[Management View]
Cintas reported total revenue of $2.67 billion for Q4 FY2025, reflecting 8% reported growth and 9% organic growth. Key segments showed strong performance: Uniform Rental and Facility Services grew organically by 7.2%, First Aid and Safety by 18.5%, and Fire Protection Services by 12.1%. Gross margin improved to 49.7%, up from 49.2% YoY. Management emphasized disciplined execution, strategic investments in technology (SAP, SmartTruck), and infrastructure as drivers of sustained growth and margin expansion.

[Outlook]
For FY2026, Cintas expects revenue between $11.00-$11.15 billion (6.4%-7.8% growth) and diluted EPS of $4.71-$4.85 (7%-10.2% growth). Operating margin is projected to expand further, supported by cost control, productivity initiatives, and technology investments. Management anticipates double-digit growth in Fire and First Aid businesses, while Uniform Direct Sale is expected to grow in low single digits. No future acquisitions, share buybacks, or significant economic disruptions are assumed in the guidance.

[Financial Performance]
Cintas achieved record FY2025 revenue of $10.34 billion, up 7.7% YoY, with 8% organic growth. Operating margin reached an all-time high of 22.8%, compared to 21.6% in FY2024. Diluted EPS grew 16.1% YoY to $4.40. Free cash flow totaled $1.6 billion, and capital deployment included $408.9 million in capital expenditures, $2.2329 billion in acquisitions, $612 million in dividends, and $935 million in share repurchases.

[Q&A Highlights]
Question 1: Can you discuss the overall selling environment, sales cycles, and client sentiment?
Answer: Management noted no significant changes in customer behavior or sales cycles. Retention rates remain high, and the value proposition continues to resonate across economic cycles. Uncertainty in tariffs and interest rates creates opportunities to add value for customers, such as cost savings on disposable gloves.

Question 2: Why did incremental margins narrow this quarter compared to previous quarters?
Answer: Incremental margins for Q4 FY2025 were 25%, down from 40%-50% in prior quarters due to tougher YoY comparables. Management emphasized that running a business isn’t linear and highlighted investments for future growth.

Question 3: Can you provide more color on FY2026 guidance cadence and ad stops trends?
Answer: FY2026 revenue growth is expected at 6.4%-7.8%, with EPS growth of 7%-10.2%. Management sees strong momentum in the business and expects ad stops to remain stable, supported by a broad customer base (70% service providers, 30% goods producers).

Question 4: What are the drivers of FY2026 incremental margins and revenue growth?
Answer: Incremental margins are guided at 25%-35%, reflecting investments in SAP for fire protection and supply chain initiatives. Revenue growth is expected to be driven by mid-to-high single-digit growth in rental businesses and double-digit growth in Fire and First Aid segments.

Question 5: What drove Q4 FY2025 organic growth above expectations?
Answer: Organic growth of 9% exceeded expectations due to discrete one-time benefits in First Aid training revenue and strong performance in Uniform Direct Sale.

Question 6: How has FY2026 started, and are there changes to the go-to-market strategy?
Answer: FY2026 has started as expected, consistent with guidance. No major changes to the go-to-market strategy, though vertical strategies in healthcare, government, education, and hospitality continue to perform well.

Question 7: What is the outlook for cost changes and tariff impacts in FY2026?
Answer: Management anticipates manageable cost changes, supported by inventory management, geographic sourcing diversity, and operational efficiencies. Tariff impacts are factored into guidance, with no outsized pricing actions expected.

Question 8: What are the prospects for M&A activity going forward?
Answer: M&A remains a key growth lever, with a strong pipeline of bolt-on acquisitions across route-based segments. Timing is unpredictable, but relationships built over decades position Cintas well for future opportunities.

Question 9: Are higher price increases expected in FY2026 due to tariffs?
Answer: Pricing is expected to remain at historical levels, with no outsized increases planned. Management focuses on operational efficiencies rather than passing costs directly to customers.

Question 10: Can you provide updates on strategic verticals and First Aid business traction?
Answer: Strategic verticals are expected to outperform average growth rates, with innovations like privacy curtain solutions expanding beyond healthcare. First Aid business growth is broad-based, driven by recurring revenue products like AED rentals and eyewash stations.

Question 11: What percentage of First Aid revenue is recurring versus one-time?
Answer: While exact percentages are not disclosed, recurring revenue products like cabinets and AED rentals are significant contributors. Training revenue spikes are acknowledged as nonrecurring.

Question 12: What drove the spike in Uniform Direct Sale growth in Q4 FY2025?
Answer: Uniform Direct Sale grew 9% in Q4 due to one-time rollouts, which are not expected to continue into FY2026.

Question 13: Are there any areas of weakness or strength in end markets?
Answer: No significant weaknesses were noted. Goods-producing customers face more pressure, while service-providing customers are fulfilling strong demand.

Question 14: How is AI being utilized at Cintas?
Answer: AI investments are in early stages, focusing on machine learning, data analytics, and operational efficiencies. Initiatives like SmartTruck and garment sharing are examples of leveraging technology for incremental improvements.

[Sentiment Analysis]
Management maintained a confident and disciplined tone, emphasizing strong execution and strategic investments. Analysts were constructive, with questions focused on guidance details, cost management, and growth drivers.

[Quarterly Comparison]
| Metric | Q4 FY2025 | Q4 FY2024 | YoY Change |
|----------------------------|-----------|-----------|------------|
| Total Revenue | $2.67B | $2.47B | +8% |
| Organic Growth | 9% | 8% | +1pp |
| Gross Margin | 49.7% | 49.2% | +0.5pp |
| Diluted EPS | $1.09 | $1.00 | +9% |
| Operating Margin | 22.4% | 21.6% | +0.8pp |

[Risks and Concerns]
1. Tariff and trade uncertainties could impact input costs.
2. Macroeconomic volatility, including interest rates, may affect customer sentiment.
3. Discrete revenue spikes in First Aid training are nonrecurring, potentially affecting future growth rates.
4. Incremental margin expansion may face challenges due to ongoing investments in SAP and supply chain initiatives.

[Final Takeaway]
Cintas delivered strong Q4 FY2025 results, achieving record revenue and margin expansion while maintaining disciplined execution. Strategic investments in technology and infrastructure position the company for sustained growth, with FY2026 guidance reflecting confidence in mid-to-high single-digit revenue growth and margin expansion. Management’s focus on operational efficiencies, customer retention, and vertical strategies underscores its ability to navigate macroeconomic uncertainties and capitalize on growth opportunities. Investors should monitor tariff impacts, M&A activity, and the scalability of technology initiatives as key factors influencing future performance.