MEMPHIS, Tenn. - August 04, 2015 - (BUSINESS WIRE) - ServiceMaster Global Holdings, Inc. (NYSE: SERV), a leading provider of essential residential and commercial services, today announced preliminary unaudited second-quarter 2015 results. The company reported second-quarter 2015 revenue of $716 million, an increase of 5 percent compared to the same period in 2014. The increase in revenue was driven by strong organic growth at American Home Shield (“AHS”), increased sales of new services at Terminix and price increases, partially offset by lower demand for traditional termite services.
“Both Terminix and American Home Shield continue to perform well with new services driving growth at Terminix and our investment in marketing yielding accelerated top line growth at AHS.”
The company reported second-quarter 2015 net income of $67 million or $0.49 per share, including a loss on extinguishment of debt of $14 million related to the company’s redemption of its 8% Senior Notes, versus $40 million or $0.44 per share in the same period in 2014.
The company reported second-quarter 2015 adjusted net income of $82 million, or $0.60 per share, versus $52 million, or $0.56 per share, for the same period in 2014. Earnings per share and other share data contained in this release reflect 136.5 million and 92.2 million diluted share counts for the second quarter ended June 30, 2015 and 2014, respectively.
The company reported second-quarter 2015 Adjusted EBITDA of $191 million, an increase of $20 million or 12 percent compared to the same period in 2014. The increase was largely driven by Adjusted EBITDA increases at AHS and Terminix of $10 million and $8 million, respectively.
Rob Gillette, ServiceMaster’s chief executive officer, noted “Both Terminix and American Home Shield continue to perform well with new services driving growth at Terminix and our investment in marketing yielding accelerated top line growth at AHS.”
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A reconciliation of income from continuing operations to both adjusted net income and Adjusted EBITDA, as well as a reconciliation of net cash provided from operating activities from continuing operations to pre-tax unlevered free cash flow, are set forth below in this press release.
Terminix, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported a 5 percent revenue increase in the second-quarter of 2015 compared to the second-quarter of 2014. The revenue increase was primarily driven by increased sales of new services and improved pricing, partially offset by lower demand for traditional termite services. Adjusted EBITDA increased 9 percent or $8 million versus prior year, driven primarily by the flow-through effect of higher revenue, partially offset by higher selling costs during the quarter.
American Home Shield, which provides home warranties for household systems and appliances, reported an 8 percent revenue increase in the second-quarter of 2015 compared to the second-quarter of 2014, driven by organic growth and price increases. Adjusted EBITDA increased 16 percent or $10 million versus prior year, primarily reflecting the flow-through effect of higher revenue, partially offset by an increase in claim costs. The company increased marketing spend by $5 million compared to the second quarter 2014 which was offset by a gain on the sale of investments realized during the quarter.
The Franchise Services Group, which provides residential and commercial disaster restoration, janitorial, residential cleaning, furniture repair and home inspection services, reported a 6 percent revenue decrease in the second-quarter of 2015 compared to the second-quarter of 2014. The revenue decrease primarily reflects the conversion of company-owned Merry Maids branches to franchises, partially offset by an increase in lower margin janitorial national account revenue. Adjusted EBITDA decreased 5 percent or $1 million versus prior year, primarily reflecting the flow-through effect of lower revenue, largely offset by cost reduction initiatives.
For the six months ended June 30, 2015, net cash provided from operating activities from continuing operations increased to $210 million from $149 million for the six months ended June 30, 2014.
Net cash used for investing activities from continuing operations was $20 million for the six months ended June 30, 2015 compared to $36 million for the six months ended June 30, 2014.
Net cash used for financing activities from continuing operations was $213 million for the six months ended June 30, 2015.
On February 17, 2015, the company redeemed $190 million of the 8% Senior Notes due 2020 using cash on hand. As part of the transaction, the company paid an $11 million pre-payment premium.
On April 1, 2015, the company redeemed the remaining $200 million of the 8% Senior Notes due 2020. As part of the transaction, the company paid $14 million in fees and pre-payment premium. To redeem the $200 million 8% Senior Notes, the company used $39 million in cash and incurred incremental borrowings of $175 million under its term loan facility to finance the remaining portion of the redemption.
For the six months ended June 30, 2014, net cash used for financing activities from continuing operations was $54 million, largely consisting of a $35 million contribution to TruGreen Holding Corporation as part of the spin-off transaction.
