Cintas Q1 2026 Earnings Call Transcript

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September 24, 2025

Key Takeaways

  • Positive Sentiment: SLS is uniquely positioned to capitalize on the AI-driven expansion of hyperscale data centers with a full-service model and global operations.
  • Positive Sentiment: Between 2023 and 2025, SLS revenues grew from $325 million to $427 million while underlying EBIT surged by 78%, driven by robust hyperscaler demand.
  • Positive Sentiment: SLS boasts a diversified mix of resale, service fees, and commodity recovery, with hyperscalers now representing 47% of total sales, up from 31%.
  • Positive Sentiment: The company maintains a capital-light approach, high return on invested capital, and strong operating cash conversion, enabling disciplined growth and rapid site roll-outs.
  • Negative Sentiment: Hyperscalers could choose to insource decommissioning or data-destruction services, posing a strategic risk to SLS’s current market share.
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Earnings Conference Call
Cintas Q1 2026
00:00 / 00:00

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Operator

Good day, everyone, and welcome to the Cintas Corporation Announces Fiscal 2026 First Quarter Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingley, Vice President, Treasurer, and Investor Relations. Please go ahead, sir.

Jared Mattingley
Jared Mattingley
VP, Treasurer and Investor Relations at Cintas Corporation

Thank you, Ross. 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 first 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 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. 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.

Todd Schneider
President and CEO at Cintas Corporation

Thank you, Jared. We are pleased with our start to fiscal year 2026, reflecting the strength of our business model and the dedication of our employee partners. Our first quarter performance is a testament to the strength of our value proposition. First quarter total revenue grew 8.7% to $2.72 billion. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.8%. This is right where we like to be. Each of our three route-based businesses had strong revenue growth in the quarter. Gross margin as a percent of revenue was 50.3%, a 20 basis point increase over the prior year. Operating income grew to $617.9 million, an increase of 10.1% over the prior year. Diluted EPS of $1.20 grew 9.1% over the prior year. Our culture continues to be our greatest competitive advantage.

Todd Schneider
President and CEO at Cintas Corporation

We've shown an ability throughout the years to perform well in a variety of macroeconomic environments. Our ongoing investments continue to help drive revenue growth and expand margins. These investments include technology to make it easier for our employee partners to do their jobs, whether that is growing the business or making us more efficient. Reflecting our strong first quarter performance, we are raising our fiscal 2026 financial guidance. We expect our revenue to be in the range of $11.06 billion-$11.18 billion, a total growth rate of 7%-8.1%. We expect diluted EPS to be in the range of $4.74-$4.86, a growth rate of 7.7%-10.5%. With that, I'll turn it over to Jim to discuss the details of our first quarter results.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

Thanks, Todd. I want to begin by discussing our strong revenue performance. Our employee partners continue to perform at a high level and demonstrate that our value proposition resonates with all types of customers. We are seeing great success in converting no-programmers, selling additional processing services to our existing customers, as well as retaining our valued customers. Let me provide an example. Recently, there was a department of transportation located in Northwest that was a do-it-yourselfer, or what we refer to as a no programmer. The employees purchased and wore their own clothing, while the highway department provided the required high visibility safety vest to be worn over their personal garments. They reached out and expressed challenges with their safety vest program, including the time and effort to administer the program, budgeting difficulties, and inconsistent compliance among workers.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

Cintas was able to offer a solution with our recently expanded line of Carhartt high visibility safety apparel. These high visibility garments were well received by the employees and have allowed the highway department to receive the benefits of the Cintas rental program by providing an exclusive Carhartt branded rental garment for daily use, Cintas' reliable service, a reduction in administrative time and effort, more predictive budgeting, the convenience of a laundry service, and improved safety compliance among their workers. This example illustrates how our value proposition continues to resonate with customers in many different verticals through our various economic cycles and to customers of all types, including no-programmers. Now turning to our business segments, organic growth by business was 7.3% for uniform rental facility services, 14.1% for first aid and safety services, 10.3% for fire protection services, and uniform direct sale declined 9.2%.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

Gross margin percentage by business was 49.7% for uniform rental facility services, 56.8% for first aid and safety services, 48.9% for fire protection services, and 41.7% for uniform direct sale. Gross margin for the uniform rental facility services segment increased 40 basis points from last year. This improvement is a result of strategic sourcing by the supply chain team and process improvement initiatives from our engineering and black belt teams. In addition, strong revenue growth is helping to generate leverage. Gross margin for the first aid and safety services segment was 56.8%. We are pleased our investments to grow this business are generating strong double-digit revenue growth while maintaining attractive gross margin. Selling and administrative expenses as a percent of revenue was 27.5%, which was a 10 basis point decrease from last year.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

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

Scott Garula
Scott Garula
EVP and CFO at Cintas Corporation

Thanks, Jim, and good morning, everyone. First quarter operating income was $617.9 million compared to $561 million last year. Operating income as a percentage of revenue was 22.7% in the first quarter of fiscal 2026 compared to 22.4% in last year's first quarter. This was an increase of 30 basis points. Our effective tax rate for the quarter was 17.6% compared to 15.8% 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 first quarter was $491.1 million compared to $452 million last year. This year's first quarter diluted EPS was $1.20 compared to $1.10 last year, an increase of 9.1%. Cash flow provided from operating activities was $414.5 million. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders.

