BrightView Holdings, Inc. — Q1 Fiscal 2022 Form 10-Q
Reporting period: Three months ended December 31, 2021, compared with the three months ended December 31, 2020. BrightView provides commercial landscape maintenance, snow removal, enhancement and development services in the United States. Results are unaudited; the company notes that interim results are seasonal and may not indicate full-year performance.
Financial performance
| Metric | Q1 FY2022 | Prior-year quarter |
|---|---|---|
| Net service revenue | $591.8 million | $554.4 million |
| Gross profit / margin | $139.9 million / 23.6% | $133.6 million / 24.1% |
| Operating loss | $8.4 million | $3.6 million |
| Net loss / diluted loss per share | $12.8 million / $0.12 | $12.0 million / $0.11 |
| Adjusted EBITDA / margin | $42.6 million / 7.2% | $52.4 million / 9.5% |
| Operating cash flow | $(22.4) million | $5.1 million |
| Free cash flow | $(49.9) million | $(4.0) million |
Revenue rose 6.7%, while gross margin fell 50 basis points. Higher material and fuel costs pressured gross margin; higher salaries and employee-related costs, including acquisition impacts and reinstatement of the employer savings-plan match, lifted SG&A to $134.9 million from $123.3 million. Interest expense decreased to $9.7 million from $13.6 million, primarily reflecting interest-rate swaps.
Maintenance Services revenue increased 4.8% to $438.2 million, but segment Adjusted EBITDA declined 8.7% to $45.3 million and its margin fell to 10.3% from 11.9%. Lower snow revenue and higher fuel costs offset growth in core landscaping and acquisitions. Development Services revenue increased 12.6% to $154.7 million, largely from acquired businesses; segment Adjusted EBITDA declined 15.2% to $14.5 million, with margin down to 9.4% from 12.4%, primarily due to higher material costs. Weather-related project delays partly offset Development revenue growth.
Balance sheet, liquidity and cash flow
At December 31, 2021, cash and cash equivalents were $132.8 million, total current assets were $711.7 million, and current liabilities were $456.4 million. Net working capital was $255.3 million, up from $214.7 million at September 30, 2021.
Total debt, net, was $1,214.4 million, up from $1,141.0 million at September 30, primarily reflecting $75.0 million borrowed under the receivables financing agreement. The company had no borrowings under its $260 million revolving credit facility and reported compliance with debt covenants and no default. The Series B term loan bears interest at LIBOR plus 2.5%; $500 million of interest-rate swaps were outstanding, with hedging effective through December 2022. Management said existing cash, operating cash flow and available borrowing capacity should fund obligations and planned needs for the next 12 months.
Operating cash flow was negative $22.4 million, with management citing cash use in accounts payable and other operating liabilities, principally repayment of payroll tax deferrals under the CARES Act. Capital expenditures were $28.6 million, versus $9.7 million a year earlier. Investing cash outflow was $33.7 million, including $6.0 million for acquisitions. Financing cash inflow of $65.2 million included the $75.0 million receivables-facility borrowing.
Outlook, risks and notable items
- The filing provides no specific financial guidance. Management described maintenance services as largely recurring and non-discretionary, while noting that seasonality, snowfall, weather and construction activity can affect quarterly results.
- Management cited inflation, fuel and material costs, labor availability and retention, COVID-19 developments and related restrictions, customer retention, acquisition integration, and variable-rate debt and LIBOR transition among relevant uncertainties.
- In December 2021, the company announced a share repurchase program of up to $250 million and agreed to repurchase 5,906,954 shares from MSD Valley Investments, LLC at $13.98 per share. The transaction closed January 19, 2022. In January 2022, the company also repaid the $75.0 million receivables-facility borrowing.
- Self-insurance reserves were $154.1 million. The company said it was not aware of legal matters expected to have a material effect. It reported effective disclosure controls as of December 31, 2021 and no material change in internal control over financial reporting.
Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Free Cash Flow are non-GAAP measures; review the filing’s reconciliations and the adjustments included in those measures.
Most important facts for investors to verify
- Whether lower snow revenue and persistent fuel, material and labor cost pressures continue to weigh on segment margins.
- Whether operating cash flow and free cash flow recover after the seasonal working-capital outflow, elevated capital spending and payroll-tax repayment.
- Debt balances, borrowing availability, interest-rate exposure and the terms and effects of the LIBOR transition.
- The funding and completion effects of the substantial repurchase agreement and broader $250 million buyback authorization.
- Acquisition contributions to revenue versus their integration costs and impact on profitability.