Cintas Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: George Tong - The Goldman Sachs Group, Inc. - Analyst : Hi, thanks. Good morning. Can you talk a little bit about the overall selling environment and what you're seeing any changes in customer purchasing behaviours in response to the overall macro environment in evolving macro uncertainty.

Question: George Tong - The Goldman Sachs Group, Inc. - Analyst : Got it. And you continue to highlight health care, hospitality, education, and government as key focus for the goals for the company. Can you talk a little bit more about traction you're seeing in those verticals and how growth and performance here comparing versus the broader company?

Question: Luke McFadden - William Blair & Company - Analyst : Tim, this is Luke McFadden on for Tim Mulrooney. Thanks for taking our questions today. I might have missed it in your prepared remarks, but could you provide the breakdown in new sales between market share wins and conversion of no programmers for the quarter?

Question: Luke McFadden - William Blair & Company - Analyst : Understood. Really helpful. And then kind of just sticking on that topic with my follow-up. It sounds like that no programmer penetration continues to be an area of strength in the business. Was hoping you could offer maybe some insights into the typical profile of these recent no programmer conversions or the majority of these recent wins of a particular business size and the concentrated in any specific end market or the relatively broad-based?

Question: Andrew Steinerman - JPMorgan Chase & Co. - Analyst : Hi, this is Andrew. If I could talk about merchandise amortization in the quarter year-over-year? How much is merchandise amortization, a headwind or tailwind? And what have you assumed for the fiscal year in terms of trends and merchandise amortization?

Question: Jasper Bibb Bib - Truist Securities, Inc. - Analyst : Hey, good morning, guys. Wanted to ask about Smart Trunk and the Google partnership. I think you announced that Bob will over a year ago now (technical difficulty) where you might be seeing some associated marginal efficiency benefits at this stage?

Question: Jasper Bibb Bib - Truist Securities, Inc. - Analyst : Thanks. And then maybe following up on that last point on tend to look pretty good growth in prior in the quarter. Any color on an underlying operating margin for that business was in the first quarter? And would be great to hear how some of the initiatives you're doing there like SAP implementation and some of the G&A investments and called out in the past are where we stand today?

Question: Ronan Kennedy - Barclays Bank PLC - Analyst : Ronan Kennedy on for Manav. The strong growth (technical difficulty) sourcing supply chain hack operating efficiencies and (technical difficulty) mix of 20 bps from energy. Can I please confirm whether there's any one time factors in there ? Or is it the more sustainable drivers and do you see upside to the margin expansion opportunity ?

Question: Ronan Kennedy - Barclays Bank PLC - Analyst : And, broader (technical difficulty) dynamic and, potential implications of potential M&A and your thought process, capital allocation?

Question: Joshua Chan - UBS Securities LLC - Analyst : Hi, good morning. Todd, Mike and Jared. Thanks for taking my questions. On the rental business. Could you confirm that you haven't seen much change in where levels and kind of relatedly, if you were to see where levels start to moderate the economy, could you talk about the syntax playbook and that scenario and what you can do to sustain the attractive growth that you're used to seeing? Thank you,

Question: Joshua Chan - UBS Securities LLC - Analyst : Great. Thank you for the color and, and on your guidance was the quarter -- was the growth in Q1 better than your internal expectation. And I guess I'm asking in the context of you raising the four year guidance exception at the low and just wanted color on your thoughts around that. Thanks so much for your time.

Question: Andy Wittmann - Robert W. Baird & Co., Inc. - Analyst : Great. Thanks. And good morning. Thank you for taking my questions. You guys in the script, you talked about Six Sigma, you talked about your engineering teams, degree of automation. So I was just wondering if you could talk about the roll out of things like RF ID inside your plants. I know that you've been kind of testing this for a while and I think maybe that, you're ramping this a little bit more. I thought maybe, Todd, you could comment on that specifically and kind of where you are and if this is the direction we're heading and really how long does it take you to get to that promised land where this is the way that your business runs on a day to day basis? I guess, maybe there'd be a similar question related to, the Auto Sort station. I think in the past, you guys have talked that you like Auto Sort like half of your business, roughly. I was just wondering, if there's any new developments on that, like cheaper technologies that make it so that you can deploy it more widely or I know that sometimes like space considerations in your plant have been a limiting factor. Any technologies that have been developed, that allow you to broaden, the roll out of your Auto Sort station. So just was hoping you could talk about those two things in particular.

Question: Andy Wittmann - Robert W. Baird & Co., Inc. - Analyst : Appreciate those perspectives thought, maybe I'd ask you about some innovation, maybe that you're, that's relevant to the top line financials of your business. You've talked so much about health care, government education. It's been a well tried thing for a while now. But I mean, you guys are always trying to open up new and markets and I thought maybe you could talk about some of the developing end markets that maybe you're getting more excited about things around residential home services. Is that an opportunity for you and can you just talk about. If you can play there and in the size of that market in comparison to some of these other growth markets that you've talked about in the past.

