ServiceMaster Releases 2018 Fourth Quarter and Full-Year Results

ServiceMaster Releases 2018 Fourth Quarter and Full-Year Results

Results include Terminix's revenue having increased 7 percent from the previous year, its highest growth rate since 2002.

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MEMPHIS, Tenn. — For the full year 2018, ServiceMaster reported a year-over-year revenue increase of 8 percent to $1,900 million and a net loss of $41 million, or $0.30 per share. Net loss was negatively impacted by a $249 million mark-to-market loss on investment in frontdoor, inc. Our post-spin Adjusted EBITDA of $398 million included $33 million of costs which were historically allocated to American Home Shield but are not permitted to be classified as discontinued operations under U.S. GAAP. Our pre-spin Adjusted EBITDA guidance of between $425 and $435 million excluded these $33 million of historically allocated costs. Adjusted net income(2) was $130 million, or $0.95 per share versus $101 million, or $0.74 per share, for the same period in 2017.
 
For the fourth quarter, the company reported a year-over-year revenue increase of 12 percent to $457 million and net loss of $248 million, or $1.83 per share. Fourth quarter net loss in 2018 was negatively impacted by a $249 million mark-to-market loss on investment in frontdoor, inc. Adjusted EBITDA was $80 million, a year-over-year increase of $6 million and adjusted net income was $26 million, or $0.19 per share versus $10 million, or $0.07 per share, for the same period in 2017.
 
“Our primary goal in 2018 was to transform our Terminix business and unlock the potential to drive sustainable revenue growth. We are pleased to report that our focused efforts throughout 2018 and strategic initiatives resulted in record revenue at Terminix in the fourth quarter and full year 2018,” said ServiceMaster Chief Executive Officer Nik Varty. “Improvements in pest sales, driven by enhanced marketing initiatives, and stronger start and completion rates drove organic growth of 5 percent during the quarter, including over 7 percent in residential pest for a second consecutive quarter. The strong second half performance in these areas led to full-year organic growth of 2 percent, meeting the high end of expectations we set a year ago. ServiceMaster Brands grew revenue organically 5 percent in the fourth quarter and 9 percent for the full year. We continue to create strong growth by focusing on high-value segments in the cleaning and restoration businesses, with revenue in both commercial restoration and commercial cleaning national accounts up over 20 percent in 2018.”
 
“While making meaningful strategic investments in the business to drive long-term sustainable growth and shareholder value, the company delivered on its guidance for Adjusted EBITDA for the full year. Our growth strategy is on track for 2019, including major initiatives in the commercial pest and termite businesses, as well as a focus on adjacent opportunities in the cleaning and restoration businesses. We will also remain diligent in our focus on business productivity as we absorb dis-synergies from the successful spin of the American Home Shield business, which increased shareholder value.”
 
TERMINIX RESULTS. Terminix reported 12 percent year-over-year revenue growth in the fourth quarter of 2018, including over 7 percent organic growth in residential pest control services and 33 percent growth from acquisitions in commercial pest control, primarily from the March 2018 Copesan acquisition. This is the second consecutive quarter of over 7 percent organic revenue growth in residential pest control. Organic termite growth in the fourth quarter of 3 percent was aided by approximately $2 million from a one-time acceleration of revenue related to an accounting method change for a bundled pest and termite service offering in order to comply with new revenue recognition standards. This fourth quarter benefit was more than offset in the full year by an initiative to upgrade bait stations for a sub-set of our customers in 2017.
 

Adjusted EBITDA in the fourth quarter decreased by $6 million year-over-year, partially the result of absorbing $4 million in spin related dis-synergies, $3 million increased sales and marketing expense to drive continued growth, $5 million of selling and administrative expenses from acquisitions and $3 million in other investments in growth, including our partnership with Salesforce to replace legacy operating systems. These costs were partially offset by $14 million in flow-through from higher revenue. The company expects full year 2019 dis-synergies will impact Terminix by $16 million, or $11 million higher than the impact in 2018.

Source: Servicemaster.com