Cintas Corp Q2 2025 Earnings Call Summary

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

Question: Tim Mulrooney - William Blair - Analyst : Yeah. Hi. Thanks for taking my questions. I wanted to ask about your guide on organic growth. It looks like it came down slightly at the high end from 8.1% to 7.7%. Just curious what the reason for that was a second quarter sales came in below your expectations or if it's, the outlook for the second half of the fiscal year, it shifted slightly? I know it's a small number, but just curious if you had any comment there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call

Question: Tim Mulrooney - William Blair - Analyst : Okay. That's good color. It sounds like just some fine tuning around the edges and continuation of what you've been doing. So that's very helpful context. Thank you. For my second question is I just wanted to touch on the incremental EBITDA margins, 60%, I think, in the quarter. Obviously, very impressive, well above street expectations. Just putting my analyst hat on and trying to pick this apart a little bit. Curious if there's any one-offs or discrete factors that we should be considering that were either favorable to this year or unfavorable to last year that might help explain some of the strong outperformance because 60% is obviously just really, really high. Thank you.

Question: Tim Mulrooney - William Blair - Analyst : Got it. Thanks Todd. Thanks Mike. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call

Question: Andrew Steinerman - JPMorgan Securities - Analyst : Hi. When talking about the organic revenue growth of 7.1% in the quarter, could you just give us a sense if price realization has kind of now return to the long-term average increase? And then also, did adopt change much when looking at the November quarter year-over-year versus the August quarter year-over-year?

Question: Andrew Steinerman - JPMorgan Securities - Analyst : Okay, thank you very much.

Question: Jasper Bibb - Truist Securities - Analyst : Hey, good morning guys. I want to ask about the proposed tariffs from the new administration and potential impact on your material cost if those proposals come through. I think you previously talked about a bit of inflation on (inaudible) costs from tariffs on China during the last Trump administration. Is there more sourcing coming through Mexico, Canada or China that could potentially be impacted?

Question: Jasper Bibb - Truist Securities - Analyst : Thanks for that. And then maybe to follow up on Tim's earlier question. Is there anything that you think might make incremental operating margins to moderate in the second half versus the first half? I mean, on my math, adjusting for working days, incremental operating margin was well north of 40% in the first half and seems like guidance imply a pretty material step down in the incremental for the second half. Is there anything specific driving that first half, second half (inaudible) ?

Question: Jasper Bibb - Truist Securities - Analyst : Got it. Thank you for taking the questions.

Question: Manav Patnaik - Barclays - Analyst : Yeah, thank you. If I can just follow up on that. The top line guide that you lowered by 40 basis points. It sounds like you said all your expectations have kind of remain the same, but you still lowered it. So just curious, is that, can you just help us with why you lowered it by 40 bps, maybe if the catalog sales that were down? Is that what it was? Just any color there would be helpful.

Question: Manav Patnaik - Barclays - Analyst : I mean, I guess, are you seeing that maybe this quarter perhaps didn't come in better than maybe what you would have thought?

Question: Manav Patnaik - Barclays - Analyst : Okay. Fine. And then if I can just follow up. Sorry, go ahead if you were saying something.

Question: Manav Patnaik - Barclays - Analyst : I was just going to say the M&A in the quarter, can you, it seems like you were pretty active. So just curious in which areas and anything to call out there?

Question: Manav Patnaik - Barclays - Analyst : Got it. Thank you.

Question: Josh Chan - UBS - Analyst : Hi, good morning. Todd, Mike, Jared. I guess, on the guidance question, maybe I can ask it this way. I guess, as compared to the scenario where you would have held your top line guidance, the top end of your top line guidance, like what did not happen, I guess, what did you not see could allow you to kind of hold that? I guess maybe that helps ask that question a little bit.

Question: Josh Chan - UBS - Analyst : Certainly, that's still very good growth. And then maybe my follow-up on fire, obviously, it grew 10% this quarter, that's really strong. But I guess in prior quarters, it had been above that. So was there any abnormality in fire this quarter? Or do you think it's just normal fluctuation? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call

Question: Josh Chan - UBS - Analyst : Great. Thanks for your time and good luck in the second half.

Question: George Tong - Goldman Sachs - Analyst : Hi, thanks. Good morning. You mentioned new business and retention rates were strong in the quarter. Can you talk more about what you're seeing with customer sentiment and customer purchasing behaviors and how they've evolved over the course of the quarter?

Question: George Tong - Goldman Sachs - Analyst : Yes. Sorry, I was on mute. So on the margin side, you're seeing good benefits from sourcing and supply chain and routing. Can you talk a little bit more about where you are in your journey in terms of unlocking additional efficiencies, what you've already achieved? In other words, are you, would you say you're still in the very early innings of what you hope to achieve with efficiencies? Or are you towards the middle or towards the later stages of what you hope to accomplish?

Question: George Tong - Goldman Sachs - Analyst : Got it. That's helpful. Thank you.

Question: Shlomo Rosenbaum - Stifel - Analyst : Hi. Thank you for taking my questions. Just to talk a little bit about the guidance a little more on the top end. But I'd like to ask a little bit about the M&A. It looks like you did about $145 million in acquisitions in the quarter. Could you talk about how much those acquisitions are expected to add to revenue in this fiscal year, and if there, where exactly would they be falling out, would be mostly in the laundry and the uniforms. Or was there something else that you (inaudible) that was sizable. I mean, didn't hit the news? And then I'll have a follow-up.

