Rollins (ROL) 27 Apr 232023 Q1 Earnings call transcript

Greetings, and welcome to the Rollins Inc.

First Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

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could statement results this differ of risk actual historical a materially to XX, number yesterday's call, including strategies Please results and our from in all as as and on facts, the statements. release. website. excluding have risk and available of non-GAAP and statements, business actual refer December are today. information, this for for that on and and company's discusses the our XXXX, factors company's the factors are subject certain we cause in any These The today's presentation contains discussion outlook ended to available The release Investor release appendix as make made the filings, certain presentation, forward-looking our have financial been We of year more other included press press earnings that SEC the section forward-looking well release XX-K made of measures Form Relations part press morning. are to statements non-GAAP the our and differ. reconciliations particular The risk

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

you to like would John, begin?

shareholder over Rollins appreciate We highlighted us revenue good of Robert with King quarter has quarter as meeting, Woodruff and serves help Genuine call. our as since Joe, Russ first He Spalding, earnings too a you all solid morning. the Northwestern XXXX for report, Russ practiced joining Parts Company. of results, numerous has growth of and ways Company, director Hardin to I thank Yes, at recent of earnings to member. delivered to Atlanta, to P. first begin Rollins the you served in pleased board by served this was of & I'm list. share of as XX%. as well the of community growth board President W. as Russell firm Hardin. and trustee elected law XXXX. XX%, long-time Hardin of by newest our our Neutral want and as welcoming Please a resident a per welcome Foundation me

Now Control about turning strong Enjoying have to this long we Fox's success. acquisition, I'm very excited reputation in the Fox marketplace, Pest event. of respected the history a recent

Fox Mike founders, began initially is of growth markets. In other to growing XX PCT from company, have Pest Fox. and summer pest programs by XXX now to in door-to-door strategies in also sales many Inc. to serve, through growth as fastest Fox include co-founding through homeowners in of XXth markets largest the pest historically now back in locations as our recap the of formally as third a according greater enough XX a Jerry and their about as companies customers underserved is doing about control management Romney, consistent rank evolved the the going of XXXX marketing what to one are Fox stress detail. transaction control Magazine general great a relationship America. for the effort I results, streams, in received Through States. fact, quarter services I'll expansion, service XXXX, brands, In close in prior one the does I only in addition Rollin's to provides acquired their leader their was sales years, first Not Orkin talk Fox channels. this established to a with they for call market with rankings, Control digital Mike pest recognition of family Fox Fox to over and private a reputation. now cannot great hand XX the

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

partnership with XX-month Our Fox was process. an

the business, this and growth with unique visit many April, Fox more and with deep impressed at to the had transaction and Fox, I their they the increasingly became rates, consistent As learned culture, the In members their strong their Fox team have operating executing we witness fantastic we worked model. was about on firsthand the of brand. able opportunity pride to in and early

we very the benefits believe Additionally, are in as later, detail cover financial compelling. will Ken more

well. be in transaction to the earnings the accretive expect long-term as provide cash first and to financial and ownership, of year benefits full flow meaningful We will

of We platform the space. in for brand complementary residential nature opportunities growth also their creates for believe the strategic enhancing Rollins's

the and with delivers incredible operating to the led team track has utilizing passionate values-driven coupled at customer for solid customers, tying while service, members, Fox and to in approach years. and Romney, that also provide employee particularly XX potential faster way. retention. HomeTeam learn Fox of for will community with the one also alignment White, and under strong We're have and Control the resilient an and share opportunities and campaigns team Bryant this Furthermore, still consistently co-founders we There a our Fox Fox offerings While being to along partnership Pest residential door-to-door and the new the strong a another. by sense ability excited for closely markets about quality the of record of Taexx their value shareholders. growth predominantly the culture with with provide their scale brand Mike cross-sell and see to at service creates we are Fox been over with HomeTeam HomeTeam, alliance activate who to business benefits teams customers multiple

As we've key a demonstrated growth of part in past, strategy. Rollins's acquisitions are the

years, very our transitions perfectly the our path a we've add with them of In family into to our pest Over we about are for control aligns their our for profitable and smooth brands. proud ahead excited summary, company, that are to incredibly business Fox. impressive successful built sustainable I'm extremely we Fox's to confident strategy growth, and playbook

financial financials realized in in many in a performance areas moment, progress key of detail to Rollins address that I'm report quarter delivered first Ken three pleased I'd will more year-over-year to but the highlight growth quarter. our Transitioning strong and in recent to results like performance, the solid key areas.

