# ROLLINS INC (ROL) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from ROLLINS INC's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/84839/000008483925000024/rol-20241231.htm
Accession: 0000084839-25-000024
Filing date: 2025-02-13
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/ROL/
All MD&A years: /company/ROL/mda/
Previous year: /company/ROL/mda/fy2023/ (FY 2023)
Next year: /company/ROL/mda/fy2025/ (FY 2025)

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Caution Regarding Forward-Looking Statements

This Annual Report on Form 10-K as well as other written or oral statements by the Company may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current opinions, expectations, intentions, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Although we believe that these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations. Generally, statements that do not relate to historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “should,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

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Forward-looking statements in this Annual Report on Form 10-K include, but are not limited to, statements regarding:

•expectations with respect to our financial and business performance and strategy;

•expansion efforts and growth opportunities, including, but not limited to, organic growth and recent and future acquisitions in the United States and in foreign markets where we have a presence and integration efforts with respect to recent acquisitions;

•our belief that we are starting 2025 with favorable demand and demand will continue to be solid;

•our belief that we compete effectively and favorably with our competitors;

•our alignment around the key strategic areas that will enable us to grow faster than our market, position our business for the future, and deliver value for all stakeholders and our ability to execute on our strategic plan;

•the impact of inflation, changing interest rates, tariffs, trade disputes, foreign exchange rate risk, business interruptions due to natural disasters and changes in the weather patterns, seasonality, employee shortages, and supply chain issues;

•our belief that we maintain a sufficient level of products, materials, and other supplies and have qualified comparable products and materials and our ability to foresee potential supply disruptions;

•expectations with respect to new and innovative products and services;

•our approach to human capital management, including training, development, retention, inclusion, and engaging with our local communities;

•continuously improving our safety culture and monitoring safety goals, including, but not limited to, our proactive approach with respect to safety and risk management;

•our policies and procedures that are designed to identify, assess, and manage material risks arising from cybersecurity incidents;

•new information technology systems and technology will lead to new or improving business capabilities and streamline business processes, financial reporting, and acquisition integration;

•expectations with respect to interest costs and effective tax rates;

•our robust pipeline for acquisitions;

•our focus on continuous improvement initiatives to enhance profitability across our business;

•the underlying health of core pest control markets;

•our focus on pricing, ongoing modernization efforts, and a culture of continuous improvement should support healthy incremental margins;

•sufficiency of current cash and cash equivalents balances, future cash flows, and available borrowings under our Credit Facility to finance our current and future operations;

•our belief that the Company has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims;

•our approach to capital allocation inclusive of our intent to pay cash dividends to common shareholders and to invest in acquisitions;

•our belief that no pending or threatened claim, proceeding, litigation, regulatory action or investigation, either alone or in the aggregate, including, but not limited to, the investigation by certain California governmental authorities regarding compliance with environmental regulations and claims filed under California's Private Attorneys General Act, will have a material adverse effect on our financial position, results of operations or liquidity;

•the suitability and adequacy of our facilities to meet our current and reasonably anticipated future needs; and

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•estimates, assumptions, and projections related to our application of critical accounting policies, described in more detail under “Critical Accounting Estimates.”

These forward-looking statements are based on information available as of the date of this report, and current expectations, forecasts, and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements including, but not limited to, those described in Item 1A “Risk Factors” of Part I, Item 7 “Management’s Discussion and Analysis of Financial condition and Results of Operations” of Part II, and elsewhere in this Annual Report on Form 10-K for our fiscal year ended December 31, 2024 and may also be described from time to time in our future reports filed with the SEC.

Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required by law.

Presentation

This discussion should be read in conjunction with our audited financial statements and related notes included elsewhere in this document. Discussions of 2022 items and year-to-year comparisons of 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. The following discussion (as well as other discussions in this document) contains forward-looking statements. Please see “Cautionary Statement Regarding Forward-Looking Statements” and "Risk Factors" for a discussion of uncertainties, risks and assumptions associated with these statements.

The Company

Rollins, Inc. (“Rollins,” “we,” “us,” “our,” or the “Company”), is an international services company headquartered in Atlanta, Georgia that provides pest and termite control services to both residential and commercial customers through its wholly-owned subsidiaries and independent franchises in the United States, Canada, Australia, Europe, and Asia with international franchises in Canada, Central and South America, the Caribbean, Europe, the Middle East, Asia, Africa, and Australia. Our pest and termite control services are performed pursuant to terms of contracts that specify the pricing arrangement with the customer. The Company operates as one reportable segment and the results of operations and its financial condition are not reliant upon any single customer.

Strategic Update

We are focused on continuous improvement throughout the business. During 2024, we made significant strides in all four pillars of our strategic objectives: 1) people first 2) customer loyalty 3) growth mindset and 4) operational efficiency.

