Aramark (ARMK) Q1 2026 Earnings Call Transcript

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Date

Tuesday, February 10, 2026 at 8:30 a.m. ET

Call participants

• Chief Executive Officer — John J. Zillmer
• Chief Financial Officer — James J. Tarangelo

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Takeaways

• Organic Revenue -- $4.8 billion, up 5%; the quarter was negatively impacted by a calendar shift, which management estimated reduced growth by 3% (approximately $125 million).
• Adjusted Operating Income (AOI) -- $263 million, 1% higher on a constant currency basis, with calendar effects estimated to reduce AOI by $25 million, implying underlying growth of approximately 11%.
• GAAP EPS and Adjusted EPS -- GAAP EPS was $0.36, adjusted EPS was $0.51; the calendar shift decreased adjusted EPS growth by roughly 13%.
• Client Retention -- Management explicitly cited record-high retention at a time in the fiscal year when normally we would have lost a little bit of business by now. So we are very pleased with the results to date. We are hyper-focused on it. It is a very important part of our compensation systems. People are very aware of how seriously we all take this as an organization. So we are pleased. We are driving for success. We want to get better every day. client retention rates in both US and International segments, surpassing prior-year benchmarks at this point in the year.
• Net New Business -- The company targets net new business growth of 4%-5% for fiscal 2026, reporting strong early progress and a robust pipeline with major wins in healthcare, education, and corrections in the US, and sports, mining, and energy internationally.
• Segment Revenue Growth -- Food and Support Services (FSS) US organic revenue was $3.4 billion, up 2% (estimated 5% without the calendar shift); FSS International organic revenue reached $1.5 billion, up over 13%, with International seeing its nineteenth consecutive quarter of double-digit organic growth.
• Major Contract Wins -- New multi-year contracts include Penn Medicine (largest US contract win to date, serving nearly 4,000 beds across seven hospitals) and RWJBarnabas Health in New Jersey (covering 18 locations and 5,700 beds).
• Global Supply Chain and GPO -- Company-managed global supply chain group purchasing organization (GPO) contracted spend exceeded $20 billion, driven by double-digit growth and increased penetration in hospitality verticals including theme parks, hotels, and cruise lines.
• Pricing and Cost Environment -- Management indicated average pricing increases of approximately 3%, in line with prevailing inflation; food and labor cost inflation also ran about 3% across geographies, with beef highlighted as remaining elevated.
• Capital Expenditures -- CapEx was approximately 4.5% of revenue due to new business mobilization in sports and higher education, with expectations to return to a 3.5% run-rate by year-end.
• Leverage and Cash Availability -- Quarter-end cash availability was approximately $1.4 billion, and full-year leverage ratio guidance remains below three times net debt to EBITDA.
• Guidance for Fiscal 2026 -- Management reaffirmed organic revenue growth guidance of 7%-9%; AOI growth of 12%-17%; adjusted EPS growth of 20%-25%; and a leverage ratio under three times.
• Share Repurchases and Debt Repricing -- $30 million of share repurchases completed in the quarter; $2.4 billion of 2030 term loans repriced at a 25 basis point lower interest rate.
• Technology and AI Initiatives -- Supply chain and GPO operations benefit from AI deployments including analytics and mobile chatbots; management described significant performance improvement from AI, with investment funded within the ongoing IT budget.

Summary

Aramark (NYSE:ARMK) reported robust organic growth for the period, with International continuing to deliver double-digit expansion and the US segment advancing despite a material headwind from calendar shifts. Large healthcare contract wins, notably Penn Medicine and RWJBarnabas Health, are set to meaningfully contribute to top-line and operating income progress as they ramp up throughout the fiscal year. Record retention rates and broad-based new account momentum support management’s confidence in achieving or exceeding the targeted 4%-5% net new business growth. The group purchasing organization’s contracted spend surpassed $20 billion, highlighting the company’s strategic positioning across supply chain and hospitality spend categories. Cost inflation in food and labor aligns with guidance, and operational improvements, including AI-driven supply chain efficiencies, have begun to yield measurable gains.

• James J. Tarangelo stated, CapEx was about 4.5% of revenue. in the quarter, with expectations for normalization to historical averages by year-end driven by the timing of significant new business mobilizations.
• The company signaled accelerated onboarding of new accounts in the second quarter, specifically mentioning DePaul University and University of Pennsylvania Health Care System.
• Interest expense was $81 million for the quarter, with an adjusted tax rate of approximately 25%.
• Contract profitability ramp for new healthcare wins is expected to be faster than typical, due to cost-plus arrangements and lower start-up capital, according to management.
• Leadership described no material changes in consumer behavior or per capita spend, with sports and entertainment attendance and spend per transaction remaining solid according to John J. Zillmer.
• The full-year outlook for revenue, AOI, and adjusted EPS was reaffirmed as highly confident by management, citing ongoing favorable trends in retention and pipeline conversion.

