Good day, and welcome to the Rollins Inc. 2nd Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, all participants are in a listen only mode. Later, we will conduct 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, Valerie. 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 0 three-eleven twelve with the passcode 9,000,14, 16.
Let me repeat that, 9,004,116. Additionally, the call is being webcast at www.viovid.com and a replay will be available for 90 days. On the line with me today are Gary Rollins, Vice Chairman and Chief Executive Officer and Eddie Northland, 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. Thank you, Marilyn, and good morning. We appreciate all of you joining us for our Q2 2016 conference call. And 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, 2015 for more information and the risk factors that could cause actual results to differ.
Thank you, Eddie. We are pleased to have posted a positive results for the quarter, marking our 41st consecutive quarter of improved revenue and earnings. For the quarter, revenue grew 4.8 percent to approximately $411,100,000 compared to $392,200,000 in last year's Q2. Income before taxes increased 6.4 percent to 77,000,000 dollars compared to $72,300,000 for the Q2 of 2015. Net income rose 6% to $47,800,000 or $0.22 per diluted share compared to net income of 45,100,000 dollars or $0.21 per diluted share for the same period last year.
Revenues for the 1st 6 months grew 5.6% to $763,900,000 compared to $723,100,000 for the same period of last year. Net income increased 5.8 percent to approximately $79,700,000 with EPS of $0.36 per diluted share compared to $75,400,000 or $0.34 per diluted share. Historically, the company's revenue and profit performance are somewhat lumpy from quarter to quarter. As examples, the weakest revenue percent increase last year was the 3rd quarter. And in 2014, it was the 4th quarter.
This repeated itself this year as the 2nd quarter percent increase of 4.8% was a pace less than the 1st quarter. We think Mother Nature has a role in this regard, and unfortunately, we can't control that. After saying that, I want to add that all of our business lines experienced good growth during the quarter with residential pest control up 6.7%, commercial pest control grew 2.6%, while termite increased 5.2%. Eddie will provide more details on these numbers in a few minutes. The rollout of our CRM and new operating system, FOSS, went extremely well in the Q2 with over 95% of the Orkin branches on the system by quarter end.
We remain on track to have this rollout completed by the end of this current quarter. Eddie will also provide further information on this, but we are very pleased with our conversion, and I want to express my thanks to all of our employees that have worked so hard to make this happen. As I've said in the past, we believe this new operating system will be a real game changer for our company. We're also pleased to have made our first acquisition in the United Kingdom, Safeguard Pest Control and Environmental Services. This purchase further expands our global footprint.
Safeguard is headquartered in Westerham, Kent and provides residential and commercial pest control services for its customers in Greater London and the surrounding Southeast Counties, which by the way is one of the most densely populated English regions. Established in 1991, Safeguard is a UK pest control leader with a rich history of providing exceptional pest control and bird control and other related services to residential and commercial customers. The company has a wonderful reputation and management team headed by Paul Budrick and Tim Sheehan, with whom we share a mutual commitment to continuous improvement. They will remain here to run Safeguard's operations and we look forward to sharing best practices between our 2 organizations. This quarter, we added 8 other pest control companies to our growing network.
We're benefiting in many regards from these additions as all of us are smarter than any one of us. Earlier this morning, we announced several changes to the company's operational leadership. The first situation involves Gene Irouci. After a long and successful business career at Rollins and Orkin, Gene will be retiring at the end of September. We're most fortunate to have Gene on our team for 13 years.
He began his career as a regional manager trainee in 2003, starting in South Florida. Gene was very quickly promoted to Louisiana region manager in 2,004. And by the way, Gene is one of the few in our company's history to have successfully operated a region without having managed a branch. No small feat. In 2005, Gene was promoted to Orkin's Atlantic Division President and did an outstanding job.
