ARMK

Good morning, and welcome to Aramark's second quarter fiscal 2026 earnings results conference call. My name is Kevin, and I'll be your operator for today's call. At this time, I'd like to inform you this conference is being recorded for rebroadcast and that all participants are on a listen-only mode. We will open the conference call for questions at the conclusion of the company's remarks. I will now turn the call over to Felise Kissell, Senior Vice President, Investor Relations and Corporate Development. Ms. Kissell, please proceed.

Thank you, welcome to Aramark's earnings conference call and webcast. This morning, we'll be hearing from our CEO, John Zillmer, as well as our CFO, Jim Tarangelo. As always, there are accompanying slides for this call that can be viewed through the webcast and are also available on the IR website for easy access. Our notice regarding forward-looking statements is scheduled in our press release. During this call, we will be making comments that are forward looking. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the Risk Factors, MD&A, and other sections of our annual report on Form 10-K and SEC filings. We will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in our press release and IR website.

With that, I will now turn the call over to John.

Good morning, everyone, and welcome to our fiscal 2nd quarter earnings call. Thank you for joining us. Our financial results underscore the continued momentum occurring at the company, driven by our unwavering focus on growth through delivering hospitality excellence. Jim and I will review the key contributors to the quarter's outperformance and our confidence in achieving the outlook for fiscal 2026. We enter the 2nd half of the year with exceptionally strong business trends, including, first, a client retention rate exceeding 98% across the company. Second, organic revenue growth at record levels in both FSS US and international. Third, new client wins that have already reached an unprecedented total of $1 billion this fiscal year to date. Lastly, we're very excited about our entry into the hyperscale AI data center market, where we believe Aramark is uniquely positioned to deliver an integrated suite of capabilities.

As we execute on our newly awarded multi-year engagement with a top global hyperscaler to provide comprehensive hospitality and facility services across multiple AI data center locations, this client is expected to become the largest in our portfolio. We see significant runway for additional growth with this client and other hyperscalers. In the second quarter, Aramark's organic revenue grew 12% to $4.8 billion, including an estimated 3% benefit from the calendar shift. As a reminder, the calendar shift will ultimately have no bearing on the full year results. Our strong revenue performance was due to broad-based net new business and base business growth across sectors and geographies. Throughout the organization, our client-led growth strategies consistently offer a differentiated guest experience while providing operational rigor, unparalleled supply chain capabilities, and advanced technology solutions. Moving to the business segments.

FSS U.S. organic revenue increased 12% to $3.4 billion. Would have increased approximately 8% without the calendar shift benefit, which occurred primarily in education, with collegiate hospitality also experiencing growth in residential meal plans associated with higher student enrollment. Revenue growth in the second quarter for the U.S. was additionally driven by sports and entertainment, which had a strong opening day for Major League Baseball, with increased fan attendance and record per capita spending. Sports entertainment also participated in several marquee events, including the World Baseball Classic and the NCAA basketball tournament. Workplace Experience sustained double-digit growth as a result of significant new business contributions, exceptionally high retention rates, and elevated catering demand.

Refreshments expanded its client base, building incremental route density across several key geographic areas, including Central New York, the Southeast, the Pacific Northwest, while increasing the average size of new wins by 15%. Healthcare completed the successful launch of Penn Medicine, which is now fully operational. As reviewed on the last earnings call, the team is set to mobilize RWJBarnabas Health this summer. During the quarter, FSS US achieved several notable client wins, including Suffolk University and the University of Wisconsin–Oshkosh in Collegiate Hospitality, which will fully launch in the new academic year. Toyota and Workplace Experience, where we recently began operations at their North American headquarters. The Oklahoma Department of Corrections, an example of our expanding presence in state-run correctional facilities.

Stone Mountain in destinations, the most visited attraction in Georgia, where we start offering food and beverage, lodging, retail, tours, and camping next month ahead of the peak summer tourist season. As hyperscale AI data center development accelerates and demand for support services grows in tandem, we launched Aramark Nexus, a new platform delivering integrated hospitality and workforce support services in large scale, complex, and often remote operating environments where we believe we have proven expertise. We've been selected by a top global hyperscaler to support thousands of workers in providing employee housing, dining and hospitality hubs with modern lifestyle amenities and entertainment, transportation to and from construction sites, and full housekeeping and guest services delivered through a unified management structure. Our engagement is underway and set to begin this fiscal year.

We expect this new suite of services to generate margins above the company average and achieve attractive investment returns. The significant growth opportunity currently is not reflected in our fiscal 26 financial outlook. We will provide updates as we launch, grow, and scale the business. As I mentioned earlier, we see substantial growth potential in hyperscale data and operation centers. The international segment achieved another quarter of consistent compounded growth, with organic revenue increasing 13% to $1.4 billion, inclusive of an estimated 1% benefit from the calendar shift. This exceptional revenue performance was broad-based across every region, attributed to double-digit growth in Europe and Canada and high single-digit growth in emerging markets. Business momentum was led by sports and entertainment, education, extractive services, and business and industry, highlighting the depth of our in-country expertise and strong cross-border collaboration.

