Rollins, Inc.

Q1 2026 Earnings Call — April 23, 2026

Lindsay Barton (Vice President of Investor Relations): Greetings and welcome to the Rollins Incorporated First Quarter 2026 Earnings Conference Call.

At this time, all participants are in a listen-only mode.

A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Lindsay Barton, Vice President of Investor Relations.

Jerry Galoff (President and Chief Executive Officer): Thank you, Lindsay. Good morning, everyone. I'm pleased to report Rollins delivered strong first quarter results. We saw sequential acceleration through the quarter and continued to see solid growth across all major service lines with total revenue growth of 10.2% and organic growth of 6.6%. Demand was a little slower to start the quarter, particularly given some unfavorable weather in January, but we exited with well over 8% organic growth in March. Spring sprang quickly for our teams as we were experiencing healthy growth in recurring and one-time services. As expected, we continued our investments in incremental sales staffing, and marketing activities ahead of peak season to ensure that we are positioned top of mind for the consumer as pest season begins. We are well staffed on the sales, technician, and customer support front with our teammates onboarded, extensively trained, and ready to provide an exceptional level of service for our customers. Earlier this month, we announced our acquisition of Romex Pest Control, a top 40 pest management company according to PCC top 100 rankings.

RoMAX provides us with entry points into new markets while enabling them to further scale their operations and expand service offerings to their existing customer base. Most importantly, they have a strong people and customer-focused culture, and we were thrilled to welcome our new RoMAX teammates to the Rollins family. As you know, we believe the combination of Orkin and our strong group of regional brands is a competitive differentiator for Rollins, giving us multiple bites at the apple with potential customers, while also providing some balance and diversification with respect to customer acquisition. The addition of Romex is another example of our successful M&A playbook in action as we continue to add high-quality businesses to our premier portfolio brands through a disciplined and strategic approach. On the commercial side of the business, we're encouraged by our momentum. Overall, we delivered solid commercial growth for the first quarter. Over the last year, we have strategically added resources to support our dedicated commercial division within Orkin. These resources are paying off as Orkin Commercial continues to deliver new customer wins across key verticals.

Beyond growth, our dedication to operational efficiency and continuous improvement is an important part of our strategy and culture. Kim will discuss in more detail what we saw headwinds to profitability from higher insurance and claims, as well as some pressure from headcount given lower volume earlier in the quarter. As we discussed last quarter, it's important that we maintain healthy staffing levels ahead of peak season so we aren't hiring, training, and onboarding a large number of new teammates at the same time seasonal demand ramps up. We've learned that extreme swings in hiring activity drives teammate turnover rates higher and has potential negative impacts on the customer experience. This hinders profitability in the short term, but is the right decision for the business long-term and sets us up to capitalize on peak season demand, as evidenced by our performance in March. In closing, we're excited about where our business stands today. The year is off to a solid start and demand from our customers remains strong.

Our teams in the field are ready to support our customers as peak season ramps up, and I want to thank each of our 20,000 plus team members around the world for their ongoing commitment to our customers. I'll now turn the call over to Ken.

Ken Krause (Executive Vice President and Chief Financial Officer): Thank you, Jerry, and good morning, everyone. Diving into the quarterly financial statements and starting first with revenue. Revenue growth was solid to start the year. It was very encouraging to see an improving growth profile as we moved throughout the quarter. In total, we delivered revenue growth of 10.2% year over year. Organic growth of 6.6% was negatively impacted by unfavorable weather, particularly in January, but we saw very strong sequential improvement in each month moving through the quarter. We were especially pleased with approximately 12% total growth and over 8% organic growth in the month of March. Overall, organic growth of 6.6% in the quarter represents a 90 basis point improvement versus the fourth quarter of 2025. We realized good growth across each of our service offerings. In the first quarter, resi revenues increased 9.3%, commercial pest control rose 9.6%, and termite and ancillary increased by 13.5%. Organic growth was also healthy across the portfolio, with growth of 4.2% in residential, 7.7% in commercial, and almost 10% in termite and ancillary.

