Cintas Corporation Announces Fiscal 2024 Third Quarter Results

By: Cintas Corporation via Business Wire

March 27, 2024 at 08:30 AM EDT

Cintas Corporation (Nasdaq: CTAS) today reported results for its fiscal 2024 third quarter ended February 29, 2024. Revenue for the third quarter of fiscal 2024 was $2.41 billion compared to $2.19 billion in last year’s third quarter, an increase of 9.9%. The organic revenue growth rate for the third quarter of fiscal 2024, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays, was 7.7%.

Gross margin for the third quarter of fiscal 2024 was $1.19 billion compared to $1.03 billion in last year’s third quarter, an increase of 14.9%. Gross margin as a percentage of revenue was 49.4% for the third quarter of fiscal 2024 compared to 47.2% in last year's third quarter, an increase of 220 basis points. Energy expenses comprised of gasoline, natural gas and electricity were 40 basis points lower for the third quarter of fiscal 2024 compared to last year's third quarter.

Operating income for the third quarter of fiscal 2024 increased 16.6% to $520.8 million compared to $446.8 million in last year's third quarter. Operating income as a percentage of revenue was 21.6% in the third quarter of fiscal 2024 compared to 20.4% in last year's third quarter.

Net income was $397.6 million for the third quarter of fiscal 2024 compared to $325.8 million in last year's third quarter, an increase of 22.0%. The third quarter of fiscal 2024 effective tax rate was 19.9% compared to 22.1% in last year's third quarter. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Third quarter of fiscal 2024 diluted earnings per share (EPS) was $3.84 compared to $3.14 in last year's third quarter, an increase of 22.3%.

On March 15, 2024, Cintas paid an aggregate quarterly cash dividend of $137.6 million to shareholders, an increase of 17.1% from the amount paid last March.

Todd M. Schneider, Cintas' President and Chief Executive Officer, stated, "Our third quarter results reflect the outstanding dedication and execution of our employees, whom we call partners. Each of our operating segments continue to execute at a high level, which led to robust revenue growth of 9.9%, record high gross margin of 49.4%, record high operating margin of 21.6% and diluted EPS growth of 22.3%."

Mr. Schneider concluded, "Based on our third quarter results, we are increasing our full fiscal year financial guidance. We are raising our annual revenue expectations from a range of $9.48 billion to $9.56 billion to a range of $9.57 billion to $9.60 billion and our diluted EPS from a range of $14.35 to $14.65 to a range of $14.80 to $15.00." Please note the following regarding guidance:

Fiscal year 2024 interest expense is expected to be approximately $99.0 million compared to $109.5 million in fiscal year 2023, predominately as a result of less variable rate debt. This may change as a result of future share buybacks or acquisition activity.
Fiscal year 2024 effective tax rate is expected to be 20.6% compared to a rate of 20.4% in fiscal year 2023.
Our diluted EPS guidance includes no future share buybacks.

Cintas

Cintas Corporation helps more than one million businesses of all types and sizes get Ready^™ to open their doors with confidence every day by providing products and services that help keep their customers’ facilities and employees clean, safe and looking their best. With offerings including uniforms, mats, mops, restroom supplies, first aid and safety products, fire extinguishers and testing, and safety training, Cintas helps customers get Ready for the Workday^®. Headquartered in Cincinnati, Cintas is a publicly held Fortune 500 company traded over the Nasdaq Global Select Market under the symbol CTAS and is a component of both the Standard & Poor’s 500 Index and Nasdaq-100 Index.