All countries within our international portfolio are driving favorable net new business underpinned by an extensive sales pipeline. Second quarter new client awards ranged from an increased presence in festivals such as Brockwell Live in the U.K., serving hundreds of thousands of visitors, to the new T-Mobile Arena in the Czech Republic, scheduled to host its first event later this fall, and Xinhua Hospital in China, a leading institution in clinical care and medical education. Now to global supply chain. We continue to see rapid GPO expansion in multiple categories, including sizable growth in golf and spa destinations within the U.S. and internationally across the hospitality industry. Inflation continues to track in line with our expectations throughout all regions. Aramark remains resilient amid geopolitical uncertainty, including the recent volatility occurring in the energy markets.

The significant scale of our food service agreements provides efficient cost flexibility and enables us to remain proactive in managing strategic pricing and sourcing actions. Bottom line, we believe the organization is well equipped to navigate a broader macro backdrop. Before handing the call over to Jim, I want to reinforce the message we've been sharing with our teams across the country. We are executing our growth strategies with focus and discipline. Our ambitions for Aramark have never been higher, and we are consistently setting new milestones. We're proud of the performance the teams have delivered, and we remain fully committed to working together to build on this continued momentum and drive the business to even greater levels of success. Jim, I'll now turn the call over to you.

Thanks, John, and good morning, everyone. We've made great progress across our key operating metrics during the first half of fiscal 2026, delivering strong financial performance. Our results in the second quarter reflected continued momentum in driving both top and bottom line results from strategies that have not only advanced the current state of the business, but we believe have also positioned us for sustained success. As we move into the second half of fiscal 2026, we remain focused on disciplined execution of our growth efforts across the organization with a mindset of creating significant shareholder value. As John reviewed, we reported organic revenue growth in the second quarter of more than 12% versus the prior year period, led by broad-based net new business, higher like-for-like volumes, and the favorable impact of the calendar shift, which was approximately 3%.

For the first half of fiscal 2026, organic revenue growth was 8.5%, with the calendar shift having no effect on the first half growth results. Regarding second quarter profit growth, operating income was $220 million, up 26% versus the prior year. Adjusted operating income was $258 million, up 24% on a constant currency basis, and AOI margins increased 50 basis points. The strong profit growth was a result of higher revenue, productivity gains in food and labor supported by our technology capabilities, supply chain efficiencies, and disciplined above-unit cost management. The calendar shift also benefited AOI in the quarter by an estimated $25 million or 12%. Turning to the business segments, the U.S. reported AOI growth of 27% compared to the same period last year.

Growth was driven by increased revenue levels, technology-enabled productivity gains in food and labor, supply chain efficiencies, and disciplined above-unit cost management. The calendar shift also benefited AOI growth by approximately 13%. Once again, the international segment had double-digit AOI growth in the quarter, increasing 12% on a constant currency basis. This performance reflected higher base business volume, new business maturity, and strengthened supply chain economics, which more than offset some in-country investments during the quarter to support significant growth. Turning to the remainder of the income statement, interest expense was $82 million in the quarter, and the adjusted tax rate was 25.3%. Our quarterly performance resulted in GAAP EPS of $0.38 and adjusted EPS of $0.49, an increase of 40% compared to the prior year period on a constant currency basis.

The calendar shift benefited adjusted EPS growth in the quarter by approximately 20%. With respect to cash flow, we generated a significant cash inflow in the quarter from the contribution of higher earnings and favorable working capital. Net cash provided by operating activities in the second quarter was $400 million, an increase of $144 million or 56% compared to the prior year period. Free cash flow was $305 million, which improved by $164 million or 116% year-over-year. The strong free cash flow in the quarter enabled us to proactively repay $55 million of term loans. We also continued to repurchase shares under our current share repurchase program. To date, we have repurchased approximately $194 million of Aramark stock.

We remain disciplined in our capital allocation priorities as we are committed to reaching a leverage ratio below 3 times by the end of the fiscal year. At quarter end, the company had more than $1.4 billion in cash availability. Finally, let me wrap up with our performance expectations for the remainder of fiscal 2026. We are extremely pleased with our year-to-date financial results and the positive trends occurring in the business, including a strong revenue trajectory from the net new business and continued base business expansion. As a result, we have updated our fiscal 2026 outlook for organic revenue growth to the high end of our 7%-9% range, and we are reaffirming our expectations for AOI growth to be up 12%-17% and adjusted EPS growth between 20% and 25%.

We continue to expect accelerated AOI margin expansion this fiscal year consistent with our expectations, capitalizing on the company's multiple operating levers while mobilizing a record level of new business openings. As John mentioned, the outlook for fiscal 2026 does not currently reflect the multi-year engagement with a top global hyperscaler that is currently underway. In summary, we are seeing strong momentum throughout the company as our teams continue to execute our growth strategies led by extensive new business wins and high client retention rates. We also believe our entry into the hyperscale data center market further advances the company's growth opportunities. These positive trends in the business are translating into strong revenue and profitability, positioning the company well for continued success this year. We are confident in our ability to build on this momentum into fiscal 2027.

