Rollins (ROL) 16 Feb 232022 Q4 Earnings call transcript

Greetings, and welcome to the Rollins Inc. Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to call like host, to now Calabrese. Joe would turn over the your I you. Thank

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found on website also www.rollins.com. Rollins' company slide a The is be offering at investors, can supporting presentation which

our following morning, us. be that this you view on presentation slide that call to will with encourage and We

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

you John, begin? like would to

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

statement and forward-looking today. statements call, other actual uncertainties are materially release outlook this forward-looking number to facts of all business and These make our any and differ Our may subject risks particular discusses that certain made historical from earnings have contain statements results we excluding on been and a statements.

our information differ. yesterday's section and the the the to Risk more risk to December that for including XX, of filings, our and actual refer cause results SEC XX-K release, ended year for factors could Factors XXXX press Form Please

net performance. continued solid revenue you, Thank out growth last $XX to with closed financial to report XX.X% In XX.X% quarter, to revenue improvement we I'm Rollins report the million, year of strong improved pleased income and Julie. million. fourth and that, $XXX

XXXX, but more net For tremendous who we goes obstacles. detail, well. income will greater all of many all continue revenue XX%, to growth our Jerry credit than and improving provide team, to overcome with achieved Ken as of

As XXXX, we company positioned the our business well deliver objectives. begin on remains long-term to

to Now, over Jerry. let me the turn call

you, for all thank joining call Thank John, you today. our and

Let quarter equally continue our our of me company that, the I'm women service. fourth growth drive year saying and great also and men begin results, to that extremely proud by through pleased we're and our with of full hard-working customer

address our detail like another solid execution performance. quarter, provide the strong growth highlighted in financials I'd XX% in revenue Ken full and of quarter of year. strategies, more on will Rollins in for to the my the a fourth moment. then the quarter, performance over by fourth operating fourth comments total delivered Reflecting XXXX our in over XX%

momentum achieve we and positioned growth in company objectives, in our solid well we're business. levels The strong markets. have our to the remains Operationally, seeing of long-term

has and Rollins enable and our focus safety. accountable, existing on continue our Complementing aware, culture. protocols an a are you long-standing safety-driven empower employees guidelines new of implement many As to designed to company-wide initiatives we personal

customers our crucial First out way. training remains for keeping harm's of

incentivize branch and to stronger to manager's the down Second, on also metrics branch have for new a to We're levels behaviors. safe-driving operation. ties emphasize highest bonus we're the program metrics safety now programs working to plan employee-level of updating safety compensation will incentive their our A level.

safely later Rollins. our home each workforce began pilot ensure their these pilot we XXXXX-plus to our this for We returns later to this at this drivers help day. initiatives program to program plan believe family, – or We year will and this every year

results the full financial at year. the Organic and X.X% for X.X% we at the came growth delivered. compared closer growth with in Looking

still we in the growth residential sector. realized slower strong, While

this market the started in to across While indicates performance be industry, strong consistent data January. we residential XXXX revenue with

a solid trend month demand it good long-term the is to year. start see was to While not a

to customer succeed in other service continue termite within offerings to along trusted homeowners termite the with remains particularly offerings. are within Rollins XX.X% from which lines our grew to ancillary ancillary, also on We've very partner. taken We our other treatment on and prevention from perspective service responsibility well-positioned these ancillary And growth drive the year-over-year. a educate business. and this

and on focused remain base. growing growth We revenue driving activities large customer our across cross-selling from

a tremendous to continues Our job here. do team

presented Our the has prior us year. over year with for strong a also line commercial XX.X% growth

sales sales We're performance perform office sold brands. locally efforts this continue across strong with commercial in area and solid well to building teams segments. account national our all seeing both the with results very The retail, in and on restaurant customers

