These are top 10 stocks traded on the Robinhood UK platform in July
On Thursday, 13 March 2025, Aramark (NYSE: ARMK) presented at the UBS Global Consumer and Retail Conference 2025, showcasing a robust start to the year. CFO Jim Thirangirl emphasized the company’s focus on organic growth, new business acquisitions, and financial flexibility. While Aramark achieved significant financial targets for fiscal year 2024, it continues to navigate challenges in a fragmented market.
Key Takeaways
- Aramark reported 5% organic growth in Q1 2025, with a 25% increase in earnings.
- The company is targeting 4% to 5% net new business growth in 2025.
- M&A strategy focuses on small to medium-sized acquisitions to enhance GPO capabilities.
- Aramark’s exposure to federal spending is limited to 2.5% of revenues.
- The company aims to maintain a retention rate exceeding 95%.
Financial Results
- Q1 2025 Performance:
- Achieved 5% organic growth overall.
- Recorded 6% organic growth in the food business.
- AOI increased by 13%.
- Earnings grew by approximately 25%.
- Fiscal Year 2024 Achievements:
- Surpassed guidance with 10% organic growth.
- Achieved 20% AOI growth, meeting the upper end of guidance.
- Reduced leverage from 4x to a target of 3x, the lowest in nearly 20 years.
- Guidance for 2025:
- Projected organic growth of 5.5% to 7.5%, excluding a 2% impact from an extra week.
- Pricing expected to contribute 2% to 3% to organic growth.
Operational Updates
- New Business Wins:
- Secured contracts with University of Nebraska athletics and Loyola Marymount.
- Added Arizona State University account, including athletics and faculty services.
- Retention:
- Aiming for retention rates above 95%.
- Secured the largest higher education account with Arizona State University.
- M&A Strategy:
- Focused on small to medium-sized acquisitions.
- Acquired Quantum in Europe and First Class Vending in California to enhance services.
Future Outlook
- Key Priorities for 2025:
- Drive a growth-oriented model with net new targets of 4% to 5%.
- Improve financial flexibility and capital structure.
- Growth Drivers:
- Anticipates broad-based growth across sectors and geographies.
- Strong starts in interactions, business dining, and higher education.
- Potential Upside:
- More contract conversions in the pipeline.
- Continued consumer resilience at concerts and events.
Q&A Highlights
- M&A Strategy:
- Focus on enhancing GPO capabilities and refreshment services.
- Capital Allocation:
- Balancing debt reduction with a $500 million share repurchase authorization.
- Vertical Performance:
- Strong performance in sports and entertainment, driven by technology and record per caps.
- Business and Industry benefiting from return-to-work trends.
- Exposure to Federal Spending:
- Limited to 2.5% of revenues, primarily with the National Park Service.
- Impact of Tariffs:
- Minimal due to domestic production of over 85% of products.
Aramark’s strategic focus on growth and financial flexibility positions it well for the coming year. Readers are encouraged to refer to the full transcript for more detailed insights.
Full transcript - UBS Global Consumer and Retail Conference 2025:
Josh Chan, Analyst, UBS: Good morning. I’m Josh Chan. I cover business services here at UBS. So, we’re pleased to have Aramark with us today.
They are a $10,000,000,000 market cap provider of food and facility services in The U. S. And some other international countries. With us from Aramark is Jim Thirangirl, CFO. And we have a fireside Q and A discussion, but I’ll open up the floor from time to time for any Q and A as well.
So feel free, you can also send your questions on the iPad here. With that, Jim, glad to have you at the conference.
Jim Thirangirl, CFO, Aramark: Yes. Thank you. Thanks for hosting us this morning. Just in the way of sort of opening comments, we’re off to a really good start this year. We’re really pleased with the results we generated in the first quarter, generating 5% organic growth, 6% organic growth in the underlying food business, 13% growth in AOI and about 25% growth in earnings.
