Good morning and welcome to Aramark's third quarter fiscal 2024 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 that 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. Mr. Kissell, please proceed.

Thank you, and welcome to Aramark's third quarter fiscal 2024 earnings conference call and webcast. This morning, we'll be hearing from the company's Chief Executive Officer, John Zillmer; as well as Chief Financial Officer, Jim Tarangelo. As a reminder, our notice regarding forward-looking statements is included in our press release this morning, which can be found on our website. 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 our other SEC filings. Additionally, we will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in this morning's press release as well as on our website. So with that, I'll now turn the call over to John.

Good morning, everyone. Thank you all for joining us today. We continue to successfully execute on our strategic vision. I'm pleased to report another strong quarter of results for Aramark with record revenue and profitability for our third quarter in FSS U.S. as well as record international revenue and profitability for any quarter. Jim and I will review the key drivers for the outperformance before turning to our financial expectations for the fiscal year with just one quarter to go. Given the substantial growth opportunities ahead and our proven ability to capitalize on them, we're confident that our business momentum will continue into next fiscal year and beyond. Aramark's third quarter revenue growth was broad-based, coming from virtually all lines of business and geographies. Revenue for the quarter was $4.4 billion, with organic growth up 11% year-over-year, once again led by base business growth from a mix of volume and pricing as well as contributions from new client wins. The company's multiple operating levers allowed us to scale higher sales volume, manage costs effectively and achieve supply chain efficiencies, all while benefiting from an inflation tailwind. Our actions contributed to a 22% increase in operating income compared to the prior year and a 21% year-over-year increase in adjusted operating income on a constant currency basis. Aramark's performance is a testament to the extraordinary talent within this organization, which allows us to provide world-class hospitality services to clients while we focus on our ambitious path forward. Turning now to the business segments. FSS U.S. grew organic revenue 9% versus the comparable period last year, led by continued record levels of per capita spending and greater event attendance in Sports and Entertainment, new wins coming on board in business and industry, meal plan initiatives and collegiate hospitality before entering the quieter summer season and enhanced commissary services and corrections. We saw strength this quarter using our capabilities to deliver higher revenue volumes at prominent events, including professional golf tournaments such as the U.S. Open at Pinehurst and the Travelers Championship in addition to serving over 300,000 fans at the Indianapolis 500. We also provided retail merchandise for the Philadelphia Phillies and the New York Mets, both Aramark clients as they participated in Major League Baseball's London series. The sales pipeline remains extremely strong across sectors, particularly in first-time outsourcing. New clients include the Tulsa Public Schools, our first entry into Oklahoma for Student Nutrition, Harding University and the Southeast Georgia Health System to name a few. We're in the process of finalizing some sizable new client opportunities, which we are targeting to close this fiscal year. As part of our ongoing efforts to offer a differentiated and innovative client experience, we just entered into a partnership with renowned Michelin Star Chef, Daniel Boulud, which will be focused first on expanding our B&I culinary capabilities in corporate catering, special events, conferences and more. The collaboration will be branded Cuisine Blue New York with operations primarily from a centralized kitchen located in Manhattan with services offered throughout the New York Metropolitan area and beyond. Lastly, in FSS U.S., a few weeks back, we brought together the top 1,000 of our senior operating district, regional and corporate leaders for ongoing leadership development training educating teams on new initiatives, services, products, equipment and technology through our partner sponsor Expo and celebrating excellence in our hospitality culture. This type of collaboration across lines of business and job function is a clear realization of our values and will help propel us into the future. Now to international. Momentum in the International segment continued with organic revenue increasing 16% year-over-year. All geographies in the portfolio experienced organic revenue growth led by the U.K., Canada and Spain as well as Latin America from net new business, base business volume and pricing initiatives. Our teams were hard at work, which included successfully driving our increased presence in sports and entertainment, particularly in highly attended and globally recognized events. In Germany, we served approximately 1.6 million visitors during the 2024 men's European football championships, partnering with the majority of the stadiums in the tournament which are Aramark clients, including for the final match in Berlin. And in Spain, we served over 280,000 fans for the Formula One Grand Prix multi-day race in Barcelona, and we are already working on plans and partnership with the rapidly growing Formula 1 for upcoming events this summer and into next season. We are thrilled to share that Aramark has been selected as Everton Football club's official global food and experiences partner for the new Everton Stadium at Bramley Moore Dock in Liverpool, England. The approximately 53,000 capacity stadium, which opens ahead of the '25, '26 season, will be one of the most accessible and sustainable stadiums in Europe. This marks the company's first engagement in the English Premier League and expands on our long-standing European sports and entertainment business with La Liga in Spain and the Bundesliga in Germany. We also continue to build scale in other countries within industries we serve with new client wins coming from mining in Chile, health care in China and government-related services in Ireland. And finally, in international, we recently concluded our international chefs Cup in Toronto, Canada, which after a year of in-country competition, recognized our global culinary talent and celebrated the winning chefs from each country. Our global supply chain team continues to effectively grow, leverage and optimize Aramark spend, which contributed to our strong performance in the quarter. By the end of this fiscal year, we expect our managed services global supply chain and GPO network spend to surpass $20 billion. We are pursuing GPO acquisition opportunities to complement the organic growth we are seeing to drive even faster growth and enhance capabilities in key areas. International expansion is of particular interest if we find the right fit. Domestically, we are leveraging our expertise in hospitality to expand and more deeply penetrate adjacent industries such as wellness and entertainment. On the inflation front, we're seeing continued improvement in North America, Europe and Asia, while Latin America has been a bit stickier. In the third quarter, we reached the low end of the range we originally estimated and expect global inflation in the 3s for next quarter as long as these favorable trends continue with the U.S. already dropping into that range. As always, we're ensuring our supplier contracts are capturing any market opportunities and we'll transition business appropriately to maximize these benefits. Lastly, we reached an agreement to sell the remaining portion of our ownership stake in the San Antonio Spurs NBA franchise. We anticipate the transaction will close in the fourth quarter subject to NBA approval. We expect to use the proceeds for debt repayment as part of our deleveraging strategy. We continue to work closely with the Spurs as a valued client. Before turning the call over to Jim, I'd like to highlight a few key accomplishments and recognitions we received in the third quarter. First, we were named as one of the 50 most community-minded companies in the United States, often referred to as the Civic 50 by Points of Light, an organization dedicated to accelerating people-powered change. Second, Fair360 highlighted Aramark as a top employer for both diversity and black executives, with 36% of our management being racially and ethnically diverse and 20% of the company's Board members being women of color. And lastly, Aramark Canada was recognized as one of the country's greenest employers for 2024 by Mediacorp Canada, highlighting our ongoing commitment to sustainability and the innovative green practices now ingrained in our operations. We believe that the focus on our people and the communities we serve are a key differentiator for the company, which has led to tremendous outcomes. Jim?

