ServiceMaster trims workforce, withdraws guidance due to COVID-19 impact

By , Special to the Daily Memphian Updated: May 08, 2020 4:39 PM CT | Published: May 07, 2020 2:01 PM CT

ServiceMaster expects the coronavirus pandemic to further negatively impact business, but posted a 9% increase in revenue in the first quarter while earnings fell short of analysts’ estimates.

For the quarter ended March 31, Memphis-based ServiceMaster Global Holdings reported earnings of 8 cents per share, 8 cents lower than analysts’ consensus estimate of 16 cents.


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The company reported earnings of 33 cents in first quarter a year ago and 22 cents per share in the fourth quarter of 2019.

Revenue for the quarter came in at $456 million versus the consensus estimate of $462.77 million, a year-over-year increase of 9%.

The company said it has taken steps to preserve about $45 million in cash, including “delaying merit increases, rightsizing the back-office, eliminating or furloughing excess frontline employees, delaying discretionary capital and operating spending and vehicle leasing,” according to a release.

Throughout the COVID-19 pandemic, all of ServiceMaster’s brands have been considered essential, with the exception of residential cleaning services. It reported several Merry Maids locations closed during the COVID-19 pandemic.

“While our services have been deemed as essential, we did see an impact to revenue and profitability in the second half of March, primarily as a result of the effect of COVID-19 on our customers, and we anticipate this impact will continue into future periods,” ServiceMaster chairman and interim CEO Naren Gursahaney said in a release. “However, with a strong recurring revenue customer base, resilient cash generation dynamics and significant access to liquidity, we believe we are well positioned to weather this crisis.”

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Gursahaney said the company is taking aggressive actions to retain existing customers, reduce discretionary costs, preserve cash and pursue new opportunities, such as the launch of disinfection services within Terminix.

Gursahaney also voluntarily elected to forego 25% of his salary for the remainder of his tenure as interim CEO, and board directors have voluntarily elected to forego 25% of their cash retainers for the next two quarters.

To mitigate effects of COVID-19, ServiceMaster has enhanced PPE requirements for employees, improved paid time off policies, allowed back-office and call center employees to work from home and minimized face-to-face interactions including suspending its summer door-to-door sales program.

“We remain focused on our previously communicated 2020 strategic priorities and expect to emerge from this crisis even better positioned to drive future growth and profitability,” he said.


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Despite efforts to minimize the impact of COVID-19, more employees may have to be laid off or furloughed in the future, the company said.

ServiceMaster also withdrew its guidance for the remainder of the year, based on uncertainty about what future impact the virus might have on business operations. It is focused on four strategic priorities for 2020: reduce employee turnover, improve customer retention, enhance profit margins and revitalize its termite business.

Gursahaney was named interim CEO in January 2020 after Nik Varty stepped down. ServiceMaster is searching for Varty’s replacement, who will be the sixth CEO the company has had in 14 years.

In January, ServiceMaster also announced that it is considering a sale of its five ServiceMaster Brands — ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec —leaving it with its dominant business, Terminix.

ServiceMaster provides termite and pest control, cleaning and restoration services in both the residential and commercial markets, operating through a service network of more than 8,000 company-owned locations and franchise and license agreements.

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Topics

ServiceMaster Global Holdings Naren Gursahaney

Christin Yates

Christin Yates is a native Memphian who has worked in PR and copywriting since 2007. She earned her B.S. in public relations and M.S. in mass communications from Murray State University.


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