Good day, everyone, and welcome to the Cintas Corporation Announces Fiscal 2023 Third Quarter Earnings Release Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Paul Adler, Vice President, Treasurer, and Investor Relations. Please go ahead, sir. Thank you, Ross, 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 2023 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. Third quarter total revenue grew 11.7% to $2.19 billion. Each of our businesses continue to execute at a high level. The benefit of our strong revenue growth flowed through to our bottom line, excluding a gain in the related tax benefit in last year's third quarter. Operating income margin increased 110 basis points to 20.4% and diluted EPS grew 16.7% to $3.14. I thank our employees, whom we call partners, for their continued focus on our customers, our shareholders, and each other. The Uniform Rental and Facility Services operating segment revenue for the third quarter of fiscal 2023 was $1.72 billion compared to $1.55 billion last year. The organic revenue growth rate was 10.8%. While price increases contributed at a higher level than historically, revenue growth was driven mostly from increased volume. Our sales force continues to add new customers and penetrate and cross-sell our existing customer base. Businesses prioritize all we provide, including image, safety, cleanliness, and compliance. Our First Aid & Safety Services operating segment revenue for the third quarter was $231.6 million compared to $213 million last year. The organic revenue growth rate was 7.8%. The segment was up against a difficult revenue comparison because last year's third quarter revenue included about $15 million in sales of COVID-19 test kits that did not repeat this year. Excluding the prior year test kit sales, the organic revenue growth rate was 16%. We continue to have good momentum in our first aid cabinet business, which continues to grow greater than 20%. Health and safety of employees remains top of mind. We provide businesses with access to quick and effective products and services that promote health and wellbeing in the workplace. Our Fire Protection Services and Uniform Direct Sale businesses are reported in the All Other segment. All Other revenue was $242.2 million compared to $194.3 million last year. The Fire business revenue was $155.8 million, and the organic revenue growth rate was 20.7%. Uniform Direct Sale business revenue was $86.5 million, and the organic growth rate was 32%. Now, before turning the call over to Mike to provide details of our third quarter results, I'll provide our updated financial expectations for our fiscal year. We are increasing our financial guidance. We are raising our annual revenue expectations from a range of $8.67 billion-$8.75 billion to a range of $8.74 billion-$8.80 billion. The total growth rate of 11.3%-12%. We are raising our annual diluted EPS expectations from a range of $12.50-$12.80 to a range of $12.70-$12.90, a growth rate of 12.6%-14.4%. Mike? Thanks, Todd. Good morning. Our fiscal 2023 third quarter revenue was $2.19 billion compared to $1.96 billion last year. The organic revenue growth rate, adjusted for acquisitions and foreign currency exchange rate fluctuations, was 11.8%. Gross margin for the third quarter of fiscal 2023 was $1 billion compared to $898.2 million last year, an increase of 15.1%. Gross margin as a percent of revenue was 47.2% for the third quarter of fiscal 2023, compared to 45.8% last year, an increase of 140 basis points. Energy expenses comprised of gasoline, natural gas, and electricity were a tailwind, decreasing 15 basis points from last year. Strong volume growth from new customers and the penetration of existing customers with more products and services helped generate great operating leverage. Gross margin percentage by business was 47.1% for Uniform Rental and Facility Services, 51.6% for First Aid & Safety Services, 48.5% for Fire Protection Services, and 35.8% for Uniform Direct Sale. Operating income of $446.8 million compared to $407.6 million last year. Operating income as a percentage of revenue was 20.4% in the third quarter of fiscal 2023, compared to 20.8% in last year's third quarter. Fiscal 2022 third quarter operating income included a $30.2 million gain on an equity method investment transaction. The gain was recorded in selling and administrative expenses. Excluding this gain, fiscal 2023 third quarter operating income as a percentage of revenue was 20.4% compared to 19.3% in last year's third quarter, an increase of 110 basis points. Our effective tax rate for the third quarter was 22.1% compared to 18.2% last year. The fiscal 2022 third quarter equity method investment transaction included a significant tax benefit. Excluding the transaction, the effective tax rate for the third quarter of fiscal 2022 was 19.6%. Net income for the third quarter was $325.8 million compared to $315.4 million last year. This year's third quarter diluted EPS of $3.14 compared to $2.97 last year. Fiscal 2022 third quarter diluted EPS contained $0.28 from the gain on the equity method investment transaction, which included a related $0.07 tax rate benefit. Excluding this gain and the related tax benefit, fiscal 2023 third quarter diluted EPS of $3.14 compared to $2.69 in last year's third quarter, an increase of 16.7%. Cash flow remains strong. On December 15, 2022, we paid shareholders $117.4 million in quarterly dividends, an increase of 18.6% from the amount paid the previous December. Todd provided our annual financial guidance. Related to the guidance, please note the following. Fiscal 2022 included a gain on sale of operating assets in the first quarter and a gain on an equity method investment in the third quarter. Excluding these items, fiscal 2022 operating