Scott Garula
Scott Garula
EVP and CFO at Cintas Corporation

In the first quarter, we continued to invest in our businesses through capital expenditures of $102.0 million. Although not significant, we were able to make acquisitions in all three of our route-based businesses. We also returned capital to shareholders via our quarterly dividends and announced an increase of 15.4% in our quarterly cash dividend. This marks the 42nd consecutive year that we increased our dividend, meaning we have maintained that practice every year since going public in 1983. Also, during the first quarter and as of September 23rd, we were active in the buyback program with repurchases of $347.4 million of Cintas shares. Earlier, Todd provided our updated guidance for the remainder of the year. That guidance assumes the following expectations. Please note 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.

Scott Garula
Scott Garula
EVP and CFO at Cintas Corporation

Our guidance assumes a constant foreign currency exchange rate, the fiscal 2026 net interest expense of approximately $97.0 million, a fiscal 2026 effective tax rate of 20.0%, which is the same compared to our fiscal 2025. Finally, our guide does not include any future share buybacks or significant economic disruptions or downturns. With that, I'll turn it back to Todd for some closing remarks.

Todd Schneider
President and CEO at Cintas Corporation

Thank you, Scott. Looking ahead to the remainder of fiscal 2026, our outlook reflects continued confidence in our strategy and in the value we provide by helping customers meet their image, safety, cleanliness, and compliance needs. We remain committed to delivering exceptional customer experiences and making the investments necessary to sustain growth for fiscal 2026 and well into the future. As always, I want to express my appreciation to our employee partners for their dedication to Cintas and our customers. Our culture remains our strongest competitive advantage. I'll now turn it back over to Jared.

Jared Mattingley
Jared Mattingley
VP, Treasurer and Investor Relations at Cintas Corporation

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

Operator

If you would like to ask a question, please press star one on your telephone keypad now. Please be prepared to ask your question when prompted. You will also be allowed to ask one follow-up question. Once again, if you would like to ask a question, please press star one on your phone now. Our first question comes from Manav Patnik from Barclays. Please go ahead, Manav.

Manav Patnaik
Manav Patnaik
Research Analyst at Barclays

Thank you. Good morning, guys. I just had a question. The highway example you gave in converting from non-programmer to your customer was very helpful. In the context of more budget pressures, if the macro weakens, I was hoping you could give us some historical anecdotal examples if that's a positive for you guys in terms of accelerating the pace of converting no-programmers to your clients.

Todd Schneider
President and CEO at Cintas Corporation

Good morning, Manav. I think we demonstrate that we can grow in many ways. Certainly, in environments where people are under more pressure, we help customers in those circumstances to free up cash flow. We help them to, for budgetary purposes, give them back more time. When you think about an environment where, in Jim's example, the customer was struggling to manage the program, this frees them up and frees them up to focus on other areas. We like to talk about when you outsource to us, it allows our customers to then focus on their customers. It gives them back time, gives them back certain times that saves them money, certainly smooths out budgeting and cash flow. We've demonstrated we have the ability to do that. We're confident we're able to continue to convert no-programmers or the do-it-yourselfers over.

Todd Schneider
President and CEO at Cintas Corporation

We've been doing that for many years and we'll continue to do that as well.

Manav Patnaik
Manav Patnaik
Research Analyst at Barclays

Got it. Just as a follow-up, on the fire side, the decline in gross margins, I'm guessing, is that because the SAP implementation is in full swing now, or just any updates on that, please?

Todd Schneider
President and CEO at Cintas Corporation

Yeah, certainly. We are busy working on SAP for our fire protection services business, and there are additional costs that come along with that. We're quite bullish on that business, and we're investing for the future in that business. That includes all kinds of different investments, you know, with bench strength, operational capacity, technologies around that, not just SAP, but other items. As we expand that business, we're going to continue to make investments, and those investments are smart and important for us to be successful, not just in the near term, but in the long term as well.

Manav Patnaik
Manav Patnaik
Research Analyst at Barclays

Got it. Thank you.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

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

George Tong
George Tong
Business Services Senior Research Analyst at Goldman Sachs

Hi, thanks. Good morning. Can you provide an update on the overall selling environment, including client budget trends and sales cycles?

Todd Schneider
President and CEO at Cintas Corporation

Yeah, good morning, George. As far as customer behavior, we really, there's nothing specific to call out. I wouldn't say there's any changes to sales cycles, nothing like that. We're certainly operating in a, I'll call it a somewhat uncertain environment right now. Despite that uncertainty, the value proposition that we provide continues to resonate. As I referred to earlier, it can even improve during uncertain periods. The outsourcing can improve and steady the cash flow that I talked about. We continue to sell good new business. We like that very much. Retention rates are still at very attractive levels. The customer base that you asked about was steady. If anything, I would say improved slightly during the quarter.

George Tong
George Tong
Business Services Senior Research Analyst at Goldman Sachs

Got it. That's helpful. You increased your revenue guidance as well as your EPS guidance. Can you elaborate on parts of the business that outperformed your initial expectations to drive this increase in the outlook?

Todd Schneider
President and CEO at Cintas Corporation

Great question, George. Yeah, thank you for that. The guide, first off, is right where we like to be. We're performing really well, and we like the momentum we have in the business. I'd just like to point out the implied growth in Q2 through Q4 is higher than the opening guide at all points within the range. We like the range that we're in, especially with this, as I mentioned, somewhat uncertain environment. Our three route-based businesses are all performing very well, and we like the momentum we have in each of those. We're encouraged by that momentum. Our value proposition is continuing to resonate and has in all kinds of environments. It's showing its strength in the current operating environment.

