Q2 2024 Cintas Corp Earnings Call

December 21, 2023

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Operator: Good day, everyone, and welcome to the Cintas Corporation's fiscal 2024 second quarter earnings release conference call. Today's call is being recorded. At this time, I would like to turn the meeting over to Mr. Jared Mattingly, Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

Good day, everyone and welcome to the Cintas Corporation announces fiscal 2024 second quarter earnings release Conference call. Today's call is being recorded at this time I would like to turn the turn the meeting over to Mr. Jared Mattingly, Vice President Treasurer and Investor Relations. Please go ahead Sir.

Good day, everyone, and welcome to the Synthes Corporation announces FISCO 2024 Second Quarter Earnings Release Conference Call.

Jared Mattingly: Thank you for joining us. With me is Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2024 second quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the company's current views as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussions on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd.

Yeah.

Jared Mattingly: Thank you for joining US with me is Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer, who will discuss our fiscal 2024 second quarter results. After our commentary we will open the call to questions from analysts in the private Securities Litigation Reform Act of 119.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the company's current views as to future events and financial performance.

<unk> hundred 95 provides a safe harbor from Civil litigation for forward looking statements. This conference call contains forward looking statements that reflect the company's current views as to future events and financial performance. These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those.

These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussions on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd.

As we may discuss I refer you to the discussions on these points contained in our most recent filings with the Securities and Exchange Commission.

Jared Mattingly: Now I'll turn the call over to Todd.

Todd Schneider: Thank you, Jared. We are pleased with our second quarter results and are excited about the future. Second quarter total revenue grew 9.3% to $2.38 billion. Each of our businesses continues to execute at a high level. Our momentum in the business is good, and volume remains robust. We can grow in a number of different ways. Contribution to our growth from new business remains strong and comes from companies that either outsource their program today or they are managing it themselves. We continue to have great success cross-selling to existing customers. Retention levels are strong and remain at very attractive levels. Our value proposition of image, safety, cleanliness, and compliance continues to resonate across businesses of all sizes and in all verticals. We continue to be pleased with results from our focus on prospects within the verticals of healthcare, hospitality, education, and state and local government.

Thank you, Jared. We are pleased with our second quarter results and are excited about the future.

Todd Schneider: Thank you Jared.

Todd Schneider: We are pleased with our second quarter results and are excited about the future.

Second quarter total revenue grew 9.3% to $2.38 billion. Each of our businesses continue to execute

Second quarter total revenue grew nine 3% due to <unk> three 8 billion.

Each of our businesses continue to execute at a high level.

momentum in the business is good and volume remains robust.

Todd Schneider: Our momentum in the business is good and volume remains robust.

Todd Schneider: We can grow in a number of different ways.

Contribution to our growth from new business remains strong and comes from companies that either outsource their program today or they are managing it themselves. We continue to have great success across the world.

Todd Schneider: Contribution to our growth from new business remained strong and comes from companies that either outsource their program today or they are managing it themselves.

Todd Schneider: We continue to have great success cross selling to existing customers.

Retention levels are strong and remain at very attractive levels.

Our value proposition of image, safety, cleanliness, and compliance continues to resonate across businesses of all sizes and in all verticals.

Todd Schneider: And our value proposition of image safety cleanliness and compliance continues to resonate across businesses of all sizes and then all verticals.

We continue to be pleased with results from our focus on prospects within the verticals of healthcare, hospitality, education, and state and local government.

Todd Schneider: We continue to be pleased with results from our focus on prospects within the verticals of healthcare hospitality education and state and local government.

Todd Schneider: We recently announced the opening of two clean room facilities, one in North Carolina and the other in Wisconsin. These facilities will provide additional capacity in these regions in order to expand our efforts in this area of attractive growth from pharmaceutical and biotechnology companies. The benefits of our strong volume growth and revenue flow through to our bottom line. Gross Margin for the second quarter grew 11.6%. Operating income grew 12.3%. Diluted EPS grew 15.7% to $3.61. Cash flow remains strong. Net cash provided by operating activities in the second quarter grew 17.8% over the prior year. Our strong cash flow gives us flexibility to choose how we deploy our capital. In the second quarter, we continued to invest in our businesses. We also acquired several smaller businesses.

We recently announced the opening of two clean room facilities, one in North Carolina and the other in Wisconsin. These facilities will provide additional capacity in these regions in order to expand our efforts in this area of attractive growth from pharmaceutical and biotechnology companies. The benefits of our strong volume growth and revenue flow through to our bottom line. Gross Margin for the second quarter grew 11.6%. Operating income grew 12.3%. Diluted EPS grew 15.7% to $3.61. Cash flow remains strong. Net cash provided by operating activities in the second quarter grew 17.8% over the prior year. Our strong cash flow gives us flexibility to choose how we deploy our capital. In the second quarter, we continued to invest in our businesses. We also acquired several smaller businesses.

We recently announced the opening of two clean room facilities, one in North Carolina and the other in Wisconsin.

These facilities will provide additional capacity in these regions in order to expand our efforts in this area of attractive growth from pharmaceutical and biotechnology companies.

Todd Schneider: These facilities will provide additional capacity in these regions in order to expand our efforts in this area of attractive growth from pharmaceutical and biotechnology companies.

The benefits of our strong volume growth and revenue flow through to our bottom line.

Todd Schneider: The benefits of our strong volume growth and revenue flowed through to our bottom line.

Gross margin for the second quarter grew 11.6% and operating income grew 12.3%.

Todd Schneider: Gross margin for the second quarter grew 11, 6% and.

And operating income grew 12, 3%.

Deleted EPS grew 15.7% to $3.61.

Todd Schneider: Diluted EPS grew 15, 7% to $3 61.

Todd Schneider: Cash flow remained strong.

Net cash provided by operating activities in the second quarter grew 17.8% over the prior year.

Todd Schneider: Net cash provided by operating activities in the second quarter grew 17, 8% over the prior year.

Our strong cash flow gives us flexibility to choose how we deploy our capital. In the second quarter, we continue to invest in our businesses.

Todd Schneider: Our strong cash flow gives us flexibility to choose how we how we deploy our capital.

Todd Schneider: In the second quarter, we continued to invest in our businesses.

Todd Schneider: We also acquired several smaller businesses.

Todd Schneider: On 15 December, we paid shareholders $137.5 million in quarterly dividends, an increase of 17.1% from the amount paid the previous December. During the second quarter, we also purchased $320.3 million of CINTAS Common Stock under our buyback program. I would like to thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other. Now, before I turn the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year. We are increasing our financial guidance. We are raising our annual revenue expectations from a range of $9.4 billion to $9.52 billion to a range of $9.48 billion to $9.56 billion, a total growth rate of 7.5% to 8.4%.

On 15 December, we paid shareholders $137.5 million in quarterly dividends, an increase of 17.1% from the amount paid the previous December. During the second quarter, we also purchased $320.3 million of CINTAS Common Stock under our buyback program. I would like to thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other. Now, before I turn the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year. We are increasing our financial guidance. We are raising our annual revenue expectations from a range of $9.4 billion to $9.52 billion to a range of $9.48 billion to $9.56 billion, a total growth rate of 7.5% to 8.4%.

On December 15th, we paid shareholders $137.5 million in quarterly dividends.

Todd Schneider: On December 15th we paid shareholders $137 $5 million in quarterly dividends and.

An increase of 17.1% from the amount paid to previous December .

An increase of 17, 1% from the amount paid the previous December.

During the second quarter, we also purchased $320.3 million of Centos Common Stock under our buyback program.

Todd Schneider: During the second quarter, we also purchased $323 million of Cintas common stock under our buyback program.

I would like to thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other.

Todd Schneider: I would like to thank our employees, whom we call partners for their continued focus on our customers our shareholders and each other.

Before I turn the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year.

Todd Schneider: Now before I turn the call over to Mike to provide details of our second quarter results I'll provide our updated financial expectations for our fiscal year.

Mike Hansen: We are increasing our financial guidance.

We are raising our annual revenue expectations from a range of $9.4 billion to $9.5 billion to a range of $9.48 billion to $9.56 billion, a total growth rate of 7.5 to 8.4%.

Mike Hansen: We are raising our annual revenue expectations from a range of $9 4 billion to $9 $5 2 billion to a range of $9 $48 billion to $95 6 billion.

Mike Hansen: A total growth rate of seven five to eight 4%.

Todd Schneider: Also, we are raising our annual Diluted EPS expectations from a range of $14.00 to 14.45 to a range of $14.35 to 14.65, a growth rate of 10.5% to 12.8%. Mike?

Also, we are raising our annual Diluted EPS expectations from a range of $14.00 to 14.45 to a range of $14.35 to 14.65, a growth rate of 10.5% to 12.8%. Mike?

Also, we are raising our annual diluted EPS expectations from a range of $14 to $14.45 to a range of $14.35 to $14.65, a growth rate of 10.5 to 12.8 percent.

Mike Hansen: Also we are raising our annual diluted EPS expectations from a range of $14 to $14 45.

Mike Hansen: So a range of $14 35.

Mike Hansen: To $14 65.

Mike Hansen: Our growth rate of 10, five to 12, 8%.

Mike Hansen: Thanks, Todd, and good morning. Our fiscal 2024 second quarter revenue was $2.38 billion compared to $2.1 billion last year. The organic revenue growth rate, adjusted for acquisitions and foreign currency exchange rate fluctuations, was 9%. Organic growth by business was 7.9% for uniform rental and facility services, 12.7% for first aid and safety services, 17.8% for fire protection services, and 4.7% for uniform direct sale. Gross margin for the second quarter of fiscal 2024 was $1.14 billion compared to $1.02 billion last year, an increase of 11.6%. Gross margin as a percent of revenue was 48% for the second quarter of fiscal 2024 compared to 47% last year, an increase of 100 basis points. Strong volume growth and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Nick.

Thanks Todd and good morning. Our fiscal 2024 second quarter revenue was $2.38 billion compared to $2.1 billion last year. The organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was 9%.

Nick: Thanks, Todd and good morning.

Nick: Our fiscal 2024 second quarter revenue was $2 three $8 billion compared to $2 $1 billion last year, the organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was 9%.

Organic growth by business with 7.9% for uniform rental and facility services, 12.7% for first aid and safety services, 17.8% for fire protection services, and 4.7% for uniform direct sales.

Nick: Organic growth by business was seven 9% for uniform rental and facility services 12, 7% for first aid and safety services 17, 8% for fire protection services and four 7% for uniform direct sale.

Gross margin for the second quarter of fiscal 24 was $1.14 billion compared to $1.02 billion last year, an increase of 11.6%.

Nick: Gross margin for the second quarter of fiscal 'twenty four was 114 billion.

Nick: Compared to $1.02 billion last year, an increase of 11, 6%.

Gross margin as a percent of revenue was 48% for the second quarter of fiscal 24 compared to 47% last year, an increase of 100 basis points.

Nick: Gross margin as a percent of revenue was 48% for the second quarter of fiscal 'twenty four compared to 47% last year, an increase of 100 basis points.

Strong volume growth and continued operational efficiencies help generate this strong growth margin.

Strong volume growth and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Gross margin percentage by business was 47.4% for Uniform Rental and Facility Services, 54.5% for First Aid and Safety Services, 48.6% for Fire Protection Services, and 40.9% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 40 basis points from last year. We continue to leverage our strong revenue growth and extract inefficiencies out of the business in order to expand margins. Our year-over-year improvements are no accident. Our Six Sigma and engineering teams have helped us create efficiencies in the plant that allow us to maximize the utilization of our equipment, labor, and energy. Our SmartTruck technology allows us to improve our route efficiencies and provide density to our existing routes.

Gross margin percentage by business was 47.4% for Uniform Rental and Facility Services, 54.5% for First Aid and Safety Services, 48.6% for Fire Protection Services, and 40.9% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 40 basis points from last year. We continue to leverage our strong revenue growth and extract inefficiencies out of the business in order to expand margins. Our year-over-year improvements are no accident. Our Six Sigma and engineering teams have helped us create efficiencies in the plant that allow us to maximize the utilization of our equipment, labor, and energy. Our SmartTruck technology allows us to improve our route efficiencies and provide density to our existing routes.

Nick: Gross margin percentage by business was 47, 4% for uniform rental and facility services 54, 5% for first aid and safety services.

Gross margin percentage by business was 47.4% for Uniform Rental and Facility Services, 54.5% for First Aid and Safety Services,

48.6% for fire protection services, and 40.9% for uniform direct sale.

48, 6% for fire protection services, and 49% for uniform direct sale.

gross margin for the Uniform Rental and Facility Services segment increased 40 basis points from last

Gross margin for the uniform rental and facility services segment increased 40 basis points from last year.

We continue to leverage our strong revenue growth and extract inefficiencies out of the business in order to expand margins. Our year over year improving

Nick: We continue to leverage our strong revenue growth and extracting efficiencies out of the business in order to expand margins are year over year improvements are no accident.

Our six Sigma and engineering teams have helped us create efficiencies in the plant to allow us to maximize the utilization of our equipment, labor and energy.

Nick: Our six Sigma and engineering teams have helped us create efficiencies in the plant to allow us to maximize the utilization of our equipment labor and energy.

Our smart truck technology allows us to improve our route efficiencies and provide density to our existing routes.

Nick: Our smart truck technology allows us to improve our route efficiencies and provide density to our existing routes.

Mike Hansen: While energy expenses comprised of gasoline, natural gas, and electricity were a tailwind of 40 basis points from last year, please keep in mind that some of the energy benefit is the result of efficiencies just mentioned. As an example, our rental revenue grew organically at 7.9%, but we only added 1% to our route structure since last year. Gross margin for the first aid and safety services segment increased 400 basis points from last year. Our revenue growth is strong, and our value proposition continues to resonate in this segment. Health and safety of employees remains top of mind. Our mix of revenue continues to be healthy, including growing high-margin recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak. We continue to use technology like SmartTruck to optimize our routes and improve efficiencies. Our first aid dedicated distribution center allows us to lower product costs.

While energy expenses comprised of gasoline, natural gas, and electricity were a tailwind of 40 basis points from last year, please keep in mind that some of the energy benefit is the result of efficiencies just mentioned. As an example, our rental revenue grew organically at 7.9%, but we only added 1% to our route structure since last year. Gross margin for the first aid and safety services segment increased 400 basis points from last year. Our revenue growth is strong, and our value proposition continues to resonate in this segment. Health and safety of employees remains top of mind. Our mix of revenue continues to be healthy, including growing high-margin recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak. We continue to use technology like SmartTruck to optimize our routes and improve efficiencies. Our first aid dedicated distribution center allows us to lower product costs.

Nick: While energy expenses comprised of gasoline natural gas and electricity were a tailwind of 40 basis points from last year. Please keep in mind that some of the energy benefit as a result of efficiencies just mentioned.

As an example, our rental revenue grew organically at 7.9%, but we only added 1% to our route structure since last year.

Nick: As an example, our rental revenue grew organically at seven 9%, but we only added 1% to our route structure since last year.

Gross margin for the first aid and safety services segment increased 400 basis points from last year. Our revenue growth is strong and our value proposition continues to resonate in this segment.

Nick: Gross margin for the first aid and safety services segment increased 400 basis points from last year.

Nick: Our revenue growth is strong and value our value proposition continues to resonate in this segment.

Health and safety of employees remains top of mind. Our mix of revenue continues to be healthy, including growing high-marge and recurring revenue products like AED rentals, eye-wash stations, and water breaks.

Nick: Health and safety of employees remains top of mind, our mix of revenue continues to be healthy, including growing high margin recurring revenue products like AED rentals eyewash stations in Waterbury.

We continue to use technology like SmartTruck to optimize our routes and improve efficiency.

We continue to use technology like smart truck to optimize our routes and improve efficiencies.

And our first aid dedicated distribution center allows us to lower product costs, all of these contribute to our improved margins.

Nick: And our first aid dedicated distribution center allows us to lower product costs all of these contribute to our improved margins.

Mike Hansen: All of these contribute to our improved margins. Selling and administrative expenses grew $64.4 million, or 11.1% over last year. Strong revenue growth creates leverage, which allows us to invest in the business. We continue to invest in our people, adding selling resources, investing in our management training program to develop future leaders, and expanding our talent acquisition efforts. Operating income of $499.7 million compared to $444.9 million last year. Operating income as a percent of revenue was 21% in the second quarter of fiscal 2024 compared to 20.5% in last year's second quarter, an increase of 50 basis points. Our effective tax rate for the second quarter was 20.9% compared to 22.1% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $374.6 million compared to $324.3 million last year.

All of these contribute to our improved margins. Selling and administrative expenses grew $64.4 million, or 11.1% over last year. Strong revenue growth creates leverage, which allows us to invest in the business. We continue to invest in our people, adding selling resources, investing in our management training program to develop future leaders, and expanding our talent acquisition efforts. Operating income of $499.7 million compared to $444.9 million last year. Operating income as a percent of revenue was 21% in the second quarter of fiscal 2024 compared to 20.5% in last year's second quarter, an increase of 50 basis points. Our effective tax rate for the second quarter was 20.9% compared to 22.1% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $374.6 million compared to $324.3 million last year.

Selling and administrative expenses grew $64.4 million or 11.1% over last year. Strong revenue growth creates leverage, which allows us to invest in the business.

Selling and administrative expenses grew $64 4 million or 11, 1% over last year.

Nick: Strong revenue growth creates leverage which allows us to invest in the business.

We continue to invest in our people, adding selling resources, investing in our management training program to develop future leaders, and expanding our talent acquisition efforts.

Nick: We continue to invest in our people, adding selling resources investing in our management trade training program to develop future leaders and expanding our talent acquisition efforts.

Nick: Operating income of $499 7 million.

Operating income of $499.7 million compared to $444.9 million last.

Nick: Compared to $444 $9 million last year.

operating income as a percent of revenue was 21% in the second quarter of fiscal 24 compared to 20.5% in last year's second quarter, an increase of 50 basis.

Nick: Operating income as a percent of revenue was 21% in the second quarter of fiscal 'twenty four compared to 25% in last year's second quarter, an increase of 50 basis points.

Nick: Our effective tax rate for the second quarter was 29% compared to 22, 1% last year.

Our effective tax rate for the second quarter was 20.9 percent compared to 22.1 percent last year.

tax rates in both quarters were impacted by certain discreet items, primarily the tax accounting impact for stock-based compensation.

The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock based compensation.

Net income for the second quarter was $374.6 million compared to $324.3 million last year.

Nick: Net income for the second quarter was $374 6 million compared.

Compared to $324 $3 million last year.

Mike Hansen: This year's second quarter diluted EPS of $3.61 compared to $3.12 last year, an increase of 15.7%. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2024 interest expense is expected to be $100 million compared to $109.5 million in fiscal 2023, predominantly as a result of less variable rate debt. Our fiscal 2024 effective tax rate is expected to be 21.3%. This compares to a rate of 20.4% in fiscal 2023. The higher effective tax rate negatively impacts fiscal 2024 EPS guidance by about 16 cents and diluted EPS growth by about 120 basis points. Our financial guidance does not include the impact of any future share buybacks. Guidance includes the impact of having one more workday in fiscal 2023 compared to fiscal—I'm sorry, fiscal 2024 compared to fiscal 2023. This extra workday comes in our fiscal third quarter.

This year's second quarter diluted EPS of $3.61 compared to $3.12 last year, an increase of 15.7%. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2024 interest expense is expected to be $100 million compared to $109.5 million in fiscal 2023, predominantly as a result of less variable rate debt. Our fiscal 2024 effective tax rate is expected to be 21.3%. This compares to a rate of 20.4% in fiscal 2023. The higher effective tax rate negatively impacts fiscal 2024 EPS guidance by about 16 cents and diluted EPS growth by about 120 basis points. Our financial guidance does not include the impact of any future share buybacks. Guidance includes the impact of having one more workday in fiscal 2023 compared to fiscal—I'm sorry, fiscal 2024 compared to fiscal 2023. This extra workday comes in our fiscal third quarter.

This year's second quarter diluted EPS of $3.61.

Nick: This year's second quarter diluted EPS of $3 61.

compared to $3.12 last year, an increase of 15.7%.

Nick: Compared to $3 12.

Last year, an increase of 15, 7%.

Provided our annual financial guidance related to the guidance, please note the following

Nick: So I have provided our annual financial guidance related to the guidance. Please note the following.

Fiscal 24 interest expense is expected to be $100 million compared to $109.5 million in fiscal 23, predominantly as a result of less variable rate debt.

Nick: Fiscal 'twenty for interest expense is expected to be $100 million.

Compared to $109 5 million in fiscal 'twenty three.

<unk> as a result of less variable rate debt.

Nick: Our fiscal 'twenty four effective tax rate is expected to be 21, 3%.

Our fiscal 24 effective tax rate is expected to be 21.3 percent. This compares to a rate of 20.4 percent in fiscal 23.

This compares to a rate of 24% in fiscal 'twenty three.

The higher effective tax rate negatively impacts fiscal 'twenty four EPS guidance by about <unk> 16.

The higher effective tax rate negatively impacts fiscal 24 EPS guidance by about 16 cents and diluted EPS growth by about 120 basis.

And diluted EPS growth by about 120 basis points.

financial guidance does not include the impact of any future share buyback.

Nick: Our financial guidance does not include the impact of any future share buybacks.

And guidance includes the impact of having one more workday in fiscal 23 compared to fiscal, I'm sorry, fiscal 24 compared to fiscal 23, this extra workday comes in our fiscal third quarter.

Nick: And guidance includes the impact of having one more work day in fiscal 'twenty, three compared to fiscal I'm, sorry fiscal 'twenty four compared to fiscal 'twenty three.

Nick: This extra workday comes in our fiscal third quarter.

Mike Hansen: I'll turn it back to Jared.

I'll turn it back to Jared.

I'll turn it back to Jerry.

Jared Mattingly: Thanks, Mike. That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just one question and a single follow-up if needed. Thank you.

Thanks, Mike. That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just one question and a single follow-up if needed. Thank you. If you would like to ask the question.

Jerry: Thanks, Mike that concludes our prepared remarks now we are happy to answer questions from the analysts. Please ask just one question and a single follow up if needed. Thank you.

Operator: If you would like to ask a question, please press star one on your telephone keypad now. Please be prepared to ask your question when prompted. You will be allowed to ask one question and one follow-up question. Once again, if you would like to ask a question, please press star one on your phone now. Our first question comes from Ashish Sabadra from RBC. Please go ahead, Ashish.

Jerry: If you would like to ask a question. Please press star one on your telephone keypad now.

Jerry: Please be prepared to ask your question when prompted.

We will be allowed to ask one question and one follow up question.

Jerry: Again, if you would like to ask a question. Please press star one on your phone now.

Jerry: And our first question comes from Ashish <unk> from RBC. Please go ahead Ashish.

Ashish Sabadra: Thanks for taking my question. Just on the four verticals that you highlighted as the areas of strength in particular, I was wondering if you can quantify how big the combined revenues are from those verticals and how does the growth profile there compare to the company average, any color? Thanks.

Thanks for taking the question. Just on the four verticals that you highlighted as the areas of strength in particular, I was wondering if you can quantify how big the combined revenues are from those verticals and how does the growth profile there combine compared to the computer.

Thanks for taking my question just on the four verticals that you highlighted as.

As the areas of strength in particular I was wondering if you can quantify how big the combined revenue from those verticals and how does the growth profile data come by or come back and look.

Jerry: Company average any color.

Todd Schneider: Good morning, Ashish. This is Todd. Thanks for the question. Yeah, I don't have a specific number for you as far as that exact number, but I can tell you that our verticals are performing quite well. We're having really good success. Our focus around not just selling, but organizing around those is really paying off for us. I've just got a couple of wins I can share with you regarding the verticals. In healthcare, in the acute space, we're having good success, and non-acute as well. We've got a scrub rental program to a big hospital network in South Carolina that is benefiting from a new consistent image, but also identification. The customer told us that they were interested in being able to, pardon me, identify their people, understanding who was supposed to be in what area, and this new scrub program did that.

Good morning, Ashish. This is Todd. Thanks for the question. Yeah, we don't, I don't have a specific number for you as far as that exact number, but I can tell you that our verticals are performing quite well. We're having really good success.

Good morning, Ashish. This is Todd thanks for the question yes.

Jerry: We don't.

Jerry: I don't have any specific number for you as far as.

Jerry: That exact number but I can tell you that our our verticals are performing quite well, we're having really good success.

Our focus around, not just selling, but organizing around those is really paying off for us.

Jerry: Our focus around not just selling but organizing around those is really paying off for us.

I've just got a couple wins I can I can share with you regarding the verticals in health care in the acute space. We're having good success and non acute as well. We we we've got a scrub rental program to a big hospital network in South Carolina that that is benefiting from.

Jerry: And I've just got a couple of wins I can I can share with you regarding the verticals.

Jerry: In healthcare in the acute space, we're having good success in non acute as well.

We have got a scrub rental program to a big Hospital network in South Carolina that that is benefiting from.

of a new consistent image, but also identification. The customer told us that they were interested in being able to, pardon me, identify their people, understanding who was supposed to be in what area, and this new scrub program did that. We had a really similar experience with a nursing home in Virginia. Same thing, they were buying their own and they, but the leadership wanted to be able to identify and have a consistent image with their people.

Jerry: Our new consistent image, but also identification that customer told us that they were interested in being able to.

Jerry: Pardon me identify their people understanding who was supposed to be and what area. In this new scrub program did that.

Todd Schneider: We had a really similar experience with a nursing home in Virginia. Same thing. They were buying their own, but the leadership wanted to be able to identify and have a consistent image with their people. We had, on the acute side again, a hospital in Florida that we rolled out a new microfiber program because they were struggling with inventory control and product quality, which led to cleanliness concerns. And our program offered some great products, technology to control the inventory, which allowed them to focus more on their patients instead of having to fool around with trying to manage the microfiber. Excuse me. And I've got a couple of other examples I thought might be helpful for the group.

We had a really similar experience with a nursing home in Virginia. Same thing. They were buying their own, but the leadership wanted to be able to identify and have a consistent image with their people. We had, on the acute side again, a hospital in Florida that we rolled out a new microfiber program because they were struggling with inventory control and product quality, which led to cleanliness concerns. And our program offered some great products, technology to control the inventory, which allowed them to focus more on their patients instead of having to fool around with trying to manage the microfiber. Excuse me. And I've got a couple of other examples I thought might be helpful for the group.

Jerry: We had a really similar experienced with a nursing home in Virginia.

Jerry: Same thing they were they were buying their own and they but the.

Jerry: The leadership and wanted to be able to identify and have a consistent image with their people.

We had a, on the acute side again, a hospital in Florida that we wrote out a new microfiber program because they were struggling with inventory control and product quality, which led to cleanliness concerns.

