ServiceMaster
Global Holdings, Inc. (NYSE: SERV), a leading provider of
essential residential and commercial services, today announced the
following preliminary revenue, net income, Adjusted net income(1)
and Adjusted EBITDA(2) for the third-quarter 2016 financial
results and updates to full-year 2016 outlook. The company plans to
release its full third-quarter 2016 financial results on Tuesday,
October 25, 2016.
The company’s net income, Adjusted net income and Adjusted EBITDA were
negatively impacted by a $5 million increase in claims costs at American
Home Shield (“AHS”) associated with a higher number of HVAC work orders
driven by record high temperatures experienced nationwide during the
quarter. Due to the adverse impact of the record high temperatures on
the company’s operating performance, the company is providing
preliminary third-quarter results and updated 2016 outlook in advance of
its scheduled earnings call.
The company expects to report revenue of $758 million for the quarter,
or a year-over-year increase of 7 percent, driven primarily by organic
growth at AHS, the impacts of acquiring Alterra Pest Control, LLC in
November 2015 and OneGuard Home Warranties in June 2016 and 2 percent
organic revenue growth at Terminix, primarily driven by price.
The company expects to report third-quarter 2016 net income of $70
million, or $0.51 per share, versus $49 million, or $0.36 per share, in
the same period in 2015. Third-quarter 2016 Adjusted net income is
expected to be $81 million, or $0.59 per share, versus $74 million, or
$0.54 per share, for the same period in 2015.
The company expects to report Adjusted EBITDA of $192 million for the
quarter, or an increase of 10 percent over the same period prior year.
Adjusted EBITDA was negatively impacted by the previously mentioned $5
million increase in weather-related claims costs at AHS. Reconciliations
of both Adjusted net income and Adjusted EBITDA to net income are set
forth below in this press release.
Segment Performance
Revenue and Adjusted EBITDA for each reportable segment and Corporate
were as follows:
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
$ millions
|
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
Terminix
|
|
|
|
$
|
396
|
|
|
|
$
|
24
|
|
|
|
$
|
92
|
|
|
|
$
|
10
|
|
|
|
$
|
1,174
|
|
|
|
$
|
71
|
|
|
|
$
|
299
|
|
|
|
$
|
27
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
|
|
6.5
|
%
|
|
|
|
23.2
|
%
|
|
|
|
1.2
|
pts
|
|
|
|
|
|
|
|
|
6.4
|
%
|
|
|
|
25.5
|
%
|
|
|
|
0.8
|
pts
|
|
American Home Shield
|
|
|
|
|
309
|
|
|
|
|
34
|
|
|
|
|
79
|
|
|
|
|
5
|
|
|
|
|
786
|
|
|
|
|
75
|
|
|
|
|
170
|
|
|
|
|
(4
|
)
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
|
|
12.4
|
%
|
|
|
|
25.6
|
%
|
|
|
|
(1.3
|
)pts
|
|
|
|
|
|
|
|
|
10.5
|
%
|
|
|
|
21.6
|
%
|
|
|
|
(2.9
|
)pts
|
|
Franchise Services Group
|
|
|
|
|
51
|
|
|
|
|
(7
|
)
|
|
|
|
21
|
|
|
|
|
1
|
|
|
|
|
151
|
|
|
|
|
(27
|
)
|
|
|
|
58
|
|
|
|
|
—
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
|
|
(12.1
|
)%
|
|
|
|
41.2
|
%
|
|
|
|
6.7
|
pts
|
|
|
|
|
|
|
|
|
(15.2
|
)%
|
|
|
|
38.4
|
%
|
|
|
|
5.8
|
pts
|
|
Corporate
(3)
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
|
|
3
|
|
|
Total
|
|
|
|
$
|
758
|
|
|
|
$
|
52
|
|
|
|
$
|
192
|
|
|
|
$
|
18
|
|
|
|
$
|
2,113
|
|
|
|
$
|
120
|
|
|
|
$
|
523
|
|
|
|
$
|
25
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
|
|
7.4
|
%
|
|
|
|
25.3
|
%
|
|
|
|
0.7
|
pts
|
|
|
|
|
|
|
|
|
6.0
|
%
|
|
|
|
24.8
|
%
|
|
|
|
(0.2
|
)pts
|
|
|
Full-Year 2016 Outlook
Revenue is expected to range from $2,740 million to $2,750 million, or
an increase of 6 percent compared to 2015. Due to the higher claims
costs at AHS in the third-quarter and an acceleration of investment in
Terminix’s field operations focused on improving safety, technician
efficiency, customer service and retention in the fourth-quarter, the
company now expects Adjusted EBITDA to range from $665 million to $675
million, or an increase of 7 percent to 8 percent compared to 2015. A
reconciliation of the forward-looking 2016 Adjusted EBITDA outlook to
net income is not being provided as the company does not currently have
sufficient data to accurately estimate the variables and individual
adjustments for such reconciliation.
