Q2 2025 Cintas Corp Earnings Call

December 19, 2024

Operator: Good day everyone and welcome to the Cintas Corporation announces the Fiscal 2025 Second Quarter Results Conference Call. Today's call is being recorded at this time. I would like to turn the call 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 2025 second quarter results Conference call today's call is being recorded.

At this time I would like to turn the call over to Mr. Jared radically Vice President Treasurer and Investor Relations. Please go ahead Sir.

Jared Mattingly: Thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2025 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 discussion 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 Mattingley: Thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2025 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 discussion 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 Radically: Thank you for joining US with me are Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer, who will discuss our fiscal 2025 second quarter results. After our commentary we will open the call to questions from analysts.

Jared Radically: The private Securities Litigation Reform Act of 1095 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 Radically: These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss.

Speaker Change: Refer you to the discussion on these points contained in our most recent filings with the Securities and Exchange Commission I'll now turn the call over to Todd.

Todd Schneider: Thank you, Jared. We are pleased with our strong second quarter results, which reflect great execution by our employee partners. The comprehensive value proposition we provide to our customers in supporting their image, safety, cleanliness, and compliance needs. Second quarter total revenue grew 7.8% to $2.56 billion, an all-time high for revenue in a quarter. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.1% in the second quarter. We continued to experience strong demand for our services, reflecting the complementary nature of our platform and our unmatched product and service offerings for businesses of all types and sizes. Virtually every business has a need Cintas is ready to meet, whether it's a front door that needs a mat, a bathroom to service, exit lighting, fire extinguishers, and sprinkler systems, first aid and safety needs, or an apparel solution.

Todd Schneider: Thank you Jared we are pleased with our strong second quarter results, which reflects great execution by our employee partners and a comprehensive value proposition, we provide to our customers and supporting their image safety cleanliness and compliance needs.

Todd Schneider: Second quarter total revenue grew seven 8% to $2 $5 6 billion in.

Todd Schneider: An all time high for revenue in a quarter.

Todd Schneider: The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations was seven 1%.

Todd Schneider: In the second quarter, we continued to experience strong demand for our services, reflecting the complementary nature of our platform.

Todd Schneider: And our unmatched product and service offerings for businesses of all types and sizes.

Virtually every business has a need cintas is ready to mean, whether it's our front door that needs a mat a bathroom to service X.

Todd Schneider: <unk> lighting fire extinguishers, and sprinkler systems, first aid and safety needs or in apparel solution.

Todd Schneider: Cintas is continually deepening our value propositions, particularly within our four focused verticals of health care, hospitality, education, and state and local government which continued to perform well. Gross margin for the second quarter grew 11.8% over the prior year to 49.8%, just below our all-time high. We set in the first quarter operating income of 23.1% as a percent of revenue was an all-time record, an increase of 18.4% over the prior year. Diluted EPS grew a robust 21.1% to $1.09. Our strong earnings growth reflects our operational excellence via sourcing and supply chain initiatives, route and energy optimization, and technology-enabled efficiency in our facilities. Cash flow this year continues to be very strong, with free cash flow for the first six months increasing 34.9% over the prior year.

Cintas is continually deepening our value propositions, particularly within our four focused verticals of health care, hospitality, education, and state and local government which continued to perform well. Gross margin for the second quarter grew 11.8% over the prior year to 49.8%, just below our all-time high. We set in the first quarter operating income of 23.1% as a percent of revenue was an all-time record, an increase of 18.4% over the prior year. Diluted EPS grew a robust 21.1% to $1.09. Our strong earnings growth reflects our operational excellence via sourcing and supply chain initiatives, route and energy optimization, and technology-enabled efficiency in our facilities. Cash flow this year continues to be very strong, with free cash flow for the first six months increasing 34.9% over the prior year.

Todd Schneider: Cintas is continually deepening our value propositions, particularly within our four focused verticals healthcare hospitality education, and state and local government, which continued to perform well.

Todd Schneider: Gross margin for the second quarter grew 11, 8% over the prior year to 49, 8% just below our all time high we set in the first quarter.

Todd Schneider: Operating income of 23, 1% as a percent of revenue was an all time record an increase of 18, 4% over the prior year.

Todd Schneider: Diluted EPS grew a robust 21, 1% to $1 nine.

Todd Schneider: Our strong earnings growth reflects our operational excellence, we are sourcing and supply chain initiatives were out in energy optimization and technology enabled efficiency in our facilities.

Todd Schneider: Cash flow. This year continues to be very strong with free cash flow for the first six months, increasing 34, 9% over the prior year.

Todd Schneider: We continue to deploy capital across each of our capital allocation priorities, starting with investing back into our businesses. This strong cash flow generation allows us to focus on making strategic investments on our customers and our employee partners, which positions us to deliver long-term value for our shareholders. Our technology investments remain a significant area of reinvestment. We continue to leverage our SAP system to standardize our processes across our operations. Combined with our focus on operational excellence, we are improving the way our employees work and getting the right products to our customers faster, all of which improves the customer experience and positively impacts our margin profile. At the same time of investing in our customers and employee partners, and making strategic acquisitions, returning capital to Cintas shareholders remains a key priority.

We continue to deploy capital across each of our capital allocation priorities, starting with investing back into our businesses. This strong cash flow generation allows us to focus on making strategic investments on our customers and our employee partners, which positions us to deliver long-term value for our shareholders. Our technology investments remain a significant area of reinvestment. We continue to leverage our SAP system to standardize our processes across our operations. Combined with our focus on operational excellence, we are improving the way our employees work and getting the right products to our customers faster, all of which improves the customer experience and positively impacts our margin profile. At the same time of investing in our customers and employee partners, and making strategic acquisitions, returning capital to Cintas shareholders remains a key priority.

Todd Schneider: We continued to deploy capital across each of our capital allocation priorities, starting with investing back into our businesses.

Todd Schneider: This strong cash flow generation allows us to focus on making strategic investments in our customers and our employee partners.

Which positions us to deliver long term value for our shareholders.

Todd Schneider: Our technology investments remain a significant area of reinvestment.

Todd Schneider: We continued to leverage our SAP system to standardize our processes across our operations can.

Todd Schneider: Combined with our focus on operational excellence, we are improving the way our employees work.

Todd Schneider: And getting the right products to our customers faster.

Todd Schneider: All of which improves the customer experience and positively impacts our margin profile.

Todd Schneider: At the same time investing in our customers and employee partners and making strategic acquisitions and returning capital to Cintas to shareholders remains a key priority.

Todd Schneider: Cintas paid a quarterly cash dividend of $0.39 per share last week, and looking ahead, we will continue our opportunistic approach with share buybacks before turning the call over to Mike to provide details of our second quarter results. I'll provide our updated financial expectations for our fiscal year, which reflect our strong momentum and confidence in our outlook. We are updating our annual revenue expectations from a range of $10.22 billion to 10.32 billion to a range of $10.255 billion to 10.32 billion, a total growth rate of 6.9% to 7.5%. We expect our organic growth rate to be in the range of 7.0% to 7.7%. We are also updating our annual Diluted EPS expectations from a range of $4.17 to 4.25 to a range of $4.28 to 4.34, a growth rate of 12.9% to 14.5%.

Cintas paid a quarterly cash dividend of $0.39 per share last week, and looking ahead, we will continue our opportunistic approach with share buybacks before turning the call over to Mike to provide details of our second quarter results. I'll provide our updated financial expectations for our fiscal year, which reflect our strong momentum and confidence in our outlook. We are updating our annual revenue expectations from a range of $10.22 billion to 10.32 billion to a range of $10.255 billion to 10.32 billion, a total growth rate of 6.9% to 7.5%. We expect our organic growth rate to be in the range of 7.0% to 7.7%. We are also updating our annual Diluted EPS expectations from a range of $4.17 to 4.25 to a range of $4.28 to 4.34, a growth rate of 12.9% to 14.5%.

Todd Schneider: Cintas paid a quarterly cash dividend of <unk> 39 per share last week and looking ahead, we will continue our optima, our opportunistic approach with share buybacks.

Todd Schneider: Before turning the call over to Mike to provide details of our second quarter results I will provide our updated financial expectations for our fiscal year, which reflect our strong momentum and confidence in our outlook.

Todd Schneider: We are updating our annual revenue expectations from a range of $10 to $2 billion to $10 three 2 billion.

Todd Schneider: To a range of 10 to $5 5 billion.

Todd Schneider: To 10, three 2 billion.

Todd Schneider: The total growth rate of six 9% to seven 5%.

Todd Schneider: We expect our organic growth rate to be in the range of 7.0% to seven 7%.

Todd Schneider: We are also updating our annual diluted EPS expectations from a range of $4 17.

Todd Schneider: The $4 25.

Todd Schneider: So a range of $4 28.

Todd Schneider: To $4 34.

Todd Schneider: Our growth rate of 12 nine to 14, 5%.

Speaker Change: Cintas is differently.

Todd Schneider: Cintas' differentiated culture, superior products and services, and industry-best talent position us to deliver meaningful value creation in fiscal 2025 and beyond. We remain focused on delivering outstanding customer experiences and making appropriate investments in the business to sustain our growth. I thank all of Cintas' employee partners whose outstanding work and dedication to our customers remains the key to our success. With that, I'll turn it over to Mike to discuss the details of our second quarter results.

Cintas' differentiated culture, superior products and services, and industry-best talent position us to deliver meaningful value creation in fiscal 2025 and beyond. We remain focused on delivering outstanding customer experiences and making appropriate investments in the business to sustain our growth. I thank all of Cintas' employee partners whose outstanding work and dedication to our customers remains the key to our success. With that, I'll turn it over to Mike to discuss the details of our second quarter results.

Speaker Change: Cintas is differentiated culture.

Superior products and services and industry best talent position us to deliver meaningful value creation in fiscal 2025 and beyond.

Speaker Change: We remain focused on delivering outstanding customer experiences and making appropriate investments in the business to sustain our growth.

Speaker Change: I think all Cintas is employee partners, whose outstanding work and dedication to our customers remains the key to our success.

Speaker Change: With that I'll turn it over to Mike to discuss the details of our second quarter results.

Jared Mattingly: Thanks Todd and good morning. Our fiscal 2025 second quarter revenue was $2.56 billion compared to $2.38 billion last year. The organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate was 7.1%. Organic growth by business was 6.9% for Uniform Rental and Facility Services, 12.3% for First Aid and Safety Services, 10% for Fire Protection Services, and Uniform Direct Sale was down 9.2%. Gross margin for the second quarter of fiscal 2025 was $1.28 billion, compared to $1.14 billion last year, an increase of 11.8%. As Todd mentioned, gross margin as a percent of revenue was 49.8% for the second quarter compared to 48% last year, an increase of 180 basis points. Robust volume growth, operating leverage, and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Thanks Todd and good morning. Our fiscal 2025 second quarter revenue was $2.56 billion compared to $2.38 billion last year. The organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate was 7.1%. Organic growth by business was 6.9% for Uniform Rental and Facility Services, 12.3% for First Aid and Safety Services, 10% for Fire Protection Services, and Uniform Direct Sale was down 9.2%. Gross margin for the second quarter of fiscal 2025 was $1.28 billion, compared to $1.14 billion last year, an increase of 11.8%. As Todd mentioned, gross margin as a percent of revenue was 49.8% for the second quarter compared to 48% last year, an increase of 180 basis points. Robust volume growth, operating leverage, and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Thanks, Todd and good morning, our.

Our fiscal 2025 second quarter revenue was $2 $5 6 billion compared to $2 three $8 billion last year, the organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was seven 1%.

Mike Hansen: Organic growth by business was six 9% for uniform rental and facility services 12, 3% for first aid and safety services, 10% for fire protection services and uniform direct sale was down nine 2%.

Mike Hansen: Gross margin for the second quarter of fiscal 'twenty, five was 128 billion compared.

Todd Schneider: Compared to $1 $4 billion last year, an increase of 11, 8% as Todd mentioned gross margin as a percent of revenue was 49, 8% for the second quarter compared to 48% last year, an increase of 180 basis points robust volume growth.

Todd Schneider: <unk> leverage and continued operational efficiencies helped generate this strong gross margin.

Jared Mattingly: Gross margin percentage by business was 49.1% for Uniform Rental and Facility Services, 57.3% for First Aid and Safety Services, 49.9% for Fire Protection Services, and 41.2% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 170 basis points from last year. Our progress year over year reflects our focus on operational excellence initiatives combined with leverage from strong revenue growth. We continue to realize benefits from our technology investments and extracting inefficiencies from the business through our Six Sigma and engineering teams. Gross margin for the First Aid and Safety Services segment increased 280 basis points from last year with strong revenue growth continuing to create leverage. Our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak.

Gross margin percentage by business was 49.1% for Uniform Rental and Facility Services, 57.3% for First Aid and Safety Services, 49.9% for Fire Protection Services, and 41.2% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 170 basis points from last year. Our progress year over year reflects our focus on operational excellence initiatives combined with leverage from strong revenue growth. We continue to realize benefits from our technology investments and extracting inefficiencies from the business through our Six Sigma and engineering teams. Gross margin for the First Aid and Safety Services segment increased 280 basis points from last year with strong revenue growth continuing to create leverage. Our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak.

Todd Schneider: Gross.

Todd Schneider: Arjun percentage five business was 49, 1% for uniform rental and facility services 57, 3% for first aid and safety services 49, 9% for fire protection services, and 41, 2% per uniform direct sale.

Todd Schneider: Gross margin for the uniform rental and facility services segment increased 170 basis points from last year.

Todd Schneider: Our progress year over year reflect our focus on operational excellence initiatives combined with leverage from strong revenue growth.

Todd Schneider: We continue to realize benefits from our technology investments and extracting and inefficiencies from the business through our six Sigma and engineering teams.

Gross margin for the first aid and safety services segment increased 280 basis points from last year with strong revenue growth continuing to create leverage our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals.

Todd Schneider: Eyewash stations in Waterbury or.

Jared Mattingly: Our technology investment in SmartTruck provides route optimization and improved efficiencies, and we continue to see sourcing benefits from our first aid dedicated distribution center that have allowed us to lower product costs. All of these contribute to improved margins. Selling and administrative expenses as a percent of revenue was 26.8%, which was relatively consistent with last year. Q2 operating income was $591.4 million compared to $499.7 million last year. Operating income as a percent of revenue was 23.1% in Q2 of fiscal 2025 compared to 21% in last year's Q2, an increase of 210 basis points. Our effective tax rate for Q2 was 20.7% compared to 20.9% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Our technology investment in SmartTruck provides route optimization and improved efficiencies, and we continue to see sourcing benefits from our first aid dedicated distribution center that have allowed us to lower product costs. All of these contribute to improved margins. Selling and administrative expenses as a percent of revenue was 26.8%, which was relatively consistent with last year. Q2 operating income was $591.4 million compared to $499.7 million last year. Operating income as a percent of revenue was 23.1% in Q2 of fiscal 2025 compared to 21% in last year's Q2, an increase of 210 basis points. Our effective tax rate for Q2 was 20.7% compared to 20.9% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Our technology investment in Smart truck provides route optimization and improved efficiencies and we continue to see sourcing benefits from our first date dedicated distribution center that have allowed us to lower product costs. All of these contribute to improved margins.

Todd Schneider: Selling and administrative expenses as a percent of revenue was 26, 8%, which was relatively consistent with last year.

Todd Schneider: Second quarter operating income was $591 4 million compared to $499 $7 million last year.

Operating income as a percent of revenue was 23, 1% in the second quarter of fiscal 'twenty five compared to 21% in last year's second quarter, an increase of 210 basis points.

Todd Schneider: Our effective tax rate for the second quarter was 27% compared to 29% last year the tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock based compensation.

Jared Mattingly: Net income for the second quarter was $448.5 million compared to $374.6 million last year. This year's second quarter diluted EPS of $1.09 compared to $0.90 last year, an increase of 21.1%. As Todd mentioned earlier, we continue to generate strong cash flow through the first six months. Our free cash flow increased 34.9% over the prior year. This great cash flow over the first six months has allowed us to deploy a total of $1.3 billion of capital across each of our capital allocation priorities of capital expenditures, M&A, dividends, and share buybacks. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2025 net interest expense is expected to be approximately $101 million compared to $95 million in fiscal 2024, predominantly as a result of higher variable rate debt.

Net income for the second quarter was $448.5 million compared to $374.6 million last year. This year's second quarter diluted EPS of $1.09 compared to $0.90 last year, an increase of 21.1%. As Todd mentioned earlier, we continue to generate strong cash flow through the first six months. Our free cash flow increased 34.9% over the prior year. This great cash flow over the first six months has allowed us to deploy a total of $1.3 billion of capital across each of our capital allocation priorities of capital expenditures, M&A, dividends, and share buybacks. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2025 net interest expense is expected to be approximately $101 million compared to $95 million in fiscal 2024, predominantly as a result of higher variable rate debt.

Todd Schneider: Net income for the second quarter was $448 5 million compared to $374 $6 million last year.

This year's second quarter diluted EPS of $1 nine.

Todd Schneider: Compared to 90 last year, an increase of 21, 1%.

Speaker Change: As Todd mentioned earlier, we continue to generate strong cash flow.

Speaker Change: Through the first six months, our free cash flow increased 34, 9% over the prior year. This great cash flow over the first six months has allowed us to deploy a total of $1 $3 billion of capital across each of our capital allocation priorities of capital expenditures M&A dividends.

Speaker Change: And share buybacks.

Speaker Change: Provided our annual financial guidance related to the guidance. Please note. The following fiscal 'twenty five net interest expense is expected to be approximately $101 million compared to $95 million in fiscal 'twenty four predominantly as a result of higher variable rate debt.

Jared Mattingly: Our fiscal 2025 effective tax rate is expected to be 20.2%, and guidance does not include any future share buybacks, or significant economic disruptions, or downturns. I'll now turn it back over to Jared. 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.

Our fiscal 2025 effective tax rate is expected to be 20.2%, and guidance does not include any future share buybacks, or significant economic disruptions, or downturns. I'll now turn it back over to Jared.

Our fiscal 'twenty five effective tax rate is expected to be 22% and guidance does not include any future share buybacks were significant economic disruptions or downturns.

Speaker Change: Now I'll turn it back over to Jared.

Jared Mattingley: 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.

Jared Radically: 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.

Todd Schneider: 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 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 Tim Mulroney from William Blair. Please go ahead.

Speaker Change: 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 one follow up question. Once again, if you would like to ask a question. Please press star one on your phone now.

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

[Analyst]: Tim.

Jared Mattingly: Yeah, hi.

Tim Mulrooney: Yeah, hi. Thanks for taking my questions. I wanted to ask about your guide on organic growth. It looks like it came down slightly at the high end from 8.1% to 7.7%. Just curious what the reason for that was. If second quarter sales came in below. Your expectations or if it's the outlook for the second half of the fiscal year, it shifted slightly. I know it's a small number, but just curious if you had any comment there.

Tim Mulrooney: Yes, hi, thanks for taking my questions I wanted to ask about.

Todd Schneider: Thanks for taking my questions. I wanted to ask about your guide on organic growth. It looks like it came down slightly at the high end from 8.1% to 7.7%. Just curious what the reason for that was. If second quarter sales came in below.

Tim Mulrooney: Your guide on organic growth it looks like it.

Tim Mulrooney: It came down slightly at the high end from eight 1% to seven 7% just curious what the reason for that was the second quarter sales came in below your expectations or if it's.

Jared Mattingly: Your expectations or if it's the outlook?

Tim Mulrooney: The outlook for the second half of the fiscal year. It shifted slightly I know, it's a small number but just curious if you had any comment there.

Todd Schneider: For the second half of the fiscal year, it shifted slightly. I know it's a small number, but just curious if you had any comment there. Well, good morning Tim. Thanks for the question. First, we're pleased with our organic growth rate of 7.1%. It's very good. It's right where we'd like to be. And our second half guide implies a continuation of that good growth, mid to high single digits. The rental division is right in line where we'd like it to be. And the first aid and fire divisions both grew double digits, so they continue to perform well, and the value proposition continues to resonate. So we like where we are, and we think that our guide reflects attractive growth for the year and the back half of the year as well.

Todd Schneider: Well, good morning Tim. Thanks for the question. First, we're pleased with our organic growth rate of 7.1%. It's very good. It's right where we'd like to be. And our second half guide implies a continuation of that good growth, mid to high single digits. The rental division is right in line where we'd like it to be. And the first aid and fire divisions both grew double digits, so they continue to perform well, and the value proposition continues to resonate. So we like where we are, and we think that our guide reflects attractive growth for the year and the back half of the year as well.

Speaker Change: Well good morning, Tim.

Speaker Change: Thanks for the question first we're pleased with our organic growth rate of seven 1%, it's very good in right, where we'd like to be.

Speaker Change: And our second half guidance implies a continuation of that.

Good growth mid to high single digits.

Speaker Change: The rental.

Speaker Change: Division is right in line.

Speaker Change: Where we'd like it to be and the first aid and fire da.

Divisions both.

Speaker Change: <unk> grew double digits. So they continue to perform well in there the value proposition continues to resonate so we like where we are.

Speaker Change: We think that our guide reflects attractive growth on.

Speaker Change: For the year in the back half of the year as well.

Jared Mattingly: Tim, I might offer a couple things on the guide as well. You know, the workday adjusted revenue for the year is now 7.7% to 8.4%. So a really nice range for us. And as you said, the organic revenue growth of 7% to 7.7% is a really good year for us and not much of a change. But maybe I'll give you a bit of thoughts on the implied growth as well. So if you think about that guide that we just gave, it implies an organic growth rate range of 6.6% to 7.9% for the back half of the year. And that's the same implied growth rate that we had in the guide last quarter for the final three quarters. So in other words, that implied guide hasn't really changed.

Mike Hansen: Tim, I might offer a couple things on the guide as well. You know, the workday adjusted revenue for the year is now 7.7% to 8.4%. So a really nice range for us. And as you said, the organic revenue growth of 7% to 7.7% is a really good year for us and not much of a change. But maybe I'll give you a bit of thoughts on the implied growth as well. So if you think about that guide that we just gave, it implies an organic growth rate range of 6.6% to 7.9% for the back half of the year. And that's the same implied growth rate that we had in the guide last quarter for the final three quarters. So in other words, that implied guide hasn't really changed.

Speaker Change: And Tim I might offer a couple of things on the guide as well.

Speaker Change: Workday adjusted revenue for the year.

Speaker Change: Is now seven 7% to eight 4%.

Speaker Change: So a really nice a range for us and as you said the organic revenue growth of 7% to seven seven is a really good year for us and not much of a change, but but maybe I'll give you a little bit.

Speaker Change: A bit of thoughts on the implied growth as well. So if you think about that guide that we just gave.

Speaker Change: It implies an organic growth rate range of six 6% to seven 9% for the back half of the year and Thats. The same implied growth rate that we had in the guide last quarter for the final three quarters. So in other words.

Speaker Change: That implied guide Hasnt really changed.

Todd Schneider: And so again as Todd said we.

Jared Mattingly: And so again, as Todd said, we had a nice quarter, and the outlook for the second half of the year really hasn't changed all that much. Still a really good year both in total growth and in organic growth.

And so again, as Todd said, we had a nice quarter, and the outlook for the second half of the year really hasn't changed all that much. Still a really good year both in total growth and in organic growth.

Todd Schneider: We had a nice quarter and.

Todd Schneider: The outlook for the second half of the year really hasn't changed all that much still a really good year, both in total growth and organic growth.

Todd Schneider: Okay, that's good color, sounds like just some fine tuning around the edges and continuation of what you've been doing. So that's very helpful context. Thank you for. My second question is I just wanted to touch on the incremental EBITDA margin 60% I think in the quarter. Obviously very impressive, well above street expectations. You know, just putting my, my analyst hat on and trying to pick this apart a little bit. Curious if there's any one-offs or discrete factors that we should be considering.

Tim Mulrooney: Okay, that's good color, sounds like just some fine tuning around the edges and continuation of what you've been doing. So that's very helpful context. Thank you for. My second question is I just wanted to touch on the incremental EBITDA margin 60% I think in the quarter. Obviously very impressive, well above street expectations. You know, just putting my, my analyst hat on and trying to pick this apart a little bit. Curious if there's any one-offs or discrete factors that we should be considering.

Speaker Change: Okay. That's good color it sounds like just some fine tuning around the edges and continuation of what you've been doing so that's very helpful. Context. Thank you for my second question is I just wanted to touch on the incremental EBITDA margins.

Speaker Change: 60% I think in the quarter, obviously very impressive well above street expectations.

Speaker Change: Just putting my analysts had out in China picked us apart a little bit I'm curious if there's any one offs or discrete factors that we should be considering that we're either favorable to this year unfavorable to last year that might help explain some of the strong outperformance to 60% is obvious.

Jared Mattingly: That were either favorable to this year or unfavorable to last year that might.

Jared Mattingley: That were either favorable to this year or unfavorable to last year that might help explain some of the strong outperformance. Because 60% is obviously just, just really, really high. Thank you.

Todd Schneider: Help explain some of the strong outperformance.

Jared Mattingly: Because 60% is obviously just, just really, really high.

Just really really high thank you.

Todd Schneider: Thank you. Well, Tim, you know, no one-offs to speak of, you know. We're getting good leverage from our revenue growth. So the revenue growth is really helping us to get leverage. We've spoken in the past about, you know, we've got programs, initiatives to extract out inefficiencies in our business, and that continues to go well. Our Six Sigma Black Belt team, our global supply chain, our engineering teams are all functioning at high levels and allowing us to extract out improvements throughout our organization. So no one-offs to speak of. We're trying to get great leverage on the revenue and then extract that inefficiencies, and that plan is working. Got it.

Tim Mulrooney: Well Tim.

Todd Schneider: Well, Tim, you know, no one-offs to speak of, you know. We're getting good leverage from our revenue growth. So the revenue growth is really helping us to get leverage. We've spoken in the past about, you know, we've got programs, initiatives to extract out inefficiencies in our business, and that continues to go well. Our Six Sigma Black Belt team, our global supply chain, our engineering teams are all functioning at high levels and allowing us to extract out improvements throughout our organization. So no one-offs to speak of. We're trying to get great leverage on the revenue and then extract that inefficiencies, and that plan is working.

