filings.toolsRollins 10-Q 2026-03-31
Filed 2026-04-23. 8 sections, 162K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
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 March 31, 2026
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 481,463,663 shares of its $1 par value Common Stock outstanding as of April 13, 2026.
ROLLINS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
ROLLINS, INC. AND SUBSIDIARIES
PART 1 FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS OF MARCH 31, 2026 AND DECEMBER 31, 2025
(in thousands except share data)
(unaudited)
| March 31, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 116,543 | $ | 100,004 | |||||||
| Trade receivables, net of allowance for expected credit losses of $22,008 and $23,528, respectively | 210,721 | 202,518 | |||||||||
| Financed receivables, short-term, net of allowance for expected credit losses of $2,944 and $3,112, respectively | 44,243 | 44,723 | |||||||||
| Materials and supplies | 44,128 | 42,982 | |||||||||
| Other current assets | 98,043 | 82,455 | |||||||||
| Total current assets | 513,678 | 472,682 | |||||||||
| Equipment and property, net of accumulated depreciation of $244,373 and $237,815, respectively | 124,910 | 126,187 | |||||||||
| Goodwill | 1,384,591 | 1,374,664 | |||||||||
| Customer contracts, net | 392,044 | 407,516 | |||||||||
| Trademarks & tradenames, net | 166,193 | 166,779 | |||||||||
| Other intangible assets, net | 7,486 | 8,089 | |||||||||
| Operating lease right-of-use assets | 412,690 | 424,528 | |||||||||
| Financed receivables, long-term, net of allowance for expected credit losses of $8,704 and $7,922, respectively | 110,879 | 110,057 | |||||||||
| Other assets | 47,763 | 50,021 | |||||||||
| Total assets | $ | 3,160,234 | $ | 3,140,523 | |||||||
| LIABILITIES | |||||||||||
| Short-term debt | $ | 163,926 | $ | 123,683 | |||||||
| Accounts payable | 61,188 | 44,361 | |||||||||
| Accrued insurance - current | 45,204 | 44,123 | |||||||||
| Accrued compensation and related liabilities | 102,461 | 128,259 | |||||||||
| Unearned revenues | 194,273 | 187,670 | |||||||||
| Operating lease liabilities - current | 136,714 | 137,410 | |||||||||
| Other current liabilities | 90,897 | 120,019 | |||||||||
| Total current liabilities | 794,663 | 785,525 | |||||||||
| Accrued insurance, less current portion | 88,274 | 79,157 | |||||||||
| Operating lease liabilities, less current portion | 279,873 | 290,765 | |||||||||
| Long-term debt | 486,627 | 486,147 | |||||||||
| Other long-term accrued liabilities | 129,109 | 124,608 | |||||||||
| Total liabilities | 1,778,546 | 1,766,202 | |||||||||
| 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, 481,461,825 and 481,193,751 shares issued and outstanding, respectively | 481,462 | 481,194 | |||||||||
| Additional paid in capital | 167,767 | 179,406 | |||||||||
| Accumulated other comprehensive (loss) income | (26,324) | (25,194) | |||||||||
| Retained earnings | 758,783 | 738,915 | |||||||||
| Total stockholders’ equity | 1,381,688 | 1,374,321 | |||||||||
| Total liabilities and stockholders’ equity | $ | 3,160,234 | $ | 3,140,523 |
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, 2026 AND 2025
(in thousands except per share data)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Customer services | $ | 906,424 | $ | 822,504 | |||||||||||||||||||
| COSTS AND EXPENSES | |||||||||||||||||||||||
| Cost of services provided (exclusive of depreciation and amortization below) | 445,522 | 400,134 | |||||||||||||||||||||
| Sales, general and administrative | 282,918 | 250,513 | |||||||||||||||||||||
| Depreciation and amortization | 32,498 | 29,209 | |||||||||||||||||||||
| Total operating expenses | 760,938 | 679,856 | |||||||||||||||||||||
| OPERATING INCOME | 145,486 | 142,648 | |||||||||||||||||||||
| Interest expense, net | 8,851 | 5,796 | |||||||||||||||||||||
| Other (income) expense, net | (463) | (692) | |||||||||||||||||||||
| CONSOLIDATED INCOME BEFORE INCOME TAXES | 137,098 | 137,544 | |||||||||||||||||||||
| PROVISION FOR INCOME TAXES | 29,260 | 32,296 | |||||||||||||||||||||
| NET INCOME | $ | 107,838 | $ | 105,248 | |||||||||||||||||||
| NET INCOME PER SHARE - BASIC AND DILUTED | $ | 0.22 | $ | 0.22 | |||||||||||||||||||
| Weighted average shares outstanding – basic | 481,385 | 484,414 | |||||||||||||||||||||
| Weighted average shares outstanding – diluted | 481,398 | 484,434 | |||||||||||||||||||||
| DIVIDENDS PAID PER SHARE | $ | 0.1825 | $ | 0.1650 |
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, 2026 AND 2025
(in thousands)
(unaudited)
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| NET INCOME | $ | 107,838 | $ | 105,248 | |||||||||||||||||||
| Other comprehensive (loss) income, net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | (1,111) | 5,231 | |||||||||||||||||||||
| Pension settlement | — | 493 | |||||||||||||||||||||
| Unrealized gain (loss) on available for sale securities | **(19 |
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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 March 31, 2026:
-
First quarter revenues were $906.4 million, an increase of 10.2% over the first quarter of 2025 with organic revenues* increasing 6.6%. This represents our 98th consecutive quarter of revenue growth.
