Good day, and welcome to the Rollins Inc. 2nd Quarter 2018 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 question and answer session and instructions will be given at that time.
I would now like to introduce your host for today's call, Marilyn Meek. Ms. Meek, you may begin.
Thank you, Todd. 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 1, 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 1 hour after the call and run for 1 week. The replay can be accessed by dialing 1-eight eighty eight 031-112 with the passcode 340-2261.
Additionally, the call is being webcast at vioved.com and a replay will be available for 90 days. On the line with me today presenting are Gary Rollins, Rollins' Vice Chairman and Chief Executive Officer John Wilson, Rollins' President and Chief Operating Officer and Eddie Northland, Senior 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?
Yes, Marilyn, and thank you and good morning. We appreciate all of you joining us for our Q2 2018 conference call. Eddie will read our forward looking statement and disclaimer and then we'll begin.
Our earnings release discusses our business outlook and contains certain forward looking statements. These particular forward looking statements and all other statements that have been made on this call, excluding historical facts, are subject to a number of risks and uncertainties, and actual risks may differ materially from any statement we make today. Please refer to today's press release and our SEC filings, including the Risk Factors section of our Form 10 ks for the year ended December 31, 2017 for more information and the risk factors that could cause actual results to differ.
Thank you, Eddie. We're very pleased to report our 49th consecutive quarter of improved revenue and earnings. For the quarter, our revenues grew 10.8 percent to $480,500,000
compared to $433,600,000
for the same period last year. Net income increased 21.1 percent to $65,000,000 or $0.30 per diluted share compared to $53,700,000 or $0.25 per diluted share for the same quarter last year. Revenues for the 1st 6 months rose 9.9 percent to $889,200,000 compared to 808 $800,000 for the same period last year. Net income increased 20.9% to approximately $113,600,000 with earnings per share of $0.52 per diluted share compared to 94,000,000 dollars or $0.43 per diluted share for the same period last year. We experienced good growth in all of our business lines with residential up 11.6%, commercial pest control rose 6% and termite and ancillary services rose 16.9%.
Eddie will provide greater detail on our financial results in a few moments. We're extremely pleased with the expansion that we continue to make with our global footprint. During the quarter, we made 2 significant acquisitions in this regard. In May, we acquired Guardian Pest Control in the United Kingdom. Guardian was founded in 2002 and is well recognized for its pest control services, Legionnaire disease control and hygiene services.
These services are provided to commercial customers throughout the U. K. Midlands. This acquisition, our 4th in the U. K, will help us to expand our footprint within this country.
As in the past, we look forward to sharing best practices with one another. On July 2, we marked another important company milestone having closed on the acquisition of Aardwolf Pest Care, our 1st company owned acquisition in Singapore. Founded in 1997, Aardwolf is a highly regarded company and known for its superior pest control and specialty services to both residential and commercial customers. In selecting to partner with Rollins, founders John Ho and Patrick Chong shared that it's taken them 3 years to find a company that had the same business philosophy that they had. Both of our companies share a commitment to quality service and care for our employees.
We're most pleased that Doctor. Chong will remain in a leadership role and we look forward to working with him and his fine team with a goal of becoming the dominant pest control provider in Singapore. The Landmark acquisition expands our residents now into 54 countries worldwide. John will provide greater details on this acquisition. We received an overwhelmingly positive response from our employees resulting from the tax related benefit improvements announced last quarter.
If you recall, we granted Rollins' stock to over 7,000 employees based on tenure with the company. This was a one time charge for the 2nd quarter P and L. P and L. On a going
forward basis, our 401 plan
was improved, which benefited all participating employees. This was complemented by an additional floating holiday and an enhanced college scholarship program. Investing in our people is always beneficial and critical to our mission to become the world's best service company. Before turning the call over to John, I'd also like to acknowledge HomeTeams receiving for the 7th time in a row David Weekley's highly coveted Partners of Quality Award. David Weekley Homes is the largest privately held builder in the country, implementing its rigorous supply feedback platform as a way to measure world class vendor excellence and to demonstrate their commitment to partner with their suppliers believing that when a partner improves its relationship with them, they both become better providers in the marketplace.
