We're going to get going. My name is Tim Mulrooney, and I'm the research analyst here at William Blair, that covers Rollins. For a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com. Rollins is a leading provider of pest control and termite services to residential and commercial customers across the U.S. If you look back over the last 20 years, organic growth has kind of hovered in that 3%-5% range. Over the last several years, organic growth has been considerably higher than that, and that momentum has carried through the most recent quarter here in 2023. We would have expected that growth would have begun to normalize by now, but to our surprise, Rollins continues to be firing on all cylinders. Something I hope we can dig into a little bit today. We're pleased to have with us this morning President and CEO, Jerry Gahlhoff, and CFO, Ken Krause. This format's a formal presentation, followed by a breakout session in the Jenny B Room. With that, we'll get started. Good morning, Jerry and Ken. Thank you, Tim. All right. Good morning, everybody. On behalf of our almost 18,000 employees at Rollins, I want to lead with, I speak on the behalf of their efforts at our company, what they do each and every day. What you see today is the output and the result of their hard work each and every day. I want to be respectful of that as we move forward. You're all aware of the kind of the standard safe harbor language. This is kind of the standard lingo that we have to go over in the beginning. Let me kick off with a brief overview about what Rollins is all about, from a general overview standpoint. If you look at the top left of this slide, we talk about driven by a service first and people-focused culture. Pest control is a service business, it's all about relationships. It's about the relationships that we have with our employees, how we treat our employees, in turn, how those employees interact with their clients to build relationships, build rapport and hopefully keep from a long-term perspective, their customers for many, many years. That's the main thing about what we do. If you go down a couple of bullet points on that check mark, you see we talk about our consistent growth through challenging cycles. As I mentioned before, we're obviously in pest control. Well, much like a cockroach or a mosquito may be somewhat resistant to insecticides over time as they're used, our business is very much the same way. We have shown through a lot of different business cycles and a lot of different environments, that, we can continue to grow and prosper and remain a very healthy company. That's not always true of a lot of other types of business, but we're very fortunate in that, and I think as I speak to you here this morning, you'll see a little bit about why that is and have an understanding about that. That last bullet point at the bottom left, talks about the really the importance of what we do. I think oftentimes that gets lost in the whole thing because people think pest control, and they're not really thinking about big picture or what that means. Let's say, for example, Ken is a recent he recently relocated from Pittsburgh to Atlanta. Ken buys a new home, a year later, Ken finds out he has termites in his house, and he and his wife, Tanya, are frustrated, upset, and lying there, not knowing much about termites. I mean, he probably knows more today about termites, not knowing much about termites, wondering, "Gosh, is my house being eaten right out from under me? As I lay here in bed, are they above me? Are they gonna eat, you know, eat my... Are they eating my roof?" Right? You have not only the physical aspect of the damage being done, you also have the mental anguish that comes with a lot of the pest problems. Imagine, how many of you have ever had bedbugs? You probably wouldn't raise your hand if you did. That's a traumatic, emotional experience to go through that. You're talking about throwing out furniture, potentially, and people reacting a certain way. Then there's the psychological impact of waking up every morning with welts on your skin, and itchy and scratchy and thinking, "I got to go back there and get eaten by bedbugs again tomorrow night?" Right. There's that real. To me, it's a real tangible value that a lot of people, because you don't experience it firsthand, until you do, you don't recognize the real value of it. We think about it from a branding standpoint. Let's say Ken decided to give up his job as CFO of Rollins and wanted to open a fancy restaurant in Buckhead, Atlanta. Instead, instead of CFO, he's going to be a restaurateur, and he opens a big fancy restaurant, and on a Friday night at 7:00, a rat runs across the floor of his restaurant. Imagine the damage to his brand as a picture of that rat sitting in the middle of the floor or wandering across there, gets posted on social media or posted in reviews or makes it to the news, right? That's when we talk about, when we talk about brand protection, and we sell on the commercial side, brand protection. No, no business, no entity, this hotel, a restaurant, nobody wants that type of bad publicity, because these days, as we've all seen, it spreads like wildfire. In the middle of the page here, you, it shows the diversity of our segments, and this is a big part of what makes us fairly resilient through a variety of cycles or events that could happen in the world. You take a look in the middle there. You've got 43% residential, 35% commercial, 21% termite ancillary business. That's a pretty good mix of business. Take during COVID. During COVID, sure, the commercial side, we had businesses closing down, restaurants closing their doors, things like that. Our commercial business took a little bit of a hit. On the other side of it, the residential, when people were home more, the residential side started to boom. You could have a different type of cycle where