5 years later, he was elevated to Rollins, Vice President of Corporate Services. In 2013, he returned to operations and was promoted as President of Orkin North America. In this role, Gene led Orkin to pass the $1,000,000,000 revenue milestone for the first time in our history. Gene will truly be missed both as a friend and a valued associate. We wish him and his wife, Trudy, the best as they enter the next chapter of their lives.
We're truly blessed to have strong leadership across the country. And with Jean's retirement, we have made several new assignments that will help us to exceed the $2,000,000,000 revenue mark. Freeman Elliott has been promoted to President of Orkin U. S. With a responsibility for leading the 5 Orkin U.
S. Divisions as well as Orkin's national sales and client services teams. Freeman came to our company right after graduating from the University of Georgia in 1991. And like many of our superstars started as a technician, at that time in our lawn care division. Following, he successfully assumed many other management roles, including having led 2 different Orkin regions and 2 separate divisions.
Most recently, he and his team have led the Southeastern division to an excellent record of operational achievements. In addition to serving as President of HomeTeam Pest Defense for the past 5 years, Jerry Galoff will be elevated to assume responsibility for our Western Pest Services and WAPM Services brands. Jerry has been tremendously successful at HomeTeam in finding and cultivating outstanding employees that are making important contributions to our business and culture. Additionally, he will also be responsible for Rollins Human Resources and our training organization, both of which help us recruit, educate and retain the very best people, our most important asset. Steve Levitt, who has headed our group of specialty brands, will be leading our new emerging opportunities group.
This group includes Orkin Canada, our Australian companies, Safeguard, the company that I just mentioned, and any future international acquisitions. Steve will also be responsible for TruTek and Critter Control while retaining responsibility for IFC and PermaTree. He's going to be a very busy man. We have a great and experienced team at Rollins and worked diligently over the years to build our bench strength. Today, we see our efforts paying off as is evident from these announcements.
Management development will be a never ending initiative as we maintain our crown of being the best pest control company in the world. I'll now turn the call over to Eddie. Eddie?
Thank you, Gary. We had a solid revenue growth that helped with our 41st consecutive quarter of improved earnings results. Even with accelerating BOSSS related costs pushed into the Q1 into this quarter as well, we had a strong 6% net income growth. Many of our operations have gone through a substantial effort during a very busy time of the year in order to get this project finished in August. Each of our service lines showed continued growth and key to the quarter included continued strong residential and termite revenue gains, new international market expansion, strong home team results and significantly higher year over year BOSS expense.
Looking at the numbers, the company reported 2nd quarter revenues of $411,100,000 an increase of 4.8% over the prior year's 2nd quarter revenue of $392,200,000 Good steady growth continues in 2016. For the quarter, income before income taxes increased 6.4% to 76,900,000 dollars Last year, we had a small positive tax adjustment, which didn't repeat this year. Our foreign taxes were a bit higher than last year due to the growth in our foreign operations. And as a result, net income increased 6% to 47,800,000 dollars with earnings per share up 4.8 percent to $0.22 versus $0.21 per diluted share last year in the Q2. I will talk in a few minutes about our BOSS results to date, but first, I want to circle back to share some of the tremendous results that HomeTeam continues to produce.
As they approach their milestone 1,000,000 KX tubes in the wall pest control installation since inception, they continue double digit installation growth. Year to date, new installations were up 11.6%. Each install gives us an opportunity for HomeTeam to capture a new recurring pest control customer. Part of the continued overall Rollins termite success can be attributed to the excellent builder pre treat and recurring termite customers of HomeTeam. This service is offered when HomeTeam works with builders during the new construction phase.
Year to date, the number of homes receiving this pretreatment service has grown 12%. This installation opens the door for HomeTeam to continue to provide termite protection to that customer on a recurring basis moving forward, plus they enjoy prospect of a potential pest control customer. Let's take a look through the revenue by service line. Our total revenue increase of 4.8%, which included a small 4 10th of a percent from acquisitions and the remaining 4.4% was from pricing and organic growth. Residential pest control was up a solid 6.7%, Commercial Pest Control up 2.6 percent and termite up a strong 5.2%.
