Good morning, and welcome to Aramark’s First Quarter 2020 Earnings Results Conference Call. My name is Paulette, and I’ll be your operator for today’s call. At this time, I would like to inform you that 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. Rich Kotzker, Associate Vice President, Capital Markets and Investor Relations will kick off today's call. He is standing in for Felise Kissell, who is unfortunately under the weather. Mr. Kotzker, please proceed.

Thank you, and welcome to Aramark’s first quarter fiscal 2020 earnings conference call and webcast. This morning, we will have the pleasure of hearing from our new Chief Executive Officer, John Zillmer, as well as our new Chief Financial Officer, Tom Ondrof, who we are excited to have join us at Aramark just about four weeks ago. As a reminder, 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 due to 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 our SEC filings. Additionally, we will discuss certain non-GAAP financial measures and year-over-year GAAP results including the impact of the divestiture of the healthcare technologies business completed in the first quarter of last year, as well as miscellaneous unusual organizational items. A reconciliation of these items to U.S. GAAP can be found in this morning’s press release and on our website. With that, I will now turn the call over to John.

Thank you, Rich, and good morning everyone. I look forward to spending time with you today to share an update on the progress we are making across the company to accelerate revenue growth and unlock the economic potential of the business. As I continue my visits with our operations leaders and client partners, I am more encouraged than ever about Aramark's strong DNA. There is a unified commitment to service, quality, and innovation that is amplified by the integrity and passion of our team. This powerful mindset gives me confidence in our dynamic path forward as we create long-term value for the company and all of our stakeholders. I am very pleased to welcome Tom Ondrof to the team as Aramark's new CFO, appointed about four weeks ago. We are extremely fortunate to have Tom, our highly seasoned foodservice and hospitality industry veteran who is not only a financial expert but also provides valued insights as a former Chief Development Officer and Chief Strategy Officer. In a few minutes, Tom will share his initial observations from our financial results along with his immediate priorities. I also want to take this opportunity to thank Steve Bramlage for his numerous contributions during his five-year tenure with Aramark and for providing his expertise and guidance during this transition period. We wish Steve all the best. Turning to our financial performance, the quarter materialized as expected and reflects the early actions of our reinvestment for accelerated revenue growth. While we saw organic revenue growth across all segments, there is ample opportunity ahead to drive additional performance. As we work to elevate the company's hospitality culture and drive future growth, we have realigned resources specifically in the areas of client retention, sales, marketing, finance, and human resources to directly support our field organization who serve our clients and end customers. Marc Bruno, a respected leader at Aramark who has been with the company for 26 years and has risen through the ranks, has been promoted to Chief Operating Officer, U.S. Food and Facilities. As someone who originally hired Marc at Aramark, I am very confident in his ability to inspire the teams and drive performance. In addition, Gary Crompton has returned to Aramark as President of Business Dining. Gary is a highly respected industry leader with over two decades of prior experience with Aramark, including serving as President of Business Dining and Healthcare Hospitality. I firmly believe our leadership changes, which also include the recent appointment of John Orobono to oversee our global supply chain and group purchasing organization that I mentioned on our last earnings call, combined with the talented teams already in place, create favorable catalysts for the business. We have already begun to recognize John's influence on our supply chain strategies as we implement customized and differentiated experiences for clients that complement our productivity and product quality enhancement initiatives. John and the team are actively strengthening and leveraging our global spend pools, conducting comprehensive reviews of targeted product categories, refining our broadline distribution programs, and extending our procurement scale in innovative forms, including beyond our traditional touchpoints. We have commenced our reinvestment in the business funded by approximately $35 million in further synergy capture for the Avendra and AmeriPride integrations. Our spending thus far includes more field-based resources for new account sales efforts and client retention as well as establishing resources to actively pursue adjacent business opportunities that further serve our clients’ needs. We anticipate continuing to realign resources and add where necessary throughout the year, particularly in the second quarter, to ensure we're positioned for future opportunities. As part of our work to reignite the hospitality mindset across the portfolio, we are actively creating customized dining experiences that meet our clients’ partners' unique needs and preferences. I'm very pleased with the early progress of this approach that has already resulted in several new and expanded relationships. I continue to be confident in the company's long-term prospects. In just a few months, we've mobilized several key components of our focused plan to unlock the economic potential of the business. This approach is quickly being adopted by our sales and operations leaders. In fact, a few weeks ago, I participated in our global sales meeting. The excitement, energy, and commitment of the team reaffirm my enthusiasm for the extensive runway we have ahead. Before I turn it over to Tom, some of you have asked about our business in China, given what we see unfolding with the Coronavirus. First and foremost, we focus on ensuring the safety of our employees and the clients we serve. Broadly speaking, China represents about 2% of our total company business, primarily in healthcare, with minimal presence in the Wuhan region. We are monitoring the situation daily and are in constant contact with our Chinese leadership team. Now, I'd like to turn the call over to Tom to share his initial observations and insights on the company's financial performance.

