Q2 2026 Cintas Corp Earnings Call

December 18, 2025

Call today's call is being recorded.

At this time, I would like to turn the turn. The call over to Mr. Jared, maddingley, vice president Treasurer and investor relations. Please go ahead, sir.

Thank you, Ross, and thank you for joining us with me, our Todd Schneider president, and Chief Executive Officer, Jim rosaca, Executive, Vice, President and Chief Financial Officer. We will discuss our fiscal 202026 second quarter results.

After our commentary, we will open the call to questions from analysts.

Speaker #1: Good day, everyone, and welcome to the Cintas Corp announces fiscal 2026 second quarter results conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingly.

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 the future events in 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.

Speaker #1: Vice President, Treasurer, and Investor Relations. Let's go ahead, sir.

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

Speaker #2: Thank you, Ross, and thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer; Jim Rozakis, Executive Vice President and Chief Operating Officer; and Scott Garula, Executive Vice President and Chief Financial Officer.

Thank you, Jared.

We had another successful quarter reflecting the strength of our value proposition.

Speaker #2: We will discuss our fiscal 2026 second quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements.

Sent us delivered record revenues and strong operating margin performance. While we continue to invest in our business, to position the company for the future.

Second quarter, total revenue. Grew a strong 9.3% to 2.8 billion.

Speaker #2: 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.

The organic growth rate which just for the impacts of Acquisitions and foreign foreign currency exchange. Rate fluctuations was 8.6%

each of our 3 route based businesses had strong Revenue growth in the quarter.

Speaker #2: 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.

Our business continues to operate at a high level, as our employee Partners deliver strong execution, across the board and maintain a clear. Focus on driving value for our customers and shareholders.

Speaker #3: Thank you, Jared. We had another successful quarter, reflecting the strength of our value proposition. Cintas delivered record revenues and strong operating margin performance. While we continue to invest in our business to position the company for the future, second quarter total revenue grew a strong 9.3% to $2.8 billion.

Gross margin as a percent of Revenue was 50.4% a 60 basis point increase over the prior year.

Operating income grew to 655.7 million. An increase of 10.9% over the prior year.

Diluted EPS of a $1.21 through 11% over the prior year.

Speaker #3: The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 8.6%. Each of our three route-based businesses had strong revenue growth in the quarter.

Our strong Revenue growth is creating leverage and our cost savings initiatives and Investments. We've made are helping to improve our employee partners' productivity and help them deliver better solutions for our customers.

Speaker #3: Our business continues to operate at a high level as our employee partners deliver strong execution across the board and maintain a clear focus on driving value for our customers and shareholders.

Our operating margin for the company was an all-time high. The operating margins for our 2 largest route-based. Businesses were also all-time highs reflecting the high level of execution by our employee partners.

Turning the turning to guidance.

Speaker #3: Gross margin as a percent of revenue was 50.4%, a 60 basis point increase over the prior year. Operating income grew to $655.7 million, an increase of 10.9% over the prior year. Diluted EPS of $1.21 grew 11% over the prior year.

We are raising our physical 2026 Financial guidance.

We expect our Revenue to be in the range of 11.15 billion to 11.22 billion. The total growth rate of 7.8% to 8.5%.

Speaker #3: Our strong revenue growth is creating leverage, and our cost savings initiatives and the investments we've made are helping to improve our employee-partners' productivity and help them deliver better solutions for our customers.

We expect diluted EPS to be in the range of $4.81 to $4.88 a growth rate of 9.3% to 10.9%.

With that, I'll turn it over to Jim to discuss the details of our second quarter results.

Speaker #3: Our operating margin for the company was an all-time high, and the operating margins for our two largest route-based businesses were also all-time highs, reflecting the high level of execution by our employee partners.

Thanks Todd, this quarter marked another period of style of progress for our business as we continue to advance the roll out of our technology initiatives and build on a strong Foundation of organic growth. We have established

Our focus on Innovation, operational excellence. And customer engagement is delivering measurable results.

Speaker #3: Turning to guidance, we are raising our fiscal 2026 financial guidance. We expect our revenue to be in the range of $11.15 billion to $11.22 billion.

We are striving our relationships with existing customers through expanded offerings and security service which has less all-time highs and retention rates. While also, successfully attracting new customers who see the clear benefits of partnering with us.

Speaker #3: The total growth rate of 7.8% to 8.5%. We expect diluted EPS to be in the range of $4.81 to $4.88, a growth rate of 9.3% to 10.9%.

These achievements, reflect the commitment and talent of our employee Partners whose efforts are positioning us for sustained success.

Turn into our business segments. Organic growth by business was 7.8% for uniform, rental facility services.

Speaker #3: With that, I'll turn it over to Jim to discuss the details of our second quarter results.

14.1 for first aid and safety services. 11.5% for fire protection services and 2% for uniform direct sale.

Speaker #4: Thanks, Todd. This quarter marked another period of solid progress for our business. As we continue to advance the rollout of our technology initiatives and build on the strong foundation of organic growth we have established, our focus on innovation, operational excellence, and customer engagement is delivering measurable results.

Of course, margin percentage by business was 49.28% for uniform, rental facility services.

57.7 for first aid and safety services. 48.2 for fire protection, services and 41.9% for the uniform direct sale.

Speaker #4: We are strengthening our relationships with existing customers through expanded offerings and security service, which has led to all-time highs in retention rates, while also successfully attracting new customers who see the clear benefits of partnering with us.

Gross margin for uniform, rental facility services segment, increased 70 basis points from last year.

The 49.8% gross margin is the second highest gross margin ever for this segment.

The strong Revenue growth in this segment is helping to create Leverage.

Speaker #4: These achievements reflect the commitment and talent of our employee partners, whose efforts are positioning us for sustained success. Turning to our business segments, organic growth by business was 7.8% for Uniform Rental Facility Services, 14.1% for First Aid and Safety Services, 11.5% for Fire Protection Services, and 2.0% for Uniform Direct Sale.

In addition, our supply chain team and process Improvement initiatives from our engineering and 6 Sigma Black Belt teams. Continue to help expand our margins, while navigating, the current economic environment,

This equals a previous all-time high set last year.

As we mentioned, previously the mix of Revenue and time and go Investments can impact this business from quarter to quarter.

Speaker #4: Gross margin percentage by business was 49.8% for Uniform Rental Facility Services, 57.7% for First Aid and Safety Services, 48.2% for Fire Protection Services, and 41.9% for Uniform Direct Sale.

We are pleased our investments to grow this business are generating strong double-digit Revenue growth while being able to expand our gross margin

Speaker #4: Gross margin for the Uniform Rental Facility Services segment increased 70 basis points from last year. The 49.8% gross margin is the second-highest gross margin ever for this segment.

We are growing in many ways. We're adding new business with over 2/3, being converted from know, programmers. We are cross-selling to existing customers. Our retention rates are at all-time highs and we continue to experience success in our Focus verticals of healthcare, Hospitality education and state and local governments.

Speaker #4: The strong revenue growth in this segment is helping to create leverage. In addition, our supply chain team and process improvement initiatives from our engineering and Six Sigma Black Belt teams continue to help expand our margins while navigating the current economic environment.

Our strong culture of execution combined with multiple growth. Levers has positioned us over the years to grow multiples of jobs, growth and GDP.

Speaker #4: Gross margin for the First Aid and Safety Services segment was 57.7%. This equals a previous all-time high set last year. As we mentioned previously, the mix of revenue and timing of investments can impact this business from quarter to quarter.

All businesses have a need for image safety cleanliness, and compliance our value proposition resonates, in all economic Cycles, as evidenced by our growth and sales and profit in 54 out of the last 56 years.

With that, I'll turn it over to Scott to discuss our operating income Capital allocation performance in 2026 got assumptions.

Speaker #4: We are pleased our investments to grow this business are generating strong double-digit revenue growth while being able to expand our gross margin. We are growing in many ways.

Thank you, Jim and good morning, everyone. As Todd mentioned, we continue to perform at a high level as evidenced by record level revenue and operating margins for the second quarter.

Speaker #4: We're adding new business, with over two-thirds being converted from no-programmers. We are cross-selling to existing customers, and retention rates are at all-time highs.

Speaker #4: And we continue to experience success in our focus verticals of healthcare, hospitality, education, and state and local governments. Our strong culture of execution, combined with multiple growth levers, has positioned us over the years to grow in multiples of jobs growth and GDP.

selling and administrative expenses as a percentage Revenue was 27%, which was a 20 basis point increase from last year,

Jim Rozakis: Mentality, education, and state and local governments. Our strong culture of execution, combined with multiple growth levers, has positioned us over the years to grow multiples of job growth and GDP. All businesses have a need for image, safety, cleanliness, and compliance. Our value proposition resonates in all economic cycles, as evidenced by our growth in sales and profit in 54 out of the last 56 years. With that, I'll turn it over to Scott to discuss our operating income, capital allocation performance, and 2026 guidance assumptions.

second quarter, operating income was 655.7 Million compared to 591.4%.

Speaker #4: All businesses have a need for image, safety, cleanliness, and compliance. Our value proposition resonates in all economic cycles, as evidenced by our growth in sales and profit in 54 out of the last 56 years.

Operating income is a percentage of Revenue was 23.4% in the second quarter of fiscal 2026 compared to 23.1% in last year's second quarter, an increase of 30 basis points and an all-time high.

Speaker #4: With that, I'll turn it over to Scott to discuss our operating income, capital allocation performance, and 2026 guidance.

Speaker #4: assumptions. Thanks, Jim.

Our effective tax rate for the second quarter was 21.2% compared to 20.7% last year.

Speaker #1: And good morning, everyone. As Todd mentioned, we continue to perform at a high level, as evidenced by record-level revenue and operating margins for the second quarter.

Scott Garula: Thanks, Jim, and good morning, everyone. As Todd mentioned, we continue to perform at a high level, as evidenced by record-level revenue and operating margins for the second quarter. Selling and administrative expenses as a percentage of revenue was 27%, which was a 20 basis point increase from last year. Second quarter operating income was $655.7 million, compared to $591.4 million last year. Operating income as a percentage of revenue was 23.4% in the second quarter of fiscal 2026, compared to 23.1% in last year's second quarter, an increase of 30 basis points and an all-time high. Our effective tax rate for the second quarter was 21.2%, compared to 20.7% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $495.3 million, compared to $448.5 million last year.

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

Speaker #1: Selling and administrative expenses as a percentage of revenue were 27%, which was a 20 basis point increase from last year. Second quarter operating income was $655.7 million, compared to $591.4 million last year.

Net income for the second quarter was 495.3 Million compared to 448.5 Million last year.

This year's second quarter diluted earnings per share was 1.21 cents compared to 1.9 cents last year and the increase of 11%.

Speaker #1: Operating income as a percentage of revenue was 23.4% in the second quarter of fiscal 2026, compared to 23.1% in last year's second quarter—an increase of 30 basis points and an all-time high.

For the second quarter, our free cash flow was 425 million. An increase of 23.8% over the prior year.

Speaker #1: Our effective tax rate for the second quarter was 21.2%, compared to 20.7% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Our strong cash generation allows us to have a balanced approach to Capital allocation in order to create value for our shareholders.

In the second quarter, we continue to invest in our businesses, through Capital, expenditures of 106.3 million.

Speaker #1: Net income for the second quarter was $495.3 million, compared to $448.5 million last year. This year's second quarter diluted earnings per share was $1.21, compared to $1.09 last year.

Also, in the second quarter, we were able to make strategic Acquisitions totaling 85.6 million in all 3 of our route-based businesses.

During the second quarter, we paid dividends in the amount of 182.3 million.

Scott Garula: This year's Q2 diluted earnings per share was $1.21, compared to $1.09 last year, an increase of 11%. For the Q2, our free cash flow was $425 million, an increase of 23.8% over the prior year. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders. In the Q2, we continued to invest in our businesses through capital expenditures of $106.3 million. Also, in the Q2, we were able to make strategic acquisitions, totaling $85.6 million in all three of our route-based businesses. During the Q2, we paid dividends in the amount of $182.3 million. Also, during the Q2, and as of 17 December, we were active in the buyback program with repurchases of $622.5 million of Cintas shares. That is the third largest share repurchase we've made in a quarter.

This year's Q2 diluted earnings per share was $1.21, compared to $1.09 last year, an increase of 11%. For the Q2, our free cash flow was $425 million, an increase of 23.8% over the prior year. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders. In the Q2, we continued to invest in our businesses through capital expenditures of $106.3 million. Also, in the Q2, we were able to make strategic acquisitions, totaling $85.6 million in all three of our route-based businesses. During the Q2, we paid dividends in the amount of $182.3 million. Also, during the Q2, and as of 17 December, we were active in the buyback program with repurchases of $622.5 million of Cintas shares. That is the third largest share repurchase we've made in a quarter.

Speaker #1: An increase of 11%. For the second quarter, our free cash flow was $425 million, an increase of 23.8% over the prior year. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders.

Also, during the second quarter and as of December 17th, we were active in the buyback program with repurchases of 622.5 million of Centos shares. That is the third largest share, we purchase we've made in a quarter.

So in the first 6 months of fiscal 2026, we have returned 1.24 billion dollars in capital to our shareholders in the form of dividends and share BuyBacks.

Speaker #1: In the second quarter, we continue to invest in our businesses through capital expenditures of $106.3 million. Also in the second quarter, we were able to make strategic acquisitions totaling $85.6 million in all three of our route-based businesses.

Earlier, Todd provided our updated guidance for the remainder of the fiscal year.

As you contemplate, the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognize a 15 million gain on the sale of an asset.

Speaker #1: During the second quarter, we paid dividends in the amount of $182.3 million. Also during the second quarter, and as of December 17th, we were active in the buyback program with repurchases of $622.5 million.

that will not repeat and will be a headwind when comparing the third quarter results, year-over-year,

In addition, please note the following in the guidance.

Both fiscal 2025 and fiscal 2026. Have the same number of work days for the year and by quarter,

Speaker #1: That is the third largest share repurchase we've made in a quarter. During the first six months of fiscal 2026, we have returned $1.24 billion in capital to our shareholders in the form of dividends and share buybacks.

Our guidance does not assume any future acquisitions.

Scott Garula: During the first six months of fiscal 2026, we have returned $1.24 billion in capital to our shareholders in the form of dividends and share buybacks. Earlier, Todd provided our updated guidance for the remainder of the fiscal year. As you contemplate the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognized a $15 million gain on the sale of an asset. That will not repeat and will be a headwind when comparing the third quarter results year over year. In addition, please note the following in the guidance: both fiscal 2025 and fiscal 2026 have the same number of workdays for the year, and by quarter. Our guidance does not assume any future acquisitions.

During the first six months of fiscal 2026, we have returned $1.24 billion in capital to our shareholders in the form of dividends and share buybacks. Earlier, Todd provided our updated guidance for the remainder of the fiscal year. As you contemplate the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognized a $15 million gain on the sale of an asset. That will not repeat and will be a headwind when comparing the third quarter results year over year. In addition, please note the following in the guidance: both fiscal 2025 and fiscal 2026 have the same number of workdays for the year, and by quarter. Our guidance does not assume any future acquisitions.

Our guidance assumes a constant foreign currency exchange rate.

Fiscal 2026, net interest expense of approximately 104 million dollars.

Speaker #1: Earlier, Todd provided our updated guidance for the remainder of the fiscal year. As you contemplate the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognized a $15 million gain on the sale of an asset.

A fiscal 2026 effective tax rate of 20% Which is the same compared to our fiscal 2025.

And the guidance does not include the impact of any future share BuyBacks, or significant, economic disruptions or downturns.

Speaker #1: That will not repeat, and will be a headwind when comparing the third quarter results year over year. In addition, please note the following in the guidance.

With that, I'll turn it back to Todd for some closing remarks.

Speaker #1: Both fiscal 2025 and fiscal 2026 have the same number of workdays, for the year and by quarter. Our guidance does not assume any future acquisitions.

We are right where we want to be and our Focus remains on helping customers. Meet, in many cases, exceed their image safety cleanliness. Compliance needs

Speaker #1: Our guidance assumes a constant foreign currency exchange rate. Fiscal 2026 net interest expense of approximately $104 million; a fiscal 2026 effective tax rate of 20%, which is the same compared to our fiscal 2025; and the guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns.

Scott Garula: Our guidance assumes a constant foreign currency exchange rate, fiscal 2026 net interest expense of approximately $104 million, a fiscal 2026 effective tax rate of 20%, which is the same compared to our fiscal 2025, and the guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns. With that, I'll turn it back to Todd for some closing remarks.

Our guidance assumes a constant foreign currency exchange rate, fiscal 2026 net interest expense of approximately $104 million, a fiscal 2026 effective tax rate of 20%, which is the same compared to our fiscal 2025, and the guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns. With that, I'll turn it back to Todd for some closing remarks.

We remain committed to leveraging our investments, to sustain, our positive amount, our positive momentum, and deliver exceptional customer service. I want to thank our employee partners for their incredible commitment to our customers and everything they do for SAS.

I'm now turn it back over to Jared.

That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just 1 question and a single follow-up if needed. Thank you.

Speaker #1: With that, I'll turn it back to Todd for some closing remarks.

Speaker #1: remarks.

If you would like to ask a question, please press star 1 on your telephone keypad. Now, please be prepared to ask your question when prompted you also be allowed to ask 1, follow-up question.

Speaker #2: Thank you, Scott. Looking ahead to the

Todd Schneider: Thank you, Scott. Looking ahead to the second half of fiscal 2026, we are right where we want to be, and our focus remains on helping customers meet, in many cases, exceed their image, safety, cleanliness, and compliance needs. We remain committed to leveraging our investments to sustain our positive momentum and deliver exceptional customer service. I want to thank our employee partners for their incredible commitment to our customers and everything they do for Cintas. I'll now turn it back over to Jared.

Speaker #2: Second half of fiscal 2026, we are right where we want to be, and our focus remains on helping customers meet and, in many cases, exceed their image, safety, cleanliness, and compliance needs.

Once again, if you would like to ask a question, please press star 1 on your phone now.

And our first question comes from Tim Maloney from William Blair, please go ahead. Tim

Speaker #2: We remain committed to leveraging our investments to sustain our positive momentum and deliver exceptional customer service. I want to thank our employee-partners for their incredible commitment to our customers and everything they do for Cintas.

Todd Scott, Jared. Good morning.

Good morning. Good morning.

Speaker #2: I'll now turn it back over to

Speaker #2: Jared. That concludes our

Speaker #1: 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.

Scott Garula: 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 Mattingly: 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.

Only 10 minutes on the prepared remarks, that's what I'm thankful for this holiday season. Thank you for that. So, um, just 1 question from me. Um, there, there continues to be a lot of noise in the labor market data. Uh, but I think

Speaker #3: 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.

Operator: If you would like to ask a question, please press *1 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 *1 on your phone now. Our first question comes from Tim Mulroney from William Blair. Please go ahead, Tim.

You know, most would agree that we've seen a softening Trend in terms of hiring activity over the last several months, at least on balance. And I'm, I, I'd be curious to hear

Speaker #3: 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.

if you've seen any material change in employment levels across your customer base, if what we are seeing in the broader, payroll numbers are playing out in your world or

Speaker #3: And our first question comes from Tim Mulroney from William Blair. Please go ahead, Tim.

Speaker #4: Todd, Scott, Jared, good morning.

Timothy Mulrooney: Todd, Scott, Jared, good morning.

Tim Mulrooney: Todd, Scott, Jared, good morning.

Speaker #6: Good Good morning. morning.

Jared Mattingly: Morning.

Todd Schneider: Good morning.

Speaker #4: Only ten minutes on the prepared remarks. That's what I'm thankful for this holiday season. Thank you for that.

