Aramark Q2 2020 Earnings Report
Key Takeaways
Aramark's Q2 2020 results were impacted by COVID-19, with revenue down 6.7% year-over-year. The company has taken proactive steps to navigate the economic environment, including cost-reduction strategies and increased financial flexibility.
Amended debt covenant and increased cash availability in April.
Revenue decreased by 6.7%, with organic revenue down by 5.4% due to COVID-19 impact.
Operating loss was $98 million, primarily due to a pre-tax non-cash goodwill impairment of $199 million in FSS International and the impact from COVID-19.
EPS was $(0.80) and adjusted EPS was $0.26.
Aramark
Aramark
Aramark Revenue by Segment
Forward Guidance
Aramark has withdrawn its previously stated outlook for the 2020 fiscal year due to rapidly changing market dynamics. The company initiated cost-reduction strategies and expects a near-term operating income drop through of approximately 20% of any corresponding revenue decline, with the flexibility to drive it lower to approximately 15% as future market conditions warrant.
Positive Outlook
- Comprehensive re-opening plans, including new models for service delivery and customer engagement, all designed to ensure the safest, most hygienic environments
- The Company has the ability to quickly scale offerings to meet evolving client needs
- Initiated cost-reduction strategies at the end of the second quarter
- The Company has additional flexibility to drive drop through even lower to approximately 15% as future market conditions warrant.
- Pursuing opportunities to win new business, retain clients or extend contracts by providing exceptional service.
Challenges Ahead
- Withdrew its previously stated outlook for the 2020 fiscal year
- Market dynamics are rapidly changing
- COVID-19 pandemic
- Renegotiation of client contracts
- Salary and other compensation adjustments and reductions to corporate expenses
Revenue & Expenses
Visualization of income flow from segment revenue to net income