ROLLINS, INC. REPORTS THIRD QUARTER 2022 FINANCIAL RESULTS

Rhea-AI Summary

Rollins, Inc. (ROL) reported robust third-quarter results, with revenues of $729.7 million, reflecting a 12.2% increase from Q3 2021. Organic revenue grew 8.6% to $706.0 million. Operating income rose 13.3% to $143.7 million, while quarterly net income increased 14.7% to $107.6 million, translating to an EPS of $0.22. Strong cash flow generation reached $127.7 million, up 60.2% year-over-year, with a 30% increase in quarterly dividends to $49.2 million. The company remains optimistic for Q4 2022 and emphasizes growth through acquisitions.

Positive

• Revenue growth of 12.2% year-over-year to $729.7 million.
• Net income increased 14.7% to $107.6 million.
• EPS grew from $0.19 to $0.22.
• Operating cash flow surged 60.2% to $127.7 million.
• Dividends increased 23.2% to $49.2 million.

Negative

• Higher losses related to automobile accident claims negatively impacted EBITDA margins by 140 basis points.

Strong revenue growth drives 14.7% increase in quarterly net income

ATLANTA, Oct. 26, 2022 /PRNewswire/ -- Rollins, Inc. (NYSE:ROL) ("Rollins" or the "Company"), a premier global consumer and commercial services company, reported unaudited financial results for its third quarter and nine months ended September 30, 2022.

Quarterly Highlights

• Third quarter revenues were $729.7 million, an increase of 12.2% over the third quarter 2021 with organic revenues* increasing 8.6% to $706.0 million. The stronger dollar versus foreign currencies in countries where we operate reduced revenues by 50 basis points during the quarter. Growth in revenues was driven by strong growth across all major service lines.
• Quarterly operating income was $143.7 million, an increase of 13.3% over the third quarter of 2021. Quarterly operating margin was 19.7% of revenue, an increase of 20 basis points compared to the third quarter of 2021. Adjusted EBITDA* was $169.9 million for the quarter, an increase of 12.6%. Adjusted EBITDA was 23.3% of sales, an increase of 10 basis points compared to the third quarter of 2021. The Company incurred higher losses stemming from asserted claims associated with automobile accidents. These losses reduced EBITDA margins by 140 basis points, the majority of which was in gross profit margin.
• Quarterly net income was $107.6 million, an increase of 14.7% over the prior year. Quarterly EPS was $0.22 per diluted share, an increase from $0.19 in the prior year.
• Operating cash flow was $127.7 million, increasing 60.2% compared to the same quarter a year ago.
• The Company invested $60.8 million in acquisitions in the quarter. Dividends totaled $49.2 million for the quarter reflecting a 23.2% increase versus the same period a year ago. The Company announced a 30% increase to the regular quarterly dividend for the fourth quarter.

Comments from Management

"Our third quarter results reflected strong execution by our team across all of the business", said Gary Rollins, Chairman and Chief Executive Officer.  We continued to see favorable demand for our services with double digit growth across all major service lines.  Our quarterly results reflect our employees' commitment to deliver exceptional customer service," Mr. Rollins said. 

"Cash flow generation was strong and our balance sheet positions us well to continue to drive growth through acquisitions while maintaining our balanced approach to capital allocation," Mr. Rollins said. 

"Overall, we remain well positioned to continue to deliver strong results in the fourth quarter of 2022 and beyond. Demand for our services remains strong as we start the fourth quarter. Our teams remain focused on executing our plans and driving increased revenues and profitability as we close out 2022," Mr. Rollins concluded. 

