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DATE
Thursday, December 18, 2025 at 10 a.m. ET
CALL PARTICIPANTS
- President and CEO — Todd Schneider
- Executive Vice President and CFO — Scott Garula
- Chief Operating Officer — Jim Rozakis
- Director of Investor Relations — Jared Mattingley
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TAKEAWAYS
- Revenue Growth Guidance -- Management raised full-year revenue growth guidance to a range of 7.8%-8.5%, with a midpoint of 8.2%, citing both current performance and continued demand.
- Customer Retention Rates -- Andrew Wittmann reported "retention rates are at an all-time high," supporting consistent recurring revenue and positive customer trends.
- Capital Deployment -- The company invested over $100 million in capital expenditures, deployed $85 million on M&A, paid $182 million in dividends, and executed more than $600 million in share repurchases this quarter.
- M&A Activity -- All three route-based businesses were acquisitive during the quarter, and management views M&A as a continuing and unpredictable but essential part of strategy.
- Key Vertical Performance -- Healthcare is the largest of four key verticals, representing approximately 8% of total revenue, with all four verticals in aggregate contributing about 11% and growing faster than the company's average.
- Technology Investments -- The company continues to invest in technologies including SmartTruck and AI, aiming to drive operational efficiency, cost reduction, and future margin expansion.
- Tariffs Impact -- While acknowledging tariff-related headwinds, management emphasized ongoing cost control measures and a strategy of not simply passing on costs through higher pricing.
- ERP Implementation Costs -- Additional costs related to SAP FHIR implementation are underway, with more expected, and Scott Garula stated the fire business margin headwind for fiscal 2027 is anticipated at approximately 100 basis points.
SUMMARY
Management highlighted record customer retention and accelerated investment in M&A, technology, and strategic verticals while raising revenue guidance despite tougher second-half comparisons. The revised guidance incorporates cautious expectations for higher ERP-related costs, tariff headwinds, and more challenging future comps. The company affirmed its opportunistic share repurchase policy, stable customer demand across business sizes, and long-term strategies centering on value-driven growth and disciplined capital allocation. Ongoing integration of acquisitions and continued deployment of technological innovation were identified as fundamental to sustaining mid- to high-single-digit organic growth.
- Schneider noted, "we're not going to do that just through pricing." and reinforced extracting inefficiencies as the main driver of margin improvement.
- Rozakis confirmed that four targeted verticals, led by healthcare, are collectively outpacing company-wide revenue growth and represent meaningful future upside.
- Management stated the company is in the "early stages" of leveraging AI and continues to organize teams and invest accordingly for long-term gains.
INDUSTRY GLOSSARY
- Route-Based Business: Operating divisions structured around repeat field service operations, often involving local delivery, facility visits, and recurring customer contact.
- SmartTruck: Cintas’ proprietary technology for optimizing uniform and supply delivery routes to reduce costs and improve operational efficiency.
- SAP FHIR: The enterprise resource planning (ERP) system being implemented specifically in Cintas’ fire protection services segment.
- Tuck-In Acquisition: The acquisition of a smaller business that is integrated into an existing platform, often for strategic synergies or geographic expansion.
- Verticals: Industry-specific business divisions (e.g., healthcare, hospitality, government, education) targeted for specialized products and services.
Full Conference Call Transcript
Andrew Wittmann: Yeah, I mean, as you know, we operate in a very competitive environment. Always have, always will. My entire career, it has always been like that. And we certainly do win some business from competitors, but that is, as you know, not where our focus is. Our focus is on signing new customers that were not programmers when we walked in, and when we walk out, they are. As a result, still over two-thirds of our new customers are coming from that sector. The white space is incredibly large there. With us servicing a little over a million customers, but there are still 16 plus million businesses in the US and Canada. That is really attractive for us.
As I mentioned, our retention rates are at an all-time high. That is helping us as well. 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. We are 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 are really excited about.
Andrew Wittmann: Great. Thank you. Just for my follow-up, I thought I would just ask a little bit on the M and A side. Obviously, the last fiscal year was one of your bigger years that you had for a while. A pretty big quarter here in terms of capital deployment towards M and A. Maybe, Todd, you could just talk about the funnel here. Do you feel like, thinking about the amount of capital deployment last year, it is again doable this year with the progress that you made this year so far?
