On July 29, 2020, the Company reported second quarter revenues of $553.3 million, an increase of 5.6% over the prior year's second quarter revenue of $524.0 million. Rollins' net income increased 17.2% to $75.4 million, or $0.23 per diluted share for the second quarter ended June 30, 2020, compared with $64.3 million, or $0.20 per diluted share for the same period in 2019.

Results of Operations:

THREE MONTHS ENDED JUNE 30, 2020 COMPARED TO THREE MONTHS ENDED JUNE 30, 2019

COVID-19 Pandemic Impact

Going into the quarter ended June 30, 2020, we were faced with the global economic downturn resulting from the COVID-19 pandemic. The Company responded with numerous operational adjustments to address the economic and health safety challenges. These included new COVID-related procedures, modified customer service and related protocols, daily health screenings before entering shared offices, and a transition to remote work locations to reduce concentrations of personnel in offices where appropriate. Cost containment efforts included furloughs, layoffs, elimination of non-essential travel, postponing capital expenditures, and temporary salary reductions for upper management, among other actions.

Customer retention during the pandemic is less predictable, and of greater immediate concern. Our residential pest control business has remained consistent with seasonal trends, especially as temperatures rise across the U.S. and pest activity increases. Through the date of this filing, our commercial pest control business has been more adversely impacted, as it crosses multiple industries such as healthcare, food processing, logistics, grocery, retail and hospitality. Each of these industries is being impacted differently by the pandemic. Many of our commercial customers continue to operate as "essential" businesses; however, unfortunately, there are a notable number of others forced to temporarily close their doors. We expect this impact will persist for the remainder of 2020 and possibly beyond, the degree of the impact will depend on the extent and duration of the economic contraction.

While we have a substantial amount of intangible assets on our balance sheet, based on our second quarter revenues, we do not anticipate any significant long-term loss in revenues or cash flows that would approach a level for impairment of intangible assets.

All of our critical supply-chain vendors have remained operational, and we have engaged additional new sources to supplement our existing suppliers, especially for critical PPE and other COVID-19 related items. Fleet suppliers and support vendors continue to serve our needs.

Revenue

Revenues for the second quarter ended June 30, 2020 increased $29.4 million, or 5.6%, to $553.3 million compared to $524.0 million for the second quarter ended June 30, 2019. Approximately 3.1 percentage points of the 5.6% increase in revenues came from acquisitions, while growth in customers and pricing made up the remaining 2.5 percentage points.

The Company has three primary service offerings: commercial pest control, residential pest control and termite, including ancillary services. During the second quarter ended June 30, 2020, commercial pest control revenue approximated 33% of the Company's revenues, residential pest control approximated 47% of the Company's revenues, and termite and ancillary service revenue approximated 20% of the Company's revenues.



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                         ROLLINS, INC. AND SUBSIDIARIES

Our commercial customers' operations were most heavily impacted by the various governmental shelter-in-place mandates and their negative effect on small to medium size businesses. As a result, when comparing the second quarter of 2020 to the second quarter of 2019, the Company's commercial pest control revenue decreased 6.0%. However, the Company's believes the launch of its new VitalClean sanitation services helped some of its commercial customers reopen and protect their employees and customers. By contrast, demand for our residential pest control service offerings grew significantly during the second quarter of 2020. For example, mosquito sales grew more than 30% compared to the second quarter of 2019. The Company believes with many people working from or confined to their homes, the awareness of unwanted pests has helped contribute to our growth in residential service revenues. Comparing the second quarter of 2020 to the second quarter of 2019, residential pest control revenue grew 14.8%. Termite and ancillary services revenue grew 7.3%. Foreign operations accounted for approximately 6% and 7% of total revenues during the second quarter of 2020 and 2019, respectively.

Revenues are impacted by the seasonal nature of the Company's pest and termite control services. The increase in pest activity, as well as the metamorphosis of termites in the spring and summer (the occurrence of which is determined by the change in seasons), has historically resulted in an increase in the Company's revenues as evidenced by the following chart:

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