Item 1. FINANCIAL STATEMENTS

64K characters. Original on sec.gov · Markdown

Item 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF MARCH 31, 2025 AND DECEMBER 31, 2024

(in thousands except share data)

(unaudited)


	March 31, 2025		December 31, 2024
ASSETS
Cash and cash equivalents	$	201,177	$	89,630
Trade receivables, net of allowance for expected credit losses of $23,699 and $19,770, respectively	194,105		196,081
Financed receivables, short-term, net of allowance for expected credit losses of $2,589 and $2,536, respectively	38,898		40,301
Materials and supplies	41,249		39,531
Other current assets	80,542		77,080
Total current assets	555,971		442,623
Equipment and property, net of accumulated depreciation of $390,827 and $382,266, respectively	123,754		124,839
Goodwill	1,178,704		1,161,085
Customer contracts, net	375,786		383,092
Trademarks & tradenames, net	150,519		149,895
Other intangible assets, net	8,508		8,602
Operating lease right-of-use assets	422,683		414,474
Financed receivables, long-term, net of allowance for expected credit losses of $6,527 and $6,150, respectively	91,843		89,932
Other assets	40,790		45,153
Total assets	$	2,948,558	$	2,819,695
LIABILITIES
Accounts payable	$	53,075	$	49,625
Accrued insurance - current	44,981		54,840
Accrued compensation and related liabilities	88,898		122,869
Unearned revenues	191,162		180,851
Operating lease liabilities - current	127,456		121,319

Other current liabilities	131,247		115,658
Total current liabilities	636,819		645,162
Accrued insurance, less current portion	70,551		61,946
Operating lease liabilities, less current portion	298,126		295,899
Long-term debt	485,451		395,310
Other long-term accrued liabilities	101,859		90,785
Total liabilities	1,592,806		1,489,102
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, 484,619,254 and 484,372,303 shares issued and outstanding, respectively	484,619		484,372
Additional paid in capital	149,086		155,205
Accumulated other comprehensive loss	(37,941)		(43,634)
Retained earnings	759,988		734,650
Total stockholders’ equity	1,355,752		1,330,593
Total liabilities and stockholders’ equity	$	2,948,558	$	2,819,695

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands except per share data)

(unaudited)


	Three Months Ended March 31,
	2025		2024
REVENUES
Customer services	$	822,504	$	748,349
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)	400,134		365,558
Sales, general and administrative	250,513		223,057

Depreciation and amortization	29,209		27,310
Total operating expenses	679,856		615,925
OPERATING INCOME	142,648		132,424
Interest expense, net	5,796		7,725
Other (income) expense, net	(692)		61
CONSOLIDATED INCOME BEFORE INCOME TAXES	137,544		124,638
PROVISION FOR INCOME TAXES	32,296		30,244
NET INCOME	$	105,248	$	94,394
NET INCOME PER SHARE - BASIC AND DILUTED	$	0.22	$	0.19
Weighted average shares outstanding – basic	484,414		484,131
Weighted average shares outstanding – diluted	484,434		484,318
DIVIDENDS PAID PER SHARE	$	0.165	$	0.150

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands)

(unaudited)


	Three Months Ending March 31,
	2025		2024
NET INCOME	$	105,248	$	94,394
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	5,231		(5,774)
Pension settlement	493		—
Unrealized (loss) gain on available for sale securities	(31)		57

Other comprehensive income (loss), net of tax	5,693		(5,717)
Comprehensive income	$	110,941	$	88,677

