Operator: And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead Toni.
Toni Kaplan: Thanks so much. Wanted to ask about your staffing right now, are you being more cautious now because of the environment or not because I know you mentioned you haven’t really seen a slowdown yet in your customer base. So maybe nothing has really changed, so I just wanted to think about how you’re thinking of staffing going forward?
Todd M. Schneider: Yes, Toni, today. The labor market in general is easier than it was six months ago. It’s certainly not easy still. And so we’re focused on staffing at the level to make sure that we provide really good customer service. And so that’s where we are. We will adjust accordingly if the economic cycle changes. And 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. But we certainly have a watchful eye out to understand if demand starts to change based upon what’s going on in the broader economy.
Toni Kaplan: Terrific. And I wanted to ask about pricing. You mentioned a couple of times on the call that price contributed more this quarter versus in the past. And so is that — I just wanted to understand, is this a function of you had been raising prices a lot and now you are sort of at — and you’re still raising or like is the rate of change on pricing still higher versus before or it’s just the prior price increases still coming in? Thanks.
Todd M. Schneider: Yes, Toni. So our pricing, it varies based upon — pricing is a local subject. So we handle it differently in different businesses and different geographies. So that being said, yes, our pricing is above what it has been historically. That being said, the volume growth is the majority of our growth. And the reason being is 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, and 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 but certainly, if the work of the Fed is such that it brings inflation down, then we’ll manage our business accordingly to match that.
J. Michael Hansen: Toni, I might just add that the pricing that Todd talked about earlier is relative to historical levels, not — we were not pointing out that there is a sequential increase in that level of pricing. So 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.
Operator: And our next question comes from Shlomo Rosenbaum from Stifel. Please go ahead Shlomo.
Shlomo Rosenbaum: Hi, thank you very much. I want to 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 skew more towards midsized and larger clients, I just want to get a little bit further into how to read some of the kind of economic reports versus the very strong results that we’re seeing at Cintas?
Todd M. Schneider: Yeah, thank you Shlomo for the question. We have a really diverse customer base. And so no, we are not more geared towards the medium-sized — small, medium, large customers, geographic, different verticals. We have a really diverse customer base. And when you think about our business now, it is more geared towards the service economy than it is just goods producing. And 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, there maybe — their particular environment. And the same goes for the medium and the larger customers. It’s a real mix and we work with them. So 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. But again, we also have other products and services that they might be procuring elsewhere where we might help them and provide cost savings to them. So, it varies based upon the customer but we are focused on providing that value and we will continue to focus on that.
Shlomo Rosenbaum: Okay, great and then just following up on Toni’s question on the pricing, is there any change at all in customer behavior in terms of the continued pricing, is there any more pushback or its kind of the same that you have had over the last say two to three quarters?
J. Michael Hansen: Yeah, well there is always pushback from customers, always have and always will be. The current environment with inflation levels make it an opportunity for us to do so better than historical, larger than historical. But I wouldn’t tell you that the environment has changed dramatically. But certainly inflation is starting to, it appears to come down and so we are managing our business accordingly and we will manage our customers accordingly as well.
Operator: And the next question comes from Scott Schneeberger from Oppenheimer. Please go ahead Scott.
Scott Schneeberger: Thanks, good morning everyone. I guess, on — the focus on margin question, could you provide a little bit of attribution, a 110 basis points just operating income improvement year-over-year is really impressive, could you kind of provide what was that via the topline as opposed to where were you getting efficiencies on the cost lines, and maybe elaboration to the extent you are able of what was Smart Truck, what was just automation in the facilities, what was SAP, really, that’s where the question is focused on the cost lines, where are you getting the most benefit presently? Thanks.
J. Michael Hansen: Well Scott, look, it starts with great growth. And 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. And 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, and again that allows us to see things coming, and it allows us to plan accordingly.
And so again, the growth helps in that area, but it also allows us to think about things like process improvements, Smart Truck that you mentioned. And in all of our businesses, we’ve got those kinds of initiatives. And all of them are — we’re hard at work in all of them. And so we’re seeing benefits from process improvement. Some are just simply better improvements, better training, and some are technology related, like the Smart Truck. 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 that we’re certainly getting in that space. But we also have lots of other good things going on in there. We are sourcing better in First Aid and Safety.
And we do have some really nice process improvement opportunities going on there, and we’ve initiated Smart Truck in the First Aid and Safety business and in the Fire business. So certainly, First Aid has been a big part of that margin improvement, but we’ve seen it all. So it’s hard — I don’t have specific numbers to give you, Scott, but it starts with great growth and leverage and then we get into better sourcing, process improvement, technology gains, and certainly then healthy mix. All of those things have contributed.
Todd M. Schneider: Scott, I’d just like to add, certainly what Mike was talking about, it starts with great growth. That is so critical to us. But part of our culture here is we’re focused on extracting inefficiencies out of our business. And we’ve — and I spoke earlier that there’s a lot of inputs to revenue growth, and there’s a lot of inputs to margin improvement. And Mike went through a list, which was pretty darn comprehensive. But generally speaking, the — I’ll just say that we’re focused on and we’re not going to just grow through pricing, and we’re going to 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 is doing a heck of a job, and we’re quite proud of it.
Scott Schneeberger: Sounds good, I appreciate the overview. Sounds like a lot of good momentum. You all touched upon My Cintas portal earlier. It sounded like maybe a little bit more you’re willing to share. Just curious what percent penetration do you have there, where do you anticipate that to go? And you mentioned that gets used at all hours of the day, but I’m just wondering what inning are we in, and 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.