Thanks, John, and good morning, everyone. As John mentioned, we had another very strong quarter on both the top and bottom line across the business with solid growth across nearly all sectors and geographies. We are excited about the many growth and operational efficiency opportunities ahead. In the third quarter, we reported revenue on a GAAP basis of $4.4 billion, up 8% compared to the prior year period, reflecting approximately $116 million of foreign currency translation. Organic revenue grew 11% versus the prior year, driven by increased business volume and the contribution from net new business along with pricing. Operating income in the third quarter increased 22% year-over-year to $162 million, and adjusted operating income was up 21% on a constant currency basis from a year ago to $193 million. AOI margin grew nearly 40 basis points year-over-year on a constant currency basis, driven by those underlying operating levers, so core to our model, including supply chain efficiencies, disciplined middle of the P&L management and progression of new business majority along with improving inflation trends. Turning to the business segments. FSS U.S. achieved AOI growth of 14%, with an AOI margin improvement of 22 basis points, both on a constant currency basis compared to the same period last year. Note, there was some favorability in the prior year associated with insurance-related costs. If it wasn't for this item, the FSS U.S. AOI margin improvement would have been comparable to last quarter. The International segment had year-over-year AOI growth of 41% and AOI margin improvement of 86 basis points, also on a constant currency basis. Year-over-year AOI expansion was driven by higher base business volume, net new business and control of operational costs, particularly in food, labor and overall SG&A led by Spain, the U.K., Ireland and Latin America. Regarding inflation, trends continue to track favorably, which provided some tailwinds to our underlying margin levers in the third quarter. As John shared, we saw global inflation come in at the low end of our expected 4% to 5% range with the U.S. even better. We are seeing overall inflation tracking in the 3% range for the fourth quarter and if current trends continue, we expect inflation to come down even more heading into next fiscal year. Turning to the remainder of the income statement. Interest expense decreased 27% year-over-year primarily from the $1.5 billion debt repayment of the 2025 senior notes. The adjusted tax rate was approximately 26%. Our quarterly performance resulted in GAAP EPS of $0.22 and adjusted EPS of $0.31, an increase of over 50% versus the prior year on a constant currency basis. Regarding cash flow, net cash provided by operating activities was $141 million and free cash flow was $62 million in the third quarter, an inflow consistent with our normal seasonal business cadence. Our free cash flow improved by almost $200 million from higher cash from operations and favorable working capital compared to the prior year. At quarter end, the company had over $1.1 billion in cash availability. Turning to the capital structure, we improved our leverage ratio another 50 basis points this quarter compared to the prior year period. This positive trend reflects our financial discipline as we remain focused on reaching 3.5 times by the end of this fiscal year, and we are committed to continue reducing our leverage ratio. After quarter end, we also took steps to further strengthen our balance sheet and create additional financial flexibility by extending the maturities of our revolving credit facility and Term A loan by five years. Part of this action also includes increasing our borrowing capacity under our revolving credit facility by $200 million to $1.4 billion. We will proactively pursue other opportunities to enhance our capital structure with a focus on optimal returns for shareholders. I'll wrap up with our outlook expectations for the remainder of this fiscal year. We are very pleased with our year-to-date performance as we continue to make great progress against our financial targets. As a result, we currently anticipate the following full year performance: Organic revenue growth at approximately 10%, AOI growth at approximately 20% and adjusted EPS growth at approximately 35%. And lastly, a leverage ratio at approximately 3.5 times with ongoing improvement. Our results reinforce our ability to execute on our focused strategies, which, in turn, we expect will deliver significant shareholder value. Thank you for your time this morning. And with that, I'll turn it back to John.

