ROL - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the Rollins, Inc.

Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

I would now like to introduce your host for today’s call, Marilyn Meek. Ms. begin. may you Meek,

Marilyn Meek

now, press have release. By copy received of the you you. all should a Thank

office we However, and and distribution receive our list. would anyone make like XXX-XXX-XXXX, if is on to one, missing sure you please the a send you will a are copy at release and Company’s contact

with There one week. call X-XXX-XXX-XXXX, the for one passcode hour The by a can the and of accessed call, the replay be after will which begin be replay will XXXXXXX. run dialing

Additionally, is replay webcast www.viavid.com, will at be the days. being call and available a for XX

the presenting the Chief Financial to line some Treasurer. would Management Vice John Rollins’ On open Senior Officer; me opening with Executive you Gary, like Rollins’ Officer and remarks, Wilson, line Northen, today Chief Operating are Gary Officer; President, make Chief we’ll and and for will and Rollins, then and begin? questions. and President your Eddie Chairman Vice

Gary Rollins

joining all you Thank read and Marilyn. you and Eddie statement call. XXXX our Yes, our then We forward-looking will and good appreciate second begin. conference disclaimer quarter of us we’ll morning. for

Eddie Northen

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

Gary Rollins

Thank you, Eddie.

Unfortunately, was expect, everyone periods weaker have strong. like strong uncertainty. that for we’ve or season with some had season As the comes. situation companies, when weaker more most after like quarter. handled the the the is other knows you Christmas seasonal by retail and because growth looks timing these to both was Thankfully, where pest headcount our year with cost fact adjusting we not July Historically, control performance unique periods We, This our would of our disappointed late. level. very the appropriate

a So have make-up opportunity. we

For it rose to revenues of $XX million million million, per $X.XX the and year. last the compared income quarter for currency $XXX.X foreign When declined in second compared and the minutes. adjusted exchange, share, $X.XX quarter, million financial detail results per per year. share. will X.X% on Eddie of the $XX.X Clark revenues X.X% $X.XX second for to to Net $XXX.X share would other same this in a acquisition diluted few last diluted period or be or greater to expense the one-time provide

to of the million rose X.X% diluted $XXX.X to last six per diluted year. first first per million the compared the share earnings compared Net to of period last year. to for X.X% approximately share, months months $XXX.X million $X.XX with $XXX.X $X.XX for Revenues same million, $XXX.X six income for decreased or

that more initiatives Rollins. growth improvement. to and these like I’d Rollins’ specifically will of a We impact talk and enhance improvements number have will they business future how about margin

that multi-billion strategic becoming us right make dollar the will time future. to company, a the As approach is investments for we prepare

and a is $X use We believe are, of expense you not is an estimate XXXX broadened that as improved of this stock innovations recall, for these XXXX. that and we year-end. our grants resources. better investments there of business XXX(k) But Some at million our we additional

employee a investment retention improvement As a two in strong has first helped our employees people our excellent is retain This business, for and quarters. recruit ability generate to paramount.

our our organized our to customers and increased employees have from to better technician technology better customer’s benefits The scheduling. the plan and and finish. receive day, the it’s now directly start customer reliability. guide service and routing expanded This appointment days with technicians our address We in investment we’ve and Next, customers. communication

the area customer technical via adoption time date Glympse, of communicate of recent in to with is email service the enables to a most us Our that service. and text software as upcoming innovation this or their

even to Our their have customers now is see the route technician where there en account. to ability when

and also tools, improvements for with relationship a a contributed a our their As of driven. is job technicians. as better we better capability result reduction and and these change The employees our and time to their to better circumstances customers retention customers This investment service and served of has created has our the customer day have dictate. miles

recall complete, this As few an this details When Eddie calls administrative significant we transitioning provider. this are will earlier our to will initiative that discuss insurance more you a savings. pension minutes. from a about expense in create our

the some to making of experienced As Expanding innovations we to the this. our improvements challenges Company’s are prepare of I mentioned, due the revenue these and and we’ve and future made seasonality business. our to recurring for mitigate accomplishes help better

As will you with effect that a a amount these would have associated and of effort expenditures positive initiatives the company. on been expect, there that significant are has have and

our program. I on favorable would Rollins. add has our that don’t and shown we have a return at Yourself record a And improved Spend Company’s Rich new we that track culture expect

other brands acquisition Clark and to companies evaluate will one adding remain prospects primary the will great as acquisition With objectives. continue of complete, we our

