Rollins (ROL) 26 Oct 222022 Q3 Earnings call transcript

Greetings. Welcome to Rollins' Third Quarter 2022 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Joe Calabrese. Thank you.

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speaking Chief Chairman; like for Group Rollins, Gary, Jr., Krause, the today Gary and opening and Operating Officer; Bimmerman, Management President, Rollins' line Executive Vice Wilson, are line and John open Julie will Kenneth Vice Finance and and begin? Chairman to Jerry and remarks President, Chief Officer; Financial Chief your Investor me Officer with President On Gahlhoff make and you Treasurer; some would Vice we'll Executive Relations. questions.

and forward-looking disclaimer our us Yes. XXXX Thank statement you, Joe, we'll investor read and appreciate all third quarter for our Julie good you joining begin. morning. of We call. will then

release of cause subject more factors of uncertainties call, results Form XX, excluding differ Please refer statements Our made this have all facts differ. materially for we that and XXXX, earnings December results section including for information filings, actual forward-looking are make other press actual statement been the contain certain risk that and statements. These release XX-K our our could and the and any to particular ended risks Risk forward-looking and Factors discusses may our year today's to to business SEC today. number outlook the on from and a historical statements

Thank was growth that solid performance quarter I'm report continued financials. by you, pleased to and Julie. third Rollins' highlighted

regarded As to I'm new well Officer, is to Rollins' our positioned Chief company proud Kenneth objectives. also long-term of a ahead, look business welcome business Krause. later. accounting we Financial continue the financial to highly remains Ken accomplishment Jerry two our success. already Ken welcome to more more about with executive Ken him than decades and of contributing experience. will our We is team. share

will John? now turn Let call who John business some to Chairman, the me updates. our provide over Vice Wilson,

works our incredible Rollins, its respected at benefit with center Pursuant this ago, We're are our our asset. well our offer to reduced Health virtually to offers company. a improve XXX since Last Gary. Everside providing you, the for cost announced opening nationally. months four visits execution this to strategies. everyone. always another prescriptions. delivered and employee effort primary are XXX or as free over health employees. new continue offerings that that day and to want we pleased direct to able that, primary where and efforts program filled partnership our registered Atlanta dedicated training new over a has share we morning, they great and office employee care quarter, as of providing on-site operating a care caring the This emphasize to professionally. home of all care and workplace grow our objectives team result people people to This performance of Rollins is are and our Thank Rollins' Good strong valuable quarter, looking achieve work for of that take every hard solid to success I reflecting customers. At our most

care easier employees. at these lives focused team center this as date Feedback handles positive work, primary and draws, to within prescriptions, services, a screenings XX/X starting plan free are our also believe help Ultimately, satisfaction next very covered are by this care at needs. health with healthier for as we we management. lab immunizations, been this appointments, effort. offers outcomes ability urgent rate. we facilitating offering kinds high better everything It chronic January home to Further, to mental of live extremely very routine access Xst. and same while medication the our members day to With the healthier of to that a We happier, dependence well on services, day multiple from providing reach enabling benefits on-site enjoying to and expand to employees team health disease has

employee as our have allows XXX% benefit launched to term compared growth we as enrolled. In culture, important Most to to to greater feel Rollins' the ownership company. summary, purchase by represents team Thank plan our employees and grants guided Employee discounted goodness, contender want employees relief has - expanded to would discuss the like employees in even in an all in the act employee interest Hurricane first are them our to ownership This in have enable employees a the everything effectively an have vested multiple safe, in greater to address to they all Ian. only our impacted - to over and incentivizing of following purchase needed we but address Through the for at program. plan we are retaining to success, hardship. a This than top payroll not option recently we at think Ian's path Rollins employees also days emergency XX% employees want our within and long performance processing leading who XXXX, I commitment Rollins members endured through team participants to We our been to stock XXX previous that but full stock common Since everyone plan. grants types the deductions. employee and for provided programs price our Last, Rollins our our also, assistance. employees pleased our of importantly, XX our these valued Relief encourage like X,XXX needs. we hurricane team improvement Fund, of levels stock essential in have are talent. a shares over Since July by owners then, position to brands

