ROL 10-Q Quarterly Report Sept. 30, 2024 | Alphaminr
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ROL 10-Q Quarter ended Sept. 30, 2024

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ROLLINS INC
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-4422

ROLLINS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0068479
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2170 Piedmont Road, N.E. , Atlanta , Georgia
(Address of principal executive offices)
30324
(Zip Code)
( 404 ) 888-2000
(Registrant’s telephone number, including area code)
___________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock ROL NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer x Accelerated filer o
Non-accelerated filer o Smaller reporting company o
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No x
Rollins, Inc. had 484,305,016 shares of its $1 par value Common Stock outstanding as of October 14, 2024.

ROLLINS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Pages
2
ROLLINS, INC. AND SUBSIDIARIES
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023
(in thousands except share data)
(unaudited)
September 30,
2024 		December 31,
2023
ASSETS
Cash and cash equivalents $ 95,282 $ 103,825
Trade receivables, net of allowance for expected credit losses of $ 18,548 and $ 15,797 , respectively
226,452 178,214
Financed receivables, short-term, net of allowance for expected credit losses of $ 2,271 and $ 1,874 , respectively
39,289 37,025
Materials and supplies 39,283 33,383
Other current assets 86,196 54,192
Total current assets 486,502 406,639
Equipment and property, net of accumulated depreciation of $ 378,768 and $ 360,421 , respectively
129,168 126,661
Goodwill 1,135,122 1,070,310
Customer contracts, net 381,197 386,152
Trademarks & tradenames, net 151,294 151,368
Other intangible assets, net 8,230 8,214
Operating lease right-of-use assets 391,626 323,390
Financed receivables, long-term, net of allowance for expected credit losses of $ 5,354 and $ 3,728 , respectively
87,880 75,909
Other assets 45,179 46,817
Total assets $ 2,816,198 $ 2,595,460
LIABILITIES
Accounts payable $ 58,217 $ 49,200
Accrued insurance - current 50,106 46,807
Accrued compensation and related liabilities 108,227 114,355
Unearned revenues 201,909 172,380
Operating lease liabilities - current 113,727 92,203
Other current liabilities 89,882 101,744
Total current liabilities 622,068 576,689
Accrued insurance, less current portion 57,510 48,060
Operating lease liabilities, less current portion 280,555 233,369
Long-term debt 445,176 490,776
Other long-term accrued liabilities 93,112 90,999
Total liabilities 1,498,421 1,439,893
Commitments and contingencies (see Note 9)
STOCKHOLDERS’ EQUITY
Preferred stock, without par value; 500,000 shares authorized, zero shares issued
— —
Common stock, par value $ 1 per share; 800,000,000 shares authorized, 484,305,525 and 484,080,014 shares issued and outstanding, respectively
484,306 484,080
Additional paid in capital 145,489 131,840
Accumulated other comprehensive loss ( 21,137 ) ( 26,755 )
Retained earnings 709,119 566,402
Total stockholders’ equity 1,317,777 1,155,567
Total liabilities and stockholders’ equity $ 2,816,198 $ 2,595,460
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(in thousands except per share data)
(unaudited)
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2024 2023 2024 2023
REVENUES
Customer services $ 916,270 $ 840,427 $ 2,556,539 $ 2,319,192
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below) 421,892 388,533 1,197,735 1,099,566
Sales, general and administrative 274,918 244,906 769,522 696,668
Restructuring costs — 5,196 — 5,196
Depreciation and amortization 27,664 24,668 82,685 73,609
Total operating expenses 724,474 663,303 2,049,942 1,875,039
OPERATING INCOME 191,796 177,124 506,597 444,153
Interest expense, net 7,150 5,547 22,650 10,797
Other income, net ( 582 ) ( 493 ) ( 933 ) ( 6,226 )
CONSOLIDATED INCOME BEFORE INCOME TAXES 185,228 172,070 484,880 439,582
PROVISION FOR INCOME TAXES 48,315 44,293 124,176 113,428
NET INCOME $ 136,913 $ 127,777 $ 360,704 $ 326,154
NET INCOME PER SHARE - BASIC AND DILUTED $ 0.28 $ 0.26 $ 0.74 $ 0.66
Weighted average shares outstanding – basic 484,317 490,775 484,231 491,980
Weighted average shares outstanding – diluted 484,359 490,965 484,270 492,158
DIVIDENDS PAID PER SHARE $ 0.15 $ 0.13 $ 0.45 $ 0.39
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(in thousands)
(unaudited)
Three Months Ending
September 30, 		Nine Months Ended
September 30,
2024 2023 2024 2023
NET INCOME $ 136,913 $ 127,777 $ 360,704 $ 326,154
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments 9,921 ( 6,199 ) 5,453 ( 3,740 )
Unrealized gains on available for sale securities 138 64 165 116
Other comprehensive income (loss), net of tax 10,059 ( 6,135 ) 5,618 ( 3,624 )
Comprehensive income $ 146,972 $ 121,642 $ 366,322 $ 322,530
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(in thousands)
(unaudited)
Common Stock Paid-in-
Capital 		Accumulated Other
Comprehensive
Income / (Loss) 		Retained
Earnings 		Total
Shares Amount
Balance at June 30, 2024 484,314 $ 484,314 $ 137,914 $ ( 31,196 ) $ 645,026 $ 1,236,058
Net Income — — — — 136,913 136,913
Other comprehensive income, net of tax:
Foreign currency translation adjustments — — — 9,921 — 9,921
Unrealized gains on available for sale securities — — — 138 — 138
Cash dividends — — — — ( 72,820 ) ( 72,820 )
Stock compensation ( 16 ) ( 16 ) 7,558 — — 7,542
Shares withheld for payment of employee taxes 8 8 17 — — 25
Balance at September 30, 2024 484,306 $ 484,306 $ 145,489 $ ( 21,137 ) $ 709,119 $ 1,317,777
Common Stock Paid-in-
Capital 		Accumulated Other
Comprehensive
Income / (Loss) 		Retained
Earnings 		Total
Shares Amount
Balance at June 30, 2023 492,821 $ 492,821 $ 121,005 $ ( 29,051 ) $ 757,450 $ 1,342,225
Net Income — — — — 127,777 127,777
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments — — — ( 6,199 ) — ( 6,199 )
Unrealized gains on available for sale securities — — — 64 — 64
Cash dividends — — — — ( 63,809 ) ( 63,809 )
Stock compensation ( 57 ) ( 57 ) 6,153 — — 6,096
Shares withheld for payment of employee taxes ( 2 ) ( 2 ) ( 510 ) — — ( 512 )
Repurchase and retirement of common stock, including excise tax ( 8,724 ) ( 8,724 ) ( 2,799 ) — ( 291,276 ) ( 302,799 )
Balance at September 30, 2023 484,038 $ 484,038 $ 123,849 $ ( 35,186 ) $ 530,142 $ 1,102,843
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(in thousands)
(unaudited)
Common Stock Paid-in-
Capital 		Accumulated Other
Comprehensive
Income / (Loss) 		Retained
Earnings 		Total
Shares Amount
Balance at December 31, 2023 484,080 $ 484,080 $ 131,840 $ ( 26,755 ) $ 566,402 $ 1,155,567
Net income — — — — 360,704 360,704
Other comprehensive income, net of tax:
Foreign currency translation adjustments — — — 5,453 — 5,453
Unrealized gains on available for sale securities — — — 165 — 165
Cash dividends — — — — ( 217,987 ) ( 217,987 )
Stock compensation 495 495 24,914 — — 25,409
Shares withheld for payment of employee taxes ( 269 ) ( 269 ) ( 11,265 ) — — ( 11,534 )
Balance at September 30, 2024 484,306 $ 484,306 $ 145,489 $ ( 21,137 ) $ 709,119 $ 1,317,777
Common Stock Paid-in-
Capital 		Accumulated Other
Comprehensive
Income / (Loss) 		Retained
Earnings 		Total
Shares Amount
Balance at December 31, 2022 492,448 $ 492,448 $ 119,242 $ ( 31,562 ) $ 687,069 $ 1,267,197
Net income — — — — 326,154 326,154
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments — — — ( 3,740 ) — ( 3,740 )
Unrealized gains on available for sale securities — — — 116 — 116
Cash dividends — — — — ( 191,805 ) ( 191,805 )
Stock compensation 586 586 17,841 — — 18,427
Shares withheld for payment of employee taxes ( 272 ) ( 272 ) ( 10,435 ) — — ( 10,707 )
Repurchase and retirement of common stock, including excise tax ( 8,724 ) ( 8,724 ) ( 2,799 ) — ( 291,276 ) ( 302,799 )
Balance at September 30, 2023 484,038 $ 484,038 $ 123,849 $ ( 35,186 ) $ 530,142 $ 1,102,843
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2024 2023
OPERATING ACTIVITIES
Net income $ 360,704 $ 326,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 82,685 73,609
Stock-based compensation expense 22,762 18,427
Provision for expected credit losses 24,915 17,484
Gain on sale of assets, net ( 1,367 ) ( 6,226 )
Provision for deferred income taxes — 144
Changes in operating assets and liabilities:
Trade accounts receivable ( 69,885 ) ( 58,114 )
Financing receivables ( 14,234 ) ( 14,887 )
Materials and supplies ( 5,208 ) ( 2,729 )
Other current assets ( 32,553 ) ( 30,496 )
Accounts payable and accrued expenses 12,630 37,428
Unearned revenue 29,090 18,033
Other long-term assets and liabilities 9,956 ( 3,286 )
Net cash provided by operating activities 419,495 375,541
INVESTING ACTIVITIES
Acquisitions, net of cash acquired ( 105,529 ) ( 349,312 )
Capital expenditures ( 23,389 ) ( 21,279 )
Proceeds from sale of assets 2,973 10,214
Other investing activities, net 2,385 ( 1,957 )
Net cash used in investing activities ( 123,560 ) ( 362,334 )
FINANCING ACTIVITIES
Payment of contingent consideration ( 33,417 ) ( 9,288 )
Borrowings under revolving commitment 391,000 980,000
Repayments of term loan — ( 55,000 )
Repayments of revolving commitment ( 437,000 ) ( 381,000 )
Payment of dividends ( 217,964 ) ( 191,805 )
Cash paid for common stock purchased ( 11,534 ) ( 314,914 )
Other financing activities, net 3,409 5,750
Net cash (used in) provided by financing activities ( 305,506 ) 33,743
Effect of exchange rate changes on cash 1,028 ( 49 )
Net (decrease) increase in cash and cash equivalents ( 8,543 ) 46,901
Cash and cash equivalents at beginning of period 103,825 95,346
Cash and cash equivalents at end of period $ 95,282 $ 142,247
Supplemental disclosure of cash flow information:
Cash paid for interest $ 25,687 $ 9,746
Cash paid for income taxes, net $ 133,807 $ 125,878
Non-cash additions to operating lease right-of-use assets $ 153,848 $ 99,061
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ROLLINS, INC. AND SUBSIDIARIES

NOTE 1. BASIS OF PREPARATION
Basis of Preparation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, the instructions to Form 10-Q and applicable sections of Securities and Exchange Commission ("SEC") regulation S-X, and therefore do not include all information and footnotes required by U.S. GAAP for complete financial statements. There have been no material changes in the Company’s significant accounting policies or the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Rollins, Inc. (including its subsidiaries unless the context otherwise requires, “Rollins,” “we,” “us,” “our,” or the “Company”) for the year ended December 31, 2023. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2023 Annual Report on Form 10-K.