John will other Clark and on you plans. our now update acquisition the

John Wilson

line of Once require a contributed success profitable company provide and control will the fully Clark pest these longer growth. apply that might as bottom incorporated expansion to top with and provide acquired growth ability to integrating of larger the growing integrate, customers well. which past the in Historically, of services. bit acquisitions with as you the our Thank track the you, our to though, and believe many We benefits long-term to excellent our speaks acquisitions expect, related additional acquisitions have our years, made in to over record companies and we’ve ways had Gary. XX all

successful Internet of power technology. will is I meet purchasing our benefit a addition them to track Gary plan their companies are progress. in Clark check and transferable brands. team and and there and greater our week their with we expect to acquired on next out when family highly on we with heading experience, business from be These our

Clark, about majority as excited Northern branches area. our are of Company’s this in their addition We strengthens the their dramatically are and in presence California

benefit first experienced our continued as customer our of helps you retention As the you may on obviously quarters in retention. employee in members would XXXX, directly the with for with our team and Improving that two employee retain trajectory. we recall, retention history, expect, best ended XXXX correlates recent the and we’d package people. Further, enhancing

However, helps technology greatly process investments in and here too.

with slightly we – these I’m have – member we various as team tools. simply improved As job sorry satisfaction have

A customers extremely to service is loyalty their with technician’s customer expanding and important ensuring our base. relationship customer

this scheduling to and customer route. improvement service additional are and their to contributor customers’ better some add in enables cases, enables As Gary technicians our large has a as expand in their needs, fulfill capabilities shared, to their area it routing customers time. This them to

of provides the For of additional our field behind this amount wheel. spent personnel, time benefits reducing in the the technology form

per we the human improvements information the employees. item full stop. stop second gained of this Orkin down a efficiency implementation of during and system last number in half year fully of related technology, our resource system for reductions. utilized to of field pain first when points solves One consecutive the our months driving X% miles again we and For by fleet our measured nice have miles in had per per were had year-over-year Average we stop quarter, miles driven XX as

We expect to and see from technology continued benefits various these mentioned. through XXXX beyond initiatives

year, mosquito we line in and of large around increased business continues part this Year-over-year, in including our about overall a note, concern we to how of and we On although service cross-sell Zika, pest get driven base. of at gain our this diseases. future Nile, business questions relatively and growth small grow time West XX% control and has customer expect service public over another greater continued issues is our awareness other as penetration the doing, this by grown our mosquito point, is part lot a of disease-borne

let turn Eddie discuss call financials. to over me the Now, to our

Eddie Northen

strength different. pent-up demand and John. you, what far point call you in again this sharing of begin only QX have through Thank quarters previous July. significantly to at demand discussing June from with some the come May know April I’ll We so look we our to coming

to results these quarter can years present the looking be results second defined periods time and piece build reporting on for today continue at of Our and will of significant you the past, that Each come. are quarters to by the we a future. the results to have and

year-to-date continued past uneven in quarters a the For we specific, investment events restricted XXXX the in $XXX,XXX all international $X.X and that stock, about negative quarter of to million our keys demand XXX(k) for impact for plan. the showed million dollar of currency Gary retention, and $X.X growing employees business, XXX(k) our and lines quarter, be $X.XX will of and the customer our enhanced the the for million, add employee by special this significant about both our included our and quarter in through more service for growth remaining benefits mentioned Clark as to U.S. stronger exchange the and To pest opening. improvements

their items which joining lasting the employee the forward detail the on reminder, we Again, which as these will our SG&A, contribution year, plan just key increasing retention, special long-term is I impact this moment. move leaving as John has moving a discuss this the or the our impacted that event XXX(k) the CSP or grants in a both was and success. one-time spoke reducing more outcome to in made While investment stock be a driver vesting of employees will forward. by and about

that be items acquisition our and of a impacted In addition and future to significantly minutes John ago, present Clark. is will the and mentioned by Gary few our

systems our made integration August, more have opportunity levels. procurement already with We’re changes over Based XX%. fleet Clark acquisitions, which go the will margins and with a plants. in will on on Rollins’ to live and fleet vehicles, the week of the improve pace be to we benefits related margins on past our getting second fleet to line their step operating have positive

