View
215
Download
1
Category
Preview:
Citation preview
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Jim Shields
Vice President, Investor Relations
and Treasurer
Confidential
Safe Harbor Statement
This presentation contains “forward-looking statements” that are based on management’s beliefs and assumptions and on information currently available to management. Most forward-
looking statements contain words that identify them as forward-looking, such as “anticipates,” “believes,” “continues,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,”
“potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms that relate to future events. Forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause ServiceMaster’s actual results, performance or achievements to be materially different from any projected results,
performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent the beliefs and assumptions of ServiceMaster only as of
the date of this presentation and ServiceMaster undertakes no obligation to update or revise publicly any such forward-looking statements, whether as a result of new information,
future events or otherwise. As such, ServiceMaster’s future results may vary from any expectations or goals expressed in, or implied by, the forward-looking statements included in this
presentation, possibly to a material degree. ServiceMaster cannot assure you that the assumptions made in preparing any of the forward-looking statements will prove accurate or that
any long-term financial or operational goals and targets will be realized. For a discussion of some of the important factors that could cause ServiceMaster’s results to differ materially
from those expressed in, or implied by, the forward-looking statements included in this presentation, investors should refer to the disclosure contained under the heading “Risk Factors”
in our Annual Report on Form 10-K for the year ended December 31, 2015 and our other filings with the SEC.
Note to Non-GAAP Financial Measures
This presentation 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 used by other companies. See Non-GAAP reconciliations in our SEC filings for a reconciliation of these measures to
the most directly comparable GAAP financial measures. Adjusted EBITDA, Adjusted Net Income, Adjusted earnings per share and 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, earnings per share 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 they facilitate 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.
Adjusted EBITDA is defined as net income before: loss from discontinued operations, net of income taxes; provision for income taxes; loss on extinguishment of debt; interest
expense; depreciation and amortization expense; 401(k) Plan corrective contribution; non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids
branches; and other non-operating expenses. Adjusted net income is defined by the company as income from continuing operations before: amortization expense; 401(k) Plan
corrective contribution; restructuring charges; gain on sale of Merry Maids branches; loss on extinguishment of debt; other expense; and the tax impact of all of the aforementioned
adjustments. Adjusted earnings per share is calculated as adjusted net income divided by the weighted-average number of dilutive shares outstanding. Free Cash Flow is defined as
net cash provided from operating activities from continuing operations before: call premium paid on retirement of debt; less property additions.
Cautionary Statement
Confidential
Agenda
8:00 a.m. Welcome and Opening Remarks
8:30 a.m. Part I –
10:00 a.m. Break
10:15 a.m. Part II – Business Units
11:15 a.m. Part III – Finance
11:45 a.m. Closing Remarks
smServSmart
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Rob Gillette
Chief Executive Officer
Confidential
1929 2014200719521947 1971 1986 1989 1996198819621929 1952 1962 1988 19961947 1986 1989 201420071971
Our Story: 87 Years Dedicated to Growing Essential Services
ServiceMaster is
taken private, led
by CD&R
ServiceMaster
acquires:
ServiceMaster
incorporates ServiceMaster
acquires
ServiceMaster
goes public
ServiceMaster
is founded by
Marion Wade
in Chicago
ServiceMaster
establishes one
of the first
franchise
businesses in
the U.S.
