MEMPHIS, Tenn. — ServiceMaster Global Holdings, Inc. announced unaudited first-quarter 2019 results. The American Home Shield segment, which was separated in a tax-free transaction on October 1, 2018, is reported in discontinued operations for prior periods.
For the quarter ended March 31, 2019, the company reported a year-over-year revenue increase of 13 percent to $482 million with net income of $70 million, or $0.51 per share. Net income benefited from a $40 million tax-free realized gain on the monetization of the company’s 16.7 million shares in frontdoor, inc. Adjusted EBITDA(1) for the quarter was $109 million, and adjusted net income(2) was $45 million, or $0.33 per share, versus $28 million, or $0.21 per share, for the same period in 2018.
“Our solid performance in the quarter reflects the consistent progress we are making on executing our strategic initiatives,” said ServiceMaster Chief Executive Officer Nik Varty. “In our pest control core, organic growth of 3 percent in the quarter included 4 percent growth in residential pest and 2 percent in termite and home services, despite the impact of unseasonably cold weather and flooding on our operations and lead flow. We see positive trends in commercial pest with customer retention reaching three-year highs, driven by continued improvement in customer service as we leverage the best practices of Copesan and enhance the customer experience we deliver. ServiceMaster Brands grew revenue organically 5 percent in the first quarter. Our focus on high-growth market verticals is paying dividends with healthcare cleaning and disinfection up 7 percent and commercial restoration up 35 percent in the quarter. Strategic M&A also continues to be a growth driver, with 11 pest control acquisitions in the quarter.”
“We recently launched the Terminix Tick Defend System, in response to increasing tick borne illnesses. This is a reflection of our improved ability to leverage our product knowledge and application expertise to rapidly assess market needs and respond with innovative solutions for our customers. We also delivered on a major shareholder commitment as we successfully monetized our holdings in Frontdoor. With the proceeds, we further reduced our net debt levels by $484 million giving us additional flexibility to execute on our strategic initiatives. We remain diligently focused on profitability while investing in growth with a new operating system and a dedicated commercial pest team. Overall, solid first-quarter performance keeps us on track with our 2019 guidance expectations.”
TERMINIX. Terminix reported 14 percent year-over-year revenue growth in the first quarter of 2019, including over 4 percent organic growth in residential pest control services, 2 percent organic growth in termite and home services, and 43 percent growth from acquisitions in commercial pest control, principally from the March 2018 Copesan acquisition and the January 2019 acquisition of Assured Environments. Similar to the prior year, first-quarter 2019 revenue growth was negatively impacted by approximately $3 million due to unseasonably cold weather conditions and flooding that affected branch operations and lead flow.
Adjusted EBITDA in the first quarter decreased by $3 million year-over-year, partially the result of $6 million of investments in growth, including $2 million increased sales and marketing expense to drive continued growth and $2 million in Salesforce implementation costs as the company replaces legacy operating systems. First-quarter Adjusted EBITDA was also burdened by $4 million in spin related dis-synergies. These costs were partially offset by $6 million in flow-through from higher organic revenue and $4 million in contribution from acquisitions.