Q3 2024 BrightView Holdings Inc Earnings Call
If you would like to ask a question. Please press star followed by one on your telephone keypad now if you change your mind. Please press star followed by two I will now hand over to your host, Chris Costco, Vice President Finance and Investor Relations to begin Chris.
Chris Costco: Chris. Please go ahead.
Speaker Change: Good morning, and thank you for joining breakthroughs third quarter earnings call ill ask Glenn breakthroughs, President and Chief Executive Officer, and Bret Ervin Chief Financial Officer are on the call.
Speaker Change: I'll now refer you to slide two of the presentation, which can also be found on our website, which contains our safe Harbor disclaimer. Our presentation includes forward looking statements subject to risks and uncertainties. In addition, during the call we will refer to certain non-GAAP financial measures. Please see our press release and 8-K issued yesterday for reconciliations.
Speaker Change: One of these measures with that I will now turn the call over to Dale.
Dale: Thanks, Chris and good morning, everyone.
Dale: As I reflect on my time here, which is approaching the one earmarks.
Dale: My conviction in the incredible opportunities, both near and long term.
Speaker Change: <unk> to increase as we are on pace to deliver a breakout year.
Speaker Change: We are doing this by operating as a unified one bright view and leveraging our size and scale to drive profitable growth.
Speaker Change: Both will lead to meaningful shareholder value creation.
Speaker Change: As I have said from day one.
Speaker Change: This begins with taking better care of our employees, who will in turn provide better service to our customers.
Speaker Change: I am extremely grateful for our employees and their increased commitment for putting our customers at the center of everything we do.
Speaker Change: I will start on slide four by emphasizing our achievements and ongoing progress.
Speaker Change: Along the strategic updates that will enhance our position to accomplish our objectives.
Speaker Change: <unk>.
Speaker Change: We delivered a record Q3 and year to date EBITDA with margin improvement across all segments.
Speaker Change: And we are reaffirming full year 'twenty for revenue.
Speaker Change: EBITDA and margin guidance, all while raising free cash flow for the second time this year.
Speaker Change: We'll get into more details on the financials in a few minutes.
Speaker Change: I want to focus my comments on the tremendous progress being made towards one breakthrough.
Speaker Change: As I have said from day, one our goal is to become the employer of choice.
Speaker Change: And this is the first step in our journey <unk>.
Speaker Change: Investing in our frontline employees will be the core to our future success by.
Speaker Change: By making these investments it will translate to improved employee turnover and customer retention more on this in a minute.
Speaker Change: We are also streamline our operating structure integrated our business lines to promote cross selling and are enhancing our technology offerings to ensure optimal market coverage and route density by.
Speaker Change: By reducing legacy inefficiencies.
Speaker Change: <unk> us closer to our customers.
Speaker Change: On slide five I will discuss some of the initiatives, we are taking to become the employer of choice and the impact it is having.
Speaker Change: As I said earlier, our objective is to build a winning culture. So our employees take greater pride in being part of the bright blue team and have unwavering confidence in the fact that they are our single most important asset.
Speaker Change: While this requires upfront investment. This will result in reduced employee turnover and increased customer retention and ultimately drive sustainable profitable growth.
Speaker Change: To remind you of a few examples of these investments we are refreshing our fleet of trucks and mowers and in March we launched the boost program to ensure our employees are not only safe.
Speaker Change: But comfortable enabling them to better service our customers.
Speaker Change: While this is a snapshot of a few of the changes underway, we are already seeing positive momentum in employee turnover.
Speaker Change: Instant.
Speaker Change: Past seven months the turnover rate for our frontline employees has improved an impressive 19 100 basis points, including six consecutive monthly improvement.
Thank you for your commitment for putting our customers at the center of everything we do.
Speaker Change: This shows.
Speaker Change: Unequivocally that if we take care of our employees they'll become more engaged and more likely to stay.
along with strategic updates that will enhance our position to accomplish our objectives. First, we delivered a record Q3 and year-to-date EBITDA with margin improvement across all segments.
Speaker Change: The first step in our one bright future Ernie has always been employees first.
Speaker Change: As they are the key to providing best in class service.
Speaker Change: On slide six similar to investing in our employees the goal to significantly improve customer retention requires a commitment to provide best in class service levels.
Speaker Change: This will translate to the momentum towards growth.
Speaker Change: As you can see on the chart.
Speaker Change: We have seen a steady increase in retention rates specifically over my first nine months, we have delivered 150 basis points improvement with significant opportunity remaining.
Speaker Change: While these trends may not be linear as we continue to transform bright view.
Speaker Change: I am confident that we will experience incremental benefit as a more consistent employee base delivers efficient collaborative and unified service to our customers continued.
Speaker Change: Progress on employee turnover and customer retention will fundamentally change the way bright view operates and had the greatest impact to delivering long term profitable growth.
by Reducing Legacy Inefficiencies.
Speaker Change: On slide seven I'll further highlight the benefit of operating as a unified one breakthrough.
Speaker Change: As we have broken down silos.
Speaker Change: Are gaining traction in cross selling bright views full suite of services.
Speaker Change: As an example, we've recently concluded a $4 million development project in the southwest on behalf of a prominent corporate client and converted this relationship into a $400000 annual reoccurring maintenance contract. This.
Speaker Change: This is one example of the significant under leveraged opportunity that will create meaningful future growth. Additionally.
Speaker Change: Additionally, as we seek to optimize our total addressable market. We have equipped our branches with a prospecting tool that enables more deliberate customer targeting the.
Speaker Change: The combination of incorporating our sales force into our branches and leveraging enhanced technology is expected to improve route density reduce windshield time and improve margins.
Speaker Change: In the past seven months, the turnover rate for our frontline employees has improved an impressive 1,900 basis points, including six consecutive monthly improvements.
Speaker Change: As you can see on the map on the right. The legacy sales strategy was to win new accounts with limited consideration for customer location relative to existing accounts in turn our crews spent too much waste of time behind the windshield instead of servicing our customers.
Speaker Change: The increased route density funded with increased cross selling between the development and maintenance business will drive sustainable long term profitable growth and margin expansion.
The first step in our OneBrightView journey has always been employees first, as they are the key to providing best-in-class service.
Speaker Change: On slide 6, similar to investing in our employees, the goal to significantly improve customer retention requires a commitment to provide best-in-class service levels.
Speaker Change: Before turning the call over to Brett to discuss our financial results for the quarter I'll remind everyone that the investments we are making in our employees today are crucial to positioning us for sustainable success over the long term as.
This will translate to the momentum towards growth.
Speaker Change: As the nation's largest provider in our industry. There is tremendous opportunity to leverage our size and scale and capitalize on cross selling opportunities to unlock growth in our business and gain market share.
Speaker Change: As I visit our branches, it's refreshing to see a whole new mindset and sense of teamwork across the integrated business. This.
Speaker Change: While these trends may not be linear as we continue to transform Brightview, I am confident that we'll experience incremental benefit as a more consistent employee base delivers efficient, collaborative, and unified service to our customers.
Speaker Change: This gives me an added level of confidence that the work we have done in strengthening our culture will translate to continued improvements in employee turnover and client retention, while delivering best in class services to our customers.
Speaker Change: While there's more work to be done we have successfully taken the initial steps to instill a more disciplined strategy to the customers we approach and the pride we take in servicing that we are increasingly confident in our ability to capitalize on the significant opportunities that lie ahead of fiscal 2000.
Speaker Change: As we have broken down silos, we are gaining traction in cross-selling Brightview's full suite of services.
Speaker Change: 24 is on track to be a breakthrough year.
Speaker Change: As an example, we recently concluded a $4 million development project in the Southwest on behalf of a prominent corporate client and converted this relationship into a $400,000 annual reoccurring maintenance contract.
Speaker Change: Our enthusiasm is truly unbridled as we think about the long term when we reflect on our earnings power cash flows and value, we can deliver to our employees customers and shareholders with that I.
Speaker Change: I'll turn it over to Brett who will discuss our strong results and our financial guidance Brett.
Speaker Change: This is one example of the significant under leveraged opportunity that will create meaningful future growth.
Brett: Thank you Dale and good morning to everyone let.
Brett: Let me start by saying how proud I am of the entire bright view team as we continue to work together during what is on pace to be a breakout year as we execute on our strategy of driving profitable growth.
Speaker Change: A combination of incorporating our sales force into our branches and leveraging enhanced technology is expected to improve route density, reduce windshield time, and improve margins.
Brett: This is evidenced in our strong results for both the quarter and year to date, which both reflect a record EBITDA performances for the company alongside margin expansion across all segments.
Speaker Change: We are truly transforming this business and setting the stage for long term profitable growth and shareholder value creation.
Brett: Moving to slide nine.
Brett: Total revenue during the quarter of $739 million was down three 6% year over year. However, when excluding the impact of exiting the U S bonds and aggregator business revenue was essentially flat.
Speaker Change: The increased route density, funded with increased cross selling between the development and maintenance business.
Speaker Change: will drive sustainable long-term profitable growth and margin expansion.
Brett: While land revenue was impacted by the exit of these two businesses. We remain very encouraged by the underlying health of the market and recent trends within our business.
Brett: Notably our improved employee turnover and customer retention metrics as Dale previously mentioned.
Dale: The development business increased five 7% as a result of continued conversion of our backlog and high quality projects.
Dale: This presents significant opportunity with our revamped go to market strategy to convert these projects into future recurring maintenance contracts.
Speaker Change: As I visit our branches, it's refreshing to see a whole new mindset and sense of teamwork across the integrated business.
Speaker Change: As development continues to grow this enhances our ability to further drive land results through cross selling opportunities in fiscal 'twenty five and beyond.
Brett: Turning now to profitability and the details on slide 10.
