Q1 2022 Terminix Global Holdings Inc Earnings Call

Ladies and gentlemen, welcome to the Terminix first quarter 2022 earnings call today's call is being recorded and broadcast on the Internet.

Beginning today's call is Jesse Jackson's Terminix as vice President of Investor Relations.

P N D and treasurer I will now turn it over to Mr. Jenkins, who will introduce the other speakers on the call.

Thank you good morning, and welcome before we begin I'd 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 in the appendix all forward looking statements cautionary statements, including those about the proposed rent to kill transaction.

Our 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 information discussed on today's call speaks only as of today may six 2022, the company undertakes no obligation to update any information.

As discussed on today's call.

This morning, Terminix issued a press release filed with the SEC on form 8-K, including our own ordered in first quarter 2022 is going to actual results.

Press release 8-K, and the related presentation can be found on our Investor relations website at investors Terminix Dot com.

We will reference certain non-GAAP financial measures throughout today's call in order to better assist you in understanding our financial performance. We have included definitions and reconciliations of these measures to the most comparable GAAP financial measures.

Joining me on today's call, our Terminix CEO , Brett Ponton and CFO Bob respect.

Slide three of the presentation posted on the Investor Relations section of our web site that leaves out the agenda, we will cover today with Brett opening with highlights of Terminix, we update and an update on our termite damage claims mitigation efforts followed by Bob reviewing our financials and then returning to Brett for a brief rentokil merger of.

Date closing comments and questions.

I will now turn it over to Brett Brett.

Thanks, Jesse and thank you for joining US overall it was a strong start to a transformational year at Terminix I am pleased with the momentum of our performance and excited to start off by sharing the progress. The team has made on our strategic priorities.

In the first quarter, we reported revenue of $496 million, reflecting growth of 5%.

<unk>, we had a strong quarter in our residential business and sequential improvement in our commercial business with strong price realization across all channels.

<unk> revenue growth.

<unk> grew 6% organically driven by volume growth in reoccurring core services as well as home services.

Residential pest grew 4% organically with improved retention rates and better cross selling of mosquito in bed bug sales volume.

Commercial pest grew 2% with organic declines of 1%, excluding the impact of foreign currency and approximately $1 million of disinfection revenue in the prior year commercial pest organic growth would've been approximately 2%.

<unk> continues to improve with strong sales improved retention rates and the disinfection headwinds now behind US we are well positioned for growth in the coming months.

And total organic growth accelerated to 4% in the first quarter, which was in line with our own expectations and reflects the progress we have made in the business.

First quarter adjusted EBITDA was $86 million for a margin of 17, 3%.

The decline in EBITDA in the quarter was driven by planned key investments in labor and staffing levels that are needed to support growth in the coming quarters like most companies. We also experienced some inflationary pressures and fuel labor and materials in the quarter, which we are expecting to continue throughout the next few key.

<unk>.

In the middle of last year, we began investing in our strategic pricing capabilities and have been successfully increasing prices above historical rates with minimal impact to our customer retention levels. This program has continued for a few consecutive quarters and I am confident we can continue our progress and to future quarters.

We are confident that these price increases enhanced our ability to cover inflationary increases as we move throughout the rest of the year just because we did this quarter.

Now turning to the progress we've made in advancing our strategic priorities.

Just last week I was in the Dallas Fort worth area for the launch of our Terminix weighed pilot. This exciting launch puts interaction all the work we've been doing behind the scenes to make enhancements for our frontline that will make it easier to provide world class service to our customers.

I will share more on the changes implemented with the Terminix way in a moment.

The back office team is also making progress towards completing the rentokil merger with pre integration planning increasing across the functions, including finance HR and it.

Just last week several members of the <unk> team were in Memphis for onsite meetings in technology and operations.

Progress on all conditions to close we continue to see late in the third quarter as a target for transaction completion.

The pending merger will enable us to further our important investments to drive organic growth and we are excited at the prospect of accelerating the progress already well underway at Terminix.

Starting on slide five I will go a little deeper on the Terminix way pilot and the enhancements we have in the pipeline in the coming months.

