- Revenue growth of 4%, including 2% from
acquisitions
- Termite renewals growth highest since 2018, despite monthly
subscription impacts
- Eight tuck-in acquisitions completed this quarter
- Net income of $38 million with a margin of 7.2%
- Adjusted EBITDA of $102 million with a margin of
19.2%
Terminix Global Holdings, Inc. (NYSE: TMX), a leading provider
of essential termite and pest management services to residential
and commercial customers, today announced unaudited third-quarter
2021 results.
For the third quarter of 2021, the Company reported a
year-over-year revenue increase of four percent to $530 million.
Net income increased year-over-year by $45 million to $38 million,
or $0.30 per share. Adjusted EBITDA(1) for the quarter increased
year-over-year by $3 million to $102 million, and Adjusted Net
Income(2) increased by $17 million to $51 million, or $0.41 per
share.
“Solid performance in our termite business highlighted a quarter
of continued progress on the Terminix Way and the CxP operating
platform initiatives,” said Terminix CEO Brett Ponton. “Strong
growth in termite renewals, price realization and contribution from
eight tuck-in acquisitions in the quarter led to solid revenue
growth. On the bottom line, higher revenue contribution and direct
cost productivity were partially offset by increased medical
expenses and staffing challenges as we manage through pandemic
related pressures on the business. Even with continued inflationary
pressure on building materials, we also made progress managing
termite damage claims, with fewer claims in the quarter leading to
the first year-over-year reduction in cost since 2019.”
“As we turn to the fourth quarter, we remain focused on building
our digital marketing and ecommerce capabilities with a new website
scheduled for launch in December,” Ponton continued. “We remain on
track to begin the implementation of the CxP operating platform
before the end of the year and are planning a pilot of the Terminix
Way in the first quarter of next year. The combination of these
initiatives into 2022 will unlock the selling capabilities of our
technician base to deliver better lead generation, customer
retention, an improved customer experience and a better teammate
experience. We are excited about the work in front of us and remain
confident installing these capabilities will support improved
profitable growth in 2022 and beyond.”
Consolidated Performance
Three Months Ended September
30,
Nine Months Ended September
30,
$ millions
2021
2020
B/(W)
2021
2020
B/(W)
Revenue
$
530
$
512
$
18
$
1,562
$
1,502
$
60
YoY growth
4
%
4
%
Gross Margin
221
213
8
665
626
38
% of revenue
41.6
%
41.6
%
0.1
pts
42.6
%
41.7
%
0.9
pts
SG&A
142
140
2
422
423
—
% of revenue
(26.8
)%
(27.3
)%
0.5
pts
(27.0
)%
(28.1
)%
1.1
pts
Income (Loss) from Continuing
Operations before Income Taxes
52
(7
)
59
162
50
112
% of revenue
9.7
%
(1.4
)%
11.1
pts
10.4
%
3.3
%
7.1
pts
Income (Loss) from Continuing
Operations
38
(21
)
59
119
20
99
% of revenue
7.2
%
(4.1
)%
11.4
pts
7.6
%
1.4
%
6.3
pts
Net Income (Loss)
38
(7
)
45
119
61
58
% of revenue
7.2
%
(1.3
)%
8.5
pts
7.6
%
4.0
%
3.6
pts
Adjusted Net Income (Loss)(2)
51
34
17
157
98
58
% of revenue
9.7
%
6.7
%
3.0
pts
10.0
%
6.5
%
3.5
pts
Adjusted EBITDA(1)
102
98
3
315
277
38
% of revenue
19.2
%
19.2
%
(0.0
)pts
20.2
%
18.4
%
1.7
pts
Net Cash Provided from Operating
Activities from Continuing Operations
65
39
26
216
211
5
Free Cash Flow(3)
60
34
26
199
191
8
Reconciliations of net income (loss) 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.
Third-Quarter Performance
Revenue
Three Months Ended
September 30,
(In millions)
2021
2020
Growth
Organic
Acquired
Residential Pest Management
$
199
$
193
$
6
3
%
$
3
1
%
$
4
2
%
Commercial Pest Management
144
140
4
3
%
(1
)
(1
)%
5
4
%
Termite and Home Services
156
151
5
3
%
4
3
%
—
—
%
Sales of Products and Other
31
28
3
11
%
3
11
%
—
—
%
Total revenue
$
530
$
512
$
18
4
%
$
9
2
%
$
10
2
%
Revenue increased four percent over the prior year, including
two percent from acquisitions.
Termite and home services organic revenue growth(4) was three
percent. Termite and home services completions increased three
percent, driven by sales of our new monthly pay tiered termite
product and improved cross-selling of home service to existing
customers. Termite renewals increased three percent, due to
increased volume and improved price realization, offset by a more
than $1 million impact from the change in the timing of revenue
recognition in our new monthly subscription-based termite offering.
