ROL | Q2 2025

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Overview

• Non-GAAP EPS of of $0.30 in-line.

• Revenue of $1B (+12.1% Y/Y) beats by $11.54M.

Takeaways

Q2 was another strong one for Rollins (ROL), with revenue up 12.1% and organic growth coming in at 7.3%. Non-adjusted EPS came in at $0.29 per share, or $0.30 adjusted for acquisition-related costs.

Free cash flow for the quarter rose 23% year-over-year, and Rollins converted 119% of its net income into cash—which is incredibly impressive and reflects just how efficient the business is. For the first half of the year, that conversion rate is even higher at 125%.

Things were a little bumpy early on thanks to colder, wetter weather in parts of the country, which slowed demand in May. But activity quickly picked up in June, giving the company a big backlog heading into July. Overall, management says Q3 is off to a very busy start so far.

Getting into each segment, residential, commercial, and termite services all saw solid growth. Residential revenue rose 11.6%, commercial was up 11.4%, and termite and ancillary services jumped nearly 14%. If we’re just talking organic growth, termite was the standout at 10.3%, followed by commercial at 8.4% and residential at 4.9%.

A big highlight this quarter was the acquisition of Saela, which closed in April. The integration has gone smoothly, and management noted that Saela added about a penny to non-GAAP earnings in Q2 and should generate solid returns going forward.

M&A activity overall remains competitive, especially for smaller deals, but Rollins continues to find attractive opportunities and has plenty of financial flexibility to pursue them. Even after the Saela deal, net leverage is under 1x and interest expenses are actually down year-to-date.

Another bright spot this quarter was commercial pest control, with recurring revenue growing at a double-digit clip. Rollins has been investing heavily in this part of the business—building out dedicated teams and expanding marketing—and that effort is paying off.

Commercial customers tend to stick around longer and are more profitable over time, so this growth is especially valuable. To help solidify it as a key part of the overall business, Rollins promoted Scott Weaver to COO of Commercial Operations for Orkin.

One of the more underrated wins this quarter was employee retention. First-year technician turnover—which has been a big challenge for the company since COVID—has improved a lot. This improvement has allowed the company to cut back on hiring, save on training, and deliver more consistent service, which translates to better customer retention over time.

Regarding profitability, margins took a slight hit this quarter from insurance-related costs tied to older auto claims. These are impossible to predict and can certainly fluctuate, but Rollins is investing in safety tech and training to try to reduce future incidents.

Despite that, Rollins is in an overall great spot. The business is still growing like crazy, acquisitions are accretive, and cash flow is still pouring in.

The only sore spot, at least in my opinion, is the share price. Now approaching $60 per share, it continues to move farther and farther away from my desired buy price. Hopefully this continued patience will pay off some day!

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