Full Transcript: Cintas Q1 2027 Earnings Call

Cintas (NASDAQ: CTAS ) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

01 billion for the first quarter of fiscal 2027, marking the first time the company exceeded $3 billion in quarterly revenue. 39 when excluding UniFirst transaction-related expenses. 54. 5%.

Management cited confidence in closing the UniFirst acquisition by the end of calendar 2026, pending regulatory clearances. 6% and conducted $545 million in share buybacks, highlighting a balanced capital allocation strategy. The company remains focused on cross-selling opportunities and leveraging technology and operational efficiencies to drive margin expansion. Full Transcript OPERATOR Good day everyone and welcome to the Cintas Corporation fiscal 2027 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 — Vice President - Treasurer & Investor Relations Thank you, Ross, and thank you for joining us. With me are Todd Schneider, Chief Executive Officer; Jim Rothakis, President and Chief Operating Officer; and Scott Garula, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2027 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 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. Todd Schneider, Chief Executive Officer Thank you, Jared. We are pleased with our start to fiscal 2027. Our first quarter results reflect the strength of our business model, the execution of our employee-partners, and the value proposition we provide by helping customers meet their safety, cleanliness, and compliance needs.

01 billion. This marks the first time we've reached $3 billion of revenue in a quarter. 9%. We remain encouraged by the consistency of demand we are seeing as businesses continue to see the value of outsourcing to a service provider like Cintas.

Our first quarter performance demonstrates that Cintas is well positioned to help businesses of all sizes improve productivity, reduce complexity, and operate more efficiently. Whether through our Uniform Rental and Facility Services business, First Aid and Safety Solutions, Fire Protection Services, or Uniform Direct Sale business, our value proposition continues to resonate. 3% from the prior year. 8% from the prior year.

Drawing on the strength of our performance, we continue to allocate capital in a balanced manner. 6% of sales. 6% for the shareholders of record as of August 14, 2026. We are pleased to have increased our dividend every year since going public 43 years ago.

In addition, we were optimistic with our share buybacks, purchasing $545 million through today's date. Our culture remains our greatest competitive advantage. The combination of our strong culture, operational excellence, effective supply chain management, technology investments, and focus on customer experience continues to differentiate Cintas in a highly competitive market. Reflecting our strong first quarter performance and confidence in the remainder of the year, we are updating our fiscal 2027 guidance.

9%. 1%. Before I turn the call over to Jim, I'd like to provide a brief update on our acquisition of UniFirst. First, we remain confident of the substantial long-term value creation for our combined customers, partners, and shareholders.

S. and Canada. That process is ongoing as we continue to work toward obtaining regulatory clearance and completing other closing conditions. We remain optimistic that the deal will close by the end of calendar 2026.

In order to avoid creating speculation, we will not be providing any additional commentary on this process. We will update the market going forward as appropriate. With that, I'll turn it over to Jim to discuss our operating performance in greater detail. Jim Rothakis, President and Chief Operating Officer Thank you, Todd.

Our employee-partners continue to execute at a high level and demonstrate how well our value proposition resonates with customers of all sizes. Our strong top-line growth is due to a number of factors largely concentrated around our ability to deliver more value for customers. We are succeeding in tapping into the massive total addressable market as we convert non-programmers to a managed solution. In addition, we continue to expand our relationships with existing customers by adding new products and services, and we are maintaining strong customer retention while pricing remains consistent with prior years.

I'm going to provide an example in our rental business of converting a non-programmer to a managed rental solution. An owner of a small fitness studio in Florida recently shared on social media why she chose to partner with Cintas. Her story highlights why our value proposition resonates so strongly with small businesses. As her company expanded, she found herself spending more and more time managing restroom supplies, floor mats, air fresheners, and other facility needs that were essential to maintaining the experience her members expected.

She recognized those responsibilities were taking time away from serving her customers, supporting her employees, and growing her business. By outsourcing to Cintas, she gained the convenience of a trusted partner. The breadth of our product line addressed her facility needs while enhancing the image, cleanliness, and consistency of her studios. Most importantly, it gave her valuable time back to focus on the core aspects of her operation and what matters most.

That's why our value proposition continues to resonate with small businesses and why they represent such an important part of our addressable market. Business owners like her are already managing these responsibilities on their own and recognize that partnering with Cintas helps them operate more efficiently, elevate the customer experience, and focus on growing their business. That value proposition continues to drive strong customer demand across our businesses and was reflected in our performance this quarter. As Todd mentioned, we had strong organic revenue growth for the company.

6% for Uniform Direct Sale. 5%, an all-time high. 9% for Uniform Direct Sales. 8%.

This business continues to benefit from strong revenue growth, which creates leverage. In addition, we continue to see margin expansion as a result of the investments we are making in technology. These technology investments also serve to make it easier for our employee-partners to do their job while creating a better customer experience. Our First Aid and Safety Services segment gross margin increased 80 basis points from last year.

We continue to grow at attractive rates, which is also creating leverage. Businesses throughout the United States and Canada continue to place an emphasis on workplace safety training, compliance, and health and wellness solutions. Our Fire Protection Services segment had really strong margins for the quarter. Keep in mind that margins can fluctuate from quarter to quarter based on the timing of certain investments and sales mix.

