BrightView(BV) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) For the six months ended March 31, 2025, the company reported a net loss of $4.0 million, a significant decrease from the $17.3 million net income in the prior year period, primarily due to a $43.9 million gain on divestiture in 2024 that did not recur. Total assets decreased slightly to $3.32 billion. Net cash from operations increased to $151.7 million, while net cash used in investing activities was $83.4 million, a reversal from the prior year's cash provided, driven by higher capital expenditures and the absence of divestiture proceeds Consolidated Balance Sheet Summary | (In millions) | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Total current assets | $715.5 | $780.1 | | Total assets | $3,324.8 | $3,391.8 | | Total current liabilities | $504.8 | $543.3 | | Total liabilities | $1,556.4 | $1,609.4 | | Total stockholders' equity | $1,261.3 | $1,275.3 | Consolidated Statement of Operations Summary | (In millions, except per share data) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net service revenues | $1,261.8 | $1,299.6 | | Gross profit | $274.3 | $285.9 | | Income from operations | $21.7 | $56.0 | | Net (loss) income | $(4.0) | $17.3 | | Basic and diluted (loss) earnings per share | $(0.23) | $(0.01) | Consolidated Statement of Cash Flows Summary | (In millions) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $151.7 | $109.5 | | Net cash (used) provided by investing activities | $(83.4) | $32.3 | | Net cash (used) by financing activities | $(67.4) | $(31.5) | Notes to Unaudited Consolidated Financial Statements The notes detail the company's business segments, revenue recognition policies, and key financial data. A significant event was the January 2024 divestiture of U.S. Lawns for $51.0 million, resulting in a $43.6 million gain. The company utilizes interest rate and fuel hedging derivatives to manage market risk. As of March 31, 2025, total long-term debt stood at $798.9 million. The company also initiated a share repurchase program in March 2025 and entered into new fuel swap agreements in April 2025 - The company operates in two reportable segments: Maintenance Services and Development Services[27] - On January 12, 2024, the company sold its subsidiary, U.S. Lawns, for $51.0 million in cash, recognizing a gain of $43.6 million[54] - As of March 31, 2025, total long-term debt, net of financing costs, was $798.9 million, primarily consisting of the Series B term loan[55] - The company uses interest rate swaps and collars to manage interest rate risk on its variable-rate debt and entered into fuel swap agreements to hedge against fuel price volatility[71][74] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue for Q2 FY2025 decreased 1.5% YoY to $662.6 million, driven by strategic reductions in non-core Maintenance businesses, partially offset by growth in Development Services. Despite lower revenue, Adjusted EBITDA increased 13.4% to $73.5 million, and the margin expanded from 9.6% to 11.1%, reflecting successful cost management under the 'One BrightView' initiative. The company highlights a potential risk related to its Maintenance segment's goodwill, where the fair value exceeded its carrying value by only 9.6% in the last annual test. Liquidity remains sufficient, supported by cash from operations and credit facilities - The 'One BrightView' initiative, launched in fiscal 2024, aims to streamline operations and focus on profitable core businesses, resulting in improved customer/employee retention and profitability[120] - A key risk identified is that the fair value of the Maintenance reporting unit exceeded its carrying value by only 9.6% as of the July 1, 2024, impairment test, indicating a risk of future impairment if conditions worsen. The goodwill for this unit was $1,797.6 million as of March 31, 2025[130] Key Financial Metrics Comparison (Three Months Ended March 31) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net service revenues | $662.6 | $672.9 | | Net income (loss) | $6.4 | $33.7 | | Adjusted EBITDA | $73.5 | $64.8 | | Adjusted Net Income | $21.5 | $16.9 | Results of Operations For the three months ended March 31, 2025, net service revenues fell 1.5% to $662.6 million. Gross profit decreased by 3.0% to $147.5 million. However, a 5.5% reduction in SG&A to $118.1 million, driven by cost management, helped improve operational efficiency. Net income dropped to $6.4 million from $33.7 million, largely because the prior-year period included a $43.9 million gain from the U.S. Lawns divestiture. For the six-month period, revenues decreased 2.9% to $1,261.8 million, resulting in a net loss of $4.0 million compared to a $17.3 million net income in the prior year - Three-month revenue decreased by $10.3 million (1.5%) YoY, driven by a $17.7 million decline in Maintenance Services, partially offset by a $7.5 million increase in Development Services[136] - SG&A expense for the three months decreased by $6.9 million (5.5%) YoY, primarily due to lower compensation-related costs from cost management initiatives[138] - The significant drop in Q2 net income compared to the prior year is mainly due to the non-recurring $43.9 million gain on the divestiture of U.S. Lawns in Q2 2024[139][144] - For the six months ended March 31, 2025, net service revenues decreased by $37.8 million (2.9%) YoY, leading to a net loss of $4.0 million[148][156] Non-GAAP Financial Measures The company uses non-GAAP measures such as Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, and Adjusted Free Cash Flow to evaluate