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ServiceMaster
Q1 2018 Non Deal Roadshow Presentation
March 5 - 16, 2018
1
Cautionary Statements
Safe Harbor Statement
This presentation contains “forward-looking statements,” including 2018 revenue and Adjusted EBITDA outlook, organic revenue growth projections, as well as
statements with respect to the potential separation of AHS from ServiceMaster and the distribution of AHS shares to ServiceMaster shareholders, 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, 2017 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 l iquidity 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, taxation,
the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.
2
ServiceMaster At A Glance
$2.9B Revenue
$678M Adjusted
EBITDA
8 years Consecutive
Revenue &
Adjusted EBITDA
Growth
23% Adjusted
EBITDA
Margin
Selected 2017 Financial Data
ServiceMaster helps make the homeowner’s life
easier every step of the way. Our extensive portfolio of
home and commercial services include cleaning,
disaster restoration, home warranties, furniture and
cabinet restoration, inspections, mold remediation,
pest control and fire and water damage restoration.
Our unmatched network of trusted employees,
technicians, contractors and franchisees reach into
more than 75,000 homes and businesses each day.
3
2017 Investment Highlights
1See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
2Adjusted earnings per share (EPS) is calculated as adjusted net income divided by the diluted share counts of 135.4M shares and 137.3M shares for full-year 2017 and 2016, respectively.
4
$80
$100
$120
$140
$160
$180
$200
$220
$240
$260
$280
$300
$320
6/2
6/2
01
4
12/3
1/2
01
4
12/3
1/2
01
5
12/3
0/2
01
6
12/2
9/2
01
7
3/1
/20
18
SERV S&P 500 Index S&P 400 Consumer Service Index
Delivering Significant Returns To Shareholders
182%
Data From: June 26, 2014 – March 1, 2018
54%
48%
S & P 400 Consumer
Services Index
S & P 500 Index
We continue to outperform the major indices
Scale
: June 2
6,
2014 p
rices =
$100
5
Tax-Free American Home Shield Spin
6
Source: Specialty Consultants, LLC, NPMA, National Association of Realtors, SEC filings and management estimates based on industry data; 1 As measured on 12/31/2016 customer-level revenue basis. Rollins customer-level revenue derived from company filings and management estimates; 2As derived from Pest Control Technology (PCT) Magazine’s top 100 list published in 2017.
3Derived from 12/31/2016 results, adjusted to include annualized impact of Landmark and One Guard acquisitions.
Terminix
21%1
Rollins
19%1
Others
(~20,000)
47%
U.S. Market: ~$8B U.S. Market: ~$2B
AHS
46%3
First American
11%
Old Republic
9%
Others
33%
Rentokil 7%2
Ecolab 5%2
Leading Positions In Large and Growing Markets
Pest & Termite
Industry
Home Warranty
IndustryOther Residential and
Commercial Services
Industries
7
Terminix Overview
2017 Revenue/CLR: $1.5B/$1.9B 2017 Adj. EBITDA: $330M 2017 Adj. EBITDA margin: 21%
Leading provider of U.S extermination services
Operate in 19 countries and 47 U.S. states
U.S. locations include ~400 company-owned and
franchise branches
Large and attractive U.S. market (~$8B)
Competitive strengths include scale and expertise
Positioned for growth in core and new services
1,309 1,370 1,444 1,524 1,541
20%
23% 24% 24%21%
10%
20%
30%
0
500
1,000
1,500
2,000
2013 2014 2015 2016 2017
Revenue ($millions) Adj. EBITDA Margin
Historical Revenue and Adj. EBITDA Margin
8
Terminix Business Transformation
Implementing disciplined, Lean Six
Sigma approach
Developing a strong commercial
business
Driving accountability
Empowering our technicians to deliver
an exceptional customer experience
Building a strong leadership team
Deliver consistently strong revenue & earnings growth
•
•
•
–
–
–
–
–
•
–
–
Developing a strong Commercial Business
10
American Home Shield Overview
2017 Revenue: $1.2B 2017 Adj. EBITDA: $260M 2017 Adj. EBITDA Margin: 23%
Leading provider of home warranties in the U.S.
