Greetings, welcome to Rollins, Inc. First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Lyndsey Burton, Vice President of Investor Relations. Thank you, you may begin. Thank you, and good morning, everyone. In addition to the earnings release that we issued yesterday, the company has also prepared a supporting slide presentation. The earnings release and presentation are available on our website at www.rollins.com. 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 earnings release. 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, and actual results may differ materially from any statement we make today. Please refer to yesterday's press release and the company's SEC filings, including the risk factors section of our Form 10-K for the year ended December 31st, 2023. On the line with me today and speaking are Jerry Gahlhoff, President and Chief Executive Officer, 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. Before I turn it over to Jerry, I want to remind everyone of our upcoming Investor Day on May 17th in New York City. We're looking forward to hosting the investment community and discussing our strategies for growing our business and driving value for our stakeholders. Jerry, would you like to begin? Thank you, Lyndsey. Good morning, everyone. I'm pleased to report that Rollins delivered another good quarter of growth and profitability, reflecting consistent execution of our operating strategies and continuous improvement in our business. Our financial performance for the first quarter was highlighted by an increase in revenue of nearly 14% to $748 million. We delivered healthy organic growth of 7.5% in the quarter, despite some unfavorable and erratic weather in January compared to last year, which Ken will discuss in more detail. Overall, we continued to see double-digit revenue growth across all major service lines as total residential revenue increased 16.5%, commercial rose 11.4%, and termite was up 11.7% this quarter. We continue to invest in growing our business. As you would expect, we invested in incremental sales staffing and marketing activities ahead of peak season to ensure that we are well-positioned and top of mind for the consumer as pest season begins. We are well-staffed on the technician and customer support front so that our people are onboarded, extensively trained, and ready to provide an exceptional level of service for our customers. On the commercial side of the business, we are leveraging analytics to identify areas in the market where opportunity warrants additional resources, and this continues to pay dividends as evidenced by another quarter of double-digit commercial growth. We continue to strategically add feet on the street to our sales force and are leveraging our training and sales tools to better enable their success as well. Investments to drive organic growth are complemented by strategic M&A. April 1st marked the one-year anniversary of closing the Fox acquisition, and that team has performed exceptionally well. We anticipate that Fox will continue to positively impact organic growth and profitability as we go forward. We closed 12 tuck-in deals in the first three months of the year, and the M&A pipeline remains healthy. We're actively evaluating acquisition opportunities both domestically and internationally and remain on track to deliver at least 2% of growth from M&A activity in 2024. Beyond growth, our dedication to operational efficiency and continuous improvement is an important part of our strategy and culture. Ken will discuss in more detail, but we saw healthy margin improvement in the quarter as we executed our pricing strategy, leveraged our cost structure, and drove efficiencies throughout the business. Safety remains an important area of focus for us, and efforts to enhance safety coaching, training, and protocols resulted in higher driving safety scores and fewer recorded safety incidents when compared to a year ago. In closing, we're excited about where our business stands today. This year is off to a solid start, and demand from our customers remains strong with over 7% organic growth in the first quarter. Our markets are solid, staffing levels are healthy, and our team is focused on driving continuous improvement and profitable growth. I want to thank each of our 19,000+ team members around the world for their ongoing commitment to our customers. Before I hand it over to Ken, I'd like to announce a few changes to our board of directors. First, we would like to thank Jerry Nix, who recently retired from our board, for his service to our company. We've been so fortunate to have Jerry as our Lead Director for the past several years. His experience, wisdom, and guidance helped us navigate uncharted waters for our company, and we're incredibly grateful for the significant contributions he's made along the way. Second, we would like to welcome Dale Jones, who was elected to our board at a recent shareholder meeting. Additionally, Louise Sams has been appointed as our new Lead Independent Director. We're excited about the level of expertise and experience that both Dale and Louise will bring to our board in their new roles. Ken, I'll now