Cintas(CTAS) - 2025 Q2 - Quarterly Results

Press Release Highlights Fiscal 2025 Second Quarter Financial Performance Cintas Corporation achieved strong financial growth in FY2025 Q2, with significant increases in revenue, gross profit, operating income, net income, and diluted EPS Fiscal 2025 Second Quarter Key Financial Data (as of November 30, 2024) | Metric | FY2025 Q2 (million USD) | FY2024 Q2 (million USD) | YoY Growth (%) | | :----------------------------------- | :---------------------- | :---------------------- | :------------- | | Revenue | 2,560 | 2,380 | 7.8% | | Organic Revenue Growth Rate | - | - | 7.1% | | Gross Profit | 1,280 | 1,140 | 11.8% | | Gross Margin | 49.8% | 48.0% | +180 bps | | Operating Income | 591.4 | 499.7 | 18.4% | | Operating Income as % of Revenue | 23.1% | 21.0% | +210 bps | | Net Income | 448.5 | 374.6 | 19.7% | | Diluted EPS | 1.09 | 0.90 | 21.1% | | Quarterly Dividend | 158.0 | - | 14.9% | Management Commentary and Fiscal 2025 Outlook CEO Todd M. Schneider expressed satisfaction with strong Q2 results, raising FY2025 revenue and diluted EPS guidance, emphasizing sustained value creation - CEO Todd M. Schneider noted strong revenue and earnings growth, excellent margin expansion, and robust cash generation in Q2, attributed to outstanding employee execution and a comprehensive value proposition for customers[8] Fiscal 2025 Annual Guidance Update | Metric | Original Guidance Range (billion USD) | Updated Guidance Range (billion USD) | | :---------- | :------------------------------------ | :----------------------------------- | | Revenue | 10.220 - 10.320 | 10.255 - 10.320 | | Metric | Original Guidance Range (USD) | Updated Guidance Range (USD) | | :---------- | :---------------------------- | :--------------------------- | | Diluted EPS | 4.17 - 4.25 | 4.28 - 4.34 | Fiscal 2025 Guidance Details Revenue Guidance The company raised its full-year FY2025 revenue guidance, provided workday-adjusted growth rates, and clarified key underlying assumptions Fiscal 2025 Total Revenue Guidance (million USD) | Metric | FY2024 | Original Guidance Low End | Original Guidance High End | Updated Guidance Low End | Updated Guidance High End | | :-------------- | :-------- | :------------------------ | :------------------------- | :----------------------- | :------------------------ | | Total Revenue | 9,596.6 | 10,220.0 | 10,320.0 | 10,255.0 | 10,320.0 | | YoY Growth Rate | - | 6.5% | 7.5% | 6.9% | 7.5% | Workday-Adjusted Revenue Guidance (million USD) | Metric | FY2024 | Original Guidance Low End | Original Guidance High End | Updated Guidance Low End | Updated Guidance High End | | :----------------------- | :-------- | :------------------------ | :------------------------- | :----------------------- | :------------------------ | | Workday-Adjusted Revenue | 9,596.6 | 10,298.6 | 10,399.4 | 10,333.9 | 10,399.4 | | YoY Growth Rate | - | 7.3% | 8.4% | 7.7% | 8.4% | Organic Revenue Growth Rate Guidance | Metric | Original Guidance Low End | Original Guidance High End | Updated Guidance Low End | Updated Guidance High End | | :---------------------- | :------------------------ | :------------------------- | :----------------------- | :------------------------ | | Organic Revenue Growth Rate | 7.0% | 8.1% | 7.0% | 7.7% | - Revenue guidance assumes no future acquisitions, constant foreign currency exchange rates, and no significant economic disruptions or recessions[10] Diluted EPS Guidance The company raised its FY2025 diluted EPS guidance, providing assumptions including projections for net interest expense and effective tax rate Fiscal 2025 Diluted EPS Guidance (USD) | Metric | FY2024 | Original Guidance Low End | Original Guidance High End | Updated Guidance Low End | Updated Guidance High End | | :-------------- | :----- | :------------------------ | :------------------------- | :----------------------- | :------------------------ | | Diluted EPS | 3.79 | 4.17 | 4.25 | 4.28 | 4.34 | | YoY Growth Rate | - | 10.0% | 12.1% | 12.9% | 14.5% | - FY2025 net interest expense is projected to be approximately $101 million, up from $95 million in FY2024, primarily due to increased variable-rate debt[13] - The effective tax rate for FY2025 is anticipated to be 20.2%[14] - Diluted EPS guidance excludes future share repurchases or significant economic disruptions or recessions[15] Company Information and Disclosures Company Profile Cintas Corporation, a Fortune 500 company listed on Nasdaq (CTAS), provides essential services like uniforms, mats, and safety products to businesses - Cintas Corporation provides products and services to over one million businesses of all sizes, including uniforms, mats, mops, restroom supplies, first aid and safety products, fire extinguishers, and safety training, preparing clients for the workday[16] - Cintas is a publicly traded Fortune 500 company on the Nasdaq Global Select Market under the ticker CTAS, and a component of the S&P 500 and Nasdaq 100 indices[16] Forward-Looking Statements This press release contains forward-looking statements about future business plans and expectations, subject to various risks and uncertainties, with no obligation for public updates - This press release contains forward-looking statements about the company's future business plans and expectations, subject to various risks, uncertainties, potentially inaccurate assumptions, and other factors that could cause actual results to differ from those stated[17] - Risk factors include, but are not limited to: higher-than-anticipated operating costs (e.g., energy and fuel), decreased sales volume, customer attrition, acquisition integration costs, supply chain constraints, macroeconomic conditions (inflationary pressures and high interest rates), changes in global trade policies, fluctuations in material and labor costs, union activity, failure to comply with government regulations, foreign currency exchange rate fluctuations, environmental compliance costs, ability to achieve ESG goals, cybersecurity threats, and litigation outcomes[17] - Cintas undertakes no obligation to publicly revise or update any forward-looking statements, except as required by law[17] Contact Information Contact details for investor relations and financial executives are provided for further information - Contacts: J. Michael Hansen (Executive Vice President and Chief Financial Officer) - 513-972-2079; Jared S. Mattingley (Vice President, Treasurer, and Investor Relations) - 513-972-4195[18] Consolidated Financial Statements Consolidated Condensed Statements of Income (Three Months) Cintas Corporation reported year-over-year growth in revenue, gross profit, operating income, net income, and a 21.1% increase in diluted EPS for the three months ended November 30, 2024 Consolidated Condensed Statements of Income (Three Months, as of November 30, in thousand USD, except per share data) | Metric | 2024 | 2023 | % Change | | :----------------------------------- | :-------- | :-------- | :------- | | Revenue: | | | | | Uniform Rental and Facility Services | 1,990,410 | 1,850,542 | 7.6% | | Other | 571,373 | 526,635 | 8.5% | | Total Revenue | 2,561,783 | 2,377,177 | 7.8% | | Costs and Expenses: | | | | | Cost of Uniform Rental and Facility Services | 1,014,052 | 974,231 | 4.1% | | Cost of Other | 271,028 | 261,398 | 3.7% | | Selling and Administrative Expenses | 685,313 | 641,865 | 6.8% | | Operating Income | 591,390 | 499,683 | 18.4% | | Interest Income | (962) | (769) | 25.1% | | Interest Expense | 26,665 | 26,590 | 0.3% | | Income Before Income Taxes | 565,687 | 473,862 | 19.4% | | Income Tax Expense | 117,192 | 99,249 | 