Transcript PDF

Rollins, Inc.

J.P. Morgan Annual U.S. All Stars Conference

(Raw Transcript)

September 23, 2026

Presenters

Jerry E. Gahlhoff, President & CEO

Will Harkins, Executive Vice President & CFO

Facilitator

Tomohiko Sano – J.P. Morgan

Tomohiko Sano

Good afternoon, everyone, and thank you for joining us today. Welcome to JP Morgan, the US All Stars Conference in London. My name is Tomohiko from JP Morgan. We're very pleased to host Rollins this afternoon.

Joining us today are Jerry Gahlhoff, President and CEO as well as Will Harkins, Chief

Financial Officer. And, well, before we get started, congratulations on the new CFO role.

I think this may be the first investor conference in London, in the new position. So, congratulations and we’re delighted to have you with us today.

It's been an interesting year for the company. Investors have spent a lot of time trying to better understand the unusual demand volatilities experienced during the second quarter, while also evaluating the long-term opportunities around the commercial growth technology investment and M&A. So, today I'd like to spend some time discussing what happened in second quarter, also what you're seeing as we move forward to the back half of the year, and then, why you remain confident in the long-term growth outlook for the business.

So, with that, let's jump right in. Jerry, maybe we can start with the big topic on everyone's mind. It's been roughly 60 days after second quarter results, which came with a lot of the demand volatilities. Could you take a step back and give us your key takeaways from second quarter, and also what you learned and where you think business stands today as we move forward to the back half of the year? Thank you.

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Jerry E. Gahlhoff

Right. Thank you, Tomo. So, it has been quite a saga for us. And I think to, help give some context to this discussion, it may help to even go back further, briefly, into late last year, early this year, because there's been a lot of noise. There's been a lot of speculation about what's going on. I hear things and yet I'm also living it. I live it each and every day.

So, when I hear things, I [think], well, that's not at all what we're saying or what we're experiencing. I thought I'd give you my perspective on how this is all played out. If you go back to the fourth quarter of last year and actually most of last year, go back to

March or April of 2025. I talked about softening lead generation coming through the business from about March on of 2025.

We were seeing these mid-single digit 5% kind of lead declines throughout the performance marketing, driven brands like in Orkin, and that was fairly consistent through the year. We still grew really well and achieved great results because the lead volume that we were getting were higher quality leads that were converting at a higher rate and also starting at a higher rate. Our volumes were good and we were dealing with that.

Fast forward through 2025 to about November, we actually, in much of the United

States, had kind of an early winter and that seemed to have halted the pest pressure a little bit early. It was by weeks. Normally, it's end of November beginning in December.

Instead, it was that first week of November that was really quite different. In some ways winter just kind of started early, Tomo. We reported fourth quarter and it's a lot of our one-time business that was impacted. Then people were wondering, well, is it really the weather or is somebody else taking share, what else is going on in the market? There's all this speculation. No, we knew exactly what that was.

Then you go into January. January was really tough and we had ice storms that affected much of the South. We had branch closures or branches that couldn't drive and operate safely, and it really was a challenge operationally. But then as we moved through the quarter, we saw similar kinds of lead changes like we saw in 2025. As we moved through the quarter we exited March with an 8% organic growth rate.

Things were looking good and things looked healthy. April was fine. It wasn't a record setting month, but it was solid. Then we move into May and as we moved over the course of May, especially as we move towards the back half of May, things started to deteriorate. Those are times in our business when you get close to June when the lead volume and the activity in this space is really typically quite high. And that separation really started. You really started to feel it as we moved through the back half of May.

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June had some highs and lows, the end of June was decent and we started out July good. And then it seemed to drop again. I talked about that on the earnings call. At times there were glimmers of hope and sometimes when things ended strong.