Tim Mulrooney: Sure.

Speaker Change: No one offs to speak of were getting good leverage from our revenue growth.

Speaker Change: So the revenue growth is really helping us too.

To get leverage.

We've spoken in the past about.

Speaker Change: We've got programs initiatives to extract out inefficiencies in our business and that continues to go well R. R.

Speaker Change: Six Sigma Black belt team are.

Speaker Change: Our global supply chain. Our engineering teams are all are functioning at high levels, and allowing us to extract out improve.

Speaker Change: Improvements throughout our organization so no no one offs to speak of and.

Speaker Change: We're trying to.

Speaker Change: Great great leverage on the revenue and then extract out inefficiencies and net that plan is working.

Speaker Change: Got it thanks, Tom Thanks, Mike Thank you.

Tim Mulrooney: Got it. Thanks Todd. Thanks Mike.

Jared Mattingly: Thanks Todd. Thanks Mike.

Todd Schneider: Thank you.

Todd Schneider: Thank you. Our next question comes from Andrew Steinerman from J.P. Morgan. Please go ahead.

You.

Operator: Our next question comes from Andrew Steinerman from J.P. Morgan. Please go ahead.

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

Todd Schneider: Andrew, hi. When talking about the organic revenue growth of 7.1% in the quarter, could you just give us a sense if price realization has kind of now returned to the long-term average increase? And then also did add stop change much when looking at the November quarter year over year versus the August quarter year over year? Well, good morning, Andrew. Obtaining price increases is more challenging than it was in the past compared to the earlier portion of the calendar year and the first quarter. But we're still able to obtain price increases. They are right at about our historical levels now, which makes sense since, you know, we continue to see price increases coming down as inflation has come down. And in spite of this, I'm really proud of the organization being able to increase margins while extracting out those inefficiencies I spoke about earlier.

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

Speaker Change: Hi, <unk>.

Speaker Change: Talking about the organic revenue growth of seven one in the quarter could you just give us a sense.

Sure.

Speaker Change: Nice realization should have kind of now return to the long term average.

Speaker Change: And.

Speaker Change: And then also did add stop change much.

Speaker Change: When looking at the November quarter year over year versus the August quarter year over year.

Todd Schneider: Well, good morning, Andrew. Obtaining price increases is more challenging than it was in the past compared to the earlier portion of the calendar year and the first quarter. But we're still able to obtain price increases. They are right at about our historical levels now, which makes sense since, you know, we continue to see price increases coming down as inflation has come down. And in spite of this, I'm really proud of the organization being able to increase margins while extracting out those inefficiencies I spoke about earlier.

Speaker Change: Well good morning, Andrew.

Sure.

Speaker Change: Obtaining price increases is more challenging than it was in the past.

Speaker Change: Compared to.

Speaker Change: Earlier portion of the calendar year in the first quarter, but we're still able to obtain price increases there.

Speaker Change: We are right at about our historical levels now, which makes sense since we continue to see price increases coming down as inflation has come down.

Speaker Change: And in spite of this I'm really proud of the organization being able to increase margins, while expecting of those inefficiencies I spoke about earlier.

Todd Schneider: As was mentioned with Tim previously, our incremental margins are really strong. Why don't I just speak a little bit about customer behavior in general. I mentioned price increases. New business is quite strong. Our retention rates are still at very attractive levels. AED stops, I would say no significant changes there. Catalog spending was down a little bit, but overall the business is functioning at a high level. You know, the macro data seems to be pretty stable. The second half guide I think reflects that. We're going to have, we plan to have a very good year and not only the first half, but the second half reflects that.

Speaker Change: And as was mentioned with Tim previously our incremental margins are really strong.

As was mentioned with Tim previously, our incremental margins are really strong. Why don't I just speak a little bit about customer behavior in general. I mentioned price increases. New business is quite strong. Our retention rates are still at very attractive levels. AED stops, I would say no significant changes there. Catalog spending was down a little bit, but overall the business is functioning at a high level. You know, the macro data seems to be pretty stable. The second half guide I think reflects that. We're going to have, we plan to have a very good year and not only the first half, but the second half reflects that.

Speaker Change: As far as why don't you just speak a little bit about customer behavior in general.

Speaker Change: I mentioned price increases new business is quite strong.

Speaker Change: Our retention rates are still at very attractive levels at stops I would say no significant changes there.

Speaker Change: Catalog spending was down a little bit, but overall the business is functioning at a high level.

Speaker Change: And the macro data seems to be pretty stable in the second half guide I think reflects that.

Speaker Change: We were going to have a we plan to have a very good year and.

Speaker Change: Not only the first half second half reflects that.

Operator: Okay, thank you very much.

Andrew Steinerman: Okay, thank you very much.

Speaker Change: Okay. Thank you very much.

Todd Schneider: Thank you.

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

Speaker Change: 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 <unk> Securities. Please go ahead Jasper.

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

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

Speaker Change: Hey, good morning, guys I wanted to ask about the proposed tariffs from the new administration and potential impact on your material cost of those proposals come through I think you've previously talked about a bit of inflation on hangar costs from tariffs on China. During the last Trump administration that's there.

Speaker Change: More sourcing coming through Mexico, Canada, or China that could potentially be impacted.

Todd Schneider: Good morning, Jasper. Certainly we're watching all those items very closely with tariffs. It's still way too early to tell exactly what's going to occur there, but I know this. We have a world-class global supply chain, and they're positioned to pivot as necessary. We're already in a position where we dual source over 90% of our products. So those multiple sources include also geographic diversity. So I think we're in a good spot because when those types of challenges that we may face in the future or the world will face, our global supply chain will have a chance to shine, and I'm confident that that's exactly what they'll do and we'll pivot as appropriate. But we're in a good spot.

Speaker Change: Good morning Gaspar.

Certainly we're watching.

Speaker Change: All of those items very closely with tariffs.

Speaker Change: It's still way too early to tell exactly what's going to occur there.

Speaker Change: But I know this we have a world class global supply chain and they're positioned to.

Speaker Change: To pivot as.

Speaker Change: As necessary, we're already in a position, where we dual source over 90% of our products.

Speaker Change: There's multiple sources include also geographic diversity.

Speaker Change: So I think we're in a good spot to.

Speaker Change: Because.

Speaker Change: When those types of challenges.

Speaker Change: That we may face in the future of the World will face.

Speaker Change: Our global supply chain will have a chance to shine and I am confident that that's exactly what they will do and we'll pivot as appropriate but we're in a good spot.

Jared Mattingly: Jasper, I might just as a reminder speak to our rental material cost. So in the rental business you just, you might keep in mind that we amortize the costs of our garments, our mats, and other products over some period of time. And that allows us the time to have our global supply chain adapt to the current situation, maybe make some changes, but also it allows us to recognize those costs over a longer period of time. In other words, we don't recognize that cost in our P&L right away and that allows us to do other things like not just sourcing changes, but also how to think about our initiatives that we've got going on in the business and how to think of future price increases and so on.

Mike Hansen: Jasper, I might just as a reminder speak to our rental material cost. So in the rental business you just, you might keep in mind that we amortize the costs of our garments, our mats, and other products over some period of time. And that allows us the time to have our global supply chain adapt to the current situation, maybe make some changes, but also it allows us to recognize those costs over a longer period of time. In other words, we don't recognize that cost in our P&L right away and that allows us to do other things like not just sourcing changes, but also how to think about our initiatives that we've got going on in the business and how to think of future price increases and so on.

Speaker Change: <unk> I might I might just as a reminder, speak to our rental.

Speaker Change: Material costs, so in the rental business you might keep in mind that.

Speaker Change: We amortize the costs of our garments, our mats and other products over some period of time.

Speaker Change: And that allows us to.

Speaker Change: Time to have our global supply chain adapt to the current situation.

Speaker Change: Maybe make some changes but also it allows us to recognize those costs over a longer period of time in other words, we don't we don't recognize that cost in our P&L right away and that allows us to do other things like.

Speaker Change: Not just sourcing changes, but also how to think about our initiatives that we've got going on in the business.

Speaker Change: How to think of future price increases and so on so.

Jared Mattingly: So just as a reminder, our ability to amortize a good chunk of our materials can really be a benefit in a time when uncertainty like this related to these tariffs. Thanks for that. And then maybe to follow up on Tim's earlier question, is there anything you think might make incremental operating margins moderate in the second half versus the first half? I mean, on my math, adjusting for working days, incremental operating margin was well north of 40% in the first half and seems like guidance would imply a pretty material step down in incremental for the second half. Is there anything specific driving that first half, second half split?

So just as a reminder, our ability to amortize a good chunk of our materials can really be a benefit in a time when uncertainty like this related to these tariffs.

Just as a reminder, our hour.

Speaker Change: Ability to amortize a good chunk of our materials.

Speaker Change: Can really be a benefit in a time when.

Uncertainty like this related to these tariffs.

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

Speaker Change: Thanks for that.

Speaker Change: And then maybe to follow up on Tim's earlier question is there anything that you think might make incremental operating margins moderate in the second half versus the first half.

Speaker Change: I mean on my map adjusting for working days incremental operating margin was well north of 40% in the first half.

Speaker Change: It seems like guidance implies a pretty material step down in April about for the second half is there anything specific driving that first half second half split.

Speaker Change: Nothing specific Jasper.

Todd Schneider: Nothing specific, Jasper. Certainly running a business isn't linear.

Todd Schneider: Nothing specific, Jasper. Certainly running a business isn't linear. But when you look at our guide for the year, we think we're in a really good spot to grow our operating margin. Our EPS so attractive margins for the year, and we think we're in a good spot to deliver that.

Speaker Change: Certainly running business isn't linear.

Jared Mattingly: But.

Speaker Change: But when you look at our guide for the year, we think we're in a really good spot to to grow.

Todd Schneider: When you look at our guide for the year, we think we're in a really good spot to grow our operating margin. Our EPS so attractive margins for the year, and we think we're in a good spot to deliver that.

Speaker Change: Our operating margin our EPS.

Speaker Change: So.

Speaker Change: Attractive margins for the year and we think we're in that we're in a good spot to to deliver that.

Jared Mattingly: You might remember, Jasper, that our, you know, we want to be in an incremental of 25% to 35%. And while we are above that in the first half of the year, our expectation is longer term. We're going to be sort of in that range and that's what we have guided for the, for the back half of the year. We will, we will likely be closer to that range. It's hard to think that we would be in a 40% to 50% incremental longer term. But as Todd said, we've got a lot of initiatives that are really working for us. Got it. Thank you for taking the questions.

Mike Hansen: You might remember, Jasper, that our, you know, we want to be in an incremental of 25% to 35%. And while we are above that in the first half of the year, our expectation is longer term. We're going to be sort of in that range and that's what we have guided for the, for the back half of the year. We will, we will likely be closer to that range. It's hard to think that we would be in a 40% to 50% incremental longer term. But as Todd said, we've got a lot of initiatives that are really working for us.

Speaker Change: Might remember Jasper that are we want to be in an incremental of 25% to 35%.

Speaker Change: Percent and while we are above that in the first half of the year our expectation is.

Speaker Change: Longer term, we're going to be sort of in that range and thats, what we have guided for the for the back half of the year we will.

Speaker Change: We will likely be closer to that range. It's hard to think that we would be in <unk>.

Speaker Change: 40% to 50%.

Speaker Change: Incremental longer term.

Speaker Change: But as Todd said, we got a lot of initiatives that are really working for us.

Jasper Bibb: Got it. Thank you for taking the questions.

Speaker Change: Got it thank you for taking the questions.

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

Speaker Change: And our next question comes from Manav Patnaik from Barclays. Please go ahead manav.

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

Todd Schneider: Yeah, thank you. If I can just follow up on that. The top line guide that you lowered by 40 basis points, it sounds like you said all your expectations have kind of remained the same, but you still lowered it. So just curious, can you just help us with why you lowered it by 40 pips? Maybe it's the catalog sales that were down. Is that what it was? Just any color there would be helpful.

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

Manav Patnaik: Yes. Thank you if I could just follow up on that the topline guide that you lowered by 40 basis points. It sounds like you said earlier expectations.

Kind of remain the same but you're still loaded. So just curious is that can you just help us with why you lowered it about 40 bps, maybe it's the catalog sales that were down is that what it was just any any color there would be helpful.

Jared Mattingly: Manav, you know, it's a little bit of math, right? The guide, the implied guide is about the same today as it was for the second half of the year as it was after the first quarter. But we've got a quarter in, another quarter in the books. Our Q2 at 7.1 comes right in the middle of that range. And so that's really, that's the math of seeing it go from 8.1 to 7.7. But the implication of that guide for the rest of the year is still the same as what we called out after our first quarter. Does that make sense?

Mike Hansen: Manav, you know, it's a little bit of math, right? The guide, the implied guide is about the same today as it was for the second half of the year as it was after the first quarter. But we've got a quarter in, another quarter in the books. Our Q2 at 7.1 comes right in the middle of that range. And so that's really, that's the math of seeing it go from 8.1 to 7.7. But the implication of that guide for the rest of the year is still the same as what we called out after our first quarter. Does that make sense?

Manav Patnaik: Yeah Manav.

Manav Patnaik: It's a little bit of Av.

Speaker Change: Math right. The guide the implied guide is about the same.

Speaker Change: Today as it was.

Speaker Change: For the second half of the year as it was after the first quarter, but we've got a quarter another quarter in the books.

Speaker Change: Our Q2 at seven one.

Comes right in the middle of that range.

Speaker Change: And so that's really it.

Speaker Change: The math of seeing it go from eight 1% to 77%, but the implication of that guide for the rest of the year.

Speaker Change: Is still the same as what we called out.

Speaker Change: After our first quarter.

Speaker Change: Does that makes sense.

Todd Schneider: I mean, I guess. Are you saying that maybe this quarter perhaps didn't come in better than maybe what you would have thought?

Manav Patnaik: I mean, I guess. Are you saying that maybe this quarter perhaps didn't come in better than maybe what you would have thought?

I mean, I guess are you.

Speaker Change: Seeing that maybe this quarter, perhaps didn't come in better than maybe what you would've thought.

Jared Mattingly: Well, this quarter is sort of in the middle of that organic revenue guide that we've given.

Mike Hansen: Well, this quarter is sort of in the middle of that organic revenue guide that we've given.

Speaker Change: Well.

Speaker Change: This quarter is sort of in the middle of that.

Speaker Change: Okay that organic revenue guide.

Speaker Change: That we've given.

Todd Schneider: Okay, fine.

Manav Patnaik: Okay, fine. And then if I can just follow up. Sorry, go ahead. If you were saying something.

Speaker Change: Okay, and then if I can just follow up.

[Analyst]: And then if I can just follow up.

Todd Schneider: Sorry, go ahead. If you were saying something.

Speaker Change: Sorry go ahead, if he was saying something.

Jared Mattingly: Nope, go ahead.

Mike Hansen: Nope, go ahead.

Speaker Change: Go ahead.

Todd Schneider: I was just going to say the MA in the quarter, can you? You know, it seemed like you were pretty active, so just curious in which areas and anything to call out there. Manav. I'll speak to that. Good morning. You know, MA is hard to predict. We've been pursuing businesses in all of our route based businesses as long as I can remember. We did have a good quarter with M and A. We bought some businesses in each of our areas, and you know, in those we get, you know, some. We're after really good quality businesses that can position us to obtain synergies in certain cases and then help us with an offering, broader offering to that customer base. So yeah, we like the businesses we're buying. They're very complementary, and they're quality businesses.

Manav Patnaik: I was just going to say the MA in the quarter, can you? You know, it seemed like you were pretty active, so just curious in which areas and anything to call out there.

Speaker Change: I was just going to say the M&A in the quarter can you just it seems like.

Speaker Change: You were pretty active so just curious in which areas and anything to call out there.

Todd Schneider: Manav. I'll speak to that. Good morning. You know, MA is hard to predict. We've been pursuing businesses in all of our route based businesses as long as I can remember. We did have a good quarter with M and A. We bought some businesses in each of our areas, and you know, in those we get, you know, some. We're after really good quality businesses that can position us to obtain synergies in certain cases and then help us with an offering, broader offering to that customer base. So yeah, we like the businesses we're buying. They're very complementary, and they're quality businesses.

Speaker Change: Manav I'll speak to that and good morning.

Manav Patnaik: M&A is.

Manav Patnaik: It's hard to predict we've been.

Manav Patnaik: Pursuing businesses in all of our route based businesses.

Manav Patnaik: Yes.

Manav Patnaik: As long as I can remember and we did have a good quarter with M&A, we bought some some businesses and.

Manav Patnaik: Each of our areas.

Manav Patnaik: And those we get.

Manav Patnaik: Some we're after a really good quality businesses that can position us to obtain synergies in certain cases.

Manav Patnaik: And then help us with an offering broader offering to that customer base. So yes, we like the businesses we're buying.

Manav Patnaik: They are very.

Manav Patnaik: Complementary end and there are quality businesses, and we think that's going to be a good long term investment for our organization.

Todd Schneider: We think that's going to be a good long-term investment for our organization. Got it. Thank you.

We think that's going to be a good long-term investment for our organization.

Manav Patnaik: Got it. Thank you.

Speaker Change: Got it thank you.

Speaker Change: And our next question comes from Josh Chan from UBS. Please go ahead Josh.

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

Todd Schneider: Hi, good morning.

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

Josh Chan: Hi, Good morning, Mike Jared.

Operator: Todd, Mike, Jared.

Todd Schneider: I guess, you know, on the guidance question, maybe I can ask it this way. I guess as compared to the scenario where you would have held your top.

Josh Chan: I guess.

Josh Chan: On the guidance question, maybe I can ask it this way I guess.

Josh Chan: <unk> to the scenario, where you would have helped your top line guidance. The top end they'll get topline guidance like what what did not happen I guess, what did you not see to allow you to kind of hold that I guess, maybe maybe that helps.

Operator: Line guidance, the top end of your.

Todd Schneider: Top line guidance, like what?

Operator: What did not happen?

Todd Schneider: I guess what did you not see to allow you to kind of hold that? I guess maybe that helps ask that question a little bit. Well, Josh, as I described earlier, the pricing environment, obtaining price increases, is more challenging than it was. And now we're still able to obtain price increases, but it's more challenging. It's back to historical levels. So we're having to grow off of over and above that. So just tightening that up a little bit. But when you look at, as Mike spoke of, when you look at the back half of the year organic, the implied organic of 6.6% to 7.9%, and workday adjusted growth of 7.3% to 8.6%, it's right where we want to be, and we like that. And we think we're well positioned to achieve those results.

Josh Chan: You asked that question Robin.

Todd Schneider: Well, Josh, as I described earlier, the pricing environment, obtaining price increases, is more challenging than it was. And now we're still able to obtain price increases, but it's more challenging. It's back to historical levels. So we're having to grow off of over and above that. So just tightening that up a little bit. But when you look at, as Mike spoke of, when you look at the back half of the year organic, the implied organic of 6.6% to 7.9%, and workday adjusted growth of 7.3% to 8.6%, it's right where we want to be, and we like that. And we think we're well positioned to achieve those results.

Well, Josh as I described earlier the pricing environment is obtaining price increases is more challenging than it was.

Speaker Change: It is.

Speaker Change: Now, we're still able to obtain price increases, but it's more challenging it's back to historical levels. So we're having to grow off of over and above that.

Speaker Change: So just tightening that up a little bit but.

Speaker Change: When you look at as Mike spoke of when you look at the back half of the year organic.

Speaker Change: <unk>.

Speaker Change: Implied organic of six 6% to 709.

Speaker Change: <unk> and workday adjusted growth of 73 to 86.

Speaker Change: Right, where we want to be and we like that and we think were.

Speaker Change: Well positioned to to achieve those results.

Operator: Certainly that's still very good growth.

Operator: Certainly that's still very good growth. Then maybe my follow-up on Fire. Obviously, it grew 10% this quarter. That's really strong. I guess in prior quarters it had been above that. So was there any abnormality in Fire this quarter or do you think it's just normal fluctuation?

Speaker Change: That's still very good growth and then maybe my follow up on fire. Obviously it grew 10% this quarter that thats really strong, but I guess in prior quarters that had been above that so was there any abnormality in fire this quarter or do you think it's just normal fluctuation.

Todd Schneider: And then maybe my follow-up on Fire. Obviously, it grew 10% this quarter.

Jared Mattingly: That's really strong.

Todd Schneider: But I guess in prior quarters it had been above that. So was there any abnormality in Fire this quarter or do you think it's just normal fluctuation? Yeah, Josh, no abnormality to speak of. You know, they were coming off a pretty attractive growth rate last year, so. But no, we think we're really well positioned there to continue to grow that business at those levels, at double digit levels. And the team has organized around that and positioned it and that's what we certainly expect in the future. Great, thanks for your time and good luck in the second half. Thank you.

Todd Schneider: Yeah, Josh, no abnormality to speak of. You know, they were coming off a pretty attractive growth rate last year, so. But no, we think we're really well positioned there to continue to grow that business at those levels, at double digit levels. And the team has organized around that and positioned it and that's what we certainly expect in the future.

Josh Chan: Yes, Josh no abnormality to speak of.

Josh Chan: They were coming off.

Josh Chan: A pretty attractive.

Josh Chan: Growth rate last year, so, but now we think we're really well positioned there to continue to grow that business.

Josh Chan: Those.

Levels at double digit levels and the team is organized around that and positioned it and.

Josh Chan: That's what we we certainly expect in the future.

Josh Chan: Great, thanks for your time and good luck in the second half. Thank you.

Speaker Change: Great. Thanks for your time and good luck in the second half.

Speaker Change: Thank you.

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

Speaker Change: And 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.

Todd Schneider: George, hi. Thanks.

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

George Tong: Alright. Thanks. Good morning, you mentioned, new business and retention rates were strong in the quarter can you talk more about what youre seeing with customer sentiment and customer purchasing behaviors and how they've evolved over the course of the quarter.

Jared Mattingly: Good morning. You mentioned new business and retention rates were strong in the quarter. Can you talk more about what you're seeing with customer sentiment and customer purchasing behaviors and how they've evolved over the course of the quarter?

Todd Schneider: Good morning, George. You know, besides what I mentioned with customer behavior, you know, not much has changed there. The sales cycle is. It's not elongated. It's pretty similar to what it has been in the past. We're still selling. About 2/3 of all of our new accounts are no programmers. And that's exciting to us because the pie is massive out there, because we talked about, we service a little over 1 million business customers, and there are 16 million businesses in North America. So that makes it really attractive. Now that being said, those businesses that we're selling, it's not always new money. They're wearing clothes, garments. They've got items to help keep their facilities clean and maintained. We can do it better, faster, smarter, cheaper, in certain ways, certain times. That allows for those customers to accomplish their objectives more in a better fashion.

Speaker Change: Good morning, George.

Speaker Change: Besides what I mentioned with customer behavior.

Not much has changed there the sales cycle is.

Speaker Change: It's not elongated.

Speaker Change: It's pretty similar to what it has been in the past we're still selling.

Speaker Change: No.

About two thirds of all of our new accounts are no programmers.

Speaker Change: And that's exciting to us because the pie is massive out there because we.

Speaker Change: We talked about we serviced a little over 1 million customer business customers and there are 16 million businesses.

Speaker Change: In North America so.

Speaker Change: That's it makes it really attractive now that being said those businesses that we're selling.

Speaker Change: It's not always new money.

Speaker Change: They're wearing clothes garments, there they've got items two to help keep their facilities clean and maintain we can do it better faster smarter cheaper in certain ways certain times.

Speaker Change: That allows for those customers to accomplish their objectives.

Speaker Change: More in a better fashion so.

Todd Schneider: So no changes there. We're still selling a significant amount of no-programmers and the future looks bright there because there's just such a massive quantity out there of no-programmers.

So no changes there. We're still selling a significant amount of no-programmers and the future looks bright there because there's just such a massive quantity out there of no-programmers.

Speaker Change: So no changes there we.

Speaker Change: We're still selling.

Speaker Change: A significant amount of no programmers and.

Speaker Change: And the future looks bright there because there's just such a massive quantity out there of no programmers.

Operator: George, did you have a follow up question?

Speaker Change: George if you have a follow up question.

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

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

George Tong: Yes, sorry, I was on mute.

George Tong: So on the margin side Youre seeing.

Good benefits.

Benefits from sourcing and supply chain and routing can you talk a little bit more about where you are in your journey.

George Tong: In terms of unlocking additional additional efficiencies from what you've already achieved in other words are you would you say you're still in the early innings.

George Tong: What you hope to achieve with efficiencies, where you towards the middle or towards the later stages of what you hope to accomplish.

Todd Schneider: Thank you, George. Part of our culture here is a culture of positive discontent. We are constantly looking for ways to improve, and so you're going to continue to see improvements in those areas. There's a long list of initiatives that we are constantly focused on and we're excited about because, and the team has done one heck of a job in that area. Whether I mentioned sourcing, engineering, Six Sigma, it's been impressive performance and they, they still have a big to do list.

George Tong: Thank you George.

Speaker Change: Part of our culture here is a.

Speaker Change: Cultural positive discontent.

Speaker Change: We are constantly looking for ways to improve and.

Speaker Change: So youre going to continue to see improvements in those areas.

Yes.

Speaker Change: Theres a long list of initiatives that we are constantly focused on.

Speaker Change: And we're excited about because and the team has done one heck of a job in that area, whether I mentioned sourcing engineering.

Speaker Change: Six Sigma.

Speaker Change: <unk>.

Speaker Change: It's been impressive performance.

Speaker Change: They still have a big to do list.

Jared Mattingly: Got it. That's helpful. Thank you.

George Tong: Got it. That's helpful. Thank you.

Speaker Change: Got it that's helpful. Thank you.

[Analyst]: Thank you.

Operator: Thank you. Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead, Shlomo.

Speaker Change: Thank you.

Operator: Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead.

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

Todd Schneider: Shlomo, hi.

Shlomo Rosenbaum: Hi. Thank you for taking my questions. Just to talk a little bit about the guidance, a little more on the top end, but let's ask a little bit about the M and A. It looks like you did about $145 million in acquisitions in the quarter. Could you talk about how much those acquisitions are expected to add to revenue in this fiscal year? And, you know, if they're, you know, where exactly would they be falling out mostly? Would it be mostly in the laundry and the uniforms, or was there something else that you made that was sizable? Excuse me, that didn't hit the news. And then I'll follow up.