As John always says, we wouldn't be where we are today without our teams around the world, and we thank them for all their efforts. We could not be more excited about the future. Thank you, everyone. Operator, we will now open the call for questions.

Thank you. We'll now begin the question and answer session. If you have a question, please press star then 11 on your touch-tone phone. If you're using a speakerphone, you may need to pick up a handset before pressing the numbers. In order to accommodate participants in the question queue, please limit yourself to 1 question, 1 follow-up. To remove yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Jaafar Mestari with BNP Paribas. Your line is open.

Hi. Good morning. I had two questions, please. Firstly, on your $1 billion of signings to date, we don't have the exact context for where you were at the same stage last year, but it certainly looks strong. You ended the year at $1.6 billion last year. If you look at the fabric of what you counted in this $1 billion, would you say that the timeline over which these signings are expected to ramp up is fully comparable to historical signings? It's big numbers. Just wondering if to some extent there are some longer projects in there, things that would ramp up over 2027, 2028, for example.

On your guidance updates, small upgrades to where you see organic growth, no change to where you see adjusted EBITs and EPS for the full year. It's a very small delta, but effectively you're implying 5 basis points lower margins if my math is correct. Am I splitting hair or are you accounting for contract startups, or just some caution because another year of record signings would mean another year, of high incentive compensation for your sales teams eventually?

Yeah, John.

Sure.

Go ahead, John. Okay. I'll take it. Yeah. I'll start, John, and you can chime in. Yeah, in terms of the pacing, Jaafar, we are certainly ahead of schedule with the $1 billion of signings. As you noted last year, the total was $1.6 billion. We are ahead of where we expect it to be at this point. With those signings, we signed a number of large accounts this year, and opening RWJBarnabas and Stone Mountain, Oklahoma Department of Corrections. Very large accounts which are opening in year. One of the good things is, right, we signed a lot of large accounts. We're opening many of those accounts in the second half of the year, and that leads to your second question on margin.

Thanks to the success we've seen in selling we're opening a record level of new business in year, and we're still covering those start-up costs and expect to achieve the 30 to 40 basis points of margin improvement that we've been generating. Those margins will scale up as they normally do, and yeah, we'll continue to provide tailwinds into fiscal 2027.

I would just add that, you know, I think the scale-up of that new business obviously is very important to us. We haven't included in the projection in the second half of the year any revenues and/or profitability from the hyperscaler ramp-up, which will take place beginning very soon. There'll be some impact from that that hasn't been projected into the forecast. I think all in all, we do expect continued margin acceleration through the balance of the year. You know, we think it was prudent to go ahead and be slightly conservative, but we have very strong expectations for the business going forward.

Thank you.

Our next question comes from Ian Zaffino with Oppenheimer. Your line is open.

Hi, great. Thank you very much. You know, really nice quarter here. Seems like these are some of the best results, you know, really trajectory of the business that you've delivered since I've effectively been covering the stock. It's been a while here. It seems like you're firing on all cylinders. Is that kind of the right and accurate read? You know, maybe talk about the sustainability of kind of what we're seeing now into future quarters. Thanks.

Yeah, thank you very much, Ian. Absolutely, we believe in the sustainability of the business. You know, we think we have a very strong leadership team delivering across the board in all geographies and just the continued momentum throughout the business. You know, we have worked very hard to build the organization. It's delivering on those commitments and on those results. So yes, I do believe we're operating on all cylinders. That does not mean that we don't have opportunities for continued improvement and continued growth in the organization. I think the company is very disciplined and focused on that. We are proud of where we are, but wanna get better every day. I do think, you know, that this quarter was very important to us.

You know, we believed in the growth narrative that we had been describing over the last several quarters, and what you're seeing is it coming to fruition and us delivering on those expectations. We're confident in our ability to maintain this trajectory and to continue into, 2027 and beyond.

Okay. Thank you. If I could just drill down on Nexus a little bit. You know, I know you have some agreement and confidentiality stuff going on here, but can you maybe give us an idea of, you know, maybe a little bit more of the economics here as far as, you know, will you be doing or it's overseeing any of the construction? I'm just trying to think about it from a CapEx perspective. Also, can you talk about maybe your market position here, your competitive advantage, and maybe also what margins might look like in this business vis-à-vis your other businesses? I know there's a lot there, but any color you could give me would be helpful. Thanks.

I'll start off, and Jim can add to this as well. You know, first of all, yes, we are under a confidentiality agreement with the this customer, and so we can't disclose the terms of the agreement. I think what we've talked about is the fact that they'll be above company average margins and we expect very strong financial returns. I would characterize this as a capital-light business for us. We are not investing in the construction process, you know, as partners in this engagement. That will limit our capital requirement for it. We won't be overseeing the actual construction, but we'll be overseeing all the activities that support the workforce doing the work.

