Second Quarter Fiscal 2021 Earnings Call - NYSE: BV May 6, 2021
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Second Quarter Fiscal 2021 Earnings Call NYSE: BV May 6, 2021
Introductory Information
Forward-Looking Statements
This presentation contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 that
involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this presentation, including statements made under the heading “Financial
Guidance” and other statements related to our expectations regarding our industry, strategy, future operations, future liquidity and financial position, future revenues, projected costs, prospects,
plans and objectives of management, are forward-looking statements. The words such as “outlook,” “guidance,” “projects,” “continues,” “believes,” “expects,” “may,” “will,” “should,” “seeks,”
“intends,” “plans,” “estimates,” or “anticipates,” or the negative version of these words or similar expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain these identifying words. By their nature, forward-looking statements: speak only as of the date they are made; are not statements of historical fact or guarantees of future
performance; and are subject to risks, uncertainties, assumptions, or changes in circumstances that are difficult to predict or quantify. 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. Factors that could cause actual results to differ materially from those projected include, but
are not limited to: general business economic and financial conditions; the duration and extent of the novel coronavirus (COVID-19) pandemic and its resurgence, and the impact of federal, state
and local governmental actions and customer behavior in response to the pandemic, including possible additional or reinstated restrictions as a result of a resurgence of the pandemic; competitive
industry pressures; the failure to retain current customers, renew existing customer contracts and obtain new customer contracts; the failure to enter into profitable contracts, or maintaining
customer contracts that are unprofitable; a determination by customers to reduce their outsourcing or use of preferred vendors; the dispersed nature of our operating structure; our ability to
implement our business strategies and achieve our growth objectives; acquisition and integration risks; the seasonal nature of our landscape maintenance services; our dependence on weather
conditions; increases in prices for raw materials and fuel; changes in our ability to source adequate supplies and materials in a timely manner; any failure to accurately estimate the overall risk,
requirements, or costs when we bid on or negotiate contracts that are ultimately awarded to us; the conditions and periodic fluctuations of real estate markets, including residential and commercial
construction; our ability to retain our executive management and other key personnel; our ability to attract and retain trained workers and third-party contractors and re-employ seasonal workers;
any failure to properly verify employment eligibility of our employees; subcontractors taking actions that harm our business; our recognition of future impairment charges; laws and governmental
regulations, including those relating to employees, wage and hour, immigration, human health and safety and transportation; environmental, health and safety laws and regulations, including
regulatory costs, claims and litigation related to the use of chemicals and pesticides by employees and related third-party claims; the distraction and impact caused by litigation, of adverse
litigation judgments and settlements resulting from legal proceedings; increase in on-job accidents involving employees; any failure, inadequacy, interruption, security failure or breach of our
information technology systems; our ability to adequately protect our intellectual property; restrictions imposed by our debt agreements that limit our flexibility in operating our business; our ability
to generate sufficient cash flow to satisfy our significant debt service obligations; our ability to obtain additional financing to fund future working capital, capital expenditures, investments or
acquisitions, or other general corporate requirements; increases in interest rates governing our variable rate indebtedness increasing the cost of servicing our substantial indebtedness including
proposed changes to LIBOR; ownership of our common stock; occurrence of natural disasters, terrorist attacks or other external events; changes in generally accepted accounting principles in
the United States; and costs and requirements imposed as a result of maintaining the requirement of being a public company. Additional factors that could cause our results to differ materially
from those described in the forward-looking statements can be found under “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2020 as such factors may be updated
from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual
outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary
statements that are included in this presentation and in our filings with the SEC. Any forward-looking statement made in this presentation speaks only as of the date on which it was made. We
undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Non-GAAP Financial Measures
Included in this presentation are certain non-GAAP financial measures, such as “Adjusted EBITDA”, “Adjusted EBITDA Margin”, “Adjusted Net Income”, “Free Cash Flow”, Total Financial
Debt”, “Total Net Financial Debt” and “Total Net Financial Debt to Adjusted EBITDA ratio”, designed to complement the financial information presented in accordance with U.S. GAAP because
management believes such measures are useful to investors. These non-GAAP financial measures should be considered only as supplemental to financial measures provided in accordance
with GAAP. Please refer to the appendix of this presentation for a reconciliation of the historical non-GAAP financial measures included in this presentation to the most directly comparable
financial measures prepared in accordance with GAAP. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without
unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures. For the same reasons we are unable to address the probable significance of the
unavailable information, which could have a potentially unpredictable and potentially significant impact on its future GAAP financial results..