turn the call over to you. Thanks, Jerry, and good morning, everyone. The first quarter reflects continued strong execution by the Rollins team. A few highlights to start: growth was robust to start the year. We delivered revenue growth of 13.7% year-over-year. Organic growth was 7.5%, and we saw significant improvement moving throughout the quarter as organic revenue growth accelerated to over 10% for February and March. Adjusted operating margins were 18.4%, up a healthy 130 basis points, with strong gross profit performance and solid expense leverage despite incremental investments aimed at growing our business. Cash flow continues to be very strong, with free cash flow increasing 29%, enabling a balanced capital allocation strategy. Diving further into the quarter, we saw good growth across each of our service offerings. In the first quarter, residential revenues increased 16.5%, commercial pest control rose 11.4%, and termite and ancillary increased by 11.7%. Organic growth was also healthy across the portfolio, with growth of 4.3% in residential, 10.1% in commercial, and 9.3% in termite and ancillary. As Jerry mentioned, our residential organic growth was impacted by a slower start in January. To provide context, February and March total organic growth was a very strong 10.8% versus 7.5% for the quarter. Looking at residential revenue specifically, February and March organic growth was a healthy 8% versus 4.3% for the quarter. We are pleased with the consistent growth we continue to see across the business. Turning to profitability, our gross margins were healthy at 51.2%, up 90 basis points versus last year. We continue to be positive on the price-cost equation and saw good performance across several key cost categories. While Fox was accretive to gross margins for the quarter by about 40 basis points, organic margin improved 50 basis points as we saw nice leverage from people cost, fleet, and materials and supplies. Quarterly SG&A cost as a percentage of revenue decreased by 10 basis points versus last year. Excluding the earnout adjustment for the Fox acquisition, SG&A cost as a percentage of revenue decreased by 20 basis points in the quarter. We saw healthy leverage from administrative-related costs, which enabled reinvestment and incremental advertising and selling expenses associated with growth initiatives that Jerry discussed. First quarter GAAP operating income was $132 million, up 18% year-over-year. Adjusted operating income was $138 million, up nearly 23% versus prior year on approximately 14% total revenue growth. Adjusted operating margins were 18.4%, up 130 basis points year-over-year on strong gross margins coupled with solid expense leverage. First quarter EBITDA was $160 million, up over 14% and representing a 21.3% margin, up 10 basis points versus last year. You'll recall that last quarter we called out a negative impact to adjusted EBITDA due to lower non-operational gains versus the comparable period in the prior year. We saw a similar dynamic in the first quarter as well. Given that we do, from time to time, divest non-operational assets, we have made the decision to exclude gains and losses on these types of sales. Adjusted EBITDA, adjusted net income, and adjusted EPS are measures of operating performance, and this change will allow us to better compare our underlying performance more consistently over time. A table showing the revised metrics for fiscal 2023 is included in our earnings release. First quarter adjusted EBITDA was $161 million, up 19% versus last year. Adjusted EBITDA margin of 21.5% was strong, improving 100 basis points driven by leverage across the P&L. Incremental adjusted EBITDA margin was 29%, a healthy result considering that Q1 is a slower period and can have a lower profitability profile as we invest ahead of our busier seasons. The effective tax rate was approximately 24% in the quarter, in line with the prior year. Quarterly GAAP net income was $94 million or $0.19 per share, increasing from $0.18 per share in the same period a year ago. For the first quarter, we had non-GAAP pre-tax adjustments associated with the Fox acquisition related items totaling approximately $5 million of pre-tax expense in the quarter. Accounting for these expenses, adjusted net income for the quarter was $98 million or $0.20 per share, increasing over 17% from the same period a year ago despite the higher level of interest costs on the higher debt balances versus the comparable period. Turning to cash flow and the balance sheet, operating cash flow increased 27% in the quarter to $127 million. We generated $120 million of free cash flow, a 29% increase versus last year. Cash flow conversion, the percent of income that was converted into operating cash flow, was well above 100% for the 120% for the quarter. We made acquisitions totaling $47 million, and we paid $73 million in dividends, both up versus the same period a year ago. Debt-to-EBITDA leverage is well below one times on a gross and net level, and our balance sheet is very healthy and positions us well to continue to execute on our capital allocation priorities. In closing, our performance this quarter continues to demonstrate the strength of our business model and the engagement level of our teams. Demand is healthy, and our acquisition pipeline provides us a sense of optimism. We remain focused on providing our customers with the best customer experience and driving growth both organically and through disciplined acquisitions. With that, I'll turn the call back over to Jerry. Thank you, Ken. We're happy to take any questions this time. Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please ask one question and one follow-up question and requeue for additional questions. Our first question is from Tim Mulrooney with William Blair. Please proceed. Ken, Jerry, good morning. Good morning. Morning. So just stepping back here with trends accelerating in February and March, I just wonder if folks are going to extrapolate that 10% organic growth rate into the next several months and quarters. I mean, 10% to me just sounds a touch on the strong side. So I wonder if that's how you're thinking about things or if expectations are better level set to kind of what we saw over the last several quarters, more in that 7%-8% range for organic growth. Thanks for the question, Tim. I appreciate that. And when looking at the business, we certainly did see some improvements as we went throughout the quarter. But one quarter is certainly not a long-term trend. We are continuing to remain very confident in our outlook, and that outlook is really anchored around 7%-8% sort of growth rate that we've consistently talked about. That's stepped up, as you all know, since COVID, and we continue to benefit from that higher growth rate and more favorable operating environment. But yeah, I think 7%-8% is kind of how we think about the business from an organic basis going forward. That's really helpful. Thank you, Ken. This is not a follow-up. It's a completely separate topic, but I'm going to do it anyway. The step up in sales and marketing expense, okay? I think there's a couple of different ways folks could interpret that, either as more of a defensive move because you're having to spend more, maybe on digital marketing to win customers, or more as an offensive move, hiring more sales folks for future growth, for example. Could you just double-click into that increase in sales and marketing expense column and help us understand that decision a little better to ramp up spend there? Thank you. Hey, Tim. This is Jerry. A lot of that cost really was on the heavier side on the selling expense as it relates to us staffing up. Let me give you a couple of examples, a couple of data points. Just looking at Orkin alone, when we looked compared to prior year in the first quarter, we had over 50 more commercial account managers at Orkin alone. We had over 100 more home sales inspectors at Orkin in the first quarter of this year than we did the last year. So that's where a lot of our investment continues to be. We see that opportunity. That's what I referred to as the feet on the street, the opportunity. So our sales salaries are up there. It's not necessarily a "some sort of targeted defensive marketing spend." It's an offensive sales mobilization and really building out your sales team for the growth opportunities ahead. Got it. Makes sense. Thank you. Thank you. Our next question is from George Tong with Goldman Sachs. Please proceed. Hi. Thanks. Good morning. Wanted to dive into trends that you're seeing in the residential business. It sounds like most of the impact to organic revenue growth in residential was due to unfavorable January weather, leading to the 4% organic growth. I wanted to see if there were any other trends you would call out there. I know last quarter, you highlighted one-time sales impact. So any changes there and other operating items to consider as it relates to the organic growth in residential? Certainly. When we look at the residential business, we look at the residential business very broadly across our residential services as well as our termite and ancillary. Across that portfolio, the business continues to perform very well. One-time business can be choppy. It continues to be choppy. But generally, demand for our services remains very healthy. As I indicated in my prepared commentary, what we saw when we looked just at the residential business alone, we saw an improvement, 4.3% growth for the quarter, but close to 8% growth as we look at February and March. So we continue to see really good demand levels for our business. I would add to that, George, that when we think about some of the one-time business, as well as Ken mentioned, it's usually choppier in the shoulder seasons when weather that's an area of the business that weather can impact more so than anything. But you still have your recurring customer base that's there to service. But we also continue to see really strong health in our one-time ancillary business that really shows that the consumer side of it is strong and the consumers continue to be willing to invest in protecting their homes. Got it. That's helpful context. And then within the termite and ancillary services business, organic growth seems to have decelerated a bit to 9% compared to 11% in 4Q. Can you talk