ServiceMaster Global (SERV) Q2 Revenue Guidance Tops Consensus

ServiceMaster Global Holdings, Inc. (NYSE: SERV), a leading provider of essential services to residential and commercial customers in the termite, pest control, cleaning and restoration markets, today provided an outlook for the second quarter of 2020.

Second-Quarter 2020 Outlook

In order to update the market on recent trends in the business, second-quarter 2020 Revenue and Adjusted EBITDA guidance is provided below for Continuing Operations, and the ServiceMaster Brands Divesture Group.

(*Consensus sees Q2 revenue of $476 million)

Residential Pest Control

Residential Pest Control organic revenue growth is expected to be flat to slightly down versus prior year. Continuing improvement in service levels and customer retention in the second quarter are expected to be offset by the COVID-19 related suspension of the door-to-door summer sales program in most markets and lower one-time sales, primarily related to bedbug services. The impact of COVID-19 related service postponements have continued to moderate and improve from late first quarter peaks but remain higher than prior year.

Commercial Pest Control

Commercial pest control organic revenue growth is expected to be down approximately 10 percent versus prior year. COVID-19 related service postponements peaked in April and continue to trend positively into June but remain above prior year levels. New unit sales, primarily one-time sales such as bedbug and bird services, have been negatively impacted by COVID-19. Disinfection services are not expected to be material in the second quarter. Future trends in commercial pest control are expected to closely follow state and city specific reopening plans.

Termite and Home Services

Termite and home services organic revenue growth is expected to be three to five percent, primarily driven by higher core termite completion new unit sales due to the strong termite swarm season and the successful roll-out of our new affordable monthly payment offering.

ServiceMaster Brands Divestiture Group

ServiceMaster Brands is continuing to see strong momentum in disinfection services in both the ServiceMaster Clean and ServiceMaster Restore brands. Growth in royalty fees from disinfection services are expected to partially offset the impact of COVID-19 related service postponements in ServiceMaster Clean and a decrease in area-wide events driven by the mild winter in ServiceMaster Restore. Residential cleaning services, through the Merry Maids brand, are expected to remain well below prior year levels in the second quarter but have increased from lows in April as our franchisees resume operations and demand for cleaner homes increases.

Liquidity

As of May 31, 2020, the Company had total liquidity of over $635 million, including $267 million in available cash. Strong cash generation in the first two months of the second quarter was the result of the flow-through of Adjusted EBITDA as well as the impact of payroll and income tax deferrals as a result of the CARES Act.

Adjusted EBITDA

Adjusted EBITDA guidance reflects the impact of previously disclosed cost actions as well as additional labor and vehicle efficiencies and other indirect cost actions targeted in the quarter. The Company will continue to look for additional permanent and temporary cost actions to improve Adjusted EBITDA margins throughout the remainder of 2020.

Costs Historically Allocated to ServiceMaster Brands are expected to be approximately $3 million in the second quarter. These costs are reflected in the second quarter guidance and will impact continuing operations and benefit the SMB Divestiture Group.

The second quarter outlook reflects an $8 million year-over-year increase in termite damage claims and mitigation expense and is largely in line with expectations. The timing and frequency of new termite damage claim litigated case filings is difficult to predict. The actual pace and volume of litigated termite damage claims could differ.

The Company plans to announce second quarter results on August 6, 2020 and will provide details in due course.

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