Then you move forward, as we talk about current environment, this softness has really remained with us this entire time. This extra softness in the leads where we're talking about double-digit lead declines instead of 4 or 5% lead declines. It made for a really challenging environment. Looking back on the Q2 earnings call, we talked about: is it the consumer, is it the LLMs, is it pest pressure, or all these things?

We really started doing a deep dive into what are the things that are driving, some of this change? We were working on that as we ended the quarter and doing some of the look-back on there. Where we land today is we tested a lot of things. We looked at the data, and there may be some degree of it that's tied back to the consumer and the consumer health. We don't think that's a lot because we looked at lead volume by income band and you would have suspected that the lower income bands may have seen steeper reduction in lead volume. That really wasn't the case. It was proportional across all of our income bands that we that we're aware of. So, that really didn't seem to be it. It just wasn't significant enough to represent a significant change.

We looked at pest pressure. We did see some change in what I call bellwether pests like mosquitoes and things that were down single digits. Looking at the resurface rate that, for us, is an indication of pest pressure.

Then you have the LLMs, which was the unknown. We also learned that March 19 is when Google went to AI overviews in all their default search.

Will Harkins

May 19.

Jerry Gahlhoff

What did I say?

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Will Harkins

March

Jerry Gahlhoff

May 19 is when they went to the AI overview as default search. That's also when we started to see that gap start to really begin to widen as well. So certainly, if I had to name it, I would say at least 50 to 60% of what we experienced is probably related to this shift in the LLMs. There's also a few other factors that are involved, probably at a much less level. Since then, we've been focused rather aggressively. Our marketing teams have navigated changes like this before. We've not navigated when it went from

Google to Google LSA and some other challenges over the years. We’ll navigate this one, too.

We've engaged some outside help with our team. We have a great, fantastic team that I believe in, that I know can help us navigate this. Rather than playing one game like we used to play, or just a couple of digital acquisition methods, now we have to play in how do we, how do we deal with Gemini? How do we deal with ChatGPT? How do I deal with Claude?

So, there's all these things that all value certain things differently. So, we have to look at our content online, what we do on our websites, how we feel, making sure that our brands feel like we're local companies in the markets that we serve. We have 400 branch web pages that all have to make sure we have the local feel. We have to do things like increasing our price transparency. We have to start talking about things like same-day service, next day service as part of our value propositions. Maybe more pricing transparency in our business so that when we're searched, a consumer has a range of what to compare us to, [with] competitors in the market.

These are things that we're out there doing right now and learning quickly. If you think about the shape, the steep S learning curve, AI and how that is and we're having to do much the same. But I remain optimistic.

What I can't tell you is are we going to have this kind of fixed in the next two or three months or is it going to go on to next year? I really don't know, but that's what makes

Rollins so great. We have lots of different brands, lots of different ways we acquire customers.

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We have lots of different brands, lots of different ways we acquire customers. For example, our Fox brand continues to be very healthy driving through the door to door space, driving new growth and they're growing great organically in the residential space, which also demonstrates that the market is still there and the appetite for our services is still there.

Our HomeTeam business, which is also mostly residential through the home building channel is doing is really strong. We also have opportunities to continue to focus on our commercial growth. So that's a great opportunity for us to drive as well. So we're excited about it.

A lot has changed and but yet I feel like if there's any team that's going to survive this and drive this level of consistency, it's us. You'd think back 25 years of every quarter of organic growth, not one quarter have we not grown organically for 25 years. And we ought to be able to continue that, that that's a winning streak.

And so well, it might soften or where it comes from might shift over time, but we can we're going to still be that resilient, strong with a strong, really resilient company with a strong customer base that's always going to be there for us.

So that that's how it's really shaped up over over recent months.

Tomohiko Sano

That's helpful context Jerry.

So well, maybe building on that, if you look at the share price over the past three months, the stock is down 25%. And as a CFO, like how do you like translate this to capital allocation, reinvestment and then some share repurchase and like what's the capital allocation here?

Will Harkins

Yeah, thank you, Tomo.

