ROL - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Rollins, Inc.

Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Lyndsey Burton, Vice President of Investor Relations. Thank you. Ms. begin. may you Burton,

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

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

Jerry Gahlhoff

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

organic X.X% the and second solid continued ancillary major termite $XXX as XX.X% and quarter. increase revenue revenue we service to in across rose and for of to residential million, performance increased an in all the healthy delivered X.X%, growth of revenue financial X.X%, up was quarter total was Overall see this by commercial highlighted Our lines quarter. we X.X% growth

business. growing to continued our invest in We

the would strategic and expect, investments made during incremental sales activities you quarter. marketing staffing As we in

ensure to of invest for will as and throughout well-positioned gains We that QX share mind continues. top we to continue season remain pet peak

technician people support the level on means provide investments and convert extensively well-staffed our our an and positioned are trained, so into that for are new front marketing we service to onboarded, also customer customers. This of We sales customer growth. our that and ready exceptional to are

Our of team of symphony continuously We trillions compose with songs of in accompany cicadas. The new support this different rhythms current impressions and our think customers. Earlier a with hosted X live the for recorded challenges broods to of curated to the relevance with of music crafted and on itself cicadas. around Rheude, symphony the team as enhance creative initiative to continues summer, currently Emmy-nominated is Orkinstra unique the emergence brand, to entirely brands the ways hundreds X-act historic of streaming Bryan Orkin composer, and available our partnered millions Illinois, future for at of of garnered in the all Orkin event the and Springfield, symphony composed platforms.

I encourage it found day relaxing. it to to just you a on to other listened flight I be and fact, In check it again out. very the

On dividends. pay made continue space BXB business, a the growth side to in the dollar the we've on of multibillion to investments commercial opportunity capitalize

our XXXX. domestically M&A drive acquisition opportunities XX closed activity the deals We're both actively X tuck-in to better sales and commercial organic training of remains to in the their remain street new growth months to strategic feet We division first and M&A. on pipeline and track of and are internationally, least from analytics evaluating M&A to in X% deliver by the healthy. the add at leveraging complemented continues growth Our on and are strategically to data force, enable we success. Investments year,

QX, culture. new safety In and training roads is focus. remains our teammates pricing safe our neighborhoods an efficiency our we executed awareness the serve. our operational Ken will in we detail, our enhanced of more area saw to our as cost efficiencies Beyond a strategy, more to emphasis we program needed robust improvement new our with the we in providing for the margin continuous we and by onboarding with how healthy courtesy quarter part on in important improvement business. Safety dedication discuss and leveraged technical growth, on strategy structure, drivers important throughout skills, but and an drove equip of and the an be

to company. scores strive our to Our yield further we culture safety solid driver safety efforts continued of throughout promote and reinforced the

We end, ways Directors structure recently our to our Board from bylaws classified to a a amended restated and of to one. continue transition modernize look company. that And declassified to for our Board to

Board and for quarter over elected Going in X% are practices. In growth first be half business about X-year with organic This today. remained the to of governance step up where terms. the with forward, reelection for that aligns closing, excited customers our Demand year. from members will our strong best the we're corporate stands

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

Kenneth Krause

good Jerry, Thanks, and morning, everyone.

to saw each the range ancillary of leverage revenue over Rollins end XX% year-over-year, free that XX% in less revenues the $XXX increased and XX% having start. We business growth and of revenue with P&L. And million, conversion. Driving both was portfolio approximates good team flow relative in of cash the free and organic X% throughout cash termite the X.X%, in X.X%, into of pest quarter, XX.X% operating and organic of was by team year, increased rose in in strong X.X% growth the EBITDA reflects recent ancillary offerings. of approached X.X% very the quarter, continued our A last by to commercial the and year. the metrics we second Investor $XXX but cash and of in million our the first solid termite across QX with across few service driven flow and we X.X%. Incremental despite days XX.X%. X.X% of Year-to-date, strong margins X.X%, and June least, ahead delivered Day, to discussed operating were total of of commercial, Organic Residential growing services. $XXX the of growth revenue X our cash further the Investor by X% growth control for The Through services quarter approximates half healthy we the healthy Day, first recent million highlights at second XX.X% flow in our not team. prior also discussed the growth the growth growth execution of our half delivered year, flow with $XXX million. delivered residential, high

to Turning profitability.