Industry glossary

• AOI (Adjusted Operating Income): Operating income adjusted for items not indicative of underlying performance, such as restructuring or one-off charges, measured on a constant currency basis unless otherwise noted.
• GPO (Group Purchasing Organization): Entity that aggregates purchasing volume from multiple clients to negotiate discounted supply contracts, enhancing procurement scale and efficiency.

Full Conference Call Transcript

John J. Zillmer: Good morning, everyone, and welcome to our fiscal first quarter earnings call. Thank you for joining us. We are very pleased with the strong results delivered in the quarter. Even when considering the calendar shift referenced in the earnings release, the company has significant business momentum, which Jim and I will share in greater detail. We believe we are well positioned to record-breaking financial performance driven by our growth mindset, operational discipline, and unwavering commitment to service.

We are seeing multiple positive growth trends throughout the organization, including extraordinary client retention in both FSS US and International, levels we have never seen before achieved at this point in the fiscal calendar, combined with significant new client wins already awarded to us early in the fiscal year, particularly in healthcare, education, and corrections within the US, and in sports, mining, and energy within International. Substantial new business opportunities are immediately upon us, giving us great confidence in reaching our net new target of 4% to 5% in fiscal 2026.

And lastly, adding new purchasing spend in our global supply chain GPO network within hospitality areas such as theme parks, hotels, and now cruise lines, in addition to benefiting from increased volume and scale occurring more broadly at the company.

In the first quarter, organic revenue for Aramark grew 5% to $4.8 billion and would have increased approximately 8% if not for the calendar shift. Growth resulted from both strong base business and net new business. We expect performance acceleration to occur as we successfully onboard a record level of new account wins combined with maintaining the unprecedented retention levels I just mentioned. Notably, this does not factor in sizable new client wins which would drive our business momentum even further and we are expecting those to begin this fiscal year. Moving to the business segments, FSS US organic revenue increased to $3.4 billion, or 2%.

It is worth highlighting that the segment would have grown approximately 5% if not for the calendar shift, which primarily affected education. Of course, this growth will simply be recaptured in the second quarter as part of our results, ultimately having no impact on the full year. Top-line revenue growth drivers in the quarter were led by workplace experience, which delivered a seventeenth consecutive quarter of double-digit growth from launching significant new business wins in addition to strong holiday catering activity. Refreshments mobilized new accounts at an accelerated rate, and identifying additional growth opportunities from an integrated enterprise-wide strategy. Healthcare experienced strong base business, specifically from vertical sales success and the expansion of multi-service offerings.

Sports and Entertainment expanded our college football portfolio by providing a pro-level hospitality experience where alcohol unit sales are now becoming comparable to NFL stadiums. And Corrections continue to add statewide systems as our Into Work program is nationally recognized for the ability to provide pathways for education, career development, and rehabilitation.

Just last week, we successfully launched operations at Penn Medicine, the largest contract win ever in the US, as you recall. As the fiscal year progresses, we will continue to roll out services across Penn Medicine's nearly 4,000-bed, seven-hospital system, including patient and retail food service, environmental services, patient transportation, and an integrated call center to support operations. I am extremely excited to announce that our success in demonstrating Aramark's enterprise-wide capabilities and collaboration resulted in our newest healthcare win, RWJBarnabas Health, the largest, most comprehensive academic health system in New Jersey, covering eight counties serving over 5 million people. RWJBarnabas Health has 18 primary locations with 5,700 beds.

Anticipated to launch this summer, we will support their patients in retail dining, environmental services, and patient transport. This represents one of the largest contracts awarded in healthcare in recent history. Other clients added to the portfolio include the University at Albany, where we began operations this semester to redefine the student dining experience through innovation, inclusivity, and community engagement, as well as a new statewide relationship with the Alabama Department of Corrections to deliver food services, integrating our proprietary AI platforms for menu planning and operational efficiency across 27 facilities. As you can see, we are already off to a great start for the fiscal year in new account wins.

We anticipate the US growth trajectory to benefit from strong new business, high retention rates, and increased volume growth.

Once again, International delivered outstanding results with revenue reaching $1.5 billion in the first quarter, an increase of over 13% year over year on an organic revenue basis, with International revenue results largely unaffected by the calendar shift. International reported a nineteenth consecutive quarter of double-digit growth, maintained an exceptional client retention level, and every country contributed to revenue growth in the quarter with the UK, Spain, Germany, and Chile leading the way. New business in the first quarter within International included the Welsh Rugby Union, highlighted on the last earnings call.

In just a few days, we will be serving 74,000 fans at Principality Stadium, the largest stadium in Wales and the fourth largest in the UK, and the location for the upcoming highly attended Six Nations Rugby Championships. We were also awarded copper mining and state-owned giant Codelco and other meaningful mining contracts in Latin America. The International team achieved well over 100 core account wins in the first quarter, providing us with the ability to establish additional business development and operational scale in the countries we serve.