The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements. The Company considered the impact of economic trends on the assumptions and estimates used in preparing the condensed consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the quarter have been made. These adjustments are of a normal recurring nature but complicated by the continued uncertainty surrounding economic trends. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of results for the entire year. The severity, magnitude and duration of certain economic trends continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to economic trends and may change materially in future periods.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
Accounting standards and disclosure rules issued but not yet adopted
In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” to amend certain disclosure and presentation requirements for a variety of topics within the Accounting Standards Codification ("ASC"). These amendments align the requirements in the ASC to the removal of certain disclosure requirements set out in Regulation S-X and Regulation S-K, announced by the SEC. The effective date for each amended topic in the ASC is either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. Early adoption is prohibited. The Company does not expect that the application of this standard will have a material impact on its disclosures.
In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which is intended to improve reportable segment disclosure requirements, primarily through additional and more detailed information about a reportable segment's expenses, even for companies with only one reportable segment. The Company is required to adopt the guidance for its 2024 annual report filed on Form 10-K. The Company is currently evaluating the impact of these amendments on its disclosures, but this standard update will not impact the Company's results of operations or financial position.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, while retrospective application is permitted. The Company is currently evaluating the potential impact of adopting this new guidance on its disclosures.
In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule will require registrants to disclose certain climate-related information
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ROLLINS, INC. AND SUBSIDIARIES
in registration statements and annual reports. On April 4, 2024, the SEC voluntarily stayed the effective date of the final rule pending judicial review of petitions challenging it, which have been consolidated for review by the U.S. District Court of Appeals for the 8th Circuit. Notwithstanding any changes as a result of these challenges, the disclosure requirements will apply to the Company's fiscal year beginning January 1, 2025. The Company is currently evaluating the impact this final rule will have on its financial statement disclosures.
NOTE 3. ACQUISITIONS
2024 Acquisitions
The Company made 32 acquisitions during the nine months ended September 30, 2024. The aggregate preliminary values of major classes of assets acquired and liabilities assumed recorded at the dates of acquisition are included in the reconciliation of the total preliminary consideration as follows (in thousands):
September 30, 2024
Cash $ 1,061
Accounts receivable 2,819
Materials and supplies 721
Other current assets 246
Equipment and property 5,961
Goodwill 61,689
Customer contracts 46,923
Trademarks & tradenames 1,612
Other intangible assets 1,685
Current liabilities ( 715 )
Unearned revenue ( 353 )
Other assets and liabilities, net ( 1,771 )
Assets acquired and liabilities assumed $ 119,878
Included in the total consideration of $ 119.9 million are acquisition holdback liabilities of $ 13.7 million.
The Company also made payments of $ 0.4 million for prior year acquisitions during the nine months ended September 30, 2024.
Goodwill from acquisitions represents the excess of the purchase price over the fair value of net assets of businesses acquired. The factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized. A majority of the recognized goodwill is expected to be deductible for tax purposes. Valuations of certain assets and liabilities, including intangible assets and goodwill, as of the acquisition date have not been finalized at this time and are provisional.
Fox Pest Control Acquisition
On April 1, 2023, the Company acquired 100 % of FPC Holdings, LLC (“Fox Pest Control”, or "Fox"). As part of funding the Fox acquisition, on April 3, 2023, the Company borrowed incremental amounts under the Credit Agreement of $ 305.0 million. The proceeds were used to pay cash consideration at closing.
The Fox acquisition was accounted for as a business combination. The valuation of the Fox acquisition was performed by a third-party valuation specialist under our management’s supervision. The values of identified assets acquired and liabilities assumed were finalized as of March 31, 2024 and are summarized in the table below (in thousands).
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ROLLINS, INC. AND SUBSIDIARIES
Final Fair Value
Cash $ 4,560
Accounts receivable 1,542
Materials and supplies 431
Operating lease right-of-use assets 8,689
Other current assets 487
Goodwill 188,176
Customer contracts 118,000
Trademarks & tradenames 38,000
Current liabilities ( 5,538 )
Unearned revenue ( 6,144 )
Operating lease liabilities ( 8,689 )
Assets acquired and liabilities assumed $ 339,514
The Company purchased Fox for $ 339.5 million. Included in the total consideration were cash payments of $ 302.8 million made upon closing, contingent consideration valued at $ 28.0 million that were based on Fox's financial performance in the twelve months following acquisition, and holdback liabilities valued at $ 8.7 million held by the Company to settle indemnity claims and working capital adjustments. The fair value of the contingent consideration was estimated using a Monte Carlo simulation. During the nine months ended September 30, 2024, we recognized a charge of $ 1.0 million related to adjustments to the fair value of contingent consideration resulting from the acquisition of Fox. This charge is reported within sales, general and administrative expenses in our condensed consolidated statement of income.
Acquired customer contracts are estimated to have a remaining useful life of 7 years. The acquired trademarks and tradenames are expected to have an indefinite useful life.
Goodwill from this acquisition represents the excess of the purchase price over the fair value of net assets of the business acquired. The factors contributing to the amount of goodwill were based on strategic and synergistic benefits that are expected to be realized. The recognized goodwill is deductible for tax purposes.
Pro Forma Financial Information
The following table presents unaudited consolidated pro forma information as if the acquisition of Fox had occurred on January 1, 2022. The information presented below is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisition had actually occurred as of the beginning of such years or results which may be achieved in the future.
(in thousands) Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023
Revenues $ 840,427 $ 2,348,100
Net income 126,294 314,279
The pro forma financial information above adjusts for the effects of material business combination items, including the alignment of accounting policies, the effect of fair value adjustments including the amortization of acquired intangible assets, interest expense related to the incremental borrowings under the Credit Agreement, and income tax effects as if Fox had been part of Rollins since January 1, 2022.
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ROLLINS, INC. AND SUBSIDIARIES
NOTE 4. REVENUE
Revenue, classified by the major geographic areas in which our customers are located, was as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
United States $ 850,253 $ 782,073 $ 2,371,952 $ 2,155,237
Other countries 66,017 58,354 184,587 163,955
Total Revenues $ 916,270 $ 840,427 $ 2,556,539 $ 2,319,192
Revenue from external customers, classified by significant product and service offerings, was as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Residential revenue $ 428,290 $ 402,559 $ 1,166,042 $ 1,069,403
Commercial revenue 299,633 273,865 845,517 767,472
Termite completions, bait monitoring, & renewals 177,674 155,135 515,758 457,664
Franchise revenues 4,282 4,292 12,688 12,386
Other revenues 6,391 4,576 16,534 12,267
Total Revenues $ 916,270 $ 840,427 $ 2,556,539 $ 2,319,192
Revenues classified by significant product and service offerings for the three and nine months ended September 30, 2023 were misstated by an immaterial amount and have been restated from the amounts previously reported to correct the classification of such revenues. There was no impact on our condensed consolidated statements of income, financial position, or cash flows.
The Company records unearned revenue when we have either received payment or contractually have the right to bill for services in advance of the services or performance obligations being performed. Unearned revenue recognized in the three and nine months ended September 30, 2024 and 2023 was $ 63.8 million and $ 59.4 million, and $ 189.1 million and $ 172.6 million. Changes in unearned revenue were as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Beginning balance $ 233,899 $ 218,274 $ 210,059 $ 187,994
Deferral of unearned revenue 69,980 61,354 219,145 204,891
Recognition of unearned revenue ( 63,819 ) ( 59,375 ) ( 189,144 ) ( 172,632 )
Ending balance $ 240,060 $ 220,253 $ 240,060 $ 220,253
As of September 30, 2024 and December 31, 2023, the Company had long-term unearned revenue of $ 38.2 million and $ 37.7 million, respectively, recorded in other long-term accrued liabilities. Unearned short-term revenue is recognized over the next 12-month period. The majority of unearned long-term revenue is recognized over a period of five years or less with immaterial amounts recognized through 2034.
Incremental Costs of Obtaining a Contract with a Customer
Incremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not have incurred if the contract had not been obtained, primarily sales commissions. These costs are recorded as an asset and amortized to expense over the life of the contract to the extent such costs are expected to be recovered. As of September 30, 2024, we have $ 29.9 million of unamortized capitalized costs to obtain a contract, of which $ 23.6 million is recorded within other current assets and $ 6.3 million is recorded within other assets on our condensed consolidated statement of financial position. As of December 31, 2023, we had $ 22.0 million of unamortized capitalized costs to obtain a contract, of
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ROLLINS, INC. AND SUBSIDIARIES
which $ 15.3 million was recorded within other current assets and $ 6.7 million was recorded within other assets on our condensed consolidated statement of financial position. During the three and nine months ended September 30, 2024, we recorded approximately $ 6.7 million and $ 14.7 million of amortization of capitalized costs, which is recorded within sales, general and administrative expense on our condensed consolidated statement of income. During the three and nine months ended September 30, 2023, we recorded $ 3.6 million and $ 4.8 million of amortization of capitalized costs, respectively.
