ROLLINS, INC. AND SUBSIDIARIES

PART 1 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION


	March 31, 2023		December 31, 2022
ASSETS
Cash and cash equivalents	$	112,503	$	95,346
Trade receivables, net of allowance for expected credit losses of $12,476 and $14,073, respectively	150,426		155,759
Financed receivables, short-term, net of allowance for expected credit losses of $1,935 and $1,768, respectively	38,599		33,618
Materials and supplies	30,859		29,745
Other current assets	35,479		34,151
Total current assets	367,866		348,619
Equipment and property, net of accumulated depreciation of $339,885 and $333,298, respectively	124,117		128,046
Goodwill	852,800		846,704
Customer contracts, net	296,494		298,559
Trademarks & tradenames, net	111,353		111,646
Other intangible assets, net	7,402		8,543
Operating lease right-of-use assets	274,540		277,355
Financed receivables, long-term, net of allowance for expected credit losses of $3,541 and $3,200, respectively	62,962		63,523
Other assets	41,352		39,033
Total assets	$	2,138,886	$	2,122,028
LIABILITIES
Accounts payable	$	39,073	$	42,796
Accrued insurance - current	40,816		39,534
Accrued compensation and related liabilities	67,761		99,251
Unearned revenues	167,564		158,092
Operating lease liabilities - current	83,981		84,543
Current portion of long-term debt	—		15,000
Other current liabilities	68,161		54,568
Total current liabilities	467,356		493,784
Accrued insurance, less current portion	40,582		38,350
Operating lease liabilities, less current portion	194,860		196,888
Long-term debt	62,432		39,898
Other long-term accrued liabilities	85,904		85,911
Total liabilities	851,134		854,831
Commitments and contingencies (see Note 11)
STOCKHOLDERS’ EQUITY
Preferred stock, without par value; 500,000 shares authorized, zero shares issued	—		—
Common stock, par value $1 per share; 800,000,000 shares authorized, 492,787,005 and 492,447,997 shares issued and outstanding, respectively	492,787		492,448
Additional paid in capital	115,018		119,242
Accumulated other comprehensive loss	(31,303)		(31,562)
Retained earnings	711,250		687,069
Total stockholders’ equity	1,287,752		1,267,197
Total liabilities and stockholders’ equity	$	2,138,886	$	2,122,028

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended March 31,
		2023		2022
REVENUES
Customer services		$	658,015	$	590,680
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		326,842		295,378
Sales, general and administrative		196,431		178,785
Depreciation and amortization		22,502		23,127
Total operating expenses		545,775		497,290
OPERATING INCOME		112,240		93,390
Interest expense, net		465		568
Other (income), net		(4,714)		(1,279)
CONSOLIDATED INCOME BEFORE INCOME TAXES		116,489		94,101
PROVISION FOR INCOME TAXES		28,255		20,335
NET INCOME		$	88,234	$	73,766
NET INCOME PER SHARE - BASIC AND DILUTED		$	0.18	$	0.15
Weighted average shares outstanding - basic		492,516		492,213
Weighted average shares outstanding - diluted		492,701		492,325
DIVIDENDS PAID PER SHARE		$	0.13	$	0.10

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended March 31,
		2023		2022
NET INCOME		$	88,234	$	73,766
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		97		3,127
Unrealized gain (loss) on available for sale securities		162		(590)

Other comprehensive income (loss), net of tax		259		2,537
Comprehensive income		$	88,493	$	76,303

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Accumulated Other

Common Stock

Paid-in-

Comprehensive

Retained


Shares

Amount

Capital

Income / (Loss)

Earnings

Total
Balance at December 31, 2021

491,911

$
491,911

$
105,629

$
(16,411)

$
500,919

$
1,082,048
Net Income

—

—

—

—

72,445

72,445
Other comprehensive income / (loss), net of tax:








Foreign currency translation adjustments

—

—

—

3,127

—

3,127
Unrealized losses on available for sale securities

—

—

—

(590)

—

(590)
Cash dividends

—

—

—

—

(49,205)

(49,205)
Stock compensation

757

757

5,381

—

—

6,138
Employee stock buybacks

(207)

(207)

(6,227)

—

—

(6,434)
Balance at March 31, 2022

492,461

$
492,461

$
104,783

$
(13,874)

$
524,159

$
1,107,529

Accumulated Other

Common Stock

Paid-in-

Comprehensive

Retained


Shares

Amount

Capital

Income / (Loss)

Earnings

Total
Balance at December 31, 2020

491,612

$
491,612

$
101,757

$
(10,897)

$
358,888

$
941,360
Net Income

—

—

—

—

92,643

92,643
Other comprehensive income / (loss), net of tax:








Foreign currency translation adjustments

—

—

—

(421)

—

(421)
Change in derivatives

—

—

—

163

—

163
Cash dividends

—

—

—

—

(39,389)

(39,389)
Stock compensation

768

768

3,153

—

—

3,921
Employee stock buybacks

(256)

(256)

(9,086)

—

—

(9,342)
Balance at March 31, 2021

492,124

$
492,124

$
95,824

$
(11,155)

$
412,142

$
988,935


	Common Stock			Paid-in- Capital		Accumulated Other Comprehensive Income / (Loss)		Retained Earnings		Total
	Shares	Amount
Balance at December 31, 2022	492,448	$	492,448	$	119,242	$	(31,562)	$	687,069	$	1,267,197
Net Income								88,234		88,234
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments	—	—		—		97		—		97
Unrealized gain on available for sale securities	—	—		—		162		—		162
Cash dividends	—	—		—		—		(64,053)		(64,053)
Stock compensation	601	601		5,346		—		—		5,947
Employee stock buybacks	(262)	(262)		(9,570)		—		—		(9,832)
Balance at March 31, 2023	492,787	$	492,787	$	115,018	$	(31,303)	$	711,250	$	1,287,752


	Common Stock			Paid-in- Capital		Accumulated Other Comprehensive Income / (Loss)		Retained Earnings		Total
	Shares	Amount
Balance at December 31, 2021	491,911	$	491,911	$	105,629	$	(16,411)	$	530,088	$	1,111,217
Net Income								73,766		73,766
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments						3,127				3,127
Unrealized loss on available for sale securities						(590)				(590)
Cash dividends								(49,205)		(49,205)
Stock compensation	757	757		5,381				—		6,138
Employee stock buybacks	(207)	(207)		(6,227)				—		(6,434)
Balance at March 31, 2022	492,461	$	492,461	$	104,783	$	(13,874)	$	554,649	$	1,138,019

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

Three Months Ended

March 31,


2022

2021

OPERATING ACTIVITIES





Net income

$
72,445

$
92,643

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

24,847

23,596

Stock-based compensation expense

6,138

3,921

Provision for expected credit losses

4,257

2,686

Gain on sale of assets, net

(1,279)

(32,260)

Provision for deferred income taxes

2,046

(2,039)

Changes in operating assets and liabilities:

Trade accounts receivable and other accounts receivable

(1,440)

471

Financing receivables

(707)

624

Materials and supplies

151

(2,011)

Other current assets

(3,629)

(4,604)

Accounts payable and accrued expenses

(16,934)

26,618

Unearned revenue

11,294

9,680

Other long-term assets and liabilities

(9,657)

161

Net cash provided by operating activities

87,532

119,486

INVESTING ACTIVITIES





Acquisitions, net of cash acquired

(13,223)

(16,978)

Capital expenditures

(7,995)

(7,826)

Proceeds from sale of assets

1,290

65,101

Other investing activities, net

—

(154)

Net cash (used in) provided by investing activities

(19,928)

40,143

FINANCING ACTIVITIES



Payment of contingent consideration

(3,051)

(4,926)

Borrowings under term loan

251,783

—

Borrowings under revolving commitment

11,000

3,500

Repayments of term loan

(4,000)

(21,000)

Repayments of revolving commitment

(118,000)

(70,500)

Payment of dividends

(49,205)

(39,389)

Cash paid for common stock purchased

(6,434)

(9,342)

Net cash provided by (used in) financing activities

82,093

(141,657)

Effect of exchange rate changes on cash

3,340

873

Net increase in cash and cash equivalents

153,037

18,845

Cash and cash equivalents at beginning of period

105,301

98,477

Cash and cash equivalents at end of period

$
258,338

$
117,322

Supplemental disclosure of cash flow information:





Cash paid for interest

$
753

$
663

Cash paid for income taxes, net

$
11,962

$
719

Non-cash additions to operating lease right-of-use assets

$
17,937

$
60,389

Three Months Ended
March 31,
2023 2022
OPERATING ACTIVITIES
Net income $ 88,234 $ 73,766
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 22,502 23,127
Stock-based compensation expense 5,947 6,138
Provision for expected credit losses 3,896 4,257
Gain on sale of assets, net (4,714) (1,279)
Provision for deferred income taxes 6,929 2,445
Changes in operating assets and liabilities:
Trade accounts receivable and other accounts receivable 1,533 (1,440)
Financing receivables (4,421) (707)
Materials and supplies (1,043) 151
Other current assets (1,501) (3,629)
Accounts payable and accrued expenses (17,548) (16,934)
Unearned revenue 8,656 11,294
Other long-term assets and liabilities (7,697) (9,657)
Net cash provided by operating activities 100,773 87,532
INVESTING ACTIVITIES
Acquisitions, net of cash acquired (15,480) (13,223)
Capital expenditures (7,636) (7,995)
Proceeds from sale of assets 8,886 1,290
Other investing activities, net 640 —
Net cash (used in) investing activities (13,590) (19,928)
FINANCING ACTIVITIES
Payment of contingent consideration (4,098) (3,051)
Borrowings under term loan — 251,783
Borrowings under revolving commitment 180,000 11,000
Repayments of term loan (55,000) (4,000)
Repayments of revolving commitment (115,000) (118,000)
Payment of dividends (64,053) (49,205)
Cash paid for common stock purchased (11,443) (6,434)
Other financing activities, net (1,488) —
Net cash (used in) provided by financing activities (71,082) 82,093
Effect of exchange rate changes on cash 1,056 3,340
Net increase in cash and cash equivalents 17,157 153,037
Cash and cash equivalents at beginning of period 95,346 105,301
Cash and cash equivalents at end of period $ 112,503 $ 258,338
Supplemental disclosure of cash flow information:
Cash paid for interest $ 429 $ 753
Cash paid for income taxes, net $ 12,572 $ 11,962
Non-cash additions to operating lease right-of-use assets $ 20,828 $ 17,937

The accompanying notes are an integral part of these condensed consolidated financial statements.

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ROLLINS, INC. AND SUBSIDIARIES

NOTE 1.BASIS OF PREPARATION

Basis of Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, the instructions to Form 10-Q and applicable sections of SEC regulation S-X, and therefore do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Effective January 1, 2023, we reorganized our reporting structure including the transition of Jerry E. Gahlhoff, Jr. to the role of Chief Executive Officer. As a result of the transition, we reevaluated our segment reporting and determined that we now have two operating segments and two goodwill reporting units, but we continue to operate under one reportable segment which contains our residential, commercial, and termite business lines. As of January 1, 2023, we performed an assessment of whether there was an indication of impairment before and after the reorganization. In that analysis, we determined that no goodwill impairment existed. There have been no material changes in the Company’s significant accounting policies or the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Rollins, Inc. (including its subsidiaries unless the context otherwise requires, “Rollins,” “we,” “us,” “our,” or the “Company”) for the year ended December 31, ~~2021.~~2022. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the ~~2021~~2022 Annual Report on Form 10-K.

The ~~preparation of~~Company’s condensed consolidated financial statements ~~in conformity with U.S. GAAP requires management to make~~reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities ~~revenue~~ and ~~expenses and certain~~related disclosures as of the date of the condensed consolidated financial statement disclosures. Estimates and assumptions are used for, but not limited to, accrued insurance, revenue recognition, right-of-use ("ROU") asset and liability valuations, accounts and financing receivable reserves, inventory valuation, employee benefit plans, income tax contingency accruals and valuation allowances, contingency accruals and goodwill and other intangible asset valuations. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

statements. The Company considered the impact of ~~COVID-19~~economic trends on the assumptions and estimates used in preparing the condensed consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the quarter have been made. These adjustments are of a normal recurring nature but complicated by the continued uncertainty surrounding ~~the global~~ economic ~~impact of COVID-19.~~trends. The results of operations for the three months ended March 31, ~~2022~~2023 are not necessarily indicative of results for ~~future years.~~the entire year. The severity, magnitude and duration ~~as well as the~~of certain economic ~~consequences of COVID-19,~~trends, continue to be uncertain and are ~~uncertain, rapidly changing and~~ difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to ~~COVID-19~~economic trends and may change materially in future periods.

Certain condensed consolidated financial statement amounts relative to the prior period have been revised as detailed in our annual report on Form 10-K for the year ended December 31, 2022. The ~~Company operates as 1 reportable segment~~impact of this revision on the Company's previously reporting condensed consolidated financial statements for the three months ended March 31, 2022 includes a decrease to depreciation and amortization expense of $1.7 million and an increase in the ~~results~~provision for income tax expense of ~~operations~~$0.4 million. This revision affects these specific line items and ~~its financial condition are not reliant upon any single customer.~~

subtotals within the consolidated statements of income, comprehensive income, stockholders' equity and cash flows.

