Rollins, Inc. (ROL) Earnings Call Transcript & Summary

Well, thanks, everyone, for coming. We're very happy to have Jerry Gahlhoff and Ken Krause from Rollins. So obviously, we don't cover Rollins, but we have been following you guys for many years, and we cover Rentokil. I'm sure there are lots of questions on the Rollins story. So maybe if we just start with a few general comments on where the business is at now, what would you like to highlight? We'll see if there's anything you can say on Q3, I'm sure people will be thrilled but we can understand if you cannot at this stage. Okay, maybe just start with that, and then we'll kick off with the Q&A.

Well, thank you, Sylvia, for having us. I appreciate you being our host. I'll let Ken give some thoughts on the opening part there, make sure we don't say anything wrong. No pressure.

Thanks again for having us. It's great to be here. It was great to be here last year, although this trip is going a lot better than last year's Jerry.

You guys may not realize this last year, we were here, Ken was in that same seat and he was not feeling well. I thought for sure he had COVID, and I thought now it means I'm going to get COVID. That wasn't what it was, he had an infection in his hip related to an old vaccine, he ended up in the hospital. I left here, went to Switzerland. We were supposed to meet up later on. I went to Switzerland, and I got a call in the middle of the night from his wife telling me Ken was in the hospital. He's up the street in the hospital with an infection and a bad fever. And so I flew back to London, sat in a hospital with them for 3 days. I can assure you we know we got to know each other quite well during holidays.

And everybody else is getting to know me now.

So we got him home and he is good, but yes, this is a much better trip.

No, it's great to be here. It is a much better trip. It is a much better trip.

I am glad that you came back.

But no, it's always great to be here. The business continues to do well. We enjoy a tremendous position with our customers. We have a great business model. We've oftentimes spoke about the breadth of our brand portfolio and how it enables us a unique position in our markets. We continue to benefit from that unique position. Back in the first half of the year, which we finished in June and reported in late July, we talked about the range of growth that we had provided to our investors during our Investor Day. And that range of organic growth was 7% to 8%, with a 2-or-plus percent or so of M&A contribution over and above that. And for the first 6 months of the year, we were performing very well. Through the first 6 months, our organic revenue growth was roughly 7.6%. I think the second quarter was around 7.7% or so. So we continue to improve that growth through the first half, and we continue to do that here in the third quarter. And so we're continuing to perform at those ranges, at the high end of those ranges in the third quarter here as we finish through August continue to be positioned very well. Admittedly, it's a very short-cycle business. So it's hard to say how we'll fare for the quarter. But generally, through the first 8 months of the year, we're performing very well at the high end of the ranges that we provided back in May. As a result of the strength we're seeing in our underlying markets, we're investing. Back in June or July, we talked about that the fact that our seasons were getting longer. And so as a result, our advertising expense and the experience with our investments in advertising were changing. We didn't have as much in Q2. We expected more in Q3. So we are seeing more advertising expense in Q3. We're also seeing a higher level of investment in sales people, sales and related efforts to go after and procure more business. If the business -- if the market is growing, like we see it, then we certainly want to capture that growth while we can. And so we're investing in resources advertising door-to-door, sales salaries, sales people, technicians, feet on the street to capture the growth. So we continue to invest in this market. And you'll see that as we go through the third quarter and talk about our results, you'll see the investments we've made this quarter. We expect to continue to drive healthy business levels, healthy performance as we go throughout the remainder of the year. From where we sit today and what -- based upon what we know today, of course, that could change. But based upon what we see today, we see a very favorable demand environment. The one thing that I would also indicate is we continue to ramp up our efforts on safety. And so we're investing in safety. The mentor system that we talked about consistently, we continue to talk about that. It's interesting. If I go back to Q2 of '22, we incurred, I want to say, almost $10 million of claims. Q3 of last year, we had a really good experience. So as a result of having that a good experience, we certainly saw some improved margins. I want to say it was about a 70 basis point improvement on gross margin alone last year in Q3. We continue to see good experience there, not necessarily another improvement like we saw this year, but we don't see major increases in claims and major exposures surfacing. So that's a good thing to see. But generally, good demand, performing just where we thought it would be, quite frankly, on the high end of what we thought it would be, and we're investing -- we're making investments to go after and continue to grow in these markets.

