elevated. Uh retention rates that are running higher than what we would have planned for the business. Uh, we've seen the base business, pick up already, particularly in in the sports business, as I mentioned, a number of teams handful of teams that are in playoff contention with good uh Revenue Trends and good attendance Trends on on top of that. So I think we have a pretty good line of sight to the path, and those are the key factors driving it

Yeah, I would just add. Um as I said, we're off to a very strong start after July, um, that uh, gives us a high degree of confidence in achieving that ramp that you just described uh, at the rates that you described. So, um, you know, as Jim said, very high retention rates. Keep in mind that retention in in parts of our business like K through 12 and a higher education is felt most in August and September those accounts that we did not lose impact our results. Uh more effectively in those months and the new business the net new business uh comes on. So uh a very a high retention rate is most impactful in August and September in those lines of business.

Then you have price pricing that gets layered in in the K through 12 and and higher education. Sector in the fourth quarter as the new terms begin, and you have pricing that accelerates in the corrections business as well. So all of those individual discrete elements, add up to, uh, the trajectory that we've described and give us a very high degree of confidence, in our ability, to hit the numbers that we've that we've outlined.

Got it and just just to clarify because the fourth quarter implies such a wide range of outcomes, both sort of on implied Revenue growth, step up and, and margins. Can you maybe give us a little bit of color on? Uh, how you guys are are think how July was and how you guys think the margin might progress in in 4 kilo?

Um, well, I think we've given the full year guidance. I think that's what we're going to leave it. We have a strong, uh, belief in our ability to hit that full year guidance. Uh, and, um, so I, you know, I don't think I would add more color on the margin or profit side at this point. Uh, only only to say that, again, we've reiterated the guidance, we believe in it and we're off to a strong start in uh July.

Tony, Kaplan with Morgan Stanley, your line is open.

Thanks so much. Um, first I wanted to ask about um, where you stand with the

Universities and their sports teams. I know there's a really big opportunity for cross sell um across those different uh pieces of of sort of a similar customer base. So um wanted to see if you've been making any progress there or or how that stands right now.

Yeah, as I mentioned in my comments, we and we will be operating at 31 Division, 1 schools, uh, this year, and obviously, in a lot of D2, and D3 schools as well. Uh, from a, from a, uh, an Athletics perspective. So, uh, it's a very strong, uh, business for us. Uh, we've established leadership, uh, that's focused on that business, and we've got a great partnership between Collegiate hospitality and our Sports business to really bring the right, uh, talent and execution, to Bear against those initiatives. As you can guess some of those, some of those Division 1 schools produce more revenues on a game day basis than some of our pro teams do. So it's a it's a significant Focus for us. Uh moving forward. We expect to continue to grow that segment and uh we clearly are the leader in it now and and will be uh continuing to build it.

Thanks and then, um, wanted to ask about the recent Fenway Park strike. I think there was part of the situation where employees were concerned about the automation advancements in the park impacting their compensation and I was wondering, just broadly, would you expect to be this to be a continued issue across?

Um, Sports in particular or or some business lines where if you do have sort of more efficiency from automation, but it does, you know, sort of impact the labor. Um, especially I think there's a little bit more unionized labor uh with the sports segment um should should this potentially be a, a Labour disruption issue, going forward and in some cases and how to deal with that? Thanks.

Yeah, that's a great question, Tony. First of all I would say that uh historically as we've implemented new systems and new technologies across the sports and entertainment business that we see it as a way to enhance customer service and customer throughput. We don't see it as a labor reduction strategy. Um, what we want to do is improve The Fan Experience, so they're not waiting in line. Uh, while the game is going on. We want them to get to the stands and to be able to transact and be back in their seats, to see the action, if you will, and that that's what the teams want to have happen. And that's what we would.

Like to have happen, and frankly it's what the fans want. Um, so as I said, we don't see it as a labor reduction strategy people. Uh, we haven't, uh, reduced significant numbers of employees, as a result of deploying technology throughout Sports, uh, and so I I really don't believe that that is a uh, significant issue facing us going forward. I think will work very carefully to resolve the concerns of the of the workforce in um, at Fenway. Uh, you know, we're actively engaged in in. Good faith, negotiations. And we'll find a way through as we have uh, many times before. Uh and but we are fully prepared to operate in the in the face of what could be a labor action. So you know our commitment is to is to be there to service the fans and the team, and we'll do that.

