Cintas Corp ($CTAS) Q4 2026 Earnings Call

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 2027 outlook. We are very pleased with our fourth quarter results to close out fiscal 2026. 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 and foreign currency exchange rate fluctuations, was 8.4%. We continued 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 2025. Organic revenue growth was 8.3% for the year. This marks the 55th year out of the last 57 years that we've 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 on the opportunity of a total addressable market that is massive. And it shows that we have a long runway for future growth of 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 four 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 2026 operating margin reached 23.1%. When you adjust for the UniFirst-related transaction expenses, adjusted operating margin was 23.3%, expanding by 50 basis points compared to fiscal 2025. 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 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 a key pillar of our value creation strategy. In the fourth quarter and throughout fiscal 2026, we deployed capital across each of our priorities. First, we prioritize investments back into the business in many forms, including our products, technology, and people. Second, we love M&A. 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 2027, our outlook reflects confidence in our business model. As we will discuss in more detail, we expect fiscal 2027 revenue in the range of 12.1 billion to 12.25 billion, implying total growth of 7.4% to 8.7%. We expect fiscal 2027 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 to 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've 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 Jim, I'd like to provide a brief update on our acquisition of UniFirst. Based on the limited due diligence we've been able to complete, we remain confident for the substantial long-term value creation for our combined customers, partners, and shareholders. When we announced the transaction in March, we indicated the merger was subject to approval by UniFirst shareholders, regulatory clearances in both the US 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 GK 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 2026. In order to avoid creating speculation, we will not be providing any additional commentary on this process. We will update the market going forward as appropriate. With that, I'll turn the call over to Jim for additional insights on our operational performance.

Thank you, Scott. As we enter fiscal 2027, 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 want to thank our almost 50,000 employee partners for their dedication. It's your hard work that drives our success. I'll now turn it back over to Jared.

Good morning, Manav. You know, it seems like we've been operating in an uncertain macro environment for so many years now. We stay focused on what we can control. There's certain things that are out of our control, 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's 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 paints a pretty darn good picture. That being said, we're always on edge and we're trying to see around the corner and invest appropriately. So we think that the future looks bright. Can't 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're not strictly dependent upon that. We certainly love when GDP is thriving and employment, 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 virtually endless for us, and that paints a pretty good picture for the opportunity ahead.

Manav, I would just add to what Scott said. First off, we feel really good about our guide. It's a very strong guide. 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 we're guiding right towards that. Running a business isn't linear, so you'll see our results bounce between quarter to quarter, but throughout the year, we're 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'll bounce back and forth a little bit, but we like where we're positioned.

Thank you.

Alex, this is Todd. I'll start. And just to answer the back half of your question, it's adjusted to adjusted is the way you should be thinking about it. Going back to the gross margin, you're right, there's plenty of uncertainty out in the marketplace and we've dealt with whether it's tariffs or how they impact us, but how they affect our customer base. Fuel prices have been, as Scott mentioned, bouncing around all over. 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've done an outstanding job. They have the advantage of being able to source through multiple vendors across very diverse geographic opportunities. So it's 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 out inefficiency in our business and improve that gross margin. Jim.

Thank you.

Josh. You're right. Last year the first aid business grew 18.5% in Q4 and this year was 13.2% 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 pipe, we don't give away too much. We like having a competitive advantage in the marketplace and launching our products. But I'll say this, part of our culture is we're constantly working on improving our products, existing products, and identifying additional products and services 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's so many businesses that we don't do business with. And Jim talked about in his example earlier that we'll have people that will redirect monies to us, but they're all solving for these objectives somehow. They're spending monies on these subjects. We just want to redirect them to us because we think we can do it better for them. And that's working quite well in each of our businesses and First Aid's been a shining star for many years now.

Thank you, Josh.

Jasper, thanks for the question. This is Todd. We don't give a specific KPI on wearers, but I'll say this, each of our areas of our business are performing well. Jim spoke about our growth from current customers is doing quite well. And some of that shows up in wearers and it 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're currently doing it. That's 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's working for us quite well.