Every meeting we've had starts with what Jerry just said about tell me a little bit about the the industry, the market, resi, what's going on with residential sales and organic growth.

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And then it always ends with capital allocation. So I'm really happy that you're you're hitting this second and some of you in this room have heard us have this very same conversation. But the one thing that I can, you know, tell you is that we have, you know, an authorization with our board. As we think about capital allocation, you know, there are there are a couple of different components to it.

First and foremost is always going to be M&A. We want to we want to reinvest in the business through M&A.

Second is we're going to continue to grow the dividend.

And then third, which is what most people are asking about this time is what do you do with share repurchases because that's up the component of the strategy as well. And so you know, we have an authorization from our board. We've had it for years that we can repurchased shares up to 11 million of them. And you've seen us play in, you know our shares when the family has gone to a secondary and the family has sold down. You've seen that over the last two times.

And then earlier this year we started talking about the fact that we were going to repurchase $40 million worth of shares just to really offset the dilutive effect of our stock compensation program. But you know, we see the same share price that everybody is seeing out there. We absolutely believe that the company is undervalued at the moment. And so you know one thing that we have done in the third quarter is we purchased $100 million worth of shares in the third quarter. And so you know that is something that will continue to be something that we discuss at the board level. You know that that doesn't mean that it's 100 and done. Like I said, we have a much larger authorization that's out there, but we do want to deploy a very, you know, we will be very intentional about how we how we reinvest in the business. And, and while that is one leg of the stool, you know there are others as well.

I think the second component that I would want to just share with you is that people often ask, well, if you do X, can you also do Y? And so it's not an either or story. It is, you know, we can certainly continue to, to you know, go after strategic M&A opportunities. We can continue to grow that dividend and we can also repurchase our shares because our balance sheet is incredibly healthy as many of you know, we are only at one times leverage and so there there's opportunity for us to to do more. So thank you for that question not waiting until the end and kind of bookending it.

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Tomohiko Sano

Thank you.

And going back to you, Jerry, maybe just to unpack that a bit like what had what happened in the second quarter, what's happening?

So you described this situation as a multitude of factors and like which hypothesis did you explore that didn't like fully explain the patterns, whether regional mix, competitive dynamics and pest pressures and macro, a lot of things going on and how would you like like respond that actually questions?

Jerry E. Gahlhoff

Yeah, luckily we have a pretty, pretty good data team that's and we have good rich, rich data.

And so we could pull data from looking at geographies, various Orkin divisions, and we've played with weather data and kind of back ending backing our way and our history on weather, analyzing by income band to see what's going on.

If somebody something fundamentally changed in the market, which doesn't appear to be the case that there's not something fundamentally different in the in the consumer.

But the, you know, one of the questions and we still don't know this answer, it deserves more research. If, if our leads are down and demand is still there, where is it going? So there's this debate about is it going to DIY? Is it going hyperlocal down to one or two person operators in, in the space? And we don't yet have a really good sense of where that, where that lead volume is going or what consumers are choosing to do. But I, I think that will reveal, reveal itself over time as we do more research in that space and the, the pest pressure side of it is something we're continuing to, we continue to monitor and see if there's something going on there.

We have seen pot. It's, it's interesting too that and this is where you lead more towards the LLM’s facade is when it dropped, it dropped the same kind of percentages everywhere. It just suddenly, no matter if you are in California or in Virginia, those those kinds of declines just were spread out equally then weren't necessarily across certain geographics with certain weather or maybe certain types of consumer heavy.