HomeTeam performs thousands of services for David Weekley Homes 13 cities where they conduct business. This award confirms HomeTeam's commitment to providing exceptional service to its business partner. I'd now like to turn the call over to John.
Thank you, Gary. I'm often asked about whether the tight labor market and the competition for talent is impacting our business. As you well know, in April May, the unemployment rate reached lows not seen since 2000. However, I'm pleased to report that our brands are dealing fairly well with this issue. We believe the strength of our various brands' recognition and their reputation has helped, evidenced by the volume of applicants we continue to get for employment opportunities at Rollins Companies.
Through the first half of this year, our number of applicants per job opening was similar to a year ago. And for March April, when unemployment figures hit their lowest, our applicant flow remained comparable to 2017 levels as well. That said, we recognize a strong applicant flow is not enough. We also have to ensure that our hiring processes are efficient and that we select the right people. Toward that end, we have made a few changes to our assessment tools and pre employment screening processes to reduce the time it takes to get someone on board and begin their training program.
Any reduction in time we can implement around these processes reduces the risk that we lose a good candidate to some other employer. Most importantly, it allows us to interview hard and ultimately choose well. One of the most important ways we do that is by having our top job candidates complete what we call an observation day, where the candidate spends time shadowing one of our top employees who performs really well in the same type of work. This helps a candidate to decide whether the work we do in our company is a good fit for them. We get to see how they interact with coworkers and their likelihood to fit into the team.
This additional step also helps to ensure we select the best people. One other added benefit of taking the time for the observation period is that it keeps the candidate engaged and active in the process and gives our managers a bit more time to check background and references on their candidates. 4.5 years ago, we pledged to hire 1,000 veterans over 5 years and we put more effort into recruiting military veterans. These folks are returning from Iraq, Afghanistan and other places around the world and are well trained, very motivated and very disciplined. I am happy to report that we have exceeded that goal by 177 new team members prior to the 5th year being completed.
At the end
of last year, we also hired a human resources consulting company to review the effectiveness of our compensation programs. They found that our company is in the top quartile in compensation for comparable industries. However, they have also shown us areas to improve. We feel strongly that being the employer of choice for the pest control industry and even for the service industry at large will continue to provide us with a good supply of candidates to choose from. In addition to ensuring we get the right people on our team, we also want to get them up to speed more quickly.
As I mentioned on a previous earnings call, we were evaluating the best way to move forward. Prior to making any ill advised decisions, we decided to survey our new hires to see how well we were doing with their onboarding experience. We found out we weren't always doing a very good job of providing these folks with an experience that would help them to be successful and leave our customers happy. In late 2017, we implemented new onboarding processes to improve the experience. We wanted them to feel a part of the team from day 1 and to quickly get the training and development they need to learn their jobs more quickly.
By making these changes based on this survey feedback, we have made improvements. Today, our onboarding surveys tell us that 93% of our new hires
are proud to work for
our brand and over 90% said they would recommend our company as a great place to work. Of course, there is a lot more to this than just selecting and hiring new team members. We have to train them exceptionally well, provide them with all the tools necessary, show them that there is plenty of opportunity with our company, compensate them well, and most importantly, treat them well. There are certainly a lot of moving parts to it, but it is well worth that extra effort to ensure that we build and maintain a strong team. So while the labor market is tight, we are continuing to adjust.
We know talented people have choices and we want the Rollins brands to be a leading contender for the best talent. Following up Gary's remarks on our acquisition of Aardwolf and Guardian, I wanted to reiterate how pleased we are to have them join our company. The depth and talent of the leadership team at Ardmore played a major factor in our desire to join with this organization. With a strong history of growth and leadership in the industry, Ard Wolfe shares many similarities with the Rollins family of brands. Gary mentioned that Patrick Chong remains with us to lead this talented team forward.
We wish John Ho well as he transitions into retirement and then begins to travel and spend quality time with his family. We look forward to working and learning from these new members of the Rollins family for years to come. I will now turn the call over to Eddie.