About Rollins, Inc.:

Rollins, Inc. is a premier global consumer and commercial services company.  Through its family of leading brands, Orkin, HomeTeam Pest Defense, Clark Pest Control, Northwest Exterminating, McCall Service, Trutech, Critter Control, Western Pest Services, Waltham Services, OPC Pest Services, The Industrial Fumigant Company, PermaTreat, Crane Pest Control, Missquito, Orkin Canada, Orkin Australia, Safeguard (UK), Aardwolf Pestkare (Singapore), and more, the Company and its franchises provide essential pest control services and protection against termite damage, rodents and insects to more than 2.8 million customers in North America, South America, Europe, Asia, Africa, and Australia from more than 800 locations. You can learn more about Rollins and its subsidiaries by visiting our web site at www.rollins.com, where you can also find this and other news releases by accessing the news releases button.

*Amounts are non-GAAP financial measures. See the appendix to this release for a discussion of non-GAAP financial metrics including a reconciliation of the most closely correlated GAAP measure.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this press release and on our earnings call, may contain forward-looking statements that involve risks and uncertainties concerning the business and financial results of Rollins, Inc. We have based these forward-looking statements largely on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Such forward looking statements include, but are not limited to, statements regarding the Company's belief that its balance sheet positions the Company well to continue to drive growth through acquisitions while maintaining a balanced approach to capital allocation, and that the Company is well positioned to continue to deliver strong results in the fourth quarter of 2022.  

Our actual results could differ materially from those indicated by the forward-looking statements because of various risks, timing and uncertainties including, without limitation, the failure to maintain and enhance our brands and develop a positive client reputation; our ability to protect our intellectual property and other proprietary rights that are material to our business and our brand recognition; actions taken by our franchisees, subcontractors or vendors that may harm our business; general economic conditions; the impact of the extent and duration of economic contraction related to COVID-19 on general economic activity for the remainder of 2022 and beyond; the impact of future developments related to the COVID-19 pandemic on the Company's business, results of operations, accounting assumptions and estimates and financial condition, including, without limitation, inflation and restrictions in customer discretionary expenditures, disruptions in credit or financial markets, increases in fuel prices, raw material costs or other operating costs; potential increases in labor costs; labor shortages and/or our inability to attract and retain skilled workers; competitive factors and pricing practices; changes in industry practices or technologies; the degree of success of our termite process reforms and pest control selling and treatment methods; our ability to identify, complete and successfully integrate potential acquisitions; unsuccessful expansion into international markets; climate change and unfavorable weather conditions; a breach of data security resulting in the unauthorized access of personal, financial, proprietary, confidential or other personal data or information about our customers, employees, third parties, or of our proprietary confidential information; damage to our brands or reputation; possibility of an adverse ruling against us in pending litigation, regulatory action or investigation; changes in various government laws and regulations, including environmental regulations; the adequacy of our insurance coverage to cover all significant risk exposures; the effectiveness of our risk management and safety program; general market risk; management's substantial ownership interest and its impact on public stockholders and the availability of the Company's common stock to the investing public; and the existence of certain anti-takeover provisions in our governance documents, which could make a tender offer, change in control or takeover attempt that is opposed by the Company's Board of Directors more difficult or expensive. All of the foregoing risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. The Company does not undertake to update its forward-looking statements.

 

ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands)
(unaudited)
		September 30,			December 31,
		2022			2021
ASSETS
Cash and cash equivalents		$	121,876		$	105,301
Trade receivables, net			170,274			139,579
Financed receivables, short-term, net			32,253			26,152
Materials and supplies			28,572			28,926
Other current assets			45,981			52,422
Total current assets			398,956			352,380
Equipment and property, net			130,362			133,257
Goodwill			772,325			721,819
Customer contracts, net			319,382			325,929
Trademarks and tradenames, net			114,016			108,976
Other intangible assets, net			9,807			11,679
Operating lease right-of-use assets			270,365			244,784
Financed receivables, long-term, net			58,634			47,097
Other assets			38,636			34,949
Total assets		$	2,112,483		$	1,980,870
LIABILITIES
Accounts payable			42,874			44,568
Accrued insurance - current			40,424			36,414
Accrued compensation and related liabilities			95,694			97,862
Unearned revenues			166,866			145,122
Operating lease liabilities - current			82,611			75,240
Current portion of long-term debt			15,000			18,750
Other current liabilities			66,300			73,206
Total current liabilities			509,769			491,162
Accrued insurance, less current portion			35,257			31,545
Operating lease liabilities, less current portion			191,565			172,520
Long-term debt			109,878			136,250
Other long-term accrued liabilities			69,463			67,345
Total Liabilities			915,932			898,822
STOCKHOLDERS' EQUITY
Common stock			492,472			491,911
Retained earnings and other equity			704,079			590,137
Total stockholders' equity			1,196,551			1,082,048
Total liabilities and stockholders' equity		$	2,112,483		$	1,980,870

