UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

Commission File Number 1-4422

ROLLINS, INC.

(Exact name of registrant as specified in its charter)


Delaware	51-0068479
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2170 Piedmont Road, N.E., Atlanta, Georgia

(Address of principal executive offices)

30324

(Zip Code)

(404) 888-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ROL	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐
Yes	☐	No	☒

Rollins, Inc. had 492,048,685 shares of its $1 par value Common Stock outstanding as of October 15, 2021.

ROLLINS, INC. AND SUBSIDIARIES

PART 1 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2021, AND DECEMBER 31, 2020

(in thousands except share data)

(unaudited)


	September 30,		December 31,
	2021		2020
ASSETS
Cash and cash equivalents	$	117,655	$	98,477
Trade receivables, net of allowance for expected credit losses of $13,473 and $16,854, respectively		152,866		126,337
Financed receivables, short-term, net of allowance for expected credit losses of $1,519 and $1,297, respectively		27,294		23,716
Materials and supplies		26,976		30,843
Other current assets		48,663		35,404
Total current assets		373,454		314,777
Equipment and property, net of accumulated depreciation of $315,921 and $294,226, respectively		131,549		178,052
Goodwill		665,645		653,176
Customer contracts, net		284,393		298,949
Trademarks & tradenames, net		108,231		109,044
Other intangible assets, net		9,914		10,777
Operating lease, right-of-use assets		251,374		212,342
Financed receivables, long-term, net of allowance for expected credit losses of $2,488 and $1,934, respectively		45,410		38,187
Benefit plan assets		1,118		1,198
Deferred income taxes		2,568		2,222
Other assets		31,157		27,176
Total assets	$	1,904,813	$	1,845,900
LIABILITIES
Accounts payable	$	38,509	$	64,596
Accrued insurance		34,790		31,675
Accrued compensation and related liabilities		96,285		91,011
Unearned revenues		151,645		131,253
Operating lease liabilities - current		76,684		73,248
Current portion of long-term debt		18,750		17,188
Other current liabilities		60,833		63,540
Total current liabilities		477,496		472,511
Accrued insurance, less current portion		32,582		36,067
Operating lease liabilities, less current portion		177,381		140,897
Long-term debt		49,250		185,812
Deferred income tax liabilities		13,288		10,612
Other long-term accrued liabilities		53,187		58,641
Total liabilities		803,184		904,540
Commitments and contingencies (see Note 6)
STOCKHOLDERS’ EQUITY
Preferred stock, without par value; 500,000 shares authorized, zero shares issued		—		—
Common stock, par value $1 per share; 800,000,000 shares authorized, 492,048,685 and 491,612,059 shares issued and outstanding, respectively		492,049		491,612
Additional paid in capital		102,484		101,757
Accumulated other comprehensive loss		(17,465)		(10,897)
Retained earnings		524,561		358,888
Total stockholders’ equity		1,101,629		941,360
Total liabilities and stockholders’ equity	$	1,904,813	$	1,845,900

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(in thousands except per share data)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
REVENUES
Customer services	$	650,199	$	583,698	$	1,823,957	$	1,624,928
COSTS AND EXPENSES
Cost of services provided		305,474		275,474		864,888		782,248
Depreciation and amortization		23,617		22,404		70,519		65,926
Sales, general and administrative		194,261		168,006		539,951		497,121
Chairman's accelerated stock vesting expense		—		6,691		—		6,691
(Gain) loss on sale of assets, net		(447)		1,355		(33,598)		629
Interest expense, net		222		866		1,334		4,491
INCOME BEFORE INCOME TAXES		127,072		108,902		380,863		267,822
PROVISION FOR INCOME TAXES		33,219		29,323		95,513		69,617
NET INCOME	$	93,853	$	79,579	$	285,350	$	198,205
NET INCOME PER SHARE - BASIC AND DILUTED	$	0.19	$	0.16	$	0.58	$	0.40
DIVIDENDS PAID PER SHARE	$	0.08	$	0.05	$	0.24	$	0.19
Weighted average shares outstanding - basic and diluted		492,069		491,631		492,058		491,236

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(in thousands)

