Rollins(ROL) - 2025 Q2 - Quarterly Results

Executive Summary & Company Overview Rollins, Inc. achieved strong Q2 2025 financial results with double-digit revenue growth and improved earnings, while detailing its global pest control services Second Quarter 2025 Financial Highlights Rollins, Inc. reported strong second-quarter 2025 financial results, driven by double-digit revenue growth across all major service lines, leading to healthy improvements in earnings and cash flow - Rollins, Inc. reported strong second quarter 2025 financial results with double-digit revenue growth across all major service lines[1][5] - Management is focused on driving growth while also improving profitability and expects strong results in 2025 and beyond[5] - EBITDA margins were pressured by 70 basis points due to developments on legacy auto claims, but underlying operations showed healthy margin performance[6] - The Company invested $226 million in acquisitions, $7 million in capital expenditures, and paid $79 million in dividends during the quarter[7] Q2 2025 Key Financial Metrics (YoY Growth) | Metric | Q2 2025 Value | YoY Growth | | :-------------------------------- | :------------ | :--------- | | Revenues | $1 billion | 12.1% | | Organic Revenues* | N/A | 7.3% | | Operating Income | $198 million | 8.7% | | Operating Margin | 19.8% | (60) bps | | Adjusted Operating Income* | $206 million | 10.3% | | Adjusted Operating Margin* | 20.6% | (30) bps | | Adjusted EBITDA* | $231 million | 10.0% | | Adjusted EBITDA Margin* | 23.1% | (50) bps | | Net Income | $141 million | 9.3% | | Adjusted Net Income* | $147 million | 11.1% | | EPS (diluted) | $0.29 | 7.4% | | Adjusted EPS* (diluted) | $0.30 | 11.1% | | Operating Cash Flow | $175 million | 20.7% | Consolidated Financial Performance Rollins reported strong GAAP and non-GAAP financial results for Q2 and YTD June 2025, with double-digit revenue growth and improved profitability across key metrics GAAP Financial Metrics Rollins reported strong GAAP financial results for Q2 and YTD June 2025, with double-digit revenue growth and healthy increases in gross profit, operating income, net income, and EPS GAAP Financial Performance (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Q2 % Change | YTD 2025 | YTD 2024 | YTD % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Revenues | $999,527 | $891,920 | 12.1% | $1,822,031 | $1,640,269 | 11.1% | | Gross profit | $537,666 | $481,635 | 11.6% | $960,036 | $864,426 | 11.1% | | Gross profit margin | 53.8% | 54.0% | (20) bps | 52.7% | 52.7% | — bps | | Operating income | $198,333 | $182,377 | 8.7% | $340,981 | $314,801 | 8.3% | | Operating margin | 19.8% | 20.4% | (60) bps | 18.7% | 19.2% | (50) bps | | Net income | $141,489 | $129,397 | 9.3% | $246,737 | $223,791 | 10.3% | | EPS | $0.29 | $0.27 | 7.4% | $0.51 | $0.46 | 10.9% | | Net cash provided by operating activities | $175,122 | $145,115 | 20.7% | $322,014 | $272,548 | 18.1% | Non-GAAP Financial Metrics Rollins' non-GAAP metrics for Q2 and YTD June 2025 also showed strong growth, with adjusted operating income, adjusted net income, adjusted EPS, and adjusted EBITDA all increasing double-digits year-over-year Non-GAAP Financial Performance (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Q2 % Change | YTD 2025 | YTD 2024 | YTD % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Adjusted operating income | $205,900 | $186,596 | 10.3% | $352,769 | $324,285 | 8.8% | | Adjusted operating margin | 20.6% | 20.9% | (30) bps | 19.4% | 19.8% | (40) bps | | Adjusted net income | $146,902 | $132,229 | 11.1% | $254,775 | $230,586 | 10.5% | | Adjusted EPS | $0.30 | $0.27 | 11.1% | $0.53 | $0.48 | 10.4% | | Adjusted EBITDA | $231,152 | $210,088 | 10.0% | $403,009 | $370,871 | 8.7% | | Adjusted EBITDA margin | 23.1% | 23.6% | (50) bps | 22.1% | 22.6% | (50) bps | | Free cash flow | $168,046 | $136,419 | 23.2% | $308,157 | $256,681 | 20.1% | Significant Expense Categories An analysis of expense categories for Q2 and YTD 2025 shows that employee expenses remain the largest cost component, with insurance and claims costs increasing as a percentage of revenue in Q2 2025 - Insurance and claims expenses, both within cost of services and SG&A, increased as a percentage of revenue in Q2 2025 compared to Q2 2024[10] Key Expense Categories as % of Revenue (Q2 2025 vs. Q2 2024) | Expense Category | Q2 2025 (% of Revenue) | Q2 2024 (% of