Thank you, John. I'm excited to be here and have the chance to work with you. While I've only been part of the company for a short time, it's already clear that there's a great deal of talent within the organization and genuine enthusiasm for the future prospects of Aramark. I look forward to partnering with John, the Board, and our business teams to position resources to best serve our clients, drive disciplined revenue growth, and strengthen our capital structure for added financial flexibility. As John mentioned, the quarter materialized as expected and reflects the early actions and commitment to reinvest in a hospitality culture and support future revenue growth. In the first quarter, organic revenue grew 1.6% compared to the prior year with increases delivered across all segments. U.S. food and facilities posted a 0.9% increase in organic revenue backed by solid base business growth in healthcare, sports leisure, and corrections, partially offset by negative net new business in education. Reiterating John's point earlier, there is ample opportunity in the year ahead to drive top-line performance. International grew organic revenue a healthy 3.2%, despite the unfavorable impact of the strategic exit of non-core custodial accounts in Europe late last year, with notable performance also delivered in South America overcoming the social unrest in Chile. Uniform showed balance in the quarter, growing organic revenue 2.5% from pricing and volume increases, while also remaining focused on increasing adjacency services for additional revenue opportunities. Turning to adjusted operating income, in the quarter, constant currency AOI was down 2% compared to the prior year. AOI in U.S. Food and Facilities declined 11% on a constant currency basis primarily as a result of actions to accelerate growth, negative net new business in education, an increase in medical insurance claim costs, and lower income from possessory interest versus the prior year. International group constant currency AOI declined 43% due to the strategic exit of non-core facilities accounts in Europe and the timing of incentive-based compensation in the prior year. Uniforms increased constant currency AOI by 2% over the prior year as productivity improvements in operations and the anticipated synergies from AmeriPride will be partially offset by investment in salesforce resources and training. Adjusted EPS was $0.62 for the quarter, which was flat to the prior year on a constant currency basis. This was a result of the slight decrease in constant currency AOI I just outlined, offset by the benefit of reduced interest expense and a lower adjusted effective tax rate in the quarter. Free cash flow was negative $405 million, which was $88 million less than the same period last year, due primarily to the timing of incentive-based compensation payments compared to the prior year and special contributions to employee retirement plans this year. These outflows were partially offset by slightly lower quarter-over-quarter capital expenditures. A reminder that free cash flow is historically negative in the first quarter due to the seasonality of the business. The capital structure continues to strengthen and is an area of focus and opportunity. The company reduced its net debt position by $221 million in the quarter, and the leverage ratio remained at 4.2 times. And finally, with an as-expected first quarter behind us, the outlook for fiscal 2020 on a 52-week basis provided during the last earnings call remains unchanged. Earlier John asked me to share my immediate priorities. So let me wrap up with that before turning the call back over to him. Over the next few quarters, I plan to focus my time on five areas: number one, growth. I will support the investment to increase sales resources across all business lines and lean on my previous experience to help reinforce the sales process and implement reporting tools to drive accountability and increase closed rates on new business. Number two, ownership and retention. I will work with John and the senior operating teams to continue identifying opportunities to invest in field-level hospitality, culinary resources, training, merchandising, and marketing programs and help implement the appropriate level of decentralization to promote account ownership by unit managers and improve client retention. Number three, procurement. I look forward to working with John Orobono and his team to identify ways to grow the Avendra business bringing value and savings to Aramark's clients and GPO customers. Number four, G&A. While I believe that a company can't cut its way to greatness, I will work with the businesses and corporate teams to ensure that G&A dollars are invested in the right places and we are fit for purpose to best support our field associates and clients. And lastly, free cash flow. I will look to review and implement a series of tested working capital initiatives to improve free cash flow, reduce debt, and provide financial flexibility to support client investment opportunities and enable us to execute a disciplined strategic M&A program. While appreciating the immediate work ahead of us, I am confident that we will execute on John's vision to provide great service to our customers and position Aramark for sustained excellence. I look forward to spending time with many of you in the coming months. John?

