Good morning, and welcome to the Rollins Incorporated 4th Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, all participants are in a listen only mode. Later, we will be conducting a Q and A session and instructions will be given at that time. I would now like to introduce your host for today's call, Marilyn Meek.
Meek, you may begin.
Thank you. By now, you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive 1, please contact our office at 218-827-3746, 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-two zero three-one hundred and twelve with the passcode 8962,426.
Additionally, the call is being webcast at www. Viavid.com and the replay will be available for 90 days. On the line with me today are Gary Rollins, Vice Chairman and Chief Executive Officer and Eddie Northam, Vice President, Chief Financial Officer and Treasurer. Management will make some opening remarks, and then we'll open up the line for your questions. Gary, would you like to begin?
Sure.
Thank you, Marilyn, and good morning. We appreciate all of you joining us for our Q4 year end 2015 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 will be 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, 2014, for more information and the risk factors that could cause actual results to differ.
Thank you, Eddie. Before I begin, I want to introduce John Wilson. We have another attendee at today's investor call. John is President and COO of Rollins. He's new to our investor calls, but certainly not new to Rollins.
You may recall that John was promoted in 2013 to President and COO. Prior to that, Jonathan, President of Orkin USA, he began his career as a technician and sales inspector at Wellman College and joined the company full time in 1996 as a branch manager trainee. He's had various positions of increasing responsibility, beginning as a branch manager, region manager, vice president and president of the Southeast Division. He attended the University of Tennessee and has completed the executive pardon me, the executive program at the University of Virginia Darden School of Business. Rollins' Board of Directors named John an Officer and Vice President in 2011.
John is doing a terrific job as an important part of our success and our future. We are extremely pleased to have posted record results for the quarter as well as our 18th consecutive year of improved revenues and profits. For the quarter, revenue grew 5.4 percent to $362,500,000 compared to $344,000,000 in last year's Q4. Income before taxes rose 11.3 percent to $51,800,000 compared to $46,500,000 for the prior year period. Net income rose 6.1 percent to $31,700,000 or $0.15 per share compared to net income of $29,900,000 or $0.14 per diluted share for the same quarter last year.
Revenues for the full year rose 5.2 percent to 1,485,000,000 dollars compared to $1,412,000,000 for the same period last year. Income before income taxes increased 10.8% to $243,200,000 compared to $219,500,000 in the prior year. Net income increased 10.5 percent to $152,100,000 with earnings per diluted share of $0.70 compared to $137,700,000 or $0.63 per diluted share for the same period. We completed another record year in revenue and profits. All of our business lines experienced growth during the quarter with residential pest control up 6.1%, commercial pest control grew 3.2% and termite rose 6.2%.
We're also very pleased with the progress that our specialty brands made last year, with all of those reported improved sales and profitability. These are our non working pest control and wildlife companies. Their results underscore the value that we're experiencing in acquiring selective, market leading pest control and wildlife. Speaking of wildlife, our business there also enjoyed a good year. TruTech grew substantially and Credit Control, which we acquired in February of last year, performed above our expectations.
We're very excited about the potential for this service line going forward. HomeTeam also had a banner year as the housing market continued to improve, particularly among the world class builders they partner with, such as Lennar, Homes, PulteGroup, Toll Brothers, D. R. Horton and Meritage Homes. Revenues for the full year grew approximately 8%.
Eddie will provide more details on HomeTeam as well as the specialty companies in a few minutes. Insulation and drive zone ancillary businesses, which include bed bugs and mosquitoes, continue to perform well. Bed bugs have not gone away, and we are benefiting from good revenue increases in that area. Some of you may have noted in recent media coverage that we have made a threat for mosquitoes, Zika. 1 national news agency have headlined its article, As disease proliferate, mosquitoes become public enemy number 1.
Zika is a rare virus that has not made an impact from its discovery in the 1940s until now. For gingay, Zika is spread by the same species of mosquitoes, which can be found in much of the USA. In the past year, Zika has spread from Africa and Asia to the Americas. Although Zika was first diagnosed in Brazil in May, it has been linked to more than 3,500 cases of infant deformity. The leading experts predict that the USA needs to be prepared for a similar scenario.
