Earnings Call Transcript - ROL Q1 2022

Operator, Operator

Greetings, and welcome to Rollins Inc. First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I'd now like to turn the call over to Joe Calabrese. Thank you. You may begin.

Joe Calabrese, Executive Secretary

Thank you. By now you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact our office at (212) 827-3746, and we will send you a release and make sure you're on the company's distribution list. There will be a replay of the call, which will begin one hour after the call and run for one week. The replay can be accessed by dialing (877) 660-6853 with the pass code 13728548. Additionally, the call is being webcast at www.rollins.com, and a replay will be available for 90 days. The company is also offering investors a supporting slide presentation, which can be found on Rollins' website at www.rollins.com. We'll be following that slide presentation on a call this morning, and encourage you to view that with us. On the line with me today and speaking are Gary Rollins, Rollins' Chairman and Chief Executive Officer; John Wilson, Vice Chairman; Jerry Gahlhoff Jr., President and Chief Operating Officer; and Julie Bimmerman, Interim Chief Financial Officer, Vice President, and Treasurer. Management will make some opening remarks. And then we'll open the line for your questions. Gary, would you like to begin?

Gary Rollins, Chairman and CEO

Yes. Thank you, Joe, and good morning. We appreciate all of you joining us for our first quarter 2022 investor call. Julie will read our forward-looking statement, disclaimer, and then we will begin.

Julie Bimmerman, Interim CFO

Our earnings release discusses our 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 risks may differ materially from any statement we make today. Please refer to today's press release and our SEC filings, including the Risk Factors section of our Form 10-K for the year ended December 31, 2021, for more information and the risk factors that could cause actual results to differ.

Gary Rollins, Chairman and CEO

Thank you, Julie. I'm pleased to report that Rollins delivered solid first quarter results and realized strong year-over-year growth in many key performance areas. We remain well positioned to deliver on our short-term and long-term objectives. And we look forward to sharing our progress in the quarters ahead. I would now like to give an update on our SEC investigation. Rollins reached a settlement agreement with the U.S. Security and Exchange Commission on April 18th. The settlement fully resolves the SEC's investigation into certain adjustments to accruals and reserves and their impact on reported earnings per share in the first quarter of 2016 and the second quarter of 2017. Rollins paid an $8 million civil penalty, which was fully accrued in the third and fourth quarters of 2021. Under terms of the settlement, Rollins neither admits nor denies the SEC's findings in this matter. The settlement completes the SEC's investigation and there will be no restatement of Rollins' financials related to this matter. I want to take a moment to highlight the actions that we've taken to strengthen Rollins controls and procedures to prevent something like this from happening in the future. From the beginning, we took this matter very seriously and hired outside consultants to evaluate and strengthen our financial reporting. This included improving processes, procedures, and supporting documentation that impact financial results. We also hired a Chief Accounting Officer, Traci Hornfeck, last October and added two retired E&Y partners to our audit committee, Susan Bell and Pat Gunning. Susan currently serves as Chair of that committee. We have also hired and added several experienced accounting personnel to further strengthen our team. Jerry will share with you details of our active CFO search to further improve this area. It is noteworthy that the SEC recognizes within the order that Rollins 'cooperation and the remedial actions were promptly undertaken to prevent and detect the type of misconduct described in the order. Out of respect for the process, we will not answer any questions during our Q&A on this matter. I assure you that integrity is at the core of who we are as a company. And we remain committed to doing the right thing for our employees, investors, and customers. And finally, we are pleased that this matter is resolved. With that, let me turn the call over to John who will provide some business updates. John?

