Rollins, Inc. (ROL) Q1 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the Rollin’s Incorporated First Quarter Earnings Conference Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode. Later, we will be conducting a question-and-answer session and instructions will be given at that time. [Operator Instructions] I’d now like to introduce your host for today's call Marilynn Meek. Ms. Meek, you may begin.

Thank you. By now you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact our office at 212-827-3746 and we will send you a release and make sure you are on the company’s distribution list. There will be a replay of the call, which will begin one hour after the call and run for one week. The replay can be accessed by dialing 1-888-203-1112 with the passcode 6386676. Additionally, the call is being webcast at www.viavid.com and a replay will be available for 90 days. On the line with me today is Gary Rollins, Vice Chairman and Chief Executive Officer; and Harry Cynkus, Senior Vice President, Chief Financial Officer and Treasurer; and newly elected Chief Financial Officer and Treasurer, Eddie Northen. Management will make some opening remarks and then we’ll open up the line for your questions. Gary, would you like to begin?

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

Our earnings release discusses our business outlook and contains certain forward-looking statements. These particular forward-looking statements and all other statements that have been made on this call excluding historical facts are subject to a number of risks and uncertainties and actual risks may differ materially from any statement we make today. Please refer to today’s press release and our SEC filings including the Risk Factors section of our Form 10-K for the year-ended December 31, 2014 for more information and the risk factors that could cause actual results to differ.

Thank you, Harry. Before I delve into our first quarter results, I wanted to take a moment and thank Harry for his 17 years of service to Rollins as our CFO. As most of you know, he will be retiring from our company on May 1. Harry’s leadership, talent, and dedication played a major role in the growth and success of Rollins. We will miss him greatly and wish him and his family all the best in retirement. Be assured, however, I am not going to let him stray too far. I would also like to take this opportunity to welcome Eddie Northen to our company. We are extremely pleased to have him join Rollins as our new CFO. Eddie comes to us from UPS and brings, not only a wealth of financial experience, strong international exposure, but also a great background in routing and supply-chain management. These areas are extremely important to us as we continue to grow our company. Eddie, please tell everyone a little bit more about yourself.

Thank you, Gary. I want to also thank Harry for his leadership and support during my transition period. Filling Harry’s shoes will be quite the task, but the transition period that Gary has allowed and Harry has taken with me definitely has me ready to take the next step. I had the opportunity to spend time with a number of Rollins team members in Atlanta and in the field, as well as meet with numerous investors. This exposure has made me feel even more privileged to be a part of this exceptional company. During my 30 years at UPS, I was extremely fortunate to gain invaluable operational and finance experience. Early in my career, I worked on the frontline and drove a package car. This time enabled me to learn the business from the ground up and help me to prepare me for the future opportunities in front of me. After spending time in internal audit and several director of finance roles around the U.S., our family moved to Hong Kong in 2006 where I was the CFO of Asia-Pacific region. A few years later, I returned back to the States, where I held a similar role as Vice President of Finance of the West region. Most recently, I was Vice President of Finance of the Global Business Service Group based here in Atlanta. I believe the fact that UPS and Rollins are both route based businesses with very similar cultures will help me with the transition into my new job and enable me to focus as Harry has on the long-term financial strength of Rollins. I will now turn the call back to Gary.

