BrightView reports solid start to FY2024, strategic sales boost By Investing.com

BrightView Holdings , Inc. (NYSE: NYSE:), a leading commercial landscaping services company, has reported a solid start to fiscal year 2024, emphasizing strategic initiatives and a robust sales pipeline. The company has made significant progress with its One BrightView strategy, resulting in the successful sale of its non-core U.S. Lawns franchise business for $52 million.

This move is part of a broader effort to concentrate on high-quality, profitable business avenues and reinvest in its core operations. BrightView has maintained its financial outlook for the full year, projecting flat to 5% revenue growth and expecting to generate free cash flow in the range of $45 million to $75 million.

Key Takeaways

• BrightView executed its One BrightView strategy, aligning sales with local branches and reintegrating core businesses.
• The company sold its U.S. Lawns franchise business for $52 million, which will be reinvested in core operations.
• BrightView reported six consecutive quarters of growth and margin expansion in its development business.
• Full-year financial guidance remains unchanged, with expectations of revenue growth between flat to 5%.
• The company plans to generate free cash flow between $45 million to $75 million.

Company Outlook

• BrightView aims to become the employer of choice by investing in employees and streamlining organizational structures.
• The company plans to focus on fleet replacement, purchasing new lawn mowers, and enhancing employee health and safety with the proceeds from the U.S. Lawns sale.
• They expect total revenue of $2.825 billion to $2.975 billion and adjusted EBITDA of $310 million to $340 million for fiscal ’24.

Bearish Highlights

• The maintenance land business experienced a 5% organic decline in Q1, partly due to Hurricane Ian.
• Demand for ancillary services declined in Q1, attributed to the hurricane comp issue.

Bullish Highlights

• BrightView reported a strong backlog in its land business, with a 10% year-over-year increase.
• The development business backlog is sold through this year and into the first half of 2025.
• Development revenue growth exceeded expectations in Q1, contributing to the optimistic full-year guidance.

Misses

• The company experienced a shortfall in Q1 but saw strong activity in January.

Q&A Highlights

• BrightView is evaluating an aggregator business, with plans to update on this evaluation by the end of Q2.
• The company is reviewing over $700 million in potential M&A opportunities, with a focus on strategic fit and cultural alignment.
• Management stressed the importance of centralizing non-customer-facing work to improve customer service and maximize value.

BrightView Holdings is poised for what could be a breakthrough year, with the company’s leadership expressing confidence in achieving EBITDA and EBITDA margin expansion. The strategic divestiture of non-core assets and a focus on profitable growth are central to BrightView’s strategy. The company’s CEO is optimistic about the opportunities ahead and remains committed to creating shareholder value.

InvestingPro Insights

BrightView Holdings, Inc. (NYSE: BV) has shown resilience and strategic focus as it navigates its fiscal year 2024, bolstered by the successful execution of its One BrightView strategy. The company’s commitment to profitable growth is reflected in the InvestingPro Tips and real-time metrics, which provide a more nuanced view of the company’s financial health and market position.

InvestingPro Tips suggest that analysts are optimistic about BrightView’s financial trajectory. Net income is expected to grow this year, and three analysts have revised their earnings upwards for the upcoming period. This could signal confidence in the company’s ability to capitalize on its strategic initiatives and enhance its financial performance. Additionally, the company’s liquid assets surpass its short-term obligations, indicating a solid liquidity position that may support ongoing operations and strategic investments.

The InvestingPro Data metrics offer additional context to the company’s market valuation and profitability outlook. BrightView’s market capitalization stands at $831.79 million, with a forward-looking P/E Ratio for the last twelve months as of Q1 2024 at 39.69, suggesting investors are anticipating earnings growth. Furthermore, the company has demonstrated a strong return over the last three months, with a 28.3% price total return, reflecting positive market sentiment and possibly the impact of its strategic sales and operational improvements.

For readers interested in deeper analysis, there are additional InvestingPro Tips available as part of the InvestingPro subscription, now on a special New Year sale with discounts of up to 50%. Use coupon code SFY24 for an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 for an additional 10% off a 1-year InvestingPro+ subscription, offering valuable insights for informed investment decisions.

While the company does not pay a dividend to shareholders, the focus remains on reinvestment and growth, which could be appealing to growth-oriented investors. BrightView’s strategic moves and financial outlook, enriched by InvestingPro insights, paint a picture of a company poised to navigate the fiscal year with a clear vision for profitability and growth.

Full transcript – BrightView Holdings (BV) Q1 2024:

Operator: Hello, and welcome to the BrightView Holdings’ Q1 2024 Earnings Call. My name is Elliot. I’ll be coordinating your call today. [Operator Instructions]. I now like to hand over to Chris Stoczko, Vice President of Finance. The floor is yours. Please, go ahead.

