~~ROLLINS, INC. AND SUBSIDIARIES~~

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

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ROLLINS, INC. AND SUBSIDIARIES

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 ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (in thousands).


	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

~~ROLLINS, INC. AND SUBSIDIARIES~~

Allowance for Credit Losses


Trade

Financed

Total

Receivables

Receivables

Receivables
Balance at June 30, 2022

$
13,666

$
4,554

$
18,220
Provision for expected credit losses

3,842

1,316

5,158
Write-offs charged against the allowance

(5,095)

(970)

(6,065)
Recoveries collected

1,370

—

1,370
Balance at September 30, 2022

$
13,783

$
4,900

$
18,683

Allowance for Credit Losses

Trade

Financed

Total


Receivables

Receivables

Receivables
Balance at June 30, 2021

$
13,863

$
4,341

$
18,204
Provision for expected credit losses

3,526

323

3,849
Write-offs charged against the allowance

(5,163)

(657)

(5,820)
Recoveries collected

1,247

—

1,247
Balance at September 30, 2021

$
13,473

$
4,007

$
17,480

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

9,396

4,195

13,591
Write-offs charged against the allowance

(13,561)

(3,280)

(16,841)
Recoveries collected

4,063

—

4,063
Balance at September 30, 2022

$
13,783

$
4,900

$
18,683

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

5,760

2,762

8,522
Write-offs charged against the allowance

(12,912)

(1,986)

(14,898)
Recoveries collected

3,771

—

3,771
Balance at September 30, 2021

$
13,473

$
4,007

$
17,480

~~ROLLINS, INC. AND SUBSIDIARIES~~

NOTE 6.GOODWILL AND INTANGIBLE ASSETS

The following table summarizes changes in goodwill during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and the twelve months ended December 31, ~~2021~~2022 (in thousands):

Goodwill:



Balance at December 31, 2020

$
653,176
Additions

69,264
Adjustments due to currency translation

(621)
Balance at December 31, 2021

721,819
Additions

60,962
Measurement adjustments

65
Adjustments due to currency translation

(10,521)
Balance at September 30, 2022

$
772,325


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 ~~$88.9~~$98.0 million as of ~~September 30, 2022~~March 31, 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, 2022. Based upon the results of this analysis, the Company concluded that no impairment of its goodwill or other intangible assets was indicated.~~

Contents

ROLLINS, INC. AND SUBSIDIARIES

The following table sets forth the components of indefinite-lived and amortizable intangible assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (in thousands):

September 30, 2022

December 31, 2021

Accumulated

Carrying

Accumulated
Carrying

Useful Life

Gross

Amortization

Value

Gross

Amortization

Value

in Years
Amortizable intangible assets:

Customer contracts

$
567,698

$
(248,316)

$
319,382

$
551,277

$
(225,348)

$
325,929

3-20
Trademarks and tradenames

18,086

(7,201)

10,885

12,784

(6,492)

6,292

7-20
Non-compete agreements

13,999

(6,927)

7,072

13,125

(5,573)

7,552

3-20
Patents

6,934

(6,692)

242

6,946

(5,509)

1,437

3-15
Other assets

1,910

(1,645)

265

2,150

(1,687)

463

10
Total amortizable intangible assets

$
608,628

$
(270,781)

337,847

$
586,282

$
(244,609)

341,673


Indefinite-lived intangible assets:






Trademarks and tradenames

103,131

102,684


Internet domains

2,227

2,227


Total indefinite-lived intangible assets

105,358

104,911


Total customer contracts and other intangible assets

$
443,205

$
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 ~~$41.6~~$45.3 million and ~~$42.1~~$46.1 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. The carrying amount of trademarks and tradenames in foreign countries was ~~$4.1 million and $2.9~~$4.2 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022. The carrying amount of other intangible assets in foreign countries was ~~$0.7~~$0.6 million and $0.7 million as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Amortization expense related to intangible assets was ~~$15.9~~$14.0 million and $13.4 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Amortization expense related to intangible assets was $46.7 million and $39.5 million for the nine months ended September 30, 2022 and 2021,~~ respectively. Customer contracts and other amortizable intangible assets are amortized on a straight-line basis over their economic useful lives.

~~ROLLINS, INC. AND SUBSIDIARIES~~

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 ~~September 30, 2022~~March 31, 2023 are as follows:

(in thousands)



2022 (excluding the nine months ended September 30, 2022)

$
16,283
2023

59,772
2024

56,197
2025

47,083
2026

42,670

(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. The Company elected the practical expedient approach permitted under 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 ~~September 30, 2022,~~March 31, 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 contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

During the nine months ended September 30, 2021, the Company completed multiple sale-leaseback transactions where it sold 17 of its properties related to the Clark Pest Control acquisition for gross proceeds of $67.0 million and a pre-tax gain of $31.5 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.

~~ROLLINS, INC. AND SUBSIDIARIES~~

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.

Table of Contents

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except Other Information)

Lease Classification

Financial Statement Classification

2022

2021

2022

2021

Short-term lease cost

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

$
46

$
51

$
108

$
176

Operating lease cost

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

24,419

23,472

72,057

69,497

Total lease expense

$
24,465

$
23,523

$
72,165

$
69,673

Other Information:











Weighted-average remaining lease term - operating leases

5.2 years

5.5 years

Weighted-average discount rate - operating leases

3.41
%

3.69
%
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$
71,240

$
68,614

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 ~~September 30, 2022~~March 31, 2023 were as follows:

Operating
(in thousands)

2022 (excluding the nine months ended September 30, 2022)

$
24,234
2023

86,079
2024

62,772
2025

44,160
2026

26,286
2027

14,764
Thereafter

48,050
Total Future Minimum Lease Payments

306,345
Less: Amount representing interest

32,169
Total future minimum lease payments, net of interest

$
274,176


(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 ~~$163.5~~$149.5 million for building leases and ~~$142.8~~$161.6 million for vehicle leases. As of ~~September 30, 2022,~~March 31, 2023, the Company had additional future obligations of ~~$15.6~~$10.8 million for leases that had not yet commenced.

