CTAS - Earnings call transcript Q2 2019

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Operator

Good day, everyone and welcome to the Cintas Quarterly Earnings Results Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Mr. Mike Hansen, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

Mike Hansen

evening. good and you Thank With me President Treasurer. Cintas’ Paul Adler, Vice and is

Securities provides statements and the statements. a which current quarter discuss fiscal that be to The for to reflect financial will our cause to views events performance. subject differ results uncertainties, the conference we future statements refer civil happy you Act to we risks Private XXXX forward-looking results questions. on to and any forward-looking those the our We Safe in Harbor second SEC. filings may could litigation most answer contained call I will These actual company’s commentary, for with Litigation of Reform are from discussion our This as XXXX. materially from After points contains recent these discuss. forward-looking

ended the impacts organic exchange was organic of First was ago, revenue Services its we growth organic was X% was Facility growth The last revenue and year’s trajectory the and Services which Our and expected second the increase of also for Uniform rate which G&K growth revenue segment X.X%, impact announcement for Rental billion, acquired quarter, and rate of The XX.X%. November foreign and the for X%. currency an Safety acquisitions nearly growth rate and Services of rates. adjusts the X over Rental XX, quarter. fluctuations years second Facility rate $X.XXX of revenue Aid Since on the segment the acquisition the Services communicated Uniform our

fiscal of lapping we rate the the bottom organic would the G&K acquisition, due of during to growth ‘XX. that the rate discussed of reach have year, in organic accelerate remainder quarter the first fiscal growth the this to and expect We revenue

quarter’s of rental quarter rate from growth expected rate X.X%. second the as X.X% organic of rebounded first Our

X.X% this fact, our expectations. organic In exceeded internal growth rate of

we in year-to-date quarter’s including for related last G&K $XXX the and impacted by the year. for margin Gross have cost quarter in some the seen $XX.X increased last and good of productivity particularly of rep headwinds hygiene was on $XXX year’s from for in was quarter million legacy million ‘XX G&K second the the million fiscal year’s quarter income pre-acquisition fiscal second last in and compared despite customers, quarter million second second fiscal quarter the second cited was XX.X% revenue earnings of ‘XX Gross million $X.X last operating compared of integration performance the our seen in to quarter. commodities. Reported second second revenue have penetrating of year. and margin Operating XX.X% higher to a margin income negatively the expenses in of of XX.X% quarter call, certain fiscal costs fiscal fiscal reach improved ‘XX. facility of XX.X% in from the second Uniform quarter as margin last We in to gross as improved we X.X% the services a percentage by quarter. second of percentage levels, acquisition to inflation $XXX sales and rental quarter wage ‘XX Gross space. for

‘XX the second lower in quarter Net second quarter continuing operations compared Diluted fiscal gain about interest increase the Excluding income year. ‘XX an quarter the the of of EPS $X.XX was fiscal second $X.XX quarter from of ‘XX of in quarter the quarter, quarter and operations ‘XX and ‘XX the EPS lower second EPS integration for of $X.XX benefited from of fiscal XX.X%, compared and continuing year fiscal Act. income from XX.X% negatively year last to this expense from last for and debt to from Net ‘XX Net quarter due expenses ‘XX Also income from and a income an to last from and operations $XXX XX.X% second from tax continuing million to acquisition. of fiscal of a in cost operating quarter of second second the positively grew in year’s sale EPS G&K Tax from the increased compared from operations primarily of of continuing expenses, related continuing our net resulting the last $X.XX. second effective a operations rate operations of to Jobs enactment EPS impacted fiscal million Net from quarter $XXX net margin by were on second from investment. XX% income continuing method were to for by Cuts fiscal respectively XX% were year’s income $X.XX, continuing integration second operating operations for million. the reduction. of impacted $X the

operations items, press EPS $X.XX compared EPS continuing provided from $X.XX. Excluding operations a in release. quarter year’s in were second table last these today’s our from figures continuing We’ve special of to these

of quarter of increasing we year, forecast annual a are second and fiscal our our results result guidance. the As remainder for the

of range a We billion billion to $X.X is operations $X.XX to rate to and continuing XXX assumes guidance are of million a year. expenses. million of quarter. It range shares. diluted to $X.XX. It from an computing commercial from It Note guidance quarter’s count EPS share assume last the guidance. following a $X new assumes of for $X.XX integration additional a from due from any of $X.XX $X.X raising a not EPS our rate assumes as billion some does to last It regarding million to interest the total revenue billion additional range EPS to having paper. the for $X.XXX still of guidance $X.XX to range the G&K effective an same $X.XX XX.X% expense This of

year. to million range $XX fiscal $XX However, these of million we the in incur for full to do expect the

quoted we our are release, planning the press As our our in system. pleased Farmer Chairman progress today’s and CEO, resource with G&K the of the of enterprise integration Scott the Board on implementation was and acquisition of

another year on track to growth. of we strong continue commit deploying shareholder and are additionally, to to We and generate cash revenue value. And earnings effectively to cash solid flow achieve increase

buyback reminder of million to paid now X, we dividend $X.XX an dividend; annual I a per quarter, turn stock on and increase second last December of the annual under of over end call year’s As share, purchased Paul. will XX.X% we through an the of Cintas over our authorizations. $XXX our