NOTE 5. ALLOWANCE FOR CREDIT LOSSES
The Company is exposed to credit losses primarily related to accounts receivables and financed receivables derived from customer services revenue. To reduce credit risk for residential pest control accounts receivable, we promote enrollment in our auto-pay programs. In general, we may suspend future services for customers with past due balances. The Company’s credit risk is generally low with a large number of individuals and entities comprising Rollins’ customer base and dispersion across many different geographical regions.
The Company manages its financed receivables on an aggregate basis when assessing and monitoring credit risks. The Company’s established credit evaluation and monitoring procedures seek to minimize the amount of business we conduct with higher risk customers. The credit quality of a potential obligor is evaluated at the loan origination based on an assessment of the individual’s credit bureau score. Rollins requires a potential obligor to have good credit worthiness with low risk before entering into a contract. Depending upon the individual’s credit score, the Company may accept with 100 % financing, require a significant down payment or turn down the contract. Delinquencies of accounts are monitored each month. Financed receivables include installment receivable amounts, some of which are due subsequent to one year from the balance sheet dates.
The Company’s allowances for credit losses for trade accounts receivable and financed receivables are developed using historical collection experience, current economic and market conditions, reasonable and supportable forecasts, and a review of the current status of customers’ receivables. The Company’s receivable pools are classified between residential customers, commercial customers, large commercial customers, and financed receivables. Accounts are written off against the allowance for credit losses when the Company determines that amounts are uncollectible, and recoveries of amounts previously written off are recorded when collected. The Company stops accruing interest to these receivables when they are deemed uncollectible. Below is a roll forward of the Company’s allowance for credit losses for the three and nine months ended September 30, 2024 and 2023.
Allowance for Credit Losses
(in thousands) Trade
Receivables 		Financed
Receivables 		Total
Receivables
Balance at December 31, 2023 $ 15,797 $ 5,602 $ 21,399
Provision for expected credit losses 4,823 2,870 7,693
Write-offs charged against the allowance ( 7,184 ) ( 2,362 ) ( 9,546 )
Recoveries collected 1,428 146 1,574
Balance at March 31, 2024 $ 14,864 $ 6,256 $ 21,120
Provision for expected credit losses 4,503 2,941 7,444
Write-offs charged against the allowance ( 4,690 ) ( 2,985 ) ( 7,675 )
Recoveries collected 1,423 195 1,618
Balance at June 30, 2024 $ 16,100 $ 6,407 $ 22,507
Provision for expected credit losses 7,268 2,510 $ 9,778
Write-offs charged against the allowance ( 6,244 ) ( 1,361 ) $ ( 7,605 )
Recoveries collected 1,424 69 $ 1,493
Balance at September 30, 2024 $ 18,548 $ 7,625 $ 26,173
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ROLLINS, INC. AND SUBSIDIARIES
Allowance for Credit Losses
(in thousands) Trade
Receivables 		Financed
Receivables 		Total
Receivables
Balance at December 31, 2022 $ 14,073 $ 4,968 $ 19,041
Provision for expected credit losses 1,461 2,435 3,896
Write-offs charged against the allowance ( 4,687 ) ( 1,927 ) ( 6,614 )
Recoveries collected 1,629 — 1,629
Balance at March 31, 2023 $ 12,476 $ 5,476 $ 17,952
Provision for expected credit losses 3,185 2,865 6,050
Write-offs charged against the allowance ( 4,271 ) ( 2,332 ) ( 6,603 )
Recoveries collected 1,349 — 1,349
Balance at June 30, 2023 $ 12,739 $ 6,009 $ 18,748
Provision for expected credit losses 4,739 2,799 7,538
Write-offs charged against the allowance ( 5,582 ) ( 2,731 ) ( 8,313 )
Recoveries collected 1,428 — 1,428
Balance at September 30, 2023 $ 13,324 $ 6,077 $ 19,401
NOTE 6. GOODWILL AND INTANGIBLE ASSETS
The following table summarizes changes in goodwill during the nine months ended September 30, 2024 (in thousands):
Balance at December 31, 2023 $ 1,070,310
Additions 61,689
Adjustments due to currency translation and other 3,123
Balance at September 30, 2024 $ 1,135,122
The following table sets forth the components of indefinite-lived and amortizable intangible assets as of September 30, 2024 and December 31, 2023 (in thousands):
September 30, 2024 December 31, 2023
Gross Accumulated
Amortization 		Carrying
Value 		Gross Accumulated
Amortization 		Carrying
Value 		Useful Life
in Years
Amortizable intangible assets:
Customer contracts $ 674,690 $ ( 293,493 ) $ 381,197 $ 625,920 $ ( 239,768 ) $ 386,152
3 - 20
Trademarks and tradenames 23,367 ( 11,806 ) 11,561 21,566 ( 9,933 ) 11,633
7 - 20
Other intangible assets 26,577 ( 20,574 ) 6,003 24,766 ( 18,779 ) 5,987
3 - 20
Total amortizable intangible assets $ 724,634 $ ( 325,873 ) $ 398,761 $ 672,252 $ ( 268,480 ) 403,772
Indefinite-lived intangible assets 141,960 141,962
Total customer contracts and other intangible assets $ 540,721 $ 545,734
Amortization expense related to intangible assets was $ 19.2 million and $ 16.5 million for the three months ended September 30, 2024 and 2023, respectively. Amortization expense related to intangible assets was $ 57.2 million and $ 48.5 million for the nine months ended September 30, 2024 and 2023, respectively. Customer contracts and other amortizable intangible assets are amortized on a straight-line basis over their economic useful lives.
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ROLLINS, INC. AND SUBSIDIARIES
Estimated amortization expense for the existing carrying amount of amortizable intangible assets for each of the five succeeding fiscal years as of September 30, 2024 are as follows:
(in thousands)
2024 (excluding the nine months ended September 30, 2024) $ 18,952
2025 76,087
2026 71,931
2027 68,065
2028 66,054
NOTE 7. FAIR VALUE MEASUREMENT
The Company’s financial instruments consist of cash and cash equivalents, trade receivables, financed and notes receivable, accounts payable, other short-term liabilities, and debt. The carrying amounts of these financial instruments approximate their respective fair values.
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs.
As of September 30, 2024 and December 31, 2023, we had investments in international bonds of $ 8.7 million and $ 10.2 million, respectively. These bonds are accounted for as available for sale securities and are level 2 assets under the fair value hierarchy. The bonds are recorded at their fair market values and reported within other current assets and other assets in our condensed consolidated statement of financial position. The unrealized gain or loss activity during the three and nine months ended September 30, 2024 and 2023 was not significant.
As of September 30, 2024 and December 31, 2023, the Company had $ 22.1 million and $ 46.1 million of acquisition holdback and earnout liabilities payable to former owners of acquired companies, respectively. The earnout liabilities were adjusted to reflect the expected probability of payout, and both earnout and holdback liabilities were discounted to their net present value on the Company’s books and are considered level 3 liabilities. The table below presents a summary of the changes in fair value for these liabilities.
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Beginning balance $ 22,637 $ 49,308 $ 46,104 $ 13,496
New acquisitions and measurement adjustments 3,123 2,872 13,572 42,903
Payouts ( 3,128 ) ( 4,938 ) ( 37,614 ) ( 9,288 )
Interest and fair value adjustments 13 910 556 2,016
Charge offset, forfeit and other ( 507 ) ( 607 ) ( 480 ) ( 1,582 )
Ending balance $ 22,138 $ 47,545 $ 22,138 $ 47,545
NOTE 8. DEBT
On February 24, 2023, the Company entered into a revolving credit agreement (the "Credit Agreement") with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”), which refinanced its previous credit facility.
The Credit Agreement provides for a $ 1.0 billion revolving credit facility (the “Credit Facility”), which may be denominated in U.S. Dollars and other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, subject to a $ 400 million foreign currency sublimit. The Credit Facility also includes sub-facilities for the issuance of letters of credit of up to $ 150 million and swing line loans at the Administrative Agent’s discretion of up to $ 50 million. Certain subsidiaries of Rollins provide unsecured guarantees of the Credit Facility. Rollins has the ability to expand its borrowing availability under the Credit Agreement in the form of increased revolving
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ROLLINS, INC. AND SUBSIDIARIES
commitments or one or more tranches of term loans by up to an additional $ 750 million, subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028.
Loans under the Credit Agreement bear interest, at Rollins’ election, at (i) for loans denominated in U.S. Dollars, (A) an alternate base rate (subject to a floor of 0.00 %), which is the greatest of (x) the prime rate publicly announced from time to time by JPMorgan Chase, (y) the greater of the federal funds effective rate and the Federal Reserve Bank of New York overnight bank funding rate, plus 50 basis points, and (z) Adjusted Term SOFR for a one month interest period, plus a margin ranging from 0.00 % to 0.50 % per annum based on Rollins’ consolidated total net leverage ratio; or (B) the greater of term SOFR for the applicable interest period plus 10 basis points (“Adjusted Term SOFR”) and zero , plus a margin ranging from 1.00 % to 1.50 % per annum based on Rollins’ consolidated total net leverage ratio; and (ii) for loans denominated in other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, such interest rates as set forth in the Credit Agreement.
As of September 30, 2024, the Company had outstanding borrowings of $ 447.0 million under the Credit Facility. Borrowings under the Credit Facility are presented under the long-term debt caption of our condensed consolidated balance sheet, net of $ 1.8 million in unamortized debt issuance costs as of September 30, 2024. The aggregate effective interest rate on the debt outstanding as of September 30, 2024 was 6.2 %. As of December 31, 2023, the Company had outstanding borrowings of $ 493.0 million under the Credit Facility and $ 2.2 million in unamortized debt issuance costs. The aggregate effective interest rate on the debt outstanding as of December 31, 2023 was 6.5 %.
