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

So for those of you that don't know me, my name is Lyndsey Burton. I run Investor Relations for Rollins and have the privilege of telling our fantastic story on behalf of the 22,000-plus teammates that we have around the globe. So thank you for joining us this morning. The attention of this event was really to just get everybody together. It's been a great year. It's been a busy year for the Rollins team. So we just wanted to take the opportunity to get to know all of you a little bit better. We have the entire leadership team here with us today. We have some new faces from the sell-side perspective. So it's great to have you all here. Thank you for taking the time and joining us. So the program really today is going to be a few minutes of prepared remarks from Jerry, our CEO; and Ken, CFO. And then we're going to bring members of the leadership team up to answer your questions. We're going to keep it more focused on the strategic element. We're not going to provide intra-quarter updates or anything like that, but just really want to kind of have the opportunity for dialogue with all of you. Next year, we're finalizing dates for a more formal investor and analyst conference that will probably be in the spring time. So stay tuned for that. And then on the years that we don't do a formal investor conference we'll try to get together in a form an event like this. So real quickly, these are forward-looking statements. I won't read these to you. I think we've all seem them and know, but will be in our reconciliation of non-GAAP information. So thanks for joining us. I'll now introduce Jerry Gahlhoff, our CEO. And thank you all.

Well, good morning, everybody. Thank you all for attending our conference here today. We're really excited. I can assure you my team is also very excited about this as well. Ken and I have just lapped 3 years together with me coming in as CEO and Ken as CFO. And we've already had a really strong run. And I'm going to spend a few minutes with you this morning talking about 2 main topics, a little bit about my team, and I'm going to reveal something publicly that we haven't done -- we haven't talked about outside our organization yet. So I'm going to give you some insight into something that we're working on that is very strategic to us, very strategic to our company, and we're going to give you some insight on that. So to kick it off a little bit, hopefully, as you guys are eating breakfast and mingling around, you got to meet of our team. I wanted to take a minute and introduce many of my teammates that are all part of my executive leadership team at Rollins, and I would encourage you to take some time to get to know them while you're here if you haven't already. So on the next slide, I'll give you a brief introduction. You can read some of the experience and technical aspects. And real quick, I'm going to have each one raise their hand when I call out their name. I'll give really a brief introduction. Beth Chandler, who's our General Counsel. She's here with us today. Beth, maybe she's behind the column, l can't see, and she's raising her hand. I also have Thomas Tesh, my Chief of Staff and our Chief Administrative Officer, who runs a lot of our home office functions, and Thomas is right back there. Obviously, you all know Ken. Pat Chrzanowski from Orkin is here. He runs all of Orkin in the U.S., and his counterpart on U.S. brands is Stanford Phillips, who's right there in the back. Everything that's not Orkin in the U.S. reports in through Stanford. So if you want to learn about our other brands, it's a great opportunity. Renee Pearson is back here in the back corner. She's our Chief Information Officer, everything IT and technology, she's your resource. Also have Clay Shearer. Clay Shearer is our Vice President of Operational Support. Clay is a PhD entomologist with a great deal of experience in our industry. He and I have known each other for, G. Clay, I think, close to 30 years, and he's been a tremendous addition to our team. Also joining us here today is Brady Knudsen, our Treasurer. He's here in the back. Obviously, you guys know Lyndsey as well. So all these folks are here and represented. And again, I would really encourage you to get to know them. So in that introduction, one of the reasons we brought them with us here is what you can't see or feel on the slide is the alignment, the passion across our leadership team. And for me, personally, my team is my inspiration. They're my passion, they're my why about why we do what we do at Rollins each and every day. And I get a tremendous amount of energy from our 20,000-plus teammates around the world, but this team is really special, really special to me. And I hope that you and your interactions, you'll be able to get the same feeling that I get along the way. And we'll have opportunity for you today to be able to interact with and have any role-specific questions that you would like to ask that team. So I mentioned in my opening that there was something that I was going to reveal publicly for the first time. We'll get right to that. So I joined the company in 2008. It was April of 2008, I joined the company. It was at about the time that Rollins had just crossed the $1 billion mark in revenue. And that was a pretty significant milestone because Rollins, Inc. had been around a very long period of time. But since then, we've almost quadrupled since 2008, the size of Rollins, Inc. We've done that through organic growth as well as inorganic growth through acquisitions, just like the acquisition that I came from and several others in this room that have come from acquisitions as well. Over that time, Rollins over the years has had a really strong legacy. When we think about our company values and the things that have driven us throughout the years, values such as customer service, professionalism, continuous improvement, that's something you hear us talk about a lot as well as doing the right thing. Those are the core components of our culture. As our culture -- as our company, I'm sorry, has evolved, though, when I joined in 2008, it was -- the company was largely Orkin. We had acquired by that time, Western Pest Services, which is based here locally in the New Jersey area. And then the HomeTeam brand where I came from, that's how the company looked. Today, Rollins is now the parent company to dozens of brands in the pest control space. So that has really had -- the company has changed from and what I would call an Orkin-centric shift to now being a parent company of a lot of high-quality brands with very unique cultures and business models. So while we all still do pest control, each one of our brands, whether you're Northwest Exterminating or HomeTeam or Clark, you all have your own microcultures, if you will. So this umbrella of Rollins operating with customer service and professionalism, things along those lines, every one of our brands has words to describe what they're all about. So what we -- this multi-branded approach that we've taken over the last several years over probably the last 15 years that has resulted in so much growth and so much improvement and enhancement in our business is really a key differentiator for us at Rollins in our business from a competitive standpoint. This is a really strategic advantage for us. However, one of the things that we were lacking is a unifying force across all of our brands that was clearly defined in what we're doing. But as we really dig deep into what all of our brands are about, whether you're at Western or Waltham or Northwest or HomeTeam or Orkin, the one thing that we all had in common and it's most important to us is the unifying force of being focused on our customers and our teammates. Those are the 2 most important things across our business, and it doesn't matter what brand you work for or what micro culture that you may have at your own brand or what your value systems are at our own brands -- at those brands. We were intently focused and aligned with customer and teammates and making sure those relationships that we have with customers and our teammates are long and prosperous. So today, I'm going