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Second-Quarter 2020 Earnings Webcast
August 6, 2020
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Cautionary Statements
Safe Harbor Statement
This presentation contains forward-looking statements and cautionary statements, including cash flow outlook and projections,
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, 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 like 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, free
cash flow, free cash flow to Adjusted EBITDA conversion rate,ServiceMaster Brands Divestiture Group Adjusted EBITDA and free
cash flow from discontinued operations 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, net
earnings from discontinued operations, cash flow from operating activities from discontinued operations or any other performance
or liquidity 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,
acquisition activity, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based,
long-term incentive plans.
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Agenda
➢ Q2 2020 Performance HighlightsNaren Gursahaney
➢ 2020 Strategic Priorities Progress Update
Naren Gursahaney
➢ Q2 Financial Summary
Tony DiLucente
➢ Q3 2020 Guidance
Tony DiLucente
➢ Closing Remarks and Q&A
Naren Gursahaney
Naren GursahaneyChairman and Interim CEO
Tony DiLucenteChief Financial Officer
Jesse JenkinsVP Investor Relations &
Treasurer
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Q2 Performance Highlights
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Stable and Resilient Business Model Well Positioned for Uncertain 2H20
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Call Out 1
• Turnover Improved YTD
• Strong Technician Retention
• Improved Labor Productivity
• Improved Service Levels
• Aggressive Cost Reductions
• Reduced Employee Turnover
• Better Customer Retention
• Focus on High Margin Termite Services
• 7% Organic Growth
• Strong Core Termite Unit Growth
• Tiered / Monthly Pay Offering
• Mobile Bay Area Mitigation Plan on Track
Progress on All 2020 Strategic Priorities Despite Challenging Environment
Reduce EmployeeTurnover
Improve CustomerRetention
EnhanceProfit Margins
Revitalize Termite Business
190 bps Margin Expansion YoY 14% Termite Completion Growth
Residential Daily Cancels Down 15% YoYTechnician Turnover Down 8% YTD
C
a
l
l
O
u
t
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• Daily Cancel Rate Improvement
• Commercial Pest Retention Negatively
Impacted by COVID-19 and Profitability
Focus
• Net Promoter Scores Remain High
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1See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
Q2 Continuing Ops Consolidated Financial Summary
($ millions) Q2 2020 Q2 2019
Revenue:
Terminix 517$ 495$
European Pest Control and Other 17$ —
Revenue from Continuing Operations 534$ 494$ 40$ 8%
Adjusted EBITDA1:
Terminix 120$ 106$
European Pest Control and Other 2 1
Costs historically allocated to SMB (3) (3)
Adjusted EBITDA from Continuing Operations 119$ 104$ 15$ 15%
Margin 22.4% 21.1%
Adjusted Net Income1
53$ 48$ 4$ 9%
Margin 9.9% 9.8%
Adjusted EPS1 0.40$ 0.35$ 0.05$ 13%
Variance
✓ Terminix - see slides 7 & 8
✓ European Pest Operations and Other
• Revenue impacted by COVID-19 related commercial customer shutdowns
• Adjusted EBITDA:
• $2M Nomor (Sweden & Norway) – mid teens margin
• Terminix UK negatively impacted by COVID-19 and integration/carve-out spending
✓ Continuing Operations EBITDA included $3M in costs historically allocated to SMB
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Terminix Q2 Revenue Growth by Channel
Strong Organic Residential Growth of 3%, Improving Commercial
7%
$183$196
$84$84
$99$112
Termite
Renewals
Termite
& Home
Services
Completions
2%
0%
29%14%
0%
Q2 2020
Growth
Organic 7%
M&A 1%
Total 7%
Q2 2020
Growth
Organic -1%
M&A 1%
Total 0%
Q2 2020
Growth
Organic -9%
M&A 11%
Total 2%
Total Q2 2020
Growth
Organic 0%
M&A 5%
Total 5%
Q2 2020
Growth
Organic -9%
M&A 38%
Total 29%
$ millions
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Terminix Q2 Financial Results
1See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
($ millions) Q2 2020 Q2 2019
Residential Pest 182$ 182$ — 0%
Commercial Pest 107$ 105$ 2$ 2%
Termite & Home Services 196$ 183$ 13$ 7%
All Other 32$ 25$ 7$ 29%
Revenue 517$ 495$ 22$ 5%
Gross Profit 231$ 217$ 14$ 6%
Margin 44.7% 43.9%
Adjusted EBITDA1
120$ 106$ 15$ 14%
Margin 23.3% 21.4%
Variance
Adjusted EBITDA ($M)
Direct ~$11M
Indirect /SG&A ~$ 7M
Total Productivity $18M
$2M
Mitigation
Cost
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Q2 Simplified Free Cash Flow
1Disc Ops represents financial information for the ServiceMaster Brands Divestiture Group which is included in discontinued
operations. 2 Free Cash Flow and continuing operations and discontinued operations Adjusted EBITDA reconciliations provided in
the appendix of this presentation.
