Q4 2024 BrightView Holdings Inc Earnings Call
Good day and welcome to the bright view fourth quarter and full year 2024 earnings call.
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Chris Stasko: It is now my pleasure to turn the call over to Chris Stasko.
Chris Stasko: Nice President of Finance and Investor Relations. Please go ahead.
Good morning, and thank you for joining breakthroughs fourth quarter and full year fiscal 2024 earnings call.
I'll ask one bright juice, president and Chief Executive Officer.
Speaker Change: Urban Chief Financial Officer are on the call.
Speaker Change: I'll refer you to slide two of the presentation, which can also be found on our Investor Relations website. It contains our safe Harbor disclaimer.
Speaker Change: Our presentation includes forward looking statements subject to risks and uncertainty.
Speaker Change: In addition, during the call we will refer to certain non-GAAP financial measures.
Speaker Change: Please see our press release and 8-K issued yesterday for a reconciliation of these measures with that I will now turn the call over to Dale.
Dale: Thank you, Chris and good morning, everyone.
As I reflect on my first year here I am both honored and humbled to lead this journey and incredibly proud of the progress. The team has made in such a short period of time.
Dale: As we committed to you 12 months ago, we delivered breakout results for physical 2020 for all.
All while transforming this business.
Dale: Unwinding be yes, selling our U S lawns business streamlining.
Dale: Aligning our operating structure and snow coming in below original expectations.
We are also positioned to grow EBITDA again in fiscal 2025.
Dale: Reflecting our second consecutive annual record EBITDA.
Dale: This is underpinned by revenue growth in both our development and land maintenance business.
Dale: As each quarter passes we as a team.
He greater conviction.
Dale: We're in the early stages of capitalizing on the many expansive opportunities that will benefit our results in both the near and long term.
Dale: We are doing all this by operating as a unified one bright beauty.
As I said since the first day I joined breakthrough.
Dale: This begins with taking better care of our employees, who will in turn provide better service to our customers to make us the service provider of choice.
Dale: This is the cornerstone of our one bright you approach that will drive long term profitable growth and deliver meaningful shareholder value.
Dale: I will start on slide four by emphasizing our achievements and ongoing progress along the strategic updates that will enhance our position to accomplish our future objectives.
Dale: First we delivered record Q4, and full year EBITDA results, while expanding EBITDA margins in both operating segments.
Dale: Throughout 2024, we not only demonstrated consistent financial improvement, but position the company for further success in 2025.
Dale: With our fiscal year 2025 guidance, we are on track to deliver another record EBITDA year, reaffirming our commitment to delivering profitable growth.
Dale: And we have significantly improved our balance sheet, enabling us to reinvest in the business with our employees at the epicenter of this investment.
Dale: We'll get into more details on the financials in a few minutes.
Dale: I want to focus my comments on the tremendous progress being made towards further developing our one bright view culture we.
Dale: We continue to prioritize our employees and customers to become both the employer of choice and service provider of choice.
This will be the key to our sustained success as we progress on this journey, which remains in the early stages.
Dale: Further leveraging our size and scale will supplement these initiatives to drive our laser focus goal of long term profitable growth with margin expansion to deliver continued value to our shareholders.
Moving on to slide five.
Dale: Here, we recapped many of the initiatives, we have been successfully delivering on.
Dale: Equipping us to drive organic revenue and continued the momentum of profitable growth.
Dale: As you can see on the top left of this slide we have been prioritizing our employees through multiple avenues and are highly confident these actions will continue to improve our employee turnover and customer retention rates.
Dale: By putting our customers choice and delivering best in class service.
Dale: Improved communication to our customers we are demonstrating why we should be the preferred partner of choice.
Dale: All of our ongoing hard work will generate a more unified one bright pink culture, which will continue to drive the exciting transformation already underway. This was all done while streamlining our operating structure and integrating our sales group into our branches.
Dale: On the customer retention front, we again saw sequential momentum, resulting in a 200 basis point improvement in 2024.
Dale: Further evidence that we are gaining traction.