ServiceMaster
spins off
TruGreen &
completes
Initial Public
Offering
ServiceMaster
acquires
American
Home Shield
pioneers the
home
warranty
concept
ServiceMaster
acquires ServiceMaster
acquires
2015
ServSmart
is launched
Long history of competing and winning in new markets
2016
ServiceMaster
acquires
A new brand
is unveiled
sm
Confidential
Terminix 56%
Other<1%
Reported Revenue1: $917 million
EBITDA1 %: 22.4%
Service Requests4: >3 million
Coverage: 50 states
Reported Revenue1: $1.4 billion
Customer-Level Revenue1,2: $1.7 billion
EBITDA1 %: 24%
U.S. Locations: ~300 company-owned
+~25 Licenses
Coverage: 46 states / 22 countries
FSG
10%
American
Home Shield
35%
Reported Revenue1: $232 million
Customer-Level Revenue1,2: $2.4 billion
EBITDA1 %: 33.2%
U.S Licenses ~5,500 total
Coverage: 50 states /15 countries
Business Segments
FSG
9%
1 Represents results for full year 20152Customer-level represents (i) reported revenue and (ii) revenue earned by our franchisees,
less (iii) royalty fees (reported by us, based on revenue earned by our franchisees)3 U.S. locations include franchises and company-owned Merry Maid branches4 Full-year 2015 service activity
Confidential
Terminix22%1
Rollins19%1
Others
(~20,000)
59%
U.S. Market: $8B
AHS42%
First American11%
Old Republic9%
Others38%
U.S. Market: $2B
#1 in Attractive Markets
Sources: Specialty Products Consultants, LLC, SEC filings and management estimates based on industry data1As measured on a customer-level revenue basis. Rollins customer-level revenue derived from company filings and management estimates2Compared to franchise networks on a customer-level revenue basis; management estimates based on industry data
2
Confidential
Multiple Delivery Platforms
5,000 service technicians 11,000 contractors
45,000 service technicians
5,500 franchise licenses
33,000 individuals
2.8 million customers 1.6 million customers
3 million service requests
$2.4 billion CLR
200k homes served/month
Market share leader
1.5x brand awareness
of competitors
75% retention rate
“2015 Top Rated” by
Home Warranty Review
#1 market position in
respective categories
National network
Customer-Facing
Professionals
Customers
Customer
Awareness
Customer
Satisfaction
80%-85% retention rate
Strong net promoter scores
42% market share
#1 market position
Strong net promoter scores
Associates Contractors Franchisees
Trusted professionals… 75,000+ service calls each dayTrusted professionals… 75,000 visits a day
Confidential
$475$557
$622
21%
23%24%
2013 2014 2015
Consistent Financial Performance
$2,293$2,457 $2,594
2013 2014 2015
$ millions
’12-’15 CAGR = 6.4%RevenueA
dj. E
BIT
DA
Ma
rgin
1
Adj. EBITDA1
$ millions
’12-’15 CAGR = 14.4%
1Adjusted EBITDA and Adjusted EBITDA Margin reflects the annualized benefit of transferring $25m of
corporate costs to TruGreen
$50
$100
$150
$200
$250
5/31/14 5/31/15
SERV SP500
SERV Performance
Return: 120%
Return: 10%
Confidential
Market Trends Are In Our Favor
But, the world has changed
Do It For Me (DIFM)
Emerging Consumer Segment
Decreasing Labor Pool
Increasing Complexity
and Requirements
Fragmented Markets
Few Quality Competitors
of Scale
Confidential
The Opportunity
Combining physical delivery with digital convenience
On-Demand economy raises expectations
Essential services require expertise and
know-how
Physical repairs, service cannot be
delivered digitally
Limited competition of scale
The way consumers want to shop, buy and schedule is changing
Confidential
Enhance the customer experience and service
delivery – on-time, quality service with simplicity
Combine digital-first, self-service capability with
our unmatched network
Continue to drive customer-first mindset and
cultural change throughout our company
Create customer awareness, insights
and advocacy
Drive growth and productivity simultaneously
Our Approach: ServSmart
Leverage our legacy … differentiate with convenience
sm
Confidential
ServSmart Benefits
Improve customer experience and our efficiency
Makes it easy to find us, buy from
us and stay with us
Growth
Awareness
Reduced acquisition cost
Emphasizes self-service/
scheduling
Customer satisfaction
Reduces cost to serve
Promotes sales and
service mobility
Improves customer experience
Reduces technician/sales workload
Go to market with Minimally Viable
Product (MVP)
Start with the basics
Build momentum
Drive change
sm
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Raj MidhaVice President, Strategy & Marketing
Confidential
The Homeowner’s Dilemma
• Who can I trust to help me with my problem?
• What are the options to solve my problem?
• Which service solution is right for me?
• When can someone come fix my problem?
• How do I receive ongoing protection?
Confidential
Convenient access to essential home services
Homeowner’s
Dilemma
• Websites
• Mobile
• SEO/SEM
• Content
• Social Media
• Buy Online
• Live Chat
• Sales
Mobility
• Schedule
Online
• Where’s My
Tech
• Instant
Feedback
• My Account
• eNewsletters
• Monthly
Billing
Easy to
Find
Easy to
Self Educate
Easy to
Buy
Easy to
Get Service
Easy to
Pay & Stay
Instill Trust
dependable – accountable – expert
Drive Empowerment
responsive – respectful – accessible
ServiceMaster
Brand
• Who can I
trust to help
me with my
problem?
• What are the
options to
solve my
problem?
• Which
service
solution is
right for me?
