Q1 2020 Earnings Call

And it's Tony will cover in more detail. We have a covenant-lite debt structure with no current maintenance covenants and after completing a tightly priced Term Loan be offering a quarter of 2019. We have no scheduled debt repayments until late in 2024. And while this crisis is unlike anything we've ever seen in the past and there's significant uncertainty about what the economic recovery will look like having an experienced leadership team with a history of strong performance across a diverse array of Industries faith in difficult. Economic Cycles will help us manage through this pandemic. We also enjoy strong leadership positions in growing and resilient Industries driven partially by wage increases in temperatures insect populations continue to rise across the world. These pets are immune to economic cycles and health concerns and 2019 reporting wage.

Moving to slide 11. I thought it would be helpful to walk through how we think about our cash flow Dynamics given the current focus on liquidity in the markets. We have extremely strong free cash flow conversion rates in this business. I'll walk down some of the higher impact line items that contribute to free cash flow in the chart on the left side of the page. We expect working capital usage to be rough to be flat for the full year is the government stimulus plan allows us to defer payroll taxes that should more than offset. Any delays in customer collections on the phone line. We use ten million dollars in the first quarter and are taking actions to limit discretionary spending specifically and leasehold improvements on our facilities are cash interest is large life in expected to be approximately eighty-five million dollars for the full year cash taxes are expected to be be between 12 and 14% for the full year. It will benefit of the Dead.

Second warmest year in recorded history in 2020 already predicted to be in the top five these underlying Tailwind show no sign of slowing.

On the service masterbrand side of the business. We're watching the world change in front of our eyes and ensuring Clean safe and disinfected homes and businesses is vital to support the world wage to get people back to work would be strong underlying demand drivers for our services leading to higher retention rates and attractive Mark margins real well positioned to build on Mondays Trends in both near and long-term with this is a backdrop. Let's turn to slide five and discuss the specifics of what we're doing to lessen the impact of covid-19 on our business office.

Order from a penalty-free delay as part of the recently-passed cares Act.

Turning two uses of cash. We spent twenty six million dollars in the first quarter on several small tuck-in Acquisitions. We continue to have deals in the pipeline and given our strong cash flow Dynamics. We expect to continue are talking program and opportunities surprised. We have scheduled that payments primarily related to leased vehicles in previous Acquisitions. I expected to be slightly over seventy million dollars for the full year. We also completed our share repurchase program in the first quarter with the purchase of over three point seven million shares at $27.64 per share. We have no immediate plans to seek additional authorization as we look to conserve cash and liquidity given the current uncertainties wage is Generation remains a strong characteristic of our business and although only representing one month of the second quarter collections of remain strong so far in April and our cash balances increase dead.

Going to start to the quarter. But as we moved into late March it became apparent we needed to take quick action to mitigate the impacts of covid-19 on our business. We quickly we quickly formulated a bath and approached our top priority and the most important we had issue we had to address was protecting the health of both our colleagues and our customers we quickly mobilize supply chain team to obtain the PPE needed to protect all of our online technicians and roll it out a training protocol to ensure it was used effectively in all service lines.

Providing this essential protection for employees has resulted in increased costs impacting our profits in the quarter but protecting our people and our customers was a critical step in affecting our business. We strengthened our time off policies by increasing paid time off to any employees with symptoms of the virus or direct contact with those who have symptoms of the month including time off to care for any sick family members.

approximately forty billion dollars in the month

On slide 12 you can see our cash debt and leverage ratios as of the end of the quarter as you will remember, we refinanced our Term Loan be in November of last year extended maturity by three years to 20 26, upsizing our revolver capacity and improving our interest rates by 75 basis points. We remain in an extremely strong position with immediate access the 370 million dollars in cash from a revolving credit agreement and an attractive rate of Libor plus 175.

We also changed our front line and back office protocols to reduce face-to-face contact between our employees and our customers as much as we can while still providing exceptional service off. And finally we made the decision to suspend our door-to-door summer sales program to further ensure the safety of our customers and our partners. This program has been a truck driver for us for the past in the past and suspending it will have an impact on new sales and revenue growth in the residential pest business line as we move into future quarters.