especially lines. our First, than organic encouraging we growth. major X% was the with quarter, all more growth. XX% growth was Organic delivered across revenue service strong for was What growth

were XX% this paying the earlier and to delivered new year-end earnings approximately We start off. On XX%. call, on margins us, share pricing, per margins healthy and certainly to year, we grew productivity, we selling year. We and invest Secondly, growth in an price increase remain balanced initiate incremental discussed GAAP pricing but intention area the is strategy. our helped a March. business, that very The last, focus least, And We'll continue cash that positioned and strong to are to flow not capital essential value ensure well to our this on focus to acquisitions, effectively in reported the particularly and quarter. maintain we continue allocation services. of for our

favorable weather we sales season. into first recent results. to strong services our to demand are ahead, resulting And performance. like staffed to and our are patterns our move add services to bundling and peak consider drive outdoor force to April remain and months, confident I XXXX pest positioned We're operating start, we emphasizing through in how good multiple wet well for operations. our with As business our spring teams continuing Rollins’s as and when strong we into emphasize expect is conditions. the and you to ability well for trained we looking want in our a a call strong head continue and summer quarter we environment off and traditional also mosquito field in center of pleased

to the turn call now I'll over Ken.

Thank The good morning, you, a year. delivered the to start team strong everyone. Jerry, and

financial Let first highlights for a few the quarter me of XXXX. with begin

with the total of delivered growth revenue the we XX% all X% in quarter. growth the over across growth our approximately quarter, in robust first First, revenue Acquisitions drove offerings. service

to expect of meaningful see from month. of for announced the from the remainder We improvement acquisitions stemming in the this earlier Fox we growth acquisition year,

margins XXX basis-point bright but drove XX% a they we improvements delivered in share increased speak EBITDA the improvement last, XX% flow. but will margin improvement margins shortly, And cash on cash to per free improvement $X.XX about flow, quarter. earnings emphasis per spot. in were a incremental XX% indicated, and operating as a I in Jerry least, GAAP in continued share. our not Second,

off detail. revenue by Let's look was dollar, on the reduced British notably basis. at Starting Currencies XX and $XXX million, quarterly with dollar, reported versus XX% dollar. the Canadian more up points just the the basis a pound, over the growth stronger revenue, quarterly results on in it Australian

see this quarter. year-end our XX.X% we realized intent We prices it call, brands revenue profitability. our to the gross We more more of good offset all discussed as the profit, and to We in pressures. in consistent and in took we impact were profit the saw performance margin. Turning steps on profit of margins our raising Gross pricing good profitability, was gross across basis on than year. do of this were XX points inflationary to on revenue improvement

insurance points as were in margins as These margins, to the comprise saw a buckets major during improvements quarter. well were expense supplies delivered revenue margins. and of and well. We of with the fleet costs, percentage at people associated services SG&A Looking people, four insurance most claims. SG&A while of fleet, improved and stated in approximately costs. Material and as XX We quarter. materials when headwind improvements basis of supplies, XX% costs, recent in to and a neutral as cost claims

make SG&A and more. a of in was SG&A. area. while and and to our benefited People the margins. and the costs, Advertising into Let's claims costs, spend of a major headwind relatively in selling-related people to insurance a majority dive costs selling bit Margins margins, insurance and cost neutral advertising categories were claims, up

we costs or was invest the As prior customer more strong quarter. the prior or heavily XXX have tick year XXX we up points the any basis margin year, case busy the EBITDA do EBITDA more our income in QX SG&A increasing from start second the acquisition-related not income operating of XX.X%, this a same was ago. to operating revenue, adjustments margin. year. year the XX.X% non-GAAP over quarter a of basis GAAP EBITDA points in $XXX million as expect business season across up in We during see slightly to in the

to or As like have business most incremental generated meaning, approximately using On period. percent of in margins an ago. growth revenue $X.XX what GAAP same the converted EBITDA. XX% consistently million was basis, every I incremental we per indicated, the of I margins an at look increasing of as-reported a to is in $XX recent dollar share, the net earnings period share per in $X.XX or from Quarterly income year additional