So, so we investigate all those kinds of things really went where things were looked at and we also began trying a lot of things. We tried it and you know this idea that you, you

Rollins, Inc. Page 7 of 19 Rollins.com learn fast by failing fast. And we put a lot of things into place trying to make adjustments. And look, the reality is a lot of them didn't work. A lot of them, a lot of those adjustments that we attempted to make across June and July, they just just flat didn't work. And so there were a couple that did, but that was that was that was rare. But we have to encourage our teams. You got to keep trying these things. You got to keep learning. The faster we learn, the faster we adapt, the faster we'll get through this. So partnering with other people is going to continue to help us drive that. Partnering with people that are experts in this field will help, will help us. But it's, I think Sandy said it earlier, it's a brave new world out there and we're not the only ones experiencing it, But I know that we can. We'll, we'll figure it out. We'll get past it.

Tomohiko Sano

Thank you.

And investors are debating LL like whether LLM and AI driven surge is changing the lead generations. Like how are you framing that risk opportunities today? And how are you measuring, monitoring it?

Jerry E. Gahlhoff

Yeah, it's a, we think there are a lot of opportunities and, and some of the some of the the basically over the last several months to put it in a nutshell, the customer journey is shifting a lot. How you discover us, how you discover our brands is shifting a lot. And that means how we track lead generation and that customer journey, we have to adapt a lot of the tracking so that we, we know where things are going and how to allocate resources. So that's a really high priority is tracking that customer journey. How are they finding us? And how are how are that we then catering to them and meeting them where they are so that we're top of mind. So that's probably the biggest thing we're challenged with is, is making sure we get that lead attribution part worked out so that way we know exactly what's going on and then can continue to adapt as things change moving forward.

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Tomohiko Sano

Jerry, if you could explain to us the differences between the Google search era versus where we are today, having like 4 to 5 or 6 tools that the customers actually can explore to get to Rollins.

Jerry E. Gahlhoff

Yeah, old school Google search, whether it was buying keywords or doing Google ads or pay-per-click and all those kinds of things, I think most of you know how all that work has evolved. At that point in time, Google ratings, or your Google reviews, were the key driver of a lot of that search and how you appeared in a lot of that search. Today, you have ChatGPT. Chat’s not going to use Google's reviews, they're going to use someone else, and they partnered with Yelp, and so now you have to also have the Yelp reviews, or they're using the Better Business Bureau, or they're using Reddit to feed their content and their responses. Different ones are all doing different things. So now that shift from us understanding and knowing Google and maybe a couple others on a smaller scale has really shifted into, now I've got to run five or six of these things, understand what makes them all tick and then how do we adjust to them over time. And that's really what the marketing team is focused on. First learning, understanding and then you have to stay involved with how they evolve and how things change over time, because you can get a different result today typing in the same query, when next week, you might get a different result, right. So we're going to have to stay top of mind, really managing that on the day-to-day basis moving forward.

Tomohiko Sano

Thank you. And then let's talk about the second-half outlook and updated 2026 frameworks. You updated 2026 expectations to 6% organic growth and 10% incremental margins with the improvement more weighted to fourth quarter. What gives you confidence in a back half set up and then why the Q4 waiting this year?

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Will Harkins

So, when we came up with that guidance and, and we were looking at the models that we had in at the end of the second quarter, and as we were preparing for earnings call, it was looking at the company's forecast of revenue growth and then trying to look at what we were going to be hurdling in the third quarter and the fourth quarter.

And so, certainly part of the revenue story that we were thinking is through the first half of the year, we had 6.1% of organic revenue growth and so we said we don't expect it to, meaningfully decline from there we expect it to be more the same, as we go through the end of the year. We also don't expect it to meaningfully improve in the back half of the year with everything that we had seen as we were looking at the different hypotheses that we had about what was going on in the business and in the market.

And so that's how we arrived at it at our 6% organic growth for the year. The one thing that you just mentioned and that we wanted to make sure people walked away with, and

I'm grateful to be able to reiterate that here on the public webcast, is the fact that it is weighted towards the fourth quarter. We certainly have seen, just more turbulence as we've gone through the third quarter even and so that has not, I mean gratefully that's what we were also forecasting in the sense that we knew it was going to be a choppier third quarter as well, we assumed, but we believe when we get to the fourth quarter, we've got a slightly better hurdle that we're going to be overcoming.