Turbine X way as an initiative designed to give our frontline to tools training and technology, they need to provide consistent world class customer service across our 50000 customer touch points a day.

At Terminix, we have always believed that the technician is the center of the customer relationship and they need to feel supported in order to provide excellent customer service.

We have seen a direct correlation between technician retention and customer retention, which led us to one of the guiding principles of the Terminix way all process enhancements to drive higher teammate retention.

As we explored the first year turnover data in our organization, we saw room for improvement and our teammate retention rates in the early months of their hires.

In an effort to address this we have created a white glove process for our technicians, which we're calling their journey to route similar.

Similar to our customer journey mapping exercise I have done many times in my life and marketing we mapped teammate journey from day, one of hiring as a training through the necessary training courses and finally to graduation into a full route technician and have developed a thorough plan to address all of the touch points and this experience.

The 60 day period on average as our first chance to make an impression on our teammates and we have mapped out a detailed daily activity less from day, one that we believe will improve the experience.

The process Leverages best practices from branches with high teammate retention rates and touches all corners of the organization with involvement from our corporate talent acquisition team region and division level field leaders and executive leadership.

We're also working to modernize our training curriculum for all positions in the company. In addition to refreshing in the graphics and content, we're making the training more interactive with the potential for both in person and virtual sessions and small classroom settings to foster both a sense of inclusion as well as the more.

So laurie inexperienced tailored to the way our teammates learned today.

We have created short videos that work well for independent learning and have pivoted to more of them on the job ride alongs with current technicians guided by management and tenured teammates who have completed our recently launched certified trainer program. The certified trainer program launched in Dallas last month and Paris.

Season teammates with new hires, allowing our tenured teammates to pass on the practical knowledge as well as fostering meaningful peer to peer relationships with new hires.

These enhancements will also help us move new hires through the training quicker. So they congratulated throughout tax in a shorter period of time and move directly from the classroom to serving customers with confidence.

We plan to houses materials, and a new learning management tool will make it easier for us to make them available to anyone in the organization well. After the initial training sessions are completed these enhancements are in production and scheduled for launch in the coming weeks. We are excited about the benefits of these actions will bring to help improve our teammates.

Turnover in the coming months.

As I mentioned last quarter, we have made tremendous progress in talent acquisition that has improved our staffing levels in the business leading to an increase in productive technicians year over year at the end of the quarter.

With this increase in new hires we're making enhancements in our pay structure to ensure we make progress with turnover.

For our hourly trainees, we have increased wages in certain markets to attract candidates to the job and help improve turnover.

These increases are nominal on the total population, but make a big impact at the individual level when having compensation discussions.

We have also instituted additional pay certainty for newly promoted route technicians. These teammates will still graduate into a production base position, but we have created higher minimum pay floors. So they can feel supported with more fixed pay if they needed as they transition to their new positions. While these changes are.

Relatively new the initial feedback from our teammates has been positive and we believe these changes will drive improvement in turnover in the crucial first year with the company.

Total turnover in the quarter for our route technicians was relatively flat to the end of the year in Q1, while we did see an uptick in turnover for our hourly positions our significant investments in labor in the quarter has led to a 35% increase in training head count year over year in the quarter. These.

These trainees will graduate in early Q2, and with these enhanced onboard training and pay structures, they will be better prepared to serve our customers in the vital spring season.

Despite the challenging labor markets. We are encouraged by the capability. We have built over the last few quarters that has positioned us well to capitalize on growth opportunities over the balance of the year.

Turning to slide six we also made some technology enhancements that makes it easier for technicians to become trusted advisors to our customers in.

In addition to simple step by step instructions for service delivery. There is a quick five question survey will help identify possible opportunities to enhanced protection for homeowners beyond their existing services, resulting in solutions, such as mosquito control and wildlife exclusion.

Our technicians are well positioned to help customers understand the risks and limitations in their current services and offer solutions to those problems.

One example that makes us easy is through prompts for pictures of the conditions that could lead to issues with boost past then with a portion of a button technicians can now generate proposals and sell some of our most needed services directly to interested homeowners.