Thanks, Tom. I appreciate your insightful perspective and know that your financial and industry expertise will be an invaluable asset to us as we propel the company forward. Before we have the opportunity to take your questions, I also want to thank our associates across the globe for their extraordinary focus on serving our customers and growing the business, and to offer my congratulations to the Kansas City Chiefs, our customer, for a great season and their Super Bowl win on Sunday. And now we’d like to go ahead and take your questions.

Thank you. We will now begin the question-and-answer session. Operator Instructions. Our first question comes from Ian Zaffino from Oppenheimer. Please go ahead.

Great. Thank you very much. Tom, maybe you could also broaden the conversation and talk about some of the experiences you had at your last positions, or maybe just talk about your best practices you'll bring to Aramark. Thanks.

We are very sorry. Your question cut out several times. Would you mind repeating it?

Yes. Sorry. The question was for Tom. Tom, maybe you could talk about the five areas you focused on, maybe touch on your experiences at your last positions, how you will lead those into what you're doing at Aramark in those five areas, or maybe just talk about some best practices you can bring to the table. Thanks.

It's great to be here. I bring in 25 years of experience to the business. John was very persuasive in laying out his vision to me. He's a tough guy to say no to; so, it's great to be back in the industry, and Aramark has such a great history. I was excited by John's vision and the chance to help the company sort of reset its priorities and take a more balanced approach to running the business. I did outline the priorities that I have, so I don't want to really repeat those. I think I would mention that they were listed in a specific priority. Growth is going to come first. We are very focused on that. In John's initial few months, his priority has been there, and I think everything else falls from there. In terms of best practices, you've got to be able to grow the business. You've got to create momentum from the top of the P&L and then have it work its way down. So that will certainly be the priority, and we won't lose, I think some really good things have been put in place here, some good disciplines, good cost culture, but again it's just trying to bring the balance back to the forward-looking execution of the business.

Okay. Thanks. And then just a question for John just more broadly speaking. How do you feel about your brand lineup, what you have, what you may need to add, or maybe some areas that you might need to add in or are you kind of happy with what you have and what Aramark has? Thanks.

Yes. Thank you. Well, first of all, I'm very confident in our ability to compete as one Aramark that as an organization we have the capability, the technology, and the branded concepts that our customers want, and where we don't have a brand that serves the particular needs, we will develop and implement one appropriately for each individual customer. I've always had a firm belief that customized solutions are the solution set that best serves the needs of our clients and customers, so I don't have an out-of-the-box solution for any customer in any part of this industry. I think we have, in higher education, we have Harvest Table, we have Simple Spoon and B&I, we have LifeWorks, we have a number of premium brands we can bring to bear when that serves the clients’ interests, and we can also compete as one Aramark against the vast majority of our customers and clients. I also believe that we will do whatever is necessary to compete aggressively to win new business, and we'll partner with branded concepts, we will partner with restaurant operators, and we will partner with prospective organizations in a way that serves our clients’ best interests.