let's say something happened in the residential segment or demand slowed, maybe demand slows 'cause people are tightening their wallets or something like that, but the commercial side may be booming, right? Who's gonna not, on the commercial side, protect their business and protect their brand? They're gonna continue to do that. That's not something they can stop doing. They still have to worry. Ken still has to worry about that rat that may run across his restaurant if that's the business he's in at that point in time. Take a look to the right. Some of our key metrics, are over 51% gross margin is quite strong, 22% EBITDA margin. That's an area I'll let Ken talk to a little bit more about how we feel like we can continue to expand that, especially with our focus on SG&A. Again, look at bottom right, 80% of our revenue is recurring. You see, you know, just in one slide, I've kind of built a case for you a little bit about how we manage our way through cycles and how this is really such an absolutely wonderful business. Let's talk a minute about some of the secular data that helps drive our growth. If you look there, I look at this like a clock, and you think of the 12 o'clock and 1 o'clock, importance of health and safety, and some of the demand. Really, this is about what I talked about at the outset. This is about how over the, I would say over the last certainly 100 years, how people's tolerances have changed over time. You know, 100 years ago, think back to 1920. If you were living in Chicago and found a cockroach in your home, eh, probably no big deal, right? Today, somebody from Maine retires to Fort Myers, Florida, sees 1 cockroach in the bathroom. What do you think is gonna happen? That's the end of the world for some of those folks. It really is, right? It's not only about the health and safety, it's just as much about people's tolerances. I mean, how many is too many? How many mosquitoes are too many? One. One bite is about my tolerance level, right? That is a shift in mindset of what people's expectations... It's a quality of life thing, which is part of the reason we hang on to our customers as well as we do, 'cause they understand the importance of pest control as it relates to quality of life. If you look at about the 3 o'clock, we talk about the weather, talk about climate. You know, certainly, the South has seen more weather... warmer weather patterns. Even in the North, I've seen invasive species that of pests that have come into the United States in the last 20 years, that have moved much farther North than they ever used to, right. Everyone's impacted. We certainly have people relocating to the South, more than we have in the past, and you have warmer temperatures in the North. You go to think about at Orkin, our Midwest division, you think it's Midwest, it goes all the way up in Iowa and here in Chicago. Their business is booming on the residential side. Demand is great, certainly, this plays an impact. Probably around the 6:30, 7:00 range, I've already talked about that, the pest damage to your property and your home, and that again goes back to damage can also be the intangible damage, like your brand, your image, things along those lines. This is a subject that Tim talks about a lot, is about this impact of remote work. We get this question a lot. More people are at home, so they need pest control, or they notice it more. Certainly, we've seen that, we saw that impact during COVID. We still have a lot of folks that are working at least two or three days from home, if not more. I mean, it's, there's, I know there's some pressures there that are beginning to shift some of that. I would also temper that with, you know, if everybody went back to work, the threat is, oh, well, then some of that demand is gonna go away. We had strong demand before COVID on the residential sector. I think that our brands, our family of brands, and their ability to execute can help us continue to accelerate our growth on the residential, no matter what happens, from that standpoint. When you take the secular data, you take a little bit about our history, our track record, our performance. What I led off with, which is about our people, the quality of our team, the quality of our people. All of that culminates into the kind of performance that you see out of Rollins and what we're all about. This is kind of a snapshot of our first quarter, where we saw double-digit revenue growth, and you see each of our segments in or each of our service lines in commercial, residential, and termite ancillary, growing very strong, 20% EBITDA growth year-over-year. You go to the bottom there, you see what we do with our cash. We take half of our cash, we reinvest in our business through M&A over the last five years. We continue to grow our business, add to our portfolio of brands, and then the vast majority of the rest of our cash use is paid out in the form of dividends. Look, looking at the, at the upper right-hand side of this slide, you see some information there. We, we announced the Fox acquisition at the beginning of, the beginning of April of this year. I'm very excited about this. This is another one of the, this is one of those acquisitions that's gonna really help us on the residential side. Very fast-growing business on the residential side that is targeting consumers, mostly door-to-door, and targeting certain types of neighborhoods with the right household incomes, the right kind of demographics of who a buyer of pest control services is. One of the things that I believe this industry has done, this door-to-door industry, has made our pie bigger on the residential side. Folks that never really knew that they wanted or needed pest control, their eyes and ears are being opened to it. We're really excited about the Fox acquisition. I'm gonna turn it over to Ken, let him give you a little more color on the details of that