John Wilson, Vice Chairman

Thank you and good morning everyone. As Gary mentioned, we are pleased with our first quarter financial results, with revenue increasing to $590.7 million and net income totaling $72.4 million or $0.15 per share. Overall, we experience solid growth across our family of pest management brands and continue to achieve strong levels of customer growth. Over the past couple of years, we have been actively strengthening and solidifying our Board of Directors and board committees, reflecting our commitment to effective corporate governance. For those of you who are familiar with Rollins, our Board consists of outstanding directors who have diverse backgrounds and bring invaluable experience, strong governance, and their unique perspectives to our company. As part of that process, our directors have also been a key component of driving Rollins long-term strategic vision. We are pleased to announce that Gregory Morrison has been recently appointed to Rollins' audit committee. Some of you may recall that Greg, who joined as a Director of Rollins in 2021, served 18 years as Vice President and Corporate Chief Information Officer for Cox Enterprises. At Cox, he was responsible for the management and operations of all information technology, including cybersecurity solutions, which we believe makes him particularly well-suited to join the audit committee. In addition to his responsibilities as a member of our Board's human capital management and compensation committee. We are also pleased to announce that Don Carson has been appointed to our nominating and governance committee. Don also joined our Board in 2021 and is a trusted advisor to Catheter Precision, where he also serves as a Director. Don also acts as a trustee for The Cook and Bynum Fund. Furthermore, we strengthened our Board with the recent selection of seasoned executive Louise Sams. Louise has also been appointed to our nominating and governance committee and the compensation committee. For almost 20 years, Louise was an Executive Vice President and General Counsel of Turner Broadcasting System. As General Counsel, Louise oversaw legal work related to Turner's business activities and at subsidiaries worldwide, including licensing and production of content for Turner Television. She was also involved in the sale and distribution of those networks. The protection of intellectual property, employment matters, as well as litigation and transactional work related to acquisitions and joint ventures. Most recently, Louise focused on issues related to technology, information security, use of data and consumer privacy, as well as enterprise-wide risk management. We are pleased to have Louise join our Board, and we believe her broad experience will help to further strengthen Rollins and guide our strategic direction. At our core, we are foremost a service company. Our track record of success is a direct result of the efforts of the dedicated and caring people that work at Rollins. Toward this end, I'd like to highlight that during the quarter Rollins was awarded a 2022 top workplaces award by the Atlanta Journal Constitution. Rollins will rank 17th in the large business category, marking the sixth consecutive year we've received this award. This recognition is based solely on employee satisfaction and engagement feedback gathered through a third-party survey. The survey measures several aspects of workplace culture, including alignment, execution, and leadership. More than 2,900 Atlanta companies participated in this program and over 68,000 of their employees were surveyed about their workplace experience. Another recent recognition that I am particularly proud of is that Newsweek ranked Rollins number eight in their article on America's Most Trustworthy Companies for 2022 in the consulting and professional services category. Over 110,000 evaluations were collected and reviewed regarding customer trust, investor trust, and employee trust to receive this recognition. We remain committed to providing a workplace where our team members can grow professionally and have a positive impact on the community, and many thanks go to our leadership team who deserve all the credit for Rollins achieving these honors. Now, let me turn the call over to Jerry who will provide more details on our business.

