Aramark reported fourth quarter and full year fiscal 2022 results.
“We are extremely pleased with our performance in the fourth quarter and throughout fiscal 2022 as we delivered the highest annual revenue in Aramark’s history, a second consecutive year of record Net New Business, and ongoing margin expansion,” John Zillmer, Aramark's chief executive officer, said in the announcement. “The strong results and multiple milestones achieved over the past year are reflective of our 'everyone sells' mindset and a testament to the work of our teams across the globe to meet and exceed the demands of our clients. Our strong finish was driven by broad-based growth across all segments, as well as the strategic initiatives and hospitality-focused culture we have implemented to position our business for continued success.”
Q4 year-over-year summary
Revenue +24%; organic revenue +26%.
· Revenue at 111% of pre-COVID level; organic revenue at 113% of pre-COVID level.
· Driven by record net growth, pricing, and ongoing base recovery.
Operating income +50%; adjusted operating income (AOI) +62%.
· Operating income margin +79 bps; AOI margin +136 bps.
· Continued margin recovery as a percentage of pre-COVID level.
EPS increased $0.15 to $0.29; adjusted EPS more than doubled to $0.49
· Effect of currency translation impacted Adjusted EPS by $0.01
Fiscal 2022 year-over-year summary
Record net new business of $790 million, over 50% higher than fiscal '21
· Annualized gross new business exceeded $1.6 billion, representing 10% of pre-COVID revenue
· Retention rate of 95.3%, maintained significant improvement vs. historical average
Revenue +35%; organic revenue +35%
· Represents highest annual revenue in company history
· Strong momentum into fiscal 2023 driven by net growth, pricing, and ongoing base recovery
Operating income +228%; adjusted operating income (AOI) +169%
· Operating income margin +227 bps; AOI margin +243 bps
· Improved profitability from higher sales volume and operational cost management
EPS increased $1.11 to $0.75; Adjusted EPS increased $1.49 to $1.20
· Effect of currency translation impacted Adjusted EPS by $0.04
Fourth-quarter results
Consolidated revenue was $4.4 billion in the fourth quarter, an increase of 24% compared to the prior year period. Organic revenue, which adjusts for the effect of currency translation and certain acquisitions, improved 26% year-over-year.
Consolidated revenue reached 111% and organic revenue reached 113% of pre-COVID levels, driven by broad-based net new business, pricing, and ongoing base recovery.
FSS United States organic revenue increased 26% compared to the fourth quarter last year, primarily due to the following contributors in each sector:
Education
Strong start to the new academic year that commenced at the end of the quarter, following a typical seasonal slowdown in the summer months. Additional pricing actions have been implemented, as appropriate, for board plans and on-campus retail outlets.
Sports, Leisure & Corrections
Sports & Entertainment maintained high attendance levels with better-than-historic per capita spending. Destinations had greater guest activity and Corrections reported strong growth led by a record level of new business wins.
Business & Industry
Continued steady progress as return-to-office gained momentum across the portfolio, particularly in September, providing customized solutions tailored to client needs.
Healthcare
Continued steady progress as return-to-office gained momentum across the portfolio, particularly in September, providing customized solutions tailored to client needs.
Facilities & Other
Supported ongoing demand in core business offerings at existing client locations, in addition to a strong level of new account wins.
FSS International grew organic revenue 39% year-over-year in the fourth quarter, driven by higher per capita spending at sports and entertainment venues, particularly in Europe, and increased business & industry activity across the portfolio. Similar to FSS U.S., education internationally was largely closed in the summer and resumed activity at high levels with the start of the fall semester. Consistent multi-year net new business performance continued to drive strong results in the segment.
Operating income grew 50% year-over-year to $198 million and adjusted operating income (AOI) improved 62%1 to $267 million, resulting in an AOI margin of 6.2%. The effect of currency translation had an approximate 10 basis point impact that led to a constant currency AOI margin of 6.1%, a year-over-year increase of 136 basis points. Improvement was due to operating leverage from increased sales volumes and effective cost management, partially offset by the impact of inflation as well as the profitability ramp of meaningfully higher levels of new business and related start-up costs.