acquisition. Ken? Great. Thank you, Jerry. Appreciate that, Jerry. You know, Jerry commented a lot about the markets and, you know, we do compete and operate in a really attractive market. You know, it's a $20+ billion global market, growing at mid-single digits. Not only is it growing at mid-single digits, but it's highly fragmented. There's a tremendous amount of M&A opportunities in our market, and we've been very acquisitive over the years, and we were excited to bring Fox into the fold back in April. We spent about $350 million, $318 million, excluding the earn-out, to acquire north of $100 million of revenue and a very attractive business. When we think about this business, there are a number of things that make it very attractive. First and foremost is we see the opportunity to continue to accelerate our growth through Fox. As Jerry indicated, you know, advertising and marketing efforts are a big part of our customer acquisition activities. When we look at the Fox Pest Control, it's a door-to-door business. The thing that we get excited about when we think about this business is teaming Fox with HomeTeam. HomeTeam is our business where we've got Tubes in the Wall, and there are legacy tubes that unfortunately, customers aren't using because they moved away from the home that they originally built, and the new owner doesn't even realize that these tubes are in the house. These are proprietary tubes to the HomeTeam business. We have the opportunity with Fox to go back in and to raise awareness around the Tubes in these homes, drive demand, and drive some revenue improvements associated with that. We're really excited about it. This acquisition should add approximately $100 million to sales this year, because we bought it in April, so that's about 9 months of activity. Expect about $18 million-$22 million of EBITDA to come through in this, and expect some accretion to earnings in the first full year. Probably later, you know, you've got some interest expense early on, some purchase accounting that you go through in the first 6 or 9 months. As we sunset the first year and exit the first year of ownership, we should start to see some accretion associated with this business. The couple things, you know, when we think about our acquisition strategy, you know, there's 5 or so key metrics that I'll oftentimes look at an acquisition through. First and foremost, the sales growth and the trajectory of organic sales is certainly paramount. We want to buy a business that's gonna be accretive to our overall growth, and the thing that's really important in this industry is churn. Oftentimes you'll hear door-to-door, door-knocking businesses that have a high degree of churn. What's that mean? You acquire a customer, they have 1 service, and then they leave you. Fox actually was very attractive in that its churn is not any more significant than what we see in certain parts of our business. That was exciting. It was exciting to find that, and so we feel like this business will continue to grow. We have an opportunity to accelerate growth of our business through this acquisition, and we're excited about what the future holds with respect to Fox. A couple things, you know, to talk about as well. When we think about Rollins, there's two words that come to mind. One is consistency, and the second is continuous improvement. I think this slide does a really good job of demonstrating the consistency of our business. You know, when you look back to the period from 2000 to 2022, it's hard for me to find a business that's grown every single year, whether it be through the Great Recession, whether it be through the industrial recession, or whether it be through Covid. We've seen consistent growth through the last 20-plus years. More recently, you know, we're seeing a compounded annual growth rate of about 10% over the last five years. The five-year period prior to that was probably closer to 7%. We've seen growth certainly inflect a bit as we went through COVID, and our business continues to perform well. In the first quarter, we saw about 9% organic growth coming through the business. When you think about opportunities going forward, though, as I said earlier, the market's incredibly fragmented, so there's a lot of M&A opportunity that remains in the business. Even though we just closed our second-largest acquisition in our history, we feel like there's more opportunities ahead for us as we think about acquisitions. The other thing that comes to mind in terms of continuous improvement are margins. Despite having 22% margins and 52%, roughly, gross margins, we feel like there's an opportunity to continue to improve our margin profile. Let me give you an example of where we see that opportunity. That opportunity is primarily in what we would call SG&A. When we look at the P&L, and we dissect the income statement and the margin profile, 52% margins are incredibly attractive, and it's hard to find businesses with 50-plus% gross margins. It's also hard to find businesses that are spending 30% of sales in SG&A. We feel like there's an opportunity in that SG&A line item to really improve what we're doing, continue to implement shared services, to continue to improve our talent profile, to change our processes, and we feel. We feel like there's an opportunity there. I'm not saying that opportunity is, you know, 700 or 800 basis points, because there's customer acquisition costs that are in this business that you don't see in other businesses, but it's probably not out of the stretch, out of the realm of reason to think about a couple hundred basis points over the next several years. We're really looking at this. We're trying to action this, and I would ask you just to stay tuned. As we make progress on this, we'll continue to refine what we think we can do with respect to improving our cost structure moving forward. With that said, you know, I talk