Cintas will host a live webcast to review the fiscal 2024 third quarter results today at 10:00 a.m., Eastern Time. The webcast will be available to the public on Cintas' website at www.Cintas.com. A replay of the webcast will be available approximately two hours after the completion of the live call and will remain available for two weeks.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. Forward-looking statements may be identified by words such as ��estimates,” “anticipates,” “predicts,” “projects,” “plans,” “expects,” “intends,” “target,” “forecast,” “believes,” “seeks,” “could,” “should,” “may” and “will” or the negative versions thereof and similar words, terms and expressions and by the context in which they are used. Such statements are based upon current expectations of Cintas and speak only as of the date made. You should not place undue reliance on any forward-looking statement. We cannot guarantee that any forward-looking statement will be realized. These statements are subject to various risks, uncertainties, potentially inaccurate assumptions and other factors that could cause actual results to differ from those set forth in or implied by this Press Release. Factors that might cause such a difference include, but are not limited to, the possibility of greater than anticipated operating costs including energy and fuel costs; lower sales volumes; loss of customers due to outsourcing trends; the performance and costs of integration of acquisitions; inflationary pressures and fluctuations in costs of materials and labor, including increased medical costs; interest rate volatility; costs and possible effects of union organizing activities; failure to comply with government regulations concerning employment discrimination, employee pay and benefits and employee health and safety; the effect on operations of exchange rate fluctuations, tariffs and other political, economic and regulatory risks; uncertainties regarding any existing or newly-discovered expenses and liabilities related to environmental compliance and remediation; our ability to meet our goals relating to environmental, social and governance (ESG) opportunities, improvements and efficiencies; the cost, results and ongoing assessment of internal controls for financial reporting; the effect of new accounting pronouncements; disruptions caused by the inaccessibility of computer systems data, including cybersecurity risks; the initiation or outcome of litigation, investigations or other proceedings; higher assumed sourcing or distribution costs of products; the disruption of operations from catastrophic or extraordinary events including global health pandemics such as the COVID-19 coronavirus; the amount and timing of repurchases of our common stock, if any; changes in federal and state tax and labor laws; and the reactions of competitors in terms of price and service. Cintas undertakes no obligation to publicly release any revisions to any forward-looking statements or to otherwise update any forward-looking statements whether as a result of new information or to reflect events, circumstances or any other unanticipated developments arising after the date on which such statements are made, except otherwise as required by law. A further list and description of risks, uncertainties and other matters can be found in our Annual Report on Form 10-K for the year ended May 31, 2023 and in our reports on Forms 10-Q and 8-K. The risks and uncertainties described herein are not the only ones we may face. Additional risks and uncertainties presently not known to us, or that we currently believe to be immaterial, may also harm our business.

Cintas Corporation Consolidated Condensed Statements of Income (Unaudited) (In thousands except per share data)

	Three Months Ended
	February 29, 2024			February 28, 2023			% Change
Revenue:
Uniform rental and facility services	$	1,876,642		$	1,716,165		9.4%
Other		529,531			473,821		11.8%
Total revenue		2,406,173			2,189,986		9.9%

Costs and expenses:
Cost of uniform rental and facility services		960,208			907,993		5.8%
Cost of other		258,117			247,962		4.1%
Selling and administrative expenses		667,048			587,219		13.6%

Operating income		520,800			446,812		16.6%

Interest income		(930	)		(373	)	149.3%
Interest expense		25,530			28,819		(11.4)%

Income before income taxes		496,200			418,366		18.6%
Income taxes		98,621			92,539		6.6%
Net income	$	397,579		$	325,827		22.0%

Basic earnings per share	$	3.90		$	3.19		22.3%

Diluted earnings per share	$	3.84		$	3.14		22.3%

Basic weighted average common shares outstanding		101,477			101,714
Diluted weighted average common shares outstanding		103,187			103,418

Cintas Corporation Consolidated Condensed Statements of Income (Unaudited) (In thousands except per share data)

	Nine Months Ended
	February 29, 2024			February 28, 2023			% Change
Revenue:
Uniform rental and facility services	$	5,554,009		$	5,123,924		8.4%
Other		1,571,671			1,407,374		11.7%
Total revenue		7,125,680			6,531,298		9.1%

Costs and expenses:
Cost of uniform rental and facility services		2,882,022			2,705,486		6.5%
Cost of other		772,691			741,222		4.2%
Selling and administrative expenses		1,949,928			1,752,724		11.3%

Operating income		1,521,039			1,331,866		14.2%

Interest income		(2,121	)		(872	)	143.2%
Interest expense		76,664			85,459		(10.3)%

Income before income taxes		1,446,496			1,247,279		16.0%
Income taxes		289,219			245,470		17.8%
Net income	$	1,157,277		$	1,001,809		15.5%

Basic earnings per share	$	11.34		$	9.82		15.5%

Diluted earnings per share	$	11.15		$	9.65		15.5%

Basic weighted average common shares outstanding		101,681			101,589
Diluted weighted average common shares outstanding		103,347			103,363

CINTAS CORPORATION SUPPLEMENTAL DATA

Gross Margin and Net Income Margin Results

	Three Months Ended		Nine Months Ended
	February 29, 2024	February 28, 2023	February 29, 2024	February 28, 2023