People First

We continue to focus on the development of our people. During 2024, we continued to make strategic improvements to both our support functions, as well as the customer-facing side of our business, by hiring and onboarding the right people

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into the right roles. Additionally, we upgraded our training and onboarding programs to help improve our overall teammate retention. We remain committed to developing exceptional talent and investing in our teams.

Customer Loyalty

We remain committed to providing our customers with the best customer experience. Effective sales and service staffing levels helped us to capitalize on continued demand and deliver solid results for the year, with organic revenues* growing by 7.9% compared to 2023.

Growth Mindset

2024 marked a record year in terms of revenues, totaling $3.4 billion, an increase of 10.3% over 2023, with acquisition revenues* growing by 3.1% compared to 2023. We completed 44 acquisitions in 2024, including 32 acquisitions and 12 franchise buybacks, driving inorganic growth at our brands both domestically and internationally.

Operational Efficiency

We saw healthy margins in 2024, with gross margin improving 50 basis points to 52.7% in 2024 compared to 52.2% in 2023. Operating margin was 19.4% of revenue, an increase of 40 basis points over 2023 and adjusted operating income margin* was 19.9%, an increase of 20 basis points over the prior year.

*Amounts are non-GAAP financial measures. See the schedules below for definitions and a discussion of non-GAAP financial metrics, including a reconciliation to the most directly comparable GAAP measure.

Impact of Economic Trends

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 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 consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the year have been made. These adjustments are of a normal recurring nature but are complicated by the continued uncertainty surrounding these macro economic 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.

The extent to which changing interest rates, inflation and other economic trends will continue to impact the Company’s business, financial condition and results of operations is uncertain. Therefore, we cannot reasonably estimate the full future impacts of these matters at this time.

Tax Legislation Developments

The Organization for Economic Co-operation and Development ("OECD") has proposed a global minimum tax of 15% of reported profits ("Pillar Two") for multinational enterprises with annual global revenues exceeding €750 million. Pillar Two has been agreed upon in principle by over 140 countries and is intended to apply for tax years beginning in 2024. The OECD has issued administrative guidance (including transitional safe harbor rules) in conjunction with the implementation of the Pillar Two global minimum tax. These rules did not have a material impact on financial results in 2024 due to certain transitional safe harbors. The Company will continue to monitor the potential impact of Pillar Two proposals and developments on our consolidated financial statements and related disclosures as various tax jurisdictions begin enacting such legislation.

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Results of Operations—2024 Compared to 2023

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31,"],["","","","","","Variance"],["(in thousands, except per share data and margins)","2024","","2023","","$","%"],["GAAP Metrics"],["Revenues","$","3,388,708","","","$","3,073,278","","","315,430","","10.3"],["Gross profit (1)","$","1,785,511","","","$","1,603,407","","","182,104","","11.4"],["Gross profit margin (1)","52.7","%","","52.2","%","","","50 bps"],["Operating income","$","657,224","","","$","583,226","","","73,998","","12.7"],["Operating income margin","19.4","%","","19.0","%","","","40 bps"],["Net income","$","466,379","","","$","434,957","","","31,422","","7.2"],["EPS","$","0.96","","","$","0.89","","","0.07","","7.9"],["Net cash provided by operating activities","$","607,653","","","$","528,366","","","79,287","","15.0"],["Non-GAAP Metrics"],["Adjusted operating income (2)","$","675,126","","","$","604,217","","","70,909","","11.7"],["Adjusted operating margin (2)","19.9","%","","19.7","%","","","20 bps"],["Adjusted net income (2)","$","479,190","","","$","434,142","","","45,048","","10.4"],["Adjusted EPS (2)","$","0.99","","","$","0.89","","","0.10","","11.2"],["Adjusted EBITDA (2)","$","771,493","","","$","691,322","","","80,171","","11.6"],["Adjusted EBITDA margin (2)","22.8","%","","22.5","%","","","30 bps"],["Free cash flow (2)","$","580,081","","","$","495,901","","","84,180","","17.0"]]
[[/GREPCENT_TABLE]]

(1) Exclusive of depreciation and amortization

(2) Amounts are non-GAAP financial measures. See "Non-GAAP Financial Measures" below for a discussion of non-GAAP financial metrics including a reconciliation to the most directly comparable GAAP measure.

