[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company's unaudited condensed consolidated financial statements reflect its financial position, income, equity, and cash flows for Q1 2024 [Condensed Consolidated Statements of Financial Position](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20POSITION) Total assets grew to $2.66 billion, driven by increases in Goodwill and operating lease right-of-use assets Condensed Consolidated Statements of Financial Position (in thousands) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total current assets** | $424,353 | $406,639 | | **Goodwill** | $1,095,141 | $1,070,310 | | **Total assets** | **$2,658,619** | **$2,595,460** | | **Total current liabilities** | $591,936 | $576,689 | | **Long-term debt** | $510,909 | $490,776 | | **Total liabilities** | **$1,491,123** | **$1,439,893** | | **Total stockholders' equity** | **$1,167,496** | **$1,155,567** | [Condensed Consolidated Statements of Income](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Revenues grew 13.7% to $748.3 million in Q1 2024, with net income rising 7.0% to $94.4 million Q1 2024 vs Q1 2023 Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | **Revenues** | $748,349 | $658,015 | 13.7% | | **Operating Income** | $132,424 | $112,240 | 18.0% | | **Net Income** | $94,394 | $88,234 | 7.0% | | **Net Income Per Share - Diluted** | $0.19 | $0.18 | 5.6% | | **Dividends Paid Per Share** | $0.15 | $0.13 | 15.4% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) Comprehensive income remained flat at $88.7 million, as net income growth was offset by foreign currency translation losses Comprehensive Income (in thousands) | | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net Income** | $94,394 | $88,234 | | **Other comprehensive (loss) income, net of tax** | $(5,717) | $259 | | **Comprehensive income** | **$88,677** | **$88,493** | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Stockholders' equity increased to $1.17 billion, reflecting net income additions partially offset by dividend payments - Key changes in stockholders' equity for Q1 2024 include the addition of **$94.4 million in net income**, offset by **$72.6 million in cash dividends** and **$11.3 million for shares withheld for employee taxes**[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Operating cash flow increased 26.5% to $127.4 million, while investing cash use rose due to higher acquisition spending Summary of Cash Flows (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $127,433 | $100,773 | | **Net cash used in investing activities** | $(52,465) | $(13,590) | | **Net cash used in financing activities** | $(64,254) | $(71,082) | | **Net increase in cash and cash equivalents** | $9,146 | $17,157 | | **Cash and cash equivalents at end of period** | $112,971 | $112,503 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes detail accounting policies, acquisitions, revenue, and debt, including the impact of the Fox Pest Control acquisition - The company made **12 acquisitions** during Q1 2024 for a total consideration of **$53.8 million**[28](index=28&type=chunk) - The Fox Pest Control acquisition, completed in April 2023, contributed **$35.5 million in revenues** and **$1.5 million in net earnings** during Q1 2024[31](index=31&type=chunk) - As of March 31, 2024, the company had **$513.0 million in outstanding borrowings** under its $1.0 billion revolving credit facility at an effective interest rate of **6.4%**[56](index=56&type=chunk) - The company paid cash dividends of **$0.15 per share** in Q1 2024, up from $0.13 per share in Q1 2023[62](index=62&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=17&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses a 13.7% revenue increase driven by organic growth and acquisitions, alongside improved operating margins Q1 2024 Key Performance Metrics | Metric | Q1 2024 | Change vs Q1 2023 | | :--- | :--- | :--- | | **Revenues** | $748.3M | +13.7% | | **Organic Revenues*** | - | +7.5% | | **Operating Income** | $132.4M | +18.0% | | **Operating Margin** | 17.7% | +60 bps | | **Adjusted EBITDA*** | $160.8M | +19.3% | | **Adjusted EBITDA Margin*** | 21.5% | +100 bps | | **EPS** | $0.19 | +5.6% | | **Adjusted EPS*** | $0.20 | +17.6% | | **Operating Cash Flow** | $127.4M | +26.5% | *Non-GAAP measure. - The company is targeting **7% to 8% organic growth** and **2% to 3% inorganic growth** for the full year 2024[73](index=73&type=chunk) - Revenue growth was strong across all major service lines: Residential pest control grew approximately **16%**, commercial pest control grew **11%**, and termite/ancillary services grew **12%**[81](index=81&type=chunk) - Gross margin improved by **90 basis points to 51.2%**, with 40 basis points of the improvement attributed to the accretive Fox Pest Control acquisition[84](index=84&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company reports no material changes to its market risk exposure compared to the 2023 year-end disclosures - There were **no material changes** to