income was $1.55 billion, a margin of 19.7%, and diluted EPS was $11.28. Please see the table in our earnings press release for more information. Fiscal 2023 operating income is expected to be in the range of $1.77 billion-$1.80 billion, compared to $1.55 billion in fiscal 2022 after excluding the gains. Fiscal 2023 interest expense is expected to be $112 million compared to $88.8 million in fiscal 2022, due in part to higher interest rates. Our fiscal 2023 effective tax rate is expected to be 20.7%. This compares to a rate of 17.9% in fiscal 2022 after excluding the gains and their related tax impacts. Our financial guidance does not include the impact of any future share buybacks. We remain in a dynamic environment that can continue to change. Our guidance contemplates a stable economy and excludes significant economic disruptions or downturns. I'll turn it back over to Paul. That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just one question and a single follow-up if needed. Thank you. If you would like to ask a question, please press star one on your phone now. Please be prepared to ask your question when prompted. You will be allowed to ask one follow-up question. Once again, if you have a question, please press star one on your phone now. Our first question comes from Manav Patnaik from Barclays. Please go ahead, Manav. Thank you. Good morning. I was just hoping you could talk about, you know, clearly you had strong results in the quarter, so I presume all the trends that you're hearing from your customers were solid. You know, have you seen any changes more recently with, you know, all the events that have occurred out there in the banking world, and if that's impacting, you know, kind of the small business confidence where you guys have more kind of exposure to? Good morning, Manav. Thanks for the question. You know, it is, we're watching it very closely. Certainly there's rumblings when you read the newspapers every day and what's going on in the marketplace. Our customers seem still, you know, quite solid. You know, it's always a very competitive marketplace and we're competing quite well there. They like our products and services and we help them run their business better, so and help them free them up to take care of items to where they can focus on their business. You know, we like our value proposition and, but we certainly, prefer an environment where our customers are in a great, strong economy. We're not seeing it just yet and, but we're certainly watching it very closely and monitoring it and making sure that we're focused on providing great value for our customers. Got it. Just, you know, the growth has obviously been, you know, pretty strong, you know, better than I think what we were expecting to. You said most of that growth was mostly volume. I was just wondering on the volume piece, is it that you're taking, you know, maybe more share than normal? Is it just that these businesses are starting to get back to more normal capacity, and so there's more of that volume recovery that's eating that? Yeah, it's a good question. you know, there's a whole lot of inputs to our success in growing our revenue at the levels that we're growing, and it is exceeding our expectations. Certainly, new business is quite good. We really like that. Our retention levels are very attractive. You know, cross-sell that we've spoken about in the past is continuing to improve, and as we mentioned, pricing is above historical. The volumes are really coming from, you know, the three areas that I mentioned. Keep in mind, the majority of the new accounts that we sell are new to our segment, meaning we call them new programmers. We're, we're growing the pie, not taking, just taking share. We certainly love to do both, but growing the pie has been something that we are quite good at and have done, consistently over the years. We, we still, we think the future is quite bright there. Our next question comes from Andrew Steinerman from J.P. Morgan Securities LLC. Please go ahead, Andrew. Hi. With just one quarter left in the fiscal year, I just wanted to ask what the organic revenue growth year-over-year for the fourth quarter 2023 is implied in the upgraded, you know, fiscal 2023 guide? Andrew, the fourth quarter guide would contemplate 6.5%-9.5% revenue growth. Keep in mind, we talked a lot about the Uniform Direct Sale business, which grew 32% in the third quarter, and it is coming up against tougher comps. We just don't see that kind of growth continuing and settling back into what we would say is a typical growth rate for Uniform Direct Sale in that low single digits. That's the primary change that we see in the fourth quarter. Right. For the rental business, you're expecting a similar growth rate in the fourth quarter than you had in the third? Well, I'll say this, Todd just talked about the that we haven't seen much change in customer behavior, and the demand has still been really good and the momentum in the rental business is good. While I'm not ready to say we're guiding to a specific number, we don't see much change to it, coming into the fourth quarter. Momentum still is strong. Our next question comes Faiza Alwy from Deutsche Bank. Please go ahead, Faiza. Yes. Hi, good morning. I was hoping to talk a little bit about, you know, you've historically seen, you know, your results have accelerated beyond what the models would suggest, and you've talked about, you know, new verticals and the benefits of SAP implementation. Curious about how much more runway do you see in both of those areas as we look ahead to, you know, next fiscal year, and potentially in the long term? Faiza, I'll start, and then Mike can certainly chime in. You know, as far as our results are quite good. We usually do grow in