Third-Quarter 2016 Earnings Conference Call
The company plans to discuss its third-quarter 2016 financial and
operating results during a conference call at 8 a.m. central time (9
a.m. eastern time), Tuesday, October 25, 2016. To participate on the
conference call, interested parties should call 800.667.9916 (or
international participants, 303.223.4361). Additionally, the conference
call will be available via webcast. A slide presentation highlighting
the company’s results will also be available. To participate via webcast
and view the slide presentation, visit the company’s investor
relations home page. The call will be available for replay until
November 24, 2016. To access the replay of this call, please call
800.633.8284 and enter reservation number 21820185 (international
participants: 402.977.9140, reservation number 21820185). You may also
review the webcast on the company’s investor
relations home page.
About ServiceMaster
ServiceMaster Global Holdings, Inc. is a leading provider of essential
residential and commercial services, operating through an extensive
service network of more than 8,000 company-owned locations and franchise
and license agreements. The company’s portfolio of well-recognized
brands includes American Home Shield (home warranties), AmeriSpec (home
inspections), Furniture Medic (furniture and cabinet repair), Merry
Maids (residential cleaning), ServiceMaster Clean (janitorial),
ServiceMaster Restore (disaster restoration) and Terminix (termite and
pest control). The company is headquartered in Memphis, Tenn. Go to www.servicemaster.com
for more information about ServiceMaster or follow the company at twitter.com/ServiceMaster
or Facebook.com/ServiceMaster.
Information Regarding Forward-Looking Statements
This press release contains forward-looking statements and cautionary
statements, including 2016 revenue and Adjusted EBITDA outlook and
expected third-quarter revenue, net income, Adjusted net income and
Adjusted EBITDA. Some of the forward-looking statements can be
identified by the use of forward-looking terms such as “believes,”
“expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,”
“aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,”
“anticipates” or other comparable terms. Forward-looking statements are
subject to known and unknown risks and uncertainties, many of which may
be beyond our control, including, without limitation, the risks and
uncertainties discussed in the “Risk Factors” and “Information Regarding
Forward-Looking Statements” sections in the company’s reports filed with
the U.S. Securities and Exchange Commission. We caution you that
forward-looking statements are not guarantees of future performance or
outcomes and that actual performance and outcomes, including, without
limitation, our actual results of operations, financial condition and
liquidity, and the development of the market segments in which we
operate, may differ materially from those made in or suggested by the
forward-looking statements contained in this press release.
Additional factors that could cause actual results and outcomes to
differ from those reflected in forward-looking statements include,
without limitation, lawsuits, enforcement actions and other claims by
third parties or governmental authorities; compliance with, or violation
of environmental health and safety laws and regulations; 401(k) Plan
corrective contribution; the effects of our substantial indebtedness;
changes in interest rates, because a significant portion of our
indebtedness bears interest at variable rates; weakening general
economic conditions; weather conditions and seasonality; the success of
our business strategies, and costs associated with restructuring
initiatives. The company assumes no obligation to update the information
contained herein, which speaks only as of the date hereof.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures.
Non-GAAP measures should not be considered as an alternative to GAAP
financial measures. Non-GAAP measures may not be calculated or
comparable to similarly titled measures of other companies. See non-GAAP
reconciliations below in this press release for a reconciliation of
these measures to the most directly comparable GAAP financial measures.
Adjusted EBITDA, adjusted net income and adjusted earnings per share are
not measurements of the company’s financial performance under GAAP and
should not be considered as an alternative to net income or any other
performance measures derived in accordance with GAAP. Management uses
these non-GAAP financial measures to facilitate operating performance
comparisons from period to period. We believe these non-GAAP financial
measures are useful for investors, analysts and other interested parties
as they facilitate company-to-company operating performance comparisons
by excluding potential differences caused by variations in capital
structures, taxation, the age and book depreciation of facilities and
equipment, restructuring initiatives and equity-based, long-term
incentive plans.
_________________________________________________
(1)Adjusted net
income is defined as net income before: amortization expense; 401(k)
Plan corrective contribution; fumigation related matters; insurance
reserve adjustment; restructuring charges; gain on sale of Merry Maids
branches; impairment of software and other related costs; loss from
discontinued operations, net of income taxes; loss on extinguishment of
debt; and the tax impact of the aforementioned adjustments. The
company’s definition of adjusted net income may not be comparable to
similarly titled measures of other companies. Adjusted earnings per
share is calculated as adjusted net income divided by the
weighted-average diluted common shares outstanding.
(2)Adjusted EBITDA is defined as net income before: depreciation and
amortization expense; 401(k) Plan corrective contribution; fumigation
related matters; insurance reserve adjustment; non-cash stock-based
compensation expense; restructuring charges; gain on sale of Merry Maids
branches; non-cash impairment of software and other related costs; loss
from discontinued operations, net of income taxes; provision for income
taxes; loss on extinguishment of debt; interest expense; and other
non-operating expenses. The company’s definition of Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.
