Rollins Inc (ROL) 2016 Q2 法說會逐字稿

Good day. And welcome to the Rollins Inc. second-quarter 2016 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, Valerie. By now you should all have 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 1-888-203-1112 with the passcode 9004116. Let me repeat that: 9004116. 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 are Gary Rollins, Vice Chairmen and Chief Operating Officer, and Eddie Northen, Vice President, Chief Financial Officer, and Treasurer. Management will make some opening remarks and then we will 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 second-quarter 2016 conference call. And Eddie will read our forward-looking statement and disclaimer, and then we will 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 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, 2015, for more information on the risk factors that could cause actual results to differ.

Thank you, Eddie. We are pleased to have posted a positive results for the quarter, marking our 41st consecutive quarter of improved revenue and earnings. For the quarter, revenue grew 4.8% to approximately $411.1 million compared to $392.2 million in last year's second quarter.

Income before taxes increased 6.4% to $77 million compared to $72.3 million for the second quarter of 2015. Net income rose 6% to $47.8 million or $0.22 per diluted share compared to net income of $45.1 million or $0.21 per diluted share for the same period last year.

Revenues for the first 6 months grew 5.6% to $763.9 million compared to $723.1 million for the same period of last year. Net income increased 5.8% to approximately $79.7 million with EPS of $0.36 per diluted share compared to $75.4 million or $0.34 per diluted share.

Historically, the Company's revenue and profit performance are somewhat lumpy from quarter to quarter. As examples, the weakest revenue percent increase last year was in the third quarter. And in 2014, it was the fourth quarter. This repeated itself this year as the second-quarter percent increase of 4.8% was a pace less than the first quarter.

We think Mother Nature has a role in this regard, and unfortunately, we can't control that. After saying that, I want to add that all of our business lines experienced good growth during the quarter, with residential pest control up 6.7%, commercial pest control grew 2.6%, while termite increased 5.2%. Eddie will provide more details on these numbers in a few minutes.

The rollout of our CRM and new operating system, BOSS, went extremely well in the second quarter, with over 95% of the Orkin branches on the system by quarter end. We remain on track to have this rollout completed by the end of this current quarter.

Eddie will also provide further information on this, but we are very pleased with our conversion. And I want to express my thanks to all of our employees that have worked so hard to make this happen. As I've said in the past, we believe this new operating system will be a real game changer for our Company.

We're also pleased to have made our first acquisition in the United Kingdom: Safeguard Pest Control and Environmental Services. This purchase further expands our global footprint. Safeguard is headquartered in Westerham, Kent and provides residential and commercial pest control services for its customers in Greater London and the surrounding southeast counties, which, by the way, is one of the most densely populated English regions.

Established in 1991, Safeguard is a UK pest control leader with a rich history of providing exceptional pest control and bird control and other related services to residential and commercial customers. The company has a wonderful reputation and management team headed by Paul Butterick and Tim Sheehan, with whom we share a mutual commitment to continuous improvement. They will remain here to run Safeguard's operations, and we look forward to sharing best practices between our two organizations.

This quarter, we added eight other pest control companies to our growing network. We are benefiting in many regards from these additions, as all of us are smarter than any one of us.

Earlier this morning, we announced several changes to the Company's operational leadership. The first situation involves Gene Iarocci. After a long and successful business career at Rollins and Orkin, Gene will be retiring at the end of September.

We're most fortunate to have Gene on our team for 13 years. He began his career as a regional manager trainee in 2003, starting in South Florida. Gene was very quickly promoted to Louisiana region manager in 2004. And by the way, Gene is one of the few in our Company's history to have successfully operated a region without having managed a branch -- no small feat.

In 2005, Gene was promoted to Orkin's Atlantic Division president and did an outstanding job. Five years later, he was elevated to Rollins' Vice President of Corporate Services. In 2013, he returned to operations and was promoted as President of Orkin North America.

In this role, Gene led Orkin to pass the $1 billion revenue milestone for the first time in our history. Gene will truly be missed both as a friend and a valued associate. We wish him and his wife Trudy the best as they enter the next chapter of their lives.

We are truly blessed to have strong leadership across the country. And with Gene's retirement, we have made several new assignments that will help us to exceed the $2 billion revenue mark. Freeman Elliott has been promoted to President of Orkin US with a responsibility for leading the five Orkin US divisions as well as Orkin's national sales and client services teams.

