Q3 2025 Cintas Corp Earnings Call

March 26, 2025

Thank you very much.

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

Jared Mattingley: Thank you, Ross. 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 third 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.

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.

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 will now turn the call over to Todd.

Todd Schneider: Thank you, Jared. We are pleased with our strong third quarter results. Third quarter total revenue grew 8.4% to $2.61 billion. Our organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.9%. Our results reflect great execution by our employee partners across each of our business segments. Uniform rental and facility services continues to perform well, with organic growth of 7%, and our first aid and safety services, and fire protection services businesses grew double digits, underscoring the comprehensive value proposition we offer to customers of all types and sizes. Gross margin for the third quarter grew 11.1% over the prior year to 50.6%, an all-time high. Operating income increased 17.1% to 23.4%, which was also an all-time high. Our third quarter profitability includes a $15 million gain on the sale of property.

Todd: Thank you Jared.

Todd: We are pleased with our strong third quarter results.

Todd: Third quarter total revenue grew eight 4% to $2 $61 billion.

Todd: Our organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations was seven 9%.

Todd: Our results reflect great execution by our employee partners across each of our business segments.

Uniform rental and facility services continues to perform well, with organic growth of 7%, and our first aid and safety services, and fire protection services businesses grew double digits, underscoring the comprehensive value proposition we offer to customers of all types and sizes. Gross margin for the third quarter grew 11.1% over the prior year to 50.6%, an all-time high. Operating income increased 17.1% to 23.4%, which was also an all-time high. Our third quarter profitability includes a $15 million gain on the sale of property.

Todd: If our rental and facility services continues to perform well with organic growth of 7% and our first aid and safety services and fire protection services businesses grew double digits underscoring the comprehensive value proposition, we offer to customers of all types and sizes.

Todd: Gross margin for the third quarter grew 11, 1% over the prior year to 56% an all time high.

Todd: Operating income increased $17 seven excuse me 17, 1% to 23, 4%, which was also an all time high.

Todd: Our third quarter profitability includes a $15 million gain on the sale of property.

Todd Schneider: Excluding that benefit, operating income as a percent of revenue was 22.8%, the second highest in Cintas history. Diluted EPS grew a robust 17.7% to $1.13. Our strong earnings growth and profitability reflect our continued operational excellence via sourcing and supply chain initiatives, route and energy optimization, and technology-enabled efficiency in our facilities. For example, we continue to leverage our SAP system to standardize our processes across our operations. These initiatives are improving the way our employee partners work in getting the right products to our customers faster, improving both the customer experience and our margin profile. Cash flow this year continues to be very strong. Our free cash flow for the first nine months of the year increased 14.5% over the prior year.

Excluding that benefit, operating income as a percent of revenue was 22.8%, the second highest in Cintas history. Diluted EPS grew a robust 17.7% to $1.13. Our strong earnings growth and profitability reflect our continued operational excellence via sourcing and supply chain initiatives, route and energy optimization, and technology-enabled efficiency in our facilities.

Todd: Excluding that benefit operating income as a percent of revenue was 22, 8% the second highest in Cintas history.

Todd: Diluted EPS grew a robust 17, 7% to $1 13.

Todd: Our strong earnings growth and profitability reflects our continued operational excellence via sourcing and supply chain initiatives Wroughton energy optimization and technology enabled efficiency in our facilities.

For example, we continue to leverage our SAP system to standardize our processes across our operations. These initiatives are improving the way our employee partners work in getting the right products to our customers faster, improving both the customer experience and our margin profile. Cash flow this year continues to be very strong. Our free cash flow for the first nine months of the year increased 14.5% over the prior year.

Todd: For example, we continued to leverage our SAP system to standardize our processes across our operations.

Todd: These initiatives are improving the way our employee partners work and getting the right products to our customers faster improving both the customer experience and our margin profile.

Todd: Cash flow. This year continues to be very strong are.

Todd: Our free cash flow for the first nine months of the year increased 14, 5% over the prior year.

Todd Schneider: Our strong cash flow generation enabled us to deploy capital across each of our capital allocation priorities, starting with investing back in the business, including products and technologies to support our employee partners as they look to sustain attractive growth levels and create value over the long term. Additionally, we made strategic acquisitions across each of our three route-based segments in the quarter. Returning capital to Cintas shareholders also remains a key priority. Cintas paid a quarterly cash dividend of $0.39 per share on 14 March, and we continue our opportunistic approach to share buybacks. Before turning the call over to Mike to provide details of our third quarter results, I'll provide our updated financial expectations for the remainder of our fiscal year, which reflect our continued momentum and confidence in our outlook.

Our strong cash flow generation enabled us to deploy capital across each of our capital allocation priorities, starting with investing back in the business, including products and technologies to support our employee partners as they look to sustain attractive growth levels and create value over the long term. Additionally, we made strategic acquisitions across each of our three route-based segments in the quarter.

Todd: Our strong cash flow generation enabled us to deploy capital across each of our capital allocation priorities, starting with investing back in the business, including products and technologies to support our employee partners as they look to sustain attractive growth levels and create value over the long term. Additionally.

Todd: Additionally, we made strategic acquisitions across across each of our three wrapped based segments in the quarter.

Returning capital to Cintas shareholders also remains a key priority. Cintas paid a quarterly cash dividend of $0.39 per share on 14 March, and we continue our opportunistic approach to share buybacks. Before turning the call over to Mike to provide details of our third quarter results, I'll provide our updated financial expectations for the remainder of our fiscal year, which reflect our continued momentum and confidence in our outlook.

Todd: Returning capital to Cintas shareholders also remains a key priority cintas paid a quarterly cash dividend of <unk> 39 per share on March 14, and we continue our opportunistic approach to share buybacks.

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

Todd Schneider: We are updating our annual revenue expectations from a range of $10.255 to 10.32 billion to a range of $10.28 to 10.305 billion. As we enter our last quarter of fiscal 2025, we have narrowed our revenue guidance to increase total revenue growth and organic revenue growth at the midpoints of the guide. The $15 million reduction at the top end of the range reflects the negative impact of the foreign currency exchange rate experienced in the third quarter and the expected impact for the fourth quarter. Please keep in mind that the impact of foreign currency exchange rate fluctuations does not impact organic growth. Our organic revenue growth guidance is now to be in the range of 7.4% to 7.7%.

We are updating our annual revenue expectations from a range of $10.255 to 10.32 billion to a range of $10.28 to 10.305 billion. As we enter our last quarter of fiscal 2025, we have narrowed our revenue guidance to increase total revenue growth and organic revenue growth at the midpoints of the guide.

Todd: We are updating our annual revenue expectations from a range of 10 to $5 5 billion.

Todd: To 10, three $2 billion to a range of $10 to $8 billion to $10 315 billion.

Todd: As we enter our last quarter of fiscal 2025, we have narrowed our revenue guidance to increase total revenue growth and organic revenue growth at the midpoint of the guide.

The $15 million reduction at the top end of the range reflects the negative impact of the foreign currency exchange rate experienced in the third quarter and the expected impact for the fourth quarter. Please keep in mind that the impact of foreign currency exchange rate fluctuations does not impact organic growth. Our organic revenue growth guidance is now to be in the range of 7.4% to 7.7%.

Todd: The $15 million reduction at the top end of the range reflects the negative impact of the foreign currency exchange rates experienced in the third quarter and the expected impact for the fourth quarter.

Please keep in mind that the impact of foreign currency exchange rate fluctuations does not impact organic growth.

Todd: Our organic revenue growth rate excuse me, our organic revenue growth guidance is now to be in the range of seven 4% to seven 7%.

Todd Schneider: We are also raising our annual diluted EPS expectations from a range of $4.28 to 4.34 to a range of $4.36 to 4.40, implying a growth rate of 15% to 16.1%. I want to thank all of Cintas' employee partners for their outstanding work and dedication to our customers. With our culture of continuous improvement, superior products and services, and the strong value proposition we offer to our customers, we remain poised to deliver sustained growth and value creation for the rest of fiscal year 2025 and beyond. With that, I'll turn the call over to Mike to discuss details of our third quarter results.

We are also raising our annual diluted EPS expectations from a range of $4.28 to 4.34 to a range of $4.36 to 4.40, implying a growth rate of 15% to 16.1%. I want to thank all of Cintas' employee partners for their outstanding work and dedication to our customers. With our culture of continuous improvement, superior products and services, and the strong value proposition we offer to our customers, we remain poised to deliver sustained growth and value creation for the rest of fiscal year 2025 and beyond. With that, I'll turn the call over to Mike to discuss details of our third quarter results.

Todd: We're also raising our annual diluted EPS expectations from a range of $4 28.

Todd: The $4 34.

Todd: So a range of $4 36 to $4 40.

Todd: Implying a growth rate of 15% to 16, 1%.

Todd: I want to thank all of the synthesis employee partners for their outstanding work and dedication to our customers with our culture of continuous improvement superior products and services and the strong value proposition, we offer to our customers, we remain poised to deliver sustained growth and value creation for the rest of fiscal year 2025 and beyond with that.

Todd: I'll turn the call over to Mike to discuss details of our third quarter results. Thanks, Todd and good morning, our fiscal 2025 third quarter revenue was $2 $61 billion <unk>.

Jared Mattingley: Thanks, Todd, and good morning. Our fiscal 2025 third quarter revenue was $2.61 billion compared to $2.41 billion last year. The organic revenue growth rate, adjusted for acquisitions and foreign currency exchange rate fluctuations, was 7.9%. As Todd alluded to, foreign exchange rates negatively impacted third quarter revenue growth by 40 basis points. Organic growth by business was 7% for Uniform Rental and Facility Services, 15% for First Aid and Safety Services, 10.6% for Fire Protection Services, and Uniform Direct Sale was down 2.3%. Gross margin for the third quarter of fiscal 2025 was $1.32 billion compared to $1.19 billion last year, an increase of 11.1%. Gross margin as a percent of revenue was an all-time high at 50.6% for the third quarter compared to 49.4% last year, an increase of 120 basis points. Robust volume growth, operating leverage, and continued operational efficiencies helped generate this strong gross margin.

Michael Hansen: Thanks, Todd, and good morning. Our fiscal 2025 third quarter revenue was $2.61 billion compared to $2.41 billion last year. The organic revenue growth rate, adjusted for acquisitions and foreign currency exchange rate fluctuations, was 7.9%. As Todd alluded to, foreign exchange rates negatively impacted third quarter revenue growth by 40 basis points.

Mike: Compared to $2 four $1 billion last year, the organic revenue growth rate adjusted for acquisitions and foreign currency exchange rate fluctuations was seven 9% as Todd alluded to foreign exchange rates negatively impacted third quarter revenue growth by 40 basis points.

Organic growth by business was 7% for Uniform Rental and Facility Services, 15% for First Aid and Safety Services, 10.6% for Fire Protection Services, and Uniform Direct Sale was down 2.3%. Gross margin for the third quarter of fiscal 2025 was $1.32 billion compared to $1.19 billion last year, an increase of 11.1%. Gross margin as a percent of revenue was an all-time high at 50.6% for the third quarter compared to 49.4% last year, an increase of 120 basis points. Robust volume growth, operating leverage, and continued operational efficiencies helped generate this strong gross margin.

Mike: Organic growth by business was 7% for uniform rental and facility services, 15% for first aid and safety services 10, 6% for fire protection services and uniform direct sale was down two 3%.

Mike: Gross margin for the third quarter of fiscal 'twenty, five was 132 billion compared to $1 one $9 billion last year, an increase of 11, 1% gross.

Mike: Gross margin as a percent of revenue was an all time high at 56% for the third quarter compared to 49, 4% last year, an increase of 120 basis points.

Mike: Robust volume growth operating leverage and continued operational efficiencies helped generate this strong gross margin.

Jared Mattingley: Gross margin percentage by business was 50% for Uniform Rental and Facility Services, 57% 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 120 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. Gross margin for the First Aid and Safety Services segment increased 70 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 50% for Uniform Rental and Facility Services, 57% 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 120 basis points from last year. Our progress year over year reflects our focus on operational excellence initiatives combined with leverage from strong revenue growth.

Mike: Gross margin percentage by business was 50% for uniform rental and facility services, 57% for first aid and safety services 49, 9% for fire protection services and 41, 2% for uniform direct sale.

Mike: Gross margin for the uniform rental and facility services segment increased 120 basis points from last year.

Mike: 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. Gross margin for the First Aid and Safety Services segment increased 70 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: We continue to realize benefits from our technology investments and extracting inefficiencies from the business.

Mike: Gross margin for the first aid and safety services segment increased 70 basis points from last year with strong revenue growth continuing to create leverage.

Mike: Our sales mix remains favorable with more profitable first aid products and increases in our recurring revenue products like AED rentals, eyewash stations and water break or.

Jared Mattingley: 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 percentage of revenue was 27.2%. As Todd shared, there was a $15 million gain on the sale of property during the third quarter of fiscal 2025. Without that gain, selling and administrative expenses would have been 27.8%. Last year, there was a $15 million agreement in principle to settle a purported class action contract dispute. Without that $15 million settlement, selling and administrative expenses last year would have been 27.1% instead of the reported 27.7%. Third quarter operating income was $609.9 million compared to $520.8 million last year.

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 percentage of revenue was 27.2%.

Mike: Our technology investment in Smart truck provides a route.

Mike: Our optimization and improved efficiencies and we continue to see sourcing benefits from our first day dedicated distribution center that have allowed us to lower product costs. All of these contribute to improved margins.

Mike: Selling and administrative expenses as a percentage of revenue was 27, 2%.

As Todd shared, there was a $15 million gain on the sale of property during the third quarter of fiscal 2025. Without that gain, selling and administrative expenses would have been 27.8%. Last year, there was a $15 million agreement in principle to settle a purported class action contract dispute. Without that $15 million settlement, selling and administrative expenses last year would have been 27.1% instead of the reported 27.7%. Third quarter operating income was $609.9 million compared to $520.8 million last year.

