ServiceMasterinvestors.servicemaster.com/sites/servicemaster.investorhq... · 1 Confidential Cautionary Statements Safe Harbor Statement This presentation contains “forward-looking

Confidential

ServiceMaster

J.P. Morgan Ultimate Services

Investor Conference

November 15, 2016

Confidential

1

Cautionary StatementsSafe Harbor Statement

This presentation contains “forward-looking statements,” including 2016 revenue and Adjusted EBITDA outlook and the statements relating to the proposed refinancing, 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 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 of other companies. See non-GAAP reconciliations below in this presentation 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, net cash provided by operating activities

from continuing operations or any other performance or liquidity measure 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, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

Adjusted EBITDA is defined as net income (loss) 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; management and consulting

fees; consulting agreement termination fees; non-cash asset impairment of property and equipment and other non-operating expenses. 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 taxes; loss on extinguishment of debt; and the tax impact of the

aforementioned adjustments. Adjusted earnings per share is calculated as adjusted net income divided by the weighted-average diluted common shares outstanding. Free

Cash Flow is defined as net cash provided from operating activities from continuing operations plus cash paid for consulting agreement termination fees, less property

additions. Free Cash Flow for 2016 LTM and Q3 2016 on pages 10, 17 and 19 excludes the impact of $90m (net of $35m taxes) and $88m (net of $34m taxes) respectively in

payments for fumigation related matters.

Confidential

Jim ShieldsVP Investor Relations

& Treasurer

2

Table of Contents

Alan HaughieChief Financial Officer

Financial Review

Business Segments & Performance

Company Overview & Business Strategy

Appendix

Confidential

Financial Review



3

Appendix

Confidential

New branding is

unveiled

is launched

87 Years Dedicated to Growing Essential Services

4

1929 1947 1952 1962 1971 1986 1988 1989 1996 2007 2014 2015 2016

ServiceMaster

is founded by

Marion Wade

in Chicago

Long history of competing and winning in new markets

ServiceMaster

establishes

one of the

first franchise

businesses in

the U.S.

American

Home Shield

pioneers the

home

warranty

concept

ServiceMaster

acquires

ServiceMaster

acquires

ServiceMaster

spins off

TruGreen &

completes

Initial Public

Offering

ServiceMaster

acquires

ServiceMaster

acquires

ServiceMaster

Incorporates

ServiceMaster

goes public

ServiceMaster

acquires

ServiceMaster

acquires

ServiceMaster is

taken private,

led by CD&R

Confidential

Investment Highlights

5

#1 positions in large, fragmented and growing markets

High-value service offerings resulting in high customer retention and recurring revenues

Growth driven by operational excellence and superior customer service

Experienced management team

Resilient financial model with track record of consistent performance and significant free cash flow generation

Differentiation through proprietary, adaptive technology

Confidential

Source: Specialty Products Consultants, LLC, NPMA, National Association of Realtors, SEC filings and management estimates based on industry data; 1 As measured on an estimated 12/31/2015 customer-level revenue basis. Rollins customer-level revenue derived from company filings and

management estimates; 2 As measured by 12/31/2015 estimates 3 Management estimates based on industry data

Leading Positions in Large, Fragmented and Growing Markets…

6

Terminix

22%1

Rollins

19%1

Others

(~20,000)

59%

U.S. Market: ~$8bn U.S. Market: ~$2bn

AHS

42%2

First

American

11%

Old

Republic

9%

Others

38%

3

Leading market positions across portfolio of essential services

Confidential

…Delivered through Multiple, Scaled Platforms

7

Trusted professionals… 75,000 visits a day

Customer-Facing

Professionals

Customers

Customer Awareness

Customer Satisfaction

Associates

5,000 service technicians

2.8 million customers

Market share leader

1.5x brand awareness of

competitors

High retention rates

Strong net promoter scores

FranchiseesContractors

11,000 contractors

45,000 service technicians

1.8 million customers

3.7 million service requests

42% market share

#1 market position

76% retention rate

"2015 Top Rated" by Home

Warranty Review

5,500 worldwide franchise

licenses

33,000 individuals

$2.4 billion CLR

200k homes served/month

Leading market positions in

respective categories

National network

Strong net promoter scores

Confidential

Reported Revenue1: $1.5 billion

Customer-Level Revenue1,2: $1.8 billion

Adj. EBITDA1 $ / % margin: $374 million / 24.7%

U.S. Locations: ~300 company-owned

+~25 Licenses

Coverage: 46 states / 22 countries

Reported Revenue1: $992 million

Adj. EBITDA1 $ / % margin: $201 million / 20.3%

Service Requests1: 3.7 million

Coverage: 50 states

Reported Revenue1:

Customer-Level Revenue1,2:

Adj. EBITDA1 $ / % margin:

Worldwide Licenses3:

Coverage:

$205 million

$2.4 billion

$76 million / 37.3%

~5,500 total

50 states /15 countries

Portfolio of essential services

Terminix

56%

Other <1%

American

Home Shield

36%

FSG

8%

1 LTM through period ending 9/30/162 Customer-level represents (i) reported revenueand (ii) revenueearned by our franchisees, less (iii) royalty fees (reportedby us, based on revenueearned by our franchisees)3 Active licenses related to franchise agreements managed by FSG as of December 31, 2015 Confidential

Portfolio provides risk diversification and expansion opportunities

Total Reported Revenue of $2.7 billion1

Total Reported Adjusted EBITDA of $646 million1

Adjusted EBITDA margin of 23.8%1

8

LTM Revenue by segment

Confidential

ServSmartsm: Differentiate with Convenience

Our Approach

ServSmartsm Benefits

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

Makes it easy to find us, buy from

us and stay with us

Emphasizes self-service/ scheduling

Promotes sales and

service mobility

Go to market with Minimally Viable

Product (MVP)

Growth Awareness Reduced acquisition cost

Customer satisfaction Reduces cost to serve

Improves customer experience Reduces technician/sales workload

Start with the basics Build momentum Drive change

9

Leverage our legacy by combining physical delivery with digital convenience

Confidential

1Adjusted EBITDA and Adjusted EBITDA margin reflect the annualized benefit of transferring $25m of corporate costs to TruGreen, spun off in 2014; 2Free Cash Flow is defined in cautionary statements on page 1 3Adjusted EBITDA through 2013 does not reflect the annualized benefit of transferring $25m of corporate costs to TruGreen 4 2016 LTM Free Cash Flow excludes the impact of $90m in payments on fumigation related matters, net of $35m taxes

Consistent Financial PerformanceRevenue ($millions)

$2,214$2,293

$2,457 $2,594 $2,714

2012 2013 2014 2015 2016 LTM

’12-’15 CAGR = 5%

Adj. EBITDA¹ ($millions)

$438$475

$557 $622 $646

20% 21% 23% 24% 24%

2012 2013 2014 2015 2016 LTM

Ad

j. E

BIT

DA

Ma

rgin

¹

’12-’15 CAGR = 12 %

Free Cash Flow2,4

$100

$169

$274$358 $3234

24%

38%

49%58%

50%

2012 2013 2014 2015 2016 LTM

% o

f A

dj. E

BIT

DA

Net Debt / Adj. EBITDA3 ($millions)

8.7x 7.8x

5.0x 4.2x 4.1x

2012 2013 2014 2015 2016 LTM

10

Well-positioned for continued robust cash flow generation

Confidential

Transaction Overview

Financial Review



11

Appendix

Confidential

1 LTM through period ending 9/30/16

Residential Termite

34%

Residential Pest41%

Commercial Pest17%

Commercial Termite 3%

Other5%

Revenue1: $1.5b

2010 – LTM 9/30/16 CAGR: 4.8%

Customer-Level Revenue1: $1.8b

Adjusted EBITDA1: $374m

Adjusted EBITDA margin1: 24.7%

Revenue By Service Type1

Terminix Overview

Leading provider of extermination services in the U.S.

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: branch, scale, expertise, etc.

