Q1 2021 Brightview Holdings Inc Earnings Call
Ladies and gentlemen, thank you for standing by and weapon to the bright view fiscal first quarter earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one.
On your telephone if you acquired any further assistance. Please press star Zero I would now like to hand, the conference over to your Speaker today, Mr. John Shave Vice President of Investor Relations. Thank you. Please go ahead Sir.
Thank you operator, and good morning, before we begin I would like to remind listeners that some of the comments made today, including responses to questions and information reflected in the presentation slides will be forward looking and actual results may differ materially from those projected.
Please refer to the company's SEC filings for more detail on the risks and uncertainties that could impact the company's future operating results and financial condition.
Comments made today will also include a discussion of certain non-GAAP financial measures reconciliations to comparable GAAP financial measures are provided in today's press release.
Flamers on forward looking statements and non-GAAP financial measures apply both to today's prepared remarks as well as the Q&A.
Context breakthrough as the leading and largest provider of commercial landscaping services in the United States with annual revenues in excess of $2 billion approximately 10 times. Our next largest competitor together with our legacy company is bright view has been in operation for more than 80 years and our field leadership team has an average tenure of 14 years.
<unk> commercial landscaping services range from landscape maintenance and enhancements the tree care and landscape development, we operate through an integrated national service model, which systematically deliver services at the local level by combining our network of more than 240 maintenance and development branches.
With a qualified service partner network, our branch delivery model.
Underpins our position as a single source end to end provider.
We have a diverse customer base the national regional local levels, which we believe represents a significant competitive advantage. We also believe our customers understand the financial and Reputational risks associated with inadequate landscape maintenance and consider our services to be essential.
Non discretionary I'll now turn the call over to breakthrough CEO Andrew Masterman.
Thank you John.
Good morning, everyone and thank you for joining us today.
It was another busy quarter for our company as we continue in an environment that you have ever experienced <unk>.
Despite these unusual times the bright view team has delivered incredibly strong results, John and I will go into more detail in a moment, but still under still operating under the specter of a global pandemic. Our company completed several strategic acquisitions drove top line growth and margin expansion all of them.
Maintaining our focus on keeping people healthy and safe.
I want to be clear.
Well, we always have more work to do and more progress to make I'm exceptionally proud of these results and the effort and commitment of the breakthrough team.
Although I will cover the topic in much more detail shortly.
Also want to mention the terrific progress we've made on ESG.
Ironically bright view has many leading processes and practices in this area. However, we have not made it easy for any of our stakeholders to see how important good ESG is to us and how ingrained in our culture and operating philosophy. It has already become.
I'm also very proud of the work we've accomplished and the focus we've created for this year on ensuring more robust disclosure for you.
Before continuing with our remarks, we should pause and again express our heartfelt gratitude to our team members and customers and our thoughts continue to be with those impacted by the COVID-19 outbreak, we could not deliver for our clients.
And ultimately for our shareholders without the unwavering support from so many we.
Would be remiss, if we did not express our appreciation to first responders health care professionals, all essential workers, our customers and of course, our dedicated workforce.
Starting on slide four let me provide you with an overview of our strong first quarter fiscal year 2021 results.
First I'm pleased to report that all bright view branches continue to be fully operational with no limitation on the scope of services.
Second inclusive of acquisitions, our maintenance contract based business for the quarter grew seven $4 million or 3% versus the prior year.
Contract maintenance is our core book of business and continues to represent a recurring and durable revenue stream.
Third total adjusted EBITDA for the first quarter was $52 4 million.
Up one 4% versus prior year.
Fourth our usage of technology is driving margin improvement labor management tools combined with proactive cost containment resulted in an adjusted EBITDA margin increase of 40 basis points from the prior year.
And finally, our strong on strong acquisition strategy continues unabated acquisition supported our revenue growth during the quarter and was an attractive pipeline acquisitions will continue to be a reliable and sustainable source of revenue growth.
Despite COVID-19 headwinds our performance exhibited a solid start to the fiscal year, and we remain confident and opportunities to generate value.
Before we turn to the details of our first quarter. Let me provide you with our outlook for our second quarter on slide five.
As expected January and early February has seen continued COVID-19 business impact on ancillary demand in the maintenance segment and project pipeline softness in the development segment.
Our maintenance contract base business remains strong and our two largest verticals homeowners associations and commercial properties have remained resilient, we got off to a solid start.
Our net new sales in fiscal Q1 was a record for bright view, given driven by our highest ever new contract closings and landscape at.
Also realized more than 10% of new contract growth and our snow book of business. This.
This investment shows or the investment in our sales force is generating tangible results.
More on that later.
We also expect a favorable tailwind from acquisitions that were completed in fiscal 2020 and early in fiscal 2021.
Okay.
In our development segment, we expect Q2 2021 to experience an approximately 20% to 25% revenue decline after considering the bright view free company divestiture.
Fortunately our backlog indicates a return to prior year levels beginning in Q3, and we are optimistic that historical organic growth trends should return within the calendar year.
As a result for our second quarter fiscal 2021, we.