Um, but I, I think the technology implementation, uh, is, as I said, not designed to reduce labor, but designed to enhance The Fan Experience. And if you've been to Fenway, uh, you know, that that is a park that that is aged, uh, is difficult to move around. All we want to do is get the fans back in their seats, a little bit faster and let them enjoy the game.

Thank you. Our next question comes from Neil, Tyler, with the Rothschilds and Co in redbourn.

Yeah, thank you. Good morning. Uh, John Jim. Um,

Ments around commencement of, um, of contracts and, and the sort of, uh, dependency on those. Um, but, you know, equally, you've you've expressed confidence in the, um, momentum, you're enjoying in the fourth quarter. So is the, uh, I suppose is the is the sort of caveat if you want to call it that around the commencement of contracts, really. Just um, the the I suppose the the influence that's preventing or that that's that's uh, you know, leads you to potentially, um, you know, not be able to narrow the range at this at this stage. Thank you.

Yeah, I think that's a, that's a good point. Jim can comment on this as well. I think, you know, we do have a range of outcomes. And the range is a little bit wider than normal as a result of anticipated activity, uh, and potential new accounts startups, um, that, uh, that could drive us to higher levels, uh, of the range, uh, and that could also impact, um, you know, the, the aoi range as we open those new accounts and experience the opening costs associated with them. So, as I said, we're, we're confident in the, in the range and that's why we've reiterated the guidance.

Um, you know, there are a few puts and takes with respect to the revenue side and there's a few puts and takes, potentially on the aoi side. Uh, depending upon uh, the speed and rapidity of new openings, uh, some of which could be very impactful in, in the long term. So some some big opportunities in the pipeline that we're hoping to close here in the, in the fourth quarter. And um, so it's an exciting time. Uh, we feel very good about our prospects. Uh, and we feel very good about delivering the guidance as we've talked about. Yeah. I just had in terms of the, you talked about the sort of the multi-year targets, you know, and and the Run rate headed into to fiscal 26. You're right, we're not, we're not going to get give a guy for 26 but but absolutely, I think the, uh, we're positioned for these, you know, really high net new potentially, on Pace for a record at new for the company, you know, and, and some of the larger wins, we've had more weighted towards the second half of the year and as John mentioned, there's a couple large ones outstanding uh, that we hope to close with the next uh couple of weeks.

And if things go, you know as as expected we could be positioned to certainly be at the the higher end of the that multi-year uh growth rates. Um and as we said, exiting the year at the higher end of that that range.

Thank you. That's very helpful.

Thank you.

Our next question comes from Carl green with RBC Capital markets. Your line is open.

Yeah, thanks very much. Good morning, gentlemen. My first question is just about the, the fact that you called out the profitability, improvements in education and BNI in the US, could you just remind me how the profitability in those divisions is tracking versus fiscal 19, before all of the, the lockdowns. And then notwithstanding the drag from from new openings in the short term. What you think the potential in the in those divisions is from here, please, uh, and then the second question, much more straightforwardly. I perhaps I missed it. Uh, could you just, uh, indicate what the per cap? Uh, uh, spending increases were in the US in sports and Leisure.

Thank you.

Sure. Um, I'll take the per cap. Question first, uh, per capita is, uh, in a Major League baseball or running, uh, ahead of our expectation. Um, you know what drives what drives revenues and sports is attendance. And per capita spending, uh, per capita spending very strong attendance in those teams that are performing well. Uh, very good, uh, meeting expectations. We do have a couple of teams that, uh, are struggling, uh, in terms of their records, that obviously, their attendance is impacted, but on balance, uh, the portfolio performing very, uh, very well. So feel good about the, uh, the consumer, their level of spending, uh, and, um,

You know, the uh per capita spending continues to support very strong uh results. So with respect to the uh the margins in those business from 19, I think they're actually outperforming

but Jim will comment on that.

Yeah, in terms of the, uh, the question on education, I think at this point compared to 19, both k12 and higher ed. The revenues are significantly above where we were in, in 19 in terms of, uh, net new and uh, focusing the organization on growth. Um, we've made significant investment in technology and cyber some of the costs that have sort of affected, uh, the US business. But, you know, we're we're on track.

Toward uh, being on or exceeding the uh, the fiscal 19 base.

That's great. Thank you.

