Rollins, Inc. 10-K (2022-02-25)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2021

 

 

Business

 

General Overview

 

Rollins, Inc. (“Rollins,” “we,” “us,” “our,” or the “Company”), is an international services company headquartered in Atlanta, Georgia. Through our family of leading brands, we provide essential pest and wildlife control services and protection against termite damage, rodents and insects to more than two million residential and commercial customers from more than 800 Company-owned and franchised locations in over 70 countries.  

 

termite : an insect that lives in organized groups, mainly in hot countries. Termites do a lot of damage by eating the wood of trees and buildings.

 

rodent : any small animal that belongs to a group of animals with strong sharp front teeth. Mice, rats and squirrels are all rodents.

 

 

 

Over the course of our lengthy operating history, we have garnered a reputation for providing great customer service. The contracted and recurring nature of our services provide us with visibility into a significant portion of our future earnings.

 

lengthy : very long, and often too long, in time or size

 

garner : to obtain or collect something such as information, support, etc.

 

recur : to happen again or a number of times

 

 

 

In 1964, brothers O. Wayne and John Rollins acquired Orkin Exterminating Company and in 1965 we changed our name from Rollins Broadcasting, Inc to Rollins, Inc. In 1968, Rollins began trading on the New York Stock Exchange under the symbol “ROL”. Since then, we have grown into a premier consumer and commercial services business with numerous industry leading brands including the world renowned Orkin, as well as HomeTeam Pest Defense, Clark Pest Control, Western Pest Services, Critter Control Wildlife, and Northwest Pest Control, among others.

 

 

 

We operate under one reportable segment which contains our three business lines:

 

Residential: Pest control services protecting residential properties from common pests, including rodents, insects and wildlife;

 

Commercial: Workplace pest control solutions for customers across diverse end markets such as healthcare, foodservice, logistics; and

 

Termite: Traditional and baiting termite protection services and ancillary services for both residential and commercial customers.

 

 

 

Our Competitive Strengths

 

Rollins is a global leader in pest control. We have established a portfolio of premier brands with extensive service capabilities across a deep operating network. Our scale enables delivery of great service and provides a significant and reinforcing competitive advantage through (i) comprehensive capabilities to win new residential and commercial accounts, (ii) technology investments for operations optimization and enhanced customer experience, (iii) route density to manage variable costs, and (iv) financial flexibility to generate organic growth and pursue M&A.

 

pest : an insect or animal that destroys plants, food, etc. / an annoying person or thing

 

reinforce : to make a feeling, an idea, etc. stronger / to make a structure or material stronger, especially by adding another material to it

 

comprehensive : including all, or almost all, the items, details, facts, information, etc., that may be involved / (of education) designed for students of all abilities in the same school

 

variable : a situation, number or quantity that can vary or be varied

 

flexibility : the ability to change to suit new conditions or situations / the ability to bend easily without breaking

 

 

 

Robust Operating Platform with Proprietary Technology

 

Our extensive footprint creates an efficient and scalable operating platform to facilitate exceptional customer service delivery, increased cross-selling opportunities, and cost efficiencies.

 

scalable : used to describe a computer, a network, software, etc. that can be adapted to meet greater needs in the future / designed to work on a large or small scale, according to needs

 

facilitate : to make an action or a process possible or easier

 

cross-selling : the activity of selling a different product to someone who is already buying a product from the same company 

 

 

 

We have strategically invested in proprietary routing and scheduling technologies to increase our competitive advantage, which includes real-time service tracking and customer Internet communication to personalize the customer experience.

 

proprietary : (of goods) made and sold by a particular company and protected by a registered trademark / relating to an owner or to the fact of owning something 

 

 

 

We also developed and launched our proprietary Branch Operating Support System (“BOSS”), which offers a back-end interface to facilitate service tracking and payment processing for technicians.

 

 

 

BOSS also provides virtual route management tools to increase route efficiency across our network, reducing miles driven and associated costs while increasing customer retention through on-time and rapid response service.

 

retention : the action of keeping something rather than losing it or stopping it / the action of keeping liquid, heat, etc. inside something rather than letting it escape

 

 

 

Differentiated Employee Base and Service Delivery

 

Our employees are critical to delivering an outstanding customer experience, and we are highly focused on providing our team with best-in-class training and development opportunities. We operate the 27,000 square foot Rollins Learning Center training facility located in Atlanta, GA, which is a distance-learning and global broadcast facility with simulated environments and classrooms for training.