2Q FY2021 Earnings Presentation | 2
Quarter Highlights and Business Update
Andrew Masterman | President and Chief Executive Officer
2Q FY2021 Earnings Presentation | 3
Executive Overview
REVENUE
• Contract snow book of business
expansion driven by 10% organic
growth
ADJUSTED EBITDA
• $66.8M in 2Q’21 with a margin
increase of 320 bps to 10.2%
LEVERAGE & LIQUIDITY
• Leverage ratio of 3.5x, total liquidity
as of 2Q’21 was $401.5M
STRONG-ON-STRONG M&A
• 5 acquisitions during FY21; pipeline
has over $400M in revenue
2Q FY2021 Earnings Presentation | 4
Financial Guidance1
Total Revenue Assumptions
Revenue: investment in our sales
$640M - $2.48B - team is driving sustainable organic
$660M $2.52B growth and record revenue.
Acquisitions: benefitting from
early execution of FY2021 M&A
Adjusted EBITDA strategy.
Cost Management: expect to
$91M - $302M - maintain same discipline and
$95M $310M controls deployed at the beginning
of pandemic.
Executing BV Strategy Drives 2H Organic Growth
1Our financial guidance, which was updated on 5/6/21, contains forward-looking statements and is subject to risks and uncertainties.
See “Introductory Information”.
2Q FY2021 Earnings Presentation | 5
Preferred Acquirer in Commercial Landscaping
2017 2018 2019 2020 2021
Anaheim, CA
Portland, OR Austin, TX
Bay Area, CA Mesa, AZ
Hartford, CT Fresno, CA San Jose, CA
Vista, CA Las Vegs, NV Plymouth, MN
Dallas, TX Rock Hill, SC San Diego, CA
Fort Lauderdale, FL Austin, TX
St. Paul, MN
Danville, CA
Sanford, FL Napa, CA
Phoenix, AZ Norcross, GA
Syracuse, NY
Shamong, NJ
Tucson, AZ
~ $100M Re-investing
Significant FCF in
Annualized M&A Transactions
Revenue in 2021
1Aquisitions completed through 05/6/2021. 2Q FY2021 Earnings Presentation | 6
Quarterly YoY Maintenance Land Growth
1
100%
Pandemic Starts-------------->
2
Organic Growth in 3Q and 4Q
1 Baseline is Prior Fiscal Year Results
2
2Q FY2021 Earnings Presentation | 7
Adjusted for Managed Exits in Q1 Only
2Q Snow Growth
Numbers in $Ms $226
$188
$170 $170
$103
FY'20 FY'20 FY'21 FY'21 FY'21
* BoB Results BoB Start BoB End Results
Record Organic Growth in Annual Contract Snow Book
* Book of Business (BoB)
2Q FY2021 Earnings Presentation | 8
ESG Leadership
Trees, shrubs and grass planted by A BrightView crew member installs a green roof, one
BrightView will consume millions of tons of the company's many environmentally responsible
of carbon over their lifetimes practices
BrightView has saved millions of gallons of
water and reduced water bills for our clients
across thousands of properties nationwide
The University of Pennsylvania will run an average of
300 hours per year on electric mowers, and this will
eliminate the amount of emissions equivalent to
approximately 1,500 cars averaging 12,000 miles each
year
A BrightView crew assists in repairs
following a hurricane
2Q FY2021 Earnings Presentation | 9
ESG - BrightView’s People Strategy
Strong brand to attract new team members
Develop talent pipelines and adapt recruiting strategy
Select the right talent for the right role
Automate Application and Hiring processes
Offer comprehensive, competitive Total Rewards, recognition and performance
incentives
Create an inclusive culture
Effective Onboarding experience
Develop leaders, leadership and technical skills
Training, performance management and coaching
Provide learning and development for team members
Recognize team member contributions
Focus on succession planning and career paths
Facilitate regular Talent Talks and review Talent Metrics
Provide comprehensive, competitive Total Rewards and pay for performance through
equity and bonus programs
Investing in Sales Organization
Launching Digital Marketing Initiatives Through New Channels
2Q FY2021 Earnings Presentation | 10Technology Blueprint
Customer
Engagement
• Best-in-class
solutions.