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income / (Loss)		Retained Earnings		Total
	Shares	Amount
Balance at December 31, 2024	484,372	$	484,372	$	155,205	$	(43,634)	$	734,650	$	1,330,593
Net Income	—	—		—		—		105,248		105,248
Other comprehensive income, net of tax:
Foreign currency translation adjustments	—	—		—		5,231		—		5,231
Pension settlement	—	—		—		493		—		493
Unrealized loss on available for sale securities	—	—		—		(31)		—		(31)
Cash dividends	—	—		—		—		(79,910)		(79,910)
Stock compensation	541	541		8,258		—		—		8,799
Shares withheld for payment of employee taxes	(294)	(294)		(14,377)		—		—		(14,671)
Balance at March 31, 2025	484,619	$	484,619	$	149,086	$	(37,941)	$	759,988	$	1,355,752


	Common Stock			Additional 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	—	—		—		—		94,394		94,394
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments	—	—		—		(5,774)		—		(5,774)
Unrealized gain on available for sale securities	—	—		—		57		—		57
Cash dividends	—	—		—		—		(72,589)		(72,589)
Stock compensation	414	414		6,767		—		—		7,181
Shares withheld for payment of employee taxes	(264)	(264)		(11,076)		—		—		(11,340)

Balance at March 31, 2024	484,230	$	484,230	$	127,531	$	(32,472)	$	588,207	$	1,167,496

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2025 AND 2024

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2025		2024
OPERATING ACTIVITIES
Net income	$	105,248	$	94,394
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	29,209		27,310
Stock-based compensation expense	8,799		7,181
Provision for expected credit losses	10,730		7,693
Gain on sale of assets, net	(692)		(368)
Provision for deferred income taxes	12,470		—
Other operating activities, net	358		—
Changes in operating assets and liabilities:
Trade accounts receivable	(7,766)		(6,400)
Financing receivables	(506)		(1,822)
Materials and supplies	(1,117)		(2,286)
Other current assets	(3,069)		(8,867)
Accounts payable and accrued expenses	(25,292)		(9,396)
Unearned revenue	10,202		13,691
Other long-term assets and liabilities	8,318		6,303
Net cash provided by operating activities	146,892		127,433
INVESTING ACTIVITIES
Acquisitions, net of cash acquired	(27,191)		(47,132)
Capital expenditures	(6,781)		(7,171)
Proceeds from sale of assets	1,405		712
Other investing activities, net	—		1,126
Net cash used in investing activities	(32,567)		(52,465)
FINANCING ACTIVITIES
Payment of contingent consideration	(1,193)		(1,474)
Issuance of senior notes	492,215		—

Borrowings under revolving commitment	11,000		110,000

Repayments of revolving commitment	(408,000)		(90,000)
Payment of debt issuance costs	(5,428)		—
Payment of dividends	(79,910)		(72,589)
Cash paid for common stock purchased	(14,671)		(11,340)
Other financing activities, net	1,375		1,149
Net cash used in financing activities	(4,612)		(64,254)
Effect of exchange rate changes on cash	1,834		(1,568)
Net increase in cash and cash equivalents	111,547		9,146
Cash and cash equivalents at beginning of period	89,630		103,825
Cash and cash equivalents at end of period	$	201,177	$	112,971
Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,107	$	8,707
Cash paid for income taxes, net	$	5,853	$	5,591
Non-cash additions to operating lease right-of-use assets	$	41,751	$	45,531

The accompanying notes are an integral part of these condensed consolidated financial statements.

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, 2024. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2024 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 months ended March 31, 2025 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 issued but not yet adopted

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. This amendment modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold, (2) the amount of income taxes paid (net of refunds received) (disaggregated by federal, state, and foreign taxes) as well as individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid net of refunds, (3) the income or loss from continuing operations before income tax expense or benefit (disaggregated between domestic and foreign) and (4) income tax expense or benefit from continuing operations (disaggregated by federal, state and foreign). 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 ASU on its disclosures.

In November 2024, the FASB issued ASU 2024-03, "Disaggregation of Income Statement Expenses (DISE)", which requires additional disclosure of the nature of expenses included in the income statement in response to longstanding requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The guidance will be effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.

