Good day, everyone, and welcome to the Cintas Quarterly Earnings Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Paul Adler, Vice President, Treasurer and Investor Relations. Sir, please go ahead.
Recorded. Good morning and thank you for joining us. With me today is Scott Farmer, Cintas' Chairman of the Board and Chief Executive Officer Todd Schneider, recorded by the company's Chief Operating Officer and Mike Hansen, Executive Vice President and Chief Financial Officer. Recorded. We will discuss our Q3 results for fiscal 2021.
After our commentary, we will be happy to answer questions. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward looking statements. Recorded. This conference call contains forward looking statements that reflect the company's current views as to future events and financial performance. Recorded.
These forward looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. Recorded. I refer you to the discussion on these points contained in our most recent filings with the SEC. I'll now turn the call over to Scott Farmer. Recorded.
Thank you, Paul. Good morning, everyone. The COVID-nineteen coronavirus pandemic continues recorded and remains a significant disruption to the economy. Our fiscal Q3, which included the months of December, January February was particularly challenging. Recorded.
COVID-nineteen case counts surged from about 180,000 on December 1 to a peak of a little over 300,000 on January 8. Recorded. Not surprisingly, economic indicators reflected an economic recovery that slowed considerably. Recorded. In December, the U.
S. Economy posted job losses again after 7 straight months of job gains. The operating environment was also challenged by severe winter weather. The snow and ice storm in February caused extensive energy blackouts in the U. S, especially in the state of Texas.
Recorded. Despite a very difficult operating environment in late December and into January, our sales rep productivity remained strong recorded and our employee partners persevered enabling us to offset the headwinds and get to flat on a sequential basis. Recorded. On top of that, we were able to help our customers with large supplies of personal protective equipment before the end of the quarter. We provided more personal protective equipment than ever, enabling us to exceed our financial expectations.
Recorded. Also on an organic basis, our quarterly revenue was flat year over year, a strong accomplishment considering the comparison to the prior year quarter recorded that was not impacted by COVID-nineteen. Looking ahead to our Q4, we expect lower COVID-nineteen case recorded. We do not anticipate that personal protective equipment sales will be as strong, recorded. So, 4th quarter revenue in this product line will decline sequentially.
However, we believe that our recurring revenue service service revenue will increase solidly on a sequential basis after being flat in the 3rd quarter. Mike will provide more information regarding our 4th quarter guidance soon. Regardless of the operating environment, our employee partners work with urgency to get businesses ready for the workday. Recorded. For over 90 years, Syntas has accomplished getting businesses ready for the workday in numerous ways, recorded, including providing hygienically cleaned uniforms to auto manufacturers, for example, so that the workers can safely build their cars, restroom supplies and services to professional services firms, so bathrooms are ready for use by employees and clients igenically laundered towels to coffee chains, so baristas can serve their coffee lovers first aid products to restaurants recorded to address the cuts and burns of the kitchen crew and test inspection and repair services of fire extinguishers and alarm systems recorded.
The COVID-nineteen pandemic registered in for businesses a new era of readiness. Getting ready for the workday today also includes taking actions to prevent and reduce transmission of called Viruses and Bacteria. Our solutions for getting businesses ready for the workday include providing hygienically clean scrubs to dentist offices, recorded because hygienists feel vulnerable taking them home to wander. Sanitizing spray surfaces and disinfectant wipes for food manufacturers for instance, recorded. Hand sanitizer dispensing units, the university, recorded.
Masks and gloves to city, county and recorded in the press release, and hygienically cleaned isolation gowns to hospitals helping businesses get ready for the workday has arguably never been more relevant. Every business has a need that SIMTAS can help fulfill. Recorded. And in this unpredictable environment, requiring new and increased demands, businesses appreciate the certainty of Cintas. The Cintas' tagline, I'm ready for the work day, helps describe what we do.
It also helps describe who we are. Our employees, whom we call partners, are always ready for the workday, whether it's in the best of times or in the most uncertain of times. Our partners are honored to be deemed essential. They are ready to listen, ready to offer solutions, ready to solve problems recorded and ready to be counted on to deliver, and they do. Now I'll turn the call back over to Mike for commentary on our financial results.
Recorded.
Thank you, Scott. Our fiscal 2021 Q3 revenue was $1,780,000,000 recorded compared to $1,810,000,000 in last year's Q3. Earnings per diluted share or EPS were $2.37 recorded, an increase of 9.7 percent from last year's Q3. The organic revenue growth rate adjusted for acquisitions, divestitures, recorded. Foreign currency exchange rate fluctuations and differences in the number of workdays was flat for the Q3 of fiscal 2021.
