Rollins Inc (ROL) 2015 Q4 法說會逐字稿

Good morning and welcome to the Rollins, Inc. fourth-quarter 2015 earnings conference call. Today's conference 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 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 can be dialing 1-888-203-112, (sic - see press release, "888-203-1112") with the passcode 8962426. Additionally, the call is being webcast at www.viavid.com, and the replay will be available for 90 days.

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

Gary, would you like to begin?

Sure. Thank you, Marilynn, and good morning. We appreciate all of you joining us for our fourth-quarter and year-end 2015 conference call.

Eddie 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 will be 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, 2014, for more information on the risk factors that could cause actual results to differ.

Thank you, Eddie. Before I begin, I want to introduce John Wilson. We have another attendee at today's investor call. John is President and COO of Rollins. He is new to our investor calls, but certainly not new to Rollins. You may recall that John was promoted in 2013 to President and COO. Prior to that, John had been president of Orkin USA.

He began his career as a technician and sales inspector while in college, and joined the Company full-time in 1996 as a branch manager trainee. He's had various positions of increasing responsibility, beginning as a branch manager, region manager, Vice President, and President of the Southeast division. He attended the University of Tennessee, and has completed the Executive Program at the University of Virginia Darden School of Business.

Rollins' Board of Directors named John an Officer and Vice President in 2011. John is doing a terrific job as an important part of our success and our future.

We were extremely pleased to have posted record results for the quarter, as well as our 18th consecutive year of improved revenues and profits. For the quarter, revenue grew 5.4% to $362.5 million compared to $344 million in last year's fourth quarter. Income before taxes rose 11.3% to $51.8 million compared to $46.5 million for the prior-year period. Net income rose 6.1% to $31.7 million or $0.15 per share, compared to net income of $29.9 million or $0.14 per diluted share for the same quarter last year.

Revenues for the full year rose 5.2% to $1.485 billion compared to $1.412 billion for the same period last year. Income before income taxes increased 10.8% to $243.2 million compared to $219.5 million in the prior year. Net income increased 10.5% to $152.1 million, with earnings per diluted share of $0.70 compared to $137.7 million or $0.63 per diluted share for the same period.

We completed another record year in revenue and profits. All of our business lines experienced growth during the quarter, with residential pest control up 6.1%; commercial pest control grew 3.2%; and termite rose 6.2%.

We're also very pleased with the progress that our specialty plans made last year, with all of those reporting improved sales and profitability. These are our non-Orkin pest control and wildlife companies. Their results underscore the value that we are experiencing in acquiring selective, market-leading pest control and wildlife companies.

Speaking of wildlife, our business there also enjoyed a good year. TruTech grew substantially. And Critter Control, which we acquired in February of last year, performed above our expectations. We're very excited about the potential for this service line going forward.

HomeTeam also had a banner year, as the housing market continued to improve, particularly among the world-class builders they partner with, such as Lennar Homes, Pulte Group, Toll Brothers, DR Horton, and Meritage Homes. Revenues for the full year grew approximately 8%. Eddie will provide more details on HomeTeam, as well as the specialty companies in a few minutes.

Insulation and [DryZone] ancillary businesses, which include bedbugs and mosquitoes, continued to perform well. Bedbugs have not gone away, and we are benefiting from good revenue increases in that area. Some of you may have noted in recent media coverage the latest threat from mosquitoes, Zika. One national news agency headlined its article: as disease proliferate, mosquitoes become public enemy number one.

Zika is a rare virus that has not made an impact from its discovery and the 1940s until now. Like dengue, Zika is spread by the same species of mosquitoes, which can be found in much of the USA. In the past year, Zika has spread from Africa and Asia through the Americas. Although Zika was first diagnosed in Brazil in May, it has been linked to more than 3,500 cases of infant deformity.

The leading experts predict that the USA needs to be prepared for a similar scenario. This situation is unfortunate. However, based on our experience with the West Nile outbreak, publicity concerning mosquito risk will escalate.