Jerry: We had a.

On the acute side again, a hospital in Florida.

We rolled out a new micro micro fiber program, because they were struggling with inventory control and product quality.

Jerry: Led to cleanliness concerns.

And our program offered, you know, some great products, technology to control the inventory, which allowed them to focus more on their patients instead of having to fool around with trying to manage the microfiber.

Jerry: Our program offered.

Jerry: Some great products technology to control, the inventory, which allowed them to focus more on their patients instead of having to fool around with trying.

Trying to manage the microfiber.

Speaker Change: Excuse me.

And I've got a couple other examples I thought might be helpful for the group. In our government sector, you know, we have, we just recently rolled out a first aid and AED rental program to a public library system in California, which is, you know, you wouldn't think of a public library system as being a great prospect for us, but it is. They realize that the value would bring to their employees.

Speaker Change: And then I've got a couple of other examples I thought might be helpful for for the group.

Todd Schneider: In our government sector, we just recently rolled out a first aid and AED rental program to a public library system in California, which is, you wouldn't think of a public library system as being a great prospect for us, but it is. They realized that the value it would bring to their employees and being prepared with the AEDs in case it was needed because the public's in their locations. And then lastly, I'll just share with you a little bit on education, a variety of wins there. We had a chemistry department at a nice-sized university in Virginia. They put all their educators and students in a lab coat program. Maintenance department at a university in California put all of their people in Carhartt uniforms, a rental program from us. They love the Carhartt.

In our government sector, we just recently rolled out a first aid and AED rental program to a public library system in California, which is, you wouldn't think of a public library system as being a great prospect for us, but it is. They realized that the value it would bring to their employees and being prepared with the AEDs in case it was needed because the public's in their locations. And then lastly, I'll just share with you a little bit on education, a variety of wins there. We had a chemistry department at a nice-sized university in Virginia. They put all their educators and students in a lab coat program. Maintenance department at a university in California put all of their people in Carhartt uniforms, a rental program from us. They love the Carhartt.

In our government sector.

Speaker Change: We have we just recently rolled out a first aid and AED rental program to a public library system in California, which is you wouldn't think of.

Speaker Change: Of our public library system as being a great prospect for us, but it is there.

Speaker Change: I realize that the value, we bring to their employees and being prepared with the aedes NK cell it was needed because the publics in there and their locations.

and being prepared with the AEDs in case it was needed because the public's in their location.

And then lastly, I'll just share it with you a little bit on education. A variety of wins there. We had a chemistry department at a nice size university in Virginia, they put all their educators and students and lab and a lab code program.

Speaker Change: Then lastly, I'll just share with you a little bit of an education.

Speaker Change: A variety of wins there.

Speaker Change: We had a chemistry department at a nice sized university in Virginia, They put all their educators and students in lab and our lab coat program.

maintenance department at a university in California.

Speaker Change: <unk>.

Speaker Change: Maintenance Department at a University in California could all of their people and carhartt uniforms.

could all their people in car heart uniforms rental program from us they they love the car heart and then the last item would be there's a dining facility at a university in Arizona.

Speaker Change: Our rental program from us they love the carhartt.

Todd Schneider: And then the last item would be there was a dining facility at a university in Arizona where they put all their culinary people in Chef Works, which is a big win for those folks. The branded programs with Carhartt and Chef Works were big wins. So I don't want to belabor it, but I thought I would just share a few wins because I know verticals are of interest to yourself, Ashish, but also plenty of other folks on the call.

And then the last item would be there was a dining facility at a university in Arizona where they put all their culinary people in Chef Works, which is a big win for those folks. The branded programs with Carhartt and Chef Works were big wins. So I don't want to belabor it, but I thought I would just share a few wins because I know verticals are of interest to yourself, Ashish, but also plenty of other folks on the call.

Speaker Change: And then the last item would be there was a dining facility at a university in Arizona, where they put all their culinary people in chef works, which is a big win for those folks the branded programs with carhartt and chef works, where big wins, So I don't want to belabor, it but I thought I'd just share a few wins because I know.

Speaker Change: Verticals are of interest to yourself Ashish, but also plenty of other folks on the call. Yes. The only other thing I might add as Todd just talked about we have so many ways to win in and clearly those verticals are growing faster than the average. So we still are seeing really good momentum in each of those.

Mike Hansen: Yeah, the only other thing I might add is, as Todd just talked about, we have so many ways to win, and clearly those verticals are growing faster than the average. So we still are seeing really good momentum in each of those.

Ashish Sabadra: That's great color, and thanks for sharing those wins. It does provide a lot more clarity on those verticals. If I can ask a quick follow-up, I was just wondering if you could share any update on your technology, the SmartTruck program, and particularly the partnership with Google, Verizon, and SAP, any updates on that front? Thanks.

That's a great color and thanks for sharing those events. It does provide a lot more clarity on the

Speaker Change: That's great color and thanks for sharing those events provider.

Provide a lot more clarity on those verticals and if I can ask a quick follow up I was just wondering if this.

And if I can ask a quick follow-up, I was just wondering if you could share any update on your technology, the smart trip program, and particularly the partnership with Google, Verizon, and SAP, any updates on that front? Thanks.

Speaker Change: If you could shed any update on your technology, the smartcard program and particularly the partnership a bit Google Verizon and our safety and any updates on that Capex.

Todd Schneider: Certainly. I think one of the things we have around here is we don't make money when the wheels are moving. We make money when the wheels stop. And so we're the way Mike described it. In total for our company, we grew revenues over 9%, but we only added 1% to our route structure in total. So that means we're spending more time with the customer, less time driving, which is better for our customers, better for our partners, and better for Cintas. So we're pleased with that. Our technology, and we still have plenty of room to go there. We're focused on bringing those efficiencies, extracting out the inefficiencies in our business. We sent out a note, a press release regarding our migration this quarter to the Google Cloud. That has been very successful for us.

You know, I think how one of the things we have around here so we don't make money when the when the wheels are moving, we make money when the when the wheel stop and.

Speaker Change: Certainly.

Speaker Change: Think.

Speaker Change: One of the things we have around here. So we don't make money when that when the wheels are moving we make money when that when the will stop and.

And so we're, the way Mike described it, you know, in total for our company, we grew revenues over 9%, but we only added 1% to our route structure in total. So that means we're spending more time with the customer, less time driving, which is better for our customers, better for our partners, and better for Sintos.

Speaker Change: And so we're the way Mike described it.

Speaker Change: In total for our company, we grew revenues over 9%, but we only added 1% to our route structure in total so.

That means we're spending more time with the customer.

Speaker Change: Less time, driving which is better for our customers better for our partners.

Speaker Change: And in Bedford for Cintas. So we're pleased with that our technology.

So, we're pleased with that our technology and we still have plenty of room to go there we're we're focused on bringing those efficiencies extracting out the inefficiencies in our business.

Speaker Change: We still have plenty of room to go there we're focused on bringing those efficiencies extracting out the inefficiencies in our business.

We sent out a note, a press release regarding our migration this quarter to the Google Cloud. That has been very successful for us. There's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure, so very important to us. Second item is over time, we believe we will, that'll be more cost effective for us.

Speaker Change: We sent out a note our press release regarding our migration this quarter to the Google cloud.

Speaker Change: That has been.

Speaker Change: A very successful for us there's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure so very important to us.

Todd Schneider: There's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure, so very important to us. Second item is, over time, we believe that'll be more cost-effective for us. And the third is it gives us access to Google's AI platform. So certainly in the very, very early innings, we just migrated, but we think that that will be able to help us longer term in making it more attractive, making it easier to do business with Cintas, making sure that we are positioning our people to be successful, to point them in the right direction, and leverage those types of tools.

There's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure, so very important to us. Second item is, over time, we believe that'll be more cost-effective for us. And the third is it gives us access to Google's AI platform. So certainly in the very, very early innings, we just migrated, but we think that that will be able to help us longer term in making it more attractive, making it easier to do business with Cintas, making sure that we are positioning our people to be successful, to point them in the right direction, and leverage those types of tools.

Speaker Change: Second item is who over time, we believe we will that will be more cost effective for us.

And the third is it gives us access to Google's AI platform. So, certainly in the very, very early innings, we just migrated, but we think that that will be able to help us longer term in making it more attractive, making it easier to do business with CentOS, making sure that we are positioning our people to be successful, to point them in the right direction and leverage that type of, those types of tools.

Speaker Change: Third is it gives us access to Google.

Speaker Change: AI platform so.

Speaker Change: Certainly in the very very early innings, we just migrated but we think that that will be able to help us <unk>.

Speaker Change: <unk> term in May.

Speaker Change: Making it more attractive and easier to do business with Centas, making sure that we are positioning our people to be successful.

Speaker Change: Point them in the right direction, and and leverage that type of those types of tools.

Operator: Our next question comes from Manav Patnaik from Barclays. Please go ahead, Manav.

And our next question comes from Manav Patnaik from Barclays Capital. Please go ahead manav.

our next question comes from Manaf Patnick from Barclays Capital. Please go ahead Manaf.

Ashish Sabadra: Thank you. Todd, just to follow up on all the wins and contracts you talked about, maybe I guess the question's more around the competitive environment versus is this just first-time outsourcers? Any trends, any changes you're seeing from that front, the new business percentage you called out before, but whether that's more market share or just first-time outsourcing?

Manav Patnaik: Thank you. Todd, just to follow up on all the wins and contracts you talked about, maybe I guess the question's more around the competitive environment versus is this just first-time outsourcers? Any trends, any changes you're seeing from that front, the new business percentage you called out before, but whether that's more market share or just first-time outsourcing?

Thank you. Todd, just to follow up, you know, on all the wins and contracts you talked about, maybe, you know, I guess the questions more on the competitive environment versus is this just, you know, first time outsourcers, any trends, any changes you're seeing, you know, from back front, you know, the new business.

Manav Patnaik: Thank you Todd just to follow up on all the wins and contract you talked about maybe not.

I guess the question is more on the competitive environment Places is this just first time outsourcers any trends any changes you're seeing from that front the new business.

percentage you've called up before, but whether that's more market share or just first-time outsourcing.

Manav Patnaik: Percentage of called that before but leather that small market share. We're just supposed in outsourcing.

Todd Schneider: Good morning, Manav. Great question. As Mike said, we win in many ways. We have been selling no programmers since the inception of my career, I can tell you that. We continue to. I'll just remind you, we service a little over a million businesses, but there's 16 million businesses in the US and Canada. So there's plenty of opportunity there. We like both. We certainly win some from the competitors. We like growing the pie. Then the examples I was giving, it's a mix, but in large part, it is they were either doing it in-house, meaning they were processing microfibers in-house, or they were telling their employees to go buy product. So there's different variations of no programmers, meaning some are just buying products and providing to their people and telling them to wear them.

Speaker Change: Good morning, Manav great question.

You know as Mike said we went in many ways we have been selling no programmers since the inception of my career I can tell you that and we continue to and I'll just remind you there's.

Speaker Change: As Mike said, we win in many ways.

Speaker Change: We have been selling no programmers since the inception of my career I can tell you that and we continue to.

Speaker Change: Remind you there is we service a little over 1 million businesses, but our 16 million businesses in the U S and Canada. So there's plenty of.

We service a little over a million businesses, but there's 16 million businesses in the US and Canada.

So there's plenty of opportunity there, and we like both, you know, we certainly win some from the competitors, we like growing the pie, and in the examples I was giving, it's a mix, but in large part it is.

Speaker Change: Opportunity there and we.

Speaker Change: We like both.

Speaker Change: We certainly win some from the competitors.

Speaker Change: We are we like growing the pie and.

And then the.

Speaker Change: The examples I was giving it's a mix but in large part it is.

They were either doing it in-house, meaning they were processing microfibers in-house or they were telling their employees to go buy products.

Speaker Change: They were either doing it in house.

Speaker Change: Meaning they were processing micro fibers in house or they were telling there.

Speaker Change: Our employees to go by product so.

So, you know, there's different variations of no programmers, meaning some are just, we're buying products and, and providing to their people and telling them to wear them, some of them they,

Speaker Change: There's different variations of no programmers, meaning some are just.

Speaker Change: We're buying products and providing to their people and telling them to wear them some of them late.

Todd Schneider: Some of them, they were just telling them to show up to work and look good. Nevertheless, we bring so much better consistent program identification, cleanliness, all these, and compliance are big drivers for our customers.

Some of them, they were just telling them to show up to work and look good. Nevertheless, we bring so much better consistent program identification, cleanliness, all these, and compliance are big drivers for our customers.

They were just telling them to show up to work and look good, but nevertheless, we bring so much better consistent program identification, cleanliness, all these and compliance are big drivers for our customers.

Speaker Change: They were just telling them that show up to work and look good.

Speaker Change: Nevertheless, we.

Speaker Change: We bring.

Speaker Change: So much better consistent program identification.

Speaker Change: Glenn Leanness, all these and compliance are big drivers for our customers.

Operator: Got it. And then just on the capital allocation front, I mean, the buyback number, one of the bigger quarters for a while now. I mean, is that any indication of the M&A market slowing down or just how we should think about that balance there?

Manav Patnaik: Got it. And then just on the capital allocation front, I mean, the buyback number, one of the bigger quarters for a while now. I mean, is that any indication of the M&A market slowing down or just how we should think about that balance there?

Speaker Change: Got it and then just on the capital allocation front ending the buyback number one.

Got it. And then just on the capital allocation front, I mean, the buyback number, you know, one of the bigger quarters for a while now. I mean, is that any indication of the M&A market slowing down or just how we should think about that balance?

Speaker Change: Glenn.

Glenn Leanness: The bigger quarters for a while now.

Glenn Leanness: Any indication of the M&A market slowing down and just how we should think about that balance.

Mike Hansen: Manav, no change in what we're seeing in M&A. Still, we're working the pipeline as best we can. We've made some nice acquisitions this year. From a buyback perspective, you've heard us speak to it being an opportunistic execution. That's what you saw this quarter as we think back about our first quarter results. We thought they were pretty good. The stock reacted a little bit negatively. We saw that as a nice opportunity, and we took advantage of it. So it was a good example during the quarter of an opportunistic execution of that buyback program. The beauty, Manav, as we speak about our capital allocation, we don't always have to choose, right? In the quarter, or maybe let's call it for the year, we've invested in the business, as we've talked about.

Monove, no change in what we're seeing in M&A, still we're working the pipeline as best we can. We've made some nice acquisitions this year.

Glenn Leanness: Manav.

Manav Patnaik: No change in what we're seeing in M&A still still.

Manav Patnaik: We're working the pipeline as best we can we've made some nice acquisitions this year.

From a buyback perspective, you've heard us speak to it being an opportunistic execution and that's what you saw this quarter as we think back about our first quarter results.

Manav Patnaik: From a buyback perspective, you've heard us speak to it being an opportunistic.

Manav Patnaik: Execution and that's what you saw this quarter.

Manav Patnaik: As we think back about.

Manav Patnaik: Our first quarter results.

and we thought they were pretty good. The stock reacted a little bit negatively, and we saw that as a nice opportunity, and we took advantage of it. So that's a, it was a good example during the quarter of an opportunistic execution of that buyback program, and the beauty monive as we speak about our capital allocation, we don't, we don't always have to choose right in the

Manav Patnaik: And we thought they were pretty good the stock.

Manav Patnaik: Reacted a little bit negatively and we saw that as a nice opportunity and we took advantage of it. So it was a good example, during the quarter on opportunistic execution of that buyback program and the beauty Manav as we speak about our capital allocation.

Manav Patnaik: We don't we don't always have to choose.

In the quarter or.

Or maybe let's call it for the year, you know, we've invested in the business as we've talked about our CAPX is up, which is important to us.

Manav Patnaik: Or maybe let's call it for the year.

Manav Patnaik: We've invested in the business as we've talked about our Capex is up which is important to us.

Mike Hansen: Our CapEx is up, which is important to us as a part of that investment. M&A is up from last year. Dividends are up 17% from last year. And we've been able to execute on the buyback program. And so when you hear us talk about the sort of the four levers of capital allocation, we've done them all, I think, nicely this year. And again, the beauty of our cash flow and our balance sheet is we don't really have to choose.

Our CapEx is up, which is important to us as a part of that investment. M&A is up from last year. Dividends are up 17% from last year. And we've been able to execute on the buyback program. And so when you hear us talk about the sort of the four levers of capital allocation, we've done them all, I think, nicely this year. And again, the beauty of our cash flow and our balance sheet is we don't really have to choose.

As a part of that investment M&A is up from last year dividends are up 17% from last year and we've been able to execute on the buyback program. So when.

Manav Patnaik: As a part of that investment.

Manav Patnaik: M&A is up from last year dividends are up 17% from last year, and we've been able to execute on the buyback program. So when when when you hear us talk about the sort of the four levers of capital allocation.

When you hear us talk about the sort of the four levers of capital allocation, we've done them all, I think, nicely this year.

Manav Patnaik: We've done them all I think.

Manav Patnaik: Nicely this year.

And again, the beauty of our cash flow and our balance sheet is we don't really have to queue.

Manav Patnaik: Again, the beauty of our cash flow and our balance sheet as we don't we don't really have to choose.

Todd Schneider: Mike, I would just add that we think we're being really good fiduciaries of our shareholders' investments. Mike mentioned all the levers. And the net-net of that is we still have great dry powder, which allows us to take on M&A of all shapes and sizes. And we're interested in that.

Mike, I would just add that, you know, we think we're being really good fiduciaries of our shareholders' investments. Mike mentioned all the levers, and the net net of that is we still have great dry powder which allows us to to take on M&A of all shapes and sizes, and we're interested in that.

Speaker Change: Mike I would just add that we think we are being really good fiduciaries of our shareholders' investments Mike mentioned all the levers.

Speaker Change: And.

Speaker Change: The net net of that is we still have great dry powder.

Speaker Change: Which allows us to.

Speaker Change: To take on M&A of all shapes and sizes and we're interested in that.

Operator: Our next question comes from Joshua Chan from UBS. Please go ahead, Joshua.

And our next question comes from Joshua Chen from UBS. Please go ahead Joshua.

Ashish Sabadra: Hi, good morning. Thanks for taking my questions. So Todd, you mentioned the opening of the clean rooms. I was just wondering if you can kind of frame for us what you see as the attractive parts of this business, how is it attractive, and what kind of opportunity does it mean for Cintas going forward in the clean rooms?

Joshua Chan: Hi, good morning. Thanks for taking my questions. So Todd, you mentioned the opening of the clean rooms. I was just wondering if you can kind of frame for us what you see as the attractive parts of this business, how is it attractive, and what kind of opportunity does it mean for Cintas going forward in the clean rooms?

Hi, good morning. Thanks for taking my questions. So Todd, you mentioned the opening of the clean rooms. I was just wondering if you can kind of frame for us, you know, what you see as the attractive parts of this business, how is it attractive and what kind of opportunity does it mean for, for syntax going forward in the.

Joshua Chen: Hi, good morning, Thanks for taking my questions.

Joshua Chen: So Todd you mentioned the opening of the clean rooms I was just wondering if you can kind of frame for us what you saw.

As the attractive parts of this business how is it attractive and what kind of opportunity does it mean for for Cintas going forward in the Cleveland.

Todd Schneider: Thanks for the question, Josh. Yeah, the clean room business, it's an attractive sector for us. I mentioned pharmaceutical and biotechnology companies. And it seems like there's more and more every year that need that level of cleaning, that level of cleanliness. So we think that bodes well for that business in the future. And there has been. You've seen some momentum on onshoring in that area. And we want to make sure that we have the appropriate capacity to serve our current customers and that we're prepared for the future as well. So we like the trends in that business, and we like the business.

Thanks for the question, Josh. Yeah, the clean room businesses, it's an attractive sector for us.

Speaker Change: Thanks for the question Josh Yes.

Speaker Change: Yes, the cleaner businesses, it's an attractive sector for us.

I mentioned pharmaceutical and biotechnology companies, and it seems like there's more and more every year that need that level of cleaning, that level of cleanliness. So that is, we think that bodes well for that business in the future.

Speaker Change: Yeah.

Speaker Change: I mentioned pharmaceutical and biotechnology companies.

Speaker Change: It seems like there is more and more every year that need that level of cleaning that level of cleanliness. So that is.

We think that bodes well for that business in the future and.

And, you know, there has been, you've seen some momentum on on-shoring in that area and we want to make sure that we have the appropriate capacity to serve our current customers and that we're prepared for the future as well. So we like to trends in that business and we like the business.

Speaker Change: There has been <unk> seen some momentum on onshoring in that area and we want to make sure that.

Speaker Change: We have the appropriate capacity to serve our current customers and that we're prepared for the future as well so we like to trends in that business and we like the business.

Operator: Great. Thank you for the color there, Todd. If I can follow up with the margin question, I guess if in the future the energy favorability were to lessen, could you talk to the opportunities that you still have to drive margin expansion and the targeted incremental margins going forward without as much energy tailwind?

Joshua Chan: Great. Thank you for the color there, Todd. If I can follow up with the margin question, I guess if in the future the energy favorability were to lessen, could you talk to the opportunities that you still have to drive margin expansion and the targeted incremental margins going forward without as much energy tailwind?

Great. Thank you for the call there, Todd. And in fact, if I can follow up with the margin question.

Speaker Change: Great. Thank you for the color there Todd.

Speaker Change: Can follow up with the margin question.

I guess if in the future, you know, the energy favorability were to lessen, could you talk to the opportunities that you still have to drive margin expansion and, you know, the targeted incremental margins going forward, you know, without as much energy tailing.

Speaker Change: I guess if in the future.

The energy favorability, where to lessen could you talk to the opportunities that you still have that drive margin expansion and targeted incremental margins going forward.

Speaker Change: As much energy tailwind.

Todd Schneider: Yeah, great question. Yeah. So we recognize that energy prices go up, they go down. But one thing that's going to be consistent is we're going to be focused on extracting out inefficiencies in our route structure and in our production facilities. So that will be really important to us. And we think there's certainly ample opportunity there still to go. We've talked about the SmartTruck technology. That's been impactful to us in many ways. But what's also impactful is, as Mike mentioned, our Six Sigma team of professionals, our engineering professionals, and then layering in with that technology allows us to have a centralized visibility into our operations at a level that we've never had before in the history of the company. This technology allows us. And it allows us to maximize our labor, our equipment, ultimately our energy spend.

Yeah, great question. Yeah, so we recognize that

Speaker Change: Yes, great question, yes. So.

Speaker Change: We recognize that.

You know, energy prices go up and they go down, but one thing that's going to be consistent is we're going to be focused on extracting out inefficiencies in our, in our route structure and in our production facilities. So, so that will be really important to us and.

Energy prices go up they go down, but one thing is going to be consistent as we are going to.

Be focused on extracting out inefficiencies in our in our route structure and in our production facilities. So.

Speaker Change: So that will be really important to us and we think there is certainly ample opportunity there still to go we talked about the smart truck technology, that's been impactful to us.

We think there's certainly ample opportunity there still to go we've talked about the smart truck technology. That's been impactful to us in many ways

Speaker Change: And in many ways.

But what's also impactful is, as Mike mentioned, our Six Sigma team of professionals, our engineering professionals, and then layering in with that technology allows us to have

Speaker Change: But what's also impactful is.

Speaker Change: As Mike mentioned, our six Sigma team of professionals, our engineering professionals, and then layering in with that technology allows us to have.

a centralized visibility into our operations at a level that we've never had before.

Speaker Change: Our centralized visibility into our operations at.

Speaker Change: At a level that we've never had before.

In the history of the company This technology allows us so and it allows us to maximize Our labor our equipment Ultimately our energy spend so and we're we're focused on extracting out those inefficiencies so that we can Manage it moving forward. We love when energy goes costs go down But we recognize those markets will move but we're gonna be focused on extracting out those inefficiencies You

Speaker Change: The history of the company.

Speaker Change: Technology allows us so and it allows us to maximize.

Our labor our equipment.

Speaker Change: Ultimately our energy spend so we're focused on extracting out those inefficiencies.

Todd Schneider: We're focused on extracting out those inefficiencies so that we can manage it moving forward. We love when energy costs go down, but we recognize those markets will move. We're going to be focused on extracting out those inefficiencies.

We're focused on extracting out those inefficiencies so that we can manage it moving forward. We love when energy costs go down, but we recognize those markets will move. We're going to be focused on extracting out those inefficiencies.

Speaker Change: So that we can.

Speaker Change: Manage it moving forward.

Loved when energy goes cost go down.

Speaker Change: But we recognize those markets will move, but we're going to be focused on extracting out those inefficiencies.

Operator: Our next question comes from Heather Balsky from Bank of America. Please go ahead, Heather.

Speaker Change: And our next question comes from Heather <unk> from Bank of America. Please go ahead Heather.

Speaker Change: Okay.

Jared Mattingly: Hi, sorry about that. Thank you for taking my question. First question with regard to the programmers and non-programmers, as we're further and further out from the COVID period, are you still seeing the shift in demand in terms of more non-programmers looking to outsource, or do you think it's starting to normalize back to pre-COVID trends?

Heather Balsky: Hi, sorry about that. Thank you for taking my question. First question with regard to the programmers and non-programmers, as we're further and further out from the COVID period, are you still seeing the shift in demand in terms of more non-programmers looking to outsource, or do you think it's starting to normalize back to pre-COVID trends?

Hi, sorry about that. Thank you for taking my question at first question with regards to the programmers and non programmers as we're further and further out from the COVID period. Are you still seeing the shift in demand in terms of more non programmers looking to outsource or do you think it's starting to normalize back to pre.

Heather: Hi, sorry about that thank you for taking my question.

Heather: First question with regard to the programmers and non programmers.

Heather: Further and further out from the Covid period are you.

Heather: Yes.

Heather: Demand.

Heather: The more non programmers looking to outsource.

Heather: Or do you think its starting to normalize back to pre COVID-19 trends.

Todd Schneider: Well, Heather, it's a great question. I'll start, and Mike, feel free to chime in. There's various reasons why a prospect would turn into a customer, going from a no programmer to a customer. One of them is, "Hey, we'd like to outsource it because we're not very good at it," or, "We're not, we're struggling to staff, and we're struggling to find people to manage this." So that still continues. But there are other reasons. It might be we don't like the image that we're portraying. We don't like the lack of identification. We don't like the lack of compliance. You can provide them, and we know that they're hygienically cleaned. So there's many different motives. One of it might be, "Hey, we can't staff, and we need help." And we still see that, frankly.

Well Heather, it was a great question. I'll start. Mike, feel free to chime in.

Speaker Change: Well Heather it's a great question I'll start Mike feel free to chime in.

