Jimmy

Jimmy asked about the 33% USIS mortgage outperformance (26% revenue growth against a 7% inquiry decline) and its drivers. He also inquired about the adoption hurdle for VantageScore in the securitization market and Equifax's navigation strategy.

Answer

CFO John Gamble and CEO Mark Begor confirmed the outperformance calculation, attributing it primarily to the FICO price increase from the previous year, with some contribution from new mortgage pre-approval products. Mark Begor stated that VantageScore is already used in the securitization market for post-loan analysis and is widely accepted in other verticals. John Gamble added that Equifax is expanding tools and data for the securitization market to accelerate adoption.

Jimmy asked about the drivers behind USIS mortgage's 33% outperformance (26% revenue growth against a 7% inquiry decline) in the quarter, specifically if new mortgage pre-approval products were a key factor. He also inquired about the adoption hurdles for VantageScore in the securitization market, and how Equifax plans to navigate these challenges, given that free VantageScores for lenders might not directly impact securitization visibility.

Answer

John Gamble, Chief Financial Officer, clarified that the outperformance was primarily driven by the significant FICO price increase from the previous year flowing through revenue, with some growth also coming from pre-qual and pre-approval products. Mark Begor, Chief Executive Officer, explained that VantageScore is already used in the securitization market for post-loan analysis and is widely accepted in other verticals like auto and cards. John Gamble added that Equifax is expanding tools and data through Ignite and long-term data panels to help rating agencies and others in the securitization market accelerate their analytics and adoption.

Jimmy asked about any changes in the competitive environment and if Cintas sees a growing opportunity to gain market share from struggling competitors. He also inquired about the factors driving softness in the operating margins for the 'all-other' segment.

Answer

Todd Schneider, President and CEO, stated that the market remains competitive with strong retention rates. He emphasized that new business primarily comes from 'no-programmers' due to the vast unserved market, rather than focusing on taking business from traditional competitors. He explained that the 'all-other' segment (fire and design collective) is experiencing appropriate investments for future growth, including additional SAP costs in the fire business, which impacts margins but is seen as an investment for a bright future.

Jimmy inquired about any changes in the competitive environment, specifically if Cintas sees a growing opportunity to win market share from competitors, given that some peers are struggling.

Answer

Todd Schneider, President and CEO, stated the market remains very competitive with strong retention rates. He reiterated that new business primarily comes from 'no-programmers' (do-it-yourselfers) due to the immense Total Addressable Market (TAM) of 16-17 million businesses in the U.S. and Canada, of which Cintas services just over 1 million. While Cintas will take business from traditional competitors, it's not their main focus, even with a competitor 'working on their foundation.' For a follow-up on the 'all-other' segment's operating margins, Mr. Schneider explained that the segment's gross margin was up sequentially but down year-over-year due to appropriate investments for future growth, including bench strength, capacity, leadership, management trainees, and sales resources, as well as additional costs from the SAP implementation in the fire business.

Jimmy asked if Cintas is observing any changes in the competitive environment, particularly a growing opportunity to win market share from struggling peers, and what factors are driving the softness in operating margins for the 'all-other' segment.

Answer

President and CEO Todd Schneider stated that the market remains competitive, but Cintas's primary focus for new business is the vast 'no-programmer' market (16-17 million businesses in the U.S. and Canada, with Cintas servicing just over 1 million). While they will take business from competitors, it's not their main strategy. He explained that the 'all-other' segment (fire and design collective) is experiencing appropriate investments for future growth, including bench strength, capacity, leadership, and sales resources, along with additional costs from SAP implementation in the fire business.