Good morning. I'm Heather Balsky, B of A Business and Information Services Analyst. I'm excited to kick off our conference today. This marks my third year of doing this conference, but it is only my second time doing it in person, and I'm really excited to see everyone face to face. We have a great lineup today. I'm pleased to kick off the conference with Aramark Management team, John Zillmer, Chief Executive Officer, and Jim Tarangelo. I hope I got that right. Yes. Chief Financial Officer. Jim, I heard this is your first time traveling with John to meet investors since you stepped into your CFO role, so it's exciting to have you both up here. We appreciate it. Thank you. Glad to be here. So before we go into the fireside chat, if anyone in the audience wants to ask a question, I'll pause towards the end, but I have plenty of questions to keep us busy. So let's get started. So first off, Aramark has been on a transformative journey over the past three years or so. When you look at Aramark in 2019, versus today, in what ways is the business different? Yeah. Well, first of all, it's been a joy to be back here since 2019, to rejoining the company just prior to COVID. Certainly, a number of things occurred in the last three years which were unexpected, but truly, the transformation journey has been terrific. We've been able to achieve a lot of very significant results. Really, what's most different is the organizational culture. We've reinvigorated the growth culture and the hospitality culture which was in the DNA of the organization but had gone dormant for a few years based on former management's leadership approach and their approach to running the business. So really, we took a number of actions like decentralizing the organization, putting accountability and responsibility back into the field organization, you know, reinvesting in the sales group, and reinvesting in culture. And so we're really pleased with where we are now. We've gotten past COVID, gotten past the hyperinflation which we all experienced, and we're really in a position now to really move forward, and optimize the business in a very meaningful way. Do you think there's still opportunity to further refine your execution? What do you focus on this year? Absolutely. There's always opportunity to refine execution, and we continue to look at things like managing the middle of the P&L, giving people systems and processes that help to optimize food and labor costs, giving them the tools to help them do that, and continuing to focus on growing the business and growing the growth culture, if you will. So, we're never happy. We're always focused on improvement, and we'll continue to do so. And I think this year is really about execution, optimization, doing all the, you know, taking all the things that we've achieved over the last three years and really, you know, forcing them through the business and getting it done. And for the past two years or so, you've talked about an outsize shift to outsourcing and self-op conversions. Is that still the case today, or have you seen things start to normalize? Do you think that eases as the labor market loosens and inflation moderates? Well, we first of all continue to see a very robust sales pipeline of outsourcing opportunities. It's not necessarily the primary segment of the market. We've always enjoyed a good outsourcing trend across a range of businesses, across a range of geographies. Over the last couple of years, it has been a little higher than normal, and still remains elevated at this point. But the market size is so large, and the opportunity set is so big, so significant that there really isn't, even if it goes back to kind of the normal third, a third, and a third, there's plenty of tailwind for the organization to continue to grow rather dramatically. That helps. Thank you. It's a question we get sometimes: is, when you're competing against peers or, or larger regional players, what do you think is Aramark's competitive advantage or, or differentiating qualities? Yeah. I, you know, I think that's a question we get asked a lot, and I always focus on the quality of the leadership and the management team in the organization. And it's the management team's ability to create customized solutions for their clients and to, to be, you know, to be listening and understanding client needs, in a very significant way. And that goes back to the relationship that the people develop. The management team develops with their clients, and the sales group develops with their prospects, having a deep understanding, a better understanding than our competitors do of those particular clients' needs. And that's what drives our success in the long term. It really is a relationship business. We all sell the same food product. We all have the same kind of technologies that we can employ. It's really having that deep understanding and that deep relationship that drive the difference. That's really helpful. I so help us appreciate the broader demand environment and what you're excited about. You know, in the Q1, you raised your outlook for basically all financial measures and indicated it's very bullish, or indicated that, you know, bullishness in your sales outlook with regards to volumes. Where are you seeing momentum? Yeah. I'll start with this. I mean, we were really encouraged by the trends we saw in the Q1: 13% organic growth, 20% a little north of 20% growth in our international business, and 10% growth in the U.S. business. And it was really broad-based growth across nearly all geographies and sectors, so we're really excited about that and the trends