Chris Stoczko: Good morning and thank you for joining BrightView’s First Quarter Fiscal 2024 Earnings Call. Dale Asplund, BrightView’s President and Chief Executive Officer, and Brett Urban, Chief Financial Officer, are on the call. I will now refer you to Slide 2 of the presentation, which can also be found on our Investor Relation website and which contains our safe harbor disclaimer. This call may include forward-looking statements subject to certain risks and uncertainties. In addition, during this call we will refer to certain non-GAAP financial measures. Please see our 8-K issued yesterday for the reconciliation of these non-GAAP financial measures. I will now turn the call over to Dale.

Dale Asplund: Thank you, Chris, and good morning, everyone. I will start today’s call on Slide 4 with some highlights for the first quarter and then provide an update on our strategic initiatives. I’m pleased to report that we are off to a solid start in fiscal 2024 as we achieved meaningful progress on our objectives outlined under One BrightView. On our last earnings call, we set a clear and refreshed strategy, prioritize our employees, align our core businesses while ensuring our customers come first, focus on profitable growth and unify the company under One BrightView. During the quarter, we began to successfully execute on this strategy by aligning our sales force to our local operating branches, reintegrating core self-perform businesses back into our branches, deemphasizing non-core portions of our business and continuing to focus on pursuing higher quality, profitable business. While these actions led to a modest impact on our land maintenance revenue for the quarter, I am confident we are taking the necessary steps to ensure growth in the medium and long term. I’m also pleased to report that for the 6th quarter in a row, our development business once again showed significant growth and margin expansion. Additionally, we are proving our commitment to becoming more efficient and removing cost with improvement in our corporate segment. I’m encouraged by the underlying momentum in our business as we execute our renewed strategy. And as a result, we are reiterating our financial guidance for the full year. Additional evidence of our strategy in action was the sale of our U.S. Lawns franchise business in January for roughly $52 million. This was a non-core business that did not align with our strategy around self-performance and capital allocation. This move underscores our focus on the core business, but also highlights the value of achieving profitable and reoccurring growth. We have attained a substantial valuation in the private markets, well above our current trading multiple, providing proceeds that we intend to reinvest in our core business. The enhancements we have made in our business align with our overarching initiatives to operate as a unified BrightView. Throughout the quarter, we made progress implementing our strategy across the entire organization. We believe successful execution of our One BrightView strategy will unlock significant long-term shareholder value. This starts by focus on becoming the employer of choice, and we are doing this by reinvesting in our core businesses and our employees. We are making investments in our fleet and investing in the health, safety, and development of our team. We are also streamlining and optimizing organizational structures at the branch level, resulting in a revitalized go-to-market strategy. And we renewed our focus on improving how we service our customers with the goal of increasing retention and growing profitably. Alongside these efforts, we took measures to better align our capital allocation priorities with our branch-level needs and our broader initiatives throughout the organization. On Slide 5, we show One BrightView in action and provide a few specific examples of the improvements we have made in the early stages of this value creation journey. Under this, we realigned our sales efforts and implemented an incentive plan to ensure the entire organization, from the branch to our corporate office, is focused on driving profitable growth. Furthering the collaboration throughout the organization, we put in place a cohesive customer first go-to-market strategy. We also enhanced our customer survey, which resulted in improved response rate and is helping us to gain an even deeper understanding of our customers and their needs. We are leveraging these findings to further refine and strengthen our go-to-market approach. An example of this go-to-market strategy was the reintegration of our tree and golf services into our core maintenance branches. This streamlines operations internally, but also helps us deliver more efficient, collaborative, and unified services for the customer. We are focused on becoming the partner of choice and taking actions to enhance our positioning, which will allow for opportunities to grow our business with existing customers and win new customers. As the nation’s largest provider in our industry, there is tremendous opportunity to leverage our size and scale to drive efficiencies across the business. While improving essential functions such as safety, training, and the centralization of operations to better align and support our core business. Moving to Slide 6. And before turning the call over to Brett to discuss our financial results for the quarter, I want to remind everyone that the focus of One BrightView begins with becoming the employer of choice. We do that by putting our employees first and by developing a culture where people seek to achieve individual and group success. We prioritize our employees, so they have the capabilities, training, and equipment required to do their jobs at a high level. Doing this materially impacts the level of service provided to customers and leads to an exceptional customer experience. By making these investments in our employees, and in turn employees taking care of our customers, we will become the partner of choice in our industry. We are focused on improving customer retention and accelerating profitable growth by bringing on new customers and expanding relationships with existing customers. Once we have established a strong foundation for profitable growth in a unified BrightView, we will be in a position to expand strategically. M&A can be a powerful lever for growth and generate meaningful returns on capital, but only when it fits strategically, culturally, and financially. As One BrightView, we have the best at what we do, and I’m confident that we can continue to deliver on these goals. With that, I’ll turn it over to Brett, who will discuss our financial performance and outlook in more detail. Brett?