(unaudited)


	Three Months Ending				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
NET INCOME	$	93,853	$	79,579	$	285,350	$	198,205
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments		(7,207)		5,758		(6,924)		(1,732)
Change in derivatives		632		252		356		(312)
Other comprehensive income / (loss), net of tax		(6,575)		6,010		(6,568)		(2,044)
Comprehensive income	$	87,278	$	85,589	$	278,782	$	196,161

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(in thousands)

(unaudited)


						Accumulated Other
	Common Stock			Paid-in-		Comprehensive		Retained
	Shares	Amount		Capital		Income / (Loss)		Earnings		Total
Balance at June 30, 2021	492,079	$	492,079	$	98,842	$	(10,890)	$	470,653	$	1,050,684
Net Income									93,853		93,853
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments							(7,207)				(7,207)
Change in derivatives							632				632
Cash dividends									(39,945)		(39,945)
Stock compensation	(22)		(22)		3,942						3,920
Employee stock buybacks	(8)		(8)		(300)						(308)
Balance at September 30, 2021	492,049	$	492,049	$	102,484	$	(17,465)	$	524,561	$	1,101,629


						Accumulated Other
	Common Stock			Paid-in-		Comprehensive		Retained
	Shares	Amount		Capital		Income / (Loss)		Earnings		Total
Balance at June 30, 2020	491,643	$	491,643	$	88,640	$	(29,163)	$	311,710	$	862,830
Net Income									79,579		79,579
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments							5,758				5,758
Change in derivatives							252				252
Cash dividends									(26,214)		(26,214)
Stock compensation	(18)		(18)		10,521				8		10,511
Employee stock buybacks	(1)		(1)		—				1		—
Balance at September 30, 2020	491,624	$	491,624	$	99,161	$	(23,153)	$	365,084	$	932,716


						Accumulated Other
	Common Stock			Paid-in-		Comprehensive		Retained
	Shares	Amount		Capital		Income / (Loss)		Earnings		Total
Balance at December 31, 2020	491,612	$	491,612	$	101,757	$	(10,897)	$	358,888	$	941,360
Net Income									285,350		285,350
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments							(6,924)				(6,924)
Change in derivatives							356				356
Cash dividends									(119,677)		(119,677)
Stock compensation	728		728		11,034						11,762
Employee stock buybacks	(291)		(291)		(10,307)						(10,598)
Balance at September 30, 2021	492,049	$	492,049	$	102,484	$	(17,465)	$	524,561	$	1,101,629


						Accumulated Other
	Common Stock			Paid-in-		Comprehensive		Retained
	Shares	Amount		Capital		Income / (Loss)		Earnings		Total
Balance at December 31, 2019	491,146	$	491,146	$	89,413	$	(21,109)	$	256,300	$	815,750
Impact of adoption of ASC 842									2,484		2,484
Net Income									198,205		198,205
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments							(1,732)				(1,732)
Change in derivatives							(312)				(312)
Cash dividends									(91,745)		(91,745)
Stock compensation	809		809		17,612				(270)		18,151
Employee stock buybacks	(331)		(331)		(7,864)				110		(8,085)
Balance at September 30, 2020	491,624	$	491,624	$	99,161	$	(23,153)	$	365,084	$	932,716

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2021		2020
OPERATING ACTIVITIES
Net income	$	285,350	$	198,205
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		70,519		65,926
Provision for deferred income taxes		2,221		3,701
Provision for expected credit losses		8,522		12,820
(Gain) loss on sale of assets, net		(33,598)		629
Stock-based compensation expense		11,762		18,151
Other, net		(83)		1,423
Changes in operating assets and liabilities		(45,782)		39,752
Net cash provided by operating activities		298,911		340,607
INVESTING ACTIVITIES
Cash used for acquisitions of companies, net of cash acquired		(39,692)		(79,880)
Purchases of equipment and property		(20,031)		(17,690)
Proceeds from sales of assets		70,967		2,131
Proceeds from sales of franchises		134		430
Other, net		(274)		478
Net cash provided by/(used in) investing activities		11,104		(94,531)
FINANCING ACTIVITIES
Payment of contingent consideration		(19,413)		(24,168)
Borrowings under revolving commitment		82,500		68,000
Repayments of term loan		(83,000)		(20,000)
Repayments of revolving commitment		(134,500)		(169,500)
Payment of dividends		(119,677)		(91,745)
Cash paid for common stock purchased		(10,598)		(8,085)
Net cash used in financing activities		(284,688)		(245,498)
Effect of exchange rate changes on cash		(6,149)		586
Net increase in cash and cash equivalents		19,178		1,164
Cash and cash equivalents at beginning of period		98,477		94,276
Cash and cash equivalents at end of period	$	117,655	$	95,440
Supplemental disclosure of cash flow information:
Non-cash additions to operating lease right-of-use assets	$	101,720	$	67,877

