ROL - Earnings call 4 2023

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Operator

Good day, ladies and gentlemen. Thank you for standing by. Welcome to Rollins Inc. Fourth Quarter and Full Year 2023 Earnings Call. [Operator Instructions] This conference is being recorded today, Thursday, February 15, 2024. hand Investor over Relations. to Vice Lyndsey like of President now the to call Burton, I'd Please ahead. go

Lyndsey Burton

Thank you, and good morning, everyone.

In prepared presentation. release company presentation addition that we our on issued earnings to website yesterday, are at available has a earnings The also slide supporting release and the www.rollins.com. the

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

questions. speaking are and then Executive we'll the line with Vice would make opening remarks, Gahlhoff, Officer like will Jerry, some your me you today and and President open and Financial On line Chief Ken Chief Jerry and to Officer; President, Executive Krause, Treasurer. begin? for Management the

Jerry Gahlhoff

service strong from XXXX of remained throughout billion Rollins we milestone as everyone. customers you, $X.X all year Thank across for Lyndsey. Demand revenue. achieved morning, was major the an year Fiscal offerings. outstanding Good in a our

share sustained in our business. We with grew XX% XX% year, markets strategies and we our observed by fourth of and adjusted a XX%, commitment the execution per serve. reflecting finished strength revenue versus earnings operating control improvement the year continuous in strong we earnings increased full quarter by share over a to While consistent and last pest per year

a sales share We Digital to reach methods approach also drive with door-to-door continue engagement customers scale growth. at support to marketing, enhance leveraging differentiate competitively. bundling organic gains our to and cross-selling, in existing service help us markets multi-brand, customers new multichannel by in ourselves

strategically We force commercial capitalize training verticals. on business also in allocated our to resources have of and grown Most our invested sales the enable within side we to opportunities have and to success. notably, their tools key

and gain become our helps Our customized, offerings professionals and sales service new confidence high, quickly. quality is which are successful

of to America Orkin Additionally, commercial to both customers North and the serve Canada. leveraging our we brand scale across the effectively coast are coast in U.S.

businesses our strategic by this Pest M&A was While complemented respect to and we Fox early are in efforts largest to XX welcomed in new by results the history. through with commercial drive XX% year. Investments company XXXX, organic which we're as Control, acquisition. area, growth the into acquisition revenue growth This includes good we our our company's of demonstrated in the for still see second approximately addition

the financial exceeding integration we well targets team Our with the synergistic last to approach outlined gone Fox has April.

respect growth businesses, grass. with to turf remain divested of of control in weed gain transaction on strategy our our exceptional We focus we the talent recognized decision during fertilization in investing committed divest core asset approximately million. The pretax operations. Operationally, aligns insect, most teams. pest $XX developing this control certain sale to fourth quarter, includes and to profitable lawn on and noncore we which business, for our Additionally, a care notably that with improvement the year. XXXX continued customer-facing for key us help both for and The side well focus staffing and on was and in safety deliver right Effective hiring service we demand us. levels as a business. the important put as into also our year in as solid support the continuous environment lot of results to XXXX area sales capitalize improved an energy a was onboarding of of functions people

During our goals a then once driver safe year-end, of we the culture acceleration, pleased that proud organization. the is data vehicle encourage app is detects the that into maneuvers done over isn't have I'm safety safety our driver motion. to braking our The aren't driving we by believe our year, will ensure have score associated But app increased and people we progress day. help XX% something of for that we impacts efforts every from with safe ambitious return overnight. but safety monitors on financial negative the potentially We behaviors that report mitigate our for are to and unsafe converts in business drivers year, stopping throughout driving score. implemented behaviors improve there. Improving most beginning home importantly, customers, ourselves an speed, these ability and set collected average monitor serve to the we our made

of continuous own This also efforts Our These to progress, the strength enabling functions. to we we brands. In are aimed and efforts closing, XXXX some during a our business in office took further support team. steps become important talent in of back of year. effective level performance the increasing improvement priorities engagement the upgrade as and at on our shared modernize systems but initiatives demonstrates model to and services our our for a work growth better, center our work productivity is provider and more our

into experience of the to are brands driving stands around call over XXXX. the our efforts now and the control business their I'll disciplined want thank carry associates And meaningfully for with are to acquisitions. We're we best momentum as well investing today success world growth both the providing drive pleased Ken. pest through and in XX,XXX-plus where our focused to We of business. continuous turn each family we profitable contribution I to XXXX. organically, on customer to our the our as customers remain committed throughout improvement team and and growth Our in our with

