Rollins Conference Call Summary Company Overview - **Company**: Rollins, Inc. (NYSE: ROL) - **Industry**: Pest Control Services Key Points and Arguments Economic and Labor Market Insights - The current economic environment presents a peculiar labor situation, influenced by immigration and job numbers [1] - Rollins has seen improvements in attracting talent post-COVID, with a strong workforce and consistent business model [2][3] Financial Performance - Rollins has experienced significant revenue growth, increasing from approximately $600 million to $3.8 billion over the last 25 years, with margins improving by 700-800 basis points [4] - Organic growth remains strong at 7-8%, with M&A contributing an additional 2-3% [5] - Pricing strategy is effective, with price increases of 3-4% outpacing the Consumer Price Index (CPI) [5][6] Growth Strategies - Rollins' acquisition strategy has been successful, with recent acquisitions like Saela and Fox Pest Control enhancing organic growth [7][24] - The ancillary services segment is growing at a strong double-digit pace, contributing positively to overall growth [8] Market Dynamics - The residential pest control market is highly competitive, while the commercial market has fewer competitors, allowing Rollins to leverage its Orkin brand effectively [10][11] - The company has focused on building a commercial sales force to enhance its market position [13][15] Competitive Landscape - Rollins has observed changes in the competitive landscape, with fewer scaled competitors than in previous years, which has aided in market share growth [14] - The company remains vigilant about competitors like Terminix but does not perceive significant shifts in their strategies [59] Customer Engagement and Pricing Strategy - Rollins tracks customer responses to price increases, with rollback requests being less than 1%, indicating strong pricing power [29][30] - The company employs a "triple guarantee" to attract commercial clients, enhancing customer confidence in switching service providers [64][65] Environmental and Seasonal Factors - Weather patterns and climate changes are influencing pest control demand, with warmer environments generally benefiting the industry [38][40] - Seasonal fluctuations can create volatility in demand, but 75% of Rollins' business is recurring, providing stability [38] Technological Integration - Rollins is exploring AI to enhance operational efficiency, particularly in routing and scheduling, while maintaining a focus on human interaction [42][44] Future Outlook - The company is optimistic about continued growth, with a focus on modernization and improving back-office processes to support front-line operations [54][56] - Rollins is committed to ongoing investments in talent development and leadership training to enhance employee retention and customer relationships [51][52] M&A Strategy - Rollins remains active in pursuing acquisitions, with a full pipeline of opportunities across various geographies, including Canada and the Midwest U.S. [26] - The company emphasizes acquiring businesses with strong cultures and brands that align with its growth strategy [27] Additional Important Insights - The company has raised its dividend by 70% and has made significant changes to its capital structure, including entering the investment-grade bond market [54] - Rollins has expanded its sell-side analyst coverage significantly, indicating increased investor interest and confidence [55] This summary encapsulates the key insights from the Rollins conference call, highlighting the company's strategic focus, financial performance, and market dynamics.

Company Overview - Rollins is a consumer services company that has recently gained coverage, indicating potential for growth and investment interest [1] - The company is participating in the Piper Sandler Growth Frontiers Conference, highlighting its visibility and engagement with investors [1] Leadership - The CFO of Rollins, Ken Krause, and the VP of Investor Relations, Lyndsey Burton, are present at the conference, showcasing the company's commitment to investor relations and transparency [2]

Company Overview - Rollins is a consumer services company that has recently gained coverage, indicating potential for growth and investment interest [1] - The company is participating in the Piper Sandler Growth Frontiers Conference, highlighting its relevance in the consumer services sector [1] Leadership - The CFO of Rollins, Ken Krause, and the VP of Investor Relations, Lyndsey Burton, are present at the conference, showcasing the company's commitment to investor engagement [2]

Rollins (NYSE:ROL) FY Conference Summary Company Overview - Rollins operates in the pest control industry, which is a $20 billion global market focused on pest control services, including additional services like insulation and exclusion work [8][8] - The company has shown resilience and growth through various economic cycles, including the financial crisis of 2008, the industrial slowdown in 2015, and the COVID-19 pandemic [8][8] Modernization Efforts - Rollins has initiated a modernization journey aimed at improving transparency and operational efficiency, with a focus on back-office improvements and talent acquisition [15][15] - Key changes include a 70% increase in dividends, a $1.5 billion stock buyback, and becoming an investment-grade issuer with a bond offering [15][16] - The modernization strategy is expected to enhance growth, margins, and cash flow performance [17][17] Pricing Strategy - Rollins has adopted a pricing strategy that aims for CPI plus pricing realization, with recent price increases of 3% to 4% having minimal impact on customer churn [27][28] - The company has achieved organic growth rates of 7% to 8%, attributed to effective execution and pricing