Dale: But again, we remain in the early innings and are excited for what is still to come.
Dale: On slide six we illustrate our long term perspective of the transformation we are undergoing.
Dale: We are proud of the strategic success to date and the financial results. We delivered this year, it's important to keep in context, how far we have.
Dale: In fiscal 2022.
Dale: EBITDA margins were at all time low comp.
Dale: The company was operating in silos and.
Dale: And we were executing non accretive acquisitions that led to an over levered balance sheet with limited liquidity.
Dale: During 2023, we partnered with one rock capital, our strategic partner, but the operational expertise, whose investment enabled us to delever the balance sheet and significantly improved liquidity.
Dale: This set the stage for the breakout year in 2024.
Dale: Looking ahead, there is much more to accomplish with plenty of runway ahead of US. This includes returning to top line language, leveraging our size and scale and executing future acquisitions as we reincorporate acquisitions into our growth strategy, we will be utilizing a drag.
Dale: Lastly, revised playbook to ensure that transactions are accretive.
Speaker Change: Before turning it over to Brett who will discuss our strong results and our financial guidance I will say it again.
Speaker Change: It's an honor to lead this journey and I am proud of the team for executing and delivering on the multifaceted transformation.
Speaker Change: This has enabled breakthrough to turned the quarter and we will benefit from these initiatives for years to come with that said I will now turn it over to Brett.
Brett: Thank you Dale and good morning to everyone I'll start by echoing dallas' enthusiasm and conviction as we continue to transform this business.
Brett: As we sit here today, a little more than a year into our one bright view journey the future has never been more exciting this.
Brett: This is a testament to the hard work and dedication of our 20000 employees working together to make bright view better by placing our customers at the center of everything we do.
Brett: This unwavering passion and focus led to our record results in EBITDA for the year alongside meaningful margin expansion.
We successfully executed on our commitment to deliver a breakout year.
Brett: While our transformation is not complete we are already seeing the impact takes shape in our results.
Moving to slide eight.
Brett: Total revenue for the fourth quarter was $729 million.
Brett: It was an approximate 2% increase when adjusting for the U S lawn sale and the unwinding of B, yes, our aggregator business.
Brett: In maintenance, we remain encouraged by the underlying trends in the business that will lead to long term profitable growth, notably our customer retention improvement and our continued focus on cross selling and route density.
Brett: The development business increased eight 6% as a result of the ongoing conversion of our backlog into high quality projects.
Brett: As we continue to further align our one bright view culture, we see numerous cross selling opportunities to convert development work into recurring maintenance contracts.
Brett: We believe this represents a meaningful lever as we drive future topline growth in all segments of the business.
Brett: Okay.
Brett: Turning now to profitability on slide nine.
Brett: Total adjusted EBITDA for the fourth quarter was $105.2 million, an increase of $3 $6 million or 4% higher versus the prior year period.
Brett: Adjusted EBITDA margins expanded by 70 basis points, which is our sixth consecutive quarter of year over year margin expansion on a company wide basis.
Brett: The adjusted EBITDA margin in the maintenance segment expanded 110 basis points as we continue to streamline our cost structure and create efficiencies.
Brett: We are now well positioned to capitalize on our strong operating leverage as we return to land revenue growth.
Brett: And the development segment adjusted EBITDA for the fourth quarter was $41 million, which represented a record quarter for this segment.
Brett: The adjusted EBITDA margin expanded 390 basis points, which was driven by a combination of converting our high quality backlog and further cost efficiencies.
Brett: Turning to slide 10.
Brett: Fiscal 'twenty four was a breakout year as we delivered on our commitment to transform this business by taking better care of our employees and prioritizing our customers.
Brett: In the past year alone, we delivered record EBITDA performance and expanded margins by 110 basis points, making significant progress from the low point in fiscal 'twenty two.
Brett: We delivered these results despite unwinding.
Brett: Yes.
Brett: Selling our U S lawns business and snow coming in below original expectations.
Brett: 110 basis point margin improvement was driven by a combination of factors, including our new streamlined operating structure and reduced SG&A.