Thanks, John. The hiring method that John discussed is extremely timely with the historic revenue growth rates that we've seen this quarter, which followed a very strong Q1. While M and A made up roughly half of the 10.8% growth rate that Gary mentioned, the remaining 5.4% organic growth rate drove the need for accelerated hiring and additional service payroll to get these new accounts up and running with a quality service. Our financial results continue to show the impacts of our extremely high level of acquisitions over the past 6 months as depreciation and amortization impacted both our income before taxes and net income. That said, we look forward to the related profit improvements in the future.
For the quarter, all of our service lines showed significant growth and keys to the quarter included historic commercial organic revenue growth, substantial increase in depreciation and amortization as a result of multiple acquisitions and thirdly, fleet expense increase, which was impacted by lease costs and a significant increase in fuel price per gallon. Looking at the numbers, the 2nd quarter revenues of $480,500,000 was an increase of 10.8% over the prior year's 2nd quarter revenue of $433,600,000 Income before taxes increased 4.7 percent to $90,200,000 from $86,100,000 in 20 17. Net income rose 22.1 percent to 65 $500,000 and earnings per share increased 20 percent to $0.30 per diluted share in the Q2 of 2017. As we discussed last quarter, there were 2 unusual items that affected the profit numbers compared to the typical quarter, as they will continue to do for the remainder of 2018. The first was the enhanced employee benefits that Gary referred to earlier.
This impacted the Q2 by about a penny due in part to the expense related to our enhanced 401 match and the one time stock grants to many of our U. S.-based employees. We have received very positive feedback from our workforce on this tremendous use of a portion of our tax savings. Additionally, the second significant item is the increase in recent acquisitions, which has increased our amortization of intangible assets for the quarter by 27.3%. Over the past 5 years, our average increase of amortization of intangible assets year over year has been 9.5%.
Compared to last year, this significant increase also impacted the earnings per share by $0.01 and is a tremendous investment for our future. With our strong increase in pest control revenue generated, there is an aspect of our business that we have not spent a lot of time discussing in the past. This is related to start up costs for new recurring business. This would include initial sale, materials and supplies, sales commissions and labor costs, all of which falls in the 1st month of service with only a portion of the revenue recognized. For commercial customers, this would include equipment needs such as rodent traps, fly lights and base stations just to name a few.
The time to get this equipment in place and to provide the needs of the new account reduced the profit contribution for the first 3 to 4 visits. Once we are at that 4 to 5 visit level, the profitability significantly improves and this is a key reason that we concentrate on high levels of customer service to ensure that we retain these customers for years to come. Because of the consistency of our organic revenue growth over the years, this has not been readily visible in our quarterly numbers. With the recent significantly accelerated organic growth, especially on the commercial side, the revenue growth of over 4% in Q1 and Q2, we felt this was a timely discussion for us to have. A deeper look into our organic growth rates reveals that in Q2, our recurring revenue grew greater than 10%, well above our historic norms.
We believe that our investments in technology, training and our employee base are paying these dividends. In comparison, we know that one time revenue is immediately profitable, but the recurring revenue will ultimately generate excellent profitability. With strong residential and commercial retention rates, this investment will pay dividends for years to come. Let's take a look through the revenue by service line for the Q2. As discussed earlier, our total revenue increase of 10.8% included 5.4% from several acquisitions and the remaining 5.4% was from pricing and organic growth.
In total, residential pest control, which made up 42% of our revenue, was up 11.6 percent. Commercial pest control, which made up 37% of our revenue, was up 6% and termite and ancillary services, which made up approximately 20% of our revenue, was up 16%. Our commercial growth has trended higher over the past 5 years, but as I've mentioned, this quarter is the fastest growth that has occurred during that time period. Again, total revenue less acquisitions was up 5.4% and from that residential was up 6.1%, commercial increased 4.2% and termite improved 3.3%. When we take a look at the quarter taking out the impact of foreign companies and currency, in total, we grew 10.9%, residential grew 11.5%, commercial pest control was up 5% and termite and ancillary improved 16.7%.
And total gross margin for the quarter was 52%, down from 52.8% prior year's quarter. A large impact was felt from gasoline costs that were up on average $0.39 per gallon compared to last year. However, our efforts around route optimization through our virtual route management system continues to see improvement and partially offset the fuel increase. The Q2 and specifically June revealed the best improvement in stops per mile since we completed our rollout of the virtual route management system in 2017. Fleet expenses in total increased $3,500,000 or 21.5 percent for the quarter, driven by fuel price increases that I mentioned and leased vehicle expense.
