10-QPeriod: Q1 FY2023

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2022

Filed October 6, 2022For Securities:CTAS

Summary

Cintas Corporation (CTAS) reported strong financial results for the first quarter of fiscal year 2023, ending August 31, 2022. Total revenue increased by 14.2% year-over-year to $2,166.5 million, with organic growth of 13.9%. This growth was driven by both the Uniform Rental and Facility Services segment, which saw a 12.6% increase in revenue, and the 'Other' revenue categories (including First Aid and Safety Services), which grew by 20.6%. Net income also saw a healthy increase of 6.2% to $351.7 million, translating to a 9.0% rise in diluted earnings per share to $3.39. The company demonstrated effective cost management, with Cost of other improving as a percentage of revenue, and selling and administrative expenses as a percentage of revenue showing improvement excluding a prior-year gain on asset sale. While the gross margin for Uniform Rental and Facility Services saw a slight decrease, primarily due to increased energy and labor costs, overall operational efficiencies and strong revenue growth contributed to a robust net income. Cintas continues to execute its strategy of increasing penetration at existing customers and broadening its customer base, supported by ongoing investments in its sales force and operational capabilities.

Financial Highlights

49 data points
Beta

Revenue

$2.17B

Net Income

$351.69M

16.2% Net Margin

EPS (Diluted)

$0.85

Total Assets

$8.26B

Cash & Equivalents

$74.56M

Free Cash Flow

$228.14M

Financial Statements
Beta
Revenue$2.17B
SG&A Expenses$587.99M
Operating Income$440.12M
Interest Expense$27.72M
Net Income$351.69M
EPS (Basic)$0.86
EPS (Diluted)$0.85
Shares Outstanding (Basic)405.71M
Shares Outstanding (Diluted)413.35M

Key Highlights

  • 1Total revenue surged 14.2% to $2.17 billion, with organic growth of 13.9%, indicating strong underlying business performance.
  • 2Net income rose 6.2% to $351.7 million, demonstrating the company's ability to translate revenue growth into profitability.
  • 3Diluted earnings per share (EPS) increased by 9.0% to $3.39, outpacing net income growth due to a reduction in outstanding shares from share repurchases.
  • 4The Uniform Rental and Facility Services segment, the largest revenue contributor, grew revenue by 12.6% organically.
  • 5The 'Other' revenue categories, including First Aid and Safety Services, experienced robust growth of 20.6% organically.
  • 6Operating income as a percentage of revenue slightly decreased from 20.8% to 20.3%, mainly due to a one-time gain on asset sale in the prior year period impacting the comparison.
  • 7The company actively returned capital to shareholders through dividends ($97.7 million paid) and significant share repurchases ($320.3 million in the quarter), reflecting confidence in its financial position.

Frequently Asked Questions

Cintas' revenue growth was driven by a combination of factors including new business acquisition, increased penetration of additional products and services at existing customers, and strategic price increases across its segments. The Uniform Rental and Facility Services segment and the First Aid and Safety Services segment, along with other smaller segments, all contributed positively to the top-line growth.

Cintas demonstrated effective cost management. While the cost of uniform rental and facility services increased due to higher sales volume and increased energy and labor costs, the cost of other services improved as a percentage of revenue due to favorable sales mix and operational efficiencies. Selling and administrative expenses also showed improvement as a percentage of revenue, excluding a prior-year gain on asset sale, driven by efficiencies in labor.

Cintas continues to prioritize returning capital to shareholders. During the quarter, the company paid $97.7 million in dividends and repurchased $320.3 million of its common stock. This indicates a strong commitment to share buybacks as a means to enhance shareholder value and manage its capital structure.

Cintas expects its cash flows from operating activities to remain sufficient for liquidity needs. The company also has access to a $2.0 billion revolving credit facility. Management believes the company has sufficient liquidity to operate in the current business environment, with acquisitions, share repurchases, and dividends remaining strategic objectives dependent on economic outlook and company liquidity.