operating results and liquidity. For Q2 2025, Adjusted EBITDA increased to $73.5 million from $64.8 million in Q2 2024. Adjusted Net Income rose to $21.5 million from $16.9 million. However, Adjusted Free Cash Flow for the six-month period decreased to $67.0 million from $89.4 million, primarily due to higher capital expenditures - The company believes non-GAAP measures like Adjusted EBITDA and Adjusted Net Income are helpful for investors as they exclude items whose fluctuations may not correspond to core business operations[160] Reconciliation of Net Income to Adjusted EBITDA (Three Months Ended March 31) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $6.4 | $33.7 | | Adjustments (Taxes, Interest, D&A, etc.) | $59.3 | $(12.8) | | Business transformation and integration costs | $7.8 | $6.1 | | Equity-based compensation | $4.6 | $4.8 | | Gain on divestiture | — | $(43.9) | | Adjusted EBITDA | $73.5 | $64.8 | Segment Results For Q2 2025, the Maintenance Services segment saw a 3.5% revenue decline to $492.8 million due to strategic reductions, but its Adjusted EBITDA margin improved by 60 bps to 11.4% due to cost controls. The Development Services segment showed strong performance, with revenue increasing 4.6% to $171.9 million and its Adjusted EBITDA margin expanding significantly by 410 bps to 10.0%, driven by higher project volumes and favorable project mix Maintenance Services Segment Results (Three Months Ended March 31) | (in millions) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Service Revenues | $492.8 | $510.5 | (3.5)% | | Segment Adjusted EBITDA | $56.3 | $55.1 | 2.2% | | Segment Adjusted EBITDA Margin | 11.4% | 10.8% | +60 bps | Development Services Segment Results (Three Months Ended March 31) | (in millions) | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Net Service Revenues | $171.9 | $164.4 | 4.6% | | Segment Adjusted EBITDA | $17.2 | $9.7 | 77.3% | | Segment Adjusted EBITDA Margin | 10.0% | 5.9% | +410 bps | Liquidity and Capital Resources The company's primary liquidity sources are cash on hand ($141.3 million), cash from operations, and borrowings under its credit facilities. For the six months ended March 31, 2025, cash from operations increased to $151.7 million from $109.5 million in the prior year. However, net working capital decreased to $210.7 million from $236.8 million at fiscal year-end 2024. The company believes it has sufficient liquidity for the next twelve months to fund operations, debt service, and capital spending - Principal sources of liquidity are cash, cash from operations, and borrowings under the Credit Agreement and Receivables Financing Agreement[185] Cash Flow Summary (Six Months Ended March 31) | (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Operating activities | $151.7 | $109.5 | | Investing activities | $(83.4) | $32.3 | | Financing activities | $(67.4) | $(31.5) | - Net working capital decreased by $26.1 million from September 30, 2024, to March 31, 2025, primarily due to decreases in unbilled revenue and accounts receivable, and an increase in deferred revenue[198] Quantitative and Qualitative Disclosures About Market Risk The report indicates no material changes to the company's market risk disclosures from those presented in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - The company refers to 'Item 7A. Quantitative and Qualitative Disclosure of Market Risk' in its Annual Report on Form 10-K for the fiscal year ended September 30, 2024, for disclosures about market risk[204] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. There were no material changes in the company's internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[206] - No changes occurred during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[207] PART II. OTHER INFORMATION Legal Proceedings The company is subject to various legal proceedings and claims in the ordinary course of business. Information regarding these matters is incorporated by reference from Note 11 of the financial statements, which states that no pending litigation is expected to have a material effect on the company's financial condition - Information on legal proceedings is incorporated by reference from Note 11, 'Commitments and Contingencies'[210] - The company is not aware of any legal matter that it believes will have, individually or in the aggregate, a material effect on its financial condition, results of operations, or cash flows[90] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 - No material changes to risk factors have occurred since the filing of the Annual Report on Form 10-K for the fiscal year ended September 30, 2024[211] Unregistered Sales of Equity Securities and Use of Proceeds On March 13, 2025, the company announced a share repurchase program authorizing the repurchase of up to $100 million of its common stock. During the quarter ended March 31, 2025, the company repurchased 136,352 shares for approximately $1.8 million, leaving approximately $98.2 million available under the program - A share repurchase program of up to $100 million was announced on March 13, 2025, with no time limit[212] Share Repurchase Activity (March 1 - March 31, 2025) | Period | Total shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased | | :--- | :--- | :--- | :--- | | March 1 - 31, 2025 | 136,352 | $13.11 | $98,211,813 | Exhibits The report includes several exhibits, most notably the CEO and CFO certifications under the Sarbanes-Oxley Act and the Inline XBRL documents for financial reporting - Key exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL data files[217]