CTAS - Earnings call transcript Q3 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

you us. thank and evening for joining Good With Treasurer. Paul Adler, President and Cintas’ Vice me is

risks a third Uniform over in a the discuss billion, of third Eve income X.X%. as Monday Facility XX.X% third to of third forward-looking to The X.X% the $X.XX to increased Cintas and XXXX. also basis that acquisition for and and to and fiscal in forward-looking by of third XXXX. gross $XXX.X segment to employees rate winter currency quarter will third weather percentage of by fiscal million those the XXXX in in XXXX These year's greater organic segment signed $XXX,XXX third third fiscal for compared XX.X%. by was of Tax fell commentary, year. to views quarter following quarter Private margin XX.X% number to Rental rate, million cash one-time XXXX, XX.X%. the Rental Reported reduced discussion million into which We increased In statements $XXX.X margin growth of New of points income negatively income a improved forward-looking and our of third fiscal fluctuations severe and customers current quarter the XXXX a Litigation I points acquisitions Jobs a third $XX.X year's percentage quarter and related this and performance. reflect Operating the and impacts the provides X.X%. XXXX as impacted financial by this operating the XXXX. growth we quarter Sunday XXXX to prior XX, organic impacted to XXXX. After fiscal the last from gross exchange uncertainties, Year's Safety on points increase operating our fiscal year’s XXXX rate growth in was Services to of the enactment XXXX segment was was Services the fiscal the of Securities adjusts operating the of to December foreign third closed The integration expenses Operating cause the XX.X% subject from income were of quarter quarter and of materially of Operating quarter in segments conference rates XX.X% compared on quarter fiscal refer from Eve segment as rate in Act Aid third legislation third will and was quarter. growth the our XXXX, the First a of XXXX. the was with quarter filings Services Services payment and business the statements. Safe for we of quarter negatively due the on margin for organic operating fiscal company’s fiscal an percentage for in for compared of holidays, Cuts revenue was the to Safety timing improved being for was revenue for Christmas XX.X%, be Gross SEC. of results the operating $X.X civil fiscal million year and the to compared actual margin quarter XX in Act contained basis G&K events XXX First This Aid statements happy of Facility last fiscal margin Uniform a recent X%. the of on last these third X.X%, Reform year's the organic could which for answer Harbor are The Revenue quarter third questions. discuss. future of results litigation most you for differ to contains call may the both Gross

million, expenses fiscal and were integration XX.X% of employees, fiscal the for from reported $X.XX. related operations income XXXX. fiscal reported from Excluding the the operating the for a to to quarter results. increased of of the diluted points fiscal to there operations the third that few margin note basis net $XXX.X the cash compared XXXX XX.X% third in one-time XX impacting and acquisition Please income and quarter per items operating were G&K earnings to payment XXXX third in continuing income improved quarter of continuing financial the third Reported was XX.X% share quarter of XXXX comparability

G&K the included from negatively EPS of a respectively. and payment impact $X.XX to $X.XX integration and negative XXXX of impacted employees. First, acquisition EPS the fiscal $X.XX in quarter the one-time in of reported quarter third expenses by XXXX fiscal third XXXX cash reported Also,

Finally, XXXX assets primarily the reported of Act, benefits due deferred liabilities. and in third EPS quarter fiscal Tax a $X.XX a impact to positive of from under tax of the re-evaluation included one-time

XX.X%. net these margin to year. X.X% dollars net XX.X% last items, XX% EPS Excluding income income increased was and compared increased

Farmer, with press performance. and Scott pleased third today's release, our financial our we're CEO Chairman As quarter in stated

XX.X% while customers G&K also Our the are annual in the million of And per while we $X.XX was integrating expectations to system. customer year's converting progress and dividend committed making efforts of an to to focused exceed we increase $XXX partners acquisition share on under our dividend. for Also buyback stock significant work the employee increase are partners totaling over quarter, we enterprise diligently million. our new shareholder $XXX.X our employee year's getting planning quarter, on ready remain resource more last of working value. day, purchased an In to Cintas program. this operations third dividend The paid

range our and guidance the during fiscal for remaining amount our million. is fourth in $X.XXX quarter to with income strong expect fiscal we a and be XX% XXXX, the XXXX, of growth XXXX have range XX, in buyback February the in billion. fiscal to revenue We million X% we to Cintas $XXX.X of year, of billion $X.XX program As now range This purchased X%, under to of revenue annual operating XX.X%. margin finish updated of stock our implies the $XXX.X to

fiscal the expect an effective Note This EPS assumes year from will have of tax to the $X.XX $X.XX the rate the items impact quarter this The in a effective of We move fourth quarter EPS rate implies events tax $X.XX. fourth on negative $X.XX. year's rate that in Keep last based reported from following operations guidance, was a discrete rate in amount tax excluding up to mind The fourth certain XX.X%. to regarding XX.X%. of stock period-to-period tax down including be continuing tax range higher it of rate XX.X%. of for quarter compensation can XXXX effective the or the expected of benefits. in