There's various reasons why a prospect would turn into a customer, going from a no-programmer to a customer. One of them is, hey, you know, we're, we'd like to outsource it because we're not very good at it or we're not, we don't have, we're struggling to staff and we're struggling to find people to manage this, so that still continues.

Speaker Change: There's various reasons why.

Speaker Change: A prospect would turn into a customer we're going from no programmers to a to a to a customer one of them is hey, we're.

Speaker Change: We'd like to outsource it because we're not very good at it or we're not.

Speaker Change: We don't have we are struggling to staff and we're struggling to find people that manage this so that still continues.

But there's our other reason. So it might be we don't like the, you know, the image that we're portraying. We don't like the lack of identification. We don't like the lack of compliance. You can provide them and we know that they're hygienically cleaned. So there's many different motives. One of it might be, hey, we can't staff and we need help. And we still see that, frankly, and it allows

Speaker Change: But there are other reasons so it might be we don't like the image that we are.

Speaker Change: Our training, we don't like the lack of identification, we don't like the the lack of compliance.

Speaker Change: You can provide them in and we know that Theyre hygienically cleans, so theres many different motives.

Speaker Change: One of it might be.

Speaker Change: We can't staff and we need help.

And we still see that frankly, and it allows our customers to focus on what's most important to them taking care of their customers their patients their guests wherever it is instead of having to manage through these various programs.

Todd Schneider: It allows our customers to focus on what's most important to them, taking care of their customers, their patients, their guests, whatever it is, instead of having to manage through these various programs.

It allows our customers to focus on what's most important to them, taking care of their customers, their patients, their guests, whatever it is, instead of having to manage through these various programs.

Our customers to focus on what's most important to them, taking care of their customers, their patients, their guests, whatever it is, instead of having to manage through these various programs.

Mike Hansen: Heather, the non-programmers still, we get more than 60% of our new business comes from non-programmers. Your reference to the pandemic might be, we did certainly in the early days of the pandemic see an increase in personal protective equipment and things like hand sanitizer. Those have normalized back to what we would call normal and ongoing levels. So that might be the only change that we had, and back to normal.

Heather, the no programmers, it's still, we get more than 60% of our new business comes from no programmers.

Speaker Change: Heather the.

Speaker Change: No programmers.

Speaker Change: Still we get.

Speaker Change: More than 60% of our new business comes from no programmers at your reference to the pandemic might be.

Your reference to the pandemic might be we did certainly in the early days of the pandemic see a an increase in personal protective equipment.

Speaker Change: We did certainly in the early days of the pandemic CA.

An increase in personal protective equipment.

And things like hand sanitizer, those have normalized back to what we would call normal and an ongoing levels. So that might be the only change that that we had and back to normal.

Speaker Change: Things like hand, sanitizer those have normalized.

Speaker Change: Back to what we would call.

Speaker Change: <unk>.

Speaker Change: Normal and an ongoing levels so.

Speaker Change: That might be the only change that we had and back to normal.

Jared Mattingly: Thank you. And then on the margin front, we're just kind of curious, when you think about, you talked earlier about opportunities for efficiencies and further productivity. When you think about the source of those savings, how much are just organic Six Sigma efforts, how much is coming from your SAP? And are there still G&K synergy or opportunities that you're kind of benefiting from? Thanks.

Heather Balsky: Thank you. And then on the margin front, we're just kind of curious, when you think about, you talked earlier about opportunities for efficiencies and further productivity. When you think about the source of those savings, how much are just organic Six Sigma efforts, how much is coming from your SAP? And are there still G&K synergy or opportunities that you're kind of benefiting from? Thanks.

Speaker Change: Okay.

Thank you. And then on the margin front, we're just kind of curious when you think about, you talked earlier about opportunities for efficiencies and further root productivities. When you think about the source of the savings, how much are just organic,

Speaker Change: Thank you and then on the margin front.

Speaker Change: Kind of curious when you think about you talked earlier about opportunities for efficiencies.

Speaker Change: Further productivity when you think about the source of the savings how much or just.

Organic.

Speaker Change: Six Sigma effort, how much is coming from your S&P and are there still TNK synergy opportunities that youre benefiting from.

stigma, effort, how much is coming from your SAP, and are there still G in case, energy, or opportunities that you're gonna benefit from?

Speaker Change: Okay.

Todd Schneider: Heather, it's a good question. We don't really discern the difference between our Six Sigma team, our engineering team, and our technologies. They all have to work, be orchestrated appropriately to get the efficiencies. That's exactly what we're doing. Everybody has to be involved, and that's what produces the great results. As for G and K, yeah, we're now, I think, about six and a half years since we've acquired, if my math is correct. Yeah, I wouldn't say that there's anything left on the bone there.

Speaker Change: Heather it's a good question.

We don't really discern the difference between our Six Sigma team, our engineering team, and our technologies. They all have to work, be orchestrated appropriately to get the efficiencies.

Heather: We don't really discern the difference between our six Sigma team, our engineering team and our technologies are they all have to work.

Heather: Yes.

Heather: Orchestrated appropriately to get the efficiencies so.

And that's exactly what we're doing. So, everybody has to be involved and that's what produces the great results. As for G&K, yeah, we've now, we're, I think, about six and a half years since we acquired. If my math is correct, so.

Heather: And that's exactly what we're doing so everybody has to be <unk>.

Heather: Involved and and that's what produces the great results.

Heather: As for GNK.

Heather: Yes.

Heather: Now we are.

Heather: I think about six five years.

Since we've since we acquired it.

Heather: If my math is correct so.

Yeah, I wouldn't say that there's anything left on the bone there.

Speaker Change: Yes, I Wouldnt say that Theres anything left on the bone there.

Operator: Our next question comes from Andy Whitman from RW Baird. Please go ahead, Andy.

Operator: Our next question comes from Andy Wittman from RW Baird. Please go ahead, Andy.

Speaker Change: And our next question comes from Andy Wittmann from RW Baird. Please go ahead Andy.

Ashish Sabadra: Yeah, great. Thanks. Good morning, and thank you for taking my questions. I guess I just wanted to ask on the outlook a little bit here, Mike. The second half total revenue guidance is in the 7% range at the midpoint against an organic 9% quarter here. So a degree of deceleration, I guess that was implicit in your previous guidance as well. But just thought maybe I'd give you a chance to elaborate a little bit more on that, talk about what you're seeing in the macro, and if that's just you guys being kind of your normal prudent approach, or if there's something that we should be considering.

Andy Wittman: Yeah, great. Thanks. Good morning, and thank you for taking my questions. I guess I just wanted to ask on the outlook a little bit here, Mike. The second half total revenue guidance is in the 7% range at the midpoint against an organic 9% quarter here. So a degree of deceleration, I guess that was implicit in your previous guidance as well. But just thought maybe I'd give you a chance to elaborate a little bit more on that, talk about what you're seeing in the macro, and if that's just you guys being kind of your normal prudent approach, or if there's something that we should be considering.

Yeah, great. Thanks. Good morning and thank you for taking my questions. I guess I just wanted to ask on the outlook a little bit here, Mike.

Yeah, great. Thanks, Good morning, and thank you for taking my questions I guess I just wanted to ask on the outlook a little bit here Mike.

The second half, total revenue guidance is in the 7% range at the midpoint against an organic 9% quarter here. So a degree of deceleration, I guess that was implicit in your previous guidance as well, but just thought maybe I'd give you a chance to elaborate a little bit more on that, talk about what you're seeing in the macro, if that's just you guys being kind of your normal prudent approach, or if there's something that we should be considering.

Mike Hansen: Second half total revenue guidance is in the 7% range.

Mike Hansen: The mid point against an organic 9% quarter here. So a degree of deceleration I guess that was implicit in your previous guidance as well but.

Speaker Change: Thought maybe give you a chance to elaborate a little bit more on that talk about what youre seeing in the macro if that's just you guys being kind of your normal prudent approach or if theres something that we should be considering.

Mike Hansen: Andy, I'd lead with it's our normal prudent approach. When you think about where we are, we've talked a little bit already about the growth is still good, momentum is good. So we like where the business is going. The range for the back half of the year certainly does imply a little bit over 7% at the midpoint to a little over 8% at the high point. We like that range. The cadence is good for us, as you know. But look, as we look into calendar 2024, there certainly is a little bit of uncertainty as to what the new economy may bring, what the Fed movements may bring. So we think it is wise to be prudent as we look out.

Andy, I lead with it's our normal prudent approach and when you think about where we are, we've talked a little bit already about the growth is still good, momentum is good, and so we like where the business is going, the range for the back half of the year certainly does imply a little bit over 7% at the midpoint, a little over 8% at the high point.

Andy.

Andy Wittmann: Lead with it's it's our normal prudent approach and when you think about where we are.

Andy Wittmann: We've talked a little bit already about the growth is still good momentum is good.

And so we like where the business is going.

They either range for the back half of the year.

Does certainly does imply a little bit over 7% at the midpoint to eight.

All over 8% at the at the high point.

We like that range, the cadence is good for us, as you know, but, you know, look, as we look into calendar 24, there certainly is a little bit of uncertainty as to what the new economy may bring, what the Fed movements may bring. And so, we think it is wise to be prudent as we look out. Great. That's my only question for today. Have a Merry Christmas, guys.

We like that range. The cadence is good for us as you know but.

Look as we as we look into calendar 'twenty four there certainly.

Andy Wittmann: Is a little bit of uncertainty as to what the new economy may bring what the fed movements may bring and so we think it is wise to be prudent as we look out.

Ashish Sabadra: Great. That's my only question for today. Have a Merry Christmas, guys.

Andy Wittman: Great. That's my only question for today. Have a Merry Christmas, guys.

Speaker Change: Great. That's my only question for today have a Merry Christmas guys.

Todd Schneider: Thank you.

Mike Hansen: Thank you, Andy.

Speaker Change: Thank you thank you Andy.

Todd Schneider: Thank you, Andy.

Operator: Our next question comes from George Tong from Goldman Sachs. Please go ahead, George.

Speaker Change: And our next question comes from George Tong from Goldman Sachs. Please go ahead George.

George Tong: Hi, thanks. Good morning. Earlier, you mentioned that business momentum was good, volumes were robust in the quarter. Can you provide more color on overall customer budget trends, customer sentiment, and any changes that you might be seeing in the sales cycle?

Hi, thanks. Good morning. Earlier you mentioned that business momentum was good, volumes were robust in the quarter. Can you provide more color on overall customer budget trends and customer sentiment and any changes that you might be seeing in the sales cycle?

George Tong: Hi, Thanks, good morning.

George Tong: Earlier, you mentioned that business momentum was good volumes were robust in the quarter can you provide more color on overall customer budget trends in customer sentiment and any changes that you might be seeing in the sales cycle.

Todd Schneider: George, good morning, George. Forward-looking, as Mike said, there's always. We're not trying to prognosticate exactly how our customers will react to the turning of the calendar year. But we're not seeing any change in sales cycles. And we haven't seen a change in our customer base and how they're reacting to what's going on in the marketplace. So kind of business has been consistent. And it's more what Mike referred to, the turn of the calendar year. And we'll see how businesses react coming out of the holidays.

Speaker Change: George we are good.

George Tong: Morning, George.

Forward-looking, as Mike said, you know, there's always, you know, we're not trying to prognosticate exactly how our customers will react to the turning of the calendar year, but we're not seeing any change in sales cycles, and we haven't seen a change in our customer base and how they're reacting to what's going on in the marketplace. So, kind of business has been consistent.

George Tong: Yes.

George Tong: Forward looking as Mike said, there's always.

Speaker Change: We're not trying to prognosticate.

Speaker Change: Exactly how our customers will react to the turning of the calendar year.

Speaker Change: But we're not seeing any change in.

Speaker Change: And sales cycles, and we haven't seen a change in our.

Speaker Change: And our customer base in there.

Speaker Change: How they are reacting to whats going on in the marketplace. So it's kind of.

Speaker Change: Business has been consistent and.

and it's more what Mike referred to the turning of the calendar year and we'll see how businesses react coming out of the holiday.

Speaker Change: It's more what Mike referred to the turn of the calendar year, and we'll see how businesses react coming out of <unk>.

Speaker Change: Holidays.

George Tong: Got it. That's helpful. Also, you mentioned cross-selling was good in the quarter. Can you elaborate more on cross-selling trends that you're seeing and which areas you're seeing most amount of bundling or upsell, cross-sell from?

And also you mentioned cross-selling was good in the quarter. Can you elaborate more on cross-selling trends that you're seeing and which areas you're seeing most amount of bundling or upsell, cross-sell from?

Speaker Change: Got it that's helpful. And also you mentioned cross selling was good in the quarter can you elaborate more on cross selling trends that youre seeing in which areas you see the most amount of bundling or sell.

Speaker Change: <unk> cross sell from.

Todd Schneider: Yeah, George, cross-sell is an important component of our growth. The nature of it is we're having good success across all of our areas of our business. We're blessed to be in a position where our customers, fortunately, they really like us. They like our relationships. We have people in their businesses on a really frequent basis, mostly on a weekly basis. So that means we have eyes, ears, and minds in their business. We can help. It doesn't matter to us what a customer might lead with, whatever they're interested in, but then we will quickly pivot, and we can help them in many ways.

Yeah, George, cross cell is an important component of our growth.

Speaker Change: Hey, George Cross sell is.

Speaker Change: Jim.

Speaker Change: It's an important component of our growth.

<unk>.

Speaker Change: The nature of it is we're having good success across all of our areas of our business.

You know, we're blessed to be in a position where our customers, fortunately, they really like us, they like our relationships. We have people in their businesses on a really frequent basis, mostly on a weekly basis.

Speaker Change: We're blessed to be in a position where our customers. Fortunately they really like us they like our relationships we have people in their businesses on a really frequent basis, mostly on a weekly basis. So.

So they, we have, so that means we have eyes, ears and minds in their business and we can help and it doesn't matter to us, you know, what a customer might lead with whatever they're interested in, but then we will quickly pivot and that we can help them in many ways.

Speaker Change: And we have so that means we have eyes ears in mines in their business and we can help and.

Speaker Change: Sure.

Doesn't matter to us.

Speaker Change: What a customer might lead with whatever they're interested in but then we will quickly pivot in that we can help them in many ways. So but just the nature of the size of the rental division is such that because there's so many customers there.

So, but just the nature of the size of the rental division is such that because there's so many customers there, there's plenty of opportunity for our first aid and fire business to cross on to that just because of the numbers there. But nevertheless, it's working quite well across all the organization. We share leads, we share thoughts.

Todd Schneider: But just the nature of the size of the rental division is such that because there are so many customers there, there's plenty of opportunity for our first aid and fire business to cross-sell into that just because of the numbers there. But nevertheless, it's working quite well across all of our organization. We share leads, we share thoughts, and we make sure that the customer is well taken care of.

But just the nature of the size of the rental division is such that because there are so many customers there, there's plenty of opportunity for our first aid and fire business to cross-sell into that just because of the numbers there. But nevertheless, it's working quite well across all of our organization. We share leads, we share thoughts, and we make sure that the customer is well taken care of.

Speaker Change: There's plenty of opportunity for our first aid and fire business.

Speaker Change: To cross sell into that.

Speaker Change: Just because.

Speaker Change: The numbers there, but nevertheless, it's.

Speaker Change: It's working quite well across all of our organization, we share leads we share thoughts.

And we make sure that the customer is well taken care of.

Speaker Change: And and we make sure that the customer is well taken care of.

Operator: Our next question comes from Tim Mulroney from William Blair. Please go ahead, Tim.

Speaker Change: And our next question comes from Tim Mulrooney from William Blair. Please go ahead Tim.

Speaker Change: Okay.

Timothy Michael Mulrooney: Yeah, good morning. I just wanted to ask one question. Pricing now normalized back to the 2% range. I mean, that means your organic growth was comprised of approximately 7 points of volume. I was just hoping you could dig into that a little bit more as it was a little stronger than I think most of us were expecting. Did you see an uptick in retention? Did you have a strong quarter with that cross-sell or maybe new account growth? Any details would be helpful.

Tim Mulrooney: Yeah, good morning. I just wanted to ask one question. Pricing now normalized back to the 2% range. I mean, that means your organic growth was comprised of approximately 7 points of volume. I was just hoping you could dig into that a little bit more as it was a little stronger than I think most of us were expecting. Did you see an uptick in retention? Did you have a strong quarter with that cross-sell or maybe new account growth? Any details would be helpful.

Yeah, good morning. I just wanted to ask one question, you know, pricing.

Tim Mulrooney: Yes, good morning, I just wanted to ask one question pricing.

not normalized back to the 2% range. I mean, that means your organic growth was comprised of approximately seven points of volume. I was just hoping you could dig into that a little bit more.

Tim Mulrooney: Normalized back to the 2% range I mean that means your organic growth was comprised of approximately seven points of volume.

Speaker Change: Hoping you could dig into that a little bit more.

a little stronger than I think most of us were expecting. Did you see another

Speaker Change: And there was a little stronger than I think most of US were expecting did you see.

Speaker Change: An uptick in retention.

you have a strong quarter with that, that cross cell or maybe new account growth and any details would be helpful.

Speaker Change: Did you have a strong quarter with that that cross sell or maybe new account growth or any details would be helpful.

Todd Schneider: Yeah, good morning, Tim. So our new business is robust. As I mentioned, retention levels are very good, and our cross-sell is very good. And the pricing is still lower than last year. It is higher than historical, but it's certainly getting much closer to historical. But when you think about that, it is, our various inputs to growth are all performing well, and we expect that to continue.

Speaker Change: Yeah, Good morning, Tim So our.

Our new business is robust as I mentioned retention levels are very good and our cross-sell is very good and the pricing is still, it's lower than last year.

Speaker Change: Our new businesses as robust as I mentioned retention levels are very good.

Speaker Change: And our cross sell is very good and in the pricing is.

Speaker Change: Still.

Speaker Change: It's lower than last year.

It is higher than historical, but it's certainly getting much closer to historical, so when you think about that, our various inputs to growth are all performing well, and we expect that to continue.

Speaker Change: It is higher than historical but it is.

<unk>.

Certainly getting much closer to historical so.

Speaker Change: But when you. So when you think about that it is.

Speaker Change: Our various inputs to growth are all performing well and we.

Speaker Change: We expect that to continue and as we talk we win and a lot of ways.

Mike Hansen: Yeah, and as we talk, we win in a lot of ways. And the momentum in the rental business is still really good. But we also saw in the quarter some really nice acceleration in first aid and safety from 11% in Q1 to 12.7% organically in Q2. And we saw some nice improvement in fire, where we went from a little over 14% in Q1 to 17.8% in Q2. So we just see some really good momentum in all of our businesses. And particularly, those two had some really nice performance in Q2.

And as we talk, we win in a lot of ways, and the momentum in the rental business is still really good, but we also saw in the quarter some really nice acceleration in first aid and safety from 11% in the first quarter to 12-7, organically in the second quarter.

Speaker Change: And.

Speaker Change: The momentum in our rental business is still really good but we also saw in the quarter. Some really nice acceleration in first aid safety from 11% in the first quarter to 12, 7% organically in the second quarter and we saw some nice improvement in fire, where we went from a little over <unk>.

And we saw some nice improvement in fire where we went from a little over 14 in the first quarter to 17.8 in the second quarter. So we just see some really good momentum in all of our businesses and particularly those two had some really nice performance in the second quarter.

Speaker Change: <unk> in the first quarter to $17 eight in the <unk>.

Second quarter so.

Speaker Change: We just see some really good momentum in all of our businesses and particularly those two had some really nice.

Performance in the second quarter.

Timothy Michael Mulrooney: Yeah, I did notice that re-acceleration across both those businesses. That's helpful color. Thanks, guys. Happy holidays.

Tim Mulrooney: Yeah, I did notice that re-acceleration across both those businesses. That's helpful color. Thanks, guys. Happy holidays.

Speaker Change: Yes, I did notice that reacceleration across both those businesses. That's that's helpful color. Thanks, guys happy holidays.

Yeah, I did notice that reacceleration across both those businesses. That's that's helpful color. Thanks guys. Happy holidays. Thank you, Tim. You as well.

Todd Schneider: Thank you, Tim. You as well.

Speaker Change: Thank you Tim as well.

Operator: And our next question comes from Andrew Steinerman from J.P. Morgan Securities. Please go ahead, Andrew.

Operator: And our next question comes from Andrew Steinerman from JPMorgan Securities. Please go ahead, Andrew.

And our next question comes from Andrew Steinman from Jpmorgan Securities. Please go ahead Andrew.

Andrew Steinerman: Hi. Could you just mention if your add stops directionally in the Uniform Rental business was up, down, or flat recently?

Hi, could you just mention if your ad stops directionally and the uniform rental business was up, down, or flat recently?

Hi could you just mention if you add stops directionally in the uniform rental business was up down or flat recently.

Todd Schneider: Good morning, Andrew. Our add/stop metrics have been pretty consistent. We haven't seen much of a change in our customer base. And so I'd say that's how I would describe it. We see still positive trends in our add/stop metrics. But that's pretty consistent as it has been for the last six to 12 months.

Good morning, Andrew. Our stop metrics are have been pretty consistent. We haven't seen much of a change in our in our customer base, and so I'd say that's how I would describe it, you know,

Speaker Change: Good morning, Andrew.

Andrew: Our add stop metrics are have been pretty consistent.

Andrew: Haven't seen much of a change in our in our customer base.

Andrew: And.

So I'd say, that's how I would describe it.

Yes.

Andrew: We see still positive trends in our in our add stop metric <unk>.

We see still positive trends in our ad stop metrics, but that's pretty consistent as it has been for the last six to 12 months. Okay. Thank you very much. Yes, sir. Thank you.

Andrew: But that's pretty consistent as it has been for the last.

Andrew: Six months to 12 months.

Andrew Steinerman: Okay. Thank you very much.

Okay. Thank you very much.

Todd Schneider: Yes, sir. Thank you.

Yes, Sir thank you.

Operator: Our next question comes from Jasper Bibb from Truist Securities. Please go ahead, Jasper.

Speaker Change: And our next question comes from Jasper Bibb from true true with some security. Please go ahead Jasper.

George Tong: Hey, good morning, guys. You mentioned that you're on your tailwind from energy, but was just hoping to get some additional color on other cost inputs, I guess specifically labor and materials?

Jasper Bibb: Hey, good morning, guys. You mentioned that you're on your tailwind from energy, but was just hoping to get some additional color on other cost inputs, I guess specifically labor and materials?

Jasper Bibb: Hey, Good morning, guys, you mentioned that year on year tailwind from energy, but was just hoping to get some additional color on other cost inputs, I guess, specifically labor and materials.

Hey, good morning, guys. You mentioned that year on year tail went from energy, but was just hoping to get some additional color on other cost inputs. I guess, specifically labor.

Todd Schneider: Yeah, I'll start, Jasper. Good morning. We're seeing, just like you're seeing with inflation in total, we're seeing that come down. It's never coming down as fast as we like, but we are seeing it. Cotton has stabilized. We're seeing freight come down, and that's important to us. And the labor market, it's easier. It's still not easy, but it is easier. So I think that probably the right way to think about it would be as the labor market eases, then that will lessen pressure on wage growth as well.

Yeah, I'll start. Jasper, good morning. You know, we're seeing, just like you're seeing with inflation in total, we're seeing that come down. It's never coming down as fast as we like, but we are seeing it. You know, cotton is stabilized. We're seeing freight come down. And that's important to us.

Speaker Change: Yes, I'll start.

Speaker Change: Good morning.

Speaker Change: We're seeing just like Youre seeing with the inflation in total we are seeing that.

Speaker Change: Come down.

Speaker Change: It's never coming down as fast as we like.

Speaker Change: But we are seeing it.

Speaker Change: Cotton has stabilized.

Speaker Change: Seeing freight come down.

Speaker Change: And that's important to us and.

And the labor market is, it's easier, it's still not easy, but it is easier. So I think that probably the right way to think about it would be, you know, as the labor market eases and that will lessen pressure on wage growth as well.

Speaker Change: And the labor market is it's easier it's still not easy, but it is easier. So so I think that probably the right way to think about it would be.

Speaker Change: As the labor market eases.

Speaker Change: That will lessen pressure on.

Speaker Change: Wage growth as well.

George Tong: Thanks. And then wanted to follow up on first aid. Operating margins there were really strong in the first half. Should we think about these low 20% levels as sustainable going forward? And would you say there's anything that's changed there that's unlocked another leg of operating margin expansion year to date?

Jasper Bibb: Thanks. And then wanted to follow up on first aid. Operating margins there were really strong in the first half. Should we think about these low 20% levels as sustainable going forward? And would you say there's anything that's changed there that's unlocked another leg of operating margin expansion year to date?

Thanks, and then I wanted to follow up on on first aid operating margins there. We're really strong in the first half. Should we think about these like low 20% levels of sustainable going forward? And would you say there's anything that's changed there that's unlocked another leg of operating margin expansion here today?

Speaker Change: Thanks, and then wanted to follow up on per stayed operating margins. There were really strong in the first half should we think about these like low 20% levels are sustainable going forward and would you say there is anything thats changed there thats unlocked another leg of operating margin expansion year to date.

Mike Hansen: Sure. Well, Jasper, we have seen some nice performance in that business. And I spoke to a few of them where from a margin perspective, first of all, the value that we sell with, nothing's more important than the health and safety of your employees, is really still resonating well. And so our growth has been really good in that business. We talked a little bit in the opening comments about sort of the recurring revenue streams of AED rentals, our eyewash stations, and our WaterBreak. And these have been great businesses for us. The growth has been really good, and the margins are great for us. Many times, these are add-on products to existing customers. But in all three of them, we install, and then we have a recurring service program that goes on after that. And again, it leads to really nice stickiness and also nice margins.

Sure, uh, uh, Jasper, we have seen some nice performance in that business and, um,

Speaker Change: Sure.

Jeff where we have seen some nice performance in that business in.

I spoke to a few of them where, from a margin perspective, first of all, the value that we sell with, nothing's more important than the health and safety of your employees, is really still resonating well, and so our growth has been really good in that business. We talked a little bit in the opening

Speaker Change: I spoke to a few of them were from a from a margin perspective first of all.

Speaker Change: The value that we.

That we sell with.

Speaker Change: Nothing is more important than the health and safety of our employees is really still resonating well and so our growth has been really good in that business, we talked a little bit in the openings.

Speaker Change: Comments about sort of the recurring revenue streams of AED rentals or eyewash stations and our water break and these have been great businesses for us the growth has been really good and the margins are great for us. Many times. These are add on.

about the sort of the recurring revenue streams of AED rentals, our eye wash stations, and our water break. And these have been great businesses for us. The growth has been really good and the margins are great for us. Many times these are add-on products to existing customers.

