Cintas Corporation (CTAS) Q4 2026 Earnings Report, Transcript and Summary

Good day, everyone. Welcome to the Cintas Corporation announces fiscal 26 fourth quarter and full year results conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared S. Mattingley, vice president, treasurer, investor relations. Please go ahead, sir.

Thank you, Ross, and thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer Jim Rozakis, Executive Vice President and Chief Operating Officer and Scott A. Garula, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 26 fourth quarter results After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 2000 provides a safe harbor from civil litigation for forward looking statements. This conference call contains forward looking statements that reflect the company's current views as to future events and financial performance. These forward looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the Securities and Exchange Commission. I will now turn the call over to Todd.

Thank you, Jared, and thank you all for joining us. On today's call, I will start with an overview of our fourth quarter and full year performance, and thoughts on the year ahead. Jim will provide further detail on segment performance and Scott will walk through additional financial details and assumptions for our fiscal 27 outlook. We are very pleased with our fourth quarter results to close out fiscal 26. We delivered robust top line growth, and strong profitability. Underscoring the strength of our value proposition across each of our businesses. In the fourth quarter, total revenue increased 8.9% to $2.91 billion Our organic revenue growth rate which adjusts for the impacts of acquisitions, in foreign currency exchange rate fluctuations, was 8.4%. We continue to execute at a high level across each of our business segments. Turning to profitability, gross margin for the fourth quarter was 51%, the same as the third quarter. Which was an all time high and up approximately 130 basis points from the prior year. Operating income as a percent of revenue was 23.2% and grew to $673 million an increase of 12.7% over the prior year. Adjusting for UniFirst related transaction expenses, adjusted operating income as a percent of revenue was 23.6% representing a year over year increase of roughly 120 basis points. Diluted earnings per share of 1.26 grew 15.6% over the prior year. Adjusted diluted earnings per share for the quarter were 1.29 an increase of 18.3% compared to $1.09 in last year's fourth quarter. These results conclude an outstanding fiscal year for Cintas. For the full year 2026, revenue was approximately $11.26 billion an 8.9% increase over fiscal 25. Organic revenue growth was 8.3% for the year. This marks the 55th year of the last 57 years that we have grown both our top and bottom lines. Our strong top line performance highlights the durability of our business model in all macro environments. It shows how our culture continues to be our biggest differentiator and shows how we are capitalizing the opportunity of a total addressable market that is massive and it shows that we have a long runway for future growth customers of all sizes across all industries. Gross margin for the year was 50.7%, up 70 basis points from the prior year. Over the last 4 years, we have expanded our gross margin by 450 basis points, demonstrating our culture of positive discontent. Challenging ourselves to continuously improve the business while continuing to provide better products and services to our customers. Fiscal 26 operating margin reached 23.1%. You adjust for the UniFirst related transaction expenses, adjusted operating margin was 23.3%. Expanding by 50 basis points compared to fiscal 25. This represents an all time high for our company. Achieved while we continue to make strategic investments in the business. Adjusted diluted earnings per share for the year were $4.94 up 12.3% versus $4.40 last year. In March, we gave full year EPS guidance in the range of $4.86 to $4.90 That guidance excluded UniFirst transaction expenses. Against this guidance, full year EPS excluded transact excluding transaction expenses was $4.94. This excellent performance reflects consistent execution by our team regardless of the macro environment. Our balanced approach to capital allocation remains key pillar of our value creation strategy. In the fourth quarter and throughout fiscal 2020, we deployed capital across each of our priorities. First, we prioritized investments back into the business in many forms including our products, technology and people. Second, we love M&A, and we continue to pursue strategic acquisitions in our route-based businesses. Lastly, we look to return capital to shareholders via dividends, and share buybacks. We will continue to prioritize these areas moving forward. Looking ahead to fiscal 27, our outlook reflects confidence in our business model. As we will discuss in more detail, we expect fiscal 27 revenue in the range of $12.1 billion to $12.25 billion implying total growth of 7.4% to 8.7%. We expect fiscal 27 adjusted diluted EPS between $5.36 and $5.50 which represents 8.5% to 11.3% growth. Scott will provide more context on our assumptions for the guidance later in the call. Once again, we were named the prestigious Fortune 500 for the 10th consecutive year. It is an honor to be recognized among the most successful and respected companies. So I have said before, our culture is our greatest competitive advantage. Our employee partners pride themselves on delivering the highest quality products and services to help our customers manage their businesses better. Our drive for continuous improvement is a key component of our culture. We remain positioned to achieve long term growth and value creation. Before I turn the call over to Tim, I would like to provide a brief update on our acquisition of UniFirst. Based on the limited due diligence we have been able to complete, we remain confident for the substantial long term value creation for our combined customers, partners and shareholders. We announced the transaction in March, we indicated the merger was subject to approval by UniFirst shareholders, regulatory clearances in both the U.S. and Canada, and other customary closing conditions. The merger was approved by UniFirst shareholders in June. The regulatory process is ongoing. As expected, we did receive a second request from the FTC. Similar to what we experienced with the G&K acquisition. We continue to work toward obtaining regulatory clearance and completing the other closing conditions. We remain optimistic that the deal will close during the second half of calendar 26. In order to avoid creating speculation, we will not be providing any additional commentary on this process. We will update the market going forward as appropriate. With that, I will turn the call over to Tim for additional insights on our operational performance.