Personnel related costs were up due to the 401 plan company match and stock grant that we began to amortize this quarter. Depreciation and amortization expense for the 2nd quarter increased $2,800,000 to $16,400,000 an increase of 20.8 percent. Depreciation increased $936,000 due to acquisitions, vehicle leases and equipment purchases as mentioned before. Amortization of intangible assets increased $1,900,000 due mostly to amortization of customer contracts included in the various acquisitions. Sales, general and administrative expenses for the quarter increased $13,700,000 or 10.6 percent to 29.8 percent of revenues, down 0.1 percentage point from 29.9% for the Q1 last year.
The decrease in the percent of revenue is due to lower sales salaries, which increased slower than revenue and reduced professional services as we wrapped up various projects. As for our cash position, for the quarter ended June 30, 2018, we spent $14,200,000 on acquisitions compared to $11,200,000 the same quarter last year as we continue to deploy higher levels of cash on acquisitions year over year and $61,100,000 on dividend, an increase of 22%. We had $14,200,000 of CapEx, which was up 27% from 2017, primarily from planned IT upgrades and the Northwest acquisition. We ended the quarter with $87,900,000 in cash, of which $40,100,000 is primarily held in non interest bearing accounts at various domestic banks. There is one other item to note related to our cash flow moving forward.
We have initiated the process to transition our pension plan to an insurance provider. The timeline will take the next 16 to 18 months, but with the pension plan over 100 percent funded, interest rates rising and pricing very attractive, we felt this was the best time to move forward. On an annual basis, historically, we have made a $5,000,000 contribution to the pension plan. This means that we do not have any plans to make this payment moving forward in time. Last night, the Board of Directors declared a regular cash dividend of $0.14 per share that will be paid on September 10, 2018 to stockholders of record at the close of business August 10, 2018.
The cash dividend is a 22% increase over the prior year. This marks the 16th consecutive year the Board has increased our dividend by a minimum of 12%. Before I turn the call over to Gary, I'd like to ensure that you are all aware of our Analyst Investor Day on August 10 at the New York Stock Exchange, recognizing the 50th anniversary of Rollins as a publicly listed company on the New York Stock Exchange. Gary, John, Julie and I will be giving an update on several parts of our business as we see them today and moving forward. Gary, I'll turn the call back over to you.
Thank you, Andy. We're happy to take your questions at this time.
We'll take our first question from Jamie Clement with Buckingham.
Hey, gentlemen, good morning. Eddie, if I could start with you, if
you don't
mind. Typically, you guys don't talk about on a quarterly basis the difference between growth in recurring revenue versus organic growth. And I think based on the numbers you gave, the recurring number, I think, was like 2x, but it would be already pretty strong organic growth. What exactly is the difference there? Because like generally speaking, if I think about you adding a commercial customer, I consider that recurring.
And if you sign a residential customer to a 1 year contract, I would also consider that recurring. So what's the difference there?
Well, the reason why we're pointing this out is because our profitability really begins after that 3rd or 4th visit. Yes, so the first visit to the first, second, and third visit if it's a commercial account, we're setting up all this equipment, we're setting up the base stations, we're setting up the rodent trap, we're learning the customer. And by that 4th to 5th visit is really when all of that is behind us. The expense of all that is behind us and that's when the profitability really improves rapidly. To a lesser degree, we'll still see that on the residential side.
We may have sales commissions that may be a part of that new residential sale or we may also have a learning curve with the new customer as well. So we were just pointing out with the rapid growth on the organic side, that's a little bit different than what we've seen in the historical kind of regulated or regular organic growth that we've seen.
Okay.
And then just It bodes well as we move forward, Jamie.
Sure, for sure. And then on the investments that you all have made this year into your employees, I think you said it was about a penny for the Q1 too. Am I right about that?
That's correct.
Should that I was a little unclear. Should that impact go be the same in Q3 and Q4? Or should that go down because you've already given out the stock?