NOTE 2.RECENT ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting standards

In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance.” The amendments in this Update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. The amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2021. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

~~Accounting standards issued but not yet adopted~~

In March 2022, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The amendments in this Update eliminate the accounting guidance for troubled

~~ROLLINS, INC. AND SUBSIDIARIES~~

debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, for public business entities, the amendments in this Update require that an entity disclose current-period gross write-offs by year of origination for financing receivables. ASU 2022-02 iswas effective for fiscal years beginning after December 15, 2022. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Accounting standards issued but not yet adopted

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurements of Equity Securities Subject to Contractual Sale Restrictions.” The amendments in this Update clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. This Update also introduces new disclosure requirements for equity securities subject to contractual sale

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ROLLINS, INC. AND SUBSIDIARIES

restrictions that are measured at fair value. These amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years. The Company does not currently own any equity securities and therefore the adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3.ACQUISITIONS

The Company made 8six acquisitions during the three-month period ended March 31, ~~2022, and 39 acquisitions for the year ended December 31, 2021. For the 8 acquisitions completed through March 31, 2022, the~~2023. The preliminary values of major classes of assets acquired and liabilities assumed recorded at the dates of acquisition, as adjusted during the valuation period, are included in the reconciliation of the total consideration as follows (in thousands):

March 31, 2022

Accounts receivable, net

$
88

Materials and supplies

149

Equipment and property

1,148

Goodwill

4,455

Customer contracts

8,165

Trademarks & tradenames

2

Other intangible assets

405

Current liabilities

(30)

Other assets and liabilities, net

17

Total consideration paid

$
14,399

Less: Contingent consideration liability

(1,176)

Total cash purchase price

$
13,223


	March 31, 2023
Accounts receivable	$	33
Materials and supplies	86
Equipment and property	1,171
Goodwill	6,050
Customer contracts	10,086

Other intangible assets	160
Current liabilities	(62)
Other assets and liabilities, net	(744)
Total consideration	$	16,780
Less: Acquisition holdback liabilities	(1,300)
Total cash purchase price	$	15,480

Goodwill from acquisitions represents the excess of the purchase price over the fair value of net assets of businesses acquired. The factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized. For the ~~period~~three months ended March 31, ~~2022, $4.5~~2023, $6.1 million of goodwill was added related to the 8six acquisitions noted above. The recognized goodwill is expected to be deductible for tax purposes. The purchase price allocations for these acquisitions are preliminary until the Company obtains final information regarding these fair values.

NOTE 4.REVENUE

~~The following tables present~~

Revenue, classified by the major geographic areas in which our ~~revenues disaggregated~~customers are located, was as follows:


	Three Months Ended March 31,
	2023		2022
(in thousands)
United States	$	609,311	$	546,460
Other countries	48,704		44,220
Total Revenues	$	658,015	$	590,680

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ROLLINS, INC. AND SUBSIDIARIES

Revenue from external customers, classified by ~~revenue source (in thousands).~~

significant product and service offerings, was as follows:


	Three Months Ended March 31,
(in thousands)	2023		2022
Residential revenue	$	283,625	$	259,259
Commercial revenue	230,402		205,787
Termite completions, bait monitoring, & renewals	136,605		119,706
Franchise revenues	3,787		3,737
Other revenues	3,596		2,191
Total Revenues	$	658,015	$	590,680

Sales and usage-based taxes are excluded from revenues. No sales to an individual customer or in a country other than the United States accounted for 10% or more of the sales for the periods listed onin the following table.

~~Revenue, classified by the major geographic areas in which our customers are located, was as follows:~~

Three Months Ended

March 31,

2022

2021

(in thousands)

United States

$
546,460

$
494,100

Other countries

44,220

41,454

Total Revenues

$
590,680

$
535,554

~~ROLLINS, INC. AND SUBSIDIARIES~~

~~Revenue from external customers, classified by significant product and service offerings, was as follows:~~

Three Months Ended

March 31,

(in thousands)

2022

2021

Residential revenue

$
259,259

$
235,179

Commercial revenue

205,787

188,697

Termite completions, bait monitoring, & renewals

119,706

105,694

Franchise revenues

3,737

3,459

Other revenues

2,191

2,525

Total Revenues

$
590,680

$
535,554

The Company records unearned revenue when we have either received payment or contractually have the right to bill for services in advance of the services or performance obligations being performed. ~~Deferred~~Unearned revenue recognized in the three months ended March 31, 2023 and 2022 ~~and 2021~~ was ~~$49.9~~$55.5 million and ~~$45.8~~$49.9 million, respectively. Changes in unearned revenue were as follows:

Three Months Ended March 31,



2022

2021
(in thousands)

Beginning balance

$
168,607

$
149,224
Deferral of unearned revenue

61,635

55,379
Recognition of unearned revenue

(49,909)

(45,837)
Ending balance

$
180,333

$
158,766


	Three Months Ended March 31,
	2023		2022
(in thousands)
Beginning balance	$	187,994	$	168,607
Deferral of unearned revenue	65,626		61,635
Recognition of unearned revenue	(55,466)		(49,909)
Ending balance	$	198,154	$	180,333

As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, the Company had long-term unearned revenue of ~~$23.8~~$30.6 million and ~~$18.4~~$29.9 million, respectively, recorded in other long-term accrued liabilities. Unearned short-term revenue is recognized over the next 12-month period. The majority of unearned long-term revenue is recognized over a period of five years or less with immaterial amounts recognized through ~~2032.~~

2033.

NOTE 5.ALLOWANCE FOR CREDIT LOSSES

The Company is exposed to credit losses primarily related to accounts receivables and financed receivables derived from customer services revenue. To reduce credit risk for residential pest control accounts receivable, we promote enrollment in our auto-pay programs. In general, we may suspend future services for customers with past due balances. The Company’s credit risk is generally low with a large number of individuals and entities comprising Rollins’ customer base and dispersion across many different geographical regions.

The Company manages its financing receivables on an aggregate basis when assessing and monitoring credit risks. The Company’s established credit evaluation and monitoring procedures seek to minimize the amount of business we conduct with higher risk customers. The credit quality of a potential obligor is evaluated at the loan origination based on an assessment of the individual’s Beacon/credit bureau score. Rollins requires a potential obligor to have good credit worthiness with low risk before entering into a contract. Depending upon the individual’s credit score, the Company may accept with 100% financing, or require a significant down payment or turn down the contract. Delinquencies of accounts are monitored each month. Financing receivables include installment receivable amounts, some of which are due subsequent to one year from the balance sheet dates.

The Company’s allowances for credit losses for trade accounts receivable and financed receivables are developed using historical collection experience, current economic and market conditions, reasonable and supportable forecasts, and a review of the current status of customers’ receivables. The Company’s receivable pools are classified between residential customers, commercial customers, large commercial customers, and financed receivables. Accounts are ~~written-off~~written off against

~~ROLLINS, INC. AND SUBSIDIARIES~~

the allowance for credit losses when the Company determines that amounts are uncollectible, and recoveries of amounts

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previously written off are recorded when collected. The Company stops accruing interest to these receivables when they are deemed uncollectible. Below is a roll forward of the Company’s allowance for credit losses for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 (in thousands).

Allowance for Credit Losses


Trade

Financed

Total

Receivables

Receivables

Receivables
Balance at December 31, 2021

$
13,885

$
3,985

$
17,870
Provision for expected credit losses

3,204

1,054

4,258
Write-offs charged against the allowance

(4,248)

(1,189)

(5,437)
Recoveries collected

1,329

—

1,329
Balance at March 31, 2022

$
14,170

$
3,850

$
18,020

Allowance for Credit Losses

Trade

Financed

Total


Receivables

Receivables

Receivables
Balance at December 31, 2020

$
16,854

$
3,231

$
20,085
Provision for expected credit losses

1,865

821

2,686
Write-offs charged against the allowance

(4,099)

(682)

(4,781)
Recoveries collected

1,111

—

1,111
Balance at March 31, 2021

$
15,731

$
3,370

$
19,101


	Allowance for Credit Losses
	Trade Receivables		Financed Receivables		Total Receivables
Balance at December 31, 2022	$	14,073	$	4,968	$	19,041
Provision for expected credit losses	1,461		2,435		3,896
Write-offs charged against the allowance	(4,687)		(1,927)		(6,614)
Recoveries collected	1,629		—		1,629
Balance at March 31, 2023	$	12,476	$	5,476	$	17,952


	Allowance for Credit Losses
	Trade Receivables		Financed Receivables		Total Receivables
Balance at December 31, 2021	$	13,885	$	3,985	$	17,870
Provision for expected credit losses	3,204		1,054		4,258
Write-offs charged against the allowance	(4,248)		(1,189)		(5,437)
Recoveries collected	1,329		—		1,329
Balance at March 31, 2022	$	14,170	$	3,850	$	18,020

NOTE 6.GOODWILL AND INTANGIBLE ASSETS

The following table summarizes changes in goodwill during the three months ended March 31, ~~2022~~2023 and the twelve months ended December 31, ~~2021:~~

Goodwill (in thousands):



Balance at December 31, 2020

$
653,176
Additions

69,264
Adjustments due to currency translation

(621)
Balance at December 31, 2021

721,819
Additions

4,455
Measurement adjustments

2,572
Adjustments due to currency translation

1,293
Balance at March 31, 2022

$
730,139

2022 (in thousands):


Goodwill:
Balance at December 31, 2021	$	786,504
Additions	64,997
Measurement adjustments	(9)
Adjustments due to currency translation	(4,788)
Balance at December 31, 2022	846,704
Additions	6,050
Measurement adjustments	—
Adjustments due to currency translation	46
Balance at March 31, 2023	$	852,800

The carrying amount of goodwill in foreign countries was ~~$83.3~~$98.0 million as of March 31, ~~2022~~2023 and ~~$82.1~~$97.4 million as of December 31, ~~2021.~~

~~The Company completed its most recent annual impairment analysis as~~2022.

Table of ~~September 30, 2021. Based upon the results of this analysis, the Company concluded that no impairment of its goodwill or other intangible assets was indicated.~~

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ROLLINS, INC. AND SUBSIDIARIES

The following table sets forth the components of indefinite-lived and amortizable intangible assets as of March 31, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):

March 31, 2022

December 31, 2021

Accumulated

Carrying

Accumulated
Carrying

Useful Life

Gross

Amortization

Value

Gross

Amortization

Value

in Years
Amortizable intangible assets:

Customer contracts

$
557,164

$
(238,358)

$
318,806

$
551,277

$
(225,348)

$
325,929

3-20
Trademarks and tradenames

12,904

(6,783)

6,121

12,784

(6,492)

6,292

7-20
Non-compete agreements

13,362

(6,364)

6,998

13,125

(5,573)

7,552

3-20
Patents

6,946

(6,502)

444

6,946

(5,509)

1,437

3-15
Other assets

2,217

(1,796)

421

2,150

(1,687)

463

10
Total amortizable intangible assets

$
592,593

$
(259,803)

332,790

$
586,282

$
(244,609)

341,673


Indefinite-lived intangible assets:






Trademarks and tradenames

103,399

102,684


Internet domains

2,227

2,227


Total indefinite-lived intangible assets

105,626

104,911


Total customer contracts and other intangible assets

$
438,416

$
446,584


	March 31, 2023						December 31, 2022
	Gross		Accumulated Amortization		Carrying Value		Gross		Accumulated Amortization		Carrying Value		Useful Life in Years
Amortizable intangible assets:
Customer contracts	$	504,980	$	(208,486)	$	296,494	$	502,689	$	(204,130)	$	298,559	3-20
Trademarks and tradenames	17,516		(10,346)		7,170		17,351		(10,009)		7,342		7-20
Non-compete agreements	13,923		(8,943)		4,980		14,180		(8,226)		5,954		3-20
Patents	6,916		(6,896)		20		6,934		(6,802)		132		3-15
Other assets	1,980		(1,805)		175		2,016		(1,786)		230		10
Total amortizable intangible assets	$	545,315	$	(236,476)	308,839		$	543,170	$	(230,953)	312,217
Indefinite-lived intangible assets:
Trademarks and tradenames					104,183						104,304
Internet domains					2,227						2,227
Total indefinite-lived intangible assets					106,410						106,531
Total customer contracts and other intangible assets					$	415,249					$	418,748

The carrying amount of customer contracts in foreign countries was ~~$40.9~~$45.3 million and ~~$42.1~~$46.1 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The carrying amount of trademarks and tradenames in foreign countries was ~~$2.8 million and $2.9~~$4.2 million as of March 31, ~~2022~~2023 and December 31, ~~2021, respectively.~~2022. The carrying amount of other intangible assets in foreign countries was $0.6 million and $0.7 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Amortization expense related to intangible assets was ~~$15.1~~$14.0 million and ~~$13.1~~$13.4 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. Customer contracts and other amortizable intangible assets are amortized on a straight-line basis over their economic useful lives.

Estimated amortization expense for the existing carrying amount of customer contracts and other intangible assets for each of the five succeeding fiscal years as of March 31, ~~2022~~2023 are as follows:

(in thousands)



2022 (excluding the three months ended March 31, 2022)

$
44,867
2023

55,441
2024

51,857
2025

42,806
2026

38,422

(in thousands)
2023 (excluding the three months ended March 31, 2023) $ 45,487
2024 57,542
2025 48,732
2026 45,214
2027 41,550

NOTE 7.LEASES

The Company leases certain buildings, vehicles, and ~~equipment in order to reduce the risk associated with ownership and to maximize working capital utilization.~~equipment. The Company elected the practical expedient approach permitted under ~~ASC~~Accounting Standards Codification Topic 842 “Leases”, not to include short-term leases with a duration of 12 months or less on the balance sheet. As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, all leases were classified as operating leases. Building leases generally carry terms of 5 to 15 years with annual rent escalations at fixed amounts per the lease. Vehicle leases generally carry a fixed term of one year with renewal options to extend the lease on a monthly basis resulting in lease terms up to 7 years depending on the class of vehicle. The exercise of renewal options is at the Company’s sole discretion. It is reasonably certain that the Company will exercise the renewal options on its vehicle leases. The measurement of right-of-use assets and liabilities for vehicle leases includes the fixed payments associated with such renewal periods. We separate lease and non-lease components of

~~ROLLINS, INC. AND SUBSIDIARIES~~

contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

During the three months ended March 31, 2021, the Company completed multiple sale-leaseback transactions where it sold 16 of its properties related to the Clark Pest Control acquisition for gross proceeds of $62.1 million and a pre-tax gain of $31.1 million, which is included as Other income, net on the income statement. These leases are classified as operating leases with terms of 7 to 15 years.

The Company uses the rate implicit in the lease when available; however, most of our leases do not provide a readily determinable implicit rate. Accordingly, we estimate our incremental borrowing rate based on information available at lease commencement.