Brett Urban: Thank you, Dale, and good morning, everyone. I’ll start on Slide 8. I’m pleased to report that fiscal ’24 is off to a good start with our strategy towards One BrightView showing positive signs in the first quarter. A continued focus on profitable growth and land maintenance, another quarter of strong performance and development and execution of our cost efficiency plan led to quality revenue and EBITDA margin expansion for the business. Important to note, during the quarter, our performance was impacted by the year-over-year decline in snowfall. When normalizing for snowfall consistent with the prior year, our overall profitability and margins would have shown significant improvement. More to come on that later in the presentation. Our enhanced net working capital, coupled with the timing of capital intensity and reduced interest expense resulted in a meaningful increase of free cash flow compared to the prior year. This resulted in a net leverage ratio of 2.9x, allowing for financial flexibility for ongoing execution of our profitable growth strategy and investments in the business. Moving to Slide 9. Total revenue during the quarter decreased 4.5% year-over-year to $627 million. Maintenance was impacted by snow that decreased $22 million due to lower snowfall, a decline in ancillary services and the continued focus on core self-perform business. Partially offsetting these headwinds was the solid demand in our development business, which grew by an impressive 6.3% compared to the prior year due to our ability to convert our strong backlog into higher project volume. Development’s performance in recent quarters reflects the appealing nature of the business model, while also creating momentum and opportunities for future growth. Turning now to profitability and the details on Slide 10. Total adjusted EBITDA for the first quarter was $46.7 million, a decrease of roughly $2 million, reflecting early benefits from our One BrightView initiatives and improved profitability, offset by the impact of lower snowfall. As I mentioned before, on a similar snowfall to prior year, Q1 EBITDA would have exceeded the prior year results. In the maintenance segment, total adjusted EBITDA of $42 million was down $8 million compared to the prior year, driven by the previously mentioned revenue shortfalls, which were primarily related to snow. In the development segment, adjusted EBITDA for the first quarter was $19.6 million, an increase of approximately 19% compared to the prior year. Adjusted EBITDA margin expanded 110 basis points, which marks our 6th consecutive quarter of development margin expansion. This is a result of the quality backlog conversion while simultaneously reducing our costs, ultimately resulting in accretive growth. In our corporate segment, expenses for the first quarter decreased year-over-year as we made significant progress with our One BrightView strategy to increase efficiencies across our core functions and reduce overhead. Turning now to Slide 11 to discuss the timing impact of snow. As I alluded to earlier, and in an effort to enhance transparency in evaluating our quarter’s performance, we have normalized Q1 results for snowfall, assuming comparable levels with the previous year. The comparison highlights the increase in EBITDA and additional margin expansion, underscoring the effectiveness of our initiatives and commitment to achieving more profitable growth. Also, this emphasizes the importance of evaluating our business on a full year basis as the timing and magnitude of snowfall changes year-to-year. For example, this year we didn’t see snowfall in late December, but we did see meaningful snowfall in January. Let’s now turn to Slide 12 to review our free cash flow, capital expenditures, and debt. For the quarter, we are extremely pleased with our free cash flow generation of $17 million compared to a usage of $55 million in the prior year period. As we communicated on our prior call, we are committed to reinvesting back into the core business and executing our renewed capital allocation strategy. With this said, we are maintaining our cash flow and CapEx guidance for the full year. Net leverage for the quarter came in at 2.9x compared to 4.9x in the prior year period. The lower leverage reflects a significant reduction in our debt as a result of One Rock’s investment, improved liquidity, and profitability growth in the business. Our leverage profile allows for financial flexibility for ongoing execution of our profitable growth strategy and investment in the business. Moving to Slide 13. And as Dale mentioned earlier in the call, we are executing on our strategy by focusing on our core business. A positive example of this action is the divestiture of our non-core U.S. Lawns franchise business. We sold this business for roughly $52 million in proceeds, reflecting a double-digit EBITDA multiple. This opportunistic transaction generated meaningful returns and allows us to better focus on our core business and reinvest proceeds into driving further efficiencies and profitable growth. We plan to use these cash proceeds to accelerate the execution of our capital investment plan by replacing aging fleet, buying new lawn mowers, and continuing to make significant investments in the health and safety of our employees. Let’s now turn to Slide 14 to review our outlook for fiscal ’24. Profitable growth will continue to be our guiding factor and key focus. I am pleased to reiterate that we are reaffirming our full year revenue, EBITDA, and free cash flow guidance. We expect total revenue of $2.825 billion to $2.975 billion, reflecting a range of flat to 5% revenue growth. We continue to assume the following underlying assumptions. In maintenance, we expect our focus on profitable growth to continue to have a near-term impact to remain encouraged by the underlying health of the market and recent trends within our business. For snow, our fiscal ’24 guidance range assumes flat at the low end and a 5-year historical average at the high end. While Q1 started slow, we saw a meaningful pickup in snowfall events in January as we moved into the second quarter. And for development, the growth and conversion of our strong backlog of projects will continue to benefit revenue. Moving to adjusted EBITDA. One BrightView will be the key driver of the growing profit and expanding margins. In fiscal ’24, we continue to expect margin expansion in both maintenance and development segments benefiting from key initiatives and disciplined management of the business. We expect these improvements to generate total margin expansion of 40 to 80 basis points and adjusted EBITDA of $310 million to $340 million. In fiscal ’24, we expect a continuation of healthy cash flow generation driven by profitable growth and improved operating performance. Our outlook reflects our commitment to growth and investment in our core business. Contributions from reduced interest expense will be managed alongside the ongoing requirements to optimize the business. Altogether, we continue to expect to generate free cash flow of $45 million to $75 million, supporting the financial flexibility we maintain today, while enhancing our ability to generate future profitable growth. With that, let me turn the call back to Dale to wrap up on Slide 15.