I visited call with staff Rollins When Lodi, I run the how high Clark had On impressively Rollins’ a we our employees a such how to gained and they their visit, to understanding to its and center truly learning more much. my calls I that learn several and time, customer at impressed Since their about visited an level. Atlanta Stockton the operations efficiency. support efforts. have deeper integration of in with can support they visited Our the recent I branch, have with so California, interaction are function, customers Clark listen was chance and

related QX addition Clark In to per will fleet and to million expense, the buildings that items added. will in other P&L the for $X.X up quarter and reduced are, impact vehicles depreciation QX be

We acquisitions have of the XX the last as as XX-plus of over $X.X made including received Clark we that a and the valuation million. amortization draft months, increased has Clark well other

a worked through in expense to to position the purchase some are of more now have We details interest we specifics. share that related the

million QX, the quarter borrowings. For interest of partial for $X.X we had of

For swap QX, rate interest paying loans a below we down already the the an of estimate $X.X and as bps we at of have roughly portion started to a rate XX fix million, loan have LIBOR. added

to million estimate the interest off be to loans to a the $X.X QX. We by outstanding and XXXX. continue will early Again, pay are pay started we’ve already reduction debt-free to expense and loans our down in plans for

Finally, time the were of experts in-depth at significantly to to and will professional our There to our QX, $X.X the acquisition services for originally real an case for expense $XXX,XXX estate additional to we call up the regulatory and due for expertise anticipate QX in of be transactions. QX. need as economic in anticipated QX than related higher review nothing related well support this an as million

to transportation and expenses an expenses vehicles and these was results addition. detail. of additional XXXX you review of be the chance share to prior a line in the will agreement expenses normal of related had make company some integration gains there from then X-K is Clark finalizing that time. which private These add release that the bottom to $X.X additional that as $X.X of There margin changes of other acquisition. financials, million on elimination From were those are the were I additional in For the to to since audited previously changes be our of the own there move points that changes from excluded approximately to of business properties, longer the these for we $XX no million paid rents be will we that we are million, the shared, several mentioned. that will and added our now forward wanted

in Including QX, acquisition with free deal million free this and a Even where One line approximately XXXX. benefits of will the years. flow. previous increase will have with Clark, the $XX cash net flow Clark our average have and benefits additional increase will we item lower QX be in income few is than the in for cash in the

For earnings half share believe will but deal shared per XXXX, flat, a accretive prior will we’ve we calls, by penny the as the XXXX. for full of year the on be be

occur Looking the X.X% year million There second $XXX last that that XXXX. over change year’s at of was quarter franchise prior an an recognition by second of accounting revenue of revenue $X.X approximately did the $XXX.X not increased numbers, quarter revenues million, in the increase was million. our

to XXXX. over $X.XX $XX.X XXXX. X.X% several but still term per $XXX was to expense X.X% fell million lagged as EBITDA is million. the the EBITDA income quarter. up XXXX. near of from during for share per in areas taxes addition income million QX quarter with of diluted $X.XX decreased $XX diluted per best in our all measure subsequent improved were adjustments before was line well. in but made, $XX.X Earnings X.X% in of first This the Net share, million, the impacted with from financial Favorable the QX, Income metrics Clark. demand share

Income revenues income million, six taxes the X.X% from XX, $XXX.X prior million. was X.X% showed $XXX quarter June second to months $XXX.X an the for million X.X% down fell million, seven-tenths increase million to of a before $X.XX, of and decreased $XXX of $XXX.X in ended year’s Revenue over Net down XXXX XXXX share was from the compared XXXX. million earnings of number $XXX.X income EBITDA XXXX. per percent X.X% $X.XX. to was

of some the the out detailed and I present. past

discussion turn let’s the our to Now, future.

of There stages quarters positive are of daily elimination the several this managing many of our $X the step, plan the the in off ago, from impacts As that, the the and assets, fund of elimination the we the are of to the payment transitioning plan administrative mentioned of fully first books. plan. pension final our annual volatility the of funded include management which elimination million so

our deployed that since our roughly approximately addition, QX will XXX% funded, areas other In million, which be call. plan to will assets in our equates be on $X of is these business discussed earnings

of impact QX. the Most transition from in pension the will occur financial

the and QX The plan. per we be which unrealized will the third companies year. pension in million. Net have tax accumulated $XX loss tax approximately will reduction a The will other charge be with approximately of the First, consistent the taxes. million method losses rate our accounting the of tax for non-cash This tax, a the with equate the after for the treatment effect of $XX $XX will apply. $X.XX would quarter sum transition effective approximately significant million from is of be plan pre-tax, expense will pension the treatment which share expense to of associated in is