• When can
someone
come fix my
problem?
• How do I
receive
ongoing
protection?
ServSmart
Vision
sm
Confidential
Investments in targeted, measurable advertising
• 89% of spend on paid
search advertising
• Keyword targeting
• Cost per lead / cost per
sale analysis
• 61% of spend on direct
response radio and TV
• Demographic and
geographic targeting
• Cost per call / cost per
sale analysis
• 62% of spend on modeled
direct mail to pure prospects
• Targeting to individual
households based on
predictive models
% of 2015 Spend Overview
Digital45%
Direct Mail37%
Broadcast14%
CRM, Social & Other
14%
Confidential
Revenue Growth (%) Gross Margin (%)
1st Year Direct-to-Consumer Home Warranty
5%
18%20%
0
0
0
0
0
0
2013 2014 2015
32%
37% 37%
30%
31%
32%
33%
34%
35%
36%
37%
38%
2013 2014 2015
Confidential
BroadcastDigital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
Pricing
Analytics
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
BroadcastDigital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
Pricing
Analytics
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
BroadcastDigital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
Pricing
Analytics
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
Pricing
AnalyticsBroadcast
Digital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
BroadcastDigital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
Pricing
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
BroadcastDigital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
Pricing
Analytics
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
Pricing
AnalyticsBroadcast
Digital
Marketing
Direct
MarketingSocial Media Brand
Customer
Relationship
Management
• Paid search
advertising
• Mobile
advertising
• Search
engine
optimization
• Buy online
• Social media
• Content
marketing
• Online
reputation
management
• Brand TV
advertising
• Direct
response TV
advertising
• Radio
• Direct mail
advertising
marketing
• Database
marketing
• Cross-selling
• Customer
research
• Brand
strategy
• Creative
development
• Customer
onboarding
• Customer
engagement
• Customer
experience
• Renewal and
payment
• Rate card
prices
• Discounting
strategy
• Price
increases
Centralized marketing team to leverage talent, best
practices and solutionssmServSmart
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Chelsea SumrowDirector, Marketing Strategy and Planning
American Home Shield
Confidential
ServSmartsm is a Shift in Mindset and Culture
Confidential
Confidential
45% Increase in Online Transactions YoY at AHS for 2015
4X More Sales YoY 2X More Sales YoY
Confidential
Confidential
Doubled Mobile SalesYoY for Q1 2016
4X more sales from this channel in 2015
Confidential
Confidential
Doubled Online Salesfrom the email
remarketing
channel at AHS
for 2015
15% Growth for
Q1 this year
eCommerce Sales from email
Confidential
70% Lift in
Conversion Rate
Old Creative New CreativeEmail Optimization
Confidential
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Jamie SmithSenior Vice President
and Chief Information Officer
Confidential
Enabling the
ServSmart
Experience
Open, API-First
Platform
World-Class
Delivery
Capabilities
ServiceMasterIT Strategy
sm
Confidential
A Modern Platform for Home Services
• API first, microservices architecture allows open
consumption across brands and externally
• “Leapfrog” of technical generations from previous legacy
platforms
• Allows rapid value capture never before possible
• Enables true cross-brand experiences
Confidential
ConsumerMobile Apps
ConsumerWebsites
InternalApplications
ContactCenter
EmployeeApps
Machine toMachine
PartnerIntegration
ExternalIntegrations
SmartServePlatform
APIs
Existing Appsand Data
New AppsAnd Services
PlatformIntegrations
Open, API-First Platform
Confidential
Delivering at the Speed of Digital Business
• Completely transformed from traditional
big-bang waterfall to scaled agile delivery
• Multiple release trains allow rapid innovation and
time to market
• DevOps delivers multiple releases per day into
product for real-time value
• Speed allows opportunity capture
Confidential
Agile Teams
Self-organizing Agile Teams
Integrated and Committed Product Owners
Primarily On Site Development Teams
DevOps and Agile Infrastructure
Product
OwnerDevelopers
QAScrum
Master
DevOps
Architect
Delivering at the Speed of Digital Business
Confidential
The ServSmart Experience
• Data driven approach to winning the
“critical moments” in the customer and service
provider experience
• Overarching goal is to reduce friction at all
points of interaction
• Contemplates both the digital and the “last mile”
of the analog experience
• Shared ServiceMaster experience creates customer
value proposition
sm
Confidential
Customer Experience
Service Provider Experience
ServiceMaster Experience
Enabling the ServSmart Experiencesm
Confidential
The Future of ServSmart
Consumer
Mobile Apps
Consumer
WebsitesInternal
ApplicationsContact
CenterEmployee
AppsMachine to
MachinePartner
IntegrationExternal
Integrations
ServSmart
Platform
APIs
Existing Apps
and Data
New Apps
And Services
Platform
Integrations
sm
sm
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Mary Kay WegnerSenior Vice President, Service
and Operations
Confidential
ServSmart Experience: Redesigning the Experience
ServiceMaster is this guy ...