 

ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(unaudited)
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2022			2021			2022			2021
REVENUES
Customer services		$	729,704		$	650,199		$	2,034,433		$	1,823,957
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)			348,158			305,474			980,316			864,888
Sales, general and administrative			213,581			194,261			612,353			539,951
Depreciation and amortization			24,282			23,617			73,454			70,519
Total operating expenses			586,021			523,352			1,666,123			1,475,358
OPERATING INCOME			143,683			126,847			368,310			348,599
Interest expense, net			846			222			2,294			1,334
Other (income), net			(1,980)			(447)			(5,170)			(33,598)
CONSOLIDATED INCOME BEFORE INCOME TAXES			144,817			127,072			371,186			380,863
PROVISION FOR INCOME TAXES			37,195			33,219			90,820			95,513
NET INCOME		$	107,622		$	93,853		$	280,366		$	285,350
NET INCOME PER SHARE - BASIC AND DILUTED		$	0.22		$	0.19		$	0.57		$	0.58
Weighted average shares outstanding - basic			492,316			492,069			492,285			492,058
Weighted average shares outstanding - diluted			492,430			492,069			492,398			492,058

 

ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW INFORMATION
(in thousands)
(unaudited)
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2022			2021			2022			2021
OPERATING ACTIVITIES
Net income		$	107,622		$	93,853		$	280,366		$	285,350
Depreciation and amortization			24,282			23,617			73,454			70,519
Change in working capital and other operating activities			(4,184)			(37,764)			(11,283)			(56,958)
Net cash provided by operating activities			127,720			79,706			342,537			298,911
INVESTING ACTIVITIES
Acquisitions, net of cash acquired			(60,838)			(11,307)			(110,418)			(39,692)
Capital expenditures			(7,040)			(6,802)			(22,921)			(20,031)
Other investing activities, net			6,532			588			9,961			70,827
Net cash (used in) provided by investing activities			(61,346)			(17,521)			(123,378)			11,104
FINANCING ACTIVITIES
Net debt repayments			(110,000)			(20,000)			(30,000)			(135,000)
Payment of dividends			(49,201)			(39,945)			(147,635)			(119,677)
Other financing activities			(6,444)			(6,849)			(18,650)			(30,011)
Net cash used in financing activities			(165,645)			(66,794)			(196,285)			(284,688)
Effect of exchange rate changes on cash and cash equivalents			183			(6,264)			(6,299)			(6,149)
Net (decrease) increase in cash and cash equivalents		$	(99,088)		$	(10,873)		$	16,575		$	19,178

 

APPENDIX

Reconciliation of GAAP and non-GAAP Financial Measures

The Company has used the non-GAAP financial measures of organic revenues, adjusted EBITDA, adjusted net income and adjusted earnings per share ("EPS") in this earnings release, and the non-GAAP financial measures of organic revenues by type, and free cash flow in today's conference call. Organic revenue is calculated as revenue less acquisition revenue. Acquisition revenue is based on the trailing 12-month revenue of our acquired entities. 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 net income, adjusted EPS and adjusted EBITDA as measures of operating performance because these measures allow the Company to compare performance consistently over various periods without regard to the impact of the property disposition gains. Management also uses organic revenues, and organic revenues by type to compare revenues over various periods excluding the impact of acquisitions. Management uses free cash flow, which is calculated as net cash provided by operating activities less capital expenditures, to demonstrate the Company's ability to maintain its asset base and generate future cash flows from operations. 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.