Brett: Total adjusted EBITDA for the third quarter was $108 million, an increase of $6 million or.
Speaker Change: While there is more work to be done, we have successfully taken the initial steps to instill a more disciplined strategy to the customers we approach and the pride we take in servicing them.
Brett: Four 6% versus the prior year period.
Brett: Margin expanded an impressive 130 basis points and reflects continued benefits from our ongoing profitability initiatives.
Brett: Adjusted EBITDA margins in the maintenance segment improved by 40 basis points as we continue to operate more efficiently.
Speaker Change: While fiscal 2024 is on track to be a breakthrough year, our enthusiasm is truly unbridled as we think about the long term when we reflect on our earnings power, cash flows, and value we can deliver to our employees, customers, and shareholders.
Brett: This represents an adjusted EBITDA decline of $5 million of which a little more than $1 million was it related to the divestitures of U S loans.
Brett: Additionally, during the quarter, our overhead expense savings enabled us to reinvest towards best in class service levels for our land customers.
Speaker Change: With that, I'll turn it over to Brett, who will discuss our strong results in our financial guidance.
Brett: Thank you, Dale, and good morning to everyone. Let me start by saying how proud I am of the entire BrightView team as we continue to work together during what is on pace to be a breakout year as we execute on our strategy of driving profitable growth.
Brett: The majority of this reinvestment was in the form of frontline labor.
Brett: And was an approximate $10 million increase year over year in Q3.
Brett: The development segment adjusted EBITDA for the third quarter was $31 million, an increase of 29% compared to the prior year.
Brett: This is evidenced in our strong results for both the quarter and year-to-date, which both reflect record EBITDA performances for the company, alongside margin expansion across all segments.
Brett: Adjusted EBITDA margin expanded a notable 270 basis points.
Brett: This is a result of the high quality backlog conversion, while further reducing our costs ultimately, resulting in accretive growth.
Brett: We are truly transforming this business and setting the stage for long-term profitable growth and shareholder value creation.
Brett: In our corporate segment corporate expenses for the third quarter saw a substantial decrease year over year as we made further progress with our one bright view strategy.
Brett: Total revenue during the quarter of $739 million was down 3.6% year-over-year. However, when excluding the impact of exiting the U.S. lawns and aggregator business, revenue was essentially flat.
Brett: We continue to evaluate opportunities for centralization, which we expect to lead to further efficiencies in totality for breakthrough.
Brett: While land revenue is impacted by the exit of these two businesses, we remain very encouraged by the underlying health of the market and recent trends within our business, notably our improved employee turnover and customer retention metrics as Dale previously mentioned.
Speaker Change: Let's now turn to slide 11 to review, our free cash flow capital expenditures and leverage.
Brett: Our year to date free cash flow generation was robust at $120 million compared.
Brett: Compared to $38 million in the prior year.
Dale: The development business increased 5.7% as a result of continued conversion of our backlog and high quality projects.
Brett: It is important to note we are committed to reinvesting in our fleet and our year over year Capex reduction is largely timing related.
Dale: This presents significant opportunity with our revamped go-to-market strategy to convert these projects into future recurring maintenance contracts.
Brett: Year to date net Capex was $32 million, however, timing can impact us as we saw in the third quarter.
Brett: For example, we received approximately $21 million of vehicle deliveries in Q3, but will pay for them in the fourth quarter.
Brett: For the year, we still expect net capex intensity to be approximately three 5% of revenue or around $100 million.
Dale: Turning now to profitability and the details on slide 10.
Brett: Net leverage at the end of the quarter came in at two four times compared to four eight times in the prior year period.
Brett: This lower leverage reflects a significant reduction in our debt improve liquidity.
Brett: Liquidity and improve profitability in the business.
Brett: Our leverage profile allows for financial flexibility for ongoing execution of our profitable growth strategy and further investment in the business.
Dale: Adjusted EBITDA margins in the maintenance segment improved by 40 basis points as we continue to operate more efficiently.
Brett: Let's now turn to slide 12.
Brett: Over the last year, we have fundamentally changed the overall debt and liquidity structure of the business.
Brett: Let me quickly remind you of what we have done to reduce leverage and create significant financial flexibility.
Dale: Additionally, during the quarter, our overhead expense savings enabled us to reinvest towards best-in-class service levels for our land customers.
Brett: We amended our term loan.
Brett: And we extended and Upsized, our AR securitization facility, resulting.
Brett: The resulting in reduced interest rates and no near term debt maturities.
Brett: We reduced our debt by $549 million or roughly by 40%.
Dale: In the development segment, adjusted EBITDA for the third quarter was $31 million, an increase of 29% compared to the prior year.
Brett: We reduced annual interest expense by approximately $45 million.
Brett: And we increased total liquidity by over 60% to approximately $535 million.
Dale: This is the result of a high-quality backlog conversion while further reducing our costs, ultimately resulting in accretive growth.
Brett: These steps we have taken over the last year demonstrates that we will execute every opportunity to fortify our balance sheet drive shareholder value and be good stewards of capital.
Dale: In our corporate segment, corporate expenses for the third quarter saw a substantial decrease year-over-year as we made further progress with our OneBrightView strategy.
Brett: Before moving to our guidance I want to take a minute on slide 13 to reflect on a year to date progress as we transform this business.
Dale: We continue to evaluate opportunities for centralization, which we expect to lead to further efficiencies in totality for BrightView.
Brett: Nine months into the fiscal year, we are extremely pleased with our results and remain on track to deliver on our commitments. Despite the impact of snow at the low end of our guide and exiting two non core businesses.
Dale: Let's now turn to slide 11 to review our free cash flow, capital expenditures, and leverage.
Dale: Our year-to-date free cash flow generation was a robust $120 million compared to $38 million in the prior year.
Brett: Fiscal 'twenty four is on pace to be a record year as we have revamped our operating structure and changed our compensation plans to encourage collaboration and drive profitable growth and as a result, we are seeing margins expand across all segments.
Dale: Year-to-date net CapEx was $32 million. However, timing can impact this as we saw in the third quarter.
Brett: Moving to slide 14.
Brett: Where we outlined our revenue EBITDA and free cash flow guidance.
Brett: While we narrowed our ranges it's important to note that we continue to hold the midpoint of our guidance for revenue and EBITDA.
Dale: For the year, we still expect net capex intensity to be approximately 3.5% of revenue or around $100 million.
Brett: Additionally, we are raising our free cash flow guidance for the second time this year.
Brett: As we close in on the end of our fiscal year. We are tightening the revenue ranges to 275 to $2 $79 billion and maintaining our midpoint of $2 77 billion.
Dale: Net leverage at the end of the quarter came in at 2.4 times compared to 4.8 times in the prior year period.
Dale: This lower leverage reflects a significant reduction in our debt, improved liquidity, and improved profitability in the business.
Brett: The updated revenue guidance assumes the following for land, we have not changed our guidance and are holding to the approximately 6% down which includes the roughly $70 million impact from exiting our non core businesses.
Dale: Our leveraged profile allows for financial flexibility for ongoing execution of our profitable growth strategy and further investment in the business.
Brett: For development, we are increasing our assumption of 2% to 5% growth for the year to the high end of 5% as the conversion of our robust backlog continues.
Dale: Over the last year, we have fundamentally changed the overall debt and liquidity structure of the business.
Brett: Moving to adjusted EBITDA, we are tightening this range as well to $320 million to $330 million.
Dale: We amended our term loan.
Brett: In maintaining our midpoint of $325 million with margin expansion expected across all segments.
Brett: For free cash flow, we expect to continuation of healthy cash flow generation driven by improved operating performance.
Dale: We reduced annual interest expense by approximately 45 million dollars and we increased total liquidity by over 60% to approximately 535 million dollars.
Brett: Our outlook reflects our continued momentum on our broad based initiatives to reinvest in the business and drive profitable growth.
Brett: Altogether, we now expect to generate free cash flow of $65 million to $80 million, which marked the second consecutive increase to the guidance range.
Dale: These steps we have taken over the last year demonstrate that we will execute every opportunity to fortify our balance sheet, drive shareholder value, and be good stewards of capital.
Brett: Before I hand, the call back over to Dale I want to reiterate my excitement around the investments we are making and the impact. It has had on the momentum in the business and our culture.
Dale: Before moving to our guidance, I want to take a minute on slide 13 to reflect on our year-to-date progress as we transform this business.
Dale: By taking better care of our employees.
Dale: Nine months into the fiscal year, we are extremely pleased with our results and remain on track to deliver on our commitments despite the impact of snow at the low end of our guide and exiting two non-core businesses.
Dale: Who in turn are taking better care of our customers I feel more optimistic than ever regarding the future of our company.
Brett: With that let me now turn the call back to Dale to wrap up on slide 15.
Dale: Thanks, Brett before we open the call for questions I want to provide a brief recap on our performance and key takeaways from our remarks today first we generated record Q3 and year to date EBITDA with margin improvements across all segments.
Dale: Fiscal 24 is on pace to be a record year as we have revamped our operating structure and changed our compensation plans to encourage collaboration and drive profitable growth and as a result we are seeing margins expand across all segments.
Dale: Our employee investments are positively impacting turnover and engagement.
Dale: Moving to slide 14.
Dale: where we outline our revenue, EBITDA, and free cash flow guidance.
Brett: Best in class customer service levels, coupled with increased employee engagement are leading to momentum in our customer retention.
Dale: While we narrowed our ranges, it's important to note that we continue to hold the midpoint of our guidance for revenue and EBITDA.
Brett: The new one bright view alignment creates significant opportunities to cross sell development in the maintenance.
Dale: As we close in on the end of our fiscal year, we are tightening the revenue ranges to $2.75 to $2.79 billion and maintaining our midpoint of $2.77 billion.
Dale: And technology enhancements are enabling our branches to efficiently identify targeted growth opportunities and to capture market share.
