CINTAS CORP Q2 FY2025 earnings call

• Todd Schneider highlighted strong second quarter results with revenue growth to $2.56B, organic growth 7.1%, gross margin 49.8%, operating income record 23.1% of revenue, diluted EPS up 21.1% to $1.09. Cash flow strong with free cash flow up 34.9% in first six months. Focus on deepening value propositions in healthcare, hospitality, education, and state and local government verticals. - Mike Hansen discussed revenue details, gross margin by business, selling and administrative expenses at 26.8% of revenue, operating income $591.4M, effective tax rate 20.7%, and benefits from technology investments and operational efficiencies.

Fiscal 2025 second quarter revenue was $2.56 billion. Organic revenue growth rate was 7.1%. By business: Uniform Rental and Facility Services had 6.9% organic growth, First Aid and Safety Services 12.3%, Fire Protection Services 10%, and Uniform Direct Sale was down 9.2%. Gross margin for the quarter was $1.28 billion, 49.8% of revenue. Gross margin percentage by business: Uniform Rental and Facility Services 49.1%, First Aid and Safety Services 57.3%, Fire Protection Services 49.9%, Uniform Direct Sale 41.2%.

• Updated annual revenue expectations from $10.22 billion to $10.32 billion to $10.255 billion to $10.32 billion, total growth rate 6.9% to 7.5%. - Organic growth rate expected to be 7.0% to 7.7%. - Annual diluted EPS expectations updated from $4.17 to $4.25 to $4.28 to $4.34, growth rate 12.9% to 14.5%.

• Tariffs: Uncertainty around proposed tariffs and potential impact on material costs, with the global supply chain being positioned to pivot as needed.

Q: Regarding organic growth guide, why was there a slight decrease?

A: The implied guide for the second half of the year remained the same, and Q2 organic growth of 7.1% fell in the middle of the range.

Q: About incremental EBITDA margins, any one-offs?

A: No one-offs, leverage from revenue growth and operational efficiency initiatives are driving margins.

Q: Price realization and ad stop changes?

A: Price increases back to historical levels, ad stops not significantly changed.

Q: Impact of proposed tariffs on material costs?

A: Global supply chain is dual-sourced over 90% and positioned to pivot, rental material costs are amortized to help adapt.

Q: Incremental operating margins in second half?

A: No specific factors to moderate, but expected to be in the 25% to 35% range.

Q: M&A activity and revenue contribution?

A: Active in route-based businesses, bought quality businesses complementary to existing offerings.

Q: Growth of targeted verticals?

A: Focused verticals performing well above normal growth levels, organized around understanding and serving those businesses.

Q: Uniform Direct Sale performance and cross-selling?

A: Uniform Direct Sale down, but current customers are interested in other products, with early stages of cross-selling.

Q: First Aid margins sustainability?

A: Margins sustainable with favorable mix, repeat revenue, and investments in the business.

Q: Pricing difficulty and M&A valuation?

A: Pricing increases more challenging due to lower inflation, M&A focused on quality businesses with great customer bases.

Q: Innovations in verticals and myCintas portal?

A: Innovations in healthcare and other verticals, myCintas portal helps customers manage accounts efficiently.

Q: Price increases relative to history and verticals?

A: Price increases back to historical 0% to 2% range, no specific vertical easier for pricing.

Q: Incremental margins in second half?

A: Not linear, may be affected by comps and timing of investments.