Thank you, Eddie. While winter continued its roll through part of the quarter, particularly in the Northeast, however, this year for much of the quarter we were blessed with warmer weather in most other parts of the country. New customer demand increase coupled with our strong recurring revenue resulted in our generating both record revenue and profit for the quarter. Revenues grew 5.6% to approximately $331 million, compared to $313 million in the prior year’s first quarter. Net income increased 17.5% to over $30 million with EPS of $0.14 per diluted share, compared to $25.8 million or $0.12 per diluted share for the first quarter of last year. All of our business lines experienced good growth with residential pest control up 6.2%, commercial pest control grew 4.2%, and termite was up 8% for the quarter. Harry will provide greater detail on the contributions from acquisitions and the negative currency impact as well. Leads, lead closure, and prices were all up. Momentum in leads that we saw last year carried through the first quarter and finished especially strong in March. Typically, a strong March is followed by a weak April. At this point, we are seeing a contradiction and we could enjoy a strong March and April. As many of you might recall, during the first quarter of each year, we conduct test to determine where customer pricing opportunities exists. This year’s testing again shows that our service rates remain inelastic. We believe that this is the result of our strong brand preference and the delivery of value that we provide to our residential and commercial customers. This past quarter, we executed on some strategic initiatives to help ensure our ongoing growth in profitability. Let me highlight just a few of these initiatives. Employee training has been and will continue to be extremely important to our company. To that end, we recently hired a new Director of Training, John Torres, to help us further advance Rollins’ award-winning training programs. By way of background, John brings over 25 years of experience in creating and implementing learning initiatives that drive positive business results. Almost every company does train, but many don’t measure the effectiveness of the training. And one of John’s objectives is to help us improve the tracking and measuring of our training results. We believe that this will lead to better outcomes and help to ensure that we remain a national leader with our training programs. Another training initiative is a new hands-on training that our call center agents are receiving at the Rollins training center here in Atlanta where they experience training in our model home. The company’s sales and service agent teams nearly doubled in the busy part of the pest control season to meet the seasonal business demand. We want to ensure that these new employees are well trained and are able to address our prospects, questions, and requirements. They spend the day at the center where the agents can see firsthand how technicians interact with new customers and observe the treatments that they provide during a pest control initial start, that’s the customers first service. When they leave, their ability to paint a picture for our prospects of what a technician does provides confidence and builds value in our services. As many of you are aware, we host a leadership meeting in January of each year with our top management that comes from all over North America. During this meeting, we explain and set the stage for our key programs and initiatives for the year. This year’s main theme was focused on hiring the right people. Every manager in our company recognizes first and foremost that our business is a people’s business and it requires great employees to meet our customers’ expectations. As the customers’ needs and anticipations continue to increase, it is more important now than ever that we have the right person in the right job. We’ve concluded that it’s not the what, but the who that matters; and one of things that we’re doing in refining our recruiting and interview methodology. We are improving our processes to better identify and hire the right people. Our training in this area is really catching all throughout the company and is being driven down into the different brands and divisions. As Rollins President and COO, John Wilson put it, if we do a great job in selecting the who, the what would be much easier. We are continuing to successfully rollout our CRM system or what we refer to as BOSS; branch operations support system and we now have a 118 Orkin branches converted. It’s important to note that even as we bring additional Orkin branches online, we’re also taking steps to make technology improvements to other brands in order to improve their customer service and profitability. One such example is at TruTech where they are now in the process of having a technician use tablets for all their work order processing. Additionally, they are able to handle checks and credit card payments on their tablets. In March, we turned on the switch in the converted branches for the BOSS automated work order processing feature. We’re currently in test and the results thus far are very promising. In the old system, the technician at the end of the day would bring his or her work tickets back to the branch where they had to be keyed into the system and reviewed by an Ad man. Depending on the volume this process could take days. What we discovered with our new automation was that less than 1% of the work orders actually needed human intervention. In test, the average processing time for new work order completion on the iPhone can be done in 18.5 minutes, versus the manual paper handling that could take two days to get service posted to a customer’s account. We now freed up approximately two hours of an Ad man’s time each day, which allows him or her to take on additional value-added projects such as collections and customer schedule. We have other initiatives centered around BOSS, which we are working on and Eddie and I will provide you further updates as they roll out. These initiatives include further improvement of our routing capabilities and a management dash board, which will allow the service manager to track the progress of technicians throughout the day. I think this gives you a snap shot of several improvements that are provided by BOSS. This is a work in progress and going forward we will continue to add more platforms and routines. Like most computer systems it doesn’t all come day one. BOSS would help us improve our productivity, our margins and most important our customer experience. Growing our business through acquisitions is also an ongoing company goal. We recently enhanced our wildlife line of business with the acquisition of credit control that franchisor of the nation’s leading wild life control company. This has indirectly made us the largest wild life control company in the country. For those of you who aren’t familiar with this business, these services include trapping and removal of wild life, exclusion of wild life from residences and other buildings and the repair and remediation of damages caused by wild life. Top test includes squirrels, raccoons, bats, birds, and snakes. The market in the U.S. for residential and commercial wild life control is approximately $300 million and we believe that there is a tremendous opportunity to grow this business and capitalize on the industry’s leading brand. We are off to a good start for the year and excited about all the opportunities that we have to continue the growth in improvement of our company. I’ll now turn the call over to Harry.