flow period. strong cash We very was income sheet, the recent Fox percent We of earnings. and coming free in $XX level. on the to quarter. above EBITDA into and Turning balance quarterly million over We April. quarter. and in on was XX% $XX most flow a and gross acquisitions cash a that turned flow flow million remains Xx the cash Free XXX% below generated increased totaling made dividends. cash of closed of for negligible, by conversion, flow $XX $XX Debt cash, the acquisition million was in Cash in and in is the also the to debt paid well million, earlier spot, announced we free bright

us. this provide are excited few details. financial A growth the opportunities about We strategic acquisition will

to expect in year. for $XX used the existing to add We borrowings cash strategic $XXX acquisition for of add acquisition million EBITDA of and of this should the and XXXX. $XX combination balances a We acquisition. million this remainder pay $XX of revenue The million between million to

pursuing We very additional to acquisition opportunities. active continue in be

latter the We the expect the to earnings during to of and next be meaningful year first part to year. full this quarter year, with Fox of into in first acquisition accretive more the contributions EPS

our our and process. in process on this We complete are we'll an purchase the finalizing update July provide accounting, we on QX after that call of in

addition in facilities to more banking secure revolver opportunity We that a to expire credit in XXXX. During that, the closed quarter, the refinanced we with our future. were our set in to metrics into other incorporate us were facility, modernized on crisis March, the facility new successfully the and before of sustainability benefits, in we April to able the provides

Thornton, service engaged for been Deloitte external XX had auditor conducted years. place an new our in for as provider, audit RFP our previous Additionally, the our we who Grant of and auditor

making a business. business. we to The as on robust, We customers issues growth experience us summary, quarter strong on positions continues to is and and engagement strong sheet are are we demonstrate to of We In in customer business. model of best our continue our well housekeeping will through to us general performance number progress balance to team. dividend our pipeline financial flow best to well grow grow the the our good invest our to of business providing demand position cash We very our use remain help that acquisitions. our level remains and our positioned our with fund the well sheet strength through and to and healthy, focused Organic and acquisition driving balance positioned very our continue remain grow acquisition. continue

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

to With that, Jerry. back call I'll the turn over

Ken. you, Thank

any happy We this to take time. questions are at

question. from [Operator very Instructions] proceed Please The William your from first Tim you question Blair. Mulrooney comes Thank with much. Tim.

Jerry, John, was prepared did questions. to strategic ask Fox, rationale going you the on Thanks the about for a that taking Ken, morning. job my in guys remarks. great about good but I

basically significant a The double strong that pest like were for organic So, error, jump quarter, expecting a that that's was skip first of I'm and particularly just organic business we to think growth margin growth. the to I what going business, and the in yours. commercial predictable

you've piece? new that anything anything pick-up in is a programs can wins, as highlight you to in So, strength commercial there contributed cross-selling, here? unexpected can that customer highlight Large what established, you

managers. in we've on simple. with commercial Tim, made this our is pretty about side, To it's and hiring investments It's commercial account me, Jerry. front staffing commercial the the the

We have ago. more a far did considerably even years two than and larger staff year ago than we did a we

single efforts So, not the Bringing every wins customers that's day. they're or in everything in, new their bringing done. efforts like difference. they've or feed making that. on business It's Street about anything big the It's collective volume of the individual what's at that the

Okay.

broad-based. the at looking given normally that you are mean, your potentially several different do you. now Thank more you can that M&A zero in then should And remainder you switching it you. over we slowdown do, still million to also allocation, that you've back XX $XXX from growth a do basis? typically drive go-forward like of - the already acquire might already a spent I going Sounds in mean, the on spend gears Or discuss XX Thank are organic XXXX, you leverage And a you or capital we year? bolt-ons just than ratio? to capital year? intend for next in we we expect at to years to a see structure I plans to for Rollins

too deal the anything transition our We make on this the recent handled want put I'll for a to part them smoothly. like that for that and first We'll tuck-in course, in is continue short - and the fairly for much time of even focus time, handle We team run. to and for with Yes, sure they're that there larger continue attention is we're most continue We'll to that to acquisitions. distraction don't of in to at if But is also what acquisitions, Jerry. smoothly, that. acquisitions evaluate cautious. look right. us bolt-on to we've goes and ensure or is the path, timing well so, the same jump get Tim, goes of our and that

we'll probably large the we're So, let address in bit Ken deals capital. to really I'll a the little about cautious the but very on there term, bolt-ons. do short And continue question

Sure.

