BrightView Holdings, Inc. — FY2021 Form 10-K
Business context and reporting period. BrightView provides commercial landscaping, maintenance, snow removal and development services across the United States. This filing covers the fiscal year ended September 30, 2021—not calendar-year Q4 alone. The company operates through Maintenance Services and Development Services.
Financial performance
| Metric (US$ millions, except margins and per-share data) | FY2021 | FY2020 |
|---|---|---|
| Net service revenue | $2,553.6 | $2,346.0 |
| Gross profit / gross margin | $650.8 / 25.5% | $595.3 / 25.4% |
| Operating income | $90.5 | $12.1 |
| Net income (loss) / diluted EPS | $46.3 / $0.44 | ($41.6) / ($0.40) |
| Adjusted EBITDA / margin | $302.3 / 11.8% | $271.6 / 11.6% |
| Operating cash flow | $148.4 | $245.1 |
| Free cash flow (non-GAAP) | $96.7 | $197.2 |
Revenue rose 8.8%; net income improved by $87.9 million. Interest expense declined to $42.3 million from $64.6 million, principally reflecting lower term-loan rates and interest-rate swaps. Free cash flow is defined by the company as operating cash flow less capital expenditures, plus proceeds from property and equipment sales.
Segment results
- Maintenance Services: Revenue increased 14.7% to $1,982.9 million; Segment Adjusted EBITDA rose 20.5% to $299.6 million; margin expanded 70 basis points to 15.1%. Snow revenue increased to $284.9 million, supported by more snowfall and growth in the contract book.
- Development Services: Revenue fell 7.3% to $574.9 million; Segment Adjusted EBITDA declined 20.1% to $65.2 million; margin contracted 190 basis points to 11.3%. Lower pandemic-affected backlog and higher materials costs weighed on results.
Liquidity, debt and capital
- At September 30, 2021, cash was $123.7 million and total debt was $1,141.0 million, versus $157.1 million and $1,139.8 million a year earlier. Net working capital was $214.7 million, up from $183.0 million.
- Reported availability was $207.7 million under the revolving credit facility and $75.0 million under the receivables financing agreement. The revolving facility had no borrowings outstanding; $52.3 million of letters of credit were outstanding. The receivables facility balance was $150.4 million.
- The company reported compliance with debt covenants and stated that cash, operating cash flow and facility availability were expected to fund current obligations, working capital, debt service and capital spending for the next 12 months.
- Cash from operations declined $96.7 million, primarily from less cash provided by working capital. Acquisition spending was $110.4 million; capital expenditures were $61.2 million. The company completed eight acquisitions, with approximately $158.6 million of aggregate annualized revenue.
- No common-stock dividend was paid; management said it did not intend to pay cash dividends in the foreseeable future.
Changes, outlook and risks
- Improved consolidated results were led by Maintenance Services, including snow removal and acquisitions. Development Services weakened amid pandemic-related backlog reductions and cost pressure.
- Management provided no specific numeric earnings or revenue guidance. It described the COVID-19 outlook as uncertain and cited possible operational restrictions, labor and supply disruptions, inflation and vaccination-related costs.
- Other key risks include labor availability and wage inflation, reliance on seasonal H-2B workers, weather and snowfall variability, customer contract cancellation, competitive pricing, construction-market exposure, and the ability to pass through higher fuel and materials costs.
- Debt is largely variable-rate and linked to LIBOR; the filing noted benchmark transition and interest-rate exposure. A 100-basis-point rate change was estimated to change FY2021 interest expense by approximately $6.5 million, after hedges.
- Unusual and non-GAAP items include $23.0 million of COVID-related expenses and $28.5 million of business transformation and integration costs included as Adjusted EBITDA adjustments. FY2020 included a $15.5 million goodwill impairment and $5.7 million loss on divestitures. Goodwill and other intangible assets totaled $2,148.4 million, or 66.4% of assets; no FY2021 goodwill impairment was recorded.
- MSD Partners ended its director nomination and voting-agreement rights in May 2021, and BrightView ceased to qualify as an NYSE “controlled company.” KKR and MSD nevertheless held approximately 48.1% and 11.2% of shares, respectively, at fiscal year-end.
Important facts for investors to verify
- Whether the sharp decline in operating cash flow and free cash flow reflects timing-related working-capital movements or persists.
- Whether Maintenance Services’ growth and margins can offset continued softness and margin pressure in Development Services.
- Acquisition integration, realization of acquired revenue and synergies, and remaining integration costs.
- Debt maturities, borrowing availability, covenant headroom, and the impact of variable rates and the LIBOR transition.
- Exposure to labor shortages, wage and input-cost inflation, COVID-related disruption, and weather-dependent snow revenue.
- The sensitivity of goodwill valuations to forecast assumptions; the filing reports fair value above carrying value but identifies the Maintenance reporting-unit valuation as a critical audit matter.