Greetings, welcome to the Rollins, Inc. first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Joseph Calabrese. Thank you may proceed, sir. Thank you, Claudia. By now, you should have all received a copy of the press release. If anyone is missing a copy and would like to receive one, please contact our office at 212-827-3746, and we'll send you a release and make sure you're on the company's distribution list. The call is being webcast at www.rollins.com, and a replay will be available for 180 days. The company is also offering investors a supporting slide presentation, which can be found on Rollins' website at www.rollins.com. We will be following that slide presentation on our call this morning and encourage you to view that with us. We have included certain non-GAAP financial measures as part of our discussion this morning. The non-GAAP reconciliations are available in the appendix of today's presentation, as well as in our press release. The presentation and press release are available on our investor relations website. The company's earnings release discusses the business outlook and contains certain forward-looking statements. These particular forward-looking statements, and all other statements that have been made on this call, excluding historical facts, are subject to a number of risks and uncertainties. Actual results may differ materially from any statement we make today. Please refer to yesterday's press release in the company's SEC filings, including the Risk Factors section of our Form 10-K for the year ended December 31, 2022 for more information and the risk factors that could cause actual results to differ. On the line with me today and speaking are Jerry Gahlhoff, Jr., President and Chief Executive Officer; John Wilson, Vice Chairman; and Kenneth Krause, Executive Vice President, Chief Financial Officer, and Treasurer. Management will make some opening remarks, and then we'll open the line for your questions. John, would you like to begin? Yes. Thank you, Joe. Good morning. We appreciate all of you joining us for our first quarter 2023 earnings call. I'm pleased to report Rollins delivered solid first quarter results, highlighted by revenue growth of over 11% and earnings per share growth of 20%. I want to begin by welcoming P. Russell Hardin as Rollins' newest board member. Russ was elected to our board at our recent shareholder meeting and has served as president of the Robert W. Woodruff Foundation since 2006. He serves as a director of Genuine Parts Company, as well as a trustee of the Northwestern Mutual. Hardin practiced law with the firm of King & Spalding, and as a longtime resident of Atlanta, has served his community in ways too numerous to list. Please help me welcome Russ Hardin. Turning to the Fox Pest Control acquisition, I'm very excited about this recent event. Enjoying a strong reputation in the marketplace, we have long respected Fox's history of success. In fact, I have a relationship with one of their founders, Mike Romney, going back close to 20 years, as Mike began doing summer sales programs for Orkin prior to co-founding Fox. Fox Pest Control was formally established in 2012, initially marketing through the door-to-door sales effort in historically underserved pest control markets. Through consistent growth and expansion, Fox now provides general pest control services for homeowners from 32 locations in 13 states. Fox evolved in their growth strategies to include other streams, as now about 1/3 of their customers are acquired through digital channels. Not only does Fox rank as the 13th largest pest management company according to the PCT 100 rankings, Fox also received recognition in 2021 by Inc. magazine as one of the fastest-growing private companies in America. In many of the markets they serve, Fox is a market leader with a great service reputation. I cannot stress enough what a great addition this is to our family of brands. I'll now hand the call over to Jerry to recap Rollins' first quarter results and talk about the transaction in greater detail. Thank you, John, and thank you all for joining our call today. Our partnership with Fox was an 18-month process. As we worked on executing this transaction and learned more about the Fox business, we became increasingly impressed with their culture, their consistent and strong growth rates, and their unique operating model. In early April, I had the opportunity to visit with many of the fantastic team members at Fox and was able to witness firsthand the deep pride they have in the Fox brand. Additionally, as Ken will cover in more detail later, we believe the financial benefits are very compelling. We expect the transaction to be accretive to earnings and cash flow in the first full year of ownership and will provide meaningful long-term financial benefits as well. We also believe the complementary nature of their brand creates opportunities for enhancing Rollins' strategic platform for growth in the residential space. While still operating under the Fox Pest Control brand and being led by co-founders Mike Romney and Bryant White, we see incredible potential for the teams at Fox and HomeTeam to learn and share with one another. There are multiple benefits to tying Fox closely with HomeTeam, who have also been utilizing door-to-door campaigns to activate Taexx customers in their predominantly residential business for over 20 years. Furthermore, this alliance will provide HomeTeam with an ability to scale markets faster while we provide the team at Fox with new service offerings and cross-sell opportunities along the way. We're also particularly excited about the strong alignment of their culture and the value the partnership creates for customers, team members, and to our shareholders. Fox has a passionate sense of community and a values-driven approach that consistently delivers quality service, coupled with a resilient track record