ROL - Earnings call transcript Q1 2024

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Operator

Greetings. Welcome to Rollins, Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Lyndsey Burton, Vice President of Investor Relations. you. Thank

begin. may You

Lyndsey Burton

good and morning, you, everyone. Thank

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

financial included available of are our as have in appendix the of morning. We as measures non-GAAP our well release. this as The part non-GAAP certain reconciliations in discussion today's presentation earnings

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

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

for remind Before York strategies May for to I I community everyone stakeholders. our discussing forward our would investment Day our and We're Jerry, Jerry, to turn begin? to Investor growing of and looking XX want it upcoming City. to our you New value driving over on in like hosting business the

Jerry Gahlhoff

execution operating and our report of and another quarter in Lyndsey. Good growth our business. that pleased morning, strategies consistent Rollins reflecting you, everyone. delivered improvement to Thank I'm continuous profitability, good of

despite XX% year, discuss healthy by was the for in in last of detail. in quarter in the some of X.X% We organic which delivered unfavorable Our and quarter Ken weather million. to more January revenue $XXX erratic financial highlighted compared an to increase growth performance first nearly will

service quarter. major Termite Residential increased across see this revenue revenue XX.X% to Overall, we lines double-digit XX.X%, as Commercial growth all XX.X% continued and up rose total was

in business. We to our invest continue growing

invested As consumer ensure well that expect, and staffing pet of marketing the for season peak we are you sales positioned would begins. in activities and mind season as of ahead top to we incremental

staffed customers. and exceptional customer support trained well and the are that to of an on onboarded, are people We service so technician ready our for front, provide level extensively

commercial we are evidenced the leveraging to the On And additional where market warrants commercial double-digit another continues as of pay this of business, in areas quarter identify opportunity analytics dividends growth. to side the resources. by

well. strategically and strategic by organic Investments to to the We well. continue training enable April has sales that their exceptionally impact go better as as to feet add will continue X our forward. our we marked success anniversary positively force of acquisition, growth and are performed M&A. and drive anticipate closing Fox street tools on growth team organic are sales to leveraging that to Fox the the X-year We profitability complemented and

opportunities, both year, remains the acquisition in and and track M&A from We're first We domestically X tuck-in to in activity deliver of the XXXX. closed and actively X% deals on M&A of at months internationally, remain pipeline healthy. least the growth evaluating XX

in strategy efficiency leveraged in to saw our our structure and and improvement Beyond executed important is we efficiencies and pricing the quarter a detail, business. drove continuous of part we Ken operational healthy the dedication but strategy, an growth, our throughout our more discuss improvement as will culture. cost margin

in a incidents when and compared enhance us recorded the area strong of stands about focus ago. demand important to resulted remains fewer scores coaching, from with and a and an to organic efforts off training quarter. start, solid excited year we're safety In closing, higher our first driving remains our protocols growth This is to in customers today. for business and where Safety over safety year safety X%

is our continuous our for our ongoing markets around are and healthy, team on customers. focused the thank levels driving of XX,XXX-plus each to staffing improvement their are members I commitment and solid, world Our team want profitable to growth.

Before Ken, I to few hand Directors. of our to I'd it to like over announce a Board changes

the and along contributions been us thank First, the company, Jerry and company. he's uncharted his made to who we're we Director waters navigate for to our significant experience, for the Jerry our grateful would service like have past recently years. to retired His our as from Nix, Board, Lead for guidance fortunate way. wisdom helped our incredibly for We've several so

Dale Second, like recent shareholder to a meeting. was Jones, our elected who welcome to we would Board at

the Louise both in appointed the Director. that Independent level bring has of and their experience roles. to We're Board our been call Sams over about excited and expertise Dale Lead Ken, our Louise as Additionally, I'll you. will turn new now new to

Kenneth Krause

Thanks, Jerry, morning, and good everyone.

