信达思 (CTAS) 2027财年第一季度业绩电话会：营收突破30亿美元，上调业绩指引lg...

信达思（Cintas Corporation，NASDAQ: CTAS）公布2027财年第一季度营收首次突破30亿美元，这主要得益于新客户拓展、客户留存与交叉销售。管理层上调了全年的营收和调整后每股收益（EPS）指引，同时指出工作日天数安排将对季度同比比较产生影响。

核心要点

• 2027财年第一季度营收同比增长10.9%至30.1亿美元；在剔除并购、外汇变动及工作日天数差异后，内生性营收增长率为8.9%。
• 稀释每股收益增长13.3%至1.36美元。扣除与UniFirst交易相关的费用后，调整后稀释每股收益增长15.8%至1.39美元。
• 毛利率创下51.5%的历史新高；营业利润率上升90个基点，达到23.6%的历史新高。
• 各业务内生性增长率分别为：制服租赁与设施服务业务8.0%，急救与安全服务业务14.2%，消防服务业务9.2%，制服直销业务9.6%。
• 信达思将2027财年营收指引上调至121.5亿至122.7亿美元，并将调整后稀释每股收益指引上调至5.45至5.54美元。
• 管理层表示，业务量依然是主要增长动力。超过三分之二的新业务来自从无管理方案转化而来的客户，同时客户留存率和交叉销售表现也均有所提升。

关键财务数据

额外多出的一个工作日为2027财年第一季度营业利润率带来了50个基点的积极贡献，但被UniFirst交易相关费用造成的50个基点负面影响所抵消。销售及管理费用占营收的27.4%，同比改善了10个基点。

业务与运营表现

制服租赁与设施服务业务毛利率提升110个基点，创下50.8%的历史新高。管理层将这一改善归功于营收杠杆效应以及对支持员工生产力和客户服务的技术投资。

急救与安全服务仍是增长最快的业务。随着市场对工作场所安全、培训、合规、健康与保健解决方案需求的提升推动了经营杠杆，该业务的毛利率上升了80个基点。

消防服务业务受益于增加的工作日天数和良好的收入结构。管理层继续预计该业务将在2027财年实现双位数增长，但同时提醒，季度利润率可能会随销售结构以及在技术人员、领导层能力建设和新网点方面的投资而有所波动。

管理层表示定价策略与往年保持一致。增长主要反映了新业务生产力的提高、留存率的进一步提升以及交叉销售的加强。交叉销售目前仍处于“早期阶段”，在信达思的现有客户群中蕴藏着诸多增长机会。

生产力提升举措包括通过Smart Truck进行路线优化、服装共享、自动化、产能利用率提升以及供应链效率改善。管理层表示，这些举措旨在抵消成本压力，而非单纯依赖提价。

管理层指引

管理层表示，按照营收范围的中点和上限计算，更新后的指引意味着增量利润率达到32%-34%，高于此前预测的30%-32%区间。

2027财年的工作日天数比2026财年多一天。其中一季度增加了一个工作日，二季度天数相同，三季度减少一个，四季度增加一个。就全年而言，管理层估计多出的一个工作日将为营收增长带来40-50个基点的提升，为营业利润率带来10-15个基点的提升，并为增量利润率带来100-125个基点的提升。

该指引假定外汇汇率保持不变，且未计入未来的并购交易、未来的股票回购、重大经济动荡以及与UniFirst交易相关的非经常性费用。

风险与关注事项

• 工作日天数安排在一季度构成了利好因素，但在三季度形成了不利因素，这可能会导致季度营收增长率和利润率出现波动。
• 一季度能源支出占营收的1.8%，同比上升10个基点。管理层预计今年剩余时间的能源成本将维持在或略高于2026财年第四季度的水平。
• 由于收入结构变化以及在技术人员、管理能力和业务区域扩张方面的投入，消防服务业务的利润率可能会发生波动。
• 消防服务业务的SAP系统仍处于试点阶段，尚未正式上线。管理层预计系统推广将于2027财年期间开始，但也指出ERP系统转换过程较为复杂。
• 对UniFirst收购案的监管审批目前仍在美国和加拿大推进。管理层表示，对交易在2026日历年年底前完成保持乐观。

分析师问答精选

推动营收展望上调的主要因素是什么？管理层指出，新客户拓展、客户留存以及交叉销售全面提升。超过三分之二的新业务来自客户从无管理方案转向信达思的管理解决方案。

宏观经济的不确定性是否削弱了需求？管理层将当前环境描述为充满动态变化，但表示客户需求依然稳定。公司未观察到销售周期出现显著变化，并指出当客户追求效率和运营一致性时，外包服务的价值往往更为突出。

投资者应如何看待利润率的变化节奏？上半年受益于较低的对比基数以及一季度增加的一个工作日。下半年的对比基数则更具挑战，包括三季度减少了一个工作日以及四季度面临较高的增量利润率对比基数。

信达思如何应对通货膨胀？管理层表示公司不征收燃料附加费，也不会自动将上升的投入成本转嫁给客户。公司计划尽可能通过提升运营效率、运用技术手段及优化供应链管理来消化成本压力。

员工留存率的前景如何？管理层表示员工合伙人的留存率处于历史最高水平，并将薪酬待遇、福利、工作环境和企业文化列为关键因素。

业绩电话会议完整文字记录

---

完整财报电话会议逐字稿

管理层陈述

Operator

Good day, everyone, and welcome to the Cintas Corporation Announces Fiscal 2027 First Quarter Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingley, Vice President, Treasurer and Investor Relations. Please go ahead, sir.

Jared Mattingley

Thank you, Ross, and thank you for joining us. With me are Todd Schneider, Chief Executive Officer; James Rozakis, President and Chief Operating Officer; and Scott Garula, Executive Vice President and Chief Financial Officer.

We will discuss our fiscal 2027 first quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 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'll now turn the call over to Todd.