Shlomo Rosenbaum: Hi, Thank you for taking my questions.

Jared Mattingly: Thank you for taking my questions. Just to talk a little bit about the guidance, a little more on the top end, but let's ask a little bit about the M and A. It looks like you did about $145 million in acquisitions in the quarter. Could you talk about how much those acquisitions are expected to add to revenue in this fiscal year? And, you know, if they're, you know, where exactly would they be falling out mostly? Would it be mostly in the laundry and the uniforms, or was there something else that you made that was sizable? Excuse me, that didn't hit the news. And then I'll follow up. Shlomo, we did make some nice acquisitions in the rental space. We've also made some in the fire and first aid safety space. But the rental space, we did have some nice acquisitions.

Shlomo Rosenbaum: Just to talk a little bit about the guidance a little more on the top end, but I wanted to ask a little bit about the M&A will take do you think about a $145 million in acquisitions in the quarter could you talk about how much those acquisitions are expected to add to revenue in this fiscal year.

And.

Speaker Change: If there.

Speaker Change: Where exactly would they be falling out mostly it would be mostly in the laundry and the uniforms or was there something else that you made that was sizable excuse me that didn't hit the news and then I'll follow up.

Mike Hansen: Shlomo, we did make some nice acquisitions in the rental space. We've also made some in the fire and first aid safety space. But the rental space, we did have some nice acquisitions.

Speaker Change: Shlomo we did make some some nice acquisitions in the in the rental space. We've also made some in the fire and first aid safety space, but.

Speaker Change: The rental space, we did have some nice acquisitions, we don't typically get into exactly the amount of those.

Jared Mattingly: We don't typically get into exactly the amount of those. They are sort of local market to maybe a little bit of regional, but really nice players in the market and we're excited about them.

We don't typically get into exactly the amount of those. They are sort of local market to maybe a little bit of regional, but really nice players in the market and we're excited about them.

Speaker Change: They are.

Speaker Change: Sort of local market, maybe a little bit of regional but.

Speaker Change: Really nice players in the market and we're excited about.

Todd Schneider: Okay.

Shlomo Rosenbaum: Okay. The reason I was asking is because there's a huge focus on kind of that tweaking of the guidance on the top. It's, you know, the commentary about the pricing being a little bit tougher. You know, just to dimensionalize. It would be helpful to know how much we should be expecting in terms of incremental M&A. So that's where that question is coming from. But the second question to follow up I have: could you give a little bit more color on the growth of the targeted verticals specifically in the quarter? Did some do better than others? Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals, some of them accelerating versus decelerating. Just so we get a sense as to how the efforts are progressing there.

Speaker Change: Okay.

Jared Mattingly: The reason I was asking is because there's a huge focus on kind of that tweaking of the guidance on the top. It's, you know, the commentary about the pricing being a little bit tougher. You know, just to dimensionalize. It would be helpful to know how much we should be expecting in terms of incremental M and A. So that's where that question is coming from. But the second question to follow up I have: could you give a little bit more color on the growth of the targeted verticals specifically in the quarter? Did some do better than others? Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals, some of them accelerating versus decelerating. Just so we get a sense as to how the efforts are progressing there.

Speaker Change: The reason I was asking is because there's a huge focus on on kind of the.

Speaker Change: Tweaking of the guidance on the top end.

Speaker Change: The commentary about the pricing being a little bit tougher just to dimensionalize.

Speaker Change: <unk> it would be helpful to know how much.

Speaker Change: We should be expecting in terms of incremental M&A. So that's where that question is coming from.

Speaker Change: But the second the second question a follow up I have.

Speaker Change: Give a little bit more color on the growth of the targeted verticals.

Speaker Change: Specifically in the quarter, some do better than others.

Speaker Change: Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals in some some of them accelerating versus decelerating just so we get a sense as to how the efforts are progressing there.

Todd Schneider: Shlomo. Our four focus verticals are performing well. They have been and continue to perform well. They perform at above our normal operating levels of growth. And we expect them to because they're focused verticals. And I think it's important to understand it's not just a sales focus in those areas. We organize around those. We have teams of leaders and partners that are focused on understanding those businesses, understanding products and services that are important to them. And so they're in that world and they're delivering great results and helping customers accomplish their objectives better. And we expect that to continue. But that's been baked into our business for the past few years and we suspect that that will continue to occur.

Speaker Change: Shlomo.

Speaker Change: Our four focus verticals are performing well.

Speaker Change: They have been in and continue to perform well they perform at or above.

Our.

Speaker Change: Our normal operating levels of growth, so we expect them to because their focus verticals.

Speaker Change: And I think it's important to understand it's not just a sales focus in those areas.

Speaker Change: As we organize around those we have a team.

Speaker Change: <unk> teams.

Speaker Change: <unk>.

Speaker Change: Leaders and partners that are focused on understanding those businesses understanding products and services that are important to them and so they're in that world and and they are delivering.

Speaker Change: Great results and helping customers accomplish their objectives better and.

Speaker Change: And we expect that to continue but that's that's been baked into our business.

Speaker Change: For the past few years and we.

Speaker Change: Suspect that that will continue to occur.

Jared Mattingly: Thank you.

Shlomo Rosenbaum: Thank you.

Speaker Change: Thank you.

Todd Schneider: Thank you.

Operator: Thank you. Obbb

Speaker Change: Thank you.

Operator: Our next question comes from Ashish Sabadra from RBC. Please go ahead.

Speaker Change: And our next question comes from Ashish <unk> from RBC. Please go ahead Ashish.

Operator: ur next question comes from Ashish Sabadra from RBC. Please go ahead.

Todd Schneider: Ashish. Hi, good morning. This is David Page on for Ashish. I was just curious if we could, if you could just give us some sense on how the Uniform Direct sales performed in the quarter. Was it in line with your expectations? And then not to go back to it, but how is that playing? Uniform Direct, specifically playing into your organic revenue growth guide for 2025. Thank you. Good morning, David. So our Uniform Direct Sale business, as we mentioned, was down in the quarter. It's a strategic business for us that sells into Fortune 1000 type customers, airlines, hotels, casinos, those types. So that business can be quite lumpy. And it was negative in the quarter. But keep in mind, we sell many things into that customer base. It's not just direct sale.

David Paige: Ashish. Hi, good morning. This is David Page on for Ashish. I was just curious if we could, if you could just give us some sense on how the Uniform Direct sales performed in the quarter. Was it in line with your expectations? And then not to go back to it, but how is that playing? Uniform Direct, specifically playing into your organic revenue growth guide for 2025. Thank you.

Speaker Change: Hi, Good morning. This is David page on.

Speaker Change: For Ashish I was just curious if we could.

Speaker Change: Could you just give us some sense on how the uniform direct sales.

Speaker Change: Performed in the quarter was in line with your expectations and then.

Speaker Change: I have to go back to it but how is that playing.

Speaker Change: Uniform direct specifically playing into your organic revenue growth guide fair. Thank.

Todd Schneider: Good morning, David. So our Uniform Direct Sale business, as we mentioned, was down in the quarter. It's a strategic business for us that sells into Fortune 1000 type customers, airlines, hotels, casinos, those types. So that business can be quite lumpy. And it was negative in the quarter. But keep in mind, we sell many things into that customer base. It's not just direct sale.

Speaker Change: Thank you.

Good morning, David So our uniform direct sale business as we mentioned was was down in the in the quarter.

Speaker Change: It's a strategic business for us.

Speaker Change: That sells into.

Speaker Change: Fortune 1000 type customers.

Speaker Change: Airlines hotels casinos those types so.

Speaker Change: So that businesses can be quite lumpy.

Speaker Change: And.

Speaker Change: And it was negative in the quarter.

Speaker Change: But but keep in mind, we sell many things into the customer base, it's not just direct sale.

Todd Schneider: So it's been a strategic area for us to sell, whether it's rental garments or facility services. Our fire and our first aid businesses all sell into those. So it's a real strategic market for us. And again, that business can be a little lumpy, and certainly it went backwards in Q2. But we like that market and we like the solutions that we're providing those customers. Okay, great. That's helpful. And then I know you mentioned that your focus verticals are continuing to perform really strong, but was there any specific vertical either within the focus or outside of the focus verticals that performed? I guess that stood out of the quarter, performed really well. Thank you, David. Nothing specific to call out. Regarding the four verticals, they're all performing well.

So it's been a strategic area for us to sell, whether it's rental garments or facility services. Our fire and our first aid businesses all sell into those. So it's a real strategic market for us. And again, that business can be a little lumpy, and certainly it went backwards in Q2. But we like that market and we like the solutions that we're providing those customers.

Speaker Change: So it's been a strategic.

Speaker Change: Area for us to sell.

Speaker Change: Whether it's a rental garments or facility.

Speaker Change: Services are.

Speaker Change: The fire in our first aid business all sell into those so it's a real strategic market for us and again that business can be a little lumpy and.

Speaker Change: Certainly and then went backwards in Q2, but we like that market and we like the.

Speaker Change: The solutions that we're providing those customers.

David Paige: Okay, great. That's helpful. Then I know you mentioned that your focus verticals are continuing to perform really strong, but was there any specific vertical either within the focus or outside of the focus verticals that performed? I guess that stood out of the quarter, performed really well. Thank you.

Speaker Change: Okay, Great. That's helpful. And then I know you mentioned that Youre focused verticals.

Speaker Change: We are continuing to perform really strong but was there any specific vertical either within the focus or outside of the focus verticals that perform.

Speaker Change: That stood out of the quarter performed really well.

Todd Schneider: David, nothing specific to call out. Regarding the four verticals, they're all performing well. We've been investing to make sure that we're positioning them for the future to get the right products, the right services for those customers. And it's showing in their results and we expect that that will continue.

Speaker Change: David nothing specific to call out regarding the four verticals are all performing well.

Todd Schneider: We've been investing to make sure that we're positioning them for the future to get the right products, the right services for those customers. And it's showing in their results and we expect that that will continue.

Speaker Change: <unk>.

Speaker Change: <unk> been investing.

Speaker Change: To make sure that we're positioning them for the future to to get the right products the right services for those customers and.

Speaker Change: And it's showing in and their results and we expect that that will continue.

Speaker Change: Okay.

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

Operator: Our next question comes from Andrew Whitman from R.W. Baird.

Operator: Our next question comes from Andrew Whitman from R.W. Baird. Pleasego ahead, Andrew.

Todd Schneider: Please.

Operator: Go ahead, Andrew.

Speaker Change: Yes.

Speaker Change: Okay.

Jared Mattingly: Yeah, thanks. Excuse me. Good morning, guys. I just thought maybe, Mike, I'd give you an opportunity to talk a little bit more about the margin profile here today. Obviously, results were good, but could you just talk about any categories in particular? Obviously you called out the energy. You always call out the energy. But maybe other key categories: merchandise costs, maybe route costs in general beyond just the energy. Are there other things in the plant or things in SG&A? Just to help understand some of the puts and takes on that line. And, with gross margins now having been consistently above people's expectations for several quarters in a row, I thought maybe opportunity to drill into that a little bit more would be helpful. Sure. Andy. As you know, within our. And I'll speak to rentals.

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

Speaker Change: Yes. Thanks.

Speaker Change: Excuse me good morning, guys.

Speaker Change: I just thought maybe like give you an opportunity to talk a little bit more about the margin profile here today.

Speaker Change: Results were good but could you just talk about any categories. In particular, obviously you called out the energy always call. It the energy, but maybe other key categories merchandise costs, maybe route costs in general beyond just the energy there other things in the plant or things in SG&A.

Speaker Change: Understand some of the puts and takes on that line item with gross margins now haven't been consistently above.

Speaker Change: People's expectations now for several quarters or I thought maybe opportunity to drill into that a little bit more it would be helpful.

Mike Hansen: Sure. Andy as you know, within our. And I'll speak to rentals. As you know, in our cost of rentals there are. You can think of three buckets, right? The material cost, the production cost, which is the cost associated with operating our laundry facilities, and the service costs. So that's the routing. And the really good news, Andy, is we've got initiatives that are working really well in each of those. And so over the last year, couple years, we've seen improvements in all of those areas. So material cost. Todd talks about our global supply chain. It has operated so well for us and continues to do so and is constantly looking for better ways to source. In addition to that, you've heard us speak to a garment sharing. So this goes to the stock rooms, and when we share garments, that means we get better utilization out of those garments.

Sure.

Speaker Change: Andy as you know within our I don't.

Speaker Change: Speak to rentals.

Speaker Change: <unk>.

Todd Schneider: As you.

Jared Mattingly: No, in our cost of rentals there are. You can think of three buckets, right? The material cost, the production cost, which is the cost associated with operating our laundry facilities, and the service costs. So that's the routing. And the really good news, Andy, is we've got initiatives that are working really well in each of those. And so over the last year, couple years, we've seen improvements in all of those areas. So material cost. Todd talks about our global supply chain. It has operated so well for us and continues to do so and is constantly looking for better ways to source. In addition to that, you've heard us speak to a garment sharing. So this goes to the stock rooms, and when we share garments, that means we get better utilization out of those garments.

Speaker Change: As you know in our cost of rentals. There are you can think of three buckets right. The material cost the production cost, which is the cost associated with operating our laundry facilities and the service costs. So thats the routing and the really good news is we've got initiatives that are that are.

Speaker Change: Working really well in each of those and so over the last.

Year, a couple of years, we've seen improvements in all of those areas. So material cost Tom talks about our global supply chain.

Speaker Change: It has operated so well for us and continues to do so.

Speaker Change: And that is constantly looking for better ways to source.

Speaker Change: In addition to that you have heard us speak to.

Speaker Change: Garment sharing so this goes to the stock rooms, and when we shared garments.

Speaker Change: That means we get better utilization out of those garments.

Jared Mattingly: We order fewer new garments from our distribution centers. So in other words, that is allowing us to put fewer garments into service, meaning our amortization costs tend to come down. That's been a really good area for us over the course of the last year, two years. If we move to production, we talked a lot about operational excellence and things like making sure we are perfectly loading the washers and dryers, has been really important for us. We are automating our sortation. As you know, once those garments come out of the dryer, we have to sort them to get them back to the customer. And we've got initiatives going on that are automating that sorting, and that allows for efficiencies in the production department.

We order fewer new garments from our distribution centers. So in other words, that is allowing us to put fewer garments into service, meaning our amortization costs tend to come down. That's been a really good area for us over the course of the last year, two years. If we move to production, we talked a lot about operational excellence and things like making sure we are perfectly loading the washers and dryers, has been really important for us. We are automating our sortation. As you know, once those garments come out of the dryer, we have to sort them to get them back to the customer. And we've got initiatives going on that are automating that sorting, and that allows for efficiencies in the production department.

We order fewer garments, new garments from our distribution centers. So in other words.

That is allowing us to put fewer garments into service, meaning our amortization can.

Speaker Change: It tends to come down that's been a really good area for us over the course of the last year or two years, if we move to production.

Speaker Change: We've talked a lot about operational excellence and things like making sure we are.

Speaker Change: Perfectly loading the washers and dryers has been really important for us.

Speaker Change: We are automating our sortation as you as you know once those garments come out of the dryer, we have to sort them to get them back to the customer and we've got initiatives going on that are automating that sorting and that allows for efficiencies in the production depart.

Jared Mattingly: So the wash alley has become more efficient, the sorting has become more efficient, and that helps overall production costs. And then you continue to hear us speak to SmartTruck. It's just a new way of life for us, but it continues to allow us to leverage the service costs in that bucket. And so when we are able to be better at routing, that means fewer trucks need to be purchased, fewer routes being opened, and we are just more efficient. Todd always talks about we don't make money when the truck is moving, and effectively the truck is not moving as much as it has been in the past. So really nice performance there.

So the wash alley has become more efficient, the sorting has become more efficient, and that helps overall production costs. And then you continue to hear us speak to SmartTruck. It's just a new way of life for us, but it continues to allow us to leverage the service costs in that bucket. And so when we are able to be better at routing, that means fewer trucks need to be purchased, fewer routes being opened, and we are just more efficient. Todd always talks about we don't make money when the truck is moving, and effectively the truck is not moving as much as it has been in the past. So really nice performance there.

<unk>. So so the wash alley has become more efficient.

Speaker Change: <unk> has become more efficient and that helps overall production costs and then and then you continue to hear us speak to smart <unk>. It's just a new way of life for us, but it continues to allow us to leverage the service costs.

Speaker Change: That bucket.

Speaker Change: And so when we are able to.

Speaker Change: Be better at routing.

Speaker Change: It means fewer trucks need to be purchased fewer routes being opened.

Speaker Change: And we are just more efficient Todd always talks about we don't make money when the truck is moving and effectively the truck is.

Speaker Change: Not moving as much as it has been in the past so.

Speaker Change: Really nice performance there the other thing that smart truck allows us to do is save on energy because we can do things like <unk>.

Jared Mattingly: The other thing that SmartTruck allows us to do is save on energy because we can do things like monitor idling, and our idling is down, and that means we are more efficient with our energy spend. So Andy, those are a few of the components of those different buckets that are operating really well. And as you hopefully can pick up, those aren't sort of one-timers that go away. Those are all sort of new ways or more efficient ways of doing business. Got it. Thank you for that context. Maybe just from my follow up, I'd say over the last 18 months it kind of feels like there's been more national account business that's kind of hit the market in its traded hands. Obviously there's always some of that. It's not new.

The other thing that SmartTruck allows us to do is save on energy because we can do things like monitor idling, and our idling is down, and that means we are more efficient with our energy spend. So Andy, those are a few of the components of those different buckets that are operating really well. And as you hopefully can pick up, those aren't sort of one-timers that go away. Those are all sort of new ways or more efficient ways of doing business.

Speaker Change: Monster Idling and are idling is down and that means we are more efficient with our energy spend.

Speaker Change: So.

Speaker Change: Andy are those are those are a few of the components of those different buckets that are operating really well and as you as you hopefully can pick up those arent those arent sort of one timers that go away those are all sort of new ways.

Speaker Change: Or more efficient ways of doing business.

Andrew Wittmann: Got it. Thank you for that context. Maybe just from my follow up, I'd say over the last 18 months it kind of feels like there's been more national account business that's kind of hit the market in its traded hands. Obviously there's always some of that. It's not new.

Speaker Change: Got it thank you for that context.

Speaker Change: Maybe just for my follow up I'd say over the last 18 months it kind of feels like there's been more national account business that kind of hit the market.

Speaker Change: Traded hands.

Speaker Change: Obviously, theres always some of them.

Jared Mattingly: Because there was a bit more of a flurry around that, I just thought I would kind of talk to you about getting your thoughts and about a national account business today. How much is trading compared to historical levels, and what you're seeing in the pricing dynamics specifically related to that segment of the marketplace?

Speaker Change: Not new but.

Speaker Change: Because because there was a bit more of a flurry around that I would just thought I would kind of.

Because there was a bit more of a flurry around that, I just thought I would kind of talk to you about getting your thoughts and about a national account business today. How much is trading compared to historical levels, and what you're seeing in the pricing dynamics specifically related to that segment of the marketplace?

Speaker Change: Talk to you about getting your thoughts and about our national account business today.

Speaker Change: How much is <unk>.

Speaker Change: Trading compared to historical levels.

Speaker Change: What youre seeing in the pricing dynamic specifically related to that segment of the marketplace.

Todd Schneider: Andy? Nothing specific there. It's always been a highly competitive market. Our business in general is highly competitive, and our team has done a great job with pursuing those, retaining those, and certainly those wins are nice. But we're trying to build our business around selling, growing the pie of customers. We think that's really attractive, and there's a massive opportunity there. So that's where we're focusing. Our business is selling those no-programmers, providing great value for them. And so often when we get in there and we talk to the customers, they don't even realize that what we provide, and the fact that our average customer is relatively small. Many of our customers think that they're not big enough to have a service like what we provide.

Speaker Change: Andy nothing specific there.

Speaker Change: It's always been a highly competitive market.

Speaker Change: Our business in general is highly competitive.

Speaker Change: And our team has done a great job with.

Speaker Change: Pursuing those retaining those.

Speaker Change: And certainly those wins or are nice, but we.

Speaker Change: We're trying to build our business.

<unk>.

Speaker Change: Selling.

Speaker Change: Growing the pie of customers, we think that's really attractive and theirs.

Speaker Change: A massive opportunity there.

Speaker Change: No.

Speaker Change: It's where we're focusing our businesses selling.

Speaker Change: Selling those no programmers.

Speaker Change: Providing great value for them and and so often when we get in there.

Speaker Change: And we talk to the customers.

Speaker Change: Even realize that.

Speaker Change: What we provide and.

Speaker Change: And the fact that our customer is relatively small many of our customers don't think that they're not big enough to have a service like what we provide.

Todd Schneider: And so it's our role is to get out there and talk to them about it and make them aware and that's helping to grow our business and we like where that's heading.

Speaker Change: And so it's our role is to get out there and talk to them about it and and make them aware and thats, helping to grow our business and we like where that's heading.

It's our role is to get out there and talk to them about it and make them aware and that's helping to grow our business and we like where that's heading.

Jared Mattingly: Great, thanks a lot. Have a happy holidays, guys.

Andrew Wittmann: Great, thanks a lot. Have a happy holidays, guys.

Speaker Change: Great. Thanks, a lot have been asked to holidays guys.

Todd Schneider: Thank you, Andy.

Jared Mattingly: Thank you, Andy.

Mike Hansen: Thank you, Andy.

Andy: Thank you Andy.

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

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

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

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

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

Toni Kaplan: Thanks, So much I was hoping to go back to the direct sales business and less focused on the quarter, because I think the accomplice fairly tough but just.

Toni Kaplan: When you think about how fast that.

Speaker Change: Line of business should grow over time, how should we be thinking about that and.

Speaker Change: Could you also give us an update on what percent of your customers are buying products or services across more than one segment.

Todd Schneider: So, Toni, as far as the direct sale business, we tend to grow our other businesses faster than that business. Now when you think of that group of customers, they're growing at, I'll call it normalized levels. But the direct sale business specifically isn't. It's not growing. We wouldn't expect it to grow at the levels of our business in total. So as we look at it, we see many of those customers are very interested in those products, which gets us in the door and then we can sell many other products and services to them. As far as any particular percentages we see, I don't think we've given out specific percentages of how many customers use what products and services. But we are still in the very early innings of cross selling across our business.

Speaker Change: So Tony as far as the direct sale business.

Speaker Change: We tend to grow our other businesses faster than that business.

Speaker Change: Now when you think of that group of customers.

Speaker Change: They are growing at.

Speaker Change: Ed I'll call it normalized levels, but the direct sale business specifically.

Speaker Change: Isn't it.

Speaker Change: It's not growing it wouldn't we wouldn't expect it to grow at the levels of our business in total.

So as we look at it.

Speaker Change: We see many of those customers are very interested in those products, which gets us in the door and then we can sell many other products and services to them as far as any.

Speaker Change: Particular percentages.

Speaker Change: We see.

Speaker Change: Don't think we've given them a specific percentages as of.

Speaker Change: How many customers use what products and services, but we have we are still in the very early innings of cross selling.

Speaker Change: Across our business. So we're we're focused on doing that but we're also focused on adding new customers.

Todd Schneider: So we're focused on doing that, but we're also focused on adding new customers. Whether they be up and down the street customers or more regional in nature. We think there's an amazing opportunity to sell more into our current customer base and even more amazing opportunity to bring additional customers on because we service a little over a million businesses and there's 16 million businesses in North America. So great opportunity.

So we're focused on doing that, but we're also focused on adding new customers. Whether they be up and down the street customers or more regional in nature. We think there's an amazing opportunity to sell more into our current customer base and even more amazing opportunity to bring additional customers on because we service a little over a million businesses and there's 16 million businesses in North America. So great opportunity.

Whether they be up and down the street customers or more regional in nature.

Speaker Change: Think there is an amazing opportunity to sell more into our current customer base and even more amazing opportunity to bring additional customers on because we service a little over 1 million businesses, and there's 60 million businesses North America. So.

Speaker Change: Great opportunity.

[Analyst]: Yep, great. And then on First Aid margins, they've really ramped up over the past few years. You mentioned the favorable mix and sourcing benefits in this quarter. I guess, should we expect those to be sustainable? How big were those benefits? And maybe just in general the margins were very good. And so how are you thinking about the right level of investment? How much should you be investing? More, for example?

Toni Kaplan: Yep, great. And then on First Aid margins, they've really ramped up over the past few years. You mentioned the favorable mix and sourcing benefits in this quarter. I guess, should we expect those to be sustainable? How big were those benefits? And maybe just in general the margins were very good. And so how are you thinking about the right level of investment? How much should you be investing? More, for example?

Speaker Change: Okay, Great and then.

Speaker Change: On first aid margins, they've really ramped up over the past few years, you mentioned, the favorable mix and sourcing benefits in this quarter.

Speaker Change: I guess should we expect those.

Speaker Change: The sustainable.

Speaker Change: How big were those benefits and maybe just in general like the margins were very good and so like how are you thinking about the right level of investment.

Speaker Change: How much.

Speaker Change: Should you be investing more.

Speaker Change: For example, thanks.

Todd Schneider: Thanks. Great, Tony, thank you. We love the first aid business. It's growing really attractively, as you mentioned. The margins are very good, and it's not linear. So there's puts and takes in every quarter. But we suspect that these margins will be sustainable, and nothing specific to call out besides the fact that we're continuing to get very good efficiencies from our dedicated distribution center in First Aid. The mix of business is very attractive. And what we're selling, it's repeat revenue. And we are investing heavily. And I think you're seeing that in the growth rates that we've experienced and, and expect to continue experiencing in that business. So really good business, and we're investing to grow it at very attractive levels.

Speaker Change: Great Tony Thank you.

Speaker Change: The first aid business.

Speaker Change: It's growing really attractively as you mentioned the margins are very good.

Speaker Change: It's not linear so theres puts and takes in every quarter, but we suspect that these.

Speaker Change: These margins will be sustainable and <unk>.

Speaker Change: Nothing specific to call out.

Speaker Change: Besides the fact that we're continuing to get very good.