George Tong
George Tong
Business Services Senior Research Analyst at Goldman Sachs

Got it. Very helpful. Thank you.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

Our next question comes from Tim Mulrooney from William Blair. Please go ahead, Tim.

Luke McFadden
Luke McFadden
Equity Research Associate at William Blair

Hi, good morning. This is Luke McFadden on for Tim Mulrooney. Thanks for taking our questions. We've seen growth in non-farm payrolls decelerate somewhat meaningfully over the last few months. I'm curious if this showed up at all in net wear levels across your rental business during the quarter.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, Luke, thanks for the question. Certainly, when we've seen that, we're reading the same information that you're reading about the employment levels. Our team continues to execute at a very high level. I mentioned the uncertainty environment can create opportunities for us, and we've demonstrated that we can grow in excess of jobs growth in GDP. We would way rather swim downstream and have jobs be incredibly abundant, but we've demonstrated that we can win in many ways. Certainly, converting over no-programmers is a very important component of our growth, selling additional products and services into our existing customers. I mentioned our retention levels are really good, and we do take business from the competition, although that's not our major focus. M&A has been important to us over the past few quarters, and we can talk about that more, but we like the pipeline there.

Todd Schneider
President and CEO at Cintas Corporation

Pricing is included as well, but we have the ability to grow. We'd love employment to pick up dramatically, but we're not counting on that, and we're going to continue to run our business and grow it successfully. Sure, we'd love for it to be easier, but we're doing it in an impressive manner.

Luke McFadden
Luke McFadden
Equity Research Associate at William Blair

Really helpful. If I can just build off of that, I heard the comment earlier about strengths just in terms of demand actually growing through the quarter. Could you perhaps just elaborate on that a little bit and maybe talk about just demand trends through the first few weeks of the second quarter here?

Todd Schneider
President and CEO at Cintas Corporation

Yeah, nothing really I would say different in the start of the quarter compared to the results that we're posting. You see that our rental business is performing well. You referred to earlier the employment levels. Again, as I mentioned, we'd like to swim downstream with employment, but we're continuing to grow our business at attractive levels without that. No real changes in the demand from Q1 to Q2 so far. We like the momentum we have in each of our route-based businesses. Rental, as you saw, is performing well, but they're all performing well. We're encouraged by that.

Luke McFadden
Luke McFadden
Equity Research Associate at William Blair

Great. Thank you very much.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

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

Alex Hess
Alex Hess
Equity Research VP at JPMorgan

Hi, this is Alex Hess on for Andrew. I want to just start with the comment about, you know, to refocus on this, the customer base being steady or if anything improving slightly. When you guys make that call out, what are you actually looking to to make that? Is that anecdotal? Is that based on any piece of data you look at? You know, we all see the jobs number, we all see the macro data. I'm just trying to understand exactly what you're trying to point investors to when you make that call out. I'll ask my follow-up.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, thank you, Alex. Yeah, sir, you know, awareness matters to us for sure. We have many ways to grow our business. I think it'd probably be appropriate, Jim, you have an example to maybe share on how we go about doing that?

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

Yeah, sure. I think that, you know, we could talk a little bit about our strategy to expand our relationship with our current customers. We brought that up a little bit on the last call. Effectively, we said it doesn't really matter to us which business line we start with with a customer. Our objective is to get a business line into a customer, to create an exceptional customer experience, to build a relationship, to become a trusted resource for that customer. How does that play out over time? We have an example here of a customer out in the Southwest that was a manufacturing customer, been a long-term customer of ours utilizing our uniform rental program. They are going through an exciting time and they're expanding their business, opening another line and opening another building.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

During those conversations, our folks are actively involved in conversations with them 0on a day-to-day basis. Trusted resource, they asked about setting up the garments, the rental program, uniform rental program in the new building. During those conversations, the customer expressed how busy they were. It's an exciting time, but obviously a lot on their plate. They needed some help and asked what other items we can help out with. We were able to go ahead and add a facility service line to the new building. We're able to add our first aid and safety services to the new building and fire protection services to the new building. This is an example of us being in the door, having a great relationship, the customer looking at us as a trusted resource in a time of a lot of work and being a little bit slightly overwhelmed with the new assignment.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

They looked at us to say, "How can you help?" We were able to go in and provide all the resources and add value to the relationship. In many cases, this is things they were going to have to spend money on anyhow. Just diverting that spend to us because we've established ourselves as that trusted resource.

Alex Hess
Alex Hess
Equity Research VP at JPMorgan

Understood. Appreciate that. Just thinking about positioning for, you know, I know everybody's got peak job fears right now, but maybe the other side of that. If we are at something like trough unemployment or trough non-farm payroll growth and that re-accelerates, maybe helping us think to where you guys can go from here. If you don't mind, I'll throw in one quick more. Any comments on sort of the inventory and uniform and rent uniforms and service injection that we saw this quarter?

Todd Schneider
President and CEO at Cintas Corporation

Yeah, so Alex, regarding employment, we're not in the prediction business of what will happen with there. That would delight us if our customers all were hiring a lot more people, but we're not forecasting for that. We're planning to grow our business in the, I'll say, with the current environment, and our guide reflects, I think, attractive growth without, you know, the employment picture being, you know, real favorable. Yeah, we'd love that. That would be super. Regarding the inventory items, Scott, if you want to take that.