Positioned for growth: core and new services

12

1,0891,157 1,193

1,265 1,3091,370

1,4441,515

19% 19%21% 21% 20%

23% 24%25%

10%

15%

20%

25%

30%

0

200

400

600

800

1,000

1,200

1,400

1,600

2009 2010 2011 2012 2013 2014 2015 Q3 2016LTM

Revenue Adj. EBITDA Margin

Historical Revenue and Adjusted EBITDA Margin ($millions)

Confidential

Revenue1: $992m

2010 – LTM 9/30/16 CAGR: 7.4%



American Home Shield Overview

13

Serves 1.8m customers in 50 states; 3.7m service

requests

Significant market leadership: ~4 times larger than

largest competitors

76% customer retention rates

National network of ~11,000 pre-qualified contractors

Significant direct-to-consumer marketing and lead

generation capabilities

1LTM through period ending 9/30/16

Leading provider of home warranties in the U.S.

Historical Revenue and Adjusted EBITDA Margin

630657

687721 740

828

917

992

15% 14%

16%16%

20%

22% 22%

20%

10%

15%

20%

25%

30%

0

200

400

600

800

1,000

1,200

2009 2010 2011 2012 2013 2014 2015 Q3 2016LTM


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

Renewals66%

RE20%

DTC14%

-$50 $0 $50 $100 $150 $200 $250

Renewals

RE - 1st Year

DTC - 1st Year

($millions)

Drives stability of

financial results

Revenue By Channel1

EBITDA By Channel

1LTM through period ending 9/30/16

Revenue & Margin

Channel by Customer Count

Confidential

Franchise Services Group Overview

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

1LTM through period ending 9/30/16 2 Active licenses related to franchise agreements managed by FSG as of December 31, 2015

Market-leading residential and commercial services

Revenue By Channel1Revenue1: $205m

Customer-Level Revenue1: $2.4b

2010 – LTM 9/30/16 CLR CAGR: 2.0%



15

Historical Revenue and Adjusted EBITDA Margin ($millions)

204 211 220 221236

253232

205

35% 36%34%

32% 33%31%

33%

37%

20%

25%

30%

35%

40%

45%

50%

0

50

100

150

200

250

300

2009 2010 2011 2012 2013 2014 2015 Q3 2016LTM


Royalties58% Janitorial

National Accounts

21%

Products 8%

Owned Branches 7%Other 6%

Confidential


Financial Review



16

Appendix

Confidential

$(25) $(10)

$22

$100

$169

$274

$358 $323 4

2009 2010 2011 2012 2013 2014 2015 LTM

$1,929 $2,031 $2,105 $2,214 $2,293 $2,457 $2,594 $2,714

2009 2010 2011 2012 2013 2014 2015 LTM

$376 $379 $422 $438

$475

$557 $622 $646

19% 19% 20% 20% 21%23% 24% 24%

$-

$200

$400

$600

2009 2010 2011 2012 2013 2014 2015 LTM

History of steady growth and improving profitability

1 LTM through period ending 9/30/16; 2 Adjusted EBITDA includes the pro forma effect of $25mm of corporate expenses transferred to TruGreen in 2013 and prior years; 3 Free Cash Flow is defined in cautionary statements on page 1

($millions)

17

Revenue

Adj. EBITDA2

1

1A

dj. E

BIT

DA

Marg

in

Consistent financial performance through business cycles

Grew Adjusted EBITDA at greater than 1.8 times the rate of revenue

Strong track record of Adjusted EBITDA margin expansion

Capital light business model results in strong free cash flow generation and deleveraging

Free cash flow1,3,4

1

4 LTM Free Cash Flow excludes the impact of $90m in payments for fumigation related matters, net of $35m in taxes

Confidential

Refinancing transaction

18

On November 8, 2016, ServiceMaster refinanced its

existing Term Loan B and $300 million Revolver with:

• New $300 million Revolver: L + 250

• $1,650 million Term Loan B: L + 250

• $750 million 5.125% High Yield Notes

Benefits:

• Reduced weighed average cost of debt

• Lowered cash interest

• Diversified sources of capital

• Extended maturity tenure

• Increased fixed to floating debt ratio

• Established benchmark high yield issue

• Lowered annual debt amortization

Actual Pro forma

Cash and cash equivalents 230 230

Long-term Debt:

Old Term Loan Facility 2,356 -

Amended Term Loan Facility - 1,650

High Yield Notes - 750

Continuing notes 357 357

Vehicle capital leases 83 83

Other long-term debt 70 70

Less current portion (64) (64)

Total long-term debt 2,802 2,846

Total equity 637 607

Total capitalization 3,439 3,453

Weighted average cost of debt 4.9% 4.5%

Weighted average maturity 5.5 yrs. 7.6 yrs.