We anticipate total revenues between 550 and $600 million.
And adjusted EBITDA between 44, and $54 million with a lower end of the range contemplating lighter snowfall for the rest of the quarter and the higher end of the range contemplating historically average snowfall in February and March.
January snowfall was light across the country as it was last year essentially flat versus prior year.
Of course, if higher than average snow events occur, particularly in the eastern the eastern Seaboard. There is the possibility of exceeding the above range.
Due to the uncertain outlook regarding the full extent of COVID-19 impact on the economy and its longevity, we will not be providing annual guidance for fiscal 2021 at this time.
We will operate under the premise that headwinds will continue to impact ancillary demand in our maintenance segment.
This factor will impact our ability to grow organically in the first half.
Our maintenance business should show positive growth beginning in the second half of fiscal 2021 as a result of the investments made in our expanded sales teams and sales enablement technologies.
Combined with an average snowfall during the second quarter, our most critical snow quarter and a modest recovery from the pandemic in the second half we remain poised to deliver improved results year over year.
Moving now.
On to slide six.
We are laser focused on business continuity.
Company wide, we continue to exercise extreme prudence as we navigate through a challenging period, but moving quickly on opportunities to maintain and grow our base contract service protect margins enhanced cash and liquidity manner.
Manage capital expenditures and reduce working capital.
<unk> is well positioned to navigate through this challenging period, because our services are systematically delivered at the local level to a diversified customer base.
Our branch structure ensures consistent service quality reliability and delivery.
Bright view account managers are on site actively seeking opportunities to sell enhancements while branch managers are incentivized by performance and growth targets combined with a dedicated local development team. We are well positioned for continued contract growth and service excellence within our diversified customer base.
Yes.
Across all regions of the country, our two largest verticals HOA and commercial properties continue to perform.
Both stay at home and work from home highlight the importance of our services to millions of residents who live in communities, we maintain <unk>.
Commercial and corporate campuses combined with HOA represent approximately three quarters of our maintenance contract book.
Hospitality and retail have been the most impacted verticals, but represent less than 10% of our overall maintenance contract book.
Conditions presented by COVID-19 remains fluid, but our quarterly results highlight the stability of our contract based business and reflect the positive underlying trends in our acquisition strategy cash generation and growth from liquidity. Our team has done an incredible job delivering steady results.
Turning now to slide seven since the beginning of fiscal 2021, we have previously announced three acquisitions that position us as market leaders and several key msas.
Earlier today, we announced our fourth acquisition since the beginning of fiscal 2021, Las Vegas based Green image. We expect these four acquisitions to add approximately $80 million in incremental annualized revenue.
We have now achieved our fiscal 2021, M&A revenue target and still have a truck attractive opportunities in our pipeline, which continues to develop.
In October we acquired commercial tree care of San Jose, California, combined with our legacy operations throughout the Bay area. Great view is now the leading tree care company in Northern California.
Additionally in October we acquired full service commercial landscaping firm W. L E, which operates across three markets in central Texas.
The 250 member WLR team serves HOA developer commercial and municipal clients in this important and rapidly growing region.
At the end of December <unk> acquired cutting edge based in Plymouth, Minnesota.
Cutting edge provides a full suite of winter services landscape maintenance and enhancements free care in irrigation services, we welcomed more than 110 skilled team members for the bright new family and the transaction Salt solidifies us as a service leader and a desirable upper with Midwest market.
Our most recent acquisition in January of 2021 Green image is recognized as a leading provider of both maintenance and development services in the Las Vegas market.
The company has a diverse revenue stream deep developer relationships and a strong HOA and commercial base of business.
We welcomed more than 400 skilled team members and with a strong local brand new presence, we expect a fairly short and efficient integration.
We have a disciplined and repeatable acquisition, an integration framework, which resulted in less risk and generates predictable and accretive returns.
Acquisitions provide us with an established client base a company with a track record of operating results of <unk>.
Field leadership team and an experienced workforce.
Currently our M&A pipeline has over $400 million.
And revenue opportunity as the acquirer of choice in our industry. We have closed 24 acquisitions since January 2017, and are accelerating our pace of acquisitions and integration. We will continue our aggressive but disciplined approach against our attractive pipeline as we seek market expansion and new market entry and.
<unk> Msas as.
As we progress through fiscal 2021, we will continue to update you on this core strategy.
Turning to slide eight we remain focused on driving maintenance contract growth. During fiscal 2021 are contract based business represents the core component of maintenance, including mowing edging pruning trimming blowing and other core landscaping services and in 2020.
Rented approximately two thirds of our maintenance business.
This slide provides a more granular look at our maintenance contract book of business. We think it is a valid way to better understand both the resiliency and stability of our core maintenance business.
During the first quarter of fiscal 2021 are contract based business remained at 98% unchanged versus the previous quarter.
Contract maintenance is our primary book of business and continues to represent a recurring and durable revenue stream.
As mentioned, we believe our maintenance business should show positive sequential growth beginning in our fiscal second half as a result of our expanded sales teams and sales enablement technologies.
