證券交易委員會
華盛頓特區 20549
表格
（選擇一個）
根據1934年證券交易法第13或15(d)條的季度報告 |
截至季度末
或
根據1934年證券交易法第13條或15(d)條的轉變報告 |
過渡期從 到
委員會檔案編號：
(註冊人在其章程中指定的確切名稱)
( 州或其他管轄區名 成立或組織) |
(I.R.S. 僱主 |
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(主要執行辦公室地址) |
(郵政編碼) |
註冊人的電話號碼，包括區號：(
根據《證券法》第12(b)節註冊的證券：
每個類別的標題 |
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交易標的 |
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註冊的交易所名稱 |
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根據法案第12(g)條註冊的證券：無
請用勾選標記指示註冊人（1）在過去12個月內（或註冊人必須提交這些報告的較短期間內）是否已提交證券交易法1934年第13節或第15(d)節要求提交的所有報告，以及（2）在過去90天內是否受到了此類提交要求的監管。
請勾選以指示註冊人是否在過去12個月內（或註冊人被要求提交此類文件的較短期間內）根據規則405提交了所有必須提交的互動數據文件，這些文件符合S-t條例（本章第232.405條）。
請在方框內勾選申報者是否為大型快速申報者、快速申報者、非快速申報者、較小型報告公司或新興成長公司。在《交易所法》第120亿2條中，請查看「大型快速申報者」、「快速申報者」、「較小型報告公司」和「新興成長公司」的定義。
大型加速報告公司 |
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☒ |
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非加速報告公司 |
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☐ |
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小型報告公司 |
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新興增長公司 |
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如果是新興成長型企業，在符合任何依據證券交易法第13(a)條所提供的任何新的或修改的財務會計準則的遵循的延伸過渡期方面，是否選擇不使用覈準記號進行指示。☐
請勾選註冊人是否爲空殼公司（根據《交易法》第120亿.2條的定義）。是 ☐ 否
截至2025年1月31日，註冊人的普通股流通股數量爲
目錄 內容
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頁 |
第一部分。 |
6 |
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項目 1。 |
6 |
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6 |
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7 |
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8 |
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9 |
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10 |
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11 |
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項目2。 |
26 |
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項目3。 |
38 |
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項目4。 |
38 |
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第二部分。 |
39 |
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項目 1。 |
39 |
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項目 1A。 |
39 |
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項目2。 |
39 |
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項目3。 |
39 |
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項目4。 |
39 |
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Item 5. |
39 |
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Item 6. |
40 |
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2
關於前瞻性陳述的特別說明
本季度報告（表格10-Q）（以下稱「表格10-Q」）包含根據1995年美國私人證券訴訟改革法案第27A條及1933年證券法（經修訂版）（「證券法」）和1934年證券交易法（經修訂版）（「交易法」）的安全港條款的定義，所稱的「前瞻性聲明」。除本表格10-Q中包含的歷史事實聲明外，所有聲明，包括有關我們計劃、目標、信念、業務前景、行業趨勢、預期、策略、未來事件、未來運營、未來流動性和財務狀況、未來收入、預計成本、管理層前景、計劃和目標以及其他信息的聲明，可能都是前瞻性聲明。
Words such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “estimates,” or “anticipates,” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, or guarantees of future performance and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and projections will result or be achieved, and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.
There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under the heading “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Some of the key factors that could cause actual results to differ from our expectations include risks related to:
3
We caution you that the risks, uncertainties, and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits, or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent
4
events or circumstances, any change in assumptions, beliefs or expectations or any change in circumstances upon which any such forward-looking statements are based, except as required by law.
5
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
BrightView Holdings, Inc.
Consolidated Balance Sheets
(Unaudited)
(In millions, except par value and share data)
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December 31, |
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September 30, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Unbilled revenue |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Goodwill |
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Operating lease assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Deferred revenue |
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Current portion of self-insurance reserves |
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Accrued expenses and other current liabilities |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Long-term debt, net |
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Deferred tax liabilities |
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Self-insurance reserves |
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Long-term operating lease liabilities |
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Other liabilities |
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Total liabilities |
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Mezzanine equity: |
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Series A convertible preferred shares, $ |
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Stockholders’ equity: |
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Preferred stock, $ |
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Common stock, $ |
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Treasury stock, at cost; |
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( |
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( |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income (loss) |
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( |
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Total stockholders’ equity |
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Total liabilities, mezzanine equity and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
BrightView Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
(In millions, except per share data)
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Three Months Ended |
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2024 |
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2023 |
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Net service revenues |
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$ |
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$ |
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Cost of services provided |
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Gross profit |
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Selling, general and administrative expense |
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Amortization expense |
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(Loss) from operations |
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( |
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( |
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Other (income) |
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( |
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( |
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Interest expense, net |
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(Loss) before income taxes |
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( |
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( |
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Income tax (benefit) |
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( |
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( |
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Net (loss) |
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$ |
( |
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$ |
( |
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Less: dividends on Series A convertible preferred shares |
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Net (loss) attributable to common stockholders |
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$ |
( |
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$ |
( |
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(Loss) per share: |
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Basic and diluted (loss) per share |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
BrightView Holdings, Inc.
Consolidated Statements of Comprehensive (Loss)
(Unaudited)
(In millions)
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Three Months Ended |
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2024 |
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2023 |
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Net (loss) |
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$ |
( |
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$ |
( |
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Net derivative gains (losses) and other costs arising during the period, net of tax (benefit) expense of $ |
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( |
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Reclassification of (gains) into net (loss), net of tax (expense) of $( |
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( |
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( |
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Other comprehensive income (loss) |
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( |
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Comprehensive (loss) |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
BrightView Holdings, Inc.
Consolidated Statements of Changes in Stockholders’ Equity and Mezzanine Equity
Three Months ended December 31, 2024 and 2023
(Unaudited)
(In millions)
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Stockholders’ Equity |
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Mezzanine Equity |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Treasury |
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Total |
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Preferred |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Stock |
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Equity |
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Shares |
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Amount |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Net (loss) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Capital contributions and issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock and distributions |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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— |
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— |
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Series A Preferred Stock dividends |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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Balance, December 31, 2024 |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
( |
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$ |
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$ |
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Stockholders’ Equity |
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Mezzanine Equity |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Treasury |
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Total |
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Preferred |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Stock |
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Equity |
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Shares |
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Amount |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
) |
$ |
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$ |
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Net (loss) |
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— |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
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— |
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— |
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Other comprehensive (loss), net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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— |
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— |
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Capital contributions and issuance of common stock |
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— |
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— |
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— |
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— |
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— |
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— |
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Equity-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock and distributions |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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— |
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— |
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Series A Preferred Stock dividends |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
) |
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— |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
9
BrightView Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
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Three Months Ended |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net (loss) |
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$ |
( |
) |
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$ |
( |
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Adjustments to reconcile net (loss) to net cash provided by operating activities: |
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Depreciation |
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Amortization of intangible assets |
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Amortization of financing costs and original issue discount |
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Deferred taxes |
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( |
) |
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( |
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Equity-based compensation |
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Realized gain on hedges |
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( |
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( |
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Other non-cash activities |
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Change in operating assets and liabilities: |
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Accounts receivable |
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Unbilled and deferred revenue |
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Other operating assets |
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( |
) |
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( |
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Accounts payable and other operating liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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( |
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( |
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Proceeds from sale of property and equipment |
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Other investing activities |
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Net cash (used) by investing activities |
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( |
) |
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( |
) |
Cash flows from financing activities: |
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Repayments of finance lease obligations |
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( |
) |
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( |
) |
Repayments of receivables financing agreement |
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( |
) |
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( |
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Proceeds from receivables financing agreement, net of issuance costs |
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Debt issuance and prepayment costs |
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( |
) |
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Series A preferred stock dividend |
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( |
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Proceeds from issuance of common stock, net of share issuance costs |
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Repurchase of common stock and distributions |
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( |
) |
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( |
) |
Contingent business acquisition payments |
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( |
) |
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( |
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Decrease in book overdrafts |
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( |
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Other financing activities |
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Net cash (used) by financing activities |
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( |
) |
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( |
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Net change in cash and cash equivalents |
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( |
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( |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental Cash Flow Information: |
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Cash paid (received) for income taxes, net |
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$ |
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$ |
( |
) |
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Cash paid for interest |
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$ |
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$ |
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Non-cash Series A Preferred Stock dividends |
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$ |
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$ |
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Accrual for property and equipment |
|
$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
10
BrightView Holdings, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(In millions, except per share and share data)
1. Business
BrightView Holdings, Inc. (the “Company” and, collectively with its consolidated subsidiaries, “BrightView”) provides landscape maintenance and enhancements, landscape development, snow removal and other landscape related services for commercial customers throughout the United States. BrightView is aligned into
Basis of Presentation
These consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim reporting and are unaudited.
