BrightView(BV) - 2024 Q2 - Quarterly Results

Overall Financial Performance and Outlook Second Quarter Fiscal 2024 Performance Summary BrightView reported strong Q2 FY2024 growth, with revenue up 3.5% and net income surging 253%, boosted by a divestiture gain | Metric | Q2 FY2024 | YoY Change | | :--- | :--- | :--- | | Total Revenue | $672.9 million | +3.5% | | Net Income | $33.7 million | +253% | | Net Income Margin | 5.0% | +840 bps | | Adjusted EBITDA | $64.8 million | +38.5% | | Adjusted EBITDA Margin | 9.6% | +240 bps | - The company recorded a $43.9 million gain on the divestiture of its non-core U.S. Lawns Business, significantly boosting net income[3] - Revenue growth in Q2 was primarily driven by a $34.3 million increase in snow removal revenue and an $8.8 million increase from development services, partially offset by a $21.5 million decrease in the commercial landscaping business[33] - CEO Dale Asplund attributed the strong results to the company's strategy of focusing on profitable growth and a unified go-to-market offering under 'One BrightView'[11] Updated Fiscal Year 2024 Guidance BrightView updated its FY2024 guidance, lowering revenue but reaffirming Adjusted EBITDA and raising Free Cash Flow outlook | Metric | Prior Guidance | Updated Guidance | | :--- | :--- | :--- | | Total Revenue | $2.825 - $2.975 billion | $2.740 - $2.800 billion | | Adjusted EBITDA | $310 - $340 million | $315 - $335 million | | Adj. EBITDA Margin | +40bps to +80bps | +90bps to +130bps | | Free Cash Flow | $45 - $75 million | $55 - $75 million | - The company reaffirmed its breakthrough EBITDA guidance for fiscal 2024 while raising its Free Cash Flow guidance, reflecting confidence in profitability and operational efficiency[11] Detailed Financial Results Consolidated Financial Performance For the six months ended March 31, 2024, total revenue decreased 0.5%, but Adjusted EBITDA increased 17.0% due to cost management | Metric (Six Months Ended March 31) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,299.6 M | $1,306.3 M | (0.5%) | | Net Income (Loss) | $17.3 M | $(40.9) M | +142.3% | | Adjusted EBITDA | $111.5 M | $95.3 M | +17.0% | | Adjusted EPS | $0.13 | $(0.09) | +244.4% | - The six-month revenue decrease was driven by a $40.4 million decline in commercial landscaping, partially offset by a $19.8 million increase in development services and a $12.1 million increase in snow removal revenue[13] - The increase in Adjusted EBITDA for both the three and six-month periods was attributed to successful cost management initiatives focused on payroll and overhead, as well as the reduction in non-core businesses[8][34] Segment Performance In Q2 FY2024, Maintenance Services revenue grew 2.6% and Development Services revenue increased 5.7%, with both segments improving margins Maintenance Services Maintenance Services revenue increased 2.6% in Q2, driven by snow removal, leading to 28.6% Adjusted EBITDA growth and margin expansion | Maintenance Services (Q2 FY2024) | Amount | YoY Change | | :--- | :--- | :--- | | Total Revenue | $510.5 M | +2.6% | | - Landscape Maintenance | $337.4 M | (6.0%) | | - Snow Removal | $173.1 M | +24.7% | | Adjusted EBITDA | $66.5 M | +28.6% | | Adjusted EBITDA Margin | 13.0% | +260 bps | - The increase in segment Adjusted EBITDA and margin was driven by higher snow removal revenue and lower labor costs resulting from the company's cost management initiatives[35] Development Services Development Services revenue increased 5.7% in Q2 due to higher project volumes, with Adjusted EBITDA growing 9.9% and margin expanding | Development Services (Q2 FY2024) | Amount | YoY Change | | :--- | :--- | :--- | | Revenue | $164.4 M | +5.7% | | Adjusted EBITDA | $14.4 M | +9.9% | | Adjusted EBITDA Margin | 8.8% | +40 bps | - For the six months ended March 31, 2024, segment revenue increased 6.0% and Adjusted EBITDA increased 14.9%, driven by higher project volumes and cost savings[37] Cash Flow and Capital Expenditures For the first six months of FY2024, operating cash flow nearly doubled and Free Cash Flow surged, supported by reduced capital expenditures | Cash Flow Metrics (Six Months Ended March 31) | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $109.5 M | $55.0 M | +99.1% | | Capital Expenditures | $22.7 M | $42.7 M | (46.8%) | | Free Cash Flow | $89.4 M | $15.9 M | +462.3% | - The increase in operating cash flow was due to higher net income and favorable changes in accounts receivable and unbilled/deferred revenue[38] Balance Sheet and Debt Position As of March 