Freeman came to our Company right after graduating from the University of Georgia in 1991. And like many of our superstars, started as a technician, at that time in our lawn care division. Following, he successfully assumed many other management roles, including having led two different Orkin regions and two separate divisions. Most recently, he and his team have led the southeastern division to an excellent record of operational achievements.

In addition to serving as president of HomeTeam Pest Defense for the past five years, Jerry Gahlhoff will be elevated to assume responsibility for our Western Pest Services and Waltham Services brands. Jerry has been tremendously successful at HomeTeam in finding and cultivating outstanding employees that are making important contributions to our business and culture. Additionally, he will also be responsible for Rollins' human resources and our training organization, both of which help us recruit, educate, and retain the very best people, our most important asset.

Steve Leavitt, who has headed our group of specialty brands, will be leading our new emerging opportunities group. This group includes Orkin Canada, our Australian companies, Safeguard, the company that I just mentioned, and any future international acquisitions. Steve will also be responsible for Trutech and Critter Control while retaining responsibility for IFC and PermaTreat. He is going to be a very busy man.

We have a great and experienced team at Rollins and have worked diligently over the years to build our bench strength. Today we see our efforts paying off, as is evident from these announcements. Management development will be a never-ending initiative as we maintain our crown of being the pest-control company in the world.

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

Thank you, Gary. We had a solid revenue growth that helped with our 41st consecutive quarter of improved earnings results. Even with accelerating BOSS-related costs pushed into the first quarter and to this quarter as well, we had a strong 6% net income growth.

Many of our operations have gone through a substantial effort during a very busy time of the year in order to get this project finished in August. Each of our service lines showed continued growth, and key to the quarter included continued strong residential and termite revenue gains, new international market expansion, strong HomeTeam results, and significantly higher year-over-year BOSS expense.

Looking at the numbers, the Company reported second-quarter revenues of $411.1 million, an increase of 4.8% over the prior year's second-quarter revenue of $392.2 million. Good, steady growth continues in 2016.

For the quarter, income before income taxes increased 6.4% to $76.9 million. Last year, we had a small positive tax adjustment which didn't repeat this year. Our foreign taxes were a bit higher than last year due to the growth in our foreign operations. And as a result, net income increased 6% to $47.8 million, with earnings per share up 4.8% to $0.22 versus $0.21 per diluted share last year in the second quarter.

I will talk in a few minutes about our BOSS results to date, but first, I want to circle back to share some of the tremendous results that HomeTeam continues to produce. As they approach their milestone 1 million Taexx tubes in the wall pest control installation since inception, they continue double-digit installation growth. Year to date, new installations were up 11.6%. Each install gives us an opportunity for HomeTeam to capture a new recurring pest control customer.

Part of the continued overall Rollins termite success can be attributed to the excellent builder pretreat and recurring termite customers of HomeTeam. This service is offered when HomeTeam works with builders during the new construction phase.

Year to date, the number of homes receiving this pretreatment service has grown 12%. This installation opens the door for HomeTeam to continue to provide termite protection to that customer on a recurring basis moving forward. Plus they enjoy the prospect of a potential pest control customer.

Let's take a look through the revenue by service line. Our total revenue increased to 4.8%, which included a small 0.4% from acquisitions and the remaining 4.4% was from pricing and organic growth. Residential pest control was up a solid 6.7%, commercial pest control up 2.6%, and termite up a strong 5.2%.

During the quarter, we acquired Murray Pest Control in Australia, which made a positive impact on our termite business. And as I mentioned earlier, HomeTeam has been a key to our continued termite gains.

As I have mentioned earlier, we have pushed a lot of expense into the first and second quarters to get this rollout wrapped up, but we are very pleased to see improvements that BOSS is producing on a limited basis to date. Since the last call, we have added 1,200 new pest control and termite control iPhone-equipped technicians to BOSS for a total of over 5,300 active users. For those of you that are a bit more tech savvy, BOSS is a greatly improved platform that enables integration and products, which will speed the delivery of future enhancements.

Separately from that, we see the business benefits to date falling into three buckets: employee, customer, and financial. Starting with the employee benefits, Millennials to our most seasoned employees love the ease-of-use and professional presence with the customer by moving from the old CN-50 handheld to the new iPhone.

The system helps to organize the dates of a technician and allows needed changes to the route throughout the day. This is another way that we are creating a better overall job experience for our people. In addition, the system has built-in turn-by-turn directions that will populate when the next customer is selected to help with ease and efficiency of navigating the route each day.

