Rollins, Inc. (ROL) Q4 2015 Earnings Report, Transcript and Summary

Good morning. And welcome to the Rollins Incorporated Fourth Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, all participants are in a listen-only mode. Later, we will be conducting a Q&A session, and instructions will be given at that time. [Operator Instructions] I would now like to introduce your host for today's call, Marilynn Meek. Ms. Meek, you may begin.

Thank you. By now you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact our office at (212) 827-3746 and we will send you 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) 203-112 with the pass code 8962426. Additionally, the call is being webcast at www.viavid.com and a replay will be available for 90 days. On the line with me today are Gary Rollins, Vice Chairman and Chief Executive Officer; and Eddie Northen, Vice President, Chief Financial Officer and Treasurer. Management will make some opening remarks and then we'll open up the line for your questions. Gary, would you like to begin?

Sure. Thank you, Marilynn, and good morning. We appreciate all of you joining us for our fourth quarter and year end 2015 conference call. Eddie will read our forward-looking statements and disclaimer and then we will begin.

Our earnings release discusses our business outlook and contains certain forward-looking statements. These particular forward-looking statements and all other statements that we 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, Eddie. Before I begin, I want to introduce John Wilson. We have another attendee at today's investor call. John is President and COO of Rollins. He is new to our investor calls but certainly not new to Rollins. You may recall that John was promoted in 2013 to President and COO. Prior to that John has been President of Orkin USA. He began his carrier as a technician and sales inspector while in college and joined the company full time in 1996, as a branch manager trainee. He's had various positions of increasing responsibility beginning as a Branch Manager, Region Manager, Vice President and President of the Southeast Division. He intended the University of Tennessee and he has completed the Executive Program at the University of Virginia, Darden School of Business. Rollins Board of Directors' named John an Officer and Vice President in 2011. John is doing a terrific job, he is an important part of our success and our future. We were extremely pleased to have posted record results for the quarter, as well as our 18th consecutive year of improved revenues and profits. For the quarter revenue grew 5.4% of 362.5 million compared to 344 million in last year's fourth quarter. Income before taxes rose 11.3% to $51.8 million, compared to$ 46.5 million for the prior year period. Net income rose 6.1% to $31.7 million or $0.15 per share compared to net income of $29.9 million or $0.14 per diluted share for the same quarter last year. Revenues for the full year rose 5.2% to $1.485 billion, compared to a $1.412 billion for the same period last year. Income before income taxes increased 10.8% to $243.2 million compared to $219.5 million in the prior year. Net income increased 10.5% to $152.1 million with earnings per diluted share of $0.70 compared to $137.7 million or $0.63 per diluted share for the same period. We completed another record year in revenue and profits. All of our business lines experienced growth during the quarter with residential pest control up 6.1%, commercial pest control grew 3.2%, and termite rose 6.2%. We are also very pleased with our progress that our specialty clients made last year with all of those reported improved sales and profitability. These are nonworking pest control and wildlife companies. Their results underscore the value that we’re experiencing in acquiring selective, market leading pest control in wildlife. Speaking of wildlife, our business there also enjoyed a good year. TruTech grew substantially and Critter Control which we acquired in February of last year performed above our expectations. We are very excited about the potential for this service line going forward. HomeTeam also had a better year as the housing market continue to improve particularly among the world class builders they partner with such as Lennar Homes, PulteGroup, Toll Brothers, DR Horton and Meritage Homes. Revenues for the full year grew approximately 8%. Eddie will provide more details on HomeTeam as well with the specialty companies in a few minutes. Installation and drive zone ancillary businesses which include bedbugs and mosquitoes, continues to perform well. Bedbugs have not gone away and we are benefitting from good revenue increases in aggregate. Some of you may have noted in recent media coverage that the latest threat from mosquitoes, Zika. One national news agency have headlined this article as disease perforate [ph], mosquitoes become public enemy number one. Zika is a rare virus that is not made any impact from its discovery