Turning to profitability and our gross margins, they were 50.8%, a decrease of 60 basis points. The lower volume in the first part of the quarter, coupled with higher insurance and claims activity, were headwinds to quarterly margins. Looking at our four major buckets of service costs, people, fleet, materials and supplies, and insurance claims. First and foremost, lower vehicle gains within our fleet line on the income statement created 50 basis points of headwinds to gross profit margin. We should see this start to improve as we go into the second quarter. Insurance and claims drove an additional 30 basis points of headwinds to gross margins, while service payroll costs provided 20 basis points of headwinds as we carried more technicians ahead of the start to peak season in March. Fuel costs represent approximately 1.5% of sales, and we saw a relatively neutral impact from fuel in the quarter. We currently expect fuel costs to continue to track below 2% of sales in 2026.

We are seeing good receptivity on our recent price increase and expect price to contribute 3% to 4% of growth for the year ahead of CPI, and we expect to be positive on price costs for the year at that level of price realization. Gross margins are usually at their lowest point in Q1 given revenue seasonality, but we anticipate improving margins in our underlying operations as we move through peak season. Quarterly SG&A costs as a percentage of revenue increased by 70 basis points versus last year. Incremental selling investments provided 50 basis points of headwind, while higher insurance and claims costs contributed 20 basis points of headwinds on the SG&A line. First quarter GAAP operating income was $145 million, up 2% year over year. Adjusted operating income was $153 million, up 4% versus prior year. First quarter adjusted EBITDA was $179 million, up 4.4% versus last year, and represents a 19.8% margin. The effective tax rate was 21.3% in the quarter versus 23.5% and reflects the benefits of both the improvement associated with windfall tax benefits, as well as the work our tax team has done to improve our effective tax rate.

We expect our effective tax rate to come in under 25% for the year, down approximately 100 basis points from historical levels. Quarterly GAAP net income was $108 million, or 22 cents per share. For the first quarter, we had non-GAAP free tax adjustments associated with acquisition-related and other items, totaling approximately $7 million of pre-tax expense in the quarter. Accounting for these expenses, adjusted net income for the quarter was $113 million, or 24 cents per share, increasing 9.1% from the same period a year ago. Turning to cash flow in the balance sheet, we delivered operating cash flow of $118 million and free cash flow of $111 million. Free cash flow conversion, the percent of income that was converted in the cash flow, was over 100% for the quarter. Cash flow performance was negatively impacted by the timing of tax payments associated with our tax credit planning strategy. This strategy has delivered meaningful benefits and is enabling very strong improvements in our effective rate. Also, our year-over-year cash performance was impacted by our transition to semiannual interest payments on our 2035 senior notes that we issued a year ago.

Excluding these items, free cash flow would have increased 14% versus Q1 2025, and free cash flow conversion would have been approximately 140%. All very healthy, enabling us to continue our balanced capital allocation strategy. During Q1, we made acquisitions totaling $18 million, and we paid $88 million in dividends in the first quarter. We continue to expect M&A to contribute 2% to 3% of revenue growth for 2026. Our leverage ratio stands at 0.9 times. Our balance sheet remains very healthy and it positions us well for future growth.

Management: Ladies and gentlemen, please stand by. It appears that our speakers have disconnected. Please stay on the line.

Q4 2025 Earnings Call — February 12, 2026

Analyst Tim Mulrooney (William Blair): Ben, Jerry, good morning. Thanks for all the detail around the one-time sales and the recurring base of business. It's all very helpful to understand how the underlying business is performing. But I'm curious if you could expand a little bit more on that 7% growth that you're seeing in the recurring and ancillary business. How do you get comfortable that that level of growth is sustainable heading into 2026? Can you provide any details on retention rate or net gains or customer wins? Any of these underlying metrics that might help shed some additional light for us?

Executive Jerry (Title): Tim, this is Jerry. I'll give you a walk you through a few of the main points on my mind, and maybe Ken can add a little color to it. I think there's a lot of data points that we have that give us that comfort, if you will, about the future. You know, in the fourth quarter, we looked at our price increase data, and we monitored that throughout the year, and we look at what the consumer health is like, for example. We have really super low impact of percentages of rollbacks and things along those lines. That gives us a great deal of confidence that our consumer is still healthy. It also indicates to us that we affirm our plan to continue to move forward with our pricing initiatives that we've laid out for ourselves to continue to use price as a lever as we move into 2026. If you look at the customer retention side, it's very stable, and we've also had some areas that have improved.