Turning to slide nine the largest variable to our first quarter financial performance as snow removal services are annual contracts no book of business grew more than 10% this year.
This implied growth was a result of new wins improved retention and price increases as a result of the investments we've been making in our sales force.
As many of you have experienced over the past few days or arena was a positive impact to our business and provides a good foundation for growth additional moderate still events over the next few months should allow us to achieve our forecast.
Some of you may be familiar with the data from the national Oceanic and atmospheric administration or NOAA.
Which is helpful and monitoring macro snowfall trends at both the national and regional level, we provided here as a reference.
However, breakthrough utilizes data provided by weather works, which is the industry standard.
Weather works reported detailed data by ZIP code, which is important for a decentralized branch network and as the data source specified in our customer contracts for billing and invoicing purposes.
Whether works data for the three months ended December 31.
2020 reported snowfall totals specific to bright news branch footprint as approximately down 14% versus prior year.
Let me, let me give a few years to your specifics on our three largest stowmarket dent.
Denver, historically strong and consistent snow removal market recorded just 21 inches of snow through the end of calendar 2020 versus 43 inches in the prior year.
Chicago recorded $2 seven inches of snow down 58% versus the prior year.
Hope on Boston, Unfortunately was up three nine interest a 26, 7% increase over the prior year.
The 14% overall snowfall decline in breakthrough snow markets snow removal revenue of $55 8 million during the quarter was up slightly versus prior year, a testament to our impressive snow contract growth.
Now turning to slide 10.
We continue to be leaders in environmental social and corporate governance or ESG.
Bright new is focused on generating value for our communities our customers.
<unk> partners suppliers team members and stockholders our commitment to the core principles of BSP is a source of pride for every member of our team.
As the largest provider of commercial landscaping services in the United States, we take environmental stewardship seriously.
Revenue creates preserves that maintains beautiful external environments.
In addition to the landscapes, we design build maintain and enhance we are continually striving to minimize the impact of our work from the environment.
Through innovative landscaping techniques efficient equipment Andrew.
And responsible practices.
Notable among these efforts our breakthrough is one of the nation's largest user of zero emission equipment, and we plant more than $100 million.
Worth of carbon consuming plant each year, reducing our carbon impact in helping offset carbon produced by others.
<unk> see us at accident sites like the University of Pennsylvania, where even deployed all electric crews with mowers and handheld equipment across the entire campus.
As leaders in water conservation, we help clients can serve millions of gallons of water annually through innovative irrigation technology and design strategies recently.
Silicon Valley Water Conservation Awards coalition recognized Oracle's two campuses with the overall award for efficient water use where bright view engineered systems to save 91 million gallons of potable water in one year.
We take pride in the opportunity to create a more sustainable planet and continue to look for ways to make our operations more environmentally friendly.
Turning to slide 11 from workforce workplace safety and diversity to community engagement and philanthropy social responsibility is one of our highest priorities.
Despite an unprecedented environment breakthrough continues to take care of our people we had the lowest employee injury rate in commercial landscaping with over 6200 hours devoted to safety every single day.
We also strive to take care of our communities with the same passion that we dedicate to the care of our team members. We regularly donate time expertise materials and financial resources to help our communities Prosper and thrive select highlights include our partnership with homemade Atlanta, a nonprofit builds and renovates housing for individuals experience.
<unk> homelessness, and Margaret <unk> High school in Florida, where bright new install the tranquility garden, including our hydroponics display and butterfly garden.
We are also very proud of our grow organization, which stands for growth and relationships and opportunities for women.
And employee led resource group advocating for the hiring promotion and retention of women across the company.
Since its establishment in 2017, the group has grown to more than 1400 members with over 800 women participating in regular professional development programs.
We employ more women in the landscaping industry than any other company and pride ourselves on promoting gender diversity from all female crews to leadership positions at all levels.
Lastly, our fund from social Justice support organizations and initiatives that promote equality and inclusion at the local level.
<unk> by a local branch team.
We are a diverse organization that seeks to be a part of positive change, helping bridge, the social educational and economic gaps that divide us.
The fund provides financial in-kind and employment resources to empower those struggling with the consequences of injustice, helping them find ways to achieve their greatest potential.
Response from within our company has been deeply gratifying to me in just a few months since inception. The fund has already made impactful donations to 15 charities addressing issues such as homelessness.
Technical skills training and hunger, we expect additional grants to be made in the weeks ahead and are committed to working with organizations that address the consequences of the justice.
Moving to slide 12, ultimately our performance exhibits a solid start to the fiscal year and we continue to be confident we will emerge this crisis, a better and stronger company, while remaining focused on building, our long term fundamental strength and creating superior value for our stockholders I'll now turn it over to John who will discuss our financial performance in greater day.
Tim.
Thank you Andrew and good morning to everyone I am very pleased with the results we delivered in our first quarter of fiscal 2021.
The stability of our contract maintenance business.
Bind with efficiencies gained from our investments in technology.
And our ongoing focus on productivity and cost management have all been meaningful in driving improved margins and collectively underscored the strength of our business.