Organic revenue for the Uniform Rental and Facility Services Operating segment was also flat. Organic revenue for the First Aid and Safety Services recorded. Gross margin for the Q3 of fiscal 2021 was $809,500,000 recorded compared to $824,400,000 in last year's Q3. Gross margin as a percentage of revenue increased 10 basis points recorded to 45.6 percent for the Q3 of fiscal 2021 compared to 45.5% in the Q3 of fiscal 2020. Recorded.
Selling and administrative expenses as a percentage of revenue were 27.2% in the Q3 of fiscal 2021 recorded and 28.2% last year. Fiscal 2021 third quarter results benefited from increased sales rep productivity recorded and lower discretionary spending. Operating income for the Q3 of fiscal 2021 of $326,500,000 recorded. Operating margin increased 100 basis points to 18.4% in the Q3 of fiscal 2020 recorded compared to 17.4% in the Q3 of fiscal 2020. Recorded.
Our effective tax rate on continuing operations for the Q3 of fiscal 2021 was 14.4% recorded compared to 18.9% last year. The tax rate can move from period to period based on discrete events, including the amount of stock recorded for the Q3 of fiscal 2021 recorded. This conference call was $258,400,000 an increase of 10.2%. And again, EPS was $2.37 recorded, an increase of 9.7% from last year's Q3. Our balance sheet and cash flow remains strong.
Recorded. Our leverage calculation for our credit facility definition was 1.6 times debt to EBITDA. We have an untapped credit facility of $1,000,000,000 recorded. During the Q3 of fiscal 2021, we purchased $82,000,000 of Cintas common stock under our buyback programs. Recorded.
Earlier this week, on March 15, Cintas paid shareholders $79,500,000 in quarterly dividends. Recorded. For financial modeling purposes, please note that there is one more workday in our fiscal 'twenty one than in our fiscal 'twenty. One more workday recorded. 1 more workday also benefits operating margin and EPS.
Recorded. Fiscal 'twenty one operating margin will be about 12.5 basis points better in comparison to fiscal 'twenty due to one more day of revenue. Recorded. In fiscal 2020, the 4th quarter contained 65 workdays. This fiscal year's Q4 contains 66.
Recorded. Please keep these differences in mind when modeling results on year over year and sequential basis. Recorded. For our Q4, we expect our revenue to be in the range of $1,800,000,000 to $1,830,000,000 recorded and diluted EPS to be in the range of $2.20 to $2.40 Our 4th quarter effective tax rate recorded and is expected to be in the range of 21% to 22.5%. Please note that our guidance does not include any future share buybacks recorded for additional government restrictions on businesses in the event of increasing COVID-nineteen cases.
Recorded. We are encouraged by vaccinations, stimulus and business reopenings and we expect an improved operating environment in our 4th quarter. Recorded. We expect recurring revenue to increase solidly on a day adjusted sequential basis in the range of about 1% to 2.5% recorded after being flat in the Q3. However, we do not anticipate that personal protective equipment sales will remain at record levels.
Recorded. So, 4th quarter revenue in this product line will decline sequentially. Please keep in mind these points when comparing our 4th quarter guidance recorded to 3rd quarter results. Our fiscal 4th quarter marks the lapping of the onset of the COVID-nineteen pandemic. Recorded.
Our prior year Q4 coincided with the period of greatest GDP decline and job losses resulting from unprecedented restrictions on businesses recorded to help combat the surge of COVID-nineteen cases. While the pandemic continues, our 4th quarter financial results, including revenue growth, recorded. Our last year's 4th quarter operating income was also significantly affected recorded by many items caused by the COVID-nineteen coronavirus. These included additional reserves on accounts receivable and inventory, recorded in the press release and lower incentive compensation expense. Excluding these items, recorded.
Last year's 4th quarter operating margin was 15.5%. All these items were recorded in selling and administrative expense. Recorded. The additional inventory reserves account for slow moving inventory, mostly in the Uniform Direct Sale business, where customers in some of the most severely impacted industries, recorded. Please keep these points in mind when comparing our fiscal Q4 financial guidance to the prior year quarter.
Recorded. I'll now turn the call over to Todd Schneider to discuss the performance of each of our businesses.
Thanks, Mike. Recorded. The Uniform Rental Facility Services operating segment includes the rental and servicing of uniforms, healthcare scrubs, mats and towels recorded and the provision of restaurant supplies and other facility products and services. The segment also includes the sale of items from our catalogs to our customers on route. Uniform Rental and Facility Services revenue was $1,420,000,000 compared to $1,450,000,000 last year.