a l.ook line revenue service for the second take quarter. through by Let’s the Rollins’

acquisitions, revenue, ancillary from and commercial and As of approximately growth. and our up revenue total remaining up was total, revenue, and of revenue, was discussed made was XX% of which was a the In earlier, made XX% X.X% pest services, our X.X% and XX% termite our increase of residential up from up Clark made XX.X%, pest included X.X%, up control, which up pricing control, X.X% organic X.X%. which our other

XX% and gross administrative well out total, XX.X%. employee due one-time salaries, year’s was in amortization X.X%, and increases share salaries from with to that, up for as was less salaries. revenue gross as special period. supplies in was the X.X%, quarter and The been these increased down acquisitions have grants due restricted termite year X.X%. up fleet slightly prior commercial Taking acquisitions from to of margin ancillary experienced the XX.X% Service would quarter. increased materials prior most X.X%, In items, to the residential and and expenses total margin from Again, grew production and increased

an million amortization due purchases the amortization intangible to quarter customer assets mentioned the and $XX.X for Depreciation due of $X.X increased $X.X million from acquisitions $X.X expense increased of as amortization equipment and XX.X%. while contracts million several to of Depreciation to increased million, increase earlier, acquisitions.

expenses for administrative of quarter of quarter the percent and expense. million revenues, the these increase have million and million in revenues, increased point been would restricted in second one-time XX.X% the from up general for XXX(k) increases SG&A The XX.X% XX.X%. Taking and XXXX. of $XX.X Sales, $XXX.X X.X I XXXX to revenues XX.X% percentage due of of to $XXX.X or the or second the is as or the items, shares discussed, grant primarily special amortization out distribution acquisitions from

planned X.X% for ended primarily the million spent same cash period Canada building We our IT $XX.X dividends the period of $XX.X XXXX, of which XX, in was our rollout As had $XX.X from on such CapEx, and to for million as upgrades, is cash, up which position $XXX.X million subsidiaries. $XX.X on in $XX.X XXXX we June our We paid period with the compared held million ended acquisitions, and foreign by million last year. improvements. BOSS million

XXXX share the minimum regular the is increased be dividend by a The the year. marks business Directors declared XXth of close dividend August of year to consecutive over at paid per our dividend the stockholders $X.XXX of a cash XX%. XX.X% cash of has XXXX. Board prior September that the Yesterday, record a X, will of XX, This increase on Board

turn Gary, to you. over the call back I’ll

Gary Rollins

Thank you, Eddie.

time. at to happy We’re take questions your this

Operator

from question Hoffman first our with [Operator Instructions] We’ll Michael now take Stifel.

Michael Hoffman

growth believe had macro rate, a secular decline overall is about pest to the see the in you’re is organic have beginning underlying much market will it and to very slow, you for the taking we’ve part a question – improving an you within cycle economic a the an big cycle, growing broadly. Do improvement be rate starting control I that questions. then that growth slower? market to tied of overall Thank

Eddie Northen

I in that move Yes, we a would continue as know insights don’t will believe Michael. is growth to be we This forward Eddie. have we market any what that time. change

other. current one and think have the patterns side on moved weather I things

times. warmer during Over patterns, warmer during seen the growth the previous few current I those think and years, we’ve weather seasons occurred

the this certain I think I of in at part with we’ve the highlighted the you year in seen areas least U.S. of some that first actually over we’ve patterns adjustments weather seen think that and that.

I So, or see what know nature in anything we’ve don’t that secular know than we different seen. anything in nature or other

Michael Hoffman

Okay, thank you.

John Wilson

advantage we have what I one now have North about branches that in And think we is America. XXX

So, coast with to far seeing and as how weather lot see really that has overall starts a didn’t is the as concerned. said coast from season we’re to demand Eddie as just do and we not decrease an certainly

Michael Hoffman

that’s comment Okay, come us, Clark shared want then the with to you Eddie. helpful. and the back queue. And to gears I’ll clear just be switching on into I

as my was in vehicles $XX million. reported approximately of out item, you million is were there – because vehicles there is – underlying, add notes, you of through forgetting income the $X by $X rounding here, you of that other rents million it and and I’m that that but have there’s that, looking can pulled to million So you’re I’m X-K there $XX is back a the – Clark suggesting and

way that Is So run to I’m before think on business it other about any way as starting right you’d looking the the at a adjustments? $XX the million number.