strategies [28][28] M&A Strategy - Rollins targets an additional 2% to 3% growth from M&A, with a robust pipeline of opportunities in a fragmented market [35][35] - The acquisition of Saela Pest Control is highlighted as a successful integration, contributing to double-digit organic growth and strong EBITDA margins [40][40] Market Dynamics - The pest control market is projected to grow at 2% to 3% long-term, influenced by factors such as climate change, pest evolution, and low penetration rates (only 15% of homeowners currently use pest control services) [55][55] - The rise of the "do-it-for-me" consumer trend is expected to further drive market growth as younger generations prefer professional services over DIY solutions [56][56] Financial Performance and Targets - Rollins aims for a long-term annual EPS growth target, with a focus on double-digit revenue growth and cash flow compounding at 15% to 20% [73][74] - The company reports an incremental EBITDA margin of 25% to 30%, with potential for expansion through operational efficiencies [62][70] Conclusion - Rollins is positioned for continued growth through modernization, strategic pricing, and M&A, with a strong focus on enhancing shareholder value through dividends and cash flow generation [75][75]

Core Insights - Geotab Inc. awarded Rollins, Inc. the inaugural CEO Visionary Award, recognizing its leadership in utilizing connected vehicle data for fleet safety and efficiency over the past two decades [1][2][5] - The partnership between Geotab and Rollins has been pivotal in advancing telematics solutions, focusing on safety and operational efficiency [2][4] - Geotab celebrated its 25th anniversary by making a $25,000 donation to the United Way of Greater Atlanta in honor of Rollins [3][4] Company Overview - Geotab is a global leader in connected vehicle solutions, processing 80 billion data points daily from over 4.7 million vehicle subscriptions [7] - The company serves more than 55,000 global customers, including Fortune 500 organizations and public sector fleets, emphasizing data security and privacy [7] - Geotab's open platform and ecosystem of partners provide hundreds of fleet-ready third-party solutions, enhancing fleet management and efficiency [7] Partnership Highlights - Rollins has collaborated with Geotab for over 20 years, developing custom dashboards to monitor driver behavior and vehicle health [2][3] - The partnership has significantly contributed to Rollins' culture of safety and operational goals, ensuring the well-being of its team [2][3] - Geotab's ongoing feedback from customers like Rollins drives innovation in fleet management solutions [3] Award Significance - The CEO Visionary Award was created to honor customers that have significantly influenced the connected vehicle industry [5] - The award ceremony took place on September 9, 2025, at the Atlanta Tech Park, highlighting the importance of customer collaboration in driving industry standards [6] - Rollins' recognition reflects its role as Geotab's first U.S. enterprise customer, showcasing a successful long-term partnership [3][6]

Core Investment Strategy - The wide moat strategy focuses on investing in companies with durable competitive advantages that ensure long-term profitability and market leadership, allowing them to withstand economic fluctuations [2][3]. Company Summaries Adobe Inc. (ADBE) - Adobe has integrated AI applications across its products, enhancing user efficiency and introducing tools like Adobe Firefly and Adobe Express for quick editing [7][9]. - The company is diversifying into digital marketing services through its AI-driven cloud platform, enabling personalized marketing experiences [8]. - ADBE has an expected revenue growth rate of 9.5% and earnings growth rate of 12% for the current year, with earnings estimates improving by 0.1% recently [11]. The Walt Disney Co. (DIS) - Disney is experiencing growth in Domestic Parks & Experiences, although international locations face challenges [12]. - The company anticipates double-digit operating income growth in fiscal 2025, with ESPN showing significant viewership growth [13]. - Disney's streaming business has turned profitable, with a second-quarter Direct-to-Consumer operating income of $336 million [14]. - DIS has an expected revenue growth rate of 4.1% and earnings growth rate of 16.3% for the current year, with earnings estimates improving by 0.3% recently [15]. Intuit Inc. (INTU) - Intuit is benefiting from steady revenue growth in its Online Ecosystem and Desktop segments, driven by strong performance in its services [16]. - The company’s generative AI tool, "Intuit Assist," provides personalized financial insights, enhancing user experience across its platforms [17]. - INTU has an expected revenue growth rate of 11.7% and earnings growth rate of 13.7% for the current year, with earnings estimates improving by 4.3% recently [19]. Rollins Inc. (ROL) - Rollins utilizes technology and disciplined acquisitions to enhance operations and customer service, maintaining a strong cash position with zero debt [20]. - The company has made 44 acquisitions in 2024, reflecting its growth strategy and commitment to increasing dividends [20]. - ROL has an expected revenue growth rate of 10.7% and earnings growth rate of 12.1% for the current year, with earnings estimates improving by 0.9% recently [21]. Johnson & Johnson (JNJ) - Johnson & Johnson reported strong earnings, with growth driven by its Innovative Medicine unit and key products [22][23]. - Despite challenges in the MedTech segment, the company expects sales growth to improve in the second half of the year [23]. - JNJ has an expected revenue growth rate of 5.2% and earnings growth rate of 8.8% for the current year, with earnings estimates improving by 0.1% recently [24].