This situation is unfortunate. However, based on our experience with the West Nile outbreak, publicity concerning the skis risk will escalate. We're particularly pleased with the success that we had this year with the rollout of our CRM system box. We ended 2015 with 50% of our Oregon branches on the system. In December, we picked up our pace and began rolling out this branch operating system to 2 regions a month and currently expect to have all Orkin locations on BOSS by the end of Q3 of this year.
This is ahead of our previous target completion date. This time last year, we discussed that one of the important advantages of BOSS was the feature of issuing iPhone to our technicians to help them better complete their customer administrative requirements. At the end of this past year, 2,600 of our technicians were using their iPhone to provide customers better communications and acknowledgment of their service revenue, while improving our branch administrative productivity. You may also recall that we recently completed the service manager check-in dashboard, which provides a real time online display of all technician services and status and where they stand on completing their routes. Additionally, this data can identify Additionally, this data can identify opportunities for a newly sold customer to receive a same day service start.
These are just two examples of major benefits the system is providing in improving customer service while making our operations more efficient. Our technology team wasn't solely focused on BOS, however. During this past year, they upgraded and replaced a number of our tire and support systems to provide better financial reporting and communications, while improving our customer experience and reducing calls. Our marketing folks were a major contributor to our success last year. They continued to up their game across all of our marketing channels, digital, mobile, traditional media.
And frankly, we're getting better at reaching our target prospects and identifying the best channels in which to reach them. As you are aware, we established an in house analytical team a couple of years ago to help us better understand our customers' preferences and to know more about price elasticity. Their contribution is allowing us to take our marketing plans to another level. Like so much of what we do, we see the marketing of our brands as a work in progress. It just keeps evolving and we look forward to even greater contributions in this area in the future.
We also continue to add to our roster of franchises globally, having established a total of 7 international franchises in the first half of the year. We opened franchises in India, China, Central America and Mexico. The Q4, we announced that Orkin extended its presence in North America, South America, Europe, the Middle East and Asia with the addition of 9 new franchises. These new franchises are located in Mexico, Colombia, Republic of Georgia, Paytour, China and South Korea. As of this date, we have 48 international franchise.
We look to expand our franchise footprint, both domestically and internationally, while at the same time working more closely with our franchise partners to help them grow their businesses. Strategic acquisitions remain a priority for us. And as in the past, we will continue to seek out companies that are a fit for us in both the pest control and wildlife areas of our business. The service business is 1st and foremost a people business and our employees are our most important asset. A major priority for us every year is to improve on the retention of our employees.
Our employee retention rate again improved in 2015. We continue to work with our employees to ensure that they are receiving the very best training that they need to be successful and to advance their career. We want them to feel that they have a future in our company and a career, not just a job. 2015 is now behind us and I want to express how proud I am of what our employees and franchise partners accomplished during the year. The dedication to continuous improvement is the driving force behind our success.
Equally important to what we accomplished and learned during the year is that we set the stage for initiatives that will help us continue to grow our revenue and profits in the New Year. We're looking forward to achieving another record year. All of our team members will be working diligently to improve the customers' experience. We look forward to discussing with you the progress that we're making throughout the year. And I'll now turn the call over to Ed.
Ed? Thank you, Gary.
I had the opportunity last week to attend my 1st Rollins Leadership Conference. For me, it was a time to connect with many that I've spent time with learning the business over the past year and meeting many other new faces. I share this because this event continued to confirm a key reason for our consistent performance, the depth of our strong management teams. That consistency continued with our 39th consecutive quarter of improved earnings results. Behind the record setting results are managers, technicians, franchises, sales and support staff to take the continuous improvement culture and execute year after year.
