Rollins Inc (ROL) 2015 Q1 法說會逐字稿

Good morning and welcome to the Rollins, Inc. first-quarter earnings conference call. Today's call is being recorded. (Operator Instructions) I would now like to introduce your host for today's call, Marilynn Meek. Ms. Meek, you may begin.

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 are 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 1-88-203-112 (sic) with a passcode 6386676. Additionally, the call is being webcast at www.viavid.com, and a replay will be available for 90 days.

On the line with me today is Gary Rollins, Vice Chairman and Chief Executive Officer; Harry Cynkus, Senior Vice President and Chief Financial Officer and Treasurer; and newly elected Chief Financial Officer and Treasurer Eddie Northen. Management will make some opening remarks, and then we'll open up the line for your questions.

Gary, would you like to begin?

Yes. Thank you, Marilynn, and good morning. We appreciate all of you joining us for our first-quarter 2015 conference call. Harry will read our forward-looking statement and disclaimer, and then we'll begin.

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 fact, are subject to a number of risks and uncertainties, and actual risks (sic) 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, 2014, for more information and the risk factors that could cause actual results to differ.

Thank you, Harry. Before I delve into our first-quarter results, I wanted to take a moment and thank Harry for his 17 years of service to Rollins as our CFO. As most of you know, he will be retiring from our Company on May 1. Harry's leadership, talent, and dedication played a major role in the growth and success of Rollins. We'll miss him greatly and wish him and his family all the best in retirement. Be assured, however, I'm not going to let him stray too far.

I would also like to take this opportunity to welcome Eddie Northen to our Company. We are extremely pleased to have him join Rollins as our new CFO. Eddie comes to us from UPS and brings not only a wealth of financial experience, strong international exposure, but also a great background in routing and supply chain management. These areas are extremely important to us as we continue to grow our Company. Eddie, please tell everyone a little bit more about yourself.

Thank you, Gary. I want to also thank Harry for his leadership and support during my transition period. Filling Harry's shoes will be quite the task, but the transition period that Gary has allowed and Harry has taken with me definitely has me ready to take the next step.

I had the opportunity to spend time with a number of Rollins team members in Atlanta and in the field, as well as meet with numerous investors. This exposure has made me feel even more privileged to be a part of this exceptional Company.

During my 30 years at UPS, I was extremely fortunate to gain invaluable operational and finance experience. Early in my career, I worked on the front line and drove a package car. This time enabled me to learn the business from the ground up and helped me to prepared me for the future opportunities in front of me.

After spending time in internal audit and several Director of Finance roles around the US, our family moved to Hong Kong in 2006, where I was the CFO of the Asia-Pacific region. A few years later, I returned back to the States, where I held a similar role as Vice President of Finance of the West region. Most recently, I was Vice President of Finance of the Global Business Service group, based here in Atlanta.

I believe the fact that UPS and Rollins are both route-based businesses with very similar cultures will help me with the transition into my new job and enable me to focus, as Harry has, on the long-term financial strength of Rollins.

I will now turn the call back to Gary.

Thank you, Eddie. Winter continued its role through part of the quarter, particularly in the Northeast. However, this year, for much of the quarter, we were blessed with warmer weather in most other parts of the country. New customer demand increase, coupled with our strong recurring revenue, resulted in our generating both record revenue and profit for the quarter.

Revenues grew 5.6% to approximately $331 million compared to $313 million in the prior year's first quarter. Net income increased 17.5% to over $30 million, with EPS of $0.14 per diluted share compared to $25.8 million or $0.12 per diluted share for the first quarter of last year.

All of our business lines experienced good growth, with residential pest control up 6.2%, commercial pest control grew 4.2%, and termite was up 8% for the quarter. Harry will provide greater detail on the contributions from acquisitions and the negative currency impact as well.

Leads, lead closure, and prices were all up. Momentum in leads that we saw last year carried through the first quarter and finished especially strong in March. Typically, a strong March is followed by a weak April. At this point, we are seeing a contradiction, and we could enjoy a strong March and April.

