Jim Tarangelo: Sure. So like I said, we had very strong performance in Q1 and Q2 with 65 basis points of margin improvement. In terms of the outlook, we remain very optimistic. And I say you’re expecting to be toward the higher end of that range. A couple of factors in terms of we’re lapping some significant pricing actions in the prior year, so we’ll see how inflation plays out. And the timing of new obviously could have an impact as well. But like I said, we’re really optimistic with the outlook and we’ll continue to keep you posted on that front.
John Zillmer: Yes, I would just add commentary. As we indicated, the top end of the range of AOI and EPS, we’re very confident in our ability to deliver on that. We’re also somewhat subject to the — to what happens in the inflation environment from that — in that respect. And so we believe that this is a good environment that we have inflation that ultimately may moderate further. And if it does, that will be a continuing tailwind into the third and fourth quarter and as we experience those changes, we’ll continue to update that AOI guidance. Obviously, we’re working to get that number as high as we can. We’re all incented for the same thing. We all want to drive that — the performance to the organization, and we’ll update further as we have more data with respect to what second half inflation might look like.
Leo Carrington: Okay, thank you. If I might just follow-up on that one. If you could help on within the margin expansion in Q2, to what extent the pricing has been driving the margin expansion, i.e. that the pricing has now caught up to the incurred cost inflation?
Jim Tarangelo: Yes. Again the underlying levers, right, which excludes the pricing component was about 50 basis points. So the delta between 68 basis points and 50 basis points. So 15 basis points to 18 basis points of margin improvement was a result of the pricing and inflation moderating.
Leo Carrington: Okay, very clear. Thank you very much.
Operator: Our next question comes from Ashish Sabadra with RBC. Your line is open.
Ashish Sabadra: Thanks for taking my question. Solid progress on the margin front. I was wondering if you could highlight some of the efforts in place to continue to drive more — better margin expansion particularly on the supply chain efficiency side as well as the progress on the cost takeout front. Thanks.
John Zillmer: Certainly, on the supply chain side, we continue to work very aggressively to pursue as we build the business and grow the organization, we continue to use that leverage to go ahead and negotiate new and better and more attractive deals with our suppliers and the manufacturer partners that we have around the world. And we’ve been able to do just that. We’re seeing significant improvement year over year in supply chain profitability that contributes to the overall profitability of the enterprise. So very pleased with that progress. We’re also working very aggressively to build our international scale in terms of global supply chain and working with other partners to go ahead and build that scale which gives us additional opportunity to impact the business both domestically and internationally.
So very, very focused on supply chain growth. And we think it will be a good — big contributor to margin expansion over time. That’s one of the key levers for the company that we’ve identified in our business case and in our Investor Day, if you will, that that will be a solid contributor going forward and it has proven to be and will continue to be. And I’m sorry, I didn’t get the second half of your question.
Jim Tarangelo: Drivers. Yes, Ashish. Some of the other drivers there of margin expansion the middle of the P&L. We really like what we saw with the operating environment more normalized. Our operators are doing a great job optimizing food and labor costs specifically reducing overtime and agency labor, again, as an environment more normalizes. And then secondly, on our SG&A, the organization is really fit for purpose. With the spin, you can see SG&A actually and corporate costs down a little bit versus the prior year. So we’re able to take a lot more growth on really without adding much to the top line cost.
Ashish Sabadra: That’s great color. Thank you very much.
Operator: Our next question comes from Stephanie Moore with Jefferies. Your line is open.
Stephanie Moore: Hi. Good morning. Thank you.
John Zillmer: Good morning.
Stephanie Moore: I was hoping you could talk a little — good morning. I was hoping you could talk a little bit about the strength you’re seeing in the base business. What’s driving a lot of this growth in this environment? Thanks.
John Zillmer: Yes, we’re seeing overall participation rates and strong customer acceptance in a number of businesses. Higher education, we’re seeing very strong performance in terms of the customer satisfaction scores and the overall participation on university campuses. We’re seeing upperclassmen select board plans on a more frequent basis, which is a key driver of growth opportunity. We’re seeing very strong base business growth in the B&I segment both domestically and internationally, as return to work has normalized and businesses are focused on growing again. And we’re seeing very strong new business wins in B&I as well contributing to that. So overall, we’re seeing a very healthy environment for all the businesses we operate in and we’re very pleased overall with the results in both the operating environment, their cost containment, the customer counts, overall participation rates, all very supportive of just that strong base business growth.
Stephanie Moore: Great. And that’s helpful. And just as a follow-up, could you remind us for which retention rates are trending at the moment? Thanks.
John Zillmer: Yes right now we’re — we expect to achieve 96% retention, which is our historical standard and we are on track to achieve that objective this year. So feel very good about continued high retention rates across the enterprise.
Operator: Thank you. Our next question comes from Jasper Bibb with Truist Securities. Your line is open.
Jasper Bibb: Hey, good morning. I was hoping you could give a bit more color on the GPO and supply chain efficiencies. I guess, how are you thinking about the opportunity to keep growing spend under management over the next few years and what that could drive in terms of margin leverage?
John Zillmer: Well very specifically, we believe that the supply chain GPO opportunity is very significant. We continue to look at both the organic growth of that through the addition of new business as well as the potential M&A activity in the GPO sector both domestically and internationally looking at ways to continue to build scale. But our primary growth vehicle for the GPO will be the organic growth of selling new business, adding new accounts and adding that spend to our existing $19 billion worth of spend that has double benefits. We earn both the income from the GPO and we are able to negotiate better deals that impact our core business as a result of that increased volume. So it is a key factor for the long term margin expansion of the enterprise.
And as I said, we are working very aggressively to continue to build that business both domestically and internationally and working with our existing partners to find ways to serve them in other parts of the world that opens up a whole new range of opportunities for us.
Jasper Bibb: Thanks. And then curious if you could provide any update on Salesforce productivity. It seems like you’ve gotten good leverage there on the investments you made a few years ago, but any update on where that stands today would be helpful.
John Zillmer: Yes, I would say we’re very, very pleased with overall Salesforce productivity that as we work through the operating review discipline we have on a monthly basis with each of the businesses, we sit down and review with the Presidents of those businesses and with the country Presidents the sales results literally every 30 days. And so we’ve seen — we see the evidence of that productivity on a continuing basis. So very pleased with the results. And frankly, we feel like we’ve got a very productive sales organization. We are fully staffed and feel comfortable with the level of resources that we have positioned against the growth opportunities. And we’re always looking for new and different verticals to add to the capabilities of the company to go ahead and expand this — the universe of opportunities for that sales group to pursue.
So Merlin was a great example of that. That was a vertical which had — was 100% self-op in the past. It was a great business opportunity and we continue to look for new verticals that we can add to the portfolio.
Jasper Bibb: That’s helpful. Thanks for taking the questions.
Operator: Our last question comes from Josh Chan with UBS. Your line is open.
Josh Chan: Hi, good morning. Thanks for taking my questions. I think you mentioned that the underlying margin improvement was 50 basis points this quarter. I think it was the same last quarter. So could you just remind us what’s implied in your guidance in terms of underlying margin improvement for the year?