Perfect. Thank you. Well, quite a few questions to follow up on that. So maybe on organic, I guess the range that you've given now for the medium term is above where you were -- what your experience was before COVID. So can we maybe pick that in a couple of ways? So one, I guess pricing seems to be now more of a feature of the market, you saying CPI plus, maybe with CPI minus before. How do you think about that? Is it down to the [ tools ]? Is it down to just a habit now with the customers and then it will pick up on volume after that.

I'd say we have a pretty good cadence. We've got very strong pricing disciplines throughout our organization as we've added brands to our portfolio of brands. We continue to bring them into the loop also to leverage price and do a lot of education, a lot of training, a lot of data. We're pretty good at analyzing the data behind our price increase information and showing our field operations what's possible and what we can continue to do. So we see that as a lever we continue to drive through.

And on the volume side, I suppose what seems to have done really well for you is winning new business, that marginal new customer signing up for pest control. Could you maybe remind us of your formula, how much attrition is largely a recurring revenue business model but stay -- you've got some attrition? And how much is new business wins and how maybe that's trended pre-COVID and then your experience after?

What -- I think what we're seeing today is really the culmination of what's been a long-term play for us around our brand strategy and curating our brands that we've added to our portfolio over the last 15 years. We have a variety of brands that bring in customers a variety of ways. And that enables us to leverage the organic growth through lots of different channels. So, I can walk you through some examples of that pretty easily. You take Orkin, it's our national brand, national footprint. I call that your easy button of pest control for the consumer in North America. And then we have our -- what we call our second at the Apple brands like, say, a Northwest Exterminating or Clark Pest Control, that have been established in their markets for decades, have good brand recognition and are seen as the local pest control company. They are the mom and pop, if you will, of pest control. And there's some people that like to do business with those types of companies that have more of a local feel. From there, you also have our specialized or more targeted brands, take a HomeTeam Pest Defense, that partners with homebuilders who -- and they install their proprietary built-in pest control system called Taexx into new home construction through their B2B sales channel and then they go capture those customers and turn them into recurring revenue streams through a B2C sales force. And that's something that's unique to HomeTeam. And as you probably have seen, there's housing shortages in North America. And the housing market is really tight and building is booming, and there's a lot going on there, and they're able to capitalize on acquiring customers that way, just as our Northwest Exterminating does a lot to partner with realtors to work the real estate space. Then you take Orkin, who has good brand awareness, gets a lot of organic attention just because of the power of the brand, plus they're the primary brand that plays in the digital space with -- through digital and the customer acquisition through, say, web-based. And then, for example, you take our latest -- large acquisition of Fox Pest Control, that enabled us to begin getting customers in through the door-to-door channel, that has also been a source for accelerating the growth. So when you look at our business overall, it's really our brand portfolio that we've acquired over time when we made decisions about which brands to leave as stand-alone operations and we buy and build those brands and build those platforms. That's been the accelerator, I think, for our growth now that we've matured in that way, and they're all participating and helping us achieve that -- those growth levels.

And both you and Ken obviously mentioned customer acquisition and continuing to invest in that. Can you maybe talk a little bit about how that works on the residential side? Do you do any, I guess, market or how does that work on the commercial side? And then maybe just zoom into the residential side, you said Orkin, that's where the digital spend is going and the other brands maybe use more traditional means. Maybe just give us a bit of background on how that works?

We try not to have our brands step on each other's toes, right? They have kind of their way to acquire customers. And if you go back to our Investor Day materials, you can see some good illustrations of how that is. But everyone has their own individual role to play in that -- in how they go about that. They've got their -- we call it their recipe for growth. Everyone plays their unique role in doing that. .