As many of you might recall, during the first quarter of each year, we conduct tests that determine where customer pricing opportunities exist. This year's testing again shows that our service rates remain inelastic. We believe that this is the result of our strong brand preference and the delivery of value that we provide to our residential and commercial customers.

This past quarter, we executed on some strategic initiatives to help ensure our ongoing growth and profitability. Let me highlight just a few of these initiatives.

Employee training has been and will continue to be extremely important to our Company. To that end, we recently hired a new Director of Training, John Torres, to help us further advance Rollins' award-winning training programs. By way of background, John brings over 25 years of experience in creating and implementing learning initiatives that drive positive business results.

Almost every company does train, but many don't measure the effectiveness of the training. And one of John's objectives is to help us improve the tracking and measuring of our training results. We believe that this will lead to better outcomes and help to ensure that we remain a national leader with our training programs.

Another training initiative is the new hands-on training that our cost center agents are receiving at the Rollins Training Center here in Atlanta, where they experience training in our model home. The Company's sales and service agent teams nearly double in the busy part of the pest control season and meet the seasonal business demands. We want to ensure that these new employees are well trained and are able to address our prospects' questions and requirements.

They spend the day at the center, where the agents can see firsthand how technicians interact with new customers and observe the treatments that they provide during a pest control initial start. That's the customer's first service. When they leave, their ability to paint a picture for our prospects of what a technician does provides confidence and builds value in our services.

As many of you are aware, we host a leadership meeting in January of each year with our top management that comes from all over North America. During this meeting, we explain and set the stage for our key programs and initiatives for the year.

This year's main theme was focused on hiring the right people. Every manager in our Company recognizes, first and foremost, that our business is a people's business, and it requires great employees to meet our customers' expectations. As the customers' needs and anticipations continue to increase, it is more important now than ever that we have the right person in the right job.

We've concluded that it's not the what, but the who, that matters. And one of the things that we are doing is refining our recruiting and interview methodology. We are improving our processes to better identify and hire the right people. Our training in this area is really catching on throughout the Company and is being driven down into the different brands and divisions. As Rollins' President and COO, John Wilson, put it, if we do a great job in selecting the who, the what will be much easier.

We are continuing to successfully roll out our CRM system, or what we refer to as BOSS, Branch Operations Support System. And we now have 118 Orkin branches converted. It's important to note that even as we bring additional Orkin branches online, we are also taking steps to make technology improvements to other brands in order to improve their customer service and profitability.

One such example is at TruTech, where they are now in the process of having their technicians use tablets for all their order processing. Additionally, they are able to handle checks and credit card payments on their tablets.

In March, we turned on the switch in the converted branches for the BOSS automated work order processing feature. We are currently in test, and the results thus far are very promising. In the old system, the technician at the end of the day would bring his or her work tickets back to the branch, where they had to be keyed into the system and reviewed by an admin. Depending on the volume, this process could take days.

What we discovered with our new automation was that less than 1% of the work orders actually needed human intervention. In test, the average processing time for new work order completion on the iPhone can be done in 18.5 minutes versus the manual paper handling that could take two days to get service posted to a customer's account. We've now freed up approximately 2 hours of an admin's time each day, which allows him or her to take on additional value-added projects, such as collections and customer scheduling.

We have other initiatives centered around BOSS which we are working on, and Eddie and I will provide you further updates as they roll out. These initiatives include further improvement of our routing capabilities and a management dashboard, which will allow the service manager to track the progress of technicians throughout the day.

I think this gives you a snapshot of several improvements that are provided by BOSS. This is a work in progress, and going forward, we will continue to add more platforms and routines. Like most computer systems, it doesn't all come day one. BOSS will help us improve our productivity, our margins, and most important, our customer experience.

Growing our business through acquisitions is also an ongoing Company goal. We recently enhanced our wildlife line of business with the acquisition of Critter Control, the franchisor of the nation's leading wildlife control company. This has indirectly made us the largest wildlife control company in the country.