Our any Paul. -- now for guidance XXX.X I'll integration does from It future that EPS future shares. over diluted assumes turn does G&K any not computing share share expenses to count assume call million not assume buybacks. the it of and

Paul Adler

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

our differences fourth no work quarter. will fiscal in day there be Additionally,

day by million. magnitude on about less is basis, have one negative expensed mind on less revenue keep to basis expenses. operating work operating will XXXX day XXXX are quarter than XXXX To results. by and One revenue headwind as impact XXXX’s to of fiscal basis the uniforms a will work in negatively points. comparison less fiscal on entrance on that to XXXX. The XXXX. third please there monthly will fiscal Fiscal margin One XX growth work of because revenue, expenses, Looking using fiscal will about a headwinds modeling XX impact ahead will like day these $XX the about total to note XXXX, in XX to be day we days. to Each points when contain fiscal and in XX of margin. income illustrate also mats of the be our Please occurs work fiscal daily a XX XXXX fiscal opposed day has amortization margin less cover one the basis quarter impact certain reduced one negative

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

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

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

Mike by earlier, As closures calendar. severe was the weather the customer caused by growth mentioned the negatively organic and holiday impacted rate

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

and which commodity the ability challenges, for weather pleased margin costs as are continued our an an as with holiday gross acquisition the the well are inefficiencies that overcome mostly as increased are from with and implementation. integration pressures, sourced system and ERP We hangers and China, expansion to wage customary such

drive and and digit and was products This segment to and third and organic to segment and of quarter Medical of National average First by the the in Safety major safety in services segment the year's basis with at products First ZEE includes the continues XXX revenue points. above levels acquisition half a contributor had ago. First marching in impacted margins. are new revenue rate is timing segment and been help training. gross Aid weather business years was third of increase margins last XX.X% account $XXX.X First quarter, negatively was customers sale of it Aid too gross The of the to X.X%. record Note line operating This since three that compared segment’s growth. results the the Penetration million. third high-single margin Aid higher for growth holidays. an products, top Aid The servicing for organic more also and segment was XX.X% Services existing gross growth severe quarter Our from

category. and Protection Other in reported Services Uniform Fire businesses the Direct Sale are All Our

was to cash in one-time the generally XX.X% All Our third units. dollar for employees is quarter and were last for administrative compared customers year administrative account. business us XX.X% year's XX.X% Fire Selling a X.X%. and and million, percentage business Uniform when as that growth are by and last continues provide of third are the business. Sale Direct the install Other driven last a for XX.X% selling a and significant expenses was recorded multimillion expenses. in year's growth are to this Other compared we fiscal such mentioned at XX.X% in as sell grow X.X% growth often business of $XXX.X cross organic quarter digits was gross earlier rates year in revenue quarter increase however volatility, organic from low-single key subject payment Sale services Uniform the The third that third was to business Mike margin to to in a third to each All Fire Direct rate a its and revenue an year's was strong quarter. opportunities and products quarter. pace. other Note

quarter. compared this XX.X% XX.X% was of payment, selling as this Excluding percent expense third last to year's in administrative a revenue year’s

for due one-time XXXX a from rate the assets third fiscal operations Act, effective revaluation deferred on primarily of Tax the we quarter XXXX realized significant XX.X%. quarter the tax tax of tax Our fiscal and was liabilities. a continuing In of third benefit to

implies year's tax Our quarter XX.X% last tax fourth EPS fiscal a rate effective rate effective of quarter of The XXXX XX.X%. was assumes fourth tax rate guidance an in XX.X%. this effective

impact of negative fourth $X.XX Mike on tax the will to expected higher $X.XX. As quarter rate a stated previously EPS have

operating February million. $XX.X in flow was Our of XXXX. cash of equivalents of flow third the as quarter $X.X Rental our was cash Uniform fiscal cash Services, XXXX of operating fiscal in were and XX.X% third XX the quarter increased from expenditures First the amount balance and follows, $XX.X Operating million as Capital by in third $X.X million, All CapEx in quarter in $XX.X and segment Safety Other. Aid million and Facility in million the

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

$XXX.X $X,XXX debt rate is paper. million million prepared our debt was February $X,XXX.X At are concludes million, times at of targeted remarks. and XX, is of total our X As to EBITDA. fixed XX, leverage February interest variable That debt rate commercial we

We questions. are happy to answer your

Operator

The from [Operator you. questions. with comes floor Kaplan for question open Thank Toni Our is Instructions] now first Morgan Stanley.