Significant year-over-year AOI growth and margin expansion was broad-based across all operating segments:
FSS United States AOI increased 60%1, reflecting an AOI margin improvement of 150 bps1, primarily driven by operating cost management across the portfolio and revenue recovery, particularly in Sports & Entertainment and Business & Industry.
FSS International AOI grew 105%1 and expanded AOI margins by 114 bps1 as a result of greater client activity across geographies and the benefit from previously implemented cost savings actions.
Uniform & Career Apparel AOI increased 22%1 with double-digit AOI margins higher by 125 bps1 due to improved operational efficiencies, progress in route-based optimization, and strength in adjacency services.
Corporate AOI remained relatively unchanged year-over-year with overhead costs tightly managed to support the business as revenue increased.
Fourth-quarter GAAP summary
Fourth quarter fiscal 2022 GAAP results improved across all metrics compared to the prior year period. On a GAAP basis, revenue was $4.4 billion, operating income was $198 million, net income attributable to Aramark stockholders was $76 million, and diluted earnings per share were $0.29. These results included $61 million of revenue from the acquisition of Union Supply Group. Comparatively, fourth quarter fiscal 2021 revenue was $3.6 billion, operating income was $132 million, net income attributable to Aramark stockholders was $35 million, and diluted earnings per share were $0.14.
Fiscal 2022 summary
On a GAAP basis, revenue was $16.3 billion, operating income was $628 million, net income attributable to Aramark stockholders was $194 million, and diluted earnings per share were $0.75. These results included $333 million of revenue related to the acquisitions of Next Level Hospitality and Union Supply Group, collectively. Comparatively, fiscal 2021 revenue was $12.1 billion, operating income was $191 million, net loss attributable to Aramark stockholders was $91 million, and diluted loss per share were $0.36.
Organic revenue of $16.3 billion for the year sequentially increased each quarter relative to pre-COVID levels, reaching 113% in the fourth quarter. Adjusted operating income grew 169% to $780 million and resulted in an AOI margin of 4.9% on a constant-currency basis, a 243 bps increase compared to fiscal 2021.
Business update
Aramark drove strong business performance through record-level net new business, pricing, and ongoing base revenue recovery, while navigating a complex operating environment.
The company's strong growth performance was broad-based, coming from multiple lines of business and geographies, as well as from clients both large and small. Annualized gross new business wins exceeded $1.6 billion — representing 10% of pre-COVID annual revenue — and the annual retention rate remained above 95% for the second consecutive year. Collectively, this resulted in $790 million of net new business, more than 50% higher than fiscal 2021 and over 8.5x greater than the historical five-year average prior to last fiscal year. At nearly 5% of pre-COVID revenue, this level of net new business achieved is already at the top end of the multi-year target range provided at Aramark's Analyst Day. The company expects to sustain its growth momentum into fiscal 2023.
Aramark continued to strategically manage the current inflationary environment by utilizing various actions available across the food, labor, and direct cost categories, and worked with clients to implement targeted pricing actions, where appropriate, to offset the impact on operational profitability. The company is confident in its ability to drive continued margin progression that will ultimately exceed pre-COVID levels.
Outlook
Aramark currently expects the following full-year total company performance for fiscal 2023:
· Organic revenue growth between +11% and +13% driven by net new business, pricing, and ongoing base recovery.
· Adjusted operating income (AOI) growth of +34% to +39%.
Zillmer added in the announcement: “We enter fiscal 2023 with excellent momentum and remain intently focused on delivering upon our growth strategies that are expected to result in significant value for our clients, employees, and shareholders. Aramark is well-poised to continue to win new business, drive operating efficiencies, and leverage enhanced financial flexibility for sustained success, while remaining committed to providing world-class service for clients.”