This technology built off our legacy platform will give our team the confidence needed to not just upsell customers, but provide value added services and education to homeowners, who may otherwise be unaware of potential problems.

We also felt is important to ensure that the customers who are not home. When we perform our services also have access to this additional resource to receive better insights into the work we have completed as well as any possible pest risk we identify while at home.

A new healthy home report is in development and we will be system generating this based on inputs from a technician during completion of a normal service. We fill these valuable insights can be helpful and building better relationships with our customers ultimately leading to better retention.

Our willingness to accept price increases and to consider terminix for additional recurring and onetime services.

This was also a nice way to increase the pay of our dedicated technicians with additional commission opportunities as they deepen their relationships with customers on their routes.

I was on site when we deployed this feature to our team and the Dallas Fort Worth area and the response was overwhelmingly positive with technicians mentioning speed to execute and ease of use as the primary benefits. While this remains a very limited sample size.

The results were quite impressive we are seeing more than double the technician generated leads than we saw in the same time period last year with significantly improved close rates with those early results and the overwhelming field leadership and technician response, we are taking steps to deploy these features to other areas of the country.

<unk> as soon as possible.

We've already made great progress with the Terminix way and I am encouraged with the competency, we have built and executing strategic initiatives and it gives us confidence that hit our deliverables on future enhancements in the pipeline, we are making great strides to provide our field facing teammates with best in class tools training and technology.

Needed to provide world class customer service.

Before I hand, it over to Bob for.

Full review of our financials I also wanted to touch on the progress we have made on our termite damage claims mitigation efforts. We continue to feel that we are taking the right steps in our approach in this area. Despite historic inflationary pressure and building materials over.

Over the last couple of years, we have improved our visibility into claims across the country and the data shows that our problem remains intensely focused in the region along the Gulf of Mexico within a 250 mile radius of mobile Alabama.

This area accounts for almost 90% of the outstanding litigation and over the last 12 months had a claim rate that is over five times larger than the rest of the country despite representing approximately.

Approximately 13% of our protection plan termite customers.

Because of this problem is local our solution as global as well if you will remember during 2020, we completed a comprehensive mitigation program that enhance the protection of all of our customers in the mobile Bay area that plan continues to pay dividends.

New non litigated claims in mobile in the first quarter decreased another 10% year over year and outstanding claims were 24% lower than the previous lowest reported numbers during 2021.

Expanded elements of the program to other high risk areas and have seen similar claims reductions.

In total our new claims are down 55% from our highest reported peak in 2019.

While claims counts have fallen drastically we have been absorbing historic inflationary pressure in building materials and contractor labor costs, including the price of lumber that is still about three times the pre pandemic levels.

We also only recently we also recently began a claims management transition from a third party provider to an internal team in order to improve the speed of resolution for our customers.

By leveraging a team with over 140 years of termite control experience.

We feel we can better adapt to the unique needs of our customers and resolve issues quickly and effectively the reduction in new claims and improvement in closing older claims have resulted in total outstanding non litigated claims in the first quarter at the low lowest levels, we have ever reported.

We are confident in our trajectory and our ability to continue to make progress reducing non litigated claims in the quarters to come.

On a litigated side case counts have remained high with 15, new cases in the first quarter almost all of which are in a 250 mile radius of mobile <unk>.

Despite a few more claims than we were projecting we are continuing to see a steady decline in the quality of these cases with cost per case, dropping 25% since the fourth quarter of 2019, while we did see an increase of about $3 million year over year in total termite damage damage claims expense, we remain confident we.

We are taking the right actions to reduce termite damage claims expense to baseline levels of approximately 4% of termite revenue.

The experiences we have gained in the actions we are taking will help us move beyond those baseline numbers in the years to come.

I will now turn it over to Bob to walk through the revenue drivers the major fluctuations in costs in the first quarter cash flow I will come back with a brief update on the proposed rent fill merger as well as closing thoughts before our Q&A session.

Thanks, Brad.

Let's start with a detailed review of our top line performance overall, we have delivered revenue growth of $25 million driven by $19 million of organic growth of 4% as well as a 1% growth from acquisitions.