And for example, the digital marketing spend because that's a discussion point because of your peers as well. What is that as a proportion of sales, let's say in Orkin? And how has that trended over the last 5 years?

We tend to keep that. We target our spend because, say, take an Orkin brand, they have very consistently spent heavily into brand awareness, and that's what helps us also drive the organic volume that we get that's very inexpensive to acquire customers from. But we tend to manage our margins very closely. We watch that spend very closely. We manage to -- cost of customer acquisition, we look at lifetime value of the customers. But we tend to target a very similar spend year-over-year as a percent of revenue fairly consistently. We may move that 10th of a percentage point here and there. But then we try to allocate those dollars to the right brand and the right opportunity as we go. So I don't know, Ken, do you want to give more color on what those percentages?

No, it's just -- it moves around from quarter-to-quarter, certainly based upon the demand levels. But -- and that's kind of what I was alluding to earlier in the webcast is that Q3 is probably going to be little bit heavier. So if anything might weigh down on the margin a little bit. But generally, as Jerry indicated, from an annual perspective, it should flatten out. And if you look at some of the work we've done over the last 12 to 24 months, we've done a lot of restructuring and productivity enhancements to fund the growth as well so that it's not all incremental. It's actually self-funding some of the cost takeout we're doing is funding the investments we're making in customer generation activities.

And that's interesting because at your CMD event. Clearly, you're highlighting the productivity investments you've put through investments in tech. But at the same time, you're also opening more branches you're now opening, let's say, commercial-only branches but also you are opening just more branches in general. And I guess on the face of it, we get questions on that because we live in a more digital world. Why do you need a physical presence? Can you maybe just talk a little bit about the strategy and how that -- it seems to work very well financially. So if you can comment.

Yes. And the logic that -- and I get the logic to say, "Hey, look, technicians are leaving from their house, going to their first stop". Do we need fewer branches, not more? But yet, here we are opening more branches, and that maybe confused me. I guess I have a bit of a different take on this. I think if there's anything that we need to be doing as an organization is we need to be closer to our people. And so being close to the customer, putting our branches close to where our customers are also helps us be closer to our people. I still want to see our people on a regular basis. We have in-person training meetings. We have weekly service meetings. There's -- operationally, if there's a process or procedure that needs to change or adjust, the best way to talk about that is face-to-face. It's to get everybody together and talk about it as a team. And so we look at creating smaller, more family stock. We want people to feel like a team. And for us, when we -- when it gets really big, you become less familiar with one another. And so putting our branches where our customers are, close to where our people live, they're not maybe not driving an hour, 1.5 hours to the other side of town, pick up materials and supplies or to come in weekly for our meetings, we want to see them. In fact, we see that as an opportunity. It's something that we missed during the COVID period of time when we couldn't see our people as much. We see that there's a lot of value in that. So yes, we are opening -- our goal is to -- what we've seen -- our experience has been that if we had an $8 million or $9 million operation, the mindset of a manager goes from a growth mindset to a maintained mindset. They're saying, how do I not go backwards? And growing at $8 million, 3% and it's a challenge of growing a $4 million branch, 10% or 15% is actually, in some ways, a lot easier. And to me, it's a heck of a lot more fun, and you feel like you're in progress and your team is there and you're familiar with one another. And even back in the Investor Day presentation, we gave examples, and we have a lot of case studies that we've looked at around what happens when we split branches and split regions. We can take that $8 million branch, split into the two $4 million's, and in 4 years, we have two $8 million branches again, versus taking that $8 million branch and grinding out 2% or 3% growth in 4 years, I don't have two $16 million -- I don't have one $16 million operation. So in our model, the way we operate our business, that's how we've seen that. Now it doesn't necessarily always mean that we need the size of the branch that we used to have. Maybe our footprint should be smaller, perhaps we need a little more warehouse space and a lot less office space. So we think about our footprint, it's challenged us to think about the footprint that we need quite a bit differently, so we can go into smaller locations or even co-locate with other brands that operate in the same market that have some space in that part out in the suburb of say, Phoenix, is there another brand has some space that we can just automatically go in and leverage and use their facility for storage and meeting space and things like that. So we are thinking. So it's -- I think there's this mindset. Sometimes when we talk about it that we're just going in and running another facility and starting all over. That's not always the case. Sometimes, in an existing facility, like when we open a commercial branch, we can just say, okay, this part of the branch is the commercial branch and this part is the residential branch, and we can have a shared meeting space for when we do have group meetings and team meetings. So there's that element, too. But yes, that's a common question we get too.

