BrightView Reports Third Quarter Fiscal 2022 Results
August 04, 2022 at 06:15 AM EDT
Company Updates Fourth Quarter and Full Year Fiscal 2022 Guidance
BrightView Holdings, Inc. (NYSE: BV) (the “Company” or “BrightView”), the leading commercial landscaping services company in the United States, today reported unaudited results for the third quarter ended June 30, 2022.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20220804005263/en/
(Graphic: Business Wire)
“We delivered strong third quarter revenues powered by organic growth and our excellent M&A engine. In addition, we strategically managed through inflationary headwinds, most notably rising fuel prices, with tenacity and focus on positioning BrightView for long-term success,” said Andrew Masterman, BrightView President and Chief Executive Officer. “Although we are operating in a dynamic environment, our business fundamentals remain strong, our execution is at the highest level and our strategy is validated by the momentum in our business, giving us confidence that we remain poised for long-term profitable growth.”
1Adjusted EBITDA and Adjusted Earnings per Share are non-GAAP measures. Refer to the “Non-GAAP Financial Measures” section for more information. The Company is not providing a quantitative reconciliation of its financial outlook for Adjusted EBITDA to net income (loss), its corresponding GAAP measure, because the GAAP measure that is excluded from its non-GAAP financial outlook is difficult to reliably predict or estimate without unreasonable effort due to its dependence on future uncertainties, such as items discussed below. Additionally, information that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Free Cash Flow and Adjusted Earnings per Share are non-GAAP measures. Refer to the “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” sections for more information.
Third Quarter Fiscal 2022 Highlights
Nine Months Fiscal 2022 Highlights
Fiscal 2022 Results – Total BrightView
For the third quarter of fiscal 2022, total revenue increased 11.0% to $747.4 million driven by $38.0 million from organic growth, or 5.6% of the total percentage increase quarter over quarter, and $35.8 million from acquired business, or 5.3% of the total percentage increase quarter over quarter. Net Income was $10.8 million compared to Net Income of $25.2 million in the prior year period. Total Adjusted EBITDA increased $0.7 million, or 0.7%, to $94.3 million from $93.6 million in the prior year period.
For the nine months ended June 30, 2022, total revenue increased 9.1% to $2,051.2 million driven by $58.8 million from organic growth, or 3.1% of the total percentage increase quarter over quarter, and $112.5 million from acquired businesses, or 6.0% of the total percentage increase quarter over quarter. Net Loss was $1.3 million compared to Net Income of $19.5 million in the prior year period. Total Adjusted EBITDA decreased $16.2 million, or 7.6%, to $196.6 million from $212.8 million in the prior year period.
Fiscal 2022 Results – Segments
For the third quarter of fiscal 2022, revenue in the Maintenance Services Segment increased by $37.2 million, or 7.1%, from the prior year. The increase was primarily driven by a $15.7 million revenue contribution from acquired businesses combined with an increase of $12.0 million, or 2.3%, in underlying commercial landscape services underpinned by a combination of contract services growth and to a greater extent ancillary services growth. Snow removal services increased $9.5 million principally driven by higher snowfall.
Adjusted EBITDA for the Maintenance Services Segment for the three months ended June 30, 2022 decreased by $1.4 million to $89.2 million from $90.6 million in the 2021 period. Segment Adjusted EBITDA Margin decreased 140 basis points, to 15.9%, in the three months ended June 30, 2022, from 17.3% in the 2021 period. The decreases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were principally driven by higher fuel costs and increased selling, general & administrative costs, including the reinstatement of the employer match for the employee savings plan and the investment to grow our business development team, which were partially offset by increases in revenues from underlying commercial landscape services and acquisitions discussed above.
For the nine months ended June 30, 2022, revenue in the Maintenance Services Segment increased by $75.0 million, or 5.1%, from the 2021 period. The increase was primarily driven by a $63.5 million, or 5.3%, increase in underlying commercial landscape services underpinned by a combination of contract services growth and to a greater extent ancillary services growth, as well as a $60.7 million revenue contribution from acquired businesses. Offsetting this was a decrease of $28.1 million in snow removal services, net of $21.1 million from acquired businesses, due to overall less snowfall during the nine months ended June 30, 2022 as compared to the 2021 period.