Fixed-to-floating ratio 39% 62%

As of Sept 30, 2016

1 WACD on cash interest payments assuming LIBOR of 0.75%

1

2

2 Includes $650m in interest rate swaps fixed at 4%

Confidential

19

Q3 Consolidated Financial Summary

$ millions, except per share amounts

Top-Line Growth with Resilient Margins1 Free Cash Flow is defined in cautionary statements on page 1. 2 Q3 2016 Free Cash Flow excludes the impact from $88m in payments on fumigation related matters, net of $34m in taxes. 3 Adjusted earnings per

share is calculated as adjusted net income divided by the diluted share counts of 137.1m shares and 136.8m shares for the thi rd quarter of 2016 and 2015, respectively.

Growth in AHS direct-to-

consumer and real estate

channels

Alterra acquisition

Pricing across brands

Weather driven claim costs

at AHS

ServSmart investment

Third Quarter

Var.

2016 2015 $ %

Revenue $ 758 $ 706 52 7%

Adj. EBITDA 192 174 18 10%

% of revenue 25.3% 24.6%

Adj. Net Income 81 74 7 9%

% of revenue 10.7% 10.5%

Capital expenditures 14 10 4 40%

Free cash flow1 11 36 (25) (69%)

Adjusted EPS3 0.59 0.54 0.05 9%

2

Confidential

20

2016 Full Year Outlook

2016 Revenue and Adj. EBITDA Outlook

Strong top line with AHS organic growth

~10%

OneGuard acquisition

Terminix growth middle single digits

Continued operating leverage

High customer retention; pricing 1% - 2%

Strong pipeline of tuck-in acquisition targets

Investing in growth (marketing/ServSmart)

2016 Full Year Outlook1

Revenue $2,740 - $2,750

Growth 6%

Adj. EBITDA $665 - $675

Growth 7% - 8%

Adj. EBITDA margin 24% - 25%

~ 50 bps

$ millions

1 Based solely on the press release dated October 25, 2016 furnished with ServiceMaster Global Holdings, Inc. current report on form 8-K furnished with the SEC on October 25, 2016.

(As of October 25, 2016)

Confidential

Investment Highlights

21

#1 positions in large, fragmented and growing markets

High-value service offerings resulting in high customer retention and recurring revenues

Growth driven by operational excellence and superior customer service

Experienced management team

Resilient financial model with track record of consistent performance and significant free cash flow generation

Differentiation through proprietary, adaptive technology

Confidential


Financial Review



22

Appendix

Confidential

23

Q3 and September YTD Simplified Cash Flow$ millions

Cash at Beginning of Period $ 342 $ (18) $ 296 $ (92)

Adjusted EBITDA 192 18 523 25

Change in working capital (65) (26) (36) (31)

Property additions (14) (4) (45) (15)

Interest payments (42) 14 (112) 37

Cash taxes (20) 11 (58) (20)

Payments on fumigation related matters (88) (88) (90) (90)

Other (6) (4) (12) 4

Free Cash Flow $ (43) $ (79) $ 170 $ (90)

Acquisitions (14) (2) (86) (55)

Change in restricted cash — — (95) (95)

Sales and maturities of securities — (3) 48 18

Debt repayment, net of borrowing (17) 113 (50) 338

Repurchase of common stock (36) (36) (52) (52)

Other (3) (5) (1) (1)

Cash at End of Period $ 230 $ (30) $ 230 $ (30)

Free Cash Flow / Adjusted EBITDA (22)% -43 pts 33% -20 pts

2016 B/(W) 2016 B/(W)

Third Quarter YTD Sept

Confidential

Adjusted EBITDA Reconciliation

2009 2010 2011 2012 2013 2014 2015 3Q16 LTM

Net Income (Loss) $22 ($10) $46 ($714) ($507) ($57) $160 $140

Reconciliation to Adjusted EBITDA:

(Income) Loss from discontinued operations, net of income taxes (47) (37) (53) 696 549 100 2 1