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

cost positive the of most fleet across realized as We points adjusted a SG&A XX with and several categories, be on contributions to equation. notable year. revenue versus coming decreased from by percentage costs improvements basis price/cost continue We the and insurance claims. Quarterly last

activity, customer in on We expect some and quarter, to services we several we While areas the we improvements investments costs driving claims from acquisition make to focus saw third cost in categories. quarter. also continue but saw in leverage additional did for see these across demand during leverage our insurance the

up X.X% margins growth. revenue $XXX basis XX% year-over-year on income Operating operating XX.X%, points GAAP on up strong expense solid quarter approximately million, XXX were leverage. was and margins Second year-over-year gross

quarter EBITDA effective strong claims the our adjusted adjusted XX%, versus improving the incremental solid basis half and XXX well We growth quarter. margin EBITDA last $XXX as growth with rate with XX% over by end-markets. The more and business focused XX.X% investing quarter XX.X% and categories. I'm operating profitability and points a as was first up in XXXX. activity delivered Margins year, in Second favorable million, of capturing underlying pleased supported benefits approaching margins improvements in in traditional more was in profile margin. representing remained very leverage approximately tax for and were the from expense attractive our up in on the were an

and share, this approximately share the XX.X% to from expect $XXX year we first GAAP $X.XX was ETR approximate same increasing income $X.XX rate XX% per ago. for Our net in million or the a for period per was half, year. Quarterly XX% the

ago quarter, level pretax items, $X second quarter. Accounting despite $X.XX the quarter for expenses, these primarily net Fox per approximately higher XX% period acquisition the of costs. or was associated had the totaling a related with adjustments adjusted in for over share, the the from For income same year we expense interest of non-GAAP million the million increasing $XXX pretax

costs, costs in rate run to second half. expect the interest of first Speaking half a for similar relative we the these

slightly timing. first is cash and million, Operating million said, with to flow. capital that by I'm flow $XXX cash This and cash XX% balance driven half versus $XXX Turning sheet. of working cash flow in growth we generated the last year, free the was flow. pleased With down

well very remains for positioned flow operating as net quarter. first leverage level. cash business deliver X capital gross months. We enabling was in cash healthy $XX on conversion, continue below percent well flow Our well a acquisitions converted million, of $XX as to the totaling into XXX% the dividends is Cash and that strategy. paid the quarter the balanced flow, allocation performance, Debt-to-EBITDA was income in over and million made we Xx to for a

our into performance of the us second very quarter this and and to healthy, first strength is of throughout level our engagement balance closing, our model half of well of half sheet Our business XXXX positions year. In the demonstrate and continues the the the team. heading it

initiatives. while focus modernization to driving executing improvement continuous continue growth on on We and our

half over the we I'll healthy providing our Jerry. our with investing We the and call with second turn are committed customer organic and that, in experience. With best starting people to the back customers to demand, remain

Jerry Gahlhoff

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

Operator

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

Timothy Mulrooney

you I be in elevated Just your claims activity were little Strong in I to the your XX%. here, very on in strong this. as prior me, of there remembering period, correctly. one I'm prepared dig a approaching remarks, the in quarter, so But profitability. the wanted know if seems theme to highlighted margins for bit were the Ken, year profitability the quarter some incremental on

how we look? XX%? So exclude that, did range historical of then above XX% to average if that incremental margins they Were your still

Kenneth Krause

at call -- exceptional. that for a We as continues look what And the took it's appreciate performance quarter. that, we great to something a business performance the we Tim, for be you healthy. found margin. question. was across close and prepared Thank The margin the leverage certainly and incredibly gross the reviewed was It's we question, saw

in SG&A. saw also We improvements

our you margin incremental indicated, quarterly XX%. As approached

we've years, at we that we like If pace some those I to improvement were of margins. you back our still And a couple would go or that's of fact, margins above exclude incremental the see. And seen if items nonoperational call, some in great those in XX%.

those range. benefit So without coming good of even at items to it's margins those the see or in, nonoperational the XX% of above some

Timothy Mulrooney

it. Got guys. Nice quarter,

Operator

comes Ashish question next Capital Markets. Sabadra from RBC Our from

Ashish Sabadra

in business. had consumer, below slightly momentum improvement in And did what but quarter, Really if seen strong compared the trending on to I to we've first historically. see the it's organic growth nitpick,

if also, of was there I some color that So recurring could working June? seeing we on hoc fewer are on more any provide wondering impact was X just And versus What the ad days you in front. services?

