• Revenue: $3.4 billion for fiscal 2024, a 10.3% increase year-over-year.
• Organic Growth: 7.9% for the year.
• Adjusted Earnings Per Share: Increased by 11.2% for the year.
• Operating Cash Flow: $608 million, up 15% year-over-year.
• Free Cash Flow: $580 million, up 17% year-over-year.
• Fourth Quarter Revenue Growth: 10.4% with organic growth at 8.5%.
• Residential Revenue Growth: 8.4% in the fourth quarter.
• Commercial Pest Control Revenue Growth: 9.2% in the fourth quarter.
• Termite and Ancillary Services Revenue Growth: 16.6% in the fourth quarter.
• Gross Margin: Improved by 40 basis points to 51.3% in the fourth quarter.
• Quarterly Adjusted EBITDA: $181 million with a margin of 21.8%.
• Quarterly GAAP Net Income: $106 million or $0.22 per share.
• Adjusted Net Income: $109 million or $0.23 per share for the fourth quarter.
• Investment-Grade Credit Ratings: Fitch BBB+ and S&P BBB.

• Warning! GuruFocus has detected 5 Warning Sign with ROL.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Rollins Inc (NYSE:ROL) achieved a milestone of $3.4 billion in revenue for fiscal 2024, with a 10.3% increase in full-year revenue compared to the previous year.
• The company reported strong organic growth of 7.9% for the year, supported by effective execution of operating strategies and investments in staffing.
• Rollins Inc (NYSE:ROL) strategically expanded its commercial division within Orkin, growing its sales force by over 15% and investing in training and support.
• The company closed 44 tuck-in deals in 2024, maintaining a robust M&A pipeline to drive additional growth.
• Rollins Inc (NYSE:ROL) received investment-grade corporate credit ratings from Fitch and S&P, enhancing its access to capital markets for executing growth strategies.

Negative Points

• Investments in long-term growth objectives tempered incremental margins in the second half of the year.
• The company faced headwinds from legacy auto claims, impacting incremental margins by 40 basis points in the fourth quarter.
• SG&A costs as a percentage of revenue increased by 50 basis points in the fourth quarter due to growth initiatives.
• The commercial business experienced a slight deceleration in growth during the fourth quarter despite easier comps.
• Rollins Inc (NYSE:ROL) continues to work through a long tail of safety claims, which remains a challenge for the company.

Q & A Highlights

Q: Can you explain what drove the better-than-expected organic growth in your residential business during the fourth quarter? A: Jerry Gahlhoff, President and CEO, noted that despite external data suggesting otherwise, Rollins experienced strong demand, particularly in rodent control, which contributed to the growth. The company saw increased call volumes and lead demand, which were not necessarily aligned with external data reports.

Q: How did auto claims activity impact EBITDA margins in the quarter? A: Kenneth Krause, CFO, explained that auto claims resulted in a 40 basis point loss in leverage across the P&L, with 20 basis points affecting gross margin and another 20 basis points impacting SG&A. These claims are legacy issues, and the company is investing in safety programs to mitigate future risks.

Q: What are your expectations for pricing increases in 2025, particularly in the consumer and commercial segments? A: Kenneth Krause stated that Rollins aims to achieve CPI-plus level pricing, similar to the past few years. The company believes it can maintain pricing slightly ahead of CPI due to the essential nature of its services and the value provided to customers.

Q: Can you provide insight into the progress of your back-office modernization and its impact on your ability to acquire businesses? A: Kenneth Krause highlighted that since 2022, Rollins has achieved 50 basis points of leverage from administrative cost savings, which have been reinvested into sales and marketing. The company continues to focus on improving its acquisition and integration capabilities.

Q: How are you managing cost inflation, particularly in labor, materials, and fleet expenses? A: Kenneth Krause mentioned that inflation is under control, with the company effectively managing costs in materials and supplies. However, fleet costs have increased due to higher leasing expenses compared to previous years. Despite this, Rollins feels confident in its ability to manage overall inflation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.