BrightView Reports Third Quarter Fiscal 2020 Results

BrightView Holdings, Inc. (NYSE: BV) (the “Company” or “BrightView”), the leading commercial landscaping services company in the United States, today reported unaudited results for the third quarter ended June 30, 2020.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200805005317/en/

(Graphic: Business Wire)

“Our quarterly results highlight the resiliency of our contract-based business and reflect the positive underlying trends of our strong-on-strong acquisition strategy, cash generation and liquidity, and our on-going focus on working capital and reducing capital expenditures,” said Andrew Masterman, BrightView President and Chief Executive Officer. “Our services and results of operations continue to benefit from a designation as an essential service. Our team has done an incredible job responding to the COVID-19 crisis by prioritizing health and safety and by delivering solid results in a challenging operating environment.”

“Despite ancillary softness and project delays, COVID-19 impacts to date have been modest due to our resilient contract revenue base and our earnings have benefited from cost management actions. Cash generation remains exceptional, margins strong, our capex requirements are modest, and we expect our M&A pipeline to continue to be a reliable and sustainable source of revenue growth,” Masterman said.” “We expect COVID-19 impacts will be felt over the next few quarters as conditions remain fluid. That said, we believe we are in a strong position to generate near-term solid EBITDA results, continued strong cash generation and stable top line performance.”

Third Quarter Fiscal 2020 Highlights

• Net cash provided by operating activities of $76.2 million, an increase of 71.2% compared to $44.5 million in the prior year.
• Free Cash Flow of $66.5 million, an increase of 385.4% compared to prior year of $13.7 million.
• Total revenue of $608.1 million; a 7.5% decrease compared to prior year of $657.2 million.
• Maintenance revenue of $460.0 million; a 6.5% decrease compared to prior year of $492.1 million;
  • Land revenue of $454.9 million; 6.5% decrease compared to prior year of $486.4 million.
• Development revenue of $149.1 million, a 10.3% decrease compared to prior year of $166.3 million.
• Net Loss of $2.4 million, or $(0.02) per share, and a net loss margin of 0.4%, compared to Net Income of $31.7 million, or $0.31 per share, and a net income margin of 4.8%, in the prior year.
• Adjusted EBITDA of $91.0 million and Adjusted EBITDA margin of 15.0%, compared to Adjusted EBITDA of $101.9 million and Adjusted EBITDA margin of 15.5% in the prior year.

Nine Months Fiscal 2020 Highlights

• Net cash provided by operating activities of $161.9 million, an increase of 48.3% compared to $109.2 million in the prior year.
• Free Cash Flow of $119.8 million, an increase of 208.8% compared to prior year of $38.8 million.
• Total Revenues for the nine months were $1,737.9 million, a 2.4% decrease compared to $1,779.9 million in the prior year.
• Maintenance revenue of $1,295.1 million; a 4.6% decrease compared to prior year of $1,358.0 million;
  • Land revenue of $1,132.0 million; 1.7% growth compared to prior year of $1,112.6 million;
  • Snow revenue of $163.1 million; a 33.5% decrease compared to prior year of $245.4 million.
• Development revenue of $445.5 million, a 4.9% increase compared to prior year of $424.7 million.
• Net Loss of $35.5 million, or $(0.34) per share, and a net loss margin of 2.0%, compared to Net Income of $19.3 million, or $0.19 per share, and a net income margin of 1.1%, in the prior year.

Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income, Free Cash Flow and Adjusted Earnings per Share are non-GAAP measures. Refer to the “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” sections for more information.

Adjusted EBITDA of $181.6 million and Adjusted EBITDA margin of 10.4%, compared to Adjusted EBITDA of $213.1 million and Adjusted EBITDA margin of 12.0% in the prior year, with the negative variance largely driven by the decremental margins due to the lower snow revenue. “During the quarter we generated $66.5 million in Free Cash Flow, which further helped to benefit our strong liquidity” said John Feenan, BrightView Executive Vice President and Chief Financial Officer. “We continue to maintain a disciplined financial policy while remaining intensely focused on accretive transactions and paying down debt. The fundamentals of our business and our industry remain strong and our cash generation, combined with modest capital needs, will continue to drive stockholder value.”

