Stifel 2024 Cross Sector Insight Conference
2
Rollins, Inc.
June 5, 2024
1 | © 2024 Rollins, Inc. All rights reserved. |
Cautionary Statement Regarding
Forward-Looking Statements
This presentation as well as other written or oral statements by the Company may contain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. We have based these forward-looking statements on our current opinions, expectations, intentions, beliefs, plans, objectives, assumptions and projections about future events and financial trends affecting the operating results and financial condition of our business. Although we believe that these forward-looking statements are reasonable, we cannot assure you that we will achieve or realize these plans, intentions, or expectations. Generally, statements that do not relate to historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. The words "believe," "continue," "could," "estimate," "expect," "intend," "may," "might," "plan," "possible," "potential," "predict," "should," "will," "would," and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
Forward-looking statements in this presentation include, but are not limited to, statements regarding: expectations with respect to our financial and business performance; demand for our services; our loyal customer base; brand awareness and market position; our results and pipeline of mergers and acquisitions; preserving brands of acquired companies; revenue and cost synergies; expected growth and margin expansion; strategic objectives; pricing strategies; optimizing cost structure; commercial growth opportunities; branch expansion strategies; continuous improvement initiatives enhancing profitability; secular tailwinds; market opportunities; and a balanced capital allocation program, including dividends and share repurchases.
These forward-looking statements are based on information available as of the date of this presentation and current expectations, forecasts, and assumptions, and involve a number of judgments, risks and uncertainties. Important factors could cause actual results to differ materially from those indicated or implied by forward-looking statements including, but not limited to, those set forth in the sections entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and may also be described from time to time in our future reports filed with the SEC.
Further, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required by law.
2 | © 2024 Rollins, Inc. All rights reserved. |
Reconciliation of GAAP and
Non-GAAP Financial Measures
The Company has used the non-GAAP financial measures of organic revenues, organic revenues by type, adjusted operating income, adjusted operating margin, adjusted net income, adjusted earnings per share ("EPS"), earnings before interest, taxes, depreciation and amortization ("EBITDA"), EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, incremental EBITDA margin, adjusted incremental EBITDA margin, free cash flow, free cash flow conversion, net debt, net leverage ratio, and adjusted sales, general and administrative expenses ("Adjusted SG&A") in this presentation. Organic revenue is calculated as revenue less the revenue from acquisitions completed within the prior 12 months and excluding the revenue from divested businesses. Acquisition revenue is based on the trailing 12-month revenue of our acquired entities. Adjusted operating income and adjusted operating income margin are calculated by adding back to the GAAP measures those expenses resulting from the amortization of certain intangible assets and adjustments to the fair value of contingent consideration resulting from the acquisition of Fox. Adjusted net income and adjusted EPS are calculated by adding back to the GAAP measure amortization of certain intangible assets and adjustments to the fair value of contingent consideration resulting from the acquisition of Fox and excluding gains and losses on the sale of non-operational assets and by further subtracting the tax impact of those expenses, gains, or losses. Adjusted EBITDA and adjusted EBITDA margin are calculated by adding back to the GAAP measures those expenses resulting from the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox and excluding gains and losses on the sale of non-operational assets. Incremental margin is calculated as the change in EBITDA divided by the change in revenue. Adjusted incremental margin is calculated as the change in adjusted EBITDA divided by the change in revenue. Free cash flow is calculated by subtracting capital expenditures from cash provided by operating activities. Free cash flow conversion is calculated as free cash flow divided by net income. Net debt is calculated as total long-term debt less cash and cash equivalents. Net leverage ratio is calculated by dividing net debt by trailing twelve-month EBITDA. Adjusted SG&A is calculated by removing the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox. These measures should not be considered in isolation or as a substitute for revenues, net income, earnings per share or other performance measures prepared in accordance with GAAP.
Management uses adjusted operating income, adjusted operating income margin, adjusted net income, adjusted EPS, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, incremental EBITDA margin, adjusted incremental EBITDA margin, and adjusted SG&A as measures of operating performance because these measures allow the Company to compare performance consistently over various periods. Management also uses organic revenues, and organic revenues by type to compare revenues over various periods excluding the impact of acquisitions and divestitures. Management uses free cash flow to demonstrate the Company's ability to maintain its asset base and generate future cash flows from operations. Management uses free cash flow conversion to demonstrate how much net income is converted into cash. Management uses net debt as an assessment of overall liquidity, financial flexibility, and leverage. Net leverage ratio is useful to investors because it is an indicator of our ability to meet our future financial obligations. Management believes all of these non-GAAP financial measures are useful to provide investors with information about current trends in, and period-over-period comparisons of, the Company's results of operations. An analysis of any non-GAAP financial measure should be used in conjunction with results presented in accordance with GAAP.
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 the most directly comparable measure so calculated and presented.
See the appendix for a reconciliation of non-GAAP financial measures used in this presentation with their most directly comparable GAAP measures.
3 | © 2024 Rollins, Inc. All rights reserved. |
Long-Term Compounder
2000-2023 | Adj. EBITDA 1 |
Annual TSR
Operating Cash Flow
Adj. EBITDA 1
Revenue
+7% | +14% | +18% | +21% |
CAGR | CAGR | CAGR | Average |
1 This is a non-GAAP measure (see Appendix).
4 | © 2024 Rollins, Inc. All rights reserved. |
Successful Track Record
20+ YEARS | ~8% | >75% | +800BPS | |||||
OF CONSECUTIVE | 2008-2023 | RECURRING | 2008-2023 | |||||
Adj. EBITDA1 MARGIN | ||||||||
GROWTH | REVENUE CAGR | REVENUE | ||||||
EXPANSION | ||||||||
RESILIENT FINANCIAL PERFORMANCE ACROSS CYCLES | ||||||||
REVENUE GROWTH | ADJ. EBITDA GROWTH 1 | |||||||
2008 - 2010 | ~6% | ~11% | ||||||
GREAT FINANCIAL CRISIS | ||||||||
~6% | ~8% | |||||||
2015 - 2016 | ||||||||
INDUSTRIAL SLOWDOWN | ||||||||
~12% | ~15% | |||||||
2020 - 2022 | ||||||||
COVID PANDEMIC | ||||||||
1 This is a non-GAAP measure (see Appendix).
5 | © 2024 Rollins, Inc. All rights reserved. |
Disciplined Capital Deployment
Free Cash Flow1 ($MM)
~13%
CAGR
~$496
~$272
HOW IT WAS SPENT
Free Cash Flow1 Allocated to M&A, Dividends & Share Repurchases
Share
Repurchases
14%
M&A
47%
Dividends
39%
20182023
1 This is a non-GAAP measure (see Appendix).
M&A | Dividends | |
$1.2B | $1.0B | |
• | High-Quality, Profitable | • | Dividend Increased 45% |
Businesses with Strong | since Q4 2022 | ||
• | Leadership | • | Sustainable; Focus on |
Prioritize Opportunities | Growing as Earnings and | ||
with Significant Synergies | Cash Flow Compound |
- Attractive Returns
Share Repurchases
$0.4B
-
16.9MM Share Repurchase Authorization with Remaining Authorization
of 11.4MM - ~40% IRR on Recent Deployment
6 | © 2024 Rollins, Inc. All rights reserved. |
Platform Poised for Strong and Continued Growth
Organic Revenue Growth | Accretive M&A | Margin Expansion | ||
Above-Market
Organic Growth
Continue above market growth through broad brand portfolio and multi-channel access
Product
Adjacencies and
Portfolio Expansion
Cross-sell new service offerings such as mosquito, bed bug, wildlife control, and flea and tick services
SG&A | ||||||
Gross Margin | ||||||
Continued | Centralization of | |||||
select back-office | ||||||
Accretive M&A | ||||||
Strategic pricing | ||||||
International | services, platform | |||||
and procurement | technology | |||||
Expansion | ||||||
Drive further | optimization | spend, and talent | ||||
through scale and | management | |||||
growth | ||||||
vendor | ||||||
opportunities | ||||||
Build on existing | relationships | |||||
across fragmented | ||||||
international | landscape | |||||
platforms | ||||||
7 | © 2024 Rollins, Inc. All rights reserved. |
Q1 2024 Results
Revenue of
$748M up 14%
Adjusted $0.20 up 18% EPS1 of
Cash
Free $120M 29%
Flow1up
Other
Q1 Highlights
- Double-digitgrowth across all major service lines
- Organic growth1 of 7.5% despite unfavorable weather in January; acquisitions drove remaining growth
- Growth accelerated through the quarter with organic growth of 10%+ for February and March
- Solid Q1 gross margin and further leverage in SG&A drove 130 basis points of improvement in adjusted operating margins1
- Free cash flow conversion1 of ~127%
Double-Digit Revenue & Adj. Earnings Growth Despite Slower Start In January
Comparisons are against Q1 2023 unless otherwise noted.
1 These amounts are non-GAAP measures (see Appendix).
8
Key Takeaways
1 |
Rollins is a scaled player
in the core North
American pest control market, with distinct competitive advantages that enable us to extend our leadership position
2 |
We operate in a large and highly fragmented industry with significant runway for growth that has been accelerated by
a number of structural
tailwinds
3 |
We continue to invest for growth, both organically as well as through disciplined and strategic M&A
4 |
We strongly embrace our
culture of continuous
improvement and
productivity that will be
enhanced by our
modernization efforts
5 |
We are a compounder
and will continue to
create shareholder value
through disciplined
capital allocation
9 | © 2024 Rollins, Inc. All rights reserved. |
Appendix
10 | © 2024 Rollins, Inc. All rights reserved. |
Attachments
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Disclaimer
Rollins Inc. published this content on 05 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 June 2024 17:31:05 UTC.