It's very comprehensive, you know, from hospitality with lodging, entertainment, food, support services, you name it, we'll be doing it. It's a one-stop solution for the company buying these services. That's what's attractive to them. This unique set of capabilities is what we deliver in the national parks. It's what we deliver in extractive services in the mines in Chile, in the remote camps in Canada. It's something we're very good at and have strong management disciplines and capabilities around it. As you know, there are hundreds of these kinds of projects under consideration in the U.S. alone and many more globally. We see it as a very significant addition to the total addressable market that is uniquely positioned against the capabilities that we have.

We like the growth trajectory coming from it. We're investing significant resources and talent in the execution of this. That's also why this company selected us because they saw the commitment we were willing to make to it right up front. It's exciting, and we'll be able to talk more and disclose more as the summer goes on. I would say at the simplest or lowest possible level, it is going to be accretive to margins and going to be accretive to earnings significantly.

All right. Great work. Thank you very much.

Thank you.

Our next question comes from Andrew Steinerman with JP Morgan. Your line is open.

Hi there. I just wanna go back to the quarter, the second fiscal quarter organic revenue growth. Could you just give us a sense of quantity of how much net new and base growth contributed to the quarter, and which drove the kind of upside to budgeted figures?

Sure. It's Morning, Andrew. For Q2, specifically, the contribution from new was about 5%. Base business was about 4%. That was comprised of 3% pricing and about 1% volume, so that totals to 9. Then as we mentioned, there's a 3% benefit from the 53rd week which gets you to the 12%. Year to date, I would say similar, more like 4.5% on the new business. I would say a combination of in terms of exceeding expectations, a little bit on the new, as we mentioned, opening more than we expected in year. Then good base business performance, particularly in sports. You know, we talked about a great successful opening of the baseball season.

The season did open a little bit earlier this year with a few more games in Q2 than Q3. Those are the main drivers.

Okay, thank you.

Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.

Hi, good morning. This is Yehuda Silverman on for Toni Kaplan. Just wanted to focus on retention a little bit. Like, 98% extremely high following similar path to last year so far. Can you talk about what particularly is driving your customers to remain for longer? Are you seeing any difference in terms of contract duration or cost and deal structure with new renewals?

I'm sorry, you were breaking up a little bit on the second half of the question. Could you repeat that?

Yeah, sorry. I'll repeat it. Retention, 98% was very high following a similar path to last year. I was just curious if you could talk about what's driving customers to remain for longer and if you're seeing any difference in terms of contract duration or cost or deal structure with these new contracts.

Yeah, no, first of all, I think it's performance related. We are retaining more business because our customers recognize the value that Aramark brings to their operations. That's always when you retain customers, it's generally 'cause you're doing a good job. We are hyper-focused on that discipline, on making sure that we're delivering on our customers' expectations, and that's leading to these higher retention levels that occurred both last year and are occurring this year. We're, you know, feel very good about that discipline. I would say no difference in terms of tenure of contracts. Those contracts that have expiration dates are coming up as they normally would. We continue to try to proactively retain that business and renew those contracts.

I would say in general, the trends we're seeing in the retention rate are basically aligned to our improved performance overall and our continued discipline around customer relationship management. It's really driving the results.

Great. Thank you. Just one quick follow-up on facilities. You've highlighted the commitment to sales opportunities within B&I and education. Can you talk about how these have gone so far and when we could expect this to meaningfully show?

I'm sorry. Again, I'm having trouble. I am remote unfortunately today, so the speaker phone that I'm on is not working very well. Could you repeat that?

Sorry about that. Just highlighting facilities, I was curious if you could talk a little bit more about the commitment to sales opportunities within B&I and education, and how these have gone so far and what the expectations for this could be going forward.

Sure, absolutely. I apologize for my miss. No, there is a significant commitment to selling facility services in the B&I marketplace and in higher education. We continue to be very successful in that regard. Our B&I sales for facilities are generally focused on large institutions and providing services to the food production industry and others. We are not doing facility services, white collar building cleaning. This is not a janitorial company. This is a fully integrated suite of facility services that we bring to large customers. We've had very good results across the board in all the verticals that we serve. It's a business we're very committed to and will continue to invest in it.

Thank you.

Our next question comes from Andrew Wittmann with Baird. Your line is open.

Yeah. Excuse me. Thanks for taking my questions. I wanted to continue to go on more Nexus questions, I guess. But I guess, I mean, just for a clarify, did I hear you say that you believe that this contract could be the largest in the company? Are you saying that to this customer specifically or for this idea of these types of services to data centers? Just related to that, I'm curious as to, now that you've got this contract, why you didn't put it in guidance yet. Is it start timing? Is it something else? Those things would, I think, be helpful for us to understand. Thank you.

Yeah. Yeah. Good questions, Andy. Thank you. Each of these data center locations represents potential value in the hundreds of millions of dollars over the life of the contract. This first contract with this particular hyperscaler is initially for multiple locations and will scale up to being several hundred million dollars on an annualized basis. Yes, this particular contract will be the largest in the company's portfolio when it's fully ramped. The reason for really not including it yet is we're still understanding the ramp-up period in terms of when employment starts in the location, when the housing begins. There's two different time frames, two different locations, and a couple of different entry points and start points.