Jerry Gahlhoff

Ashish, is this So Jerry.

working look that the quarter. us at for a days was start I'll fewer impact with X the when we mean significant in I quarter June. pretty in the So --

workdays. More year, and June your ability get to it fairly significantly, season, the the had the last anything, things of productivity in even lines. year, those of than peak done though a bit to work thick You're fewer softer right of have we affected along the X in a about middle

in quarter. April, those days much extra would in in would an have rather than early So a the I X I June very

growth there our the outpacing that's business additions organic revenue there. The customer our are So growth. new interesting. some And recurring impact was to actually is

So that's healthy.

when think in it's still residential when double-digit a we in growth you on, range, that home like services. in people have it, see consumer, the our of still about look a business, remaining there's be very it little control healthy. the but That consumer consumer the staying tells and may pest is you, their home, So certainly still and to ancillary on healthy strong marketplace. a at very the termite adding some at control, home, consumer you a of while you buying there, the side onetime relocation staying homes, going that are very, and That investing that lot pest their is things in their still really softer less

that, Would seen anything to Ken? that really haven't a we any So side from shift consumer regard in you add either.

Kenneth Krause

a, had what say only I it, The is was No. X.X% would growth. thing we residential

quarter. And consideration you above X% the those they have -- impact -- the or on onetime into And certainly you they growth I at so described, look overall some recurring mean, the you the when an in was having of of factors take the had at when or rate. business potential

quarter, we and good the level quarter. feel the of to of we the demand the into the about levels customers, in going level So we activity saw around third continue growth see

Ashish Sabadra

maybe on quick ask question on And I commercial can a color. great That's side. follow-up, my the if

the investments seeing about -- I if there stronger talked you wondering you're You to talk certain environment? about, or demand was there could capture capitalize. verticals are where

Jerry Gahlhoff

that our force by is the think we're don't on stronger demand in certain there. and commercial that we've seen possible results best getting the side is Where -- I we sales necessarily a verticals. out can building biggest

force, development, training, our what's building That's a their necessarily invest strong, cohesive sales continue not in and the side. add We or paying commercial really very one sales vertical team in to invest another. dividends, to on

there think business new trying I to we're team. the our that out adding new through to just we're capture people

Ashish Sabadra

That's a quarter. on very Congrats solid helpful.

Operator

next George comes Goldman question Our Tong Sachs. from from

Keen Fai Tong

estimate way June than segments? in X to greater in any much organic affected growth working to estimate Is in each segments impact certain way -- days your impact there the how of fewer the others? Was any

Jerry Gahlhoff

in think others segments certain was I greater Yes. necessarily. it don't than

you larger then time residential talk would a are that been month, get, of And in termite year it work completed me take complete. Although, when tells fewer my on like to will to ancillary little last about result in affected month and more time June. June, intuition in take being pest, it bit completed and in us the because over that days often the having those and a July in a that have maybe some X carrying jobs not in

kind the that of pest impact, both really and termite residential, on side. ancillary, probably on it's commercial So than more and the

Kenneth Krause

because well could because also the to have as the not opportunity both impact business have maybe get don't as losing days. the we those we're onetime probably start onetime those just we're it from the because And calls we recurring out And days. and don't seeing recurring business

Jerry Gahlhoff

Right.

as peak get onetime You very much the that peak don't the in in of season. --

Kenneth Krause

Exactly.

Jerry Gahlhoff

right. That's

Keen Fai Tong

Got it. That's helpful.

of On seeing for business? the the acceleration also healthy you've you demand be heading you're possible given side, What mentioned would rates levels seeing exit that residential residential XQ. that been into kind the

Kenneth Krause

of Yes. our QX, of very that Investor I but say for that into confidence much to to growth. giving see want through to at consistent X.X%, range quarter we continue acceleration were of at X% the growth high I we're to wouldn't just Day we of organic roughly months seeing we the in first were in we deliver on X% demand levels the provided range. at X ability end the mean the and our services, us and

when like we're we saw feel our stakeholders in for business value of we demand ability So seeing QX. drive about here good to and this all the levels

Operator

Kaplan from Stanley. from next question Morgan comes Our Toni

Hilary Lee

Hilary Kaplan. for is on Lee This Toni

to did in wanted and like have XQ? the July talk you're kind far? trends the what see you throughout so into any commercial, residential seeing you just And seen about and changes I months that So -- what the of

Kenneth Krause

that deliver trends continue our well giving positive. healthy, spoke all in Demand just of organic ability to both as I X% confidence X% to in The commercial, that remains us growth as have resi about. been to

continue in that our on generally, things we've was ourselves. we season. set And our to give us are lose where to ability deliver But where see it calendar days Jerry a the for as you that control our couple confidence goals in of so in unfortunate fell, the indicated, peak certainly

Jerry Gahlhoff

see right, that That's we to Ken. really some don't have impact significant any on We what headwinds could exactly continue see.