Group 1 - The article expresses a positive outlook on Rollins (NYSE: ROL), highlighting improvements in pricing, execution, retention, and margin expansion as key factors for investment consideration [1] - The author emphasizes a comprehensive investment strategy that incorporates fundamental, technical, and momentum investing approaches, suggesting a well-rounded perspective on market analysis [1] - The intention behind writing on Seeking Alpha is to track investment ideas and connect with like-minded investors, indicating a focus on community engagement and performance monitoring [1] Group 2 - There are no disclosed positions in any of the companies mentioned, indicating an unbiased perspective in the analysis [2] - The article is presented as an individual opinion without compensation, reinforcing the authenticity of the insights shared [2] - Seeking Alpha clarifies that past performance does not guarantee future results, emphasizing the importance of independent research for investors [3]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section presents Rollins, Inc.'s unaudited condensed consolidated financial statements and management's analysis [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Rollins, Inc.'s unaudited condensed consolidated financial statements and accompanying notes [CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20POSITION) This section presents Rollins, Inc.'s condensed consolidated statements of financial position **Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024):** | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total Assets | $3,180,040 | $2,819,695 | $360,345 | 12.78% | | Total Liabilities | $1,736,169 | $1,489,102 | $247,067 | 16.59% | | Total Stockholders' Equity | $1,443,871 | $1,330,593 | $113,278 | 8.51% | | Cash and cash equivalents | $123,035 | $89,630 | $33,405 | 37.27% | | Goodwill | $1,337,903 | $1,161,085 | $176,818 | 15.23% | | Short-term debt | $59,989 | $— | $59,989 | N/A | | Long-term debt | $485,278 | $395,310 | $89,968 | 22.76% | - Significant increases in total assets and liabilities, primarily driven by acquisitions and debt issuance. Goodwill increased by over **15%**, reflecting acquisition activity. Cash and cash equivalents saw a substantial increase of over **37%**[10](index=10&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF INCOME](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) This section provides Rollins, Inc.'s condensed consolidated statements of income for the reported periods **Income Statement Highlights (Three Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenues | $999,527 | $891,920 | $107,607 | 12.06% | | Operating Income | $198,333 | $182,377 | $15,956 | 8.75% | | Net Income | $141,489 | $129,397 | $12,092 | 9.35% | | Net Income Per Share - Basic and Diluted | $0.29 | $0.27 | $0.02 | 7.41% | | Dividends Paid Per Share | $0.165 | $0.150 | $0.015 | 10.00% | **Income Statement Highlights (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenues | $1,822,031 | $1,640,269 | $181,762 | 11.08% | | Operating Income | $340,981 | $314,801 | $26,180 | 8.32% | | Net Income | $246,737 | $223,791 | $22,946 | 10.25% | | Net Income Per Share - Basic and Diluted | $0.51 | $0.46 | $0.05 | 10.87% | | Dividends Paid Per Share | $0.330 | $0.300 | $0.030 | 10.00% | [CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME) This section presents Rollins, Inc.'s condensed consolidated statements of comprehensive income **Comprehensive Income (Three Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net Income | $141,489 | $129,397 | $12,092 | 9.35% | | Other comprehensive income (loss), net of tax | $15,334 | $1,276 | $14,058 | 1101.72% | | Comprehensive income | $156,823 | $130,673 | $26,150 | 20.01% | **Comprehensive Income (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net Income | $246,737 | $223,791 | $22,946 | 10.25% | | Other comprehensive income (loss), net of tax | $21,027 | $(4,441) | $25,468 | N/A | | Comprehensive income | $267,764 | $219,350 | $48,414 | 22.07% | - Other comprehensive income saw a significant positive shift in 2025, primarily due to foreign currency translation adjustments, moving from a loss in 2024 to a substantial gain in 2025[14](index=14&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20EQUITY) This section details Rollins, Inc.'s condensed consolidated statements of stockholders' equity **Stockholders' Equity (June 30, 2025 vs. December 31, 2024):** | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total Stockholders' Equity | $1,443,871 | $1,330,593 | $113,278 | 8.51% | | Common Stock (Shares) | 484,640 | 484,372 | 268 | 0.06% | | Retained Earnings | $822,014 | $734,650 | $87,364 | 11.90% | | Accumulated Other Comprehensive Loss | $(22,607) | $(43,634) | $21,027 | -48.19% | - The increase in total stockholders' equity was driven by net income and a significant reduction in accumulated other comprehensive loss, partially offset by cash dividends paid[18](index=18&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) This section outlines Rollins, Inc.'s condensed consolidated statements of cash flows **Cash Flow Summary (Six Months Ended June 30):** | Activity | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net cash provided by operating activities | $322,014 | $272,548 | $49,466 | 18.15% | | Net cash used in investing activities | $(263,091) | $(93,621) | $(169,470) | 181.02% | | Net cash used in financing activities | $(28,570) | $(173,886) | $145,316 | -83.57% | | Net increase in cash and cash equivalents | $33,405 | $2,872 | $30,533 | 1063.19% | - Operating cash flow increased significantly, while investing activities saw a substantial increase in cash usage, primarily due to acquisitions. Financing activities used considerably less cash in 2025 compared to 2024, mainly due to debt issuance offsetting repayments[21](index=21&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=9&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the condensed consolidated financial statements [NOTE 1. BASIS OF PREPARATION](index=10&type=section&id=NOTE%201.%20BASIS%20OF%20PREPARATION) This note describes the basis of preparation for the unaudited condensed consolidated financial statements - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, Form 10-Q instructions, and SEC regulation S-X, and should be read with the 2024 Annual Report on Form 10-K[22](index=22&type=chunk) - Management's estimates and assumptions reflect economic trends, but future results may vary due to continued uncertainty in economic conditions[23](index=23&type=chunk) [NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS](index=10&type=section&id=NOTE%202.