Speaker Change: Efficiencies from our our dedicated distribution center and first aid the mix of business is very attractive and what we're selling it's repeat.

Speaker Change: Revenue.

Speaker Change: And.

Speaker Change: And we are investing heavily and I think youre seeing that in the in the growth rates that we've experienced and expect to continue experiencing in that business. So really good business and we're investing two to grow at a very attractive levels.

[Analyst]: Thanks and happy holidays as well.

Toni Kaplan: Thanks and happy holidays as well.

Thanks, and happy holidays as well.

Todd Schneider: Thank you.

Speaker Change: Thank you.

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

Faiza Alwy: Our next question comes from Faiza Alwi from Deutsche Bank. Please go ahead. Faiza.

Speaker Change: And our next question comes from Faiza <unk> from Deutsche Bank. Please go ahead Faiza, Yes, hi, Thank you and good morning.

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

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

Speaker Change: Wanted to ask a little bit more about the pricing comments that you made and I'm curious if you're seeing more difficulty in taking pricing across the board or is it more.

Speaker Change: Specific product categories vertical maybe to Andy's question earlier around some of the national accounts.

Speaker Change: Just more color on this.

Speaker Change: And perhaps if you can help us dimensionalize the deceleration in pricing that you've seen and what you expect from here.

Todd Schneider: You know, Faiza, we've, as I mentioned, it's always been a very competitive environment that we've operated in my entire career. It has been. And as far as, you know, price adjustments, it's pretty. Well, it's more of a general position that price increases are more challenging than they were several, you know, in the first quarter, but nothing, no real changes. Besides the fact that inflation's come down significantly. And with that, it's very reasonable to think that price increases will come down as well. So we are facing that. But nevertheless, the team is doing one heck of a job and in growing the business in spite of that and finding efficiencies to grow margins in spite of that as well. So very bullish on the future and proud of what the team is accomplishing.

Speaker Change: Faiza we've.

Speaker Change #100: As I've mentioned, we it's always been a very competitive environment that we've operated in my entire career it has been.

And as.

As far as.

Speaker Change #100: Price adjustments.

Speaker Change #100: It's pretty well.

Speaker Change #100: It's more of a general <unk>.

Speaker Change #100: Physician net price increases are more challenging than they were.

Speaker Change #100: Separately, though in the first quarter.

Speaker Change #100: And but nothing.

Speaker Change #100: No no real changes besides the fact that inflation has come down significantly.

Speaker Change #100: And with that.

Speaker Change #100: Very.

Speaker Change #100: Reasonable too.

Speaker Change #100: I think that pricing price increases will come down as well so we are facing that.

Speaker Change #100: But nevertheless, the team is doing one heck of a job in growing the business in spite of that and finding efficiencies to grow margins in spite of that as well so very bullish on the future and proud of what the team is accomplishing.

[Analyst]: Great, thank you. And then wanted to ask about M and A. You know, we've seen some increasing activity in M and A, and I'm curious what you're seeing in terms of valuation expectations and just the opportunities out there. What's the environment like?

Faiza Alwy: Great, thank you. And then wanted to ask about M and A. You know, we've seen some increasing activity in M and A, and I'm curious what you're seeing in terms of valuation expectations and just the opportunities out there. What's the environment like?

Speaker Change #101: Great. Thank you and then I wanted to ask about M&A, we've seen from increasing activity in.

Speaker Change #100: Anthony.

Speaker Change #100: Im curious what youre seeing in terms of valuation expectations and just the opportunities out there what's the what's the environment like.

Speaker Change #100: Okay.

Speaker Change #100: Yes.

Todd Schneider: First, trying to predict M&A is challenging because it really depends upon if it's a local business. It takes, in many cases, some type of event to occur where a family member decides to move on from the business that would trigger something like that. So it's tough to predict it. I can say this. We're very active, and we're most active in the best businesses because we want to buy really good businesses that can have great customer bases, that are happy, have great employee partners that can come into our organization, and then the ability to extract out inefficiencies, whether it gave us some additional capacity that we can leverage or routing capacities. All those items are opportunities for us. So trying to predict it's tough, but we do, we're very active. We think it's a very strategic investment for us long-term.

Speaker Change #100: Trying to predict M&A is challenging because it really depends upon.

Speaker Change #100: If it's a local business. It takes many cases some type of an event to occur.

Speaker Change #100: A family member decides to Tim.

Speaker Change #100: To move on from the business that would trigger trigger or something like that so it's tough to predict it I can say that we're very active.

Speaker Change #100: And.

Speaker Change #100: And we are.

Speaker Change #100: Most active in the best businesses because.

Speaker Change #100: We we want to buy really good businesses that can they have great customer bases that are happy have great.

Speaker Change #100: Employee partners that can come into our organization and.

Speaker Change #100: And then the ability to extract out inefficiencies, whether it's it gave us some additional capacity that we can leverage or routing capacities.

Speaker Change #100: All of those items are opportunities for us so trying to predict it's tough, but we do we're very active and we think it is.

Speaker Change #100: A very strategic.

Speaker Change #100: Investment for Us long term.

[Analyst]: Great. Thank you so much.

Faiza Alwy: Great. Thank you so much.

Speaker Change #100: Great. Thank you so much.

Speaker Change #100: Okay.

Operator: Our next question comes from Stephanie Moore from Jefferies. Please go ahead, Stephanie. Hello, this is Harold on for Stephanie Moore. I just want to piggyback on one of the questions about the company's verticals. I know in past calls you've talked about some of the innovations you've done.

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

Speaker Change #102: And our next question comes from Stephanie <unk> from Jefferies. Please go ahead Stephanie.

Harold Antor: Hello, this is Harold on for Stephanie Moore. I just want to piggyback on one of the questions about the company's verticals. I know in past calls you've talked about some of the innovations you've done in the healthcare sector in terms of providing curtains and stuff Just wanted to ask what other innovations have you done in some of your other verticals like hospitality, state, local government.

Speaker Change #103: Hello, This is <unk> on for Stephanie.

Speaker Change #104: So I just wanted to piggyback on one of the questions about the continuation of the close.

No.

In past calls you've talked to assume the innovation.

Jared Mattingly: In the healthcare sector in terms of.

Speaker Change #105: You have done in the.

Speaker Change #105: Both care sector in terms of providing essential so just wanted to ask.

Operator: Providing curtains and stuff.

Jared Mattingly: So just wanted to ask what other.

Speaker Change #105: Other innovations.

Operator: Innovations have you done in some of.

Speaker Change #105: As some of your other verticals like hospitality state and local governments.

Jared Mattingly: Your other verticals like hospitality, state, local government.

Operator: And then, I guess the follow-up on that would be, you know, help us understand, you know, the incremental margins, how they've turned in these new innovative products, and I guess the increasing.

Speaker Change #106: And then I guess to follow up on that would be.

Speaker Change #107: Let's focus on just on the incremental margins.

We've turned in in these new innovative products.

Speaker Change #107: Yes.

Speaker Change #107: <unk>.

Jared Mattingly: Revenues.

Revenue.

Operator: That you have seen in those businesses from these innovations.

Speaker Change #107: You have seen in those businesses from deceleration. Thank you.

Todd Schneider: Thank you, Harold. Thanks for the question. I'll answer the first half. As I mentioned, we do organize around those verticals. The healthcare is the one that I think I'll speak to, that, whether it is microfiber mops that our customers are using to keep patient rooms and common areas clean, to help prevent healthcare-acquired infections. So that's very important to them. Certainly we have provided technology around dispensing of garments that has really helped our customers not just in the healthcare vertical, but all verticals where they can control the dispensing of inventory, which allows them to ensure that people have the garments when they need them, but also control any loss that occurs.

Carol Thanks for the question I'll answer the first half.

Speaker Change #107: Yes.

Speaker Change #107: As I mentioned, we do organized around.

Speaker Change #107: Those verticals.

Speaker Change #107: The healthcare.

Speaker Change #107: One that.

Speaker Change #107: That I think I'll speak to that.

Speaker Change #107: Other it is.

Speaker Change #107: Microfiber mops that we.

Speaker Change #107: Our customers are using to keep patient rooms, and common areas clean to help prevent healthcare acquired infections.

Speaker Change #107: So that's very important to them certainly we have.

Speaker Change #107: Provided.

Speaker Change #107: Technology around.

Speaker Change #107: Dispensing of garments that has really helped our customers.

Speaker Change #107: Not just in the health care vertical, but all verticals.

Speaker Change #107: Where they can.

Speaker Change #107: Control the the dispensing of inventory, which allows them to ensure that people have the garments when they need them.

Speaker Change #107: But also control.

Speaker Change #107: Any any loss that occurs so that's been important to our customers in general.

Todd Schneider: So that's been important to our customers in general, healthcare-specific, just because when you think of healthcare, they tend to wear scrubs, which normally was a kind of a commodity item because they would put them on a shelf and then they would disappear through some type of wherever they would end up. So that's been really valuable to our customers. And then lastly, you cited the privacy curtains. We learned of this issue with our customers spending time with the customers and asking them where they need help. And this item continued to come up where they said it's a significant compliance problem for them. It certainly affects healthcare-acquired infections. And those are two really strong buying motives for our customers. So we came up with technology that allows for us to help them with that.

So that's been important to our customers in general, healthcare-specific, just because when you think of healthcare, they tend to wear scrubs, which normally was a kind of a commodity item because they would put them on a shelf and then they would disappear through some type of wherever they would end up. So that's been really valuable to our customers. And then lastly, you cited the privacy curtains. We learned of this issue with our customers spending time with the customers and asking them where they need help. And this item continued to come up where they said it's a significant compliance problem for them. It certainly affects healthcare-acquired infections. And those are two really strong buying motives for our customers. So we came up with technology that allows for us to help them with that.

Speaker Change #107: Health care specific just because of when you think of health care, they tend to wear scrubs, which.

Speaker Change #107: Normally was.

Speaker Change #107: Kind of a commodity item because.

Speaker Change #107: They were they would put them on the shelf and then they would disappear.

Speaker Change #107: Through some type of wherever they would end up so.

So that's been really valuable to our customers and then lastly, you cited the privacy curtains.

Speaker Change #107: We learned of this issue with our customers are spending time with the customers and asking them, where they need help and this item continue to come up where they said it's a <unk>.

Speaker Change #107: Significant compliance problem Forum, it certainly affects healthcare acquired infections.

Speaker Change #107: And those are those are two really strong buying motives for our customers. So we came up with.

Speaker Change #107: Technology that allows for us to help them with that came up with a patented product that allows us to help them with that and and.

Todd Schneider: It came up with a patented product that allows us to help them with that. And the customers are embracing it. They very much like it. They struggle to find labor to handle it. And we're able to help them with that solution. So I think that's attractive and we'll continue to invest in the future for those customers.

It came up with a patented product that allows us to help them with that. And the customers are embracing it. They very much like it. They struggle to find labor to handle it. And we're able to help them with that solution. So I think that's attractive and we'll continue to invest in the future for those customers.

Speaker Change #107: And the customers are embracing it.

They very much like it they struggled to find labor to handle it and we're able to help them with that that solution. So so I think thats attractive and we'll continue to.

To invest in the future for those customers.

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

Speaker Change #108: And our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead Scott.

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

[Analyst]: Scott.

Todd Schneider: Thanks very much. Good morning. I want to follow up on a few M and A questions in here. Guys, I understand there's limited color you'll share there, but this was, I think, the biggest quarter of M and A since all the way back to.

Scott Schneeberger: Thanks very much. Good morning. I want to follow up on a few M&A questions in here. Guys, I understand there's limited color you'll share there, but this was, I think, the biggest quarter of M&A since all the way back to G&K in fiscal 2016. You said it was across a few of the business lines you served. Was there any one particularly large acquisition in one area?

Scott Schneeberger: Thanks, very much good morning, I wanted to follow up.

Scott Schneeberger: M&A questions in here and.

Scott Schneeberger: I understand there's limited color Youll youll share there, but this was I think the biggest quarter of M&A since all the way back to gene came in fiscal 16.

Operator: G in fiscal 2016.

Jared Mattingly: You said it was across a few of the business lines you served.

Speaker Change #110: You said it was a cross sell.

Speaker Change #110: A few of the.

Speaker Change #110: The business lines, you serve but was it was there any one particularly large acquisition.

Todd Schneider: Was there any one particularly large?

Jared Mattingly: Acquisition in one area?

Speaker Change #110: In one area and.

Todd Schneider: And I'm just curious, kind of, you know, is it as a follow up on this topic, what are you looking for in M&A right now? What type of, I think, 5x the multiples.

I'm just curious, kind of, you know, is it as a follow up on this topic, what are you looking for in M&A right now? What type of, I think, 5x the multiples. Just if you could talk about prevailing multiples that would be great of what you're seeing out there. What are you looking for? Are you looking to add technology? Are you building out vended laundry, on-premises laundry? Just curious, are there some new areas you might be moving into? Thanks.

Speaker Change #110: And I'm, just curious kind of is it.

Speaker Change #110: And as a follow up on this topic what are you looking for in M&A right now what type of I think five asset multiples, but.

Jared Mattingly: But just if you could talk about?

Just if you could talk about prevailing multiple that would be great of what youre seeing out there and what are you looking for are you looking to add technology are you building out then the laundry on premises laundry just curious.

Todd Schneider: Prevailing multiples that would be great of what you're seeing out there. What are you looking for? Are you looking to add technology? Are you building out vended laundry, on-premises laundry? Just curious, are there some new areas you might be moving into? Thanks, Scott. Thanks for the question. We're active across all of our route-based businesses and acquiring businesses. What are we interested in? We're interested in quality businesses, buying really good businesses with great customer base and great employee partners. Those are usually the businesses that have invested in making sure that they are positioned to take great care of customers and their employees. So those are the ones we're interested in. We don't get into multiples. But as far as the focus, it's quality businesses that are in. The businesses that we're in is what we bought. So nothing out of the ordinary there.

Speaker Change #110: Are there some new areas you might be moving into thanks.

Todd Schneider: Scott. Thanks for the question. We're active across all of our route-based businesses and acquiring businesses. What are we interested in? We're interested in quality businesses, buying really good businesses with great customer base and great employee partners. Those are usually the businesses that have invested in making sure that they are positioned to take great care of customers and their employees. So those are the ones we're interested in. We don't get into multiples. But as far as the focus, it's quality businesses that are in. The businesses that we're in is what we bought. So nothing out of the ordinary there.

Speaker Change #111: Scott. Thanks for the question, we're active across all of our route based businesses in and acquiring businesses.

Speaker Change #111: What are we interested in where interest in quality businesses.

Speaker Change #111: Buying really good businesses with great customer base and great employee partners.

Speaker Change #111: Those are usually the businesses that have invested in.

And making sure that they are positioned to take great care of customers and their employees. So those are the ones we're interested in.

Speaker Change #111: We'll get into multiples, but.

Speaker Change #111: As far as.

Sure.

Speaker Change #111: The focus it's quality businesses that are in other businesses that we're in is what we bought and so nothing.

Speaker Change #111: Out of the ordinary there.

Todd Schneider: And it's across each of the route based businesses. We think we're in a really good spot to do that. And then once we do it, we certainly are interested in extracting out synergies. We get in certain cases really good capacity and then what we always get is a customer base that we can sell more into and provide more value to those customers. So our focus is on buying great businesses with great people and great customers. And when we do that, really good things happen.

And it's across each of the route based businesses. We think we're in a really good spot to do that. And then once we do it, we certainly are interested in extracting out synergies. We get in certain cases really good capacity and then what we always get is a customer base that we can sell more into and provide more value to those customers. So our focus is on buying great businesses with great people and great customers. And when we do that, really good things happen.

Speaker Change #111: And it's across each of the route based businesses.

Speaker Change #111: I think we're in a really good spot to do that and.

Speaker Change #111: And then once we do it.

We.

And certainly your interest in extracting out.

Speaker Change #111: Synergies.

We get in certain cases really good capacity.

Speaker Change #111: And then.

Speaker Change #111: And what we always get is.

Speaker Change #111: Our customer base that we can sell more into.

Speaker Change #111: And I can provide more value to those customers. So.

Our focus is on buying great businesses with great people and great customers.

Speaker Change #111: And when we do that really good things happening.

Operator: Great, thanks.

Scott Schneeberger: Great, thanks. As a follow-up, I don't think we've discussed MyCintas portal on an earnings call in a while. Just a progress report on that. Just curious, is that contributing at all? It could be. It's been around for a few years now. Is that contributing at all yet to the impressive margins that we're seeing?Thanks.

Speaker Change #112: Great. Thanks, and just as a follow up I don't think we have discussed in my Cintas portal on.

Todd Schneider: As a follow-up, I don't think we've discussed MyCintas portal on an.

Jared Mattingly: Earnings call in a while.

Speaker Change #113: On an earnings call in a while.

Todd Schneider: Just a progress report on that. Just curious, is that contributing at all? It could be. It's been around for a few years now. Is that contributing at all yet to the impressive margins that we're seeing?

Speaker Change #114: A progress report on that end.

Speaker Change #115: Just curious is that is that contributing at all it could be it's been it's been around for a few years now is that contributing at all yet to the impressive margins that we're seeing thanks.

Jared Mattingly: Thanks.

Todd Schneider: Yeah, thank you, Scott. MyCintas has been important to our business, important to our customers. It allows us to to provide our customers an opportunity to manage their account, manage it at the time that they want to do it. We've always had the ability to. We're going to see our customers for the most part, every single week. Certainly they can call us if they need anything. But that interaction in person on a weekly basis is really, really valuable. But it doesn't mean that the customer wants to do business or all their business, right? Then they may not even be available at that point. So having an electronic portal that allows for them to manage their business, pay their bill is just another conduit that makes it easier to do business with for the customer. And that's important to us. So it allows for that.

Speaker Change #116: Yes. Thank you Scott My Cintas is.

Speaker Change #115: <unk> has been.

Speaker Change #115: Important to our business important to our customers.

It allows us to.

Speaker Change #115: To provide our customers.

Speaker Change #115: An opportunity to manage their account management on the time that they want to do it.

Speaker Change #115: We've always had the ability to we're going to see our customers for the most part every single week.

Speaker Change #115: Certainly they can call us if they need anything but that.

Speaker Change #115: That interaction in person on a weekly basis is really really valuable.

Speaker Change #115: But it doesn't mean that the customer wants to do business.

Speaker Change #115: All their business right then they may not even be available at that point, so having a electronic portal that allows for them to manage their business pay their bill.

Speaker Change #115: It's just another conduit that makes.

Speaker Change #115: US easier to do business with for the customer.

And that's important to us so it allows for that that allows for us to.

Todd Schneider: It allows for us to. If the customer pays their bills, there is no cash application. So it gets us, meaning it goes right to the account, so we don't have to apply it. So there's efficiencies there. If they're managing their account and they're not calling in, there's efficiencies there.

It allows for us to. If the customer pays their bills, there is no cash application. So it gets us, meaning it goes right to the account, so we don't have to apply it. So there's efficiencies there. If they're managing their account and they're not calling in, there's efficiencies there.Right.

Speaker Change #115: The customer pays there bill.

Speaker Change #117: There is no.

Speaker Change #117: Cash application so it gets us meaning that it goes right to right to the account. So we don't have to apply it. So there's there's efficiencies there.

Speaker Change #117: <unk>.

Speaker Change #117: If theyre managing their account and they're not calling in there is efficiencies there right. So.

Jared Mattingly: Right.

Todd Schneider: But it just allows the customer another conduit, and many of them really, really like that conduit, which allows for them to be happier and us to get efficiencies and a better relationship with the customer.

But it just allows the customer another conduit, and many of them really, really like that conduit, which allows for them to be happier and us to get efficiencies and a better relationship with the customer.

Speaker Change #117: It just allows the customer another conduit and many of them really really liked that conduit and which allows for them to be happier than us to get efficiencies and <unk> and <unk>.

Speaker Change #117: Better relationship with the customer.

Jared Mattingly: Great.

Scott Schneeberger: Great. Thanks, guys. Happy holidays.

Speaker Change #118: Great. Thanks, guys happy holidays.

Todd Schneider: Thanks, guys. Happy holidays. Thank you. You as well.

Todd Schneider: Thank you. You as well.

Speaker Change #119: Thank you you as well.

Operator: Our next question comes from Jason Haas from Wells Fargo. Please go ahead. Jason.

Speaker Change #120: And our next question comes from Jason Haas from Wells Fargo. Please go ahead Jason.

Todd Schneider: Hey, good morning, and thanks for taking my questions. I'm curious if you could help quantify where we are in terms of the price increases relative to history?

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

Hey, good morning, and thanks for taking my questions.

Speaker Change #120: I'm curious if you could help quantify where we are in terms of the price increases relative to history are we still might close to 3% and we're sort of on a path back to 2% or how would you describe that.

Jared Mattingly: Are we still like close to 3%?

Todd Schneider: We're sort of on a path back to 2% or how would you describe it? And then are there certain verticals or industries where you find it a little bit easier to maintain those prices? Jason, thanks for the question. Yeah, as I mentioned, historically, we're in the 0% to 2% price increase range. We've been above that with inflation being well above that, certainly well below those peak levels of inflation. And as a result, our price increases are now back into that historical range. And, you know, it's tough to predict what inflation looks like moving forward. We watch what the Fed is trying to figure out, and we're watching that very closely, and we will manage it appropriately moving forward. Got it. That's very helpful. And I guess I'll talk to you. So are there any verticals that it's easier to maintain those prices or is.

Speaker Change #120: And then are there certain verticals or industries, where you find it a little bit easier to maintain this those prices.

Todd Schneider: Jason, thanks for the question. Yeah, as I mentioned, historically, we're in the 0% to 2% price increase range. We've been above that with inflation being well above that, certainly well below those peak levels of inflation. And as a result, our price increases are now back into that historical range. And, you know, it's tough to predict what inflation looks like moving forward. We watch what the Fed is trying to figure out, and we're watching that very closely, and we will manage it appropriately moving forward.

Jason Thanks for the question, yes, as I mentioned.

Speaker Change #120: <unk>.

Speaker Change #120: Historically were.

In the zero to 2% price.

Increase range.

Speaker Change #120: We've been above that.

Speaker Change #120: With inflation being.

Speaker Change #120: Well above that certainly well below those peak levels of inflation and and.

And as a result, our.

Speaker Change #120: Our price increases are now back into that historical range.

And.

Speaker Change #120: It's tough to predict what inflation looks like.

Speaker Change #120: Moving forward, we watch what the fed is trying to figure out and we're watching that very closely and we will manage it appropriately moving forward.

Jason Haas: Got it. That's very helpful. And I guess I'll talk to you. So are there any verticals that it's easier to maintain those prices or is it all sort of, is it all reverted back to that historical 0% to 2% range? And then I also want to just follow up on the incremental margins because.Those were really strong in the first.

Speaker Change #121: Got it that's very helpful and.

Speaker Change #122: I guess I'll talk to you. So are there any verticals that it's easier.

Speaker Change #122: To maintain those prices or is it all sort of.

Jared Mattingly: It all sort of.

Todd Schneider: Is it all reverted back to that historical 0% to 2% range? And then I also want to just follow up on the incremental margins because.

Speaker Change #123: He said all reverted back to that historical year to 2% range.

Speaker Change #124: And then I also wanted to just follow up on the incremental margins because those were really strong in the first half and I know you.

Jared Mattingly: Those were really strong in the first.

Todd Schneider: H1 and I know you said that we're, you know, the expectations will get back to more sort of normal targeted levels for H2. But I was just curious like what the drivers of that would be. So what changes from H1 to H2 that causes those incremental margins to come down? Thanks, Jason. So as far as any verticals, are we able to obtain better price increases in any one particular? I wouldn't say so. You know, it's probably pretty darn reflective of the market in general. So as far as incrementals in the back half of the year, yeah, we had, you know, as I mentioned, it's not linear, so.

H1 and I know you said that we're, you know, the expectations will get back to more sort of normal targeted levels for H2. But I was just curious like what the drivers of that would be. So what changes from H1 to H2 that causes those incremental margins to come down? Thanks.

Speaker Change #124: Said that the expectation, we'll get back to more sort of.

Speaker Change #124: Normal targeted levels for the second half, but I was just curious what the drivers of that would be so what changes from the first half to the second half that causes those incremental margins to come down.

Todd Schneider: Jason. So as far as any verticals, are we able to obtain better price increases in any one particular? I wouldn't say so. You know, it's probably pretty darn reflective of the market in general. So as far as incrementals in the back half of the year, yeah, we had, you know, as I mentioned, it's not linear, so.

Jason Haas: Jason So.

Jason Haas: As far as.

Any verticals is it able to are we able to obtain better price increases in any one particular I wouldn't say so.

Jason Haas: Yes.

Jason Haas: It's probably pretty darn reflective of the market in general so as far as Incrementals in the back half of the year, Yes, we had.

Jason Haas: As I mentioned, it's not linear so we had some really good incrementals in the in.

Todd Schneider: We had some really good incrementals in the first half, but we like that 25% to 35% range and that's what we're guiding towards and that's what we're organizing around as well. That's what I think you should be thinking about.

We had some really good incrementals in the first half, but we like that 25% to 35% range and that's what we're guiding towards and that's what we're organizing around as well. That's what I think you should be thinking about.

Jason Haas: In the first half.

Jason Haas: But.

Jason Haas: We liked that 25% to 35% range and that's what we're guiding towards in that.

What we're organizing around as well so that's what I think you should be.

Jason Haas: Thinking about sometimes it's tough comps.

Jared Mattingly: Sometimes it's tough comps. Relative to last year, we had a really good second half of the year margin. And as Todd said, sometimes it's just timing of investments. It is not going to be a straight line for sure.

Mike Hansen: Sometimes it's tough comps. Relative to last year, we had a really good second half of the year margin. And as Todd said, sometimes it's just timing of investments. It is not going to be a straight line for sure.

Jason Haas: Relative to last year, we had a really good second half of the year margin.

Speaker Change #126: And as Todd said, sometimes it's just timing of of investments it is not going to be a straight line for sure.

Todd Schneider: Got it. That's very helpful.

Jason Haas: Got it. That's very helpful.

Speaker Change #127: Got it that's very helpful. Thank you.

Jared Mattingly: Thank you.

Todd Schneider: Thank you.