Kenneth Krause

good and Jerry, you, everyone. morning, Thank

the quarter for strong continued team. and by the year reflect the execution results Our

Let highlights for XXXX. a me begin with few

each First, X% organic we the was the delivered our robust growth X% be to part growth offerings. our total continue XX% while of double-digit of see a profile, of across growth service for accounting with growth. of of to approximately It revenue year meaningful for growth for encouraging our acquisitions year revenue

both $X.XX operating XX% Adjusted Second, across we margin on share P&L. we per made adjusted margins This for the finished improving year. On generated improvement up of earnings margins share, leverage improvement points gross an basis XX% EPS by XXXX. the XX.X%, for the Full good XXX flow for up at year. of into and million, GAAP XX% adjusted year the driven year the key almost of per million were $XXX $XXX over XX% year versus healthy of incremental and were in $X.XX, and as-reported free for not over And year margins last incremental last basis, across we least, translated and an the cost delivered price-cost but progress equation cash year. on of XX% on flow as we profitability the basis, saw cash were almost categories. several positive up operating

of enabled capital capital allocation for repurchases. returning performance flow and share balanced cash us billion deploying a shareholders execute $X growth, investing nearly strategy, a cash on a to growing to while focus through in strong XXXX with dividend Our

our acquisitions with had with fourth Turning revenue performance. $XXX a of in businesses strong The growth We a Currencies $XX We up pretax to negligible and over activities accounting lawn sale. growth. the XX% million. the other million revenue profitability revenue good the quarter, business impact was on gain quarter noncore certain pest organic team core delivered X% the control that profile The purchase a $XX organic proceeds during in and on provide notably saw our price balance up of million. mentioned $XX recorded quarter care or growth inorganic doesn't to a business. This business. X% divested we of the our quarterly transaction between most as growth. Jerry for for XXXX was million received of

and normally growth portfolio don't the with in increased XX step XX%. XX% We due a commercial approximately with XX% along rose we growth future. In QX residential QX to seasonality. and down in in in points service the associated basis divestitures quarter. control XX%, growth nearly healthy of any across saw the margin as termite anticipate growth pest organic quarter, this residential, improved we commercial see revenues lines. Gross and and QX X% forward, last Comparing X% ancillary. XX.X% in acceleration well over up the year, in over across was Going significant all was fourth foreseeable in ancillary approximately portfolio with to revenue to Organic in as termite rationalization year an nearly

decades. Quarterly costs I'm saw and XX levels our we insurance-related with Gross lower fourth for last was discussed. as basis costs Fox quarter quarter in QX steps primarily several and in points our as margins with accretive percentage revenue year-over-year and While QX pressure margin of SG&A volume highest to said, XX year. from improvement a business the pleased saw associated materials points, leverage higher basis from organic improvement also fleet the about QX, supplies profit down and due gross and by people offset basis points to costs. in level that as I gross by seasonality With the last previously performance of the increased we versus of margin recorded XX

quarter $XXX year. $XXX XX XX% SG&A costs points XX% Quarterly year. Fourth $XXX the margin that as the total representing increased basis versus percentage over for and the discussed basis versus XX% saw the growth. up revenue income growth leverage initiatives year, XXX quarter. million, EBITDA a adjustment prior versus quarter year-over-year. and operating XX%, margin, Jerry earn-out healthy up by a income adjusted in EBITDA XX.X% versus last Adjusted million, XX% advertising flat and on nice previously. Fourth million, was costs, associated the was on acquisition, was a up Excluding EBITDA $XXX expense points up million, We decreased last selling was Fox operating last offset was which up year people XX% with GAAP of revenue

full approximately respect incremental XX.X% income both the we're both income was rate negatively per net tax impacted the $XXX ago. the SG&A, and in on points same in of by XX%. year for rate margins -- compared XXXX, nice increase $X.XX share property And effective million of basis tax rate share, well. The when Quarterly expecting XX% impacted in a sales per the While other that an the period and about with fourth last to we effective margins saw period. quarter EBITDA was nonoperational leverage from year due the $X.XX nearly profit approximately as gains and This to in to quarter quarter gross GAAP quarter EBITDA were an or year. XX were lower adjusted for of included vehicle

had Fox non-GAAP pretax we quarter, pretax adjustments fourth the approximately million the $X For that totaling I associated items mentioned in quarter. the earlier, with acquisition-related of expense