Jerry Gahlhoff, President and COO

Thank you, John and hello everyone. I'd now like to walk through our 2022 first quarter financial results, focusing on items that directly impacted our operations during the quarter. Julie will address the non-GAAP adjustments a little later. Looking at our numbers, Rollins' first quarter 2022 was highlighted by revenue growth of 10.3% to $590.7 million compared to $535.6 million in last year's first quarter. Net income was $72.4 million or $0.15 per diluted share. This is compared to $92.6 million or $0.19 per diluted share for the same period in 2021. This decline in EPS was primarily the result of last year's gain on the sale of Clark properties. As mentioned, Julie will review GAAP and non-GAAP results as well as organic revenue growth numbers shortly. Operationally, all our business lines experience good growth during the quarter, with residential pest control up 10.2%, commercial pest control rising 9.1%, and termite increasing 13.3%. On the expense side, in the first quarter, we felt significant inflationary pressures in fleet and pest control materials and supplies. I'll give insight on these and an overview of the actions we've been implementing to mitigate these expense pressures. As you may recall from last quarter, we've been proactively addressing supply chain issues in our termite and ancillary service offerings. With our procurement team seeking alternate products and suppliers, while our operations teams have been successfully initiating increases in our rate card pricing where needed to counteract the rise in some of these material costs. We believe we've struck the right balance and these efforts are helping to bring material costs back in line for our termite and ancillary business. In the first quarter, we began experiencing similar inflationary headwinds within our residential and commercial pest control materials and supplies. Given the successes we've achieved mitigating costs in termite, we're implementing a proactive approach within our pest control business by adjusting our rate cards and diversifying through alternative suppliers and also by seeking shipping and freight efficiencies. Most importantly, to improve our profit margin, we're also implementing our annual price increase programs earlier this year. These more aggressive price increases were initiated within all our brands in late spring as compared to the typical timing of the early summer months in prior years. In short, we're proactively managing through this. Our fuel expense is an important example. We gave up seven tenths of a point in margin to increases in fleet expense in Q1. Through extensive routing and scheduling initiatives, we have reduced our overall mileage necessary, which lowers our fuel requirements. For our first quarter of 2022, our fuel would have been approximately $700,000 higher if we had not begun these routing and scheduling processes. This equates to an estimated addition of over 3.2 million miles driven if our miles between stops had not been reduced using our routing and scheduling technologies. We expect that we will see ongoing benefits of these improvements as we move throughout the remainder of the year. Furthermore, we continue to increase the number of hybrid and electric vehicles in our fleet, as we now have over 800 currently deployed. Next for a quick update on our acquisition pipeline. Fortunately, it's full. We have plenty of potential opportunity that we're actively engaged with. Our acquisition team has been busy, both domestically and internationally. One of our latest acquisitions, highlighted in a recent press release, NBC Environment, headquartered in the U.K., closed on April 1st and now gives us full coverage within the U.K., including multiple locations within Scotland. Before closing, I'd like to provide an update on our Chief Financial Officer search. While we don't have an announcement to make today, we have engaged an executive search firm to assist with identifying an exceptional candidate to join our leadership team. We are focused on getting a seasoned, talented financial executive as our CFO. The search is progressing well, and we look forward to providing an update this summer. Julie has been filling in remarkably as our Interim CFO, and you can all rest assured that Julie will be remaining with Rollins as our Group Vice President of Finance and Investor Relations. I know that I sleep better at night knowing that. Before I turn it over to Julie, I want to emphasize how pleased we are with our first quarter results, given the inflationary pressures we faced and remain well-positioned for 2022. I'll now turn the call over to Julie.

Julie Bimmerman, Interim CFO

Thank you, Jerry. We delivered a strong first quarter highlighted by significant growth across many key financial metrics. Like last quarter, we are including a slide deck on our website, which presents the numbers we discussed during today's earnings call presentation. To view the deck, please go to rollins.com, click on news and events, then presentation. Now onto the numbers. Our first quarter revenues of $590.7 million was an increase of 10.3% at actual exchange rate and 7% organic. For the constant exchange rate, the total revenue growth totaled 9.6%, with 6.3% organic. As previously mentioned, residential, commercial, and termite all presented strong growth for the quarter. Residential grew 10.2%, 5.8% organic, commercial grew 9.1%, 7.9% organic. Lastly, we have termite which grew 13.3% with 8.5% organic. Now onto our income. For the first quarter, we are presenting adjusted EBITDA for comparison purposes due to the impact of our gain on sale of several of our Clark properties of $31 million in Q1 of last year. First quarter EBITDA 2022 was $117.8 million or 4.2% over 2021 adjusted EBITDA of $113 million. First quarter 2022 EPS was $0.15 per diluted share or 7.1% improvement over 2021 adjusted EPS. For the first quarter 2022, gross margin decreased to 50% or 1.2 points below last year. As mentioned, fleet created another quarter of strong headwinds in Q1, 2022, primarily from fuel in the amount of $4.6 million and vehicle repairs of $1.2 million over last year. Combined, these fleet expense increases equated to seven tenths of a point in additional cost. Service salaries were up four tenths of a point, while pest control materials and supplies were up $2.9 million or one-tenth of a point. Fuel increases were driven by a 42% increase in average price paid per gallon in Q1, 2022, over 2021. This along with customer growth brought a 55% increase in our total fuel cost for the quarter. The service wages increase was a combination of COVID sick time taken and overtime paid to cover work for employees out sick with COVID. We faced some difficult challenges in January as our reported number of employees testing positive for COVID-19 increased 154% over January 2021. Additional overtime pay required to complete our routes and cover for these COVID cases contributed to a 21% increase over Q1 2021. We believe this to be a one-time event unless another COVID surge occurs. Sales, general and administrative, or SG&A, on the other hand, held flat Q1, 2022, over 2021 with both quarters coming in at 30.3%. Now for a few notes regarding our cash flow. Our dividends for Q1, 2022 totaled $49.2 million or an increase of 25% over 2021, while cash used for acquisitions declined 22% to $13.2 million for 2022. We ended the current period with $258.3 million in cash, of which $86.1 million was held by our foreign subsidiaries. As you've probably noted, we have also increased our term loan over last year. This will put us in a strong position to act quickly on either potential acquisitions or stock repurchases as opportunities may arise. Now to free cash flow. For the quarter of 2022, our free cash was $79.5 million or a decrease of 28.8% over last year. The decline was related to $30.6 million in payroll taxes deferred under the Coronavirus Aid, Relief, and Economic Security, or CARES Act, in 2022 and subsequently paid in the third quarter of 2021. In comparing the current first quarter to last year, the deferral was within the Q1, 2021 operating activities. Last, I am pleased to share that yesterday the Board of Directors approved a regular cash dividend of $0.10 per share that will be paid on June 10th, 2022, to shareholders of record at the close of business May 10th, 2022. This represents a 25% increase over the dividends paid in June 2021. The dividend increase reflects our strong performance in the quarter of 2022, accentuates our financial strength, and the Board's confidence in our outlook for continued growth. Gary, I'll turn the call back to you.