to spend a few minutes talking with you about an initiative that we set out on about a year ago that's really designed to help unify and connect all of our brands and across all of our brands by allowing them -- and also at the same time, allowing them to preserve some of their autonomy. So when we -- as I introduce you to these concepts, these unifying concepts across Rollins, I want you to understand, too. All these concepts are rooted also rooted in -- rooted in my personal experience. I've been in the pest control industry directly for 32 years. They're rooted in my personal experience and the personal experiences of working across our team. And basically, what we've done is created this concept called The Rollins Way. And The Rollins Way will be described, I'll walk you through is really 6 words. There's 2 or three two-word couplets that I think will enable us at Rollins to give us sustainable growth and maintain those long profitable relationships with our customers as well as our teammates. So I'm going to walk you through these -- three two-word couplets, what they mean to me and share with you where they came from and how they're important. Most importantly, what I want you to hear or what I hope that you should actually understand is that these concepts are simple for everyone to understand throughout our company. If you're an Orkin Pro, if you're a technician at HomeTeam, if you're a customer service rep that's talking on the phone to a customer, if you're someone in sales, this is relevant to every single position, including our leaderships, our leadership positions, and it's deeply tied to our mission at Rollins. So I'm going to walk you through these -- each of these three two-word couplets. The first one I want to talk about is actually very personal to me. As I mentioned a minute ago, I started my career in pest control 32 years ago. I started as a technician. And if you ask me, I was a pretty good technician. I took a lot of pride in my work. Once I got really trained and knowledgeable about what it is I did, I took a great amount of pride in solving customer problems. Oftentimes, what I had to do wasn't necessarily fun to -- a lot of you may not consider it fun. But if it meant waking up at 1 in the morning and driving to a customer's house because I needed to track down and try to find nocturnal carpenter ants that were forging in a kitchen and trace them back to the nest at 2:00 in the morning, that's the kind of stuff I did. If it meant there was a restaurant that had a German cockroach infestation and I had to be there after they closed at 11:00 at night, doing a cleanout to make sure that all those roaches were gone, that's what I did. If it meant I had to be in a cross space crawling around and digging a trench along the side or drilling the block inside of a cross space and spending hours underneath in a confined space in a crawl space, that's what I did. And I took a great pride -- took great pride in it. And I did that because I knew there weren't a lot of people that were willing to do what I did. There wasn't a lot of people that were brave enough. Once in a while, I sit in some of our new hire orientations with some of our frontline teammates. And one of the questions I'll get is, hey, I keep going up in these attics and I'm back in this dark corner or I'm in a cross space. Does it ever get a little less scary? And I said, no, it doesn't. right? It always will take a little bit of bravery. It's always -- you're going to have to be brave in these very tough situations, putting yourself in these unique predicaments that not a lot of people would do. And I absolutely loved that about my job because to me and to my customers, the customers that I served, there was no one better than me to take care of their problem, right? To me, that's the lens at which I saw. So when I had customers that were struggling with a problem and had dealt with it for a long period of time, and I was there to save the day, -- that's what our people get to do each and every day. They get to do this all day long. And so the first of our 2 word couplets is heroic impact. Heroic impact is about protecting others, putting others first, going above and beyond. These are things to really solve customers' problems. And I just gave you the perspective of what that means as a technician in our company to be able to do that. But if you're on the phone with a customer who's upset because -- or a potential client that has, say, someone you had a mice in your kitchen, right? That's a traumatic event, right? So even someone talking on the phone has the opportunity to speak with an empathetic voice, to calm a customer down, to try to do his or her best to quickly schedule just as fast as possible and reassure that customer that we're going to be there for them. That's also a heroic impact, right? So this is something that can be done across all of our business units, all of our teammates. And if you're a leader, your job as a leader in our organization to have a heroic impact is to roll up your sleeves and do it with them. This is why we talk -- I mentioned on the Q3 earnings call about our collab where we're teaching servant leadership content. It has to do with being willing not just to tell people what to do, but to roll up your sleeves and go help them and show them and demonstrate what that means. Also, heroic impact has kind of another meeting, and it's about how our brands interact with each other. It's about how our brands show up for one another. It's about -- so for example, I think about at Orkin, if Orkin is getting calls for Wildlife, they're helping our Wildlife brand by funneling leads to them. Orkin looks good because they're making it a seamless process for us to transfer customers to them in a warm way. And our Wildlife brand is benefiting by getting the leads that Orkin is helping generate for them. They're having a heroic impact. I talk a lot about building a positive peer culture. And of that positive peer culture where our brands help each other out and they cover for each other. When somebody is short staffed, can somebody go help them in that same market. That's showing up for one another. That's also another form of heroic impact. So that's the first of the two-word couplets. This is the one that for me personally, I can really strongly relate to and a lot of our people in our company, we -- when I talk the story about heroic impact, a lot of our people can relate to it because they know that's what they do each and every day. So the next 2 words I want to talk about are essential together. Most of -- some of you may know this, but I actually grew up -- while I said I've been hands-on around the pest control business for 32 years, I actually grew up around Orkin. My dad was -- my dad worked for Orkin. And between the ages of like 6 and probably 12 years old, I spent most of my Saturdays in an Orkin branch as a kid. I went to work with my dad. I went to work with my dad most Saturday mornings because I got doughnuts and got to look at the critters that he kept in the aquarium. And I had a lot of fun. The Orkin family that I had because I moved around a lot as a kid because we moved around. My dad went from branch to branch kind of fixing branches. And the teammates that were in those branches, those were my family as a kid growing up, and I have fond memories of how everyone worked together, how -- there's a picture actually on my desk of me at an Orkin picnic. I think I'm about 8 years old, and I'm sitting next to my dad and his Orkin hat and the whole branch is there at a park somewhere in Louisiana, and there's a party, right, a picnic. That's the togetherness that I felt growing up and Orkin was certainly my family. And that gave stability, belongingness, it gave connectedness to what were independent branches across Orkin. We had our microcultures. But what -- even as a kid, I got to see someone maybe answering the -- customer service answering the phone to the technician or the salesperson, they all had to work together. So if I -- keep in mind my story about heroic impact, I really -- despite the fact that I felt like mostly I was on my own working as an independent person