Hilary Lee

a, Got well? the any do regarding And year? dovetail peak what not warmer with an to to off care season the cicada of Do with expect issue you unusually, in you July kind Or it's is And just of symphony out for recent handle, that, it. this kind of really guys as kind but memory. that issue? help of been not the indication taking to than guys you on that

Jerry Gahlhoff

bugs ago going do Yes. weather do about time a are and given pests up to weather. trying to what I've long are the predict and going to the

for never generally weather change. just you speaking, And so know warmer is fast but business, that could good how

If you there. in weeks a couple recall we back little spell through June softened back up that then bit And in picked July, last went crazy year in of for that June, again. things cold went of and a

what's store really just kind much in we weather. about never don't the So too and you think terms weather, in of know of the

cicadas, the not about typically about. asked while he the not consumer, it's cicadas. of do terms not problem, a probably are can there's they perceived -- In much -- listening, we still do something pest is pest Ashish They a

chosen fun some attention As potentially to recognition extent something that go them quiet consumer problem, cicadas through have necessarily build have the however. getting, the and That's pretty demand, not the around down I we've a that to mentioned, trillions it, we you're are not really brand millions, extreme. would little a you talking about do. Instead, be create to with would of some and pest cicadas,

Kenneth Krause

On like September. it you season see environment the things and about warming like is into are the that. side the get But just hurricane you as you you weather, weather, never might on of statistics just and here know right, adding look other what August

tough season. a people lot hurricane are think a of predicting pretty I

about the know. I just control overall, look a at seeing we business. feel doing, demand that what we're look good we levels and when have that a you across disruption, short-term the at we things our So could disruption. mean we But never we're

Operator

Balsky America. Bank of from Our question from next Heather comes

Heather Balsky

investing commentary customer in to acquisition. and drill down was I on marketing hoping around a

it thinking the of you're -- Just seeing the you're competition back the in pace quarter, how just this about how well. from and it half, you're as what

Jerry Gahlhoff

paid don't to on I going lot our standpoint, competitive a kind we business regard. and of that measure We and attention what's know that needs a market-to-market in things From our are what of look a know on at basis.

have to of is competitors, You lot regional still and local. everything competition, we're highly remember, and so with business includes very fragmented that in just a a

philosophically, back most will XX that do. XX from change compared is can and of digital, week, over the ago to to the to that lot that digital you today, of things was philosophy a used if just look say, -- we to lot X few it or So That has of we marketplace the day say has the that say, one week to in spend years late standpoint, sometimes dynamic to digital how, a performance, September. where was shifted, April advertising, especially and into shifted that years, some money of on our last day. I spent,

on into early dollars now we're the tails processes well are both digital holds starting March in is you what on weather our October, of middle those a of and the the maybe lot of activity, that So of with we've and this if environments, demand even running warmer we more these really the curve have up in -- is, generally curve softened seen starting middle, that right and now that good. the in that has we of pest got of put went now a the spike November still have seasons kind curve where season. And now you've shoulder side

a out it dynamic our those same really just of some we've call are quarters, a of of period time, X-month But spread time So even we at dynamics kind climate within even because to it's the little within it, process. decision-making that of differently the marketing, still pretty we we've where used now there. than most spend out weather that, -- of do

Kenneth Krause

into our point the that and to QX, out selling at ramping that investment to in -- in like in in bit leverage so and dynamic some take marketing is posted shoulder that, impact of understand longer here area, when look little try that's we the -- of quarter presentation was seeing and that though our of saw this costs, and saw Yes. a you the some we're season. less you had of as to we advantage advertising online. What pointed we're you

very these here July an expecting we're see bit as healthy the of to efforts a in we because are markets uptick advertising go for throughout So us.

Operator

Chan next UBS. Josh comes Our from question from

Joshua Chan

your you more Maybe marketing. there you of brands, sticking different particular know noticed? successful than that channels that have do of with marketing. variety are a certain I other the that channels Are year with across this channels,

Jerry Gahlhoff

channels necessarily any I think don't of are or any worse. any better the

doing don't the investment approach, sure And about we're leads of think how driving the really leads well spend, of fulfill We we're that return don't you balance have making the sake I to getting a money to that the want. just having it's to in spending on we balanced our where them. we wisely, capacity demand. all drive for want

those of into things All play. come

return businesses it a pretty So I we our think to about results our done our good our disciplined brands what we we measure have execute and that, ensuring investment. we're and do, we job of on and measure

been it's those solid across pretty channels. So all

Joshua Chan

to great pretty all in country any there for hear. differences notable? my this are is That's follow-up, growing within is Or growth Okay. quarter? geographic that regions similarly the the And

