Cintas Corporation (NASDAQ:CTAS) Q3 2018 Earnings Conference Call - Final Transcript
Mar 22, 2018 • 05:00 pm ET
(Operator Instructions) Hamzah Mazari, Macquarie Capital.
That the first question is just on consolidation in this space broadly. I know you've sort of outlined cost synergies. Maybe if you could touch on -- there's been another uniform deal in the space. Could you maybe touch on the revenue side? Do you expect pricing to get better in the space post-consolidation. I realize it's a local business, so there may be some nuances there. So maybe if you could touch on that. And then how to think about G&K revenue synergies?
Sure. So from the standpoint of pricing, you know the pricing environment, I would say, hasn't changed much in the last 90 days, since we spoke last. And quite honestly, I don't expect that the consolidation that has happened will have much of an impact on the pricing environment. It's still a very competitive environment. We face legacy like competition, as well as other catalogue type competitors. And so that's not going away. So I don't think that's going to have much of an impact on the pricing environment.
From the standpoint of the revenue synergies, we're moving cautiously as we have -- as we've talked about in the past, but we have begun to introduce some of the products where we can -- where we have converted systems or where we have integrated routes into Cintas locations. And while it's early and we haven't seen any notable impact, you know it's anecdotally positive so far. So, I would say, as we continue to move through this year, we've got a lot of integration activity left, and we're going to continue to introduce Cintas products and services to those customers, but I would not expect much of an impact at this point in time.
And then just on the SAP, I know, you sort of gave color on the integration of the SAP and timeline. But maybe you're not ready quantitatively, but qualitatively should once SAP is implemented, should we expect that 28% of sales SG&A run rate to come down materially, or how are you thinking about sort of benefits of SAP, maybe just qualitatively, if you want to address that?
Yeah. I think, we'll see, once we get through that implementation effort, which we expect to be by the end of fiscal '20, we do expect some expenses to roll-off, certainly those that are part of the integration and implementation effort. So we will certainly see some benefit from that in fiscal '21, but more than anything from that system, we like the information and the power of that information. And we're not necessarily looking for a significant cost reduction. What we are looking for is, more opportunity to make our selling team more productive. So how can we create warmer leads with better information? How can we use that information to be more directive in the way we approach our customers with our various products and services? So we're not looking necessarily for a significant SG&A reduction. We