Thank you, Jim. We continue to work hard every day and are excited about the opportunities ahead to deliver for our stakeholders. We are exceeding the financial expectations we initially set for the fiscal year and remain confident in our strategic vision. Our talented teams across the globe embody our culture, performing at a high level and pursuing a path that will bring us to new levels of success. And operator, we'll now open the call for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Shlomo Rosenbaum with Stifel. Your line is open.

Hi, excuse me, thank you very much for taking my questions. Hey John, can you comment a little bit about the contracting in the higher education space? June is usually the most important quarter and that runs kind of through July. Can you talk a little bit about the success the company had, whether it was a lot with what you expected, how it sets you up for next year? And after that, I have one follow-up.

Yes, we had a very strong selling season in higher education. We actually sold more new accounts this year than ever in our history. So we're feeling very good about the new sales growth, the contract negotiation process in terms of pricing for next year for Board plans has gone very, very well. And so we feel very good about higher education opportunities for next year and beyond. So yes, all in all, a very good selling season. We obviously did have a couple of accounts that we transitioned this year, and so we're very focused on both the retention and new sales efforts in higher education and feel very strongly about that business's ability to perform at a high level.

Great. And then for Jim, just are we at a point that the new wins are not really going to be something that would have to be concerned about them impeding the operating margin expansion? Over the last several years, we had a situation where the new wins were a headwind to operating margin expansion, and we're starting to see margin expansion ahead of what was expected. Are we at that point where the maturing contracts are really just offsetting the new business ramps?

Yes, that's right. I mean if you look again, the year-to-date margin expansion at 60 basis points is very strong, right? And all those underlying margin levers are working and one of those levers is the maturity of the new business profile. And at this point, given where we are, that should no longer be a significant headwind like it was prior to the new business ramp up.

Great, thank you.

Thanks, Shlomo.

Thanks so much. I wanted to ask about the international business, really strong quarter of growth again. Could you talk about any initiatives you've been implementing there that might have led to the success? And in prior quarters, you've attributed the momentum there to outsourcing. So I'm assuming that's still the case, but are there any particular geographies where you're seeing more of the move towards outsourcing? And is that being driven by sort of this lingering inflation or something else? And as inflation comes down, does that sort of change the dynamics going on? Thanks.