Brett: The alignment of compensation plans that promotes profitable growth.
Brett: And continued focus on centralization scale advantages and deficiencies.
Brett: All of these factors allowed us to execute our strategy and reinvest back into the business our employees and our customers.
Now, let's turn to slide 11 to review, our free cash flow capital expenditures and leverage.
Brett: For the full year, our reported free cash flow was $145 million versus $80 million in the prior year and.
Brett: And capex was $60 million versus $50 million in the prior year.
Brett: Important to note there was a timing impact to capex related to newly purchased vehicles being delivered in fiscal 'twenty four.
Brett: Paid for in fiscal 'twenty five.
We will discuss this more in the guidance section of this presentation.
Brett: On a normalized basis adjusting for the timing impact of capital expense payments free cash flow still increased $14 million or 18%.
Brett: Additionally, we executed our capital allocation and fleet strategy, which saw more than double the amount of net capital spend on a normalized basis from 50 million to $111 million.
Brett: Net leverage at the end of the year came in at two three times, representing the lowest leverage ratio in the history of right deal.
Brett: This lower leverage reflects the impact from lower debt levels improved profitability and generating more cash flow alongside improved liquidity.
Brett: The improved leverage dynamics provides significant financial flexibility and reduced interest expense.
Brett: Moving to slide 12.
Brett: We outlined our revenue and EBITDA guidance for fiscal 'twenty, five which translates to another record breaking EBITDA year and continued margin expansion.
Brett: And it's underpinned by returning to growth in our land maintenance business.
Brett: For revenue, we expect to deliver results in a range of $2 $75 billion to $2.84 billion.
Brett: And EBITDA in a range of $335 million to $355 million.
Brett: The revenue guidance range assumes the following.
Brett: For land.
Brett: We expect total core land revenue to increase by 1% to 3%.
Brett: When including the roughly $20 million impact from unwinding, our <unk> business, we expect total land to be approximately flat to 2%.
Brett: For snow, we are anticipating revenue to be in the range of $160 million to $200 million, which incorporates the impact of unwinding, the <unk> business, which is separate from the land business.
Brett: We are also implementing strategic sales strategy and the snow business to reduce the revenue volatility as we begin to shift towards more fixed rate contracts.
Brett: For development, we expect revenue to increase in a range of 3% to 6% as this segment is well positioned to continue to benefit from the healthy backlog.
Brett: Moving to adjusted EBITDA, we expect margins in the maintenance segment to expand by 60 to 100 basis points in margins in the development segment to expand by 10 to 30 basis points, reflecting continued momentum in the multiple initiatives that are currently underway to drive profitable growth.
Brett: <unk>.
Brett: It is important to note these margin assumptions reflect a reallocation of corporate expense into the operating segments.
Brett: Turning to slide 13, we will expand on this.
Brett: As we continue to focus on centralization scale advantages and driving efficiencies.
Brett: 25, we have eliminated our corporate segment and will allocate corporate expenses into the two operating segments.
Brett: Here on slide 13, we present, both as reported and the recast of our historical segment results, reflecting the elimination of the corporate segment.
Brett: Further details, including quarterly views are provided in our 8-K and the appendix of this presentation.
Brett: Continuing with guidance on slide 14, we are issuing free cash flow guidance in a range of $40 million to $60 million.
Brett: However, as.
Brett: As we referenced earlier free cash flow in both fiscal 'twenty four and fiscal 'twenty five is being impacted by the timing difference related to vehicles being delivered in fiscal 'twenty four but paid for in fiscal 'twenty five.
Brett: This represents a $51 million benefit in fiscal 'twenty four as described earlier.
With an offset in fiscal 'twenty five.
Brett: Normalizing guidance to reflect the impact from the Capex timing difference the free cash flow range would be $90 million to $110 million.
Brett: Delivering on this range would represent a three year cash flow conversion of approximately 30%.
Speaker Change: Before turning the call back over to Dale I will provide a longer term perspective on slide 15 of the exciting momentum we are seeing as we continue to transform this business.