Gary Rollins, Chairman and CEO

Thank you, Julie. We're happy to take any questions at this time.

Operator, Operator

Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of Tim Mulrooney with William Blair. Please proceed with your questions.

Tim Mulrooney, Analyst

Gary, Julie, Jerry, John, good morning.

Julie Bimmerman, Interim CFO

Good morning.

Gary Rollins, Chairman and CEO

Good morning.

Jerry Gahlhoff, President and COO

Good morning.

Tim Mulrooney, Analyst

Thanks for taking my questions. So, I just had a couple about pricing, and I appreciate the color that Jerry gave. But the first one is, pricing is typically, call it, 1% to 2%. How much do you expect it to be this year? I mean, we've spoken to several regional providers who are talking about price increases of more than 5% this year. So, we're wondering if Orkin is thinking along the same lines.

Julie Bimmerman, Interim CFO

So, I'll start with this and then any of the guys can jump in if they want to add to that, Tim. As you know, our price increase will typically equate to 1% to 2% of our overall growth. And we have said bringing it 4% earlier this year and the fact that we are being more aggressive than we do expect it to increase over that. We're obviously not going to give you an exact number. As you know, I don't really do that. But keep in mind what this means by being more aggressive is there are customers that in the past that we may have considered not doing the increase or holding off a little bit longer, we'll do that. Also, there may be some areas that we may push that envelope a little bit and increase it higher by region.

Jerry Gahlhoff, President and COO

Yeah. Tim, this is Jerry. We took a hard look and as we said, we've been more aggressive than we probably ever have in the future. And we looked at it as from a standpoint of what will the market bear and we've just been considerably more aggressive than we have in prior years with our percentage increases.

Tim Mulrooney, Analyst

Okay. Well, I'll take what I can get. Thank you. For my follow-up on pricing, could you explain how it works on the commercial side? I understand that on the residential side, you announce your price increase in the second quarter every year, which makes sense. However, I think the commercial aspect might be more complex, so please correct me if I'm mistaken. My question is whether there are opportunities for pricing discussions every time you meet with a commercial customer, or if it only happens once a year, or if the price is fixed for the entire contract duration. Could you provide more insight into how this dynamic functions on the commercial side?

John Wilson, Vice Chairman

Tim, yeah. This is John. I'll take that. I guess, the easy answer is it depends. It depends entirely on that customer, the contract arrangement and where we are in terms of service duration. Most of our commercial customers sort of equate service duration to the price they pay. And so, if we get some pretty robust reporting out of our systems to provide our managers and field sales folks with the information they need to then kind of have that conversation if service durations are exceeding kind of what our revenue per hour goal might be. So, it just depends entirely on the customer and where they are relative to all that.

Gary Rollins, Chairman and CEO

I'd like to add something, John. This is Gary. We have been doing price increases on a consistent program or a routine program for the last 20-plus years. And we have a tremendous database that we're able to compare the price that the customer is paying related to the current rate card, look at the exact gap, if you will, between the rate card and the price and study quite carefully what the results are going to be. So, I think it's not a hit or miss deal. And we measure rollbacks. This would be a situation where the customer objects and we feel like the customer is certainly profitable obviously. But we've learned that really there's not much difference between the customers that are being rolled back. In other words, we have branches that rollback very few, maybe 10% of their customers. So, we really share that data and which really kind of adds integrity to what we're doing because there's no need to change the pricing. And then we even get something. Our attitude is, they may not have required the full amount of the pricing increase, but we do get some amount. So, this is something that we've been watching carefully and it's made a big difference to our company.

