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    ROL
    Earnings call· Mar 2026(Q1 FY26)

    ROLLINS Q1 FY26 earnings call ROL

    Apr 23, 2026 Source

    Executive summary

    Rollins Q1 FY26 — Strong Organic Growth and Strategic M&A

    Rollins delivered a solid Q1 FY26, overcoming early-quarter weather impacts to achieve strong organic growth, particularly in March. The company's strategic investments in staffing and M&A, including the Romex acquisition, position it for continued growth into peak season, despite short-term profitability headwinds from insurance and staffing. Management remains confident in its full-year organic growth and margin improvement outlook.

    Highlights

    5

    • Total revenue grew 10.2% year-over-year, with organic growth of 6.6% and a March exit rate exceeding 8%.

    • Adjusted net income increased 9.1% to $113 million, or $0.24 per share.

    • Free cash flow conversion was over 100%, reaching approximately 140% excluding one-time tax and interest payment impacts.

    • Strategic acquisition of Romex Pest Control, a top 40 pest management company, expanded market presence and service offerings.

    • Commercial pest control revenue rose 9.6% with 7.7% organic growth, driven by strategic investments and new customer wins.

    Concerns

    3

    • Gross margins decreased 60 basis points to 50.8%, primarily due to lower vehicle gains (50 bps headwind), higher insurance and claims (30 bps headwind), and service payroll costs (20 bps headwind).

    • SG&A costs as a percentage of revenue increased 70 basis points, impacted by incremental selling investments (50 bps headwind) and higher insurance and claims (20 bps headwind).

    • Unfavorable weather in January negatively impacted organic growth, particularly in the residential segment, which grew 4.2% organically for the quarter.

    Guidance & targets

    6
    CategoryTargetConfidence
    Effective tax rate
    under 25%
    medium materiality
    High
    M&A contribution to revenue growth
    2% to 3%
    medium materiality
    High
    Organic growth
    7% to 8%
    high materiality
    High
    Free cash flow conversion
    above 100%
    medium materiality
    High
    Fuel costs as percentage of sales
    below 2%
    low materiality
    Medium
    Price contribution to growth
    3% to 4%
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Residential
    Experienced strong sequential improvement in March after being negatively impacted by unfavorable weather in January.
    Organic growth: 4.2% (Q1 FY26)Organic growth in March: over 7%
    		increased 9.3%———
    Commercial Pest Control
    Delivered solid growth, supported by strategic investments in dedicated commercial division and new customer wins across key verticals.
    Organic growth: 7.7% (Q1 FY26)
    		rose 9.6%———
    Termite and Ancillary
    Showed strong growth, with ancillary services seeing great demand. Cross-selling efforts are going well across the brand portfolio.
    Organic growth: almost 10% (Q1 FY26)
    		increased by 13.5%———

    Operational metrics

    23
    Total revenue growth
    10.2%YoY
    Q1 FY26

    Solid start to the year with improving growth profile.

    Organic growth
    6.6%YoY
    Q1 FY26

    Negatively impacted by unfavorable weather in January, but saw strong sequential improvement.

    Total growth
    approximately 12%YoY
    March FY26

    Strong performance in the month of March.

    Organic growth
    over 8%YoY
    March FY26

    Strong exit rate for the month of March.

    Gross margins
    50.8%decrease of 60 basis points
    Q1 FY26

    Lower volume in the first part of the quarter coupled with higher insurance and claims activity were headwinds.

    Fuel costs
    approximately 1.5%relatively neutral impact
    Q1 FY26

    Represents approximately 1.5% of sales, with a relatively neutral impact in the quarter.

    SG&A costs as percentage of revenue
    increased by 70 basis pointsYoY
    Q1 FY26

    Increased versus last year due to incremental selling investments and higher insurance and claims costs.

    GAAP operating income
    $145 millionup 2% YoY
    Q1 FY26

    First quarter GAAP operating income.

    Adjusted operating income
    $153 millionup 4% YoY
    Q1 FY26

    First quarter adjusted operating income.

    Adjusted EBITDA
    $179 millionup 4.4% YoY
    Q1 FY26

    First quarter adjusted EBITDA.

    Effective tax rate
    21.3%versus 23.5%
    Q1 FY26

    Reflects benefits of windfall tax benefits and tax team efforts.

    GAAP net income
    $108 million
    Q1 FY26

    First quarter GAAP net income.

    Non-GAAP pretax adjustments
    approximately $7 million
    Q1 FY26

    Associated with acquisition-related and other items.

    Adjusted net income
    $113 millionincreasing 9.1% YoY
    Q1 FY26

    First quarter adjusted net income.

    Free cash flow conversion
    over 100%
    Q1 FY26

    Percentage of income converted into cash flow. Negatively impacted by timing of tax payments and transition to semiannual interest payments.

    Acquisitions spend
    $18 million
    Q1 FY26

    Total spend on acquisitions during the quarter.

    Dividends paid
    $88 million
    Q1 FY26

    Total dividends paid in the first quarter.

    Leverage ratio
    0.9x
    Q1 FY26

    Balance sheet remains very healthy.

    M&A contribution to revenue growth
    3.6%
    Q1 FY26

    Bolstered by the Sala acquisition from the prior year; expected to moderate for the full year.

    Technician turnover
    making great strides
    Q1 FY26

    Improvements in short-term technician retention, especially for new hires.