Beginning with the termite and home services column on the left side of slide eight revenue increased by $9 million or 6% in the quarter.

Termite and home services completions were up 13% in the quarter.

With core termite completion is up 5% in home service completions up 19% year over year due to increased cross selling to existing customers.

We experienced strong unit growth in the quarter, despite lapping 12% growth in completions in the first quarter of 2021.

Termite renewals were down 1% due to lower volume, partially offset by better pricing in an inflationary environment.

We are lapping a strong renewal period in the prior year and have continued to see pressure on retention and termite renewals from increased moves in the quarter.

We are planning to launch a new mover program in the second quarter and are off to a strong start in early April .

Residential pass grew 5% in the quarter with organic revenue growth of 4%.

Organic revenue growth was driven by improvement in cancel rates and trailing 12 month retention rates.

Increased mosquito and bed bug sales volume due to improved cross selling and strong price realizations.

Commercial pest was up 2% in the quarter driven by M&A growth of 4%.

Organic revenue growth of 1% was driven by a reduction in onetime services, including more than $1 million of disinfection revenue from the same period in 2021.

International growth was negatively impacted by increased COVID-19 related sick leave in both Sweden, and the United Kingdom that peaked in late January and early February.

Growth was also impacted by unfavorable foreign currency fluctuations of about $1 million.

Excluding the impact of foreign currency and the more than $1 million of disinfection revenue commercial pest organic growth would've been approximately 2%.

And the other service revenue line product sales were up 18% organically over the period.

Over the prior year due to increased chemical demand as we lap the impacts of COVID-19.

Overall, the first quarter continued positive momentum in the residential businesses with growth in our termite and residential pest segments.

We also saw sequential improvement in our commercial business and with improving retention rates and that service line, we are well positioned for growth in the coming quarters.

Turning to slide nine you can see the financial summary, and detail on the adjusted EBITDA drivers for the quarter.

On the P&L at the top left of this slide you can see in the $25 million or 5% revenue growth we covered on the previous slide.

Adjusted EBITDA of $86 million was down $4 million or 5% compared to prior year.

Adjusted net income of $42 million improved $3 million or 7% and adjusted EPS increased five or 16% to <unk> 35 per share.

Across the bottom of the slide you can see the adjusted EBITDA drivers for the quarter.

Revenue growth added $13 million of adjusted EBITDA in the quarter for a gross margin flow through of 52%.

Higher than our normal rates due to strong pricing pricing, we delivered in the quarter.

Labor increased $6 million in the quarter, primarily driven by investments in staffing levels and talent acquisition to get ahead of peak season and drive growth in 2022.

As Brent mentioned earlier, the bulk of the costs came from approximately 35% more nonproductive training head count in the quarter compared to the same period in the prior year.

While most of our teammates on a production base plans, we did see some wage pressure on our hourly employees, but we're able to pass along price increases to cover that inflation.

As we alluded in February .

Vehicle fuel increased $2 million driven by higher prices per gallon.

Given current fuel prices, we expect to see similar increases in future periods.

As a reminder, we have approximately 90% of our fuel usage in 2022 protected with the fuel hedge which gives us more certainty about these impacts despite the volatility we see in oil and pump prices.

As Brent discussed in detail termite damage claims increased $3 million due to higher litigated claims counts in the mobile Bay area as well as higher cost per non litigated claims due in part to inflationary pressures on building materials and contractor costs.

Investments in Terminix way increased $1 million as we deployed enhanced technology and training to our teammates in the quarter.

Investments in staffing levels and training in both sales and service and our call center increased $3 million to support expected growth in the back half of the year.

And finally travel expenses increased $1 million due to the easing of COVID-19 travel restrictions.

These results are in line with our expectations for the first quarter and we remain firmly on our full year plan with needed labor investments in the quarter, increasing our staffing levels to support continued growth over the remainder of the year.

Turning to slide 10, you will see the cash flow summary for the quarter.

<unk> capital improved $11 million.

Verbally impacted by seasonal activity and the timing of interest and income tax payments.

Opex for the $7 million for the quarter included recurring capital needs and information technology projects.

Restructuring charges of $10 million, primarily included costs related to our proposed acquisition by Renato.

