Rollins Q4 Earnings Call Highlights

Key Points

• Rollins hit a FY2025 milestone of $3.8 billion in revenue, delivering double‑digit growth (11% revenue, 6.9% organic) and adjusted EBITDA up 10.8%, while generating strong cash flow (free cash flow ~$650M) and deploying over $880M in dividends, buybacks and acquisitions with leverage at 0.9x.
• Early winter weather weighed on Q4 one‑time and seasonal work—one‑time revenue declined nearly 3%—which pressured profitability (gross margin down 30 bps, an ~80‑bp fleet-related headwind and SG&A up 50 bps) despite healthy recurring-service growth.
• Management expects another year of double‑digit revenue, earnings and cash‑flow growth for 2026 with an organic growth guide of 7–8% plus 2–3% from M&A, and sees margin upside from pricing, improved retention and easing fleet costs, while flagging near‑term weather risk.

Rollins NYSE: ROL management said fiscal 2025 produced another year of double-digit growth in revenue, earnings and cash flow, but executives pointed to weather-driven softness late in the year that weighed on one-time and seasonal demand and pressured fourth-quarter profitability.

On the company’s fourth-quarter earnings call, President and CEO Jerry Gahlhoff said Rollins reached a “milestone” of $3.8 billion in revenue for the year. He characterized the fourth quarter as “a tougher finish,” citing early winter weather that softened demand—particularly in the Midwest and Northeast—and created operational challenges in serving some project work.

Weather hit one-time work as recurring growth held

Both Gahlhoff and CFO Ken Krause emphasized a split between the company’s recurring and ancillary services—representing more than 80% of revenue—and its one-time work, which they said is more exposed to seasonal patterns and serviceability constraints.

Management said organic growth in recurring and ancillary services was above 7% for both the quarter and the year. By contrast, one-time revenue declined nearly 3% in the fourth quarter after growing about 4% through the first nine months of the year. Krause described the quarter’s weather as “erratic,” noting that demand and the ability to service one-time work were “particularly subdued in November and December due to early winter weather in the eastern half of the United States.”

Executives also said the impact varied by line of business. In commercial, Krause said recurring commercial growth remained healthy, but one-time work (roughly 15% of that business) was pressured, including weakness in “commodity fumigation,” which management described as all one-time work. In residential, leadership pointed to one-time categories such as wildlife work and seasonal pests as being affected by a shorter season in parts of the Eastern Seaboard and Midwest, while results in western markets such as California remained strong. In termite, management cited softness in pretreat and other one-time termite work, while the recurring base continued to grow.

Gahlhoff said the company is maintaining staffing levels ahead of peak season to avoid extreme hiring ramp-ups that can increase turnover and hurt service quality, even if that choice can pressure productivity in slower “shoulder” periods.

Fourth-quarter results and margins

Krause reported fourth-quarter revenue increased 9.7% year over year, with organic growth of 5.7%. By service line, revenue rose 9.7% in residential, 8.7% in commercial pest control, and 11.9% in termite and ancillary. Organic growth was 4.4% in residential, 6.4% in commercial, and 7.6% in termite and ancillary.

Profitability was pressured by lower volume and cost dynamics. Gross margin was 51% in the quarter, down 30 basis points. Krause said fleet expenses were higher as a percentage of revenue due largely to timing of vehicle gains compared with the prior year, creating an 80-basis-point headwind in the quarter. People-cost deleverage was attributed to lower volumes. Those pressures were partially offset by improved margins in insurance and claims, and in materials and supplies.

SG&A costs as a percentage of revenue increased 50 basis points year over year, which the company attributed to continued investments in the business despite lower one-time volumes.

For the quarter, Krause reported:

• GAAP operating income of $160 million, up 6.3% year over year
• Adjusted operating income of $167 million, up 8.1%
• EBITDA of $194 million and an EBITDA margin of 21.2%
• GAAP net income of $116 million, or $0.24 per share
• Adjusted net income of $121 million, or $0.25 per share, reflecting about $6 million of pre-tax acquisition-related and other adjustments

Asked about the profitability of one-time work, management said it is “oftentimes better” than recurring business because it is priced with the expectation it will not repeat. Management said that dynamic makes one-time work margin-accretive, though they noted it is roughly 15% of the company’s overall portfolio.

Full-year 2025 growth, cash flow and capital returns

For the year, Krause said Rollins delivered 11% revenue growth, including 6.9% organic growth, and Adjusted EBITDA increased 10.8% to $854 million despite what he described as significant growth investments.

Operating cash flow was $678 million and free cash flow was $650 million, up 11.6% and 12.1%, respectively. Krause said cash flow was negatively impacted by a $22 million out-of-period tax payment tied to disaster relief measures that allowed Rollins to defer a fourth-quarter 2024 payment into the first half of 2025; excluding that, he said free cash flow growth was approximately 20% for the year.

Management said strong cash generation supported a “balanced” capital allocation strategy, with more than $880 million deployed in 2025, including dividends, share repurchases and acquisitions. In the fourth quarter, Rollins made $21 million of acquisitions, paid $88 million in dividends (up 11% year over year), and repurchased approximately $200 million of shares. Krause said the company’s leverage ratio was 0.9x and reiterated a commitment to maintaining an investment-grade profile and leverage well under 2x.

Acquisitions, retention initiatives and 2026 outlook

Gahlhoff said Rollins closed the acquisition of Saela in 2025 and completed 26 additional tuck-in deals, adding that Saela’s performance has exceeded expectations and integration has progressed smoothly. Krause provided additional detail, stating Saela contributed “upwards of $16 million” of revenue in the fourth quarter and $55 million year to date. He also said the acquisition delivered about two cents of adjusted EPS accretion in the first nine months of ownership.

Leadership also highlighted investments in talent development and retention. Gahlhoff said teammate retention for employees with one year or less tenure improved by approximately 8% in 2025 and has improved nearly 18% since 2023. In the Q&A, management said the retention gains translated into hiring about 600 fewer people year over year, and estimated onboarding costs at roughly $10,000 to $15,000 per hire—implying $5 million to $10 million of savings—while calling the longer-term opportunity “tens of millions of dollars.”

Looking to 2026, management said it remains focused on another year of double-digit revenue, earnings and cash flow growth. Krause reiterated an organic growth outlook of 7% to 8%, with at least 2% to 3% additional growth from M&A, and said cash flow conversion is expected to remain above 100%. Executives cautioned that weather could affect near-term results, with Krause noting the company would “not be surprised if [growth is] a little bit slower to start the year” given more branch closures in January than a year ago.

On margins, Krause cited several factors he believes could support improvement in 2026, including continued pricing actions (which he said could be in the 3% to 4% range), reduced costs tied to improved new-hire retention, and easing fleet-related headwinds that he said totaled about $17 million in 2025, including roughly $6 million in the fourth quarter.

About Rollins NYSE: ROL

Rollins, Inc NYSE: ROL is a provider of pest and termite control services operating through a network of subsidiaries and franchises. Headquartered in Atlanta, Georgia, the company offers a broad range of pest management solutions for both residential and commercial customers, positioning itself as a specialist in protecting property and public health from pests and vectors.

Its service offerings include general pest control, termite inspection and treatment, bed bug remediation, mosquito and vector control, wildlife exclusion, and related specialty services.

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