Operator: At this time, there are no further questions. I'd like to turn the call back over to Jared for closing remarks.

Jared Radically: And at this time there are no further questions I'd like to turn the call back over to Jared for closing remarks.

Operator: At this time, there are no further questions. I'd like to turn the call back over to Jared for closing remarks.

Jared Mattingly: Thank you for joining us this morning. We will issue our third quarter of fiscal 2025 financial results in March. We look forward to speaking with you again at that time.

Jared Mattingley: Thank you for joining us this morning. We will issue our third quarter of fiscal 2025 financial results in March. We look forward to speaking with you again at that time. Thank you.

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

Todd Schneider: Thank you.

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

Speaker Change #128: This now concludes today's conference call. Thank you for your participation you may now disconnect.

[Analyst]: The host has ended this call. Goodbye.

Operator: The host has ended this call. Goodbye.

The host has ended this call goodbye.

Speaker Change #128: [music].

Todd Schneider: It.

Operator: Good day, everyone, and welcome to the Cintas Corporation announces Fiscal 2025 Second Quarter Results Conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingly, Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

Speaker Change #128: Treasurer and Investor Relations. Please go ahead Sir.

Jared Mattingly: Thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2025 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 discussion 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 Mattingley: Thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2025 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 discussion on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd.

Speaker Change #129: Thank you for joining US with me are Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer, who will discuss our fiscal 2025 second quarter results. After our commentary we will open the call to questions from analysts.

Speaker Change #129: The private Securities Litigation Reform Act of 1095 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.

Speaker Change #129: These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss.

We refer you to the discussion on these points contained in our most recent filings with the Securities and Exchange Commission I will now turn the call over to Todd.

Todd Schneider: Thank you, Jared, we are pleased with our strong second quarter results which reflect great execution by our employee partners. The comprehensive value proposition we provide to our customers in supporting their image, safety, cleanliness, and compliance needs. Second quarter total revenue grew 7.8% to $2.56 billion, an all-time high for revenue in a quarter. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.1% in the second quarter. We continued to experience strong demand for our services, reflecting the complementary nature of our platform and our unmatched product and service offerings for businesses of all types and sizes. Virtually every business has a need Cintas is ready to meet.

Todd Schneider: Thank you Jared we are pleased with.

Todd Schneider: Our strong second quarter results, which reflects great execution by our employee partners and a comprehensive value proposition, we provide to our customers and supporting their image safety cleanliness and compliance needs.

Todd Schneider: Second quarter total revenue grew seven 8% to $2 $5 6 billion an.

Todd Schneider: An all time high for revenue in a quarter.

The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations was seven 1%.

Todd Schneider: In the second quarter, we continued to experience strong demand for our services, reflecting the complementary nature of our platform.

And our unmatched product and service offerings for businesses of all types and sizes.

Todd Schneider: Nearly every business has a need cintas is ready to meet whether it is a front door that means a mat a bathroom to service exit lighting fire extinguishers, and sprinkler systems first aid and safety needs or in apparel solution.

Todd Schneider: Whether it's a front door that needs a mat, a bathroom to service, exit lighting, fire extinguishers, and sprinkler systems, first aid and safety needs, or an apparel solution, Cintas is continually deepening our value propositions, particularly within our four focused verticals of healthcare, hospitality, education, and state and local government, which continued to perform well. Gross margin for the second quarter grew 11.8% over the prior year to 49.8%, just below our all-time high. We set, in the first quarter, operating income of 23.1% as a percent of revenue was an all-time record, an increase of 18.4% over the prior year. Diluted EPS grew a robust 21.1% to $1.09. Our strong earnings growth reflects our operational excellence via sourcing and supply chain initiatives. Route and energy optimization and technology enabled efficiency in our facilities.

Whether it's a front door that needs a mat, a bathroom to service, exit lighting, fire extinguishers, and sprinkler systems, first aid and safety needs, or an apparel solution, Cintas is continually deepening our value propositions, particularly within our four focused verticals of healthcare, hospitality, education, and state and local government, which continued to perform well. Gross margin for the second quarter grew 11.8% over the prior year to 49.8%, just below our all-time high. We set, in the first quarter, operating income of 23.1% as a percent of revenue was an all-time record, an increase of 18.4% over the prior year. Diluted EPS grew a robust 21.1% to $1.09. Our strong earnings growth reflects our operational excellence via sourcing and supply chain initiatives. Route and energy optimization and technology enabled efficiency in our facilities.

Todd Schneider: Cintas is continually deepening our value propositions, particularly within our four focused verticals of healthcare hospitality education, and state and local government, which continued to perform well.

Todd Schneider: Gross margin for the second quarter grew 11, 8% over the prior year to 49, 8% just below our all time high we set in the first quarter.

Operating income of 23, 1% as a percent of revenue was an all time record an increase of 18, 4% over the prior year.

Todd Schneider: Diluted EPS grew a robust 21, 1% to $1 <unk>.

Todd Schneider: Our strong earnings growth reflects our operational excellence, we are sourcing and supply chain initiatives route and energy optimization and technology enabled efficiency in our facilities.

Todd Schneider: Cash flow this year continues to be very strong with free cash flow for the first six months increasing 34.9% over the prior year. We continue to deploy capital across each of our capital allocation priorities, starting with investing back into our businesses. This strong cash flow generation allows us to focus on making strategic investments in our customers and our employee partners, which positions us to deliver long-term value for our shareholders. Our technology investments remain a significant area of reinvestment. We continue to leverage our SAP system to standardize our processes across our operations. Combined with our focus on operational excellence, we are improving the way our employees work and getting the right products to our customers faster, all of which improves the customer experience and positively impacts our margin profile. At the same time, investing in our customers and employee partners, and making strategic acquisitions.

Cash flow this year continues to be very strong with free cash flow for the first six months increasing 34.9% over the prior year. We continue to deploy capital across each of our capital allocation priorities, starting with investing back into our businesses. This strong cash flow generation allows us to focus on making strategic investments in our customers and our employee partners, which positions us to deliver long-term value for our shareholders. Our technology investments remain a significant area of reinvestment. We continue to leverage our SAP system to standardize our processes across our operations. Combined with our focus on operational excellence, we are improving the way our employees work and getting the right products to our customers faster, all of which improves the customer experience and positively impacts our margin profile. At the same time, investing in our customers and employee partners, and making strategic acquisitions.

Cash flow. This year continues to be very strong with free cash flow for the first six months, increasing 34, 9% over the prior year.

Todd Schneider: We continued to deploy capital across each of our capital allocation priorities, starting with investing back into our businesses.

Todd Schneider: This strong cash flow generation allows us to focus on making strategic investments in our customers and our employee partners.

Todd Schneider: Which positions us to deliver long term value for our shareholders.

Todd Schneider: Our technology investments remain a significant area of reinvestment.

Todd Schneider: We continued to leverage our SAP system to standardize our processes across our operations can.

Todd Schneider: Combined with our focus on operational excellence, we are improving the way our employees work.

And getting the right products to our customers faster.

Todd Schneider: All of which improves the customer experience and positively impacts our margin profile.

Todd Schneider: At the same time investing in our customers and employee partners and making strategic acquisitions and returning capital to Cintas to shareholders remains a key priority.

Todd Schneider: Returning capital to Cintas shareholders remains a key priority. Cintas paid a quarterly cash dividend of $0.39 per share last week, and looking ahead, we will continue our opportunistic approach with share buybacks. Before turning the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year, which reflect our strong momentum and confidence in our outlook. We are updating our annual revenue expectations from a range of $10.22 to 10.32 billion to a range of $10.255 to 10.32 billion, a total growth rate of 6.9% to 7.5%. We expect our organic growth rate to be in the range of 7.0% to 7.7%. We are also updating our annual diluted EPS expectations from a range of $4.17 to $4.25 to a range of $4.28 to $4.34, a growth rate of 12.9% to 14.5%.

Returning capital to Cintas shareholders remains a key priority. Cintas paid a quarterly cash dividend of $0.39 per share last week, and looking ahead, we will continue our opportunistic approach with share buybacks. Before turning the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for our fiscal year, which reflect our strong momentum and confidence in our outlook. We are updating our annual revenue expectations from a range of $10.22 to 10.32 billion to a range of $10.255 to 10.32 billion, a total growth rate of 6.9% to 7.5%. We expect our organic growth rate to be in the range of 7.0% to 7.7%. We are also updating our annual diluted EPS expectations from a range of $4.17 to $4.25 to a range of $4.28 to $4.34, a growth rate of 12.9% to 14.5%.

Todd Schneider: Cintas paid a quarterly cash dividend of 39 per share last week and looking ahead, we will continue our optum.

Todd Schneider: Our opportunistic approach with share buybacks.

Speaker Change #130: Before turning the call over to Mike to provide details of our second quarter results I'll provide our updated financial expectations for our fiscal year, which reflect our strong momentum and confidence in our outlook.

Speaker Change #130: We are updating our annual revenue expectations from a range of $10 billion to $2 billion to $10 three 2 billion.

Speaker Change #130: To a range of 10 to $5 $5 billion to $10 three 2 billion.

Speaker Change #130: The total growth rate of six 9% to seven 5%.

Speaker Change #130: We expect our organic growth rate to be in the range of 7.0% to seven 7%.

Speaker Change #130: We are also updating our annual diluted EPS expectations from a range of $4 17.

Speaker Change #130: The $4 25.

Speaker Change #130: So a range of $4 28.

Speaker Change #130: To $4 34.

Speaker Change #130: Our growth rate of $12 nine to 14, 5%.

Speaker Change #130: Cintas is differentiate cintas is differentiated culture.

Speaker Change #130: Superior products and services and industry best talent position us to deliver meaningful value creation in fiscal 2025 and beyond.

Speaker Change #130: We remain focused on delivering outstanding customer experiences and making appropriate investments in the business to sustain our growth.

Speaker Change #130: Thank all synthesis employee partners, whose outstanding work and dedication to our customers remains the key to our success.

With that, I'll turn it over to Mike to discuss the details of our Q2 results.

Speaker Change #130: With that I'll turn it over to Mike to discuss the details of our second quarter results.

Jared Mattingly: Thanks Todd and good morning. Our fiscal 2025 second quarter revenue was $2.56 billion compared to $2.38 billion last year. The organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was 7.1%. Organic growth by business was 6.9% for Uniform Rental and Facility Services, 12.3% for First Aid and Safety Services, 10% for Fire Protection Services, and Uniform Direct Sale was down 9.2%. Gross margin for the second quarter of fiscal 2025 was $1.28 billion compared to $1.14 billion last year, an increase of 11.8%. As Todd mentioned, gross margin as a percent of revenue was 49.8% for the second quarter compared to 48% last year, an increase of 180 basis points. Robust volume growth, operating leverage, and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Thanks Todd and good morning. Our fiscal 2025 second quarter revenue was $2.56 billion compared to $2.38 billion last year. The organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was 7.1%. Organic growth by business was 6.9% for Uniform Rental and Facility Services, 12.3% for First Aid and Safety Services, 10% for Fire Protection Services, and Uniform Direct Sale was down 9.2%. Gross margin for the second quarter of fiscal 2025 was $1.28 billion compared to $1.14 billion last year, an increase of 11.8%. As Todd mentioned, gross margin as a percent of revenue was 49.8% for the second quarter compared to 48% last year, an increase of 180 basis points. Robust volume growth, operating leverage, and continued operational efficiencies helped generate this strong gross margin.

Mike Hansen: Thanks, Todd and good morning, our.

Mike Hansen: Our fiscal 2025 second quarter revenue was $2 $5 6 billion compared to $238 billion last year, the organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was seven 1%.

Mike Hansen: Gross margin for the second quarter of fiscal 'twenty, five was 128 billion compared.

Mike Hansen: Compared to $114 billion last year, an increase of 11, 8% as Todd mentioned gross margin as a percent of revenue was 49, 8% for the second quarter compared to 48% last year, an increase of 180 basis points robust volume growth opera.

Mike Hansen: Getting leverage and continued operational efficiencies helped generate strong gross margin.

Jared Mattingly: Gross margin percentage by business was 49.1% for uniform rental and facility services, 57.3% for first aid and safety services, 49.9% for fire protection services, and 41.2% for uniform direct sale. Gross margin for the uniform rental and facility services segment increased 170 basis points from last year. Our progress year over year reflects our focus on operational excellence initiatives combined with leverage from strong revenue growth. We continue to realize benefits from our technology investments and extracting inefficiencies from the business through our Six Sigma and engineering teams. Gross margin for the first aid and safety services segment increased 280 basis points from last year with strong revenue growth continuing to create leverage. Our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak.

Gross margin percentage by business was 49.1% for uniform rental and facility services, 57.3% for first aid and safety services, 49.9% for fire protection services, and 41.2% for uniform direct sale. Gross margin for the uniform rental and facility services segment increased 170 basis points from last year. Our progress year over year reflects our focus on operational excellence initiatives combined with leverage from strong revenue growth. We continue to realize benefits from our technology investments and extracting inefficiencies from the business through our Six Sigma and engineering teams. Gross margin for the first aid and safety services segment increased 280 basis points from last year with strong revenue growth continuing to create leverage. Our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals, Eyewash Stations, and WaterBreak.

Mike Hansen: Gross margin percentage five business was 49, 1% for uniform rental and facility services 57, 3% for first aid and safety services 49, 9% for fire protection services and 41, 2% for uniform direct sale.

Mike Hansen: Gross margin for the uniform rental and facility services segment increased 170 basis points from last year.

Mike Hansen: Our progress year over year reflect our focus on operational excellence initiatives combined with leverage from strong revenue growth.

Mike Hansen: We continue to realize benefits from our technology investments and extracting and inefficiencies from the business through our six Sigma and engineering teams.

Mike Hansen: Gross margin for the first aid and safety services segment increased 280 basis points from last year with strong revenue growth continuing to create leverage our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals.

Mike Hansen: Eyewash stations in Waterbury are.

Jared Mattingly: Our technology investment in Smart Truck provides route optimization and improved efficiencies, and we continue to see sourcing benefits from our first aid dedicated distribution center that have allowed us to lower product costs. All of these contribute to improved margins. Selling and administrative expenses as a percent of revenue was 26.8%, which was relatively consistent with last year. Second quarter operating income was $591.4 million compared to $499.7 million last year. Operating income as a percent of revenue was 23.1% in the second quarter of fiscal 25 compared to 21% in last year's second quarter, an increase of 210 basis points. Our effective tax rate for the second quarter was 20.7% compared to 20.9% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Our technology investment in Smart Truck provides route optimization and improved efficiencies, and we continue to see sourcing benefits from our first aid dedicated distribution center that have allowed us to lower product costs. All of these contribute to improved margins. Selling and administrative expenses as a percent of revenue was 26.8%, which was relatively consistent with last year. Second quarter operating income was $591.4 million compared to $499.7 million last year. Operating income as a percent of revenue was 23.1% in the second quarter of fiscal 25 compared to 21% in last year's second quarter, an increase of 210 basis points. Our effective tax rate for the second quarter was 20.7% compared to 20.9% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Mike Hansen: Selling and administrative expenses as a percent of revenue was 26, 8%, which was relatively consistent with last year.

Mike Hansen: Second quarter operating income was $591 4 million compared to $499 $7 million last year.

Mike Hansen: Operating income as a percent of revenue was 23, 1% in the second quarter of fiscal 25% compared to 21% in last year's second quarter, an increase of 210 basis points.

Our effective tax rate for the second quarter was 27% compared to 29% last year the tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock based compensation.

Jared Mattingly: Net income for the second quarter was $448.5 million compared to $374.6 million last year. This year's second quarter diluted EPS of $1.09 compared to $0.90 last year, an increase of 21.1%. As Todd mentioned earlier, we continue to generate strong cash flow. Through the first six months, our free cash flow increased 34.9% over the prior year. This great cash flow over the first six months has allowed us to deploy a total of $1.3 billion of capital across each of our capital allocation priorities of capital expenditures, M&A, dividends, and share buybacks. Todd provided our annual financial guidance. Related to the guidance, please note the fiscal 2025 net interest expense is expected to be approximately $101 million compared to $95 million in fiscal 2024, predominantly as a result of higher variable rate debt.

Net income for the second quarter was $448.5 million compared to $374.6 million last year. This year's second quarter diluted EPS of $1.09 compared to $0.90 last year, an increase of 21.1%. As Todd mentioned earlier, we continue to generate strong cash flow. Through the first six months, our free cash flow increased 34.9% over the prior year. This great cash flow over the first six months has allowed us to deploy a total of $1.3 billion of capital across each of our capital allocation priorities of capital expenditures, M&A, dividends, and share buybacks. Todd provided our annual financial guidance. Related to the guidance, please note the fiscal 2025 net interest expense is expected to be approximately $101 million compared to $95 million in fiscal 2024, predominantly as a result of higher variable rate debt.

Mike Hansen: Net income for the second quarter was $448 5 million compared to $374 $6 million last year.

Mike Hansen: This year's second quarter diluted EPS of $1 nine.

Mike Hansen: Compared to 90 last year, an increase of 21, 1%.

As Todd mentioned earlier, we continue to generate strong cash flow.

Speaker Change #131: Through the first six months, our free cash flow increased 34, 9% over the prior year. This great cash flow over the first six months has allowed us to deploy a total of $1 $3 billion of capital across each of our capital allocation priorities of capital expenditures M&A dividends.

Speaker Change #131: And share buybacks.

Speaker Change #131: <unk> provided our annual financial guidance related to the guidance. Please note. The following fiscal 'twenty five net interest expense is expected to be approximately $101 million compared to $95 million in fiscal 'twenty four predominantly as a result of higher variable rate debt.

Jared Mattingly: Our fiscal 2025 effective tax rate is expected to be 20.2% and guidance does not include any future share buybacks, significant economic disruptions, or downturns. I'll now turn it back over to Jared. Thanks, Mike. That concludes our prepared remarks.

Our fiscal 2025 effective tax rate is expected to be 20.2% and guidance does not include any future share buybacks, significant economic disruptions, or downturns. I'll now turn it back over to Jared.

Speaker Change #131: Our fiscal 'twenty five effective tax rate is expected to be 22% and guidance does not include any future share buybacks were significant economic disruptions or downturns.

Jared Radically: Now I'll turn it back over to Jared.

Jared Mattingley: 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.

Todd Schneider: Thank you.

Jared Mattingly: 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 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 Tim Mulroney from William Blair. Please go ahead. Tim.

Speaker Change #132: 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.

Speaker Change #132: You will be allowed to ask one one follow up question. Once again, if you would like to ask a question. Please press star one on your phone now.

Speaker Change #133: And our first question comes from Tim Mulrooney from William Blair. Please go ahead Tim.

Todd Schneider: Yeah, hi. Thanks for taking my questions. I wanted to ask about your guide on organic growth. It looks like it came down slightly at the high end from 8.1% to 7.7%. Just curious what the reason for that was. If Q2 sales came in below your expectations or if it's, you know.

Tim Mulrooney: Yeah, hi. Thanks for taking my questions. I wanted to ask about your guide on organic growth. It looks like it came down slightly at the high end from 8.1% to 7.7%. Just curious what the reason for that was. If Q2 sales came in below your expectations or if it's, you know. The outlook for the second half of the fiscal year. It shifted slightly. I know it's a small number, but just curious if you had any comment there.

Tim Mulrooney: Yes, hi, Thanks for taking my questions I wanted to ask about your your guide on organic growth it looks like it.

Tim Mulrooney: It came down slightly at the high end from eight 1% to seven 7% just curious what the reason for that was second quarter sales came in below your expectations or if it's.

Jared Mattingly: The outlook for the second half of the fiscal year.

Tim Mulrooney: The outlook for the second half of the fiscal year its shifted slightly I know, it's a small number but just curious if you had any comment there.

Todd Schneider: It shifted slightly. I know it's a small number, but just curious if you had any comment there. Well, good morning Tim. Thanks for the question. First, we're pleased with our organic growth rate of 7.1%. It's very good. It's right where we'd like to be. And our second half guide implies a continuation of that good growth, mid to high single digits. You know, the rental division is right in line where we'd like it to be. And the first aid and fire divisions both grew double digits, so they continue to perform well. And the value proposition continues to resonate. So we like where we are and we think that our guide reflects attractive growth for the year and the back half of the year as well.

Todd Schneider: Well, good morning Tim. Thanks for the question. First, we're pleased with our organic growth rate of 7.1%. It's very good. It's right where we'd like to be. And our second half guide implies a continuation of that good growth, mid to high single digits. You know, the rental division is right in line where we'd like it to be. And the first aid and fire divisions both grew double digits, so they continue to perform well. And the value proposition continues to resonate. So we like where we are and we think that our guide reflects attractive growth for the year and the back half of the year as well.

Speaker Change #134: Well good morning, Tim.

Speaker Change #135: Thanks for the question first we're pleased with.

Speaker Change #135: Our organic growth rate of seven 1%, it's very good in right, where we'd like to be.

Speaker Change #135: And our second half guidance implies a continuation of that.

Speaker Change #135: Good growth mid to high single digits.

Speaker Change #135: Rental.

Speaker Change #135: The division is right in line.

Speaker Change #135: Where we'd like it to be and the first aid and fire.

Divisions both.

Speaker Change #135: Grew double digits. So they continue to perform well and that the value proposition continues to resonate. So we like where we are.

Speaker Change #135: We think that our guide reflects attractive growth on.

For the year in the back half of the year as well.

Jared Mattingly: Tim, I might offer a couple things on the guide as well. You know, the workday adjusted revenue for the year is now 7.7% to 8.4%. So a really nice range for us. And as you said, the organic revenue growth of 7% to 7.7% is a really good year for us and not much of a change. But maybe I'll give you a bit of thoughts on the implied growth as well. So if you think about that guide that we just gave, it implies an organic growth rate range of 6.6% to 7.9% for the back half of the year and that's the same implied growth rate that we had in the guide last quarter for the final three quarters. So in other words, that implied guide hasn't really changed.

Mike Hansen: Tim, I might offer a couple things on the guide as well. You know, the workday adjusted revenue for the year is now 7.7% to 8.4%. So a really nice range for us. And as you said, the organic revenue growth of 7% to 7.7% is a really good year for us and not much of a change. But maybe I'll give you a bit of thoughts on the implied growth as well. So if you think about that guide that we just gave, it implies an organic growth rate range of 6.6% to 7.9% for the back half of the year and that's the same implied growth rate that we had in the guide last quarter for the final three quarters. So in other words, that implied guide hasn't really changed.

And Tim I might offer a couple of things on the guide as well.

Speaker Change #135: Workday adjusted revenue for the year.

Speaker Change #135: Is now seven 7% to eight 4%.

Speaker Change #136: So a really nice a range for us and as you said the organic revenue growth of 7% to seven seven is a really good year for us and not much of a change, but but maybe I'll give you a little bit.

Speaker Change #136: A bit of thoughts on the implied growth as well. So if you think about that guide that we just gave.

Speaker Change #136: It implies an organic growth rate range of six 6% to seven 9% for the back half of the year and Thats. The same implied growth rate that we had in the guide last quarter for the final three quarters. So in other words.

That implied guide Hasnt really changed.

Jared Mattingly: And so again, as Todd said, we had a nice quarter and the outlook for the second half of the year really hasn't changed all that much. Still a really good year both in total growth and in organic growth.

And so again, as Todd said, we had a nice quarter and the outlook for the second half of the year really hasn't changed all that much. Still a really good year both in total growth and in organic growth.

Speaker Change #136: And so again as Todd said.

Speaker Change #136: We had a nice quarter and the.

Speaker Change #136: The outlook for the second half of the year really hasn't changed all that much still a really good year.

Speaker Change #136: Year, both in total growth and organic growth.

Todd Schneider: Okay, that's good. Color sounds like just some fine tuning around the edges and continuation of what you've been doing. So that's very helpful context. Thank you. For my second question, I just wanted to touch on the incremental EBITDA margins. 60%, I think, in the quarter, obviously very impressive, well above street expectations. Just putting my analyst hat on and trying to pick this apart a little bit, curious if there's any one offs or discrete factors that we should be.

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

Speaker Change #137: Okay. That's good color it sounds like just some fine tuning around the edges and continuation of what you've been doing so that's very helpful. Context. Thank you for my second question is I just wanted to touch on the incremental EBITDA margins.

Speaker Change #137: 60% I think in the quarter, obviously very impressive well above street expectations.

Speaker Change #138: Just putting my analysts had out in China picked us apart a little bit I'm curious if there's any one offs or discrete factors that we should be considering that we're either favorable to this year unfavorable to last year that might help explain some of the strong outperformance to 60% is obviously just.

Jared Mattingly: Considering that we're either favorable to this.

Todd Schneider: Year, unfavorable to last year that might help explain some of the strong outperformance.

Jared Mattingly: Because 60% is obviously just really, really high.

Speaker Change #138: Just really really high thank you.

Todd Schneider: Thank you. Well Tim, you know, no one-offs to speak of, you know, we're getting good leverage from our revenue growth. So the revenue growth is really helping us to get leverage. We've spoken in the past about, you know, we've got programs, initiatives to extract out inefficiencies in our business, and that continues to go well. Our Six Sigma Black Belt team, our global supply chain, our engineering teams are all functioning at high levels and allowing us to extract out improvements throughout our organization. So no one-offs to speak of, and we're trying to get great leverage on the revenue and then extract those inefficiencies in that plant working.

Speaker Change #138: Yeah.

Todd Schneider: Well Tim, you know, no one-offs to speak of, you know, we're getting good leverage from our revenue growth. So the revenue growth is really helping us to get leverage. We've spoken in the past about, you know, we've got programs, initiatives to extract out inefficiencies in our business, and that continues to go well. Our Six Sigma Black Belt team, our global supply chain, our engineering teams are all functioning at high levels and allowing us to extract out improvements throughout our organization. So no one-offs to speak of, and we're trying to get great leverage on the revenue and then extract those inefficiencies in that plant working.

Speaker Change #138: Tim.

Speaker Change #138: <unk>.

Speaker Change #138: No one offs to speak of were getting good leverage from our revenue growth.

Speaker Change #138: So the revenue growth is really helping us to take.

Speaker Change #138: To get leverage.

We've spoken in the past about.

Speaker Change #138: We've got programs initiatives to extract out inefficiencies in our business and that continues to go well.