• Standard apps drive
efficiency, productivity
Operations
and seamless
Management
acquisition rollups.
• Integrated
architecture supports
sophisticated
business intelligence
and analytics. Enterprise
Enablers
2Q FY2021 Earnings Presentation | 11Customer Satisfaction
Fiscal Year Metrics
OVERALL SATISFACTION OVERALL SATISFACTION
Maintenance Segment Development Segment
2018 2018
2019 2019
2020 2020
1 2 3 4 5 6 1 2 3 4 5 6
Dissatisfied Highly Dissatisfied Highly
Satisfied Satisfied
EASE OF DOING BUSINESS WILLING TO RECOMMEND INTENT TO RENEW/REPEAT
Maintenance Segment Maintenance Segment Maintenance Segment
2018 2018 2018
2019 2019 2019
2020 2020 2020
1 2 3 4 5 6 0% 50% 0% 50%
Dissatisfied Highly
Satisfied
NBRI - National Business Research Institute
2Q FY2021 Earnings Presentation | 12Financial Review and Outlook
John Feenan | EVP and Chief Financial Officer
2Q FY2021 Earnings Presentation | 132Q FY2021 Revenue
(Numbers $M) 2Q’21 2Q’20 Commentary
• 16.6% Increase
Total Revenue $651.9 $559.1 • (+) Higher Snowfall, Continued M&A Strength
• (-) COVID-19 Headwinds & Divestitures
• 29.6% Increase
Maintenance Services $535.7 $413.5 • (+) Higher Snowfall, Strong-on-Strong M&A
• (-) COVID-19 Headwinds (Ancillary Demand)
• (20.0)% Decrease
Development Services $117.1 $146.3 • (+) Strong-on-Strong M&A
• (-) COVID-19 Headwinds (Backlog Softness)
2Q FY2021 Earnings Presentation | 142Q FY2021 Adjusted EBITDA
(Numbers $M) 2Q’21 2Q’20 Commentary
• 71.7% Increase
Total Adj. EBITDA $66.8 $38.9 • 10.2% Adjusted EBITDA margin
• 320 basis point expansion
• 77.6% Increase
Maintenance Services $72.3 $40.7 • 13.5% Adjusted EBITDA margin
• 370 basis point expansion
• (23.2)% Decrease
Development Services $10.9 $14.2 • 9.3% Adjusted EBITDA margin
• 40 basis point contraction
• 2.5% Increase
Corporate Expenses ($16.4) ($16.0) • 2.5% of revenue
• 40 basis point improvement
Maintenance Services Segment
Increased snow contracts / volume and incremental M&A
Cost containment efforts continued to benefit margins during the quarter
Development Services Segment
Project backlog softness / timing and tree nursery divestiture offset M&A growth
Productivity initiatives offset revenue softness, minimizing margin compression
2Q FY2021 Earnings Presentation | 151H FY2021 Results
(Numbers $M) Revenue Adjusted EBITDA
1H’21 1H’20 1H’21 1H’20
Total BrightView $1,206.3 $1,129.8 $119.3 $90.5
Maintenance Services $953.8 $832.4 $121.9 $88.4
Development Services $254.4 $299.1 $27.9 $33.3
Corporate Expenses - - ($30.5) ($31.2)
2Q FY2021 Earnings Presentation | 16Net CapEx, Net Debt and Liquidity
1 2 3
Net Capital Net Debt Liquidity
Expenditures $1,166.4
$35.1
$1,047.5
$27.9
Net
Capex
1 Net
Capex
1
Q2'20 Q2'21
Asset Disposals
Net CapEx / Total Revenue Net Debt / TTM Adjusted EBITDA Liquidity
2.9% in 1H’20 vs. 2.0% in 1H’21 4.1x at 2Q’20 $235.5M at 2Q’20 vs. $401.5M at 2Q’21
Expect to be approximately 3.0% 3.5x at 2Q’21 Focus on Consistent Cash Generation