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

~~ROLLINS, INC. AND SUBSIDIARIES~~

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 ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, we had investments in international bonds of ~~$10.6~~$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 was recorded in other current assets. Management reassessed their intentions on the investment and at September 30, 2022, $0.6~~2023, $0.7 million was included in other current assets and ~~$10.0~~$9.6 million was included in other assets. At December 31, 2022, $0.5 million was included in other current assets and $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 ~~$1.0~~$0.6 million included in other comprehensive income during the ~~nine~~three months ended ~~September 30, 2022.~~

March 31, 2023 and 2022, respectively.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had ~~$19.4~~$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

Nine Months Ended

September 30,

September 30,
(in thousands)

2022

2021

2022

2021
Beginning balance

$
22,742

$
27,057

$
25,156

$
35,744
New acquisitions and revaluations

3,706

1,341

6,457

5,314
Payouts

(6,468)

(6,540)

(11,663)

(19,413)
Interest on outstanding contingencies

79

178

327

715
Charge offset, forfeit and other

(669)

(514)

(887)

(838)
Ending balance

$
19,390

$
21,522

$
19,390

$
21,522

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. 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. In addition, the Credit Agreement has provisions to extend the term of the Revolving 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.

described above.

As of ~~September 30, 2022,~~March 31, 2023, the Company had outstanding borrowings of ~~$124.9~~$62.4 million under the ~~Term Loan and there were no outstanding borrowings under the Revolving Commitment.~~Credit Facility. The aggregate effective interest rate on the debt outstanding as of ~~September 30, 2022~~March 31, 2023 was ~~3.866%~~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

~~ROLLINS, INC. AND SUBSIDIARIES~~

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 ~~September 30, 2022.~~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 ~~$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 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 gains of ~~$1.0~~$0.1 million and net losses of $0.1 million for the quarters ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and net gains of $1.1 million and net losses of $0.6 million for the nine months ended September 30, 2022 and 2021,~~ respectively. The fair values of the Company’s FX Forwards were recorded as a net asset of ~~$0.8~~$0.0 million and $0.3 million in Other Current Assets as of ~~September 30, 2022~~March 31, 2023 and ~~an insignificant net obligation in Other Current Liabilities as of~~ December 31, ~~2021,~~2022, respectively.

As of ~~September 30, 2022,~~March 31, 2023, the Company had the following outstanding FX Forwards (in thousands except for number of instruments):

Non-Designated Derivative Summary


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

Table of Contents

Number of

Sell

Buy
FX Forward Contracts

Instruments

Notional

Notional
Sell AUD/Buy USD Fwd Contract

16

2,300

$
1,615
Sell CAD/Buy USD Fwd Contract

16

16,000

12,313
Total

32



$
13,928

ROLLINS, INC. AND SUBSIDIARIES

NOTE 11.CONTINGENCIES

~~ROLLINS, INC. AND SUBSIDIARIES~~

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.

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 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 may be subsequently revised based on developments relating to such claims. The Company contracts with an independent third party to provide the Company 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 we hold are based on estimates that involve a degree of judgment and 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 take timely corrective actions to limit future costs may be 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 September 30, 2022. The Company has not made any employer contributions to its Waltham defined benefit retirement plan in 2022.

NOTE ~~13.~~12. STOCKHOLDERS’ EQUITY

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company paid ~~$147.6~~$64.1 million, or ~~$0.30~~$0.13 per share, in cash dividends compared to ~~$119.7~~$49.2 million, or ~~$0.24~~$0.10 per share, during the same period in ~~2021.~~

2022.

During the ~~nine~~three months ended ~~September 30, 2022~~March 31, 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 ~~$0.0~~$9.8 million and ~~$0.3~~$6.4 million for the quarters ended ~~September 30,~~March 31, 2023 and 2022, respectively.

Restricted Shares and ~~2021, and $7.0 million and $10.6 million for the nine-month periods ended September 30, 2022 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 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 ~~September 30, 2022,~~March 31, 2023, approximately ~~5.9~~5.3 million shares of the Company’s common stock were reserved for issuance.

~~ROLLINS, INC. AND SUBSIDIARIES~~

~~Time Lapse Restricted Shares~~

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

(in thousands)

2022

2021

2022

2021

Time lapse restricted stock:









Pre-tax compensation expense

$
4,957

$
3,920

$
15,914

$
11,762

Tax benefit

(1,298)

(1,025)

(3,894)

(2,950)

Restricted stock expense, net of tax

$
3,659

$
2,895

$
12,020

$
8,812


	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 ~~September 30, 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

(68)

26.32
Vested

(666)

19.97
Granted

854

30.12
Unvested Restricted Stock at September 30, 2022

2,716

$
28.93

March 31, 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 ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, the Company had ~~$57.9~~$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 ~~3.7~~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

Nine Months Ended

��
September 30,

September 30,


2022

2021

2022

2021

Weighted-average outstanding common shares

489,756

489,306

489,705

489,241
Add participating securities:

Weighted-average time-lapse restricted awards

2,560

2,763

2,580

2,817
Total weighted-average shares outstanding - basic

492,316

492,069

492,285

492,058
Dilutive effect of restricted stock units

114

—

113

—
Weighted-average shares outstanding - diluted

492,430

492,069

492,398

492,058


	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 ~~$37.2~~$28.3 million and ~~$33.2~~$20.3 million for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and $90.8 million and $95.5 million for~~respectively.