Turning to slide 13.
First fiscal quarter 2021 revenue for the company totaled $554 4 million.
Maintenance revenues of $418 million for the three months ended December 31.
Was flat to prior year, excluding divestitures of $900000.
COVID-19 business impact on ancillary demand continued.
Offset by a solid revenue contribution of $23 7 million from.
<unk> from acquired businesses.
For the three months ended December 31st development revenues declined 6%, excluding a $6 6 million revenue reduction from the breakthrough tree company divestiture.
In the development segment, we expect COVID-19 related softness to be more pronounced in Q2 versus last year, but we are also encouraged by our backlog pipeline and bid calendar.
Dissipate increased stability during the second half of fiscal 2021.
Turning to the details on slide 14.
Total adjusted EBITDA for the first quarter was $52 4 million, an increase of $700000 or one 4% from $51 7 million in the prior year.
The impact of lower revenues due to COVID-19 was more than offset by productivity initiatives and SG&A cost containment, resulting in a strong 40 basis point expansion in EBITDA margins to nine 5%.
In the maintenance segment, adjusted EBITDA of $49 6 million.
Presented an increase of $1 9 million or 4% from $47 $7 million in the prior year.
Cost containment initiatives solid labor management, and leveraging our technology initiatives led to strong margin expansion.
The result was an impressive 50 basis point expansion in EBITDA margin to 11, 9%.
And the development segment, adjusted EBITDA decreased $2 million to $17 1 million compared.
Compared to $19 1 million in fiscal Q1 of 2020.
The decline was driven by lower revenues and approximately half of the EBIT decline was attributable to the sale of the breakthrough tree company.
However through strong cost containment efforts the development business was able to mitigate against the revenue loss.
Which resulted in a 10 basis point decrease in EBITDA margin to 12, 4% in fiscal Q1.
Corporate expenses for fiscal first quarter decreased $800000, representing two 6% of revenue.
Let's move now to our balance sheet and capital allocation on slide 15.
Net capital expenditures totaled $9 $1 million for the first fiscal quarter down from $13 5 million in the first quarter of fiscal 2021 expressed as a percentage of revenue net capital expenditures were one 6% in the first fiscal quarter and we expect fiscal 2021 capital.
<unk> to be approximately 3% of revenue in line with our long term guidance.
In the first fiscal quarter of 'twenty, one we self funded approximately $62 million on acquisitions versus $18 4 million in fiscal Q1 of 2020.
Our net debt was $1 9 billion at the end of fiscal Q1 2021 versus $1 6 billion at the end of fiscal Q1 2020.
Our leverage ratio was four times at the end of the fiscal first quarter of 2021 versus three eight times in the prior year quarter.
If our M&A transactions were of the same magnitude as Q1 of 2020, and we had experienced a normal Q2 snow last year as we did in Q2 of <unk> 19.
Leverage ratio would be approximately three five times.
In line with our target to get to less than three times as a public company.
Our free cash flow performance in Q1 was solid although historically, our weakest free cash flow quarter. This was driven by our solid EBITDA results.
Prudent management of capital expenditures lower interest expense and decent net working capital performance.
An update on liquidity is on slide 16.
At the end of the first fiscal quarter of 2021, we had approximately $182 6 million of availability under our revolver.
Approximately $60 million of availability under our receivables financing agreement, which we are in the process of extending until February of 2024, and $81 6 million of cash on hand.
Total liquidity as of December 31, 2020 was approximately $324 million.
This compares to $254 million as of December 31, 2019.
This gives us ample flexibility and continuing our accretive M&A strategy.
We are confident that we have ample liquidity and cash on hand.
Not only run breakthrough effectively but also maintain our focus of paying down debt and aggressively pursuing profitable growth with that let me turn the call back over to Andrew.
Thank you John.
Turning now to slide 18, our first fiscal quarter results reflect a solid start to the year. Despite.
Despite anticipated and continued COVID-19 related impacts the fundamentals of our business and our industry remains strong.
With our improved liquidity, we expect to continue our pace of acquisitions.
Additionally, we continue to remain focused on deploying technology to enhance productivity profitability and client engagement across all verticals, we have fully implemented our EPC labor management tool across both segments. We are expanding adoption of HOA connect facilitating.
Facilitating direct customer communication with our teams.
We continue to expand the usage and capabilities of the sales force customer relationship management tool.
And quality site assessment software continues our focus on improved retention and supporting property enhancement.
In addition to technological enhancements, we continue to grow and invest in our sales organization and expand the use and effectiveness of our sales tools did.
Digital marketing initiatives, and new markets and verticals and through new channels with a more effective omni channel approach continue to support the success of these expanded sales teams.
Our sales and marketing strategies and structure, our formula for long term success and our investments in field based sales and operations leadership will drive stronger new sales and result in improved client retention will further streamlining our service delivery.
The investment and expansion of our sales team combined with targeted regional efforts in digital marketing has resulted in our sales opportunity pipeline in both snow and maintenance contracts to its highest level in the company's history.
Over time, this enhanced and a robust pipeline should support growth ahead of industry averages.