day remainder call fleet, how Jerry more our to must need. only far vehicles team effort shut and worse those down for a while who Our in XX employees loss end closures the load are and the one total of about offices, a by days to energy but team the details XX care, by hearts time This like or volunteered was we Overall, hours to will a go tremendously were the our acknowledge impact turn now often impact location supplies quarter. our their those two, work after jumped in commitment hurricane, affected week. on gather, our and impacted in to out of provide members in the were than have to and following various They to to while I'd the to assist closed ways. quickly we those I all within their the and help proud Ian our of over few business. several the another. who storm was to deliver total most the compassion excited the following opened of branch Between these

Ken CFO September John. we Chief Xst. our as large everyone. Financial you, publicly-traded of August, experience, Krause Good effective new Ken a Thank early of be Officer morning, the In global finance most years has as will that manufacturer. announced joining recently Rollins many

him about with yet, a business, You'll hear the unique very in is passionate of operational bit, financial a who but had for expertise. experienced from and hasn't of pleasure combination he strategic, little speaking and him anyone has

leadership We member period. him are through will I'd like more XXXX to a items the the impacted focusing walk during directly performance, detail to moment. our our quarter address on financials a have operations our as Ken third in now team. extremely in pleased that of

the Net during was strong revenue all for was Operationally per share. increased quarter, highlighted pest Residential diluted control growth. million of $X.XX commercial of solid same million by Rollins' growth to per Looking experience at to XX.X% growth XX.X%. the to financial period a quarter. This was quarter. to quarter increased or $XXX the for in in control $X.XX and $XX pest our XXXX. organic continue termite million Rollins share $XXX X.X% diluted third or income total results, presented compared XX.X%, third business is X.X%, lines compared up year's million last Overall, $XXX XXXX

expense turn side. Next, to I'd like the to

beginning fuel routing also We've scheduling gradual reduction specifically presented to we've a to to costs, last few provided pressures, visit improvement been vehicle fuel a proactive conference mileage also initiatives. note pressures. repairs context, the through and we inflationary into pleased these fleet-related that the see QX, I'm during when quarter, and various in been have In service X% materials supplies. QX prices. Overall, During our to discussed fuel and and reducing per overall last compared in this We've insights implementing expense. we're mitigate actions calls, primarily

from fleet a previously, of maintenance side, as On higher we're beginning as of cost will our vehicles manufacturers, items some Recently, certainly basic repairs to trucks for well than we norm. longer outside normal primary fleet discussed arrive help. keeping tires, as the are our amount and forcing like new the which small

by the However, the what we quantities historically point are year. of this less than received

the and new we told for an our Looking by ahead, we're manufacturers expect in improving the could is that inflow environment coming potentially uptick quarters. levels in vehicles supply that

and you future year, similar received a on keep updated watchful we've eye As calls. this certainly conference on we're assurances last keeping we'll

remain workplace attractive effectively opportunities, benefit talent the employee while tight and also by in well employee prioritizing offerings. and deploying inclusion market, labor providing On labor even side, well-being, the Rollins positioned attracting, professional retaining though development

a being a destination premier We record have talent. for track of

prospective a for season our platform open candidates. easily a few potential into talent minutes integrated headed to easier we successfully and more hiring As from and with software to it engage device. in and makes this positions recruiting recruit recruitment year, our for we portals apply allow do managers efficiently positions platform new This to team so just hiring a open peak they on explore members can career mobile

way. a and streamlined more hiring Our with interviews managers easily pre-screen in candidates, can them more communicate schedule

applicant have this third add able despite across tight of year job total successfully country new been the submittals. candidates process, almost talent to the last enhanced hiring the month we've we and source In experience, five months, XX,XXX matched quarter. offering result And averaged improved over per XXXX a labor application by submittals qualified the As for short, the an market. we