Adjusted EBITDA for the Maintenance Services Segment for the nine months ended June 30, 2022 decreased by $15.1 million to $197.4 million from $212.5 million in the 2021 period. Segment Adjusted EBITDA Margin decreased 170 basis points, to 12.7%, in the nine months ended June 30, 2022, from 14.4% in the 2021 period. The decreases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were principally driven by the decrease in snow removal revenues and higher fuel costs which were partially offset by increases in revenues from underlying commercial landscape services and acquisitions discussed above.
For the third quarter of fiscal 2022, revenue in the Development Services Segment increased by $36.1 million, or 24.0%, compared to the prior year. The increase was principally driven by an increase in Development Services project volumes of $21.1 million coupled with $15.0 million of revenue contributions from acquired businesses.
Adjusted EBITDA for the Development Services Segment for the three months ended June 30, 2022 increased $2.2 million, to $20.9 million, compared to the 2021 period principally due to the increase in revenues described above. Segment Adjusted EBITDA Margin decreased 120 basis points, to 11.2% for the quarter from 12.4% in the prior year primarily as a result of increased use of subcontractors due to the mix of projects performed during the period, reinstatement of the employer match for the employee savings plan and higher fuel costs, partially offset by lower material costs as a percentage of revenue.
For the nine months ended June 30, 2022, revenue in the Development Services Segment increased by $96.1 million, or 23.7%, compared to the 2021 period. The increase was principally driven by a $51.8 million revenue contribution from acquired businesses combined with an increase of $44.3 million due to additional project volumes.
Adjusted EBITDA for the Development Services Segment nine months ended June 30, 2022 increased $1.6 million, to $48.2 million, compared to the 2021 period principally due to the increase in revenues described above, partially offset by higher materials costs. Segment Adjusted EBITDA Margin decreased 190 basis points, to 9.6% for the nine months ended June 30, 2022, from 11.5% in the 2021 period, primarily as a result of higher materials and fuel costs as a percentage of revenue, partially offset by lower labor and subcontractor costs as a percentage of revenue.
Net cash provided by operating activities for the nine months ended June 30, 2022 decreased $67.7 million, to $65.7 million, from $133.4 million in the prior year. This decrease was due to a decrease in the cash provided by accounts payable and other operating liabilities principally due to the repayment of the payroll tax deferral under the CARES Act coupled with a reduction in cash provided by other operating assets. This was partially offset by an increase in cash provided by unbilled and deferred revenue and accounts receivable.
Free Cash Flow decreased $113.2 million to an outflow of $17.0 million for the nine months ended June 30, 2022 from an inflow of $96.2 million in the prior year. The decrease in Free Cash Flow was due to the decrease in net cash provided by operating activities described above, and an increase in cash used for capital expenditures, as described below.
For the nine months ended June 30, 2022, capital expenditures were $88.1 million, compared with $44.7 million in the 2021 period driven principally by receipted orders previously impacted by pandemic-related supply chain challenges. The Company also generated proceeds from the sale of property and equipment of $5.4 million and $7.5 million during the nine months ended June 30, 2022 and 2021, respectively. Net of the proceeds from the sale of property and equipment, net capital expenditures represented 4.0% and 2.0% of revenue in the nine months ended June 30, 2022 and 2021, respectively.
As of June 30, 2022, the Company’s Total Net Financial Debt was $1,368.6 million, an increase of $320.5 million compared to $1,048.1 million as of June 30, 2021. The Company’s Total Net Financial Debt to Adjusted EBITDA ratio was 4.8x and 3.5x as of June 30, 2022 and June 30, 2021, respectively.
On April 22, 2022, the Company, entered into Amendment No. 6 to the credit agreement (the “Existing Credit Agreement”) dated December 18, 2013. The Existing Credit Agreement was amended to provide for: (i) a $1,200.0 million seven-year term loan (the “Series B Term Loan”) and (ii) a $300.0 million five-year revolving credit facility. The Company used the net proceeds from the Series B Term Loan to repay all amounts outstanding under the Company’s Existing Credit Agreement.
