Rollins(ROL) - 2024 Q2 - Quarterly Results

Financial Highlights Rollins, Inc. achieved robust Q2 2024 financial results, marked by strong revenue growth, significant margin expansion, and improved profitability Q2 2024 Key Financial Metrics (vs. Q2 2023) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $892 million | $821 million | +8.7% | | Organic Revenues | - | - | +7.7% | | Operating Income | $182 million | $155 million | +17.8% | | Net Income | $129 million | $110 million | +17.5% | | Adjusted EBITDA | $210 million | $182 million | +15.3% | | Diluted EPS | $0.27 | $0.22 | +22.7% | | Adjusted EPS | $0.27 | $0.23 | +17.4% | - The company maintained strong cash flow, deploying capital towards strategic initiatives. In Q2 2024, Rollins generated $145 million in operating cash flow, invested $35 million in acquisitions, spent $9 million on capital expenditures, and returned $73 million to shareholders through dividends[33] Management Commentary Management expressed satisfaction with strong organic growth and margin improvements, emphasizing continued investment and a healthy market outlook - CEO Jerry Gahlhoff, Jr. credited the team for delivering strong organic growth and an improving margin profile, positioning the company for another year of healthy growth in 2024[10] - CFO Kenneth Krause highlighted the solid performance in revenue and profitability, specifically pointing to the 140 basis point improvement in EBITDA margins and strong incremental EBITDA margin performance[13] Consolidated Financial Statements The unaudited consolidated financial statements reflect the company's strong financial health, consistent cash generation, and strategic capital deployment Condensed Consolidated Statements of Income The income statement for Q2 2024 shows significant revenue growth and improved profitability, leading to higher net income and diluted EPS Income Statement Highlights (in thousands) | Account | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $891,920 | $820,750 | $1,640,269 | $1,478,765 | | Operating Income | $182,377 | $154,789 | $314,801 | $267,029 | | Net Income | $129,397 | $110,143 | $223,791 | $198,377 | | Net Income Per Share - Diluted | $0.27 | $0.22 | $0.46 | $0.40 | Condensed Consolidated Statements of Financial Position The balance sheet as of June 30, 2024, indicates a solid financial position with increased total assets and stockholders' equity, alongside managed liabilities Balance Sheet Summary (in thousands) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $474,292 | $406,639 | | Total Assets | $2,766,502 | $2,595,460 | | Total Current Liabilities | $609,950 | $576,689 | | Long-term Debt | $502,043 | $490,776 | | Total Liabilities | $1,530,444 | $1,439,893 | | Total Stockholders' Equity | $1,236,058 | $1,155,567 | Condensed Consolidated Cash Flow Information Cash flow from operations significantly increased for the six months ended June 30, 2024, supporting strategic investments and shareholder returns Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $272,548 | $248,186 | | Net cash used in investing activities | ($93,621) | ($331,622) | | Net cash (used in) provided by financing activities | ($173,886) | $140,195 | Appendix: Reconciliation of GAAP and Non-GAAP Financial Measures This appendix provides detailed reconciliations of non-GAAP financial measures, offering a clearer view of the company's core operating performance - Management uses non-GAAP measures like organic revenues, adjusted operating income, adjusted EBITDA, and free cash flow to compare performance consistently over various periods, excluding impacts from acquisitions, divestitures, and other non-operational items[23][43] - In Q1 2024, the company revised its non-GAAP metrics (adjusted net income, adjusted EPS, and adjusted EBITDA) to exclude gains and losses from non-operational asset sales to better reflect core operating performance[28] Reconciliation of Operating Income, Net Income, and EPS Reconciliations show adjusted operating income and net income for Q2 2024, reflecting core performance after excluding specific non-operational items Q2 2024 Reconciliation of GAAP to Adjusted Operating and Net Income (in thousands) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Operating Income | $182,377 | $4,219 | $186,596 | | Net Income | $129,397 | $2,832 | $132,229 | | Diluted EPS | $0.27 | $0.00 | $0.27 | Reconciliation of EBITDA and Free Cash Flow Adjusted EBITDA and free cash flow reconciliations for Q2 2024 demonstrate strong profitability and cash generation after specific adjustments Q2 2024 EBITDA and Free Cash Flow Reconciliation (in thousands) | Metric | Q2 2024 | Q2 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Income | $129,397 | $110,143 | 17.5% | | EBITDA | $210,500 | $182,247 | 15.5% | | Adjusted EBITDA | $210,088 | $182,275 | 15.3% | | Free Cash Flow | $136,419 | $140,638 | (3.0)% | Reconciliation of Revenues to Organic Revenues This section details the reconciliation of reported revenues to organic revenues, highlighting growth drivers excluding acquisition impacts Q2 2024 Revenue to Organic Revenue Reconciliation (in thousands) | Description | Amount | % of Revenue | | :--- | :--- | :--- | | Reported Revenues | $891,920 | 100.0% | | Less: Revenues from acquisitions | ($14,153) | (1.7)% | | Impact of Divestitures | $5,924 (vs PY) | 0.7% | | Organic Revenues | $877,767 | 98.4% | Q2 2024 Organic Revenue Growth by Segment | Segment | Organic Growth % | | :--- | :--- | | Residential | 5.4% | | Commercial | 8.6% | Reconciliation of SG&A and Net Debt Reconciliations show improved adjusted SG&A as a percentage of revenues and a lower net leverage ratio, indicating enhanced operational efficiency and balance sheet strength Net Debt and Leverage Ratio | Metric | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Long-term debt | $504,000 | $493,000 | | Less: cash | $106,697 | $103,825 | | Net debt | $397,303 | $389,175 | | Net leverage ratio | 0.5x | 0.6x |