Yes, I can imagine. Well, it seems that it still requires a lot of importance from the center. So it's a hyper local business, but you still need to, obviously, 2 brands are not going to come together organically. You need to tell them we're going to now co-locate you. So how -- can you just remind us what does the team in the center do? What's centralized already? And what -- do you have more -- I think in the previous meeting, attended you were talking about maybe centralizing some of the spend further, some of the costs, what's in the center, what's decentralized?

Yes. We like to centralize the things that don't add value to either our teammate relationship or the local relationship with customers. So if it's legal and corporate HR, some of the accounting and tax and all that stuff, we don't want any of that kind of stuff to be local. We want to have that all done more centrally. But when you think about our brand portfolio, what we want them to have control of is their local HR, their teammate relations, their relationships with their employees. We want them to have a sale over their marketing because they all have different marketing strategies and that are uniquely different from one another, that needs to be local and specific to the brand. No one in Atlanta is sitting there, calling all the shots for every single one of our brands about how they should be marketing to their customers or what that messaging should be or how they go about it. We supervised that, and we have oversight of what they do to make sure we're not stepping on each other's toes or spending things irresponsibly without being able to measure it. But the customer and the people relationships remain local and which we're trying to do a better job of taking in the rest of that, the rest of those functions into a centralized position.

And maybe mentioning people, clearly, the cost of people and churn have been very important for the industry, and that's been a big discussion point over the last few years. Where are you now, the labor markets will obviously go a little bit more slack. Where are you on that on hiring and costs as well?

Yes. We've experienced that as well. We're in the labor market. We are experiencing much more favorable conditions in terms of when we post for a job for Orkin Pro, for example, we're getting a lot more applicants than we were 2 years ago. Not all of them are qualified, but we are getting more to choose from, and we still have to be selective in who we pick. So that part has definitely eased up. And I think some of -- think about Orkin and the brand and the professionalism of our Orkin brand, that draws the right kind of people to our brand as well. So when someone sees the Orkin, and if any of you have ever seen, I would encourage you, if you haven't seen it, go to YouTube and take a look at some of the Orkin ads that are on there. We talk a lot about our frontline people or the heroes of the story. They're the ones that are out there solving customers' problems. So imagine if you would, you're a customer with a mouse in your kitchen and you want that -- you don't want that mouse to still be there. Well, our people get to be the hero of that story. And that appeals to a lot of people. And so I think the branding that shows in our advertising is also helping us from a deployment brand standpoint as well. So that's been a good part. We do still struggle with the -- what we call churn of new people. We get ghosted. We go through the hiring process, get all the way to where they're supposed to show up on day 1 and this person in that I guess that's called catfish stuff, not ghost. We get catfished and we get ghosted. So we get catfished where they don't show up on day 1. That counts as turnover. We went all the way through that process and spend all that time and energy. And then sometimes they get in, they get there for a week, even though they've done a ride along reevaluation, I know what the job is going to be like. They're there for a week, they start the training and they go, "I don't feel like going back tomorrow". And I think -- I don't think this is right for me, I'm going to go do something else. So we still have that problem. And that wasn't -- we had some of that 5 years ago before COVID, but that's still rather prevalent today. That's been that -- that's our biggest challenge, I would say.