Speaker Change #138: Sure.

Speaker Change #138: Six Sigma Black belt team are.

Speaker Change #138: Our global supply chain. Our engineering teams are all are functioning at high levels, and allowing us to extract out.

Speaker Change #138: Improvements throughout our organization so no no one offs to speak of and.

Speaker Change #138: We're trying to.

Speaker Change #138: Great Okay, great leverage on the revenue and then extract out inefficiencies and net debt plan is working.

Operator: Got it.

Tim Mulrooney: Got it. Thanks Todd. Thanks Mike.

Speaker Change #139: Got it thanks, Scott Thanks, Mike.

Jared Mattingly: Thanks Todd.

Todd Schneider: Thanks Mike. Thank you.

Todd Schneider: Thank you.

Speaker Change #138: You.

Operator: 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 #140: And our next question comes from Andrew Steinman from Jpmorgan Securities. Please go ahead Andrew.

Todd Schneider: Hi. When talking about the organic revenue growth of 7.1% in the quarter, could you just give us a sense if price realization has, you know, kind of now returned to the long-term average increase, and then also did add stop change much when looking at the November quarter year over year versus the August quarter year over year? Well, good morning, Andrew. Obtaining price increases is more challenging than it was in the past compared to earlier portion of the calendar year and the first quarter. But we're still able to obtain price increases. They are right at about our historical levels now, which makes sense since we continue to see price increases coming down as inflation has come down. And in spite of this, I'm really proud of the organization being able to increase margins while extracting out those inefficiencies.

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

Hi, <unk>.

Speaker Change #140: About the organic revenue growth of seven one in the quarter could you just give us a sense.

Speaker Change #141: Price realization should have kind of now return to the long term average.

Speaker Change #141: And then also did add stop change much.

Speaker Change #141: Looking at the November quarter year over year versus the August quarter year over year.

Todd Schneider: Well, good morning, Andrew. Obtaining price increases is more challenging than it was in the past compared to earlier portion of the calendar year and the first quarter. But we're still able to obtain price increases. They are right at about our historical levels now, which makes sense since we continue to see price increases coming down as inflation has come down. And in spite of this, I'm really proud of the organization being able to increase margins while extracting out those inefficiencies.

Speaker Change #142: Well good morning, Andrew.

Speaker Change #142: Sure.

Speaker Change #142: Obtaining price increases is more challenging than it was in the past.

Compared to.

Speaker Change #142: Earlier portion of the calendar year in the first quarter, but we're still able to obtain price increases.

Speaker Change #142: Our right at about our historical levels, now, which makes sense since.

Speaker Change #142: We continue to see price increases coming down as inflation has come down.

Speaker Change #142: And in spite of this I'm really proud of the organization being able to increase margins, while expecting of those inefficiencies I spoke about earlier.

Todd Schneider: I spoke about earlier and as was mentioned with Tim previously, our incremental margins are really strong as far as. Why don't I just speak a little bit about customer behavior in general. I mentioned price increases. New business is quite strong. Our retention rates are still at very attractive levels. Ad stops, I would say no significant changes there. Catalog spending was down a little bit. Overall, the business is functioning at.

I spoke about earlier and as was mentioned with Tim previously, our incremental margins are really strong as far as. Why don't I just speak a little bit about customer behavior in general. I mentioned price increases. New business is quite strong. Our retention rates are still at very attractive levels. Ad stops, I would say no significant changes there. Catalog spending was down a little bit. Overall, the business is functioning at.A high level.

Speaker Change #142: And as was mentioned with Tim previously our incremental margins are really strong.

As far as why don't I, just speak a little bit about customer behavior in general.

Speaker Change #142: I mentioned price increases new business is quite strong.

Speaker Change #142: Our retention rates are still at very attractive levels add stops I would say no significant changes there.

Speaker Change #142: Catalog spending was down a little bit, but overall the business is functioning at a high level.

Jared Mattingly: A high level.

Todd Schneider: You know, the macro data seems to be pretty stable. The second half guide I think reflects that. We're going to have a, we plan to have a very good year, and not only the first half, but the second half reflects that.

And the macro data seems to be pretty stable in the second half guide I think reflects that.

You know, the macro data seems to be pretty stable. The second half guide I think reflects that. We're going to have a, we plan to have a very good year, and not only the first half, but the second half reflects that.

Speaker Change #142: We were going to have a we plan to have a very good year and.

Speaker Change #142: Not only the first half, but second half reflects that.

Operator: Okay, thank you very much.

Andrew Steinerman: Okay, thank you very much.

Speaker Change #143: Okay. Thank you very much.

Todd Schneider: Thank you.

Speaker Change #142: Thank you.

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

Speaker Change #144: And our next question comes from Jasper Bibb from <unk> Securities. Please go ahead Jasper.

Jared Mattingly: Hey, good morning guys. I want to ask about the proposed tariffs from the new administration and potential impact on your material costs if those proposals come through. I think you previously talked about a bit of inflation on garment costs from tariffs on China during the last Trump administration. Is there more sourcing coming through Mexico, Canada, or China that could potentially be impacted by.

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

Hey, good morning, guys.

Speaker Change #145: I wanted to ask about the proposed tariffs from the new administration and potential impact on our material cost of those proposals come through I think you've previously talked about a bit of inflation on hangar costs from tariffs on China. During the last Trump administration is there.

Speaker Change #145: More sourcing coming through Mexico, Canada, or China that could potentially be impacted.

Todd Schneider: Good morning, Jasper. Certainly we're watching all those items very closely with tariffs. It's still way too early to tell exactly what's going to occur there. But I know this. We have a world class global supply chain and they're positioned to pivot as necessary. We're already in a position where we dual source over 90% of our products. So those multiple sources include also geographic diversity. So you know, I think we're in a good spot too because when those types of challenges that we may face in the future or the world will face, our global supply chain will have a chance to shine. And I'm confident that that's exactly what they'll do and we'll pivot as appropriate. But we're in a good spot.

Speaker Change #146: Good morning Gaspar.

Speaker Change #147: Certainly we're watching.

Speaker Change #147: All of those items very closely with tariffs.

Speaker Change #147: It's still way too early to tell exactly what's going to occur there but.

Speaker Change #147: But I.

Speaker Change #147: I know this we have a world class global supply chain and they're positioned to.

Speaker Change #147: To pivot as.

Speaker Change #147: Necessary, we're already in a position, where we dual source over 90% of our products.

Speaker Change #147: So there's multiple sources include also geographic diversity.

Speaker Change #147: I think we're in a good spot to.

Speaker Change #147: Because.

Speaker Change #147: So when those types of challenges.

Speaker Change #147: That we may face in the future of the World will face.

Speaker Change #147: Our global supply chain will have a chance to shine and I am confident that that's exactly what they will do and we'll pivot as appropriate but we're in a good spot.

Jared Mattingly: Jasper, I might just, as a reminder, speak to our rental material cost. So in the rental business you just, you might keep in mind that we amortize the costs of our garments, our mats, and other products over some period of time, and that allows us time to have our global supply chain adapt to the current situation, maybe make some changes. But also it allows us to recognize those costs over a longer period of time. In other words, we don't recognize that cost in our P&L right away, and that allows us to do other things like not just sourcing changes but also how to think about our initiatives that we've got going on in the business and how to think of future price increases and so on.

Mike Hansen: Jasper, I might just, as a reminder, speak to our rental material cost. So in the rental business you just, you might keep in mind that we amortize the costs of our garments, our mats, and other products over some period of time, and that allows us time to have our global supply chain adapt to the current situation, maybe make some changes. But also it allows us to recognize those costs over a longer period of time. In other words, we don't recognize that cost in our P&L right away, and that allows us to do other things like not just sourcing changes but also how to think about our initiatives that we've got going on in the business and how to think of future price increases and so on.

Speaker Change #147: <unk> I might I might just as a reminder, speak to our rental.

Speaker Change #147: Material costs, so in the rental business you might keep in mind that.

Speaker Change #147: We amortize the costs of our garments, our mats and other products over some period of time.

Speaker Change #147: <unk>.

Speaker Change #147: And that allows us.

Speaker Change #147: Time to have our global supply chain adapt to the current situation.

Speaker Change #147: Maybe make some changes but also it allows us to recognize those costs over a longer period of time in other words, we don't we don't recognize that cost in our P&L right away and that allows us to do other things like.

Speaker Change #147: Not just sourcing changes, but also how to think about our initiatives that we've got going on in the business and.

Speaker Change #147: And how to think of future price increases and so on so.

Jared Mattingly: So just as a reminder, our ability to amortize a good chunk of our materials can really be a benefit in a time when uncertainty like this related to these tariffs.

So just as a reminder, our ability to amortize a good chunk of our materials can really be a benefit in a time when uncertainty like this related to these tariffs.

Speaker Change #147: Just as a reminder, our hour.

Speaker Change #147: Ability to amortize a good chunk of our materials.

Speaker Change #147: Can really be a benefit in a time when.

Speaker Change #147: Uncertainty like this related to these tariffs.

Todd Schneider: Thanks for that.

Speaker Change #148: Thanks for that.

Jared Mattingly: And then maybe to follow up on Tim's earlier question, is there anything you think might make incremental operating margins moderate in the second half versus the first half? I mean, on my math, adjusting for working days, incremental operating margin was well north of 40% in the first half and seems like guidance would imply a pretty material step down in incremental for the second half. Is there anything specific driving that first half, second half split?

Speaker Change #149: And then maybe to follow up on Tim's earlier question is there anything that you think might make incremental operating margins moderate in the second half versus the first half.

Speaker Change #150: I mean on my map adjusting for working days incremental operating margin was well north of 40% in the first half.

Speaker Change #150: It seems like guidance implies a pretty material step down in April about for the second half is there anything specific driving that first half second half split.

Todd Schneider: Nothing specific, Jasper. Certainly running a business isn't linear.

Todd Schneider: Nothing specific, Jasper. Certainly running a business isn't linear. When you look at our guide for the year, we think we're in a really good spot to grow our operating margin. Our EPS, so attractive margins for the year, and we think we're in a good spot to deliver that.

Speaker Change #151: Nothing specific Jasper.

Speaker Change #151: Certainly running a business isn't linear.

Jared Mattingly: But.

Speaker Change #151: But when you look at our guide for the year, we think we're in a really good spot to to grow.

Todd Schneider: When you look at our guide for the year, we think we're in a really good spot to grow our operating margin. Our EPS, so attractive margins for the year, and we think we're in a good spot to deliver that.

Speaker Change #151: Our operating margin our EPS.

Speaker Change #151: So.

Speaker Change #151: Attractive margins for the year and we think we're in that we're in a good spot to to deliver that.

Jared Mattingly: Yeah, you might remember, Jasper, that our, you know, we want to be in an incremental of 25% to 35%. And while we are above that in the first half of the year, our expectation is longer term. We're going to be sort of in that range and that's what we have guided for the, for the back half of the year. We will, we will likely be closer to that range. It's hard to think that we would be in a 40% to 50% incremental longer term. But as Todd said, we've got a lot of initiatives that are really working for us.

Mike Hansen: Yeah, you might remember, Jasper, that our, you know, we want to be in an incremental of 25% to 35%. And while we are above that in the first half of the year, our expectation is longer term. We're going to be sort of in that range and that's what we have guided for the, for the back half of the year. We will, we will likely be closer to that range. It's hard to think that we would be in a 40% to 50% incremental longer term. But as Todd said, we've got a lot of initiatives that are really working for us.

Speaker Change #151: Might remember Jasper that are we want to be in an incremental of 25% to 35.

Speaker Change #151: Percent and while we are above that in the first half of the year our expectation is.

Speaker Change #151: Longer term, we're going to be sort of in that range and thats, what we have guided for the for the back half of the year we will.

We will likely be closer to that range. It's hard to think that we would be in <unk>.

Speaker Change #151: 40% to 50%.

Speaker Change #151: Incremental longer term.

Speaker Change #152: But as as Todd said, we've got a lot of initiatives that are really working for us.

Todd Schneider: Got it.

Jasper Bibb: Got it. Thank you for taking the questions.

Speaker Change #153: Got it thank you for taking the questions.

Jared Mattingly: Thank you for taking the questions.

Operator: Our next question comes from Manav Patnaik from Barclays, please. Go ahead, Manav.

Speaker Change #154: And our next question comes from Manav Patnaik from Barclays. Please go ahead manav.

Todd Schneider: Yeah, thank you. If I could just follow up on that. The top line guide that you lowered by 40 basis points, it sounds like you said all your expectations have kind of remained the same, but you still lowered it. So just curious, can you just help us with why you lowered it by 40 pips? Maybe it's the catalog sales that were down. Is that what it was? Just any color there would be helpful.

Manav Patnaik: Yeah, thank you. If I could just follow up on that. The top line guide that you lowered by 40 basis points, it sounds like you said all your expectations have kind of remained the same, but you still lowered it. So just curious, can you just help us with why you lowered it by 40 pips? Maybe it's the catalog sales that were down. Is that what it was? Just any color there would be helpful.

Manav Patnaik: Yeah. Thank you if I can just follow up on that the topline guide that you lowered by 40 basis points. It sounds like you said.

Manav Patnaik: Are your expectations kind of remain the same but you're still loaded. So just curious is that can you just help us with why you lowered it about 40 bps, maybe it's the catalog sales that were down is that what it was just any any color there would be helpful.

Jared Mattingly: Manav, you know, it's a little bit of math, right. The implied guide is about the same today as it was for the second half of the year as it was after the first quarter. But we've got a quarter in another quarter in the books. Our Q2 at 7.1 comes right in the middle of that range. And so that's really, that's the math of seeing it go from 8.1 to 7.7. But the implication of that guide for the rest of the year is still the same as what we called out.

Mike Hansen: Manav, you know, it's a little bit of math, right. The implied guide is about the same today as it was for the second half of the year as it was after the first quarter. But we've got a quarter in another quarter in the books. Our Q2 at 7.1 comes right in the middle of that range. And so that's really, that's the math of seeing it go from 8.1 to 7.7. But the implication of that guide for the rest of the year is still the same as what we called out after our Q1. Does that make sense?

Speaker Change #155: Yeah Manav.

Speaker Change #155: <unk>.

Speaker Change #155: It's a little bit of Av.

Speaker Change #155: Of math right. The guide the implied guide is about the same.

Speaker Change #155: Today as it was for.

Speaker Change #155: For the second half of the year as it was after the first quarter, but we've got a quarter another quarter in the books.

Speaker Change #155: Our Q2 at seven one.

Speaker Change #155: Comes right in the middle of that range.

Speaker Change #155: And so that's really that's the math of seeing it go from eight 1% to 77%, but the implication of that guide for the rest of the year.

Speaker Change #155: There is still the same as what we called out.

Todd Schneider: After our Q1.

After our first quarter.

Jared Mattingly: Does that make sense?

Speaker Change #156: Does that makes sense.

Todd Schneider: I mean, I guess. Are you saying that maybe this quarter perhaps didn't come in better than maybe what you would have thought?

Manav Patnaik: I mean, I guess. Are you saying that maybe this quarter perhaps didn't come in better than maybe what you would have thought?

Speaker Change #156: I mean, I guess are you.

You're seeing that maybe this quarter, perhaps didn't come in better than maybe what you would have thought.

Jared Mattingly: Well, this quarter is sort of in the middle of that organic revenue guide that we've given.

Mike Hansen: Well, this quarter is sort of in the middle of that organic revenue guide that we've given.

Speaker Change #156: Well.

Speaker Change #156: This quarter is sort of in the middle of that.

Speaker Change #156: That organic revenue guide that.

Speaker Change #156: That we've given.

Todd Schneider: Okay, fine.

Manav Patnaik: Okay, fine. And then if I can just follow up. Sorry, go ahead. If he was saying something.

[Analyst]: And then if I can just follow up.

Speaker Change #157: Okay Fine and then if I can just follow up.

Todd Schneider: Sorry, go ahead. If he was saying something.

Speaker Change #157: Go ahead, if he was saying something.

Jared Mattingly: Nope, go ahead.

Mike Hansen: Nope, go ahead.

Speaker Change #157: Go ahead.

Todd Schneider: I was just going to say the M&A in the quarter, can you, you know, it seemed like, you know, you were pretty active. So just curious in which areas and anything to call out there. Manav, I'll speak to that. Good morning. You know, M&A is hard to predict. We've been pursuing businesses in all of our route-based businesses as long as I can remember. And we did have a good quarter with M&A. We bought some businesses in each of our areas, and you know, in those we get, you know, some we're after really good quality businesses that can position us to get to obtain synergies in certain cases and then help us with an offering, broader offering to that customer base. So yeah, we like the businesses we're buying.

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

Speaker Change #158: I was just going to say the M&A in the quarter can you it.

Speaker Change #158: It seemed like.

Speaker Change #160: You were pretty active so just curious in which areas and anything to call out there.

Todd Schneider: Manav, I'll speak to that. Good morning. You know, M&A is hard to predict. We've been pursuing businesses in all of our route-based businesses as long as I can remember. And we did have a good quarter with M&A. We bought some businesses in each of our areas, and you know, in those we get, you know, some we're after really good quality businesses that can position us to get to obtain synergies in certain cases and then help us with an offering, broader offering to that customer base. So yeah, we like the businesses we're buying.

Speaker Change #161: Manav I'll speak to that and good morning.

Speaker Change #161: M&A is.

Speaker Change #161: It's hard to predict.

We've been.

Speaker Change #161: Pursuing businesses in all of our route based businesses.

Speaker Change #161: Yes.

As long as I can remember and we did have a good quarter with M&A, we bought some some businesses.

Speaker Change #161: Each of our areas.

Speaker Change #161: And those we get.

Speaker Change #161: Some we're after a really good quality businesses that can position us to.

Speaker Change #161: Obtained synergies in certain cases.

Speaker Change #161: And then help us with an offering broader offering to that customer base. So yes, we like the businesses we're buying.

Speaker Change #161: They are very complementary.

Todd Schneider: They're very complementary and they're quality businesses and we think that's going to be a good long-term investment for our organization.

They're very complementary and they're quality businesses and we think that's going to be a good long-term investment for our organization.

Speaker Change #161: Memory, and and their quality businesses, and we think thats going to be a good long term investment for our organization.

Jared Mattingly: Got it.

Manav Patnaik: Got it. Thank you.

Speaker Change #162: Got it thank you.

Todd Schneider: Thank you.

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

And our next question comes from Josh Chan from UBS. Please go ahead Josh.

Todd Schneider: Hi, good morning, Todd. Mike, Jared, I guess, you know, on the guidance question, maybe I can ask it this way. I guess as compared to the scenario where you would have held your top.

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

Josh Chan: Hi, good morning Jared.

Speaker Change #163: I guess, yes.

Speaker Change #164: On the guidance question, maybe I can ask it this way I guess.

Speaker Change #164: Paired to the scenario, where you would have helped your top line guidance. The top end of your topline guidance like what what did not happen I guess, what did you not see to allow you to kind of hold that I guess, maybe maybe that helps.

Operator: Line guidance, the top end of your.

Todd Schneider: Top line guidance, like what, what did not happen? I guess what did you not see to allow you to kind of hold that? I guess maybe that helps ask that.

Operator: Question a little bit.

Speaker Change #165: You asked that question Robin.

Todd Schneider: Well, Josh, as I described earlier, the pricing environment, obtaining price increases, is more challenging than it was. Now we're still able to obtain price increases, but it's more challenging. It's back to historical levels. So we're having to grow off of over and above that. So just tightening that up a little bit. But when you look at, as Mike spoke of, when you look at the back half of the year organic or implied organic of 6.6% to 7.9% and weather-adjusted growth of 7.3% to 8.6%, it's right where we want to be and we like that. We think we're well positioned to achieve those results. Certainly that's still very good growth. Then maybe my follow up on fire. Obviously it grew 10% this quarter.

Speaker Change #166: Well, Josh as I described earlier the pricing environment is obtaining price increases is more challenging than it was in.

It is.

Speaker Change #166: Now, we're still able to obtain price increases, but it's more challenging it's back to historical levels. So we're having to grow off of over and above that.

Speaker Change #166: So just tightening that up a little bit but.

Speaker Change #166: When you look at as Mike spoke of when you look at the back half of the year organic.

Speaker Change #166: <unk>.

Speaker Change #166: Implied organic of six 6% to 709.

<unk> and workday adjusted growth of 73 to 86.

Speaker Change #166: Right, where we want to be and we like that and we think we're <unk>.

Speaker Change #166: Well positioned to to achieve those results.

Todd Schneider: Certainly that's still very good growth. Then maybe my follow up on fire. Obviously it grew 10% this quarter that's really strong.

Speaker Change #167: That's still very good growth and then maybe my follow up on fire, obviously, a grew 10% this quarter.

Jared Mattingly: That's really strong.

Speaker Change #168: Strong, but I guess in prior quarters that had been above that so was there any abnormality in fire this quarter or do you think it's just normal fluctuation.

Todd Schneider: But I guess in prior quarters it had been above that. So was there any abnormality in Fire this quarter or do you think it's just normal fluctuation? Yeah, Josh, no abnormality to speak of. You know, they were coming off a pretty attractive growth rate last year, but we think we're really well positioned there to continue to grow that business at the levels, at double digit levels. And the team has organized around that and positioned it and that's what we certainly expect in the future. Great, thanks for your time, and good luck in the second half. Thank you.

But I guess in prior quarters it had been above that. So was there any abnormality in Fire this quarter or do you think it's just normal fluctuation?

Todd Schneider: Yeah, Josh, no abnormality to speak of. You know, they were coming off a pretty attractive growth rate last year, but we think we're really well positioned there to continue to grow that business at the levels, at double digit levels. And the team has organized around that and positioned it and that's what we certainly expect in the future.

Speaker Change #169: Yes, Josh no abnormality to speak of.

Speaker Change #169: They were coming off.

Speaker Change #169: A pretty attractive.

Speaker Change #169: Growth rate last year, so, but now we think we're really well positioned there to continue to grow that business.

Speaker Change #169: Those.

Speaker Change #169: Levels at double digit levels and the team is organized around that and positioned it and.

Speaker Change #169: That's what we we certainly expect in the future.

Josh Chan: Great, thanks for your time, and good luck in the second half. Thank you.

Speaker Change #170: Great. Thanks for your time and delivered in the second half.

Thank you.

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

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

Speaker Change #171: And our next question comes from George Tong from Goldman Sachs. Please go ahead George.

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

Jared Mattingly: Thanks. Good morning. You mentioned new business and retention rates were strong in the quarter. Can you talk more about what you're seeing with customer sentiment and customer purchasing behaviors and how they've evolved over the course of the quarter?

Hi, Thanks. Good morning, you mentioned, new business and retention rates were strong in the quarter can you talk more about what youre seeing with customer sentiment and customer purchasing behaviors and how they've evolved over the course of the quarter.

Todd Schneider: Good morning, George. You know, besides what I mentioned with customer behavior, not much has changed there. The sales cycle is not elongated. It's pretty similar to what it has been in the past. We're still selling. About 2/3 of all of our new accounts are no-programmers. And that's exciting to us because the pie is massive out there because, as we talked about, we serviced a little over a million business customers. There are 16 million businesses in North America. So that makes it really attractive. Now that being said, those businesses that we're selling, it's not always new money. They're wearing clothes, garments; they've got items to help keep their facilities clean and maintained. We can do it better, faster, smarter, cheaper, in certain ways, certain times. That allows for those customers to accomplish their objectives more in a better fashion. So no changes there.

Speaker Change #172: Good morning, George.

George Tong: Besides what I mentioned with customer behavior.

George Tong: Not much has changed there the sales cycle is.

George Tong: It's not elongated.

George Tong: It's pretty similar to what it has been in the past we're still selling.

George Tong: About two thirds of all of our new accounts are no programmers.

George Tong: And that's exciting to us because the pie is massive out there because as we.

George Tong: We talked about we serviced a little over 1 million customers business customers and there are 16 million businesses in.

George Tong: In North America so.

George Tong: That's it makes it really attractive now that being said those businesses that we're selling.

George Tong: It's not always new money.

George Tong: They are wearing clothes garments, there they've got items two to help keep their facilities clean and maintain we can do it better faster smarter cheaper in certain ways certain times.

George Tong: That allows for those customers to accomplish their objectives.

George Tong: More in a better fashion so.

George Tong: So no changes there.

Todd Schneider: We're still selling a significant amount of no-programmers, and the future looks bright there because there's just such a massive quantity out there of no-programmers.

We're still selling a significant amount of no-programmers, and the future looks bright there because there's just such a massive quantity out there of no-programmers.

George Tong: We're still selling.

A significant amount of no programmers and.

George Tong: And the future looks bright there because there's just such a massive quantity out there of no programmers.

Operator: George, do you have a follow up question?

Speaker Change #173: George if you have a follow up question.

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

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

George Tong: Yes, sorry, I was on mute.

George Tong: So on the margin side Youre seeing.

George Tong: Good.

Speaker Change #174: Benefits from sourcing and supply chain and routing can you talk a little bit more about where you are in your journey.

Speaker Change #174: In terms of unlocking additional additional efficiencies from what you've already achieved in other words are you would you say you're still in the early innings of what you hope to achieve with efficiencies, where you towards the middle or towards the later stages.

Speaker Change #174: What you hope to accomplish.

Todd Schneider: Thank you, George. You know, part of our culture here is a culture of positive discontent. We are constantly looking for ways to improve, and so you're going to continue to see improvements in those areas. There's a long list of initiatives that we are constantly focused on, and we're excited about because. And the team has done one heck of a job in that area. Whether I mentioned sourcing, engineering, Six Sigma, it's been impressive performance, and they still have a big to-do list.

Speaker Change #175: Thank you George.

Speaker Change #175: Part of our culture here is a.

Cultural positive discontent.

Speaker Change #175: We are constantly looking for ways to improve and so.

Speaker Change #175: So youre going to continue to see improvements in those areas.

Speaker Change #175: There's a long list of initiatives that we are constantly focused on.

Speaker Change #175: We're excited about because and the team has done one heck of a job in that area, whether I mentioned sourcing engineering.

Speaker Change #175: Six Sigma.

Speaker Change #175: It's been impressive performance.

Speaker Change #175: They still have a big to do list.

