Rollins(ROL) - 2025 Q1 - Quarterly Results

Q1 2025 Financial Performance Overview Rollins, Inc. reported its financial results for the first quarter of 2025 Q1 2025 Key Highlights Rollins reported strong Q1 2025 results with a 9.9% increase in revenue to $823 million and a 15.8% rise in GAAP EPS to $0.22. Organic revenue grew by 7.4%, demonstrating solid underlying business performance despite a negative currency impact. The company also saw a 15.3% increase in operating cash flow, reaching $147 million Q1 2025 Financial Highlights (in millions) | Metric | Q1 2025 | Change vs. Q1 2024 | | :--- | :--- | :--- | | Revenues | $823 | +9.9% | | Organic Revenues* | - | +7.4% | | Operating Income | $143 | +7.7% | | Adjusted Operating Income* | $147 | +6.7% | | Net Income | $105 | +11.5% | | Adjusted Net Income* | $108 | +9.7% | | EPS (Diluted) | $0.22 | +15.8% | | Adjusted EPS* | $0.22 | +10.0% | | Operating Cash Flow | $147 | +15.3% | - The stronger dollar had a negative impact on revenues, reducing them by 40 basis points during the quarter[7] - During the quarter, the company invested $27 million in acquisitions, $7 million in capital expenditures, and paid $80 million in dividends[7] Management Commentary Management highlighted the company's resilient business model and focus on operational excellence as key drivers for the strong start to the year. They emphasized continued investment in organic growth and strategic M&A, such as the recent Saela acquisition. The CFO noted that despite one less business day, organic growth was solid and markets remain healthy, positioning the company for continued strong results - CEO Jerry Gahlhoff, Jr. credited the results to the company's resilient business model and focus on operational excellence[5] - The company continues to invest in organic demand generation and strategic M&A, highlighted by the recent acquisition of Saela[5] - CFO Kenneth Krause noted that organic growth of 7.4% was at the midpoint of their range, even with one less business day in the quarter[6] Detailed Financial Results This section provides a comprehensive breakdown of Rollins' financial performance, including detailed statements and expense analysis Financial Highlights Summary For the three months ended March 31, 2025, Rollins reported revenues of $822.5 million, a 9.9% increase year-over-year. GAAP net income grew 11.5% to $105.2 million. While gross profit margin improved slightly to 51.4%, GAAP operating margin decreased by 40 basis points to 17.3%. Non-GAAP adjusted operating margin also saw a decline of 50 basis points to 17.9% GAAP Financial Highlights (in thousands) | GAAP Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $822,504 | $748,349 | 9.9% | | Gross Profit | $422,370 | $382,791 | 10.3% | | Operating Income | $142,648 | $132,424 | 7.7% | | Net Income | $105,248 | $94,394 | 11.5% | | EPS | $0.22 | $0.19 | 15.8% | | Net Cash (Operating) | $146,892 | $127,433 | 15.3% | Non-GAAP Financial Highlights (in thousands) | Non-GAAP Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Adjusted Operating Income | $146,861 | $137,689 | 6.7% | | Adjusted Net Income | $107,868 | $98,357 | 9.7% | | Adjusted EPS | $0.22 | $0.20 | 10.0% | | Adjusted EBITDA | $171,857 | $160,783 | 6.9% | | Free Cash Flow | $140,111 | $120,262 | 16.5% | Expense Analysis In Q1 2025, total cost of services provided was 48.6% of revenue, a slight improvement from 48.8% in the prior year. However, total sales, general, and administrative (SG&A) expenses increased to 30.5% of revenue from 29.8%, driven primarily by higher selling and marketing expenses, which rose from 11.1% to 11.9% of revenue Expense Categories as Percentage of Revenue | Expense Category (% of Revenue) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Cost of Services Provided | 48.6% | 48.8% | | Total Sales, General & Administrative | 30.5% | 29.8% | | - Selling and marketing expenses | 11.9% | 11.1% | | - Administrative employee expenses | 9.9% | 10.1% | | Depreciation and amortization | 3.6% | 3.6% | Consolidated Financial Statements The consolidated financial statements show a healthy financial position. As of March 31, 2025, total assets stood at $2.95 billion. The income statement reflects strong revenue and net income growth. The cash flow statement highlights a significant increase in cash from operations, which funded acquisitions, dividends, and capital expenditures Statement of Financial Position (Balance Sheet) As of March 31, 2025, total assets increased to $2.95 billion from $2.82 billion at year-end 2024. This was primarily driven by a significant increase in cash and cash equivalents to $201.2 million and a rise in goodwill. Total liabilities grew to $1.59 billion, mainly due to an increase in long-term debt to $485.5 million Condensed Consolidated Statements of Financial Position (in thousands) | Balance Sheet Item (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,948,558 | $2,819,695 | | Cash and cash equivalents | $201,177 | $89,630 | | Goodwill | $1,178,704 | $1,161,085 | | Total Liabilities | $1,592,806 | $1,489,102 | | Long-term debt | $485,451 | $395,310 | | Total Stockholders' Equity | $1,355,752 | $1,330,593 | Statement of Income For Q1 2025, Rollins generated $822.5 million in revenue, up from $748.3 million in Q1 2024. Operating income rose to $142.6 million, and net income increased to $105.2 million. This resulted in a diluted net income per share of $0.22, a 15.8% increase from $0.19 in the prior-year quarter. Dividends paid per share also increased to $0.165 from $0.150 Condensed Consolidated