Have incentives changed at all? I mean one thing that you've spoken about a lot this year as well as hiring more salespeople. How do you incentivize sales people, how do you incentivize technicians? And how has that changed or have you helped to amend?

The salespeople are still salespeople -- in terms of highly incentivized towards what you produce, how you get paid. And we -- I'm really proud of a lot -- we have really awesome folks when we bring people onboard how fast they ramp up how fast they're making a very good living because of the tools that we give them to be equipped and it's largely commission-based. Years ago, we recognized that there's this ramp-up period of time in B2B sales. And so we had -- we made adjustments many years ago in increasing kind of our base rate to make sure they had a ramp up time to get to the earnings they needed to get to. Our technicians are largely -- have some sort of a base or hourly rate plus of commission based on productivity. So they're incentivized to -- on the work that they do and the quality of the work that they do. They get compensated on that. In brands like Orkin also incentivize on customer retention for our technicians. They have quarterly bonuses for retention of customers on the routes, things along those lines. It's -- that pay plan in so many ways, helps us because as we do price increases, our technicians in the field get raises through that process as we do. And they also get raises when we do our regular merit increases to their base or hourly rate. That's how we've been able to manage when people think, oh, the labor wages are going up 8%, we weren't having to raise 8% because we have the benefit of the price increase plus our normal kind of merit pool that kind of netted out to that if we're raising price at a CPI plus type of rate. Would you add anything to that, Ken?

No, I think that's right. I mean I think the way that we compensate people is a competitive advantage, and it allows us to retain people, but also provide them a significant amount of upside in their compensation. As we grow our business, they're rewarded. And so I think it's a great program that we have.

And then maybe on M&A, could you talk a little bit -- so you committed to that 2% per annum on top of the 7% to 8%. Could you talk about kind of how long do you have the targets in your sphere, how long you kind of meet with them? And I guess, winding down with the founders is still mainly mom-and-pop as far as I understand. And then outside -- maybe in the U.S., what are the gaps? And then outside of the U.S., was the strategy may be more medium term as well?

So the business is -- the strategy of our business is very much focused in the U.S. and Canada. We do have opportunities that we've been able to execute on here in the U.K., in Australia, Singapore. But the largest, most fragmented market that is both residential and commercial, is primarily in the U.S. And so we continue to look at opportunities in the U.S. We look at opportunities through a geographic lens. We look at opportunities through a service lens. We want to buy businesses that are focused on commercial. We want to buy businesses that are also focused on residential services, general pest control, very, very attractive areas. The pipeline is full. We continue to engage in conversations with a whole host of folks ranging in sizes, from very small to larger. Our focus is to take the long-term view with our acquisitions, and that has afforded us an opportunity to develop the reputation as an acquirer of choice. And so we've bought a number of businesses that we've kept intact. We keep their people intact. We keep their brands intact. It doesn't happen all the time, but a large brand that we would acquire a platform that we would acquire that we can invest in, we want to keep it separate and we want to continue to invest in it, very much like the Northwest brand or other brands that we've acquired over the years. We also look at tuck-ins. Tuck-ins are attractive. We call it a tuck-in when it's a small deal that can be put right into an Orkin branch or a Northwest branch or some branch of one of our brands. And so those are very attractive. And multiples are very healthy. It's a great space. It's a great industry. It's a great market. And so there's a lot of interest. But we don't like to obviously compete in auctions. We like to compete based upon reputation for how we'll take care of the business. It's not all about price. If you're looking to maximize price, oftentimes, that's not the right -- we're not the right party. We'll pay a fair price, but we will also -- while paying a fair price, take care of your people and be responsible with the business that we're inheriting. And so that's a unique part of our equation.