of strong customer growth and solid employee retention. As we've demonstrated in the past, acquisitions are a key part of Rollins's growth strategy. Over the years, we have built a very successful playbook for their smooth transitions into our company, and we are extremely excited about our path ahead with Fox. In summary, we are confident that Fox's business perfectly aligns to our strategy for sustainable, profitable growth, and I'm incredibly proud to add them to our impressive family of pest control brands. Transitioning to our recent financial performance, I'm pleased to report that Rollins delivered solid first quarter results and realized strong year-over-year growth in many key performance areas. Ken will address the financials in more detail in a moment, but I'd like to highlight three key areas of progress in the quarter. First, we delivered 11% revenue growth. What was especially encouraging was our organic growth. Organic growth was more than 9% for the quarter, with strong growth across all major service lines. Secondly, margins were very healthy to start the year. We delivered approximately 32% incremental margins and grew GAAP earnings per share of 20%. The focus on pricing, selling new business, and productivity is paying off. On our year-end call, we discussed our intention to initiate an earlier price increase this year, and that certainly helped us, particularly in March. We will continue to focus on this area to ensure that we are effectively pricing the value of our essential services. Last but not least, we reported strong growth in cash flow for the quarter. We remain well-positioned to continue to invest in acquisitions and maintain a balanced capital allocation strategy. As we move into spring and summer months, we expect a good business environment and strong demand for our services when you consider recent weather patterns resulting in wet outdoor conditions. April is off to a favorable start, and our teams in the field are well-staffed and trained as we head into our traditional peak season. We're also continuing to add to our sales force and emphasizing bundling of multiple services like pest and mosquito through our call center operations. I wanna emphasize how pleased we are with Rollins' strong first quarter performance. Looking ahead, we remain well-positioned for 2023 and confident in our ability to continue to derive strong operating results. I'll now turn the call over to Ken. Thank you, Jerry. Good morning, everyone. The team delivered a strong start to the year. Let me begin with a few financial highlights for the first quarter of 2023. First, we delivered over 11% revenue growth in the first quarter, with robust growth across all our service offerings. Acquisitions drove approximately 2% of the total revenue growth in the quarter. We expect to see meaningful improvement in growth from acquisitions for the remainder of the year stemming from the acquisition of Fox we announced earlier this month. Second, our continued emphasis on margin improvements drove a 130 basis point improvement in EBITDA margins in the quarter. I will speak about incremental margins shortly, as Jerry indicated, they were a bright spot. GAAP earnings per share increased 20% to $0.18 per share. Last but not least, we delivered a 15% improvement in operating cash flow and a 17% improvement in free cash flow. Let's look at the quarterly results in more detail. Starting off with revenue, it was $658 million, up just over 11% on a reported basis. Currencies reduced quarterly revenue growth by 60 basis points on the stronger dollar, notably versus the Canadian dollar, the British pound, and the Australian dollar. Turning to profitability, we realized 30 basis points improvement in gross profit margin. Gross profit margins were 50.3% of revenue in the quarter. We saw good performance on gross profit as pricing more than offset inflationary pressures. We were more consistent in raising prices across all of our brands this year. We discussed our intent to do this on our year-end call, and it was good to see the impact of the steps we took on revenue and profitability. Looking at 4 major buckets of cost: people, fleet, materials and supplies, and insurance and claims. These comprise approximately 90% of cost of services in the quarter. We saw improvements in margins associated with people costs as well as fleet costs. Material and supplies were neutral to margins, while insurance and claims were a headwind to margins. We delivered improvements in SG&A expense as well. SG&A improved 40 basis points when stated as a percentage of revenue during the most recent quarter. Let's dive into the major categories of SG&A a bit more. People costs, advertising and selling costs, and insurance and claims make up a majority of our spend in SG&A. Margins benefited in the people cost area. Advertising and selling related costs were relatively neutral to margins, while insurance and claims was a headwind to margins. As the case in the prior year, we expect to see SG&A tick up slightly in Q2 as we invest more heavily in customer acquisition related costs across the business during the start of our more busy season in the second quarter. We did not have any non-GAAP adjustments to operating income or EBITDA this year. GAAP operating income was $112 million or 17.1% of revenue, increasing 130 basis points from the same quarter a year ago. EBITDA margin was 21.2%, up a strong 130 basis points over the prior year EBITDA margin. As I have consistently indicated, I like to look at the business using incremental margins, or meaning what% of every additional dollar of revenue growth is converted to EBITDA. On an as-reported basis, we generated incremental margins of approximately 32% in the most recent period. Quarterly GAAP net income was $88 million or $0.18 in an earnings per share, increasing from $0.15 per share in the same period a year ago. Turning