%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note discusses recent accounting pronouncements and their potential impact on the Company's financial statements - ASU 2023-09 (Income Taxes): Issued December 2023, effective for annual periods after December 15, 2024, enhancing income tax disclosures. The Company is evaluating its potential impact[24](index=24&type=chunk) - ASU 2024-03 (Disaggregation of Income Statement Expenses): Issued November 2024, effective for annual periods after December 15, 2026, requiring additional expense disclosures. The Company is evaluating its potential impact[25](index=25&type=chunk) [NOTE 3. ACQUISITIONS](index=10&type=section&id=NOTE%203.%20ACQUISITIONS) This note provides details on significant acquisitions made by Rollins, Inc. during the reported periods - **Saela Pest Control Acquisition (April 1, 2025):** * Acquired 100% of Saela Holdings, LLC for **$207.1 million**, funded by cash on hand and commercial paper borrowings[26](index=26&type=chunk) * Contributed **$18.9 million** in revenues and **$2.7 million** in net earnings during the three months ended June 30, 2025[28](index=28&type=chunk)[29](index=29&type=chunk) * Preliminary valuation includes **$132.96 million** in goodwill, **$52.2 million** in customer contracts (6.5-year useful life), and **$17.3 million** in indefinite-lived trademarks/tradenames[30](index=30&type=chunk)[31](index=31&type=chunk) - **Other 2025 Acquisitions:** * The Company made 12 other acquisitions during the six months ended June 30, 2025, with an aggregate preliminary value of **$67.1 million**[35](index=35&type=chunk) * Resulted in **$35.12 million** in goodwill and **$25.98 million** in customer contracts[37](index=37&type=chunk) **Pro Forma Financial Information (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------ | :------------------ | :------------------ | | Pro Forma Revenues | $1,850,939 | $1,667,502 | | Pro Forma Net Income | $253,371 | $226,433 | [NOTE 4. REVENUE](index=13&type=section&id=NOTE%204.%20REVENUE) This note details Rollins, Inc.'s revenue breakdown by geographic area, service offering, and unearned revenue **Total Revenues by Geographic Area (Six Months Ended June 30):** | Geographic Area | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :---------------- | :------------------ | :------------------ | :--------- | :--------- | | United States | $1,691,251 | $1,521,699 | $169,552 | 11.14% | | Other countries | $130,780 | $118,570 | $12,210 | 10.30% | | **Total Revenues** | **$1,822,031** | **$1,640,269** | **$181,762** | **11.08%** | **Total Revenues by Service Offering (Six Months Ended June 30):** | Service Offering | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------------- | :------------------ | :------------------ | :--------- | :--------- | | Residential revenues | $811,978 | $737,752 | $74,226 | 10.06% | | Commercial revenues | $604,847 | $545,884 | $58,963 | 10.80% | | Termite and ancillary revenues | $383,985 | $338,084 | $45,901 | 13.58% | | Franchise revenues | $7,678 | $8,406 | $(728) | -8.66% | | Other revenues | $13,543 | $10,143 | $3,400 | 33.52% | | **Total Revenues** | **$1,822,031** | **$1,640,269** | **$181,762** | **11.08%** | **Unearned Revenue (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------- | :------------------ | :------------------ | | Beginning balance | $223,872 | $210,059 | | Deferral of unearned revenue | $155,481 | $149,165 | | Recognition of unearned revenue | $(135,894) | $(125,325) | | Ending balance | $243,459 | $233,899 | [NOTE 5. ALLOWANCE FOR CREDIT LOSSES](index=14&type=section&id=NOTE%205.%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) This note provides information on Rollins, Inc.'s allowance for credit losses for trade and financed receivables **Allowance for Credit Losses (June 30, 2025):** | Metric | Trade Receivables (in thousands) | Financed Receivables (in thousands) | Total Receivables (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | :----------------------------- | | Balance at Dec 31, 2024 | $19,770 | $8,686 | $28,456 | | Provision for expected credit losses | $11,112 | $5,349 | $16,461 | | Write-offs charged against allowance | $(10,485) | $(4,799) | $(15,284) | | Recoveries collected | $2,485 | $527 | $3,012 | | Balance at June 30, 2025 | $22,882 | $9,763 | $32,645 | - Total allowance for credit losses increased by **$4.19 million** (**14.7%**) from December 31, 2024, to June 30, 2025, driven by higher provisions for expected credit losses[44](index=44&type=chunk)[46](index=46&type=chunk) [NOTE 6. GOODWILL AND INTANGIBLE ASSETS](index=15&type=section&id=NOTE%206.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) This note details changes in Rollins, Inc.'s goodwill and intangible assets, including amortization expense **Goodwill Changes (Six Months Ended June 30, 2025):** | Metric | Amount (in thousands) | | :-------------------------------- | :-------------------- | | Balance at December 31, 2024 | $1,161,085 | | Additions (from acquisitions) | $168,079 | | Adjustments due to currency translation and other | $9,883 | | Balance at June 30, 2025 | $1,337,903 | - Goodwill increased by **$176.8 million** (**15.2%**) primarily due to additions from acquisitions[47](index=47&type=chunk) **Intangible Assets (June 30, 2025 vs. December 31, 2024):** | Asset Type | June 30, 2025 Carrying Value (in thousands) | December 31, 2024 Carrying Value (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :--------- | | Customer contracts, net | $424,119 | $383,092 | $41,027 | 10.71% | | Trademarks & tradenames, net | $10,941 | $12,079 | $(1,138) | -9.42% | | Other intangible assets, net | $8,879 | $8,602 | $277 | 3.22% | | Indefinite-lived intangible assets | $157,031 | $137,816 | $19,215 | 13.94% | | **Total intangible assets, excluding goodwill** | **$600,970** | **$541,589** | **$59,381** | **10.96%** | **Amortization Expense (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Amortization expense related to intangible assets | $43,700 | $38,000 | $5,700 | 15.00% | - Estimated amortization expense for existing amortizable intangible assets is projected to be **$45.6 million** for the remainder of 2025 and **$89.2 million** in 2026[48](index=48&type=chunk) [NOTE 7. DEBT](index=16&type=section&id=NOTE%207.