ROLLINS, INC. REPORTS THIRD QUARTER 2022 FINANCIAL RESULTS
Strong revenue growth drives 14.7% increase in quarterly net income
ATLANTA, Oct. 26, 2022 /PRNewswire/ -- Rollins, Inc. (NYSE:ROL) ("Rollins" or the "Company"), a premier global consumer and commercial services company, reported unaudited financial results for its third quarter and nine months ended September 30, 2022.
Quarterly Highlights
- Third quarter revenues were $729.7 million, an increase of 12.2% over the third quarter 2021 with organic revenues* increasing 8.6% to $706.0 million. The stronger dollar versus foreign currencies in countries where we operate reduced revenues by 50 basis points during the quarter. Growth in revenues was driven by strong growth across all major service lines.
- Quarterly operating income was $143.7 million, an increase of 13.3% over the third quarter of 2021. Quarterly operating margin was 19.7% of revenue, an increase of 20 basis points compared to the third quarter of 2021. Adjusted EBITDA* was $169.9 million for the quarter, an increase of 12.6%. Adjusted EBITDA was 23.3% of sales, an increase of 10 basis points compared to the third quarter of 2021. The Company incurred higher losses stemming from asserted claims associated with automobile accidents. These losses reduced EBITDA margins by 140 basis points, the majority of which was in gross profit margin.
- Quarterly net income was $107.6 million, an increase of 14.7% over the prior year. Quarterly EPS was $0.22 per diluted share, an increase from $0.19 in the prior year.
- Operating cash flow was $127.7 million, increasing 60.2% compared to the same quarter a year ago.
- The Company invested $60.8 million in acquisitions in the quarter. Dividends totaled $49.2 million for the quarter reflecting a 23.2% increase versus the same period a year ago. The Company announced a 30% increase to the regular quarterly dividend for the fourth quarter.
Comments from Management
"Our third quarter results reflected strong execution by our team across all of the business", said Gary Rollins, Chairman and Chief Executive Officer. We continued to see favorable demand for our services with double digit growth across all major service lines. Our quarterly results reflect our employees' commitment to deliver exceptional customer service," Mr. Rollins said.
"Overall, we remain well positioned to continue to deliver strong results in the fourth quarter of 2022 and beyond. Demand for our services remains strong as we start the fourth quarter. Our teams remain focused on executing our plans and driving increased revenues and profitability as we close out 2022," Mr. Rollins concluded.
About Rollins, Inc.:
Rollins, Inc. is a premier global consumer and commercial services company. Through its family of leading brands, Orkin, HomeTeam Pest Defense, Clark Pest Control, Northwest Exterminating, McCall Service, Trutech, Critter Control, Western Pest Services, Waltham Services, OPC Pest Services, The Industrial Fumigant Company, PermaTreat, Crane Pest Control, Missquito, Orkin Canada, Orkin Australia, Safeguard (UK), Aardwolf Pestkare (Singapore), and more, the Company and its franchises provide essential pest control services and protection against termite damage, rodents and insects to more than 2.8 million customers in North America, South America, Europe, Asia, Africa, and Australia from more than 800 locations. You can learn more about Rollins and its subsidiaries by visiting our web site at www.rollins.com, where you can also find this and other news releases by accessing the news releases button.
*Amounts are non-GAAP financial measures. See the appendix to this release for a discussion of non-GAAP financial metrics including a reconciliation of the most closely correlated GAAP measure.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Statements made in this press release and on our earnings call, may contain forward-looking statements that involve risks and uncertainties concerning the business and financial results of Rollins, Inc. We have based these forward-looking statements largely on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Such forward looking statements include, but are not limited to, statements regarding the Company's belief that its balance sheet positions the Company well to continue to drive growth through acquisitions while maintaining a balanced approach to capital allocation, and that the Company is well positioned to continue to deliver strong results in the fourth quarter of 2022.