in the 1940s until now. Like Guillain-Barré, Zika is spread by the same species of mosquitoes which can be found in much of the USA. In the past year, Zika has spread from Africa and Asia to the Americas. Although Zika was first diagnosed in Brazil in May, it is been linked to more than 3500 cases of infant deformity. The leading experts predict that the USA needs to be prepared for a similar scenario. This situation is unfortunate. However based on our experience with the West Nile outbreak, publicity concerning mosquitoes risk will accelerate. We’re particularly pleased with the success that we had this year with the rollout of our CRM system, BOSS. We ended 2015 with 50% of our Orkin branches on this system. In December, we picked up our pace and began rolling-out this branch operating system to two regions a month and currently expect to have all Orkin locations on BOSS by the end of the third quarter of this year. This is ahead of our previous target completion day. This time last year we discussed that one of the important advantages of BOSS was the feature of issuing iPhones to our technicians to help them better complete their customer administrative requirements. At the end of this past year, 2600 of our technicians were using our iPhones to provide customer better communication and acknowledgment of their service, while improving our branch administrative productivity. You may also recall that we recently completed the service manager check-in dashboard which provides a real time, online display of all technician services and status and where they stand on completing their routes. Additionally, this data can identify opportunities for a newly sole customer to receive a same-day service store. These are just two examples of major benefits to systems providing and improving customer service, while making our operations more efficient. Our technology team wasn't solely focused on BOSS however. During this past year, they upgraded and replaced a number of our retired support systems, to provide better financial reporting and communications, while improving our customer experience and reducing costs. Our marketing folks were major contributor to our success last year. They continue to up their game across all of our marketing channels, digital, mobile, traditional media. And frankly, we are getting better at reaching our target prospects, and identifying the best channels in which to reach them. As you are aware, we established a in-house analytical team couple of years ago, to help us better understand our customer's preferences and to know more about price elasticity. Their contribution is allowing us to take our marketing plans to another level. Like so much of what we do, we see the marketing of our brands is a work in progress. It just keeps evolving and we look forward to even greater contributions in this area in the future. We also continue to add to our roster of franchises globally having established a total of seven international franchises in the first half of the year. We opened franchises in India, China, Central America, and Mexico. In the fourth quarter we announced that Orkin extended its presence in North America, South America, Europe, the Middle East, and Asia with the addition of nine new franchises. These new franchises are located in Mexico, Columbia, Republic of Georgia, Qatar, China and South Korea. As of this date we have 48 international franchises. We look to expand our franchise footprint both domestically and internationally while at the same time working more closely with our franchise partners that help to improve their business. Strategic acquisitions remain a priority for us and as in the past we will continue to seek out companies that are a fit for us in both the pest control and wildlife areas of our business. The service business is first and foremost a people business and our employees are our most important asset. A major priority for us every year is to prove on the retention of our employees. Our employee retention rate again improved in 2015. We continue to work with our employees to ensure that they are receiving the very best training if they need to be successful and to advance their career. We want them to feel that they have a future at our company and a career not just a job. 2015 is now behind us and I want to express how proud I am of what our employees and franchise partners accomplished during the year. The dedication to continuous improvement is the driving force behind our success. Equally important of what we accomplished and learned during the year is that we set the stage for initiatives that will help us continue to grow our revenue and profits in the New Year. We’re looking forward to achieving another record year. All of our team members will be working diligently to improve the customers' experience. We look forward in discussing with you the progress that we are making throughout the year and I am now going to turn the call over to Eddie. Eddie?