Thanks, Toni. Frankly, we're seeing very broad-based success in international across all the geographies. I really couldn't point to an area where we're not enjoying that success in terms of the growth. I think part of it is just the longer-term discipline we've had in terms of growth for international. That team has been in place for a long time and is very disciplined and focused, and we continue to see great results across the portfolio in virtually every country. So I think we have strong expectations for continued growth in that sector. I don't see any secular trends, which would really impact one way or another. Outsourcing activity still remains high and the pipeline, the sales pipeline is even more robust now than it's ever been. It's just an amazing thing. So we're very pleased with the overall results in international, and we expect that growth will continue.

Terrific. And then just on the margin drivers, you mentioned on slide eight and you've talked about in the prepared remarks, supply chain efficiencies. You've been sort of calling that out for a couple of quarters now. Maybe just talk about how much more is there to go with regard to additional margin expansion from supply chain or from the operating efficiencies that you've been seeing that would be helpful.

There's still significant opportunities ahead, right, with this growth-oriented model. Supply chain efficiencies are generating really nice margin accretion. We continue to see disciplined management of SG&A, the organization is fit for growth. So we're able to take on a lot more growth without adding much in the way of SG&A. And you see that in our corporate results as well. And then finally, the middle of the P&L. I think as the operating environment continues to normalize, obviously, staffing is more available now. We're seeing improvement in labor and food productivity without maintaining high-quality service to our clients with reduced agency and over time, as an example. So that will continue to provide tailwinds into next year and those margin levers will continue to be more pronounced.

That's right. And Toni, that last factor on supply chain. Obviously, we continue to focus on growing the GPO spend both domestically and internationally and the acceleration of that spend has significant efficiency benefits for us, both in terms of new contract development and overall rates for the products that we buy. So we see that lever continuing to be a significant impact item going forward.

Hi, can you just talk maybe a little bit about the pipeline and what's going on there a little bit deeper? I know you gave some color, but a little bit more maybe geography or kind of areas and I guess I'm trying to key in on this Everton, which congratulations on getting. Are there other opportunities in that vertical as well in that country? Thanks.

Yes, there are definitely other opportunities in that vertical, both there and in other parts of the world. In fact, we're very close to closing on another opportunity that's both to retain and grow in that sector in the International segment. So we're very excited about the overall growth prospects of the Sports and Entertainment business, we're also enjoying very significant special event opportunities, concert seasons. And a team performance has a big impact on the overall sales and revenue growth in sports and entertainment. So we're actually seeing very strong performance by our core teams that we serve around the world. So all in all, we're very pleased with it, and we see continued good opportunities going forward.

Thank you. Could you discuss how the business performs during a recession and how you manage to mitigate its impact? Any additional insights would be appreciated.

Yes. I think one of the hallmarks of this business is it stands up very well during recessions. I mean it's literally a business with over 10,000 profit centers and a diverse set of sectors across 15 countries. So there's a natural diversity to the business that stands up and is very resilient as the economy becomes more challenging. If you look back over 20 years and you go back to the financial crisis in '08, again, the business fared very well with revenues just down a tad and margins were relatively intact. So it's a good spot to be when we're facing challenging economic times.

Yes, I would just add, we consider the business to be very recession-resilient. I think as Jim said, it's based on the strength and diversity of the portfolio and the businesses that we serve and our ability to manage in a disciplined operating environment, and the processes that we have in place, the systems and the technology that we have in terms of managing the middle of the P&L for both food and labor really puts us in a very good position. We manage this business literally on a weekly basis. So we can react and respond very rapidly to changing economic conditions. And we feel our people are very well equipped and it's been demonstrated over many, many years that the company, in particular, Aramark in particular, particularly the food part of the business is very recession-resilient.

Hi, good morning. Thank you for taking my question. I was hoping you could talk a little bit more about your GPO. You talked about it surpassing $20 billion. And when you answered Toni's question, you talked about the margin opportunity there. Can you just talk about the pace of growth you've been seeing, what's driven that and the opportunities ahead? Do you have a target in terms of how big you think you can get it? When you look at your peers, I guess, how do you think about it from that perspective?