Scott Garula
Scott Garula
EVP and CFO at Cintas Corporation

Oh yeah, thanks, Todd. I would just answer that question that you've seen a nice steady uptick in growth in our rental business really over the last four quarters. We continue to see strong growth out of both our first aid and safety business as well as our fire business. When that happens, we stated in the past that we're going to have a use of capital. That would include the injection of garments for the uniform rental business. I would say that's just reflective of the growth that you're seeing in all three of our route-based businesses.

Alex Hess
Alex Hess
Equity Research VP at JPMorgan

Thank you.

Operator

Our next question comes from Joshua Chan from UBS. Please go ahead, Joshua.

Joshua Chan
Joshua Chan
Executive Director and Equity Research Analyst at UBS

Hi, good morning. Thanks for taking my questions. Great job growing through a choppy environment. I guess I'm wondering, as you look at the different verticals within your business, are you seeing customers behave differently in some of the more stressed verticals, recognizing that you can kind of grow through any of the environment, just wondering if there's any subtle behavior change kind of by vertical.

Todd Schneider
President and CEO at Cintas Corporation

Josh, good question. We're not seeing really any change in behavior in each of the verticals. Again, we think we've chosen those verticals really well. They're all accretive to our growth. Just as a reminder, we don't just sell into them. We organize around them and spend an inordinate amount of time with those customers trying to help them run their business. I wouldn't speak to any real change in behavior there. As a reminder, you know, healthcare is a great vertical for us, hospitality business as well. The education vertical and then the state and local governments all are performing well and pretty consistently as well.

Joshua Chan
Joshua Chan
Executive Director and Equity Research Analyst at UBS

Great. Thank you for the call there, Todd. I noticed that on the EPS guidance, it's a little wider at this juncture of the year than it was last year at this time. Is there any color regarding that or kind of the thought process behind that?

Todd Schneider
President and CEO at Cintas Corporation

No, I wouldn't say, Joshua, wouldn't read anything into that. We like where our guide is. We like where our business is performing. As we think about that, we're in a position where the guide would explain to you that we're in a spot where we think our incrementals are attractive. We're able to grow the business nicely. It's right where we like to be, meaning we're performing really well and like the momentum. We've increased the guide at all points in the EPS within the range. Q2 through Q4 implied guide also increases at all points within the range. The incrementals are right where we like them to be at that stated 25%-35% range. It also implies margin expansion within there as well. This range, Josh, allows us to make the investments that we need for the long term.

Todd Schneider
President and CEO at Cintas Corporation

Being able to make those investments while improving margins at the exact same time, it's a real strength of our business.

Joshua Chan
Joshua Chan
Executive Director and Equity Research Analyst at UBS

That's great to hear. Congrats on the raised guidance.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

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

Jasper Bibb
Jasper Bibb
VP Equity Research at Truist Securities

Hey, good morning, guys. I joined a little bit late, so apologies if you already covered this, but was just hoping you could update us on what you're seeing on the tariff-driven expense growth front at [Cintas] and maybe how that's compared to your initial expectations for the year.

Todd Schneider
President and CEO at Cintas Corporation

Jasper, thanks for joining the call. That subject has not come up yet, so glad you asked. You know, as you know, the situation around tariffs has been really dynamic. We certainly aren't immune from any impact of higher costs as a result of tariffs. However, I'll say our global supply chain is a true competitive advantage for us. Our team really exemplifies our corporate culture. Our traits of positive discontent and competitive urgency fuel our process improvements and drive us, frankly, to be more efficient. We don't simply accept product costs that are increasing and then pass along to our customers. That's not our culture and that's not how we run our business. We also have some other built-in advantages there. We've got, as you can imagine, significant purchasing power. We also have great geographic diversity. We also, 90%+ of our products have two or more providers.

Todd Schneider
President and CEO at Cintas Corporation

All of this gives us optionality. You know, when tariffs go across the board, they go up. The geographic diversity can give you some advantage, but not as much. What doesn't change is our drive for process improvement and our drive for more efficiencies so that we can extract those out of our organization. I'd just like to remind you that our guide contemplates the current environment for tariffs as well.

Jasper Bibb
Jasper Bibb
VP Equity Research at Truist Securities

Got it. Curious about sales cycles for no-programmers. Has there been any change this year in what you're seeing in customer behavior?

Todd Schneider
President and CEO at Cintas Corporation

No, no real change on the sales cycle for programmers or, frankly, in general. I'd say the sales cycle has remained pretty consistent. We're continuing to invest for the future so that we're prepared to be successful ongoing.

Jasper Bibb
Jasper Bibb
VP Equity Research at Truist Securities

Great. Thank you for taking the questions.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

Our next question comes from Andrew Wittmann from Rw Baird. Please go ahead, Andrew.

Andrew Wittmann
Managing Director and Senior Research Analyst at Rw Baird

Hi, yeah, great. Thanks for taking my questions this morning. Maybe, Scott, one for you. On the first aid segment gross margins, they were down a decent amount year-over-year. I was wondering if you could help us understand what either happened this quarter that caused them to be down or maybe in the prior year if there was a comp issue, just so we'd have a better understanding about the gross margins there in first aid. Thanks.

Scott Garula
Scott Garula
EVP and CFO at Cintas Corporation

Yeah, Andrew, thanks for the question. I'll just go back to some comments that Todd mentioned. Nothing really to call out here. We continue to invest in all of our route-based businesses, specifically in both our first aid and fire business. I think you're seeing the benefits of those investments show up in the double-digit growth rates that we're enjoying in both our first aid and fire business. Jim, I don't know if you want to comment further on that first aid business.

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

I would, Andy, appreciate the question. You know, our gross margin first aid and safety is actually flat sequentially. We did have a little bit of a challenging comp from Q1 of last fiscal year to this fiscal year. What we really love with that business is position. We continue to make investments specifically in areas like route capacity, leadership bench strength, technology, selling resources, and managing trainees. I would just call that more of a timing issue. Running the business isn't linear, and we want to make the investments for the future. We really like the outlook of that business.

Andrew Wittmann
Managing Director and Senior Research Analyst at Rw Baird

Got it. Just to build on that then, Jim, do you think that fiscal 2026 is a higher investment year in some of these things like route leadership, management trainees, technology than it was in 2025? Obviously, 2025 margins was a big story for the year. They were so impressive. You're way above the incrementals. I know that you're going to tell me this is kind of more like what you've talked about for the long term. I'm just wondering, as you compare this year to last year in terms of the P&L investments that you're making, is this a higher year than last year? Is that part of the reason why we're seeing the margins be good but not quite as good as last year in terms of the improvement year-over-year?

Jim Rozakis
Jim Rozakis
EVP and COO at Cintas Corporation

Yeah, Andy, I would more call that a little bit of timing, meaning there's investments that are made periodically. I think you saw us begin to invest a little heavier in the fourth quarter of last fiscal year, continuing to put on those selling resources and adding the route capacity. It's more of a timing issue. Yeah, we are continuing to invest in that business and we really like the outlook on it.

Andrew Wittmann
Managing Director and Senior Research Analyst at Rw Baird

Okay. Thanks, guys.

Operator

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

Operator

Hi, this is Jimmy on for Jason Haas. Curious, are you seeing any change in the competitive environment? I know historically, most of your wins come from no-programmers, but we're seeing a lot of your peers struggle in this environment with one of your peers laying off a big portion of their sales force recently. Curious if you see a growing opportunity to win share from your competitors. Thanks.

Todd Schneider
President and CEO at Cintas Corporation

Yes, thank you, Jimmy, for the question. The overall market remains very competitive. Our retention rates are still very strong. The new business wins come, as you know, mostly from no-programmers, more so than the competition. We love that huge TAM of that unserved market, that do-it-yourselfers or no-programmers. We will certainly take business from traditional competitors, but that's not really where our focus is. It's not where we focus our time and our efforts. We recognize that one of our particular competitors is working on their foundation. Again, it's not where our focus is. We see this huge TAM of opportunity with people that are do-it-yourselfers. The 16, 17 million businesses out there in the U.S. and Canada, we're servicing a little over 1 million. There is a massive opportunity. That's really where we spend our time to focus to help expand that market.

Todd Schneider
President and CEO at Cintas Corporation

It's worked for us quite well. That's our plan for the future as well.

Todd Schneider
President and CEO at Cintas Corporation

Great. For my follow-up, can you talk about what's driving the softness in the operating margins for the all-other segment?

Todd Schneider
President and CEO at Cintas Corporation

The all-other segment, as you know, is the fire and the design collective business. Our gross margin in the all-other was up 10 basis points sequentially, down 30 basis points year-over-year. We're investing appropriately in all of those businesses, and we like the returns that we're getting in our three route-based businesses specifically. We're investing for the future because we see the opportunity that's out there. We're going to continue to, as Jim mentioned, invest in bench strength and capacity. We're going to invest in leadership, management trainees, sales resources, all those. We're doing that because we see the opportunity ahead. Certainly, we do have some additional costs with SAP in the fire business as we are still going through that process, but those are, again, our investments for the future. We think the future is quite bright, so we're going to invest appropriately.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

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

Ashish Sabadra
Ashish Sabadra
Information and Business Services Analyst at RBC

Thanks for taking my question. Maybe just a quick one on the uniform direct sale. I know that can be pretty choppy quarter to quarter, but I was just wondering if you could talk more about some of the softness that we saw in the quarter, but also any comments on the trend going forward. Thanks.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, thank you, Ashish. The uniform direct sale business is a strategic business for us, not so much in the size of it because it's only 2.6% of our revenue, but in the nature of those customers. Meaning we sell all of our route-based businesses into those customers. You know, an example would be if you think about a hotel, the front of the house with the front desk, the bell top, the concierge. If you're doing business with them in the front of the house, that can lead to the back of the house opportunities, which tend to be in rental, which would be housekeeping, maintenance, culinary. This is a strategic business for us, and it allows us, again, not just to sell rental, but to sell first aid into those customers and to sell fire as well. Very important.

Todd Schneider
President and CEO at Cintas Corporation

Certainly, the uniform direct sale business can be a bit lumpy with rollouts of large programs. We like the business, and this is a strategic business for us.

Ashish Sabadra
Ashish Sabadra
Information and Business Services Analyst at RBC

That's very helpful information. Maybe just switching gears on M&A. I was wondering if you could talk about the M&A pipeline, not just for more tuck-in deals, but also larger deals. Would you consider diversifying into newer areas? Any color on that front? Thanks.

Todd Schneider
President and CEO at Cintas Corporation

Yes, thanks for the question, Ashish. First off, M&A is important to us. We have, I think, demonstrated that we can leverage our balance sheet to buy really good companies. When we do that, we either get a really good capacity or we get really good synergies, sometimes a combination. M&A is important to us. We didn't have as much M&A in Q1 as what we have over the last 12 months, but the funnel looks good. We like where we are. It'll be an important component for us. That being said, it's tough to predict those items. You know, because when a seller wants to sell, it's up to them. We just want to make sure we're there and have great relationships and do exactly what we say we'll do so that we can make sure that the pipeline looks attractive.

Todd Schneider
President and CEO at Cintas Corporation

As far as getting outside of our current businesses, we're always looking at those opportunities. The great news is we don't have to. The opportunity that we have in our current businesses is immense. We're primarily focused there, but we're certainly always evaluating opportunities.

Ashish Sabadra
Ashish Sabadra
Information and Business Services Analyst at RBC

Thanks. Great color. Thank you.

Operator

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

Faiza Alwy
Faiza Alwy
Equity Research Analyst at Deutsche Bank

Yes, hi. Good morning. Thank you. I wanted to ask about the first aid and safety services business again. I'm curious, as you're making these investments, how your outlook for top-line growth here has maybe changed or evolved. You've talked about seeing the opportunity. I know historically we've talked about this business as maybe a low double-digit grower. Curious how you think about top-line growth moving forward over the next three to five years.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, good morning, Faiza. Thanks for the question. We are making investments in that business, and we think we're doing so smartly. We do see it as a low double-digit growth business, and it's performed really well over the last year. We would expect that low double-digit number to be a good number for us. We are encouraged by how the business is performing, and we are going to continue to invest there because the future is quite attractive for us. We think about investments in the manner of wanting to make sure we're positioned for the long term, and we're making those investments so that we can provide great customer service and position our employee partners to be highly successful. Doing so while increasing operating margins is, again, we think, a real strength of our business.

Todd Schneider
President and CEO at Cintas Corporation

We're investing in all of our route-based businesses, and the first aid is performing very attractively. Again, I would think about it as a low double-digit growth business for us moving forward.

Faiza Alwy
Faiza Alwy
Equity Research Analyst at Deutsche Bank

Understood. You talked about timing as it relates to the investments. It sounded like, even in the fourth quarter of last year, because you talked about sequential margins being similar. Give us a bit more color on the timing. Is this, are you, when do you expect to be sort of through with those? How should we think about the incremental margins in that business going forward?

Todd Schneider
President and CEO at Cintas Corporation

Yeah, so Faiza, it is, from a timing standpoint, you know, we certainly have different initiatives in each of our businesses. First aid is no different. We'll have certain rollouts of products, which might affect the mix. We're planning to grow that business attractively. I'll just remind you that that 56.8% gross margin is really attractive. We're quite happy with it. We've had a significant increase over the last few years in that area. We're going to continue to get leverage there. It's at a high level. We think it's really good. The mix of the business has been attractive for us. We're providing more and more value to those customers. We're selling other items into those customers outside of the first aid business. It all works quite nicely.

Todd Schneider
President and CEO at Cintas Corporation

I wouldn't be thinking of it as, oh geez, you know, the first aid margin is going to pop after a certain timing. We'll get leverage and we'll grow that business attractively and provide more value to customers. We like where it is and in the future as well.

Faiza Alwy
Faiza Alwy
Equity Research Analyst at Deutsche Bank

Great. Thank you very much.

Operator

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

Stephanie Moore
Stephanie Moore
SVP Equity Research at Jefferies

Hi, good morning. Thank you. I wanted to maybe follow up a question that was asked earlier in regards to M&A and kind of compare that to some commentary you made about growing your maybe other segments, fire and safety, for example. Maybe to talk about your appetite as you think about other areas within your total company as you look to expand. What is your appetite to further expand your fire and safety business? How do you leverage both doing so organically as well as potentially opportunistic M&A? Thank you.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, Stephanie, thank you for the question. You know, our fire business, we think the future is quite bright there. We are very active in M&A in that business and growing it organically. Those, again, just like any M&A, can be a little lumpy. We're quite active there. We make, I would say, acquisitions almost every quarter in that business. Some of them are smaller. Many of them are smaller. Some might give us an additional footprint. Many of them are also tuck-ins. We love both. When we get the additional footprint, that gives us an opportunity to invest in sales organizations and other resources and to self-serve that many more customers. When we do tuck-ins in that business, we get synergies from back office and other areas.

Todd Schneider
President and CEO at Cintas Corporation

How we go about running a business tends to be that we're able to extract out some inefficiencies and run it in a more productive manner. That's all part of our strategy. We really like that business. We are acquisitive and will continue to be.