Dale Asplund: Thank you, Brett. Before opening the call for questions, I would like to provide a few final thoughts. We are making significant progress on our goals, and we are seeing the returns on these efforts begin to materialize in our results and gaining traction across the company. As we transform this business, I continue to believe there are tremendous opportunities ahead of us. We are moving this business forward, and we are strategically positioned to accelerate profitable growth and to create meaningful value for our shareholders. We will now open the call for questions.

Operator: [Operator Instructions] Our first question comes from Bob Labick with CJS Securities.

Bob Labick: We’re very excited for the transformation you’re driving at BrightView.

Dale Asplund: Thanks, Bob.

Bob Labick: I wanted to start, you gave us some great details in the introduction for sure. Maybe you could start with some of the key metrics, key operating metrics, you’re focused on improving this year, fiscal ’24, and how you’ll share that progress with investors throughout the year?

Dale Asplund: Yes. That’s great. I would just say it’s the number one message that we’re monitoring is profitable growth. I think that’s the reoccurring theme that we keep talking about. But we want to make sure, as we grow this business, we’ll grow in the bottom line. So expanding margins, making sure we see growth in our EBITDA is critical in our path forward. We have a lot of internal metrics, Bob, that we’re monitoring. And some of the work that we did over the summer, during the transition, as Jim stepped in to help the business and we transformed the Project Liberty, really got us going on a lot of internal work, such as customer retention and conversion rates. We’re monitoring that on a daily basis, but we won’t be sharing that externally. I think from the external view, profitable growth should be that north star that you guys stay on top of. But, Brett, do you want to add anything?

Brett Urban: Yes, Bob, I would just say absolutely profitable growth, moving towards One BrightView as you see in the strip, aligning the business, aligning our sales force, aligning incentive plans and making sure everyone is marching towards the same profile growth goal. Absolutely part of our drive. I’d say the other thing is core business focus. And a huge highlight in the quarter or a subsequent event to the quarter was us divesting our non-core U.S. Lawns franchise business. And as we move forward, I think if we were to share any more data or information publicly, it’d probably be on our non-core businesses and some of the impact they have on the total. But really, really excited as you think about the quarter, and you think about that subsequent event for U.S. Lawns. I think if we’re going to share more, it’s going to be more things like U.S. Lawns type non-core businesses that we’re focused on evaluating and figuring out they fit long-term in the portfolio.

Bob Labick: And then you touched on this in one of your bullets as well, but maybe expand a little on, how do you get the benefit of scale as the largest operator in the U.S., but it’s a decentralized business? So it’s kind of like opposite ends there. So how can you improve operations and get the benefit of your scale based on where you stand today?

Brett Urban: Yes. So I think obviously, leveraging our size and scale and the more we can look to centralize, the more we can leverage and create consistency across our business and allow all of our frontline operators to really focus on the customer. So we have so many things that today we might still have out in the field with our branches focused on that we’ve got to rethink and centralize and leverage the size and scale. So we not only do them more consistently, we can do them more efficiently. So I think a good one that we’re working on right now, Bob, as an example, we just started the process of taking our field finance partners and centralizing them to drive that efficient and more consistent support of our field operators. You can see this and even the way we’re doing it, Bob, if you look at our numbers that we just reported, our corporate cost structure came down by $3.5 million year-over-year in Q1. So there’s a huge opportunity to centralize and do it more efficiently. So it’s a double benefit when we do it right. So I hope that gives you a little more detail.

Bob Labick: And last one for me, I promise. I think I know the answer, but I just want to kind of hear you guys say it again. In terms of — if you look out 3 to 5 years and the growth or the profitable growth of BrightView, will it be more account growth and retention? Or will it be more higher margins per account as the key drivers? Where is the focus on pricing and margin per account? Or is it more accounts, better retention, et cetera? How would you distinguish between those 2 things driving your growth?

Dale Asplund: Yes. I think it’s all of the above, we can start with. I think the first and foremost focus we have and our partners have One Rock are helping us as we try to set focus on this. And we actually saw a modest little improvement in Q4 year-over-year is the retention of existing customers. And we have to make sure that the customers that are our customers today, see the value we provide and continue to be our customers long-term. And if perhaps the service they’re getting doesn’t match the level of price they’re paying, we’ve got to work with them and figure out how we can provide the service that matches the price or figure out a way to make sure that the price gets adjusted to the right level. But obviously, keeping our existing customer base is key to driving growth in this business. But it’s also making sure, Bob, we’re going after the target customer segment we have. The franchise business we sold was more focused on a little bit of the residential business, which is not our focused end market. We want to go after the commercial business that’s our target customer that the size and scale of BrightView, we can add value across the nation. So it’s going to be both. Make sure we retain every account we can, make sure our customers see the value we provide and then grow as many new accounts that fit our target audience at the right price that we can. And when we do that, you’ll see that organic growth start coming back into the business.