Our actual results could differ materially from those indicated by the forward-looking statements because of various risks, timing and uncertainties including, without limitation, the failure to maintain and enhance our brands and develop a positive client reputation; our ability to protect our intellectual property and other proprietary rights that are material to our business and our brand recognition; actions taken by our franchisees, subcontractors or vendors that may harm our business; general economic conditions; the impact of the extent and duration of economic contraction related to COVID-19 on general economic activity for the remainder of 2022 and beyond; the impact of future developments related to the COVID-19 pandemic on the Company's business, results of operations, accounting assumptions and estimates and financial condition, including, without limitation, inflation and restrictions in customer discretionary expenditures, disruptions in credit or financial markets, increases in fuel prices, raw material costs or other operating costs; potential increases in labor costs; labor shortages and/or our inability to attract and retain skilled workers; competitive factors and pricing practices; changes in industry practices or technologies; the degree of success of our termite process reforms and pest control selling and treatment methods; our ability to identify, complete and successfully integrate potential acquisitions; unsuccessful expansion into international markets; climate change and unfavorable weather conditions; a breach of data security resulting in the unauthorized access of personal, financial, proprietary, confidential or other personal data or information about our customers, employees, third parties, or of our proprietary confidential information; damage to our brands or reputation; possibility of an adverse ruling against us in pending litigation, regulatory action or investigation; changes in various government laws and regulations, including environmental regulations; the adequacy of our insurance coverage to cover all significant risk exposures; the effectiveness of our risk management and safety program; general market risk; management's substantial ownership interest and its impact on public stockholders and the availability of the Company's common stock to the investing public; and the existence of certain anti-takeover provisions in our governance documents, which could make a tender offer, change in control or takeover attempt that is opposed by the Company's Board of Directors more difficult or expensive. All of the foregoing risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. The Company does not undertake to update its forward-looking statements.
ROLLINS, INC. AND SUBSIDIARIES | ||||||
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||
(in thousands) | ||||||
(unaudited) | ||||||
September 30, | December 31, | |||||
2022 | 2021 | |||||
ASSETS | ||||||
Cash and cash equivalents | $ | 121,876 | $ | 105,301 | ||
Trade receivables, net | 170,274 | 139,579 | ||||
Financed receivables, short-term, net | 32,253 | 26,152 | ||||
Materials and supplies | 28,572 | 28,926 | ||||
Other current assets | 45,981 | 52,422 | ||||
Total current assets | 398,956 | 352,380 | ||||
Equipment and property, net | 130,362 | 133,257 | ||||
Goodwill | 772,325 | 721,819 | ||||
Customer contracts, net | 319,382 | 325,929 | ||||
Trademarks and tradenames, net | 114,016 | 108,976 | ||||
Other intangible assets, net | 9,807 | 11,679 | ||||
Operating lease right-of-use assets | 270,365 | 244,784 | ||||
Financed receivables, long-term, net | 58,634 | 47,097 | ||||
Other assets | 38,636 | 34,949 | ||||
Total assets | $ | 2,112,483 | $ | 1,980,870 | ||
LIABILITIES | ||||||
Accounts payable | 42,874 | 44,568 | ||||
Accrued insurance - current | 40,424 | 36,414 | ||||
Accrued compensation and related liabilities | 95,694 | 97,862 | ||||
Unearned revenues | 166,866 | 145,122 | ||||
Operating lease liabilities - current | 82,611 | 75,240 | ||||
Current portion of long-term debt | 15,000 | 18,750 | ||||
Other current liabilities | 66,300 | 73,206 | ||||
Total current liabilities | 509,769 | 491,162 | ||||
Accrued insurance, less current portion | 35,257 | 31,545 | ||||
Operating lease liabilities, less current portion | 191,565 | 172,520 | ||||
Long-term debt | 109,878 | 136,250 | ||||
Other long-term accrued liabilities | 69,463 | 67,345 | ||||
Total Liabilities | 915,932 | 898,822 | ||||
STOCKHOLDERS' EQUITY | ||||||
Common stock | 492,472 | 491,911 | ||||
Retained earnings and other equity | 704,079 | 590,137 | ||||
Total stockholders' equity | 1,196,551 | 1,082,048 | ||||
Total liabilities and stockholders' equity | $ | 2,112,483 | $ | 1,980,870 |