... being amazing for these folks.
sm
Confidential
• Mapping customer experience journey
• Measure importance and performance
of each activity
• Prioritize investment
ServSmart Experience: Winning the critical moments
One critical moment we must win:
On-time delivery
20%
30%
40%
50%
60%
70%
80%
90%
On-Time Delivery
sm
Confidential
Hire for attitude and train for skills
• Leveraging ServiceMaster recruiting and hiring capabilities
• Expanded service and technical training
• Leadership development program
ServSmart Experience: Hire and Train Wellsm
Confidential
Increase self-service options Invest in helpful content
ServSmart Experience: Empower the Customersm
Confidential
Service Coalition Sales and Service Mobility
• Service technicians
• Identify the highest friction points
• Feedback
• Guide change management
ServSmart Experience: Empower our Employeessm
Confidential
ServSmart Experience: Service Mobility for Customers
• Notification when technician is
en route via text and e-mail
• Photo of technician
• Link to see an ETA and location of
technician
• Rate service experience
sm
Confidential
ServSmart Experience: Service Mobility for Technicians
• Smart device enabled
• New service order notification
• Schedule visibility
• Customer notified when technician
is en route
• Turn-by-turn directions
sm
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
ServSmart Panel Discussionsm
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Tim HaynesPresident, American Home Shield
Confidential
• Serves 1.6m customers in 50 states; >3m service
requests1
• Significant market leadership: ~4 times larger than
largest competitors
• High and stable customer retention rates
• National network of ~11,000 pre-qualified
contractors
• Significant direct-to-consumer marketing and lead
generation capabilities
1Represents results for LTM 3/31/16; 2Sources include SEC filings and company estimates
Leading provider of home warranties in the U.S.
American Home Shield Snapshot
Renewals65%
Home resales20%
Direct-to-consumer
15%
AHS42%
Old Republic
9%
Others38%
Drives stability of financial results
First American
11%
Revenue1: $935m
2010 – LTM 3/31/16
CAGR: 7.0%
Adjusted EBITDA1: $195m
Adjusted EBITDA margin1: 20.8%
Market Share2
Revenue By Channel1
Confidential
Who we are
• The nation’s #1 home warranty provider
• Over 42% market share
• Culture of innovation
• 45 years of experience
• Experts in contractor management
What we do
• Offer reliable repairs from the nation’s largest
network of independent, pre-screened home
service professionals.
• Real Estate Sales – “Peace of mind”
• Coverage for sellers during listing period
• Coverage for buyers after transaction
• Consumer Sales – “Financial Protection”
• Buy independent of real estate sale
• “Convenience” a growing selling point
• Plans cover the repair and replacement of up
to 21 major home appliances and system
components that wear down over time.
AHS Overview
Confidential
Focused on Our Customers Available however/wherever our customers choose
• 7 service channels (Phone, IVR, Web, Chat, E-mail, Mobile, Social Media)
• 10+ Million annual contacts
• 37% of DTC sold through eCommerce
• Over 70,000 sales chats online with $8MM in revenue
• Over 115,000 service chats with 90% resolution
• 268,000+ likes on Facebook
• 30,000 sales/$16.5 million in revenue through email last year
• 275,000 operational emails
• 55% request service without talking to a service agent
Delivering Omni-channel Customer Experience
Confidential
Continuously Improving Service Delivery
Keep More Customers
Respond quickly
when customer needs us
Schedule appointment
fast (immediate is desired)
Fix/replace in a reasonable
time
Provide transparency
throughout the repair
Improving the Customer Experience YOY
• 173K dispatches using interactive scheduling/messaging
• 11% decrease in customer escalations
• 6% improvement in after call survey results
Investing in the Future
• Real-time scheduling
• Next-gen dispatch capability
• Advanced demand/capacity management
• Online appliance ordering
• Integrated parts ordering
• Automated warranty check
ServSmart is Improving Service Delivery Efficiency, Effectiveness and Customer Experience sm
Confidential
• Contractors want to work for us
- Consistent/predictable quantity of work
- Fast payment
- Lead source for retail work
- Consultative assistance to grow their
business
Unrivaled Contractor Management Expertise
• Contractor obligation
- Appointments scheduled within 24 hours
- Timely status updates
- Service customer within 48 hours Mon.-Fri.