Todd Schneider

Thank you, Jared. We are pleased with our start to fiscal 2027. Our first quarter results reflect the strength of our business model, the execution of our employee partners and the value proposition we provide by helping customers meet their image, safety, cleanliness and compliance needs. First quarter total revenue grew 10.9% to $3.01 billion. This marks the first time we have reached $3 billion of revenue in a quarter. The organic growth rate, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and Workday differences was 8.9%. We remain encouraged by the consistency of demand we are seeing as businesses continue to see the value of outsourcing to a service provider like Cintas.

Our first quarter performance demonstrates that Cintas is well positioned to help businesses of all sizes improve productivity, reduce complexity and operate more efficiently, whether through our Uniform Rental and Facility Services business, First Aid and Safety Solutions, Fire Protection Services or our Uniform Direct Sale business, our value proposition continues to resonate.

Diluted EPS for the quarter was $1.36, an increase of 13.3% from the prior year. Adjusting for the UniFirst transaction-related expenses, adjusted diluted EPS was $1.39, an increase of 15.8% from the prior year. Drawing on the strength of our performance, we continue to allocate capital in a balanced manner in the first quarter. Our capital expenditures were within our targeted range at 3.6% of sales. We were active in M&A and increased our dividend 15.6% for the shareholders of record as of August 14, 2026. We are pleased to have increased our dividend every year since going public 43 years ago.

In addition, we were opportunistic with our share buybacks, purchasing $545 million through today's date. Our culture remains our greatest competitive advantage. The combination of our strong culture, operational excellence, effective supply chain management, technology investments and focus on customer experience continues to differentiate Cintas in a highly competitive market. Reflecting our strong first quarter performance and confidence in the remainder of the year, we are updating our fiscal 2027 guidance. We are raising fiscal 2027 revenue guidance from a range of $12.10 billion to $12.25 billion to a range of $12.15 billion to $12.27 billion, a total growth rate of 7.9% to 8.9%.

We are also raising our fiscal 2027 adjusted diluted EPS from a range of $5.36 to $5.50 to a range of $5.45 to $5.54, a growth rate of 10.3% to 12.1%.

Before I turn the call over to Jim, I'd like to provide a brief update on our acquisition of UniFirst. First, we remain confident of the substantial long-term value creation for our combined customers, partners and shareholders. We mentioned on our last call that the merger was subject to regulatory clearances in both the U.S. and Canada. That process is ongoing as we continue to work toward obtaining regulatory clearance and completing other closing conditions. We remain optimistic that the deal will close by the end 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 it over to Jim to discuss our operating performance in greater detail.

James Rozakis

Thank you, Todd. Our employee partners continue to execute at a high level and demonstrate how well our value proposition resonates with customers of all sizes. Our strong top line growth is due to a number of factors, largely contrate around our ability to deliver more value for customers. We are succeeding and tapping into the massive total addressable market as we convert no programmers to a managed solution. In addition, we continue to expand our relationships with existing customers by adding new products and services. And we are maintaining strong customer retention while pricing remains consistent with prior years.

I'm going to provide an example in our rental business of converting a no programmer to a managed rental solution, an owner of a small fitness studio on Florida recently shared on social media, why she chose to partner with Cintas. Her story highlights why our value proposition resonates so strongly with small businesses. As our company expanded, she found ourselves spending more and more time managing restaurant supplies, formats, air fresheners and other facility needs that were essential to maintaining the experience our members expected. She recognized those responsibilities were taking time away from serving our customers, supporting our employees and growing our business. By outsourcing the Cintas, she gained a convenience of a trusted partner. The breadth of our product line addressed our facility needs while enhancing the image, cleanliness and consistency of our studios. Most importantly, it gave for a valuable time back to focus on the core aspects of our operation and what matters most. That's why our value proposition continues to resonate with small businesses, and why they represent such an important part of our addressable market.

Business owners like her are already managing these responsibilities on our own and recognize that partner with Cintas helps them operate more efficiently, elevate the customer experience and focus on growing their business. That value proposition continues to drive strong customer demand across our businesses and was reflected in our performance this quarter.

As Todd mentioned, we had strong organic revenue growth for the company. Organic growth by business was 8% for Uniform Rental and Facility Services, 14.2% for First Aid Safety Services, 9.2% for Fire Protection Services and 9.6% for Uniform Direct sale. Gross margin as a percentage of revenue was 51.5%, an all-time high. Gross margin percentage by business was 50.8% for Uniform Rental Facility Services, 57.6% for First Aid and Safety Services, 52.8% of our Protection Services and 38.9% for Uniform Direct sales.

Gross margin for the Uniform Rental and Facility Services segment increased 110 basis points from last year to achieve an all-time high gross margin of 50.8%. This business continues to benefit from strong revenue growth, which creates leverage. In addition, we continue to see margin expansion as a result of the investments we are making in technology. These technology investments also serve to make it easier for our employee partners to do their job while creating a better customer experience. Our First Day in Safety Services segment gross margin increased 80 basis points from last year. We continue to grow at attractive rates, which is also creating leverage. Businesses throughout the United States and Canada continue to place an imposition of workplace safety, training, compliance and health and wellness solutions. Our Fire Protection Services segment had really strong margins for the quarter. Keep in mind that margins can fluctuate from quarter-to-quarter based on the timing of certain investments and sales mix. Some of those investments include increasing growth capacity by hiring technicians need to perform specialized tasks as well as building out a national footprint. Selling and administrative expenses as a percent of revenue was 27.4%, which was a 10 basis point improvement from last year.

With that, I'll turn it over to Scott.

Scott Farmer

Thanks, Jim, and good morning, everyone. First quarter operating income was $711.9 million compared to $617.9 million last year, an increase of 15.2%. Excluding the UniFirst transaction-related expenses, operating income increased 17.6% over the prior year. Operating income as a percentage of revenue was at an all-time high at 23.6% in the first quarter of fiscal 2027 compared to 22.7% in last year's first quarter. Keep in mind that there was an extra work day in the first quarter. The impact of the extra Workday on operating margin was a benefit of 50 basis points, which was offset by 50 basis points of UniFirst transaction-related expenses.