Dale: As you can hear we continue to make great strides and achieve milestones on a wide range of initiatives and remain highly confident we will continue to deliver on our objectives that will translate into our impressive long term growth trajectory and create value.
Dale: The updated revenue guidance assumes the following. For land, we have not changed our guidance and are holding to the approximately 6% down, which includes the roughly $70 million impact from exiting our non-core businesses.
Dale: For our stakeholders.
Speaker Change: We will now open the call for questions.
Speaker Change: Thank you very much.
Speaker Change: Like to ask a question. Please press star followed by one on your telephone keypad now when prepping to ask a question. Please ensure your devices on muted locally if you change your mind. Please press star followed by Kim.
Dale: Moving to adjusted EBITDA, we are tightening this range as well to $320-$330 million and maintaining our midpoint of $325 million with margin expansion expected across all segments.
Speaker Change: Kim.
Speaker Change: Our first question from Michael Rooney with William Blair. Your line is now open. Please go ahead.
Michael Rooney: Good morning.
Tim: Good morning, Tim.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: So seeing that improvements in.
Speaker Change: Customer retention rates is very promising.
Dale: Altogether, we now expect to generate free cash flow of $65 to $80 million, which marks a second consecutive increase to the guidance range.
Speaker Change: I guess I'm.
Speaker Change: Hoping you could give us a little more history here on customer retention rates within that maintenance business could you talk about.
Speaker Change: Before I hand the call back over to Dale, I want to reiterate my excitement around the investments we are making and the impact it has had on the momentum in the business and our culture.
Speaker Change: We're bright view was.
Speaker Change: Several years ago back when the company went public.
Speaker Change: Today, and where you'd ideally like to be what do you think a scaled.
Dale: who in turn are taking better care of our customers.
Speaker Change: Commercial landscaping business should be generating optimally.
Speaker Change: Okay.
Speaker Change: With that, let me now turn the call back to Dale to wrap up on slide 15.
Speaker Change: Great.
Speaker Change: I'll start with that this is Dale look.
Dale: Thanks, Brett. Before we open the call for questions, I want to provide a brief recap on our performance and key takeaways from our remarks today. First, we generated record Q3 and year-to-date EBITDA with margin improvements across all segments.
Dale: Since day, one I said the number one most important metric in this business is taken care of the customers, we have today and retaining them. So we can grow and grow profitably in the long term. Let me give you let me give everybody a high level of the history of this statistic without giving specific decimal place.
Dale: Our employee investments are positively impacting turnover and engagement.
Speaker Change: But this is why when I give you the history Youll Youll realize why we're still excited.
Speaker Change: If you think back to when the company went public.
Speaker Change: The company was if you look at the original S. One it will give you the number it was 85% was our retention when the company went public we saw during 2019 and 2000 22021, a slight deterioration to that original <unk>.
Dale: The new One BrightView alignment creates significant opportunities to cross-cell development into maintenance.
Dale: And technology enhancements are enabling our branches to efficiently identify targeted growth opportunities and to capture market share.
Speaker Change: Number that we went live when we went public.
Speaker Change: In 2022, we saw much greater deterioration as we maybe hit some headwinds with some of the M&A work, we had done and didn't integrate properly and at that point that it hit almost the bottom 2023 in my mind, it's deteriorated a little more from 2022 to hit.
Dale: As you can hear,
Dale: We continue to make great strides and achieve milestones on a wide range of initiatives.
Dale: and remain highly confident we will continue to deliver on our objectives that will translate into a impressive long-term growth trajectory and create value for our stakeholders.
Speaker Change: A bottom level that was over 5% below.
Speaker Change: We will now open the call for questions.
Speaker Change: The original go live of 85%.
Speaker Change: Now what we've shared today was in my first nine months year to date through Q3 for US we've seen a 150 basis point improvement.
Speaker Change: Thank you very much. If you would like to ask a question, please press star followed by 1 on your telephone keypad now. When prepping to ask your question, please ensure your device is unmuted locally. If you change your mind, please press star followed by 2.
Speaker Change: And this is what the most exciting if you think about the history I just said to you.
Speaker Change: 2024 will be the first year since the company went public.
Speaker Change: We've got our first question.
Speaker Change: We are going to see an increase year over year.
Speaker Change: Our retention.
Speaker Change: This is what makes us feel exciting Tim because this is our path for future growth. This is the metric that really matters and I have been preaching to my branches. There is nothing more important than putting the customer at the center of everything we do and I can I can over Brent can maybe add to this if you'd like to enter.
Speaker Change: From Tim Mulrooney with William Blair. Tim, your line is now open. Please go ahead.
Tim Mulrooney: Dale, Brett, good morning.
Dale: Good morning, Tim.
Brent: About some of the metrics that <unk> seen and we shared that investments are Brent why don't you add Tim its a great question I think from this they'll step foot in as CEO. He mentioned employees and customers our main focus and need to be our main focus is to get this business going in the right direction long term kind of.
Speaker Change: So seeing that improvement in the customer retention rates is very promising.
Tim Mulrooney: You know, I guess I'm hoping you could give us a little more history here on customer retention rates within that maintenance business. Could you talk about...
Tim: Be more excited about the momentum in the business I mean, we are making the right long term business decisions by focusing on our employees and taking care of our customers.
Speaker Change: Where BrightView was, I guess, several years ago, back when the company went public, where you're at today, and where you'd ideally like to be.
Speaker Change: If you look at Q3, and we said the number in our script.
Speaker Change: What do you think a scaled commercial landscaping business should be generating optimally?
Speaker Change: We had the.
Speaker Change: We had the substantial savings in our SG&A line of $16 million year over year. We also saw development produced high quality projects, both on the job level margins, increasing as well as the overhead efficiencies theyre getting both of those things allowed us the flexibility to go and reinvest back into <unk>.
Speaker Change: Great. Tim, I'll start with that. This is Dale. Look, since day one I said the number one most important metric in this business is taking care of the customers we have today and retaining them so we can grow and grow profitably in the long term.
Speaker Change: Your line labor and back into customer service levels that reinvestment was around $10 million in Q3, and even with that reinvestment, we still posted a record quarter. So we are we were looking at the right long term business decisions to manage this business. We're still focused on producing profits were still focused on growing this business.
Speaker Change: Let me give you, let me give everybody a high level of the history of this.
Speaker Change: The company was, if you look at the original S-1, it will give you the number. It was 85% was our retention when the company went public.
Dow: But we are focused on the right long term decisions and that reinvestment. We're starting we're starting to see those green shoots and customer retention as Dow mentioned and we feel confident that this year will be the first year since going public that we'll see that customer retention metric improve for Tim Let me, let me take the second part of your question as you said.
Tim: What do I think is optimal.
Tim: Don't think here's what I can tell you I've been out to branches that are operating at customer retention in the 90% level those branches grow and they grow profitably. They have engaged employees. They have happy customers and the whole team is understanding the importance of that customer.
Speaker Change: And at that point...
Tim Mulrooney: It hit almost the bottom. 2023.
Speaker Change: In my mind, it deteriorated a little more from 2022 to hit a bottom level that was over 5% below the original go-live of 85%.
Speaker Change: I don't think that the go public level of 85% should be our target. We have some work to do to get back to that level and every 1% improvement creates an opportunity of around $15 million of maintenance land revenue for us. That's why we're so excited I see it's going well.
Speaker Change: Now, what we shared today was, in my first nine months, year-to-date, through Q3 for us, we've seen 150 basis point improvements. And this is what's the most exciting. If you think about the history I just said to you.
Speaker Change: Past that 85% level that we went public with with back in 2018.
Speaker Change: So I don't want to give a number for where we're going to end because my branches no like safety with no no accidents acceptable I don't want to lose any customers. My goal is to get 100% customer retention, whether thats unrealistic.
Speaker Change: This is what makes us so exciting, Tim, because this is our path for future growth.
Tim: Really like to go for that goal one day.
Tim Mulrooney: This is the metric that really matters, and I've been preaching to my branches, there's nothing more important than putting the customer at the center of everything we do.
Tim: That's.
Speaker Change: That's all really great color guys. Thank you for all of that just has a really quick follow ups.
Speaker Change: You mentioned.
Speaker Change: 100 basis point improvement equates to $15 million in extra revenue, how should we think about the margins associated with that.
Tim: Yeah.
Speaker Change: With that extra revenue I mean is that a different margin profile than what than new business.
Tim Mulrooney: And customers are our main focus and need to be our main focus to get this business going in the right direction long-term. I couldn't be more excited about the momentum in the business. I mean, we are making the right long-term business decisions by focusing on our employees and taking care of our customers.
Tim: Okay, Yeah, obviously, the cost to acquire a customer you already have as much has been getting a new one so absolutely Tim when we grow this business in 2025, and our land and we push that through our existing infrastructure organically you will see margins.
Speaker Change: And if you look at Q3, we said the number in our script.
Speaker Change: You know, we had the, you know, we had the substantial savings in our SG&A line of $16 million year over year. We also saw development produce high quality projects, both on the job level margins increasing as well as the overhead efficiencies they're getting.
Tim: Improved because the flow through on that incremental business, leveraging our existing overhead will be greater than our existing margins. So absolutely I mean I would be very disappointed. If this didn't help continue the progress we've seen this year on margin expansion as we went through 'twenty five 'twenty six.
Tim Mulrooney: Both those things allowed us the flexibility to go and reinvest.
Tim Mulrooney: back into our front line labor and back into customer service levels. That reinvestment was around $10 million in Q3, and even with that reinvestment, we still posted a record quarter. So we were looking at the right long-term business decisions to manage this business.
Speaker Change: Future years.
Speaker Change: So it's a great question I think.