During the quarter, we acquired Murray Pest Control in Australia, which made a positive impact on our termite business. And as I mentioned earlier, HomeTeam has been a key to our continued termite gains. As I have mentioned earlier, we have pushed a lot of expense into the 1st and second quarters to get this rollout wrapped up, but we're very pleased to see improvements that BOSS is producing on a limited basis to date. Since the last call, we have added 1200 new pest control and termite control iPhone equipped technicians to BOSS for a total of over 5,300 active users. For those of you that are a bit more tech savvy, BOSS is a greatly improved platform that enables integration and products, which will speed the delivery of future enhancements.
Separately from that, we see the business benefits today falling into 3 buckets: employee, customer and financial. Starting with the employee benefits, millennials to our most seasoned employees love the ease of use and professional presence with the customer by moving from the old CN50 handheld to the new iPhone. The system helps to organize the day for the technician and allows needed changes to the route throughout the day. This is another way that we are creating a better overall job experience for our people. In addition, the system has built in turn by turn directions that will populate when the next customer is selected to help with ease and efficiency of navigating the route each day.
Also when an employee is in front of the customer, the technician will have visibility to all of the services that are active with that customer. If one of our service technicians are with a customer, they can more readily tell what of our other services they should offer based on that customer's needs. This will improve our ability to increase share of wallet as well as customer retention. As our data shows, the more services the customer has, the stickier that customer will be going forward. The customer benefits are a key to the long term success of the project.
Customers now are able to receive an email of an improved service ticket as soon as the service is complete instead of the former paper version. Currently, over 50% of our customers are taking advantage of this feature. Our customer experience will improve with our ability to schedule or reschedule a follow-up appointment in the future. The updates will be sent to the technician's iPhone in some cases while the customer is still on the line. In the past, it was a very manual process and those same requests were received at our branch locations where the administrative group would have to call or text the technician to see how their day looked and then explain the change needed.
This new scheduling process is much more customer friendly. 1 of the many financial benefits is the real time thinking of customer service tickets and billing. This saves time from our administrative ranks no longer needing to post these services and will speed up the billing and collection cycle between 1 2 days. Beginning in Q3, our implementation and handheld expense for new iPhone kits will drop dramatically. By Q4, these conversion costs will be completely eliminated.
As we've noted before, we are still assessing how we will address implementation of the other independent brands with this technology and we'll keep you posted. With more regions now deployed over the 12 month comparison period, we continue to see improvements in administrative overtime, customer retention, both pest control and termite as well as reductions in pest control bad debt as the administrative groups are more able to concentrate on this important area of cash flow. We will continue to assess and monitor these and other areas of benefit as we continue down the maturity path of the system. In total, gross margin for the quarter improved 52.3% versus 51.5% in the prior year. The margin for the quarter benefited from lower personnel related expense as group insurance claims were down year over year, lower fleet costs due to a decrease in fuel prices and service salaries as a percent of revenue with the better employee productivity.
Depreciation and amortization expense for the Q2 increased 7.1 percent totaling $12,400,000 Depreciation was $5,900,000 increasing $1,160,000 with most of that increase related to our BOSS system. Amortization was $6,400,000 dollars which increased $57,000 due to the addition of Critter Control customer contracts that will be amortized over 7 years. Sales, general and administrative expenses for the quarter increased $7,900,000 or 6.7 percent, but deteriorated slightly to last year at 30.8 percent of revenues. Increases were in the areas of professional services, mostly due to the SafeGuard acquisition and higher sales salaries needed for the increased demand and increased administrative salaries due to the accelerated BOSS implementation. As for our cash position, for the 1st 6 months ended June 30, 2016, we spent almost $36,000,000 on our 21 acquisitions and paid out $43,700,000 in dividends, which is up 25% over last year.