Uniform rental and facility services gross margin	48.8%	47.1%	48.1%	47.2%
Other gross margin	51.3%	47.7%	50.8%	47.3%
Total gross margin	49.4%	47.2%	48.7%	47.2%
Net income margin	16.5%	14.9%	16.2%	15.3%

Reconciliation of Non-GAAP Financial Measures

The press release contains non-GAAP financial measures within the meaning of the rules promulgated by the U.S. Securities and Exchange Commission. To supplement its consolidated condensed financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides these additional non-GAAP financial measures of free cash flow and organic revenue growth. The Company believes that these non-GAAP financial measures are appropriate to enhance understanding of its past performance as well as prospects for future performance. A reconciliation of the differences between these non-GAAP financial measures with the most directly comparable financial measures calculated in accordance with GAAP are shown in the tables below.

Computation of Free Cash Flow

	Nine Months Ended
(In thousands)	February 29, 2024			February 28, 2023

Net cash provided by operations	$	1,386,741		$	1,044,191
Capital expenditures		(307,558	)		(224,116	)
Free cash flow	$	1,079,183		$	820,075

Management uses free cash flow to assess the financial performance of the Company. Management believes that free cash flow is useful to investors because it relates the operating cash flow of the Company to the capital that is spent to continue, improve and grow business operations.

Computation of Organic Growth

	Three Months Ended					Nine Months Ended
	February 29, 2024		February 28, 2023		Growth %	February 29, 2024		February 28, 2023		Growth %
	A		B		G	I		J		O
Revenue	$	2,406,173	$	2,189,986	9.9%	$	7,125,680	$	6,531,298	9.1%
					G=(A-B)/B					O=(I-J)/J
	C		D			K		L
Workdays in the period	65		64			196		195

	E		F		H	M		N		P
Workday adjusted revenue growth	$	2,369,155	$	2,189,986	8.2%	$	7,089,324	$	6,531,298	8.5%
	E=(A/C)*D		F=(B/D)*D		H=(E-F)/F	M=(I/K)*L		N=(J/L)*L		P=(M-N)/N

Acquisition and foreign currency exchange impact, net					(0.5)%					(0.3)%

Organic growth					7.7%					8.2%

Management believes that organic revenue growth is valuable to investors because it reflects the revenue performance compared to a prior period with the same number of revenue generating days and excludes the impact from acquisitions, divestitures and foreign currency exchange rate fluctuations.

SUPPLEMENTAL SEGMENT DATA

(In thousands)	Uniform Rental and Facility Services		First Aid and Safety Services		All Other		Corporate			Total
For the three months ended February 29, 2024
Revenue	$	1,876,642	$	262,602	$	266,929	$	—		$	2,406,173
Gross margin	$	916,434	$	147,732	$	123,682	$	—		$	1,187,848
Selling and administrative expenses	$	496,027	$	90,015	$	81,006	$	—		$	667,048
Interest income	$	—	$	—	$	—	$	(930	)	$	(930	)
Interest expense	$	—	$	—	$	—	$	25,530		$	25,530
Income (loss) before income taxes	$	420,407	$	57,717	$	42,676	$	(24,600	)	$	496,200

For the three months ended February 28, 2023
Revenue	$	1,716,165	$	231,605	$	242,216	$	—		$	2,189,986
Gross margin	$	808,172	$	119,408	$	106,451	$	—		$	1,034,031
Selling and administrative expenses	$	448,177	$	72,137	$	66,905	$	—		$	587,219
Interest income	$	—	$	—	$	—	$	(373	)	$	(373	)
Interest expense	$	—	$	—	$	—	$	28,819		$	28,819
Income (loss) before income taxes	$	359,995	$	47,271	$	39,546	$	(28,446	)	$	418,366

For the nine months ended February 29, 2024
Revenue	$	5,554,009	$	789,696	$	781,975	$	—		$	7,125,680
Gross margin	$	2,671,987	$	438,824	$	360,156	$	—		$	3,470,967
Selling and administrative expenses	$	1,445,440	$	262,996	$	241,492	$	—		$	1,949,928
Interest income	$	—	$	—	$	—	$	(2,121	)	$	(2,121	)
Interest expense	$	—	$	—	$	—	$	76,664		$	76,664
Income (loss) before income taxes	$	1,226,547	$	175,828	$	118,664	$	(74,543	)	$	1,446,496