Mode is the cabinet light instrument and as such as no maintenance covenants until more than a hundred twenty million dollars in cash is drawn from the revolving credit facility in the unlikely event of the company draws more than a hundred twenty million dollars from the facility. The applicable Covenant would be four times adjusted. Ebitda is defined in the the credit agreement to net first name that only when including even. From discontinued operations that ratio is currently one point three times. This leaves us ample capacity for both cats cash usage and the ability to absorb any even. Declines over the coming quarters while the impact of the virus will be felt many aspects of our business We believe We remain well-positioned operation Thursday and from a liquidity balance sheet perspective to whether the those impacts. We are taking aggressive actions as we manage through the pandemic and will emerge from it in an even stronger position.

we also took steps to ensure continuity of our services these actions are designed to make sure that we can continue to provide our essential service to customers while maintaining the proper safety protocols to that end where possible we're emphasizing exterior pest work this works well for quarterly residential pest treatments but we've seen an impact in new uniforms in both termite completions and to a larger extent in-home services that require access to the interior of customers homes we remain laser focused on our relationship with God and if improved or pre-service call process to inform customers about the additional steps we're taking to keep them safe during this time

Where customers are concerned about people coming into their homes in this environment? We've shown flexibility in allowing customers to postpone their service. We're also accommodating our commercial customers who have been required to close locations, and we've seen an increase in customer postponements in impacted Industries such as hospitality and Retail

Before I turn it over to the rain. I also wanted to briefly touch on the decision to withdraw our full-year guidance.

Given the evolving and unprecedented health and economic impacts and covid-19 on our customers and the economy at large. It's difficult for us to accurately estimate the ultimate scale the exact in the timing of the subsequent recovery.

We've also played considerable financial assistance to our franchisees including relaxing financing payment requirements and palsy royalty payments in the heavily impacted Merry Maids business life.

We'll continue to monitor the landscape and the pandemics impact on the predictability of earnings and we'll reevaluate the this decision when or if the impacts normalized the coming months in quarters. And with that I'll now turn it back over to the rain for closing comments rains. Thanks Tony before we close. I wanted to provide a brief update on the time for two initiatives. I've been focused on during my tenure as interim CEO first we remain on track with our original timeline for a permanent CEO placement. Our CEO search committee has been a to conduct many virtual interviews over the past few months and we're encouraged by the quality of the candidates that are available and excited by this opportunity.

help

Set these impacts. We've undertaken approximately 45 million dollars in cost actions from our twenty-twenty plan designated to maintain profitability and preserve liquidity Thursday. We right-sized our front-line teams to align with the trends that we saw in the latter part of March by reducing about 450 Pest Control technicians and sales professionals the majority of these worth a furlough, but they can retain their benefits and we have flexibility to bring them back when activity recovers this had an impact of about ten million dollars on our variable cost to help offset the the expected reduction in Revenue versus our previous expectations and guidance. We then accelerated the restructuring of our G&A cost within our business and our corporate staff functions reducing a g n a cost for the Year by about $18 with about thirty million dollars of run rate benefit in 2021.

As I mentioned on the last call the board and I are looking for a candidate who will come in and accelerate the execution of our strategic priorities with a keen focus on improving employee retention through a certain mindset driving improvements in customer retention and improving our operating margins. I'll share more with you about the search and ultimate higher at the appropriate time said, we're continuing with our review of strategic alternatives for the service master Brands business. As I have said previously, we view the brands business as an extremely attractive business and despite Thursday and a MC and resulting turmoil and capital markets perspective buyers have continued to show very strong interest in this business given the market turmoil. Our process is slowed down but we continue to believe shareholder value would be enhanced through becoming a pure-play pest control company and using the proceeds of an appropriately valued transaction to strengthen our balance sheet and competitive position.

We also took actions to provide short-term benefits of about four million dollars including the deferral of our plan Merit increases in a voluntary 25% reduction in my salary retainer fees for our board. We've also taken several actions to reduce Capital expenditures by about fifteen million dollars including a reduction of Fleet fleet vehicle leasing an elimination of other discretionary capex Investments. We're continuing to monitor Revenue Trends in real time and are looking at other cost actions to protect and enhance our ebitda Bap NE badal margins.