Thank you Gary for those kind words. It’s hard to believe that 17 years have gone by since I joined Rollins. I’ve been thinking about that next chapter in my life for some time. I was told that long time ago that the best time to start thinking about your retirement is before the boss does. Anyways, I’m reminded of the Vince Lombardi quote, “The harder you work, the harder it is to surrender.” And believe me it’s hard to leave such a great company with such great people. However, I am confident that I am leaving it in good hands with the future as bright as ever. Let’s get to the numbers, I’m sure no one dialed in today to hear me wax poetic and in fact I hope everyone has forgotten that one call with my poetry. Eddie, I wouldn’t recommend trying poetry here. Looking at the numbers, the company reported first quarter revenues of $330.9 million, an increase of 5.6% over the prior year's first quarter’s revenue of $313.4 million. We experienced that growth across all of our family of brands as measured in constant currency. We will talk more about that in a minute. Net income increased an impressive 17.5% to $30.3 million, compared to $25.8 million with EPS, up 16.7% to $0.14 versus $0.12 per diluted share last year in the first quarter, a good start to the New Year. Having grown up in the Northeast I’ve had to learn to speak a little more slowly, as I’ve migrated down South. And then when it comes to explaining our revenue between the impact of currency, acquisitions and with and without fumigation it’s important to go slowly. On the surface, revenue is up 5.6%, good growth among all brands and all service lines. Residential pest control is up 6.2%, commercial pest control up 4.2% and termite up 8%. With operations in Canada and Australia, the strong dollar was not our friend. With the loonie down nearly 12% from last year and the Australian dollar down more 14% in total it caused us nearly nine-tenths of a percent i.e. 90 basis points on growth. On the other hand, the more significant acquisitions we made over the last year AllPest that we lapped in mid-February, Statewide, PermaTreat and our most recent acquisition Critter Control contributed 1.9%. Put that all together and it means our business, excluding currency, excluding acquisition, grew 4.6% versus 4.2% in Q4. Residential pest control business, which represents 40% of our revenue continues to build momentum. For the quarter, it grew 6.2%, ex-acquisition 5.2%, termite which makes up 17% was up 8%, excluding acquisition 4.8%; and commercial pest control 42% of the revenue was up 4.2%, excluding acquisition 2.5%. We’re pleased with the growth we are showing for residential pest control and termite. Commercial was heavily impacted by the weak Canadian and Australian dollar as most of our business in these countries is commercial. If you just look at our domestic commercial business, excluding acquisitions it grew 4.4%, which does include a 40 basis point lift from fumigation. Fumigation had its best growth quarter in sometime, up 12.9%. As we have previously stressed, it is especially important for us to add recurring residential pest control customers to our customer base. Be it good fortune, better weather or just great marketing, we saw strong lead growth, improved closure percent and average price, which enabled Orkin to achieve significant growth in sales in a quarter not always known for its robustness. Last year, we reported that we have nearly 4000 less calls in the first quarter. This year calls were up 20,000 and it’s encouraging to see the trends continue into April. Residential pest control isn’t quite like other consumer businesses. I read the other week in The Wall Street Journal that retailer sales rose in March, but U.S. consumer showed signs of continued caution. Well thankfully not when it comes to buying pest control. I love repeating Gary’s quote that rats and roaches don’t read The Wall Street Journal. With insects being the public’s third greatest fear and the ever increasing concern over health and safety, the phone has been ringing. We can see the same degree of strong consumer response when it came to termite with a modest increase in leads, some price improvement realization, we had a respectable first quarter growth. HomeTeam’s increase in new home pretreat certainly was a good help. Speaking of HomeTeam, they came out of the gate fast this year and as I said before we’re trying to figure out HomeTeam, don’t waste a lot of time looking at the national statistics on new home starts or sales, as the national picture doesn’t represent well the 50 markets they are in or the tail of installs