For the third quarter of fiscal 2020, total revenue decreased 7.5% to $608.1 million due to decreases in both the Maintenance Services Segment and Development Services Segment revenues. Net Loss was $2.4 million compared to Net Income of $31.7 million in the 2019 period, attributable to lower Income from operations, principally driven by an increase in non-recurring expenses and a decline in gross profit due to lower ancillary revenue, partially offset by an increase in Other income, a decrease in Interest expense and an increase in the Income tax benefit. Total Adjusted EBITDA decreased 10.7% due to a decrease in both Maintenance Services Segment Adjusted EBITDA and Development Services Segment Adjusted EBITDA, as discussed further below. The decrease in Adjusted EBITDA was partially offset by a decrease in corporate expenses of $2.1 million.

For the nine months ended June 30, 2020, total revenue decreased 2.4% to $1,737.9 million due to a decrease in Maintenance Services Segment revenues driven by meaningfully lower snowfall as compared to historical averages, partially offset by an increase in Development Services Segment revenues. Total Adjusted EBITDA was $181.6 million, down 14.8% versus the prior year, due to a decrease in Maintenance Services Segment Adjusted EBITDA driven by the decremental margins as a result of the lower snow revenue and a decrease in Development Services Segment Adjusted EBITDA, as discussed further below. The decrease in Adjusted EBITDA was partially offset by a reduction in corporate expenses of $1.5 million.

For the third quarter of fiscal 2020, revenue in the Maintenance Services Segment decreased 6.5% to $460.0 million. Revenues from landscape maintenance services were $454.9 million, a decrease of $31.5 million over the 2019 period, driven by a $60.1 million decrease principally due to a reduction in demand for ancillary services as a result of the COVID-19 pandemic, partially offset by a $28.6 million revenue contribution from acquired businesses.

Adjusted EBITDA for the Maintenance Services Segment in the quarter decreased 7.8% to $84.0 million, principally driven by the decrease in landscape maintenance ancillary services revenues described above. Segment Adjusted EBITDA Margin decreased 20 basis points versus the prior year, to 18.3%, in the three months ended June 30, 2020, from 18.5% in the 2019 period due to the decline in ancillary offset by overhead cost reductions.

For the nine months ended June 30, 2020, revenue in the Maintenance Services Segment decreased 4.6% to $1,295.1 million. Revenues from snow removal services were $163.1 million, a decrease of $82.3 million over the 2019 period and revenues from landscape services were $1,132.0 million, an increase of $19.4 million over the 2019 period. The decrease in snow removal services is primarily attributable to a decreased frequency of snowfall events, the geographical distribution of the snowfall events which negatively impacted the Mid-Atlantic, Northeast, and Midwest regions, the lower volume of snowfall per event and the lower relative snowfall in the nine months ended June 30, 2020 (for our current branch structure, snowfall for the nine months ended June 30, 2020 and 2019 was 61.1% and 86.3%, respectively, of the historical 10-year average for that nine-month period). The increase in landscape services revenues was driven by a $76.8 million revenue contribution from acquired businesses, partially offset by a decrease of $55.7 million principally due to a reduction in demand for ancillary services as a result of the COVID-19 pandemic.

Adjusted EBITDA for the Maintenance Services Segment for the nine months ended June 30, 2020 decreased 15.6% to $172.9 million, with the Adjusted EBITDA Margin decreasing 170 basis points versus the prior year. The decreases in Segment Adjusted EBITDA and Adjusted EBITDA Margin were due to the decrease in net service revenues described above.