The Company maintained $ 72.0 million in letters of credit as of September 30, 2024 and $ 71.7 million as of December 31, 2023. These letters of credit are required by the Company’s insurance companies, due to the Company’s high deductible insurance program, to secure various workers’ compensation and casualty insurance contracts coverage. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims.
The Credit Agreement contains customary terms and conditions, including, without limitation, certain financial covenants including covenants restricting Rollins’ ability to incur certain indebtedness or liens, or to merge or consolidate with or sell substantially all of its assets to another entity. Further, the Credit Agreement contains a financial covenant restricting Rollins’ ability to permit the ratio of Rollins’ consolidated total net debt to EBITDA to exceed 3.50 to 1.00. Following certain acquisitions, Rollins may elect to increase the financial covenant level to 4.00 to 1.00 temporarily. The Company is in compliance with applicable debt covenants as of September 30, 2024.
NOTE 9. CONTINGENCIES
In the normal course of business, the Company and its subsidiaries are involved in, and will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental matters primarily arising in the normal course of business or claims filed under California's Private Attorneys General Act. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.
The Company retains, up to specified limits, certain risks related to general liability, workers’ compensation and auto liability. The estimated costs of existing and future claims under the retained loss program are accrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of the claims may not be made until future periods) and may be subsequently revised based on developments relating to such claims. The Company contracts with an independent third party to provide the Company an estimated liability based upon historical claims information. The actuarial study is a major consideration in establishing the reserve, along with management’s knowledge of changes in business practice and existing claims compared to current balances. Management’s judgment is inherently subjective as a number of factors are outside management’s knowledge and control. Additionally, historical information is not always an accurate indication of future events. The accruals and reserves we hold are based on estimates that involve a degree of judgment and are inherently variable and could be overestimated or insufficient. If actual claims exceed our
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ROLLINS, INC. AND SUBSIDIARIES
estimates, our operating results could be materially affected, and our ability to take timely corrective actions to limit future costs may be limited.
Management does not believe that any pending claim, proceeding or litigation, regulatory action or investigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or liquidity; however, it is possible that an unfavorable outcome of some or all of the matters could result in a charge that might be material to the results of an individual quarter or year.
NOTE 10. STOCKHOLDERS' EQUITY
During the three months ended September 30, 2024, the Company paid $ 72.8 million, or $ 0.15 per share, in cash dividends compared to $ 63.8 million, or $ 0.13 per share, during the same period in 2023. During the nine months ended September 30, 2024, the Company paid $ 218.0 million, or $ 0.45 per share, in cash dividends compared to $ 191.8 million, or $ 0.39 per share, during the same period in 2023.
The Company withholds shares from employees for the payment of their taxes on equity awards that have vested. The Company withheld $ 11.5 million and $ 10.7 million in connection with employee tax obligations during the nine month periods ended September 30, 2024 and 2023, respectively.
During the nine months ended September 30, 2023, the Company completed the repurchase of 8,724,100 of the shares of common stock from LOR, Inc ("LOR") for $ 300.0 million in conjunction with the Offering, as defined in our 2023 Annual Report on Form 10-K. As we repurchase our common stock, we reduce common stock for par value of the shares repurchased, with the excess of the purchase price over par value recorded as a reduction to additional paid-in capital and retained earnings.
The Company did not repurchase shares on the open market during the three and nine months ended September 30, 2024 and September 30, 2023.
The following table summarizes the components of the Company’s stock-based compensation programs, including time-lapsed restricted share awards, performance share unit awards, and employee stock purchase plan, recorded as expense:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2024 2023 2024 2023
Stock-based compensation expense $ 7,202 $ 6,096 $ 22,762 $ 18,427
NOTE 11. EARNINGS PER SHARE
The Company reports both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to participating common stockholders by the weighted average number of participating common shares outstanding for the period. Diluted earnings per share is calculated by dividing the net income available to participating common shareholders by the diluted weighted average number of shares outstanding for the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive equity.
A reconciliation of weighted average shares outstanding is as follows (in thousands):
Three Months Ended
September 30, 		Nine Months Ended
September 30,
2024 2023 2024 2023
Weighted-average outstanding common shares 482,219 488,304 482,082 489,467
Add participating securities:
Weighted-average time-lapse restricted awards 2,098 2,471 2,149 2,513
Total weighted-average shares outstanding – basic 484,317 490,775 484,231 491,980
Dilutive effect of restricted stock units and PSUs 42 190 39 178
Weighted-average shares outstanding – diluted 484,359 490,965 484,270 492,158
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ROLLINS, INC. AND SUBSIDIARIES
NOTE 12. INCOME TAXES
The Company’s provision for income taxes is recorded on an interim basis based upon the Company’s estimate of the annual effective income tax rate for the full year applied to “ordinary” income or loss, adjusted each quarter for discrete items. The Company recorded a provision for income taxes of $ 48.3 million and $ 44.3 million for the three months ended September 30, 2024 and 2023, and $ 124.2 million and $ 113.4 million for the nine months ended September 30, 2024 and 2023, respectively.
The Company’s effective tax rate increased to 26.1 % in the third quarter of 2024 compared with 25.7 % in the third quarter of 2023. The higher rate for the quarter was primarily due to an increase in non-deductible expenses and foreign tax expense in 2024. During the nine months ended September 30, 2024, the Company's effective tax rate decreased to 25.6 % compared to 25.8 % in 2023. The reduced rate was primarily due to a reduction in foreign tax expense in 2024.
NOTE 13. RESTRUCTURING COSTS
During the third quarter of 2023, the Company executed a restructuring program to modernize its workforce. These changes were primarily across corporate-related functions and enabled us to make more strategic improvements in our support functions. As a result of this program, the Company incurred $ 5.2 million in restructuring costs, consisting mainly of one-time termination benefits, including severance and outplacement services, stock-based compensation, and other benefits-related costs. These costs are recorded within restructuring costs in our condensed consolidated statement of income. As of December 31, 2023, the Company had accrued restructuring costs of $ 2.1 million, which are included in other current liabilities in our condensed consolidated balance sheet. No such costs were incurred during 2024 and as of September 30, 2024 we have no remaining obligation associated with this program.
NOTE 14. SUBSEQUENT EVENTS
Quarterly Dividend
On October 22, 2024, the Company’s Board of Directors declared a regular quarterly cash dividend on its common stock of $ 0.165 per share payable on December 10, 2024 to stockholders of record at the close of business on November 12, 2024.
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ROLLINS, INC. AND SUBSIDIARIES
ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report on Form 10-Q.
GENERAL OPERATING COMMENTS
Below is a summary of the key operating results for the three months ended September 30, 2024:
• Third quarter revenues were $916.3 million, an increase of 9.0% over the third quarter of 2023 with organic revenues* increasing 7.7%.
• Quarterly operating income was $191.8 million, an increase of 8.3% over the third quarter of 2023. Quarterly operating margin was 20.9%, a decrease of 20 basis points versus the third quarter of 2023. Adjusted operating income* was $196.0 million, an increase of 4.5% over the prior year. Adjusted operating income margin* was 21.4%, a decrease of 90 basis points compared to the prior year.
• Adjusted EBITDA* was $219.5 million, an increase of 5.5% over the prior year. Adjusted EBITDA margin* was 24.0%, a decrease of 80 basis points versus the third quarter of 2023.
• Quarterly net income was $136.9 million, an increase of 7.1% over the prior year. Adjusted net income* was $139.6 million, an increase of 3.3% over the prior year.
• Quarterly EPS was $0.28 per diluted share, a 7.7% increase over the prior year EPS of $0.26. Adjusted EPS* was $0.29 per diluted share, an increase of 3.6% over the prior year.
• Operating cash flow was $146.9 million for the quarter, an increase of 15.4% compared to the prior year. The Company invested $23.9 million in acquisitions, $7.5 million in capital expenditures, and paid dividends totaling $72.8 million.
Demand remains favorable to start the fourth quarter and the pipeline of acquisition activity remains healthy. Although we continue to navigate a highly uncertain macro-environment, we believe we are well positioned to continue to deliver strong results in the last quarter of 2024.
We remain focused on driving 7% to 8% organic revenue growth while adding 2% to 3% of inorganic revenue growth for 2024. While we believe this goal is achievable, we acknowledge the potential impact weather as well as volatility in one-time business, and staffing levels, amongst other factors, might have on revenue performance. We continue to focus on improving the efficiency of our business model while investing in programs aimed at growing our business across our service offerings.
*Amounts are non-GAAP financial measures. See the schedules below for a discussion of non-GAAP financial metrics including a reconciliation of the most directly comparable GAAP measure.
IMPACT OF ECONOMIC TRENDS
The continued disruption in economic markets due to inflation, changing interest rates, business interruptions due to natural disasters and changes in weather patterns, employee shortages, and supply chain issues, all pose challenges which may adversely affect our future performance. The Company continues to execute various strategies previously implemented to help mitigate the impact of these economic disruptors.
However, the Company cannot reasonably estimate whether these strategies will help mitigate the impact of these economic disruptors in the future.
The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements. The Company considered the impact of economic trends on the assumptions and estimates used in preparing the condensed consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the quarter have been made. These adjustments are of a normal recurring nature but are complicated by the continued uncertainty surrounding these macro economic trends.
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ROLLINS, INC. AND SUBSIDIARIES
The severity, magnitude and duration of certain economic trends continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to economic trends and may change materially in future periods.
The extent to which changing interest rates, inflation and other economic trends will continue to impact the Company’s business, financial condition and results of operations is uncertain. Therefore, we cannot reasonably estimate the full future impacts of these matters at this time.
Tax Legislation Developments
The Organization for Economic Co-operation and Development ("OECD") has proposed a global minimum tax of 15% of reported profits ("Pillar Two") for multinational enterprises with annual global revenues exceeding €750 million. Pillar Two has been agreed upon in principle by over 140 countries and is intended to apply for tax years beginning in 2024. The OECD has issued administrative guidance (including transitional safe harbor rules) in conjunction with the implementation of the Pillar Two global minimum tax. The Company has evaluated the impact of these rules and currently believes they will not have any material impact on financial results in 2024 due to certain transitional safe harbors. The Company will continue to monitor the potential impact of Pillar Two proposals and developments on our condensed consolidated financial statements and related disclosures as various tax jurisdictions begin enacting such legislation.