For those of you who aren't familiar with this business, these services include trapping and removal of wildlife, exclusion of wildlife from residences and other buildings, and the repair and remediation of damages caused by wildlife. Top pests include squirrels, raccoons, bats, birds, and snakes.

The market in the US for residential and commercial wildlife control is approximately $300 million, and we believe that there is a tremendous opportunity to grow this business and capitalize on the industry's leading brand.

We're off to a good start for the year and excited about all the opportunities that we have to continue the growth and improvement of our Company. I'll now turn the call over to Harry.

Thank you, Gary, for those kind words. It's hard to believe that 17 years have gone by since I joined Rollins.

I've been thinking about that next chapter in my life for some time. I was told a long time ago that the best time to start thinking about your retirement is before the boss does. Anyways, I'm reminded of a Vince Lombardi quote: The harder you work, the harder it is to surrender. And believe me, it's hard to leave such a great company with such great people. However, I am confident that I'm leaving it in good hands with a future as bright as ever.

Let's get to the numbers. I'm sure no one dialed in today to hear me wax poetic. And in fact, I hope everyone has forgotten that one call with my poetry. Eddie, I wouldn't recommend trying poetry here!

Looking at the numbers, the Company reported first-quarter revenues of $330.9 million, an increase of 5.6% over the prior year's first quarter's revenue of $313.4 million. We experienced that growth across all of our family of brands, as measured in constant currency. We'll talk more about that in a minute.

Net income increased an impressive 17.5% to $30.3 million compared to $25.8 million, with EPS up 16.7% to $0.14 versus $0.12 per diluted share last year in the first quarter. A good start to the new year.

Having grown up in the Northeast, I've had to learn to speak a little more slowly as I've migrated down South, and that when it comes to explaining our revenue, between the impact of currency, acquisitions, and with and without fumigation, it's important to go slowly.

On the surface, revenue is up 5.6%, good growth among all brands and all service lines. Residential pest control is up 6.2%, commercial pest control up 4.2%, and termite up 8%. With operations in Canada and Australia, the strong dollar was not our friend. With the loonie down nearly 12% from last year and the Australian dollar down more 14% in total, it cost us nearly 0.9%, i.e. 90 basis points, on growth. Ouch.

On the other hand, the more significant acquisitions we made over the last year, Allpest that we've lapped in mid-February, Statewide, PermaTreat, and our most recent acquisition, Critter Control, contributed 1.9%. Put that all together, and it means our business, excluding currency, excluding acquisitions, grew 4.6% versus 4.2% in Q4.

Residential pest control business, which represents 40% of our revenue, continues to build momentum. For the quarter, it grew 6.2%; ex-acquisition, 5.2%. Termite, which makes up 17%, was up 8%; excluding acquisition, 4.8%. And commercial pest control, 42% of our revenue, was up 4.2%; excluding acquisition, 2.5%.

We are pleased with the growth we are showing for residential pest control and termite. Commercial was heavily impacted by the weak Canadian and Australian dollar, as most of our business in these countries is commercial.

If you just look at our domestic commercial business, excluding acquisitions, it grew 4.4%, which does include a 40-basis-point lift from fumigation. Fumigation had its best growth quarter in some time, up 12.9%.

As we have previously stressed, it's especially important for us to add recurring residential pest control customers to our customer base. Be it good fortune, better weather, or just great marketing, we saw strong lead growth, improved closure percent, and average price, which enabled Orkin to achieve significant growth in sales in a quarter not always known for its robustness.

Last year, we reported that we had nearly 4000 less calls in the first quarter. This year, calls were up 20,000. And it's encouraging to see the trends continue into April.

Residential pest control isn't quite like other consumer businesses. I read the other week in The Wall Street Journal that retailer sales rose in March, but US consumers showed signs of continued caution. Well, thankfully, not when it comes to buying pest control. I love repeating Gary's quote that rats and roaches don't read The Wall Street Journal. With insects being the public's third-greatest fear and the ever-increasing concern over health and safety, the phone has been ringing.