to cash flow and the balance sheet. Quarterly free cash flow was very strong in the quarter. We generated $93 million of free cash flow on $88 million of earnings. Free cash flow increased by over 17% in the most recent period. Cash flow conversion, the% of income that was turned into cash, was also a bright spot, coming in at above 100% for the quarter. We made acquisitions totaling $15 million, and we paid $64 million in dividends. Debt remains negligible and Debt to EBITDA is well below 1 times on a gross level. We closed and announced the Fox acquisition earlier in April. We are excited about the strategic growth opportunities this acquisition will provide us. A few financial details. We expect this acquisition to add between $90 million and $100 million of revenue in 2023. The acquisition should add $18 million-$22 million of EBITDA for the remainder of the year. We used a combination of existing cash balances and borrowings to pay for this strategic acquisition. We continue to be very active in pursuing additional acquisition opportunities. We expect the Fox acquisition to be accretive to earnings in the first full year, with more meaningful contributions to EPS during the latter part of this year and into the first quarter of next year. We are in the process of finalizing our purchase accounting. We'll provide an update on this on our Q2 call in July after we complete that process. During the quarter, we refinanced our credit facilities that were set to expire in April of 2024. We closed on our new facility before the banking crisis in March. We were able to successfully secure a more modernized facility that, in addition to other benefits, provides us with the opportunity to incorporate sustainability metrics into the revolver in the future. Additionally, we conducted an RFP for our external audit service provider and engaged Deloitte as our new auditor in place of Grant Thornton, who had been our auditor for the previous 19 years. We are making good progress on a number of general financial housekeeping issues that will help position us best as we continue to grow our business. We remain very well positioned to continue to fund our dividend and grow through acquisitions. In summary, our quarter performance continues to demonstrate the strength of our business model and the engagement level of our team. We remain focused on providing our customers with the best customer experience and driving growth through acquisition. Organic demand remains robust and we are very well positioned to continue to use our strong balance sheet to grow our business. The acquisition pipeline is healthy. Our strong cash flow and balance sheet positions us well to invest in our business. We continue to focus on execution and driving long-term profitable growth for our shareholders. With that, I'll turn the call back over to Jerry. Thank you, Ken. We are happy to take any questions at this time. Thank you very much. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Please limit your questions to one question and one follow-up question. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we poll for The first question comes from Tim Mulrooney from William Blair. Please proceed with your question, Tim. Jerry, John, Ken, good morning. Morning. Good morning, Tim. Thanks for taking my questions. I was going to ask about the strategic rationale on Fox, but you guys did a great job about that in the prepared remarks. I think I'm going to skip that and just jump to the strong organic growth. You know, the commercial pest business, you know, that organic growth was basically double what we were expecting in the first quarter. That's a significant margin of error but particularly for a predictable business like yours. Is there anything you can highlight here? Large customer wins, new programs you've established, a pickup in cross-selling. Anything you can highlight as to what contributed to that unexpected strength in that commercial piece. Tim, this is Jerry. To me, it's pretty simple. It's about the investments we've made in hiring and staffing on the commercial side, the commercial front with our commercial account managers. We have a considerably larger staff than we did even a year ago, and far more than we did two years ago. Their efforts, feet on the street every single day, bringing new business in at the volume they're bringing in, that's what's making the difference. It's not about individual wins of big customers or anything like that. It's the collective efforts of everything that they've done. Okay. It sounds broad-based. Thank you. You know, just switching gears from organic growth to capital allocation. I mean, now that you've already spent, you know, more than $300 million already in 2023, should we expect a slowdown in M&A spend for the remainder of the year? Or are we still gonna see you acquire 30-40 bolt-ons that you normally do in a given year? Can you also discuss your plans for that leverage ratio? I mean, do you intend to drive it back to 0 over the next several years like you typically do? Or you know, are we potentially looking at a different capital structure at Rollins on a go-forward basis? Thank you. Tim, this is Jerry. I'll handle the first part of that. We'll continue to look for tuck-in acquisitions, bolt-on acquisitions. We'll continue that path, and of course, continue to evaluate even larger acquisitions if they're there for us to get and the timing is right. At the same time, we're also fairly cautious. We like to ensure that what we've the most recent deal is handled well, and our time and attention and focus is put on that to make sure that goes smoothly, that transition goes smoothly. We don't wanna jump in anything with too much of a distraction for our team or for them in the short run. We're probably a little bit cautious there on really large deals in the very short term, but we'll continue to do the