RESULTS OF OPERATIONS
Quarter ended September 30, 2024 compared to quarter ended September 30, 2023
Three Months Ended September 30,
Variance
(in thousands, except per share data) 2024 2023 $ %
GAAP Metrics
Revenues $ 916,270 $ 840,427 $ 75,843 9.0 %
Gross profit (1)
$ 494,378 $ 451,894 $ 42,484 9.4 %
Gross profit margin (1)
54.0 % 53.8 % 20 bps
Operating income $ 191,796 $ 177,124 $ 14,672 8.3 %
Operating income margin 20.9 % 21.1 % (20) bps
Net income $ 136,913 $ 127,777 $ 9,136 7.1 %
EPS $ 0.28 $ 0.26 $ 0.02 7.7 %
Operating cash flow $ 146,947 $ 127,355 $ 19,592 15.4 %
Non-GAAP Metrics
Adjusted operating income (2)
$ 196,012 $ 187,582 $ 8,430 4.5 %
Adjusted operating margin (2)
21.4 % 22.3 % (90) bps
Adjusted net income (2)
$ 139,617 $ 135,191 $ 4,426 3.3 %
Adjusted EPS (2)
$ 0.29 $ 0.28 $ 0.01 3.6 %
Adjusted EBITDA (2)
$ 219,460 $ 208,038 $ 11,422 5.5 %
Adjusted EBITDA margin (2)
24.0 % 24.8 % (80) bps
Free cash flow (2)
$ 139,425 $ 120,487 $ 18,938 15.7 %
(1) Exclusive of depreciation and amortization
(2) Amounts are non-GAAP financial measures. See "Non-GAAP Financial Measures" of this Form 10-Q for a discussion of non-GAAP financial metrics including a reconciliation of the most directly comparable GAAP measure.
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ROLLINS, INC. AND SUBSIDIARIES
Revenues
The following presents a summary of revenues by product and service offering:
451 452
Revenues for the quarter ended September 30, 2024 were $916.3 million, an increase of $75.8 million, or 9.0%, from 2023 revenues of $840.4 million. The increase in revenues was driven by demand from our customers across all major service offerings, partially offset by weakness late in the quarter associated with hurricane activity. Organic revenue* growth was 7.7% with acquisitions adding 2.1% in the quarter, offset by divestitures of 0.8%. Residential pest control revenue increased 6.4%, commercial pest control revenue increased 9.4% and termite and ancillary services grew 14.5% including both organic and acquisition-related growth in each area. Organic revenue* growth was strong across our service offerings, growing 4.9% in residential, 8.1% in commercial, and 13.7% in termite and ancillary activity. Residential organic revenue* growth was driven by stronger recurring revenue growth but was offset by slower one-time business.
Revenues are impacted by the seasonal nature of the Company’s pest and termite control services. The increase in pest activity, as well as the metamorphosis of termites in the spring and summer (the occurrence of which is determined by the change in seasons), has historically resulted in an increase in the Company’s revenues as evidenced by the following table:
Consolidated Net Revenues
(in thousands) 2024 2023 2022
First Quarter $ 748,349 $ 658,015 $ 590,680
Second Quarter 891,920 820,750 714,049
Third Quarter 916,270 840,427 729,704
Fourth Quarter — 754,086 661,390
Year to date $ 2,556,539 $ 3,073,278 $ 2,695,823
Gross Profit (exclusive of Depreciation and Amortization)
Gross profit for the quarter ended September 30, 2024 was $494.4 million, an increase of $42.5 million, or 9.4%, compared to $451.9 million for the quarter ended September 30, 2023. Gross margin improved 20 basis points to 54.0% in 2024 compared to 53.8% in 2023, as pricing more than offset inflationary pressures. We saw good leverage across a number of cost categories with the most significant leverage in fleet costs and materials and supplies, partially offset by investments in people and less favorable insurance and claims.
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ROLLINS, INC. AND SUBSIDIARIES
Sales, General and Administrative
For the quarter ended September 30, 2024, sales, general and administrative ("SG&A") expenses were $274.9 million and increased $30.0 million, or 12.3%, compared to the quarter ended September 30, 2023.
As a percentage of revenue, SG&A increased to 30.0% from 29.1% in the prior year. Selling and marketing costs have increased as we continue to invest in growth initiatives, including advertising. Insurance and claims costs have also increased, offset by leverage associated with lower administrative costs and fleet costs.
While we are focused on driving improvement in SG&A as a percentage of revenue, we expect to continue to invest in growth initiatives, which may, from time to time, impact this ratio.
Restructuring Costs
For the quarter ended September 30, 2024 restructuring costs decreased by $5.2 million. During the quarter ended September 30, 2023, we executed a restructuring program to modernize our workforce. No such costs were incurred during the quarter ended September 30, 2024.
Depreciation and Amortization
For the quarter ended September 30, 2024, depreciation and amortization increased $3.0 million, or 12.1%, compared to the quarter ended September 30, 2023. The increase was due to higher amortization of intangible assets from acquisitions.
Operating Income
For the quarter ended September 30, 2024, operating income increased $14.7 million, or 8.3%, compared to the prior year.
As a percentage of revenue, operating income was 20.9%, a decrease of 20 basis points compared to the third quarter of 2023. Operating margin declined mostly due to investments in people, growth initiatives, and less favorable insurance and claims.
While we expect to continue to invest in our business in the fourth quarter, we expect the pace of investment to moderate as we go through the final quarter of the year.
Interest Expense, Net
During the quarter ended September 30, 2024, interest expense, net increased $1.6 million compared to the prior year primarily due to the higher average debt balance. The increase was driven by the debt associated with the share repurchase completed in the third quarter of 2023.
Other Income, Net
During the quarter ended September 30, 2024, other income increased $0.1 million primarily due to higher gains on non-operational asset sales.
Income Taxes
The Company’s effective tax rate was 26.1% in the third quarter of 2024 and 25.7% in the third quarter of 2023. The 2024 rate was higher primarily due to an increase in non-deductible expenses and foreign tax expense in 2024.
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ROLLINS, INC. AND SUBSIDIARIES
Nine months ended September 30, 2024 compared to nine months ended September 30, 2023
Nine Months Ended September 30,
Variance
(in thousands, except per share data) 2024 2023 $ %
GAAP Metrics
Revenues $ 2,556,539 $ 2,319,192 $ 237,347 10.2 %
Gross profit (1)
$ 1,358,804 $ 1,219,626 $ 139,178 11.4 %
Gross profit margin (1)
53.2 % 52.6 % 60 bps
Operating income $ 506,597 $ 444,153 $ 62,444 14.1 %
Operating income margin 19.8 % 19.2 % 60 bps
Net income $ 360,704 $ 326,154 $ 34,550 10.6 %
EPS $ 0.74 $ 0.66 $ 0.08 12.1 %
Operating cash flow $ 419,495 $ 375,541 $ 43,954 11.7 %
Non-GAAP Metrics
Adjusted operating income (2)
$ 520,286 $ 459,872 $ 60,414 13.1 %
Adjusted operating margin (2)
20.4 % 19.8 % 60 bps
Adjusted net income (2)
$ 370,194 $ 333,217 $ 36,977 11.1 %
Adjusted EPS (2)
$ 0.76 $ 0.68 $ 0.08 11.8 %
Adjusted EBITDA (2)
$ 590,331 $ 525,055 $ 65,276 12.4 %
Adjusted EBITDA margin (2)
23.1 % 22.6 % 50 bps
Free cash flow (2)
$ 396,106 $ 354,262 $ 41,844 11.8 %
(1) Exclusive of depreciation and amortization
(2) Amounts are non-GAAP financial measures. See "Non-GAAP Financial Measures" of this Form 10-Q for a discussion of non-GAAP financial metrics including a reconciliation of the most closely correlated GAAP measure.

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ROLLINS, INC. AND SUBSIDIARIES
Revenues
The following presents a summary of revenues by product and service offering:
407 408
Revenues for the nine months ended September 30, 2024 were $2.6 billion, an increase of $237.3 million, or 10.2%, from 2023 revenues of $2.3 billion. The increase in revenues was driven by demand from our customers across all major service offerings. Organic revenue* growth was 7.7% with acquisitions adding 3.3% in the nine months ended September 30, 2024, offset by divestitures of 0.8%. Residential pest control revenue increased 9.0%, commercial pest control revenue increased 10.2% and termite and ancillary services grew 12.7%, including both organic and acquisition-related growth in each area. Organic revenue* growth was strong across our service offerings, growing 4.9% in residential, 8.9% in commercial, and 11.4% in termite and ancillary activity. Residential organic revenue* growth was driven by stronger recurring revenue growth but was offset by slower one-time business.
Gross Profit (exclusive of Depreciation and Amortization)
Gross profit for the nine months ended September 30, 2024 was $1.4 billion, an increase of $139.2 million, or 11.4%, compared to $1.2 billion for the nine months ended September 30, 2023. Gross margin improved 60 basis points to 53.2% in 2024 compared to 52.6% in 2023, as pricing more than offset inflationary pressures. We saw leverage across several areas, including fleet and materials and supplies.
Sales, General and Administrative
For the nine months ended September 30, 2024, SG&A expenses increased $72.9 million, or 10.5%, compared to the nine months ended September 30, 2023. The increase is driven by expenses associated with growth initiatives aimed at capitalizing on the health of our underlying markets.
As a percentage of revenue, SG&A expenses increased to 30.1% from 30.0% in the prior year. Selling and marketing costs have increased as we continue to invest in growth initiatives, offset by leverage associated with lower administrative costs.
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ROLLINS, INC. AND SUBSIDIARIES
Restructuring Costs
For the nine months ended September 30, 2024, restructuring costs decreased by $5.2 million. During the nine months ended September 30, 2023, we executed a restructuring program to modernize our workforce. No such costs were incurred during the nine months ended September 30, 2024.