Speaker Change: The midpoint of our guide right now is suggesting over 100 basis points improvement from last year's results and I see that continuing and this will be a key lever that will allow us to continue to expand those margins.
Tim Mulrooney: We're still focused on producing profits. We're still focused on growing this business.
Speaker Change: That's what I was looking for thank you guys. Thanks Brett.
Speaker Change: Damn extent.
Speaker Change: Yeah.
Speaker Change: Thank you very much. Our next question is from Bob <unk> with <unk>.
Speaker Change: D J as Securities. Your line is now open. Please go ahead.
Speaker Change: I don't think, here's what I can tell you, I've been out to branches that are operating at customer retention in the 90 plus percent level. Those branches grow and they grow profitably. They have engaged employees, they have happy customers, and the whole team is understanding the importance of that customer.
Bob: Thank you good morning, and congratulations on the strong retention improvement numbers in such a short period of time.
Bob: Thanks, Bob Thanks, Bob.
Speaker Change: Absolutely yeah. So I wanted to start you have them. Obviously, you don't want it seems is profitable growth and driving that and looking at slide seven you talk about something I wanted to dig into a little bit you know one of the things. We've talked about is the big opportunity of converting development service work into recurring reoccurring maintenance work. So.
Speaker Change: I don't think that the goal public level of 85% should be our target. We have some work to do to get back to that level, and every 1% improvement creates an opportunity of around $15 million of maintenance land revenue for us.
Speaker Change: What are you doing differently now what historically the breakthrough do in the past that was either unsuccessful or was it not even in an effort to do that and how do you see this driving profitable growth going forward, what's the opportunity ahead of us.
Brett: Great question, Bob So I'll start off at a high level operationally and then ill, let Brett talk through some of the math and how it can help us long term.
Brett: So firstly, we've talked about on our last call, our new operating structure breaking down silos getting people working together.
Speaker Change: That's all really great color guys. Thank you for all of that. Just as a really quick follow-up.
Brett: That was that's been a huge cultural change for this business to have eight geographic leaders that manage both our development groups and our maintenance group.
Brett: We brought those teams together that actually are now communicating regularly on a daily basis in the past. These groups were almost motivated cannot be cooperating with each other and not get the full leverage of the ongoing maintenance our development business is growing and growing as you saw in the quarter.
Tim Mulrooney: Yeah, obviously, the cost to acquire a customer you already have is much less than getting a new one. So absolutely. Tim, if when we grow this business in 2025 in our land, and we push that through our existing infrastructure organically,
Bob: And expected to grow this year at the high end of the range. We gave you last quarter. It is a very very quality group and the work. We're getting continues to come out of the ground. The opportunity like you said is to take that work and transitioning to our maintenance group, it's our ability to leverage the size and scale.
Tim Mulrooney: You will see margins improve because the flow through on that incremental business leveraging our existing overhead
Bob: <unk> bright view to further distance that growth every year by converting that and let me, let Brett comment on the math behind that it probably makes sense for you why we're so excited about this new collaboration that we're feeling under our new org structure.
Speaker Change: will be greater than our existing margins.
Tim Mulrooney: So, absolutely. I mean, I would be very disappointed if this didn't help continue the progress we've seen this year on margin expansion as we went through 2025, 2026, and future years.
Tim Mulrooney: So, it's a great question. I think the midpoint of our guide right now is suggesting over 100 basis points improvement from last year's results, and I see that continuing, and this will be a key lever that will allow us to continue to expand those margins.
Brett: Yeah, Bob I'll just go through the math again look I think as we showed an example on the deck of a.
Brett: Of a development conversion again, we're at that worth of early very early stages of this conversion opportunity as you think about the way the business was siloed in the past and now our new operating structure at a leadership level and our new go to market.
Speaker Change: That's what I was looking for. Thank you, Dale. Thanks, Brett.
Brett: Strategy as we approach customers as one holistic bright view creates such opportunity for development that converted to maintenance. We showed we showed a slide in the deck of a $4 million development opportunity that we just recently converted into a $400000 maintenance contracts.
Tim Mulrooney: Thanks, Tim. Thanks, Tim.
Speaker Change: Thank you very much. Our next question is from Bob Labick with CJS Securities. Bob, your line is now open. Please go ahead.
Brett: Really what we're talking about is is seeing more of those opportunities convert.
Bob: In the past, we converted at less than 10% of projects from development into maintenance contract less than 10% and the size of the prize there Bob.
Bob Labick: Absolutely, yeah. So I wanted to start, you have, obviously, you know, one of the themes is profitable growth and driving that. And looking at slide seven, you talk about something I want to dig into a little bit. You know, one of the things we've talked about is the big opportunity of converting development service work.
Bob: Just to remind everyone on the call our development business is guided to around $800 million of revenue. This year. It's about seven cents on every development dollars converts into a maintenance contract because of the development projects are larger onetime in nature. The reoccurring maintenance is is really seven cents on the dollar.
Speaker Change: into recurring or reoccurring maintenance work.
Speaker Change: So, what are you doing differently now? What historically did BrightView do in the past that was either unsuccessful or was it not even an effort to do that? And how do you see this driving profitable growth going forward? What's the opportunity ahead of us?
Brett: So general rule of thumb that $800 million of revenue will kick off something like $55 million of maintenance contracts in the next 12 months, we've converted less than 10% of that in the past call. It less than 5 million. There is a $60 million untapped opportunity that the way we are structured in the past.
Brett: Great question, Bob. So I'll start off at a high level, operationally, and then I'll let Brett talk through some of the math and how it can help us long term.
Bob: It wasn't really allowing for that collaboration to convert those projects that maintenance, but now the labor structure in the future again, we're seeing some some early wins like the one we showed in our slide deck are really taking advantage of that $50 million to surprise on those conversions and that as we coupled with the customer retention, we talked about earlier.
Brett: So firstly, we talked about on our last call, our new operating structure, breaking down silos, getting people working together.
Brett: That's been a huge cultural change for this business, to have eight geographic leaders that manage both our development groups and our maintenance groups.
Speaker Change: <unk>, that's where we feel really confident that as we get into 'twenty five and beyond we're going to see that land organic growth beginning to pick up.
Brett: In the past, these groups were almost motivated to not be cooperating with each other and not get the full leverage of the ongoing maintenance. Our development business is growing and growing as you saw in the quarter and expected to grow this year at the high end of the range we gave you last quarter.
Speaker Change: Okay, Great. Yeah, that's super helpful and is obviously can be very powerful and exciting.
Speaker Change: So just one.
Speaker Change: One other quick question, if I may in terms of one of the things you highlighted as well as reinvestment in the fleet and the trucks and the mowers and your employees.
Speaker Change: Can you give us a sense of where we are in that and when do you start seeing benefits I believe the benefits are going to be an equipment rental and maintenance costs dropping can you can you maybe size. It and is this are you now.
Speaker Change: The opportunity, like you said, is to take that work.
Speaker Change: Five year program 10 year program.
Speaker Change: Might we even start seeing some benefits next year, how does that roll into the P&L.
Speaker Change: So there is theres two ways to look at it first I would say we've started that process. We are getting we've we've received a lot of new mowers. This year to replace some of our older mowers and we will continue on the mowers and the trucks, we're starting to upgrade at a regular pace. In fact, we saw a lot of fleet.
Speaker Change: <unk> land right at the end of Q2 or Q3 and as we head into Q4, we still expect our guide that we originally started with about three 5% of revenue to be accurate.
Brett: The way the business was siloed in the past and now are.
Brett: new operating structure at a leadership level and our new go-to-market strategy as we approach customers as one holistic right view. I mean, it creates such opportunity for development to convert into maintenance. We showed a slide in the deck of a $4 million development opportunity that we just recently converted into a $400,000 maintenance contract. That's really what we're talking about is seeing more of those opportunities convert.
Speaker Change: The reduced maintenance.
Speaker Change: Future residual values are great. Even the fleet we've received today, Bob the bigger impact is on the employee the employee having a mower that they can depend on that's new that they can take care of customers with the employee getting a new truck that struck as their office that truck is important for them based.
Speaker Change: Spend their whole day in there.
Bob: We started the whole conversation with today.
Speaker Change: I said from day, one we have to become the employer of choice we have to make sure we take better care of the people that touch our customers on the frontline.
Brett: And the size of the prize there, Bob, just to remind, I guess, everyone on the call, our development business is guided to around $800 million of revenue this year.
Speaker Change: I don't want anybody to Miss the metric we share.
Speaker Change: In the last since December we've had our overall turnover of our frontline crews come down 900 basis.
Speaker Change: That's a result of not only the boost program like I said, but getting these new trucks getting new moa.
Speaker Change: That's what's so exciting the investments we are making great theyre going to help us on the P&L long term.
Speaker Change: And over the next three years, let's call. It we'll go through that transition, but it's bigger than that it is helping us in the most important metric taking better care of our customers. So they can taking better care of our employees. So that they can service their customers better, but Brad if you want to add any comment no I think right on in Alaska last earnings call we mentioned.
Speaker Change: wasn't really allowing for that collaboration to convert those projects to maintenance. But now, the way we're structured in the future, again, we're seeing some early wins, like the one we showed in our slide deck, of really taking advantage of that $50 million size of the prize on those conversions.
Speaker Change: Bob We just brought on a new leader for our fleet Department to really enact this strategy to make sure our fleet with our trucks and mowers is it truly a strategy of how we acquire maintain and then dispose of timely the fleet. We have so we're going through that process now of of upgrading the age of our fleet and <unk>. We also.
Speaker Change: And that, as we couple with the customer retention we talked about earlier, that's where we feel really confident that, you know, as we get into 25 and beyond, we're going to see that land organic growth beginning to pick up.
Speaker Change: Brought on a new leader of procurement that is.
