10-QPeriod: Q1 FY2024

CINTAS CORP Quarterly Report for Q1 Ended Aug 31, 2023

Filed October 5, 2023For Securities:CTAS

Summary

Cintas Corporation (CTAS) reported strong financial performance for the first quarter of fiscal year 2024, which ended August 31, 2023. Total revenue increased by 8.1% year-over-year to $2.34 billion, with organic revenue growth also at 8.1%. This growth was driven by solid performance across its key segments, particularly Uniform Rental and Facility Services, which saw a 7.6% increase in revenue, and First Aid and Safety Services, which experienced an impressive 11.3% revenue growth. The company demonstrated improved profitability, with operating income rising to $500.6 million (21.4% of revenue) from $440.1 million (20.3% of revenue) in the prior year's comparable quarter. Net income grew by 9.5% to $385.1 million, translating to diluted earnings per share of $3.70, a 9.1% increase from the prior year. Cintas also generated robust operating cash flow, allowing for continued investment in capital expenditures and strategic initiatives, alongside returning capital to shareholders through dividends and share repurchases.

Financial Highlights

48 data points
Beta

Revenue

$2.34B

Net Income

$385.08M

16.4% Net Margin

EPS (Diluted)

$0.93

Total Assets

$8.72B

Cash & Equivalents

$88.13M

Free Cash Flow

$230.25M

Financial Statements
Beta
Revenue$2.34B
SG&A Expenses$641.01M
Operating Income$500.56M
Interest Expense$24.54M
Net Income$385.08M
EPS (Basic)$0.94
EPS (Diluted)$0.93
Shares Outstanding (Basic)407.58M
Shares Outstanding (Diluted)414.29M

Key Highlights

  • 1Total revenue for the quarter grew 8.1% to $2.34 billion, driven by both organic growth and acquisitions.
  • 2Uniform Rental and Facility Services revenue increased 7.6% to $1.83 billion, while First Aid and Safety Services revenue surged 11.3% to $260.7 million.
  • 3Operating income increased by 13.7% to $500.6 million, with operating margin expanding to 21.4% from 20.3% in the prior year.
  • 4Net income rose by 9.5% to $385.1 million, and diluted earnings per share increased by 9.1% to $3.70.
  • 5Cash flow from operating activities was strong at $336.9 million, enabling investments and shareholder returns.
  • 6Capital expenditures increased to $106.7 million, reflecting investments in growth and operational improvements.
  • 7The company maintained compliance with all debt covenants, demonstrating financial stability.

Frequently Asked Questions

Cintas' revenue growth was driven by a combination of factors including new business acquisition, increased penetration of additional products and services into existing customer relationships, and strategic price adjustments. The Uniform Rental and Facility Services segment saw growth from new sales representatives and expanded offerings, while the First Aid and Safety Services segment benefited from strong sales execution, customer retention, and favorable market demand.

Cintas demonstrated improved profitability through effective cost management and operational leverage. The cost of other services decreased as a percentage of revenue due to favorable sales mix, sourcing initiatives, and better leverage of fixed costs. Selling and administrative expenses, while increasing in absolute terms due to labor and employee expenses, were managed effectively relative to revenue growth, leading to an expansion of the operating margin. Additionally, productivity initiatives and lower energy costs as a percentage of revenue contributed to gross margin improvements in key segments.

Cintas expects its operating cash flows to remain sufficient to provide adequate liquidity. The company has access to a $2.0 billion revolving credit facility and believes it has sufficient liquidity for at least the next 12 months and the foreseeable future. Acquisitions, share repurchases, and dividends remain strategic objectives, contingent on the economic outlook and the company's liquidity.

Cintas continues to return capital to shareholders through dividends and share repurchases. During the quarter, the company paid dividends and repurchased common stock, primarily to cover employee payroll taxes related to stock options and awards. Share buyback activity decreased compared to the prior year, reflecting a strategic deployment of capital. The company has substantial authorized share repurchase programs that do not have expiration dates.