We account period the gain was noncore from year of our also sale $X.XX the Taking $XXX increasing a adjustments, adjusted the $XX same on million share, net XX% these associated recognized income quarter per or benefit pretax for million business. the over into ago. with a

flow cash of flow on income above Debt Cash sheet. below a XXX% flow million. XX% net cash well the the low gross cash XX% remains operating conversion, and last quarter. $XXX level. to of is percent Operating a million We balance generated was $XXX to on cash million that flow year. increased debt-to-EBITDA well earnings, into and free Turning quarter GAAP $XXX increase the was versus in of flow and Xx the converted for

We our fund continued quarter. in the dividend to

fourth of flow cash as and quarter have we XXXX, funding committed dividend our increased growing XX% a the we to improves. to back dividend Going remain

the of As we XXXX, strength the by team. execution markets and by look to remain our our encouraged we

incremental remain another consistent to value we a pricing the at positive are on on services by that remain we year focused in effectively levels. a the approach focused healthy and of complemented quarter prices And a have is XXXX with our price and to equation. disciplined rate M&A. first robust cost We pricing on raise the begun for XXXX to strategic margins, growth From further delivering of perspective,

We in rate cards. continue to our also be managing active

in driving delivering margins in remains investing growth, on on consistent incremental initiatives that capital market. growth focus strategy will enable compounding core a Our and cash healthy our balanced flow allocation focused

more call announce the holding and Investor the for we turn will back turn success of over We're the I morning wanted strategic we date. With Analyst back how for in share priorities York on future. about the sharing and more I'll the weeks to Before that, we and in please forward New hold City, continued I looking are positioning XX to now, details to to months. ourselves call May But be the coming an in Conference our Jerry. where will Jerry, that

Jerry Gahlhoff

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

Operator

[Operator Blair. is William question Instructions] with Mulrooney Our from first Tim

Timothy Mulrooney

A couple questions of here.

Ken, decelerated quarter. as the But highlighted, On X% the to you're growth, fourth third to it you the right. resi organic from from X%

from As quarter, at historically, I I seasonally do quarter typically. the results fourth deceleration third look a to slight the see

could if -- talk talk about that's seasonal you onetime So recurring And about revenue how your residential are? what else. you your could factors fourth stream like looked whatever also or just the those recurring the case, revenue quarter? in Like

Kenneth Krause

to has the start [ and But business, business, revenue. the high a here look Jerry well well. I'll you Tim, when comments over for ] Certainly, of degree additional turn at then it so recurring indicate as we as

and is a That's -- fourth thing at enjoy of we have impact tough see recurring It stacked decel time an we was September. to is to service. what there more did And was those of healthy growth up from on recall, because you on beneficial impact revenue our look last largest growth in the to against October, with of rate level we the the encouraged, the And revenue may that growth the us despite does and a in see consistent business. we that continue in the of of areas really area type time level business. were being call in from. hurricane base growth pretty so a when that onetime the business we probably quarter, was season one we quarter a our the the from quite benefit the of The for as quarter. We in result, deceleration frankly,

business to growth, respect weather. that with continue of last with business encouraged to in puts be in some we our into of of course, the and so always fourth the year. And takes, pushed quarter this But sector. especially pretty resi There's

Jerry Gahlhoff

a your residential butter. add, -- quarterly pest growing your our healthiest I as going that's think indicator of are the of month service recurring and about increasing on bread and and bread our the every that. business would is our top. Ken, to positive your I and customer new volumes we ending that pest are net the certainly control in did from is in in as And and is And we other the that on customers we standpoint -- frequency customers what's start year business, onetime quarterly offerings control, EOM net base, and -- gravy your That your year, butter

gravy slowdown don't $X And that about care, in also sometimes that's what's as get million caused on the lawn side quarter of that number to the was that Tim. really residential you addition always in that divestiture impacted well, and the the another the