I'm pretty deliberate about time that I spend working on building relationships in our industry and in -- so sometimes relationships take years to foster. Sometimes it's 5 or 6 years and then something materializes, sometimes it's 6 months. So that process, you just have to be patient and know -- and I always find myself in the relationships that I have with people in our industry. There's just wonderful people in this industry, and I have a lot of friends in this industry, and we're able to learn what works and what's not -- and we share some of our commiserate some of our challenges and learn from each other about how we're tackling some of those challenges, say, with people or those kinds of things. And then through that process, we build relationships. And -- like I said, it could take 30 days. About out of our tuck-ins, I would say out of -- let's say, we did 30 tuck-in acquisitions, 15 or so are coming through some sort of brokered relationship and maybe half are organic from our people in the field and the relationships that they have with their -- with local companies and the reputation that they've established over time to drive those types of tuck-in deals to us.

It's unique in that the relationships are long and they're deep. And it's interesting when you look at the deals and -- I hate to use the word deal, but the acquisitions that we make and the partnerships that we form take -- they come over a long term -- long time period. And they come from the field. They don't come from a centralized corporate development function. It's very much relationships are built out in the field that bring the opportunities to us that we can execute upon. And that's the best way of doing it. You want somebody that's championing up deal and an opportunity to partner with somebody. It just makes for a better overall pipeline and more success when you think about post acquisition stage. .

Perfect. Maybe we'll pause here to check if there is any questions in the room. There's one.

The increase in marketing and advertising you talked about, is that normal course of business? Or is this a sort of offensive push? While other competitors are sort of tripping on their own shoelaces to grow new clients and still meet those service levels.

It's in line with our strategy. If you go back to our Capital Markets Day, Lyndsey is in the audience today, she did a fantastic job of putting together the Investor Day that we had back in May. And in that Investor Day, we talked about our commercial opportunities. More feet on the street on the commercial side, building out that segment of our business and investing in that segment of business. Certainly, as the investments we're making this quarter are reflective of those efforts. They're also reflective of the effort that we talked about in June where we said that the season is getting longer. And so there's a shift in where -- how we're investing our advertising dollars. We're spending more advertising in Q3 than we did last year, and we're spending -- we spent a little bit less in Q2 than we normally would have seen. And so that's just a timing shift, if you will, is what's occurring there. But generally, the increase is borne out of the strategy that we formed and the direction we're headed combined with the favorable market dynamics. It's not necessarily just competitive driven, it's driven by what we're seeing in our end markets and how we feel about our business.

And I think if we were looking at it competitively, we're looking at it competitively at the overall market because there's lots of strong regional, large regional players that could be in the space, that decide at one time or another that they suddenly want to go spend into the space and drive costs up. And we may withdraw for a short period of time and let them go do that and put our dollars elsewhere or hold them back for better opportune time when we feel like we're going to get a better return on our investment. So it's really looking at probably the macro competitive environment that may get factored into some of the timing of the marketing spend.

And any comment on the success of those initiatives? And how do you measure it? And what those success look like? .

I think the easiest way of measuring the success is the performance we're seeing in revenue. And as I said earlier, we're performing at the high end of the range that we provided through the first 6 or so months. It is, say 7.7%, improved Q2 versus Q1. And here in third quarter, we continue to see similar performance. And so it's been good. I think the performance we're seeing is keeping us at that level of growth that we hope to see for the year and quite frankly, at the high end at that level.

Another metric it has to do with we look at like cost per lead and what I would call a highly inflationary cost per lead type of environment, we've been able to keep that in check. And that's a big part of timing and being reactive and dynamics and monitoring that every day, every week knowing what's going on and being aware so that we can truly optimize we've got a defined amount of money that we're going to spend and how do we optimize that. So when somebody is doing something that's driving price up in a general market, we're pulling back and maybe moving those dollars to where we can be more effective with them. That -- keeping those -- that inflationary cost of, say, Google search kind of terms in line is key.