Pre-tax unlevered free cash flow(3) was $338 million for the six months ended June 30, 2015, compared to $267 million for the six months ended June 30, 2014.
On June 2, 2015, certain selling stockholders, including investment funds sponsored by, or affiliated with, Clayton, Dubilier & Rice, LLC, the company’s principal stockholder, sold 20 million shares of common stock in a secondary offering. On June 12, 2015, the underwriters of the secondary offering exercised their option to purchase an additional 3 million shares of common stock pursuant to the underwriting agreement. The company did not receive any proceeds from the sale of the aggregate 23 million shares of common stock by the selling stockholders.
As previously reported, in April 2014, the Consumer Financial Protection Bureau (the “CFPB”) issued a Civil Investigative Demand to AHS seeking documents and information related to the Real Estate Settlement Procedures Act and its implementing regulation (“RESPA”) and other laws enforceable by the CFPB. AHS believes that it has complied with RESPA and other laws applicable to AHS’s home warranty business. AHS provided the CFPB with materials in response to the CFPB’s request. On June 25, 2015, the CFPB informed AHS by letter that it has completed its review and does not intend to take any enforcement action.
On July 16, 2015, the company gave notice that it has elected to redeem in full $488 million of the 7% Senior Notes due 2020 on August 17, 2015. The company expects to record in the third quarter of 2015 a $31 million loss on the extinguishment debt, of which $25 million is a pre-payment premium on the 7% Senior Notes and $6 million is the write-off of debt issuance costs. To redeem the 7% Senior Notes, the company anticipates using a combination of cash and incremental borrowings under a term loan facility. The redemption is subject to satisfaction of specified conditions precedent, including, without limitation, consummation of availability of financing on terms and conditions satisfactory to the company.
The company anticipates that revenue will be between $2,570 million and $2,590 million, a 5 percent increase compared to 2014. Adjusted EBITDA is anticipated to be at least $610 million for the full-year 2015, an increase of approximately 10 percent compared to 2014.
The company will discuss its second-quarter 2015 operating results during a conference call at 8 a.m. central time today, August 4, 2015. To participate on the conference call, interested parties should call 800.706.9302 (or international participants, 303.223.2688). Additionally, the conference call will be available via webcast. A slide presentation highlighting the company’s results and key performance indicators will also be available. To participate via webcast and view the slide presentation, visit the company’s investor relations home page at www.servicemaster.com.
The call will be available for replay until September 3, 2015. To access the replay of this call, please call 800.633.8284 and enter reservation number 21772159 (international participants: 402.977.9140, reservation number 21772159). Or you can review the webcast on the company’s investor relations home page.
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 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.
This press release contains forward-looking statements and cautionary statements. 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, the effects of our substantial indebtedness; changes in interest rates, because a significant portion of our indebtedness bears interest at variable rates; lawsuits, enforcement actions and other claims by third 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. The company assumes no obligation to update the information contained herein, which speaks only as of the date hereof.
This press release contains certain non-GAAP financial measures, which are not measures of financial condition or profitability. 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 used by 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 pre-tax unlevered free cash flow 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 or as an alternative to net cash provided by operating activities or any other measures of the company’s cash flow or liquidity. We believe these non-GAAP financial measures are useful for investors, analysts and other interested parties as it facilitates company-to-company operating and financial condition performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, consulting agreements and equity-based, long-term incentive plans.
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The following table presents reconciliations of Income from Continuing Operations to Adjusted Net Income for the periods presented.
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The following table presents reconciliations of Net Cash Provided from Operating Activities from Continuing Operations to Pre-Tax Unlevered Free Cash Flow for the periods presented.
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The following table presents reconciliations of Adjusted EBITDA to Income from Continuing Operations for the periods presented.
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The table below presents selected operating metrics related to renewable customer counts and customer retention for our Terminix and American Home Shield segments.
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Termite renewal revenue comprised 47 percent and 49 percent of total revenue from Termite and Other Services for the three months ended June 30, 2015 and 2014, respectively.
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SOURCE ServiceMaster Global Holdings, Inc.
James Shields
ServiceMaster Global Holdings, Inc.
Investor Relations:
901-597-6839
James.Shields@servicemaster.com
Peter Tosches
ServiceMaster Global Holdings, Inc.
Media Relation
901-597-8449
Peter.Tosches@servicemaster.com
ServiceMaster Global Holdings, Inc. is a provider of essential residential and commercial services.