out there solving my customers' pest problems, it didn't take just me. If my customer called the office, they had to talk to someone in customer service. And that customer service person had to schedule at a time then they knew I could actually arrive and show up when I'm supposed to show up or somebody had to sell the job and set proper expectations with that customer about what that meant. If any one of those things did not occur, there's a break in the service cycle, right? If a salesperson told the customer something that we couldn't do and then I showed up to do the service, we'd disappoint that customer. It all has to work together. None of us are independent operators. It takes all of us doing our parts, doing our jobs together in order to truly build those long-term relationships with each other. Essential Together also has another meeting, I think, a deeper meeting. When we talk about our service, you hear Ken talk a lot about we're an essential service when we talk about pricing, things along those lines. Essential also means reminding our people each and every day, what they do is essential. It's essential to quality of life, protecting public health. No one wants to live with rats and roaches in their house, right? So essential together, if we're essential together as a team, working together as a team, our customers feel the positive benefit of that. It also means from a leadership standpoint, our leaders have to -- in order to be essential together, their core job, their fundamental job, and this is what we teach in collab is that their job is to build essential teams. That's who we hire, how we train, how you create a team type of environment, how you think about systems and processes, that takes a team. So if you think about essential together when we talk about this, this has a lot of logic when we talk about our teammate retention and the challenges -- some historic challenges that we've had there. Think about us building strength and building muscle around essential together. It's really easy to leave a company, but it's really hard to quit a team. When you're a part of that team, when you're connected, when you're empowered, when you're celebrated, recognized and reward as part of a team, you're essential to one another, it's really hard to leave that. So we also believe this is us emphasizing essential together will be really key to how we work together. Let me give you another example on a bigger perspective of how essential together may also work and heroic impact talked about how our brands show up for one another. But I also imagine a world in the future where we have certain cross-brand behaviors amongst our brands. Imagine, if you will, if we were able to share data between our brands on lost customers, right? So let's say, a customer left brand A and then one of our other brands quickly got that list and began to be able to circle back to that customer to recapture that customer. That's an example of us being essential together, being able to work with one another to share information between us and also to maybe even flex capacity to get work done between our brands. These are all opportunities that as we grow and mature as a company, that essential together helps us get. The last one I want to discuss has to do is Be Remarkable. Be remarkable to me has nothing to do with pest control. Myself, when I was a technician, I was a pretty handy guy. So I could fix stuff. I would notice things around a customer's house. I may fix a broken sprinkler head. I may readjust the light. I may help them adjust a patio door that's sticking or stuck, those types of things. Just because I'm walking around the house, I'm seeing that, and I'm keen to what's going on around the house. What does that do? That builds relationship because that's going above and beyond for our customers. So what we encourage our teammates at Rollins to do to be remarkable is to bring your personal flare, bring your personal energy of what that is -- whatever that is that means to you. It's as simple as maybe it's bringing up the trash can or the newspapers from the end of the driveway, or it's to maybe to the extent of, hey, I know all of the names of all my customers' pets and I play with them at each and every -- or I have a pocket full of dog biscuits that I'm sharing with my customers. We have this. It goes on every single day at Rollins and across our brands, be remarkable. So when our leaders are attempting to be remarkable, that means they have to be remarkable to their teammates. How do they know them individually? How are they interacting with them? Do they know what's going on in their personal lives? Do they know how to reach out to help them to go above and beyond that? Maybe it doesn't have anything to do about with their job, but it has to do with helping them and maybe helping them be better as individuals. So when you put these things together on the next slide, you'll see each of these two-word couplets, Heroic Impact, Be Remarkable, Essential Together, right there in the middle in this venn diagram where they all overlap. This is where my vision for Rollins and our brands comes into play and how we serve, how we lead, how we -- how our brands interact with each other. I imagine my vision, my dream is that every single one of our teammates is at each time, if I'm a technician, every time I get out of my truck and I'm about to interact with a customer, I have the opportunity to have a heroic impact to solve their problem, prevent a problem, to be brave. I recognize that it takes my whole team for me to be there and do that. And when our customers see that we're all talking and we're on the same page that we're essential together. And then if I take and add that a little bit of extra, how am I remarkable for our customers each and every time, that builds the strength of our relationship with our clients. And right there, we're doing that where all 3 of these things overlap is the Rollins way. And I think what a tremendous opportunity, if we were able to do that at every customer service interaction that we had, -- we have customers for life. You have the most loyal customers you could possibly imagine. So that's really the sweet spot. And this is how we frame it to our people, and our people really relate to this. Last week, me, Ken, Pat, Stanford were out and visiting branches, and we have these conversations with people, and you see the heads nodding. They get it. And this is the pride that they need to take in their work because this is -- they are performing an essential service. It's essential to what we do. And this is how we're beginning to talk about while we have these various brands, this is the force that unifies us all. I firmly believe that across our company, embracing these behaviors can -- it will impact our future more than anything else we do because this business is all about our relationships with our customers and our relationships with our teammates. And this will drive the behaviors that we need to be successful. So I truly believe that if we have every teammate living the Rollins way, this will allow us to unify our strengths as a company and also allow our brands to preserve their individuality because they understand this is the umbrella in which they're part of. This is what it means to be a part of Rollins. So I mentioned at the outset, we've grown -- we're approaching the $4 billion mark. And getting bigger and growing our business is very important. But bigger only works if we're better as a company. And the Rollins way that I've laid out for you here today is how we get both. So I hope this message resonates with you as much as it is with our team as we have rolled this out internally over the last year. As I mentioned, this is the first time we're sharing this outside of Rollins. And as you interact with our people and learn more about our business, you are definitely going to feel this the way I feel it throughout Rollins. So I'm now going to turn it over to Ken, and I'll let Ken connect this cultural operating system to how we turn the business into long-term durable growth through a lot of investments that we'll continue to make. Ken, come on up.