the company's market risk exposure during the first quarter of 2024[128](index=128&type=chunk) [Controls and Procedures](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of the quarter-end, excluding recent acquisitions - The principal executive and financial officers concluded that **disclosure controls and procedures were effective** as of March 31, 2024[129](index=129&type=chunk) - The assessment of internal controls over financial reporting **excludes Fox Pest Control**, which was acquired in the second quarter of 2023 and is still being integrated[130](index=130&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls[131](index=131&type=chunk) [PART II - OTHER INFORMATION](index=29&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=29&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in routine litigation and a specific California environmental inquiry, none deemed materially adverse - The company is involved in various **routine legal matters** arising from its business operations[133](index=133&type=chunk) - The company is currently working with local governments in California regarding an **investigation into compliance with environmental regulations** for waste and pesticide disposal for its Orkin and Clark Pest Control operations[135](index=135&type=chunk) - Management does not believe any pending legal proceeding will have a **material adverse effect** on the company's financial condition or results[136](index=136&type=chunk) [Risk Factors](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors disclosed in the 2023 Annual Report on Form 10-K - There have been **no material changes** to the risk factors disclosed in the company's 2023 Form 10-K[137](index=137&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company withheld shares for employee taxes but made no open market repurchases, with 11.4 million shares remaining authorized Share Repurchase Activity (Q1 2024) | Period | Total Shares Purchased(1) | Weighted Average Price Paid | Shares Purchased as Part of Publicly Announced Plan | | :--- | :--- | :--- | :--- | | Jan 2024 | 213,181 | $43.52 | — | | Feb 2024 | 48,075 | $41.05 | — | | Mar 2024 | 324 | $46.70 | — | | **Total** | **261,580** | | **—** | (1) Shares withheld for employee tax obligations. - As of March 31, 2024, the company has authorization to repurchase an additional **11.4 million shares** under its share repurchase program[139](index=139&type=chunk) [Defaults Upon Senior Securities](index=30&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the period - None[140](index=140&type=chunk) [Mine Safety Disclosures](index=30&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The company reported no mine safety disclosures for the period - None[141](index=141&type=chunk) [Other Information](index=31&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The CEO and President adopted a Rule 10b5-1 trading plan for the potential sale of company securities - CEO and President Jerry E. Gahlhoff, Jr. adopted a **Rule 10b5-1 trading plan** on March 8, 2024, for the sale of up to **12,000 shares** of common stock[143](index=143&type=chunk) [Exhibits](index=32&type=section&id=ITEM%206.%20EXHIBITS) This section lists filed exhibits, including Sarbanes-Oxley certifications and Inline XBRL data files - The exhibits include **CEO and CFO certifications** pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[145](index=145&type=chunk)

Financial Data and Key Metrics Changes - Rollins reported a revenue increase of nearly 14% to $748 million for Q1 2024, with organic growth of 7.5% despite adverse weather conditions in January [10][15] - Adjusted operating margins improved to 18.4%, up 130 basis points year-over-year, driven by strong gross profit performance and solid expense leverage [16][22] - Free cash flow increased by 29% to $120 million, reflecting strong cash flow generation [27] Business Line Data and Key Metrics Changes - Residential revenue increased by 16.5%, commercial pest control rose by 11.4%, and termite and ancillary services increased by 11.7% [4][17] - Organic growth in residential services was 4.3%, while commercial and termite services saw organic growth of 10.1% and 9.3%, respectively [17][18] Market Data and Key Metrics Changes - The company closed 12 tuck-in deals in the first three months of the year, indicating a healthy M&A pipeline [5] - The effective tax rate for the quarter was approximately 24%, consistent with the prior year [24] Company Strategy and Development Direction - Rollins continues to invest in sales staffing and marketing activities ahead of peak season to enhance customer service and drive growth [4][5] - The company aims for at least 2% growth from M&A activity in 2024, reflecting a commitment to operational efficiency and continuous improvement [5][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a long-term organic growth rate of 7% to 8%, despite fluctuations in quarterly performance [34][56] - Demand for services remains strong, with expectations for continued