Aramark (NYSE:ARMK) held its second-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.
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Summary
Aramark reported a 12% increase in organic revenue, reaching $4.8 billion, driven by strong client retention, record levels of new client wins, and a calendar shift benefit.
The company entered the hyperscale AI data center market with a multi-year engagement, expecting it to become the largest in their portfolio.
FSS US organic revenue rose 12%, supported by growth in Collegiate Hospitality, Sports and Entertainment, and new business contributions in Workplace Experience.
International segment saw 13% organic revenue growth, with strong performance in Europe, Canada, and emerging markets.
The company's entry into the hyperscale data center market is expected to generate above-average margins, though it's not yet included in their fiscal 26 financial outlook.
Adjusted operating income grew by 24%, and the company reported GAAP EPS of $0.38 and adjusted EPS of $0.49.
Aramark updated its fiscal 26 outlook, expecting organic revenue growth at the high end of 7% to 9%, and reaffirmed AOI growth to be up 12% to 17%.
The company emphasized strong cash flow with a significant free cash flow increase, allowing for proactive debt repayment and share repurchases.
Aramark continues to focus on leveraging technology to enhance productivity, particularly in labor and food management.
Full Transcript
Operator
Good morning and welcome to Aramark's second quarter fiscal 2026 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 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. I will now turn the call over to Felice Cassell, Senior Vice President, Investor Relations and Corporate Development. Ms. Cassell, please proceed.
Felice Cassell (Senior Vice President, Investor Relations and Corporate Development)
Thank you and welcome to Aramark's Earnings Conference Call and webcast. This morning we'll be hearing from our CEO John Zilmer as well as our CFO Jim Tarrangelo. As always, there are accompanying slides for this call that can be viewed through the webcast and are also available on the IR website for easy access. Our notice regarding forward looking statements is scheduled 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 as a result of various risks, uncertainties and important factors, including those discussed in the Risk Factors MD and A and other sections of our Annual report on Form 10K and SEC filings. We will be discussing certain non GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in our press release and IR website. So with that I will now turn the call over to John
John Zilmer (Chief Executive Officer)
Good morning everyone and welcome to our fiscal second quarter earnings call. Thank you for joining us. Our financial results underscore the continued momentum occurring at the company driven by our unwavering focus on growth through delivering hospitality excellence. Jim and I will review the key contributors to the quarter's outperformance and our confidence in achieving the outlook for fiscal 26. We enter the second half of the year with exceptionally strong business trends including first, a client retention rate exceeding 98% across the company second, organic revenue growth at record levels in both FSS U.S. and international third, new client wins that have already reached an unprecedented total of $1 billion this fiscal year to date. And lastly, we're very excited about our entry into the hyperscale AI data center market where we believe Aramark is uniquely positioned to deliver an integrated suite of capabilities as we execute on our newly awarded multi year engagement with the top global hyperscaler to provide comprehensive hospitality and facility services across multiple AI data center locations. This client is expected to become the largest in our portfolio. We see significant Runway for additional growth with this client and other Hyperscalers in the second quarter, Aramark's organic revenue grew 12% to $4.8 billion, including an estimated 3% benefit from the calendar shift. As a reminder, the calendar shift will ultimately have no bearing on the full year results. Our strong revenue performance was due to broad based net new business and base business growth across sectors and geographies throughout the organization. Our client led growth strategies consistently offer a differentiated guest experience while providing operational rigor, unparalleled supply chain capabilities and advanced technology solutions. Moving to the business segments, FSS U.S. organic revenue increased 12% to $3.4 billion and would have increased approximately 8% without the calendar shift benefit, which occurred primarily in education, with Collegiate Hospitality also experiencing growth in residential meal plans associated with higher student enrollment. Revenue growth in the second quarter for the US Was additionally driven by Sports and Entertainment, which had a strong opening day for Major League Baseball with increased fan attendance and record per capita spending. Sports and Entertainment also participated in several marquee events including the World Baseball Classic and the NCAA Basketball tournament. Workplace Experience sustained double digit growth as a result of significant new business contributions, exceptionally high retention rates and elevated catering demand. Refreshments expanded its client base, building incremental route density across several key geographic areas including Central New York, the Southeast, the Pacific Northwest while increasing the average size of new lands by 15% and healthcare completed the successful launch of Penn Medicine, which is now fully operational and as reviewed on the last earnings call, the team is set to mobilize RWJBarnabas Health this summer. During the quarter, FSSUS achieved several notable client wins including Suffolk University and the University of Wisconsin Oshkosh in Collegiate Hospitality, which will fully launch in the new academic year. Toyota and Workplace Experience, where we recently began operations at their North American headquarters, the Oklahoma Department of Corrections, an example of our expanding presence in state run correctional facilities and Stone Mountain in Destinations, the most visited attraction in Georgia, where we start offering food and beverage lodging, retail tours and camping next month ahead of the peak summer tourist season as hyperscale AI data center development accelerates and demand for support services grows. In tandem, we launched Aramark Nexus, a new platform delivering integrated hospitality and workforce support services in large scale, complex and often remote operating environments. Where we believe to have proven expertise where we believe we have proven expertise and an established competitive advantage. We've been selected by a top global hyperscaler to support thousands of workers in providing employee housing, dining and hospitality hubs with modern lifestyle amenities and entertainment, transportation to and from construction sites, and full housekeeping and guest services delivered through a unified management structure. Our engagement is underway and set to begin this fiscal year. We expect this new suite of services to generate margins above the company average and achieve attractive investment returns. The significant growth opportunity currently is not reflected in our fiscal 26 financial outlook, but we will provide updates as we launch, grow and Scale the business As I mentioned earlier, we see