BrightView Holdings, Inc. (NYSE: BV), the leading commercial landscaping services company in the United States, reported unaudited results for the first quarter ending Dec. 31, 2020.
“We are very pleased with the strong start to fiscal year 2021. Despite continued COVID-19 headwinds, our first quarter results reflect solid contract-based business and Adjusted EBITDA growth combined with meaningful margin expansion versus the prior year, a testament to the investments made in our expanded sales teams and sales enablement technologies, and the ongoing leverage of our technology and productivity initiatives,”said Andrew Masterman, BrightView President and Chief Executive Officer. “Our team continues to do an incredible job responding to the COVID-19 crisis by prioritizing health and safety, focusing on client relationships, and by delivering solid results in a challenging operating environment. The consistency and resiliency of our model continues to reflect fundamental strengths. Coupled with ongoing execution of our M&A strategy, we remain confident in our ability to create value.”
First Quarter Fiscal 2021 Highlights
• Total revenue of $554.4 million compared to the prior year of $570.7 million.
• Maintenance revenue of $418.0 million compared to the prior year of $418.9 million;
◦ Land revenue of $362.2 million compared to the prior year of $363.3 million;
◦ Snow revenue of $55.8 million compared to the prior year of $55.6 million.
• Development revenue of $137.4 million compared to the prior year of $152.8 million.
• Net Loss of $12.0 million, or $(0.11) per share, compared to Net Loss of $12.6 million, or $(0.12) per share in the prior year; Net Loss Margin of 2.2%, flat to the prior year.
• Adjusted EBITDA of $52.4 million, an increase of $0.7 million or 1.4% compared to Adjusted EBITDA of $51.7 million in the prior year; Adjusted EBITDA margin of 9.5%, an increase of 40 basis points compared to Adjusted EBITDA margin of 9.1% in the prior year.
• Net cash provided by operating activities of $5.1 million compared to $7.3 million in the prior year.
1 Adjusted EBITDA is a non-GAAP measure. Refer to the “Non-GAAP Financial Measures” section for more information. The Company is not providing a quantitative reconciliation of its financial outlook for Adjusted EBITDA to net income (loss), its corresponding GAAP measure, because the GAAP measure that is excluded from its non-GAAP financial outlook is difficult to reliably predict or estimate without unreasonable effort due to its dependence on future uncertainties, such as items discussed below. Additionally, information that is currently not available to the Company could have a potentially unpredictable and potentially significant impact on its future GAAP financial results.
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.
Fiscal 2021 Results – Total BrightView
Total BrightView – Operating Highlights
For the first quarter of fiscal 2021, total revenue decreased 2.9% to $554.4 million driven principally by a decrease in Development Services revenues of $15.4 million. Net Loss was $12.0 million compared to Net Loss of $12.6 million in the prior year period. Total Adjusted EBITDA increased $0.7 million, or 1.4%, to $52.4 million from $51.7 million in the prior year period. Maintenance Services Segment Adjusted EBITDA increased $1.9 million, or 4.0%, to $49.6 million compared to $47.7 in the prior year period, principally driven by targeted cost containment actions and leveraging our technology initiatives. Development Services Segment Adjusted EBITDA decreased to $17.1 million from $19.1 million in the prior year period due principally to a decrease in net service revenues. The Segment Adjusted EBITDA results are discussed further below.
Fiscal 2021 Results – Segments
Maintenance Services – Operating Highlights
For the first quarter of fiscal 2021, revenue in the Maintenance Services Segment was flat to the prior year excluding divestitures of $0.9 million. Revenues from commercial landscaping decreased $23.7 million over the 2019 period inclusive of snow, primarily due to a reduction in demand for ancillary services as a result of the COVID-19 pandemic, which was fully offset by a $23.7 million revenue contribution from acquired businesses inclusive of snow.
Adjusted EBITDA for the Maintenance Services Segment increased 4.0% to $49.6 million, from $47.7 million in the 2019 period. Additionally, Segment Adjusted EBITDA Margin increased 50 basis points, to 11.9% from 11.4% in the 2019 period. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were principally driven by targeted cost containment actions and leveraging our technology initiatives.