(3)Corporate includes The ServiceMaster Acceptance Company Limited
Partnership (SMAC) and the unallocated expenses of our headquarters
function.
The following table presents reconciliations of Adjusted Net Income to
Net Income for the periods presented.
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net Income
|
|
|
|
$
|
70
|
|
|
|
$
|
49
|
|
|
|
$
|
124
|
|
|
|
$
|
144
|
|
|
Amortization expense
|
|
|
|
|
8
|
|
|
|
|
7
|
|
|
|
|
24
|
|
|
|
|
31
|
|
|
401(k) Plan corrective contribution
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Fumigation related matters
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
92
|
|
|
|
|
—
|
|
|
Insurance reserve adjustment
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
23
|
|
|
|
|
—
|
|
|
Restructuring charges
|
|
|
|
|
8
|
|
|
|
|
2
|
|
|
|
|
13
|
|
|
|
|
4
|
|
|
Gain on sale of Merry Maids branches
|
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
|
|
(2
|
)
|
|
|
|
(5
|
)
|
|
Impairment of software and other related costs
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
2
|
|
|
Loss on extinguishment of debt
|
|
|
|
|
—
|
|
|
|
|
31
|
|
|
|
|
—
|
|
|
|
|
58
|
|
|
Tax impact of adjustments
|
|
|
|
|
(7
|
)
|
|
|
|
(14
|
)
|
|
|
|
(56
|
)
|
|
|
|
(33
|
)
|
|
Adjusted Net Income
|
|
|
|
$
|
81
|
|
|
|
$
|
74
|
|
|
|
$
|
221
|
|
|
|
$
|
201
|
|
|
Weighted-average diluted common shares outstanding
|
|
|
|
|
137.1
|
|
|
|
|
136.8
|
|
|
|
|
137.5
|
|
|
|
|
136.5
|
|
|
Adjusted earnings per share
|
|
|
|
$
|
0.59
|
|
|
|
$
|
0.54
|
|
|
|
$
|
1.61
|
|
|
|
$
|
1.47
|
|
|
|
|
|
The following table presents reconciliations of Adjusted EBITDA to Net
Income for the periods presented.
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Terminix
|
|
|
|
$
|
92
|
|
|
|
$
|
82
|
|
|
|
$
|
299
|
|
|
|
$
|
272
|
|
|
American Home Shield
|
|
|
|
|
79
|
|
|
|
|
74
|
|
|
|
|
170
|
|
|
|
|
174
|
|
|
Franchise Services Group
|
|
|
|
|
21
|
|
|
|
|
20
|
|
|
|
|
58
|
|
|
|
|
58
|
|
|
Corporate
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
(3
|
)
|
|
|
|
(6
|
)
|
|
Adjusted EBITDA
|
|
|
|
$
|
192
|
|
|
|
$
|
174
|
|
|
|
$
|
523
|
|
|
|
$
|
498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
|
|
(24
|
)
|
|
|
|
(18
|
)
|
|
|
|
(68
|
)
|
|
|
|
(66
|
)
|
|
401(k) Plan corrective contribution
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
Fumigation related matters
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
(92
|
)
|
|
|
|
—
|
|
|
Insurance reserve adjustment
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(23
|
)
|
|
|
|
—
|
|
|
Non-cash stock-based compensation expense
|
|
|
|
|
(3
|
)
|
|
|
|
(3
|
)
|
|
|
|
(10
|
)
|
|
|
|
(8
|
)
|
|
Restructuring charges
|
|
|
|
|
(8
|
)
|
|
|
|
(2
|
)
|
|
|
|
(13
|
)
|
|
|
|
(4
|
)
|
|
Gain on sale of Merry Maids branches
|
|
|
|
|
—
|
|
|
|
|
3
|
|
|
|
|
2
|
|
|
|
|
5
|
|
|
Non-cash impairment of software and other related costs
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
Provision for income taxes
|
|
|
|
|
(46
|
)
|
|
|
|
(32
|
)
|
|
|
|
(76
|
)
|
|
|
|
(91
|
)
|
|
Loss on extinguishment of debt
|
|
|
|
|
—
|
|
|
|
|
(31
|
)
|
|
|
|
—
|
|
|
|
|
(58
|
)
|
|
Interest expense
|
|
|
|
|
(39
|
)
|
|
|
|
(41
|
)
|
|
|
|
(115
|
)
|
|
|
|
(128
|
)
|
|
Other non-operating expenses
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
Net income
|
|
|
|
$
|
70
|
|
|
|
$
|
49
|
|
|
|
$
|
124
|
|
|
|
$
|
144
|
|
|
|
|
|
|
|
ServiceMaster Global Holdings, Inc.
Investor Relations:
James Shields, 901-597-6839
James.Shields@servicemaster.com
or
Media:
Peter Tosches, 901-597-8449
Peter.Tosches@servicemaster.com