Timothy Mulrooney: Only 10 minutes on the prepared remarks. That's what I'm thankful for this holiday season. Thank you for that. So just one question from me. There continues to be a lot of noise in the labor market data, but I think most would agree that we've seen a softening trend in terms of hiring activity over the last several months, at least on balance. I'd be curious to hear if you've seen any material change in employment levels across your customer base, if what we are seeing in the broader payroll numbers are playing out in your world, or if the reported job losses are more in the white-collar world where you're providing some services, but those folks don't typically wear uniforms.

Tim Mulrooney: Only 10 minutes on the prepared remarks. That's what I'm thankful for this holiday season. Thank you for that. So just one question from me. There continues to be a lot of noise in the labor market data, but I think most would agree that we've seen a softening trend in terms of hiring activity over the last several months, at least on balance. I'd be curious to hear if you've seen any material change in employment levels across your customer base, if what we are seeing in the broader payroll numbers are playing out in your world, or if the reported job losses are more in the white-collar world where you're providing some services, but those folks don't typically wear uniforms.

Speaker #1: All right.

You know, if the reported job losses are, are more in the white collar world where you're providing some services, but you know, those folks don't typically wear uniforms. I know you've emphasized your ability to grow in all types of environments, but but I'd be interested in your take on, on more, the underlying Dynamics here, given the number of businesses that you service week to week. Thank you.

Speaker #4: All right. So just one question from me. There continues to be a lot of noise in the labor market data, but I think most would agree that we've seen a softening trend in terms of hiring activity over the last several months, at least on balance.

Speaker #4: And I'd be curious to hear if you've seen any material change in employment levels across your customer base—if what we are seeing in the broader payroll numbers is playing out in your world, or if the reported job losses are more in the white-collar world, where you're providing some services, but those folks don't typically wear uniforms.

Speaker #4: I know you've emphasized your ability to grow in all types of environments, but I'd be interested in your take on more of the underlying dynamics here, given the number of businesses that you service.

Timothy Mulrooney: I know you've emphasized your ability to grow in all types of environments, but I'd be interested in your take on more of the underlying dynamics here, given the number of businesses that you service week to week. Thank you.

I know you've emphasized your ability to grow in all types of environments, but I'd be interested in your take on more of the underlying dynamics here, given the number of businesses that you service week to week. Thank you.

Well, uh, thank you, Tim. I, um, uh, you know, we're certainly, we're reading the same things, you are. We're watching jobs reports as we always do. Um, and uh, as as we spoke about, in our prepare, remarks is a reminder. Uh, We've shown the ability to grow in multiples of GDP and jobs growth for a long time now. Uh, and we certainly love it when our customers are adding employees and their, their businesses are really healthy and, uh, uh, uh, that's all we love that. Um, but we don't need it in order to to grow our business. The, the way we like to that being said, uh, to your point, I think you have to dig past the headlines on the jobs report. Um, you know, first off, we've picked our verticals, really well. Um, very strategically and the

Speaker #4: Week to week. Thank you.

Speaker #6: Well, thank you, Tim. We're certainly reading the same things you are. We're watching jobs reports, as we always do. And as we spoke about in our prepared remarks—as a reminder—we've shown the ability to grow in multiple GDP and jobs growth environments for a long time now.

Todd Schneider: Well, thank you, Tim. We're reading the same things you are. We're watching jobs reports, as we always do. And as we spoke about in our prepared remarks, as a reminder, we've shown the ability to grow in multiples of GDP and jobs growth for a long time now. And we certainly love it when our customers are adding employees and their businesses are really healthy. And that's all we love that. But we don't need it in order to grow our business the way we like to. That being said, to your point, I think you have to dig past the headlines on the jobs report. First off, we've picked our verticals really well, very strategically. And the employment picture for them is, if you look at it, it's positive. Healthcare, education, hospitality, state and local government, those are good. The services providing sector continues to show growth.

The employment picture for them, uh, is uh, if you look at it, it's it's Positive. Healthcare education, Hospitality State, local government, those are good. Uh, the services providing sector continues to show growth, um,

Speaker #6: And we certainly love it when our customers are adding employees, and their businesses are really healthy, and that's all—we love that. But we don't need it in order to grow our business the way we like to.

Speaker #6: That being said, to your point, I think you have to dig past the headlines on the jobs report. First off, we've picked our verticals really well.

uh, and the goods producing sector isn't performing as well, but the specialty trades within them are are doing well. Uh, and that's those are obvious, uh, Uniform Wares and users of our services. So, um, there are certainly many jobs that are under pressure. Uh, hence, what you see in the, in the uh, in the headlines, in the markets reports. Uh, but they are certainly more generally, White Collar, jobs it Financial back office that are really not end markets for us uh as you pointed out Tim

Really helpful. Thank you. Tim

Speaker #6: Very strategically. And the employment picture for them is, if you look at it, it's positive. Healthcare, education, hospitality, state, local government—those are good.

Thank you.

And our next question comes from manav Patnick from Barclays. Please go ahead and enough.

Speaker #6: The services-providing sector continues to show growth, and the goods-producing sector isn't performing as well, but the specialty trades within them are doing well.

Todd Schneider: The goods producing sector isn't performing as well, but the specialty trades within them are doing well. Those are obvious uniform wearers and users of our services. There are certainly many jobs that are under pressure, hence what you see in the headlines and the market reports. But they are certainly, more generally, white-collar jobs, IT, financial, back office that are really not end markets for us, as you pointed out, Tim.

The goods producing sector isn't performing as well, but the specialty trades within them are doing well. Those are obvious uniform wearers and users of our services. There are certainly many jobs that are under pressure, hence what you see in the headlines and the market reports. But they are certainly, more generally, white-collar jobs, IT, financial, back office that are really not end markets for us, as you pointed out, Tim.

Speaker #6: And those are obvious uniform wearers and users of our services. So, there are certainly many jobs that are under pressure, hence what you see in the headlines and the market reports.

Thank you, good morning. Uh, I also just had 1 draw the question. Maybe just following up from that 1. Um, you know, I know you obviously shown that you guys can add the form and and execute in any kind of environment but just maybe help us. Appreciate like what is your downtime Playbook look like like, if if I'm employment does crack, uh, how do you still, you know, keep up these kind of high single digit growth levels, like which which levels typically make up more? Is it all of them just any color that

Speaker #6: But they are certainly more generally white-collar jobs—IT, financial, back office—that are really not end markets for us, as you pointed out, Tim.

Would be helpful.

Yeah, good question man. Um

Speaker #3: Really helpful. Thank you, Todd.

Operator: Really helpful. Thank you, Todd.

Tim Mulrooney: Really helpful. Thank you, Todd.

Speaker #6: Thank you.

Todd Schneider: Thank you.

Speaker #3: And our next question comes from Manav Patnik from Barclays. Please go ahead.

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

Speaker #3: Manav. Thank you.

Speaker #7: Good morning. I also just had one broader question, maybe just following up from that one. I know you've obviously shown that you guys can outperform and execute in any kind of environment, but just maybe help us appreciate what is your downturn playbook look like?

Manav Patnaik: Thank you. Good morning. I also just had one broader question, maybe just following up from that one. I know you've obviously shown that you guys can outperform and execute in any kind of environment, but just maybe help us appreciate what does your downturn playbook look like? If unemployment does crack, how do you still keep up these kind of high single-digit growth levels? Which levers typically make up more? Is it all of them? Just any color there would be helpful.

Speaker #7: If unemployment does crack, how do you still keep up these kinds of high single-digit growth levels? Which levels typically make up more? Is it all of them?

Speaker #7: Just any color there would

Speaker #7: be helpful. Yeah,

Speaker #6: Good question, Manav. We certainly have a wide array of products and services that we provide, and we service a wide breadth of customers as well.

Todd Schneider: Yeah, good question, Manav. We certainly have a wide array of products and services that we provide, and we service a wide breadth of customers as well. Our target of mid to high single-digit organic growth is important to us. We have so many different ways to grow that it gives us flexibility. Certainly, new business is important to us. When you think about a business that, when they have less people, that can certainly impact us. But they also have still other needs that they need to address. In many cases, they don't have enough people to address those, and they look to us to outsource for those items. New business is important. We are still very early in the innings of cross-selling all of our various products and services into us.

Speaker #6: So our target of mid- to high-single-digit organic growth is important to us, and we have so many different ways to grow that it gives us flexibility.

Speaker #6: Certainly, new business is important to us, and when you think about a business that, when they have less people, that can certainly impact us. But they also have still other needs that they need to address.

Flexibility, uh, certainly. New business is important to us. Uh, and when you think about a business that, um, uh, when they have less people, uh, that, that can certainly impact us, but they also have still other needs that they need to address. And in many cases, they don't have enough people to address those and they look to us to Outsource for those items. So, um, uh, so new business is important. We have, uh, uh, are still very early in the endings of cross-selling, uh, uh, all of our various products and services into us. So, uh, you know, trying to gain growth from our current customers, uh, is an important lever for us. So that's all a valuable m&a. Tends to get better during those periods of times as well. Um, uh, but we're, we have many levers, uh, in addition to obviously, uh, uh, uh, uh, the ones that I mentioned that, I think, uh, give us, uh, real optionality, um, uh, uh, and certainly when we, when we look at know,

programmers. That's a big opportunity for us.

Speaker #6: And in many cases, they don't have enough people to address those, and they look to us to outsource for those items. So new business is important.

Speaker #6: We are still very early in the innings of cross-selling all of our various products and services into us. So, trying to gain growth from our current customers is an important lever for us.

Todd Schneider: So trying to gain growth from our current customers is an important lever for us. So that's all valuable. M&A tends to get better during those periods of times as well. But we have many levers in addition to, obviously, the ones that I mentioned that I think give us real optionality. And certainly, when we look at new programs, that's a big opportunity for us.

So trying to gain growth from our current customers is an important lever for us. So that's all valuable. M&A tends to get better during those periods of times as well. But we have many levers in addition to, obviously, the ones that I mentioned that I think give us real optionality. And certainly, when we look at new programs, that's a big opportunity for us.

Hey man, this is Jim, perhaps I can give it just a little more color on how much opportunity really lies within our current customers. And, and as Todd mentioned, uh, as prepared remarks. Our objective is to First Supply our customers with with a great experience with us and that, that starts at the foundational level and then we earn the right now to be able to, uh, ask them for more opportunities and, and to steer more that are spend, uh, that they already have over to us. Uh, and just due to the

Speaker #6: So that's all valuable. M&A tends to get better during those periods of time as well. But we have many levers, in addition to, obviously, the ones that I mentioned, that I think give us real optionality. And certainly, when we look at new programmers, that's a big opportunity for us.

Speaker #3: And Manav, this is Jim. Perhaps I can give just a little more color on how much opportunity really lies within our current customers. And as Todd mentioned in his prepared remarks, our objective is to first supply our customers with a great experience with us.

Scott Garula: Hey, Manav, this is Jim. Perhaps I can give it just a little more color on how much opportunity really lies within our current customers. As Todd mentioned in his prepared remarks, our objective is to first supply our customers with a great experience with us. That starts at the foundational level. Then we earn the right now to be able to ask them for more opportunities and to steer more of their spend that they already have over to us. Just due to the nature of our service model, we're in their facilities so frequently that we get a really deep understanding of what their needs are and where the opportunities may come from. So I have an example here of a property management company that we service out on the West Coast.

Speaker #3: And that starts at the foundational level. And then we earn the right now to be able to ask them for more opportunities and to steer more of their spend that they already have over to us.

Speaker #3: And just due to the nature of our service model, we're in their facilities so frequently that we get a really deep understanding of what their needs are and where the opportunities may come from.

Nature of our service model. We're in their facilities, so frequently that we get a really deep understanding of what their needs are and where the opportunities may may come from. So I have an example here of a property management company, uh, that we service out on the west coast and we've been servicing that facility for a number of years for Uniform, Rental for all the folks who work on the property, uh, and during our routine visits our team uncovered that they were doing bulk orders, uh, from an e-commerce solution for all their restroom supplies. And, uh, when inquiring with the company, they realized that they were tying up, cash flow. Uh, they were tying really precious, uh, real estate space and storage space, that they did not want to tie up, uh, and they were taking a lot of their labor and manpower to go ahead and and inventory all of those goods. Uh, our folks went in and introduced the concept of Outsourcing that to us and and utilizing the syntax hygiene program. Uh, they found out that now, their spend is much steadier than it was in the past. It makes much easier to budget, they're not tying up that space.

Speaker #3: So I have an example here of a property management company that we service out on the West Coast. And we've been servicing that facility for a number of years for uniform rental for all the folks who work on the property.

Scott Garula: We've been servicing that facility for a number of years for uniform rental for all the folks who work on the property. During our routine visits, our team uncovered that they were doing bulk orders from an e-commerce solution for all their restroom supplies. When inquiring with the company, they realized that they were tying up cash flow. They were tying up really precious real estate space and storage space that they did not want to tie up. They were taking a lot of their labor and manpower to go ahead and inventory all of those goods. Our folks went in and introduced the concept of outsourcing that to us and utilizing the Cintas Hygiene Program. They found out that now their spend is much steadier than it was in the past. It makes it much easier to budget. They're not tying up that space.

We've been servicing that facility for a number of years for uniform rental for all the folks who work on the property. During our routine visits, our team uncovered that they were doing bulk orders from an e-commerce solution for all their restroom supplies. When inquiring with the company, they realized that they were tying up cash flow. They were tying up really precious real estate space and storage space that they did not want to tie up. They were taking a lot of their labor and manpower to go ahead and inventory all of those goods. Our folks went in and introduced the concept of outsourcing that to us and utilizing the Cintas Hygiene Program. They found out that now their spend is much steadier than it was in the past. It makes it much easier to budget. They're not tying up that space.

Uh and maybe most importantly their team is not involved in taking their precious time away from what they focus on uh going ahead and managing hygiene inventories. They let us handle that for them. So just a small example of activities that happen across a million plus customers every day.

Speaker #3: And during our routine visits, our team uncovered that they were doing bulk orders from an e-commerce solution for all their restroom supplies. And when inquiring with the company, they realized that they were tying up cash flow.

Thank you so much, appreciate it.

And our next question comes from Andrew Steinman from JP Morgan. Please go ahead. Andrew

Speaker #3: They were tying up really precious real estate space and storage space that they did not want to tie up. And they were taking a lot of their labor and manpower to go ahead and inventory all of those goods.

Speaker #3: Our folks went in and introduced the concept of outsourcing that to us, and utilizing the same type of hygiene program. They found out that now their spend is much steadier than it was in the past.

Speaker #3: It makes it much easier to budget. They're not tying up that space. And maybe most importantly, their team is not involved in taking their precious time away from what they focus on, going ahead and managing hygiene inventories they let us handle that for them.

Scott Garula: Maybe most importantly, their team is not involved in taking their precious time away from what they focus on, going ahead and managing hygiene inventories. They let us handle that for them. Just a small example of activities that happen across a million-plus customers every day.

Maybe most importantly, their team is not involved in taking their precious time away from what they focus on, going ahead and managing hygiene inventories. They let us handle that for them. Just a small example of activities that happen across a million-plus customers every day.

Hi. I I I definitely heard the pluses and minuses about the customer's employee base, but I just didn't quite get a compilation. Um, if um, if ad stops, uh, are changed, uh year-over-year. I surely, you know, hurt the separate point that you continue, uh, to grow with, uh, same customers. So just a comment on ADD stops year-over-year. And then my second question is with the uh Acquisitions that were completed. In this uh second quarter, how much will that add to second half of the Year revenues?

Speaker #3: So just a small example of activities that happen across a million-plus customers every day.

Uh, well, I'll take the first half. Um, uh, Andrew. So thank you for the question. Um,

Speaker #3: day. Thank

Speaker #7: Thank you so much. I appreciate it.

Todd Schneider: Thank you so much. Appreciate it.

Manav Patnaik: Thank you so much. Appreciate it.

Speaker #3: And our next question comes from Andrew Steinerman from J.P. Morgan. Please go ahead, Andrew.

Operator: Our next question comes from Andrew Steinerman from JPMorgan. Please go ahead, Andrew.

Operator: Our next question comes from Andrew Steinerman from J.P.?Morgan.

Speaker #8: Hi. I definitely heard the pluses and minuses about the customers' employee base, but I just didn't quite get a compilation if ad stops are changed year over year.

Andrew Steinerman: Hi. I definitely heard the pluses and minuses about the customer's employee base, but I just didn't quite get a compilation if Ad Stops are changed year over year. I surely heard the separate point that you continue to grow with same customers. So just a comment on Ad Stops year over year. And then my second question is, with the acquisitions that were completed in this Q2, how much will that add to the H2 revenues?

Speaker #8: I surely heard the separate point that you continue to grow with same customers. So just a comment on ad stops year over year, and then my second question is, with the acquisitions that were completed in this second quarter, how much will that add to the second half of the year revenues?

You know, uh, as we, we mentioned in through Jim's example. We, we talked about the, uh, all the various products and services. We can provide for our customers. Uh, and it's, it's Broad and and growing. So, um, from that standpoint, uh, growth from current customers. I would describe it as, um, uh, very stable and if anything slightly positive. Um, so, you know, we're we're in a good position. We're our our, our current customers, see the value proposition that we, uh, we can offer to them, uh, and that actually helps with retention as well, Scott, if you want to address the second half. Yeah, thanks Todd. And, uh,

Hello, uh, Andrew. Uh, we've talked in the, uh, prepared remarks, the, uh, acquisition impact. During the second quarter was about the 70 bips.

Speaker #6: Well, I'll take the first half. Andrew, so thank you for the question. As we mentioned, and through Jim's example, we talked about all the various products and services we can provide for our customers.

Todd Schneider: Well, I'll take the first half. Andrew, so thank you for the question. As we mentioned, and through Jim's example, we talked about all the various products and services we can provide for our customers. And it's broad and growing. So from that standpoint, growth from current customers, I would describe it as very stable, if anything, slightly positive. So we're in a good position. Our current customers see the value proposition that we can offer to them. And that actually helps with retention as well. Scott, if you want to address the second half?

Speaker #6: And it's broad, and growing. So, from that standpoint, growth from current customers I would describe as very stable, and if anything, slightly positive.

And if you think about the, uh, the rest of the year and our guide, uh, you know, we obviously assume, uh, no new acquisitions. You can assume that there's a normal tail, uh, when it comes to the acquisition volume and generally for the second half of the year, you would assume about half of the second quarter impact. So call it, uh, you know, 30 to 35 bits,

Okay, thank you.

Speaker #6: So we're in a good position. Our current customers see the value proposition that we can offer to them, and that actually helps with retention as well.

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

Speaker #6: Scott, if you want to address the second

Speaker #6: half. Yeah, thanks, Todd.

Speaker #2: And hello, Andrew. We talked in the prepared remarks. The acquisition impact during the second quarter was about 70 bips. And if you think about the rest of the year and our guide, we obviously assume no new acquisitions.

Scott Garula: Yeah. Thanks, Todd. And hello, Andrew. We talked in the prepared remarks; the acquisition impact during the second quarter was about 70 basis points. If you think about the rest of the year and our guide, we obviously assume no new acquisitions. You can assume that there's a normal tail when it comes to the acquisition volume. And generally, for the second half of the year, you would assume about half of the second quarter impact, so call it 30 to 35 basis points.

Speaker #2: You can assume that there's a normal tail when it comes to the acquisition volume, and generally for the second half of the year, you would assume about half of the Q2 impact.

Hi, good morning. Congrats on a really strong quarter. Um I guess my uh my 2 questions uh 1. I think both Todd and Jim mentioned that uh retention rates are at record levels. Usually you see those in stronger Economic Times. So maybe could you talk about how you're able to achieve strong retention rates, even in these types of climate? And then I guess my second question is on the incremental margins, I think uh both q1 and Q2 were within your longer term range but maybe towards the lower end. So so any way to think about how that kind of transpires in the in the second half would be great. And thanks, thanks for taking my questions.