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The following table presents financial information, including our significant expense categories, for the twelve months ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","Twelve Months Ended December 31,"],["(in thousands)","2024","2023"],["","$","% of Revenue","$","% of Revenue"],["Revenue","$","3,388,708","","100.0","%","$","3,073,278","","100.0","%"],["Less:"],["Cost of services provided (exclusive of depreciation and amortization below):"],["Employee expenses","1,048,992","","31.0","%","953,600","","31.0","%"],["Materials and supplies","212,296","","6.3","%","197,825","","6.4","%"],["Insurance and claims","68,326","","2.0","%","60,390","","2.0","%"],["Fleet expenses","131,898","","3.9","%","127,390","","4.1","%"],["Other cost of services provided (1)","141,685","","4.2","%","130,666","","4.3","%"],["Total cost of services provided (exclusive of depreciation and amortization below)","1,603,197","","47.3","%","1,469,871","","47.8","%"],["Sales, general and administrative:"],["Selling and marketing expenses","427,916","","12.6","%","375,805","","12.2","%"],["Administrative employee expenses","313,814","","9.3","%","291,772","","9.5","%"],["Insurance and claims","41,434","","1.2","%","37,946","","1.2","%"],["Fleet expenses","33,580","","1.0","%","31,415","","1.0","%"],["Other sales, general and administrative (2)","198,323","","5.9","%","178,295","","5.8","%"],["Total sales, general and administrative","1,015,067","","30.0","%","915,233","","29.8","%"],["Restructuring costs","\u2014","","\u2014","%","5,196","","0.2","%"],["Depreciation and amortization","113,220","","3.3","%","99,752","","3.2","%"],["Interest expense, net","27,677","","0.8","%","19,055","","0.6","%"],["Other income, net","(683)","","\u2014","%","(22,086)","","(0.7)","%"],["Income tax expense","163,851","","4.8","%","151,300","","4.9","%"],["Net income","$","466,379","","13.8","%","$","434,957","","14.2","%"]]
[[/GREPCENT_TABLE]]

1) Other cost of services provided includes facilities costs, professional services, maintenance and repairs, software license costs, and other expenses directly related to providing services.

2) Other sales, general and administrative includes facilities costs, professional services, maintenance and repairs, software license costs, bad debt expense, and other administrative expenses.

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Revenues

The following presents a summary of revenues by service offering:

Revenues for the year ended December 31, 2024 were $3.4 billion, an increase of $315.4 million, or 10.3%, from 2023 revenues of $3.1 billion. The increase in revenues was driven by demand from our customers that remained strong throughout the year across all major service offerings. Comparing 2024 to 2023, organic revenue* growth was 7.9% with acquisitions adding 3.1% during the year, offset by divestitures of 0.7%. Residential pest control revenue increased approximately 9%, commercial pest control revenue increased approximately 10% and termite and ancillary services grew approximately 14% including both organic and acquisition-related growth in each area. Organic revenue* growth was strong across our service offerings, growing over 5% in residential, over 8% in commercial, and over 12% in termite and ancillary activity. The Company’s foreign operations accounted for approximately 7% of total revenues for the years ended December 31, 2024 and 2023.

*Amounts are non-GAAP financial measures. See the schedules below for definitions and a discussion of non-GAAP financial metrics, including a reconciliation to the most directly comparable GAAP measure.

Gross Profit (exclusive of Depreciation and Amortization)

Gross profit for the twelve months ended December 31, 2024 was $1.8 billion, an increase of $182.1 million, or 11.4%, compared to $1.6 billion for the year ended December 31, 2023. Gross margin improved 50 basis points to 52.7% in 2024 compared to 52.2% in 2023, as pricing more than offset inflationary pressures. We saw 20 basis points of leverage in fleet and 10 basis points of leverage in materials and supplies, while employee expenses and insurance and claims were flat as a percentage of revenue.

Sales, General and Administrative

For the twelve months ended December 31, 2024, sales, general and administrative (SG&A) expenses increased $99.8 million, or 10.9%, compared to the twelve months ended December 31, 2023. The increase is driven by expenses associated with growth initiatives aimed at capitalizing on the health of our underlying markets.

As a percentage of revenue, SG&A increased 20 basis points to 30.0% in 2024 versus 29.8% in 2023. Selling and marketing costs have increased 40 basis points as we continue to invest in growth initiatives. This was partially offset by 20 basis points of leverage associated with lower administrative costs.

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Restructuring Costs

For the twelve months ended December 31, 2024, restructuring costs decreased by $5.2 million. During the twelve months ended December 31, 2023, we executed a restructuring program to modernize our workforce. No such costs were incurred during the twelve months ended December 31, 2024.

Depreciation and Amortization

For the twelve months ended December 31, 2024, depreciation and amortization increased $13.5 million, or 13.5%, compared to the twelve months ended December 31, 2023. The increase was primarily due to higher amortization of intangible assets from acquisitions, most notably from a full year of acquisition costs of FPC Holdings, LLC ("Fox Pest Control", or "Fox").

Operating Income

For the twelve months ended December 31, 2024, operating income increased $74.0 million or 12.7% compared to the prior year. As a percentage of revenue, operating income increased to 19.4% from 19.0% in the prior year. The improvement in operating income as a percentage of revenue is primarily driven by the improvement in gross profit discussed previously.