that we're seeing. I'll call on a few. I mean, sports fans level of fans, the attendance in the stadium is very high, record levels of average checks. Y ou know, we've switched to cashless, and with that, people tend to spend more. With credit cards, and B&I, folks are back to work. Not only are they back in the office, but they're in the office, the participation rates are up, so we're seeing really nice trends in our B&I sector. Europe, over 20% growth, in the quarter. Germany, sports, B&I, and it really in the UK, good trends in the dining sector as well. So the nice thing about the quarter and the outlook is it's really broad-based and across numerous geographies and sectors. You mentioned, you know, over 20% growth internationally, and it's, you know, something that's kind of interesting. What's going on internationally? Like, how does that compare to your domestic business? You know, what's driving that really robust growth? There's a couple of different factors, you know. First of all, when the organization went through its cost-cutting phase back in the mid-teens, a lot of the sales organization in the US was cut. So, they went from over 130 salespeople down to, like, 30 or 40. So literally, the sales resources were significantly reduced in the US. That wasn't done in the international business. The international business was left alone. So those sales managers were left in territory, working against their prospects, and so getting their culture back to reaccelerate to growth was not as difficult. We had to rebuild the sales organization, leadership, and functionality inside the domestic operations. So that was a significant part of it. Also, you know, I think it, you know, part of it's law of big numbers. International business is smaller, and so it, as we accelerate the growth, the percentages are a little larger. I'm very pleased, actually, with the growth in both parts of the organization. The US has achieved very good results over the last several years as well. But we do, we're very, very grateful. The team, the international team, Carl Mittleman, and the leadership has really been able to refocus, and reenergize the growth across the international sector, and their growth is broad-based. It's in every geography and every vertical, so we're, we're excited about it. I gotta jump in 'cause I spent about 10 years in the international business culminating in the CFO, and we've always had, we used to call ourselves the growth engine of Aramark. So that growth mindset that we reinvigorated when John came back was really always there in international. So we've seen the model work, and now we have that mindset across the organization which is a result of the proactive strategy we put in place. That's helpful. And you know, talking about that strategy, John, you've had a lot of great wins in your business recently. And while appreciating there can always be some headlines regarding a few customer exits, what's reflected in your guidance on the retention and new business front that you've continued to feel comfortable about? Yeah. We, you know, first of all, we expect our retention rate this year to be, at or above last year's rate. We don't see a significant change in retention. While there have been a couple of headline losses this year, they were anticipated, for the most part. Understood that those were those contracts were expiring and that we were likely to go ahead and move on from those relationships. Our expectation is for our net new to be in the range that we've guided to. We're excited about the prospects that we have, the wins that we already have. You may have seen recently, the San Francisco Giants selected us to be their new operator at Oracle Park in San Francisco. That's a very significant win which more than offsets some of the other losses in sports and entertainment. So, you know, we're very comfortable with the trajectory both for retention and for growth that we've outlined for the year that's in our guidance. And as I said, many of these potential losses were anticipated based on their contract expiration. That's really helpful. Thank you. You know, before I was gonna ask you about your guidance this year, but sports and entertainment, it's just been so strong. And it's just something you know, what enables you to drive growth there? What about how what's the consumer doing that is driving those sales higher? Yeah. There's Jim mentioned a little bit of it earlier. The transition to cashless payment systems has really driven significant per capita spending increases, basically across the client portfolio. And then the introduction of technology, frictionless stores, for example. If you go to Coors Field in Denver and you want to get a, you know, a certain beer, you don't have to wait in line and belly up to the old concession stand and wait for the person to pour it from the fountain. Basically, you walk into the store without ever touching anything, take it out of the cooler, and walk out. And so it's, you know, the transaction speed is spectacular. And so people don't wanna miss things at sporting events. So. Yeah. They don't wanna have to take the time at a concession stand, but if they can get to the store, grab it, and go, and be back in their seat to see the next hitting, that drives, both participation and revenue growth. So it's been exciting to watch. There's a great leadership team in sports and entertainment, and they've done a terrific job of optimizing, and using technology and using data to really drive enhanced consumer, reaction to their offering. It makes a lot of sense. I don't like waiting in line. I definitely have walked away from food just. Yeah. Because of that. So it makes a lot of sense. So, you know, moving to the kind of the year, your sales guidance seems to imply slower trends compared to 1Q for the remainder of the year. Can you walk us through what you see happening in your business as we progress through the year? And is it the sort of deceleration related to pricing, or what's going on there? Yeah. Like I said, we're really, you know, excited and encouraged by the trends that we saw and off to a really strong start, with the Q1. You know, as we look toward the remainder of the year, the timing of net new and when new business rolls out is always a factor. The way pricing is impacted by inflation, we do a lot of our contractually-based pricing in the June and July time period, so how inflation plays out will affect how our outlook for the remainder of the year. And then there's always some natural seasonality as well. So that's why you see the cadence that you do. But having said that, like I said, we are very encouraged with the trends, the momentum of the business, and we'll be providing another update in part as part of our May earnings update. That's helpful. So it's funny. I, I wrote this question originally saying that you talked about food inflation moderating from fiscal 4Q to fiscal 1Q, and, and I think until this past week, we hadn't seen that in the CPI data, and we finally saw a material step down. So it's interesting. There, there seems to be a lag there in the data we're tracking, and so I'm just curious if you can help us understand that dynamic, and kind of help us appreciate what you're experiencing right now from a cost perspective. Certainly. I can start, John. Sure. Yeah. Inflation was running, you know, 4%-5% for us in the Q1. It was 4% in the U.S., 5% globally. That was a little bit better than what we had expected. Embedded in our guidance for the remainder of the year is a similar level of inflation. So like you're seeing with the print that just came out, like, a similar level is what we are seeing. To the extent inflation should moderate, there'd be a corresponding benefit to both AOI and margin. But at this point, what we're seeing is fairly consistent inflation with what we saw in the Q1. Yeah. I would just add that our data that we use for inflation is really our specific purchasing data, our specific cost data for the products we buy and in the geographies where we buy it. So, you know, we're very confident in our understanding of what's going on in the marketplace, and in terms of the inflationary environment. And it is very consistent with the data that you're now beginning to see printed by BLS and others. So we're confident in our assumptions for the balance of the year, but as Jim said, if we see a continued step down, we're very excited about what that means for the business. That makes sense. That's really helpful. And your guidance assumes in well, okay. Well, I guess, you know, can you help us understand what it could mean for your business from a sales and margin perspective if we did see another step down in inflation? Yeah. Certainly. Jim, do you wanna go ahead and? Yeah. I mean, I'll start. If we look at the Q1, we generated 64 basis points of margin improvement. We talked about 50 basis points coming from the underlying levers of the business and about 14 coming from inflation. So that gives you a sense of inflation coming in a little better than expected, provided some additional tailwind to our Q1 results. So that gives you a proxy for what the opportunity could be should inflation moderate. That's helpful. And, you know, beyond inflation and the sort of dynamics there, you know, can you talk about the improvement you've seen in your supply chain as well? Are things nearing back to normal? Are they back to normal? You know, do we still have a ways to go? What's the update there? Yeah, you know, first of all, we have a terrific supply chain organization managed by Autumn Bayles, who I think is spending some time with investors over the next couple of weeks. The supply chain team has done an extraordinary job of building an organization that can respond on a moment's notice to changes in the marketplace. It is normalizing. Our supply chain is normalizing. Product availability is kind of pretty much back to normal, so manufacturers are back running full speed. We don't see the disruptions that existed last year in the supply chain, and we see that both domestically and internationally, you know, things are generally available from a food production perspective. Labor availability is also significantly improved. Both domestically and internationally. So I you know, I'd say supply chain is in a very good place. We continue to have opportunity to continue to renegotiate deals as we have gained significant size and scale, so we now have the GPO has over $19 billion of spend that it manages. And so they are bringing that to bear in terms of new negotiations with manufacturers and distributors, which will create benefit for our customers and our clients and for Aramark as we continue to leverage the supply chain for improved economics. So, you talked about your GPO, and, you know, it came up at the investor day, you know, a fair amount. I'm curious, you know, just update give a total, but just give update on that, you know, how does that work within the organization, the benefits that you get from that, you know, what, you know, opportunities to grow it further? Yeah. First of all, we directly benefit from the purchasing power, if you will, of the GPO. It has an impact on what Aramark purchases for its own consumption and use in our existing operations. And then our client customers and partners like Marriott and Hyatt and others, you know, benefit from that increased scale as they get reduced costs and improved economics as well. So we have an opportunity to continue to grow the GPO. We've made a number of tuck-in acquisitions both domestically and internationally to grow the GPO. And we have significant opportunity to continue to grow it both domestically and internationally. And we have the opportunity to partner and to extend the relationship with people like Marriott and Hyatt outside of the United States. When we bought Avendra, our international was not a part of that process, but we've been very diligent about building out those capabilities internationally and building the platform to go ahead and increase that, that potential. So we're excited about what that potential is, both, both domestically and internationally, and it will continue to be an increasing part of the profitability story, of Aramark as we go forward. That's helpful. And flipping back to the margin guidance, you know, the guidance that you gave for the year, you know, we talked about inflation. Supply chain's better. What else are the key drivers to your margin expansion this year? Yeah. It all starts with what I call the fundamental underlying margin levers. And really, it starts with supply chain, what we just covered in terms of scale, not only scale but internal compliance. We have a tool called MarketPro which has generated significant improvements in the SKUs that we buy where we have better and more attractive deals. The middle of the P&L is, as John mentioned earlier, certainly an opportunity as the operating environment continues to normalize. Containment of SG&A, you know, SG&A is relatively flat in the Q1. By the way, that doesn't preclude us from growth. It's at the corporate level. We could continue to add a lot of growth and a lot of business with really limiting the amount of SG&A that we add at the corporate side of the organization. And then the progression of net new, right, with the record net new that we've had, strong net new over the past few years, and our business margins are lower when they roll out and they mature to a natural progression of our base business margin over 3-4 years. So that continued to provide some benefit and will continue to provide the benefit going forward. And then I said, like, icing on the cake in the Q1 was inflation moderating. So those are really the levers and the core to our model about how we get margin enhancement for our business. Helpful. And where are you in the in terms of, you know, in the last few years, you've been attracting net new business, and those businesses come in, they're a little, they're margin dilutive. And so as you've sort of built up that muscle, you know, you've had some headwinds in the first few years, you know, where are you in that sort of normalization of scaling new business and getting that up to speed? Yeah. I think, as Jim said, those contracts mature over a period of time and depending on the complexity, they take either shorter or longer to mature. So those accounts that we sold three years ago, if they were management fee accounts, they're fully mature. If they were P&Ls, it might take a year to get them fully mature. So, but once you've established this kind of consistent engine and you've got call it a half a billion dollars' worth of new sales every year, you're beginning to roll over those effects. So, you know, the accounts you sold last year are still maturing. The accounts you sold two years ago are mature. The accounts you sold three years ago are beyond mature and starting to accelerate. So, you know, I would say we're at that point now where we have consistent new sales development and consistent delivery of net new. And so you should lose the impact of seeing that in terms of margin degradation. It should normalize over time and become part of the tailwind for the organization as we grow the margin over the next couple of years. So, I think we're in very good shape. And the only time you end up with an expected anomaly is when you have an outsized sales year like we did when we sold. Merlin. Merlin, and we had $800 million worth of new business two years ago, and so that spiked, and it so you end up having that kind of margin impact for a year or two, as you mature that business. That makes a lot of sense. I figured I would just check in case anyone has a question. Otherwise, we can keep going down my list. Okay. Great. So, you know, we may have checked all the boxes of margin. I feel like we talked. Is there did I just wanna make sure we cover everything when you think about the next, not just this year but the next three years. Yeah. I think when you think about our multiyear targets targeting north of 5.9% by fiscal 2026, it's really those core margin levers that I described, right? And what I like about the Q1 is, you know, the core margin levers generate 50 basis points of margin improvement. So, we know that's sustainable, and it's been consistent, and it proves for us that the model is working and gives us a lot of confidence in getting to the fiscal 2026 financial objectives that we established. Okay. For those, you know, for those objectives, what is kind of factored in with regards to inflation? Is it continuation? Over the long term and mid-term, inflation is sort of neutral, right? We don't price for profit. Inflation and pricing will basically reach an equilibrium over time, right? You know, it was a transitory headwind when inflation was rising. It's really a transitional tailwind as inflation is subsiding. But over time, it really should have a neutral impact on the business. Okay. Yeah. You saw this, this industry and this business kind of operate with a neutral kind of platform for inflation for, call it almost 15 or 20 years. As long as the inflationary environment was relatively benign, pricing remained pretty consistent. That's pretty the norm that's pretty much the normalized state that we expect to get back to. But now that we've got the muscle rebuilt for pricing which had been lost during that kind of time, you know, we can respond much more aggressively. If we see a tick up in inflation, we can be much more aggressive in terms of responding through price and levers to manage the business than we were able to last year when it spiked so dramatically and unexpectedly. Helpful. And on the balance sheet, you're targeting 2.75-3.25 times net leverage by 2025. Assuming you're in that range next year, what happens next? How do you think about taking leverage down further versus returning capital shareholders versus having capital to do acquisitions? Sure. I'll, I'll start. I mean, in terms of the outlook for this fiscal year, we're expecting to be about 3.5 times levered. We'll be about 3 times levered, by the end of fiscal 2025. At 3.5 times leverage, actually the lowest leverage we've had since we did the Avendra acquisition back in 2017, at 3 times leverage, that would be the lowest we've had, since we did the LBO back in 2007. So this is an organization that has a very strong track record of deleveraging. We have very attractive cash attributes. So, you know, we're comfortable with the debt load that we had. Having said that, we recognize in a higher interest rate environment, we're very focused on deleveraging. The cash model that we have is very flexible so that as we delever, we are contemplating additional shareholder returns, whether that's in the form of an increased dividend or additional share repurchases. We've already started some of those discussions at the board level, and we're well-positioned for that to be on the table. Yeah. That's absolutely right. There's, you know, we're very we're very excited about the, the future prospects of the organization. We certainly have the cash and the ability to invest in the growth of the enterprise. We can do tuck-in acquisitions. We can do whatever we need to do from a capital perspective in the business and still achieve the deleveraging profile that we've talked about. So it's exciting to think about, all right, what are the alternatives for return to shareholders, and how do we and how do we best execute against the needs of shareholders, going forward? And we'll be able to do both of those things. And the board is diligently considering, you know, what those next steps might be and what the appropriate timing would be. Yeah. You talked about investing in the business in your answer. You know, what are the investments that you're making right now that you're most excited about if you think about the next few years? Yeah. We continue to invest in the growth of the organization, continuing to add resources and capabilities, so that we can continue to accelerate the growth. We're making significant investments in technology. Hold on. We're not. There's no headline that, "Hey, we're investing in an ERP system," or something like that. But we continue to invest in technology in ways to improve the business, giving our frontline managers tools to improve the way they manage the operations using AI, for example, to go ahead and optimize supply chain. You know, we buy thousands of SKUs of products, and every distributor calls the same product something else, right? So, you know, so in one location, it's cheddar cheese sliced. In another location, it's cheddar cheese bricks. So, so our, the computer systems have a very difficult time understanding what are the differences between those two items. Well, in essence, you know, when you're trying to manage spend, you're aggregating that data in a way that you can then take it back to the manufacturer and say, "Okay. I bought 200,000 pounds of this product. Now, let's negotiate the best price." With AI, we can get through that data much more rapidly, to aggregate that spend data and to really get meaningful negotiations started. And so we've begun to employ a number of different pilot tests for AI throughout the business, for menu optimization, pricing optimization. Those investments aren't costing a lot, but it's really exciting to see the impact that they can have on the business. Yeah. It's interesting how I mean, you talked about self-checkout earlier. Yeah. And all that. It's the amount of technology that's involved in your business, you know, 'cause it's the customer. You're not necessarily seeing it, but. No. No. That's right. And our frontline managers have handheld devices that essentially allow them to manage food cost, labor cost. They literally, you know, when I go back to the days when I managed as a frontline manager in our operations, walking around with a notepad and sheets and a pencil, taking down inventory levels, and the advances that technology have given our frontline managers in terms of their ability to impact, and to manage operations have been very significant. So it's actually fun to watch the evolution of the industry and how it's impacted our customers. Yeah. It is, it's fun to watch as an analyst as well, and I'm sure as an investor too. I really appreciate this. Thank you so much for your time. Thank you. Thank you for having us.