• Total Revenue Growth: 3.6% in the third quarter.

• Organic Revenue Growth: 2.6% in the third quarter.

• International Regions Organic Growth: 4.4% in the third quarter.

• Europe Organic Growth: 4.7% in the third quarter.

• Asia and MENAT Organic Growth: 6.5% in the third quarter.

• North America Organic Revenue Growth: 1.4% in the third quarter.

• Annualized Cost Saving: $22 million from headcount reduction.

• Additional Inflation Costs: $7 million annualized.

• Material and Consumable Costs: $10 million expected to unwind during Q4 and next year.

• Customer Retention in North America: Improved to 79.9%.

• Colleague Retention in North America: Improved from 77.8% to 78.5%.

• Integration Progress: Systems and data integration in 28 branches with combined revenues of $136 million.

• Total Integrated Branches: 36 branches with revenues of around $172 million.

• Upcoming Integration: Systems migration in 23 branches with total revenue of around $130 million.

• Warning! GuruFocus has detected 5 Warning Signs with RKLIF.

Release Date: October 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Rentokil Initial PLC (RKLIF) reported a total revenue growth of 3.6% in the third quarter, with organic revenue growth of 2.6%.

• The company's international regions showed strong performance, with Europe achieving 4.7% organic growth and Asia and MENAT regions delivering 6.5% organic growth.

• Cost-saving measures in North America are expected to result in an annualized saving of around $22 million.

• The company is implementing new strategies to increase organic growth, including the Right Way 2 growth plan and piloting new satellite branches.

• Customer retention in North America improved slightly to 79.9%, and colleague retention also showed improvement.

Negative Points

• North America's organic revenue growth was only 1.4%, which was below expectations.

• The company faced higher-than-expected material and consumable costs in North America, partly due to inflation.

• There was a weaker termite season in North America, leading to elevated inventory levels.

• The integration process has led to a delay in synergy realization, pushing out 2025 synergies by approximately two to three months.

• The company is facing challenges in optimizing its branch network, which may impact future growth strategies.

Q & A Highlights

Q: You've had a significant improvement in five-star Google reviews across your major brands. Is this due to improved service quality or are you being more proactive in asking customers for reviews? Are technicians incentivized to get these reviews? A: It's a bit of both. Technicians are trained to ask for reviews when customers express satisfaction. We don't solicit reviews, but we do encourage happy customers to leave them. This year, we've seen a significant increase in five-star reviews, particularly for Terminix. Improving organic search involves updating webpage content, increasing five-star reviews, and optimizing location presence, which is why we're piloting satellite branches.