Also, when an employee is in front of the customer, the technician will have visibility to all of the services that are active with that customer. If one of our service technicians are with the customer, they can more readily tell what of our other services they should offer based on that customer's needs. This will improve our ability to increase share of wallet as well as customer retention, as our data shows the more services a customer has, the stickier that customer will be going forward.

The customer benefits are a key to the long-term success of the project. Customers now are able to receive an email of an improved service ticket as soon as the services complete, instead of the former paper version. Currently, over 50% of our customers are taking advantage of this feature.

Our customer experience will improve with our ability to schedule or reschedule a follow-up appointment in the future. The updates will be sent to the technician by phone, in some cases while the customer is still on the line.

In the past, it was a very manual process and those same requests were received at our branch locations, where the administrative group would have to call or text the technician to see how their day looked and then explain the change needed. This new scheduling process is much more customer friendly.

One of the many financial benefits is the real-time syncing of customer service tickets and billing. This saves time from our administrative ranks no longer needing to post these services and will speed up the billing and collection cycle between one and two days.

Beginning in Q3, our implementation and handheld expense for new iPhone kits will drop dramatically. By Q4, these conversion costs will be completely eliminated. As we have noted before, we are still assessing how we will address implementation of the other independent brands with this technology, and we'll keep you posted.

With more regions now deployed over the 12-month comparison period, we continue to see improvements in administrative overtime, customer retention, both pest control and termite, as well as reductions in pest control bad debt as the administrative groups are more able to concentrate on this important area of cash flow. We will continue to assess and monitor these and other areas of benefits as we continue down the maturity path of the system.

In total, gross margin for the quarter improved to 52.3% versus 51.5% in the prior year. The margin for the quarter benefited from lower personnel-related expense as group insurance claims were down year over year, lower fleet costs due to a decrease in fuel prices, and service salaries as a percent of revenue with the better employee productivity.

Depreciation and amortization expense for the second quarter increased 7.1%, totaling $12.4 million. Depreciation was $5.9 million, increasing $1.16 million, with most of that increase related to our BOSS system. Amortization was $6.4 million, which increased $57,000 due to be addition of Critter Control customer contracts that will be amortized over seven years.

Sales, general, and administrative expenses for the quarter increased $7.9 million or 6.7%, but deteriorated slightly to last year at 30.8% of revenues. Increases were in the areas of professional services, mostly due to the Safeguard acquisition and higher sales salaries needed for the increased demand, and increased administrative salaries due to the accelerated BOSS implementation.

As for our cash position, for the first 6 months ended June 30, 2016, we spent almost $36 million on our 21 acquisitions and paid out $43.7 million in dividends, which is up 25% over last year. We were active with share repurchase in the open market, purchasing a total of 419,329 shares for a total of $11,158,491. We had $19.9 million of CapEx and ended with $126 million in cash, up 15.3% from last year.

Last night, the Board of Directors declared a regular cash dividend of $0.10 per share that will be paid on September 9, 2016, to stockholders of record at the close of business August 10, 2016. This marks the 14th consecutive year the Board has increased our dividend by a minimum of 12% or greater. We look forward to finishing the BOSS project and to begin realizing the benefits of our investment.

For our analysts and the investment community, I hope that you will mark September 20 on your calendar for our first Rollins investor analyst day in New York City. I look forward to the opportunity for you to meet our top executives and learn more about our business.

I will now turn the call back over to Gary.

Thank you, Eddie. Well, Eddie and I are here to answer any questions that you might have.

(Operator Instructions) Jamie Clement, Macquarie.

Gary, when you were talking about your comments on HomeTeam, you mentioned that it had a contributing factor on the high growth rate on termite that you had during the quarter. Obviously, we know all about HomeTeam.

I don't recall really historically you calling out HomeTeam as being a major contributor to termite. So have you emphasized pretreatment through them more in recent orders or in recent years? Or is it something that has been there all along?

This is Eddie; I'm the one who had those comments.

Oh, my bad. I'm sorry.

That's okay. I think this is something that has been there through time. I don't know that it's necessarily tremendously different as far as the overall impact. I just wanted to highlight the fact that they do continue to have substantial growth in this particular part of what they offer, especially with the new builders.

The thing that's a positive there is we get a kick for that pretreatment. And we are getting another opportunity to have a new customer, which has really given us an opportunity to continue to grow both on the termite and on the pest control side.