healthy levels of demand in April [51] Other Important Information - The company announced changes to its Board of Directors, welcoming new members and expressing gratitude to retiring members [13][14] - Rollins is focused on enhancing safety protocols, resulting in improved safety scores and fewer incidents compared to the previous year [12] Q&A Session Summary Question: Trends in organic growth rates - Management indicated that while February and March showed improved growth, the long-term expectation remains around 7% to 8% organic growth [34][36] Question: Increase in sales and marketing expenses - The increase is primarily due to staffing up sales teams rather than defensive marketing strategies, aimed at capturing growth opportunities [35][36] Question: Trends in the residential business - Management noted that organic growth in residential services was impacted by weather in January but improved significantly in February and March [39][41] Question: Factors affecting termite and ancillary services growth - The growth in this segment remains strong, but productivity challenges due to weather-related branch closures affected performance [42][43] Question: Sustainability of commercial organic growth - Management emphasized ongoing investments in the sales force and training as key to sustaining strong commercial growth [44][45] Question: Pricing strategy and pushback - Rollins is implementing CPI-plus pricing, expecting to maintain price increases without significant pushback from customers [63] Question: Capital allocation and M&A pipeline - The M&A pipeline is healthy, with expectations of 2% to 3% revenue growth contribution from acquisitions in 2024 [53] Question: Residential growth expectations - Management anticipates that residential growth may lag behind commercial and termite growth, reflecting historical trends [56][58]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2023 Commission file No. 1-4422 _____________________________ ROLLINS, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 2170 Piedmont Road, N.E., Atlanta, Georgia 30324 (Address of principal executive offices) (Zip ...

Financial Data and Key Metrics Changes - The company achieved a revenue milestone of $3.1 billion for fiscal 2023, reflecting a robust revenue growth of 14% year-over-year [17][24] - Adjusted net income for the fourth quarter was $101 million, or $0.21 per share, an increase of over 23% from the same period a year ago [8][54] - Full-year earnings per share grew by over 18%, with adjusted earnings per share increasing by 20% [17][51] - Operating cash flow for the year was $528 million, and free cash flow was $495 million, both up over 13% compared to the previous year [24][27] Business Line Data and Key Metrics Changes - In the fourth quarter, Residential revenues increased approximately 18%, Commercial Pest Controls rose nearly 11%, and Termite and Ancillary services were up over 13% [25] - Organic growth was reported at nearly 5% in Residential, approximately 9% in Commercial, and over 11% in Termite and Ancillary [25][23] - The company experienced a deceleration in residential organic growth from 7% in Q3 to 5% in Q4, attributed to seasonal factors and a slowdown in one-time services [57][58] Market Data and Key Metrics Changes - The company noted a competitive environment in the pest control industry, with no significant shifts in competitiveness [38] - The commercial revenue growth for the year was approximately 11%, indicating strong demand in that segment [46] Company Strategy and Development Direction - The company is focused on organic growth complemented by strategic M&A, having welcomed 24 new businesses through acquisition in 2023, including the significant acquisition of Fox Pest Control [19][24] - Investments have been made in the commercial side of the business, including growing the sales force and enhancing training and tools for success [18] - The company is committed to continuous improvement and safety, implementing initiatives to modernize back-office functions and improve driver safety scores [20][21][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum heading into 2024, highlighting strong execution and demand across service offerings [7][49] - The company plans to continue raising prices in line with previous years, monitoring customer sensitivity to these increases [64][93] - Management remains confident in delivering healthy growth rates and incremental margins, supported by disciplined pricing and M&A strategies [77][119] Other Important Information - The company divested its lawn care business for $18 million, recognizing a pretax gain of $15 million, aligning with its strategy to focus on core pest control operations [34][47] - The effective tax rate for the quarter and full year was 25.8%, with expectations for a similar rate in 2024 [54] Q&A Session Summary Question: What level of price increase was implemented last year? - The company passed along a 3% to 4% price increase last year and plans to implement a similar