Aramark Services (NYSE: ARMK) reported Q4 EPS of $0.68, $0.01 worse than the analyst estimate of $0.69. Revenue for the quarter came in at $3.95 billion versus the consensus estimate of $3.94 billion.

• Revenue +1.0%; Legacy Business Revenue +3.0%
  • Legacy growth across all segments
• Operating Income (26)%; Adjusted Operating Income (2)%1
  • Increased incentive-based compensation; Solid operational performance
• EPS of $0.34, (51)%; Adjusted EPS of $0.68, +1%1

“Aramark is an iconic company with a promising future. I am incredibly inspired by the many talented field leaders and valued client partners I have met in just 45 days back with the Company,” said John Zillmer, Chief Executive Officer, Aramark. “My immediate priority is to elevate the Company’s hospitality culture and drive the business forward in a way that unlocks meaningful value for all stakeholders."

BUSINESS UPDATE

Aramark has made extensive progress improving profitability, increasing procurement scale, evolving its portfolio, and driving free cash flow to strengthen the balance sheet and enhance financial flexibility. The Company is well-positioned to accelerate revenue growth that will include consideration of select investment opportunities while maintaining a long-term balanced focus on margin progression, Adjusted EPS growth, return on capital improvement and strong cash flow generation.

“I am confident that now is the time to pursue a more accelerated revenue growth strategy, while appropriately balancing other important financial drivers. We expect to initiate targeted investments that will support new account sales efforts and client retention; enhanced product and service offerings; and value-added innovation and technology,” Zillmer added. “Our diverse portfolio affords us the financial flexibility to activate this strategic approach while simultaneously propelling business performance. I look forward to working with the Board as we chart our dynamic path forward.”

2020 OUTLOOK

Aramark provides its expectations for organic revenue growth, full-year adjusted EPS and full-year free cash flow on a non-GAAP basis, and does not provide a reconciliation of such forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for the impact of the change in fair value related to certain gasoline and diesel agreements, severance and other charges and the effect of currency translation.

Aramark’s 2020 Fiscal Year and fourth quarter results contain an extra, or 53rd, week, when compared to prior period results. The guidance provided below is based on 52 weeks for year-over-year comparability purposes.

• Organic Revenue Growth of approximately 3% that is expected to consistently improve as the year progresses.
• Adjusted EPS growth led by further synergy capture from the Avendra and AmeriPride integration; business operating improvements; and reduced interest expense, while considering select investment opportunities.
• Free Cash Flow generation of at least $600M.
• Net debt to covenant adjusted EBITDA approximately 3.5x to 3.6x by the end of the fiscal year.

Organic Revenue, Adjusted Operating Income, Adjusted Net Income and Adjusted Earnings Per Share Growth will be adjusted for the 53rd week. Prior to the adjustment, the 53rd week is expected to have a full year benefit of approximately 2% on these metrics. Due to certain outflows from the natural cadence of the business including interest and tax payments, employee and client payments and commissions, Free Cash Flow is expected to be modestly unfavorable in the 53rd week period, with the Company diligently managing offset opportunities over the course of the year.

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