Thank you, Jerry. Really appreciate that. And I really appreciate each and every one of you taking time out of your day to spend with us to get to know our story, to get to know our business and just to get to know our people as well. In the room today, we've got a lot of our leaders. And so hopefully, you get the opportunity to spend some time with them and get to know them a little bit more. Jerry spent a lot of time talking about the how. The how is really important. The how is how we -- it explains how we invest in our teammates. It also describes how we interact with our customers. That how is enabling us to continue to deliver exceptional financial results. Simply said, we compound revenue, earnings and cash flow by acquiring and growing market-leading pest control businesses. We continue to be very acquisitive, and we continue to deliver exceptional results. When I think about the exceptional results and how I would quantify exceptional results, I think this slide here really does it. When we look at our long-term compounder and our performance over the last 25 years, since 2000, we've been compounding revenue at 7%. We've been compounding earnings at 14%. Operating cash flow has compounded at 18% and our average annual TSR is over 20% -- more recently, in the third quarter of this year, I was really proud to deliver such strong results with such a strong group of teammates behind us. We delivered 12% revenue growth. We delivered earnings growth of 18%. Our cash flow is compounding at 30%. And year-to-date, it's over 20%. And our stock year-to-date is returning just under 40%. We're not a Mag 7, but we are pretty magnificent when we think about the performance that we're delivering for our shareholders. When we think about the financial performance through the lens of various cycles, -- it's interesting. We've grown through the great financial crisis. We grew through the industrial slowdown. We grew through the pandemic. You all know that. You've seen this chart. I like to show this chart because this is such an impressive chart, and it just reflects all the great work that all of our teammates continue to do around the world. But one thing you may not know is that for 96 straight quarters, not just years, but 96 quarters, we've been growing. We have not went backwards since the third quarter of 2001. And even at that point, it was a very small decline. So we've been continuing to compound on a consistent basis through a number of different economic cycles and challenges because we continue to operate in such an attractive market with such a highly engaged group of teammates. When we think about the performance, this strong performance enables us to maintain a very balanced approach to capital allocation. We talk about capital allocation quite frequently. We spent a lot more time recently on capital allocation. But year-to-date, we've deployed almost $800 million of cash flow. We've only generated $550 million of operating cash flow. So we've used our balance sheet a little bit more in recent years. But we continue to grow our cash flow position and cash flow continues to compound, enabling this very balanced approach to capital allocation. Year-to-date, we've bought back shares of over $200 million. We've deployed M&A and investment for growth of just under $300 million, and our dividend is growing quite nicely, representing almost 45% of cash flow and is $239 million. Going back 3 or so years here, you can see we've deployed just south of $3 billion of capital, $550 million in share repurchases. We've invested in growth. We bought over 50 companies for almost $1 billion of capital. And we've grown our dividend over 80%. We've grown our annual recurring dividend over this time by over 80% and have deployed over $1 billion in dividend payments to our shareholders. So I hopefully agree that it's a very balanced approach. We continue to be committed to the same type of balance. But when I think about and I reflect upon the last 3 or 4 years, I can't help but talk about and highlight all the great activity that our team is doing to modernize our business. We've used that word quite frequently. And there's a number of different areas that we've really been focused on when it comes to modernization. Just starting on the capital allocation. I just pointed out, we've deployed just under $1 billion of capital over the last 3 years. We bought businesses like Saela and Fox, but we've also bought a number of other pest control companies that you may not be familiar with like American Pest and others. And we're really excited to have all of them continuing to add to the portfolio of businesses that we have to go to market with. As I said earlier, our dividend is up over 80%, and we've deployed over $500 million in share repurchases, most recently in November in our secondary offering. Our capital structure, we continue to modernize that area of our business as well. Back in the first part of '23, we upsized our revolver. But more importantly, this year, in 2025, we debuted on the bond market with an investment-grade rating from Fitch and from S&P. We issued $500 million of bonds, and we also established a commercial paper program that we're using to fund some of these acquisitions that we're making. The Investor Relations program continues to expand, and we continue to be very transparent, enabling us to really execute a very tight secondary offering in the first part of November. We continue to implement performance share programs that are tied not just to time, but they're tied to performance. They're tied to revenue growth. They're tied to EBITDA margins. We've also increased our sell-side coverage. We've tripled our sell-side coverage. We went from 5 analysts back in 2022 to 15 analysts today. And probably most importantly, our talent, we continue to make investments in our talent. We have a lot of individuals that have been with the business for a very long time, and we value those folks greatly. The experience is so important to us. But what we've also done is couple that experience with some new ideas and new thoughts and new people. And it's exciting to see the chemistry between those 2 groups of people and what they're doing to really drive performance. We've also changed the Board quite a bit. You've seen some new Board members come on, and we've continued to modernize that by declassifying the Board most recently. When I think about the future, you look at this and you look at our financial performance, and you might ask yourself, well, what's left? What's left in the tank? And when you think about what's left in the tank, I like to think about things as I look at the financial statements in a very systematic or structured manner. And so when I think about it, just starting at revenue, I continue to have great confidence in our ability to grow double digit. You heard me talk about double-digit revenue growth, double-digit earnings growth and compounding cash flow that's growing faster than earnings. That's really the focus. So when we think about revenue, the organic growth, our markets continue to be attractive, continue to be an area of value. We really think that we continue to see an underpenetrated residential market with between 15% and 20% of homeowners using pest control. We think that number has an opportunity to expand and in turn, help us grow. The commercial opportunity is exceptional. We continue to see great results from the team there. We've made a lot of investments in that area since our last Investor Day, and we continue to make investments there because we see great opportunities to compound that at a high single-digit rate of growth. M&A continues to be important to us. Did you know that over -- there's over 33,000 competitors in our space. It gives us great opportunities. We don't have to have any one opportunity, and we can remain very disciplined and focused on being the acquirer of choice using our culture and our relationships across the pest control industry to enable us to continue to grow. And then ancillary markets or the ancillary business. It's interesting. When you look at our business, we report under 3 broad service categories: residential, which I talked a lot about, commercial, and then we have what's called the termite and ancillary. And the ancillary is a really important area for us. It continues to grow at double-digit rates of growth organically. And oftentimes, we'll look at it and ask ourselves, how does that continue? Well, we really do believe that will continue because it represents a really small part of our customer base. We estimate that less than 5% of our customers are using ancillary services. And in fact, substantially all of the ancillary services today are coming through Orkin. They're not coming through the specialty brands. So we have an opportunity to continue to expand that area of our business with our specialty brand offering. Gross margins, we continue to see really strong performance on the gross margin. What I like to see when I think about gross margin is an incremental gross margin that's north of 55%. And so when I look at our business in the third quarter, for example, we delivered a 58% incremental margin on the gross line. That, I think, is achievable. It's a really good number to see come through the business, but it's really reflective of the strong competitive position and the attractiveness of our markets. We continue to see pricing opportunities. You'll hear us talk about CPI plus pricing. So what that means is as long as CPI is at 2% to 3%, I'm going to be focused and Jerry and the team are going to be focused on delivering price increases that are 3% to 4%. This is a GDP plus grower. It's also a CPI plus pricing model. And so great opportunities there. But not only do we see opportunities to get paid for the essential nature of our services through pricing, but we also see great opportunities to continue to drive improvements in our cost structure, whether it be on the material side or on the technician turnover side. We really do struggle with turnover in the first 6 months. When somebody joins us and they're only here for a short period of time, you stand the risk of losing that person if you're not creating this essential together culture. If you're not focused on the heroic impact or being remarkable or The Rollins Way, you really stand the risk of losing these folks. And that represents a really big drain in terms of financial resources. We're investing upwards of $10,000 to $15,000 on each person we're bringing into the business. If we see those people come in and move out quickly, that represents a huge opportunity for some cost savings if we can move the needle there. And we have moved the needle there. This year alone, we're estimating that we've saved between $5 million and $10 million with reduced turnover. That's a fraction of what we could see as we think about the future. On the SG&A side, continue to look at that. My goal is to deliver an SG&A -- an incremental SG&A that's less than 25%. And we've done that. In the most recent quarter, we delivered a 23% incremental SG&A level. And as a result, we've delivered an incremental margin that was north of 35%. Not something that we're committed to just yet to deliver each and every quarter, but I think it shows the opportunity in the business. We continue to focus on the back office modernization and a number of other initiatives to really drive continued improvement in the overall SG&A not only just continued improvement, but an opportunity to invest in the growth because this is really, as I said earlier, when you're growing for 96 straight quarters and you're growing at high single digits, this is a growth market, and you want to go after and invest in growth to capture additional share in this really attractive market we continue to operate in. But I firmly believe with double-digit earnings growth or double-digit revenue growth, we should be delivering double-digit earnings growth, growth that's a multiple of the revenue. And so that's really the focus for me as I think about the future. And also on the tax rate, in the last quarter, the first time I think you heard us talk about it, but we delivered a meaningful improvement in our tax rate. And I do think there's an opportunity as we think about the next 1 to 3 years to deliver 100 basis points of ETR improvement. The team is really focused on deploying a number of initiatives, including tax credits that will allow us to continue to improve our tax position. And I do have a lot of confidence in the ability to deliver that as we think about the next several years. All this comes together to create a business that's growing. It's growing strongly with earnings that are growing at double digits. And so I really look forward to welcoming the team here to the stage with me, going through maybe some Q&A with you as we think about kind of the next several years. So I'll just ask my team to maybe join me at the front to answer some questions you might have.