Across all driver the service lines is I a just of pricing. discussed, key growth

challenges, earlier increases be price inflationary implemented to our January. brought program price already even light are annual the will we we in XXXX, this XXXX year. in beginning During in March in Most early were bringing forward increase some the these of ongoing In initiated forward of earlier. and

non-Orkin are the services. brands on their our of ramping Furthermore, pricing up value focus our

our all brands increasing rate Additionally, are their cards.

on into equation. environment focused price/cost inflationary to and We the expect persist managing XXXX the are

start XXXX. Acquisitions major focus we a remain as

of acquisitions $XXX we XX a with total acquisitions million This $XXX million XXXX. XXXX and compares invested. successfully During representing invested completed XX in

store completed strategic what's remain last attention sidelines to While New few we of our proactively we a acquisitions optimistic in XXXX strategy. the our for on deals our turned and remains leveraging XXXX focus We're quarter the during growth as four successfully fourth the pipeline. during the of about months in Year acquisitions very

our investing to drive in Next, committed we efficiency. business remain to

continue to technology applications of leverage new As a adding our this of we of brands. part number by portfolio to

are successes we're initiatives brands making and these at For Orkin and out Services, HomeTeam. technology Pest routing progress and efficiency. Each with meaningful scheduling at and routing off scheduling example, our of improving building Western rolling at technology Clark

in this excited initiative about very to comment the is Clark expects to-date. quarter be the end to Robert and to by proving best and implementation implementation Both results by far so many went on-time Clark's be full years. metrics is quarter. the President the at have in second full since thing Baker Clark should end delivery complete utilization that seen of HomeTeam their their be brands an of at utilization the as started. for this improvement

impact our our fuel lower these requirements visits In to technician. reach between found us the addition and mileage it reduce to manner, service drive direct our overall also costs. labor has enabling we time efficient and can more our does in productive customers both this initiatives meaningfully for only Not on a a

to few a look forward that, your answering With in questions I moments.

XXXX over I before turn to we a to our our team to business. emphasize over at the turn However, profitability call Ken in had year want in call Rollins successful I'll our ability now continue confident are growth the to and in driving and I Ken. that improving

morning, year. Thank and We you, strong Jerry a had finish good to everyone. the quarter and

few start me with Let a highlights.

was for revenue First, year. XX% Acquisitions growing XX% quarter with and revenue growth approximately of the year. and the in for quarter drove revenue in the total growth healthy X% the full

and that drive growth years will continue see to enable quarters acquisition continue to through the in to We tremendous come. us to opportunities

throughout basis in versus were up a $X.XX, It per approximately good to Second, growth the growth. same a ago. statement. on XX.X%, from XXX $X.XX period period the healthy quarterly the share see EBITDA year the earnings adjusted healthy was the earnings income points up margins strong year We a same were GAAP results ago. strong revenue saw in

We operating healthy free not least, cash growing flow quarterly last same with off finished year the versus flow XX% very year strong cash And ago. with cash over a was XX%. another growing over but flow free period

just Quarterly on the notably revenue million, reported the by Currencies versus growth a the Let's of dollar was good results were and dollar Australian XX% was reduced growth healthy it pound. at dollar, to Quarterly the quarterly revenue see basis all revenues strong our over more stronger service across XX and look lines. on detail. quarterly Canadian in British points basis. the $XXX up

the than remains was ago. the of quarter evaluating basis to quarter, profitability. on we in inflationary further implement to We gross same Pricing price in Turning more our quarter of offset profit performance a and year are at revenue a first saw profit increases pricing top opportunities Gross the up XX points good agenda of the pressures. as from XX.X% XXXX.

to area. reserves quarter the previously, casualty are we elevated with $XX that continue up focus for For implementing charges in in key million programs aimed and number this on that the We mentioned back a at you alone. million costs improving third year with $XX these the with associated year, saw Jerry that October in of discussed of