Excluding the impact of the monthly subscription-based termite
offering, termite renewal growth would have been six percent and
total termite and home services growth would have been four
percent.
Residential pest management revenue growth was three percent,
reflecting organic revenue growth of one percent. Organic revenue
growth was driven by improved price realization and improved
trailing 12-month customer retention rates.
Commercial pest management growth was three percent. Organic
revenue decline of one percent was driven by a reduction in
completed recurring and one-time services as a result of staffing
shortages during the insourcing of certain national accounts
customers. These declines more than offset continued growth
internationally, including favorable foreign currency fluctuations
of approximately $1 million.
Sales of products and other revenue growth was 11 percent due to
increased chemical demand as we lap the impacts of COVID-19 on the
three months ended September 30, 2020.
Adjusted EBITDA
Adjusted EBITDA was $102 million for the third quarter, a
year-over-year increase of $3 million. The impact on Adjusted
EBITDA from higher revenue was $8 million. Production labor
increased $3 million, primarily due to labor market driven
increased turnover year-over-year. Direct cost productivity reduced
expenses $4 million year-over-year, driven by lower chemical costs,
improvements in fleet management, lower fuel prices, primarily
related to favorable fuel hedge rates, and productivity from the
insourcing of certain national accounts customers. Termite damage
claims expenses decreased $5 million due to lower claims counts in
the third quarter of 2021, partially offset by higher cost per
Non-Litigated Claim due, in part, to inflationary pressure on
building materials and contractor costs, primarily in the Mobile
Bay Area. Medical costs increased $5 million due to increased
medical claims and short-term disability costs as a result of the
COVID-19 pandemic. Third-party investments in the design,
implementation and deployment of Terminix Way and CxP were $1
million. Other expenses, including sales, marketing, and travel
increased $5 million in total.
Liquidity and Free Cash Flow
In the third quarter, the Company strategically deployed cash to
repurchase 3.8 million shares for $171 million and completed eight
tuck-in acquisitions for $41 million. Year-to-date free cash flow
was $199 million, with a free cash flow conversion rate(5) of 63
percent. The Company ended the third quarter with $156 million in
available cash and access to $378 million under its revolving
credit facility for total liquidity of $534 million and a net debt
leverage ratio(6) of 1.9 times.
Full-Year 2021 Outlook
(In millions)
Low
High
Revenue
$
2,035
$
2,050
Growth Rate
4%
4%
Adjusted EBITDA
$
380
$
390
Margin
18.7%
19.0%
For the full-year 2021, revenue is expected to range between
$2,035 and $2,050 million. We have increased the low end of the
revenue guidance range to reflect increased acquisitions in the
third quarter. Organic revenue is expected to remain between three
and four percent.
Adjusted EBITDA remains unchanged between $380 and $390 million
and includes the flow through of revenue growth, staffing and
medical pressure as we continue to manage through the COVID-19
pandemic, increased sales and marketing expense, investments in
Terminix Way and CxP, and current estimates on termite damage
claims expense.
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.
Third-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 Tuesday, November 2, 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
third quarter ended September 30, 2021. Participants may join this
conference call by dialing 877.243.0931 (or international
participants, +1.415.226.5359). 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 investor
relations home page at investors.terminix.com.
The call will be available for replay until December 2, 2021. To
access the replay of this call, please call 800.633.8284 and enter
reservation number 21998418 (international participants:
+1.402.977.9140, reservation number 21998418). 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,” “targets,” “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 the COVID-19
pandemic 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
conversion rate, organic revenue growth 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
(loss), 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.
_______________________________________________
(1) Adjusted EBITDA is defined as net
income (loss) before: depreciation and amortization expense;
acquisition-related costs; Mobile Bay Formosan termite settlement;
fumigation related matters; non-cash stock-based compensation
expense; restructuring and other charges; goodwill impairment;
amortization of cloud based software; net earnings from
discontinued operations; provision for income taxes; loss on
extinguishment of debt; 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 (loss) before: amortization expense; acquisition-related
costs; Mobile Bay Formosan termite settlement; fumigation related
matters; restructuring and other charges; goodwill impairment;
amortization of cloud based software; net earnings from
discontinued operations; loss on extinguishment of debt; 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) Organic revenue growth is defined as
revenue excluding revenue from acquired customers for 12 months
following the acquisition date.
(5) Free cash flow conversion rate is
defined as free cash flow divided by Adjusted EBITDA.