Recorded. Our Uniform Rental and Facility Services segment gross margin increased 50 basis points to 46.3% for the 3rd quarter recorded compared to 45.8% in last year's Q3, driven in large part to lower production and service expense as a percent of revenue. Our First Aid and Safety Services operating segment includes revenue from the sale and servicing of First Aid products, safety products, recorded in the Q3 of 2019. This segment's revenue for the Q3 was $198,500,000 recorded compared to $170,500,000 last year.
The
recorded. The First Aid segment gross margin was 43.5 percent in the 3rd quarter compared to 48.0% in last year's Q3. Recorded. The difference in gross margin is due to revenue mix. In the pandemic, the needs of businesses for personal protective equipment, including masks recorded.
Even though personal protective equipment is a less predictable revenue stream with lower gross margins than the relatively recorded in the quarter. Personal protective equipment is a profitable product line and we continue to work with urgency to fulfill the needs of businesses. Recorded. Also note that on a sequential basis, First Aid segment gross margins and operating margins have improved through the pandemic. Our fire protection services and Uniform Direct Sale businesses are reported in the all other category.
Recorded. All other revenue was $160,700,000 compared to $192,100,000 last year. Recorded. The fire business organic revenue increased 3.5%. The Uniform Direct Sales business organic revenue growth rate recorded.
Revenue from our airline, cruise line, hospitality and gaming customers recorded. These industries continue to be among the hardest hit by the pandemic. Recorded. That concludes our prepared remarks. We're happy to answer your questions.
Thank you,
recorded.
Signaled for questions. Our first question will come from Tim Mulrooney with William Blair.
Recorded. Good morning, Scott, Todd, Mike and Paul. My question, I just have one for you this morning is on the Uniform Rental recorded in the quarter. Operating margins in this business have ticked up nicely in 2021. And I think some of that was recorded from structural cost savings and maybe some from temporary cost savings.
Moving forward, would you expect uniform operating margins to kind of normalize recorded towards that pre pandemic run rate over time or would you expect operating margins to kind of settle at a somewhat higher level than the pre pandemic run rate? Thank you.
Recorded. Well, Tim, this is Scott. I'd start by saying that There have been a lot of expenses this year that we have been able to control tightly Discretionary spending, travel, things like that that impact the P and L. How much of that returns, I'm not sure. I recorded.
We've learned an awful lot. We don't necessarily have to have the large group meetings where everybody is traveling into one town to Some of that will happen, but a lot of that probably won't. But I'd say that In our recurring revenue businesses, recorded. As the economy continues to, I think, improve, you're going to see us need to add some expense back onto the P and L. That might be growth routes in the rental division as an example, recorded.
Jobs that would help us with growth, additional sales people, sales training, Additional headcount is in production operations to be able to process things. Recorded. So I wouldn't expect a linear improvement, but I would tell you that we do think that we will continue to see 20% to 30 recorded. I think that we can maintain margins that will be recorded at least at or above, probably above where we were pre pandemic. So That's how I would answer that.
Does that help you? No, that's really helpful,
recorded. Thank you. Our next question comes from Andrew Steinerman with JPMorgan.
Hi, there. A question for Todd. Recorded. When you think of rentals being flat in the just reported quarter, could you just give us a sense of how much ancillary services Is contributing versus are you seeing improvement in Uniform Rentals as well? And a quick recorded.
Can you comment on how dependent are you in some of the areas like restaurants that are still kind of opening up ahead?
Andrew, great question. We had, as was mentioned in the prepared remarks, Demand for various items around PPE and etcetera, other items regarding the pandemic recorded. Was very strong in Q3. That was a result of what was going on with case counts And you all saw that. So that was significant for us.
To the tune of about $45,000,000 more recorded in Q2. We don't see that as repeating that level repeating in Q4. But we are very encouraged by what we're seeing in business coming back. So recorded. You can see in our sequential improvement what we see coming in Q4 over Q3 even without that level, that recorded.
Elevated level of those types of products and services. As far as restaurants, etcetera, that's certainly a component of our business. Recorded. We are encouraged by what we're seeing there with folks' activity increasing, recorded. Consumer spending increasing.
We need people having money in their pockets via stimulus will help that. And we sure hope that the small business folks who have been incredible about weathering the storm, that their demand starts to pick up even more. So So we're encouraged by what we see.
Okay. Thank you.
Andrew, if I could just add a recorded. A point of clarification, the $45,000,000 that Todd referred to, that is in the rental segment as well as the 1st aid segment. You saw 1st recorded in all of these different kinds of things in from all of our customers and we're doing our best to meet those demands. So it's That $45,000,000 is not all within the rental segment. It's in all of our businesses.
Okay. Thank you.