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Three Months Ended March 31,

(in thousands, except Other Information)

Lease Classification

Financial Statement Classification

2022

2021

Short-term lease cost

Cost of services provided, Sales, general, and administrative expenses

$
26

$
60

Operating lease cost

Cost of services provided, Sales, general, and administrative expenses

24,023

22,634

Total lease expense

$
24,049

$
22,694

Other Information:







Weighted-average remaining lease term - operating leases

5.5 years

5.7 years

Weighted-average discount rate - operating leases

3.54
%

3.85
%
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$
23,758

$
22,457

ROLLINS, INC. AND SUBSIDIARIES


		Three Months Ended March 31,
(in thousands, except Other Information)
Lease Classification	Financial Statement Classification		2023			2022
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses		$	67		$	26
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		26,187			24,023
Total lease expense			$	26,254		$	24,049

Other Information:
Weighted-average remaining lease term - operating leases			5.0 years			5.5 years
Weighted-average discount rate - operating leases			3.73		%	3.54		%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases			$	25,965		$	23,758

Lease Commitments

Future minimum lease payments, including assumed exercise of renewal options as of March 31, ~~2022~~2023 were as follows:

Operating
(in thousands)

2022 (excluding the three months ended March 31, 2022)

$
62,839
2023

67,440
2024

43,519
2025

26,295
2026

16,493
2027

12,119
Thereafter

44,593
Total Future Minimum Lease Payments

273,298
Less: Amount representing interest

28,996
Total future minimum lease payments, net of interest

$
244,302


(in thousands)
2023 (excluding the three months ended March 31, 2023)	$	71,814
2024	75,649
2025	57,061
2026	37,087
2027	17,741
2028	12,061
Thereafter	39,726
Total future minimum lease payments	311,139
Less: Amount representing interest	32,298
Total future minimum lease payments, net of interest	$	278,841

Future commitments presented in the table above include lease payments in renewal periods for which it is reasonably certain that the Company will exercise the renewal option. Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of ~~$163.3~~$149.5 million for building leases and ~~$110.0~~$161.6 million for vehicle leases. As of March 31, ~~2022,~~2023, the Company had additional future obligations of ~~$9.5~~$10.8 million for leases that had not yet commenced.

~~ROLLINS, INC. AND SUBSIDIARIES~~

NOTE 8.FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist of cash and cash equivalents, trade receivables, financed and notes receivable, accounts payable, other short-term liabilities, and debt. The carrying amounts of these financial instruments approximate their respective fair values. The Company also has derivative instruments as further discussed in Note 10. Derivative Instruments and Hedging Activities.

The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs, and Level 3 includes fair values estimated using significant non-observable inputs.

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ROLLINS, INC. AND SUBSIDIARIES

As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, we had investments in international bonds of ~~$13.0~~$10.3 million and ~~$12.6~~$10.7 million, respectively. These bonds are accounted for as available for sale securities and are level 2 assets under the fair value hierarchy. At ~~December~~March 31, ~~2021, the entire investment~~2023, $0.7 million was ~~recorded~~included in other current assets and $9.6 million was included in other assets. At ~~March~~December 31, 2022, ~~management reassessed their intentions on the investment and~~ $0.5 million was included in other current assets and ~~$12.5~~$10.2 million was included in other assets. The bonds are recorded at fair market value with unrealized gains of $0.2 million and unrealized losses of $0.6 million included in other comprehensive income during the three months ended March 31, ~~2022.~~

2023 and 2022, respectively.

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$23.4~~$10.5 million and ~~$25.2~~$13.5 million of acquisition holdback and earnout liabilities payable to former owners of acquired companies, respectively. The earnout liabilities were discounted to reflect the expected probability of payout, and both earnout and holdback liabilities were discounted to their net present value on the Company’s books and are considered level 3 liabilities. The table below presents a summary of the changes in fair value for these liabilities.

Three Months Ended

March 31,
(in thousands)

2022

2021
Beginning balance

$
25,156

$
35,744
New acquisitions and revaluations

1,176

2,067
Payouts

(3,051)

(4,926)
Interest on outstanding contingencies

126

279
Charge offset, forfeit and other

(8)

(188)
Ending balance

$
23,399

$
32,976

Three Months Ended
March 31,
(in thousands) 2023 2022
Beginning balance $ 13,496 $ 25,156
New acquisitions and revaluations 1,300 1,176
Payouts (4,098) (3,051)
Interest on outstanding contingencies 22 126
Charge offset, forfeit and other (187) (8)
Ending balance $ 10,533 $ 23,399

NOTE 9.DEBT

On February 24, 2023, the Company entered into a revolving credit agreement ("the Credit Agreement") with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”), which refinanced its previous credit facility described below.

The Credit Agreement provides for a $1.0 billion revolving credit facility (the “Credit Facility”), which may be denominated in U.S. Dollars and other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, subject to a $400 million foreign currency sublimit. The Credit Facility also includes sub-facilities for the issuance of letters of credit of up to $150 million and swing line loans at the Administrative Agent’s discretion of up to $50 million. Certain subsidiaries of Rollins provide unsecured guarantees of the Credit Facility. Rollins has the ability to expand its borrowing availability under the Credit Agreement in the form of increased revolving commitments or one or more tranches of term loans by up to an additional $750 million, subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028.

Loans under the Credit Agreement bear interest, at Rollins’ election, at (i) for loans denominated in U.S. Dollars, (A) an alternate base rate (subject to a floor of 0.00%), which is the greatest of (x) the prime rate publicly announced from time to time by JPMorgan Chase, (y) the greater of the federal funds effective rate and the Federal Reserve Bank of New York overnight bank funding rate, plus 50 basis points, and (z) Adjusted Term SOFR for a one month interest period, plus a margin ranging from 0.00% to 0.50% per annum based on Rollins’ consolidated total net leverage ratio; or (B) the greater of term SOFR for the applicable interest period plus 10 basis points (“Adjusted Term SOFR”) and zero, plus a margin ranging from 1.00% to 1.50% per annum based on Rollins’ consolidated total net leverage ratio; and (ii) for loans denominated in other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, such interest rates as set forth in the Credit Agreement.

In April 2019, the Company entered into a Revolving Credit Agreement with Truist Bank N.A. (formerly SunTrust Bank N.A.) and Bank of America, N.A. (the ~~“Credit~~“2019 Credit Agreement”) for an unsecured revolving commitment of up to $175.0 million, which includes a $75.0 million letter of credit subfacility and a $25.0 million swingline subfacility (the “Revolving Commitment”), and an unsecured variable rate $250.0 million term loan (the “Term Loan”). On January 27, 2022, the Company entered into an amendment (the “Amendment”) to the 2019 Credit Agreement with Truist Bank and Bank of America, ~~N.A~~N.A. whereby additional term loans in an aggregate principal amount of $252.0 million were advanced to the Company. The Amendment also replaced LIBOR as the benchmark interest rate for borrowings with the Bloomberg ~~Short-Term~~Short-

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ROLLINS, INC. AND SUBSIDIARIES

Term Bank Yield Index rate (“BSBY”) and reset the amortization schedule for all term loans under the 2019 Credit Agreement. The ~~maturity of all loans made under~~Amendment was refinanced with the Credit Agreement prior to the Amendment remains unchanged at April 29, 2024 and all other terms of the Credit Agreement remain unchanged in all material respects. Subsequent to the Amendment, the aggregate outstanding principal balance of all term loans under the Credit Agreement was $300.0 million (consisting of an outstanding principal balance of the initial term loan in the amount of $48.0 million and the additional $252.0 million term loan borrowing made). In addition, the Credit Agreement has provisions to extend the term of the Revolving

described above.

~~ROLLINS, INC. AND SUBSIDIARIES~~

~~Commitment beyond April 29, 2024, as well as the right at any time and from time to time to prepay any borrowing under the Credit Agreement, in whole or in part, without premium or penalty.~~

As of March 31, ~~2022,~~2023, the Company had outstanding borrowings of ~~$295.8~~$62.4 million under the ~~Term Loan.~~Credit Facility. The aggregate effective interest rate on the debt outstanding as of March 31, ~~2022~~2023 was ~~0.871%~~6.1%. ~~The effective interest rate is comprised of the BSBY plus a margin of 75.0 basis points as determined by the Company’s leverage ratio calculation.~~ As of December 31, ~~2021,~~2022, the Revolving Commitment had outstanding borrowings of ~~$107.0~~$54.9 million ~~and~~under the previous Term Loan ~~had outstanding borrowings~~with an effective interest rate of ~~$48.0 million.~~

5.1%.

The Company maintains ~~approximately $71.3~~$194.2 million in letters of credit as of March 31, ~~2022.~~2023. These letters of credit are required by the Company’s insurance companies, due to the Company’s high deductible insurance program, to secure various workers’ compensation and casualty insurance contracts coverage and were increased from ~~$37.2~~$71.3 million as of December 31, ~~2021.~~2022. This balance is higher as of quarter end due to overlapping letters of credit as the Company transitions to new letters of credit associated with the new Credit Facility. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate ~~such~~potential future insurance claims.

~~In order~~

The Credit Agreement contains customary terms and conditions, including, without limitation, certain financial covenants including covenants restricting Rollins’ ability to ~~comply~~incur certain indebtedness or liens, or to merge or consolidate with ~~applicable debt covenants,~~or sell substantially all of its assets to another entity. Further, the ~~Company is required~~Credit Agreement contains a financial covenant restricting Rollins’ ability to ~~maintain at all times a leverage~~permit the ratio of ~~not greater than 3.00:~~Rollins’ consolidated total net debt to EBITDA to exceed 3.50 to 1.00. Following certain acquisitions, Rollins may elect to increase the financial covenant level to 4.00 to 1.00 temporarily. The ~~Leverage Ratio~~ratio is calculated as of the last day of the fiscal quarter most recently ended. The Credit Agreement also contains provisions permitting a future environmental, social and governance amendment, subject to certain terms and conditions contained therein, by which pricing may be adjusted pursuant to the Company's’ performance measured against certain sustainability-linked metrics. The Company remained in compliance with applicable debt covenants through the date of this filing and expects to maintain compliance throughout ~~2022.~~

2023.

NOTE 10.DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company is exposed to certain interest rate risks on our outstanding debt and foreign currency risks arising from our international business operations and global economic conditions. The Company enters into certain derivative financial instruments to lock in certain interest rates, as well as to protect the value or fix the amount of certain obligations in terms of its functional currency, the U.S. dollar.

The Company is exposed to fluctuations in various foreign currencies against its functional currency, the USU.S. dollar. We use foreign currency derivatives, specifically foreign currency forward contracts (“FX Forwards”), to manage our exposure to fluctuations in the USD-CAD and USD-AUD exchange rates. FX Forwards involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. The FX Forwards are typically settled in USU.S. dollars for their fair value at or close to their settlement date. We do not currently designate any of these FX Forwards under hedge accounting, but rather reflect the changes in fair value immediately in earnings. We do not use such instruments for speculative or trading purposes, but rather use them to manage our exposure to foreign exchange rates. Changes in the fair value of FX Forwards were recorded in other income/expense and were equal to net ~~losses~~gains of $0.1 million and ~~$0.3~~net losses of $0.1 million for the quarters ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The fair values of the Company’s FX Forwards were recorded as a net ~~obligations~~asset of ~~$0.2~~$0.0 million and ~~$0.0~~$0.3 million in Other Current ~~Liabilities~~Assets as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

As of March 31, ~~2022,~~2023, the Company had the following outstanding FX Forwards (in thousands except for number of instruments):

Non-Designated Derivative Summary

Number of

Sell

Buy
FX Forward Contracts

Instruments

Notional

Notional
Sell AUD/Buy USD Fwd Contract

20

$
3,200

$
2,356
Sell CAD/Buy USD Fwd Contract

20

20,000

15,826
Total

40



$
18,182


FX Forward Contracts	Number of Instruments	Sell Notional	Buy Notional
Sell AUD/Buy USD Fwd Contract	18	1,900	$	1,276
Sell CAD/Buy USD Fwd Contract	18	18,000	13,346
Total	36		$	14,622

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ROLLINS, INC. AND SUBSIDIARIES

NOTE 11.CONTINGENCIES

In the normal course of business, the Company and its subsidiaries are involved in, and will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

~~As previously disclosed,~~

The Company retains, up to specified limits, certain risks related to general liability, workers’ compensation and auto liability. The estimated costs of existing and future claims under the ~~Securities~~retained loss program are accrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of the claims may not be made until future periods) and ~~Exchange Commission (the “SEC”) conducted~~may be subsequently revised based on developments relating to such claims. The Company contracts with an ~~investigation primarily focused on how~~independent third party to provide the Company ~~established~~an estimated liability based upon historical claims information. The actuarial study is a major consideration in establishing the reserve, along with management’s knowledge of changes in business practice and existing claims compared to current balances. Management’s judgment is inherently subjective as a number of factors are outside management’s knowledge and control. Additionally, historical information is not always an accurate indication of future events. The accruals and reserves ~~at period-ends for periods beginning January 1, 2016 through December 31, 2018~~we hold are based on estimates that involve a degree of judgment and ~~the impact of certain adjustments~~are inherently variable and could be overestimated or insufficient. If actual claims exceed our estimates, our operating results could be materially affected, and our ability to those accruals and reserves on reported earnings per share, specifically, in the first quarter of 2016 and the second quarter of 2017 (the “SEC Investigation”). The Company previously disclosed that it had reached a settlement with the SEC, which was publicly announced on April 18, 2022. Under the terms of the settlement, the Company neither admitted nor denied the SEC’s findings and paid an $8.0 million civil penalty, which was accrued in the third and fourth quarters of 2021. During the first quarter of 2022, the Company placed the $8.0 million in escrow for this settlement. This amount is included in cash and cash equivalents in the condensed consolidated statements of financial position. The settlement resolves the SEC Investigation, and there willtake timely corrective actions to limit future costs may be ~~no restatement of the Company’s historical financial results related to this investigation.~~

limited.

Management does not believe that any pending claim, proceeding or litigation, regulatory action or investigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or liquidity; however, it is possible that an unfavorable outcome of some or all of the matters could result in a charge that might be material to the results of an individual quarter or year.