substantial growth potential in hyperscale data and operations centers. The international segment achieved another quarter of consistent compounded growth with organic revenue increasing 13% to $1.4 billion inclusive of an estimated 1% benefit from the calendar shift. This exceptional revenue performance was broad based across every region attributed to double digit growth in Europe and Canada and high single digit growth in emerging markets. Business momentum was led by sports and entertainment, education, extractive services and business and industry, highlighting the depth of our in country expertise and strong cross border collaboration. All countries within our international portfolio are driving favorable net new business underpinned by an extensive sales pipeline. Second quarter new client awards ranged from an increased presence in festivals such as Rockwell Live in the uk, serving hundreds of thousands of visitors to the new T Mobile arena in the Czech Republic, scheduled to host its first event later this fall, and Tsinghua Hospital in China, a leading institution in clinical care medical education. Now to global supply chain. We continue to see rapid GPO expansion in multiple categories including sizable growth in golf and spa destinations within the US and internationally. Across the hospitality industry, inflation continues to track in line with our expectations throughout all regions. Aramark remains resilient amid geopolitical uncertainty, including the recent volatility occurring in the energy markets. The significant scale of our food service agreements provides efficient cost flexibility and enables us to remain proactive in managing strategic pricing and sourcing actions. Bottom Line we believe the organization is well equipped to navigate a broader macro backdrop. Before handing the call over to Jim, I want to reinforce the message we've been sharing with our teams across the country. We are executing our growth strategies with focus and discipline. Our ambitions for Aramark have never been higher and we are consistently setting new milestones. We're proud of the performance the teams have delivered and we remain fully committed to working together to build on this continued momentum and drive the business to even greater levels of success. Jim, I'll now turn the call over to you.
Jim Tarrangelo (Chief Financial Officer)
Thanks John and good morning everyone. We've made great progress across our key operating Metrics during the first half of fiscal 26, delivering strong financial performance. Our results in the second quarter reflected continued momentum in driving both top and bottom line results from strategies that have not only advanced the current state of the business, but we believe have also positioned us for sustained success. As we move into the second half of fiscal 26, we remain focused on disciplined execution of our growth efforts across the organization with a mindset of creating significant shareholder value. As John reviewed, we reported organic revenue growth in the second quarter of more than 12% versus the prior year period led by broad based net new business, higher like for like volumes and the favorable impact of the calendar shift which was approximately 3%. For the first half of fiscal 26, organic revenue growth was 8.5% with the calendar shift having no effect on the first half growth results. Regarding second quarter profit growth, operating income was 220 million up 26% versus the prior year. Adjusted operating income was 258 million, up 24% on a constant currency basis and Ali margins increased 50 basis points. The strong profit growth was a result of higher revenue productivity gains in food and labor supported by our technology capabilities, supply chain efficiencies and disciplined above unit cost management. The calendar shift also benefited AOI in the quarter by an estimated 25 million or 12%. Turning to the business segments, the US reported AOI growth of 27% compared to the same period last year. Growth was driven by increased revenue levels, technology enabled productivity gains in food and labor, supply chain efficiencies and disciplined above unit cost management. The calendar shift also benefited AOI growth by approximately 13%. Once again, the international segment had double digit AOI growth in the quarter, increasing 12% on a constant currency basis. This performance reflected higher base business volume, new business maturity and strengthened supply chain economics which more than offset some in country investments during the quarter to support significant growth. Turning to the remainder of the income statement, interest expense was 82 million in the quarter and the adjusted tax rate was 25.3%. Our quarterly performance resulted in GAAP EPS of $0.38 and adjusted EPS of $0.49, an increase of 40% compared to the prior year period. On a constant currency basis, the calendar shift benefited adjusted EPS growth in the quarter by approximately 20%. With respect to cash flow, we generated a significant cash inflow in the quarter from the contribution of higher earnings and favorable working capital. Net cash provided by operating activities in the second quarter was 400 million, an increase of 144 million or 56% compared to the prior year period and Free cash flow was 305 million, which improved by 164 million, which were 116% year over year. The strong free cash flow in the quarter enabled us to proactively repay $55 million of term loans. We also continued to repurchase shares under our current share repurchase program. To date we have repurchased approximately $194 million of Aramark stock. We remain disciplined in our capital allocation priorities as we are committed to to reaching a leverage ratio below three times by the end of the fiscal year. At quarter end, the company had more than 1.4 billion in cash availability and finally, let me wrap up with our performance expectations for the remainder of fiscal 26. We are extremely pleased with our year to date financial results and the positive trends occurring in the business, including a strong revenue trajectory from the net new business and continued base business expansion. As a result, we have updated our fiscal 26 outlook for organic revenue growth to the high end of our 7% to 9% range and we are reaffirming our expectations for AOI growth to be up 12% to 17% and adjusted EPS growth between 20% and 25%. We continue to expect accelerated AOI and margin expansion this fiscal year consistent with our expectations, capitalizing on the company's multiple operating levers while mobilizing a record level of new business openings. As John mentioned, the outlook for fiscal 26 does not currently reflect the multi year engagement with a top global hyperscaler that is currently underway. In summary, we are seeing strong momentum throughout the company as our teams continue to execute our growth strategies, led by extensive new business wins and high client retention rates. We also believe our entry into the hyperscale data center market further advances the company's growth opportunities. These positive trends in the business are translating into strong revenue and profitability, positioning the company well for continued success this year. We are confident in our ability to build on this momentum into fiscal 27. As John always says, we wouldn't be where we are today without our teams around the world and we thank them for all their efforts. We could not be more excited about the future. Thank you everyone. Operator we will now open the call for questions.