Speaker Change: From a low of fiscal 'twenty, two we have increased EBITDA margins by 130 basis points and expect continued improvement in fiscal 'twenty five.
Speaker Change: From a leverage ratio perspective, we are currently at two three times, which is less than half of where we stood in 2022.
Speaker Change: Also our net debt has gone from $1 $4 billion to approximately $740 million and our liquidity has increased dramatically to $600 million.
Speaker Change: Furthermore, our free cash flow generation has increased from $7 million in 2022 to approximately $100 million based on the adjusted midpoint of fiscal 'twenty five guidance.
Speaker Change: While still early in our one bright new journey this year's breakout year and our outlook for fiscal 'twenty five reinforce our conviction in the incredible prospects that lie ahead.
Speaker Change: With that let me now turn the call back to Dale to wrap up on slide 16.
Dale: Thanks, Brett.
Dale: Before we open the call for your questions I will provide a few examples of the many levers we are utilizing to drive further momentum in our profitable growth strategy.
Dale: As you can see on the slide there are many including route density sleep management procurement and continued focus on size and scale with centralized support.
Dale: However.
Dale: At the end of the day it all comes back to our people and operating as one breakthrough.
Dale: By investing in our employees so they provide best in class service.
Dale: This will lead to a return to land revenue growth, which is paramount to our success in continuing to deliver on our commitments and drive value for our employees customers and shareholders. We will now open the call for your questions.
Speaker Change: The floor is now open for questions.
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Speaker Change: Our first question will come from Bob <unk> with CJS Securities. Please go ahead.
Speaker Change: Good morning, and congratulations on a fantastic year and doing what you said you would do a year ago, a great work there.
Speaker Change: Thanks, Bob Thanks, Bob.
Speaker Change: Sure Yeah, I wanted to focus on obviously the transformations driven around the one bright view foundation and as you've said, it's the <unk>.
Speaker Change: You know focus on the employees, who focus on our customers and you've really focused on employee retention, which has led to customer retention. So maybe.
Speaker Change: Are there incremental steps that you'll be taking in 2025 or one of the carryover steps that you've already taken maybe a little of both that should help you benefit you know both of these key metrics retention of employees and customers in 2025 and beyond.
Speaker Change: Yeah, Great question, Bob So.
From day, one I said as I said in my script.
It starts with our employees our employees to touch our customers every day. So it's critical to make sure. They feel good about the place that they work and they feel the value that they give us we have made such progress and it's shown in our employee turnover number which we saw another sequential decline in the fourth quarter.
Speaker Change: This is going to be critical as we keep driving that customer retention improvement that we talked about we've used several examples from giving them safety boots to show how much we care about their safety better fleet better mowers newer trucks all of those have been great. The next thing we started working on is.
Speaker Change: <unk>.
Speaker Change: Hourly frontline employees will be paying less for benefits than our salary people as we try to make it more affordable for them in the year to come. So our goal is to make sure. These people understand the value they put into the business and everyday how critical they are in our mission to make sure.
Speaker Change: Our customers recognize that they are the most critical thing for us to grow this business. So.
Speaker Change: The employees feel so much better Bob we we just recently launched our employee engagement survey because after a year being here and traveling to the branches.
Speaker Change: Really wanted to get a pulse of what they're saying and when I see responses like they feel that we prioritize safety and a sense of belonging empowerment and teamwork those types of things that they're responding about that just gives me a sense of we are making a transition in this business.
Speaker Change: We have a long way to go we are just at the early stages of this journey, but like I've said from day, one those hourly frontline people are the most critical asset we have Greg do you want to add anything.
Greg: I would agree with everything Dallas, Adam So early days of the one bright view journey, but it's amazing with the right focus I'm, taking care of our employees.
Speaker Change: In turn will take care of our customers and the ability for us to streamline our new operating structure and lean out our SG&A to be able to take those dollars and reinvest them right back into the frontline Bob.
Speaker Change: And that 200 basis points customer retention improvement as Darryl mentioned I mean, that's really the that's really the what we're driving towards so more improvement to come in 'twenty five we got to continue to stay focused on the right things taken care of the employees, who take care of the customers' everyday on the frontline and get them the right equipment going in the right safety equipment.