This year. We quarter something year. costs, most wasn't million costs in notably got in the impactful this costs, $X as gradually the people year. throughout about but were worse area the Additionally, up saw higher throughout necessarily was that the medical for

under or as percentage expense SG&A up see but in when percentage the basis in just points of revenue $X year. million stated XX% as XXX improvements year, the to SG&A million from It the a quarter revenue. improving of prior good a to of the was was $XXX revenues, finish

carried lower good leverage, cost While categories. it due see number the control to advertising expense was basis across XXX to drove points timing a of of

taking improvement. but focus we revenue, a under of there know this Stay that on in performance will are we on in of we are ours of XXXX. key start feel represents action front area improve this come. just drive to XX% to years Management At area focused SG&A as opportunities help tuned

was have Adjusted profitability. a EBITDA prior revenue. EBITDA We operating basis income points this adjusted the any over XX.X% non-GAAP XXX income year $XXX year. margin was closer operating to margin. not million or XX.X%, GAAP at up or of did strong EBITDA Looking adjustments

year indicated As adjustments any did we not EBITDA I to have margin. this previously,

the the adjusted matter. quarterly non-recurring we SEC recall, of EBITDA you year impact by If the prior margin

the percent an to every like or revenue As incremental business last of margins call, growth converted meaning EBITDA incremental is look In margins we're the the XX%. as-reported what on dollar we basis, quarter, approaching I adjusted additional using EBITDA. discussed at to generated on that we of

period the higher the XX% quarter. mentioned $X.XX were non-GAAP charges the casualty incremental year $XX or same EBITDA million spend adjusted half, $X.XX you incurring good were to was When a from lower margins share ago. And out margins is net I advertising EBITDA share, second in adjusted increasing Quarterly half see. previously, XX%. in in income per incremental earnings second the the the take with for approximately approaching even adjusted This per for certainly

to the million cash a strong flow very and Free generated balance of free healthy sheet. cash $XX flow up increased We cash flow was over in earnings the on quarter. free quarter of XX% Turning Quarterly in the year. entire very for finish by the cash XX% flow year. was to million and $XXX the

above Xx well and totaling was conversion, Cash and is and for quarter. Debt percent We XXX% that was during the the turned cash we made in flow in income dividends a on finish debt-to-EBITDA $X year. well million negligible position $XX below remains acquisitions full gross the of We a level. were cash year. to million quarter into the the net paid

million just dividends $XXX acquisitions beginning $XXX the end are $XX the have totaling million. made over we Year-to-date million XXXX. of of approximately million $XXX $XX balances since the Debt year and down and finishing down at at paid million of is cash

XXXX. We facilities that options April to of to credit refinance evaluating expire are our are actively in set

We make first quarter. in the to on expect this progress

misstatements quarter, the financial during Also corrected statements. the immaterial in we

summary on per our reduced file these by making Our immaterial information we we $X.XX expect earnings reported are press XX-K earnings non-cash-related this these later that increased release items in that originally what more change for per an historical share to By by will amount. today changes. year. But and include

share the value The asset company to earnings per historical $X.XX the much understated past are assets and to intangible for for of corrects Let too changes short related we of is me accounting allocated that The adjustment amortizable in reported acquisitions. per it repeat this immaterial by year. purchase this. the acquired

positions acquisition. Organic our use model. remain are to customer very fourth well the our well us our driving our strength balance closing, to sheet very and and healthy and customers continue in business. very strong to We focused best acquisition on business. sheet pipeline of cash quarter demand performance invest providing our growth remains continues our In The we robust balance our to flow business positioned is grow experience and with the to through demonstrate

on focus profitable growth long-term to and continue driving shareholders. our We for execution

for that, closing call With turn the Jerry I'll to over back Jerry? remarks.