- Allow time slots for emergency service
• Acceptance Criteria
- Reputation review
- Insurance verification
- Licensing verification
- Background check
• Performance Measurement
- Scored regularly, equally weighting cost and
quality performance
- Customer surveys sent after every repair
- Contractors regularly visited to review
performance
83% of surveyed contractors say “AHS is the best warranty company to work with”
Confidential
Unmatched Scale and Cost Management
Cost
Number of Dispatches
Preferred
Direct Dispatch
Network
Confidential
Owner-occupied households(less home resales)
Households with homewarranty
66.1m
without
home
warranty2.6m with
home warranty 52%
AHS / HSA
48%
Competitors
68.7m 2.6m
Home resales Home resales with homewarranty
3.9m sold
without
home
warranty
1.4m sold
with home
warranty
27%
AHS / HSA
73%
Competitors
5.3m 1.4m
Category Dynamics
Real Estate Direct to Consumer
Confidential
Home Warranty Market Penetration Survey
Own a Home
74M
Claimed Home Warranty Owners
19M
Verified Warranty
Owners
5M
Only 3% - 7% Category Penetration
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Marty WickPresident, Franchise Services Group
Confidential
Franchise Services Group Snapshot
• Operate in 50 U.S. states and 15 countries
• ~5,500 franchise licenses2
• Strong and trusted brands
• Leading market positions in all brands
• Attractive value proposition to franchisees
• Scale to service national accounts
1 Represents results for LTM 3/31/162 Active licenses related to franchise agreements managed by FSG as of December 31, 2015
Market-leading residential and commercial services
~96% of royalty fees are generated by
SM Restore, SM Clean and Merry Maids
Revenue By Channel1Revenue1: $222m
2010 – LTM 3/31/16 CAGR: 1.0%
Customer-Level Revenue1: $2.4b
Adjusted EBITDA1: $77m
Adjusted EBITDA margin1: 35%
Royalties53%
Owned Branches
15%
National Accounts
18%
Products8%
Other6%
Confidential
Leading Market Positions
Established
# of States
Home CleaningJanitorial
CleaningHome Inspection
Cabinet & Furniture
Repair
North
American
Licenses1
North
American
CLR2
% of total
1988 1992
42 45
~280 licenses ~280 licenses
$35 million
2%
$33 million
2%
50
$553 million3
28%
1929: started business
1952: began franchising
50
$1,041 million
53%
1980
48
~1,000 licenses
14 owned branches
$320 million
16%
1 Licenses held as of April 26, 20162 Represents customer level revenue results for full year 2015 3 Includes $74 million of commercial and residential floor care.
Disaster
Restoration
~1,300 licenses
2 owned branches
~2,000 licenses
Confidential
Growth Focus
Increase Franchisee Network Capacity
‒ Target under-penetrated markets
‒ Transition low performers out
Drive Sales Growth
‒ Increase National Accounts
‒ Strengthen franchisees’ local sales capabilities
Innovation
‒ Develop complementary services for customers
‒ Improve quality of service and customer interactions
‒ Leverage ServiceMaster’s capabilities and purchasing power
Confidential
18-Apr
20-Apr
22-Apr
25-Apr
27-Apr
29-Apr
2-May
4-May
6-May
9-May
11-May
0% -15% -23% -25% -36% -41% -39% -45% -49% -49% -52%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Growing National Insurance Partnerships
Gaining Share of Insurance Claims Reconstruction
Leveraging Technology Cabinet Repair
• High percent of home disasters impact cabinets
• Emerging trend
• Reduces total repair time for the homeowner
• Most water mitigation claims
require reconstruction
• Increase revenue per job claim
• Core competency of network
2014 2015
SM Restore
Other
Key Insurance Partner Total Water Claims Share
49%56%
% Decrease in Pending DR Claims Over 30 Days
Confidential
Leveraging the ServiceMaster Organization
ServiceMaster Answers!