Mike: As Todd shared there was a $15 million gain on the sale of property during the third quarter of fiscal 'twenty five without that gain selling.

Mike: Selling and administrative expenses would have been 27, 8%.

Mike: Last year, there was a $15 million agreement in principle to settle a purported class action contract dispute without that $15 million settlement selling and administrative expenses last year would have been 27, 1% instead of the reported 27, 7%.

Mike: Third quarter operating income was $609 9 million compared to $528 million last year.

Jared Mattingley: Operating income as a percentage of revenue was 23.4% in the third quarter of fiscal 2025 compared to 21.6% in last year's third quarter, an increase of 180 basis points. Adjusted for the gain on the property sale, operating margin in the third quarter of fiscal 2025 was 22.8%, the second highest in Cintas history. Our effective tax rate for the third quarter was 21% compared to 19.9% last year. The tax rate in both quarters was impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the third quarter was $463.5 million compared to $397.6 million last year. This year's third quarter diluted EPS of $1.13 compared to $0.96 last year, an increase of 17.7%. When adjusted for the $15 million property sale, EPS was $1.10. As Todd mentioned earlier, we continue to generate strong cash flow.

Operating income as a percentage of revenue was 23.4% in the third quarter of fiscal 2025 compared to 21.6% in last year's third quarter, an increase of 180 basis points. Adjusted for the gain on the property sale, operating margin in the third quarter of fiscal 2025 was 22.8%, the second highest in Cintas history. Our effective tax rate for the third quarter was 21% compared to 19.9% last year.

Mike: Operating income as a percentage of revenue was 23, 4% in the third quarter of fiscal 'twenty five compared to 21, 6% in last year's third quarter, an increase of 180 basis points adjust.

Mike: Adjusted for the gain on the property sale operating margin in the third quarter of fiscal 25 was 22, 8% the second highest in Cintas history.

Mike: Our effective tax rate for the third quarter was 21% compared to 19, 9% last year.

The tax rate in both quarters was impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the third quarter was $463.5 million compared to $397.6 million last year. This year's third quarter diluted EPS of $1.13 compared to $0.96 last year, an increase of 17.7%. When adjusted for the $15 million property sale, EPS was $1.10. As Todd mentioned earlier, we continue to generate strong cash flow.

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

Mike: Net income for the third quarter was $463 5 million compared to $397 $6 million last year.

Mike: This year's third quarter diluted EPS of $1 13.

Mike: Compared to <unk> 96 last year, an increase of 17, 7% when.

Mike: When adjusted for the $15 million property sale EPS was $1 10.

Mike: As Todd mentioned earlier, we continue to generate strong cash flow over the first nine months of the year, our free cash flow increased 14, 5% over the prior year. This has allowed us to invest back in the business, which has resulted in the third quarter capital expenditures of $99 9 million.

Jared Mattingley: Over the first nine months of the year, our free cash flow increased 14.5% over the prior year. This has allowed us to invest back in the business, which has resulted in the third quarter capital expenditures of $99.9 million. We expect capital expenditures for the year to finish close to our target of 4% of revenue. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2025 revenue guidance accounts for the impact of negative foreign currency exchange rate fluctuations. While the first half of the year was negatively impacted by only 10 basis points or $5 million, the second half of the year is expected to be negatively impacted by approximately 40 basis points or $16 million. Fiscal 2025 net interest expense is expected to be approximately $100 million compared to $95 million in Fiscal 2024.

Over the first nine months of the year, our free cash flow increased 14.5% over the prior year. This has allowed us to invest back in the business, which has resulted in the third quarter capital expenditures of $99.9 million. We expect capital expenditures for the year to finish close to our target of 4% of revenue. Todd provided our annual financial guidance. Related to the guidance, please note the following.

Mike: We expect capital expenditures for the year to finish closer to our target of 4% of revenue.

Mike: Todd provided our annual financial guidance related to the guidance. Please note the following.

Fiscal 2025 revenue guidance accounts for the impact of negative foreign currency exchange rate fluctuations. While the first half of the year was negatively impacted by only 10 basis points or $5 million, the second half of the year is expected to be negatively impacted by approximately 40 basis points or $16 million. Fiscal 2025 net interest expense is expected to be approximately $100 million compared to $95 million in Fiscal 2024.

Mike: Fiscal 'twenty five revenue guidance accounts for the impact of negative foreign currency exchange rate fluctuations, while the first half of the year was negatively impacted by only 10 basis points or $5 million.

Mike: The second half of the year is expected to be negatively impacted by approximately 40 basis points were $16 million.

Mike: Fiscal 'twenty five net interest expense is expected to be approximately $100 million compared.

Mike: Compared to $95 million in fiscal 'twenty four.

Jared Mattingley: Our fiscal 2025 effective tax rate is expected to be 20.2%. Please note that this implies a fourth quarter effective tax rate of 23% compared to an effective tax rate in last year's fourth quarter of 21.4%. As a reminder, there are two fewer workdays in fiscal 2025 compared to fiscal 2024, which has a negative impact on total revenue growth of about 80 basis points for the year. Also, as a reminder, the upcoming fourth quarter will have one less workday than last year's fourth quarter. This will negatively impact the fourth quarter total revenue growth by about 160 basis points. Guidance does not include any future share buybacks, or significant economic disruptions, or downturns. I'll now turn the call back over to Todd for some closing remarks.

Our fiscal 2025 effective tax rate is expected to be 20.2%. Please note that this implies a fourth quarter effective tax rate of 23% compared to an effective tax rate in last year's fourth quarter of 21.4%. As a reminder, there are two fewer workdays in fiscal 2025 compared to fiscal 2024, which has a negative impact on total revenue growth of about 80 basis points for the year.

Mike: Our fiscal 'twenty five effective tax rate is expected to be 22%. Please note that this implies a fourth quarter effective tax rate of 23% compared to an effective tax rate in last year's fourth quarter of 21, 4%.

Mike: As a reminder, there are two fewer workdays in fiscal 'twenty five compared to fiscal 'twenty, four which has a negative impact on total revenue growth of about 80 basis points for the year.

Also, as a reminder, the upcoming fourth quarter will have one less workday than last year's fourth quarter. This will negatively impact the fourth quarter total revenue growth by about 160 basis points. Guidance does not include any future share buybacks, or significant economic disruptions, or downturns. I'll now turn the call back over to Todd for some closing remarks.

Mike: So as a reminder, the upcoming fourth quarter will have one less workday than last year's fourth quarter. This will negatively impact the fourth quarter total revenue growth by about 160 basis points.

Mike: Guidance does not include any future share buybacks or significant economic disruptions or downturns.

Todd: I'll now turn the call back over to Todd for some closing remarks.

Todd Schneider: Thank you, Mike. Before we open the line to Q&A, I want to address the announcement we made on Monday afternoon. Cintas has terminated discussions with UniFirst regarding Cintas' proposal to acquire UniFirst for $275 per share in cash. After we publicly announced our proposal in early January, we engaged with UniFirst and its advisors in an effort to reach a mutual agreement regarding a transaction that we believe offers tremendous value for customers and shareholders. Despite Cintas' considerable efforts, we were unable to have substantive engagement with UniFirst regarding key transaction terms. While we continue to believe in the merits of a transaction, we do not believe further discussions are warranted at this time. As you all can appreciate, we will not have more to say on this matter.

Todd: Thank you Mike before we open the line to Q&A I want to address the announcement, we made on Monday afternoon. The synthesis terminated discussions with universe regarding cintas his proposal to acquire universe for $275 per share in cash.

Todd: After we publicly announced our proposal in early January we engaged with <unk> and its advisors in an effort to reach a mutual agreement regarding that transaction that we believe offers tremendous value for customers and shareholders.

Despite Cintas' considerable efforts, we were unable to have substantive engagement with UniFirst regarding key transaction terms. While we continue to believe in the merits of a transaction, we do not believe further discussions are warranted at this time. As you all can appreciate, we will not have more to say on this matter.

Todd: Despite cintas is considerable efforts we were unable to have substantive engagement with universe regarding key transaction terms, while we continue to believe in the merits of a transaction. We do not believe further discussions are warranted at this time.

Todd: As you all can appreciate we won't have.

Todd: We will not have more to say on this matter.

Todd Schneider: As our third quarter performance demonstrates, we remain focused on executing our strategy and taking great care of our customers, and we look forward to the great market opportunity ahead. With that, I'll turn it back over to Jared.

As our third quarter performance demonstrates, we remain focused on executing our strategy and taking great care of our customers, and we look forward to the great market opportunity ahead. With that, I'll turn it back over to Jared.

Speaker Change: As our third quarter performance demonstrates we remain focus on executing our strategy and taking great care of our customers and we look forward to the great market opportunity ahead with that I'll turn it back over to Jared.

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

Operator: If you would like to ask a question, please press star one on your telephone keypad now. Please be prepared to ask your question when prompted. You will also 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. And our first question comes from George Tong from Goldman Sachs. Please go ahead, George.

Speaker Change: If you would like to ask a question. Please press star one on your telecom telephone keypad now please.

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

Speaker Change: You will also be allowed to ask one follow up question.

Jared: Once again, if you would like to ask a question. Please.

Speaker Change: Please press star one on your phone now.

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

George Tong: Hi, thanks. Good morning. Can you talk a little bit about how customer purchasing behaviors and sales cycles are changing given the currently evolving macro environment?

Speaker Change: Alright, thanks, good morning.

Speaker Change: Can you talk a little bit about how customer purchasing behaviors in sales cycles are changing given the currently evolving macro environment.

Todd Schneider: Good morning, George. So the customer behavior, I would say, remains stable. Our new business and our retention rates continue to be attractive. Our ad stops metrics, really, there has been no significant change. We certainly recognize there is more uncertainty in the marketplace right now, and we're reading similar things to what you're reading, and we continue to monitor things. But our value proposition continues to resonate, especially in the periods of uncertainty like this. Outsourcing can improve and steady cash flow and saves time that can be spent on people's business, on our customers' business. So no real change, I would say, to customer behavior at this point, sales cycles, etc. But we're certainly monitoring it and paying close attention as, again, we're reading the same things you're reading.

Speaker Change: Good morning, George.

George Tong: So the customer behavior I would say is.

Speaker Change: It remains stable.

Speaker Change: Our our new business and our retention rates continue to be attractive.

Speaker Change: Our add stops metrics.

Speaker Change: Metrics really there has been no significant change.

Speaker Change: We certainly recognize there is more uncertainty in the marketplace right now and we're reading the similar things to what you are reading.

Speaker Change: And we continue to monitor things monitor things, but but our value proposition continues to resonate, especially in the periods of uncertainty like this.

But our value proposition continues to resonate, especially in the periods of uncertainty like this. Outsourcing can improve and steady cash flow and saves time that can be spent on people's business, on our customers' business. So no real change, I would say, to customer behavior at this point, sales cycles, etc. But we're certainly monitoring it and paying close attention as, again, we're reading the same things you're reading.

Speaker Change: Outsourcing can improve.

Speaker Change: And steady cash flow and saves time that can be spent on people's business on our customers' business. So.

Speaker Change: No real change I would say to the.

Speaker Change: Two customer behavior at this point sales cycles et cetera, but we're certainly monitoring it paying close attention as again, we're reading the same things you are ready.

George Tong: Got it. That's helpful. Just as a quick follow-up, you mentioned last quarter that you were experiencing some pricing normalization as inflation normalizes. Can you talk a little bit about how pricing trends are performing this quarter compared to past quarters?

Speaker Change: Got it that's helpful and just as a quick follow up you mentioned last quarter that you were experiencing some pricing normalization as inflation normalizes can you talk a little bit about how pricing trends are performing this quarter compare to past quarters.

Todd Schneider: Great question. The pricing environment, as always, it's always challenging. It has been my entire career, and I'm sure it will be in the future. Our pricing is right at historic levels. So again, there is more uncertainty in the market than there was 90 days ago, but we really haven't seen any change from that standpoint. And I'd like to just say that I'm really proud of the organization, being able to grow at attractive levels the way they are and expand margins by extracting out inefficiencies in our business. It's been impressive to watch in an environment that has been certainly a little bit more uncertain with the news that has been coming out of the administration and other areas of our economy.

Speaker Change: Great question.

Speaker Change: The pricing environment as always it's always challenging.

Speaker Change: He has been my entire career and I'm sure we'll be in the future.

Speaker Change: Our pricing is right at historic levels.

Speaker Change: So.

Speaker Change: Again, there is more uncertainty in the market than there was 90 days ago, but we really haven't seen any any change from that standpoint.

And I'd like to just say that I'm really proud of the organization, being able to grow at attractive levels the way they are and expand margins by extracting out inefficiencies in our business. It's been impressive to watch in an environment that has been certainly a little bit more uncertain with the news that has been coming out of the administration and other areas of our economy.

Speaker Change: And I'd like to just say that I'm really proud of the organization.

Speaker Change: Being able to grow at attractive levels the way they are and expand margins.

Speaker Change: By extracting out inefficiencies in our business.

Speaker Change: It's been it's been.

Speaker Change: Impressive to watch in an environment that has been certainly.

Speaker Change: A little bit more uncertain with.

Speaker Change: The news that has been coming out of <unk>.

Speaker Change: The administration and in other areas of our economy.

George Tong: Very helpful. Thank you.

Speaker Change: Very helpful. Thank you.

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

Jennifer: And our next question comes from Jasper Bibb from <unk> Securities. Please go ahead Jennifer.