I want to extend my heartfelt thanks for the tireless efforts of each of these groups and for their commitment to these outstanding results. We had a strong performance in the 4th quarter with all service lines showing continued growth. Keys to the quarter included strong revenue gains, significant growth in the number of international franchises and Australia's improved profitability. That was offset by currency headwinds and slower growth from acquisitions. A few one time tax events impacted the net income.
Looking at the numbers, the company reported 4th quarter revenues of 362,500,000 dollars an increase of 5.4 percent over the prior year's 4th quarter revenues of $344,000,000 All brands, all segments and all geographies performed well as measured in constant currency. For the quarter, income before income tax increased 11.3% to $51,800,000 but due to a less favorable tax rate created by a few one time events, the net income increased 6.1% to $31,700,000 with earnings per share up 7.1 percent to $0.15 versus $0.14 per diluted share last year in the Q4. This year's 4th quarter tax rate was higher than the rate for last year's 4th quarter. At the end of 2014, we had a beneficial adjustment that reduced the effective tax rate, and this year, we had a few detrimental adjustments such as an increase to the reserve for uncertain tax positions and an increase in certain bistled out expenses that while small individually collectively affected the quarter. Also, our foreign taxes were a bit higher than last year due to the growth of our foreign operations.
For the year, revenue came in at 1.4 $85,000,000,000 a 5.2 percent increase. Net income for the full year increased 10.5% to $152,100,000 or $0.70 per diluted share with EBITDA coming in at 288,000,000 dollars I want to take a minute to highlight the efforts of our Australia theme. As I'm sure you remember, a year ago, we were sharing the successful purchase of our second company in a suburb of Melbourne. Even with the slowing economy, our Australia operations grew revenue 9.4% and is profitable for the year. We are very proud of the results for this team and excited about our future in Australia.
Let's take a look through the revenue by service line. Our total revenue increase of 5.4% included approximately 6.4% underlying sales and pricing growth and 0.4 percent contribution from acquisitions, offset by a currency headwind of approximately 1.4%. Residential Pest Control was up a consistent 6.1%, commercial pest control up 3.2% and termite up an impressive 6.2%. Critter Control was the only major acquisition that was included in our numbers for the quarter. As I mentioned last quarter, we realigned our sales force, which helped contribute to the impressive revenue growth numbers.
With the use of our Home Sweet iPad technology, the sales force was a large contributor to the 6.2% termite growth for the quarter. The use of this technology, along with the opportunity to offer in house financing through our own Rollins Acceptance Corporation, has helped us to grow the revenue and ancillary businesses. In addition, I want to recognize the efforts of our inbound sales group that did an outstanding job keeping up with the increased demand late in the year. As you know, this is normally a slower season for pest control, but November December were incredibly strong and this team did a great job working with the operations group in meeting this demand. All of these teams did an outstanding job.
Again, for the quarter, when we take out the impact of foreign currency, residential, which makes up 41% of our revenue, grew 6.3% termite, which makes up 17% of our revenue, was up 6.9%, and commercial pest control, which is 41% of the revenue, was up 5.8%. Commercial was most impacted by the weak Canadian and Australian dollars as most of our business in these countries is commercial. As HomeTeam begins their 20th year of service, I want to spend a few minutes highlighting some of their many accomplishments that would have made our founder, O'Wayne Rollins himself, very proud. In 2015, HomeTeam grew 93,000 KX tubes in the wall installs to bring the life to date total to over 900,000 homes. In 2015, revenue grew 8.1%, which was primarily driven by an increase in KX system activation of 16.5%.
Also, HomeTeam saw an increase in sales efficiencies, which resulted in decreased customer acquisition costs. Due to its environmental friendliness and high customer satisfaction, termite baiting is becoming a preferred treatment method in HomeTeam's growing pretreat business. This has opened up a new area of opportunity for the future, which offers home team higher customer activation and improved retention over alternative methods of pretreats. In total, gross margin for the quarter improved to 49.7% versus 49.1% in the prior year. The margin for the quarter benefited from lower fleet costs due to a decrease in fuel price and lower service salaries as a percent to revenue, offset by personnel related costs due to increased health care costs and higher material costs due to the increased sales.