in FY 2021
Strong Cash Generation and Improved Leverage Ratio
1 Net capital expenditures includes proceeds from sale of property & equipment.
2 Net Debt includes total long-term debt, net of original issue discount, and capital lease obligations net of cash and equivalents 2Q FY2021 Earnings Presentation | 17
3 See the “Non-GAAP to GAAP Reconciliation” in the Appendix of this presentation for a reconciliation to the most directly comparable GAAP measureLiquidity Update
$(M) As of As of
3/31/2020 3/31/2021
Revolving Credit Facility $124.0 $207.2
Receivables Financing Agreement 23.5 70.5
Total Credit Available 147.5 277.7
Cash and Cash Equivalents 88.0 123.8
Total Liquidity $235.5 $401.5
Debt Maturities:
Receivables Financing Agreement
Maturity: February 2024
Revolving Credit Facility Term Loan
Maturity: August 2023 Maturity: August 2025
2Q FY2021 Earnings Presentation | 18Closing Remarks
Andrew Masterman | President and Chief Executive Officer
2Q FY2021 Earnings Presentation | 19Key Takeaways
Market
Fundamentals of Business Remain Strong
Growth
Investments in Sales Driving Organic Growth
Technology
Investments in Technology Improving Margins
Sales & Marketing
A Formula for Long-Term Success
M&A
Acquisition Pipeline Robust
Cash
Leverage Ratio a Historic Low
Focus on People & Culture
2Q FY2021 Earnings Presentation | 202Q FY2021 Earnings Call
QUESTIONS &
ANSWERS
2Q FY2021 Earnings Presentation | 21Appendix
Non-GAAP to GAAP Reconciliation
Three Months Ended Six Months Ended
March 31, March 31,
(in millions)* 2021 2020 2021 2020
Adjusted EBITDA
Net income (loss) $ 6.3 $ (20.5) $ (5.7) $ (33.1)
Plus:
Interest expense, net 9.6 17.1 23.1 34.5
Income tax expense (benefit) 2.3 (6.7) (1.4) (11.6)
Depreciation expense 20.7 19.3 42.3 39.5
Amortization expense 12.5 13.6 26.4 27.1
Establish public company financial reporting compliance (a) — — — 0.9
Business transformation and integration costs (b) 6.2 8.9 12.8 17.3
Offering-related expenses (c) — 1.2 0.2 1.5
Equity-based compensation (d) 5.3 4.9 10.2 13.3
COVID-19 related expenses (e) 3.9 1.1 11.4 1.1
Adjusted EBITDA $ 66.8 $ 38.9 $ 119.3 $ 90.5
Adjusted Net Income
Net income (loss) $ 6.3 $ (20.5) $ (5.7) $ (33.1)
Plus:
Amortization expense 12.5 13.6 26.4 27.1
Establish public company financial reporting compliance (a) — — — 0.9
Business transformation and integration costs (b) 6.2 8.9 12.8 17.3
Offering-related expenses (c) — 1.2 0.2 1.5
Equity-based compensation (d) 5.3 4.9 10.2 13.3
COVID-19 related expenses (e) 3.9 1.1 11.4 1.1
Income tax adjustment (f) (7.0) (7.3) (15.2) (15.6)
Adjusted Net Income $ 27.2 $ 1.9 $ 40.1 $ 12.5
Free Cash Flow
Cash flows from operating activities $ 78.3 $ 78.4 $ 83.4 $ 85.7
Minus:
Capital expenditures 18.2 20.6 27.9 35.1
Plus:
Proceeds from sale of property and equipment 2.8 1.6 3.4 2.7
Free Cash Flow $ 62.9 $ 59.4 $ 58.9 $ 53.3
(*) Amounts may not total due to rounding.
2Q FY2021 Earnings Presentation | 23Non-GAAP to GAAP Reconciliation (cont.)