Jasper Bibb: Hey, good morning, guys. I was hoping you could update us on what you're seeing on the COGS side related to tariffs on Mexico and China. And I guess, is there any way to frame the exposure to purchasing from those countries and what you might be able to do to offset any potential increased costs with your sourcing efforts?

Speaker Change: Hey, good morning, guys.

Jennifer: Hoping you could update us on what Youre seeing on the Cogs side related to tariffs on Mexico and China.

Jennifer: I guess is there any way to frame the exposure purchasing from those countries and what you might be able to do to offset any potential increased costs with your sourcing efforts.

Todd Schneider: Good morning, Jasper. Yeah, first off, it's too early to tell any tariff impact that might have. Certainly, we're well aware of 2 April that the administration is going to be announcing potentially additional tariffs. But it's too early to tell at this point. I'll say this: our supply chain organization is a strategic advantage for us. So we have less than 10% of our products are sole sourced. We're in a really good position to negotiate from that standpoint. Certainly, it is something that we're watching, but we think we've got a real competitive advantage there. The geographic diversity that we have, as I mentioned, the dual sourcing, and our corporate culture traits of positive discontent and competitive urgency, they fuel process improvements that drive us to be more efficient. So we think we're in a good position there.

Speaker Change: Good morning Jasper.

Jennifer: Yes first off it's.

Jennifer: It's too early to tell.

Jennifer: Any tariff impact that might have.

Jennifer: Certainly.

Jennifer: We are well aware of April 2nd that the administration is going to be announcing.

Jennifer: Potentially additional tariffs.

Jennifer: But it's too early to tell at this point I'll say this our supply chain.

Jennifer: Organization is a strategic advantage for us.

Jennifer: So.

Jennifer: We have.

Jennifer: Less than 10% of our products are sole sourced we're in a really good position to to negotiate from that standpoint.

We're in a really good position to negotiate from that standpoint. Certainly, it is something that we're watching, but we think we've got a real competitive advantage there. The geographic diversity that we have, as I mentioned, the dual sourcing, and our corporate culture traits of positive discontent and competitive urgency, they fuel process improvements that drive us to be more efficient. So we think we're in a good position there.

Jennifer: Certainly it is.

Jennifer: Thing that we're watching.

Jennifer: But we're we think we've got a real competitive advantage there the geographic diversity that we have as I mentioned the dual sourcing.

Jennifer: And our corporate culture trade positive.

Jennifer: Positive discontent.

Jennifer: And competitive urgency.

Jennifer: They fuel process improvements.

Jennifer: It drives us to be more efficient so.

Jennifer: We think we're in a good position there were certainly paying very close attention to it.

Todd Schneider: We're certainly paying very close attention to it, and we will pivot as appropriate, and we believe we're well positioned to pivot. All that being said, as you're aware, it takes a while for products to get through the system for us. Whether it is manufacturing it, it has to get into our inventory, then it has to be purchased by our locations, and then we amortize it. So we have really good visibility on what our costs will look like, which gives us time to pivot and time to address these subjects with customers as appropriate.

We're certainly paying very close attention to it, and we will pivot as appropriate, and we believe we're well positioned to pivot. All that being said, as you're aware, it takes a while for products to get through the system for us. Whether it is manufacturing it, it has to get into our inventory, then it has to be purchased by our locations, and then we amortize it. So we have really good visibility on what our costs will look like, which gives us time to pivot and time to address these subjects with customers as appropriate.

Jennifer: And we will pivot as appropriate and we believe we're well positioned to pivot.

Jennifer: All that being said.

Jennifer: As you are aware it takes a while for products to get through the system for us whether it is.

Jennifer: Manufacturing it has to get into our inventory then it has to be.

Jennifer: Purchased by our locations and then we amortize it so we have really good <unk>.

Jennifer: Visibility on.

Jennifer: And what our costs will look like which gives us time to pivot.

Jennifer: And time to address these subjects with customers as appropriate.

Jasper Bibb: Thanks for that. Then maybe stepping back on the M&A question, are you thinking about the opportunity to consolidate, I guess, more midsize private platforms that could be available in rental uniform or your other industry verticals? And I guess separately, how would you characterize the pipeline of those smaller tuck-in-size deals for that?

Jennifer: Thanks for that and then maybe stepping back on that question.

Jennifer: Are you thinking about the opportunity to consolidate I guess more midsized private platforms, which will be available in rental uniforms or your other industry verticals and I guess separately, how would you characterize the pipeline of those smaller tuck in sized deals for that.

Todd Schneider: Great question. First, we have M&A has been an important part of our strategy for the last, I would say, 30, 40 years. So that's important to us. And we love M&A. We love tuck-ins. Tuck-ins are very attractive for us, allow us to bring efficiencies on route, bring customers on, where we can offer a wider breadth of products and services to those customers. And in certain cases, we're able to bring on M&A that allows us to have additional capacity. So that's all important to us, and we are always in search of that. You really can't pace it. That pacing is really around, in certain cases, family dynamics, whether or not an operator is getting to a retirement age or an operator doesn't have children that is interested in participating or whatever.

Jennifer: Great question.

Jennifer: First of all.

Jennifer: We have M&A.

Jennifer: Has been an important part of our.

Jennifer: Our strategy for the last.

Jennifer: I would say 30 40 years, so that's important to us.

Jennifer: And we love <unk>.

Jennifer: We love Tuck ins tuck ins are very attractive for us.

Jennifer: Allow us to.

Jennifer: Bring efficiencies on route bring customers on where we can.

Jennifer: Offer additional a wider breadth of products and services to those customers and then in certain cases, we're able to.

And in certain cases, we're able to bring on M&A that allows us to have additional capacity. So that's all important to us, and we are always in search of that. You really can't pace it. That pacing is really around, in certain cases, family dynamics, whether or not an operator is getting to a retirement age or an operator doesn't have children that is interested in participating or whatever.

Jennifer: Bring on M&A that.

Jennifer: That allows us to have additional capacity so.

Jennifer: That's all important to us and we are always in search of that you really can't pace. It.

Jennifer: That pacing is really around.

Jennifer: In certain cases family dynamics.

Jennifer: Are there or not.

Jennifer: And operator.

Jennifer: Is getting to a retirement age or an operator doesn't have children that isn't interested in participating or whatever so it's tough to pace those can predict them, but we are active in the market.

Todd Schneider: So it's tough to pace those and predict them, but we're active in the market, and we are pursuing M&A in all of our route-based segments, and we think it's a great use of cash for us.

So it's tough to pace those and predict them, but we're active in the market, and we are pursuing M&A in all of our route-based segments, and we think it's a great use of cash for us.

Jennifer: Our.

Jennifer: Pursuing.

Jennifer: M&A and all of our route based segments and we think it's a it's great that use of cash for us.

Jasper Bibb: Thanks for taking the question, Cintas.

Jennifer: Thanks for taking the questions guys.

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.

George Tong: Hi, good morning. This is Ronan Kennedy from Manav. Thank you for taking my question. Could I please reconfirm the primary drivers of the impressive margins, especially at the GM level? And then also the sustainability of those drivers and how that will evolve going forward in consideration as to whether the 25% to 35% incremental range is still the right way to think about it?

Ronan Kennedy: Hi, good morning. This is Ronan Kennedy from Manav. Thank you for taking my question. Could I please reconfirm the primary drivers of the impressive margins, especially at the GM level? And then also the sustainability of those drivers and how that will evolve going forward in consideration as to whether the 25% to 35% incremental range is still the right way to think about it?

Speaker Change: Hi, Good morning. This is roni Kennedy off from an off thank you for taking my question could I. Please reconfirm. The primary drivers of these of the impressive margins, especially at the GM level.

Speaker Change: And then also the sustainability of those drivers and how that will evolve going forward in consideration as to whether the 25% to 35% incremental range is still the right way to think about it.

Todd Schneider: Good morning, Ronan. I'll start, Mike, if you want to chime in. First off, yeah, we believe the 25% to 35% incrementals are the area where we want to point towards, and we believe we can continue to do that. It's really driven by solid execution in our key initiatives. As I speak about often, our corporate culture is our greatest competitive advantage, and it drives the behaviors around trying to execute at high levels, but also find ways to extract out inefficiencies. That being said, strong revenue growth is a very powerful leverage for us, and we've executed nicely upon that. In addition to that, the material cost improvements we've seen through improved sourcing, the technology that we've deployed into our facilities that allows us to get better reuse of garments has been important to us.

Speaker Change: Good morning, Ron and I'll start Mike if you want to chime in.

Speaker Change: First of all yes, we believe that 25% to 35% Incrementals are.

Speaker Change: Are the areas that where we want to point towards.

Speaker Change: And we believe we can continue to do that.

Speaker Change: It's really driven by.

Speaker Change: Solid execution in our key initiatives.

Speaker Change: As I speak about often our corporate culture is our greatest competitive advantage and it drives.

The behaviors around trying to execute at high levels, but also.

Speaker Change: Find ways to extract out inefficiencies that being said strong revenue growth is.

That being said, strong revenue growth is a very powerful leverage for us, and we've executed nicely upon that. In addition to that, the material cost improvements we've seen through improved sourcing, the technology that we've deployed into our facilities that allows us to get better reuse of garments has been important to us.

Speaker Change: <unk>.

Speaker Change: Very powerful leverage for us.

Speaker Change: And we've executed nicely upon that.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: In addition to that the material cost improvements, we've seen that through improved sourcing.

Speaker Change: The technology that we deployed into our facilities that allows us to get better reuse of garments has been important to us.

Todd Schneider: And then I would say the other infrastructure improvements that we made through our engineering department and our Six Sigma Black Belt teams have been encouraging for us, and we still see that target of 25% to 35% incrementals being where we're focused on and where we plan to drive towards.

And then I would say the other infrastructure improvements that we made through our engineering department and our Six Sigma Black Belt teams have been encouraging for us, and we still see that target of 25% to 35% incrementals being where we're focused on and where we plan to drive towards.

Speaker Change: And then.

Speaker Change: I would say the other infrastructure improvements that we've made through our engineering Department and our our six Sigma Black belt teams have been.

Speaker Change: Encouraging for us and we still see.

That target of 25% to 35% Incrementals being where we're focused on and where we plan to drive towards.

Jasper Bibb: Thank you. Appreciate it. Then going, I guess, to a more granular level with that question, how should we think about the current operating and incrementals for the respective segments? Uniforms and first aid, drivers and sustainability there, and I guess also for fire protection. I understand there is going to be some potential impacts of SAP conversion next year, but just anything to be mindful of margin-related by segment specifically.

Ronan Kennedy: Thank you. Appreciate it. Then going, I guess, to a more granular level with that question, how should we think about the current operating and incrementals for the respective segments? Uniforms and first aid, drivers and sustainability there, and I guess also for fire protection. I understand there is going to be some potential impacts of SAP conversion next year, but just anything to be mindful of margin-related by segment specifically.

Speaker Change: Thank you I appreciate it and then going I guess to a more granular level with that question. How should we think about the current operating and incrementals for the respective segments uniforms at first state drivers and sustainability. There I guess also for fire protection I understand there is going to be some potential impacts SaaS conversion next year.

Speaker Change: But just anything to be mindful of margin wise by segment specifically.

Todd Schneider: Yeah. I spoke a little bit to the rental, the garment sharing, the technology we're deploying in our facilities, our SmartTruck technology that we're leveraging across all of our route-based systems, our route-based businesses have been important for us. Just speaking of first aid, really, again, really good organic revenue growth, which is giving us real leverage. The value proposition in that business is resonating big time. We talk the leadership of our organization of first aid speaks about what's more important to a customer than the health and safety of a business's employees and their customers. So that value proposition is resonating. The mix of revenue in the first aid business is attractive. It's in recurring type areas of our business. Our sourcing organization has done a really nice job with our dedicated first aid distribution center. And as I mentioned, SmartTruck.

Speaker Change: Yes, I spoke a little bit to the rental the garment sharing.

Speaker Change: The technology, we're deploying in our.

Speaker Change: And our facilities are smart truck.

Speaker Change: Technology that we're leveraging across all of our route based systems are a route based businesses.

Speaker Change: I have been important for us.

Speaker Change: Just speaking of first aid.

Speaker Change: Again really good.

Speaker Change: Organic revenue growth, which is giving us real leverage.

Speaker Change: The value proposition and that business is resonating big time.

We talk the leadership of our organization of first aid speaks about what's more important to a customer than the health and safety of a business's employees and their customers. So that value proposition is resonating. The mix of revenue in the first aid business is attractive. It's in recurring type areas of our business. Our sourcing organization has done a really nice job with our dedicated first aid distribution center. And as I mentioned, SmartTruck.

Speaker Change: We talked.

Speaker Change: The leadership of our organization first aid.

Speaker Change: Speaks about what's more important to talk customer than the health and safety.

Speaker Change: Our business is employees.

Speaker Change: Our customers so.

Speaker Change: <unk>.

Speaker Change: Value proposition is resonating the mix of revenue in the first aid business is.

Speaker Change: It's attractive it's in.

Speaker Change: Recurring type of areas of our business.

Speaker Change: Our sourcing organization has done a really nice job with our dedicated first aid distribution center as I mentioned smart truck.

Todd Schneider: In the fire business, the leverage that we're getting is, again, on attractive revenue growth, deploying technology to make our people more successful and more efficient. You're correct. We are investing in deploying SAP into that business, and we're encouraged about, as we get through the deployment there, reaping some benefits in that business as well.

In the fire business, the leverage that we're getting is, again, on attractive revenue growth, deploying technology to make our people more successful and more efficient. You're correct. We are investing in deploying SAP into that business, and we're encouraged about, as we get through the deployment there, reaping some benefits in that business as well.

Speaker Change: And then in the fire business or the leverage that we're getting is again, an attractive revenue growth deploying technology to make our people more successful and more efficient.

Speaker Change: And you are correct, we are investing in.

Speaker Change: And deploying SAP.