Timothy Mulrooney

it. Got

Okay.

that? your recurring Am the was -- gravy in is there on it business growth quarter, little that So a correct above fourth that less fourth your implies which quarter. stated I the in revenue in organic

Jerry Gahlhoff

our definitely our service quarterly yes, every -- outpaced number. overall organic recurring It month other

Timothy Mulrooney

Got it.

thank me, that, digital is you other one leads. on for for The and

that wrong flat quarter slightly. me through that up to down or digital all? think the it were, just if that. the was moved if quarter or But Correct down is about last trend fourth marketing if I mentioned curious I You I'm carried at leads language

Jerry Gahlhoff

Yes.

wasn't business, but overall a certainly an and was saw modest see as But fourth stellar flat. in did digital increases so better It queries improvement it there. increases healthy we from lift than the just queries, quarter prior was digital digital versus as performance, So a we did the the result lead sales at year-over-year. we the as in -- saw our both year. we starts quarter, look in the in well we some It it in did

space. to So we key benefit formula overly believe organic a that's we we're the that our reliant continue not digital in on from diversified approach a part the all of growth. And

Kenneth Krause

is in look year, And and really the at one the termite what the cross-sell ways see really that business that. throughout interesting, It's Jerry, to well that. about and point ancillary to When access we're on Yes. we and representative the we area additional cross-sell, we customer. the of business as proves the quarter fourth good is talk just as continuing always the adding

of that side We the which level on see by robust our a cross-sell upon. continue activity is ancillary really continues business, the demand to lot team of driven that to execute

Timothy Mulrooney

my up Got systems. it. I kids one to When turn monitoring try might XX, of those you driver hit for

Jerry Gahlhoff

a It's good idea.

it get yourself, You too. on should probably

Operator

from Jason with Bank of America. is next Our question Haas

Jason Haas

the had in I'm if could customers to curious And seeing it's price from but year. increase more the curious I putting in last? any I'm you this you last what of you're early sensitivity if year, us versus remind you're level in year price increase know put

Kenneth Krause

we we as X% year along that increase which year. a similar So our had price increase here first of starts heavier to quarter. with a X% passed in this the pest season, here the followed prior quarter, Jason, previously, talked had ahead in the about price in market again later We on first

So terms our we look cancellations, at the on rollbacks. look seeing we're customer look in We -- monitor metrics. different side, a at of look churn, and at We assess is at that. that, we we're the very along healthy feel we we're the number that what passing we pretty we level at services. a of representative is And value of of level like

Jason Haas

any gains how opportunities in If could to the ahead? to gaining about the you're great And you like as year you industry. just share share? see still Got industry? if curious compared I'm it. competitive a for And That's the in dynamics question, follow-up feel rates your I'm XQ talk just you in then hear. curious further if growth

Jerry Gahlhoff

and what on been do, competitive. necessarily highly have at characterize a just in it's shifts or way. doing I are very our focusing there I some what there, here changes that wouldn't mean that business -- any And industry. we competitiveness, market this to in fragmented to It trying while in that we significant flows win in ebbs keep remains always we we continue and do. and

So...

Kenneth Krause

relative When how was that at we're we which we about we've pretty in look discussed and our and degree quarter growth to organic Jason, business think level the how the see X%, with the also seeing business. encouraged growth, fares performed, north how of also growth, we've the the -- business. that to that continue we about happy continue future we're we in high we're this the of through optimism growth to come a and have And of

we at look at performing our pleased expectations, a level with. how So we're to we relative pretty that really to continue we're and perform

Operator

Our Tong Sachs. next from with question Goldman is George

Keen Fai Tong

Following you what up business, key were? see going your on the relative recurring can trends of forward? you acceleration growth what quarters? earlier growth residential it about to did revenue And as perform talk drivers How the

Kenneth Krause

look always a at just saw quarters, I step But we QX ago, Certainly, hold prior perform the year the growth in what a healthy growth we pretty sees business it's look to It above level. continues and recurring mean and rates well. year-over-year. generally there. at to at to continues revenue be growth George. relative When down and it the we to the continues a

decel seeing there's business. coming or that we're different nothing that's there's -- the So significant profile growth a in through and indicating our a growth growth rates a the rates change or that in