Jared Mattingly: Got it. That's helpful. Thank you.

George Tong: Got it. That's helpful. Thank you.

Speaker Change #176: Got it that's helpful. Thank you.

Todd Schneider: Thank you.

Speaker Change #176: Thank you.

Operator: Our next question comes from Shlomo Rosenbaum from Stifel.

Operator: Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead,Shlomo.

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

Jared Mattingly: Please go ahead.

Todd Schneider: Shlomo, hi.

Shlomo Rosenbaum: Hi, Thank you for taking my questions.

Jared Mattingly: Thank you for taking my questions. Just to talk a little bit about the guidance, a little more on the top end, but let's ask a little bit about the M and A. It looks like you did about $145 million in acquisitions in the quarter. Could you talk about how much those acquisitions are expected to add to revenue in this fiscal year? And you know, if they're, you know, where exactly would they be falling out mostly? Would it be mostly in the laundry and the uniforms, or was there something else that you made that was sizable? Excuse me, that didn't hit the news. And then I'll follow up. Shlomo, we did make some nice acquisitions in the, in the rental space. We've also made some in the fire and first aid safety space. But the rental space, we did have some nice acquisitions.

Shlomo Rosenbaum: Hi. Thank you for taking my questions. Just to talk a little bit about the guidance, a little more on the top end, but let's ask a little bit about the M and A. It looks like you did about $145 million in acquisitions in the quarter. Could you talk about how much those acquisitions are expected to add to revenue in this fiscal year? And you know, if they're, you know, where exactly would they be falling out mostly? Would it be mostly in the laundry and the uniforms, or was there something else that you made that was sizable? Excuse me, that didn't hit the news. And then I'll follow up.

Shlomo Rosenbaum: Just two.

Shlomo Rosenbaum: Talk a little bit about the guidance a little more on the top end, but wanted to ask a little bit about the M&A. It looks like you did about a $145 million in acquisitions in the quarter could you talk about how much those acquisitions are expected to add to revenue in this fiscal year.

Shlomo Rosenbaum: And.

Shlomo Rosenbaum: If there.

Shlomo Rosenbaum: Where exactly would they be falling out mostly it would be mostly in the laundry and the uniforms or was there something else that you need.

Shlomo Rosenbaum: That was sizable excuse me that didn't hit the news and then I'll have Paul.

Mike Hansen: Shlomo, we did make some nice acquisitions in the, in the rental space. We've also made some in the fire and first aid safety space. But the rental space, we did have some nice acquisitions. We don't typically get into exactly the amount of those. They are sort of local, market to maybe a little bit of regional, but really nice players in the market, and we're excited about it.

Sure.

Shlomo Rosenbaum: Shlomo we did make some some nice acquisitions in the in the rental space. We've also made some in the fire and first aid safety space, but.

Shlomo Rosenbaum: The rental space, we did have some nice acquisitions, we don't typically get into exactly the amount of those.

Jared Mattingly: We don't typically get into exactly the amount of those. They are sort of local, market to maybe a little bit of regional, but really nice players in the market, and we're excited about it. Okay. The reason I was asking is because there's a huge focus on kind of that tweaking of the guidance on the top, and it's, you know, the commentary about the pricing being a little bit tougher. You know, just to dimensionalize. It would be helpful to know how much we should be expecting in terms of incremental margin. So that's where that question is coming from. But the second question, the follow-up I have, could you give a little bit more color on the growth of the targeted verticals specifically in the quarter? Did some do better than others?

Shlomo Rosenbaum: They are.

Shlomo Rosenbaum: Sort of local market, maybe a little bit of regional but.

Shlomo Rosenbaum: Really nice players in the market and we're excited about.

Shlomo Rosenbaum: Okay. The reason I was asking is because there's a huge focus on kind of that tweaking of the guidance on the top, and it's, you know, the commentary about the pricing being a little bit tougher. You know, just to dimensionalize. It would be helpful to know how much we should be expecting in terms of incremental margin. So that's where that question is coming from. But the second question, the follow-up I have, could you give a little bit more color on the growth of the targeted verticals specifically in the quarter? Did some do better than others?

Shlomo Rosenbaum: Okay.

Speaker Change #178: I was asking is because there's a huge focus on on kind of the tweaking of the guidance on the top end.

Speaker Change #178: The commentary about the pricing being a little bit tougher just to dimensionalize. It would be helpful to know how much.

Speaker Change #178: We should be expecting in terms of incremental M&A, so thats, where their questions coming from.

Speaker Change #178: But the second the second question a follow up I have is could you give a little bit more color on the growth of the targeted verticals.

Speaker Change #178: Specifically in the quarter.

Speaker Change #178: Some do better than others.

Jared Mattingly: Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals, some of them accelerating versus decelerating. Just so we get a sense as to how the efforts are progressing there.

Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals, some of them accelerating versus decelerating. Just so we get a sense as to how the efforts are progressing there.

Maybe just give us a little bit more detail in terms of how much of the growth is being driven by those verticals in some part some of them accelerating versus decelerating just so we get a sense.

Speaker Change #178: Two how the efforts are progressing there.

Todd Schneider: Shlomo, our four focus verticals are performing well. They have been and continue to perform well. They perform at above our normal operating levels of growth, and we expect them to because they're focused verticals. I think it's important to understand it's not just a sales focus in those areas. We organize around those. We have teams of leaders and partners that are focused on understanding those businesses, understanding products and services that are important to them. So they're in that world and they're delivering great results and helping customers accomplish their objectives better. We expect that to continue. But that's been baked into our business for the past few years, and we suspect that that will continue to occur.

Speaker Change #178: Shlomo.

Speaker Change #178: Our four focus verticals are performing well.

Speaker Change #178: They have been in and continue to perform well they perform at or above.

Speaker Change #178: <unk>.

Speaker Change #178: Our normal operating levels of growth, so and we expect them to because their focus verticals and.

Speaker Change #178: And I think it's important to understand it's not just a sales focus in those areas.

As we organize around those we have a.

Speaker Change #178: Teams of.

Speaker Change #178: <unk>.

Speaker Change #178: Leaders and partners that are focused on understanding those businesses understanding products and services that are important to them and so they're in that world and and they are delivering.

Speaker Change #178: Great results and helping customers accomplish their objectives better and.

Speaker Change #178: And we expect that to continue but that's that's been baked into our business.

For the past few years and that we see.

Speaker Change #178: Expect that that will continue to occur.

Jared Mattingly: Thank you.

Shlomo Rosenbaum: Thank you.

Speaker Change #179: Thank you.

Todd Schneider: Thank you.

Speaker Change #179: Thank you.

Operator: Our next question comes from Ashish Sabadra from RBC. Please go ahead.

Operator: Our next question comes from Ashish Sabadra from RBC. Please go ahead. Ashish.

Speaker Change #180: And our next question comes from Ashish <unk> from RBC. Please go ahead Ashish.

Todd Schneider: Ashish, hi, good morning. This is David Page for Ashish. I was just curious if we could, if you could just give us some sense on how the uniform direct sales performed in the quarter. Was it in line with your expectations? And then not to go back to it, but how is that playing Uniform Direct, specifically playing into your organic revenue growth guide for 2025. Thank you. Good morning, David. So our uniform direct sale business, as we mentioned, was down in the quarter. It's a strategic business for us that sells into Fortune 1000 type customers, airlines, hotels, casinos, those types. So that business can be quite lumpy. And it was negative in the quarter. But keep in mind, we sell many things into that customer base. It's not just direct sale.

David Paige: Hi, good morning. This is David Page for Ashish. I was just curious if we could, if you could just give us some sense on how the uniform direct sales performed in the quarter. Was it in line with your expectations? And then not to go back to it, but how is that playing Uniform Direct, specifically playing into your organic revenue growth guide for 2025. Thank you.

Speaker Change #181: Hi, Good morning. This is David page on.

Speaker Change #181: For Ashish I was just curious if we could.

Speaker Change #181: Could you just give us some sense on how the uniform direct sales.

Speaker Change #181: Performed in the quarter was in line with your expectations and then.

Speaker Change #181: I have to go back to work how is that playing.

Speaker Change #181: Uniform direct specifically playing into your organic revenue growth guide for 2025. Thank.

Todd Schneider: Good morning, David. So our uniform direct sale business, as we mentioned, was down in the quarter. It's a strategic business for us that sells into Fortune 1000 type customers, airlines, hotels, casinos, those types. So that business can be quite lumpy. And it was negative in the quarter. But keep in mind, we sell many things into that customer base. It's not just direct sale.

Speaker Change #182: Thank you.

Speaker Change #183: Good morning, David So our uniform direct sale business as we mentioned was was down in the in the quarter.

Speaker Change #183: It's a strategic business for us.

Speaker Change #183: That sells into.

Speaker Change #183: Fortune 1000 type customers.

Speaker Change #183: Airlines hotels casinos those types so.

So that businesses can be quite lumpy.

Speaker Change #183: <unk>.

Speaker Change #183: And it was negative in the quarter.

Speaker Change #183: But but keep in mind, we sell many things into the customer base, it's not just direct sale.

Todd Schneider: So it's been a strategic area for us to sell, whether it's rental garments or facility services. Our fire and our first aid businesses all sell into those. So it's a real strategic market for us. And again, that business can be a little lumpy and certainly went backwards in Q2. But we like that market and we like the solutions that we're providing those customers. Okay, great. That's helpful. And then I know you mentioned that your focus verticals are continuing to perform really strong, but was there any specific vertical either within the focus or outside of the focus verticals that performed? I guess that stood out in the quarter or performed really well. Thank you, David. Nothing specific to call out regarding the four verticals.

So it's been a strategic area for us to sell, whether it's rental garments or facility services. Our fire and our first aid businesses all sell into those. So it's a real strategic market for us. And again, that business can be a little lumpy and certainly went backwards in Q2. But we like that market and we like the solutions that we're providing those customers.

Speaker Change #183: So it's been a strategic.

Speaker Change #183: Area for us to sell.

Speaker Change #183: Whether it's a rental garments or facility.

Services.

Speaker Change #183: The fire in our first aid businesses all sell into those so it's a real strategic market for us and again that business can be a little lumpy.

And certainly and then went backwards in Q2, but we like that market and we like gap.

Speaker Change #183: The solutions that we're providing those customers.

David Paige: Okay, great. That's helpful. And then I know you mentioned that your focus verticals are continuing to perform really strong, but was there any specific vertical either within the focus or outside of the focus verticals that performed? I guess that stood out in the quarter or performed really well. Thank you.

Speaker Change #184: Okay, Great. That's helpful. And then I know you mentioned that Youre focused verticals.

Speaker Change #184: Our continuing to perform really strong but was there any.

Speaker Change #184: Specific vertical either within the focused or outside of the focus verticals that perform.

Speaker Change #184: That out of the quarter performed really well.

Todd Schneider: David, nothing specific to call out regarding the four verticals. They're all performing well and we've been investing to make sure that we're positioning them for the future to get the right products, the right services for those customers. It's showing in their results, and we expect that that will continue.

Speaker Change #185: David nothing specific to call out regarding the four verticals are all performing well.

Todd Schneider: They're all performing well and we've been investing to make sure that we're positioning them for the future to get the right products, the right services for those customers. It's showing in their results, and we expect that that will continue.

Speaker Change #185: And we've.

We've been investing.

Speaker Change #185: To make sure that we're positioning them for the future to to get the right products the right services for those customers and.

Speaker Change #185: And it's showing in their results and we expect that that will continue.

Speaker Change #185: Okay.

Operator: Our next question comes from Andrew Whitman from R.W. Baird, please. Go ahead, Andrew.

Operator: Our next question comes from Andrew Whitmann from R.W. Baird, please. Go ahead, Andrew.

Speaker Change #186: And our next question comes from Andrew Wittmann from RW Baird. Please go ahead Andrew.

Jared Mattingly: Yeah, thanks. Excuse me. Good morning, guys. I just thought maybe, Mike, I'd give you an opportunity to talk a little bit more about the margin profile here today. Obviously, results were good, but could you just talk about any categories in particular? Obviously, you called out the energy. Always call it the energy. But maybe other key categories, merchandise cost, maybe route costs in general beyond just the energy there, other things in the plant or things in SGA. Just to help understand some of the puts and takes on that line, and then with gross margins now having been consistently above people's expectations now for several quarters in a row, I thought maybe opportunity to drill into that a little bit more would be helpful. Sure. Andy. As you know, within our. And I'll speak to rentals.

Andrew Wittmann: Yeah, thanks. Excuse me. Good morning, guys. I just thought maybe, Mike, I'd give you an opportunity to talk a little bit more about the margin profile here today. Obviously, results were good, but could you just talk about any categories in particular? Obviously, you called out the energy. Always call it the energy. But maybe other key categories, merchandise cost, maybe route costs in general beyond just the energy there, other things in the plant or things in SGA. Just to help understand some of the puts and takes on that line, and then with gross margins now having been consistently above people's expectations now for several quarters in a row, I thought maybe opportunity to drill into that a little bit more would be helpful.

Andrew Wittmann: Okay. Thanks.

Excuse me good morning, guys.

I just thought maybe I'd give you an opportunity to talk a little bit more about the margin profile here today.

Speaker Change #188: We see <unk>.

Speaker Change #188: Results were good but could you just talk about any categories. In particular, obviously you called out the energy always call. It the energy, but maybe other key categories merchandise costs, maybe route costs in general beyond just the energy there other things in the plant or things in SG&A just to help understand some of the puts and takes.

Speaker Change #188: On that line item with gross margins now haven't been consistently above.

Speaker Change #189: People's expectations are for several quarters or a thought maybe opportunity to drill into that a little bit more it would be helpful.

Andrew Wittmann: Sure. Andy as you know, within our. And I'll speak to rentals as you know, in our cost of rentals there are. You can think of three buckets, right? The material cost, the production cost, which is the cost associated with our operating our laundry facilities, and the service costs. So that's the routing. And the really good news, Andy, is we've got initiatives that are, that are working really well in each of those. And so over the last year, couple years, we've seen improvements in all of those areas. So material cost. Todd talks about our global supply chain. It has operated so well for us and continues to do so and is constantly looking for better ways to source. In addition to that, you've heard us speak to a garment sharing. So this goes to the stock rooms.

Speaker Change #189: Sure.

Speaker Change #190: Andy as you know within our I'll speak to rentals.

Speaker Change #190: As you know in our cost of rentals. There are you can think of three buckets right. The material cost the production cost, which is the costs associated with operating our laundry facilities and the service costs. So thats the routing and the really good news Andy is we've got initiatives that are that are.

Todd Schneider: As you.

Jared Mattingly: Now, in our cost of rentals there are. You can think of three buckets, right? The material cost, the production cost, which is the cost associated with our operating our laundry facilities, and the service costs. So that's the routing. And the really good news, Andy, is we've got initiatives that are, that are working really well in each of those. And so over the last year, couple years, we've seen improvements in all of those areas. So material cost. Todd talks about our global supply chain. It has operated so well for us and continues to do so and is constantly looking for better ways to source. In addition to that, you've heard us speak to a garment sharing. So this goes to the stock rooms.

Speaker Change #190: Working really well in each of those and so over the last.

Speaker Change #191: Year couple of years, we've seen improvements in all of those areas. So material cost Todd talked about our global supply chain.

It has operated so well for us and continues to do so.

Speaker Change #191: And is constantly looking for better ways to source in.

Speaker Change #191: In addition to that you've heard us speak to a garment sharing so this goes to the stock rooms, and when we shared garments.

Jared Mattingly: When we share garments, that means we get better utilization out of those garments and we order fewer garments, new garments from our distribution center. So in other words, that is allowing us to put fewer garments into service, meaning our amortization tends to come down. That's been a really good area for us over the course of the last year, two years, if we move to production. We talked a lot about operational excellence and things like making sure we are perfectly loading the washers and dryers has been really important for us. We are automating our sortation. As you know, once those garments come out of the dryer, we have to sort them to get them back to the customer. We've got initiatives going on that are automating that sorting and that allows for efficiencies in the production department.

When we share garments, that means we get better utilization out of those garments and we order fewer garments, new garments from our distribution center. So in other words, that is allowing us to put fewer garments into service, meaning our amortization tends to come down. That's been a really good area for us over the course of the last year, two years, if we move to production. We talked a lot about operational excellence and things like making sure we are perfectly loading the washers and dryers has been really important for us. We are automating our sortation. As you know, once those garments come out of the dryer, we have to sort them to get them back to the customer. We've got initiatives going on that are automating that sorting and that allows for efficiencies in the production department.

Speaker Change #191: That means we get better utilization out of those garments and we.

Speaker Change #191: We order fewer garments, new garments from our distribution centers. So in other words.

Speaker Change #191: That is allowing us to put fewer garments into service, meaning our amortization can.

Speaker Change #191: It tends to come down that's been a really good area for us over the course of the last year or two years, if we move to production.

Speaker Change #191: We talked a lot about operational excellence and things like making sure we are.

Speaker Change #191: Perfectly loading the washers and dryers has been really important for us.

Speaker Change #191: We are automating our sortation as you as you know once those garments come out of the dryer, we have to sort them to get them back to the customer and we've got initiatives going on that are automating that sorting and that allows for efficiencies in the production.

Speaker Change #191: <unk>. So some of the wash alley has become more efficient the sorting has become more efficient and that helps overall production costs and then and then you continue to hear us speak to smart Chuck It's just a new way of life for us, but it continues to allow us to leverage the service call.

Speaker Change #191: <unk>.

Speaker Change #191: That bucket.

Speaker Change #191: And so when we are able to.

Speaker Change #191: Be better at routing.

That means fewer trucks need to be purchased fewer routes being opened.

And we are just more efficient Todd always talks about we don't make money when the truck is moving and effectively the truck is.

Todd Schneider: Not moving.

Not moving as much as it has been in the past so.

Jared Mattingly: As much as it has been in the past. So really nice performance there. The other thing that SmartTruck allows us to do is save on energy because we can do things like monitor idling and our idling is down and that means we are more efficient with our energy spend. So Andy, those are a few of the components of those different buckets that are operating really well. And as you hopefully can pick up, those aren't sort of one-timers that go away. Those are all sort of new ways or more efficient ways of doing business. Got it. Thank you for that context. Maybe just from a follow-up, I'd say over the last 18 months it kind of feels like there's been more national account business that's kind of hit the market and it's traded hands. Obviously there's always some of that, it's not new.

As much as it has been in the past. So really nice performance there. The other thing that SmartTruck allows us to do is save on energy because we can do things like monitor idling and our idling is down and that means we are more efficient with our energy spend. So Andy, those are a few of the components of those different buckets that are operating really well. And as you hopefully can pick up, those aren't sort of one-timers that go away. Those are all sort of new ways or more efficient ways of doing business.

Speaker Change #191: Really nice performance there the other thing that smart truck allows us to do is save on energy because we can do things like <unk>.

Speaker Change #191: <unk> idling and are idling is down and that means we are more efficient with our energy spend.

Speaker Change #191: So.

Speaker Change #191: And do those are those are a few of the components of those different buckets that are operating really well and as you as you hopefully can pick up those arent those arent sort of one timers that go away those are all sort of new ways or more efficient ways of doing business.

Andrew Wittmann: Got it. Thank you for that context. Maybe just from a follow-up, I'd say over the last 18 months it kind of feels like there's been more national account business that's kind of hit the market and it's traded hands. Obviously there's always some of that, it's not new.

Speaker Change #192: Got it thank you for that context.

Maybe just for my follow up I'd say over the last 18 months it kind of feels like there's been more national account business that kind of hit the market and it has traded hands.

Speaker Change #192: Obviously, there is always some of that but.

Jared Mattingly: But because there was a bit more of a flurry around that, I just thought I would kind of talk to you about getting your thoughts and about national account business today. How much is trading compared to historical levels and what you're seeing in the pricing dynamics specifically related to that segment of the marketplace?

But because there was a bit more of a flurry around that, I just thought I would kind of talk to you about getting your thoughts and about national account business today. How much is trading compared to historical levels and what you're seeing in the pricing dynamics specifically related to that segment of the marketplace?

Speaker Change #192: Not new but.

Because because there was a bit more of a flurry around that I would just thought I would kind of.

Speaker Change #192: Talk to you about getting your thoughts on about our national account business today.

Speaker Change #192: How much is <unk>.

Speaker Change #192: Trading compared to historical levels.

Speaker Change #192: What youre seeing in the pricing dynamics, specifically related to that segment of the marketplace.

Todd Schneider: Andy, nothing specific there. It's always been a highly competitive market. Our business in general is highly competitive, and our team has done a great job with pursuing those, retaining those, and certainly those wins are nice. We're trying to build our business around selling, growing the pie of customers. We think that's really attractive, and there's a massive opportunity there.

Speaker Change #193: Andy nothing specific there.

Speaker Change #194: It's always been a highly competitive market.

Speaker Change #194: Our business in general is highly competitive.

Speaker Change #194: And our team has done a great job with.

Speaker Change #194: Pursuing those retaining those.

Speaker Change #194: And certainly those wins or are nice, but we.

Jared Mattingly: But.

Todd Schneider: We're trying to build our business around selling, growing the pie of customers. We think that's really attractive, and there's a massive opportunity there. So that's where we're focusing our businesses, selling those no-programmers, providing great value for them. And so often when we get in there and we talk to the customers, they don't even realize that what we provide, and the fact that our average customer is relatively small. Many of our customers think that they're not big enough to have a service like what we provide. And so it's our role is to get out there and talk to them about it and make them aware, and that's helping to grow our business, and we like where that's heading.

Speaker Change #194: We're trying to build our business around.

Speaker Change #194: Selling.

Speaker Change #194: Growing the pie of customers, we think that's really attractive and theirs.

Speaker Change #194: A massive opportunity there.

So that's where we're focusing our businesses, selling those no-programmers, providing great value for them. And so often when we get in there and we talk to the customers, they don't even realize that what we provide, and the fact that our average customer is relatively small. Many of our customers think that they're not big enough to have a service like what we provide. And so it's our role is to get out there and talk to them about it and make them aware, and that's helping to grow our business, and we like where that's heading.

Speaker Change #194: That's where we're focusing our businesses.

Speaker Change #194: Selling those no programmers.

Speaker Change #194: Providing great value for them and so often when we get in there.

Speaker Change #194: And we talked to the customers they don't even realize that what we provide and.

Speaker Change #194: And the fact that.

Speaker Change #194: Our customer is relatively small many of our customers don't think that they're not big enough to have a service like what we provide.

Speaker Change #194: And so it's our role is to get out there and talk to them about it and and make them aware and that's helping to drive our business and we like where that's heading.

Jared Mattingly: Great, thanks a lot. Have a happy holidays, guys.

Andrew Wittmann: Great, thanks a lot. Have a happy holidays, guys.

Speaker Change #195: Great. Thanks, a lot have been asked to holidays guys.

Todd Schneider: Thank you Andy.

Jared Mattingly: Thank you, Andy.

Mike Hansen: Thank you, Andy.

Andrew Wittmann: Thank you Andrew.

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

Speaker Change #196: And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead Tony.

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

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

Toni Kaplan: Thanks, So much I was hoping to go back to the direct sales business and unless focused on the quarter, because I think the accomplice fairly tough but.

Toni Kaplan: Just when you think about how fast that line of business should grow over time, how should we be thinking about that and.

Speaker Change #197: Could you also give us an update on what percent of your customers are buying products or services across more than one segment.

Todd Schneider: So, Toni, as far as the direct sale business, we tend to grow our other businesses faster than that business. Now when you think of that group of customers, they're growing at, I'll call it, normalized levels. But the direct sale business specifically is not growing. We wouldn't expect it to grow at the levels of our business in total. So as we look at it, we see many of those customers are very interested in those products, which gets us in the door. And then we can sell many other products and services to them. As far as any particular percentages we see, I know that we've given out some specific percentages of how many customers use what products and services, but we have. We are still in the very early innings of cross selling across our business.

So Tony as far as the direct sale business.

Speaker Change #197: We tend to grow our other businesses faster than that business.

Speaker Change #197: Now when you think of that group of customers.

They're growing at.

Speaker Change #198: Ed I'll call it normalized levels, but the direct sale business specifically.

Speaker Change #198: Isn't it.

Speaker Change #198: It's not growing it wouldn't.

Expect it to grow at the levels of our business in total.

Speaker Change #198: So as we look at it.

Speaker Change #198: Were we.

Speaker Change #198: We see many of those customers are very interested in those products, which gets us in the door and then we can sell many other products and services to them as far as any.

Speaker Change #198: <unk> percentages.

Speaker Change #198: We see I don't know.

Speaker Change #198: We've given now them specific percentages is.

Speaker Change #198: <unk>.

Speaker Change #198: How many customers use what products and services, but we have we are still in the very early innings of cross selling.

Speaker Change #198: Across our business. So we're we're focused on doing that but we're also focused on adding new customers.

Todd Schneider: So we're focused on doing that, but we're also focused on adding new customers, whether they be up and down the street customers or more regional in nature. We think there's an amazing opportunity to sell more into our current customer base and even more amazing opportunity to bring additional customers on because we service a little over a million businesses and there's 16 million businesses in North America. So great opportunity.

So we're focused on doing that, but we're also focused on adding new customers, whether they be up and down the street customers or more regional in nature. We think there's an amazing opportunity to sell more into our current customer base and even more amazing opportunity to bring additional customers on because we service a little over a million businesses and there's 16 million businesses in North America. So great opportunity.

Speaker Change #198: Whether they be up and down the street customers or more regional in nature. We think there is an amazing opportunity to sell more into our current customer base and even more amazing opportunity to bring additional customers on because we service a little over 1 million businesses and there is $60 million business as North America. So.

Speaker Change #198: Great opportunity.

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

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

Speaker Change #201: Okay, Great and then.

Speaker Change #202: On first aid margins, they've really ramped up over the past few years, you mentioned, the favorable mix and sourcing benefits in this quarter.

Speaker Change #203: I guess should we expect those.

Speaker Change #203: To be sustainable.

Speaker Change #203: How big were those benefits and maybe just in general like the margins were very good and so like how are you thinking about the right level of investment.

Speaker Change #203: How much.

Speaker Change #203: Should you be investing more.

Speaker Change #203: For example, thanks.