multiples of GDP and, but we like where we're, where we are and where we're heading. Regarding SAP, we're very much in the early innings of SAP. You know, that is the umbrella of our technology investment, our the digitization of our business. You know, we went through all the implementation, which we're, you know, still. There's always work to be done there. Nevertheless, you know, we're seeing benefits from our technology investments. Our customers are seeing benefits from our technology investments. We certainly love when we derive efficiencies from technology, but we get even more excited when our customers see benefits, giving us a competitive advantage in the marketplace. You know, we've talked in the past about the certain advantages that we get with technology investments, myCintas Portal is one of the more obvious ones that the customers see an advantage. They get to be able to manage their account. They get to make requests. The majority of our requests are done outside of normal business hours. You know, our customers don't always just wanna be able to deal with our service provider in person or call our office during normal business hours. They like to be able to... the flexibility to do business on their time and to get things off their list and move it on to ours. That portal allows that flexibility for them. It's showing up in customer satisfaction and customer loyalty. Yeah, very much on the early innings of our technology deployment. I can certainly speak more to that if you like. Before you get into that, Todd, I just might provide a reminder that, look, we love the market opportunity also for our business. It's a, we look at it as a very big opportunity. In other words, when we talk about we have a little bit over one million customers, there are 16 million customers or 16 million businesses in the U.S. and Canada, we're just continuing to try to highlight that there is a great market opportunity. Todd brought up the point that when the majority of our new business is expanding the served market or tapping into that large market potential, it means that we can grow in those multiples of GDP and employment growth for a long period of time. I think it's important to keep that in mind as you think about the growth potential over the longer term. The market opportunity is great. Great. That's really helpful. I mean, I would love to hear more about the technology, so I'll leave it up to you in terms of how much more you'd like to share. Maybe specifically on the healthcare vertical, could you talk about, you know, is, you know, what the growth trends have been like there? What they were like this particular quarter and sort of how they've been trending. Certainly. The healthcare business is a great vertical for us. We have spent years organizing appropriately around that with our service providers, our sales partners. We've organized around products and services that they find attractive. You know, a good example of that is, let me back up. Our growth rates are very attractive there. They're in excess of where we're running in totality. They're primarily due to what I just described, but also some specific products that we have launched. We've spoken a little bit about, you know, the Scrub business. The Scrub business historically was not a real attractive business for us. The reason being it was low-quality products, heavy, low margin, and just they were kind of not treated as a disposable but pretty close to a disposable product. We changed the game on that when we launched our garment dispensing service there, which controls the inventory levels for our customers. Here's the big thing, is that what it, because the technology controls it and only allows what the administrator of the hospital says each person can get, then what it allows us to do is provide a higher quality product and not be dealing with such low cost, low margin products. The customer's happier, we control the cost so much better because the inventory is controlled. That's a great example of one of the innovations that we've brought to the healthcare industry. That certainly is a technology that people value, and it's helping us grow that business really attractively. We're still very much in the early innings of that. Hopefully that gives you a little more color. Our next question comes from George Tong from Goldman Sachs. Please go ahead, George. Hi. Thanks. Good morning. I wanted to dive a little bit more into the selling environment. Can you discuss what you're seeing with, client sales cycles, budgets and client headcount, and what the implications are for the business? Yeah, thanks for the question, George. You know, I would say that the selling environment is very similar, has not really changed much. Sales cycles, they're not elongating. You know, what's going on with our customers, you know, they're still, you know, fighting for to bring people on, to make sure that they're providing the right levels of service. In these types of environments, we help provide value to them. We provide a benefit to them running their business. In many cases, we're able to help customers save money from what they were doing. Y ou know, I spoke earlier about when you walk into a customer and they are, they're not a programmer, well, they still have products and that, probably that they have procured on their own, kind of a do it yourself. They're struggling to keep up with that. In many cases, because of our scale and our ability to source products, and the fact that we are already there servicing them in many cases, we can provide great value for them and actually, help lower their costs. W e've seen that throughout the years, and that's a real benefit as we go through trying to provide value for our customers. Yeah, generally