ROLLINS, INC. REPORTS STRONG FIRST QUARTER 2023 FINANCIAL RESULTS

Strong Revenue Growth Drives a 20.0% increase in Earnings Per Share

ATLANTA, April 26, 2023 /PRNewswire/ -- Rollins, Inc. (NYSE:ROL) ("Rollins" or the "Company"), a premier global consumer and commercial services company, reported unaudited financial results for the first quarter of 2023. 

Quarterly Highlights

  • First quarter revenues were $658.0 million, an increase of 11.4% over the first quarter 2022 with organic revenues* increasing 9.2%. The stronger dollar versus foreign currencies in countries where we operate reduced revenues by 60 basis points during the quarter.
  • Quarterly operating income was $112.2 million, an increase of 20.2% over the first quarter of 2022. Quarterly operating margin was 17.1% of revenue, an increase of approximately 130 basis points compared to the first quarter of 2022. EBITDA* was $139.5 million for the quarter, an increase of 18.4%. EBITDA* was 21.2% of sales, an increase of approximately 130 basis points compared to the first quarter of 2022.
  • Quarterly net income was $88.2 million, an increase of 19.6% over the prior year net income. Quarterly EPS was $0.18 per diluted share, a 20.0% increase over the prior year EPS of $0.15.
  • Operating cash flow was $100.8 million, increasing 15.1% compared to the same quarter a year ago. The Company invested $15.5 million in acquisitions, $7.6 million in capital expenditures, and paid dividends totaling $64.1 million for the quarter. Free cash flow* was $93.1 million, an increase of 17.1% compared to the first quarter of 2022.
  • The Company acquired FPC Holdings, LLC (Fox Pest Control) in April 2023 for $318 million excluding $32 million of contingent consideration based upon the attainment of future growth and profitability levels.

Management Commentary

"Our first quarter results reflect our resilient business model and strong focus on execution by our team," said Jerry Gahlhoff, Jr., President and CEO. "The demand environment is healthy and our pipeline for acquisitions remains robust to start the second quarter. We continued to see strong demand for our services in the quarter and remain very well positioned to continue to deliver strong results in 2023 and beyond. Our team remains focused on driving strong growth, improving margins and cash flows," Mr. Gahlhoff added.

"We started the year strong with very healthy growth on both the top and bottom line," said Kenneth Krause, Executive Vice President and CFO. "We continue to focus on driving strong growth through both organic and inorganic investments like the Fox acquisition we made in April while delivering strong incremental margins," he added. "Cash flow generation was strong, and our balance sheet positions us well to continue to invest in profitable growth while maintaining our balanced approach to capital allocation," Mr. Krause concluded.

Quarterly Financial Highlights

Three months ended March 31,

(in thousands)

2023

2022

Variance

Revenues

$         658,015

$          590,680

$               67,335

11.4 %

EBITDA*

$         139,456

$          117,796

$               21,660

18.4 %

EBITDA Margin*

21.2 %

19.9 %

130

BPS

GAAP EPS

$               0.18

$                0.15

0.03

20.0 %

Operating Cash Flow

$         100,773

$            87,532

13,241

15.1 %

 

*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.

About Rollins, Inc.:

Rollins, Inc. (ROL) is a premier global consumer and commercial services company.  Through its family of leading brands, 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, with more than 17,500 employees from more than 800 locations. Rollins is parent to 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, Fox Pest Control, Orkin Canada, Orkin Australia, Safeguard (UK), Aardwolf Pestkare (Singapore), and more. You can learn more about Rollins and its subsidiaries by visiting www.rollins.com.

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 Company's business and financial results. 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 the demand environment is healthy and the Company's pipeline for acquisitions remains robust to start the second quarter, the Company is well positioned to continue to deliver strong results in 2023 and beyond, that the Company remains focused on driving strong growth, improving margins and healthy cash flows and that the Company's balance sheet positions the Company well to continue to continue to invest in profitable growth while maintaining a balanced approach to capital allocation.

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 effects of a pandemic, such as the COVID-19 pandemic, or other major public health concern on the Company's business, results of operations, accounting assumptions and estimates and financial condition; adverse economic conditions, including, without limitation, market downturns, inflation and restrictions in customer discretionary expenditures, increases in interest rates or other 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; new or proposed regulations regarding climate change; any noncompliance with, changes to, or increased enforcement of various government laws and regulations, including environmental regulations; possibility of an adverse ruling against us in pending litigation, regulatory action or investigation; 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.