During the ~~nine~~three months ended ~~September 30, 2022 and 2021, respectively.~~

~~The Company’s effective tax rate decreased to 25.7% in the third quarter of 2022 compared to 26.1% in 2021. During the nine months ended September 30, 2022,~~March 31, 2023, the Company’s effective tax rate ~~decreased~~increased to ~~24.5%~~24.3% in the first quarter of 2023 compared to ~~25.1%~~21.6% in ~~2021.~~2022. The rate was ~~lower~~higher due to ~~a decrease in~~higher foreign income taxes ~~from 2021~~and state income taxes compared to ~~2022.~~

the prior year.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, we~~2022, the Company had deferred income tax assets of ~~$2.6~~$1.8 million, ~~and $2.9 million, respectively,~~ included in other assets, and deferred income tax liabilities of ~~$15.1~~$31.0 million and ~~$13.3~~$24.2 million, respectively, included in other long-term accrued liabilities.

NOTE ~~16.~~15. SUBSEQUENT EVENTS

Fox Pest Control Acquisition

On April 1, 2023, the Company acquired 100% of FPC Holdings, LLC (“Fox Pest Control”) for $318 million plus $32 million of contingent consideration that will be paid upon the 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 price allocation is not complete as of the date of this filing. As part of funding the Fox Pest Control acquisition, on April 3, 2023 the Company borrowed incremental amounts under the Credit Agreement of $305.0 million. The proceeds, as well as cash on hand, were used to pay cash consideration at closing.

Quarterly Dividend

On ~~October~~April 25, ~~2022,~~2023, the Company’s Board of Directors declared a regular quarterly cash dividend on its common stock of $0.13 per share payable on ~~December~~June 9, ~~2022~~2023 to stockholders of record at the close of business on ~~November~~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. 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 12.2% percent to $729.7~~with strong growth across all major service lines. Total revenues finished at $658.0 million compared to ~~$650.2~~$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, ~~increased 14.0% to $144.8~~depreciation and amortization ("EBITDA")* and related margin was $139.5 million and 21.2% compared to ~~$127.1~~$117.8 million and 19.9% in the ~~prior year.~~ first quarter of 2022.Net income increased ~~14.7%~~19.6% to ~~$107.6~~$88.2 million, with earnings per diluted share of ~~$0.22~~$0.18 compared to ~~$93.9~~$73.8 million, or ~~$0.19~~$0.15 per diluted share for the prior year.

~~During~~

Operating cash flow was strong during the ~~nine months ended September 30, 2022, revenues increased 11.5%~~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 Company paid dividends to $2.0 billion compared to $1.8 billion for the prior year. Income before income taxes decreased 2.5% to $371.2 million compared to $380.9 million the prior year. Net income decreased 1.7% to $280.4 million, with earningsinvestors of $0.13 per diluted share in the first quarter of ~~$0.57~~2023 as compared to ~~$285.4 million, or $0.58~~$0.10 per diluted share for the prior ~~year.~~

~~As more fully discussed~~year, resulting in a 30% increase in dividends per share.

Demand remains favorable to start the second quarter and 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 ~~operations, our residential, commercial, and termite and ancillary services experienced double digit revenue percentage growth for both~~non-GAAP financial metrics including a reconciliation of the ~~quarter and nine months ended September 30, 2022.~~

most closely correlated GAAP measure.

IMPACT OF ~~COVID-19 AND OTHER~~ ECONOMIC TRENDS

The global spread and unprecedented impact of the COVID-19 pandemic (“COVID-19”) has created uncertainty and economic disruption around the world. We will continue to monitor COVID-19 and may again 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.

~~In addition,~~ continued disruption in economic markets due to high inflation, ~~increased fuel costs,~~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 ~~revamping its routing and scheduling process to decrease the number of miles per stop,~~ advanced scheduling to compensate for employee and vehicle shortages, ~~shipping delays,~~ and maintaining higher purchasing levels to allow for sufficient inventory.

However, the Company cannot reasonably estimate whether these strategies will help mitigate the impact of these economic disruptors in the 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 and other~~ 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 ~~COVID-19 and other~~these macro economic trends. ~~The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results for the entire year.~~ The severity, magnitude and duration of certain economic trends, ~~as well as the economic consequences of COVID-19,~~ continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to ~~COVID-19 and other~~ economic trends and may change materially in future periods.

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ROLLINS, INC. AND SUBSIDIARIES

The extent to which ~~COVID-19,~~increasing interest rates, inflation and other economic trends will continue to impact the Company’s business, financial condition and results of operations is ~~highly~~ uncertain. Therefore, we cannot reasonably estimate the full future impacts of these matters at this time.

