Rollins(US:ROL)2025-10-30 19:37Financial Performance - Third quarter revenues were $1.0 billion, an increase of 12.0% over the third quarter of 2024, with organic revenues increasing 7.2%[99] - Quarterly operating income was $225.0 million, a 17.3% increase compared to the prior year, with an operating margin of 21.9%, up 100 basis points[99] - Adjusted EBITDA was $258.3 million, reflecting a 17.7% increase year-over-year, with an adjusted EBITDA margin of 25.2%, an increase of 120 basis points[99] - Quarterly net income reached $163.5 million, a 19.4% increase from the previous year, with adjusted net income at $168.5 million, up 20.7%[99] - Revenues for the nine months ended September 30, 2025, were $2.848 billion, an increase of $291.6 million, or 11.4%, from $2.556 billion in 2024[124] - Gross profit for the same period was $1.519 billion, up $159.9 million, or 11.8%, compared to $1.359 billion in 2024[126] - Operating income increased to $566.0 million, reflecting an increase of $59.4 million, or 11.7%, from $506.6 million in 2024[131] - Net income for the nine months ended September 30, 2025, was $410.3 million, a rise of $49.6 million, or 13.7%, compared to $360.7 million in 2024[121] - Adjusted EBITDA for the nine months ended September 30, 2025, was $661.3 million, an increase of $71.0 million, or 12.0%, from $590.3 million in 2024[124] Revenue Growth - Organic revenue growth was strong across service offerings, with residential pest control growing 5.2%, commercial pest control 8.3%, and termite and ancillary services 10.8%[106] - Organic revenue growth was 7.3%, with acquisitions contributing an additional 4.1% during the nine months ended September 30, 2025[124] - The company is targeting 7% to 8% organic revenue growth and 3% to 4% inorganic revenue growth for 2025[95] Cash Flow and Investments - Operating cash flow for the quarter was $191.3 million, a 30.2% increase compared to the prior year, with investments of $34.7 million in acquisitions[99] - Free cash flow for the nine months ended September 30, 2025, was $491.0 million, an increase of $94.9 million, or 24.0%, from $396.1 million in 2024[124] - Free cash flow for the three months ended September 30, 2025, was $182,846, representing a 31.1% increase from $139,425 in 2024[150] - Free cash flow conversion improved to 111.8% for the three months ended September 30, 2025, compared to 101.8% in 2024[150] - Cash used in investing activities rose significantly to $302.8 million for the nine months ended September 30, 2025, compared to $123.6 million in 2024, primarily due to acquisitions[171] - The company invested $22.4 million in capital expenditures during the nine months ended September 30, 2025[171] Expenses and Margins - Sales, general and administrative expenses increased by 9.6% to $301.4 million, but as a percentage of revenue, SG&A decreased to 29.4% from 30.0%[111] - Gross profit for the quarter was $558.7 million, a 13.0% increase compared to the prior year, with a gross margin of 54.4%[109] - SG&A expenses increased by $90.0 million, or 11.7%, to $859.5 million, representing 30.2% of revenue[128] - Adjusted SG&A as a percentage of revenues decreased to 29.3% for the three months ended September 30, 2025, compared to 30.0% in 2024[152] Tax and Effective Rates - The effective tax rate decreased to 24.8% in the third quarter of 2025 from 26.1% in the prior year, primarily due to the purchase of transferable federal income tax credits[117] - The effective tax rate decreased to 24.9% in 2025 from 25.6% in 2024, primarily due to the purchase of transferable federal income tax credits[135] Debt and Liquidity - As of September 30, 2025, the company had outstanding long-term debt of $500 million from the issuance of 2035 Senior Notes[155] - The leverage ratio remained stable at 0.8x as of September 30, 2025, consistent with the previous period[152] - The company maintained $127.4 million in total cash, with $55.2 million held by foreign subsidiaries[157] - The company has $1 billion available under its commercial paper program, with no outstanding borrowings as of September 30, 2025[162] Risks and Liabilities - The Company retains certain risks related to general liability, workers' compensation, and auto liability, with costs accrued based on historical trends[178] - Estimated liabilities are based on historical claims information provided by an independent third-party actuary, which is a major consideration in establishing reserves[178] - Management's judgment in estimating reserves is subjective and may lead to overestimation or insufficient accruals, potentially affecting operating results[178] - There were no material changes to the Company's market risk exposure during the nine months ended September 30, 2025[185]