Leo Carrington

Leo Carrington inquired about the expected duration of Aramark's strong net new growth, particularly if it's driven more by retention than gross wins, and when the company might exceed its target. He also asked about AI's risks and opportunities for revenue (e.g., catering importance in offices, data centers) and its current payoff in back-end efficiencies and supply chain productivity.

Answer

CFO Jim Tarangelo stated Aramark is ahead of expectations for net new growth, well on track to meet or exceed the 4-5% target, driven by strong retention and a robust pipeline. CEO John Zillmer explained that AI is already impacting back-office productivity, especially in supply chain, with minimal investment from the normal IT budget. He views AI as a long-term opportunity for business growth, not a threat, citing potential in data centers and a changing marketplace.

Leo Carrington asked about the expected duration of Aramark's net new growth, particularly as it's driven by strong retention, and when the company might exceed its targets. He also questioned the risks and opportunities of AI on revenues (e.g., catering in offices, data centers) and its current impact on cost efficiencies.

Answer

CFO Jim Tarangelo indicated that Aramark is running ahead of expectations for net new business, well on track to deliver and potentially exceed the 4-5% target, supported by strong retention and a robust pipeline. CEO John Zillmer added that the long-term growth algorithm is improving due to operational discipline, leading to better new account sales and retention. On AI, Zillmer views it as an opportunity, not a threat, already seeing significant impact on supply chain productivity (data capture, negotiation) with relatively small investment within the normal IT budget. He believes AI will be productive for job evolution and presents long-term growth opportunities, such as in data centers, which are analogous to remote camps.

Leo Carrington inquired about the implications of the Penn Medicine deal for further hospital groups consolidating and outsourcing catering, and asked for details on what is driving market share growth in the BNI segment, given its sharp organic growth acceleration.

Answer

CEO John Zillmer stated that the Penn Medicine deal signals significant new opportunities for self-op conversion in healthcare, with transferable solutions and a belief that other systems will follow Penn's lead. Regarding BNI and Workplace Experience, Zillmer attributed growth to capabilities, diverse brand offerings, and strong overall performance, noting success in new niches. CFO Jim Tarangelo added that refreshment services, including coffee and micro markets, are also contributing to rapid, consistent growth in the Workplace Experience segment.

Leo Carrington asked about the implications of the Penn Medicine deal for other hospital groups, specifically regarding consolidation and outsourcing catering, and the potential in that subsector.

Answer

CEO John Zillmer indicated significant new opportunities in healthcare for self-op conversion, with large systems adopting strategies similar to Penn Medicine to reduce operating costs. He emphasized that the solutions offered to Penn are highly transferable, and Penn's reputation is expected to encourage other systems to follow suit. Carrington also inquired about the drivers of market share growth in the BNI segment, given its sharp organic growth acceleration. Zillmer attributed this to the team's performance, diverse brand offerings under the Workplace Experience umbrella, and overall operational excellence, allowing them to grow share in new niches. CFO Jim Tarangelo added that refreshment services, including coffee and micro markets, are also contributing to rapid growth with high retention and net new business.

Leo Carrington of Citi questioned the equity investment in the Las Vegas A's franchise, its impact on contract terms, and whether M&A, like the NTA Catering deal, is an increasing focus for capital allocation.

Answer

CEO John Zillmer confirmed a small, opportunistic equity stake in the A's, stating it's not standard practice and doesn't tie to the contract. CFO Jim Tarangelo and Zillmer clarified that M&A remains a secondary, bolt-on strategy, with organic growth being the primary focus.

Leo Carrington asked about the profit contribution from the Avendra GPO business and sought more specific guidance on the organic growth trajectory for Q3 and Q4, excluding any one-off effects.

Answer

CFO Jim Tarangelo reiterated that Avendra has very attractive margins, north of 55-60%, and is a significant driver of the company's overall margin improvement, but its specific profit is not disclosed for competitive reasons. While declining to give specific quarterly guidance, he pointed to the 6% growth in April and reiterated that the Q4 exit rate would be strong, exceeding the multiyear target range of 5-8%.