Operator
Thank you. We'll now begin the question and answer session. If you have a question, please press star then 11 on your touch tone phone. If you're using a speakerphone, you may need to pick up a handset before pressing the numbers. In order to accommodate participants in the question queue, please limit yourself to one question one Follow up To remove yourself from the queue, please press Star one one Again. We'll pause for a moment while we compile our Q and A roster. Our first question comes from Jafar Mastari with BNP Paribas. Your line is open
Jafar Mastari (Equity Analyst at BNP Paribas)
Hi, good morning. I had two questions. Please. Firstly, on your 1 billion of signings to date, we don't have the exact context for where you were at the same stage last year, but it certainly looks strong. You ended the year at 1.6 billion last year. If you look at the fabric of what you counted in this 1 billion, would you say that the timeline over which these signings are expected to ramp up is fully comparable to historical signings? It's a big number. So just wondering if to some extent there are some longer projects in there, things that would ramp up over 27, 28 for example, and then on your guidance, updates, small upgrades to where you see organic growth, no change to where you see adjusted EBITS and EPS for the full year. It's a very, very small delta, but Effectively you're implying 5 basis points lower margins if my math is correct. Am I splitting here or are you accounting for contract startups or just some caution? Because another year of record signings would mean another year of high incentive compensation for sales teams eventually.
Jim Tarrangelo (Chief Financial Officer)
Yeah, John, I can go ahead, John. Okay, I'll take it. Yeah, so I'll start John, then you can chime in. So yeah, in terms of the pacing Jafar, we are certainly ahead of schedule with the 1 billion of signings. As you noted last year the total was 1.6. So we are ahead of where we expected to be at this point. And with those signings, we signed a number of large accounts this year and opening RWJBarnabas and Stone Mountain, Oklahoma Department of Corrections. So very large accounts which are opening in year. So one of the good things is right we signed a lot of large accounts. We're opening many of those accounts in the second half of the year. And that leads to your second question on margin. So thanks for the success we've seen in selling. We're opening a record level of new business in year and we're still covering those startup costs and expect to achieve the 30 to 40 basis points of margin improvement that we've been generating. Those margins will scale up as they normally do and we'll continue to provide tailwinds into fiscal 27.
John Zilmer (Chief Executive Officer)
Yeah, and I would just add that I think the scale up of that new business obviously is very important to us. We haven't included in the projection in the second half of the year any revenues and or profitability from the hyperscaler ramp up which will take place beginning very soon. And so there will be some impact from that that hasn't been projected into the forecast. So I think all in all, we do expect continued margin acceleration through the balance of the year, and we think it was prudent to go ahead and be slightly conservative. But we have very strong expectations for the business going forward. Thank you.
Operator
Our next question comes from Ian Defina with Oppenheimer. Your line is open.
Ian Defina (Equity Analyst at Oppenheimer)
Hi. Great. Thank you very much. You know, really nice quarter here. Seems like these are some of the best results. You know, really trajectory of the business that delivered. Since I've effectively been covering the stock. It's been a while here. It seems like you're firing on all cylinders. Is that kind of the right and accurate read? Maybe talk about the sustainability of kind of what we're seeing now into future quarters. Thanks.
John Zilmer (Chief Executive Officer)
Yeah, thank you very much, Ian. Absolutely. We believe in the sustainability of the business. You know, we think we have a very strong leadership team delivering across the board in all geographies and just see continued momentum throughout the business. You know, we have worked very hard to build the organization. It's delivering on those commitments and on those results. And so, yes, I do believe we're operating on all cylinders. That does not mean that we don't have opportunities for continued improvement and continued growth in the organization. I think the company is very disciplined and focused on that, and we are proud of where we are, but want to get better every day. I do think that this quarter was very important to us. We believed in the growth narrative that we had been describing over the last several quarters. And what you're seeing is it coming to fruition and us delivering on those expectations. So we're confident in our ability to maintain this trajectory and to continue into 27 and beyond.
Ian Defina (Equity Analyst at Oppenheimer)
Okay, thank you. And then if I could just drill down on Nexus a little bit. You know, I know you have some agreements and confidentiality stuff going on here, but can you maybe give us an idea of, you know, maybe a little bit more the economics here as far as, you know, will you be doing or overseeing any of the construction? I'm just trying to think about it from a capex perspective. And then also, can you talk about maybe your market position here, your competitive advantage, and maybe also what margins might look like in this business vis a vis or other businesses? I know there's a lot there, but any color you could give me would be helpful. Thanks.