Question: Shlomo Rosenbaum - Stifel Financial Corp. - Analyst : Hi. Thank you. I want to get back to a question. I think that George was touching on. I know there's broad based growth but were there particular types of clients or verticals that you might want to call out over here in terms of, really stand out growth during the quarter.

Question: Shlomo Rosenbaum - Stifel Financial Corp. - Analyst : Thanks. And this is just a housekeeping item for Mike. Just the pressure. He says you purchased about $474 million in stock and I go to the cash flow statement, it looks like $615 million. Can you just talk about what the difference is between what's on the cash flow statement? What's in the commentary?

Question: Ashish Sabadra - RBC Capital Markets - Analyst : Thanks for digging my question. I just wanted to follow up on the margin front of really solid margin expansion in the quarter of the 38% incremental margins were above your like a midterm guidance of -- 25% to 35%. And that's despite one fewer working day headwind. So as we go through the year, obviously, you've made out multiple different margin expansion drivers. But how should we think about the incremental margins for the rest of the year? Thanks.

Question: Ashish Sabadra - RBC Capital Markets - Analyst : That's great color. And maybe just a quick follow up on M&A. I just wanted to follow up on our earlier question on M&A. If you can talk about your M&A pipeline and appetite for potentially a large M&A deal as well. Thanks.

Question: Faiza Alwy - Deutsche Bank AG - Analyst : I wanted to talk about the First Aid business because we're seeing organic revenue growth acceleration in that business. And I'm curious, if you can talk about your drivers there and really what expectation is for, you know, the long term opportunity here. I don't know, if you can talk about a potential cam or how we should think about the sustainability of -- teams type of building in that business.

Question: Faiza Alwy - Deutsche Bank AG - Analyst : And are you finding that there's, revenue synergies with the uniform business? I know that you're running the businesses separately, in terms of, certainly there's different trucks and things like that. But I'm curious like what percentage of sort of new customers that you have in this First Aid & Safety business or existing, you know, uniform customers? Or is it a whole new type of customer that you're attracting REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 2:00PM, CTAS.OQ - Q1 2025 Cintas Corp Earnings Call

Question: Stephanie Moore - Jefferies Group LLC - Analyst : Hi, good morning. Thank you. I wanted to touch on maybe the competitive environment within your vended market. If you're seeing anything in terms of stepped up competitive activity in the form of maybe aggressively going after existing customers, maybe a little bit challenging from a pricing standpoint, any color there on the competitive activity would be great. Thanks.

Question: Stephanie Moore - Jefferies Group LLC - Analyst : Great. And then just as a follow up. You touched on this actually a couple questions ago. But clearly, there's some kind of potential industry consolidation activity going on. As you think about that, if you were to see your industry continue to consolidate, how do you think that would impact you thoughts on competitive activity in a more consolidated environment? And the likes of that? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 2:00PM, CTAS.OQ - Q1 2025 Cintas Corp Earnings Call

Question: Stephanie Moore - Jefferies Group LLC - Analyst : And, I guess, just to take that one quick point. I mean, you basically said it's always been competitive if you had a, greater consolidation, do you think it would be even more, with maybe another player that's new to the North America? Do you think they would end up being actually a more or less competitive environment?

Question: Scott Schneeberger - Oppenheimer & Co., Inc. - Analyst : Thanks very much. I have two. I'll, ask them both up front since we're getting late here. First one, uniform direct sales, the organic declines they persisted for I think five quarters now. And I know this is a lumpy business. And in the years prior is very strong. But could you guys please elaborate on trend over the balance of the year? What we might see there to the extent you have visibility. And then the second question is free cash flow really strong in the first quarter, CapEx appears on pace, so it looks like the strength was something working capital driven. Could you discuss it? Was this a timing issue or should we anticipate a particularly strong cashier in fiscal 2025? Thanks, REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 2:00PM, CTAS.OQ - Q1 2025 Cintas Corp Earnings Call

Question: Jason Haas - Wells Fargo & Company - Analyst : Hey, good morning and thanks for taking my questions. I'm curious, if you could remind us what level of price increases you're putting in this year. And then I'm curious what the reception has been like from your customers?

Question: Jason Haas - Wells Fargo & Company - Analyst : Got it. That makes sense. Thank you. And, it's a good to take away my next question. I was curious about the hiring market for your own business and I'm curious if it's gotten any easier or harder to hire people. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 2:00PM, CTAS.OQ - Q1 2025 Cintas Corp Earnings Call