Conference Call

Rollins will host a conference call on Thursday, April 27, 2023 at 8:30 a.m. Eastern Time to discuss the first quarter 2023 results. The conference call will also broadcast live over the internet via a link provided on the Rollins, Inc. website at www.rollins.com. Interested parties can also dial into the call at 1-877-869-3839 (domestic) or 1-201-689-8265 (internationally) with conference ID of 13737037. For interested individuals unable to join the call, a replay will be available on the website for 180 days.

 

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands)

(unaudited)

March 31,
2023

December 31,
2022

ASSETS

Cash and cash equivalents

$         112,503

$           95,346

Trade receivables, net

150,426

155,759

Financed receivables, short-term, net

38,599

33,618

Materials and supplies

30,859

29,745

Other current assets

35,479

34,151

Total current assets

367,866

348,619

Operating lease right-of-use assets

274,540

277,355

Financed receivables, long-term, net

62,962

63,523

Other assets

1,433,518

1,432,531

Total assets

$      2,138,886

$      2,122,028

LIABILITIES

Accounts payable

39,073

42,796

Accrued insurance - current

40,816

39,534

Accrued compensation and related liabilities

67,761

99,251

Unearned revenues

167,564

158,092

Operating lease liabilities - current

83,981

84,543

Current portion of long-term debt

15,000

Other current liabilities

68,161

54,568

Total current liabilities

467,356

493,784

Accrued insurance, less current portion

40,582

38,350

Operating lease liabilities, less current portion

194,860

196,888

Long-term debt

62,432

39,898

Other long-term accrued liabilities

85,904

85,911

Total liabilities

851,134

854,831

STOCKHOLDERS' EQUITY

Common stock

492,787

492,448

Retained earnings and other equity

794,965

774,749

Total stockholders' equity

1,287,752

1,267,197

Total liabilities and stockholders' equity

$      2,138,886

$      2,122,028

 

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share data)

(unaudited)

Three Months Ended March 31,

2023

2022

REVENUES

Customer services

$         658,015

$         590,680

COSTS AND EXPENSES

Cost of services provided (exclusive of depreciation and amortization below)

326,842

295,378

Sales, general and administrative

196,431

178,785

Depreciation and amortization

22,502

23,127

Total operating expenses

545,775

497,290

OPERATING INCOME

112,240

93,390

Interest expense, net

465

568

Other income, net

(4,714)

(1,279)

CONSOLIDATED INCOME BEFORE INCOME TAXES

116,489

94,101

PROVISION FOR INCOME TAXES

28,255

20,335

NET INCOME

$           88,234

$           73,766

NET INCOME PER SHARE - BASIC AND DILUTED

$                0.18

$                0.15

Weighted average shares outstanding - basic

492,516

492,213

Weighted average shares outstanding - diluted

492,701

492,325

Certain consolidated financial statement amounts relative to prior periods have been revised, the effects of which are immaterial. See the appendix to this release for a discussion of this revision.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW INFORMATION

(in thousands)

(unaudited)

Three Months Ended March 31, 2023

2023

2022

OPERATING ACTIVITIES

Net income

$           88,234

$           73,766

Depreciation and amortization

22,502

23,127

Change in working capital and other operating activities

(9,963)

(9,361)

Net cash provided by operating activities

100,773

87,532

INVESTING ACTIVITIES

Acquisitions, net of cash acquired

(15,480)

(13,223)

Capital expenditures

(7,636)

(7,995)

Other investing activities, net

9,526

1,290

Net cash (used in) investing activities

(13,590)

(19,928)

FINANCING ACTIVITIES

Net borrowings

10,000

140,783

Payment of dividends

(64,053)

(49,205)

Other financing activities

(17,029)

(9,485)

Net cash (used in) provided by financing activities

(71,082)

82,093

Effect of exchange rate changes on cash and cash equivalents

1,056

3,340

Net increase in cash and cash equivalents

$           17,157

$         153,037

Certain consolidated financial statement amounts relative to prior periods have been revised, the effects of which are immaterial. See the appendix to this release for a discussion of this revision.