Priority focuses on responding to Opportunities. We recently launched disinfectants in our term next Commercial Business and are seeing strong customer interest off this service disinfects and kills germs on high touch hard services in businesses helping minimize and visible threats including novel coronavirus has like covid-19 off a rapid Nationwide rollout is seeing growing demand early in the second quarter with several closed deals.

Market as I said earlier, we believe ServiceMaster is extremely well positioned to manage through this crisis.

We're taking quick actions to protect our people ensure the continuity of our operations as an essential service provider Drive costs out of the system to protect liquidity and develop opportunities such as our disinfection services in Terminix. We remain focused on our longer-term strategic priorities to improve the quality of our Frontline by reducing employee turnover driving a customer retention improvements improving our operating margins and revitalizing our termite business as Tony described in detail. We have ample liquidity and strong free cash flow conversion that will allow us to whether the impacts of the pandemic while remaining opportunistic and m&a in coming quarters. And now more than ever. We're focused on continued customer satisfaction and retention rates my team and I are focused on the challenges of the coming quarters and through strong management where continent will emerge in a position of strength.

On the service masterbrand side we were able to rapidly mobilize an existing disinfecting service and we've seen considerable activity to help offset work order postponements by our Commercial Banking clients who are closed offices. We also leverage our strong cash position to purchase over three point seven million shares of common stock at an average price of $27.64 a share in the quarter. We close by tuck-in Acquisitions during the quarter and plan to continue our tuck-in acquisition program in the near-term.

Over the course of this event. We've learned a lot about our ability to work remotely that will allow us to explore reducing our Branch call center and office real estate footprint as we move forward.

Before I handed over to Jessie, I'd like to end where I began by thanking the tens of thousands of workers representing, Terminix and ServiceMaster Brands, but their dedication and service in these trying times you have my thanks, and finally, I want to express my gratitude to our many residential and Commercial customers. We are all in this together, and we continue to appreciate your business office and now Jesse will lead us through the Q&A session. Thanks and rain with the queue being long this morning, please limit yourself to a single question so that we can get to everyone in the allotted time. Let's now open the line up for questions. Thank you for a question, please press the one followed by the on your telephone. You will hear a three-tone prompt technology request off if your question has been answered and you would like to withdraw your registration, please press one three. One moment, please for the first question.

While the current events will certainly have an impact on our performance as we move into future quarters, we believe these strong actions will allow us to whether those impacts in position as well to emerge and an even stronger position once the economy normalizes.

Turning now to our strategic priorities for 2020 on slide six. You can see that our actions to mitigate the virus support our previously discussed priorities for the year. We continue to make good progress on these initiatives and they remain top-of-mind as we manage through covid-19.

Prior to the election that I mentioned earlier, we had made considerable improvements in our employee turnover in all of our front-line positions out of necessity. We've gone to Virtual trained technicians and are receiving positive feedback from our techs on this change. We also made substantial improvement in our hiring process as we reduce the time to fill an open requisition bought several weeks.

The state of the current labor markets will allow us to bring in top talent when the economy returns and through our improved hiring and onboarding process has this will ensure we meet our objective to become a an employer of choice in the pest control space.

Our first question comes from the line of 20 Kaplan Morgan Stanley, please go ahead. Thank you. Glad to hear you all are doing well. Just want to ask about the hygiene opportunity you talked about a disinfection product refresh released it about a month ago. Just how does the product compared to service manager claim do they compete against each other and how much couldn't this contribute to revenue this year? Just given that this is such a big Focus among businesses right now to before they reopen. Thank you so much.

Never is customer retention been more important to our business than it is today with new sales likely to be challenged in the coming months.

We are laser focused on engaging customers and have implemented robust service center actions to save customers that are concerned about safety and affordability of our services as I mentioned earlier. We've taken our customer communication protocols to a new level to ensure our customers understand the things we're doing to keep them safe and the results of these actions are showing in the numbers off net promoter score is increased in residential Pest and Termite during March. And while we were impacted late in the month and are expected to see additional impact in future quarters, the first quarter sauce cancellation rates and Termite and improvements in residential pest retention was also flight flat in Terminix commercial during the quarter as we absorb the revenue impact of exiting a few unprofitable national accounts.

