Ladies and gentlemen, welcome to ServiceMaster’s First Quarter 2015 Earnings Conference Call. Today’s call is being recorded and broadcast on the internet. Beginning today’s call is Jim Shields, ServiceMaster’s Vice President of Investor Relations and Treasurer and he will introduce the other speakers on the call. At this time, we will begin today’s call. Please go ahead, Mr. Shields.

Thank you, Frank. Good morning and thank you for joining our first quarter 2015 earnings conference call. Today, you will hear from ServiceMaster’s Chief Executive Officer, Rob Gillette; and Chief Financial Officer, Alan Haughie. For those of you who haven’t had a chance to download the investor presentation from our website, I will walk you through the agenda items shown on Slide 1. Rob will lead off by providing a summary of our full year financial results and then review our performance by segment. Alan will then review our consolidated results. Rob will then provide summary comments before opening the call to your questions. Before we begin, I would like to remind you that throughout today’s call, management may make forward-looking statements to assist you in understanding the company’s strategies and operating performance. As stated on Slide 2, all forward-looking statements are subject to the forward-looking statement legends contained in our public filings with the Securities and Exchange Commission. These forward-looking statements are not guarantees of performance and are subject to the risk factors contained in our public filings that may cause actual results to vary materially from those contemplated in the forward-looking statements. The information discussed on today’s call speaks only as of today, April 28, 2015. The company undertakes no obligation to update any information discussed on today’s call. This morning, ServiceMaster issued a press release filed with the SEC on Form 8-K highlighting our first quarter 2015 financial results. And we have posted a related presentation both of which can be found on the Investor Relations section of our website. We will reference certain non-GAAP financial measures throughout today’s call and we have included definitions of these terms in our press release, which is available on our website. We have also included reconciliations of the relevant non-GAAP financial measures to the most comparable GAAP financial measures in our press release and presentation in order to better assist you in understanding our financial performance. All references on the call to EBITDA are to adjusted EBITDA as defined in our press release and the figures labeled as such therein. I will now turn the call over to ServiceMaster CEO, Rob Gillette for opening comments. Rob?

Thanks, Jim and good morning, everyone. Thanks for joining us today for our first quarter 2015 earnings call. Before I walk you through our financial results, I would like to address an incident that occurred at a U.S. Virgin Island resort served by a local Terminix branch. The family of four was seriously injured and our foremost concern is for the family to make a full recovery. Our thoughts and prayers go out to them. On March 25, we were informed that the United States Department of Justice initiated a criminal investigation in the matter surrounding the incident. We were also informed that the United States Environmental Protection Agency did participate in the investigation and working with the U.S. Virgin Island’s Department of Planning and Natural Resources. We take this thing very seriously and are cooperating fully with all relevant governmental authorities. Our investigation is currently underway. We say it’s a great priority of the company on providing safe, convenient and dependable service to our customers. The incident was tragic and our utmost concern is for the family and their full recovery. We appreciate the desire of many of our stakeholders for additional information about the incident, but due to the ongoing investigation, we will make no further comments at this time. Alan will discuss later how this has been reflected in our financial results for the quarter and we appreciate your understanding and support. Okay, now, let me turn to the first quarter results on Slide 3. We had a strong top and bottom line growth as we continue to grow customer focused teams that delivered convenient, on-time and dependable customer service. Revenue increased $38 million or 7% versus prior year. The increase was driven by the introduction and growth of new services at Terminix, the continued development of…

Thanks, Rob and good morning, everybody. I will now cover our first quarter results as shown on Slide 8. Revenue for the quarter increased 7% or $38 million over the prior year and it was about $23 million, a little over 4% of organic growth, including pricing. The balance of the revenue increase of $15 million was largely due to acquisition with HSA acquired at the end of February 2014, representing $10 million and $5 million from acquisitions within Terminix. Significantly, American Home Shield grew organically about 9%, largely as a result of the heavy marketing campaign in the second half of last year. And within Terminix, solid performance in the pest business and continued growth in new services more than offset the decline in traditional termite revenue, giving Terminix about 3.5 points of organic revenue year-over-year. Gross profit increased by $23 million, of which about $4 million was due to the HSA acquisition and about $3 million from the Terminix acquisition. With that $4 million, about $16 million of the increased gross profit was largely organic, representing a conversion rate of almost 70% of organic revenue to gross profit that is $16 million of incremental margin on $23 million of incremental organic revenue. And this operating leverage helped gross margin as a percentage of revenue increase by almost 1 point over last year to 46.9% from 46%. Selling, general and administrative expenses remained flat year-over-year and therefore fell as a percentage of revenue by 2 points. This flat SG&A does reflect the impact of about $4 million of additional structural SG&A due to the acquisition of HSA and so does reflect not only continued operating leverage, but also continued reductions in infrastructure costs of about $4 million. And as a reminder, in the first quarter 2014, we recorded an…

