Form 8-K TERMINIX GLOBAL HOLDINGS For: May 06

Jerome Powell

Exhibit 99.1



For further information contact:

Investor Relations:

Jesse Jenkins

901.597.8259

[email protected]terminix.com

 

Media:

James Robinson

901.597.7521

[email protected]terminix.com

 

Terminix Reports First-Quarter 2021 Revenue Growth of Three Percent,

Net Income Growth of 92 Percent and Adjusted EBITDA Growth of 50 Percent



·

Delivered net income of $27 million with a margin of 5.7%, up 260 basis points

·

Achieved Adjusted EBITDA of $90 million with a margin of 19.0%, up 590 basis points

·

Repurchased 3.5 million shares at an average price of $48.12 per share for $169 million

·

Raised Full-Year 2021 Adjusted EBITDA outlook to between $380 and $390 million   



MEMPHIS, TENN. — May 6, 2021 —Terminix Global Holdings, Inc. (NYSE: TMX), a leading provider of essential termite and pest management services to residential and commercial customers, today announced unaudited first-quarter 2021 results.

For the first quarter of 2021, the Company reported a year-over-year revenue increase of three percent to $471 million. Net income increased year-over-year by $13 million, or 92 percent, to $27 million, or $0.20 per share. Adjusted EBITDA(1) for the quarter increased year-over-year by $30 million, or 50 percent, to $90 million, and Adjusted Net Income(2) increased by $28 million to $40 million, or $0.30 per share. 

“Solid revenue growth across our major service lines and continued improvements in profitability highlighted a strong start to 2021,” said Terminix CEO Brett Ponton. “Improvements in customer retention, pricing realization and strong unit growth in our termite business were key to the strong revenue performance. Margin expansion was driven by profitable revenue growth, improved direct cost productivity, as well as benefits from initiatives to simplify our back-office structure as a more focused pest management company.”

“Looking ahead, we are excited about the launch of the Terminix Way initiative and the roll-out of our customer experience platform, or CXP,” Ponton continued. “The Terminix Way initiative will enhance standard operating procedures, develop robust training curriculums, and more clearly define career paths for our teammates, while CXP will improve our marketing capabilities and service delivery through an easy-to-use, best-in-class operating system. We remain focused on driving growth and profitability while launching these platforms that will enhance the teammate experience and improve our customer acquisition and retention capabilities. Our work over the course of this year to develop these platforms will lay the foundation needed to drive greater consistency across the business and position us to become the preferred pest management provider in the eyes of our customers, our teammates and the communities we serve.”


 

Consolidated Performance













 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended March 31,

 

$ millions

 

2021

 

2020

 

B/(W)

 

Revenue

 

$

471 

 

 

$

456 

 

 

$

16 

 

 

YoY growth

 

 

 

 

 

 

 

 

 

 

%

 

Gross Margin

 

 

202 

 

 

 

177 

 

 

 

25 

 

 

% of revenue

 

 

42.8 

%

 

 

38.8 

%

 

 

4.0 

pts

 

SG&A

 

 

137 

 

 

 

140 

 

 

 

(4)

 

 

% of revenue

 

 

(29.0)

%

 

 

(30.8)

%

 

 

1.8 

pts

 

Income (Loss) from Continuing Operations before Income Taxes

 

 

37 

 

 

 

(1)

 

 

 

38 

 

 

% of revenue

 

 

7.8 

%

 

 

(0.2)

%

 

 

8.0 

pts

 

Net Income

 

 

27 

 

 

 

14 

 

 

 

13 

 

 

% of revenue

 

 

5.7 

%

 

 

3.1 

%

 

 

2.6 

pts

 

Adjusted Net Income(2)

 

 

40 

 

 

 

11 

 

 

 

28 

 

 

% of revenue

 

 

8.4 

%

 

 

2.5 

%

 

 

5.9 

pts

 

Adjusted EBITDA(1)

 

 

90 

 

 

 

60 

 

 

 

30 

 

 

% of revenue

 

 

19.0 

%

 

 

13.1 

%

 

 

5.9 

pts

 

Net Cash Provided from Operating Activities from Continuing Operations 

 

 

75 

 

 

 

55 

 

 

 

20 

 

 

Free Cash Flow(3)

 

 

69 

 

 

 

45 

 

 

 

23 

 

 



Reconciliations of net income to Adjusted Net Income and Adjusted EBITDA, as well as a reconciliation of Net Cash Provided from Operating Activities from Continuing Operations to Free Cash Flow, are set forth below in this press release. 