Keen Fai Tong

talk bit about progress you to good And a your areas for to expect making sales. XXXX Can little and drive about Got priorities talked you performance? that it. with door-to-door cross-selling respect bundling, you with these volume how earlier, in

Kenneth Krause

focused about We value prices raise prices manage pricing you across forward, talked priorities. number pricing. our and our We're we And at raised our services when George, step we continue effectively. Certainly, we it again on about earlier we at back getting rate we'll look and the and look of strategic management. through the certainly our to expectations and cards a -- when going think business, different of you

equation. that's side of the one So

to expected growth business, growth then in X%. And this year rate at that point we secondly, And we saw in across by profile X% position associated be remain so our to -- what market. ago we that with the is at with when pricing our look rate line at encouraged a

the of We going of the with to healthy a benefit and to on of continue last years. rate what over that's growth have accelerating line forward confidence benefit level deliver our couple the here we've seen you've We've growth enjoyed in post-COVID. our all ability seen

of have the saw We at customers we to certainly and pretty service look as but trying that uptick the the initiatives additional across and focusing after third operate a like robust business then, talked add X organic the in commercial level really last associated least, a like may other not growth from business important. And an healthy the then is at about in is our services business, commercial Continuing but ancillary really And in the in year. When cross-sell certainly the quarter growth perspective. mosquito with we side. termite continue to M&A those business very that. well. is going the course, Jerry last important, of ticks it services and on we spoke about to detail, in

We there. on place of commercial driving the growth portion to this and continue business focus

all going So to initiatives give our about optimism growth as we us forward. rates those together coming are think of

Jerry Gahlhoff

HomeTeam one Each just rely now, ways on we our -- our to of love different this diversity that Jerry. doing customers, it Northwest think and has say, Fox heavily door-to-door. market I our various we When the or strategy. brand of homebuilding due and us about be, have that by from to this the growth that we the what business continues acquire And the the for George, is brands ways example, I'll in that things get we the add our and from is one model they things of their future. for and solid doing HomeTeam across the are brands to expanding we profile brings can learn These with that think to each diversity business help door-to-door deploy Fox all team. table offering whether

Operator

Stifel. is from question Our Michael Hoffman with next

Michael Hoffman

ask X. to creative to can questions in how I is So be X challenge the

help so model, like you of wrong. the rollover about get that amount pricing, specifics year, So Ken, of in to 'XX, do everybody would X% share And right? you the is calendar are dollar that it don't cadence think gets think from we I what how the the just so can X% in things XQ the that that M&A just the

Kenneth Krause

M&A, we be look to continue M&A. at When on focused we Certainly.

We continue to the of We from on in carryover disciplined focus with is Fox, first executing that Fox X% XXXX A into M&A. part that, strategy. quarter we coming acquired see course, large of here roughly last April.

So quarter we close the of are pipeline. When we up. healthy we activity in a were still active benefit. X see We to XXXX. the have year very also that pipeline, deals out we then look closed, at start to January and

continue But growth So that level the is of around we associated X% plus to we plus chart -- as with X%. X% to growth carryover level of X% forward. go M&A towards

Michael Hoffman

that nonoperating understand does maybe gains think them And and 'XX And XX%, Okay. were in with year? on both my 'XX, we can an basis creative that? the And There's XX%, were then influence gains question you those is this about unadjusted What -- X... target shared with adjusted, XX% isolate what how 'XX. incremental to how XX%. and adjusted us in well, margins so for on can you

Kenneth Krause

we the continue -- delivering When in margins. we profile, no see Certainly. I reason have level a there's look incremental confidence mean, to XX% and at margin incremental

we've several years, last up. it look step margin you the If seen the incremental at

and the has incremental been profile. improvements Our laser-focused been margin on margins on focus driving we've --

that seen XX%. to think we as high about that's range XX% quarters when We've level, so at the And as XX%.