U.S. In and House Georgia. of control we to Year-to-date, completed in the Australia acquisitions. Pest Next, XX Bug House in Mike one be we acquisitions. was Canada, have the the largest of grown companies August, customers to Georgia. third Central completed turn I'd to across Pest by has like Control Bug Bug were South serves in residential Five Control. commercial Founded House Prosperi announced and quarter of XXXX, pest and throughout acquisition and these the

We team are more proud to welcome XXX Rollins. to members their than

potential remains strong. year continue remainder as ahead the we the XXXX, pursue and We to opportunities pipeline of into look to our

call want to the turn emphasize third to quarter strong I Rollins' pleased Before are how I we Ken, performance. with over

the in call confident ability to business. over growth driving in and profitability are our the I'll turn to now Ken. improving We continue

to across good Rollins look stakeholders. forward It's with working great to value be as here and Thanks, team of continue and I morning, Jerry to Jerry, for all we our everyone. the drive and

I've During attended visited with It trade or to investor conferences. our our customers. spoken the industry investors, vendors spend been and opportunity had so I've at field. days, my I've shows teams our the investors of with in beneficial with spent to stakeholders. employees, several and first and interact time with XX key has time

want my key I on highlight to two experiences I observations. reflect As thus far,

a all First, Rollins is what strong best stakeholders. to has of right for our commitment doing and

first a they build time tremendous our on of to where customers' is can and none. employees culture our is employees focused a on career. effort a places long and company a workplace promoting providing problems Our rewarding amount with our commitment solving that The customers and the second to

strategy Second, driving strong is our results.

financial strong growth. have valuable we and by drive can a profitable We business well which a very model, recognized brands position

Let me quarter. highlighting the a start accomplishments key in by few

revenue under strong basis. First, revenue X% an growing was organic as on just reported with growth

the casualty incurring healthy higher were margins points a charges. reserve strong and share XXX growing EBITDA Second, period see These per EBITDA was XX the quarter. it share to operating XX% margins cash free in despite good year period time performance flow period. basis XX.X%, a by basis XX% same flow the was with cash reserve approximately margin up inflationary points per in ago. bit, down a weighed I ago, versus the versus Earnings but very same to healthy will at more $X.XX on in over this casualty spend year the challenging improved charges

now in over just Currencies Let's Quarterly and revenue X% with growth double-digit more dollar commercial from the activity. at This and good includes and growth basis with quarterly rate stemming reported on increased and the dollar, termite Canadian XX services across organic sales basis. from XX% the was British organic detail. points termite stronger It our All by dive service acquisitions growth a see commercial, dollar organic pound. a Residential acquisitions. was businesses. versus approximately into both very notably lines. XX% million, in results growth residential up the growth revenues $XXX grew on of growth the to approximately strong services strong Australian reduced

across all We also of our had strong growth substantially brands.

not signs rates We slowing start fourth robust and significant to any retention quarter. the are are of remains changing our Overall, for seeing demand services materially. not

XX.X% in ago. claims. increase year quarter, the reserve related primarily sales basis The decline the is quarter of down profitability. points auto driven to Gross profit a to an casualty from Turning XX by our in same was

claim from better EBITDA auto-related in of As either quarter. the resolution impact we total reached was number the change time-to-time XXX the liability on estimation quarter points in quarter with matured by provided the drove most by information I expense the profit. in This the additional said claims and with driven down quarter. the about received this that of or tend margins that gross to earlier, of for nature claim increase associated a claims the significant These in a the basis

remains associated profit gross expense our from the people, SG&A quarter inflationary increases saw million was XX.X% in more the approximately prior in Pricing $XXX we and than of managing sales, margins other at improvement this, pricing fleet the top pressures and of offset with Excluding as and year. areas. million our under just up agenda. $XX or