ROLLINS, INC. AND SUBSIDIARIES

NOTE 3. ACQUISITIONS

2025 Acquisitions

The Company made 4 acquisitions during the three months ended March 31, 2025. 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):


	March 31, 2025
Cash	$	94
Accounts receivable	466
Materials and supplies	554
Other current assets	232
Equipment and property	1,008
Goodwill	16,031
Customer contracts	11,326
Trademarks & tradenames	533
Other intangible assets	400
Current liabilities	(63)
Unearned revenue	(27)
Other assets and liabilities, net	(1,639)
Assets acquired and liabilities assumed	$	28,915

Included in the total consideration of $28.9 million are acquisition holdback liabilities of $4.7 million.

The Company also made payments of $3.1 million for prior year acquisitions during the three months ended March 31, 2025.

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.

NOTE 4. REVENUE

Revenue, classified by the major geographic areas in which our customers are located, was as follows:


	Three Months Ended March 31,
(in thousands)	2025		2024
United States	$	763,350	$	693,860
Other countries	59,154		54,489
Total Revenues	$	822,504	$	748,349

ROLLINS, INC. AND SUBSIDIARIES

Revenue from external customers, classified by significant product and service offerings, was as follows:


	Three Months Ended March 31,
(in thousands)	2025		2024
Residential revenue	$	356,313	$	329,338
Commercial revenue	284,357		258,114
Termite completions, bait monitoring, & renewals	172,130		152,060
Franchise revenues	3,770		3,961
Other revenues	5,934		4,876
Total Revenues	$	822,504	$	748,349

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 months ended March 31, 2025 and 2024 was $67.0 million and $61.9 million. Changes in unearned revenue were as follows:


	Three Months Ended March 31,
(in thousands)	2025		2024
Beginning balance	$	223,872	$	210,059
Deferral of unearned revenue	76,506		74,796
Recognition of unearned revenue	(67,013)		(61,888)
Ending balance	$	233,365	$	222,967

As of March 31, 2025 and December 31, 2024, the Company had long-term unearned revenue of $42.2 million and $43.0 million, respectively, recorded in other long-term accrued liabilities. Unearned short-term revenue is recognized over the next 12-month period. We recognized $45.2 million and $43.1 million of revenue in the quarters ended March 31, 2025 and 2024, respectively, that was included in the balance of unearned revenue at the beginning of each respective fiscal year. The majority of unearned long-term revenue is recognized over a period of five years or less with immaterial amounts recognized through 2035.

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 March 31, 2025, we have $16.8 million of unamortized capitalized costs to obtain a contract, of which $14.8 million is recorded within other current assets and $2.0 million is recorded within other assets on our condensed consolidated statement of financial position. As of December 31, 2024, we had $23.4 million of unamortized capitalized costs to obtain a contract, of which $19.3 million was recorded within other current assets and $4.1 million was recorded within other assets on our condensed consolidated statement of financial position. During the three months ended March 31, 2025 and 2024, we recorded approximately $7.1 million and $3.8 million, respectively, of amortization of capitalized costs, which is recorded within sales, general and administrative expense on our condensed consolidated statement of income.

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

ROLLINS, INC. AND SUBSIDIARIES

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 months ended March 31, 2025 and 2024.


	Allowance for Credit Losses
(in thousands)	Trade Receivables		Financed Receivables		Total Receivables
Balance at December 31, 2024	$	19,770	$	8,686	$	28,456
Provision for expected credit losses	8,081		2,649		10,730
Write-offs charged against the allowance	(5,428)		(2,460)		(7,888)
Recoveries collected	1,276		241		1,517
Balance at March 31, 2025	$	23,699	$	9,116	$	32,815


	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	1,429		146		1,575
Balance at March 31, 2024	$	14,865	$	6,256	$	21,121

NOTE 6. GOODWILL AND INTANGIBLE ASSETS

The following table summarizes changes in goodwill during the three months ended March 31, 2025 (in thousands):