Speaker Change: Into that business and.

Speaker Change: We are encouraged about as we get through the deployment there reaping some benefits in that business as well.

Jasper Bibb: Thank you. I appreciate it.

Ronan Kennedy: Thank you. I appreciate it.

Speaker Change: Thank you I appreciate it.

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

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

Luke Fadenhofer: Hey, good morning. This is Luke Fadenhofer from Tim Mulroney. Thanks for taking our questions today. Maybe starting off one here just on the macro picture. Fully recognize you're not providing guidance for 2026 at this time, but just curious kind of at a high level, how should we think about the setup heading into next fiscal year given organic growth in the business remains pretty healthy, but obviously there's a decent amount of uncertainty out there right now?

[Analyst] (William Blair): Hey, good morning. This is Luke Fadenhofer from Tim Mulroney. Thanks for taking our questions today. Maybe starting off one here just on the macro picture. Fully recognize you're not providing guidance for 2026 at this time, but just curious kind of at a high level, how should we think about the setup heading into next fiscal year given organic growth in the business remains pretty healthy, but obviously there's a decent amount of uncertainty out there right now?

Luke McFadden: Hey, Good morning. This is Luke Mcfadden offer Tim Mulrooney, Thanks for taking our questions today.

Speaker Change: Maybe starting off.

Speaker Change: Here just on the macro picture fully recognize you're not providing guidance for 2026 at this time, but just curious kind of at a high level. How should we think about the set up heading into next fiscal year, given organic growth in the business remains pretty healthy, but obviously, there's a decent amount of uncertainty out there right now.

Todd Schneider: Yeah. Good morning. Yeah. So we're certainly monitoring it very closely, but we're positioning our people to be successful in the short, mid, and long term. So we're investing in our business so that we have great products, great services, and provide a real value proposition to our customers. We've shown the ability to grow our business in just about every economic environment that we've seen over my career. And we've shown the ability to grow in multiples of GDP. We certainly love it when people are hiring more workers, but we've been able to grow in spite of that. So whatever the economic environment that is thrown at us, we plan to be successful. And we're organized around that. We're investing for that, and we see that opportunity moving forward.

Speaker Change: Yes, good morning.

Speaker Change: Yes, so were.

Speaker Change: Certainly.

Speaker Change: Monitoring it very closely.

Speaker Change: But we're positioning.

Speaker Change: Our people to be successful.

Speaker Change: And the short mid and long term. So we're investing in our business. So that we have great products, great services and can provide a real value proposition to our customers.

Speaker Change: We've shown the ability to grow our business in just about every economic environment that is that we've seen over my career.

And we've shown the ability to grow in multiples of GDP. We certainly love it when people are hiring more workers, but we've been able to grow in spite of that. So whatever the economic environment that is thrown at us, we plan to be successful. And we're organized around that. We're investing for that, and we see that opportunity moving forward.

Speaker Change: And we've shown the ability to grow in multiples of GDP.

Speaker Change: We certainly love it when people are hiring more workers, but.

Speaker Change: But we've been able to grow and.

Speaker Change: In spite of that so.

Speaker Change: So whatever the economic environment.

Speaker Change: Is thrown at US we plan to be successful and we're organized around that we're investing for that and we see that opportunity moving forward. So.

Todd Schneider: So we'll continue to monitor it very closely and watch the impact to the economy and to our customer base, and we'll pivot appropriately. But nevertheless, we think our value proposition resonates with folks and helping them run a better business.

So we'll continue to monitor it very closely and watch the impact to the economy and to our customer base, and we'll pivot appropriately. But nevertheless, we think our value proposition resonates with folks and helping them run a better business.

Speaker Change: We continue to monitor it very closely.

Speaker Change: And watched the impact to the economy and to our customer base and will pivot appropriately, but nevertheless, we think our value proposition resonates with folks.

Speaker Change: And helping them run a better business.

Luke Fadenhofer: Understood. Thanks. That's really helpful. Then maybe switching gears a bit here, you've spoken recently about government as being a focus vertical. Just curious how you're thinking about that opportunity in light of the administration's intentions to reduce spending broadly across the federal government agencies. Thanks.

[Analyst] (William Blair): Understood. Thanks. That's really helpful. Then maybe switching gears a bit here, you've spoken recently about government as being a focus vertical. Just curious how you're thinking about that opportunity in light of the administration's intentions to reduce spending broadly across the federal government agencies. Thanks.

Speaker Change: Understood. Thanks.

Speaker Change: Really helpful. And then maybe switching gears a bit here you've spoken recently about government as being a focused vertical just curious how youre thinking about that opportunity in light of the administration's intentions to reduce spending broadly across the federal government agencies.

Todd Schneider: Great. Good question. Keep in mind we have a very broad customer base, but the efforts that are going on there, it's too early to tell what exactly is going to happen. As you have seen, the efforts are really around the federal government, and our focus has been on state and local governments. So there's certainly a possibility that the work still needs to be done at the state and local government level. So as the federal government shrinks, it's very possible that the state and local government just take on more work. So we're watching that.

Speaker Change: Great Good question.

Speaker Change: Yes.

Speaker Change: Keep in mind.

Speaker Change: We have a very broad customer base.

Speaker Change: But the efforts that are going on there.

Speaker Change: It's too early to tell what exactly is going to happen.

Speaker Change: As you have seen the efforts are really around the federal government.

Speaker Change: And our focus has been on state and local governments. So.

Speaker Change: There is certainly a possibility that the work still needs to be done at the state and local government level. So ads.

Speaker Change: Yes.

Speaker Change: The federal government shrinks, its very possible that.

Speaker Change: That's the state and local government just take on more work so well.

Speaker Change: We're watching that.

Todd Schneider: We recently, from a state and local standpoint, we had a local public school system that was a very large public school system come to us and talk about, hey, is there ways that you can take cost out? And in that case, we consolidated suppliers, meaning that provided us more business, but lowered their overall total cost of their program. And so this allowed us to streamline invoicing for the customer, which lowered administrative burden for the school system. So net-net, we took cost out of the total dollars that were in their budget, but we were able to enjoy a larger portion of that wallet. So we expect that certainly that may very well be a more common subject in the future, but we're having those types of conversations with all customers, and certainly school systems are not immune to that.

We recently, from a state and local standpoint, we had a local public school system that was a very large public school system come to us and talk about, hey, is there ways that you can take cost out? And in that case, we consolidated suppliers, meaning that provided us more business, but lowered their overall total cost of their program.

Speaker Change: We've recently from a state and local standpoint, we had a local public school system.

Speaker Change: A very large public school system come to us and talk about a certain ways that you can take cost out.

Speaker Change: And in that case, we consolidated suppliers, meaning that provided us more business, but lowered their overall total cost of that program.

And so this allowed us to streamline invoicing for the customer, which lowered administrative burden for the school system. So net-net, we took cost out of the total dollars that were in their budget, but we were able to enjoy a larger portion of that wallet. So we expect that certainly that may very well be a more common subject in the future, but we're having those types of conversations with all customers, and certainly school systems are not immune to that. So we think we're in a good spot.

Speaker Change: So this allowed us to streamline invoicing for the customer which have lowered administrative burden for the school system. So net net we took cost out of the total.

Speaker Change: Dollars that were in our budget.

Speaker Change: But we were able to.

Speaker Change: Enjoy a larger portion of that wallet.

Speaker Change: So these are we expect that certainly.

Speaker Change: That may very well be a more common subject in the future but.

Speaker Change: We're having those types of conversations with all customers and certainly.

Speaker Change: School systems are not immune to that so so we think we're in a good spot.

Todd Schneider: So we think we're in a good spot.

Luke Fadenhofer: Great. Thanks so much.

[Analyst] (William Blair): Great. Thanks so much.

Speaker Change: Great. Thanks, so much.

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

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

Jasper Bibb: Hey, Mike. Two questions. One small one, one math one. So what was energy and fuel cost as a percentage of revenues in the just reported Q3? And my second question is, could you tell us what's embedded in your full-year organic revenue growth guidance when you look on a sequential basis at the Q4 that we're in now versus the Q3? And you can imagine I'm talking about organic, constant currency, sequential, same-day basis.

Andrew Steinerman: Hey, Mike. Two questions. One small one, one math one. So what was energy and fuel cost as a percentage of revenues in the just reported Q3? And my second question is, could you tell us what's embedded in your full-year organic revenue growth guidance when you look on a sequential basis at the Q4 that we're in now versus the Q3? And you can imagine I'm talking about organic, constant currency, sequential, same-day basis.

Speaker Change: Hey, Mike two questions one small one one math one.

Speaker Change: Worldwide energy and fuel costs as a percentage of revenues in the just reported third quarter.

Speaker Change: And my second question is could you tell us what's implied what's embedded into your full year organic revenue growth guidance. When you look on a sequential basis at the fourth quarter that we're in now.

Speaker Change: Versus the third quarter and you can imagine I'm talking about organic constant currency sequential same day basis.

Luke Fadenhofer: Let me start, Andrew, with energy. The energy for the quarter for the total company was 1.7% of revenue. That's the same as last year's third quarter. Rental was 2%, same as last year, 2%. From an organic guide, Andrew, we talked about a 40 basis points impact on total revenue in the third quarter because of FX. We expect that to be fairly similar in the fourth quarter. In addition to that, in the quarter, we had, call it, 70 basis points of M&A impact. Actually, it was 90 basis points of M&A impact with a 40 basis points headwind to get to that 50 basis points differential. Something not too different than that in the fourth quarter is where I would be guiding you.

Michael Hansen: Let me start, Andrew, with energy. The energy for the quarter for the total company was 1.7% of revenue. That's the same as last year's third quarter. Rental was 2%, same as last year, 2%. From an organic guide, Andrew, we talked about a 40 basis points impact on total revenue in the third quarter because of FX.

Speaker Change: Let me start Andrew with energy and the energy for the quarter was for the total company was one 7% of revenue.

Speaker Change: That's the same as last year's.

Speaker Change: Third quarter.

Speaker Change: Rental was 2% same as last year, 2%.

Speaker Change: From an organic guide.

Speaker Change: Andrew We just we talked about a 40 basis point impact on total revenue.

Speaker Change: In the third quarter because of FX, we expect that to be fairly similar in the fourth quarter.

We expect that to be fairly similar in the fourth quarter. In addition to that, in the quarter, we had, call it, 70 basis points of M&A impact. Actually, it was 90 basis points of M&A impact with a 40 basis points headwind to get to that 50 basis points differential. Something not too different than that in the fourth quarter is where I would be guiding you.

Speaker Change: In addition to that.

Speaker Change: In the quarter, we had.

Speaker Change: Call it.

Speaker Change: 70 basis points of Av.

M&A impact actually it was 90 basis points of M&A impact with a 40 basis point headwind.

Speaker Change: To get to that 50 basis point differential.

Speaker Change: Not too different than that in the fourth quarter is where I would be guiding yet.

Jasper Bibb: Right. So maybe let me just ask it one other way. When you look at the sequential revenue for the fourth quarter that we're in versus the third quarter we just reported, are you assuming a normal seasonal pattern?

Andrew Steinerman: Right. So maybe let me just ask it one other way. When you look at the sequential revenue for the fourth quarter that we're in versus the third quarter we just reported, are you assuming a normal seasonal pattern?

Speaker Change: Right. So maybe let me just ask you one other way when you look at the sequential revenue for the fourth quarter that ran versus the third quarter. We just reported are you assuming a normal seasonal pattern.

Luke Fadenhofer: Well, we would assume a normal seasonal pattern in the performance of the business, in the underlying performance of the business, yes. The FX is a little different in that we have seen a change in the FX in this back half of the year, both in terms of the size of the move and the quickness of the move that is not usual for us. That's why we've called out the Canadian FX impact.

Michael Hansen: Well, we would assume a normal seasonal pattern in the performance of the business, in the underlying performance of the business, yes.

Speaker Change: Well, we would assume a normal seasonal pattern in the in the <unk>.

Speaker Change: Performance of the business and the underlying performance of the business yes.

Andrew Steinerman: Okay.

Michael Hansen: The FX is a little different in that we have seen a change in the FX in this back half of the year, both in terms of the size of the move and the quickness of the move that is not usual for us. That's why we've called out the Canadian FX impact.

Speaker Change: The FX is a little different in that.

Speaker Change: We have seen a change in the FX.

Speaker Change: In this back half of the year, both in terms of the size of the move and the and the quickness of the move that is that is not usual for us and that's why we've called out the Canadian FX impact.

Jasper Bibb: Good. Okay. Thank you.

Andrew Steinerman: Good. Okay. Thank you.

Speaker Change: Great. Okay. Thank you.

Operator: Our next question comes from Justin Hauck from RW Baird. Please go ahead, Justin.

Speaker Change: And our next question comes from Justin Hauke from R. W. Baird. Please go ahead Justin.

Jared Mattingley: Yeah. Great. Thank you. I guess I just wanted to follow up on that question that was just asked because it would look like the Q4 organic, constant currency, and workday adjusted implied number with having that same FX headwind and the M&A contribution would be closer to 6% versus the high sevens that you've done in the last two quarters. So I guess I just am curious why there would be kind of a deceleration there. And then the second one, and this is also just purely a number question, but the $15 million gain on sale, which segment was that in on the SG&A line? Thank you.

[Analyst] (Baird): Yeah. Great. Thank you. I guess I just wanted to follow up on that question that was just asked because it would look like the Q4 organic, constant currency, and workday adjusted implied number with having that same FX headwind and the M&A contribution would be closer to 6% versus the high sevens that you've done in the last two quarters. So I guess I just am curious why there would be kind of a deceleration there. And then the second one, and this is also just purely a number question, but the $15 million gain on sale, which segment was that in on the SG&A line? Thank you.