Digital Journeys
• Dispatch: Improving service journey
• Sales Mobility: Real-time sales process
• Respond 365: End-to-end insurance
claims process
• Provide fee-based call center
services to franchisees
• Call center agents understand home
services
• Screen sales leads, schedule service
Franchise AHS Trades
• AHS and insurance carrier claim
volume
• ServiceMaster purchasing power
• ServiceMaster franchising expertise
Merry Maids eCommerce
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Bill DerwinPresident, Terminix
Confidential
Operate in 22 countries and 46 U.S. states
U.S. locations include ~300 company-owned
branches and ~25 franchise agreements
Large and attractive U.S. market (~$8b)
Competitive strength: brand, scale, expertise, etc.
Positioning for growth: core and new services1Represents results for LTM 3/31/162Sources: Specialty Products Consultants, LLC, SEC filings and management estimates based on industry data as measured on a customer-level revenue basis
Residential Termite
35%
Residential Pest40%
Commercial Pest17%
Commercial Termite
3%
Other5%
Terminix22%
Rollins19%
Others
59%
Revenue1: $1.5b
2010 – LTM 3/31/16 CAGR: 4.7%
Customer-Level Revenue1: $1.8b
Adjusted EBITDA1: $353m
Adjusted EBITDA margin1: 24.0%
Market Share2
Revenue By Service Type1
Terminix Snapshot
Confidential
Market Dynamics
Essential service: “Darwin” at work; real health and
nuisance problems
Recession-Resistant Demand: High cost of inaction or
ineffective treatment
Price Inelastic: Protects most valuable asset
Fragmented Industry: ~20,000 termite and pest control
companies in U.S.
Scale Advantages: Large providers offer standardized and
scalable service
Terminix
42%
Arrow
4% Rollins
17%
Others
33%
Total market: $1.4 billion
TMX
#1
Termite Market
Rollins
18%
Ecolab
7%
Terminix
15%
Others
53%
Total market: $6.4 billion
TMX
#2
Pest Control Market
Rentokil
6%
1Sources: Specialty Products Consultants, LLC: PCT Top 100
Confidential
Competitive Advantages
Industry-Leading Brand: Unaided awareness >60%;
~1.5x greater than nearest competitor
ServSmartsm: Technology powering customer
experience, productivity and growth
Technical Expertise: Industry leading experts
including industry-renowned mosquito expert
Experienced Leadership: Branch managers and
technicians with significant tenure
National Footprint: Ability to serve national and
regional customers
Size: Sourcing leverage in marketing, chemicals
and vehicles
Leadership Tenure
Well-trained and empowered to exceed
customers’ expectations
Average technician tenure
Average branch
manager tenure
7 years
11 years
Industry Leadership
Confidential
Terminix Historical Financial Growth
Revenue and Growth Adjusted EBITDA and Margin
$1,157 $1,193$1,265 $1,309
$1,370$1,444
2010 2011 2012 2013 2014 2015
$223$249
$266 $266
$309
$347
2010 2011 2012 2013 2014 2015
2010 – 2015 CAGR: 4.5%2010 – 2015 CAGR: 9.2%
($ in millions) ($ in millions)
% growth 6.3% 3.1% 6.1% 3.5% 4.6% 5.4% Margin 19.3% 20.9% 21.0% 20.4% 24.0%22.6%
Resilient, consistent revenue growth Accelerating margin expansion
Confidential
Growth StrategiesQ4/2015 & Q1/2016 Results
Key Acquisitions
Accelerating sales growth
rates in all four segments:
• Termite Bait
• Residential Pest Control
• Commercial Pest Control
• Innovation
Lifetime Value Priority: Alignment of incentives and
tactics toward renewable services
ServSmart Powered Organic Growth: Investing for
sales, retention and customer service improvements
Multiple product segments:Termite, residential pest
control, commercial pest control, innovation
Pricing: Capability developed to optimize; software
assisted A/B testing and predictive modelling
Acquisitions: High-quality targets, attractive
economics, consolidation continuing
sm
Confidential
ServSmart Success
Sales & Service Mobility
eCommerce & Website
Website Visitors: +120%
Organic Visitors: +200%
eCommerce: >1,500 units
Pilot Q2
Customer satisfaction
Sales productivity
sm
Confidential
Termite – Repositioning for Growth
Last few years:
• Bait product to enhance preventive market
• Terminix innovation success
Our response:
• Lifetime value priority
• New product DAPP, bait with pest control
• Innovation sales with targeted bait tag-along
• Marketing promotions