In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments, including normal, recurring accruals that are necessary for a fair presentation of the Company’s operations for the periods presented in conformity with GAAP. All intercompany activity and balances have been eliminated from the consolidated financial statements. The consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year.
The Consolidated Balance Sheet as of September 30, 2024, presented herein, has been derived from the Company’s audited consolidated financial statements as of and for the fiscal year ended September 30, 2024, but does not include all disclosures required by GAAP, for annual financial statements. For a more complete discussion of the Company’s accounting policies and certain other information, refer to the audited consolidated financial statements and the notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2024, filed with the Securities and Exchange Commission (“SEC”).
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. On an ongoing basis, management reviews its estimates, including those related to allowances for doubtful accounts, revenue recognition, self-insurance reserves, estimates related to the Company’s assessment of goodwill for impairment, useful lives for depreciation and amortization, realizability of deferred tax assets, and litigation based on currently available information. Changes in facts and circumstances may result in revised estimates and actual results may differ from estimates.
2. Recent Accounting Pronouncements
Reference Rate Reform
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting which provides optional expedients and exceptions for the accounting for contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. In January 2021, the FASB issued ASU 2021-01 to clarify the scope of certain optional expedients for derivatives that are affected by the discounting transition. In December 2022, the FASB issued ASU 2022-06 to defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. As of December 31, 2024, the Company was not party to any contracts, hedging relationships, or other transactions affected by reference rate reform.
Segment Reporting
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The purpose of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods in fiscal years beginning after
11
December 15, 2024. The Company is in the process of evaluating the impact of ASU No. 2023-07 on its consolidated financial statements.
Income Taxes
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands public entities tax disclosures including improving disclosures surrounding the company's rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The amendment is effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact of ASU No. 2023-09 on its consolidated financial statements.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, Income Statement (Subtopic 220-40): Expense Disaggregation Disclosures. The ASU enhances disclosure of income statement expense categories to improve transparency and provide financial statement users with more detailed information about the nature, amount, and timing of expenses impacting financial performance. In January 2025, the FASB issued ASU No. 2025-01 to clarify the effective date of the update. The amendment is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. The Company is in the process of evaluating the impact of ASU No. 2024-03 on its consolidated financial statements.
3. Revenue
The Company’s revenue is generated from Maintenance Services and Development Services. The Company generally recognizes revenue from the sale of services as the services are performed, typically ratably over the term of the contract(s), which the Company believes to be the best measure of progress. The Company recognizes revenues as it transfers control of products and services to its customers. The Company recognizes revenue in an amount reflecting the total consideration it expects to receive from the customer. Revenue is recognized according to the following five step model: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenues when a performance obligation is satisfied. The Company determined that for contracts containing multiple performance obligations, stand-alone selling price is readily determinable for each performance obligation and therefore allocation of the transaction price to multiple performance obligations is not necessary. The transaction price will include estimates of variable consideration, such as returns and provisions for doubtful accounts and sales incentives, to the extent it is probable that a significant reversal of revenue recognized will not occur. In all cases, when a sale is recorded by the Company, no significant uncertainty exists surrounding the purchaser’s obligation to pay.
Maintenance Services
The Company’s Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from to
12
Development Services
Development Services revenues are generated primarily through landscape architecture and development services. These revenues are primarily recognized over time using the cost-to-cost input method, measured by the percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress. The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses are immaterial to current and historical operations. Changes in job performance, job conditions, and estimated profitability, including final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.
Disaggregation of revenue
The following table presents the Company’s reportable segment revenues, disaggregated by revenue type. The Company disaggregates revenue from contracts with customers into major services lines. The Company has determined that disaggregating revenue into these categories depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. As noted in the business segment reporting information in Note 12 “Segments”, the Company’s reportable segments are Maintenance Services and Development Services.
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Landscape Maintenance |
|
$ |
|
|
$ |
|
||
Snow Removal |
|
|
|
|
|
|
||
Maintenance Services |
|
|
|
|
|
|
||
Development Services |
|
|
|
|
|
|
||
Eliminations |
|
|
( |
) |
|
|
( |
) |
Net service revenues |
|
$ |
|
|
$ |
|
||
Remaining Performance Obligations
Remaining performance obligations represent the estimated revenue expected to be recognized in the future related to performance obligations which are fully or partially unsatisfied at the end of the period.
As of December 31, 2024, the estimated future revenues for remaining performance obligations that are part of a contract that has an original expected duration of greater than one year was approximately $
Contract Assets and Liabilities
When a contract results in revenue being recognized in excess of the amount the Company has invoiced or has the right to invoice to the customer, a contract asset is recognized. Contract assets are transferred to Accounts receivable, net when the rights to the consideration become unconditional. Contract assets are presented as Unbilled revenue on the Consolidated Balance Sheets.
There were $
Contract liabilities consist of payments received from customers, or such consideration that is contractually due, in advance of providing the product or performing services such that control has not passed to the customer. Contract liabilities are presented as Deferred revenue on the Consolidated Balance Sheets.
Changes in Deferred revenue for the three month period ended December 31, 2024 were as follows:
|
|
Deferred |
|
|
Balance, September 30, 2024 |
|
$ |
|
|
Recognition of revenue |
|
|
( |
) |
Deferral of revenue |
|
|
|
|
Balance, December 31, 2024 |
|
$ |
|
|
13
Practical Expedients and Exemptions
The Company offers certain interest-free contracts to customers where payments are received over a period not exceeding one year. Additionally, certain Maintenance Services and Development Services customers may pay in advance for services. The Company does not adjust the promised amount of consideration for the effects of these
As permitted under the practical expedient available under ASU No. 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance and (iii) contracts for which the Company recognizes revenue at the amount which we have the right to invoice for services performed.
4. Accounts Receivable, net
Accounts receivable of $
5. Property and Equipment, net
Property and equipment, net consists of the following:
|
|
Useful Life |
|
December 31, |
|
|
September 30, |
|
||
Land |
|
— |
|
$ |
|
|
$ |
|
||
Buildings and leasehold improvements |
|
|
|
|
|
|
|
|||
Operating equipment |
|
|
|
|
|
|
|
|||
Transportation vehicles |
|
|
|
|
|
|
|
|||
Office equipment and software |
|
|
|
|
|
|
|
|||
Construction in progress |
|
— |
|
|
|
|
|
|
||
Property and equipment |
|
|
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
$ |
|
|
$ |
|
||
Construction in progress includes costs incurred for software and other assets that have not yet been placed in service. Depreciation expense related to property and equipment was $
6. Intangible Assets, Goodwill, Acquisitions, and Divestitures
Intangible Assets, net
Identifiable intangible assets consist of acquired customer contracts and relationships. Amortization expense related to intangible assets was $
Intangible assets, net, as of December 31, 2024 and September 30, 2024 consisted of the following:
|
|
|
|
December 31, 2024 |
|
|
September 30, 2024 |
|
||||||||||
|
|
Estimated |
|
Gross |
|
|
Accumulated |
|
|
Gross |
|
|
Accumulated |
|
||||
Customer relationships |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|||
Total intangible assets |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
14
Goodwill
The following is a summary of the goodwill activity for the periods ended September 30, 2024 and December 31, 2024:
|
|
Maintenance |
|
|
Development |
|
|
Total |
|
|||
Balance, September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Acquisitions (1) |
|
|
|
|
|
|
|
|
|
|||
Divestiture |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance, September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Acquisitions (1) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance, December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Divestiture
7. Long-term Debt
Long-term debt consists of the following:
|
|
December 31, |
|
|
September 30, 2024 |
|
||
Series B term loan |
|
$ |
|
|
$ |
|
||
Receivables financing agreement |
|
|
|
|
|
|
||
Financing costs, net |
|
|
( |
) |
|
|
( |
) |
Total debt, net |
|
$ |
|
|
$ |
|
||
Less: Current portion of long-term debt |
|
|
|
|
|
|
||
Long-term debt, net |
|
$ |
|
|
$ |
|
||
First Lien credit facility term loans and Series B Term Loan due 2029
In connection with the KKR Acquisition, the Company and a group of financial institutions entered into a credit agreement (the “Credit Agreement”) dated
On August 28, 2023, the Company voluntarily repaid $
On May 28, 2024, the Company entered into Amendment No. 8 to the Credit Agreement (the “Eighth Credit Agreement Amendment”). Under the Eighth Credit Agreement Amendment, the existing Series B Term Loans were amended to bear interest at a rate per annum based on a secured overnight funding rate (“Term SOFR”), plus a margin of
15
Revolving credit facility
The Company has a
Receivables financing agreement
On April 28, 2017, the Company, through a wholly-owned subsidiary, entered into a receivables financing agreement (the “Receivables Financing Agreement”).