From trifari with B&B parabas, your line is open.

Hi, good morning. Um, I've got 2 of those. All right. Uh, so so just again on this, uh, folio 25 Gardens and the, uh, the implied range for, for Q4. Uh, just trying again. Um, your rate rating does that mean, yeah? Probably towards the midpoint, um, or, or if the full range of outcomes still really on the table. I mean, the, the, the low end of 9% looks pretty much guaranteed with that bridge. Uh, you've you've discussed, um, but at the top end 16% organic Revenue growth in Q4 that that's X accounting. Uh, what? What's the scenario? Where you deliver that? Is that more?

More signings and and immediate opening of anything extra, you sign from here.

Um, and just, um, related to that, uh, to to help us believe in that very big expiration. You've given some some useful, um, ad hoc updates on retention 97 cents here to date just curious if you have something equivalent

Um, in terms of signings, um, so something along the lines of the, uh, sort of $1.4 billion, um, for full year '24. Um, where are you year to date would be very useful.

Yeah, look at it. I I'll I'll start it. And again, I know um you know we're relatively late in the year. What's unusual here is there are a few large accounts uh, particularly in healthcare and Corrections. Some very sizable accounts that we are. Uh, if we're able to convert and we're feeling pretty good about those accounts, they would start up, uh, you know, in, in fiscal 25. So that's 1 variable. We've talked about. Um, if you think about, I've mentioned a few times. Now, the base business within Sports is quite a range, right? When you have a number of teams 5 or 16 teams that we have that are, um, you know, in a playoff Pursuit that could lead to a significant range in outcome on revenues as well. Uh, John mentioned, the pricing actions, uh, going into place and executing those and then again the retention rates, typically, if we plan it 95 or 96 and, you know, 1 point of retention is is a, is a, is a point of growth, right? So, uh, the Outlook there remains pretty favorable as well. Um, I think we've, we're the terms of, uh, rebid activity.

And visibility and, and retention for the full year. We, we further in a good spot. Yeah. And I would just, I would just, uh, reiterate, um, you know, that given given where we are today and given our understanding of the business. What is potentially, uh, to come? Um, you know, that the that the range of outcomes is pretty is pretty wide and we understand that um, and uh, you know that we believe there is an opportunity to get to the high end of the ranges uh, based on uh,

The disability that we have uh, if certain circumstances occur, um, most of which we can't talk about because we're an active negotiations with clients and and potential customers. And so, um, I'm

you know, we're confident we've said it as many times as we can and repeated ourselves, as often, as we can to go ahead and

And uh, hopefully convey that confidence. Uh, we're strong Believers. We're all aligned shareholders here. Uh, we all want the same outcome. Uh, and uh, so we we're confident in the ramp, we're confident in the guidance.

Uh, and um, and that's about all the detail. We can give you that makes sense. And apologies for delivering the points. Uh, but just to triple check is, is there any suggestion for example, that if you were to land at the top end of the organic Revenue range, then we would need to assume immediately the bottom end of the um,

profit growth range because of mobilization costs, or is that

Not what you're saying. It's open-ended on both sides.

They're they're linked but no, I don't think I would characterize it that way.

Thank you very much.

Our next question comes from fisa AE with Deutsche Bank, your line is open.

Yes, hi, thank you. Good morning. Um, I see that.

You had some really nice acceleration in the BNI segment this quarter and I know you mentioned, you know, new business higher participation rates and you know micro Market vending services, so curious. If you could help disaggregate uh, some of that for us and sort of how sustainable that acceleration is, you've also talked about, you know, sort of proactive approach to leveraging the Strategic value and business timing. So maybe give us a bit more color in terms of what you're doing there.

Both uh, you know, corporate with BNI and Refreshment Services, both businesses are generating very solid uh new business. I think record levels for both both groups uh, elevated retention rates for both, uh, groups as well. Um, the acceleration really from continuing to rolling out uh, new accounts, um, particularly in the Refreshment Services business, um, they've been particularly effective.

Within that BNI, the the Partnerships, The Branding they've done.

Yeah, we have a um Life Works brand at the partnership with Daniel booed in New York uh additional catering activities. Um participation rates continue to remain, you know, elevated. Uh, particularly in environment where some High Street pricing is um, is elevated, uh, 2/3 of our accounts are subsidized which I think is resulting in folks, eating more uh in in the court in their corporate cafes. So all those factors are I think are are driving the strong performance that you're seeing in that sector.