We’re really pleased with the trajectory of the business. We’re off to a really good start with our new business wins. We think we’re well positioned from a retention standpoint. On top of that, we’ve done a number of refinancing activities lately, including issuing a European bond a couple of weeks ago, actually the lowest coupon printed for a high yield issuer U. S.
Issuer out of Europe since 2021. So, we’re really pleased where we are and the outlook for the business.
Josh Chan, Analyst, UBS: That’s good to hear. Yes, thanks for that overview. So, we are at a consumer conference. So, I know that you serve at a certain segment of the consumer. So, based on the consumer that you interface with, how would you describe the state of consumer, any differences in terms of confidence, spending levels, things like that?
Jim Thirangirl, CFO, Aramark: Yes, I’ll start off. I mean for us, unlike a traditional retailer or fast casual restaurant, our consumer segment is much more resilient, right? So we operate in segments like education. So the number of students is pretty predictable even in economic downturn. In higher education, enrollment tends to actually go up during periods where people downturns where folks go back to school.
Healthcare, think about senior living and hospitals, very predictable and resilient consumers. And even in segments that might be viewed as somewhat more discretionary like sports as an example, we’re still seeing very favorable trends overall with record average checks, good transaction levels and what I call the experience based consumer still looking to spend in sort of that environment. A lot of that performance tends to be more team driven. So for us, the consumer remains resilient and strong overall.
Josh Chan, Analyst, UBS: Great. Yes, thank you. So, you’ve been CFO for just over a year now. And so, what’s been kind of the highlight over the past year from your seat and what are some areas that you’re kind of paying attention to going forward?
Jim Thirangirl, CFO, Aramark: Yes. Sorry, I think it’s been a remarkably smooth transition into the role, having been at the company for twenty years and working very closely with John and Tom, my predecessor, leading up to the role. I think we’re very proud of the results we delivered last year. It was really about execution, right? As you know, we put this transformation in the company toward a growth oriented hospitality focused company.
So with that model firmly in place, for me it was really about executing last year and delivering the results that we wanted to deliver. And I look back, we had guided to 7% to 9% organic growth in fiscal twenty twenty four. We delivered 10%. We got to 15% to 20% AOI growth, we delivered 20%. So we’re proud of achieving or exceeding the results that we set out to deliver.
On top of that, improving the financial flexibility, enhancing the capital structure, We significantly improved the leverage profile of the organization, improving leverage from about four times last year and working our way towards three times levered by the end of this fiscal year, which will be the lowest leverage the company has had in nearly twenty years.
Josh Chan, Analyst, UBS: Okay. So as we look into 2025, I know that you’re already into your fiscal year, what are some of the key priorities for management this year? And what are some things that you really want to get right for this year?
Jim Thirangirl, CFO, Aramark: Well, it’s consistent with the highlights I just talked about. And that’s what’s a relatively simple business model for organization. And it really starts with growth. So again, the focus in 2025 and beyond is going to be driving that growth oriented model, achieving the net new target of 4% to 5% that’s really core to our model is something we’re very focused on. And with that, we’re off to a really good start.
We’ve announced a number of large new wins, including University of Nebraska athletics, Loyola Marymount in our higher education portfolio. So we like the pipeline remains robust. So we’re very encouraged by the trajectory we see with respect to new. On the retention side, again, we’re well positioned. There just simply aren’t the size and scale of accounts that there were out for rebid as there were last year.
So statistically, we’re just in a better position. We’ve already secured our largest higher education account with Arizona State University, not only secured it, but we added athletics and concessions, we added the faculty launch of that program as well. So with that, we think we’re very well positioned from a net new standpoint. And as you know, our net new really drives the output of this business in terms of margin levers and it really fuels the long term performance.
Josh Chan, Analyst, UBS: Great. That’s encouraging. Anybody has any questions before we dive into more of the business? Great. Okay.
So for this year, you’re guiding to 5.5% to 7.5% organic growth excluding the 2% you get from the extra week. So how are you thinking about the different components that add up to organic growth between the net new pricing based business and things like that?