Serves 2M customers in 50 states
Significant market leadership: 4x larger than
nearest competitors
75% customer retention rates
National network of ~15,000 contractors
Significant direct-to-consumer marketing and
lead generation capabilities
740 828 9171,020
1,157
20%22% 22% 22% 23%
10%
20%
30%
0
500
1,000
1,500
2013 2014 2015 2016 2017
Revenue ($millions) Adjusted EBITDA Margin
Historical Revenue and Adj. EBITDA Margin
11
Owner-Occupied Households(less home resales)
Households with HomeWarranty
67.3M
homes
without
home
warranty2.8M with
home warranty 53%
AHS
47%
Competitors
70.1M 2.8M
Home Resales Home Resales with HomeWarranty
4M homes
sold
without
home
warranty
1.5M sold
with home
warranty
32%
AHS
68%
Competitors
5.5M 1.5M
Real Estate Channel Direct-to-Consumer Channel
Significant opportunity in a large under-penetrated growing market
2016 Home Warranty Category Dynamics
12
1 Active licenses related to franchise agreements managed by FSG as of December 31, 2017
Franchise Services Group Overview
2017 Revenue/CLR: $212M/$2.6B 2017 Adj. EBITDA: $87M 2017 Adj. EBITDA Margin: 41%
Operates in 50 U.S. states and 10 countries
Over 5,000 world-wide franchises & licenses1
Strong and trusted brand
Leading market positions in all brands
Attractive value proposition to franchisees
Scale to service national accounts
236 253232
200 212
33% 31% 33%
39% 41%
20%
30%
40%
50%
0
100
200
300
2013 2014 2015 2016 2017
Revenue ($millions) Adj. EBITDA Margin
Merry Maids Branch
Dispositions
Historical Revenue and Adj. EBITDA Margin
13
169
274358 3264 338
38%
49%58%
49% 50%
2013 2014 2015 2016 2017%
of
Ad
j. E
BIT
DA
Revenue ($millions)
2,2932,457 2,594
2,746 2,912
2013 2014 2015 2016 2017
CAGR = 6.2%
Adjusted EBITDA¹ ($millions)
475557 622 667 678
21% 23% 24% 24% 23%
2013 2014 2015 2016 2017
Ad
j. E
BIT
DA
Ma
rgin
¹
CAGR = 9.3%
Free Cash Flow2,4 ($millions) Net Debt / Adjusted EBITDA3
7.8x
5.0x 4.2x 4.1x 3.7x
2013 2014 2015 2016 2017
Consistent Financial Performance
1 2013 Adjusted EBITDA and Adjusted EBITDA margin reflect the annualized benefit of transferring $25 million of corporate costs to TruGreen. 2 Free Cash Flow is defined in the appendix. 3 Adjusted EBITDA in 2013 does not reflect the annualized benefit of transferring $25 million of corporate
costs to TruGreen. 4 2016 Free Cash Flow excludes the impact of $56 million, net of tax in payments, on fumigation related matters.
14
Leverage relationships with insurance companies
Accelerate national accounts growth
Extend reach & growth beyond core areas
Extend current product offerings
Expand into adjacent markets
Increase market penetration using world-class service
Achieve world-class customer service
Expand commercial business
Execute business transformation
Strategic Growth Priorities
Appendix
16
2017 Consolidated Financial Summary
• Revenue growth of 6% driven primarily by revenue growth of 13%
at AHS and 6% at FSG
• Strong full-year Adjusted EBITDA growth of 18% at AHS and 10%
at FSG was mostly offset by an 11% decline at Terminix, primarily
due to business transformation initiatives
1See Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
($ millions, except EPS) FY 2017 FY 2016
Revenue 2,912$ 2,746$ 165$ 6%
Adjusted EBITDA1 678$ 667$ 11$ 2%
Margin 23.3% 24.3%
Adjusted Net Income1
286$ 281$ 5$ 2%
Margin 9.8% 10.2%
Adjusted EPS1,2 2.11$ 2.04$ 0.06$ 3%
Variance
2Adjusted earnings per share (EPS) is calculated as adjusted net income divided by the diluted share counts of 135.4M shares and 137.3M shares for full-year 2017 and 2016, respectively.
Full-Year 2018 Outlook1
(As of February 27, 2018)
2See Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
1 Outlook assumes AHS remains with ServiceMaster for full year and does not include potential financial impact from acquisitions or projected costs related to AHS separation targeted for Q3 2018
18
Adjusted EBITDA is defined as net income before: unallocated corporate expenses; depreciation
and amortization expense; 401(k) plan corrective contribution; fumigation related matters; insurance
reserve adjustment; management and consulting fees; consulting agreement termination fees; 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 on extinguishment of debt;
(gain) loss from discontinued operations, net of income taxes; (benefit) provision for income taxes;
interest expense; and other non-operating expenses.