Okay. Are we good? Okay. You can all hear me. So I think I just want to start out -- I'll start with a few questions, and then we'll turn it over to you guys. But I just kind of wanted to talk about Jerry and the rest of the team. The Rollins Way, why now? Like why now was the right moment for it? Obviously, I know we've been working a lot and talking about it a lot internally. But why now do you think was the right time?

Yes. Our company has changed. And we're not -- as I mentioned, it's not just an Orkin-centric business only. Orkin is still an incredibly important part of what we do. But for us to continue to be able to leverage the power of our brands as we have described as a competitive differentiator, this is what we have to do to unify our company and be the parent -- the type of parent company to the brands that we need to be. I'm curious, Pat, what would you say about that as over the last years, you've watched us with The Rollins Way and what that means even to folks at Orkin?

Not to boil it down, it's just fun right now. Stanford and I and our teams, my division presidents, his division presidents, we -- this sounds common sense, but it just hasn't really been part of our DNA for years, and it has been the last 3 years or so, where we're just -- we're collaborating. Orkin is kind of the venerable uncle, if you would, of this family of brands. But there's things that we've learned that we've shamelessly stole from Northwest. One of the things that has really made a difference in my organization is Northwest had this good deeds team that they wanted to get out into the community, and it brought their teams together. It made an impact in their community. And we are now on year 3 of the Orkin service program, where our teams go out into the communities and they come together. It's important to our teammates to do that. It makes an impact in the community. It improves morale. That's just one example on kind of a feel good side. And then on the -- as Ken mentioned earlier, on the ancillary services side, Orkin has been doing ancillary and expanding that part of our business for a while. And we've got more and more of the brands coming and knocking on our doors for our operators and saying, hey, how do we do this? How is it priced? What equipment do we need, what training do we need? That path is already very well worn for us. And we've got -- we've made our mistakes. We bumped ourselves along the way, and we've got that streamlined. So we are continuing to deploy that with Stanford's team.

What would you add, Stanford?

Yes. So what I would say is The Rollins Way, it's not so much the parent company telling our teammates how to behave, rather, it's been our brands influencing The Rollins Way. I mean this is stuff that our teammates are out there doing each and every day. We're just putting words around what it is they're doing. Second, I think about -- I came from an acquisition. So Northwest is my family company. And I was a little nervous joining a corporate organization. Well, I think about how nice would it have been if I had known that this is what was most important to Rollins back then. So this just really helps to tell our story to those potential acquisitions that we're having conversations with about what's important to us.

Okay. Maybe switching gears a little bit to more of what you're focused on kind of with the day-to-day. Maybe each of you talk about what -- it's been a busy year, but we're looking to 2026. What are you each most focused on and most excited about for kind of the next year, 12 to 18 months, I would say?

She goes, Pat?

Sure. Two years ago, we opened up the commercial division. And we looked inside of our organization. We pulled out our DEDCOM, our Dedicated Commercial Ops, and we formed the commercial division. And that's been -- it's been a great run. Very proud of Scott Weaver and his team. Recently promoted Scott to the Chief Operating Officer of -- all things Commercial for Orkin. And we, in January, are going to be splitting that division because of the growth and the span of control opportunities, and we're going to have now 2 dedicated commercial divisions. Two years ago, we didn't have any dedicated commercial division. Now we're going to have 2. That's going to start in January. We're working on that now, making preparations for that. Scott's got his team aligned and built for that and looking forward to that in '26 and beyond.

That's probably the biggest thing on my mind right now.

Stanford?

Yes. So I wish you could have been with us on our road trip last week and got to meet some of our teammates. It very quickly puts it into perspective about what our competitive advantage is. We -- it's our people, and it's the relationships that they have with our customers. And so what I'm most looking forward to is year 2 of The Rollins Way, because really, we were just focusing on rolling it out, getting to our region managers, trickling down to our branch managers, year 2, is getting it down to our front line. And so when we are living and striving for The Rollins Way, that's when we'll be separating ourselves from our competition.

For me, it's been all about technology and modernization of many of our platforms and systems. Over the last year, we've been really focused on modernizing our call center, which recently went live. Fundamentally will change the experience of our call center agents as well as the experience with our customers calling into the call center. Second is data. So you heard Jerry mention a little bit about sharing information across brands. Each of the brands has core systems that they use to run their business. Connecting that data together to allow in-depth analysis is a game changer for us. So we've been investing in really unifying our data across our systems and platforms to enable this. And third for me, you may have heard of something called artificial intelligence. So this is, of course, a major focus for us in what we do moving forward, use cases that we used to implement and investments that we're making in AI, not only in people, but in capabilities as well.

From my perspective, I sit there and I'm watching Ken, and we're going through the numbers and what we've done. And as I sit there, and I'm proud of that, and I think that's great. But for me, everything I think of and where my passion and where my energy is coming from is like we just have so much potential. There's still so much that we can all do, and there's just so much upside. So for me, that's what gets me excited as I just see there's just so much opportunity ahead for us.

I would agree. When I was in the field last week, we spent 4 days in the road, and we went to 3 cities and we covered 12 branches. And what I walked away with was an even more stronger confidence in our ability to deliver exceptional results. And the reason that I have that is because when we talk about sharing of data, sharing of information, every day, we lose customers. And there's oftentimes we have 2 or 3 or 4 brands, if not more, in 1 geography. But there's no sharing of the lost customer amongst from an Orkin customer to a Northwest customer. There's very little interaction, but there's more energy right now than there ever has been. For so long, this business had silos between Orkin and the rest of the brands. Those silos no longer exist. So it's creating opportunities for us to share information like lost customers. It's helping us learn best practices around the ancillary side. Pat is doing an exceptional job driving all 9 shots on goal around the house. But we're not doing it as well on the brands. We just don't do a lot of that on the brand side yet, but we're starting to share more information to enable us to learn from the lessons that we've learned over the years to really be more successful there. And what you see on the screen there is that 9 shots on goal, that ancillary business, such a big opportunity for us. So those are the things. When I think about it, I can't help but get excited. We've had great financial results, just like Jerry indicated. But man, I really do think the best is yet to come in the business.

Great. So maybe I'll pause here and let some of you ask questions if you have any. If you want to raise your hand, we'll bring a mic over to you if you could just introduce yourself and say who you're with.

A whole bunch of hands over here.

Jason Haas with Wells Fargo. I guess the first question is just on the incremental margins. I believe in the past, there was a range of 30% to 35%. So can you just talk about the thought process to move to just giving a more pointed estimate of 30%?

Sure. Yes, hopefully, don't take that away that it's just a pointed estimate that we're giving because it really isn't. I think it just describes how I think the business should operate over the long term. But we've delivered 25% to 35% incremental margins, and that's what we've talked about. Our goal is to stay in that range. But as you saw in the third quarter, there are huge opportunities. When we're not experiencing claims and things like that or we're not making investments. We're not being intentional about certain investments, there's an opportunity to deliver that 35% incremental margin. But if we're doing those things, it's not unusual to see a 25% or 30%. For me, when I think about the business, I think the business -- it's -- for me, it's all about how do I compound revenue at double digits? How do I compound earnings at double digits. So that's like a 10% revenue growth. That's like a 13% sort of earnings growth. And then how do I compound cash flow at 15% to 20%. That's what I've consistently said, and that's how I consistently look at the business and evaluate the effectiveness of what we're doing.

Yes. And just for clarity, nothing's changed in terms of the medium to long-term kind of 30% to 35% range. That's not -- we weren't trying to break any news here with that today. It was more thinking about just the natural performance of the business.

Tomo from JPMorgan. I'd like to ask you, how do you assess the impact of improved employee retentions and initiatives like call out, you talk about on the field productivity and service quality. So what metrics are you using to these improvements, please?

Yes. So we break down our teammate retention metrics into buckets of less than 30 days, less than 90 days, less than 6 months, turnover, we're measuring all those buckets, and we have a lot of data from an HR perspective within there, everything from turnover by age and all kind of demographic data that we look at. And then we can take and extrapolate what happens there because those are -- somebody leaves you in less than 90 days, you never had really any productivity out of those. And so then we use a number -- you could call it -- we can argue that number because some of them are considered soft cost, but you could throw a number out at $15,000 a higher that doesn't go well or $20,000 or somewhere in that range. And that's really how Ken got to that $5 million to $10 million estimate on improving retention is by applying about $15,000. I think that's the number you're using about -- if we can avoid making those mistakes, it's worth about $15,000 a higher. And so that -- we see that in service wage improvement year over year of just -- and it's not coming from necessarily efficient or route efficiencies or anything like that. It's coming straight from improving retention. So that's why that number is so important to us. There's so much potential upside if we're better. And it's another example of how we use The Rollins Way. When you start with us, we need to put pest control in your blood. And that's how I look at it. It's like we've got to get you thinking the way I felt 32 years ago as a technician that what I do is important that I'm part of a team, and I have the opportunity to have a remarkable impact or leave -- be remarkable to my customers each and every time. That gives me a sense of pride in what I do. And the faster we get people to that and understanding how wonderful this business is, the more we drive improvements in that short-term retention. But we know if I can get you here for a year, I've got you here for a long time because I've got it in your blood. But if I can't get you -- I got to get you past the 90-day mark and get you sold the way I'm sold on this business and the opportunities in this business. And that's what The Rollins Way helps us do.

I know I said I'd let you guys ask the questions, but I think an important follow-up to that would be what are some of the tangible things that we're doing that you think are making an impact? Pat or Stanford, what have you seen your teams doing? Because I know we've made some nice improvements here. What do you think is working?

Jerry and Stanford and I earlier -- actually last year, really drew a line in the sand with our leaders. Our churn on our teammates was just -- I mean, it was just unacceptable. And so everybody got some basic marching orders and they went back to their business units and they really dug in. And this essential together of The Rollins Way is another example that those folks in the field that are making this impact then got together and we started to build a playbook on what is the best teammate experience from day 1 all the way through the first year and then beyond that. And that's just an example of when we collectively put our heads together, the immediate results. And it's been -- I mean, we're not where we want to be, but we are significantly better on our teammate onboarding than we have been in recent years, and it's going to continue to get better, because we've got the focus on that.

Yes. So one of our teammates, Adam Vannest, has led up a collaboration group where we have 2 teammates from every brand, including Orkin, saying, what do we need to do to create a world-class onboarding experience? And the charge was, let's create an onboarding experience that we want any of our kids to go through in the experience. So we're really focusing on the human element of the first year. So how are we connecting with them? Are we creating an extraordinary first day? What are we doing to create the essential together? We're big believers that if we serve together, if we eat together, we stay together. So we're focusing on experiences that we're already doing it in many of our brands, and there's 10 of them. So we're trying to get those involved at all our brands and rolled out this year.

And we see out in the field, our operations are trying different things. For example, [ Leland ] is out there with retention specialists where we've tried putting additional staff that are doing nothing but tracking each new hire and their progress and maintaining a relationship with them, checking and following up, ensuring that processes are being followed, things along those lines. And then you go to Art Watson, who's invested a lot in more regionalized training that's very specific to the geographies working in. And that, I think, drives heroic impact, right? Because the faster I get knowledgeable and competent when I was a technician, when I first started, I wasn't as good as I was bragging about because I didn't have the knowledge that I needed to have the confidence to do my job. The faster I got that, the faster I get that, the quicker I feel good about what it is I'm doing and what I'm delivering to my customers every day. So we're trying all those things, and we have sessions in our quarterly review meetings when we're benchmarking with each other on these things that we're trying to move that needle.

Tim Mulrooney, William Blair. While I have Renee here and the business leaders, I'd love to have a conversation about data. Because, Renee, you mentioned that you are finding new ways to leverage data, you're unifying the data. There's probably a lot that you're excited about. But I'd love to know what you guys are excited about as it relates to using this data. When I think about -- Jerry touched on this, like what's the #1 reason for a customer cancellation, someone moves. I've always wondered why you guys don't capture -- all you got to do is ask the question. Where are you moving to...

Where are you moving to? I can warm transfer you to...

How hard could that be? I'm sure it is really hard.

It is. For various reasons, we seem to make it really hard.

So I'd love to hear like -- I don't know if it's the moving thing or whatever else, but what are you guys excited about as Renee and her team continue to work to unify the data?

The potential is just -- it's virtually unlimited. During our roadshow last week, we were in another brand. We were in the Saela branch, and they had just hired a new account manager and new account manager got into a conversation with Scott over the commercial. And next thing you know, Scott had transferred a data file for that area of the country of a couple of hundred or maybe 1,000 history of canceled customers for commercial. And by the time we got to the next city, that young man had reached back out to the team and said, I've already got 3 appointments. So now the kickback on that is Scott's leaders like, "Hey wait a minute, what are you doing?" And Scott just say, "You're not working them." So we will give them to a brand that's going to start putting them together. And we are working them, but maybe not as disciplined. But that's -- as we can pull that data, right now, that's manual. The vision that Renee and I have talked about, Stanford and I have talked about is when we get to the point where that's automatic and we don't have to manually print something up and hand it to somebody or even just send a manual data file. When you think about the power and the magnitude of that across our brands, it's exciting. And that's the direction we're heading.

Yes. So similar to the point you were making, we have a lot of this data with -- at our fingertips. But like Pat coming to one of my brands, and he's looking at the data from a different perspective. When you're so close to it, sometimes you just -- you go right past, well, that's so simple, just ask for this, right? Well, it's the same -- he got all excited about an opportunity that he saw at HomeTeam, right? And you're like, wow, you got all this data, like, we can run this campaign, this campaign. And so that's kind of the essential together piece is -- and that's why we really collaborate amongst all the brands because you got some that are just truly fantastic at running campaigns. And there's an art to campaigns, right? So how do we use the data we have and then leverage the expertise of running campaigns to get them maybe back as customers, cross-sell additional services. I think that -- to me, that's probably one of our greatest opportunities.

I mean listen to what just happened, you've got Pat and Stanford who run different business units and different brands, traveling together, walking into each other's locations and each other's operations with different set of eyeballs helping each other and cooperating. That didn't happen 10 years ago. There was not a lot of those types of activities going on at all. As was mentioned, the walls were up, the silos...

It probably didn't happen 5 years ago.

No, you're right. So that's the culture. That's the spirit. And that's where we talk about this culture operating model. If we can create the culture in which these types of things can occur, if Pat and Stanford's leaders see them doing it, -- they'll be role modeling that behavior, creating a positive peer culture that instills that, hey, this is okay, and this is what we do at Rollins. And that's a big part of what excites me as well.

It was exciting, Jerry, last week. Stanford and I and us, the executive team talking about this is one thing to get it across the enterprise is the challenge. And every location we went to last week, this came up. How do we do this? How do we connect with our brothers and sisters and these other brands that are 2 miles from where we're sitting right now. And so when that occurs and it's occurring, Leland has got a follow-up meeting in Houston with -- he got all the brands together and he took the lead, and it's going to happen. And that's -- it's going to be a slow burn, but that's also going to just add to our -- getting better as we get bigger.

And while we are speaking of really analyzing the field operations, marketing analysis, customer retention. We're also investing -- I'll speak for you a little bit here, Ken, in an enterprise financial data model and EPM solutions that give us better enterprise forecasting and analysis, planning and consolidation capabilities. So all investment in not only the operations side, but our enterprise financial systems is really going to give us new insights, better capabilities to really achieve some of the goals from an operations and financial perspective we're talking about.