Jerry Gahlhoff

there's some or we've of business. another been even I any where across there's think -- or international. significant say Ken country growth market Geographically, I solid market wouldn't pretty -- the radically the lagging difference we seen part that's

So it be I board, across would to I don't generally tends say, the -- healthy. fairly

Kenneth Krause

things there maybe as brands quarter I our certain good and a they some business No, right we're levels. have to southeast, of online performance mean I it as western the but start drive came in areas. was saw doing pretty parts overall, well. went the up we we and Canada United mean was be agree well. market seems healthy, saw slower the in quarter tend earlier there certain commercial demand in to continues throughout do the the trying sure, in whether States, we what southeastern improved and But States. I United the to certain

So the really in performance business. seeing we're generally, good

Jerry Gahlhoff

of see shoulder it usually comes Yes. differences, may may those edges weather extreme back we geographically. differences the those -- weather more in usually the if wintertime And on edges is the when it of or you see more, -- when seasons usually, those impact

Joshua Chan

great That's quarter. good a color. on Congrats

Operator

Shrestha Our Aadit next Stifel. from question comes from

Aadit Shrestha

to you out XX quarter. But basis much strong back break that going could versus so driven spread profit. It and maybe by gross and points the overall Just cost how claims this another up of from was quarter, was tailwind insurance fee? it's price

Kenneth Krause

Thanks want points say for just the I Yes. good gross the margin and the XX the leverage insurance basis gross your margin cost roughly leverage, to is of claims question. the XX of remainder is that and categories, across activity, categories.

fleet, example, there. for saw leverage So we some good

of so of seeing combination I a a the combination, operational earlier, on said we're leverage. as with claims coupled more favorable some in good experience quarter And just that the generally, some

Jerry Gahlhoff

has Yes. well. price And to as certainly that contributed

Aadit Shrestha

ancillary one And accelerated Great. split that just and seems follow-up, How that really the a have the services. a -- completely termite Okay. Was out follow-up within did not X? better But between organic not growth, to than related. the XX% other?

Jerry Gahlhoff

So I you a very Both continue little lines service grow well. to can color that. on those give

especially the in see range, very demand double-digit continue They've a to ancillary in been to Both both a quarter, both us well. amount Some are here, really growing tend healthy grow us. dollar somewhat just both higher quite the generally, business easier of pure have But to ticket at for levels. termite. faster is little been or performers price sort good than rate does the are be and of a good higher for and

Aadit Shrestha

a on great Congratulations Great. quarter.

Operator

question from next Stephanie comes from Our Jefferies. Moore

Stephanie Benjamin Moore

to heightened the moment? that from at touch standpoint, to deals maybe on acquisitions wanted you're quickly here. attractive Maybe within a competition are strategic any for I And areas that any guys then pests the particularly you seeing?

Kenneth Krause

continue to be very acquisitive. We

I think the first half. deals we closed in XX

back a go a seeing you basis. were If deals full-year few XX, on you years, XX

certainly always be and are Day like we at in for talked a invest lot acquirer about brands we've choice that feel levels. Certainly, see good is and of and we and it. our to us. people of to This brand Investor take space people of off incredibly attractive interested and So May continue competition. is in we an how our going in preserve But demand care market paying

and with very and business to for people in continue anything active new to month also additional about the Jerry be like not them. on it's evaluating We continue interesting their comfortable a ideas, with last that but It's approach. in so, we selling in the valuable or some how new consider is the over that the the ideas. and turning people investing interesting road an and incredibly it's on not I have auction and future. This relationships will time just or spent looking to opportunities. And you really look relationships long-term to keys might about they're so It's develop focused do that. something is important at

think And good results. some so we're trying we we're to And take the time to that. continue to seeing develop

Stephanie Benjamin Moore

did follow-up, my it, say Got growth sorry it. just I but July as trended? you missed organic how if then has And

Kenneth Krause

on consistently ourselves. our that to give We've continuing business seeing in haven't. deliver us ability that confidence it's said We we've for to the we're is that set coming -- ranges in see to

to that. do pretty our ability And good so we about feel

Operator

our management concludes floor the would I like to back closing for session. This over to turn question-and-answer comments.

Jerry Gahlhoff

We forward Thanks your interest for us appreciate company, Thank you, a on later our lot. in to quarter everyone, this call joining our and earnings today. third speaking you look with year.

Operator

today's concludes teleconference. This

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

Rollins (ROL) 25 Jul 242024 Q2 Earnings call transcript