Justin Hauke: Yes, great.

Justin Hauke: Thank you I guess I just wanted to follow up on.

Justin Hauke: That question that was just asked because it would look like the fourth quarter organic.

Justin Hauke: Constant currency and workday adjusted.

Justin Hauke: Implied number with with having that same FX headwind and the M&A contribution would be closer to like.

Justin Hauke: 6% versus the.

Justin Hauke: With 70 high Seventeens that you've done in the last few quarters, So I guess.

Speaker Change: I'm curious.

Justin Hauke: Why there would be kind of a deceleration there and then the second one and this is also just purely.

Justin Hauke: Question, but the $15 million gain on sale, which segment was that in on the SG&A line. Thank you.

Luke Fadenhofer: I'll answer the second question first. It was a spread across for both this year and last year, spread across each of our segments. From a Q4 revenue standpoint, Justin, let's keep in mind that there's one less workday, right? So that is 180 basis points of growth impact. So if you take that, if you take the guide range and solve it for the Q4, yes, you are going to see deceleration in total growth mainly because we have the headwind of one less workday. So when you add back that 180 basis points to our growth, you get something very similar to what we've been doing for the full year, both in growth, excluding the workday impact, as well as the organic growth. We expect to have a pretty good quarter in the Q4. That's what the guide is leading us to.

Todd Schneider: I'll answer the second question first. It was a spread across for both this year and last year, spread across each of our segments. From a Q4 revenue standpoint, Justin, let's keep in mind that there's one less workday, right? So that is 180 basis points of growth impact.

Justin Hauke: I'll ask answer the second question first that was.

Justin Hauke: It was spread across.

Justin Hauke: Both this year and last year spread across each of our segments.

Justin Hauke: From a fourth quarter revenue standpoint.

Justin Hauke: Justin let's keep in mind that there is one less workday right. So that is 180 basis points of growth impact.

So if you take that, if you take the guide range and solve it for the Q4, yes, you are going to see deceleration in total growth mainly because we have the headwind of one less workday. So when you add back that 180 basis points to our growth, you get something very similar to what we've been doing for the full year, both in growth, excluding the workday impact, as well as the organic growth. We expect to have a pretty good quarter in the Q4. That's what the guide is leading us to.

Justin Hauke: So if you take that if you take the guide.

Range.

Justin Hauke: And and solve it for the fourth quarter, Yes, you are going to see deceleration in total growth, mainly because we have the headwind of one less workday.

Justin Hauke: So when you when you add back that 180 basis points to our growth.

Justin Hauke: You get something.

Justin Hauke: Similar to what we've been doing for the full year both in growth.

Justin Hauke: Excluding the workday impact as well as the organic growth, we expect to have a pretty good quarter in the fourth quarter. That's what the guide is leading us to.

Jared Mattingley: Okay. All right. Thank you for clarifying that. I guess we'll check the math on the workdays, but it sounds like it should be similar to what you've done. Thank you.

[Analyst] (Baird): Okay. All right. Thank you for clarifying that. I guess we'll check the math on the workdays, but it sounds like it should be similar to what you've done. Thank you.

Justin Hauke: Okay, Alright, thank you for clarifying that.

Justin Hauke: We'll check the math on the work days, but it sounds like it should be similar to what you.

Justin Hauke: Thank you.

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

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

Jared Mattingley: Hi. Good morning. This is David Page on for Ashish. Thanks for taking our questions. Yeah. Can you just dive a little bit deeper into uniform direct sales? It looks like sequentially it performed better, but still a little down. So any color there? And then as a follow-up, just circling back to the capital allocation, can you just give us an overview of, I guess, the valuations and the multiples you're seeing out in the market, and absent of any large M&A, would you shift towards a buyback? Thank you.

David Paige: Hi. Good morning. This is David Page on for Ashish. Thanks for taking our questions. Yeah. Can you just dive a little bit deeper into uniform direct sales? It looks like sequentially it performed better, but still a little down. So any color there? And then as a follow-up, just circling back to the capital allocation, can you just give us an overview of, I guess, the valuations and the multiples you're seeing out in the market, and absent of any large M&A, would you shift towards a buyback? Thank you.

John: Hi, Good morning. This is John in for Ashish, Thanks for taking our questions.

Speaker Change: Yes.

Speaker Change: Diving, a little bit deeper into uniform direct sales it looks like sequentially it performed better but still down.

Speaker Change: So any color there and then follow up just circling back to the capital allocation.

Speaker Change: Can you just.

Speaker Change: Give us an overview.

Speaker Change: Yes.

Speaker Change: <unk> and the multiples youre seeing out in the market and absent of any large M&A would you shift.

Speaker Change: Our buyback thank you.

Todd Schneider: Yes. Thanks for the question. First off, our Uniform Direct Sale business is historically, there is some lumpiness to that business. It was improved sequentially, but that's a very important business to us. It's a strategic business. We sell a lot into those customers, not just Uniform Direct Sale, but they are outstanding prospects for Uniform Rental, also for Facility Services, First Aid, and fire services. So that's a strategic business for us that sets the table for us to sell additional services. And yeah, there can be some lumpiness, but we think we're well positioned in that business. Regarding capital allocation, just to remind you, our number one use of cash is investing back in the business.

Speaker Change: Yes, thanks for the question.

Speaker Change: First off our uniform direct sale business.

Speaker Change: Historically, there is some lumpiness to that business.

Speaker Change: Was improved sequentially.

Speaker Change: And.

Speaker Change: But we are that's a very important business to us it's a strategic business.

Yes.

Speaker Change: We sell a lot into those customers not just uniform direct sale, but they are outstanding prospects for uniform rental also for facility services first aid and fire services. So that's a strategic.

So that's a strategic business for us that sets the table for us to sell additional services. And yeah, there can be some lumpiness, but we think we're well positioned in that business. Regarding capital allocation, just to remind you, our number one use of cash is investing back in the business.

Speaker Change: Business for us that.

Speaker Change: Sets the table for us to sell additional services and yes. There are there can be some lumpiness.

Speaker Change: But we think we're well positioned.

Speaker Change: In that business.

Speaker Change: Regarding capital allocation.

Speaker Change: Just to remind you our number one use of cash is investing back in the business. So we want to invest back in the business because we want to make sure that we are positioning our people to be highly successful.

Todd Schneider: So we want to invest back in the business because we want to make sure that we're positioning our people to be highly successful with the appropriate capacity, the appropriate technology, tools, products, services, and training. All that is very important. Second item for us would be M&A. And I think we've shown to be very good stewards of capital as it relates to that. We're making strategic acquisitions, really attractive businesses that we can bring our products and services to and also bring our efficiencies to. But it starts with, when you have the strategic M&A, it starts with the most important resources there. Certainly, your products, trucks, and systems, what have you, but it's really the people and it's our network. And then lastly, buyback. We have dividend buyback returning back to the shareholders. As I mentioned, 14 March, we paid out our dividend.

So we want to invest back in the business because we want to make sure that we're positioning our people to be highly successful with the appropriate capacity, the appropriate technology, tools, products, services, and training. All that is very important. Second item for us would be M&A. And I think we've shown to be very good stewards of capital as it relates to that.

Speaker Change: But with the appropriate capacity the appropriate technology tools products services training all that is very important.

Speaker Change: <unk>.

Speaker Change: Second.

Speaker Change: Item for us would be M&A and I think we've shown to be very good stewards of capital as it relates to that we're making.

We're making strategic acquisitions, really attractive businesses that we can bring our products and services to and also bring our efficiencies to. But it starts with, when you have the strategic M&A, it starts with the most important resources there. Certainly, your products, trucks, and systems, what have you, but it's really the people and it's our network. And then lastly, buyback. We have dividend buyback returning back to the shareholders. As I mentioned, 14 March, we paid out our dividend.

Speaker Change: Strategic.

Speaker Change: Acquisitions really attractive businesses that.

Speaker Change: That we can.

Speaker Change: Bringing our products and services to and also bring our efficiencies too and.

Speaker Change: But it starts with when you're when you have those strategic M&A.

Speaker Change: With the.

Speaker Change: The most important resources they are certainly our products in trucks in CIS.

Speaker Change: Systems, what have you, but it's really the people and.

Speaker Change: Our network.

Speaker Change: And then lastly.

Speaker Change: Buyback, we have dividend buyback returning back to the shareholders as I mentioned March 14th.

Speaker Change: We paid out our dividend and then buy back we have always looked at buyback as.

Todd Schneider: And then buyback, we have always looked at buyback as an opportunistic way to redeploy capital back to our shareholders and give a return. And there were no buybacks in Q3, but we think our balance sheet puts us in an incredibly good position to deploy as needed.

And then buyback, we have always looked at buyback as an opportunistic way to redeploy capital back to our shareholders and give a return. And there were no buybacks in Q3, but we think our balance sheet puts us in an incredibly good position to deploy as needed.

Speaker Change: A.

Speaker Change: Opportunistic way too.

Speaker Change: Redeploy capital back to our shareholders and give a return.

Speaker Change: And.

Speaker Change: There were no buybacks in Q3, but we see we think we're our balance sheet puts us in incredibly good position to.

Speaker Change: To deploy as needed.

Jared Mattingley: Great. Thank you.

David Paige: Great. Thank you.

Speaker Change: Great. Thank you.

Speaker Change: Okay.

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

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

Speaker Change: Okay.

Jared Mattingley: Thanks very much. I just wanted to touch base on, I think it's pronounced Hibbich, the acquisition you made a quarter or two ago. Any learnings or just a progress report there and any evolution or opportunity to offer new Cintas products, not only stemming from perhaps that, but from other acquisitions or ideas or initiatives you've come with recently? Thanks.

Scott Schneeberger: Thanks very much. I just wanted to touch base on, I think it's pronounced Hibbich, the acquisition you made a quarter or two ago. Any learnings or just a progress report there and any evolution or opportunity to offer new Cintas products, not only stemming from perhaps that, but from other acquisitions or ideas or initiatives you've come with recently? Thanks.

Speaker Change: Thanks very much.

Speaker Change: I just wanted to I wanted to touch base on.

Speaker Change: It's pronounced.

Speaker Change: The acquisition, you made a quarter or two ago.

Speaker Change: Any any learnings or just a progress report there and any any evolution or opportunity to offer new cintas products.

Speaker Change: Not only stemming from perhaps that but from other acquisitions or ideas or initiatives you've come with recently thanks.

Todd Schneider: Thanks for the question, Scott. Hieber's is how you pronounce it. It's a company that we've admired for decades. That was in a particular case where it was in the family for generations. The owner, Jim Vaudreuil, passed away. The family then saw it as the most appropriate decision to merge their business in with Cintas. Great example of an outstanding company, great customer relationships. We received capacity in those markets as well. The most important thing that we got there were certainly the people and the customers. We love the capacity, but it's about the now Cintas employee partners and their customers. Every time we acquire a company, we learn and we get better as a result of that. We learn from them. Hopefully, they learn a little from us. The most important thing is we get usually really good people.

Speaker Change: Thanks for the question Scott Hips is how you pronounce it.

Speaker Change: And it's a company that we've admired for.

Speaker Change: Decades.

Speaker Change: And.

Speaker Change: And that was in our particular case, where it was in the family for.

Speaker Change: Generations.

Speaker Change: And the owner, Jim Bob Dray passed away and in.

Speaker Change: In the family.

Speaker Change: Solid as the most appropriate decision too.

Speaker Change: Two merger business and Lucent us so.

Speaker Change: A great example of an outstanding company.

Speaker Change: <unk> customer relationships.

Speaker Change: We received.

Speaker Change: Capacity in those markets as well.

The most important thing that we got there were certainly the people and the customers. We love the capacity, but it's about the now Cintas employee partners and their customers. Every time we acquire a company, we learn and we get better as a result of that. We learn from them. Hopefully, they learn a little from us. The most important thing is we get usually really good people. In that case, we absolutely did. Great customers that we're going to try to make sure we nurture and hang on to and grow.

Speaker Change: But the most important thing that we got there were certainly the people and the customers we loved the capacity.

Speaker Change: But it's about.

Now Centas employee partners and.

Speaker Change: And their customers and in every time we.

Speaker Change: Acquire a company.

Speaker Change: We learn and we get better as a result of that we learn from them hopefully they learned a little from us but.

Speaker Change: But the most important thing is we get usually really good people in that case, we absolutely did.

Todd Schneider: In that case, we absolutely did. Great customers that we're going to try to make sure we nurture and hang on to and grow.

Speaker Change: And great customers that we're going to try to make sure we nurture and hang on to enter and grow.

Jared Mattingley: Great. Thanks. Appreciate that. For the follow-up, just free cash flow has been very strong this year. Looks like in working capital, you've been making a lot of improvements. Just curious, what has occurred structurally, perhaps thinking ahead to the out years? Are you going to be able to achieve a new level? How should we think about free cash flow as a percent of revenue, perhaps? Are you moving in a very positive direction? Maybe some discussion of how that's occurred. Thanks.

Scott Schneeberger: Great. Thanks. Appreciate that. For the follow-up, just free cash flow has been very strong this year. Looks like in working capital, you've been making a lot of improvements. Just curious, what has occurred structurally, perhaps thinking ahead to the out years? Are you going to be able to achieve a new level? How should we think about free cash flow as a percent of revenue, perhaps? Are you moving in a very positive direction? Maybe some discussion of how that's occurred. Thanks.

Speaker Change: Great. Thanks, appreciate that and for the follow up just free cash flow has been very strong this year. It looks like in working capital you've been making a lot of improvement just curious whats what has occurred structurally perhaps.

Speaker Change: Thinking ahead to the out years.

Speaker Change: Or are you going to be able to achieve a new level.

Speaker Change: How should we think about free cash flow as a percent of revenue perhaps in an hour.