Yeah. Sure. I'll start on the fire business and we're really pleased with the fourth quarter of the fire business. Obviously they perform well, highest gross margin that we've seen within that business and so we're pleased with the execution, great work by the team. I would expect that you'll see some variability of gross margin in that business moving forward. That business, as you know, can be impacted by revenue mix in a particular quarter. But also we're 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 we're comfortable being able to do. We will have an NSAP implementation in fire that was scheduled for this upcoming fiscal year that will have about a 100 basis point annual headwind for the fire protection business. So we're expecting a little bit of volatility in that gross margin. But overall we do love the fundamentals of the fire business. We'll 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.

Jason, thanks for the question. This is Todd. Our customers have been automating for years. So that is certainly in our run rate of what we've experienced in the past. We are automating throughout our facilities as well. We're 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 to think about it from that standpoint, automation plays a probably larger role in manufacturing goods producing than it does in services providing. Our business 25 years ago was 70% of our customers were goods producing and 30% were services providing. And today it's the exact opposite. It's 30% goods producing and 70% services providing. So certainly automation plays roles in our business and our customers' business in different ways depending upon the business. But it's absolutely a component and as that occurs, it doesn't 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. There's 16 to 20 million businesses out there. And they're 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's our job to position our people to make that clear to our customers and our prospects, and we're working diligently to do just that.

Hey, good morning Seth. We really like the fire business. It's the only business that we're in where you legally have to have it for our customers and so as a result the TAM is beyond massive. The opportunity out there is incredible. It's a service business and because everybody is served in some manner, unless you're talking about new construction, which really isn't a focus for us. So it's a service business. We are investing appropriately to have a footprint as Jim mentioned, as you plant new flags in markets. Short-term there's some headwinds on margin, but we see the opportunity is so large that we want to make sure that we're investing appropriately to provide those levels of service to customers across the country. That being said, 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're big fans of the business. See an incredible runway and we're investing appropriately to attack that opportunity.

Seth, I'll just add that first off, the deal has not closed. We're running two separate businesses. And I wouldn't read into the three and a half percent saying, well, they're getting ready for universe, so they're not investing appropriately. We're running our business in the normal course. When we close, then we'll 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're running separate businesses and running the normal course.

Thank you.

Good morning Tony. Thanks for the question. We don't like to give away too much of where we're investing but I'll just give you a little color. There's certain areas like supply chain, distribution, manufacturing where automation is a little bit more clear. We've 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's other areas of automation that we consider automation that you may not be a robot or it might be another nature of automation such as the garment sharing that Jim spoke of and such as smart truck. So all that plays into the role of automation. It's throughout our business and has been and will continue to be.

Thank you for the question Connor. Our healthcare business is going quite well. And you're right, you look at how healthcare as a component of GDP, how it's growing the jobs, so we chose well in picking that vertical. And it's not just think about it as selling to 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 we can solve those needs for those customers better and better. Uniforms play a role in that, but we have plenty of products and services that we service into the healthcare sector. You asked about is it growing faster? Anytime we have a focus vertical, we expect it to grow faster than the average because there's 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.

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

Curtis, regarding supply chain and business efficiencies, extracting out those inefficiencies, they all contribute. They're all important to us. We have a culture here of positive discontent. We are always have initiatives because we want to extract out those inefficiencies to run a better business. Jim talked about that we operate in a very competitive environment. As costs go up and people want to be paid more, we don't 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's 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're positioned there and that culture is what drives us to be constantly seeing ahead around the corner and leveraging our positive discontent to get better.

I'm happy to start. Jim, you can speak to anything we're seeing in the customer base. But Will, we read the same prints that you do. We understand where the employment picture is. As I mentioned, we're not dependent upon employment. We love it when employment is strong. That usually bodes well for the economy and GDP. But we're not employment dependent. And I think we've demonstrated that over the years that we grow in multiples of employment. We grow multiples of GDP. There are certain sectors that are doing better than others. Jim mentioned I think we've 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're spending money on solving for these image safety cleanliness and compliance needs already. Just to, we're trying to redirect it to us because we think we can do better. Jim, anything you're seeing in the customer base on those types of trends?

Thank you.