really integration are important Just efforts mentioned, adding the had what on certainly us. to Jerry to

strategic sheet. quite It grow or From want have business. And up three which acquisitions. this make disrupting don't businesses to customer-facing times in at much debt two EBITDA these we as we're a I need an look we as our to. balance can, to aspect transformational to structure, to not does capital mean so strong lever so we we businesses, that frankly, of believe manner strong. go after incredibly our were is not that is perspective, so, business integrate asking, what we when you going We, but we are while The these sheet sure a will do strong, Tim, balance to use the

a I much debt you we can focus. ratio, commit the will EBITDA what but can't is, that's to investment I very to tell so, remain And leverage grade.

much the that paid which our a off We to time, investors. for we've will remain executed playbook certainly long very has very for

proceed The next Stephanie comes Stephanie. from question Moore Thank you. with from Please Jefferies. question, your

This Harold How tracking Good I quarter on you. track it this is know spend year-over-year. and did quarter, spend quarter for Stephanie reduced how you Thank marketing the Last marketing for morning. for ‘XX? Antor Moore. XQ is

Thank you, relatively Harold. the advertising This mentioned question. were prepared my I comments neutral margins. in and is had appreciate marketing-related costs Ken. to I that

to So, quarter. quarter, said, rate spending With that enter as revenue that the investment about we in the customer were first that cost. the of growth ramp we just at acquisition-related in up we means of are our continuing second

the important relationship second which so, as it's have for we business. incredibly our And customers, with an procure valuable new to long-term us into quarter, go those

recurring. approximately know, XX% you As of is business our

those to for go and get new after customers fold. the And into so, it's important us

years. And we up in second that in continue tick to the as past so, have we'll quarter,

modeling to year. the second point important and the third remember as out, an that's think think of say I about so, quarter And you

That'll be all. you. Thank

RBC. The with next Paige your proceed David. question question, Thank from David comes you. Please from

taking you Thank call. I'm actually for my Ashish for morning. on at RBC. Sabadra good Hi,

you You acquisition an Thank Rollins? the Fox one you. digital mentioned acquired the customer through Fox digital HomeTeam, and Control, outlook Pest customers and of fully overall Do through post then are channels. for integrated about third maybe have at channels

their over that, transition We themselves and at on Fox efforts that the digital into had have this analysis. time, side. expertise our the to Certainly, Fox them - know that way help what want of help point, mature have deep Fox years has don't do to they can smooth leads a look to up that transition, at I term they're the through gotten terms the sales area doing. like them you help this any we’ll and give what And along of It’s - premature for and and want we've some gone starts convert to we feel we time. ramping settled or knowledge support from team a But and into that a in long to - over in of give make them those wouldn't we to now continue two still types them year with that I like now. from insight things may

add a would Fox the does is really marketing Rollins their brands. and exceptional of efforts, might Fox in job opportunity that to an be Jerry, leverage I What that, there to family and

really we benefit that's us want business to combination. do go work all And about really across their important certainly forward. think and to through as this the a that so, you leverage I think to good do they job, They

you. Thank

from question Weber comes Seth your question, next The you. Thank with Please Fargo. Seth. Wells from proceed

Congratulations for quarter. in on the filling strong John Seth. actually is This Hi.

as year? headwind the as about Just we on how going well maybe color think the really you kind how in the should this of Thanks. more could and us forward the quickly quarter, on cost some claims, insurance progressed give

the there's insurance In when just that the a been to headwind do comments. believe year. you, premiums. bit third and last a year, we we talked back claims, for This are of at experience. experience quarter, Insurance higher look about of can going the Certainly, has a insurance for period One to that. claims I here appreciate time, aspects and that in and two

know, you poor year. had As last we experience

the quarter. first And year. premiums the come unfortunately, that carry in the higher saw with through insurance That'll we for so, remainder through of

The focus see focus But right areas tighter area. just help on that making the it's continue in negative company, ramping second the to and is, the impact some of improvements. company, do on our that'll insurance ensuring we part that we we're area. continue feel across some experience for the it performance driving in the up our an and a We're behavioral-based in of Unfortunately, area unfavorable safety focus improve that of market, we however. investments to

residential? think a can with Got more in of a for it. the or cadence great be And color. of high single-digit level quickly, about customer these pacing Thanks. an just we us kind you. you the from spend kind quarter acquisition are advertising at kind on ramping organic maybe And and it would could assume peak basis? a how give residential, you're of of the thinking acceleration you of That's about kind fair see we of just thinking levels, high especially as Thank season, an to second the steady-state, sense of

provide estimate about two. the that hard to as an next we or think quarter It's on

the very individual with cross-sell our However, with folks, and every continue we to sales making people, share in cross-selling the feel wider really feel our investments the a we off. position and making and residential and of paying wallet And and in opportunity our on important customer, we're each about optimistic our future. to customers technicians is into driving our grow bullish our focus we're like

would is the to in really strong it's Yes, marketplace this good Jerry. advantage we're as in of there. a take I add, position demand

the able strong position on to potential capitalize to market, So, so. be for in growth we feel about the our

with your proceed Grant. comes [Operator Morningstar. Slade instructions] question, The next Grant from question from Please