On June 27, 2024, the Company, through a wholly-owned subsidiary, entered into the Fifth Amendment to the Receivables Financing Agreement (the “Fifth Amendment”). The Fifth Amendment (i) increased the borrowing capacity to $
All amounts outstanding under the Receivables Financing Agreement are collateralized by substantially all of the accounts receivable and unbilled revenue of the Company. During the three months ended December 31, 2024 the Company borrowed $
The following are the scheduled maturities of long-term debt for the remainder of fiscal 2025 and the following four fiscal years and thereafter, which do not include any estimated excess cash flow payments:
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 and thereafter |
|
|
|
|
Total long-term debt |
|
|
|
|
Less: Current maturities |
|
|
|
|
Less: Original issue discount |
|
|
|
|
Less: Financing costs |
|
|
|
|
Total long-term debt, net |
|
$ |
|
The Company has estimated the fair value of its long-term debt to be approximately $
8. Fair Value Measurements and Derivative Instruments
Fair value is defined as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
Fair Value Hierarchy
The following hierarchy for inputs used in measuring fair value should maximize the use of observable inputs and minimize the use of unobservable inputs by requiring that the most observable inputs be used when available:
Level 1 Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement dates.
Level 2 Significant observable inputs that are used by market participants in pricing the asset or liability based on market data obtained from independent sources.
16
Level 3 Significant unobservable inputs the Company believes market participants would use in pricing the asset or liability based on the best information available.
The carrying amounts shown for the Company’s cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to the short-term maturity of those instruments. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are generally settled at or near cost.
Investments held in Rabbi Trust
A non-qualified deferred compensation plan is available to certain executives. Under this plan, participants may elect to defer up to
Derivatives
The Company’s objective in entering into derivative transactions is to manage its exposure to interest rate movements associated with its variable rate debt and changes in fuel prices. The Company recognizes derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. The fair values of the derivative financial instruments are determined using widely accepted valuation techniques including discounted cash flow analysis based on the expected cash flows of each derivative. Although the Company has determined that the significant inputs, such as interest yield curve and discount rate, used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with the Company’s counterparties and its own credit risk utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2024 and September 30, 2024, the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 and September 30, 2024:
|
|
December 31, 2024 |
|
|||||||||||||
|
|
Carrying Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments held by Rabbi Trust |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest rate derivative contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fuel derivative contracts |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Obligation to Rabbi Trust |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
17
|
|
September 30, 2024 |
|
|||||||||||||
|
|
Carrying Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Other assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments held by Rabbi Trust |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Accrued expenses and other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fuel derivative contracts |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate derivative contracts |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Obligation to Rabbi Trust |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Total liabilities |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
Hedging Activities
As of December 31, 2024 and September 30, 2024, the Company’s outstanding derivatives qualified as cash flow hedges. The Company assesses whether derivatives used in hedging transactions are “highly effective” in offsetting changes in the cash flow of the hedged forecasted transactions. Regression analysis is used for the hedge relationships and high effectiveness is achieved when a statistically valid relationship reflects a high degree of offset and correlation between the fair values of the derivative and the hedged forecasted transaction. The entire change in the fair value for highly effective derivatives is reported in Other comprehensive income (loss) and subsequently reclassified into Interest expense, net (in the case of interest rate contracts) and Cost of services provided (in the case of fuel hedge contracts) in the Consolidated Statements of Operations when the hedged item affects earnings. If the hedged forecasted transaction is no longer probable of occurring, then the amount recognized in Accumulated other comprehensive income (loss) is released to earnings. Cash flows from the derivatives are classified in the same category as the cash flows from the underlying hedged transaction.
Interest Rate Contracts
The Company has exposures to variability in interest rates associated with its variable interest rate debt, which includes the Series B Term Loan. As such, the Company has entered into interest rate contracts to help manage interest rate exposure by economically converting a portion of its variable-rate debt to fixed-rate debt. Effective for the periods March 18, 2016 through December 31, 2022, the Company held interest rate swaps with a notional amount of $
On August 28, 2023, the Company terminated $
The notional amount of interest rate contracts was $
The effects on the consolidated financial statements of the interest rate contracts which were designated as cash flow hedges were as follows:
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Income (Loss) recognized in Other comprehensive income (loss) |
|
$ |
|
|
$ |
( |
) |
|
reclassified from Accumulated other comprehensive income (loss) into Interest expense |
|
|
|
|
|
|
||
Fuel Contracts
The Company has exposures to variability in fuel pricing associated with its purchase and usage of fuel during the ordinary course of business operating a large fleet of vehicles and equipment. As such, the Company has entered into gasoline hedge contracts to help reduce its exposure to volatility in the fuel markets. In March 2024, the Company entered into a fuel swap agreement with a notional volume of
18
The effects on the consolidated financial statements of the fuel swap contracts which were designated as cash flow hedges were as follows:
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
(Loss) recognized in Other comprehensive income (loss) |
|
$ |
|
|
$ |
|
||
reclassified from Accumulated other comprehensive income (loss) into Cost of services provided |
|
|
( |
) |
|
|
|
|
9. Income Taxes
The following table summarizes the Company’s income tax (benefit) and effective income tax rate for the three months ended December 31, 2024 and 2023.
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
(Loss) before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
Income tax (benefit) |
|
|
( |
) |
|
|
( |
) |
Effective income tax rate |
|
|
% |
|
|
% |
||
The increase in the effective tax rate for the three months ended December 31, 2024, when compared to the three months ended December 31, 2023, is primarily attributable to equity-based compensation shifting to a windfall position, as a result of recent increases in the share price of the company's common stock.
10. Equity-Based Compensation
Amended and Restated 2018 Omnibus Incentive Plan
On June 28, 2018 (and as amended and restated on March 10, 2020 and March 5, 2024), in connection with the IPO, the Company’s Board of Directors adopted, and its stockholders approved, the BrightView Holdings, Inc. 2018 Omnibus Incentive Plan (the “2018 Omnibus Incentive Plan”). The total number of shares of common stock that may be issued under the 2018 Omnibus Incentive Plan is
2023 Employment Inducement Incentive Award Plan
On September 11, 2023, the Company adopted the BrightView Holdings, Inc. 2023 Employment Inducement Incentive Award Plan (the “Inducement Plan”). Pursuant to the Inducement Plan, the Company may grant equity incentive compensation as a material inducement for certain individuals to commence employment with the Company. A total of
Restricted Stock Awards
A summary of the Company’s restricted stock award activity for the three month period ended December 31, 2024 is presented in the following table:
|
|
Shares |
|
|
Weighted-Avg Distribution Price per Share |
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Less: Forfeited |
|
|
|
|
$ |
|
||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
||
19
Restricted Stock Units
A summary of the Company’s restricted stock unit activity for the three month period ended December 31, 2024 is presented in the following table:
|
|
Shares |
|
|
Weighted-Avg Distribution Price per Share |
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Less: Vested |
|
|
|
|
$ |
|
||
Less: Forfeited |
|
|
|
|
$ |
|
||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
||
During the three month period ended December 31, 2024, the Company issued
Stock Option Awards
A summary of the Company’s stock option activity for the three month period ended December 31, 2024 is presented in the following table:
|
|
Shares |
|
|
Weighted-Avg Exercise Price per Share |
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Less: Exercised |
|
|
|
|
$ |
|
||
Less: Forfeited |
|
|
|
|
$ |
|
||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
||
Vested and exercisable at December 31, 2024 |
|
|
|
|
$ |
|
||
Expected to vest after December 31, 2024 |
|
|
|
|
$ |
|
||
Performance Stock Unit Awards
A summary of the Company’s performance stock unit activity for the three month period ended December 31, 2024 is presented in the following table:
|
|
Shares |
|
|
Weighted-Avg Distribution Price per Share |
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Outstanding at December 31, 2024 |
|
|
|
|
$ |
|
||
* Awards above presented assuming 100% attainment
During the three month period ended December 31, 2024, the Company issued
20
Equity-Based Compensation Expense
The Company recognizes equity-based compensation expense using the estimated fair value as of the grant date over the requisite service or performance period applicable to the grant. Estimates of future forfeitures are made at the date of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The Company recognized $
2018 Employee Stock Purchase Plan
The Company’s Stockholders have approved the Company’s 2018 Employee Stock Purchase Plan, (the “ESPP”). A total of
11. Commitments and Contingencies
Risk Management
The Company carries general liability, auto liability, workers’ compensation, and employee health care insurance policies. In addition, the Company carries other reasonable and customary insurance policies for a Company of our size and scope, as well as umbrella liability insurance policies to cover claims over the liability limits contained in the primary policies. The Company’s insurance programs, for workers’ compensation, general liability, auto liability and employee health care for certain employees contain self-insured retention amounts, deductibles and other coverage limits (“self-insured liability”). Claims that are not self-insured as well as claims in excess of the self-insured liability amounts are insured. The Company uses estimates in the determination of the required reserves. These estimates are based upon calculations performed by third-party actuaries, as well as examination of historical trends and industry claims experience. The Company’s reserve for unpaid and incurred but not reported claims under these programs at December 31, 2024 was $
Litigation Contingency
21
12. Segments
The operations of the Company are conducted through
Maintenance Services primarily consists of recurring landscape maintenance services and snow removal services as well as supplemental landscape enhancement services.