speaking, George, I would say the selling environment is pretty similar. Has not a whole lot of change over the past six months or so. Got it. That's helpful. As a follow-up, you increased your full year guidance pretty much across the board. How much of that increase was driven by fiscal 3Q outperformance versus your own internal expectations compared to a stronger fiscal 4Q outlook? George, I don't know if I can specifically separate the guidance raise, but clearly we had a nice third quarter and the performance was strong from the organic growth to the gross margins to the operating margin. A pretty s olid quarter all the way through. Our guide for Q4 would suggest we expect more of the same. The guide would suggest we expect another nice quarter. Hard to separate though for us, exactly what the difference is because, you know, our internal expectations are a little bit different than our external, I'll say, consensus and guide. Our next question comes from Stephanie Moore from Jefferies. Please go ahead, Stephanie. Hi, this is Hans Hoffman on for Stephanie. Thanks for taking my question. Just, you know, wanted to ask on margins, specifically, you know, the First Aid & Safety gross margin. You know, obviously really strong at almost 52%. Is that just, you know, a function of kind of, you know, lower margin PPE sales rolling off and higher margin, you know, cabinet business kind of becoming a larger part of the mix? Or, you know, is there anything else kind of to call out on the performance there? How should we be thinking about margin in that business on a go-forward basis? Hans, it's a good question, and good morning. Certainly, we're very happy with the trends that we're seeing in the gross margin in the First Aid business. We're very happy in general with the First Aid business. It is execution is at a very high level. Certainly, the mix of business is we're benefiting from since you know PPE sales and safety sales tend to be lower margin. There is strong demand for what we are providing. Health and wellness is resonating in the marketplace. The mantra that we have in that business is what's more important to a business than the health and safety of their people. That is resonating. So we're getting good leverage from the growth and in the mix. Strong execution, and we really like how we're operating in that business. Got it. Thanks. Just, you know, for my follow-up, I wanted to ask on, you know, the All Other segment, you know, clearly really strong growth there in the quarter. I know last quarter, you guys kind of talked about, you know, tougher comps, specifically in the Uniform Direct Sale business in the, you know, second half of this year. I was just kind of curious, you know, what kind of drove the strong performance this quarter, 'cause I think, you know, a lot of us, you know, kind of expected that to kind of show up in Q3. Yeah. It's certainly the comps are in Q4 quite challenging, and as Mike mentioned, we do expect that to moderate. You know, the Uniform Direct Sale business is a little lumpier, and sometimes things come through based upon customer demand a little faster, or what have you. Certainly the comps in Q4 are tougher, and that's part of our guide. Our next question comes from Andrew Wittmann from R.W. Baird. Please go ahead, Andrew. Yeah, great. Thanks, and good morning, everyone. I guess, I was hoping, Mike, you could talk a little bit about some of the relevant inflationary factors that are, you know, driving so much distress in the overall economy. Specific to your business, I was wondering if you'd talk about the, basically the cogs or merchandise costs, whether it's for uniforms, mats, or the ancillary services that you provide, as well as address how labor is progressing in your business. Have those things generally have you been able to, like, get leverage on those items despite the challenges? In other words, are those down as a percentage of revenue in the quarter? Can you just talk about the trend lines that you're seeing in those, if there's any moderation or acceleration in them? Sure. I'll start with material cost, Andrew. you know, let me start with, we source or direct the sourcing of more than 90% of our volume and more than 90% of our items have more than one source. That's really important to keep in mind so that when our vendors may have inflationary pressures on them, the thing to remember is we have choices. Sometimes that means we do have to take increases, but many times it means we can flex, and we can negotiate, and we can, again, we have choices, we don't always have to accept every vendor price increase that comes our way when we direct the sourcing ourselves and when we have multiple sources. That's really important. The other thing is, obviously, the amortization of this bucket of expenses, allows us to see ahead, to anticipate what's coming. As you can imagine, when a vendor does come to us and has a price increase, it takes a while to, first of all, build the inventory, and then it goes to our distribution centers, and then after a turn, it comes into our rental locations, and that's where the amortization starts. In month one, we have 1/18 of that inflation for garments, for example, 1/48 of that for entrance mats. You can kind of get a feel for it. It takes a long time for those in-inflationary pressures to come to us. That means we can do lots of planning. We can think about initiatives that we have going on, and we can accelerate some of those. We can think about process improvement, and we can implement those. We can also get in at least one annual price increase and maybe multiple price increases before that full inflation hits us. We can really get ahead of that kind of cost. We have choices. We can really see ahead of that. That gives us a really