Additionally, the results of our strong on strong acquisition strategy continued to benefit our revenue growth and with an attractive pipeline acquisitions will continue to be reliable and sustainable source of growth.
Our business is cash generative with low capital intensity, allowing us to consolidate the marketplace in an efficient and disciplined manner that we have shown to be repeatable.
Combined with our quarter cultural knowledge and excellence and our ability to operate multiple service lines under one banner. We believe we are well positioned to drive solid performance in fiscal 2021 and beyond.
I would like to personally thank our dedicated employees families clients and partners for their resiliency and dedication during a challenging time.
Our strong customer and team oriented culture drives the resiliency of our business at all levels in the organization our focus on taking care of each other and our customers sustains and drives our organization.
Thank you for your attention this morning, and we will now open the call for your questions.
Ladies and gentlemen at this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad.
That is all wanted to ask a question.
And your first question is from the line of Shlomo Rosenbaum with Stifel.
Hi, Good morning. Thank you for taking my questions. This morning could you Andrew could you talk a little bit about the trends in the ancillary revenue in the quarter or just kind of an absolute what youre seeing.
And then just kind of versus what your expectations, where is it coming in the way that you expect is it.
Above below just given the importance of that part of the business too.
Profitability et cetera, if you can just comment on that.
Absolutely, yes, what we what we saw in the first quarter was pretty much what we expected as far as our team goes which was a continued softness relative to prior years.
Fortunately, we did see a slight improvement in our underlying organic.
Our organic shortfall, so I'd say, if you look over the last three quarters, we've seen our ancillary.
Year over year rates improve from Q3 into Q4 and now into Q1.
We do expect to see that ancillary kind of softness continue into the second quarter, but we do believe as we get into the second half of fiscal 'twenty. One we do see a return to a growth profile relative to prior years.
Overall, COVID-19 impacts and certainly continued to weigh in on the business book, we're very encouraged by seeing a positive trend.
So just.
The return in the second half of the year is that.
Kind of the opening up expectation is that has to do with more sales that are going on in general.
Additional acquisitions that are going to be additive whats.
How is that layering into your thinking.
It's a combination of all free.
So absolutely the new sales we've had we had the best sales quarter in the history of the company in Q1. So we would expect that sales to help build a little bit into those ancillary.
Those ancillary levels. In addition, we do believe the opening of the economy the summer with the vaccine being distributed more widely that we would anticipate to a certain degree not completely but to a modest degree a return from from levels that we saw last year during the height of the pandemic.
And your next question is from the line of Tim Mulrooney with William Blair.
Yes.
Good morning.
Okay. Good morning, Tim.
I wanted to ask about retention last quarter, you mentioned that customer retention continues to improve even as new sales slowed in ancillary revenue was down.
Did that retention trend continued through the fourth quarter and are there any sort of metrics, whether it's the actual retention rate or net promoter scores or any quantitative metrics that you can share with investors around the directional change in retentions.
Yes, we don't disclose specifically number but we have talked about something called net new and net new is the sum of our sales minus our retention losses that we have in any given quarter and I can say that we've seen increasing profile, where we see that net new number being the best we actually have seen it.
In the first quarter, which then is one indicator showing that we are seeing an improving <unk>.
Moving profiles it will manifest itself ultimately in growth as you get to the second half of the year. We also to your point on our <unk> customer satisfaction scores.
We have seen year over year improvements in the overall performance of that and in subsequent quarters. What we can do is shows from data showing the improvement in those key sales force and we'd be happy to dive into that in detail in a later period.
Yes, that'd be great, we'd love to see.
Anything you can provide around that but the net new is also very helpful shift.
Shifting gears one more question from me on pricing, we saw a lot of commercial services providers temporarily pause price increases last year can you remind me I just can't remember if you took a similar approach and maybe just broadly update on how pricing has trended and how that compares to your historical average thanks guys.
Yes.
Thanks for the question Tim.
You're pretty much spot on Tim we experienced.
Alright.
Downward pressure in pricing in fiscal 2020.
Prior to that in fiscal 17, 18, 19, we were able to pretty much use pricing to offset.
Wage inflation.
Our expectations and what we've modeled this year and continue to see pricing pressure.
Yes.
Some of the Covid areas and the relations there however.
On a bright note.
Andrew talked about the increase in snow contracts that we were able to achieve early in the year.
And part of that whole equation.
Was a price component which was favorable.
A favorable for us granted thats, a small part of our business. We continue to expect to see pressures from COVID-19. So it'll be a balance of how much we can push on price versus maintaining the business, but overall, we expect and have modeled pretty much. The same true correct same trajectory in 2021 as we saw in 'twenty.
And your next question is from the line of George Tong with Goldman Sachs.
Hi, Thanks, good morning.
So fall in Brighton used markets was down 14% in the quarter, but snow contract growth was relatively strong can you discuss what drove the strength in snow contracts and how snowfall in fiscal <unk>. Thus far is tracking relative to internal expectations in prior year.
Yes, absolutely George.