Eddie Northen

about fair it. I a way think that’s Yes. thinking

Michael Hoffman

in I’ll the back Okay. queue. come

Eddie Northen

Thank you.

Operator

Dan from question next with Nomura. our Dolev take now We’ll

Dan Dolev

Hey, taking my you questions. Thank for guys.

Gary Rollins

Dan. morning, Good

Eddie Northen

Good morning.

Dan Dolev

that’s look the is little Thank little X.X% more should bit pressure you’re comp little your commercial anything side? regarding you that lower that like good about being sub-segment I’m I you. a side that is averaging I if historically, competitive a it I quite on growth impacts we the was larger I wrong; did the easier. on hey, Is about – aggressive I in X%, X%. that bit from bit bit residential? surprised concerned weather in help was can’t organic competitor there not think was impact be a – that’s than morning. commercial a

Eddie Northen

Yes.

that, is customers from I fumigation didn’t and have looking Dan, and it’s and side, in that would come hefty and piece one the quarter jobs So, tariff actual we seen. commercial say, do didn’t through what say historically that ago, it’s side, the that jobs number we a of the we the would just on commercial that it’s related, anything X.X%, some not year I through was of at saw fumigation come on a pretty things we individual was like not grew that’s that that just a else just

went a impacts it in us at commercial So, rounding percent through what at those all. for time When it nature and we over wasn’t looked side. period, that on competitive the to were was

kind adjustments, something where can that. like but operations we’ve we’ve made in the moves that, historically, with So, that’s of seen we not

So, fumigation no of year the bit competitive concerns and at a this point, ago a a from comp piece. higher little

Dan Dolev

what obviously, Got here that show push any – back increases? changes the inelasticity. the good from for very like is Have known people and customer noticed it. separate But price you I that on the some in you. it matters than satisfaction felt And price more has like had anything satisfaction. almost Thank service that customers this Orkin really industry other we’ve like just expected. infinite It pricing hand, the a the customer is on survey been done question, work

Eddie Northen

seen Yes, with that. that. issues not thanks for We’ve

talked know group that our we’ve when robust we think of and it about, comes testing, I so price, for most sort because the our I know understand of the out not us. rolling what is we’ll markets in the think to as and very do have price you in individual customer important to thing is lose they’re temperature want marketing and value to to lifetime because individual areas, customer we want

on. that we feel think going I the we’ve with push that’s back had. So, don’t any know testing material comfortable I of

we our in again, improve. as Our mentioned to what retention call, line pricing the numbers with customer seen is we’ve on years. in continue And previous relatively

at So, think this or concerns or seeing point we’re problems that I in that area. don’t time in issues

Gary Rollins

fortunate Eddie, if that can in I verify if with call we’re any issues really that pricing there’s we center our we our closure. could, very have –

So, calls of kind so and same Northeast from people the handling you will, the that and a forth laboratory, have and on. of you so Midwest we kind if have these the

by to able closure track we’re literally region division. and So,

Dan Dolev

Got it. Thank you, Ed. Appreciate Gary. Thanks, it.

Eddie Northen

Thanks, Dan.

Operator

now take Jamie Buckingham. We’ll a Clement question with from

Jamie Clement

Hi, good morning, gentlemen.

Gary Rollins

morning. Good

Eddie Northen

Good morning.

Jamie Clement

just was could your if I Right. curious I get thoughts.

they generate to this our do both leads and all the hard quarters, you sense I them how more think second blueprint? stick And just in who was tend perspective, of spend has and quarter, the unusual from what faced of that? this trying – first an been notice you was, to try leads the kind you that industry I any you it in local has has in do and Did the strategically second to curious year the in markets, about some generate unusual if respond? the was with of weather quarter? Do your everybody, found in the first competitors match to or some

Eddie Northen

seen we’re even don’t close what there. we from price make total. the able the having tend to think per it’s stick with we’ve to on think the and be marketing do to necessarily the sure to go to different lead that for out through that doing be ways innovative I has that figure lead blueprint, it we’ll in acquisition cost us I and really with then when comes to anything to

the enough our group, channels is Now, job to a think I think for other winning there don’t are more it’s again, a of obviously that I it’s be great matter there those some but we’re it’s And going marketing expensive, of, and some that create leads by not there demand just able and finding to leads. doing necessarily channels lead? are

that I just been the being leads us. think, there to it’s not is available the and demand