For the nine months ended February 28, 2023
Revenue	$	5,123,924	$	701,740	$	705,634	$	—		$	6,531,298
Gross margin	$	2,418,438	$	354,698	$	311,454	$	—		$	3,084,590
Selling and administrative expenses	$	1,324,577	$	221,086	$	207,061	$	—		$	1,752,724
Interest income	$	—	$	—	$	—	$	(872	)	$	(872	)
Interest expense	$	—	$	—	$	—	$	85,459		$	85,459
Income (loss) before income taxes	$	1,093,861	$	133,612	$	104,393	$	(84,587	)	$	1,247,279

Cintas Corporation Consolidated Condensed Balance Sheets (In thousands except per share data)

	February 29, 2024			May 31, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	128,483		$	124,149
Accounts receivable, net		1,262,077			1,152,993
Inventories, net		451,215			506,604
Uniforms and other rental items in service		1,025,597			1,011,918
Prepaid expenses and other current assets		163,624			142,795
Total current assets		3,030,996			2,938,459

Property and equipment, net		1,505,810			1,396,476

Investments		294,261			247,191
Goodwill		3,212,432			3,056,201
Service contracts, net		335,863			346,574
Operating lease right-of-use assets, net		186,514			178,464
Other assets, net		412,999			382,991
	$	8,978,875		$	8,546,356

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	307,941		$	302,292
Accrued compensation and related liabilities		182,669			239,086
Accrued liabilities		720,545			632,504
Income taxes, current		18,310			12,470
Operating lease liabilities, current		44,430			43,710
Total current liabilities		1,273,895			1,230,062

Long-term liabilities:
Debt due after one year		2,474,908			2,486,405
Deferred income taxes		481,177			498,356
Operating lease liabilities		146,060			138,278
Accrued liabilities		368,752			329,269
Total long-term liabilities		3,470,897			3,452,308

Shareholders’ equity:
Preferred stock, no par value:		—			—
100,000 shares authorized, none outstanding
Common stock, no par value, and paid-in capital:		2,246,329			2,031,542
425,000,000 shares authorized
FY 2024: 193,090,252 issued and 101,444,090 outstanding
FY 2023: 192,198,938 issued and 101,732,148 outstanding
Retained earnings		10,341,248			9,597,315
Treasury stock:		(8,439,817	)		(7,842,649	)
FY 2024: 91,646,162 shares
FY 2023: 90,466,790 shares
Accumulated other comprehensive income		86,323			77,778
Total shareholders’ equity		4,234,083			3,863,986
	$	8,978,875		$	8,546,356

Cintas Corporation Consolidated Condensed Statements of Cash Flows (Unaudited) (In thousands)

	Nine Months Ended
	February 29, 2024			February 28, 2023
Cash flows from operating activities:
Net income	$	1,157,277		$	1,001,809

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		207,637			190,801
Amortization of intangible assets and capitalized contract costs		119,815			113,281
Stock-based compensation		84,490			75,334
Deferred income taxes		(21,366	)		22,001
Change in current assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net		(109,040	)		(132,473	)
Inventories, net		55,834			(60,563	)
Uniforms and other rental items in service		(9,060	)		(85,991	)
Prepaid expenses and other current assets and capitalized contract costs		(104,873	)		(116,842	)
Accounts payable		5,771			32,851
Accrued compensation and related liabilities		(58,511	)		(32,666	)
Accrued liabilities and other		52,945			17,856
Income taxes, current		5,822			18,793
Net cash provided by operating activities		1,386,741			1,044,191

Cash flows from investing activities:
Capital expenditures		(307,558	)		(224,116	)
Purchases of investments		(7,592	)		(4,618	)
Acquisitions of businesses, net of cash acquired		(185,028	)		(32,983	)
Other, net		(3,100	)		(6,894	)
Net cash used in investing activities		(503,278	)		(268,611	)

Cash flows from financing activities:
Payments of commercial paper, net		—			(62,200	)
Repayment of debt		(13,450	)		—
Proceeds from exercise of stock-based compensation awards		1,275			2,941
Dividends paid		(393,310	)		(332,421	)
Repurchase of common stock		(468,146	)		(370,917	)
Other, net		(5,839	)		(11,996	)
Net cash used in financing activities		(879,470	)		(774,593	)

Effect of exchange rate changes on cash and cash equivalents		341			(2,895	)

Net increase (decrease) in cash and cash equivalents		4,334			(1,908	)
Cash and cash equivalents at beginning of period		124,149			90,471
Cash and cash equivalents at end of period	$	128,483		$	88,563

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