First-Quarter Performance

Revenue





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

March 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In millions)

 

2021

 

2020

 

Growth

 

Organic

 

Acquired

Residential Pest Management

 

$

166 

 

$

159 

 

$

 

%

 

$

 

%

 

$

 

 —

%

Commercial Pest Management

 

 

129 

 

 

124 

 

 

 

%

 

 

 

%

 

 

 

%

Termite and Home Services

 

 

162 

 

 

155 

 

 

 

%

 

 

 

%

 

 

 —

 

 —

%

Sales of Products and Other

 

 

15 

 

 

18 

 

 

(3)

 

(16)

%

 

 

(3)

 

(16)

%

 

 

 —

 

 —

%

Total revenue

 

$

471 

 

$

456 

 

$

16 

 

%

 

$

14 

 

%

 

$

 

 —

%

Revenue increased three percent over the prior year, including approximately half of a percent from favorable foreign currency fluctuations. Residential pest management organic revenue growth(5) was driven by an improvement in customer retention and improved price realization, offset, in part, by the year-over-year impact of lower summer sales in 2020 due to COVID-19. Commercial pest management organic revenue growth of three percent was driven primarily by double-digit international growth. Foreign currency fluctuations contributed approximately $3 million, or two percent, of the commercial pest management organic revenue growth. Termite and Home Services revenue increased four percent organically. Termite completions increased 11 percent, driven by sales of our monthly pay tiered termite product, and home services increased 14 percent, primarily as a result of improved cross selling to existing customers. Termite renewals decreased two percent, primarily due to an approximately $5 million impact from the change in the timing of revenue recognition in our monthly subscription-based termite offering. Sales of products and other declined 16 percent, driven by tighter inventory management by larger distributors and longer transit times on shipment of products to customers in response to COVID-19.

Adjusted EBITDA

Adjusted EBITDA was $90 million for the first quarter, a year-over-year increase of $30 million. The impact on Adjusted EBITDA from higher revenue was $7 million. Direct costs, including labor, materials and fleet costs, were $12 million lower year-over-year. Back-office simplification contributed $3 million, while travel expenses were $4 million lower. Additionally, $4 million in insurance reserve adjustment benefits were the result of lower workers’ compensation, auto and general liability claims year-over-year. These gains were partially offset by higher termite damage claims expense, up $2 million year-over-year, primarily driven by higher cost per non-litigated claim due to inflationary pressures on building materials and contractor costs.   

Liquidity and Free Cash Flow

The Company ended the first quarter with $484 million in available cash and access to $378 million under its revolving credit facility for total liquidity of $862 million. The Company purchased 3,514,693 shares in the quarter at an average price of $48.12 per share


 

totaling $169 million. The Company completed four tuck-in acquisitions in the quarter for $22 million. Year-to-date free cash flow was $69 million, with a free cash flow to Adjusted EBITDA conversion rate(4) of 77 percent.

Full-Year 2021 Outlook



 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

(In millions)

 

Low

 

High

Revenue

 

$

2,025 

 

 

$

2,050 

 

Growth Rate

 

 

3% 

 

 

 

4% 

 

Adjusted EBITDA

 

$

380 

 

 

$

390 

 

Margin

 

 

18.8% 

 

 

 

19.0% 

 



For the full-year 2021, organic revenue growth is expected across all service lines. Residential pest is expected to accelerate due to pricing realization and the lapping of lower summer sales units in 2020 due to COVID-19. Commercial pest is expected to increase the pace of organic growth as the economy continues to reopen. Termite and home services is expected to continue to grow despite an approximately $5 million impact in the second quarter the timing impact of revenue recognized for our monthly subscription-based termite offering.

The Company has increased its outlook for Adjusted EBITDA to between $380 and $390 million up from $365 to $380 million previously provided. This increase incorporates the partial flow-through of first-quarter favorability, expected teammate retention pressure from tighter labor markets, reduced termite damage claims expense, increased travel and investments in key operational capabilities.

The timing and frequency of new termite damage claims litigated case filings are difficult to predict. This guidance represents the Company’s best estimate of litigated case filings, but actual pace and volume could differ.

A reconciliation of the forward looking full-year 2021 Adjusted EBITDA outlook to net income is not being provided, as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.