(6) Net debt leverage ratio is defined as
total debt less cash divided by LTM Adjusted EBITDA. LTM Adjusted
EBITDA is calculated as Q3 2021 YTD Adjusted EBITDA ($315 million)
plus Q4 2020 Adjusted EBITDA ($68 million).
TERMINIX GLOBAL HOLDINGS,
INC.
Consolidated Statements of
Operations and Comprehensive Income
(In millions, except per share
data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Revenue
$
530
$
512
$
1,562
$
1,502
Cost of services rendered and products
sold
309
299
897
876
Selling and administrative expenses
142
140
422
423
Amortization expense
10
9
29
26
Acquisition-related costs
1
(1
)
—
—
Mobile Bay Formosan termite settlement
—
49
4
49
Fumigation related matters
—
—
1
—
Restructuring and other charges
2
2
10
14
Goodwill impairment
3
—
3
—
Interest expense
11
22
34
67
Interest and net investment income
—
(1
)
(2
)
(2
)
Loss on extinguishment of debt
—
1
—
1
Income (Loss) from Continuing
Operations before Income Taxes
52
(7
)
162
50
Provision for income taxes
14
15
45
31
Equity in earnings of joint ventures
1
1
2
2
Income (Loss) from Continuing
Operations
38
(21
)
119
20
Net earnings from discontinued
operations
—
14
—
40
Net Income (Loss)
$
38
$
(7
)
$
119
$
61
Total Comprehensive Income
(Loss)
$
35
$
(16
)
$
133
$
3
Weighted-average common shares outstanding
- Basic
124.3
132.0
127.6
132.9
Weighted-average common shares outstanding
- Diluted
124.7
132.0
128.1
133.1
Basic Earnings (Loss) Per Share:
Income (Loss) from Continuing
Operations
$
0.31
$
(0.17
)
$
0.93
$
0.14
Net earnings from discontinued
operations
—
0.11
—
0.30
Net Income (Loss)
0.31
(0.06
)
0.93
0.44
Diluted Earnings (Loss) Per Share:
Income (Loss) from Continuing
Operations
$
0.31
$
(0.17
)
$
0.93
$
0.14
Net earnings from discontinued
operations
—
0.11
—
0.30
Net Income (Loss)
0.30
(0.06
)
0.93
0.44
TERMINIX GLOBAL HOLDINGS,
INC.
Consolidated Statements of
Financial Position
(In millions, except share
data)
As of
As of
September 30,
December 31,
2021
2020
Assets:
Current Assets:
Cash and cash equivalents
$
156
$
615
Receivables, less allowances of $31 and
$25, respectively
219
206
Inventories
41
44
Prepaid expenses and other assets
149
145
Total Current Assets
564
1,010
Other Assets:
Property and equipment, net
193
182
Operating lease right-of-use assets
79
80
Goodwill
2,192
2,146
Intangible assets, primarily trade names,
service marks and trademarks, net
1,101
1,111
Restricted cash
89
89
Notes receivable
32
31
Long-term marketable securities
15
14
Deferred customer acquisition costs
101
98
Other assets
78
75
Total Assets
$
4,445
$
4,837
Liabilities and Stockholders'
Equity:
Current Liabilities:
Accounts payable
$
108
$
91
Accrued liabilities:
Payroll and related expenses
96
102
Self-insured claims and related
expenses
72
76
Accrued interest payable
3
7
Other
94
99
Deferred revenue
105
102
Current portion of lease liability
17
17
Current portion of long-term debt
52
94
Total Current Liabilities
547
588
Long-Term Debt
845
826
Other Long-Term Liabilities:
Deferred taxes
370
346
Other long-term obligations, primarily
self-insured claims
211
239
Long-term lease liability
93
96
Total Other Long-Term Liabilities
674
681
Commitments and Contingencies
Stockholders' Equity:
Common stock $0.01 par value (authorized
2,000,000,000 shares with 148,948,815 shares issued and 121,568,176
outstanding at September 30, 2021 and 148,400,384 shares issued and
132,080,845 shares outstanding at December 31, 2020)
2
2
Additional paid-in capital
2,386
2,359
Retained Earnings
960
841
Accumulated other comprehensive loss
(25
)
(39
)
Less common stock held in treasury, at
cost (27,380,639 shares at September 30, 2021 and 16,319,539 shares
at December 31, 2020)
(945
)
(423
)
Total Stockholders' Equity
2,378
2,741
Total Liabilities and Stockholders'
Equity
$
4,445
$
4,837
TERMINIX GLOBAL HOLDINGS,
INC.