The accompanying notes are an integral part of these condensed consolidated financial statements.

ROLLINS, INC. AND SUBSIDIARIES

NOTE 1.BASIS OF PREPARATION AND OTHER

Basis of Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. There has been no material change in the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Rollins, Inc. (including its subsidiaries unless the context otherwise requires, “Rollins,” “we,” “us,” “our,” or the “Company”) for the year ended December 31, 2020. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2020 Annual Report on Form 10-K.

The preparation of interim financial statements requires management to make estimates and assumptions for the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes estimates in its interim condensed consolidated financial statements for the termite accrual, allowance for expected credit losses, environmental, regulatory and litigation claims, the insurance accrual, which includes auto liability, general liability, worker’s compensation and medical claims, inventory adjustments, discounts and volume incentives earned, among others.

The Company has one reportable segment, its pest and termite control business. The Company’s results of operations and its financial condition are not reliant upon any single customer, a few customers, or the Company’s foreign operations.

Three-for-Two Stock Split

All prior year share and per share data presented have been adjusted to account for the three-for-two stock split effective December 10, 2020.

NOTE 2.RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The update provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) contract modifications on financial reporting, caused by reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company does not expect the adoption of the standard to have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The standard eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intraperiod tax allocation (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The ASU also is designed to improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for (1) franchise taxes that are partially based on income, (2) transactions with a government that result in a step-up in the tax basis of goodwill, (3) separate financial statements of legal entities that are not subject to tax, and (4) enacted changes in tax laws in interim periods. The Company adopted ASU 2019-12 effective January 1, 2021, and the adoption did not have a material impact on the Company’s condensed consolidated financial statements.

NOTE 3.REVENUE

The following tables present our revenues disaggregated by revenue source (in thousands).

Sales and usage-based taxes are excluded from revenues. No sales to an individual customer or in a country other than the United States accounted for 10% or more of the sales for the periods listed on the following table.

ROLLINS, INC. AND SUBSIDIARIES

Revenue, classified by the major geographic areas in which our customers are located, was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
(in thousands)
United States	$	602,336	$	540,763	$	1,686,371	$	1,510,685
Other countries		47,863		42,935		137,586		114,243
Total Revenues	$	650,199	$	583,698	$	1,823,957	$	1,624,928

Revenue from external customers, classified by significant product and service offerings, was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Residential revenue	$	307,747	$	275,581	$	835,871	$	738,159
Commercial revenue		218,648		199,561		618,183		562,777
Termite completions, bait monitoring, & renewals		117,423		102,144		350,791		306,188
Franchise revenues		4,128		3,852		11,698		10,791
Other revenues		2,253		2,560		7,414		7,013
Total Revenues	$	650,199	$	583,698	$	1,823,957	$	1,624,928

See Note 8. Unearned Revenue, for disclosures related to our unearned revenue balances.

NOTE 4.ALLOWANCE FOR CREDIT LOSSES

Effective January 1, 2020, the Company adopted ASC 326, the new accounting standard related to credit losses. The Company is exposed to credit losses primarily related to accounts receivables and financed receivables derived from customer services revenue. To reduce credit risk for residential pest control accounts receivable, we promote enrollment in our auto-pay programs. In general, we may suspend future services for customers with past due balances. The Company’s credit risk is generally low with a large number of entities comprising Rollins’ customer base and dispersion across many different geographical regions.