Development Services primarily consists of landscape architecture and development services for new construction and large scale redesign projects.
The operating segments identified above are determined based on the services provided, and they reflect the manner in which operating results are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to allocate resources and assess performance. The CODM is the Company’s Chief Executive Officer. The CODM evaluates the performance of the Company’s operating segments based upon Net Service Revenues, Adjusted EBITDA and Capital Expenditures. Management uses Adjusted EBITDA to evaluate performance and profitability of each operating segment.
The accounting policies of the segments are the same as those described in Note 2 “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024. As previously disclosed, effective October 1, 2024, certain expenses previously classified as "Corporate", including corporate executive compensation, finance, legal and information technology and other corporate costs, are allocated to the
The following is a summary of certain financial data for each of the segments:
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Maintenance Services |
|
$ |
|
|
$ |
|
||
Development Services |
|
|
|
|
|
|
||
Eliminations |
|
|
( |
) |
|
|
( |
) |
Net Service Revenues |
|
$ |
|
|
$ |
|
||
Maintenance Services |
|
$ |
|
|
$ |
|
||
Development Services |
|
|
|
|
|
|
||
Capital Expenditures |
|
$ |
|
|
$ |
|
||
Maintenance Services |
|
$ |
|
|
$ |
|
||
Development Services |
|
|
|
|
|
|
||
Segment Adjusted EBITDA(1) |
|
$ |
|
|
$ |
|
||
|
|
Three Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Segment Adjusted EBITDA |
|
$ |
|
|
$ |
|
||
Interest expense, net |
|
|
|
|
|
|
||
Depreciation expense |
|
|
|
|
|
|
||
Amortization expense |
|
|
|
|
|
|
||
Business transformation and integration costs (a) |
|
|
|
|
|
|
||
Equity-based compensation (b) |
|
|
|
|
|
|
||
(Loss) before income taxes |
|
$ |
( |
) |
|
$ |
( |
) |
22
13. Mezzanine Equity
Series A Convertible Preferred Stock
On August 28, 2023 (the “Original Issuance Date”), BrightView Holdings, Inc. entered into an Investment Agreement with each of Birch Equity Holdings, LP, a Delaware limited partnership, and Birch-OR Equity Holdings, LLC, a Delaware limited liability company (collectively, the “Investors”), pursuant to which the Company issued and sold, in a private placement, an aggregate of
On December 17, 2024 the company declared a cash dividend of $
23
14. (Loss) Per Share of Common Stock
The Company calculates basic and diluted (loss) earnings per common share using the two-class method. The two-class method is an allocation formula that determines net (loss) income per common share for each share of common stock and Series A Convertible Preferred Stock, a participating security, according to dividends declared and participation rights in undistributed earnings. Under this method, all earnings (distributed and undistributed) are allocated to common shares and Series A Convertible Preferred Stock based on their respective rights to receive dividends. The holders of the Series A Convertible Preferred Stock do not participate in losses. The holders of Series A Convertible Preferred Stock participate in cash dividends that the Company pays on its common stock in an as-converted basis. Diluted net (loss) income per common share is computed based on the weighted average number of shares of common stock outstanding during each period, plus potential common shares considered outstanding during the period, as long as the inclusion of such awards is not antidilutive. Potential common shares consist of unvested and unexercised stock compensation awards and the Series A Convertible Preferred Stock, using the more dilutive of either the two-class method or if-converted stock method.
Set forth below is a reconciliation of the numerator and denominator for basic and diluted (loss) earnings per share calculation for the periods indicated:
|
Three Months Ended |
|
|||||
|
2024 |
|
|
2023 |
|
||
Basic (Loss) per common share |
|
|
|
|
|
||
Numerator: |
|
|
|
|
|
||
Net (loss) |
$ |
( |
) |
|
$ |
( |
) |
Less: dividends on Series A convertible preferred shares |
|
( |
) |
|
|
( |
) |
Less: Earnings allocated to Convertible Preferred Shares |
|
|
|
|
|
||
Net (loss) available to common shareholders |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
||
Weighted average number of common shares outstanding – basic |
|
|
|
|
|
||
|
|
|
|
|
|
||
Basic (loss) per share |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Diluted (loss) per common share |
|
|
|
|
|
||
Numerator: |
|
|
|
|
|
||
Net (loss) available to common shareholders – diluted |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
||
Weighted average number of common shares outstanding – basic |
|
|
|
|
|
||
Dilutive effect of: |
|
|
|
|
|
||
Stock compensation awards |
|
|
|
|
|
||
Series A convertible preferred stock |
|
— |
|
|
|
— |
|
Weighted average number of common shares outstanding – diluted |
|
|
|
|
|
||
|
|
|
|
|
|
||
Diluted (loss) per share |
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
||
Other Information: |
|
|
|
|
|
||
Weighted average number of anti-dilutive Series A convertible preferred shares, options and restricted stock(a) |
|
|
|
|
|
||
24
15. Subsequent events
On January 29, 2025, the Company entered into Amendment No. 9 to the Credit Agreement (the "Ninth Credit Agreement Amendment"). The Ninth Credit Agreement Amendment, among other things, reduces the applicable margin for the existing Series B Term Loans from (i)
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis supplements our management’s discussion and analysis for the year ended September 30, 2024 as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 13, 2024, and presumes that readers have read or have access to such discussion and analysis. The following discussion and analysis should also be read together with the unaudited consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that reflect our plans and strategy for our business, and involve risks and uncertainties. You should review the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as updated by subsequent filings with the Securities and Exchange Commission, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.
Overview
Our Company
We are the largest provider of commercial landscaping services in the United States, with revenues approximately 5 times those of our next largest commercial landscaping competitor. We provide commercial landscaping services ranging from landscape maintenance and enhancements to tree care and landscape development. We operate through a differentiated and integrated national service model which systematically delivers services at the local level by combining our network of over 280 branches with a qualified service partner network. Our branch delivery model underpins our position as a single-source end-to-end landscaping solution provider to our diverse customer base at the national, regional and local levels, which we believe represents a significant competitive advantage. We believe our commercial customer base understands the financial and reputational risk associated with inadequate landscape maintenance and considers our services to be essential and non-discretionary.
Our Segments
We report our results of operations through two reportable segments: Maintenance Services and Development Services. We serve a geographically diverse set of customers through our strategically located network of branches in 36 U.S. states.
Maintenance Services
Our Maintenance Services segment delivers a full suite of recurring commercial landscaping services in both evergreen and seasonal markets, ranging from mowing, gardening, mulching and snow removal, to more horticulturally advanced services, such as water management, irrigation maintenance, tree care, golf course maintenance and specialty turf maintenance. In addition to contracted maintenance services, we also have a strong track record of providing value-added landscape enhancements. We primarily self-perform our maintenance services through our national branch network, which are route-based in nature. Our maintenance services customers include Fortune 500 corporate campuses and commercial properties, HOAs, public parks, leading international hotels and resorts, airport authorities, municipalities, hospitals and other healthcare facilities, educational institutions, restaurants and retail, and golf courses, among others.
Development Services
Through our Development Services segment, we provide landscape architecture and development services for new facilities and significant redesign projects. Specific services include project design and management services, landscape architecture, landscape installation, irrigation installation, tree moving and installation, pool and water features and sports field services, among others. Our development services are comprised of sophisticated design, coordination and installation of landscapes at some of the most recognizable corporate, athletic and university complexes and showcase highly visible work that is paramount to our customers’ perception of our brand as a market leader.