Interest Expense, Net

During the twelve months ended December 31, 2024, interest expense, net increased $8.6 million compared to the prior year, due to the increase in the average debt balance associated primarily with the share repurchase completed in the third quarter of 2023 and the acquisition of Fox in the second quarter of 2023. This was partially offset by a lower average effective interest rate in 2024 compared to 2023.

Other Income, Net

During the twelve months ended December 31, 2024, other income, net decreased $21.4 million primarily due to the Company recognizing a $15.5 million gain on the sale of certain businesses during 2023, with no such gain on sale during 2024, and lower gains on sales of non-operational assets.

Income Taxes

The Company’s effective tax rate was 26.0% in 2024 compared to 25.8% in 2023. The 2024 rate was negatively impacted by higher state income taxes and foreign income taxes compared to 2023.

General Commentary

Our team delivered a strong finish to the 2024 fiscal year, exceeding our own revenue expectations and delivering healthy earnings growth for the full year. As we look to 2025, demand for our services is solid and our pipeline for acquisitions is robust. We invested meaningfully in our business throughout 2024, which helped accelerate the organic revenue growth* rate in the third and fourth quarter of the year. We are capitalizing on this momentum as we start 2025, while remaining focused on continuous improvement initiatives to enhance profitability across our business.

We saw strong full year growth in revenue, cash flow and earnings in 2024. We delivered double-digit revenue and operating cash flow growth, as well as a 40 basis point improvement in operating margins. Growth investments and pressure from developments on legacy auto claims that materialized in December of 2024 impacted our incremental adjusted EBITDA margin* for the year. Additionally, we continued to execute a balanced capital allocation program enabled by compounding operating cash flow and a strong balance sheet.

*Amounts are non-GAAP financial measures. See the schedules below for definitions and a discussion of non-GAAP financial metrics, including a reconciliation to the most directly comparable GAAP measure.

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2025 Outlook

For 2025, the Company anticipates:

•The underlying health of core pest control markets, as well as Rollins’ ongoing commitment to operational execution, should support another year of strong organic revenue growth*, further complemented by a strategic and disciplined approach to acquisitions. We continue to target 7-8 percent organic revenue growth* and a contribution of 2-3 percent from acquisitions.

•A focus on pricing, ongoing modernization efforts, and a culture of continuous improvement should support healthy incremental adjusted EBITDA margins*. While we expect incremental margins to be healthy, we do expect a more challenging first half of 2025 relative to the first half of 2024.

•Compounding operating cash flow and strong balance sheet should continue to enable a balanced capital allocation strategy.

*Amounts are non-GAAP financial measures. See the schedules below for definitions and a discussion of non-GAAP financial metrics, including a reconciliation to the most directly comparable GAAP measure.

Non-GAAP Financial Measures

Reconciliation of GAAP and non-GAAP Financial Measures

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.

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 believes all of these non-GAAP financial measures are useful to provide investors with information about current trends in, and period-over-period comparisons of, the Company's results of operations. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.

The Company has used the following non-GAAP financial measures in this Form 10-K:

Organic revenues

Organic revenues are calculated as revenues less the revenues from acquisitions completed within the prior 12 months and excluding the revenues from divested businesses. Acquisition revenues are based on the trailing 12-month revenue of our acquired entities. Management uses organic revenues, and organic revenues by type to compare revenues over various periods excluding the impact of acquisitions and divestitures.

Adjusted operating income and adjusted operating margin

Adjusted operating income and adjusted operating margin are calculated by adding back to net income those expenses resulting from the amortization of certain intangible assets, adjustments to the fair value of contingent consideration resulting from the acquisition of Fox, and restructuring costs related to restructuring and workforce reduction plans. Adjusted operating margin is calculated as adjusted operating income divided by revenues. Management uses adjusted operating income and adjusted operating margin as measures of operating performance because these measures allow the Company to compare performance consistently over various periods.

Adjusted net income and adjusted EPS

Adjusted net income and adjusted EPS are calculated by adding back to the GAAP measures amortization of certain intangible assets, adjustments to the fair value of contingent consideration resulting from the acquisition of Fox Pest Control, and restructuring costs related to restructuring and workforce reduction plans, and excluding gains and losses on the sale of non-operational assets and gains on the sale of businesses, and by further subtracting the tax impact of those expenses, gains, or losses. Management uses adjusted net income and adjusted EPS as measures of operating performance because these measures allow the Company to compare performance consistently over various periods.