On June 22, 2022, the Company entered into the Third Amendment to the Receivables Financing Agreement which extended the term through June 22, 2025 and increased the borrowing capacity to $275.0 million. All amounts outstanding under the Receivables Financing Agreement are collateralized by substantially all of the accounts receivable and unbilled revenue of the Company. During the nine months ended June 30, 2022 the Company borrowed $224.0 million against the capacity and voluntarily repaid $203.0 million. During the nine months ended June 30, 2021 the Company borrowed $24.5 million against the capacity and voluntarily repaid $24.6 million.
Conference Call Information
A conference call to discuss the third quarter fiscal 2022 financial results is scheduled for August 4, 2022, at 10 a.m. ET. The U.S. toll free dial-in for the conference call is (844) 200-6205 and the international dial-in is (929) 526-1599. The Conference ID is 135741. A live audio webcast of the conference call will be available on the Company’s investor website https://investor.brightview.com, where presentation materials will be posted prior to the call.
A replay of the call will be available until 11:59 p.m. ET on August 11, 2022. To access the recording, dial (866) 813-9403 (Conference ID 812407).
BrightView (NYSE: BV), the nation’s largest commercial landscaper, proudly designs, creates, and maintains the best landscapes on Earth and provides the most efficient and comprehensive snow and ice removal services. With a dependable service commitment, BrightView brings brilliant landscapes to life at premier properties across the United States, including business parks and corporate offices, homeowners' associations, healthcare facilities, educational institutions, retail centers, resorts and theme parks, municipalities, golf courses, and sports venues. BrightView also serves as the Official Field Consultant to Major League Baseball. Through industry-leading best practices and sustainable solutions, BrightView is invested in taking care of our team members, engaging our clients, inspiring our communities, and preserving our planet. Visit www.BrightView.com and connect with us on Twitter, Facebook, and LinkedIn.
Forward Looking Statements
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this presentation, including statements relating to our fourth quarter fiscal 2022 and full year fiscal 2022 guidance and other statements related to our expectations regarding our industry, strategy, future operations, future liquidity and financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words such as “outlook,” “guidance,” “projects,” “continues,” “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” or the negative version of these words or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. By their nature, forward-looking statements: speak only as of the date they are made; are not statements of historical fact or guarantees of future performance; and are subject to risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements. Factors that could cause actual results to differ materially from those projected include, but are not limited to: general business economic and financial conditions; the duration and extent of the novel coronavirus (COVID-19) pandemic and its resurgence, and the impact of federal, state and local governmental actions and customer behavior in response to the pandemic, including possible additional or reinstated restrictions as a result of a resurgence of the pandemic; competitive industry pressures; the failure to retain current customers, renew existing customer contracts and obtain new customer contracts; the failure to enter into profitable contracts, or maintaining customer contracts that are unprofitable; a determination by customers to reduce their outsourcing or use of preferred vendors; the dispersed nature of our operating structure; our ability to implement our business strategies and achieve our growth objectives; the possibility that the anticipated benefits from our business acquisitions will not be realized in full or at all or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of acquired businesses’ operations will be greater than expected and the possibility that integration efforts will disrupt our business and strain management time and resources; the seasonal nature of our landscape maintenance services; our dependence on weather conditions; increases in prices for raw materials, labor and fuel caused by rising inflation or otherwise; changes in our ability to source adequate supplies and materials in a timely manner; any failure to accurately estimate the overall risk, requirements, or costs when we bid on or negotiate contracts that are ultimately awarded to us; the conditions and periodic fluctuations of real estate markets, including residential and commercial construction; our ability to retain or hire our executive management and other key personnel; our ability to attract and retain trained workers and third-party contractors and re-employ seasonal workers; any failure to properly verify employment eligibility of our employees; subcontractors taking actions that harm our business; our recognition of future impairment charges; laws and governmental regulations, including those relating to employees, wage and hour, immigration, human health and safety and transportation; environmental, health and safety laws and regulations, including regulatory costs, claims and litigation related to the use of chemicals and pesticides by employees and related third-party claims; the distraction and impact caused by litigation, of adverse litigation