Jim Thirangirl, CFO, Aramark: Yes. I think core to the algorithm and financial model for the business, it starts with what we call gross new business, which we target 8% to 10% on an annualized basis with new. We target retention rates in excess of 95%. So with that, you get the net new target of 4% to 5%. On top of that, you get some pricing and some base business or volume growth that gets us to our long term algorithm, which is a five percent to 8% growth target for the organization.
In relation to the components of growth, that’s basically it. So this year, pricing is in the 2% to 3% neighborhood and again we continue to target net new in the 4% to 5% range and that’s how we think about the components of growth.
Josh Chan, Analyst, UBS: Okay.
Jim Thirangirl, CFO, Aramark: All
Josh Chan, Analyst, UBS: right. Before we go into the verticals, there is a question from the audience. What’s your strategy for the next one to two years in terms of M and A? And where are you seeing the acquisition opportunities? And are you competing with private equity buyers potentially?
Jim Thirangirl, CFO, Aramark: So our M and A strategy is focused on primarily small and medium sized acquisition targets that are consistent with our strategy, generally falling in three areas, I’d say. Really at the top of the list is adding on to our GPO capabilities and increasing the size and scale of the spend that we manage because that’s really critical for our economic model. And you saw us execute that with the acquisition of Quantum in Europe back in December. That was one of the largest remaining independent GPOs in Europe. It was an asset that we had cultivated the relationship for many years.
And it really rounds out and enhances our global capabilities to serve clients like Marriott and Hyatt more globally. So that’s a differentiating asset for us. Refreshment services or convenience retail is another area of the business. If you think about there’s sort of a route based business with a fixed cost. So anything you can add on to those routes becomes very margin accretive to the organization.
So again, we executed an asset called First Class Vending, which is one of the top vending businesses based in California more recently, so consistent with that strategy. And then finally, enhancing the brand. So we’ve done a number of sort of small bolt on type deals to bolster brands and sort of enhance our capabilities to serve premium segments of the market. An example there would be Graysons or Wilson Vale in The UK, which allows us to serve more premium clients really adding on to the Aramark core brand. Okay.
Josh Chan, Analyst, UBS: And how are you since we’re on M and A, how are you thinking about balancing the path to three times and then M and A? I think you recently have a repurchase authorization as well. So how are you kind of balancing all those priorities?
Jim Thirangirl, CFO, Aramark: Sure. So, first of all, this is a company that generates a lot of cash. It’s very resilient. So we have good visibility and predictability into our cash flow generation. So in terms of our capital structure, we’re working our way towards three times levered by the end of this fiscal year.
And as I noted earlier, that’s the lowest leverage we’ve had since 02/2007. Optically, I think we do want to get under three times as we work toward fiscal twenty twenty six. We find that particularly with sort of European, Asian and Australian investors who are expressing a lot of demand in our interest in our equity optically being under three times or the path under three times is important. So that’s something we can we’re focused on. In conjunction with that, we announced a $500,000,000 share repurchase program back in November.
I think a testament to the confidence the management team and the board has in the outlook of the business. And we started commencing with buybacks at the end of Q1. We’re active buyers today. We see a lot of value in terms of where the stock is trading versus where we see the intrinsic value. So we will be active when we see opportunities and balancing that with working our way toward three times levered as well.
Josh Chan, Analyst, UBS: That’s great. Great to see the different options. So in terms of your business, looking at the different verticals, so sports has been one of the very strong growers within your portfolio. Could you talk about kind of the spending backdrop and whether you see the strength being sustainable over the coming years?
Jim Thirangirl, CFO, Aramark: Yes. Sports has remained sports and entertainment has remained a strong segment for the business. We continue to see record per caps being generated for the organization. We’ve been able to leverage technology very effectively in this sector. So if you think about adding in automated checkout point of sales where you can have one attendant monitoring multiple point of sales system, you see this in a lot of the stadiums that increases the number of transactions that can flow through with enhanced labor productivity.
So specific tactical thing we do there. I think more higher level in particular in sports, the opportunities we see within Collegian and University. So while the professional market might be more mature from an outsourcing standpoint, we see lots of opportunities with Collegiate Athletics, many of whom sell off. You see some of the wins we’ve announced with Arizona State adding athletics, University of Nebraska. Colleges and universities are increasingly seeing athletics as a source or need for funding, right?
With name, image and likeness, essentially athletes being paid leads to enhanced funding requirements. So they want to elevate that fan experience, elevate the average checks and sort of more replicate what we do on the professional sports side of the business. Many of these stadiums are in football and basketball. They’re larger than their professional stadiums counterparts and they’re introducing alcohol. So, this is a really exciting opportunity for the business.
Josh Chan, Analyst, UBS: Yes. And are you seeing that building of pipeline in terms of potential new win opportunities down the line?
Jim Thirangirl, CFO, Aramark: We are. I think it represents a significant opportunity for the organization. I think we serve something like 500 colleges and universities today. Less than 50% of those that we do athletics and sports. So even cross selling within the business is a big opportunity for us.
And like I said, it’s something that we are actively pursuing, reacting to the needs of the market. Okay.
Josh Chan, Analyst, UBS: So education is another sizable part of your business within The U. S. So how does your exposure break down between K-twelve and higher ed and what trends are you seeing there?
Jim Thirangirl, CFO, Aramark: About 80% of the education sector is what we call collegiate hospitality, which is colleges and universities. We continue to see favorable trends in this sector as well. I know it’s sort of from a macro perspective, there’s some concern about an enrolling clip. But within the Aramark portfolio, we have a heavy presence and exposure to warmer climate schools in the South and Southeast. So think about like SEC type schools and there’s been a migration from students to those warmer climate larger universities.
So we’re seeing and continue to see favorable enrollment trends across the business. So that’s sort of on the macro side. From a tactical standpoint, the business has done an excellent job enhancing our retail capabilities, what we call meal plan optimization. So a big piece of the higher education business are residential meal plans, right? Your freshman, sophomore year, fall and spring board plans as you might say.
And we’ve done a nice job basically moving folks up the value chain, moving from say a silver plan to a gold standard plan. In some cases, introducing a platinum plan recognizing there’s always a portion of the population that will migrate to something that’s even higher there. So that in conjunction with getting more upper class in juniors and seniors under these plans, we call them voluntary meal plans. Typically after freshman, sophomore year, students tend to do sort of cook on their own, but there’s certainly opportunities that are sizable to get those juniors and seniors on to Aramark sponsored plans.
Josh Chan, Analyst, UBS: Okay, great. And then on the business and industry side, you’ve had very strong double digit growth since the pandemic recovery really. I’m sure back to office is a tailwind. So do you see that continuing to help growth over time? And what are you seeing in terms of potential new wins opportunities too in B and I?
Jim Thirangirl, CFO, Aramark: The B and I segment has been performing very well, double digit growth for a number of quarters. The return to work is certainly a moderate sort of tailwind to the business. And I think you see it here in financial services here in New York, right? What was three days a week became four days a week, four days a week became five days a week. So many of our clients including JPMorgan and Goldman Sachs has some examples.
But not only that, but when folks are in the office, we’re seeing participation rates being elevated because two thirds of our B and I segment is subsidized, which means we can offer more attractive and lower priced meals and going out to retail or the high street. So that in combination with employers liking the collaboration and keeping folks in the building more productive have been some of the tailwinds that we’re seeing benefiting that business.
Josh Chan, Analyst, UBS: Okay. So maybe a couple of topical questions. So I guess looking across your entire business, how are your leaders thinking about your exposure to federal government spending? Could you size for us? What potentially could be at risk from a federal spending perspective?
Jim Thirangirl, CFO, Aramark: Yes. Good question. I think there’s a bit of a misperception out there. So, I’d like to sort of clarify. Our exposure to federal contracts overall is only about 2.5% of our revenues and about 2% of that is with the National Park Service.
And within the National Parks, our contracts are all individually negotiated. So our contract for Denali is separate terms, conditions and length and investment than our contract with Yosemite. Yosemite is very different than Lake Powell. So they’re not negotiated in an aggregate basis. They’re sort of all unique assets that are negotiated on a one by one basis.
Again, I know there’s been some negative press in general with those, but the bottom line is we’ve seen good outlook in the business in terms of room bookings and then the government has announced we’re hiring 3,000 seasonal workers in the national parks. The national parks are a source of great pride and it’s also a source of funding for the government where there’s typically a commission that’s paid back to the government as a percentage of the sales. So we see the outlook in that business good. And again, in total, only about 2.5% of Aramark revenues are coming from federal contracts. And you feel like
Josh Chan, Analyst, UBS: the state and local piece of your business is more insulated from these new locations?
Jim Thirangirl, CFO, Aramark: Yes, the state and local is primarily going to be on the correction side and on the K-twelve side of the business. So our corrections business has been performing very well. The net new business there has been very strong and that’s a business where the outsourcing trends are very favorable. We see many states significant opportunities for those states to outsource. So we see that business continuing to grow.
I think K-twelve is much more of a local decision. That’s not a federal decision, right? That’s all local school boards and municipalities. And again, I think more than 50% of that sector is still self op. So we see significant opportunities to improve efficiencies for those municipalities that are continuing to self op and creates opportunities for Aramark.
Great.
Josh Chan, Analyst, UBS: Thanks for the color there. And the other topic I’ve been getting questions on is the tariff. So could you kind of ballpark for us what’s the imported food component? But then also what happens if your costs with the tariffs included kind of goes up?
Jim Thirangirl, CFO, Aramark: The vast majority of our products that are used and consumed in The U. S. Are produced in The U. S. So over 85% of our product and consumption is produced in The U.
S. So where we have some imports, Mexico maybe a few percentage points, it’s primarily seasonal fruits and vegetables. As we come into the spring, most of those fruits and vegetables are actually produced in The U. S. Or actually less relying on Mexico over the next few months.
Some additional comes in product comes in from China, but that’s primarily textiles and linens. And those products generally are more on the avenger on the GPO side of the business. So obviously, we want to mitigate any cost pressure there, but it doesn’t affect our P and L or cost of sales directly. And with China, this is nothing new. We’ve been looking for and there are alternative sources with Malaysia and Vietnam.
So we do see some of that production shifting. So the takeaway is really our exposure on the tariff front is limited because again the vast majority of our consumption and production are in the countries that we operate.
Josh Chan, Analyst, UBS: Okay. That’s great. So when I think about your guidance, the top line guidance for the year, I guess the 5.5% to 7.5% excluding the extra week. So organic growth was just under 5% in Q1. So could you talk about the cadence through the year and what drives that acceleration from Q1 as we kind of go through the rest of the year?
Jim Thirangirl, CFO, Aramark: I think the simple way of looking at it, so you talked about the 5% organic print in the first quarter. We also talked about 2% headwinds from exiting those facilities contracts. So if you sort of add that in your sort of 7%, which is at the high end of the algorithm we’ve always talked about 5% to 8% organic growth is the model that we need to sort of fuel the margin leverage. So that in conjunction with lapping the facilities exits, onboarding new business that we’ve already won or not relying on business on the come. It’s business that we already know about.
In conjunction with the favorable outlook we have on retention, right, our business is contractually based. It takes time if you were to switch contracts. So we have very good visibility for the second half of the year at this point. And so are confident in that ramp up in revenues that’s implied from the guidance.
Josh Chan, Analyst, UBS: And what would drive the difference between whether you hit the low end or the high end of that range?
Jim Thirangirl, CFO, Aramark: Yes, we have there’s a number of fairly sizable contracts that are in the pipeline. So to the extent we are able to convert more of those and sort of accelerate when those commence that could potentially be where there would be would be upside. Like I said, we have good visibility into the outlook. For us, consumer has remained resilient to the extent that changes in terms of sort of just number of folks coming to concerts or events that could affect it as well. But like I said, we have good visibility and what we’re seeing is favorable trends in the business overall.
Josh Chan, Analyst, UBS: All right. Yes, that’s good to hear. So on the net news side, you target 4% to 5% like you said. It sounds like you feel good about hitting it this year. I guess, could you just talk to the pluses and minuses of how you feel about getting to 4% or 5% or maybe even above that this year?
Jim Thirangirl, CFO, Aramark: Yes. On the news side, the company has had consistent performance in generating new business. Last year, we generated $1,400,000,000 of new business, which was a record for the Food and Facilities organization. This year, if we look at the pipeline, what’s been pending and what’s been proposed and expect the conversion rates, we are on track and we’ve announced I said a few large wins already with University of Nebraska, Loyola Marymount. We expect to announce a few more in the coming earnings call.
So that in combination with the outlook we have on retention, which again we have good visibility into what’s out to bid. It’s just less in terms of number and size and scale that there were in prior years gives us a lot of confidence into both the new and the retention to that we’re on track to achieve the
Josh Chan, Analyst, UBS: 4% to 5% net new for the organization. Okay. And where what verticals do you see the most opportunities for net new over the next like one
Jim Thirangirl, CFO, Aramark: to two years? Yes. The great thing about our business is it’s broad based, right? I mean, as we look at the sectors and we sit down with the different businesses and target net new, I mean, they’re all in that range of sort of 8% to 10% in terms of net new or greater. So not only sectors, but geographies, right?
The countries that we operated in have significant runway as well. Particularly, interactions, business dining as an example, higher education are some that we’ve highlighted to particularly strong starts this year. But the bottom line is we expect that net new target to be really consistent across all the sectors that we operate in. That’s great.
Josh Chan, Analyst, UBS: So there has been a outsourcing push since the pandemic. And so where are you seeing first time outsourcing and do you feel like that slightly elevated trend can kind of continue?
Jim Thirangirl, CFO, Aramark: If you look at where we win our new business, I think historically about a third would come from first time outsourced conversions, about a third would come from the large global players and about a third from small regional players. During COVID, we saw first time outsourcing conversions. We have 40% of our new business coming from there. And that’s remained elevated in particular. I think just the overall labor challenges and inflation historically, I think something we do every day, we’re effective at.
Managing technology, I think has become an important part of how we provide value to client in terms of improving productivity with things like unattended micro markets or self checkout. Those sorts of things allow us to increase productivity and it’s something we’re good at and requires technology investments. So I think those are some of the reasons we’ve seen the percentage of first op conversions being higher than it has historically. Okay. And from a retention perspective,
Josh Chan, Analyst, UBS: how has that been trending and what drives fluctuations in retention from your perspective?
Jim Thirangirl, CFO, Aramark: We’ve elevated our retention game, right, over the past few years. If you look at the underlying food business, we’ve been operating in the 95% to 96% retention levels for the past few years. So I think we’ve done a nice job improving retention as part of this transformation that the company has executed. We’re heavily incentivized, the management team, the sector teams in terms of retention and net new, which generally is about 40% of our incentive compensation. We’ve decentralized the organization.
We’ve heavily invested in sales resources and retention resources to both elevate the consumer experience and elevate how we serve our clients. And as I said off to a nice start with already retaining what was the largest account we had out to bid this year with Arizona State.
Josh Chan, Analyst, UBS: Yes, that’s great. Anybody has any questions from the floor? Okay.
Jim Thirangirl, CFO, Aramark: Yes, I’ll start the market in general is rational. The large players, they’re all growing. They’re all showing margin improvement. Capital levels have remained relatively consistent. I always like to start with the market, right?
It’s an attractive market. It’s a $300,000,000,000 market that is still relatively fragmented. So I think I’ll start with the industry overall, which we continue to see as favorable and rational. We like how we stand versus our competitors. We’ve elevated our game over the past few years.
If you compare our organic growth rates to our competitors, we think we’re in a good spot. The percentage of business that we’re taking, like I said, has been about a third. That hasn’t really changed. The new model is really driven by tailored solution, client by client, empowering the field. They’re closer to the decision makers, closer
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.