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

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

Ken, Jerry, Julie morning. John, good

morning. Good

morning. Good

Good morning.

morning. Good

quick of ones couple for a Just me.

expense? we'd higher was volumes was couple it the you XX, EBITDA XX% coming because quarter business? there of and as you this points every happening call SG&A the from I'm down it layer fixed expect you. of below percentage you to had basis a XX savings there on Is below or or fourth expect XX% of leverage primarily folks sometimes at fair typically expect a anticipating deliberate and primarily Thank year. as to it's the savings in most see from on what up it. below were your savings you of them little programs as you cost would at is the a trying what What to sales, you that So surprise move come XX bit beat that just cost and it was advertising would XX, costs here, maybe it Are year level the guys. quarter your been every leverage back here fourth to by like But investments nice we XXXX, and to that get in the through had see continued a a is, get

This question, really respect had agree take control programs Ken. But performance good in you. Tim. this Thanks the fourth SG&A. I and I'll is We with cost for would question. quarter with our to the

benefit in indicated an of commentary, had advertising my $X I'd million. As we prepared about

XXX of improvement. So basis about that's points the

we certainly number contemplate to growth business. to very our it were changes we actively at However, to leverage cost that evaluating deliver look quarter, we are the forward. going structure able opportunities reduction to certainly to in but higher our continue and improve continue cost and rates with the continue a of also We did measures across cost

Ken get Ken's is is here table. we better. radar topics us one been we always SG&A this can how hot that improve better how and know you screen Since And can and our get challenged and looking to Tim, equation as has of and on Yes, it's Jerry. the we're brought the to his

And so help ways that. to we're some -- and finding Ken's do us

whip? the Ken's cracking

Yes.

XXXX One But or about we in how even bit level surprising. year, the pricing. levels the which the year pulling how with pricing curious the consumer Jerry, you're historical pricing turn year. was like level be you're thinking with I Okay. mean pricing know to it above level? and sense. than of Thank on a Thanks expect that may more earlier thanks But Do was outlook this Ken. think should line it of about little murkier increase? as forward makes historical average, this last into a just it which sounds corner that average I question still higher I'm you. increases historical you more we be the

Tim So, Jerry. this is

Orkin prior gotten aggressive very year. the to other looking were prior side, to on actually what did brands the more really So in -- than in we we we on where similar we've our are at levels year,

the forward on we XXXX. net performance better in is out going is expect of whole anything what the that pricing So if result of

Got it. Thank you.

you. Thank

comes Please line your proceed question Sabadra next from question. with Markets. with Our RBC Ashish of the Capital

taking for my Thanks question.

on So side. residential my first is question the

improve pretty you're the You execution? was technology talked about other how driven you talk about really and in good improvement driving Can wondering tools January. it. to talk just in some Thanks. if better about better growth what's Is can by XXXX? it using you I residential

back fourth turning mind softened efforts wound in keep the year marketing quarter November, half end back our of down And to -- and spend marketing advertising we some we reduced so on We or marketing year. that and we advertising December, the you the last XXXX began of spend of our in in of got that January. -- as the

It anything impact you think, had overall I I a better technology don't We less along board, It know or have with add those was pretty we an overall had lines. about an just helped the environment. that? better of demand. just We pretty Across environment to anything not good we in the something necessarily prior COVID to the lot that did John weather. a year environment was than had business January. good of

staff staffed related to Only a We better maybe of were Part position. staffing. better and that's COVID.

Post-COVID, yes.

with We COVID year were people sick with in racked January out really ago. a

better opportunity year handle so to were we And we the positioned had. this that

growth. And maybe look has question great. organic we over compared three That's broader pre-pandemic then on last the growth the organic level. If just a at improved materially years to

guidance about it looking also with not the perspective particularly a just history And should we into so with think in history? but the we we growth look but in line as with more from line Thanks. recent growth more the the XXXX, as organic think mid-term organic being recent about being trajectory, the

As you know, Ashish, we don't provide guidance.

look very -- our we business and look the to when And opportunity is over business market that the opportunities. long-term that attractive of you all and this do has growth we However, that a at COVID, single I and you during we saw this market from continue with high know the attractive eliminating at do think if grow digits. recovery to COVID mid to some the volatility fluctuations at

feel continuing mid very sort business to term our all while to we our high the to over So be the long active acquisition confident of grow in growth at continue front. single-digit on that rate to ability the

off the have intention gas We the no to it and down. take foot slow

beat our year-over-year. better rates So get and always those is to maintain goal to or try

our So to keep going aim. that's We're going.

on Thank solid a you. quarter. That's And congrats great.

