BrightView Holdings, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended June 30, 2022. The filing is unaudited. BrightView provides commercial landscape maintenance, enhancements, development and snow removal services through Maintenance Services and Development Services.
Financial performance
| Metric | Three months ended June 30, 2022 | Three months ended June 30, 2021 | Nine months ended June 30, 2022 | Nine months ended June 30, 2021 |
|---|---|---|---|---|
| Revenue | $747.4 million | $673.6 million | $2,051.2 million | $1,879.9 million |
| Gross profit / margin | $189.2 million / 25.3% | $179.0 million / 26.6% | $486.2 million / 23.7% | $470.7 million / 25.0% |
| Operating income | $44.7 million | $43.3 million | $48.0 million | $57.3 million |
| Net income (loss) | $10.8 million | $25.2 million | $(1.3) million | $19.5 million |
| Adjusted EBITDA | $94.3 million | $93.6 million | $196.6 million | $212.8 million |
| Operating cash flow | $23.4 million | $50.0 million | $65.7 million | $133.4 million |
| Free cash flow | $2.3 million | $37.3 million | $(17.0) million | $96.2 million |
Quarterly revenue increased 11.0%, while nine-month revenue increased 9.1%. Gross margin fell 130 basis points in both comparisons, which management attributed primarily to higher fuel costs for the quarter and higher materials and fuel costs year to date. Nine-month Adjusted EBITDA declined 7.6% and its margin fell to 9.6% from 11.3%.
Segments and changes versus prior periods
- Maintenance Services: Revenue rose 7.1% for the quarter and 5.1% year to date. Quarterly segment Adjusted EBITDA fell 1.5% to $89.2 million; nine-month EBITDA fell 7.1% to $197.4 million. Margin declines reflected fuel costs and, year to date, lower snow-removal revenue due to less snowfall.
- Development Services: Revenue increased 24.0% for the quarter and 23.7% year to date, supported by project volume and acquisitions. Segment Adjusted EBITDA increased 11.8% for the quarter and 3.4% year to date, but margins declined in both periods due to project mix and higher input costs.
- Quarterly net income decreased to $10.8 million from $25.2 million, despite higher revenue. Higher interest expense and $12.6 million of debt-extinguishment expense contributed to the decline. Nine-month results moved from $19.5 million net income to a $1.3 million net loss.
Cash, debt and liquidity
- At June 30, 2022, cash was $26.3 million, down from $123.7 million at September 30, 2021. Net working capital was $154.1 million, versus $214.7 million.
- Total debt, net, was $1,348.4 million, up from $1,141.0 million at September 30, 2021. The April refinancing established a $1.2 billion Series B term loan due 2029 and a $300 million revolving facility due 2027. The term loan bears variable interest based on Term SOFR or the base rate; interest expense rose 57.4% in the quarter.
- The company reported no revolver borrowings outstanding at quarter-end and had $171.4 million outstanding under its receivables financing agreement, whose capacity was increased to $275 million and term extended to 2025. BrightView said it was in compliance with debt covenants and expected cash flows and available borrowing capacity to meet obligations for the next 12 months.
- Nine-month operating cash flow fell to $65.7 million; capital expenditures were $88.1 million. Investing activities used $172.1 million, including $89.4 million for acquisitions. Financing activities included $163.7 million of common-stock repurchases and distributions.
Outlook, commentary, risks and unusual items
- The filing gives no specific earnings or revenue guidance. Management described maintenance services as largely recurring and non-discretionary, but noted seasonal and weather-related variability; its stated liquidity outlook covers the next 12 months.
- Management cited inflation, fuel and materials costs, labor availability and costs, supply-chain disruption, interest-rate increases, weather and snowfall variability, customer retention, construction-market conditions and continuing COVID-19 uncertainty as risks to results.
- The April debt refinancing resulted in a $12.6 million loss on extinguishment of debt. The company acquired seven businesses for approximately $89.4 million, net of cash acquired; acquisition fair-value estimates remained preliminary.
- A $250 million share-repurchase program announced in December 2021 had approximately $88.4 million remaining at June 30. The company repurchased 5.9 million shares during April at an average $12.33 per share.
- Self-insurance reserves totaled $151.2 million. BrightView said it knew of no legal proceeding or claim expected to have a material effect. Disclosure controls were concluded effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Whether pricing and productivity can offset continued fuel, materials, labor and subcontractor cost pressure.
- How cash generation, capital expenditures, acquisitions and repurchases affect liquidity and debt reduction.
- The sensitivity of interest expense to variable rates, including the status of the $500 million interest-rate swaps scheduled through December 2022.
- Whether acquisition integration and the preliminary purchase-price allocations ultimately deliver expected growth and returns.
- How seasonal weather and snowfall compare with assumptions underlying maintenance and snow-removal performance.