ROL | Q3 2024
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Overview
Non-GAAP EPS of $0.29 misses by $0.01.
Revenue of $916M (+9.0% Y/Y) beats by $4.5M.
Takeaways
Rollins Inc. (ROL) had an impressive third quarter, with healthy growth in their pest control services that came both organically and from acquisitions. The numbers back it up: revenue rose by 9% to $916 million, with nearly 8% coming from organic growth.
Growth was spread nicely across their service areas. Residential revenues grew 6.4%, commercial pest control was up 9.4%, and termite and other services surged by 14.5%.
That last jump is especially nice to see because it shows Rollins’ potential to cross-sell within its customer base, where management plans to keep pushing for more recurring services.
Demand for pest control looks to be as strong as ever, and Rollins is making sure they’re prepared to continue delivering—investing in new hires, ramping up marketing, and pushing to turn leads into loyal customers. So far in 2024, they've closed 32 acquisitions, adding to their annual 2% growth target from these deals alone.
With that said, higher spending on hiring and advertising did put some pressure on margins. Operating margin dipped by 20 basis points to 20.9%, and EBITDA margin took a small hit.
Still, management views these investments in hiring and advertising as worthwhile for future growth, betting that the added spending now will lead to bigger payoffs down the road. Clearly, they’re thinking long-term—which is great to see.
One of the most exciting stats to come out of the call is that free cash flow is up nearly 12% for the year, which allowed Rollins to raise the dividend by 10%—marking the latest in over 20 years of dividend increases.
In the Q&A session, management reiterated their intention to invest as needed in high-potential areas. They are particularly focused on expanding commercial and residential service coverage where data shows opportunities, but they’ll only pull the trigger when the market supports it.
Rollins' balance sheet still looks incredibly healthy, with a debt-to-EBITDA ratio well below 1.0, providing flexibility to continue funding growth initiatives without straining financial stability.
All in all, Rollins continues to fire on all cylinders. It seems to me that the only thing wrong with this company is the share price. Would it kill them to drop down into the $30s?