few quarter by we Growth the start accelerated year. XX% over at year-over-year. of the growth delivered throughout highlights significant first growth to for continued and execution was of moving start. improvement X.X%, quarter to We revenue March. the revenue A was growth The organic saw reflects robust Rollins February team. the and XX.X% strong Organic as

aimed profit increasing investments despite XX.X%, be cash strong flow Cash Adjusted operating margins basis growing performance XXX free a incremental very strategy. business. and capital allocation XX%, flow points were leverage with healthy a solid at gross with to our up continues enabling strong expense balanced

XX.X%. healthy growth In increased was of with further revenues our ancillary. and portfolio, each XX.X% residential, the saw growth good growth control commercial quarter, first Diving the also X.X% the service in Organic by termite in quarter, rose residential X.X% XX.X% in and of termite across and and commercial into pest increased offerings. XX.X%, across we ancillary

was for growth growth a for organic organic impacted To And strong and quarter. was XX.X% was revenue January. versus growth residential a versus slower X% a at context, our healthy residential quarter. organic X.X% and X.X% mentioned, Jerry in total March As start by February the February looking provide specifically, March very the

the we across see growth the with business. to continue pleased are We consistent

Turning to profitability.

Our at healthy up were versus points XX.X%, last XX basis year. gross margins

key performance be categories. We continue cost price positive several saw cost equation to on and the across good

for was Fox gross leverage basis by supplies. margin points improved nice people materials saw accretive organic margins XX the about basis cost, While and points, XX from fleet as to we quarter and

costs percentage decreased Quarterly basis by versus of revenue as points XX a SG&A year. last

reinvestment Excluding from growth basis and the leverage percentage decreased quarter. SG&A incremental earnout We selling costs XX a adjustment in the saw expenses which Fox cost associated acquisition, by the advertising Jerry initiatives as for of healthy revenue that discussed. enabled with and administrative-related points

with versus up expense million, XXX Adjusted operating total Adjusted gross operating year GAAP year-over-year $XXX XX% income nearly year-over-year. approximately XX% solid growth. prior margins on were points basis income XX% up XX.X%, margins, quarter was operating revenue First strong leverage. $XXX was million, on coupled up

First $XXX and XX% million, year. was XX.X% up quarter a margin, up representing last EBITDA versus XX points over basis

that EBITDA the out similar to saw well. versus impact adjusted a period quarter first prior to comparable quarter, year. the last recall called dynamic We nonoperational negative lower we due gains in as a You'll in the

performance, adjusted adjusted performance do to allow that us types losses EPS time we Given on are consistently of time, underlying to operating income have and gains compare will better Adjusted from sales. decision we to these and more made over EBITDA, net exclude our divest of assets, the measures and change time. this nonoperational

fiscal is for metrics included revised release. the our earnings showing XXXX in table A

of was approximately up considering as profitability million, and a $XXX that the margin was EBITDA adjusted year. by adjusted XX.X% have period driven Adjusted EBITDA slower The profile in XX% EBITDA improving points the in seasons. busier prior XXX XX% versus our lower rate quarter, quarter can QX year. was a line leverage we tax a P&L. the ahead last of is invest margin with effective was result strong, across XX%, First Incremental basis healthy

Quarterly ago. per the period share, GAAP $X.XX $XX share million was income from per $X.XX increasing year net same a or in

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

cost expenses, higher for period or Accounting versus income the year per these period. the over comparable balances quarter level XX% of interest share, $X.XX the increasing on for the net despite from $XX debt was ago same higher a adjusted the million

XX% free income Turning of XXX% to generated last was $XXX the $XXX XX% well versus conversion, increase We the quarter. sheet. in flow cash quarter into converted above flow a and for that flow Operating increased was percent of cash flow, million Cash the million. cash flow year. cash the to balance operating

on We a level, our ago. positions made gross up is a million, Xx totaling execute net both in is very and to continue $XX acquisitions we $XX and dividends, paid and period versus balance capital same well below healthy priorities. us well to on leverage sheet allocation our and Debt-to-EBITDA million the year

our We both of organically acquisition us remain customers demonstrate disciplined over the to business on performance and growth engagement In with our the teams. healthy providing level and the the sense strength focused closing, continues pipeline back turn driving model of Demand best that, our to through and our our call this acquisitions. I'll experience With a Jerry. optimism. of and provides customer is quarter

