Rollins(ROL) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents Rollins, Inc.'s unaudited condensed consolidated financial statements and management's analysis ITEM 1. FINANCIAL STATEMENTS This section presents Rollins, Inc.'s unaudited condensed consolidated financial statements and accompanying notes CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 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 | $89,968 | 22.76% | - Significant increases in total assets and liabilities, primarily driven by acquisitions and debt issuance. Goodwill increased by over 15%, reflecting acquisition activity. Cash and cash equivalents saw a substantial increase of over 37%[10] CONDENSED CONSOLIDATED STATEMENTS OF INCOME This section provides Rollins, Inc.'s condensed consolidated statements of income for the reported periods Income Statement Highlights (Three Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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 | $0.030 | 10.00% | CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME This section presents Rollins, Inc.'s condensed consolidated statements of comprehensive income Comprehensive Income (Three Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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 | $48,414 | 22.07% | - Other comprehensive income saw a significant positive shift in 2025, primarily due to foreign currency translation adjustments, moving from a loss in 2024 to a substantial gain in 2025[14] CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY This section details Rollins, Inc.'s condensed consolidated statements of stockholders' equity Stockholders' Equity (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | 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) | $21,027 | -48.19% | - The increase in total stockholders' equity was driven by net income and a significant reduction in accumulated other comprehensive loss, partially offset by cash dividends paid[18] CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS This section outlines Rollins, Inc.'s condensed consolidated statements of cash flows Cash Flow Summary (Six Months Ended June 30): | Activity | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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] NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section provides detailed explanations and disclosures for the condensed consolidated financial statements NOTE 1. BASIS OF PREPARATION 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] - Management's estimates and assumptions reflect economic trends, but future results may vary due to continued uncertainty in economic conditions[23] NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS 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] - 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] NOTE 3. ACQUISITIONS 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] * Contributed $18.9 million in revenues and $2.7 million in net earnings during the three months ended June 30, 2025[28][29] * 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][31] - 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] * Resulted in $35.12 million in goodwill and $25.98 million in customer contracts[37] 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 | $226,433 | NOTE 4. REVENUE This note details Rollins, Inc.'s revenue breakdown by geographic area, service offering, and unearned revenue Total Revenues by Geographic Area (Six Months Ended June 30): | Geographic Area | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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 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][46] NOTE 6. GOODWILL AND INTANGIBLE ASSETS 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 $176.8 million (15.2%) primarily due to additions from acquisitions[47] Intangible Assets (June 30, 2025 vs. December 31, 2024): | Asset Type | June 30, 2025 Carrying Value (in thousands) | December 31, 2024 Carrying Value (in thousands) | Change ($) | 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 $89.2 million in 2026[48] NOTE 7. DEBT This note describes Rollins, Inc.'s debt structure, including senior notes, commercial paper, and credit facilities Long-term Debt (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | 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][62] - Commercial Paper Program: * Established in March 2025, allowing issuance of up to $1 billion in unsecured commercial paper[63] * 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] - Revolving Credit Facility: * $1.0 billion facility maturing February 24, 2028[58] * Amendment No. 1 in March 2025 released subsidiary guarantors[59] * No outstanding borrowings as of June 30, 2025[62] NOTE 8. FAIR VALUE MEASUREMENT This note provides information on Rollins, Inc.'s fair value measurements, including contingent consideration and senior notes Contingent Consideration (June 30, 2025 vs. December 31, 2024): | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change ($) | 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] 2035 Senior Notes Fair Value (June 30, 2025): | Metric | Fair Value (in thousands) | Carrying Value (in thousands) | | :---------------- | :------------------------ | :-------------------------- | | 2035 Senior Notes | $502,150 | $485,278 | - The fair value of the 2035 Senior Notes was slightly above their carrying value, classified as Level 2 in the fair value hierarchy[73] NOTE 9. CONTINGENCIES This note outlines Rollins, Inc.'s involvement in various legal and environmental contingencies - The Company is involved in various claims, arbitrations, disputes, investigations, and litigation, including allegations of service/vehicle damage, service efficacy, acquisition-related claims, and regulatory violations, and accrues loss contingency reserves based on probable and estimable outcomes[74] - Retains risks for general liability, workers' compensation, and auto liability, with estimated costs based on historical trends and actuarial studies[75] - An ongoing environmental investigation in California is not expected to have a material adverse effect on financial results[77][78] NOTE 10. STOCKHOLDERS' EQUITY This note details changes in Rollins, Inc.'s stockholders' equity, including dividends and stock-based compensation Cash Dividends Paid (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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 | $4,249 | 27.31% | - The Company did not repurchase shares on the open market during the reported periods[81] NOTE 11. EARNINGS PER SHARE This note provides calculations for Rollins, Inc.'s basic and diluted earnings per share Weighted Average Shares Outstanding (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :----- | :--------- | | Total weighted-average shares outstanding – basic | 484,530 | 484,187 | 343 | 0.07% | | Weighted-average shares outstanding – diluted | 484,559 | 484,356 | 203 | 0.04% | NOTE 12. INCOME TAXES This note details Rollins, Inc.'s provision for income taxes and effective tax rate Provision