Just sticking with cost inflation. Back to the war for people. Is there a way to contextualize compensation levels for a sales rep or an account rep, now versus, say, 4 or 5 years ago? And I guess just as a follow-on, the catfish example you mentioned. Presumably, that's because unemployment is at low 4s. And when that moderates to closer to 5, we see some of that disappear because of other opportunities or where do we think they're going? Part of my question.

That term's a new term to me, quite frankly. .

He had to ask me what catfish you meant the other day.

I was joking. I think that -- our -- the way we compensate people is unique, and it results in steady improvements in standard of living of our people. And it's not necessarily driven by a market dynamic. It's driven by how we compensate them. In terms of the loss of people, one thing that we're doing, and Jerry can talk about this, is leadership development. And not only leadership development, but investing in onboarding and training and all the work around that. And so we think that's a really important area. We're a people-based company, and it's important for us to invest in our people. And we think that if we make the investments that we think we can make on the training and onboarding, leadership side, we think that will have a favorable impact on us as we think about the future and the retention of some of those folks. But generally, you're going to deal with -- in this industry, you're probably going to always deal with challenges around turnover and churn. It's a tough job. And inevitably, people will sign up for something and they realize they signed up for something that they didn't understand or fully appreciate. Even though we have a ride along process that they go through before they come on board, it's just a tough job. And so as a result, you might have a little bit more elevated turnover in that area. But we're taking some steps to try to mitigate that on our business.

Do you see any positive effects from this Rentokil/Terminix merger in winning new customers or hiring indications or other skilled people?

We really don't focus on the competition. And with respect to Rentokil/Terminix, very rarely will say the name. But it's a big process they're going through. It's a lot of challenges. And we certainly don't envy the challenges that they're facing. And they're facing a lot of them. But we're not certainly focused on their challenges and capitalizing on that. We're focused on executing our business, just like we have for the last 60-plus years. We have a great business. Jerry and I inherited this business and the opportunity to lead all the associates and the team members that we have. We really -- we enjoy coming to work each and every day. We enjoy servicing our customers and we enjoy investing in our people. And as a result of doing all of that, we feel like we will continue to be successful. And so that's really the focus. It has really very little conversation that we have around the competitive challenges that people are facing, but it's about what are we facing because we know if we take the eye off the ball that we're playing, we're going to face some challenges. So let's just execute our strategy.

I would say other people talk about it 100 times more than we do. And it's because we are more internally-focused, there are lots of competitors and focusing on just one and one opportunity would be a little shortsighted on our side. As it relates to people and being able to get -- bring more talent in the organization, I just have a strong personal preference for I'd rather train folks to do it, have our brands, train our folks to do it their way, and how they provide service. And what that means and what those service standards are, I'd rather us go out, hire somebody that has -- people skills that can communicate, can look at a customer in the eye and speak with empathy about the problem that they're having. And then I'd rather teach them how to control the pests and give them the technical skills that they need to do the job to be effective. So that's my personal preference. So as we're looking at applicants, I want to bring in people that have those skill sets and then we teach them our way of doing -- the way we do business versus maybe retrain somebody that came from anywhere else in our industry. And that's not to say there aren't good people that -- from time to time, we do hire folks. But I just -- I like the idea of us teaching them the right thing and hire for their strengths and their people skills and teach the rest.

Last year when you were here, you talked about a great business that you'd come into, but your desire to sort of quicken the pulse of it, which with Ken on hospital probably is exactly what he needed. Quickening that pulse, obviously, you have different ways of doing that. What are the sort of focuses at the moment to sort of speed things up and get the business humming even more?