Speaker #2: So call it 30 to 35 bips.

Speaker #3: Okay, thank you. And our next question comes from Josh Chan from UBS. Please go ahead.

Andrew Steinerman: Okay. Thank you.

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

Speaker #3: Josh. Hi, good morning.

Uh, thank you Josh, I appreciate that. Um, uh, I'll take the first half, uh, and, and regarding retention and Jim will address the incremental, the, um, you know, our retention rates are they're at, uh, uh, at all time levels. And, and we have been, uh, for, um, um,

Speaker #4: Congrats on a really strong quarter. I guess my two questions—one, I think both Todd and Jim mentioned that retention rates are at record levels.

Manav Patnaik: Hi. Good morning. Congrats on a really strong quarter. I guess my two questions, one, I think both Todd and Jim mentioned that retention rates are at record levels. Usually, you see those in stronger economic times. So maybe could you talk about how you're able to achieve strong retention rates even in these types of climates? And then I guess my second question is on the incremental margins. I think both Q1 and Q2 were within your longer-term range, but maybe towards the lower end. So any way to think about how that kind of transpires in the second half would be great. And thanks for taking my questions.

Josh Chan: Hi. Good morning. Congrats on a really strong quarter. I guess my two questions, one, I think both Todd and Jim mentioned that retention rates are at record levels. Usually, you see those in stronger economic times. So maybe could you talk about how you're able to achieve strong retention rates even in these types of climates? And then I guess my second question is on the incremental margins. I think both Q1 and Q2 were within your longer-term range, but maybe towards the lower end. So any way to think about how that kind of transpires in the second half would be great. And thanks for taking my questions.

Speaker #4: Usually, you see those in stronger economic times, so maybe could you talk about how you're able to achieve strong retention rates even in these types of climates?

Speaker #4: And then I guess my second question is on the incremental margins. I think both Q1 and Q2 were within your longer-term range, but maybe towards the lower end.

Speaker #4: So, any way to think about how that kind of transpires in the second half would be great. And thanks for taking my—

Speaker #4: questions. Thank you, Josh.

Several quarters now and it speaks to a number of things. First off, the execution, by our team is impressive, uh, they're doing a great job, um uh making sure they're taking great care of our customers, that is easy to say really hard to do starts with our supply chain team, uh, our, our operations, uh, organization. Um, uh, they are, uh, they're doing a great job and that all ties back into our culture and it and we have spoken, um, over and over again about the fact that our culture is our ultimate competitive Advantage. Um, and it's, um, you know, it

Speaker #6: I appreciate that. I'll take the first half. And regarding retention, and Jim will address the incrementals. The retention rates are they're at all-time levels.

Todd Schneider: Thank you, Josh. I appreciate that. I'll take the first half regarding retention, and Jim will address the incrementals. Our retention rates are, they're at all-time levels. We have been for several quarters now. It speaks to a number of things. First off, the execution by our team is impressive. They're doing a great job making sure they're taking great care of our customers. That is easy to say, really hard to do. Starts with our supply chain team, our operations organization. They're doing a great job. That all ties back into our culture. We have spoken over and over again about the fact that our culture is our ultimate competitive advantage. It shines even brighter in economic environments that are a little bit more uncertain than others. It's showing up big time for our folks.

Speaker #6: And we have been for several quarters now. And it speaks to a number of things. First off, the execution by our team is impressive.

Speaker #6: They're doing a great job. Making sure they're taking great care of our customers. That is easy to say, really hard to do. Starts with our supply chain team.

Speaker #6: Our operations organization—they are doing a great job. And that all ties back into our culture. We have spoken over and over again about the fact that our culture is our ultimate competitive advantage.

Speaker #6: And it shines even brighter in economic environments that are a little bit more uncertain than others. So it's showing up big time for our folks.

Shines, uh, even brighter and economic environments that are, um, uh, are a little bit more uncertain than others. So, um, uh, and it's, it's showing up big time, uh, for our folks. Um, we're also providing, um, uh, great value for our customers. And they're seeing it with, not only the products, but the services, the technology that we're utilizing in the technology Investments that we've made, uh, help accomplish, uh, 2 things at a 30,000 foot level 1 is it makes it easier for our partners, our employee Partners to service and take care of our customers, uh, um, uh, to provide value for them. And the second was it makes it easier for our customers to do business with us. So, uh, when you, when you, uh, add those up, it, it, uh, all that you mix it in it. Uh, it adds up to retention rates that we find very attractive. Jim you, yep. Yeah, Josh, I'll get to the, uh, the second question regarding margins. So, so first of all, we ran

Speaker #6: We're also providing great value for our customers, and they're seeing it with not only the products, but the services and the technology that we're utilizing.

Todd Schneider: We're also providing great value for our customers, and they're seeing it with not only the products, but the services, the technology that we're utilizing, and the technology investments that we've made help accomplish two things at a 30,000-foot level. One is it makes it easier for our employee partners to service and take care of our customers, to provide value for them. And the second one is it makes it easier for our customers to do business with us. So when you add those up, all that, you mix it in, it adds up to retention rates that we find very attractive. Jim?

We're also providing great value for our customers, and they're seeing it with not only the products, but the services, the technology that we're utilizing, and the technology investments that we've made help accomplish two things at a 30,000-foot level. One is it makes it easier for our employee partners to service and take care of our customers, to provide value for them. And the second one is it makes it easier for our customers to do business with us. So when you add those up, all that, you mix it in, it adds up to retention rates that we find very attractive. Jim?

Speaker #6: And the technology investments that we've made help accomplish two things at a 30,000-foot level. One is it makes it easier for our partners our employee partners to service and take care of our customers.

a 27% incremental margin, but the second quarter, which which we really like, and that's right in our, our stated range of that 25 to 35% that that range is really important for us. Uh, does that allows us to continue, uh, to invest in the future growth of the business, uh, while the NL expand margin along the way. So we really like that, that allows us to, uh, make the investments in technology the necessary investments in capacity bench ranks selling resources. Uh, all of those are really critically important to us. Uh, so that

Speaker #6: To provide value for them. And the second one is it makes it easier for our customers to do business with us. So when you add those up, you mix it in, it adds up to retention rates that we find very attractive.

Speaker #6: Jim, you?

Speaker #2: Yep. Yeah, Josh, I'll get

Speaker #2: To the second question regarding margins. So, first of all, we ran a 27% incremental margin for the second quarter, which we really like. And that's right in our stated range of that 25% to 35%.

Scott Garula: Yep. Yeah, Josh. So I'll get to the second question regarding margins. So first of all, we ran a 27% incremental margin with Q2, which we really like. And that's right in our stated range of that 25% to 35%. That range is really important for us because that allows us to continue to invest in the future growth of the business while being able to expand margin along the way. So we really like that. That allows us to make the investments in technology, the necessary investments in capacity, bench strength, selling resources. All of those are really critically important to us. So that would be really right in the sweet spot of the range. Now, a couple of things to keep in mind with regards to incrementals this year and how it plays out for the remainder of the year.

Jim Rozakis: Yep. Yeah, Josh. So I'll get to the second question regarding margins. So first of all, we ran a 27% incremental margin with Q2, which we really like. And that's right in our stated range of that 25% to 35%. That range is really important for us because that allows us to continue to invest in the future growth of the business while being able to expand margin along the way. So we really like that. That allows us to make the investments in technology, the necessary investments in capacity, bench strength, selling resources. All of those are really critically important to us. So that would be really right in the sweet spot of the range. Now, a couple of things to keep in mind with regards to incrementals this year and how it plays out for the remainder of the year.

Speaker #2: That range is really important for us because that allows us to continue to invest in the future growth of the business, while being able to expand margin along the way.

Speaker #2: So we really like that. That allows us to make the investments in technology, the necessary investments in capacity, bench strength, selling resources, all of those are really critically important to us.

Speaker #2: So that would be really right in the sweet spot of the range. Now, a couple of things to keep in mind with regards to incrementals this year and how it plays out for the remainder of the year.

Would be uh really right in The Sweet Spot of the range now. Now a couple things to keep in mind with regards to incremental this year, uh, and how it plays out for the remainder of the year. Uh, first off, we're coming off of a comparison to last fiscal year, uh, which is a really tough comp last fiscal year. We ran in the second quarter incremental, so 49.7, uh, that that's an outperforming, that's not what we normally expect. So we're really pleased with the 27, this quarter uh, given that comparison. Uh, in fact, if you look at the whole first half of last year, we ran an incremental of 444.3%. Uh, so, uh, so we're really, really high in the beginning of last fiscal year, uh, setting back into our range, uh, this fiscal year. Uh, a couple of things maybe to keep in mind, is really with the guide implies, uh, with regards to the incremental for this fiscal year. Uh, if you look at the whole year across the board, uh, incremental would imply somewhere between the 29 and 30 uh when you adjust for the 15th, uh, sale from last fiscal year. So that's

Speaker #2: First off, we're coming off of a comparison to last fiscal year, which is a really tough comp. Last fiscal year, we ran in the second quarter incrementals of 49.7.

Scott Garula: First off, we're coming off of a comparison to last fiscal year, which is a really tough comp. Last fiscal year, we ran in the second quarter incrementals of 49.7. That's an outperformance. That's not what we normally expect. So we're really pleased with the 27 this quarter given that comparison. In fact, if you look at the whole first half of last year, we ran an incremental of 44.3%. So really, really high in the beginning of last fiscal year, settling back into our range this fiscal year. A couple of other things maybe to keep in mind is really what the guide implies with regards to incrementals for this fiscal year. If you look at the whole year across the board, incrementals would imply somewhere between 29 and 30 when you adjust for the $15 million asset sale from last fiscal year.

First off, we're coming off of a comparison to last fiscal year, which is a really tough comp. Last fiscal year, we ran in the second quarter incrementals of 49.7. That's an outperformance. That's not what we normally expect. So we're really pleased with the 27 this quarter given that comparison. In fact, if you look at the whole first half of last year, we ran an incremental of 44.3%. So really, really high in the beginning of last fiscal year, settling back into our range this fiscal year. A couple of other things maybe to keep in mind is really what the guide implies with regards to incrementals for this fiscal year. If you look at the whole year across the board, incrementals would imply somewhere between 29 and 30 when you adjust for the $15 million asset sale from last fiscal year.

Speaker #2: That's an outperform. That's not what we normally expect, so we're really pleased with the 27 this quarter. Given that comparison, in fact, if you look at the whole first half of last year, we ran an incremental of 44.3%.

Right in the heart of where we want to be, uh, perfect level of investment continuing to uh, to fuel the future growth. Uh, and if you look at the back half of the year, that would imply incremental is of 30 to 33%. So moving back up towards a high side of that range. So we're really pleased with where we are. We like the Outlook of the year and uh, we think that's a great spot for us to run the business.

Great. Thank you. Both and congrats again.

Thank you.

Speaker #2: So really, really high in the beginning of last fiscal year. Selling back into our range this fiscal year. A couple of other things, maybe to keep in mind, is really what the guide implies with regards to incrementals for this fiscal year.

And our next question comes from Jasper, bib from truist Securities, please. Go ahead, Jasper.

Speaker #2: If you look at the whole year across the board, incrementals would imply somewhere between $29 and $30 when you adjust for the $15 million asset sale from last fiscal year.

Hey, morning everyone. Um, why don't we get an update on your experience with sourcing costs and, uh, tariffs so far this year, I, I guess how have things Trend relative to your expectations when you initially set down at the start of the year?

Uh, good morning Jasper. Um, thanks for the question.

Speaker #2: So that's right in the heart of where we want to be. Perfect level of investment continuing to fuel future growth. And if you look at the back half of the year, that would imply incrementals of 30 to 33 percent.

Scott Garula: So that's right in the heart of where we want to be, perfect level of investment, continuing to fuel future growth. And if you look at the back half of the year, that would imply incrementals of 30% to 33%. So moving back up towards the high side of that range. So we're really pleased with where we are. We like the outlook of the year, and we think that's a great spot for us to run the business.

So that's right in the heart of where we want to be, perfect level of investment, continuing to fuel future growth. And if you look at the back half of the year, that would imply incrementals of 30% to 33%. So moving back up towards the high side of that range. So we're really pleased with where we are. We like the outlook of the year, and we think that's a great spot for us to run the business.

Speaker #2: So moving back up towards a high side of that range. So we're really pleased with where we are. We like the outlook of the year, and we think that's a great spot for us to run the business.

Speaker #2: So moving back up towards a high side of that range. So we're really pleased with where we are. We like the outlook of the year, and we think that's a great spot for us to run the

Speaker #4: Great. Thank you both, and congrats again.

Manav Patnaik: Great. Thank you both, and congrats again.

Josh Chan: Great. Thank you both, and congrats again.

Speaker #6: Thank

Speaker #6: Thank you. And our next question comes

Todd Schneider: Thank you.

Speaker #3: from Jasper Bibb from Truist Securities. Please go ahead, Jasper.

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

Speaker #7: Hey, morning, everyone. Why don't we get an update on your experience with sourcing costs and

Scott Garula: Hey, morning, everyone. Why don't we get an update on your experience with sourcing costs and tariffs so far this year? I guess how have things trended relative to your expectations when you initially set guidance for the fiscal year?

Jasper ?Bibb: Hey, morning, everyone. Why don't we get an update on your experience with sourcing costs and tariffs so far this year? I guess how have things trended relative to your expectations when you initially set guidance for the fiscal year?

Speaker #7: Tariffs so far this year?

Speaker #2: I guess, how have things trended relative to your expectations when you initially set guidance this year?

Speaker #7: Good morning, Jasper. Thanks for the question. Yeah, with the tariffs, it is certainly a dynamic environment as it relates to that. But we continue to execute at a high level.

Todd Schneider: Good morning, Jasper. Thanks for the question. Yeah, with the tariffs, it is certainly a dynamic environment as it relates to that. But we continue to execute at a high level. As I mentioned earlier, our culture, when times are challenging, you might have to run at higher RPMs, but we're executing at a high level. We're not immune from impacts of higher costs from tariffs. But our supply chain has always been a competitive advantage. And when you're in this type of environment, it's that much more of an advantage. Now, keeping in mind, they have the ability to. They're flexible and adaptable. And part of how they have that optionality is because we source from all over the world. And we do have really good geographic diversity. And we have spoken in the past that 90+% of our products, we have two or more options.

Uh, it is. It's certainly a dynamic, um, uh environment. Uh, as a result, uh, as it relates to that. Um, but we continued execute at a high level, um, you know, as I mentioned earlier, our culture, uh, when the times are challenging, uh, you might have to run in higher RPMs. Uh, but we, uh, uh, we're, we're executing at a high level. We're not immune from impacts of of higher costs from uh, tariffs, uh, but our our supply chain is, is always been a competitive Advantage. Uh, and when you're in this and type environment, is that much more of an advantage. Now, um, uh, keeping in mind they have the, the, the, the ability to to their flexible, uh, and adaptable. Uh, and part of how they have that optionality is because we Source from all over the world, um, and we do have really good Geographic diversity. And we have spoken in the past that 90 plus percent of our products, we have 2, or more options. So that optionality is incredibly important when it comes to, uh, uh, an economic

Speaker #7: As I mentioned earlier, our culture—when the times are challenging—you might have to run at higher RPMs. But we're executing at a high level.

Speaker #7: We're not immune from impacts of higher costs from tariffs. But our supply chain has always been a competitive advantage. And when you're in this type of environment, it's that much more of an advantage.

Speaker #7: Now, keeping in mind, they have the ability to—they're flexible and adaptable. And part of how they have that optionality is because we source from all over the world.

Excuse me, a, uh, uh, ah, uh, sourcing environment that what we're dealing with, um, the guy does contemplate, uh, the current economic, Uh, current, uh, environment for tariffs. Um, so, uh, uh, it's it's coming in, uh, very similar to what we expected. Uh, you you recognize that we do have the ability to, uh, we we advertise most of our Goods. So, uh, uh, as a result of that, uh, it does give us time to Pivot, uh, and adapt. Uh, but, uh, it's coming in, uh,

Speaker #7: And we do have really good geographic diversity. And we have spoken in the past that 90-plus percent of our products, we have two or more options.

About where we expected. Uh, and uh, but we're certainly, uh, staying on our toes because the uh the uh sourcing environment is dynamic, and the Tariff environment is um uh there certainly could be changes coming as well.

Speaker #7: So that optionality is incredibly important when it comes to an economic, or—excuse me—a sourcing environment like what we're dealing with. The guide does contemplate the current economic, or current environment for tariffs.

Todd Schneider: So that optionality is incredibly important when it comes to an economic, excuse me, a sourcing environment in what we're dealing with. The guide does contemplate the current environment for tariffs. So it's coming in very similar to what we expected. You recognize that we do have the ability to, we amortize most of our goods. So as a result of that, it does give us time to pivot and adapt. But it's coming in about where we expected. But we're certainly staying on our toes because the sourcing environment is dynamic. And the tariff environment is, there certainly could be changes coming as well.

So that optionality is incredibly important when it comes to an economic, excuse me, a sourcing environment in what we're dealing with. The guide does contemplate the current environment for tariffs. So it's coming in very similar to what we expected. You recognize that we do have the ability to, we amortize most of our goods. So as a result of that, it does give us time to pivot and adapt. But it's coming in about where we expected. But we're certainly staying on our toes because the sourcing environment is dynamic. And the tariff environment is, there certainly could be changes coming as well.

Thanks for that. And then uh you know, really healthy margin in in the first aid business. This quarter can you provide a bit more detail on what the underlying makes it look like in that business this year? I know you were a bit heavier on the training side for the end of last year. Secureus, if that's flipped back, more, current Revenue,

Speaker #7: So, it's coming in very similar to what we expected. You recognize that we do have the ability to amortize most of our goods.

Speaker #7: So, as a result of that, it does give us time to pivot and adapt. But it's coming in about where we expected. But we're certainly staying on our toes because the sourcing environment is dynamic.

Speaker #7: And the tariff environment is, there certainly could be changes coming as

Speaker #7: well. Thanks for

Speaker #3: And then, really healthy margin in the First Aid business is there. Can you provide a bit more detail on what the underlying mix has looked like in that business this year?

Scott Garula: Thanks for that. And then really healthy margin in the first aid business this quarter. Can you provide a bit more detail on what the underlying mix has looked like in that business this year? I know you were a bit heavier on the training side toward the end of last year. So curious if that's what backs more recurring revenue.

Jasper ?Bibb: Thanks for that. And then really healthy margin in the first aid business this quarter. Can you provide a bit more detail on what the underlying mix has looked like in that business this year? I know you were a bit heavier on the training side toward the end of last year. So curious if that's what backs more recurring revenue.

Speaker #3: I know you were a bit heavier on the training side toward the end of last year, so I'm curious if that's flipped back to be more current.

Speaker #3: revenue. Yeah, we're

Todd Schneider: Yeah. We love the first-aid business. It is a great business for us. We're very pleased with that. You've seen that they've had outsized performance for a period of time now. One of the things that the mantra that we have and the leadership of our organization there talks about: there's nothing more important than the health and wellness of a business's employees and customers. We completely agree with that. You're seeing really good growth in that business. We see them as a low double-digit grower for the foreseeable future. That's great. That being said, certainly the mix of business can have an impact on the margins in that. We like the range we're in. But if we have a little bit of change in mix and there's a little change in margin within a range for us, we're okay with that.

Speaker #7: We love the First Aid business. It is a great business for us. We're very pleased with that. And you've seen that they've had outsized performance for a period of time now.