We haven't seen the same degree of strong consumer response when it came to termite, but with a modest increase in leads, some price improvement realization, we had a respectable first-quarter growth. HomeTeam's increase in new-home pretreat certainly was a good help.

Speaking of HomeTeam, they came out of the gate fast this year. And as I said before, while trying to figure out HomeTeam, don't waste a lot of time looking at the national statistics on new-home starts or sales, as the national picture doesn't represent well the 50 markets they are in, or the tale of installs versus turnouts. Their Taexx built-in pest control defense systems installs in new homes was up 7.5% for the quarter. Termite pretreat work was up 8.1%. And we saw the largest month-over-previous-month increase in some time for new customer capture, customers activating systems that were installed when the house was under construction.

When it comes to revenue, the last thing worth mentioning is bedbugs. The first quarter is not typically the big quarter for growth in this service. The last couple of years, it has been only 15% to 16%. However, this year, we saw the largest first-quarter dollar growth since we've been tracking it -- the year-to-year changes in 2011, up over 25% increase to $14.6 million.

Sadly for our listeners, the residential bedbug business grew 33%. Unfortunately, bedbugs are good hitchhikers, and people are taking them home with them when they travel. As I've said before, bedbugs do not make good pets. One of the shareholders gave me a good lead on some reading material now that I'll have more time. It's the number-one Amazon bestseller in the Entomology category. It's called Infested by Brooke Borel, and I've read that it's a fun, wild romp through the wily world of bedbugs. I don't want to give too much of the book away, but I've been told that it's a real page-turner.

Gross margin for the quarter improved to 49.2% for the first quarter versus 48.5% in the prior year. The quarter benefited from improved service and administrative salaries with lower fleet costs due to the drop in fuel, while maintaining good cost controls across most spending categories.

Depreciation and amortization expense for the first quarter increased $567,000, totaling $10.8 million. Depreciation was $4.6 million, increasing $1.2 million, $1 million of the increase related to our new BOSS system.

Amortization of intangibles was $6.2 million, which decreased nearly $700,000, as some of the older, 8 to 10 years older, acquisitions have become fully amortized. For the full year, amortization of intangibles, typically from the value assigned to acquired customer contracts, will represent a significant after-tax noncash charge of approximately $0.07 to $0.08 this year.

Sales, general and administrative expenses for the first quarter increased $4.7 million or 4.7% to 31.9% of revenues, decreasing from [32.1]% from the first quarter last year. The decrease in margin percent is due to being able to leverage our administrative salaries and other costs, keeping them relatively flat to last year, despite the increase in revenues.

The margin improvement was partially offset by the $1.2 million in this year's higher costs related to the CRM system implementation, as well as higher sales salaries and professional fees related to procurement and acquisitions.

Income before taxes was up 12.7% in the quarter. We caught a break on the tax rate this quarter, which dropped to 35%, having identified some discrete items which unfortunately won't repeat. We expect the tax rate to return to potentially 38% next quarter.

As a result, our net income was up 17.5% for the first quarter. I think that qualifies, as Gary said, a good start to the new year. Our balance sheet remains strong; no surprise there. We continue to look for more opportunities to reinvest in our business. This quarter, we spent nearly $30 million on acquisitions and $8 million on CapEx.

To our bankers' chagrin, we won't run out of cash anytime soon, ending the quarter with $93 million in cash and no debt.

One interesting facet of the business that I enjoy pointing out is that we continue to have more customers prepay us for services, over $100 million recognized currently on our balance sheet as unearned revenue, than those who owe us for current services, $85.4 million in trade and finance receivables, which we believe the new BOSS system will help us reduce. What a great business model we have.