Well, thanks for the question Tony. This is Lorraine. It is a similar type of product and a similar type of service. So theoretically we could argue that they could we have good discussions internally about that. The reality is with the size of the market and the sheriff positions that we have in either business. I think it's going to be very rare for us to actually overlap it and individual customer. The Terminix focus is on their existing customers and offering the services either as a stand-alone or as a back to business bundle that includes pest control and potentially a potentially some authors services in there. But you know, we we think it's a nice opportunity. It's it's done very well in the clean business already and they see and and in their store business and you know, and I'd say on the truck outside. It's new. We're getting good customer response and we're starting to close deals. So we feel pretty optimistic about the future. But remember we're starting from a base line of zero in that business.

I already mentioned the approximately $45 million dollars in cost actions. We're taking in 2020 to stabilize their profit margins a number of these back office actions are a permanent acceleration right-sizing in anticipation of becoming a pure-play pest control company. We are relentlessly focused on discretionary spending and other costs actions and see ample opportunities that could arrive as we search for ways to reduce a real estate footprint in the future. And finally we're making meaningful progress on revitalizing our termite business in the Mobile area. We're nearing completion of our staffing for the inspection and supplemental treatment teams and have completed approximately 1,000 treatment since our last update in addition to the approximately 2,500 dual defend conversions previously competed met of cancellations. We have approximately 9,000 supplemental treatments remaining to perform during the year.

Thank you.

JPMorgan please. Go ahead.

Hi, good morning. I was hoping to draw a little bit more into the impact the covid-19 the quarter and in the subsequent times since then first of all, I was hoping you would just be able to supply maybe a little bit of trends that you bring in April. Um, since the quarter ended you mentioned some level of stabilization, but I was hoping you could help us think about if you've seen signs of recovery have we bottomed out yet? And then a as a corollary to that question just trying to understand the impact to residential versus commercial in that first quarter. I think you you mentioned that you expect presidential to be the least impacted which makes sense versus commercial yet in the first quarter both seem to be impacted semi evenly, you know on a, you know, fairly significant basis. So maybe you could talk a little bit about what happened to residential what you expect to change a little bit going forward. Thank you so much.

Well damage claims are.

Higher year-over-year were encouraged by the success of our actions and remain on track with all previous guidance on termite damage claims for the year on the revenue side. We're seeing positive momentum and Termite sales from our new affordable monthly payment offering while sales will likely be challenging in the near-term. We're in a strong position. As we enter the termite season now, he's over to Tony to discuss our first quarter results and cost and revenue drivers were expecting in the second quarter. I'll return with some closing comments before our Q&A session Tony thanks to rain today. I'll be covering q1 performance including how we're thinking about the covid-19 impact on future quarters are strong liquidity position and are flexible balance sheet.

Yeah, thanks Judith great to hear from you in residential. I think the biggest impact was work order postponements. You know, mainly I am dealing with you know, the healthcare. Obviously I think is led to just can't temporary cancellations of work orders and probably the biggest impact the the unit sells obviously worse off in the month and you know, we saw a pretty big impact in residential and in the one-time area the Home Services the bedbugs the fume you get think about few Min the same standpoint that you have at your home in order to do a fume and obviously that's not going to happen in States like California where we do a lot of fume. So that's why we saw I think a bigger impact wage maybe than we saw in commercial and Commercial the main areas are again, we're postponements for businesses shut down again. They haven't canceled their agreements birth.

Turning to slide seven. Let's start with the continuing operations Financial summary. I'm going to talk about Terminix section in more detail later. So let me first cover European Pest Control. In other operations are European pets can test operations contributed eighteen million dollars of Revenue in the. Primarily for Nomar in Sweden and Norway wage as well as our Terminex UK business the $18 in Revenue contributed approximately two million dollars in ebit on the quarter as strong margins and no more raw set by my my back office costs remaining after the carve-out of Terminix UK from its previous owners operating systems as we look forward into the rest of the year. Our European businesses will be impacted by covid-19 Norway in the UK implemented significant shelter-in-place orders and all those Sweden officially remained open many businesses independently shut down.