nice opportunity to plan the business without a lot of disruption. The other thing I'll say, Andrew, is we've got a lot of infrastructure. You know, we've got a lot of facilities and trucks and things, rents, and those aren't quite as disrupted by inflation or at least immediately. Again, with our great growth, we can get some really nice leverage on that part of our cost structure. When you think about labor that you touched on, Andrew, we certainly wanna make sure that we are maintaining the absolute best partner engagement that we can, and that means we like to be at market or slightly above market rates. That's important for us in terms of the labor rates. You know, we've talked about we've had a couple things happen over the course of the last five or six years. One is, we had a lot of G&K synergies being realized over the course of the last six years, and that allowed us to be a little bit more aggressive on raising rates. We were never caught flat-footed in terms of when the labor challenges hit. That's been important to us, and it's allowed us to keep disruption down. The other thing is, we've talked a lot about initiatives like SmartTruck. We talked a lot about the technology impacts in our facilities that allow us to be more efficient. That means as we're growing, we don't need to add as many resources within the plants or on the routes, and that allows us to leverage that labor environment even in this period of time where, we've got raising labor rates. Mike, if I can add, Andrew, certainly, in this type of inflationary environment, it's challenging to grow gross margin. We've been quite successful in doing so. Getting good leverage on that revenue has been key for us. But managing our variable costs, that is just simply part of our culture, managing it very, very closely. That's been big. To Mike's point, in leveraging some of our digital transformation, SmartTruck has been very important to us. Also the managing our inventory in our used stock rooms has been really important. We have good systems in place there that allows us to get better reuse, which is better for the customer because they the speed at which we can provide products goes up because it's right there available locally. Don't have to get it from a distribution center and ship it into us. It also obviously helps the amortization schedule when you can get better reuse of that current product that you're already paying for. The leverage that we're getting as a result of the systems and processes we've put in place with technology have are paying off. Great. That's helpful. I guess just for my follow-up, I wanted to ask about, I guess the balance sheet. Mike, I mean, in the next quarter or two, you'll be at about one times leverage, which is, you know, on the lower end of where you've historically run the company. With the company doing, you know, effectively $2.2 billion of EBITDA and growing, and, you know, cash flow being very strong, you're gonna have not only the ability to leverage the balance sheet plus the cash coming in, that's a lot of capital to deploy. How do you deploy that capital in a world where we haven't seen, you know, that amount of capital deployed really since you guys did G&K, like you said, six years ago? How do you keep the balance sheet geared appropriately? What are the opportunities that are out there for you? Well, the first thing that I'll say is, the most important thing for us is to make sure that we're investing in the right way for long-term success of the business. We wanna make sure that we are growing capacity as needed with our growth, that we're training our partners, that we're doing the things that we need to do to continue to grow long term. We still wanna be very acquisitive. It's hard to pinpoint when those may or may not happen, but we wanna continue to be acquisitive. We talked about the dividend a little bit and that we've raised it almost 20% this past year. Certainly, while we didn't do any buybacks in the last quarter, that remains an opportunity for us as we look forward. Andy, we wanna make sure that we are prudent in the way that we invest our cash. So sometimes that means, we may take a little bit longer to deploy cash, but we wanna make sure more than anything, job number one is long-term growth of the business, both on the top line and on the bottom line, and are we doing the right things in order to make that happen? Then prudently look for ways to enhance that. And our next question comes from Tim Mulrooney from William Blair. Please go ahead, Tim. Hey, this is Sam on for Tim. Thanks for taking our questions here. I guess to start on the margin side, lower energy costs were a 15 basis point benefit during the quarter. I'd imagine this dynamic is gonna continue through the next few quarters. I was wondering if you could help frame for us the pacing and size of any benefit you're expecting if you have any color to provide there. Well, certainly, Sam, we watch the energy prices very closely. Fuel as in diesel and gasoline, hasn't changed that much year over prior. Natural gas, we're watching, and we expect that that will be a benefit in the near future. And the electricity doesn't change a whole lot. I wouldn't say that you can count on, you know, a significant tailwind there. We are certainly not, when you think about energy as a percent of sales, I think we came in at 2.15% energy as a percent of sales. We like when they're coming down, and we manage it as they're going up. I wouldn't expect a real change there. Just to frame it a little bit, Sam. Last year in the fourth quarter, our total energy was 2.5% of revenue. In the first quarter, it was 2.4%. This time it was 2.15%. We may see a little bit of a benefit in Q4 and Q1, but boy, we've worked so hard to get this to be