John Zilmer (Chief Executive Officer)
Yeah, I'll start off and Jim can add to this as well. You know, first of all, yes, we are under confidentiality agreement with this customer, and so we can't disclose the terms of the agreement. I think what we've talked about is the fact that they'll be above company average margins and we expect very strong financial returns. I would characterize this as a capital light business for us. We are not investing in the construction process as partners in this engagement. And so that will limit our capital requirement for it. We won't be overseeing the actual construction, but we'll be overseeing all the activities that support the workforce doing the work. So it's very comprehensive and from hospitality, lodging, entertainment, food, support services, you name it, we'll be doing it. And it's a one stop solution for the company buying these services. That's what's attractive to them. This unique set of capabilities is what we deliver in the national parks, it's what we deliver in extractive services in the mines in Chile, in the remote camps in Canada. So it's something we're very good at and have strong management disciplines and capabilities around it. So as you know, there are hundreds of these kinds of projects under consideration in the US alone and many more globally. And so we see it as a, as a very significant addition to the total addressable market that is uniquely positioned against the capabilities that we have. So we like the growth trajectory coming from it. We're investing significant resources and talent in the execution of this. And that's also why this company selected us, because they saw the commitment we were willing to make to it right up front. So it's exciting and we'll be able to talk more and disclose more as the summer goes on. But I would say at the simplest or lowest possible level, it is going to be accretive to margins and going to be accretive to earnings significantly.
Ian Defina (Equity Analyst at Oppenheimer)
All right, great work. Thank you very much. Thank you.
Operator
Our next question comes from Andrew Steinerman with JPMorgan. Your line is open.
Andrew Steinerman (Equity Analyst at JPMorgan)
Hi there. I just want to go back to the quarter, the second fiscal quarter, organic revenue growth. Could you just give us a sense of quantity of how much net new and base growth contributed to the quarter and which drove the kind of upside to budgeted figures?
Jim Tarrangelo (Chief Financial Officer)
Sure. Good morning, Andrew. Yeah, for Q2 specifically, the contribution from new was about 5%. Base business was about 4%. That was comprised of 3% pricing and about 1% volume. So that totals to 9. And then as we mentioned, there's a 3% benefit from the 53rd week which gets you to the 12% year to date. I would say similar, more like 4.5% on the new business. I would say a combination of, in terms of exceeding expectations a little bit on the new, as you mentioned, opening more than we Expected in year and then good base business performance, particularly in sports. We talked about a great successful opening of the baseball season. The season did open a little bit earlier this year with a few more games in Q2 than Q3, but those are the main drivers. Okay, thank you.
Operator
Our next question comes from Tony Kaplan with Morgan Stanley. Your line is open.
Yehuda Silverman (Equity Analyst)
Hi, good morning. This is Yehuda Silverman on for Tony. Just wanted to focus on retention a little bit like 98% extremely high, following a similar path last year so far. Can you talk about what particularly is driving your customers to remain for longer? And are you seeing any difference in terms of contract duration or or cost, deal structure with new renewals? I'm sorry, you were breaking up a little bit on the second half of the question. Could you repeat that? Yeah, sorry, I'll repeat it. So retention 98% was very high following a similar path to last year. I was just curious if you could talk about what's driving customers to remain for longer and if you're seeing any difference in terms of contract duration or our cost or deal structure with these new contracts.
John Zilmer (Chief Executive Officer)
Yeah, first of all, I think it's performance related. We are retaining more business because our customers recognize the value that earmark brings to their operations. And that's always when you retain customers, it's generally because you're doing a good job. And so we are hyper focused on that discipline, on making sure that we're delivering on our customers expectations and that's leading to these higher retention levels that occurred both last year and are occurring this year. So we feel very good about that discipline. I would say no difference in terms of tenure of contracts. Those contracts that have expiration dates are coming up as they normally would. We continue to try to proactively retain that business and renew those contracts. But I would say in general the trends we're seeing in the retention rate are basically aligned to our improved performance overall and our continued discipline around customer relationship management. And it's really driving the results.
Yehuda Silverman (Equity Analyst)
Great, thank you. And just one quick follow up on facilities you've highlighted the commitment to sales opportunities within B and I in education. Can you talk about how these have gone so far and when we could expect this to meaningfully show. I'm sorry, I'm having trouble. I am remote unfortunately today. So the speakerphone that I'm on is not working very well. So could you repeat that? Yeah, sorry about that. Just highlighting facilities. I was curious if you could talk a little bit more about the commitment to sales opportunities within BI in education and how These have gone so far and what the expectations for this could be going forward.
John Zilmer (Chief Executive Officer)
Sure, absolutely. I apologize for my miss. There is a significant commitment to selling facility services in the B and I marketplace and in higher education. We continue to be very successful in that regard. Our bi sales for facilities are generally focused on large institutions and providing services to the food production industry and others. We are not doing facilities services, white collar building cleaning. This is not a janitorial company. This is a fully integrated suite of facility services that we bring to large customers. And we've had very good results across the board in all the verticals that we serve. So it's a business we're very committed to and we'll continue to invest in it. Thank you.
Operator
Our next question comes from Andrew Whitman with Baird. Your line is open.
Sandy
Yeah, excuse me. Thanks for taking my questions. I wanted to continue to go on more Nexus questions, I guess. But I guess just for clarification, did I hear you say that you believe that this contract could be the largest in the company? And are you saying that for this customer specifically or for this idea of these types of services to data centers? And just related to that, I'm curious as to now that you've got this contract, why you didn't put it in guidance yet, does it start timing? Is it something else? Those things would, I think, be helpful for us to understand. Thank you.
