Stephanie Moore: Okay. And then, lastly for me, and I apologize if I missed it, but did you touch on the P&L transition and the back to P&L and cost plus and is where you are in that transition for the end of the last quarter? Thank you.
John Zillmer: Yes. I would say it’s really unchanged. There is no significant pressure from client organizations to transition back to P&L. And I would say it’s relatively consistent with prior quarters. We continue to be predominantly management fee in the B&I sector except in the very large operations that have P&L capability. If you continue to have companies struggling with their return-to-work strategies, the three-day work week, four-day work week. And so there has not been significant pressure to transition back to P&L. And frankly, in this inflationary environment, when you’ve got both food cost inflation and labor rate inflation that actually works to our advantage to continue to stay on a management fee or cost plus basis, as we grapple with the challenges in those segments, particularly if you’re not fully up to speed or fully back operational in a particular customer or client location.
Operator: Thank you. Our next question comes from Jaafar Mestari with Exane BNP Paribas. Your line is now open.
Jaafar Mestari: Hi, good morning, everyone. And just one question really, which is trying to put together all the comments you’ve made on inflation trends through the year, new business trends through the year and the recovery in like-for-like volumes, which, obviously, towards the end of the year, you won’t have much of that left, inflation will be normalized. And so now that the year has really started and you had this first Q1 and you’re able to reiterate the full-year guidance for 11% to 13% organic growth. And I’m really curious what sort of Q4 performance you’re seeing once most of these factors normalize or slowdown is going to be a very, very interesting data point that exit rate of organic growth is almost test to what you can do medium-term?
So yes, I guess my question is, if you’ve — talk a little bit more about the quarterly sequencing, and do we think the sequence of organic growth is going to be 18%, 14%, 10%, 6% or a bit stronger than that the exit rate? Or on the contrary, a lot more content loaded in that with the volume recovery and the inflation that’s above trend in H1?
Tom Ondrof: Well, yes, I think directionally, you’re correct. We said at Analyst Day, our medium-term algorithm is 5% to 7% top-line growth, that’s what we’d expect from the business on an ongoing basis, once the COVID recovery and the base volume recoveries subsided and that also included 1% to 2% pricing. So if you strip it all the way back to that that net growth number, we would continue to expect to see that anchor that 4% — sort of that 5% — 4% to 5% as we exit the year and going into 2024 and 2025, the variables are what’s pricing. And is there any remaining COVID recoveries for what that’s worth as we continue to get further away from that. So something that’s more with what we said at Analyst Day, the four to five days plus pricing is probably roughly going to be what the Q4 year-end exit rate going into 2024, 2025.
Jaafar Mestari: All right. Super. And then are there any specific breakpoints in the year that you flagged? Or is the volume recovery and inflation subsiding? Is that going to be very progressive throughout the year?
John Zillmer: Yes. I would say it’s very hard to predict exactly when inflation will abate. We are continuing to move price to offset the cost of food and labor rates throughout the year. So I would expect pricing to remain relatively high going into the close of the year and call it, the second, third and fourth quarters. So unless we see something drastically change in terms of the overall environment, I would expect pricing to continue to be at a relatively high-level compared to prior years, but we do anticipate that at some point it will transition and normalize. So what we’re really focused on is selling the net new business and growing accounts and the core growth of the company and just using the inflation impact or using pricing to offset the impact of inflation and to generally grow the company through those new account acquisition opportunities.
So hard to say exactly when those breakpoints will be. But we’re focused on delivering net new and ultimately growing the company in that way.
Tom Ondrof: I’d just add one more comment that it’s coming off of 1% to 2% growth for a number of years pre-COVID to then exit this as we get into 2024, 2025 and beyond at mid-single-digits. It’s maybe easy to lose perspective on how good an improvement, how fundamentally different that is pre-COVID to sort of going into next year and beyond from 1% to 2% to mid-single-digits or upper single digits. So we’re proud of what the business has accomplished and changed throughout the last few years to be able to get us to that incrementally new level of growth as we go forward.
Operator: Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is now open.
Ronan Kennedy: Hi, good morning. It’s Ronan Kennedy on for Manav. Thank you for taking my questions. May I ask, can you just recap the sources of new wins and also your current assessment and outlook for competitive dynamics within the industry?
John Zillmer: Well, the sources — we haven’t really disclosed the sources of new wins. We typically — if you look at the historic trends, we typically sell about 35% of self-op conversions, about 35% from our core competitors, and then the balance from small to regional competitors. So I think that’s very consistent with the historical trends, maybe a little bit higher rate on the self-op conversions over the last couple of years, but — and we expect that, that trend may continue throughout this year. So that’s our anticipated source. And I’m sorry, the second part of your question was?
Ronan Kennedy: Competitive dynamics?
John Zillmer: Competitive dynamics. I think nothing has really changed. It’s a very competitive marketplace, and we’re all competing aggressively for new business, but our win rates are going up. We’ve achieved record new account wins in the last two years, and we expect to achieve, again, another great result this year, and we’re very focused on that net new perspective, if you will, in growing the business dramatically. And achieving what Tom just highlighted in that mid-single-digit net growth number is truly an extraordinary result that we’ve been able to achieve the last couple of years and have expectations for continuing that trend going forward. Operator, are there any further questions?
Operator: Our last question comes from Ashish Sabadra with RBC Capital Markets. Your line is now open.
Ashish Sabadra: Thanks for taking my question. I wanted to drill down further on the prior question on the Uniform business. And then particularly, on the pricing, there was a particular callout on pricing, I was just wondering if you could talk about how the pricing realization is trending compared to prior year — pre-pandemic levels? And also a question on the growth and demand environment there, some concerns around unemployment or employment slowing down could be on the growth in that business. I was just wondering if you could help respond to that and talk about the strength there from ancillary services. Thanks.