increase in the first quarter of this year [64] Question: How does the growth rate in Q4 compare to the industry? - Management expressed confidence in their growth rates, indicating they continue to gain market share despite a competitive landscape [65][69] Question: What are the trends in recurring revenue growth? - Recurring revenue growth remains healthy, with no significant deceleration observed compared to prior quarters [67][68] Question: What is the outlook for M&A activity? - The company sees a healthy pipeline for M&A, expecting a carryover of approximately 2% growth from acquisitions into 2024 [118] Question: How is the company addressing unit cost inflation? - Management noted ongoing challenges with inflation but remains cautiously optimistic about managing costs effectively [149][152]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The financial statements for the nine months ended September 30, 2023, show significant growth driven by acquisitions, with total assets increasing to $2.64 billion and Q3 revenues rising 15.2% to $840.4 million [Condensed Consolidated Statements of Financial Position](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20POSITION) Key Balance Sheet Items (in thousands of dollars) | Account | Sep 30, 2023 | Dec 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$2,639,957** | **$2,122,028** | **+24.4%** | | Goodwill | $1,053,965 | $846,704 | +24.5% | | Customer contracts, net | $402,349 | $298,559 | +34.8% | | **Total Liabilities** | **$1,537,114** | **$854,831** | **+79.8%** | | Long-term debt | $596,642 | $39,898 | +1395.4% | | **Total Stockholders' Equity** | **$1,102,843** | **$1,267,197** | **-13.0%** | - The significant increase in **Goodwill**, **Customer Contracts**, and **Long-term Debt** is primarily attributable to the acquisition of **Fox Pest Control**, while the decrease in **Stockholders' Equity** reflects the impact of a large share repurchase[11](index=11&type=chunk)[24](index=24&type=chunk)[82](index=82&type=chunk) [Condensed Consolidated Statements of Income](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Q3 2023 vs Q3 2022 Performance (in thousands of dollars, except per share data) | Metric | Q3 2023 | Q3 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $840,427 | $729,704 | +15.2% | | Operating Income | $177,124 | $145,404 | +21.8% | | Net Income | $127,777 | $108,943 | +17.3% | | Diluted EPS | $0.26 | $0.22 | +18.2% | Nine Months 2023 vs 2022 Performance (in thousands of dollars, except per share data) | Metric | Nine Months 2023 | Nine Months 2022 | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $2,319,192 | $2,034,433 | +14.0% | | Operating Income | $444,153 | $373,471 | +18.9% | | Net Income | $326,154 | $284,329 | +14.7% | | Diluted EPS | $0.66 | $0.58 | +13.8% | - The company incurred **$5.2 million** in restructuring costs during the third quarter of 2023, which were not present in the prior year[12](index=12&type=chunk)[98](index=98&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash Flow Summary for Nine Months Ended Sep 30 (in thousands of dollars) | Activity | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $375,541 | $342,537 | +$33,004 | | Net cash (used in) investing activities | ($362,334) | ($123,378) | -$238,956 | | Net cash provided by (used in) financing activities | $33,743 | ($196,285) | +$230,028 | | **Net increase in cash** | **$46,901** | **$16,575** | **+$30,326** | - The significant increase in cash used for **investing activities** was driven by acquisitions, which totaled **$349.3 million**, primarily for **Fox Pest Control**, while the shift in **financing activities** from a use of cash to a source was due to net borrowings of **$599 million** funding acquisitions and a **$314.9 million** share repurchase, also covering **$191.8 million** in dividends[19](index=19&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) - On April 1, 2023, the Company acquired 100% of **Fox Pest Control** for **$339.5 million**, funded by borrowing **$305.0 million** under its Credit Agreement, with Fox contributing **$81.0 million** in revenues and **$1.9 million** in net earnings from April 1 to September 30, 2023[24](index=24&type=chunk)[26](index=26&type=chunk) - The company entered into a new **$1.0 billion** revolving credit facility on February 24, 2023, with outstanding borrowings of **$599.0 million** at an effective interest rate of **6.4%** as of September 30, 2023[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - In September 2023, the Company repurchased **8,724,100 shares** of its common stock from LOR, Inc. for approximately **$300 million**[82](index=82&type=chunk)[95](index=95&type=chunk) - A restructuring program was executed in Q3 2023 to modernize the workforce, resulting in **$5.2 million** in costs, primarily for one-time termination benefits[98](index=98&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reported strong Q3 2023 results with revenues up 15.2% to $840.4 million, driven by 8.4% organic growth and