~~NOTE 12.~~~~PENSION PLANS~~

In September 2019, the Company settled its fully-funded Rollins, Inc. pension plan and during 2021, all remaining assets were reverted to the Company per ERISA regulations. The Company continues to sponsor its Waltham, Inc. defined benefit plan. This plan had assets of $2.2 million, a projected liability of $2.9 million and an unfunded status of $0.7 million as of March 31, 2022. The Company has 0t made any employer contributions to its Waltham defined benefit retirement plan in 2022.

NOTE ~~13.~~12. STOCKHOLDERS’ EQUITY

During the three months ended March 31, ~~2022,~~2023, the Company paid ~~$49.2~~$64.1 million, or ~~$0.10~~$0.13 per share, in cash dividends compared to ~~$39.4~~$49.2 million, or ~~$0.08~~$0.10 per share, during the same period in ~~2021.~~

2022.

During the ~~first quarter~~three months ended March 31, ~~2022~~2023 and during the same period in ~~2021,~~2022, the Company did not repurchase shares on the open market.

However, in 2023 the Company purchased shares on behalf of employees for the Employee Stock Purchase Plan ("ESPP") discussed below.

The Company repurchases shares from employees for the payment of their taxes on restricted shares that have vested. The Company repurchased ~~$6.4~~$9.8 million and ~~$9.3~~$6.4 million for the quarters ended March 31, 2023 and 2022, respectively.

Restricted Shares and ~~2021, respectively.~~

Performance Share Unit Awards

As more fully discussed in Note 1514 of the Company’s notes to the consolidated financial statements in its ~~2021~~2022 Annual Report on Form 10-K, time-lapse restricted awards and restricted stock units (“restricted shares”) have been issued to officers and other management employees under the Company’s Employee Stock Incentive Plans. Beginning with the ~~2022~~2023 grant, restricted shares vest in 2025 percent increments over ~~five~~four years from the date of the grant. Prior grants vest either over

~~ROLLINS, INC. AND SUBSIDIARIES~~

five years or over six years from the date of grant, depending on the year of the grant.

During the first quarter of 2023, certain executives were granted Performance Share Unit awards (PSUs) in addition to restricted shares, representing 25% of their total annual stock compensation awards. 50% of the PSUs will be determined by the Company’s 3-year average Adjusted EBITDA Margin, and the other 50% will be determined by Rollins' 3-year average Revenue compound annual growth rate (CAGR). As well as the standard PSUs offered, there will also be a “kicker” option that can be earned based upon the Company’s 3-year average TSR value as compared to the S&P 500. In accordance with ASC 718, Compensation-Stock Compensation, the PSUs will be accounted for as equity awards with the fair value of the awards determined as of the grant date. These awards will be expensed on a straight-line basis over the

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ROLLINS, INC. AND SUBSIDIARIES

three-year vesting period. The grant date fair value of the awards was determined with the assistance of a third party specialist based on a range of potential outcomes relative to the market condition.

The Company issues new shares from its authorized but unissued share pool. As of March 31, ~~2022,~~2023, approximately ~~5.9~~5.3 million shares of the Company’s common stock were reserved for issuance.

~~Time Lapse Restricted Shares~~

The following table summarizes the components of the Company’s stock-based compensation programs recorded as expense:

Three Months Ended

March 31,

(in thousands)

2022

2021

Time lapse restricted stock:





Pre-tax compensation expense

$
6,138

$
3,921

Tax benefit

(1,324)

(886)

Restricted stock expense, net of tax

$
4,814

$
3,035


	Three Months Ended March 31,
(in thousands)		2023		2022
Restricted shares and PSUs:
Pre-tax compensation expense		$	5,755	$	6,138
Tax benefit		(1,396)		(1,324)
Compensation expense, net of tax		$	4,359	$	4,814

The following table summarizes information on unvested ~~restricted stock~~awards outstanding as of March 31, ~~2022:~~

Weighted

Average

Number of

Grant-Date
(number of shares in thousands)

Shares

Fair Value
Unvested Restricted Stock at December 31, 2021

2,596

$
26.26
Forfeited

(14)

25.52
Vested

(595)

19.39
Granted

771

29.70
Unvested Restricted Stock at March 31, 2022

2,758

$
28.74

2023:


(number of shares in thousands)	Number of Shares	Weighted Average Grant-Date Fair Value
Unvested restricted shares and PSUs at December 31, 2022	2,685	$	28.97
Forfeited	(37)	29.61
Vested	(790)	26.45
Granted	546	36.18
Unvested restricted shares and PSUs at March 31, 2023	2,404	$	31.43

As of March 31, ~~2022,~~2023, and December 31, ~~2021,~~2022, the Company had ~~$66.2~~$68.6 million and ~~$65.2~~$52.3 million of total unrecognized compensation cost, respectively, related to ~~time-lapse~~ restricted shares and PSUs that are expected to be recognized over a weighted average period of approximately ~~4.1~~3.4 years and ~~4.5~~3.5 years, respectively.

Employee Stock Purchase Plan

As more fully discussed in Note 14 of the Company’s notes to the consolidated financial statements in its 2022 Annual Report on Form 10-K, shareholders approved the Rollins, Inc. 2022 Employee Stock Purchase Plan which provides eligible employees with the option to purchase shares of Company common stock, at a discount, through payroll deductions. The first purchase period for the ESPP began on July 1, 2022 and ended on December 30, 2022. The Company recorded compensation expense of $0.2 million associated with the purchase period which is included in cost of services provided and sales, general and administrative expenses for the quarter ended March 31, 2023.

NOTE ~~14.~~13. EARNINGS PER SHARE

The Company reports both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to participating common stockholders by the weighted average number of participating common shares outstanding for the period. Diluted earnings per share is calculated by dividing the net income available to participating common shareholders by the diluted weighted average number of shares outstanding for the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive equity.

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ROLLINS, INC. AND SUBSIDIARIES

A reconciliation of weighted average shares outstanding is as follows (in thousands):

Three Months Ended

March 31,

2022

2021

Weighted-average outstanding common shares

489,616

489,123
Add participating securities:

Weighted-average time-lapse restricted awards

2,597

2,880
Total weighted-average shares outstanding - basic

492,213

492,003
Dilutive effect of restricted stock units

112

—
Weighted-average shares outstanding - diluted

492,325

492,003


	Three Months Ended March 31,
		2023	2022

Weighted-average outstanding common shares		490,209	489,616
Add participating securities:
Weighted-average time-lapse restricted awards		2,307	2,597
Total weighted-average shares outstanding - basic		492,516	492,213
Dilutive effect of restricted stock units and PSUs		185	112
Weighted-average shares outstanding - diluted		492,701	492,325

~~ROLLINS, INC. AND SUBSIDIARIES~~

NOTE ~~15.~~14. INCOME TAXES

The Company’s provision for income taxes is recorded on an interim basis based upon the Company’s estimate of the annual effective income tax rate for the full year applied to “ordinary” income or loss, adjusted each quarter for discrete items. The Company recorded a provision for income taxes of ~~$19.9~~$28.3 million and ~~$27.2~~$20.3 million for the three months ended March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~The~~

During the three months ended March 31, 2023, the Company’s effective tax rate ~~decreased~~increased to ~~21.6%~~24.3% in the first quarter of ~~2022~~2023 compared to ~~22.7%~~21.6% in ~~2021.~~2022. The rate was ~~lower~~higher due to ~~a decrease in~~higher foreign income taxes ~~offset by a reduction in restricted stock benefits from 2021~~and state income taxes compared to ~~2022.~~

the prior year.

As of March 31, ~~2022~~2023 and December 31, ~~2021, we~~2022, the Company had deferred income tax assets of ~~$3.0~~$1.8 million, ~~and $2.9 million, respectively,~~ included in other assets, and deferred income tax liabilities of ~~$13.5~~$31.0 million and ~~$13.3~~$24.2 million, respectively, included in other long-term accrued liabilities.

NOTE ~~16.~~15. SUBSEQUENT EVENTS

~~Employee Stock Purchase Plan~~

Fox Pest Control Acquisition

On April ~~26, 2022, shareholders approved~~1, 2023, the ~~Rollins, Inc. 2022 Employee Stock Purchase Plan~~Company acquired 100% of FPC Holdings, LLC (“~~ESPP” or “The Plan”~~Fox Pest Control”) ~~which provides eligible employees with~~for $318 million plus $32 million of contingent consideration that will be paid upon the ~~option~~attainment of future growth and profitability levels. The acquisition is expected to be accounted for as a business combination and the assets acquired and liabilities assumed will be measured at fair value as of the acquisition date. The initial purchase ~~shares~~price allocation is not complete as of ~~Company common stock, at a discount, through payroll deductions. The ESPP is effective~~the date of this filing. As part of funding the Fox Pest Control acquisition, on April ~~26, 2022. All offering periods will be approximately 6 months and~~3, 2023 the ~~option purchase price may be~~Company borrowed incremental amounts under the ~~lower~~Credit Agreement of ~~90% of the closing price~~$305.0 million. The proceeds, as well as cash on ~~the first trading day of the offering period or 90% of the closing price on the purchase date. The Company anticipates its first offering period~~hand, were used to ~~commence on July 1, 2022.~~

pay cash consideration at closing.

Quarterly Dividend

On April ~~26, 2022,~~25, 2023, the Company’s Board of Directors declared a regular quarterly cash dividend on its common stock of ~~$0.10~~$0.13 per share payable on June ~~10, 2022~~9, 2023 to stockholders of record at the close of business on May 10, ~~2022.~~

2023.

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ROLLINS, INC. AND SUBSIDIARIES

~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report on Form ~~10 Q.~~10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties and reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A, “Risk Factors,” of our ~~2021~~2022 Form 10-K and Part II, Item 1A, “Risk Factors” and “Caution Regarding Forward-Looking Statements” included in this report and those discussed in other documents we file from time to time with the SEC.

GENERAL OPERATING COMMENTS

~~Revenues~~

The Company recognized 11.4% growth in revenues for the quarter ~~increased 10.3% percent to $590.7~~with strong growth across all major service lines. Total revenues finished at $658.0 million compared to ~~$535.6~~$590.7 million for the prior year. ~~Income~~Organic revenue* growth was 9.2% and acquisitions added 2.2% in the quarter. The stronger U.S. Dollar versus the same quarter a year ago reduced current revenues by 60 basis points. The weaker Canadian Dollar, British Pound and Australian Dollar relative to the U.S. Dollar were the biggest headwind on currency.

Operating income increased 20.2%, to $112.2 million compared to $93.4 million in the same quarter a year ago. When stated as a percentage of sales, operating income was 17.1% vs. 15.8% the same quarter a year ago. The improvement versus. the prior year reflects improved price realization and improved control over sales, general and administrative ("SG&A") costs. Earnings before income taxes, ~~decreased 22.9% to $92.4~~depreciation and amortization ("EBITDA")* and related margin was $139.5 million and 21.2% compared to ~~$119.9~~$117.8 million and 19.9% in the ~~prior year.~~ first quarter of 2022.Net income ~~decreased 21.8%~~increased 19.6% to ~~$72.5~~$88.2 million, with earnings per diluted share of ~~$0.15~~$0.18 compared to ~~$92.6~~$73.8 million, or ~~$0.19~~$0.15 per diluted share for the prior year.

~~COVID-19~~

Operating cash flow was strong during the quarter and finished at $100.8 million up from $87.5 million in 2022. We paid $15.5 million for six acquisitions in 2023. The ~~global spread~~Company paid dividends to investors of $0.13 per diluted share in the first quarter of 2023 as compared to $0.10 per diluted share for the prior year, resulting in a 30% increase in dividends per share.

Demand remains favorable to start the second quarter and ~~unprecedented~~we expect acquisitions to have a larger impact on revenue growth in the second quarter versus the first quarter of this year due to the recently announced Fox Pest Control acquisition.Although we continue to navigate a highly uncertain macro-environment, we are positioned well to deliver strong operating results in 2023.

*Amounts are non-GAAP financial measures. See the schedules below for a discussion of non-GAAP financial metrics including a reconciliation of the most closely correlated GAAP measure.

IMPACT OF ECONOMIC TRENDS

The continued disruption in economic markets due to high inflation, increases in interest rates, business interruptions due to natural disasters, employee shortages and supply chain issues, all pose challenges which may adversely affect our future performance. The Company continues to carry out various strategies previously implemented to help mitigate the impact of these economic disruptors, including advanced scheduling to compensate for employee and vehicle shortages, and maintaining higher purchasing levels to allow for sufficient inventory.

However, the ~~COVID-19 pandemic (“COVID-19”) has and continues to create uncertainty and~~Company cannot reasonably estimate whether these strategies will help mitigate the impact of these economic disruption around the world. In 2020, the pest control industry was designated as “essential” by the Department of Homeland Security. The Company has been able to remain operational in every part of the world in which it operates. With the availability of vaccinations and a decreasedisruptors in the prevalence of severe COVID cases, many COVID-19 restrictions have been lifted, including the mask mandate; however, public hesitancy regarding the vaccinations and the continued spread of COVID-19 and/or the emergence of additional COVID-19 variants may result in such restrictions and mandates being again imposed. We have been actively monitoring and will continue to monitor the evolving situation related to COVID-19 and may take actions that may alter our operations, including those that may be required by federal, state, or local authorities, or that we determine are in the best interests of our employees and customers. We do not know when, or if, it will become practical to eliminate all of these measures entirely as there is no guarantee that COVID-19 will be fully contained.

future.

The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements. The Company considered the impact of ~~COVID-19~~economic trends on the assumptions and estimates used in preparing the condensed consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the ~~quarter~~year have been made. These adjustments are of a normal recurring nature but complicated by the continued uncertainty surrounding ~~the global~~these macro economic ~~impact of COVID-19. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of results for the entire year.~~trends. The severity, magnitude and duration ~~as well as the~~of certain economic ~~consequences of COVID-19,~~trends, continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to ~~COVID-19~~economic trends and may change materially in future periods.