We've been talking about the investment in our sales force for a couple of quarters now.
And.
Truly what we saw in the seasonal markets is basically an expansion of our pipeline and the expansion of the conversion of that pipeline into what is our historically, our our best snow contract year, we've ever had.
Usually within postal contracts is clearly green contracts.
But that is the primary reason is basically an expanded sales force interest.
Deliberate intent on using the marketing tools that we've implemented we are a digital marketing efforts combined with that expand sales force expanded sales force that works together with our local branch teams on expanding that footprint and by the way that growth was across the country. It wasn't necessarily.
Concentrated in any specific area it was fairly balanced.
So as you see that that was our Q1 Q2.
The first month of January was a very light month.
No question about it he was very similar to last year and last year was also a very very light month.
So as we as we saw.
Frankly in many of the northeastern communities in the first quarter.
In January.
Was followed on by what was a significantly significantly higher value with arena, which we're still moving at hauling snow away from sites today.
From a storm that happened over the course of three days. So while January was light we got off to a great start here in February.
And what we expect as we look into the second quarter as we need several more decent events in February ended March when I say decent I mean, 5% to six inch snows.
In the eastern corridor to kind of hit to hit the averages that are out there the 30 year averages.
If those occur as you'll see it in guidance.
We believe with those averages will hit the high end of the guidance.
And kind of with a light.
Over the late snow events over the next two months will be the lower end and so we still need to know to come but certainly our arena gave us a great spot and we're confident that we're going to be able to improve or beat.
<unk> levels that we saw in fiscal 2020.
Very helpful.
You mentioned in the development business that fiscal <unk>.
Performance, there might take a bit of a step back.
With improvement in the second half of the year can you talk about the puts and takes that might put near term pressure on development and <unk>.
And to elaborate on some of the tailwind that you expect to manifest in the second half of the fiscal year.
Absolutely.
We as we've talked about in prior quarters, we saw it coming.
Quarters ago during the height of the pandemic with reduced amounts of architectural activity.
<unk> pipeline.
And we knew that we were going to see a shift downwards in our fiscal second quarter right here in the January through March time period.
It's playing out as we said 2025% reduction of Fortunately the pipeline build has as we looked at it in the last three months.
In October through December and actually as we continue into January that bid pipeline or the bidding activity continues to be quite strong and we believe this is going to be Q2 will be a trough quarter and that will be climbing back out and frankly being similar to the levels that we saw last year return as soon as the second half of this year.
Were there completely happens in Q3 or Q4, we still need to see the layering in of bookings, but all the trends that we see our development business are very encouraging and we would expect that we would return to organic growth growth at the latest by the back half of this calendar year.
Your next question is from the line of Andrew Wittmann with Baird.
Yes, great. Thanks, guys, I guess, just drilling into the guidance a little bit more.
And maybe as it relates to M&A, specifically, you mentioned that Theres an annualized.
Run rate that you've closed this fiscal year of $80 million, but I was wondering John maybe if you could cut the numbers a little bit different way and talk about what the inorganic contribution to fiscal 'twenty. One both from deals that closed last year and contribute to this year as well as deals that closed this year and will contribute partially to the CX could you give us the in year.
Inorganic revenues that are implied.
Or that we should be expecting not just from maybe sort of the second quarter, but just to help us frame the year at this point.
Yes are you talking about Q1, Andrew for free.
For the full year.
Yes, looking well.
The Q1 numbers, obviously, you disclose those and those are clear. So if you could give it for the second quarter that'd be helpful. And then just kind of help us ballpark what the inorganic revenue contribution maybe is for the year you gave us the $80 million annualized and timing and all these other things make it I don't know if I want to assume that as the actual number in the year for the year either so.
Maybe you could just help us whether that'd be helpful. I think.
Yes, no. Thanks for that clarification, I think where we sit today historically, we've guided around $60 million in the composition of that would be 30 of rap.
<unk>.
And so with the progress that we've made this year.
Would be upping that to more than 90 $90 million range and that would still be $30 million wrap but with this progress and these early deals getting done.
Utilization of new would be more approaching 60, so think 90 versus our historic 60.
Got it Okay that is helpful and then just.
I guess does that philosophically here after the second quarters in the books.
I guess, we'll have we'll be into those COVID-19 comps into some of the.
You're seeing growth do you expect that maybe after next quarter, you'll be able to guide for the rest of the year I'm just wondering how the visibility shaping up after this quarter.
We think.
Andrew we think thats very realistic.
No.
A little hard to get full year now with just the variability of snow to be candid in Q2.
But we think once that quarters behind us.
And once we have a.
A deep dive into Q3, Q4 that Youll see a full year guide from us.
Next call not only removing Andrew this is Andrew Andrew removing the.
The uncertainty around snowfall levels, but in addition through April as our primary selling season for our for our contract based business and we will have a very good understanding of kind of where that lays out and what the pandemic impacts are going to be because we contracted that and so by the time, we get to our may call, we'll be able to give you some better better.
For the year.
Your next question is from the line of Hamzah <unk> with Jefferies.
Hey, good morning.