 

 

 

In addition to in-person training, the Rollins Learning Center offers on-demand training sessions that employees can access from anywhere in the world that are produced at our on-site, state-of-the-art broadcast studio. Our unique programs contribute to our position as an employer of choice and have earned us recognition from Training magazine among the Top 125 U.S. Training Companies 16 times in the past 19 years. We continuously monitor co-worker engagement and customer loyalty. 

 

 

 

Experienced Management Team

Our management team combines extensive business and consumer services experience with robust local pest control leadership. Consistent with our culture of attracting, developing and progressing talented individuals, our senior leadership team consists of a combination of long-term internal leaders and strategic hires from well-respected external platforms. Our Chairman and CEO, Gary Rollins, is the son of Rollins, Inc. co-founder O. Wayne Rollins and has spent his entire career with the Company, serving as CEO since 2001.

 

 

 

International Business

 

We continue to expand our international presence through organic growth, international acquisitions, and our international franchise programs. In 2021, we saw revenue growth in our operations in Canada, Australia, the United Kingdom, and Singapore.

 

organic growth : the increase in a company's sales and profits that is a result of developing its own business activities, rather than buying other companies

 

 

 

We believe geographic diversity allows us to increase brand recognition, meet demands of global customers, and draw on business and technical expertise from teams in several countries, and offers us an opportunity to access new markets.

 

 

 

Franchising Programs

 

We have franchise programs through Orkin, Critter Control and our Australian subsidiaries. We had a total of 135, 128 and 134 domestic franchise agreements as of December 31, 2021, 2020 and 2019, respectively. International franchise agreements totaled 103, 101 and 104 as of December 31, 2021, 2020 and 2019, respectively.

 

 

 

Transactions with our franchises involve sales of territories and customer contracts to establish new franchises and the payment of initial franchise fees and royalties by franchisees. The territories, customer contracts and initial franchise fees are typically paid for by a combination of cash and notes.

 

 

 

Acquisition Strategy

 

We have extensive experience acquiring companies of all sizes. Over the last three years, we have completed approximately 100 acquisitions, including 39 acquisitions in 2021. Our acquisition strategy targets high quality, profitable businesses with strong leadership that would benefit from incremental growth capital and have the potential to achieve margin expansion through cost and revenue synergies.

 

incremental : increasing in regular amounts

 

 

 

Seasonality

 

Our business is somewhat affected by weather conditions, including climate change and the seasonal nature of our pest and termite control services. The increase in pest presence and activity, as well as the metamorphosis of termites in the spring and summer (the occurrence of which is determined by the timing of the change in seasons), has historically resulted in an increase in the revenue of our pest and termite control operations during such periods as evidenced by the following chart.

 

metamorphosis : (biology) the process in which an insect or an amphibian (such as a frog) changes from its young form to its adult form in two or more separate stages / (formal) a process in which somebody/something changes completely into something different 

 

 

 

 

Materials and Supplies

 

Our Company has relationships with a vast network of national pest control product distributors, manufacturers and other suppliers for pest and termite control treatment products. We maintain a sufficient level of products, materials, and other supplies to fulfill our immediate servicing needs and to mitigate any potential short-term shortage in availability from our national network of suppliers.

 

vast : extremely large in area, size, amount, etc.

 

 

 

We also have qualified comparable products and materials for key categories to have alternatives ready as needed. However, at any time supply chain disruptions that are more than short-term in nature could impact our levels of products, materials and other supplies.

 

 

 

Competition

 

We operate in a highly competitive environment. The principal factors of competition in our pest and termite control markets are the delivery of high quality of service, customer proximity, guarantee terms, reputation for safety, technical proficiency, and price.

 

proximity : the state of being near somebody/something in distance or time

 

 

 

Due to our strong direct partnerships with product manufacturers, distributors, and visibility into the inventories, ordering and distribution of materials and supplies, we are able to foresee potential supply disruptions and to quickly adapt. The use of an innovative and industry changing distribution model and technology enables us to maintain adequate supplies for our field operations without a significant investment in warehousing and inventory.

 

foresee : to think something is going to happen in the future; to know about something before it happens

 

 

 

We believe that, through our wholly-owned subsidiaries, we compete effectively and favorably with our competitors as one of the world’s largest pest and termite control companies. Our major competitors include Terminix, Ecolab, Rentokil and Anticimex.

 

 

 

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