Speaker Change: Products to existing customers.

But but in all three of them we we install and then we have a recurring service program that goes on after that and and and again it leads to really nice stickiness and also nice margins.

Speaker Change: But in all three of them, we install and then we have a recurring service program that goes on after that and again it leads to really nice stickiness and also nice margins. The other thing that I'll point out is we opened our first aid and first aid and safety.

Mike Hansen: The other thing that I'll point out is we opened a first aid and safety distribution center a couple of years ago. That allows us to source more. It allows us to centralize some of our sourcing. Those kind of things lead to a better product cost. That, again, drives down the material cost in our first aid and safety business. The combination of really good sales mix, really good growth in the business, good sourcing, and the one I didn't mention was smart truck technology that is also having a benefit there. All of those things are contributing. This is not a case of six months of sort of unusual items. This is a little bit of a lot of hard work and execution by our first aid and safety partners to really get this margin going.

The other thing that I'll point out is we opened a first aid and safety distribution center a couple of years ago. That allows us to source more. It allows us to centralize some of our sourcing. Those kind of things lead to a better product cost. That, again, drives down the material cost in our first aid and safety business. The combination of really good sales mix, really good growth in the business, good sourcing, and the one I didn't mention was smart truck technology that is also having a benefit there. All of those things are contributing. This is not a case of six months of sort of unusual items. This is a little bit of a lot of hard work and execution by our first aid and safety partners to really get this margin going.

The other thing that I'll point out is we opened a first aid and safety distribution center a couple years ago.

Speaker Change: <unk> centre, a couple of years ago.

And that allows us to source more.

Speaker Change: And that allows us to source more.

It allows us to centralize some of our sourcing and those kind of things lead to a better product cost.

Speaker Change: It allows us to centralize some of our sourcing and those kind of things lead to.

Speaker Change: Better product cost and that again drives down the material costs in our first aid and safety business. So the combination of really good sales mix really good growth in the business.

and that again drives down the material cost in our first aid and safety business. So the combination of really good sales mix, really good growth in the business, good sourcing, the one I didn't mention was smart truck technology that is also having a benefit there. All of those things are contributing

Speaker Change: Good sourcing.

Speaker Change: The one I Didnt mentioned was smart truck technology that is also having a benefit there all of those things are contributing and so this is not a case of six months.

And so this is not a case of six months of of sort of unusual items. This is this is a little bit of a lot of hard work and and execution by our first aid and safety partners to really get this margin going. So very helpful.

Sort of unusual items. This is this is a little bit of a lot of hard work and execution by our first aid and safety partners.

Speaker Change: To really get this margin going.

Timothy Michael Mulrooney: So very helpful. Thanks for taking the questions.

Jasper Bibb: So very helpful. Thanks for taking the questions.

Speaker Change: Very helpful. Thanks for taking the questions.

Operator: Our next question comes from Faiza Alwi from Deutsche Bank Securities. Please go ahead, Faiza.

And our next question comes from Faiza <unk> from Deutsche Bank Securities. Please go ahead.

Faiza Alwi: Yes, hi. Thank you so much. So I wanted to follow up on both the first aid business and the fire business. You touched on the first aid a little bit, but curious on what's driving the acceleration, if you could expand on that, both on first aid and fire. And then as we think about your outlook, do you expect this level of growth to sustain looking ahead? And I know in fire, you talked about an SAP implementation that was happening in this fiscal year. So maybe is that helping the top line? Has that happened? How should we think about margins going forward in that business?

Faiza: Yes, hi, thank you.

So I wanted to follow up on both the first aid business and the fire business. You touched on the first aid a little bit, but curious on, you know, what's the driving, the acceleration, if you could expand on that, both on first aid and fire. And then as we think about your outlook, do you expect this level of growth to sustain looking ahead?

Faiza: So I wanted to follow up on both the first aid business in the fire business you touched on the first date, a little bad but curious on what's driving the acceleration.

Faiza: If you could expand on that both on for Kate on fire and then as we think about your outlook.

Faiza: Do you expect this growth to sustain looking ahead.

Faiza: And I know on fire you had talked about an SCB implementation that was happening.

Faiza: This fiscal year or so maybe is that helping the top line has that happened how should we think about.

Margins going forward in that business.

Todd Schneider: Good morning, Faiza. Thanks for the question. We really like the fire business. It's the only business we're in where you legally have to have it. So there is, I'll call it a double negative, no program market. Everyone is a programmer. But we are able to cross-sell very well into that market. We're using various technologies that Mike referenced to make sure that we're positioning our partners to be more successful, meaning we use SmartTruck technology in all of our businesses. And that helps us. But we're getting leverage from our growth. And the growth is attractive. And we think, there's certainly, running a business isn't linear. So there will be ebbs and flows. But we like the long-term outlook for the fire business. That being said, as you mentioned, we are going through an SAP implementation. Certainly, we haven't even implemented at this point.

Speaker Change: Good morning, Faiza. Thanks for the question.

Faiza: We really like the fire business.

Faiza: It's the only business, where in where you legally have to have it. So there is.

Faiza: I'll call it a double negative no no program market.

Faiza: One is a programmer but.

Faiza: But we are able to cross sell very well into that market.

Faiza: We are using <unk>.

Faiza: Various technologies that Mike referenced to make sure that we're.

Faiza: Positioning our partners to be more successful, meaning we use smart truck technology in all of our businesses and and that helps us.

Faiza: But we're getting leverage from our growth and.

And the growth is attractive and.

Faiza: And we think it's.

Faiza: There is certainly.

Faiza: We're running our business isn't linear so there will be ebbs and flows.

Faiza: But we like the long term outlook for the fire business.

Faiza: That being said.

Faiza: As you mentioned, we are going through an SAP implementation.

Faiza: We.

Certainly.

Faiza: We haven't even implemented at this point so we haven't seen any benefits just yet, but we're we're optimistic about how that can help our business over the coming years, maybe I'll add two things to the to the fire.

Todd Schneider: We haven't seen any benefits just yet. We're optimistic about how that can help our business over the coming years.

We haven't seen any benefits just yet. We're optimistic about how that can help our business over the coming years.

Mike Hansen: Maybe I'll add two things to the fire and a little bit of first aid too. The market opportunity in those businesses is really large. Our expectation, as we've talked about, is that those businesses will continue into the future near that double-digit type of a place. Again, the market opportunity is really large. One last comment on the SAP. We've not started it. So as we get into that, which is likely going to be more about next fiscal year, we may see a little bit of pressure in the fire segment because, as you can imagine, when you start to go into an SAP conversion, you don't get benefits overnight. It takes a little bit of time. So we'll have some additional costs in 2025 and certainly then setting up really nice benefits into the future for that business.

A little bit of first aid too.

Faiza: The market opportunity in those businesses is really large and our expectation as we've talked about is that those businesses will continue into the future near that double digit type of a place.

Faiza: Again, the market opportunity is really large one.

Faiza: One last comment on the SAP, we've not started it.

Faiza: And so as we as we get into that which is likely going to be more about next fiscal year, we may see a little bit of pressure in the fire segment.

Faiza: Because as you can imagine when you turn when you start to go into an SAP conversion you don't get benefits overnight. It takes a little bit of time. So we'll have some additional costs in 'twenty five.

Faiza: Certainly then setting up really nice benefits into the future for that business.

Faiza Alwi: Great. Thank you. Then, if I could just follow up on the macro environment. You made some comments, and this sounds to a previous question around just you're being prudent and there is some uncertainty. Just given sort of how well you're doing with programmers and the momentum you're seeing in sort of these other businesses, I'm curious if you can give us a framework in terms of how we should think about the impact of macro on your business.

Speaker Change: Great. Thank you and then if I could just follow up on the macro environment.

Speaker Change: Made some comments.

Speaker Change: Thanks to a previous question around.

Speaker Change: Just.

Speaker Change: <unk> proven to and there is some uncertainty.

Speaker Change: Just given how well youre doing programmer then the momentum you're seeing in some of these other businesses I'm curious if you can if you have if you can give us a framework in terms of how we should think about the impact of.

Macro on on your business.

Mike Hansen: Well, I'll start, Faiza, with our history has been we grow certainly in multiples of GDP and employment growth. You hit it. We are able to sell into new programs. Even when they're not, let's say, adding people, we can take pressure off of them by managing programs for them. So our new business effort is always really good. But certainly, if we see turns in the economy, we've got to adjust potentially. If we see our customers start to reduce their number of people, we've got to adjust. So it is prudent for us to sort of think about that as we look into our guidance and into the future of the business.

Speaker Change: Well I'll start Pfizer with.

Our history has been we grow certainly in multiples of GDP.

Speaker Change: GDP and employment growth in and you hit it.

Speaker Change: We are able to sell into no programmers.

Speaker Change: Even when they're not let's say adding people.

Speaker Change: We can take pressure off of them by take by managing programs for them.

Speaker Change: Our new business effort is always really good.

Speaker Change: But certainly.

Speaker Change: If we see turns in the economy, we've got to adjust potentially if we see our customers.

Start to reduce their number of people, we've got to adjust and so it is prudent for us to sort of think about that as we look into our guidance and into the future.

Speaker Change: The business.

Faiza Alwi: Understood. Thank you so much.

Speaker Change: Understood. Thank you so much.

Operator: Our next question comes from Seth Webber from Wells Fargo. Please go ahead, Seth.

Operator: Our next question comes from Seth Weber from Wells Fargo. Please go ahead, Seth.

Speaker Change: And our next question comes from Seth Weber from Wells Fargo. Please go ahead Sir.

George Tong: Hey, good morning and happy holidays, guys. I wanted to just go back to the clean room discussion for a minute. If there's any way to frame how we should be thinking about that new facility openings, and are those facilities higher CapEx relative to a traditional facility? Is there any way to combine facilities? Or I'm just trying to get a better understanding of this opportunity and what the investment might be for Cintas going forward. Thanks.

Seth Weber: Hey, good morning and happy holidays, guys. I wanted to just go back to the clean room discussion for a minute. If there's any way to frame how we should be thinking about that new facility openings, and are those facilities higher CapEx relative to a traditional facility? Is there any way to combine facilities? Or I'm just trying to get a better understanding of this opportunity and what the investment might be for Cintas going forward. Thanks.

Hey, good morning, happy holidays guys.

Seth Weber: I wanted to just go back to the clean room discussion for a minute if there was any way too.

Seth Weber: Frame, how we should be thinking about that new facility openings and are those facilities higher capex relative to a traditional facility is there any way to.

Seth Weber: Combined facilities or I'm, just trying to get a better understanding of this opportunity and what the investment might be for some thoughts going forward. Thanks.

Todd Schneider: Yeah, Seth, thank you for the question. As you know, that's a segment of the uniform market. As I mentioned earlier, it does seem more companies over the last decade or so have higher cleaning quality requirements. So we think there's a tailwind there. As far as the CapEx required for a facility like that, you can think of it as very similar to a uniform facility. The only difference I think that you may want to think about is it serves usually a larger geographic area than we would with a traditional facility. The reason being is we only have so many of them, and they have to cover the customer base. So as a result of that, we do cover a larger geographic area out of each of those facilities.

Speaker Change: Yes, Seth Thank you for the question.

Speaker Change: As you know Thats a segment of the uniform market.

I mentioned earlier it's.

Speaker Change: It does seem more companies over the last.

Speaker Change: Decade, or so have had.

Speaker Change: Higher cleaning quality requirements. So.

Speaker Change: So we think there is a tailwind there.

Speaker Change: As far as the Capex required for a facility like that.

Speaker Change: You can think of it as very similar to a uniform facility.

Speaker Change: The only difference I think that you may want to think about is.

It serves usually a larger geographic area then.

Speaker Change: Then we would with a traditional facility and the reason being is we only have so many of them and they have to cover.

Speaker Change: The customer base so.

So as a result of that they do cover a lot we do cover a larger geographic area for out of each of those facilities.

George Tong: Okay. That's helpful. Is there any way for us to think about how many of these facilities you might be opening over the next couple of years? I mean, I saw the press release for the Wisconsin facility, but is this order of magnitude ones and twos, or could this be much bigger going forward?

Seth Weber: Okay. That's helpful. Is there any way for us to think about how many of these facilities you might be opening over the next couple of years? I mean, I saw the press release for the Wisconsin facility, but is this order of magnitude ones and twos, or could this be much bigger going forward?

Yes.

Okay. That's helpful.

Speaker Change: Is there any way to.

Speaker Change: For us to think about how many of these facilities you might be opening over the next couple of years relative I mean, I saw the press release for the Wisconsin facility, but.

Speaker Change: As this order of magnitude ones and twos or it could just be much much bigger going forward.

Todd Schneider: Yeah, Seth, I wouldn't say you're not going to see ones and twos coming out every quarter or every year based upon the size of the market. So it certainly won't be anywhere near that pace. But it will be a pace based upon the demand from the marketplace. If there's more and more customers that are interested in it, then we'll be prepared to meet that demand.

Speaker Change: Yes, Seth I wouldn't.

Speaker Change: Youre not going to see.

Speaker Change: Ones and twos coming out every every quarter or every every year based upon the size of the market. So.

Speaker Change: It certainly won't be anywhere near that pace, but it will be paid based upon the demand from the marketplace. If those theres more and more customers that are interested in it. Then then we'll be prepared to meet that demand.

George Tong: Got it. Okay. That's helpful. Thanks. And then maybe just a quick follow-up on the direct. It's nice to see the direct sales business turn to be positive again in the quarter. Is there any color on whether that's coming more from the service side of your customer base, more of the manufacturing side, and any just detail there, or is it just kind of across the board?

Seth Weber: Got it. Okay. That's helpful. Thanks. And then maybe just a quick follow-up on the direct. It's nice to see the direct sales business turn to be positive again in the quarter. Is there any color on whether that's coming more from the service side of your customer base, more of the manufacturing side, and any just detail there, or is it just kind of across the board?

Speaker Change: Got it Okay. That's helpful. Thanks, and then maybe just a quick follow up on the direct it was nice to see the direct sales business.

Positive again in the quarter is there any color on whether thats.

Speaker Change: More from the service side of the of your customer base and more on the manufacturing side any detail there or is it just kind of across the board.

Speaker Change: Okay.

Todd Schneider: Good question, Seth. The Design Collective business, the direct sale portion of it, we've spoken in the past; it's certainly lumpier. And so as far as where that growth is coming from, it's really more national accounts where we would get it: hospitality, lodging. And when they have rollouts or new allotment programs, you tend to get spikes. And then so we love the spikes, and then what comes after the spike isn't as good. But I wouldn't think about it as a big growth engine for us.

Speaker Change: Good question, Seth the design collective business that direct sale portion of it.

Speaker Change: Yes.

Speaker Change: We've spoken in the past, it's certainly lumpier.

Speaker Change: <unk>.

So.

Speaker Change: As far as where that growth is coming from it's really more national accounts.

Speaker Change: Where we would get it.

Speaker Change: Hospitality lodging.

Speaker Change: When they have rollouts or new allotment programs, you tend to get spikes and then.

And then so.

Speaker Change: We loved the spikes and then the.

Speaker Change: What comes after the spike isn't as good but I wouldn't.

Speaker Change: Think about it as a big growth engine for US yes, we typically would say in the low to mid single digit growth. So this quarter is sort of right in line with that expectation.

Mike Hansen: Yeah. We typically would say in the low to mid single-digit growth. So this quarter is sort of right in line with that expectation.

Operator: Our next question comes from Stephanie Moore from Jefferies. Please go ahead, Stephanie.

Speaker Change: And our next question comes from Stephanie more from Jefferies. Please go ahead Stephanie.

Jared Mattingly: Hi, good morning. Thank you. I wanted to touch a bit on maybe the cross-sell opportunity over time. I think you've proven you continue to execute very well on your investments, particularly on the technology front, and called out just the enhanced visibility that you have. So maybe you can talk about, given some of these investments, what this might mean for cross-selling, meaning the opportunity to add those additional products and kind of continue to further penetrate each existing customer. So kind of how are you balancing the incremental products that you can offer over time? Thanks.

Stephanie Moore: Hi, good morning. Thank you. I wanted to touch a bit on maybe the cross-sell opportunity over time. I think you've proven you continue to execute very well on your investments, particularly on the technology front, and called out just the enhanced visibility that you have. So maybe you can talk about, given some of these investments, what this might mean for cross-selling, meaning the opportunity to add those additional products and kind of continue to further penetrate each existing customer. So kind of how are you balancing the incremental products that you can offer over time? Thanks.

Stephanie: Hi, good morning, Thank you.

Stephanie: I wanted to touch a bit on maybe the cross sell opportunity over time.

Speaker Change: Got it and you continue to execute very well on your end.

Speaker Change: Particularly on the technology front and called out this enhanced visibility that you have and maybe you can talk about given some of these investments what this might mean for cross selling meeting the opportunity to add those additional products.

Speaker Change: And kind of continue to further penetrate each existing customer so kind of how are you balancing the incremental products that you can offer all the time.

Todd Schneider: Yeah. Good morning, Stephanie. Well, you can think about it. We call it cross-sell. Cross-sell is really division to division. There's also upsell, which would be we have products that our customers don't use all of our products, even within the rental division or the first aid division, and what have you. So those are all components of growth for us. And we see a significant, massive, frankly, runway in all those areas. So we're trying to position our employee partners to make sure that they're in the right spot and have the right information to help the customer. And then we're also continually; it's part of our corporate culture is to invest in new products and new services. We're always working on that. And we get those ideas from those customers. And then we test them, and then we launch them. And we're always working on that.

Good morning, Stephanie.

Stephanie: Well you can think about it we call. It cross sell there is cross sell is really <unk>.

Stephanie: Division to division, there's also upsell, which would be.

Stephanie: We have products that.

Stephanie: Our customers don't use all of our products, even within the rental division or the first aid division and what have you. So.

Those are all components of growth for us and we see a.

Stephanie: A significant massive frankly runway.

Stephanie: All of those areas so.

Stephanie: So we're trying to.

Stephanie: Our position our employee partners.

Stephanie: Two.

Stephanie: To make sure that they are in the right spot and have the right information to help the customer and then we're also continually it's part of our corporate culture is to to invest in new products and new services.

Stephanie: We're always working on that.

Stephanie: And we get those ideas from those customers.

Stephanie: And then we test them and then we launch them in and we're always working on that.

Todd Schneider: It's always been a component of our growth and always will be.

It's always been a component of our growth and always will be.

Stephanie: It's always been a component of our growth and always will be.

Jared Mattingly: Thank you. Appreciate it.

Stephanie Moore: Thank you. Appreciate it.

Speaker Change: Thank you I appreciate it.

Todd Schneider: Thank you.

Speaker Change: Thank you.

Operator: Our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead, Scott.

Speaker Change: And our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead Scott.

Mike Hansen: Thanks, Scott. Good morning, everyone. Happy holidays. My first one, I'm going to delve into the SG&A running low double-digit growth, something you did last year as well. And you cited investment in selling resources, management training program, tech, and also some talent acquisition efforts. Just curious, and you guys have said on this call, labor is getting better, but still a little tough. Could you elaborate on the labor aspect and kind of what you guys are doing pushing the selling? And then also curious about the tech aspect. Maybe you've already covered it in the call, if that's what you meant, but just wondering if there's anything extra there. Thanks.

Scott Schneeberger: Thanks, Scott. Good morning, everyone. Happy holidays. My first one, I'm going to delve into the SG&A running low double-digit growth, something you did last year as well. And you cited investment in selling resources, management training program, tech, and also some talent acquisition efforts. Just curious, and you guys have said on this call, labor is getting better, but still a little tough. Could you elaborate on the labor aspect and kind of what you guys are doing pushing the selling? And then also curious about the tech aspect. Maybe you've already covered it in the call, if that's what you meant, but just wondering if there's anything extra there. Thanks.

Scott Schneeberger: Thanks, Scott Good morning, everyone happy holidays.

Scott Schneeberger: My first one I am going to delve into the SG&A running low double digits growth something you did last year as well and you said investment in selling resources.

Scott Schneeberger: Amazing training program Tak and also some talent acquisition efforts just curious and you guys. Just said on this call waivers getting better but still a little tough could you elaborate on the.

Scott Schneeberger: The labor aspect and kind of what you guys are doing pushing the selling and then also curious about the tech aspect, maybe you've already covered it in the call. If that's what you meant but just wondering if theres anything extra there. Thanks.

Todd Schneider: Yeah. Good morning, Scott. The items that you mentioned, they're all really important to us. There's not one that I would call out, but I would think about it this way. We think the future is really bright, and we want to invest for the future. We know we need the talent acquisition team to be attracting the very best talent. The management training programs are leaders of the future. And we think they are a critical pipeline, and we're going to need those leaders. And then the selling resources are we see it looks we think the future is bright with how many customers we have, what the size of the market is. I mentioned 1 million customers, but 16 million businesses. So that's all great.

Yes, good morning, Scott.

Speaker Change: The items that you mentioned they are all really important to us.

Speaker Change: We are there is not one that I would call out, but I would think about this way.

Speaker Change: We think the future is really bright and we want to invest for the future.

Speaker Change: No we need.

Speaker Change: Talent acquisition team to be attracting the very best talent the management training program as our as our leaders of the future.

Speaker Change: We think they are a critical pipeline and and we're going to need those leaders.

Speaker Change: And then the.

Speaker Change: Selling resources are.

Speaker Change: We see it looks.

Speaker Change: We think the future is bright with or how many customers. We have what the size of the market is I mentioned 1 million customers about 16 million businesses. So that's all great and then you kind of wrap it all with technology, because technology will we want to make it easier to do business with us and we want to leverage technology.

Todd Schneider: Then you kind of wrap it all with technology because technology we want to make it easier to do business with us. We want to leverage technology to make our partners more successful, point them in the right direction, give them the right tools in their toolbox to spend their time in the right spots, but also to make it easier for the customer to buy, easier to do business with in totality.

Then you kind of wrap it all with technology because technology we want to make it easier to do business with us. We want to leverage technology to make our partners more successful, point them in the right direction, give them the right tools in their toolbox to spend their time in the right spots, but also to make it easier for the customer to buy, easier to do business with in totality.

Speaker Change: <unk> to make our partners more successful point them in the right direction.

Speaker Change: Give them the right tools in their toolbox to.

Speaker Change: To spend their time in the right spots, but also too.

Speaker Change: To make it easier for the customer to buy easier to do business with in totality.

Mike Hansen: Great. Thanks. Appreciate that. And then not a lot of acquisition activity in the quarter, but there was some. And there was a good amount in the first quarter. I remember you saying it was across all businesses, but we didn't hit it up too much last quarter. Could you talk about what it is that you're acquiring and clearly across segments, but what the strategies have been there? Thanks. Sure. Not a lot of change in the strategy, Scott. And that is we love rental tuck-in opportunities, and we've made a number of those this year. And as you can imagine, when we do that in a marketplace, we add immediate capacity utilization improvement, route density. And so those things really help us in the rental business. So we've made some of those. We certainly have made some first aid acquisitions, and we've made fire acquisitions.

Scott Schneeberger: Great. Thanks. Appreciate that. And then not a lot of acquisition activity in the quarter, but there was some. And there was a good amount in the first quarter. I remember you saying it was across all businesses, but we didn't hit it up too much last quarter. Could you talk about what it is that you're acquiring and clearly across segments, but what the strategies have been there?

Speaker Change: Great. Thanks, I appreciate that and then.

Speaker Change:

Speaker Change: Not a lot of acquisition activity in the quarter, but there was some and there was a good amount in the first quarter I remember you, saying it was across all businesses, but we didn't hit it up too much last quarter could you talk about what it is that you are acquiring and <unk>.

Speaker Change: Clearly across segments, but what the.

Mike Hansen: Thanks. Sure. Not a lot of change in the strategy, Scott. And that is we love rental tuck-in opportunities, and we've made a number of those this year. And as you can imagine, when we do that in a marketplace, we add immediate capacity utilization improvement, route density. And so those things really help us in the rental business. So we've made some of those. We certainly have made some first aid acquisitions, and we've made fire acquisitions.

Speaker Change: What's the strategy had been there thanks.

Speaker Change: Sure not a lot of change in the strategy Scott and that is we love rental tuck in opportunities and we've made a number of those this year.

Speaker Change: And as you can imagine.

Speaker Change: When we do that in a marketplace, we add immediate.

Speaker Change: Capacity utilization improvement.

Speaker Change: Route density and so those things really help us.

Speaker Change: In the rental business. So we've made some of those we certainly have made some first aid acquisitions and we've made fire acquisitions.

Mike Hansen: Again, the dynamic is similar in all three of these. These are really nice tuck-in opportunities that just strengthen our business in the local markets in which we acquire them. And we'll continue to look for those opportunities as best we can.

Again, the dynamic is similar in all three of these. These are really nice tuck-in opportunities that just strengthen our business in the local markets in which we acquire them. And we'll continue to look for those opportunities as best we can.

Speaker Change: The dynamic is similar in all three of these these are really nice tuck in opportunities that just strengthen our business in the local markets in which we acquire them and we will continue to look for those opportunities as best we can.

Todd Schneider: One thing I might add is, to Mike's point, we get synergies. It helps us with density, helps us with capacity utilization, allows us to spend more time with the customers. So all that's valuable. But in each of the businesses, depending upon the business we acquire, but normally when we make an acquisition in rental, first aid, or fire, we're able to provide an offering to that customer base that's broader than what they had in the past. So the rental, we have a broader offering than most companies out there. Certainly, in the first aid, we do as well. And depending upon the fire acquisition, that's very consistent. Separate from, then we can cross-sell. So it adds nice value.

Speaker Change: Thing I might add is.

Speaker Change: To Mike's point, we get synergies it helps us with density helps us with capacity utilization.

Speaker Change: It allows us to spend more time with the customers.

Speaker Change: So all of that is valuable but.

Speaker Change: In each of the businesses depending upon.

Speaker Change: The business, we acquire but normally when we make an acquisition in rental first aid or fire.

Speaker Change: We're able to provide an offering to that customer base, that's broader than what they had in the past so the rental waiver broader offering than most companies out there certainly in the first aid, we do as well and and depending upon the fire acquisition. That's very consistent separate from then we can cross sell.

Speaker Change: So it just adds a nice value.

Operator: Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead, Shlomo. Well, Shlomo, are your line muted?

Speaker Change: And our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead Shlomo.

Shlomo Rosenbaum: Shlomo your line muted.

Jared Mattingly: Sorry, my line was muted. Sorry. This is a question basically for Mike. Just a little bit going through some of the technical items in the quarter. Receivables days were up two days sequentially. I was wondering if there was a lot of business that came in at the end of the quarter. Are you seeing any changing patterns in what clients are paying, or are there any other factors in that? Because the last time we saw 48 days was during COVID.