Balance at December 31, 2024	$	1,161,085
Additions	16,031

Measurement adjustments	(627)
Adjustments due to currency translation and other	2,215
Balance at March 31, 2025	$	1,178,704

ROLLINS, INC. AND SUBSIDIARIES

The following table sets forth the components of indefinite-lived and amortizable intangible assets as of March 31, 2025 and December 31, 2024 (in thousands):


	March 31, 2025						December 31, 2024
	Gross		Accumulated Amortization		Carrying Value		Gross		Accumulated Amortization		Carrying Value		Useful Life in Years
Amortizable intangible assets:
Customer contracts	$	662,885	$	(287,099)	$	375,786	$	671,242	$	(288,150)	$	383,092	3-20
Trademarks and tradenames	24,327		(13,534)		10,793		24,559		(12,480)		12,079		7-20
Other intangible assets	27,040		(18,532)		8,508		26,507		(17,905)		8,602		3-20
Total amortizable intangible assets	$	714,252	$	(319,165)	$	395,087	$	722,308	$	(318,535)	$	403,773

Indefinite-lived intangible assets					139,726						137,816
Total customer contracts and other intangible assets					$	534,813					$	541,589

Amortization expense related to intangible assets was $20.8 million and $18.7 million for the three months ended March 31, 2025 and 2024, respectively. Customer contracts and other amortizable intangible assets are amortized on a straight-line basis over their economic useful lives.

Estimated amortization expense for the existing carrying amount of amortizable intangible assets for each of the five succeeding fiscal years as of March 31, 2025 are as follows:


(in thousands)
2025 (excluding the three months ended March 31, 2025)	$	60,954
2026	78,811
2027	74,925
2028	63,767
2029	49,867

NOTE 7. DEBT

Components of debt were as follows (in thousands):


	March 31, 2025		December 31, 2024
2035 Senior Notes	$	500,000	$	—
Revolving Credit Facility	—		397,000
Total debt	$	500,000	$	397,000

Less: Unamortized debt discount	(7,612)		—
Less: Unamortized debt issuance costs	(6,937)		(1,690)

Total Long-term debt	$	485,451	$	395,310

Long-term Debt

2035 Senior Notes

In February 2025, we issued ten-year notes with an aggregate principal amount of $500 million due on February 24, 2035 (the “2035 Senior Notes”) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act. We issued the 2035 Senior Notes at 98.443% of par, representing a discount of $7.8 million, and paid approximately $5.4 million for debt issuance costs. The interest is payable semi-annually in arrears on February 24 and

ROLLINS, INC. AND SUBSIDIARIES

August 24 of each year at 5.25% per annum, beginning on August 24, 2025, and the entire principal amount is due at the time of maturity. We used the net proceeds from this offering primarily to repay outstanding borrowings under the Revolving Credit Facility, as defined below, as well as for general corporate purposes.

The 2035 Senior Notes are senior unsecured obligations of the Company and, at the time of issuance, were guaranteed by the Company’s subsidiaries that were guarantors under its Revolving Credit Facility, provided for by the Credit Agreement defined below. Subsequent to the issuance of the 2035 Senior Notes, and described further below, we amended our Credit Agreement to release the Company's subsidiaries as guarantors.

The indenture governing the 2035 Senior Notes contains customary covenants that limit the Company and its subsidiaries’ ability to, among other things, incur liens and certain types of indebtedness. The indenture also provides for customary events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2035 Senior Notes to be due and payable immediately. We were in compliance with all covenants as of March 31, 2025.

The effective interest rate of our 2035 Senior Notes was 5.6% as of March 31, 2025.

Revolving Credit Facility

In February 2023, the Company entered into a credit agreement (the "Credit Agreement") with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”).