The company maintained good cost controls across most spending categories. Depreciation and amortization expense for the 4th quarter increased 8 10ths of a percent, totaling $11,300,000 Depreciation was $5,100,000 increasing 175,000 dollars with most of that increase related to our new BOSS CRM system. Amortization was $6,300,000 dollars which increased $265,000 due to the addition of Critter Control customer contracts that will be amortized over 7 years. For the full year, amortization of intangibles, which is typically from the value assigned to acquired customer contracts, will represent a significant after tax non cash charge of approximately $0.07 this year. Our rollout of BOSS is ahead of plan.
As Gary mentioned, we now have over 2,600 pest control technicians with iPhones and who are now paperless. We will give a more in-depth update on our Q1 call, but I want to share another BOSS benefit that will also impact our initiative of improving our routing and scheduling. One of the benefits is our ability to schedule or reschedule while the customer is on the phone and immediately update the technician on the iPhone. This will have an immediate positive impact to our customer experience. We have begun training on the routing and scheduling portion of BOSS called Virtual Route Management or VRM.
Our IT group has set up a support desk and put together 7 training videos that will help the branches use the basic routing functionality that has been built into BOSS. The training will include topics such as route setup, route territory planning, route optimization for scheduled accounts, optimizing routes and balancing route production. For the year, costs associated with BOSS had a $0.05 impact on earnings per share, and we anticipate a similar impact in 2016 as we roll out the remaining Orkin divisions. At this time, we are still assessing the next steps for BOSS related to the independent brands, and we'll share those when these plans have been finalized. Sales, general and administrative expenses for the quarter increased $46,200,000 or 5.6 percent, but remained flat to last year at 32.4 percent of revenues.
A reduction in the areas of bad debt and lower administrative costs, reflecting ongoing cost containment programs, were offset by higher insurance expenses, higher advertising and higher sales salaries related to our increased volume. Our balance sheet remains strong as we continue to look for more opportunities to reinvest in our business. For the year, we spent over $33,000,000 on acquisitions even though we attempted to use a lot more. Our pipeline is full of opportunities for 2016 with mergers and acquisitions. We had $39,000,000 of CapEx for the year and had $134,000,000 in cash along with no debt for the full year.
As you may have read, last night, the Board of Directors declared a regular cash dividend of $0.10 per share that will be paid on March 10, 2016 to stockholders of record at the close of business February 10, 2016. The cash dividend will represent a 25% increase over the prior quarterly dividend. This marks the 14th consecutive year the board has increased our dividend by a minimum of 12% or greater. 2015 was a great year, and I'm strongly encouraged that we will have a great 2016. Our management team is focused and energized to continue to raise the bar for our customer service, and this will translate into improving financial success.
I'll now turn the call back over to Gary.
Our first question comes from James Clement with Macquarie. Please go ahead. Your line is open.
Gary, Eddie, thanks so much in advance for taking my questions.
Thank you. Good morning.
Good morning. Eddie, maybe I can start with you. I was trying to get I was trying to understand a little bit better what exactly the BOSS and iPhone interface will do for your technicians and customers with respect to when you have that customer on the phone, heck, maybe soccer practice got changed, they can't receive a technician at a certain time. Can you talk a little bit more in-depth about specifically what this is going to do for you all?
Yes. So take your soccer example. So someone makes the phone call. We have that phone call at the branch location. We have the customer on the line.
Now we have that capability of being able to make an updated change based on availability of that technician, basically in real time that the technician will be able to see on their iPhone. So it needs to be moved back a couple of hours or whatever would need to be done with that, assuming we have a time availability then, we'll be able to see that in more of a real time.
It's hard for me to appreciate this kind of thing, but like what happens now? Before this capability is out there, like, I mean, how did you all handle this kind of thing?
Well, it would not have been as real time. So it would have been a request to the branch. And then the branch from there would have taken the message. And then the branch from there would have followed up with that technician and or the branch the branch manager, service manager who had to get back with the customer, which that time may or may not have worked for the customer. So now in real time, we're able to see this is the time that's available for this technician.