And looking specifically, take Orkin, for example, at the net gain of the customers they carried in at what they had at the end of the year, but compared to the beginning of the year, they had the best performance in growing their customer base that they had since the COVID era. This is the best year since then. We look at things, monitor things like our close rates on customers calling in. And that also tells you a little bit about the health of the consumer, you know, the health of our pricing programs, things like that. When we look at the leads and our closure rates, the closure rates, it's up. It's not down. So we're also seeing, for example, on ancillary business, our customers are not overly price sensitive, and we have financing options that give them the ability to get the much-needed work that they need done to give them peace of mind and allow them to pay over time. So we see all those. Those are the things that we look at every single day. And it just gives us a lot of comfort. That's why I said what I said fairly emphatically in my opening remarks is that there's nothing fundamental about our business has changed.

We're going to keep doing what we do and trying to deliver the best service that we possibly can for our continuing growing customer base. Because that's the most important part of our business is the recurring piece, and that's where we want to spend our marketing dollars is creating recurring base, and that's how we want to continue to invest in our business. Tim, just to add on to what Jerry had mentioned there, another couple of points. If you look at the recurring organic business without ancillary, right, if you actually look at it and unpack it even further, you actually saw 10 basis points more of growth in Q4 versus Q3. And so you've actually seen that business hold in, and if anything, it's strengthened a little bit between Q3 and Q4. The ancillary business still growing, strong high-teens, mid-teens, double-digit. That business normally grows in that 20% range. When you can't get people on the roof safely and you can't get them out into the worksite, you'll feel the pain and you'll feel the impact there. But that business, again, growing at mid to high teens, very healthy. And that's the big ticket.

That's the nine shots on goal that I've talked about quite frequently with investors is that we have all these opportunities and we continue to see good demand there. So I think those two things, I think, especially that recurring revenue, which is 75% of our business strengthening by 10 or so basis points between Q3 and Q4, I think gives us a sense that the business is holding in there. And I think, too, Ken, you think about Q4 of 2024 was our best quarter of 2024, and we were having to lap that, right, in some a little more challenging conditions. And we knew starting the year that was going to be a tougher comparable for us year over year, and certainly that was a little bit of a headwind for us the last couple months of the year.

Analyst: That's all great color. Thank you. And I think you're more comfortable with the fact that the underlying business is fine. This is all weather related. Can you dive into this weather disruption by segment? Like, was it more on the... I'm thinking about it more like, hey, it would be on the resi and termite side more... But your resi business actually held in better than what I was expecting, given the comp situation. But then I look at the commercial side, and I saw Ecolab's fourth quarter results. Their commercial pest business was fine in the fourth quarter. It doesn't seem like they saw that disruption that you saw. So I'm just trying to reconcile all that. Can you talk a little bit about impact by segments from that weather?

Executive Jerry (Title): Yeah. I'll take that, and then Jerry will add on to that as well. But I think just starting with commercial and looking at the commercial business, commercial recurring business grew at 7.3%. And so, again, we continue to see good demand there. The challenge was, again, one-time business, even in the commercial setting, which is roughly 15% of that business. And so you certainly saw the one-time impact on the commercial business. You saw it in the residential. I mean, our residential recurring business is holding in there and is strong, and we feel good about it. But the one-time business, the wildlife business and things like that, certainly felt the impact of the slower, the challenging weather patterns. And then on the termite, you're spot on. The termite, the pre-treat, that sort of work, you saw some weakness. The recurring, the bait in the recurring business, continues to do very well. It continues to be a very healthy growth pace for us. But some of the pre-treat one-time termite, you saw a little bit of weakness.

And so I think when you frame it, you know, we feel good about, again, all of the businesses and the recurring businesses coming through. We feel like the fact that we couldn't get out, we couldn't service, we couldn't get that work done, that caused the most significant impact on our revenue growth in the quarter. And, Tim, looking at the commercial side in particular, it was the commodity fumigation business that on the tail end of the year, that's all one-time work. And year over year, we had a comp there that was more challenging for us. And so, again, while our recurring base in commercial continues to grow, the one time isn't the one time necessarily selling to our existing customer base, adding on programs. services, it was driven very heavily through commodity fumigation. And then when you look at the residential side, a lot of that is wildlife and some of the seasonal pests that we didn't have as long of a window of time to get at some of those seasonal pests that are, you know, take the fall pests, box elder bugs and stink bugs and these kinds of things that are seasonal pests.