We expect to have additional restructuring payments related to the transaction in future periods, but will negatively impact our expected free cash flow conversion rates for the year.

Free cash flow conversion for the quarter was 73%.

During the quarter, we borrowed $80 million from a range of Oliver for short term liquidity needs repaying $50 million within the period and the remaining $30 million subsequent to quarter end.

While we did not complete any acquisitions in the quarter, we remain active with our small tuck in acquisition program.

We also used approximately $30 million to initiated restructuring of our minority interest in several businesses in China.

We expect to receive proceeds from those transactions in the coming quarters as the restructuring is completed.

As we discussed last quarter given the pending merger, we are not planning to be in the share repurchase market in the near term.

We ended the quarter with $170 million in cash and $518 million in available liquidity with a net debt leverage ratio of two times.

Overall, we are excited by the momentum we have built in our business with accelerating growth rates and investments in staffing levels and determined next way positioning us for additional profitable growth in the coming quarters.

While we are not providing guidance due to the pending merger. We are encouraged by the first quarter results and the outlook, we have for the remainder of the year.

And with that I'll turn it back over to Brad for closing comments.

Thanks, Bob.

Closing in on Slide 11, the first quarter was another quarter of progress against both our short term goals and our longer term strategic priorities, we delivered strong growth in termite and improved our growth rates in both residential and commercial pest from the fourth quarter.

With our key investments in staffing levels across our technician base, we are well positioned for continued growth as we look to spring.

Our strategic pricing plan has good momentum and runway to continue to provide support in this inflationary market and I remain confident we can continue to pass along increasing costs in order to absorb increases in fuel labor and materials in the future by.

I am encouraged by the positive feedback we have received from our frontline after deploying the first phase of Terminix way and I look forward further enhancements in the pipeline.

We remain on track with our operating plan for the year and we are well positioned to continued our trajectory into the peak season.

And our back office, we are supporting the additional closing conditions on the pending merger. We are finalizing agreements for the sale of our UK and Norway businesses and are expecting an announcement as early as next week.

Other integration planning is well underway and we remain on track for a close towards the end of the third quarter and with that I will hand, it over to Jesse to lead us through the Q&A. Thanks.

Thanks, Brad.

As a reminder, we were limited in our ability to discuss specifics on the timeline of the merger, but we are happy to take any other questions. You may have at this time operator, let's open the line for questions.

Thank you.

If you would like to register a question. Please press star one four on your telephone you will hear a three pronged technology request.

If your question has been answered and I would like to withdraw your registration. Please press. The one followed by the <unk> III one moment. Please for the first question.

Our first question comes from Tim Mulrooney.

With William Blair.

Please proceed.

Bret Bob Jesse good morning.

Good morning, Tim.

Brent I know you.

Discuss pricing.

Briefly in your prepared remarks, but I didn't catch it so I apologize if you.

<unk> already addressed this but we did want to ask about pricing given the inflationary environment.

Believe it typically averages between 1% to 2%.

On an annualized basis.

But curious how much you expect it to be.

This year on an annualized basis like for the full year, we've spoken to.

A number of different private.

Privately held companies in the space over the last couple of weeks and over the last month, who are talking about.

Significant price increases like 5% or more.

Wondering if terminix is thinking along the same lines because this could obviously.

Impact, how we're thinking about organic growth.

<unk>.

Sure. Good morning, Tim again, great question by the way first.

First of all and just as a starting statements I think we feel very good about our ability to price to recover any inflationary pressure that we're seeing in our material costs as well as some wage inflation. So regarding specific targets for the year, we're not going to provide specific numbers here, but I think it's fair to say.

Using the industry benchmark, one five to two 5%.

Feel like it's going to exceed that pretty significantly in a couple of things thats driving that procurement exited I think if you remember last year, we talked about one of our major strategic initiatives was to establish a much more robust strategic pricing team.

Leveraging stronger analytics better competitive intelligence down at the hyper local market level and I'm really pleased with the progress. The teams made last year that we're now starting to see the benefits of us being able to take the necessary price.

Feel like there is an opportunity to take and all.