31, 2024, BrightView significantly improved its leverage profile, reducing Net Financial Debt and the Net Debt to Adjusted EBITDA ratio to 2.4x | Debt Metrics | Mar 31, 2024 | Sep 30, 2023 | Mar 31, 2023 | | :--- | :--- | :--- | :--- | | Total Financial Debt | $931.2 M | $937.5 M | $1,409.3 M | | Total Net Financial Debt | $753.9 M | $870.5 M | $1,398.8 M | | Net Debt / Adj. EBITDA Ratio | 2.4x | 2.9x | 5.0x | - The company's cash and cash equivalents increased significantly to $177.3 million as of March 31, 2024, compared to $11.0 million a year prior[17] Financial Statements and Reconciliations Consolidated Balance Sheets The unaudited consolidated balance sheet as of March 31, 2024, shows total assets of $3.36 billion, with cash rising and liabilities stable | Balance Sheet Item (in millions) | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $177.3 | $67.0 | | Total current assets | $798.6 | $742.1 | | Goodwill | $2,015.7 | $2,021.4 | | Total Assets | $3,361.6 | $3,352.2 | | Liabilities & Equity | | | | Total current liabilities | $477.2 | $466.7 | | Long-term debt, net | $880.4 | $888.1 | | Total Liabilities | $1,610.6 | $1,610.7 | | Total Stockholders' Equity | $1,243.9 | $1,243.3 | Consolidated Statements of Operations The consolidated statement of operations for Q2 FY2024 shows a net income of $33.7 million, a turnaround from a net loss, driven by a divestiture gain | Income Statement (Three Months Ended Mar 31, in millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net Service Revenues | $672.9 | $650.4 | | Gross Profit | $152.0 | $147.1 | | (Gain) on divestiture | $(43.9) | - | | Income (loss) from operations | $62.2 | $(2.6) | | Net income (loss) | $33.7 | $(22.0) | Consolidated Statements of Cash Flows For the six months ended March 31, 2024, net cash from operating activities significantly improved, with investing activities providing net cash from divestiture proceeds | Cash Flow (Six Months Ended Mar 31, in millions) | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $109.5 | $55.0 | | Net cash provided (used) by investing activities | $32.3 | $(51.8) | | Net cash (used) by financing activities | $(31.5) | $(12.3) | | Net change in cash and cash equivalents | $110.3 | $(9.1) | Reconciliation of GAAP to Non-GAAP Financial Measures The company provides detailed reconciliations for non-GAAP measures like Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow, clarifying their use as supplementary information | Reconciliation to Adjusted EBITDA (Q2 FY2024, in millions) | Amount | | :--- | :--- | | Net income (loss) | $33.7 | | Interest expense, net | $16.0 | | Income tax expense | $13.3 | | Depreciation & Amortization | $34.8 | | Business transformation & integration costs | $6.1 | | Gain on divestiture | $(43.9) | | Equity-based compensation | $4.8 | | Adjusted EBITDA | $64.8 | - Business transformation and integration costs of $6.1 million in Q2 included severance, IT infrastructure, and business integration expenses[53][59] Supporting Information About BrightView BrightView is the largest commercial landscaping services company in the U.S., offering design, maintenance, and snow/ice removal services to diverse properties - BrightView provides comprehensive commercial landscaping and snow removal services across the U.S.[18] - Key client types include corporate offices, homeowners' associations, healthcare facilities, educational institutions, and sports venues[18] Forward-Looking Statements This press release contains forward-looking statements about future performance, subject to risks and uncertainties like economic conditions and weather impacts - Forward-looking statements are identified by words like "outlook," "guidance," "expects," and are not guarantees of future performance[19] - Key risks include economic conditions, raw material costs, customer retention, weather dependency, and regulatory changes[19][43] Non-GAAP Financial Measures The company uses non-GAAP financial measures to supplement GAAP results, aiding investors in comparing core operating performance, but cautions they are not substitutes - The company uses non-GAAP measures to assist investors in comparing performance on a consistent basis by excluding non-recurring or non-cash items[21] - Key non-GAAP measures defined include: Adjusted EBITDA, Adjusted Net Income (Loss), Adjusted EPS, Free Cash Flow, and various debt metrics[21] - The company cautions that these non-GAAP measures have limitations and may not be comparable to similarly titled measures of other companies[45]