Speaker Change: And then, so just one other quick question if I may, in terms of, one of the things you highlighted as well is reinvestment in the fleet, in the trucks, in the mowers, and in your employees.
Speaker Change: That is going through how to procure those pieces of equipment better how to procure materials better. So as I think when you think about the long term margin of the business. Yes, it's customer retention focus those customers are much less expensive to acquire than acquiring new customers. It's been acting our fleet strategy and buying maintained.
Speaker Change: Can you give us a sense of where we are in that and when do you start seeing benefits? I believe the benefits are going to be in equipment rental and maintenance costs dropping. Can you maybe size it and is this a, you know, five-year program, ten-year program, or might we even start seeing some benefits next year? How does that, like, roll into the P&L?
Speaker Change: <unk> and disposing of them in a timely manner, we're not keeping fleet now 10, plus years, where we're spending a significant amount of maintenance and then it breaks down and we have a rent something new that's all going to go away, it's going to take US a few years ago through that whole strategy, but that's all going to be incremental margin improvement as we move forward.
Speaker Change: We are getting we've we've received a lot of new mowers this year to replace some of our
Speaker Change: Super Thank you so much.
Speaker Change: Thanks, Bob Thank you Bob.
Speaker Change: Thank you very much. Our next question is from Andy Wittmann.
Speaker Change: of Q2 or Q3, and as we head into Q4, we still expect our guide that we originally started with about 3.5% of revenue to be accurate.
Andy Wittmann: With Baird.
Speaker Change: Andy Your line is now open. Please go ahead.
Andy Wittmann: Thanks, Good morning, and thank you for taking my questions I wanted to build on the.
Speaker Change: The capital question from from the last person here.
Andy Wittmann: Your free cash flow guide here is 65 to 80 million up and that's great. But you guys are at by my calculations and $120 million year to date. So there is a.
Andy Wittmann: Big cash drag in <unk> and Brett So if I may.
Speaker Change: I'd give you a chance to talk about why.
Speaker Change: Cash burn in the fourth quarter.
Speaker Change: Is that Capex is typically heavy.
Speaker Change: Or is there a working capital or what's going on there.
Speaker Change: Yeah, I'd say two things Andy one our balance sheet is so well positioned right now to invest back in the business. We have leveraged at all time lows. We have liquidity at all time highs that are at all time lows since going public. So the balance sheet is so well positioned to reinvest back into the business as you think about where we are to date.
Speaker Change: Third $20 million of free cash flow, that's 31 $32 million of Capex, we are still guiding to spend right around $100 million of Capex a lot of this capital if we could get it quicker we would but a lot of the capital is being coming in mainly in trucks like at the end of June we received a significant amount of trucks about 'twenty one.
Speaker Change: The investments we are making, great. They're going to help us on the P&L long-term. And over the next three years, let's call it, we'll go through that transition. But it's bigger than that. It's helping us in the most important metrics.
Speaker Change: taking better care of our customers so they can taking better care of our employees so they can service our customers.
Speaker Change: $1 million worth.
Speaker Change: We're going to end up paying for that in the first couple weeks of July when it hits Capex. So right. There. If you just adjust for that number of $120 million of cash flow is more like $100 million of cash flow and that would put us on pace to spend another $50 million or so in Q4 for capital. So we're going to continue to make sure we reinvest.
Speaker Change: And in capital in our fleet and timing could impact that as we get to the end of Q4, but the data. We're looking at that now would still have us on track to spend about $100 million of Capex. So that's about a $70 million drag right now from whats in the P&L and the balance sheet for Q3 versus what's in Q4.
Speaker Change: that is going through how to procure those pieces of equipment better, how to procure materials better. So, as I think, if you think about the long-term margin of the business.
Speaker Change: The biggest item Andy that's going to that's going to drive that down.
Speaker Change: Yes.
Speaker Change: Customer Retention Focus, those customers are much...
Speaker Change: Yeah.
Speaker Change: Okay.
Dale: And then Dale for you I guess since you took the job you've kind of looked at the comp plans of the to any common plans. They weren't working on lots of things you said about the comp plan.
Speaker Change: Mentioned in your prepared remarks as well so.
Speaker Change: Maybe I would have you just.
Speaker Change: Give a little bit more detail on this one what levels and positions were specifically impacted as you change.
Speaker Change: Centers around your company and can you talk about.
Speaker Change: Any changes at a high level, what those included and maybe even more importantly, how they've been received.
Speaker Change: Super, thank you so much.
Speaker Change: It's helped or hindered the employee retention on those positions that were affected by the comp plan change.
Speaker Change: Thank you very much. Our next question is from Andy Wittmann with Baird. Andy, your line is now open. Please go ahead.
Speaker Change: Yeah, Greg Good question, Andy I would say you brought it up we had a lot of people being compensated differently across the company in fact, when I joined we had over 30 different discretionary compensation programs to reward our people for the way that they perform.
Speaker Change: That obviously didn't create everybody rowing in the same direction. So we redid. It we found a way to come up with a simple plan for our branch that everybody at the branch shares and the common profit sharing pool, when they grow and they grow profitably.
Speaker Change: What's key we don't use budget, we use year overview year profitable growth and what can we hit the happiest about that Brent talked about the $10 million increase we saw making investments in our frontline people to make sure we can service customers better.
Speaker Change: Yeah, I'd say two things, Andy. One, our balance sheet is so well-positioned right now to invest back in the business. We have leverage at all-time lows. We have liquidity at all-time highs. Our debt are at all-time lows since going public. So the balance sheet is so well-positioned to reinvest back in the business.
Speaker Change: That creates a headwind for all of those branches that make that decision that taking care of our customers. So important because they know the impact that will have on their program next year and the year after that so.
Speaker Change: It's all about getting everybody on one program in fact, we have two programs as a company now we basically have our branch and market Graham and then we have a corporate program and the only difference with corporate is like many public companies, we use in key metrics such as diversity safety.
Speaker Change: Like, at the end of June , we received a significant amount of trucks, about $21 million worth, but we're going to end up paying for that in the first couple weeks of July when it hits CapEx.
Speaker Change: That we put into our overall program, but our programs, 80% based on that EBITDA and EBITDA growth.
Speaker Change: All about getting everybody aligned its all about taking every person at the branch A&D and make sure. They are all working at the common goal of driving profitable growth long term.
Speaker Change: in Capital and our fleet, and...
Speaker Change: It's been received very well.
Speaker Change: In the past.
Speaker Change: Bonus dollars were district distributed by who could budget at the lowest level and even if the budget does shrink and they shrunk it could be rewarded today. The profit sharing program is going to reward the people there.
Speaker Change: So the bottom line and Thats, what we wanted to so it's been very well received and it's motivating people to know that if they run their business and run it responsibly take care of their customers and grow the business, they're going to be rewarded for it but great question.
Andy: You mentioned in your prepared remarks as well. So, um, maybe I would have you just
Speaker Change: I appreciate that answer I'm.
Speaker Change: Give a little bit more detail on this one. What levels and positions were specifically impacted as you changed incentives around your company? And can you talk about any changes at a high level, what those included?
Speaker Change: Im going to leave it there for today have a good day.
Danny: Okay. Thank you Danny.
Speaker Change: Thank you very much. Our next question is from Greg Palm with Craig Hallum Capital Group.
Speaker Change: and maybe even more importantly how they've been received and if it's helped or hindered the employee retention on those positions that were affected by the comp plan change.
Speaker Change: Greg Your line is now open. Please go ahead.
Greg Palm: Yeah. Thanks, good morning, everybody and congrats on the continued progress here.
Andy Whitman: Good question, Andy. I would say, you brought it up, we had a lot of people being compensated differently across the company. In fact, when I joined, we had over 30 different discretionary compensation programs to reward our people for the way that they performed.
Greg Palm: I know you alluded to the return to growth in that core maintenance segment, but can we dig into that a little bit more.
Speaker Change: Clearly lots of levers to cross selling potential retention rates. It seems like there's a lot of positive indicators at this point, it's still pretty early so thanks.
Speaker Change: Thanks for the question I mean do some of these initial metrics make you more confident in that ultimate reacceleration kind of the longer term potential would love to get maybe just a little bit more color on how youre thinking about the long term.
Speaker Change: That obviously didn't create everybody rowing in the same direction.
Speaker Change: Yes.
Speaker Change: Look I think let me jump in Greg Real quick I think the way bread and it is part of the opening today says a lot Brett clean and breath or believer now with the commitment that we made to reinvest in our employees because we're not managing the business for each quarter, we had a record quarter we had an.
Speaker Change: That's what's key, we don't use budget, we use year over year of profitable growth. And what makes me the happiest about that, Brett talked about the $10 million increase we saw, making investments in our frontline people to make sure we can service customers better.
Speaker Change: Unbelievable Q3 for the business and we are showing progress in so many ways.
Brett: That creates a headwind for all those branches that make that decision that taking care of our customers is so important because they know the impact that will have on their program next year and the year after that.
Speaker Change: But we.
Speaker Change: We need to grow this business not just development not just cut the overhead we need to grow our core land business that is our next lesser so.
Greg: Talk about how he sees it going out through 'twenty, five, but youre right. Greg. This is our next level and we are positioned today that we are in a better position going into 'twenty five that any other year, we were going into so Brett I'll, let you comment.
Speaker Change: We basically have our branch.
Brett: and Market Program.
Brett: I fully agree look I think if you look at slide nine of the presentation, we're still stepping over some of our aggregator business exit U S. Lawns divestiture, that's going to be about $25 million headwind in Q4, that's going to be about $10 million headwind to that land number in Q1, ending Q tiers or call it $20 million in the first half of the year, but.
Greg: Well, Greg I can't tell you if it's going to be.
Speaker Change: March of next year April of next year June of next year July of next year, but we are on such such momentum behind that land growth metric.