RESULTS OF OPERATIONS

Quarter ended March 31, 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:

~~QUARTER ENDED SEPTEMBER 30, 2022 COMPARED TO QUARTER ENDED SEPTEMBER 30, 2021~~

Three Months Ended September 30,

Variance

As a % of Revenue
(in thousands)

2022

2021

$

%

2022

2021
REVENUES

Customer services

$
729,704

$
650,199

79,505

12.2

100.0

100.0
COSTS AND EXPENSES

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

348,158

305,474

42,684

14.0

47.7

47.0
Sales, general and administrative

213,581

194,261

19,320

9.9

29.3

29.9
Depreciation and amortization

24,282

23,617

665

2.8

3.3

3.6
Total operating expenses

586,021

523,352

62,669

12.0

80.3

80.5
OPERATING INCOME

143,683

126,847

16,836

13.3

19.7

19.5
Interest expense, net

846

222

624

NM

0.1

0.0
Other (income), net

(1,980)

(447)

(1,533)

NM

(0.3)

(0.1)
CONSOLIDATED INCOME BEFORE INCOME TAXES

144,817

127,072

17,745

14.0

19.8

19.5
PROVISION FOR INCOME TAXES

37,195

33,219

3,976

12.0

5.1

5.1
NET INCOME

$
107,622

$
93,853

13,769

14.7

14.7

14.4

~~Revenue~~

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ROLLINS, INC. AND SUBSIDIARIES

Revenues for the ~~third~~ quarter ended ~~September 30, 2022~~March 31, 2023 were ~~$729.7~~$658.0 million, an increase of ~~$79.5~~$67.3 million, or ~~12.2%~~11.4%, from ~~third quarter 2021~~2022 revenues of ~~$650.2~~$590.7 million. ~~Revenue performance~~Organic revenue* growth was ~~strong~~9.2% and acquisitions added 2.2% in the ~~third~~quarter. The weaker U.S. Dollar versus the same quarter ~~despite~~ a ~~resurgence of COVID-19 that affected our business earlier in~~year ago reduced current revenues by 60 basis points. The currency headwind was primarily related to a stronger dollar versus the ~~quarter as well as~~Canadian Dollar, the ~~business interruption from Hurricane Ian that impacted~~British Pound and the ~~Southeast market in the latter part of the quarter.~~Australian Dollar. Comparing ~~2022~~2023 to ~~2021,~~2022, residential pest control revenue increased ~~10%~~9%, commercial pest control revenue increased ~~11%~~12% and termite and ancillary services grew 19%. The Company’s revenue mix for the third quarter ended September 30, 2022 consisted primarily of 46% residential pest control, 33% commercial pest control and 19% termite and ancillary revenues (such as moisture control, insulation, deck and gutter work)14%. The Company’s foreign operations accounted for approximately 7% of total revenues for the ~~third~~ quarters ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~

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

714,049

638,204

553,329
Third Quarter

729,704

650,199

583,698
Fourth Quarter

—

600,343

536,292
Year to date

$
2,034,433

$
2,424,300

$
2,161,220


	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 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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ROLLINS, INC. AND SUBSIDIARIES

~~Cost of Services Provided~~

Sales, General and Administrative

For the quarter ended September 30, 2022, cost of services provided increased $42.7 million, or 14.0%, compared to the quarter ended September 30, 2021. As a percentage of revenue cost of services increased to 47.7% from 47.0% in the prior year. Cost of services as a percent of revenue increased primarily due to an increase in the casualty reserve. The change in the casualty reserve was driven by a number of asserted auto claims that matured in the quarter. These claims can change from time to time and we either reached resolution or received additional information about the nature of the claim that provided a better estimation of the total liability associated with the claim in the quarter. We also saw a general increase in spending associated with people, materials and supplies and fleet costs, due to an increase in business activity albeit at a slower pace than revenue growth.

~~Sales, General and Administrative~~

~~For the quarter ended September 30, 2022, sales, general and administrative (SG&A)~~March 31, 2023, SG&A expenses increased ~~$19.3~~$17.6 million, or 9.9%, compared to the quarter ended ~~September 30, 2021.~~March 31, 2022. As a percentage of revenue, SG&A decreased to ~~29.3%~~29.9% from ~~29.9%~~30.3% in the prior year. ~~Despite investing in additional~~

There are three categories of costs that comprise the majority of SG&A: people ~~advertising~~costs, customer acquisition related costs, and ~~other customer facing activities to drive growth,~~insurance and claims. In the quarter, we saw ~~an improvement in SG&A~~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 second quarter, which marks the start of the busier seasons for our business, we expect to see an uptick in SG&A primarily related to customer acquisition costs as we ~~continue~~work to ~~manage~~acquire new customers and grow our ~~cost structure. Although claims activity had an impact on SG&A, it had a lesser impact on SG&A than cost of services.~~business.

Depreciation and Amortization

For the quarter ended ~~September 30, 2022,~~March 31, 2023, depreciation and amortization ~~increased $0.7~~decreased $0.6 million, or ~~2.8%~~2.7%, compared to the quarter ended ~~September 30, 2021. The increase~~March 31, 2022. A decrease in the depreciation of retirements exceeding additions was ~~due to~~partially offset by the additional amortization of customer contracts from acquisitions.

Operating Income

For the quarter ended ~~September 30, 2022,~~March 31, 2023, operating income increased ~~$16.8~~$18.9 million or ~~13.3%,~~20.2% compared to the quarter ended September 30, 2021. As a percentage of revenue operating income increased to 19.7% from 19.5% in the prior year. Operating income increased due to an increase in revenue driven by double digit growth in all lines of service, despite a resurgence of COVID-19 that affected our productivity earlier in the quarter as well as the business interruption from Hurricane Ian that impacted the Southeast market in the latter part of the quarter. The improvement in revenue was partially offset by an increase in expenses associated with the casualty reserve as well as an increase in spending associated with people, advertising and customer facing activities.

~~Other Income, Net~~

~~During the quarter ended September 30, 2022, other income increased $1.5 million compared to the quarter ended September 30, 2021 due to gains on asset sales.~~

~~Interest Expense, Net~~

For the quarter ended September 30, 2022, interest expense, net increased $0.6 million, compared to the quarter ended September 30, 2021 due to the increase in the average debt balance and the increase in weighted average interest rates.