such a small part of our cost structure that I'm not sure the benefit is gonna be that significant one way or the other. Gotcha. Appreciate the color there. I guess for the follow-up, you know, you've spoken before about SmartTruck, and I think you just mentioned the question previously for the routing software. Now that it's been over a year since kinda first rolling it out, I guess I'd be curious if you could help quantify any of its benefit to your margins and if you still think there's a sizable benefit remaining there from further iterations or adoption? Yeah, good question, Sam. Yeah, we absolutely see opportunities still to come with Smart Truck. You know, it's one of the things that we are very careful about is, you know, it's, you know, when you route a new customer, that's one thing. When you are rerouting your existing customer base, we're very judicious about that because, you know, changing the face of the service provider, can sometimes bring issues, meaning, you know, they love their service provider, and now you change it? You gotta be really careful with that. You're gonna see, I would expect benefits in that area for years to come. That shows up in energy, in emissions, but it shows up also in productivity because, you know, our partners have more time to spend with the customers, and they can provide more value to the customers. As, one of the things we talk often about here is, we don't generate any revenue when the wheels are moving. It's only when the wheels stop. We're very focused on that, you're gonna see it, I think, for years to come. Our next question comes from Seth Weber from Wells Fargo. Please go ahead, Seth. Hey, you guys. Good morning. Hey, Mike, I just wanted to ask about free cash flow. It was a little bit below what we were looking for in the quarter. Is that you feel like just a transitory, you know, function of revenue growth ramping a little bit better and you're just kinda getting a little bit behind on working capital? Or, you know, can you just talk us through how you're thinking about working capital going forward? Thanks. Well, I'll say free cash flow, I think your point is a good one from the perspective of it's a little bit transitory, but in the way of, look, we're coming off of a fiscal 2021 year where there wasn't a lot of growth and then really getting some nice acceleration into fiscal 2022 and 2023. There's there is a little bit of as we have used capacity through the pandemic, we've gotten back into a time period where we need some capacity here and there. We've been really good at managing the capacity in many different ways, whether it is, for example, better efficiency in our existing wash alleys to adding a washer, to adding a dryer, to maybe then adding a new facility. We've gotten to the point where it's time to add capacity again, and that's healthy. I would call that there is a little bit of a, of a mismatch there that we're catching up a bit from that. Having said that, look, we still expect free cash flow to be very, very strong. Whenever we're growing nicely, we're gonna use some working capital. That's just the nature of our business. That's, that's a good thing. You know, you're right. There's a little bit of a catch-up in our capital expenditures. We'll start to, I'll say those will get more in sync as we go into the next year and following years, assuming there's no other economic disruption. Okay, that's helpful. Do you think CapEx could go back to that, you know, 4% of revenue range where you, where you kind of were towards the end of the last decade or, you know, and then it went to, like, 2% a couple years ago? I'm just trying to understand. Yeah, it's gonna be close. We certainly don't expect it to be down at that 2% level. It's gonna be closer to that 4% level as we think about moving forward. Our next question comes from Heather Balsky from Bank of America. Please go ahead, Heather. Hi. Thank you. you talked a fair amount during the call about your success with new customers and that a lot of them are what you call non-programmers. You know, I think a key theme that's been discussed on multiple calls is the shift to outsourcing and an acceleration kind of in that trend. I'm just curious, as you kind of look to what happened in the third quarter and as you're looking out, kind of your thoughts on how that trend continues. Do you see it normalizing, or do you think there's further momentum into the next few years? Thanks. Good morning, Heather. I'd say that trend continues. You know, there's still 10 million job openings of folks trying to attract talent and trying to run their business and provide the levels of service that their customers expect. You know, when we have the ability to outsource items for them at very competitive rates, and again, many cases because we're already there, then that makes it quite attractive. It's one of these, like, "Oh my gosh, you can take this off my plate? Then please take it, take it off my plate." We leverage that, and we'll continue to leverage that. You know, you know, economic cycle aside, customers still need to take care of their customers and we can help them do exactly that. We'll be focused on providing that value and, managing our cost structure so that we can do it at very competitive rates. Great. Thank you. I guess as my follow-up, you discussed earlier that you are looking for M&A opportunities, although you don't know kind of when those might occur. I'm curious, can you talk about your priorities with regards to M&A? Are there white space areas you wanna fill in? Is it geographic opportunities? Just what are your priorities? Thanks. Yeah, good question, Heather. We're interested in M&A, certainly in our rental business, in our First Aid business and our fire business. You know, we