Before I turn the call back to Gary, let me express our appreciation and thank you to all our associates and others whose hard work and dedication has gotten us off to a good start in 2015. It is with bittersweet emotions that I leave to begin my retirement. I'm excited about what the future offers and enjoying the rewards of a very long career, but I am sad to say goodbye to so many great people I've had the opportunity to work with here at Rollins. It is through their combined efforts that Rollins is great, and I will miss them all.

Likewise, I will miss the people that I've gotten to know in the investment community. Thanks for all you do and the positive impact you've had on me and my career.

With that, I'll now turn the call back to you, Gary.

Thank you, Harry. We are now ready to open the call for any questions that you might have.

(Operator Instructions) Dan Dolev, Jefferies.

Thanks for taking my question. Actually, I have two questions. I've got two questions, actually one for Eddie, and then I have a question on the operational side.

So my question for Eddie is, look, you've been with the Company now for a few months. You've traveled around, both internal role in [the trenches], and you've been -- I'm sure you've seen every aspect of the Company. What are the things that you've seen that you think -- where do you see the most opportunity actually at improving going forward from what you've seen thus far?

Yes, Dan, thanks. You know, you mentioned having time to spend learning different parts of the business. Gary's been very supportive with allowing me to spend about a month in the operations, learning the different operations. And I think what I've tried to do from that perspective is take what I brought with me from UPS and really kind of look at it through those lens.

As I was visiting the operations, one of the things that I saw was really the depth of the management that we had there and how strong they are from a P&L perspective. And I think that's something that we can really continue to use as we move forward.

I think that routing and scheduling continues to be an opportunity for us. And Gary mentioned that when he was talking about the BOSS. So I think that we are going to be able to kind of bring those two pieces together. And in fact, I have kind of some follow-up meetings with the operations over the coming months, and that's really where I want to try to spend some time and energy there, is to see what and how I might be able to help from that perspective.

Got it. No, thank you very much. And my other question, more on the operational side, for you or Harry or Gary, you mentioned, Gary, that the first -- that you've had warmer weather. April was good; March was good. And clearly you've had -- the weather hadn't been that big of an impact. But if I think about sort of the organic growth acceleration ex-M&A, ex-FX of 4.6% versus 4.2% in Q4, I can't help but think it's not as impressive as I would have wanted it to be, given that the compares -- organic compares are so much easier. So is there something that I'm missing, or is this just the start of an accelerating year, or how should we think about that? Thanks.

While the weather wasn't as difficult, I'd point out it doesn't matter how -- unless you have record highs in January and February, you're just not adding a lot of customers during that timeframe. So, while -- I think we are more impressed than you are that we did grow in the first quarter, and like I said, it's really the strong March that gets it going.

But we'll get as many leads in June as we get in probably January, February, and March combined. So, again, it's just you have a big base of customers in trying to get that number accelerated; takes a lot of new customers. And I think the exciting number was there are 24,000 more calls this year than last year. Now, all those calls don't turn into customers, but it gives you a good shot at them.

Got it. Okay, well, thank you very much. And again, congrats to Eddie, and a lot of warm regards to Harry as well in your retirement. Thank you.

Joan Tong, Sidoti.

I have a couple of questions here. First off, regarding the new CRM system, thanks for all the color in terms of all the new features that are supposed to come on in the future. It's really good to hear that there's more specific that we can talk about in this stuff going forward.

And I understand that, like, all this good stuff is good, but in terms of how you can incentivize people to use the features and use all this good stuff in the new CRM system, can you just talk about, like, how are you going to do that and approach that in terms of making sure your technicians, your managers, are all using the CRM system in the right way?

I think simply that it makes their job easier. I mean, we've had new programs and processes in the past where we really did have to spend a lot of time following up and making sure that they were being utilized. But in this case, the branches love the system. And although we don't have our routing and scheduling put in, but even beyond that, it's just a lot more flexible. It's just a better operating system. So I think that we are blessed that they are going to enjoy it. The ones that are on it enjoy it. Never have we had, even when the thing was very immature, did we ever have a branch that says please take this thing out and just give me what I used to have.