bolt-ons. I'll let Ken address the question about capital. Sure. just adding on to what Jerry had mentioned. You know, the integration efforts are certainly really important to us. So we wanna make sure that we integrate these businesses as much as we can while not disrupting the customer-facing aspect of these businesses, which are so strong. From a Debt to EBITDA perspective, Tim, I believe you were asking. You know, when we look at our capital structure, we have an incredibly strong balance sheet. It does not mean that we're gonna lever up 2 or 3 times to go after transformational acquisitions. We quite frankly don't need to. The business is so strong. but we will do is use our balance sheet in a strategic manner to grow this business. That's the focus. I can't commit to a debt-to-EBITDA leverage ratio, but what I can tell you is we will remain very much investment grade. We will very much remain to the playbook that we've executed for a very long time, which has certainly paid off for our investors. Thank you. The next question comes from Stephanie Moore from Jefferies. Please proceed with your question, Stephanie. Good morning. This is Harold Antor on for Stephanie Moore. Last quarter, I know you reduced marketing spend for the quarter on year-over-year. How did marketing spend track this quarter, and how is it tracking for 2Q 2023? Thank you. Thank you, Harold. I appreciate the question. This is Ken. I had mentioned in my prepared comments that advertising and marketing related costs were relatively neutral to margins. That means that we were spending at just about the rate of growth of revenue in the first quarter. With that said, as we enter the second quarter, we are continuing to ramp up our investment in customer acquisition related costs. As we go into the second quarter, it's important for us to procure those new customers, which have an incredibly valuable long-term relationship with our business. As you know, approximately 80% of our business is recurring, and so it's important for us to go after and get those new customers into the fold. We'll continue to tick that up in the second quarter as we have in past years. I think that's an important point to remember as you think about modeling out, say, the second and third quarter of the year. Thank you. That'll be all. Thank you. The next question comes from David Paige from RBC. Please proceed with your question, David. Hi. Good morning. Thank you for taking my call. I'm actually on for Ashish Sabadra at RBC. You mentioned Fox Pest Control, about 1/3 of the customers are acquired through digital channels. Do you have an outlook for the customer acquisition through digital channels, post fully integrated Fox and maybe at HomeTeam and then overall Rollins? Thank you. I don't know that we've gotten that deep into the analysis. We want Fox. We wanna make for a smooth transition and have Fox settle into what they're doing. Certainly, they have. The team at Fox has had themselves gone through this transition over time, ramping up on the digital side, and we'll help them and continue to support their efforts to do that, give them some of our expertise and knowledge along the way, to help them mature in that area and convert, you know, leads to sales and starts and those types of things that we feel like we can help them with over time. At this point, I wouldn't give you any insight in terms of long-term, what that may look like a year from now or two years from now. Well. Still premature. What I would add to that, Jerry, is that Fox does a really exceptional job in their marketing efforts, and there might be an opportunity to leverage Fox in the Rollins family of brands. I think that's really important to think about as you go forward. They do a really good job, and we certainly wanna leverage all the work that they do across their business to benefit us through this combination. Thank you. Thank you. The next question comes from Seth Weber from Wells Fargo. Please proceed with your question, Seth. Hi, this is actually John filling in for Seth. Congratulations on the strong quarter. Just maybe quickly on the insurance and claims, could you give us some more color on really kind of how the headwind progressed in the quarter as well as how we should think about the cost going forward this year? Thanks. Certainly can do that for you and appreciate the comments. Insurance and claims has been a bit of a headwind here for a period of time, I believe going back to last year. In the third quarter, we talked about that. This year, when we look at the experience in claims, there's two aspects to that experience. One are just higher insurance premiums. As you know, we had poor experience last year, and so unfortunately we saw that come through with higher insurance premiums in the first quarter. That'll carry through for the remainder of the year. The second part of it is we continue to see just some unfavorable experience in that area. We're ramping up our focus on behavioral-based safety across the company and ensuring that we're making the right investments in the areas that'll help improve our performance in that area. It's an area of focus for the company, and we continue to focus on driving some improvements. Unfortunately, we do feel the negative impact of a tighter insurance market, however. Got it. That's great color. Thank you. Maybe quickly, just as we think about the cadence of residential, especially with advertising and customer acquisition spend ramping in the second quarter for the kind of peak season, can you just give us a sense at a high level how you're thinking about the kind of pacing of residential? Would it be, fair to assume we could kind of see an acceleration from these levels, or are you thinking more of a kind of steady state, high single digit on an organic basis? Thanks. You know, it's hard to provide an estimate, on that, as we think about the next quarter