The operator introduces the Rollins, Inc. Second Quarter 2024 Earnings Conference Call and reminds participants that the call is being recorded. Lyndsey Burton, Vice President of Investor Relations, leads the call and introduces the speakers, Jerry Gahlhoff and Ken Krause. Gahlhoff reports that Rollins has had a successful quarter due to their strong execution of operating strategies.

The company saw a significant increase in revenue for the second quarter, with growth across all major service lines. They have made strategic investments in sales, staffing, and marketing to continue growing their business. Their creative team at Orkin partnered with a composer to create a symphony based on the emergence of cicadas, which gained a lot of attention and is now available on streaming platforms.

In addition to focusing on organic growth and strategic acquisitions, the company is also dedicated to operational efficiency and safety. They have seen healthy margin improvement and have enhanced their safety training program for new employees. The company is also modernizing its board structure to align with best practices. Overall, the company is in a strong position for future success.

In the fourth paragraph of the article, the company's CEO and CFO discuss the strong demand from customers and solid performance in the second quarter. Revenue growth was at the high end of expectations, with organic growth of 7.7%. The team's focus on continuous improvement and profitable growth is credited for this success. The company also saw growth across all service offerings and healthy profit margins. Operating and free cash flow also showed significant growth.

The company saw improvements in several cost categories, with the most significant being fleet and insurance and claims. They also saw leverage in customer acquisition costs, but plan to continue investing in demand for their services. Operating income and margins increased, with adjusted EBITDA up over 15%. The effective tax rate was 26.1% and net income increased by 23%. Non-GAAP pretax adjustments related to the Fox acquisition resulted in $4 million of expense in the quarter.

The company's adjusted net income for the quarter was $132 million, or $0.27 per share, showing a 17% increase from the same period last year. Despite higher interest costs, the company expects a similar run rate in the second half. Cash flow and the balance sheet remain strong, with operating cash flow of $145 million and free cash flow of $136 million. The company made acquisitions totaling $35 million and paid $73 million in dividends. Debt to EBITDA leverage is below one-times on a gross and net level. The company remains focused on driving growth and investing in its people to provide the best customer experience. The team's performance in the first half of the year demonstrates the strength of the business model. The company is starting the second half with healthy organic demand.

Analysts Jerry Gahlhoff, Kenneth Krause, and Tim Mulrooney discuss the strong profitability of the company in the quarter. Mulrooney asks about the incremental margins, which were around 40%, but Krause notes that they were still at or above 30% even without non-operational items. Ashish Sabadra asks about the consumer business, which showed improvement in organic growth compared to the first quarter but is slightly below historical trends. He requests more information on this.

Jerry Gahlhoff and Ken Krause discuss the impact of two fewer working days in June on their business. They mention that the recurring business is outpacing organic revenue growth and that the consumer side remains strong, with double-digit growth in termite and ancillary services. They do not see any shift in consumer behavior and residential growth was at or above 6% in the quarter.

The speaker discusses the potential impact of various factors on the overall growth rate and expresses satisfaction with the growth seen in the quarter. They also mention investments in the commercial side and the strength of their salesforce. A question is asked about the impact of two fewer working days in June on organic growth in different segments. The speaker responds that the impact was not greater in certain segments.

In this paragraph, the speaker mentions that their intuition tells them that the impact of having two fewer days in the month of June may have affected the residential pest and termite/ancillary business more than the commercial side. This is because these types of jobs take longer to complete and the lost days may have resulted in some work carrying over into July. The speaker also mentions that the lack of these days may have affected both one-time and recurring business, as they were not able to start new recurring services and may have missed out on one-time calls during the peak season. However, they note that demand for residential services remains healthy and they are confident in their ability to achieve their growth goals for the year.

The trends in both residential and commercial sectors have remained positive and demand is healthy, giving the company confidence in its ability to deliver on its goals. The warmer weather in July may be beneficial for business, but the company does not rely on predicting weather. The cicada issue has not had a significant impact on the company's operations.

The speaker discusses how cicadas are not considered a pest by consumers and how the company has chosen to have fun with the situation and create demand. They also mention the uncertainty of hurricane season and how they feel good about their business and competition. They then mention their focus on their own business rather than paying attention to competition, as it is a highly fragmented market.

The company's approach to advertising has shifted over the years, with a focus on the digital marketplace and a spread out timeline from March to October. This decision-making process is dynamic and can change week to week. In the current quarter, there was less spending on advertising, but it will increase in the following quarter to take advantage of the longer shoulder season.

The speaker discusses the expected increase in advertising efforts in July due to the healthy market. They also mention that all marketing channels have been successful and there are no significant differences in growth across different regions or countries. They credit this success to a balanced approach, disciplined execution, and measuring return on investment.

The speaker discusses the overall healthy performance of the market in different regions, such as the western and southeastern United States, and Canada. They mention a slower start in certain parts of the southeast, but good demand levels overall. They also mention that differences in performance are usually seen on the edges of shoulder seasons or during extreme weather. The speaker then answers a question about gross profit, stating that 30 basis points were driven by insurance and claims activity, while the rest was due to operational leverage and prices.

The company has experienced strong organic growth in both termite and ancillary services, with the latter showing slightly higher growth due to higher ticket prices. They have also been very active in acquisitions, with 26 deals closed in the first half of the year. They are seeing competition for deals, but their approach as an acquirer of choice has been successful in preserving brands and investing in their people. They remain interested in further opportunities for growth.

The speaker, Jerry, and his colleague, Kenneth, have been traveling and looking for new ideas and building relationships with potential sellers. They are taking a long-term approach and are confident in their ability to deliver on their goals. They did not disclose the trend of July's organic growth. The call concludes with a thank you and an invitation to join their next earnings call.

This summary was generated with AI and may contain some inaccuracies.