➢ Working capital benefits from payroll tax deferral
➢ $20M cash tax benefit from 2015 net operating loss refund
➢ Expected 2020 full-year free cash flow conversion of approximately 60%
Strong Free Cash Flow Conversion and Net Leverage Reduction
Cont'
Ops
Disc
Ops1 Total
Cont'
Ops
Disc
Ops1 Total
Opening Cash 185 280
Adj. EBITDA 119 24 143 179 47 226
Working Capital 21 (1) 20 26 (9) 17
CapEx (5) (1) (6) (15) (1) (16)
Cash Interest (26) — (26) (42) — (42)
Cash Taxes 16 — 16 15 — 15
Other (14) (7) (20) (7) (10) (16)
Free Cash Flow2112 17 127 157 26 183
FCF Conversion 94% 71% 89% 88% 56% 81%
M&A 2 (24)
Debt Payments (15) (40)
Share Repurchase — (103)
Other 2 7
Cash Flow 116 22
Ending Cash Balance 302 302
Net Debt Leverage Ratio 3.6x
Q2 2020 YTD 2020$ millions
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Third-Quarter 2020 Continuing Operations Outlook
11See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
Revenue
Approximately $20M from TMX acquisitions
$16M-$18M from European pest
Improving commercial trends
Residential impact from loss of summer
sales units and bed bug
Adjusted EBITDA
Improving acquisition and
European pest margins
Terminix margin expansion
Higher termite damage claims expense
$3M cost historically allocated
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ServiceMaster Brands Divestiture GroupQ2 Financial Results & Q3 Outlook
1See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
➢ ServiceMaster Restore - Disaster Restoration
• Minimal COVID-19 impact
• Absorbing impact of mild winter and reduction in area-wide events
➢ ServiceMaster Clean - Commercial Cleaning and National Accounts
• Solid performance and demand for recurring enhanced cleaning and sanitization services
• Strong growth in national accounts customers
➢ Merry Maids - Residential Cleaning
• Initial significant impact from COVID-19
• Significant improvement in May and June and trending back to normal
($ millions) Q2 2020 Q2 2019
Customer Level Revenue 616$ 690$ (74)$ (11)%
Revenue 63$ 66$ (2)$ (4)%
Gross Profit 33$ 39$ (6)$ (16)%
Margin 51.4% 58.9%
Adjusted EBITDA1
24$ 27$ (3)$ (11)%
Margin 37.2% 40.4%
Variance3Q20 Outlook Range
(millions $) Low High
Revenue $63 $68
Growth Rate 0% 8%
Adj. EBITDA $23 $27
Margin % 37% 40%
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Closing comments and Q&A
➢ Meaningful Progress on the ServiceMaster Brands Strategic Review
• Improving credit and equity markets will support renewed SMB process
➢ Ample liquidity, resilient profit dynamics and strong growth profile bolstered
by recent cost actions position the company well to manage through an
uncertain second half
We Serve We DeliverWe Care
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Appendix
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Non-GAAP Reconciliation Definitions
Adjusted EBITDA is defined as net income before: depreciation and amortization
expense; acquisition-related costs; fumigation related matters; non-cash stock-based
compensation expense; restructuring and other charges; realized (gain) on investment in
frontdoor, inc.; net earnings from discontinued operations; provision for income taxes; loss
on extinguishment of debt; and interest expense.
Adjusted net income is defined as net income before: amortization expense; acquisition-
related costs; fumigation related matters; restructuring and other charges; realized (gain)
on investment in frontdoor, inc.; net earnings from discontinued operations; 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; less property additions.
Free Cash Flow Conversion is defined as free cash flow divided by Adjusted EBITDA.