for Income Taxes (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | Provision for income taxes | $82,052 | $75,861 | $6,191 | 8.16% | Effective Tax Rate (Six Months Ended June 30): | Metric | 2025 | 2024 | Change (bps) | | :---------------- | :--- | :--- | :----------- | | Effective tax rate | 25.0% | 25.3% | -30 bps | - The effective tax rate decreased due to a decrease in state income tax expense in 2025[86] NOTE 13. SEGMENT AND GEOGRAPHIC INFORMATION This note provides information on Rollins, Inc.'s reportable segment and geographic distribution of assets - The Company operates under one reportable segment, encompassing residential, commercial, and termite and ancillary service offerings[87] - The CEO, as CODM, uses net income to assess financial performance and allocate resources[87] Long-lived Tangible Assets by Location (June 30, 2025 vs. December 31, 2024): | Location | 2025 (in thousands) | 2024 (in thousands) | Change ($) | Change (%) | | :--------------- | :------------------ | :------------------ | :--------- | :--------- | | United States | $506,544 | $503,767 | $2,777 | 0.55% | | International | $41,886 | $35,546 | $6,340 | 17.84% | NOTE 14. SUBSEQUENT EVENTS 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] - 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] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on Rollins, Inc.'s financial performance and condition GENERAL OPERATING COMMENTS 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] - The Company aims for 7% to 8% organic revenue growth and 3% to 4% inorganic revenue growth for 2025[96] - Focus on improving business model efficiency while investing in programs aimed at growing the business across service offerings[96] RECENT DEVELOPMENTS AND ECONOMIC CONDITIONS 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][101] - 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] - 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] RESULTS OF OPERATIONS 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 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 | $30,007 | 20.7% | - Revenue Growth Drivers (Q2 2025): * Total revenue increased by 12.1%, with organic revenue growth of 7.3% and acquisitions contributing 4.8%[108] * Residential pest control revenue increased 11.6% (4.9% organic)[108] * Commercial pest control revenue increased 11.4% (8.4% organic)[108] * Termite and ancillary services grew 13.9% (10.3% organic)[108] - Operating Margin Decline (Q2 2025): * Operating margin decreased by 60 basis points to 19.8%, primarily due to higher insurance and claims costs (40 bps) and fleet costs (30 bps), partially offset by leverage in employee expenses (30 bps) and materials and supplies (40 bps)[112][114][116] Six months ended June 30, 2025 compared to six months ended June 30, 2024 This section compares Rollins, Inc.'s financial performance for the first half of 2025 against 2024 Key Financial Performance (H1 2025 vs. H1 2024): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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 | $49,466 | 18.1% | - Revenue Growth Drivers (H1 2025): * Total revenue increased by 11.1%, with organic revenue growth of 7.4% and acquisitions contributing 3.7%[125] * Residential pest control revenue increased 10.1% (5.2% organic)[125] * Commercial pest control revenue increased 10.8% (7.9% organic)[125] * Termite and ancillary services grew 13.6% (10.7% organic)[125] * Foreign currency headwinds impacted revenue by 20 basis points[125] - Operating Margin Decline (H1 2025): * Operating margin decreased by 50 basis points to 18.7%, mainly due to higher selling and marketing costs, fleet costs, and insurance and claims costs, partially offset by leverage in materials and supplies and employee expenses[127][129][131] Non-GAAP Financial Measures This section defines and reconciles various non-GAAP financial measures used by Rollins, Inc. Organic Revenues (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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 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] - 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] - 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] - 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] - Revolving Credit Facility: $1.0 billion facility, with no outstanding borrowings as of June 30, 2025 (compared to $397.0 million at December 31, 2024)[165] Cash Flow Summary (Six Months Ended June 30): | Activity | 2025 (in thousands) | 2024 (in thousands) | Change ($) | 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][170][171][172][173] 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] - Retains risks for general liability, workers' compensation, and auto liability, with estimated costs based on historical trends and actuarial studies[177] - 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][179] CRITICAL ACCOUNTING ESTIMATES 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] CAUTION REGARDING FORWARD-LOOKING STATEMENTS 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] - 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] - 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][183] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] - Refer to Part II, Item 7.A of the 2024 Form 10-K for detailed information on market risks[184] ITEM 4. CONTROLS AND PROCEDURES 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] - The assessment of internal control over financial reporting excludes Saela Holdings, LLC, which was acquired during the quarter and is currently being integrated[186] - No other material changes in internal control over financial reporting during the quarter ended June 30, 2025[187] PART II OTHER INFORMATION This section provides additional information not covered in the financial statements or management's discussion and analysis ITEM 1. LEGAL PROCEEDINGS 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] - Loss contingency reserves are established for probable and reasonably estimable outcomes[188][189] - An environmental investigation in California is ongoing, but management does not believe it will have a material effect on financial results[190][191] ITEM 1A. RISK FACTORS 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] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 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] - 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] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This section confirms Rollins, Inc. has not experienced any defaults upon senior securities - No defaults upon senior securities[195] ITEM 4. MINE SAFETY DISCLOSURES This section states that Rollins, Inc. has no mine safety disclosures to report - No mine safety disclosures[196] ITEM 5. OTHER INFORMATION This section provides other information, specifically regarding Rule 10b5-1 Trading Plans Rule 10b5-1 Trading Plans 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] ITEM 6. EXHIBITS 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] 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]