Seasonal things that come up that we kind of rely on and get those one-time calls to go take care of them. Or general pests just seeking indoor shelter. That season was just a little shorter. And it was really more in the eastern seaboard, parts of the Midwest. We didn't see as strong of a trend in that out west in California and some of those other markets that remain very strong. So, again, that just tells us the underlying business is still pretty strong. It was there, but we were just impacted by this choppiness.

Analyst: Understood. Commodity fume. I hadn't even considered that. That fully explains it on the commercial side as well. So thank you for all the color, guys. This is very helpful.

Analyst Manav Paknik (Barclays): Thank you. Yeah, I was hoping you could just put some numbers by segment as well. You know how you gave us the plus 4% year-to-date and then down 3% for fourth quarter, just by segment as well. And also, you know, what's the margin profile of this one-time business, just to consider that as well?

Executive: Yeah, that's a great question, Manav, and thank you for asking that. The margin profile on this one-time business is oftentimes better than the margin on our recurring business because we're pricing that business assuming that it's not coming back. And so, you know, if you're going to a customer knowing you're going one time, you might get $200, $300, $400 for a service. The cost isn't necessarily that different than it would be on a recurring service that you might be getting $150 or $200 for, for example. So you see a much better margin profile on the one-time business. That has an impact on the overall results. And I think, you know, again, it's only 15% of the business, so I don't want to overstate how much of an impact that had on the margins, but it certainly is margin accretive to our overall business. And I would say it was, there's some impact in every category. I think the residential side was probably hurt a little bit more, especially in things like wildlife and road work and things along those lines. And the ancillary and termite side, some of that softness were to and we sell it and still have some backlog that we carry into January things along those lines on some of that kind of work, but some of it you just never really make up you're not going to make it up.

Analyst: Got it. And then just so we're not surprised in the next quarter as well. I mean I know your full year guide is seven to eight but just you talked about spillover into January. Just thoughts on what one Q might look like relative to the rest of the year?

Executive: Yeah, it's always hard. It's such a short cycle business, which can change on a dime. But what I would say is we still are firmly anchored in a 7% to 8% organic growth for the year. I would not be surprised if it's a little bit slower to start the year because January, we had more branches closed in January than we did a year ago because of some of the weather that we endured. But I do firmly believe the business still is going to be, for the year, at that 7% to 8% pace of growth.

Analyst Anish Sabhadra (RBC Capital Markets): Hi. Thanks for taking my question. So maybe just a question on the margins. Are there any puts and takes to be cognizant of as you think about the incremental margins in 26? And those margins of 25 to 30 are still below the midterm targets. So how should we think about the tailwinds, not just in 26, but going forward to drive it closer to the midterm targets? Thanks.

Executive: Yeah, thanks for the question, Ashish. When I look at the overall margin profile and I think about 2026, I'll take you through a few thoughts. One, pricing remains very healthy. Three to four percent pricing is very realistic to expect. That's what we're introducing across the portfolio, just like we had here in the past couple of years. Second, two-thirds of our cost of services are people costs, and we are really doing a lot better job at onboarding and training and keeping those new hires with us. That turnover and new hire is really expensive, and we're seeing improvements there. That will be a tailwind for us as we go into 2026. Third, fleet costs. Second, another large item on cost of services. You know, when we think about fleet, in the 2025 financials, there was about a $17 million headwind. Six of that was in Q4 alone, associated with the sale of leased vehicles. That should not be as much of a concern for 2026 as it was in 2025. And so when I think about the gross margin, I think there's a lot of reasons to be optimistic in our ability to lift margins and improve margins in 2026.

And then when I go down the P&L and I look at SG&A and back office and all the work there, continues to be great opportunities there. We're launching a company-wide systems implementation around our financial processes in 2026. We'll start to see some benefits of that as we go throughout the year and into next year. So we remain very optimistic and confident in our ability to deliver that 25% to 30% margin profile.