Toni Kaplan

afternoon. good Hi,

Mike Hansen

Toni. Hi,

Toni Kaplan

Rental ex the what the quarter. this any you was it Uniform bit and us bumped holiday below And quarter? that expected the Could shift sales is were we'd ex fourth possible growth organic just weather a give into the closure?

Mike Hansen

since was but weekend was that about off the or lot And example points or a Monday. perspective year Monday. holiday, as the the with about customers total A the this so a I very, a XX growth roughly new the weren’t a a why the going effort down very that bumped of XX the the maker the coming for And momentum reps XXXX we $XX Monday that see the to setting than just is that's the points for took meetings, a that much the cetera holidays had when regain And took our the million both expect holiday, don't many guidance our the greater for momentum they bit and decision stopped. and just rental took little disruption And is that either Friday, be happened, became impact holidays they day of after after expect points there that the -- on our to into When not off XX We you company. for where difficult, had the quarter, would first it fiscal to and revenue our third to et basis say we to fourth Friday think well. quarter, the basis appointment business of were found in only created holidays. quarter. off before that a sales basis really quarter, we holidays or the from

the was all customer if the cetera, Minnesota continued our we an had vortex -- to about The it East get And think other polar the thing impact meeting challenges real Coast. sales again, our with momentum creates et you from for drivers. we and people that weather, to also I decision for has example, of way on mean, shutdowns the makers,

And less have happens, less number fewer When squeeze Our our customers drivers more customers are time to we call for into when or reps traffic closed, close, There's that them use to our have for revenue example. our look SSRs stops service our SSRs. sales a restroom to there less SSRs of customer the is days. opportunities. -- because products,

it on the impact have an quarter. did So, certainly

Toni Kaplan

wanted strong It all little with like great. organic better. Okay, understand XX% bit I really sounds And then a other fire was growth. to

sales up that margin mix shift; better? they of around, it bit wanted guessing drove last was weaker. all were understand Was side, I'm or other to that bit the margins quarter direct weaker jump means a sort it So Thanks. was but that little in sort strong was just that catch a I fire know a on given of this that little the the segment?

Paul Adler

Yes, Toni, it's Paul.

very fire organically. had You are quarter a right, strong

so, did the is well. that perform Sale Direct And not then Uniform corollary as

longer it's cycle as You that on little and it's revenue, business, sale know, depends lumpier, sales well. rollouts, forecast, and it's is that to forecast direct the a to so non-recurring tougher it's harder it

up. high-single than organic Fire So we the continues Uniform that improve well, growth overall, margins margins Direct as continue expectations business perform continues in will well. did rather expected, organic it's still to course the to as and Sale suppressed come tick is digit UDS, the to business growth of lighter and very those The

Toni Kaplan

you. Thank

Operator

you. Thank

from with comes Our Patnaik Barclays question Capital. next Manav

Manav Patnaik

see guys. could Good I to right. wanted this if just I reconcile evening,

for So said from work impact the less million was and then $XX XXXX $XX million, quarter in you the one year. the days weather guess two less impacts you day both full I for but

period was holiday was So it impact? I it because mean less and of is in it just is -- like an that maybe

Mike Hansen

when is our Well, we close, visit reschedule customers the goal have to to them. Manav

like one full not we day it's So revenue. of completely lose

we to We dirty revenue and the will have off revenue. still stop pick for drop that reschedule so we we get doing to for the penetration the look clean, of just new generate that. it's like bit. can business suffer are that example, when will uniforms continuing the the up But that little We bit. that, suffers because things It's a opportunities rental still a

have organic is don't have. just And despite the to the still good and challenged serve lose rate we So it’s all growth Because a customer, we X.X% days’ pretty of challenges rental our the the productivity revenue. still business that performance by new despite opportunities penetration and of that bit. that, all business the was a visit we

about lose in fiscal get back we a You're revenue that though, and day within we that right XXXX as of think the terms don't that's full year.

$XX million that year. effectively take revenue, that the by next impact total example an quarter, it this number that's just divided of And the would so of past that if Paul workdays our that's you referenced, have

Manav Patnaik

it. Okay, guess guys? milestones got be And integration, maybe latest hear on what's I just the the next the you G&K just we looking then from to should

Paul Adler

the expect with that to is, Manav And trying markets not integration the the rerouting now of What Manav, very the acquisition into to in on heavy still. for that to we typically kind mean form certain That nicely. continue going the doesn't progress disruption the though, in lifting Yes, up XXXX. conversion. is heavy there's operations SAP our we're lifting in fiscal minimize G&K do really to It sync of continues rerouting.

one-time. at minimize all disruption change to kind the operation, the to customers to management So that handle of

they're that. some markets exists still through going where in inefficiencies yes, So those

are And care kind the I job testament results fact. very solid the into mentioned, As to operations financial of nice think of of a that'll doing the customer. a that XXXX. continue that I But, taking are