We're particularly pleased with the success that we had this year with the roll out of our CRM system, BOSS. We ended 2015 with 50% of our Orkin branches on the system. In December, we picked up our pace and began rolling out this branch operating system to two regions a month, and currently expect to have all Orkin locations on BOSS by the end of the third quarter of this year.

This is ahead of our previous target completion date. This time last year, we discussed that one of the important advantages of BOSS was the feature of issuing iPhones to our technicians to help them better complete their customer administrative requirements. At the end of this past year, 2,600 of our technicians were using their iPhone to provide customers better communications and acknowledgment of their service (technical difficulty), while improving our branch administrative productivity.

You may also recall that we recently completed the service manager check-in dashboard, which provides a real-time, online display of all technicians' services and status, and where they stand on completing their routes. Additionally, this data can identify opportunities for a newly sold customer to receive a same-day service start.

These are just two examples of major benefits the system is providing in improving customer service while making our operations more efficient.

Our technology team wasn't solely focused on BOSS, however. During this past year, they upgraded and replaced a number of our tired support systems to provide better financial reporting and communications, while improving our customer experience and reducing costs.

Our marketing folks were a major contributor to our success last year. They continued to up their game across all of our marketing channels -- digital, mobile, traditional media -- and, frankly, we're getting better at reaching our target prospects and identifying the best channels in which to reach them.

As you are aware, we established an in-house analytical team a couple years ago to help us better understand our customers' preferences and to know more about price elasticity. The contribution is allowing us to take our marketing plans to another level. Like so much of what we do, we see the marketing of our brands as a work in progress. It just keeps evolving, and we look forward to even greater contributions in this area in the future.

We also continued to add to our roster of franchises globally, having established a total of seven international franchises in the first half of the year. We opened franchises in India, China, Central America, and Mexico. The fourth quarter, we announced that Orkin extended its presence in North America, South America, Europe, the Middle East, and Asia, with the addition of nine new franchises. These new franchises -- located in Mexico, Colombia, Republic of Georgia, Qatar, China, and South Korea. As of this date, we have 48 international franchises.

We look to expand our franchise footprint both domestically and internationally, while at the same time working more closely with our franchise partners to help them grow their businesses.

Strategic acquisitions remain a priority for us. As in the past, we will continue to seek out companies that are a fit for us in both the pest control and wildlife areas of our business.

The service business is, first and foremost, a people business, and our employees are our most important asset. A major priority for us every year is to improve on the retention of our employees. Our employee retention rate again improved in 2015. We continue to work with our employees to ensure that they are receiving the very best training that they need to be successful and to advance their careers. We want them to feel that they have a future in our Company, and a career, not just a job.

2015 is now behind us, and I want to express how proud I am of what our employees and franchise partners accomplished during the year. The dedication to continuous improvement is the driving force behind our success.

Equally important to what we accomplished and learned during the year is that we set the stage for initiatives that will help us continue to grow our revenue and profits in the new year.

We are looking forward to achieving another record year. All of our team members will be working diligently to improve the customers' experience. We look forward to discussing with you the progress that we're making throughout the year.

And I will now turn the call over to Eddie. Eddie?

Thank you, Gary. I had the opportunity last week to attend my first Rollins leadership conference. For me, it was a time to connect with many that I've spent time with learning the business over the past year and meeting many other new faces. I share this because this event continued to confirm a key reason for our consistent performance: the depth of our strong management teams. That consistency continued with our 39th consecutive quarter of improved earnings results.

Behind the record-setting results are managers, technicians, franchises, sales, and support staff that take the continuous improvement culture and execute, year after year. I want to extend my heartfelt thanks for the tireless efforts of each of these groups, and for their commitment to these outstanding results.