Statements of Income (in thousands) | Income Statement Item (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $822,504 | $748,349 | | Operating Income | $142,648 | $132,424 | | Net Income | $105,248 | $94,394 | | Net Income Per Share - Diluted | $0.22 | $0.19 | | Dividends Paid Per Share | $0.165 | $0.150 | Statement of Cash Flows Net cash provided by operating activities in Q1 2025 was $146.9 million, a 15.3% increase from $127.4 million in Q1 2024. The company used $27.2 million for acquisitions and $6.8 million for capital expenditures. Financing activities included net borrowings of $95.2 million and dividend payments of $79.9 million, resulting in a net increase in cash of $111.5 million for the quarter Condensed Consolidated Cash Flow Information (in thousands) | Cash Flow Activity (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,892 | $127,433 | | Net cash used in investing activities | ($32,567) | ($52,465) | | Net cash used in financing activities | ($4,612) | ($64,254) | | Net increase in cash and cash equivalents | $111,547 | $9,146 | Non-GAAP Financial Measures & Reconciliations This section details the company's non-GAAP financial measures and provides reconciliations to their most directly comparable GAAP measures Definition of Non-GAAP Measures The company utilizes several non-GAAP financial measures, such as organic revenues, adjusted operating income, adjusted EBITDA, and free cash flow. Management believes these metrics are useful for investors to understand current business trends and compare performance over time by excluding items like acquisition impacts, restructuring costs, and certain amortization expenses - Organic revenues are used to compare performance excluding the impact of acquisitions and divestitures within the prior 12 months[25] - Adjusted operating income, adjusted net income, and adjusted EPS are calculated by adding back expenses like amortization of certain intangibles and costs related to the Fox Pest Control acquisition[26][27] - Free cash flow is calculated as cash from operating activities minus capital expenditures and is used to demonstrate the company's ability to generate cash from operations[29] Reconciliation of GAAP to Non-GAAP Measures The appendix provides detailed reconciliations of GAAP results to the non-GAAP metrics used in the report. Key adjustments include removing the impact of recent acquisitions to calculate organic growth and excluding specific expenses, such as those related to the Fox acquisition, to arrive at adjusted income and EBITDA figures Revenue Reconciliation Total reported revenue grew 9.9% to $822.5 million. After excluding $18.6 million in revenue from recent acquisitions, the organic revenue growth was 7.4%. Organic growth was led by the Termite and ancillary segment at 11.1%, followed by Commercial at 7.4% and Residential at 5.7% Revenue Growth (Q1 2025 vs Q1 2024) | Revenue Growth (Q1 2025 vs Q1 2024) | Total Growth | Organic Growth | | :--- | :--- | :--- | | Total Revenue | 9.9% | 7.4% | | Residential | 8.2% | 5.7% | | Commercial | 10.2% | 7.4% | | Termite and ancillary | 13.2% | 11.1% | Operating & Net Income Reconciliation GAAP operating income of $142.6 million was adjusted for $4.2 million in Fox acquisition-related expenses, resulting in an adjusted operating income of $146.9 million (6.7% growth). Similarly, GAAP net income of $105.2 million was adjusted for the same expenses and tax impacts, yielding an adjusted net income of $107.9 million (9.7% growth) and an adjusted EPS of $0.22 (10.0% growth) Operating and Net Income Reconciliation (in thousands) | Reconciliation (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Income (GAAP) | $142,648 | $132,424 | | Fox acquisition-related expenses | $4,213 | $5,265 | | Adjusted Operating Income | $146,861 | $137,689 | | Net Income (GAAP) | $105,248 | $94,394 | | Adjustments (net of tax) | $2,620 | $3,963 | | Adjusted Net Income | $107,868 | $98,357 | EBITDA Reconciliation EBITDA for Q1 2025 was $172.5 million, an 8.1% increase from the prior year. After adjustments, including the gain on sale of assets, adjusted EBITDA was $171.9 million, a 6.9% increase. The adjusted EBITDA margin was 20.9%, a decrease of 60 basis points from 21.5% in Q1 2024 EBITDA Reconciliation (in thousands) | EBITDA Metric (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $105,248 | $94,394 | | EBITDA | $172,549 | $159,673 | | Adjusted EBITDA | $171,857 | $160,783 | | Adjusted EBITDA Margin | 20.9% | 21.5% | Cash Flow Reconciliation Free cash flow for Q1 2025 increased by 16.5% to $140.1 million. This was calculated by taking the net cash from operating activities of $146.9 million and subtracting capital expenditures of $6.8 million. The free cash flow conversion rate improved to 133.1% from 127.4% in the prior year Free Cash Flow Reconciliation (in thousands) | Free Cash Flow (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,892 | $127,433 | | Capital expenditures | ($6,781) | ($7,171) | | Free cash flow | $140,111 | $120,262 | | Free cash flow conversion | 133.1% | 127.4% | Leverage Ratio Reconciliation The company's leverage ratio remained stable at 0.8x at the end of Q1 2025, unchanged from the end of the previous year. The calculation is based on adjusted net debt of $744.5 million and adjusted EBITDAR of $956.7 million for the trailing twelve months - The leverage ratio was 0.8x as of March 31, 2025, consistent with December 31, 2024[38] - Adjusted net debt was calculated at $744.5 million, and adjusted EBITDAR for the period was $956.7 million[38]