Thank you, Todd, and good morning, everyone. Our business continued to perform at a high level in the fourth quarter. We are adding many new customers. 2-thirds of which transitioned to a managed program after initially handling it on their own. Each of these new customers rely on Cintas for their image, safety, cleanliness and compliance needs. We also continue to sell additional processing services to our existing customer base. Retention rates remain very attractive, and pricing was close to our historical levels. Turning to our segment performance. In the fourth quarter, we saw strong results across all of our segments. Organic growth by business was 7.9% for Uniform Rental Facility Services. 13.2% for first aid and safety services, 10.7% for Fire Protection services, and 4%. As we have done in the past, I will provide the revenue mix of our Uniform Rental Facility Services segment for the quarter. Keep in mind that mix can fluctuate slightly between quarters. In the fourth quarter, Uniform Rental represented 47% Uniform Rental Facility Services segment revenue. Dust control was 20%, hygiene services were 16%, Shop Towels were 3%, linen including wipes, towels, aprons was 11%, and catalog sales were 3%. Gross margin percentage by business in the fourth quarter was 50.2% for Uniform Rental and Facility Services, 57.9% for First Aid and Safety Services, 50.8% for Fire Protection Services, and 42% for uniform direct sale. Gross margin for the Uniform Rental Facility Services segment increased 120 basis points from last year. Strong top line growth continued to generate leverage, which is helping to expand margins. We also benefited from technology investments, a high performing supply chain team that is effectively navigating a dynamic macro environment as well as ongoing process improvement initiatives. Gross margin for the First Aid and Safety Services segment increased 110 basis points from last Our investments continue to generate strong top line growth that has helped expand margin. These long term investments are things such as needed route capacity, leadership development, management trainees, technology, and selling resources in this business. Gross margin for the Fire Protection Services segment was 50.8%, an all time high. As we have noted in prior quarters, this segment can see some variability due to revenue mix, and ongoing integration of acquisitions. While margins may go up and down from quarter to quarter as we grow our national footprint, we like the long term fundamentals of the Fire business and remain committed to investing appropriately for future growth. Our adjusted incremental profit margins in the fourth quarter were effectively 38%. The highest over the last 5 quarters. For the year, we finished right at 30% when you adjust for the transaction related expenses in the current year and the $15 million gain on a 1 time sale in the prior year. This is in the heart of our stated range of 25% to 35%. Which allows us to invest for long term growth while still expanding margins. Our value proposition continues to resonate in a dynamic macro environment. All types of customers, regardless of the industry they operate in, seek reliable business partners to help manage their operations. Reduce the administrative burden, and ensure consistent service that allows them to focus on running their core business That demand is creating ongoing opportunities for Cintas. We serve a diversified customer base, and our solutions are widely utilized across our 4 strategic vertical markets. Health care, hospitality, education, and state and local government. Which continue to be solid contributors to our growth. Our addressable market remains very large, our track record shows we can drive growth across various economic cycles. Before I hand it over to Scott, I want to share a brief customer example that shows how Cintas helps businesses elevate their brand and strengthen their image in the marketplace. We recently added a customer on the East Coast. Is in what we refer to as a specialty trade sector. The employees were required to purchase their own workwear to meet the company's appearance standard. Which ultimately fell short of ownership's expectations. After learning about the breadth and quality Cintas has offered through our marketing efforts, they reached out to learn more. We introduced them to our product line, which delivers high quality, professional workwear for virtually every job imaginable. The employees had the opportunity to wear the Cintas ComfortFlex Pro garments, they were pleased with the quality, appearance, and functionality. The owners value the consistent professional image they created and management now leverages the uniform program as part of its recruiting strategy. This is another example of how the breadth and quality of our products and services helps our value proposition resonate with businesses of all types and sizes. I will now turn it over to Scott for more detail on our financials, capital allocation, and assumptions for our guidance for fiscal 27.

Thanks, Tim, and good morning, everyone. As Todd highlighted, fiscal 26 was a year of outstanding financial performance, for Cintas. Our balance sheet remains healthy, and we continue to generate significant cash flow. We generated $709.1 million operating cash flow, our strongest cash flow generation of the year. We invested in the business by making capital expenditures of $96 million during the quarter and making acquisitions of $61.9 million We also returned capital to our shareholders in the form of dividends of $180.6 million Our effective tax rate for the fourth quarter was 21.2% compared to 22.1% last year. The tax rates in both quarters were impacted by certain discrete items primarily the tax accounting impact for stock based compensation. For the full year, the effective tax rate was 20.2%. Throughout fiscal 2026, our capital allocation was in line with our long term priorities and was supported by robust cash generation. We invested $395.1 million in capital expenditures representing 3.5% of revenue. Which is in line with our historical CapEx intensity. We deployed $164.5 million towards acquisitions in our route-based businesses. Adding new customers and expanding our capabilities. In addition, we returned $1.7 billion to shareholders via dividends and share repurchases. This was the second largest return of capital we have made for a fiscal year. Our annual dividend remains an important component of shareholder return and our share buyback program continues to be executed opportunistically. Todd has already provided our fiscal 2027 guidance ranges for revenue and adjusted EPS. Let me add a bit more context on our assumptions. Fiscal 2027 will have 1 more work day than 2026. This will positively impact total growth by about 40 basis points. We are not assuming additional acquisitions in our guidance. Our guide assumes a constant foreign currency exchange rate and we anticipate interest expense net to be around $105 million in fiscal 27. Our effective tax rate for fiscal 27 is expected to be similar to the fiscal 26 rate of 20.2%. The guide does not include the impact of any future share buybacks or significant economic disruptions or downturns. And our guidance excludes non recurring transaction costs related to the UniFirst acquisition. With that, I will turn it back to Todd for some closing remarks.