John Zilmer (Chief Executive Officer)
Yeah, good question, Sandy. Thank you. So this marketplace obviously is very, very large. And each of these data center locations represents potential value in the hundreds of millions of dollars over the life of the contract. And so the this first contract with this particular hyperscaler is initially for multiple locations and will scale up to being several hundred million dollars on an annualized basis. So yes, this particular contract will be the largest in the company's portfolio when it's fully ramped. The reason for really not including it yet is we're still understanding the ramp up period in terms of when employment starts in the location, when the housing begins. And so there's two different time frames, two different locations, and a couple of different entry points and start points. So, you know, we're making significant progress. The work is already beginning, the team's already engaged, but we're still working through the scale up, if you will, in terms of how rapidly we can begin to recognize revenues coming from the employment and the delivery of services to those customers. So that's really all there is. It's just a question of how fast does it scale up and when do we have definitive information that we can provide
Sandy
that's really helpful. I'm going to keep going on this one a little bit more. For all of our benefits, what is the duration of a typical site on one of these things? And maybe for context here, once the center is built, do you anticipate maintaining some level of what I'd call base revenue? Recognizing that I have to imagine that revenue is going to be down significantly if you're not having to transport a lot of people and house them and just be kind of normal day to day. But I was wondering, is there an opportunity there? Is that part of this. Is that material at all? Any of those thoughts would be helpful as well, I think.
John Zilmer (Chief Executive Officer)
Yeah, you bet. Well, obviously during the construction phase, that's when the real revenue production will take place. These are multiple year developments, if you will. The time frame for building these is variable, depending on the size and the complexity of the operation. So it's multiple years. It could be three to five, dependent upon the size and scale and the timing of construction. So they do have a shelf life, if you will. But our anticipation is that as we expand our share of this market and our capabilities in this market and our relationship with these customers is that we'll be moving from one location to the next as they begin to move on to their next opportunity and their next construction site. So we see it as kind of a rolling process here moving forward, starting with these first two and moving on to other opportunities as that process continues. There will be opportunities to serve the location for normal services, whether it be refreshment services or workplace experience, group or food service or the like on a continuing basis for a smaller number of employees. But the real revenue and profit opportunity is in the construction phase on these particular sites. We'll ramp these and then we'll rotate on to new opportunities. As I said, there are several hundred of these projects on the board, as you know, across the United States, I think some count as high as 700. So it remains to be seen how many actually get built. But in the meantime, there is a lot of opportunity for us to pursue and significant profitability for us to earn. Thank you very much.
Operator
Our next question comes from Faiza Alway with Deutsche Bank. Your line is open.
Faiza Alway (Equity Analyst at Deutsche Bank)
Yes, hi. Thank you. So following up around the same line of questioning, are you anticipating sort of just. You talked about the ramp up in revenues and cost. I'm curious, given that you talked about an asset light model, are you expecting costs to come before the revenues roll in and if you could talk about the timing of that, or is it going to be more of a one to one situation where you incur the costs when you start getting the revenues.
John Zilmer (Chief Executive Officer)
Yeah, I would say I'll let Jim talk a little bit about the accounting of it, but generally these contracts will be cost reimbursable and so it's the costs that we incur to start up. While there won't be any customers initially, we'll be ramping to serve those people either lodging and or working on site that will incur no operating costs in the early stages. So Jim, do you want to talk about the accounting of this?
Jim Tarrangelo (Chief Financial Officer)
Yeah, I'll keep it pretty high level again for competitive reasons. But yeah, our model does not entail investing significant capital for housing or lodging as part of our balance sheet per se. So with that it's not a situation where there's significant costs in advance of the revenues ramping up. So again the way we've structured this is more aligned with our costs will be ramp up in line with the revenues and services that we are providing. So it's a situation where there is not significant startup cost. It reaches the targeted margins very quickly and as John mentioned, those margins are above average for the company. It's a light capital, so low capital investment and generally the working capital is favorable as well.
Faiza Alway (Equity Analyst at Deutsche Bank)
Okay, wonderful. That's very helpful I guess. I'm curious, there are some companies out there that are, that seem to be in a similar line of business but are taking on sort of more CapEx and you know, more asset heavy approach. I'm curious, competitively, what are you hearing from your customers? Is there a reason for them to prefer companies that are willing to take on that capex investment or are they neutral and just give us some context around that piece?
John Zilmer (Chief Executive Officer)
Yeah, I would say first of all, I think that's a philosophical decision for the potential client to make and we would not necessarily be opposed to investing if the client desired it and we could earn appropriate returns attached to that investment. But it's not the way we've engaged to date and it's not anticipated that it would be a significant requirement going forward. These projects are so significant and require so much capital that this. And there's such a degree of uncertainty in terms of the ramp up schedules, construction schedules permitting, all those things that go into the development process that the capital investment is not a significant consideration for those clients. Their costs of capital are lower and frankly the investment that they're making is very significant. So this, the housing is, pardon the expression, but a drop in the bucket compared to the actual total cost of building a hyperscale data center. So I think we're positioned well and we believe that this is a significant opportunity that we can scale, that we've got these unique advantages and capabilities that we can bring to bear. We can offer a very, call it a one stop shop solution, reduce a lot of complexity in the process so that they're not having to deal with multiple subcontractors and the like. And I think they find that option attractive. So we're going to build it and we're very excited about it. Great. Thank you so much.