Hi, the Thank acquisition. detail helpful. on Fox additional the much very It's very both you for Jerry. Hi, Ken.

should from if cost be if just expecting I does expecting EBITDA may. curious, Just I a further or helpful, quantum for $XX point timing in million the and I those to in would synergies And be we this the extent year, share later? that us. of of million synergies of the full you're clarification, realize $XX deal? however, so, if to include to there contribution that you're detail was guess the that able Or are with perhaps XXXX the

thank all integration for with and are to certainly about makes started as $XX We synergies think year two think first like too valuable. that do that's we about - that the million margins is on a business to But question. can quickly, the taking feel to this the We will year. the getting in and of years. want we the the approach million business want move or deliver acquisition do best we to synergies respect too accretive what to and when is pragmatic trying we don't we you estimate our what this we synergy don't slowly. Yes, to to be feel we three but about so also call, capture. like understand $XX move expectation next our We in think But

much. very you Thank Great.

Stifel. question from your with Aadit next Please from Shrestha The proceed Aadit. you. comes question, Thank

Aadit is Thank Hi, taking for and quarter. strong This Stifel. good on morning. you the congratulations from my questions,

low So, XXX $XXX of that end that versus you allocated my businesses? What million the drivers actually the how acquisition. Fox would what across million are should building in annual just the million? should Pest in? $XX question first of that How $XX to And are you be really to million sales, get lines is the $

you don't Why this, Ken? handle

Yes. Sure.

that on the is at sector. A that breakdown business, look business of residential. percentage is resi so, focused large when highly we And

similarly $XX residential come of our like would our through come business that'll how million We is very probably segment to so, $XXX million to reported. business And into our that business. feel our

also our a then like reflective see That's estimate, QX, opportunities further realistic you'll a and on. the the We a the but ramping. drive there, growth like feel So, very there's feel million growth seasonality just to business million I some of growth from and this ramping outsized QX, $XXX trajectory, that see you'll to already is QX is $XX trajectory strong of is business.

that to year think realistic $XX year. very million we we it's of the achieving $XXX remainder And feel this like million so, in about the as

add, but if add, Ken, this critical. retention may if may Wilson, I John is is I

we go million in way we why retain path into on which employees, to the the their Fox But $XXX is assimilation. and so and whether those carefully important to that's don't they these looking so, And current continuing customers, get on their customers the go with will $XX versus world keep acquisitions, the to integration rock million. retain their determine their and/or

you the And the right. the have maybe XX% pretty How the in? you've Pest remain regarding it we that? think Plus that. Can exceed for like, of Thank actions of a All sort impact that initiatives I with what's healthy, Fox follow-up the incremental about on you should year? margins, XX%. for and cost-cutting pricing that put of

Certainly. Thanks for the question.

margin last that's last the look XX%. last at incremental months, consistently if you an back If nine quarters, the second delivered of approaching half year, going we've three you will, to the

you positioned you feel very one one where exceed might that forward. There's there you margin of quarter There’s and that, be might always we're challenges. XX% move might puts, incremental as to but sort like there's have and we we below takes, that. well where be deliver So, always quarter

to to acquisition customer little business. in to costs. for I a quarter, see get the long-term prepared We investment in see going go are create second said more comments, customers going our my value you're that As after an bit opportunity and

investment, investment value we that of help second we us very as bit about long-term in probably you'll quarter, more a feel area those XX deliver will the about from come incremental customers heavier but see good little creation margin little think profile that so, a that percent. through And plus

Thank I'd at like remarks. are to to you turn this no you. time. for management further closing floor Thank the questions much. very There back

you on you. today. update call. Well, thanks, everyone, the look the forward Thank end We'll you quarter at see of then. our for call second an joining next giving We to our

and that today's Ladies much. does very conference. gentlemen, you Thank conclude

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