Thank you, Gary. I had the opportunity last week to attend my first Rollins leadership conference. For me it was a time to connect with many that I spent time with learning the business over the past year and meeting many other new faces. I share this because this event continue to confirm a key reason for our consistent performance, the depth of our strong management teams. That consistency continued with our 39th consecutive quarter of improved earnings results. Behind the record setting results are managers, technicians, franchisees, sales and support staff that take the continuous improvement culture and execute year-after-year. I want to extend my heartfelt thanks for the tireless efforts of each of these groups and for their commitment to these outstanding results. We had a strong performance in the fourth quarter with all service lines showing continued growth. Keys to the quarter included strong revenue gains, significant growth in the number of international franchises and Australia’s improved profitability. That was offset by currency headwinds and slower growth from acquisitions. A few onetime tax events impacted the net income. Looking at the numbers, the company reported fourth quarter revenues of 362.5 million, an increase of 5.4% over the prior year's fourth quarter revenues of 344 million. All brands, all segments and all geographies performed well as measured in constant currency. For the quarter income before income tax increased 11.3% to 51.8 million but due to a less favorable tax rate created by our few onetime events, the net income increased 6.1% to 31.7 million with earnings per share of 7.1% to $0.15 versus $0.14 per diluted share last year in the fourth quarter. This year’s fourth quarter tax rate was higher than the rate for last year’s fourth quarter. At the end of 2014, we had a beneficial adjustment that reduced the effective tax rate and this year we had a few detrimental adjustments such as an increase to the reserve for uncertain tax positions and an increase in certain disallowed expenses that while small individually, collectively affected the quarter. Also our foreign taxes were a bit higher than last year due to the growth of our foreign operations. For the year revenue came in at 1.485 billion a 5.2% increase. Net income for the full year increased 10.5% to a 152.1 million or $0.70 per diluted share with EBITDA coming in at 288 million. I want to take a minute to highlight the efforts of our Australia team, as I’m sure you remember a year ago we were sharing the successful purchase of our second company in a suburb of Melbourne. Even with the slowing economy, our Australia operations grew revenue 9.4% and is profitable for the year. We are very proud of the results for this team and excited about our future in Australia. Let’s take a look through the revenue by service line. Our total revenue increase of 5.4% included approximately 6.4% underlying sales and pricing growth and 10.4% contribution from acquisitions offset by a currency headwind of approximately 1.4%. Residential pest control was up to consistent 6.1%, commercial pest control up 3.2%, and termite up an impressive 6.2%. Critter Control was the only major acquisition that was included in our numbers for the quarter. As I mentioned last quarter, we realigned our sales force which helped contribute to the impressive revenue growth numbers. With the use of our home suite iPad technology, the sales force was a large contributor to the 6.2% termite growth for the quarter. The use of this technology along with the opportunity to offer in-house financing through our own Rollins acceptance corporation has helped us to grow the revenue and ancillary businesses. In addition I want to recognize the efforts of our inbound sales group who did an outstanding job keeping up with the increase demand late in the year. As you know, this is normally a slower season for pest control but November and December were incredibly strong and this team did a great job working with the operations group in meeting this demand. All of these teams did an outstanding job. Again for the quarter, when we take out the impact of foreign currency, residential which makes up 41% of our revenue through 6.3%, termite which makes up 17% of our revenue was up 6.9% and commercial pest control which is 41% of the revenue was up 5.8%. Commercial was most impacted by the weak Canadian and Australian dollars as most of our business in these countries is commercial. As HomeTeam begins their 20th year of service, I want to spend