Yeah, we're we're, uh, you know, we love the first aid business. It is a great business for us. Um, uh, we're we're very pleased with that. Uh, and uh, you've you've seen that they've had outside performance, uh, for a period of time now. Um, 1 of the things that, uh, uh, the Mantra that we have and the leadership of our organization, there talks about, there's nothing more important than the health and wellness of a business's employees and customers. We completely agree with that. Uh, and um, uh, you're seeing really good growth, uh, in that business. Um, uh, we we, we see them as a low double digit grower for, um, uh, for the foreseeable future. So, uh, that's great. That being said, um, uh, certainly the, the mix of business can have an impact, uh, on the margins in that. Um, uh, so we, we like the range we're in, uh, where, uh, but if we, if we have a little bit change of mix, uh,

Speaker #7: One of the things that the mantra that we have, and the leadership of our organization there talks about, is that there's nothing more important than the health and wellness of a business's employees and customers.

Speaker #7: We completely agree with that. And you're seeing really good growth in that business. We see them as a low double-digit grower for the foreseeable future.

And there's a little change in margin within a range for us. We're okay with that. We're Investing For That for the future, providing more value to our customers, um, and uh, you know, running a business isn't linear, so we're not focused on, you know, just a pure. Hey, we've got to get another, uh, you know, a certain amount of basis points a lift in gross margin that business. Uh, we think it's important that we are running a range that's really attractive, so we can grow our operating margins. Um, but mix of business really, uh, uh, is impacted by that. So uh and Jim, anything else that you'd like to comment on that?

Speaker #7: So that's great. That being said, certainly the mix of business can have an impact on the margins in that. So we like the range we're in.

Uh, no, it's not. I think you you, you you hit all the main points of what really drives this business. The only other thing I might just say is the team did a fantastic job in the quarter of execution. Um, and uh, you know, we're we're really pleased with the results and why they're standing.

Speaker #7: But if we have a little bit of change in mix, and there's a little change in margin within a range for us, we're okay with that.

Great, thank you very much.

Speaker #7: We're investing for that for the future, providing more value to our customers. And running a business isn't linear. So we're not focused on just pure, 'Hey, we've got to get another certain amount of basis points lift in gross margin in that business.' We think it's important that we are running a range that's really attractive.

Todd Schneider: We're investing for the future, providing more value to our customers. And running a business isn't linear. So we're not focused on just a pure, "Hey, we've got to get another certain amount of basis points lift in gross margin in that business." We think it's important that we are running a range that's really attractive so we can grow our operating margins. But mix of business really is impacted by that. So, Jim, anything else that you'd like to comment on that?

We're investing for the future, providing more value to our customers. And running a business isn't linear. So we're not focused on just a pure, "Hey, we've got to get another certain amount of basis points lift in gross margin in that business." We think it's important that we are running a range that's really attractive so we can grow our operating margins. But mix of business really is impacted by that. So, Jim, anything else that you'd like to comment on that?

And our next question comes from Andrew whittmann from RW beard. Please go ahead and Andrew

Speaker #7: So we can grow our operating margins. But a mix of business really is impacted by that. So Jim, anything else that you'd like to comment on that?

Great. Thanks for taking my question. I just thought I would give you guys an opportunity or here. I'd like to hear a little bit about the competitive environment, obviously, over the last couple of years, you've had some competitors that have really gone on a volume chasing, uh, spree. You guys have obviously executed very well amongst all this but I was just wondering what you're seeing out there and how that's affecting, um, your your price realization.

Speaker #2: No, Todd, I think you hit all the main points of what really drives this business. The only other thing I might just say is the team did a fantastic job in the quarter of execution.

Scott Garula: No, Todd. I think you hit all the main points of what really drives this business. The only other thing I might just say is the team did a fantastic job in the quarter of execution. And we're really pleased with the results and where they stand.

Jim Rozakis: No, Todd. I think you hit all the main points of what really drives this business. The only other thing I might just say is the team did a fantastic job in the quarter of execution. And we're really pleased with the results and where they stand.

Speaker #2: And we're really pleased with the results and where they are.

Speaker #2: stand. Great.

Speaker #3: Thank you for taking the questions. And our next question comes from Andrew Whitman from RW Baird. Please go ahead, Andrew.

Operator: Great. Thank you for taking the question. Our next question comes from Andrew Whitman from RW Baird. Please go ahead, Andrew.

Jasper ?Bibb: Great. Thank you for taking the question.

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

Speaker #8: Great, thanks for taking my question. I just thought I would give you guys an opportunity, or would like to hear a little bit about the competitive environment.

Andrew Steinerman: Great. Thanks for taking my question. I just thought I would give you guys an opportunity, or like, to hear a little bit about the competitive environment. Obviously, over the last couple of years, you've had some competitors that have really gone on a volume-chasing spree. You guys have obviously executed very well among all this. But I was just wondering what you're seeing out there and how that's affecting your price realization.

Andrew? Whittman: Great. Thanks for taking my question. I just thought I would give you guys an opportunity, or like, to hear a little bit about the competitive environment. Obviously, over the last couple of years, you've had some competitors that have really gone on a volume-chasing spree. You guys have obviously executed very well among all this. But I was just wondering what you're seeing out there and how that's affecting your price realization.

Speaker #8: Obviously, over the last couple of years, you've had some competitors that have really gone on a volume-chasing spree. You guys have obviously executed very well amongst all this.

Speaker #8: But I was just wondering what you're seeing out there, and how that's affecting your price realization?

Speaker #7: Good morning, Andrew. Thanks for the question. Yeah, I mean, as you know, we operate in a very competitive environment—always have, always will. My entire career, it's always been like that.

Todd Schneider: Good morning, Andrew. Thanks for the question. Yeah. I mean, as you know, we operate in a very competitive environment, always have, always will. My entire career, it's always been like that. And we certainly do win some business from competitors. But as you know, that's not where our focus is. Our focus is on signing new customers that weren't in a program when we walked in. And when we walk out, they are. And as a result of that, still over 2/3 of our new customers are coming from that sector. And the white space is incredibly large there with us servicing a little over a million customers, but there's still 16-plus million businesses in the US and Canada. So that's really attractive for us. So I mentioned our retention rates are at all-time high. That's helping us as well.

Speaker #7: And we certainly do win some business from competitors. But, as you know, that's not where our focus is. Our focus is on signing new customers that weren't programmers when we walked in.

Speaker #7: And when we walk out, they are. And as a result of that, still over two-thirds of our new customers are coming from that sector.

That's still over 2/3 of our new customers, uh, are coming from that sector, uh, and the whitespace is, um, incredibly large there with us servicing a little over a million customers, but there's still 16 plus million businesses in, uh, in the US and Canada. So, um, uh, that's, that's really attractive for us. So, um, um, I mentioned our, our retention rates are at all-time high that's helping us, um, as well. Uh, but that's really about the value proposition that we're providing for our customers, uh, which starts with our culture, uh, and is executed through our employee Partners. Um, but it is a, um, we're pleased with, uh, how our folks are performing, uh, competing in the marketplace, uh, and really attacking that large, um, Tam out there of that, uh, uh, no program Market, which uh, we we think we're really excited about

Speaker #7: And the white space is incredibly large there, with us servicing a little over a million customers. But there's still 16-plus million businesses in the U.S. and Canada.

Speaker #7: So that's really attractive for us. So I mentioned our retention rates are at all-time high. That's helping us. As well, but that's really about the value proposition that we're providing for our customers.

Todd Schneider: But that's really about the value proposition that we're providing for our customers, which starts with our culture and is executed through our employee partners. But we're pleased with how our folks are performing, competing in the marketplace, and really attacking that large TAM out there of that no-program market, which we think we're really excited about.

But that's really about the value proposition that we're providing for our customers, which starts with our culture and is executed through our employee partners. But we're pleased with how our folks are performing, competing in the marketplace, and really attacking that large TAM out there of that no-program market, which we think we're really excited about.

Great. Thank you. Uh, just for my follow-up. I thought I would just ask a little bit on the m&a side obviously, you know, last fiscal year was 1 of your bigger years that you had since uh for a while a pretty big quarter here in terms of capital deployment um to towards m&a. Uh maybe Todd you could just talk about kind of the, the funnel here. Do you feel like um you know, thinking about, you know the amount of capital deployment? Um last year is is again doable this year with the progress that you made, uh, this year so far.

Speaker #7: culture. And is executed Which starts with our through our employee partners. But it is a we're pleased with how our folks are performing. Competing in the marketplace.

Speaker #7: And really attacking that large TAM out there of that no-program market, which we think we're really excited about.

Speaker #3: Great, thank you. Just for my follow-up, I thought I would just ask a little bit on the M&A side. Obviously, last fiscal year was one of your bigger years that you had in a while.

Operator: Great. Thank you. Just for my follow-up, I thought we'd just ask a little bit on the M&A side. Obviously, last fiscal year was one of your bigger years that you had since, for a while. Pretty big quarter here in terms of capital deployment towards M&A. Maybe, Todd, you could just talk about kind of the funnel here. Do you feel like thinking about the amount of capital deployment last year is, again, doable this year with the progress that you made this year so far?

Andrew? Whittman: Great. Thank you. Just for my follow-up, I thought we'd just ask a little bit on the M&A side. Obviously, last fiscal year was one of your bigger years that you had since, for a while. Pretty big quarter here in terms of capital deployment towards M&A. Maybe, Todd, you could just talk about kind of the funnel here. Do you feel like thinking about the amount of capital deployment last year is, again, doable this year with the progress that you made this year so far?

Speaker #3: Pretty big quarter here in terms of capital deployment. Towards M&A, maybe Todd, you could just talk about kind of the funnel here. Do you feel like, thinking about the amount of capital deployment, last year is, again, doable this year with the progress that you made this year so far?

Speaker #7: Andrew, great question. First off, just capital allocation in general. We're very pleased with how we're going there. We just we invested over $100 million in CapEx for the quarter.

Todd Schneider: Andrew, great question. First off, just capital allocation in general. We're very pleased with how we're going there. We invested over $100 million in CapEx for the quarter, $85 million in M&A. All three route-based businesses we were acquisitive in. And then on top of that, $182 million in dividends paid out and over $600 million in buybacks. So we really like that capital allocation strategy. We've shown to be good fiduciaries with that. And M&A is certainly a part of that. As I mentioned, we had a really good quarter. We had a great year last year. But as you know, it's hard to predict. M&A tends to be a little unpredictable and lumpy, whether it's because there's family-owned businesses that are waiting on the next generation, whether they want to move on or not. And we do love M&A of all shapes and sizes. We love tuck-ins.

Uh uh Andrew great question. Uh, first off uh just Capital allocation in general. Uh uh we're very pleased with how we're we're going there. We just uh uh, you know we we invested over a hundred million dollars in capex for the quarter 85 million. In m&a, all 3 route based businesses, we were inquisitive in, um, and then on top of that 182 million dollars in dividends paid out and, and um, uh, over 600 million dollars in BuyBacks. Um, so, uh, we really like that. Um, uh, Capital allocation strategy. We, we've shown, uh, to be good for this series with that, uh, but, uh, and m&a is certainly a part of that. As I mentioned, we had a really good quarter. Um, uh, we had a great year last year, and, uh, but as you know, it's hard to predict, um, uh, you know, m&a tends to be a little, um, unpredictable and lumpy, um, you know, whether it's because there's, you know, family-owned businesses that are waiting on their

Speaker #7: So we really like that. Capital allocation strategy, we've shown to be good fiduciaries with that. But in M&A is certainly a part of that.

Their, um, uh, the Next Generation whether they want to move on or not. Um, and we do love m&a of all shapes and sizes. We love tuck-ins. Uh, we like new geographies, uh, and when we, when we make m&a, we always, uh, we value so much of it, but there's the number 1 things that we get out of. It are the people that are running the business and the customers and, uh, and we try to make sure that we can get synergies. If it's a tuck in, um,

Speaker #7: Had a really good quarter. We had a great year last year. But as you know, it's hard to get to $85. As I mentioned, we predict.

Speaker #7: M&A tends to be a little unpredictable and lumpy. Whether it's because there's family-owned businesses that are waiting on their the next generation, whether they want to move on or not.

Speaker #7: And we do love M&A of all shapes and sizes. We love tuck-ins, we like new geographies. And when we make M&A, we always—we value so much of it.

And if it's not a tuck in, then uh, then we get extra capacity and we also, uh, then have more customers that we can cross out. So all that's attractive, you know, the, uh, the, uh, the pipe. We are always working on that pipe, uh, uh, Jim and I, uh, and our corporate development team are, Are all, uh, in that game together. We relationships that are going back decades. Uh, and, um, uh, we're we're ready and willing to, uh, to uh, uh, for m&a to, uh, uh, to be an important component of our strategy moving forward.

Todd Schneider: We like new geographies. When we make M&A, we value so much of it. The number one things that we get out of it are the people that are running the business and the customers. We try to make sure that we can get synergies. If it's a tuck-in, and if it's not a tuck-in, then we get extra capacity. We also then have more customers that we can cross-sell. All that's attractive. The pipe, we are always working on that pipe. Jim, I, and our corporate development team are all in that game together. We have relationships that are going back decades. We're ready and willing for M&A to be an important component of our strategy moving forward.

We like new geographies. When we make M&A, we value so much of it. The number one things that we get out of it are the people that are running the business and the customers. We try to make sure that we can get synergies. If it's a tuck-in, and if it's not a tuck-in, then we get extra capacity. We also then have more customers that we can cross-sell. All that's attractive. The pipe, we are always working on that pipe. Jim, I, and our corporate development team are all in that game together. We have relationships that are going back decades. We're ready and willing for M&A to be an important component of our strategy moving forward.

Have you all got happy holiday guys? Uh have a good day. Thanks a lot. Thank you Andrew.

Speaker #7: But the number one things that we get out of it are the people that are running the business and the customers. And we try to make sure that we can get synergies if it’s a tuck-in, and if it’s not a tuck-in, then we get extra capacity.

and our next question comes from George Tong from Goldman Sachs, please go ahead George

Speaker #7: And we also then have more customers that we can cross-sell. So all that's attractive. The pipe—we are always working on that pipe. Jim and I, and our corporate development team, are all in that game together.

Hi, thanks. Good morning. Uh, you touched on some of this but can you provide a high-level overview on what you seeing with sales cycles and um, broader customer purchasing behaviors? And if you've noticed any meaningful changes from prior quarters,

Speaker #7: We have relationships that are going back decades, and we're ready and willing for M&A to be an important component of our strategy moving forward.

Speaker #7: forward. Have

Speaker #3: You holidayed, guys? Have a good day.

Uh, Good morning, George. Um, you know, nothing specific to call out. Um, you know, we've certainly operated in, uh, easier environments, uh, the, as this economic environment. It's a little less certain than we like, uh, but despite that uncertainty, um, the value proposition continues to resonate. Um, as I mentioned earlier, especially in periods of uncertainty, it can do that. Uh, Outsourcing, uh, can save money, uh, improving steady cash flow and saving time that can be spent on running the business.

Operator: Happy holiday, guys. Have a good day. Thanks a lot.

Andrew? Whittman: Happy holiday, guys. Have a good day. Thanks a lot.

Speaker #3: Thanks a lot. Thank you,

Todd Schneider: Thank you, Andrew.

Speaker #3: And now, Andrew, our next question comes from George Tong from Goldman Sachs. Please go ahead.

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

Speaker #3: George. Hi, thanks.

Speaker #8: Good morning. You touched on some of this, but can you provide a high-level overview on what you're seeing with sales cycles and broader customer purchasing behaviors?

George Tong: Hi, thanks. Good morning. You touched on some of this, but can you provide a high-level overview on what you're seeing with sales cycles and broader customer purchasing behaviors? And if you've noticed any meaningful changes from prior quarters?

Speaker #8: And if you've noticed any meaningful changes from prior quarters?

Uh, that was referenced in Jim's example that we talked about uh, earlier. Uh, I've I've already uh, referred to retention rates being a very attractive levels, um, and our um, uh, and I also mentioned our growth from our current customers was steady and if anything improved slightly. So, um, you know, uh, uh, we think we're in a good spot and, uh, and we like uh, where we are, uh, where we're pointed

Speaker #7: Good morning, George. Nothing specific to call out. We've certainly operated in easier environments, as this economic environment is a little less certain than we like.

Todd Schneider: Good morning, George. Nothing specific to call out. We've certainly operated in easier environments. This economic environment is a little less certain than we like. But despite that uncertainty, the value proposition continues to resonate. As I mentioned earlier, especially in periods of uncertainty, it can do that. Outsourcing can save money, improving steady cash flow, and saving time that can be spent on running the business. That was referenced in Jim's example that we talked about earlier. I've already referred to retention rates being at very attractive levels. And I also mentioned our growth from our current customers was steady, and if anything, improved slightly. So we think we're in a good spot, and we like where we're pointing.

Speaker #7: But despite that uncertainty, the value proposition continues to resonate. As I mentioned earlier, especially in periods of uncertainty, it can do that. Outsourcing can save money.

Guide for Revenue. Can you talk about how much of the increase reflects upside in the quarter versus what you were internally expecting compared to maybe a stronger outlook for the remainder of the year?

Speaker #7: Improving steady cash flow and saving time that can be spent on running the business—that was referenced in Jim's example that we talked about earlier.

Speaker #7: I've already referred to retention rates being at very attractive levels, and I also mentioned our growth from our current customers was steady.

Speaker #7: And if anything, improved slightly. So we think we're in a good spot, and we like where we are, where we're pointed.

Speaker #3: Got it, that's helpful. And then, just to follow up—you took up your full-year guide for revenue. Can you talk about how much of the increase reflects upside in the quarter versus what you were internally expecting, compared to maybe a stronger outlook for the remainder of the year?

Operator: Got it. That's helpful. And then just to follow up, you took up your full-year guide for revenue. Can you talk about how much of the increase reflects upside in the quarter versus what you were internally expecting compared to maybe a stronger outlook for the remainder of the year?

George Tong: Got it. That's helpful. And then just to follow up, you took up your full-year guide for revenue. Can you talk about how much of the increase reflects upside in the quarter versus what you were internally expecting compared to maybe a stronger outlook for the remainder of the year?

Speaker #7: Yeah. First off, our guide for the year is really good. It looks right where we want it to be. If you look at the guide for—excuse me, the guide for the year is showing growth of 7.8% to 8.5%, with a midpoint of 8.2%.

Todd Schneider: Yeah. First off, our guide for the year is really good. It looks right where we want it to be. If you look at the guide for, excuse me, the guide for the year is showing growth of 7.8% to 8.5%, midpoint of 8.2. It's right where we want. I think it's also important to recognize that the comps do get tougher in the second half for growth. Last year's second half growth was about 90 basis points higher than the first half of last year. So we've booked a good performance. But we're going to be up against tougher comps in the second half on growth than we were in the first half. But we're pleased with where we are, and we're pleased with our guide.

Uh, yeah, we're um, uh, you know, first off our, our guide for the year is, uh, really good. Uh, it looks, uh, it looks uh, right where we want it to be. Um, uh, if you look at, um, uh, the guide for uh, or excuse me, the, the guy for the years showing growth of 7.8% to 8.5% midpoint of 82, it's right where we want. Um, I think it's also important to recognize that the comps do get tougher in the second half for growth. Uh, last year's uh, second half growth was about 90 basis points higher than the first half of last year. So, um, uh, you know, we've we've booked a, a good performance, um, but we're going to be up against tougher comps, um, uh, in the second half on growth, then we were uh, in the first half. Uh, so, uh, but we're pleased with where we are. And we're pleased to with, uh, with our guide. Uh, and we think that, uh, we uh, uh, will be able to, uh, get some um, leverage as we uh, move forward.

Forward on that guy which will help um, fall to the bottom line. Hence, the uh, the EPS guide as well.

Got it. Thank you.

Thank you.

Speaker #7: It's right where we want it. I think it's also important to recognize that the comps do get tougher in the second half for growth. Last year's second-half growth was about 90 basis points higher than the first half of last year.

And our next question comes from Jason has from Wells Fargo. Please go ahead. Jason

Speaker #7: So, we've booked a good performance. But we're going to be up against tougher comps in the second half on growth than we were in the first half.

