ROLLINS, INC. REPORTS SECOND QUARTER AND SIX MONTH 2022 FINANCIAL RESULTS

Jul 27th, 2022 11:30 EST

ATLANTA, July 27, 2022 /PRNewswire/ -- Rollins, Inc. (NYSE: ROL) ("Rollins" or the "Company"), a premier global consumer and commercial services company, reported unaudited financial results for its second quarter and six months ended June 30, 2022.

The Company recorded record second quarter 2022 revenues of $714.0 million, an increase of 11.9% over the second quarter 2021 revenues of $638.2 million, with organic revenues* increasing 8.7% to $693.6 million. The Company's second quarter 2022 reported net income was $100.3 million or $0.20 per diluted share, compared to $98.9 million or $0.20 per diluted share for second quarter of 2021. Net income for the quarter was impacted by an increase in revenues offset by cost increases related to people, advertising, fleet, and materials and supplies. Revenues are impacted by the seasonal nature of the Company's pest and termite control services. Our residential, commercial, and termite and ancillary services each experienced double digit revenue percentage growth. People costs and materials and supplies increased in conjunction with the increase in revenues, and fleet costs were driven by an increase in fuel costs. Advertising costs are up due to a combination of an increase in our advertising campaigns in reaction to the late arrival of spring, combined with the impact of a change in our quarterly process for estimating and accruing advertising expenses. However, we expect total advertising expense to be consistent as a percentage of revenue year over year.  Adjusted net income* and adjusted earnings per diluted share* for the second quarter ended June 30, 2021 were $98.5 million and $0.20 per diluted share, respectively. The second quarter 2021 results have been adjusted to exclude the gain related to the disposition of properties received through the 2019 acquisition of Clark Pest Control of Stockton, Inc. of $0.5 million ($0.3 million, net of tax).

For the six months ended June 30, 2022, the Company's revenues rose 11.2% to $1.305 billion compared to $1.174 billion for the prior year, with organic revenues* increasing 8.0% to $1.267 billion. The Company reported net income of $172.7 million or $0.35 per diluted share compared to $191.5 million or $0.39 per diluted share for the prior year. Net income for the six months was impacted by an increase in revenues offset by cost increases related to people, fleet, advertising, and materials and supplies. Adjusted net income* and adjusted earnings per diluted share* for the six months ended June 30, 2021 were $168.3 million and $0.34, respectively. The results for 2021 have been adjusted for the gain related to the disposition of the properties received through the 2019 acquisition of Clark Pest Control of Stockton, Inc. of $31.5 million ($23.2 million net of tax).

Gary W. Rollins, Chairman and Chief Executive Officer of Rollins stated, "We are proud of our second quarter results and believe we are well positioned for the remainder of 2022. Our employees have displayed a strong level of commitment and drive towards taking care of our customers. We are confident in our continued strategic growth and profitability moving forward."

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 expectation in connection with its advertising expense, the Company's belief that it is well positioned for 2022 and its confidence in its strategic growth and profitability moving forward.  

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)

June 30, 

December 31, 

2022

2021

ASSETS

Cash and cash equivalents

$

220,964

$

105,301

Trade accounts receivables, net

162,755

139,579

Financed receivables, net

29,822

26,152

Materials and supplies

29,515

28,926

Other current assets

63,942

52,422

Total Current Assets

506,998

352,380

Equipment and property, net

130,424

133,257

Goodwill

742,019

721,819

Customer contracts, net

318,015

325,929

Trademarks and tradenames, net

111,040

108,976

Other intangible assets, net

10,004

11,679

Operating lease, right-of-use assets

252,355

244,784

Financed receivables, long-term, net

52,961

47,097

Other assets

43,666

34,949

Total Assets

$

2,167,482

$

1,980,870

LIABILITIES

Accounts payable

50,702

44,568

Accrued insurance, current

37,724

36,414

Accrued compensation and related liabilities

95,948

97,862

Unearned revenue

165,220

145,122

Operating lease liabilities, current

77,867

75,240

Current portion of long-term debt

15,000

18,750

Other current liabilities

75,283

73,206

Total Current Liabilities

517,744

491,162

Accrued insurance, less current portion

32,470

31,545

Operating lease liabilities, less current portion

178,021

172,520

Long-term debt

219,858

136,250

Long-term accrued liabilities

73,822

67,345

Total Liabilities

1,021,915

898,822

STOCKHOLDERS' EQUITY

Common stock

492,417

491,911

Retained earnings and other equity

653,150

590,137

Total stockholders' equity

1,145,567

1,082,048

Total Liabilities and Stockholders' Equity

$

2,167,482

$

1,980,870

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share data)

(unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2022

2021

2022

2021

REVENUES

Customer services

$

714,049

$

638,204

$

1,304,729

$

1,173,758

COSTS AND EXPENSES

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

336,780

297,862

632,158

559,414

Sales, general and administrative

219,987

183,482

398,772

345,690

Depreciation and amortization

24,325

23,306

49,172

46,902

   Total operating expenses

581,092

504,650

1,080,102

952,006

OPERATING INCOME

132,957

133,554

224,627

221,752

Interest expense, net

880

506

1,448

1,112

Other (income), net

(1,911)

(891)

(3,190)

(33,151)