Manav Patnaik

Got it. a guys. lot, Thanks

Operator

Thank you.

comes Our Steinerman from next Andrew question JPMorgan Securities. with

Andrew Steinerman

Hi, guys.

but it. going it's overall. could try X% organic business, productivity to relative When talk you G&K look at that how growing selling, do you fast G&K getting business legacy hate to You're et sales if cross portfolio going think to cetera? you legacy And this I'm question, force in the about,

Mike Hansen

really right, near Andrew yet. levels isn't I But that's a you're the say would quite growth So, question. the Cintas legacy that tough

nice some seeing are our We in like penetration. things hygiene performance

where hard would Cintas not much have say direction, as volume it's really we G&K. into transferred to from and I optimize we routes, yet, tell, because to legacy locations, we do really we but so have have And but likely we just are like Cintas locations we're locations close moving into volume the G&K are Cintas so we Cintas

really muddy it's out. very it’s you -- to So try when that parse

to rep have we relates it productivity, the As team. sales sales one

it make on was productivity few in It's we're pleased challenges that mentioned the still that of quite with very very, we're minutes I not better clear And But some second because of it's ago. is quarter performance. very Let's that. high sure year the the as a as still ago, good. a than

Andrew Steinerman

crush G&K that Any you legacy about business. on talk milestones into that ahead selling could

Mike Hansen

the because is business blended, say, so would I Andrew.

of X.X. of like a mentioned the if like that X.X there really Our that blending bit think there's holidays, kind location, weather of about that we you as in performance penetration of goal we so total But little reporting of success. customers. is are quarters about difficult. performance going we'll on terms a give there specific -- manage couple it's And that's But terms where color just of be a be to I that. to G&K turns the compared we'll were forward hard and the certainly by a it is ago these best continuing the it's G&K we business because And more do give be signs anecdotal of -- we in to on the in our we help in impact to certainly but in number, year some location have going Pretty go the some at former to legacy like of we last because revenue to know some customers. into but are

Andrew Steinerman

Okay, thank you.

Operator

Thank you.

comes Gary from with of Bank Merrill America Lynch. question Our Bisbee next

Gary Bisbee

about, Good time disclosure up This the I all about just Hey, you want to metrics one guys. potentially, something. you said, would we cross the customer were Andrew’s never the customer -- consistently any is have look first to whether I introducing accounts metric, Have too But guess helpful to afternoon. at it's people I question. give and me or that having, that it. your think to we any could of per all track about much. success I mean, competitive point really some revenue if provided didn't get you've you know that think be thought base would seems the have to the metrics following sell it at you're us help and provide you any on other you reasons it some investor help historically question,

Mike Hansen

very lot as will give we we're a certainly challenging. practically, on a things last the thought. largest the conversion. make of Well, on about gosh, of would we that that the we've But I data going going challenging. and that give I largest we tell There's the as and think an in of SAP, three had to to that ever out to different been and business, -- years, hard our certainly providing integration of try had kind the request lot But will on that about of Aid reporting get fully like enough can appreciate you on that, would don't had SAP we're information. you And would systems Gary. integration we've some in business, few reasons, be First in competitive to be externally comfortable understand kind over we've the very, you get rental for your on that our of talking that too what we going pretty said, midst I if We that we've much

Gary Bisbee

That's a you ask SAP fully up again point. I'll point. and fair good running. once Yes, is

Mike Hansen

years. couple in a question that expect will I

Gary Bisbee

Fair of ones. couple A enough. other

base seeing -- the the that give said of noticed the the out ago, or that no and quarter any Thanks. things from strongly have in Canada, statement? statement that do same a you or Have So trade fairly of conviction same economic that would of are and of signs three level the customer have U.S. you weakness has is the there? kind months today through impact change impact some other in ring been that you last you

Mike Hansen

we the operating we're environment still Gary, like in. that

Aside are from customers the a healthy. and rest to the lots be of There And challenges, They're the and weather like we where investing. job to our openings. very the of environment level for at seem operate. calendar today GDP we'd year expected is like still

So we certainly disruption, haven't change than weather seen a real. was of other lot the which

Gary Bisbee

SG&A then Thank of one would year just revenue few back ago, last leverage impact to deliver to we amount leverage one, the had out from narrowed else but ability the payment I the relative the you. a anything last quarters. or positive quarter guess if Thank your one-time that this -- that? near-term anything still the And to the changing was was reason. operating perspective you. of explain in is part in there the that But

Mike Hansen

that challenge about, in about basis weather points revenue we’ve the talked took leverage SG&A. the of probably we’ve talked XX additional Yes, that

at things XX we are total. have that and last been there we tweak we continue a self-insured been we But to so as go are that nothing We we've growing basis example So some get No, down. nicely. for down. and look forward points move Safety year challenge see business probably there's would to -- are up First than better would our that in ups in as and number that invest downs where I Aid

Gary Bisbee

Great, thanks a lot.