Jerry Gahlhoff

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

Operator

Instructions] [Operator

is Mulrooney Blair. Timothy first from Our question William with

Timothy Mulrooney

are here, March. extrapolate me organic stepping just if quarters. the sounds mean months several accelerating going to back just So growth into with XX% touch and that to like and side. rate I next trends the I on just wonder strong February folks XX% in

saw better thinking if to you're level how in are of or kind growth. we several organic X% that's if over for the wonder X% range last I to So about more quarters, things that what set expectations

Kenneth Krause

question, at one that. long-term And But certainly we some the for did we business, as is Tim. certainly appreciate I the the Thanks not improvements looking a throughout quarter. went trend. quarter when see

outlook benefit are growth about. to in know, forward. that rate continuing of business our you we've is growth all I we around stepped and confident operating X% as up, from remain talked how yes, COVID, that that think the think But anchored to consistently about and X% and an favorable organic X% really going sort We of since That we basis higher to kind outlook, very environment. from continue more rate to X% is

Timothy Mulrooney

offensive understand an on topic, helpful. sales is just more you to in a as for marketing a anyway. spend double as help future or a think us into that, move, completely ramp The do a And there's move, spend column? step-up to growth, of you, Ken. different either customers example. Thank it increase hiring little this because and digital of I'm okay? to And That's could there? going more, maybe and more Could defensive interpret that It's I having decision up for folks not to click expense that sales sales marketing more a really win follow-up. you're in separate marketing folks better ways expense, but couple

Jerry Gahlhoff

up. staffing lot Jerry. side is cost relates us really on that lied the it this selling of heavier as on A Tim, expense to the

Let a you me couple data examples, a couple points. give of of

looking sales had Orkin first XX XXX Orkin first when compared at managers we prior looked alone, last this in alone. year to more over inspectors the had of more commercial We home we over Just than did we at the Orkin quarter year. year at in the quarter, account

of That's be. investment a as our the on continues referred I where lot that's street to to that what see opportunity. So the opportunity. We feet

of salaries So are spend. up not sort for the really sales your offensive marketing targeted defensive an our It's It's ahead. opportunities sales there. growth mobilization building and out necessarily sales team some

Operator

with is Our Sachs. Goldman Tong George next question from

Keen Fai Tong

the January I wanted residential highlighted organic last unfavorable any call see that sounds residential in of trends weather, revenue there organic in would growth leading other sales out like trends It I you onetime you're were wanted most due quarter, to the the was there? you impact if to seeing know growth. to impact. I to to dive X% into business.

it and items as there consider in operating growth residential? other changes the any relates to organic So to

Kenneth Krause

the portfolio, very that healthy. at ancillary. perform very look as well to we remains the continues Onetime and When as look our services be at business, Certainly. our be for It residential residential to business we our choppy. generally, broadly across demand very the well. termite But residential services continues business can business Across choppy.

improvement, business alone, February As prepared commentary, I look to at as saw we an the and just look X.X% but X% saw quarter we close my March. growth residential we for the indicated we what when growth in at

So to business. we demand see our continue really good for levels

Jerry Gahlhoff

to is customer of there But their it shows but we see business have also your when as that of George, consumers base seasons we usually in in area in you onetime the our weather recurring that weather the it's willing protecting side as consumer strong choppier continue more really to shoulder the that's of mentioned, Ken so business when service. that -- that, to a can continue add strong anything, some be that's an would and onetime impact business about think health the still that well, to invest ancillary really than I to homes.

Keen Fai Tong

That's to seems it. that in And Got and to decelerated takes Can growth services have helpful. X% could puts organic and termite to that to some compared XX% about the you within talk then ancillary business, XQ. of performance? a bit have led the

Kenneth Krause

Certainly, termite ancillary the business, unpack is the X your termite business, there and when there's then in business your termite components you the normal demand you seeing We're well. pretreat business, There and good have ancillary. to as across really spectrum. recurring

rate. business, continues very grow in grow healthy area continues also to Our a that well a business, our our to level, recurring ancillary at bait monitoring at as nice but business

that a So growth broad-based demand it's we're our for in seeing really services.