Yes. To improve financial performance, you've got to have alignment, transparency and full agreement. An example is you need to have one version of the truth. And so there's times where we have such a fragmented system across, especially our specialty brands that I'll bring a number and Stanford will bring a different number. And instead of us talking about how to improve the number, we're talking about what's the right number. That's a giant waste of time. And so what we're trying to do is invest in systems that will allow us to get one version of the truth and complete alignment at the executive level to focus on what matters most and to drive the business forward.

Okay. Next question.

This is Harold on for Stephanie Moore. So I guess 2 quick ones for me. The first is on the commercial branch splitting. I guess when you outlined this initiative in '24, I guess, how many branches have been split or how many branches do you have now versus you had then? And then if you could just talk about, I guess, the organic growth and the margin benefits you see once you split a branch, how those improve over time? And then on the $5 million to $10 million savings, I think Ken outlined that there's a lot more leverage there. So if you could just talk about what you think the full benefit is in that savings in terms of retention and I guess, if you -- I don't want to say give guidance, but I guess, when you think you'll be able to achieve that?

So maybe there's a couple of questions there. One is commercial and where we are in commercial path. Go ahead. Why don't you start with that?

So in our operations before the split or the realignment for commercial, when you're looking at what we would call a ResCom operation, you're running all 3 of the service lines inside of that operation. What we've experienced when we pulled this all out is you've got a dedicated focus, if you will, just on the commercial line of business, and so by doing that, just this year, Scott's team has split out 14 additional dedicated commercial branches and 3 more dedicated regions inside his footprint. And so when you -- there's another mindset that we have around -- are you in your growth mindset mode? Or are you in a maintained mindset mode? And everybody in the room would want to say, well, I'm a growth guy. Well, you are a growth guy until you're not. And what happens is these operations, Jerry and I did a video a couple of years ago about a balloon. So as you grow and you get bigger and your span of control starts to get challenged, whether it's commercial or residential, you can't help yourself. You just -- it becomes a -- you shift into more of a maintained mindset. When we split these branches, when we split these divisions, when we split these regions, all of a sudden, that pressure in that balloon goes down, it becomes more manageable. And then you start getting -- so if you take a $7 million operation or an $8 million operation, you split it into two 4s, the very next thing those operators are thinking locally is, how do I get to 5. And that's what accelerates that mindset of growth. When you're running an $8 million or a $10 million operation, at times, it can be challenging, do I really want to get to 12 million? I mean you do, of course, but the time line of getting there because there's so many other things pressing on you in the day-to-day operations, it's just -- it slows down a little bit.

I mean when you split those branches, you essentially open up new markets for yourself. And so as opposed to just focusing on that incredibly dense area that you already are very successful, when you split it, you increase your addressable market. And that's really what it's about...

And for a little bit of clarity, too, a lot of times when these branches split, we're not getting necessarily new bricks and mortar right away. We'll keep them in the same building. We had a branch in Columbus that we did a few years ago that it was res right down the middle on the left, and it was commercial right down the middle on the right of the building. And then both of those grew and we split it then in half going the other way, and we had 4 branches. We had 2 residential branches and 2 commercial branches, all under one footprint, one roof. Now since they've grown, it got obviously a little uncomfortable. We had to go get some more buildings. But for a while until we got on our feet, we just -- we were running 4 operations out of one house because we're not inside the house. We're out in the field.

And your other question, I think, was around the opportunity on the service technicians. And so as you all know, we're a people business. And 50% of every dollar we sell is spent in people. And so as a result, there's over a $50 million opportunity here. But I'm not saying we're going to deliver improvement of $50 million overnight. Let's think about bite-sized portions. If we hire 500 less people in a year, that's $7.5 million. If we hire 1,000 less people, that's $15 million. So that gives you the frame of reference to understand and appreciate the opportunity and how we might deliver that over time and help improve the margin profile of the business.

I just want to circle back because I've heard you guys deliver this message to our teammates in the field, but just connecting back to this branch splitting and it's great for the business. It fuels growth. Obviously, you often see split branches just inflect growth even higher. But there's also a people element to it, right, in terms of the opportunity that it's creating in the career path. And maybe talk a little bit because I heard you deliver that message pretty consistently.

So this past year, we rolled out what we call our Grow mentor program, and the Grow mentor program was pushed out to region managers and above that very simply stated every leader in the organization was to have 2 mentees by the end of the year, and that's been going on. And there's a regular cadence for those meetings. And the idea is -- when you hear Jerry tell his story or Stanford or many of our leaders that are running their operations, a lot of our folks started with boots on the ground, running the route or started out as a salesperson. And they have moved through the organization because someone in their career invested in them, and now they're running a multimillion dollar operation for us. By doing this, we are filling the ranks, if you will, of the next generation of leaders as we grow because the one thing that stands in the way of this growth, splitting branches and regions and divisions is exciting. But if you don't have the leadership there to do it, then it's -- you can run into a little bit of a wobble. This year, starting -- or next year, starting in January, we're deploying the second phase of the Grow mentor program that every branch manager and above in our organization is going to have 2 mentees. And you mentioned AI earlier, a very simple approach to AI, but it's helped us accelerate this the writing of these individual development plans that everyone is going to have as part of this mentor program, AI was able to help us get that done in just no time at all. And so now if you're an employee with us and you have this individual development plan, that also contributes to the turnover because now this job that I was just coming in and thinking I'm going to do this until I find my dream job, we've now painted a picture of your career path and how you can grow with our company as we grow.

It's interesting, not only are you doing work or are we doing work around that, we're also doing a lot of work leadership development. And so the thing that we talk about is our collab experience. And it's important because we're investing in our people through it. But I also think there's this benefit associated with collab of people from different brands coming together in one classroom setting as one organization focused on themselves. And we see the benefit of that. I mean if you just look at -- it's interesting, you look at LinkedIn or other social media applications, you'll see teammates from Orkin, you'll see teammates from HomeTeam together, spending time together, doing things that they otherwise wouldn't normally do 5 or 10 years ago. So it's really, really, really cool to see that happening.

Yes. And you'll see they're fans of each other. No, they want the best for each other. They're reaching out. They're connecting with one another. And you're starting to see the very beginning of our talent starting to move between brands. And again, that was a wall that used to be put up. Clay, who's up here, he brought on talent from other brands to the technical team, and they had Technical Director of Orkin came from another brand.

Josh Chan with UBS. On that point about bringing down the silos within the company, culturally, how easy or difficult is it to do that? Because I know that through acquisitions, different brands may have different culture. So how are you bringing that together? And how big of a lift is it?

It felt harder a few years ago.

Yes, it was harder a few years ago...

It was harder a few years ago.

This isn't a plug at Jerry, but I'll say it. When it's modeled, it's one thing to say it. It's one thing and then move on. It becomes kind of the flavor of the week or the flavor of the year. Jerry has been consistent in the last 3 years of we're going to work together. And when Stanford came in to his role, and he and I have gotten closer over the last couple of years, really for the first time recently, it doesn't really -- I mean, us modeling it is one thing. But when the crew sees it and they hear he and I either in front of them or on something that's been recorded or in a new hire training class that we present in or any of the interactions we have, it's starting to gain a lot more speed and momentum. It's not a nice idea anymore. It's actually -- it's happening. And so it is a challenge, but it's building ahead of steam. We're a lot closer to it today than we were 3 or 5 or 10 years ago, as was mentioned. But it really just comes down to word of mouth and it being modeled and then rewarding that behavior.