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, net of
government grant fundings for property additions.
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;
(gain) loss from discontinued operations, net of income taxes; loss on extinguishment of debt; the
tax impact of the aforementioned adjustments; and the impact of the tax law changes on deferred
taxes.
Adjusted earnings per share is calculated as adjusted net income divided by the weighted-
average diluted common shares outstanding.
Non-GAAP Reconciliation Definitions
19
Adjusted EBITDA Reconciliation
Note: Adjusted EBITDA in 2013 does not reflect the annualized benefit of transferring $25m of corporate costs to TruGreen
2013 2014 2015 2016 2017
Net Income (Loss) ($507) ($57) $160 $155 $510
Reconciliation to Adjusted EBITDA:
(Income) Loss from discontinued operations, net of income taxes 549 100 2 1 -
Depreciation & amortization expense 99 100 85 94 103
401(k) Plan corrective contribution - - 23 2 (3)
Fumigation related matters - - 9 93 4
Insurance reserve adjustment - - - 23 -
Non-cash stock-based compensation expense 4 8 10 13 12
Management and consulting fees 7 4 - - -
Consulting agreement termination fees - 21 - - -
Non-cash impairment of software and other related costs - 47 - 1 2
Restructuring charges 6 11 5 17 34
(Benefit) Provision for income taxes 43 40 107 85 (139)
Interest expense 247 219 167 153 150
Loss on extinguishment of debt - 65 58 32 6
Gain on sale of Merry Maids branches - (1) (7) (2) -
Other non-operating expenses 2 - 3 - -
Total Adjustments 957 613 462 512 169
Adjusted EBITDA $450 $557 $622 $667 $678
Terminix 266 309 347 371 330
American Home Shield 145 179 205 220 260
Franchise Services Group 78 78 77 79 87
Other Operations & Headquarters (39) (9) (9) (3) 1
Adjusted EBITDA $450 $557 $622 $667 $678
20
2013 2014 2015 2016 2017
Net Cash Provided from Operating Activities from Continuing Operations1 $208 $289 $398 $325 $413
Reconciliation to Free Cash Flow:
Cash paid for consulting agreement termination fees - 21 - - -
Property additions, net of government grant fundings for property additions (39) (35) (40) (56) (75)
Free Cash Flow $169 $274 $358 $270 $338
1 As a result of the early adoption of 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 retirement of debt, net of premium received on issuance of debt for 2015, and 2014 respectively, were retrospectively presented as financing activities. 2 2016 Free Cash Flow includes the impact of $56 million, net of tax, in payments on fumigation related matters
2
Free Cash Flow Reconciliation
2017 Net Income to Adjusted EBITDA and Adjusted Net Income Reconciliations
$ millions, except per share dataNet Income $ 510 $ 155
Depreciation and amortization expense 103 94
401(k) Plan corrective contribution (3) 2
Fumigation related matters 4 93
Insurance reserve adjustment — 23
Non-cash stock-based compensation expense 12 13
Restructuring charges 34 17
Gain on sale of Merry Maids branches — (2)
Non-cash impairment of software and other related costs 2 1
(Gain) loss from discontinued operations, net of income taxes — 1
(Benefit) Provision for income taxes (139) 85
Loss on extinguishment of debt 6 32
Interest expense 150 153
Adjusted EBITDA $ 678 $ 667
Terminix $ 330 $ 371
American Home Shield 260 220
Franchise Services Group 87 79
Corporate 1 (3)
Adjusted EBITDA $ 678 $ 667
Net Income $ 510 $ 155
Amortization expense 27 33
401(k) Plan corrective contribution (3) 2
Fumigation related matters 4 93
Insurance reserve adjustment — 23
Restructuring charges 34 17
Gain on sale of Merry Maids branches — (2)
Impairment of software and other related costs 2 1
(Gain) loss from discontinued operations, net of income taxes — 1
Loss on extinguishment of debt 6 32
Tax impact of adjustments (23) (73)
Impact of tax law change on deferred taxes (271) —
Adjusted Net Income $ 286 $ 281
Weighted-average diluted common shares outstanding 135.4 137.3
Adjusted Earnings Per Share $ 2.11 $ 2.04
2017 2016
Full Year