ROL Q4 Deep Dive: One-Time Revenue Weakness and Weather Disruptions Shape Results

Pest control company Rollins (NYSE:ROL) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 9.7% year on year to $912.9 million. Its non-GAAP profit of $0.25 per share was 6.6% below analysts’ consensus estimates.

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StockStory’s Take

Rollins' fourth quarter saw a negative market reaction following results that missed Wall Street’s expectations for both revenue and non-GAAP profit. Management attributed the underperformance primarily to early winter weather in the Midwest and Northeast, which sharply reduced demand for one-time and seasonal pest control projects. CEO Jerry Gahlhoff described the impact as “choppy,” noting that while recurring and ancillary services grew more than 7%, the one-time business declined almost 3% in the quarter. Management emphasized that underlying customer retention and demand trends remained healthy, suggesting the softness was transitory and not reflective of broader weakness.

Looking ahead, Rollins’ forward guidance is anchored in expectations of 7% to 8% organic growth, underpinned by the stability of its recurring customer base and continued pricing initiatives. Management expects ongoing investments in talent retention and cross-brand collaboration to drive operational improvements and long-term value. CFO Kenneth Krause highlighted improving new employee retention and sustained pricing power as key tailwinds, while also cautioning that weather-related volatility could continue to affect short-term results. The company remains focused on leveraging its diverse service offerings and M&A pipeline to support growth in 2026.

Key Insights from Management’s Remarks

Management cited weather disruptions and the resulting decline in one-time projects as the primary drivers of Q4’s performance, while reiterating the strength of recurring and ancillary service growth.

• Recurring Revenue Resilience: Over 80% of Rollins’ business comes from recurring and ancillary services, which grew above 7% organically in Q4. Management reported stable customer retention and noted that flagship brand Orkin achieved its best net customer gains since the initial COVID surge, supporting confidence in the business’s core health.

• One-Time Revenue Drop: One-time projects, such as seasonal pest and wildlife work, declined by nearly 3% due to erratic weather in the Midwest and Northeast. This segment not only contributed less to top-line growth, but also negatively impacted margins as it typically carries higher profitability than recurring services.

• Segment Impact: The softness in one-time revenue affected both residential and commercial lines, with particular weakness in commodity fumigation and wildlife services. In contrast, recurring revenue within commercial and termite services held steady or grew, demonstrating the company’s diversified revenue streams.

• Operational Staffing Strategy: Rollins maintained elevated staffing ahead of peak season to limit disruptive hiring spikes, which increased short-term costs but is expected to improve service quality and retention as demand ramps up. First-year employee retention improved by 8%, reducing hiring needs by roughly 600 positions and saving $5–10 million annually in onboarding costs.

• M&A and Cross-Brand Collaboration: The acquisition of Sela and 26 smaller deals contributed to growth, with Sela exceeding expectations and providing $0.02 in non-GAAP EPS accretion since April. Management is focused on leveraging synergies across brands and expanding ancillary service penetration, especially through technology and shared best practices.

Drivers of Future Performance

Rollins’ outlook for 2026 relies on strong recurring revenue, pricing discipline, and ongoing efficiency initiatives, but acknowledges potential weather-related headwinds.

• Recurring and Ancillary Growth: Management expects the recurring and ancillary service lines—which make up the majority of revenue—to deliver 7% to 8% organic growth in 2026. Customer demand remains stable, with retention rates at healthy levels and limited signs of price sensitivity, supporting confidence in the forecast.

• Margin Expansion Initiatives: Rollins is targeting incremental margin improvement through continued pricing actions (3%–4%), reductions in fleet and onboarding costs, and operational efficiency gains. Enhanced employee retention and a new enterprise-wide financial systems rollout are anticipated to deliver further cost savings and margin leverage.

• M&A and Service Diversification: The company sees its acquisition pipeline as robust, with anticipated M&A contributing an additional 2%–3% to revenue growth. Cross-brand collaboration and increased penetration of ancillary services, such as add-on pest treatments, are expected to provide further upside. However, management noted that unpredictable weather and short-cycle business dynamics may cause quarterly volatility.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace of recurring and ancillary service growth and customer retention, (2) the recovery of one-time revenue as weather normalizes, and (3) progress in cross-brand collaboration and ancillary service expansion. Developments in M&A activity, operational system upgrades, and the ability to manage cost pressures—particularly around staffing and fleet—will also be key indicators of Rollins’ execution against its growth strategy.

Rollins currently trades at $57.22, down from $65.67 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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