Shlomo Rosenbaum: Sorry, my line was muted. Sorry. This is a question basically for Mike. Just a little bit going through some of the technical items in the quarter. Receivables days were up two days sequentially. I was wondering if there was a lot of business that came in at the end of the quarter. Are you seeing any changing patterns in what clients are paying, or are there any other factors in that? Because the last time we saw 48 days was during COVID.

Shlomo Rosenbaum: Sorry, My line was muted sorry.

Speaker Change: This is a question basically for Mike just a little bit going through.

Mike Hansen: Some of the technical items in the quarter receivables days were up two days sequentially. I was wondering if there was a lot of business that came in at the end of the quarter are you seeing any changing patterns and what clients are paying are there any other factors in that because the last time, we saw 48 days was during COVID-19.

Mike Hansen: Shlomo, when our quarters end on a holiday, and it seems like too many of them do, it does create a little bit of disruption in terms of the ability to collect the mail, the application. We have seen maybe just a touch of slowing in the AR, but we've not seen any, I'll say, deterioration from the standpoint of additional write-offs. But we did see a little bit of slowing. And the Thanksgiving holiday can usually contribute to that.

Mike Hansen: Shlomo.

Mike Hansen: Our.

Shlomo Rosenbaum: When our quarters end on holiday and it seems like too many of them do.

Shlomo Rosenbaum: It does create a little bit of disruption in terms of the the ability to.

Shlomo Rosenbaum: Collect the mail the application we have seen maybe just a touch of slowing in the in the AAR, but we've not seen.

Shlomo Rosenbaum: I'll say deterioration.

Shlomo Rosenbaum: From the standpoint of additional write offs, but we did see a little bit of slowing and the Thanksgiving holiday can usually contribute to that.

Jared Mattingly: Okay. And in the OPM, the operating margin, the other unit was up very nicely sequentially, even though there's one less day sequentially in the quarter. Could you just give us some of the mechanics or tell us just what's going on on the ground over there? It's increasing the margin very nicely. And is that something that we should expect to continue at kind of that 16% level?

Shlomo Rosenbaum: Okay. And in the OPM, the operating margin, the other unit was up very nicely sequentially, even though there's one less day sequentially in the quarter. Could you just give us some of the mechanics or tell us just what's going on on the ground over there? It's increasing the margin very nicely. And is that something that we should expect to continue at kind of that 16% level?

Shlomo Rosenbaum: Okay.

Shlomo Rosenbaum: Then in the OPM the operating margin. The other unit was up very nicely sequentially, even though the there was one less day sequentially in the quarter.

Could you just give us some of the mechanics or tell us just what's going on on the ground over there it's increasing the margin very nicely and is that something that we should expect to continue at kind of that 16% level.

Mike Hansen: Well, certainly, the revenue growth is powerful in all of our businesses. And when we see some really nice revenue growth, that's important. The other thing that I would say is the Uniform Direct Sale business went from a negative 2.7% in terms of revenue growth to 4.7%. And that is important for operating margins too. So we did see some nice improvement there in the Direct Sale. Nothing, I would say, that is noteworthy other than, again, some nice acceleration in the revenue.

Speaker Change: Well we.

Speaker Change: Certainly the revenue growth.

Powerful in all of our businesses and when we see some really nice revenue growth that's important.

Speaker Change: The other thing that I would say is.

Speaker Change: Uniform direct sale business went from a negative.

Speaker Change: Negative two 7%.

Speaker Change: In terms of revenue growth to.

Four 7%.

Sure.

Speaker Change: And that is important for four operating margins too. So we did see some nice improvement there in the direct sale.

Speaker Change: Nothing I would say that that is noteworthy other than.

Speaker Change: Again.

Speaker Change: Some nice acceleration in the revenue.

Operator: Our next question comes from Leo Carrington from Citigroup. Please go ahead, Leo.

Speaker Change: And our next question comes from Leo Carrington from Citigroup. Please go ahead Leo.

Jared Mattingly: Thank you. And morning. If I can ask a follow-up on that point around the one-off or the cost that you called out in Q2 around talent acquisition, training, technology. Were you calling them out to any of these one-off increases in nature or more to highlight where the spend is? And then, in terms of the underlying margins and drop-through in Q2 and the organic growth, do you see that as sustainable when you factor in the additional investment this quarter?

Leo Carrington: Thank you. And morning. If I can ask a follow-up on that point around the one-off or the cost that you called out in Q2 around talent acquisition, training, technology. Were you calling them out to any of these one-off increases in nature or more to highlight where the spend is? And then, in terms of the underlying margins and drop-through in Q2 and the organic growth, do you see that as sustainable when you factor in the additional investment this quarter?

Leo Carrington: Thank you.

Leo Carrington: Morning.

Leo Carrington: I can ask a follow up on.

Leo Carrington: Points around the one off.

Leo Carrington: The costs that you called out Q2 around content physician training.

Leo Carrington: LNG.

Leo Carrington: Calling them out.

Leo Carrington: One off increase in nature.

Leo Carrington: Highlight why the spending and then.

In terms of the underlying margins and drop through in Q2.

Speaker Change: Got it right.

Speaker Change: Do you see that as sustainable.

Speaker Change: You factor in the <unk>.

Speaker Change: Investment this quarter.

Mike Hansen: Well, I'll start with we called them out because we think it's important to make sure that our investors understand that we are looking at the long term, and we want to continue to invest in the business. Those investments are really important, and they set up, let's say, more penetration opportunities, more cross-sell opportunities, but also productivity improvements, capacity utilization opportunities. In these cases, we wanted to call them out to show that, look, we're focused on the long term, and we're going to continue in the business. As Todd said a couple of times, the future is bright for us. We want to make sure that we take advantage of that bright future by investing in the business. The callouts were really more about that. The future is bright. In the quarter, we had incremental margins of 27%.

Speaker Change: Well we are.

Speaker Change: I'll start with.

Speaker Change: We call them out because we think it's important.

Speaker Change: Two to make sure that.

Speaker Change: Our investors understand that we are we are looking at the long term and we want to continue to invest in the business and those investments are really important and they set up.

Speaker Change: They set up let's say.

Speaker Change: Penetration opportunities more cross sell opportunities, but also productivity improvements capacity utilization opportunities. In these cases, we wanted to call them out to show that look we're focused on the long term and we're going to continue in the business as Todd said a couple of <unk>.

Speaker Change: The future is bright for us and we want to make sure that we take advantage of that bright future by investing in the business and the call outs were were really more about that the future is bright.

Speaker Change: In the quarter.

Speaker Change: We had incremental margins of 27%.

Mike Hansen: Look, our expectation is that we're going to be in the 20% to 30% range going forward. We recognize that when we're sitting at 21%, they need to be in the higher level of that range. We think that we can continue to do that. When we talk about things like SAP, technology, and other investments, and by the way, we're able to get 27% even when we're investing in the business. We give those to say we're setting up those future margin and revenue opportunities. It's important for us, I think, to communicate that.

Look, our expectation is that we're going to be in the 20% to 30% range going forward. We recognize that when we're sitting at 21%, they need to be in the higher level of that range. We think that we can continue to do that. When we talk about things like SAP, technology, and other investments, and by the way, we're able to get 27% even when we're investing in the business. We give those to say we're setting up those future margin and revenue opportunities. It's important for us, I think, to communicate that.

Speaker Change: Look our.

Speaker Change: Our expectation is that we're going to be in the 20% to 30% range going forward, we recognize that that when we're sitting at 21% they need to be in the higher higher.

Speaker Change: Level of that range.

Speaker Change: And we think Thats that we can continue to do that and and when we talk about things like SAP and technology and other investments.

Speaker Change: And by the way, we're able to get 27%, even when we're investing in the business, but we give those to say we're setting up those future.

Speaker Change: Margin and revenue opportunities, it's important for us to I think communicate that.

Operator: Right there. Thank you. Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead, Toni.

Leo Carrington: Right there. Thank you.

Operator: Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead, Toni.

Speaker Change: Alright, great. Thank you.

Speaker Change: And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead Tony.

Ashish Sabadra: Thanks very much. You mentioned the success that you've had with the branded products earlier, particularly with Carhartt and ChefWorks. Could you just remind us if these are exclusive relationships and how long the relationships are for? And then, are there any other areas that could benefit from branded products or equipment that you could offer as well?

Toni Kaplan: Thanks very much. You mentioned the success that you've had with the branded products earlier, particularly with Carhartt and ChefWorks. Could you just remind us if these are exclusive relationships and how long the relationships are for? And then, are there any other areas that could benefit from branded products or equipment that you could offer as well?

Toni Kaplan: Thanks very much.

You mentioned the success that you've had with the branded products earlier, particularly with carhartt and chef works could you just remind us. If these are exclusive relationships and how long the relationships. Therefore, and then are there any other areas that could benefit from branded products or equipment.

Toni Kaplan: That that you could offer as well.

Todd Schneider: Good morning, Tony. Thank you for the question. We've had a long-standing relationship with Carhartt and ChefWorks. We are the exclusive licensees for those folks, for those companies on the rental programs. We work with them to design products that the end users want to wear, but also that goes very well through our processing systems. That's all very important to us. We don't get into contractual arrangements with them, but I can tell you this. We love products that our end users get excited about wearing them. Carhartt and ChefWorks are two great examples of that in great companies, great brands, great products. As far as are there other opportunities, we're constantly looking for that.

Speaker Change: Good morning, Tony. Thank you for the question. So we've had a longstanding relationship with carhartt and chef works and.

And we are.

Speaker Change: The exclusive licensees for those folks for those.

Speaker Change: Companies on the rental programs and so we worked with them to design products that.

Speaker Change: The end users want.

Speaker Change: I want to wear and.

Speaker Change: But also that goes very well through our processing systems.

Speaker Change: So that's all very important to us as far as we don't get into contractual arrangements with them, but what I can tell you. This.

Speaker Change: We love products that.

Speaker Change: That are.

Speaker Change: End users are that get excited about wearing them and carhartt and chef works are two great examples of that.

Speaker Change: And great companies great brands.

Speaker Change: Products.

Speaker Change: And as far as are there other opportunities we're constantly looking for that and.

Todd Schneider: We spend a lot of time with our customers and with our working partners to talk about that and to see where those opportunities have come from. Those are two great relationships, long-standing relationships that are really important to us.

We spend a lot of time with our customers and with our working partners to talk about that and to see where those opportunities have come from. Those are two great relationships, long-standing relationships that are really important to us.

Speaker Change: And we spent a lot of time with our customers and with our working partners.

Speaker Change: Can you talk about that and to see where those opportunities are come from but those are two great relationships longstanding relationships that are really important to us.

Ashish Sabadra: Yep. Terrific. And maybe if you could just give us your latest thoughts on potential international expansion, that'd be great. Thanks.

Toni Kaplan: Yep. Terrific. And maybe if you could just give us your latest thoughts on potential international expansion, that'd be great. Thanks.

Speaker Change: Terrific.

Speaker Change: And maybe if you could just give us your latest thoughts on potential international expansion that'd be great. Thanks.

Todd Schneider: I'd say similar to products, we're always looking at those types of opportunities. We certainly stay in contact with the people that are running those businesses. But the great news is we don't have to do that in order to be really, really successful in the future. We look at it and say, again, we're servicing about 1 million businesses. There's 16 million businesses in the US and Canada. Here's what's really exciting is by the time we get to 2 million customers, there will be more than 16 million businesses in the US and Canada. So that's kind of a bummer if you're running a race, but it's really exciting if you're running a business because once we get to the two-mile mark, the race is going to be extended. So that's separate from we're going to have more products and services over the coming years.

Speaker Change: I would say similar to products, we're always looking at those types of opportunities, we certainly know.

Stay in contact with the.

The people that are running those businesses, but the great news is we don't have to do that too.

Speaker Change: In order to.

Speaker Change: It will be really really successful in the future. We look at it and say there is again were servicing about 1 million businesses Theres 60 million businesses in U S and Canada.

Speaker Change: Here's what's really exciting is by the time, we get to 2 million customers.

There will be more than 16 million businesses in the U S and Canada. So that's kind of a bummer, if youre running a race, but it's really exciting if you're running a business because once we get to the two mile. Mark the race is going to be extended so that separate from we're going to have more products and services over the coming years. So all that being said is.

Todd Schneider: So, all that being said is, we continue to watch it. We evaluate it. We look for the right opportunity. And if that opportunity presents itself, then we will seize it. But it's certainly not required in order for us to be successful in the future.

So, all that being said is, we continue to watch it. We evaluate it. We look for the right opportunity. And if that opportunity presents itself, then we will seize it. But it's certainly not required in order for us to be successful in the future.

Speaker Change: We continue to watch it we evaluate it we look for the right opportunity.

Speaker Change: And if that opportunity presents itself, then we will seize it.

Speaker Change: But it's certainly not.

Speaker Change: It is not required in order for us to be successful in the future.

Operator: At this time, there are no further questions. I'd like to turn the call back over to Jared Mattingley to close out the call.

Speaker Change: And at this time there are no further questions I would like to turn the call back over to Jared manually to close out the call.

Jared Mattingly: Thank you for joining us this morning. We will issue our Q3 of Fiscal 2024 financial results in March. We look forward to speaking with you again at that time.

Jared Mattingly: Thank you for joining us. This morning, we will issue our third quarter of fiscal 'twenty for financial results in March we look forward to speaking with you again at that time.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Jared Mattingly: The host has ended this call. Goodbye. Good day, everyone, and welcome to the Cintas Corporation announces fiscal 2024 second quarter earnings release conference call. Today's call is being recorded. At this time, I'd like to turn the meeting over to Mr. Jared Mattingly, Vice President, Treasurer, and Investor Relations. Please go ahead, sir. Thank you for joining us. With me is Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2024 second quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the company's current views as to future events and financial performance.

The host has ended this call. Goodbye.

Speaker Change: The host has ended this call goodbye.

Good day, everyone, and welcome to the Cintas Corporation announces fiscal 2024 second quarter earnings release conference call. Today's call is being recorded. At this time, I'd like to turn the meeting over to Mr. Jared Mattingly, Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

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Speaker Change: Good day, everyone and welcome to the Cintas Corporation announces fiscal 2024 second quarter earnings release Conference call. Today's call is being recorded at this time I would like to turn the turn the meeting over to Mr. Jared Mattingly, Vice President Treasurer and Investor Relations. Please go ahead Sir.

Litigation Reform Act of $19 95 provides a safe harbor from Civil litigation for forward looking statements. This conference call contains forward looking statements that reflect the company's current views as to future events and financial performance.

Jared Mattingly: These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussions on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd.

Jared Mattingly: These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss I refer you to the discussions on these points contained in our most recent filings with the Securities and Exchange Commission.

Jared Mattingly: Now I'll turn the call over to Todd.

Todd Schneider: Thank you, Jared. We are pleased with our second quarter results and are excited about the future. Second quarter total revenue grew 9.3% to $2.38 billion. Each of our businesses continue to execute at a high level. Our momentum in the business is good, and volume remains robust. We can grow in a number of different ways. Contribution to our growth from new business remains strong and comes from companies that either outsource their program today or they are managing it themselves. We continue to have great success cross-selling to existing customers. Retention levels are strong and remain at very attractive levels. Our value proposition of image, safety, cleanliness, and compliance continues to resonate across businesses of all sizes and in all verticals. We continue to be pleased with the results from our focus on prospects within the verticals of healthcare, hospitality, education, and state and local government.

Todd Schneider: Thank you Jared.

Todd Schneider: We are pleased with our second quarter results and are excited about the future.

Todd Schneider: Second quarter total revenue grew nine 3% to $2 three 8 billion.

Todd Schneider: Each of our businesses continue to execute at a high level.

Todd Schneider: Our momentum in the business is good and volume remains robust.

Todd Schneider: We can grow in a number of different ways.

Todd Schneider: Contribution to our growth from new business remained strong and come from companies that either outsource their program today.

Todd Schneider: They are managing it themselves.

Todd Schneider: We continue to have great success cross selling to existing customers.

Retention levels are strong and remain at very attractive levels.

Todd Schneider: And our value proposition of image safety cleanliness and compliance continues to resonate across businesses of all sizes and in all verticals.

Todd Schneider: We continue to be pleased with the results from our focus on prospects within the verticals of healthcare hospitality education and state and local government.

Todd Schneider: We recently announced the opening of two clean room facilities, one in North Carolina and the other in Wisconsin. These facilities will provide additional capacity in these regions in order to expand our efforts in this area of attractive growth from pharmaceutical and biotechnology companies. The benefits of our strong volume growth and revenue flow through to our bottom line. Gross Margin for the second quarter grew 11.6%. Operating income grew 12.3%. Diluted EPS grew 15.7% to $3.61. Cash flow remains strong. Net cash provided by operating activities in the second quarter grew 17.8% over the prior year. Our strong cash flow gives us flexibility to choose how we deploy our capital. In the second quarter, we continue to invest in our businesses. We also acquired several smaller businesses.

We recently announced the opening of two clean room facilities, one in North Carolina and the other in Wisconsin. These facilities will provide additional capacity in these regions in order to expand our efforts in this area of attractive growth from pharmaceutical and biotechnology companies. The benefits of our strong volume growth and revenue flow through to our bottom line. Gross Margin for the second quarter grew 11.6%. Operating income grew 12.3%. Diluted EPS grew 15.7% to $3.61. Cash flow remains strong. Net cash provided by operating activities in the second quarter grew 17.8% over the prior year. Our strong cash flow gives us flexibility to choose how we deploy our capital. In the second quarter, we continue to invest in our businesses. We also acquired several smaller businesses.

Todd Schneider: We recently announced the opening of two clean room facilities, one in North Carolina and the other in Wisconsin.

Todd Schneider: The benefits of our strong volume growth and revenue flow through to our bottom line.

Todd Schneider: Gross margin for the second quarter grew 11, 6% and.

Todd Schneider: And operating income grew 12, 3%.

Todd Schneider: Diluted EPS grew 15, 7% to $3 61.

Todd Schneider: Cash flow remained strong.

Todd Schneider: Net cash provided by operating activities in the second quarter grew 17, 8% over the prior year.

Todd Schneider: Our strong cash flow gives us flexibility to choose how we how we deploy our capital.

Todd Schneider: In the second quarter, we continued to invest in our businesses.

Todd Schneider: We also acquired several smaller businesses.

Todd Schneider: On 15 December, we paid shareholders $137.5 million in quarterly dividends, an increase of 17.1% from the amount paid the previous December. During the second quarter, we also purchased $320.3 million of Cintas Common Stock under our buyback program. I would like to thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other. Now, before I turn the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year. We are increasing our financial guidance. We are raising our annual revenue expectations from a range of $9.4 billion to 9.52 billion to a range of $9.48 billion to 9.56 billion, a total growth rate of 7.5% to 8.4%.

On 15 December, we paid shareholders $137.5 million in quarterly dividends, an increase of 17.1% from the amount paid the previous December. During the second quarter, we also purchased $320.3 million of Cintas Common Stock under our buyback program. I would like to thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other. Now, before I turn the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year. We are increasing our financial guidance. We are raising our annual revenue expectations from a range of $9.4 billion to 9.52 billion to a range of $9.48 billion to 9.56 billion, a total growth rate of 7.5% to 8.4%.

Todd Schneider: On December 15th we paid shareholders $137 $5 million in quarterly dividends.

An increase of 17, 1% from the amount paid the previous December.

Todd Schneider: During the second quarter, we also purchased $323 million of Cintas common stock under our buyback program.

Todd Schneider: I would like to thank our employees, whom we call partners for their continued focus on our customers our shareholders and each other.

Todd Schneider: Now before I turn the call over to Mike to provide details of our second quarter results I'll provide our updated financial expectations for our fiscal year.

Mike Hansen: We are increasing our financial guidance.

Mike Hansen: We are raising our annual revenue expectations from a range of $9 4 billion to $9 $5 2 billion to a range of $9 four 8 billion to.

Mike Hansen: To 956 billion.

Mike Hansen: A total growth rate of seven five to eight 4%.

Todd Schneider: Also, we are raising our annual Diluted EPS expectations from a range of $14.00 to 14.45 to a range of $14.35 to 14.65, a growth rate of 10.5% to 12.8%. Mike?

Also, we are raising our annual Diluted EPS expectations from a range of $14.00 to 14.45 to a range of $14.35 to 14.65, a growth rate of 10.5% to 12.8%. Mike?

Mike Hansen: Also we are raising our annual diluted EPS expectations from a range of $14 to $14 45.

Mike Hansen: So a range of $14 35.

Mike Hansen: <unk> to $14 65.

Mike Hansen: Our growth rate of 10, five to 12, 8%.

Mike Hansen: Mike.

Mike Hansen: Thanks, Todd and good morning, our fiscal 2024 second quarter revenue was $2 three 8 billion.

Mike Hansen: Compared to $2 $1 billion last year, the organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was 9%.

Mike Hansen: Organic growth by business was seven 9% for uniform rental and facility services 12, 7% for first aid and safety services 17, 8% for fire protection services and four 7% per uniform direct sale.

Mike Hansen: Gross margin for the second quarter of fiscal 'twenty, four was 114 billion compared.

Mike Hansen: Compared to $1.02 billion last year, an increase of 11, 6%.

Mike Hansen: Gross margin as a percent of revenue was 48% for the second quarter of fiscal 'twenty four compared to 47% last year, an increase of 100 basis points.

Mike Hansen: Strong volume growth and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Gross margin percentage by business was 47.4% for Uniform Rental and Facility Services, 54.5% for First Aid and Safety Services, 48.6% for Fire Protection Services, and 40.9% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 40 basis points from last year. We continue to leverage our strong revenue growth and extract inefficiencies out of the business in order to expand margins. Our year-over-year improvements are no accident. Our Six Sigma and engineering teams have helped us create efficiencies in the plant to allow us to maximize the utilization of our equipment, labor, and energy. Our SmartTruck technology allows us to improve our route efficiencies and provide density to our existing routes.

Gross margin percentage by business was 47.4% for Uniform Rental and Facility Services, 54.5% for First Aid and Safety Services, 48.6% for Fire Protection Services, and 40.9% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 40 basis points from last year. We continue to leverage our strong revenue growth and extract inefficiencies out of the business in order to expand margins. Our year-over-year improvements are no accident. Our Six Sigma and engineering teams have helped us create efficiencies in the plant to allow us to maximize the utilization of our equipment, labor, and energy. Our SmartTruck technology allows us to improve our route efficiencies and provide density to our existing routes.

Mike Hansen: Gross margin percentage by business was 47, 4% for uniform rental and facility services 54, 5% for first aid and safety services.

Mike Hansen: <unk> 48, 6% for fire protection services, and 49% for uniform direct sale.

Mike Hansen: Gross margin for the uniform rental and facility services segment increased 40 basis points from last year.

Mike Hansen: We continue to leverage our strong revenue growth and extracting efficiencies out of the business in order to expand margins are year over year improvements are no accident.

Mike Hansen: Our six Sigma and engineering teams have helped us create efficiencies in the plant to allow us to maximize the utilization of our equipment labor and energy.

Mike Hansen: Our smart truck technology allows us to improve our route efficiencies and provide density to our existing routes.

Mike Hansen: While energy expenses comprised of gasoline, natural gas, and electricity were a tailwind of 40 basis points from last year, please keep in mind that some of the energy benefit is the result of efficiencies just mentioned. As an example, our rental revenue grew organically at 7.9%, but we only added 1% to our route structure since last year. Gross margin for the First Aid and Safety Services segment increased 400 basis points from last year. Our revenue growth is strong and our value proposition continues to resonate in this segment. Health and safety of employees remains top of mind. Our mix of revenue continues to be healthy, including growing high-margin recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak. We continue to use technology like SmartTruck to optimize our routes and improve efficiencies. Our First Aid dedicated distribution center allows us to lower product costs.

While energy expenses comprised of gasoline, natural gas, and electricity were a tailwind of 40 basis points from last year, please keep in mind that some of the energy benefit is the result of efficiencies just mentioned. As an example, our rental revenue grew organically at 7.9%, but we only added 1% to our route structure since last year. Gross margin for the First Aid and Safety Services segment increased 400 basis points from last year. Our revenue growth is strong and our value proposition continues to resonate in this segment. Health and safety of employees remains top of mind. Our mix of revenue continues to be healthy, including growing high-margin recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak. We continue to use technology like SmartTruck to optimize our routes and improve efficiencies. Our First Aid dedicated distribution center allows us to lower product costs.

Mike Hansen: While energy expenses comprised of gasoline natural gas and electricity were a tailwind of 40 basis points from last year. Please keep in mind that some of the energy benefit is the result of efficiencies just mentioned.

Mike Hansen: As an example, our rental revenue grew organically at seven 9%, but we only added 1% to our route structure since last year.

Okay.

Mike Hansen: Gross margin for the first aid and safety services segment increased 400 basis points from last year.

Mike Hansen: Our revenue growth is strong and value our value proposition continues to resonate in this segment.

Mike Hansen: Health and safety of employees remains top of mind, our mix of revenue continues to be healthy, including growing high margin recurring revenue products like AED rentals eyewash stations in Waterbury.

Mike Hansen: We continue to use technology like smart truck to optimize our routes and improve efficiencies.

Mike Hansen: And our first aid dedicated distribution center allows us to lower product costs all of these contribute to our improved margins.

Mike Hansen: All of these contribute to our improved margins. Selling and administrative expenses grew $64.4 million, or 11.1% over last year. Strong revenue growth creates leverage, which allows us to invest in the business. We continue to invest in our people, adding selling resources, investing in our management trainee program to develop future leaders, and expanding our talent acquisition efforts. Operating income of $499.7 million compared to $444.9 million last year. Operating income as a percent of revenue was 21% in the second quarter of fiscal 2024 compared to 20.5% in last year's second quarter, an increase of 50 basis points. Our effective tax rate for the second quarter was 20.9% compared to 22.1% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $374.6 million compared to $324.3 million last year.

All of these contribute to our improved margins. Selling and administrative expenses grew $64.4 million, or 11.1% over last year. Strong revenue growth creates leverage, which allows us to invest in the business. We continue to invest in our people, adding selling resources, investing in our management trainee program to develop future leaders, and expanding our talent acquisition efforts. Operating income of $499.7 million compared to $444.9 million last year. Operating income as a percent of revenue was 21% in the second quarter of fiscal 2024 compared to 20.5% in last year's second quarter, an increase of 50 basis points. Our effective tax rate for the second quarter was 20.9% compared to 22.1% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $374.6 million compared to $324.3 million last year.

Mike Hansen: Selling and administrative expenses grew $64 4 million or 11, 1% over last year.

Mike Hansen: Strong revenue growth creates leverage which allows us to invest in the business.