We were active with share repurchase in the open market, purchasing a total of 419,329 shares for a total of $11,158,491 We had $19,900,000 of CapEx and ended with $126,000,000 in cash, up 15.3% from last year. Last night, the Board of Directors declared a regular cash dividend of $0.10 per share that will be paid on September 9, 2016 to stockholders of record at the close of business August 10, 2016. This marks the 14th consecutive year the Board has increased our dividend by a minimum of 12% or greater. We look forward to finishing the BOSS project and to begin realizing the benefits of our investment. For our analysts and the investment community, I hope that you will mark September 20 on your calendar for our 1st Rollins Investor Analyst Day in New York City.
I look forward to the opportunity for you to meet our top executives and learn more about our business. I will now turn the call back over to Gary.
Thank you, Eddie. Eddie and I are here to answer any questions that you might have.
Thank And we'll take our first question from the line of Jamie Clement of Macquarie. Please go ahead.
Gary, Eddie, good morning. Good morning. Good morning. Gary, you when you were talking about your comments on HomeTeam, you mentioned that it had a contributing factor on the high growth rate in termite that you had during the quarter. Obviously, we know all about HomeTeam.
I don't recall really historically you calling out HomeTeam as being a major contributor to termite. So have you emphasized pretreat through them more in recent quarters or in recent years or so? Or is it something that's been there all along?
Hey, Jamie, this is Eddie. I'm the one who had those comments. Well, my bad. I'm sorry. That's okay.
I think this is something that has been there through time. I don't know that it's necessarily tremendously different as far as the overall impact. Just wanted to highlight the fact that they do continue to have substantial growth in this particular part of what they offer, especially with the new builders. The thing that's positive there is that we get a chance for that pretreatment and we're getting another opportunity to have a new customer.
For sure.
Which has really given us an opportunity to continue to grow both on the termite and on the pest control side.
And I think the size of the builders that we represent gives us a wonderful opportunity.
But one
of the requirements of financing and most states require that there be a pretreatment done on a new home. So we're handy and we're taking advantage of it.
Now Gary is that with that requirement is this sort of like a does a home buyer actually have to opt into that in some technical way? Or is it something where the builder just contracts with you and it's going to happen regardless of what the incoming homeowner wants that happen?
Right. It's a builder requirement.
In fact, the homeowner at
that time is not a typically is not a homeowner. Right, right. Plus it's one of the first things that are done when a home start comes out of the ground and the slabs poured is when the pretreatment is done.
Got it. And just a follow-up. Eddie, with respect to the BAW system rollout, I think you gave us the kind of the incremental depreciation expense year over year. In terms of operating expense, both that you can quantify as well as the stuff that's a little bit less tangible, what do you think the total cost during the quarter other than depreciation related to BOSS may well have been that by, let's say, the Q4 or first half of next year will be gone from your quarterly numbers?
Well, so Q1 and Q2, we enhanced our rollout and a large part of the cost of that are the implementation teams. So we basically in Q1 and Q2 kind of doubled up our efforts of what we had seen in previous quarters. And so we have contractors that we use for that where we actually have people at each one of the branch locations that are there as trainers as they're going through the implementation phase. So that's a large part of the overall expense as we're rolling this out. And then of course, the actual iPhone kits themselves.
So again, in Q1 and Q2, we're doubling up our expense and our efforts there as we're getting those rolled out. And that's how we got to this total of over 5,300 total active users.
Okay. Are you depreciating the is that are the iPhones CapEx though? Or are those actually OpEx?
Or is it a mix? So the iPhones are OpEx. The depreciation is for the system. So the depreciation, obviously, will continue to build over time and we'll have that full bore Q3 as we move forward. But the implementation costs will be the part that will be reduced substantially in Q3 and will be eliminated in Q4 and the same thing with the iPhone kits.
All right. That's helpful because I think I may have had that wrong because I had assumed the iPhones I assumed that was actually CapEx rather than actually flowing through the P and L. So my bad one. Yes.
Okay.
Anyway, thanks very much for the time, Eddie. I appreciate it.
Yes, absolutely.