-
Quarterly operating income was $145.5 million, an increase of 2.0% over the first quarter of 2025. Quarterly operating margin was 16.1%, a decrease of 120 basis points versus the first quarter of 2025. Adjusted operating income* was $152.8 million, an increase of 4.0% over the prior year. Adjusted operating margin* was 16.9%, a decrease of 100 basis points compared to the prior year.
-
Adjusted EBITDA* was $179.5 million, an increase of 4.4% over the prior year. Adjusted EBITDA margin* was 19.8%, a decrease of 110 basis points versus the first quarter of 2025.
-
Quarterly net income was $107.8 million, an increase of 2.5% over the prior year. Adjusted net income* was $113.2 million, an increase of 5.0% over the prior year.
-
Quarterly EPS was $0.22 per diluted share in the first quarter of 2026 and 2025. Adjusted EPS* was $0.24 per diluted share, an increase of 9.1% over the prior year.
-
Operating cash flow was $118.4 million for the quarter, a decrease of 19.4% compared to the prior year. Free cash flow* was $111 million for the quarter, a decrease of 20.6% compared to the prior year. Cash flow was negatively impacted by $39.5 million due to the timing of tax payments associated with our tax credit planning strategy, as well as $8.8 million due to the transition to semi-annual interest payments on our 2035 Senior Notes. The Company invested $18.5 million in acquisitions, $7.1 million in capital expenditures, and paid dividends totaling $87.8 million.
The Company expects to report 7% to 8% organic and 2% to 3% inorganic revenue growth in 2026. While we saw a slower start to the year in the first quarter, our business improved in the back half of the quarter and the strength of our recurring revenue and ancillary services gives us confidence in our ability to meet our financial outlook for 2026.
*Amounts are non-GAAP financial measures. See the schedules below for a discussion of non-GAAP financial metrics including a reconciliation to the most directly comparable GAAP measure.
RECENT DEVELOPMENTS AND ECONOMIC CONDITIONS
The continued disruption in economic markets due to inflation, changing interest rates, tariffs, trade disputes, 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 macroeconomic trends. 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.
ROLLINS, INC. AND SUBSIDIARIES
The extent to which these 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.
RESULTS OF OPERATIONS
Quarter ended March 31, 2026 compared to quarter ended March 31, 2025
| Three Months Ended March 31, | ||||||||||||||||||||
| Variance | ||||||||||||||||||||
| (in thousands, except per share data) | 2026 | 2025 | $ | % | ||||||||||||||||
| GAAP Metrics | ||||||||||||||||||||
| Revenues | $ | 906,424 | $ | 822,504 | $ | 83,920 | 10.2 | % | ||||||||||||
| Gross profit (1) | $ | 460,902 | $ | 422,370 | $ | 38,532 | 9.1 | % | ||||||||||||
| Gross profit margin (1) | 50.8 | % | 51.4 | % | -60 bps | |||||||||||||||
| Operating income | $ | 145,486 | $ | 142,648 | $ | 2,838 | 2.0 | % | ||||||||||||
| Operating margin | 16.1 | % | 17.3 | % | -120 bps | |||||||||||||||
| Net income | $ | 107,838 | $ | 105,248 | $ | 2,590 | 2.5 | % | ||||||||||||
| EPS | $ | 0.22 | $ | 0.22 | $ | — | — | % | ||||||||||||
| Operating cash flow | $ | 118,367 | $ | 146,892 | $ | (28,525) | (19.4) | % | ||||||||||||
| Non-GAAP Metrics | ||||||||||||||||||||
| Adjusted operating income (2) | $ | 152,793 | $ | 146,861 | $ | 5,932 | 4.0 | % | ||||||||||||
| Adjusted operating margin (2) | 16.9 | % | 17.9 | % | -100 bps | |||||||||||||||
| Adjusted net income (2) | $ | 113,229 | $ | 107,868 | $ | 5,361 | 5.0 | % | ||||||||||||
| Adjusted EPS (2) | $ | 0.24 | $ | 0.22 | $ | 0.02 | 9.1 | % | ||||||||||||
| Adjusted EBITDA (2) | $ | 179,469 | $ | 171,857 | $ | 7,612 | 4.4 | % | ||||||||||||
| Adjusted EBITDA margin (2) | 19.8 | % | 20.9 | % | -110 bps | |||||||||||||||
| Free cash flow (2) | $ | 111,228 | $ | 140,111 | $ | (28,883) | (20.6) | % |
(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 to the most directly comparable GAAP measure.