or two. However, we feel like the investments we're making in our people and our technicians and our sales folks, the focus we're making on cross-selling, and driving cross-sell and a wider share of wallet with each and every individual customer is paying off. We feel very optimistic and bullish about our opportunity to continue to grow our position with our really important residential customers, into the future. Yeah. This is Jerry. I would add, we're in a really good position to take advantage of strong demand in the marketplace, as it's there. We feel strong about our position to be able to capitalize on the potential for growth in the market. Thank you. Ladies and gentlemen, just another reminder, if you'd like to ask a question, please press star and then one. If you'd like to ask a question, please press star and then one, and please limit your question to one question and one follow-up question. The next question comes from Grant Slade from Morningstar. Please proceed with your question, Grant. Hi, Jerry. Hi, Ken. Thank you both very much for the additional detail on the Fox acquisition. It's very helpful. Just a point of clarification, however, if I may. I was just curious, the $18 million-$22 million in EBITDA contribution for this year, does that include the full extent of cost synergies that you're expecting to realize from the deal? Are there perhaps further synergies we should be expecting in 2024 or later? I guess if so, you know, the quantum of those, and the timing would be helpful if you're able to share that detail with us. Thank you for the question. We feel like that's. When we think about synergies and we think about integration as we started the call, we certainly are taking a pragmatic approach with respect to synergies and synergy capture. We do think that this business will be accretive to our margins in the next 2-3 years. The first year is all about getting in and trying to understand what makes the business so valuable. We don't wanna move too quickly, we also don't wanna move too slowly. We do feel like that $18 million-$22 million is our best expectation or estimate of what we can deliver on the acquisition this year. Great. Thank you very much. Thank you. The next question comes from Aadit Shrestha from Stifel. Please proceed with your question, Aadit. Hi, good morning. This is Aadit from Stifel. Thank you for taking my questions, and congratulations on the strong quarter. My first question is just relating to the Fox Pest acquisition. How should the annual $90 million-$100 million in sales, how should that be allocated across the lines of businesses? What are the drivers that would get you to $100 million versus that low end of $90 million? What are you actually building in? Why don't you handle it, Ken? Sure. When we look at that business, the breakdown is highly focused on residential. Large percentage of that business is the resi sector, that'll come through our residential segment of our business. You know, we feel like that $90 million-$100 million would probably come into our business very similarly to how our business is reported. Q2, you'll see a ramping from Q1, Q3 you'll see a further ramping. That's just the seasonality of our business. We feel like there's opportunities to drive some outsized growth there, but I also feel like this $90 million-$100 million is a very realistic estimate and is reflective of the growth trajectory, the strong growth trajectory that the business is already on. We feel like it's very realistic in achieving that $90 million-$100 million this year as we think about the remainder of the year. Ken, if I may add, this is John Wilson. If I may add, retention is critical, that's why with these acquisitions, we don't go into looking to rock their world and go so carefully on the integration and/or assimilation. Fox continuing their current path on the way they retain their customers and retain their employees, which are important to keeping those customers, will determine whether we get to the $100 million versus the $90 million. All right. Thank you for that. I have a follow-up regarding incremental margins. Pretty healthy 32%. How should we think about it for the remainder of the year? Can you maybe even exceed that 32% with sort of the pricing actions and the cost-cutting initiatives that you've put in? It's like what's the impact of Fox Pest on that? Certainly. Thanks for the question. You know, if you look at the last 9 months, the last 3 quarters, if you will, going back to the second half of last year, we've consistently delivered an incremental margin that's approaching 30%. We feel like we're positioned very well to deliver that 30% sort of incremental margin as we move forward. There's always challenges. There's always puts, and there's takes. There might be 1 quarter where you might be below that, but you might have 1 quarter where you exceed that. As I said in my prepared comments, the second quarter, you're gonna see a little bit more investment in customer acquisition costs. We see an opportunity to go after and get customers that are gonna create long-term value for our business. You'll probably see a little bit more investment, a little heavier investment come through in that area as we think about the second quarter. We feel very good about long-term value creation from those customers that will help us deliver that incremental margin profile of 30%+. Thank you very much. There are no further questions at this time. I'd like to turn the floor back to management for closing remarks. Thank you. Well, thanks everyone for joining our call today. We look forward to giving you an update, at the end of the second quarter on our next call. We'll see you then. Thank you. Thank you. Thank you very much. Ladies and gentlemen, that does conclude today's conference. You may disconnect your lines at this time, and thank you very much for your participation.