Jamie Clement

And sure QX? as to QX were not about be from a Thank caught of $X.X sequentially this. I that you Eddie, result Okay. up depreciation you. I’m Clark million would saying

Eddie Northen

said that think depreciation. I I don’t about

Jamie Clement

sort get to is trying D&A like, was current I what’s number the Basically, of post-Clark? quarterly Okay. all-in

Eddie Northen

Yes. We was $X.X up did year-over-year. say million it

Jamie Clement

a know about that Q errors. I different wanted you sure and it’s I just non-cash that to if I didn’t just modeling because just – are and was thought there gave was you cumulative, there number was know just make no story I

Eddie Northen

and share back go that the and we’ll We’ll with about you. How at look transcript we’ll that?

Jamie Clement

international great. businesses And yes, are performing? Okay, general comment, the right, a just how all Gary,

Gary Rollins

They are well. performing

very in Singapore. but some we We’ve have very our have Australia, America, robust here had we’re their corner UK, been pleased seem the pleased economy as there, in with in has operation challenges to turned North not we we’re very with We’re pleased. as but

our think pleased I all so we’re And in all, with international business.

Jamie Clement

international more Or acquisition much is very on table? the

Gary Rollins

think I so.

continue have we is record to our when can – we track understand it. us candidates. and I think We what can And expect expect helped has

that – have these pleased, we’re the great of is stayed. So, I is think than and a robust that businesses people little bit but really we’re built have things more we these were one before,

been culture refer a that learn think our can acquired is a with. all So, that’s we to we a also to have a other don’t other a local And individual I already we extremely and the familiar have that’s that position and companies. things candidate blessing –

Jamie Clement

Right.

Gary Rollins

us taken or a long good we that’s results long not and them, companies. if things we a and but way that think benefit that helped because feedback we’ve And think heavy go acquire change we would goes you’re hand everything try ways, to trying when to cheer I get change that’s think good a in everybody we patient, or I to and don’t try

Jamie Clement

and very your Okay. thank appreciate time for much it. you all I

Eddie Northen

out million for $X.X what per close Clark. Clark, to we did up depreciation loop, we I just the called vehicles quarter Jamie, with mention, versus for the Hey, sure do I to want did having total to the make say building

Jamie Clement

– that’s year-over-year? was second that And quarter so

Eddie Northen

correct. That’s

Jamie Clement

Okay. All Thank you very right. much.

Eddie Northen

welcome. You’re

Operator

will Blair. with Tim Mulrooney We move Instructions] now [Operator to William

Tim Mulrooney

and of of guys revenue a appears for like heading margin maybe a and have and John, for out of you think expenditures, the would IT think year thought I overall guess? numbers headwinds morning. and you stepping if about you step there this up been other are how your – should the back here, about customers, exclude I and us offsetting of of on roll-off kind higher just lot Good of consider could you. but on in it growth some takes some kind more maybe, back morning puts this Eddie, here, the just major margins, recurring these more us benefits. to and normalized Gary we XXXX margins major we thrown puts you of should Clark a second, the how give with Thank Could things of takes

Eddie Northen

We additional normal that be and don’t dollar plan other put But have if is it Tim, have if was improved we benefit. numbers you be to the take, that the a come have flat the a do something going talked amount solid larger people with the for staffing wasn’t to headwind it one you to We it’s or I to as amount season out to there, have a that, to know, more people expense for take going that. do is we’re going of piece hasn’t to would we as in expected. you be have be – the pieces with match year. but will that having be joining the we for the you do more take don’t give been Clark thought out, we of with us. plan, to that about dollar the has that the as piece benefit an usage a our going But previous expense-wise, that thought increasing their of think plan,

Tim Mulrooney

XX%, in investments or room about out density you this margin right. run and XX% range? long-term helpful. margin go-forward stuff the EBITDA more Do think All How there that? like is That’s business do basis? Or to tops through you a stronger a think on and tech

Eddie Northen

a I get little and find John learning and time time little density from rolling think the after every me single depth, make life a that efficient more regional before coming and bit importance to brand and we density another background, end up best the that we a top company, wife or and they my my decision marrying find acquire get happens. into convinced and a in more we acquire single organization, that’s every of understanding the Gary we mountain bit was company become better Group existing

are extremely out come. for be fragmented I technology So with and in I investments with a go, that think of a executing you down this I on to those that technology years think an upside have, on like runway to at potential continue is to go when we point to in opportunities lot the still made personally industry lot that. the we double with me, on fact there has time, of to And there think how upside we have that investments the

Tim Mulrooney

XX%, So, a of structurally lot runway why margin reason Rollins’ at no tops XX%. out EBITDA left,

Eddie Northen

so. believe don’t I

I to think room in more we forward potentially is time. there as go look

Tim Mulrooney

in one just I want to kind squeeze more of to you. here, Thank because that. of related

in you years? that’s couple you Clark about excluding margin that Thank right a run doing the I am one-time right? Am go-forward EBITDA rate getting EBITDA range? more and those math the do million think in And Just get Clark I how EBITDA if you you that on $XX already to high-teens do to calculated it acquisition, that items how to the the get a Clark doing add items a million $XX I of think for where math long-term? to to we Are back or we can won’t closer repeat, that reported you. of $XX XX% million,

Gary Rollins

Yes.

already is on started moving are do math with right. calling to improving out we things of your vehicle think I having the margin. our some We that

be folks spend going benefits of some is plans, with started procurement items. some those car which our – We’re going of a our moving already to be to over over saving. We’ve to the folks to

be they’re million. multiple know margin going we going points are to that addition be to that those other in I $XX be called out to So, to items

mentioned, work news those understand staff is good support through here can of I our on The priority out like what to are. integration we’ve and we steps I needs move quickly the their They’ve We had like in had said. been there. how

start the two The plan of fleet going over even August in plan, piece fleet; be we’re moving we’re going be would So to Rollins’ a which it. to with moving in XXX(k) weeks, starting saving. the XXX(k) to the is

you opportunities are what believe from there – help lined in perspective, a to that we addition is margin there So multiple will out.

Tim Mulrooney

luck you. half I understand. the Thank year. Good in of the back

Gary Rollins

you. Thank Yes.

Operator

from [Operator Stifel. Instructions] Hoffman Michael a with now follow-up take We’ll

Michael Hoffman

One you the of pulled margin adjusted So, noise. there’s pieces us two out here. gross the – which gave on all an XX.X%,

how number, year-over-year down still you that’s struggling the $X million for got I with total, us then per does that quarter? D&A, why but So, still and at like second gave I plus you quarterly an yet tell flow better. So, us in improving. was retention’s didn’t that I’m Clark million margins for aren’t part, amortization when And amortization or look through? $X.X whether what

Eddie Northen

Yes.

the it value normally come that, we not go adjustments there. We where I’ll abnormality for things to a it’s efficiency as And staffed demand not as season we’re for way as what be a the to opened care staffed fallen. the be you a we’re bit just and and long-term season, of we question have We’ve from a have perspective making Michael, back responded of of normal had don’t kind would And through that for then as to position, think want a has the take a call, this has a – in accordingly season able and of to customer customer back good perspective. seen our the that not I it’s we what not from there. come Gary we’re – we’ve little up Tim perspective. So, isn’t first

there abnormality I that’s piece. that an margin had think we’re we seeing part and So, what as of

I good been making that, said, to we’re We’re has start. off a to like adjustments July moving forward,

Gary Rollins

ago, in like month add really we’d our right vehicles that, be our count I’d we’d to a if now. shape bad and head cut

period So, whether I got and you’ve as right were build strategy or expense expecting, actions hold just very guess, that painful do, vehicles. is giving you’ve not on fortunately, that in you your the it’s that that really got incremental to things when you that were you showing up revenue but and you’re it like but now the have the or those form not, headcount of July

that’s any on So what than margin piece that. more the put other really than pressure

Eddie Northen

short-term not through of and Rollins a mean is and a line then has to that damage long-term way that’s bottom we’re we’re our and of or our decision for might company about like lot quarter, a a to manage make business. what going been not X% X% years that margin help And going or it’s else that I successful the whatever Michael, the the

these that gone and Gary’s first what quarters, we’re not demand unfortunately that’s and prepared and two the it’s point, paying that’s do through going we’ve for We’re we’re to through and to off seeing coming that.

