Rollins U.S. All Stars Conference

Thank you. Right. So thank you, Tomo.

It has been quite a saga for us. I think to help give some context to this discussion, it may help to even go back further, briefly, into late last year and early this year, because there's been a lot of noise. There's been a lot of, I guess, speculation about what's going on. I hear things, but yet I'm also living it. So I live it each and every day. So when I hear things, I'm like, "Well, that's not at all what we're seeing or what we're experiencing." So, I thought I'd give you my perspective on how this has all played out. So if you go back to the fourth quarter last year, and actually most of last year. Go back to, say, March or April of 2025.

I had talked about softening lead generation coming through the business from about March on of 2025. We were seeing these single digit, mid-single digit, 5% lead declines throughout the performance marketing driven brands like in Orkin. That was fairly consistent through the year. We still grew really well, achieved great results, because the lead volume that we were getting was higher quality leads that were converting at a higher rate and also starting at a higher rate. So our volumes were good and we were dealing with that. Fast-forward through 2025 to about November. November, we actually, in much of the U.S., had kind of an early winter, and that seemed to have halted the pest pressure a little bit early. It was by weeks. Normally it's end of November, beginning of December. Instead, it was that first week of November that was really quite different.

So in some ways, winter just kind of started early, Tomo. So, we reported fourth quarter, and it was a lot of our one-time business that was impacted. People were wondering, "Well, is it really the weather or is somebody else taking share? What else is going on in the market?" There's a lot of speculation. We're like, "No," we knew exactly what that was. You go into January. January was really tough, and we had ice storms that affected much of the South. We had branch closures, branches that couldn't drive and operate safely. It really was a challenge operationally. As we moved through the quarter, we saw similar kind of lead changes like we saw in 2025. As we moved through the quarter, we exited March with an 8% organic growth rate.

Things were looking good and things looked healthy. April was fine. It wasn't a record-setting month, but it was solid. Then we move into May. As we moved over the course of May, especially as we moved towards the back half of May, things started to deteriorate. Those are times in our business when you get close to June, when the lead volume and the activity in this space is really typically quite high. That separation really started. You really started to feel it as we moved through the back half of May. June had some highs and lows. The end of June was decent and we started out July good. Then it seemed to drop again, and I talked about that on the earnings call. At times, there were glimmers of hope and some times when things isn't strong.

Then you move forward into, as we talk about current environment, this softness has really remained with us this entire time. This extra softness in the leads, where we're talking about double-digit lead declines instead of 4% or 5% lead decline. It made for a really challenging environment. Looking back on the Q2 earnings call, we talked about, is it the consumer? Is it the LLMs? Is it pest pressure? Or all these things. We really started doing a deep dive into what are the things that are driving some of this change. We were working on that as we ended the quarter and doing some of the look back on there.

Where we land today is we tested a lot of things, we looked at the data, and there may be some degree of it that's tied back to the consumer and the consumer health. We don't think that's a lot because we tested, we looked at our income bands, we looked at lead volume by income band, and you would have suspected that the lower income bands may have seen steeper reduction in lead volume. That really wasn't the case. It was proportional across all of our income bands that we're aware of. That really didn't seem to be it. It just wasn't significant enough to represent the significant change. We looked at pest pressure. We did see some change in certain, what I call bellwether pests, like mosquitoes and things that were down single digits.

Looking at the re-service rate, that for us is an indication of pest pressure. Then you have the LLMs, which is the unknown, and we also learned that March 19th is when Google went to AI Overviews and all their default search, which- May 19th. What did I say? March. March 19th. But May 19th is when they went to the AI Overview as default search, and that's also when we started to see that gap really begin to widen as well. Certainly, if I had to name it, I would say certainly, at least 50%-60% of what we experience is probably related to this shift in the LLMs, and there's probably also a few other factors that are involved there, probably at a much less level. Since then, we've been focused rather aggressively for our marketing teams. We've navigated changes like this before.

We navigated when it went from Google to Google LSA and some other challenges over the years. We will navigate this one too. We have engaged some other outside help with our team. We have a great, fantastic team that I believe in, that I know can help us navigate this. Rather than playing one game like we used to play or just a couple of digital acquisition methods, now we have to play in how do we deal with Gemini, how do we deal with ChatGPT, how do I deal with Claude? There are all these things that all value certain things differently. We have to look at our content online, what we do on our websites, how we feel, making sure that our brands feel like we are local companies in the markets that we serve.