Leo Carrington asked for further elaboration on the points made regarding tariffs, specifically focusing on any effects on Cintas's cost base in terms of CapEx and any changes to CapEx expectations.

Answer

President and CEO Todd Schneider reiterated that Cintas is not immune to tariffs, but their supply chain organization effectively mitigates impacts across all businesses through geographic diversity and multiple providers, driving efficiencies. He stated that this culture helps them navigate challenging environments. He also confirmed that the 4% targeted CapEx as a percentage of revenue is expected to remain consistent moving forward.

Leo Carrington asked for further elaboration on the points Cintas made regarding tariffs, specifically their effects on the cost base and any changes to CapEx expectations.

Answer

Todd Schneider, President and CEO, reiterated that Cintas is not immune to tariffs but highlighted that its supply chain organization supports all businesses and is effectively finding efficiencies through geographic diversity and multiple providers. He stated that Cintas' culture of process improvement helps navigate challenging environments. He also confirmed that the 4% targeted CapEx would remain consistent moving forward.

Leo Carrington asked for further elaboration on the impact of tariffs, specifically whether they have affected Cintas' cost base in terms of CapEx and if there are any changes to CapEx expectations.

Answer

Todd Schneider, President and CEO, reiterated that Cintas is not immune to tariffs, but its supply chain supports all businesses (not just rental) and is finding efficiencies through geographic diversity and multiple providers. He stated that the company's culture helps it 'shine' in challenging times. He confirmed that the 4% targeted CapEx is expected to remain consistent moving forward, indicating no changes to CapEx expectations due to tariffs.

Leo Carrington asked about the landscape for other large M&A targets in North America following the terminated UniFirst discussions and whether the company's focus is solely on tuck-ins or includes other services or geographies.

Answer

President and CEO Todd Schneider affirmed that Cintas's strategic focus remains on North America, where it sees a vast and fragmented market with a long runway for growth. He stated there is no current need to expand internationally and that the company is focused on acquiring well-run businesses with great customers and employees within its existing geographic footprint.

Leo Carrington of Citigroup Inc. asked about the performance of other booking channels as direct digital bookings increased and inquired about the regional drivers of the 9% growth in newbuild signings, particularly developer sentiment outside of China.

Answer

CEO Elie Maalouf stated that the growth in digital bookings is primarily taking share from channels like voice, not third-party channels, with which IHG maintains a constructive relationship. CFO Michael Glover provided a regional breakdown of newbuild signings: they constituted 51% of signings in EMEAA (up 45%), 67% in Greater China (up 4%), and only 3% in the Americas. He noted that IHG has a strong mix of brands to capture both newbuild and conversion opportunities across all regions.

Leo Carrington of Citi asked about the drivers behind the 2-percentage-point increase in direct digital bookings, which channels were losing share, and for a regional breakdown of the 9% growth in new-build signings.

Answer

CEO Elie Maalouf clarified that the growth in direct digital bookings primarily took share from the voice channel, not third-party channels, reflecting a natural shift in consumer behavior. CFO Michael Glover provided a regional breakdown for new-build signings in the half: Americas at 3%, EMEAA at 51% (up 45% YoY), and Greater China at 67% (up 4% YoY), demonstrating a strong mix across the portfolio.

Leo Carrington from Citigroup Inc. asked about the performance of other booking channels given the 2% improvement in direct digital bookings and inquired about the regional drivers of the 9% growth in newbuild signings, particularly outside of China.

Answer

CEO Elie Maalouf stated that digital booking growth is gaining share from other channels, including voice, but not from third-party travel agencies, with whom IHG has a constructive relationship. CFO Michael Glover provided a regional breakdown of newbuild signings: they constituted 51% of signings in EMEAA (up 45%), 67% in Greater China (up 4%), and only 3% in the Americas, demonstrating that growth is occurring outside of China, especially in EMEAA.