~~Income Taxes~~

~~The Company’s effective tax rate decreased to 25.7% in the third quarter of 2022 compared to 26.1% in 2021. The rate was lower due to a decrease in foreign taxes from 2021 to 2022.~~

~~ROLLINS, INC. AND SUBSIDIARIES~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2021~~

Nine Months Ended September 30,

Variance

As a % of Revenue
(in thousands)

2022

2021

$

%

2022

2021
REVENUES

Customer services

$
2,034,433

$
1,823,957

210,476

11.5

100.0

100.0
COSTS AND EXPENSES

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

980,316

864,888

115,428

13.3

48.2

47.4
Sales, general and administrative

612,353

539,951

72,402

13.4

30.1

29.6
Depreciation and amortization

73,454

70,519

2,935

4.2

3.6

3.9
Total operating expenses

1,666,123

1,475,358

190,765

12.9

81.9

80.9
OPERATING INCOME

368,310

348,599

19,711

5.7

18.1

19.1
Interest expense, net

2,294

1,334

960

72.0

0.1

0.1
Other (income), net

(5,170)

(33,598)

28,428

84.6

(0.3)

(1.8)
CONSOLIDATED INCOME BEFORE INCOME TAXES

371,186

380,863

(9,677)

(2.5)

18.2

20.9
PROVISION FOR INCOME TAXES

90,820

95,513

(4,693)

(4.9)

4.5

5.2
NET INCOME

$
280,366

$
285,350

(4,984)

(1.7)

13.8

15.6

~~Revenue~~

Revenues for the nine months ended September 30, 2022 were $2.0 billion, an increase of $210.5 million, or 11.5%, from 2021 revenues of $1.8 billion. Comparing 2022 to 2021, residential pest control revenue increased 10%, commercial pest control revenue increased 11% and termite and ancillary services grew 16%. The Company’s revenue mix for the nine months ended September 30, 2022 consisted primarily of 45% residential pest control, 34% commercial pest control and 20% termite and ancillary revenues. The Company’s foreign operations accounted for approximately 7% and 8% of total revenues for the nine months ended September 30, 2022 and 2021, respectively.

~~Cost of Services Provided~~

For the nine months ended September 30, 2022, cost of services provided increased $115.4 million, or 13.3%, compared to the nine months ended September 30, 2021. As a percentage of revenue cost of services increased to 48.2% from 47.4% in the prior year. Cost of Services increased due to an increase in the casualty reserve in the third quarter coupled with an increase in people costs, materials and supplies and fleet costs due to an increase in business activity.

~~Sales, General and Administrative~~

For the nine months ended September 30, 2022, sales, general and administrative (SG&A) expenses increased $72.4 million, or 13.4%, compared to the nine months ended September 30, 2021. As a percentage of revenue SG&A increased to 30.1% from 29.6% in the prior year. SG&A increased due primarily to an increase in people costs, advertising costs and fleet costs due to an increase in business activity.

~~Depreciation and Amortization~~

For the nine months ended September 30, 2022, depreciation and amortization increased $2.9 million, or 4.2%, compared to the nine months ended September 30, 2021. The increase was primarily due to the additional amortization from several acquisitions.

~~ROLLINS, INC. AND SUBSIDIARIES~~

~~Operating Income~~

For the nine months ended September 30, 2022, operating income increased $19.7 million, or 5.7%, compared to the prior year. As a percentage of revenue operating income decreased to 18.1% from 19.1% in the prior year. The increase in revenue was partially offset primarily by an increase in expense associated with ~~the casualty reserve~~insurance and claims.

As a percentage of revenue, operating income increased to 17.1% from 15.8% in the ~~third~~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 ~~coupled with an increase in spending~~relative to the first quarter associated with ~~people, advertising, and fleet~~higher customer acquisition costs ~~on the increased business activity.~~

~~Other Income,~~as described above.

Interest Expense, Net

During the ~~nine months~~quarter ended ~~September 30, 2022, other income~~March 31, 2023, interest expense, net decreased ~~$28.4~~$0.1 million compared to the ~~nine months ended September 30, 2021 due to the Company recognizing a $31.5 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~~

~~During the nine months ended September 30, 2022, interest expense, net increased $1.0 million compared to the nine months ended September 30, 2021~~ primarily due to the ~~increase in the~~lower average debt balance ~~and the~~which was partially offset by increase in weighted average interest rates ~~for the nine months ended September 30,~~in 2023 compared to 2022.

Other Income, ~~Taxes~~

Net

During the ~~nine months~~quarter ended ~~September 30, 2022, the~~March 31, 2023, other income increased $3.4 million primarily due to gains on asset sales.

Income Taxes

The Company’s effective tax rate ~~decreased~~increased to ~~24.5%~~24.3% in the first quarter of 2023 compared to ~~25.1%~~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~~accordance with GAAP.

Management uses EBITDA as a 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 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 ~~$121.9~~$112.5 million of total cash at ~~September 30, 2022~~March 31, 2023 is ~~primarily money market funds and cash~~ held at various banking institutions. Approximately ~~$65.4~~$74.9 million is held in cash accounts at international bank institutions and the remaining ~~$56.5~~$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. ~~Repatriation~~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 ~~cash from~~increased revolving commitments or one or more tranches of term loans by up to an additional $750 million, subject to the ~~Company’s international subsidiaries is not a part~~agreement of the ~~Company’s current business plan.~~

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.

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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 ~~September 30, 2022.~~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 ~~$37.2~~$71.3 million as of December 31, ~~2021.~~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.