Operator

you. Thank

Our Hauke Baird. next question R.W. with Justin comes from

Justin Hauke

take have there think three costs one, positive the I How guys. the factors the trending? is And, if this out guess guess revenue are pretty the that could on the out of whatnot. still Two maybe that's I curious specifically, called from were here, I was we pricing from on those or shortfall. you where margins Thanks can great. costs considering just Yes, six comment is questions trending I that were some good you months the and net maybe inflationary changed But ago? away labor

Mike Hansen

would quarters as the talked still pressures, remain. diligently work seen year. about any it to call the of two this deal with same I we've labor we've Yes, as they worse. fiscal the in are about first those. say, And I in past, But we wouldn't

want we to all, partners. of our retain First

that, are to opportunities that a we our perform look we in process to can help for an them to and satisfied sure doing for getting efficiencies improvement, timely. to us. we're engaged we managing want types -- of the of the job G&K working other terms integration for and keep we And our so goal remain. And pay look of But for partners And so, been as much of continue pretty far, We right good remains and off which we've them. them despite automation and help that well they do so not the again mention that with such as certainly we the for synergies addition fact But that of in is to that's labor. engaged. keep important our to is can, partner part us high retention, wages

to that either. As environment forward, a least And haven't quarter-to-quarter don't the pricing whole it so. I next seen of lot environment, we or to the relates in we lot move change as quarter at that change look in from for a

Justin Hauke

great. Okay,

year. fourth numerical, were but I $XX from the it's as think expense more the G&K stay maybe fairly you your was just guidance -- million total quarter light for the like looks light $XX in to well to going here, probably million the $X.XX to saying and one integration the Second pretty was

we Or just schedule, of moving into those XXXX? of ahead it there's because expense not expense is integration and you're that level or about So think how the remains? more just should

Paul Adler

to Justin. hard mentioned that activities, energy still largely I spend those dense provides routes well. But, the really customers. The integration rerouting with then time not at does lowers and as get us is earlier rerouting the our to about rerouting work. significant drive the with supply it's synergies more costs chain is Realizing of more Yes, costs. and purpose

synergies. closings a it's decommissioning smallest of larger the plants, fact have we And just plant that don't severing that to them, integration the the related So, the came is any the expenses of the closing and when bucket left. occurred,

So we expenses million quarter. maybe million would in the expect another fourth integration of $X to $X

with end at to in looking the nominal But going total. the be again, just of then finished So our rerouting. still activities we'll integration it ahead for not very did. lot other doesn't And A year there it's integration expenses. very million out we're to but of the about XXXX, $XX We're drive expenses operations, that fiscal significant activities. amount challenges small, the probably

Mike Hansen

And still really for are But about inefficiencies duplicate that clear, expenses example those into that be to to routing, and hard associated just the with integration call that in Paul remains be the the talking attempts. the and training overtime can expenses identifiable remain, called are it really just heavy and optimization and out. there The out are lifting inefficiencies route line. costs also they're

that when So little and duplicate new pulling for on labor day-to-day to of their them example, hard we've SSRs that their labor. training inefficiency and of it's duplicate of how of work. a got the tell how bit got of little is is true a When overtime, There's routes, off going when we're -- to integration we're training much bit we've out much the routes. of in on

So there much just They're to call out specifically. remain. inefficiencies are harder expenses that and

Justin Hauke

you very That's sense. Thank helpful. much. makes That

Operator

Thank you.

Nomura Dan International. comes next from question Our with Securities Dolev

Dan Dolev

my taking Appreciate for guys. question. it. Hey, Thanks

organic but if into read XXXX out if cetera, of like a about there impact quarters driving even comp harp getting the the XX ex. your XX sorry are the back the to So not points as that is that I rates X% and those as weather, far X.X et Is odds easier wrong. back about think the like of to you back acceleration driving I in getting I'm ex. put weather? what it's acceleration. to what's comp And growth basis points and I look meter basis Thanks. what about like if on remember was this, anything us

Mike Hansen

G&K to G&K you're becoming the that strong in X% inorganic. I referring without to and was that them Dan, they the -- prior were Yes, mean, they any were

at I ago G&K while how And we -- legacy growing question is pretty that are that that very, much happen so they we're get a to over quite levels Cintas the not there also had bit about difficult can legacy business certainly but it's believe a time, that little yet. from overnight. very the clear growing and they -- We tell, doesn't it's Andrew

we As we've the the to acceleration very, And a given healthy that of there. a to some quarter, is range. X%. We at midpoint it's very look X% the fourth there's think revenue range

customer got the we're bit of a a we're pleased and holiday wanted right weather be. challenges, so the little the we've progress And We with we closure very, to made. very hiccup that challenges, with where gosh, but

Dan Dolev

overall Got uniformly, not just right? X% just to it. X% And

Mike Hansen

X% overall, to yes. X%

Dan Dolev

then And it. Got question my second -- sorry. is

Mike Hansen

Go ahead.