Operator
Our next question comes from Curtis Nagle with Bank of America. Your line is open.
Ryan Rivera (Equity Analyst)
Hi, good morning, this is Ryan Rivera on for Curtis Nagel. Can you touch on the sports event calendar for the remainder of FY26? Any upcoming events that can meaningfully impact revenue or profit? Or would you say that growth is more dependent on adding new stadiums and teams? And then finally, is the World cup still expected to be a neutral event for the company? Thank you.
John Zilmer (Chief Executive Officer)
Sure. Yeah, John, I can kick it off. So as I mentioned, the second quarter did benefit from MLB schedule starting early. We also had strong per caps and good performance with the opening of that baseball season. We did have the World baseball classic in Q2 as well. So I think that maybe contributed about 1% to the second quarter growth in terms of the outlook. In terms of FIFA, as we've mentioned, we see that relatively neutral versus the prior year as there'll be less conscious events as we roll out those games that there's 17, 17 games scheduled as part of FIFA operating across for Aramark Stadium.
Ryan Rivera (Equity Analyst)
And then if I can squeeze in another one, can you touch on the enhanced tech capabilities that are driving productivity? What are these key initiatives behind this? How are they tracking versus expectations? And what inning would you say that you're in on these productivity benefits? Thanks.
Jim Tarrangelo (Chief Financial Officer)
We've targeted our tech and our AI really at the most impactful areas for the organization and the performance. Right. So targeting food and labor in particular and price with respect to food, we've talked in the past about Culinary Copilot, a tool that optimizes our menu planning, factoring in contractual requirements, consumer preferences and the most optimal cost structure. Really I'd say going forward we're implementing a tool called Labor IQ which is an insights based dashboard and facilitates our general managers frontline to essentially plan and optimize labor better. As an example, it allows us to fill roles labor scheduling across Aramark employees and reduces reliance on agency labor. As this tool makes it easier to find Aramark employees to fill shifts, it helps our GMs to staff labor based on peak and non peak times. So it's a tool that's rolling out very rapidly across the US at this point we're seeing favorable trends in labor and favorable trends in labor productivity as we continue to roll this tool out.
Operator
Thank you. Our next question comes from Jasper Bibb with Truist Securities. Your line is open.
Jasper Bibb (Equity Analyst at Truist Securities)
Hey, good morning everyone. Maybe I'll follow up on Nexus too. I think you said the 100 million plus earlier was multiple projects. I just wanted to ask if we could break it down to a typical kind of data center construction project and how much revenue you can expect per location. I think some of these larger ones there might be like 1000 plus people on site building these things. So it sounds like a lot of opportunity there. Just any more detail on the scope of kind of a normal site and the drivers of the revenue opportunity there from all the services you're providing would be helpful, thank you.
John Zilmer (Chief Executive Officer)
Sure. You bet. Well, the size and scale can vary rather dramatically. Some locations with thousands of employees up to nine or 10,000. So yeah, they can vary significantly site to site. So there's no average data center site. And each of these contracts will look very different based on the size, scale, location and the degree of complexity. Is it a remote site? Is it an urban site? What kind of workforce needs to be brought to bear? So very difficult to give you an average. I would say the best data that we can give you is related to the two, to the sites that we have currently under agreement. And as I said, we see the revenues for those to be well over $100 million each annually and over the life of the contract, several hundred million dollars in terms of size and scale. So again, I apologize for not being able to be more definitive. As I said, we're under an NDA. We have two issues here. First of all, we have a customer who we are absolutely committed to doing the right thing with respect to their confidentiality. And we also have a competitive environment where we want to maintain the ability to go ahead and have first mover advantage, to have competitive advantage. And so we're being very careful not to disclose a number of things from a competitive point perspective. But as the business ramps and it becomes the results become clear in our results, it will be much more transparent for our investors and clients to see. But this first opportunity, many hundreds of millions of dollars of opportunity over the course of this particular contract,
Jasper Bibb (Equity Analyst at Truist Securities)
that's helpful. Maybe I wanted to pivot to higher education. I think in the past month or so you Picked up a new contract at Texas State, also impacted by some restructuring at the University of Kentucky, I guess. How did you do from a net new perspective so far in the selling season? I think you're not all the way through that. So there are potentially some more opportunities that could come through for fall 2026 on a new business front.
John Zilmer (Chief Executive Officer)
Yeah, I would say we're positioned again for another record net new performance in the aggregate for the company and in their respective businesses. Very positive results. As you said. Texas State was also an award that we and University of Kentucky is a disappointment. But I will say this, that we saw the opportunity to rebid Kentucky as an opportunity for us to improve the overall financial returns for that contract, which frankly has been the worst performing contract we've had since it was sold. So we saw the opportunity to potentially grow the relationship by taking on either healthcare facilities and keeping the current agreement for higher education. But failing that, we saw the opportunity to improve returns of the company and to redeploy the capital to higher return opportunities. And that's precisely what happened. We never like to lose. But this is one where I feel like ultimately the financial returns for the company are better as a result of not moving forward in that relationship, having to commit significantly greater sums of capital and operating it on very thin margins. So on a total basis, net new again, we've had extraordinary results year to date and expect to achieve another record net new performance this year. Very helpful. Thank you for taking the questions.