Recorded. Thank you. Our next question comes from George Tong with Goldman Sachs.
Hi, thanks. Good morning. If you exclude the $45,000,000 in PPE lift in the Uniform Rentals business, could you perhaps talk about How revenue trends progressed moving through fiscal 3Q? Yes, George. But to Mike's recorded.
That $45,000,000 was spread out across all of our divisions. It wasn't just a rental lift. But relative recorded. I think it's important that we all keep in mind that our Q3 recorded. It has 2 holidays in it with Christmas and New Year's and our recorded.
Customers sometimes take multiple days off depending on what day those holidays fall on. There's always the potential of weather issues recorded with snow and ice storms and things like that. And both of those things happened this year. And if you combine that with the increasing COVID cases, it made it a little bit more complicated recorded. I would say as we went into the Q3, we were very concerned about what we were seeing.
Recorded. COVID cases were on the rise. I said earlier in my remarks that The economy shed jobs for the first time in 7 months in December. So December and into January, recorded. Really even into February, we saw a very difficult economic environment.
But as we got into February, recorded. We started to see our recurring revenue start to pick back up. Cases were dropping dramatically that governors that we thought were going to put on businesses didn't fully materialize. Recorded. And so we built some momentum in February that we continue to see as we moved into March.
Recorded and I think that is reflected in the guidance that we've given for the Q4. Recorded. Got it. That's helpful. And just as a follow-up to that, if you look at new business trends recorded and plans for sales force hiring.
Can you talk a little bit about how the pipeline is building? Recorded. We're very pleased with our pipeline. Our sales rep productivity continues to be at very, very high levels. We believe that the our value proposition is resonating recorded today in the economy more than ever.
So we're excited about our opportunities as we look out into the future. There are 16,000,000 or roughly 16,000,000 businesses in the United States and Canada, and we do business with 1,000,000 of them. Recorded and we really like our opportunity as we approach recorded. Hopefully, the end of this pandemic and a more normalized economy of our ability recorded to attract new customers. So we're the pipeline is relatively full and the reps are performing at high levels even considering the fact that many times they're making sales calls over a virtual recorded.
Teams call or Zoom call and being successful in doing it. So we're excited recorded about getting past this pandemic and getting into a normal economy. We think we'll be we're well positioned to take advantage of that.
Recorded. Thank you. Our next question comes from Hamzah Mazari with Jefferies.
Hey, good morning. Recorded. My question is a little bit more big picture. Pre COVID, I guess, your long term growth rate was sort of 6 reached to 8% depending on the year. In a post COVID world and you touched on a little bit of this with some of the ancillary services recorded that may be benefited from the pandemic, which may normalize.
But at the same time, you have these newer verticals you've penetrated. There's some structural outsourcing maybe in healthcare, there could be a tailwind. I don't know if that sort of plateaued out or it continues. Recorded. So when you put all the puts and takes together in a post COVID world, do you expect your growth rate recorded.
To be better than what it was prior to the pandemic on a normalized basis as you look out over the next couple of years?
Recorded. That's tough for us to predict. I'm not recorded. I'm sure that I'm going to go out and say that we're going to be doing better than we were from a percentage growth standpoint Post pandemic than we were pre pandemic. But as I have said, we really like where we're positioned.
Recorded. We've made a lot of investments in the business that we think are beginning to pay off recorded that allow us to move quicker to be a better supplier to customers. Recorded. Our customer satisfaction rates that we measure with net promoter scores are at all time highs, recorded and we have opened up new segments of opportunity for us. We have new products and services that we can offer to more and more businesses.
So I'll just answer that by saying, recorded. We think we're very well positioned and we're excited about the future.
This is Todd. Just to expand upon what Scott is saying, The real unknown is what is going to happen with the demand for some of these additional services that we've been able to provide. Here's what we know is that recorded. Demand is going to be higher in the future than it was pre pandemic. And what's exciting is many of our customers Didn't even realize that we offered those types of products and services in the past.
Let me be clear, there is nothing positive that came out of pandemic, Right. But if there is any silver linings, it's the fact that our customers understand more the value that we can provide them. Recorded. And Scott mentioned that our NPS scores are reflecting that. And And we think that is a the more the products and services our customers procure from us, the more value we're bringing to that.
And we think recorded. The other item that I think is important to understand is that we're going on 2 years now recorded without having had a price adjustment to our customers. We have felt very passionate recorded. That it was not the appropriate time to adjust pricing when people are going through so much difficulty fighting through the pandemic. And as a result of that, again, our customers have really appreciated that and it's really positioned recorded in a short term approach.
So hopefully all that color helps.