judgments and settlements resulting from legal proceedings; increase in on-job accidents involving employees; any failure, inadequacy, interruption, security failure or breach of our information technology systems; our ability to adequately protect our intellectual property; restrictions imposed by our debt agreements that limit our flexibility in operating our business; our ability to generate sufficient cash flow to satisfy our significant debt service obligations; our ability to obtain additional financing to fund future working capital, capital expenditures, investments or acquisitions, or other general corporate requirements; increases in interest rates governing our variable rate indebtedness increasing the cost of servicing our substantial indebtedness including changes related to LIBOR reform; ownership of our common stock; occurrence of natural disasters, terrorist attacks, geopolitical events, hostilities or other external events; changes in generally accepted accounting principles in the United States; our ability to pursue and achieve our environmental, social and corporate governance (ESG) focus area goals; unexpected delays, difficulties, and expenses encountered or incurred in pursuing our ESG goals and costs and requirements imposed as a result of maintaining the requirement of being a public company. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found under “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2021 as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. Any forward-looking statement made in this press release speaks only as of the date on which it was made. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Non-GAAP Financial Measures
To supplement the Company’s financial information presented in accordance with GAAP and aid understanding of the Company’s business performance, the Company uses certain non-GAAP financial measures, namely “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Adjusted Net Income”, “Adjusted Earnings per Share”, “Free Cash Flow”, “Total Financial Debt”, “Total Net Financial Debt” and “Total Net Financial Debt to Adjusted EBITDA ratio”. We believe Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share, Free Cash Flow, Total Financial Debt, Total Net Financial Debt, and Total Net Financial Debt to Adjusted EBITDA ratio assist investors in comparing our results across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes these non-GAAP financial measures are useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate and capital investments. Management regularly uses these measures as tools in evaluating our operating performance, financial performance and liquidity. Management uses Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share, Free Cash Flow, Total Financial Debt, Total Net Financial Debt, and Total Net Financial Debt to Adjusted EBITDA ratio to supplement comparable GAAP measures in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation and to compare our performance against that of other peer companies using similar measures. In addition, we believe that Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share, Free Cash Flow, Total Financial Debt, Total Net Financial Debt, and Total Net Financial Debt to Adjusted EBITDA ratio are frequently used by investors and other interested parties in the evaluation of issuers, many of which also present Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share, Free Cash Flow, Total Financial Debt, Total Net Financial Debt, and Total Net Financial Debt to Adjusted EBITDA ratio when reporting their results in an effort to facilitate an understanding of their operating and financial results and liquidity. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone.
Adjusted EBITDA: We define Adjusted EBITDA as net income (loss) before interest, taxes, depreciation and amortization, as further adjusted to exclude certain non-cash, non-recurring and other adjustment items.
Adjusted EBITDA Margin: We define Adjusted EBITDA Margin as Adjusted EBITDA, defined above, divided by Net Service Revenues.
Adjusted Net Income: We define Adjusted Net Income as net income (loss) including interest and depreciation, and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items.
Adjusted Earnings per Share: We define Adjusted Earnings per Share as Adjusted Net Income divided by the weighted average number of common shares outstanding for the period.
Free Cash Flow: We define Free Cash Flow as cash flows from operating activities less capital expenditures, net of proceeds from the sale of property and equipment.
Total Financial Debt: We define Total Financial Debt as total long-term debt, net of original issue discount, and finance/capital lease obligations.
Total Net Financial Debt: We define Total Net Financial Debt as Total Financial Debt minus total cash and cash equivalents.
Total Net Financial Debt to Adjusted EBITDA ratio: We define Total Net Financial Debt to Adjusted EBITDA ratio as Total Net Financial Debt divided by the trailing twelve month Adjusted EBITDA.
Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Adjusted Earnings per Share, Free Cash Flow, Total Financial Debt, Total Net Financial Debt, and Total Net Financial Debt to Adjusted EBITDA ratio are not recognized terms under GAAP and should not be considered as an alternative to net income (loss) or the ratio of net income (loss) to net revenue as a measure of financial performance, cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Additionally, these measures are not intended to be a measure of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.
BrightView Holdings, Inc.