Rollins Inc at Stifel Cross Sector Insight Conference Transcript

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

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : When you think about maybe the start of this year and kind of the seasonality that you normally see, first quarter was warmer than expected. How's that played into the second quarter? When you think about -- was anything pulled into the first quarter from the second quarter? How's the seasonal ramp up to the busy periods kind of working out?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : When you think about the different segments across in that benefiting of the seasonal difference, maybe talk about just residential, commercial, [termite], what's the impact?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Right. I mean, you talked about that on your Investor Day, kind of that six commercial division. And when you think about the commercial, you talked -- on residential, you talked about nine services. How does that look in commercial? And when you talk about maybe the penetration of services to the commercial and how does that evolve under the new kind of commercial division?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Right. Culture and brand was a big piece of the Investor Day as well. Maybe we could just review some of that and then perspective of how does culture and brand really help you outgrow the competition when you think about growth rates within the segments?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : I guess how different is that from a lot of your competition, whether it be larger ones or smaller? I mean, is that -- is it hard to find a lot of smaller acquisitions or M&A that kind of fit that mantra? Because it seems somewhat of a unique structure.

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Right. And I was going to say, when you acquire, how often do you keep on the management?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Right. And I guess -- I mean, growth capital may be a good segue into when you think about -- you talked about again, on Investor Day, digital and the investments that are being made in digital. I mean, how much -- one, just digital, let's talk about what's that doing for Rollins. But how much of that is an opportunity in that M&A that you can do exactly like the Northwest, where many smaller players -- is that a big hurdle for them to overcome, putting in a digital platform and those kinds of things that you can then help with?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Right. And has that helped M&A on the commercial side?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : So I guess it's an interesting, just kind of growth on a broader picture. But when you think about acquiring companies, and let's say they're growing kind of at the market growth rate, how much can you accelerate that when you pick them up and you're able to kind of put the Rollins process behind it? I mean, what's kind of a typical gain you think about organic? I mean, obviously, maybe an exact number is not out there. But clearly, there's something above the cost savings and the integration. There's definitely a revenue growth opportunity.

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Yes, and I think -- well, let's talk about growth again, I guess, maybe through the segments. I mean, you kind of delineated this before, but I think might be useful to review just kind of what's the market growth rates within the segments and in kind of that incremental that Rollins is able to achieve above that, because, I mean, that's part of what we're talking about right here on the M&A and the other projects. So let's kind of maybe walk through them.

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : And beyond growth then, when you think of margins, how should we think about margins across the segments? I know you don't really break it down in great detail and there's some similarity, but maybe just some color on how to think about it.

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : So I guess from a customer return perspective, maybe commercial ends up being a little bit higher while the margins don't necessarily --

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Is there any easy metric out there when you think about the life of a commercial versus the average life of a residential? Is it twice as long, three times?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Okay, and then we've talked a lot about growth and those opportunities. How about on the cost side when you think about opportunities to take costs out maybe across the segments. Where does that happen? Maybe at a higher level, back office. What were some of the opportunities there?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Right. And I guess that's an important point. I just kind of wanted to highlight that incremental margin. When you think about that incremental margin versus where your average margin is, that differential -- and then maybe, can that incremental margin get higher? I mean, how high can that go?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Okay, and then with our last few minutes here, let's talk about capital allocation. Maybe, how do you guys think about that from a deployment of capital, whether that be M&A, dividends, share buybacks? And then also maybe leveraging the balance sheet, how that would work or what that might look like?

Question: Brian Butler - Stifel, Nicolaus & Company, Inc. - Analyst : Okay. Well, I think I'm -- we're just about on time. I got a minute left. I want to thank you very much for participating. This was great. Appreciate it. Hope to have you back again.