Rollins, Inc.

What they do

Rollins provides essential pest and wildlife control services and protection against termite damage, rodents and insects from more than 800 Company-owned and franchised locations in approximately 70 countries. The company operates under one reportable segment with three service offerings: Residential, Commercial, and Termite and Ancillary. Recurring services made up approximately 75% of 2025 business, ancillary services 10%, and one-time services 15%.

Revenue drivers

• Residential pest control — Protects residential properties from rodents, insects and wildlife; part of a single reportable segment. The 10-Q attributes slower growth in parts of this offering to a decline in lead volume at brands reliant on consumer-initiated demand through search, digital media and inbound calls.
• Commercial pest control — Workplace pest control solutions sold across end markets such as healthcare, food service and logistics; part of the same reportable segment.
• Termite and Ancillary — Termite protection (liquid treatments, foam applications, baiting, wood treatments) plus ancillary services such as exclusion work, crawlspace encapsulation, moisture remediation and insulation for residential and commercial customers.
• Recurring service base — Approximately 75% of 2025 business was recurring services under scheduled service agreements, which the company says provides visibility into a significant portion of future revenue.

Recent performance

Second quarter 2026 revenues rose 7.9% to $1,078.6 million, with organic revenues up 5.7% and the company marking its 99th consecutive quarter of revenue growth. Operating income was $201.4 million, up 1.5%, but operating margin fell 110 basis points to 18.7%; adjusted EBITDA margin fell 120 basis points to 21.9%. Net income was $143.9 million, up 1.7%, and diluted EPS was $0.30, up 3.4% from $0.29. Operating cash flow was $172.5 million for the quarter, down 1.5%, with management citing timing of tax payments. The company said results fell short of expectations due to slower residential lead volume, though lead volume improved late in June and into July.

Strategy

Rollins states key strategic objectives of People First, Customer Loyalty, Growth Mindset and Operational Efficiency, and says it expects these to enable growth faster than its market. The company pursues a multi-brand approach and an acquisition strategy targeting businesses with potential for organic growth and margin expansion; second-quarter 2026 acquisition investment was $116.8 million. It says it has strategically invested in proprietary routing and scheduling technologies and describes a balanced capital allocation approach supported by operating cash flow and its balance sheet. Management says it has implemented organizational and operational changes to improve local execution, strengthen accountability and align resources with current demand conditions.

Risks

• Residential lead volume decline — Q2 2026 growth slowed in residential brands reliant on search, digital media and inbound calls as lead volume declined, and management remains cautious on near-term demand trends.
• Margin compression — Second-quarter operating margin fell 110 basis points to 18.7% and adjusted EBITDA margin fell 120 basis points to 21.9% as the cost structure remained positioned for stronger growth.
• Macroeconomic and cost pressures — The 10-Q cites inflation, changing interest rates, tariffs, trade disputes, natural disasters and weather, employee shortages and supply chain issues as challenges that may adversely affect future performance.
• Economic trends uncertainty — Management states that the severity, magnitude and duration of certain economic trends remain uncertain and difficult to predict, and that accounting estimates and assumptions may change materially in future periods.

Outlook

Given first-half results and near-term operating conditions, management updated its 2026 outlook to at least 6% organic revenue growth, 2% to 3% inorganic revenue growth, adjusted incremental EBITDA margin of at least 10%, and free cash flow conversion greater than 100%. This is below the 7% to 8% organic revenue growth expectation stated in the prior 10-K. Management says the medium-term targets outlined at its May Investor & Analyst Conference remain ahead of it and it maintains conviction in achieving those targets over time. The 10-K also states an expectation of a 24.5% to 25% effective tax rate and approximately $30 million of interest expense in 2026.