points which ago profit leverage the XX points revenue, $XXX percent sales of or operating As realized XX.X% the revenue, a prior points basis the growth, helped SG&A XX.X%, double-digit up income gross XX of from EBITDA GAAP offset million in margin on we headwinds. was to over year period. year. of basis the basis up was XX

look basis, or the expense negatively quarter, with indicated, And incremental activity the margins associated basis as EBITDA. to increased on percent reported additional business points. impacted margins of EBITDA growth in I in XX% consider converted XXX incremental on As revenue. the claims reported of in by versus I you we at what net margins, is dollar period every per like using XX% GAAP with share, an the XX% generated the ago to associated a expense or the increase XX% increasing the higher $XXX year $X.XX quarter income when but activity. claims the million same was included over earnings revenue

cash dividends. cash flow the in flow third by the $XX over the times we debt-to-EBITDA We of totaling made and negligible increased paid Debt approximated the cash $XXX $XXX quarter. free in million in to generated beginning the to $XX end balances $XX million is million, Free under strong XX% year the are sheet. flow just dividends acquisitions gross acquisitions balance Year-to-date, quarter. a million down $XXX earnings was quarter. approximately of third million $XXX and paid finish million flow on quarter. and level. million up cash have in remains totaling quarter balances over and at and free approximately over Turning of X We made the very on quarter. of cash since balances to $XXX finishing the we million Cash the of over is $XX debt well below Debt million. a just Quarterly

XXXX. per last this increasing the ago. to XX% With this share, quarter will to Speaking night year quarterly of dividend regular a again our an we $X.XX increase in of us enable an dividends, dividend third realize increased announcement, versus

continue approach maintain capital our positioned allocation. We to are to balanced well to

focus fund balance dividend is sheet fund increases continuing to our regular as grows, business additional to a consistently our Our acquisition-related growth. that while to use

Our to demand balance model. our our we of strength third continue invest quarter well in robust positioned use The business and our cash our are sheet healthy to Organic us demonstrated grow acquisition and positions flow sheet very performance pipeline is the business. to to remains strong well balance and our business.

We continue the closing I a to that, for over back remarks. our With long-term for turn to profitable and on Gary growth will shareholders. focus call execution Gary? driving

We're happy time. this Ken. you, any Thank at questions take to

Instructions] Mulrooney [Operator from proceed. with you. William Tim Our first question Thank Please comes Blair.

Yes. morning, Good everybody.

morning. Good

morning. Good

morning. Good

wanted residential some you a I I the So, first hoping a dig business. wanted the say should congratulations that now business on to uncertainty, of consumer, that first right compares is your you in on the to second, specifically. Well, last just concern to you're and was you I see slowdown respect any to October, great about the macro lead ask increased how quarter, Are to given on to trends year? from but the days September these there to because to residential I comment state the could into resi maybe for comment volumes could August generation seeing maybe business on and as we starting with move

in the with at lead the you of our It's quarter. Despite volume keeping - if it we The Certainly, that hurricane if heavily leads it. revenue end that It's is of is down side, end impacted that, residential to Tim, the the hard in is kind - and possible quarter, were quarter to economic, the this strong. kinds the bit. attribute hard residential than when at where look was - worst if residential time little month other the lower remain driven, you know categories. things. get always Florida, it's the weather we're businesses we And up you challenges were are two parts very the We those Jerry. also a it Southwest quarter see Florida don't have a dragging was and it on weighted a drag little impacted we end at of of the that the on the for of still side.