My question is just a little bit around M&A.
And I.
I guess from a technology standpoint, you talked a lot about.
Sort of the CRM system sales et cetera does your technology enabled you to integrate deals faster now on on the M&A side, and then and then as part of that on the M&A side are you seeing more people has COVID-19 impacted sort of people's willingness to sell at all or it.
Really doesn't matter.
You know what it's interesting we operate on one system.
JD Edwards <unk> system across the entire enterprise and frankly, having done 24 deals.
A team who has done 24 deals of integration and we have a playbook, which allows us to very quickly take advantage of the back office operations and consolidations and move those acquisitions onto our platforms frankly within a couple of months, it's a pretty impressive team and it really I would say absolutely technology helps that.
More of the introducing the introduction of EPC, Timekeeping tools, and labor management tools as well as our sales force and quality site assessment tools.
Our acquired companies are hungry for these they actually are looking forward.
Alps, along with the acquisition because they get to have new tools introduced that they otherwise wouldn't have.
So thats.
That absolutely is a big positive regarding the sellers sellers appetite.
I would say that it's.
It's a little bit accelerated shall I say and I think what I mean by that is that owners, who may have been on the fence, who werent sure whether or not they were going to sell their company or not.
<unk> is kind of put more uncertainty out there in the world has put people, perhaps reflecting on their own lives and what they want to do going forward and those who are on the fence.
Time, Inc. Side, you know, what I'm going to kind of redefine what I'm doing and put their properties are put there put their assets up for sale. So I think we've seen a little bit of it.
The increase from that.
And I think that view is reflected from.
In fact, we used to see about $300 million or so in our pipeline now.
And now we're up to moving up towards 400.
Got it and just my follow up question is just on <unk>.
Maintenance margins I guess 11, 9%.
They're pretty strong.
How should we think about you talked a lot about sort of the revenue trajectory second half ancillary et cetera, but on the margin side, how should we think about sort of how much room you have there.
What variable costs sort of come back into the business, what sort of cost structure.
What sort of cost have you taken out structural just any color on the margin trajectory would be helpful too.
Yes.
So this is John good morning, I think for the quarter. There were three main drivers around.
The improvement in margins.
Not surprising on any of them. The first was headwind around ancillary that.
A more profitable part of the business and with the shortfall versus prior year that was a headwind. There is also a slight headwind.
Around the new acquisitions that we're bringing onboard because historically well run companies, but not at a rate yet so it takes time to get them up.
Where we've made significant progress is around cost reductions and I would say productivity inefficiencies around leveraging the tools like every company, where we've taken cost out around labor and travel and other discretionary items, but now we have.
Labor is a big part of our program and now that we have UTC fully implemented across both sides of the business, we've been able to make some.
Some progress there.
As far as longer term and looking at Q2, three and four I would say, we're very we're very confident that we will stay within our historical guide of somewhere around 10 to 30 basis point improvement, we had a really good second quarter.
We expect the same improvement in the second quarter, which was evidenced in our in our guide.
And when we talk again in May.
For the full year, we'll have more to say about it but for the longer term, we're still in that 10 to 30 bps range.
Your next question is from the line of Kevin Mcveigh with credit Suisse.
Great. Thank you hey, so.
$80 million it sounds like year to date.
Is it fair to say.
ECB poised to commvault into a higher range from kind of acquired revenue structurally or is this just taking advantage of the pipeline that's out there and you know.
That incremental 100 million. So the three to four do you expect a higher close rate based on the pipeline because obviously.
I don't think he close all of that maybe just remind us what the percentage ASM.
Clothes versus where the pipeline sits historically.
Yes.
Kevin I think I think what you see in the overall pipeline and the opportunities are increasing but I would not expect our close rate go up any any any great deal just because every acquisition takes a great deal of diligence, we meet with the teams we understand who they are and the reality is.
As there are many more companies that we actually turned down than actually.
Ultimately end up going to the altar with so I haven't seen a dramatic shift in that kind of percentage.
I will say that I do believe with the pipeline that we continue to see in front of us.
It is likely that we will continue to be doing deals.
As we move forward, we're not slowing down and so I would say that we will see something north of that $80 million annualized revenue.
Going forward as we progress through the next couple of quarters.
And then as you think about.
Just I guess.
Maybe more from some of these.
ESG initiatives continued grow more or less.
Is that from a maintenance aspect from a business longer term I'd imagine, there's probably a little bit more upfront investment, but how should we think about that as the fleet converts.
I don't know if you have any thoughts as to what percentage of free ultimately those electric but what does that mean to hammer the SG&A longer term because I'd imagine, there's probably less maintenance associated with equipment.
Yes. There is there is certainly there certainly is some less maintenance involved with equipment, but these are heavy duty machines and the thing is if more comes down to a lot of the gears.
The blades and the and those kinds of things and they also more expensive equipment upfront, okay, and so the upfront Apple outlay may have some slight higher levels offset by perhaps lower operating cost levels going forward, but at the end of the day.
Our strength tremor is still needs a person running the strength tremor printing.