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Q2 YTD 2020 Simplified Cash Flow
Cash Beginning Balance $ 368 $ 313 $ 55
Free Cash Flow $ 157 $ 111 $ 46
Free Cash Flow / Adjusted EBITDA 88% 59% 2844 bps
Acquisitions (24) (115) 90
Borrowings, net of debt payments (40) (24) (16)
Share repurchases (103) (17) (87)
Issuance of common stock 3 9 (6)
Other 2 8 (7)
Discontinued operations 28 30 (3)
Cash Flow 22 3 19
Cash Ending Balance $ 391 $ 316 $ 74
Adjusted EBITDA 179 187 (8)
YTD
2020 2019 B/(W) PY
$ millions
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Q2 2020 Consolidated Results
$ millions, except per share data
1See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
2020 2019 B/(W)
Revenue $ 534 $ 494 $ 40
YoY Growth 8%
Gross Margin 237 218 18
% of revenue 44.3% 44.1% 0.2 pts
Selling and administrative expenses (143) (138) (4)
% of revenue 26.7% 28.0% 1.3 pts
Amortization expense (9) (5) (4)
Acquisition-related costs — (3) 3
Fumigation related matters — 1 (1)
Restructuring and other charges (8) (2) (6)
Interest expense (22) (18) (3)
Interest and net investment income 1 3 (2)
Income from Continuing Operations before Income Taxes 57 56 1
Provision for income taxes 18 14 3
Equity in earnings of joint venture 1 — 1
Income from Continuing Operations 40 42 (2)
Net earnings from discontinued operations 13 17 (4)
Net Income $ 53 $ 59 $ (6)
Weighted-average diluted common shares outstanding 132.0 136.5
Diluted Earnings Per Share $ 0.40 $ 0.43 $ (0.03)
Adjusted Net Income1 $ 53 $ 48 $ 4
Adjusted EBITDA1 $ 119 $ 104 $ 15
Adjusted Earnings Per Share1 $ 0.40 $ 0.35 $ 0.05
Second Quarter
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2020 Free Cash Flow
$ millions
Net Income $ 53 $ 59 $ 67 $ 129
Depreciation and amortization expense 27 22 55 45
Working capital, excluding impact of accrued interest and taxes 21 4 26 (1)
Fumigation related matters, net of payments — (2) — (2)
Loss on extinguishment of debt — — — 6
Working capital impact of accrued interest and taxes 30 (5) 36 6
Deferred income tax provision (1) 5 — 8
Stock-based compensation expense 5 4 10 8
Restructuring and other charges, net of payments 3 (2) 6 (1)
Acquisition-related costs, net of payments (1) 1 (3) 1
Realized (gain) on investment in frontdoor, inc. — — — (40)
Net earnings from discontinued operations (13) (17) (26) (34)
Other non-cash expenditure add-backs (7) (18) 1 —
Net Cash Provided from Operating Activities $ 117 $ 51 $ 172 $ 124
Property additions (5) (4) (15) (13)
Free Cash Flow $ 112 $ 47 $ 157 $ 111
Free Cash Flow Conversion 94% 45% 88% 59%
2020 2019
Second Quarter June YTD
2020 2019
1See Appendix for Non-GAAP Reconciliations and Non-GAAP Reconciliation Definitions.
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Q2 Net Income to Adjusted EBITDA and Adjusted Net Income Reconciliations
Net Income $ 53 $ 59
Depreciation and amortization expense 27 22
Acquisition related costs — 3
Fumigation related matters — (1)
Non-cash stock-based compensation expense 5 4
Restructuring and other charges 8 2
Net earnings from discontinued operations (13) (17)
Provision for income taxes 18 14
Interest expense 22 18
Adjusted EBITDA $ 119 $ 104
Terminix $ 120 $ 106
European Pest Control and Other 2 1
Costs historically allocated to ServiceMaster Brands (3) (3)
Adjusted EBITDA $ 119 $ 104
Net Income $ 53 $ 59
Amortization expense 9 5
Acquisition related costs — 3
Fumigation related matters — (1)
Restructuring and other charges 8 2
Net earnings from discontinued operations (13) (17)
Tax impact of adjustments (4) (2) Adjusted Net Income $ 53 $ 48
Weighted-average diluted common shares outstanding 132.0 136.5
Adjusted Earnings Per Share $ 0.40 $ 0.35
Second quarter
2020 2019
$ millions, except per share data
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Q2 Discontinued Operations Reconciliations
1Net earnings from discontinued operations per the statement of operations is the closest GAAP measure to ServiceMaster Brands Divestiture Group Adjusted
EBITDA. ServiceMaster Brands Divestiture Group Adjusted EBITDA is defined as Net earnings from discontinued operations less the following expenses directly
attributable to the ServiceMaster Brands Divestiture Group and recorded in discontinued operations: depreciation and amortization expense; non-cash stock based
compensation expense; restructuring and other charges; and provision for income taxes.
Net Earnings from Discontinued Operations $ 13 $ 17 $ 26 $ 34
Depreciation and amortization expense — 2 1 4
Non-cash stock-based compensation expense 1 — 1 1
Restructuring and other charges 5 1 9 2
Provision for income taxes 5 7 9 12
ServiceMaster Brands Divestiture Group Adjusted EBITDA $ 24 $ 27 $ 47 $ 53
Net Earnings from Discontinued Operations $ 13 $ 17 $ 26 $ 34
Depreciation and amortization expense — 2 1 4
Non-cash stock based compensation expense 1 — 1 1
Restructuring and other charges, net of payments 4 (1) 8 —
Working capital (1) (3) (9) (7)
Other — — 1 —
Cash Provided from Operating Activities from Discontinued Operations $ 17 $ 16 $ 27 $ 32
Property additions (1) (1) (1) (2)
Free Cash Flow from Discontinued Operations $ 16 $ 15 $ 26 $ 30
Q2 YTD
2020 2019
Second quarter
2020 2019
Second quarter
2020 2019
Q2 YTD
2020 2019
$ millions
