Rollins(US:ROL)2023-02-16 21:30Financial Performance - The company achieved record revenue of $2.7 billion in 2022, reflecting an 11.2% increase from $2.4 billion in 2021[116] - Net income for 2022 was $368.6 million, a 3.4% increase compared to $356.6 million in 2021, with earnings per diluted share rising to $0.75 from $0.72[116] - The gross profit for 2022 was $1.4 billion, a 10.0% increase from $1.3 billion in 2021, with a gross margin of 51.5%[128] - Total revenues for the year ended December 31, 2022, were $2,695,823, an increase from $2,424,300 in 2021, representing a growth of approximately 11.2%[183] - Net income for 2022 was $368,599, compared to $356,565 in 2021, reflecting a year-over-year increase of about 3.3%[183] - The company reported an operating income of $493,388 for 2022, up from $447,636 in 2021, indicating a growth of approximately 10.2%[183] Cash Flow and Investments - Operating cash flow increased to $465.9 million in 2022, up from $401.8 million in 2021, marking a 16.0% growth[144] - Cash generated from operating activities increased to $465.9 million in 2022 from $401.8 million in 2021, representing a $64.1 million increase driven by strong operating results[145] - The company used $134.1 million in investing activities in 2022, up from $99.0 million in 2021, with $30.6 million allocated to capital expenditures compared to $27.2 million in 2021[146] - Cash paid for acquisitions totaled $119.2 million in 2022, down from $146.1 million in 2021, with expectations for additional acquisitions in 2023[146] - Cash used in financing activities increased to $336.0 million in 2022 from $290.2 million in 2021, including net debt repayments of $100.0 million compared to $48.0 million in 2021[147][149] Debt and Liquidity - The company repaid $100 million in debt during 2022 and made $119 million in payments for 31 acquisitions[116] - The effective interest rate on outstanding debt as of December 31, 2022, was 5.123%[141] - The company maintains a $175 million revolving credit facility and a $300 million term loan facility, with adequate liquidity to finance operations and expansion[151] - Total contractual obligations as of December 31, 2022, amounted to $383.7 million, with $119.8 million due within one year[153] - The company had outstanding borrowings of $54.9 million under the term loan as of December 31, 2022, with no borrowings under the revolving credit facility[158] Revenue Breakdown - Residential service revenue increased by 10%, commercial revenue also grew by 10%, and termite and ancillary revenue rose by 15% in 2022[116] - Residential revenue increased to $1.2 billion in 2022, a rise of 9.9% from $1.1 billion in 2021, and $977.5 million in 2020[251] - Deferred revenue recognized in 2022 was $205.3 million, compared to $187.3 million in 2021, indicating a growth of 9.0%[251] - Franchise revenues for 2022 were $15.7 million, slightly down from $15.8 million in 2021[243] - The company reported a total of 137 domestic franchise agreements as of December 31, 2022, an increase from 135 in 2021[242] Expenses and Liabilities - Sales, general and administrative expenses rose by 10.3% to $802.7 million, but as a percentage of revenue, they decreased to 29.8% from 30.0%[129] - The accrued insurance liability increased to $39,534 in the current year from $36,414 in the previous year, showing a rise of about 5.8%[182] - The total current liabilities slightly increased to $493,784 in 2022 from $491,162 in 2021, indicating a marginal rise of about 0.5%[182] - The company’s long-term accrued liabilities include deferred compensation, acquisition holdback, and earnout liabilities, reflecting ongoing financial commitments[232] Acquisitions and Growth Strategy - The company made 31 acquisitions in 2022 for a total cash purchase price of $116.0 million, compared to 39 acquisitions for $146.1 million in 2021[249] - Goodwill from acquisitions in 2022 amounted to $65.0 million, reflecting strategic benefits expected from the acquisitions[250] - The company is well-positioned for growth in 2023, with a strong acquisition pipeline and plans to renegotiate its credit facility expiring in April 2024[117] Shareholder Returns - The company paid cash dividends of $211.6 million in 2022, or $0.43 per share, compared to $208.7 million, or $0.42 per share, in 2021[149] - The company paid dividends of $0.43 per share in 2022, up from $0.42 per share in 2021, reflecting a growth of approximately 2.4%[183] Operational Efficiency - The company engaged an actuarial specialist to evaluate the methods and assumptions used in determining the accrued insurance reserve, highlighting the complexity and estimation uncertainty involved[179] - The independent auditor confirmed the effectiveness of the company's internal control over financial reporting as of December 31, 2022[165] - The company recognizes compensation expense for unvested restricted shares over the service period, based on the stock price at the grant date[311] Market and Economic Factors - The company believes that foreign exchange rate risks will not materially impact its results of operations going forward[158] - The company plans to raise prices for services in the first quarter of 2023 to offset inflationary pressures[128]