So they are very positive, and Eddie, you might share what you saw on your ride-alongs.

Yes, Joan, when I was out for the month, I rode with probably more than a dozen technicians during the time. And I have to tell you, the ones that were on the BOSS system, they were excited to share with me what the capabilities were, I mean, making it easier for their interface with the customer, making it easier for them to schedule what it is that they are going to do for their customer, if they need to make changes or adjustments. And, you know, I don't really know a lot about the former system. But for technicians, as they are trying to teach me about the business, and this was something that they wanted to share with me, to me that tells me that they were adopting it very well.

And I just want to say, I think you are going to find, like on any curve, you are going to see 20% of the people taking to it and being your power users. And we've identified the bottom 20% who are struggling. And in fact, what we're doing is in the way -- when I say struggling, it's probably -- it could be a misnomer. But what we do is we're measuring the number of calls to the helpline for people who are having problems and call the helpline.

3So, the branches that are calling more frequently, i.e. have more questions about it, we are sending some of the trainers back to those branches to help them overcome the pieces they don't know. So part of it's going to be continued training. And we can measure, and that's one of the things we're doing, is if they don't understand it, well, they are calling. So we know who we need to go out and help.

And then I think ultimately, we will find ways to disseminate what the power users are doing and whether we use the trainers to take that to the other branches, best practice. But as both Gary and Eddie have said, there's tremendous excitement in the field. It's making their job easier. They have a cool iPhone, and they are more than happy to get rid of what I've started referring to as our turn-of-the-century old CRM system.

That's very good. Thank you for the update. And then, on the international side, you guys -- seems like -- I just want to get an update on your view in terms of expanding internationally. Is Australia still going to be an area that you are going to focus on? Because I believe in the past, you mentioned that area can be as big, if not bigger than, your Canadian division. And also, maybe, Eddie, talk about how your international experience would help Rollins maybe over the longer term to maybe even accelerate the international expansion strategy there.

Yes, we continue to be excited by Australia. I think we realize to be successful there, we have to follow the same model that we did in Canada, and that's to be in all major cities. We're not there yet today. We continue to explore opportunities there. But we are patient. We'll find the right companies with the right culture, and we will build out our network and continue in Australia.

Joan, I've had a chance to spend some time with Tom, who is in charge of our international operation. In fact, I'm going to be attending the international franchise meeting that they have, their annual meeting. So I'm going to get a chance to learn more about where we are right now, what is working for us right now, and then also talk about that as we are moving forward in time. So I'm really kind of going through the learning curve of that.

But Tom and I have had some good conversations. But I think that right now, the focus is in the areas where we know we have opportunities, and of course, that being Australia, as we've already talked about.

Okay. Thank you very much.

Joe Box, KeyBanc Capital Markets.

This is Sean Egan on for Joe Box. I was hoping to dig in a little bit to the gross margin expansion. I was hoping you could maybe either quantify or place an order of magnitude, kind of what that fuel savings benefit was. And within that fuel savings benefit, what was attributed to fuel price declines versus any route optimization efficiencies that you had?

I wish I could answer that question and that I could measure my route operation efficiency that closely. In fact, I know I drove more miles this first quarter, but I have a lot more customers than I had last year at this time. And so I can't break it down that finely.

I do know, approximately, the fuel savings, which isn't all CSP; some of it is reflected in SG&A, [RAND], I have it right here. I think it was like around $2.3 million is what we have estimate the savings in fuel was. And pretty much offsetting that was increased costs due to the BOSS implementation and depreciation, which came in at about $2.2 million. So, those two pretty much offset each other in the Q1.

Okay, great. And then carrying on with the depreciation comment that you've made, I guess we kind of expected it to be higher than it came in at, given the CRM implementation. So should we expect a similar level that we saw this quarter heading forward? Or do you expect that to bump up as you continue to roll out this system?

Well, we certainly haven't finished spending money on the CRM system, so it will be some additional, but I think it will be a slow creep as opposed to a large bump at this point.

