Andrew J. Wittmann • Robert W. Baird & Co.

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CEO Dale Asplund explained that significant fleet investments provide flexibility, allowing them to potentially age the fleet if needed without hurting service. CFO Brett Urban noted that higher new vehicle prices would likely increase residual values on used assets, providing a hedge. On margins, Dale Asplund credited the 'One BrightView' strategy for the 410 bps expansion in the Development segment, with continued upside expected from operational leverage and organic growth.

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EVP and CFO Glenn Jackola stated the international business grew organically in line with expectations, consistent with a mid-single-digit target. He estimated that weather impact accounted for about 5 lost days in Q1, representing a mid-single-digit headwind to Specialty's organic growth. President and CEO Russell Becker explained the systems investment is a 3-year initiative to provide field teams with better tools for efficiency and to build a scalable foundation for future growth. Regarding reporting, Jackola directed investors to 'segment earnings' in the presentation, which he described as a comparable metric to segment adjusted EBITDA.

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President and CEO Russ Becker responded that the company continuously evaluates all parts of its business, not just Specialty, and will perform 'selective pruning' of any assets that do not align with long-term margin expansion goals. Interim CFO David Jackola explained that Q4 transformation costs were driven by Chubb integration, restructuring, and the final stages of SOX and cyber security deployments. He noted that restructuring and deployment costs are expected to decrease in 2025.

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Christophe Beck, Chairman and CEO, explained that reaching the 30% margin target in Life Sciences will take a few years as it depends on long-term investments in new plants and R&D. CFO Scott Kirkland addressed cash flow, stating that Q1 was in line with historical progression and that despite a tough comp, they are confident in delivering their 90% free cash flow conversion target for the year, supported by strong earnings growth.

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Theodore Wahl (executive) explained that underlying industry fundamentals are strong, bolstered by demographic tailwinds and improving labor availability. He highlighted that a recent Texas court ruling striking down the CMS minimum staffing rule has provided clarity and removed an industry overhang. Regarding potential Medicaid changes, Wahl conveyed that the skilled nursing facility (SNF) community is confident the new administration will remain supportive, as it was in its first term, and that any potential changes would likely be modest and phased in over time.

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CFO Ryan Robinson attributed the strong margin performance primarily to operating leverage from 9.5% organic growth. CEO Jennifer Scanlon added that customer reactions to tariffs should balance out over time. Robinson quantified the potential 2025 FX headwind at just under 1% on revenue, noting most of it is offset by expenses in local currencies.

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President and CEO Jennifer Scanlon detailed AI's impact on their ULTRUS software and early-stage testing for AI data centers and PC-embedded AI. EVP and CFO Ryan Robinson confirmed that Q4 year-over-year adjusted EBITDA margin expansion is expected to accelerate beyond the year-to-date rate of 130 basis points, though the magnitude will be tempered by higher fulfillment and compensation costs.

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Executive Gary Bowman noted the backlog is characteristically similar to the past but may be "beneficially stacked" for 2025 due to recent project timing shifts. CFO Bruce Labovitz confirmed that the one-time staffing adjustment costs of approximately $1.6 million were added back to adjusted EBITDA. He then explained the shift to a trailing four-quarter organic growth calculation was to smooth volatility from acquisition timing, noting that under the old method, discrete Q3 organic growth would have been flat.

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President and CEO Todd Schneider explained that Cintas is constantly innovating and continues to test and develop RFID and proprietary auto-sortation technologies to drive efficiency. Regarding new markets, he clarified that residential services is not a current area of focus or significant investment for the company.

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