We had a strong performance in the fourth quarter, with all service lines showing continued growth. Keys to the quarter included strong revenue gains, significant growth in the number of international franchises, and Australia's improved profitability. That was offset by currency headwinds and slower growth from acquisitions. A few one-time tax events impacted the net income.

Looking at the numbers, the Company reported fourth-quarter revenues of $362.5 million, an increase of 5.4% over the prior year's fourth-quarter revenues of $344 million. All brands, all segments, and all geographies performed well, as measured in constant currency.

For the quarter, income before income taxes increased 11.3% to $51.8 million. But due to a less favorable tax rate created by a few one-time events, the net income increased 6.1% to $31.7 million, with earnings per share up 7.1% to $0.15 versus $0.14 per diluted share last year in the fourth quarter.

This year's fourth-quarter tax rate was higher than the rate for last year's fourth quarter. At the end of 2014, we had a beneficial adjustment that reduced the effective tax rate. And this year, we had a few detrimental adjustments, such as an increase to the reserve for uncertain tax positions and an increase in certain disallowed expenses that, while small individually, collectively affected the quarter. Also, our foreign taxes were a bit higher than last year due to the growth of our foreign operations.

For the year, revenue came in at $1.485 billion, a 5.2% increase. Net income for the full year increased 10.5% to $152.1 million or $0.70 per diluted share, with EBITDA coming in at $288 million.

I want to take a minute to highlight the efforts of our Australian team. As I'm sure you remember, a year ago we were sharing the successful purchase of our second company in a suburb of Melbourne. Even with the slowing economy, our Australia operations grew revenue 9.4% -- is profitable for the year. We are very proud of the results for this team, and excited about our future in Australia.

Let's take a look through the revenue by service line. Our total revenue increase of 5.4% included approximately 6.4% underlying sales and pricing growth, and 0.4% contribution from acquisitions, offset by a currency headwind of approximately 1.4%.

Residential pest control was up a consistent 6.1%; commercial pest control, up 3.2%; and termite up an impressive 6.2%. Critter Control was the only major acquisition that was included in our numbers for the quarter.

As I mentioned last quarter, we realigned our salesforce, which helped contribute to the impressive revenue growth numbers. With the use of our HomeSuite iPad technology, the salesforce was a large contributor to the 6.2% termite growth for the quarter. The use of this technology, along with the opportunity to offer in-house financing through our own Rollins Acceptance Corporation, has helped us to grow the revenue in ancillary businesses.

In addition, I want to recognize the efforts of our inbound sales group that did an outstanding job keeping up with the increased demand, late in the year. As you know, this is normally a slower season for pest control, but November and December were incredibly strong, and this team did a great job working with the operations group in meeting this demand. All of these teams did an outstanding job.

Again for the quarter, when we take out the impact of foreign currency, residential -- which makes up 41% of our revenue -- grew 6.3%. Termite, which makes up 17% of our revenue, was up 6.9%. And commercial pest control, which is 41% of the revenue, was up 5.8%. Commercial was most impacted by the weak Canadian and Australian dollars, as most of our business in these countries is commercial.

As HomeTeam begins their 20th year of service, I want to spend a few minutes highlighting some of their many accomplishments that would have made our founder, O. Wayne Rollins himself, very proud.

In 2015, HomeTeam grew 93,000 Taexx tubes-in-the-wall installs to bring the life-to-date total to over 900,000 homes. In 2015, revenue grew 8.1%, which was primarily driven by an increase in Taexx system activation of 16.5%. Also, HomeTeam saw an increase in sales efficiencies, which resulted in decreased customer acquisition costs.

Due to its environmental friendliness and high customer satisfaction, termite baiting is becoming a preferred treatment method in HomeTeam's growing pre-treat business. This has opened up a new area of opportunity for the future, which offers HomeTeam higher customer activation and improved retention over alternative methods of pre-treats.