Yes, that's very helpful. And Just my follow-up question and I'll turn it over. Just on the fire business, I know it's a a smaller business for you, but it's a good business. Could you maybe talk about how you're thinking about scaling that business up? And the reason I ask is, recorded.
We look at the First Aid business and you did Z Medical in 2015 and that business scaled up. Does Fire have the same potential in your mind? And maybe if you could just talk about
recorded. Yes. We do think the fire business has an opportunity to recorded. There are lots and lots and lots of small independent players. There are regional players.
There are some PE groups that are doing some regional roll ups. So there are opportunities for us to make some acquisitions in that business recorded that would help us ramp up scale and geographic coverage. It is a very good business. Recorded. One of the things that is important to understand is that different states have different licensing requirements for the recorded.
Level of different reps that we have, service technicians that we've had out there performing different levels of service, be it recorded. Fire extinguisher repair and replacement versus sprinkler systems and alarm systems. They have different certification levels that they have to so it's different than just hiring somebody off of the street recorded and us being able to train them to be a first aid service rep. These people need to get received from state certifications and licensing and things like that. But that said, we like our ability to grow in the geographies that we're in.
Recorded. There is a lot of geography that we would like to expand into, and there are lots of opportunities for in acquisitions in the markets that we're in right now. So we really like that business. And I think over time, we can scale that up To be of size, I always tell the division presidents, including fire and first aid, Their job is to figure out how to get their division to be at least $1,000,000,000 in revenue, and that's what they should be thinking about. We decided what type of resources we want to invest in the different businesses and so forth, but we clearly think that both First Aid and Fire Divisions can be over $1,000,000,000
recorded. Thank you. Our next question comes from Andrew Wittmann with R. W. Baird.
Recorded. Great and thanks for taking my questions. I had one question and then a follow-up. I guess on the first question here, maybe Mike, recorded. Over the years, Cintas' growth has been fairly consistent in the characteristics comprised of between things like price and ad stops and new accounts, even retention from some extent.
I mean, in normal times, recorded. We have a pretty good sense about how that contributes to your year over year growth rate. Now that the next few quarters are going to be driven more by a reopening type growth rate, I recorded. I was wondering if you could talk about which of those factors you think will contribute more than the historical percentage to the growth and maybe less, Just to understand how you're thinking about how this matters and will unfold in the next few months quarters.
Yes, Andrew. Boy, it's been a it certainly has been a different environment operating in the last recorded. I think what we'll What we've guided to in the Q4 and likely will get us off to a start in the Q1 of 'twenty two recorded. Is the continued reopening of businesses and getting those businesses back to recorded. We were on a nice trajectory of that towards the end of our first recorded this year and into our Q2.
That certainly took a pause. But we've got a lot of customers that recorded. Still are either not opened or at limited capacity. And so I think as we look at the next recorded. Couple of quarters, maybe even the most of fiscal 2022, it's going to be about fully reopening the economy and getting those getting our customers and other businesses back to healthy operating environments.
That means we'll take businesses off of a held status in the rental division. We'll start to service first aid cabinets again at a greater pace. Recorded. We'll start to understand the needs when they open and come off of hold, how can we help them in this new type of environment recorded with all of the things that we've talked about that have been important. So I think it's going to be more of that, The reopening of the economy and getting back to some normal type of process than anything else.
Recorded. That's helpful. Then
just for
my follow-up, I wanted to just talk about inflation a little bit. There's been obviously a lot talked about and it seems recorded. Mike, there's a lot of merit given the amount of stimulus that's going to be hitting the system here, it's already hitting the system. So I recorded. I was hoping, Mike, you could talk a little bit about where inflation could fit you, where you might be seeing it today or expect to see it tomorrow.
Obvious areas come to mind like energy and be curious as to your thoughts on how that impacts the outlook here for the calendar 2021. But also maybe even in some of the products that you're selling, in the ancillary business and in first aid, labor, obviously, if you could just address recorded. How you expect to affect you and your ability to recover it in pricing against a recovering, but still not full bore macro? Thanks.
Yes. So from a I'll say a short term, we could certainly see changes in gas prices at the pump. Recorded. We saw sequentially an increase in our energy percentage of about 10 basis points and that certainly recorded. Could contribute over the course of the next year.
I think labor is certainly in the news and the conversations recorded about wage rates is likely to have some impact on us as well as our customers. We could see, as you mentioned, certainly in some of the PPE, we have seen recorded. Quite dramatic changes in prices, in costs to us, in terms of gloves and masks released in Sanitizer over the course of the last year. And there's probably a little bit of that continued unpredictability in that kind of product. But Andrew, the really good news in all of that is, we've got great efficiency in our business.