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 non-GAAP financial measures used in today's earnings release and conference call with their most comparable GAAP measures.

 

(unaudited, in thousands except EPS)
		Three Months Ended											Nine Months Ended
		September 30,											September 30,
								Variance											Variance
		2022			2021			$			%		2022			2021			$			%
Reconciliation of Net Income to Adjusted Net Income and EPS
Net income		$	107,622		$	93,853		$	13,769		14.7		$	280,366		$	285,350		$	(4,984)		(1.7)
Property disposition gains (net of tax $23,230)			—			—			—		—			—			(31,517)			31,517		—
Adjusted income taxes on excluded items			—			—			—		—			—			8,287			(8,287)		—
Adjusted net income		$	107,622		$	93,853		$	13,769		14.7		$	280,366		$	262,120		$	18,246		7.0
Adjusted earnings per share - basic and diluted		$	0.22		$	0.19		$	0.03		15.8		$	0.57		$	0.53		$	0.04		7.5
Weighted average shares outstanding - basic			492,316			492,069			247		0.1			492,285			492,058			227		0.0
Weighted average shares outstanding - diluted			492,430			492,069			361		0.1			492,398			492,058			340		0.1
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income		$	107,622		$	93,853		$	13,769		14.7		$	280,366		$	285,350		$	(4,984)		(1.7)
Depreciation and amortization			24,282			23,617			665		2.8			73,454			70,519			2,935		4.2
Interest expense, net			846			222			624		281.1			2,294			1,334			960		72.0
Provision for income taxes			37,195			33,219			3,976		12.0			90,820			95,513			(4,693)		(4.9)
EBITDA			169,945			150,911			19,034		12.6			446,934			452,716			(5,782)		(1.3)
Property disposition gains			—			—			—		—			—			(31,517)			31,517		—
Adjusted EBITDA		$	169,945		$	150,911		$	19,034		12.6		$	446,934		$	421,199		$	25,735		6.1
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Net cash provided by operating activities		$	127,720		$	79,706		$	48,014		60.2		$	342,537		$	298,911		$	43,626		14.6
Capital expenditures			(7,040)			(6,802)			(238)		(3.5)			(22,921)			(20,031)			(2,890)		(14.4)
Free Cash Flow		$	120,680		$	72,904		$	47,776		65.5		$	319,616		$	278,880		$	40,736		14.6

 

