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Mar 27, 2020
Aramark Q2 2020 Earnings Report
Reported second quarter earnings performance in line with preliminary results announced April 22, 2020.
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.
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Aramark has withdrawn its previously stated outlook for the 2020 fiscal year due to rapidly changing market dynamics.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
Historical Earnings Impact
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Avg. Return Before/After Earnings
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