Hey, good morning and thanks for taking my questions. I just wanted to follow up, um, to get some more detail on the, the timing of the, the Tariff costs. It sounds like those are Maybe started to flow through the p&l, but there's more impact to come. Is that, like a, a fair understanding and then how is the industry reacting? How are you reacting? Um, have you started to raise prices of your competitors began? Raising prices. How should we think through that? Thank you.

Speaker #7: So, we're pleased with where we are, and we're pleased with our guide. We think that we will be able to get some leverage as we move forward on that guide, which will help fall to the bottom line—hence the EPS guide as well.

Uh, good morning, Jason. Um,

Todd Schneider: We think that we will be able to get some leverage as we move forward on that guide, which will help fall to the bottom line. Hence, the EPS guide as well.

We think that we will be able to get some leverage as we move forward on that guide, which will help fall to the bottom line. Hence, the EPS guide as well.

Speaker #3: Got it. Thank

Speaker #3: Got it. Thank you. And our next...

Operator: Got it. Thank you.

George Tong: Got it. Thank you.

Speaker #7: you.

Todd Schneider: Thank you.

Speaker #3: The question comes from Jason Haas from Wells Fargo. Please go ahead.

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

Speaker #3: Jason. Hey, good morning.

Speaker #8: And thanks for taking my questions. I just wanted to follow up to get some more detail on the timing of the tariff costs. It sounds like those have maybe started to flow through the P&L.

Jason Haas: Hey, good morning, and thanks for taking my questions. I just wanted to follow up to get some more detail on the timing of the tariff costs. It sounds like those have maybe started to flow through the P&L, but there's more impact to come. Is that a fair understanding? And then how is the industry reacting? How are you reacting? Have you started to raise prices? Have your competitors begun raising prices? How should we think through that? Thank you.

Speaker #8: But there’s more impact to come—is that a fair understanding? And then, how’s the industry reacting? How are you reacting? Have you started to raise prices?

Well, a few things, uh, first off, um, uh, as tariffs come through, uh, I mentioned that we have optionality. Um, so uh, don't think of it as, as simple as, uh, well tariffs are um, uh, significant impact. And we just haven't seen it yet. That's not the case. Um, because, uh, our culture is such that we don't just accept that. Uh, we've got to go find ways to improve. Uh, we've got to find uh uh work on higher, RPMs to find other uh additional suppliers to take costs out of our business as well. Uh, and we're doing all that. Um, I mentioned we're not immune from it, uh, and um, uh, but we're working really hard to mute that subject that's very best. Uh, we can um, as far as pricing is concerned

Speaker #8: Have your competitors begun raising prices? How should we think through that? Thank you.

Speaker #7: Good morning, Jason. Well, a few things. First off, as tariffs come through, I mentioned that we have optionality. So don't think of it as simple as, well, tariffs are a significant impact.

Todd Schneider: Good morning, Jason. Well, a few things. First off, as tariffs come through, I mentioned that we have optionality. So don't think of it as simple as, "Well, tariffs are a significant impact. We just haven't seen it yet." That's not the case because our culture is such that we don't just accept that. We've got to go find ways to improve. We've got to work at higher RPMs to find other additional suppliers to take costs out of our business as well. And we're doing all that. I mentioned we're not immune from it, but we're working really hard to mute that subject as very best we can. As far as pricing is concerned, we take a long-term approach on pricing. We are at what I'll call historical-type levels. But our philosophy is we care about the long-term value of a customer.

Speaker #7: We just haven't seen it yet. That's not the case, because our culture is such that we don't just accept that. We've got to go find ways to improve.

Speaker #7: We've got to find work on higher RPMs to find other additional suppliers to take costs out of our business as well. And we're doing all that.

Speaker #7: I mentioned we're not immune from it, but we're working really hard to mute that subject as best we can. As far as pricing is concerned, we take a long-term approach on pricing.

Speaker #7: We are at what I'll call historical-type levels. But our philosophy is we care about the long-term value of a customer. So we're focused on growing our business via volume growth, not just pricing.

Uh, we're um, uh, we we take the long-term approach. I'm praising. You know, we are at what I'll call is historical type levels, uh, but our philosophy is, uh, we we we care about the, the long-term value of of a customer. So, uh, we're we're focused on, um, you know, growing our business via volume growth, not just pricing. Um, we're going to go out and, uh, and extract out the inefficiencies of our business that will help us allow allow us to, uh, uh, grow our margins at a track of levels along with the, the revenue, uh, growth to help us get leverage. Um, but we don't simply just, um, pass along those costs to our customers and, uh, uh, because we operate in a really competitive environment, and, uh, there's customers have choices. So we've got to, um, work really diligently to mute the costs, uh, impacts of terrorists and other costs that are going through so that, uh, and uh, we're we're extracting out those inefficiencies and doing the very best we can

To, um, uh, to make sure that we're positioned for Success, uh, to grow our margins.

Todd Schneider: So we're focused on growing our business via volume growth, not just pricing. We're going to go out and extract out the inefficiencies of our business that will help us allow us to grow our margins at attractive levels, along with the revenue growth to help us get leverage. But we don't simply just pass along those costs to our customers because we operate in a really competitive environment. And those customers have choices. So we've got to work really diligently to mute the cost impacts of tariffs and other costs that are going through. And we're extracting out those inefficiencies and doing the very best we can to make sure that we're positioned for success to grow our margins.

So we're focused on growing our business via volume growth, not just pricing. We're going to go out and extract out the inefficiencies of our business that will help us allow us to grow our margins at attractive levels, along with the revenue growth to help us get leverage. But we don't simply just pass along those costs to our customers because we operate in a really competitive environment. And those customers have choices. So we've got to work really diligently to mute the cost impacts of tariffs and other costs that are going through. And we're extracting out those inefficiencies and doing the very best we can to make sure that we're positioned for success to grow our margins.

Speaker #7: We're going to go out and extract the inefficiencies of our business that will help us grow our margins at attractive levels, along with the revenue growth, to help us get leverage.

Great. Thank you. That's very helpful. And then as a follow-up, can you just refresh us on the timing of the sap, fire? Implementation costs? Are you expect? Are you still expecting? Um a greater headwind to margins in in fire in the second half of the year? That that system gets turned on and you start recognizing the amortization. Thank you.

Speaker #7: But we don't simply just pass along those costs to our customers, because we operate in a really competitive environment. And those customers have choices.

Speaker #7: So we've got to work really diligently to mute the cost impacts of tariffs and other costs that are going through, so that we're extracting out those inefficiencies and doing the very best we can to make sure that we're positioned for success to grow our margins.

Speaker #8: Great, thank you. That's very helpful. And then, as a follow-up, can you just refresh us on the timing of the SAP FHIR implementation costs?

Jason Haas: Great. Thank you. That's very helpful. And then as a follow-up, can you just refresh us on the timing of the SAP S/4 implementation costs? Are you still expecting a greater headwind to margins in S/4 in the second half of the year as that system gets turned on and you start recognizing the amortization? Thank you.

Speaker #8: Are you still expecting a greater headwind to margins in FHIR in the second half of the year, as that system gets turned on and you start recognizing the amortization?

Speaker #8: Thank you.

Speaker #7: Yeah, Jason, thanks for the question. These ERP implementations take time, and we are experiencing some additional costs now for sure. But there is more cost to come in the future.

Todd Schneider: Yeah. Jason, thanks for the question. These ERP implementations take time. We are experiencing some additional costs now, for sure. But there is more cost to come in the future. We're working really hard on this implementation. We think it'll be really valuable for our employee partners and our customers. We're investing for the future in that business. You see that we're growing it really attractively. We're not only growing it attractively, but we are also highly acquisitive in that business. When you think about the Fire business, think about it this way. We are also dealing with M&A that comes to us. As I mentioned earlier, M&A, you can't predict it exactly. In that business, some of our M&A allows us to be tuck-ins, but others are actually geographic expansion.

Speaker #7: We're working really hard on this implementation. We think it'll be really valuable for our employee-partners and our customers. But yeah, we're investing for the future in that business.

Speaker #7: You see that we're growing it really attractively. We're not only growing it attractively, but we are also highly acquisitive in that business. So, when you think about the FHIR business, think about it this way.

Speaker #7: We are also dealing with M&A that comes to us. And as I mentioned earlier, M&A—you can't predict it exactly. But in that business, some of our M&A allows us to be tuck-ins, but others are actually geographic expansion.

Uh, uh, um, m&a that comes to us. Um, and as I mentioned earlier, uh, m&a, you can't predict it exactly. But, uh, uh, and in that business we are some of our m&a is, is, uh, allows us to be tuck-ins but others are actually, uh, Geographic expansion. Um, and when we make m&a in that business, um, uh, and you get m&a expansion, uh, it is, uh, for, uh, a period of time. They, uh, that uh, doesn't run at the, uh, the margin profile that we do, where we've got to make sure that we get our operating protocols in place. Um, and as you can see m&a account for 3440 basis points of total growth for fire in Q2. Um, so that's a component of of, uh, any margin. Uh, uh, uh, um, uh, pressure that we have in that business a little bit of essay, uh, sap. Uh, but we're investing for that, uh, in that business because we think the future,

Is really, really bright. Uh, and uh, we're quite optimistic about the coming years.

Speaker #7: And when we make M&A in that business, and you get M&A expansion, it is for a period of time that doesn't run at the margin profile that we do.

Todd Schneider: When we make M&A in that business and you get M&A expansion, it is for a period of time. That doesn't run at the margin profile that we do. We've got to make sure that we get our operating protocols in place. As you can see, M&A account for 340 basis points of total growth for Fire in Q2. That's a component of any margin pressure that we have in that business, a little bit of SAP. But we're investing for that in that business because we think the future is really, really bright. We're quite optimistic about the coming years.

When we make M&A in that business and you get M&A expansion, it is for a period of time. That doesn't run at the margin profile that we do. We've got to make sure that we get our operating protocols in place. As you can see, M&A account for 340 basis points of total growth for Fire in Q2. That's a component of any margin pressure that we have in that business, a little bit of SAP. But we're investing for that in that business because we think the future is really, really bright. We're quite optimistic about the coming years.

Jason this is uh Scott I just might add, you know, as Todd mentioned uh these Erp implementations take some time. Uh we've got some experience with that and you know, our rental business as well as first aid and safety. And we are expecting the fire roll out to uh, carry on into next fiscal year.

Speaker #7: We've got to make sure that we get our operating protocols in place. And as you can see, M&A account for 340 basis points of total growth for FHIR in Q2.

And I would just, uh, look at the impact of for a fiscal year 27 to be around that um, you know, 100 uh basis points for the fire protection business.

Okay, great. That's very helpful. Thank you.

Speaker #7: So that's a component of any margin pressure that we have in that business, a little bit of SAP, but we're investing for that in that business because we think the future is really, really bright.

And our next question comes from fisa Ali from Deutsche Bank. Please go ahead fisa.

Yes. Hi. Thank you.

Speaker #7: And we're quite optimistic about the coming quarter.

Speaker #7: years. Jason, this is

Speaker #2: Scott, just might add, as Todd mentioned, these ERP implementations take some time. We've got some experience with that in our rental business as well as first aid and safety.

Operator: Jason, this is Scott. Just to add, as Todd mentioned, these ERP implementations take some time. We've got some experience with that in our rental business as well as first aid and safety. We are expecting the Fire rollout to carry on into next fiscal year. I would just look at the impact for fiscal year 2027 to be around that 100 basis points for the Fire protection business.

Scott Garula: Jason, this is Scott. Just to add, as Todd mentioned, these ERP implementations take some time. We've got some experience with that in our rental business as well as first aid and safety. We are expecting the Fire rollout to carry on into next fiscal year. I would just look at the impact for fiscal year 2027 to be around that 100 basis points for the Fire protection business.

Speaker #2: And we are expecting the FHIR rollout to carry on into next fiscal year. And I would just look at the impact for fiscal year '27 to be around that 100 basis points for the FHIR protection.

So, I wanted to ask about your technology instead of, I think it's, you know, well, that you guys are at the Forefront of, you know, implementing the latest and greatest, in terms of technology. So just wanted to get an update on, you know, what are, if there's any recent initiatives you'd like to talk about and, um, you know, maybe the the return on, on, on those type of Investments, whether it's AI related or or anything else, you would want to highlight.

Speaker #2: business. Okay.

Speaker #8: Great. That's very helpful. Thank you.

Jason Haas: Okay. Great. That's very helpful. Thank you.

Speaker #3: And our next question comes from Faiza Alwi from Deutsche Bank. Please go ahead, Faiza.

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

Speaker #4: Yes. Hi. Thank you. So, I wanted to ask about your technology initiatives. I think it's well understood that you guys are at the forefront of implementing the latest and greatest in terms of technology.

Timothy Mulrooney: Yes, hi. Thank you. So I wanted to ask about your technology initiatives. I think it's well understood that you guys are at the forefront of implementing the latest and greatest in terms of technology. So just wanted to get an update on what are there any recent initiatives you'd like to talk about, and maybe the return on those types of investments, whether it's AI-related or anything else you would want to highlight?

Faiza? Alwy: Yes, hi. Thank you. So I wanted to ask about your technology initiatives. I think it's well understood that you guys are at the forefront of implementing the latest and greatest in terms of technology. So just wanted to get an update on what are there any recent initiatives you'd like to talk about, and maybe the return on those types of investments, whether it's AI-related or anything else you would want to highlight?

Speaker #4: So I just wanted to get an update on what are, if there's any recent initiatives you'd like to talk about, and maybe the return on those types of investments, whether it's AI-related or anything else you would—

Yeah, good morning fisa. Um, yeah, well, we are, uh, investing in technology have been for many years and, uh, we'll be, uh, probably in perpetuity, uh, just it's a nature of how business works now. And, uh, and we are, uh, we, we spoke about in the past, we're seeing benefits, whether it's a material cost, uh, or cost of goods, uh, production, uh, delivery cost, uh, all those, uh, you're seeing that, um, uh, we talked about smart truck, uh, helping us uh, from a technology standpoint garment utilization. Um, being on 1 System, allows us to share garments, uh, and uh, and reduce our costs there.

Speaker #7: Yeah, good morning, Faiza. Yes, well, we are investing in technology—have been for many years—and we’ll be probably in perpetuity. It's just the nature of how business works now.

Todd Schneider: Yeah. Good morning, Faiza. Yes, we are investing in technology, have been for many years, and will be probably in perpetuity. Just, it's the nature of how business works now. We spoke about in the past; we're seeing benefits, whether it's in material cost, cost of goods, production, and delivery cost, all those; you're seeing that. We talked about SmartTruck helping us from a technology standpoint; garment utilization being on one system allows us to share garments and reduce our cost there. All that is important. Certainly, AI, we see obvious opportunity there. We're in the early stages as many companies are on the AI front. I include that into our total technology investment. But we're optimistic about where that will impact us in the future. We are organizing and investing appropriately to make sure we leverage those opportunities.

Speaker #7: And, as we spoke about in the past, we're seeing benefits, whether it's in material cost or cost of goods, production, delivery cost—all those, you're seeing that.

All that is important. Um uh certainly AI. We see uh uh obvious opportunity. There we're in the early stages. As many companies are on the AI front. Um uh and uh am I you know uh include that into our total technology uh investment. Uh but we're um we're optimistic about where that will impact us in the future and uh and we are uh uh organizing and investing appropriately to make sure we leverage those opportunities.

Thank you so much.

Speaker #7: We talked about Smart Truck helping us from a technology standpoint. Garment utilization being on one system allows us to share garments and reduce our cost there.

And our next question comes from Stephanie Moore from Jeffrey. Please go ahead. Stephanie.

Great. Good morning. Thank you everybody.

Speaker #7: All that is important. Certainly, AI—we see obvious opportunity there. We're in the early stages, as many companies are, on the AI front. And I include that into our total technology investment.

Speaker #7: But we're optimistic about where that will impact us in the future, and we are organizing and investing appropriately to make sure we leverage those opportunities.

Speaker #4: Great. Thank you so

Speaker #4: Thank you very much. And our next question comes from

Timothy Mulrooney: Thank you so much.

Faiza? Alwy: Thank you so much.

I think, you know, 2 2 areas of your strategy were very clear um, this morning and obviously have been clear for some time now. And the first is obviously, the record retention levels that you can continue to see as well as, um, you know, as you called out your Investments and key verticals and just the that you're seeing there, despite the uncertain macro. So kind of given these 2 factors, you know, maybe talk about how your view on pricing can change, because it would seem like it would look retention is very strong. You're in. You're also in these verticals where you're, you know, seeing a lot of impact but also, you know, continuing to build out your value with these customers. So IE, I would assume being much stickier. So maybe just talk about how that's

Speaker #3: Stephanie Moore from Jefferies. Please go ahead.

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

Can inform your pricing strategy going forward. Thanks.

Speaker #3: Stephanie. Great.

Speaker #4: Good morning. Thank you, everybody. I think two areas of your strategy were very clear this morning, and obviously have been clear for some time now. The first is, obviously, the record retention levels that you continue to see, as well as, as you called out, your investments in key verticals and just the strength that you're seeing there, despite the uncertain macro.

Timothy Mulrooney: Great. Good morning. Thank you, everybody. I think two areas of your strategy were very clear this morning and obviously have been clear for some time now. First is obviously the record retention levels that you could continue to see, as well as, as you called out, your investments in key verticals and just the strength that you're seeing there despite the uncertain macro. So kind of given these two factors, maybe talk about how your view on pricing can change because it would seem like retention is very strong. You're also in these verticals where you're seeing a lot of impact, but also continuing to build out your value with these customers. So, i.e., I would assume being much stickier. So maybe just talk about how this can inform your pricing strategy going forward. Thanks.

Stephanie? Moore: Great. Good morning. Thank you, everybody. I think two areas of your strategy were very clear this morning and obviously have been clear for some time now. First is obviously the record retention levels that you could continue to see, as well as, as you called out, your investments in key verticals and just the strength that you're seeing there despite the uncertain macro. So kind of given these two factors, maybe talk about how your view on pricing can change because it would seem like retention is very strong. You're also in these verticals where you're seeing a lot of impact, but also continuing to build out your value with these customers. So, i.e., I would assume being much stickier. So maybe just talk about how this can inform your pricing strategy going forward. Thanks.

Speaker #4: So, kind of given these two factors, maybe talk about how your view on pricing can change, because it would seem like the retention is very strong.

Speaker #4: You're in, you're also in these verticals where you're seeing a lot of impact, but also continuing to build out your value with these customers.

Speaker #4: So, I.e., I would assume being much stickier. So maybe just talk about how this can inform your pricing strategy going forward.

Speaker #4: Thanks. Yeah.

Speaker #7: Good morning, Stephanie. Our pricing strategy hasn't changed and, as I mentioned, we're running at historical levels. And I also mentioned we think long-term about these subjects.

Todd Schneider: Yeah. Good morning, Stephanie. Our pricing strategy hasn't changed. As I mentioned, we're running at historical levels. I also mentioned we think long-term about these subjects. Our strategy around pricing, thinking long-term, has helped the retention rates. We're focused on growing our margins, but we're not going to do that just through pricing. We have to go extract out inefficiencies because we operate in a very competitive market. We have many competitors, whether it is what you might think of as a traditional competitor, but online, e-commerce, the big box retail, we compete with all these people. As a result, we've got to be focused on providing great value. That applies to our key verticals as well. Each of our verticals, we operate in a very competitive environment.

Speaker #7: So our strategy around pricing thinking long-term has helped the retention rates. So growing our margins but we're not going to do that we're focused on just through pricing.