Operator
Our next question comes from Josh Zhang with ubs. Your line is open.
Josh Zhang (Equity Analyst)
Hi, good morning, John. Jim, thanks for taking the questions. Maybe a broader question on kind of in customer inquiry levels on some of these new businesses that you have won in terms of Nexus but also in healthcare, are you seeing similar types of customers inquiring about your services in these types of offerings since you have announced them, how have those been trending?
John Zilmer (Chief Executive Officer)
Yeah, we see momentum. Yes. The short answer is yes, we see obviously momentum in the healthcare space, particularly with the successful opening and scaling up of Penn as well as the anticipated opening of RWJ Barnabas. So we do have significant, significant momentum in the healthcare space and we're very pleased with that. And yes, the announcement of Nexus and its and the award of the initial contract has opened the door to a number of other opportunities that we're currently engaged in and evaluating, none of which I'm prepared to disclose right now.
Josh Zhang (Equity Analyst)
Sure, sure, that sounds great. And then on the, I think around now is when you start to have pricing discussions with customers that reset annually. So could you just talk about posture and what might be a reasonable outcome in terms of those pricing discussions?
Jim Tarrangelo (Chief Financial Officer)
Jim, do you want to go ahead and take that? Sure, yeah. I'll start with inflation. We're seeing total inflation come in in line with our expectations at about 3.5% or so. And as we've talked about, we don't price for profit. We essentially put price to mitigate inflation. And so the discussions we're having are in that range of 3.5 to 4% on the contractual base portion of the business. And as you know, about two thirds of the business as we refer to as dynamic pricing that is sort of more rapidly adjusted to the inflation expectations. But inflation is coming in line with expectations. We have tools at our disposal to counter inflation should it escalate in the second half of the year.
Josh Zhang (Equity Analyst)
Great. Thank you both for the color and congratulations on a good quarter.
Operator
Thank you. Thank you. Our next question comes from Carl Green with RBC Capital Markets. Your line is open.
Carl Green (Equity Analyst at RBC Capital Markets)
Yeah, thanks very much. Good morning to you both. Just a couple of questions on US organic growth. Firstly just in sports and entertainment, the higher per cap spending. I just wondered if you could indicate if you're seeing any limits to how high you can push that in terms of price elasticity or is it still kind of powering along at levels you've seen over the last 12 to 18 months? And then on BNI within that segment in the US clearly new business and very. You describe it as exceptionally high client retention rates are doing the heaviest of lifting there for double digit growth. But could you just talk a little bit more about how like, for like volumes are trending there just in terms of higher participation rates, your expanded formats, et cetera. Just to give us a sense as to how robust that like to like volume position is, please. Thank you.
Jim Tarrangelo (Chief Financial Officer)
Yeah, I'll kick it off on sports and entertainment. A good quarter in sports, sports, leisure and corrections growing at about 7% underlying. A really great start to the MLB. I'd say base business growth and volumes more or less in line with what I mentioned earlier. 3 to 4% for the company is what we're seeing in sports. We obviously have to be sensitive to pricing there and making sure we're providing experience and economics that are good with the team and appropriate and so forth. Within BNI again we've grew over 20% year to date. Really strong outlook. The new business at the end of the day I think is the main driver there. Along with the exceptional retention levels, we had a nice performance with premium catering in the quarter benefiting from the partnership we did with Daniel Boulud. And then refreshment services and micro markets also falls into the B and I segment as well. And that business is growing at a similar level. We see nice geographic expansion in the west coast and in the New York area in particular and continue to enhance and increase the route density of those that business as well as some of the drivers with a strong performance there. Okay, thank you.
Operator
Our next question comes from Neil Tyler with Rothschild Co. In Redburn. Your line is open. Yeah, thanks.
Neil Tyler
Good morning. Just one left for me really. I wanted to go back to the topic of inflation and ask you about sort of learnings that you take from perhaps 20, 22, 23 in terms of identifying areas in the customer suite of friction that might create opportunities and whether
Jim Tarrangelo (Chief Financial Officer)
there's how you expect those to materialize manifest over the next year or two. Yeah, so we have a number of levers at our disposal. As I mentioned, we generally try to have pricing in line with inflation on that contractual based portion of the business where the pricing is locked in a little bit longer. We have a number of operating levers we can substitute our menu. The tool I just mentioned a little bit earlier with LaborIQ allows us to flex and optimize our staffing levels. So those are some of the other tools we have at our disposal to counter inflation. It's a very flexible business model. I think the organization is well equipped based on the experience we had a few years ago. It's a topic of all our operating reviews. Our supply chain team does a nice job first of all, mitigating inflation. We tend to have longer term contracts given our scale. And as part of all the business reviews that we have, we're always talking about the inflation outlook and what are we doing to mitigate that impact.
Neil Tyler
Sorry John, I was just going to say. Yeah. In terms of where the new growth opportunities from first time outsourcing might be shaken out by a sort of higher inflation environment.