CONSOLIDATED INCOME BEFORE INCOME TAXES

133,988

133,939

226,369

253,791

PROVISION FOR INCOME TAXES

33,689

35,085

53,625

62,294

NET INCOME

$

100,299

$

98,854

$

172,744

$

191,497

NET INCOME PER SHARE - BASIC AND DILUTED

$

0.20

$

0.20

$

0.35

$

0.39

Weighted average shares outstanding - basic

492,327

491,999

492,270

491,950

Weighted average shares outstanding - diluted

492,440

491,999

492,382

491,950

APPENDIX

Reconciliation of GAAP and non-GAAP Financial Measures

The Company has used the non-GAAP financial measures of organic revenues, adjusted net income and adjusted earnings per share ("EPS") in this earnings release, and the non-GAAP financial measures of organic revenues by type, organic revenues in constant dollars, adjusted EBITDA, 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, organic revenues by type and organic revenues in constant dollars to compare revenues over various periods excluding the impact of acquisitions and the change in foreign currency rates. 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

Six Months Ended

June 30, 

June 30, 

Variance

Variance

2022

2021

$

%

2022

2021

$

%

Reconciliation of Net Income to Adjusted Net Income and EPS

Net income

$

100,299

$

98,854

$

1,445

1.5

$

172,744

$

191,497

$

(18,753)

(9.8)

Property disposition gains (net of tax $337 and $23,230, respectively)

(459)

459

(31,517)

31,517

Adjusted income taxes on excluded items

122

(122)

8,287

(8,287)

Adjusted net income

$

100,299

$

98,517

$

1,782

1.8

$

172,744

$

168,267

$

4,477

2.7

Adjusted earnings per share - basic and diluted

$

0.20

$

0.20

$

$

0.35

$

0.34

$

0.01

2.9

Weighted average shares outstanding - basic

492,327

491,999

328

0.1

492,270

491,950

320

0.1

Weighted average shares outstanding - diluted

492,440

491,999

441

0.1

492,382

491,950

432

0.1

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

Net income

$

100,299

$

98,854

$

1,445

1.5

$

172,744

$

191,497

$

(18,753)

(9.8)

Depreciation and amortization

24,325

23,306

1,019

4.4

49,172

46,902

2,270

4.8

Interest expense, net

880

506

374

73.9

1,448

1,112

336

30.2

Provision for income taxes

33,689

35,085

(1,396)

(4.0)

53,625

62,294

(8,669)

(13.9)

EBITDA

159,193

157,751

1,442

0.9

276,989

301,805

(24,816)

(8.2)

Property disposition gains

(459)

459

(31,517)

31,517

Adjusted EBITDA

$

159,193

$

157,292

$

1,901

1.2

$

276,989

$

270,288

$

6,701

2.5

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

Net cash provided by operating activities

$

127,285

$

99,719

$

27,566

27.6

$

214,817

$

219,205

$

(4,388)

(2.0)

Capital expenditures

(7,886)

(5,403)

(2,483)

(45.9)

(15,881)

(13,229)

(2,652)

(20.0)

Free Cash Flow

$

119,399

$

94,316

$

25,083

26.6

$

198,936

$

205,976

$

(7,040)

(3.4)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

Variance

2022

2021

$

%

2022

2021

$

%

Reconciliation of Revenues to Organic Revenues and Organic Revenues in Constant Dollars

Revenues

$

714,049

$

638,204

75,845

11.9

$

1,304,729

$

1,173,758

130,971

11.2

Revenue growth from acquisitions

(20,471)

(20,471)

(38,039)

(38,039)

Organic revenues 

693,578

638,204

55,374

8.7

1,266,690

1,173,758

92,932

8.0

Adjustment to organic revenues on a constant exchange rate

(7,624)

(7,624)

(11,287)

(11,287)

Organic revenues in constant dollars

$

685,954

$

638,204

47,750

7.5

$

1,255,403

$

1,173,758

81,645

7.0

Reconciliation of Residential Revenues to Organic Residential Revenues

Residential revenues

$

325,311

$

292,945

32,366

11.0

$

584,570

$

528,124

56,446

10.7

Residential revenues from acquisitions

(11,625)

(11,625)

(21,908)

(21,908)

Residential organic revenues

$

313,686

$

292,945

20,741

7.0

$

562,662

$

528,124

34,538

6.6

Reconciliation of Commercial Revenues to Organic Commercial Revenues

Commercial revenues

$

234,483

$

210,838

23,645

11.2

$

440,270

$

399,535

40,735

10.2

Commercial revenue growth from acquisitions

(3,943)

(3,943)

(6,165)

(6,165)

Commercial organic revenues

$

230,540

$

210,838

19,702

9.3

$

434,105

$

399,535

34,570

8.7

Reconciliation of Termite Revenues to Organic Termite Revenues

Termite revenues

$

146,781

$

127,674

19,107

15.0

$

266,487

$

233,368

33,119

14.2

Termite revenues from acquisitions

(4,903)

(4,903)

(9,966)

(9,966)

Termite organic revenues

$

141,878

$

127,674

14,204

11.2

$

256,521

$

233,368

23,153

9.9

CONFERENCE CALL ANNOUNCEMENT

Rollins, Inc. (NYSE: ROL)

Management will hold a conference call to discuss Second Quarter 2022 results on

Wednesday, July 27, 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 13731028 at least 5 minutes before start time.

REPLAY: available through August 3, 2022 Please dial 1-877-660-6853 / 1-201-612-7415, Passcode 13731028 THIS CALL CAN ALSO BE ACCESSED THROUGH THE INTERNET AT

www.rollins.com

Questions? Contact Samantha Alphonso at Financial Relations Board at 212-827-3746 Or email to [email protected]

SOURCE Rollins, Inc.

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