ServiceMaster Global Holdings (SERV) Posts Mixed Prelim. Q3 Results

October 14, 2016 7:02 AM EDT
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ServiceMaster Global Holdings, Inc. (NYSE: SERV) 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.

(NOTE: The Street sees Q3 revenue of $753 million and EPS of $0.63.)

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


6.4% 25.5% 0.8pts
American Home Shield 309 34 79 5 786 75 170 (4)
YoY growth / % of revenue 12.4% 25.6% (1.3


10.5% 21.6% (2.9


Franchise Services Group 51 (7) 21 1 151 (27) 58
YoY growth / % of revenue (12.1)% 41.2% 6.7pts (15.2)% 38.4% 5.8pts
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% 0.7pts 6.0% 24.8% (0.2


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.

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