Thank you, Scott. As we enter fiscal 27, we remain encouraged by the momentum in our business. Our results demonstrate the power of our strategy and the critical value we provide in addressing customers' image, safety, cleanliness, and compliance needs. We are focused on delivering exceptional service to our customers while continuing to invest in our company and our people to support sustainable growth and profitability. We appreciate the trust our customers place in Cintas. We will continue to work every day to earn that trust. I wanna thank our almost 50 thousand employee-partners for their dedication. it is your hard work that drives our success. I will now turn it back over to Jared.

Thanks, Todd, Jim, and Scott. That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just 1 question and a single follow-up if needed.

Thank you. If you would like to ask a question, please press 1 on your telephone keypad now. Please be prepared to ask your question when prompted. You will also be allowed to ask 1 follow-up question. Once again, if you would like to ask a question, please press star 1 on your phone now. And our first question comes from Manav Patnaik from Barclays Capital. Please go ahead, Manav.

Thank you. Good morning, guys. I guess, you know, Todd, first question, obviously, 55 out of 57 years, you know, always an impressive stat to talk about. When you look forward just given the uncertainty of the macro environment, can you just talk about some of the things you are looking out for that perhaps would you know, make you pivot 1 way or the other from the way you are already operating today?

Good morning, Manav. You know, it seems like we have been operating in an uncertain macro environment for many years now. You know, we stay focused on what we can control. there is certain things that are out of our control, you know, geopolitics, and other items that affect inflows and outflows But nevertheless, we stay focused on investing in our business controlling what we can control, investing in our people. Trying to position our people so that they can be sustainably successful and provide more value to the customers. it is an incredibly competitive environment out there for partners, working partners. For customers, and for shareholders. And we take that very seriously, and we invest appropriately so that we can be sustainably successful And I think our track record of 55 out of 57, you know, paints a pretty a darn good picture. That being said, we are always on edge. We are trying to see, around the corner and invest appropriately. So we think that the future looks bright. cannot control everything, but we are focused on what we can control. And the last thing I would add is that when we look at the future, that total addressable market is so massive that it allows for opportunities for us in various economic cycles. So we are not strictly dependent upon that. We certainly love when GDP is thriving and the employment is high, all that. We love all that. But because of the opportunity out there and because of how we help customers run a better business, the opportunities are, you know, virtually endless for us. And, that paints a pretty good picture for the opportunity ahead.

All right. Great. that is good to hear. And just on the guidance I know it is kind of typical the way you start with a little bit of conservatism, but just specific to the implied incremental margins, are there any moving pieces or comps or anything for the rest of the year that we should keep in mind when considering that?

Yeah, Manav. Good morning. This is Scott. Appreciate the question. You know, we really like the guide. We believe the guide is strong. When you look at the midpoint of our EPS diluted adjusted diluted EPS guide, it implies EPS growth of 10%. And to your question about incrementals, you know, this has been a question that we have received really throughout the year. You know, we finished the year really strong, with our incremental margins of effectively 38%. And for the year, when you, you know, take into consideration the 1 time, sale the year finished right at 30% incrementals. And our guide for fiscal year 27 has incremental margins in that range of 30 to 32%. Which is right in the heart of our stated range of 25 to 35%. And, you know, as Todd alluded to, you know, first and foremost, you know, the momentum that we have in the business on top line revenue you know, is, you know, provides a tailwind when it comes to incremental margins. Our, you know, supply chain continues to be a strategic difference maker for us. And some of the operational initiatives that you have heard us talk about continue to have an impact on margin expansion and, incremental margin.

Manav, this is Todd. I would just add to what Scott said. What first off, we feel really good about our guide. it is a very strong guide. You know, our objectives are to grow our top line in mid to high single digits and grow our bottom line, our EPS in double digits and you are guiding right towards that. You know, you will see running a business is not linear, so you will see items our results bounce between quarter to quarter, but throughout the year, we are hitting right where our objectives are. Those incrementals might bounce from quarter to quarter, but we ran 30 last year and we expect to run right around 30 again this coming year. So we feel really good about our guide and our approach and understand that it will bounce back and forth a little bit. But we like where we are positioned.

Got it. Thank you very much.

Thank you. And our next question comes from Timothy Mulrooney from William Blair. Please go ahead, Timothy.

Yes. Good morning, everybody. Thank you for taking my questions here. I just want to build on that last 1 while we are talking about it, because, you know, I just did some back of the envelope math, so I could be wrong. But I was getting the incrementals for 2027 a little bit below that 30% to 32% rate And there is a lot of moving pieces here, so I could be you know, just not doing the math right. But maybe asking it a different way is what do you expect for operating margin expansion on a basis points level for 27 versus 26. And can you also talk about the headwinds and tailwinds, for example, energy cost? Is that what is your assumption for basis points impact there. I think there is an ERP implementation and anything else that might be missing that you would consider material to that? Thank you.