Speaker Change: Equipment as well.
Speaker Change: More good things to come.
Speaker Change: That's Super and then maybe just one other.
Speaker Change: One other quick question and I'll jump back in queue and you know one of the themes also throughout the past year has been in terms of one bright he was getting the development services and the maintenance services to work together and you've talked about in the past a little bit getting development work into the maintenance service work and you've been very low previous.
Speaker Change: Where do you stand now and where do you see that going how is that playing out.
Speaker Change: Yes, great Great question, I think as I travel the country. The one thing I quickly became aware of this our development group has some of the best talent across North America, and the jobs that we do.
Speaker Change: They were probably the group that unfortunately, we are operating the most in this high low versus our maintenance team. So.
Speaker Change: So we put a focus on that and we have leaders in our business that are working with our branches today.
Both development and maintenance geographically versus having independent leaders in the past we had mentioned in the past if you do the quick math, Bob roughly about 7% of new development work becomes the opportunity for maintenance. So we'll just use $800 million last year roughly of developer.
Speaker Change: We did that should create about a 56 million dollar opportunity for new maintenance revenue in the past, we said, we converted less than 10% of that I.
Speaker Change: I am pleased to say, it's now up to mid teens, we made progress as we exited the year to get momentum entering this year. We are far from the 70% that I believe is very very realistic, but I would tell you that.
Speaker Change: Momentum is really when you see the branches communicating and working together and here's the exciting part.
A lot of our maintenance branches now see opportunities that theyre turning over to our development brands to make sure that we're getting that for new development work. Our development group had an amazing year last year the growth that they showed and we're predicting another strong year as we enter 2025, we like I said this.
Speaker Change: Business is about taking care of customers and when we do development, we have to keep mentioned breakthrough customer and do the maintenance work, but Brett you want to add anything no I would just echo how exciting is to see that conversion grow even small incremental amounts and think about the opportunity ahead that you know that 50 to 60 million.
Opportunity set that development kicks off into maintenance work and the great thing about a development had such a great year and probably benefit at one of the most in the business from moving to a one bright view culture and operating together and working together as one business in 2024, but the backlog remains very strong for 'twenty five.
Speaker Change: And we can even be a bit more selective now in development as we pursue new opportunities to make sure those opportunities kick off the right potential maintenance contracts to them today. So we felt very bullish on the on the development business and what next year can bring in 25 as you can see in our guide.
Speaker Change: And that will just create more opportunities to continue to increase the conversion rate as we operate more effectively as one bright deal.
Super Thanks, so much and congratulations again on the results and outlook.
Speaker Change: Thanks, Bob and thank you Bob.
Speaker Change: Thank you. Our next question will come from Tim Mulrooney with William Blair. Please go ahead.
Speaker Change: Dell Brett good morning, I've got a.
Speaker Change: Quick questions here. The first one is on your maintenance land business it looks like the core maintenance land.
Speaker Change: Our growth was down about 1% in the fourth quarter.
Speaker Change: But obviously that's better than what we saw in the third.
Speaker Change: Third quarter, and then the second quarter and.
Speaker Change: First quarter. So we're seeing we're seeing nice progress here curious how youre thinking about the trajectory of that growth as you move through fiscal 2025.
Speaker Change: Yeah great.
Speaker Change: Good question, Tim I think it's worth noting that steady progress has happened from the unwinding as we started to eliminate RBS business and get people focused on taking care of our core customers that we can self perform the work now Brett I'll walk through a little bit of the details in a second but that's underpinned by then.
Speaker Change: That 200 basis point improvement that we're seeing in customer retention.
Speaker Change: We still have some work to do to eliminate some of the challenges that we had customers will spend more ancillary money with you as they buildup trusting you. So the deeper we can get into 2025. The more we anticipate growth my focus is to make sure as we exit 'twenty.