Revenue) | | :-------------------------------- | :----------------------- | :----------------------- | | Employee expenses (Cost of services) | 29.8% | 30.1% | | Materials and supplies | 6.0% | 6.4% | | Insurance and claims (Cost of services) | 2.1% | 1.7% | | Fleet expenses (Cost of services) | 4.2% | 3.9% | | Total cost of services provided | 46.2% | 46.0% | | Selling and marketing expenses | 14.0% | 14.1% | | Administrative employee expenses | 8.9% | 8.9% | | Insurance and claims (SG&A) | 1.3% | 1.0% | | Total sales, general and administrative | 30.8% | 30.4% | | Depreciation and amortization | 3.2% | 3.1% | Condensed Consolidated Financial Statements Rollins' condensed consolidated financial statements for Q2 and YTD June 2025 reflect increased assets, liabilities, revenues, and net income, with strong operating cash flow and significant acquisition spending Condensed Consolidated Statements of Financial Position As of June 30, 2025, Rollins' total assets increased to $3.18 billion from $2.82 billion at December 31, 2024, primarily driven by increases in goodwill, intangibles, and current assets Key Balance Sheet Items (June 30, 2025 vs. December 31, 2024, in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :----- | | Total assets | $3,180,040 | $2,819,695 | +$360,345 | | Cash and cash equivalents | $123,035 | $89,630 | +$33,405 | | Trade receivables, net | $229,735 | $196,081 | +$33,654 | | Goodwill | $1,337,903 | $1,161,085 | +$176,818 | | Intangibles, net | $600,970 | $541,589 | +$59,381 | | Total current assets | $537,907 | $442,623 | +$95,284 | | Total liabilities | $1,736,169 | $1,489,102 | +$247,067 | | Short-term debt | $59,989 | $0 | +$59,989 | | Long-term debt | $485,278 | $395,310 | +$89,968 | | Unearned revenues | $200,110 | $180,851 | +$19,259 | | Total stockholders' equity | $1,443,871 | $1,330,593 | +$113,278 | Condensed Consolidated Statements of Income For the three months ended June 30, 2025, Rollins reported revenues of $999.5 million, an increase from $891.9 million in the prior year, with net income growing to $141.5 million Key Income Statement Items (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | Revenues | $999,527 | $891,920 | $1,822,031 | $1,640,269 | | Total operating expenses | $801,194 | $709,543 | $1,481,050 | $1,325,468 | | Operating income | $198,333 | $182,377 | $340,981 | $314,801 | | Consolidated income before income taxes | $191,245 | $175,014 | $328,789 | $299,652 | | Net income | $141,489 | $129,397 | $246,737 | $223,791 | | Net income per share - diluted | $0.29 | $0.27 | $0.51 | $0.46 | | Dividends paid per share | $0.165 | $0.150 | $0.330 | $0.300 | Condensed Consolidated Cash Flow Information Rollins generated $175.1 million in net cash from operating activities in Q2 2025, a 20.7% increase year-over-year, with significant acquisition spending impacting investing activities - Acquisition spending significantly increased in Q2 2025 to $226.4 million, compared to $34.5 million in Q2 2024[21] Key Cash Flow Items (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $175,122 | $145,115 | $322,014 | $272,548 | | Net cash used in investing activities | $(230,524) | $(41,156) | $(263,091) | $(93,621) | | Acquisitions, net of cash acquired | $(226,387) | $(34,522) | $(253,578) | $(81,654) | | Capital expenditures | $(7,076) | $(8,696) | $(13,857) | $(15,867) | | Net cash used in financing activities | $(23,958) | $(109,632) | $(28,570) | $(173,886) | | Payment of dividends | $(79,463) | $(72,578) | $(159,373) | $(145,167) | | Net (decrease) increase in cash and cash equivalents | $(78,142) | $(6,274) | $33,405 | $2,872 | Company Information & Forward-Looking Statements Rollins, Inc. outlines its global operations, provides a cautionary statement on forward-looking information, and details the upcoming conference call for Q2 2025 results About Rollins, Inc. Rollins, Inc. is a premier global consumer and commercial services company, offering essential pest control services and protection against various pests to over 2.8 million customers across multiple continents - Rollins, Inc. provides essential pest control services and protection against termite damage, rodents, and insects[11] - The company serves over 2.8 million customers in North America, South America, Europe, Asia, Africa, and Australia, with more than 20,000 employees from over 800 locations[11] - Rollins operates through a family of leading brands including Orkin, HomeTeam