Analyst: That's great, Pilar. And then maybe just on the competitive environment, a question that we get quite often is, have you seen any change from a competitive perspective? Obviously, the strength and recurring revenue seems to suggest that things are trending really well, but any color on that front will be helpful. Thank you.

Executive Jerry (Title): We haven't seen or heard too much in that arena. We are very internally focused, and we have lots of great competitors and new ones that pop up all the time that keeps us on our toes, and we wake up every day excited, ready to fight another daily battle in that competitive space. This is a competitive industry, and there's just so many out there. And it can be local. It can be regional. And so I wouldn't characterize anything that we've seen really throughout 2025 as having any significant shift in the competitive environment. Right. I mean, we continue to invest in the business in Q4. You saw that. And it's not that we're out allocating large amounts of capital to the digital side, but we continue to put more feet on the street. We continue to fund our door knocking areas, which are our fastest growing areas. And so we continue to be bullish about our position in our overall markets.

Analyst Greg Parrish (Morgan Stanley): Hey, good morning. Thanks for taking our question. All right. Yeah, I just wanted to double-click on 1Q, and apologies for that. But just given many of us have been snowed in here for a few weeks, I know you said slower start, but will the weather impact be kind of similar to what you saw in fourth quarter? Will it be worse? I don't know. It's like a similar pace to fourth quarter. Is that a decent way to think about 1Q? I guess any further color I think would be helpful for us.

Executive: Our weather forecaster can't get the forecast tomorrow right. We try not to manage our business around that. It's our job to get our work done and continue to move forward and do everything we can despite that. And what I can assure you is that our team is going to work really hard despite whatever those headwinds are to get through that. It's really hard to say because just as we saw you look at November December and in some of the areas we mentioned earlier where you had two weeks where it just got frigid cold and the next you know Thanksgiving you know you're wearing shorts. So these things just surprise us, and that same thing can happen here. It could be really bad for longer – we could have two weeks of spell in late February or a late start to spring. So we can't predict today or tomorrow. So I think it's really hard for us to think about those impacts. What I can tell you, though, is that our team is engaged and we're going to do our darndest to fight through that.

Analyst: Okay, that's helpful. Oh yeah, I appreciate it. I had to try. Maybe just for my follow-up maybe talk about some of the ancillary opportunities I know you have a lot of shots on goal a lot of things you're excited about maybe in 26 what are you most excited about in terms of gaining traction or maybe picking up a little bit versus the prior year?

Executive: I think when you look at that business, what I consistently say, Greg, is that we've got a number of opportunities. We're not necessarily excited about just one opportunity. We've got so many different opportunities that we avail ourselves to with our customer base, and it continues to be a very low penetration rate. You know, we estimate that less than 3% or 4% of our customers are using those ancillary services. And quite frankly, it's predominantly all in our Orkin brand. It's not in our specialty brand. And so we're doing a lot of work to really get out and, as Jerry indicated in his prepared commentary, improve collaboration across the brand portfolio to enable us to see some improvements in this area with some of our specialty brands. Really important area of growth for us. You know, for the year growing at 20%, really exciting, and it's a good area to continue to invest in because we're seeing great results coming out of that area. There's just so much upside. The runway is so long to continue to drive that.

And much when we talked about the Rollins way and collaboration between our brands, the opportunities that we have also, we have some brands say like a home team that doesn't do certain other services. And how do we leverage our other brands and them passing certain types of ancillary business that maybe they don't do, but somebody else does? over to their sister companies. There's so much opportunity for that, and we're getting more and more mature in that space, using both with technology and really just bringing people together so that we're one big family all working together, taking care of each other. So that part, as we're watching that come together and come to life, is what excites me the most.

Analyst: Great. That's helpful, Connor. Thank you.

Analyst Tomo Sano (JP Morgan): Good morning, everyone. Thank you for taking my questions. Could you give us more colors on sailors' revenue margin EPS contribution in Q4? And if you could give us more color on pipeline for M&A in 2026, it would be great. Thank you.

Executive: Certainly. Thanks for the question, Tomo. CELA is performing exceptionally well, just like Fox did two years ago. CELA contributed upwards of $16 million in the quarter of revenue in a year to date. We bought it in April of last year, and year to date it's contributed $55 million. We've actually seen two cents of non-GAAP or adjusted EPS accretion that's really difficult to do in the first nine months of owning an asset, especially with the cost of financing where it is, albeit our teams do an exceptional job with our commercial paper program and bond market. So with that said, continues to perform well, really good to have that group of teammates as part of our organization, and really excited about what we can do in that area going into 2026.