In our Development Services business, we are typically hired by general contractors, with whom we maintain strong relationships as a result of our superior technical and project management capabilities. We believe the quality of our work is also well-regarded by our end-customers, some of whom directly request that their general contractors utilize our services when outsourcing their landscape development projects.
26
Components of Our Revenues and Expenses
Net Service Revenues
Maintenance Services
Our Maintenance Services revenues are generated primarily through landscape maintenance services and snow removal services. Landscape maintenance services that are primarily viewed as non-discretionary, such as lawn care, mowing, gardening, mulching, leaf removal, irrigation and tree care, are provided under recurring annual contracts, which typically range from one to three years in duration and are generally cancellable by the customer with 30-90 days’ notice. Snow removal services are provided on either fixed fee based contracts or per occurrence contracts. Both landscape maintenance services and snow removal services can also include enhancement services that represent supplemental maintenance or improvement services generally provided under contracts of short duration related to specific services. Revenue for landscape maintenance and snow removal services under fixed fee models is recognized over time using an output based method. Additionally, a portion of our recurring fixed fee landscape maintenance and snow removal services are recorded under the series guidance. The right to invoice practical expedient, defined within Note 3 “Revenue” to our unaudited consolidated financial statements, is generally applied to revenue related to landscape maintenance and snow removal services performed in relation to per occurrence contracts as well as enhancement services. When use of the practical expedient is not appropriate for these contracts, revenue is recognized using a cost-to-cost input method. Fees for contracted landscape maintenance services are typically billed on an equal monthly basis. Fees for fixed fee snow removal services are typically billed on an equal monthly basis during snow season, while fees for time and material or other activity-based snow removal services are typically billed as the services are performed. Fees for enhancement services are typically billed as the services are performed.
Development Services
For Development Services, revenue is primarily recognized over time using the cost-to-cost input method, measured by the percentage of cost incurred to date to the estimated total cost for each contract, which we believe to be the best measure of progress. The full amount of anticipated losses on contracts is recorded as soon as such losses can be estimated. These losses have been immaterial to current and historical operations. Changes in job performance, job conditions and estimated profitability, including final contract settlements, may result in revisions to costs and revenue and are recognized in the period in which the revisions are determined.
Expenses
Cost of Services Provided
Cost of services provided is comprised of direct costs we incur associated with our operations during a period and includes employee costs, subcontractor costs, purchased materials, and operating equipment and vehicle costs. Employee costs consist of wages and other labor-related expenses, including benefits, workers compensation and healthcare costs, for those employees involved in delivering our services. Subcontractor costs consist of costs relating to our qualified service partner network in our Maintenance Services segment and subcontractors we engage from time to time in our Development Services segment. When our use of subcontractors increases, we may experience incrementally higher costs of services provided. Operating equipment and vehicle costs primarily consist of depreciation related to branch operating equipment and vehicles and related fuel expenses. A large component of our costs are variable, such as labor, subcontractor expense and materials.
Selling, General and Administrative Expense
Selling, general and administrative expense consists of costs incurred related to compensation and benefits for management, sales and administrative personnel, equity-based compensation, branch and office rent and facility operating costs, depreciation expense related to branch and office locations, as well as professional fees, software costs and other miscellaneous expenses. Corporate expenses, including corporate executive compensation, finance, legal and information technology, are included in consolidated Selling, general and administrative expense and not allocated to the business segments.
Amortization Expense
Amortization expense consists of the periodic amortization of intangible assets, customer relationships. The corresponding intangible assets were originally recognized in connection with the KKR and ValleyCrest acquisitions, as well as from subsequent acquisitions.
Other (Income)
Other (income) consists primarily of investment gains related to investments held in Rabbi Trust.
27
Interest Expense, Net
Interest expense, net consists primarily of interest expense related to our long-term debt as well as interest income related to our cash and cash equivalents. See Note 7 “Long-term Debt” in the unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.
Income Tax (Benefit)
Income tax (benefit) includes U.S. federal, state and local income taxes. Our effective tax rate differs from the statutory U.S. income tax rate due to the effect of state and local income taxes, tax credits and certain nondeductible expenses. Our effective tax rate may vary from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical distribution of our pre-tax earnings, changes in the tax rates of different jurisdictions, the availability of tax credits and nondeductible items. Changes in judgment due to the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the period of the change.
Trends and Other Factors Affecting Our Business
Various trends and other factors affect or have affected our operating results, including:
Seasonality
Our services, particularly in our Maintenance Services segment, have seasonal variability such as increased mulching, flower planting and intensive mowing in the spring, leaf removal and cleanup work in the fall, snow removal services in the winter and potentially minimal mowing during drier summer months. This can drive fluctuations in revenue, costs and cash flows for interim periods.
We have a significant presence in geographies that have a year-round growing season, which we refer to as our evergreen markets. Such markets require landscape maintenance services twelve months per year. In markets that do not have a year-round growing season, which we refer to as our seasonal markets, the demand for our landscape maintenance services decreases during the winter months. Typically, our revenues and net income have been higher in the spring and summer seasons, which correspond with our third and fourth fiscal quarters of our fiscal year ending September 30. The lower level of activity in seasonal markets during our first and second fiscal quarters is partially offset by revenue from our snow removal services. Such seasonality causes our results of operations to vary from quarter to quarter.
Weather Conditions
Weather may impact the timing of performance of landscape maintenance and enhancement services and progress on development projects from quarter to quarter. For example, snow events in the winter, hurricane-related cleanup in the summer and fall, and the effects of abnormally high rainfall or drought in a given market may impact our services. These less predictable weather patterns can impact both our revenues and our costs, especially from quarter to quarter, but also from year to year in some cases. Extreme weather events such as hurricanes and tropical storms can result in a positive impact to our business in the form of increased enhancement services revenues related to cleanup and other services. However, such weather events may also negatively impact our ability to deliver our contracted services or impact the timing of performance.
In our seasonal markets, the performance of our snow removal services is correlated with the amount of snowfall and number of snowfall events in a given season. We benchmark our performance against ten- and thirty-year cumulative annual snowfall averages.
Acquisitions
In addition to our organic growth, we have grown, and expect to continue to grow, our business through acquisitions in an effort to better service our existing customers and attract new customers. These acquisitions focused on increasing our density and leadership positions in existing local markets, entering into attractive new geographic markets and expanding our portfolio of landscape enhancement services and improving technical capabilities in specialized services.
As we move forward, we will selectively pursue accretive acquisitions that will focus on increasing market density to build upon our existing footprint in strategic markets, entering new attractive geographies (i.e. ‘greenfield’), and increasing service line density and entering adjacent service lines to provide a robust and consistent suite of services to our customers. Under this renewed strategy, we believe we are the acquirer of choice in the highly fragmented commercial landscaping industry because we offer the ability to leverage our significant size and scale to drive accretive acquisitions, quickly and seamlessly integrate new businesses into ours and provide stable and potentially expanding career opportunities for employees of acquired businesses.
28
In accordance with GAAP, the results of the acquisitions we have completed are reflected in our consolidated financial statements from the date of acquisition. We incur transaction costs in connection with identifying and completing acquisitions and ongoing integration costs as we integrate acquired companies and seek to achieve synergies. Integration costs vary based on factors specific to each acquisition, such costs are primarily comprised of one-time employee retention costs, employee onboarding and training costs, and fleet and uniform rebranding costs. We typically anticipate integration costs to represent approximately 7%-9% of the acquisition price, and to be incurred within 12 months of acquisition completion.
Goodwill
Goodwill represents the excess of the purchase price over the fair values of the underlying net assets acquired in an acquisition. Goodwill is not amortized, but rather is tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. We test goodwill for impairment annually in the fourth quarter of each year using data as of July 1 of that year.
Goodwill is allocated to, and evaluated for impairment at our two identified reporting units. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount. We may elect not to perform the qualitative assessment for some or all reporting units and perform the quantitative impairment test. The quantitative goodwill impairment test requires us to compare the carrying value of the reporting unit’s net assets to the fair value of the reporting unit. The Company determined fair values of each of the reporting units using a combination of the income and market multiple approaches. The estimates used in each approach include significant management assumptions, including valuation multiples of selected guideline public companies, long-term future growth rates, operating margins, and discount rates.
If the fair value exceeds the carrying value, no further evaluation is required, and no impairment loss is recognized. If the carrying amount of a reporting unit, including goodwill, exceeds the estimated fair value, the excess of the carrying value over the fair value is recorded as an impairment loss, the amount of which would not exceed the total amount of goodwill allocated to the reporting unit.