a to than a was had - you end anything necessarily that's bit or revenue on residential drag more anybody but and quarter, have change that that so certainly demand. And some the - there? of challenging to in add John

unnecessarily thing lead but the Well, is I leads business would of receives lead time. down lead measure been Tim increasing that organic and sales closure up, residential some leading yardstick. as revenue Quality residential or not leads only for has the really been add me of excuse a a and increased good for closure to is the have of strength

to challenges, we We close work. higher continue give to at are some where - our our the rate and and can a teams labor getting

it. we're it but years? still we're as couple optimistic very over Maybe seeing not, it Is as residential. of strength last in was the So strong still about

a and the was late some hurricane, deliver we September COVID well of revenue throughout The as revenue only just the healthy was little some by throughout ability had Jerry with was add area, hampered had exceptionally associated in was us very we as I quarter look hit when growth good to growth strong quarter. It July well, challenges exposures revenue the quarter. services thing but the in We out. from a as unfortunately, with residential would saw the which perspective bit at but month the interesting, COVID, by is pointed in and August our weakness

intact So overall, side. residential on the well remains business pretty

hurricane as presence large a the is forget went not that area have residential through where a we impacted let's And South standpoint. - large well, which another there, Carolina also very on

everybody. Okay. That's really helpful. color Thanks for the all

very it sounds looking the you're else anything the like much exactly trend more at. strong was was and might but at I it So a still that than seems looking yes what be it's result. and Jerry hurricane in like that's related right to - slowing residential, like down I

basis So Ken a In more I headwind, there. My quick exclude words, that Julie. it strong been last figure, exclude for like if remained for does sounds have the is demand just growth the organic maybe like It's currency acquisitions? just points of X.X% XX or one. X.X% question quarter? would foreign organic The other growth

XX You're correct, about We that Tim. as X.X% point a basis revenues. The had headwind an is number. thinking on organic reported

currency just the have headwind, growth X%. back of north adding would organic So your been

Thank you everybody.

Thank you.

Thank you.

question Markets. Ashish is RBC next proceed. from Please Sabadra Our Capital with

taking could I the again, add solid quarter. focus congrats my well I you and base? existing was but new cross-selling question, also you my me about are on as for selling momentum if better how wanted let staffed, to getting is helping to customers? opportunities. more drive wondering that the your Thanks are how more just the traction also your much on customer cross technicians sales existing into among appropriately And as Thanks. talk

cross-selling So is we result a to so opportunity. base, customer where that's is a termite the of termite through lot directly existing ancillary lift on cross-sell of a lot the side you get the is - of ancillary your what in see growth

continues us for great to for So come. that strong a to for years continues remain be certainly to and opportunity

nice sell. a more of lead seen - a sales and in the in year the better has also that will technicians little staffed the are actively our technicians this we uptick ways decline, better have we know technicians, We offset bit the some with

ticking is residential as be formula an sales, with as well see - we that on right the upgrades up we getting So and have where on the technician could sales side well. side certainly commercial seen productivity technicians. in We good as involved see uptick do it but

maybe margin a XX% one-time excluding follow incremental I item strong great. on very And The margins. just up of profile. have a the like looks question the can growth if That's margins

Thanks. think about think momentum the way forward, that about inflation and not think going we the some to being forward? from but and strong, rolling takes about revenue is and as incremental of right puts going a margins As over necessarily guidance we the perspective

XX I'd Ashish, I to tell margin ask profile margin for continue to margin I so but type have business. but to our a the something a confidence too is generate gross business of is XX we appealing of nonetheless, that gross do profile gross profile, only little to don't bit forward. confidence the the of that some margin the our early ability drivers me provides and you have plus of the want margins in, time what that me to percent certainly have is sense in commit and of some or am and better days ability But here. we profile in I'll an to in in that our our gives understand we improve pricing opportunities going business what

a on Congrats good again quarter. great. once That's such

Thank you.

