Rollins revenue rises 6.2% from a year earlier while margin pressure cuts adjusted EPS to $0.34

Rollins, Inc. reported third-quarter 2026 revenue of $1.1 billion, up 6.2% from a year earlier, while operating margin narrowed 140 basis points to 20.5% and net income fell 3.4% to $158 million, or $0.33 a diluted share. Adjusted earnings per share were $0.34, down 2.9% from a year earlier, and adjusted EBITDA margin fell 170 basis points to 23.5%.

Organic growth of 4.4% splits sharply between commercial and residential

Revenue of $1.1 billion was 6.2% above the third quarter of 2025, and the release separates the pieces. Acquisitions added $18.35 million of revenue, or 1.8 percentage points of the increase, leaving organic revenue growth of 4.4% — below the 5.5% organic growth booked in the first nine months of 2026. Commercial organic revenue grew 6.6% from a year earlier, to $357.15 million from $334.96 million; residential organic revenue grew 2.3% from a year earlier, to $487.37 million from $476.27 million. Residential is the larger line on a total segment revenue basis — total residential revenue of $499.68 million in the quarter against $360.69 million commercial and $217.93 million termite and ancillary — so the slower-growing segment carries the most weight in the consolidated rate.

Will Harkins, the chief financial officer, said residential customer acquisition "remained under pressure in the third quarter" and described a reallocation of marketing spending toward the "channels and capabilities generating the highest returns", including work to improve visibility in AI- and LLM-driven discovery.

Insurance and claims absorb the operating leverage

Cost of services provided rose to 46.5% of revenue from 45.6%. Insurance and claims inside that line climbed to 2.1% of revenue from 1.1%, and insurance and claims within sales, general and administrative expense rose to 1.3% from 0.7%. SG&A rose 8.4% to $326.77 million, faster than revenue, lifting SG&A to 30.0% of revenue from 29.4%. Selling and marketing expense grew 5.4% to $146.34 million, slower than revenue, and slipped to 13.4% of revenue from 13.5%, so the margin pressure came from insurance and claims and from fleet expense — 4.2% of revenue from 3.8% in cost of services and 1.1% from 0.9% in SG&A — rather than from customer acquisition spending. Gross margin, which Rollins reports exclusive of depreciation and amortization, narrowed to 53.5% from 54.4%.

The arithmetic flows to the operating line: operating income fell 1.0% from the third quarter of 2025 to $223 million even as revenue grew. Adjusted operating income, which adds back $7.82 million of acquisition-related amortization and contingent-consideration charges, fell 0.6% to $231 million, a 21.2% margin against 22.6% a year earlier. Adjusted EBITDA fell 0.7% to $257 million.

Buybacks, borrowings and a tax refund in the cash flow

Cash paid for common stock purchased was $120.07 million in the quarter, against $3.65 million a year earlier. Short-term debt rose to $239.56 million on September 30 from $123.68 million on December 31, 2025, an increase of 93.7%. Net interest expense rose 34.3% in the third quarter to $10.67 million from $7.94 million in the third quarter of 2025. The company's leverage ratio, a non-GAAP measure built on adjusted net debt and adjusted EBITDAR, moved to 1.0x at September 30, 2026 from 0.9x at December 31, 2025.

Operating cash flow was $241.86 million, up 26.4% from a year earlier, and free cash flow was $235.5 million, up 28.8%. The quarterly increase in operating cash flow was only $50.51 million, and the release says cash flow was "favorably impacted by $63 million due to the timing of a tax refund associated with our tax credit planning strategy" — a refund benefit larger than the entire increase, which leaves operating cash flow excluding that benefit below the third quarter of 2025 level. The nine-month figures show the same timing skew: operating cash flow rose 3.8% to $532.73 million, against 26.4% for the quarter alone. Dividends paid were $0.1825 a share against $0.1650.

A call on October 22 with no guidance to check

The nine-month figures show the margin problem is not confined to one quarter. Revenue rose 8.0% to $3.07 billion, but operating margin fell to 18.5% from 19.9%, net income was flat at $409.68 million against $410.26 million, and adjusted EPS rose to $0.89 from $0.87.

Jerry Gahlhoff, Jr., the chief executive, said "We are disappointed with our third quarter performance and are acting with urgency to address the challenges impacting our results." He cited the company's "record of 100 consecutive quarters of revenue growth" as evidence of durability — a claim the release states but this desk did not independently verify.

The release, filed as Form 8-K Exhibit 99.1, offers no financial outlook for the fourth quarter, no quarterly customer counts or retention metrics, and no split between demand weakness and marketing efficiency in residential. It is unaudited, and it discloses no consensus comparison. The next scheduled disclosure is the earnings call on Thursday, October 22, 2026 at 8:30 a.m. Eastern Time, where executives may quantify the marketing reallocation and the claims trend.