First-Quarter 2021 Earnings Conference Call

The Company will hold a conference call to discuss its financial and operating results at 8 a.m. central time (9 a.m. eastern time) on Thursday, May 6, 2021.

The Company invites all interested parties to join Chief Executive Officer Brett Ponton, Executive Vice President and Chief Financial Officer Bob Riesbeck, and Vice President of Investor Relations, FP&A and Treasurer Jesse Jenkins for an update on the Company’s operational performance and financial results for the first quarter ended March 31, 2021. Participants may join this conference call by dialing 800.954.0656 (or international participants, +1.212.231.2905). Additionally, the conference call will be available via webcast. A slide presentation highlighting the Company’s results will also be available. To participate via webcast and view the presentation, visit the Company’s new investor relations home page at investors.terminix.com.

The call will be available for replay until June 5, 2021. To access the replay of this call, please call 800.633.8284 and enter reservation number 21993506 (international participants: +1.402.977.9140, reservation number 21993506). The webcast will also be available on the company’s investor relations home page.



About Terminix

Terminix Global Holdings (NYSE: TMX) is a leading provider of residential and commercial pest management. The Company provides pest management services and protection against termites, mosquitoes, rodents and other pests. Headquartered in Memphis, Tenn., with more than 11,400 teammates and 2.9 million customers in 24 countries and territories, the Company visits more than 50,000 homes and businesses every day. To learn more about Terminix, visit Terminix.com, or LinkedIn.com/company/terminix.

Information Regarding Forward-Looking Statements

This press release contains forward-looking statements and cautionary statements. Forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including, without limitation, the risks and uncertainties discussed in the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections in the Company’s reports filed with the U.S. Securities and Exchange Commission. Such risks, uncertainties and changes in circumstances include, but are not limited to: the impact of reserves attributable to pending Litigated and Non-Litigated Claims for termite damages; future termite damage claim expenses above historical norms remaining within the ringfence estimate; implementation of Mobile Bay Formosan termite settlement remediation measures; the mitigating impact of the Mobile Bay Formosan termite settlement on future litigated termite damage claims; the impact of COVID-19 on our operations; lawsuits, enforcement actions and other claims by first parties or governmental authorities; compliance with, or violation of environmental health and safety laws and regulations; weakening general economic conditions; weather conditions and seasonality; the success of our business strategies, and costs associated with restructuring initiatives. We caution you that forward-looking statements are not guarantees of future performance or outcomes and


 

that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this press release. The Company assumes no obligation to update the information contained herein, which speaks only as of the date hereof.

Non-GAAP Financial Measures

This press release 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 press release 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 and organic revenue growth 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 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, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

_______________________________________________

(1) Adjusted EBITDA is defined as net income before: depreciation and amortization expense; acquisition-related costs; non-cash stock-based compensation expense; restructuring and other charges; net earnings from discontinued operations; provision (benefit) for income taxes; and interest expense. The Company’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

(2) Adjusted Net Income is defined as net income before: amortization expense; acquisition-related costs; restructuring and other charges; net earnings from discontinued operations; and the tax impact of the aforementioned adjustments. The Company’s definition of Adjusted Net Income may not be comparable to similarly titled measures of other companies. Adjusted earnings per share is calculated as Adjusted Net Income divided by the weighted-average diluted common shares outstanding.

(3) Free cash flow is defined as net cash provided from operating activities from continuing operations less property additions.

(4) Free cash flow to Adjusted EBITDA conversion rate is defined as free cash flow divided by Adjusted EBITDA.

(5) Organic revenue growth is defined as revenue excluding revenue from acquired customers for 12 months following the acquisition date.










 

TERMINIX GLOBAL HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income 

(In millions, except per share data)





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2021

 

2020

Revenue 

 

$

471 

 

$

456 

Cost of services rendered and products sold

 

 

270 

 

 

279 

Selling and administrative expenses

 

 

137 

 

 

140 

Amortization expense

 

 

10 

 

 

Acquisition-related costs

 

 

 

 

Restructuring and other charges

 

 

 

 

Interest expense

 

 

12 

 

 

23 

Interest and net investment income

 

 

(1)

 

 

 —

Income (Loss) from Continuing Operations before Income Taxes 

 

 

37 

 

 

(1)

Provision (benefit) for income taxes

 

 

11 

 

 

(2)