a few minutes highlighting some of their many accomplishments that would have made our founder O. Wayne Rollins himself very proud. In 2015 HomeTeam grew 93,000 Taexx tubes in the wall installs to bring the life to date total to over 900,000 homes. In 2015, revenue grew 8.1% which was primarily driven by an increase in Taexx system activation of 16.5%. Also HomeTeam saw an increase in sales efficiencies which resulted in decreased customer acquisition costs. Due to its environmental friendliness and high customer satisfaction, termite baiting is becoming a preferred treatment method in HomeTeam growing pre-treat business. This has opened up a new area of opportunity for the future which offers HomeTeam higher customer activation and improved retention over alternative methods of pre-treats. In total, gross margin for the quarter improved to 49.7% versus 49.1% in the prior year. The margin for the quarter benefited from lower fleet costs due to a decrease in fuel price and lower service salaries as a percent to revenue offset by personnel related costs due to increased healthcare costs and higher material costs due to the increased sales. The company maintained good cost controls across most spending categories. Depreciation and amortization expense for the fourth quarter increased 10.8% totaling 11.3 million. Depreciation was 5.1 million increasing 175,000 with most of that increase related to our new BOSS CRM system. Amortization was 6.3 million which increased 265,000 due to the addition of Critter Control customer contracts that will be amortized over seven years. For the full year amortization of intangibles which is typically from the value assigned to acquired customer contracts or representing significant after-tax noncash charge was approximately $0.07 this year. A rollout of us is ahead of plan. As Garry mentioned, we now have over 2600 pest control technicians with iPhone's and who are now paperless. We will give a more in-depth update on our Q1 call but I want to share another BOSS benefit that will also impact our initiative of improving our routing and scheduling. One of the benefits is our ability to schedule or reschedule while the customer is on the phone and immediately update the technician on the iPhone. This will have an immediate positive impact to our customer experience. We’ve begun training on the routing and scheduling portion of BOSS called Virtual Route Management or VRM. Our IP Group has set up a support desk and put together seven training videos that will help the branches use the basic routing functionality that has been built into BOSS. The training will include topics such as route set ups, route territory planning, route optimization for scheduled accounts, optimizing routes and balancing route production. For the year cost associated with BOSS had a $0.05 impact on earnings per share and we anticipated similar impact in 2016 as we roll-out the remaining Orkin divisions. At this time we're still assessing the next steps for BOSS related to the independent brands and we will share those when these plans have been finalized. Sales, general and administrative expenses for the quarter increased 46.2 million or 5.6% but remained flat for last year at 32.4% of revenues. A reduction of areas of bad debt and lower administrative costs reflecting ongoing cost containment programs were offset by higher insurance expenses, higher advertising and higher sales salaries related to our increased volume. Our balance sheet remains strong as we continue to look for more opportunities to reinvest in our business. For the year we spent over 33 million on acquisitions even though we attempted to use a lot more. Our pipeline is full of opportunities for 2016 with mergers and acquisitions. We had 39 million of CapEx for the year and had 134 million in cash along with no debt for the full year. As you may have read last night the Board of Directors declared a regular cash dividend of $0.10 per share that will be paid on March 10, 2016 to stockholders of record at the close of business February 10, 2016. The cash dividend will represent a 25% increase over the prior quarterly dividend. This marks the 14th consecutive year the Board has increased our dividend by a minimum of 12% or greater. 2015 was a great year and I’m strongly encouraged that we will have a great 2016. Our management team is focused and energized to continue to raise the bar for our customer service and this will translate into improving financial success. I'll now turn the call back over to Gary.