Speaker Change: Moving in a very positive direction and maybe some discussion of how that occurred.

Luke Fadenhofer: Sure, Scott. Free cash flow has been strong for us. Last year was quite a strong year, and we've grown about 15% over last year. We have generally, from a net income conversion to free cash flow, we've generally been in a 90% to 100% type of a range. That's where we are this year. That's where our expectation would be as we go into the next several years. We have, there are times, for example, where we may spend a little bit more on inventory as we did in Q3. You saw inventory go up just a little bit to maybe get out ahead of the tariffs.

Michael Hansen: Sure, Scott. Free cash flow has been strong for us. Last year was quite a strong year, and we've grown about 15% over last year. We have generally, from a net income conversion to free cash flow, we've generally been in a 90% to 100% type of a range. That's where we are this year. That's where our expectation would be as we go into the next several years. We have, there are times, for example, where we may spend a little bit more on inventory as we did in Q3. You saw inventory go up just a little bit to maybe get out ahead of the tariffs.

Scott: Sure Scott.

Speaker Change: Free cash flow has been strong for us and last year was quite a strong year and we've grown about 15% over over last year.

Speaker Change: We have generally from a net income conversion to free cash flow, we've generally been in the 90% to 100% type.

Speaker Change: <unk> type of a range and Thats, where we are this year and thats, where our expectation would be as we go into the next several years.

Speaker Change: We are we have there are times for example, where we may we may spend a little bit more on inventory as we did in the third quarter. You saw inventory go up just a little bit to maybe get out ahead of the tariffs Todd talked about how we're dealing with tariffs and maybe make a little bit more of an investment.

Luke Fadenhofer: Todd talked about how we're dealing with tariffs and maybe make a little bit more of an investment in the near term to make sure that we've got the inventory we want at the cost that we want. So there can be various quarters, ups and downs. But generally speaking, we like our ops cash flow to be in that 110 to 120 range. And we'd like our free cash flow to be in that 90% to 100% range. I would expect that going forward too.

Todd talked about how we're dealing with tariffs and maybe make a little bit more of an investment in the near term to make sure that we've got the inventory we want at the cost that we want. So there can be various quarters, ups and downs. But generally speaking, we like our ops cash flow to be in that 110 to 120 range. And we'd like our free cash flow to be in that 90% to 100% range. I would expect that going forward too.

Speaker Change: In the near term.

Speaker Change: To make sure that we've got the inventory we want that the cost that we want.

Speaker Change: And so there can be various <unk>.

Speaker Change: <unk> has ups and downs, but generally speaking we like.

Speaker Change: Our ops cash flow to be in that 110 to 120 range and we like our free cash flow to be in that 90% to 100% range I would expect that going forward too.

Jared Mattingley: Great. Thanks.

Scott Schneeberger: Great. Thanks.

Speaker Change: Great. Thanks.

Speaker Change: Okay.

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

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

Speaker Change: Please go ahead Shlomo hi.

Shlomo Rosenbaum: Hi. Thank you. I just have a few questions out there. Todd, are you seeing any change at all competitively? One of your major competitors has just seen a lot of change at the top of their organization. I was just wondering, is that something that you kind of notice on the ground, or is that not really noticed on the ground over the last kind of year, year and a half?

Speaker Change: Hi, Thank you I just have a few.

Speaker Change: Questions out there.

Speaker Change: What are you seeing any change at all competitively one of your.

Speaker Change: Major competitors is just seen.

Speaker Change: <unk> seen a lot of change on the top of the organization and I was just wondering is that something that you kind of notice on the ground or is that not really noticed on the ground over the last kind of year year and a half.

Todd Schneider: Yeah. So good morning, Shlomo. Thanks for the question. We operate in a very competitive industry. It always has been. So nothing noteworthy as far as change there. Certainly, we're aware of the changes in the organization at the top level of the organization you're speaking of. But I don't know that that's changed any dynamic of how people are taking care of their customers and what have you. And just keep in mind that how our new business wins tend to come from the vast majority are from. We call it no programmers, those who are not renting when we walk in and when we walk out, they are. So yeah, we love winning business in all ways. But for the past several decades, we've grown our business primarily by growing the pie of customers, those who were sourcing products somehow.

Shlomo Rosenbaum: So good morning, Shlomo Thanks for the question.

Speaker Change: It's.

Speaker Change: We operate in a very competitive industry. It always has been so nothing noteworthy as far as the change there.

Speaker Change: Certainly we're aware of the changes in the organization at the top level of the organization you're speaking of but.

Speaker Change: But I don't know that Thats changed any dynamic of how people are taking care of their customers and and what have you.

And just keep in mind that how our new business wins tend to come from the vast majority are from. We call it no programmers, those who are not renting when we walk in and when we walk out, they are. So yeah, we love winning business in all ways. But for the past several decades, we've grown our business primarily by growing the pie of customers, those who were sourcing products somehow.

Speaker Change: And just keep in mind that.

Speaker Change: How we are new business wins tend to come from.

Speaker Change: The vast majority are from.

Speaker Change: Company call it no programmers those who we.

Speaker Change: Or are not.

Speaker Change: Renting when we walk in and we will walk out they are.

Speaker Change: So yes, we.

Speaker Change: Lovely.

Speaker Change: Winning business in all ways.

Speaker Change: But.

Speaker Change: For the.

Speaker Change: Past several decades.

Speaker Change: We've grown our business primarily by growing the pie of customers those who were sourcing product somehow they might be buying it on the internet or they might be buying at costco or walmart or or what have you.

Todd Schneider: They might be buying it on the internet, or they might be buying it at Costco or Walmart or what have you. We've shown them a better, faster, smarter way. Even with garments, especially with garments, I would say everybody's wearing garments. That's just a matter of what's the best way to obtain those garments. So in fact, I've got a couple of examples I'll give you. We recently converted over a large equipment manufacturer that was purchasing flame-resistant clothing from a competitor. They were really excited about our Carhartt-branded flame-resistant clothing line. They were looking for a higher quality garment to improve employee comfort and overall satisfaction. As we dug into it, we were actually able to save them some dollars in the rental program because of the turnovers that they had.

They might be buying it on the internet, or they might be buying it at Costco or Walmart or what have you. We've shown them a better, faster, smarter way. Even with garments, especially with garments, I would say everybody's wearing garments. That's just a matter of what's the best way to obtain those garments. So in fact, I've got a couple of examples I'll give you. We recently converted over a large equipment manufacturer that was purchasing flame-resistant clothing from a competitor.

Speaker Change: And we show them, a better faster smarter way even with garments.

Speaker Change: Especially the garments I would say.

Speaker Change: Everybody is wearing garments and thats just matter of what's the best way to.

Speaker Change: Obtain those garments.

Speaker Change: I've got a couple of examples I'll give you.

Speaker Change: We recently converted over.

Speaker Change: A large equipment manufacturer that was purchasing flame resistant clothing from a competitor.

They were really excited about our Carhartt-branded flame-resistant clothing line. They were looking for a higher quality garment to improve employee comfort and overall satisfaction. As we dug into it, we were actually able to save them some dollars in the rental program because of the turnovers that they had.

Speaker Change: They were really excited about our carhartt branded carhartt branded.

Speaker Change: Climate resisting clothing line and they were looking for a higher quality garment to improve it.

Speaker Change: Employee comfort and overall satisfaction and as we dug into it we're actually able to save them some dollars.

Speaker Change: In the end the rental program because of the turnovers that they had.

Todd Schneider: And also, our first aid and safety team at the same time was able to provide some essential training for that customer around their electrical program in conjunction with some recent OSHA guidance change on that subject. So that's an example where they were certainly wearing garments, but they were not taking it from a rental competitor there. But it resulted for the customer in a safer, more compliant customer with happier wears and lower overall costs. So I've got other examples like that that we've seen. We just recently converted over a Fortune 500 global field service company with thousands of remote service technicians that were in a direct purchase program. Again, they were dealing with long lead times. How do they repair the garments? How do they replace them? Size changes, new hires. And the challenge is the workforce doesn't report back to a central location.

And also, our first aid and safety team at the same time was able to provide some essential training for that customer around their electrical program in conjunction with some recent OSHA guidance change on that subject. So that's an example where they were certainly wearing garments, but they were not taking it from a rental competitor there. But it resulted for the customer in a safer, more compliant customer with happier wears and lower overall costs.

Speaker Change: And also our first aid and safety team at the same time was able to provide some essential training for that customer around our electrical program in conjunction with some recent osha guidance change on that subject. So.

Speaker Change: That's an example, where.

Speaker Change: They were certainly wherein garments they were but they are.

Speaker Change: We're not taking up from a rental competitor there.

Speaker Change: But they but it resulted for the customer in a safer more compliant customer with.

Speaker Change: With happier wears and lower overall costs so.

So I've got other examples like that that we've seen. We just recently converted over a Fortune 500 global field service company with thousands of remote service technicians that were in a direct purchase program. Again, they were dealing with long lead times. How do they repair the garments? How do they replace them? Size changes, new hires. And the challenge is the workforce doesn't report back to a central location.

Speaker Change: I've got other examples like that.

Speaker Change: That we've seen.

Speaker Change: We just recently converted over a fortune 500 global field service company.

Speaker Change: With thousands of remote service technicians.

Speaker Change: And we're in a.

Speaker Change: Our direct purchase program again.

Speaker Change: And with long lead times.

Speaker Change: How do they repair the garments, how they replace some size changes new hires.

Speaker Change: And the challenge is the workforce doesn't report back to a central location. So in that case, we place them in a managed program whether employees were able to clean their own product.

Todd Schneider: So in that case, we placed them in a managed program where their employees were able to clean their own product, clean the garments, but we manage the inventory, size changes, repairs, placement. So I give those examples because, yeah, certainly we're always interested in the competitive landscape. It's always been competitive, always will be. But we see the greatest opportunity is to expand that pie and sell programs, manage programs into companies that are buying product or haven't seen the value yet in having a uniform program. And we grow that pie. So it's really important to us. It's been a key strategic lever for us for decades and will continue into the future.

So in that case, we placed them in a managed program where their employees were able to clean their own product, clean the garments, but we manage the inventory, size changes, repairs, placement. So I give those examples because, yeah, certainly we're always interested in the competitive landscape. It's always been competitive, always will be.

Speaker Change: Cleaning the garments, but we manage the inventory size changes prepares placements so.

Speaker Change: I give those examples because yeah, certainly we're always interested in the competitive landscape, it's always been competitive always will be.

But we see the greatest opportunity is to expand that pie and sell programs, manage programs into companies that are buying product or haven't seen the value yet in having a uniform program. And we grow that pie. So it's really important to us. It's been a key strategic lever for us for decades and will continue into the future.

Speaker Change: But where we see the greatest opportunity is to expand that pie and cell programs managed programs into companies that are buying product.

Speaker Change: And or Havent seen the value, yet and having a uniform program.

Speaker Change: And we grow that pie. So it's really important to us it's been a key strategic lever for us for decades and will continue into the future.

Shlomo Rosenbaum: Great. Thank you. Just one follow-up from Mike. Can you just give us a heads-up in what the days look like for the quarters in fiscal year 2026 for our modeling? Is the year the same? Are there any nuances between the quarters?

Speaker Change: Great. Thank you just one follow up for Mike can you just give us a heads up and what the days look like for the quarters in fiscal year 'twenty six for modeling like as the year the same or are there any nuances between the quarters.

Luke Fadenhofer: Shlomo, they are all the same as current fiscal 2025. So the quarters, the days per quarter in fiscal 2026 are the same as in fiscal 2025.

Michael Hansen: Shlomo, they are all the same as current fiscal 2025. So the quarters, the days per quarter in fiscal 2026 are the same as in fiscal 2025.

Mike: Shlomo they are all the same.

Speaker Change: As as current.

Speaker Change: Fiscal 'twenty five set of quarters.

Speaker Change: The days per quarter in fiscal 'twenty six are the same as in <unk> as in <unk>.

Speaker Change: Fiscal 'twenty five.

Shlomo Rosenbaum: Okay. Keep going.

Speaker Change: 65, 65 million every quarter.

Luke Fadenhofer: 65 in every quarter.

Michael Hansen: 65 in every quarter.

Shlomo Rosenbaum: Thank you.

Speaker Change: Thank you.

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

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

Harold Antor: Hello. This is Harold Antor for Stephanie Moore. So I guess just real quick on the tech investment side, you talk about SAP, SmartTruck, and MyCintas portal. I know you still have some. I know you're still rolling it out. So if you could just provide us a sense of where you are, at least which inning you're in along that journey. And I guess if you're doing any other incremental tech investments in the business that you're waiting to materialize, that'd be helpful. Thank you.

Speaker Change: Hello. This is <unk> on for Stephanie more so I guess just real quick on the <unk>.

Speaker Change: Tech investments.

Speaker Change: Talk about Sap's, one might swing to us ports. So I know you still have some I know youre still rules.

Speaker Change: So you could just provide us a sense of where you are at least like which in the year and.

Speaker Change: Along that journey and I guess, if youre doing any other incremental investments in the business that you're waiting to materialize.

Speaker Change: Dave.

Todd Schneider: Yeah. Harold, thanks for the question. We're always making tech investments because it's important to make our employee partners more successful and provide more value to our customers. So specific to the MyCintas portal, yeah, it is rolled out. Once we roll out the Fire business onto SAP, all of our route-based businesses will be on that same portal. And we see advantages absolutely today, and we see advantages coming in the future as we expand it out, but also offer more benefits to the customers. So when you think about it, they can pay. They can make service requests. They can manage their program in totality, and they can buy. So all that is an additional conduit for the customer to be able to work with us and make it easier to work with us.

Dave: Yes, Hi, Rob we are thanks for the question.

Speaker Change: Always making tech investments.

Speaker Change: Because it's it's important to make our employee partners.