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ROLLINS, INC. AND SUBSIDIARIES

The extent to which increasing interest rates, inflation and other economic trends will continue to impact the Company’s business, financial condition and results of operations is uncertain. Therefore, we cannot reasonably estimate the full future impacts of these matters at this time.

RESULTS OF OPERATIONS

~~QUARTER ENDED MARCH~~

Quarter ended March 31, ~~2022 COMPARED TO QUARTER ENDED MARCH 31, 2021~~

Three Months Ended March 31,

Variance

As a % of Revenue
(in thousands)

2022

2021

$

%

2022

2021
REVENUES

Customer services

$
590,680

$
535,554

55,126

10.3

100.0

100.0
COSTS AND EXPENSES

Cost of services provided (exclusive of depreciation and amortization below)

295,378

261,552

33,826

12.9

50.0

48.8
Sales, general and administrative

178,785

162,208

16,577

10.2

30.3

30.3
Depreciation and amortization

24,847

23,596

1,251

5.3

4.2

4.4
Total operating expenses

499,010

447,356

51,654

11.5

84.5

83.5
OPERATING INCOME

91,670

88,198

3,472

3.9

15.5

16.5
Interest expense, net

568

606

(38)

(6.3)

0.1

0.1
Other income, net

(1,279)

(32,260)

30,981

(96.0)

(0.2)

(6.0)
CONSOLIDATED INCOME BEFORE INCOME TAXES

92,381

119,852

(27,471)

(22.9)

15.6

22.4
PROVISION FOR INCOME TAXES

19,936

27,209

(7,273)

(26.7)

3.4

5.1
NET INCOME

$
72,445

$
92,643

(20,198)

(21.8)

12.3

17.3

~~Revenue~~

~~Revenues for the first~~2023 compared to quarter ended March 31, 2022


	Three Months Ended March 31,				Variance		As a % of Revenue
(in thousands)	2023		2022		$	%	2023	2022
Revenues	$	658,015	$	590,680	67,335	11.4	100.0	100.0
Cost of services provided (exclusive of depreciation and amortization below)	326,842		295,378		31,464	10.7	49.7	50.0
Gross Profit	331,173		295,302		35,871	12.1	50.3	50.0
Sales, general and administrative	196,431		178,785		17,646	9.9	29.9	30.3
Depreciation and amortization	22,502		23,127		(625)	(2.7)	3.4	3.9
Operating income	112,240		93,390		18,850	20.2	17.1	15.8
Interest expense, net	465		568		(103)	(18.1)	0.1	0.1
Other (income), net	(4,714)		(1,279)		(3,435)	268.6	(0.7)	(0.2)
Consolidated income before income taxes	116,489		94,101		22,388	23.8	17.7	15.9
Provision for income taxes	28,255		20,335		7,920	38.9	4.3	3.4
Net income	$	88,234	$	73,766	14,468	19.6	13.4	12.5

Revenues

The following presents a summary of revenues by product and service offering and revenues by geography:

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ROLLINS, INC. AND SUBSIDIARIES

Revenues for the quarter ended March 31, 2023 were ~~$590.7~~$658.0 million, an increase of ~~$55.1~~$67.3 million, or ~~10.3%~~11.4%, from ~~first quarter 2021~~2022 revenues of ~~$535.6~~$590.7 million. Organic revenue* growth was 9.2% and acquisitions added 2.2% in the quarter. The weaker U.S. Dollar versus the same quarter a year ago reduced current revenues by 60 basis points. The currency headwind was primarily related to a stronger dollar versus the Canadian Dollar, the British Pound and the Australian Dollar. Comparing ~~2022~~2023 to ~~2021,~~2022, residential pest control revenue increased ~~10%~~9%, commercial pest control revenue increased 9%12% and termite and ancillary services grew 13%. The Company’s revenue mix for the first quarter ended March 31, 2022 consisted primarily of 44% residential pest control, 35% commercial pest control and 20% termite and ancillary revenues (such as moisture control, insulation, deck and gutter work)14%. The Company’s foreign operations accounted for approximately 7% ~~and 8%~~ of total revenues for the ~~first~~ quarters ended March 31, ~~2022~~2023 and ~~2021, respectively.~~

2022.

Revenues are impacted by the seasonal nature of the Company’s pest and termite control services. The increase in pest activity, as well as the metamorphosis of termites in the spring and summer (the occurrence of which is determined by the change in seasons), has historically resulted in an increase in the Company’s revenues as evidenced by the following chart:

Consolidated Net Revenues
(in thousands)

2022

2021

2020
First Quarter

$
590,680

$
535,554

$
487,901
Second Quarter

—

638,204

553,329
Third Quarter

—

650,199

583,698
Fourth Quarter

—

600,343

536,292
Year to date

$
590,680

$
2,424,300

$
2,161,220

~~Cost~~


	Consolidated Net Revenues
(in thousands)	2023		2022		2021
First Quarter	$	658,015	$	590,680	$	535,554
Second Quarter	—		714,049		638,204
Third Quarter	—		729,704		650,199
Fourth Quarter	—		661,390		600,343
Year to date	$	658,015	$	2,695,823	$	2,424,300

Gross Profit (exclusive of ~~Services Provided~~Depreciation and Amortization)

Gross profit for the quarter ended March 31, 2023 was $331.2 million, an increase of $35.9 million, or 12.1%, compared to $295.3 million for the quarter ended March 31, 2022. Gross margin was 50.3% in 2023 compared to 50.0% in 2022. Gross profit remains strong, and we saw good performance on gross profit as pricing more than offset inflationary pressures. We pulled our price increase forward by a month this year. We were also more consistent in raising pricing across all our brands this year.

There are categories of costs that comprise the majority of cost of services provided: people, materials and supplies, fleet, and insurance and claims. We saw favorable results as a percentage of sales in people related costs as well as fleet costs, materials and supplies costs were neutral to margins and insurance and claims continues to be a headwind to margins.

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Sales, General and Administrative

For the quarter ended March 31, ~~2022, cost of services provided~~2023, SG&A expenses increased ~~$33.8~~$17.6 million, or ~~12.9%~~9.9%, compared to the quarter ended March 31, ~~2021. The increase was driven by increased~~2022. As a percentage of revenue, SG&A decreased to 29.9% from 30.3% in the prior year.

There are three categories of costs that comprise the majority of SG&A: people costs, customer acquisition related costs, and ~~materials~~insurance and ~~supplies due~~claims. In the quarter, we saw favorable results as a percentage of sales in people, customer acquisition costs were relatively neutral to margins while insurance and claims were a headwind to margins.

As we start the ~~increase~~second quarter, which marks the start of the busier seasons for our business, we expect to see an uptick in ~~revenues. Additionally, fleet~~SG&A primarily related to customer acquisition costs ~~increased mainly driven by an increase in fuel costs.~~

as we work to acquire new customers and grow our business.

Depreciation and Amortization

~~ROLLINS, INC. AND SUBSIDIARIES~~

~~Sales, General and Administrative~~

For the quarter ended March 31, ~~2022, sales, general~~2023, depreciation and ~~administrative (SG&A) expenses increased $16.6~~amortization decreased $0.6 million, or ~~10.2%~~2.7%, compared to the quarter ended March 31, ~~2021. The increases were driven by increased people costs due to~~2022. A decrease in the ~~increase in revenues,~~depreciation of retirements exceeding additions was partially offset by ~~a decrease in advertising costs.~~

~~Depreciation and Amortization~~

the additional amortization of customer contracts from acquisitions.

Operating Income

For the quarter ended March 31, ~~2022, depreciation and amortization~~2023, operating income increased ~~$1.3~~$18.9 million or ~~5.3%,~~20.2% compared to the ~~quarter ended March 31, 2021.~~prior year. The increase in revenue was ~~due~~partially offset primarily by an increase in expense associated with insurance and claims.

As a percentage of revenue, operating income increased to 17.1% from 15.8% in the prior year. The improvement in operating income as a percentage of sales is driven by the pricing actions discussed above which helped provide improved leverage across a number of categories of the income statement, as discussed in gross profit and SG&A areas above.These improvements were partially offset by higher insurance and claims costs.

While we remain focused on driving improvements in operating income and related margins, we could see a lower level of incremental margins in the second quarter relative to the ~~additional amortization from several acquisitions.~~

~~Other Income,~~first quarter associated with higher customer acquisition costs as described above.

Interest Expense, Net

During the quarter ended March 31, ~~2022, other income~~2023, interest expense, net decreased ~~$31.0~~$0.1 million compared to the prior year, primarily due to the lower average debt balance which was partially offset by increase in weighted average interest rates in 2023 compared to 2022.

Other Income, Net

During the quarter ended March 31, ~~2021~~2023, other income increased $3.4 million primarily due to the Company recognizing a $31.1 million gain in the prior year related to multiple sale-leaseback transactions where the Company sold and leased back properties that it acquired in 2019 with the Clark Pest Control acquisition.

~~Interest Expense, Net~~

Interest expense, net was $0.6 million for both quarters ended March 31, 2022 and 2021. The increase in the average debt balance for the quarter ended March 31, 2022 was offset by a decrease in weighted average interest rates.

gains on asset sales.

Income Taxes

The Company’s effective tax rate ~~decreased~~increased to ~~21.6%~~24.3% in the first quarter of ~~2022~~2023 compared to ~~22.7%~~21.6% in ~~2021.~~2022. The 2023 rate was ~~lower~~less favorable due to higher foreign income taxes and state income taxes as compared to the prior year.

Non-GAAP Financial Measures

Reconciliation of GAAP and non-GAAP Financial Measures

The Company has used the non-GAAP financial measures of organic revenues and EBITDA in this Form 10-Q. Organic revenue is calculated as revenue less acquisition revenue. Acquisition revenue is based on the trailing 12-month revenue of our acquired entities. These measures should not be considered in isolation or as a ~~decrease~~substitute for revenues, net income, earnings per share or other performance measures prepared in ~~foreign taxes offset by~~accordance with GAAP.

Management uses EBITDA as a ~~reduction~~measure of operating performance because this measure allows the Company to compare performance consistently over various periods. Management also uses organic revenues to compare revenues over various periods excluding the impact of acquisitions.

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ROLLINS, INC. AND SUBSIDIARIES

A non-GAAP financial measure is a numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in ~~restricted stock benefits~~the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from ~~2021 to 2022.~~

the most directly comparable measure so calculated and presented.

Set forth below is a reconciliation of non-GAAP financial measures with their most comparable GAAP measures.

Three Months Ended March 31, Variance As a % of Revenue
2023 2022 $ % 2023 2022
Reconciliation of Revenues to Organic Revenues
Revenues $ 658,015 $ 590,680 67,335 11.4 100.0 100.0
Revenue growth from acquisitions (13,155) — (13,155) — (2.0)
Organic revenues $ 644,860 590,680 54,180 9.2 98.0
Reconciliation of Net Income to EBITDA
Net income $ 88,234 $ 73,766 14,468 19.6 13.4 12.5
Depreciation and amortization 22,502 23,127 (625) (2.7) 3.4 3.9
Interest expense, net 465 568 (103) (18.1) 0.1 0.1
Provision for income taxes 28,255 20,335 7,920 38.9 4.3 3.4
EBITDA $ 139,456 117,796 21,660 18.4 21.2 19.9

LIQUIDITY AND CAPITAL RESOURCES

Cash and Cash Flow

The Company’s $112.5 million of total cash at March 31, 2023 is held at various banking institutions. Approximately $74.9 million is held in cash accounts at international bank institutions and the remaining $37.6 million is primarily held in Federal Deposit Insurance Corporation (“FDIC”) insured non-interest-bearing accounts at various domestic banks which at times exceed federally insured amounts.

The Company’s international business is expanding, and we intend to continue to grow the business in foreign markets in the future through reinvestment of foreign deposits and future earnings as well as acquisitions of unrelated companies. The Company expects to repatriate unremitted foreign earnings from our foreign subsidiaries. The Company asserts that we continue to be permanently reinvested with respect to our investments in our foreign subsidiaries.

On February 24, 2023, the Company entered into a revolving credit agreement with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”), which refinanced its previous credit facility.

The Credit Agreement provides for a $1.0 billion revolving Credit Facility, which may be denominated in U.S. Dollars and other currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, subject to a $400 million foreign currency sublimit. Rollins has the ability to expand its borrowing availability under the Credit Agreement in the form of increased revolving commitments or one or more tranches of term loans by up to an additional $750 million, subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028. Refer to Note 9. Debt, of the Notes to Condensed Consolidated Financial Statements for further details.

As of March 31, 2023, the Company had outstanding borrowings of $62.4 million under the Credit Facility. The aggregate effective interest rate on the debt outstanding as of March 31, 2023 was 6.1%. As of December 31, 2022, the Revolving

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ROLLINS, INC. AND SUBSIDIARIES

Commitment had outstanding borrowings of $54.9 million under the previous Term Loan with an effective interest rate of 5.1%.

The Company maintains $194.2 million in letters of credit as of March 31, 2023. These letters of credit are required by the Company’s insurance companies, due to the Company’s high deductible insurance program, to secure various workers’ compensation and casualty insurance contracts coverage and were increased from $71.3 million as of December 31, 2022. This balance is unusually high as of quarter end due to overlapping policies while the Company transitions to new letters of credit associated with the new Credit Facility. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims.

The Company believes its current cash and cash equivalents balances, future cash flows expected to be generated from operating activities, and available borrowings under its Credit Facility will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future.

The following table sets forth a summary of our cash flows from operating, investing and financing activities for the three-month periods presented:


	Three months ended March 31,				Variance
(in thousands)	2023		2022		$	%
Net cash provided by operating activities	$	100,773	$	87,532	13,241	15.1
Net cash used in investing activities	(13,590)		(19,928)		6,338	(31.8)
Net cash (used in) provided by financing activities	(71,082)		82,093		(153,175)	(186.6)
Effect of exchange rate on cash	1,056		3,340		(2,284)	(2.4)
Net increase in cash and cash equivalents	$	17,157	$	153,037	(135,880)	(88.8)

Cash Provided by Operating Activities

Cash from operating activities is the principal source of cash generation for our businesses.