about the opportunities on changing the SG&A. You know, this business is a very attractive incremental margin. Despite having that high SG&A expense, we're continuing to perform and provide 30%+ incremental margin. Growth is important, taking a look at the continuous improvement efforts is important, and continuing to manage this business. Cash flow generation is incredibly strong. You know, when we look at cash flow, it's been compounding at 15% since 2000, 2001. Over the last five years, it's been compounding at 15.6%. Pretty similar. You ask yourself, you scratch your head, and you think, how do you produce that type of cash flow compounding? When I look at it, you know, I think about the business, how I think about it is, if you can grow this business at a high single digit, mid to high single digit growth rate, and if you can compound earnings at a multiple of that growth rate, that means you're gonna compound earnings in a low double-digit range. If you can convert the cash, the earnings to cash, at roughly 110%-118%, as you see on this slide, you get to a 15% compounding pretty quick. So that's really how when we think about the business and how we manage the business, that's really a important metric for us, as we think about the future. You know, our focus is to continue to compound cash flow, continue to create cash flow, continue to invest in M&A, and also share in the form of a dividend as we move forward. When we think about the business, too, you know, the thing that Jerry and I are really heavily focused on is, how do we modernize and professionalize the organization? You know, when we think about the last 9 or 10 months. You know, I joined the company last September, after joining, I quickly learned that I inherited such a valuable franchise. This is incredible business. What's incredible about it is the level of financial acumen that exists in the organization, from the top, clear down to the bottom. You know, Jerry and I were at a branch in Raleigh, North Carolina, in early April with the management team, we were sitting down with branch managers of HomeTeam and Orkin. We spent about a half a day talking about incremental margins and pull-through and a full P&L. It's hard to find businesses that, at that level of the organization, understand how to drive financial results. I think that is very much correlated with our financial performance is the level of financial acumen across the organization. Setting that aside, you know, we think there's an opportunity to continue to modernize the organization. If you look at the last nine or so months and the things that we've done, you know, we started back in November, where we prioritized the regular dividend. We had been paying a special dividend from time to time, what we did in November is bake in the special dividend and raised our regular dividend by 30%. We raised the regular dividend, and we're committed to continuing to fund that regular dividend as we move forward. The second thing we did was, in January, we went forward, we refinanced our revolver. In January, we had a revolver that was one year off out of expiration and was gonna expire in 2024, we decided to go forward and refinance that and bring in a lot of new banking partners. We had two banking partners with a $175 million revolver for a $20 billion market cap company. We said we needed to prepare for a number of different scenarios, we put in place a billion-dollar facility with eight banks, provides us a lot more flexibility going forward. After 19 years, we decided to move away from Grant Thornton and move to Deloitte. In March, we actually changed our audit firm, and we moved from Grant Thornton to Deloitte. We're excited about what the future holds with Deloitte and working with Deloitte as our independent auditor. Then just the other day, on Monday evening, we filed a shelf facility. We actually went forward and filed a shelf facility. It's a universal shelf. That universal shelf has two components, a primary and a secondary component. The primary component, once approved by the SEC, would provide the company an opportunity to raise up to $1.5 billion of capital through a number of different means. There's a number of different options. The other side of the shelf is a secondary. The secondary allowed the company to work closely with the Rollins family to register the entire family stake. 'Cause if you follow Rollins, you know that the Rollins family owns about 50% of the company, and surprising to me, those shares weren't registered. As I joined last fall, and as we went through the fall, and we saw some activity, with selling activity, I thought to myself, you know, what should we be doing as a company to manage that? I thought, you know, as I compared to precedents and other strongly, family-owned companies, it was really surprising to me that those shares were not registered. We registered those shares, and in addition to registering those shares, we put in place a registration rights agreement with the family, that allows us to work more closely with the family, to be more aligned, to have a more strategic approach to that ownership position. We're excited about that. It's really, quite frankly, it's just corporate housekeeping. It's modernization, it's corporate housekeeping, it's professionalizing the organization, and we're excited about the steps that we're taking to do that. Last but certainly not least, we're hiring a lot of key talent in the organization. Casey Forrest is with me today in the back of the room. I just hired him. He's the head of strategy and FP&A. comes to us from WestRock and United Technologies. Prior to that, I hired a new tax director. We have a great chief accounting officer that we hired recently, not too long ago, and we've made changes with Pat Chrzanowski heading up Orkin, and Steve Leavitt heading up our brands. We feel like we're putting a