make acquisitions every year, every quarter, it seems, in each of those businesses. They're usually reasonably small. Some of them are geographic expansion, some of them are tuck-in, so it's a real mixture. You know, M&A tends to ebb and flow a bit. It's tough to predict timing, but we're interested in M&A in all those businesses. They have to be the right businesses, meaning well-run businesses. You know, large, medium, small, we are interested in all in each of those businesses. Our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead, Toni. Thanks so much. Wanted to ask about your staffing right now. Are you being more cautious now because of the environment or not? I know you mentioned you haven't really seen a slowdown yet in your customer base, so, you know, maybe nothing's really changed. Just wanted to think about how you're thinking of staffing going forward. Yeah, Toni, we're, we like our staffing levels today. The labor market in general is easier than it was six months ago. It's certainly not easy still. We're focused on staffing at the levels to make sure that we provide really good customer service. That's where we are. We will adjust accordingly if the economic cycle changes. We're watching it really closely, as you can imagine, to make sure that we're providing the right service, the right value to our customers. We're certainly have a watchful eye out to understand if demand starts to change based upon what's going on in the broader economy. Terrific. I wanted to ask about pricing. You mentioned a couple of times on the call that price contributed more this quarter, versus, you know, in the past. I just wanted to understand, is this a function of you had been raising prices, you know, a lot and now you're sort of at and you're still raising? Like, is the rate of change on pricing still higher versus before, or it's just the prior price increases still coming in? Thanks. Yes, Toni. Our pricing, it varies based upon, you know, pricing's a local subject. You know, we handle it differently in different businesses, and in different geographies. That being said, yeah, our pricing is above what it has been historically. That being said, the volume growth is the majority of our growth. The reason being is, you know, the inflationary environment is such that, we have to pass on a larger price increase than we do historically. Fortunately, the customers are-- they understand that, they understand the environment, we've been very successful in providing the right levels of service so that they are open to those adjustments. We're not here to give guidance beyond Q4. Certainly, if the work of the Fed is such that it brings inflation down, then we'll manage our business accordingly to match that. Toni, I might just add that the pricing that Todd talked about earlier is relative to historical levels. We were not pointing out that there is a sequential increase in that level of pricing. If that's where your question might have been coming from, it's really that relative to the historical levels of pricing we're certainly above that, but not a real change in practice sequentially. Our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead, Shlomo. Hi, thank you very much. I wanna ask back on kind of the questions Manav was asking about initially. Just in terms of the client base that you have, it's interesting, like the ADP National Employment Report is talking about small businesses have been shedding jobs basically since August. Are you not seeing that at all in your client base, or is it that you just, you know, skew more towards mid-sized and larger clients? I just want to get a little bit further into, you know, how to read some of the kind of economic reports versus, you know, the very strong results that we're seeing at Cintas. Yeah. Thank you, Shlomo, for the question. You know, we have a really diverse customer base. So, no, we are not more geared towards the medium size. We have, you know, small, medium, large customers, geographic, different verticals. You know, we have a really diverse customer base. When you think about our business now, it is more geared towards the service economy than it is just goods producing. Yeah, so you name it, we've got it. We've got some small customers that are struggling. We've got some that are thriving, and that is really more dependent upon their business, their, maybe their, particular environment. The same goes for the medium and the larger customers. You know, it's a real mix. We work with them. If we have a customer who is particularly struggling, then we pivot and try to adjust accordingly. If their demand is such that it's coming down, then we pivot and handle it accordingly. Again, we also have other products and services that they might be procuring elsewhere, where we might be able to help them and provide cost savings to them. You know, it varies based upon the customer, but we're focused on providing that value and we'll continue to focus on that. Okay, great. Just following up on Toni's question in the pricing, is there any change at all in customer behavior in terms of the continued pricing? Is there any more pushback or it's kind of the same that you've had over the last, say, two to three quarters? Well, there's always pushback from customers. Always has been, always will be. The current environment with inflation levels, make it an opportunity for us to do so better than historical, larger than historical. I, I wouldn't tell you that the environment's changed dramatically. Certainly inflation is starting to, it appears to come down. So we're managing our business accordingly, and we'll manage our customers accordingly as well. Our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead, Scott. Thanks. Good morning, everyone. I guess on the focus on margin question. Could you provide a little bit of attribution? 