Thank you.
We'll move to our next question from the line of Joan Tong of Sidoti and Company. Please go ahead.
Good morning, Gary and Eddie. How are you guys?
Good morning, Gary.
Good morning. So the first question regarding the growth rate and Gary, you mentioned the growth rate is a little bit lighter than the Q1. And if I were to ask you about the operating metrics that you always seem to comment on that on each conference call, for example, the lead, the retention rate as well as the customer closing rate. Are those numbers like in line with what you expected?
Yes. Our retention was in line with what we expected. The phenomena of the pace, I guess everybody's got a theory. I think my theory is that Mother Nature has more to do with that than anything. We were staffed.
Our advertising was going. Our digital marketing was going. I mean, there was no operational hiccup. It was just a matter of leads and demand really.
Hey, Joe, if you look at the total revenue through the 1st two quarters and you compare back to the last 3 years, we're ahead of the pace of the last 3 years. So I think Gary's word of lumpiness is probably the best way to look at that. Q1 obviously was strong and Q2 not quite as strong as that. But to his point, retention rates are still well in line with where we'd expect them to be. And sales results for our service lines are in line as well.
Okay. If you look at the commercial growth rate, it's particularly weak. I wouldn't say weak, it's still growing at that 2%, 3% range. So other than the lumpiness of the business, is there anything else like changes in competitive landscape, any specifically for that particular business line on commercial?
I really don't think so. Our leads were not as strong as we'd like. Our commercial business is a lot of our commercial business is sold in the branches and it's influenced by the leads that we get. So you might think, first of all, that commercial shouldn't be impacted by Mother Nature, but it is. And it doesn't influence the lead flow.
So that's our staffing was there, our pricing was there. We've had competition from the start. So I don't really think that anything unique is taking place in the competitive area.
That would be my take, Joan, on the situation. Yes, Joan, I think we've had good growth on the residential and on the termite side. And if you take a look at the commercial, kind of like our total our revenue in total, if you look at our commercial year to date, we're higher at 3.6% than we were for the full year 2015. So it's not growing at the same rate necessarily as the residential or the termite in this quarter, but still well in line if you look at it just from last year's number.
Okay. All right. That's fair. And maybe moving forward to the expenses questions. I mean, Jamie asked about the depreciation and amortization expenses.
I got it like, what, dollars 12,000,000 for this quarter. Is it a good run rate? So next quarter, are we going to see like a further edge up? So I assume that's the case and that's first question. And then second question, it seems to me that like your iPhone kit expenses is not done yet.
So Q4, I'm not sure, you talked about it might edge down, but maybe there will be more next year. Can you just elaborate on that two fronts?
So let me go to your second question first. So we're 95% done with the Orkin brand at the end of the quarter. At this point in time, as I mentioned in my remarks, we're still assessing what we're going to do, if anything, with the other independent brands. We're going through to take a look to see what makes sense from a financial perspective with the changes we'd have to make to the system and then what the return would be for those independent brands. So once we get done with this Orkin at this point in time, we'll be done with the iPhone kits as far as the add on.
And again, we have 5% of total Orkin left. That will be done in Q3 and we won't have any expense at all in Q4 unless we were to make the decision to move forward with one of those other independent brands, which of course we'll share with you once we know more along those fronts. Okay.
And when
you take a look at if you take a look at some of those other independent brands and the reason why we're having to go through and do this assessment is because they're very different than Orkin. Of their business models are different, some of them are more weighted towards commercial, where it may or may not be the same benefit that we would see as an overall more balanced Orkin group. So that's what's going on with that analysis right now.
Okay. And did you disclose like what's the elevated expenses related to BOSS and that it's going to roll off in the 4th quarter? Is it like a major impact on your bottom line, a $0.01 to $0.02?
Yes. We didn't break that out. But I think we're going to be along the same lines of what we saw a year ago when we talked about what the impact was for the entire year. So if you think about what we talked about as far as the entire year, we finished everything off through the 1st two quarters and then we'll go through from there and be able to have virtually nothing in the Q4 and much less in the Q3. The implementation piece is a big piece.