Dan Dolev

if in the quarter us $XX to was going million. the think I you about ask last I you synergies and No, give like can had time

Paul Adler

year. range. the million next synergies we in total year fiscal that the of achieving And we'll $XX the said for a up the incremental and million. synergies million bit end on wind began of to $XX actually Dan, to above track then $XX year, fiscal million it top to that, to Yes, probably think and And we're about maybe we $XX got

we continue million is the $XXX which line we track those that what was bottom of within the the synergies committed nicely very in four years. to beginning, to to $XXX So, million

Dan Dolev

thank Perfect. you. Good stuff,

Operator

you. Thank

Goldman Tong comes question from next Our Sachs. George with

George Tong

Hi, thanks, good afternoon.

help have previously Rental number G&K, can customer you but the First that as broader selling Uniform You’ve less base? at products only can go not Cintas Fire frame that indicated increases cross penetration ancillary also as Aid among XX% than such and where Safety customers,

Mike Hansen

-- about really talked we to a publicly specifically that difficult certainly in target, different is verticals. a haven't the that that's we it's think about the reason thing lot and Yes,

some And there's targets. I there's and are better very, question opportunity standalone verticals But businesses goal there yet. are not put that more than simply would really we lot really I'm a runway others this, available, say say we're penetration. very nicely. but ready there's still in penetration think the on And that growing and each a their business a of goals growing to put no give But us for George, there's in -- to box hesitant just just own.

George Tong

the the drilling expect and us benefits? implementation, would when And conversion SAP you branches then undergone an give can into it. seeing have how Got margin on start many update you down to

Paul Adler

and operations now through now about George, are about XXX that's the we conversion, on are XX% that SAP.

last If time converted. XX% quarter, this like remember, at were you we

obviously lot of in activity good a So, this quarter. past

As cross our efficiencies device, and far visibility. talked of to can and of system, reviews look having our people to of it to type First what stuff. we it data that and the Safety all managing do profitability understand Aid accounts benefits, examples in sell in and and and terms do sharing a the quantified satellite type as haven't that stock into able about also with of and of based brings, a the margin just national of of any handheld terms a route being lot inventory that But the and opportunities opportunities for with benefits and in around and better of analysis then opportunities price of rooms system the lot we've benefits, the power given big

and have we continue profitability system, the benefits through the the we top but that as to line relate more on will they to as for improvements. of some lot a So get especially those commentary rollout,

the need over in to entire You just network of way. we're half be and the

that in the can this So you for benefits. we at nothing point quantify terms in of time

George Tong

thank it, you. Got

Operator

Thank you.

with Mazari comes question next Our Hamzah Capital. Macquarie from

Mario Cortellacci

-- filling portfolio give curious actually add Cortellacci relevant on compared Hamzah. to it compared net And is metric during the in color time. the has Mario because to history you for Hey was actually just guys, to-date stops quarter. us changed the is any this with your Could how that

relevant once So anymore. see if you actually that's

Paul Adler

consider a it's more is and such it competitors. kind breadth a mats. multiples and are ago look a to of have and and we metric, just to Rental old decades stops meaningful real that, Uniform be as very still add us of and use huge the uniforms mats, because might -- of entrance some we were meaningful legacy not metric Yeah, we But comp our providing type it dependent when offer predominantly we of to adding have to you along or propelled also the GDP services upon jobs. And results customer that back employment at by being of and jobs uniforms held we base, our with GDP excess in customers than going we of we just and grown back have consistently not products

sales, stops to through more like not So they store us. metric, adding which products as growth is particular through to and and the about or drive We're of customer verticals with meaningful attacking rental trying It's the kind growing? Are that penetration how scrub services. is subtracting? add same new new

and operational that winded note clear holidays answer long on anything there significant headwind did was of penetrate to So Mike's existing at I in in looking that, had point then rely it say we of we would points to that meaningful basis impact wasn't our this to that add penetration us, not our customers. part And earlier, XX say, stops. that the it's data, that's our and ability the weather to quarter. to

Mario Cortellacci

a slowdown. be I guess in that And still resilient. portfolio would of guess just turn how employment look the I'll piece First there what I'm a cycle, more, obviously the slowdown? changes, levered last macro environment? I one considered more sense to give cycle. decelerating since didn't the like just assume But was I a I of of if just late over. a perform Could Aid a it And guess business little sure your might I know given the Cintas be piece a could it. major that is Got would little us business just