Depreciation and Amortization
For the nine months ended September 30, 2024, depreciation and amortization increased $9.1 million, or 12.3%, compared to the nine months ended September 30, 2023. The increase was primarily due to higher amortization of intangible assets from acquisitions, most notably from the acquisition of FPC Holdings, LLC ("Fox Pest Control", or "Fox").
Operating Income
For the nine months ended September 30, 2024, operating income increased $62.4 million, or 14.1%, compared to the nine months ended September 30, 2023.
As a percentage of revenue, operating income increased to 19.8% from 19.2% in the prior year. Operating margin improved due to revenue growth and the changes noted in gross profit and SG&A above.
Interest Expense, Net
For the nine months ended September 30, 2024, interest expense, net increased $11.9 million, compared to the nine months ended September 30, 2023, due to the increase in the average debt balance associated with the share repurchase completed in the third quarter of 2023 and the acquisition of Fox Pest Control in the second quarter of 2023.
Other Income, Net
During the nine months ended September 30, 2024, other income decreased $5.3 million compared to the nine months ended September 30, 2023, due to lower gains on non-operational asset sales.
Income Taxes
During the nine months ended September 30, 2024, the Company’s effective tax rate decreased to 25.6% compared to 25.8% in 2023 due to a decrease in foreign tax expense in 2024.
We expect the effective tax rate to approximate 26% for the full year. This implies a fourth quarter rate in excess of 27%.
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ROLLINS, INC. AND SUBSIDIARIES
Non-GAAP Financial Measures
Reconciliation of GAAP and non-GAAP Financial Measures
The Company has used the non-GAAP financial measures of organic revenues, organic revenues by type, adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share (“EPS”), earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA margin, Adjusted EBITDA, adjusted EBITDA margin, incremental EBITDA margin, adjusted incremental EBITDA margin, free cash flow, free cash flow conversion, net debt, net leverage ratio, and adjusted sales, general and administrative expenses ("SG&A") in this Form 10-Q. Organic revenue is calculated as revenue less the revenue from acquisitions completed within the prior 12 months and excluding the revenue from divested businesses. Acquisition revenue is based on the trailing 12-month revenue of our acquired entities. Adjusted operating income and adjusted operating income margin are calculated by adding back to the GAAP measures those expenses resulting from the amortization of certain intangible assets, adjustments to the fair value of contingent consideration resulting from the acquisition of Fox, and restructuring costs related to restructuring and workforce reduction plans. Adjusted net income and adjusted EPS are calculated by adding back to the GAAP measure amortization of certain intangible assets, adjustments to the fair value of contingent consideration resulting from the acquisition of Fox, and restructuring costs related to restructuring and workforce reduction plans, and excluding gains and losses on the sale of non-operational assets and by further subtracting the tax impact of those expenses, gains, or losses. Adjusted EBITDA and adjusted EBITDA margin are calculated by adding back to the GAAP measures those expenses resulting from the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox, restructuring costs related to restructuring and workforce reduction plans, and excluding gains and losses on the sale of non-operational assets. Incremental EBITDA margin is calculated as the change in EBITDA divided by the change in revenue. Adjusted incremental EBITDA margin is calculated as the change in adjusted EBITDA divided by the change in revenue. Free cash flow is calculated by subtracting capital expenditures from cash provided by operating activities. Free cash flow conversion is calculated as free cash flow divided by net income. Net debt is calculated as total long-term debt less cash and cash equivalents. Net leverage ratio is calculated by dividing net debt by trailing twelve-month EBITDA. Adjusted SG&A is calculated by removing the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox. These measures should not be considered in isolation or as a substitute for revenues, net income, earnings per share or other performance measures prepared in accordance with GAAP.
Management uses adjusted operating income, adjusted operating income margin, adjusted net income, adjusted EPS, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, incremental EBITDA margin, adjusted incremental EBITDA margin, and adjusted SG&A as measures of operating performance because these measures allow the Company to compare performance consistently over various periods. Management also uses organic revenues, and organic revenues by type to compare revenues over various periods excluding the impact of acquisitions and divestitures. Management uses free cash flow to demonstrate the Company’s ability to maintain its asset base and generate future cash flows from operations. Management uses free cash flow conversion to demonstrate how much net income is converted into cash. Management uses net debt as an assessment of overall liquidity, financial flexibility, and leverage. Net leverage ratio is useful to investors because it is an indicator of our ability to meet our future financial obligations. Management believes all of these non-GAAP financial measures are useful to provide investors with information about current trends in, and period-over-period comparisons of, the Company's results of operations. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.
A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.
Set forth below is a reconciliation of the non-GAAP financial measures contained in this report with their most directly comparable GAAP measures (unaudited, in thousands, except per share data and margins).

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ROLLINS, INC. AND SUBSIDIARIES
Three Months Ended September 30, Variance Nine Months Ended September 30, Variance
2024 2023 $ % 2024 2023 $ %
Reconciliation of Operating Income to Adjusted Operating Income and Adjusted Operating Income Margin
Operating income $ 191,796 $ 177,124 $ 506,597 $ 444,153
Fox acquisition-related expenses (1)
4,216 5,262 13,689 10,523
Restructuring costs (2)
— 5,196 — 5,196
Adjusted operating income $ 196,012 $ 187,582 8,430 4.5 $ 520,286 $ 459,872 60,414 13.1
Revenues $ 916,270 $ 840,427 $ 2,556,539 $ 2,319,192
Operating income margin 20.9 % 21.1 % 19.8 % 19.2 %
Adjusted operating margin 21.4 % 22.3 % 20.4 % 19.8 %
Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS (6)
Net income $ 136,913 $ 127,777 $ 360,704 $ 326,154
Fox acquisition-related expenses (1)
4,216 5,262 13,689 10,523
Restructuring costs (2)
— 5,196 — 5,196
Gain on sale of assets, net (3)
(582) (493) (933) (6,226)
Tax impact of adjustments (4)
(930) (2,551) (3,266) (2,430)
Adjusted net income $ 139,617 $ 135,191 4,426 3.3 $ 370,194 $ 333,217 36,978 11.1
EPS - basic and diluted $ 0.28 $ 0.26 $ 0.74 $ 0.66
Fox acquisition-related expenses (1)
0.01 0.01 0.03 0.02
Restructuring costs (2)
— 0.01 — 0.01
Gain on sale of assets, net (3)
— — — (0.01)
Tax impact of adjustments (4)
— (0.01) (0.01) —
Adjusted EPS - basic and diluted (5)
$ 0.29 $ 0.28 0.01 3.6 $ 0.76 $ 0.68 0.08 11.8
Weighted average shares outstanding – basic 484,317 490,775 484,231 491,980
Weighted average shares outstanding – diluted 484,359 490,965 484,270 492,158
Reconciliation of Net Income to EBITDA, Adjusted EBITDA, EBITDA Margin, Incremental EBITDA Margin, Adjusted EBITDA Margin, and Adjusted Incremental EBITDA Margin (6)
Net income $ 136,913 $ 127,777 $ 360,704 $ 326,154
Depreciation and amortization 27,664 24,668 82,685 73,609
Interest expense, net 7,150 5,547 22,650 10,797
Provision for income taxes 48,315 44,293 124,176 113,428
EBITDA $ 220,042 $ 202,285 17,757 8.8 $ 590,215 $ 523,988 66,227 12.6
Fox acquisition-related expenses (1)
— 1,050 1,049 2,097
Restructuring costs (2)
— 5,196 — 5,196
Gain on sale of assets, net (3)
(582) (493) (933) (6,226)
Adjusted EBITDA $ 219,460 $ 208,038 11,422 5.5 $ 590,331 $ 525,055 65,276 12.4
Revenues $ 916,270 $ 840,427 $ 2,556,539 $ 2,319,192
EBITDA margin 24.0 % 24.1 % 23.1 % 22.6 %
Incremental EBITDA margin 23.4 % 27.9 %
Adjusted EBITDA margin 24.0 % 24.8 % 23.1 % 22.6 %
Adjusted incremental EBITDA margin 15.1 % 27.5 %
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow and Free Cash Flow Conversion
Net cash provided by operating activities $ 146,947 $ 127,355 $ 419,495 $ 375,541
Capital expenditures (7,522) (6,868) (23,389) (21,279)
Free cash flow $ 139,425 $ 120,487 18,938 15.7 $ 396,106 $ 354,262 41,844 11.8
Free cash flow conversion 101.8 % 94.3 % 109.8 % 108.6 %
(1) Consists of expenses resulting from the amortization of certain intangible assets and adjustments to the fair value of contingent consideration resulting from the acquisition of Fox. While we exclude such expenses in this non-GAAP measure, the revenue from the acquired company is reflected in this non-GAAP measure and the acquired assets contribute to revenue generation.
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ROLLINS, INC. AND SUBSIDIARIES
(2) Restructuring costs consist of costs primarily related to severance and benefits paid to employees pursuant to restructuring and workforce reduction plans.
(3) Consists of the gain or loss on the sale of non-operational assets.
(4) The tax effect of the adjustments is calculated using the applicable statutory tax rates for the respective periods.
(5) In some cases, the sum of the individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.
(6) In the first quarter of 2024, we revised the non-GAAP metrics adjusted net income, adjusted EPS, and adjusted EBITDA to exclude gains and losses related to non-operational asset sales. These measures are of operating performance and we believe excluding the gains and losses on non-operational assets allows us to better compare our operating performance consistently over various periods. Refer to our first quarter 2024 press release for fully revised quarterly metrics.