The Company manages its financing receivables on an aggregate basis when assessing and monitoring credit risks. The Company’s established credit evaluation and monitoring procedures seek to minimize the amount of business we conduct with higher risk customers. The credit quality of a potential obligor is evaluated at the loan origination based on an assessment of the individual’s Beacon/credit bureau score. Rollins requires a potential obligor to have good credit worthiness with low risk before entering into a contract. Depending upon the individual’s credit score, the Company may accept with 100% financing or require a significant down payment or turn down the contract. Delinquencies of accounts are monitored each month. Financing receivables include installment receivable amounts, some of which are due subsequent to one year from the balance sheet dates.

The Company’s allowances for credit losses for trade accounts receivable and financed receivables are developed using historical collection experience, current economic and market conditions, reasonable and supportable forecasts, and a review of the current status of customers’ receivables. The Company’s receivable pools are classified between residential customers, commercial customers, large commercial customers, and financed receivables. Accounts are written-off against the allowance for credit losses when the Company determines that amounts are uncollectible, and recoveries of amounts previously written off are recorded when collected. The Company stops accruing interest to these receivables when they

ROLLINS, INC. AND SUBSIDIARIES

are deemed uncollectible. Below is a roll forward of the Company’s allowance for credit losses for the three and nine months ended September 30, 2021 and 2020.


	(in thousands)
	Allowance for Credit Losses
	Trade		Financed		Total
	Receivables		Receivables		Receivables
Balance at June 30, 2021	$	13,863	$	4,341	$	18,204
Provision for expected credit losses		3,526		323		3,849
Write-offs charged against the allowance		(5,163)		(657)		(5,820)
Recoveries collected		1,247		—		1,247
Balance at September 30, 2021	$	13,473	$	4,007	$	17,480


	Allowance for Credit Losses
	Trade		Financed		Total
	Receivables		Receivables		Receivables
Balance at December 31, 2020	$	16,854	$	3,231	$	20,085
Provision for expected credit losses		5,760		2,762		8,522
Write-offs charged against the allowance		(12,912)		(1,986)		(14,898)
Recoveries collected		3,771		—		3,771
Balance at September 30, 2021	$	13,473	$	4,007	$	17,480


	Allowance for Credit Losses
	Trade		Financed		Total
	Receivables		Receivables		Receivables
Balance at June 30, 2020	$	16,452	$	3,014	$	19,466
Provision for expected credit losses		2,363		689		3,052
Write-offs charged against the allowance		(3,502)		(567)		(4,069)
Recoveries collected		660		—		660
Balance at September 30, 2020	$	15,973	$	3,136	$	19,109


	Allowance for Credit Losses
	Trade		Financed		Total
	Receivables		Receivables		Receivables
Balance at December 31, 2019	$	16,699	$	2,959	$	19,658
Adoption of ASC 326		(3,330)		—		(3,330)
Provision for expected credit losses		10,843		1,977		12,820
Write-offs charged against the allowance		(11,735)		(1,800)		(13,535)
Recoveries collected		3,496		—		3,496
Balance at September 30, 2020	$	15,973	$	3,136	$	19,109

NOTE 5.EARNINGS PER SHARE

The Company reports both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to participating common stockholders by the weighted average number of participating common shares outstanding for the period.

ROLLINS, INC. AND SUBSIDIARIES

Basic and diluted earnings per share attributable to common and restricted shares of common stock for the period were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Basic and diluted earnings per share
Common stock	$	0.19	$	0.16	$	0.58	$	0.40
Restricted shares of common stock	$	0.19	$	0.16	$	0.58	$	0.40

NOTE 6.CONTINGENCIES

In the normal course of business, from time to time, the Company and certain subsidiaries are parties to lawsuits, claims, arbitrations, regulatory actions or investigations. In addition, from time to time in the ordinary course of business, the Company also defends employment-related cases as well as claims arising out of environmental matters.

