Conestoga Capital Advisors, LLC on Rollins, Inc.
Thesis
Conestoga remains positive on Rollins because of its recurring pest-control revenues and diversified brands, including Orkin. Residential demand was weak and organic sales growth fell short of the long-term target, but inbound lead activity started improving toward quarter-end. Commercial pest control and termite services maintained healthy growth. The firm expects that Rollins can expand within a fragmented industry as near-term pressure eases.
“We remain confident in the company's recurring revenue business model, diversified portfolio of brands and long-term opportunities”
Key risks
- Consumer-initiated residential demand weakened, particularly at Orkin.
- Higher medical costs, fuel inflation and lower volumes pressured margins.
- Organic growth of 5.7% lagged the 7-8% long-term goal for a third consecutive quarter.