Keen Fai Tong

the there? have could that Got deceleration growth in Any Okay. organic revenue factors it. caused

Jerry Gahlhoff

standpoint. productivity a from it at look I

backlog sales is to phenomenon, quarter we that there And had the multiple they do prior in there backlog selling and work for a January do be out and goes that and to building affects sales We if continue the to work continuing force to back out done. -- working there, challenge. that what a of get operations type the and and -- get done, to days more And the of to closed the can ability productivity are compared even the branches our where they're year.

the get us is work done. And for so there to

about the in selling time. a we're of optimistic given us getting that. done So period not issue. all It's workload a It's

over quarter, things add second helps, into to color. look backlog So the still carry That a you healthy. when any

Operator

Stephanie is with Our Moore next Jefferies. from question

Unknown Analyst

else And On for just over was analytics if mentioned to touch talk know strong I commercial I if of on kind like leveraging sustainability I Stephanie of wanted there? Moore. about could And growth out? but quarters. you anything been call curious things and last that's just pretty there's organic few the the growth you to that,

Jerry Gahlhoff

them and it now BXB a patient, just long we've of process We a I getting few in got continue a record up being sales for and and ramped broken like our sale. selling you sales be That sounds type years. you It's know relationship got said to to got successful. invest. cycle, invest a is staff, this to

ramped brought as fast to invest got when tools those brought to get in up speed and and and You training managers up sales to possible. they're supporting new just them account as

That the We opportunity more add continue in and there. make to more them you force is the you the make investments sales just successful. that to see

other continue I magical our wouldn't it being incrementally committed add So say force. anything to to about there's to than sales

Kenneth Krause

an taking different I We're in. of I business back on spend the continue our and very is look back a but and we business. at disproportionately some our the at in salaries front the in we perspective look invest end Jerry to continue saving areas, sales admin of to money spot pretty trend interesting. office on It's on, When heavily and invest financials, of the costs and offensive continues across that categories step be area I SG&A, to

Unknown Analyst

far? the resi of the Anything share business guys anything And on any how or seen kind Just slowdown? you customer shaping so to pickup April new that's sort churn and lower a in up wins have could just you is meaningful maybe meaningful around household of income then areas? side, related

Jerry Gahlhoff

significant change way any issue other. seen haven't retention We or from one the a

solid color and any So that remains pretty April... on

Kenneth Krause

growing very [ we It business ] our chiding the to saw would rate in difficult customer be churn. at grow we're if

remains again, a [ of although to chiding at April future. healthy churn, it When it we is to continue the to as think But X% strongly. across for improve. we look we see sort And to still growth opportunity about X% to continue starting continue an think so April, us ], levels not of organic the demand. business rate We're we customer about

Operator

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

Unknown Analyst

This ] is for Pedron [ Ashish. David

that keep how lapped smaller robust your of Fox I larger deals should pipeline deals especially the terms that In terms now allocation, cash in generating? you've this acquisition, think about flow forward, of you going we free M&A given capital or guess,

Kenneth Krause

the with across very When M&A. we look There's to respect very at healthy. balanced. opportunities spectrum the It's pipeline, it's

is think have realistic growth do contribution Something probably said, consistently we of is X% XXXX, that we from that of X% that revenue a however, expectation to for M&A.

at look to continue deals. We

evaluate fact, deals. $XX continue in And considerably on that to We was spent QX, in million roughly we to $XX M&A, million and up year-over-year.

to But course, continue to that year, pipeline very I market shows just were think compete healthy that there Of preparing a we of very for in continues Fox. in. M&A we last a be fragmented it

Operator

Josh is [Operator Instructions] UBS. next from Chan with question Our

Joshua Chan

X% that thinking residential X% mentioned the curious and that that sustainable you strong businesses to termite that X% is, about you X% going how to rate. you're imply growth range guess Just how in forward? how commercial given contribute to remain kind of I So this And is does X%. expect different to