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EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, incremental EBITDA margin and adjusted incremental EBITDA margin

EBITDA is calculated by adding back to net income depreciation and amortization, interest expense, net, and provision for income taxes. EBITDA margin is calculated as EBITDA divided by revenues. Adjusted EBITDA and adjusted EBITDA margin are calculated by further adding back those expenses resulting from the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox, restructuring costs related to restructuring and workforce reduction plans, and excluding gains and losses on the sale of non-operational assets and gains on the sale of businesses. Management uses EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin as measures of operating performance because these measures allow the Company to compare performance consistently over various periods. Incremental EBITDA margin is calculated as the change in EBITDA divided by the change in revenue. Management uses incremental EBITDA margin as a measure of operating performance because this measure allows the Company to compare performance consistently over various periods. Adjusted incremental EBITDA margin is calculated as the change in adjusted EBITDA divided by the change in revenue. Management uses adjusted incremental EBITDA margin as a measure of operating performance because this measure allows the Company to compare performance consistently over various periods.

Free cash flow and free cash flow conversion

Free cash flow is calculated by subtracting capital expenditures from cash provided by operating activities. Management uses free cash flow to demonstrate the Company’s ability to maintain its asset base and generate future cash flows from operations. Free cash flow conversion is calculated as free cash flow divided by net income. Management uses free cash flow conversion to demonstrate how much net income is converted into cash. Management believes that free cash flow is an important financial measure for use in evaluating the Company’s liquidity. Free cash flow should be considered in addition to, rather than as a substitute for, net cash provided by operating activities as a measure of our liquidity. Additionally, the Company’s definition of free cash flow is limited, in that it does not represent residual cash flows available for discretionary expenditures, due to the fact that the measure does not deduct the payments required for debt service and other contractual obligations or payments made for business acquisitions. Therefore, management believes it is important to view free cash flow as a measure that provides supplemental information to our consolidated statements of cash flows.

Adjusted sales, general and administrative ("SG&A")

Adjusted SG&A is calculated by removing the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox. Management uses adjusted SG&A to compare SG&A expenses consistently over various periods.

Leverage ratio

Leverage ratio, a financial valuation measure, is calculated by dividing adjusted net debt by adjusted EBITDAR. Adjusted net debt is calculated by adding operating lease liabilities to total long-term debt less a cash adjustment of 90% of total consolidated cash. Adjusted EBITDAR is calculated by adding back to net income depreciation and amortization, interest expense, net, provision for income taxes, operating lease cost, and stock-based compensation expense. Management uses leverage ratio as an assessment of overall liquidity, financial flexibility, and leverage.