You know, we're focused on, um, you know, growing our margins, but we're not going to do that, just through pricing. Um, we have to go extract out inefficiencies because we operate in a, in a, a very competitive market and, uh, uh, and we have many competitors. You know, whether it is, um, uh, what you might think of as a traditional competitor, uh, but online e-commerce, um, uh, the, uh, The Big Box retail, we compete with all these people. Uh, and as a result, we've, we've got to be, um, uh, focused on providing Great Value, uh, uh, and, and that applies to our key verticals as well. Each of our verticals that's we operate in a very competitive environment, um, and uh, and we're focused on providing the value. Uh, extracting out those inefficiencies, uh, but, uh, because we do not operate, uh, never have and never will operate in an environment where we can just, um, adjust price up. Um, because uh, it's a ultra competitive environment.

Speaker #7: We have to go extract out inefficiencies because we operate in a very competitive market. And we have many competitors, whether it is what you might think of as a traditional competitor, but online, e-commerce, the big box retail—we compete with all these people.

Thank you, appreciate it.

Thank you.

And our next question comes from Scott schneberger from Oppenheimer. Please go ahead, Scott.

Speaker #7: And as a result, we've got to be focused on providing great value, and that applies to our key verticals as well. Each of our verticals, we operate in a very competitive environment.

Speaker #7: And we're focused on providing the value, extracting out those inefficiencies. But because we do not operate—never have, never will operate—in an environment where we can just adjust price up, because it's an ultra-competitive environment.

Todd Schneider: We're focused on providing the value, extracting out those inefficiencies, because we do not operate, never have, never will operate in an environment where we can just price up because it's an ultra-competitive environment.

We're focused on providing the value, extracting out those inefficiencies, because we do not operate, never have, never will operate in an environment where we can just price up because it's an ultra-competitive environment.

Oh, thanks very much. Um, it was after earlier a question on, um, on sales cycles and you guys covered the Spectrum with the answer, pretty. Well, I'm curious. Um, just to ask that a little different way, what? You're seeing behaviorally from large customers as opposed to small customers, um, are you seeing any, uh, any, any any softness or strength in 1 or the other? Um, just any indications, on on those, uh, on on, on size category. Thanks.

Speaker #4: Thank you. Appreciate it.

Timothy Mulrooney: Thank you. Appreciate it.

Stephanie? Moore: Thank you. Appreciate it.

Speaker #7: Thank you.

Todd Schneider: Thank you.

Speaker #3: And our next question comes from Scott Schneberger from Oppenheimer. Please go ahead, Scott.

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

Speaker #8: Thanks very much. It was asked earlier—a question on sales cycles—and you guys covered the spectrum with the answer pretty well. I'm curious, just to ask that a little different way, what you're seeing behaviorally from large customers as opposed to small customers?

Jared Mattingly: Thanks very much. It was asked earlier a question on sales cycles. You guys covered the spectrum with the answer pretty well. I'm curious, just to ask that a little different way, what you're seeing behaviorally from large customers as opposed to small customers? Are you seeing any softness or strength in one or the other? Just any indications on those on size category. Thanks.

Scott? Schneeberger: Thanks very much. It was asked earlier a question on sales cycles. You guys covered the spectrum with the answer pretty well. I'm curious, just to ask that a little different way, what you're seeing behaviorally from large customers as opposed to small customers? Are you seeing any softness or strength in one or the other? Just any indications on those on size category. Thanks.

Speaker #8: Are you seeing any softness or strength in one or the other? Just any indications on those, on size category.

Speaker #8: Thanks. Yeah.

Speaker #7: Good question, Scott. As you can imagine, we watch our customer base really closely. And we have such a wide breadth of customers and products and services. It's a wide breadth of customers, whether it's geographic or by NAIC code—you name it, we service it.

Todd Schneider: Yeah. Good question, Scott. As you can imagine, we watch our customer base really closely. But we have such a wide breadth of customers, products, and services. But it's that wide breadth of customers, whether it's geographic or by NAIC code, you name it, we service it. And so nothing to call out specifically there. We've got certain customers that are thriving. Certain ones have more challenges. But I wouldn't say anything specific to call out regarding the customer base. If we want to go to the fourth decimal type, we could get into those levels. But I don't think it's appropriate at this point because, in general, our customer base has been pretty stable. And as I mentioned earlier, if anything, we had slight improvement there.

Yeah, good question, Scott. You know, uh, as you can imagine, we're we watch our our customer base, uh, really closely. Um, and uh, but we have such a, uh, wide breadth of of customers and products and services. Um, but it's a, uh, that wide breadth of customers. Um, uh, uh, whether it's Geographic or by, uh, Nate code. Uh, You Name It. We we service it. Uh, and, uh, so nothing to call out specifically there, you know, we've got, you know, a, a certain customers that are thriving. Certain ones are have more challenges, um, but we're, um, I would say anything specific to call out regarding the customer base. Um, uh, you know, if you, if we want to go to the, you know, fourth decimal type, uh, we could get into those levels. But, uh, I don't think it's appropriate that this, uh, uh, point because in general, our, our customer base is, uh, has been, uh, pretty stable. Uh, and as I mentioned earlier,

Uh, if anything, um, uh, we had a slight Improvement there.

Speaker #7: And so nothing to call out specifically there. We've got certain customers that are thriving, certain ones that have more challenges. But I wouldn't say anything specific to call out regarding the customer base.

Speaker #7: If we want to go to the fourth decimal type, we could get into those levels. But I don't think it's appropriate at this point because, in general, our customer base has been pretty stable.

Thanks and um, I I did some, you know, you guys mentioned very large buyback in the quarter and clearly, uh, we infer from this call, you're you're interested in being inquisitive. Um, but with the it seems like we're going to see some large BuyBacks from you, going forward based on on on what we've just seen. And your your Leverage is below 1 time. Uh ticked up a little bit, using a little bit of uh of of short-term borrowing to do it. Um what's the propensity uh to take the leverage higher and do that? How aggressive might we see you be with the BuyBacks and and and where would you take the leverage? Thanks.

Speaker #7: And as I mentioned earlier, if anything, we had a slight improvement.

Speaker #7: there. Thanks.

Speaker #8: And I did see you guys mentioned a very large buyback in the quarter. And clearly, we infer from this call you're interested in being acquisitive.

Jared Mattingly: Thanks. And as you guys mentioned very large buyback in the quarter. And clearly, we infer from this call you're interested in being acquisitive. But it seems like we're going to see some large buybacks from you going forward based on what we've just seen. And your leverage is below one time, ticked up a little bit using a little bit of short-term borrowing to do it. What's the propensity to take the leverage higher and do that? How aggressive might we see you be with the buybacks? And where would you take the leverage? Thanks.

Scott? Schneeberger: Thanks. And as you guys mentioned very large buyback in the quarter. And clearly, we infer from this call you're interested in being acquisitive. But it seems like we're going to see some large buybacks from you going forward based on what we've just seen. And your leverage is below one time, ticked up a little bit using a little bit of short-term borrowing to do it. What's the propensity to take the leverage higher and do that? How aggressive might we see you be with the buybacks? And where would you take the leverage? Thanks.

Speaker #8: But it seems like we're going to see some large buybacks from you going forward, based on what we've just seen. And your leverage is below one time, ticked up a little bit, using a little bit of short-term borrowing to do it.

Speaker #8: What's the propensity to take the leverage higher and do that? How aggressive might we see you be with the buybacks, and where would you take the leverage?

Uh, good question. Um, you know, uh, we we view BuyBacks as a, an excellent use of cash, uh, to provide shareholder return. Uh, that being said, um, uh, we we have been, uh, uh, you know, very transparent on this, uh, that we, we view it as an opportunity to approach. Um, so, um, uh, I I wouldn't just, uh, simply model in, uh, that, uh, uh, that we are going to, uh, lever up and, uh, and, and be highly aggressive on, uh, BuyBacks. We'll be opportunistic, um, uh, and, uh, and handle that as we have in the past. And if you look at our history, um, you know, even our 5 10, 20 year history, we've been pretty consistent on that, you know, uh, our, our Capital, allocation approach and I wouldn't change, I wouldn't expect to change

Speaker #8: Thanks.

Speaker #7: Good question. We view buybacks as an excellent use of cash to provide shareholder return. That being said, we have been very transparent on this.

Todd Schneider: Good question. We view buybacks as an excellent use of cash to provide shareholder return. That being said, we have been very transparent on this. We view it as an opportunistic approach. I wouldn't just simply model in that we are going to lever up and be highly aggressive on buybacks. We'll be opportunistic and handle that as we have in the past. If you look at our history, even our five, 10, 20-year history, we've been pretty consistent on that, our capital allocation approach. I wouldn't expect a change to our approach there. We'll continue to look at that opportunistically and return that back to our shareholders as appropriate.

Change to our approach there. We'll continue to look at that opportunistically. Uh, and, uh, and uh, uh, return that back to our shareholders as appropriate.

Okay. Thanks. Happy holidays.

You as well.

Speaker #7: We view it as an opportunistic approach. So, I wouldn't just simply model in that we are going to lever up and be highly aggressive on buybacks.

and our next question comes from stifel, please go ahead sumo

Speaker #7: We'll be opportunistic and handle that as we have in the past. And if you look at our history, even our 5-, 10-, 20-year history, we've been pretty consistent on that.

Speaker #7: Our capital allocation approach—and I wouldn't expect to change our approach there. We'll continue to look at that opportunistically and return that back to our shareholders as—

Speaker #7: appropriate. Great.

Speaker #8: Thanks. Happy

Right now. And and then just a separate, just a deep dive, a little bit more on on 1 of the verticals. In terms of some of those like, uh, scrubs business that you guys have been very successful in how much if, uh, a differentiator is it for you? Uh, in terms of being able to use your balance sheet to have, you know, uh, those dispensers out there and really invest in in effective dispensers. Thank you.

Speaker #8: holidays. You as

Jared Mattingly: Great. Thanks. Happy holidays.

Scott? Schneeberger: Great. Thanks. Happy holidays.

Speaker #7: well. And

Todd Schneider: You as well.

Speaker #3: Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead.

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

Speaker #3: Shlomo. Hi.

Speaker #9: Thank you very much for taking my questions. The first question I have is just hoping to get more detail on the growth verticals versus the rest of the business.

Scott Garula: Hi. Thank you very much for taking my questions. The first question I have, just hoping to get more detail on the growth verticals versus the rest of the business. Maybe you could talk a little bit about the growth of those verticals in aggregate versus the rest of the business and maybe versus each other, and what percentage of the business they are right now. And then just a deep dive a little bit more on one of the verticals. In terms of some of those scrubs business that you guys have been very successful in, how much of a differentiator is it for you in terms of being able to use your balance sheet to have those dispensers out there and really invest in effective dispensers? Thank you.

Shlomo Rosenbaum: Hi. Thank you very much for taking my questions. The first question I have, just hoping to get more detail on the growth verticals versus the rest of the business. Maybe you could talk a little bit about the growth of those verticals in aggregate versus the rest of the business and maybe versus each other, and what percentage of the business they are right now. And then just a deep dive a little bit more on one of the verticals. In terms of some of those scrubs business that you guys have been very successful in, how much of a differentiator is it for you in terms of being able to use your balance sheet to have those dispensers out there and really invest in effective dispensers? Thank you.

Speaker #9: Maybe you could talk a little bit about the growth of those verticals in aggregate versus the rest of the business, and maybe versus each other, and what percentage of the business they are right now.

Too much. You take the first half and then I'll talk about the dispensers. Sure. Uh, yeah. So, uh, as we mentioned in our prepared remarks, we continue to see, uh, really good success across all 4, uh, of our verticals, uh, Healthcare Hospitality, uh, state and local government and and education. Uh, you know, we continue right now, Healthcare is the largest and, and probably the most, uh,

Speaker #9: And then just a separate—just to deep dive a little bit more on one of the verticals. In terms of some of those scrubs businesses that you guys have been very successful in, how much of a differentiator is it for you in terms of being able to use your balance sheet to have those dispensers out there and really invest in effective dispensers?

Speaker #9: Thank

Speaker #9: you. Too much?

Speaker #7: You take the first half, and then I'll talk about the rest.

the most developed we've been in that business. The longest, uh, that 1 represents about 8% of our total revenue is growing and all 4 of them. By the way are growing slightly faster, uh, than the aggregate of the company. But all the company we're getting demand in in all of our business lines. Uh, so we're, we're seeing good growth across the board, uh, but right now Healthcare is about 8% of total. And if you put all 4 uh together they're about 11%. Uh but we really like the trajectory and the total available Market in each 1 of those. Uh, so we can continue to organize around those and put good resources towards them.

Todd Schneider: Shlomo, would you take the first half, and then I'll talk about the dispensers.

Speaker #8: Sure. Yeah. Shlomo, as we mentioned in our prepared remarks, we continue to see really good success across all four of our verticals: healthcare, hospitality, state and local government, and education.

Operator: Sure. Yeah. Shlomo, as we mentioned in our prepared remarks, we continue to see really good success across all four of our verticals of healthcare, hospitality, state and local government, and education. We continue. Right now, healthcare is the largest and probably the most developed. We've been in that business the longest. That one represents about 8% of our total revenue is growing. All four of them, by the way, are growing slightly faster than the aggregate of the company. But all the company, we're getting demand in all of our business lines. So we're seeing good growth across the board. But right now, healthcare is about 8% of total. And if you put all four together, they're about 11%. But we really like the trajectory and the total available market in each one of those. So we continue to organize around those and put good resources towards them.

Jim Rozakis: Sure. Yeah. Shlomo, as we mentioned in our prepared remarks, we continue to see really good success across all four of our verticals of healthcare, hospitality, state and local government, and education. We continue. Right now, healthcare is the largest and probably the most developed. We've been in that business the longest. That one represents about 8% of our total revenue is growing. All four of them, by the way, are growing slightly faster than the aggregate of the company. But all the company, we're getting demand in all of our business lines. So we're seeing good growth across the board. But right now, healthcare is about 8% of total. And if you put all four together, they're about 11%. But we really like the trajectory and the total available market in each one of those. So we continue to organize around those and put good resources towards them.

Speaker #8: We continue right now, healthcare is the largest and probably the most developed. We've been in that business the longest. That one represents about 8% of our total revenue. It is growing, and all four of them, by the way, are growing slightly faster.

Speaker #8: Then the aggregate of the company, but all the company—we're getting demand in all of our business lines. So we're seeing good growth across the board.

Speaker #8: But right now, healthcare is about 8% of total. And if you put all four together, they're about 11%. But we really like the trajectory and the total available market in each one of those.

Speaker #8: So, we continue to organize around those and put good resources towards them.

Speaker #7: Yeah. And I'll take the second half, Shlomo. As a reminder, we don't just sell into these verticals; we organize around them, whether it be customer service, the routing of that—which would take a little bit away from density—but we think it's so important to be experts in that business so that we can provide that much more value.

Todd Schneider: Yeah. And I'll take the second half, Shlomo. As a reminder, we don't just sell into these verticals. We organize around them, whether it be customer service, the routing of that, which would take a little bit away from density. But we think it's so important to be experts in that business so that we can provide that much more value. So that helps us get better at finding the next products and services that those customers want and help us provide a better customer experience. That being said, you mentioned dispensers. We have deployed dispensers at many customers. And the value that we bring is significant there because it changes the game for them and allows them to look at the product differently.

Yeah. And I'll take the second half, Shlomo. As a reminder, we don't just sell into these verticals. We organize around them, whether it be customer service, the routing of that, which would take a little bit away from density. But we think it's so important to be experts in that business so that we can provide that much more value. So that helps us get better at finding the next products and services that those customers want and help us provide a better customer experience. That being said, you mentioned dispensers. We have deployed dispensers at many customers. And the value that we bring is significant there because it changes the game for them and allows them to look at the product differently.

Yeah, and I'll take the second half. So the, um, uh, as a reminder, um, yeah, we don't just sell into these verticals. We, we organize them, organized around them, whether it be, you know, a customer service. Um, uh, the um, uh, the routing, uh, of that, um, uh, which you know, would take a little bit away from density, but we think it's so important to be, um, uh, experts in that business. Uh, so that we can provide that much more value. So that helps us get better at finding the next products and services that those customers want, uh, and help us provide, uh, a better customer experience. Um, uh, uh, that being said, um, you you mentioned dispensers. Uh, we, uh, we have deployed dispensers at, uh, uh, uh, uh, uh, uh, many customers and, uh, the value that we bring, uh, is significant there because, um, it changes the game for them and allows them to look at the pro.

Speaker #7: So that helps us get better at finding the next products and services that those customers want, and helps us provide a better customer experience.

Product differently instead of looking at the product as a commodity, that's, uh, and let's go with the cheapest 1. We can, they can provide a better value product, uh, because they have, uh, control over that, uh, inventory. So that's all important, um, and we're blessed to have a great balance sheet. Uh, we have a balance sheet that allows us to invest for those customers, uh, and, uh, and ultimately get a return for our company, uh, but provide a better value, uh, uh, uh, and value proposition for the customer

Speaker #7: That being said, you mentioned dispensers. We have deployed dispensers at many customers, and the value that we bring is significant there because it changes the game for them and allows them to look at the product differently.

For better products, better service better technology. Uh, and uh, that gives us a strategic advantage.

Thank you.

And our next question comes from Tony Kaplan from Morgan Stanley. Please go ahead, Tony.

Speaker #7: Instead of looking at the product as a commodity and saying, 'Let's go with the cheapest one we can,' they can provide a better value product because they have control over that inventory.

Todd Schneider: Instead of looking at the product as a commodity that's, and let's go with the cheapest one we can, they can provide a better value product because they have control over that inventory. So that's all important. And we're blessed to have a great balance sheet. We have a balance sheet that allows us to invest for those customers and ultimately get a return for our company, provide a better value and value proposition for the customer, better product, better service, better technology, and that gives us a strategic advantage.

Speaker #7: So that's all important. And we're blessed to have a great balance sheet. We have a balance sheet that allows us to invest for those customers.

Speaker #7: And ultimately, get a return for our company, but provide a better value and value proposition for the customer—better products, better service, better technology—and that gives us strategic

Speaker #7: advantage. Thank

Thanks so much. Um, I was hoping you could talk about. If you think about your business long term, you know, the you're already growing High, single digits. Great. Um, where do you see the next? Like, Step Up of growth coming from? Uh, is it from the key verticals? Is it from New geographies, you know, new products. Um, you know, I guess when you think about, um, you know, your penetration in the key verticals, like, you know, how, how do you think about long-term sustainability of growth at this level and where are the biggest growth drivers come from. Thank you.

Scott Garula: Thank you.

Speaker #8: Thank you.

Todd Schneider: Thank you.

Speaker #3: And our next

Speaker #3: question comes from Tony Kaplan from you.

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

Speaker #3: Tony. Thanks so

Speaker #10: much. I was hoping you could talk about if you think about your business long-term, you're already growing high single digits, great. Where do you see the next step up of growth coming from?

Timothy Mulrooney: Thanks so much. I was hoping you could talk about, if you think about your business long-term, that you're already growing high single digits, great. Where do you see the next step up of growth coming from? Is it from the key verticals? Is it from new geographies, new products? I guess when you think about your penetration in the key verticals, how do you think about long-term sustainability of growth at this level, and where the biggest growth drivers come from? Thank you.

Toni Kaplan: Thanks so much. I was hoping you could talk about, if you think about your business long-term, that you're already growing high single digits, great. Where do you see the next step up of growth coming from? Is it from the key verticals? Is it from new geographies, new products? I guess when you think about your penetration in the key verticals, how do you think about long-term sustainability of growth at this level, and where the biggest growth drivers come from? Thank you.

Speaker #10: Is it from the key verticals? Is it from new geographies? New products? I guess, when you think about your penetration in the key verticals, how do you think about long-term sustainability of growth at this level, and where the biggest growth drivers come from?

Good morning, Tony. Um, you know, we really like the growth levels that we're at. Um, you you see that? Uh, you know, organically we're growing at that, you know, mid to high single digit Revenue number. And then we've, uh, we we've had some nice m&a uh, uh, Advantage as well. So we really like where we are um, uh and it all goes into the algorithm. Um, you know, our verticals as Jim mentioned, are growing at a higher rate than, uh, our business overall.