Depreciation & amortization expense 127 130 121 100 99 100 85 86

401(k) Plan corrective contribution - - - - - - 23 24

Fumigation related matters - - - - - - 9 101

Insurance reserve adjustment - - - - - - - 23

Non-cash stock-based compensation expense 8 9 8 7 4 8 10 13

Management and consulting fees 8 8 8 7 7 4 - -

Consulting agreement termination fees - - - - - 21 - -

Non-cash asset impairment of property and equipment - - - 9 - - - -

Non-cash impairment of software and other related costs - - - - - 47 - 1

Non-cash impairment of trade name and goodwill 5 - - - - - - -

Restructuring charges 18 5 7 15 6 11 5 14

(Benefit) Provision for income taxes (30) (32) (6) (8) 43 40 107 92

Interest expense 293 280 266 245 247 219 167 154

Loss on extinguishment of debt (52) - - 55 - 65 58 -

Gain on sale of Merry Maids branches - - - - - (1) (7) (4)

Other Non-operating expenses (1) 1 - 1 2 - 3 -

Total Adjustments 329 364 351 1,127 957 613 462 506

Adjusted EBITDA $351 $354 $397 $413 $450 $557 $622 $646

24

Note: Adjusted EBITDA through 2013 does not reflect the annualized benefit of transferring $25m of corporate costs to TruGreen

Confidential

Free Cash Flow Reconciliation

25

Note: Financials through 2013 do not reflect the annualized benefit of transferring $25m of corporate costs to TruGreen 1 As a result of the early adoption certain Accounting Standards Updates 2016-09 and 2016-15, $13 million of excess tax

benefits for 2015 were retrospectively presented as an operating activity, and $49 million and $35 million of call premium paid on ret irement of debt for 2015 and 2014, respectively, were retrospectively presented as a financing activity22016 LTM Free Cash Flow includes the impact of $90m in payments on fumigation related matters

2009 2010 2011 2012 2013 2014 2015 2016 LTM

Net Cash (Used for) Provided from Operating Activities from Continuing Operations1 $2 $38 $74 $144 $208 $289 $398 $323

Reconciliation to Free Cash Flow:

Cash paid for consulting agreement termination fees - - - - - 21 - -

Property additions (27) (48) (52) (44) (39) (35) (40) (55)

Free Cash Flow ($25) ($10) $22 $100 $169 $274 $358 $2682

Confidential

26

Q3 Adjusted EBITDA and Adjusted Net Income Reconciliations

$ millions, except per share data

Terminix $ 92 $ 82

American Home Shield 79 74

Franchise Services Group 21 20

Corporate — (1)

Adjusted EBITDA $ 192 $ 174

Depreciation and amortization expense (24) (18)

Fumigation related matters (1) —

Non-cash stock-based compensation expense (3) (3)

Restructuring charges (8) (2)

Gain on sale of Merry Maids branches — 3

Loss from discontinued operations, net of income taxes — (1)

Provision for income taxes (46) (32)

Loss on extinguishment of debt — (31)

Interest expense (39) (41)

Net Income $ 70 $ 49

Amortization expense 8 7

Fumigation related matters 1 —

Restructuring charges 8 2

Gain on sale of Merry Maids branches — (3)

Loss from discontinued operations, net of income taxes — 1

Loss on extinguishment of debt — 31

Tax impact of adjustments (7) (14)

Adjusted Net Income $ 81 $ 74

Weighted-average diluted common shares outstanding 137.1 136.8

Adjusted Earnings Per Share $ 0.59 $ 0.54

Third Quarter

2016 2015

Confidential

27

Q3 and September YTD Cash Flow

Net Income $ 70 $ 49 $ 124 $ 144

Depreciation and amortization expense 24 18 68 66

Fumigation related matters 1 — 92 —

Payments on fumigation related matters (88) — (90) —

Insurance reserve adjustment — — 23 —

Loss on extinguishment of debt — 31 — 58

Working capital (65) (39) (36) (5)

Other 29 (13) 34 27

Net Cash (Used for) Provided from Operating

Activities $ (29) $ 47 $ 215 $ 290

Property additions (14) (10) (45) (30)

Free Cash Flow $ (43) $ 36 $ 170 $ 260

2016 2015

Third Quarter YTD September

2016 2015$ millions

Documents

ServiceMasterinvestors.servicemaster.com/sites/servicemaster.investorhq... · 1 Confidential Cautionary Statements Safe Harbor Statement This presentation contains “forward-looking