In March 2025, the Company entered into Amendment No. 1 to the Credit Agreement (the “Amendment No 1”), among the Company, JPMorgan Chase, and the lenders party thereto, which amended the Credit Agreement with, among others, the Company and the Administrative Agent. The Amendment No. 1, among other things, released each of Orkin, LLC, Northwest Exterminating Co., LLC, Clark Pest Control of Stockton, Inc. and Hometeam Pest Defense, Inc. (collectively, the “Existing Guarantors”) as guarantors under the Credit Agreement. Following the release of the Existing Guarantors from their guarantees of the obligations under the Credit Agreement, no subsidiary of the Company guarantees the obligations under the Credit Agreement.

The Credit Agreement provides for a $1.0 billion revolving credit facility ("Revolving Credit Facility"), which may be denominated in U.S. Dollars and other currencies, 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.

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, such interest rates as set forth in the Credit Agreement.

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 March 31, 2025.

As of March 31, 2025, the Company had no outstanding borrowings under the Revolving Credit Facility. As of December 31, 2024, the Company had outstanding borrowings of $397.0 million under the Revolving Credit Facility.

ROLLINS, INC. AND SUBSIDIARIES

Short-term Debt

Commercial Paper Program

In March 2025, we established a commercial paper program under which we may issue unsecured commercial paper up to a total of $1 billion outstanding at any time, with maturities of up to 397 days from the date of issue. The net proceeds from the issuance of commercial paper are expected to be used for general corporate purposes. As of March 31, 2025, there were no outstanding borrowings under the commercial paper program.

Letters of Credit

The Company maintained $82.4 million in letters of credit as of March 31, 2025 and $72.0 million as of December 31, 2024. 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.

NOTE 8. FAIR VALUE MEASUREMENT

Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The levels of the fair value hierarchy are:

Level 1: observable inputs such as quoted prices in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices in active markets in Level 1 that are either directly or indirectly observable; and
Level 3: unobservable inputs for which little or no market data exists.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Debt Securities

As of March 31, 2025 and December 31, 2024, we had investments in international bonds of $8.1 million and $8.2 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 months ended March 31, 2025 and 2024 was not significant.

Contingent Consideration

As of March 31, 2025 and December 31, 2024, the Company had $25.0 million and $21.0 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 March 31,
(in thousands)	2025		2024
Beginning balance	$	21,008	$	46,104
New acquisitions and measurement adjustments	4,730		6,664
Payouts	(1,193)		(1,474)
Interest and fair value adjustments	20		534
Charge offset, forfeit and other	440		30
Ending balance	$	25,005	$	51,858

ROLLINS, INC. AND SUBSIDIARIES

Other Fair Value Disclosures

The carrying amount of cash and cash equivalents, trade and financed receivables, accounts payable, and short-term liabilities approximate fair value due to their short-term nature. The carrying amounts of borrowings outstanding under our Revolving Credit Facility approximate fair value, as interest rates are variable and reflective of market rates.

The following table presents the aggregate fair value and carrying value of our 2035 Senior Notes, which are classified as Level 2 within the fair value hierarchy:


	March 31, 2025				December 31, 2024
(in thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value
2035 Senior Notes	$	496,795	$	485,451	$	—	$	—

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 investigations, cases, and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations, claims filed under California's Private Attorneys General Act, and claims related to our enforcement of post-employment restrictive covenants. We are also involved from time to time in certain environmental 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 in accordance with ASC 450.

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 actuary 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.

ROLLINS, INC. AND SUBSIDIARIES

NOTE 10. STOCKHOLDERS' EQUITY

During the three months ended March 31, 2025, the Company paid $79.9 million, or $0.165 per share, in cash dividends compared to $72.6 million, or $0.150 per share, during the same period in 2024.

The Company withholds shares from employees for the payment of their taxes on equity awards that have vested. The Company withheld $14.7 million and $11.3 million in connection with employee tax obligations during the three month periods ended March 31, 2025 and 2024, respectively.

The Company did not repurchase shares on the open market during the three months ended March 31, 2025 and March 31, 2024.