ROLLINS, INC. AND SUBSIDIARIES
The following table presents financial information, including our significant expense categories, for the three months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| (unaudited, in thousands) | 2026 | 2025 | ||||||||||||||||||||||||
| $ | % of Revenue | $ | % of Revenue | |||||||||||||||||||||||
| Rev |
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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 2025 Form 10-K. There were no material changes to our market risk exposure during the three months ended March 31, 2026.
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 March 31, 2026 (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 March 31, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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, inquiries, 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 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 and investigations 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 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.
As previously reported, the Federal Trade Commission (the "FTC") requested information regarding certain of the Company's practices related to post-employment restrictive covenants entered into with certain of the Company's employees. The Company has now resolved this inquiry by entering into a voluntary consent order (the "Consent Order") with the FTC restricting the Company from entering into certain employment non-compete restrictive covenants with certain of its employees or enforcing such restrictive covenants. This Consent Order will be subject to public comment prior to being finalized and binding on the Company. The Consent Order contains ongoing compliance requirements for the Company but is not expected to have a material impact on Rollins.
SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental regulations if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, the Company uses a threshold of $1.0 million (which does not exceed the lesser of $1.0 million or 1% of our current assets as of December 31, 2025) for purposes of determining whether disclosure of any such proceedings is required. Also, we will continue to disclose any environmental proceedings that we determine are otherwise material, regardless of the amount of potential monetary sanctions. Currently, there is no required disclosure.
Management does not believe that any pending or threatened claim, proceeding, 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, 2025.
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 January 1, 2026 to March 31, 2026.
| 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) | ||||||||||||||||||||||
| January 1 to 31, 2026 | 122,100 | $ | 63.12 | — | 11,415,625 | |||||||||||||||||||||
| February 1 to 28, 2026 | 237,391 | $ | 61.80 | — | 11,415,625 | |||||||||||||||||||||
| March 1 to 31, 2026 | 321 | $ | 52.46 | — | 11,415,625 | |||||||||||||||||||||
| Total | 359,812 | — |
(1)Represents shares withheld by the Company in connection with tax withholding obligations of its employees upon vesting of such employees' restricted stock 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 March 31, 2026, 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.
ROLLINS, INC. AND SUBSIDIARIES
Item 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
Securities Trading Plans of Directors and Executive Officers
During the three months ended March 31, 2026, the following directors and “officers” (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted, modified or terminated contracts, instructions or written plans for the sale of the Company’s securities, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1 of the Exchange Act, referred to as Rule 10b5-1 trading plans.
| Name and Title | Date of Adoption of the Rule 10b5-1 Trading Plan | Scheduled Expiration Date of the Rule 10b5-1 Trading Plan | Total Amount of Securities to Be Sold | Transactions Pursuant to 10b5-1 Trading Plan | Early Termination of the Rule 10b5-1 Trading Plan | ||||||||||||
| Jerry E. Gahlhoff, Jr. Chief Executive Officer and President | February 13, 2026 | November 13, 2026 | 30,000 shares of Company common stock | Sales to occur on or after May 15, 2026, if certain limit prices are met | If all 30,000 shares are sold prior to the scheduled expiration date, the trading plan will terminate on such earlier date |
ROLLINS, INC. AND SUBSIDIARIES
Item 6. EXHIBITS
** 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: April 23, 2026 | By: | /s/ Kenneth D. Krause | ||||||
| Kenneth D. Krause | ||||||||
| Principal Financial Officer | ||||||||
| Date: April 23, 2026 | By: | /s/ William W. Harkins | ||||||
| William W. Harkins | ||||||||
| Principal Accounting Officer |