It will be slightly less. So we began the amortization. We'll have a slightly less amount of amortization in Q3 and Q4. So it will probably to your point, it will probably round down slightly less than a penny.
Would it also fair to say that based on John's comments about hiring more folks and that kind of thing, I mean, I would imagine that your technicians are more profitable, all else being equal, after they've been on
the job. I don't know what
the right number is, 9 months, 12 months than when they just start. So if you're adding a bunch of new business and you're adding new employees, you sort of get a little bit of a double whammy there, right? And it's temporary, right?
That's right. We're going to have the training expense. You're going to have obviously hiring expense when you're hiring more people as we're able to grow this revenue as well as we're able to grow. And that's part of the reason why John talked a couple of quarters ago about the onboarding process and making sure that we're doing the right things to move that retention in the right direction and why you wanted to follow-up on that on this quarter.
Do you
have anything else you want to add to that, John?
Yes. Jamie, in some markets depending on regulatory requirements, it takes us 90 days to get a new person on the street and producing revenues or taking care of customers. So you're absolutely right. The longer they're aboard, the more profitable and the better that is. In addition, it costs some number anywhere from $5,000 to $10,000 just to source and hire a new employee.
So, it's a pretty expensive proposition upfront, but that's why we want to put so much effort into sourcing right, hiring right and retaining those people.
All right, terrific. Thank you all very much as always for your time.
Thanks, JB.
Thank you all. We'll take our next question from Tim Mulrooney with
William Blair. Good morning.
Good morning. Good morning, Tim.
So the gross margin contracted, I think, 80 basis points in the quarter, which was a little bit more than what we were expecting. How much of this was related to stronger organic growth onboarding new customers as you discussed in your prepared remarks? And how much of this was the impact from recent acquisitions?
Yes. So I would say the organic growth was probably from a weighted average perspective was probably the larger piece of that. So we have more employees are spending a little bit more time on those new customers as we've added them so rapidly over these last two quarters. But then fleet is also a piece of that as well. The fuel price is up on average $0.39 per gallon.
And then our leased vehicle cost is up. So as we're adding these new customers and this new revenue and we're adding new employees, we have had additional vehicle lease expense as well. So those were 2 of the key items that really made that impact that you mentioned.
Yes. Okay. Thanks. And then secondly on international expansion. I mean with some of the recent acquisitions you've expanded your presence in the U.
K, now Singapore. You guys have leading positions in Canada and Australia as well. Could you just talk about the international pest landscape? I mean, are there any other large international markets where maybe you have a smaller presence today, but they have a large TAM and maybe right for consolidation or further investment in the future? And are these mostly in Europe?
Or are there others in Asian and South American markets as well for example?
Yes. There's significant growth opportunities in lesser developed countries. The growth rates that we see in places like Southeast Asia and in China through our franchise groups, The growth rates there is significantly higher. To your point, in Europe, there are some very mature markets that are larger markets that are out there. And we'll continue to be able to go through and take a look at different countries.
We're at this point in time probably going to continue to still take a look at countries where we understand the language, we understand the culture. It is a business environment we clearly understand. But we're going to continue to use these franchises to be able to know and understand these markets as we're growing and we're moving forward, especially in these higher emerging opportunity countries that are out there. And it's a formula that's worked very well for us. I mean the franchise group in total, the international franchise group has grown significantly faster than our overall company's growth rate.
Now of course we only have the royalties portion of that from a financial perspective, but it gives us an opportunity to be able to know and understand the footprint and the opportunities that are out
there around the rest of the globe.
So we feel good with Australia moving forward the way that it has and developing that landscape starting there in 2014 and then adding new countries in 2016 in U. K. And then now 2018 in Singapore. It's been a good cadence for us for us to be able to digest that and learn and understand more about those parts of the world. And we're excited about what that future looks like.
Yes. And Tim, I would just add this is John Wilson, by the way. I would just add that, while we're excited about the opportunity, there's tons of opportunity right there in the countries that we've already expanded in. And as you guys well know, density is really important to our businesses. And so building out the footprint and the service capabilities of the countries that we're in already is real important to us improving those businesses.
So we're looking at opportunities and always interested, but I think my first priority is take care of what we expand what we have, I guess.