Also with MIT.

Mitigating the impact we see on customer retention. So we feel very good about striking that balance.

So net net I think we feel very good about our ability to recover any inflationary pressure here and also see an opportunity here to close a potential gap that we've found in certain markets relative to the market, which I think over the long term helps fuel our objective of expanding margins in this business over the long term.

Yeah, that's really helpful.

Color, Brad and I appreciate that.

Because jessie forgot to limit us to one question I'm going to go ahead, and Darren I ask a second question really quickly.

Just as a follow up to that to ask.

When your price increases typically go into effect I think one of your competitors said second quarter is typically when the annualized price increase.

It goes into effect, but I'm curious, how you think about layering in those price increases.

Is it just for new customers or for existing customers as well. Thank you.

Yeah. Good question Tim.

We don't have an annualized price increase schedule if it happens a certain time of year, our pricing at the customer specific level based upon the terms of the contracts that we have with those customers. So in effect, we're taking pricing actions every month.

This business based upon the terms so.

So we have with our customers, which as you would expect gives us a lot of flexibility to deal with any short term trends that we might see that.

Will impact our overarching pricing objectives that we would establish there. So again, we just feel very good about the capability that we built in this area.

Adding foreseen I think some hyper inflationary environment, so were expecting like the investments we've made in strengthening our pricing analytics is certainly starting to pay off here.

Our next question comes from Ashish <unk> with RBC capital markets. Please proceed.

Hi, Thanks for taking my question if I can just build on Tims last question would it be possible for you to provide any details on what percentage of your portfolio has already been repriced higher floor the inflationary environment.

Well.

I think I'll ask Bob if it adds color to this.

Look we price on a rolling basis here so.

We look pretty strongly at customer demographics and in certain markets. We look to the competitive dynamics based upon a set of local and regional competitors and it's those two decision points I think that we do we take into consideration.

In addition to our input costs that we're seeing there. So in terms of the impact on a percentage basis of customers I'll, let Bob add some color to that and if you recall, we started taken price really in Q3 of last year.

So we're just continuing that momentum among Brett mentioned and the fact that we.

We put together a team that started looking at more strategically in the back half of last year. So we are seeing some kind of a tailwind in the first quarter and second quarter of this year, but it will start to level off in the back half of the year.

That's very helpful color and maybe just on my follow up can I I just wanted to drill down further on the cross sell opportunity. There was several references to improve cross selling and now that youre well staffed we could potentially see better cross selling going forward I was just wondering if it's possible to provide any color on.

How much of your existing customer base as penetrate data how do you think about the cross sell opportunity.

Any color there would be helpful. Thanks.

Great Great question, and maybe I'll point back to a metric we shared on our last call.

There's four core services, we offer to customers at Terminix General pest control termite mosquito and wildlife exclusion and across those four services today on average our customers are buying one three of those four services. So.

About a year ago, we identified this as a significant growth opportunity for us to develop deeper.

Our relationships with our customers in an effort to drive higher penetration.

Really pleased as I made in the prepared remarks, but we launched our first initiatives to fully capitalize on that opportunity by launching the first phase of the Terminix way in Dallas now, although there is two parts of the Terminix way ones focused on training and Onboarding, our technicians to create a good experience that allows them to get to.

Our full performance faster, but also there was an element of terminix way to unlock the power of the upsell or cross sell by putting in the hands of our technicians and easy to follow an inspection process that allows us to quickly translate the.

The results of that inspection into an up sell opportunity with the customer, but also make it really easy for the technician to do that we've talked about one button execution of amending contracts on the customers' front step. If you will that makes it really easy to do that and as we shared the prepared remarks, although the data is pretty small sample size.

Very very encouraged by how quickly our team is ramping up and driving better leads through this process that we implemented as well as a higher close rate on those leads as well. So naturally as you would expect the excitement that we're seeing with that cross sell opportunity is allowing us to challenge the team to accelerate rolling that initial.

It out across our branch network in the upcoming months.

As a reminder to register a question. Please press the one followed by the four on your telephone.

Our next question comes from George Tong with Goldman Sachs. Please proceed.

