News Details

MEMPHIS, Tenn.--(BUSINESS WIRE)-- Terminix Global Holdings, Inc. (NYSE: TMX), a leading provider of essential termite and pest management services to residential and commercial customers, today announced unaudited second-quarter 2021 results.

For the second quarter of 2021, the Company reported a year-over-year revenue increase of five percent to $560 million. Income from continuing operations increased year-over-year by $14 million, or 35 percent, to $54 million, or $0.42 per share. Adjusted EBITDA⁽¹⁾ for the quarter increased year-over-year by $4 million, or 3 percent, to $123 million, and Adjusted Net Income⁽²⁾ increased by $13 million to $66 million, or $0.51 per share.

“Solid revenue growth in commercial and residential pest management highlighted a quarter of continued progress on our strategic initiatives,” said Terminix CEO Brett Ponton. “The double-digit organic revenue growth in our commercial business continues the positive momentum we have seen in the service line as we move beyond the impacts of the COVID-19 pandemic. We delivered strong pricing and customer retention improvements in residential pest management and are making progress on key marketing initiatives that will improve lead generation. I am encouraged by our ability to drive productivity in our fleet and materials cost to help offset expected increases in labor costs due to the more competitive macro labor market.”

“We remain focused on the Terminix Way initiative and customer experience platform as key growth and profitability enablers for the years ahead,” Ponton continued. “Investments in easy-to-use systems will improve lead generation, customer retention, and the customer experience across all touchpoints. Terminix Way will transform the teammate experience with enhanced operating procedures, training curriculums and career paths that will enhance teammate retention and provide the foundation for accelerated growth and improved consistency throughout the organization. I remain confident that we are making the necessary investments in operating capabilities to create a sustainable growth model that will allow us to become the preferred pest management provider in the industry.”

Consolidated Performance

Reconciliations of net income to Adjusted Net Income and Adjusted EBITDA, as well as a reconciliation of Net Cash Provided from Operating Activities from Continuing Operations to Free Cash Flow, are set forth below in this press release.

Second-Quarter Performance

Revenue

Revenue increased five percent over the prior year, including approximately one percent from favorable foreign currency fluctuations. Commercial pest management organic revenue growth⁽⁴⁾ of ten percent, including double-digit international growth, was driven by a decrease in temporary cancellations from the prior year and improved price realization. Foreign currency fluctuations contributed approximately $4 million, or three percent, of the commercial pest management organic revenue growth. Residential pest management organic revenue growth of four percent was driven by an improvement in customer retention and improved price realization, offset, in part, by lower one-time sales. Termite and Home Services revenue decreased two percent organically primarily due to an approximately $5 million impact from the change in the timing of revenue recognition in our monthly subscription-based termite offering. Excluding this impact, Termite and Home Service revenue would have increased approximately one percent. Sales of products and other increased eight percent due to prior year COVID-19 pandemic impacts.

Adjusted EBITDA

Adjusted EBITDA was $123 million for the second quarter, a year-over-year increase of $4 million. The impact on Adjusted EBITDA from higher revenue was $13 million. Direct costs, including materials and fleet costs, were $4 million lower year-over-year. These gains were partially offset by a $6 million increase in labor expense, $2 million in investments in the customer experience platform and Terminix Way, higher sales and marketing expense of $3 million, and a $1 million increase in termite damage claims expense, primarily driven by higher cost per non-litigated claim due, in part, to inflationary pressures on building materials and contractor costs.

Liquidity and Free Cash Flow

The Company ended the second quarter with $313 million in available cash and access to $378 million under its revolving credit facility for total liquidity of $691 million. In the second quarter, the Company purchased 3.7 million shares for $181 million at an average price of $48.77 per share. Year-to-date free cash flow was $139 million, with a free cash flow conversion rate⁽⁵⁾ of 65 percent. The Company ended the second quarter with a net debt leverage ratio⁽⁶⁾ of 1.5 times.

Full-Year 2021 Outlook

For the full-year 2021, our outlook remains unchanged with organic revenue growth expected between three and four percent. Residential pest is expected to continue growth from pricing realization. Commercial pest is expected to stabilize to more normalized growth levels than the second quarter as the prior year impact of the COVID-19 pandemic mitigates in the third and fourth quarters. Termite and home services is expected to be negatively impacted by approximately $2 million in the third quarter due to the timing of revenue recognized for our monthly subscription-based termite offering.

Adjusted EBITDA remains between $380 and $390 million and includes the flow through of revenue growth, expected teammate retention pressure from tighter labor markets, increased sales and marketing expense and investments in key operational capabilities.

The timing and frequency of new termite damage claims litigated case filings are difficult to predict. This guidance represents the Company’s best estimate of litigated case filings, but actual pace and volume could differ.

A reconciliation of the forward looking full-year 2021 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.

Second-Quarter 2021 Earnings Conference Call

The Company will hold a conference call to discuss its financial and operating results at 8 a.m. central time (9 a.m. eastern time) on Thursday, August 5, 2021.

The Company invites all interested parties to join Chief Executive Officer, Brett Ponton, Executive Vice President and Chief Financial Officer, Bob Riesbeck, and Vice President of Investor Relations, FP&A and Treasurer, Jesse Jenkins, for an update on the Company's operational performance and financial results for the second quarter ended June 30, 2021. Participants may join this conference call by dialing 877.256.3282 (or international participants, +1.212.231.2904). 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 presentation, visit the Company’s investor relations home page at investors.terminix.com.

The call will be available for replay until September 4, 2021. To access the replay of this call, please call 800.633.8284 and enter reservation number 21995995 (international participants: +1.402.977.9140, reservation number 21995995). The webcast will also be available on the company’s investor relations home page.

About Terminix

Terminix Global Holdings (NYSE: TMX) is a leading provider of residential and commercial pest management. The Company provides pest management services and protection against termites, mosquitoes, rodents and other pests. Headquartered in Memphis, Tenn., with more than 11,400 teammates and 2.9 million customers in 24 countries and territories, the Company visits more than 50,000 homes and businesses every day. To learn more about Terminix, visit Terminix.com, or LinkedIn.com/company/terminix.

Information Regarding Forward-Looking Statements

This press release contains forward-looking statements and cautionary statements. 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. Such risks, uncertainties and changes in circumstances include, but are not limited to: the impact of reserves attributable to pending Litigated and Non-Litigated Claims for termite damages; future termite damage claim expenses above historical norms remaining within the ringfence estimate; implementation of Mobile Bay Formosan termite settlement remediation measures; the mitigating impact of the Mobile Bay Formosan termite settlement on future litigated termite damage claims; the impact of the COVID-19 pandemic on our operations; lawsuits, enforcement actions and other claims by first parties or governmental authorities; compliance with, or violation of environmental health and safety laws and regulations; weakening general economic conditions; weather conditions and seasonality; the success of our business strategies, and costs associated with restructuring initiatives. 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. 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 like 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, Adjusted earnings per share, free cash flow, free cash flow conversion rate, organic revenue growth and net debt leverage ratio are not measurements of the Company’s financial performance under GAAP and should not be considered as an alternative to net income, net cash provided by operating activities from continuing operations or any other performance or liquidity measures derived in accordance with GAAP. Management uses these non-GAAP financial measures to facilitate operating performance and liquidity comparisons, as applicable, 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 and liquidity comparisons, as applicable, by excluding potential differences caused by variations in capital structures, acquisition activity, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.
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The following table presents reconciliations of net income to Adjusted Net Income:

The following table presents reconciliations of net cash provided from operating activities from continuing operations to free cash flow:

The following table presents reconciliations of net income to Adjusted EBITDA.