Our methodology for estimating the fair value of our reporting units utilizes a combination of the market and income approaches. The market approach is based on the guideline public company method, which measures the value of the reporting unit through applying valuation multiples of selected guideline public companies to the reporting unit’s key operating metrics. The income approach is based on the Discounted Cash Flow (“DCF”) method, which is based on the present value of future cash flows. The principal assumptions utilized in the DCF methodology include long-term future growth rates, operating margins, and discount rates. There can be no assurance that our estimates and assumptions regarding forecasted cash flow, long-term future growth rates and operating margins made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. We believe the current assumptions and estimates utilized under each approach are both reasonable and appropriate.
Based on our most recent annual analysis as of July 1, 2024, the fair values for all identified reporting units exceeded the carrying values, and therefore no indicators of impairment existed for the reporting units; however, the fair value of the Maintenance reporting unit exceeded the carrying value by 9.6%. Since the Maintenance reporting unit fair value did not substantially exceed the carrying value, we may be at risk for an impairment loss in the future if interest rates and market conditions continue to trend unfavorably or if our forecasts assumed in the fair value calculation are not realized. As of December 31, 2024, there was $1,797.5 million of goodwill recorded related to the Maintenance reporting unit.
Industry and Economic Conditions
We believe the non-discretionary nature of our landscape maintenance services provides us with a fairly predictable recurring revenue model. The perennial nature of the landscape maintenance service sector, as well as its wide range of end users, minimizes the impact of a broad or sector-specific downturn. However, in connection with our enhancement services and development services, when demand for commercial construction declines, demand for landscape enhancement services and development projects may decline. When commercial construction activity rises, demand for landscape enhancement services to maintain green space may also increase. This is especially true for new developments in which green space tends to play an increasingly important role. Economic conditions, including rising inflation and fuel prices, as well as rising interest rates, have impacted and may further impact our costs and expenses, and fluctuations in labor markets, may impact our ability to identify, hire and retain employees.
29
Results of Operations
The following tables summarize key components of our results of operations for the periods indicated.
|
|
Three Months Ended |
|
|||||
(in millions) |
|
2024 |
|
|
2023 |
|
||
Net service revenues |
|
$ |
599.2 |
|
|
$ |
626.7 |
|
Cost of services provided |
|
|
472.4 |
|
|
|
492.9 |
|
Gross profit |
|
|
126.8 |
|
|
|
133.8 |
|
Selling, general and administrative expense |
|
|
119.3 |
|
|
|
129.9 |
|
Gain on divestiture |
|
|
- |
|
|
|
— |
|
Amortization expense |
|
|
8.1 |
|
|
|
10.1 |
|
(Loss) from operations |
|
|
(0.6 |
) |
|
|
(6.2 |
) |
Other (income) |
|
|
(0.2 |
) |
|
|
(1.2 |
) |
Interest expense, net |
|
|
14.2 |
|
|
|
17.1 |
|
(Loss) before income taxes |
|
|
(14.6 |
) |
|
|
(22.1 |
) |
Income tax (benefit) |
|
|
(4.2 |
) |
|
|
(5.7 |
) |
Net (loss) |
|
$ |
(10.4 |
) |
|
$ |
(16.4 |
) |
(Loss) per Share |
|
$ |
(0.20 |
) |
|
$ |
(0.27 |
) |
Adjusted EBITDA(1) |
|
$ |
52.1 |
|
|
$ |
46.7 |
|
Adjusted Net Income(1) |
|
$ |
5.6 |
|
|
$ |
3.0 |
|
Cash flows from operating activities |
|
$ |
60.5 |
|
|
$ |
26.2 |
|
Adjusted Free Cash Flow(1) |
|
$ |
4.4 |
|
|
$ |
17.3 |
|
(1) See the “Non-GAAP Financial Measures” section included below for a reconciliation to the most directly comparable GAAP measure.
Three Months Ended December 31, 2024 compared to Three Months Ended December 31, 2023
Net Service Revenues
Net service revenues for the three months ended December 31, 2024 decreased $27.5 million, or 4.4%, to $599.2 million, from $626.7 million in the 2023 period. The decrease was driven by a decrease in Maintenance Services revenues of $33.0 million, partially offset by an increase in Development Services revenues of $6.4 million as discussed further below in Segment Results.
Gross Profit
Gross profit for the three months ended December 31, 2024 decreased $7.0 million, or 5.2%, to $126.8 million, from $133.8 million in the 2023 period. Gross margin decreased 10 basis points, to 21.2%, in the three months ended December 31, 2024, from 21.3% in the comparable 2023 period. The decreases in gross profit was primarily driven by the decrease in Net Services revenues described above.
Selling, General and Administrative Expense
Selling, general and administrative expense for the three months ended December 31, 2024 decreased $10.6 million, or 8.2%, to $119.3 million, from $129.9 million in the 2023 period. As a percentage of revenue, Selling, general and administrative expense decreased 80 basis points for the three months ended December 31, 2024 to 19.9%, from 20.7% in the 2023 period. The decrease was driven primarily by decreases in compensation-related costs as a result of the Company's cost management initiatives.
Amortization Expense
Amortization expense for the three months ended December 31, 2024 decreased $2.0 million, or 19.8%, to $8.1 million, from $10.1 million in the 2023 period. The decrease was principally due the decrease in the amortization of intangible assets, based on the pattern consistent with expected future cash flows calculated at the time the assets were acquired.
30
Other Income
Other income was $0.2 million for the three months ended December 31, 2024 compared to $1.2 million in the 2023 period. The decrease of $1.0 million was driven principally by the change in value of investments held in the Rabbi Trust.
Interest Expense, Net
Interest expense, net for the three months ended December 31, 2024 decreased $2.9 million, or 17.0%, to $14.2 million, from $17.1 million in the 2023 period. The decrease was driven by lower interest expense as a result of the decrease in interest rates as a result of the repricing of our Series B Term Loans in fiscal 2024 and the decrease in the Company's long-term debt balance with an increase in interest income associated with the increase in cash and cash equivalents balance.
Income Tax (Benefit)
For the three months ended December 31, 2024, Income tax benefit was $4.2 million compared to $5.7 million in the 2023 period. The decrease was primarily attributable to the decrease in net loss relative to the prior year.
Net loss
For the three months ended December 31, 2024, Net loss was $10.4 million compared to $16.4 million in the 2023 period due to the changes noted above. Net loss as a percentage of revenue was 1.7% for the three months ended December 31, 2024, compared to 2.6% for the three months ended December 31, 2023.
Adjusted EBITDA
Adjusted EBITDA increased $5.4 million for the three months ended December 31, 2024, to $52.1 million, from $46.7 million in the 2023 period. Adjusted EBITDA as a percentage of revenue was 8.7% and 7.5% for the three months ended December 31, 2024 and 2023, respectively. The increase in Adjusted EBITDA was primarily driven by an increase of $3.2 million, or 10.2%, in Maintenance Services Segment Adjusted EBITDA, combined with an increase of $2.2 million, or 14.4%, in Development Services Segment Adjusted EBITDA, as discussed further below in Segment Results.
Adjusted Net Income
Adjusted Net Income for the three months ended December 31, 2024 increased $2.6 million to $5.6 million, from $3.0 million in the 2023 period due to the changes noted above.
Non-GAAP Financial Measures
In addition to our GAAP financial measures, we review various non-GAAP financial measures including Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (“Adjusted EPS”) and Adjusted Free Cash Flow.
We believe that Adjusted EBITDA, Adjusted Net Income and Adjusted EPS are helpful supplemental measures to assist us and investors in evaluating our operating results as they exclude certain items whose fluctuations from period to period do not necessarily correspond to changes in the operations of our business. Adjusted EBITDA represents net (loss) before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. Adjusted Net Income is defined as net (loss) including interest and depreciation and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions and the removal of the discrete tax items. Adjusted EPS is defined as Adjusted Net Income divided by the (i) weighted average number of common shares outstanding used in the calculation of basic earnings per share plus (ii) shares of common stock related to the Series A Preferred Stock on an as-converted basis, assumed to be converted for the entire period. We believe that the adjustments applied in presenting Adjusted EBITDA, Adjusted Net (Loss) and Adjusted EPS are appropriate to provide additional information to investors about certain material non-cash items and about non-recurring items that we do not expect to continue at the same level in the future.