Alright. Thanks, Alan. Just to close we have a motivated team focused on providing outstanding customer service with exceptional expertise in each of our businesses. For our network of employees, franchise owners, contractors and technicians, we are well positioned to be the leading provider of essential residential and commercial services. In each of the services we provide, whether termite and pest control, HVAC repair, plumbing, disaster restorations are one of the many other services we provide. We are dedicated to convenient on-time dependable and effective service delivery to our customers. By meeting these commitments we are confident that we will continue to drive both top and bottom line growth and deliver value to our shareholders. I look forward to sharing our performance with you in coming quarters. I will now turn it over to Jim Shields to start the Q&A. Thanks.

Thanks Rob. As a reminder during the question-and-answer session we encourage you to ask questions that you may have, but please note that guidance is related to outlook we have provided in the press release and the webcast presentation. In addition since the queue is long this morning please limit yourself to one follow-up question so that we can get to everyone in the allotted time. Frank let’s open it up – up the line for questions.

Thank you. [Operator Instructions] Our first question comes from of the line of George Tong with Piper Jaffray. Please proceed.

Hi, thanks. Good morning. You saw meaningful organic growth in the American Home Shield segment this quarter driven by investments in the direct to consumer channel, can you discuss your outlook for further investments in the DTC sales channel and how this compares with prior investments?

Well, I will make a comment and actually have Mark Barry here with me, so I’ll let him comment as well, but thanks George, we will continue to invest in marketing and look at new and different ways to expand the direct to consumer channel. And we are looking for opportunities to free up investments to further grow the business and we will continue to do that like we did in 2014. So Mark can comment in terms of his outlook and balance, but we are really happy with the performance of the business and how well we have been able to grow that channel. So, go ahead, Mark.

Yes. George, we are very happy with our ability to create new accounts and our acquisition costs, factoring and trading down a little bit and our renewal rates going up, meaning we can grow while acquiring new resorts within more and more cost associated [indiscernible] the floating expense for 2015 is similar to 2014, but we don’t currently have it all that we had in Q4 although if we create that opportunity we are likely to do the rest.

That’s helpful. And as a follow-up can you provide an update on you commercial initiatives within your Terminix segment and if commercial penetration assumptions are incorporated into your guidance or if it represents upside?

Well, I think everything is incorporated in the guidance in general. So I think we are really happy with the progress we made on the commercial front and we are continuing to see growth with the current customers and expanding base. So as we talked about before, we started on an isolated basis with key customers refining processes as we enter the market and so it has continued to reinforce and add commercial people to that team. So, it’s included in the business outlook that Alan provided and we are happy with the progress.

Okay, thank you.

Thanks.

Our next question comes from the line of Sara Gubins with Bank of America Merrill Lynch. Please proceed.

Thank you. Good morning. You talked about price increases as being a driver of the revenue growth, could you help us think about the magnitude?

Yes, sure. It’s about 1.5% to 2% almost across all segments.

Okay, great. And then – I am sorry.

Yes. I was going to say, bear in mind that because we have a large recurrent customer base, those price increases, as I said before they are perpetual. So, they work on same anniversaries for the company, it’s really the first anniversary of let’s say customers contract as well and that should continue.

Great, thanks. And then with the number of termite clients going down, do you think that you are losing market share or do you think that the market is actually shrinking. And aside from weather, what might cause that, if the market is shrinking, what might cause the market growth to improve?

Well, we would say it is flattish in nature. I wouldn’t say shrinking necessarily, I think a lot of the product offerings that we had mentioned in the overview, we are looking at and targeting new and different ways to serve customers. So when we mentioned contracted customer base that applies everything that we do in general. So, there is a trend towards people wanting the thought services they need versus contracting on an annualized basis. So, we continue to do that and mentioned that in the text of our comments and we are seeing growth. So, it hasn’t – we haven’t had the [indiscernible] I think that we would have expected over the last several years. I would say the good news is we think that at least now there is more activity that we see and having more inquiries and leads coming in for business. So we would anticipate that the season would be at least equal to last year and hopefully better.

Thank you.

Our next question comes from the line of Jeff Volshteyn with JPMorgan. Please proceed.

Hi, good morning. Thank you for taking question. Just following up on AHS, is there any color that you can give around sort of geographies of where you see incremental growth?

Go ahead, Mark.

Yes. This is Mark Barry. We are investing very heavily in the Southeast right now. Our traditional base is very, very strong on the West Coast and from Texas [indiscernible] here as a country. The acquisition they did there last year it really strengthened our position in the Mid-Atlantic and the Midwest, so it’s a great opportunity to grow and very quickly in Florida, Georgia and Carolinas and Virginia is right now is a good platform [indiscernible] to grow there as well, so it’s in the right place at the right time.

