CINTAS CORP Q3 FY2025 earnings call

• Strong third quarter results with total revenue up 8.4% to $2.61 billion, organic growth 7.9%. • Gross margin was 50.6%, an all-time high; operating income was 23.4%, also an all-time high. • Operational excellence via sourcing, supply chain, route and energy optimization, and technology-enabled efficiency. • Made strategic acquisitions in route-based segments, paid dividends, and continued share buybacks. • Mike Canton discussed revenue by segment, gross margin details, selling and administrative expenses, operating income, tax rate, and strong cash flow.

Third quarter total revenue was $2.61 billion, with an 8.4% growth. Organic growth rate was 7.9%. Segment-wise: Uniform Rental and Facility Services had organic growth of 7%, gross margin 50%; First Aid and Safety Services had double-digit organic growth, gross margin 57%; Fire Protection Services had 10.6% organic growth, gross margin 49.9%; Uniform Direct Sale was down 2.3%, gross margin 41.2%.

• Updated annual revenue guidance from $10.255 billion - $10.32 billion to $10.28 billion - $10.305 billion. • Organic revenue growth guidance 7.4% - 7.7%. • Raised annual diluted EPS expectations to $4.36 - $4.40. • Noted negative impact of foreign currency exchange rate, fewer workdays in fiscal 2025 affecting revenue growth. • Fourth quarter will have one less workday, negatively impacting revenue growth by about 160 basis points.

• Uncertainty around tariffs on Mexico and China, too early to tell impact. • Economic uncertainty and potential government spending cuts affecting customer behavior and business. • Impact of SAP conversion on Fire Protection Services margin in the future.

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

A: Todd Schneider said customer behavior remains stable, new business and retention rates are attractive, and the value proposition resonates even in uncertain times.

Q: Hey, good morning, guys. I was hoping you could update us on what you're seeing on the COGS side related to tariffs on Mexico and China...

A: Todd Schneider said it's too early to tell tariff impact, but supply chain organization is a strategic advantage, with less than 10% of products sole sourced, and they're watching and will pivot as appropriate.

Q: Good morning. This is Ronan Kennedy on for Manav. Could I please reconfirm the primary drivers of these impressive margins...

A: Todd Schneider mentioned 25% to 35% incrementals are the target, driven by solid execution, strong revenue growth, material cost improvements, technology deployment, and infrastructure improvements.

Q: Good morning. This is Luke McFadden for Tim Mulrooney. Maybe switching gears a bit here. You've spoken recently about government as being a focus vertical...

A: Todd Schneider said they're watching the impact of federal government spending cuts, but state and local governments may take on more work, and they've had success with local public school systems by consolidating suppliers to lower costs and streamline invoicing.

Q: Hey, Mike. Two questions. One small one, one math one. So what was energy and fuel cost as a percentage of revenues in the just reported third quarter?...

A: Mike Canton said energy and fuel cost was 1.7% of revenue for the quarter, same as last year's third quarter. On organic guide, expected similar FX impact in fourth quarter with M&A impact.