    Residential customer retention
    modest improvements
    Q1 FY26

    Modest improvements seen across the business as of Q1 exit.

    Commercial customer retention
    very strong, very stable
    Q1 FY26

    Commercial side of retention remains very strong and stable.

    Commercial account sales managers
    almost 80 moreYoY
    Q1 FY26

    Increased headcount at the beginning of the year compared to Q1 last year, contributing to new wins.

    Industry KPIs

    6
    MetricValueDetails
    Volume6.6%%
    Core price3% to 4%%
    EBITDA margin19.8%%
    Churn retentionmodest improvements
    Safety turnovermaking great strides
    Price to cost spreadpositive

    Deals & partnerships

    1
    Romex Pest ControlAcquisition of a top 40 pest management company, providing entry points into new markets and enabling scaling and service expansion for Romex. Romex has a strong people and customer-focused culture.

    Announced earlier this month, the acquisition of Romex Pest Control, a top 40 pest management company according to PCT Top 100 rankings. Romex provides entry points into new markets while enabling them to further scale their operations and expand service offerings to their existing customer base. Rollins is excited to leverage its knowledge and expertise to help Romex expand its depth of relationship with customers.

    Risks & headwinds

    4
    Higher insurance and claims activityOngoing, some claims 3-5 years old, expected to deal with for 'several years now'.

    30 bps headwind to gross margin, 20 bps headwind to SG&A in Q1 FY26.

    Mitigation: Investments in driving safety, piloting programs to reduce collision/injury frequency rates, aiming to change the trajectory of this cost component long-term.

    Lower vehicle gains (fleet line)Expected to improve in Q2 FY26.

    50 bps headwind to gross profit margin in Q1 FY26.

    Mitigation: Implied to be a temporary impact that will normalize in subsequent quarters.

    Service payroll costs (carrying technicians ahead of peak season)Short-term impact in Q1, sets up for peak season.

    20 bps headwind to gross margins in Q1 FY26.

    Mitigation: Strategic decision to maintain healthy staffing levels to avoid high turnover and negative customer experience, ensuring readiness for seasonal demand ramp-up.

    Unfavorable weatherQ1 FY26, particularly January.

    Negatively impacted organic growth in January FY26.

    Mitigation: Business recovered strongly in March, indicating a temporary impact. Management saw through the temporary challenge and maintained staffing.

    What to watch in Q2 FY26

    5

    Organic growth rate

    Next quarter (Q2 FY26)
    Current6.6% for Q1 FY26, >8% exit rate in March FY26
    Target7% to 8% for the year

    Why it matters

    Verifies underlying demand trends and sustainability of March's strong performance, crucial for achieving full-year guidance.

    We continue to expect organic growth in the 7% to 8% range for the year with growth from M&A up 2% to 3%.

    Q&A highlights

    6

    Is the strong March exit rate (over 8% organic growth) primarily due to normalization from early-quarter weather or underlying demand trends suggesting a higher organic base for the rest of the year?

    Management is confident in the March exit rate and the full-year organic growth outlook of 7-8%. The improvement from Q4 to Q1 reaffirms this confidence, with strong demand seen across services, particularly residential which grew over 7% organically in March.

    “We feel good about the exit rate. We feel good about our business. The improvement of 90 basis points from Q4 to Q1, reaffirms the confidence we have in our outlook.”

    asked by Unknown Analyst · answered by Kenneth Krause

    2 min read5 chapters

    Detailed Narrative

    01

    Operational Efficiency and Staffing Strategy

    Rollins strategically maintained healthy staffing levels ahead of peak season, absorbing short-term profitability pressure from higher service payroll costs (20 bps headwind to gross margin) to avoid high turnover and negative customer experience associated with extreme hiring swings. This approach, though impacting Q1 margins, is seen as crucial for long-term business health and capitalizing on peak season demand, as evidenced by strong March performance.

    02

    M&A Strategy and Romex Acquisition

    The acquisition of Romex Pest Control, a top 40 pest management company, expands Rollins' market presence and service offerings. This deal exemplifies Rollins' disciplined M&A playbook, integrating high-quality businesses that align with its people- and customer-focused culture, leveraging the competitive differentiator of its multi-brand portfolio. The company sees opportunities to expand Romex's service offerings using Rollins' expertise.

    03

    Commercial Segment Momentum

    The company is encouraged by the momentum in its commercial business, attributing solid growth to strategic investments in resources for its dedicated Orkin Commercial division. These resources are yielding new customer wins across key verticals and channels, including local sales and national accounts, contributing to overall growth and providing optimism for the remainder of the year as new business converts to recurring revenue.

    04

    Insurance and Claims Headwinds

    Higher insurance and claims activity presented a significant headwind to profitability, impacting both gross margins (30 bps) and SG&A (20 bps). Management acknowledges the volatility and long-term nature of these claims, with some dating back several years, and expects to deal with this for a while. However, positive lead indicators from ongoing safety investments, particularly in driving safety, are expected to improve the long-term trajectory.

    05

    Cash Flow Performance Drivers

    While reported operating cash flow was $118 million and free cash flow $111 million, performance was negatively impacted by the timing of📎 tax payments related to tax credit planning and the transition to semiannual interest payments on 2035 senior notes. Excluding these items📎, free cash flow would have increased 14% year-over-year with a conversion rate of approximately 140%, demonstrating underlying healthy cash generation.

    AI-generated summary of the company’s earnings call. Not investment advice.