Income from Continuing Operations 

 

 

27 

 

 

Net earnings from discontinued operations

 

 

 —

 

 

13 

Net Income

 

$

27 

 

$

14 

Total Comprehensive Income (Loss)

 

$

49 

 

$

(36)

Weighted-average common shares outstanding – Basic

 

 

131.4 

 

 

134.9 

Weighted-average common shares outstanding – Diluted

 

 

131.9 

 

 

135.1 

Basic Earnings Per Share:

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.20 

 

$

0.01 

Net earnings from discontinued operations

 

 

0.00 

 

 

0.09 

Net Income

 

 

0.20 

 

 

0.10 

Diluted Earnings Per Share:

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.20 

 

$

0.01 

Net earnings from discontinued operations

 

 

0.00 

 

 

0.09 

Net Income

 

 

0.20 

 

 

0.10 



 


 

TERMINIX GLOBAL HOLDINGS, INC.

Consolidated Statements of Financial Position

(In millions, except share data)





 

 

 

 

 

 



 

 

 

 

 

 



 

As of

 

As of



 

March 31,

 

December 31,



 

2021

 

2020

Assets:

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

484 

 

$

615 

Receivables, less allowances of $24 and $25, respectively

 

 

182 

 

 

206 

Inventories

 

 

50 

 

 

44 

Prepaid expenses and other assets

 

 

167 

 

 

145 

Total Current Assets

 

 

882 

 

 

1,010 

Other Assets:

 

 

 

 

 

 

Property and equipment, net

 

 

172 

 

 

182 

Operating lease right-of-use assets

 

 

79 

 

 

80 

Goodwill

 

 

2,153 

 

 

2,146 

Intangible assets, primarily trade names, service marks and trademarks, net

 

 

1,102 

 

 

1,111 

Restricted cash

 

 

89 

 

 

89 

Notes receivable

 

 

31 

 

 

31 

Long-term marketable securities

 

 

14 

 

 

14 

Deferred customer acquisition costs

 

 

90 

 

 

98 

Other assets

 

 

76 

 

 

75 

Total Assets 

 

$

4,687 

 

$

4,837 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

96 

 

$

91 

Accrued liabilities:

 

 

 

 

 

 

Payroll and related expenses

 

 

81 

 

 

102 

Self-insured claims and related expenses

 

 

71 

 

 

76 

Accrued interest payable

 

 

 

 

Other

 

 

108 

 

 

99 

Deferred revenue

 

 

108 

 

 

102 

Current portion of lease liability

 

 

17 

 

 

17 

Current portion of long-term debt

 

 

91 

 

 

94 

Total Current Liabilities

 

 

575 

 

 

588 

Long-Term Debt 

 

 

823 

 

 

826 

Other Long-Term Liabilities:

 

 

 

 

 

 

Deferred taxes

 

 

356 

 

 

346 

Other long-term obligations, primarily self-insured claims

 

 

207 

 

 

239 

Long-term lease liability

 

 

94 

 

 

96 

Total Other Long-Term Liabilities

 

 

657 

 

 

681 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

Common stock $0.01 par value (authorized 2,000,000,000 shares with 148,712,839 shares issued and 128,865,530 outstanding at March 31, 2021 and 148,400,384 shares issued and 132,080,845 shares outstanding at December 31, 2020)

 

 

 

 

Additional paid-in capital

 

 

2,370 

 

 

2,359 

Retained Earnings

 

 

868 

 

 

841 

Accumulated other comprehensive loss

 

 

(17)

 

 

(39)

Less common stock held in treasury, at cost (19,847,309 shares at March 31, 2021 and 16,319,539 shares at December 31, 2020)

 

 

(592)

 

 

(423)

Total Stockholders’ Equity

 

 

2,631 

 

 

2,741 

Total Liabilities and Stockholders’ Equity 

 

$

4,687 

 

$

4,837 




 

TERMINIX GLOBAL HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In millions) 





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

2021

 

2020

Cash and Cash Equivalents and Restricted Cash at Beginning of Period 

 

$

704 

 

$

368 

Cash Flows from Operating Activities from Continuing Operations:

 

 

 

 

 

 

Net Income

 

 

27 

 

 

14 

Adjustments to reconcile net income to net cash provided from operating activities:

 

 

 

 

 

 

Net earnings from discontinued operations

 

 

 —

 

 

(13)