John Zilmer (Chief Executive Officer)
Yeah, I think that's a very good point. And I think it's not just the inflation environment, it's the total macro environment with respect to things. That's why you're seeing higher levels of outsourcing in health care. Because not only are there challenged with overall inflation in the in that backdrop, but they're also significantly under pressure from reduced reimbursements from the governments where we operate. And so there's an overall cost pressure that's occurring that's been really building for a number of years. And so more and more institutions have recognized that they are in fact disadvantaged. And so that's one of the reasons you're seeing significant outsourcing from people like Penn and our W.J. barnabas to systemize the outsourcing approach, to take advantage of that ability to reduce cost in the long run, not only from a product cost perspective, but from an operations, administration and efficiency perspective as well. So integrating all those services, that helps to really manage the total, total employment level and the ability to deliver the right outcomes for patients. So there is significant opportunity there. And we see that manifesting itself in particular in healthcare, but we see that in other segments as well.
Neil Tyler
Okay, yeah, great, thanks. That makes total sense.
Operator
Our next question comes from A.J. nandal with Citi. Your line is open.
Ajay
Good morning. This is Ajay for Leo. One question for me, please. Compass Group at its earnings call alluded to adverse weather conditions impacting their business to some extent in the US during the months of February, March. Did you see any such impact on your business? And if yes, can you quantify that? Thank you. We had a little trouble hearing. Could you just repeat that question, please? Yeah, sure. Just wanted to check that. Compass Group at its call alluded to adverse weather conditions impacting their business development during the months of February, March. Yes, got it. Okay. Did you see any such impact?
Jim Tarrangelo (Chief Financial Officer)
Sure. So we did have an unusual amount of snow and ice, particularly in the northeast, a little bit of the south on the quarter, which did have an impact on our higher ED and K12 business. I'd say maybe 15 to 20 million of revenue and a few million of AOI. Despite the weather resurrects, we still achieve the targets that we had communicated. So should that reverse in this quirk quarter. Yeah, that was in the second quarter.
Ajay
That doesn't come back. Yeah, that would be something. We're lapped next year. Thank you.
Operator
Our last question comes from Stephanie Moore with Jeffreys. Your line is open.
Stephanie Moore (Equity Analyst at Jeffreys)
Great. Thank you so much. I wanted to touch a little bit on what you might be seeing from just a base standpoint and general customer health. Clearly it's not embedded in your results at all. But I think there's some maybe questioning or skepticism out there about the overall health of the consumer just given higher fuel prices and the like. So just curious and you know, maybe the aspects of your business where you would be more sensitive to discretionary income by the consumer, if you've seen anything in the last couple months that could suggest any kind of pulling back of activity, that would be helpful. Thanks.
John Zilmer (Chief Executive Officer)
Yeah, happy to take that. As a matter of fact, we are still Seeing strong consumer demand in those consumer sensitive businesses that we operate. When you think about us, think about sports and entertainment. That's clearly an area where there's some customer sensitivity or the potential for it. We're seeing very strong results both in both in per capita spending as well as in attendance. We're seeing strong reservation capacity in the national parks, significant consumer. Those businesses are generally significantly impacted by consumer behavior. But strong reservations and the outlook very good for those businesses as well. So the short answer is not really seeing a consumer impacted yet in those businesses. And so we see the consumer as being very resilient at this point and not seeing it impact our business to date. And you know, we do believe that this business has been historically very resilient in times of higher inflation. And generally we're serving people where they work, where they are getting medical care, where they're studying. People are going to continue to consume in those environments. And we're not seeing a significant impact as a result of a change in the consumers attitudes at this stage.
Stephanie Moore (Equity Analyst at Jeffreys)
Understood, thank you. And then just a follow up, you touched a little bit about this. But clearly really strong new wins and performance. Can you kind of maybe speak to the competitive environment, how you would frame some of your increased wins from your own obviously actions over the last several years which have been very favorable, but at the same time maybe due to any kind of competitive changes as well, where you're able to kind of capture some incremental share. So any way to frame that would be helpful. Thanks. I would say we are continuing to enjoy significant success. In all the markets where we operate both domestically and internationally and across all the different businesses. And I think it's as a result of the investment that we've continued to make in the growth algorithm, if you will, and the growth initiatives inside the organization. And the competitive environment has always been robust. We've always had the competitors that are very interested in growth as well, but we've always been able to maintain a solid growth rate. And I think it's a result of our increased investment in growth, our performance throughout the services that we provide to our customers and the unique proposals that we develop for those prospective customers and the quality of the earning of the capabilities that we bring to bear. So this has always been a competitive marketplace. I think we are well positioned to compete in it. We're seeing enhanced throughput as a result of first time outsourcing. It is a significant proportion of our new wins. And we're also still maintaining the competitive dynamic against our large competitors as well. As the regional competitors. So we're being very successful, we're being very diligent and we're being very focused on growth. And right now we continue to win disproportionate numbers of these opportunities. So we're hyper focused on it and we continue to enjoy success.
Operator
Absolutely. Thank you, everybody. I'm not showing any further questions while I turn the call back over to Mr. Zilmer for any further remarks.
John Zilmer (Chief Executive Officer)
Perfect. Thank you very much. Again, thank you all for your support of the company and participating this morning. We are extraordinarily excited about the results that we've delivered and about the prospects for the balance of fiscal 26 and 27. We're executing our growth strategies with focus and discipline. As I said earlier, our ambitions for Aramark have never been higher and we are consistently setting new milestones. We expect to continue to do that, and we believe that we have all the capabilities and the best team in the industry, and we're going to make that happen. So thank you very much.
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