You know, we're making significant progress. The work is already beginning. The team's already engaged, but we're still working through the scale up, if you will, in terms of how rapidly we can begin to recognize revenues coming from the employment and the delivery of services to those customers. That's really all there is. It's just a question of how fast does it scale up and when do we have definitive information that we can provide.

That's really helpful. I'm gonna keep going on this one a little bit more. Just for all of our benefits, what is the duration of a typical site on one of these things? Maybe for context here, once the center is built, do you anticipate maintaining some level of what I'd call base revenue, recognizing that I have to imagine that revenue is going to be down significantly if you're not having to transport a lot of people and house them and, you know, just be kind of normal day-to-day. I was wondering, is there an opportunity there? Is that part of this? Is that material at all? Any of those kind of thoughts would be helpful as well, I think.

Yeah, you bet. Obviously, during the construction phase, that's when the real revenue production will take place. These are multiple year developments, if you will. The time frame for building these is variable depending on the size and the complexity of the operation. It's multiple years. It could be three to five, dependent upon the size and scale and the timing of construction. They do have a shelf life, if you will. Our anticipation is that as we expand our share of this market and our capabilities in this market and our relationship with these customers, is that we'll be moving from one location to the next as they begin to move on to their next opportunity and their next construction site.

We see it as kind of a rolling process here, moving forward, starting with these first two and moving on to other opportunities as that process continues. There will be opportunities to serve the location for normal services, whether it be refreshment services or Workplace Experience group or, you know, food service of the like, on a continuing basis for a smaller number of employees. The real revenue and profit opportunity is in the construction phase on these particular sites. You know, we'll ramp these and then we'll rotate on to new opportunities. As I said, there are several hundred of these projects on the boards, as you know, across the U.S. I think some count as high as 700. It remains to be seen how many actually get built.

In the meantime, there is a lot of opportunity for us to pursue and significant profitability for us to earn.

Thank you very much.

Our next question comes from Faiza Alwy with Deutsche Bank.

Yes. Hi. Thank you. Following up around the same line of questioning, are you anticipating sort of just, you know, you talked about the ramp up in revenues and costs. I'm curious, you know, given that you talked about an asset light model, like, are you expecting costs to come before the revenues roll in? You know, if you could talk about the timing of that, or is it gonna be more of a, you know, one-to-one situation where you incur the costs when you start getting the revenues?

Yeah, I would say, I'll let Jim talk a little bit about the accounting of it. Generally these contracts will be cost reimbursable. You know, so it's the costs that we incur to start up, you know, while there won't be any customers initially, and we'll be ramping to serve those people either lodging and/or working on site, that will incur no operating costs in the early stages. Jim, do you wanna talk about the accounting of this?

I mean, I'll keep it, you know, pretty high level again for competitive reasons. Our model does not entail investing significant capital for housing or lodging as part of our balance sheet per se. With that, it's not a situation where there's significant costs in advance of the revenues ramping up. Again, the way we've structured this is more aligned with, you know, our costs will be ramp up in line with the revenues and services that we are providing. It's a situation where there is not significant startup cost. It reaches the targeted margins very quickly. As John mentioned, you know, those margins are above average for the company. It's a light capital, so low capital investment.

Generally, the working capital is favorable as well.

Okay, wonderful. That's very helpful. I guess I'm curious, like there are some companies out there that seem to be in a similar line of business, but are taking on sort of more CapEx and, you know, so a more asset-heavy approach. I'm curious competitively, you know, what are you hearing from your customers? Is there a reason for them to prefer companies, you know, that are willing to take on that CapEx investment or, you know, are they neutral? Just give us some context around that piece.

I would say, you know, first of all, I think that's a philosophical decision for the potential client to make. We would not necessarily be opposed to investing if the client desired it and we could earn appropriate returns attached to that investment. It's not the way we've engaged to date, and it's not anticipated that it would be a significant requirement going forward. That, you know, these projects are so significant and require so much capital that this, and there's such a degree of uncertainty in terms of the ramp-up schedules, construction schedules, permitting, all those things that go into the development process, that the capital investment is not a significant consideration for those clients.

Their costs of capital are lower, and frankly, the investment that they're making is very significant. The housing is a, pardon the expression, but a drop in the bucket compared to the actual total cost of building a hyperscale data center. You know, I think, we're positioned well and we believe that this is a significant opportunity that we can scale, that we've got these unique advantages and capabilities that we can bring to bear. We can offer a very, call it a one-stop-shop solution, reduce a lot of complexity in the process so that they're not having to deal with multiple subcontractors and the like, and I think they find that option attractive. We're gonna build it and we're very excited about it.

Great. Thank you so much.

Our next question comes from Curtis Nagle with Bank of America. Your line is open.