Pest Defense, Clark Pest Control, and many others[11] Cautionary Statement Regarding Forward-Looking Statements This section advises readers that the press release may contain forward-looking statements based on current expectations and assumptions, which involve risks and uncertainties, and actual results could differ materially - Forward-looking statements are based on current opinions, expectations, intentions, beliefs, plans, objectives, assumptions, and projections about future events and financial trends[12] - Important factors could cause actual results to differ materially from forward-looking statements, as detailed in the 'Risk Factors' section of the Annual Report on Form 10-K[13] - The company does not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, except as required by law[14] Conference Call Information Rollins will host a conference call on July 24, 2025, at 8:30 a.m. Eastern Time to discuss the second quarter 2025 results, with a live broadcast and replay available - Rollins will host a conference call on Thursday, July 24, 2025, at 8:30 a.m. Eastern Time to discuss Q2 2025 results[15] - The conference call will be broadcast live on www.rollins.com, and a replay will be available for 180 days[15] Non-GAAP Financial Measures & Reconciliations Rollins defines its non-GAAP financial measures and provides detailed reconciliations for key metrics such as organic revenue, adjusted operating income, net income, EPS, EBITDA, free cash flow, SG&A, and leverage ratio Non-GAAP Financial Measures Definitions This section defines Rollins' non-GAAP financial measures, explaining their calculation and management's rationale for their use in evaluating performance and liquidity - Non-GAAP measures are used to provide investors with information about current trends and period-over-period comparisons, excluding certain items like acquisition impacts or amortization of intangibles[25][26][27] - Organic revenues exclude revenues from acquisitions completed within the prior 12 months and divested businesses[26] - Adjusted operating income, net income, and EPS add back amortization of intangible assets and adjustments to contingent consideration from Fox Pest Control and Saela Pest Control acquisitions[27][28] - Free cash flow is calculated by subtracting capital expenditures from cash provided by operating activities, used to demonstrate the Company's ability to maintain its asset base and generate future cash flows[30] Organic Revenue Reconciliations Rollins' total revenues increased by 12.1% in Q2 2025, with organic revenue growth of 7.3% after excluding $42.6 million from acquisitions, demonstrating strong organic growth across all service lines Organic Revenue Growth (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 Revenues | Q2 2024 Revenues | Q2 Acq. Revenues | Q2 Organic Revenues | Q2 Organic % Change | YTD 2025 Revenues | YTD 2024 Revenues | YTD Acq. Revenues | YTD Organic Revenues | YTD Organic % Change | | :-------------------------------- | :--------------- | :--------------- | :--------------- | :------------------ | :------------------ | :---------------- | :---------------- | :---------------- | :------------------- | :------------------- | | Total Revenues | $999,527 | $891,920 | $42,602 | $956,925 | 7.3% | $1,822,031 | $1,640,269 | $61,152 | $1,760,879 | 7.4% | | Residential Revenues | $455,665 | $408,414 | $27,208 | $428,457 | 4.9% | $811,978 | $737,752 | $35,574 | $776,404 | 5.2% | | Commercial Revenues | $320,490 | $287,770 | $8,689 | $311,801 | 8.4% | $604,847 | $545,884 | $15,721 | $589,126 | 7.9% | | Termite and Ancillary Revenues | $211,855 | $186,024 | $6,705 | $205,150 | 10.3% | $383,985 | $338,084 | $9,857 | $374,128 | 10.7% | Adjusted Operating Income & Margin Reconciliations Adjusted operating income for Q2 2025 was $205.9 million, an increase of 10.3% year-over-year, after adding back $7.6 million in acquisition-related expenses, with a slight decrease in adjusted operating margin Adjusted Operating Income & Margin (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Q2 % Change | YTD 2025 | YTD 2024 | YTD % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Operating income | $198,333 | $182,377 | N/A | $340,981 | $314,801 | N/A | | Acquisition-related expenses | $7,567 | $4,219 | N/A | $11,788 | $9,484 | N/A | | Adjusted operating income | $205,900 | $186,596 | 10.3% | $352,769 | $324,285 | 8.8% | | Operating margin | 19.8% | 20.4% | N/A | 18.7% | 19.2% | N/A | | Adjusted operating margin | 20.6% | 20.9% | (30) bps | 19.4% | 19.8% | (40) bps | Adjusted Net Income & EPS Reconciliations Adjusted net income for Q2 2025 increased by 11.1% to $146.9 million, and adjusted EPS rose by 11.1% to $0.30 per diluted share, after accounting for acquisition-related expenses and their tax impact Adjusted Net Income & EPS (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Q2 % Change | YTD 2025 | YTD 2024 | YTD % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Net income | $141,489 | $129,397 | N/A | $246,737 | $223,791 | N/A | | Acquisition-related expenses | $7,567 | $4,219 | N/A | $11,788 | $9,484 | N/A | | Gain on sale of assets, net | $(292) | $(412) | N/A | $(984) | $(351) | N/A | | Tax impact of adjustments | $(1,862) | $(975) | N/A | $(2,766) | $(2,338) | N/A | | Adjusted net income | $146,902 | $132,229 | 11.1% | $254,775 | $230,586 | 10.5% | | EPS - diluted | $0.29 | $0.27 | N/A | $0.51 | $0.46 | N/A | | Adjusted EPS - diluted | $0.30 | $0.27 | 11.1% | $0.53 | $0.48 | 10.4% | EBITDA & Adjusted EBITDA Reconciliations Rollins reported Q2 2025 EBITDA of $230.4 million, a 9.4% increase, and Adjusted EBITDA of $231.2 million, a 10.0% increase, after adjustments, though both EBITDA and Adjusted EBITDA margins saw slight declines EBITDA & Adjusted EBITDA (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Q2 % Change | YTD 2025 | YTD 2024 | YTD % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Net income | $141,489 | $129,397 | N/A | $246,737 | $223,791 | N/A | | Depreciation and amortization | $31,737 | $27,711 | N/A | $60,946 | $55,021 | N/A | | Interest expense, net | $7,380 | $7,775 | N/A | $13,176 | $15,500 | N/A | | Provision for income taxes | $49,756 | $45,617 | N/A | $82,052 | $75,861 | N/A | | EBITDA | $230,362 | $210,500 | 9.4% | $402,911 | $370,173 | 8.8% | | Acquisition-related expenses | $1,082 | $0 | N/A | $1,082 | $1,049 | N/A | | Gain on sale of assets, net | $(292) | $(412) | N/A | $(984) | $(351) | N/A | | Adjusted EBITDA | $231,152 | $210,088 | 10.0% | $403,009 | $370,871 | 8.7% | | EBITDA margin | 23.0% | 23.6% | N/A | 22.1% | 22.6% | N/A | | Adjusted EBITDA margin | 23.1% | 23.6% | N/A | 22.1% | 22.6% | N/A | | Incremental EBITDA margin | N/A | N/A | 18.5% | N/A | N/A | 18.0% | | Adjusted incremental EBITDA margin | N/A | N/A | 19.6% | N/A | N/A | 17.7% | Free Cash Flow Reconciliations Free cash flow for Q2 2025 increased by 23.2% to $168.0 million, driven by strong operating cash flow and a decrease in capital expenditures, leading to improved free cash flow conversion Free Cash Flow & Conversion (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | Q2 % Change | YTD 2025 | YTD 2024 | YTD % Change | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $175,122 | $145,115 | N/A | $322,014 | $272,548 | N/A | | Capital expenditures | $(7,076) | $(8,696) | N/A | $(13,857) | $(15,867) | N/A | | Free cash flow | $168,046 | $136,419 | 23.2% | $308,157 | $256,681 | 20.1% | | Free cash flow conversion | 118.8% | 105.4% | N/A | 124.9% | 114.7% | N/A | Adjusted SG&A Reconciliations Adjusted SG&A for Q2 2025 was $306.5 million, slightly lower than reported SG&A after removing $1.1 million in acquisition-related expenses, with adjusted SG&A as a percentage of revenues increasing slightly Adjusted SG&A (Q2 and YTD June 30, 2025 vs. 2024, in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | SG&A | $307,596 | $271,547 | $558,109 | $494,604 | | Acquisition-related expenses | $1,082 | $0 | $1,082 | $1,049 | | Adjusted SG&A | $306,514 | $271,547 | $557,027 | $493,555 | | Adjusted SG&A as a % of revenues | 30.7% | 30.4% | 30.6% | 30.1% | Leverage Ratio Reconciliations As of June 30, 2025, Rollins' leverage ratio increased to 0.9x from 0.8x at December 31, 2024, reflecting an increase in adjusted net debt primarily due to new short-term and long-term borrowings - Short-term debt increased to $60.0 million as of June 30, 2025, from no outstanding borrowings at December 31, 2024, under the commercial paper program[39][41] - Long-term debt increased to $500.0 million from $397.0 million, primarily due to the issuance of 2035 Senior Notes[39][42] Leverage Ratio (June 30, 2025 vs. December 31, 2024, in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Adjusted net debt | $871,183 | $733,551 | | Adjusted EBITDAR | $986,339 | $934,531 | | Leverage ratio | 0.9x | 0.8x |