Rollins(ROL) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues for Q1 2019 grew 5% to $429.1 million, compared to $408.7 million in Q1 2018 [11] - Net income decreased by 8.9% to $44.2 million, with earnings per diluted share falling 6.7% to $0.14 from $0.15 in the prior year [11][38] - EBITDA was reported at $72.5 million, down 4.9% compared to Q1 2018 [38] Business Line Data and Key Metrics Changes - Residential pest control revenue increased by 4.9%, commercial pest control rose by 4.6%, and termite and ancillary services grew by 4.8% [12] - The overall revenue increase included 1.1% from acquisitions, with the remaining 3.9% attributed to pricing and organic growth [47] Market Data and Key Metrics Changes - The first quarter was impacted by extreme weather conditions, including a polar vortex, which affected pest demand [34][78] - Employee retention improved significantly, with a 33% increase in retention metrics for the Orkin brand [21] Company Strategy and Development Direction - The company is focused on enhancing employee benefits, including a revamped 401(k) plan, which has led to increased employee participation [15] - The acquisition of Clark Pest Control is a strategic move to expand the company's footprint and enhance service offerings [17][18] Management Comments on Operating Environment and Future Outlook - Management acknowledged the adverse effects of weather on Q1 results but expressed optimism for a strong demand recovery in Q2 [34][86] - The company is well-prepared for increased demand due to improved employee retention and training [86] Other Important Information - The company declared a cash dividend of $0.105 per share, marking a 12.9% increase over the prior year [54] - The company is on track to finalize the derisking of its pension plan by Q3, which will involve a significant one-time non-cash accounting charge [55] Q&A Session Summary Question: What impacted the operating margins this quarter? - Management indicated that weather-related demand softness and staffing without corresponding revenue put pressure on margins [63] Question: Was the weaker commercial performance due to weather? - Management noted that commercial performance fluctuates and this quarter was weaker compared to previous years [64] Question: How will the tax rate play out for the remainder of the year? - The tax rate is expected to average around 26% for the year, with Q1 being lower at 21% [69] Question: How much did weather impact top line results in Q1? - Management stated that extreme weather significantly affected pest work, but they could not quantify the exact impact [78] Question: Is pent-up demand expected to stress the system? - Management expressed confidence that existing trained staff would handle the increased demand without needing to hire new employees [92]