Recorded. And so many times we're able to offset that with current initiatives that we have within the business. But if we can't, we certainly can look to pricing changes into the future. Todd mentioned we have not recorded. Like that idea in the last year, we did not think it's the right thing to do, but and it's been 2 years really since we've done it.
But if we see inflation peak, that's an opportunity that we will certainly have to consider. And recorded. And usually in the past, that's allowed us to pass on a good portion of those kind of costs if we can't
Andrew, it's Todd. Just to build upon that, everything Mike said is right on target. Recorded. We're in a good position to withstand those adjustments based upon our model, our efficiencies that we can bring recorded. But with all these, whether it's inflation in general or wage inflation specifically, Our biggest concern is always the impact to our customers.
We will manage our business. We will do it so appropriately. Recorded. But if it affects our customer base, then that's a much greater concern. And we're hoping that The health of those smaller businesses has been tested and we're recorded in hopes that they can continue to withstand and thrive in the new environment.
Recorded.
Thank you. Our next question comes from Toni Kaplan with Morgan Stanley.
Recorded. Thank you. Just wanted to ask about the SAP benefits that you are seeing just now that the integration within rental recorded. I know we're sort of in a unique period, but just wanted to see if any of those are coming through now or if we should be expecting it recorded going forward. Just anecdotally, any benefits from the SAP program?
Thanks.
Yes. Tony, this is Todd. We're seeing very nice efficiencies from having beyond, for the most part, one platform for the entire organization, benefiting our customers in one view of Cintas. It's benefiting our locations and the ability to recorded. Our distribution centers in order to be able to anticipate needs.
It's been quite impactful recorded and a lot of positive things that have come out of having that one platform and the efficiencies that come along with it, both for the customer, but also internally, has been very encouraging.
Recorded. Great. I wanted to also ask about capital allocation. If we hit a period now where demand accelerates, recorded. Do you expect to be investing more back into the business for organic growth opportunities or M and A?
And I saw you were buying back some stock in the quarter. Recorded. Does that get back to historical levels? Just what are you thinking about allocating capital?
Recorded. Well, if we start with CapEx, we're still sort of managing through the unpredictability recorded in the Q4 of the economy. So we're probably a little more conservative right now and will be in the Q4. Recorded. But over time, I think our CapEx spend as the economy turns around, we'll get back to a more normalized historical type and that's typically roughly 60% based on growth and 40% on maintenance.
Recorded. So I think we'll continue to see that type of spend. We do generate a lot of cash. We've got a very strong balance sheet. Recorded.
And so we would be interested in acquisitions in all of our businesses. Recorded. And then obviously, the dividend is important to our shareholders. We have recorded. We continue to be in a position where we could increase the dividend to our shareholders every year since we went public.
And recorded. Obviously, that is a streak that we'd like to see continue. And then, yes, finally, we do have roughly $1,000,000,000 left on our authorization, and that is more sort of opportunistic from time to time recorded as we see opportunities to acquire our own stock. And recorded. So should we be in a position where we're building cash and we think the opportunity is right?
I think that recorded. The Board would agree that we would be in a position to buy back some of our stock. You You saw a little bit of that in the Q3 when the stock price went down. And so it I think that, I wouldn't be surprised to see that sort of thing in the future.
Recorded. Thank you. Our next question comes from Gary Bisbee with Bank of America.
Hey guys, good morning. It's impressive to get back to flat year over year same day sales, I guess a quarter really before lapping the step down I wanted to ask about mix within that sale. So can you Give us a sense of how meaningful PP and E Sanitizers and other pandemic driven sales to the current revenue levels and so how much the more normal historical mix would still be down right in Q3 recorded. Without that,
that's the first question.
Well, let me start by saying that things like recorded. The hand sanitizer and some of the sanitation products and wipes that we have into a recurring revenue stream once we put this like the restroom supplies, once we put the Stand out there. We come in service and on a regular basis, make sure they have enough product in there to make it through till their next delivery and so forth. So recorded. That is that becomes part of the recurring revenue stream.
The other products, things like disposable gloves, released. Disposable face masks and things like that are the one time PPE sale, refer to it as one time, but it's more of a direct sale that recorded. It can fluctuate up and down depending on customer needs. But we have a lot of it depends on geography. It depends on recorded.
The industry that the customer is in, some distribution type businesses, they've increased headcount, increased number of wearers. We other businesses have reduced the number of wearers. So it's a little bit all over the board trying to put I'd say recurring revenue with the understanding that some of that is now the result recorded. It is flat recorded through the quarter. And we think that that revenue is going to pick up as the economy turns around as our customers get back to being able to open their businesses more fully, bring back some of their headcount.