(unaudited, in thousands)
		Three Months Ended											Nine Months Ended
		September 30,											September 30,
								Variance
		2022			2021			$			%		2022			2021			$			%
Reconciliation of Revenues to Organic Revenues
Revenues		$	729,704		$	650,199			79,505		12.2		$	2,034,433		$	1,823,957			210,476		11.5
Revenue growth from acquisitions			(23,709)			—			(23,709)		—			(61,748)			—			(61,748)		—
Organic revenues		$	705,995			650,199			55,796		8.6		$	1,972,685			1,823,957			148,728		8.2
Reconciliation of Residential Revenues to Organic Residential Revenues
Residential revenues		$	337,878		$	307,747			30,131		9.8		$	922,448		$	835,871			86,577		10.4
Residential revenues from acquisitions			(13,909)			—			(13,909)		—			(35,818)			—			(35,818)		—
Residential organic revenues		$	323,969		$	307,747			16,222		5.3		$	886,630		$	835,871			50,759		6.1
Reconciliation of Commercial Revenues to Organic Commercial Revenues
Commercial revenues		$	243,478		$	218,648			24,830		11.4		$	683,748		$	618,183			65,565		10.6
Commercial revenue growth from acquisitions			(3,693)			—			(3,693)		—			(9,857)			—			(9,857)		—
Commercial organic revenues		$	239,785		$	218,648			21,137		9.7		$	673,891		$	618,183			55,708		9.0
Reconciliation of Termite Revenues to Organic Termite Revenues
Termite revenues		$	139,668		$	117,423			22,245		18.9		$	406,155		$	350,791			55,364		15.8
Termite revenues from acquisitions			(6,107)			—			(6,107)		—			(16,073)			—			(16,073)		—
Termite organic revenues		$	133,561		$	117,423			16,138		13.7		$	390,082		$	350,791			39,291		11.2
		Three Months Ended											Nine Months Ended
		September 30,											September 30,
								Variance
		2021			2020			$			%		2021			2020			$			%
Reconciliation of Revenues to Organic Revenues
Revenues		$	650,199		$	583,698			66,501		11.4		$	1,823,957		$	1,624,928			199,029		12.2
Revenue growth from acquisitions			(12,689)			—			(12,689)		—			(42,677)			—			(42,677)		—
Organic revenues		$	637,510			583,698			53,812		9.2		$	1,781,280			1,624,928			156,352		9.6
Reconciliation of Residential Revenues to Organic Residential Revenues
Residential revenues		$	307,747		$	275,581			32,166		11.7		$	835,871		$	738,159			97,712		13.2
Residential revenues from acquisitions			(6,004)			—			(6,004)		—			(16,800)			—			(16,800)		—
Residential organic revenues		$	301,743		$	275,581			26,162		9.5		$	819,071		$	738,159			80,912		11.0
Reconciliation of Commercial Revenues to Organic Commercial Revenues
Commercial revenues		$	218,648		$	199,561			19,087		9.6		$	618,183		$	562,777			55,406		9.8
Commercial revenue growth from acquisitions			(4,532)			—			(4,532)		—			(19,701)			—			(19,701)		—
Commercial organic revenues		$	214,116		$	199,561			14,555		7.3		$	598,482		$	562,777			35,705		6.3
Reconciliation of Termite Revenues to Organic Termite Revenues
Termite revenues		$	117,423		$	102,144			15,279		15.0		$	350,791		$	306,188			44,603		14.6
Termite revenues from acquisitions			(2,153)			—			(2,153)		—			(6,176)			—			(6,176)		—
Termite organic revenues		$	115,270		$	102,144			13,126		12.9		$	344,615		$	306,188			38,427		12.6

 

CONFERENCE CALL ANNOUNCEMENT

Rollins, Inc.
(NYSE: ROL)

Management will hold a conference call to discuss
Third Quarter 2022 results on

Wednesday, October 26, 2022 at:
10:00 a.m. Eastern
9:00 a.m. Central
8:00 a.m. Mountain
7:00 a.m. Pacific

TO PARTICIPATE:
Please dial 1-877-869-3839 domestic;
1-201-689-8265 international
with conference ID of 13733118
at least 5 minutes before start time.

REPLAY: available through November 2, 2022
Please dial 1-877-660-6853 / 1-201-612-7415, Passcode 13733118
THIS CALL CAN ALSO BE ACCESSED THROUGH THE INTERNET AT

www.rollins.com

Questions?
Contact Samantha Alphonso at Financial Relations Board at 212-827-3746
Or email to salphonso@mww.com

For Further Information Contact
Julie Bimmerman (404) 888-2103

View original content:https://www.prnewswire.com/news-releases/rollins-inc-reports-third-quarter-2022-financial-results-301659328.html

SOURCE Rollins, Inc.

FAQ

What were Rollins, Inc.'s Q3 2022 earnings results?

Rollins reported Q3 2022 revenues of $729.7 million, with a net income of $107.6 million and EPS of $0.22.

How did Rollins, Inc. perform compared to Q3 2021?

In Q3 2022, Rollins' revenues increased by 12.2%, and net income improved by 14.7% compared to Q3 2021.

What is Rollins, Inc.'s future outlook?

Rollins remains optimistic for Q4 2022, noting strong demand for services and plans for continued growth through acquisitions.

What is the significance of the dividend increase for Rollins, Inc.?

Rollins announced a 30% increase in quarterly dividends, reflecting strong financial performance and commitment to returning value to shareholders.