Mike Hansen: We continue to invest in our people, adding selling resources investing in our management training program to develop future leaders and expanding our talent acquisition efforts.

Mike Hansen: Operating income of $499 7 million compared to $444 $9 million last year.

Mike Hansen: <unk> income as a percent of revenue was 21% in the second quarter of fiscal 'twenty four compared to 25% in last year's second quarter, an increase of 50 basis points.

Mike Hansen: Our effective tax rate for the second quarter was 29% compared to 22, 1% last year.

Mike Hansen: Rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock based compensation.

Mike Hansen: Net income for the second quarter was $374 6 million compared to $324 $3 million last year. This.

Mike Hansen: This year's second quarter diluted EPS of $3.61 compared to $3.12 last year, an increase of 15.7%. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2024 interest expense is expected to be $100 million compared to $109.5 million in fiscal 2023, predominantly as a result of less variable rate debt. Our fiscal 2024 effective tax rate is expected to be 21.3%. This compares to a rate of 20.4% in fiscal 2023. The higher effective tax rate negatively impacts fiscal 2024 EPS guidance by about $0.16 and diluted EPS growth by about 120 basis points. Our financial guidance does not include the impact of any future share buybacks. Guidance includes the impact of having one more workday in fiscal 2023 compared to fiscal. I'm sorry, fiscal 2024 compared to fiscal 2023. This extra workday comes in our fiscal third quarter.

This year's second quarter diluted EPS of $3.61 compared to $3.12 last year, an increase of 15.7%. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2024 interest expense is expected to be $100 million compared to $109.5 million in fiscal 2023, predominantly as a result of less variable rate debt. Our fiscal 2024 effective tax rate is expected to be 21.3%. This compares to a rate of 20.4% in fiscal 2023. The higher effective tax rate negatively impacts fiscal 2024 EPS guidance by about $0.16 and diluted EPS growth by about 120 basis points. Our financial guidance does not include the impact of any future share buybacks. Guidance includes the impact of having one more workday in fiscal 2023 compared to fiscal. I'm sorry, fiscal 2024 compared to fiscal 2023. This extra workday comes in our fiscal third quarter.

Mike Hansen: This year's second quarter diluted EPS of $3 61.

Mike Hansen: Compared to $3 12 last year, an increase of 15, 7%.

Mike Hansen: So I provided our annual financial guidance related to the guidance. Please note the following.

Mike Hansen: Fiscal 'twenty for interest expense is expected to be $100 million compared to $109 5 million in fiscal 'twenty three predominantly as a result of less variable rate debt.

Mike Hansen: Our fiscal 'twenty four effective tax rate is expected to be 21, 3%.

Mike Hansen: This compares to a rate of 24% in fiscal 'twenty three.

The higher effective tax rate negatively impacts fiscal 'twenty four EPS guidance by about <unk> 16.

Mike Hansen: And diluted EPS growth by about 120 basis points.

Mike Hansen: Our financial guidance does not include the impact of any future share buybacks.

Mike Hansen: And guidance includes the impact of having one more work day in fiscal 'twenty, three compared to fiscal I'm, sorry fiscal 'twenty four compared to fiscal 'twenty three.

Mike Hansen: This extra workday comes in our fiscal third quarter.

Mike Hansen: I'll turn it back to Jared.

I'll turn it back to Jared.

Mike Hansen: I'll turn it back to Jerry.

Jerry: Thanks, Mike that concludes our prepared remarks now we are happy to answer questions from the analysts. Please ask just one question and a single follow up if needed. Thank you.

Ashish Sabadra: If you would like to ask a question, please press star one on your telephone keypad now. Please be prepared to ask your question when prompted. You will be allowed to ask one question and one follow-up question. Once again, if you would like to ask a question, please press star one on your phone now. Our first question comes from Ashish Sabadra from RBC. Please go ahead, Ashish.

Jerry: If you would like to ask a question. Please press star one on your telephone keypad now.

Jerry: Please be prepared to ask your question when prompted.

Jerry: There will be allowed to ask one question and one follow up question. Once again, if you would like to ask a question. Please press star one on your phone now.

Question comes from Ashish <unk> from RBC. Please go ahead Ashish.

George Tong: Thanks for taking our question. Just on the four verticals that you highlighted as the areas of strength in particular, I was wondering if you can quantify how big the combined revenues are from those verticals and how does the growth profile there compare to the company average. Any color? Thanks.

Ashish Sabadra: Thanks for taking our question. Just on the four verticals that you highlighted as the areas of strength in particular, I was wondering if you can quantify how big the combined revenues are from those verticals and how does the growth profile there compare to the company average. Any color? Thanks.

Hi, Thanks for taking my question.

ashish: Just on the four verticals that you highlighted as.

ashish: As the areas of strength in particular I was wondering if you can quantify how big the combined revenue from those verticals and how does the growth profile data combined compared to <unk>.

The company average any color.

Todd Schneider: Good morning, Ashish. This is Todd. Thanks for the question. Yeah, we don't have a specific number for you as far as that exact number, but I can tell you that our verticals are performing quite well. We're having really good success. Our focus around not just selling, but organizing around those is really paying off for us. I've just got a couple of wins I can share with you regarding the verticals. In healthcare, in the acute space, we're having good success and non-acute as well. We've got a scrub rental program to a big hospital network in South Carolina that is benefiting from a new consistent image, but also identification. The customer told us that they were interested in being able to, pardon me, identify their people, understanding who was supposed to be in what area, and this new scrub program did that.

ashish: Good morning, Ashish. This is Todd thanks for the question yes.

ashish: We don't.

ashish: I don't have any specific number for you as far as.

That exact number but I can tell you that our our verticals are performing quite well, we're having really good success.

ashish: Our focus around not just selling but organizing around those is really paying off for us.

I've just got a couple of wins I can I can share with you regarding the verticals.

ashish: In healthcare in the acute space, we're having good success in non acute as well.

We've got a scrub rental program to a big Hospital network in South Carolina that that is benefiting from.

ashish: Our new consistent image, but also identification and the customer told us that they were interested in being able to.

ashish: Me identify their people understanding who was supposed to be and what area. In this new scrub program did that.

Todd Schneider: We had a really similar experience with a nursing home in Virginia. Same thing. They were buying their own, but the leadership wanted to be able to identify and have a consistent image with their people. We had, on the acute side again, a hospital in Florida that we rolled out a new microfiber program because they were struggling with inventory control and product quality, which led to cleanliness concerns. Our program offered some great products, technology to control the inventory, which allowed them to focus more on their patients instead of having to fool around with trying to manage the microfiber. Excuse me. I've got a couple of other examples I thought might be helpful for the group.

We had a really similar experience with a nursing home in Virginia. Same thing. They were buying their own, but the leadership wanted to be able to identify and have a consistent image with their people. We had, on the acute side again, a hospital in Florida that we rolled out a new microfiber program because they were struggling with inventory control and product quality, which led to cleanliness concerns. Our program offered some great products, technology to control the inventory, which allowed them to focus more on their patients instead of having to fool around with trying to manage the microfiber. Excuse me. I've got a couple of other examples I thought might be helpful for the group.

ashish: We had a really similar experienced with a nursing home in Virginia.

ashish: Same thing they were they were buying their own and they but the.

ashish: The leadership and wanted to be able to identify and have a consistent image with their people.

ashish: We had a.

ashish: On the acute side again hospital in Florida.

ashish: That.

ashish: We rolled out a new micro micro fiber program, because they were struggling with inventory control and product quality.

ashish: Which led to cleanliness concerns.

ashish: And our program offered.

ashish: Some great products technology to control, the inventory, which allowed them to focus more on their patients instead of having a full ramp.

Trying to manage the microfiber.

Speaker Change #101: Excuse me.

Speaker Change #102: And I've got a couple of other examples I thought might be helpful for for the group.

Todd Schneider: In our government sector, we just recently rolled out a first aid and AED rental program to a public library system in California, which is, you wouldn't think of a public library system as being a great prospect for us, but it is. They realized that the value it would bring to their employees in being prepared with the AEDs in case it was needed because the public's in their locations. And then lastly, I'll just share with you a little bit on education, a variety of wins there. We had a chemistry department at a nice-sized university in Virginia. They put all their educators and students in a lab coat program. Maintenance department at a university in California put all of their people in Carhartt uniforms, a rental program from us. They love the Carhartt.

In our government sector, we just recently rolled out a first aid and AED rental program to a public library system in California, which is, you wouldn't think of a public library system as being a great prospect for us, but it is. They realized that the value it would bring to their employees in being prepared with the AEDs in case it was needed because the public's in their locations. And then lastly, I'll just share with you a little bit on education, a variety of wins there. We had a chemistry department at a nice-sized university in Virginia. They put all their educators and students in a lab coat program. Maintenance department at a university in California put all of their people in Carhartt uniforms, a rental program from us. They love the Carhartt.

Speaker Change #102: In our government sector.

Speaker Change #102: We have we just recently rolled out a first aid and AED rental program to a public library system in California, which is you wouldn't think of.

Speaker Change #102: Of our public library system as being a great prospect for us, but it is they realize that the value would bring to their employees and being prepared with the aedes NK cell it was needed because the publics in there and their locations.

Speaker Change #102: And then lastly, I'll just share with you a little bit of an education.

Speaker Change #102: A variety of wins there.

Speaker Change #102: We had a chemistry department at a nice sized University in Virginia.

Speaker Change #102: Put all their educators and students in lab and our lab coat program.

Speaker Change #102: <unk>.

Speaker Change #102: <unk> Department at a University in California could all of their people and carhartt uniforms.

Speaker Change #102: Our rental program from us they love the carhartt.

Todd Schneider: Then the last item would be there was a dining facility at a university in Arizona where they put all their culinary people in Chef Works, which is a big win for those folks. The branded programs with Carhartt and Chef Works were big wins. I don't want to belabor it, but I thought I would just share a few wins because I know verticals are of interest to yourself, Ashish, but also plenty of other folks on the call.

Then the last item would be there was a dining facility at a university in Arizona where they put all their culinary people in Chef Works, which is a big win for those folks. The branded programs with Carhartt and Chef Works were big wins. I don't want to belabor it, but I thought I would just share a few wins because I know verticals are of interest to yourself, Ashish, but also plenty of other folks on the call.

Speaker Change #102: And then the last item would be there's a dining facility at a university in Arizona, where they put all their culinary people in chef works, which is a big win for those folks are the branded programs with carhartt and chef works, where big wins, So I don't want to belabor, it but I thought I'd just share a few wins because I know.

Speaker Change #102: Verticals are of interest to yourself Ashish, but also plenty of others folks on the call. Yes. The only other thing I might add as Todd just talked about we have so many ways to win in and clearly those verticals are growing faster than the average. So we still are seeing really good momentum in each of those.

George Tong: That's great color, and thanks for sharing those wins. It does provide a lot more clarity on those verticals. And if I can ask a quick follow-up, I was just wondering if you could share any update on your technology, the SmartTruck program, and particularly the partnership with Google, Verizon, and SAP, any updates on that front? Thanks.

Ashish Sabadra: That's great color, and thanks for sharing those wins. It does provide a lot more clarity on those verticals. And if I can ask a quick follow-up, I was just wondering if you could share any update on your technology, the SmartTruck program, and particularly the partnership with Google, Verizon, and SAP, any updates on that front? Thanks.

Speaker Change #103: That's a great color and thanks for sharing those events. It does provide a lot more clarity on those verticals and if I can ask a quick follow up I was just wondering.

Speaker Change #103: If you could shed any update on your technology to small program and particularly the partnership a bit Google Verizon and safety any any updates on that context.

Todd Schneider: Certainly. I think one of the things we have around here is we don't make money when the wheels are moving. We make money when the wheels stop. And so, we're the way Mike described it. In total for our company, we grew revenues over 9%, but we only added 1% to our route structure in total. So that means we're spending more time with the customer, less time driving, which is better for our customers, better for our partners, and better for Cintas. So we're pleased with that. Our technology, and we still have plenty of room to go there. We're focused on bringing those efficiencies, extracting out the inefficiencies in our business. We sent out a note, a press release regarding our migration this quarter to the Google Cloud. That has been very successful for us.

Speaker Change #103: Certainly.

Speaker Change #103: Think.

Speaker Change #103: One of the things we have around here. So we don't we don't make money when that when the wheels are moving we make money when that when we'll stop and.

Speaker Change #103: And so we're the way Mike described it.

Speaker Change #103: In total for our company, we grew revenues over 9%, but we only added 1% to our route structure in total so.

Speaker Change #103: That means we're spending more time with the customer.

Speaker Change #103: Less time, driving which is better for our customers better for our partners and in Bedford for Cintas. So we're pleased with that our technology.

Speaker Change #103: We still have plenty of room to go there we're focused on bringing those efficiencies extracting out the inefficiencies in our business.

Speaker Change #103: We sent out a note our press release regarding our migration this quarter to the Google cloud.

Speaker Change #103: That has been.

Todd Schneider: There's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure, so very important to us. Second item is, over time, we believe that'll be more cost-effective for us. The third is it gives us access to Google's AI platform. So certainly in the very, very early innings, we just migrated, but we think that that will be able to help us longer term in making it more attractive, making it easier to do business with Cintas, making sure that we are positioning our people to be successful, to point them in the right direction, and leverage those types of tools.

There's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure, so very important to us. Second item is, over time, we believe that'll be more cost-effective for us. The third is it gives us access to Google's AI platform. So certainly in the very, very early innings, we just migrated, but we think that that will be able to help us longer term in making it more attractive, making it easier to do business with Cintas, making sure that we are positioning our people to be successful, to point them in the right direction, and leverage those types of tools.

Speaker Change #103: A very successful for us there's a number of benefits that we get from moving from a server farm to the Google Cloud. The first one is it's more secure so very important to us.

Speaker Change #103: Second item is will over time, we believe we will that will be more cost effective for us.

Speaker Change #103: And third is it gives us access to google's.

Speaker Change #103: AI platform so.

Certainly in the very very early innings, we just migrated but we think that that will be able to help us <unk>.

Speaker Change #103: <unk> term in May.

Speaker Change #103: Making it more attractive making it easier to do business Centas, making sure that we are positioning our people to be successful.

<unk> them in the right direction, and and leverage that type of those types of tools.

Ashish Sabadra: Our next question comes from Manav Patnaik from Barclays. Please go ahead, Manav.

Speaker Change #104: And our next question comes from Manav Patnaik from Barclays Capital. Please go ahead manav.

George Tong: Thank you. Todd, just to follow up on all the wins and contracts you talked about, maybe I guess the question is more around the competitive environment versus is this just first-time outsourcers? Any trends, any changes you're seeing from that front, the new business percentage you called out before, but whether that's more market share or just first-time outsourcing?

Manav Patnaik: Thank you. Todd, just to follow up on all the wins and contracts you talked about, maybe I guess the question is more around the competitive environment versus is this just first-time outsourcers? Any trends, any changes you're seeing from that front, the new business percentage you called out before, but whether that's more market share or just first-time outsourcing?

Manav Patnaik: Thank you Todd just to follow up on all the wins and contract you talked about maybe.

Manav Patnaik: I guess the question is more on the competitive environment versus is this just first time outsourcers any trends any changes youre seeing from that plan the new business.

Manav Patnaik: Percentage of called that before but leather that small market share, which especially in outsourcing.

Todd Schneider: Good morning, Manav. Great question. As Mike said, we win in many ways. We have been selling new programs since the inception of my career, I can tell you that. We continue to. I'll just remind you, we service a little over a million businesses, but there are 16 million businesses in the US and Canada. So there's plenty of opportunity there. We like both. We certainly win some from the competitors. We like growing the pie. In the examples I was giving, it's a mix, but in large part, it is they were either doing it in-house, meaning they were processing microfibers in-house, or they were telling their employees to go buy product. So there's different variations of new programs, meaning some were buying products, providing to their people, and telling them to wear them.

Speaker Change #105: Good morning, Manav great question.

Speaker Change #106: As Mike said, we win in many ways.

Speaker Change #106: We have been selling no programmers since the inception of my career I can tell you that.

Speaker Change #106: We continue to and I'll just remind you there is we service a little over 1 million businesses, but our 16 million businesses in the U S and Canada. So there's plenty of.

Speaker Change #106: Opportunity there and we like both we certainly win some from the competitors.

Speaker Change #106: We are we like growing the pie and.

Speaker Change #106: And then the.

Speaker Change #106: The examples I was giving it's a mix but in large part it is.

They were either doing it in house.

Speaker Change #106: Meaning they were processing micro fibers in house or they were telling their their employees to go by product. So.

Speaker Change #106: There's different variations of no programmers, meaning summer.

Speaker Change #106: We're buying products and providing to their people and telling them to wear them some of them may.

Todd Schneider: Some of them, they were just telling them to show up to work and look good. But nevertheless, we bring so much better consistent program identification, cleanliness, all these, and compliance are big drivers for our customers.

Some of them, they were just telling them to show up to work and look good. But nevertheless, we bring so much better consistent program identification, cleanliness, all these, and compliance are big drivers for our customers.

Speaker Change #106: They were just telling them that show up to work and look good.

But nevertheless, we.

Speaker Change #106: We bring.

Speaker Change #106: So much better consistent program identification.

Cleanliness all of these and compliance are big drivers for our customers.

George Tong: Got it. And then just on the capital allocation front, I mean, the buyback number, one of the bigger quarters for a while now. I mean, is that any indication of the M&A market slowing down or just how we should think about that balance there?

Speaker Change #107: Got it and then just on the capital allocation front I mean, the buyback number one of the big.

Speaker Change #107: Accordingly for a while now I mean is that any.

Occasion of the M&A market slowing down or just how we should think about that balance.

Manav.

Manav Patnaik: No change in what we're seeing in M&A still still.

Manav Patnaik: We're working the pipeline as best we can we've made some nice acquisitions this year.

Manav Patnaik: From a buyback perspective, you've heard us speak to it being an opportunistic.

Manav Patnaik: Execution and that's what you saw this quarter.

Manav Patnaik: As we think back about.

Manav Patnaik: Our first quarter results.

And we thought they were pretty good the stock.

Manav Patnaik: Reacted a little bit negatively and we saw that as a nice opportunity and we took advantage of it so it.

Manav Patnaik: It was a good example, during the quarter on opportunistic execution of that buyback program and the beauty Manav as we speak about our capital allocation.

Manav Patnaik: We don't we don't always have to choose.

Manav Patnaik: In the quarter.

Manav Patnaik: Or maybe let's call it for the year.

We've invested in the business as we've talked about our Capex is up which is important to us.

Mike Hansen: Our CapEx is up, which is important to us as a part of that investment. M&A is up from last year. Dividends are up 17% from last year. We've been able to execute on the buyback program. So when you hear us talk about the sort of the four levers of capital allocation, we've done them all, I think, nicely this year. Again, the beauty of our cash flow and our balance sheet is we don't really have to choose.

Our CapEx is up, which is important to us as a part of that investment. M&A is up from last year. Dividends are up 17% from last year. We've been able to execute on the buyback program. So when you hear us talk about the sort of the four levers of capital allocation, we've done them all, I think, nicely this year. Again, the beauty of our cash flow and our balance sheet is we don't really have to choose.

Manav Patnaik: As a part of that investment.

<unk> is up from last year dividends are up 17% from last year, and we've been able to execute on the buyback program. So when when when you hear us talk about the sort of the four levers of capital allocation.

We've done them all I think.

Manav Patnaik: Nicely this year.

Manav Patnaik: And again, the beauty of our cash flow and our balance sheet as we don't we don't really have to choose.

Todd Schneider: Mike, I would just add that we think we're being really good fiduciaries of our shareholders' investments. Mike mentioned all the levers. The net-net of that is we still have great dry powder, which allows us to take on M&A of all shapes and sizes. We're interested in that.

Mike I would just add that we think we are being really good fiduciaries of our shareholders' investments Mike mentioned all the levers.

Manav Patnaik: And.

Manav Patnaik: The net net of that is we still have great dry powder.

Manav Patnaik: Which allows us to.

To take on M&A of all shapes and sizes and we're interested in that.

Ashish Sabadra: Our next question comes from Joshua Chan from UBS. Please go ahead, Joshua.

Operator: Our next question comes from Joshua Chan from UBS. Please go ahead, Joshua.

Speaker Change #108: And our next question comes from Joshua Chen from UBS. Please go ahead Joshua.

George Tong: Hi, good morning. Thanks for taking my questions. So Todd, you mentioned the opening of the clean rooms. I was just wondering if you can kind of frame for us what you see as the attractive parts of this business, how is it attractive, and what kind of opportunity does it mean for Cintas going forward in the clean rooms?

Joshua Chen: Hi, good morning, Thanks for taking my questions.

Joshua Chen: So Todd you mentioned the opening of the clean rooms I was just wondering if you can kind of frame for us what you see as the attractive parts of this business how is it attractive and what kind of opportunity does it mean for for Cintas going forward in the Cleveland.

Todd Schneider: Thanks for the question Josh Yes.

Todd Schneider: Yes, the cleaner businesses, it's an attractive sector for us.

Todd Schneider: Yeah.

I mentioned pharmaceutical and biotechnology companies.

Todd Schneider: It seems like there is more and more every year that need that level of cleaning that level of cleanliness. So that is.

Todd Schneider: We think that bodes well for that business in the future and.

Todd Schneider: There has been <unk> seen some momentum on onshoring in that area and we want to make sure that.

Todd Schneider: We have the appropriate capacity to serve our current customers and that we're prepared for the future as well so we like to trends in that business and we like the business.

George Tong: Great. Thank you for the color there, Todd. And if I can follow up with the margin question, I guess if in the future the energy favorability were to lessen, could you talk to the opportunities that you still have to drive margin expansion and the targeted incremental margins going forward without as much energy tailwind?

Joshua Chan: Great. Thank you for the color there, Todd. And if I can follow up with the margin question, I guess if in the future the energy favorability were to lessen, could you talk to the opportunities that you still have to drive margin expansion and the targeted incremental margins going forward without as much energy tailwind?

Speaker Change #109: Great. Thank you for the color there Todd.

Can follow up with the margin question.

Speaker Change #109: I guess if in the future.

Speaker Change #109: The energy favorability, where to lessen could you talk to the opportunities that you still have to drive margin expansion and the targeted incremental margins going forward.

Speaker Change #109: As much energy tailwind.

Todd Schneider: Yeah, great question. Yeah. So we recognize that energy prices go up, they go down. But one thing that's going to be consistent is we're going to be focused on extracting out inefficiencies in our route structure and in our production facilities. So that will be really important to us. And we think there's certainly ample opportunity there still to go. We've talked about the SmartTruck technology. That's been impactful to us in many ways. But what's also impactful is, as Mike mentioned, our Six Sigma team of professionals, our engineering professionals, and then layering in with that technology allows us to have a centralized visibility into our operations at a level that we've never had before in the history of the company. This technology allows us, and it allows us to maximize our labor, our equipment, ultimately our energy spend.

Speaker Change #110: Yes, great question, yes. So.

Speaker Change #111: We recognize that.

Speaker Change #111: Energy prices go up they go down, but one thing is going to be consistent as we are going to.

Speaker Change #111: Be focused on extracting out inefficiencies in our in our route structure and in our production facilities. So.

Speaker Change #111: So that will be really important to us and we.

We think there is certainly ample opportunity there still to go we talked about the smart truck technology, that's been impactful to us.

Speaker Change #111: <unk>.

Speaker Change #111: In many ways.

Speaker Change #111: But what's also impactful is.

Speaker Change #111: As Mike mentioned, our six Sigma team of professionals, our engineering professionals, and then layering in with that technology allows us to have.

Speaker Change #111: Our centralized visibility into our operations at.

Speaker Change #111: At a level that we've never had before.

Speaker Change #111: The history of the company.

Speaker Change #111: Technology allows us so and it allows us to maximize.

Speaker Change #111: Our labor our equipment.

Speaker Change #111: Ultimately our energy spend so we're focused on extracting out those inefficiencies.

Speaker Change #111: So that we can.

Speaker Change #111: Manage it moving forward.

Speaker Change #111: Loved when energy goes cost go down.

But we recognize those markets will move, but we're going to be focused on extracting out those inefficiencies.

Ashish Sabadra: Our next question comes from Heather Balsky from Bank of America. Please go ahead, Heather.

Operator: Our next question comes from Heather Balsky from Bank of America. Please go ahead, Heather.

Speaker Change #112: And our next question comes from Heather <unk> from Bank of America. Please go ahead Heather.

Speaker Change #112: Okay.

Timothy Michael Mulrooney: Hi, sorry about that. Thank you for taking my question. First question with regard to the programmers and non-programmers, as we're further and further out from the COVID period, are you still seeing the shift in demand in terms of more non-programmers looking to outsource, or do you think it's starting to normalize back to pre-COVID trends?

Heather: Hi, sorry about that thank you for taking my question.

Heather: First question with regard to the programmers and non programmers as well further and further out from the Covid period.

Heather: The shift in demand.

Heather: The more non programmers looking to outsource.

Hmm.

Or do you think its starting to normalize back to pre COVID-19 trends.

Todd Schneider: Well, Heather, it's a great question. I'll start. Mike, feel free to chime in. There's various reasons why a prospect would turn into a customer, going from a new programmer to a customer. One of them is, "Hey, we'd like to outsource it because we're not very good at it," or, "We're not, we're struggling to staff, and we're struggling to find people to manage this." So that still continues. But there are other reasons. It might be we don't like the image that we're portraying. We don't like the lack of identification. We don't like the lack of compliance. You can provide them, and we know that they're hygienically clean. So there's many different motives. One of it might be, "Hey, we can't staff, and we need help." And we still see that, frankly.

Speaker Change #113: Well Heather it's a great question I'll start Mike feel free to chime in.

There's various reasons why.

Speaker Change #113: A prospect would turn into a customer we're going from a no programmer to a to a to a customer one of them is hey, we're wed.

Speaker Change #113: We'd like to outsource it because we're not very good at it or we're not.

Speaker Change #113: We don't have we can we're struggling to staff and we're struggling to find people that manage this so that still continues.

Speaker Change #113: But there are other reasons so it might be we don't like the <unk>.

Speaker Change #113: <unk>.

Speaker Change #113: We're training, we don't like the lack of identification, we don't like the the lack of compliance.

Speaker Change #113: You can provide them in and we know that Theyre hygienically cleans. So theres many different motives one of it might be.

Speaker Change #113: We can't staff and we need help.

Speaker Change #113: And we still see that frankly and allows our customers to focus on what's most important to them taking care of their customers their patients their guests whatever it is instead of having to manage through these various programs.