Hi, good morning. This is Ryan Rivera on for Curtis Nagle. Can you touch on the sports event calendar for the remainder of FY 2026? Any upcoming events that can meaningfully impact revenue or profit? Would you say that growth is more dependent on adding new stadiums and teams? Finally, is the World Cup still expected to be a neutral event for the company? Thank you.

Sure. Yeah, John, I can kick it off. As I mentioned, the second quarter did benefit from MLB schedule starting early. We also had strong per caps and good performance with the opening of that baseball season. We did have the World Baseball Classic in Q2 as well, I think that maybe contributed about 1% to the second quarter growth. In terms of the outlook, in terms of FIFA, as we've mentioned, we see that relatively neutral versus the prior year, as there'll be less conscious events as we roll out those games. I think there's 17 games scheduled as part of FIFA operating across four Aramark stadiums.

If I can squeeze in another one. Can you touch on the enhanced tech capabilities that are driving productivity? What are these key initiatives behind this? How are they tracking versus expectations? What inning would you say that you're in on these productivity benefits? Thanks.

We've targeted our tech and our AI really at the most impactful areas for the organization and the performance, right? Targeting food and labor in particular and price. With respect to food, we've talked in the past about, you know, Culinary Co-Pilot, a tool that optimizes our menu planning, factoring in contractual requirements, consumer preferences, and the most optimal cost structure. Really, I'd say going forward, we're implementing a tool called LaborIQ, which is an insights based dashboard and facilitates our General Managers and frontline to essentially plan and optimize labor better.

As an example, it allows us to fill roles, labor scheduling across Aramark employees and reduces reliance on agency labor, as this tool makes it easier to find Aramark employees to fill shifts. It helps our GMs to staff labor based on peak and non-peak time. It's a tool that's rolling out very rapidly across the U.S. At this point, we're seeing favorable trends in labor and favorable trends in labor productivity as we continue to roll this tool out.

Thank you. Our next question comes from Jasper Bibb with Truist Securities. Your line is open.

Hey, good morning, everyone. Maybe I'll follow up on Nexus too. I think you said the $100 million plus earlier was multiple projects. I just wanted to ask if we could break it down to a typical kind of data center construction project and how much revenue you can expect per location. I think some of these larger ones, there might be like a 1,000 plus people on site building these things. It sounds like a lot of opportunity there. Just any more detail on the scope of kind of a normal site and the drivers of revenue opportunity there from all the services you're providing would be helpful. Thank you.

Sure. You bet. Well, the size and scale can vary rather dramatically. Some locations with thousands of employees, up to 9 or 10,000. Yeah, they can be They can vary significantly site to site. There's no average data center site. Each of these contracts will look very different, based on the size, scale, location, and the degree of complexity. Is it a remote site? Is it an urban site? Those are, you know, what kind of workforce needs to be brought to bear? Very difficult to give you an average. You know, I would say the best data that we can give you is related to the sites that we have currently under agreement.

As I said, we see the revenues for those to be well over $100 million each annually, and over the life of the contract, several hundred million dollars in terms of size and scale. Again, I apologize for not being able to be more definitive. As I said, we're under an NDA. We have two issues here. First of all, we have a customer who we are absolutely committed to doing the right thing with respect to their confidentiality. We also have a competitive environment where we want to maintain the ability to go ahead and to have first mover advantage, to have competitive advantage. We're being very careful not to disclose a number of things from a competitive perspective.

As the business ramps and the results become clear in our results, it'll be much more transparent for our investors and clients to see. This first opportunity, many hundreds of millions of dollars of opportunity over the course of this particular contract.

Well, awesome. That's helpful. I wanted to pivot to higher education. I think in the past month or so, you picked up a new contract at Texas State, also impacted by some restructuring at the University of Kentucky. I guess, how did you do from a net new perspective so far in the selling season? I think you're not all the way through that. Are there potentially some more opportunities that could come through for fall 2026 on the new business front?

Yeah, I would say we're positioned again for another record net new performance in the aggregate for the company and in their respective businesses, very positive results. As you said, Texas State was also an award that we had. And University of Kentucky is a disappointment, and, but I will say this, that we saw the opportunity to rebid Kentucky as an opportunity for us to improve the overall financial returns for that contract, which frankly, has been the worst performing contract we've had since it was sold. You know, we saw the opportunity to potentially grow the relationship by taking on either healthcare facilities and keeping the current agreement for higher education.

Failing that, we saw the opportunity to improve returns of the company and to redeploy the capital to higher return opportunities, that's precisely what happened. You know, we never like to lose, this is one where I feel like ultimately the financial returns for the company are better as a result of not moving forward in that relationship, having to commit significantly greater sums of capital and operating it on very thin margins. On a total basis, net new, again, we've had extraordinary results year to date and expect to achieve another record net new performance this year.

Very helpful. Thank you for taking the questions.

Our next question comes from Joshua Chan with UBS. Your line is open.

Hi, good morning, John, Jim. Thanks for taking the questions. Maybe a broader question on kind of customer inquiry levels on some of these new businesses that you have won, you know, in terms of Aramark Nexus, but also in healthcare. Are you seeing similar types of customers, you know, inquiring about, you know, your services in these types of offerings since you have announced them? How have those been trending?