%20DEBT) This note describes Rollins, Inc.'s debt structure, including senior notes, commercial paper, and credit facilities **Long-term Debt (June 30, 2025 vs. December 31, 2024):** | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | 2035 Senior Notes | $500,000 | $— | $500,000 | N/A | | Revolving Credit Facility | $— | $397,000 | $(397,000) | -100.00% | | Total long-term debt, net | $485,278 | $395,310 | $89,968 | 22.76% | - The Company issued **$500 million** in 2035 Senior Notes in February 2025 at **5.25%** interest, using proceeds to repay the Revolving Credit Facility, which had **$397 million** outstanding at year-end 2024 and zero outstanding at June 30, 2025[50](index=50&type=chunk)[62](index=62&type=chunk) - **Commercial Paper Program:** * Established in March 2025, allowing issuance of up to **$1 billion** in unsecured commercial paper[63](index=63&type=chunk) * Outstanding borrowings of **$59.99 million** at June 30, 2025, with a weighted average annual interest rate of **4.57%** and average remaining term of **2.5 days**[65](index=65&type=chunk) - **Revolving Credit Facility:** * **$1.0 billion** facility maturing February 24, 2028[58](index=58&type=chunk) * Amendment No. 1 in March 2025 released subsidiary guarantors[59](index=59&type=chunk) * No outstanding borrowings as of June 30, 2025[62](index=62&type=chunk) [NOTE 8. FAIR VALUE MEASUREMENT](index=18&type=section&id=NOTE%208.%20FAIR%20VALUE%20MEASUREMENT) This note provides information on Rollins, Inc.'s fair value measurements, including contingent consideration and senior notes **Contingent Consideration (June 30, 2025 vs. December 31, 2024):** | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Acquisition holdback and earnout liabilities | $40,215 | $21,008 | $19,207 | 91.43% | - Contingent consideration liabilities significantly increased, primarily due to new acquisitions and measurement adjustments[71](index=71&type=chunk) **2035 Senior Notes Fair Value (June 30, 2025):** | Metric | Fair Value (in thousands) | Carrying Value (in thousands) | | :---------------- | :------------------------ | :-------------------------- | | 2035 Senior Notes | $502,150 | $485,278 | - The fair value of the 2035 Senior Notes was slightly above their carrying value, classified as Level 2 in the fair value hierarchy[73](index=73&type=chunk) [NOTE 9. CONTINGENCIES](index=19&type=section&id=NOTE%209.%20CONTINGENCIES) This note outlines Rollins, Inc.'s involvement in various legal and environmental contingencies - The Company is involved in various claims, arbitrations, disputes, investigations, and litigation, including allegations of service/vehicle damage, service efficacy, acquisition-related claims, and regulatory violations, and accrues loss contingency reserves based on probable and estimable outcomes[74](index=74&type=chunk) - Retains risks for general liability, workers' compensation, and auto liability, with estimated costs based on historical trends and actuarial studies[75](index=75&type=chunk) - An ongoing environmental investigation in California is not expected to have a material adverse effect on financial results[77](index=77&type=chunk)[78](index=78&type=chunk) [NOTE 10. STOCKHOLDERS' EQUITY](index=20&type=section&id=NOTE%2010.%20STOCKHOLDERS%27%20EQUITY) This note details changes in Rollins, Inc.'s stockholders' equity, including dividends and stock-based compensation **Cash Dividends Paid (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total Cash Dividends | $159,373 | $145,167 | $14,206 | 9.79% | | Dividends Per Share | $0.330 | $0.300 | $0.030 | 10.00% | **Stock-based Compensation Expense (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Stock-based compensation expense | $19,809 | $15,560 | $4,249 | 27.31% | - The Company did not repurchase shares on the open market during the reported periods[81](index=81&type=chunk) [NOTE 11. EARNINGS PER SHARE](index=20&type=section&id=NOTE%2011.%20EARNINGS%20PER%20SHARE) This note provides calculations for Rollins, Inc.'s basic and diluted earnings per share **Weighted Average Shares Outstanding (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :----- | :--------- | | Total weighted-average shares outstanding – basic | 484,530 | 484,187 | 343 | 0.07% | | Weighted-average shares outstanding – diluted | 484,559 | 484,356 | 203 | 0.04% | [NOTE 12. INCOME TAXES](index=21&type=section&id=NOTE%2012.%20INCOME%20TAXES) This note details Rollins, Inc.'s provision for income taxes and effective tax rate **Provision for Income Taxes (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Provision for income taxes | $82,052 | $75,861 | $6,191 | 8.16% | **Effective Tax Rate (Six Months Ended June 30):** | Metric | 2025 | 2024 | Change (bps) | | :---------------- | :--- | :--- | :----------- | | Effective tax rate | 25.0% | 25.3% | -30 bps | - The effective tax rate decreased due to a decrease in state income tax expense in 2025[86](index=86&type=chunk) [NOTE 13. SEGMENT AND GEOGRAPHIC INFORMATION](index=21&type=section&id=NOTE%2013.%20SEGMENT%20AND%20GEOGRAPHIC%20INFORMATION) This note provides information on Rollins, Inc.'s reportable segment and geographic distribution of assets - The Company operates under one reportable segment, encompassing residential, commercial, and termite and ancillary service offerings[87](index=87&type=chunk) - The CEO, as CODM, uses net income to assess financial performance and allocate resources[87](index=87&type=chunk) **Long-lived Tangible Assets by Location (June 30, 2025 vs. December 31, 2024):** | Location | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------- | :------------------ | :------------------ | :--------- | :--------- | | United States | $506,544 | $503,767 | $2,777 | 0.55% | | International | $41,886 | $35,546 | $6,340 | 17.84% | [NOTE 14. SUBSEQUENT EVENTS](index=23&type=section&id=NOTE%2014.%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after the reporting period, including dividends and tax legislation - **Quarterly Dividend:** On July 22, 2025, the Board declared a regular quarterly cash dividend of **$0.165** per share, payable on September 10, 2025[91](index=91&type=chunk) - **Tax Legislation (OBBBA):** President Trump signed the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which permanently extends certain 2017 Tax Cuts and Jobs Act provisions and modifies the international tax framework. The Company does not expect a material impact on its condensed consolidated financial statements[92](index=92&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Rollins, Inc.'s financial performance and condition [GENERAL OPERATING COMMENTS](index=24&type=section&id=GENERAL%20OPERATING%20COMMENTS) This section provides general comments on Rollins, Inc.'s operating environment and strategic objectives - Demand remains favorable to start the third quarter, and the pipeline of acquisition activity remains healthy[95](index=95&type=chunk) - The Company aims for **7% to 8%** organic revenue growth and **3% to 4%** inorganic revenue growth for 