Yes, Timothy, good question and good morning. I guess the answer to the first part of your question, when we are looking at the implied incrementals in the guide being in that 30% to 32% range. You know, you need to take a look at the midpoint and the high point of our revenue guide. And that is how you arrive at that 30% to 32% incremental margin. In terms of your question about the implied margin expansion, you know, when you look at the guide, it implies margin expansion really throughout the range On the low end, it is 10 basis point increase And on the high point of the range, it is 60 basis points. So again, just to reiterate, you know, we really feel good about the guide You know, we feel that the guides, aligns with the stated ranges, that we have talked about. And, you know, some of the headwinds you brought up you know, energy And this was something that we talked about on the third quarter call. That certainly higher gas prices had an impact in Q4. Energy costs were up about 20 basis points year over year and sequentially And if you think about that, you know, Q4 represented 1 of the most volatile periods of prices at the pump in recent memory. And the impact was minimal. It was 20 basis points. And we talked about that on the third quarter call. And if you think about that and just go through the math, you know, about 60% of our energy cost are related to fuel for our vehicles. Which translates to about 100 basis points. So if you see an, you know, on average of 20% increase in fuel prices at the pump, you know, that is gonna translate to 20 bps. You know, if it is 30, it will be 30 bps. And those are things that we have confidence that we can offset with our operational initiatives. What we have got implied in the guide is we do have we are assuming an uptick in energy expenses for next year and think about that in terms of being on par With what we experienced in Q4. Okay.

Thank you, Scott. So 10 to 60 bps, that does help clarify things. Energy headwind maybe in that 20 bp range for next year. All very clear. No follow-up needed. Thank you.

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

Thanks. Good morning. Could you provide some additional color on customer budgets and purchasing behaviors, how they have been trending over the past quarter, and what is assumed for fiscal 27?

Yes. Hey, George, this is Tim. I will take that question and coming off the year, we were quite pleased with the growth rates on the year, and we certainly saw our customers quite responsive to our value proposition across the board and we are expecting similar based upon the guide moving into the next fiscal year. Maybe if I can unpack that a little bit more and you think about where some of those growth levers are coming from and what are the key contributors to it, Number 1, a lot of credit is to our employee partners. Who do a fantastic job and executed an extraordinarily high level. We often speak about our culture being a key differentiator for us. Of course, our frontline employee partners are the ones that are creating that culture and that passion for customer satisfaction and growth out in the field. It also speaks a little bit to the size of the opportunity that is out there. And the fact that there is 16 million to 20 million businesses in North America. And even after all the years of success that we have had, we only have a little bit over a million business customers. So it is just vast opportunity for us to continue to get our value proposition out and understood. And really, the third component is how much our value proposition resonates in all economic cycles. And especially today, as we began the call and Q&A looking at macro uncertainty, That uncertainty creates a tremendous amount of opportunity for us as people are looking to really focus on their core business, and outsource and becomes a really attractive lever for them to go to. So when I think about the growth inputs that are part of our algorithm, we always start with new business, and new business continues to be strong. We are able to convert customers over, and about 2-thirds of that new business continues to be from the programmers Certainly, contributions from our verticals. So new business continued well last year, and we would expect that moving forward. Retention rates are at or at all-time highs. So we really like the again, how customers are receiving our services and how much they are satisfied with it. Pricing is really right at historical levels and maybe slightly above historical, but immaterial in nature. And then penetration of our current customers and cross-sell continues to be performing quite well. So you think about the backdrop of growth really attractive opportunity for us. And how that manifests is all 4 of our growth levers are performing well and we would expect that moving forward.

Very helpful. Thank you.

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

Yes. Hi. Can you hear me? This is Alex Hess on for Andrew Steinerman. Just wanted to maybe touch briefly on the gross margin expansion. Obviously, there is a lot in the news about supply chain pressures and fuel costs, and you guys just had a pretty significant step up, basically, across the business on the gross margin front. Could you maybe outline, you guys talk about supply chain excellence a lot, but what that sort of looks like in practice for you guys, what we should expect on that line for next year. And then just I know people keep hitting hammering on the incremental margin but when you guys are running that comparison for us, are you comparing adjusted to adjusted GAAP to GAAP? Are there any sort of you know, add backs we need to be thinking of when we are building our models out so Thank you very much.

Alex, this is Todd. I will start. And just to answer the back half of your question, it is adjusted to adjusted as the way you should be thinking about it. Going back to the gross margin, you are right. there is plenty of uncertainty out in the marketplace. And we have dealt with whether it is tariffs or which and not only tariffs, how they impact us, but how they affect our customer base. You know, fuel prices have been, as Scott mentioned, bouncing around all over. And but we stay focused on extracting out inefficiencies in our business and our team has done a great job. Our supply chain team is a strategic advantage. They have done an outstanding job They have the advantage of being able to source you know, through multiple vendors across very diverse geographic opportunities. So it is been a real advantage for us, so that we can have the products available for our customers and do so at rates that are very competitive. So, we feel really good about that. I think Jim will speak a little bit about some of our operational efforts there with operational excellence that has helped us to extract that inefficiency in our business and improve that gross margin. Tim?