Michael Hoffman

equal? the being everything, to is make – isn’t in just management adding rights first the that in ask costs so math third, for of I year-over-year, second-half get statements I about you you are the managing that the the business second, margin I because margin think you I but are new really rate, is expand, Can should in rate all growth just the the good the customers, I lower organic understood in that – did. year, lower why by right a a sure making good making, the else the way margins still is it’s all growth way If the way reasons the get clarification of the better

Eddie Northen

the way right to it. about think exactly That’s

Michael Hoffman

Okay.

Eddie Northen

think as the the through you’re remainder of moving that’s about exactly how with right and what our it we’re to expectations be would year.

Michael Hoffman

number the do gave then clarification just in how model? a the And I thanks. apply us. Okay. amortization you on it

Eddie Northen

increase, be be… what That’s going going year-over-year that’s to to is

Michael Hoffman

by XX divided months, so Full X.

Eddie Northen

Correct.

Michael Hoffman

right. All Thanks. Okay.

Eddie Northen

Yes. I I asked earlier had something. question to one Jamie, other want clarify your do about depreciation, misstated the thing, you

QX clarify So, that. be million $X.X The depreciation to is just for and Clark to the I going for want for QX.

that’s acquired April. end and them For we the QX, of at because it was $X.X million

out quarter. So, two the of months

So, we want clarify make sure that to that. I

Operator

have question And follow-up we a from Buckingham. Jamie Clement from do

Jamie Clement

thank news Eddie, there question, somebody that then and the has kind thing. if protocols? the like the of like you situation an some with follow-up just is just And to one of the reading and little like for that. you – industry California change of opportunity bit that legislation a for Is about rodenticide the

Eddie Northen

Well, a John’s question. that’s good closer really to probably that.

John Wilson

I’m right not just question. don’t a know, now. last great that’s sure I knows article anybody night. I on Jamie, that reading was Yes, an

is So, take the yet. we’re rodenticides, not We pretty to the the generation rodent there’s real obviously, there. opportunity grow do sure away dramatically second if just populations you for –

Jamie Clement

Yes.

John Wilson

be not industry good be may not I as just speak. there, the may And so we’re with that opportunity – but wrestling creates that opportunity, it just as it’s of an we can residents and unfortunate there be But for California. think

Jamie Clement

I now get Yes, it.

Gary Rollins

public on down to these pressure to gets the I put it much going think regulators. how is

Of and pretty nothing if onerous else. appearance, rats are course, just for

they all just interested legitimate you to to So, going I be thing, first this really think did apparently but have is the it’s right who between the because has shoot-out by the that indications, see, this environmentalists, think thing backfired. mean going and of really but see certainly it’s how shapes mean, had, I this respondents to the I leads this the population, to we we more has than consequences interested unintended rodent it’s out. have be

Eddie Northen

food these other from haven’t away in one use processing taken products Jamie, too, thing, plants. they

be that them number of buying of store shelf then the on you taking be The can’t to out you them. California, there XX% in Internet XX%, sources various same still dependent and that order them on products population. the rest buy to they’re at, still in and to may further look you care going can off and those grocery they’ll we the So, unvended while and using Internet is and be the going a they’re

Jamie Clement

And using probably using be responsibly using them less than them you’d – and them.

Eddie Northen

big right. issue the our been regulation, Exactly that’s so... with And

Jamie Clement

all Okay. I appreciate that.

Eddie Northen

to kind with clarification Michael, you misstated. the had one the I similar for having to to of and do to having Tim the depreciation question Jamie. back other amortization do Thanks, that with absolutely. Yes,

months part of the for as So, the Clark amortization had of two but we quarter $X.X only about was million, that.

month per will the slightly as be higher move year-over-year, that. forward than So, amortization, we

just months, be in going because to we’ll So, there, just – but clarify what, have that. I three want so to obviously,

Operator

this And no further back like time. it over there at are or appears turn additional management any to I’d the conference closing questions for to remarks.

Gary Rollins

progress initiatives quarter. quarter and Thank that on we would us taking, your fact in starting new will in and strong forward the we you joining for today. and that that you. season is We the certainly our that these look this to updating appreciate throughout numerous programs we’re our you thank also the hope company continue interest and Well,

Operator

conclude conference you your participation. once that And all again, today’s does we and thank for

You may disconnect. now

Rollins (ROL) 24 Jul 192019 Q2 Earnings call transcript