In total, gross margin for the quarter improved to 49.7% versus 49.1% in the prior year. The margin for the quarter benefited from lower fleet costs due to a decrease in fuel price and lower service salaries as a percent to revenue, offset by personnel-related costs due to increased health care costs, and higher material costs due to the increased sales. That Company maintained good cost controls across most spending categories.

Depreciation and amortization expense for the quarter increased 0.8%, totaling $11.3 million. Depreciation was $5.1 million, increasing $175,000, with most of that increase related to our new BOSS CRM system. Amortization was $6.3 million, which increased $265,000 due to the addition of Critter Control customer contracts that will be amortized over seven years.

For the full year, amortization of intangibles, which is typically from the value assigned to acquired customer contracts, will represent a significant after-tax non-cash charge of approximately $0.07 this year.

Our rollout of BOSS is ahead of plan. As Gary mentioned, we now have over 2,600 pest control technicians with iPhones, and who are now paperless. We will give a more in-depth update on our Q1 call. But I want to share another BOSS benefit that will also impact our initiative of improving our routing and scheduling.

One of the benefits is our ability to schedule or reschedule while the customer is on the phone, and immediately update the technician on the iPhone. This will have an immediate, positive impact to our customer experience. We have begun training on the routing and scheduling portion of BOSS, called virtual route management, or VRM.

Our IT group has set up a support desk and put together seven training videos that will help the branches use the basic routing functionality that has been built into BOSS. The training will include topics such as route set-up, route territory planning, route optimization for scheduled accounts, optimizing routes, and balancing route production.

For the year, costs associated with BOSS had a $0.05 impact on earnings per share. And we anticipate a similar impact in 2016, as we roll out the remaining Orkin divisions. At this time, we are still assessing the next steps for BOSS related to the independent brands, and will share those when these plans have been finalized.

Sales, general, and administrative expenses for the quarter increased $46.2 million or 5.6%, but remain flat to last year at 32.4% of revenues. A reduction in the areas of bad debt and lower administrative costs, reflecting ongoing cost containment programs, were offset by higher insurance expenses, higher advertising, and higher sales salaries related to our increased volume.

Our balance sheet remains as strong as we continue to look for more opportunities to reinvest in our business. For the year, we spent over $33 million on acquisitions, even though we attempted to use a lot more. Our pipeline is full of opportunities for 2016 with mergers and acquisitions. We had $39 million of CapEx for the year, and had $134 million in cash, along with no debt for the full year.

As you may have read, last night the Board of Directors declared a regular cash dividend of $0.10 per share that will be paid on March 10, 2016, to stockholders of record at the close of business February 10, 2016. The cash dividend will represent a 25% increase over the prior quarterly dividend. This marks the 14th consecutive year the Board has increased our dividend by a minimum of 12% or greater.

2015 was a great year, and I'm strongly encouraged that we will have a great 2016. Our management team is focused and energized to continue to raise the bar for our customer service, and this will translate into improving financial success.

I will now turn the call back over to Gary.

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

(Operator Instructions). James Clement, Macquarie.

Eddie, maybe I can start with you. I was trying to understand a little bit better what exactly the BOSS and iPhone interface will do for your technicians and customers with respect to -- when you have that customer on the phone -- heck, maybe soccer practice got changed, they can't receive a technician at a certain time -- can you talk a little bit more in depth about specifically what this is going to do for you all?

Yes, so take your soccer example. So someone makes the phone call; we have that phone call at the branch location. We have the customer on the line. Now we have the capability of being able to make an updated change based on availability of that technician basically in real-time, that the technician will be able to see on their iPhone. (multiple speakers) If it needs to be moved back a couple of hours, or whatever would need to be done with that, assuming we have a time availability then, we will be able to see that in more of a real-time.

It's hard for me to appreciate this kind of thing, but what happens now? Before but this capability is out there, how did you all handle this kind of thing?

It would not have been as real-time. So it would have been a request to the branch. And then the branch, from there, would've taken the message. And then the branch, from there, would have followed up with that technician and/or the branch manager, service management, would have to get back with the customer, which -- that time may or may not have worked for the customer.