Operator: We now turn to Andy Wittmann with Baird.

Andy Wittmann: This whole strategy about kind of focusing in on the core and then exiting things that are seen as non-core. Obviously, the franchise transaction here subsequent to quarter end is a good example of that. I think you guys have also talked about some of your national account business is something that you’re looking at as well. And then there’s the whole just kind of basic thing of there’s some customers that you’re probably servicing right now that aren’t very profitable. So I guess, taken as a whole, maybe, Dale, could you talk about, one, a little bit more of the detail behind why franchise business was non-core and how that computes and what the thought process is on the national account business there too? Some of that business — I’m not talking to national account, I’m talking about externally serviced national account business, I think you call it BES or something like that. Maybe you can talk about what that means and what kind of look that’s getting? And then where you are, how far along are you on portfolio customer review and exiting those customers, which really don’t give you the return or the profit margin that your services should deserve? Kind of a long question, but I think they’re all kind of thematically relevant together.

Dale Asplund: I think I’ve got them all weaved in my head, so let’s try to get through them, Andy. So first of all, why is the U.S. Lawns non-core to us. We are transforming this business and we are trying to develop better ways to support our branches and our sales force out in the field. Our U.S. Lawns’ non-core franchise business was getting all the benefits that we’re providing our branch managers by being part of our franchise network. Yet they really were not targeted at going after the same customer base. But over time, unfortunately, as they transitioned from some of the residential customers to more of the commercial, we began to see those direct franchisees competing against our local branches using the similar playbook and tool book, leveraging our estimating skills, leveraging our purchasing power to run their businesses. That’s not what we want to do. We want to make sure that the investments we make to improve this business goes to the benefit of our branch managers and the branches out in the field. And the added value was, we were able to get a significant multiple above our trading level today to divest this business. So it was a great choice for us to divest an $11 million of revenue business and gets $52 million roughly for it. Now, the other area that you talked about; you classified it correctly. Not really national accounts. We still believe we can add huge value to our national account group, but more of the non-core business that we outsource, and we really act as a broker on. And we are an aggregator for customers to come to and then we work with local providers to provide that service. There again, that business is going to fall into 1 or 2 buckets, and we’re evaluating this right now. It’s going to be a business that we want to self-perform, and we can add value and we can be the service provider and control the quality the customer gets. And the other part is going to be customers that we don’t target on a daily basis, and we’re 100% dependent upon those local providers to service the customer. That is too much of a risk for us, and we don’t want to jeopardize our relationship with big accounts that we don’t control the end service. So we are going to evaluate that aggregator business, and we’re going to decide how that will make sense for us on a go-forward basis. And we’ll give you guys everybody on the call an update at the end of Q2. And that business today is broken into both snow and land. And we’re working with all those partners on snow this year, and then we’re making determinations on land, which will be coming up for the summer in most markets. So I think that hits 2 of them. Did you have another piece of it?

Andy Wittmann: Well, this whole idea of just portfolio review of your underlying customers and customer access, the whole idea of addition by subtraction. And anything you could do just to maybe clarify this one and make a little finer point. Is there a revenue number that like seems like a minimum that like just needs to not happen next year, and we should be thinking about in our models since we look at them?

Dale Asplund: Yes. Good question. I think I would just say, overall, with roughly, let’s just call it 50-50, 60-40, it depends on how much it snows. Our brokerage businesses, like we have said in the past, is roughly about $100 million. So — and we’ll give you an update on Q2. It gives you exactly how much we think we can self-perform and how much we’ll look at transitioning out. On the other larger accounts, I think our team has done a pretty good job continuing to mitigate some of the ones that has inflation work through the business, they weren’t priced right. So the team continues to make some progress there. We do have some larger contracts that were done at a time that maybe it wasn’t a focus to be profitable growth, and it was more to grow the business. So we’ve done some adjustments, a few large municipal contracts with multiple years that we still have that we’ve got to work through. But I would tell you, Andy, we should be able to outrun that business just with our sales efforts that we’re doing. If we’re going to give you any headwinds from our revenue, it’s going to come really from that aggregator BES business that you mentioned. And we promise we’ll get through the snow season with our customers, and we’ll give a full update once our branches decide where and where they can best self-perform the work that we have. But great question.

Andy Wittmann: And then just my follow-up here. It has to do with snow. So you guys, obviously, December is what it was. To get to the low end of your guide, you need $170 million effectively here in the March quarter. And so I guess, as you sit here with a big snowstorm that hit through January, how much more do you need in these last 2 months to get to that low end?

Dale Asplund: Yes. So we don’t want to obviously give inter-quarter numbers. But what we can indicate to everybody, we have confidence in our range, and we feel like Brett had said in his opening comments, Andy, where we are as we work through Q1 and January, we feel we’re pretty close to where we were last year, which makes us feel very comfortable that we will land in that range. And I just remind everybody, last year, February and March were relatively low snowfall. And that still got us to $210 million of revenue. So we actually think there could be more of that upside. That’s why we kept that range with a midpoint somewhere around 240. But we’re very, very comfortable, Andy. We’re going to get in the low end minimum and probably more towards the midpoint of that range when we think about it if it snows like what we’ve seen in the past in February and March.

Operator: Our next question comes from Tim Mulrooney with William Blair.

Tim Mulrooney: Yes. So Brett, if I’m doing the math right, it looks like the maintenance land business was down about 5% organically if you exclude that 3.2 million acquisitions. Am I doing the math right there?

Brett Urban: Yes. On the total, you’re doing the math, right, Tim, it’s about $19 million for land.

Tim Mulrooney: For maintenance land. Yes, yes. Excluding snow. So my question is, did that hit your expectations? Or was it a little softer than you expected? And I’m asking because based on the midpoint of your guidance for this segment for about flat organic for the full year, starting the first quarter down 5%, flat for the full year at the midpoint, it looks like you’d be expecting a pretty strong second half of the year. Am I thinking about that the right way?

Brett Urban: You are thinking about that the right way, Tim. As you look at our first quarter, we did — we’re not giving quarterly guidance. We came out last — at the end of Q4, gave annual guidance. And we tried to say the first couple of quarters may be a little choppy and more towards the negative 2% or a little bit more than that end and then the back half of the year would be flat to the positive end. But a couple of things to call out there in Q1. We did expect right around where we land. And the biggest piece that we really didn’t talk a lot about at the end of Q4, and we’re not really talking a lot about now, but it’s the hurricane we had last year. We had Hurricane Ian come through the southeastern part of the United States. That was roughly half of our land and this came from that hurricane year-over-year comp. And the other half is essentially what we expected by focusing on our core business, deemphasizing our non-core business, and continuing to work through the profitable growth. Tim, I think as you move into the last 9 months of the year, I think you’d expect, there won’t be a comp for hurricane in Q2, but there will be some of that work still ongoing with focusing on our core business, deemphasizing, as Dale mentioned, our non-core business, specifically our aggregator business called BES. And we are working through snow now. But when it comes to land, we’ll have a fulsome update here at the end of Q2 because we’re actively working through negotiations with clients now, and we expect those to be done — primarily done here by the end of Q2, and we’ll give an update on, if any, impact will come from that business, what that looks like for Q2, 3 and 4.

Tim Mulrooney: That was very clear. Thank you for walking me through that. So I got that. I wanted to ask about your — switching gears here a little bit to the ancillary work, which I know you highlighted some softness in the ancillary business this quarter. And maybe you even made reference to it last quarter too, I don’t remember. But my questions on the ancillary are, #1, curious what you think is driving that decline in demand. Would just be interested in your perspective. And because I know that out of scope work can sometimes be helpful to margins, and I would assume that’s something you might have seen more of. And #2, sorry, what percent of your maintenance land business would you estimate is a player revenue versus base contract revenue? I think I remember on the IPO, it was like 75-25. I don’t know if that ratio is still relevant. Sorry to cut you out there, Brett.

Brett Urban: Yes, no problem, Tim, sorry to cut you. I’ll start with the second question. Yes. Ancillary to the total land revenue is about 75-25, maybe even 70-30 range or what’s contract, other specialty services versus pure ancillaries. So that’s kind of generally the way if you take the full land, the land revenue. But back to your original question, we did see declines in Q1. Majority was Ian. If you think about the total, Hurricane Ian that happened last year, think about the total Q1 comp, all that hurricane revenue was ancillary revenue. That came to the southeastern part of the United States. And as you sit here today, we really didn’t have any ancillary issue in Q4 coming out of last year. We don’t expect to see any ancillary challenges in the back half of this year or back 3 quarters of this year. Our ancillary backlogs are at an all-time high. We — some of that’s dependent on seasonality and weather as we put it in the ground. If it snows a lot more here in Q2, we may do a little bit less ancillary in Q2, but the backlogs are at an all-time high. If you look at that number, which we track, we don’t disclose total, but it’s up roughly about 10% year-over-year and what we’re bidding and customers are buying, and that’s specifically in the land business.

Tim Mulrooney: So actually — that’s good to be here because I kind of think about that as a good sign of demand generally. If folks are willing to spend a little bit more on this or that throughout the year. So there’s no signs of a decline in demand. It’s just…

Brett Urban: Yes, Tim — I think that’s an important —

Tim Mulrooney: Kind of a hurricane comp issue.

Brett Urban: Yes, Q1 is the hurricane comp issue for ancillary, that’s why we called it out in the Q. But as you think about the health of the business, the market, we see no signs of any type of weakness in the market. We see ancillary backlogs in our land business, up about 10% year-over-year. We see our new sales pipeline in the land business up year-over-year. And if you look at our development business, we are seeing extreme positivity in that business, not only on the margin side, but from a revenue growth side, it’s been 6 quarters in a row. We’re really growing that business at mid-single-digit growth rates. And our backlog for development is essentially sold through this year, and we’re selling into the first half of 2025 at this point. So we see really positive signs of momentum, not only on the upselling on the land side of the business but also on the development side of the business.