18.1% | | Net Income | 448,495 | 374,613 | 19.7% | | Basic Earnings Per Share | 1.11 | 0.92 | 20.7% | | Diluted Earnings Per Share | 1.09 | 0.90 | 21.1% | Consolidated Condensed Statements of Income (Six Months) Cintas Corporation reported year-over-year growth in revenue, operating income, net income, and a 19.7% increase in diluted EPS for the six months ended November 30, 2024 Consolidated Condensed Statements of Income (Six Months, as of November 30, in thousand USD, except per share data) | Metric | 2024 | 2023 | % Change | | :----------------------------------- | :-------- | :-------- | :------- | | Revenue: | | | | | Uniform Rental and Facility Services | 3,924,249 | 3,677,367 | 6.7% | | Other | 1,139,121 | 1,042,140 | 9.3% | | Total Revenue | 5,063,370 | 4,719,507 | 7.3% | | Costs and Expenses: | | | | | Cost of Uniform Rental and Facility Services | 1,995,215 | 1,921,814 | 3.8% | | Cost of Other | 539,321 | 514,574 | 4.8% | | Selling and Administrative Expenses | 1,376,413 | 1,282,880 | 7.3% | | Operating Income | 1,152,421 | 1,000,239 | 15.2% | | Interest Income | (2,212) | (1,191) | 85.7% | | Interest Expense | 52,284 | 51,134 | 2.2% | | Income Before Income Taxes | 1,102,349 | 950,296 | 16.0% | | Income Tax Expense | 201,821 | 190,598 | 5.9% | | Net Income | 900,528 | 759,698 | 18.5% | | Basic Earnings Per Share | 2.22 | 1.86 | 19.4% | | Diluted Earnings Per Share | 2.19 | 1.83 | 19.7% | Consolidated Condensed Balance Sheets Cintas Corporation's consolidated condensed balance sheets as of November 30, 2024, show increases in total assets and total liabilities, with a slight decrease in total shareholders' equity Consolidated Condensed Balance Sheets (in thousand USD) | Metric | November 30, 2024 | May 31, 2024 | | :----------------------------------- | :---------------- | :----------- | | Assets: | | | | Total Current Assets | 3,170,391 | 3,185,207 | | Property and Equipment, Net | 1,590,688 | 1,534,168 | | Investments | 340,134 | 302,212 | | Goodwill | 3,323,043 | 3,212,424 | | Total Assets | 9,366,529 | 9,168,817 | | Liabilities and Shareholders' Equity: | | | | Total Current Liabilities | 2,007,767 | 1,828,519 | | Total Long-Term Liabilities | 3,065,656 | 3,023,926 | | Total Shareholders' Equity | 4,293,106 | 4,316,372 | | Total Liabilities and Shareholders' Equity | 9,366,529 | 9,168,817 | Consolidated Condensed Statements of Cash Flows Cintas Corporation's cash flow statement for the six months ended November 30, 2024, shows increased operating cash flow, but net outflows from investing and financing led to a net decrease in cash Consolidated Condensed Statements of Cash Flows (Six Months, as of November 30, in thousand USD) | Activity Type | 2024 | 2023 | | :--------------------------------------- | :-------- | :------ | | Net Cash Provided by Operating Activities | 908,136 | 729,631 | | Net Cash Used in Investing Activities | (349,003) | (282,195) | | Net Cash Used in Financing Activities | (776,945) | (485,810) | | Effect of Exchange Rate Changes | (1,808) | (219) | | Net Decrease in Cash and Cash Equivalents | (219,620) | (38,593) | | Cash and Cash Equivalents at Beginning of Period | 342,015 | 124,149 | | Cash and Cash Equivalents at End of Period | 122,395 | 85,556 | Supplemental Financial Data Gross Margin and Net Income Margin Results Cintas Corporation's gross margin and net income margin improved in both the second quarter and first six months of fiscal 2025, indicating enhanced profitability Gross Margin and Net Income Margin Results | Metric | November 30, 2024 (Three Months) | November 30, 2023 (Three Months) | November 30, 2024 (Six Months) | November 30, 2023 (Six Months) | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Uniform Rental and Facility Services Gross Margin | 49.1% | 47.4% | 49.2% | 47.7% | | Other Gross Margin | 52.6% | 50.4% | 52.7% | 50.6% | | Total Gross Margin | 49.8% | 48.0% | 49.9% | 48.4% | | Net Income Margin | 17.5% | 15.8% | 17.8% | 16.1% | Reconciliation of Non-GAAP Financial Measures The company provides reconciliations for non-GAAP financial measures, including free cash flow and organic revenue growth, to enhance investor understanding of its performance - The company provides non-GAAP financial measures such as free cash flow and organic revenue growth to supplement GAAP financial statements, aiming to enhance investor understanding of its past performance and future prospects[26] Computation of Free Cash Flow Computation of Free Cash Flow (Six Months, as of November 30, in thousand USD) | Metric | 2024 | 2023 | | :----------------------------------- | :------ | :------ | | Net Cash Provided by Operating Activities | 908,136 | 729,631 | | Capital Expenditures | (194,337) | (200,527) | | Free Cash Flow | 713,799 | 529,104 | - Management uses free cash flow to evaluate the company's financial performance, considering it useful for investors as it links operating cash flow to capital expenditures for sustaining, improving, and growing business operations[28] Computation of Organic Revenue Growth Computation of Organic Revenue Growth | Metric | Three Months (as of November 30) | Six Months (as of November 30) | | :----------------------------------- | :------------------------------- | :----------------------------- | | Revenue Growth Rate | 7.8% | 7.3% | | Workday-Adjusted Revenue Growth Rate | 7.8% | 8.1% | | Acquisition and Foreign Currency Impact, Net | (0.7)% | (0.5)% | | Organic Revenue Growth Rate | 7.1% | 7.6% | - Management believes organic revenue growth is valuable to investors as it reflects revenue performance compared to prior periods with the same number of revenue days, excluding the impact of acquisitions and foreign currency fluctuations[30] Supplemental Segment Data Cintas Corporation provides supplemental data by business segment, detailing each segment's revenue, gross profit, selling and administrative expenses, and operating income Supplemental Segment Data (Three Months, as of November 30, in thousand USD) | Metric | Uniform Rental and Facility Services | First Aid and Safety Services | All Other | Total | | :----------------------------------- | :----------------------------------- | :---------------------------- | :-------- | :-------- | | 2024: | | | | | | Revenue | 1,990,410 | 299,367 | 272,006 | 2,561,783 | | Gross Profit | 976,358 | 171,485 | 128,860 | 1,276,703 | | Selling and Administrative Expenses | 503,999 | 96,262 | 85,052 | 685,313 | | Operating Income | 472,359 | 75,223 | 43,808 | 591,390 | | 2023: | | | | | | Revenue | 1,850,542 | 266,401 | 260,234 | 2,377,177 | | Gross Profit | 876,311 | 145,316 | 119,921 | 1,141,548 | | Selling and Administrative Expenses | 476,700 | 86,785 | 78,380 | 641,865 | | Operating Income | 399,611 | 58,531 | 41,541 | 499,683 | Supplemental Segment Data (Six Months, as of November 30, in thousand USD) | Metric | Uniform Rental and Facility Services | First Aid and Safety Services | All Other | Total | | :----------------------------------- | :----------------------------------- | :---------------------------- | :-------- | :-------- | | 2024: | | | | | | Revenue | 3,924,249 | 591,934 | 547,187 | 5,063,370 | | Gross Profit | 1,929,034 | 340,288 | 259,512 | 2,528,834 | | Selling and Administrative Expenses | 1,010,237 | 193,777 | 172,399 | 1,376,413 | | Operating Income | 918,797 | 146,511 | 87,113 | 1,152,421 | | 2023: | | | | | | Revenue | 3,677,367 | 527,094 | 515,046 | 4,719,507 | | Gross Profit | 1,755,553 | 291,092 | 236,474 | 2,283,119 | | Selling and Administrative Expenses | 949,414 | 172,980 | 160,486 | 1,282,880 | | Operating Income | 806,139 | 118,112 | 75,988 | 1,000,239 |