Thank you. We're ready now to open the call for any questions that you might have.

[Operator Instructions] Our first question comes from James Clement with Macquarie. Please go ahead. Your line is open.

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

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

It’s hard for me to appreciate this kind of thing, but what happens now before this capability is out there like I mean how do you handle this kind of thing?

It’d not have been as real time so it’d have been a request to the branch, and then the branch from there would have taken the message and then the branch from there would have to go followed up with that technician and/or the branch manager, service manager would have to get back with the customer which that time may or may not have worked for the customer. So now in real time we’re able to see you know this is the time it’s available for this technician, we can tell the customer in real time this is the adjustment we can make based on your request and just make that a better customer experience at that point in time rather than having a back and forth or have a delayed response back to them.

And Gary if I could ask you one, you emphasized in your prepared remarks employee retention and you certainly highlighted training. I remember I counted the years a little bit long but I think it’s about 5-7 years ago, somewhere in that stretch you all bid a fairly significant dollar investment in upgrading your training procedures as well as I think your training facilities if I remember correctly. Have you been spending above normal with some of these training initiatives or is this to use your word just always work in progress around.

By the way you’ve got a good memory.

I’m not pretty sure.

No, we’re not spending, I mean we haven't upped the spending, I think we’ve upped the sophistication. We’re on the web now rather than using satellites to dish and so of course that’s been a big improvement. And we’ve just got better at it. I think that the quality of the training has improved and the cost of the communication is going down, so you know there is some offsets there but I don’t think that we as a percent of revenue we’ve increased the rate of our spend.

Yes, because Gary I noticed certainly last earning season and in this relatively early stage, this earning season seems a lot of services companies are in fact talking about the difficulty in attracting and retaining service desk for companies that are relatively similar industries. I mean it seems like you’re bucking the trap.

You're talking about recruiting?

Well I’m talking about recruiting and retention because you know I think the good thing about the unemployment rate coming down is that folks may have more options, it seems like your retention is actually improving whereas I think a lot other services companies unfortunately going the other direction, although maybe good thing for America so who knows.

First of all the various studies indicate the compensation is like three or four's that is the reason people change jobs or keep their jobs, and I think that really that our training has an important role in our retention, when you invest in a person's career that endears now to the organization. So - and frankly we’re just turning up the efforts I mean, we have made a real strong effort to hire more veterans and more females and we take the figures every month and we’re moving them, I mean we’re doing it. And our referral program we’ve been very successful this past year getting more employee referrals of a friend or a relative or someone to come to workforce. And our experience has been that that’s a better hire typically than someone that doesn’t have any association.

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

And our next question comes from Joan Tong with Sidoti & Company. Please go ahead. Your line is open.

I have a question regarding competitive landscape. Obviously you have a large competitor came in you know to America and buying all these like different companies and trying to compete here on our turf. I’m just wondering like have you seen any changes in competitive landscape obviously they have throughout the evaluation on the M&A front but in terms of pricing, have you seen anything changes they might be a little bit more aggressive and since they have a big target they have to meet to justify that acquisition?

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

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

Well we are learning more about our business, I mean we have the capability now of better utilizing our data. We have the capability now of experimenting more. We have a wonderful laboratory with our call center because virtually we can change the prices just almost instantaneously and look at our closure to see if our closure is improving or not and seeing if we’re selling more units to the extent that to offset the price reduction. So we're just learning a lot more about our business. I don’t think that we've found a hot button if you will but I think that in and out it was zip-plus 4 we can direct our advertising more precisely and we're getting to do better at hitting our targeted prospects. So I think this is just going to be an ongoing situation of education of us learning more and I think that we have some great opportunities because when you look at moving closure it’s just a real important leverage for us as our sales are concerned.

And then if I have to look at the demographics of your customers, has there been any changes like maybe you are moving up a little bit in terms of like demographics and because those are life style customers they tend to be sticking around a little bit longer and not just like stick around for a year and then when the problems go away and then they're just kind of disappear. So how should I think about your retention? Obviously you can talk about regeneration that would be helpful.

Yes Joan, this is Eddie. Retention continues to tick slightly higher each year, it’s nothing dramatic but it just continues to tick slightly higher. And really when you talk about the analytics, that’s really one of the areas that our marketing group has done a fantastic job with using the data to know and understand the revenue bands and breaking down our abilities to first of all win in the revenue bands and then also to be able to retain and then be able to price in all of the different revenue bands. And that’s enabled them to now be able to direct our advertising to be able to make sure that we are moving to the revenue bands where we want to be involved. Revenue bands four and five, the higher revenue bands so the ones that typically we have better pricing with and that we also have longer retention and overall it's a good spend for us at that point in time. So that’s one of the areas where analytics has been very positive for us and our marketing group continues to push us in that direction to be able to have more wins in that area.

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

Yes for 2016 we will see that heightened level and we will see the gross margin based on all the anticipated benefits we’ll have. We'll see the gross margin continue to improve and as we said the 200 to 300 basis points over the two to three years and we know that’s going to be a piece of it from the impact on the cost efficiency side, and then of course we will take a look at any opportunities we have on the revenue side to continue to have a better customer experience, just like the one we just talked about in the earlier example, if we can improve that customer experience that should be a retention opportunity for us so that should enable us to continue to grow our revenue as well.

