Rollins Inc Q1 2025 Earnings Call Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Timothy Mulrooney - William Blair - Analyst : And very good morning Tim. Okay, a couple of questions. So first, just in terms of your -- I guess, this would be more your consumer-facing businesses, resi and termite. We've heard from some other industry participants that lead volumes in North America have been a little bit weaker to start the year. I'm curious what you're seeing in the market as it pertains to demand trends. Obviously, everything sounds good. But is there anything in the data to suggest that things are slowing down at all maybe towards the end of the quarter or after the quarter as macro uncertainty continues to ramp up here?

Question: Timothy Mulrooney - William Blair - Analyst : Okay. That's very clear. You guys aren't seeing it at all. And if anything, it sounds like things got better as you move through the quarter. So that's all very clear. And just to build on that comment that you were making there, Ken, on your commercial business. I think, and please correct me if I'm wrong, but I think a lot of the investments that have been weighing on margins the last couple of quarters are in work -- in commercial specifically. So this really strong result that you're seeing in your commercial business, do you think that, that's a direct result of these investments that you're making, adding feet on the street, splitting up the branches, those kind of things? Do you think you're starting to see the benefit of those investments that those are paying off? Or is it too early there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, ROL.N - Q1 2025 Rollins Inc Earnings Call

Question: Timothy Mulrooney - William Blair - Analyst : Got it, thanks guys.

Question: Ronan Kennedy - Barclays - Analyst : Hi, good morning. This is [Ronan Kennedy] on for Manav. I think it'd be fair to say that you guys have been remarkably resilient throughout the cycle. Could you just touch on for, I guess, a high-level standpoint, the drivers of the top line growth, if you see contributions from new up cross pricing and inorganic change, the drivers of margins in, say, a downturn? And then anything to note for our resiliency by segment if there's any nuances there?

Question: Ronan Kennedy - Barclays - Analyst : That's very helpful. Thank you for taking the multifaceted question. On M&A, can I just ask that you reconfirm how the pipeline looks? I know with the Saela execution or acquisition, some upside from M&A there. But also if you are seeing with the uncertain market environment, if that puts potential pressure on competitors and potentially valuations, and therefore, you may be inclined to do a more sizable transaction?

Question: Ronan Kennedy - Barclays - Analyst : Thank you, appreciate it.

Question: George Tong - Goldman Sachs - Analyst : Hi, thanks. Good morning. If I look at organic revenue growth for the residential and termite businesses, it looks like it stepped down a little bit residential organic growth take down about 1 point, and then termite organic growth tick down about 3.5 points going from 4Q to 1Q. So I know there was 1 fewer working day in the quarter, but what were some other factors that may have contributed to this growth moderation in residential and termite? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, ROL.N - Q1 2025 Rollins Inc Earnings Call

Question: George Tong - Goldman Sachs - Analyst : That's helpful color. And then with your acquisition of Saela that you closed in early April, can you confirm what the commercial and residential mix is?

Question: George Tong - Goldman Sachs - Analyst : Got it. Okay. Thank you.

Question: Jason Haas - Wells Fargo - Analyst : Hey, good morning and thanks for taking my question. In light of the Saela acquisition, can you talk about your playbook for driving synergies of the businesses you acquired? And I'm curious if there's a similar opportunity to what you saw with Fox. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, ROL.N - Q1 2025 Rollins Inc Earnings Call

Question: Jason Haas - Wells Fargo - Analyst : That's great. And as a follow-up, can you talk about what incremental margins might have looked like in 1Q, if you exclude some of these onetime impacts from the less -- 1 less workday, the FX and the investments you're making in the business, excluding those, would you have been at your long-term target? And then how are you thinking about incremental margins? How should they trend through the remainder of the year?

Question: Jason Haas - Wells Fargo - Analyst : Great, thank you.

Question: Toni Kaplan - Morgan Stanley - Analyst : Thanks so much. I wanted to sort of go back to the marketing and investments. Just wanted to ask how you're thinking about your strategy in terms of marketing, just in the current period. I know you talked -- you haven't seen any impact yet. So I imagine you're still in a business-as-usual mode and maybe gearing the spend based on traditional seasonality. But just wanted to get a sense of like what would change the trajectory dialing up or down the marketing spend.