Yeah. Alex, I will start on what are our key inputs towards driving gross margin expansion. Maybe worth noting that, we do expect that gross margin can move a little bit quarter to quarter. We do not expect that it is going to just continue to rise, as you know, running a business is not linear, and you will have different investments from time to time. But with that said, we are very focused on revenue growth as a as a key to our gross margin expansion as that creates leverage. And leverage shows up in the form of route density overall size of individual customers, certainly shows up in capacity utilization of our plants and our routes in our other business units. So that would be a really important key contributor for us on margin expansion. Todd mentioned a little bit on material cost and the great work that our supply chain team continues to do in managing that. And we have talked about our strategy and how well diversified we are in our global supply chain team, not only from different vendors, but different sources. And geographically diverse across the globe. That continues to be a strategic advantage for us. Our garment sharing program that we have deployed in the rental business, in particular. that is a piece of technology that has been really important to us in managing our material cost specifically while we are growing as we are growing today that has been led to great customer satisfaction, recognition of revenue and cost control And we have runway on our process there. Operational excellence in our production facilities has been 1 that is been really valuable to us and will continue to be valuable to us. That is both labor and overall energy control within the plants and then, of course, we round out with SmartTruck across our service platform. And when you take the revenue and then you put service, you put SmartTruck in, we really get some nice leverage on service. And we would expect to be able to continue that moving forward. Maybe worth noting also is that we always have other initiatives that we are working on and those initiatives are to support our over overall financial goals. Todd talked about that as being part of our culture, that is part of our standard operation procedures that we are working towards those finding other ways to become more efficient, extract that those inefficiencies. So we expect to continue that moving forward.

Thank you.

And our next question is coming from Joshua Chan from UBS. Please go ahead, Joshua.

Hi. Good morning, Todd, Jim, Scott, Jared. I guess my first question is on TAM penetration that you guys are talking about. Within the rental business, where do you see kind of the biggest movement in terms of shift towards a rental program and in what verticals are you having more success in this, in this penetration? Thank you.

Joshua, this is Tim. Thanks for the question. And again, we continue to see high demand in all of our product lines. So we are experiencing growth across all of our product lines. And we are really indifferent as to how we start the relationship with the customer. It can start with any 1 of our products. And or services, including inside and outside of the rental business. And any way that we could begin to establish a relationship and trust and get to know that customer, we are okay with that. And we have got multiple examples of how that would continue to work. The verticals are all performing quite well for us. I did bring an example of 1 customer to just illustrate a little bit of what this may look like in practicality, what is this penetration and cross selling? How does that play out in real life? So we had a long standing uniform customer, well over 20 year uniform customer in the retail automotive with multiple sites. And in a business review, we had a conversation with them about what challenges they were seeing in the marketplace, obviously, a dynamic macro environment. And 1 of the core principles that they were working towards is getting their local management team to focus more on their customers and focus more on their core business. And, we look for ways that we could help them with that scenario. We identified that they were spending a lot of time managing things like hygiene supplies for their restrooms, cleaning chemicals, and PPE. And that it was the local general manager who was responsible to order all of that through their distribution center, maintain stock inventories, I think you get the picture. They ultimately decided to give us a chance to leverage our route infrastructure and the fact that we are on-site with them on a regular basis. After trialing it at a few of their stores, they recognize right away that this was a cost savings, a time savings and a much more efficient way for them to go meet that need. So they took that spend that they had with someone else, They redirected over to us, and we were able to go ahead and penetrate those products. Further penetration in our rental business and cross selling with our first aid and safety business as well. So it shows up in a lot of different ways, but the opportunity is quite large.

Great. Yeah. Thank you for the color, Jim. That makes a lot of sense. And then on first aid, I think there was some understanding that in the prior year, we were lapping some kind of onetime type of revenue, but yet the first aid growth is pretty strong this quarter. So I guess, was there anything onetime this quarter as well And maybe you can talk about any new products that you are launching within First Aid that is driving growth also. Thank you.

Joshua, you are right. Last year, the First Aid business grew 18.5% in Q4 and this year was 13.2% organic, organic to organic. So just outstanding performance. That was a heck of a comp that they had to overcome. And the team is executing at a high level. As far as items and products in the in the pipe, we give away too much. We like having a competitive advantage in the marketplace and launching our products. But I will say this. Part of our culture is we are constantly working on improving our products, existing products, and identifying additional products and that we can bring to the marketplace And, the first aid business is really good at that. All of our businesses are But the opportunity out there, for the first aid business is so large because there is so many businesses that we do not do business with. And Jim talked about, in his example earlier that we will have people that will redirect monies to us they are all solving for these objectives somehow. They are spending monies on these subjects. We just wanted to redirect them to us because we can think we can do it better. For them. And, that is working quite well in each of our businesses. And First Aid's, been a shining star for many years now.

that is great. Thank you, Todd, and congrats on a good quarter. Thank you, Joshua.

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

Hey. Good morning, everyone. I was just hoping you could maybe unpack the contribution to organic growth this quarter from NetWearers and then I guess if you could outline how you are thinking about the wear levels in your fiscal 37 guidance too, that would be great.