Jerry E Gahlhoff

Last year in the third quarter all the stars aligned. It was an amazing quarter and we're lapping that, tough comparison.

Will Harkins

Certainly when you get down to the operating margin. So when you get down to the margin side of it, that that was where we came up with, you know, our 10% incremental margin story because the third quarter really was one where every metric down the

P&L, you would just check all the boxes in third quarter of ‘25. So, you know, we still continue to have the medical headwinds that we've experienced so far this year that will continue to be seen in the third quarter and also in the fourth quarter. We've got gains from a fleet perspective that we're lapping in the third quarter.

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You've heard us talk about our auto liability claims and so in the third quarter of ‘25, almost everything went in our favor. We had some favorable settlements that we went through. There were just some positive results that were coming through on that line item. We're not expecting that to happen in the third quarter of 2026. So, definitely something you know, even though we say 6% organic revenue growth, 10% incremental margins, I would not evenly weight those between the third and the fourth quarter. I would I would put the weighting more heavily on the fourth quarter to get to that full year number.

Tomohiko Sano

Thank you. And now if you could talk about how should investors reconcile the improvement like trends you referenced it in late June and early July with a cautious like full year guidance, if we can talk about that point.

Will Harkins

That's a good question as well. So, you would have heard us on that second quarter call talk about the fact that we did towards the end of July and the very end of July or sorry, the end of June, see some positive results, especially when we're looking at leads and things that at the end of June, the very beginning of July, we felt like things were starting to trend more favorably. We also tried to make sure that we were being very cautious and we shared with everybody we've seen this before. So just because the end of June, the beginning of July, were showing some positivity and some green shoots, we didn't want to forecast that and extrapolate it into the third quarter and the fourth quarter because like Jerry mentioned earlier, we finished Q1 with the best month that we've had so far this year in March. We finished Q2 not with the best month we've had, but it was certainly more favorable than the trough that we experienced in May, so we just knew that there were a number of head fakes that we've experienced throughout the year and we wanted to tame that a bit and make sure that we were being very prudent with our guidance and I think that that's exactly what we've experienced. So, we saw some positive green shoots at the end of June, beginning of July, that doesn't mean I don't want anybody to take away from this conversation that July and August have continued that trend. I mean we have continued to see that volatility. There are days that look better than others, weeks that look better than others, but still a continuation of what we experienced in the first half of the year.

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Jerry Gahlhoff

Still tough. That’s right

Tomohiko Sano

Sure, thank you. And then shifting gear to cost management in terms of protecting margins while staying true to people, fast cultures and initiatives. In 2Q, what was the biggest cost headwinds investors actually asking like medical service labor deleverage in fleet and fuel oil, we talked about, we also talked about the importance of spending more cost, analyzing like what's happening in the market and the marketing operating expenses and so on. So could you talk about how you manage the cost versus like protecting margins and more people first, the culture.

Will Harkins

That's right. Maybe I'll start with just some of the things we've done to protect the margins and then let Jerry talk a little more about People First and culture. The biggest things are what you just mentioned, medical claims, fleet we have seen, fuel prices increase, the good part for us is that we've always said that they are less than 2% of sales, fuel at least and it continues to be less than 2% of sales. It's more than last year so we're seeing 30 basis points, it's getting worse but at a pretty small level. We still have not gotten to the 2% of sales level, we're still below that. And some of the things that we're doing there is that we've got more hybrid vehicles in our fleet so we're trying to protect ourselves from fuel there. We also went out to RFP with our vendor for fleet.

We’re seeing some favorability just in our fleet costs overall as a result of that RFP.

We’re trying to protect where we can.