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[[GREPCENT_TABLE]]
[["","","Twelve Months Ended December 31,","","Variance"],["","","2024","","2023","","$","","%"],["Reconciliation of Revenues to Organic Revenues"],["Revenues","","$","3,388,708","","","$","3,073,278","","","315,430","","","10.3"],["Revenues from acquisitions","","(95,517)","","","\u2014","","","(95,517)","","","3.1"],["Revenues of divestitures","","\u2014","","","(20,559)","","","20,559","","","(0.7)"],["Organic revenues","","$","3,293,191","","","$","3,052,719","","","240,472","","","7.9"],["Reconciliation of Residential Revenues to Organic Residential Revenues"],["Residential revenues","","$","1,535,104","","","$","1,409,872","","","125,232","","","8.9"],["Residential revenues from acquisitions","","(62,799)","","","\u2014","","","(62,799)","","","4.5"],["Residential revenues of divestitures","","\u2014","","","(11,913)","","","11,913","","","(0.8)"],["Residential organic revenues","","$","1,472,305","","","$","1,397,959","","","74,346","","","5.2"],["Reconciliation of Commercial Revenues to Organic Commercial Revenues"],["Commercial revenues","","$","1,125,964","","","$","1,024,176","","","101,788","","","9.9"],["Commercial revenues from acquisitions","","(24,460)","","","\u2014","","","(24,460)","","","2.4"],["Commercial revenues of divestitures","","\u2014","","","(8,646)","","","8,646","","","(0.8)"],["Commercial organic revenues","","$","1,101,504","","","$","1,015,530","","","85,974","","","8.3"],["Reconciliation of Termite and Ancillary Revenues to Organic Termite and Ancillary Revenues"],["Termite and ancillary revenues","","$","688,186","","","$","605,533","","","82,653","","","13.6"],["Termite and ancillary revenues from acquisitions","","(8,258)","","","\u2014","","","(8,258)","","","1.4"],["Termite and ancillary organic revenues","","$","679,928","","","$","605,533","","","74,395","","","12.2"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Twelve Months Ended December 31,","","Variance"],["","","2024","","2023","","$","","%"],["Reconciliation of Operating Income and Operating Income Margin to Adjusted Operating Income and Adjusted Operating Margin"],["Operating income","","$","657,224","","","$","583,226"],["Fox acquisition-related expenses (1)","","17,902","","","15,795"],["Restructuring costs (2)","","\u2014","","","5,196"],["Adjusted operating income","","$","675,126","","","$","604,217","","","70,909","","","11.7"],["Revenues","","$","3,388,708","","","$","3,073,278"],["Operating income margin","","19.4","%","","19.0","%"],["Adjusted operating margin","","19.9","%","","19.7","%"],["Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS (7)"],["Net income","","$","466,379","","","$","434,957"],["Fox acquisition-related expenses (1)","","17,902","","","15,795"],["Restructuring costs (2)","","\u2014","","","5,196"],["Loss (gain) on sale of assets, net (3)","","(683)","","","(6,636)"],["Gain on sale of businesses (4)","","\u2014","","","(15,450)"],["Tax impact of adjustments (5)","","(4,408)","","","280"],["Adjusted net income","","$","479,190","","","$","434,142","","","45,048","","","10.4"],["EPS - basic and diluted","","$","0.96","","","$","0.89"],["Fox acquisition-related expenses (1)","","0.04","","","0.03"],["Restructuring costs (2)","","\u2014","","","0.01"],["Loss (gain) on sale of assets, net (3)","","\u2014","","","(0.01)"],["Gain on sale of businesses (4)","","\u2014","","","(0.03)"],["Tax impact of adjustments (5)","","(0.01)","","","\u2014"],["Adjusted EPS - basic and diluted (6)","","$","0.99","","","$","0.89","","","0.10","","","11.2"],["Weighted average shares outstanding - basic","","484,249","","","489,949"],["Weighted average shares outstanding - diluted","","484,295","","","490,130"],["Reconciliation of Net Income to EBITDA, Adjusted EBITDA, EBITDA Margin, Incremental EBITDA Margin, Adjusted EBITDA Margin, and Adjusted Incremental EBITDA Margin (7)"],["Net income","","$","466,379","","","$","434,957"],["Depreciation and amortization","","113,220","","","99,752"],["Interest expense, net","","27,677","","","19,055"],["Provision for income taxes","","163,851","","","151,300"],["EBITDA","","771,127","","","705,064","","","66,063","","","9.4"],["Fox acquisition-related expenses (1)","","$","1,049","","","$","3,148"],["Restructuring costs (2)","","\u2014","","","5,196"],["Loss (gain) on sale of assets, net (3)","","(683)","","","(6,636)"],["Gain on sale of businesses (4)","","\u2014","","","(15,450)"],["Adjusted EBITDA","","$","771,493","","","$","691,322","","","80,171","","","11.6"],["Revenues","","$","3,388,708","","","$","3,073,278"],["EBITDA margin","","22.8","%","","22.9","%"],["Incremental EBITDA margin","","","","","","20.9","%"],["Adjusted EBITDA margin","","22.8","%","","22.5","%"],["Adjusted incremental EBITDA margin","","","","","","25.4","%"],["Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow and Free Cash Flow Conversion"],["Net cash provided by operating activities","","$","607,653","","","528,366"],["Capital expenditures","","$","(27,572)","","","$","(32,465)"],["Free cash flow","","$","580,081","","","$","495,901","","","84,180","","","17.0"],["Free cash flow conversion","","124.4","%","","114.0","%"]]
[[/GREPCENT_TABLE]]

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[[GREPCENT_TABLE]]
[["","","Twelve Months Ended December 31,"],["","","2024","","2023"],["Reconciliation of SG&A to Adjusted SG&A"],["SG&A","","$","1,015,067","","","$","915,233"],["Fox acquisition-related expenses (1)","","1,049","","","3,148"],["Adjusted SG&A","","$","1,014,018","","","$","912,085"],["Revenues","","$","3,388,708","","","$","3,073,278"],["Adjusted SG&A as a % of revenues","","29.9","%","","29.7","%"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["","","Twelve Months Ended December 31,"],["","","2024","","2023"],["Reconciliation of Long-term Debt and Net Income to Leverage Ratio"],["Long-term debt (8)","","$","397,000","","","$","493,000"],["Operating lease liabilities (9)","","417,218","","","325,572"],["Cash adjustment (10)","","(80,667)","","","(93,443)"],["Adjusted net debt","","$","733,551","","","$","725,129"],["Net income","","$","466,379","","","$","434,957"],["Depreciation and amortization","","113,220","","","99,752"],["Interest expense, net","","27,677","","","19,055"],["Provision for income taxes","","163,851","","","151,300"],["Operating lease cost (11)","","133,420","","","110,627"],["Stock-based compensation expense","","29,984","","","24,605"],["Adjusted EBITDAR","","$","934,531","","","$","840,296"],["Leverage ratio","","0.8x","","0.9x"]]
[[/GREPCENT_TABLE]]

(1) Consists of expenses resulting from the amortization of certain intangible assets and adjustments to the fair value of contingent consideration resulting from the acquisition of Fox Pest Control. While we exclude such expenses in this non-GAAP measure, such expenses are expected to recur, the revenue from the acquired company is reflected in this non-GAAP measure and the acquired assets contribute to revenue generation.