Analyst: And any callers on M&A pipeline in 2016 to get to 2% to 3%, please? Thank you.

Executive: Certainly. Yeah, thanks for that question. Missed that. But the M&A continues to be very healthy. We firmly believe at this point that 2% to 3% is very realistic and reasonable to expect. We're carrying over a point or so slightly above that of growth from M&A, and we've got a very full pipeline that we're continuing to evaluate. We've invested over the last three years, we've invested almost $900 million in acquisitions and bringing new teammates and new brands into the portfolio. We expect to continue to invest in 2026 and add 2% to 3% of revenue growth from acquisitions again in 2026.

Analyst Josh Chan (UBS): Hi, good morning, Jerry and Ken. I guess maybe on the quarter, you mentioned that most of the weather effects were in the eastern side of the U.S. So is it true that the west and the south are basically the non-impacted regions grew at a similar rate as Q3, just some ways to maybe kind of ballpark or ring fence the weather issues, I guess?

Executive: Yeah, they absolutely did. So they had strong performances in the fourth quarter, generally speaking. And, again, that's what gives us some of that reassurance. Now, some of that Texas, northern, south-central area going up into Tennessee certainly got a little more impact in January. But in the fourth quarter, those areas performed a plan. They just couldn't exceed plan enough to offset some of the challenges that we had in other parts of the country.

Analyst: Yeah, that makes sense. And then on that Q1 kind of comment, I know that freezes are typically not the greatest thing, and there seems to be more freezes in this Q1 than normal, I guess. So is that a potential concern when it comes to spring selling season? How are you thinking about that?

Executive: You know, when we have the ice storms, the sleet, the things like that, that's what shuts down branches. And, you know, we can't safely drive on the roads. You can't safely access customers' homes. And so we had some of that in January. And all things considered, we continue to fight through that. And so, yeah, we have to prepare for that. And a lot of that is operationally, hey, when the sun's shining and the weather's good, we have to be as productive as we can possibly be because you don't know what's going to happen two days from now, right? So how do we front-end load our work? How do we make hay when you can make hay? And sometimes that requires us working weekends and things along those lines, but we have to do our best to get ahead of that and prepare and plan in order to perform as best as we possibly can in the first quarter. You know, when you look back and you think about it, weather is always going to be a factor. It's just part of the business. Sometimes it's more of a factor than others.

But when the recurring revenue continues to perform and our ancillary business, our additional work with existing customers continues to grow and we're able to grow those businesses north of 7%, we feel really good about our position. We feel really good about our ability to continue to grow earnings at double-digit pace and cash flow also at a double-digit pace. You know, we are certainly enduring – we endured a challenging January with weather. But that's one month out of three. You know, we've still got a couple months left in the first quarter, and so we're not giving up yet on the first quarter. We have a lot of reasons to be optimistic because I think the team is highly engaged and focused on delivering exceptional results again here in 2026.

Analyst Jason Haas (Wells Fargo): Hey, good morning, and thanks for taking my questions. I'm curious if you could talk about how digital leads have been trending and if you plan to make any changes to your marketing strategy. Thank you.

Executive: We make changes to our marketing strategy every day, every week. Digital leads, you know, we're still constantly fighting increases and the price of that. of generating digital leads, and we have to reallocate and adjust those plans all the time. We don't necessarily irresponsibly go spend into the market just to get leads. We have a budget. Having that budget forces you to manage within it and allocate resources to drive the best results we can to drive new recurring customers into our portfolio of brands. So that continues to be the focus. Digital is a channel. It's not our only channel. We have brands that acquire customers lots of different ways, so we're not overly reliant on that. We love that about our business. But that has been a challenging, evolving, for I guess as long as we've been in digital, except it's just changing even faster these days. And I think our team does a really good job adjusting to that. I think the broad diversification of the brand portfolio is certainly a competitive advantage. As I had mentioned earlier, the door-knocking business, Sela, but also Fox, if you go back to Fox in 23, that business is growing exceptionally well. And so our ability to pivot and maneuver and change, be agile as market conditions change, is certainly advantageous for us and helping us continue to deliver some solid financial results.

Analyst: Got it. Thank you. Makes sense. And then as a follow-up, are you able to talk about when you get a one-time business, how often does that translate into a recurring relationship with a customer? Is that like a source of new customers and you're able to build that recurring relationship from those one-time calls?

Executive: Sometimes, certainly that happens. What you don't want to do is sell somebody who really wants a one-time service and is not fully committed to recurring services, sell them a recurring service because it usually results in somebody that's not happy. What we do find, and this is really true, we've done the research on this over the years, particularly at Orkin, we have a lot of what we call recurring one-time customers. These are customers that come back to us year after year. They get one or two services a year, and they're willing to pay more for those one or two services a year, but they don't want to get, say, four to six services. It's just not their model. But yet they trust Orkin, they trust the brand, they know they've got results, and they come back. So we know there's certainly a portion there, but we also have to have a balance of not providing a service to someone that they don't really want. That just sets a relationship up for failure.

Analyst Peter Keith (Piper Sandler): Okay. Thanks. Good morning, everyone. I wanted to just dig into the incremental EBITDA margin, which was below 20%, and make sure I understand it. So I guess the weaker sales came in, but is it that you were still hiring and training and investing in those people costs? And then if that's right, just how does that inform your thinking around budgeting and those costs in Q1 with also some potential for sales weakness?

Executive: Yeah, certainly. Continue to invest. Markets continue to be very healthy. Recurring business continues to come in. New customers continue to come in, Peter. And so we continue to see really good demand for our services. When I unpacked the margin in Q4, certainly the volume had an impact. You know, when you look at that volume, call it $12 to $15 million of additional volume, probably $7 to $8 million of additional profitability from an incremental perspective, because that business is a little bit more profitable than our other business. You know, and then the other thing that I called out, which should help us here as we go into 26, is the fleet costs and the gain on vehicle sales. We had a headwind of, I believe, $6 million in Q4 associated with this. That was roughly 80 basis points of headwind. So I think those two items are certainly impacting. They impacted the Q4 results. I certainly expect fleet to improve, and I also expect that one-time business to improve as we move throughout 2026. And I wouldn't say we're still hiring a lot in the fourth quarter.

What I would say is we have more people that we brought on earlier in the year, have carried through the year, have them trained, experienced. And as long as they're performing, they're going to stay through those years. Call them the winter, the late fall winter months, so long as the performance is good. And so more than anything, we just have more people on staff that we brought in earlier, and now those people having gone through a season as we get into February, March, April, as we turn the corner and get into season, these people are put in a much better position, much better experience to be able to serve our customers quite optimally.

Analyst: Okay, that's very good feedback. Thank you for that. And I wanted to circle back on one of the comments about what you're most excited about for 2026 and driving that cross collaboration amongst your brands. There's also potential for maybe a CRM database upgrade. And I'm wondering just on the IT front, are there any investments that need to be made or any sort of structural changes to the CRM infrastructure to help drive that collaboration?

Executive: We're evaluating that. We've had a lot of recent meetings about that, and those are really ongoing discussions. More than anything, we're really talking about the use of AI because most of these CRMs are heavily driven on just like customer databases. But how do we use AI to link all these systems together and orchestrate them? irrespective of exactly which CRM they're on. So, you know, we're having those conversations now and making some decisions around particularly how we invest in AI to help us do that, more so than just strictly making. We'll have some brands and some places that may need some CRM changes to help us make this work, but that's on our radar screen. We're still probably in the first inning of those discussions.

Executive: Yeah. Peter, when you look at the capital needs, we don't see a major change in capital outlay with respect to CapEx in 2026. We're making investments. I mean, I commented earlier around our enterprise-wide financial systems that we're putting in place to help enable improvements that's going to take some investment, but not anything I don't believe that will be noticeable and disrupt our cash flow profile. There's nothing that's an overhaul of anything. It's more of what do we layer on top to enable and get systems talking to each other better. How do we continue to modernize all the things that we're doing and improve the tools that our teammates are using to improve the collaboration across brands.

Analyst George Tong (Goldman Sachs): Hi, thanks. Good morning. You mentioned that you expect 1Q one-time revenue performance to be...