Thank you.

line Stephanie Please the comes with Moore Jefferies. Our question. next your of question from proceed with

quarter. Stephanie. on Congrats the strong on This Hi. Hans is for

kind in and I wanted you on talk the Just business broadly? bit of kind consistent across could Obviously, of some about the QX. you bit more those slower in the referenced it's in more industry your trends a dig industry. prepared in resi wondered if there a Thanks. of just been to remarks growth realize

The where – engines can of get report main Google, we report at from that category search point data they is the information they us example, we can volume look like searches. for to

So like the – was range I think The heard for of the around And pest category example, Julie, XX% across category think down the words was for what down mark. searching we is the – the control. or those were industry. in number search XX% people remember the I number I

from – are to So we get that board. like companies those data across appears it the Google. that seems be And

bit bit helpful. to more on That's ability where Got then and Could in inflation the pull cost talk pricing sticky in – want a kind what then business your maybe moderating And it. cost a some price you're Thanks. of of bit in inflation. seeing sort you then dig where cost more just to And just I maybe a a you're about XXXX? in excess it's forward given your inflation for of of seeing bit?

throughout than broad we there's of Yes we at higher throughout business, started certainly. year. oil fleet we The two where buckets materials business, improvement look it the year three There's was earlier look When year. much there's gradual and move the started or when fleet. And when we that the as see felt costs. in there's as then the we to abate the people, in went pressures is we to at currently,

as one The year for that us good we was actually see improvements finished supplies. in the and materials point was to

to percentage that of sales helpful year certainly was improvement see supplies out the And in – as spoke was a close area. category and materials I so it to of costs second that about the some

It's And very least, closely. costs, our last challenging that market. manage to people but certainly we continue a not

that level tools level that and in high high to will our providing the retaining hiring the that Our and best focus we're of is engagement the for. on in turn service known continue of across customer results workforce that that drive brightest,

to price inflationary our manage we're we're about and pass cycle to continuing of trying inflationary why desire pull trying value feeling providing And our the intent Jerry reason We're price and our ahead to all stay we're the so that to pressures. the that along that's and of of pricing. – And customers. part services the that the the to spoke forward

element And some improvement repairs largely haven't on any we Ken, fleet. fleet of Basic is is relief seen remains maintenance. fuel. high. just by sky the – And we're cost tire single driven while a within continues The – no a vehicle in we've just Where there. to is climb. service and That's got relief seeing replacing one

side, in margins Ken back got as But M&S we've line. on the said, those

normalized us Our do have teams in Those levels. seemed have to fought help the side. have that to to procurement come back

So that's good for us. news

you. Thank helpful. Very

Thank proceed comes next you. [Operator question Instructions] question. your Davies from line Oliver with of Please the with Redburn. Our

question. for guys. Thanks Hi, the taking

than what you seeing are And lower firstly, or in those international operate the in Just the higher kind in? terms US? that just in markets out of growth markets of is is you it

us. continue very markets Those to be for attractive

our services grow And our in in providing acquisitions view continue We very continue but market. is because made platform our largest the out capital businesses to UK deploy in fastest also we We'll it's to to attractive we're and that year remind we the our highly market US build you of as fact UK market I that internationally, We business. it's fragmented. significant growing and a have that last the market.

amount go So of it tremendous us growth opportunities forward. as provides we

that we a we're great spans growth and got we're bullish, like we've plan pretty globe. So pretty the feel optimistic

on sales. from decent of amount then guess termite ancillary the I Thanks. assuming And Okay. that side, a I'm grows

seeing the So what on are termite business? you just

we're continue rates, -- We good housing new see I slowdown such. that look managing so get we residential business. people with lot come And demand the a seeing to challenges from concerned are associated ancillary, don't But say termite of the in through hard and starts higher the out housing market through break to business. or while we growth about and would interest it's business non-residential termite for is the the what report the that. at A

bundle got We sales have to And termite the our retention our well. with that very offerings. we programs very we make baiting great customers try that. as good It's take on and sure high service we all of to driving performance rates customer

much. so Thanks

you. Thank

you. Thank

question. the Our your Brian Butler proceed line Stifel. of next Please comes with with from question

Good hear morning. Can you me?

we Yeah, can.