Jasper, thanks for the question. This is Todd. We do not give a specific KPI on wearers, but I will say this, our each of our areas of our business are performing well. Tim spoke about our growth from current customers is doing quite well. And some of that shows up in wears and shows up in other areas. Of our business. But when we have people in our customers place of business on a regular basis, Those employee partners have eyes, ears, and minds and they see opportunities. Whether that opportunity is additional wearers or products and services that we can help solve for the customer better than what they are currently doing. that is where our focus is. In addition to taking great care of the customer, it all goes together. And obviously driving new business. So it all goes into the formula and it is working for us quite well.

That makes sense. We have not really touched on fire yet. that is been a really nice growth story for you guys. I was hoping you could maybe just talk about, you know, broad expectations for that business next year. And, obviously, you are doing some pretty significant investments in the tech platform. Hoping maybe you could refresh us on how you are thinking about the long term margin opportunity for that business.

Yeah. Sure. I will start on the Fire business. And we are really pleased with the fourth quarter of the fire business. And obviously, they performed well, highest gross margin that we have seen within that business. And so we are pleased with the execution, great work by the team. I would expect that you will see some variability of gross margin in that business moving forward. That business, as you know, a little bit can be impacted by revenue mix in a particular quarter. But also, we are still building out our national footprint in the fire protection business. And as we do that, we will make strategic acquisitions and some of those acquisitions will run at productivity numbers and profitability that are far below Cintas' and it takes some time for us to go in and implement our playbook and get the overall productivity up to Cintas performance standards That takes a little bit of time, but as we demonstrated this past year, certainly something that comfortable being able to go and do. We will have an SAP implementation in Fire that is scheduled for this upcoming fiscal year that will have a about 100 basis point annual headwind for the fire protection business. So we are expecting a little bit of volatility in that gross margin But overall, we do love the fundamentals of the fire business. We will continue to invest in the Fire business for long term growth. And believe that it can be a good contributor to Cintas in the future.

Got it. Thank you for taking the questions, guys.

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

Good morning, and thanks for taking my questions. I am curious if you could talk about the impact that automation has had on your business historically. And do you foresee any, I guess, potential headwinds there as maybe some more manufacturing processes get automated? Thanks.

Jason, thanks for the question. This is Todd. First of our customers have been automating for years. So that is in certainly in our run rate of what we have experienced in the past. We are automating and throughout our facilities as well, We are not in the technology business, but every business is in the technology business. So automation plays a role for us internally and for our customers. And, you know, just to think about it from that standpoint, automation plays a probably larger role in manufacturing, goods producing than it does in services providing. And our business 25 years ago was 70% of our customers were goods producing and 30% were service providing. And today, it is exact opposite. it is 30%, goods producing and 70 services providing. So certainly, automation plays roles in our business, in our customers' business in different ways depending upon the business. But it is absolutely plays a role. And as that occurs, it does not change our outlook whatsoever from our perspective because the opportunity out there is so massive for us We do business with a little over a million customers. For 16 to 20 million businesses out there. And they are all solving these needs. That we can provide in some manner. So, we just want to redirect those monies to us because we think we can do it better. And it is our job to position our people to make that clear to our customers and our prospects and we are working diligently to do just that.

that is great. Thank you. Certainly makes sense. And then as a follow-up, I just wanted to circle back on pricing and just to understand given that there is maybe some more inflationary pressures you talked about fuel costs, Are you taking a little bit more price to some of that? And what is the customer reception been to those price increases?

Yeah. Thank you very much for the question. And, I would say our pricing is generally in line with our historical levels As we mentioned earlier, maybe slightly elevated, but immaterial in nature. And our philosophy is really to take a long term approach when it comes to pricing. We know customers have choices of ways that they can go satisfy the needs here And we want to continue to ensure we are providing the most valuable program possible So as Todd mentioned earlier, our objective is that we want to remove inefficiencies out of our business as our primary way of expanding margins it is expedient to just pass pricing along to the customers, but not great for the long term. So we want to make sure we continue keeping that long term approach. Now we believe it is strategic and environment calls for some price increases, as we saw back in 2022-2023 with persistent and historical levels of elevation and wage increases. We certainly demonstrated we can take pricing, but it is not our preferred method and not a large component of our growth algorithm.

Got it. Certainly makes sense. Thank you very much.

And our next question comes from Seth Weber from BNP Paribas. Please go ahead, Seth.

Hey, guys. Good morning. Wanted to ask about your comments about growing the fire business into a national platform. Just can you just talk about the competitive environment when you are out bidding for deals, bidding for other assets, just sort of you know, how you are positioning that business relative to some of the other you know, growing competitors that are out there. Thank you.

Hey. Good morning, Seth. We really like the Fire business. it is the only business that we are in where you legally have to have it for our customers. And so as a result, the TAM is some word beyond massive. it is so it is the opportunity out there is incredible. it is a service business. And, because everybody is served in some manner, unless you are talking about new construction, which really is not a focus for us. So it is a service business. We are investing appropriately to have a footprint As Jim mentioned, as you plant new flags in markets, short-term, there is some headwinds on margin. But we see the opportunity is so large that we want to make sure that we are investing appropriately to provide those levels of service to customers across the country. That being said, you know, technology plays a role in that. As we roll out SAP, we think that will provide some real value to not only our people, but to our customers to help them with the levels of service that we can provide them. So we are we are big fans of the business. See an incredible runway, and we are investing appropriately to attack that opportunity.

