BrightView Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2020; comparative periods ended June 30, 2019. Amounts are in millions of U.S. dollars except per-share data. BrightView provides commercial landscape maintenance, enhancements, snow removal, and development services.
Financial performance
| Metric | Three months 2020 | Three months 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $608.1 | $657.2 | $1,737.9 | $1,779.9 |
| Gross profit / margin | $156.4 / 25.7% | $188.6 / 28.7% | $431.7 / 24.8% | $466.6 / 26.2% |
| Operating income | $11.0 | $60.7 | $2.1 | $80.2 |
| Net income (loss) | $(2.4) | $31.7 | $(35.5) | $19.3 |
| Adjusted EBITDA | $91.0 | $101.9 | $181.6 | $213.1 |
| Adjusted EBITDA margin | 15.0% | 15.5% | 10.4% | 12.0% |
| Operating cash flow | $76.2 | $44.5 | $161.9 | $109.2 |
| Free cash flow | $66.5 | $13.7 | $119.8 | $38.8 |
Quarter revenue fell 7.5%; nine-month revenue declined 2.4%. Nine-month snow-removal revenue dropped $82.3, principally due to below-average and geographically unfavorable snowfall. Development Services revenue grew 4.9% year to date, while Maintenance Services revenue declined 4.6%. COVID-19 reduced demand for ancillary maintenance work and delayed development projects.
Quarterly diluted loss per share was $0.02, versus earnings of $0.31 a year earlier; nine-month diluted loss per share was $0.34, versus earnings of $0.19. Adjusted EBITDA and free cash flow are non-GAAP measures. Adjusted EBITDA excludes, among other items, $24.1 of self-insurance estimate changes in the nine-month period.
Liquidity, debt and balance sheet
- At June 30, cash was $89.9, versus $39.1 at September 30, 2019. Net working capital was $158.3, down from $218.7.
- Total debt, net of financing costs, was $1,169.5, versus $1,144.6 at September 30, 2019; this included $1,014.2 of Series B term loans and $170.0 under receivables financing. No revolving-credit balance was outstanding at quarter-end. The $260 revolving facility matures in August 2023.
- Operating lease liabilities totaled $67.2. Management reported compliance with debt covenants and no default. It believes operating cash flow and available borrowing capacity will cover obligations and projected needs for the next 12 months.
- Nine-month investing cash outflow was $127.6, including $86.5 for acquisitions; capital expenditures were $45.9. Financing cash flow was $16.5, including temporary revolver and receivables-facility borrowing and repayment activity.
Material changes and notable items
- Quarter gross profit declined 17.1%; SG&A rose 15.6% to $131.8. The quarter included $24.1 of additional self-insurance expense—$18.3 in cost of services and $5.8 in SG&A—reflecting revised estimates and actuarial assumptions amid COVID-19 uncertainty.
- COVID-related costs were $4.0 for the quarter and $5.0 year to date. Management also described cash-preservation measures, health and safety actions, and reduced discretionary spending.
- BrightView acquired five Maintenance Services businesses for $86.5 net of cash during the nine months. Acquisition accounting valuations remained preliminary at June 30.
- BrightView agreed in principle to settle consolidated IPO-related securities litigation, subject to a final agreement and court approval. The settlement is substantially covered by D&O insurance, subject to retentions; defendants deny wrongdoing.
- The company adopted lease accounting on October 1, 2019, recording a $76.3 lease liability and $70.6 right-of-use asset; it said the change did not materially affect results, liquidity, or covenant compliance.
Outlook, risks and controls
No quantified earnings or revenue guidance is provided. Management said the pandemic’s duration and effects remain highly uncertain and that third-quarter results may not indicate the impact for the remainder of 2020. Risks include renewed restrictions, customer cancellations or delayed projects and collections, labor availability and H-2B visa processing, supply disruptions, weather and seasonality, contract profitability, acquisitions, and the company’s substantial debt and variable-rate exposure. LIBOR transition could affect borrowing costs. The filing states disclosure controls were effective at June 30, 2020 and reports no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether ancillary-services demand and development project activity recover, and how any renewed COVID-19 restrictions affect operations.
- Whether the $154.5 self-insurance reserve is adequate; the filing identifies $24.1 of period expense from revised estimates and assumptions.
- How much cash generation depends on working-capital movements, and whether reduced capital spending is sustainable.
- Debt repayment capacity, borrowing availability, covenant headroom, and exposure to interest-rate and LIBOR changes.
- Final purchase accounting for the five acquisitions and final terms and court approval of the IPO litigation settlement.