And our next question comes from Kevin McVeigh from Credit Suisse. Please go ahead.

Great. Thank you. Hey John and Tom, the growth initiative is super helpful. Can you give us a sense, it may be hard, but what the kind of current trajectories 2% to 4% type organic longer term? What can that ultimately become and how much of it is kind of close rate versus retention because it looks like the first two are revenue, the second two are kind of cost, and just any thoughts on that organic growth longer term and what that can mean from a margin perspective?

I think the higher is the initial answer right now not to be --

Right, and I get it.

Yes. It's hard to say really at the moment. I think the overall industry, I know you've looked through sort of the market structure, the global opportunity across all the business lines, the geographies that Aramark serves. There's a ton of opportunity. So, the growth rate should be higher. What can it be? Mid-single digits definitely seems like a goal over the course of time. I think that's quite doable, but there's work to be done to do it. Right now, I talked about fit for purpose, and I don't think we're there yet, and it will take time and you can't put salespeople in today and expect them to make an impact tomorrow, but we will get there. In terms of the margin impact, we’ll be disciplined about that growth. Again, the market opportunities are great enough and there's enough available market out there that we don't have to, as it has been said many times over the years in this industry, just beat each other up. So, we'll be disciplined and thoughtful with our growth, and so I think the margin will progress and that should be the goal. If we can't strike a balanced approach to growing the top and the bottom line, then we're not really doing our job.

Yes, and I would add just a couple comments, Kevin. I think as we said historically, we want to improve our retention rates and we want to grow there. We want to grow the base business as well as sell new accounts and all three elements are important for that growth trajectory and we have opportunities to improve the level of service to our customers to help grow the base business. So we have increased share in the accounts that we already serve. So increased participation rates and increased check averages which leads to further growth. We believe that we are at the historic level of retention inside the company right now and we think we have the opportunity to improve it. So adding 100 basis points to retention would dramatically alter the trajectory of the business going forward, and we think we have that opportunity, and as Tom said, improve closure rates as we sell new accounts. So we've got three levers, and we're working against all three of them.

Yes. Awesome. Okay. I'll hop back in. Thank you so much.

Thank you.

Our next question comes from Andrew Steinerman from JPMorgan. Please go ahead.

Hi, it's Andrew. I want to know if organic revenue growth should progress throughout the year, particularly thinking about second quarter. As I look at slide 7, it doesn't have that little graph that was in the last slide deck that sort of aligned up into the right to give you a sense of quarterly cadence.

I hate to, Andrew, get into sort of quarter-by-quarter detail. We think talked historically about it progressing throughout the year. I think we still feel confident about that if start to finish, so to speak. So we fully expect to have good solid momentum heading into fiscal ‘21, but within the second, third, fourth quarters, we see a progression.

Yes.

Go ahead, John, just go ahead.

Sorry. I was just going to add you have the seasonality occurring in the business. You have the ramp-up of the national parks and the sports entertainment business that occurs in the third and fourth quarter, and second, third quarter, especially on the sports side. So it's hard to delineate the quarter-over-quarter growth. As you know, the selling season in higher education tends to be in the spring. So, it’s too early to call what the sales hit rate will be and what the closure rate will be. We are working very aggressively to move those numbers, and we'll have better visibility here probably in the next quarter.

And the drag from the custodial purging contracts and Europe is now fully in the numbers as of the first quarter, right?

Yes, that's correct.

Okay. Thank you.

Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead.

Thank you. This is for Tom. Just to follow up on I think the first question that was asked but just given your prior experience at one of Aramark's main food services competitors, just curious on any initial thoughts on noticeable differences between the two organizations and what you think will help Aramark accelerate growth closer to what competitors are doing historically?