I'm So isolate XX%, try back lower EBITDA basis going or we it other forward finish it in pleased. a means basis that. to getting will and improvement for we as of that will margin asset And margin points -- And line. that come the generally, sales was see you. from XX to quarter-to-quarter. They EBITDA on time XX% That came XX here. $X asset in line on and through through the you're we're year points through. And saw we gains around as we're we sales that at jump time. go sorry, will But QX income, step million did to from come margins. The when QX we'll came about we And through to roughly pretty

Operator

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

Ashish Sabadra

Maybe if I on and pretty good Obviously, within continue to are can also hear digital revenues well stable. question really inquiries resi. ask the resi to recurring a clarifying the do

Just about coming or demand a X you environment? -- do the You solid would any and talked was particularly mean a pretty from there change I what anything the any color spend, you Did about have how the the question 'XX, environment. that quarter? But emerging groups pushing wondering is demand cicadas changing change, if the should into cicadas harder anything? importantly, seen on provide could that XXXX, of on is, competitor think fourth we that in going -- maybe for marketing demand in environment?

Jerry Gahlhoff

Jerry. to earlier significant that invest in a like the a team uptick in in little some that I And it was the from competitive It spend appear the fourth first statement. in quarter of a pretty year our the the marketing. time there of fourth investment the anecdotally there what this was when some going marketing of digital were I'll did time significant down quarter. standpoint. in that market quarter was pretty backing in -- kind asked some there when winding we'd at fourth a is try part marketing I'll take on Ashish, of to spend a the was in our spend we

certainly pick we where that competitive regard the was environment there saw up more So in spend there. into

first so new work on -- the or Now know. But residential customers that's starts and how onetime don't to sales side, really that's... that question, to equated on we your

Kenneth Krause

one of to continue many Yes. we cicadas. monitor. if to monitor And we the second don't it the certainly of expert was and Jerry, new around new activity. question, I when want pest that Cicadas pests. know continue your are part cicadas to I'm I the And think, pests comes not add. you to

positioned You're to answer probably that. much better

Jerry Gahlhoff

though nuisance at they cicadas. that very a to havoc. standpoint, of will about are away household to couldn't typically a pest it night, But humans cicadas and over they it's when not They the noise the awareness some know as Well, a in years have couple time, it a was a are I in because but -- to but ago, mountains out bother general are pest there pests eradicate create control going attempting in probably go just tend companies did and From not Yes. wreaked problem. they house as you things they volumes out be come that annoying. control our I sleep

So We're to go waiting that's over and for die and just feat. there seemingly an again. process start impossible out really whole away the off them

So it that's always in buzz create probably some good will marketplace, business. for and the

Ashish Sabadra

very EBITDA where maybe ask you Ken, if And And can That's I color. think in about back-office the modernization. to just how should margins question but process? on us we if on you understand help can a midterm. incremental helpful that contribution are that 'XX, also

Kenneth Krause

Yes.

what's we a on SG&A the we're that back to over journey good continued We come. see added very continue changes. to we've we've made of to our excited pretty respect progress. significant new team about in We've members office, to our that look number with at said, modernization, when improve. But performance making be time, early With across some

back couple XX%. it in a the quarter. was almost Going XX% here come under down of years, It's

well that investments as business and despite commercial parts business. other associated initiatives as So of with the we having continue growth in our leverage to

journey. forward the opportunities we're we go there's to some continue And improve feel like business. as We to in the so on early

Operator

Our Chan next from question with UBS. is Josh

Joshua Chan

SG&A from as done improving prior a bit years. there the I bridging over perspective, job that Maybe the over of there is an on increase last margin can more guess your initiatives expectation question a an several SG&A. I gross little get you've the from guess, good leverage really some time traction?

Kenneth Krause

Yes.

growth. improve without other there's and to the upon disproportionate think I focus a side But some With SG&A. investments do that the advertising said, the door-to-door we for opportunity that customers back office we've securing and through of to an to to that is for SG&A and time, our continue sacrificing performance. see activities. we in and the said, upon investment with said improvement have administrative improve And continue in

we've like as in And investments of just the front. we on despite years last continue or we that see -- hopeful positioned feel we're in we we're year making. so, couple well to improvement seen the see so go forward, the But we're last to improvement here like

Joshua Chan

That little in slower And the a from in you to lot there side, upcoming a little service little Is Okay. be drive perhaps that macro down or slower the interpret that sense. any that of QX maybe as a residential QX onetime well. quarter well? makes on other and that slowed the a as a for reasons perspective anything from would mentioned to