Speaker Change: Bonus dollars were distributed by who could budget at the lowest level, and even if they budgeted to shrink and they shrunk, they could be rewarded.
Speaker Change: And you think about what we're doing from a customer retention standpoint, every 100 basis points or so customer retentions were $15 million annualized of contract and ancillary growth those development conversions at $50 million of untapped opportunity I mean, thats significant growth even if we don't go all the way from zero to 100 overnight.
Speaker Change: If we start to incrementally kicked that up from less than 10% to 25% to 50%. This new found the opportunity to this company that we've never executed on in the past. So I think as Dow steadfast we are doing such a good job expanding margins. This year, which is really coming from restructuring the company and cost controls in the business and our development business can.
Danny: Thank you, Danny.
Speaker Change: Thank you very much. Our next question is from Greg Palm with Craig Halem Capital Group. Greg, your line is now open. Please go ahead.
Speaker Change: <unk> to produce as you think about next year you get into the back half for the exit speed of next year, it's going to be that land organic growth coupled with the development growth that we're seeing coupled with a streamlined operating structure, that's really going to be where this company takes off but yes, we feel we feel more confident than ever today on that long term.
Greg Palm: Clearly lots of levers, the cross-selling potential, retention rates, it just seems like there's a lot of positive indicators at this point. It's still pretty early, so...
Speaker Change: <unk> organic land growth as you get into the back half of next year.
Speaker Change: Okay. Good.
Speaker Change: And then.
Speaker Change: I mean, thanks for the question. I mean, do some of these initial metrics make you more confident in that ultimate re-acceleration? You know, kind of the longer term potential would love to get, you know, maybe just a little bit more color on how you're thinking about the long term.
Speaker Change: On the.
Speaker Change: Frontline employee retention metric I mean that really stood out and it sounds like and I'm sure. The primary reason is some of the investments you've made around the fleet and the boots. That's what it sounds like I guess, how do you continue to improve this metric going forward, even after lapping some of that.
Brett: Look, I think, let me jump in, Greg, real quick.
Speaker Change: Part of the opening today.
Speaker Change: Big initial investments that have maybe caused that metric to come down to this level.
Greg Palm: Look Greg.
Brett: Starts I'll start on particular to Brett but.
Brett: It starts with recognizing how important those people are they have to understand the importance that they service our customers every day at the highest level, that's where it starts with I have traveled around the country.
Speaker Change: Not just cut the overhead.
Brett: Been out to visit most of these branches.
Brett: The way I would start by day every time is doing stretching flex with our frontline crews and when they see that they understand and the culture has transport I remind every person above the crews that leave our yard every day, we work for them.
Brett: We work for them to make sure their jobs should be easier to service our customers at the complete change than where we were 12 18 24 months ago.
Brett: That's probably the quickest way I can tell you, what's causing that turnover reduction this culture.
Brett: That is the number one where but Brett.
Speaker Change: I would just add that we have to continue to be unwavering on executing our strategy and we have been through the first nine months of this year, we recognize the importance of every 90 day cycle and delivering a quarter, but making the right long term business decisions and taking care of those employees, making sure. We continue to get the new trucks and now.
Speaker Change: And if you think about what we're doing from a customer retention standpoint, every 100 basis points or so of customer retention is worth $15 million annualized of contract and ancillary growth.
Brett: Make sure we look at things like the boot program, where we can to get them in the right safety comfortable work shoes like we did back in Q2, we had a continue to be unwavering that Greg because that will lead to long term health of this business. We recognized 90 day cycles, we're a public company, but that even goes through our shift from going from quarterly guidance and.
Brett: <unk> guidance, because we're so focused on the right long term decisions, we have to continue to be unwavering on that and making sure. Those employees come first in turn will take care of our customers are driving that customer satisfaction driving that satisfaction data enables us to get easier price increased conversations more conversions into development into maintenance more references for.
Brett: New customers. So we just got to make sure we continue to be unwavering on that on that strategy executed every chance we get.
Speaker Change: Yeah makes sense I'll leave it there thanks for all the color.
Brett: Thanks, Greg Thank you Greg.
Brett: Thank you very much. Our next question is from Jeffrey Stevenson.
Speaker Change: On the frontline employee retention metric, I mean that really stood out, and it sounds like, and I'm sure the primary reason is some of the investments you've made around the fleet and the boots, that's what it sounds like.
Capital: Capital Jeffrey Your line is now open. Please go ahead.
Jeffrey Stevenson: Yeah. Thanks for taking my questions and congrats on a nice quarter.
Jeffrey Stevenson: So what were the primary driver out of the strong development margin expansion during the quarter and also do you believe the development margin improvement is coming in ahead of schedule. Another pricing protections are included in contracts and lower margin work is beginning to be worked off as well.
Speaker Change: I guess, how do you continue to improve this metric going forward even after lapping some of those big initial investments that have maybe caused that metric to come down to this level?
Speaker Change: Okay. So Jeff let me start the answer with that.
Speaker Change: Again for visiting Us in Chicago, where I was able to spend time with you.
Speaker Change: You saw the work we're doing at the Obama precedent center with me.
Speaker Change: Our development team hands down does some of the most amazing work across North America.
Jeffrey Stevenson: We've got to make sure we continue that as we go forward.
Capital: The level of scale, we have in our development group is second to none.
Brett: So I'll, let Brett comment about the margin of the business, but remember it starts with being the partner of choice for your customers to make sure. They know by choosing bright view, they're choosing the best group to do their work, but Brett I'll, let you comment on the margin, yes, Jeff Great question, but please feel so optimistic about this bill.
Speaker Change: That's probably the quickest way I can tell you what's causing that turnover reduction is culture.
Brett: We've said that now for the last six or seven quarters.
Brett: We're going to say it again this quarter our backlog in development is essentially sold out through this time next year.
Brett: Through the end of Q3 next year, so even if that business doesn't sell any more work between now and then we're essentially sold to this point next year, we continue to see significant opportunities in that business to grow that backlog and grow revenue I'd say from a margin standpoint, I mean, a few years back you take go back to 2019. This business was operating around 14.
Speaker Change: And we have been through the first nine months of this year, we recognize the importance of every 90 day cycle and delivering a quarter, but making the right long term business decisions.
Brett: Percent EBITA margin and then we saw hyperinflation and we had contracted and that price protection in there right, but we fixed all that in 2022 2023, we start to put those price protections in place commodity price protections in place and now with the amount of backlog. We have we have the ability to be a little more selective on the <unk>.
Speaker Change: safety comfortable work shoes like we did back in Q2. We need to continue to be unwavering in that Greg, because that will lead to long-term health of this business.
Speaker Change: We recognize the 90-day cycle. We're a public company. But that even goes through our shift from going from quarterly guidance to annual guidance because we're so focused on the right long-term decisions. We have to continue to be unwavering on that and making sure those employees come first.
Brett: Bids were going after and the pricing we're going after them with that's all leading to margin expansion in the business.
Brett: Specifically in Q3, we saw really two wind in that business, we saw job level margins increased significantly as well as reducing our overhead costs that lead to more efficient operations, which caused more margin expansion in that business. We expect to see very similar results in Q4, that's why we raised our guide in development to the <unk>.
Brett: High end of the revenue guide of 5% and we've increased margins essentially two fold. We were at 70 basis points last go around for the year now we're at a 150 basis points. This go around for margins and that gets us back to really that 12, 5% range of EBITDA Remember 19. This company was this business was up 14%. So I still feel like there's opportunity to go.
Speaker Change: Yeah, thanks for taking my questions and congrats on the nice quarter.
Brett: But being more selective in the projects, we're bidding continue to produce high quality results at that job level, coupled with the restructuring of our overhead to get more efficiency. There. There is still room to grow in that business in 'twenty, five and beyond to get that margin back up to those 2018 to 2019 levels.
Speaker Change: So what were the primary drivers of the strong development margin expansion during the quarter? And also, do you believe that development margin improvement is coming in ahead of schedule now that pricing protections are included in contracts and lower margin work is, you know, beginning to be worked off as well?
Speaker Change: Great that's very helpful.
Speaker Change: And then.
Speaker Change: Okay, so Jeff, let me start the answer with that and thank you again for visiting us in Chicago where I was able to spend time with you.
Speaker Change: Given your improved balance sheet and leverage position deal I was hoping you could provide an update on the likelihood of return into M&A in fiscal 'twenty, five and what types of acquisitions would be attractive for the company moving forward.
Brett: Yeah, Greg We've said, Jeff we paused a little bit this year as we did all of the restructuring within our own company.
Speaker Change: The business is getting very close to being able to support M&A and the people who are changing the culture. In this business my branches, who can find us a good deal.
Speaker Change: So, I'll let...
Speaker Change: Brett.
Brett: Comment about the margin of the business?
Brett: Jeff, great question. Look, we feel so optimistic about this business. We've said it now for the last six or seven quarters. We're going to say it again this quarter. Our backlog and development, you know, is essentially sold out through this time next year.
Speaker Change: Already and they want us to start looking at doing M&A, our process to do M&A is drastically different than it was when the company struggled to integrate the businesses.
Speaker Change: We are asking our operation teams to tell us who they think would be the best fit in their market, who joined Brightcove has joined the bright view has to be a privilege. We shouldnt buy companies that don't add value to us servicing our customer we will focus that on probably greenfield markets.
Speaker Change: you know, or through the end of Q3 next year. So even if that business doesn't sell any more work between now and then we're essentially sold to this point next year, we continue to see significant opportunity.
Speaker Change: We don't operate in today, we will look at ancillary businesses like tree.
Speaker Change: to grow that backlog and grow revenue.
Speaker Change: We could fold into markets, where perhaps we're not doing the work today, we're using partners.