Todd Schneider: Andrew, great question. First off, just capital allocation in general. We are very pleased with how we're going there. We just invested over $100 million in CapEx for the quarter, $85 million in M and 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. We really like that capital allocation strategy. We've shown to be good fiduciaries with that. But M and 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 is hard to predict.
M and A tends to be a little unpredictable and lumpy. Whether it's because there are family-owned businesses that are waiting on their next generation, whether they want to move on or not. We do love M and A of all shapes and sizes. We love tuck-ins, we like new geographies. When we make M and A, we always 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. 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. We are always working on that pipe. Jim and I and our corporate development team are all in that game together. We have relationships that are going back decades. We are ready and willing for M and A to be an important component of our strategy moving forward.
Andrew Wittmann: Happy holidays, guys. Have a good day. Thanks a lot.
Todd Schneider: Thank you, Andrew.
Operator: And our next question comes from George Tong from Goldman Sachs. Please go ahead, George.
George Tong: Hi, thanks. Good morning. You touched on some of this, but can you provide a high-level overview of what you're seeing with sales cycles and broader customer purchasing behaviors, and if you have noticed any meaningful changes from prior quarters?
Todd Schneider: Good morning, George. Nothing specific to call out. We have 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, improve steady cash flow, and save time that can be spent on running the business. That was referenced in Jim's example that we talked about earlier. I have already referred to retention rates being at very attractive levels. I also mentioned our growth from our current customers was steady if anything, slightly. So we think we're in a good spot and we like where we are pointed.
George Tong: 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?
Todd Schneider: You know, 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 or the guide for the year, it's 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. 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. We are pleased with where we are.
We are pleased with our guide. We think that 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.
George Tong: Got it. Thank you.
Todd Schneider: Thank you.
Operator: And our next question comes from Jason Haas from Wells Fargo. Please go ahead, Jason.
Jason Haas: I just wanted to follow up, to get some more detail on the timing of the tariff costs. Sounds like those have maybe started to flow through the P and 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 for your competitors?
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. 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 find work at higher RPMs to find other additional suppliers to take costs out of our business as well. We're doing all that. I mentioned we're not immune from it. But we're working really hard to mute that subject to the very best we can.
As far as pricing is concerned, we take the long-term approach on pricing. We are at what I would 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. We're going to go out and extract out the inefficiencies of our business. That'll 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 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 so that we are out of those inefficiencies and doing the very best we can to make sure that we're positioned for success and grow our margins.
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 FHIR implementation costs? Are you still expecting a greater headwind to margins in Fire in the second half of the year? That system gets turned on and starts recognizing the amortization.
Todd Schneider: 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. We're working really hard on this implementation. We think it'll be really valuable for our employee partners and our customers. But 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 and A that comes to us. As I mentioned earlier, M and A, you can't predict it exactly.
In that business, some of our M and A allows us to be tuck-ins but others are actually geographic expansion. When we make M and A in that business, and you get M and A expansion, it is, for a period of time, that doesn't run at the margin profile that we do. Well, we've got to make sure that we get our operating protocols in place. As you can see, M and A account for three and four 40 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 in that business because we think the future is really, really bright. We're quite optimistic about the coming years.
Scott Garula: Jason, this is Scott. I might add as Todd mentioned, these ERP implementations take some time. We've got some experience with that and 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 twenty-seven to be around that 100 basis points for the fire protection business.
Jason Haas: Okay. Great. That's very helpful. Thank you.
Operator: And our next question comes from Faiza Alwy from Deutsche Bank. Please go ahead, Faiza.
Faiza Alwy: Yes. Hi. Thank you. So I wanted to ask about your technology setup. I think that you know, well understood that you guys are at the forefront of implementing the latest and greatest in terms of technology. Just wanted to get an update on any recent initiatives you'd like to talk about and maybe the return on those type of investments, whether it's AI-related or anything else you would want to highlight.
Todd Schneider: Good morning, Faiza. Yes. Well, 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 material cost or cost of goods, production, 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 in our total technology investment.
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.
Faiza Alwy: Thank you so much.