What you would have seen in the second quarter from a people related costs, not just medical expenses, but we were staffed for 7 to 8% growth. And so if you're, staffed at the North End of that because we kept thinking the season was coming. I mean we were going to eventually get the demand that we had planned for you're going to that has been pulled back. So we are no longer staffed at that level we've right-sized the business. We started doing that at the end of May within going into June and so third quarter won't have that necessarily against it, but those were things that that were within our control that we were able to take action on pretty quickly.

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As far as marketing spend, we're reallocating those dollars. We've had a couple of questions in the meetings we've had today just around how do you shift that, will you increase your marketing spend. That is not what we're planning to do. We're just reallocating what we're investing in and where we're deploying those dollars to the channels that are that are more advantageous to us and also continuing to do the research to figure out how do we better play in a brave new world. So maybe I'll let you,

Jerry, if you want to talk through some of the kind of the culture.

Jerry E. Gahlhoff

Yeah, so I think from a people-first standpoint, and maybe you've heard me talk about

The Rollins Way, which is all about people. And we're in the service business. This entire business is about relationships. Our relationship with our teammates is what if we have healthy relationships with our teammates is what drives healthy relationships with our customers because they are our front and center and key to everything.

So we have certain brands where they really don't sense a lot of this and haven't had those like at Fox and a home team brand where they're growing and going gangbusters.

But do we have other brands say like Orkin that have had a tougher, tougher time navigating this and that's tough on people. And so when we think about that and, and let me let me also add this. We have a lot of our, a lot of our teammates at Rollins are also shareholders in our company. So they all personally feel it as well. And that's for me sometimes where some of the, some of the illogical or irrational impact on our stock price kind of bothers me because I know what goes on inside and I see how hard our people are working and what they're doing.

And so, and then they look at, they look at that stock price because it's in there that they, they're shareholders too. And they go, they don't understand it either.

They're like, well, what's this reaction about? Because they know fundamentally how good this business is and, and how good their services that they provide each, each and every day. So as a leader of our organization, it's really important. That is how we show up. We have to show up with a positive attitude. We have to encourage people.

We can't lose sight of our values, our core values and who we are and what we're all about. We talk to our people about this is cyclical. This is short term in nature. Don't worry, don't panic. We don't need knee jerk reactions. And we have to tell our leaders, look, we don't need to be making what appear to be really good short term decisions that are at the sacrifice of the long term of our business.

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I'm one, I I'm as, as in my job, I want Rollins to be around 100 and Orkin's been around

125 years. I want to make sure that Rollins is around another 125 years, not just my tenure here. So my commitment is also to the long term. And I think there's theirs is too.

So how I show up every day determines how my leaders on my leadership team show up every day.

And it's just a really important that we remain positive and we talk to our people and we have to communicate with them about what's going on and what they're experiencing, what they're feeling, because most of them are out there doing their job every single day and don't notice anything significantly different in the day-to-day. But where they see it is when they open up their phone and see a stock price, right? Look, you know those kinds of things and they're like, gosh, you know what happened And you know, that's the kind of the this illogical part of this that doesn't make a lot of sense to me.

Tomohiko Sano

Thank you.

So after my next questions, I'm going to see whether people on the floor have a question. So let us know on the pricing strategies, CPI Plus investors are debating when it comes to LLM, AI the consumer business, residential, I think it's commercial side. I will ask later is more different dynamics compared to the parts of the residential business.

Are you worried about like a pricing negotiations from consumer, you know, spending and then especially low income households or even in generally like a new generations talking about the best of control with some discount like for Rollins, what do you think?

Jerry E Gahlhoff

So I would turn that question back around and tell you what I'm actually worried about and what's on my mind and what I think we have to action behind. And that that's exactly why we have to be the best service company in the world. Because if you have relationships with your customers, if you're serving customers the right way and you build loyalty with your clients, these discussions about price over a few dollars on a service never come into play if those relationships are there. And the best way we can as a company prevent ourselves from becoming commoditized. And this being, being about price is exactly what we were just talking about. It's about our people. It's about the work that we do and the relationships that they build. It's, it's really hard for you for,

Rollins, Inc. Page 14 of 19 Rollins.com for a customer to fire Will, if Will is their technician or their or their, their Orkin pro. It's really hard for them to do that over $3.00 or $4.00. And that's often what we're talking about here. So I don't have a lot of worry about that.