Appreciate that. And then just maybe on CapEx, it was, I think, 3.5 percent this year It had been maybe closer to 4% in the last couple of years. Do you think while you are waiting for UniFirst, the UniFirst deal to close, does CapEx kind of come down a little bit while you are waiting to see what happens with the acquisition? And then as you sort of you know, figure out what assets are where and where you can utilize the UniFirst assets or do you think CapEx kind of stays in this 3.5 to 4% range for this year? Thank you.

Yes, Seth. This is Scott. I appreciate the question. Yes, CapEx for the year came in at that 3.5% of revenue, right within the range that we have stated. 3.5 to 4%. And like other things, you know, CapEx can vary from quarter to quarter and year to year. depending on the timing of different initiatives. You know, Tim mentioned, you know, 1 of the initiatives, operational excellence. And that really is centered on you know, increasing the capacity of our production facilities on a uniform space. Without investing in capital. Really through process improvement and engineering. And that would be an example of an initiative that would have a positive impact on our CapEx spend. So I am not expecting, you know, any variation in fiscal year 27 or really beyond. Relative to CapEx and still believe that we will be in that 3.5% to 4% range.

Seth, I will just add that, first off, the deal has not closed. We are running 2 separate businesses. And I would not read into the 3.5% saying, 'they are getting ready for UniFirst, so they are' they are not investing appropriately. We are running our business in the normal course. When we when we close, then we will be able to make a really good assessment. And give you a better view of what that will mean for us moving forward. But we are we are running separate businesses and running at the normal course.

Appreciate it, guys. Thank you. Thank you.

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

Thanks so much. Earlier, you were asked about automation, and I was hoping you could give some examples of what you are doing in the automation and robotics side within your own business to try to maximize efficiencies?

Good morning, Toni. Thanks for the question. We do not like to give away too much of what where we are investing, but I will just give you a little color. Now there is, there is certain areas like supply chain, you know, distribution, manufacturing, where automation is a little bit more clear. We have been investing in automation in our rental facilities. To help us with things like automatic sortation, That is really bearing fruit for us. And then there is other areas of automation that we consider automation that you may not may not be a robot or might not be might be of another nature of automation. Such as the garment sharing that Tim spoke of, and such as smart truck. So all that plays into the role of automation. it is throughout our business and has been and will continue to be.

Terrific. And then I wanted to ask about the different verticals that you are in. Have you noticed any really accelerating or any more on sort of a hold? Which markets have been good and bad for you at this point? Thanks.

Hey, Toni, this is Tim. I will take that question. And overall, we really like the verticals that we have organized around You know, those are verticals that are performing quite well for us. And we are seeing strong performance really across the board there. Certainly, may note earlier or spoke about healthcare. Healthcare continues to be a tremendous avenue for us for revenue. Our customers really appreciate the value proposition we bring in the healthcare space. So we continue to plant new flags in health care and then certainly cross sell and upsell with our current customer base. Really like the state and local government business, and that continues to perform well. Education continues to perform well. Hospitality. So they all perform above the overall company growth, and that certainly speaks to why we organize around those spaces. And it is not just a sales strategy we organize around them. We organize our product line around them. We organize our service model around them. And we think that we picked a lot of the right verticals and they are performing quite well for us.

Thank you.

And our next question comes from Connor Cerniglia from Alliance Bernstein. Please go ahead, Connor.

Thank you for the question. Maybe just building off the prior question. Talk a little bit more about the healthcare vertical Given health care employment has been really 1 of the only sectors that has been adding jobs at a healthy clip, how has your progress been? Is it well outperforming other verticals, or is it pretty balanced? Then within that within health care, is growth coming from new account wins? Or is it more same account growth from existing customers who add more headcount?

Thank you for the question, Connor. Yes, our healthcare business is going quite well. And you are right, you look at how healthcare as a component of GDP, how it is growing, the jobs, So we chose well in picking that vertical it is not do not just think about it as, hey, they sell customers in that area. We organize around that vertical. So we think of products, we think of services, we think of technology, we think of dedicated routing structures so that way we can solve those needs for those customers better and better and better. And uniforms play a role in that. But we have plenty of products and services that are that we service into the health care sector. And you asked about is it growing faster? Anytime we have a focused vertical, we expect it to grow faster than the average. Because there is that much focus and efforts and resources put on that. And the healthcare business is growing better than average for us and we expect it to. Just like we do all of our verticals.

Great. And then year's EBIT margin expansion has been pretty healthy this past quarter. My math might be wrong, but I thought it was 120 basis points if you account for the UniFirst. Transaction costs. It seems like the investments you have been making over the past year are starting to pay off. Looking ahead, can you talk about the incremental investments you plan on making if any? It seems my sense is it would be smaller than the ones we saw in the past year. But any color on that front would be helpful.

Well, Conor, we are always investing. Because we see the opportunity ahead. We have we had a great Q4, great margin expansion. Incrementals. But you are going to see it, you know, from quarter to quarter. It Certainly incrementals will bounce a little bit. And we are thinking long term. We are thinking long term as we approach customers and investments in our business. But over a year, we would expect that those that will hit our guide And I think if history is any indication of the future that will occur. But we are pleased with our Q4 and our year and we are pleased with our guide ahead. But we will we are not slowing up. We are running separate business from UniFirst. We are investing as appropriate. We are running it just as we always would.