Okay, great color. Thanks, John. Thanks, Eddie.
Yes. Thanks. Appreciate the question.
Thank you. We'll take our next question from Sean Kennedy with Nomura.
Good morning, guys.
Good morning, Sean. Good morning.
So I have another question concerning M and A, specifically the increase in M and A in recent years. I was wondering if there was a specific strategy behind the excelling M and A over the past year, especially amid the high valuations and competitions for deals in the industry. Was the decrease in tax as a factor?
So Paul, I'll answer the last piece of that. Our model the decrease in taxes helped with the model when we take a look at it. But I would not say that that has been a driving factor behind anything. We continue just to find opportunities for good quality companies that want to join the Rollins family brand that maybe aren't necessarily looking for that biggest check and then have their company broken up. They're looking for an opportunity to be able to join the Rollins family of brand to be able to continue to keep that legacy company intact and be able to continue to make improvements from there.
We've seen that through the relationships that Gary and John and our other senior management folks have developed over the years that we continue to have these folks come to the table or come to us. And in a lot of cases, we're the only ones at the table. For the last two major deals that we did, it was not a situation of a bidding process. So the valuations that other companies are paying, we're not a part of that. It's more important that whole legacy piece and continue to keep those good quality companies in place and being able to go through and find a good fit.
And one of the key things that's the most important thing to us that you hear us talk about over and over is our company culture. And when someone else is selling a company and they have a very similar culture to us, the importance of their customers and their employees is in a lot of cases a driving decision. For Ardolf in Singapore, they told us that was the number one thing that made their decision for Rolla. And as John talked about, it took them over 3 years to make their decision. But when they found us and learned about us and they found out more about our culture and who we are and how we think about our employees and how we think about our customer experience and taking care of our customers, they said that was a perfect fit for them.
Now if they had chosen someone else where there had been a different price tag for them, there's a possibility that could have been the case. But the culture piece was really the most important part for them. And we continue to see that with many, many opportunities that are out there from an acquisition perspective.
Great. Thank you.
Yes, definitely.
Thank you. We'll now take our next question from Michael Hoffman with Stifel.
Good morning. Thank you for taking questions. This is actually Brian Butler for Michael today.
Yes. Good morning.
Just to swing back on the international piece and the markets the new markets you're kind of in. Can you give a little color on the relative margins of where they are now versus kind of where the company is? And what the opportunity is once you kind of get that density in those markets?
We don't break any margins down by any of our geographic areas. When we get an opportunity to be able to add density into a country such as we were able to do in Australia, things obviously move in the right direction because we have one set of leadership that's going to be in place for the country. And as we were able to go through and add our 3rd and our 4th and our 5th and 6 companies there, we're able to go through and use that more efficiently. We're also able to be able to use our purchasing power as a company typically to be able to go through and enhance the margins in these existing countries and companies that we're buying. Our purchasing power for materials and supplies and for vehicles and all those types of things as well as benefits in a lot of cases is a very positive thing that will impact the overall margin.
But we don't break those out, but we'll have opportunities to be able to see we can help our overall company's margin move forward when we add acquisitions not just internationally, but domestically as well.
Okay. Without getting, I guess, into the detail of what the margins are, just kind of what that range is in the sense of when you add that density, is that adds 100 basis points of improvement? Or is it just trying to look at a relative kind of what the impact of those additional acquisitions are?
So when we acquire a company depending on what's already in place, we can typically pick up 4 to 5 margin points. When we go through and we strip out costs that we would not need to continue to run the company when we use our purchasing power as I just talked about, when we use our vehicle leases, when we put them on our benefits. And if there is opportunity to be able to create further synergies from there, whether it's back office or whether it is their management structure, we're able to sometimes do better than that. But we're able to use our tools typically to be able to make them better. A great example would be when we acquired Critical Control and they really didn't have a very strong Internet presence.
So we were able to go through and use our marketing group to be able to help them further develop and improve their revenue stream in a more efficient manner that enabled us to be able to improve the margins there. So just by having our structure in place, it just enables us to be able to provide that.
I was trying to find the names spelled wrong on
Okay. That's very helpful. On the switching over to the new customer, how long is it typically between the first and fourth visit?