So now, in real-time, we're able to see, this is the time that's available for this technician. We can tell the customer in real-time, this is the adjustment we can make based on your request. And just make that a better customer experience at that point in time, rather than having a back-and-forth -- or have a delayed response back to them.

Okay, that's great. That's helpful. Thank you. And Gary, if I could ask you one. You emphasized in your prepared remarks, employee retention. And you certainly highlighted training. I remember -- I could have the years a little bit wrong -- but I think it was about 5 to 7 years ago, somewhere in that stretch -- that you all made a fairly significant dollar investment in upgrading your training procedures, as well as, I think, your training facilities, if I remember correctly.

Have you been spending above normal with some of these training initiatives? Or is this -- to use your words, is this just always just a work in progress for Rollins?

By the way, you've got a good memory.

I'm not so sure.

(laughter) No, we're not spending -- we haven't upped the spending. I think we'd upped the sophistication. We're on the Web now, rather than using satellites, the dish. So that's been a big improvement. And we've just got better at it. I think that the quality of the training has improved and the cost of communication has gone down. So there's some offsets there, but I don't think that we -- as a percent of revenue, we've increased the rate of our spend.

Okay. Yes, because Gary, I've noticed certainly last earnings season, and in this relatively early stage of this earnings season, it seems like a lot of services companies are, in fact, talking about difficulty in attracting and retaining service guys for companies that are -- in relatively similar industries. So it seems like you're bucking the trend.

You're talking about recruiting?

Well, I'm talking about recruiting and retention. Because I think as -- the good thing about the unemployment rate coming down is that folks may have more options. And it seems like your retention is actually improving, and whereas I think a lot of other services companies unfortunately are going in the other direction. Although it may be a good thing for America, so who knows?

Well, first of all, the various studies indicate that compensation is, like, three or four as to reasons people change jobs, or keep their jobs. And I think that really our training has an important role in our retention, in that when you invest in a person's career, that endears them to the organization.

And, frankly, we're just turning up the effort. We have made a real strong effort to hire more veterans and more females. And we take the figures every month, and we're moving them. We're doing it. And our referral program -- we've been very successful, this past year, getting more customer referrals -- excuse me, employee referrals -- of a friend or a relative, or someone to come to work for us. Our experience has been that that's a better hire, typically, then someone that doesn't have any association.

All right. That is terrific color, as always. Thanks very much for your time.

Joan Tong, Sidoti and Company.

I have a question regarding competitive landscape. Obviously you have a large competitor, came in to America, and buying all of these different companies, and trying to compete here on our turf. I'm just wondering, have you seen any changes in competitive landscape? Obviously they have [drove up] the valuation on the M&A front. But in terms of pricing, have you seen anything changes -- they might be a little bit more aggressive? And since they have a big target they have to meet to justify that acquisition?

Yes, John, this is Eddie. At this point in time, we have not seen anything that's bubbled up. I think the growth rates again for the quarter were very strong. Demand was very strong. Their main area of concentration has been commercial, as opposed to residential. But we have not had any issues that I'm aware of that have come from our sales group, having to do with direct competition, having to do with that. I think this space is big, and the demand is big. And at this point in time, we're not seeing an issue.

Okay. Gary, you mentioned on your prepared remarks regarding the in-house analytic team. I haven't heard you talking about that team for a couple of quarters. And since you brought that up, I'm just wondering, is there anything more to harvest? Like, I remember it was a year or two years ago, it was a Boston consulting group. And then with all these analytics, can you be able to use it more, going forward, to maybe improve on your pricing, look at price elasticity going forward, just to harvest a little bit more on that?

Well, sure, we are learning more about our business. We have the capability now of better utilizing our data. We have the capability now of experimenting more. We have a wonderful laboratory with our call center. Because virtually we can change the prices just almost instantaneously; and look at our closure, to see if our closure is improving or not; and seeing if we were selling more units to the extent that -- to offset the price reduction.

