ARAMARK 2026 Q3 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- Aramark reported third quarter fiscal 2026 organic revenue growth of 9% to $5 billion, with a 2% additional increase offset by a calendar shift.
- FSS U.S. organic revenue grew 8% to $3.5 billion, with education expected to recapture calendar shift impact in Q4.
- International segment delivered 11% organic revenue growth to $1.5 billion, led by Spain, Canada, the UK, and Germany.
- Operating income grew 18% to $216 million; adjusted operating income increased 13% to $261 million with margin expansion of nearly 20 basis points.
- GAAP EPS was $0.36 and adjusted EPS was $0.52, up nearly 30% year over year and 45% excluding calendar shift.
- Net cash provided by operating activities grew by $41 million and free cash flow increased by $42 million in Q3.
- Aramark Nexus began operations at its first Texas site supporting a top global hyperscaler, with revenue and profitability contributions in late Q3.
- New client wins totaled more than $1.6 billion fiscal year to date, 51% higher than prior year, driven by strong demand for hospitality capabilities and a robust sales pipeline.
- Client retention reached a record level of approximately 98%.
- Global supply chain and GPO business delivered over $1.1 billion of annualized new spend globally.
- Several notable new client wins included University of Colorado Colorado Springs, Grand Canyon University, Ohio Wesleyan University, Texas State University, Florida State University athletics, Camden City School District, and Paul Weiss law firm.
- Aramark Nexus signed eight sites currently under development, including two hyperscaler sites being mobilized, one additional hyperscaler site under discussion, and five AI data center co-location sites.
- The initial hyperscaler contract was estimated at $100 million annually, increased by 40% to approximately $140 million per year, with a second site expected around $160 million annually, and contract duration of 4 to 5 years.
- Margins expanded in FSS U.S. by more than 20 basis points and internationally by nearly 60 basis points on a constant currency basis.
- The calendar shift reduced adjusted operating income by an estimated $20 million.
- The company proactively repaid $100 million of term loans subsequent to quarter end and targets a leverage ratio below three times by fiscal year end.
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Transcript
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Good morning, and welcome to Aramark's third quarter and fiscal 2026 earnings results conference call. My name is Kevin, and I will be your operator for today's call. At this time, I would like to inform you this conference is being recorded for rebroadcast and that all participants are in 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, and welcome to Aramark's Earnings Conference Call and Webcast.
This morning, we will 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 included 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 US GAAP can be found in our press release and IR website.
I will now turn the call over to John.
Good morning, everyone, and welcome to our fiscal third quarter earnings call. Thank you for joining us. Jim and I are pleased to be here with you to review our financial results, provide an update on the business, and discuss our strategic growth agenda, which continues to drive strong, sustained performance. We are heading into the fourth quarter with significant momentum across the portfolio, including industry-leading client retention at record levels of approximately 98%, underscoring the strength of our client relationships and the excellence of our service and execution. Accelerating organic revenue growth in every U.S. sector, absent the calendar shift in education and across all regions within international. New client wins totaling more than $1.6 billion fiscal year to date, 51% higher than the comparable prior year period, reflecting strong demand for our hospitality capabilities and the depth of our sales pipeline.
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