Yeah, we see momentum. Yes. Short answer is yes. We see obviously momentum in the healthcare space, particularly with the successful opening and scaling up of Penn, as and well as the anticipated opening of RWJBarnabas. We do have significant momentum in the healthcare space, and we're very pleased with that. Yes, the announcement of Nexus and its and the award of the initial contract has opened the door to a number of other opportunities that we're currently engaged in and evaluating, none of which I'm prepared to disclose right now.

Sure. Sure. That, that sounds great. I think around now is when you start to have pricing discussions with your customers that reset annually. Could you just talk about posture and what might be a reasonable outcome in terms of those pricing discussions?

Yeah.

Sure. Yeah. I'll start with, you know, inflation. You know, we're seeing total inflation come in in line with our expectations at about 3.5% or so. As we've talked about, if we don't price for profit, we essentially, you know, price to mitigate inflation. The discussions we're having are in that range of, you know, 3.5%-4% on the contractual base portion of the business. As you know, about two-thirds of the business, as we refer to, as dynamic pricing, that is sort of more rapidly adjusted to the inflation expectations. Inflation is coming in line with the expectations. We have tools at our disposal to counter inflation should it escalate in the second half of the year.

Great. Thank you both for the color, and congrats on a good quarter.

Thank you.

Thank you.

Our next question comes from Carl Green with RBC Capital Markets. Your line is open.

Thanks very much. Good morning to you both. Just a couple of questions on U.S. organic growth. Firstly, just in sports and entertainment, the higher per cap spending. I just wondered if you could indicate if you're seeing any limits to how high you can push that in terms of price elasticity, or is it still kind of powering along at levels you've seen over the last 12 to 18 months? Then on B&I, within that segment in the U.S., clearly new business and very, you describe it as exceptionally high client retention rates are doing the heaviest of lifting there for double-digit growth.

Could you just talk a little bit more about how like-for-like volumes are trending there, just in terms of higher participation rates, your expanded formats, et cetera, just to give us a sense of seeing how robust that like-for-like volume position is, please? Thank you.

I'll take it off on sports and entertainment, you know, a good quarter in sports. Sports leisure and corrections growing at about 7% underlying, a really great start to the MLB season. I'd say base business growth and volumes, more or less in line with what I mentioned earlier. The 3%-4% for the company is what we're seeing in sports. We obviously have to be sensitive to pricing there and making sure we're providing, you know, experience and economics that are good with the team and appropriate and so forth. Within B&I, again, we've grew over a 20% year to date. Really strong outlook.

The new business at the end of the day, I think is the main driver there, along with the exceptional retention levels. We had a nice performance with premium catering in the quarter benefiting from the partnership we did with Daniel Boulud. Refreshment services and micro markets also falls into the B&I segment as well, and that business is growing at a similar level. We've seen nice geographic e-expansion in the West Coast and in the N.Y. area in particular, and continue to enhance and increase the route density of that business as well. Some of the drivers with a strong performance there.

Okay, thank you.

Our next question comes from Neil Tyler with Rothschild & Co and Redburn. Your line is open.

Yeah, thanks. Good morning. Just one left for me, really. I wanted to go back to the topic of inflation and ask you about sort of learnings that you take from perhaps 2022, 2023 in terms of identifying areas in, in the customer suite of friction that might create opportunities and whether there's, you know, you know, how you expect those to materialize, manifest over the, over the next year or 2.

We have a number of levers at our disposal. As I mentioned, we generally try to have pricing in line with inflation. On that contractual-based portion of the business, where the pricing is locked in a little bit longer. We have a number of operating levers. We can substitute our menu. The tool I just mentioned a little bit earlier with LaborIQ allows us to flex and optimize our staffing levels. Those are some of the other tools we have at our disposal to counter inflation. It's a very flexible business model. I think the organization is well equipped based on, you know, the experience we had a few years ago. It's a topic of all of our operating reviews.

Our supply chain team does a nice job, first of all, mitigating inflation. We tend to have longer term contracts given our scale. As part of all the business reviews that we have, we're always talking about the inflation outlook and what are we doing to mitigate that impact.

Yeah, I'll just-

Sorry, John. Go on. I was just gonna say, yeah, in terms of where the, you know, new growth opportunities from first time outsourcing, you know, might be shaken out by a sort of a higher inflation environment.

Yeah, I think that that's a very good point. I think it's not just the inflation environment, it's the total macro environment with respect to things. That's why you're seeing higher levels of outsourcing in healthcare because not only are they challenged with overall inflation in that backdrop, but they're also significantly under pressure from reduced reimbursements from the governments that they where we operate. There's an overall cost pressure that's occurring that's been really building for a number of years. More and more institutions have recognized that they are disadvantaged.