The most significant source of cash in our cash flow from operations is customer-related activities, the largest of which is collecting cash resulting from services sold. The most significant operating use of cash is to pay our suppliers, employees, and tax ~~authorities and others for a wide range of material and services.~~

Three months ended March 31,

Variance
(in thousands)

2022

2021

$

%
Net cash provided by operating activities

$
87,532

$
119,486

(31,954)

(26.7)
Net cash (used in) provided by investing activities

(19,928)

40,143

(60,071)

(149.6)
Net cash provided by (used in) financing activities

82,093

(141,657)

223,750

158.0
Effect of exchange rate on cash

3,340

873

2,467

282.6
Net increase in cash and cash equivalents

$
153,037

$
18,845

~~Cash Provided by Operating Activities~~

authorities. The Company’s operating activities generated net cash of ~~$87.5~~$100.8 million and ~~$119.5~~$87.5 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The ~~three months ending March 31, 2021 had higher than usual~~$13.2 million increase was driven primarily by strong operating results and the timing of cash ~~flows due~~receipts and cash payments to ~~the $30.6 million benefit of deferred employer payroll taxes allowed under the Coronavirus Aid, Relief,~~vendors, employees, and ~~Economic Security Act (the “CARES” Act). Such deferral was included in accounts payable~~tax and ~~accrued expenses at March 31, 2021 and was repaid during the third quarter of 2021.~~

regulatory authorities.

~~ROLLINS, INC. AND SUBSIDIARIES~~

Cash Used in ~~or Provided by~~ Investing Activities

The Company’s investing activities used $13.6 million and $19.9 million for the ~~quarter~~three months ended March 31, 2023 and 2022, ~~and provided $40.1~~respectively. Cash paid for acquisitions totaled $15.5 million for the ~~quarter~~three months ended March 31, ~~2021.~~2023 as compared to $13.2 million for the three months ended March 31, 2022. The Company invested ~~approximately $8.0~~$7.6 million in capital expenditures during 2022 compared to $7.8 million during 2021. Capital expenditures for the period consisted primarily of property purchases, equipment replacements and technology-related projects. Cash paid for acquisitions totaled $13.2 million for the quarter, ended March 31, 2022 as compared to $17.0 million for the quarter ended March 31, 2021. The expenditures for the Company’s acquisitions were funded through existing cash balances, borrowings on our line of credit, a term loan, and other operating cash flows. The quarter ended March 31, 2021 included approximately $65.1offset by $8.9 million in cash proceeds from the sale of assets, ~~primarily related to the Clark Pest property sale leasebacks.~~

compared with $8.0 million of capital expenditures and $1.3 million in cash proceeds from asset sales in 2022. The Company’s investing activities were funded through existing cash balances and operating cash flows.

Cash Provided by or Used in Financing Activities

Cash used by financing activities was $71.1 million during the three months ended March 31, 2023, while cash of $82.1 million was provided by financing activities ~~was $82.1 million during the quarter ended March 31, 2022 compared to cash used of $141.7 million~~ in the prior year. Concurrent with the Amendment to our Credit Agreement, the Company borrowed $140.8 million during the quarter ended March 31, 2022, net of repayments, compared to net borrowings of $88.0 million during 2021. A total of ~~$49.2~~$64.1 million was paid in cash dividends ($~~0.10~~0.13 per share) during the quarter ~~ended March 31, 2022~~ compared to ~~$39.4~~$49.2 million in cash dividends paid ($~~0.08~~0.10 per share) during the ~~quarter~~three months ended March 31, ~~2021.~~

2022. The Company made net borrowings under its credit agreements of $10.0 million during the three months ended March 31, 2023, compared to net borrowings of $140.8 million during 2022.

In 2012, the Company’s Board of Directors authorized the purchase of up to 5 million shares of the Company’s common stock. After adjustments for stock splits, the total authorized shares under the share repurchase plan are 16.9 million shares. The Company did not repurchase shares of its common stock on the open market during the first three months of ~~2022~~2023 nor during the same period in ~~2021.~~2022. However, in 2023 the Company purchased shares on behalf of employees for the Employee Stock Purchase Plan. In total, 11.4 million additional shares may be purchased under the share repurchase

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program. The Company repurchased ~~$6.4~~$9.8 million and ~~$9.3~~$6.4 million of common stock for the ~~quarter~~three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively, from employees for the payment of taxes on vesting restricted shares. ~~The acquisitions, capital expenditures, share repurchases and cash dividends were funded through existing cash balances, borrowings on our line of credit, a term loan, and operating activities.~~

The Company’s $258.3 million of total cash at March 31, 2022 is primarily money market funds and cash held at various banking institutions. Approximately $86.1 million is held in cash accounts at international bank institutions and the remaining $172.2 million is primarily held in Federal Deposit Insurance Corporation (“FDIC”) insured non-interest-bearing accounts at various domestic banks which at times may exceed federally insured amounts.

The Company’s international business is expanding, and we intend to continue to grow the business in foreign markets in the future through reinvestment of foreign deposits and future earnings as well as acquisitions of unrelated companies. Repatriation of cash from the Company’s international subsidiaries is not a part of the Company’s current business plan.

Rollins maintains adequate liquidity and capital resources, without regard to its foreign deposits, that are directed to finance domestic operations and obligations and to fund expansion of its domestic business. In order to comply with applicable debt covenants, the Company is required to maintain at all times a leverage ratio of not greater than 3.00:1.00. The leverage ratio is calculated as of the last day of the fiscal quarter most recently ended. The Company remained in compliance with applicable debt covenants at March 31, 2022 and expects to maintain compliance throughout 2022.

The Company believes its current cash and cash equivalents balances, future cash flows expected to be generated from operating activities, and available borrowings under its $175 million revolving credit facility and $300 million term loan facility will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future.

~~LITIGATION~~

CONTINGENCIES

~~ROLLINS, INC. AND SUBSIDIARIES~~

to, and arising out of, our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental and tax matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

~~As previously disclosed,~~

The Company retains, up to specified limits, certain risks related to general liability, workers’ compensation and auto liability. The estimated costs of existing and future claims under the ~~Securities~~retained loss program are accrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of the claims may not be made until future periods) and ~~Exchange Commission (the “SEC”) conducted~~may be subsequently revised based on developments relating to such claims. The Company contracts with an ~~investigation primarily focused on how~~independent third party to provide the Company ~~established~~an estimated liability based upon historical claims information. The actuarial study is a major consideration in establishing the reserve, along with management’s knowledge of changes in business practice and existing claims compared to current balances. Management’s judgment is inherently subjective as a number of factors are outside management’s knowledge and control. Additionally, historical information is not always an accurate indication of future events. The accruals and reserves ~~at period-ends for periods beginning January 1, 2016 through December 31, 2018~~we hold are based on estimates that involve a degree of judgment and ~~the impact of certain adjustments~~are inherently variable and could be overestimated or insufficient. If actual claims exceed our estimates, our operating results could be materially affected, and our ability to those accruals and reserves on reported earnings per share, specifically, in the first quarter of 2016 and the second quarter of 2017 (the “SEC Investigation”). The Company previously disclosed that it had reached a settlement with the SEC, which was publicly announced on April 18, 2022. Under the terms of the settlement, the Company neither admitted nor denied the SEC’s findings and paid an $8.0 million civil penalty, which was accrued in the third and fourth quarters of 2021. The settlement resolves the SEC Investigation, and there willtake timely corrective actions to limit future costs may be ~~no restatement of the Company’s historical financial results related to this investigation.~~

limited.

CRITICAL ACCOUNTING ESTIMATES

There have been no changes to the Company’s critical accounting estimates since the filing of its Form 10-K for the year ended December 31, ~~2021.~~

2022.

~~ROLLINS, INC. AND SUBSIDIARIES~~

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties concerning the business and financial results of Rollins, Inc. We have based these forward-looking statements largely on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Such forward ~~looking statements~~looking-statements include, but are not limited to, statements regarding:

●

~~the Company’s belief that its accounting estimates and assumptions, financial condition and results of operations may change materially in future periods in response to the COVID-19 pandemic;~~

•the Company’s belief that its accounting estimates and assumptions may materially change over time in future periods in response to economic trends;

•the outcomes of any pending claim, proceeding, litigation, regulatory action or investigation filed against us, either alone or in the aggregate, which could have a material adverse effect on our business, or liquidity, financial condition and results of operations;

•

●

the outcomes of any pending claim, proceeding, litigation, regulatory action or investigation filed against us, either alone or in the aggregate, which could have a material adverse effect on our business, results of operations or liquidity, financial condition and results of operations;

●

the Company’s evaluation of pending and threatened claims and establishment of loss contingency reserves based upon outcomes it currently believes to be probable and reasonably estimable;

●

~~the Company’s reasonable certainty that it will exercise the renewal options on its operating leases;~~

●

risks related to the Company’s belief that its current cash and cash equivalent balances, future cash flows expected to be generated from operating activities and available borrowings under its $175.0 million revolving credit facility and $300.0 million term loan facility will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future;

●

~~the Company’s ability to remain in compliance with applicable debt covenants under the Credit Facility throughout 2022;~~

●

~~the Company’s belief that the adoption of ASU 2022-02 is not expected to have a material impact on the Company’s consolidated financial statements;~~

●

~~the Company’s ability to continue the purchase of Company common stock when appropriate;~~

●

risks related to the Company’s ability to continue to grow its business in foreign markets in the future through reinvestment of foreign deposits and future earnings as well as acquisitions of unrelated companies and that repatriation of cash from the company’s foreign subsidiaries is not a part of the Company’s current business plan;

●

~~the Company’s expectation that total unrecognized compensation cost related to time-lapse restricted shares will be recognized over a weighted average period of approximately 4.1 years;~~

●

~~the Company’s expectation that the acquisition-related goodwill recognized during the quarter will be deductible for tax purposes;~~

●

~~the Company’s conclusion that there are no impairments of its goodwill or other intangible assets;~~

●

~~the Company’s belief that the factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized;~~

●

~~the Company’s belief that foreign exchange rate risk will not have a material effect on the Company’s results of operations going forward;~~

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ROLLINS, INC. AND SUBSIDIARIES

●

the Company’s belief that it maintains adequate liquidity and capital resources that are directed to finance domestic operations and obligations and to fund expansion of its domestic business for the foreseeable future without regard to its foreign deposits; and

●

the Company’s belief that it will continue to be involved in various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, its businesses and its operations.

•the Company's belief that it does not expect the resolution of the alleged violations and information requests from governmental authorities in California for its Orkin and Clark Pest Control operations to have a material adverse effect on its consolidated financial position, results of operations or cash flows;

•the Company’s belief that it will continue to be involved in various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, its businesses and its operations. the Company’s reasonable certainty that it will exercise the renewal options on its operating leases;

•risks related to the Company’s belief that its current cash and cash equivalent balances, future cash flows expected to be generated from operating activities and available borrowings under its $1.0 billion revolving credit facility will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future;

•the Company’s ability to remain in compliance with applicable debt covenants under the Credit Facility throughout 2023;

•the Company’s belief that the adoption of ASU 2022-03 is not expected to have a material impact on the Company’s consolidated financial statements;

•risks related to, the Company’s plans to continue to grow its business in foreign markets in the future through reinvestment of foreign deposits and future earnings as well as acquisitions of unrelated companies, the Company's expectation to repatriate unremitted foreign earnings from its foreign subsidiaries, and the Company's expectations to continue to be permanently reinvested with respect to its investments in its foreign subsidiaries;

•the Company’s expectation that total unrecognized compensation cost related to restricted shares and PSUs will be recognized over a weighted average period of approximately 3.4 years;

•the Company’s expectation that the acquisition-related goodwill recognized during the quarter will be deductible for tax purposes;

•the Company’s conclusion that there are no impairments of its goodwill or other intangible assets;

•the Company’s belief that the factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized;

•the Company’s belief that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims;

•the Company’s belief that foreign exchange rate risk will not have a material effect on the Company’s results of operations going forward;

•the Company's belief that demand remains favorable to start the second quarter and its expectations that acquisitions will have a larger impact on revenue growth in the second quarter versus the first quarter;

•the Company's belief that it is positioned well to deliver strong operating results in 2023;

•the Company's expectations to see an uptick in SG&A primarily related to customer acquisition costs as the Company works to acquire new customers and grow its business;

•the Company's expectations to see a lower level of incremental margins in the second quarter relative to the first quarter associated with higher customer acquisition costs; and

•the Company’s belief that continued disruptions in economic markets due to high inflation, increases in interest rates, business interruptions due to natural disasters, employee shortages and supply chain issues, all pose current and future challenges which may adversely affect the Company’s future performance, and that the Company cannot reasonably estimate whether its current strategies will help mitigate the impact of these economic disruptors in the future.

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ROLLINS, INC. AND SUBSIDIARIES

Forward-looking statements are based on information available at the time those statements are made and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Such risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. The reader should consider the factors discussed under Item 1A., “Risk Factors,” of Part I of the Company’s Annual Report on Form 10 K, filed with the U.S. Securities and Exchange Commission, for the year ended December 31, ~~2021~~2022 (the ~~“2021~~“2022 Annual Report”) that could cause the Company’s actual results and financial condition to differ materially from estimated results and financial condition. The Company does not undertake to update its forward-looking statements.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures about Market Risk,” in Part II, Item 7.A of our 2022 Form 10-K. There were no material changes to our market risk exposure during the three months ended March 31, 2022, the Company maintained an investment portfolio included in cash and cash equivalents subject to short-term interest rate risk exposure; and other current and long-term investments. The Company is subject to interest rate risk exposure through borrowings on its $175.0 million revolving credit facility and $300.0 million term loan facility. The Company is also exposed to market risks arising from changes in foreign exchange rates. See Note 10 to Part I, Item 1 for a discussion of the Company’s investments in derivative financial instruments to manage risks of fluctuations in foreign exchange rates. The Company believes that this foreign exchange rate risk will not have a material impact upon the Company’s results of operations going forward.

2023.