Now for an update on global supply chain. Performance was strong in the quarter as the team is focused on growing and optimizing spend and offering products, services, economics, analytical insights, and sourcing solutions for our clients. Inflation continues to actualize in the range we anticipated, with all global regions in line or favorable to our assumptions. We remain highly committed to GPO growth and are actively pursuing meaningful opportunities. Double-digit growth propelled well over $20 billion worth of contracted spend as we expand business in International regions, increase penetration in adjacent hospitality areas, and further scale through select strategic acquisitions. AI-driven technology continues to differentiate our supply chain and GPO capabilities, delivering back-end efficiencies and actionable business insights.

Tools such as mobile AI chatbots and AI-enhanced analytics provide GPO clients real-time visibility into their business. Our own internal supply chain operations AI systems are accelerating back-end efficiency and productivity gains.

Before handing over the call to Jim, I want to reiterate our confidence and realize the numerous growth opportunities ahead for the business this fiscal year, driven by the strategic and operational initiatives underway at the company. Our success comes from the teams throughout the organization and around the globe who show up every day with purpose, serving with integrity, solving problems with ingenuity, delivering consistent excellence. Jim?

James J. Tarangelo: Thanks, John, and good morning, everyone. We are off to a great start to fiscal 2026. The unprecedented levels of success with our annualized gross new wins and client retention last year have built the foundation for our strong outlook, and we believe we are well on track to deliver on our financial targets for 2026. More importantly, this momentum in the business has continued; we are extremely excited about our growth prospects going forward. I will now provide some insights into our first quarter financial performance before reviewing our expectations for the second quarter as well as for the overall fiscal year.

Just to level set regarding the calendar shift, as a reminder, our fourth quarter fiscal 2025 had a fifty-third or extra week. While this has no impact on our full year 2026 results, it does affect the cadence of quarterly comparisons. Due to the fifty-third week in 2025, each quarter in 2026 starts and ends a week later than the comparable quarter last year, shifting strong activity and low activity weeks between reporting periods. With that context, as John mentioned, organic revenue growth in the first quarter was up 5%, on track with what we anticipated.

As we discussed on our previous earnings calls, we expected the calendar shift to have a 3% to 4% unfavorable impact on growth; in the first quarter that is exactly what occurred, as the estimated impact of this shift was approximately $125 million, or about 3% on revenue. Excluding the impact from the calendar shift, organic revenue growth in the quarter would have been up approximately 8%, at the high end of our long-term growth algorithm. Now for the second quarter, we have the opposite occurrence in that a low-activity week falls out of Q2 and is replaced with a strong-activity week.

We estimate the positive effect of this shift to be a benefit in a similar contribution of about 3% on revenue.

Turning to profitability in the quarter, operating income was $218 million, up slightly versus the prior year. Adjusted operating income was $263 million, up 1% on a constant currency basis compared to the same period last year. The calendar shift reduced AOI by an estimated $25 million. AOI growth would have been approximately 11% without the calendar shift. The quarter benefited from higher revenue levels, the leveraging of technology capabilities, particularly in supply chain, and disciplined organizational cost management.

Now to the business segments, US had AOI at a 1% decline compared to the same period last year, with a calendar shift impacting growth by an estimated 10%. The US AOI growth would have been approximately 9% without the calendar shift. The workplace experience group, refreshments, and corrections had strong performance in the quarter, driven by revenue drop-through, enhanced technology driving efficiencies, and supply chain productivity and above-unit cost management. The International segment had year-over-year AOI growth of 12% on a constant currency basis.

Profitability growth was led by strong results in the UK, Spain, and Chile, which is partially offset by some mobilization costs in a couple of countries from new business within Sports and Entertainment and Higher Ed as well as a slight impact from the calendar shift.

Moving to the remainder of the income statement, interest expense was $81 million, and the adjusted tax rate was approximately 25%. Our quarterly performance resulted in GAAP EPS of $0.36 and adjusted EPS of $0.51, with a calendar shift impacting adjusted EPS growth by approximately 13%. Regarding cash flow, as expected and consistent with our typical first quarter cadence, we saw a cash outflow that reflects the natural seasonality of the business. This increased compared to the prior year due to greater working capital use driven by strong growth in the business. Capital expenditures were higher from the timing of commitments associated with sizable new business wins and certain client renewals.

We continue to advance our capital allocation priorities by repurchasing another $30 million of Aramark shares as part of our share repurchase program. We also took steps to optimize our financial flexibility by proactively repricing $2.4 billion of 2030 term loans at lower interest rates. The repricing resulted in interest expense savings of 25 basis points. We will continue to pursue opportunities to further enhance our capital structure with a focus on shareholder value creation. At quarter end, the company had approximately $1.4 billion in cash availability.

