Rollins Earnings: Competition in US Ramps Up as Marketing Spending Takes Bite Out of Profit Margins

Wide-moat Rollins’ third-quarter 2024 result offered evidence of rising competitive tension in the US pest control market. Rollins’ organic sales growth remained elevated in the quarter, which rose 7.7%, implying ongoing strong execution and resultant market share gains for the number-two player in the US. However, Rollins’ increased allocation to sales and marketing resources during the quarter placed downward pressure on the group EBITDA margin, which declined 80 basis points year on year to 24.0%. We think Rollins’ ramped-up sales and marketing spending—which had a significant, 100-basis-point gross impact on the third-quarter EBITDA margin—speaks to the challenge it faces in maintaining its present above-market organic top-line growth rate and to deliver against its medium-term guidance of “above-market organic sales growth” and the heady long-term growth expectations that are baked into Rollins’ share price.