Comparing to the prior year operating margin of 22.7%, the adjusted operating margin for the first quarter was 23.6%, a 90 basis point improvement. Our effective tax rate for the first quarter was 20.0% compared to 17.6% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the first quarter was $551.7 million compared to $491.1 million last year. This year's first quarter diluted earnings per share was $1.36 compared to $1.20 last year, an increase of 13.3%. Excluding the UniFirst transaction-related expenses, adjusted diluted earnings per share was $1.39 compared to $1.20 last year, an increase of 15.8%.

Cash flow generation was stronger in the quarter and continues to support a balanced approach to capital allocation. We invested $107.5 million in capital expenditures during the quarter, primarily focused on technology, automation, capacity expansion and infrastructure investments that support future growth. We also continue to evaluate strategic acquisition opportunities across our route-based businesses. Returning capital to shareholders remains an important priority. During the quarter, we increased our regular quarterly dividend by 15.6% and up through today made $545 million in share repurchases.

Earlier, Tom provided our updated fiscal 2027 outlook. That outlook assumes the following: Fiscal 2027 has one more workday than fiscal 2026. Keep in mind the first quarter had one extra work day compared to the prior year first quarter. The second quarter will have the same number of workdays year-over-year. The third quarter will have one less workday and the fourth quarter will have one more work day than fiscal 2026. Our guidance does not assume any future acquisitions. Our guidance assumes a constant foreign currency exchange rate. The fiscal 2027 net interest expense is expected to be approximately $103 million, a fiscal 2027 effective tax rate of 20.4% compared to 20.2% in fiscal 2026. The guide does not include the impact of any future share buybacks or significant economic disruptions or downturns and the guide excludes nonrecurring transaction costs related to the UniFirst acquisition.

With that, I'll turn it back to Todd for some closing remarks.

Todd Schneider

Thank you, Scott. Looking ahead, we remain confident in our strategy and the long-term opportunities available to Cintas. We continue to see significant opportunity in a massive addressable market. The market remains highly competitive, and we believe our value proposition positions us well to help our customers meet their needs of image, safety, cleanliness and compliance. The future of Cintas remains bright, and our employee partners continue to demonstrate by our culture is our greatest competitive advantage. As always, I want to thank our employee partners for their dedication to our customers and Cintas.

I'll now turn it back over to Jared.

Jared Mattingley

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

Operator

[Operator Instructions] And our first question comes from Tim Mulrooney from William Blair.

分析师问答

Unknown Analyst

This is Rene Gagliardo on for Tim Mulrooney. It looks like you raised your revenue guidance a little bit here for the full year. Would you mind walking us through what the primary drivers are behind that?

Todd Schneider

Rene, this is Todd. I'll start, but we're -- we have many ways to grow. And the most important driver for us is new business. Converting over no programmers has been part of our history and part of our future. This is a key component for us and over 2/3 of our new business comes from no programmers. So that has been significant for us. We certainly have other ways to grow. And when we think about our current customer growth, that has been important to us. and has been steady if nothing else is positive. But our opportunities there, we see as continuing to grow our volume is our #1 focus. And the key inputs that we're seeing have been creating good momentum for us. I think you saw that in our opening guide but you also see that in our updated guidance as well. So Jim, anything you'd like to contribute on that subject?

James Rozakis

Yes. Not really, Todd. I think that you summarized it well. We're off to a nice start for the year. We really like how we're positioned it speaks to, again, the size of the market and that there is -- today, we have 1 million customers and 16 million to 20 million businesses. It also speaks to the value proposition that we have and our ability to continue to convert new programmers over to a managed solution like the commentary or like the example that I provided in our prepared remarks, our cross-sell efforts continue to go very well. And I think it's important to note that the vast majority of our growth and the momentum we have is in volume growth, which is more new customers, better retention rates, increasing our cross-sell. So a little bit of improvement on all those, and that's really what's impacting the guide. So we are really pleased with the start of the fiscal year.

Unknown Analyst

And one follow-up on that, specifically around the Uniform Rental space, looks like organic growth stepped up quite a bit in the first quarter versus the fourth. Was there anything notable behind that improvement specifically, be it new account sales or retention? Or is that result more or less in line with your internal forecast for the quarter?

James Rozakis

Yes. Thank you, Rene, this is Jim. I'll start on that one. I think that if you unpack the rental division growth. We really have four key inputs that we speak about for organic growth of rental pricing being one of those, being probably the least important of the four and pricing was consistent with prior year. So really no change there. The other three being new business, which, once again, 2/3 of that new business comes from that new program or space, new business being the most substantial growth driver that we have. That performed well once again in the quarter. Retention continues to perform really well, slight improvement in retention and then a little bit of improvement there in cross-sell. So a little bit of improvement, I think, in all three of those volume-based buckets that we would know. Now I would keep in mind that rental, in particular, had the most favorable comp in the first quarter. Last year, our rental growth rate in Q1 was 7.3%, so it gave us a little bit more favorable comp. And I would also keep in mind that we are comfortable with that moving a little bit in our stated range of mid- to high single digits. So for example, last fiscal year, we opened Q1 with an organic growth rate of 7.3%, that growth rate went to 7.8% in Q2, it turned back to 7.3% in Q3 and then up to 7.9% in Q4. So it just shows that running a business isn't linear, and we expect a little bit of variability quarter-to-quarter, but we're certainly pleased with the start of the fiscal year, and we're appreciative of how well our employee partners are executing.

Operator

And our next question comes from Manav Patnaik from Barclays.

Manav Patnaik

Just on that last part, Jim, maybe if you could elaborate a little bit more on the customer conversations you're having today in the context of all the macro uncertainty rates, even maybe your pending UniFirst deal. Just to get some more color on other than, I guess, some quarterly fluctuations like you talked about the underlying trends still seems much better than last year.

Todd Schneider

Good morning, Manav. This is Todd, I'll start. From a macro standpoint, it is certainly a dynamic environment, but we're pleased with where the demand is coming from with our customer base. As you know, we have a pretty broad customer base. So we've got some that are absolutely thriving and others that are struggling. But in general, we're quite pleased. If you look at GDP and the jobs report, they've been positive, a little -- the jobs have been a little bit choppy. But as we've stated in the past, we don't need that. We prefer an absolutely thriving economy, just like any American wood, but we don't need it. And we've demonstrated in the past that we can grow multiples to GDP and multiples of employment. Now we care passionately about how our customer base is performing, meaning how healthy their businesses are, but even in choppy environment, we have the ability to help them. And in certain cases, we're even more valuable than. But as far as any specifics on -- in our customer base, I'll pass it over to Jim.

James Rozakis

Yes. Manav, appreciate the question. And I would say that, as Todd started the ended there was that our customers right now and any time it's a dynamic environment, they are looking for solutions. They're looking for consistency. They're looking for help in running their business. And outsourcing provides exactly that. It gives them an opportunity to focus back on their business and their core elements of their business. So our value proposition certainly resonates in all different types of economic cycles, but it may resonate even more in a dynamic environment. And we see that in our ability to convert new business and our ability to go ahead and cross-sell. And the majority of our customers today are solving for image, safety, cleanliness and compliance in some way, and they see that outsourcing to Cintas is another way to solve for that, oftentimes, more efficient, more reliable way and certainly a time saver for them. So we really like where we are. We like the value proposition and think it's resonating well even in today's environment.

Manav Patnaik

Got it. Okay. That helps frame the second half or the remainder of the year kind of revenue guidance. Maybe any thoughts on the cadence of margins for the rest of the year, any comps or noise to call out there?

Todd Schneider

Yes, Manav, we feel really good about our guide. If you look at -- on the margin side, the guide infers a really attractive year along with operating margin improvement and incrementals right where we like them throughout the guide. So the incrementals that we're guiding for would be now at 32% to 34%. That's an increase from 30% to 32%. and operating margin expansion at double-digit rates throughout. So we feel really good about the guidance.

Timothy Mulrooney

Yes. And Manav, just maybe if I can just provide a little additional color. So certainly, a great start to the year on incremental margins. And as Todd pointed out, expecting to have a good year relative to incrementals mid- to high point of the guide 32% to 34%. I think some things that maybe for -- making sure we frame up the year correctly. Just keep in mind that Q1 and the first half is largely a little bit of a tailwind. So Q1, we get one extra workday and the comps in the first half prior year we're coming off our most favorable comparisons. Prior year incrementals in Q1 were 26%, Q2 were 27%. That dynamic reverses in the second half of the year. And in Q3, we have one less workday. And in Q4, we have our most difficult comp, effectively 38% for the Q4 last year incrementals. So overall, shaping up to be a really nice year in our stated range, but in the upper half of our stated range, but you may see some variability quarter-to-quarter.

Scott Garula

Manav, just a couple other points. This is Scott good morning. Todd talked about our guide. The only thing that I might add on the EPS guide is that at all points of the guide, we're demonstrating double-digit earnings growth, EPS growth throughout the range. Jim's alluded to the additional workday. And certainly, the extra Workday provided a little bit of a tailwind for us. You heard in my opening comments that had an impact on operating margin of 50 basis points. If you think about the Workday impact on incrementals in the first quarter, it was 400 basis points. And then I think it's important that, as I talked about in the opening remarks on the number of workdays by quarter. We had the benefit of an additional workday in Q1, in Q2, the same number of workdays year-over-year. And then in Q3, we actually have one less workday. And in Q4, we have one more. So when you think about the tailwind that we had in the first quarter on operating margin and incrementals, it's going to be a headwind in Q3. And just think about for the year, the one extra workday on an annual basis, revenue, think about the extra workday on an annual basis of 40 to 50 basis points on operating margin, think about it in the range of 10 to 15 basis points. And then on incrementals for the year, think about the extra workday in the range of 100 to 125 basis points. So this will be a year that we're going to be talking about workday differential kind a bit. We definitely had a tailwind on that in Q1, and it will create a headwind for us in Q3. So make sure as you're thinking about the year, you think about the workday differential and the impact on growth and margin.

Operator

And our next question comes from Andy Wittmann from R.W. Baird.

Andrew J. Wittmann

All the singing into the guidance and those assumptions is really helpful. I know this is a smaller point, but one I think that is worth understanding is on the interest expense. I just noticed that for the quarter here, you weren't quite $25 million of interest expense little bit of interest income on that. You're guiding your net interest expense increasing for the year, and you've got a comment in your release about how amortization costs are a factor in that related to the UniFirst deal. So I just was hoping to understand maybe, Scott, the mechanism by which that happens. Like the deal hasn't closed yet, but you've lined up some financing in advance of that, that you're paying noncash interest on. Can you just help me understand this so that we can get our model correct, and we don't have to -- so we can just understand how this is going to play out for the year, please?

Scott Garula

Yes. Good morning, and thanks for the question. I guess as far as -- I'll answer the question in really two parts. So when you think about our guide on our net interest expense of $103 million, we're really not changing the guide for Q2 through 4. We had some favorable results in the first quarter just based on a positive cash flow. And the fact that we were not in CP, commercial paper, at the end of the first quarter, so that had a positive impact in Q1. But if you look at what it implies for Q2 through Q4, it lines up with the original guide that we had. As far as the financing related to the UniFirst transaction, those fees are related to the bridge loan that we secured. And we've got fees associated with that bridge loan of approximately $6 million over the term of the agreement, to think about it, $6 million over 18 months. And that gets expensed to net interest expense, and that's what you're seeing there. So for fiscal year '27, that will account for about $4 million of interest expense.