Three Months Ended September 30, Nine Months Ended September 30,
Variance Variance
2024
2023 (7)
$ % 2024
2023 (7)
$ %
Reconciliation of Revenues to Organic Revenues
Revenues $ 916,270 $ 840,427 75,843 9.0 $ 2,556,539 $ 2,319,192 237,347 10.2
Revenues from acquisitions (17,339) — (17,339) 2.1 (77,479) — (77,479) 3.3
Revenues of divestitures — (5,823) 5,823 (0.8) — (16,500) 16,500 (0.8)
Organic revenues $ 898,931 $ 834,604 64,327 7.7 $ 2,479,060 $ 2,302,692 176,368 7.7
Reconciliation of Residential Revenues to Organic Residential Revenues
Residential revenues $ 428,290 $ 402,559 25,731 6.4 $ 1,166,042 $ 1,069,403 96,639 9.0
Residential revenues from acquisitions (9,571) — (9,571) 2.4 (54,257) — (54,257) 5.1
Residential revenues of divestitures — (3,263) 3,263 (0.9) — (9,668) 9,668 (1.0)
Residential organic revenues $ 418,719 $ 399,296 19,423 4.9 $ 1,111,785 $ 1,059,735 52,050 4.9
Reconciliation of Commercial Revenues to Organic Commercial Revenues
Commercial revenues $ 299,633 $ 273,865 25,768 9.4 $ 845,517 $ 767,472 78,045 10.2
Commercial revenues from acquisitions (6,434) — (6,434) 2.3 (17,456) — (17,456) 2.3
Commercial revenues of divestitures — (2,560) 2,560 (1.0) — (6,832) 6,832 (1.0)
Commercial organic revenues $ 293,199 $ 271,305 21,894 8.1 $ 828,061 $ 760,640 67,421 8.9
Reconciliation of Termite and Ancillary Revenues to Organic Termite and Ancillary Revenues
Termite and ancillary revenues $ 177,674 $ 155,135 22,539 14.5 $ 515,758 $ 457,664 58,094 12.7
Termite and ancillary revenues from acquisitions (1,334) — (1,334) 0.8 (5,766) — (5,766) 1.3
Termite and ancillary organic revenues $ 176,340 $ 155,135 21,205 13.7 $ 509,992 $ 457,664 52,328 11.4
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ROLLINS, INC. AND SUBSIDIARIES
Three Months Ended September 30, Nine Months Ended September 30,
Variance Variance
2023 (7)
2022 (7)
$ %
2023 (7)
2022 (7)
$ %
Reconciliation of Revenues to Organic Revenues
Revenues $ 840,427 $ 729,704 110,723 15.2 $ 2,319,192 $ 2,034,433 284,759 14.0
Revenues from acquisitions (49,971) — (49,971) 6.8 (114,273) — (114,273) 5.6
Organic revenues $ 790,456 $ 729,704 60,752 8.4 $ 2,204,919 $ 2,034,433 170,486 8.4
Reconciliation of Residential Revenues to Organic Residential Revenues
Residential revenues $ 402,559 $ 336,626 65,933 19.6 $ 1,069,403 $ 917,790 151,613 16.5
Residential revenues from acquisitions (42,974) — (42,974) 12.8 (91,067) — (91,067) 9.9
Residential organic revenues $ 359,585 $ 336,626 22,959 6.8 $ 978,336 $ 917,790 60,546 6.6
Reconciliation of Commercial Revenues to Organic Commercial Revenues
Commercial revenues $ 273,865 $ 245,009 28,856 11.8 $ 767,472 $ 688,523 78,949 11.5
Commercial revenues from acquisitions (3,456) — (3,456) 1.4 (10,688) — (10,688) 1.6
Commercial organic revenues $ 270,409 $ 245,009 25,400 10.4 $ 756,784 $ 688,523 68,261 9.9
Reconciliation of Termite and Ancillary Revenues to Organic Termite and Ancillary Revenues
Termite and ancillary revenues $ 155,135 $ 139,359 15,776 11.3 $ 457,664 $ 405,089 52,575 13.0
Termite and ancillary revenues from acquisitions (3,541) — (3,541) 2.5 (12,518) — (12,518) 3.1
Termite and ancillary organic revenues $ 151,594 $ 139,359 12,235 8.8 $ 445,146 $ 405,089 40,057 9.9
(7) Revenues classified by significant product and service offerings for the three and nine months ended September 30, 2023 and 2022 were misstated by an immaterial amount and have been restated from the amounts previously reported to correct the classification of such revenues. There was no impact on our condensed consolidated statements of income, financial position, or cash flows.
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Reconciliation of SG&A to Adjusted SG&A
SG&A $ 274,918 $ 244,906 $ 769,522 $ 696,668
Fox acquisition-related expenses — 1,050 1,049 2,097
Adjusted SG&A $ 274,918 $ 243,856 $ 768,473 $ 694,571
Revenues $ 916,270 $ 840,427 $ 2,556,539 $ 2,319,192
Adjusted SG&A as a % of revenues 30.0 % 29.0 % 30.1 % 29.9 %
Period Ended
September 30, 2024
Period Ended
December 31, 2023
Reconciliation of Long-term Debt to Net Debt and Net Leverage Ratio
Long-term debt (8)
$ 447,000 $ 493,000
Less: cash 95,282 103,825
Net debt $ 351,718 $ 389,175
Trailing twelve-month EBITDA $ 771,291 $ 705,064
Net leverage ratio 0.5x 0.6x
(8) As of September 30, 2024, the Company had outstanding borrowings of $447.0 million under the Credit Facility. Borrowings under the Credit Facility are presented under the long-term debt caption of our condensed consolidated balance sheet, net of $1.8 million in unamortized debt issuance costs as of September 30, 2024.
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ROLLINS, INC. AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
Cash and Cash Flow
The Company’s $95.3 million of total cash at September 30, 2024 is held at various banking institutions. As of September 30, 2024, approximately $53.5 million is held in cash accounts at international bank institutions and the remaining $41.8 million is primarily held in Federal Deposit Insurance Corporation (“FDIC”) insured non-interest-bearing accounts at various domestic banks which at times exceed federally insured amounts.
We intend to continue to grow the business in the international markets where we have a presence. As it relates to our unremitted earnings in foreign jurisdictions, we assert that foreign cash earnings in excess of working capital and cash needed for strategic investments and acquisitions are not intended to be indefinitely reinvested offshore.
On February 24, 2023, the Company entered into a revolving credit agreement with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”), which refinanced its previous credit facility.
The Credit Agreement provides for a $1.0 billion revolving Credit Facility, which may be denominated in U.S. Dollars and other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, subject to a $400 million foreign currency sublimit. Rollins has the ability to expand its borrowing availability under the Credit Agreement in the form of increased revolving commitments or one or more tranches of term loans by up to an additional $750 million, subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028. Refer to Note 8. Debt, of the Notes to Condensed Consolidated Financial Statements for further details.
As of September 30, 2024, the Company had outstanding borrowings of $447.0 million under the Credit Facility. The aggregate effective interest rate on the debt outstanding as of September 30, 2024 was 6.2%. As of December 31, 2023, the Company had outstanding borrowings of $493.0 million under the Credit Facility. The aggregate effective interest rate on the debt outstanding as of December 31, 2023 was 6.5%.
The Company maintained $72.0 million in letters of credit as of September 30, 2024 and $71.7 million as of December 31, 2023. These letters of credit are required by the Company’s insurance companies, due to the Company’s high deductible insurance program, to secure various workers’ compensation and casualty insurance contracts coverage. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims.
The Company believes its current cash and cash equivalents balances, future cash flows expected to be generated from operating activities, and available borrowings under its Credit Facility will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future.
The following table sets forth a summary of our cash flows from operating, investing and financing activities for the nine month periods presented:
Nine Months Ended September 30, Variance
(in thousands) 2024 2023 $ %
Net cash provided by operating activities $ 419,495 $ 375,541 43,954 11.7
Net cash used in investing activities (123,560) (362,334) 238,774 65.9
Net cash (used in) provided by financing activities (305,506) 33,743 (339,249) N/M
Effect of exchange rate on cash 1,028 (49) 1,077 N/M
Net (decrease) increase in cash and cash equivalents $ (8,543) $ 46,901 (55,444) (118.2)
N/M - calculation not meaningful
Cash Provided by Operating Activities
Cash from operating activities is the principal source of cash generation for our businesses. The most significant source of cash in our cash flow from operations is customer-related activities, the largest of which is collecting cash resulting from
30
ROLLINS, INC. AND SUBSIDIARIES
services sold. The most significant operating use of cash is to pay our suppliers, employees, and tax authorities. The Company’s operating activities generated net cash of $419.5 million and $375.5 million for the nine months ended September 30, 2024 and 2023, respectively. The $44.0 million increase was driven primarily by strong operating results and the timing of cash receipts and cash payments to and from customers, vendors, employees, and tax and regulatory authorities.
Cash Used in Investing Activities
The Company’s investing activities used $123.6 million and $362.3 million for the nine months ended September 30, 2024 and 2023, respectively. Cash paid for acquisitions totaled $105.5 million for the nine months ended September 30, 2024, as compared to $349.3 million for the nine months ended September 30, 2023, primarily related to the Fox acquisition. The Company invested $23.4 million in capital expenditures during the year, offset by $3.0 million in cash proceeds from the sale of assets, compared with $21.3 million of capital expenditures and $10.2 million in cash proceeds from asset sales in 2023. The Company’s investing activities were funded through existing cash balances, operating cash flows, and borrowings under the Credit Facility.
Cash Used in or Provided by Financing Activities
Cash of $305.5 million was used in financing activities during the nine months ended September 30, 2024, compared with $33.7 million of cash provided by financing activities during the nine months ended September 30, 2023. A total of $218.0 million was paid in cash dividends ($0.45 per share) during the nine months ended September 30, 2024, compared to $191.8 million in cash dividends paid ($0.39 per share) during the nine months ended September 30, 2023. The Company made net repayments under its credit agreements of $46.0 million during the nine months ended September 30, 2024 compared to net borrowings of $544.0 million during 2023. During the nine months ended September 30, 2024, the Company paid $33.4 million of contingent consideration, primarily related to the Fox acquisition, compared to $9.3 million during the nine months ended September 30, 2023. The Company withheld $11.5 million and $10.7 million of common stock for the nine months ended September 30, 2024 and 2023, respectively, in connection with tax withholding obligations of its employees upon vesting of such employees’ equity awards. In addition, during the nine months ended September 30, 2023, the Company completed the repurchase of 8,724,100 of the shares of common stock from LOR, Inc ("LOR") for $300.0 million in conjunction with the Offering, as defined in our 2023 Annual Report on Form 10-K.
In 2012, the Company’s Board of Directors authorized the purchase of up to 5 million shares of the Company’s common stock. After adjustments for stock splits, the total authorized shares under the share repurchase plan is 16.9 million shares. As of September 30, 2024, 11.4 million additional shares may be purchased under the share repurchase program.