Yes. Well [Compass has a] great business. Aramark is a great business. So that's probably as close as I'll get to a comparison. What I know is there's no structural difference between the companies. They're similar but different. I think roughly 25% of [Compass’] business is in lines of service or geographies that Aramark is not in, and the same works sort of the other way. So the comparisons are a little different but I understand the need or people's desire for benchmarks, but our goal and focus is really going to be on being the best we can be, and I know that sounds like a cliché, but we want to grow the top line and accelerate the rate. We want to progress the margin and we want to deliver free cash flow increases. If we do that, we're going to deliver it for our shareholders regardless of what any of our competition does. So that's really our focus. We'll look up one day and sort of see where we are in a comparison way, but that's not what we're after. We're after serving our clients and serving our shareholders and doing that with the only experiences that John and I have and a really solid management team has that's in place and John's putting in place.

That's helpful. As my follow-up, do you anticipate any changes to the company's capital allocation policy? Is M&A more or less of a focus? And just any thoughts around capital allocation would be helpful.

Sure, a bit early to sort of definitively opine on it, but I do know in a general sense that our first priority with free cash flow is going to be to reinvest in the business and take the opportunities we can to support growth. M&A on a disciplined and strategic basis would be second, and then reducing debt, of course. So once those three things are evaluated, then we would look at other options for the cash, but I'll get a little deeper into that as I go and certainly give a clear review on the set priorities as we get into the year.

Our next question comes from Gary Bisbee from Bank of America. Please go ahead.

Hey guys this is actually Jay in for Gary today. I am just wondering quickly on the GPO what's the longer-term roadmap there that’s going to be an M&A focus or is there internal growth? What's the longer-term plan?

Yes. I think this is John, you hit both elements. We're going to work very hard to grow the purchase spend by selling those services to third parties and continue to expand our relationship with our partners in that business. So there's definitely an organic opportunity there. We'll also look to bolt-on acquisitions in the GPO space that will increase our spend pool, and there are various opportunities to do that. We will primarily be focused on serving both the needs of our existing business as well as really getting the synergies out of that combination of our purchase spend as quarter end mark and the GPO spend as well. So we still have plenty of earnings improvement opportunity on both sides.

Okay. Great. And then for that 30 million to 40 million incremental spend this year, did I hear you say that was primarily going to occur in Q2? Or like what's the cadence for the remainder of the year?

Yes. We have basically begun investing. We've probably begun hiring salespeople throughout the businesses targeted on those businesses that have the best growth characteristics and our best opportunities. Uniform services have made significant hires over the course of the year already and will continue to bring on additional people primarily focused on adjacent opportunities, first aid, restroom services and the like bringing those sales managers on first because those represent significant margin opportunities and we have a solid base of business to sell against in our existing customers and potential new customers. So we'll be spending that, we've already begun spending those resources. We've added resources in the various growth organizations and will continue to ramp up through the balance of the year. It's our belief that we'll spend that entire amount at some point during the year, but it really depends on the quality of the people that we are able to recruit, develop and hire, and the cadence will be determined by that by the availability of quality candidates.

And I might just add on the sales side and sort of a growth expectation that the different lines of business all have different sales cycles, so we've tried to, and I know John has tried to add across those different sales cycles. For instance, for refreshment services, B&I have shorter sales cycles with a whole load of contracts so to speak. And so, the impact could be felt a little sooner from those hires. Healthcare education certainly has longer multi-year sales cycles. But if you don’t start doing the work, building the relationships today, you'll never grow the business. So, there are some investments that will pay-off more in the near term, others that will be multi-year payoffs.

That makes sense, thank you.

Our next question comes from Manav Patnaik from Barclays. Please go ahead.