Mike Hansen: Heather, the non-program business is still. We get more than 60% of our new business from non-program business. Your reference to the pandemic might be. We did certainly in the early days of the pandemic see an increase in personal protective equipment and things like hand sanitizer. Those have normalized back to what we would call normal and ongoing levels. So that might be the only change that we had, and back to normal.

Speaker Change #113: Heather.

Speaker Change #113: No programmers.

Still we get.

Speaker Change #113: More than 60% of our new business comes from no programmers at your reference to the pandemic might be.

Speaker Change #113: We did certainly in the early days of the pandemic CA.

Speaker Change #113: An increase in personal protective equipment.

Speaker Change #113: Things like hand, sanitizer those have normalized.

Back to what we would call.

Normal and an ongoing levels so.

That might be the only change that we had and back to normal.

Timothy Michael Mulrooney: Great. Thank you. And then on the margin front, we're just kind of curious when you think about, you talked earlier about opportunities for efficiencies and further productivity. When you think about the source of those savings, how much are just organic Six Sigma efforts, how much is coming from your SAP? And are there still G&K synergy or opportunities that you're kind of benefiting from? Thanks.

Heather Balsky: Great. Thank you. And then on the margin front, we're just kind of curious when you think about, you talked earlier about opportunities for efficiencies and further productivity. When you think about the source of those savings, how much are just organic Six Sigma efforts, how much is coming from your SAP? And are there still G&K synergy or opportunities that you're kind of benefiting from? Thanks.

Speaker Change #113: Okay.

Speaker Change #114: Thank you and then on the margin front.

Speaker Change #114: Kind of curious when you think about you talked earlier about opportunities for efficiencies.

Speaker Change #114: Further productivity when you think about the source of the savings how much are.

Speaker Change #114: Organic.

Speaker Change #114: My effort, how much is coming from euro and are there still GNK synergy or opportunities that you are kind of benefiting from.

Speaker Change #114: Okay.

Todd Schneider: Heather, it's a good question. We don't really discern the difference between our Six Sigma team, our engineering team, and our technologies. They all have to work, be orchestrated appropriately to get the efficiencies. And that's exactly what we're doing. So everybody has to be involved, and that's what produces the great results. As for G&K, yeah, we're now, I think, about six and a half years since we've acquired, if my math is correct. So yeah, I wouldn't say that there's anything left on the bone there.

Speaker Change #115: Heather it's a good question.

Speaker Change #116: We don't really discern the difference between our six Sigma team, our engineering team and our technologies are they all have to work.

Speaker Change #116: Yes.

Speaker Change #116: Orchestrated appropriately to get the efficiencies so.

Speaker Change #116: And that's exactly what we're doing so everybody has to be involved and and that's what produces the great results.

Speaker Change #116: As for GNK.

Speaker Change #116: We have now.

I think about six five years.

Speaker Change #116: Since we've since we acquired it.

If my math is correct so.

Yes, I wouldn't say that there is anything left on the bone there.

Ashish Sabadra: Our next question comes from Andy Whitman from RW Baird. Please go ahead, Andy.

Operator: Our next question comes from Andy Wittman from RW Baird. Please go ahead, Andy.

Speaker Change #117: And our next question comes from Andy Wittmann from RW Baird. Please go ahead Andy.

Andrew Steinerman: Yeah, great. Thanks. Good morning, and thank you for taking my questions. I guess I just wanted to ask on the outlook a little bit here, Mike. The second half total revenue guidance is in the 7% range at the midpoint against an organic 9% quarter here. So a degree of deceleration, I guess that was implicit in your previous guidance as well. But just thought maybe I'd give you a chance to elaborate a little bit more on that, talk about what you're seeing in the macro, if that's just you guys being kind of your normal prudent approach, or if there's something that we should be considering.

Andy Wittman: Yeah, great. Thanks. Good morning, and thank you for taking my questions. I guess I just wanted to ask on the outlook a little bit here, Mike. The second half total revenue guidance is in the 7% range at the midpoint against an organic 9% quarter here. So a degree of deceleration, I guess that was implicit in your previous guidance as well. But just thought maybe I'd give you a chance to elaborate a little bit more on that, talk about what you're seeing in the macro, if that's just you guys being kind of your normal prudent approach, or if there's something that we should be considering.

Yeah, great. Thanks, Good morning, and thank you for taking my questions I guess I just wanted to ask on the outlook a little bit here Mike.

Speaker Change #117: The second half total revenue guidance is in the 7% range.

Speaker Change #117: The mid point against an organic 9% quarter here. So a degree of deceleration I guess that was implicit in your previous guidance as well but.

Speaker Change #118: Thought maybe give you a chance to elaborate a little bit more on that talk about what youre seeing in the macro if that's just you guys being kind of your normal prudent approach or if theres something that we should be considering.

Mike Hansen: Andy, I lead with it's our normal prudent approach. When you think about where we are, we've talked a little bit already about the growth is still good, momentum is good. So we like where the business is going. The range for the back half of the year certainly does imply a little bit over 7% at the midpoint to a little over 8% at the high point. We like that range. The cadence is good for us, as you know. But look, as we look into calendar 2024, there certainly is a little bit of uncertainty as to what the new economy may bring, what the Fed movements may bring. So we think it is wise to be prudent as we look out.

Speaker Change #118: Andy.

Andy Wittmann: Lead with it's it's our normal prudent approach and when you think about where we are.

Andy Wittmann: We've talked a little bit already about the growth is still good momentum is good.

Andy Wittmann: And so we like where the business is going.

Andy Wittmann: They either range for the back half of the year.

Andy Wittmann: Does certainly does imply a little bit over 7% at the midpoint to eight.

Andy Wittmann: Little over 8% at the at the high point.

We like that range. The cadence is good for us as you know but.

Andy Wittmann: Look as we as we look into calendar 'twenty four there certainly.

Andy Wittmann: Is a little bit of uncertainty as to what the new economy may bring what the fed movements may bring and so we think it is wise to be prudent as we look out.

Andrew Steinerman: Great. That's my only question for today. Have a Merry Christmas, guys.

Andy Wittman: Great. That's my only question for today. Have a Merry Christmas, guys.

Speaker Change #119: Great. That's my only question for today have a Merry Christmas guys.

Todd Schneider: Thank you.

Mike Hansen: Thank you, Andy.

Todd Schneider: Thank you, Andy.

Speaker Change #120: Thank you Andrew and thank you Andy.

Ashish Sabadra: Our next question comes from George Tong from Goldman Sachs. Please go ahead, George.

Operator: Our next question comes from George Tong from Goldman Sachs. Please go ahead, George.

Speaker Change #121: And our next question comes from George Tong from Goldman Sachs. Please go ahead George.

Faiza Alwi: Hi, thanks. Good morning. Earlier, you mentioned that business momentum was good, volumes were robust in the quarter. Can you provide more color on overall customer budget trends, customer sentiment, and any changes that you might be seeing in the sales cycle?

George Tong: Hi, Thanks, good morning.

Todd Schneider: Good morning, George. Forward-looking, as Mike said, there's always, we're not trying to prognosticate exactly how our customers will react to the turning of the calendar year. But we're not seeing any change in sales cycles. And we haven't seen a change in our customer base and how they're reacting to what's going on in the marketplace. So kind of business has been consistent. And it's more what Mike referred to, the turn of the calendar year. And we'll see how businesses react coming out of the holidays.

George we are good.

Morning, George.

Speaker Change #122: Our forward looking as Mike said, there's always.

Speaker Change #122: We're not trying to prognosticate.

Exactly how our customers will react to the turning of the of the calendar year.

Speaker Change #122: But we're not seeing any change in.

Speaker Change #122: And sales cycles, and we haven't seen a change in our.

Speaker Change #122: In our customer base in there.

Speaker Change #122: How they're reacting to whats going on in the marketplace. So it's kind of.

Business has been consistent and.

Speaker Change #122: It's more what Mike referred to the turn of the calendar year, and we will see how businesses react coming out of the.

The holidays.

Faiza Alwi: Got it. That's helpful. And also, you mentioned cross-selling was good in the quarter. Can you elaborate more on cross-selling trends that you're seeing and which areas you're seeing most amount of bundling or upsell, cross-sell from?

George Tong: Got it. That's helpful. And also, you mentioned cross-selling was good in the quarter. Can you elaborate more on cross-selling trends that you're seeing and which areas you're seeing most amount of bundling or upsell, cross-sell from?

Speaker Change #123: Got it that's helpful. And also you mentioned cross selling was good in the quarter can you elaborate more on cross selling trends that youre seeing in which areas you see most amount of bundling or.

Sell cross sell from.

Todd Schneider: Yeah, George, cross-sell is an important component of our growth. The nature of it is we're having good success across all of our areas of our business. We're blessed to be in a position where our customers, fortunately, they really like us. They like our relationships. We have people in their businesses on a really frequent basis, mostly on a weekly basis. That means we have eyes, ears, and minds in their business. We can help. It doesn't matter to us what a customer might lead with, whatever they're interested in, but then we will quickly pivot and we can help them in many ways.

Speaker Change #124: Yeah George of cross sell is.

It's an important component of our growth.

Speaker Change #124: <unk>.

Speaker Change #124: The nature of it is we're having good success across all of our areas of our business.

Speaker Change #124: We're blessed to be in a position where our customers. Fortunately they really like us they like our relationships we have people in their businesses on a really frequent basis, mostly on a weekly basis. So.

Speaker Change #124: And we have so that means we have eyes ears in mines in their business and we can help and.

Speaker Change #124: And it doesn't matter to us.

Speaker Change #124: What a customer might lead with whatever they're interested in but then we will quickly pivot in that we can help them in many ways. So but just the nature of the size of the rental division is such that because there's so many customers there.

Todd Schneider: But just the nature of the size of the rental division is such that because there are so many customers there, there's plenty of opportunity for our first aid and fire business to cross-sell into that just because of the numbers there. But nevertheless, it's working quite well across all of our organization. We share leads. We share thoughts. And we make sure that the customer is well taken care of.

But just the nature of the size of the rental division is such that because there are so many customers there, there's plenty of opportunity for our first aid and fire business to cross-sell into that just because of the numbers there. But nevertheless, it's working quite well across all of our organization. We share leads. We share thoughts. And we make sure that the customer is well taken care of.

Speaker Change #124: There's plenty of opportunity for our first aid and fire business.

Speaker Change #124: Two to cross sell into that.

Speaker Change #124: Just because.

Speaker Change #124: The numbers there, but nevertheless, it's.

Speaker Change #124: It's working quite well across all of our organization, we share leads we share thoughts.

Speaker Change #124: And and we make sure that the customer is well taken care of.

Ashish Sabadra: Our next question comes from Tim Mulroney from William Blair. Please go ahead, Tim.

Operator: Our next question comes from Tim Mulrooney from William Blair. Please go ahead, Tim.

Speaker Change #125: And our next question comes from Tim Tim Mulrooney from William Blair. Please go ahead Tim.

Jasper Bibb: Yeah, good morning. I just wanted to ask one question. Pricing now normalized back to the 2% range. I mean, that means your organic growth was comprised of approximately 7 points of volume. I was just hoping you could dig into that a little bit more because it was a little stronger than I think most of us were expecting. Did you see an uptick in retention? Did you have a strong quarter with that cross-sell or maybe new account growth? Any details would be helpful.

Tim Mulrooney: Yeah, good morning. I just wanted to ask one question. Pricing now normalized back to the 2% range. I mean, that means your organic growth was comprised of approximately 7 points of volume. I was just hoping you could dig into that a little bit more because it was a little stronger than I think most of us were expecting. Did you see an uptick in retention? Did you have a strong quarter with that cross-sell or maybe new account growth? Any details would be helpful.

Speaker Change #125: Okay.

Tim Mulrooney: Yes, good morning, I just wanted to ask one question pricing.

Tim Mulrooney: Normalized back to the 2% range I mean that means your organic growth was comprised of approximately seven points of volume.

Speaker Change #126: Hoping you could dig into that a little bit more and there was a little stronger than I think most of US were expecting did you see.

Speaker Change #126: An uptick in retention.

Speaker Change #126: Did you have a strong quarter with that that cross sell or maybe new account growth or any details would be helpful.

Todd Schneider: Yeah, good morning, Tim. So our new business is robust. As I mentioned, retention levels are very good, and our cross-sell is very good. And the pricing is still lower than last year. It is higher than historical, but it's certainly getting much closer to historical. But when you think about that, our various inputs to growth are all performing well, and we expect that to continue.

Speaker Change #127: Yeah, Good morning, Tim So our.

Speaker Change #128: Our new businesses are as robust as I mentioned retention levels are very good.

And our cross sell is very good and in the pricing is.

Speaker Change #128: Still.

It's lower than last year.

It is higher than historical but it's.

Speaker Change #128: Certainly getting much closer to historical so.

Speaker Change #128: But so when you think about that it is.

Speaker Change #128: Our various inputs to growth are all performing well and we.

Mike Hansen: Yeah, and as we talk, we win in a lot of ways. The momentum in the rental business is still really good. But we also saw in the quarter some really nice acceleration in first aid and safety from 11% in Q1 to 12.7% organically in Q2. And we saw some nice improvement in fire, where we went from a little over 14% in Q1 to 17.8% in Q2. We just see some really good momentum in all of our businesses, and particularly those two had some really nice performance in Q2.

Speaker Change #128: We expect that to continue and as we talk we win and a lot of ways and.

Speaker Change #128: The momentum in the rental business is still really good but we also saw in the quarter. Some really nice acceleration in first aid and safety from 11% in the first quarter to 12, 7% organically in the second quarter and we saw some nice improvement in fire, where we went from four little over <unk>.

Speaker Change #128: <unk> in the first quarter to $17 eight in the <unk>.

Speaker Change #128: Second quarter so.

Speaker Change #128: We just see some really good momentum in all of our businesses and particularly those two had some really nice <unk>.

Speaker Change #128: Performance in the second quarter.

Jasper Bibb: Yeah, I did notice that re-acceleration across both those businesses. That's helpful color. Thanks, guys. Happy holidays.

Tim Mulrooney: Yeah, I did notice that re-acceleration across both those businesses. That's helpful color. Thanks, guys. Happy holidays.

Speaker Change #129: Yes, I did notice that reacceleration across both those businesses. That's helpful color. Thanks, guys happy holidays.

Todd Schneider: Thank you, Tim. You as well.

Thank you Tim as well.

Ashish Sabadra: Our next question comes from Andrew Steinerman from J.P. Morgan Securities. Please go ahead, Andrew.

Operator: Our next question comes from Andrew Steinerman from JPMorgan Securities. Please go ahead, Andrew.

Speaker Change #130: And our next question comes from Andrew Steinman from Jpmorgan Securities. Please go ahead Andrew.

Joshua K. Chan: Hi. Could you just mention if your add stops directionally in the uniform rental business was up, down, or flat recently?

Andrew Steinerman: Hi. Could you just mention if your add stops directionally in the uniform rental business was up, down, or flat recently?

Could you just mention if you add stops directionally in the uniform rental business was up down or flat recently.

Todd Schneider: Good morning, Andrew. Our add-stop metrics have been pretty consistent. We haven't seen much of a change in our customer base. And so I'd say that's how I would describe it. We see still positive trends in our add-stop metrics, but that's pretty consistent as it has been for the last six to 12 months.

Good morning, Andrew.

Speaker Change #131: Our add stop metrics are have been pretty consistent we.

Speaker Change #131: We haven't seen much of a change in our in our customer base.

And.

Speaker Change #131: So I'd say, that's how I would describe it.

Speaker Change #131: Yes.

Speaker Change #131: We see still positive trends in our in our add stop metric <unk>.

Speaker Change #131: But that's pretty consistent as it has been for the last.

Joshua K. Chan: Okay. Thank you very much.

Andrew Steinerman: Okay. Thank you very much.

Six to 12 months.

Speaker Change #132: Okay. Thank you very much.

Todd Schneider: Yes, sir. Thank you.

Speaker Change #133: Yes, Sir thank you.

Ashish Sabadra: Our next question comes from Jasper Bibb from Truist Securities. Please go ahead, Jasper.

Operator: Our next question comes from Jasper Bibb from Truist Securities. Please go ahead, Jasper.

And our next question comes from Jasper Bibb from true true Security. Please go ahead Jasper.

Faiza Alwi: Hey, good morning, guys. You mentioned that you're on your tailwind from energy, but was just hoping to get some additional color on other cost inputs, I guess, specifically labor and materials.

Jasper Bibb: Hey, good morning, guys. You mentioned that you're on your tailwind from energy, but was just hoping to get some additional color on other cost inputs, I guess, specifically labor and materials.

Jasper Bibb: Hey, Good morning, guys you mentioned the year on year tailwind from energy, but was just hoping to get some additional color on other cost inputs, I guess, specifically labor and materials.

Todd Schneider: Yeah, I'll start. Jasper, good morning. We're seeing, just like you're seeing with inflation in total, we're seeing that come down. It's never coming down as fast as we like, but we are seeing it. Cotton has stabilized. We're seeing freight come down, and that's important to us. And the labor market is easier. It's still not easy, but it is easier. So I think that probably the right way to think about it would be as the labor market eases, then that will lessen pressure on wage growth as well.

Speaker Change #134: Yes, I'll start.

Speaker Change #135: Jennifer good morning.

We're seeing just like Youre seeing with the inflation in total we are seeing that come.

Speaker Change #135: Come down.

Speaker Change #135: It's never coming down as fast as we like.

But we are seeing it.

Speaker Change #135: Cotton has stabilized.

Speaker Change #135: <unk> freight come down.

Speaker Change #135: And that's important to us and.

Speaker Change #135: And the labor market is it's easier it's still not easy, but it is easier. So so I think that's probably the right way to think about it would be.

Speaker Change #135: As the labor market eases.

Speaker Change #135: And that will lessen pressure on wage.

Speaker Change #135: Wage growth as well.

Ashish Sabadra: Thanks. And then wanted to follow up on first aid. Operating margins there were really strong in the first half. Should we think about these low 20% levels as sustainable going forward? And would you say there's anything that's changed there that's unlocked another leg of operating margin expansion year to date?

Speaker Change #136: Thanks, and then wanted to follow up on per stage operating margins. There were really strong in the first half should we think about these like low 20% levels are sustainable going forward and would you say there is anything thats changed there that's unlocked.

Speaker Change #136: <unk> leg of operating margin expansion year to date.

Mike Hansen: Sure. Well, Jasper, we have seen some nice performance in that business. I spoke to a few of them where from a margin perspective, first of all, the value that we sell with, nothing's more important than the health and safety of your employees, is really still resonating well. So our growth has been really good in that business. We talked a little bit in the opening comments about sort of the recurring revenue streams of AED rentals, our Eyewash Stations, and our WaterBreak. These have been great businesses for us. The growth has been really good, and the margins are great for us. Many times, these are add-on products to existing customers. But in all three of them, we install, and then we have a recurring service program that goes on after that. Again, it leads to really nice stickiness and also nice margins.

Speaker Change #137: Sure Jess.

Speaker Change #137: <unk>, where we have seen some nice performance in that business.

Speaker Change #138: I spoke to a few of them.

Speaker Change #138: From a from a margin perspective first of all.

Speaker Change #138: The value that we.

Speaker Change #138: That we sell with.

Nothing is more important than the health and safety of our employees is really still resonating well and so our growth has been really good in that business, we talked a little bit in the openings.

Speaker Change #138: Comments.

Speaker Change #138: There was sort of the recurring revenue streams of AED rentals or eyewash stations and our water break and these have been great businesses for us the growth has been really good and the margins are great for us. Many times. These are add on.

Speaker Change #138: Our products to existing customers.

Speaker Change #138: But in all three of them, we install and then we have a recurring service program.

Speaker Change #138: Goes on after that and again it leads to really nice stickiness and also nice margins. The other thing that I'll point out is we opened our first aid and first aid and safety distribution Center, a couple of years ago.

Mike Hansen: The other thing that I'll point out is we opened a first aid and safety distribution center a couple of years ago. That allows us to source more. It allows us to centralize some of our sourcing. Those kind of things lead to a better product cost. That, again, drives down the material cost in our first aid and safety business. So the combination of really good sales mix, really good growth in the business, good sourcing, the one I didn't mention was smart truck technology that is also having a benefit there. All of those things are contributing. So this is not a case of six months of sort of unusual items. This is a little bit of a lot of hard work and execution by our first aid and safety partners to really get this margin going.

The other thing that I'll point out is we opened a first aid and safety distribution center a couple of years ago. That allows us to source more. It allows us to centralize some of our sourcing. Those kind of things lead to a better product cost. That, again, drives down the material cost in our first aid and safety business. So the combination of really good sales mix, really good growth in the business, good sourcing, the one I didn't mention was smart truck technology that is also having a benefit there. All of those things are contributing. So this is not a case of six months of sort of unusual items. This is a little bit of a lot of hard work and execution by our first aid and safety partners to really get this margin going.

Speaker Change #138: And that allows us to source more.

Speaker Change #138: It allows us to centralize some of our sourcing and those kind of things lead to.

Speaker Change #138: Better product cost and that again drives down the material cost in our first aid safety business. So the combination of really good sales mix really good growth in the business.

Good sourcing.

Speaker Change #138: The one I didn't mention was smart truck technology that is also having a benefit there all of those things are contributing and so this is not a case of six months.

Speaker Change #138: Sort of unusual items. This is this is a little bit of a lot of hard work and execution by our first aid and safety partners.

Speaker Change #138: To really get this margin going.

Jasper Bibb: Very helpful. Thanks for taking the questions.

Speaker Change #139: Very helpful. Thanks for taking the questions.

Ashish Sabadra: Our next question comes from Faiza Alwi from Deutsche Bank Securities. Please go ahead, Faiza.

Operator: Our next question comes from Faiza Alwi from Deutsche Bank Securities. Please go ahead, Faiza.

Speaker Change #139: Okay.

Speaker Change #140: And our next question comes from Faiza <unk> from Deutsche Bank Securities. Please go ahead.

Jared Mattingly: Yes. Hi. Thank you, Tom. So I wanted to follow up on both the first aid business and the fire business. You touched on the first aid a little bit, but curious on what's driving the acceleration, if you could expand on that, both on first aid and fire. And then as we think about your outlook, do you expect this level of growth to sustain looking ahead? And I know in fire, you talked about an SAP implementation that was happening in this fiscal year. So maybe is that helping the top line? Has that happened? How should we think about margins going forward in that business?

Faiza Alwi: Yes. Hi. Thank you, Tom. So I wanted to follow up on both the first aid business and the fire business. You touched on the first aid a little bit, but curious on what's driving the acceleration, if you could expand on that, both on first aid and fire. And then as we think about your outlook, do you expect this level of growth to sustain looking ahead? And I know in fire, you talked about an SAP implementation that was happening in this fiscal year. So maybe is that helping the top line? Has that happened? How should we think about margins going forward in that business?

Faiza: Yes, hi, thank you.

Faiza: So I wanted to follow up on both the first aid business in the fire business you touched on the first date, a little bad but curious on what's driving the acceleration.

Faiza: If you could expand on that both on for Kate on fire and then as we think about your outlook.

Do you expect this now.

Faiza: Gorilla to sustain looking ahead.

Faiza: And I know in fire you'd talked about SAP implementation that was happening.

Faiza: This fiscal year or so maybe is that helping the top line has that happened how should we think about.

Faiza: Margins going forward in that business.

Todd Schneider: Good morning, Faiza. Thanks for the question. We really like the fire business. It's the only business we're in where you legally have to have it. So there is, I'll call it a double negative, no program market. Everyone is a programmer. But we are able to cross-sell very well into that market. We're using various technologies that Mike referenced to make sure that we're positioning our partners to be more successful, meaning we use SmartTruck technology in all of our businesses. And that helps us. But we're getting leverage from our growth. And the growth is attractive. And we think there's certainly running a business isn't linear. So there will be ebbs and flows. But we like the long-term outlook for the fire business. That being said, as you mentioned, we are going through an SAP implementation. Certainly, we haven't even implemented at this point.

Speaker Change #141: Good morning, Faiza. Thanks for the question.

We really like the fire business.

Speaker Change #141: It's the only business we are in where you legally have to have it. So there is.

Speaker Change #141: I'll call it double negative no no program market.

As a programmer but.

Speaker Change #141: But we are able to cross sell very well into that market.

Speaker Change #141: We are using.

Speaker Change #141: Various technologies that Mike referenced to make sure that we're.

Speaker Change #141: Positioning our partners to be more successful, meaning we use smart truck technology in all of our businesses and and that helps us.

Speaker Change #141: But we're getting leverage from our growth and.

Speaker Change #141: And the growth is attractive and.

And we think it's.

Speaker Change #141: Theres certainly.

Speaker Change #141: We're running our business isn't linear so there will be ebbs and flows.

Speaker Change #141: But we like the long term outlook for for the fire business.

Speaker Change #141: That being said.

Speaker Change #141: As you mentioned, we are going through an SAP implementation.

Speaker Change #141: We.

Speaker Change #141: Certainly.

Todd Schneider: We haven't seen any benefits just yet. We're optimistic about how that can help our business over the coming years.

We haven't seen any benefits just yet. We're optimistic about how that can help our business over the coming years.

Speaker Change #141: What we haven't even implemented at this point so we haven't seen any benefits just yet, but we're we're optimistic about how that can help our business over the coming years, maybe I'll add two things today to the fire.

Speaker Change #141: And a little bit of first day too.

Speaker Change #141: The market opportunity in those businesses is really large and our expectation as we've talked about is that those businesses will continue into the future near that double digit type of a place.

Speaker Change #141: Again, the market opportunity is really large.

Speaker Change #141: One last comment on the SAP, we've not started it.

Speaker Change #141: And so as we as we get into that which is likely going to be more about next fiscal year, we may see a little bit of pressure in the fire segment.

Because as you can imagine when you turn when you start to go into an SAP conversion you don't get benefits overnight. It takes a little bit of time. So we will have some additional costs in 'twenty five.

Speaker Change #141: And certainly that is setting up really nice benefits into the future for that business.

Jared Mattingly: Great. Thank you. And then if I could just follow up on the macro environment. You made some comments in response to a previous question around just you're being prudent and there is some uncertainty. Just given sort of how well you're doing with new programs and the momentum you're seeing in sort of these other businesses, I'm curious if you can give us a framework in terms of how we should think about the impact of macro on your business.

Faiza Alwi: Great. Thank you. And then if I could just follow up on the macro environment. You made some comments in response to a previous question around just you're being prudent and there is some uncertainty. Just given sort of how well you're doing with new programs and the momentum you're seeing in sort of these other businesses, I'm curious if you can give us a framework in terms of how we should think about the impact of macro on your business.

Speaker Change #142: Great. Thank you and then if I could just follow up on the macro environment.

Speaker Change #142: I made some comments in response to a previous question around.

