Cintas Corporation

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

Thank you, Sergey, and 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 third 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.

Thank you, Paul. Our third quarter financial results are led by a strong revenue increase of 10.3%. The benefits of our strong top line growth flow through to our bottom line, Excluding a one-time gain recorded in this year's third quarter selling and administrative expenses, operating income margin increased 90 basis points from 18.4% to 19.3%. And EPS grew 13.5% from $2.37 to $2.69. Our financial results are indicative of our compelling value proposition. Businesses prioritize all we provide, including image, cleanliness, safety, and compliance. And challenged with labor scarcity and rising costs, businesses increasingly turn to Cintas to help them get ready for the workday. I'm especially pleased with our financial results because they were achieved in a period in which U.S. inflation hit a 40-year high. Inflation is high and broad, and one need not look any further than the corner gas station to see it. We have been able to navigate this challenging time and delivered increased operating margins and EPS by productively selling new business, penetrating existing customers with more products and services, providing excellent service while driving operational efficiencies, and obtaining incremental price increases from our customer base. As we grow via new business, we achieve operating leverage, better negotiating leverage with suppliers, denser routes, and more volume on our plants. As we penetrate existing customers, we realize even stronger incremental operating margins. I thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other. Turning now to our business units, the uniform rental and facility services operating segment revenue for the third quarter of fiscal 22 was $1.55 billion compared to $1.42 billion last year. Organic revenue growth was 8.9%. Our newest vertical strategies of healthcare, education, and state and local government continue to post leading revenue growth rates. However, there are opportunities for us in all verticals. Businesses in all sectors are struggling to fill open positions. There are about 11 million job openings in the US alone. Businesses remain concerned with their ability to properly sanitize even as COVID infections decrease. Additionally, businesses are shedding non-core competencies to reduce costs and minimize the impacts of inflation. For these reasons and others, businesses are increasingly outsourcing to CENTOS. Our first aid and safety services operating segment revenue for the third quarter was $213.0 million compared to $198.5 million last year. Organic revenue growth was 6.2%, which is a nice improvement from last quarter's 3.2%. This improvement reflects the growing momentum of our first aid cabinet business, which grew 22% in the third quarter. We welcome this mixed shift because it is a more consistent revenue stream and has higher profit margins. Third quarter revenue growth improved despite a difficult comparison. In last year's third quarter, in response to the COVID-19 pandemic, Sales of personal protective equipment, or PPE, were very high, and the business grew organic revenue 17.7%. 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. In fact, we sold about $15 million in a new product, which is COVID test kits, in this year's third quarter. PPE remains a larger percentage of the revenue mix than it was pre-COVID. Our fire protection services and uniformed direct sale businesses are reported in the all other segment. All other revenue was $194.3 million compared to $160.7 million last year. The fire business organic revenue growth rate was 15.3% and the uniform direct sale business organic growth rate was 48.7%. Both businesses had bounced back as expected. I'd like to comment on another one of our strengths, namely cash flow. Third quarter operating cash flow increased 18.5% from last year. In this year's third quarter, $105 million was used for acquisitions. On March 15th, we paid shareholders $99 million in quarterly dividends. And during the quarter and through March 22nd, 2022, Cintas purchased $584.2 million of Cintas common stock under our buyback program. We continue to allocate capital in many ways to improve shareholder return. Our strong balance sheet and cash flow enable us to do so consistently. Finally, I want to share some great news on our technology front. Our ERP provider, SAP, extended membership in their strategic customer program to Cintas. This is an exclusive program. Only 1% of SAP's customers have membership in it. Inclusion in the program enables us to engage directly with top management of SAP and gain access to its developers and new technologies to realize valuable outcomes for our customers. suppliers, and employees. This program will speed the pace of our transformation into a more data dynamic and process efficient business. I'll now turn the call over to Mike.