And I think the size of the builders that we represent gives us a wonderful opportunity. One of the requirements of financing and most states require that there be a pretreatment down on a new home. So we are handy and we are taking advantage of it.

Now, Gary, with that requirement, is this like a -- does a homebuyer actually have to opt into that in some technical way? Or is it something where the builder just contracts with you and it's going to happen, regardless of what the incoming homeowner wants once that happens?

Right, it's a builder requirement.

Okay, got it.

In fact, the homeowner at that time typically is not a homeowner.

Right, right.

Because it's one of the first things that are done when a home comes out of the ground and the slab is poured is when the pretreatment is done.

Got it. And just to follow up, Eddie, with respect to the BOSS system rollout, I think you gave us the incremental depreciation expense year over year. In terms of operating expense, both that you can quantify as well as the stuff that's a little bit less tangible, what do you think the total cost during the quarter, other than depreciation related to BOSS, may well have been that [will exit] fourth quarter or first half of next year will be gone from your quarterly numbers?

Well, so Q1 and Q2, we enhanced our rollout. And a large part of the cost of that are the implementation themes. So we basically in Q1 and Q2 doubled up our efforts of what we had seen in previous quarters.

So we have contractors that we use for that where we actually have people at each one of the branch locations that are there as trainers, since they're going through the implementation phase. So that's a large part of the overall expense as we roll this out.

And then of course, the actual iPhone kits themselves. So again, in Q1 and Q2, we are doubling up our expense and our efforts there as we are getting those rolled out. And that's how we got to this total of over 5,300 total active users for this quarter.

Are you depreciating the -- are the iPhones CapEx, though? Or are those actually OpEx? Or is it a mix?

Yes, so the iPhones are OpEx. The depreciation is for the system. So the depreciation obviously will -- has continued to build over time. And we will have that full-bore Q3 as we move forward. But the implementation costs will be the part that will be reduced substantially in Q3 and will be eliminated in Q4. And the same thing with the iPhone kits.

All right, that's helpful. Because I think I may have had the wrong, because I had assumed the iPhones -- I assumed that was actually CapEx rather than actually flowing through the P&L. So my bad on that. Anyway, thanks.

Yes, okay.

Anyway, thanks very much for the time, Eddie. I appreciate it.

Joan Tong, Sidoti & Company.

So the first question is regarding the growth rate. And Gary, you mentioned the growth rate is a little bit lighter than the first quarter. And if I were to ask you about the operating metrics that you all always seem to comment on that on each conference call, for example the retention rate as well as the customer closing rate, are those numbers in line with what you expected?

Yes, our retention was in line with what we expected. The phenomena of the pace -- I guess everybody has got a theory. I think my theory is that Mother Nature has more to do that than anything. We were staffed. Our advertising was going. Our digital marketing was going. There was no operational hiccup. It was just a matter of leads and demand, really.

If you would look at the total revenue through the first two quarters and then you compare back to the last three years, we are ahead of the pace of the last years. So I think Gary's word of lumpiness is probably the best way to look at that. Q1 obviously was strong and Q2 not quite as strong as that.

But to his point, retention rates still well in line with where we'd expect them to be. And sales results for our service lines are in line as well.

Okay. Because if you look at the commercial growth rate, it's particularly weak. I wouldn't say weak -- it seems to be growing at that 2%, 3% range. So other than the lumpiness of the business, is there anything else, like changes in competitive landscape, any specifically for that particular business line on commercial?

I really don't think so. Our leads were not as strong as we'd like. Our commercial business is -- a lot of commercial business was sold in the branches. And it's influenced by the leads that we get.

So you might think first of all that commercial shouldn't be impacted by Mother Nature, but it is. And it does influence the lead flow. So that's -- our staffing was there, our pricing was there. We have had competition from the start. So I don't really think that anything unique is taking place in the competitive area. That would be my take, Joan, on the situation.

I think we have had good growth on the residential and on the termite side. And if you take a look at the commercial, kind of like our revenue in total, if you look at our commercial year to date, we're higher at 3.6% than we were for the full year 2015.

So it's not growing at the same rate, necessarily, as the residential or the termite in this quarter. But still well in line, if you look at it just from last year's number.

Okay. All right, that's fair. And maybe moving forward to the expenses, to the expenses questions, Jamie asked about the depreciation and amortization expenses. I guided like, what, $12 million for the quarter. Is it a good run rate? So next quarter, are we going to see like a further edge up? I assume that's the case, and that's first question.