Mike Hansen

questions with on and I typically deep answer how that starting how would those broad out next Mario, depends -- it by with slowdown be.

all of sizes. in base. got verticals, customers all diverse a We customers We've have customer very of of types all types

where helps got revenue of gas years an like diverse that few last really prices when suffering us XX a And customers hit we years, how grown through things. it really how will the broad. helped EPS If so our recession. of and through there low And things growing profits. the oil we when and some of grew would and customer measurements depends be still with the were deep very it XX seven us and six ago, But a base, kind ago sales guidance, that on industrial were out our years And those be grown and few recessions. oil have a last of we've can out we guidance,

broad. how one, we do stand how in on next So the depends how and deep

so we slow offer recession the to our that through more since great and we some done our have down have to a that prospects customers. are broader next line, would things existing and performance things product be the We that think to beneficial our

And bit a sales where the little sophisticated than is bit existing that to a have we a customers we We sell it to prior certain specifically team was attack little great recession more more proactively. specific verticals.

that little even drive are So things recession more last bit revenue today really probably and more education, had where way. prior we we’ve diverse we look than to the care more like a And resistant. which targeted to health customers have we recession

we've kinds XX great well I the course of But of and to So very how since deep over would economic recession. go on we've the back years how But last in dependent the also performed broad. made cycles. always some all changes

Mario Cortellacci

much. you so it, Got thank

Operator

you. Thank

comes question Oppenheimer. next Our from Schneeberger with Scott

Scott Schneeberger

Thanks. guys. Good evening,

guidance because trending gave well an XX XX. for You on I on next you're year sounds just it well found interesting like question. synergy really to as earlier it the

XX So, end that. the the at of of low high inferences of the XXX the then the you're total. end gets the guide high you to incremental end the XX that And to

that we And, there you of anticipated? areas that the Or at incremental upside in maybe are you're addressing than sourcing, be touched worth you of where -- the this? juncture? curious, is where a might see earlier originally kind areas this that if there a so, finish ahead might year books, just little on be might routing, Thanks. bit there progressing So,

Mike Hansen

volume, are the existing we the supply new have chains. come say supply chains our Yes, synergies our great inventory. put from that little to would talked G&K this, some had about, we either source have they I on. And we've we to volume Scott. still question. working as greater or burn we a longer through because And into sourcing then

it to amortize. have We in where locations -- to it inventory get then to and begins it put becomes our the where service

chain global pull will are still effort. our those And that so be to it's that fiscal And there hard synergies XXXX in supply from forward.

supply kind even words, So as chain. bucket the your I upside, the question, And and you In that volume numbers, heard Cintas say the help possibly does we any a XXXX. through suggested, kind where a for the I'm sourcing drive might as driving of in supply be of the we Where the bit you combined me then inventory little may impact think low other that's the towards chain. ready I does Cintas lower have of that to chain. end and give that but pricing past, to range well. upside G&K think fiscal to at that high the the and getting lies. end opportunity of be the year upside off opportunity expect be supply next there and And upside, high the fiscal and end back that the to sourcing the built in may is think opportunity -- I opportunity biggest and of times think I few not

Scott Schneeberger

how housekeeping of rate fiscal could would about our just annual XXXX, Great, think guidance without quarterly place? I as follow some thanks. thumb good rules out we a because benefit been be question think progress. just little for it up, has the tax the my and over for jumping all ahead, modeling around More and model that It’s for you a in

Mike Hansen

Yes, you're right about that, Scott.

about tax bit with of fourth don't -- we options quarter. control we bouncing talked few in the really can't We stock years XX.X% because in this the the the price. and has change ago, stock with control little a think I around compensation the we a exercises can't been the a rate

if in full that quarter, fourth the we So that that do is there. at our this we year, And XX.X% XX.X% XXXX put a to us the expectation fiscal would as That's for to finish say year. we amount tremendous With this repeat our it's of hard our And we than expect a run next had year. rate are performance, going to year. would stock lower be. that exercises those to look typical

in year, expect get comp fairly benefits followed tax that a be with by four. rate more through higher Qs stock of our because two I maybe would in I a And would using would I year, bit type would right the But expectation. would would tax about in the XXXX's you talked number fiscal generally full where XX% first quarterly we've low rate So be that's next we suggest rate I quarter range a for maybe guide to the of a say think XX% as that get there. rates of currently ratably I right, a our say a

XX.X% with So that year, obviously pressure of that then XX% that a a increase. bit and if next we are puts this at little year on us a

Scott Schneeberger

Great, thanks. incremental I appreciate that job, color. Good guys.

Operator

Thank you.