Maybe I will just add 1 little bit of color on that. Just regarding the incrementals in the fourth quarter coming at 37.7%, effectively 38%. That did not represent a step change in our strategy. You know, we are continuing to invest in our business. We continue to look at the opportunity in front of us with the unserved marketplace, the robust number of wearers that are available out there. I mean, there is 180 million people that go to work in North America. All wearing something. We only have 5 million wearers. there is over 100 million of those who are in NAICS codes that we are organized around. So just a tremendous amount of runway So we are gonna continue to invest. And a little bit of what you saw this past year was some comps from the prior year had a little bit more of an influence on that incremental margin as we had really outsized performance in the first half of fiscal 25. Relative to incrementals, and then we got a little bit more favorable comp. In the fourth quarter. So we sell that to say that we are going to continue to invest in the business. And we are comfortable anywhere in the range of our incrementals. And we are less focused on 1 quarter versus the next quarter But holistically over the year, we expect to deliver strong mid to high single digit growth rates, expand margin, and deliver 10 plus percent EPS growth.

Great. Thanks so much. I will pass it on.

And our next question comes from Curtis Nagle from Bank of America. Please go ahead, Curtis.

Great. So maybe just first, a very quick 1. Just which quarter is the extra workday going to hit in? Just that would be helpful for the model. And then secondarily, just going back on the supply chain efficiencies, maybe just in terms of kinda rank ordering or maybe putting in innings, you know, some of the larger opportunities you called out, like plant efficiency smart truck. Kind of where does that stand? Where do you see the biggest, you know, opportunities for this year? And kind of anything new coming into the mix for this year that you are excited about?

Curtis, this is Scott. I will answer the on the Workday differential. As I mentioned, there is 1 more workday in fiscal year 27 compared to fiscal year 26. Which represents about 40 basis points on revenue growth. When you look at it quarter by quarter, the first quarter of fiscal year 27 has 1 extra day. Then fiscal year 26 The second quarter has the same number of workdays. The third quarter has 1 less workday. And then the fourth quarter has 1 more workday than fiscal year 26. So really, when you look at each of the quarters, there is a workday differential in each quarter with the exception of Q2 for 1 extra day for the entire year.

Curtis, regarding, you know, supply chain and business efficiencies, extracting out those inefficiencies. Yeah, I would say they all contribute. They are all important to us. We have a culture here of positive discontent. We are we always have initiatives because we want to get out those inefficiencies to, run a better business. Tim talked about that we operate in a very competitive environment. As costs go up and people want to be paid more, we do not just pass that along to the customer. Because we recognize customers have choices. So as a result, we have to find other ways to improve our business. And, we always have a long list of initiatives and that is part of our culture. And we will continue to execute upon that. And those opportunities continue to be in front of us. So we feel quite good about where we are positioned there, and that culture is what drives us to, to be constantly, seeing ahead. Around the corner and leveraging our positive discontent to get better.

And our last question comes from Ashish Sabadra from RBC Capital Markets. Please go ahead, Ashish.

Hey. Good morning, guys. This is William Qi on for Ashish Sabadra. Appreciate you guys, squeezing us in. Maybe just a bit on the macro side. What if you could get a little bit more color, I guess, on visibility for hiring trends across the verticals? I know healthcare has been strong, but just any other kind of vertical commentary you might be able to provide. I am happy to start.

Tim, you can speak to any of the routines in the customer base. But, William, we, you know, we read the same prints that you do. We understand, where the employment picture is. As I mentioned, we are not dependent upon employment. We love it when employment is strong. That usually bodes well for the economy and GDP. But we are not employment dependent. And I think we have demonstrated that over the years. That we grow in multiples of employment. We grow in multiples of GDP. And, there are certain sectors that are doing better than others. Tim mentioned, I think we have chosen very well. Our verticals. They seem to be some of the shining stars on the employment side. But we can help customers in so many different ways And as mentioned earlier, they are spending money on solving for these image safety, cleanliness, and compliance needs already. Just to you know, we are trying to redirect it to us because we think we can do better. Tim, anything you are seeing, in the, in the customer base on those types of trends?

Yeah. I mean, I think the only thing that maybe I would add to that is we have an extraordinarily broad customer base So we see puts and takes across all the customers and that is pretty typical that we would see on a normal basis. But, you know, if you go into digging beneath the headlines on the jobs reports, it certainly supports the, you know, narrative that Todd just gave. You know, and you see nice growth in healthcare, education, hospitality. You see some in state and local government. Specialty trades is an area that continues to perform fairly well, and the biggest headlines as far as the weaker areas, tend to be around white collar jobs, which is not as important end market for us for our Uniform Rental business. So I would say, you know, puts and takes across the board. We like where we are, but we do not need that robust revenue growth to continue to grow the organization.

Thank you, guys. Congrats on the quarter.

Thank you. And the question and answer period has concluded. I will turn the call back over to Jared to close out the call.

Thank you, Ross, and thank you for joining us this morning. We will issue our first quarter of fiscal 27 financial results in September. We look forward to speaking with you again at that time. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect. The host has ended this call. Goodbye.