Rollins Operating Income Declines After Two Growth Quarters

The Tip Desk · October 26, 2026 · 3 min read

Operating income fell 1.0% to $223 million as organic revenue growth slowed to 4.4% and the company said it is reallocating marketing toward AI-driven discovery.

Rollins, Inc. (ROL), a global pest-control and commercial services company, reported a 1.0% decline in third-quarter operating income to $223 million, reversing two quarters of year-over-year growth and compressing operating margin 140 basis points to 20.5%.

Revenue was $1.1 billion, up 6.2% from a year earlier, slower than the 7.9% increase in the second quarter and the 10.2% rise in the first. Organic revenue growth slowed to 4.4% from 5.7% in the prior quarter.

Adjusted operating income fell 0.6% to $231 million after rising 2.0% in the second quarter and 4.0% in the first. Adjusted operating margin compressed 140 basis points to 21.2%. Net income declined 3.4% to $158 million, and earnings were $0.33 a share, down 2.9%. Adjusted EBITDA was $257 million, down 0.7%, with adjusted EBITDA margin at 23.5%, 170 basis points lower.

President and Chief Executive Officer Jerry Gahlhoff, Jr., said the company was “disappointed with our third quarter performance” and is “acting with urgency” on the challenges affecting results. He said the company now has a clearer understanding of how the customer-acquisition landscape is evolving.

Chief Financial Officer Will Harkins said residential customer acquisition remained under pressure. The company is reallocating marketing from the traditional digital playbook toward channels it said generate the highest returns, including those that strengthen visibility in AI- and LLM-driven discovery. In the second quarter, Gahlhoff had said lead volume declined and then improved toward the end of June.

Residential revenue was $499.7 million, up 4.9%, with organic residential revenue up only 2.3%. Commercial revenue was $360.7 million, up 7.7%, with organic commercial revenue up 6.6%. Termite and ancillary revenue was $217.9 million, up 6.5%, with organic termite and ancillary revenue up 5.3%. Franchise and other revenue was $11.4 million, up 11.4%.

Gross profit margin compressed 90 basis points to 53.5%. Insurance and claims in cost of services rose to $23.0 million, or 2.1% of revenue, from $11.1 million, or 1.1%, a year earlier. Insurance and claims in selling, general and administrative expenses rose to $13.7 million, or 1.3% of revenue, from $6.9 million, or 0.7%.

Operating cash flow rose 26.4% to $242 million and free cash flow rose 28.8% to $235 million, after both measures declined in the first two quarters. The company said cash flow was favorably impacted by $63 million from the timing of a tax refund tied to its tax-credit planning strategy.

The company invested $27 million in acquisitions, $6 million in capital expenditures, and $120 million in share repurchases, and paid $87 million in dividends. Harkins said capital-allocation priorities remain unchanged: accretive M&A, a sustainable dividend, and opportunistic buybacks.

Gahlhoff said the quarter marked 100 consecutive quarters of revenue growth and that recurring customer relationships, a diversified portfolio, and the pest-control market remain the basis for the company’s view of long-term growth.