Terminix Reports Third-Quarter 2020 Revenue Growth of 10 Percent

MEMPHIS, TENN. —Terminix Global Holdings announced unaudited third-quarter 2020 results. For the third quarter of 2020, the company reported a revenue increase of 10 percent to $512 million. Net loss of $7 million, or $0.06 per share decreased $32 million from prior year driven by the $49 million Mobile Bay Formosan termite settlement. Adjusted EBITDA(1) for the quarter increased $26 million to $98 million with Adjusted net income(2) increasing $11 million to $34 million, or $0.26 per share. Both Adjusted EBITDA and Adjusted net income for continuing operations included $3 million of costs historically allocated to ServiceMaster Brands.

Reconciliations of net (loss) income 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.

Mobile Bay Formosan Termite Settlement 

Today the Company announced a Mobile Bay Formosan termite settlement with the Alabama Attorney General. Under the terms of the settlement, the Company has agreed to establish a $25 million consumer fund to manage customer remediation measures and settle future termite damage claims disputes, and to make a $19 million payment to the Alabama Attorney General. The settlement also provides for various immediate remediation measures directly to current and former customers, including refunds of certain price increases; the reimbursement of certain investigative and monitoring costs incurred by the Department of Agriculture and Industries; and a university endowment intended to support termite and pest control research with an emphasis on Formosan termite control.   

Including all costs associated with the settlement, the Company expects future termite damage claim expenses above historical norms to be $140 to $150 million from 2020 to 2029, remaining within the previously communicated ringfence estimate.

In the third quarter of 2020, the Company recorded a charge of $49 million and a reduction of termite renewal revenue of $3 million related to the execution of the settlement. The resulting liability was recorded in accrued liabilities, other on the balance sheet. We have excluded the financial impact of the charge and the prior period portion of the reduction in revenue associated with this settlement from Adjusted Net Income and Adjusted EBITDA as management believes they do not reflect our ongoing operations.

Additional information is included in a separate press release issued today announcing the settlement.    

Terminix reported six percent year-over-year total revenue growth and two percent organic revenue growth in the third quarter of 2020. Termite organic revenue growth, including wildlife exclusion, crawl space encapsulation and attic insulation, which are managed as a component of the termite line of business, was four percent. The growth in this service line reflects 17 percent growth in core termite new unit sales driven by the launch of a new monthly pay tiered product offering and a strong termite swarm season. Termite organic revenue was negatively impacted by a $3 million charge related to the anticipated refund of certain price increases in the Mobile Bay area stemming from the Mobile Bay Formosan termite settlement (discussed above). Residential pest control organic revenue growth of four percent reflected strong customer demand, retention gains and increased price realization partially offset by, lower summer sales units and one-time bed bug revenue driven by COVID-19. Commercial pest control organic revenue declined three percent year-over-year and improved approximately 600 basis points sequentially compared to the second quarter of 2020. The commercial pest control organic revenue decline was driven by impacts from the ongoing pandemic including lower sales of non-recurring services and service postponements due to both temporary and permanent business closures. 

Terminix Adjusted EBITDA was $98 million for the third quarter, a year-over-year increase of $26 million. The flow-through from higher revenue was $14 million. Direct, indirect and general and administrative cost reductions in the quarter amounted to approximately $18 million. These improvements were partially offset by cost increases of $5 million for incentive compensation related to improved operating performance and $4 million in termite damage claims primarily related to mitigation program costs in the Mobile Bay area.

European Pest Control and Other includes pest control operations in Europe and the Company’s captive insurance subsidiary. European Pest Control and Other reported $21 million in revenue and $4 million in Adjusted EBITDA in the third quarter. Improved Adjusted EBITDA margins were driven by growth and productivity initiatives in Nomor and Terminix UK.

Source: Terminix