team in place that's really setting us up for the future, and so we're excited about that. Leave you with, you know, why invest in Rollins? I think the numbers kind of speak for themselves, but it's a, it's an incredible business. You know, 20-plus years of consecutive growth, strong execution around M&A, disciplined approach on M&A. You know, we don't chase things, and we don't have to. You know, a lot of companies have one or two opportunities that they have to go after and get. When you're in that position, you've got to pay full value. When we look at this business and this market, there are so many opportunities and so many different businesses, we really don't have to chase and pay full value for acquisitions. We feel like we can pay a fair value that allows us to create value with those organizations. There's robust margin opportunities. The incremental margin's incredibly healthy. We have consistent free cash flow generation. You know, our focus here is to continue to drive cash flow. That's an important metric for us, and we're committed to maintaining a healthy balance sheet and an investment-grade profile. Even though we've went forward and we've put a billion-dollar revolver in place, and we put a shelf facility in place, don't read into that Jerry and I are about to go on a spending spree, 'cause we're not. We're really just trying to put together a facility and a capital structure that's commensurate with our investment-grade profile. With that, I'll open it up for maybe any questions that there might be or enter the breakout session. Yeah, we got a couple minutes left. Typically, I just ask- Sure. I want to open it up to the floor. Anyone have any questions for the guys? Can you talk a little bit about what you guys do when you acquire these companies? What do you do? Do you change the names, do you integrate them completely with your organization? Do you change the brand? There's two approaches, we take, we determine early on during due diligence, is this a tuck-in or is it a standalone? We have criteria for both that we run that through. The vast majority of our acquisitions are tuck-in acquisitions, where our goal is, usually within a year to 18 months, to go from a to co-brand it with whatever brand it's being tucked into and eventually completely phase out their brand name and integrate it completely into an existing operation. That's probably 80% of the acquisitions that we do, are tuck-ins. The other ones are... Maybe it's 90%, the other ones are the standalone brands, those standalone brands, when we run them through that model, we say, when you look at our standalone brands, a lot of them have been around for over 70 years. They have very strong name recognition, brand recognition, and strong relationships with their clientele, right? That's usually what we're buying, is that brand, and so that's how we determine whether or not they're gonna be left alone and standalone. From there, during the due diligence process, we look at what are the things that we can help them with? What's the low-hanging fruit? We can help them save money. We can help them save a lot of money on a vehicle. We can help them save a lot of materials and supplies. Our approach is, first, do no harm. We're not gonna do anything to that brand that could take away or damage our relationship with those employees or their customers, and it's put things in place that can help them. If we can help the employees with their employee benefits and make that better for them, that's what we want to focus on. The other stuff, we want to get some of those quick, easy wins. The other stuff, maybe some of the harder stuff, we get past the honeymoon phase, and then maybe year two, year three, we take a long view on the brands, getting them into our pricing disciplines, some of those kinds of things that get a little more sensitive. We handle that with a little more care. You have to get better insurance rates, too, right? Better, their operating insurance. Healthcare. healthcare insurance. Yeah. Everything. Yes. You know, the other thing that I would add is, you know, the point on this last slide around, or the slide before this, around key talent. You know, what we're trying to do across finance, HR, IT, legal, those areas, is invest in our organization that will prepare us for better integration of the back office functions. 'Cause you know that when you do an acquisition, one of the biggest opportunities from a cost synergy perspective is: How do you leverage your shared service center? That's a big focus for us as we think about the future and making more investments in those areas that will allow us to be a better owner of these companies going forward. We want our standalone brands to focus on their employees and their customers and their growth. They shouldn't be worrying about where they're getting their next truck or how the lease of the new. They're splitting a branch, where's the next lease coming from? They shouldn't have to worry about those things. They should focus on their people and their customers and growing the business. We think if we give them the opportunity to have more focus on that, we'll continue to help drive the accelerate the growth of our business. Those standalone brands are pretty rare, though, right? Like, for the most part, you integrate them into Orkin. Like, if I think. Into Orkin or one of the others. Bringing them on, there's less than 20 standalone brands. Right. Mm-hmm. Correct. You don't get the benefit of the route density in those cases, 'cause you're not integrating them into Orkin. You wouldn't want to rebrand them because- Mm. There's so much brand equity you'd be destroying. Right. If you just rebranded them on day one. You wouldn't rebrand Clark or Northwest. Right. OPC or Western or any of those. Yeah. Mm-hmm. All right. Well, I hope you all, join us in the breakout room. Thank you, guys.