Ben Axler’s short outfit Spruce Point Capital has pointed to several negative bits in Rollins’ most recent earnings report to argue the pest control company is struggling, despite management touting strong results.
Last week on Wednesday after the market close, Rollins reported record revenues of $840 million in the third quarter, a 15.2% year-over-year increase, and net income of $128 million, 17.3% above last year’s figure.
In a series of Thursday posts on X, formerly known as Twitter, Spruce Point said that Rollins’ is actually seeing accounts receivables ‘‘ballooning’’ faster than revenues, which the short seller called a ‘‘classic sign of rising financial stress.’’
Spruce Point also said the report suggests that Rollins’ acquisitions are doing poorly, with tuck-in acquired revenue, except from Fox Pest Control, seeing declining double digits four quarters in a row. On Fox, Spruce Point said that the business swung to a loss of $0.3 million in the third quarter, from net earnings of $2.2 million reported in the previous quarter.
The stock jumped more than 10% during trading Thursday but closed the day up just 4%.
The short seller argued in its original October 4 report that Rollins would find it hard to maintain its historical growth and margins amid increasing competition and a potentially shrinking market.