Bret Ervin: We'll look at ways that we can be a better partner to our customers. So I think we're going to return in 2025, absolutely Bret has done an amazing job getting me in a position with our balance sheet that we're ready to go and I'll, let him comment quickly on just what that means because I think it's worth noting where our cash.
Speaker Change: And then we saw hyperinflation, and we had contracts that didn't have price protection in there.
Speaker Change: And now with the amount of backlog we have, we have the ability to be a little bit more selective on the bids we're going after and the pricing we're going after them with. That's all leading to margin expansion in the business.
Brett: The position was last year versus where we sit today, so Brad I'll, let you.
Bret Ervin: It's a great question.
Brad: Right now, we sit with over $535 million in liquidity and all of that liquidity of $115 million of that is cash.
Brad: Last year, we had $10 million of cash, which essentially we make one or one five times payroll so such a better spot from a cash position when we get back into M&A. We will have the cash to fund that M&A and I would even say from a process standpoint, we now have our strategic partners with one rock capital onboard when we do get into M&A.
Speaker Change: We expect to see very similar results in Q4. That's why we've raised our guide in development to the high end of the revenue guide of 5%, and we've increased margins essentially twofold. We were at 70 basis points last go-around for the year. Now we're at 150 basis points this go-around for margins, and that gets us back to really that 12.5% range of EBITDA. Remember, in 2019, this business was at 14%. So I still feel like there's opportunity to go with being more selective in the projects we're bidding, continue to produce high-quality results at that job level.
Brad: We start thinking about how to do diligence differently, how to look at opportunities areas differently.
Brad: Not only identify synergies, but track synergies we have this partner that does it everyday one rock who is going to help us kind of build out four to five that process. So you think about the process of going through diligence with the support of one rock you think about the process changes from our field managers, bringing those opportunities to us so a bottoms up.
Brad: Not a tops down and you couple that with the cash and liquidity we have on the balance sheet to go execute when we are ready to do M&A, we're better positioned today than we've ever been to execute.
Speaker Change: No that sounds great and I appreciate you taking my questions. Thank you.
Speaker Change: Thank you Jeff.
Speaker Change: Thank you very much. Our next question is from George Tong with Goldman Sachs. George Your line is now open. Please go ahead.
Speaker Change: We've said, Jeff, we paused a little bit this year as we did all the restructuring within our own company.
George Tong: Alright. Thanks, Good morning, you talked about dedicating investments back into the business and into personnel I just wanted to get a better sense of the timing and where exactly those investments will play out over the next couple of quarters. If you can talk a little bit more about that that'd be great.
Speaker Change: Yeah. Thanks, George Good question I think.
Speaker Change: We want to make sure that all of our customers get the service that <unk> provided we want to make sure that nobody is pushing our employees to cut any quarters. When it comes to customer service. So the majority of that cost comes at the expense of making sure. They have enough hours to do that service in the form of labor.
Speaker Change: We will focus that on probably greenfield markets that we don't operate in today. We will look at ancillary businesses like tree
Speaker Change: That's what's driving a lot of that employee retention that employee turnover decrease we're seeing because people don't feel like we're asking them to do more with less time, they feel like they're being allocated enough time to do the service levels that they can and required to service our customers and it's showing up in the numbers, it's showing up in our.
Brent: Our customer or our employee engagement and in our customer retention. So we're investing it we did the booth program everybody saw that but more importantly, it's in the labor for these people, it's making sure that they can put in the hours every week that they need to to service our customers, but Brent I'll, let you kind of yes, George just to <unk>.
Brent: Quantify that a little bit further if you think about our maintenance business, we do about half our redo about third of our revenue in the first half of the year and then we do a third of our revenue in Q3 and a third of our revenue in Q4. So we said in the prepared remarks in the script that.
Speaker Change: We invested around $10 million more in frontline labor actually in the first half of this year, we invested about $88 million in frontline labor right. It's just our business over the first two quarters isn't as big as the third quarter and included in our guide is to invest more frontline labor right around that same $10 million $10 million Mark that we did in Q3.
Speaker Change: When we get back into M&A, we will have the cash to fund that M&A.
Speaker Change: And I would even say from a process standpoint, we now have our strategic partners at One Rock Capital on board. When we do get into M&A, we start thinking about how to do diligence differently, how to look at opportunity areas differently, how to not only identify synergies, but track synergies. We have this partner that, you know, does it every day, One Rock, who is going to help us kind of build out and fortify that process.
Speaker Change: So as Dow mentioned, I mean, <unk> been unwavering on that customer service level, making sure they get the service that they deserve and that they're paying for and those investments that we're making now all while guiding to a record year, all while guiding to incremental improvement those vessels were making now will lead to that long term.
Speaker Change: So you think about the process of going through diligence with the support of OneRock, you think about the process changes from our field managers bringing those opportunities to us, so bottoms up, not tops down, and you couple that with the cash and liquidity we have in the balance sheet to go execute.
Speaker Change: Sustainable growth that that we're looking to build so we couldnt be more excited about the flexibility we have with some of the overhead savings that we've had in the business.
Speaker Change: <unk>.
Speaker Change: Bye.
Brent: Development continues to show their momentum to be able to go and reinvest those dollars back into our customer service.
Speaker Change: That's helpful and then with respect to the customer service could you give some examples of some of the blocking and tackling you're hoping to improve with labor and with some of the best practices and how that should help improve the overall customer experience, but what exactly.
Speaker Change: Thank you very much. Our next question is from George Fong with Goldman Sachs. George, your line is now open. Please go ahead.
Speaker Change: The staff are doing better going forward compared to in the past.
Speaker Change: Let me let me give you. One example of something we're working on George that helps the employee morale and it make sure our customers get served.
Speaker Change: Unfortunately, a lot of the work we do is outside and it's weather related so when markets were doing work to try to have our employees worked for 10 hour days versus $85 or five eight hour days by doing that if one day during the work work week Monday through Thursday, we get rained for the day that we can.
Speaker Change: Yeah, thanks, George. Good question, I think.
Speaker Change: Can't work, we can have a makeup than Friday the employees still get their 40 hours, we still provide the service during the week to the customer that they expect we don't try to take a week off in catch up with them. The next service cycle.
Speaker Change: The win for US long term it costs us money short term, but the employees appreciated the customers appreciated and all it takes is for us to let the customer know hey, it's ran and today, we're not going to be out there, we'll be able to do your service on Friday.
Speaker Change: And it's showing up in the numbers. It's showing up in our employee engagement and in our customer retention. So we're investing it. We did the Boots program. Everybody saw that. But more importantly, it's in the labor for these people.
Speaker Change: A different culture in the business than what we had just nine months ago. So this is a great example is the best way I can say is it's about making sure. We do what we said we're going to do every week.
Speaker Change: It's making sure that they can put in the hours every week that they need to to service our customers.
Speaker Change: Very helpful. Thank you.
Brett: But Brett, I'll let you kind of ... Yeah, George, just to quantify that a little bit further, if you think about our maintenance business, we do about a third of our revenue in the first half of the year.
Speaker Change: You bet George George question.
Stephanie More: Thank you. Our next question is from Stephanie more.
Speaker Change: Jefferies. Stephanie Your line is now open. Please go ahead.
Harold: Hello, This is Harold <unk> assessed anymore.
Speaker Change: On the Tech side I know you talked about route optimization.
Speaker Change: You know, over the first two quarters isn't as big as the third quarter.
Stephanie More: Just wanted to get an idea of where you are on that front. Some of the other initiatives that you're doing on the tech side and then if you could quantify for US you know.
Speaker Change: And included in our guide is to invest more frontline labor, right around that same $10 million mark that we did in Q3.
Brett: So as Dale mentioned, I mean, again, being unwavering on that customer service level, making sure they get the service that they deserve and that they're paying for, and those investments that we're making now, all while guiding to a record year, all while guiding to incremental improvement.
Speaker Change: How much savings you're seeing from this optimization.
Speaker Change: And using less fuel.
Speaker Change: I guess what percentage of few represent some positives.
Speaker Change: e-commerce around there would be helpful. Thank you.
Speaker Change: Yes, so apparel, let me start off with that and then Brett can add any comments he wants but.
Speaker Change: Look I think the the tool that we've deployed to our brands is the second step in our go to market strategy to better drive efficiencies at our brands. If you remember earlier in the year, we realigned our sales force to go under our operations teams. So that we have two people.
Speaker Change: That's helpful. And then with respect to customer service, could you give some examples of some of the blocking and tackling you're hoping to improve with with labor and with some of the best practices and how that should help improve the overall customer experience? But what exactly the staff are doing better going forward compared to the past?
Speaker Change: Working together to go after the market. This tool enables them to identify maybe where we have customers as the example shows that.
Speaker Change: Our remote that we're spending too much time driving to and we're not.
Speaker Change: Spending enough time servicing customers. So what this technology enables us to do is to actually go after customers that are geographically close to the customer, which we have today that might be remote so that we can retain all of our customers and drive profitability long term this tool.
Speaker Change: Unfortunately, a lot of the work we do is outside, and it's weather-related. So in markets, we're doing work to try to have our employees work four 10-hour days versus eight 5-hour days, or five 8-hour days.
Speaker Change: As in the early stages, our branches working with Salesforce are still in the early stages, but this is another example of technology that we're giving our branches that allow them to be able to manage their business better if everybody remembers in the beginning of the year in the early stage I said, we are going to.
Speaker Change: By doing that, if one day during the work week, Monday through Thursday, we get rains for the day that we can't work,
Brett: We can have a make-up day on Friday. The employees still get their 40 hours. We still provide the service during the week to the customer that they expect. We don't try to just take a week off and catch up with them the next service cycle.
Speaker Change: Transform the way we support our branches, we're giving them a playbook that allows them to manage their business better we're going to give them tools like this tool that we're showing you. So that they can run their business better that was a big driver. When we said we wanted to divest the U S. <unk> business that we sold at the beginning of the year.