Yes, certainly. It is obviously an area that we're very much focused on. And beginning all the way back to the Avendra acquisition. I think the company was embarking on a strategy not only to create a good GPO and a good business model for Avendra, but also to create additional supply chain leverage that could be brought to bear against the contract business. So obviously, we're very focused on increasing that spend. We've got a very active sales process and some very significant new client wins this year. We're also expanding our geographies, both domestically through rounding out the portfolio of the services we offer and the industries that we approach, as I mentioned in the script, approaching hospitality and entertainment or entertainment and wellness in a way that we haven't before. I think golf clubs and other related kinds of facilities as well as geographic expansion. And we've had a very good success in growing the GPO business outside of the United States, and we have an opportunity to expand significantly with our core customers both domestically and internationally. So we'll continue to build it. We're not going to throw a number out there. I think, frankly, we're just going to try and build it as rapidly as we can because we see the benefits on both sides, and we'll continue to give you more insight and more information as we establish strategy and the goals for next year.

Great. That's helpful. And also with regards to the question on potential risk or sort of managing the business through a downturn. I'm just curious, currently are you seeing anything in any of the segments of your business that point to softer demand from consumers? Any sort of change in trend?

I would say, no, we're not experiencing that in any significant way. I would say we're seeing very strong spending trends, particularly in sports and entertainment. We continue to have consumers who are willing to spend for the experience, particularly in the businesses that we serve. They're event-driven, and so people will continue to support their sports teams even in times of a significant recession. In the past, attendance at stadiums was very strong because people would still make those kinds of expenditures. They may reduce the number of airline flights that they may take, but they continue to engage in activities that are closer to home. So our portfolio is specifically designed to capture that opportunity, and we feel very good about it. But to be very clear, we are not seeing any consumer-driven trends that lead us to believe that we're seeing a downturn in consumer spending in our core businesses.

Good morning, John and Jim. Thank you for having me. I have a couple of questions. First, regarding your new initiative in the U.S. B&I business, could you elaborate on any changes in the addressable market for B&I? Specifically, I'm interested in how concepts like unattended vending and the model you're discussing, which uses a single kitchen to serve multiple customers, may lower the threshold for the size of customers worth pursuing and what that means for the market size. Apologies for the lengthy question. Secondly, Jim, your guidance indicates mid to high single-digit growth for the fourth quarter at constant currency, based on your operating income level. Is there anything in the comparison that we should consider when evaluating the year-on-year growth rate? Thank you.

Yes, I'll start with that question. So that's right. The guide does imply sort of mid- to high single digits for the fourth quarter. And again, that's a good cruising speed for this business. We've talked about the long-term growth model in the 5% to 7% range, and that's enough growth to fuel those margin levers that we talked about. That's two to three times higher than where we were in the years leading up to fiscal '19. We are lapping some significant pricing actions as we come into Q4 as inflation moderates the level of pricing will come down somewhat. But we're exiting the year at a very strong speed with good growth.

Yes. I'll address the first operational issue. The marketplace that Cuisine Blue targets is primarily the high-end catering sector. We haven't set up a central production facility in New York to serve smaller locations, as the focus is on high-end opportunities for both catering and restaurant operations. The B&I segment remains strong, and we see ongoing growth and opportunities to expand this business by acquiring new accounts. This selling season has been very successful. While each account may differ from those in 2019, with lower populations, we are serving more people, and the service style has been adapted to match current population and participation rates. Overall, the B&I model is solid. The small account model, served through our Refreshment Services division, is experiencing remarkable growth in various markets, including micro markets, vending, office coffee services, and snacks. We offer specific services aimed at these smaller site solutions. However, the reference to Cafe or Cuisine Blue today is specifically about high-end catering and the chance to serve that market in a unique way with a world-renowned Michelin Star Chef.

Hi, the 10% organic revenue growth this year stands out to me as above industry growth. And I just wanted to know if you had a sense of what you think industry growth is for food services right now. And given what you see in the industry, not just our marks book of business, what do you think the growth prospects for food services industry growth is for the next couple of years?