Turning to the outlook, our second quarter is progressing well and in line with our expectations. We believe revenue growth will continue to be strong as we onboard and roll out new business, including those recently commencing operations, DePaul University, the University at Albany in Collegiate Hospitality, and the University of Pennsylvania Health Care System, as John mentioned. Regarding profitability, we also expect AOI to benefit from our key operating levers driven by strong supply chain efficiencies, effective cost discipline, and, of course, higher revenue levels. With all that said, we anticipate performance in the second quarter to be right in line with current Wall Street expectations. We are also well on track and highly confident in achieving our full-year guidance, particularly given the phenomenal trends we are seeing in the business. As a reminder, our full-year outlook for fiscal 2026 is as follows: organic revenue growth of 7% to 9%, AOI increasing 12% to 17%, adjusted EPS growth of 20% to 25%, and a leverage ratio below three times. In summary, we are off to a strong start to the year as we continue to advance our growth strategies, fueled by extensive new business wins and outstanding client retention. We are energized about the opportunities ahead and remain highly focused on delivering exceptional top- and bottom-line performance. Thank you for your time this morning, John.

John J. Zillmer: I want to personally thank our teams for maintaining virtually flawless client retention to date, while continuing to drive exciting new business opportunities. Our efforts are centered on our ability to create a consistently strong and sustainable business focused on providing valued hospitality services to our clients. We expect to build upon our growth momentum throughout this fiscal year and beyond. I am extremely excited about what is next to come. Operator, we will now open the call for questions.

Operator: Thank you. We will now begin the question and answer session. If you have a question, please press star then 11 on your touch-tone phone. If you are using the speakerphone, you may need to pick up a handset first before pressing the numbers. In order to accommodate participants in the question queue, please limit yourself to one question and one follow-up. To remove yourself from the queue, please press star 11 again. Our first question comes from Ian Alton Zaffino with Oppenheimer. Your line is open. Hi. Great. Thank you very much.

Ian Alton Zaffino: It seems like you guys are winning a lot of, call it, competitive business here, and some larger competitors are included in that mix. Is this a trend we should expect here, and then maybe what do you attribute the success to? Thanks.

John J. Zillmer: I would say we have enjoyed significant success over the last, certainly over the course of the last year and going into 2026, in competitive new account wins. Some of those wins are very complex, large organizations that are part self-op and part served by our competitors, and we have been lucky enough to win two very large opportunities in Penn and RWJBarnabas that represent very significant both competitive wins and self-op conversions. So we see that trend continuing. We are positioned extraordinarily well to win these situations. The capabilities that our teams have built, the systems that we can bring to bear that serve our clients well and can demonstrate to them in these sales processes are significant.

And so each of these decisions is independent; all of these clients make judgments based on what is best for their needs, and we have been able to demonstrate a very unique capability and have been lucky enough to be selected in those opportunities. So we are very pleased with the performance to date and lots of wind in our sails, if you will.

Ian Alton Zaffino: Okay. Thanks. And then, just as a follow-up, kind of like a multiparter here. What I wanted to see is or find out, are there any other large bidding upcoming? Or also, rebidding that is happening, any larger ones that are coming in that would be dovetailing into, just retention in general. What are you guys doing here that you continue to improve retention and see it at these exceptional levels? Thanks.

John J. Zillmer: Thank you. Good question. And absolutely, we are focused every day on retention, and it is the number one driver of our ultimate success when we can retain the clients that we serve. It is very important. And so the first part of the question with respect to new bidding opportunities, I am not going to comment on other large pursuits that we have ongoing at the present time, because they are competitive in nature, and I do not want to signal our strategy to our competitors. There are a number of large opportunities that we are pursuing. I would say for the bidding cycle this season, we have a kind of a normalized bidding cycle.

As you know, it is the time of year where K-12 and higher ed are going through their bid processes. But we are achieving record-high retention at a time in the fiscal year when normally we would have lost a little bit of business by now. So we are very pleased with the results to date. We are hyper-focused on it. It is a very important part of our compensation systems. People are very aware of how seriously we all take this as an organization. So we are pleased. We are driving for success. We want to get better every day.

Ian Alton Zaffino: Thank you very much. Great quarter.

Operator: Next question comes from Neil Christopher Tyler with Redburn Atlantic. Your line is open. Yes, good morning. Thank you. Good morning, John, Jim. I just wanted to zoom in on a couple of the subsegments that you called out and ask for some help in framing their materiality. Specifically, within Sports and Leisure, the absolute relative scale of the college athletics revenues, where they have got to, if you can give us any help on how to think about those because that is something you have been talking very enthusiastically about for a little while now. And similarly, in Business and Industry, the refreshment component seems to be outpacing everything else.

So are these stand-out sufficient to drive the levels of growth on their own, or is there a lot going on elsewhere presumably as well? I wonder if you could help us there. Then I have got a quick follow-up on margins, if that is okay.

John J. Zillmer: Sure. The revenue growth is very broad-based and wide-ranging across the lines of business and geographies. So we are seeing very good strong net new business performance both in FSS US and in International, and it is not really driven by one group or another. When we highlight these, it is because they have had outstanding performance, but the other businesses are all performing well as well. So we feel very good about both the broad-based nature of it and the success of the entire organization as we pursue these growth opportunities.

With respect to the Sports and Entertainment business, we have not really disclosed the breakdown between collegiate sports and our pro teams, and we do not intend to disclose that at this point. I will say that when you think about the scale and the size of opportunities in collegiate athletics, it is very significant. We are certainly the largest player in that segment to date and continue to pursue significant opportunities going forward. And we may, at some point in the future, make the decision to disclose that information separately, but at present, we have not. Yeah, and I will just add, you asked about refreshments.

That is a significant piece of our Business and Industry segment, and as we mentioned, that segment has grown double-digit 17 quarters in a row. It is both our underlying B&I business and our Refreshment Services business that is benefiting from very high retention levels and really strong new business. So they both are growing double-digit and contributing to the success that we are seeing in that segment.

Neil Christopher Tyler: Got it. Thank you. And then just if I can follow up on margins. Jim, I wonder if you could just remind us or help handhold a little bit on the puts and takes in the adjusted operating margin in this quarter compared to what we should expect over the year? Just to make the major items, if that is okay. Thank you.

James J. Tarangelo: Sure. I think at the first call, as I mentioned in the script, we have about $25 million of cost associated with the fifty-third week in the first quarter that will unwind. So if you adjust for that impact, margins would be up about 20 basis points in Q1.

Neil Christopher Tyler: We do have the last quarter lapping the impact. We mentioned the GLP-1s and elevated medical costs during the last earnings call. We revamped that program so that will no longer be a factor starting January. So those are just two of the items I would point to in Q1, but it is primarily the fifty-third week impact that will unwind in the second quarter. So when you look at the first half, it will be more normalized. And then for the full year, on track for the 30 to 40 basis points that we have consistently delivered and talked about and embedded in the guidance that we provided in the beginning of the year.

So margins are falling in line with our expectations.

Neil Christopher Tyler: That is perfect. Thank you very much. Very helpful.

Operator: Our next question comes from Leo Carrington with Citi. Your line is open.

Leo Carrington: Good morning. Thank you very much for taking my questions. If I could follow up perhaps on this net new growth you have been experiencing. What is your expectations in terms of the duration that this could persist, especially as it is driven more by very strong retention rather than acceleration in gross wins as I understand this? At what point in the year do you have the confidence to perhaps exceed the target? And then secondly, could I ask two questions on AI?

Firstly, how do you perceive the risks or opportunities around your revenues, in the sense of what your blue-chip office clients are reporting in terms of the importance of catering in the context of hiring and investing in the office environment? Is there an opportunity in data centers for you? And then secondly, on the cost side, you referenced the back-end efficiencies and supply chain productivity. To what extent are your AI initiatives here paying off already? Thank you.

John J. Zillmer: That is a lot, so let us break it down into chunks and talk about AI first. Let me break that into a couple different pieces. First, in terms of the back-office productivity and the impact on our cost, we are already seeing the impact of AI, particularly on supply chain as we use it to both accelerate the data capture process as well as the negotiating process, if you will, for the services and the product that we buy. So it has already had a significant impact. And it is important to note that our investment in AI is really relatively small. It is part of our normal IT operating budget.

We do not have any significant program investment or a significant capital investment targeted towards AI implementation. We are able to do this as part of our ongoing IT spend and driving significant performance improvement already through it. So we feel very confident in the use of AI both as it relates to our organization as well as the improved profitability. With respect to the business opportunity, we see the evolution of jobs in the United States as one that will be productive for us. As you can tell from our revenue growth that is occurring in B&I and in Refreshment Services, we have lots of runway to grow the business.

We serve customers in all kinds of locations, whether it is manufacturing, office, mining, remote camps, the national parks. The vast majority of our businesses will probably see an opportunity coming from the application of AI in their respective segments. And so we do not see it as a threat to the business. We see it as an opportunity—an opportunity for further growth. Obviously, data centers are under construction, we would certainly have an opportunity to pursue and to bid on those kinds of opportunities. It is very analogous to our remote camps mining businesses, if you will. So we see it as a long-term opportunity for the company, not a threat to our organization.

And I am old enough to probably be able to say this. I remember the days when everybody thought robotics was going to replace everybody in an automotive plant. Workforces adjust, processes adjust, companies adjust. We see it as a long-term opportunity with a changing marketplace in that jobs may change, but people will still be employed. So we see it as a long-term opportunity. Jim, do you want to take the other half of the question?