We believe Adjusted Free Cash Flow is a helpful supplemental measure to assist us and investors in evaluating our liquidity. Adjusted Free Cash Flow represents cash flows from operating activities less capital expenditures, net of proceeds from the sale of property and equipment. We believe Adjusted Free Cash Flow is useful to provide additional information to assess our ability to pursue business opportunities and investments and to service our debt. Adjusted Free Cash Flow has limitations as an analytical tool, including
31
that it does not account for our future contractual commitments and excludes investments made to acquire assets under finance leases and required debt service payments.
Adjusted EBITDA, Adjusted Net Income, Adjusted EPS and Adjusted Free Cash Flow are not recognized terms under GAAP and should not be considered as an alternative to net (loss) as a measure of financial performance or cash flows provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. The presentations of these measures have limitations as analytical tools and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Because not all companies use identical calculations, the presentations of these measures may not be comparable to the same or other similarly titled measures of other companies and can differ significantly from company to company.
Set forth below are the reconciliations of net (loss) to Adjusted EBITDA and Adjusted Net Income, and cash flows from operating activities to Adjusted Free Cash Flow. Adjusted EPS is defined as Adjusted Net Income (shown below) divided by the Adjusted Weighted Average Number of Common Shares Outstanding for the period used in the calculation of basic EPS which is presented in Note 14 “(Loss) Per Share of Common Stock” in the Notes to our unaudited consolidated financial statements.
|
|
Three Months Ended |
|
|||||
(in millions) |
|
2024 |
|
|
2023 |
|
||
Adjusted EBITDA |
|
|
|
|
|
|
||
Net (loss) |
|
$ |
(10.4 |
) |
|
$ |
(16.4 |
) |
Income tax (benefit) |
|
|
(4.2 |
) |
|
|
(5.7 |
) |
Interest expense, net |
|
|
14.2 |
|
|
|
17.1 |
|
Depreciation expense |
|
|
30.4 |
|
|
|
25.6 |
|
Amortization expense |
|
|
8.1 |
|
|
|
10.1 |
|
Business transformation and integration costs (a) |
|
|
9.2 |
|
|
|
10.7 |
|
Equity-based compensation (b) |
|
|
4.8 |
|
|
|
5.3 |
|
Adjusted EBITDA |
|
$ |
52.1 |
|
|
$ |
46.7 |
|
Adjusted Net Income |
|
|
|
|
|
|
||
Net (loss) |
|
$ |
(10.4 |
) |
|
$ |
(16.4 |
) |
Amortization expense |
|
|
8.1 |
|
|
|
10.1 |
|
Business transformation and integration costs (a) |
|
|
9.2 |
|
|
|
10.7 |
|
Equity-based compensation (b) |
|
|
4.8 |
|
|
|
5.3 |
|
Income tax adjustment (c) |
|
|
(6.1 |
) |
|
|
(6.7 |
) |
Adjusted Net Income |
|
$ |
5.6 |
|
|
$ |
3.0 |
|
Adjusted Free Cash Flow |
|
|
|
|
|
|
||
Cash flows provided by operating activities |
|
$ |
60.5 |
|
|
$ |
26.2 |
|
Minus: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
58.7 |
|
|
|
10.1 |
|
Plus: |
|
|
|
|
|
|
||
Proceeds from sale of property and equipment |
|
|
2.6 |
|
|
|
1.2 |
|
Adjusted Free Cash Flow |
|
$ |
4.4 |
|
|
$ |
17.3 |
|
|
|
Three Months Ended |
|
|||||
(in millions) |
|
2024 |
|
|
2023 |
|
||
Severance and related costs |
|
$ |
(0.8 |
) |
|
$ |
2.5 |
|
Business integration (d) |
|
|
(0.3 |
) |
|
|
0.6 |
|
IT, infrastructure, transformation, and other (e) |
|
|
10.3 |
|
|
|
7.6 |
|
Business transformation and integration costs |
|
$ |
9.2 |
|
|
$ |
10.7 |
|
32
|
|
Three Months Ended |
|
|||||
(in millions) |
|
2024 |
|
|
2023 |
|
||
Tax impact of pre-tax income adjustments |
|
|
5.9 |
|
|
$ |
7.4 |
|
Discrete tax items |
|
|
0.2 |
|
|
|
(0.7 |
) |
Income tax adjustment |
|
$ |
6.1 |
|
|
$ |
6.7 |
|
33
Segment Results
We classify our business into two segments: Maintenance Services and Development Services. Our corporate operations are allocated to the segments on a pro rata basis, based on segment revenue.
We evaluate the performance of our segments on Net service revenues, Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin (Segment Adjusted EBITDA as a percentage of Net service revenues). Segment Adjusted EBITDA is indicative of operational performance and ongoing profitability. Our management closely monitors Segment Adjusted EBITDA to evaluate past performance and identify actions required to improve profitability.
As previously disclosed, effective October 1, 2024, certain expenses previously classified as “Corporate,” including corporate executive compensation, finance, legal and information technology and other corporate costs, are allocated to the two reportable segments on a pro rata basis, based on segment revenue. Prior period segment results have been recast to be consistent with the current presentation. There were no changes to the Company's consolidated financial statements.
Segment Results for the Three Months Ended December 31, 2024 and 2023
The following tables present Net service revenues, Segment Adjusted EBITDA, and Segment Adjusted EBITDA Margin for each of our segments for the three months ended three months ended December 31, 2024 and 2023. Changes in Segment Adjusted EBITDA Margin are shown in basis points, or bps.
Maintenance Services Segment Results
|
|
Three Months Ended |
|
|
Percent Change |
|
||||||
(in millions) |
|
2024 |
|
|
2023 |
|
|
2024 vs. 2023 |
|
|||
Net Service Revenues |
|
$ |
409.3 |
|
|
$ |
442.3 |
|
|
|
(7.5 |
)% |
Segment Adjusted EBITDA |
|
$ |
34.6 |
|
|
$ |
31.4 |
|
|
|
10.2 |
% |
Segment Adjusted EBITDA Margin |
|
|
8.5 |
% |
|
|
7.1 |
% |
|
140 bps |
|
|
Maintenance Services Net Service Revenues
Maintenance Services net service revenues for the three months ended December 31, 2024 decreased by $33.0 million, or 7.5%, from the 2023 period. The decrease was principally driven by a reduction in underlying commercial landscape services and snow revenue, underpinned by strategic reductions of non-core businesses.
Maintenance Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the three months ended December 31, 2024 increased by $3.2 million to $34.6 million from $31.4 million in the 2023 period. Segment Adjusted EBITDA Margin increased 140 basis points, to 8.5%, in the three months ended December 31, 2024, from 7.1% in the 2023 period. The increase in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin was primarily driven by lower overhead as a result of the Company's cost management initiatives, partially offset by the decrease in revenues described above and increased landscape services labor costs.
Development Services Segment Results
|
|
Three Months Ended |
|
|
Percent Change |
|
||||||
(in millions) |
|
2024 |
|
|
2023 |
|
|
2024 vs. 2023 |
|
|||
Net Service Revenues |
|
$ |
191.8 |
|
|
$ |
185.4 |
|
|
|
3.5 |
% |
Segment Adjusted EBITDA |
|
$ |
17.5 |
|
|
$ |
15.3 |
|
|
|
14.4 |
% |
Segment Adjusted EBITDA Margin |
|
|
9.1 |
% |
|
|
8.3 |
% |
|
80 bps |
|
|
Development Services Net Service Revenues
Development Services net service revenues for the three months ended December 31, 2024 increased $6.4 million, or 3.5%, compared to the 2023 period. The increase was driven by an increase in Development Services project volumes.
34
Development Services Segment Adjusted EBITDA
Segment Adjusted EBITDA for the three months ended December 31, 2024 increased $2.2 million, to $17.5 million, compared to the 2023 period. Segment Adjusted EBITDA Margin increased 80 basis points, to 9.1% for the three months ended December 31, 2024, from 8.3% in the 2023 period. The increases in Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin were primarily driven by the increase in revenues described above.
Liquidity and Capital Resources
Liquidity
Our principal sources of liquidity are existing cash and cash equivalents, cash generated from operations and borrowings under the Credit Agreement and the Receivables Financing Agreement. Our principal uses of cash are to provide working capital, meet debt service requirements, fund capital expenditures and finance strategic plans, including acquisitions. We may also seek to finance capital expenditures under finance leases or other debt arrangements that provide liquidity or favorable borrowing terms. We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. While we have in the past financed certain acquisitions with internally generated cash, in the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings.
Based on our current level of operations and available cash, we believe our cash flow from operations, together with availability under the Revolving Credit Facility under the Credit Agreement and the Receivables Financing Agreement, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spending requirements for the next twelve months and the foreseeable future.