It's going to go away and we won't need as many developers to be able to help with the changes that we've had to make as we've been rolling this out. So those are all going to be pieces that are going to go into that.
Okay, great. All right. Thank you. And then maybe talk a little bit about the U. K.
Pest control landscape. It is your first acquisition in that area. So I assume that like you are we will continue on like making effort there in terms of expanding that region, just like how you did that in Canada years ago and then like in Australia. And so can you just maybe talk about like how the competitive landscape like? We know that there is a sizable competitors on the top, but is it also pretty fragmented at the bottom?
Yes, it is. It's very fragmented. I'm not sure if it's to the same exact degree that we have in the U. S, but it's a very, very fragmented market. And I think we're just going to have this be another one of the opportunity areas that we look at as we're looking at the best way to deploy our cash from an acquisition perspective as we look around the world.
John, there's another advantage to this acquisition. We really want an international model branch to show our franchise owners and potential owners. I mean now they come over to the U. S. And they visit our commercial operations typically in our residential and they're just not the same that that independent owner really has to model his business after.
So one of the pluses I think that we're going to get is we're going to have a model operation that they can get a better sense of really how to get organized and how to conduct their business.
All
right. Thank you, guys.
Thank you. Thanks, Joe.
Thank
you. And we'll take our next question from the line of Sean Kennedy of Nomura. Please go ahead.
Good morning, Gary and Eddie. Thanks for taking my questions. Eddie, you mentioned the ways BOS has affected the business so far, but have you identified any new opportunities related to BOS as it becomes more mature?
Well, yes, I think when we first looked at BOSS over 2 years ago, there were I'm sure a few things that came to everyone's mind that would be able to be the benefits to make this make sense. And I think as we roll this out, I think a few different things. I think the role of the administrative team and the branches is going to be completely different. We knew there were going to be tasks that were going to be able to be eliminated, which have been eliminated. But I think to the degree of how we foresee them being, we're really going to be able to change that branch administrative person now to become much more customer focused.
We're seeing that in the retention rates that I mentioned earlier. I talked about specific numbers on last quarter, but I talked about just in general, we continue to see our pest control and our termite control retention numbers continue to get better. And I think those branch service folks as well as the service technicians are all going to be able to improve that customer experience, which is going to help us with our retention. And, anything that we can do to spend more time with the customer, is going to do nothing but help us, with our existing customers and as far as growing our customer base. So I think that's one area.
We've talked in previous calls about the routing and scheduling. I don't know if that was on our radar to the degree that it is today with this virtual route manager as a bolt on. So I think those are a couple of areas that are going to be key to us as we're moving forward. But the bottom line is anything we can do to make that customer experience better, we're just going to be better for it. And we think both of those pieces are going to enable us to be able to do
that. Great. Got it. And just one more question. One of your competitors just announced the collaboration with Google to develop an Internet of Things for pest control, like applying big data and predictive analytics to pest control.
How do you think it will impact the industry? And are you engaged in similar developments at Rollins?
Well, I can tell you that our marketing group has been really involved with the data analytics piece for probably the last 2 plus years now, breaking everything down, all the different service lines and taking a look at all the different factors that go into retaining customers, growing customers, customer segments, customer segments by income, by geography, by our different independent brands. And that's a lot of what they use when we go through and we make our decisions on how we advertise, how we price, how we go through and make a decision on what and where we want to spend our management resources as well as our capital to be able to go through and grow our business. So I'm not familiar with the specifics of what you're talking about with the competitor, but I do know that our internal marketing group, from my perspective has done a tremendous job with that in helping to guide us as we continue to move this forward. Okay. Great.
Thanks guys. Is that answer your question, Sean?
Okay.
No, that's it. Thanks.
Okay, great. Thanks.