(2) Restructuring costs consist of costs primarily related to severance and benefits paid to employees pursuant to restructuring and workforce reduction plans.

(3) Consists of the gain or loss on the sale of non-operational assets.

(4) Represents the gain on the sale of certain non-core businesses.

(5) The tax effect of the adjustments is calculated using the applicable statutory tax rates for the respective periods.

(6) In some cases, the sum of the individual EPS amounts may not equal total non-GAAP EPS calculations due to rounding.

(7) In 2024, we revised the non-GAAP metrics adjusted net income, adjusted EPS, and adjusted EBITDA to exclude gains and losses related to non-operational asset sales. These measures are of operating performance and we believe excluding the gains and losses on non-operational assets allows us to better compare our operating performance consistently over various periods. As a result, these measures may not be comparable to the corresponding measures disclosed in prior years.

(8) As of December 31, 2024 and December 31, 2023, the Company had outstanding borrowings of $397.0 million and $493.0 million, respectively, under the Credit Facility. Borrowings under the Credit Facility are presented under the long-term debt caption of our consolidated balance sheet, net of $1.7 million and $2.2 million in unamortized debt issuance costs as of December 31, 2024 and December 31, 2023, respectively.

(9) Operating lease liabilities are presented under the operating lease liabilities - current and operating lease liabilities, less current portion captions of our consolidated balance sheet.

(10) Represents 90% of cash and cash equivalents per our consolidated balance sheet as of both periods presented.

(11) Operating lease cost excludes short-term lease cost associated with leases that have a duration of 12 months or less.

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Liquidity and Capital Resources

Cash and Cash Flow

The Company’s $89.6 million of total cash at December 31, 2024 is held at various banking institutions. Approximately $48.5 million is held in cash by foreign subsidiaries and the remaining $41.1 million is held at domestic banks.

We intend to continue to grow the business in the international markets where we have a presence. As it relates to our unremitted earnings in foreign jurisdictions, we assert that foreign cash earnings in excess of working capital and cash needed for strategic investments and acquisitions are not intended to be indefinitely reinvested offshore.

On February 24, 2023, the Company entered into a revolving credit agreement with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”), which refinanced its previous credit facility.

The Credit Agreement provides for a $1.0 billion revolving Credit Facility, which may be denominated in U.S. Dollars and other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, subject to a $400 million foreign currency sublimit. Rollins has the ability to expand its borrowing availability under the Credit Agreement in the form of increased revolving commitments or one or more tranches of term loans by up to an additional $750 million, subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028. Refer to Note 10, Debt to the accompanying financial statements for further details.

As of December 31, 2024, the Company had outstanding borrowings of $397.0 million under the Credit Facility. The aggregate effective interest rate on the debt outstanding as of December 31, 2024 was 5.5%. As of December 31, 2023, the Company had outstanding borrowings of $493.0 million under the Credit Facility. The aggregate effective interest rate on the debt outstanding as of December 31, 2023 was 6.5%. The Company is in compliance with applicable financial debt covenants as of December 31, 2024.

The Company maintains $72.0 million in letters of credit 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 and were increased from $71.7 million as of December 31, 2023. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims.

The Company believes its current cash and cash equivalents balances, future cash flows expected to be generated from operating activities, available borrowings under its Credit Facility, access to debt financing based on our creditworthiness, and our newly announced $1 billion commercial paper program authorization, which is backstopped by our Credit Facility, will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future.

The following table sets forth a summary of our cash flows from operating, investing and financing activities for the year ended December 31, 2024 and 2023:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Variance"],["(in thousands)","2024","","2023","","$","","%"],["Net cash provided by operating activities","607,653","","","528,366","","","79,287","","","15.0"],["Net cash used in investing activities","(176,232)","","","(372,895)","","","(196,663)","","","(52.7)"],["Net cash used in financing activities","(440,708)","","","(149,420)","","","291,288","","","194.9"],["Effect of exchange rate on cash","(4,908)","","","2,428","","","(7,336)","","","N/M"],["Net (decrease) increase in cash and cash equivalents","$","(14,195)","","","$","8,479","","","(22,674)","","","N/M"]]
[[/GREPCENT_TABLE]]

N/M - calculation not meaningful

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Cash Provided by Operating Activities

Cash from operating activities is the principal source of cash generation for our businesses. The most significant source of cash in our cash flow from operations is customer-related activities, the largest of which is collecting cash resulting from services sold. The most significant operating use of cash is to pay our suppliers, employees, and tax authorities. The Company’s operating activities generated net cash of $607.7 million and $528.4 million for the twelve months ended December 31, 2024 and 2023, respectively. The $79.3 million increase was driven primarily by strong operating results and the timing of cash receipts and cash payments to vendors, employees, and tax and regulatory authorities.