We have you know, after we postpone the service until they reopen what time was also a pretty big impact in the commercial space. What I would say is Faith in both businesses. We were very encouraged by where we were heading weren't protector. He was but we did see a pretty Mark drop-off particularly towards the end of the month. And of course, it was hard to really deal with the the Labor Act quickly. So we we went ahead and did furloughs after the fact but that had some impact on the margins obviously in the quarter. So those were the main aspects of why we saw the, you know, the the drop offs in residential commercial drain anything you want to have that it's likely to be a little bit more short-term. I think there was an initial fear and concern around safety and health concerns and that probably drove the increase that we saw in work order postponements. Clearly that stabilized now. It's stabilized at a higher rate than yep.

We also recognize the two million dollar negative adjustment to our self insurance.

Steve in the past, but our teams are working hard to get those rescheduled and we have the opportunity where businesses are closed. It'll be tough to get that.

Business back on so many of those businesses reopen so there there could be a little timing difference as to how quickly they bounce back.

Thanks. Did you comment on April run by any chance?

Yeah, I mean obviously we're going to see a bigger impacts in April, you know, because in commercial obviously for you know, because of what you know, they're they're more businesses. Now off shut down. I think things are stabilizing for the most part across all of our businesses, uh, work order cancels are still up year-over-year, you know, the temporary cancels, but they're stabilizing a new sales or or better you a little bit better. So that's basically where we're at as we headed to April.

Next question comes to the

Thank you.

Our next question comes from the line of set Weber, please go ahead. Hey. Hey guys, good morning. Hope you're doing well. Wondering if you hi. I was wondering if you could just expand a little bit on the comment in the press release about, you know, taking aggressive action to retain customers, you know, does that mean you're using a pricing and we'll pricing get soccer here going forward and then can you just help us understand this summer the summer lead-gen program like is there any way to frame what typically represents as a percentage of you know, new Ugg new agreements for you in a typical year. Thanks.

Let me go ahead and and starts at first part of the question. Lost track of question. Let me go to the summer sales program first. Summer sales program has been a nice growth drive for us for the past couple of years clearly. It's a seasonal type of opportunity as you would suggest and we think it was the right decision for us to suspend that based on concerns of customers that something we're going to continue to re-evaluate, you know, just based on how our customers and potential customers are feeling going back to the question on retention. You know, we're really it's a it's a multi-pronged approach on retention your first and foremost. It's are saved desk. So any customer who calls to cancel we get those calls to a single group of people that is our best trained people. They've got a series of save offers that we've tested over time based on the their ability to keep customers for the long-term clear off.

Our customer communication is a big part of it, especially in this environment and we have very robust communication plans proactively reaching out to customers letting them know what we're doing to keep our employees safe, but more importantly to keep them safe when we do come to their homes or come inside their homes, and that's a big part of that. And like I said, there's there's no one that kind of Silver Bullet out there. This is one where you know, we we continue to test and roll out and do techniques much of it is really just based on continuing to enhance the quality of the service and the engagement with our techs and the customers and clearly that will be something that'll be challenged in this environment, especially in our Pest Control business if we're continuing to work primary job outside the home so we have to find other tools to make sure we get that communication and engagement with our customers.

Can you just give any is there any better, um, you know just transparency on on just the way to think about postponing service versus customers that are just you know, flat-out cancel a contract. Is there any I mean, it sounds like things kind of held together pretty well through, you know through March, but I guess when it canceled it outright cancellations increasing April or if it's just really just postponing service idea. I say the issue is still postponing. It is not real. We're not seeing a spike in capsule race, even as we go through April, I think we're continuing to perform very well, you know again, you know, we we were flat in some areas improved in some areas in q1 and I think that's continuing based off what we've seen in April and even the cancels have stabilized a little bit. So we're not seeing growth in the work order cancels, but it's something we gotta keep an eye on and we're working hard to make sure we get those wage.