What I think about is how do we constantly drive better degree, better levels of service in our organization So that that never even factors into someone's mind that they would when they're thinking about I got to choose between this or that. They're never going to choose us because they recognize the high value that we create and the relationship that we have in their lives.

Tomohiko Sano

Thank you, that's clear. Any questions from audience? Yes, please.

Question

Hi, Thanks very much. Could I ask 2 quick ones, please.

Is there any elements of change in the competitive environment in the recent period, either the bigger players or obviously the independent sector?

And secondly, perhaps a little bit aligned with that, is there a braver newer world even coming with what's rushing through the stock market at the moment in the form of consumer personal agents? Do you have a concern about that arbitraging or lead creating in a different way even to the one you're currently adjusting to?

Jerry E. Gahlhoff

Thanks. So I couldn't quite catch the first part of your

Question cont’d.

Competition. Has competition changed either the independents or the bigger chains

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Jerry E. Gahlhoff

Right. So no, I don't, I don't think there's been any significant shifts in competition. This is a very fragmented market. A lot of competitors. Those competitors vary greatly city to city, state to state. A a lot of really good companies. There's a lot of good, good service providers. So that only serves, I believe, to make us better each and every day that that means that we can't rest our own laurels. We always have to strive for continuous improvement and, and to try to be better.

On your point about the personal assistant side, like take Meta’s Muse and things like that. As these things evolve and, and I know a little bit about them, not enough. I'm not a user, but I, I, I still come back to those relationships that you have, if you're, if Will is your technician and you're seeing them all the time and, and Muse comes back and tells you, do you really think you need this service with so and so, right? If I have that relationship and I know I get good service, my home is protected and I have that Peace of Mind, is that really worth that little bit of out of pocket every three months? We have to we have to work hard to make them not even question that, not even think that. And if they want to do that with something, something else, if it's their, you know, if where there, there's no personal relationship with I, I think, I think that's a much stronger argument when those relationships aren't there. Then when those, those, these are people that you're letting into the most intimate parts of your house, right, That you need to have those relationships with. It's different than, say, the, the, the people that are maybe given your cell phone provider that we're somebody's telling you can save 20 bucks a month if you, if you call and do this. So I, I, I do think we need to be aware. I'm not trying to come across too confident on this.

I think we need to, we need to monitor and we need to prepare and, and also empower our frontline people that when they get objections or they get people talking about price or can you save me money? And that they're empowered to do that. They need to be empowered to listen to their customers with empathy, hear their concerns and make adjustments because it's much easier for us to deal with that on a personal level than and than it is to get a new customer and start from scratch. So I do think that's an opportunity for us to really double down on moving, moving forward is how we make sure that our people are empowered to make those decisions.

Tomohiko Sano

Thank you. Yes, please.

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Question

Just maybe a follow on question there. You touched on the shift in models and you said

Google's shifted its model in the past and you said you're just trying to understand how it will work with Gemini and Claude and maybe the personal assistants.

Do you see that as a one off cost understanding these different models done move on or is the potential that this is an ongoing because it looks like I think we're forecasting much change in margins if they ever dip down this year and bouncing back next year.

So I'm just trying to understand whether this is an ongoing change in how much you need to spend or is it just a one off understand them and move on? Thanks.

Jerry E. Gahlhoff

It's a great question. I don't think we know just yet. I think that'll take a little. I think I'll have better feel for that three to six months from now. I think the world, I think what we're doing right now has changed permanently. There's no doubt about that. And I don't think it's going to go back to being maybe as easy as it was. But I also believe that's our strength because we have the size, scale and resource to be able to do it.