ROLLINS, INC. AND SUBSIDIARIES | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||
(in thousands except per share data) | ||||||||||||
(unaudited) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
REVENUES | ||||||||||||
Customer services | $ | 729,704 | $ | 650,199 | $ | 2,034,433 | $ | 1,823,957 | ||||
COSTS AND EXPENSES | ||||||||||||
Cost of services provided (exclusive of depreciation and amortization below) | 348,158 | 305,474 | 980,316 | 864,888 | ||||||||
Sales, general and administrative | 213,581 | 194,261 | 612,353 | 539,951 | ||||||||
Depreciation and amortization | 24,282 | 23,617 | 73,454 | 70,519 | ||||||||
Total operating expenses | 586,021 | 523,352 | 1,666,123 | 1,475,358 | ||||||||
OPERATING INCOME | 143,683 | 126,847 | 368,310 | 348,599 | ||||||||
Interest expense, net | 846 | 222 | 2,294 | 1,334 | ||||||||
Other (income), net | (1,980) | (447) | (5,170) | (33,598) | ||||||||
CONSOLIDATED INCOME BEFORE INCOME TAXES | 144,817 | 127,072 | 371,186 | 380,863 | ||||||||
PROVISION FOR INCOME TAXES | 37,195 | 33,219 | 90,820 | 95,513 | ||||||||
NET INCOME | $ | 107,622 | $ | 93,853 | $ | 280,366 | $ | 285,350 | ||||
NET INCOME PER SHARE - BASIC AND DILUTED | $ | 0.22 | $ | 0.19 | $ | 0.57 | $ | 0.58 | ||||
Weighted average shares outstanding - basic | 492,316 | 492,069 | 492,285 | 492,058 | ||||||||
Weighted average shares outstanding - diluted | 492,430 | 492,069 | 492,398 | 492,058 |
ROLLINS, INC. AND SUBSIDIARIES | ||||||||||||
CONDENSED CONSOLIDATED CASH FLOW INFORMATION | ||||||||||||
(in thousands) | ||||||||||||
(unaudited) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||
OPERATING ACTIVITIES | ||||||||||||
Net income | $ | 107,622 | $ | 93,853 | $ | 280,366 | $ | 285,350 | ||||
Depreciation and amortization | 24,282 | 23,617 | 73,454 | 70,519 | ||||||||
Change in working capital and other operating activities | (4,184) | (37,764) | (11,283) | (56,958) | ||||||||
Net cash provided by operating activities | 127,720 | 79,706 | 342,537 | 298,911 | ||||||||
INVESTING ACTIVITIES | ||||||||||||
Acquisitions, net of cash acquired | (60,838) | (11,307) | (110,418) | (39,692) | ||||||||
Capital expenditures | (7,040) | (6,802) | (22,921) | (20,031) | ||||||||
Other investing activities, net | 6,532 | 588 | 9,961 | 70,827 | ||||||||
Net cash (used in) provided by investing activities | (61,346) | (17,521) | (123,378) | 11,104 | ||||||||
FINANCING ACTIVITIES | ||||||||||||
Net debt repayments | (110,000) | (20,000) | (30,000) | (135,000) | ||||||||
Payment of dividends | (49,201) | (39,945) | (147,635) | (119,677) | ||||||||
Other financing activities | (6,444) | (6,849) | (18,650) | (30,011) | ||||||||
Net cash used in financing activities | (165,645) | (66,794) | (196,285) | (284,688) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 183 | (6,264) | (6,299) | (6,149) | ||||||||
Net (decrease) increase in cash and cash equivalents | $ | (99,088) | $ | (10,873) | $ | 16,575 | $ | 19,178 |
APPENDIX
Reconciliation of GAAP and non-GAAP Financial Measures
The Company has used the non-GAAP financial measures of organic revenues, adjusted EBITDA, adjusted net income and adjusted earnings per share ("EPS") in this earnings release, and the non-GAAP financial measures of organic revenues by type, and free cash flow in today's conference call. Organic revenue is calculated as revenue less acquisition revenue. Acquisition revenue is based on the trailing 12-month revenue of our acquired entities. These measures should not be considered in isolation or as a substitute for revenues, net income, earnings per share or other performance measures prepared in accordance with GAAP.
Management uses adjusted net income, adjusted EPS and adjusted EBITDA as measures of operating performance because these measures allow the Company to compare performance consistently over various periods without regard to the impact of the property disposition gains. Management also uses organic revenues, and organic revenues by type to compare revenues over various periods excluding the impact of acquisitions. Management uses free cash flow, which is calculated as net cash provided by operating activities less capital expenditures, to demonstrate the Company's ability to maintain its asset base and generate future cash flows from operations. Management believes all of these non-GAAP financial measures are useful to provide investors with information about current trends in, and period-over-period comparisons of, the Company's results of operations.
A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.
Set forth below is a reconciliation of non-GAAP financial measures used in today's earnings release and conference call with their most comparable GAAP measures.
(unaudited, in thousands except EPS) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
Variance | Variance | ||||||||||||||||||||||
2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||
Reconciliation of Net Income to Adjusted Net | |||||||||||||||||||||||
Net income | $ | 107,622 | $ | 93,853 | $ | 13,769 | 14.7 | $ | 280,366 | $ | 285,350 | $ | (4,984) | (1.7) | |||||||||
Property disposition gains (net of tax $23,230) | — | — | — | — | — | (31,517) | 31,517 | — | |||||||||||||||
Adjusted income taxes on excluded items | — | — | — | — | — | 8,287 | (8,287) | — | |||||||||||||||
Adjusted net income | $ | 107,622 | $ | 93,853 | $ | 13,769 | 14.7 | $ | 280,366 | $ | 262,120 | $ | 18,246 | 7.0 | |||||||||
Adjusted earnings per share - basic and diluted | $ | 0.22 | $ | 0.19 | $ | 0.03 | 15.8 | $ | 0.57 | $ | 0.53 | $ | 0.04 | 7.5 | |||||||||
Weighted average shares outstanding - basic | 492,316 | 492,069 | 247 | 0.1 | 492,285 | 492,058 | 227 | 0.0 | |||||||||||||||
Weighted average shares outstanding - diluted | 492,430 | 492,069 | 361 | 0.1 | 492,398 | 492,058 | 340 | 0.1 | |||||||||||||||
Reconciliation of Net Income to EBITDA and | |||||||||||||||||||||||
Net income | $ | 107,622 | $ | 93,853 | $ | 13,769 | 14.7 | $ | 280,366 | $ | 285,350 | $ | (4,984) | (1.7) | |||||||||
Depreciation and amortization | 24,282 | 23,617 | 665 | 2.8 | 73,454 | 70,519 | 2,935 | 4.2 | |||||||||||||||
Interest expense, net | 846 | 222 | 624 | 281.1 | 2,294 | 1,334 | 960 | 72.0 | |||||||||||||||
Provision for income taxes | 37,195 | 33,219 | 3,976 | 12.0 | 90,820 | 95,513 | (4,693) | (4.9) | |||||||||||||||
EBITDA | 169,945 | 150,911 | 19,034 | 12.6 | 446,934 | 452,716 | (5,782) | (1.3) | |||||||||||||||
Property disposition gains | — | — | — | — | — | (31,517) | 31,517 | — | |||||||||||||||
Adjusted EBITDA | $ | 169,945 | $ | 150,911 | $ | 19,034 | 12.6 | $ | 446,934 | $ | 421,199 | $ | 25,735 | 6.1 | |||||||||
Reconciliation of Net Cash Provided by | |||||||||||||||||||||||
Net cash provided by operating activities | $ | 127,720 | $ | 79,706 | $ | 48,014 | 60.2 | $ | 342,537 | $ | 298,911 | $ | 43,626 | 14.6 | |||||||||
Capital expenditures | (7,040) | (6,802) | (238) | (3.5) | (22,921) | (20,031) | (2,890) | (14.4) | |||||||||||||||
Free Cash Flow | $ | 120,680 | $ | 72,904 | $ | 47,776 | 65.5 | $ | 319,616 | $ | 278,880 | $ | 40,736 | 14.6 |
(unaudited, in thousands) | |||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
Variance | |||||||||||||||||||||||
2022 | 2021 | $ | % | 2022 | 2021 | $ | % | ||||||||||||||||
Reconciliation of Revenues to Organic Revenues | |||||||||||||||||||||||
Revenues | $ | 729,704 | $ | 650,199 | 79,505 | 12.2 | $ | 2,034,433 | $ | 1,823,957 | 210,476 | 11.5 | |||||||||||
Revenue growth from acquisitions | (23,709) | — | (23,709) | — | (61,748) | — | (61,748) | — | |||||||||||||||
Organic revenues | $ | 705,995 | 650,199 | 55,796 | 8.6 | $ | 1,972,685 | 1,823,957 | 148,728 | 8.2 | |||||||||||||
Reconciliation of Residential Revenues to | |||||||||||||||||||||||
Residential revenues | $ | 337,878 | $ | 307,747 | 30,131 | 9.8 | $ | 922,448 | $ | 835,871 | 86,577 | 10.4 | |||||||||||
Residential revenues from acquisitions | (13,909) | — | (13,909) | — | (35,818) | — | (35,818) | — | |||||||||||||||
Residential organic revenues | $ | 323,969 | $ | 307,747 | 16,222 | 5.3 | $ | 886,630 | $ | 835,871 | 50,759 | 6.1 | |||||||||||
Reconciliation of Commercial Revenues to | |||||||||||||||||||||||
Commercial revenues | $ | 243,478 | $ | 218,648 | 24,830 | 11.4 | $ | 683,748 | $ | 618,183 | 65,565 | 10.6 | |||||||||||
Commercial revenue growth from acquisitions | (3,693) | — | (3,693) | — | (9,857) | — | (9,857) | — | |||||||||||||||
Commercial organic revenues | $ | 239,785 | $ | 218,648 | 21,137 | 9.7 | $ | 673,891 | $ | 618,183 | 55,708 | 9.0 | |||||||||||
Reconciliation of Termite Revenues to | |||||||||||||||||||||||
Termite revenues | $ | 139,668 | $ | 117,423 | 22,245 | 18.9 | $ | 406,155 | $ | 350,791 | 55,364 | 15.8 | |||||||||||
Termite revenues from acquisitions | (6,107) | — | (6,107) | — | (16,073) | — | (16,073) | — | |||||||||||||||
Termite organic revenues | $ | 133,561 | $ | 117,423 | 16,138 | 13.7 | $ | 390,082 | $ | 350,791 | 39,291 | 11.2 | |||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
Variance | |||||||||||||||||||||||
2021 | 2020 | $ | % | 2021 | 2020 | $ | % | ||||||||||||||||
Reconciliation of Revenues to Organic Revenues | |||||||||||||||||||||||
Revenues | $ | 650,199 | $ | 583,698 | 66,501 | 11.4 | $ | 1,823,957 | $ | 1,624,928 | 199,029 | 12.2 | |||||||||||
Revenue growth from acquisitions | (12,689) | — | (12,689) | — | (42,677) | — | (42,677) | — | |||||||||||||||
Organic revenues | $ | 637,510 | 583,698 | 53,812 | 9.2 | $ | 1,781,280 | 1,624,928 | 156,352 | 9.6 | |||||||||||||
Reconciliation of Residential Revenues to | |||||||||||||||||||||||
Residential revenues | $ | 307,747 | $ | 275,581 | 32,166 | 11.7 | $ | 835,871 | $ | 738,159 | 97,712 | 13.2 | |||||||||||
Residential revenues from acquisitions | (6,004) | — | (6,004) | — | (16,800) | — | (16,800) | — | |||||||||||||||
Residential organic revenues | $ | 301,743 | $ | 275,581 | 26,162 | 9.5 | $ | 819,071 | $ | 738,159 | 80,912 | 11.0 | |||||||||||
Reconciliation of Commercial Revenues to | |||||||||||||||||||||||
Commercial revenues | $ | 218,648 | $ | 199,561 | 19,087 | 9.6 | $ | 618,183 | $ | 562,777 | 55,406 | 9.8 | |||||||||||
Commercial revenue growth from acquisitions | (4,532) | — | (4,532) | — | (19,701) | — | (19,701) | — | |||||||||||||||
Commercial organic revenues | $ | 214,116 | $ | 199,561 | 14,555 | 7.3 | $ | 598,482 | $ | 562,777 | 35,705 | 6.3 | |||||||||||
Reconciliation of Termite Revenues to | |||||||||||||||||||||||
Termite revenues | $ | 117,423 | $ | 102,144 | 15,279 | 15.0 | $ | 350,791 | $ | 306,188 | 44,603 | 14.6 | |||||||||||
Termite revenues from acquisitions | (2,153) | — | (2,153) | — | (6,176) | — | (6,176) | — | |||||||||||||||
Termite organic revenues | $ | 115,270 | $ | 102,144 | 13,126 | 12.9 | $ | 344,615 | $ | 306,188 | 38,427 | 12.6 |
CONFERENCE CALL ANNOUNCEMENT
Rollins, Inc.
(NYSE: ROL)
Management will hold a conference call to discuss
Third Quarter 2022 results on
Wednesday, October 26, 2022 at:
10:00 a.m. Eastern
9:00 a.m. Central
8:00 a.m. Mountain
7:00 a.m. Pacific
TO PARTICIPATE:
Please dial 1-877-869-3839 domestic;
1-201-689-8265 international
with conference ID of 13733118
at least 5 minutes before start time.
REPLAY: available through November 2, 2022
Please dial 1-877-660-6853 / 1-201-612-7415, Passcode 13733118
THIS CALL CAN ALSO BE ACCESSED THROUGH THE INTERNET AT
Questions?
Contact Samantha Alphonso at Financial Relations Board at 212-827-3746
Or email to salphonso@mww.com
For Further Information Contact
Julie Bimmerman (404) 888-2103
View original content: https://www.prnewswire.com/news-releases/rollins-inc-reports-third-quarter-2022-financial-results-301659328.html
SOURCE Rollins, Inc.