James J. Tarangelo: Yeah. The other, you talked about, you started with the run rate and opportunity in pipeline. So we are certainly running ahead of where we expected to be in terms of net new, well on track to deliver and perhaps exceed on the 4% to 5%. So we are in a really strong position in terms of retention. As John mentioned earlier, just not the size and scale of retention risk that we may have at this point in the year. That, coupled with a number of the large wins we talked about, and then on top of that, a very robust pipeline of opportunities, many active discussions, and many of those pretty close to finalizing.

So we have kicked off the year in a very good spot, and we will keep you posted over the next couple months here.

John J. Zillmer: And I will just add one last comment on that. We see the long-term growth algorithm in this company to improve as a result of our operational discipline. We are getting better and better every day with respect to both elements of the business, which is selling these new accounts and these new opportunities by applying great systems and processes to these client organizations, as well as continued operational improvement which leads to higher client retention. And so both elements are important. Our gross new wins last year were the highest we have ever had, and we continue to see very strong success in both new business wins and retention.

Operator: Our next question comes from Jaafar Mestari with BNP Paribas. Your line is open.

Jaafar Mestari: Hi. Good morning. First question, please, on just pricing and volumes. Curious if you could quantify the contribution to organic growth in the quarter, and maybe update your views for where like-for-like price and like-for-like volumes land for the full year, please?

James J. Tarangelo: Sure. For Q1, pricing essentially about 3% in line with inflation, in line with our expectations. That is offset essentially by a 3% we talked about for the Q1. For the full year, I think we are still on track. We still anticipate pricing being in about 3%. Volumes are a half percent to 1%, and then at this point, just hit the middle of the range, and perhaps better for net new would be about 4.5%. That would put you right in the middle of the guidance. And as we talked about, on track. We are encouraged by the trends we are seeing in net new and opportunities to exceed that.

Jaafar Mestari: Super. And just a follow-up on cash flow. It is a normal cash burn quarter, but that normal seasonal outflow was $200 million more than last year. Can you perhaps detail some of the moving parts there? It looks like CapEx in the narrow sense—you buying facilities and building stuff—was actually exactly in line, but then payments to clients were $40 million higher. And if that is correct, then is the balance of $160 million all working capital outflow? Does it stay there? Does it revert?

James J. Tarangelo: If we view the payments to clients, we essentially view as capital investment in our clients. It is more of an accounting distinction. But for the first quarter, CapEx was about 4.5% of revenue. So that is elevated, and that is a result of the success we have seen with our new business and a little weighted toward sports and higher education, which, as you know, does require a higher percentage of capital. Some of the business higher proportion of business we rolled out in Q1 was from those sectors. We do expect that to normalize. Historically, if you look, we are running about 3.5% capital spending as a percentage of revenue.

By the end of the year, we should be back in that range. So Q1 was a little skewed with the capital. And then in terms of working capital, as this business grows, we do have a use of working capital, seasonal use that was a little bit higher than the prior year. As growth accelerates, additional working capital goes in. So it is in line with our expectations and how we planned it out.

Operator: Our next question comes from Andrew Steinerman with JPMorgan. Your line is open.

Andrew Steinerman: It is Andrew. I just wanted to make sure I heard you correctly about the assumption for client retention in the fiscal 2026 guide. I think you said you are counting on maintaining the same high client retention percentage that you experienced in fiscal 2025. I just wanted to make sure that I heard that correctly. And then also the second question is, is there anything else that you want to add directionally about trends in the start of this current second quarter outside of the calendar shift and the Penn Hospital start?

James J. Tarangelo: In terms of retention, as we said, Andrew, we are actually at a better spot in terms of retention this year than prior year, and as you know, last year was a record retention for the organization. So it is in early days, but I think we are on track to be consistent or even better than what we delivered in fiscal 2025. Your question on trends?

John J. Zillmer: Nothing other than what we have already modeled, I think, is probably fair, Andrew. Nothing different. We obviously have start-up of new accounts, but nothing that is really impacting the second quarter differently than we have already disclosed.

Andrew Steinerman: Okay. Thank you.

Operator: Next question comes from Andrew John Wittmann with Baird. Your line is open.

Andrew John Wittmann: There was a comment in your prepared remarks about inflation. I think you guys said that it was running kind of in line or maybe slightly better than you had anticipated. Maybe I thought you could elaborate on that a little bit more, maybe decompose it into maybe food and supplies prices versus the labor that you are seeing out there? And if it is running better, was just wondering if it is just kind of immaterially better, or if there is an offset somewhere else in the P&L that keeps the profit guidance where it is.

John J. Zillmer: Thanks, Andrew. I would say it is roughly 3% on a food basis, and that is across multiple geographies, a little higher in one, a little lower in another. So in the aggregate, it is right in that range of what we anticipated. We still see some elevated risk on certain commodities, but everything else kind of coming in line. Obviously, the big commodity in the US is beef, which continues to have demand outstrip supply, so pricing is fairly high. But we are able to mitigate that through the menu design and the like. So we think that inflation number is very consistent with what we expected and what we are seeing unfold.