2025[96](index=96&type=chunk) - Focus on improving business model efficiency while investing in programs aimed at growing the business across service offerings[96](index=96&type=chunk) [RECENT DEVELOPMENTS AND ECONOMIC CONDITIONS](index=24&type=section&id=RECENT%20DEVELOPMENTS%20AND%20ECONOMIC%20CONDITIONS) This section discusses recent economic developments and their potential impact on Rollins, Inc.'s operations - The Company continues to navigate challenges from inflation, changing interest rates, natural disasters, employee shortages, and supply chain issues, implementing strategies to mitigate impacts, though future effectiveness is uncertain[97](index=97&type=chunk)[101](index=101&type=chunk) - Ongoing changes to global trade policies, including tariffs, are monitored, with no material impact expected on the Company's business, despite potential changes in fleet and materials expenses[98](index=98&type=chunk) - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, is not expected to have a material impact on the Company's condensed consolidated financial statements[102](index=102&type=chunk) [RESULTS OF OPERATIONS](index=25&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed comparison of Rollins, Inc.'s financial performance for the reported periods [Quarter ended June 30, 2025 compared to quarter ended June 30, 2024](index=25&type=section&id=Quarter%20ended%20June%2030%2C%202025%20compared%20to%20quarter%20ended%20June%2030%2C%202024) This section compares Rollins, Inc.'s financial performance for the second quarter of 2025 against 2024 **Key Financial Performance (Q2 2025 vs. Q2 2024):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenues | $999,527 | $891,920 | $107,607 | 12.1% | | Operating Income | $198,333 | $182,377 | $15,956 | 8.7% | | Net Income | $141,489 | $129,397 | $12,092 | 9.3% | | EPS (diluted) | $0.29 | $0.27 | $0.02 | 7.4% | | Operating Cash Flow | $175,122 | $145,115 | $30,007 | 20.7% | - **Revenue Growth Drivers (Q2 2025):** * Total revenue increased by **12.1%**, with organic revenue growth of **7.3%** and acquisitions contributing **4.8%**[108](index=108&type=chunk) * Residential pest control revenue increased **11.6%** (**4.9%** organic)[108](index=108&type=chunk) * Commercial pest control revenue increased **11.4%** (**8.4%** organic)[108](index=108&type=chunk) * Termite and ancillary services grew **13.9%** (**10.3%** organic)[108](index=108&type=chunk) - **Operating Margin Decline (Q2 2025):** * Operating margin decreased by **60 basis points** to **19.8%**, primarily due to higher insurance and claims costs (**40 bps**) and fleet costs (**30 bps**), partially offset by leverage in employee expenses (**30 bps**) and materials and supplies (**40 bps**)[112](index=112&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) [Six months ended June 30, 2025 compared to six months ended June 30, 2024](index=29&type=section&id=Six%20months%20ended%20June%2030%2C%202025%20compared%20to%20six%20months%20ended%20June%2030%2C%202024) This section compares Rollins, Inc.'s financial performance for the first half of 2025 against 2024 **Key Financial Performance (H1 2025 vs. H1 2024):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Revenues | $1,822,031 | $1,640,269 | $181,762 | 11.1% | | Operating Income | $340,981 | $314,801 | $26,180 | 8.3% | | Net Income | $246,737 | $223,791 | $22,946 | 10.3% | | EPS (diluted) | $0.51 | $0.46 | $0.05 | 10.9% | | Operating Cash Flow | $322,014 | $272,548 | $49,466 | 18.1% | - **Revenue Growth Drivers (H1 2025):** * Total revenue increased by **11.1%**, with organic revenue growth of **7.4%** and acquisitions contributing **3.7%**[125](index=125&type=chunk) * Residential pest control revenue increased **10.1%** (**5.2%** organic)[125](index=125&type=chunk) * Commercial pest control revenue increased **10.8%** (**7.9%** organic)[125](index=125&type=chunk) * Termite and ancillary services grew **13.6%** (**10.7%** organic)[125](index=125&type=chunk) * Foreign currency headwinds impacted revenue by **20 basis points**[125](index=125&type=chunk) - **Operating Margin Decline (H1 2025):** * Operating margin decreased by **50 basis points** to **18.7%**, mainly due to higher selling and marketing costs, fleet costs, and insurance and claims costs, partially offset by leverage in materials and supplies and employee expenses[127](index=127&type=chunk)[129](index=129&type=chunk)[131](index=131&type=chunk) [Non-GAAP Financial Measures](index=33&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles various non-GAAP financial measures used by Rollins, Inc. **Organic Revenues (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Total Revenues | $1,822,031 | $1,640,269 | $181,762 | 11.1% | | Revenues from acquisitions | $(61,152) | $— | $(61,152) | 3.7% | | **Organic revenues** | **$1,760,879** | **$1,640,269** | **$120,610** | **7.4%** | **Adjusted Operating Income (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Operating income (GAAP) | $340,981 | $314,801 | $26,180 | 8.3% | | Acquisition-related expenses | $11,788 | $9,484 | $2,304 | 24.3% | | **Adjusted operating income (Non-GAAP)** | **$352,769** | **$324,285** | **$28,484** | **8.8%** | **Adjusted EBITDA (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | EBITDA (Non-GAAP) | $402,911 | $370,173 | $32,738 | 8.8% | | Acquisition-related expenses | $1,082 | $1,049 | $33 | 3.1% | | Gain on sale of assets, net | $(984) | $(351) | $(633) | 180.3% | | **Adjusted EBITDA (Non-GAAP)** | **$403,009** | **$370,871** | **$32,138** | **8.7%** | **Free Cash Flow (Six Months Ended June 30):** | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net cash provided by operating activities (GAAP) | $322,014 | $272,548 | $49,466 | 18.1% | | Capital expenditures | $(13,857) | $(15,867) | $2,010 | -12.7% | | **Free cash flow (Non-GAAP)** | **$308,157** | **$256,681** | **$51,476** | **20.1%** | [LIQUIDITY AND CAPITAL RESOURCES](index=37&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section details Rollins, Inc.'s financial liquidity and capital management strategies - **Cash and Cash Equivalents:** **$123.0 million** at June 30, 2025, with approximately **$60.0 million** held by foreign subsidiaries and **$63.0 million** held at domestic banks[157](index=157&type=chunk) - The Company believes its current cash, future operating cash flows, access to debt financing, **$1 billion** commercial paper program, and Revolving Credit Facility will be sufficient to finance current operations, obligations, and future business expansion[159](index=159&type=chunk) - **2035 Senior Notes:** Issued **$500 million** in February 2025 at **5.25%** interest, with proceeds primarily