~~ROLLINS, INC. AND SUBSIDIARIES~~

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 September 30, 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~~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 ~~nine-month~~three-month periods presented:

Nine Months Ended September 30,

Variance
(in thousands)

2022

2021

$

%
Net cash provided by operating activities

$
342,537

$
298,911

43,626

14.6
Net cash (used in) provided by investing activities

(123,378)

11,104

(134,482)

NM
Net cash used in financing activities

(196,285)

(284,688)

88,403

31.1
Effect of exchange rate on cash

(6,299)

(6,149)

(150)

(2.4)
Net increase in cash and cash equivalents

$
16,575

$
19,178

(2,603)

(13.6)


	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. The Company’s operating activities generated net cash of ~~$342.5~~$100.8 million and ~~$298.9~~$87.5 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The ~~$43.6~~$13.2 million increase was driven primarily by strong operating results and the timing of cash receipts and cash payments to vendors, employees, and tax and regulatory authorities.

~~ROLLINS, INC. AND SUBSIDIARIES~~

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

The Company’s investing activities used ~~$123.4~~$13.6 million and $19.9 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and provided $11.1~~respectively. Cash paid for acquisitions totaled $15.5 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2023 as compared to $13.2 million for the three months ended March 31, 2022. The Company invested ~~approximately $22.9~~$7.6 million in capital expenditures during ~~2022~~the quarter, offset by $8.9 million in cash proceeds from the sale of assets, compared ~~to $20.0~~with $8.0 million ~~during 2021. Capital~~of capital expenditures ~~for the period consisted primarily of equipment replacements~~ and ~~technology-related projects. Cash paid for acquisitions totaled $110.4~~$1.3 million ~~for the nine months ended September 30, 2022 as compared to $39.7 million for the nine months ended September 30, 2021.~~in cash proceeds from asset sales in 2022. The ~~expenditures for the~~ Company’s ~~acquisitions~~investing activities were funded through existing cash balances and operating cash flows. ~~The nine months ended September 30, 2021 included approximately $67 million in cash proceeds from the sale of assets related to the Clark Pest property sale-leaseback transactions.~~

Cash Provided by or Used in Financing Activities

Cash used by financing activities was ~~$196.3~~$71.1 million during the ~~nine~~three months ended ~~September 30, 2022 compared to~~March 31, 2023, while cash ~~used~~ of ~~$284.7~~$82.1 million was provided by financing activities in the prior year. ~~The Company made net debt repayments of $30.0 million during the nine months ended September 30, 2022, compared to net repayments of $135.0 million during 2021.~~ A total of ~~$147.6~~$64.1 million was paid in cash dividends ($~~0.30~~0.13 per share) during the ~~nine months ended September 30, 2022~~quarter compared to ~~$119.7~~$49.2 million in cash dividends paid ($~~0.24~~0.10 per share) during the ~~nine~~three months ended ~~September 30, 2021.~~

March 31, 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 ~~nine~~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 ~~$7.0~~$9.8 million and ~~$10.6~~$6.4 million of common stock for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, from employees for the payment of taxes on vesting restricted shares.

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, 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.

~~ROLLINS, INC. AND SUBSIDIARIES~~

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.

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 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, 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 and ASU 2022-03 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 3.7 years;~~

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●

~~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 recent disruptions in economic markets due to high inflation, increased fuel costs, and supply chain issues, all pose current and future challenges which may adversely affect the Company’s future performance;

●

that the Company cannot reasonably estimate whether its current strategies will help mitigate the impact of high inflation, increased fuel costs, employee and vehicle shortages, shipping delays and supply chain issues in the future;

●

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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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 ~~2021~~2022 Form 10-K. There were no material changes to our market risk exposure during the three ~~and nine~~ months ended ~~September 30, 2022.~~

March 31, 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

~~ROLLINS, INC. AND SUBSIDIARIES~~

of ~~September 30, 2022~~March 31, 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 ~~third~~first quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

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Item 103 of SEC Regulation S-K requires disclosure of certain environmental legal proceedings if the proceeding reasonably involves potential monetary sanctions of $300,000 or more. The Company has received a 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 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 our results of operations, financial 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.

Rollins, Inc did not purchase any equity securities reportable under Item 703 of Regulation S-K during the period from ~~July~~January 1, ~~2022~~2023 to ~~September 30, 2022.~~

March 31, 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)

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~~	~~per share~~		~~repurchases (1)~~	~~repurchase plan (1)~~
~~July 1 to 31, 2022~~	—	$	—	—	~~11,415,625~~
~~August 1 to 31, 2022~~	—		—	—	~~11,415,625~~
~~September 1 to 30, 2022~~	—		—	—	~~11,415,625~~
~~Total~~	—	$	—	—	~~11,415,625~~

~~(1)~~

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

10.6*
Form of Restricted Stock Grant Agreement
8-K
April 28, 2008
10(d)

10.7*
Form of Time-Lapse Restricted Stock Agreement
10-Q
April 27, 2012
10.1

10.8*
Summary of Compensation Arrangements with Executive Officers
10-K
February 25, 2011
(10)(q)

10.9*
Summary of Compensation Arrangements with Non-Employee Directors
10-K
February 25, 2015
10(i)

10.10
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

10.11
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
10.12
Annex A to the Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as
10-K
February 25, 2022
10.13

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
Administrative Agent and as a Lender and Bank of America, N.A. as a Lender
10.13
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
10.14*
Form of Rollins, Inc. 2022 Executive Bonus Plan
10-K
February 25, 2022
10.15
10.15*
Rollins, Inc. 2022 Executive Bonus Plan - Jerry Gahlhoff
10-K
February 25, 2022
10.16
10.16*
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