In addition, the Form S-3 on file with the SEC registered $1.5 billion of the Company’s common stock, preferred stock, debt securities, depositary shares, warrants, rights, purchase contracts and units for future issuance. The Company may offer and sell some or all of such securities from to time or to or through underwriters, brokers or dealers, directly to one or more other purchasers, through a block trade, through agents on a best-efforts basis, through a combination of any of the above methods of sale or through other types of transactions described in the Form S-3. The Company has not sold any securities as of the date of this Form 10-Q.
CONTINGENCIES
In the normal course of business, the Company and its subsidiaries are involved in, and will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, litigation, and tax and other regulatory matters relating to, and arising out of, our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental and tax matters primarily arising in the normal course of business or claims filed under California's Private Attorneys General Act. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.
The Company retains, up to specified limits, certain risks related to general liability, workers’ compensation and auto liability. The estimated costs of existing and future claims under the retained loss program are accrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of the claims may not be
31
ROLLINS, INC. AND SUBSIDIARIES
made until future periods) and may be subsequently revised based on developments relating to such claims. The Company contracts with an independent third party to provide the Company an estimated liability based upon historical claims information. The actuarial study is a major consideration in establishing the reserve, along with management’s knowledge of changes in business practice and existing claims compared to current balances. Management’s judgment is inherently subjective as a number of factors are outside management’s knowledge and control. Additionally, historical information is not always an accurate indication of future events. The accruals and reserves we hold are based on estimates that involve a degree of judgment and are inherently variable and could be overestimated or insufficient. If actual claims exceed our estimates, our operating results could be materially affected, and our ability to take timely corrective actions to limit future costs may be limited.
Management does not believe that any pending claim, proceeding or litigation, regulatory action or investigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or liquidity; however, it is possible that an unfavorable outcome of some or all of the matters could result in a charge that might be material to the results of an individual quarter or year.
CRITICAL ACCOUNTING ESTIMATES
There have been no significant changes in our identified critical accounting estimates as disclosed in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" of our 2023 Form 10-K.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q as well as other written or oral statements by the Company may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current opinions, expectations, intentions, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Although we believe that these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations. Generally, statements that do not relate to historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “should,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q include, but are not limited to, statements regarding:
• expectations with respect to our financial and business performance;
• expansion efforts and growth opportunities, including but not limited to recent and future acquisitions in the United States and in foreign markets;
• the impact of high inflation, increasing interest rates, business interruptions due to natural disasters and changes in the weather patterns, employee shortages, and supply chain issues;
• expectations with respect to interest costs and the effective tax rate;
• sufficiency of current cash and cash equivalents balances, future cash flows, and available borrowings under our Credit Facility to finance our current and future operations;
• our belief that the Company has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims;
• our approach to capital allocation inclusive of our intent to pay cash dividends to common shareholders and to invest in acquisitions;
• our belief that no pending or threatened claim, proceeding, litigation, regulatory action or investigation, either alone or in the aggregate, including but not limited to the investigation by certain California governmental authorities regarding compliance with environmental regulations and claims filed under California's Private Attorneys General Act, will have a material adverse effect on our financial position, results of operations or liquidity;
32
ROLLINS, INC. AND SUBSIDIARIES
• estimates, assumptions, and projections related to our application of critical accounting policies, described in more detail under “Critical Accounting Estimates.”
These forward-looking statements are based on information available as of the date of this report, and current expectations, forecasts, and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements including, but not limited to, those set forth in the sections entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and may also be described from time to time in our future reports filed with the SEC.
Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required by law.
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7.A of our 2023 Form 10-K. There were no material changes to our market risk exposure during the nine months ended September 30, 2024.
ITEM 4.    CONTROLS AND PROCEDURES
The Disclosure Committee, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2024 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the Evaluation Date to ensure that the information required to be included in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.
Changes in Internal Controls Over Financial Reporting
There were no changes in the Company’s internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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ROLLINS, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1.    LEGAL PROCEEDINGS
In the normal course of business, the Company and its subsidiaries are involved in, and will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, litigation, and tax and other regulatory matters relating to, and arising out of, our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations or claims filed under California's Private Attorneys General Act. We are also involved from time to time in certain environmental and tax matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.
The Company retains, up to specified limits, certain risks related to general liability, workers’ compensation and auto liability. The estimated costs of existing and future claims under the retained loss program are accrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of the claims may not be made until future periods) and may be subsequently revised based on developments relating to such claims. The Company contracts with an independent third party to provide the Company an estimated liability based upon historical claims information. The actuarial study is a major consideration in establishing the reserve, along with management’s knowledge of changes in business practice and existing claims compared to current balances. Management’s judgment is inherently subjective as a number of factors are outside management’s knowledge and control. Additionally, historical information is not always an accurate indication of future events. The accruals and reserves we hold are based on estimates that involve a degree of judgment and are inherently variable and could be overestimated or insufficient. If actual claims exceed our estimates, our operating results could be materially affected, and our ability to take timely corrective actions to limit future costs may be limited.
Item 103 of SEC Regulation S-K requires disclosure of certain environmental legal proceedings if the proceeding reasonably involves potential monetary sanctions of $300,000 or more. The Company has received a notice of alleged violations and information requests from local governmental authorities in California for our Orkin and Clark Pest Control operations and is currently working with several local governments regarding compliance with environmental regulations governing the management of hazardous waste and pesticide disposal. The investigation appears to be part of a broader effort to investigate waste handling and disposal processes of a number of industries. While we are unable to predict the outcome of this investigation, we do not believe the outcome will have a material effect on our results of operations, financial condition, or cash flows.
Management does not believe that any pending claim, proceeding or litigation, regulatory action or investigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or liquidity; however, it is possible that an unfavorable outcome of some or all of the matters could result in a charge that might be material to the results of an individual quarter or year.
ITEM 1A.    RISK FACTORS
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2023.
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ROLLINS, INC. AND SUBSIDIARIES
ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The following table presents the Company's share repurchase activity for the period from July 1, 2024 to September 30, 2024.
Period
Total number of
shares
purchased (1)
Weighted-
average
price paid
per share
Total number of
shares purchased as
part of publicly
announced
repurchases (2)
Maximum number of
shares that may yet be
purchased under the
repurchase plan (2)
July 1 to 31, 2024 223 $ 48.32 — 11,415,625
August 1 to 31, 2024 — $ — — 11,415,625
September 1 to 30, 2024 — $ — — 11,415,625
Total 223 — 11,415,625
(1) Represents shares withheld by the Company in connection with tax withholding obligations of its employees upon vesting of such employees’ equity awards.
(2) The Company has a share repurchase plan, adopted in 2012, to repurchase up to 16.9 million shares of the Company’s common stock. The plan has no expiration date. As of September 30, 2024, the Company had a remaining authorization to repurchase 11.4 million shares of the Company's common stock under this program.
ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.    MINE SAFETY DISCLOSURES
None.
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ROLLINS, INC. AND SUBSIDIARIES
ITEM 5.    OTHER INFORMATION

Rule 10b5-1 Trading Plans

Securities Trading Plans of Directors and Executive Officers
None of the Company’s directors or “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted , modified, or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K) during the fiscal quarter ended September 30, 2024.
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ROLLINS, INC. AND SUBSIDIARIES
ITEM 6.    EXHIBITS
Exhibit No. Exhibit Description Incorporated By Reference Filed Herewith
Form Date Number
3.1 10-Q August 1, 2005 (3)(i)(A)
3.2 10-K March 11, 2005 (3)(i)(B)
3.3 10-Q August 1, 2005 (3)(i)(C)
3.4 10-K February 25, 2015 (3)(i)(E)
3.5 10-Q July 29, 2015 (3)(i)(F)
3.6 10-Q April 26, 2019 (3)(i)(G)
3.7 10-Q July 30, 2021 (3)(i)(H)
3.8 10-Q July 25, 2024 3.8
4.1 10-K March 26, 1999 (4)
4.2 10-K February 28, 2020 4(b)
31.1 X
31.2 X
32.1** X
101.INS Inline XBRL Instance Document X
101.SCH Inline XBRL Schema Document X
101.CAL Inline XBRL Calculation Linkbase Document X
101.LAB Inline XBRL Labels Linkbase Document X
101.PRE Inline XBRL Presentation Linkbase Document X
101.DEF Inline XBRL Definition Linkbase Document X
104 Cover Page Interactive Data File (embedded with the Inline XBRL document) X
____________________

**    Furnished with this report

ROLLINS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ROLLINS, INC.
(Registrant)
Date: October 24, 2024
By: /s/ Kenneth D. Krause
Kenneth D. Krause
Principal Financial Officer
Date: October 24, 2024
By: /s/ Traci Hornfeck
Traci Hornfeck
Chief Accounting Officer
(Principal Accounting Officer)

TABLE OF CONTENTS
Part 1 Financial InformationItem 1. Financial StatementsNote 1. Basis Of PreparationNote 2. Recent Accounting PronouncementsNote 3. AcquisitionsNote 4. RevenueNote 5. Allowance For Credit LossesNote 6. Goodwill and Intangible AssetsNote 7. Fair Value MeasurementNote 8. DebtNote 9. ContingenciesNote 10. Stockholders' EquityNote 11. Earnings Per ShareNote 12. Income TaxesNote 13. Restructuring CostsNote 14. Subsequent EventsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Mine Safety DisclosuresItem 5. Other InformationItem 6. Exhibits

Exhibits

3.4 Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 26, 2011 10-K February 25, 2015 (3)(i)(E) 3.5 Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 28, 2015 10-Q July 29, 2015 (3)(i)(F) 3.6 Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 23, 2019 10-Q April 26, 2019 (3)(i)(G) 3.7 Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 27, 2021 10-Q July 30, 2021 (3)(i)(H) 3.8 Amended and Restated By-Laws of Rollins, Inc., dated July 23, 2024 10-Q July 25, 2024 3.8 4.2 Description of Registrants Securities 10-K February 28, 2020 4(b) 31.1 Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1** Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002