BrightView(BV) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the quarter ended December 31, 2021, encompassing balance sheets, income statements, cash flows, and related notes Consolidated Balance Sheets As of December 31, 2021, total assets slightly increased to $3,245.1 million, total liabilities rose to $1,910.6 million, and stockholders' equity slightly decreased to $1,334.5 million Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | Dec 31, 2021 | Sep 30, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $132.8 | $123.7 | | Total current assets | $711.7 | $710.8 | | Goodwill | $1,950.5 | $1,950.8 | | Total assets | $3,245.1 | $3,237.6 | | Liabilities & Equity | | | | Total current liabilities | $456.4 | $496.1 | | Long-term debt, net | $1,204.0 | $1,130.6 | | Total liabilities | $1,910.6 | $1,894.9 | | Total stockholders' equity | $1,334.5 | $1,342.7 | Consolidated Statements of Operations Net service revenues increased to $591.8 million for the three months ended December 31, 2021, but net loss widened to $(12.8) million, resulting in a diluted loss per share of $(0.12) Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net service revenues | $591.8 | $554.4 | | Gross profit | $139.9 | $133.6 | | (Loss) from operations | $(8.4) | $(3.6) | | Net (loss) | $(12.8) | $(12.0) | | Basic and Diluted (Loss) per share | $(0.12) | $(0.11) | Consolidated Statements of Cash Flows Net cash used in operating activities was $(22.4) million, investing activities used $(33.7) million, and financing activities provided $65.2 million, leading to a $9.1 million increase in cash and cash equivalents Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash (used) provided by operating activities | $(22.4) | $5.1 | | Net cash (used) by investing activities | $(33.7) | $(71.4) | | Net cash provided (used) by financing activities | $65.2 | $(9.2) | | Net change in cash and cash equivalents | $9.1 | $(75.5) | Notes to Unaudited Consolidated Financial Statements This section provides detailed disclosures for the consolidated financial statements, covering accounting policies, revenue recognition, acquisitions, debt, and segment reporting - The company adopted ASU No. 2019-12, simplifying income tax accounting, in the first quarter of fiscal 2022, which did not have a material impact[37] Disaggregation of Revenue by Type (in millions) | Revenue Type | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Landscape Maintenance | $402.2 | $362.2 | | Snow Removal | $36.0 | $55.8 | | Maintenance Services Total | $438.2 | $418.0 | | Development Services | $154.7 | $137.4 | | Eliminations | $(1.1) | $(1.0) | | Net service revenues | $591.8 | $554.4 | - As of December 31, 2021, estimated future revenues from remaining performance obligations for contracts with an original duration greater than one year was approximately $335.6 million[47] - During the three months ended December 31, 2020, the Company acquired three companies for aggregate consideration of approximately $62.2 million, net of cash acquired[56] - In January 2022, the Company repaid $75.0 million of borrowings under the Receivables Financing Agreement, and a share repurchase of 5,906,954 shares was completed on January 19, 2022[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2022 financial results, noting a 6.7% revenue increase driven by Maintenance and Development segments, but profitability declined with Adjusted EBITDA falling to $42.6 million due to higher costs Results of Operations Net service revenues increased 6.7% to $591.8 million in Q1 2022, but gross margin declined by 50 basis points due to higher costs, leading to a wider net loss of $(12.8) million Key Financial Results (in millions) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net service revenues | $591.8 | $554.4 | | Gross profit | $139.9 | $133.6 | | Net (loss) | $(12.8) | $(12.0) | | Adjusted EBITDA | $42.6 | $52.4 | | Adjusted Net Income | $8.2 | $12.9 | - The increase in Selling, General and Administrative expense was primarily due to an $11.0 million increase in salaries, travel, and other employee-related expenses, driven by acquisitions and the reinstatement of the employer match for the employee savings plan[124] - Interest expense decreased by $3.9 million (28.7%) due to the impact of interest rate swaps[127] Non-GAAP Financial Measures Adjusted EBITDA for Q1 2022 decreased to $42.6 million, Adjusted Net Income fell to $8.2 million, and Free Cash Flow was $(49.9) million, reflecting significant declines from the prior year Reconciliation of Net (Loss) to