We can tell the customer in real time this is the adjustment we can make based on your request and just make that a better customer experience at that point in time rather than having a back and forth or have a delayed response back to them.
Okay. That's great. That's helpful. Thank you. And Gary, if I could ask you one.
You emphasized in your prepared remarks, employee retention, and you certainly highlighted training. I remember I have the years a little bit wrong,
but I think it was about 5
to 7 years ago, somewhere in that stretch that you all made a fairly significant dollar investment in upgrading your training procedures as well as I think your training facilities, if I remember correctly. Are you all have you been spending above normal with some of these training initiatives? Or is this, to use your words, is this just always just a work in progress around?
I don't think that by the way, you've got a good memory.
I'm not so sure.
No, we're not spending. I mean, we have enough to spending. I think we've got the sophistication. On the web now rather than using satellites,
the dish and so forth. So that's been
a big improvement. And we've just got better at it. I think that the quality of the trainees improved and the cost of communications has gone down. So there's some offsets there,
but I don't think
that we as a percent of revenue, we've increased the rate of our
spin. Okay. Yes. Because Gary, it's I've noticed certainly last earnings season and in this relatively early stage of this earnings season, it seems like a lot of services companies are in fact talking about difficulty in attracting and retaining service staff for companies that are in relatively similar industries.
So I
mean, it seems like you're bucking the trend.
You're talking about recruiting?
Well, I'm talking about recruiting and retention because I think as I mean, the good thing about the unemployment rate coming down is that folks may have more options and it seems like your retention is actually improving whereas I think a lot of other services companies unfortunately going to the other direction, although it may be a good thing for America, so who knows?
Well, first of all, various studies indicate that compensation is like 3 or 4, so it's the reason people change jobs or keep their jobs. And I think that really that our training has an important role in our retention. And when you invest in a person's career, that endears them to the organization. So I think frankly, we're just turning up the effort. I mean, we have made a real strong effort to hire more veterans and more females and we take the figures every month and we're moving them.
I mean, we're doing it. And our referral program, we've been very successful this past year, getting more customer referrals excuse me, employee referrals from relative or someone to come to work for us. And our experience has been that, that's a better hire typically than someone that doesn't have any association.
All right. That is terrific color as always. Thanks very much for your time.
Okay. Thank you.
And our next question comes from Joan Tong with Sidoti and Company. Please go ahead. Your line is open.
Good morning. How are you guys?
Hey, good morning, gentlemen. Doing well.
Good, good, good. I have a question regarding competitive landscape. Obviously, you have a large competitor came in to America and buying all these like different companies and trying to compete here on our turf. I'm just wondering like have you seen any changes in competitive landscape? Obviously, they have stir up the valuation on the M and A front.
But in terms of pricing, have you seen justify that acquisition?
Yes, Joan, this is Eddie. So at this point in time, we have not seen anything that fits bubbles up. I think the growth rates again for the quarter were very strong. Demand was very strong. Their main area of concentration has been commercial as opposed to residential.
But we've not had any issues that I'm aware of that have come from our sales group having to do with direct competition, having to do with that. I think the space is big and the demand is big. And at this point in time, we're not seeing an issue.
Okay. Gary, you mentioned on your prepared remarks regarding the in house analytic teams. I haven't heard you talking about that team for a couple of quarters and you since you brought that up. I'm just wondering, is there anything more to harvest like, I remember it was a year or 2 years ago, it was the Boston Consulting Group. And then with all these analytics, can you be able to use it more going forward to maybe like improve on your pricing, like look at like price electricity like going forward just to harvest a little bit more on that?
Well, sure. We're learning more about our business. I mean, we have the capability now of better utilizing our data. We have the capability now of experimenting more. We have a wonderful laboratory with our call center because virtually we can change the prices just almost instantaneously and look at our closure to see if our closure is improving or not and seeing if we're selling more units to the extent to offset the price reduction.