Yes. So one of our growth accelerators has to do with leveraging the power of our brands and the leadership that we have in our brands that already exist. Think of about the knowledge base and the experience of the folks that come from these various backgrounds, maybe they ran a family-owned business, or maybe they work for the family that own that business. There's a lot of experience there. So being able to collaborate, creating an environment where they can collaborate. And in the past, my role has been over the last few years, it was very much -- okay, I got to put all these folks in a room, get them talking to each other and create that environment. I've got to kind of force that to happen and make them talk to each other because they're all running their businesses, and they're all busy and they're all in their worlds. But there's just so much knowledge and experience that could be leveraged. Now we're getting to the point as we kind of shift a culture a little bit is what I really want them to do is take that initiative and start reaching out and say, "Hey, I noticed in one of our quarterly business reviews that you're doing really well at this, can you help me figure that out for our business". And they're doing that without Ken or I reaching out to them and saying, you need to talk to this person about that because they're good at this. They're seeing that we're creating that environment then that they can learn and share with one another, share those best practices. We have our own incubator of ideas and best practices and thoughts. And then the other advantage that we have in our brands is that some of these smaller brands are more nimble and agile to try something without a lot of risk. So you put something into the Orkin system, it's coast to coast, north to south, east to west, that's a big change. But we can go try some of those things in the smaller local brands, test it without a lot of risk and then go roll it out and make implementation. So we've got, again, more of that incubator. Any other ideas...

I mean, I think the way that I would describe what you just said is when I joined 45 days in or so, I put together an observation list for Jerry. And I said, Jerry, the word that I'd use to describe what I see is siloed, very siloed. Nobody really talked to one another. And so there's been a conscientious effort of driving more collaboration. And so what he's describing is that collaboration that's occurring across brands, across the home office, we've had a restructuring a year ago now in the home office. We brought a lot of new people into the home office, people are talking to each other more often and sharing ideas and it makes it an energizing place to come to work. And so I think that is a really -- what you've described is really representative of how we've broken down silos, how we've improved collaboration and how it's driving value across the business.

It's really a potential superpower for us .

And one other question. I think you picked up a couple of times within your emphasis is commercial, so you seem to be putting a bit more effort maybe into commercial -- I mean not that you've not in the past, but it seems to be one of the emphasis that you're putting in now. I mean, one of the discussions we had in the previous meeting was how that marketplace actually changed. So you have fewer players now than you did 10 years ago. Could you maybe talk a little bit about that? About that shift in the commercial market and how you're maybe planning to maybe...

Yes. So if you go back 10 years ago, in particular in the U.S. market, there were a lot of large regional players that performed a lot of commercial work. They're really good at commercial work. Over the last 10 years, a lot of those have either been -- primarily have been acquired by folks like us or maybe Rentokil or maybe any [ C Max ], a lot of those providers have been acquired over time. And a lot of those regional companies 10 years ago were part of a network called Copesan. And Copesan was a consortium of all these regional players that got together under this Copesan brand to try to be like a national service provider. They use their network between them, some common CRM platforms to be able to service national accounts. So it allowed them to compete with Orkin or compete with Terminix Commercial, those kinds of businesses. The Copesan entity, sold, I think, about 5 years or so ago, especially as a lot of those large regional commercial -- somewhat commercial-focused companies were also selling off. It made it hard for them to keep that network together. Eventually, the Copesan business got sold to Terminix. And that commercial business got rolled into Terminix. And so you see that it's a pretty significant shift in terms of large regionals. If you go back to the top 10 or top 15 or so pest control companies 15 years ago, there was a lot of them that checked the box and doing commercial work. Now you look at the top 10, top 12 pest control companies, the majority of them, those have been replaced by predominantly residential pest control companies. So really, that landscape has shifted where you have Orkin, which is a coast to coast, fully-scaled platform for commercial. We have our regional second bite at the Apple brands like Western and Waltham and you got specialized commercial business like IFC that are part of our portfolio that do commercial work. And then you have Rentokil that's got commercial as well as Ecolab that's participating in that place. So it's just been a pretty significant shift over the last 10 years that -- it's slowly, it's happened over time. And during the COVID, we saw that opportunity. And the mix of COVID environment, plus the competitive shift, I think, has created a really nice opportunity for everyone in the space.

Perfect. Thank you very much. Thanks very much for the questions.

Thank you, Sylvia. Nice job. Thank you.

Thank you.

Thank you.