Jerry Gahlhoff, President and COO

I would add, Tim, that we were just as aggressive within our brands, if not more so in some cases on the commercial side than in residential. We definitely made significant moves in the commercial business regarding price increases.

Tim Mulrooney, Analyst

Okay. That's great color. Thank you everybody.

Operator, Operator

Thank you. Our next question comes from the line of Ashish Sabadra of RBC Capital Markets. Please proceed with your questions.

Ashish Sabadra, Analyst

Thank you for taking my question. Regarding gross margins, considering the various measures you've implemented through price increases and scheduling, can we assume that the challenges faced in the first quarter will lessen going forward? I understand you don't provide guidance, but can you share any insights on when we might see a shift from these challenges to a potential gross margin expansion? Is it possible we could begin to see this in the latter half of the year, or should we expect to wait until next year for significant gross margin growth? Thank you.

Julie Bimmerman, Interim CFO

I'll start on that and then let everyone else jump in. So, yes, regarding the service salaries we discussed, we believe that we have overcome that issue, which was related to the early COVID experience earlier in the year. Therefore, unless we face another wave of COVID, we think that part is behind us. Additionally, as Jerry mentioned, we are addressing the pest control maintenance and services by adjusting through our procurement group and rate cards to manage that cost. This leaves our fuel costs to address from that 10-point increase. Our price increase will certainly help cover those costs. Furthermore, our fleet group is also assessing the types of vehicles in our future fleet, as Jerry noted. We believe that a significant portion of the expenses we're discussing is behind us. Jerry, do you want to add anything?

Jerry Gahlhoff, President and COO

As we progress through the year, we've begun to notice price increases in fuel by mid-year. This will likely affect our standard run rate more than we are used to. However, the challenges we face will be lessened when we compare them to the previous year as we continue through the year.

Julie Bimmerman, Interim CFO

And let me add one last thing is the fact that Jerry had commented is keep in mind with our price increase coming in, we've actually brought that forward to where it is going in earlier as well to help mitigate those costs.

Gary Rollins, Chairman and CEO

If I could add something, most of our pest control technicians have an element of productivity in their pay plans. So, when we raised the customer's price, the technician benefits from that as well. So, it's kind of a win-win situation and makes you feel good that they're getting a raise too.

Ashish Sabadra, Analyst

That's great color. Thank you very much. And maybe if I can ask a quick follow-up on the M&A pipeline. As you mentioned, M&A pipeline is pretty solid. I was just wondering if you could comment on the valuation. And also, on the last call, there was a comment made around restructuring foreign entities to make cash available from foreign operations more readily. So, would it be fair for us to assume that we could potentially see bigger M&A in the international markets as well? Any comments on that front? Thanks.

Julie Bimmerman, Interim CFO

I'll address the second part of that regarding the cash held by foreign subsidiaries. As you mentioned, we had $86 million available at the end of March. Our acquisition that took place on April 1st in the U.K., NBC, was a great example of how we can utilize those funds for acquisitions immediately when they are already on foreign soil. We are consistently seeking acquisition opportunities and do not designate our funds for domestic or international use; we are focused on finding the right company that fits our culture, regardless of location. So, please understand that we don’t restrict these funds to either category. Did you want to discuss anything else about the pipeline?

Jerry Gahlhoff, President and COO

And I would add on the valuation part. We really haven't seen a significant change in valuation in the market. I think it's still a very competitive acquisition market. There's probably more private equity players involved now than there were even two years ago. There's still plenty of competition there on the valuation side that's keeping the prices of some of these businesses fairly well propped up.

Ashish Sabadra, Analyst

Thanks again. Very helpful color and congrats on the strong momentum in the business. Thank you.

Operator, Operator

Thank you. Our next question comes from the line of Mario Cortellacci with Jefferies. Please proceed with your question.

Mario Cortellacci, Analyst

Hi, guys. Really appreciate the time. Just my first question around kind of what the organic growth looks like in Q2, or in the back half of the year. You guys are coming up on tougher comps. I know that you guys have ramped your Salesforce as well. So, maybe you could just help us understand how much pricing is playing into helping alleviate some of that comp pressure? And then, also how much that extra Salesforce capacity that you guys have will help potentially maintain high single-digit growth in Q2 and the back half of the year?