about some of the puts and takes that could have led to that performance? Certainly. When you unpack the termite business, there's two components to the termite and ancillary. There's your normal recurring termite business, your pretreat business, and then you have ancillary business in there as well. We're seeing really good demand across the spectrum. Our recurring bait monitoring business continues to grow at a very healthy level, but also our ancillary business in that area continues to grow as well at a nice rate. So it's really a broad-based growth that we're seeing in demand for our services. Okay. Got it. Any factors that could have caused the deceleration in organic revenue growth there? I look at it from a productivity standpoint. We continue to the sales are there. Working the backlog can be a challenge. In the quarter, that goes back to a January type of phenomenon where we had more branches and operations closed for multiple days compared to the prior year. That affects productivity and ability to get the work done. Even if our sales force is out there selling it and they're out there continuing to do what they do and building that backlog of work to get done. The work is there for us to get done. We're optimistic about that. It's not a selling issue. It's us getting all the workload done in a given period of time. When you carry a backlog over into the second quarter, things still look healthy. That helps add any color. Got it. Very helpful. Thank you. Our next question is from Stephanie Moore with Jefferies. Please proceed. On for Stephanie Moore. I just wanted to touch on commercial organic growth. It's been pretty strong over the last few quarters. I know you mentioned leveraging analytics and things like that, but I was just curious if there's anything else to call out and if you could kind of talk about the sustainability of growth there? And I know it sounds like a broken record, and we've said this now for a few years. We just continue to invest in our sales staff, getting them ramped up and being successful. That B2B sales process is a relationship type of sale. It's got a long selling cycle, and you got to be patient. You got to invest. You got to invest in training and sales tools and supporting those new account managers when they're brought up to get them ramped up and brought up to speed just as fast as possible. The more you add in the sales force and the more investments you make to make them successful, we just continue to see that opportunity there. So I wouldn't say there's anything magical about it other than being committed to continue to add incrementally to our sales force. It's interesting. When I step back and I look at the financials and I look at the trend and spend across different categories of SG&A, Jerry's spot on. Sales salaries continue to be an area that we continue to invest disproportionately in. We're saving money in some of the back office costs and admin areas, but we continue to invest pretty heavily on the front end of our business and taking a very offensive perspective on our business. Just on the resi side, have you guys seen any slowdown? Anything that's meaningful related to the new business wins or any sort of meaningful pickup in customer churn and maybe lower household income areas? And then just anything you could share around how April is kind of shaping up so far. We haven't seen any significant change from a retention issue one way or the other. So that remains pretty solid. We won't see color on April. Yeah. It It would be very difficult to grow our business at the rate we're growing if we saw heightened customer churn. And so customer churn, although it is not heightened, it still remains an opportunity for us to continue to improve. When we look at April, we continue to see healthy levels of demand. We're starting April strongly. But again, we continue to think about a 7%-8% sort of organic growth rate across the business as we think about the future. Our next question is from Ashish Sabadra with RBC Capital Markets. Please proceed. Hi. Good morning. This is David Paige for Ashish. In terms of capital allocation, now that you've left the Fox acquisition, how should we think about, I guess, your M&A pipeline in terms of larger deals or smaller deals going forward, especially given this robust free cash flow that you keep generating? Thank you. When we look at the pipeline, it's very healthy. It's very balanced. There's opportunities across the spectrum with respect to M&A. Something that we have consistently said, however, for 2024 is that we do think that 2%-3% of revenue growth is probably a realistic expectation of contribution from M&A. We continue to look at deals. We continue to evaluate deals. And in fact, in Q1, we spent roughly $45 million-$50 million on M&A, and that was up considerably year-over-year. Of course, last year, we were preparing for Fox. But I think it just shows that there continues to be a very healthy pipeline of M&A and a very fragmented market that we continue to compete in. As a reminder, there's star one on your telephone keypad if you would like to ask a question. Our next question is from Josh Chan with UBS. Please