That's a great question, Andrew. I think, first of all, we see all the competitors have experienced growth year-over-year. I do think ours is industry-leading, and I think that's a result of a number of different factors based on the portfolio that we have and based on the success we've had in terms of both new account acquisition and base business improvement. So I'm sure our competitors are also seeing similar opportunities going forward. I think we've talked about a long-term growth rate for us in the mid-single digits, call it, 7% going forward. And I would expect, I think the industry is probably growing at a rate that's slightly higher than inflation. And so I think we'll all benefit going forward. It's a very disciplined industry. I think we're all focused on managing effectively for our clients. But we love our strategy and our portfolio, and we think it will lead to significant growth going forward.

Our next question comes from Ian Zaffino with Oppenheimer. Your line is open. Hi, can you just talk maybe a little bit about kind of the pipeline and what's going on there a little bit deeper? I know you gave some color, but a little bit more maybe geography or kind of areas and I guess I'm trying to key in on this Everton, which congratulations on getting. Are there other opportunities in that vertical as well in that country? Thanks.

Yes, there are definitely other opportunities in that vertical, both there and in other parts of the world. In fact, we're very close to closing on another opportunity that's both to retain and grow in that sector in the International segment. So we're very excited about the overall growth prospects of the Sports and Entertainment business, we're also enjoying very significant special event opportunities, concert seasons. And a team performance has a big impact on the overall sales and revenue growth in sports and entertainment. So we're actually seeing very strong performance by our core teams that we serve around the world. So all in all, we're very pleased with it, and we see continued good opportunities going forward.

Good morning, John, Jim. Thank you very much. I have a couple of questions. First, regarding your new initiative in the U.S. B&I business, could you clarify how you perceive any changes in the addressable market for B&I? Specifically, does the model involving unattended vending and using a single kitchen for multiple customers lower the threshold for the size of customer that is viable to serve, and how has that impacted the market size? Sorry for the lengthy question. Secondly, for Jim, your guidance indicates an operating income level suggesting mid to high single-digit growth for the fourth quarter at constant currency. Are there any considerations in the comparison base that we should take into account when evaluating the year-on-year growth rate? Thank you.

Yes, I'll start with that question. So that's right. The guide does imply sort of mid- to high single digits for the fourth quarter. And again, that's a good cruising speed for this business. We've talked about the long-term growth model in the 5% to 7% range, and that's enough growth to fuel those margin levers that we talked about. That's two to three times higher than where we were in the years leading up to fiscal '19. We are lapping some significant pricing actions as we come into Q4 as inflation moderates the level of pricing will come down somewhat. But we're exiting the year at a very strong speed with good growth.

Yes. I will address the first operational issue. Firstly, the marketplace that Cuisine Blue targets is primarily high-end catering opportunities. We have not set up a central production facility in New York to service smaller facilities. The focus remains on high-end opportunities for both catering and restaurant operations. The B&I segment continues to thrive, and we anticipate further growth by adding new accounts. We have had a strong selling season, and while each account might differ slightly from 2019 due to lower populations, we are serving more clients and have adjusted our style of service to align with population and participation rates. Overall, the B&I model is robust. The small account model is managed through our Refreshment Services division, which is experiencing significant growth across various markets, including micro markets, vending services, office coffee services, and similar refreshment and snack services. We do offer solutions focused on smaller sites. However, the specific reference to Cafe or Cuisine Blue today was relating to high-end catering and the chance to serve this market in a new and distinct manner with one of the world’s acclaimed Michelin Star Chefs.

Hi, the 10% organic revenue growth this year stands out to me as above industry growth. And I just wanted to know if you had a sense of what you think industry growth is for food services right now. And given what you see in the industry, not just Aramark’s book of business, what do you think the growth prospects for food services industry growth is for the next couple of years?

That's a great question, Andrew. I think, first of all, we see all the competitors have experienced growth year-over-year. I do think ours is industry-leading, and I think that's a result of a number of different factors based on the portfolio that we have and based on the success we've had in terms of both new account acquisition and base business improvement. So I'm sure our competitors are also seeing similar opportunities going forward. I think we've talked about a long-term growth rate for us in the mid-single digits, call it, 7% going forward. And I would expect, I think the industry is probably growing at a rate that's slightly higher than inflation. And so I think we'll all benefit going forward. It's a very disciplined industry. I think we're all focused on managing effectively for our clients. But we love our strategy and our portfolio, and we think it will lead to significant growth going forward.