Jerry Gahlhoff

of some certain of onetime main Yes. some ups type and and rodent significantly the Really, rat involves demand. bed in us months. downs. a always slowdown bug, on that, change for We're -- the on whether of that. any of was work, of quarter-to-quarter year-to-year that it also fluctuated something that's slowdown has often bugs, from the or it's of what bed weather being just residential was the we completely work in are in And something example, the side, more whether recent for saw down been has some of not and down drivers and that's a rat in wildlife change which there. type seasonal, Those But

Kenneth Krause

When from pest level, our well we grow that in high-ticket question, business and we spoke the different run And a And look if that some indicative macro at ancillary at the because ensure end that perspective. assess we the tightening ancillary. business. normally credit looked well at it's items. a residential proactive about, when look pace number of at and it's we growing, homeowners. because only we termite we've Jerry the the credit Josh, look not continues control that with also to that into at look pretty a don't were more year said, consumers, just just is the last that across is in we we business as any deal issues of And that areas we to that We look consumer healthy. With in of down

growth today's trying our a we per perspective, in not But in customers. certainly raised minimum with seeing deterioration demand profile from And we're the level credit, major be to any market. so in proactive score, acceptance just our

Operator

question with Our next Stanley. is from Morgan Toni Kaplan

Toni Kaplan

update some your you versus you initiatives normal? you labor, mentioned namely on if now other I Are hoping retention higher talk us an well. I deploying know salespeople. wondering could seeing right was employee give about And and tools sales you as could

Jerry Gahlhoff

Yes.

stay. on you the the through sales successful. longer and them success onboard helps really we be salespeople very typically at residential keeping commercial labor give and in one what how is commercial hiring, side. more have sales the makes them side, things. And or -- a of it term. you they the they're So sales And more want get little about the to President's on we the time and more on. get train, very training how the And we've But how deal commercial and types so retention. how lead residential have productive that we're a with and they those specifically things we side, -- closed, we've ultimately events, to -- money of we go side. longer create invest cycle, you that's really in that both enabled to commercial team It's they that a team side tools what The -- the those our those them, teams, of earn, good lead early on well, you with stay a especially Club hire that's to takes of on high-performing That's our bit been creative of a longer the the proud from successful, they're in more have we the long built and what learn a people that I'm it the talking selling the where our to of finding really winning, people drives you have

I of as we that So XXXX. I -- momentum that about that lot space in a we have just feel into really head good

Toni Kaplan

geographies the wanted gain you're to picture footprint. Or a that that in? geographies big you'd current of Are I portfolio other like happy around ask density Terrific. further there coverage you and are in? to with

Jerry Gahlhoff

happy. we say pretty are would I

we're have very opportunity strategy international, have you is would mainly fully built, is don't where about to when apple continue America. really some probably the under coverage think area Midwest the then where really happy a to and very when the and build Australian healthy, going like effort or to those and energy outside we Singapore Kingdom and to and We operations lot focus our the Orkin we're to And invest geographic like you we in on we we've to continue United areas. U.S., M&A. And behind broad countries brand with add of the where those we growing operate, where expanding North out brand we're that have the of but and at build continue expanded we where put We bite haven't second look going in are, currently internationally. the in Australia, we in

Operator

Instructions] next Jefferies. from Moore Stephanie is with question Our [Operator

Stephanie Benjamin Moore

on you're inflation on was what I side, key touch hoping areas. maybe cost unit little seeing the bit you a could some

little for in board, labor, just versus and likes what the expectations a about labor, and saw maybe of materials, kind XXXX equipment, bit You talked you experienced XXXX. the across but

Kenneth Krause

some we addition we costs, fleet. look X of claims, across insurance drivers people look we look are we cost our which Those supplies, not saw and structure, at our the major on business sometimes to the X leverage look categories. completely the across at at our When the the But those material be cost other in pretty we're can of our controllable areas. side -- of cost pleased organic we controllable much less with as as

our -- The from beneficial a environment That's certainly leasing rate gas that less cost fashion so pleased -- We is and higher. this basis forward. a we on and of organic with continuing from the continue saw gross margins in perspective. margin the side benefit lower we're lower focus to But our going to of side oil fleet business. prices, on services to on XX our past interest slightly the prices structure lower continue pricing gross value prices. gas favorable step definitely focus continue gross to of our points margin, the of year on will improve side We leveraging were our similar we