ITEM 4.CONTROLS AND PROCEDURES

The Disclosure Committee, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of March 31, ~~2022~~2023 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the Evaluation Date to ensure that the information required to be included in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Changes in Internal Controls Over Financial Reporting

Management’s quarterly evaluation identified no changes in our internal control over financial reporting during the first quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

~~ROLLINS, INC. AND SUBSIDIARIES~~

PART II OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

In the normal course of business, the Company and its subsidiaries are involved in, and will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, litigation, and tax and other regulatory matters relating to, and arising out of, our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental and tax matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

~~As previously disclosed,~~

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ROLLINS, INC. AND SUBSIDIARIES

Item 103 of SEC Regulation S-K requires disclosure of certain ~~adjustments to those accruals and reserves on reported earnings per share, specifically, in~~environmental legal proceedings if the ~~first quarter~~proceeding reasonably involves potential monetary sanctions of ~~2016 and the second quarter of 2017 (the “SEC Investigation”).~~$300,000 or more. The Company ~~previously disclosed that it had reached~~has received a ~~settlement~~notice of alleged violations and information requests from local governmental authorities in California for our Orkin and Clark Pest Control operations and is currently working with several local governments regarding compliance with environmental regulations governing the ~~SEC, which was publicly announced~~management of hazardous waste and pesticide disposal. The investigation appears to be part of a broader effort to investigate waste handling and disposal processes of a number of industries. While we are unable to predict the outcome of this investigation, we do not believe the outcome will have a material effect on ~~April 18, 2022. Under the terms~~our results of the settlement, the Company neither admitted nor denied the SEC’s findings and paid an $8.0 million civil penalty, which was accrued in the third and fourth quarters of 2021. The settlement resolves the SEC Investigation, and there will be no restatement of the Company’s historicaloperations, financial ~~results related to this investigation.~~

condition, or cash flows.

ITEM 1A.RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, ~~2021.~~

2022.

~~ROLLINS, INC. AND SUBSIDIARIES~~

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

~~Shares repurchased by~~

Rollins, Inc did not purchase any equity securities reportable under Item 703 of Regulation S-K during the ~~first quarter ended~~ period from January 1, 2023 to March 31, ~~2022~~2023.


Period	Total number of shares purchased	Weighted- average price paid per share		Total number of shares purchased as part of publicly announced repurchases (1)	Maximum number of shares that may yet be purchased under the repurchase plan (1)
January 1 to 31, 2023	236,310	$	36.15	—	11,415,625
February 1 to 28, 2023	7,816	36.52		—	11,415,625
March 1 to 31, 2023	18,283	36.16		—	11,415,625
Total	262,409	$	36.17	—	11,415,625

____________________

(1) ~~were as follows:~~

The Company has a share repurchase plan, adopted in 2012, to repurchase up to 16.9 million shares of the Company’s common stock. The plan has no expiration date.

Total number of

Weighted-

shares purchased as

Maximum number of

Total number of

average

part of publicly

shares that may yet be

shares

price paid

announced

purchased under the
Period

purchased (1)

per share

repurchases (2)

repurchase plan (2)
January 1 to 31, 2022

202,920

$
31.02

—

11,415,625
February 1 to 28, 2022

482

30.85

—

11,415,625
March 1 to 31, 2022

3,739

30.09

—

11,415,625
Total

207,141

$
31.00

—

11,415,625

~~(1)~~

~~Represents repurchases from employees for the payment of taxes on vesting of restricted shares.~~

~~(2)~~

~~The Company has a share repurchase plan, adopted in 2012, to repurchase up to 16.9 million shares of the Company’s common stock. The plan has no expiration date.~~

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ROLLINS, INC. AND SUBSIDIARIES

ITEM 6.EXHIBITS

Exhibit No.
Exhibit Description
Incorporated By Reference
Filed Herewith

Form
Date
Number
2.1
Stock Purchase Agreement by and among Rollins, Inc., Clark Pest Control of Stockton, Inc., the Stockholders of Clark Pest Control of Stockton, Inc. the Principals and the Stockholders Representative
10-Q
April 26, 2019
10.1

2.2
Asset Purchase Agreement among King Distribution, Inc., a Delaware corporation, Geotech Supply Co., LLC, a California limited liability company, and Clarksons California Properties, California limited partnership
10-Q
April 26, 2019
10.2

2.3
Real Estate Purchase Agreement by and between RCI – King, Inc., and Clarksons California Properties, a California limited partnership
10-Q
April 26, 2019
10.3

3.1
Restated Certificate of Incorporation of Rollins, Inc., dated July 28, 1981
10-Q
August 1, 2005
(3)(i)(A)

3.2
Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated August 20, 1987
10-K
March 11, 2005
(3)(i)(B)

3.3
Certificate of Change of Location of Registered Office and of Registered Agent, dated March 22, 1994
10-Q
August 1, 2005
(3)(i)(C)

3.4
Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 26, 2011
10-K
February 25, 2015
(3)(i)(E)

3.5
Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 28, 2015
10-Q
July 29, 2015
(3)(i)(F)

3.6
Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 23, 2019
10-Q
April 26, 2019
(3)(i)(G)

3.7
Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 27, 2021
10-Q
July 30, 2021
(3)(i)(H)

3.8
Amended and Restated By-laws of Rollins, Inc., dated May 20, 2021
8-K
May 24, 2021
3.1

4.1
Form of Common Stock Certificate of Rollins, Inc.
10-K
March 26, 1999
(4)

4.2
Description of Registrant’s Securities
10-K
February 28, 2020
4(b)

10.1+
Membership Interest Purchase Agreement by and among Rollins, Inc., Northwest Exterminating Co., Inc. NW Holdings, LLC and the stockholders of Northwest Exterminating Co., Inc. dated as of July 24, 2017
10-Q
October 27, 2017
10.1

10.2*
Rollins, Inc. Amended and Restated Deferred Compensation Plan
S-8
November 18, 2005
4.1

10.3*
Form of Plan Agreement pursuant to the Rollins, Inc. Amended and Restated Deferred Compensation Plan
S-8
November 18, 2005
4.2

10.4*
Written description of Rollins, Inc. Performance-Based Incentive Cash Compensation Plan for Executive Officer
8-K
February 1, 2021
10(a)

10.5*
Forms of award agreements under the 2013 Cash Incentive Plan
10-K
February 24, 2017
10(d)

10.6*
2018 Stock Incentive Plan
DEF 14A
March 21, 2018
Appendix A

10.7*
Form of Restricted Stock Grant Agreement
8-K
April 28, 2008
10(d)

10.8*
Form of Time-Lapse Restricted Stock Agreement
10-Q
April 27, 2012
10.1

10.9*
Summary of Compensation Arrangements with Executive Officers
10-K
February 25, 2011
(10)(q)

10.10*
Summary of Compensation Arrangements with Non-Employee Directors
10-K
February 25, 2015
10(i)

10.11
Revolving Credit Agreement dated as of April 30, 2019 between Rollins, Inc. and SunTrust Bank and Bank of America, N.A.
10-K
February 28, 2020
10.1

10.12
Amended Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender
10-K
February 25, 2022
10.12

Exhibit No.

Exhibit Description

Incorporated By Reference

Filed Herewith

Form

Date

Number

2.1

Stock Purchase Agreement by and among Rollins, Inc., Clark Pest Control of Stockton, Inc., the Stockholders of Clark Pest Control of Stockton, Inc. the Principals and the Stockholders Representative

10-Q

April 26, 2019

10.1

2.2

Asset Purchase Agreement among King Distribution, Inc., a Delaware corporation, Geotech Supply Co., LLC, a California limited liability company, and Clarksons California Properties, California limited partnership

10-Q

April 26, 2019

10.2

2.3

Real Estate Purchase Agreement by and between RCI – King, Inc., and Clarksons California Properties, a California limited partnership

10-Q

April 26, 2019

10.3

3.1

Restated Certificate of Incorporation of Rollins, Inc., dated July 28, 1981

10-Q

August 1, 2005

(3)(i)(A)

3.2

Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated August 20, 1987

10-K

March 11, 2005

(3)(i)(B)

3.3

Certificate of Change of Location of Registered Office and of Registered Agent, dated March 22, 1994

10-Q

August 1, 2005

(3)(i)(C)

3.4

Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 26, 2011

10-K

February 25, 2015

(3)(i)(E)

3.5

Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 28, 2015

10-Q

July 29, 2015

(3)(i)(F)

3.6

Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 23, 2019

10-Q

April 26, 2019

(3)(i)(G)

3.7

Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 27, 2021

10-Q

July 30, 2021

(3)(i)(H)

3.8

Amended and Restated By-laws of Rollins, Inc., dated May 20, 2021

8-K

May 24, 2021

3.1

4.1

Form of Common Stock Certificate of Rollins, Inc.

10-K

March 26, 1999

(4)

4.2

Description of Registrant’s Securities

10-K

February 28, 2020

4(b)

10.1+

Membership Interest Purchase Agreement by and among Rollins, Inc., Northwest Exterminating Co., Inc. NW Holdings, LLC and the stockholders of Northwest Exterminating Co., Inc. dated as of July 24, 2017

10-Q

October 27, 2017

10.1

10.2*

Rollins, Inc. Amended and Restated Deferred Compensation Plan

S-8

November 18, 2005

4.1

10.3*

Form of Plan Agreement pursuant to the Rollins, Inc. Amended and Restated Deferred Compensation Plan

S-8

November 18, 2005

4.2

10.4*

2018 Stock Incentive Plan

DEF 14A

March 21, 2018

Appendix A

10.5*

Form of Restricted Stock Grant Agreement

8-K

April 28, 2008

10(d)

10.6*

Form of Time-Lapse Restricted Stock Agreement

10-Q

April 27, 2012

10.1

10.70

Revolving Credit Agreement dated as of April 30, 2019 between Rollins, Inc. and SunTrust Bank and Bank of America, N.A.

10-K

February 28, 2020

10.1

10.80

Amended Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender

10-K

February 25, 2022

10.12

10.9

Annex A to the Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender

10-K

February 25, 2022

10.13

10.10

Annex B to the Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender

10-K

February 25, 2022

10.14

10.11

Credit Agreement, dated as of February 24, 2023, among Rollins, as borrower, certain other subsidiaries of Rollins from time to time party thereto as borrowers, each lender from time to time party thereto and JPMorgan Chase, N.A., as administrative agent.

8-K

February 27, 2023

10.1

10.12*

Form of Rollins, Inc. Performance Share Unit Award Agreement

10-K

February 16, 2023

10.10

10.13*

Rollins, Inc. 2023 Executive Bonus Agreement–Gary W. Rollins

10-K

February 16, 2023

10.11

10.14*

Rollins, Inc. 2023 Executive Bonus Agreement–Jerry E. Gahlhoff, Jr.

10-K

February 16, 2023

10.12

10.15*

Rollins, Inc. 2023 Executive Bonus Agreement–Kenneth D. Krause

10-K

February 16, 2023

10.13

10.16*

Rollins, Inc. 2023 Executive Bonus Agreement–John F. Wilson

10-K

February 16, 2023

10.14

10.17*

Rollins, Inc. 2023 Executive Bonus Agreement–Elizabeth B. Chandler

10-K

February 16, 2023

10.15

10.18*

Confidential Settlement and General Release Agreement dated as of April 5, 2022 between the Company and Paul E. Northen

10-Q

April 28, 2022

10.17

Table of Contents

ROLLINS, INC. AND SUBSIDIARIES

Exhibit No.
Exhibit Description
Incorporated By Reference
Filed Herewith

Form
Date
Number
10.13
Annex A to the Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender
10-K
February 25, 2022
10.13
10.14
Annex B to the Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender
10-K
February 25, 2022
10.14
10.15*
Form of Rollins, Inc. 2022 Executive Bonus Plan
10-K
February 25, 2022
10.15
10.16*
Rollins, Inc. 2022 Executive Bonus Plan - Jerry Gahlhoff
10-K
February 25, 2022
10.16
10.17*
Confidential Settlement and General Release Agreement dated as of April 5, 2022 between the Company and Paul E. Northen

X
31.1
Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X
31.2
Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X
32.1**
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X
101.INS
Inline XBRL Instance Document

X
101.SCH
Inline XBRL Schema Document

X
101.CAL
Inline XBRL Calculation Linkbase Document

X
101.LAB
Inline XBRL Labels Linkbase Document

X
101.PRE
Inline XBRL Presentation Linkbase Document

X
101.DEF
Inline XBRL Definition Linkbase Document

X
104
Cover Page Interactive Data File (embedded with the Inline XBRL document)

X

~~Certain portions~~Exhibit No.

Exhibit Description

Incorporated By Reference

Filed Herewith

10.19*

Form of ~~this document that constitute confidential information have been redacted in accordance with~~Time-Lapse Restricted Stock Agreement for Non-Section 16 Reporting Person

10-Q

October 27, 2022

10.17

10.20*

Form of Time-Lapse Restricted Stock Agreement For Section 16 Reporting Persons

10-Q

October 27, 2022

10.18

10.21*

Offer Letter dated July 25, 2022, between Kenneth D. Krause and the Company

10-Q

October 27, 2022

10.19

31.1

Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer Pursuant to Item 601(b)~~(10)~~(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document

101.SCH

Inline XBRL Schema Document

101.CAL

Inline XBRL Calculation Linkbase Document

101.LAB

Inline XBRL Labels Linkbase Document

101.PRE

Inline XBRL Presentation Linkbase Document

101.DEF

Inline XBRL Definition Linkbase Document

104

Cover Page Interactive Data File (embedded with the Inline XBRL document)

*	~~Indicates management contract or compensatory plans or arrangements.~~

**	~~Furnished with this repor~~t

____________________

+ Certain portions of this document that constitute confidential information have been redacted in accordance with Regulation S-K, Item 601(b)(10)

* Indicates management contract or compensatory plans or arrangements.