Operator: Our next question comes from Andrew Steinerman with JP Morgan.

Andrew Steinerman: This is Alex Hess (NYSE:) on for Andrew Steinerman. I just wanted to dive into sort of the tension between centralizing and decentralizing here in the business. I know this isn’t the first time that BrightView has made structural changes and what roles become centralized, what roles become decentralized. Dale, it may be helpful to hear your thoughts on that. And then I have a follow-up question on capital allocation.

Dale Asplund: Yes. There’s — it is the #1 way that we can add value to our field operations people by taking noncustomer-facing work away from them and centralizing it and allow them to spend more time with customers, which will inevitably help us be a better partner to our customers. So there are things, Tim, when we talk about interacting with the customer, that for — I’m sorry, Alex, that we definitely want to do at our branches, and I want every branch focused on those customer-facing activities. And then there’s the nonvalue things that you have to do to process whether it be AP or collect AR or support financial functions that we don’t want our operators distracted by. We want them focused on customer-facing work. So I know that the company has come back and forth from centralization to decentralized. But even when they decentralize stuff, a lot of the area was just decentralizing it to different markets. It wasn’t giving everything directly back to the branch. So if we’re going to centralize, we’re going to put the right way, and we’re going to bring it all the way to upside, we can get the maximum value for.

Andrew Steinerman: And then thinking about capital allocation at BrightView. Obviously, there have been some priorities here that maybe got you into some non-core businesses and led to some acquisitions that didn’t scale the way that they were desired. Just from like a metric standpoint, how are you sort of thinking about measuring success in capital allocation to return on invested capital framework? Is there anything sort of you’re thinking of how to measure success that maybe moves beyond these consolidated measures that you guys discussed?

Dale Asplund: Yes. I think the — you mentioned some of the challenges we’ve had is we’ve deployed capitals, and we haven’t traditionally been great stewards of that capital as we’ve deployed it. So our M&A process, that — the first thing I did with the team, and I am so happy with the progress we’ve made is tap the brakes on M&A because like I’ve said, M&A is not just a financial move. It has to fit the company strategically and culturally as much as just making the math work. And even the process for integrating that M&A that we’ve done in the past, when we buy a company, we have to own that company and be a better owner of that asset immediately. We can’t have earn-outs. We can’t just let the asset linger out there for a period of time before they become part of the BrightView team. So our M&A process is going to drastically change, and our field operators are right now reviewing — we have over $700 million of potential M&A, and our group has reviewed it to say which one of these potential targets make the most sense for us to bring into our company that we can be a better owner and they can help us that we can grow their revenue faster or drive more efficiency and create bottom line returns. We haven’t done that in the past, and that is a major shift for us. I am a huge believer in M&A, but M&A has to be done the right way. It can’t be a financial calculation that nobody understands the business and the people that work there actually are involved in the decision. So it is changing. And look, we’ve got to monitor M&A and how we’re a better owner. We’ve got to make sure, post deals, we know what improvements we’re making to make more EBITDA and more revenue on the business that we acquire.

Andrew Steinerman: And then maybe to wrap up, can you highlight any sort of tangible or intangible strategic assets that when you look at BrightView now from your sort of outsider becoming an insider vantage, you say, oh, these are true strategic and competitive assets that are distinct from our competitors and distinct in the market.

Dale Asplund: It’s a great question. I would tell you, what excites me most about this is the closer — I’ve visited not quite 1/3 of our branches, but I’ve been spending most of my first 120 days out interacting with our frontline team. The closer you get to the customer, the more dedicated they are to what they do every day to make sure they deliver the right service. We, as a corporation, as a company has to provide them the tools and resources they need. We have to upgrade some of our fleet. We have to get them better mowers. We have to get them tools and training and safety equipment. So every day, when they’re out servicing our customers, our customers understand why we’re the best provider in this industry. That’s why you heard from Brett; we’re going to take those proceeds that we got from U.S. Lawns. We’re going to reinvest that back in the business to make sure those frontline employees get the benefits that they deserve, and they can service the customers. And that’s the most positive part of this business. And yes, we had some different segments of our business that might have been a little siloed with as we announced, we’re integrating Golf and Tree. But even those businesses have dedicated people that are experts in what they do. But when we bring all the resources we have together and they all work seamlessly going in the market to our customers, nobody can compete with BrightView. We have experts from turf to development, to tree care to irrigation, the general land maintenance. We have the best people in the industry, and I see that every day when I visit the branches. So that is our secret sauce. We just have to support those people so they can spend more time doing what they do best every day.

Operator: [Operator Instructions] We now turn to [Stefan Moore] with Jefferies.

Q – Unidentified Analyst: Hello. This is [Harold] on for Stephanie Moore. Yes. So developments are some particular strength in the business. I just wanted to get an idea of what are some of the drivers of the strength in the development business this year? And do you expect the strength to be carried over throughout the rest of the year?