That’s very helpful. And a follow-up on the Merry Maids business, as your first 10 locations are converting, what are the unit economics, are they sort of the – are the numbers working out as you expected when…?

But again, that much movement we have at a few branches so as Rob mentioned but yes, the economics are we are getting the prices that we have been able for you. And certainly, in terms of taking out development cost, that’s also been encouraging. So, we are happy with what we are seeing.

Thank you very much.

Our next question comes from the line of Gary Bisbee with RBC Capital Markets. Please proceed.

Hi, good morning. Can you give us an update on just what’s the penetration of your network in selling and new services at Terminix? And over what time period do you think you rollout the rest of it? And I ask it from a context of, how are you confident in the ability to continue to deliver mid single-digit growth amid what has been a pretty persistent decline or at least not growth in both pest and termite customers?

So, I think that – we as a business I don’t have the absolute number, but most of our services, the predominance of our services that we talk about and the innovation had been introduced between customer base that we have and largely through what we would call creative sign and leads. So, our own team going out and evaluating services and talking to customers about what they would like to have done. So, we are pretty excited about the opportunity to expand that to just our existing customer base as a beginning opportunity as more and more customers become knowledgeable about all the other services that we provide. We are confident we can continue to expand that business. And I would say also on the mosquito side, we are pretty excited about the business opportunity that’s presented by 2015. And it is the fact that we have a full selling season and the team positioned to go sell that product effectively in the market. So, we are looking forward to selling you about the growth of that business as well in the future.

If you were to see the limited growth in customers and the core historical offerings, is there enough opportunity with these new services you have been talking about? You continue to drive the mid single-digit growth say for the next 2 years or are we more penetrated in that?

So, obviously we are not anywhere near penetrated and I thought we are confident in terms of the growth of the Terminix business and the core business as we always say between the pricing, the general market growth and then our own development and execution with customers to be in that mid single-digit range.

Okay, thank you.

[Operator Instructions] Our next question comes from the line of Paul Hanson with Loomis Sayles & Company. Please proceed.

Hi, thanks for taking the call and congrats on the good quarter. My question was on the capital structure, I am curious about the – if there is any intentions with the 7% notes that are callable in August?

Yes, it’s good question. We are still considering the optimal path, but the questions if I was right, that’s the next tier of high cost debt that will turn our attention to, looking to them to say precisely what we will do, but we are likely to do something in that regard in August, yes.

Alright, fair enough. Thank you.

Our next question comes from the line of Denny Galindo with Morgan Stanley. Please proceed.

Hi, guys. I jumped on a little late. So, I am sorry if this has already been asked. But I was curious if you had seen any impact on your Terminix sales since the Virgin Islands issue came up? I know it was on the news on CNN and that sort of thing. Did that affect any of your business here in the U.S. or are we not seeing the impact?

I would say that the business in terms of our growth and what we have planned versus the quarter and where we are we haven’t seen anything that has impacted the business.

Okay, that’s helpful. And then just going back to the customer growth, I think you may have addressed this earlier, but how long do you think it will be to at least see things like the customer account in pest in Terminix to turn positive? Is that something that should happen in the next couple of quarters or it will take a little bit longer?

Well, I think it varies from quarter-to-quarter. I think it was Q3 we talked about some growth in the customer account and the growing trends was more and more customers wanting stock services. And so, I think that it will balance around and change somewhat. And as we grow in commercial, it will have a different kind of impact, which may have one customer with multiple locations. So, we would expect it to continue to be flattish or some of these changes quarter-over-quarter, sometimes slightly positive or sometimes slightly negative in contracted customer accounts.

And then lastly on the incremental margins in Terminix, I mean, it then is very strong. I mean, is that – was there anything one-time that kind of impacted incremental margins this quarter or is this just kind of more in the same of more – more of what you expect going forward?

I think the team did a good job in terms of servicing customers in a high-quality way reducing cost to serve in terms of what we do everyday and the resources we would apply to deliver to customers. And that’s what the team does. They will continue to work on expanding margins much on improving the services we provide. So, it’s what we do.

Thanks for taking my questions.

Our next question comes from the line of Gary Bisbee with RBC Capital Markets. Please proceed.

Hey, just one quick follow-up. Is the 9% organic growth at American Home Shield is that a good run-rate to think about from here or what are the factors that could lead that to be different in the next couple of quarters? Thank you.

Gary, from a trajectory standpoint, we keep this deal in the range.

Okay, thank you.

Mr. Shields, there are no further questions at this time. Please continue with the presentation or closing remarks.

Okay. Thank you again for your participation in today’s conference call and webcast. As a reminder, replay of the call will be available on our website in about an hour. We look forward to speaking with you. Thank you.

Thank you.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day everyone.