• Sales Mobility and Vehicles
The results: Q4 2015 and Q1 2016 unit sales
growth accelerating
Confidential
Maintain brand leadership – Optimizing broadcast spend
(TV, radio)
Improve organic search – Redesigned website for SEO
and adding relevant content
Make it easy to buy – Launched eCommerce capabilities
and website chat
Augment product line – Added new 6x-per-year contract
Leverage third-party sales agents – Reinvigorate program
Residential Pest
Confidential
Commercial
Operating Alignment: Dedicated
commercial business unit
Targeted Sales: Five key verticals in
national and mid-sized accounts
Sales Effectiveness: Investments in
sales leadership and professionals
Innovative Services
Customer-Facing Technology
Hospitality
Health
services
Warehouse/
distribution
Real estate/
multi -family
Retail
5.4% average revenue growth last 9 quarters
Confidential
New Services Insulation Encapsulation)
Exclusion Mosquito
($ millions)
Total New Services
($ millions)
Leading the market:
• Insulation in 2009
• Exclusion launch in 2014, very successful
Innovation enabling capabilities:
• New product processes with technical protocols
• Home inspections by outside sales professionals
• Entrepreneurial “can-do” branch attitude
Well positioned for continued growth:
• Cross-selling into current base; low penetration
• Additional new services
>100
500
0
500
1000
2015 MarketPotential
1 Based on cross sell penetration to 13% of existing customers
1
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Business Unit Panel Discussion
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Confidential
Alan HaughieChief Financial Officer
Confidential
$1,929 $2,031 $2,105
$2,214 $2,293
$2,457 $2,594
2009 2010 2011 2012 2013 2014 2015
• Consistent financial performance
through business cycles
• Grew Adjusted EBITDA at greater than
1.5 times the rate of revenue
• History of Adjusted EBITDA
margin expansion
• Capital light business model
• High conversion of Adjusted EBITDA to
Free Cash Flow
Consistent Financial PerformanceRevenue
Adj. EBITDA1
1 Adjusted EBITDA includes the pro forma effect of $25m of corporate expenses transferred to TruGreen in 2013 and prior
($millions)
$376 $379 $422 $438
$475
$557
$622
19% 19%20% 20% 21%
23%24%
0%
10%
20%
30%
40%
$-
$200
$400
$600
2009 2010 2011 2012 2013 2014 2015
Confidential
Terminix – Gross Margin
Revenue Growth 2009 to Q1 2016 (TTM) = 35%
0%
20%
40%
60%
80%
100%
-
200
400
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
($s
in
mil
lio
ns
)
2010 2011 2012 2013 2014 2015 2016
44% 45%
Gross Margin
Revenue
Confidential
Revenue Growth 2009 to Q1 2016 (TTM) = 49%
American Home Shield – Gross Margin
10%
30%
50%
70%
90%
-
100
200
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
($s
in
mil
lio
ns
)
2010 2011 2012 2013 2014 2015 2016
46% 48%
Revenue
Gross Margin
Confidential
Historical Revenue & EBITDA Trends
2015 Cost to Deliver Summary (% of Rev)
Financial Overview – Terminix
Incremental Contribution (% of Rev)
1 SG&A Infrastructure includes allocated Corporate G&A of ~4% of revenue
($millions)
CAGR: 5%
CAGR: 9%
1,089 1,157 1,193
1,265 1,309
1,370 1,444
212 223 249
266 266
309
347
-
100
200
300
400
500
-
200
400
600
800
1,000
1,200
1,400
1,600
2009 2010 2011 2012 2013 2014 2015
19%
24%
Revenue Growth 355$
EBITDA Growth 135
Conversion % 38%
2009 - 2015 Growth
Labor 20%
Chemical & Materials 5%
Vehicle 5%
Retail Product Costs 5%
All Other 5%
Total Cost to Deliver 40%
100%
35%
(40%)(5%)
(10%)(5%)
(5%)
Revenue Cost toDeliver
BranchAdmin
Selling Marketing Other EBITDAConv.
Confidential
Historical Revenue & EBITDA Trends
2015 Cost Structure (% of Rev)
Financial Overview – American Home Shield
Incremental Contribution (% of Rev)
1Includes allocated Corporate G&A of ~3% of revenue
($millions)
CAGR: 6%
CAGR: 14%
630 657
687 721 740
828
917
92 90 107
117
145
179
205
-
50
100
150
200
250
300
-
100
200
300
400
500
600
700
800
900
1,000
2009 2010 2011 2012 2013 2014 2015
15%
22%
Revenue Growth 287$
EBITDA Growth 113
Conversion % 39%
2009 - 2015 Growth
Costs % of Revenue
Claims 50%
Selling 9%
Marketing 6%
Service (Call Center) 8%
G&A16%
Other 2%
Total 79%
Depr/Amort/Interest -2%
EBITDA 22%
100%
35%(50%) (5%)
(5%) (5%)
Revenue Claims Selling Marketing Service(Call Cntr)
EBITDA Conv.