Joan, we learned something as you can imagine when you get half of your branches on the system is it takes the branch some time to kind of integrate their new technology and understand it, which you have the training responsibility but we have expectations at towards reducing the mileage, and any talks about the customer experience which is first and foremost in our mind, but also the technician experience. I mean, it is very frustrating for that technician to have changes and not know the best way to get to an account and so forth. So we really think that it has employee retention benefits because we are creating a better job for our technician.

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

And we’ll go next to Sean Egan with KeyBanc Capital. Please go ahead. Your line is open.

I wanted to piggy back on that last question and throw down specifically into the routing training that you alluded to in your prepared remarks. Recognizing that it’s a moving target, when should we expect to see the training start to yield benefit within the financial results?

Well, Sean I think every trained branch is going to be one day better at being able to improve their routes. So I think that we were going to see those branches that have, first of all, the BOSS capabilities. Second of all the training from the new VRM, and then the ability to be able to go through an implement, I think we’ll start seeing those small incremental gains as we move through time. We have lots of branches around our entire network that have done a good job in this area for an extended period of time. Entrepreneurial spirits, they figured out a way to make sure that their routes are as good as they can be. We have individual technicians that have taken that on themselves. But this is going to help us formalize and get those out to all of the branches where we have the BOSS capabilities. And we will be able to go through, be able to see some improvements as they get trained and as we go through route by route, we’ll be able to see those incremental improvements. So it’s early to say, you here’s what the X dollars is going to be, or anything else like that. But again, we’re excited this is another area where BOSS is going to be able to be a benefit for us that we will be able to look forward with.

No, I guess you can say there are average branches for six months. So we’ve not mastered what we have and I think Eddie commented before about the 7 modules of training involving routing and scheduling. So you are asking the same question that I’m asking our finance department and I got the same answer that you got.

I appreciate the consistency. Can you please expand a little bit on why each run towards favoring termite baiting particularly its an advantage you. If you could put that in the context and explain why that’s a good thing for you.

Probably there are a few different things. For one, it’s environmentally more better and we get that question all the time. And not that what we use at all is environmentally unfriendly but anytime that you can use the bait rather than having any sort of a liquid would be something that will be preferred. So that’s something that is going to be a benefit to start with. And then when we take a look at it from a cost perspective, we get a chance to be able to use something – basically kind of pay for something as we use it, as we go along. When we have a free treatment, we have to spray, and things like that. We have chemicals that we have to bring in and we have to inventory them, and this gives us an opportunity to be able to have more of a real time cost associated with acquiring a new customer. It’s also a better way for us to have something that’s visible and tangible from a recurring perspective. So we have something that we are actually able to go and be a part of with the customer when we talk about their recurring annual renewal, and it’s grown very well. It’s taken over a very well-known- the HomeTeam group has probably been shifting in this direction over the last several months. And I’ve seen very positive things that have come out of their customers that they have been talking much about it.

A pretty cheap treat historically has been that you go out there with a termite side and you treat the foundations and the slabs before they're put so forth. And there is not a lot of touch that you have with the customer. They improves the touch, because out there servicing those bait stations and so you've got more contact. I think the customer sees a greater value that other situation was kind of out of site, out of mind. And as Eddie mentioned, there is a lot of - customers are looking for more environmentally positive situation.

Briefly, you mentioned that your spend on M&A during 2015 was below kind of expectation or plan, can you elaborate maybe that was due to timing, availability of targets if it signals anything in the market?

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

[Operator Instructions] We'll go next to Roland Underhill with Underhill Investments. Please go ahead. Your line is open.

I came on a little late, could you be specific about – more specific about the bed bug growth and did you touch on wildlife business growth?