Scheduled as quickly as we can to mitigate the risk their yeah, I would just add to that. We are separately tracking temporary cancels versus service agreement cancels. We took that on a daily basis and obviously temporary cancels are are up, you know significantly year-over-year for obvious reasons, but as far as service agreement cancellations, I am attention Improvement were making were continue to make progress.

Okay, I appreciate it. Thank you very much guys.

Next question comes from the line of Tim Maroney William Blair, please go ahead.

Yeah, good morning. Just building on that. I'd like to drill down on the residential business a little more. So it's some pest control companies. We talked to have said their residential business actually remains resilient and even seeing Positive Growth through this pandemic just focusing on exterior Services, your residential business was down 3% in March, but can you provide us all with a little more detail on on how organic growth in that business trended through April?

Well, we don't want to really get too much into guidance at this point him for but you know, I I would really look at it this way. If you look at residential we were moving along nicely through the first two months of the year 4% organic growth seeing nice consistent Improvement in in residential and then we did see the issue in March the most important thing that I would say about the March is the work order temporary postponement. That was the most significant component of why we saw them off and so we had customers that, you know, frankly for for either health concerns or economic concerns pushed off their services due in March, but there was a decline in in unit sales in March. And again, we solved the bigger impact big impact probably the biggest impact in in these one-time sales areas like home Surf Club.

in particular

How to get into the home, you know think of attic insulation bed bug bed bug jobs few where you have to get out of the home in order to do a few jobs. So that's where we saw the biggest impact in March. So, you know, I think it's really those type of temporary factors, you know around this crisis that really drove it. I think we were on really good progress before that.

Any change to those temporary factors in April Tony? Well, like I I think I said a few minutes ago things are stabilizing, you know, as far as a temporary cancels, we're still seeing a higher level than we did in the prior year, but they're stabilizing and you know that that's what I can tell you so far and I think we're monitoring it on a daily basis and you know, we feel we feel good about our position and and we'll go from there. Okay? Okay. Thank you very much.

Next question comes from the line of Brian Butler. Which Seafood please go ahead.

Hi, good morning. Thanks for taking my question. Can you guys hear me? Okay, great. Could you give a little bit more color? Maybe on the scope of the office on holds and the the commercial passed on how much that Hospitality restaurant and retail kind of makes up of the the customer base and then on the residential you still sucking the normal kind of if there is a normal but the the historical, you know seasonal upswing that you get in activity. Is that still occurring or is that that then also materially delayed? Thanks God.

I'd say first thing on the on the commercial side retail Hospitality that group is about 20% of our commercial revenues history. And and that's clearly it's going to be the area. That was the biggest impact because of the shutdowns on the residential side. You know, again, we are seeing the normal seasonal pickup we would expect to be so we're doing all of our comparisons versus prior Year and that would go to seasonality into it as we look at at the performance there. So no no significant changes and the typical seasonal pattern of the business.

Okay. Thank you.

Once again, thank you up real question, please. Press one for on your telephone keypad. Next question comes from the line of Gary Busey Bank of America Securities, please go ahead with this morning. I'll start off by saying I'm looking at my home office window. I see a Terminex truck and the neighbor's driveway across the street. So hopefully that's the sign don't think the guys in the house cuz like I said, hopefully that would suck that some aspects of your business or beginning to normalize. The question I wanted to I wanted to ask is just on the Terminix Financial results and Iraq has always the waterfall chart on even. You call that five to six million hit or impact that you think you saw in the first quarter from covid-19, but you know, obviously even if we took the profitability was down significantly year-over-year and I I think quite a bit more than where the consensus, you know estimate had been prior to the fire.

You know and and and obviously the materials and chemicals caught you talked about. What are the other moving Parts in and out. How do you think about the key ones? There may be versus how you were thinking about guidance before virus. Thank you. This is the right. Let me provide a bit of interest and Tony seem kind of provide a little bit more color to it. I mean the other you know, year-over-year changes were things that we had expected coming into the year. They were part of our guidance and part of our expectations when we talked to you know, and gave our fourth-quarter results and talked about guidance, you know, we laid out a few of the things that we we knew were going to be headwinds and cute or else you want from an even that perspective Tony can walk you through a few of those key items, you know, in other words the you know, the areas that we expected as far as margins birth.