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 March 31,
(in thousands)	2025		2024
Stock-based compensation expense	$	8,799	$	7,181

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 March 31,
	2025	2024

Weighted-average outstanding common shares	482,581	481,877
Add participating securities:
Weighted-average time-lapse restricted awards	1,833	2,254
Total weighted-average shares outstanding – basic	484,414	484,131
Dilutive effect of restricted stock units and PSUs	20	187
Weighted-average shares outstanding – diluted	484,434	484,318

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 $32.3 million and $30.2 million for the three months ended March 31, 2025 and 2024, respectively.

The Company’s effective tax rate decreased to 23.5% in the first quarter of 2025 compared with 24.3% in the first quarter of 2024. The lower rate for the quarter was primarily due to increased benefits from stock-based compensation.

NOTE 13. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates under one reportable segment which contains our residential, commercial, and termite service offerings. The Company's chief operating decision maker ("CODM") is the chief executive officer. The CODM uses net income to assess financial performance and allocate resources. This financial metric is used by the CODM to make key

ROLLINS, INC. AND SUBSIDIARIES

operating decisions, such as the determination of the rate of growth investments and the allocation of budget between cost categories. The measure of segment assets is reported on the balance sheet as total consolidated assets.

The following table presents selected financial information with respect to the Company’s single reportable segment:


	Three Months Ended March 31,
(in thousands)	2025		2024
Revenue	$	822,504	$	748,349

Less:
Cost of services provided (exclusive of depreciation and amortization below):
Employee expenses	261,724		238,529
Materials and supplies	48,491		44,786
Insurance and claims	16,524		17,644
Fleet expenses	36,857		30,697
Other cost of services provided (1)	36,538		33,902
Total cost of services provided (exclusive of depreciation and amortization below)	$	400,134	$	365,558

Sales, general and administrative:
Selling and marketing expenses	98,250		82,911
Administrative employee expenses	81,481		75,778
Insurance and claims	10,004		10,526
Fleet expenses	9,403		7,765
Other sales, general and administrative (2)	51,375		46,077
Total sales, general and administrative	$	250,513	$	223,057


Depreciation and amortization	29,209		27,310
Interest expense, net	5,796		7,725
Other income, net	(692)		61
Income tax expense	32,296		30,244
Net income	$	105,248	$	94,394

Other cost of services provided includes facilities costs, professional services, maintenance and repairs, software license costs, and other expenses directly related to providing services.
Other sales, general and administrative includes facilities costs, professional services, maintenance and repairs, software license costs, bad debt expense, and other administrative expenses.

See the consolidated financial statements for other financial information regarding the Company’s reportable segment. See Note 4, Revenue for further information on revenue.

The Company's long-lived tangible assets, as well as the Company's operating lease right-of-use assets recognized in the condensed consolidated statements of financial position were located as follows:


	March 31, 2025		December 31, 2024
(in thousands)
United States	$	509,937	$	503,767
International	36,500		35,546

ROLLINS, INC. AND SUBSIDIARIES

NOTE 14. SUBSEQUENT EVENTS

Saela Acquisition

On April 2, 2025, the Company acquired 100% of Saela Holdings, LLC (“Saela”) for $200 million, subject to post-closing adjustments related to the assets and liabilities of Saela at closing, plus $15 million of contingent consideration that will be paid upon the attainment of future growth and profitability levels. The acquisition is expected to be accounted for as a business combination and the assets acquired and liabilities assumed will be measured at fair value as of the acquisition date. The initial purchase price allocation is not complete as of the date of this filing. We funded this acquisition using cash on hand and borrowings under the commercial paper program.

Quarterly Dividend

On April 22, 2025, the Company’s Board of Directors declared a regular quarterly cash dividend on its common stock of $0.165 per share payable on June 10, 2025 to shareholders of record at the close of business on May 12, 2025.

ROLLINS, INC. AND SUBSIDIARIES

Previous: Cover and table of contents · Next: Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS