Aramark reported third-quarter fiscal 2022 results.
Year-over-year summary highlights
Revenue +38%; organic revenue +39%
- Revenue now surpassing pre-COVID levels across all three business segments.
- Primarily driven by record-level net growth, pricing, and ongoing base recovery.
Operating income +99%; adjusted operating income (AOI) +73%.
- Operating income margin of 3.6%, +109 bps; AOI margin of 4.4%, +85 bps.
- Improved profitability from higher sales volume and operational cost management.
EPS increased to $0.16; adjusted EPS increased to $0.25
- EPS higher by $0.03; adjusted EPS higher by $0.23.
Raising fiscal 2022 outlook for organic revenue growth and annualized net new business
- Now expect organic revenue growth of +31% to +32%; annualized net new business of $725 million to $775 million.
John Zillmer, Aramark's chief executive officer, stated in the announcement: “I'm pleased to share that our fiscal third quarter results represented a significant milestone as revenue surpassed pre-COVID fiscal 2019 levels across all three business segments. We continued to accelerate net new business growth and expand margins despite the inflationary environment, which is a testament to Aramark’s focus on operational excellence. Across the globe, new and existing clients are placing their trust in our people and our services, and we are confident in our ability to meet and exceed their expectations.”
Consolidated revenue was $4.1 billion in the third quarter, an increase of 38% compared to the prior year period. Organic revenue, which adjusts for the effect of currency translation and certain acquisitions, improved 39% year-over-year with double-digit growth in all segments.
Both consolidated revenue and organic revenue reached 103% of pre-COVID levels, a performance milestone driven by broad-based net new business, pricing, and ongoing base recovery.
FSS United States organic revenue increased 45% compared to the third quarter last year, primarily due to the following contributors in each sector:
Solid performance to end the academic year, with higher education and K-12 now preparing for the upcoming new school season. Have begun implementation of enhanced pricing strategies for board plans and on-campus retail outlets.
Sports, leisure and corrections
Significantly higher year-over-year results led by strong attendance levels. Sports & Entertainment drove increased per capita spending, led by Major League Baseball, as well as an accelerated return of concert schedules. Leisure experienced increased guest activity, particularly in National Parks. Corrections performed above pre-COVID levels driven by new business wins.
Business and industry
Continued gradual progress with higher participation rates and increased levels of in-person interaction at client sites, including social gatherings, networking opportunities, and wellness sessions.
Growth led by increased client activity related to elective surgeries and clinical care. Successfully renewed several marquee accounts as well as added new offerings, including in Ambulatory Surgical Centers.
Facilities and other
Reflected ongoing demand in core business offerings with an added focus on new engineering solutions and client project services.
Operating income grew 99% year-over-year to $148 million and adjusted operating income (AOI) improved 73% to $178 million, reflecting an operating income margin increase of 109 basis points and an AOI margin increase of 85 basis points to 4.4%. Improvement was due to effective cost management and operating leverage from higher revenue levels, partially offset by the impact of increased inflation as well as new business start-up costs. The need for off-program procurement began to ease slightly in the third quarter.
Year-over-year AOI improvement was broad-based across operating segments, demonstrating notable double-digit growth and significant margin expansion:
FSS United States AOI increased 66% due to operating cost management across the portfolio and revenue recovery, particularly in Sports & Entertainment and Business & Industry. Higher Education and Corrections have begun implementing additional pricing actions.
FSS International AOI improved 88% driven by client re-openings as country-specific restrictions continued to ease, partially offset by the decrease in government assistance program subsidies.
“I am proud of what our team has accomplished as we continue positioning Aramark for success by executing against our strategic growth initiatives,” Zillmer added in the announcement. “The planned spin-off of our Uniforms segment, which is intended to be tax-free to us and our stockholders, continues apace, and we believe that we are well-poised to achieve our long-term targets. I couldn’t be more confident in our people, our clients, our purpose, and our future.”