Second-Quarter 2021 Earnings Webcast - August 5, 2021
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Second-Quarter 2021 Earnings Webcast August 5, 2021
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 Terminix’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 Terminix only as of the date of this presentation and Terminix 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, Terminix’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. Terminix 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 Terminix’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. Organic revenue growth, Adjusted
EBITDA, adjusted net income, adjusted earnings per share, free cash flow, free cash flow conversion and net debt leverage ratio 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, 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.
2
Agenda
Q2 2021 Performance Highlights
Brett Ponton
Strategic Priorities Update
Brett Ponton
Brett Ponton
Chief Executive Officer
Q2 2021 Financial Summary
Bob Riesbeck
Q2 2021 Cash Flow
Bob Riesbeck
FY 2021 Guidance
Bob Riesbeck
Bob Riesbeck Jesse Jenkins
Closing Remarks and Q&A Executive Vice President & VP Investor Relations, FP&A
Chief Financial Officer and Treasurer
Brett Ponton
CONFIDENTIAL AND PROPRIETARY. DO NOT DISTRIBUTE.
Q2 Performance and Recent Operating Highlights
Second-quarter organic revenue growth1 of 4%
❖ 10% organic revenue growth1 in commercial pest, including double-digit international growth
❖ 4% organic revenue growth in residential pest
❖ 2% organic revenue decline in termite and home services (up 1% when excluding timing of revenue
recognition on monthly subscription-based termite product)
Second-quarter Adjusted EBITDA1 margins of 22%
❖ Productivity in fleet and materials cost offset by expected labor cost increases due to the more
competitive macro labor market
❖ Critical investments in Terminix Way and Customer Experience Platform (CxP)
Returned capital to shareholders through purchase of 3.7m shares for $181m ($48.77 per share)
Completed leadership team with additions of SVP and GC Deidre Richardson and SVP and CIO Joy Wald
Continued Progress on Digital Marketing, Terminix Way and CxP
Strong Commercial Pest Management Growth, Progress on Strategic Initiatives
1 SeeAppendix for non-GAAP reconciliations and non-GAAP definitions and slide 6 for reconciliation of revenue growth to organic revenue growth. Less than 1% of total organic
revenue growth was related to favorable currency translation.Strategic Priorities
Teammate Experience Customer Acquisition
• Progress on the Terminix Way initiative • Progress on optimizing digital marketing
• Project team led by tenured field teammates capabilities
• Internal team over 120 years of pest and • Improve customer penetration
termite industry experience
• Positive early results of CxP in
• CxP user simulation day on August 4th commercial sales
• Technician turnover negatively impacted • Website, ecommerce platform, and CxP
by more competitive macro labor market operating platform launch on track for Q4
Customer Retention Expand Profit Margin
• Trailing-twelve-month retention • $4m direct cost productivity
improvement in residential revenue lines • $6m increased labor expense due to the
• 23% commercial cancel rate more competitive macro labor market
improvement in local accounts • Strong momentum in European pest
• Launched commercial quality assurance • Higher termite damage claims due to
platform in CxP to 1,000 users in July inflationary pressure on building materials
Terminix Way initiative and CxP will Accelerate Progress on Strategic Priorities
CONFIDENTIAL &
PROPRIETARYTerminix Q2 Revenue Growth by Channel
$ millions
Total Q2 2021
(2)%
Growth
$193 $196
Organic 4%
$80 $84 5%
M&A 1%
$55
(5)% $192
Termite $76 $182 14% Total 5%
Renewals
$141
$124
$113 $112
Termite
& Home 1% 8%
Services
Completions $34 $32
Termite and Home Services Residential Pest Management Commercial Pest Management Sales of Product and Other
Termite Growth Q2 2021 Q2 2020
Excluding $5M Monthly
Termite Impact
Q2 2021 Q2 2021 Q2 2021 Q2 2021
Renewals 1%
Growth Growth Growth Growth
Completions 1%
Organic -2% Organic 4% Organic 10% Organic 8%
Total 1%
M&A 0% M&A 1% M&A 3% M&A 0%
Total -2% Total 5% Total 14% Total 8%
Solid Organic Revenue Growth1 Across Residential and Commercial Pest
1See Appendix for non-GAAP definitions. Less than 1% of total organic revenue growth was related to favorable currency translation.Terminix Q2 Financial Results
($ millions, except EPS) Q2 2021 Q2 2020 Variance
Revenue $ 560 $ 534 $ 26 5%
Gross Profit $ 242 $ 237 $ 6 2%
Margin 43.2% 44.3%
Adjusted EBITDA1 $ 123 $ 119 $ 4 3%
Margin 22.0% 22.4%
1
Adjusted Net Income $ 66 $ 53 $ 13 24%
Margin 11.7% 9.9%
Adjusted EPS1 $ 0.51 $ 0.40 $ 0.11 28%
13 6 4 2 3 1 1
119 123
Adjusted EBITDA ($M)
Q2'20 Revenue Labor Direct Productivity CxP and Terminix Sales and Termite Damage Other Q2'21
Conversion Way Investment Marketing Claims
1See Appendix for non-GAAP reconciliations and non-GAAP reconciliation definitions.Q2 2021 YTD Cash Flow Summary
$ millions
June 30, 2021 June 30, 2021
Opening Cash 615 Total long-term Debt 878
Cash 313
Adj. EBITDA 1 213
Net Debt 566
Working Capital (12) LTM Adjusted EBITDA1,2 379
CapEx (12) Net Debt Leverage Ratio 1.5x
Cash Interest (27)
Cash Taxes (3)
Other (20)
Free Cash Flow 1 139
FCF Conversion 1 65%
M&A (45)
Debt Payments (67)
Share Repurchase (350)
Other 21
Cash Flow (302)
Ending Cash Balance 313
1See Appendix for non-GAAP reconciliations and non-GAAP reconciliation definitions. 2LTM Adjusted EBITDA is calculated as Q2 2021 YTD Adjusted EBITDA ($213
million) plus 2020 Adjusted EBITDA ($345 million) less Q2 2020 YTD Adjusted EBITDA ($179 million).2021 Outlook
Range
($ millions) Low High
Revenue $ 2,025 $ 2,050
Growth Rate 3% 4%
Adjusted EBITDA1 $ 380 $ 390
Margin 18.8% 19.0%
Revenue Adjusted EBITDA1
Full-year organic ~30% incremental margins on organic
revenue growth1,2 of 3% to 4% revenue growth1,2 for the full year
Labor headwinds due to more competitive
Strong pricing realization in residential pest
macro labor market
Commercial pest growth normalizes in third Investments in Terminix Way and CxP to
and fourth quarters enhance operational capabilities
~$2m termite renewal headwind in Q3 from
Increased sales and marketing expense
revenue recognition timing
1See Appendix for non-GAAP reconciliations and non-GAAP reconciliation definitions. 2See slide 6 for reconciliation of revenue growth to organic revenue growth.Closing Comments and Q&A
❖ Completed leadership team with additions of Deidre Richardson and Joy Wald
❖ Continued progress on key investments in digital marketing, Terminix Way and CxP
❖ Focused on long-term growth and sustainable margins to increase shareholder value
Building a scalable model with the Terminix Way and CxP to become best in classAppendix CONFIDENTIAL AND PROPRIETARY. DO NOT DISTRIBUTE.