From a labor cost perspective, I would say it is still probably in that range as well, different across geographies in various countries, but in the aggregate, again, in that range. So we expect the overall impact of inflation to be about 3% to offset it through appropriate pricing strategies in market and various other changes. So really nothing extraordinary in the inflation environment for us at this stage.

Andrew John Wittmann: Okay. Cool. That is my only question. Thank you very much.

Operator: Next question comes from Joshua K. Chan with UBS. Your line is open.

Josh Chan: Hi. Good morning, John, Jim. I guess you mentioned the unprecedented retention trend. So I am just wondering what is changing or improving this year, and how does the retention pipeline, if you will, or the defense pipeline, look for the rest of the year?

John J. Zillmer: I would say again that we are just extraordinarily focused on retention as being a key driver of our success, and so we continue to get better and better at it. We continue to have very high expectations for our teams, and frankly, their performance has been extraordinary. It is a combination of a lot of different things, but most it is about performance, and it is about delivering the services that our clients expect and meeting their expectations. So with respect to the pipeline, we have a fairly normalized year. Nothing very large on the horizon in terms of risks. It is just a fairly normal year.

Josh Chan: Okay. Great. Thanks for the color there. And are you seeing any change in terms of customer spend, average spend per transaction? Is that trend continuing to move up, or what are you seeing there?

John J. Zillmer: We continue to see broad consumer support, particularly if you break down the consumer transactions in Sports and Entertainment. We are seeing very good per capita spending, very good attendance levels in the various leagues, obviously somewhat driven by team performance, but overall attendance in the NBA and NHL at good levels. So we feel very good about the trends that exist within the business. We are not seeing any consumer pushback or any strong concern with respect to the economic environment. Overall, I would say it is steady as she goes.

Josh Chan: Great. That is good to hear. Thanks for the color.

John J. Zillmer: Thank you.

Operator: Our next question comes from Toni Michele Kaplan with Morgan Stanley. Your line is open.

Yehuda Selverman: Hi, good morning. This is Yehuda Selverman on for Toni. Just had a quick question or two on the sports segment. So we wanted to talk a little bit about the World Cup and if there is any update on how this contract might work. We have heard that it could be one contract for all the games spread across the country. We are wondering if there is an update in the selection process and how that has gone and, if it really is one contract across the many different stadiums, how that might play out in terms of the stadiums that are operated by different providers at the moment.

John J. Zillmer: I am not sure where you are getting that. We have the contract to operate the games in the stadiums we operate, and that is true of our competitors as well. So we will have the games at Lincoln Financial Field, at NRG Stadium in Houston, and in Kansas City we will have the games there. So there is not one single contract. There is not one operator. The services are being provided by the company that is under contract to operate that stadium. We anticipate having positive revenue trends from the World Cup, but also keep in mind that those stadiums, while they are being used by the World Cup, cannot be used for concert activity and other events.

So all in all, we see it as being relatively revenue and profit neutral to us, not a significant upside or downside to our projected financial results for the year.

Yehuda Selverman: Got it. Thank you for clarifying. And then just one quick follow-up also on the sports segment. Similarly, coming up in Q2, there is potential tailwind from March Madness being held in a couple of stadiums that were not held previously. Curious if it is a similar scenario where it might be neutral as they cannot have other entertainment or sports events at the stadium at the same time. And, alternatively, is there an expected headwind from the NFL playoffs seeing less home games this year than last, or minor just like the MLB?

John J. Zillmer: I would say, first of all, anything that is scheduled in our stadiums has been on the calendar for quite some time. So if the NCAA Final Four or Sweet 16 is in one of our stadiums, we will have the opportunity to serve those events, and that would have already been baked into our expectations and into our planning process because we know that those things are scheduled well in advance. So it does not represent a real change to us in terms of our overall planning process. We were lucky enough to have some teams in the NFL playoffs, and it was a good playoff season.

We are very pleased to say that our clients in Seattle, the Seattle Seahawks, won the Super Bowl. We served their facilities needs there in the stadium in Seattle, and we are very proud to be of service to them. But I would say overall, our expectations for the sports year are pretty consistent with our plans, and really no expectation for either windfalls or downside.

James J. Tarangelo: Yeah, I will just add in terms of Q1, we did have about nine or so fewer major league MLB games. We had the Phillies in the prior year. So that had some headwinds in Q1 as we return to a more normalized growth rate in Q2, as John just mentioned.

Yehuda Selverman: Great. Thank you.

Operator: Our next question comes from Jasper James Bibb with Truist Securities. Your line is open.

Jasper James Bibb: Hey, good morning, everyone. A couple for me on the RWJBarnabas contract. Should we think about this as comparable in size to the Penn Medicine win? And I think I heard launching this summer. How should we think about the timeline for that hitting a mature run rate? Is that going to be more of a fiscal 2027 driver, or your contribution for 2026 going to be material too?