John Wilson, Vice Chairman

So, Mario, this is John. I'll start, and then maybe Jerry might have something to add. When we look at our business by service line, the residential segment, after two years of significant growth, has softened in the first quarter, and I believe that trend will continue, particularly due to some weather challenges in the first part of the year. However, I expect our expansion in the Salesforce will benefit us in the commercial and termite areas, and I anticipate our organic growth there to stay in the high single-digit range that you mentioned.

Jerry Gahlhoff, President and COO

And this is Jerry. We believe John is absolutely correct about commercial and termite with the enhanced Salesforce. I would like to add that spring hasn't fully arrived yet. When we analyze our call center data and observe the call volume from existing customers reaching out for additional services or reporting issues, we notice that the volume isn't at the level we would anticipate. It seems we are likely a few weeks behind from a seasonal perspective. Therefore, we expect to have more insights on this as we progress through Q2, considering how the weather unfolds. Once spring truly arrives, we should have a better understanding of the residential pest control aspect.

Mario Cortellacci, Analyst

Got it. I appreciate it. And then, just for my follow-up, I haven't asked you guys about this in a while. Just around technology and kind of connected technology or connected tools. How penetrated are you within your customer base on that connected technology front? I'm assuming it's probably more weighted towards the commercial customer base and the residential customer base. But any kind of quantification there would be extremely helpful. And maybe where do you think that could go over time? I mean, we're seeing in other industries where automation is helping reduce headcount or at least allow headcount to be used more efficiently. I'm just wondering if you guys have kind of thought about it internally about potential cost savings or efficiency through using kind of connected products or Internet of Things type of tools.

Jerry Gahlhoff, President and COO

The work that we've done technology-wise, you're right, is very heavily on the commercial side. And I would say, at this point in time, most of the technology that we're thinking about on the residential side, all has to do with customer communication and helping us improve our relationships with customers to improve customer retention. We have not been as focused on automation and back-office type stuff, although the routing and scheduling effects can be automated over time with that through the routing and scheduling technologies. But most of our technology on the residential side is focused on that relationship building with the customer communications, notifications. Hey, our truck is on the way. You can see the truck on its path coming to you, those types of things that we think will improve customer loyalty.

Mario Cortellacci, Analyst

Understood. Thank you very much.

Operator, Operator

Thank you. Our next question comes from the line of Michael Hoffman with Stifel. Please proceed with your question.

Michael Hoffman, Analyst

Thank you everyone for your question. I’d like to revisit the topic of pricing from a different perspective. If I understand correctly, the results from the first quarter of 2022 do not show the advantages of a more aggressive pricing strategy, and we can expect those benefits to materialize in the second, third, and fourth quarters.

Julie Bimmerman, Interim CFO

Exactly. You're thinking correctly, Michael.

Michael Hoffman, Analyst

Okay. Regarding the commercial growth, can you help me understand the larger context? It seems that there has been a notable increase in new business formation in North America, especially since the latter half of last year, and it hasn't peaked yet. Do you believe your commercial organic growth indicates that you are attracting new customers rather than just upselling to existing ones?

Jerry Gahlhoff, President and COO

We're probably doing a better job at adding new customers and then adding services onto the existing. Yeah. We're growing through new customers.

Michael Hoffman, Analyst

You support the notion that new business formation is still occurring and has not reached its peak. Despite concerns about declining consumer demand, recessions, and other factors, you haven't observed any decline in new businesses starting up, even in locations that require pest services.

Jerry Gahlhoff, President and COO

I don't know that there are start-ups from new businesses or it's just existing businesses making a change or initiating services for the first time. We really don't have much insight into that unfortunately for you, Michael. Sorry.

Michael Hoffman, Analyst

No. Okay. All right. Thank you.

Operator, Operator

Thank you. There are no further questions at this time. I would now like to turn the call back over to management for any closing comments.

Gary Rollins, Chairman and CEO

Okay. Well, thank you all for joining us today. We're optimistic about our opportunities ahead and appreciate your interest in our company. We look forward to updating you next quarter on our progress. Thank you again.

Operator, Operator

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.