Hi, John, Jim. Thanks for taking my questions. I think, Jim, you mentioned that the U.S. margin was held back a little by some favorability in last year. And then excluding those, the margin improvement will be similar to last quarter. So I guess is the last quarter's margin improvement rate the rate to think about going forward? How should we think about kind of the U.S. margin improvement given some of your productivity and internal actions?

Yes. The underlying margin improvement in both the U.S. and international remains strong, right? So 50 to 60 basis points. So I know that the insurance comparability, we had some favorable insurance experience in the prior Q3. Coming out of COVID, there was simply less activity and less liabilities required there with some actuary true-up work that occurred. So we're now in a more normalized run rate with respect to insurance, but the underlying margin improvement remains consistent and strong. And we'd expect the same for Q4 as well.

Yes, great. Thanks for taking my question. So I guess you guys commented on inflation a couple of times and how it came in at the low end of your expectations for the quarter. There has been a comment in your prepared remarks talking about if it stays here, you'll get some benefit to '25. So Jim, maybe I thought giving the opportunity to expand a little bit about that. It sounds like that's your base case that inflation probably a little bit of a help for you not only in the fourth quarter but into next year? I was just wondering when do you think the comps are inflation comps get to a point where it's no longer tail end and any idea you could help us with in terms of the quantum of that? I know last quarter, you said a defined basis points benefit to the results. I don't know if you wanted to kind of talk about how it's been trending here for the end of '24. But I think we could all benefit from a little bit more detail on that topic.

Last quarter, we mentioned our expectation of inflation in the 4% to 5% range, and for the third quarter, it came in at the lower end of that range globally. In the U.S., we saw inflation in the high 3s for the third quarter. As we look to the fourth quarter, we are now seeing inflation in the 3s across the organization, both in the U.S. and internationally. This trend is favorable as we plan for fiscal '25, and it continued to serve as a moderate tailwind in Q3. I believe this will carry on as a moderate tailwind into Q4. We have discussed that we do not price for profit in the long run, suggesting that pricing and inflation will balance out for the organization. However, I expect it to continue to provide a moderate tailwind over the next few quarters.

Yes. I think we expect to be right on our historical averages, really nothing significant up or down. And you're right, we will comment at the end of the year on our net new and overall retention in the business. But right now, we feel very good about the track we're on. And I would say historical averages are right in line with our expectation.

Hello, this is Harold on for Stephanie Moore. I wanted to key in on the GPO space. It sounds like you are configuring some acquisitions. So just any particular geographies where you see the most opportunity at you like to acquire to grow in the space.

We are concentrating on the European market where we already have a GPO infrastructure, and expanding that will significantly enhance our margins and improve our customer service. Some of our acquisitions span multiple regions and can affect our operations not just in Europe, but also in Latin America. Additionally, we are working with our current partners worldwide on pilot programs to establish GPO networks in regions that lack them. The overall opportunity is considerable, and we are dedicated to it. I want to clarify that we are not pursuing a substantial investment strategy for the GPOs; rather, we are focused on making smaller, strategic additions that will greatly impact our ability to manage spending and capabilities in specific markets. That is our approach and strategy.

Understood. Yes. Just to confirm, the insurance costs or savings were a benefit in the third quarter of 2023. We're highlighting that we are comparing it to a period of unusually low insurance costs. The insurance run rate is now back to normal, so it could either be a challenge or an advantage to the margin moving forward. Regarding corporate costs, we are planning a moderate overall increase. We aim for corporate costs to grow at about half the rate of our revenue growth, so you can expect a range of 2% to 3% for fiscal 2025.

Terrific. Thank you very much, and thank you, everybody, for your questions and for the support of the organization. We feel very good about our third quarter results. The opportunities ahead for the organization are bright. And I want to thank all the Aramark employees around the world for their diligence, hard work and their continued dedication to the growth of this company. So again, thank you very much and enjoy the rest of the day.

Thank you for participating. This concludes today's conference. You may now disconnect, and have a wonderful day.