So we're just learning a lot more about our business. I don't think that we found a hot button, if you will, but I think that now with Zip plus 4, we can direct our advertising more precisely and we're beginning to do better at hitting our targeted prospects. So I think this is just going to be an ongoing situation of education, of us learning more. And I think that we have some great opportunities because when you look at moving closure, it's just a real important lever as far as our sales are concerned.
Right. That's great. And then like if I have to look at the demographics of your customers, have there been any changes like maybe you are moving up a little bit in terms of like demographics. And because those are lifestyle customers, they tend to be sticking around a little bit longer, not just like stick around for a year and then when the problems go away and then they just kind of like disappear. So how should I think about like your retention?
Obviously, if you can talk about lead generation, that would be helpful.
Yes. Joan, this is Eddie. So retention continues to tick slightly higher each year. It's nothing dramatic, but it just continues to tick slightly higher. And really, when you talk about the analytics, that's really one of the areas that our marketing group has just done a fantastic job with using the data to know and understand the revenue bands and breaking down our ability to, 1st of all, win in the revenue bands and then also to be able to retain and then be able to price in all of the different revenue bands.
And that's enabled them to now be able to direct our advertising to be able to make sure that we are moving to the revenue bands where we want to be involved. Revenue bands 45, the higher revenue bands, so the ones that typically we have better pricing with and that we also have longer retention. And overall, it's a good spend for us at that point in time. So that's one of the areas where analytics has been very positive for us, and our marketing group continues to push us in that direction to be able to have more wins in that area.
Okay, great. And then finally is on your on the model, I'm just kind of looking at the SG and A expenses. You mentioned that $0.05 impact from higher expenses on the BAW system for this year and similar impact for next year. I assume that like you talked about the SG and A leverage there that we haven't seen that this year. So I'm just wondering for the BAW system, isn't most of the benefits going to be showing up on the gross margin side and then your SG and A is probably still going to be at a heightened level for 2016?
Yes. For 2016, we will see it at that heightened level and then we'll see the gross margin based on all the anticipated benefits we'll have. We'll see the gross margin continue to improve. And as we've said, the 200 to 300 basis points over the 2 to 3 years, and we know that that's going to be a piece of it just from the impact on the cost efficiency side. And then of course, we'll take a look at any opportunities we have on the revenue side to continue to have a better customer experience.
I mean, just like the one we just talked about in the earlier example, if we can improve that customer experience, that should be a better retention opportunity for us. So that should enable us to be able to continue to grow our revenue as well.
Joe, we've learned something. As you can imagine, when you get half of your branches on the system is it takes the branch some time to kind of integrate their new technology and understand it and push you have the training responsibility, but we have expectations as far as reducing the mileage. And Eddie talks about the customer experience, which is 1st and foremost in our mind, but also the technician experience. I mean, it's very frustrating for that technician to have changes and not know the best way to get to an account and so forth. So we really think that it has employee retention benefits because we're creating a better job for our technician.
And all of these benefits, Joan, are going to be what's going to help us kind of get to that total number that we've talked about. I mean, all of these individual pieces, so we will be able to see that in the gross margin area.
Okay. All right, great. Thank you, guys. Yes.
Thanks, John.
And we'll go next to Sean Egan with KeyBanc Capital. Please go ahead. Your line is open.
Hey, good morning, gentlemen.
Hey, good morning. Good morning.
I wanted to piggyback on that last question and drill down specifically into the routing training that you alluded to in your prepared remarks. Is there recognizing that it's a moving target, when should we expect to kind of see the training start to yield benefits within the financial results?
Well, Sean, I think every trained branch is going to be one day better at being able to improve their routes. So I think that we're going to see those branches that have, 1st of all, the BOS capabilities, 2nd of all, the training from the new VRM and then the ability to be able to go through and implement, I think we'll start seeing small incremental gains as we move through time. We have lots of branches around our entire network that have done a good job in this area for an extended period of time. Entrepreneurial spirits, they figured out a way to make sure that their routes are as good as they can be. We have individual technicians that have taken that on themselves.