Thanks taking questions. Great. for the

First you color how and some the was growth. one into cross-selling just that for on on cross-selling looks opportunity how XXXX? going versus Can provide price maybe maybe organic much

It's what percent, tell when of rate But hard of that into the we acquisitions that down at you total so XX you I roughly back to arrive parse detail. so you off just about level growth or is over it can X% look at of so overall X% growth. or of for

year indicated, increase Jerry the a bit. forward pulled price As last we

actually from a little but So we higher pulling saw bit more were it to along our a of passing pricing -- we inflation only pricing forward, price not customers. because

if you roughly X% increase, if talked price so in realized And X% something the to we -- about had -- probably along we X%. previously passing a

you X% we it's but to see we're our estimating estimate. X% what growth in price. what that is an growth is that estimation, could our real rate underlying rate And that's without So is that just underlying

upside business the to And this through point cross-sell terms drive the to endless. continue of the opportunity at looks in

ancillary touched We plenty but haven't programs to well -- our too offerings. host our add mosquito any we our have of of of as any still service customers, as

So with or to more percentage look more through. is enough a two services, continue services we that percentage long to our still runway the that services at when customers sell we have three multiple or of low with

to your and continue why can't that add will believe as may if offer that sales we both cross-selling well-staffed. being team. Jerry I a That's those relates to And cross-selling, to increase. we currently Without your you're is management services critical are proactively. it arena -- having of well-staffed aspect you the staff And sales in

happen. so out without a it, just do And to staff there doesn't it

are do even there point, ramp our we And their continue sales continue about our up be able staffing, team ramp up customers to to be in services to and XXXX sales volume existing our plans programs. our That's talking to adding a to to good John. to handle, out

was about offsetting stated you much pricing or you Okay. drive to kind That's fully it And in think XXXX, I mean, of again through helpful. forward inflation? those Great. than then – XXXX, continue So that think even does that? XX% it better of pulling margins incremental it I is when that how

a I to – our is only Pricing we've we're to number got that continue mean, that them. one maintain levers hopeful pulling We're margin of of profile.

are margin we not continue an profile opportunity about our We're do our over margin the continue but target, to we margins. to so term. to specific ability to to drive optimistic committing long necessarily And a improve see

could I slip if one. last maybe one And Okay.

M&A rollover into any what's from you On already in XXXX, XXXX? color the kind closed in of deals embedded on there that

know to acquisitions. thing, would I respect only of The little a us XXXX, is say, year for a as with there you bit light is

XXXX, million. almost If each acquisitions. just you go spent This we we past back to XXXX – spent and those million $XXX of years $XXX year, on about

– slightly above are what So our the that. in reiterated comments what like, lower at prepared or with But rollover you incredibly we be be might active may is to been it couple I could see we've respect that not X% has the last of than it acquisitions. years,

we world. And continue across the the and court to after country opportunities go so across

are this Jerry this our spending front. continue area a front, we so Stay to on And be I very and of because that time. it's lot an tuned active on

Great. questions. taking you much the very Thank for

Thank you.

back gentlemen, floor concludes I'll and that Ladies comments. to turn for session. management our the question-and-answer final

for Thank joining us your you, everyone and company. our today, we interest appreciate in

we We after the first market, forward Thanks look with you to updating our quarter call. will on XX-K the April the SEC be again. later earnings our and filing of close today in

concludes conference you. Thank today's call. This

you time. for disconnect participation. this Thank your may lines your You at