Yes. It will depend on what kind of customer it is. So if it is a residential customer, let's just say, is an every other month customer that we have, which is our most frequent visit. That 3rd visit, you can help through the math there. So every other month times 3 visits is what we would be looking at.
And then on the commercial side, I think in the average of averages and I'm going to say that because you have some that we some customers we visit twice a week and some customers we might visit quarterly. The average of averages would probably be about a month. So now we're talking about that 2 to 3 month time period for the average of averages to be able to go through and say that's about
where it would be.
Anything else?
Yes, I think that's right. 6 to 8 months for our residential customer and for that 3rd or 4th visit and 3 times
in a quarter for the commercial. And that's the reason why our retention rate leading the industry is such an impactful item for us as far as profitability is concerned. With residential retention rates in well into the 80s and commercial in the high 80s, that's what really helps with that profitability because we keep those customers that are profitable over a long period of time.
Okay, great. And then on the SG and A side, I mean, that kind of tracked with revenues from a growth perspective. It was up a similar amount. Looking forward, once you kind of anniversary some of the compensation changes you've made, Does this what kind of leverage do you get on that the SG and A side? I would expect it to be slower than revenue typically.
Well, so we'll definitely see leverage. This quarter was impacted by the enhanced benefits that we had for our employees. So if you kind of take that out as kind of a one time type of event, we would have seen a further improvement on the SG and A. But as we move through time and as we continue to streamline with the acquisitions and one of the things that we're able to do is we're able to sometimes pull in back office support into a more consolidated environment and help reduce the overall cost. Those numbers should continue to move in a positive direction for us.
Okay.
And then just last one. Was there anything seasonally about the Q2 unusual that contributed to any of the margin headwind there? Or was this fairly typical Q2?
I don't know if there's ever and you all have to help me with that. I don't know if there's ever a typical Q2. In April, it was still a little bit cool. In May June, it warmed up. And every year that cycle looks maybe a little bit different.
But like I said, the organic growth rates really move forward very, very positively. The recurring growth rates really move forward very, very positively. And we just hope to continue to be able to see that as we move forward. Great.
Thank you very much for taking my questions.
Yes. Thanks.
Thank you. Our next question comes from Chris McGinnis with Sidoti and Company.
Good morning, Chris. Good morning, Chris. And I just have 2 quick kind of follow ups. Just quickly around the acquisitions, obviously in Q1, I think you highlighted 16 smaller acquisitions, I guess, obviously, because of the number. Was there a number for Q2 that I missed?
I may have missed that. If I did, I apologize.
Yes. I don't know if I had that exact number off the top of my head. It was somewhere around 4, 5. I think in total, we've got somewhere around 20. I think I did mention the dollar amount that we had that we deployed this year versus last year as well.
Great. And then just quickly on the increase in the fuel. Is there any way to kind of offset that other than route out the optimization? Is there a pricing mechanism with that increase? Just a little color around that would be helpful.
Yes.
We've really analyzed a hedge type of a situation. And at this point in time, it doesn't really seem to make sense for us to be able to look at that. Gasoline in total typically has been somewhere between 3% 4% in total. So to take a chance of that and being on the wrong side of that, we just we have not made the decision. We've made the decision not to do that at this point in time.
Our real effort is around our routing and scheduling and our route optimization. And we have a lot of very good opportunity for us in that area as we move forward, not just in Orkin, but in some of our other brands as well that have made some good improvements in the routing and scheduling piece. So anything that we can do to continue to reduce our miles per stock, which we are and June was our best month that we've had since the inception of this program. We continue to move that forward. That's going to offset some of that fuel increase.
And we're just not smart enough to be able to bet on one side or another on where that price per gallon is going to go as we move forward in time. So we're going to do the parts that we can do and that's making the routes more optimized and be able to reduce the miles that way so we go through and offset it.
Appreciate the additional color. Thanks and good luck in Q3.
Thank you for that. Appreciate it. Thank you all for joining us today.
We appreciate your interest in our company and look forward to updating you on our progress on our next call. Thank you again.
Thank you, ladies and gentlemen, for joining today's conference. This concludes today's call. You may now disconnect.