Aramark Services (NYSE: ARMK) reported Q3 EPS of ($0.69), $0.01 worse than the analyst estimate of ($0.68). Revenue for the quarter came in at $2.15 billion versus the consensus estimate of $2.17 billion.

SUMMARY

• Strong cash flow management and liquidity
  • Disciplined business actions led to Cash provided by operating activities of $17 million and minimal Free Cash Flow use of $37 million in the third quarter
  • Positive cash flow since bond issuance in late April
  • Over $2.5 billion cash availability at quarter-end
• Sequential monthly revenue improvement in the third quarter
  • Revenue (46.3)%; Organic Revenue (45.3)%
  • Increasing activity particularly in Uniforms, International, Education and Leisure
• EPS of $(1.01); Adjusted EPS of $(0.69)
  • GAAP EPS included $125 million severance charges related to organizational realignment
  • AOI drop-through consistent with Company's expectations
• Launched EverSafe™ proprietary platform
  • Provides reopening solution for clients that maintains superior hygienic standards
  • Developed in partnership with Jefferson Health in accordance with leading global health organizations

“I am encouraged by how well the Company continues to navigate the complexities and challenges of the current environment. Our balance sheet and new business pipeline remain strong, and we have taken strategic actions to fortify Aramark for the future," said John Zillmer, Aramark’s Chief Executive Officer. “I am also proud of how our team members have remained focused on serving our client partners and communities in the face of significant adversity.”

BUSINESS UPDATE

Aramark's actions in the third quarter to adapt to the current environment resulted in:

• Improved client retention trends and new business wins;
• Increased agility in managing cost structure that led to an AOI drop-through at 20% of the corresponding revenue decline; and
• Enhanced financial flexibility to promptly scale services to meet changing client needs.

The Company has been providing meals, food, supplies and PPE for local communities as well as offering safe and hygienic solutions for employees, clients and customers.

Recognizing the critical need for health and safety, Aramark developed EverSafe™ — a comprehensive offering committed to the safe reopening and sustainable management of client locations. The EverSafe proprietary platform was created in partnership with Jefferson Health and in accordance with the recommendations of the CDC, WHO and other leading health organizations. In addition, the EverSafe OS web-based service and mobile app was introduced as a solution designed for small and medium-sized businesses, such as restaurants and retailers, where reopening safely is a critical concern and additional guidance to do so is needed.

Aramark's portfolio is exhibiting early signs of recovery with client activity at various stages of reopening based on geography and sector, particularly Education. The Company currently anticipates sequential top-line improvement in the fourth quarter compared to the third quarter. Aramark is focused on effectively managing costs and Free Cash Flow while operating the business with a long-term perspective that includes pursuing strategies to win new business, retain clients or extend contracts by providing exceptional service.

Aramark believes it will be a key enabler in the broader recovery with expectations that there will be increased demand and favorable outsourcing trends for prominent service providers with deep experience in safety and hygiene solutions.

“Our priority in this ever-changing environment is to ensure the health and well-being of our employees and everyone we serve through an unwavering commitment to provide safe, hygienic dining, facilities and uniform services,” Zillmer said. “Given the considerable opportunities ahead of us, I am confident in Aramark’s ability to create significant, sustainable value for our stakeholders.”

For earnings history and earnings-related data on Aramark Services (ARMK) click here.