Rollins (ROL) Q2 2025 10-Q: Acquisitions Drive 12% Revenue Growth as Margins Dip

Rollins, Inc. (ROL), a global leader in pest control and the parent company of familiar brands like Orkin, recently released its financial results for the second quarter of 2025. Today, we're diving into their latest 10-Q filing to unpack their performance, focusing on how their revenue streams flow through to the bottom line and what it tells us about the company's health and strategy.

Revenue Climbs on Acquisitions and Organic Strength

Rollins reported strong top-line growth, with quarterly revenues reaching $999.5 million, a solid 12.1% increase over the same period last year. This growth came from two primary sources: the company's existing operations and a significant new acquisition.

To understand the health of the core business, we can look at organic revenue, a measure that excludes the impact of recent acquisitions. Rollins posted a healthy 7.3% organic revenue growth, indicating robust customer demand across its services. This performance was broad-based:

• Residential Pest Control: Grew 11.6% to $455.7 million.
• Commercial Pest Control: Grew 11.4% to $320.5 million.
• Termite and Ancillary Services: Grew 13.9% to $211.9 million.

The remaining growth was largely driven by the acquisition of Saela Pest Control on April 1, 2025, for which Rollins paid $207.1 million. This move significantly expanded Rollins' footprint and contributed to the impressive overall revenue figure.

Following the Money: From Revenue to Profit

While revenue growth is strong, it's crucial to see how effectively the company converts those sales into profit. The following flow graph provides a visual breakdown of Rollins' income statement for the quarter, showing where every dollar of revenue went.

Rollins' net income for the quarter was $141.5 million, an increase of 9.3% from the prior year. However, with revenue growing at 12.1%, the slower profit growth suggests some pressure on profitability.

This is reflected in the company's operating margin, which dipped slightly from 20.4% in Q2 2024 to 19.8% in Q2 2025. A look at the expense lines reveals why:

• Cost of Services: As a percentage of revenue, the direct costs of service—things like labor, materials, and fleet expenses—ticked up slightly from 46.0% to 46.2%.
• Sales, General & Administrative (SG&A): These overhead costs, which include marketing and administrative salaries, also rose from 30.4% to 30.8% of revenue.

While these shifts are minor, they indicate that the costs of growing the business, including integrating new acquisitions and managing expenses like insurance and vehicle fleets, are rising a bit faster than revenue.

A Look at the Balance Sheet

The company's growth-by-acquisition strategy is also visible on its balance sheet. Goodwill—an intangible asset representing the premium paid for acquisitions above the fair value of their assets—increased from $1.16 billion at the end of 2024 to $1.34 billion as of June 30, 2025, largely due to the Saela deal.

To fund its growth, Rollins has also adjusted its capital structure. The company's cash flow statement shows it issued nearly $500 million in new long-term senior notes, using the proceeds to pay down its revolving credit line and fund acquisitions.

The Takeaway

Rollins is successfully executing an aggressive growth plan, delivering double-digit revenue increases through a combination of strong organic demand and strategic acquisitions. The company's ability to generate cash from its operations remains strong, providing a solid foundation for its strategy.

The primary challenge ahead will be managing costs and efficiently integrating its newly acquired businesses to prevent further margin erosion. In the competitive and labor-intensive service industry, balancing expansion with profitability is the key to long-term value creation. Investors will be watching closely to see if Rollins can maintain its growth trajectory while keeping a firm hand on expenses.