And then second question -- it seems to me that like your iPhone kit expenses is not done yet. So fourth quarter I'm not sure. You talk about it might edge down, but maybe there will be more next year. Can you just elaborate on that two fronts?

So let me go to your second question first. So we are 95% done with the Orkin brand at the end of the quarter. At this point in time, as I had mentioned in my remarks, we are still assessing what we are going to do, if anything, with the other independent brands. We are going through to take a look to see what makes sense from a financial perspective with the changes we would have to make to the system and then what the return would be for those independent brands.

So once we get done with this Orkin at this point in time, we will be done with the iPhone kits as far as the add-on. Again, we have 5% of total Orkin left. That will be done in Q3 and we won't have any expense at all in Q4, unless we were to make the decision to move forward with one of those other independent brands, which of course we will share with you once we know more along those fronts.

And when you take a look at -- if you take a look at some of those other independent brands and the reason why we are having to go through and do this assessment this because they are very different than Orkin. Some of their business models are different. Some of them are more weighted towards commercial, where it may or may not be the same benefit that we would see as an overall more balanced Orkin group. So that's what's going on with that analysis right now.

Okay. And did you disclose like what's the elevated expenses related to BOSS and that it's going to roll off in the fourth quarter? Is it like a major impact on your bottom line, a penny, two pennies?

We didn't break that out. But I think we are going to be along the same lines of what we saw a year ago when we talked about what the impact was for the entire year.

So if you think about what we talked about as far as the entire year, we've finished everything off through the first two quarters and then we will go through from there and be able to have virtually nothing in the fourth quarter and much less in the third quarter.

The implementation piece is a big piece that's going to go away. And we won't need as many developers to be able to help with the changes that we've had to make as we've been rolling this out. So those are all going to be pieces that are going to go into that.

Okay, great. All right, thank you. And then maybe just a little bit about the UK pest control landscape. Is this your first acquisition in that area? So I assume that you are -- we will continue on making effort there in terms of expanding that region, just like how you did that in Canada years ago and then like in Australia.

And so can you maybe just talk about how is the competitive landscape like? We know that there is a sizable competitors on the top, but is it also pretty fragmented at the bottom?

It is; it's very fragmented. I'm not sure if it's to the same exact degree that we have in the US, but it's a very, very fragmented market. And I think we're just going to have this be another one of the opportunity areas that we look at as we are looking at the best way to deploy our cash from an acquisition perspective as we look around the world.

There's another advantage to this acquisition. We really want an international model branch to show our franchise owners and potential owners. Now they come over to the US and they visit our commercial operations, typically in the residential. And they are just not the same that that independent owner really has to model his business after.

So one of the pluses, I think, that we are going to get is we're going to have a model operation that they can get a better sense of really how to get organized and how to conduct their business.

All right. Thank you, guys.

(Operator Instructions) Sean Kennedy, Nomura.

Thanks for taking my questions. Eddie, you mentioned the ways BOSS has affected the business so far. But have you identified any new opportunities related to BOSS as it becomes more mature?

Well, yes. I think when we first looked at BOSS over two years ago, there were, I'm sure, a few things that came to everyone's mind that would be able to be the benefits to make this makes sense. And I think as we rolled this out, I think a few different things.

I think the role of the administrative team in the branches is going to be completely different. We knew there were going to be tasks that going to be able to be eliminated, which have been eliminated. But I think to the degree of how we foresee them being, we are really going to be able to change that branch administrative person now to become much more customer focused.

We're seeing that in the retention rates that I mentioned earlier. I talked about specific numbers on last quarter, but I talked about just in general we continue to see our pest control and our termite control retention numbers continue to get better.

And I think those branch service folks as well as the service technicians are all going to be able to improve that customer experience, which is going to help us with our retention. And anything that we can do to spend more time with the customer is going to do nothing but help us with our existing customers and as far as growing our customer base.

So I think that's one area. We've talked in previous calls about the routing and scheduling. I don't know if that was on our radar to the degree that it is today with this virtual route manager as a bolt-on. So I think those are a couple of areas that are going to be key to us as we are moving forward.

But the bottom line is anything we can do to make that customer experience better, we're just going to be better for it. And we think both of those pieces are going to enable us to be able to do that.

Great, got it. And then just one more question. One of your competitors just announced a collaboration with Google to develop an Internet of Things for pest control, like applying Big Data and predictive analytics to pest control. How do you think it will impact the industry? And are you engaged in similar developments at Rollins?