Okay, got you. Thank you. And then can you just talk about a little bit as to what you think is driving that increased momentum in the residential line? Is it simply a function of better tools for the technicians to close leads? Any color there on what's driving that?

Well, training, you know, we spent a lot of time on closure. I addressed a little bit about what we're doing to prepare for the surge in our call center. So we really think that we've got some more upside as far as closure is concerned.

Our marketing people say it's all them (laughter), but I'm not buying that. I think it's just a combination of things. I mean, our service sales are up, which is important. We were just kind of attacking the thing from various points, and so far it's starting to pay off for us.

And finally, last item here, on the commercial line of business domestically, can you comment on any potential weather impacts that you saw during the period, and any kind of ramp through the quarter?

Probably the commercial business would be the least-impacted by weather. You know, if you're a restaurant, your doors are open, and the pest control company is visiting you. So, I wouldn't -- I don't think weather really had any impact on the commercial business. It certainly would impact -- the termite is kind of hard to -- your termites aren't going to swarm under 3 feet of snow. And pest control, you're waiting for the weather to get warmer.

It hasn't gotten -- well, in general, the weather was better overall, but the Northeast was -- I was up in Washington, DC, this weekend, and gee, it went down to 38 degrees one night. I was wondering when spring was coming. So it's impossible exactly to measure weather, and I think I've said a number of times, it really affects us on the fringe of the business. When is it going to get warm in the spring, and when does it get cold in the winter, and then in between it's a case of us executing our business plans.

All right, great. That's all for me. Thanks, guys.

(Operator Instructions) Jamie Clement, Macquarie.

I was wondering -- Harry, I think -- or Gary, I'm not sure which one of you in your prepared remarks, you had some numbers around folks who turned on the Taexx systems. And the numbers sounded pretty strong. So I was wondering if you could give those again. And also, can you give a little bit of color in terms of what your impression is as to why you saw the increase? Is this the way you marketed the system? Is this just sort of natural timing based on what you've seen over the last four to six quarters or so? Was just curious for your thoughts.

Yes, the Taexx, new customers was up nearly -- it was up 6% over last year, with really strong March month. I think last year actually I think we were a little disappointed with the capture. We had done some reorganization of the sales team, and I think we did ourselves a little disservice and might have understaffed or improperly staffed the sales effort last year.

So I think some of -- you know, now, is some of that weather was better in some of the Florida and Texas markets this year? Could be. Is it the sales team's efforts? Could be. Is it people who delayed -- they bought the system last year and delayed purchase for a year, but all of a sudden they are seeing they've got issues? Probably.

You know, the nice thing about those Taexx tag systems is when a customer wants to take care of his insect issue and he's got that system built in, there's only one company that can service it. So, I think it's -- we're hoping it's pent-up demand and execution.

Very good, very good.

I think I can summarize, if I could just summarize that for a minute, I think it was just -- and Harry's touched on the moving parts, but just more effort. I mean, we were disappointed last year. The HomeTeam people were disappointed. And I think they have an aggressive plan this year, and they just, they've been attacking this thing every way that they know. And the results are showing that they are successful with it.

Can you remind us how many homes are out there with the system that have not been turned on yet, approximately?

Ah, boy. I think inception to date -- as soon as I give you a number, I know I'm going to be wrong, but it's 700,000 -- 800,000 of these systems have been installed, and there's probably close to 250,000 to 300,000 active customers. I could be off on those numbers, though. I'm getting old; I need to retire. (multiple speakers) I think that we will research that for you. I'll get you some better numbers.

Terrific, and Harry, you will be very much missed. Congratulations.

Well, thank you.

(Operator Instructions)

Okay, well, I guess that's it. We'd like to thank you for joining us today. And Andy and I look forward to the next quarter, and we will continue to work hard to grow and improve our business. Thank you.

Thank you.

And that concludes today's call. Thank you for your participation. You may now disconnect.