versus turnouts. Their tax build in pest control defense systems installed in new homes was up 7.5% for the quarter, termite pretreat work was up 8.1% and we saw the largest month over previous month increase in sometime for new customer capture, customers activating systems that were installed when the house was under construction. When it comes to revenue, the last thing worth mentioning is bed box. The first quarter is not typically the big quarter for growth in this service. The last couple of years it has been only 15% to 16%. However, this year, we saw the largest first quarter dollar growth since we’ve been tracking it the year-to-year changes in 2011, up over 25% increase to $14.6 million. Sadly for our listeners, the residential bed bug business grew 33%. Unfortunately, bed bugs are good hitchhikers and people are taking them home with them when they travel. As I said before, bed bugs do not make good tats. One of the shareholders gave me a good lead on some reading material now that I’ll have more time. It’s the number one Amazon best seller in the entomology category, it’s called Infested by Brooke Borel and I’ve read that it’s a fun wild rock through the wildly world of bed bugs. I don’t want to give too much of the book away, but I’ve been told that it’s a real page turner. Gross margin for the quarter improved to 49.2% for the first quarter versus 48.5% in the prior year. The quarter benefitted from improved service, administrative salaries with lower fleet cost due to the drop in fuel while maintaining good cost controls across most spending categories. Depreciation and amortization expense for the first quarter increased 567,000 totaling 10.8 million, depreciation was 4.6 million, increasing 1.2 million, a million of the increase related to our new Boss system. Amortization of intangibles was 6.2 million, which decreased nearly 700,000 as some of the older, eight to 10 years older acquisitions have become fully amortized. For the full year, amortization of intangibles typically from the value assigned to acquired customer contracts will represent a significant after tax non-cash charge of approximately $0.07 to $0.08 this year. Sales, general and administrative expenses for the first quarter increased 4.7 million or 4.7% to 31.9% of revenues decreasing from 32.1% from the first quarter last year. The decrease in margin percent is due to being able to leverage our administrative salaries and other cost keeping them relatively flat to last year despite the increase in revenues. The margin improvement was partially offset by the $1.2 million in this year’s higher cost related to the CRM system implementation as well as higher sales salaries and professional fees related to procurement and acquisitions. Income before income taxes was up 12.7% in the quarter. We caught a break on the tax rate this quarter which could drop to 35% having identified some discrete items which unfortunately won’t repeat. We expect the tax rate to return to potentially 38% next quarter. As a result, our net income was up 17.5% for the first quarter. I think that qualifies as Gary said, a good start to the New Year. Our balance sheet remained strong, no surprise there. We continue to look for more opportunities to reinvest in our business. This quarter, we spent nearly $30 million on acquisitions and $8 million on CapEx. To our bankers [indiscernible] we won’t run out of cash any time soon ending the quarter with $93 million in cash and no debt. One interesting facet of the business that I enjoy pointing out is that we continue to have more customers prepay us for services over $100 million recognized currently on our balance sheet as unknown revenue than those who all was for current services 85.4 million in trade and finance receivables which we believe the new Boss system will help us reduce. What a great business model we have? Before I turn the call back to Gary, let me express our appreciation and thank you to all our associates and others whose hard work and dedication is getting us off to a good start in 2015. It is with bittersweet emotions that I leave to begin my retirement. I am excited about what the future offers and enjoying the rewards of a very long career, but I am sad to say good-bye to so many great people I’ve had the opportunity to work with here at Rollins. It is through their combined efforts that Rollin is great and I will miss them all. Likewise, I will miss the people that I’ve gotten to know in the investment community. Thanks for all you do and the positive impact you’ve had on me and my career. With that, I’ll now turn the call back to you, Gary.