Stephanie Moore
Stephanie Moore
SVP Equity Research at Jefferies

Thank you. Just one follow-up question. I think it's pretty well understood that based on your investments over 10+ years, you have a very strong tech stack and have really invested back into your technology capabilities. As you think about what you have in place now and the ability to leverage AI and machine learning and the likes of everything that we're talking about now, what are the conversations like internally as you think about the opportunity? Is it pretty incremental, just given you're already at such an advanced state from a technology standpoint to really leverage AI to either improve productivity or drive incremental business? Thank you.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, good question, Stephanie. As you point out, investing in technology has been a key part of our strategy for many, many years. It's certainly not slowing. Our investment in SAP has created a really valuable foundation for which we can build upon. We're really focusing our investments to help us in those areas. I'll just call it technology umbrella. AI is a component, analytics is a component, algorithms, large language models, all that is part of it. We're focused on really in two areas: making it easier for our customers to do business with us via managing their account, getting answers to questions faster, making it easier for them to purchase additional products and services, paying their bill would all be components of it.

Todd Schneider
President and CEO at Cintas Corporation

The second area is making our employee partners more successful, putting information in their hands to make them more valuable to the customer, spending their time in a more productive manner by eliminating administrative time and pointing them in the right direction to where to spend their time with the right products, the right prospects, the right areas of the business. It's all important to us, very important. It's part of our investment for the future. We think it's going to be, continue to invest and will be attractive for us. You've seen some of it with Smart Truck, myCintas, the best product, best prospect. That's all ongoing and not slowing down. We see a real opportunity to leverage that tech stack and to also leverage our engineering and black belt resources, our six sigma team. All goes into play with that. It's not just a technology.

Todd Schneider
President and CEO at Cintas Corporation

It's positioning the technology to make it easier for our customers to do business with us and make our people that much more successful.

Operator

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

Scott Schneeberger
Scott Schneeberger
Managing Director at Oppenheimer

Thanks. Good morning, everyone. Two questions. I guess I'll ask them both up front, although they're quite different. The first one's kind of playing off on some of these M&A questions. In the past, many years ago, you all had considered going international to a much greater degree and kind of doing so via existing customers who may, you know, large multinationals who may have needed service outside of the U.S. Just curious, is that it has been quiet on the M&A front? Is that a consideration? If so, what would be your approach? The second question is just on myCintas portal. We'd just love to hear any update on how that's progressing, maybe mix of, you know, what percent of sales is running through that now, what percent of payments, any other metrics you may be offered to provide, because you've been at that for a little while.

Scott Schneeberger
Scott Schneeberger
Managing Director at Oppenheimer

I imagine it's providing good productivity leverage. Thanks.

Todd Schneider
President and CEO at Cintas Corporation

Yes, thank you, Scott. First off, on the M&A front, I wouldn't say it's been quiet on the M&A front. We had our very best year last year, with the exception of, in the last 20 years, with the exception of the year we bought G&K. We have been very active, and the pipe continues to be attractive. Now, on the international front, we certainly have relationships, and we evaluate that on an ongoing basis. The best news is we don't have to. We don't see a need to do that in order to grow our business. If the right opportunities showed up, we would. We don't need to. We are, as I mentioned, servicing a little over a million businesses. In the U.S. and Canada, there are 16, 17 million businesses. The white space of opportunity out there is immense.

Todd Schneider
President and CEO at Cintas Corporation

We love the spot we're in and the geography we're in. That being said, we have those relationships, and we continue to cultivate those. If the right opportunity presented itself, we would certainly evaluate. We have the ability. We have the bench. We have the culture. We have the balance sheet and the know-how and the ability to go do something like that if we want to. Regarding the myCintas portal, that's really a platform that we use not just for our customers for paying, but also for them to manage their account. We expand it for other areas for our partners to be able to become that much more successful and productive for handling customer requests. I won't go into great detail about any metrics on that area for competitive reasons.

Todd Schneider
President and CEO at Cintas Corporation

I'll just say it's an area where we continue to invest, and we see it as a competitive advantage. Our customers really like it. When your customers like it and your employee partners like it, we think we've got something there, and we're going to continue to invest because we see the opportunity to continue to provide additional value there.

Scott Schneeberger
Scott Schneeberger
Managing Director at Oppenheimer

Sounds good. Thanks.

Operator

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

Toni Kaplan
Toni Kaplan
Executive Director and Senior Equity Research Analyst at Morgan Stanley

Thank you so much. In light of all the news on visa requirements, are you expecting any impact from changes to impact your customers' hiring? I know it could be a little bit further out, but just wanted to understand how you're thinking about that.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, Toni, it's a good question. You know, we're certainly paying attention to immigration policy. I can't tell you that we're seeing any material impact at all. Is there some impact? There might be. We're not really hearing it much from our customers. We're not seeing it in the results. The H1B subject is more of a technology, it seems is more of a technology subject. No real impact from the visas or the immigration that we can really refer to.

Toni Kaplan
Toni Kaplan
Executive Director and Senior Equity Research Analyst at Morgan Stanley

Okay, great. Just to follow up on all other, you mentioned continuing to invest. We saw SG&A step up there in the quarter. Should we expect a similar level of investment throughout the year? That would be really helpful to understand how SG&A in particular should continue to progress as we proceed through this fiscal year. Thanks.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, we think our SG&A investment is appropriate right now where it is. I don't think you'll see a ramp up or ramp down from there, from that perspective. We like the spot that we're in. We like the levels of bench that we're at. We think in totality that we got a 10 basis points improvement on SG&A for the company, going from 27.6% to 27.5% year over prior. I wouldn't overreact to the all other, more of just a timing subject there. We think we're in a good spot from an SG&A investment and plan to get leverage on that over time.