APPENDIX

Reconciliation of GAAP and non-GAAP Financial Measures

The Company has used the non-GAAP financial measures of organic revenues, organic revenues by type, EBITDA, EBITDA margin, incremental margin and free cash flow in this earnings release. 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, EBITDA, EBITDA margin and incremental margin as measures of operating performance because these measures allow the Company to compare performance consistently over various periods. Incremental margin is calculated as the change in EBITDA divided by the change in revenue. 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)

Three Months Ended March 31,

Variance

2023

2022

$

%

Reconciliation of Net Income to EBITDA

Net income

$   88,234

$   73,766

$ 14,468

19.6

Depreciation and amortization

22,502

23,127

(625)

(2.7)

Interest expense, net

465

568

(103)

(18.1)

Provision for income taxes

28,255

20,335

7,920

38.9

EBITDA

$ 139,456

$ 117,796

$ 21,660

18.4

Revenues

$ 658,015

$ 590,680

$ 67,335

Incremental margin

32.2 %

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Net cash provided by operating activities

$ 100,773

$   87,532

$ 13,241

15.1

Capital expenditures

(7,636)

(7,995)

359

(7.6)

Free cash flow

$   93,137

$   79,537

$ 13,600

17.1

Certain condensed consolidated financial statement amounts relative to the prior period have been revised as detailed in our annual report on Form 10-K for the year ended December 31, 2022. The impact of this revision on the Company's previously reporting condensed consolidated financial statements for the three months ended March 31, 2022 includes a decrease to depreciation and amortization expense of $1.7 million and an increase in the provision for income tax expense of $0.4 million. This revision affects these specific line items and subtotals within the consolidated statements of income  and cash flows.

(unaudited, in thousands)

Three Months Ended March 31,

Variance

2023

2022

$

%

Reconciliation of Revenues to Organic Revenues

Revenues

$ 658,015

$ 590,680

67,335

11.4

Revenue growth from acquisitions

(13,155)

(13,155)

Organic revenues

$ 644,860

590,680

54,180

9.2

Reconciliation of Residential Revenues to Organic Residential Revenues

Residential revenues

$ 283,625

$ 259,259

24,366

9.4

Residential revenues from acquisitions

(6,003)

(6,003)

Residential organic revenues

$ 277,622

$ 259,259

18,363

7.1

Reconciliation of Commercial Revenues to Organic Commercial Revenues

Commercial revenues

$ 230,402

$ 205,787

24,615

12.0

Commercial revenue growth from acquisitions

(4,194)

(4,194)

Commercial organic revenues

$ 226,208

$ 205,787

20,421

10.0

Reconciliation of Termite and Ancillary Revenues to Organic Termite and Ancillary Revenues

Termite and ancillary revenues

$ 136,605

$ 119,706

16,899

14.1

Termite and ancillary revenues from acquisitions

(2,958)

(2,958)

Termite and ancillary organic revenues

$ 133,647

$ 119,706

13,941

11.6

Three Months Ended March 31,

Variance

2022

2021

$

%

Reconciliation of Revenues to Organic Revenues

Revenues

$ 590,680

$ 535,554

55,126

10.3

Revenue growth from acquisitions

(17,567)

(17,567)

Organic revenues

$ 573,113

535,554

37,559

7.0

Reconciliation of Residential Revenues to Organic Residential Revenues

Residential revenues

$ 259,259

$ 235,179

24,080

10.2

Residential revenues from acquisitions

(10,282)

(10,282)

Residential organic revenues

$ 248,977

$ 235,179

13,798

5.9

Reconciliation of Commercial Revenues to Organic Commercial Revenues

Commercial revenues

$ 205,787

$ 188,697

17,090

9.1

Commercial revenue growth from acquisitions

(2,222)

(2,222)

Commercial organic revenues

$ 203,565

$ 188,697

14,868

7.9

Reconciliation of Termite and Ancillary Revenues to Organic Termite and Ancillary Revenues

Termite and ancillary revenues

$ 119,706

$ 105,694

14,012

13.3

Termite and ancillary revenues from acquisitions

(5,063)

(5,063)

Termite and ancillary organic revenues

$ 114,643

$ 105,694

8,949

8.5

For Further Information Contact
Kenneth Krause (404) 888-2242

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SOURCE Rollins, Inc.