Hedge trimmers still need someone to operate that as most moving activity still needs people to operate those mowers that being said another exciting element of what we're doing with electric as autonomous smaller.
That is that technology is in its infancy.
And really demands very large.
Well.
Wanted to know if youre not going to be taking 24 inch decks and automating those in communities, but I do think over time, you're going to see potentially some labor savings in autonomous mowing, we're on the forefront of that and we'd be well will be exciting to share some of those developments over the next year as we continue and launched that.
Which will be launched this year, we launching on several properties throughout the country.
Your next question is from the line of Sam, England with Baring Bank.
Okay.
Okay.
Your line is open.
Mr. English from your line is open.
Okay.
Tim.
I got it.
Yes, we hear you from here.
You're fine now.
Right, Yes. The first question I, just wondered if you're expecting to see any impacts from the Biogen administration coming in for example around labor laws wage inflation regulation based types of things.
Yes, Fortunately regardless of what administration is in the White house. The graphs continues to grow in the snow will fall as long as it's called.
And we will continue to be servicing our properties.
We believe.
A strong proponent of legal immigration across the across the country any any pro immigration policies that will be implemented will benefit us.
Increasing the availability of labor.
Throughout the country and Thats whether thats.
Immigrant labor or weather.
Immigrant later that exists in the country or whether its guest immigrant labor coming in we're fans of that will benefit the company and any any party which are.
Which supports a pro immigration platform, where we're thrilled about.
Great and then just looking at slide.
The end markets in 2020, I, just wondered why you're seeing the nice weakness in ancillary revenues at the moment are net of any markets that you have seen a particular improvement in sequentially. So throughout Q3, and Q4 and into Q1.
You mean within the ancillary segment.
Yes.
Yes.
Yes, I mean, there isn't any one that anyone particularly as far as what we've experienced I would have to say, perhaps in many of our retail and hospitality verticals you would've seen across the board service line impacts in some of the more discretionary color rotations that you might see.
In retail.
Where people are visiting malls youre not youre not really.
<unk> them up quite as much as you used to so.
So I think those kind of areas would be more impacted than others in the past and those would be the ones. We would expect to come back we do believe as we get into Q3 and Q4 of this summer.
And especially as people start coming back into public areas coming back to restaurants.
Going to be a need for the competition to differentiate their products and landscaping is a great way to differentiate the environments people are going to be in especially in the summer as they will be dining and shopping outside.
Your next.
Is from the line of Bob <unk> with CJS Securities.
Great Good morning.
My question is obviously its been addressed already just digging in on the ancillary by customer type. If you could you mentioned hospitality, obviously retail has been impacted.
Has there been any change to the corporate or the HOA and how theyre treating ancillary services or <unk>.
How do you expect those to trend going forward.
Yes, good question, Bob what they what they.
What I would have to say is that in the HOA environments, you've seen relatively little shift or impact.
Ancillary services, it's been pretty steady shall I say.
The HOA dues haven't been that much affected and so people tend to be utilizing and since they are staying at home working from home.
People are paying a lot of attention to their to their home environments.
Beauty environments. So we've seen kind of a stabilized element there I will say in commercial we have seen a bit of impact in commercial.
Not near as much as it's been it's been small right. The bigger impacts had been in places like retail and hospitality. So commercial has had some impact with less people coming into offices again less colored rotations youre not improving the properties when known as coming into commercial buildings. At this time, however, as we have heard.
As people come back into the offices in July and September.
Actually we believe that there is a likelihood that people are going to get the property is ready for people returning to offices, which could have a positive impact on our ancillary services in the second half of the year.
Okay Super Thanks, very much.
And the next question is from the line of Slo-mo Rosenbalm with Stifel.
Hi, Thank you for squeezing me in for a follow up just a quick one Andrew how much of the Green image business that you announced this morning.
Is residential and development versus maintenance. This is flipping through the website I just don't usually see.
Residential and some of the stuff that you guys do and I'm just wondering how much is this different from what you usually do.
Sure, Yes green image.
As heavy homeowners association, okay. So they do a lot of homeowners associations in the Vegas area, that's probably where you would have seen that they do very little true reservoir, you would typify residential.
It's just that they are in HOA is so so you will see is that is what they do they however, do have as opposed to most of the acquisitions. We've done they have a significant.
Development part of the business, it's more than half.
And what that business is it.
She is fantastic for us in Vegas, because in Vegas was one area, we had very little homeowners.
I should say association development business, which is booming in Vegas, we were more on the hospitality.
In corporate kind of development side of the market with Green image. It now puts us squarely in a spot where we are across the board between general contractors of commercial and hospitality in our legacy business and now combining with Green image is a strong position in the community development part of the market.
Great. Thanks.
And there are no further questions. Mr. Masterman do you have any closing remarks Sir.
Yes. Thank you very much operator, once again I want to thank everyone for participating in the call today and for your interest in bright view, we look forward to speaking with you. When we report our second quarter results in May please pray for snow stay safe and be well.
Ladies and gentlemen. This concludes today's conference call you may now disconnect.
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