Paul Adler

second same quarter Thank you, Mike. second fiscal number work the quarter. days our note the Please as contained of prior that year

the quarter of no be as differences the work each ‘XX same quarter contains the remainder of of fiscal Additionally, as year of the workday ‘XX. days will fiscal comparable fiscal there number

Rental of and segments, operating and Services. Direct business. Fire and First The Facility Services Services reportable Other. Safety Sale two All and of Protection our remainder Other All Aid in have We our included consists business Uniform is Uniform

of en was an second The and increase other X.X% items and revenue to First and services. our mats provision Other Aid All of compared Services operating the income billion, and as route. segment Rental Services facility customers Facility quarter. segments and the our Uniform and and Safety of supplies and includes from servicing to includes Services sale Rental Services combined $X.XXX towels, the the also last on catalogs Other Facility statement. of uniforms, products are Uniform and restroom and year’s presented rental

and of impact was foreign the rate changes, exchange organic X.X%. Excluding currency growth rate acquisitions the

points. to XX Our gross quarter, basis Services to second was an Uniform quarter. for a segment of compared of second XX.X% year’s Facility second year’s last Rental improvement XX.X% equal as revenue percentage and Energy X.X% last margin quarter the was in expenses

We hangers mostly to are implementation. ERP inefficiencies China wage with which acquisition year-to-date are integration such sourced system gross this from and with and our inflation and the for expansion overcome commodity are an pleased increased quarter as costs the that margin customary and an ability

segment’s XXX expanding gross and of very businesses strong and their growth and for Services and in employees Organic was was all to penetration confirmation Safety to the customers basis training margin quarter. compared servicing Our sale quarter and First second was organic second in million, from revenue points. the are value than gross last outsourcing place products, the $XXX be that second productive. XX% first which solid rate was higher year’s in training. programs revenue keep was existing first benefited of to revenue XX.X% growth segment quarter, segment’s the and aid, second sectors by growth the year’s an continued the business, of includes XX.X%. for safe and margins increase their On on to of Aid national an economy the of the help products last account This basis, segments XX.X% operating healthy, quarter of management safety safety aid This new and Cintas,

reported other Our fire businesses category. direct protection uniform all sale services are the and in

the business fire generally key year-over-year gross compared gross XX.X% offing quarter. grow us guidance. We call of are second the to business this revenue an sale million business sale as and products a fiscal at XX% each year of and its ‘XX, in of lower provide compared compared to lower the Standards to initial units. adoption X.X% benefit business. and year’s our growth in is growth a was rate a earnings second growth margin with $X.X last business by gross direct X.X% organic administrative from such All year’s Our as Update expense direct second of however year’s margin continues offset quarter. fiscal resulting it expenses fiscal install Selling multimillion to other quarter percentage rates from was XX.X% and to fire contracts from the discussed when was XX.X% was in $XXX the quarter. the revenue in significant ‘XX was on when second a other Uniform second for we to last strong Improvement cross-sell dollar year organic volatility subject in from The are this low of are Uniform XXXX-XX In were our Accounting accounts. we sale business a revenue and customers July more and customers. the the provided fire opportunities than increase uniform commission last million, direct of by quarter second business. margins XX.X% for single-digits quarter pace. All services was for our driven other

from this getting leverage In we good fixed addition to costs. revenue covering benefit, increased are

on operations U.S. second the tax quarter benefited Our tax effective legislation. for the from new rate continuing

XX.X%. EPS builds rate Our tax an items, ‘XX Note quarter-to-quarter from in effective reserve the amount for compensation of effective tax releases discrete tax on and each assumes the to relating based benefits stock that including fiscal fluctuate of rate guidance period. will

in XX balance November $XX $XX Capital Our million. were of was cash million. quarter and as equivalents second expenditures the

rental and million in uniform services; Our other. CapEx by safety; and in $XX aid as and follows: million facility in $X segment operating was all million $XX first

fiscal We of expect million. the ‘XX to CapEx $XXX in million be range to $XXX

debt As our is million prepared of rate And $XXX billion, remarks. rate November That November interest X.Xx was billion debt EBITDA. and $X.XXX our fixed debt total commercial to was XX, XX, paper. is $X.XXX concludes variable leverage

answer are your We happy to questions.