Dale Asplund: Yes. So Harold, I think it was, Harold, you broke up a little bit, but our development business obviously has been the benefactor of what the country has seen on the construction cycle over the last couple of years. And some of those mega projects that you heard a lot of people talk about as they come towards the end, and will continue to come towards the end for the next 1.5 years. We offer one of the top 50 specialized construction companies in North America that can actually support the final stages of those projects. So that team is very hitting the stride right now. They have a great backlog. We’re winning new jobs every day, and we’ll continue to see that demand, as Brett said, well into 2025 as we continue to bid work. So that business has been a huge benefactor of all the construction that’s gone on over the last 24 months. So we are very optimistic about development.

Unidentified Analyst: And then just on EBITDA margin. How should we think about the cadence of EBITDA margin throughout the rest of the year for you to hit, that 40 to 80 basis points in it? Just any insight on that, on the cadence of it for the rest of the – for the year will be helpful.

Brett Urban: Yes. Great question. Look, I think when you look at Q1, if not for the timing of snowfall, our margin would have been right at our guided range of the total company for the year of 40 to 80 basis points would have actually been at the higher end of that range of 60 to 80 basis points. So a little bit is just the timing of snow in Q1 and how that – what our guide would be then for the full year snow holding at $210 million to $270 would imply that, that snow shortfall in Q1 would come back in Q2. And therefore, we’d see that margin rebound here in Q2. As you think about quarter-to-quarter, we’re not again providing quarterly guidance. But as we look at the full year, we feel strong sitting here today with some of the actions we’ve taken towards One BrightView and to align the business and the momentum we’re seeing in the underlying core business and land and the momentum we’re seeing in our development business and some of the cost structure changes we’ve made in corporate that for the full year guide, we feel confident in that 60 to – 40 to 80 basis points total margin expansion for the business.

Operator: Our next question comes from George Tong with Goldman Sachs.

George Tong: You’ve reiterated your full year guide despite the sale of U.S. Lawns and the shortfall in snow revenue in fiscal 1Q. Can you elaborate on some of the assumptions around snow in the land business for the rest of the year that you’re incorporating into your full year guide?

Brett Urban: I think, George, great question. Like reiterating our full guide, we also feel exactly where we felt after we’ve worked through January on snow with that range of $210 million to $270 million of snow. So we will update everybody where we finish once we get past the snow season. But like I had said earlier, where we sit today, we still feel that guide we gave you will come in despite the shortfall we felt in Q1, but the activity we saw in January. So snow, we feel good about — and overall, with U.S. Lawns, U.S. Lawns was a strategic sale with $11 million of revenue at a double-digit multiple that we got $52 million for us. So you can do some quick math there. We believe we can still step over that incremental 3/4 of the EBITDA that that business would have generated. It’s somewhat de minimis with the multiple we got. So we feel good about the momentum that we have as we go through the year. So we are not concerned that that’s going to have a negative effect either on revenue or on EBITDA for our full year guide overall.

George Tong: And then development revenue growth of 6% came above your full year guide range of 2% to 5% for the segment. Can you discuss your growth expectations for development for the rest of the year? Any timing considerations or comp issues to be mindful of?

Dale Asplund: So I’ll start with, then I’ll let Brett. Just at a high level, the one thing I would say, the benefit that — or the lack of benefit we saw in snow that we told everybody we didn’t see a lot of snow until January. That means that the construction season can actually be running a little longer into the year. So our development group gets the benefit of that. So they did have an outstanding quarter with that growth. And I would just say, in Q2, depending on what we see for snow, that could trim that down year-over-year, especially last year, like I said, snow in February and March was relatively light. So — but Brett, do you want to add anything to that?

Brett Urban: Yes, George. Typically, development’s lowest quarter is Q2, same with our land business. So as you think about seasonality and snow, et cetera, Q2 is a bit lower. If you think about last Q2, we were essentially flat in the business just given timing of projects and seasonality. So we do still expect that full year revenue guide of 2% to 5% for the year, Q2 being a little bit less than Q1. And then as you look back to the back half of the year being right kind of in the middle of that guide. So again, we feel bullish on that business. We are essentially sold through 2024 in our backlogs. We’re selling into 2025. There could be some quarterly noise just getting projects in the ground. But at the end of the day, we feel great about that business and really the momentum in the overall company. And if you think about us reaffirming guidance, we sit here today excited by the fact that this will be a breakthrough year for BrightView, especially with EBITDA and EBITDA margin expansion. And despite what happened in Q1 timing of snow or despite what happened with stepping over a tough comp with the hurricane, we really feel confident that getting EBITDA at a breakthrough year this year for the company is where we’re reaffirming, and we feel optimistic about that.

Operator: This concludes our Q&A. I will now hand back to Dale Asplund, CEO, for closing remarks.

Dale Asplund: Thank you, operator. As everyone can tell, we are very excited about the opportunities ahead, and I’m thrilled to be leading this great company through this important period. Our objectives are clear. We are committed to becoming One BrightView, growing profitably and creating meaningful shareholder value. With that, thank you. And operator, you may end the call.

Operator: Ladies and gentlemen, today’s call has now concluded. We’d like to thank you for your participation. You may now disconnect your lines.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.