That's really why we take The Rollins Way. When I look at The Rollins Way, I see, well, here's what it means to our frontline people. Here's what it means if you're a leader in our organization. And here's what it means to our brands and how we expect the brands to interact with each other. So we're setting that expectation to say, "Hey, look, you want to be part of Rollins and you're part of Rollins. This is what's expected of you. These are the behaviors that we expect if you're to be successful. So we've, I think, been crystal clear about that expectation. And then these guys Ken are role modeling it within our operations, and it's taken hold.

And I think it's also so important because The Rollins Way is an and. It's an additional, right? It doesn't replace the spirit and the nuanced cultures that each of the brands have. And we've been very clear in our communications around that. We want the brand to have their own...

You still want you to be who you are.

Exactly.

But this is what it means to be part of Rollins. If you want to be a Rollins brand and be in that, I'm going to call it, an elite group of businesses, this is what we expect of you.

But again, I'll share commonalities. The common thread here is always the focus on their teammates and their focus on their customers. They're more alike in those important aspects than they are different...

Like you said, it's -- you said years at the beginning. This has taken a few years and will still take a while to really change the entire culture of our organization. But I think in addition to modeling it, I think we're creating environments that foster and facilitate that to happen. So bringing our leaders together, right, and carving out time that is specifically for cross-brand collaboration, bringing our collab training, intentionally bringing people from other brands together. So I think it's continuing to create and fostering those environments where never happened before, but everybody is in a room, and we are thinking of new ways to help and foster that collaboration, building relationships across the organization.

It's a potential superpower we get this going.

Yes, it's definitely a 1 plus 1 equals 4 when you think about it and you think about -- I mean, I think you get the sense of the message today, collaboration. And when I joined 3 years ago, and Jerry -- before Jerry took over, I don't think there was a lot of collaboration occurring. People struggled with the word collaboration with even defining what it really meant. And what you see today is something that looks completely different than when I joined this organization 3 years ago.

I think as the brand like presidents and Orkin division presidents, there's been collaboration and connecting over the years. Now it's going down to the next level. And that's really where the traction is starting to happen. Like there is monthly marketing collaboration calls with all the marketing leaders of all the brands. There's a VP of Ops calls. There's HR calls that's happening at every brand where they're collaborating together. And I think maybe used to, they saw it maybe as a nuisance. Now they're seeing the true value of it because they're learning from each other. They're going through the same challenges, right?

So you see it in our home office, too. Example, you all know we're acquisitive. We buy so many companies every single year, and there's a lot left to be bought. But we were struggling with the processes that we had around M&A. And so Thomas Tesh who's also here today, who's our Chief Administrative Officer, had a team member that had really strong experience with project management. And so he and I worked together to identify how to put a new process in place that had more structure. It was just a better cadence, better review process, better engagement with the team or with the field around opportunities. We're not there yet, but that's also an example of how collaboration is occurring in the home office. And so you're seeing it throughout the business on a pretty consistent basis right now.

Just mindful of time here, maybe if there's one more question.

Connor Cerniglia with Bernstein. I want to talk a little bit about cost savings efforts on a go-forward basis. Ken, you mentioned back-office modernization as future efforts. Can you give some anecdotes on some of these low-hanging fruit? I thought you've talked about a couple of examples in our conversations, but it seems like these are tangible, real, just kind of like easy low-hanging fruit.

Nothing is easy. But certainly, there are opportunities. And so when we look at the slide we have here on the presentation, we look at it through a number of different lenses. We're not just focused on one area of the P&L. There are opportunities in gross margin. We talked about price, but looking at the cost structure, how do we procure materials. Today, we're not consistent with how we procure Sentricon for termites. And so there's a huge opportunity with being more consistent around the procurement of that key material in our business. The people, as we said earlier, we spent the better part of the day on, 50% of every dollar we generate in revenue is spent in our people. And if we can help plug that hole with turnover on the short-term technician side, that's a meaningful opportunity. that we have ahead of us. And even on fleet and how we procure fleet and what we're doing around the trucks and how we're redesigning maybe the trucks and how they're upfitted as they come to us, a lot of opportunities there. We continue to focus on safety. Safety is incredibly important. We've got thousands and thousands of people on the highway every single day, and we want to get them home safe. And so we're putting investments around technology to help mitigate claims and then in turn, costs down the road. But the focus is not necessarily mitigating the cost. It's providing a safe environment for our employees. And then when you look at SG&A and you look at that opportunity, we spent about 30% of sales in SG&A, of which roughly 60% is administration. There's a lot of duplication that's occurring throughout. You hear the siloed approach. You hear what we've had and what that produces is a pretty high -- a large amount of cost in the business because you have duplicate efforts around finance, accounting, HR, IT, legal, all these various functions. I mean, in fact, in one brand, we've got 8 to 10 people processing payroll. We really don't need that in a brand that's not the size of Orkin, right? And so there's really good opportunity to continue to make investments, modernize the back office. That won't all go into the cost savings, but what that enables also is us is to invest in growth. And if you look at the last couple of years, we've done just that where we've delivered really strong growth profile for us.

Think about, Ken, the accounts payable, right? We've made some pretty significant improvements in our account payables processes through -- for the Rollins channel. Some of our larger brands had that function, had that infrastructure and could do that. We're still doing that -- some of that themselves. As we have improved process in our home office, we're now able to take in those functions and do a better job than we could even a year ago. And we're now getting those kinds of functions brought into our home office because I'm a big believer our brands should be focused on their people and their customers. And some of this other stuff is not a priority that they ought to spend a disproportionate amount of their time on. So the better we get, the better that we get at serving our business and being a better parent company and those types of things, we'll take that back office cost out of the business.

And to do that, you've got to have a leadership team that collaborates -- because if you don't have a leadership team that collaborates, you have a turf war. You have debates and discussions around, no, this is my area, that's your area. Let me do what I do and you do what you do. And I think there was a lot of that focus for a very long time. But with the changes you're seeing here in the spirit of collaboration, it's allowing us to go after and seize the opportunities that we have. To have those conversations, whereas in the past, it was a struggle.

I can give you some tangible example in what you spoke about as far as the home office and shared services. So there's things, right, that they shouldn't worry about data centers, how -- where you get your mobile phones from software, licensing, maintenance, all those things that we can provide as an IT home office shared services to our brands that not only serves our brands, but leverages Rollins size and scale to get better contracts, better rates, things like that. Also on the AI and automation, right? So on the efficiency side, we're seeing all kinds of opportunities now for our back-office functions and standard processes to become more automated.

Well, seeing that we have no more questions, I just wanted to thank all of you for coming out today, spending time with us, getting to know us a little bit more. And hopefully, you agree and share the excitement that you feel from what you've seen today. We're really excited. We're looking forward to the future. Looking forward to having our next investor event in the first half of next year. But until then, thank you and look forward to talking to you soon.