Some of those investments include increasing growth capacity by hiring technicians needed to perform specialized tasks as well as building out a national footprint. 4%, which was a 10 basis point improvement from last year. With that, I'll turn it over to Scott. Scott Garula, Executive Vice President & Chief Financial Officer Thanks, Jim, and good morning everyone.

2%. 6% over the prior year. 7% in last year's first quarter. Keep in mind that there was an extra workday in the first quarter.

7%. 6%, a 90 basis point improvement. 6% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation.

1 million last year. 3%. 8%. Cash flow generation was strong during the quarter and continues to support a balanced approach to capital allocation.

5 million in capital expenditures during the quarter, primarily focused on technology, automation, capacity expansion, and infrastructure investments that support future growth. We also continue to evaluate strategic acquisition opportunities across our route-based businesses. Returning capital to shareholders remains an important priority. 6% and, up through today, made $545 million in share repurchases.

Earlier, Todd provided our updated fiscal 2027 outlook. That outlook assumes that fiscal 2027 has one more workday than fiscal 2026. Keep in mind the first quarter had one extra workday compared to the prior year first quarter; the second quarter will have the same number of workdays year over year. The third quarter will have one less workday and the fourth quarter will have one more workday than fiscal 2026.

Our guidance does not assume any future acquisitions. Our guidance assumes a constant foreign currency exchange rate. The fiscal 2027 net interest expense is expected to be approximately $103 million. 2% in fiscal 2026.

The guidance does not include the impact of any future share buybacks or significant economic disruptions or downturns, and the guidance excludes non-recurring transaction costs related to the UniFirst acquisition. With that, I'll turn it back to Todd for some closing remarks. Todd Schneider, Chief Executive Officer Thank you, Scott. Looking ahead, we remain confident in our strategy and the long-term opportunities available to Cintas.

We continue to see significant opportunity in a massive addressable market. The market remains highly competitive and we believe our value proposition positions us well to help our customers meet their needs of image, safety, cleanliness and compliance. The future of Cintas remains bright and our employee-partners continue to demonstrate why our culture is our greatest competitive advantage. As always, I want to thank our employee-partners for their dedication to our customers and Cintas.

I'll now turn it back over to Jared. Jared Mattingley — Vice President - Treasurer & Investor Relations Thank you, 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. OPERATOR Thank you. 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. And our first question comes from Tim Mulrooney from William Blair. Please go ahead.

Tim. Renee Gagliardo, Analyst at William Blair Hi, this is Renee Gagliardo in for Tim Mulrooney. It looks like you raised your revenue guidance a little bit here for the full year. Would you mind walking us through what the primary drivers are behind that?

Todd Schneider, Chief Executive Officer Renee, this is Todd. I'll start, but we have many ways to grow and the most important driver for us is new business. Converting over no-programmers has been part of our history and part of our future. This is a key component for us and over two-thirds of our new business comes from no-programmers.

So that has been significant for us. We certainly have other ways to grow and when we think about our current customer growth that has been important to us and has been steady, if nothing else positive, but our opportunities there we see as continuing to grow. Our volume is our number one focus and the key inputs that we're seeing have been creating good momentum for us. I think you saw that in our opening guide, but you also see that in our updated guidance as well.

Jim, anything you'd like to contribute on that subject? Jim Rothakis, President and Chief Operating Officer Not really, Todd. I think that you summarized it well. We're off to a nice start for the year.

We really like how we're positioned. It speaks to, again, the size of the market and that today we have 1 million customers and there's 16 to 20 million businesses. It also speaks to the value proposition that we have and our ability to continue to convert no-programmers over to a managed solution. Like the example I provided in our prepared remarks, our cross-sell efforts continue to go very well.

And I think it's important to note that the vast majority of our growth and the momentum we have is in volume growth, which is more new customers, better retention rates, increasing our cross-sell. So a little bit of improvement on all those and that's really what's impacting the guide. So we are really pleased with the start of the fiscal year. Renee Gagliardo, Analyst at William Blair Thank you.

And one follow-up on that. Specifically around the uniform rental space, it looks like organic growth stepped up quite a bit in the first quarter versus the fourth. Was there anything notable behind that improvement specifically, be it new account sales or retention? Or is that result more or less in line with your internal forecast for the quarter?

Jim Rothakis, President and Chief Operating Officer Yeah. Thank you, Renee. This is Jim. I'll start on that one.

I think that if you unpack the rental division growth, we really have four key inputs that we speak about for organic growth, with rental pricing being one of those, being probably the least important of the four, and pricing was consistent with prior year, so really no change there. The other three being new business, which once again two-thirds of that new business comes from that no-programmer space, new business being the most substantial growth driver that we have; that performed well once again in the quarter. Retention continues to perform really well, slight improvement in retention, and then a little bit of improvement there in cross-sell.

So a little bit of improvement, I think, in all three of those volume-based buckets that we would note. Now, I would keep in mind that rental in particular had the most favorable comp in the first quarter last year.