Cintas Q2 Earnings Call Highlights

Cintas (NASDAQ:CTAS) reported fiscal second-quarter results marked by record revenue and what management described as all-time-high operating margin performance, citing strong execution across its route-based businesses and ongoing investments in technology and productivity initiatives.

Quarterly performance: revenue up 9.3% and margins expand

President and CEO Todd Schneider said second-quarter total revenue rose 9.3% year over year to $2.8 billion, while organic growth was 8.6% after adjusting for acquisitions and foreign currency. Schneider said each of the company’s three route-based businesses delivered strong revenue growth.

Gross margin was 50.4% of revenue, up 60 basis points from the prior year, while operating income increased 10.9% to $655.7 million. Diluted earnings per share were $1.21, up 11% from $1.09 a year earlier.

Executive Vice President and CFO Scott Garula added that operating income margin reached 23.4% in the quarter, up from 23.1% last year, which he called an all-time high. Selling and administrative expense was 27% of revenue, a 20 basis point increase from the prior year. The effective tax rate was 21.2%, compared to 20.7% last year, with both periods affected by discrete items tied primarily to stock-based compensation accounting.

Segment trends: strong organic growth and gross margin detail

Executive Vice President and COO Jim Rozakis said the company is seeing “measurable results” from technology initiatives, innovation efforts, and operational execution, including “all-time highs in retention rates.” He outlined organic growth by segment for the quarter:

• Uniform Rental and Facility Services: 7.8% organic growth; 49.8% gross margin
• First Aid and Safety Services: 14.1% organic growth; 57.7% gross margin
• Fire Protection Services: 11.5% organic growth; 48.2% gross margin
• Uniform Direct Sale: 2% organic growth; 41.9% gross margin

Rozakis highlighted that Uniform Rental and Facility Services gross margin improved 70 basis points from last year to 49.8%, which he said was the second-highest gross margin ever for the segment. He credited revenue-driven leverage and contributions from supply chain and process improvement initiatives, including engineering and Six Sigma Black Belt teams.

For First Aid and Safety, Rozakis said the 57.7% gross margin matched the all-time high set last year, noting that revenue mix and “time-to-go” investments can influence quarterly results. He also said more than two-thirds of new business in First Aid and Safety is converted from “no-programmers,” alongside cross-selling to existing customers and strength in focus verticals such as healthcare, hospitality, education, and state and local government.

Guidance raised and key assumptions discussed

Schneider said the company raised its financial guidance for fiscal 2026, projecting revenue of $11.15 billion to $11.22 billion (growth of 7.8% to 8.5%) and diluted EPS of $4.81 to $4.88 (growth of 9.3% to 10.9%).

Garula emphasized that the company’s guidance assumes no future acquisitions and uses constant foreign exchange rates. Other assumptions include net interest expense of approximately $104 million and an effective tax rate of 20%, consistent with fiscal 2025. He also noted the guidance excludes the impact of future share buybacks and does not assume “significant economic disruptions or downturns.”

Garula also pointed to a prior-year comparison item: during the third quarter of fiscal 2025, the company recognized a $15 million gain on the sale of an asset that will not repeat, creating a year-over-year headwind in the upcoming quarter.

Cash flow, acquisitions, dividends, and buybacks

Garula said free cash flow totaled $425 million in the quarter, an increase of 23.8% from the prior year. He described a balanced capital allocation approach, including:

• Capital expenditures: $106.3 million
• Acquisitions: $85.6 million across all three route-based businesses
• Dividends paid: $182.3 million
• Share repurchases: $622.5 million as of December 17, described as the third-largest quarterly repurchase

For the first six months of fiscal 2026, Garula said Cintas returned $1.24 billion to shareholders via dividends and buybacks.

Management commentary: labor market, retention, tariffs, and technology

During the Q&A, Schneider addressed questions about labor market trends, saying the company does not need employment growth to grow its own business “the way we like to,” and that headline job pressure appears more concentrated in white-collar areas that are “really not end markets for us.” He pointed to strategic vertical exposure (including healthcare, education, hospitality, and state and local government) and noted that specialty trades remain strong within goods-producing sectors.

On growth levers in a downturn, Schneider and Rozakis highlighted cross-selling opportunities and demand from “no-programmers,” while Schneider said M&A can be more attractive during weaker periods. Rozakis offered an example of cross-selling hygiene programs to a uniform rental customer that previously purchased restroom supplies through e-commerce in bulk, citing benefits such as steadier spend, less cash tied up in inventory, reduced storage needs, and less labor spent on inventory management.

Schneider said retention rates have been at all-time levels for several quarters, attributing the performance to operational execution, culture, service quality, and technology investments that make it easier for employees to service customers and easier for customers to do business with Cintas.

On tariffs and sourcing costs, Schneider said the company is “not immune” to higher costs but emphasized supply chain flexibility and global sourcing diversity, noting that “90-plus%” of products have two or more sourcing options. He said the guidance contemplates the current tariff environment and that impacts have been “very similar to what we expected,” while calling the environment dynamic.

Regarding pricing, Schneider said the company’s pricing approach remains long-term and “at historical-type levels,” and he emphasized margin expansion through efficiency and execution rather than simply passing costs through to customers in a competitive environment.

On technology, Schneider referenced benefits across material costs, production, and delivery, including SmartTrack and garment utilization improvements. He said the company is in early stages with AI and is organizing and investing to leverage opportunities. On Fire Protection Services, management said ERP implementation efforts are ongoing and will extend into the next fiscal year; Garula said the fiscal 2027 impact for the fire protection business is expected to be around 100 basis points.

Cintas said it will report third-quarter fiscal 2026 results in March.

About Cintas (NASDAQ:CTAS)

Cintas Corporation (NASDAQ: CTAS) is a provider of business services and products focused on workplace appearance, safety and facility maintenance. The company is best known for its uniform rental and corporate apparel programs, which include rental, leasing and direct-purchase options, laundering and garment repair. Cintas markets its services to a wide range of end-users, including manufacturing, food service, healthcare, hospitality, retail and government customers.

Beyond uniforms, Cintas offers a suite of facility services and products designed to help organizations maintain clean, safe and compliant workplaces.