(a) Represents costs incurred to establish public company financial reporting compliance, including costs to comply with the requirements of Sarbanes-Oxley and
the accelerated adoption of the revenue recognition standard (ASC 606 – Revenue from Contracts with Customers), and other miscellaneous costs.
(b) Business transformation and integration costs consist of (i) severance and related costs; (ii) vehicle fleet rebranding costs; (iii) business integration costs and
(iv) information technology infrastructure, transformation costs, and other.
Three Months Ended Six Months Ended
March 31, March 31,
(in millions)* 2021 2020 2021 2020
Severance and related costs $ - $ 0.4 $ 0.2 $ 0.6
Business integration (g) 2.1 3.5 5.7 8.9
IT infrastructure, transformation, and other (h) 4.1 5.0 6.9 7.8
Business transformation and integration costs $ 6.2 $ 8.9 $ 12.8 $ 17.3
(c) Represents expenses incurred for IPO related litigation and subsequent registration statements.
(d) Represents equity-based compensation expense and related taxes recognized for equity incentive plans outstanding.
(e) Represents expenses related to the Company’s response to the COVID-19 pandemic, principally temporary and incremental salary and related expenses,
personal protective equipment and cleaning and supply purchases, and other.
(f) Represents the tax effect of pre-tax items excluded from Adjusted Net Income and the removal of the applicable discrete tax items, which collectively result in a
reduction of income tax. The tax effect of pre-tax items excluded from Adjusted Net Income is computed using the statutory rate related to the jurisdiction that
was impacted by the adjustment after taking into account the impact of permanent differences and valuation allowances. Discrete tax items include changes in
laws or rates, changes in uncertain tax positions relating to prior years and changes in valuation allowances.
Three Months Ended Six Months Ended
March 31, March 31,
(in millions)* 2021 2020 2021 2020
Tax impact of pre-tax income adjustments $ 7.2 $ 7.3 $ 14.9 $ 15.3
Discrete tax items (0.2 ) — 0.3 0.3
Income tax adjustment $ 7.0 $ 7.3 $ 15.2 $ 15.6
(g) Represents isolated expenses specifically related to the integration of acquired companies such as one-time employee retention costs, employee onboarding
and training costs, fleet and uniform rebranding costs. The Company excludes Business integration costs from the measures disclosed above since such
expenses vary in amount due to the number of acquisitions and size of acquired companies as well as factors specific to each acquisition, and as a result lack
predictability as to occurrence and/or timing, and create a lack of comparability between periods.
(h) Represents expenses related to distinct initiatives, typically significant enterprise-wide changes. Such expenses are excluded from the measures disclosed
above since such expenses vary in amount based on occurrence as well as factors specific to each of the activities, are outside of the normal operations of the
business, and create a lack of comparability between periods.
(*) Amounts may not total due to rounding.
2Q FY2021 Earnings Presentation | 24Non-GAAP to GAAP Reconciliation (cont.)
Total Financial Debt and Total Financial Net Debt
September 30,
(in millions)* March 31, 2021 March 31, 2020 2020
Long-term debt, net $ 1,123.4 $ 1,220.8 $ 1,127.5
Plus:
Current portion of long-term debt 10.4 10.4 12.3
Financing costs, net 12.8 15.5 13.9
Present value of net minimum payment - finance lease obligations 24.7 7.7 18.6
Total Financial Debt 1,171.3 1,254.4 1,172.3
Less: Cash and cash equivalents (123.8 ) (88.0 ) (157.1 )
Total Net Financial Debt $ 1,047.5 $ 1,166.4 $ 1,015.2
Total Net Financial Debt to Adjusted EBITDA ratio 3.5x 4.1x 3.7x
(*) Amounts may not total due to rounding.
2Q FY2021 Earnings Presentation | 25Thank You
Investor Relations Contact: Media Contact:
John E. Shave Fred Jacobs
VP of Investor Relations VP of Communications & Public Affairs
484.567.7148 484.567.7244
John.Shave@BrightView.com Fred.Jacobs@BrightView.com
investor.brightview.comYou can also read