Speaker Change: More successful and provide more value to our customers. So.

Speaker Change: Specific to the <unk> portal it is rolled out.

Speaker Change: Once we rollout the fire business on SAP.

Speaker Change: All of our route based businesses will be on that same portal.

And we see advantages absolutely today, and we see advantages coming in the future as we expand it out, but also offer more benefits to the customers. So when you think about it, they can pay. They can make service requests. They can manage their program in totality, and they can buy. So all that is an additional conduit for the customer to be able to work with us and make it easier to work with us.

Speaker Change: And we see.

Speaker Change: Well.

Speaker Change: Advantages, absolutely today, and we see advantages coming in the future.

Speaker Change: As we.

Speaker Change: Expanded out but also.

For a more.

Speaker Change: Benefits to the customers. So when you think about it they can pay they can service make service requests.

Speaker Change: Can manage there.

Speaker Change: Their program in totality.

Speaker Change: Bye.

Speaker Change: So all that.

Speaker Change: As an additional conduit.

Speaker Change: For the customer to be able to work with us and make it easier to work for a work with us so.

Todd Schneider: And that's a fundamental concept that we have here is that we want to make it easier for the customer to do business with us and make it easier for our employee partners to do their jobs. So yeah, you'll see continued investment in that, and that'll be going on for many, many years.

And that's a fundamental concept that we have here is that we want to make it easier for the customer to do business with us and make it easier for our employee partners to do their jobs. So yeah, you'll see continued investment in that, and that'll be going on for many, many years.

Speaker Change: And that's a fundamental concept that we have years that we want to make it easier for the customer to do business with us.

Speaker Change: And make it easier for our our employee partners.

Speaker Change: To do their jobs. So yes, you will see continued investment in that and.

Speaker Change: That'll be going on for many many years.

Harold Antor: Thank you for the call-out. I guess just on your verticals, healthcare, hospitality, food services, anything to call out there, are you seeing any new business wins in any particular vertical this quarter or any in the pipeline that you would like to call out? Then I guess also on the new business win side, it sounds like you've seen some new business wins on the larger side. When you look at your new business wins, are they more so coming from national accounts now versus small businesses? Anything around there that would be helpful? Thank you.

Speaker Change: Thank you for the color and I guess just.

Speaker Change: On your broker calls in the health care hospitality food services anything to call out there or are you seeing any new business wins any particular vertical.

Speaker Change: This quarter or in the pipeline that you'd like to call out.

Speaker Change: And then I guess also on the new business side, it sounds like you're seeing some new business wins on the larger side. So are you. When you look at your new business wins are they more so coming from national accounts versus small businesses.

Speaker Change: We're on.

Speaker Change: That will be helpful. Thank you.

Todd Schneider: Thanks for the question, Harold. Just to address the back half of your question, the examples I gave you were a couple of larger ones, but we have wins of all shapes and sizes, all industries, really small companies, or larger ones, you name it, we have it. But as far as the verticals are concerned, they're all performing well. We're happy with our investments there. We think we've chosen really good verticals. And we've organized around them as well. Servicing them, selling them, managing them, all that is very important. In the healthcare, I'll give you a couple you asked for: a couple of examples of wins. We rolled out our healthcare privacy curtain business product line about a year or so ago. And we just recently sold a large multi-state healthcare network that we're into this privacy curtain service.

Speaker Change: Thanks for the question Harold.

Speaker Change: Just two.

Speaker Change: The address the back.

Speaker Change: Back half of your question are the examples I gave you were a couple of larger ones, but.

Speaker Change: We have wins of all shapes and sizes all industries.

Speaker Change: Really small companies or larger ones you name it we have it.

Speaker Change: But as far as the verticals are concerned they're all performing well.

We're happy with.

We think we've chosen really good verticals. And we've organized around them as well. Servicing them, selling them, managing them, all that is very important. In the healthcare, I'll give you a couple you asked for: a couple of examples of wins. We rolled out our healthcare privacy curtain business product line about a year or so ago. And we just recently sold a large multi-state healthcare network that we're into this privacy curtain service.

Speaker Change: Our investments here and we think we've chosen really good verticals.

Speaker Change: And we've organized around them as well servicing them selling them managing them all of that is very important.

Speaker Change: In the health care I'll give you a couple of you asked for a couple of them.

Speaker Change: And examples of wins.

Speaker Change: We rolled out our healthcare privacy carton business.

Speaker Change: <unk> line.

Speaker Change: About a year or so ago.

Speaker Change: And we just recently.

Speaker Change: So a large multistate healthcare network.

Speaker Change: That we're.

Speaker Change: Into this privacy curtain serviced prior to us the.

Todd Schneider: Prior to us, the customer was trying to manage the tracking, the exchange, the cleaning of the curtains themselves, which is what most of that market is. And we came in with our patented curtain system and proprietary technology. And it's had a really positive impact on their business. We received a letter from the customer, and they told us the following. They told us, first off, that our services allowed them to now achieve 100% compliance with regulators. The program has generated over 20% cost savings for them from them managing themselves. It has also helped them reduce hospital-acquired infections, which is obviously very, very important. And then lastly, our programs enhance the patient and employee satisfaction level at the hospital network. So a lot of wins there, and that came from the customer. And I'll give you one other one. We had from a healthcare scrub dispensing program.

Prior to us, the customer was trying to manage the tracking, the exchange, the cleaning of the curtains themselves, which is what most of that market is. And we came in with our patented curtain system and proprietary technology. And it's had a really positive impact on their business. We received a letter from the customer, and they told us the following. They told us, first off, that our services allowed them to now achieve 100% compliance with regulators.

Speaker Change: The customer is trying to manage the tracking the exchange the cleaning of the curtains themselves.

Speaker Change: Which is what most of that market is.

Speaker Change: And we came in with our patented curtains system and proprietary technology.

Speaker Change: And it had a really positive impact on their business.

Speaker Change: We received a letter from the customer and they told US the following they told US first off that our service has allowed them to have to.

Speaker Change: <unk> now achieved 100% compliance with regulators.

The program has generated over 20% cost savings for them from them managing themselves. It has also helped them reduce hospital-acquired infections, which is obviously very, very important. And then lastly, our programs enhance the patient and employee satisfaction level at the hospital network. So a lot of wins there, and that came from the customer. And I'll give you one other one. We had from a healthcare scrub dispensing program.

Speaker Change: The program has generated over 20% savings cost savings for them.

Theyre managing themselves.

Speaker Change: It's also helped them reduce hospital acquired infections, which is obviously very very important.

Speaker Change: And then lastly in our programs enhance the patient and employee satisfaction level.

Speaker Change: At the hospital network, so a lot of wins, there and that came from the customer.

Speaker Change: And I'll give you one other one we had from a.

Speaker Change: Healthcare scrub dispensing program.

Todd Schneider: We converted over recently a 14-hospital network that was renting scrubs from a traditional supplier, but one that had inadequate inventory control. As a result, lost scrubs were a real problem for the customer and showing up in lost charges and a lack of supply for the wearers, which was a real pain point for the administrators, the hospital administrators. Because yeah, the cost was a real problem. But when they didn't have product for the employees, then that's a really big problem. We deployed our patented dispensing technology, which eliminated the lost charges and the frustration around the lack of supply. But it also allowed us to invest in a more comfortable, high-quality scrub at a net savings for the customer. A real win-win for the healthcare worker and the administrators.

We converted over recently a 14-hospital network that was renting scrubs from a traditional supplier, but one that had inadequate inventory control. As a result, lost scrubs were a real problem for the customer and showing up in lost charges and a lack of supply for the wearers, which was a real pain point for the administrators, the hospital administrators. Because yeah, the cost was a real problem.

Speaker Change: We converted over recently of 14 Hospital network that was renting scrubbed from a traditional supplier, but but one that had inadequate inventory control.

Speaker Change: And as a result lost scrubbed, where a real problem for the customer and showing up in loss charges.

Speaker Change: And a lack of supply for the wearers, which was a real pain point for the administrators of the hospital administrators.

Speaker Change: Because yes the cost was.

But when they didn't have product for the employees, then that's a really big problem. We deployed our patented dispensing technology, which eliminated the lost charges and the frustration around the lack of supply. But it also allowed us to invest in a more comfortable, high-quality scrub at a net savings for the customer. A real win-win for the healthcare worker and the administrators.Another example of in both those cases, we're deploying better products, technology, positioning our people to take better care of the customer. In almost all those cases, we're helping to save them money.

Speaker Change: It's a real problem, but when they didn't have product for the employees then.

Speaker Change: That's a really big problem. So we deployed our patented dispensing technology.

Speaker Change: <unk> eliminated the loss charges.

Speaker Change: And the frustration around the lack of supply.

Speaker Change: It also allowed us to invest in a more comfortable high quality scrub.

Speaker Change: At a net savings for the customer so a real win win for the healthcare worker and the Ministry of <unk>.

Todd Schneider: Another example of in both those cases, we're deploying better products, technology, positioning our people to take better care of the customer. In almost all those cases, we're helping to save them money.

Speaker Change: Another example of.

Speaker Change: In both those cases.

Speaker Change: We are deploying better products technology position.

Speaker Change: Positioning our people to take better care of the customer.

Speaker Change: Most almost all of those cases, we're helping to save them money.

Speaker Change: Okay.

Harold Antor: Thank you for all the call-out. Really appreciate it.

Speaker Change: Thank you for the color.

Speaker Change: We appreciate it.

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

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

Toni Kaplan: Thanks so much. I was hoping you could give us an update on cross-selling, how many products on average each customer is purchasing, how that's trended. Just maybe where are you seeing the most cross-selling or add-ons? Is there a specific type of product or within a certain vertical? Just anything on cross-selling would be helpful.

Toni Kaplan: Thanks, so much.

Speaker Change: You could give us an update on cross selling how many products on average each customer's purchasing how that's trended.

Toni Kaplan: Maybe what where are you seeing the most cross selling or add ons like is there a specific type of product or within a certain vertical.

Toni Kaplan: Anything on crossline be helpful.

Todd Schneider: Tony, great question. Our cross-selling efforts are going quite well, but we're still very much in the early innings. As we've described in the past, our most penetrated item are walk-off mats. But we have opportunities to sell a vast majority of our products into even our rental customers, separate from that to cross-sell within the business unit. So we're really having great success with each of them. Our fire business is the only business that we're in where you legally have to have it in order to operate your business. So every business in the country is a prospect for us in that case. So that's certainly a simpler one because every customer that we service is a great candidate for our fire service, whether it be a sprinkler alarm, fire extinguishers, emergency lights, etc.

Toni Kaplan: Ah.

Toni Kaplan: Tony Great question.

Toni Kaplan: Yes.

Toni Kaplan: Our cross selling efforts are going quite well.

Toni Kaplan: But we're still very much in the early innings.

Toni Kaplan: I think we've described in the past.

Toni Kaplan: Our most penetrated item our walkoff mats.

Toni Kaplan: But we have.

Toni Kaplan: Opportunities to sell.

Toni Kaplan: A vast majority of our products into.

Toni Kaplan: Our even our rental customers separate from that to sell to cross sell within the business unit. So.

Toni Kaplan: So really having great success with each of them.

Our fire business is the only business that we're in where you legally have to have it in order to operate your business. So every business in the country is a prospect for us in that case. So that's certainly a simpler one because every customer that we service is a great candidate for our fire service, whether it be a sprinkler alarm, fire extinguishers, emergency lights, etc.

Toni Kaplan: Our fire business is the only business that we're in where you legally have to have it in order to operate your business. So.

Toni Kaplan: Every every.

Toni Kaplan: Business in.

Toni Kaplan: The country, our prospect for us in that case, so thats.

Toni Kaplan: Certainly a simpler one because every customer that we service is a.

Toni Kaplan: <unk> is a great candidate for our fire surface, whether it would be.

Toni Kaplan: Sprinkler.

Toni Kaplan: Alarm.

Toni Kaplan: Fire extinguishers emergency lights et cetera, but we're having great success.

Todd Schneider: But we're having great success and continue to have great success with cross-selling our first-aid products, AEDs, eyewash, WaterBreak, first-aid cabinets. That's going quite well. But the opportunity we have is immense to cross-sell and upsell within our current customer base, all while we're focused on bringing in additional customers into the fray.

But we're having great success and continue to have great success with cross-selling our first-aid products, AEDs, eyewash, WaterBreak, first-aid cabinets. That's going quite well. But the opportunity we have is immense to cross-sell and upsell within our current customer base, all while we're focused on bringing in additional customers into the fray.

Toni Kaplan: And continue to have great success with cross selling our first aid products.

Toni Kaplan: Aedes eyewash water break.

Toni Kaplan: First aid cabinets, that's going quite well, but the opportunity. We have is immense to cross sell and upsell within our current customer base.

Toni Kaplan: All while we're focused on bringing in additional customers.

Toni Kaplan: Into the Fray.

Toni Kaplan: Sure.

Toni Kaplan: Great. And then just as a follow-up on outsourcing, we talked about it a couple of times, how there could be an opportunity if customers want to reduce their budgets that you can provide some help to them there. Just wanted to get a sense of historically when you've seen sort of periods of budget tightening or uncertainty. Do you tend to see that outsourcing accelerate? Obviously, that could be offset by other things, but have you seen that historically, and just maybe an update on outsourcing and how that's been trending over the last, call it, few months?

Toni Kaplan: Great and then just as a follow up on outsourcing we talked about it a couple of times, how there could be an opportunity if customers want out.

Toni Kaplan: Reduce their budgets that you can provide some help to them Theyre just wanted to get a sense of historically, when you've seen sort of periods of budget tightening or uncertainty.

Toni Kaplan: Do you tend to see that outsourcing accelerate like just.

Toni Kaplan: Obviously that could be offset by other things but.

