Question-and-Answer Session
Operator
Thank you. (Operator Instructions). And, our first question from the line of Jim Famalette with Sidoti & Company. Please go ahead.
Jim Famalette
Hi, Gary. Harry, good morning.
Gary Rollins
Good morning.
Harry Cynkus
Good morning
Jim Famalette
Gary, one thing about --about HomeTeam their business model that I’m a little unclear about in and I really you know as a part of a large organization so this, limited historical numbers out there for us, but, did this HomeTeam technician actually have to be onsite when the tubes are essentially built into a home or they just sell the tubes themselves?
Gary Rollins
No, they actually install the tubes.
Jim Famalette
Okay. Okay, so, I’m looking at just their EBITDA margin based on the last 12 months, looks like it’s cut it was been half of what Rollins is, when times are challenging in a home building market as they are now, is there infrastructure in place at HomeTeam that the company just got it has to absorb until time is get better and I guess it’s kind of a follow up question so there will be two parts would be, where margins better in say 2005 and early 2006 in this business and would you expect that when conditions improve I mean is there a fair amount of margin upside in this business?
Gary Rollins
We have to answer a lot of questions.
Jim Famalette
I’m sorry, I apologize. You don’t worry, I’m going with this.
Gary Rollins
If there are, as margin now opportunities, you know, we think that we have knowledge, that we can share, that we’ve gained and wrapped the pest control business, these are good people, they are good operators, but, we think that we can bring some things that to the party to help, show them some things that they may not be aware of-- to get back into the kind of the margin movement and how things were two years ago versus you know this past year. Their margins have continued to improve. This business till some extent is kind of like to burglar alarm business or the cable television business. When you are adding a lot of homes, it’s really more costly than when you are not adding a lot of homes.
Jim Famalette
Okay.
Gary Rollins
You have the benefit of the recurring revenue base which you don’t have the installation recruitment et cetera. So, to some extent as a kind of good news bad news, the bad news is that the housing industries are, but the good news is that the housing industry is all -- because you don’t have this phenomenal investment that you are extending to install these units in these new homes. So, we really think that as Harry mentioned that there is a lot of areas that we can improve the margins and one of the factors that I have mentioned a little earlier is half of the business is just the conventional pest control. And I guess a reasonable question would be, why is that so and that’s so is because they acquired pest control companies that have a base of operation when they went into these various cities. So, they have a large number of customers that they don’t have anything to do with the tubes.
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