Andrew J. Wittmann

Got it. That's helpful. And I just wanted to ask my follow-up on the fire segment and the implementation of the SAP system there. We saw obviously the impact to the SG&A in that segment from that initiative. I was hoping you could maybe comment on if this is the right kind of SG&A level to think of for the balance of the year, where is the status of that program today in terms of its rollout? And do you have any better clarity on when the go live of that system will happen. So that we can just start thinking about the profit margin benefits that, that can result with as well as the falloff of the onetime cost for its implementation.

James Rozakis

Andy, this is Jim. I'll start on Fire Protection. And then if Scott wants to add any more color relative to the SG&A line. But I would tell you that the SAP, we have not started and we have not gone live with SAP in our Fire Protection business yet. SAP is still in pilot, and we are working diligently on that program, and we expect it to start rolling out at some point during this fiscal year. And as you know, rolling out a conversion like this is typically difficult and certainly complicated. But we like our playbook. We like our track record of ERP implementations like this, but it will take time, but it's not impacting our guidance, or it's not impacting our results at this point.

Scott Garula

Yes. And just, I guess, to add some color on SG&A. When you look at our overall SG&A expense, it's really flat when you look at the Q1 over Q1 as well as sequentially, the UniFirst transaction expenses are pulled out of that. So we are comparing apples-to-apples. And this is the area of the P&L that you're seeing some of our investments to continue to grow at the attractive rates. Some of those investments would include technology, some of those investments, selling resources, management bench strength. So those are some of the key inputs that help drive the top line revenue momentum that you're seeing. But overall, SG&A is flat sequentially and year-over-year.

James Rozakis

Yes. And maybe the last point I might just add, Andy, is that when you look at the All Other segment, it does include our Uniform Direct Sale business, and we know that the results in that business tend to have a little bit more variability quarter-to-quarter. So keep in mind, it's a blended result.

Operator

And our next question comes from George Tong from Goldman Sachs.

Keen Fai Tong

Can you talk a bit about how performance in the quarter varied across your verticals where you're seeing the most strength and where you're seeing any pockets of weakness?

James Rozakis

Hi, George. This is Jim. I'll start on that. And I would tell you, again, we really like the verticals that we've selected and all of them are performing quite well for us, and they continue to outperform the business as a whole. And so we're pleased with where we are. As a reminder, we're organized around health care and not only just in selling resources, but also our product line and delivery methodology there. Our hospitality, state and local government and education. All of those have performed really well for us and continue to perform well for us, and we continue to make investments and really like the verticals that we've selected and really like the way we've organized around those. So nothing specific to call out as one outperforming the others that are all performing above the company average.

Keen Fai Tong

Got it. That's helpful. And then can you talk a bit about how higher fuel and energy costs are impacting margins? And what actions, including pricing and operational changes you're taking to offset the impact?

Todd Schneider

George, I'll start with that one. As you know, it's a volatile situation with the price at the pump. As a reminder, we do not pass through any fuel surcharges. We manage it operationally, and we expect to get -- extract out inefficiencies in our business. And I think you're seeing it show up the price at the pump is certainly up. We had a good success from going from Q4 to Q1, down 10 bps, were up year over prior 10 bps on energy. But we're -- from a modeling standpoint, we expect it to be at, I'll call it, Q4 type levels, so a little bit above where we were in Q1 for the rest of the year. But we're going to manage through this. And as a reminder, price at the pump is about 60% of our energy costs, which is about 100 bps for the year. So there's other input costs, whether it's electric or natural gas, and we feel good about how the team is managing it, volatile area of the economy, but we're prepared to manage it and manage it efficiently, and it's certainly contemplated in our guide as well.

Operator

And our next question comes from Josh Chan from UBS.

Joshua Chan

Maybe sticking on the inflation side for a bit. Could you talk about kind of other areas of the cost structure, cotton what you're seeing in terms of inflation and kind of how you're managing those areas?

Todd Schneider

Yes, Josh. Good morning. We're certainly not immune from inflation. It is something that when we think about it, we think immediately about corporate culture because corporate cultures are our ultimate competitive advantage. And when you're dealing with these types of environments, it gives us an opportunity to really shine. And our supply chain has done a remarkable job in managing through the input costs that are important. And we've -- we're committed to managing this efficiently. And as inflation is up, we don't take the approach that well prices, our costs are up. So we're just going to pass along to the customers. We don't pick that approach because we operate in an incredibly competitive market. Our customers have choices. And as a result, we've got to be better than that. And the organization knows that. The leadership team has digested that and leads through it. And so we find ways to extract out inefficiencies in our business. And we're doing that by investing appropriately and seeing around the corner and technology being an important area for that. So we're -- you're seeing that show up in our results. And we think we're well positioned to manage it moving forward. So yes, we'll monitor it. We'll manage it. But as a result of that, as Jim stated earlier, our growth that you're seeing is not because of pricing. I mean, it's -- pricing always plays some component in it, but it is consistent with past years. Our growth is from volume, and our margin expansion is because of our corporate culture, and our team seeing around the corner and implementing projects that help us extract out those inefficiencies. I'm really proud of what they've accomplished.

Scott Farmer

Josh, this is Scott. I might just add one other point that when you think about inflation and certain parts of the P&L that might impact. We also have the advantage of time, meaning that any inflationary pressure that we receive on material cost that gets amortized. For instance -- on the garment side, the average amortization period is 18 months. If you think about another part of the P&L, like plant equipment or trucks, we also have the advantage of time here where we depreciate those -- that equipment over, call it, an average of 10 years. And then there's certainly other areas of the P&L. Todd talked about energy, supplies. Those are impacted, but they're just not material to our overall results. And as Todd alluded to, we've been able to overcome any inflationary pressure on fuel and have demonstrated that really over the last two fiscal quarters.