Hi, Thanks, good morning.

You mentioned that.

The merger is on track to close in <unk> can you discuss what remaining closing conditions there are.

In order to compete.

A complete successfully complete the merger and then also the divestiture in the UK.

Elaboration on that sounds like something might be announced over the next several days.

Sure. Good morning, George This is Brett as.

As we said we're still targeting late Q3 for the close there is three or four.

Remaining steps that we need to take care of you characterized the first one the terminix needs to execute as the sale of our UK and Norway assets and I'm really proud of the progress. Our team has made there we run a pretty robust process a lot of interest in those two assets and we would expect in the next week or so to be in a position.

<unk> to announce the future direction of those two.

Assets in our company. So we're on track there to get that condition to close completed.

In parallel we're working on the proxy.

And all of that work is on track the SEC of course need to review that proxy.

Mark that processes proxy effective of course that will allow US then to send the proxy to our shareholders. We would expect to vote then.

Taken probably 30% to 45 days later, so so all of those major events.

Comfortable with a late Q3 timeline and it's probably worth noting here that these items, we talked about at this point are very procedural in nature. So it's just a matter of us executing the process.

And the team is.

Fully focused on this and we remain committed to this late Q3 closing timeline.

George This is Bob by the way one thing we'd like to call out also related to the UK and Norway as those two assets combined represented about $60 million annually on from a revenue perspective in less than $10 million from an EBITDA perspective.

Got it very helpful. Thank you.

Our next question comes from Brian Butler with Stifel. Please.

Please proceed.

Good morning, Thanks for taking my questions.

Good morning warmer.

Can we start with the.

The EBITDA bridge that you provided.

Any helpful helpful for the first quarter can you talk maybe about how that that trend.

And the give and take look heading into the second quarter and maybe the remainder of 2022.

Yeah, we got to be careful obviously will not provide any type of guidance here, but.

We are very similar to what we had mentioned last quarter is that obviously, our revenue conversion rate should be consistent with what we've said in the past, which is roughly a 30% flow through.

The labor investments that we've made in the first quarter, we will obviously continue through the second quarter.

We did make some investments in the back half of last year.

So that will start to taper off in the back half of the year and then there are some investments in Terminix way.

It was only a $1 million in the quarter, but it is a significant amount.

Amount during the balance of the year and then the largest had when I would say would be fuel.

Even though we are hedged it isn't about a dollar per gallon more than the prior year and on a usage of $10 million to $12 million million gallons.

A rather significant headwind.

Maybe just add some color Brian to some some context here.

Well first of all we're right on where we thought we'd be at the end of Q1 here.

If you go back to last year, if you remember pretty strong margin performance in Q1 of last year driven by.

Unfortunately lowest labor.

Staffing levels that we've seen in a long time coming out of Covid. So rebuilding our staffing levels really positions us well heading into the peak quarters of Q2 Q3, if you remember last year, we had some headwinds.

Say due to shortness in staffing and when you overlay the Copa San in sourcing work that we took on in Q2 Q3 that certainly created a little bit of a headwind for us so so.

So we're not we're now lapping that this year in a much stronger labor position is a result of the investments we made in Q1. So we feel like we're well positioned to capitalize on probably accelerating performance in our business in the second half of the year and I think some of the conversations we've had in the past about margin expansion throughout the year I think that we're on track to the <unk>.

And to have that occur.

Okay. That's helpful and then as a.

A follow up when you talked about organic growth in the commercial it was negative in the first quarter, but looking to trend positive.

In 2022, how does that work through the year is that kind of just be it's going to be positive a little bit kind of going into the second third or is it going to really be backend weighted with a lot more organic growth potentially in the third and fourth quarter.

Yes, I think first of all maybe just to clarify areas as reported we were down 1%, but when you adjust for FX. This infection.

Plus 2% growth organically here, so and Thats a sequential improvement versus Q4. So we're encouraged by the momentum that we're seeing in our commercial business on the domestic front in an improving environment I think now in Q2 and our international business. So we would expect to see I think acceleration and our.

Our commercial business as we progress through the year here.

There are no further questions at this time, ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.

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