Speaker Change #142: I'll just.

Speaker Change #142: Being prudent and there is some uncertainty.

Speaker Change #142: Just given how well youre doing programmer than the <unk>.

Speaker Change #142: Momentum you're seeing in some of these other businesses.

Speaker Change #142: Since you can if you have if you can give us a framework in terms of how we should think about the impact of.

Speaker Change #142: Macro on Europe on your business.

Mike Hansen: Well, I'll start, Faiza, with our history has been we grow certainly in multiples of GDP and employment growth. And you hit it. We are able to sell into new programs. Even when they're not, let's say, adding people, we can take pressure off of them by managing programs for them. So our new business effort is always really good. But certainly, if we see turns in the economy, we've got to adjust potentially. If we see our customers start to reduce their number of people, we've got to adjust. And so it is prudent for us to sort of think about that as we look into our guidance and into the future of the business.

Well I'll start Pfizer with.

Speaker Change #142: Our history has been we grow certainly in multiples of GDP.

Speaker Change #142: GDP unemployment growth in and you hit it.

Speaker Change #142: We are able to sell into no programmers.

Speaker Change #142: Even when they're not let's say adding people.

Speaker Change #142: We can take pressure off of them by take by managing programs for them.

Speaker Change #142: So our new business effort is always really good.

Speaker Change #143: But certainly.

Speaker Change #143: If we see turns in the economy, we've got to adjust potentially if we see our customers.

Speaker Change #143: Start to reduce their number of people, we've got to adjust and so it is prudent for us to sort of think about that as we look into our guidance and into the future of the business.

Jared Mattingly: Understood. Thank you so much.

Faiza Alwi: Understood. Thank you so much.

Speaker Change #144: Understood. Thank you so much.

Ashish Sabadra: Our next question comes from Seth Webber from Wells Fargo. Please go ahead, Seth.

Operator: Our next question comes from Seth Weber from Wells Fargo. Please go ahead, Seth.

Speaker Change #145: And our next question comes from Seth Weber from Wells Fargo. Please go ahead Sir.

Faiza Alwi: Hey, good morning and happy holidays, guys. I wanted to just go back to the clean room discussion for a minute. If there's any way to frame how we should be thinking about that new facility openings, and are those facilities higher CapEx relative to a traditional facility? Is there any way to combine facilities, or I'm just trying to get a better understanding of this opportunity and what the investment might be for Cintas going forward. Thanks.

Seth Weber: Hey, good morning and happy holidays, guys. I wanted to just go back to the clean room discussion for a minute. If there's any way to frame how we should be thinking about that new facility openings, and are those facilities higher CapEx relative to a traditional facility? Is there any way to combine facilities, or I'm just trying to get a better understanding of this opportunity and what the investment might be for Cintas going forward. Thanks.

Hey, good morning, happy holidays guys.

I wanted to just go back to the clean room discussion for a minute if there was any way too.

Speaker Change #145: Frame, how we should be thinking about that new facility openings and are those facilities higher capex relative to a traditional facility is there any way to.

Speaker Change #145: Combined facilities or I'm, just trying to get a better understanding of this opportunity and what the investment might be for some thoughts going forward. Thanks.

Todd Schneider: Yeah, Seth, thank you for the question. As you know, that's a segment of the uniform market. As I mentioned earlier, it does seem more companies over the last decade or so have higher cleaning quality requirements. We think there's a tailwind there. As far as the CapEx required for a facility like that, you can think of it as very similar to a uniform facility. The only difference I think that you may want to think about is it serves usually a larger geographic area than we would with a traditional facility. The reason being is we only have so many of them, and they have to cover the customer base. As a result of that, we do cover a larger geographic area out of each of those facilities.

Yeah, Seth Thank you for the question.

Speaker Change #146: As you know Thats a segment of the uniform market.

Speaker Change #146: I mentioned earlier it's.

It does seem more companies over the last.

Speaker Change #146: Decade, or so have had higher cleaning quality requirements. So so.

Speaker Change #146: So we think there is.

Speaker Change #146: As a tailwind there.

Speaker Change #146: As far as the Capex required for a facility like that.

Speaker Change #146: You can think of it as very similar to a uniform facility.

Speaker Change #146: The only difference I think that you may want to think about is.

Speaker Change #146: It serves usually a larger geographic area then.

Speaker Change #146: And then we would with a traditional facility and the reason being is we only have so many of them and they have to cover.

Speaker Change #146: The customer base so.

Speaker Change #146: So as a result of that they do cover we do cover a larger geographic area for out of each of those facilities.

Faiza Alwi: Okay. That's helpful. And is there any way for us to think about how many of these facilities you might be opening over the next couple of years? I mean, I saw the press release for the Wisconsin facility, but is this order of magnitude ones and twos, or could this be much bigger going forward?

Speaker Change #147: Okay. That's helpful.

Speaker Change #147: Is there any way to.

Speaker Change #147: For us to think about how many of these facilities you might be opening over the next couple of years relative I mean, I saw the press release for the Wisconsin facility, but.

Speaker Change #147: As this order of magnitude ones and twos or it could just be much much bigger going forward.

Todd Schneider: Yeah, Seth, I wouldn't say you're not going to see ones and twos coming out every quarter or every year based upon the size of the market. So it certainly won't be anywhere near that pace. But it will be paced based upon the demand from the marketplace. If there's more and more customers that are interested in it, then we'll be prepared to meet that demand.

Speaker Change #148: Yes, Seth I wouldn't.

Speaker Change #148: Youre not going to see.

Ones and twos coming out every every quarter or every every year based upon the size of the market. So.

Speaker Change #148: It certainly won't be anywhere near that pace, but it will be pace based upon the demand from the marketplace. If those theres more and more customers that are interested in it. Then then we'll be prepared to meet that demand.

Faiza Alwi: Got it. Okay. That's helpful. Thanks. And then maybe just a quick follow-up on the direct. It was nice to see the direct sales business turn be positive again in the quarter. Is there any color on whether that's coming more from the service side of your customer base, more of the manufacturing side, and any just detail there, or is it just kind of across the board?

Speaker Change #149: Got it Okay. That's helpful. Thanks, and then maybe just a quick follow up on the direct it was nice to see the direct sales business.

Speaker Change #149: The positive again in the quarter is there any color on whether thats.

Speaker Change #149: Coming more from the service side of the of your customer base is more on the manufacturing side any just.

Speaker Change #149: Detail there or is it just kind of across the board.

Todd Schneider: Good question, Seth. The Design Collective business, the direct sale portion of it, we've spoken in the past. It's certainly lumpier. So as far as where that growth is coming from, it's really more national accounts where we would get it, hospitality, lodging. And when they have rollouts or new allotment programs, you tend to get spikes. And then so we love the spikes, and then what comes after the spike isn't as good. But I wouldn't think about it as a big growth engine for us.

Speaker Change #149: Yes.

Speaker Change #150: Good question, Seth the design collective business, the direct sale portion of it.

Speaker Change #150: Yes.

Speaker Change #150: We've spoken in the past, it's certainly lumpier.

Speaker Change #150: And.

Speaker Change #150: So.

As far as where that growth is coming from that it's really more national accounts.

Speaker Change #150: Where we would get it.

Speaker Change #150: Hospitality lodging and when they have rollouts or <unk>.

Speaker Change #150: New allotment programs, you tend to get spikes and then.

Speaker Change #150: And then so we love the spikes and then the what.

Speaker Change #150: What comes after the spike isn't as good but I wouldn't.

Speaker Change #150: Think about it as a big growth engine for US yes, we typically would say in the low to mid single digit growth. So this quarter is sort of right in line with that expectation.

Mike Hansen: Yeah. We typically would say in the low to mid single-digit growth. So this quarter is sort of right in line with that expectation.

Ashish Sabadra: Our next question comes from Stephanie Moore from Jefferies. Please go ahead, Stephanie.

Speaker Change #151: And our next question comes from Stephanie <unk> from Jefferies. Please go ahead Stephanie.

Jared Mattingly: Hi. Good morning. Thank you. I wanted to touch a bit on maybe the cross-sell opportunity over time. I think you've provided you continue to execute very well on your investments, particularly on the technology front, and called out just the enhanced visibility that you have. So maybe you can talk about, given some of these investments, what this might mean for cross-selling, meaning the opportunity to add those additional products and kind of continue to further penetrate each existing customer. So kind of how are you balancing the incremental products that you can offer over time? Thanks.

Stephanie: Hi, good morning, Thank you.

Stephanie: I wanted to touch a bit on maybe the cross sell opportunity over time I think you've provided you continue to execute very well on your end.

<unk>, particularly on the technology front and called out this enhanced visibility that you have so maybe you can talk about given some of these investments what this might mean for cross selling meeting the opportunity to add those additional products.

Stephanie: And kind of continue to further penetrate each existing customer so kind of how are you balancing the incremental products that you can offer over time.

Todd Schneider: Good morning, Stephanie. Well, you can think about it. We call it cross-sell. Cross-sell is really division to division. There's also upsell, which would be we have products that our customers don't use all of our products, even within the rental division or the first aid division, and what have you. So those are all components of growth for us. And we see a significant, massive, frankly, runway in all those areas. So we're trying to position our employee partners to make sure that they're in the right spot and have the right information to help the customer. And then we're also continually. It's part of our corporate culture is to invest in new products and new services. We're always working on that. And we get those ideas from those customers. And then we test them, and then we launch them. And we're always working on that.

Speaker Change #152: Good morning, Stephanie.

Stephanie: Well you can think about it we call. It cross sell there is some cross sell is really.

Stephanie: Division to division, there's also upsell, which would be we have products that.

Our customers don't use all of our products, even within the rental division or the first aid division and what have you. So.

Stephanie: Those are all components of growth for us and we see a.

Stephanie: A significant massive frankly runway.

Stephanie: And all of those areas so.

Stephanie: So we're trying to.

Stephanie: Position our employee partners.

Stephanie: Two.

Stephanie: To make sure that they're in the right spot and have the right information to help the customer and then we're also continually it's part of our corporate culture is to to invest in new products and new services.

We're always working on that.

Stephanie: And we get those ideas from those customers in.

Stephanie: And then we test them and then we launch them in and we're always working on that.

Todd Schneider: It's always been a component of our growth and always will be.

Stephanie: It's always been a component of our growth and always will be.

Stephanie: Okay.

Jared Mattingly: Thank you. Appreciate it.

Speaker Change #153: Thank you I appreciate it.

Todd Schneider: Thank you.

Speaker Change #154: Thank you.

Ashish Sabadra: Our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead, Scott.

And our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead Scott.

Mike Hansen: Thanks, Scott. Good morning, everyone. Happy holidays. My first one, I'm going to delve into the SG&A running low double digits growth, something you did last year as well. And you cited investment in selling resources, management trainee program, tech, and also some talent acquisition efforts. Just curious. And you guys have said on this call, labor is getting better, but still a little tough. Could you elaborate on the labor aspect and kind of what you guys are doing pushing the selling? And then also curious about the tech aspect. Maybe you've already covered it in the call, if that's what you meant, but just wondering if there's anything extra there. Thanks.

Scott Schneeberger: Thanks, Scott Good morning, everyone happy holidays.

Scott Schneeberger: My first one I am going to delve into the SG&A running low double digits growth something you did last year as well and you said investment in selling resources.

Scott Schneeberger: Management training program Tak and also some talent acquisition efforts just curious and you guys. Just said on this call waivers getting better but still a little tough could you elaborate on the.

The labor aspect and kind of what you guys are doing pushing the selling and then also curious about the tech aspect, maybe you've already covered it in the call. If that's what you meant but just wondering if theres anything extra there. Thanks.

Todd Schneider: Yeah. Good morning, Scott. The items that you mentioned, they're all really important to us. There's not one that I would call out, but I would think about it this way. We think the future is really bright, and we want to invest for the future. We know we need the talent acquisition team to be attracting the very best talent. The management trainee program is our leaders of the future. We think they are a critical pipeline, and we're going to need those leaders. Then the selling resources, we think the future is bright with how many customers we have, what the size of the market is. I mentioned 1 million customers, but 16 million businesses. So that's all great.

Speaker Change #155: Yes, good morning, Scott.

Sure.

Speaker Change #156: The items that you mentioned they are all really important to us.

Speaker Change #156: We are there is not one that I would call out, but I would think about it this way.

Speaker Change #156: We think the future is really bright and we want to invest for the future.

Speaker Change #156: No we need.

Speaker Change #156: Talent acquisition team to be attracting the very best talent the management training program as our as our leaders of the future.

Speaker Change #156: We think they are a critical pipeline and and we're going to need those leaders.

Speaker Change #156: And then the.

Speaker Change #156: Selling resources are.

Speaker Change #156: We see it looks.

Speaker Change #156: We think the future's bright with or how many customers we have what the size of the market as I mentioned 1 million customers, but 16 million businesses. So that's all great and then you kind of wrap it all with technology, because technology will we want to make it easier to do business with us and we want to leverage technology.

Todd Schneider: Then you kind of wrap it all with technology because technology we'll want to make it easier to do business with us. We want to leverage technology to make our partners more successful, point them in the right direction, give them the right tools in their toolbox to spend their time in the right spots, but also to make it easier for the customer to buy, easier to do business with in totality.

<unk> to make our partners more successful point them in the right direction.

Speaker Change #156: The right tools in their toolbox to.

Speaker Change #156: To spend their time in the right spots, but also too.

Speaker Change #156: To make it easier for the customer to buy easier to do business with in totality.

Speaker Change #157: Great. Thanks, I appreciate that and then.

Sure.

Speaker Change #157: Not a lot of acquisition activity in the quarter, but there was some and there was a good amount in the first quarter I remember you, saying it was across all businesses, but we didn't hit it hit it up too much last quarter could you talk about what it is that you are acquiring and.

Speaker Change #157: Clearly across segments, but what the.

Speaker Change #157: What's the strategy had been there thanks.

Speaker Change #157: Sure not a lot of change in the strategy Scott and that is we love.

Speaker Change #157: Rental tuck in opportunities and we've made a number of those this year and.

Speaker Change #157: As you can imagine.

Speaker Change #157: When we do that in a marketplace, we add immediate.

Speaker Change #157: Capacity utilization improvement.

Route density and so those things really help us.

Speaker Change #157: In the rental business. So we've made some of those we certainly have made some first aid acquisitions and we've made fire acquisitions.

Speaker Change #157: Again, the dynamic is similar in all three of these these are really nice tuck in opportunities that just strengthened our business in the local markets in which we acquire them and we will continue to look for those opportunities.

Todd Schneider: One thing I might add is, to Mike's point, we get synergies. It helps us with density, helps us with capacity utilization, allows us to spend more time with the customers. So all that's valuable. But in each of the businesses, depending upon the business we acquire, but normally when we make an acquisition in rental, first aid, or fire, we're able to provide an offering to that customer base that's broader than what they had in the past. So the rental we have a broader offering than most companies out there. Certainly, in the first aid, we do as well. And depending upon the fire acquisition, that's very consistent. Separate from, then we can cross-sell. So it adds nice value.

Speaker Change #157: Best we can.

Speaker Change #158: One thing I might add is.

Speaker Change #159: To Mike's point, we get synergies it helps us with density helps us with capacity utilization.

Speaker Change #159: It allows us to spend more time with the customers.

Speaker Change #159: So all that valuable but.

Speaker Change #159: And in each of the businesses, depending upon the business we acquired.

Speaker Change #159: Normally when we make an acquisition in rental first aid or fire.

To provide an offering to that customer base that is broader than what they had in the past so the rental wave a broader offering than than most companies out there certainly in the first aid, we do as well and and depending upon the fire acquisition. That's very consistent separate from then we can cross sell.

Speaker Change #159: So it just it adds a nice value.

Ashish Sabadra: Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead, Shlomo. Well, Shlomo, is your line muted?

Speaker Change #160: And our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead Shlomo.

Okay.

Shlomo your line muted.

Sorry, My line was muted sorry.

A question basically for Mike just a little bit going through.

Mike Hansen: Some of the technical items in the quarter receivables days were up two days sequentially. I was wondering if there was a lot of business that came in at the end of the quarter.

Mike Hansen: Are you seeing any changing patterns in.

Mike Hansen: What clients are paying or are there any other factors in that because the last time, we saw 48 days was during COVID-19.

Mike Hansen: Shlomo, when our quarters end on a holiday, and it seems like too many of them do, it does create a little bit of disruption in terms of the ability to collect the mail, the application. We have seen maybe just a touch of slowing in the AR, but we've not seen any, I'll say, deterioration from the standpoint of additional write-offs. But we did see a little bit of slowing. The Thanksgiving holiday can usually contribute to that.

Mike Hansen: Shlomo.

Shlomo Rosenbaum: Our when our quarters end on holiday and it seems like too many of them do.

Shlomo Rosenbaum: It does create a little bit of disruption in terms of the the.

Shlomo Rosenbaum: <unk> two <unk>.

Shlomo Rosenbaum: Collect the mail the application we have seen may be just a touch of slowing.

Shlomo Rosenbaum: In the in the AAR, but we've not seen any.

Shlomo Rosenbaum: I'll say deterioration from.

Shlomo Rosenbaum: From the standpoint of additional write offs, but we did see a little bit of slowing.

Shlomo Rosenbaum: And the Thanksgiving holiday can usually contribute to that.

Jared Mattingly: Okay. Then in the OPM, the operating margin, the other unit was up very nicely sequentially, even though there's one less day sequentially in the quarter. Could you just give us some of the mechanics or tell us just what's going on on the ground over there? It's increasing the margin very nicely. And is that something that we should expect to continue at kind of that 16% level?

Shlomo Rosenbaum: Okay.

Shlomo Rosenbaum: Then in the OPM the operating margin. The other unit was up very nicely sequentially, even though there's one less day sequentially in the quarter.

Speaker Change #161: Could you just give us some of the mechanics or tell us just what's going on on the ground over there, it's increasing the margin very nicely.

Speaker Change #161: Is that something that we should expect to continue at kind of that 16% level.

Mike Hansen: Well, certainly, the revenue growth is powerful in all of our businesses. And when we see some really nice revenue growth, that's important. The other thing that I would say is the Uniform Direct Sale business went from -2.7% in terms of revenue growth to 4.7%. And that is important for operating margins too. So we did see some nice improvement there in the direct sale. Nothing I would say that is noteworthy other than, again, some nice acceleration in the revenue.

Well we.

Speaker Change #161: Certainly the revenue growth is powerful in all of our businesses and when we see some really nice revenue growth that's important.

Speaker Change #161: The other thing that I would say is.

Speaker Change #161: Uniform direct sale business went from a.

Speaker Change #161: Negative $2 seven in terms of revenue growth to.

Speaker Change #161: Four 7%.

Speaker Change #161: And that is important for us for operating margins too. So we did see some nice improvement there in the direct sale.

Speaker Change #161: Nothing I would say that that is noteworthy other than <unk>.

Speaker Change #161: Again soon.

Some nice acceleration in the revenue.

Ashish Sabadra: Our next question comes from Leo Carrington from Citigroup. Please go ahead, Leo.

Speaker Change #162: And our next question comes from Leo Carrington from Citigroup. Please go ahead Leo.

Jared Mattingly: Thank you. And morning. If I could ask a follow-up on that point around the one-off or the cost that you pulled out in Q2 around talent acquisition, training, and technology. Were you calling them out for any of these one-off increases in nature or more to highlight where the spend is? And then in terms of the underlying margins and drop-through in Q2 and the organic growth, do you see that as sustainable when you factor in the additional investment this quarter?

Leo Carrington: Thank you.

Leo Carrington: <unk>, if I can ask a follow up on.

Speaker Change #163: That points around the one off costs that you called out in Q2 around content physician training.

Speaker Change #163: Technology.

Speaker Change #163: We call them out.

One off increase in nature.

Speaker Change #163: I'll highlight why the spending and then.

Speaker Change #163: In terms of the underlying margins and drop through in Q2.

Speaker Change #163: Right.

Speaker Change #163: That is sustainable.

Speaker Change #163: When you factor in the <unk>.

Speaker Change #163: Additional investment this quarter.

Mike Hansen: Well, I'll start with we called them out because we think it's important to make sure that our investors understand that we are looking at the long term, and we want to continue to invest in the business. And those investments are really important, and they set up, let's say, more penetration opportunities, more cross-sell opportunities, but also productivity improvements, capacity utilization opportunities. In these cases, we wanted to call them out to show that, look, we're focused on the long term, and we're going to continue in the business. As Todd said a couple of times, the future is bright for us. And we want to make sure that we take advantage of that bright future by investing in the business. And the call-outs were really more about that. The future is bright. In the quarter, we had incremental margins of 27%.

Speaker Change #164: Well, we I'll start with.

Speaker Change #164: We call them out because we think it's important.

Speaker Change #164: Two to make sure that.

Our investors understand that we are we are looking at the long term and we want to continue to invest in the business.

Speaker Change #164: And those investments are really important and they set up.

Speaker Change #164: They set up let's say.

Speaker Change #164: More penetration opportunities more cross sell opportunities, but also.

Speaker Change #164: Productivity improvements capacity utilization opportunities in these cases, we wanted to call them out to show that look we're focused on the long term and we're going to continue in the business as Todd said a couple of times in the future is bright for us and we want to make sure that we take advantage.

Speaker Change #164: Of that bright future by investing in the business and the call outs were were really more about that in the future is bright.

Speaker Change #164: In the quarter.

Speaker Change #164: We had incremental margins of 27%.

Mike Hansen: Look, our expectation is that we're going to be in the 20% to 30% range going forward. We recognize that when we're sitting at 21%, they need to be in the higher level of that range. We think that we can continue to do that. When we talk about things like SAP, technology, and other investments, and by the way, we're able to get 27% even when we're investing in the business. But we give those to say we're setting up those future margin and revenue opportunities. It's important for us to, I think, communicate that.

Speaker Change #164: Look our.

Speaker Change #164: Our expectation is that we're going to be in the 20% to 30% range going forward, we recognize that that when we're sitting at 21% they need to be in the higher higher.

Speaker Change #164: Level of that range.

Speaker Change #164: And we think Thats that we can continue to do that and and when we talk about things like SAP and technology and other investments.

Speaker Change #164: <unk>.

Speaker Change #164: And by the way, we're able to get 27%, even when we're investing in the business, but we give those to say we're setting up those future.

Speaker Change #164: Margin and revenue opportunities, it's important for us to I think communicate that.

Ashish Sabadra: Right there. Thank you. Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead, Toni.

Alright, great. Thank you.

Speaker Change #165: And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead Tony.

George Tong: Thanks very much. You mentioned the success that you've had with the branded products earlier, particularly with Carhartt and ChefWorks. Could you just remind us if these are exclusive relationships and how long the relationships are for? And then are there any other areas that could benefit from branded products or equipment that you could offer as well?

Toni Kaplan: Thanks very much.

Toni Kaplan: You mentioned the success that you've had with the branded products earlier, particularly with carhartt and chef Forks could you just remind us. If these are exclusive relationships and how long the relationships. Therefore, and then are there any other areas that could benefit from branded products or equipment.

Toni Kaplan: That that you could offer as well.

Todd Schneider: Good morning, Tony. Thank you for the question. So we've had a long-standing relationship with Carhartt and ChefWorks. And we are the exclusive licensees for those companies on the rental programs. And so we work with them to design products that the end users want to wear, but also that goes very well through our processing systems. So that's all very important to us. As far as, we don't get into contractual arrangements with them, but I can tell you this. We love products that our end users get excited about wearing them. And Carhartt and ChefWorks are two great examples of that in great companies, great brands, great products. And as far as, are there other opportunities, we're constantly looking for that.

Speaker Change #166: Good morning, Tony. Thank you for the question. So we've had a longstanding relationship with carhartt and chef works and.

Speaker Change #166: And we are.

Speaker Change #166: The exclusive licensees for those folks for those.

Speaker Change #166: Companies on the rental programs and so we work with them to design products that.

Speaker Change #166: The end users want.

Speaker Change #166: I want to wear and.

Speaker Change #166: But also that goes very well through our processing systems.

Speaker Change #166: So that's all very important to us as far as we don't get into contractual arrangements with them, but what I can tell you. This.

Speaker Change #166: We love products that.

Speaker Change #166: That our end users are that get excited about wearing them and carhartt and chef works are two great examples of that.

Speaker Change #166: And great companies, great brands great products.

Speaker Change #166: And as far as are there other opportunities we're constantly looking for that and.

And we spent a lot of time with our customers and with our working partners.

Speaker Change #166: To talk about that and to see where those opportunities are come from but those are two great relationships longstanding relationships that are really important to us.

George Tong: Yep. Terrific. Maybe if you could just give us your latest thoughts on potential international expansion. That'd be great. Thanks.

Speaker Change #166: Terrific.

Speaker Change #167: And maybe if you could just give us your latest thoughts on potential international expansion that'd be great. Thanks.

Speaker Change #167: I would say similar to products, we're always looking at those types of opportunities, we certainly know.

Speaker Change #167: Stay in contact with the.

Speaker Change #167: The people that are running those businesses, but the great news is we don't have to do that too.

Speaker Change #167: In order to.

Speaker Change #167: To be really really successful in the future. We look at it and say there is again were servicing about 1 million businesses Theres 60 million businesses in U S and Canada.

Speaker Change #167: Here's what's really exciting is by the time, we get to 2 million customers.

There will be more than 16 million businesses in the U S and Canada. So that's kind of a bummer, if youre running a race, but it's really exciting if you're running a business because once we get to the two mile. Mark. The race is going be extended so that separate from we're going to have more products and services over the coming years. So all of that being said is.

Todd Schneider: So, all that being said, we continue to watch it. We evaluate it. We look for the right opportunity. And if that opportunity presents itself, then we will seize it. But it's certainly not required in order for us to be successful in the future.

Speaker Change #167: We continue to watch it we evaluate it we look for the right opportunity.

Speaker Change #167: And if that opportunity presents itself, then we will seize it but.

Speaker Change #167: But it's certainly not.

Speaker Change #167: It is not required in order for us to be successful in the future.

Ashish Sabadra: At this time, there are no further questions. I'd like to turn the call back over to Jared Mattingley to close out the call.

Speaker Change #168: And at this time there are no further questions I would like to turn the call back over to Jared manually to close out the call.

Mike Hansen: Thank you for joining us this morning. We will issue our third quarter of Fiscal 2024 financial results in March. We look forward to speaking with you again at that time.

Thank you for joining us. This morning, we will issue our third quarter of fiscal 'twenty for financial results in March we look forward to speaking with you again at that time.

Ashish Sabadra: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #169: This concludes today's conference call. Thank you for your participation you may now disconnect.

Q2 2024 Cintas Corp Earnings Call

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