Brett: It's a win for us long term. It costs us money short term, but the employees appreciate it, the customers appreciate it, and all it takes is for us to let the customer know, hey, it's raining today, we're not going to be out there, we'll be out to do your service on Friday.
Speaker Change: It's a different culture in the business than what we had just nine months ago. So, it's a great example. It's the best way I can say it. It's about making sure we do what we said we're going to do every week.
Speaker Change: We did that because I don't want to give people. This tool that we're investing in to drive our branches to grow.
Speaker Change: That's what that's why we divested that business now. This is just one example of tools that we're looking at our number one asset I started the call off with this as our employees.
Speaker Change: Thank you, George. Thank you, George.
Speaker Change: We're in the process of selecting and implementing a new HR is system. So we can manage those employees from the time, we onboard them from the time, we recruit them all the way through the annual performance cycle. So we're getting a better tool to allow us to do that will create huge value for us and we have a lot of crews.
Harold Anto: Hello, this is Harold Anto on for Stephanie Moore. On the tech side, I know you talked about, you know, rod optimization. I just wanted to get an idea of where you are on that front, some of the other initiatives that you're doing on the tech side, and if you could quantify for us, you know,
Speaker Change: That go out every day and today. Unfortunately, we don't leverage technology to manage that that process will work.
Speaker Change: Drastically changing that we're implementing a new system that we plan to rollout in 'twenty five that will allow us to use technology to manage those crews as they leave and we need to shift resources around where.
Speaker Change: Still in the early days so it's tough for me to give you a quantitative number that.
Speaker Change: Comes from this route optimization, but what I will tell you quarter qualitatively.
Speaker Change: Yeah, so Harold, let me start off with that, and then Brett could add any comments he wants, but...
Brett: We are making huge progress in getting people alive, but Brett I'll, let you add fuels one area right.
Speaker Change: Look, I think the tool that we've deployed to our branch is the second step in our go-to-market strategy to better drive efficiencies at our branch.
Brett: Alright, Harrow fuels about two 5% of revenue for us so call. It 75, or so million dollars of fuel costs. If you do the math there is absolutely route optimization that will add some efficiencies there, but even more is the wear and tear on our trucks the wear and tear on our equipment on loading and Offloading all of that from our trucks every day me that all adds opportunity.
Speaker Change: Well not to mention the efficiency of our crews as Dale mentioned when you when you have to get all that stuff up and get on a truck and drive 25 miles, which is the example, we gave in the presentation 25 miles in the country might take 30 minutes 25 miles in the middle of San.
Speaker Change: So what this technology enables us to do is to actually go after customers that are geographically close to the customer which we have today that might be remote so that we can retain all our customers and drive profitability long term.
Speaker Change: San Francisco, or New York or any major metropolitan area. It could take you an hour and a half but that is all wasted time. So the more we can equip our sales force at this type of data and drive that route optimization, we're going to see efficiencies throughout the P&L and labor cost our jobs.
Speaker Change: This tool is in the early stages. Our branches working with Third Salesforce are still in the early stages.
Speaker Change: And fuel efficiencies in maintenance and repair efficiencies et cetera et cetera. So it's a great question and we feel like that is going to be a big unlock as we get into the future really driving efficiencies throughout the P&L.
Speaker Change: But this is another example of technology that we're giving our branches that allow them to be able to manage their business better. If everybody remembers...
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Thank you for the color.
Speaker Change: SG&A as a percentage of revenue.
Ron: Ron about 18% to 19% for the most largest sources, but you guys have been making considerable progress. So yes, we know anything about the long term.
Speaker Change: The long term.
Speaker Change: This outlook, where do you think this business can run on the SG&A side.
Speaker Change: As you continue to execute any possible profitable growth showcase thank you.
Speaker Change: That's what, that's why we divested that business.
Speaker Change: I'll start.
Harold: Harold look.
Harold: I am proud of all the overhead we've been able to remove from the business.
Harold: Because a lot of it was redundant created some of those silos that we had.
Speaker Change: We are going to invest in our sales force, we're going to grow our sales force and our go to market team is focused on that as we speak adding sales resources.
Speaker Change: So getting a better tool to allow us to do that will create huge value for us.
Speaker Change: As we get our crews our tools our ability to service customers at that premium level, we are going to turn loose a sales force that goes out there and gets us more customers. So we can grow this business. So we've made great progress the overhead we've taken out was needed overhead reduction the inverse.
Speaker Change: We have a lot of crews that go out every day, and today, unfortunately, we don't leverage technology to manage that process.
Brett: We're going to make is going to be in people to help us find new customers, but Brett I'll, let you give the I think you said it right on I think Harold it's we're not going to guide to a specific line on the P&L, but even if I was going to got it it would be tough to do right now because we are making so many investments back in different areas of the business as well as centralizing resources and creating efficiency.
Speaker Change: We're still in the early days, so it's tough for me to give you a quantitative number that comes from this route optimization, but what I will tell you qualitatively...
Speaker Change: We are making huge progress in getting people aligned, but Brett, I'll let you add. Yeah, I mean, fuel is one area, right? Right, Harold? Fuel is about 2.5% of revenue for us. I'd call it $75 or so million of fuel costs if you do the math.
Speaker Change: Fees and those two things are working against each other but they are the right long term moves to the business I think that the thing you can be confident on Harold is whether SG&A stays at 18, 5% whether it goes to 19, whether it goes to 18 long term or maybe less weight you can be confident as we are focused on that total EBITDA margin expansion and we're going to gain efficient.
Speaker Change: There is absolutely route optimization that will add some efficiencies there. But even more is the wear and tear in our trucks, the wear and tear in our equipment, onloading and offloading, all that from our trucks every day. I mean, that all adds
Speaker Change: Fees by centralization and use of those efficiencies to reinvest back into growth that's going to be the key and we're committing to that margin expansion not only this year, which is going to be a little bit more than those 100 basis points that we're seeing but next year as well as getting back to those call. It IPO levels, which are in the 12, 5% range.
Speaker Change: you know, opportunity as well, not to mention the efficiency of our crews, as Dale mentioned, you know, when you when you have to get and pack all that stuff up and get on a truck and drive 25 miles, which is the example we gave in the presentation, 25 miles in the country might take you 30 minutes, 25 miles in the middle of
Speaker Change: you know, San Francisco or New York or any major metropolitan area could take you an hour and a half, but that is all wasted time. So, the more we can equip ourselves for this type of data and drive that route optimization, we're going to see efficiencies throughout the P&L and labor costs are our jobs.
Speaker Change: Okay.
Speaker Change: Thank you I'll leave it there.
Speaker Change: Thanks, Harold perfect. Thanks Harold.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Thank you very much.
Speaker Change: We currently have no further questions. So I'll hand back over to Dale for any closing remarks.
Dale: Thank you operator.
Dale: I'll close by reiterating that we are extremely excited as you can tell and have a growing level of conviction regarding the transformation of breakthrough.
Speaker Change: Thank you. Thank you for the call. And I guess on, you know, SG&A, as a percentage of revenue,
Speaker Change: I am extremely happy with our record Q3 results.
Speaker Change: has run about 18 to 19% for the most part historically. But, you know, you guys have been making considerable progress. So I guess, you know, when you think about the long-term...
Speaker Change: Long term our objectives remain clear.
Speaker Change: We are committed to becoming one bright view growing profitably and creating meaningful shareholder value.
Speaker Change: Thank you operator, you can now end the call.
Speaker Change: The long-term business outlook, where do you think this business can run on the SG&A front as you continue to execute in a profitable growth strategy? Thank you.
Speaker Change: Thank you very much everyone for joining this concludes today's call you may now disconnect your lines.
Speaker Change: I'll start. Harold, look.
Speaker Change: I'm proud of all the overhead we've been able to remove from the business because a lot of it was redundant and created some of those silos that we had.
Speaker Change: We are going to invest in our sales force.
Speaker Change: We are going to grow our sales force, and our go-to-market team is focused on that as we speak, adding sales resources. As we get our crews, our tools, our ability to service customers at that premium level,
Speaker Change: We are going to turn loose a sales force that goes out there and gets us more customers so we can grow this business.
Speaker Change: So, we've made great progress. The overhead we've taken out was needed overhead reduction.
Brett: The investment we're going to make is going to be in people to help us find new customers. But, Brett, I'll let you give the call. I think you said it right on. I think, Harold, it's – we're not going to guide you a specific line on the P&L, but
Speaker Change: Even if I was going to got it, it'd be tough to do right now because we're making so many investments back in different areas of the business.
Speaker Change: As well as centralizing resources and creating efficiencies, and those two things are working against each other, but they're the right long-term moves for the business.
Speaker Change: I think that the thing you can be confident on, Harold, is whether SG&A stays at 18.5%, whether it goes to 19%, whether it goes to 18% long-term, or maybe less.
Speaker Change: What you can be confident is we are focused on that total EBITDA margin expansion and we're going to gain efficiencies by centralization and use some of those efficiencies to reinvest back into growth.
Speaker Change: That's going to be the key, and we're committing to that margin expansion, I don't mean this year, which is going to be a little bit more than those 100 basis points that we're saying, but next year as well, getting back to those call it IPO levels, which are in the 12.5% range.
Speaker Change: Thank you very much.
Speaker Change: We currently have no further questions so I will hand back over to Dale for any closing remarks.
Dale: Thank you, Operator.
Speaker Change: I am extremely happy with our record Q3 results.
Speaker Change: Long-term, our objectives remain clear. We are committed to becoming one BrightView, growing profitably and creating meaningful shareholder value.
Operator: Thank you, operator. You can now end the call.
Operator: Thank you very much everyone for joining. This concludes today's call. You may now disconnect your lines.