For the third quarter fiscal 2020, revenue in the Development Services Segment decreased 10.3% to $149.1 million. The decrease in development services revenues was principally driven by project and construction delays related to shelter in place orders as a result of the COVID-19 pandemic.

Adjusted EBITDA for the Development Services Segment decreased 21.9% to $21.1 million in the quarter. Segment Adjusted EBITDA Margin decreased 200 basis points, to 14.2%, in the three months ended June 30, 2020, from 16.2% in the 2019 period. The decrease in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin was due principally to the completion of certain large projects in the prior year combined with the decrease in net service revenues described above.

For the nine months ended June 30, 2020, revenues for the Development Services Segment increased 4.9% to $445.5 million. The increase in development services revenues was driven by higher first half project volumes and a stronger first half project completion percentage compared to the prior year.

Adjusted EBITDA for the Development Services Segment decreased 2.0% to $53.9 million during the nine months ended June 30, 2020. Segment Adjusted EBITDA Margin decreased 90 basis points, to 12.1%, in the nine months ended June 30, 2020, from 13.0% in the 2019 period. The decrease in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin was due principally to the completion of certain large projects in the prior year, partially offset by the increase in net service revenues described above.

Net cash provided by operating activities for the nine months ended June 30, 2020 was $161.9 million, compared to $109.2 million for the prior year. This increase was primarily due to an increase in cash provided by improvements in net working capital, including accounts payable and other operating liabilities, unbilled and deferred revenue, and an increase in cash provided by accounts receivable, partially offset by a decrease in cash provided by net income and a decrease in cash provided by other operating assets.

Free Cash Flow for the nine months ended June 30, 2020 was $119.8 million, an increase of $81.0 million versus the prior year. The increase in Free Cash Flow was due to an increase in cash flows from operating activities of $52.7 million as well as a decrease in capital expenditures of $31.3 million, partially offset by a decrease in proceeds from the sale of property and equipment of $3.0 million.

For the nine months ended June 30, 2020, capital expenditures were $45.9 million, compared with $77.2 million in the prior year. The Company also generated proceeds from the sale of property and equipment of $3.8 million and $6.8 million in the nine months of fiscal 2020 and 2019, respectively. Net of the proceeds from the sale of property and equipment in the nine months, net capital expenditures represented 2.4% and 4.0% of revenue in the nine months of fiscal 2020 and 2019, respectively.

As of June 30, 2020, the Company’s Total Net Financial Debt was $1,111.6 million, a decrease of $59.0 million compared to $1,170.6 million as of June 30, 2019. The Company’s Total Net Financial Debt to Adjusted EBITDA ratio was 4.1x as of June 30, 2020, compared with 3.9x as of June 30, 2019.

COVID-19 Update

• Throughout the entire country, landscape maintenance is recognized as an essential service.
• All branches operational with no limitations on scope of services.
• Executing downturn playbook and implementing prudent actions to preserve cash.
• Temporarily deferring discretionary merit increases and implemented a hiring freeze.
• Continuing to limit discretionary spending and capital expenditures.
• Specific Health and Safety actions include:
  • Proactively communicating critical information from CDC to employees.
  • Implemented branch based social distancing and hygiene and sanitization procedures.
  • Continuing to prohibit non-essential travel and mandated work from home policies as applicable.
  • Adhering to state and local mandates and guidelines.
  • Tracking current and potential exposures, imposing quarantine measures, and assigning case workers.
  • Implemented protocols requiring face coverings.

Conference Call Information

A conference call to discuss the third quarter fiscal 2020 financial results is scheduled for August 5, 2020, at 10 a.m. EDT. The conference call and webcast can be accessed by registering online here at which time registrants will receive dial-in details and a unique conference code for entry. The news release and a live webcast of the conference will also be accessible on the company's investor website.

A replay of the call will be available from 1 p.m. EDT on August 5, 2020 to 11:59 p.m. EDT on August 12, 2020. To access the recording, dial (800) 585-8367 or (416) 621-4642 (Conference ID 5266712).