Toni Kaplan
Toni Kaplan
Executive Director and Senior Equity Research Analyst at Morgan Stanley

Thank you.

Operator

Our next question comes from Kartik Mehta from Northcoast Research. Please go ahead, Kartik.

Kartik Mehta
Kartik Mehta
Executive Managing Director and Director of Research at Northcoast Research

Good morning, Todd. I know you've answered the question I'm going to ask in parts, but I thought maybe if I could get you to give a comprehensive answer or just maybe a summary of all the answers you gave would be a good perspective. The economy it seems like has changed in the last six months. I'd be curious from your perspective, at least the key metrics you look at for each of the businesses, what you think has improved, what hasn't changed, and maybe what might have gotten a little worse.

Todd Schneider
President and CEO at Cintas Corporation

Yeah, Kartik, you know, our business is performing really well. We like the momentum. You've seen that the rental business is continuing to improve. We're really encouraged by that. Each of our three route-based businesses are performing at a high level. Uniform direct sale business, the performance there in Q1 was a 30 basis point headwind for the company on growth. If you solve for that, then the business would have grown at 9%. That would be really good. We like where we are. As I mentioned earlier, Kartik, we are investing for the future because we think the future is bright because of all the opportunity ahead for us in the position that we're trying to put our partners in, our employee partners in, and the value we're trying to provide for our customers.

Kartik Mehta
Kartik Mehta
Executive Managing Director and Director of Research at Northcoast Research

Just a follow-up. You talked about M&A, and obviously you are very active in the M&A world. I'm wondering if you're seeing any change in prices for M&A in either of the businesses and if maybe sellers are getting a little bit maybe lowering prices because of what's going on.

Todd Schneider
President and CEO at Cintas Corporation

Good question, Kartik. No, I wouldn't say there's any real change in prices. It's trying to predict when someone's ready to sell their business is really challenging. There are all kinds of items that come into play: succession planning, health, maybe what they look at for how their business is going to perform in the future. There are all kinds of things. Trying to predict that one is challenging. What we can control is making sure that we're in a position to leverage our relationships. We've invested over the years to make sure that we are in a position to do that, and we'll continue to do that. Jim and I are very involved with those because we've known many of those people for decades. We think that our reputation is such that we're well positioned for when those opportunities come to the table.

Kartik Mehta
Kartik Mehta
Executive Managing Director and Director of Research at Northcoast Research

Perfect. Thank you very much.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

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

Leo Carrington
Leo Carrington
Analyst at Citigroup

Thank you very much. Good morning. Just one follow-up from me. If you could elaborate, please, on the points you made on tariffs, I think you probably were focusing more on the uniforms and rental costs. Have you seen any effects on your cost base in terms of CapEx? Any changes to your CapEx expectations? Thank you.

Todd Schneider
President and CEO at Cintas Corporation

Yes, thank you, Leo, for the question. The tariffs are, as I mentioned, we're not immune from them. Our supply chain organization supports our tire business, not just our rental business, and they're doing a great job. When I talk about a great job, all those items of the geographic diversity, having optionality with all the different providers, that applies to each of our businesses. As a result, we're finding ways to become more efficient. That culture is shining through. When you go through really challenging times, like what tariffs throw at you, it gives our organization opportunity to shine. Our supply chain is doing just that, and they're continuing to fight through what is a challenging environment. From a CapEx standpoint, our 4% targeted CapEx, I think you'll see that be consistent. We would expect that that would be where we plan to be moving forward.

Leo Carrington
Leo Carrington
Analyst at Citigroup

Thank you.

Todd Schneider
President and CEO at Cintas Corporation

Thank you.

Operator

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

Jared Mattingley
Jared Mattingley
VP, Treasurer, and Investor Relations at Cintas Corporation

Thank you, Ross. Thank you for joining us this morning. We will issue our Second Quarter and Fiscal 2026 Financial Results in December. We look forward to speaking with you again at that time. Thank you.

Operator

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

Executives
    • Jim Rozakis
      Jim Rozakis
      EVP and COO
    • Scott Garula
      Scott Garula
      EVP and CFO
    • Jared Mattingley
      Jared Mattingley
      VP, Treasurer, and Investor Relations
    • Jared Mattingley
      Jared Mattingley
      VP, Treasurer and Investor Relations
Analysts
    • Toni Kaplan
      Executive Director and Senior Equity Research Analyst at Morgan Stanley
    • Luke McFadden
      Equity Research Associate at William Blair
    • Analyst at Wells Fargo
    • Leo Carrington
      Analyst at Citigroup
    • Jasper Bibb
      VP Equity Research at Truist Securities
    • Manav Patnaik
      Research Analyst at Barclays
    • George Tong
      Business Services Senior Research Analyst at Goldman Sachs
    • Joshua Chan
      Executive Director and Equity Research Analyst at UBS
    • Stephanie Moore
      SVP Equity Research at Jefferies
    • Ashish Sabadra
      Information and Business Services Analyst at RBC
    • Todd Schneider
      President and CEO at Cintas Corporation
    • Scott Schneeberger
      Managing Director at Oppenheimer
    • Kartik Mehta
      Executive Managing Director and Director of Research at Northcoast Research
    • Andrew Wittmann
      Managing Director and Senior Research Analyst at Rw Baird
    • Alex Hess
      Equity Research VP at JPMorgan
    • Faiza Alwy
      Equity Research Analyst at Deutsche Bank
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