Operator

Well, comes thank Our Barclays. Instructions] you. with question Patnaik from Manav [Operator first

Manav Patnaik

you. gentlemen. evening Thank Good

First have manner. broader market seen obviously question fearful the you curious reacting obviously -- is, just in a

you any from there? slowing and what are what or you signs based of from down curious Just worry of things are any customers, your hearing on signs hearing seeing

Mike Hansen

Manav. No,

slowdown I on we strong, the no. guidance last year and are so of pretty good are we based pretty pretty confidence environment quarter, as we and we good, seen reflects going believe for I finish hearing well And a that our economic right our not to that strong is think the suggest are results, signs would from pretty now. which have

Manav Patnaik

guess was talked I there Okay. how revenue what we quantify or about making you especially should about some And the just G&K some progress, hoping could then think synergy help color on opportunities area. give on I in the future you side, the are? hygiene side, there maybe and the

Mike Hansen

say acquiring was quantified haven’t us them. we than that revenue is prior G&K’s other specifically than that Cintas hygiene to certainly Well, to greater percentage of

the with that. other and our some you, a some We that share still we many entrance We what we restroom for but garments seen. that making number of traction have there nice are some in, think and accounts future certainly progress opportunity things, blended because but are don’t specific the Carhartt like kind we far in is so like like of on progress we there, product are I substituting making and know to this theirs. for have we opportunity. mats an We getting

Manav Patnaik

or on got Alright, that how guidance prices obviously we think moving then And -- if color today? last energy factored just that it. of your the pieces of should just you’ve side question, the any on some down, oil in increased that with

Paul Adler

the have the like just may to though It’s We in rest quarter. the that for have touch the we what predict the of any now year. outlook pressure that that’s second hard going up slightly even we assumed we didn’t to haven’t really half, for second changed of and a right slight be look but in have was second still year, our the half of to

Manav Patnaik

Alright. Thanks, guys.

Operator

Morgan And next will Kaplan Toni Stanley. with be

Toni Kaplan

afternoon. Hi, for my taking Thanks questions. good

call looking Just the quarter you to year given share pretty count around, that. under it $X.XX. million just help a and guidance, back I the you half am this be from lower at bought of just nice the stock back that of somewhere $XXX should in calculating the

a a but me let’s obviously a of back cents sort maybe there there least couple an guidance basically, are that just say that know not beat either year, raise mentioned by you offset, this the You is higher know more? you $X.XX some implies expecting and longwinded then interest, the of you half good beat Sorry mentioned quarter, so from at to why not the conservatism maybe as basically or I that’s question. trying like of raise target, but of I internal there, but get sense by just that you your consensus a for -- to $X.XX just necessarily

Paul Adler

last end Toni, higher guidance high problem. is our of end than now No the low the our of guidance quarter.

impact. buyback the it’s previous increase guidance we margins suggest range of the end the – higher Toni, of operating sorry is looking the good We would as half year That nice low our than that organic that’s a pretty so second a integration, can well, half margin half am achieve of that on G&K expansion, our than it right the – be did end pretty of integration, end high a year And high there going good. margin in The of some the higher pretty darn year. is of with where increasing the the half the low guidance, we good is second range. the of I continued growth. very nice year if the range year, revenue provided are think terms last SAP the previous and XX%, mid-to-high is second the But of second still You year. we XX.X%. improvement in of to was have The

Toni Kaplan

recently your then just of one on Thank be repurchases And great. how have a remaining been just sort where like just your lot thinking this of in you. did timing buybacks, given you given the more should stock views forward? authorization quarter Okay, you or of XXX trading in past – your program, just and we about going has buybacks on

Mike Hansen

authorization million. is authorization Well, during previous run our remaining it’s We about over the $XXX little a out a bit $XXX million, quarter. did

change, stock we’re opportunity, our would but think that’s price we’re times, to also leverage our flow. the that level, like We it at have is at that continue unless last right be X.X obviously overreaction something to come see stock to be buying been We think have there’s XX right opportunity new we continue though, around seen something our days. an the and level certainly certainly that that I in a to I we today pretty expect target. cash And good to to going suggest We about. an different it

Toni Kaplan

holidays. Happy Thanks.

Mike Hansen

you. Thank

You too.