Kenneth Krause

to a probably and that, probably little the when interesting do than a It's slower. and on resi average little a start fine commercial bit but grow and will we that grow think you ancillary termite might overall bit faster point put

You puts in the doesn't we're growth I and bullish for across profile generally us. think portfolio. that that, residential, just has not have the takes how time over mean unfolded but just that's It

Jerry Gahlhoff

agree Ken. with you, I Yes,

any predict total. of in out all there's factors I think those hard and based on X% to number movement going that. to comes X% I it it's categories mean, be that in where of a to potentially

Joshua Chan

Yes.

decision accelerate helps off there. [indiscernible] during to investment the And That on color then your Okay. season.

Sometimes invest, ahead the season you you focus of season. sometimes invest peak the to on

what and opportunities So year, talk ahead you you're the the expect of for just about investing rationale could realize? to seeing what you this season

Kenneth Krause

Yes.

a into grow March. in organic I about, business the talked February basis started the had year-over-year pretty basis, we on to mean, nicely As and

opportunity saw saw forward doesn't any QX. some pull and in that, an to mean we going so we to invest that we're investments. It lighter And

and we're going In to drive growth. QX in to continue further fact, invest

there improve might is patterns opportunity weather when market This see is that to change, a ready invest. and very you cycle short that that invest got you've to when And market to have trends The demand business. there. or is you opportunity be

in And so growth our and that's our across just reflective investment -- our just in interest of it's I portfolio. think investing

Jerry Gahlhoff

certainly The a people ever the that carrying quarter we put people of in takes certainly costs quarter think intensity We training late the is that reality into to from it's lot and fourth energy I had. had side put the first more and than in we've development have and time level to with that ready. and time find we then and upfront, harder people

And has get been to strategy so of that. our ahead

Operator

from is Redburn Ollie question Davies next Our Atlantic. with

Oliver Davies

me. X Just for

one you So the the expenses, if any quarter. firstly, year. for of terms terms is the you're increases admin secondly, that can then residential in on you about And SG&A. level modernization coming through? some the putting in the just level I did in just from the last pushback Ken talk just you're I obviously, probably of -- guess mean, of side, that the of volume of price given first growth And seeing

So how sustainable are reinvest that? I through to and guess, they going year, ability forward this your

Kenneth Krause

your questions. thank So questions, your at looking for you

this recently, to heard of business. look back about to interesting. first pricing, CPI-plus type with you've and question think When we talk at this The step start respect it's me business, a as I we

command and is service pricing. CPI-plus this service think an we should essential So certainly level

along, we're X% stick. just is it and this too at price feel to X% the we valuable, those something seeing service to it is certainly We like it's year passed just levels. So not --

SG&A see good the improvements we're structure. cost our across you to And then at when the that in secondly, it's the business, seeing levels look

a you SG&A investments growth-oriented office sales. in XX that basis we a point XX XX points of more back spent quarter, that, basis percentage think we I in as when unpack roughly improvement see But about you basis points the talked but less of costs. on

but our effectiveness there. doing and improve the work progress We think of happy come, I the that's feel are we representative productivity with business. And more of the we're we're making like the to there's certainly to

Operator

Ashish with from And Capital Sabadra question our Markets. RBC is next

Ashish Sabadra

one, again. but the Apologies but for the was was [indiscernible] what Sorry, XX% what for growth I resi? residential? this the exit I if missed company, was believe entire for it

Kenneth Krause

it entire it fine a it XX.X% to company. X%. Yes, was the on And was point for for residential, put

Jerry Gahlhoff

For February and March.

Kenneth Krause

March. and Yes. for Yes, February

Operator

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

Jerry Gahlhoff

We joining again. look interest everyone, and Thank for our all appreciate you, in us Thanks with forward you your upcoming our company to at conference. today. speaking investor

Operator

Thank you. conference. This will today's conclude

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

Rollins (ROL) 25 Apr 242024 Q1 Earnings call transcript