Depreciation expense

 

 

18 

 

 

19 

Amortization expense

 

 

10 

 

 

Amortization of debt issuance costs

 

 

 

 

Amortization of lease right-of-use assets

 

 

 

 

Deferred income tax provision

 

 

 

 

Stock-based compensation expense

 

 

 

 

Restructuring and other charges

 

 

 

 

Payments for restructuring and other charges

 

 

(2)

 

 

(1)

Acquisition-related costs

 

 

 

 

Payments for acquisition-related costs

 

 

(1)

 

 

(3)

Other

 

 

 

 

Change in working capital, net of acquisitions:

 

 

 

 

 

 

Receivables

 

 

18 

 

 

(1)

Inventories and other current assets

 

 

(14)

 

 

Accounts payable

 

 

 

 

Deferred revenue

 

 

 

 

Accrued liabilities

 

 

(19)

 

 

(3)

Accrued interest payable

 

 

(4)

 

 

Current income taxes

 

 

 

 

 —

Net Cash Provided from Operating Activities from Continuing Operations 

 

 

75 

 

 

55 

Cash Flows from Investing Activities from Continuing Operations:

 

 

 

 

 

 

Property additions

 

 

(6)

 

 

(9)

Business acquisitions, net of cash acquired

 

 

(22)

 

 

(26)

Origination of notes receivable

 

 

(15)

 

 

(7)

Collections on notes receivable

 

 

17 

 

 

11 

Net Cash Used for Investing Activities from Continuing Operations 

 

 

(26)

 

 

(31)

Cash Flows from Financing Activities from Continuing Operations:

 

 

 

 

 

 

Payments of debt

 

 

(15)

 

 

(25)

Repurchase of common stock

 

 

(169)

 

 

(103)

Issuance of common stock

 

 

 

 

Net Cash Used For Financing Activities from Continuing Operations 

 

 

(180)

 

 

(126)

Cash Flows from Discontinued Operations:

 

 

 

 

 

 

Cash provided from operating activities

 

 

 —

 

 

11 

Net Cash Provided from Discontinued Operations

 

 

 —

 

 

10 

Effect of Exchange Rate Changes on Cash

 

 

 —

 

 

(2)

Cash (Decrease) During the Period 

 

 

(131)

 

 

(94)

Cash and Cash Equivalents and Restricted Cash at End of Period 

 

$

573 

 

$

274 






 

The following table presents reconciliations of net income to Adjusted Net Income:





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,

(In millions)

 

2021

 

2020

Net Income

 

$

27 

 

$

14 

Amortization expense

 

 

10 

 

 

Acquisition-related costs

 

 

 

 

Restructuring and other charges

 

 

 

 

Net earnings from discontinued operations

 

 

 —

 

 

(13)

Tax impact of adjustments

 

 

(4)

 

 

(4)

Adjusted Net Income

 

$

40 

 

$

11 

Weighted-average diluted common shares outstanding

 

 

131.9 

 

 

135.1 

Adjusted earnings per share

 

$

0.30 

 

$

0.08 



The following table presents reconciliations of net cash provided from operating activities from continuing operations to free cash flow:





 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,

(In millions)

 

2021

 

2020

Net Cash Provided from Operating Activities from Continuing Operations

 

$

75 

 

$

55 

Property additions

 

 

(6)

 

 

(9)

Free Cash Flow

 

$

69 

 

$

45 



The following table presents reconciliations of net income to Adjusted EBITDA.



 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended



 

March 31,



 

 

 

 

 

 

(In millions)

 

2021

 

2020

Net income

 

$

27 

 

$

14 

Depreciation and amortization expense

 

 

28 

 

 

28 

Acquisition-related costs

 

 

 

 

Non-cash stock-based compensation expense

 

 

 

 

Restructuring and other charges

 

 

 

 

Net earnings from discontinued operations

 

 

— 

 

 

(13)

Provision for income taxes

 

 

11 

 

 

(2)

Interest expense

 

 

12 

 

 

23 

Adjusted EBITDA

 

$

90 

 

$

60 

















 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 








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Boggs Inspection Services Thanks Military Members During Military Appreciation Month and All Year Long

May is Military Appreciation Month and Dwayne Boggs and his entire team of home inspectors at Boggs Inspection Services want you to join them in showing your appreciation for military service members and their families. Taking the opportunity to honor all current and former members of the US military and […]