As previously disclosed, the SEC is conducting an investigation which we believe is primarily focused on how the Company established accruals and reserves at period-ends for periods beginning January 1, 2015 and the impact of those accruals and reserves on reported earnings per share. The Company’s Audit Committee retained independent counsel to conduct an internal investigation into matters related to the SEC investigation and that investigation is being supplemented as previously reported. To date the internal investigation findings include certain inadequately supported journal entries and certain other errors, all primarily related to the Company’s reserve and accrual accounting, which the Company has determined were individually and in the aggregate immaterial to the impacted quarterly and annual financial statements. As previously disclosed in the Company’s 2020 Form 10-K, based on the results of the internal investigation, it was determined that there was a significant deficiency in the Company’s internal controls relating to the documentation and review of accounting entries for certain reserves and accruals, which was remediated as of December 31, 2020 and as discussed below. The supplemental investigation regarding the assertions described in the Current Report on Form 8-K furnished to the SEC on July 28, 2021 is ongoing. The Company continues to believe that its financial statements filed with the SEC on Forms 10-K and 10-Q for the relevant periods fairly present in all material respects its financial condition, results of operations and cash flows as of their respective balance sheet dates and for the periods then ended.

The Company is continuing to cooperate fully with the SEC investigation and has initiated discussions with the SEC staff regarding a potential resolution of the investigation. In accordance with the accounting guidance in ASC 450, “Contingencies,” and based on the findings described above and other information, the Company recorded an accrual related to this matter in the third quarter of 2021, which is reflected in other current liabilities in our condensed consolidated statements of financial position. We cannot predict the outcome of the SEC investigation and it is possible that the ultimate amount of any potential liability could be different from the amount accrued.

As previously disclosed in the Company’s 2020 Form 10-K, in connection with the SEC investigation, the Company reevaluated and strengthened its internal controls over financial reporting, including improving processes and procedures and supporting documentation, including those related to management’s judgments and estimates.

There can be no assurance that the SEC or another regulatory body will not make further regulatory inquiries or pursue action against the Company and its senior officers that could result in potentially significant sanctions and penalties, or that could require the Company to take additional remedial steps. Further, the Company may be subject to litigation from third parties related to the matters under review by the SEC.

Management does not believe that any pending claim, proceeding or litigation, regulatory action or investigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or liquidity; however, it is possible that an unfavorable outcome of some or all of the matters could result in a charge that might be material to the results of an individual quarter or year.

ROLLINS, INC. AND SUBSIDIARIES

NOTE 7.FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, trade receivables, financed and notes receivable, accounts payable, other short-term liabilities, and debt. The carrying amounts of these financial instruments approximate their respective fair values. The Company also has derivative instruments as further discussed in Note 15. Derivative Instruments and Hedging Activities.

During the nine months ended September 30, 2021, the Company invested $10.6 million of unrestricted cash in international bonds, a level 2 asset under the fair value hierarchy. The investment is recorded in other current assets. The fair market values of the bonds approximate their amortized costs.

As of September 30, 2021 and December 31, 2020, the Company had $21.5 million and $35.7 million of acquisition holdback and earnout liabilities with the former owners of acquired companies. The earnout liabilities were discounted to reflect the expected probability of payout, and both earnout and holdback liabilities were discounted to their net present value on the Company’s books and are considered level 3 liabilities. The table below presents a summary of the changes in fair value for these liabilities.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2021		2020		2021		2020
Beginning balance	$	27,057	$	47,085	$	35,744	$	49,131
New acquisitions and revaluations		1,341		3,160		5,314		8,703
Payouts		(6,540)		(16,306)		(19,413)		(24,168)
Interest on outstanding contingencies		178		386		715		1,534
Charge offset, forfeit and other		(514)		(554)		(838)		(1,429)
Ending balance	$	21,522	$	33,771	$	21,522	$	33,771

NOTE 8.UNEARNED REVENUE

The Company records unearned revenue when we have either received payment or contractually have the right to bill for services in advance of the services or performance obligations being performed. Deferred revenue recognized in the three months ended September 30, 2021 and 2020 were $47.3 million and $43.4 million, respectively. Deferred revenue recognized for the nine months ended September 30, 2021 and 2020 were $139.6 million and $129.4 million respectively. Changes in unearned revenue were as follows: