Rollins ROL · USD

SEGMENT AND GEOGRAPHIC INFORMATIONThe Company operates under one reportable segment which contains our residential, commercial, and termite service offerings. The Company's chief operating decision maker ("CODM") is the chief executive officer. The CODM uses net income to assess financial performance and allocate resources. This financial metric is used by the CODM to make key operating decisions, such as the determination of the rate of growth investments and the allocation of budget between cost categories. The measure of segment assets is reported on the consolidated statements of financial position as total consolidated assets.The following table presents selected financial information with respect to the Company’s single reportable segment for the years ended December 31:(in thousands)202520242023Revenue$3,761,050 $3,388,708 $3,073,278 Less:Cost of services provided (exclusive of depreciation and amortization below):Employee expenses1,166,044 1,048,992 953,600 Materials and supplies225,462 212,296 197,825 Insurance and claims66,897 68,326 60,390 Fleet expenses157,461 131,898 127,390 Other cost of services provided (1)161,142 141,685 130,666 Total cost of services provided (exclusive of depreciation and amortization below)1,777,006 1,603,197 1,469,871 Sales, general and administrative:Selling and marketing expenses484,859 427,916 375,805 Administrative employee expenses345,643 313,814 291,772 Insurance and claims40,816 41,434 37,946 Fleet expenses39,608 33,580 31,415 Other sales, general and administrative (2)222,306 198,323 178,295 Total sales, general and administrative1,133,232 1,015,067 915,233 Restructuring costs— — 5,196 Depreciation and amortization124,744 113,220 99,752 Interest expense, net28,558 27,677 19,055 Other (income) expense, net(3,416)(683)(22,086)Income tax expense174,221 163,851 151,300 Net income$526,705 $466,379 $434,957 (1) Other cost of services provided includes facilities costs, professional services, maintenance and repairs, software license costs, and other expenses directly related to providing services.(2) Other sales, general and administrative includes facilities costs, professional services, maintenance and repairs, software license costs, bad debt expense, and other administrative expenses.See the consolidated financial statements for other financial information regarding the Company’s reportable segment. See Note 3, Revenue for further information on revenue.

REVENUESales and usage-based taxes are excluded from revenues. No sales to an individual customer or in a country other than the United States accounted for 10% or more of the sales for the periods listed in the following tables. Revenue, classified by the major geographic areas in which our customers are located, was as follows:202520242023(in thousands)United States$3,491,325 $3,143,372 $2,853,321 Other countries269,725 245,336 219,957 Total revenues$3,761,050 $3,388,708 $3,073,278 Revenue from external customers, classified by significant service offering, was as follows:(in thousands)202520242023Residential revenues$1,693,244 $1,535,104 $1,409,872 Commercial revenues1,244,733 1,125,964 1,024,176 Termite and ancillary revenues781,542 688,186 605,533 Franchise revenues16,034 16,935 16,475 Other revenues25,497 22,519 17,222 Total revenues$3,761,050 $3,388,708 $3,073,278 The Company records unearned revenue when we have either received payment or contractually have the right to bill for services in advance of the services or performance obligations being performed. Unearned revenue recognized in the twelve months ended December 31, 2025 and 2024 was $279.0 million and $253.3 million, respectively. Changes in unearned revenue were as follows:Year Ended December 31, 20252024(in thousands)Beginning balance$223,872 $210,059 Deferral of unearned revenue288,145 267,100 Recognition of unearned revenue(279,031)(253,287)Ending balance$232,986 $223,872 As of December 31, 2025 and December 31, 2024, the Company had long-term unearned revenue of $45.3 million and $43.0 million, respectively, recorded in other long-term accrued liabilities on our consolidated statements of financial position. Unearned short-term revenue is recognized over the next 12-month period. We recognized $180.9 million and $172.4 million of revenue in the years ended December 31, 2025 and December 31, 2024, respectively, that was included in the balance of unearned revenue at the beginning of each respective fiscal year. The majority of unearned long-term revenue is recognized over a period of five years or less with immaterial amounts recognized through 2035.Incremental Costs of Obtaining a Contract with a CustomerIncremental costs of obtaining a contract include only those costs that we incur to obtain a contract that we would not have incurred if the contract had not been obtained, primarily sales commissions.

COMMITMENTS AND CONTINGENCIESIn 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, inquiries, 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 investigations, cases, and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations, claims filed under California's Private Attorneys General Act and claims and investigations related to our enforcement of post-employment restrictive covenants. 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 in accordance with ASC 450.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.

DEBTLong-term DebtComponents of long-term debt were as follows:(in thousands)Years Ended December 31,202520242035 Senior Notes$500,000 $— Revolving Credit Facility— 397,000 Total long-term debt$500,000 $397,000 Less: unamortized debt discount(7,125)— Less: unamortized debt issuance costs(6,728)(1,690)Total long-term debt, net$486,147 $395,310 2035 Senior Notes and Exchange OfferIn February 2025, we issued ten-year notes with an aggregate principal amount of $500 million due on February 24, 2035 (the “2035 Senior Notes”) in a private placement to qualified institutional buyers pursuant to Section 4(a)(2) and Rule 144A under the Securities Act. We issued the 2035 Senior Notes at 98.443% of par, representing a discount of $7.8 million and paid approximately $6.1 million for debt issuance costs. The interest is payable semi-annually in arrears on February 24 and August 24 of each year at 5.25% per annum, beginning on August 24, 2025, and the entire principal amount is due at the time of maturity. We used the net proceeds from this offering primarily to repay outstanding borrowings under the Revolving Credit Facility, as defined below, as well as for general corporate purposes.The 2035 Senior Notes are senior unsecured obligations of the Company and, at the time of issuance, were guaranteed by the Company’s subsidiaries that were guarantors under its Revolving Credit Facility, provided for by the Credit Agreement defined below. Subsequent to the issuance of the 2035 Senior Notes, and described further below, we amended our Credit Agreement to release the Company's subsidiaries as guarantors, which also released them as guarantors on the 2035 Senior Notes. The indenture governing the 2035 Senior Notes contains customary covenants that limit the Company and its subsidiaries’ ability to, among other things, incur liens and certain types of indebtedness. The indenture also provides for customary events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all the then outstanding 2035 Senior Notes to be due and payable immediately. We were in compliance with all financial covenants as of December 31, 2025.On May 6, 2025, we commenced an offer to exchange $500 million of the 2035 Senior Notes privately placed in February 2025 (“Initial Notes”) for the $500 million of the 2035 Senior Notes that have been registered under the Securities Act of 1933 (“Exchange Notes”).

INCOME TAXESFor the years ended December 31, income from continuing operations before income taxes consisted of the following: (in thousands)202520242023Income before income taxesDomestic $664,780 $592,704 $548,428 Foreign36,146 37,526 37,829 Total income from continuing operations before income taxes$700,926 $630,230 $586,257 For the years ended December 31, the Company’s income tax provision consisted of the following:202520242023(in thousands)Current:Federal$105,940 $126,246 $112,647 State35,326 36,328 33,516 Foreign13,803 11,613 12,781 Total current tax expense155,069 174,187 158,944 Deferred:Federal17,541 (6,848)(2,349)State5,253 (2,336)(2,925)Foreign(3,642)(1,152)(2,370)Total deferred tax expense (benefit)19,152 (10,336)(7,644)Total income tax provision$174,221 $163,851 $151,300 The following table presents the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended December 31:202520242023(in thousands)$%$%$%Income tax at statutory rate$147,210 21.0 %$132,361 21.0 %$123,114 21.0 %State and local income taxes, net of federal income tax effect (1) 32,485 4.6 %26,647 4.2 %23,653 4.0 %Foreign tax effects3,330 0.5 %3,303 0.5 %841 0.1 %Effect of changes in tax laws or rates enacted in the current period— — %— — %— — %Effect of cross-border tax laws(883)(0.1)%384 0.1 %505 0.1 %Tax credits:Investment tax credits(7,687)(1.1)%— — %— — %Other tax credits(1,506)(0.2)%(1,308)(0.2)%(1,300)(0.2)%Changes in valuation allowances— — %— — %— — %Nontaxable or nondeductible items2,893 0.5 %2,163 0.3 %1,940 0.3 %Changes in unrecognized tax benefits(1,411)(0.2)%44 — %958 0.2 %Other adjustments(210)(0.1)%257 0.1 %1,589 0.3 %Total income tax provision$174,221 24.9 %— $163,851 26.0 %$151,300 25.8 %(1) State taxes in California, Florida, Georgia, Illinois, and New Jersey make up the majority (greater than 50 percent) of the tax effect in this category.Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes.

LEASESThe Company leases certain buildings, vehicles, and equipment in order to reduce the risk associated with ownership. The Company elected the practical expedient approach permitted under ASC Topic 842, “Leases” not to include short-term leases with a duration of 12 months or less on the consolidated statements of financial position. As of December 31, 2025 and 2024, all leases were classified as operating leases. Building leases generally carry terms of 5 to 10 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.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.(in thousands, except Other Information)Years Ended December 31,Components of Lease ExpenseFinancial Statement Classification202520242023Short-term lease costCost of services provided, Sales, general, and administrative expenses$7,281 $16,618 $14,753 Operating lease costCost of services provided, Sales, general, and administrative expenses159,924 133,420 110,627 Total lease expense$167,205 $150,038 $125,380 Cash Flow InformationCash paid for amounts included in the measurement of lease liabilities:Operating cash flows for operating leases$159,060 $132,588 $109,631 Other InformationWeighted-average remaining lease term - operating leases4.1 Yrs4.4 YrsWeighted-average discount rate - operating leases4.50 %4.

ACQUISITIONSSaela Pest Control AcquisitionOn April 1, 2025, the Company acquired 100% of Saela Holdings, LLC ("Saela") for $207.2 million. The Company funded this acquisition using cash on hand and borrowings under the commercial paper program.The acquisition expands the Rollins family of brands, and management believes the acquisition will drive long-term value given Saela's attractive financial profile and complementary end market exposure.The Saela acquisition has been accounted for as a business combination, and Saela's results of operations are included in the Company's operations from the acquisition date. During the year ended December 31, 2025, Saela contributed revenues and net earnings of $54.9 million and $5.0 million, respectively.The valuation of the Saela acquisition was performed by a third-party valuation specialist under management’s supervision. The estimated purchase price allocation disclosed as of June 30, 2025 was revised during the measurement period as new information was received and analyzed resulting in an increase in customer contracts, a decrease in goodwill, and other immaterial changes, as presented in the table below. The initial and updated preliminary values of identified assets acquired and liabilities assumed for Saela are summarized as follows:(in thousands)Initial Preliminary Allocation as of 4/1/2025Measurement Period AdjustmentsUpdated Preliminary Allocation as of 4/1/2025Cash$1,506 $16 $1,522 Accounts receivable832 (27)805 Materials and supplies573 — 573 Other current assets414 — 414 Equipment and property4,648 9 4,657 Goodwill132,959 (3,698)129,261 Customer contracts52,200 4,100 56,300 Trademarks & tradenames17,300 — 17,300 Operating lease right-of-use assets991 — 991 Accounts payable(1,961)(23)(1,984)Accrued compensation and related liabilities(949)(115)(1,064)Other current liabilities(389)(168)(557)Operating lease liabilities(991)— (991)Assets acquired and liabilities assumed$207,133 $94 $207,227 Included in the total consideration above are cash payments of $193.7 million made upon closing, contingent consideration valued at $8.8 million that is based on Saela's expected financial performance in the two years following the acquisition, and holdback liabilities valued at $4.7 million to be held by the Company to settle indemnity claims and purchase price adjustments. The fair value of the contingent consideration was estimated using a Monte Carlo simulation.

The Company has security incident response policies and procedures for identifying, assessing, and managing material risks arising from cybersecurity incidents, including those arising from third-party service providers. The Company welcomed a new Chief Information Security Officer (“CISO”) on December 15, 2025. The new CISO has over 20 years of experience in information security and has previously served as CISO for a public company. He will be the executive primarily responsible for managing cybersecurity risks. The CISO assesses cybersecurity incidents and classifies them by severity level in accordance with the Company’s Security Incident Guidelines, which determine how each cybersecurity incident is managed and communicated. The Company uses both internal and external resources to assess risk and manage its IT and 24x7 cybersecurity operations, including managed service providers who assist in the support of key business systems. The Company may also periodically engage external consultants to assist with cybersecurity incident management, particularly where advanced or specialized expertise may be required. The Company’s Incident Response and Breach Notification Policy outlines the procedures that the Company follows for evaluation and recovery from an incident, including containment of the affected systems, and restoring systems to normal operations. To date, the Company has not had a cybersecurity event that materially impacted or affected its business strategy, results of operations, financial condition, or the security of its proprietary data.The Company has assigned responsibility for Board oversight of cybersecurity risk to the Audit Committee, which monitors the cybersecurity risk management and cyber control functions, including external security audits, and receives periodic updates from experienced senior management, including the CISO, who are knowledgeable about assessing and managing cyber risks, including, as appropriate, providing updates on the prevention, detection, mitigation, and remediation of cyber incidents.