Jerry Gahlhoff

we would truck some add, And rising. about Stephanie, prices have do I concerns

Some are our of -- these vehicles costs up. going fleet or

and Ken wild fuel there's As as always card there. fluctuations have we the mentioned, prices

savings along we from our of can, or of pricing On price as us RFP on as just insecticides M&S our is our completed on and to the at -- some some offset to passed ensure an least that in that and side, the increases trying we the being some are line termiticides, to much trying suppliers. generate

focused So are keep year. things us for that that mind we'll the are on all those top through of

Stephanie Benjamin Moore

together versus sounds as that's No, idea of price helpful. I in the similar I like mean, just then, XXXX. here Great. guess to a XXXX And coming is follow-up, just down it trying supposedly increases piece I'm inflation XXXX the but in [indiscernible]

down you're to way right probably will early what to that? a kind still in that little the interpret will too if guess the material -- inflationary saying it's I of step So tell have side XXXX. is Is that

Jerry Gahlhoff

-- slowing as that some demonstrated is still that look And we to. you That's not at some there's be hitting it it's the necessarily don't would inflation there's probably yes, may at I'm that -- costs unknowns, all data still we what as there like that's fast know.

So we're -- optimistic still we're cautiously there.

Stephanie Benjamin Moore

lastly, kind that Great. in you've activity, as sellers willingness terms on of of any M&A And pipeline M&A changes or late? just and seen then of of

Jerry Gahlhoff

don't But There's -- good basis, still kind acquiring. deal out quarter-to-quarter that we out that that ebbs there's of flows from at. I are flow a of any are plenty good think while change. sale. there worth there. potentially still We for significant to -- there's businesses get there or good that some to see and business there's out volume there's look And

a in of feel deal mind, actually good We we've that April, we year January, heads the ahead already pipeline. Fox the were where But in working on off last our announced regard. in We're start February, January. keep to we down were Fox little a year, we in in about gotten deal. So good last

lot focus that. So of stuff aside to we put on a

flow. normal as deal and to business at So kind we're looking usual of now back

Operator

Mazzoni John Wells Fargo. from with is question next Our

John Peter Mazzoni

Quickly -- yes.

touch quickly, price maybe So spread. the cost to just on

is help kind typical the be the understand it not going kind we or could flow the something would the expect a in near-term us through item, improvements lag? in Or at that half delay? I timing of kind how you the that of And costs driver safety can to lower mean, longer could it probably insurance-related a variable what's this year? Looking back to going but KPI, forward? be has just of that in of score

Kenneth Krause

we when you while year-over-year, at to did a for payouts, negative thing claims a year It's way insurance despite it does trend or were costs But with The we at it's look large financials and not months it or people. either, we're that through. having XX that its us so settled work last a to John, claims like will just predict, said, it's ago. about our quite improve. When about we look large the hard so safety, hopeful line because that take not that

our we the to very are that do and to continue night and communities how drivers culture, safe. the work them remain so here. can get And home about to return want when every We be focus people-first make we think in safe they safe, each day. we they It's really our people every and each that's and home want sure and

here. doing By will the the So that's And the right ultimately, side. we're financials thing, improve. people focus the focused on

think coming improvements be that of to we'll As will on safety. our that next continue several about the see the statement. the see we future safe, through People financial we'll in years, and benefits

John Peter Mazzoni

Day. And one stay should kind forward Anything around capital to, maybe tuned? we kind of we look color. around just of Great the is Investor or Or technology a then preview just allocation? the that of maybe could last

Kenneth Krause

and expect really talking how York but really say, we I talking to company. investment about the strategic the New and to growth would this investments will future, priorities spend day continue to we're back for growth stay We're initiatives. of just the prospects, great about excited to time the future community, to excited talking Yes. our spend our tuned, with about get our

Operator

any the closing Thank you. I now call. management for call This hand Q&A of comments. to concludes will the portion the back

Jerry Gahlhoff

a on quarter everyone, you, call for we your and speaking Thank forward company, look appreciate our months. interest in with joining you few first earnings you. Thank us today. We in to

Operator

This concludes today's conference.

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

Rollins (ROL) 15 Feb 242023 Q4 Earnings call transcript