Executive Summary / Key Takeaways

• Rollins, Inc. delivered exceptional third-quarter 2025 results, with total revenue growth of 12% and robust organic growth of 7.2%, driven by strong demand across all service lines and strategic acquisitions.
• The company's multi-brand strategy, bolstered by the successful integration of Saela Pest Control and ongoing tuck-in acquisitions, continues to be a key competitive differentiator, expanding market reach and customer acquisition channels.
• Significant investments in the commercial division and operational efficiencies are yielding tangible benefits, reflected in expanding gross and operating margins, and double-digit recurring revenue growth in Orkin Commercial.
• Rollins maintains a strong financial position with a healthy balance sheet, investment-grade credit ratings, and robust cash flow generation, enabling a balanced capital allocation strategy focused on growth investments and increasing shareholder returns.
• Despite macroeconomic uncertainties and evolving digital marketing landscapes, Rollins is well-positioned for sustained double-digit earnings growth and continued market share expansion, underpinned by its resilient business model and adaptive strategies.

The Enduring Strength of Rollins: A Multi-Brand Powerhouse

Rollins, Inc., founded in 1901, has evolved from its broadcasting roots into a premier global consumer and commercial services company, establishing itself as a dominant force in the pest and wildlife control industry. The company's enduring success is deeply rooted in its multi-brand strategy, which management consistently highlights as a core competitive differentiator. This approach, encompassing iconic brands like Orkin, alongside regional powerhouses and recent acquisitions such as Fox Pest Control and Saela, provides Rollins with "multiple bites at the apple" for customer acquisition and offers crucial diversification across various end markets and customer segments.

The pest control industry itself is characterized by its resilience and fragmentation, with approximately 19,000 companies operating in North America. This landscape presents both intense competition and ample opportunity for market share gains. Rollins strategically positions itself by leveraging its established brand recognition, extensive operational footprint, and a customer-centric service model. This allows the company to effectively compete against larger global players like Rentokil Initial (RTOKY), diversified service providers such as Ecolab (ECL), and specialized domestic competitors like ServiceMaster (Terminix). While Rentokil often boasts global scale and a strong focus on digital innovation, and Ecolab benefits from its integrated hygiene solutions, Rollins' strength lies in its deep U.S. market penetration, operational efficiency, and a diversified approach to customer engagement that fosters strong local relationships.

Rollins' competitive advantages are further amplified by its strategic investments in operational technology and digital adaptation. The company utilizes proprietary tools like its BizSuite and HomeSuite apps, which are powerful resources for its sales force, enhancing efficiency and productivity in the field. These applications streamline sales processes, allowing representatives to quickly and effectively serve customers. Furthermore, Rollins has invested in advanced safety systems for its fleet, including monitoring and scoring systems, which are crucial for mitigating auto claims and improving overall operational safety. In the rapidly evolving digital marketing landscape, Rollins' marketing teams are continuously adjusting to the impact of AI, including Google's AI agent and AI overviews. This adaptation aims to secure higher-quality leads, reduce "window shoppers," and ultimately improve close rates and customer start rates, demonstrating a proactive approach to leveraging technology for efficient customer acquisition. These technological and operational differentiators contribute significantly to Rollins' competitive moat, supporting its financial performance through enhanced sales, reduced operational risks, and sustained market positioning.

Accelerating Growth and Expanding Profitability

Rollins' strategic initiatives and operational excellence have translated into compelling financial performance, particularly evident in its recent results. For the third quarter of 2025, the company reported total revenues of $1.03 billion, marking a 12% increase over the prior year. Organic revenue growth stood at a robust 7.2%, with acquisitions contributing an additional 4.8% to the top line. This growth was broad-based, with residential pest control revenue increasing 11.2%, commercial pest control revenue rising 11.8%, and termite and ancillary services growing an impressive 15.2%.

Profitability metrics also demonstrated significant improvement. Gross margin expanded by 40 basis points to 54.4% in Q3 2025, primarily driven by a 70 basis point reduction in insurance and claims costs due to a more favorable claims experience, and a 10 basis point improvement in materials and supplies. This was partially offset by a 10 basis point increase in fleet expenses, influenced by lower vehicle gains and less favorable medical claims. Sales, General and Administrative (SGA) expenses as a percentage of revenue decreased by 60 basis points to 29.4%, reflecting leverage from lower insurance and claims costs, selling and marketing efficiencies, and administrative cost reductions. Consequently, operating margin improved by 100 basis points to 21.9% in Q3 2025. Adjusted EBITDA margin saw a 120 basis point improvement to 25.2%, with incremental margins approximating 35% for the quarter, or approximately 31% when excluding favorable adjustments related to auto and medical claims.

The nine-month period ended September 30, 2025, further underscores this positive trajectory. Revenues increased 11.4% to $2.85 billion, with organic growth of 7.3% and acquisitions adding 4.1%. Gross margin for the nine months increased to 53.3%, and operating margin rose 10 basis points to 19.9%. The effective tax rate also decreased to 24.8% in Q3 2025 and 24.9% for the nine-month period, primarily due to the strategic purchase and use of transferable federal income tax credits.