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

[Operator Instructions] We will take our first question from Dan Dolev at Jefferies.

Hey guys, thanks for taking my question. I actually have two question, actually one for Eddie and then I have a question on the operational side. So, my question for Eddie is, you’ve been with the company now for a few months, you’ve travelled around both internal Rollins branches and you’ve been, I’m sure you’ve seen every aspect of the company. What are the things that you’ve seen that you think – where do you see the most opportunity actually improving going forward from what you’ve seen thus far?

Yeah, Dan. Thanks. You mentioned having time to spend learning different parts of the business. Gary has been very supportive with allowing me to spend about a month in the operations – learning the different operations. And I think what I’ve tried to do from that perspective is kind of take what I brought with me from UPS and really kind of look at it through those lens. As I was visiting the operations, one of the things that I saw was really the depth of the management that we have there and how strong they are from a P&L perspective, and I think that’s something that we can really continue to use as we move forward. I think that routing and scheduling continues to be an opportunity for us and Gary mentioned that when he was talking about the Boss. So I think that we’re going to be able to kind of bring those two pieces together and in fact I have some follow-up meetings with the operations over the coming months and that’s really where I want to try to spend some time and energy there is to see what and how we might be able to help from that perspective.

Got it. Thank you very much. And my other question was in the operational side for you or Harry or Gary. You mentioned Gary that the first – that you had warmer weather, April was good, March was good and clearly you’ve had - the weather hadn’t been that big of an impact, but if I think about sort of the organic growth acceleration ex-M&A, ex-FX of 4.6 versus 4.2 in Q4. I can’t tell, but I think it’s not as impressive as I would have wanted it to be given that the compares – organic compares are so much easier. So was there – is there something that I’m missing or is this just a start of an accelerating year? How should we think about that? Thanks.

Well, while the weather wasn’t as difficult, I would point out it doesn’t matter how – unless you have record highs in January and February, you are just not adding a lot of customers during that timeframe. So while – I think we are more impressed than you are that we did grow in the first quarter. And like I said, it’s really the strong March that gets it going. But we will get as many leads in June as we get in probably January, February, March, combined. So, again, it’s just – you have a big base of customers and trying to get that number accelerated takes a lot of new customers. And I think the exciting number was there were 24,000 more calls this year than last year. Now, all those calls don’t turn into customers, but it gives you a good shot at them.

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

Thanks, Dan.

Thank you, Dan.

Your next question comes from Joan Tong at Sidoti.

Good morning, guys. How are you doing?

Good, wonderful.

Good. Thank you.

Good. How are you Joan?

Good, good. I have a couple of questions here. First off, regarding the new CRM system. Thanks for all the color in terms of all the new features that’s supposed to come on in the future, it’s really good to hear that. There is more specific that we can talk about and discuss going forward. And I understand that like you know all these stuff is good, but in terms of how you can incentivize people to use the features and use all these good stuff in the new CRM system, can you just talk about like how you are going to do that and approach that in terms of making sure your technicians, your managers, are all using the CRM system in the right way?

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

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

Very good.

Yeah, and I just want to say, I think you are going to find like on any curve, you’re going to see 20% of the people taking to it being your power users and we’ve identified the bottom 20% who are struggling and in fact what we’re doing is in the way, when I say struggling, it could be a misnomer. But what we do is we are measuring the number of calls to the helpline for people who are having problems and call the helpline. So the branches that are calling more frequently, i.e. have left more questions about it, we are sending some of the trainers back to those branches to help them overcome the pieces they don’t know. So, part of it is going to be continued training. And we can measure and that’s one of the things we are doing is if they don’t understand, they are calling. And so, we know who we need to go out and help. And then, I think, ultimately, we will find ways to disseminate what the power users are doing and whether we use the trainers to take that to the other branches, best practice. As both Gary and Eddie have said, there is tremendous excitement in the field. It’s making their job easier. They have a cool iPhone and they are more than happy to get rid of what I started referring to as our turn-of-the-century old CRM system.