Non-GAAP Reconciliation Definitions Organic revenue growth is defined as revenue excluding revenue from acquired customers for 12 months following the acquisition date. A reconciliation of revenue growth to organic revenue growth is included on slide 6. Adjusted EBITDA is defined as net income before: depreciation and amortization expense; acquisition-related costs; Mobile Bay Formosan termite settlement; non-cash stock-based compensation expense; restructuring and other charges; 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; Mobile Bay Formosan termite settlement; restructuring and other charges; net earnings from discontinued operations; and the tax impact of the aforementioned adjustments. Adjusted EPS 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. Net debt leverage ratio is defined as total debt less cash divided by Adjusted EBITDA. The net debt leverage ratio is calculated on slide 8.
Q2 2021 Consolidated Results
Second Quarter
$ millions, except per share data 2021 2020 B/(W)
Revenue $ 560 $ 534 $ 26
YoY Growth 5%
Gross Margin 242 237 6
% of revenue 43.2% 44.3% 1.1 pts
Selling and administrative expenses (143) (143) (1)
% of revenue 25.6% 26.7% 1.1 pts
Amortization expense (10) (9) (1)
Acquisition-related costs 1 — 1
Restructuring and other charges (2) (8) 5
Mobile Bay Formosan termite settlement (4) — (4)
Interest expense (11) (22) 11
Interest and net investment income 1 1 (1)
Income from Continuing Operations before Income Taxes 73 57 16
Provision for income taxes 20 18 3
Equity in earnings of joint ventures 1 1 —
Income from Continuing Operations 54 40 14
Net earnings from discontinued operations — 13 (13)
Net Income $ 54 $ 53 $ 1
Weighted-average diluted common shares outstanding 127.8 132.0
Diluted Earnings Per Share $ 0.42 $ 0.40 $ 0.02
Adjusted Net Income1 $ 66 $ 53 $ 13
1
Adjusted EBITDA $ 123 $ 119 $ 4
1
Adjusted Earnings Per Share $ 0.51 $ 0.40 $ 0.11
1
Free cash flow $ 71 $ 112 $ (41)
1
Free cash flow conversion 57 % 94 % (36) %
1See following slides for non-GAAP reconciliations.Q2 2021 Net Income to Adjusted EBITDA and Adjusted Net
Income Reconciliations
$ millions, except per share data
Second Quarter
2021 2020
Net Income $ 54 $ 53
Depreciation and amortization expense 26 27
Acquisition related costs (1) —
Mobile Bay Formosan termite settlement 4 —
Non-cash stock-based compensation expense 5 5
Restructuring and other charges 2 8
Net earnings from discontinued operations — (13)
Provision for income taxes 20 18
Interest expense 11 22
Adjusted EBITDA $ 123 $ 119
Net Income $ 54 $ 53
Amortization expense 10 9
Acquisition related costs (1) —
Mobile Bay Formosan termite settlement 4 —
Restructuring and other charges 2 8
Net earnings from discontinued operations — (13)
Tax impact of adjustments (4) (4)
Adjusted Net Income $ 66 $ 53
Weighted-average diluted common shares outstanding 127.8 132.0
Adjusted Earnings Per Share $ 0.51 $ 0.40Q2 2021 Net Income to Free Cash Flow Reconciliation
$ millions
June YTD
2021 2020
Net Income $ 81 $ 67
Depreciation and amortization expense 54 55
Working capital, excluding impact of accrued interest and taxes (12) 26
Equity in Earnings of joint venture (2) (1)
Working capital impact of accrued interest and taxes 2 36
Deferred income tax provision 13 —
Stock-based compensation expense 11 10
Restructuring and other charges, net of payments 3 6
Mobile Bay Formosan termite settlement 4 —
Acquisition-related costs, net of payments (2) (3)
Net earnings from discontinued operations 0 (26)
Other non-cash expenditure add-backs (3) 2
Net Cash Provided from Operating Activities from Continuing Operations $ 151 $ 172
Property additions (12) (15)
Free Cash Flow $ 139 $ 157
Adjusted EBITDA 213 179
Free Cash Flow Conversion 65% 88%You can also read