Strategic Acquisitions and Operational Focus

A cornerstone of Rollins' growth strategy is its disciplined approach to mergers and acquisitions. The acquisition of Saela Holdings, LLC on April 1, 2025, for $207.20 million, exemplifies this strategy. Saela, primarily a residential pest control company, has significantly expanded Rollins' footprint in key geographies such as the Pacific Northwest, Mountain West, and Midwestern United States. Management has reported that Saela's performance has "exceeded expectations," with projected revenue for its first 12 months of ownership in the mid-$70 million range, surpassing initial estimates. The acquisition has been accretive to Rollins' margin profile and "neutral to slightly accretive to GAAP earnings" in its first six months, a notable achievement given current borrowing costs. Beyond Saela, Rollins completed 19 other acquisitions during the first nine months of 2025, demonstrating a healthy and active M&A pipeline.

Rollins' commitment to organic growth is equally robust, particularly within its commercial division. Over the past year, the company has strategically added resources and established a dedicated commercial division within Orkin, growing its sales force by over 15% in 2024. These investments are yielding strong returns, with Orkin Commercial consistently delivering double-digit recurring revenue growth throughout 2025. The company's "Collab" program, a 3.5-day leadership development experience for people managers, is designed to foster consistent leadership behaviors and create a robust talent pipeline, further supporting future growth and operational excellence.

Robust Liquidity and Shareholder Returns

Rollins maintains a strong and flexible capital structure to support its growth ambitions and return value to shareholders. As of September 30, 2025, the company held $127.4 million in cash and cash equivalents. In February 2025, Rollins issued $500 million in ten-year senior notes, utilizing the proceeds to repay existing debt and for general corporate purposes. This was complemented by the establishment of a $1 billion commercial paper program in March 2025, providing efficient short-term liquidity. The company also has access to a $1 billion revolving credit facility, with no outstanding borrowings as of September 30, 2025.

A significant achievement in 2024 was the assignment of investment-grade corporate credit ratings (BBB+ from Fitch and BBB from S&P), which provides Rollins with access to more efficient capital markets. The company is committed to maintaining a strong investment-grade rating with leverage "well under 2x." Its current leverage ratio stands at a healthy 0.8x.

Rollins' strong operating cash flow, which increased 30% to $191 million in Q3 2025 and 22.4% to $513.4 million for the nine months ended September 30, 2025, underpins its balanced capital allocation strategy. The company increased its quarterly cash dividend by 11% to $0.1825 per share, payable in December 2025, marking an over 80% increase in regular dividends since early 2022. This commitment to shareholder returns, alongside strategic investments and opportunistic share repurchases, highlights Rollins' financial discipline and confidence in its future cash flow generation.

Outlook and Risk Considerations

Rollins' management remains optimistic about its 2025 outlook, guiding for 7% to 8% organic revenue growth and 3% to 4% inorganic growth from M&A. The company anticipates "double-digit growth in earnings" and cash flow conversion exceeding 100% for the year, with an improving incremental margin profile expected in the second half of 2025 as it laps prior growth investments. This guidance is predicated on a healthy pricing environment, with Rollins targeting "CPI plus" price increases (3% to 4%), and an expectation that inflation for most cost inputs will remain "very much under control."

Despite this positive outlook, Rollins acknowledges several risks. Macroeconomic uncertainties, including inflation and changing interest rates, could impact consumer spending and operational costs. The company also faces ongoing challenges from legacy auto claims, which have historically introduced volatility in insurance and claims expenses. Environmental regulations, such as those in California concerning hazardous waste and pesticide disposal, represent a compliance risk, though management does not anticipate a material financial impact from current investigations. Furthermore, shifts in the digital marketing landscape due to AI could necessitate continuous adaptation of customer acquisition strategies. While fleet costs are expected to be a slight headwind due to higher vehicle lease acquisition costs, Rollins' diversified approach to customer acquisition and its resilient business model are designed to mitigate these challenges.

Conclusion

Rollins, Inc. stands as a compelling investment opportunity, demonstrating consistent growth, expanding profitability, and a disciplined strategic vision. The company's multi-brand strategy, combined with targeted acquisitions like Saela Pest Control and robust investments in its commercial division, forms a powerful engine for sustained market share gains in a fragmented yet essential industry. Rollins' proactive adoption of operational technologies and adaptive digital marketing strategies further strengthens its competitive position against both large global players and numerous local competitors.

With a healthy balance sheet, investment-grade credit ratings, and a strong commitment to returning capital to shareholders through a growing dividend, Rollins is well-equipped to execute its long-term growth objectives. The company's focus on operational efficiency, talent development, and a pragmatic approach to M&A positions it to deliver continued double-digit earnings growth and superior cash flow conversion. While macroeconomic factors and operational risks warrant monitoring, Rollins' proven resilience and strategic agility underscore its potential for continued outperformance, making it a foundational holding for discerning investors.