Speaker #10: Thank you.

Speaker #7: Good morning, Tony. We really like the growth levels that we're at. You see that, organically, we're growing at that mid- to high-single-digit revenue number.

Todd Schneider: Good morning, Tony. We really like the growth levels that we're at. You see that organically we're growing at that mid- to high-single-digit revenue number. Then we've had some nice M&A advantage as well. We really like where we are. It all goes into the algorithm. Our verticals, as Jim mentioned, are growing at a higher rate than our business overall. We expect that. We're always looking at new products and services that we can launch and do launch. That goes into our algorithm as well. New geographies, we have the coverage that we really like in our rental and first-aid businesses. The fire business, we are still rolling out some flags in that area. You'll get some geographic expansion there, but we've already spoken to that.

Speaker #7: And then we've had some nice M&A advantage as well. So we really like where we are, and it all goes into the algorithm. Our verticals, as Jim mentioned, are growing at a higher rate than our business overall.

Speaker #7: And we expect that. We're always looking at new products and services that we can launch—and do launch—and that goes into our algorithm as well.

Speaker #7: New geographies? We have the coverage that we really like in our rental and first aid businesses. The fire business, we are still rolling out some flags.

News is for all of us, uh, uh, that we, we don't need to, uh, take uh, uh, uh, our, our models and go to other geographies. Um, but we certainly need to continue to invest in our business. Uh, continue to invest in and capacity invest in new products and services, um, invest in new technologies so that we can continue to grow at these levels. And uh, we like these levels of growth because we can organize around them, we can plan for them, we can staff for those, we can invest capital for those levels. Uh, and when we grow at these levels, it gives us the opportunity to get leverage. Uh and uh, and uh and uh margin expansion as a result.

Speaker #7: And that area, so you'll get some geographic expansion there. But we've already spoken to that. But the great news is, for all of us, that we don't need to take our models and go to other geographies.

Todd Schneider: The great news is for all of us that we don't need to take our models and go to other geographies. We certainly need to continue to invest in our business, continue to invest in capacity, invest in new products and services, and invest in new technologies so that we can continue to grow at these levels. We like these levels of growth because we can organize around them. We can plan for them. We can staff for those. We can invest capital for those levels. When we grow at these levels, it gives us the opportunity to get leverage and margin expansion as a result.

The great news is for all of us that we don't need to take our models and go to other geographies. We certainly need to continue to invest in our business, continue to invest in capacity, invest in new products and services, and invest in new technologies so that we can continue to grow at these levels. We like these levels of growth because we can organize around them. We can plan for them. We can staff for those. We can invest capital for those levels. When we grow at these levels, it gives us the opportunity to get leverage and margin expansion as a result.

Speaker #7: But we certainly need to continue to invest in our business, continue to invest in capacity, invest in new products and services, and invest in new technologies.

Speaker #7: So that we can continue to grow at these levels. And we like these levels of growth because we can organize around them. We can plan for them.

Tony. This is uh, Scott. I might just add that um, you know, we obviously had an outstanding quarter uh and the second quarter strong growth, uh, performance from all 3 of our uh, route based businesses. Um, you know, we had a, a favorable comp uh, in Q2 to last Q2 and uh, as we talked about earlier, when we think about the second half of the year, I think Todd mentioned this, uh, we do have some, uh, more challenging uh, comps.

Speaker #7: We can staff for those. We can invest capital for those levels. And when we grow at these levels, it gives us the opportunity to get leverage and margin expansion as a result.

Uh and you uh you can see that in our guide for uh the second half of the year. Uh but you know whether it's the first half of the year or our guide for the second half. We're right. Uh in the state of range of that mid to high single-digit growth uh and as Todd mentioned the growth algorithm we have we have a lot of confidence in uh that we can sustain that level of growth moving forward.

Speaker #7: result. Tony, this

Speaker #8: This is Scott. I might just add that we obviously had an outstanding quarter. In the second quarter, we saw strong growth performance from all three of our route-based businesses.

Terrific. Thanks and happy holidays.

Operator: Tony, this is Scott. I might just add that we obviously had an outstanding quarter. In the second quarter, strong growth performance from all three of our route-based businesses. We had a favorable comp in Q2 to last Q2. And as we talked about earlier, when we think about the second half of the year, I think Todd mentioned this, we do have some more challenging comps. And you can see that in our guide for the second half of the year. But whether it's the first half of the year or our guide for the second half, we're right in the range of that mid to high single-digit growth. And as Todd mentioned, the growth algorithm we have, we have a lot of confidence in that we can sustain that level of growth moving forward.

Scott Garula: Tony, this is Scott. I might just add that we obviously had an outstanding quarter. In the second quarter, strong growth performance from all three of our route-based businesses. We had a favorable comp in Q2 to last Q2. And as we talked about earlier, when we think about the second half of the year, I think Todd mentioned this, we do have some more challenging comps. And you can see that in our guide for the second half of the year. But whether it's the first half of the year or our guide for the second half, we're right in the range of that mid to high single-digit growth. And as Todd mentioned, the growth algorithm we have, we have a lot of confidence in that we can sustain that level of growth moving forward.

Thank you, you as well.

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

Speaker #8: We had a favorable comp in Q2 to last Q2. And as we talked about earlier, when we think about the second half of the year—I think Todd mentioned this—we do have some more challenging comps.

Thank you, Ross, and thank you for joining us this morning. We will issue our third quarter of fiscal 2026 Financial results. In March, we look forward to speaking with you again at that time. Thank you.

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

Speaker #8: And you can see that in our guide for the second half of the year. But whether it's the first half of the year or our guide for the second half, we're right in the stated range of that mid to high single-digit growth.

Speaker #8: And as Todd mentioned, the growth algorithm we have—we have a lot of confidence in that—we can sustain that level of growth moving forward.

Speaker #10: holidays.

Timothy Mulrooney: Terrific. Thanks. And happy holidays.

Tim Mulrooney: Terrific. Thanks. And happy holidays.

Speaker #7: Thank you. You as well.

Todd Schneider: Thank you. You as well.

Speaker #3: At this time, there are no further questions. I'll turn the call back over to Jared for closing.

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

Speaker #3: remarks. Thank

Speaker #11: you, Ross. And thank you for joining us this morning. We will issue our third quarter of fiscal 2026 financial results in March. speaking with you again at that time.

Jared Mattingly: Thank you, Ross. Thank you for joining us this morning. We will issue our Q3 of fiscal 2026 financial results in March. We look forward to speaking with you again at that time. Thank you.

Speaker #11: Thank you. We look forward to you.

Speaker #3: That now concludes today's conference call. Thank you for your participation. You may now disconnect.

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

Speaker #1: The host has ended this call.

Jim Rozakis: The host has ended this call. Goodbye.

Speaker #1: Goodbye. Good day,

Speaker #3: Everyone, and welcome to the Cintas Corp announces fiscal 2026 second quarter results conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingly.

Operator: Good day, everyone. Welcome to the Cintas Corporation announces fiscal 2026 second quarter results conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingly, Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

Speaker #3: Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

Speaker #11: Thank you, Ross. And thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer; Jim Rozakis, Executive Vice President and Chief Operating Officer; and Scott Garula, Executive Vice President and Chief Financial Officer.

Jared Mattingly: Thank you, Ross. And thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer, Jim Rozakis, Executive Vice President and Chief Operating Officer, and Scott Garula, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2026 second quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the company's current views as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd.

Speaker #11: We will discuss our fiscal 2026 second quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements.

Speaker #11: 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.

Speaker #11: 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.

Speaker #11: to Todd.

Speaker #7: Thank you,

Speaker #7: Jared. We had another successful quarter, reflecting the strength of our value proposition. Cintas delivered record revenues and strong operating margin performance. While we continue to invest in our business to position the company for the future, second quarter total revenue grew a strong 9.3% to $2.8 billion.

Todd Schneider: Thank you, Jared. We had another successful quarter reflecting the strength of our value proposition. Cintas delivered record revenues and strong operating margin performance while we continue to invest in our business to position the company for the future. Q2 total revenue grew a strong 9.3% to $2.8 billion. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 8.6%. Each of our three route-based businesses had strong revenue growth in the quarter. Our business continues to operate at a high level as our employee partners deliver strong execution across the board and maintain a clear focus on driving value for our customers and shareholders. Gross margin as a percent of revenue was 50.4%, a 60 basis point increase over the prior year. Operating income grew to $655.7 million, an increase of 10.9% over the prior year.

Speaker #7: The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 8.6%. Each of our three route-based businesses had strong revenue growth in the quarter.

Speaker #7: Our business continues to operate at a high level, as our employee partners deliver strong execution across the board and maintain a clear focus on driving value for our customers and shareholders.

Speaker #7: Gross margin as a percent of revenue was 50.4%, a 60 basis point increase over the prior year. Operating income grew to $655.7 million. An increase of 10.9% over the prior year.

Speaker #7: Diluted EPS of $1.21 grew 11% over the prior year. Our strong revenue growth is creating leverage, and our cost savings initiatives and investments we've made are helping to improve our employee partners' productivity and help them deliver better solutions for our customers.

Todd Schneider: Diluted EPS of $1.21 grew 11% over the prior year. Our strong revenue growth is creating leverage, and our cost savings initiatives and investments we've made are helping to improve our employee partners' productivity and help them deliver better solutions for our customers. Our operating margin for the company was an all-time high. The operating margins for our two largest route-based businesses were also all-time highs, reflecting the high level of execution by our employee partners. Turning to guidance, we are raising our fiscal 2026 financial guidance. We expect our revenue to be in the range of $11.15 billion to 11.22 billion, a total growth rate of 7.8% to 8.5%. We expect diluted EPS to be in the range of $4.81 to 4.88, a growth rate of 9.3% to 10.9%. With that, I'll turn it over to Jim to discuss the details of our second quarter results.

Diluted EPS of $1.21 grew 11% over the prior year. Our strong revenue growth is creating leverage, and our cost savings initiatives and investments we've made are helping to improve our employee partners' productivity and help them deliver better solutions for our customers. Our operating margin for the company was an all-time high. The operating margins for our two largest route-based businesses were also all-time highs, reflecting the high level of execution by our employee partners. Turning to guidance, we are raising our fiscal 2026 financial guidance. We expect our revenue to be in the range of $11.15 billion to 11.22 billion, a total growth rate of 7.8% to 8.5%. We expect diluted EPS to be in the range of $4.81 to 4.88, a growth rate of 9.3% to 10.9%. With that, I'll turn it over to Jim to discuss the details of our second quarter results.

Speaker #7: Our operating margin for the company was an all-time high. The operating margins for our two largest route-based businesses were also all-time highs, reflecting the high level of execution by our employee partners.

Speaker #7: Turning to guidance, we are raising our fiscal 2026 financial guidance. We expect our revenue to be in the range of $11.15 billion to $11.22 billion.

Speaker #7: The total growth rate is 7.8% to 8.5%. We expect diluted EPS to be in the range of $4.81 to $4.88, a growth rate of 9.3% to 10.9%.

Speaker #7: With that, I'll turn it over to Jim to discuss the details of our second quarter.

Speaker #7: results. Thanks,

Jared Mattingly: Thanks, Todd. This quarter marked another period of solid progress for our business. As we continue to advance the rollout of our technology initiatives and build on the strong foundation of organic growth we have established, our focus on innovation, operational excellence, and customer engagement is delivering measurable results. We are strengthening our relationships with existing customers through expanded offerings and superior service, which has led to all-time highs in retention rates while also successfully attracting new customers who see the clear benefits of partnering with us. These achievements reflect the commitment and talent of our employee partners, whose efforts are positioning us for sustained success. Turning to our business segments, organic growth by business was 7.8% for Uniform Rental Facility Services, 14.1% for first-aid and Safety Services, 11.5% for Fire Protection Services, and 2% for Uniform Direct Sale.

Jim Rozakis: Thanks, Todd. This quarter marked another period of solid progress for our business. As we continue to advance the rollout of our technology initiatives and build on the strong foundation of organic growth we have established, our focus on innovation, operational excellence, and customer engagement is delivering measurable results. We are strengthening our relationships with existing customers through expanded offerings and superior service, which has led to all-time highs in retention rates while also successfully attracting new customers who see the clear benefits of partnering with us. These achievements reflect the commitment and talent of our employee partners, whose efforts are positioning us for sustained success. Turning to our business segments, organic growth by business was 7.8% for Uniform Rental Facility Services, 14.1% for first-aid and Safety Services, 11.5% for Fire Protection Services, and 2% for Uniform Direct Sale.

Speaker #1: This quarter marked another period of solid progress for our business. As we continue to advance the rollout of our technology initiatives and build on a strong foundation of organic growth we have established, our focus on innovation, operational excellence, and customer engagement is delivering measurable results.

Speaker #1: We are strengthening our relationships with existing customers through expanded offerings and security service, which has led to all-time highs in retention rates, while also successfully attracting new customers who see the clear benefits of partnering with us.

Speaker #1: These achievements reflect the commitment and talent of our employee partners, whose efforts are positioning us for sustained success. Turning to our business segments, organic growth by business was 7.8% for Uniform Rental Facility Services, 14.1% for First Aid and Safety Services, 11.5% for Fire Protection Services, and 2% for Uniform Direct Sale.

Speaker #1: Gross margin percentage by business was 49.8% for Uniform Rental Facility Services, 57.7% for First Aid and Safety Services, 48.2% for Fire Protection Services, and 41.9% for Uniform Direct Sale.

Jared Mattingly: Gross margin percentage by business was 49.8% for Uniform Rental Facility Services, 57.7% for First Aid and Safety Services, 48.2% for Fire Protection Services, and 41.9% for Uniform Direct Sale. Gross margin for the Uniform Rental Facility Services segment increased 70 basis points from last year. The 49.8% gross margin is the second highest gross margin ever for this segment. The strong revenue growth in this segment is helping to create leverage. In addition, our supply chain team and process improvement initiatives from our engineering and Six Sigma Black Belt teams continue to help expand our margins while navigating the current economic environment. Gross margin for the First Aid and Safety Services segment was 57.7%. This equals a previous all-time high set last year. As we mentioned previously, the mix of revenue and time to go investments can impact this business from quarter to quarter.

Gross margin percentage by business was 49.8% for Uniform Rental Facility Services, 57.7% for First Aid and Safety Services, 48.2% for Fire Protection Services, and 41.9% for Uniform Direct Sale. Gross margin for the Uniform Rental Facility Services segment increased 70 basis points from last year. The 49.8% gross margin is the second highest gross margin ever for this segment. The strong revenue growth in this segment is helping to create leverage. In addition, our supply chain team and process improvement initiatives from our engineering and Six Sigma Black Belt teams continue to help expand our margins while navigating the current economic environment. Gross margin for the First Aid and Safety Services segment was 57.7%. This equals a previous all-time high set last year. As we mentioned previously, the mix of revenue and time to go investments can impact this business from quarter to quarter.

Speaker #1: Gross margin for the Uniform Rental Facility Services segment increased 70 basis points from last year. The 49.8% gross margin is the second-highest gross margin ever for this segment.

Speaker #1: The strong revenue growth in this segment is helping to create leverage. In addition, our supply chain team and process improvement initiatives from our engineering and Six Sigma Black Belt teams continue to help expand our margins while navigating the current economic environment.

Speaker #1: Gross margin for the First Aid and Safety Services segment was 57.7%. This equals a previous all-time high set last year. As we mentioned previously, the mix of revenue and timing of investments can impact this business from quarter to quarter.

Speaker #1: We are pleased that our investments to grow this business are generating strong double-digit revenue growth, while being able to expand our gross margin. We are growing in many ways.

Jared Mattingly: We are pleased our investments to grow this business are generating strong double-digit revenue growth while being able to expand our gross margin. We are growing in many ways. We're adding new business with over two-thirds being converted from no-program market. We are cross-selling to existing customers. Our retention rates are at all-time highs. And we continue to experience success in our focus verticals of healthcare, hospitality, education, and state and local governments. Our strong culture of execution combined with multiple growth levers has positioned us over the years to grow multiples of job growth and GDP. All businesses have a need for image, safety, cleanliness, and compliance. Our value proposition resonates in all economic cycles as evidenced by our growth in sales and profit in 54 out of the last 56 years.

We are pleased our investments to grow this business are generating strong double-digit revenue growth while being able to expand our gross margin. We are growing in many ways. We're adding new business with over two-thirds being converted from no-program market. We are cross-selling to existing customers. Our retention rates are at all-time highs. And we continue to experience success in our focus verticals of healthcare, hospitality, education, and state and local governments. Our strong culture of execution combined with multiple growth levers has positioned us over the years to grow multiples of job growth and GDP. All businesses have a need for image, safety, cleanliness, and compliance. Our value proposition resonates in all economic cycles as evidenced by our growth in sales and profit in 54 out of the last 56 years.

Speaker #1: We're adding new business, with over two-thirds being converted from non-programmers. We are cross-selling to existing customers, and retention rates are at all-time highs.

Speaker #1: And we continue to experience success in our focus verticals of healthcare, hospitality, education, and state and local governments. Our strong culture of execution, combined with multiple growth levers, has positioned us over the years to grow in multiples of job growth and GDP.

Speaker #1: All businesses have a need for image, safety, cleanliness, and compliance. Our value proposition resonates in all economic cycles, as evidenced by our growth in sales and profit in 54 out of the last 56 years.

Speaker #1: With that, I'll turn it over to Scott to discuss our operating income, capital allocation performance, and 2026 guidance assumptions.

Jared Mattingly: With that, I'll turn it over to Scott to discuss our operating income, capital allocation performance, and 2026 guidance assumptions. Thanks, Jim. Good morning, everyone. As Todd mentioned, we continue to perform at a high level as evidenced by record-level revenue and operating margins for the second quarter. Selling and administrative expenses as a percentage of revenue was 27%, which was a 20 basis point increase from last year. Second quarter operating income was $655.7 million compared to $591.4 million last year. Operating income as a percentage of revenue was 23.4% in the second quarter of fiscal 2026 compared to 23.1% in last year's second quarter, an increase of 30 basis points and an all-time high. Our effective tax rate for the second quarter was 21.2% compared to 20.7% last year.

With that, I'll turn it over to Scott to discuss

Scott Garula: our operating income, capital allocation performance, and 2026 guidance assumptions. Thanks, Jim. Good morning, everyone. As Todd mentioned, we continue to perform at a high level as evidenced by record-level revenue and operating margins for the second quarter. Selling and administrative expenses as a percentage of revenue was 27%, which was a 20 basis point increase from last year. Second quarter operating income was $655.7 million compared to $591.4 million last year. Operating income as a percentage of revenue was 23.4% in the second quarter of fiscal 2026 compared to 23.1% in last year's second quarter, an increase of 30 basis points and an all-time high. Our effective tax rate for the second quarter was 21.2% compared to 20.7% last year.

Speaker #8: Thanks, Jim, and good morning, everyone. As Todd mentioned, we continue to perform at a high level, as evidenced by record-level revenue and operating margins for the second quarter.

Speaker #8: Selling and administrative expenses as a percentage of revenue was 27%, which was a 20 basis point increase from last year. Second quarter operating income was $655.7 million, compared to $591.4 million last year.

Speaker #8: Operating income as a percentage of revenue was 23.4% in the second quarter of fiscal 2026, compared to 23.1% in last year's second quarter. An increase of 30 basis points, and an all-time high.

Speaker #8: Our effective tax rate for the second quarter was 21.2%, compared to 20.7% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

Jared Mattingly: The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $495.3 million compared to $448.5 million last year. This year's second quarter diluted earnings per share was $1.21 compared to $1.09 last year, an increase of 11%. For the second quarter, our free cash flow was $425 million, an increase of 23.8% over the prior year. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders. In the second quarter, we continue to invest in our businesses through capital expenditures of $106.3 million. Also in the second quarter, we were able to make strategic acquisitions totaling $85.6 million in all three of our route-based businesses. During the second quarter, we paid dividends in the amount of $182.3 million.