The US Internal Revenue Service provided disaster relief to all State of Georgia taxpayers due to the impact of Hurricane Helene. Therefore, we did not make an estimated payment for US federal income tax purposes in the fourth quarter of 2024. That estimated tax payment of approximately $32.0 million is now due in the second quarter of 2025.

Cash Used in Investing Activities

The Company’s investing activities used $176.2 million and $372.9 million for the twelve months ended December 31, 2024 and 2023, respectively. Cash paid for acquisitions totaled $157.5 million for the twelve months ended December 31, 2024, as compared to $366.9 million for the twelve months ended December 31, 2023, driven primarily by the acquisition of Fox in 2023. During 2024, the Company invested $27.6 million in capital expenditures, offset by $4.1 million in cash proceeds from the sale of assets, compared with $32.5 million of capital expenditures, $12.5 million in cash proceeds from asset sales, and $15.9 million in cash proceeds from the sale of businesses during 2023. The Company’s investing activities were funded through existing cash balances, operating cash flows, and borrowings under the Credit Facility.

Cash Used in Financing Activities

Cash used in financing activities was $440.7 million and $149.4 million during the twelve months ended December 31, 2024 and 2023, respectively. A total of $298.0 million was paid in cash dividends ($0.62 per share) during the twelve months ended December 31, 2024, compared to $264.3 million in cash dividends paid ($0.54 per share) during the twelve months ended December 31, 2023. The Company made net repayments under its credit facility of $96.0 million during the twelve months ended December 31, 2024, compared to net borrowings of $438.0 million during 2023. During the twelve months ended December 31, 2024, the Company paid $39.8 million of contingent consideration, primarily related to the Fox acquisition, compared to $12.5 million during the twelve months ended December 31, 2023. In addition, during the twelve months ended December 31, 2023, the Company completed the repurchase of 8,724,100 of the shares of common stock from LOR, Inc ("LOR") for $300.0 million in conjunction with the Offering, as defined in our 2023 Annual Report on Form 10-K.

In 2012, the Company’s Board of Directors authorized the purchase of up to 5 million shares of the Company’s common stock. After adjustments for stock splits, the total authorized shares under the share repurchase program is 16.9 million shares. As of December 31, 2024, we have a remaining authorization of 11.4 million shares under the share repurchase program. The Company did not repurchase shares of its common stock on the open market during 2024 or 2023. The Company also withheld $11.6 million and $10.8 million of common stock for the twelve months ended December 31, 2024 and 2023, respectively, in connection with tax withholding obligations of its employees upon vesting of such employees’ equity awards.

In addition, the Form S-3 shelf registration statement on file with the SEC registered $1.5 billion of the Company’s common stock, preferred stock, debt securities, depository shares, warrants, rights, purchase contracts and units for future issuance. The Company may offer and sell some or all of such securities from time to time or through underwriters, brokers or dealers, directly to one or more other purchasers, through a block trade, through agents on a best-efforts basis, through a combination of any of the above methods of sale or through other types of transactions described in the Form S-3. The Company has not sold any such securities as of the date of this Form 10-K. Management is continually evaluating the Company's financial structure and the potential need or desirability of raising additional liquidity through the sale of debt or equity securities.

Litigation

For discussion on the Company’s legal contingencies, see Note 12, Commitments and Contingencies to the accompanying financial statements, and Part I, Item 3, Legal Proceedings.

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Contractual Commitments

We have material cash requirements for known contractual obligations and commitments in the form of operating leases and debt obligations. We expect to fund these obligations primarily through cash generated from our operations. Refer to Note 6, Leases and Note 10, Debt to the accompanying financial statements for further details.

Critical Accounting Estimates

The Company views critical accounting estimates to be those that are very important to the portrayal of our financial condition and results of operations, and that require management’s most difficult, complex or subjective judgments. The circumstances that make these judgments difficult or complex relate to the need for management to make estimates about the effect of matters that are inherently uncertain. We believe our critical accounting estimate to be as follows:

Accrued Insurance—The Company retains, up to specified limits, certain risks related to U.S. general liability, workers’ compensation and auto liability. Risks are managed through either high deductible insurance or, for Clark Pest Control only, a non-affiliated group captive insurance member arrangement. 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 group captive is subject to a third-party actuarial study retained by the captive manager, independent from the Company. For the high deductible insurance program, 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 Company continues to be proactive in safety and risk management to develop and maintain ongoing programs to reduce and prevent incidents and claims. Initiatives that have been implemented include required pre-employment screening and ongoing motor vehicle record review for all drivers, post-offer physicals for new employees, pre-hire, random and post incident drug testing, driver training and post-injury nurse triage for work-related injuries. 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.

Recent Accounting Guidance and Other Policies and Estimates

See Note 1, Summary of Significant Accounting Policies to the accompanying financial statements (Part II, Item 8 of this Form 10-K) for further discussion.