Todd Schneider: Great, Toni, thank you. We love the first aid business. It's growing really attractively. As you mentioned, the margins are very good, and it's not linear. So there's puts and takes in every quarter. But we suspect that these margins will be sustainable. And nothing specific to call out besides the fact that we're continuing to get very good efficiencies from our dedicated distribution center in first aid. The mix of business is very attractive in what we're selling. It's repeat revenue, and we are investing heavily. And I think you're seeing that in the growth rates that we've experienced and expect to continue experiencing in that business. So really good business, and we're investing to grow it at very attractive levels.

Great Tony Thank you, we love the first aid business.

Speaker Change #204: It's growing really attractively as you mentioned the margins are very good.

Speaker Change #204: It is.

Not linear so theres puts and takes in every quarter, but we suspect that these.

Speaker Change #204: These margins will be sustainable and.

Speaker Change #204: Nothing specific to call out.

Speaker Change #204: Besides the fact that we're continuing to get better.

Speaker Change #206: Very good.

Speaker Change #206: Efficiencies from our our dedicated distribution center and first aid the mix of business is very attractive and what we're selling it's repeat.

Speaker Change #206: Revenue.

Speaker Change #206: <unk>.

Speaker Change #206: And we are investing heavily in and I think youre seeing that in the in the growth rates that we've experienced and expect to continue experiencing in that business. So really good business and we're investing two to grow at a very attractive levels.

[Analyst]: Thanks. And happy holidays as well.

Toni Kaplan: Thanks. And happy holidays as well.

Speaker Change #207: Thanks, and happy holidays as well thank you.

Todd Schneider: Thank you.

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

Speaker Change #208: And our next question comes from.

Speaker Change #209: All week from Deutsche Bank. Please go ahead faiza.

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

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

Speaker Change #210: Hi, Thank you and good morning, So I wanted to ask a little bit more about the pricing comments that you made.

Speaker Change #210: Im curious if youre seeing.

Speaker Change #210: Seeing more difficulty in taking pricing across the board or is it more.

Speaker Change #210: Today.

Speaker Change #210: Dogs categories vertical maybe to Andy's question earlier around some of the national accounts.

Speaker Change #210: Just more color on this.

Speaker Change #211: And perhaps if you can help us dimensionalize the deceleration in pricing that you've seen and what you expect from here.

Todd Schneider: Yeah, Faiza, we've, as I mentioned, it's always been a very competitive environment that we operated in my entire career. It has been. As far as, you know, price adjustments, well, it's more of a general position that price increases are more challenging than they were several in the first quarter. But nothing, you know, no real changes besides the fact that inflation's come down significantly. And with that, it's very reasonable to think that price increases will come down as well. So we are facing that. But nevertheless, the team is doing one heck of a job in growing the business in spite of that and finding efficiencies to grow margins in spite of that as well. So very bullish on the future and proud of what the team is accomplishing.

Faiza <unk>.

Speaker Change #212: As I've mentioned, it's always been a very competitive environment that we've operated in my entire career it has been.

Speaker Change #212: And.

As far as.

Speaker Change #212: Price adjustments.

Speaker Change #212: It's pretty well.

Speaker Change #212: It's more of a general.

Speaker Change #212: Positioning net price increases are more challenging than they were.

Speaker Change #212: Separately, though in the first quarter.

Speaker Change #212: And but nothing.

Speaker Change #212: No no real changes besides the fact that inflation has come down significantly.

Speaker Change #212: And with that.

Speaker Change #212: Very.

Speaker Change #212: Reasonable to.

To think that pricing price increases will come down as well. So we are facing that.

Speaker Change #212: But nevertheless, the team is doing one heck of a job.

Speaker Change #212: And growing the business in spite of that and finding efficiencies to grow margins in spite of that as well so very bullish on the future and proud of what the team is accomplishing.

Speaker Change #213: Great. Thank you and then I wanted to ask about M&A, we've seen from increasing activity.

Speaker Change #213: M&A.

Speaker Change #213: I'm curious what you're seeing in terms of valuation expectations and just the opportunities out there what's the what's the environment like.

Yes.

Speaker Change #213: <unk>.

Todd Schneider: Faiza, it's trying to predict M and A is challenging because it really depends upon if it's a local business. It takes in many cases some type of event to occur where a family member decides to move on from the business that would trigger something like that. So it's tough to predict it. I can say this. We're very active, and we're most active in the best businesses because, you know, we want to buy really good businesses that can have great customer bases that are happy, have great employee partners that can come into our organization, and then the ability to extract out inefficiencies, whether it gave us some additional capacity that we can leverage or routing capacities. All those items are opportunities for us. So trying to predict it's tough, but we do. We're very active. We think it's a very strategic investment for us long term.

Todd Schneider: Faiza, it's trying to predict M&A is challenging because it really depends upon if it's a local business. It takes in many cases some type of event to occur where a family member decides to move on from the business that would trigger something like that. So it's tough to predict it. I can say this. We're very active, and we're most active in the best businesses because, you know, we want to buy really good businesses that can have great customer bases that are happy, have great employee partners that can come into our organization, and then the ability to extract out inefficiencies, whether it gave us some additional capacity that we can leverage or routing capacities. All those items are opportunities for us. So trying to predict it's tough, but we do. We're very active. We think it's a very strategic investment for us long term.

Faiza, it's trying to predict M&A is challenging.

Speaker Change #213: It really depends upon.

Speaker Change #213: If it's a local business it takes.

Speaker Change #213: Many cases, some type of an event to occur.

Speaker Change #213: A family member decides to.

To move on from the business that would trigger a trigger something like that so it's tough to predict it I can say that we're very active.

And.

Speaker Change #213: And we are.

Speaker Change #213: Most active in the best businesses because.

Speaker Change #213: We we want to buy really good businesses that can have great customer bases that are happy have great.

Speaker Change #213: Employee partners that can come into our organization and.

Speaker Change #213: And then the ability to extract out inefficiencies, whether it's it gave us some additional capacity that we can leverage or routing capacities.

Speaker Change #213: All of those items are opportunities for us so trying to predict it's tough, but we do we're very active and we think it is.

Speaker Change #213: A very strategic.

Speaker Change #213: Investment for Us long term.

[Analyst]: Great. Thank you so much.

Faiza Alwy: Great. Thank you so much.

Speaker Change #213: Great. Thank you so much.

Speaker Change #213: Okay.

Operator: Our next question comes from Stephanie Moore from Jefferies. Please go ahead, Stephanie. Hello, this is Harold on for Stephanie Moore. So I just want to piggyback on.

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

Speaker Change #214: And our next question comes from Stephanie <unk> from Jefferies. Please go ahead Stephanie.

Harold Antor: Hello, this is Harold on for Stephanie Moore. So I just want to piggyback on one of the questions about the company's verticals. I know in past calls you've talked about some of the innovations you've done in the healthcare sector in terms of providing curtains and stuff. So, just wanted to ask what other innovations have you done in some of your other verticals like hospitality, state, local.

Speaker Change #215: Hello, This is Harold <unk> on for Stephanie.

Speaker Change #215: So I just wanted to see rock on one of the questions about the continuation of verticals.

Jared Mattingly: One of the questions about the company's verticals.

Operator: I know in past calls you've talked about some of the innovations you've done.

Speaker Change #215: No.

Speaker Change #215: In past calls you've talked to assume the innovation.

Jared Mattingly: In the healthcare sector in terms of.

Speaker Change #215: You've done in the fall.

Speaker Change #216: I was curious in terms of providing <unk>.

Operator: Providing curtains and stuff.

Jared Mattingly: So, just wanted to ask what other?

So just wanted to ask.

Operator: Innovations have you done in some of?

Speaker Change #216: Other innovations.

Jared Mattingly: Your other verticals like hospitality, state, local.

Speaker Change #216: As some of your other verticals like hospitality state and local governments.

Operator: Government, and then I guess the follow-up on that would be, you know, help us understand, you know, the incremental margins, how they've trended on these new innovative products, and I guess the increase in revenues that you have seen in.

Government, and then I guess the follow-up on that would be, you know, help us understand, you know, the incremental margins, how they've trended on these new innovative products, and I guess the increase in revenues that you have seen in those businesses from these innovations.

Speaker Change #217: And then I guess to follow up on that would be.

Speaker Change #217: Let's focus on just on the <unk>.

Incremental margins.

<unk> trend and then these new innovative products.

Speaker Change #217: <unk> and <unk>.

Speaker Change #217: Revenue.

Speaker Change #217: You have seen in those businesses from decent relations. Thank you.

Jared Mattingly: Those businesses from these innovations.

Todd Schneider: Thank you, Harold. Thanks for the question. I'll answer the first half. You know, as I mentioned, we do organize around those verticals. The healthcare is the one that I think I'll speak to that, you know, whether it is, you know, microfiber mops that we, our customers are using to keep patient rooms and common areas clean to help prevent healthcare-acquired infections. So that's very important to them. Certainly we have provided technology around dispensing of garments that has really helped our customers not just in the healthcare vertical, but all verticals where they can control the dispensing of inventory, which allows them to ensure that people have the garments when they need them, but also control any loss that occurs.

Carol: Carol Thanks for the question I'll answer the first half.

Speaker Change #217: <unk>.

Speaker Change #217: As I mentioned, we do organized around.

Speaker Change #217: Those verticals.

Speaker Change #217: The healthcare.

Speaker Change #217: One that.

Speaker Change #217: That I think I'll speak to that.

Speaker Change #217: Either it is.

Microfiber mops that we.

Speaker Change #217: Our customers are using to keep patient rooms, and common areas clean to help prevent healthcare acquired infections.

So that's very important to them certainly we have.

Speaker Change #217: Provided.

Speaker Change #217: Technology around.

Speaker Change #217: Dispensing of garments that has really helped our customers.

Speaker Change #217: Not just in the health care vertical, but all verticals.

Speaker Change #217: Where they can.

Speaker Change #217: Control the the dispensing of the inventory, which allows them to ensure that people have the garments when they need them.

Speaker Change #217: But also control.

Speaker Change #217: Any any loss that occurs so that's been important to our customers in general.

Todd Schneider: So that's been important to our customers in general, healthcare specific, just because when you think of healthcare, they tend to wear scrubs, which normally was a kind of commodity item because they would put them on a shelf and then they would disappear through some type of wherever they would end up. So that's been really valuable to our customers. And then lastly, you cited the privacy curtains. We learned of this issue with our customers spending time with the customers and asking them where they need help. And this item continued to come up where they said it's a significant compliance problem for them. It certainly affects healthcare-acquired infections. And those are two really strong buying motives for our customers. So we came up with technology that allows for us to help them with that.

So that's been important to our customers in general, healthcare specific, just because when you think of healthcare, they tend to wear scrubs, which normally was a kind of commodity item because they would put them on a shelf and then they would disappear through some type of wherever they would end up. So that's been really valuable to our customers. And then lastly, you cited the privacy curtains. We learned of this issue with our customers spending time with the customers and asking them where they need help. And this item continued to come up where they said it's a significant compliance problem for them. It certainly affects healthcare-acquired infections. And those are two really strong buying motives for our customers. So we came up with technology that allows for us to help them with that.

Speaker Change #217: Health care specific just because of when you think of health care, they tend to wear scrubs, which.

Speaker Change #217: Normally was.

Speaker Change #217: Kind of a commodity item because.

Speaker Change #217: They were they would put them on a shelf and then they would disappear.

Speaker Change #217: Through some type of wherever they would end up so.

Speaker Change #217: So that's been really valuable our customers and then lastly, you cited the privacy curtains.

Speaker Change #217: We learned of this issue with our customers are spending time with the customers and asking them, where they need help and this item continue to come up where they said it's a <unk>.

Speaker Change #217: Significant compliance problem Forum, it certainly affects healthcare acquired infections.

Speaker Change #217: And those are those are two really strong buying motives for our customers. So we came up with.

Speaker Change #217: Technology that allows for us to help them with that came up with a patented product that allows us to help them with that and in and the customers are embracing it.

Speaker Change #217: They very much like it they struggled to find labor to handle it and we're able to help them with that that solution. So so I think thats attractive and we'll continue to.

Speaker Change #217: To invest in the future for those customers.

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

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

Speaker Change #219: And our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead Scott.

[Analyst]: Scott.

Jared Mattingly: Thanks very much.

Scott Schneeberger: Thanks very much. Good morning. I want to follow up a few M&A questions here. Guys, I understand there's limited color you'll share there. This was, I think, the biggest quarter of M&A since all the way back to G in fiscal 2016.And you said it was across a few of the business lines.

Scott Schneeberger: Thanks, very much good morning, I wanted to follow up.

Todd Schneider: Good morning. I want to follow up a few M and A questions here. Guys, I understand there's limited color you'll share there, but this was, I think, the biggest quarter of M and A since.

Speaker Change #219: M&A questions in here and.

Speaker Change #219: I understand there's limited color Youll youll share there, but this was I think the biggest quarter of M&A since all the way back to gene K in fiscal 16.

Operator: All the way back to G in fiscal 2016.

Jared Mattingly: And you said it was across a few of the business lines.

Speaker Change #219: You said it was across a.

Speaker Change #219: A few of.

Speaker Change #219: The business lines, you serve but was it was there any one particularly large acquisition.

Todd Schneider: You served, but was it? Was there any one particularly large acquisition in one area? And I'm just curious, kind of as a follow up on this topic, what are you looking for in MA right now? What type of.

You served, but was it? Was there any one particularly large acquisition in one area? And I'm just curious, kind of as a follow up on this topic, what are you looking for in MA right now? What type of I think five's the multiple.

Speaker Change #219: In one area and.

Speaker Change #219: And I'm, just curious kind of is it.

Speaker Change #219: And as a follow up on this topic what are you looking for in M&A right now what type of I think five asset multiples, but.

Jared Mattingly: I think five's the multiple.

Todd Schneider: But just if you could talk about prevailing multiple that would be great of what you're seeing out there. And what are you looking for? Are you looking to add technology? Are you building out vended laundry, on-premises laundry? Just curious, are there some new areas you might be moving into?

But just if you could talk about prevailing multiple that would be great of what you're seeing out there. And what are you looking for? Are you looking to add technology? Are you building out vended laundry, on-premises laundry? Just curious, are there some new areas you might be moving into? Thanks.

Speaker Change #219: Or are there some new areas you might be moving into.

Jared Mattingly: Thanks.

Todd Schneider: Scott, thanks for the question. We're active across all of our route-based businesses and acquiring businesses. What are we interested in? We're interested in quality businesses, buying really good businesses with great customer base and great employee partners. Those are usually the businesses that have invested in making sure that they are positioned to take great care of customers and their employees. So those are the ones we're interested in. We don't get into multiples, but as far as the focus, it's quality businesses that are in the businesses that we're in, which is what we bought. So nothing out of the ordinary there. And it's across each of the route-based businesses. We think we're in a really good spot to do that. And then once we do it, we certainly are interested in extracting out synergies.

Scott Thanks for the question.

Scott Schneeberger: We're active across all of our route based businesses in and acquiring businesses.

Scott Schneeberger: What are we interested in where interest in quality businesses.

Buying really good businesses with great customer base and great employee partners.

Those are usually the businesses that have invested in.

Scott Schneeberger: And making sure that they are positioned to take great care of customers and their employees. So those are the ones we're interested in.

Scott Schneeberger: We won't get into multiples, but.

Scott Schneeberger: As far as.

Scott Schneeberger: The focus it's quality businesses that are in other businesses that we're in is what we bought and so nothing.

Out of the ordinary there.

Scott Schneeberger: And it's across each of the route based businesses.

We think we're in a really good spot to do that and.

Scott Schneeberger: And then once we do it.

Scott Schneeberger: We.

Scott Schneeberger: And certainly your interest in extracting out synergies.

Todd Schneider: We get in certain cases really good capacity and then what we always get is a customer base that we can sell more into and provide more value to those customers. So our focus is on buying great businesses with great people and great customers. And when we do that, really good things happen.

We get in certain cases really good capacity and then what we always get is a customer base that we can sell more into and provide more value to those customers. So our focus is on buying great businesses with great people and great customers. And when we do that, really good things happen.

Scott Schneeberger: We get in certain cases really good capacity.

Scott Schneeberger: And then.

Scott Schneeberger: And what we always get is are.

Scott Schneeberger: Our customer base that we can sell more into.

Scott Schneeberger: And I can provide more value to those customers. So our focus is on buying great businesses with great people and great customers.

Scott Schneeberger: And when we do that really good things happening.

Operator: Great, thanks.

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

Speaker Change #220: Great. Thanks, and just as a follow up I don't think we have discussed in my Cintas portal on.

Todd Schneider: And just as a follow-up, I.

Jared Mattingly: Don't think we've discussed my Cintas portal.

Todd Schneider: On an earnings call in a while. Just a progress report on that. And just curious, is that contributing at all? It could be. It's been around for a few years now. Is that contributing at all yet to the impressive margins that we're seeing?

Speaker Change #220: On an earnings call in a while.

Speaker Change #220: Just a progress report on that end.

Speaker Change #221: Just curious is that is that contributing at all it could be it's been it's been around for a few years now is that contributing at all yet to the impressive margins that we're seeing thanks.

Jared Mattingly: Thanks.

Todd Schneider: Yeah, thank you, Scott. MyCintas has been important to our business, important to our customers. It allows us to provide our customers an opportunity to manage their account, manage it on the time that they want to do it. We've always had the ability to. We're going to see our customers for the most part every single week. Certainly they can call us if they need anything. But that interaction in person on a weekly basis is really, really valuable. But it doesn't mean that the customer wants to do business or all their business right then, they may not even be available at that point. So having an electronic portal that allows for them to manage their business, pay their bill. It's just another conduit that makes us easier to do business with for the customer. And that's important to us. So it allows for that.

Speaker Change #222: Yes. Thank you Scott My Cintas is.

Speaker Change #222: As Ben.

Speaker Change #222: Important to our business important to our customers it.

Speaker Change #222: It allows us to.

Speaker Change #222: To provide our customers.

An opportunity to manage their account management on the time that they want to do it.

Speaker Change #222: We've always had the ability to we're going to see our customers for the most part every single week.

Speaker Change #222: Certainly they can call us if they need anything but that.

Speaker Change #222: That interaction in person on a weekly basis is really really valuable.

Speaker Change #222: But it doesn't mean that the customer wants to do business.

All their business right then they may not even be available at that point, so having a electronic portal that allows for them to manage their business pay their bill.

Speaker Change #222: It's just another conduit that makes.

Speaker Change #222: US easier to do business with for the customer.

Speaker Change #222: And that's important to us so it allows for that it allows for us to.

Todd Schneider: It allows for us to, if the customer pays their bill, there is no cash application. So it gets us, meaning that it goes right to the account, so we don't have to apply it. So there's efficiencies there. If they're managing their account and they're not calling in, there's efficiencies there. Right. But it just allows the customer another conduit. And many of them really, really like that conduit, which allows for them to be happier and us to get efficiencies and a better relationship with the customer.

It allows for us to, if the customer pays their bill, there is no cash application. So it gets us, meaning that it goes right to the account, so we don't have to apply it. So there's efficiencies there. If they're managing their account and they're not calling in, there's efficiencies there. Right. But it just allows the customer another conduit. And many of them really, really like that conduit, which allows for them to be happier and us to get efficiencies and a better relationship with the customer.

Speaker Change #222: The customer pays there bill.

Speaker Change #222: There is no.

Speaker Change #222: Cash application so it gets us meaning that it goes right to right to the account. So we don't have to apply it. So there's there's efficiencies there.

Speaker Change #222: <unk>.

Speaker Change #222: If theyre managing their account and they're not calling in there is efficiencies there right. So.

It just allows the customer another conduit and many of them really really liked that conduit and which allows for them to be happier than us to get efficiencies and <unk> and <unk>.

Speaker Change #222: Better relationship with the customer.

Operator: Great.

Scott Schneeberger: Great. Thanks, guys. Happy holidays. Thank you. You as well.

Todd Schneider: Thanks, guys. Happy holidays. Thank you. You as well.

Speaker Change #223: Great. Thanks, guys happy holidays.

Speaker Change #223: Thank you you as well.

Operator: Our next question comes from Jason Haas from Wells Fargo. Please go ahead.

Operator: Our next question comes from Jason Haas from Wells Fargo. Please go ahead, Jason.

Speaker Change #224: And our next question comes from Jason Haas from Wells Fargo. Please go ahead Jason.

Todd Schneider: Jason, hey, good morning, and thanks for taking my questions. I'm curious if you could help quantify where we are in terms of the.

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

Jason Haas: Hey, good morning, and thanks for taking my questions.

I'm curious if you could help quantify where we are in terms of the price increases relative to history are we still like close to 3% and we're sort of on a path back to 2% or how would you describe that.

Jared Mattingly: Price increases relative to history. Are we still like close to 3%?

Todd Schneider: And we're sort of on a path back to 2% or how would you describe it? And then are there certain verticals or industries where you find it a little bit easier to maintain those, those prices? Jason, thanks for the question. Yeah, as I mentioned, historically, we're in the 0% to 2% price increase range. We've been above that with inflation being well above that, certainly well below those peak levels of inflation. And as a result, our price increases are now back into that historical range. And, you know, it's tough to predict what inflation looks like moving forward. We watch what the Fed is trying to figure out, and we're watching that very closely, and we will manage it appropriately moving forward. Got it. That's very helpful. And I guess I'll talk to you.

Jason Haas: And then are there certain verticals or industries, where you find it a little bit easier to maintain this those prices.

Speaker Change #225: Jason Thanks for the question, yes, as I mentioned.

Jason Haas: <unk>.

Jason Haas: Historically were.

Jason Haas: In the zero to 2% price.

Jason Haas: Increase range.

Jason Haas: We've been above that.

Jason Haas: With inflation being.

Jason Haas: Well above that certainly well below those peak levels of inflation and and.

Jason Haas: And as a result, our.

Jason Haas: Our price increases are now back into that historical range.

Jason Haas: And.

Jason Haas: It's tough to predict what inflation looks like.

Jason Haas: Moving forward, we watch what the fed is trying to figure out and we're watching that very closely and we will manage it appropriately moving forward.

Jason Haas: Got it. That's very helpful. And I guess I'll talk to you. Are there any verticals that it's easier to maintain those prices or is it all, is it all reverted back to that historical 0% to 2% range? And then I also want to just follow up on the incremental margins because.Those were really strong in the first half. I know you said that we're.

Speaker Change #226: Got it that's very helpful and.

Speaker Change #227: I guess I'll talk to you again.

Todd Schneider: So are there any verticals that it's easier to maintain those prices or is it all, is it all reverted back to that historical 0% to 2% range? And then I also want to just follow up on the incremental margins because.

Speaker Change #228: Are there any verticals that you.

Speaker Change #227: Year.

Speaker Change #227: To maintain those prices or is it all sort of.

Speaker Change #227: Is it all reverted back to that historical year to 2% range.

Speaker Change #229: And then I also wanted to just follow up on the incremental margins because those are really strong in the first half and I know you.

Jared Mattingly: Those were really strong in the first half. I know you said that we're.

Todd Schneider: The expectations we'll get back to more sort of normal targeted levels for the second half. But I was just curious what the drivers of that would be. So what changes from the first half to the second half that causes those incremental margins to come down? Thanks, Jason. So as far as any verticals, is it able to, are we able to obtain better price increases in any one particular? I wouldn't say so. You know, it's probably pretty darn reflective of the market in general. So as far as incrementals in the back half of the year, yeah, we had, you know, as I mentioned, it's not linear, so. And we had some really good incrementals in the, in the first half. But we like that 25% to 35% range, and that's what we're guiding towards, and that's what we're organizing around as well.

The expectations we'll get back to more sort of normal targeted levels for the second half. But I was just curious what the drivers of that would be. So what changes from the first half to the second half that causes those incremental margins to come down? Thanks,

Speaker Change #229: Said that the expectation, we'll get back to more.

Speaker Change #229: Normal targeted levels for the second half, but I was just curious what the drivers of that would be what changes from the first half to the second half that causes those incremental margins to come down.

Todd Schneider: Jason. So as far as any verticals, is it able to, are we able to obtain better price increases in any one particular? I wouldn't say so. You know, it's probably pretty darn reflective of the market in general. So as far as incrementals in the back half of the year, yeah, we had, you know, as I mentioned, it's not linear, so. And we had some really good incrementals in the, in the first half. But we like that 25% to 35% range, and that's what we're guiding towards, and that's what we're organizing around as well.

Jason Haas: Jason So.

Speaker Change #230: As far as.

Speaker Change #230: Any verticals is it able to are we able to obtain better price increases in any one particular I wouldn't say so.

Speaker Change #230: It's probably pretty darn reflective of the market in general so as far as Incrementals in the back half of the year, Yes, we had.

Speaker Change #230: As I mentioned, it's not linear so we had some really good incrementals in the in.

Speaker Change #230: In the first half.

Speaker Change #230: But.

Speaker Change #230: We like that 25% to 35% range and and Thats what were guiding towards in that.

Speaker Change #230: It is what we're organizing around as well so that's what I think you should be.

Todd Schneider: That's what I think you should be thinking about.

That's what I think you should be thinking about.

Speaker Change #230: Thinking about sometimes it's tough comps.

Speaker Change #230: Relative to last year, we had a really good second half of the year margin.

Speaker Change #231: And as Tom said, sometimes it's just timing of of investments it is not going to be a straight line for sure.

[Analyst]: Got it.

Jason Haas: Got it. That's very helpful. Thank you.

Speaker Change #231: Got it that's very helpful. Thank you.

Todd Schneider: That's very helpful.

Jared Mattingly: Thank you.

Operator: At this time, there are no further questions. I'd like to turn the call back over to Jared for closing remarks.

Speaker Change #233: And at this time there are no further questions I'd like to turn the call back over to Jared for closing remarks.

Jared Mattingly: Thank you for joining us this morning. We will issue our third quarter of fiscal 2025 financial results in March. We look forward to speaking with you again at that time. Thank you.

Speaker Change #233: Thank you for joining us. This morning, we will issue our third quarter of fiscal 'twenty five financial results in March we look forward to speaking with you again at that time. Thank you.

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

Speaker Change #234: This now concludes today's conference call. Thank you for your participation you may now disconnect.

Q2 2025 Cintas Corp Earnings Call

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