Operator: Our next question comes from Stephanie Moore from Jefferies. Please go ahead, Stephanie.
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 aortic 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. Given these two factors, maybe talk about how your view on pricing can change because it would seem like, look, 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.
I would assume being much stickier, maybe just talk about how this could inform your pricing strategy going forward. Thanks.
Todd Schneider: Good morning, Stephanie. Our pricing strategy hasn't changed. As I mentioned, we're running at historical levels. I also talked about thinking 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 extract 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, 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. We're focused on providing the value extracting out those inefficiencies. But because we do not operate, have never had, and never will operate in an environment where we can just adjust price up because it's an ultra-competitive environment.
Stephanie Moore: Thank you. Appreciate it.
Todd Schneider: Thank you.
Operator: And our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead, Scott.
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 size categories?
Todd Schneider: Yes. Good question, Scott. As you can imagine, we watch our customer base really closely. We have such a wide breadth of customers and products and services. But it's a wide breadth of customers, whether it's geographic or by NAIC code, you name it, we service it. Nothing to call out specifically there. We've got certain customers that are thriving, some are having 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 think it's appropriate at this point because in general, our customer base has been pretty stable.
As I mentioned earlier, if anything, we had a slight improvement there.
Scott Schneeberger: Thanks. I did some, as you guys mentioned, very large buyback in the quarter. Clearly, we infer from this call your interest in being acquisitive. But with it seems like we're going to see some large buybacks from you going forward based on what we've just seen. Your leverage is below one time, 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 buyback and where would you take the leverage? Thanks.
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. So wouldn't simply model in that we are going to lever up and be highly aggressive on buybacks. We'll be opportunistic. Handle that as we have in the past. If you look at our history, even our five, ten, twenty-year history, we've been pretty consistent on that capital allocation approach. I expect a change to our approach there. We'll continue to look at that opportunistically. Return that back to our shareholders as appropriate.
Scott Schneeberger: Great. Thanks. Happy holidays.
Todd Schneider: You as well.
Operator: And our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead, Shlomo.
Shlomo Rosenbaum: Hi. 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. Maybe you could talk a little bit about the growth of those verticals in aggregate versus the rest of the business and maybe again percentage wise versus each other. What percentage of the business they are right now? And then just a separate, just a deep dive a little bit more on, on one of the verticals.
In terms of some of those, like, 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 out there and really invest in effective dispensers.
Jim Rozakis: Sure. Yes, 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. 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's growing, all four of them, by the way, are growing slightly faster than the aggregate of the company, but the company as a whole is getting demand across all of our business lines. We're seeing good growth across the board. But right now, healthcare is about 8% of total. If you put all four together, they're about 11%.
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 forward.
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 that whether it be, you know, a 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. 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.
The value that we bring is significant there because it changes the game for them and allows them to look at the product differently. Instead of looking at the product as a commodity and going with the cheapest one, they can provide a better value product because they have control over that inventory. That's all important. 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 products, better service, better technology, and that gives us a strategic advantage.
Shlomo Rosenbaum: Thank you.
Operator: And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead, Toni.
Toni Kaplan: Thanks so 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 of growth coming from Is it from the key verticals? Is it from new geographies? New products? When you think about your penetration in the key verticals, how do you think about the long-term sustainability of growth at this level and where the biggest growth drivers come from? Thank you.
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. And then, we've had some nice M and A advantage as well. So 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. Do launch. That goes into our algorithm as well. New geographies, we have 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.
So you'll get some geographic expansion there, but we've already spoken to that. The great news is for all this, is 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, 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.
Scott Garula: Tony, I might just add that we 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 compared to last Q2. As we had 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 stated range of that mid to high single-digit growth.
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.
Toni Kaplan: Terrific. Thanks, and happy holidays.
Todd Schneider: Thank you. You as well.
Operator: At this time, there are no further questions. I will now turn the call back over to Jared for closing remarks.
Jared Mattingley: Thank you, Ross, and thank you for joining us this morning. We will issue our 2026 financial results in March. We look forward to speaking with you again at that time.
Tim Mulrooney: Thank you. This now concludes today's conference call.
Operator: Thank you for your participation. You may now disconnect.