Great, thank you. And then just to follow up on margins. And the point that you raised around opening costs for new business, maybe give us a bit more perspective or, you know, any quantification that you can sort of, is there a rule of thumb? Uh, just you know, how how margins typically will ramp for, you know, for new business, your yours 1, 2 3, just trying to get a sense of, uh, you know, just level set on expectations for margin next year.

Yeah sure. So again great really good margin progression this year, right? First quarter 40 basis points Q, Q2 30 and 60 basis points that this quarter. So, again the, uh, the ramp up of of a large accounts, we've always talked about typically, margins are are flat, um, in that first year and then they progress to our steady state margin over the course of of 3 3 2.

Year, uh, with with net new and that's 40% of our, our compensation. So the incentive comp may be a little higher than than a typical year again. Not a bad problem to have uh, sort of rewarding folks for the great work that they, that they've done.

All right, great. Thank you.

Our next question comes from Jasper, bib with true security. Your line is open.

Hey, good morning everyone. Um hoping you could talk about competitive Dynamics in education. Clearly bullish here.

On the pipeline of opportunities. Got some new winds picking up in the fourth quarter, conversely, 1 of your large competitors. Actually talked about growth issues in their own us education business. So just curious if you've seen any changes in the market which might be driving, what looks like uh, market share gains for your own business.

Yeah, I think um, you know, first of all I think our performance speaks for itself. Uh you know we've been able to um grow that business uh very effectively over time. It's uh we have particular strengths in the higher education sector uh in our portfolio is unmatched. Uh we've got a very strong uh relationships and continue to uh retain that business at a very at a very high level uh, and

Uh, yes, our some of our competitors have struggled, um, more in the education sector than we have. I think it's primarily a result of leadership and focus, uh, and performance. Ultimately, that's what drives customers to make decisions and and drives retention. So, uh, you know, I would characterize us as just having a having a great leadership team doing a terrific job in the business and I wouldn't, I wouldn't comment on the reasons that they're they're not performing as well.

Thanks. And then maybe this is a little bit repetitive but just hoping you could maybe talk about the Run rate in the 26 again. I mean it it sounds like with 1 of the drivers.

Of the sequential stuff up in the fourth quarter, being some of those new education wins, starting late in the quarter. That September should be better than July. I'd imagine is, I guess, is that fair? And then, can you talk about, you know, what's driving your confidence? And I think it's an 8% plus run rate of organic growth into 26.

Um, for lots of different reasons and, um, but yeah, I would anticipate that September's growth rate would be higher than, than July in general, but that's, that's kind of the normal step function that exists in the business. Yeah, I think, I think that's right. And again, it's sort of John mentioned earlier that the great thing about when you have high retention and education, both k12 and and higher ed, and you have a successful year of knew that primarily hits, you know, in August, and in September. So a key reason for why we expect some elevation or acceleration there and again this this as I mentioned earlier this this Sports season. Um when you have a number of good teams performing in attendance and based business is looking good that really hits uh, August and September as well. So that I think with some of the key drivers of uh, the acceleration, we expect toward the uh, the end of the year. And again, position us into that the high end of, of the multi-year targets that we have established for the organization.

Thank you. Our next question comes from Andrew Whitman with bear. At your line is open.

Oh yeah, great. Thanks for taking my question. I um, spoke about the A's being a large contract is that kind of the large contract that you referenced. I just want to be clear on this 1 because I'm not mistaken that new stadium is inflated until open until 2028 and I did wanted to make sure that investors thought worth thinking about that when contributing with the right timing, thanks.

Yeah, thanks Andrew. Uh, yeah absolutely. That won't open till 2028 uh and it is a very large win uh 1 that 1 that uh we're very proud of but won't impact and is not included in our fourth quarter, projections or next year's projections. Uh but but it is an exciting win for us. So thanks for clarifying that

Okay, I just want to make sure on that 1 and then, um, I guess there was a, there was a comment on medical expenses in your us segments, uh, just mentioning that that, uh, margins would have been higher. I, I don't know Jim, if you want to put any meat on that bone for us, but just for context, I thought it might be helpful.

Yeah, no no problem. And uh medical costs were about sort of 15 million higher in in in the quarter is what what I was referencing and really 2 factors.