acquisitions, while operating margin expanded 120 basis points to 21.1% [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Q3 2023 vs Q3 2022 Performance Summary | Metric | Q3 2023 | Q3 2022 | Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$840.4M** | **$729.7M** | **+15.2%** | 8.4% organic growth, 6.8% from acquisitions | | Residential Revenue | - | - | +20% | Strong demand and acquisition contribution | | Commercial Revenue | - | - | +12% | Continued market penetration | | Termite & Ancillary | - | - | +11% | Solid growth in services | | **Gross Margin** | **53.8%** | **52.3%** | **+150 bps** | Accretive Fox acquisition, favorable claims experience | | **Operating Margin** | **21.1%** | **19.9%** | **+120 bps** | Gross margin improvement, offset by restructuring costs | Nine Months 2023 vs 2022 Performance Summary | Metric | Nine Months 2023 | Nine Months 2022 | Change | Key Drivers | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | **$2.32B** | **$2.03B** | **+14.0%** | 8.4% organic growth, 5.6% from acquisitions | | **Gross Margin** | **52.6%** | **51.8%** | **+80 bps** | Accretive acquisitions and pricing initiatives | | **Operating Margin** | **19.2%** | **18.4%** | **+80 bps** | Gross profit improvement and SG&A leverage | [Non-GAAP Financial Measures](index=31&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses **non-GAAP measures** such as **organic revenues**, **adjusted operating income**, **adjusted net income**, **adjusted EPS**, and **adjusted EBITDA** to provide a consistent comparison of performance over various periods, excluding items like acquisition-related expenses and restructuring costs[134](index=134&type=chunk)[135](index=135&type=chunk) Q3 2023 GAAP to Non-GAAP Reconciliation (in thousands of dollars) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Operating Income | $177,124 | $10,458 | $187,582 | | Net Income | $127,777 | $7,781 | $135,558 | | EBITDA | $202,285 | $6,246 | $208,531 | [Liquidity and Capital Resources](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - The company's primary source of liquidity is **cash from operations**, which increased **9.6%** to **$375.5 million** for the first nine months of 2023[149](index=149&type=chunk)[150](index=150&type=chunk) - A new **$1.0 billion** revolving credit facility was established in February 2023, with **$599.0 million** outstanding as of September 30, 2023, used to fund the **Fox acquisition** and a **$300 million** share repurchase[144](index=144&type=chunk)[145](index=145&type=chunk)[152](index=152&type=chunk) - **Cash used in investing activities** increased significantly to **$362.3 million** from **$123.4 million** year-over-year, driven by **$349.3 million** in acquisition spending[149](index=149&type=chunk)[151](index=151&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company reported no material changes to its market risk exposure during the nine months ended September 30, 2023, compared to its 2022 Form 10-K disclosure - There were **no material changes** to the company's market risk exposure during the first nine months of 2023[168](index=168&type=chunk) [Controls and Procedures](index=35&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, excluding the recently acquired Fox Pest Control due to ongoing integration - The principal executive and financial officers concluded that disclosure controls and procedures were **effective** as of September 30, 2023[169](index=169&type=chunk) - The assessment of internal controls over financial reporting **excludes** the recently acquired **Fox Pest Control**, as the **integration process is ongoing**[170](index=170&type=chunk) [PART II OTHER INFORMATION](index=36&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=36&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings, including a California investigation into hazardous waste and pesticide disposal, but management anticipates no material adverse effect - The company is **under investigation** by **California authorities** regarding compliance with **environmental regulations** for **hazardous waste and pesticide disposal**[174](index=174&type=chunk) - Management does **not believe** that any pending legal proceedings, including the California investigation, will have a **material adverse effect** on the company's financial position or results of operations[175](index=175&type=chunk) [Risk Factors](index=36&type=section&id=ITEM%201A.