used to repay outstanding borrowings under the Revolving Credit Facility[160](index=160&type=chunk) - **Commercial Paper Program:** Established in March 2025, allowing issuance of up to **$1 billion** in unsecured commercial paper; **$60.0 million** outstanding at June 30, 2025[162](index=162&type=chunk) - **Revolving Credit Facility:** **$1.0 billion** facility, with no outstanding borrowings as of June 30, 2025 (compared to **$397.0 million** at December 31, 2024)[165](index=165&type=chunk) **Cash Flow Summary (Six Months Ended June 30):** | Activity | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Net cash provided by operating activities | $322,014 | $272,548 | $49,466 | 18.1% | | Net cash used in investing activities | $(263,091) | $(93,621) | $(169,470) | 181.0% | | Net cash used in financing activities | $(28,570) | $(173,886) | $145,316 | -83.6% | - Operating cash flow increased due to strong operating results and timing of cash receipts/payments. Investing cash usage significantly increased due to **$253.6 million** in acquisitions. Financing cash usage decreased substantially due to debt issuance offsetting repayments and lower contingent consideration payments[168](index=168&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk) [CONTINGENCIES](index=40&type=section&id=CONTINGENCIES) This section outlines Rollins, Inc.'s involvement in various legal and environmental contingencies - The Company is involved in various claims and legal matters, including service-related damages, acquisition claims, and regulatory violations, and accrues loss contingency reserves based on probable and estimable outcomes[176](index=176&type=chunk) - Retains risks for general liability, workers' compensation, and auto liability, with estimated costs based on historical trends and actuarial studies[177](index=177&type=chunk) - An environmental investigation in California is ongoing, but management does not expect a material adverse effect on financial position, results of operations, or liquidity[178](index=178&type=chunk)[179](index=179&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=41&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section confirms no significant changes to Rollins, Inc.'s critical accounting estimates - There have been no significant changes in critical accounting estimates as disclosed in the 2024 Form 10-K[180](index=180&type=chunk) [CAUTION REGARDING FORWARD-LOOKING STATEMENTS](index=41&type=section&id=CAUTION%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary statement regarding forward-looking information in the report - This report contains forward-looking statements based on current opinions, expectations, and projections, which involve risks and uncertainties[181](index=181&type=chunk) - Key forward-looking statements include expectations for financial and business performance, growth opportunities (organic and acquisitions), credit risk, impact of economic trends (inflation, interest rates, supply chain), tax legislation, liquidity, capital allocation, and the outcome of legal contingencies[181](index=181&type=chunk) - Forward-looking statements are not guarantees of future performance and should not be unduly relied upon, with no obligation to update them except as required by law[182](index=182&type=chunk)[183](index=183&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=42&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section states no material changes to Rollins, Inc.'s market risk exposure - No material changes to market risk exposure during the six months ended June 30, 2025[184](index=184&type=chunk) - Refer to Part II, Item 7.A of the 2024 Form 10-K for detailed information on market risks[184](index=184&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=42&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section reports on the effectiveness of Rollins, Inc.'s disclosure controls and procedures - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[185](index=185&type=chunk) - The assessment of internal control over financial reporting excludes Saela Holdings, LLC, which was acquired during the quarter and is currently being integrated[186](index=186&type=chunk) - No other material changes in internal control over financial reporting during the quarter ended June 30, 2025[187](index=187&type=chunk) [PART II OTHER INFORMATION](index=42&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements or management's discussion and analysis [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section reiterates Rollins, Inc.'s involvement in various legal and regulatory matters - The Company is involved in various claims, arbitrations, contractual disputes, investigations, litigation, and tax/regulatory matters[188](index=188&type=chunk) - Loss contingency reserves are established for probable and reasonably estimable outcomes[188](index=188&type=chunk)[189](index=189&type=chunk) - An environmental investigation in California is ongoing, but management does not believe it will have a material effect on financial results[190](index=190&type=chunk)[191](index=191&type=chunk) [ITEM 1A. RISK FACTORS](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section states no material changes to the risk factors previously disclosed by Rollins, Inc. - No material changes from the risk factors disclosed in the 2024 Annual Report on Form 10-K[192](index=192&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=43&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details Rollins, Inc.'s share repurchase activity, primarily for employee tax obligations **Share Repurchase Activity (Q2 2025):** | Period | Total shares purchased | Weighted average price paid per share | Shares purchased as part of publicly announced repurchases | Maximum shares that may yet be purchased | | :------------------ | :--------------------- | :---------------------------------- | :------------------------------------------------------- | :--------------------------------------- | | April 1 to 30, 2025 | 4,275 | $55.51 | — | 11,415,625 | | May 1 to 31, 2025 | 246 | $56.25 | — | 11,415,625 | | June 1 to 30, 2025 | — | — | — | 11,415,625 | | **Total** | **4,521** | | **—** | | - Shares purchased represent shares withheld by the Company in connection with tax withholding obligations of its employees upon vesting of restricted stock awards, not open market repurchases[194](index=194&type=chunk) - As of June 30, 2025, **11.4 million** additional shares may be purchased under the existing share repurchase program, which has no expiration date[194](index=194&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=43&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms Rollins, Inc. has not experienced any defaults upon senior securities - No defaults upon senior securities[195](index=195&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=43&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that Rollins, Inc. has no mine safety disclosures to report - No mine safety disclosures[196](index=196&type=chunk) [ITEM 5. OTHER INFORMATION](index=44&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section provides other information, specifically regarding Rule 10b5-1 Trading Plans [Rule 10b5-1 Trading Plans](index=45&type=section&id=Rule%2010b5-1%20Trading%20Plans) This section addresses Rule 10b5-1 trading plans for Rollins, Inc.'s directors and executive officers - None of the Company's directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[197](index=197&type=chunk) [ITEM 6. EXHIBITS](index=45&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Form 10-Q, including corporate and debt documents - Lists various exhibits, including Restated Certificate of Incorporation, By-Laws, Form of Common Stock Certificate, Description of Registrant's Securities, Indenture for 2035 Senior Notes, Registration Rights Agreement, Commercial Paper Dealer Agreement, Amendment No. 1 to Credit Agreement, and certifications (CEO, CFO)[198](index=198&type=chunk) [SIGNATURES](index=47&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q, confirming authorization - The report is signed by Kenneth D. Krause, Principal Financial and Accounting Officer, on July 24, 2025[201](index=201&type=chunk)

Core Insights - Rollins, Inc. (ROL) reported better-than-expected second-quarter 2025 results with adjusted earnings of 30 cents per share, beating consensus estimates by 3.5% and increasing 11% year over year [1] - Revenues reached $999.5 million, surpassing consensus by 2.1% and improving 12.1% year over year, with organic revenues of $956.9 million rising 7.3% year over year [1] Financial Performance - Residential revenues increased 4.9% year over year to $428.5 million, missing the estimate of $431.6 million [3] - Commercial revenues rose 11.4% year over year to $320.5 million, exceeding the estimate of $310.3 million [3] - Termite and ancillary revenues increased 13.9% year over year to $211.9 million, beating the estimate of $211.6 million [3] - Adjusted EBITDA was $231 million, a 10% increase year over year, compared to the expectation of $227.5 million [4] - The adjusted EBITDA margin was 23.1%, a decrease of 50 basis points year over year, compared to the expected margin of 23.6% [4] Cash Flow and Debt - Rollins ended the quarter with cash and cash equivalents of $123.04 million, up from $89.6 million in the previous quarter [5] - Long-term debt increased to $485.3 million from $395.3 million at the end of the previous quarter [5] - The company generated $175.22 million in cash from operating activities, with capital expenditures of $7.08 million, resulting in free cash flow of $168.01 million [5] - Rollins paid dividends totaling $79 million during the quarter [5] Stock Performance - Rollins shares have risen 23.5% over the past year, slightly underperforming the industry growth of 24.4% [2]

Financial Data and Key Metrics Changes - The company reported total revenue growth of 12.1% year-over-year and organic growth of 7.3% [5][12] - Gross margin was reported at 53.8%, slightly down by 20 basis points compared to the previous year [14] - GAAP earnings per share were $0.29, with adjusted earnings per share at $0.30, reflecting an 11.1% increase from the same period last year [13][18] - Operating cash flow increased by 21% to $175 million, while free cash flow rose over 23% to $168 million [18][19] Business Line Data and Key Metrics Changes - Residential revenues increased by 11.6%, commercial pest control rose by 11.4%, and termite and ancillary services grew by 13.9% [13] - Organic growth in residential was 4.9%, in commercial it was 8.4%, and in termite and ancillary it was 10.3% [14] Market Data and Key Metrics Changes - The company experienced a strong demand recovery in June, leading to a robust backlog entering July [5][6] - The impact of weather was noted, particularly in May, which affected productivity in various regions [10][97] Company Strategy and Development Direction - The company is focused on strategic M&A opportunities and organic growth investments, with the recent acquisition of Saila enhancing competitive advantages [8][20] - The company aims to maintain organic growth in the range of 7% to 8% for the year, with M&A contributing an additional 3% to 4% [21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strength of markets and the company's recession-resilient business model, despite macroeconomic uncertainties [20] - The company anticipates improving margin profiles in the second half of the year, with a focus on maintaining double-digit earnings growth [21][88] Other Important Information - The company has a healthy leverage ratio of 0.9 times and continues to prioritize capital allocation while maintaining a disciplined approach to debt [20][75] - The company has seen improvements in employee retention, which positively impacts customer service and operational efficiency [113] Q&A Session Summary Question: Can you unpack the residential performance a little bit in the quarter? - Management noted that residential organic growth was 4.9%, with a strong backlog exiting June, indicating robust demand [26][28] Question: What are the impacts of generative AI on your business? - Management acknowledged adjustments in marketing strategies due to generative AI, leading to higher quality leads and improved closing rates [36][39] Question: Can you provide context on contributions from pricing and volume? - The pricing strategy targets a CPI plus level of 3% to 4%, with volume growth outpacing the underlying market [44][46] Question: What was the impact of legacy auto claims on margins? - Management indicated that legacy auto claims are difficult to predict and can impact margins, but they are actively working on improving safety to reduce claims [61][64] Question: How is the commercial segment performing? - The commercial segment continues to show strong growth, with ongoing investments in staffing and marketing to capture opportunities [70] Question: How are you balancing debt repayment and capital return? - The company maintains a disciplined approach to managing debt while investing in growth and returning capital to shareholders [75] Question: What are the trends in ancillary services? - The ancillary business has performed well, with strong organic growth and no signs of consumer slowdown [90][91]