So we're just learning a lot more about our business. I don't think that we found a hot button, if you will. But I think if -- now with Zip plus 4, we can direct our advertising precisely. And we're getting to do better at hitting our targeted prospects.

So I think this is just going to be an ongoing situation of education, of us learning more. And I think that we have some great opportunities, because when you look at -- [code move and closure] is just a real important lever as far as our sales are concerned.

Right. That's great. And then if I have to look at the demographics of your customers, have there been any changes? May be you are moving up a little bit in terms of demographics. And because those are lifestyle customers, they tend to be sticking around a little bit longer, not just stick around for a year; and then when the problems go away, and then they just disappear. So how should I think about your retention? Obviously if you can talk about lead generation, that would be helpful.

Joan, this is Eddie. So, retention continues to tick slightly higher each year. It's nothing dramatic, but it just continues to tick slightly higher. And really when you talk about the analytics, that's really one of the areas that our marketing group has just done a fantastic job, with using the data to know and understand the revenue bands and breaking down our abilities to, first of all, win in the revenue bands. And then also to be able to retain and then be able to price in all of the different revenue bands.

And that has enabled them to now be able to direct our advertising to be able to make sure that we are moving to the revenue bands where we want to be involved. Revenue bands four and five, the higher revenue bands, so the ones that typically we had better pricing with, and that we also have longer retention; and, overall, it's a good spend for us, at that point in time. So that's one of the areas where analytics has been very positive for us. And our marketing group continues to push us in that direction, to be able to have more wins in that area.

Okay, great. And then finally is on the model. I'm just looking at the SG&A expenses. You mentioned that $0.05 impact from the higher expenses on the BOSS system for this year, and similar impact for next year. I assume that -- you talked about the SG&A at leverage there, that we haven't seen that this year. So I was just wondering for the BOSS system, isn't most of the benefit going to be showing up on the gross margin side, and then your SG&A probably is still going to be at a heightened level for 2016?

Yes, for 2016, we will see it at that heightened level. And then we'll see the gross margin -- based on all of the anticipated benefits we'll have -- we'll see the gross margin continue to improve. And as we've said, the 200 to 300 basis points over the 2 to 3 years, and we know that that's going to be a piece of it, just from the impact on the cost efficiency side. And then, of course, we will take a look at any opportunities we have on the revenue side to continue to have a better customer experience, just like the one we just talked about in the earlier example.

If we can improve that customer experience, that should be a better retention opportunity for us. So that should enable us to go look -- to continue to growth our revenue as well.

Joan, we've learned something, as you can imagine, when you get half of your branches on the system, is it takes the branch some time to integrate their new technology and understand it. And, of course, you have the training responsibility, but we have expectations as far as reducing the mileage.

And Eddie talks about the customer experience, which is first and foremost on our mind, but also the technician experience. It's very frustrating for that technician to have changes, and not know the best way to get to an account, and so forth. So we really think that it has employee retention benefits, because we're creating a better job for our technician.

And all of these benefits, Joan, are going to be what's going to help us get to that total number that we've talked about. All of these individual pieces -- but we will be able to see that in the gross margin area.

Okay. All right, great. Thank you, guys.

Sean Egan, KeyBanc Capital.

I wanted to piggyback on that last question, and drill down specifically into the routing training that you alluded to in your prepared remarks. Is there -- recognizing that it's a moving target, when should we expect to see the training start to yield benefits within the financial results?

Well, Sean, I think every trained branch is going to be one day better at being able to improve their routes. So I think that we're going to see those branches that have, first of all, the BOSS capabilities; second of all, the training from the new VRM; and then the ability to be able to go through and implement. I think we will start seeing small, incremental gains as we move through time.

We have lots of branches around our entire network that have done a good job in this area for an extended period of time. Entrepreneurial spirits; they figured out a way to make sure that their routes are as good as they can be. We have individual technicians that have taken that on themselves.