%20RISK%20FACTORS) Following a share sale by LOR, Inc., the company is no longer a 'controlled company' under NYSE and SEC rules, necessitating compliance with new corporate governance standards - Following a sale of common stock by LOR, Inc., the company is **no longer a "controlled company"** under NYSE and SEC rules[177](index=177&type=chunk) - As a result, the company must now meet **heightened corporate governance standards**, including requirements for a **majority-independent board** and **fully independent nominating and compensation committees**, subject to phase-in periods ending in **September 2024**[178](index=178&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) In Q3 2023, the company repurchased 8,725,003 shares, including a special September repurchase of 8.7 million shares for approximately $300 million Share Repurchase Activity (Q3 2023) | Period | Total Shares Purchased | Weighted Average Price | | :--- | :--- | :--- | | July 2023 | 903 | $44.84 | | August 2023 | 0 | $0.00 | | September 2023 | 8,724,100 | $34.39 | | **Total Q3** | **8,725,003** | **-** | - The September repurchase of **8.7 million shares** for **~$300 million** was made concurrently with a secondary offering by LOR, Inc. and was approved under a **special, one-time authorization**, not the main repurchase plan[183](index=183&type=chunk) [Other Information](index=39&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Chief Administrative Officer Thomas D. Tesh adopted a Rule 10b5-1 trading plan on August 10, 2023, for the potential sale of company shares - On August 10, 2023, Chief Administrative Officer Thomas D. Tesh entered into a **Rule 10b5-1 trading plan** for the sale of company securities[186](index=186&type=chunk)[187](index=187&type=chunk)

ThirdQuarter 2023 Earnings Webcast Presentation Rollins, Inc. October 26, 2023 Statements made in this earnings presentation may contain forward-looking statements that involve risks and uncertainties concerning the Company's business and financial results. We have based these forward-looking statements largely on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our ...

Rollins, Inc. (NYSE:ROL) Q3 2023 Earnings Conference Call October 26, 2023 8:30 AM ET Company Participants Ken Krause - Executive Vice President, Chief Financial Officer & Treasurer Lyndsey Burton - Vice President, Investor Relations Jerry Gahlhoff - President and Chief Executive Officer Conference Call Participants Ashish Sabadra - RBC Capital Markets Tim Mulrooney - William Blair Josh Chan - UBS Aadit Shrestha - Stifel Harold Antor - Jefferies John Mazzoni - Wells Fargo Ollie Davies - Redburn Operator ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________________________________________ FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-4422 ROLLINS, INC. (Exact name of registrant as specified in its charter ...

Financial Data and Key Metrics Changes - The company reported a revenue increase of approximately 15% to $821 million, with organic growth of about 8% [32][44] - GAAP operating income was $155 million, up almost 15% year-over-year, while adjusted operating income was $160 million, up almost 19% [12] - Quarterly GAAP net income was $110 million or $0.22 per share, increasing from $0.21 per share in the same period a year ago [14] - Free cash flow was strong at $141 million, representing an increase of almost 18% [15] Business Line Data and Key Metrics Changes - Commercial pest control revenue rose approximately 11%, residential increased over 18%, and termite services were up approximately 14% [32] - The integration of the Fox acquisition contributed about $39 million in revenue for the quarter, positively impacting gross margins [27][34] Market Data and Key Metrics Changes - The company experienced a decline in advertising during the winter season, but expects a ramp-up in Q2 and Q3 [2] - The Canadian and Australian dollar's weakening relative to the U.S. dollar reduced revenue growth by 30 basis points [45] Company Strategy and Development Direction - The company remains focused on organic growth and disciplined acquisitions, with a robust acquisition pipeline [36][19] - Continuous improvement in service levels and operating efficiencies is a key part of the company's culture [37] - The company is actively evaluating acquisition opportunities both domestically and internationally [36] Management's Comments on Operating Environment and Future Outlook - Management noted a significant shift in demand in June, but observed a recovery in early July with an 18% increase in unique website visitors year-over-year [23][24] - The company is optimistic about maintaining strong organic growth and improving cash flow in the second half of the year [97][76] Other Important Information - The company filed a shelf registration with the SEC for up to $1.5 billion of primary securities, providing flexibility for long-term financing [18] - The company is investing in driver safety initiatives to mitigate higher insurance costs associated with auto claims [38][39] Q&A Session Summary Question: Impact of inflation on customer growth and pricing - Management acknowledged some pushback on pricing but stated it has not been significant thus far [5][6] Question: Trends in May and June - Management noted a strong start in April and May, followed by a decline in June, but a recovery was seen in early July [23][24] Question: Gross margin expansion and Fox acquisition - The Fox acquisition positively impacted gross margins, but organic business improvements also contributed [27][28] Question: Customer acquisition costs and advertising spend - Management