I'm always going to challenge my team. To try to work within the budget that we provide and allocate those dollars and not have to spend any more. That's a Rollins discipline about margin management and ensuring that we're monitoring costs and not letting those kinds of pressures get out of hand. It changes our operating model. We're acutely aware of trying not to let the business model have some radical shift in it, especially on the residential side. So we're going to, we're going to fight against that. It needs to make a for, for additional investments to make sense.

It needs to make a great deal of financial sense for us to do that because I can also make the choice that I need to grow. It’s better for me to grow in some other section of our business and fund that compared to that if that cost of customer acquisition and that lifetime value, the customer equation isn't quite working out. So those are kind of real time game time decisions that we'll sort out over time.

Tomohiko Sano

Thank you.

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As we have 3 minutes left, Jerry, I want to, I'd like to ask you about the culture questions. In moments like this when demand shifts, you know quickly what is Rollins’s advantages here?

How do people first training and operating philosophy translate into revisions and the execution?

Jerry E. Gahlhoff

Well, it's not, you know, in the very beginning I said we're a service company and that's a relationship and people company. So the investments that we make in training to make, make our make sure our people come out equipped with the tools that they need to be successful. The training and the investment that we make in our leaders because the experience that our frontline people get that are serving our customers, their experience at work is greatly impacted by the leaders that they work with. That's why we've invested so much in our Co-Lab training. That is where I've probably about 80%.

We've started at the top down and trained every one of our leaders from the top down on the concepts of servant leadership and what it what we expected. People that lead at

HomeTeam or Fox or Orkin. We have the same core values and the same way we lead people across Rollins. That's what it means to work at Rollins and be part of Rollins.

That's how we lead and so we're trying to drive consistency in that across our business and we're about to put all it's like 2200 leaders going through that program. I think we'll have that finished as we get into the fourth quarter and then it's on to phase two. We can't, it's not a one and done. It's an ongoing learning, and we'll go to Co-Lab 2.0 and drive that to the next.

And that's a big part of creating culture across our organization when we will also when we bring in The Co-Lab, the big part of Co- is that we bring leaders from different brands in and they're all going through this leadership experience together. They're getting to know each other, they're working across brands. They get to learn that they're actually more alike than they are different and they start helping each other. And that over time becomes a superpower of Rollins, when our brands are collaborating and truly working together, maybe passing business to one another, that one does this but another doesn't, and we put them in the environment where they can, that just benefits everybody. That's a big part of how we're driving culture at Rollins and we encapsulate that when we talk to our leaders and we talk to our frontline people, we talk about this concept of The Rollins Way.

The Rollins Way starts with Heroic Impact. We have the opportunity to make a difference, every one of us, whether you're leader or frontline person, you can have a

Rollins, Inc. Page 18 of 19 Rollins.com heroic impact each and every time you interact with the customer. We can also you also have the, the opportunity to Be Remarkable. That means going above and beyond and doing something that is the unexpected. So if I'm there to do my pest control service, but I also brought up the trash cans and, and the newspaper and hey, I, I noticed you have this plumbing problem in your house. So you need to get that fixed. These are all the things that we do to build a relationship and Be Remarkable.

And then the last one is Essential Together, recognizing that it all it takes a team, it takes all of us working together. Not one of us can do it in a silo. And if we lead that way and if our people serve that way and we do that across all of our brands, that's how at the end of the day, that's how Rollins wins. So you take business models and the rest of it, the end of the day, you can throw a lot of that out.

It's about how we serve, what our customer relationships are like that determines the longevity of Rollins, and that's why we're so focused on it.

Tomohiko Sano

Thank you very much.

OK, Since our time is up, so I'd like to wrap it up with the many thanks to Jerry and Will and everyone to join today.

Thank you very much.

Jerry E. Gahlhoff

Thank you.

Will Harkins

Thank you.

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