Adjusted EBITDA (in millions) | Reconciliation Item | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net (loss) | $(12.8) | $(12.0) | | Interest expense, net | $9.7 | $13.6 | | Income tax benefit | $(4.6) | $(3.8) | | Depreciation expense | $21.4 | $21.6 | | Amortization expense | $13.4 | $13.9 | | Other adjustments (Transformation, Equity-comp, COVID-19, etc.) | $15.5 | $19.1 | | Adjusted EBITDA | $42.6 | $52.4 | Reconciliation of Cash flows from operating activities to Free Cash Flow (in millions) | Reconciliation Item | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | | :--- | :--- | :--- | | Cash flows from operating activities | $(22.4) | $5.1 | | Capital expenditures | $(28.6) | $(9.7) | | Proceeds from sale of property and equipment | $1.1 | $0.6 | | Free Cash Flow | $(49.9) | $(4.0) | Segment Results Maintenance Services revenue grew 4.8% to $438.2 million but Adjusted EBITDA declined 8.7%, while Development Services revenue grew 12.6% to $154.7 million but Adjusted EBITDA fell 15.2% Maintenance Services Segment Results (in millions) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Service Revenues | $438.2 | $418.0 | 4.8% | | Segment Adjusted EBITDA | $45.3 | $49.6 | (8.7)% | | Segment Adjusted EBITDA Margin | 10.3% | 11.9% | (160) bps | Development Services Segment Results (in millions) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Service Revenues | $154.7 | $137.4 | 12.6% | | Segment Adjusted EBITDA | $14.5 | $17.1 | (15.2)% | | Segment Adjusted EBITDA Margin | 9.4% | 12.4% | (300) bps | Liquidity and Capital Resources Principal liquidity sources include cash, operations, and credit facilities; total debt was $1,214.4 million, and net cash used in operating activities was $(22.4) million, with net working capital increasing to $255.3 million - The company's principal sources of liquidity are existing cash, cash from operations, and borrowings under its Credit Agreement and Receivables Financing Agreement[151] - Net cash used in operating activities decreased by $27.5 million year-over-year, primarily due to the repayment of the payroll tax deferral under the CARES Act and a reduction in cash provided by other operating assets[156] - Net cash used in investing activities decreased by $37.7 million, driven by significantly lower cash used for acquisitions ($6.0 million in Q1'22 vs $62.2 million in Q1'21), partially offset by an $18.9 million increase in capital expenditures[157] Item 3. Quantitative and Qualitative Disclosures About Market Risk Disclosures on market risk remain consistent with the Annual Report on Form 10-K for the fiscal year ended September 30, 2021, with no material changes reported - The company's disclosures about market risk have not materially changed from those reported in its Annual Report on Form 10-K for the fiscal year ended September 30, 2021[167] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of December 31, 2021, with no material changes in 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 December 31, 2021[169] - There were no changes in internal control over financial reporting during the fiscal quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[170] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not aware of any legal proceedings that would materially affect its financial condition or results, as detailed in Note 11 - The company is subject to legal proceedings in the ordinary course of business but is not aware of any that would have a material effect on the company[86][173] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended September 30, 2021, have been reported - There have been no material changes to the risk factors included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2021[174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company initiated a $250 million share repurchase program and completed a separate repurchase of 5.9 million shares from MSD Valley Investments, LLC - On December 6, 2021, the Company announced a share repurchase program allowing it to repurchase up to $250 million of common stock[175] - On December 9, 2021, the Company entered into an agreement to repurchase 5,906,954 shares from MSD Valley Investments, LLC at $13.98 per share, with this transaction completed on January 19, 2022[175] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, agreements, and required CEO and CFO certifications - Exhibits filed with the report include the Share Repurchase Agreement with MSD Valley Investments, LLC, and certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act[180]