Thank you. And we have a follow-up question from the line of Jamie Clement of Macquarie. Please go ahead.
Hey, Gary and Eddie. Just one follow-up. I would have assumed this question would have come up already, but it hasn't. I did want to ask you about the mosquito business this summer, obviously, with the very serious Zika virus concerns that are out there.
Okay.
You just want general kind of
Yes, just your general thoughts. Like I mean I know that that's historically a pretty small part of your business. But it doesn't sound like it's been the equivalent of bed bugs from a couple of years ago to your industry, but I would imagine that in certain areas of the country, you're probably getting more phone calls.
Yes. I think that's a very fair assessment. We absolutely are. We're getting more phone calls and we're having more opportunities in lots of areas. The areas that you would expect, we're probably seeing more.
So we saw growth in Florida earlier because they're going to have much demand than we would see in other parts of the country. If you take a look at a very, very small base that we have, sales in a lot of areas have grown tremendously. I mean, they've doubled in some areas as far as mosquito growth. But again, small base. The MethDuck phenomenon, as you know, is something that builds over time.
Year 1 was big growth, but I'm not sure that anybody knew that it was going to be 3, 4, 5, 6, 7 year phenomenon. And we're kind of in this year 1 right now from the Zika perspective of the mosquito. So we'll continue to we want to continue to make sure that we're playing the right role in this. We want to make sure that we are educating the community to make sure that people know and understand what they can do to be able to help reduce or eliminate the concerns they have. And if they need professional help, we absolutely want to be the one to be able to help them from that perspective.
Yes.
Jamie, we also have the benefit of marketing our other services. I mean, we may get a mosquito call, but we have an opportunity to have a recurring pest control customer. And then we also have an opportunity to have a termite customer. So in addition to the revenue that it generates directly, there's revenue that's generated indirectly.
Yes. Now, Garrett, I wanted to ask you, it doesn't seem to me that the industry has historically done much advertising regarding mosquito service. And I have this feeling and maybe I'm totally off base here, but that the technology that you guys can bring to bear, the treatment protocols and maybe even the chemicals are a lot better than they were 15 years ago. I just have this feeling that Americans kind of doubt whether your mosquito treatments or the industry's mosquito treatments really work all that well. Do you think there's a disconnect here and maybe an opportunity over the next couple of years to push this service?
Well, I'll be glad, James.
Well, obviously, we think our service is better. We do mystery shopping where we see what the competitors are doing. And there's several things that we do in addition to what's done. I believe as long as the Zika situation stays covered as far as the breast is concerned, it generates a lot of mosquito business. And our mosquito customers are really happy.
I've been in this business for 5 decades now, and I've never had a service that people will stop you or talk to you at cocktail parties. I mean they're very excited about the fact that they get their backyard return to them.
Yes, Jamie from the advertising perspective, remember not everywhere in the U. S. Has mosquito demand. True. It's only in certain areas.
I mean everybody has ants, everybody has cockroaches, everybody has other stuff. Not everybody has mosquito. But to Gary's point that he just made, I mean, I'm the personal mosquito customer of ours and I've lived in the South for many, many, many years and I've tried every other off the shelf product that was out there and it does not hold a candle to this mosquito service. I mean, you absolutely do reclaim your yard at that point in time, if that's something you're trying to do. And the stats are behind it.
I mean, it's our best retention product that we have at over 95%. Yes.
And I think that the environmental concerns that the consumer has really sets us apart from Joe and his pickup truck and the fogging machine. And as Eddie said, we have on the Internet, we have quite a few sites where we really explain to the homeowner what they can do, how they can eliminate the mosquito threat.
Okay. Well, I appreciate that additional color a lot. Thank you all very much.
Thank you. Thanks, Jamie.
Thank you.
Okay. I guess that's it then. Well, we want to thank you for being here. We look forward to reporting in the Q3. I think we'll know more about BOSS at that time because we'll have another quarter under our belt and branch is getting more mature and we look forward to it.
Thank you.