Question: Shlomo Rosenbaum - Stifel - Analyst : Okay. The reason I was asking is because there's a huge focus on kind of the tweaking of the guidance on the top, and it's the commentary about the pricing being a little bit tougher just to dimensionalize, it would be helpful to know how much we should be expecting in terms of incremental M&A. So that's where the question is coming from. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call But the second question, the follow-up I have is, could you give a little bit more color on the growth of the targeted verticals, specifically in the quarter, did some do better than others. Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals are some of them accelerating versus decelerating just so we get a sense as to how the efforts are progressing there.

Question: Shlomo Rosenbaum - Stifel - Analyst : Thank you.

Question: Andrew Wittmann - Robert W Baird - Analyst : Thanks and excuse me, good morning guys. I just thought maybe, Mike, I'll give you an opportunity to talk a little bit more about the margin profile here today. Obviously, results were good. But could you just talk about any categories in particular? Obviously, you called out the energy, always call it the energy, but maybe other key categories, merchandise costs, maybe route costs in general beyond just the energy there. Other things in the plant or things in SG&A. Just to help understand some of the puts and takes on that line item with gross margins now having been consistently above people's expectations for several quarters in a row, I thought maybe opportunity to drill into that a little bit more, it would be helpful.

Question: Andrew Wittmann - Robert W Baird - Analyst : Got it. Thank you for that context. Maybe just for my follow-up, I'd say, over the last 18 months, it kind of feels like there's been more national account business that kind of hit the market its traded hands. Obviously, there's always some of that, and it's not new, but because there was a bit more of a flurry around that, I would just thought, I would kind of talk to you about getting your thoughts about a national account business today. How much is trading compared to historical levels? And what you're seeing in the pricing dynamic specifically related to that segment of the marketplace?

Question: Andrew Wittmann - Robert W Baird - Analyst : Great. Thanks a lot. Have a happy holidays guys.

Question: Toni Kaplan - Morgan Stanley - Analyst : Thanks so much. I was hoping to go back to the direct sales business, and I'm less focused on the quarter because I think the comp was fairly tough. But just when you think about how fast that line of business should grow over time. How should we be thinking about that? And could you also give us an update on what percent of your customers are buying products or services across more than one segment? Thanks.

Question: Toni Kaplan - Morgan Stanley - Analyst : Yes. Great. And then on first aid margins, they've really ramped up over the past few years. You mentioned the favorable mix and sourcing benefits in this quarter. I guess, should we expect those to be sustainable? How big were those benefits? And maybe just in general, like the margins were very good. And so like how are you thinking about the right level of investment, how much, should you be investing more, for example? Thanks.

Question: Toni Kaplan - Morgan Stanley - Analyst : Thanks and happy holidays as well. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call

Question: Faiza Alwy - Deutsche Bank - Analyst : Yes, hi, thank you and good morning. So I wanted to ask a little bit more about the pricing comments that you made. And I'm curious if you're seeing more difficulty in taking pricing across the board, or is it more specific products, categories, verticals, maybe to Andy's question earlier is that around some of the national accounts. Just more color on, is this, and perhaps if you can help us dimensionalize the deceleration in pricing that you've seen and what you expect from here?

Question: Faiza Alwy - Deutsche Bank - Analyst : Great. Thank you. And then I wanted to ask about M&A. We've seen some increasing activity in M&A. And I'm curious what you're seeing in terms of valuation expectations and just the opportunities out there? What's the environment like?

Question: Faiza Alwy - Deutsche Bank - Analyst : Great. Thank you so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call

Question: Scott Schneeberger - Oppenheimer - Analyst : Thanks very much. Good morning. I want to follow up a few M&A questions in here. And guys, I understand there's limited color you'll share there. But this was, I think, the biggest quarter of M&A since all the way back to (inaudible). And you said it was across a few of the business lines you serve. But was it, was there any one particularly large acquisition in one area? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call And I'm just curious kind of is it, as a follow-up on this topic, what are you looking for in M&A right now? What type of assets, the multiples? But, just if you could talk about prevailing multiple, that would be great, what you're seeing out there. And what are you looking for? Are you looking to add technology? Are you building out vended laundry, on-premises laundry. Just curious, are there some areas you might be moving into. Thanks.

Question: Scott Schneeberger - Oppenheimer - Analyst : Great, thanks. And just as a follow-up, I don't think we've discussed myCintas portal on an earnings call in a while. A progress report on that, and just curious, is that contributing at all? It could be, it's been around for a few years now. Is that contributing at all yet to the impressive margins that we're seeing?

Question: Scott Schneeberger - Oppenheimer - Analyst : Great, thanks guys. Happy holidays. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call

Question: Jason Haas - Wells Fargo - Analyst : Hey, good morning. And thanks for taking my questions. I'm curious if you could help quantify where we are in terms of the price increases relative to history. Are we still like close to 3%, and we're sort of on a path back to 2%? Or how would you describe it? And then are there certain verticals or industries where you find it a little bit easier to maintain those prices?

Question: Jason Haas - Wells Fargo - Analyst : Got it. That's very helpful. And I guess I'll talk to this. So are there any verticals that it's easier to maintain those prices? Or is it all sort of, is it all reverted back to that historical 0% to 2% range? And then I also wanted to just follow up on the incremental margins because those were really strong in the first half. And I know you said that we're, the expectation is we'll get back to more sort of normal targeted levels for the second half, I was just curious like what the drivers of that would be? So what changes from the first half to the second half that causes those incremental margins to come down? Thanks.

Question: Jason Haas - Wells Fargo - Analyst : Got it. That's very helpful. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 19, 2024 / 3:00PM, CTAS.OQ - Q2 2025 Cintas Corp Earnings Call