110 basis points just operating income improvement year-over-year is really impressive. Could you kind of provide, you know, what was that via the top line as opposed to where were you getting efficiencies on the cost line? Maybe elaboration to the extent you're able of what was SmartTruck, what was just automation in the facilities, what was SAP? Really that's where the question is focused. On the cost line, where are you getting the most benefit presently? Thanks. Well, Scott, look, it starts with great growth. When we, when we are growing, our top line at healthy levels, we're going to get some nice leverage. I talked a little bit about in a previous response. I talked a little bit about that, the cost structure of having some costs that are a little bit in that infrastructure type of a bucket, that when we grow real nicely, we get some great leverage. That happened in all of our businesses. The growth that we saw in the third quarter, was broad-based, in all four of our businesses, and that leads to some really nice leveraging in each of those businesses. I talked a little bit about that amortizing aspect of material costs, particularly within the rental business. Again, that allows us to see things coming, and it allows us to plan accordingly. Again, the growth helps in that area, but it also allows us to think about things like process improvements, SmartTruck that you mentioned. In all of our businesses, we've got those kinds of initiatives. All of them are we're hard at work in all of them. We're seeing benefits from process improvement. Some are just simply better improvements, better training, and some are technology-related, like the SmartTruck. We've got all of them in each of the businesses, and that is adding to it. Now certainly the First Aid margin moving from 12.4% last year to 20.4% this year, there is the mix benefit we're certainly getting in that space. We also have lots of other good things going on in there. We are sourcing better in First Aid & Safety, and we do have some really nice process improvement opportunities going on there. We've initiated SmartTruck in the First Aid & Safety business and in the fire business. Certainly First Aid has been a big part of that margin improvement, but we've seen it all. It's hard. I don't have specific numbers to give you, Scott, but it starts with great growth and leverage. Then we get into better sourcing, process improvement, technology gains, and certainly then healthy mix. All of those things have contributed. Scott, I'd just like to add, you know, certainly what Mike was talking about, it starts with great growth. That is so critical to us. Part of our culture here is we're focused on extracting inefficiencies out of our business. We've. I spoke earlier that there's a lot of inputs to revenue growth, and there's a lot of inputs to margin improvement. Mike went through a list which was pretty darn comprehensive. Generally speaking, they, you know, I'll just say that we're focused on. We're not gonna just grow through pricing, we're gonna find a way in these types of environments to extract the inefficiencies so that we can grow margins, which, in these type of inflationary environments are certainly is very challenging. But the team's doing a heck of a job, and, we're quite proud of it. Sounds good. I appreciate the overview. Sounds like a lot of good momentum. You all touched upon myCintas portal earlier. It sounded like maybe a little bit more you're willing to share. Just curious, what% penetration do you have there? Where do you anticipate that to go? You know, you mentioned that gets used at all hours of the day. I'm just wondering what inning are we in? Any quantification of benefit of if customers are using that, how much more is that efficient in financially, if there's anything you can share on that? Thanks. Yes, certainly, Scott. The, it is. You're talking about changing behavior within customers. It tends to be a higher% of new customers that are coming on board that are participating at a high level. The reason being is, it's new behavior, period. Changing the customer behavior takes longer and because they're used to a certain way of how we're doing business, and some are leaning into it faster than others. We're, we see a very long runway here of benefits that we're gonna get. Where does it show up? It shows up in so many places. Certainly trying to be easier to do business with is a focus here, and it makes it easier to do business with us. I think you'll see that benefit for years to come. It's a little bit of an evolution with myCintas in that a customer starts to use it and they like the benefits. So they then start to grow in the way that they use it and expand. As we continue to see that growth too, we can add more options and other functionality to that that over time grows and grows. This is not a, "We have flipped the switch on myCintas, and now let's see how many customers we get adopting." This is really, we've opened it, and this is going to grow. Just the product itself is gonna continue to grow and add opportunity for us. More and more customers will be added, but also more and more functionality will come with it into the future. To Todd's point, this is a journey, and it's an evolution, and we are in the very early stages of it. At this time, there are no further questions. I'd like to turn the call back over to Paul Adler for closing remarks. Okay, Ross. thank you all for joining us this morning. We will issue our fourth quarter of fiscal 2023 financial results in July. We look forward to speaking with you again at that time. Good day. This concludes today's conference call. Thank you for your participation. You may now disconnect.