Joshua Chan

Yes. That's great to hear. And maybe on the growth side of things, just stepping back from the quarter and the days. I guess, two years ago, you were growing around 8% organic. Now you have a couple of quarters in a row of above 8% organic and kind of almost 9% this quarter. So as compared to then, what's better now because I know that you have always had good retention. Your new business is always strong, but what's different now versus maybe like a year or two ago?

James Rozakis

Josh, this is Jim. I'll start on that one. And again, I think we unpack our main drivers of growth, and we look at the big inputs. I think Todd pointed out, we said a couple of times, pricing is consistent with prior year. So that's neutral in our growth algorithm there. And then if you look at the other three, when I say the other three new business being the biggest contributor of our growth, you look at our strong retention and then cross-sell, each 1 of the 3 have had improvements over the last year. So we continue to see improved productivity from our sales organization. Our sales organization is doing a great job, capitalizing on the TAM and the unserved marketplace. So we're really proud of the work that they're doing there. Retention has been really attractive, but continues to show incremental improvements, and we like the trend line what we have going on with our retention. And then cross-sell, this is one that we've been working really hard on continuing to penetrate our current customer base. And we recognize in our current customers that there is so much opportunity of products and services that we supply that they are already spending money on in other ways and trying to solve for that issue. And our teams have continued to focus on that. We're working really diligently on that when we continue to see incremental improvements in our cross-sell efforts. So if you look at that across the board, new business retention and cross-sell kind of evenly distributed on the improvement. Now I did mention earlier in the commentary, that we do expect that this growth will move from quarter-to-quarter and running a businesses in linear. So it doesn't just continue to go up in perpetuity. You will see some changes quarter-to-quarter. Like the example I gave of our rental business going through last year. But we're pleased with the start of the year. We're pleased with how well our value proposition resonates, and we like where we're at.

Operator

And our next question comes from Jasper Bibb from Truist Securities.

Jasper Bibb

I wanted to follow up on the earlier question on energy costs as a percentage of revenue in the guide, if you don't mind. I think the initial guide assumed about a 20 basis point year-on-year headwind. If I extrapolate your comments about being similar to the fiscal fourth quarter '26, I think it's still maybe 20 basis points, maybe 30 basis points headwind in your '27 guidance. Is that the right way to think about it?

Scott Farmer

Yes. Jasper, this is Scott. Yes, just to kind of walk through energy, we finished the quarter at 1.8% in energy, which as Todd alluded to, was up over last Q1 by 10 bps, but down versus Q4 by 10 bps. We feel really comfortable with how we've got energy contemplated in our guide, which is slightly above where we actually experienced Q4, and we're not expecting energy to be a headwind relative to our guide. And as Todd alluded to, when you think about our energy expense, only 60% of our energy expense is fuel for our trucks, so call it 100 bps. So we're seeing a 30% increase at the pump that for an extended period of time, that could be 30 bps impact on the P&L from our historical levels of 1.7. And we've got a variety of ways that we can offset that. And I would chalk the first one up to what Todd talked about inflation, that's just our culture. But no matter what our performance is, no matter what environment that we're operating, we're always looking at ways to extract cost or inefficiencies from the business to offset any cost headwinds.

Jasper Bibb

Makes sense. And then another really nice quarter for First Aid. Can you talk about what's driving the success there and where you are as far as the cross-selling penetration between your first aid customers and our uniform customers?

James Rozakis

Yes, Jasper, this is Jim. I'll start on First Aid and Safety and start with. We really love the First Aid and Safety business and the value proposition that it represents and certainly an easy one for our employee partners to rally behind is taking care of the health and wellness of employees and customers of our customers. So they've done a fantastic job in that business. So we really like the outlook of it certainly, as I mentioned in my commentary, more and more people continue to focus on providing those wellness solutions. I would just say that, that business, certainly cross-sell is a key component, but their growth algorithm is pretty similar to what I just described in the rental business, which is you've got kind of four major inputs. You got pricing. And once again, pricing is consistent with prior years. New business, and we continue to see increased productivity levels on our new business team in our first at safety business, and we like the way that's performing. Retention is up and cross-sell continues to perform very well. And we've got nice momentum behind cross-sell between our rental customers and our First Aid Safety customer. So I would say, again, that's one that's pretty evenly distributed across the board, and we're really pleased with the way that business is performing, and our employee partners are executing at an extremely high level.

Operator

And our next question comes from Jason Haas from Wells Fargo.

Jason Haas

I wanted to follow up on an earlier response to your question around incremental margins. I thought you said that the guidance implies incremental margins this year of 32% to 34%. Can you just clarify like what exact math you're doing to get there? Is that like the high end of guidance? Are you taking like -- can you just explain that math because I'm having a little trouble getting there.

Scott Garula

Jason, good morning. This is Scott. When you're looking at the implied incremental margin that 32% to 34%, that's based on the mid and the high end of the revenue range. So that's where you should focus on doing the math there to arrive at that 32% to 34% incremental.

Jason Haas

Okay. Great. All right. Cool. I'll double check that. And then I just wanted to follow up on the Fire Protection segment. The growth -- I know you guys are a little bit of a victory around [indiscernible], but the growth moderated a little bit, but then there was a really nice improvement in the gross margin. So I wasn't sure if maybe you're like shedding some lower-margin business? Or if there's any dynamics to discuss within Fire there?