10.17*
Form of Time-Lapse Restricted Stock Agreement for Non-Section 16 Reporting Person

X
10.18*
Form of Time-Lapse Restricted Stock Agreement For Section 16 Reporting Persons

X
10.19*
Offer Letter dated July 25, 2022, between Kenneth D. Krause and the Company

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: ~~October~~April 27, ~~2022~~ 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 27, 2023			By:
~~Date: October 27, 2022~~	~~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	☒


	September 30,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	121,876	$	105,301
Trade receivables, net of allowance for expected credit losses of $13,783 and $13,885, respectively		170,274		139,579
Financed receivables, short-term, net of allowance for expected credit losses of $1,779 and $1,463, respectively		32,253		26,152
Materials and supplies		28,572		28,926
Other current assets		45,981		52,422
Total current assets		398,956		352,380
Equipment and property, net of accumulated depreciation of $330,173 and $315,891, respectively		130,362		133,257
Goodwill		772,325		721,819
Customer contracts, net		319,382		325,929
Trademarks & tradenames, net		114,016		108,976
Other intangible assets, net		9,807		11,679
Operating lease right-of-use assets		270,365		244,784
Financed receivables, long-term, net of allowance for expected credit losses of $3,121 and $2,522, respectively		58,634		47,097
Other assets		38,636		34,949
Total assets	$	2,112,483	$	1,980,870
LIABILITIES
Accounts payable	$	42,874	$	44,568
Accrued insurance - current		40,424		36,414
Accrued compensation and related liabilities		95,694		97,862
Unearned revenues		166,866		145,122
Operating lease liabilities - current		82,611		75,240
Current portion of long-term debt		15,000		18,750
Other current liabilities		66,300		73,206
Total current liabilities		509,769		491,162
Accrued insurance, less current portion		35,257		31,545
Operating lease liabilities, less current portion		191,565		172,520
Long-term debt		109,878		136,250
Other long-term accrued liabilities		69,463		67,345
Total liabilities		915,932		898,822
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, 492,472,436 and 491,911,087 shares issued and outstanding, respectively		492,472		491,911
Additional paid in capital		113,995		105,629
Accumulated other comprehensive loss		(43,566)		(16,411)
Retained earnings		633,650		500,919
Total stockholders’ equity		1,196,551		1,082,048
Total liabilities and stockholders’ equity	$	2,112,483	$	1,980,870


	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


	Three Months Ending				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
NET INCOME	$	107,622	$	93,853	$	280,366	$	285,350
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(12,417)		(7,207)		(26,203)		(6,924)
Unrealized loss on available for sale securities		—		—		(952)		—
Change in derivatives		—		632		—		356
Other comprehensive income (loss), net of tax		(12,417)		(6,575)		(27,155)		(6,568)
Comprehensive income	$	95,205	$	87,278	$	253,211	$	278,782


		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				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
REVENUES
Customer services	$	729,704	$	650,199	$	2,034,433	$	1,823,957
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		348,158		305,474		980,316		864,888
Sales, general and administrative		213,581		194,261		612,353		539,951
Depreciation and amortization		24,282		23,617		73,454		70,519
Total operating expenses		586,021		523,352		1,666,123		1,475,358
OPERATING INCOME		143,683		126,847		368,310		348,599
Interest expense, net		846		222		2,294		1,334
Other (income), net		(1,980)		(447)		(5,170)		(33,598)
CONSOLIDATED INCOME BEFORE INCOME TAXES		144,817		127,072		371,186		380,863
PROVISION FOR INCOME TAXES		37,195		33,219		90,820		95,513
NET INCOME	$	107,622	$	93,853	$	280,366	$	285,350
NET INCOME PER SHARE - BASIC AND DILUTED	$	0.22	$	0.19	$	0.57	$	0.58
Weighted average shares outstanding - basic		492,316		492,069		492,285		492,058
Weighted average shares outstanding - diluted		492,430		492,069		492,398		492,058
DIVIDENDS PAID PER SHARE	$	0.10	$	0.08	$	0.30	$	0.24


						Accumulated Other
	Common Stock			Paid-in-		Comprehensive		Retained
	Shares	Amount		Capital		Income / (Loss)		Earnings		Total
Balance at June 30, 2022	492,417	$	492,417	$	109,070	$	(31,149)	$	575,229	$	1,145,567
Net Income	—		—		—		—		107,622		107,622
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments	—		—		—		(12,417)		—		(12,417)
Cash dividends	—		—		—		—		(49,201)		(49,201)
Stock compensation	55		55		4,902		—		—		4,957
Employee stock buybacks	—		—		23		—		—		23
Balance at September 30, 2022	492,472	$	492,472	$	113,995	$	(43,566)	$	633,650	$	1,196,551


	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


	September 30, 2022
Accounts receivable, net	$	2,926
Materials and supplies		439
Equipment and property		6,245
Goodwill		60,962
Customer contracts		44,377
Trademarks & tradenames		5,615
Other intangible assets		1,393
Current liabilities		(4,285)
Other assets and liabilities, net		(1,384)
Total consideration	$	116,288
Less: Acquisition holdback liabilities		(8,978)
Total cash purchase price	$	107,310


	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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
(in thousands)
Beginning balance	$	192,972	$	172,951	$	168,607	$	149,224
Deferral of unearned revenue		54,946		49,060		180,209		165,094
Recognition of unearned revenue		(51,553)		(47,316)		(152,451)		(139,623)
Ending balance	$	196,365	$	174,695	$	196,365	$	174,695