Consolidated Statements of
Cash Flows
(In millions)
Nine Months Ended
September 30,
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
119
61
Adjustments to reconcile net income to net
cash provided from operating activities:
Net earnings from discontinued
operations
—
(40
)
Equity in earnings of joint venture
(2
)
(2
)
Depreciation expense
52
55
Amortization expense
29
26
Amortization of debt issuance costs
2
3
Amortization of lease right-of-use
assets
11
14
Goodwill impairment
3
—
Fumigation related matters
1
—
Mobile Bay Formosan termite settlement
4
49
Deferred income tax provision
21
—
Stock-based compensation expense
15
13
Restructuring and other charges
10
14
Payments for restructuring and other
charges
(8
)
(9
)
Payments for acquisition-related costs
(2
)
(4
)
Other
(23
)
(23
)
Change in working capital, net of
acquisitions:
Receivables
(19
)
(44
)
Inventories and other current assets
(17
)
(4
)
Accounts payable
18
12
Deferred revenue
4
(1
)
Accrued liabilities
(2
)
52
Accrued interest payable
(4
)
1
Current income taxes
3
39
Net Cash Provided from Operating
Activities from Continuing Operations
216
211
Cash Flows from Investing Activities
from Continuing Operations:
Property additions
(17
)
(20
)
Sale of equipment and other assets
4
6
Business acquisitions, net of cash
acquired
(86
)
(29
)
Origination of notes receivable
(51
)
(26
)
Collections on notes receivable
51
32
Net Cash Used for Investing Activities
from Continuing Operations
(98
)
(37
)
Cash Flows from Financing Activities
from Continuing Operations:
Payments of debt
(79
)
(103
)
Debt issuance costs paid
—
(2
)
Repurchase of common stock
(522
)
(103
)
Issuance of common stock
11
4
Net Cash Used For Financing Activities
from Continuing Operations
(590
)
(205
)
Cash Flows from Discontinued
Operations:
Cash provided from operating
activities
14
43
Cash used for investing activities
—
(1
)
Cash used for financing activities
—
(1
)
Net Cash Provided from Discontinued
Operations
14
41
Effect of Exchange Rate Changes on
Cash
(1
)
(1
)
Cash (Decrease) Increase During the
Period
(459
)
9
Cash and Cash Equivalents and
Restricted Cash at End of Period
$
245
$
377
The following table presents
reconciliations of net income (loss) to Adjusted Net Income:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In millions)
2021
2020
2021
2020
Net Income (Loss)
$
38
$
(7
)
$
119
$
61
Amortization expense
10
9
29
26
Acquisition-related costs
1
(1
)
—
—
Mobile Bay Formosan termite settlement
—
51
4
51
Fumigation related matters
—
—
1
—
Restructuring and other charges
2
2
10
14
Goodwill impairment
3
—
3
—
Net earnings from discontinued
operations
—
(14
)
—
(40
)
Loss on extinguishment of debt
—
1
—
1
Amortization of cloud-based software
—
—
1
—
Tax impact of adjustments
(3
)
(6
)
(11
)
(14
)
Adjusted Net Income
$
51
$
34
$
157
$
98
Weighted-average diluted common shares
outstanding
124.7
132.0
128.1
133.1
Earnings per share
$
0.30
$
(0.06
)
$
0.93
$
0.44
Adjusted earnings per share
$
0.41
$
0.26
$
1.22
$
0.74
The following table presents
reconciliations of net cash provided from operating activities from
continuing operations to free cash flow:
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In millions)
2021
2020
2021
2020
Net Cash Provided from Operating
Activities from Continuing Operations
$
65
$
39
$
216
$
211
Property additions
(5
)
(5
)
(17
)
(20
)
Free Cash Flow
$
60
$
34
$
199
$
191
The following table presents
reconciliations of net income (loss) to Adjusted EBITDA.
Three Months Ended
Nine Months Ended
September 30,
September 30,
(In millions)
2021
2020
2021
2020
Net Income (Loss)
$
38
$
(7
)
$
119
$
61
Depreciation and amortization expense
28
27
81
81
Acquisition-related costs
1
(1
)
—
—
Fumigation related matters
—
—
1
—
Mobile Bay Formosan termite settlement
—
51
4
51
Non-cash stock-based compensation
expense
4
3
15
13
Restructuring and other charges
2
2
10
14
Goodwill impairment
3
—
3
—
Amortization of cloud based software
—
—
1
—
Net earnings from discontinued
operations
—
(14
)
—
(40
)
Provision for income taxes
14
15
45
31
Loss on extinguishment of debt
—
1
—
1
Interest expense
11
22
34
67
Adjusted EBITDA
$
102
$
98
$
315
$
277
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211102005500/en/
Investor Relations: Jesse Jenkins 901.597.8259
Jesse.Jenkins@terminix.com
Media: James Robinson 901.597.7521
James.Robinson@terminix.com
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