Cintas Corporation (NASDAQ:CTAS) Q1 2024 Earnings Call Transcript

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And we are — even though we are on SAP and will be for most of our business after the Fire Protection business gets on, there are constant things to learn from SAP. There are new initiatives in working with SAP and Google and Verizon that create new and different things. And so we look at this — I think Todd’s talked about it as one of his largest initiatives in terms of technology. And it’s a journey. It’s not a flip of the switch. We turn on new systems here and there. So we’re in the midst of that. We’ll continue to invest in all of that. And our expectation is, it’s going to continue to bring benefits into the future.

Todd Schneider: Scott, to expand upon what Mike said, it is a journey. But when you’re on that journey, there is benefits — a long, long tail of benefits as well. And so we will continue to invest appropriately. We have relationships at a very high level in each of those organizations, and it’s going to bear fruit for us. And that’s part of our plan. It’s not easy. It’s very challenging to go through these processes. But our team has shown the wherewithal to not only digest the change, but then leverage the opportunities that are in front of them.

Operator: And our next question comes from Shlomo Rosenbaum.

Shlomo Rosenbaum: Todd, maybe you can just peel the onion back a little bit more on that margin on the First Aid side? I know you pointed to some sourcing and stuff like that. But it seems like the business has gone from mid-teens to low 20s in the course of the year. And I was wondering if there — is there something to do with the route optimization? Is it mix related, pricing? Anything else that operationally made such a significant difference? And after that, I have just a question on the labor environment for you guys yourselves? Are you — is it easier for you guys to source people for what you need?

Todd Schneider: Good question, Shlomo. Yes. Again, we love the First Aid business. But we’re — there’s so many inputs to margin expansion, and we’re leveraging them all. It starts with really good revenue growth, and we’re seeing that. And that’s in a big way because the value proposition is resonating, the products, the services that we offer in the marketplace, trying to attract and retain people is still challenging. And people are trying to — customers are trying to take really good care of their people. And we’re benefiting from that and we’re helping them accomplish exactly that. We’re helping them run their business better. So that’s helpful. The mix, as you know, has — back during the pandemic, it was certainly so much more focused on safety products, a lot of clubs and a lot of sanitizer and those types of items.

And that has abated a bit, and the mix is back focused on First Aid and those types of products, more recurring revenue type. And yes, we are absolutely leveraging technology to make it easier to do business, but also to position our partners, our employee partners to provide more value to our customers. And SmartTruck is a component of that. We did have a little bit of energy tailwind, 40 basis points. But as Mike cited earlier, not all that’s because of the price at the pump. That is also because we are extracting the inefficiencies out. And we always talk around here about how we don’t make money when the wheels are moving. We make money when the wheels stop. That’s better for our customers, that’s better for our employee partners. And all that is contributing.

And then lastly, as I mentioned, our supply chain team has done a great job. They are leveraging the opportunities there. The larger we get in that business, the more leverage they have, and they’re executing at a high level. And — so many inputs that are contributing to it, and — but the — what’s really encouraging is, we see those having an opportunity to continue in the future. So certainly, no event is more of a process.

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