	Allowance for Credit Losses
	Trade		Financed		Total
	Receivables		Receivables		Receivables
Balance at June 30, 2022	$	13,666	$	4,554	$	18,220
Provision for expected credit losses		3,842		1,316		5,158
Write-offs charged against the allowance		(5,095)		(970)		(6,065)
Recoveries collected		1,370		—		1,370
Balance at September 30, 2022	$	13,783	$	4,900	$	18,683


	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		9,396		4,195		13,591
Write-offs charged against the allowance		(13,561)		(3,280)		(16,841)
Recoveries collected		4,063		—		4,063
Balance at September 30, 2022	$	13,783	$	4,900	$	18,683


Goodwill:
Balance at December 31, 2020	$	653,176
Additions		69,264
Adjustments due to currency translation		(621)
Balance at December 31, 2021		721,819
Additions		60,962
Measurement adjustments		65
Adjustments due to currency translation		(10,521)
Balance at September 30, 2022	$	772,325


	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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2022		2021		2022		2021
Residential revenue	$	337,878	$	307,747	$	922,448	$	835,871
Commercial revenue		243,478		218,648		683,748		618,183
Termite completions, bait monitoring, & renewals		139,668		117,423		406,155		350,791
Franchise revenues		4,068		4,128		11,960		11,698
Other revenues		4,612		2,253		10,122		7,414
Total Revenues	$	729,704	$	650,199	$	2,034,433	$	1,823,957



	September 30, 2022						December 31, 2021
			Accumulated		Carrying				Accumulated		Carrying			Useful Life
	Gross		Amortization		Value		Gross		Amortization			Value		in Years
Amortizable intangible assets:
Customer contracts	$	567,698	$	(248,316)	$	319,382	$	551,277	$	(225,348)		$	325,929	3-20
Trademarks and tradenames		18,086		(7,201)		10,885		12,784		(6,492)			6,292	7-20
Non-compete agreements		13,999		(6,927)		7,072		13,125		(5,573)			7,552	3-20
Patents		6,934		(6,692)		242		6,946		(5,509)			1,437	3-15
Other assets		1,910		(1,645)		265		2,150		(1,687)			463	10
Total amortizable intangible assets	$	608,628	$	(270,781)		337,847	$	586,282	$	(244,609)			341,673
Indefinite-lived intangible assets:
Trademarks and tradenames						103,131							102,684
Internet domains						2,227							2,227
Total indefinite-lived intangible assets						105,358							104,911
Total customer contracts and other intangible assets					$	443,205						$	446,584


(in thousands)
2022 (excluding the nine months ended September 30, 2022)	$	16,283
2023		59,772
2024		56,197
2025		47,083
2026		42,670


(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


	Operating
(in thousands)
2022 (excluding the nine months ended September 30, 2022)	$	24,234
2023		86,079
2024		62,772
2025		44,160
2026		26,286
2027		14,764
Thereafter		48,050
Total Future Minimum Lease Payments		306,345
Less: Amount representing interest		32,169
Total future minimum lease payments, net of interest	$	274,176


	Number of	Sell		Buy
FX Forward Contracts	Instruments	Notional		Notional
Sell AUD/Buy USD Fwd Contract	16		2,300	$	1,615
Sell CAD/Buy USD Fwd Contract	16		16,000		12,313
Total	32			$	13,928


		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	(68)		26.32
Vested	(666)		19.97
Granted	854		30.12
Unvested Restricted Stock at September 30, 2022	2,716	$	28.93


	Three Months Ended September 30,				Variance		As a % of Revenue
(in thousands)	2022		2021		$	%	2022	2021
REVENUES
Customer services	$	729,704	$	650,199	79,505	12.2	100.0	100.0
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		348,158		305,474	42,684	14.0	47.7	47.0
Sales, general and administrative		213,581		194,261	19,320	9.9	29.3	29.9
Depreciation and amortization		24,282		23,617	665	2.8	3.3	3.6
Total operating expenses		586,021		523,352	62,669	12.0	80.3	80.5
OPERATING INCOME		143,683		126,847	16,836	13.3	19.7	19.5
Interest expense, net		846		222	624	NM	0.1	0.0
Other (income), net		(1,980)		(447)	(1,533)	NM	(0.3)	(0.1)
CONSOLIDATED INCOME BEFORE INCOME TAXES		144,817		127,072	17,745	14.0	19.8	19.5
PROVISION FOR INCOME TAXES		37,195		33,219	3,976	12.0	5.1	5.1
NET INCOME	$	107,622	$	93,853	13,769	14.7	14.7	14.4


	Consolidated Net Revenues
(in thousands)	2022		2021		2020
First Quarter	$	590,680	$	535,554	$	487,901
Second Quarter		714,049		638,204		553,329
Third Quarter		729,704		650,199		583,698
Fourth Quarter		—		600,343		536,292
Year to date	$	2,034,433	$	2,424,300	$	2,161,220


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*	2018 Stock Incentive Plan	DEF 14A	March 21, 2018	Appendix A
10.6*	Form of Restricted Stock Grant Agreement	8-K	April 28, 2008	10(d)
10.7*	Form of Time-Lapse Restricted Stock Agreement	10-Q	April 27, 2012	10.1
10.8*	Summary of Compensation Arrangements with Executive Officers	10-K	February 25, 2011	(10)(q)
10.9*	Summary of Compensation Arrangements with Non-Employee Directors	10-K	February 25, 2015	10(i)
10.10	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
10.11	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
10.12	Annex A to the Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as	10-K	February 25, 2022	10.13