But this is going to help us formalize, and get this out to all of the branches where we have the BOSS capabilities. And we'll be able to go through and be able to see some improvements as they get trained and as we go through, route by route, we will be able to see those incremental improvements.

So, it's early to say, here's what the X dollar is going to be or anything else like that. But again, we're excited. This is another area where BOSS is going to be able to be a benefit for us that we will be able to move forward with.

Well, I guess you can say that our average branch has been on it for six months.

That's right.

So, we've not mastered what we have. And then I think Eddie commented before about the seven modules of training, involving routing and scheduling. So, you're asking the same question that I'm asking our finance department. (multiple speakers) And I got the same answer that you got.

Well, I guess I'll appreciate the consistency. (laughter) Can you please expand a little bit on why you trend toward favoring termite baiting, particularly if it's an advantage for you? If you could put that into context and explain why that's a good thing for you.

Probably there is a few different things. For one, it's environmentally more -- better. And we get that question all the time. And not that what we use at all is environmentally unfriendly. But any time that you can use a bait, rather than having any sort of a liquid, would be something that would be preferred. So that's something that's going to be a benefit to start with.

And then, when we take a look at it from a cost perspective, we get a chance to be able to use something -- or basically pay for something as we use it, as we go along. When we have a pre-treat, and we have to spray and things like that, we have chemicals that we have to bring in and we have to inventory them. And this gives us an opportunity to be able to have more of a real-time cost associated with acquiring a new customer.

It's also a better way for us to have something that's visible and tangible, from a recurring perspective. So, we have something that we are actually able to go and be a part of with the customer when we talk about their recurring annual renewal. And it's grown very well, and it's taken over well. The HomeTeam group has probably been shifting in this direction over the last several months. And have seen very positive things that have come out of their customers that they've been talking with about it.

A pre-treat historically has been that you go out there with a termiticide and you treat the foundations and the slabs before they are poured, and so forth. And there's not a lot of touch that you have with the customer. Bait improves the touch, because you are out there servicing those bait stations, and so you've got more contact. I think the customer sees a greater value. That other situation was out of sight, out of mind. And as Eddie mentioned, there's a lot of customers that are looking for a more environmentally positive situation.

Great. Thank you. And then, briefly, you mentioned that your spend on M&A during 2015 was below expectation or plan. Can you elaborate? Maybe that was due to timing, availability of targets, if it signals anything in the market?

Well, I'll start with the last. I don't think it signals anything in the market. We spent a lot of time on a very large acquisition that did not come to fruition. So as we regroup from there and we move forward, like I mentioned in my prepared remarks, we have refilled the pipeline. The pipeline is very full right now, and we're continuing to move forward. But we had anticipation and hopes of moving forward with a large acquisition that didn't happen. And 2016 is a new year. And we're ready to continue marching down the path that we have very successfully been able to do for the last 10-plus years.

Okay. Thank you. That's all for me.

(Operator Instructions). Roland Underhill, Underhill Investment.

I came on a little late. Could you be specific about -- more specific about the bedbug growth? And did you touch on the wildlife business growth?

Yes, so we can start with wildlife. We can start with wildlife, and we just said in our prepared remarks that it's growing well. We're very excited on how the Critter Control acquisition -- that is performing for us. It's performing slightly better than what we would have anticipated, which is a good thing. TruTech wildlife continues to grow very well. So I think the combination of the two is going to be a very positive thing for Rollins wildlife as we're moving forward in time.

As far as bedbugs, we didn't going through any specifics, Roland, on this. For the year, for bedbugs, it came in at $72.3 million for bedbugs. And that was a 13.3% increase year-over-year. The much higher base is, of course, always a challenge when it comes to growth rates.

And you know we've been tracking this back -- you are very familiar with the story -- we've been tracking this back to 2010 where we were virtually nothing. We've continued to grow this very well, and again set basically an all-time record for the dollar amount of bedbugs that we have.

