Cintas Corporation

Good day, everyone, and welcome to the CENTOS second quarter fiscal year 2022 earnings release conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Paul Adler, Vice President and Treasurer, Investor Relations. Please go ahead, sir.

Thank you, Madison. Thank you for joining us. With me is Todd Schneider, President and Chief Executive Officer, and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2022 second 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 Tom.

Thank you, Paul. Our second quarter financial results were led by our strong revenue increase of 9.4%. Our financial results are indicative of our compelling value proposition vast total addressable markets, and the outstanding execution of our employee partners. I thank our partners for continuing to navigate these challenging times by focusing on our customers. The benefits of our strong top line growth flowed through to our bottom line. Excluding last year's $18 million pre-tax gain on the sale of certain operating assets in the uniform rental and facility services segment and the related tax benefits, second quarter operating income margin increased 70 basis points from last year, and EPS grew 16.5%. These results are especially significant given that they were achieved in a period in which U.S. inflation hit a 39-year high. Uniform rental and facility services operating segment revenue was $1.54 billion compared to $1.41 billion last year. Organic revenue growth was 8.5%. The labor market is challenging. However, we are benefiting in the current environment. Businesses are struggling with the scarcity of labor, which has left many understaffed. Also, businesses have a heightened awareness of safety and cleanliness and are concerned with their ability to properly sanitize amidst persistent COVID infections. Businesses are increasingly outsourcing to Cintas so they can focus on their core competencies and be ready for the workday. And it is noteworthy that the U.S. still hasn't recovered about 4 million pre-pandemic jobs, and the job openings total about 11 million. Return of jobs represents future revenue growth opportunity for CENTOS. Our first aid and safety services operating segment revenue for the second quarter was $202.2 million compared to $194.4 million last year. organic revenue growth was 3.2%. Second quarter revenue was up against a difficult comparison. Last year's second quarter, in response to the COVID-19 pandemic, sales of personal protective equipment, or PPE, were very high, and the business per organic revenue, 14.5%. At that time, PPE comprised an outsized percentage of first aid and safety services revenue mix. The amount of PPE has declined year over year, as expected. However, COVID infections are still prevalent and PPE remains a larger percentage of the revenue mix than it was pre-COVID. Over the same period of time, the recurring first aid cabinet service business revenue has increased. In fact, it is up 20% from last year. We welcome this shift in mix because first aid cabinet service business is a more consistent revenue stream and has higher profit margins than PPE. Our fire protection services and uniform direct sale businesses are reported in the all other segment. All other revenue was $184.9 million compared to $152.1 million last year. The fire business organic revenue growth rate was 16.9% and the uniform direct sale business organic growth rate was 47.3%. Both businesses benefited in part from an improved economic environment. Regarding our balance sheet and cash flow, our financial position remains strong. Second quarter operating cash flow increased 27% from last year, and free cash flow improved 16%. Recently, on December 15th, we paid shareholders $98.5 million in quarterly dividends. The amount per share of common stock paid of 95 cents represents a 26.7% increase over the company's previous quarterly dividends. we continue to allocate capital to improve shareholder return. Before turning the call over to Mike, I want to highlight that we recently issued our 2021 Environmental, Social, and Governance Report. Cintas was founded on a sustainable business model. We are committed to protecting the environment, enhancing humanity, and maintaining accountability. The report, our second consecutive, provides expanded information and data including our reductions in energy usage, water consumption, and Scope 1 and Scope 2 emissions. Our ESG report further illustrates that our corporate culture, based on doing what is right and challenging ourselves to improve, is a competitive advantage. I'll now turn the call over to Mike.