Recorded. And I believe that an awful lot of the recurring business recorded. I have said in the past and I continue to believe that recorded. It's going to be a long time before a typical American walks into a business, walks into a restaurant, a lobby, a movie theater, recorded. Any place and isn't looking for a hand sanitizer station after they've grabbed the doorknob going in and out of a public building.
We're seeing that in stadiums. We're seeing that in hotels that are open At elevator stations and that sort of thing. I think that's going to be here to stay. So if I'm right about that as they bring back and open up their operations more fully, that will be revenue
Gary, this is Todd. I think it's Important to understand also, the vast majority of the products and services we're speaking of, whether it's face shields, gloves, recorded. Hand sanitizer, cleaning chemicals, all those, we have been offering those for decades. Recorded. It's not new, right?
It's just it's elevated. And we think it will be it will maybe not be at the current level, recorded. But it will remain elevated into the near and maybe distant future or in the near future certainly and recorded. Maybe much further out than that. So that's exciting for us.
We see that again, our customers now see that much more of a value in it, in large part because people are much more focused on hygiene and cleanliness than they were in the past. Recorded. And many of our customers, they cleaned for image, and now they are cleaning for health. Recorded. So some very positives coming out of it.
And if I could just clarify one thing in that response, Scott, you said recurring revenues Were flat. Did you mean sequentially versus Q2 or did you mean year over year? And if the latter flat year over year. Does that imply then that the one time ish PP and E sales increase year over year was similar to the Uniform direct sales decrease, which will allow that to be flat. I just want to make sure I understand exactly what you're saying.
I meant sequentially from the Q2.
Got it. Okay. All right. I mean, what I'm trying to solve for is how much the traditional businesses recorded. I appreciate everything you're saying about this demand persists in the big uptake in sustainable recurring released.
Sanitizer sales, but in the traditional pre pandemic business mix, I mean is that still down 5% and it's offset by PP and E up 5% or directionally can you help us understand it? What I'm really trying to solve for is what's at risk of going away over 12 months, 18 months as the traditional business mix obviously comes roaring back.
Gary, I think the probably the best way to describe it is, as we mentioned, in total for the company, it was up $45,000,000 sequentially. We don't think that will repeat, but we do believe that these elevated levels relatively elevated levels are here to stay.
Yes. And Gary, to answer what's at risk, it's really premature. Scott talked a little bit about The enhanced value proposition of all of these things and while we may see we have seen some Ups and downs in terms of that product mix in the last three quarters. We don't expect that to go away overnight. This is not going to be a flip of the switch and the pandemic is over.
Recorded. And so we it's hard to say how much of this will continue in the future. Will the frequency of sanitizerspray services Stay the same frequency as today. Will the frequency of our Ultra Clean Services Stay the same as today. It's hard to tell.
But what we fully expect is that this cleanliness idea and value is going to stick around for a while. And so trying to Dissect the results by product category and other things. We're not going to get into that because It's too early to tell exactly what that future run rate is going to look like.
Recorded. Thank you. Our next question comes from Kevin McVeigh with Credit Suisse.
Recorded. Great. Thanks. I know you talked to kind of severe weather holiday impact. Is there any way to think about how much the weather recorded.
And then the spike in COVID impacted the quarter. And I know it kind of varies across business lines, but Just any thoughts as to how that impacted the quarter?
Well, I guess recorded. The easiest way to look at it would be that there was a dip from early December released into January, and then revenue started to rebound as we got into February. February was better than January. And obviously, if you look at all that, the quarter winds up being flat sequentially to the 2nd quarter. Recorded.
So you can run the dip down and then the dip back up. I would tell you that recorded. We do have some momentum as we go into the Q4. And so we're recorded. We have a better expectation of economic conditions recorded and our business as we get into and through the Q4.
Recorded. Got it. And then just is there any way to think about kind of across your client base, what percentage maybe you are engaged right now or product or service versus where it was last quarter, where that's been historically. I know there's probably some seasonality there, but I guess just trying to get a sense of how many clients maybe aren't fully active right now, but you expect to start coming back as the economy starts to reopen?
Kevin, I think your question was what percentage of our customers are on hold. So recorded. We had a, as Mike mentioned, I believe, a strong run up in the summer into the fall. Recorded. Some never came back, some then went on hold.
So it's a little difficult to give you an exact number on that. But I can tell you this, we're anxious for those folks to get back. We think that there is an incredible amount of pent up demand That is in the marketplace, you add that with stimulus checks and we think consumer spending recorded despite quite strongly in the Q3, Q4 calendar years of the calendar year recorded and we think that will be really positive. If you put that together with the strong value proposition that we have increasingly, the strong value proposition that we have with our customers, meaning that they're coming back to a safe environment. And so we think all that combined is going to make for a quite a good situation.