Well, I can tell you that our marketing group has been really involved with the data analytics piece for probably the last two-plus years now, breaking everything down in all the different service lines and taking a look at all the different factors that go into retaining customers, growing customers, customer segments, customer segments by income, by geography, by our different independent brands. And that's a lot of what they use when we go through and we make our decisions on how we advertise, how we price, how we go through and make the decision on what and where we want to spend our management resources as well as our capital to be able to go through and grow our business.

So I'm not familiar with the specifics of what you are talking about with the competitor, but I do know that our internal marketing group from my perspective has done a tremendous job with that and helping to guide us as we continue to move this forward.

Okay, great. Thanks, guys.

Did that answer your question, Sean? Okay.

No, that's it. Thanks.

(Operator Instructions) Jamie Clement, Macquarie.

Just one follow-up. I would have assumed this question would have come up already, but it hasn't. I did want to ask you about the mosquito business this summer, obviously with the very serious Zika virus concerns that are out there.

You just want general kind of coverage (multiple speakers) --

Yes, just your general thoughts. Like I know that that's obviously historically a pretty small part of your business. But it doesn't sound like it has been the equivalent of bedbugs from a couple of years ago to your industry, but I would imagine that in certain areas of the country, you are probably getting more phone calls.

Yes, I think that's a very fair assessment. We absolutely are. We are getting more phone calls and we are having more opportunities in lots of areas. The areas that you would expect we are probably seeing more. So we saw growth in Florida earlier because they are going to have much more demands than we would see in other parts of the country.

If you take a look at a very, very small base that we have, sales in a lot of areas have grown tremendously. They've doubled in some areas as far as mosquito growth. But again, small base.

The bedbug phenomenon, as you know, is something that built over time. Year one was big growth. But I'm not sure that anybody knew that it was going to be a three-, four-, five-, six-, seven-year phenomenon. We're kind of in this year one right now from the Zika perspective of the mosquito.

So we will continue to -- we want to continue to make sure that we are playing the right role in this. We want to make sure that we are educating the community to make sure that people know and understand what they can do, to be able to help reduce or eliminate the concerns they'd have. And if they need professional help, we absolutely want to be the ones to be able to them from that perspective.

Yes.

We also have the benefit of marketing our other services. We may get a mosquito call, but we have an opportunity to have a recurring pest control customer. And then we also have an opportunity to have a termite customer. So in addition to the revenue that it generates directly, there's revenue that's generated indirectly.

Now Gary, I wanted to ask you -- it doesn't seem to me that the industry has historically done much advertising regarding mosquito service. And I have this feeling, and maybe I'm totally off base here, but that the technology that you guys can bring to bear, the treatment protocols and then maybe even the chemicals, are a lot better than they were 15 years ago.

I just have this feeling that Americans doubt whether your mosquito treatments or the industry's mosquito treatments really work all that well. Do you think there's a disconnect here and maybe an opportunity over the next couple years to (technical difficulty) the service?

Obviously, we think our service is better. We do mystery shopping where we see what the competitors are doing. And there's several things that we do in addition to what's done.

I believe, as long as the Zika situation stays covered as far as the press is concerned, it generates a lot of mosquito business. And our mosquito customers are really happy. I've been in this business for five decades now, and I've never had a service that people will stop you or talk to you at cocktail parties. They are very excited about the fact that they get their backyard returned to them.

Jamie, from the advertising perspective, remember: not everywhere in the US has mosquito demand.

True.

It's only in certain areas. Everybody has ants, everybody has cockroaches, everybody has other stuff. Not everybody has mosquito. To Gary's point that he just made, I'm a personal mosquito customer of ours. I've lived in the South for many, many, many years. And I've tried every other off-the-shelf product is out there.

And it does not hold a candle to this mosquito service. You absolutely do reclaim your yard this point in time, if that's some you are trying to do. And the stats are behind it. It's our best retention product that we have at over 95%.

I think that the environmental concerns that the consumer has really sets us apart from Joe in his pickup truck and a fogging machine. And as Eddie said, on the Internet, we have quite a few spikes where we really explain to the homeowner what they can do, how they can eliminate the mosquito threat.

I appreciate that additional color a lot. Thank you all very much.

(Operator Instructions)

Okay, I guess that's it, then. We want to thank you for being here. We look forward to reporting in the third quarter. I think we will know more about BOSS that time because we will have another quarter under our belt and branches getting more mature. And we look forward to it. Thank you.

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