The residential piece has continued to grow really well. And what we're really trying to concentrate on here is to be able to do everything that we can to make this a recurring service. Any time that we have to go out and we have a one-time type of a job, it's much more difficult for us to ensure that we are pricing it correctly. And we recognize that. So even though we've had great revenue growth in previous years, in some cases the cost associated with that good revenue growth has not always been in line. And we're continuing to get better with that.

We're continuing to understand what the costs are, and really want to move -- continue to move in the direction of recurring types of revenue with the bedbug product. So when we have situations where it's just a one-off type of a deal, we have not been as aggressive to be able to go and win that business because of the costs that we've had associated with that.

And then the last piece of it is probably, in 2010, there were very few players that were in the market. And over time, as media has continued to discuss this, more and more players have come into the market. And competition for some of these jobs has continued to increase.

So we're very excited about the continued growth of bedbugs. It has slowed somewhat, but an all-time high for us, this past year.

Well, also, the industry -- we're growing faster than the industry.

Absolutely.

I think that's a healthy indication. And as Eddie said, a one-time service is really not what we want. We want a situation where we routinely inspect the house, and that we guarantee against re-infestation, and so forth. And that part of the business is growing, and that's the best part of the business.

Thank you. In the past, on the TruTech and the wildlife business, you've been more specific. Growing well could be 8%. It could be 30%, or it has been in the past. Can you be -- can you help us a little more there?

We've been well into the high teens for that growth of those businesses.

Okay. That's helpful. Thank you.

James Clement, Macquarie.

Guys, question was about M&A, and it was asked and answered. So thanks very much for your time.

Joan Tong, Sidoti & Company.

I just have a couple follow-ups. I'm not sure if you can disclose how we can actually be able to get down to the branch level. Since you talk about the BOSS system has been implemented for some branches for more than six months, and I'm just wondering what has been the margin improvement for those branches?

Yes, Joan, we're not at a point to be able to discuss that. And I'm not sure that we'll ever talk about it at a branch level.

Right.

We will give you some color, more on a macro level. And again, like I said in my prepared remarks, for our Q1 call we will be more prepared to talk about some more specifics having to do with that.

Right. But over the long term, the next couple of years, you are still targeting 200, 300 basis points of margin expansion, when everything is said and done. So I'm just wondering, is this going to be more like a 2017 event that we would see a more pronounced benefit? Or we can actually see some of those coming in the second half of 2016?

I think we will see some benefits that will come in. I think we'll see benefits that will come in in 2016. Getting this to a matured state is really the key to being able to see those benefits. And this, again, is one of the many things that we've had that have created that margin expansion that you've seen over the last 12 to 14 years. This is just another one of those items that are in the line.

And I think we'll see some benefit from that towards the end of 2016. And by 2017, we should be relatively mature, and be in a good spot to be able to enjoy the benefits of it.

Sure. And then really one last question, my favorite question, is gasoline prices -- lower gasoline prices, the benefit -- what is that -- what was that for this quarter?

So we're typically, by month, somewhere between 650,000 and 800,000 gallons. We're on the lower end of that, just based on the time of the season that it is. That's per month. And we saved roughly $1 a gallon year-over-year on that.

Okay, all right, thank you.

(Operator Instructions).

Okay, no more questions. Well, first of all, we appreciate your support and interest. And we look forward to sharing our first-quarter progress in April.

And I do want to say one more thing, Gary, is that many of you have interacted with Lois Burger throughout the years, and Friday will be her last day. So any of those of you that have interacted with her, or she's been your lifeblood to this office for the last 17-plus years -- may want to reach out to her and wish her well. She's been a critical part to this call, and obviously this office, for many years. So, just wanted to pass that along. Thanks so much.

Thanks, Eddie.

And this concludes today's program. You may disconnect at this time. Thank you, and have a great day.