Toni Kaplan: Have you seen that historically and just maybe.

Toni Kaplan: To date on an outsourcing and how that's been trending over the last.

Toni Kaplan: A few months.

Todd Schneider: Tony, it's a good question. If a customer cuts back on the number of employees that they may have, there's still work to be done. In many cases, they look to an alternative source to help them get that work done. Because we're there, we have eyes, ears, and minds in our customers on a very, very frequent basis. It allows us to see opportunities and help them with those. In many cases, we hear from them, "Oh my gosh, you can take care of this for me. Thank you. I don't have to put the cash flow up upfront, and I can just outsource it to you." So that happens. That absolutely happens.

Tony: Tony It's good question.

Toni Kaplan: When.

Toni Kaplan: Customer cuts back on the number of employees that they may have there's still work to be done.

Toni Kaplan: And.

Toni Kaplan: In many cases, they look to buy an alternative source to help them get that work done and because we're there we have eyes ears in mind in our customers on a very very frequent basis. It allows us to see opportunities and help them with those.

Toni Kaplan: In many cases, we hear from them Oh, My Gosh, you didn't take care of this for me. Thank you.

Toni Kaplan: I don't have to put the cash flow up.

Toni Kaplan: Hunt.

Toni Kaplan: And I can just outsource it to you.

Toni Kaplan: So that happens that absolutely happens.

Todd Schneider: When customers are trying to cut back on cost, in many cases, they might be spending money with another vendor that's not a traditional direct competitor that you would think of, but they might be buying it from a website or a retail network. And as a result, in many cases, because we're there and we can manage it for them, we can help them reduce the cost of running the program and allow them to be freed up to take care of their employees and their customers. So we see that as an opportunity, has been an opportunity, and will be in the future. And we'll pivot as appropriate based upon what we see with our customer base.

When customers are trying to cut back on cost, in many cases, they might be spending money with another vendor that's not a traditional direct competitor that you would think of, but they might be buying it from a website or a retail network.

When customers are.

Toni Kaplan: Trying to cut back on cost in many cases, they might be spending money and another with another vendor that.

Toni Kaplan: Not.

Toni Kaplan: Traditional direct competitor that you would think but they might be buying it from.

Toni Kaplan: A website or a retail network, so and as a result in many cases, because we're there and we can manage it for them, we can help them reduce the cost.

And as a result, in many cases, because we're there and we can manage it for them, we can help them reduce the cost of running the program and allow them to be freed up to take care of their employees and their customers. So we see that as an opportunity, has been an opportunity, and will be in the future. And we'll pivot as appropriate based upon what we see with our customer base.

Toni Kaplan: Running the program and allow them to be freed up to take care of their employees and their customers. So.

Toni Kaplan: So we see that as.

Toni Kaplan: And opportunity has been an opportunity and we will be in the future and we will.

Toni Kaplan: Pivotal as appropriate based upon.

Toni Kaplan: What we see with our customer base.

Toni Kaplan: Terrific. Thanks.

Speaker Change: Perfect. Thanks.

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

Moderator: And our next question comes from Jason Haas from Wells Fargo. Please go ahead Jason.

George Tong: Hey, good morning, and thanks for taking my questions. I wanted to follow up to respond to an earlier question on pricing to see if you could put a finer point on it. I think you had said that we're right in the historical range, which my understanding of the historical range was that's 0% to 2%. And I thought, at least as of last quarter, the pricing was running more like 2%. So I wasn't sure if that implied that there's been further moderation in pricing from last quarter, and now we should think about closer to the midpoint of that range. So if you could just help clarify that, it'd be helpful.

Jason Haas: Hey, good morning, and thanks for taking my questions. I wanted to follow up to respond to an earlier question on pricing to see if you could put a finer point on it. I think you had said that we're right in the historical range, which my understanding of the historical range was that's 0% to 2%. And I thought, at least as of last quarter, the pricing was running more like 2%. So I wasn't sure if that implied that there's been further moderation in pricing from last quarter, and now we should think about closer to the midpoint of that range. So if you could just help clarify that, it'd be helpful.

Jason Haas: Hey, good morning, and thanks for taking my questions one of them fall to response.

Jason Haas: To an earlier question on pricing to see if you could put a finer point on it.

Jason Haas: You said that.

Jason Haas: We're right in the historical range, which my understanding of the historical range.

Jason Haas: At the end of 2% and I thought at least as of last quarter. The pricing was running more like 2%. So I wasn't sure if that implies that there has been further moderation in pricing from last quarter now we should think about closer to the midpoint of that range. So if you could just clarify that would be helpful.

Todd Schneider: Well, Jason, the way I'd describe it is pricing hasn't changed. It's exactly where it was last quarter, which is about historical levels. And so really no change to the environment from what we described last quarter.

Jason Haas: Well Jason.

Jason Haas: Ill.

Jason Haas: The way I would describe it as.

Jason Haas: Pricing Hasnt changed.

Jason Haas: Exactly where it was last quarter, which.

Jason Haas: Which is about historical levels.

Jason Haas: And.

Jason Haas: So really no change to the environment from what we described last quarter.

George Tong: Got it. Okay. That's helpful. Thanks for clarifying. And then just on the incremental margins, on the thought that 25% to 35% is the right range, I think we're going to be definitely above that this year, it seems. So can you help me just understand what would drive the incremental margins back down to that 25% to 35% range? I'm not sure exactly what the gain on sale, the $15 million gain on sale. So I assume that's not a recurring, I don't know if that's vehicle sales or what, but I assume that's not a recurring benefit. And then I know that there's the SAP implementation for fire, but is there anything else to think about that sort of brings those incremental margins back down lower going forward? Thank you.

Jason Haas: Got it. Okay. That's helpful. Thanks for clarifying. And then just on the incremental margins, on the thought that 25% to 35% is the right range, I think we're going to be definitely above that this year, it seems. So can you help me just understand what would drive the incremental margins back down to that 25% to 35% range? I'm not sure exactly what the gain on sale, the $15 million gain on sale.

Speaker Change: Okay. That's helpful. Thanks for clarifying.

Speaker Change: Then just on the incremental margins.

Speaker Change: On the thought that 25% to 35% is the right range I think we're going to be.

Speaker Change: Definitely we'll be above that this year it seems.

Speaker Change: So can you help me just understand what are the what would drive the incremental margins back down to that 25% to 35% range.

Speaker Change: I'm not sure exactly what the gain on sale the $15 million gain on sale. So I assume that's not a recurring.

So I assume that's not a recurring, I don't know if that's vehicle sales or what, but I assume that's not a recurring benefit. And then I know that there's the SAP implementation for fire, but is there anything else to think about that sort of brings those incremental margins back down lower going forward? Thank you.

Speaker Change: Vehicle sales or what but I assume that's not a recurring benefit.

Speaker Change: And then I know that there is the SAP implementation for fire, but is there anything else to think about that that sort of brings us incremental margins back background, while we're going forward. Thank you.

Todd Schneider: Well, Jason, first off, that land sale is not recurring. So that was a one-timer. And as far as incrementals moving forward, we're constantly making investments. So running a business is not linear. And we suspect that we'll have, over time, incrementals between 25 and 35, which we're really proud of and think are really attractive and right where we want to be. We want to make sure we're investing appropriately in the business. And so we're doing exactly that, whether it comes from—we'll be, to your point, investing in technology. We're investing in infrastructure, more products and services, and training. All those items are very important for us so that we can continue to provide a great working environment for our employee partners and a great value proposition for our customers.

Jason Haas: Well, Jason first off.

Speaker Change: <unk>.

Speaker Change: Land sale.

Speaker Change: Was is not recurring so that was a one timer.

Speaker Change: And.

Speaker Change: As far as Incrementals moving forward.

Speaker Change: We're constantly making investments so.

Speaker Change: It's running a business is not linear and we suspect that will have.

Speaker Change: Over time.

Incrementals between 25, and 35%, which we're really proud of and think are really attractive and right, where we want to be.

Speaker Change: Sure, we're investing appropriately in the business.

And so we're doing exactly that, whether it comes from—we'll be, to your point, investing in technology. We're investing in infrastructure, more products and services, and training. All those items are very important for us so that we can continue to provide a great working environment for our employee partners and a great value proposition for our customers.

Speaker Change: And so we're doing exactly that whether it comes from.

Speaker Change: We'll be.

Speaker Change: To your point investing in technology, we're investing in infrastructure more products and services training.

Speaker Change: All of those items are very important for us. So that we can continue to provide a great working environment for our employee partners and a great value proposition for our customers.

Jared Mattingley: Jason, I might add, there are times also when we're computing that incremental margin where last year's margin has an impact. So for example, especially if you remove the $15 million settlement from a year ago, our second half of fiscal 2024, we made a nice jump in operating margin. And so when you do that, that also has an impact on that incremental calculation. So it's dependent on where we were last year, what our levels and cadence of investments are this year as well. But the really good news is, as Todd's been saying, our initiatives, these initiatives that we talk about all the time, they are not one-time, but they are just changing the way we do business. And that gives us confidence that we can still work in that range for years to come.

Michael Hansen: Jason, I might add, there are times also when we're computing that incremental margin where last year's margin has an impact. So for example, especially if you remove the $15 million settlement from a year ago, our second half of fiscal 2024, we made a nice jump in operating margin. And so when you do that, that also has an impact on that incremental calculation.

Jason Haas: Jason I might add.

Jason Haas: There are times also when you're when we're computing that incremental margin where last years margin has an impact. So for example, especially if you if you remove the $15 million.

Jason Haas: Settlement from a year ago, our second half of fiscal 'twenty. Four was was we made a nice jump in operating margin.

Jason Haas: And so when you do that that also has an impact on that incremental calculation. So it's dependent on on.

So it's dependent on where we were last year, what our levels and cadence of investments are this year as well. But the really good news is, as Todd's been saying, our initiatives, these initiatives that we talk about all the time, they are not one-time, but they are just changing the way we do business. And that gives us confidence that we can still work in that range for years to come.

Jason Haas: Where we were last year, what our levels and cadence of investments are this year.

Jason Haas: As well, but the really good news is as Todd has been saying or.

Jason Haas: Our initiatives these initiatives that we talk about all the time they are not one time, but they are just changing the way, we do business and that gives us confidence that we can still.

Jason Haas: <unk>.

Jason Haas: Working that range for years to come.

Todd Schneider: That's great. Thank you.

Jason Haas: That's great. Thank you.

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

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

Leo Carrington: Good morning. Thank you. On the topic of M&A away from UniFirst itself, are there any other large M&A targets in North America? And if not in uniform rentals, where does this leave you? Other route-based service targets of interest, maybe outside of North America, or are you just solely focused on the tuck-ins otherwise? Thank you.

Speaker Change: Good morning, Thank you.

Jason Haas: On the topic of <unk>.

Speaker Change: M&A away from unit plus itself.

Speaker Change: Are there any other large M&A targets in North America, and it's mostly in uniform rentals.

Speaker Change: Where does this leave you of the dates.

Speaker Change: <unk> targets of interest.

Speaker Change: Maybe outside of North America, or you just solely focused on tuck ins otherwise. Thank you.

Todd Schneider: Yeah. Leo, thanks for the question. We really don't get into any particular M&A particular deals. But I'll say that our focus is on North America. We still see a great runway there. We service a million customers. There are 17 million businesses in the US and Canada. So we see the opportunity to, in what is still a very fragmented business, for M&A as an opportunity, but also just the selling more customers and bringing on more customers. So we don't see a need to expand outside of North America at this point. We're always watching. And we have relationships with the appropriate people in various geographies, which we stay in touch with because we want to make sure we're in touch with the market. But we don't see a need.

Speaker Change: Yes, thanks for the question.

Speaker Change: <unk>.

Speaker Change: We really don't get into any particular.

Speaker Change: M&A.

Speaker Change: Particular deals.

Speaker Change: But I will say that our focus is on North America.

Speaker Change: We still see a great.

Speaker Change: Great runway, there, we service 1 million customers or 17 million businesses and in the U S and Canada. So.

Speaker Change: We see the opportunity to.

Speaker Change: And what is a still a very fragmented business.

Speaker Change: For M&A as opportunity, but also just the.

Speaker Change: Selling more customers and bringing on more more customers. So we don't see a need to expand outside of North America at this point, we're always watching.

So we don't see a need to expand outside of North America at this point. We're always watching. And we have relationships with the appropriate people in various geographies, which we stay in touch with because we want to make sure we're in touch with the market. But we don't see a need.

Speaker Change: And we have relationships.

Speaker Change: With the appropriate people.

Speaker Change: In the various geographies, which we stay in touch with because we want to make sure. We're in touch with the market, but we don't see a need we.

Todd Schneider: We have an incredible opportunity here in North America. What we think is the greatest economy in the world. That's where our focus is. As far as any particular M&A, we're interested in buying great companies that have great customers and great employees that we can bring into the Cintas family.

We have an incredible opportunity here in North America. What we think is the greatest economy in the world. That's where our focus is. As far as any particular M&A, we're interested in buying great companies that have great customers and great employees that we can bring into the Cintas family.

Speaker Change: We have an incredible opportunity here.

Speaker Change: In North America, what we think is.

Speaker Change: The greatest economy in the world and.

Speaker Change: And that's where our focus is as far as any particular M&A.

Speaker Change: Not.

Speaker Change: We're interested in.

Speaker Change: Buying great companies that have great customers and great employees.

Speaker Change: We can bring into the Cintas family.

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

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: And at this time there are no further questions I would like to turn the call back over to Jared for some closing remarks.

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

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

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

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

Leo Carrington: The host has ended this call. Goodbye.

The host has ended this call. Goodbye.

Speaker Change: The host has ended this call goodbye.

Speaker Change: [music].

Q3 2025 Cintas Corp Earnings Call

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