A substantial portion of our liquidity needs arise from debt service requirements, and from the ongoing cost of operations, working capital and capital expenditures.
(in millions) |
|
December 31, |
|
|
September 30, |
|
||
Cash and cash equivalents |
|
$ |
98.3 |
|
|
$ |
140.4 |
|
|
|
|
|
|
|
|
||
Long-term debt |
|
$ |
796.5 |
|
|
$ |
802.5 |
|
Total debt |
|
$ |
796.5 |
|
|
$ |
802.5 |
|
The Company is party to the Credit Agreement, a five-year revolving credit facility that, as amended, currently matures on April 22, 2027 (the “Revolving Credit Facility”) and, through a wholly-owned subsidiary, a receivables financing agreement dated April 28, 2017 (as amended, the “Receivables Financing Agreement”). Each of the Company's credit facilities bear interest based in-part on a secured overnight financing rate.
We can increase the borrowing availability under the Credit Agreement or increase the term loans outstanding under the Credit Agreement by up to $303.0 million, in the aggregate, in the form of additional commitments under the Revolving Credit Facility and/or incremental term loans under the Credit Agreement, or in the form of other indebtedness in lieu thereof, plus an additional amount so long as we do not exceed a specified senior secured leverage ratio and, in the case of second lien indebtedness, a specified senior secured leverage ratio. We can incur such additional secured or other unsecured indebtedness under the Credit Agreement if certain specified conditions are met. Our liquidity requirements are significant primarily due to debt service requirements. See Note 7 “Long-term Debt” to our unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.
The Company is party to the Investment Agreement dated August 28, 2023, pursuant to which the Company issued and sold, in a private placement, an aggregate of 500,000 shares of the Company’s Series A Convertible Preferred Stock, for an aggregate purchase price of $500.0 million. The Series A Convertible Preferred Stock is entitled to dividends at a rate of 7.0% per annum, compounding quarterly, paid in kind or paid in cash, at the Company’s election.
Our business may not generate sufficient cash flows from operations or future borrowings may not be available to us under our Revolving Credit Facility or the Receivables Financing Agreement in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Our ability to do so depends on, among other factors, prevailing economic conditions, many of which
35
are beyond our control. In addition, upon the occurrence of certain events, such as a change in control, we could be required to repay or refinance our indebtedness. We may not be able to refinance any of our indebtedness, including the Series B Term Loan under the Credit Agreement, on commercially reasonable terms or at all. Any future acquisitions, joint ventures, or other similar transactions may require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms or at all.
Cash Flows
Information about our cash flows, by category, is presented in our statements of cash flows and is summarized below:
|
|
Three Months Ended |
|
|||||
(in millions) |
|
2024 |
|
|
2023 |
|
||
Operating activities |
|
$ |
60.5 |
|
|
$ |
26.2 |
|
Investing activities |
|
$ |
(55.3 |
) |
|
$ |
(8.6 |
) |
Financing activities |
|
$ |
(47.3 |
) |
|
$ |
(20.1 |
) |
Adjusted Free Cash Flow (1) |
|
$ |
4.4 |
|
|
$ |
17.3 |
|
(1) See “Non-GAAP Financial Measures” above for a reconciliation to the most directly comparable GAAP measure.
Cash Flows provided by Operating Activities
Net cash provided by operating activities for the three months ended December 31, 2024 increased $34.3 million, to $60.5 million, from $26.2 million in the 2023 period. This increase was due to increases in cash provided by accounts payable, unbilled and deferred revenue, and other operating liabilities and a decrease in net loss.
Cash Flows (used) by Investing Activities
Net cash used by investing activities increased $46.7 million to $55.3 million for the three months ended December 31, 2024 from $8.6 million in the 2023 period. The increase was driven by a $48.6 million increase in capital expenditures, partially offset by a $1.4 million increase in proceeds from the sale of property plant and equipment in comparison to the prior period.
Cash Flows (used) by Financing Activities
Net cash flows used by financing activities of $47.3 million for the three months ended December 31, 2024 included a decrease in book overdrafts of $17.0 million, repayments of finance lease obligations of $10.7 million, Series A preferred stock dividends of $9.0 million, repayments of our Receivables Financing Agreement of $8.4 million, and repurchase of common stock and distributions of $5.1 million.
Adjusted Free Cash Flow
Adjusted Free Cash Flow decreased $12.9 million to $4.4 million for the three months ended December 31, 2024 from $17.3 million in the 2023 period. The decrease in Adjusted Free Cash Flow was due to an increase in cash used for capital expenditures, partially offset by an increase in net cash provided by operating activities, each as described above.
Working Capital
(in millions) |
|
December 31, |
|
|
September 30, |
|
||
Net Working Capital: |
|
|
|
|
|
|
||
Current assets |
|
$ |
686.0 |
|
|
$ |
780.1 |
|
Less: Current liabilities |
|
|
479.3 |
|
|
|
543.3 |
|
Net working capital |
|
$ |
206.7 |
|
|
$ |
236.8 |
|
36
Net working capital is defined as current assets less current liabilities. Net working capital decreased $30.1 million to $206.7 million as of December 31, 2024, from $236.8 million as of September 30, 2024, primarily driven by a decrease in cash and cash equivalents of $42.1 million, decrease in unbilled revenue of $40.8 million, increase in deferred revenue of $28.0 million, and decrease in accounts receivable of $25.2 million. This was partially offset by a decrease in accrued expenses and other current liabilities of $69.2 million, decrease in accounts payable of $21.6 million, and increase in other current assets of $14.0 million.
Description of Indebtedness
As of December 31, 2024, we were in compliance with all of our debt covenants and no event of default has occurred or was ongoing. See Note 7 “Long-term Debt” to our unaudited consolidated financial statements included under Part I, Item 1, “Financial Statements”.
Contractual Obligations and Commercial Commitments
As of December 31, 2024, there were no material changes outside the ordinary course of business in our contractual obligations and commercial commitments from those reported as of September 30, 2024 in our Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
Management has evaluated the accounting policies used in the preparation of the Company’s consolidated financial statements and related notes and believe those policies to be reasonable and appropriate. Certain of these accounting policies require the application of significant judgment by management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. These judgments are based on historical experience, trends in the industry, information provided by customers and information available from other outside sources, as appropriate. The most significant areas involving management judgments and estimates may be found in the Annual Report on Form 10-K, in the “Critical Accounting Policies and Estimates” section of “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no material changes to our critical accounting policies as compared to the critical accounting policies described in the Annual Report on Form 10-K for the year ended September 30, 2024.
Recently Issued Accounting Policies
The information set forth in Note 2 “Recent Accounting Pronouncements” to our unaudited consolidated financial statements under Part I, Item 1, “Financial Statements” is incorporated herein by reference.
37
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
For quantitative and qualitative disclosures about market risk, see “Item 7A. Quantitative and Qualitative Disclosure of Market Risk” in the Annual Report on Form 10-K for the fiscal year ended September 30, 2024.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
In accordance with Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of disclosure controls and procedures as of December 31, 2024. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of December 31, 2024 at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
There has not been any change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
38
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The information set forth in Note 11 “Commitments and Contingencies” to our Condensed Consolidated Financial Statements under Part I, Item 1, “Financial Statements,” is incorporated herein by reference.
Item 1A. Risk Factors.
There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as filed with the SEC on November 13, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
39
Item 6. Exhibits.
The following is a list of all exhibits filed or furnished as part of this report:
Exhibit No. |
Description |
3.1 |
|
|
|
3.2 |
|
|
|
3.3 |
|
|
|
3.4 |
|
|
|
10.1†* |
Form of BrightView Holdings, Inc. Restricted Stock Unit Grant (2025) |
|
|
10.2†* |
Form of BrightView Holdings, Inc. Performance Stock Unit Grant (2025) |
|
|
10.3 |
|
|
|
31.1* |
|
|
|
31.2* |
|
|
|
32.1** |
|
|
|
32.2** |
|
|
|
101.INS |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
104 |
The cover page for the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 has been formatted in Inline XBRL. |
* Filed herewith.
** Furnished herewith.
† Indicates a management contract or any compensatory plan, contract or arrangement.
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
BrightView Holdings, Inc. |
|
|
|
|
|
Date: February 5, 2025 |
|
By: |
/s/ Brian Jackson |
|
|
|
|
|
|
|
Brian Jackson |
|
|
|
Chief Accounting Officer |
|
|
|
(Principal Accounting Officer) |
|
|
|
|
41