For the first quarter of fiscal 2021, revenue in the Development Services Segment decreased 6.0% excluding divestitures of $6.6 million, principally driven by a $13.2 million reduction due to the COVID-19 pandemic, partially offset by a $4.4 million revenue contribution from acquired businesses.
Adjusted EBITDA for the Development Services Segment decreased to $17.1 million in the quarter compared to $19.1 million in the prior year period due to the decrease in net service revenues described above. In addition, approximately half of the decline was attributable to the sale of BrightView Tree Company. Segment Adjusted EBITDA Margin was relatively flat at 12.4% for the quarter versus 12.5% in the 2019 period.
Net cash provided by operating activities for the quarter ended December 31, 2020 was $5.1 million, compared to $7.3 million for the prior year. This decrease was primarily due to an increase in cash used by accounts payable and other operating liabilities offset by a decrease in cash used by accounts receivable and other operating assets.
Free Cash Flow for the quarter ended December 31, 2020 was $(4.0) million, an increase of $2.2 million versus the prior year. The increase in Free Cash Flow was due primarily to a decline in capital expenditures of $4.8 million, described further below, partially offset by the decrease in cash flows from operating activities described above.
For the quarter ended December 31, 2020, capital expenditures were $9.7 million, compared with $14.5 million in the prior year. The Company also generated proceeds from the sale of property and equipment of $0.6 million and $1.0 million in the first quarter of fiscal 2021 and 2020, respectively. Net of the proceeds from the sale of property and equipment in the quarter, net capital expenditures represented 1.6% and 2.4% of revenue in the first quarter of fiscal 2021 and 2020, respectively.
1Total Financial Debt includes total long-term debt, net of original issue discount, and finance lease obligations
2Total Net Financial Debt equals Total Financial Debt minus Total Cash & Equivalents
3Total Net Financial Debt to Adjusted EBITDA ratio equals Total Net Financial Debt divided by the trailing twelve month Adjusted EBITDA.
As of December 31, 2020, the Company’s Total Net Financial Debt was $1,088.0 million, a decrease of $67.1 million compared to $1,155.1 million as of December 31, 2019. The Company’s Total Net Financial Debt to Adjusted EBITDA ratio was 4.0x and 3.8x as of December 31, 2020 and December 31, 2019, respectively.
Recent M&A Activity
In October 2020, BrightView acquired Commercial Tree Care, Inc. (CTC), a full-service tree care company based in San Jose, Calif. Founded in 1992, CTC is a full-service tree care provider specializing in pruning, tree removal, stump grinding, cabling, bracing, fertility treatment, pest and disease control, install and transplant, forestry fire fighting and timber harvesting. CTC also consults for development, appraisal, maintenance plans and overall site evaluation.
Additionally, in October 2020, BrightView acquired Water, Land, Environment, LLC (WLE), a commercial landscape maintenance and development company headquartered in Austin, Texas. Founded in 2003, WLE is a full-service commercial landscape management company, whose 250-member team serves HOA, developer, commercial, and municipal clients across three markets in Central Texas.
In December 2020, BrightView acquired Cutting Edge Property Maintenance, one of the leading commercial outdoor maintenance services providers in the Minneapolis-St. Paul region. Cutting Edge provides winter services, landscape maintenance and enhancements, tree care, and irrigation services in the Upper Midwest market.
In January 2021, BrightView acquired Green Image, LLC (d/b/a GTI) based in Las Vegas. GTI excels in multiple verticals, including maintenance and installation projects for municipalities, HOAs, tree care and irrigation.
• Throughout the entire country, landscape maintenance continues to be recognized as an essential service.
• All branches are operational with no limitations on the scope of services we can provide.
• Executed downturn playbook and are continuing to exercise prudence, limiting discretionary spending, and managing capital expenditures and working capital.
• Prioritizing additional actions to protect revenue and margins, and preserve cash in the event of a continued and prolonged resurgence.
• 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.