** Furnished with this report

Table of Contents

ROLLINS, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			ROLLINS, INC.
			(Registrant)

Date: April ~~28, 2022~~ 27, 2023			By:		/s/ ~~Gary W. Rollins~~ Kenneth D. Krause
					~~Gary W. Rollins~~ Kenneth D. Krause
					~~Chairman~~Executive Vice President, Chief Financial Officer and ~~Chief Executive Officer~~ Treasurer (Principal Financial Officer)
					~~(Principal Executive Officer)~~

Date: April ~~28, 2022~~ 27, 2023	By:			/s/ Traci Hornfeck
					Traci Hornfeck
					Chief Accounting Officer
		(Principal Accounting Officer)


Delaware						51-0068479
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

Yes ☐ No x ☐
~~Yes~~	☐	No	☒


	March 31,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	258,338	$	105,301
Trade receivables, net of allowance for expected credit losses of $14,170 and $13,885, respectively		137,621		139,579
Financed receivables, short-term, net of allowance for expected credit losses of $1,236 and $1,463, respectively		26,631		26,152
Materials and supplies		29,062		28,926
Other current assets		44,860		52,422
Total current assets		496,512		352,380
Equipment and property, net of accumulated depreciation of $321,122 and $315,891, respectively		132,680		133,257
Goodwill		730,139		721,819
Customer contracts, net		318,806		325,929
Trademarks & tradenames, net		109,520		108,976
Other intangible assets, net		10,090		11,679
Operating lease right-of-use assets		241,043		244,784
Financed receivables, long-term, net of allowance for expected credit losses of $2,614 and $2,522, respectively		46,192		47,097
Other assets		46,161		34,949
Total assets	$	2,131,143	$	1,980,870
LIABILITIES
Accounts payable	$	38,586	$	44,568
Accrued insurance		37,724		36,414
Accrued compensation and related liabilities		76,291		97,862
Unearned revenues		156,516		145,122
Operating lease liabilities - current		74,463		75,240
Current portion of long-term debt		15,000		18,750
Other current liabilities		82,317		73,206
Total current liabilities		480,897		491,162
Accrued insurance, less current portion		32,218		31,545
Operating lease liabilities, less current portion		169,839		172,520
Long-term debt		280,783		136,250
Other long-term accrued liabilities		59,877		67,345
Total liabilities		1,023,614		898,822
Commitments and contingencies (see Note 11)
STOCKHOLDERS’ EQUITY
Preferred stock, without par value; 500,000 shares authorized, 0 shares issued		—		—
Common stock, par value $1 per share; 800,000,000 shares authorized, 492,460,649 and 491,911,087 shares issued and outstanding, respectively		492,461		491,911
Additional paid in capital		104,783		105,629
Accumulated other comprehensive loss		(13,874)		(16,411)
Retained earnings		524,159		500,919
Total stockholders’ equity		1,107,529		1,082,048
Total liabilities and stockholders’ equity	$	2,131,143	$	1,980,870


		Pages

PART I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS	3
	CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME	4
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	5
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	6
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	7
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	27
ITEM 4.	CONTROLS AND PROCEDURES	27

PART II	OTHER INFORMATION	27

ITEM 1.	LEGAL PROCEEDINGS	27
ITEM 1A.	RISK FACTORS	28
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	28
ITEM 6.	EXHIBITS	29

SIGNATURES		31


	Three Months Ended
	March 31,
	2022		2021
REVENUES
Customer services	$	590,680	$	535,554
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		295,378		261,552
Sales, general and administrative		178,785		162,208
Depreciation and amortization		24,847		23,596
Total operating expenses		499,010		447,356
OPERATING INCOME		91,670		88,198
Interest expense, net		568		606
Other income, net		(1,279)		(32,260)
CONSOLIDATED INCOME BEFORE INCOME TAXES		92,381		119,852
PROVISION FOR INCOME TAXES		19,936		27,209
NET INCOME	$	72,445	$	92,643
NET INCOME PER SHARE - BASIC AND DILUTED	$	0.15	$	0.19
Weighted average shares outstanding - basic		492,213		492,003
Weighted average shares outstanding - diluted		492,325		492,003
DIVIDENDS PAID PER SHARE	$	0.10	$	0.08


						Accumulated Other
	Common Stock			Paid-in-		Comprehensive		Retained
	Shares	Amount		Capital		Income / (Loss)		Earnings		Total
Balance at December 31, 2021	491,911	$	491,911	$	105,629	$	(16,411)	$	500,919	$	1,082,048
Net Income	—		—		—		—		72,445		72,445
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments	—		—		—		3,127		—		3,127
Unrealized losses on available for sale securities	—		—		—		(590)		—		(590)
Cash dividends	—		—		—		—		(49,205)		(49,205)
Stock compensation	757		757		5,381		—		—		6,138
Employee stock buybacks	(207)		(207)		(6,227)		—		—		(6,434)
Balance at March 31, 2022	492,461	$	492,461	$	104,783	$	(13,874)	$	524,159	$	1,107,529


	March 31, 2022
Accounts receivable, net	$	88
Materials and supplies		149
Equipment and property		1,148
Goodwill		4,455
Customer contracts		8,165
Trademarks & tradenames		2
Other intangible assets		405
Current liabilities		(30)
Other assets and liabilities, net		17
Total consideration paid	$	14,399
Less: Contingent consideration liability		(1,176)
Total cash purchase price	$	13,223


	Three Months Ended March 31,
	2022		2021
(in thousands)
Beginning balance	$	168,607	$	149,224
Deferral of unearned revenue		61,635		55,379
Recognition of unearned revenue		(49,909)		(45,837)
Ending balance	$	180,333	$	158,766



	Allowance for Credit Losses
	Trade		Financed		Total
	Receivables		Receivables		Receivables
Balance at December 31, 2021	$	13,885	$	3,985	$	17,870
Provision for expected credit losses		3,204		1,054		4,258
Write-offs charged against the allowance		(4,248)		(1,189)		(5,437)
Recoveries collected		1,329		—		1,329
Balance at March 31, 2022	$	14,170	$	3,850	$	18,020


Goodwill (in thousands):
Balance at December 31, 2020	$	653,176
Additions		69,264
Adjustments due to currency translation		(621)
Balance at December 31, 2021		721,819
Additions		4,455
Measurement adjustments		2,572
Adjustments due to currency translation		1,293
Balance at March 31, 2022	$	730,139



	March 31, 2022						December 31, 2021
			Accumulated		Carrying				Accumulated		Carrying			Useful Life
	Gross		Amortization		Value		Gross		Amortization			Value		in Years
Amortizable intangible assets:
Customer contracts	$	557,164	$	(238,358)	$	318,806	$	551,277	$	(225,348)		$	325,929	3-20
Trademarks and tradenames		12,904		(6,783)		6,121		12,784		(6,492)			6,292	7-20
Non-compete agreements		13,362		(6,364)		6,998		13,125		(5,573)			7,552	3-20
Patents		6,946		(6,502)		444		6,946		(5,509)			1,437	3-15
Other assets		2,217		(1,796)		421		2,150		(1,687)			463	10
Total amortizable intangible assets	$	592,593	$	(259,803)		332,790	$	586,282	$	(244,609)			341,673
Indefinite-lived intangible assets:
Trademarks and tradenames						103,399							102,684
Internet domains						2,227							2,227
Total indefinite-lived intangible assets						105,626							104,911
Total customer contracts and other intangible assets					$	438,416						$	446,584


(in thousands)
2022 (excluding the three months ended March 31, 2022)	$	44,867
2023		55,441
2024		51,857
2025		42,806
2026		38,422


(in thousands)
2023 (excluding the three months ended March 31, 2023)	$	45,487
2024	57,542
2025	48,732
2026	45,214
2027	41,550


		Three Months Ended March 31,
(in thousands, except Other Information)
Lease Classification	Financial Statement Classification	2022			2021
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	26		$	60
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		24,023			22,634
Total lease expense		$	24,049		$	22,694

Other Information:
Weighted-average remaining lease term - operating leases			5.5 years			5.7 years
Weighted-average discount rate - operating leases			3.54	%		3.85	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	23,758		$	22,457


	Operating
(in thousands)
2022 (excluding the three months ended March 31, 2022)	$	62,839
2023		67,440
2024		43,519
2025		26,295
2026		16,493
2027		12,119
Thereafter		44,593
Total Future Minimum Lease Payments		273,298
Less: Amount representing interest		28,996
Total future minimum lease payments, net of interest	$	244,302


	Number of	Sell		Buy
FX Forward Contracts	Instruments	Notional		Notional
Sell AUD/Buy USD Fwd Contract	20	$	3,200	$	2,356
Sell CAD/Buy USD Fwd Contract	20		20,000		15,826
Total	40			$	18,182


		Weighted
		Average
	Number of	Grant-Date
(number of shares in thousands)	Shares	Fair Value
Unvested Restricted Stock at December 31, 2021	2,596	$	26.26
Forfeited	(14)		25.52
Vested	(595)		19.39
Granted	771		29.70
Unvested Restricted Stock at March 31, 2022	2,758	$	28.74


	Three Months Ended March 31,				Variance		As a % of Revenue
(in thousands)	2022		2021		$	%	2022	2021
REVENUES
Customer services	$	590,680	$	535,554	55,126	10.3	100.0	100.0
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		295,378		261,552	33,826	12.9	50.0	48.8
Sales, general and administrative		178,785		162,208	16,577	10.2	30.3	30.3
Depreciation and amortization		24,847		23,596	1,251	5.3	4.2	4.4
Total operating expenses		499,010		447,356	51,654	11.5	84.5	83.5
OPERATING INCOME		91,670		88,198	3,472	3.9	15.5	16.5
Interest expense, net		568		606	(38)	(6.3)	0.1	0.1
Other income, net		(1,279)		(32,260)	30,981	(96.0)	(0.2)	(6.0)
CONSOLIDATED INCOME BEFORE INCOME TAXES		92,381		119,852	(27,471)	(22.9)	15.6	22.4
PROVISION FOR INCOME TAXES		19,936		27,209	(7,273)	(26.7)	3.4	5.1
NET INCOME	$	72,445	$	92,643	(20,198)	(21.8)	12.3	17.3


	Consolidated Net Revenues
(in thousands)	2022		2021		2020
First Quarter	$	590,680	$	535,554	$	487,901
Second Quarter		—		638,204		553,329
Third Quarter		—		650,199		583,698
Fourth Quarter		—		600,343		536,292
Year to date	$	590,680	$	2,424,300	$	2,161,220


				Total number of
		Weighted-		shares purchased as	Maximum number of
	Total number of	average		part of publicly	shares that may yet be
	shares	price paid		announced	purchased under the
Period	purchased (1)	per share		repurchases (2)	repurchase plan (2)
January 1 to 31, 2022	202,920	$	31.02	—	11,415,625
February 1 to 28, 2022	482		30.85	—	11,415,625
March 1 to 31, 2022	3,739		30.09	—	11,415,625
Total	207,141	$	31.00	—	11,415,625


Exhibit No.	Exhibit Description	Incorporated By Reference			Filed Herewith
		Form	Date	Number
2.1	Stock Purchase Agreement by and among Rollins, Inc., Clark Pest Control of Stockton, Inc., the Stockholders of Clark Pest Control of Stockton, Inc. the Principals and the Stockholders Representative	10-Q	April 26, 2019	10.1
2.2	Asset Purchase Agreement among King Distribution, Inc., a Delaware corporation, Geotech Supply Co., LLC, a California limited liability company, and Clarksons California Properties, California limited partnership	10-Q	April 26, 2019	10.2
2.3	Real Estate Purchase Agreement by and between RCI – King, Inc., and Clarksons California Properties, a California limited partnership	10-Q	April 26, 2019	10.3
3.1	Restated Certificate of Incorporation of Rollins, Inc., dated July 28, 1981	10-Q	August 1, 2005	(3)(i)(A)
3.2	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated August 20, 1987	10-K	March 11, 2005	(3)(i)(B)
3.3	Certificate of Change of Location of Registered Office and of Registered Agent, dated March 22, 1994	10-Q	August 1, 2005	(3)(i)(C)
3.4	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 26, 2011	10-K	February 25, 2015	(3)(i)(E)
3.5	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 28, 2015	10-Q	July 29, 2015	(3)(i)(F)
3.6	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 23, 2019	10-Q	April 26, 2019	(3)(i)(G)
3.7	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 27, 2021	10-Q	July 30, 2021	(3)(i)(H)
3.8	Amended and Restated By-laws of Rollins, Inc., dated May 20, 2021	8-K	May 24, 2021	3.1
4.1	Form of Common Stock Certificate of Rollins, Inc.	10-K	March 26, 1999	(4)
4.2	Description of Registrant’s Securities	10-K	February 28, 2020	4(b)
10.1+	Membership Interest Purchase Agreement by and among Rollins, Inc., Northwest Exterminating Co., Inc. NW Holdings, LLC and the stockholders of Northwest Exterminating Co., Inc. dated as of July 24, 2017	10-Q	October 27, 2017	10.1
10.2*	Rollins, Inc. Amended and Restated Deferred Compensation Plan	S-8	November 18, 2005	4.1
10.3*	Form of Plan Agreement pursuant to the Rollins, Inc. Amended and Restated Deferred Compensation Plan	S-8	November 18, 2005	4.2
10.4*	Written description of Rollins, Inc. Performance-Based Incentive Cash Compensation Plan for Executive Officer	8-K	February 1, 2021	10(a)
10.5*	Forms of award agreements under the 2013 Cash Incentive Plan	10-K	February 24, 2017	10(d)
10.6*	2018 Stock Incentive Plan	DEF 14A	March 21, 2018	Appendix A
10.7*	Form of Restricted Stock Grant Agreement	8-K	April 28, 2008	10(d)
10.8*	Form of Time-Lapse Restricted Stock Agreement	10-Q	April 27, 2012	10.1
10.9*	Summary of Compensation Arrangements with Executive Officers	10-K	February 25, 2011	(10)(q)
10.10*	Summary of Compensation Arrangements with Non-Employee Directors	10-K	February 25, 2015	10(i)
10.11	Revolving Credit Agreement dated as of April 30, 2019 between Rollins, Inc. and SunTrust Bank and Bank of America, N.A.	10-K	February 28, 2020	10.1
10.12	Amended Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender	10-K	February 25, 2022	10.12