you. Thank

[Operator from is Fargo Our question Please Weber Wells proceed. Instructions] next with Securities. Seth

catch been Hey. if in May little a back, like pushed and continues, from the on messaging, up on call, but Ken. shot maybe us it's some environment you pricing Good April is kind of and was whether on whether about push talk question if but with to going customer like I bit up of and maybe - there what you about inflationary and has to there pricing. at taken? it the bit at sounded on that for it is I think pricing just us pricing might everybody, for take you're Thanks. just raising - pricing? you've another you like seeing a sounds welcome, whether year, you your any your on maybe morning, thoughts maybe guess, Can through forward, where be wanted the you're attrition ask going talked actions can last little if I the kind of based just just increases you think I - a churn ticked to

feel pricing new program to and this as like that's in rate not been rather is increases, our we to increase of - was only our helpful. increasing here our some attributed pricing, third also quarter the and year up certainly, rate cards significantly, our So price Ken but it our noted, success through successful sales very

In XXXX we'll like, the assess increase will strategy get what year. some price about the on in going on to point. those we're increase go the year be all fairly March cycle April to keep it this and - and to levels if at. by - to meet through what's in be the We have a and economic we'll need should and discussions early depend going same at strategy determinations deploy January, our that fiscal able Our we discussion for to on rest what of timeframes, have environment price again, make that we looks

was, price help and determine monitored back we look plan on what what detailed those XXXX. - - our campaign a back that. also will customer and us our part data look January increase of in to what that be use process will this look retention into like in So we'll very lengthy - year, the will We've impact rollbacks and

where feel so we noticed haven't to due we retention right any We now. significant pretty pricing, about in real jump good are

part you're seeing it's in maybe not a versus the any know, notable helpful. And in That's on can touch Thanks. U.S.? your then big what but I markets? international changes of there's if just Okay. trends you internationally Thanks. just business,

I very feeling Australia. in the there pressures in performing inflationary impact some well. guess, Kingdom we there, is our internationally, but that thriving. - well, doing some see of Same their bit a little of the United U.K. They're the the team is in quite of of business

and peak results growth been a the services engaged during side have and internationally. with very They've that's some largely we're had more the COVID services with we're So disinfection on little - that the getting Singapore disinfection those down. of lot is revenue happy a some they of were disappeared. challenges a little of

economic more a and of struggled Canadian going what's But any they've more, doing a our Canada well, overall, market well. from conditions just so they're as operations bit of necessarily And and you a in the in are standpoint. think shift growing on because fantastic internationally, little control not pest disinfection

front. that on positive very all it's So

Great.

very Thank you it. much Okay. guys. Appreciate

proceed. is Moore Our with Please Stephanie next Jefferies. question from

Hi. This of you maybe congrats bit Thank and I on drove is business? Stephanie. wondering, for was what the the question in my a Hoffman the dive kind and taking on termite for filling could you quarter. in Hans strength in commercial just

quite for. you asked didn't I what catch

your So, for me? could repeat you question

Yes. of little termite commercial the what bit and Could a strength the just business? talk sort you in drove

on of staffed have those about number feet get. commercial lot of both the we and the the and handle - A drive results home is the team demand we that and to that having on the staff really inspectors and the having It's being staffing drive street quality the sales field. and in

far, successful of that? You commercial XX headcount That's very been any the that with tools opinion our to largest last - Those in look their we've sales driver give by other at seeing. the managers and that's have added we have be jobs. given volume on account you by months. the do think that home of successful to I the - them And growth infrastructure XX of inspectors far the driver. and the we're John, that over been head folks our biggest

Yes.

side. grows I'm sales street, handle about say of nail you lines. the not the having head, to on it's lead guess. the - having service to right production amount think I the hit only needed people grow the feet all residential trying the driven, like of those That It's I to by Jerry. the on not by

got So customers. to of have bodies front those you those in

Got it. Thanks.

for of turn reached would I the over back closing have like conference question-and-answer comments. the our session. to end to management We

and for Okay. again. joining we you updating Well, Thanks quarter fourth you your earnings. We appreciate interest to thank in our forward February today. us company in our for look

does today's conclude conference. This you. Thank

You participation. time, you thank disconnect at this lines for and may your your