John J. Zillmer: Yeah. I think it will be a staged opening that will begin this summer. I think we are still working to finalize the actual opening schedules, if you will. So there will be a significant impact in 2026. We anticipate beginning to serve them in June, and then throughout the balance of the summer, it should be transitioning. But that schedule is still yet to be determined. Yeah. We are very proud to have been selected to operate Robert Wood Johnson Barnabas Health System. It is a terrific win, and as you know, the system is actually larger than Penn Medicine's, and ultimately the potential revenues are likely to be as strong as Penn's.

So we feel very good about it, and there will be impact in 2026, and we will know more here over the next few weeks as we develop the implementation schedule.

Jasper James Bibb: Great. Thanks for that. And then the Europe group was really strong again this quarter. It has been a really nice couple of years for that business. Just hoping we could step back and talk about the drivers of your growth in Europe, where you see more opportunity there, and what the pipeline looks like for that business over the balance of the year.

John J. Zillmer: I cannot say—I am sitting here looking for superlatives because they have just done an extraordinary job of building that business over the last several years. They have been hyper-focused on growth, and frankly, it has been a result of improving performance and demonstrating to our clients that we are the company that can deliver for them across a range of countries and a range of geographies. We have been committed to that growth. We have invested in sales resources and processes and systems and, frankly, in leadership.

So we have great teams on the ground really focused on building their organizations and enterprises, and they have been able to demonstrate it here now over several years running, and we have very high expectations for them this year as well. I cannot say enough about them. I am really excited by the work that they have done and their performance to date, and we believe that success will continue.

Jasper James Bibb: Great. Thank you for taking the question.

Operator: Our last question comes from Stephanie Benjamin Moore with Jefferies. Your line is open.

Stephanie Benjamin Moore: Actually, my first question is just a follow-up to maybe the prior question and the prior discussion here. Could you talk a little bit about some of these larger platform wins? Is this a change in strategy, a change in go-to-market strategy, or is it just timing of some of these wins? But it does seem like you are seeing some larger wins unless I am missing something here. So just wanted to understand if there is a strategic shift happening behind the scenes, and I have a follow-up as well.

John J. Zillmer: I would say, yes, there is a strategic shift, and it is really on the part of our clients as they begin to recognize the need to systemize their operations in order to take advantage of cost synergies and operating synergies. A great example of that is Penn Medicine. They had multiple service providers; they were also self-operating a lot of their business. Their CEO made a very strategic decision to go ahead and consolidate and systemize so that they could capture the cost savings and the synergies and ultimately reduce cost to patients and control expenses for the medical institution. You are seeing more and more of that in healthcare systems.

We are very proud of the service we provide to Baylor Scott & White in Texas, who were really one of the first organizations to apply the system-wide approach to this. Very proud to be selected to serve Robert Wood Johnson Barnabas as they apply that same strategy. My belief is that more and more organizations, particularly in healthcare, will continue to pursue that as they recognize the need for cost containment and control in a world of declining reimbursements from the federal government. They need to operate more efficiently, and we have the tools and processes and systems in place to enable them to do that in a consolidated way.

So there is a strategy shift really on the part of our clients and customers and their philosophical change. We have had great success, and we believe we will continue to enjoy outsized results as a result of our ability to go ahead and apply those systems and processes to that strategy.

Stephanie Benjamin Moore: And then just as a follow-up, I wanted to touch on your timing to contract profitability or breakeven, however you want to speak to it. Has there been any change in terms of the timing that new contracts are able to start contributing at a faster pace, just based on some of the operational improvements and investments, as you just noted, specifically? Any changes, especially as we think about maybe some of these larger contracts as well? Thank you.

James J. Tarangelo: Some of the larger contract wins this year, as John just mentioned, within healthcare, they are typically less capital. While they are large and complex, unlike a large Sports and Entertainment opening, there is less capital required, and contractual structure in healthcare is often significantly more geared toward cost-plus or cost-reimbursable, which helps mitigate some of the large start-up costs. So I think you are right. This year, with some of those large contracts rolling out, the start-up costs, the ramp up to profitability, is a little faster, and that was embedded in the plan and the guidance that we set out at the beginning of the year.

Felise Glantz Kissell: Thank you, everyone.

Operator: I will now turn the call back over to Mr. Zillmer for closing remarks.

John J. Zillmer: Terrific. Thank you very much, and thank you, all of you, for your support of the company and your questions. Always happy to provide as much information as we possibly can. We like to be as transparent as possible and make this easy. I want to thank the Aramark team for their extraordinary devotion and commitment to customer service. These financial results that we are enjoying now and that we will enjoy in the future are a direct result of your efforts. So Aramark team, thank you, and we look forward to talking to you again soon. Take care.

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

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