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

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

Yeah, Joan. I’ve had a chance to spend some time with Tom who is in charge of our international operation in fact I’m going to be attending the international franchise maybe that they have their annual meeting. So, I’m going to get a chance to learn about where we are right now, what is working for us right now and then also talk about that as we’re moving forward in time. So, I’m really kind of going through the learning curve of that, but Tom and I had some good conversations, but I think that right now the focus is in the areas where we know we have opportunities and of course that being Australia’s as we’ve already talked about.

Okay. Thank you very much.

Thank you.

We’ll go next to Joe Box at KeyBanc Capital Markets.

Hey good morning everyone. This is Sean Egan on for Joe Box.

Good morning.

Good morning. I was hoping to dig in a little bit to the gross margin expansion and I was hoping you could maybe either quantify or place an order of magnitude kind of what that fuel savings benefit was and within that fuel savings benefit what was attributed to fuel price declines versus any route optimisation efficiencies that you had?

I wish I could answer that question there, I could measure my route operation efficiencies that closely. In fact I know I drove more miles this first quarter, but I have lot more customers than I had last year this time and so I can’t break it down that finally. I don’t know approximately that fuel savings which isn’t all CSP, some of it is reflected in SG&A rents, I think it was like around $2.3 million that’s what we estimate the savings in fuel was and pretty much offsetting that was the increased cost due to the BOSS implementation and depreciation, which came in about $2.2 million. So, those two pretty much offset each other in the Q1.

Okay great and then carrying on with the depreciation comment you made, I guess we kind of expected it to be higher than it came given the CRM implementation, so should we expect a similar level that we saw this quarter heading forward or do you expect that to bump up as you continue to rollout this system?

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

Okay. Got you, thank you.

Thank you.

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

Training, we spend a lot of time on closure, just a little bit about what we are doing to pair for the surge in our call center, so we really think that we’ve got some more upside as far as closure is concerned. Our marketing people say it’s all them, but I’m not buying that. I think it’s just a combination of things, I mean our service sales are up, which is important. We are just kind of attacking the thing from various points and so far it’s starting to pay off for us.

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

Product commercial business would be the least impacted by weather. if you are restaurants, your doors are open and the pest control company is visiting you, so I wouldn’t, I don’t think weather really had any impact on the commercial business, it certainly would impact the termite, it’s kind of hard to – your termites aren’t going to swarm under 3 feet of snow and pest control you are waiting for the weather to get warmer. While in general the weather was better overall, but the northeast was – I was up in Washington D.C. this weekend and see it went down to 38 degrees one night, wondering when spring was come in. So some possible exactly to measure weather and I think I’ve said a number of items, it really affects us on the fringe of the business. Once you’re going to get warm in the spring and once it get cold in the winter and then in between its case of our – us executing our business plans.

Alright, great. That’s all from me. Thanks guys.

Thank you.

Thank you.

[Operator Instructions] We’ll take the next question from Jamie Clement at Macquarie.

Good morning, gentlemen.

Good morning.

Good morning, Jamie.

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

Yeah. The tax new customers were up nearly – it was up 6% over last year with really strong March month. I think last year actually I think we were a little disappointed with the capture. We had done some reorganization on the sales team and we did ourselves a little to service, and might have understaffed, didn’t properly staff the sales effort last year. So I think some of that – weather was better in some of the Florida and Texas markets. This year it could be the sales team’s efforts, it could be – so people who delayed the Boss system with last year and delayed purchase for a year, but all of a sudden they are seeing they got issues probably. The nice thing about those tax systems is, when a customer wants to take care of this insect issue and he has got that system built in, there is only one company that can service it. So I think it’s – where open it’s pent up demand and execution.

Very good. Very good.

I think I could summarize that. I think it was and Gary touched on the moving parts, but just more effort. We were disappointed last year the HomeTeam people were disappointed and I think that they have an aggressive plan this year and they just – they’ve been attacking this thing everywhere that they know. And the results are showing it that they are successful with it.

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

I think inception to date and sooner I give you a number, I am no longer going to be wrong but 800,000 of these systems have been installed and there is probably close to 250,000 to 350,000 active customers that could be off on those numbers. Do you think all they need to retire?

Gary, [indiscernible].

I’ll get to some better numbers.

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

Well, thank you.

[Operator Instructions]

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