Confidential
American Home Shield – By Channel
630
917
49% 49%
15%22%
2009 2015
Revenue Gross Margin EBITDA Margin
36%50%
15%
5%
49% 45%
2009 2015
Direct to Consumer Third Party Real Estate
Renewals65%
RE20%
DTC15%
-$50 $0 $50 $100 $150 $200 $250
Renewals
RE - 1st Year
DTC - 1st Year
EBITDA by Sales Channel
Revenue by Sales Channel($millions)
Confidential
77 75
( 8 )
2 4
2015EBITDA
(As Rept.)
Br Rev FeesPost Conv.
Br. Sales/Mkt
2015EBITDA
(Pro Forma)
39%33%
MM refranchising impact
Revenue: $232 (42) 2 0 $192
Historical Revenue & EBITDA Trends
2015 Pro Forma Revenue Structure
Financial Overview – Franchise Services Group
Pro Forma 2015 Revenue & EBITDA
Note: Impact of selling MM branches is ~$16m in 2015 and an additional ~$30m in 2016
Note: 2015 restated to reflect impact of fully refranchising the Company owned MM branches
• High variable margin business
• Infrastructure to support franchisee
network largely fixed
• Very limited capital requirements
Restore royalty rate 10%
All others 5 – 7%
($millions)
204 211 220 221
236 253
232
70 76 75
70 78 78 77
-
20
40
60
80
100
120
140
160
-
50
100
150
200
250
300
2009 2010 2011 2012 2013 2014 2015
35%33%
Royalty Fees 119
Janitorial National Accounts 41
Sale of Products 18
Other 14
Pro Forma 2015 Revenue 192
Confidential
Technology Investments($millions)
40% 43% 40% 40%
60%
57% 60% 60%$83
$120 $120 $120
2015A 2016E 2017E 2018E
Capital Expense (EBITDA) Revenue
%Rev: 3.2% 4.3% 4.1% 3.9%
Representative Initiatives G R E
• TMX Sales and Service mobility
• Enterprise-wide eCommerce
• Cross--channel marketing platform
• Service dispatch platform
• Terminix IVR
• HSA integration
• Hyper-converged infrastructure
• Next Gen firewalls, security monitoring
and detection tools
G = New Customer Growth, R = Retention, E = Efficiency
Minimum target of 75bps incremental growth at 35% conversion is >20% IRR
ConfidentialConfidential
2016 Outlook
2016 Revenue and EBITDA outlook
Strong top line with AHS growth ~10%
Terminix growth middle-to-high single digits
Approximately 80% revenue from recurring
customer base
Continued operating leverage
High customer retention; pricing 1% - 2%
Strong pipeline of tuck-in acquisition
targets
Free cash flow > $300 million
Investing in growth (marketing/ServSmart )
2016 Full Year Outlook
Revenue $2,750 - $2,780 Growth 6% - 7%
EBITDA $675 - $690Growth 9% - 11%
EBITDA margin 24% - 25%+ 50 - 100 bps
($millions)
sm
Confidential
EBITDA increases net of tax largely
flow through to FCF
PP&E long term spending levels
expected to be ~ 2% of Revenue
Net Debt / EBITDA ratio of 2.0x – 2.5x
by the end of 2019
Long-Range Free Cash Flow Outlook($millions)
Expected EBITDA growth of ~ 10% per year
Expected FCF growth of 10% to 15% per year
2015 2016E
EBITDA 622 675
PP&E (40) (60)
Cash interest (178) (140)
Cash taxes (44) (145)
Working Capital & Other (1) (20)
Free Cash Flow 358 310
EBITDA % 58% 46%
Net Debt / EBITDA 4.2x 3.9x
1,000 300
150
275
275
Cumulative FCF(3 yrs)
Share repurchaseprogram
Tuck-in Acquisitions Scheduled Debt paydown
Acquisitions /Other
Confidential
ServiceMaster
2016 Investor Day
May 17, 2016
Waldorf Astoria
New York City
Recommended