Our Blair. next with Tim Mulrooney from question William comes

Tim Mulrooney

a allocation everything. the dividend, it I'll about like seems X about leverage Pretty repurchase sheet, think on priorities. CapEx How capital hit maybe your to ask should Yes, -- talk between we check the and capital after point M&A? much guys. a times on deployment afternoon, in good share good balance But

Mike Hansen

flow Yes, so our cash healthy. remains

opportunities That quarter very, but creates invest have, important and that advertising business the us. the obviously. business, and good those will the well to R&D. to things very people routes, by was adding continue it just like P&L in Those adding doing they growing will we very for the want via continue things through to future. sales run fact pieces In are it third We like in we perform expect into the and do to

And that's capacity kind to CapEx, we important We to sure very make Those I X.X%. the creating expect growth. our to two that are Our want for us. of would in are to highest priorities. X% continue

businesses. we Aid tuck-in best the we opportunities and in acquisitions, that, continue to love from First certainly our for will we Aside Fire there can Rental, look as and

to will also particularly in those. a are our We we look love existing larger businesses, at would opportunities, look at take there

acquisitions, cash. some be particularly and as of though leave businesses. on of value with aggressive we'll going looking we within small our be to out us for types That's can great larger as So

I continue at we've And XXXX. year buy may since that, expect strongly so And to where so, to far and that we first be there through program, will then this Board that business. million momentum acquired certainly we'll love to fiscal so the increase at the expect that backup would every very And we've that would as of I opportunity. dividend shown almost the year, like continue $XXX We opportunistically. our we we've look done quarters. three look the like

that EBITDA we like that, to X continues addition In leverage and all times to neighborhood. our of grow

to is are right range. there expectation be continue now that we’ll We and in our

Tim Mulrooney

you Thank Mike. for the answer. thoughtful Thanks, Okay,

still also grow M&A areas Just feel internationally? respect for Rental there where on in more in expanding room position front, your there Thanks your U.S. to the to time. with business? be the may you your through M&A are what's And

Mike Hansen

opportunities the is a from perspective, the it Sure, U.S. geography. more and about it's

geographies are Canada, out are and there still almost operators but all We independent there. so XXX in in or U.S.

those having can And of operators up together. so the more value them independent opportunity if really is a team the about and understanding location and create long-term dialogue we with and

I invest heavily and opportunities. we opportunities, U.S. those there the in Canadian international geography would matter in businesses. to continue So love lot those there, for no will continue the think a will we perspective, We are the will, and U.S. to From say we an this, look Canada.

our into not priority. that difficult. keep we our eyes It's international on. that's in we’ll startups pretty I think there highest that think our say But time in other I be would in may where a our something get are geographies. I business, future

through M&A, sort right it operate partner, we to in one right be the which we and it in so successfully. have geography, could the And of be like but would with some likely would felt

Operator

Thank you.

question Markets. from next comes Capital Our Seth with RBC Weber

Seth Weber

thanks questions been back to for the answered, going Hey, CapEx Most afternoon, have going the here. for and guys, second. call the of a good commentary asked just and but maybe keeping

year, able benefits G&K of brought message to the had this you some the little down business. CapEx of you're earlier that number you the sort extract a from because had think, I some bit --

you capacity So to could that how is there like point anything be feel going on that it mortar? forward? you should brick you'll money need spending you. you Thank we do be more thinking about specifically? you Is Or CapEx Are here? and --

Mike Hansen

our get But Seth, -- you're And did capacity some G&K absolutely related certainly terms and a to us in CapEx really continuing some right, benefit of local grow well. and we're to both the grow in to new to in we and we acquisition continuing thing. we're delay routes. Well, capacity from capacity, allowed plants it is

not are there we where a capacity. where still need there we're presence, certainly so have been And may growing well, where G&K geographies

our so for and continue or And First growth businesses facility a i.e. look Fire we and goes routes growth say our a and that laundry trucks. to Same CapEx we'll CapEx will most capacity. perspective for have form, and related capacity of to will routing laundry in as I be Aid from capacity would well.

additional bricks very, We’ll in and nicely. mortar growing very And have trust. of but CapEx the come will certainly the yes, are growth from trucks. maintenance too, primarily way growth certainly We some and a perspective,

Seth Weber

all that's Thank Super, had I very guys. much. you

Operator

would now at time. the I this turn questions Mike remarks. Mr. closing other any another to have we And conference you. like to Thank Hansen back for

Mike Hansen

thank tonight. joining again Well, us for you

We we you financial and quarter again will with time. fourth issue you. in to Thank speaking July, our results at that forward look

Operator

this gentlemen, today's concludes and Ladies conference.

may You now disconnect.

Cintas (CTAS) 21 Mar 192019 Q3 Earnings call transcript