proceed. Hi. Good morning, Jerry, Ken, Lyndsey. Thank you for my question. Morning. Hi. Good morning. So I guess you mentioned that 7%-8% sustainable growth rate. And given how strong commercial and termite is, does that imply that you expect residential to kind of remain in this 4% range going forward? Just curious how you're thinking about how the different businesses contribute to that 7%-8%. Thank you. It's interesting. It's hard to put a fine point on that, but we do think that probably commercial and termite and ancillary will probably grow a little bit faster than the overall average, and resi might grow a little bit slower. You just have puts and takes across the portfolio. It doesn't mean that we're not bullish in residential, but I just think that that's generally how the growth profile has unfolded over time for us. Yeah. I agree with you, Ken. I think it's hard to predict that. I mean, there's going to be movement in any of those categories potentially based on a number of factors. And that's where it all comes out in that 7%-8% total. Yeah. Thank you. Okay. That helps. And then on your decision to accelerate investment during the off-season, sometimes you focus on the peak season to invest. Sometimes you invest ahead of the season. So could you just talk about the rationale for investing ahead of the season this year, what you're seeing, and what opportunities you expect to realize? Thank you. Yeah. As we had talked about, I mean, the business started to grow pretty nicely on a year-over-year basis, organic basis, in February and in March. And so we saw that, and we saw an opportunity to pull forward some investments. It doesn't mean that we're going to invest any lighter in Q2. In fact, we're going to continue to invest in Q2 and drive further growth. The market opportunity is there, and you've got to invest when that market opportunity is there. This is a very short-cycle business. And when you see weather patterns that improve or demand trends that might change, you have to be ready to invest. And so I think it's just reflective of our investment and our interest in investing in growth across our portfolio. We had a lot more carrying costs from people's side in late fourth quarter and certainly in the first quarter than I think we've ever had. The reality is it's certainly harder to find people. And then with the level of intensity that we put and the time and energy that we put into training and development upfront, that takes time to have people ready. And so our strategy has been to get ahead of that. Absolutely. Yeah. Thank you so much for your time, and congrats on a good quarter. Thank you. Thank you, Josh. Our next question is from Oliver Davies with Redburn Atlantic. Please proceed. Yeah. Good morning. Just two for me. So firstly, can you just talk about the level of price increases you're putting through and if you're seeing any pushback on the residential side, just given the level of volume growth in the first quarter? And then secondly, in terms of probably one for Ken, just in terms of the SG&A, I mean, obviously, the admin expenses, I guess some of that's coming from the modernization that you did last year. So how sustainable are they going forward through this year? And I guess your ability to reinvest that. So looking at your questions, thank you for your questions. The first question with respect to pricing, it's interesting. When we step back and we look at this business, I think recently you've heard me start to talk about this as a CPI-plus type of business. So we think this service is certainly an essential service and should command CPI-plus level pricing. So 3%-4% this year is certainly it's something we passed along, and we're seeing it stick. We just feel like the service is just too valuable, not to price it at those levels. And then secondly, when you look at the SG&A levels across the business, it's good to see the improvements that we're seeing in our cost structure. I think in the quarter, we talked about a 20 basis point improvement in SG&A as a percentage of sales. But when you unpack that, you see that we spent roughly 50 basis points more on growth-oriented investments but 70 basis points less of back office costs. And I think that's representative of the work we're doing to improve the effectiveness and the productivity of our business. We feel like there's more to come, but we certainly are happy with the progress we're making there. Okay. Thanks. Our next question is from Ashish Sabadra with RBC Capital Markets. Please proceed. Hey. Sorry, David again. Apologies if I missed this one, but what was the exit growth for residential? I believe the 10% was for the entire company, but what was it for resi? Yeah. It was 10.8% to put a fine point on it for the entire company. For residential, it was 8%. Thank you. For February and March. Yeah. For February and March. Yep. We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments. Thank you, everyone, for joining us today. We appreciate your interest in our company and look forward to speaking with you all at our upcoming investor conference. Thanks again. Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.