Question: Toni Kaplan - Morgan Stanley - Analyst : Great. And just as a follow-up, I wanted to ask about sort of a longer-term picture on termite. You've had double-digit organic growth there the last 4 quarters. and at least high single to low double, and basically for years. And so when you sort of just think about the main factors that have driven that high level of growth, do you find that taking share over the past 5 years or so, are you able to command more pricing in that market? Like, I guess, what are just long-term factors that are really driving the elevated growth there? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, ROL.N - Q1 2025 Rollins Inc Earnings Call

Question: Josh Chan - UBS - Analyst : Hi, good morning, Jerry, congrats on a very strong quarter. I guess two commercial questions for me. First one, just strategically, as you make these investments what's kind of your strategy in picking up new accounts? I assume you're going to have to displace existing competitors. And so I was just wondering how you're going about gaining the new accounts on commercial? Thank you.

Question: Josh Chan - UBS - Analyst : That makes a lot of sense. And then on the -- maybe more numbers question on commercial. I know, Ken, you mentioned Orkin recurring organic growth was almost 10% in the segment with [7]. So could you just kind of bridge us? Are there any other pieces there between Orkin and the onetime, how the 10% gets to 7% and then how you expect kind of these pieces to kind of flow going forward? Thank you.

Question: Josh Chan - UBS - Analyst : Great, thanks for the color and good luck in the rest of the year.

Question: David Paige - RBC Capital - Analyst : This is David Paige on for Ashish. I had a question. I know you mentioned the fleet was maybe less than 5% of cost. But I was curious to know how much of the fleet has been actually refreshed or how much will be needed to be refreshed over, let's say, the next like 1 to 2 years? Thank you.

Question: David Paige - RBC Capital - Analyst : Okay. Makes sense. Just as a follow-up, in terms of like big ticket items or nonrecurring revenue, you have a slide in the deck here, Slide 9 of the past slowdown, GFC, industrial slowdown, COVID, et cetera. How has those nonrecurring or big ticket items? How did they fared during those downturns? Just as a reminder. Thank you.

Question: David Paige - RBC Capital - Analyst : Yes, couldn't agree more. Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, ROL.N - Q1 2025 Rollins Inc Earnings Call

Question: Stephanie Moore - Jefferies - Analyst : Hi, good morning. Appreciate it. I guess continuing on the theme of potential recession here. It's been a while since I think we've -- and to your point, the business has evolved quite a bit since the last recession. But as you think about maybe the recurring side of the residential business, which I think from a relative standpoint, it's probably maybe less defensive than commercial or as we just described, some of these that are definitely necessities. But can you talk about maybe levers that you pull to maintain client retention in a recessionary environment? And also, maybe your perspective about customers' willingness to potentially trade down or reduce their monthly bill and what levers you can pull just to kind of maintain kind of status quo? Thank you.

Question: Stephanie Moore - Jefferies - Analyst : Got it. No, that's really helpful. And then maybe talk about given the uncertainty in the market and maybe risk of recession or gosh, who knows at this point. Do you think this actually could be an enabler of your M&A strategy, willing sellers looking to just kind of throw in the towel in this more challenging environment, something you can take advantage of? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 12:30PM, ROL.N - Q1 2025 Rollins Inc Earnings Call

Question: Stephanie Moore - Jefferies - Analyst : Understood. Thank you guys.

Question: Brian McNamara - Canaccord Genuity - Analyst : Hey, good morning, guys. Thanks for taking the questions. I'm curious if you have an idea of how fast the industry as a whole is growing kind of particularly in Q1. You guys have had pretty strong organic growth for some time now. And your larger peer clearly is lagging you in that regard. So there's share gains there. But any more color on maybe some of the smaller players would be helpful.

Question: Brian McNamara - Canaccord Genuity - Analyst : And then secondly, I was hoping you guys could provide some kind of update on your employee retention efforts, particularly with the first year tax and how you think that evolves in a potentially softening labor market environment? I'm assuming that's probably beneficial there.

Question: Brian McNamara - Canaccord Genuity - Analyst : Great, thanks a lot.