Hi, this is actually Greg calling for Manav. I just want to dig in on the Uniform business a bit more. I think last quarter it may have been a little early to talk about it. Given some of the commentary already about investments, give some indication on. How are you thinking about that business but just hoping to get some color on how you're thinking about Aramark’s competitive positioning there and opportunity going forward?

Yes, sure. This is John. First of all, I will tell you that I spent significant time inside the Uniform business over the past four months. I've been extraordinarily impressed by our operating team and the strategies they've laid out for the organization. The opportunities they have in front of them in terms of improving the growth rate and improving margin. As I said in our last call, my primary focus will be looking at ways to improve the operating results in that business and exploring the strategic investment opportunities in Uniform services. The board has not discussed any strategic alternatives and I don’t anticipate doing that in the near term. I'm really focused on improving the core business and operating at a very good margin, and we've got a great team running against it. They have worked very hard to realize the synergies of AmeriPride and are undergoing significant strategic implementations of the route accountability system, which will dramatically impact our ability to operate and report on the business. So, I'm really focused on those efforts right now. But I will tell you, the time I've spent with the Burbank team has been extraordinary, and I really like the business and think they're focused on the right things.

Very helpful. And then maybe on the food services side. Just curious to get your perspective on the facilities side because that's I guess a piece of that has kind of different views among the big catering players and how active to be in that space. So, just hoping to get your view on how facilities sit with the core food services offering. Thanks.

Yes, you bet. First of all we have three different facilities businesses. On the healthcare side, the facilities business is integrated along with our food service operations because it's truly an integrated system sale and so that business is aligned in that organization and very focused on serving the total needs of the healthcare system and the healthcare customer. Then, in the other businesses, facilities are a standalone business providing services to our wide range of customers both in higher education and business timing. We like the business, operates at good margins, we have a very strong team working against that business. We see it as an opportunity to continue to grow, we've got some strong technical capabilities and a very strong portfolio of existing customers. We also have significant opportunities there, as it is a large segment and we have a specific business unit focused on growing that segment. So, we like it and we're not going to shy away from it and we have people really focused on doing the right things in that business.

And our next question comes from Seth Weber from RBC Capital Markets. Please go ahead.

Hey, good morning. Maybe some more questions but on the educational business, can you just talk about the headwinds you're seeing there and what the plan is to turn that business more positive? I know it's a long cycle business, but how are you thinking about the turn that could happen in education? Thanks.

Yes, that's absolutely true. It is a long cycle selling business and we are very focused on that selling season right now as you would guess. We think that, first of all, we're number one in that business; we have a very strong position, and we think we have a right to win. I think that business was affected by the decisions over the last two years to cut resources and to centralize resources. So, we have appropriately moved resources back into the business to focus on serving those unique customers and developing a portfolio of solutions that serve the higher education marketplace more effectively. So, I think the down streaming of those resources, the repositioning of them, if you will, into higher education will help to accelerate that change. We've got a very aggressive team of sales leaders in that marketplace and good operating leadership. There are a couple of fundamental issues inside of higher education that I think all companies will struggle with over time like lower enrollments in certain universities. And that's a headwind that we'll need to work through. We have several customized programs developed to improve the meal plan take-up by freshmen and the reacquisition of meal plans by upperclassmen focused on new marketing initiatives to go ahead and have an impact on that as well. So, it's not a single solution kind of change. It is approaching the marketplace with multiple solutions. And I think that we'll have a significant impact in the near term on that business unit.

Okay. So, you think we could see a positive turn by the end of fiscal '20?

Absolutely. I believe we can see a positive turn in our new account acquisition rate, in our retention rates. Whether that will translate immediately to topline sales growth in this fiscal year is an open question, number one. When you sell a new account, you're opening it in the fall. So, you'll see one period of new business implemented in this fiscal year. You'll see a turn in the success but not necessarily an improvement in the numbers until we get into next year.