But this is going to help us formalize and get this out to all of the branches where we have the BOSS capabilities. And we'll be able to go through and be able to see some improvements as we as they get trained and as we go through kind of route by route, we'll be able to see those incremental improvements. So it's early to say here's what the X dollar is going to be or anything else like that. But again, we're excited. This is another area where BOSS is going to be be a benefit for us that we'll be able to move forward.
Well, I guess you can say that our average branch has been on it for 6 months.
That's right.
So we've not mastered what we have. And I think Eddie commented before about the 7 modules of training involving routing and scheduling. So you're asking the same question that I'm asking our finance department.
Yes, it's John. And I got
the same answer that you got.
Well, I guess I'll appreciate the Can you please expand a little bit on why the trend towards favoring termite baiting particularly is an advantage for you. I was just if you could put that into context and explain why that's a good thing for you.
I don't think there's a few different things. It's for 1, it's just environmentally more better, and we get that question all the time. And not that what we use at all is environmentally unfriendly, but anytime that you can use a bait rather than having any sort of a liquid would be something that would be preferred. So that's something that's going to be a benefit to start with. And then when we take a look at it from a cost perspective, we get a chance to be able to use something or basically kind of pay for something as we use it, as we go along.
When we have a pre treat and we have to spray and things like that, we have chemicals that we have to bring in and we have to inventory them. And this gives us an opportunity to be able to have more of a real time cost associated with acquiring a new customer. It's also a better way for us to have something that's visible and tangible from a recurring perspective. So we have something that we are actually able to go and be a part of with the customer when we talk about their recurring annual renewal. And it's grown very well, and it's taken over very well.
The HomeTeam group has probably been kind of shifting in this direction over the last several months and have seen very positive things that have come out of their customers that they've been talking about it.
A pretty cheap treat historically has been that you go out there with a termiticide and you treat the foundations and the slabs before they're poured and so forth. And there's not a lot of touch that you have with the customer. Bait improves the touch because you're out there servicing those bait stations and so you've got more contact. I think the customer sees a greater value. That other situation was kind of out of sight, out of mind.
And as Eddie mentioned, there's a lot of customers that are looking for a more environmentally positive situation.
Great. Thank you. And then briefly, you mentioned that your spend on M and A during 2015 was below kind of expectation or plan. Can you elaborate maybe that was due to timing, availability of targets, if it signals anything in the market?
Well, I'll start with the last. I don't think it signals anything in the market. We spent a lot of time on a very large acquisition that did not come to fruition. And so as we reroute from there and we move forward, like I mentioned in my prepared remarks, we've rebuilt the pipeline. The pipeline is very full right now, and we're continuing to move forward.
But we had anticipation and hopes of moving forward with a large acquisition that didn't happen. And 2016 is a new year and we're ready to continue marching down the path that we've very successfully been able to do for the last 10 plus years.
Okay. Thank you. That's all for me.
Okay. Well, thanks for taking the questions.
We'll go next to Roland Underhill with Underhill Investment. Please go ahead. Your line is
open. Hello. Could you I came on a little late. Could you be specific about more specific about the bed bug growth? And did you touch on the wildlife business growth?
Yes. So we can start with wildlife. We can start with wildlife. We just said in our prepared remarks that it's growing well. We're very excited on how the Critical Control acquisition is performing for us.
It's performing slightly better than what we would have anticipated, which is a good thing. TruTek Wildlife continues to grow very well. So I think the combination of the 2 is going to be a very positive thing for Rollins Wildlife as we're moving forward in time. As far as bed bugs, we didn't go through any specifics rolling on this. For the year, for bed bugs, it came in at $72,300,000 for bed bugs, and that was a 13.3% increase year over year.
The much higher base is, of course, always a challenge when it comes to growth rates. And we've been tracking this back. You're very familiar with the story. We've been tracking this back to 2010, where we're virtually nothing. We continue to grow this very well and again set up basically an all time record for the dollar amount of bedbugs that we have.