Operator

Bisbee Lynch. And our with come from Merrill Bank will next Gary question of America

Gary Bisbee

appears basis. Just comps it lead a like the benefit a get Is was to look anything a you’ve back But on blew that at if quarter the revenue is in taking guess to through easier talked any to there that, getting good deceleration think year-over-year rate guidance good rentals, the up. half quarter? from to guys, would the that term? it, anything or that there the obviously second organic I you first about Hey trying this in as right and this just question, afternoon. the of last we near X% run X.X% year you was

Mike Hansen

I Well, we than changing think about that expected, see productivity about don’t better so we impact quarter, of rep initially when think we the much. this sales

talked also strong. penetration We our all the remains with customers of opportunities about pretty

range So and something good X%, us the to the spot. way we that gave to we That’s range in. our that for is low sweet in pretty think that’s guidance X% right a of be in

Gary Bisbee

a the a couple last the just guess, or national that doing lot thought You you’re national the – Aid mention are you you account you’ve on opportunity and much as last – mostly of now that business, mentioned years. something calls, the I’ve few don’t Is and that on accounts First calling local Safety. that hearing of newer a Is what always front? out opportunity I over remember I –

Mike Hansen

customers is opportunity the necessarily that opportunity. we in It’s you love have we and as the talk new same to have large a not the and have ability large a their to think to we better, to it is about their where these and on one we understand a bit – It that’s Safety started It might rental, consistent Program provide little important track – allows Aid multi-location customers. compliance a First and more Safety consistent with to them basis. locations

call And growth that us provide that opportunity got business, in become so and bit others the more. real offering nice for can and that out an many not a a we we’ve has started little to one

Gary Bisbee

the years, to to flush how trying almost think if post-tax rate, change normalized into we’re of rate equity accounting And rate us I a that tax now out? could statutory can were over sort tax I’m or from benefiting flatten Great. that the to equity then accounting half just or the you rate the And and out of year the around much is what year that ago comp the a And on tax help up rate reform just benefit few next the change what guess, comp go so? that?

Mike Hansen

move cases We new we’re we guidance, that a but Yes. is in equity a it around, in a type see that. of XX.X% to may than It’s higher chunk question, a kind XX-ish to in XX% of range. get going we again with it that’s we get second quarter Gary. of of difference expect of tax that big rate. our where is can quarter If now, to certainly you turns is it a accounting some even roughly could good And more in first the a steady real that benefit closer range. compensation the fluctuation see see And what – good in you comp, I XX.X% XX%, stock the be the saw quarter. to XX% a without all percent certainly little but bit a from not saw and like

Gary Bisbee

Great. I sneak could accounting I And on you if higher change to much. one you very other. Thank year, then end of XX that think said for benefit any there still rate? just run that good this XX, a to XX, the XX Is update is

Mike Hansen

The quarter. think benefit was in out, million called the it that I Paul $X.X

Gary Bisbee

[Multiple year ‘XX – [ph] still Speakers] the For

Paul Adler

range. that in Yes,

Mike Hansen

range. I year, closer that been to it’s a half be XX XX of type think the given type the of going what of to XX to in probably it’s that first

Gary Bisbee

holidays. Thank you very much. Happy

Mike Hansen

Thanks.

You too.

Operator

with next our question from And Hamzah moving Macquarie. on, comes Mazari

Hamzah Mazari

where multiple us any Thank My you on today it through, if buying does number you. how there? penetration are or go Good what customers just well. and sort is you first of services frame to, from thoughts historically, for cross-selling that could versus as on question evening. go can just many Maybe

Mike Hansen

we there’s there. you, big numbers share those have a think don’t we is opportunity with certainly Yes, But Hamzah. to

be in we products uniform certainly all biggest that with penetrated, As our But XX% then of get mat with of we think other XX% entrance the is rental under the and above would can and our we’ve talked past, many penetration products. those.

a to the have lot over years. rate. of still that we And – we growth has been beneficial last run So few certainly the

Hamzah Mazari

competitors on market. into that recently they that it. First one said Yes. your Got Aid, to are just of going then And get

update see us, for sustainable competitive the XX% number Aid frame there? maybe of Just growth organic dynamic today us that you just in how sort sort First of is and

Mike Hansen

next think and terms do, next big we We of sustainable, in think doubles that when environment. business, do – Sure. the the singles we about macro high – it’s and for rate we digits a we in several years, run the low organic like change absent in growth certainly the

of might to this we biggest value in them the business we’ve what in and doing there great provide the believe got rental to a themselves, programmer know them. the the no or customer it are there is competition business You many that’s we out call still

So catalog the that many there there’s a ability our think of and great the are do-it-yourself compared there for out and deliver service do and that in opportunities we our to [sic] think we to value kind thing. purchasers

we business. love the like we rate. So growth that like – think continue. We We the the can organic

Hamzah Mazari

you Great. leverage have ERP talked M&A your X.X. in thoughts much. Any How to are different synergies And with buybacks, at just vertical? last question, debt is of Thank sort your sort and thinking Do too about ready much the a you on maybe pretty very M&A? you M&A? on then or about look low on of guys you you are plate

Mike Hansen

are make – in so thing sure larger we’re we opportunities and our we that looking always We than We come can’t and look them. take there those we’re along, and in ready, find tuck-in in ready certainly want of at our can in we even looking we at at and are is, of certainly Aid that investment. or our a business long-term lot if rental and kind is First Safety to will predict looking we tuck-ins value business, about our M&A business, if Fire opportunities, when think a – – M&A, the are we

Hamzah Mazari

very you. Thank Year. Have New Great. good a

Mike Hansen

Thanks.

You too.

Operator

question Andrew JPMorgan. Steinerman next with from comes our And

Andrew Steinerman

revenue us year-over-year, pricing was accelerating organic add-stops? on penetration comment typical course, retention quick is growth, I net and, you in of realized national accounts wins. at account all, strength of mentioned mentioned and revenue how you a just some the the just give When directionally you existing of Hi. driving was drivers wondering growth, what rental other was if

Mike Hansen

was some well customers real team it productivity as sales also and sells by That also. team. over sales our led we’ve very That last but team nice business into years, several new seen the our of is, we’ve usually that’s sales as been that talked out about also existing going

been. that that range good remains to pricing standpoint mid a right the bunch from net has is in historical It’s pretty And our not couple the last changed add-stop team. nonetheless. talk where last positive as And it’s we metric quarters. helped the our certainly to the been it’s getting be industry. from good much of want in XX% so we some over environment. the It and say quarters, a it several about favorable but sales Retention wouldn’t has has still benefit environment and of changed it’s pricing in as I

Andrew Steinerman

sales that just just force both quick and Cintas of you back And is both? the mean clarify productivity, a now meant quite sales to G&K meant understand legacy were Okay. levels. follow-up, back you as I Cintas didn’t pre-merger what before sales you levels productivity sales Did if inherited you force when to

Mike Hansen

team Well, let’s be now. clear, it’s one sales

Andrew Steinerman

It is.

Mike Hansen

measure it was and pre-acquisition. is so we than combined And it higher altogether it

in new certainly and and real we our have partners So made are recently want way productive. partners nice productive being in be to deal, other hired that progress them from they our words, that a some

Andrew Steinerman

Okay. Thank you.

Operator

Sachs. And come question with Tong the next George will Goldman from

George Tong

afternoon. Good Thanks. Hi.

at and assuming whether for about you by rest energy. be planning on you’re as the current for year touch how impacted demand of energy? internally you’re a elaborate levels pressure you Can oil the prices impact gross the of think you expect to from margins that to indicated You’ve stay

Paul Adler

energy pressures the in be quarter get slightly. we of pressures, to will talk an From it for was an the just expecting you and flat the specific up it price, enough we’ve the it We provide slightly to cost think year-over-year we’re back be year. let’s but oil about the half that Well cited. perspective, don’t up

the a We have about bit talked labor. little

and we’ve of contemplated quarters, second is numbers the last the the pockets the several our year. that our guidance half said in for in and the as is certainly over half for year seeing first that’s We’re of within it

margins increase great quarter and from year the the able to So pressure that some to been news this expect in continue gross despite we’ve and labor. is, for

little about a impact, July kind if China increases also on bit of about products commodities tariff for were set example, bucket you right, certain think a last, some of and seen as impacted that. announced trade a think in this We talk not services, of we we’ve that and you can the by of

in pretty second again, And The amount, by China. may to that came on change tell bucket touched it’s and were slightly on that we else quarter. that last We impacted early it’s continue. small a then September. certainly, too with but anything may that And

structure change to if NAFTA, NAFTA on NAFTA touch of continue see we a there didn’t structure the replace to we USMCA, last but And bit. – or not we to replace see they’re continue NAFTA also time, the it We certainly either. can has the but in the been a if can much news in quite

is chain, and control suppliers. control, on-trade, lesser chain, we a I of around purchases supply we significant sowing to we’ve extent, we control talked what certainly bit how those we’ve of while So the and to different our hasn’t within when really guided of about it fabrics the we And do purchase manufacturing really a the we good but really world have fabric good numbers. owned global we’re if about while news a is, and impact, been it our supply an see got think then we and either shipment much say little also

competitors where much to be and and as flexible suppliers, trade flexible have trade that. We to be tied changes or as manufacturing many to with flexible have are – the own either to be we they ability flexibility their not, the than do third-party to that tied ability of the have we our more

this And able find gross we as what think infrastructure and operating guidance margins pressures. despite these of like the these way we our we’re to in increase our perform, efficiencies, to you’re pressures, and we we about of leverage able different some that’s so way results, all seeing our current to we’re and the able like in to are

Now certainly changes that. as let significantly and macro to trade to that able improve way know still could But margins. environment change if adapt you about we in changes environment the we’re and today, or we we’ll like some the the stand

George Tong

quarters in it. a move cycles can compare follow-up, Got looking earlier what and the oil seeing out verticals oil experienced helpful. about you with pipeline as prices, decline? in the several gas the verticals to of manufacturing over has when the talk at very given levels That’s that And oil you recent similar in especially and you’re next if have changed all, the

Mike Hansen

Yes, that point of we’ve verticals. business a early. I be in this healthy seen those at at a other little we’ve it But many our seen and may pretty can’t say change time, be much least in

George Tong

it. Got you. Thank

Operator

will next Wittmann And be Andy with Baird.

Andy Wittmann

implementation would in outlook just are has talk update the moved? and the terms operating Mike, in I number of where if I revenue in missed the maybe the could what it on of SAP locations an and the of of now endpoint of of system terms but Great. about maybe I you thought about the maybe you script, ask Thanks. you implementation, talk here that under is percentage or is on timing your that kind that can

Paul Adler

it’s we We are on did Paul. still but particular progress. script, the in making nice SAP Andy, not comment in

we but I and XX%, of through. about about said XX% had number at quarter halfway last we but the remember can’t we’re implemented mentioned, about them so just now of we that I think locations,

things existing again system very of ASXXXs new are series like go from one is IT the the a So talked going on operating of how of takes previously, time implementation our going and but and to nature well new with to we’ve about we’re fiscal still track over, the to the the in other, boxes it to everything well other is ‘XX. all complete implementation because

Andy Wittmann

thing, of you year Thanks. the of is thing terms kind obviously a that Great. maybe similar process on just tricky re-routing, in this is But which or a was of on key a the be. a has And broadly in this with about very just today? integration, concurrent. are you you Can G&K talk here, lot question that where synergy can the a just given rate that And in and of as more re-routed G&K recognized synergies the are run on how then on and you about recognized number much what maybe more quarter that feeling that rate get how are that’s been you you in the overall, the run intertwined how was going? maybe that lot

Paul Adler

another have of optimization share, we’ve there cautious more even affecting where the don’t so locations, gets helping SSR cautious movement numbers it volume because of bit very part as out feel plant you and customers one and I but touches talked synergy if that from remain about very standpoint in us the we still in about our that results G&K number so really talked in million we we revenue legacy being for very to fiscal continues like legacy moving good Andy an possibly that continues, a intertwining and hitting or and it’s feel of in we’ve there optimization think with has year very so and it’s continues quarter a certainly business, Sure. this, cautious and the of the we it and the is the are volume facility today mentioned, in I’ve G&K that acquisition. overtime about about $XX as route approach participated that it’s get but, that optimization still multiple however, is of going seen performance ‘XX and route intertwined that forward more legacy a more more well even our this and of current some our us have move certainly to and continuing $X I I legacy route good that out route little optimization, about, we’re Cintas have onto targets percentage we intertwined well that, estimate we G&K out volume, the synergies to Cintas expectation doing activities part for integration put the for overall to the entire relationships The think, from may we’ve is the more so re-routing we

Andy Wittmann

evening. a will there. leave good it I Great, Have

Mike Hansen

Thanks.

Operator

question with Schneeberger the comes Oppenheimer. next Scott from And

Scott Schneeberger

it, Rental any just is you was there Services, because Actually, the just missed want Good tempered I what I said, kind curious Facility I’m than might of three. X.X had or front the Uniform fiscal year I’m expected Thanks. more guys. said have the sixes half, are organic second you missed curious, clarification, I’m if to curious should we it of better slip in in I if one are the expectation kind evening growth here have it? may second half in just because you last I talking or be high

Paul Adler

guidance suggest have don’t give by is to acceleration X that I segment, but, that We company would Scott the about certainly room that in X.X, for is think there continued we that for guidance the range total and range. do

Scott Schneeberger

That’s Right, helpful. thanks. Appreciate it.

maybe of a if visibility back business could So, obviously sounds how maybe you the for like wins more it is typically speak six-months you what curious some that and if I’m out, very you confident and mentioned visibility is half conditions half talk visibility know, the to end to into you you your asked It’s can in you my current way the have lot, new the what markets, but so guys question. back been trickles be far? out see would Thanks. than some to your business you’re

Paul Adler

we of prep as and point we the say looking change performing a we this, like and year guidance significant Well, certainly to far to we I going expect forward keep view, we in the our fiscal an how in right absent the ahead can see external way Scott fiscal we try we macro, to would ‘XX are out internally, perform from now. we as current that’s and are ‘XX and generally

the we performing is we can we our well we we more in we getting and something that ability that well, unless more efficient a get more like wrench we implementation the is is in integration in integration force throws works like to in so the SAP to more I to a can continues fully we we way us, more in happens way behind see of services, sales operate. continue and execute, very not more even broad penetrated and running are more and us we forward become and that so, and the feel very think so of customers and macro look to our and operate Our as the business but we efficient opportunity, the get change behind the Cintas we like not a existing a certainly all are products at our we it’s the what opportunity sell here bit little to don’t

Scott Schneeberger

quarter which Okay, down just this curious great last is huge, answer. but is or maybe the went not kind it’s I’m quarter down prior just from Thanks. guidance quarter, down of curious, And lastly, it that SAP related trickling CapEx that from went something development? on the else,

Mike Hansen

timing, purely It’s Scott.

to those to there, in on certainly continuing it than and are anything, to, is need of that from so, local little may We plant of the timing. the new bring a depending when can we online it’s where situations more timing we move some invest here standpoint need just markets bit a

Scott Schneeberger

Okay. Thanks, guys.

Operator

question Shlomo And from Rosenbaum the comes with next Stifel.

Shlomo Rosenbaum

Paul. Hi, taking Hi, questions. you for thank

you’re cash like first X on in if of kind wanted days flow, little us execution up build clarity you bit up sequentially. XX ask future Is half AR. or free some build the on it’s give just a of down is expecting them? a something, million or anticipation thing sales there Just is there DSO sales as continued a to timing

Paul Adler

of on that invoices changes, look slowdown coming customers implementation, prior billing as has balance a it but it it’s talked that on flow mean impacted, significant temporary will what that we customers the in we and concerns really see are with don’t concerned Mike I about believe a system the G&K many don’t have think projects the organization going there��s cash because we have you I and that of the can on time guess capital inefficiencies conversions, have but collectability of and I and you of driving and there but AR mean, it’s working we collect. so that anything our two, different receivable nothing, here accounts in we exist and causing two temporary structural is, Yes, within build are integration, two cash really on bit a lot are and is larger is provide both the do same one sheet you statement on when and categories we’re they need can certainly the once times again, disruption is we at little SAP about calls some pay, see and

Mike Hansen

forget, adoption. got and was close that’s a about AR and we’ve not there let’s rec $XX from million nice really And impact the growth the some certainly increases to rev

Paul Adler

that demand our with G&K, by ultimately build, it manage we’re putting will make of enough. other help Yes. we’re an happen us that that’s growth from point the centrally to in place finding doing in building distribution from to would so more inventory and this would had to increased bucket Shlomo again a historically them because bit negotiate those growth to what so cost now is build that new about our them of so distribution that the and then to inventory a and at that thing ready just comment place our were is talked to inventory center build, services bit get stand-alone we that online, put skews And put on little the up the vendors came we center for have we’re it a that in enough does in inventory a just us in little facility last still manage believe them a we a and elevated distribution Cintas distribution centers directly and Mike’s operation ramp support stock off is that, volume various in measure time with about the fact better items cost in inventory sufficient that’s what sense we skewed quarter but bit burning ship not finally order that would inventory timing and these little back we’re to because operations it’s lower of but they the and operations, we’ve have is

Shlomo Rosenbaum

any then mentioned to from it’s and who noticing planning integration. just are if any change in you I wondering just actually are year into and in I And are changes their that was competitiveness Okay, a Thanks is been else just, there you’re them terms customers seeing ones and driving First Hygiene. since year the of into the color. Aid great. guys to monitoring? of your that Aramark of was get that talking seeing ground, wondering from close for kind It are to the kind their AmeriPride, they you was a around,

Mike Hansen

all not we nothing this always point. our what And Aramark just out our call at that’s like competitors would would and to of are but doing? that AmeriPride, Well, say monitor competitors significant I we

Shlomo Rosenbaum

you Thank great. very Okay, much.

Operator

And to Northcoast with moving on Research. John Healy

John Healy

you the however at ask a where revenue, just the but Thank to at legacy through you, per if question, look to maybe you customers revenue wanted acquired look Cintas Cintas I and of you Mike. kind trying customers boil staff now, what metric out legacy per acquired that you per G&K, the you customer G&K you and say gap and down next that what or to the how much year look Cintas think of you over has from would still do is if potential the two between difference close? what

Mike Hansen

can the very to customers, as I new have remains metric are, than opportunity want our certainly opportunity. greater G&K like say acquisition, stop a gap, more those Well, specific customers trip still penetrate was legacy to think adding that opportunity I we time revenue in we continue the thing to some we’re a going our so year still will very share, it there we prior have the would our that we’re I is G&K greater per that closing the certainly don’t and be to mind penetration revenue we certainly there to and one was was many and to and per and it’s staff our but keep in that’s a well we customers every and slow existing is I legacy both we guess, continue, take customers but opportunity

John Healy

business what wanted guys to doesn’t I Okay, sound performed And oil then was just operations kind there? great ask deviation the seeing between there how of enough. much and you’re U.S. difference you change like have in curious seen the is Canadian fair quarter, in the and the if the much movement in

Mike Hansen

lot and there’s on mean and I out. I no, implementations a both No, in countries integrations of going would say nothing in terms call to

John Healy

months sort any versus a of and your I was thought logistics anything be anything how than quite one and just from you at you back people? they pace surface would for months CFO’s now Okay, terms in feel numbers, great. big you investments? scrutinized you are Mike, your ago? you feel you are strong what X the different mean when be are things doing in about of of I kind across business terms in just or of then it’s though, of the thought and all right a you, picture every maybe economy And ton or different question and extremely doing leaders comments about like curious, I buying hiring beneath of there guys hear versus investments lines stock operations? are I technology perspective, Whether Making internal X look ago, call board those to really negative along isn’t the much the

Mike Hansen

thought all we and economy, right year. the set change the we’re do to growth you for certainly The lot it a in this and and our move way products at try we invest of to start continuing only continue continuing we to XX we on services provides forward we we been of guidance is the simply to our is out is invest a than businesses to and do tell and our can of raise now beginning pulling fiscal future opportunity grow it’s like want as doing last and levers, back predict economy thing to are the like creates ago growth to operating for the the thing our are has in we that from the the revenue better days

John Healy

Thank guys. Great. you,

Operator

come with question will from Blair. Tim next Mulrooney William the And

Tim Mulrooney

at end the Hi, for me guys. in fitting Thanks here.

So, that share do the respect you you your half early SAP to can now the system basically branches got system? with with any us, you to new takeaways converted new that Have sometimes these know which would management are you responding by anything? great? Finding be difficult, here I opportunities been be can surprised color how extra new and change any to have positively branches

Mike Hansen

from we still to becomes get pretty management learn bit and a we takes certainly ahead with getting little just and we actually said, so said, we lot we’re system market good the do and it, we that of our we’ve better is prepared with our so, until of in of each will better what out the each certainly in with I that doing we etcetera. get as of efficient understanding have business finished integration and better and computers, we’re gotten starting bit little on really they documents and from easier to to that disruption into the markets said of standpoint seen learning are is, like means think knowledge that working few takes a the like what are years at that it but getting we we are our customers have, gets lot we at and have for lot and it in Safety a and in in different each do First that of didn’t can the so a much been and one have of, expect, better the system still of we efficiency the having how and we but are time drivers, communication working invoice as we we more different a to Aid efficient we’re going and continue get and Aid converts and that, pretty of has of and gets more lot the standpoint at tell kind I you business, information locations got we Yes, training rental is the things conversion a see it the do say, lot like a time our a used business terms from that Paul I I to further SAP they like big those getting we, of the the do everyone get are of growth we SAP, lot we used like a First a like business how our that better looking much would the so SSRs one project but we’ve training it change implementation say wouldn’t of our because not and we our than a that we is to disruption we seen it be a through, to so they be locations handheld seeing surprises brings SSRs to believe Safety from there see. of efficient and

Tim Mulrooney

will That’s I great. color. holidays Happy leave it the for Thanks there. gentlemen.

Operator

back over now the any conference turn for I’ll remarks. session. the you question-and-answer that And additional conclude to closing does or

Mike Hansen

again thank Well, you joining for tonight. us

to quarter to We will and you holidays at forward all. again issue our the happy results in to March that financial look with mid late third and we time speaking

Operator

participation. today’s your conference. thank Well, a thank you you. for day. That do We does conclude Have wonderful

Cintas (CTAS) 20 Dec 182019 Q2 Earnings call transcript