Okay. And then if I could just get a clarification, John. In your prepared remarks, I think you used the term going after business aggressively, doing whatever it takes kind of thing. I just want to understand where pricing comes in your framework. I understand there are a lot of initiatives to help margin, but is pricing going to be a lever that you use to go after new business? Thanks.

No. Well, I will answer it this way. We're going to compete on a very disciplined basis and we're not going to use price as a lever to sell new accounts. We're going to provide services to our customers that fit their needs and expectations and we will do it in a manner that is accretive to margins and appropriately grows the business on a balanced basis. We are not going to lower our financial expectations to sell new accounts.

Perfect, okay. Thank you very much.

Our next question comes from Hamzah Mazari from Jefferies. Please go ahead.

Hi, good morning, thank you. My first question is just around how are you thinking about the timeframe for the turnaround on organic growth, is it five years or three years? As part of that, I know you talked a lot about net new business, retention, adding sales people. But are you comfortable that there is nothing structural in your product or any heavy lifting that you have to undo from prior management teams, investments in standardization, technology, etc.?

Yes, we'll both answer that question. Tom, you go ahead.

Again, as I mentioned before, I don’t think there's anything structural. It's sort of an execution, it's an approach to selling new business and resourcing the selling new business, making it a priority, making retention a priority. But in terms of the client offer, just that hospitality culture, the focus on serving and satisfying the customer and client, that's all there. I don’t believe it's going to take additional CapEx in any category either for clients or within the business to grow. This is just about a prioritization and a reinvestment in feet on the street and then letting, as I mentioned before, those businesses grow but they'll all be at a different pace based on the lifecycle or the sales cycle. So probably the answer to your question can be less than five years but more than one quarter.

Yes, I would. It's a very well point, it's going to be less than five years and more than one quarter. I think we definitely have a strong pathway and trajectory towards significantly improving the organic growth rate what I would characterize as the medium term. We have expectations to improve the growth rate this year and continue to improve it next year as we've made these strategic investments and new selling resources we expect that many of them will be productive this year and some of the businesses and that the longer cycle sales will begin to really have an impact in 2021 particularly in higher education. I don’t see this as a multi-year effort, and I also don't see it as a multi-year investment requirement. We believe we'll -- we have the resources we need to operate the business going forward that we can make these -- we've made this strategic investment this year. And we can add these resources and really impact the business across all three of those growth paradigms if you will but base business growth, retention, and new account sales. So, we see this as a strategy that will accelerate going into the end of this year and will continue into next year as well.

That's very helpful. My follow-up question on Uniform, you talked about no strategic options at this stage, and at the same time you talked about investing in adjacencies and that business and turning it around. Firstly, maybe talk about if there is any synergy in Uniform and the food service business. I guess you are the only company that owns a Uniform asset. And then two, is the Uniform business a turnaround too? So, are you executing on two separate turnarounds or is the Uniform business just investing in First Aid a little bit?

Yes, I would not characterize the Uniform business as a turnaround business. I would say it's a business that performs very well in the marketplace it operates in and that there are some differences in the structure of the business between us and our competitors that we're working to close both through technology implementations and by scaling the organization through the AmeriPride acquisition. The Route Accounting System is one area where that acquisition we believe will pay significant dividends. So, I see it as a business that has significant improvement potential, not as a turnaround. They operate very effectively given the assets that they have and the resources that they have. So, the strategic investments in Uniforms are really about creating additional runway. Adding adjacency services like First Aid, we've already built that business significantly in a short period of time. It comes at very good margins; it's very accretive. So the investment and all sales managers, we think will drive significant returns in that business. So, again, I don’t see it as a turnaround; I see it as significant improvement potential.

I think I'd add that, while it doesn’t have the sort of traditional synergy definition or overlap with the other side of the business, it's a very familiar business to me. I've been exposed to it in my career, and walking in it feels very familiar. It's a B2B business and it operates very similarly to the food service side from a contract standpoint, business relationship standpoint, retention. All those things are very familiar. So, I think for both John and I, it's not a very difficult business to manage. It's got an excellent operating and management team. And as John said, it's got good financial metrics, so I'm excited to get into it a bit more.