That's one of the reasons you're seeing significant outsourcing from people like Penn and RWJBarnabas, you know, to systemize the outsourcing approach to take advantage of that ability to reduce cost in the long run, not only from a product cost perspective, but from an operations administration and efficiency perspective as well. Integrating all those services that, you know, helps to really manage the total employment level and the ability to deliver the right outcomes for patients. There is significant opportunity there, and we see that manifesting itself in particular in healthcare, but we see that in other segments as well.

Okay. Yeah, great. Thanks. That makes total sense.

Our next question comes from Ajay Nandal with Citi. Your line is open.

Hi, good morning. This is Ajay on for Leo. One question for me, please. Compass Group at its earnings call alluded to adverse weather conditions impacting their business to some extent in the U.S. during the months of February and March. Did you see any such impact on your business? If yes, can you kind of quantify that? Thank you.

We had a little trouble hearing. Could you just repeat that question, please?

Yeah, sure. Just wanted to check that Compass Group at its call alluded to adverse weather conditions.

Oh.

Business development during the months of February and March.

Yes. Got it. Okay.

Did you see any such impact?

Sure. We, you know, we did have an unusual amount of snow and ice, particularly in the Northeast, a little bit of the South on the quarter, which, you know, did have an impact on our higher ed and K-12 business. I'd say maybe $15 million-$20 million of revenue and a few million of AOI. You know, despite the weather concerns, we still, you know, achieved the targets that we had communicated.

Should that reverse in this quarter?

yeah, that was in the second quarter.

Oh. Understood. Thank you.

That doesn't come back. That would be something we'll lap next year.

Got it. Thank you.

Our last question comes from Stephanie Moore with Jefferies. Your line is open.

Great. Thank you so much. I wanted to touch a little bit on what you might be seeing from just a base standpoint and general customer health. Clearly, it's not embedded in your results at all, but I think there's some, you know, maybe, you know, questioning or skepticism out there about the overall health of the consumer, just given higher fuel prices and the like. Just curious and, you know, maybe the aspects of your business where you would be more sensitive to discretionary income by the consumer, if you've seen anything in the last couple of months that could suggest any kind of pulling back of activity. That'd be helpful. Thanks.

Yeah. Happy to take that. As a matter of fact, we are still seeing strong consumer demand in those consumer sensitive businesses that we operate. When you think about us, think about sports and entertainment, that's clearly an area where there's some customer sensitivity or the potential for it. We're seeing very strong results both in per capita spending as well as in attendance. We're seeing strong reservation capacity in the national parks, you know, significant, you know, consumer. Those businesses are generally significantly impacted by a consumer behavior. Strong reservations and the outlook very good for those businesses as well. The short answer is we're not really seeing a consumer impacted yet in those businesses.

We see the consumer as being very resilient at this point and not seeing it impact our business to date. You know, we do believe that this business has been historically very resilient in times of higher inflation, and generally, you know, we're serving people where they work, where they, where they are getting medical care, where they're studying. People are gonna continue to consume in those environments, and we're not seeing a significant impact as a result of a change in the consumer's attitudes at this stage.

Understood. Thank you. Then just a follow-up. You touched a little bit about this, but clearly really strong new wins and performance. Could you kind of maybe speak to the competitive environment? You know, if you know, how you would frame some of your increased wins from your own obviously actions over the last several years, which have been, you know, very favorable, but at the same time, you know, maybe due to any kind of competitive changes as well where, you know, you're able to kinda capture some incremental share. Any way to frame that would be helpful. Thanks.

Sure. You know, I would say we are continuing to enjoy significant success, and in all the markets where we operate, both domestically and internationally, and across all the different businesses. I think it's as a result of the investment that we've continued to make in the growth algorithm, if you will, and the growth initiatives inside the organization. The competitive environment has always been robust. We've always had the competitors that are very interested in growth as well, but we've always been able to maintain a solid growth rate.

I think it's a result of our increased investment in growth, our performance throughout the services that we provide to our customers and the unique proposals that we develop for those prospective customers and the quality of the capabilities that we bring to bear. This has always been a competitive marketplace. I think we are well-positioned to compete in it. We're seeing enhanced throughput as a result of first-time outsourcing. It is a significant proportion of our new wins. We're also still maintaining the competitive dynamic against our large competitors as well as the regional competitors. We're being very successful, we're being very diligent, and we're being very focused on growth.

Right now, we continue to win disproportionate numbers of these opportunities. We're hyper-focused on it, and we continue to enjoy success.

Absolutely. Thank you, everybody.

I'm not showing any further questions. I'll turn the call back over to Mr. Zillmer for any further remarks.

Perfect. Thank you very much. Thank you all for your support of the company and participating this morning. We are extraordinarily excited about the results that we've delivered and about the prospects for the balance of fiscal 2026 and 2027. We're executing our growth strategies with focus and discipline. As I said earlier, our ambitions for Aramark have never been higher, and we are consistently setting new milestones. We expect to continue to do that, and we believe that we have all the capabilities and the best team in the industry, and we're gonna make that happen. Thank you very much.

Thank you for participating. This does conclude today's presentation. You may now disconnect, and have a wonderful day.