is comfortable with current customer acquisition costs and sees good returns on advertising investments [96][95] Question: Future cash flow expectations - The company is optimistic about maintaining a compounding cash flow in the mid-teen range [97]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Rollins, Inc.'s unaudited condensed consolidated financial statements for Q1 2023 are presented, including financial position, income, equity, and cash flows, with detailed notes [Condensed Consolidated Statements of Financial Position](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20POSITION) Total assets increased to **$2.139 billion** as of March 31, 2023, driven by cash, while total liabilities slightly decreased to **$851.1 million**, and stockholders' equity grew to **$1.288 billion** Condensed Consolidated Balance Sheet (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | **$367,866** | **$348,619** | | Goodwill | $852,800 | $846,704 | | **Total Assets** | **$2,138,886** | **$2,122,028** | | **Total Current Liabilities** | **$467,356** | **$493,784** | | Long-term debt | $62,432 | $39,898 | | **Total Liabilities** | **$851,134** | **$854,831** | | **Total Stockholders' Equity** | **$1,287,752** | **$1,267,197** | [Condensed Consolidated Statements of Income](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Q1 2023 revenues increased **11.4%** to **$658.0 million**, with operating income up **20.2%** to **$112.2 million**, and net income rising **19.6%** to **$88.2 million**, yielding **$0.18** diluted EPS Q1 2023 vs Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Revenues | $658,015 | $590,680 | | Operating Income | $112,240 | $93,390 | | Net Income | $88,234 | $73,766 | | Net Income Per Share - Diluted | $0.18 | $0.15 | | Dividends Paid Per Share | $0.13 | $0.10 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash from operations increased to **$100.8 million** in Q1 2023, while investing activities used **$13.6 million**, and financing activities shifted to a **$71.1 million** outflow due to higher dividends and debt repayments Cash Flow Summary (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $100,773 | $87,532 | | Net cash (used in) investing activities | $(13,590) | $(19,928) | | Net cash (used in) provided by financing activities | $(71,082) | $82,093 | | Net increase in cash and cash equivalents | $17,157 | $153,037 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Key notes include **six acquisitions** for **$15.5 million**, a new **$1.0 billion** credit facility, PSU awards, and the subsequent **$318 million** acquisition of Fox Pest Control - The company completed six acquisitions during Q1 2023 for a total cash purchase price of **$15.48 million**, adding **$6.1 million** in goodwill[27](index=27&type=chunk) Revenue by Service Offering (in thousands) | Service | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Residential revenue | $283,625 | $259,259 | | Commercial revenue | $230,402 | $205,787 | | Termite & ancillary | $136,605 | $119,706 | - On February 24, 2023, the company entered into a new **$1.0 billion** revolving credit agreement, refinancing its previous facility. As of March 31, 2023, **$62.4 million** was outstanding[51](index=51&type=chunk)[52](index=52&type=chunk)[56](index=56&type=chunk) - On April 1, 2023, the Company acquired Fox Pest Control for **$318 million** plus **$32 million** of contingent consideration. The acquisition was funded by borrowing **$305.0 million** under the new credit facility and cash on hand[78](index=78&type=chunk) - The Board of Directors declared a quarterly cash dividend of **$0.13** per share on April 25, 2023[79](index=79&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses Q1 2023 financial results, highlighting **11.4%** revenue growth, **20.2%** operating income increase, margin expansion, liquidity, and the significant post-quarter Fox Pest Control acquisition - Q1 2023 revenue grew **11.4%** to **$658.0 million**, driven by **9.2%** organic growth and **2.2%** from acquisitions. A stronger U.S. Dollar had a negative **0.6%** impact on revenues[82](index=82&type=chunk) - Operating income increased **20.2%** to **$112.2 million**, with operating margin improving to **17.1%** from **15.8%** in the prior year, reflecting improved price realization and SG&A cost control[83](index=83&type=chunk) - The company anticipates the Fox Pest Control acquisition will have a larger impact on revenue growth in the second quarter compared to the first[85](index=85&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Q1 2023 revenues rose **11.4%** across all service lines, gross margin improved to **50.3%**, SG&A decreased to **29.9%**, and operating income margin expanded to **17.1%**, despite a higher effective tax rate of **24.3%** Q1 2023 vs Q1 2022 Performance Summary (in thousands) | Line Item | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $658,015 | $590,680 | 11.4% | | Gross Profit | $331,173 | $295,302 | 12.1% | | Operating Income | $112,240 | $93,390 | 20.2% | | Net Income | $88,234 | $73,766 | 19.6% | - Gross margin improved to **50.3%** from **50.0%** as pricing was pulled forward and applied more consistently across brands, more than offsetting inflationary pressures[95](index=95&type=chunk) - SG&A as a percentage of revenue decreased to **29.9%** from **30.3%** due to favorable results in people-related costs[97](index=97&type=chunk) - The effective tax rate increased to **24.3%** in Q1 2023 from **21.6%** in Q1 2022, primarily due to higher foreign and state income taxes[106](index=106&type=chunk) [Non-GAAP Financial Measures](index=23&type=section&id=Non-GAAP%20Financial%20Measures) The company reconciles GAAP to non-GAAP measures, reporting **9.2%** organic revenue growth and an **18.4%** increase in EBITDA to **$139.5 million**, with EBITDA margin expanding to **21.2%** Reconciliation of Net Income to EBITDA (in thousands) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income | $88,234 | $73,766 | | Depreciation and amortization | $22,502 | $23,127 | | Interest expense, net | $465 | $568 | | Provision for income taxes | $28,255 | $20,335 | | **EBITDA** | **$139,456** | **$117,796** | [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Q1 2023 ended with **$112.5 million** cash, **$100.8 million** from operations, and a new **$1.0 billion** credit facility, with cash used for **$15.5 million** in acquisitions and **$64.1 million** in dividends - The company entered into a new **$1.0 billion** revolving credit facility on February 24, 2023, with a maturity date of February 24, 2028[115](index=115&type=chunk)[116](index=116&type=chunk) - Cash from operating activities increased by **$13.2 million** year-over-year, driven by strong operating results and timing of cash flows[121](index=121&type=chunk) - Financing activities used **$71.1 million**, a major shift from the **$82.1 million** provided in the prior year, mainly due to higher dividend payments and net debt repayments in Q1 2023 versus significant borrowings in Q1 2022[123](index=123&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) No material changes to the company's market risk exposure occurred during Q1 2023 compared to the 2022 Form 10-K disclosures - There were no material changes to the company's market risk exposure during the first quarter of 2023[135](index=135&type=chunk) [Controls and Procedures](index=28&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during Q1 - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2023[136](index=136&type=chunk) - No changes in internal control over financial reporting occurred during the first quarter that would have a material effect[137](index=137&type=chunk) [PART II OTHER INFORMATION](index=27&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=27&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company faces various claims and litigation, including alleged hazardous waste violations in California, but management expects no material adverse financial impact - The company is involved in various claims, arbitrations, and litigation matters arising from its normal business operations[138](index=138&type=chunk) - The company has received notice of alleged violations and information requests from local governmental authorities in California concerning waste handling and disposal. Management does not expect the outcome to have a material effect on financial results[140](index=140&type=chunk) [Risk Factors](index=29&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes have occurred to the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes have been identified from the risk factors disclosed in the 2022 Annual Report on Form 10-K[142](index=142&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECU%20RITIES%20AND%20USE%20OF%20PROCEEDS) The company did not conduct open market share repurchases in Q1 2023, but repurchased **262,409** shares from employees for tax payments, with **11.4 million** shares remaining authorized - The company did not purchase any equity securities on the open market during Q1 2023[143](index=143&type=chunk) Share Repurchases in Q1 2023 | Period | Total shares purchased | Weighted average price paid per share | | :--- | :--- | :--- | | January 1 to 31, 2023 | 236,310 | $36.15 | | February 1 to 28, 2023 | 7,816 | $36.52 | | March 1 to 31, 2023 | 18,283 | $36.16 | | **Total** | **262,409** | **$36.17** | - The repurchased shares were from employees for the payment of taxes on vested restricted shares, not as part of the publicly announced repurchase plan[125](index=125&type=chunk)[144](index=144&type=chunk) [Exhibits](index=30&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including various agreements, corporate documents, and CEO/CFO certifications required by Sarbanes-Oxley - The filing includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[149](index=149&type=chunk) - The filing includes the Credit Agreement dated February 24, 2023, and various other corporate and compensatory plan documents[147](index=147&type=chunk)