And our next question comes from Andrew Wittmann from Baird. Please go ahead.

Great. Thank you for taking my questions. I'm going to keep going on Uniforms a little bit here. Some of the competitors have cited some concerns about softness in their end markets that have held them back from a little bit more optimism on their own guidance. I was wondering if you guys have seen any pockets of weakness either by end market or geographically that would be notable.

I would tell you I don't see that as I look at the business. I think in general they are experiencing good growth across all the geographies and I don't see any particular segment weakness. We do serve, we have significant customers in the automotive sector. We have significant customers across such a wide variety of customers, and I think we're somewhat insulated from any specific industry's downturn or softness. But I would tell you from both the geographic perspective and a customer perspective, we're confident in the trajectory for that business this year.

Great. And then just a follow-up question here. I just want to try to get a sense of your goals for the margin profile. I mean a few years ago, a company called G&K Services was generating operating margins in the 12% range before they got taken up by Cintas that was on less than a billion dollars of revenue. You guys are obviously more than twice that size. Is the move to 12 or beyond the right way to think about what your business is capable of, or how can you put the margin potential in context for us as you saturate your plan?

Yes. I think it's certainly we aspire to that level of margin attainment, and I think that over time it's attainable, particularly as we scale up the adjacencies. The real difference between us and Cintas historically has been the fact that we're unionized and they're not. The fact that they've got the business that was built by building plants to specification as opposed to by acquisition, which is the way we built the company. So we have a different footprint, different plant structure that gives us a slightly lower margin profile; but again, the build-out of the services capabilities, adding the adjacency services, and the improvement of the route accounting system gives us significant headroom in margin improvement potential. So that's what we're focused on. As I mentioned on our last call, I've run multiple distribution businesses. I’ve spent significant time inside the Uniform company and I'm very confident in our ability to have a significant impact on the margin potential in that business.

Great. Thanks.

Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead.

Hi, good morning. Thank you for taking my questions. Hey, John I just want to ask you, it is a long cycle business and you noted a number of changes that are going on right now that should impact the business more positively as time goes on. The ones I’m noticing are hiring and then the routing system that you're talking about in Uniforms. Are there other ones that you want to highlight that are already going on but people can’t see the impact immediately but it's one of those things that as you put it into motion the impact and numbers become more apparent over time?

Yes. I think that's a great question and I think really the actions we've taken to date have all been focused on creating that long-term growth potential opportunity. Probably the most significant action we've taken to date has been to re-resource the businesses by taking the organizations that had been centralized into a center of excellence and focused on multiple businesses and down streaming them back into the markets that they serve. So we've taken resources out of the center and given them to business dining, given them to healthcare, given them to higher education. We put people back into the businesses that they know and love. So they can focus on those individual markets and have a really deep intimate understanding and deep impact on those businesses. And I think that will have a significant result over a period of time as those leaders and those sales leaders have the opportunity to re-engage with customers in a much more intimate way. So very much behind the scenes, I think also the strengthening of the leadership group, the reintroduction of Gary Crompton into business dining, Marc's promotion, those are all, I think, terrific elements contributing to the growth culture in the company and the focus on new account sales and customer relationships that will have a significant impact over a longer period.

Great. And then, on [Compass’] call, they talked a little bit about a weakness in the B&I sector in Europe. Is that something that you guys are noticing as well or is there anything that a macro perspective besides obviously stuff going on in China that you want to call out on this call that people should be aware of?

Yes. I don’t, we are not seeing that. Our international results are actually very strong. We don't break it down by country and by segment, but we're not seeing that softness in the European results.

Okay. Great. Thank you so much.

Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating and you may now disconnect.