The residential piece has continued to grow really well. And what we're really trying to concentrate on here is to be able to do everything that we can to make this a recurring service. Anytime that we have to go out and we have a one time type of a job, it's much more difficult for us to ensure that we are pricing it correctly. And we recognize that. So even though we've had great revenue growth in previous years, in some cases, the cost associated with that good revenue growth has not always been in line.
And we're continuing to get better with that. We're continuing to understand what the costs are and really want to move continue to move in the direction of recurring types of revenue with the Bed Bug product. So when we have situations where it's just a one off type of a deal, we have not been as aggressive to be able to go and win that business because of the cost that we had associated with that. And then the last piece of it is 2010, there were very few players that were in the market. And over time, as media has continued to discuss this, more and more players have come into the market and competition for some of these jobs has continued to increase.
So we're very excited about the continued growth of bed bugs. It has slowed somewhat, but an all time high for us this past year.
Well, also, the industry was growing faster than the industry. Absolutely. And I think that's a healthy indication. And as Eddie said, a one time service is really not what we want. I mean, we want a situation where we routinely inspect the house and that we guarantee against reinvestation and so forth.
And that part of the business is growing, and that's the best part of the business.
Thank you. In the past, on the TruTech and the wildlife business, you've been more specific. Growing well could be 8%, it could be 30% where it has been in the past. What can you be can you help us a little more there?
We've been well into the high teens for that growth of those businesses.
Okay. That's helpful.
Okay. Thank you.
And our next question comes from James Clement with Macquarie. Please go ahead. Your line is open.
Guys, question was about M and A and it was asked and answered. So thanks very much for your time.
Yes, you're welcome.
And we'll go next to Joan Tong with Sidoti and Company. Please go ahead.
Hi. I just have a couple of follow ups. I'm not sure if you can disclose how we can actually be able to get down to the branch level. Since you talk about the BAW system has been implemented for some branches for more than 6 months, and I'm just wondering what has been the margin improvement for those branches?
Yes. Joan, we're not at a point to be able to discuss that, and I'm not sure that we'll ever talk about it at a branch level. We'll give you some color more on a macro level. And again, like I said in my prepared remarks in our for our Q1 call, we'll be more prepared to talk about some more specifics having to do with that.
Right. And but over the long term, the next couple of years, you're still targeting 200, three 100 kind of basis points of margin expansion when everything is said and done. So I'm just wondering, is it going to be more like a 20 17 event that we will see like a more pronounced benefit? Or we can actually see some of those like coming in the second half of twenty sixteen?
I think we'll see some benefits that will come in. I think we'll see benefits that will come in, in 2016. I mean getting this to a matured state is really the key to being able to see those benefits. And this again is one of the many things that we've had that have created that margin expansion that you've seen over the last 12 to 14 years. This is just another one of those items that are in the line.
I think we'll see some benefit from that towards the end of 2016. And by 2017, we should be relatively mature and be in a good spot to be able to enjoy the benefits of it.
Sure. And then really one last question, my favorite question is gas oil prices, lower gas oil prices, the benefit is what we said. What was that for this quarter?
So we're typically in a month somewhere between 6 100,000,800,000 gallons. We're on the lower end of that just based on the time of the season that it is, that's per month. And we saved roughly $1 a gallon a year over year on that.
Okay. All right. Thank you.
Okay. Thank
you. Thanks for the question.
Okay. Another question? Well, first of all, we appreciate your support and interest, and we look forward to sharing our Q1 progress in April.
And I do want to say one more thing, Gary, is that many of you have interacted with Lois Berger throughout the years, and Friday will be her last day. So any of those of you that have interacted with her, she's been your life blood to this office for the last 17 plus years. They want to reach out to her and wish her well. She's been a critical part to this call and obviously to this office for many years. So just wanted to pass that along.
Thanks so much. Thanks, Jamie.
And this concludes today's program. You may disconnect at this time. Thank you and have a great day.