Sure was termite damage claims if if you recall we said that this is going to peek in twenty-twenty and we we solve exactly what we were expecting in the first quarter wage and things are on track to our expectations. They're just as we solve them as far as you know, some of the other areas if you take a look at few, you know, we took that you know, we out sourced fume April 1st of 2019. And so we would see the year-over-year margin pressure in the first quarter and obviously off on the labor side of it. Some of that is is definitely much of that is definitely covid-19. The kove it. In fact, the total is 5 to 6, which is a combination of lack of the revenue delays in the even flow through on that coupled with the fact that the the the labor we we were able to take off instantaneously. We had to take it out after the fact

So those were the you know the that that was probably the unexpected impact in the quarter that five or six million that we saw from The Cove it but everything else came right towards what we were expecting a guidance.

Okay. Thank you. Next question from the line of Ian's Fino, please. Go ahead ma'am. Thank you. Thanks for the update on the brand sale. Can you just maybe give us a little bit more detail as far as maybe where you're seeing some of the interest from and then also just giving the environment does it make sense to delay or you really just seen the the prices you want and therefore you're continuing the process. Thanks.

Well, you know, I'd say a couple of things. Of course, we're not going to be able to talk about potential suitors this stage. Yeah, just not something we would normally disclose but we still feel very good about the business and the attractive nature of the business. One of the better assets. It's out there. I think on a relative basis to all the different kinds of Industries out there. It's performing relatively well in a difficult environment for businesses, I think as I look at the process, you know, we're starting to see a little bit of stabilization in the equity markets. The credit markets have clearly improved. So the truck drivers that would make any deal attractive in here continue to go and then we've continued to be in contact with those people who have been interested and they remain interested in the asset. So clearly the process is going to take longer than we had originally expected because we want to make sure that the allow things to stabilize cuz that'll ensure we get Thursday.

best value for our shareholders

But we still feel like there's a good opportunity to to do something that will truly benefit our shareholders.

All right. Thank you very much.

Our next question comes from the line of Georgetown Goldman Sachs, please. Go ahead. All right. Thanks. Good morning. You talked about $45 billion in cost a month in 2020 to stabilize profit margins. Can you elaborate on the timing of these cost savings and and what that means for the Cadence of margins moving through the year and then longer-term how do these savings impact your investment initiatives and growth Outlook coming out of the pandemic.

Yeah, thanks George good hearing from you. You know first we said $45 million, you know, the first point I wanted to make is we did furlough employees to right-size our our front front front line, you know with respect to the revenue that's a variable cost reduction obviously. So keep that in mind about 18 million of the savings represents Choice cuts that we made in G&A. That's the in year impact. If you look at the full run-rate impact heading into twenty Twenty-One, that would be thirty million, but eighteen million years for four million dollars of basically temporary actions, like deferrals of salary increases and roughly fifteen million dollars of money Capital Cuts capital deferrals and reductions of debt.

Got it, and then longer-term you're already. I'm sorry. I just wanted to go on the eighteen million in the the G and that's just that's back at loaded two more in the second half of the year. So we apologize for missing that.

And George on the growth side again, we're continuing to invest on the platforms and things that we talked about in the past, you know, the the new customer experience platform. We're moving forward on that investment we made and we continue to make significant investments in our marketing capabilities to strengthen our marketing capabilities and enhance what we're doing both on the lead generation and the pricing side. So there's we're we're continue to invest the grow the business and as we talked about in our prepared comments will continue to to look at tuck-in Acquisitions month to grow inorganically to the extent that there are meaningful opportunities out there that make economic sense.

Very helpful. Thank you.

Next question comes from the line of Justin hog with let's go ahead. Yes. Hi. Good morning. I just wanted the the circle back on the termite damage claims, you know, so it was it was six million in the quarter. I think you said in the past that you're expecting the year-over-year increase to be about 20 million, but then I thought you had some comments here that that