Q1 earnings callI just read the call transcript. Management is communicating a clear and focused vision The Service Experts business is working out quite well, and the rental model is gaining steam.
>>>Turning to Slide 5. Our objectives for Service Experts are to complete the planned rollout of our rental program in the United States; to pursue M&A opportunities; and improve profitability by growing organically. Revenue for Service Experts grew to $151 million in the first quarter, up 19% over the same period last year, and adjusted EBITDA improved by 17%, despite the seasonal nature of the business and by 19% on a constant currency basis. Customer service is also very important to the Service Experts business. I'm happy to report that we achieved a 4.75 out of 5 rating this quarter with Google. Rentals and sales were up 11%, with sales up 9% in the quarter. U.S. rental penetration doubled from the prior quarter and more than tripled year-over-year. We've now rolled out the rental model to Service Experts locations in 16 states, where 7.2% of new originations in the U.S. residential market represented rentals this quarter. Of the U.S. centers where we rolled out the rental model of 2017, over 10% of the new originations were rentals during March. We're very pleased with this rate of adoption in the U.S. market.
We've expanded into several key markets in the first quarter of 2018, completing acquisitions with operations in key metropolitan areas of Houston, Dallas Fort Worth and Tampa. We've got a robust M&A pipeline, and we're continuing to see good movement as we pursue the many opportunities in the U.S. Home Services industry.
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George Doumet, Scotiabank Global Banking and Markets, Research Division - Analyst [2] --------------------------------------------------------------------------------
John, I'd like to focus a bit on that really big jump we saw in the U.S. rentals in the quarter, especially given where we were 3 months ago. So maybe, what happened there? And given the success you've had, why not extend our program into 2019 and try to get that rate above our 10% targeted level?
So thanks for the question, George. So we did a number of things late in the fourth quarter of '17 and early in first quarter of 2018. And we built on some of the experiences we had with our initial launch to be able to improve the rental adoption. So some of the things we did is, we revisited the credit matrix. One of the things we found when we went to the U.S. market, particularly in -- when you get to larger homes, the value of the systems you're dealing with is higher. And so we had to change our credit. We were rejecting really good credit at the top end of the scale, so we changed that. We made the credit system more available, so we increased the hours of operation. We did significant retraining and encouragement and coaching of the sales team. We did a little bit of product positioning, repositioning how it was presented in the market. And then we also, in certain areas, had an increased commission for rental, not -- fairly modest but something that would help compensate the rep for some of the extra time it might take to explain the proposition to them. So all of those things seem to have -- I can't really disaggregate which of those provided the most success. But we do think we've got a good formula, and that's why we're continuing to roll out through the U.S. market. And we're particularly pleased in the new markets we entered this quarter. We had good adoption, better than the first adoption we had in the earlier markets we entered. So in terms of -- obviously, we mentioned we're at 10% in March. It's hard to predict where we're going to go. And obviously, it's important that we continue to sort of improve and strengthen what we do and really learn as we go. We haven't provided guidance in terms of where we think we'll get to, but I do think we're on the right trajectory. And I'm feeling very comfortable that while we never built any upside associated with the rental rollout in the Service Experts business when we acquired it, we're really gratified that we've been able to get some more meaningful success in this quarter. And obviously, once we see what the trajectory looks like, then we might be in a better position to give the market expectations as to where we might ultimately roll up to.
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