Recorded. Thank you. Our next question comes from Scott Schneeberger with Oppenheimer.
Thanks very much. Good morning. Somewhat following up on that last question from Kevin. Recorded. Your airline, cruise line, hospitality, the travel segment, can you put any quantification on recorded.
How much those are down and more importantly, maybe just a feel for if you've seen any improvement on those metrics Since the trough, we're still there. And then I will take away from the answer to that last question that, that is one of
To begin with, most of those of the revenue from those customers is in our direct recorded in the quarter and that business is down about 40% recorded over prior year. And as you analyze that, it's a little different depending on which segment recorded. You are talking about, for example, a lot of cruise ships are still at port. So the cruise line business has really been affected. There is some travel happening now, particularly sort of vacation travel.
So the hotels are doing a little bit better. The airlines are starting to pick up. When I say that, I mean their revenue streams within their own business. We had seen a little bit of improvement from our revenue to those customers recorded and but still down 40% is a pretty significant number. And I think that the Scenes continue to roll out and people begin to feel safer traveling.
I haven't been to the recorded. Vacation spots in Florida, but I understand that the spring break crowd is recorded. Maybe not as big as normal, but they're down there right now. So I think there is a, as Todd said, a pent up released across the country, that sort of thing. And I think that the big trigger for all that and when that all happens is recorded.
How soon a good portion of the U. S. Population has a vaccine. How long will it take to get back to pre COVID? Recorded.
I don't know, it might take a couple of years, but I definitely could see that there would be some improvement in the second half of the year if the pace of vaccines continues at the rate that it is right now.
You mentioned earlier, it's been 2 years since any change in pricing as a customer Appreciation type strategy. I'm curious as we move into the next fiscal year, recorded. What is might we see that start to happen? Would it be only in specific areas that are seemingly overdue and necessary to cover Inflation or is that a strategy you'll continue to maintain? What would it take, I guess, is the question recorded for you to start to get a little bit of sort of with pricing.
Thanks.
Scott, thanks for that question. First It's important that you understand that it's not so much that we do it as a sort of a favor to recorded. But from our perspective, we want our customers to recorded on a basis, but a small business might need to add hand sanitizers and masks and gloves and things from us, but they can't afford all of that. So we help them with adjustments on their invoices, maybe their entrance match went from a weekly service to a biweekly or monthly service at a lower rate to help them afford what was happening. And it's to us, it's the relationship that we have with a customer.
We believe we enhance their image of us and their opinion of what type of a provider we are during these type of recorded in the unfortunate situations. It was similar in the Great Recession. Recorded. We had the experience of doing things then as well, and the lifetime value of a customer as we come out of this recorded. They like us.
They're willing to they trust us. They're more willing to hear what we have to offer them when we develop new products and services. Recorded. They're more willing to try those new products and services because of the relationship that we have with them and so forth recorded and are less likely, we think, to listen to a competitor's offer. And that all goes into what we would recorded.
J. Rice:] You don't use to make our general calculations about the lifetime value of that customer. So from a price standpoint, yes, we're coming up recorded on 2 years since we last increased generally speaking, last increased our prices on our recurring revenue, recorded. And that's particularly in the rental division, where that's probably a stronger statement and more relative to the rental division than others. Listen is that when they're trying to take our business, they offer ridiculously low prices to try to get our customers' attention.
But the way they treat their customers is that they're willing to raise prices to help protect their our competitors' bottom line as opposed to help protect the customer. Recorded. We've seen that in various places in the competitive environment in the last couple of years. Recorded in our own supply chain. We'll have to figure out the right way to pass some of those costs on to our customers.
Recorded. But the fact that we haven't done it in the last couple of years puts us in a pretty darn good position when we sit down to talk to them about the fact that recorded. It's time for us to have some price adjustments. And generally speaking, I think that those conversations are going to go well. Will that happen in the near future?
That I can't tell you. I can't tell you yet. A lot of it depends on how economic conditions continue to recover. At the pace that we're on right now, I would assume that between that, recorded. The potential for energy prices to increase, the potential for inflation to increase, we're eventually going to have to adjust our prices recorded and that will happen when I'm not ready to predict.
Recorded. Thank you. This concludes today's Q and A. I would now like to turn the call back over to Paul Adler for closing remarks.
Recorded. Thank you, Katie, and thank you everyone for joining us this morning. We will issue our Q4 of fiscal 2021 financial results in July. We look forward
recorded.
Thank you. This concludes today's teleconference. You may now disconnect.