Driving that just an unusual number of high-cost claims in in the quarter as well as um prescription drug costs with some of the glp1 drugs being up a little bit as well. So it's something we are are monitoring uh closely. It's 1 of the things, as we said what a range of outcomes uh you know for the full year so something we noted that was a was a moderate drag on margins in the third quarter. Yeah. And I'll just add a little bit of color. Commentary on the glp, ones. Obviously that's a that is a

Uh, a benefit. We provide our employees. There are long-term benefits to having your employees. Get healthier over time. And so, as they use the opportunity to take advantage of that benefit, hopefully that leads to longer term Better Health, and and better outcomes uh, and lower and lower health care costs, uh, but um, but the prescription costs early on when they're taking that medication are fair, are fairly high and we're looking at ways to try to mitigate that. Um, and, uh, and over time, but, um, yeah. The, the medical claims costs can be a little bit. Lumpy typically, we don't have that kind of impact in a, on a quarter to quarter basis. But in this particular quarter, we did have a couple of large claims come through and as you know, we're we're self-insured. So um, so that was the impact.

Thank you. Our next question. Comes from Harold onto with Jeff. Reach. Your line is open.

Hello, this is Harold on for Stephanie Moore, um, so I guess that is in Just 2, quick ones for me. I wanted just on the vandro, you know, I guess could you give us an update on what's suspended their, um, you know, client receptionist to, you know, you guys being able to move around that service and then just with the margins look like in that business and how you expect to to contribute, um, in 2026 and then just on my second 1 just and may you have, um, some co-pilot and some hospitality and um, IQ and some other AI driven

Um um initiatives that uh has um assisted in the supply chain Improvement. So if you could just discuss anything you're doing on AI from the supply chain, both of those would be helpful. Thank you.

We had very good results year-over-year in terms of net new business and improving profitability throughout the year, contributing to our earnings potential and improved profits as well. So,

Um, you know, the margins in that business as, you know, are very strong uh depending on whether it's a third party, or whether it's uh contributing contributing to our uh, discount structure in our negotiated, uh, cost structure. Um, you know, very, very big contributor to our profitability, as a company and, uh, they've had very good results uh, this year. Jim, do you have any other comments? You asked about, I think Ai, and, and supply chain. And we we continue to elevate our capabilities with respect to uh, to AI. We've talked previously about leveraging AI to aggregate our spend, uh, 1 of the tools. We've recently introduced is actually a, a tool that can literally read and interpret correspondence from our suppliers. It is, an example of a supplier is trying to implement a price increase. It will scan that letter interpret it and then literally find the contract and read the contract and determine whether that supplier is eligible for a price increase or not and and then uh, generate the correspondence. So you can think of

About the efficiency that's gained when you're managing thousands and thousands of contracts over thousands of profit centers. So just an example of some of the efficiencies we're seeing with our supply chain and AI capabilities.

Thank you. Our final question comes from. Josh Chen with UBS. Your line is open.

Hi. Good morning. My question. Just a quick 1. I guess on on Q3. Um, I think you had previously given the April growth rate and and you know the the quarter came in where it is. So I guess you know did did something slow down in May or June or how how would you characterize that or is that normal fluctuation?

Yeah, I know, I think, um, you know, we anticipated a little higher level of activity on the arena in the arena business. Um, uh, April came in at the 6% level and, um, you know, we, we had a slightly lower level of activity in the Arenas, uh, over the course of the last couple of months. Uh, primarily related, as I said, to the renovations at Verizon center and um, and a couple of other Arenas. So not a, not a significant change in the church trajectory of the, or our expectation for the full year is that this is when the other, uh, I think during the Fireside, we talked about 6%, run rate the other with. Yeah, we, we didn't go as deep into the, the playoffs in the NBA and HL as anticipated as well on top of the lighter concert activity. That's correct.

I'm not throwing the call back to Mr. Zillmer, for any closing, remarks?

Terrific. Well, thanks again. Everybody for your interest in participation this morning. Uh, again, we feel very good about the third quarter results. Um, I I want to thank the Aramark team for their extraordinary performance, uh, and keep pushing for those High, retention rates and the net new business. Uh, we have a, a great fourth quarter in front of us, uh, and we'll look forward to talking to you, uh, when it's complete. Thank you. Take care. Thank you. Ladies and gentlemen, this is conclude today's presentation. You may now disconnect and have a wonderful day,