The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the second quarter was $495.3 million compared to $448.5 million last year. This year's second quarter diluted earnings per share was $1.21 compared to $1.09 last year, an increase of 11%. For the second quarter, our free cash flow was $425 million, an increase of 23.8% over the prior year. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders. In the second quarter, we continue to invest in our businesses through capital expenditures of $106.3 million. Also in the second quarter, we were able to make strategic acquisitions totaling $85.6 million in all three of our route-based businesses. During the second quarter, we paid dividends in the amount of $182.3 million.

Speaker #8: Net income for the second quarter was $495.3 million, compared to $448.5 million last year. This year's second quarter diluted earnings per share was $1.21, compared to $1.09 last year.

Speaker #8: An increase of 11%. For the second quarter, our free cash flow was $425 million, an increase of 23.8% over the prior year. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders.

Speaker #8: In the second quarter, we continued to invest in our businesses through capital expenditures of $106.3 million. Also in the second quarter, we were able to make strategic acquisitions totaling $85.6 million in all three of our route-based businesses.

Speaker #8: During the second quarter, we paid dividends in the amount of $182.3 million. Also during the second quarter, and as of December 17th, we were active in the buyback program with repurchases of $622.5 million.

Jared Mattingly: Also during the second quarter, and as of December 17, we were active in the buyback program with repurchases of $622.5 million of Cintas shares. That is the third largest share repurchase we've made in a quarter. During the first six months of fiscal 2026, we have returned $1.24 billion in capital to our shareholders in the form of dividends and share buybacks. Earlier, Todd provided our updated guidance for the remainder of the fiscal year. As you contemplate the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognized a $15 million gain on the sale of an asset. That will not repeat and will be a headwind when comparing the third quarter results year over year. In addition, please note the following in the guidance.

Also during the second quarter, and as of December 17, we were active in the buyback program with repurchases of $622.5 million of Cintas shares. That is the third largest share repurchase we've made in a quarter. During the first six months of fiscal 2026, we have returned $1.24 billion in capital to our shareholders in the form of dividends and share buybacks. Earlier, Todd provided our updated guidance for the remainder of the fiscal year. As you contemplate the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognized a $15 million gain on the sale of an asset. That will not repeat and will be a headwind when comparing the third quarter results year over year. In addition, please note the following in the guidance.

Speaker #8: That is the third largest share repurchase we've made in a quarter. During the first six months of fiscal 2026, we have returned $1.24 billion in capital to our shareholders in the form of dividends and share buybacks.

Speaker #8: Earlier, Todd provided our updated guidance for the remainder of the fiscal year. As you contemplate the guidance, it is important to remember that during the third quarter of fiscal 2025, we recognized a $15 million gain on the sale of an asset.

Speaker #8: That will not repeat and will be a headwind when comparing the third quarter results year over year. In addition, please note the following in the guidance.

Speaker #8: Both fiscal 2025 and fiscal 2026 have the same number of workdays, for the year and by quarter. Our guidance does not assume any future acquisitions.

Jared Mattingly: Both fiscal 2025 and fiscal 2026 have the same number of workdays for the year and by quarter. Our guidance does not assume any future acquisitions. Our guidance assumes a constant foreign currency exchange rate, fiscal 2026 net interest expense of approximately $104 million, a fiscal 2026 effective tax rate of 20%, which is the same compared to our fiscal 2025. The guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns. With that, I'll turn it back to Todd for some closing remarks.

Both fiscal 2025 and fiscal 2026 have the same number of workdays for the year and by quarter. Our guidance does not assume any future acquisitions. Our guidance assumes a constant foreign currency exchange rate, fiscal 2026 net interest expense of approximately $104 million, a fiscal 2026 effective tax rate of 20%, which is the same compared to our fiscal 2025. The guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns. With that, I'll turn it back to Todd for some closing remarks.

Speaker #8: Our guidance assumes a constant foreign currency exchange rate. Fiscal 2026 net interest expense of approximately $104 million; a fiscal 2026 effective tax rate of 20%, which is the same compared to our fiscal 2025; and the guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns.

Speaker #8: With that, I'll turn it back to Todd for some closing.

Speaker #8: remarks. Thank you,

Speaker #1: Scott. Looking ahead to the second half of fiscal 2026, we are right where we want to be, and our focus remains on helping customers meet and, in many cases, exceed their image, safety, cleanliness, and compliance needs.

Todd Schneider: Thank you, Scott. Looking ahead to the second half of fiscal 2026, we are right where we want to be. Our focus remains on helping customers meet, in many cases, exceed their image, safety, cleanliness, compliance needs. We remain committed to leveraging our investments to sustain our positive momentum and deliver exceptional customer service. I want to thank our employee partners for their incredible commitment to our customers and everything they do for Cintas. I'll now turn it back over to Jared.

Speaker #1: We remain committed to leveraging our investments to sustain our positive momentum and deliver exceptional customer service. I want to thank our employee partners for their incredible commitment to our customers and everything they do for Cintas.

Speaker #1: I'll now turn it back over to Jared.

Speaker #8: That concludes our prepared remarks. Now, we are happy to answer questions from the analysts. Please ask just one question, with a single follow-up if needed.

Jared Mattingly: 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.

Speaker #8: Thank you.

Speaker #9: 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.

Manav Patnaik: 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. Our first question comes from Tim Mulroney from William Blair. Please go ahead, Tim.

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. Our first question comes from Tim Mulroney from William Blair. Please go ahead, Tim.

Speaker #9: 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.

Speaker #9: And our first question comes from Tim Mulroney from William Blair. Please go ahead.

Speaker #9: Tim. Todd, Scott,

Speaker #4: Jared, good morning.

Andrew Steinerman: Todd, Scott, Jared, good morning.

Tim Mulrooney: Todd, Scott, Jared, good morning.

Speaker #1: Good Morning.

Speaker #1: Good morning. Only 10 minutes on the prepared remarks.

George Tong: Morning.

Jason Haas: Good morning.

Speaker #4: Remarks. That's what I'm thankful for this holiday season. Thank you for that. So just one question from me. There continues to be a lot of noise in the labor market data, but I think most would agree that we've seen a softening trend in terms of hiring activity over the last several months, at least on balance.

Andrew Steinerman: Only 10 minutes on the prepared remarks. That's what I'm thankful for this holiday season. Thank you for that.

George Tong: All right.

Andrew Steinerman: So just one question from me. There continues to be a lot of noise in the labor market data. But I think most would agree that we've seen a softening trend in terms of hiring activity over the last several months, at least on balance. And I'd be curious to hear if you've seen any material change in employment levels across your customer base, if what we are seeing in the broader payroll numbers are playing out in your world, or if the reported job losses are more in the white-collar world where you're providing some services, but those folks don't typically wear uniforms. I know you've emphasized your ability to grow in all types of environments, but I'd be interested in your take on more of the underlying dynamics here, given the number of businesses that you service week to week. Thank you.

Tim Mulrooney: So just one question from me. There continues to be a lot of noise in the labor market data. But I think most would agree that we've seen a softening trend in terms of hiring activity over the last several months, at least on balance. And I'd be curious to hear if you've seen any material change in employment levels across your customer base, if what we are seeing in the broader payroll numbers are playing out in your world, or if the reported job losses are more in the white-collar world where you're providing some services, but those folks don't typically wear uniforms. I know you've emphasized your ability to grow in all types of environments, but I'd be interested in your take on more of the underlying dynamics here, given the number of businesses that you service week to week. Thank you.

Speaker #4: Thank you.

Speaker #10: Well, thank you, Tim. We're certainly reading the same things you are. We're watching jobs reports as we always do. And as we spoke about in our prepared remarks, as a reminder, we've shown the ability to grow in multiples of GDP and jobs growth for a long time now.

Todd Schneider: Well, thank you, Tim. We're reading the same things you are. We're watching jobs reports as we always do. And as we spoke about in our prepared remarks, as a reminder, we've shown the ability to grow in multiples of GDP and jobs growth for a long time now. And we certainly love it when our customers are adding employees and their businesses are really healthy. And that's how we love that. But we don't need it in order to grow our business the way we like to. That being said, to your point, I think you have to dig past the headlines on the jobs report. First off, we've picked our verticals really well, very strategically. And the employment picture for them is, if you look at it, it's positive. Healthcare, education, hospitality, state and local government, those are good. The services providing sector continues to show growth.

Speaker #10: And we certainly love it when our customers are adding employees and their businesses are really healthy, and that's—well, we love that. But we don't need it in order to grow our business the way we like to.

Speaker #10: That being said, to your point, I think you have to dig past the headlines on the jobs report. First off, we've picked our verticals really well.

Speaker #10: Very strategically. And the employment picture for them is, if you look at it, it's positive. Healthcare, education, hospitality, state, local government—those are good.

Speaker #10: The services-providing sector continues to show growth, and the goods-producing sector isn't performing as well, but the specialty trades within them are doing well.

Todd Schneider: The goods producing sector isn't performing as well, but the specialty trades within them are doing well. And those are obvious uniform wearers and users of our services. So there are certainly many jobs that are under pressure, hence what you see in the headlines and the market reports. But they are certainly more generally white-collar jobs, IT, financial, and back office that are really not end markets for us, as you pointed out, Tim.

The goods producing sector isn't performing as well, but the specialty trades within them are doing well. And those are obvious uniform wearers and users of our services. So there are certainly many jobs that are under pressure, hence what you see in the headlines and the market reports. But they are certainly more generally white-collar jobs, IT, financial, and back office that are really not end markets for us, as you pointed out, Tim.

Speaker #10: And those are obvious uniform wearers and users of our services. So there are certainly many jobs that are under pressure, hence what you see in the headlines and the market reports.

Speaker #10: But they are certainly more generally white-collar jobs—IT, financial, back office—that are really not end markets for us, as you pointed out, Tim.

Speaker #9: Really helpful. Thank you, Todd.

Speaker #10: Thank

Manav Patnaik: Really helpful. Thank you, Todd.

Todd Schneider: Thank you.

Speaker #9: And our next question comes from Manav Patnik from Barclays. Please go ahead, Manav.

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

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

Speaker #11: Thank you. Good morning. I also just had one broader question, maybe just following up from that one. I know you've obviously shown that you guys can outperform and execute in any kind of environment, but just maybe help us appreciate what your downturn playbook looks like?

Jason Haas: Thank you. Good morning. I also just had one broader question, maybe just following up from that one. I know you've obviously shown that you guys can outperform and execute in any kind of environment, but just maybe help us appreciate what does your downturn playbook look like? If unemployment does crack, how do you still keep up these kind of high single-digit growth levels? Which levels typically make up more? Is it all of them? Just any color there would be helpful.

Manav Patnaik: Thank you. Good morning. I also just had one broader question, maybe just following up from that one. I know you've obviously shown that you guys can outperform and execute in any kind of environment, but just maybe help us appreciate what does your downturn playbook look like? If unemployment does crack, how do you still keep up these kind of high single-digit growth levels? Which levels typically make up more? Is it all of them? Just any color there would be helpful.

Speaker #11: If unemployment does crack, how do you still keep up these kind of high single-digit growth levels? Which levels typically make up more? Is it all of them?

Speaker #11: Just any color there would be.

Speaker #11: helpful. Yeah, good question,

Speaker #10: Manav, we certainly have a wide array of products and services that we provide, and we service a wide breadth of customers as well. So our target of mid- to high-single-digit organic growth is important to us, and we have so many different ways to grow that it gives us flexibility.

Todd Schneider: Yeah, good question, Manav. We certainly have a wide array of products and services that we provide, and we service a wide breadth of customers as well. So our target of mid to high single-digit organic growth is important to us. We have so many different ways to grow that it gives us flexibility. Certainly, new business is important to us. When you think about a business that when they have less people, that can certainly impact us. But they also have still other needs that they need to address. In many cases, they don't have enough people to address those, and they look to us to outsource for those items. So new business is important. We are still very early in the innings of cross-selling all of our various products and services into us.

Speaker #10: Certainly, new business is important to us, and when you think about a business that, when they have fewer people, that can certainly impact us. But they also still have other needs that they need to address.

Speaker #10: And in many cases, they don't have enough people to address those, and they look to us to outsource for those items. So new business is important.

Speaker #10: We are still very early in the innings of cross-selling all of our various products and services into us. So, trying to gain growth from our current customers is an important lever for us.

Todd Schneider: Trying to gain growth from our current customers is an important lever for us. That's all valuable. M&A tends to get better during those periods of times as well. But we have many levers in addition to, obviously, the ones that I mentioned that I think give us real optionality. And certainly, when we look at no-program market, that's a big opportunity for us.

Speaker #10: So that's all valuable. M&A tends to get better during those periods of time as well. But we have many levers, in addition to, obviously, the ones that I mentioned, that I think give us real optionality. And certainly, when we look at new programmers, that's a big opportunity for—

Speaker #10: us.

Speaker #9: And Manav, this is Jim. Perhaps I

Speaker #9: Can you give just a little more color on how much opportunity really lies within our current customers? And as Todd mentioned in his prepared remarks, our objective is to first supply our customers with a great experience with us.

Jared Mattingly: Hey, Manav, this is Jim. Perhaps I can give it just a little more color on how much opportunity really lies within our current customers. And as Todd mentioned in his prepared remarks, our objective is to first supply our customers with a great experience with us. And that starts at the foundational level. And then we earn the right now to be able to ask them for more opportunities and to steer more of their spend that they already have over to us. And just due to the nature of our service model, we're in their facilities so frequently that we get a really deep understanding of what their needs are and where the opportunities may come from. So I have an example here of a property management company that we service out on the West Coast.

Speaker #9: And that starts at the foundational level. And then we earn the right now to be able to ask them for more opportunities, and to steer more of their spend that they already have over to us.

Speaker #9: And just due to the nature of our service model, we're in their facilities so frequently that we get a really deep understanding of what their needs are and where the opportunities may come from.

Speaker #9: So I have an example here of a property management company that we service out on the West Coast. And we've been servicing that facility for a number of years for uniform rental for all the folks who work on the property.

Jared Mattingly: We've been servicing that facility for a number of years for uniform rental for all the folks who work on the property. During our routine visits, our team uncovered that they were doing bulk orders from an e-commerce solution for all their restroom supplies. When inquiring with the company, they realized that they were tying up cash flow. They were tying up really precious real estate space and storage space that they did not want to tie up. They were taking a lot of their labor and manpower to go ahead and inventory all of those goods. Our folks went in and introduced the concept of outsourcing that to us and utilizing the Cintas Hygiene Program. They found out that now their spend is much steadier than it was in the past. It makes it much easier to budget. They're not tying up that space.

Speaker #9: And during our routine visits, our team uncovered that they were doing bulk orders from an e-commerce solution for all their restroom supplies. And when inquiring with the company, they realized that they were tying up cash flow.

Speaker #9: They were tying up really precious real estate space and storage space that they did not want to tie up. And they were taking a lot of their labor and manpower to go ahead and inventory all of those goods.

Speaker #9: Our folks went in and introduced the concept of outsourcing that to us and utilizing the Cintas hygiene program. They found out that now their spend is much steadier than it was in the past.

Speaker #9: It makes it much easier to budget. They’re not tying up that space. And maybe most importantly, their team is not involved in taking their precious time away from what they focus on; going ahead and managing hygiene inventories—they let us handle that for them.

Jared Mattingly: Maybe most importantly, their team is not involved in taking their precious time away from what they focus on, going ahead and managing hygiene inventories. They let us handle that for them. Just a small example of activities that happen across a million-plus customers every day.

Speaker #9: So just a small example of activities that happen across a million-plus customers every day.

Speaker #11: Thank you so much. I appreciate it.

Speaker #11: it. And

Jason Haas: Thank you so much. Appreciate it.

Speaker #9: Our next question comes from Andrew Steinerman from J.P. Morgan. Please go ahead.

Manav Patnaik: Our next question comes from Andrew Steinerman from JPMorgan. Please go ahead, Andrew.

Operator: Our next question comes from Andrew Steinerman from JPMorgan. Please go ahead, Andrew.

Speaker #9: Andrew. Hi.

Speaker #11: I definitely heard the pluses and minuses about the customers' employee base, but I just didn't quite get a compilation if ad stops are changed year over year.

Operator: Hi. I definitely heard the pluses and minuses about the customer's employee base, but I just didn't quite get a compilation if Ad Stops are changed year over year. I surely heard the separate point that you continue to grow with same customers. Just a comment on Ad Stops year over year. Then my second question is, with the acquisitions that were completed in this Q2, how much will that add to H2 revenues?

Andrew Steinerman: Hi. I definitely heard the pluses and minuses about the customer's employee base, but I just didn't quite get a compilation if Ad Stops are changed year over year. I surely heard the separate point that you continue to grow with same customers. Just a comment on Ad Stops year over year. Then my second question is, with the acquisitions that were completed in this Q2, how much will that add to H2 revenues?

Speaker #11: I surely heard the separate point that you continue to grow with the same customers. So, just a comment on ad stops year over year. And then, my second question is, with the acquisitions that were completed in this second quarter, how much will that add to the second half of the year?

Speaker #10: Well, I'll take the first half. Andrew, so thank you for the question. As we mentioned, and through Jim's example, we talked about all the various products and services we can provide for our customers.

Todd Schneider: Well, I'll take the first half. Andrew, so thank you for the question. As we mentioned and through Jim's example, we talked about all the various products and services we can provide for our customers. And it's broad and growing. So from that standpoint, growth from current customers, I would describe it as very stable and, if anything, slightly positive. So we're in a good position. Our current customers see the value proposition that we can offer to them. And that actually helps with retention as well. Scott, if you want to address the second half.

Speaker #10: And it's broad, and growing. So from that standpoint, growth from current customers, I would describe it as very stable—and, if anything, slightly positive.

Speaker #10: So we're in a good position. Our current customers see the value proposition that we can offer to them, and that actually helps with retention as well.

Speaker #10: Scott, if you want

Speaker #10: To address the second half—yeah,

Speaker #2: Thanks, Todd. And hello, Andrew. We talked in the prepared remarks—the acquisition impact during the second quarter was about 70 basis points. And if you think about the rest of the year, and our guide, we obviously assume no new acquisitions.

Jared Mattingly: Yeah. Thanks, Todd. And hello, Andrew. We talked in the prepared remarks. The acquisition impact during the second quarter was about 70 basis points. If you think about the rest of the year and our guide, we obviously assume no new acquisitions. You can assume that there's a normal tail when it comes to the acquisition volume. And generally, for the second half of the year, you would assume about half of the second quarter impact, so call it 30 to 35 basis points.

Speaker #2: You can assume that there’s a normal tail when it comes to the acquisition volume. And generally, for the second half of the year, you would assume about half of the second quarter impact.

Speaker #2: So, call it 30 to 35 bps.

Speaker #11: Okay. Thank

Speaker #11: You. And our next question comes

Manav Patnaik: Okay. Thank you. And our next question comes from Josh Chan from UBS. Please go ahead, Josh.

Operator: Okay. Thank you. And our next question comes from Josh Chan from UBS. Please go ahead, Josh.

Speaker #9: From Josh Chan from UBS. Please go ahead, Josh.

Speaker #4: Hi, good morning. Congrats on a really strong quarter. I guess my two questions. One, I think both Todd and Jim mentioned that retention rates are at record levels.

Jason Haas: Hi. Good morning. Congrats on a really strong quarter. I guess my two questions. One, I think both Todd and Jim mentioned that retention rates are at record levels. Usually, you see those.

Josh Chan: Hi. Good morning. Congrats on a really strong quarter. I guess my two questions. One, I think both Todd and Jim mentioned that retention rates are at record levels. Usually, you see those.

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