James Rozakis

Yes, Jason, this is Jim. Let me unpack that one a little bit. I'll start on the top line with the revenue. And I would say that the revenue is really nothing specific to call out. Again, growth is going to move a little bit quarter-to-quarter. And our growth expectations in this business remain unchanged. We expect this to be a double-digit growth business. Our trailing 12 months is above 10%. It's around 10.5, and we expect to finish this year over 10%, and we love the fundamentals of this business. But you will see some variation quarter-to-quarter. So the first quarter was a little bit lower. We'll expect it to move around a little bit in future quarters. Now regarding margin, I do think it's probably worth spending a minute on the margin. We had a really strong quarter. In the first quarter on gross margin in Fire Protection. Certainly, that benefited from 1x workday, but it also benefited from some mix of business. And you will see that margin move in future quarters and will move for really two primary reasons in this business. One will be continued investments. And as we mentioned, we love the outlook of this business, and we love the growth structure of this business. So we want to continue to make investments in this business. Part of that is investing in capacity. And in this business, capacity comes in the form of technicians that can get out there and perform specialized work. And as you bring those technicians are not quite as productive day 1. So that could impact the margins go backwards there a little bit. It's certainly another investment we want to make is in bench, and we know that we have a bright outlook of this future. So we need to invest in our leadership bench strength. And then last and probably most significant would be new flags as we continue to build out a national footprint in this business as we still don't have operations in cities like Charlotte, Nashville and Minneapolis. So we will plant new flags. We will continue to invest in this business and that will cause a little bit of that gross margin to move from quarter-to-quarter. The second item that really moves gross margin in this business is revenue mix. And it's the business has a lot of revenue streams from the portable fire extinguishers to the alarms to the sprinklers and lots of ways that those streams generate revenue, things like test and inspection, repair work, project work and/or equipment. And how that revenue moves, the mix of that revenue from quarter-to-quarter will impact gross margin. The first quarter of this year, we certainly benefited from the extra day, but also a very, very favorable revenue mix. So you may see that move a little bit in future quarters.

Scott Garula

And then -- Jason, this is Scott, again. Just going back to your question on the math on incrementals, One thing just to remind you to keep in mind is the Workday differential impact that I walked through earlier. For the quarter, incrementals benefited from the extra Workday by 400 basis points. For the year as you're doing the math on that incremental margin, just take into consideration that, that extra workday in the year will have 100 to 125 basis point impact on incrementals.

Operator

And our next question comes from Seth Weber from BNP Paribas.

Seth Weber

There have been a few questions and answers about cross-selling this morning. I was wondering if -- is it possible to frame that for us what your wallet share is today or kind of penetration rate? Or just give us some metrics around where that is today versus where you think what that -- what you think that could add to the business going forward?

Todd Schneider

Seth, this is Todd. I'll call it, we're in the early innings of cross-sell. We think it can be an important driver for our business. And Jim mentioned that one of the keys around this is -- this isn't new money. Whenever we go to cross-sell, our customer base is solving for whatever the items that we're talking about in some manner. And so that's important for us as we move forward. Certainly, we think the more products and services we provide, the more value that the customer sees in us, and that's obviously a great indicator of our relationship with them. But it's a -- there's -- we're very much in the early innings as far as cross-sell, and we're encouraged by the moves we made and the outlook there.

Seth Weber

Okay. And then maybe just another one on the macro. Have you seen any kind of extension in the sales cycles are contracts taking longer to execute? Or any kind of just pause from customers as they contemplate making these changes?

Todd Schneider

Yes, Seth, we have not seen any changes to sales cycle. And as I mentioned earlier, we've got such a broad customer base that you'll see puts and takes within those. But in general, I would say the customer base is quite stable, and I haven't seen any real changes in the base of the customers.

Operator

And our next question comes from Curtis Nagle from Bank of America.

Curtis Nagle

Just a quick clarification point. I just want to make sure I understand, how energy is factored in the guide. Scott, I think you said for the year, slightly above the range in 4Q. So does that imply, I think, somewhere around 1.8% of sales? And then if I were to compare that for the total year in terms of rate of change, what would that be? So from fiscal '27 to '26, 20 basis points difference?

Scott Garula

Yes. Thank you for the question. When we think about energy, I'll just kind of go back and compare Q1 results to prior Q1. We were up 10 basis points over first quarter last fiscal year, down versus Q4 of last fiscal year. And the guide contemplates being slightly higher than where we were in Q4. So we're not expecting to experience any headwind relative to our guide. And just to reemphasize a point that Todd made earlier. When you think about energy, 60% of our energy costs are related to fuel for our trucks. That breaks down to about 100 basis points. So even if we experienced really elevated the fuel at the pump, let's say, 40% increase for an extended period of time, that's 40 basis points of incremental cost that we would be facing, which in the whole grand scheme of things is immaterial. And we've demonstrated over time that we can overcome that. Todd mentioned their culture of extracting costs from the business. Our global supply chain continues to operate at a high level and is a strategic advantage for us. And we just don't -- we don't feel that is going to have an impact on the business. So I would take a look at where our energy expenses are in Q1, maybe take a look at it from Q4. And if you're looking at modeling, that's where I would place it.

Todd Schneider

Curtis, I'll just say that trying to predict exactly what's going to happen with the price of oil and the price of the pump, I mean that's challenging. The vast majority of our fleet is gas. Diesel has been is a very small percentage. So not as much of exposure there, by any stretch. And -- but to Scott's point, we've got to contemplate we're contemplating an increased level for the balance of the year, and we've got other levers that we're going to extract now. So if energy is up some, we're even above where we're expecting, then we'll manage it. And I think we've demonstrated the ability to manage input costs in the past, and we're confident in our ability to meet our guide.

Curtis Nagle

Okay. Great. And then maybe just one last follow-up relative to cross-sell. So obviously, we've seen some strong wins with -- sorry, within the existing base. Is that overall or specific product lines you'd point out in terms of where you're seeing success. Anything you can comment there?

James Rozakis

Hi, Curtis, this is Jim. I'll start with that one. And yes, I would say no, no one specific product line to call out. Every customer has different needs. One of the unique parts about our model is that we're a high-touch model, meaning we have representatives within their facilities on a regular cadence, and they're often able to really get to know those customers understand their needs, understand their pain points, understand the things that they are working diligently to solve for, and we have such a broad product offering that is really a one-off on exactly what products may resonate for a particular customer or a particular time. But we like the fact that we're in there. We're building relationships we're demonstrating our professionalism, our reliability, our consistency, how that creates convenience for the customer. And then just trying to set the stage that every time they have a need, they think about us first, and we're able to go ahead and capture a little bit more of that wallet share and have them read the [indiscernible] spend over to us. So really broad success across all of our product lines continuing to move. And now maybe one other thing I might just say is that we talked about this as incremental success, right? This is an area we've been working on for quite some time, and we continue to see incremental success and would imagine that this will be one that we can continue to work on. But it is not an overnight change in the businesses. This is not a new strategy to us.

Operator

And our next question comes from Faiza Alwy from Deutsche Bank.

Faiza Alwy

I wanted to ask about the labor environment. I think you talked about improving retention, but I've seen more recently, obviously, it's in the transportation market and maybe some homebuilders talking about a tighter labor market. And I'm curious if, one, you're seeing any signs of tightness from where you sit and just based on what you're seeing in some of the other sectors, sort of if you're planning for a tighter labor market and kind of what that entails?

Todd Schneider

Good morning, Faiza. It's Todd. Yes. Our retention levels of our employee partners is really attractive at record levels. We recognize just like customers, our partners have the ability to go work to other places, and we work really hard to provide attractive wages and benefits, but more so just the environment that they operate in and the culture. So we're quite proud of where we are with retention levels and we try to see around the corner and anticipate those needs, and we think we're well positioned. As far as in construction or in transportation, I think, in particular, they're dealing with some unique circumstances there that I think are not affecting us in any broad manner whatsoever. So we feel quite good about where we are, and where we're heading there.

Faiza Alwy

Great. And then just a follow-up and apologies if I'm breaking any rules, but I just want to ask about the UniFirst transaction. And whether you're going to respond to the FTC with information that they might have asked, given that you're so optimistic about at the end of your time lines?

Todd Schneider

Yes, Faiza, I appreciate your question, but we're not going to comment any further on UniFirst transaction just to avoid any speculation. But as I stated in my prepared remarks, we remain confident that we'll close the deal in the back half of calendar 2026.

Operator

And our next question comes from Toni Kaplan from Morgan Stanley.

Toni Kaplan

You talked earlier in the call about some of the higher cost dynamics. I was wondering if you would expect the industry to sort of command higher prices next year if these dynamics persist like how you think about the outlook for pricing of the industry?

Todd Schneider

Yes. Toni, this is Todd. I certainly cannot speak for the marketplace in general. We compete with all kinds of different companies. So all I can speak of is how we run our business, and we respect the fact that our customers have choices, and we operate in an incredibly competitive market. So as a result, we're going to do -- we're going to leverage our corporate culture and leverage our competitive urgency and our focus on making sure that we don't accept just input costs going up, and where we do have input costs, we're not going to just simply pass it along. So we've got to be better than that. And we expect that to be better of the leadership team, and they're performing. And we would expect that we'll continue to manage it in that manner. And as I mentioned, I'm incredibly proud of what the leadership team has accomplished, and I think we're well positioned for the future.

Toni Kaplan

That's great. And you talked about productivity initiatives to try to offset maybe some higher cost. And so can you give an example maybe -- of maybe an impactful productivity initiatives that you've been able to achieve recently or just areas where you think the most you would be able to get the most bang for your buck in terms of productivity initiatives.

James Rozakis

Hi, Toni. This is Jim. I'll start on that one. And as we look at trying to expand our margin and deliver strong financials, it always starts for us with strong top line growth. And we know that, that top line growth creates great leverage for us. And that improves things like routing efficiency when you have more and more customers in the marketplace. When we're effective at cross-sell, the average size of each customer becomes larger, and that's a more efficient piece of revenue than a new piece of revenue. Every time we have great work on top line, it increases our capacity utilization in all of our businesses, depending on whatever the capacity is. So it always starts with a continued focus on strong top line growth and creating that leverage. And then I think it's been mentioned a number of times, we really do focus on technology and using technology to attract out things that are inefficient in our business. And we've spoken about Smart Truck, and Smart Truck being available to us to continue to incrementally route more efficiently, and we've been able to grow in excess of job creation for -- in excess of route creation for some time now by making those routes more efficient. [ Garment ] sharing in our Rental business has been enabled through technology. That's in the early innings, and we have great opportunity with [ garment ] share. Things like automation, we talked about sortation, but automation shows up in a lot of different ways, and those can incrementally make you more efficient. We also love the work by our supply chain. And when we have continued revenue growth that gives them advantage to get some volume discounts out there and do what they do. So really, all of those, I think, are major inputs towards what I'll call, making the business more efficient or extracting out the efficiencies that Todd talked about, and that's our preferred methodology for margin expansion.

Todd Schneider

Toni, this is Todd. You heard a number of things from Jim there. And it all goes back to culture. And it goes back to, there is no home run where -- well, on my goodness, we are getting massive productivity increase because of this, there's a tremendous amount of singles and doubles. And that is our culture. And that's what we leverage. And we would love home runs, right? But it's a lot of singles and doubles, and we're seeing around the corner and we know we're going to need more in the future. And so we're expecting that. Jim mentioned technology. That's obviously a big one. Most companies are going to have to leverage technology to improve productivity. And as we think about technology, we think about it in two manners: Number one, making it easier for our customers to do business with us. And number two, making our -- helping our employee partners to do their jobs more effectively, making it easier to do their jobs. So both show up in a very positive way, ultimately in our results.

Operator

And with that, the question-and-answer session has concluded. I will now turn the call back over to Jared Mattingley to close out the call.

Jared Mattingley

Thank you for joining us this morning. We will issue our second quarter of fiscal 2027 financial results in December, and we look forward to speaking with you again at that time. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

原文链接