BrightView Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended September 30, 2022, compared primarily with fiscal 2021. This is an annual report, not a standalone fourth-quarter report. BrightView is a U.S. commercial landscaping provider with Maintenance Services and Development Services segments.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net service revenue | $2,774.6 million | $2,553.6 million |
| Gross profit / margin | $674.8 million / 24.3% | $650.8 million / 25.5% |
| Operating income | $88.4 million | $90.5 million |
| Net income / diluted EPS | $14.0 million / $0.14 | $46.3 million / $0.44 |
| Adjusted EBITDA / margin | $287.9 million / 10.4% | $302.3 million / 11.8% |
| Operating cash flow | $106.9 million | $148.4 million |
| Free cash flow | $6.7 million | $96.7 million |
Revenue grew 8.7%, but profitability and cash generation weakened. Net income margin was approximately 0.5% versus 1.8% in FY2021. Free cash flow is a company-defined non-GAAP measure: operating cash flow less capital expenditures, net of asset-sale proceeds.
At September 30, 2022, cash was $20.1 million, total debt was $1,342.7 million, and net working capital was $188.7 million. Debt rose from $1,141.0 million a year earlier. The company reported $250.9 million of revolver availability and $76.6 million under its receivables financing facility. Management said existing cash, operating cash flow and facility availability should fund obligations and planned spending for the next 12 months, subject to business and market conditions.
Material changes and segment performance
- Maintenance Services: Revenue increased 5.0% to $2,082.0 million; Segment Adjusted EBITDA fell 6.9% to $278.8 million and margin declined to 13.4% from 15.1%. Landscape maintenance revenue rose, while snow removal revenue fell $28.6 million amid less snowfall. Higher fuel costs and benefit costs also pressured results.
- Development Services: Revenue increased 21.6% to $698.8 million, reflecting acquisitions and higher project volume. Segment Adjusted EBITDA rose 13.0% to $73.7 million, while margin declined to 10.5% from 11.3%, mainly due to higher materials and fuel costs.
- Gross margin fell 120 basis points, principally because materials and fuel costs increased as a share of revenue. Interest expense rose 26.0% to $53.3 million, reflecting higher borrowing rates and debt balances.
- Operating cash flow declined $41.5 million; capital expenditures increased to $107.3 million from $61.2 million. The company acquired eight businesses for approximately $93.1 million, net of cash acquired.
- Financing cash flows included $163.8 million of common-stock repurchases and distributions. Treasury shares increased to 12.7 million from 0.3 million at FY2021 year-end.
Outlook, risks and unusual items
- The filing provides no specific FY2023 revenue, earnings or cash-flow guidance. Management describes recurring maintenance as relatively predictable, but flags uncertainty from inflation, fuel and material costs, labor availability and the economic outlook; it noted recession concerns for fiscal 2023.
- Debt was refinanced in April 2022 with a $1.2 billion Series B term loan maturing in 2029 and a $300 million revolver maturing in 2027. Borrowings are variable-rate and SOFR-based; interest expense is exposed to rate increases. The refinancing resulted in a $12.6 million debt-extinguishment loss.
- Cash flow and demand are exposed to seasonality and weather, including snowfall variability. Other key risks include labor shortages and dependence on H-2B seasonal visas, cost pass-through limitations, customer contract cancellations, construction-market weakness, supply disruption and acquisition integration.
- Goodwill and other intangible assets totaled $2,183.1 million, about 66% of total assets. No impairment was recorded in FY2022, but the Maintenance reporting unit’s estimated fair value exceeded carrying value by only 7.8%, leaving it sensitive to forecast or market changes.
- Self-insurance reserves were $146.7 million. Management said it was not aware of legal matters expected to have a material effect. Deloitte issued unqualified opinions on the financial statements and internal controls; management also concluded controls were effective.
Important facts for investors to verify
- Whether pricing, productivity or other actions can restore margins as fuel, material and labor costs evolve.
- How much of revenue and cash flow depends on snow conditions, and whether FY2022 snowfall comparisons distort underlying trends.
- Debt levels, variable-rate exposure, hedge coverage, borrowing availability and covenant compliance; the company reported compliance at September 30, 2022.
- Whether capital spending and working-capital needs continue to constrain free cash flow, and how the company plans to fund acquisitions and debt service.
- Whether the Maintenance reporting unit’s goodwill valuation cushion remains adequate under updated forecasts and economic conditions.
- The continuing effects of share repurchases on outstanding shares, liquidity and capital allocation; no cash dividend was paid and none was planned for the foreseeable future.