So we can start with wildlife. We will start with wildlife and we just said in our prepared remarks that it's growing well. We're very excited on how the Critter Control acquisition is performing for us. Its performing slightly better than what we would have anticipated which is a good thing. TruTech, wildlife continues to grow very well. So I think the combination of the two is going to be a very positive thing for Rollins Wildlife as we move forward in time. As far as bed bugs, we didn't go through any specifics rolling on this. For the year, for bed bugs came in at $72.3 million for bed bugs. And that was a 13.3% increase year-over-year. The much higher base is of course always a challenge when it comes to growth rate. And you know we've been tracking this back – you're very familiar with the story. We've been tracking this back to 2010. We were virtually nothing. We continue to grow this very well and again set basically an all-time record for the dollar amount of bed bugs that we have. The residential piece has continued to grow really well and what we're really trying to concentrate on here is to be able to do everything that we can to make this a recurring service. Any time that we have to go out and we have a one-time type of a job. It's much more difficult for us to ensure that we're pricing it correctly and we've recognized that. So even that we have great revenue growth in previous years, in some cases the cost associated with that good revenue growth has not always been in line. And we're continuing to get better with that. We're continuing to understand what the costs are and really want to move, continue to move in the direction of recurring types the revenue with the bed bug product. So when we have situations, we're just one off type of a deal. We have not been as aggressive to be able to go and win that business, because of the cost that we had associated with that. And then the last piece evidence is probably in 2010 there were very few players that were in the market. And overtime as media has continue to discuss this more and more players have come into the market and competition for some of these jobs has continue to increase. So we're very excited about the continued growth of bed bugs that has slowed somewhat, but an all-time high for us this past year.

Well, also the industry was growing faster than the industry.

Absolutely.

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

In the past on the TruTech and the wildlife business you’ve been more specific growing well to be 8% to the 30% as been in the past, can you help us more there? A – Eddie Northen: We’ve been well into the high teens, for our, for that growth of those businesses.

Okay, that’s helpful.

And our next question comes from the James Clement with Macquarie. Please go ahead. Your line is open.

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

And we’ll go next to Joan Tong with Sidoti & Company. Please go ahead.

Hi, just have a couple of follow up. I’m not sure if you can disclose that how we can actually be able to get down to the branch level. You talked about the BOSS system has been implemented for some branches for more than six months and I’m just wondering what has been the margin improvements for those branches. A – Eddie Northen: Yes, Joan we’re not a point to be able to discuss that I’m not sure that will ever talk at about at a branch level. We’ll give you come color more on a macro level and again like I said in prepared remarks in our prior Q1 call, I will be more prepared to talk about more specifics having to do with that.

Right. But over the long term to next couple of years, you are still targeting 200, 300 kind of basis points of margin expansion when everything said and done. So I’m just wondering is it going to be more like a 2017 event we would see like a more pronounced benefit or we can actually see some of those like coming in the second half of 2016. A – Eddie Northen: I think we’ll see some benefits that will come in. I think we’ll see benefits that will come in at 2016. And then getting this to matured state is really, the key to being able to see those benefits. This again is one of the many things that we’ve had that have created that margin expansion that you have seen over the last 12 to 14 years, this is just another one of those items that are in the line and I think we’ll see some benefit from that towards the end of 2016 and by 2017, we should be relatively mature and be in the good spot to be able to enjoy the benefits of it.

Sure. And then really one last question my favorite question is gasoline prices, lower gasoline prices, the benefit as you already said what was that for this quarter? A – Eddie Northen: So we are typically about month of somewhere between 650 and 800,000 gallons that we are – the lower end of that, just based on the time of the season that it is, that’s per month and we saved, roughly a dollar a gallon year-over-year on that.

Okay, all right. Thank you.

[Operator Instructions]

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

And I do want to say one more thing Gary is that, many of you are interactive at [indiscernible] throughout the years, and Friday will be her last day. So any of those of you that have interacted with her, she has been your lifeline to this office for the last 17 plus years. May I want to reach out to her and wish her well. She has been a critical part to this call and obviously to this office for many years. So just want to pass that along. Thanks so much.

Thanks, Eddie.

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