Speaker Change: 25, we're going to be on a trajectory that creates mid single digit land growth. We are committed to land growth. This year, we have a plan to get it done and we're going to find a way to drive that but Brett maybe you can add a little more on the financial side No I mean, the credit goes to the 20000 dedicated employees out there everyday taking care of our.
Speaker Change: <unk> right. That's that's what drove the 200 basis point increase in customer retention, which really has been the first increase we've seen as a public company since you know since going public in 18 so.
Speaker Change: Really positive that customer retention is starting to improve and you think about the impact that has Tim and the timing on organic growth. We saw about a year ago coming out of Q1, we saw our core organic business shrink about 4%.
Speaker Change: And then Q2 Q3, it shrunk about 3% each quarter right. So we saw 4% go to 3% and you mentioned it already Q4 is at 1% shrink so that will shrink, but we're seeing that trend start to shift.
Speaker Change: Tremendously in the right direction and as you think about Q1 and Q2 of this year, we're not providing quarterly guidance, we still have some noise in it.
Speaker Change: Stepping over our BFS unwind in the first two quarters, we saw some noise with selling U S law at the end of Q1 next year, but that core trend, which is going from negative to starting to really turn the corner in Q1 Q2 in Dallas that are passed by the time, we get to the second half of this year, we expect our core land organic to be growing and ended.
Speaker Change: Exiting the year at 25% to 26 on a on a much better pace, Hey, Tim real quick I just wanted to add.
Speaker Change: To remind everybody.
Speaker Change: A year ago, when I got in share our customer retention was at all time low levels.
The progress we've seen with that 200 basis point improvement is the first improvement in any year since the company went public so yes that creates some ancillary challenges, but that momentum that we felt this year and will continue into 2025 is why we are so com.
Speaker Change: Then we're going to drive this business with land growth and we're going to be in a much better spot as we get into 2026.
Speaker Change: Okay. Thanks, guys. This is this is exactly the detail that I was looking for I. Appreciate all the color I'll leave it there hop back in queue. Thank you.
Thanks, Tim Thanks, Tim.
Speaker Change: Thank you. Our next question will come from Greg Palm with Craig Hallum. Please go ahead.
Speaker Change: Yeah. Thanks, Good morning, I guess officially congrats on the breakout EBITA year, but also just congrats on a really sort of successful time, so far in the first year, so kudos to.
Speaker Change: And the team there.
Speaker Change: Thanks, Greg.
Speaker Change: I wanted to dig into land growth, a little bit more and I'm not sure. If you can kind of rank order.
The various levers you know what.
Speaker Change: Whether it's kind of the development conversion the customer retention, but you know maybe expand on that a little bit in terms of how you see that playing out this year, but also you know thinking about route density and maybe you know new customer growth as well and kind of where we are on on that kind of research.
Speaker Change: Focus as well.
Speaker Change: Yes. Good question, we know all the levers that we have to pull to drive land growth ancillary is one of them and that's going to come as we continue to drive that customer retention number up as we go through 2025 that 200 basis point improvement, we continue to see that as an opportunity for us to work.
Speaker Change: Through in 2025, and see improvements so long term the business. When we went public we had stated before our customer retention was roughly 85% and we exited last year below 80. So we have a long way to go but here's the exciting part.
Speaker Change: 85% should not be our goal we are going to find a way to continue to make sure our customers feel all the value that we're going to place on them. So we can get that number closer or even above 90%. We have branches above 90% and those are the branches, we're seeing growth obviously the development conversion that.
Speaker Change: We spoke about a minute ago is another lever we can pull we've talked in the past and I mentioned about how important communication is our customers don't leave us because of price and in an inflationary environment, we always have a little bit about the opportunity to get a little price to help us grow our customers leave us because.
Speaker Change: We didn't do what we said we were going to do and we didn't tell them, what's going on when there's an issue with weather. So those are all in our control. So between those three items and we're putting a focus on new salespeople to get more people on the street, we've done a great job cutting overhead in this business to write.
Speaker Change: Size the business support that we need to help our branches and now we're going to fund more salespeople to go out there and help us get new accounts, we have so many levers that we're pulling right now that's why I'm. So confident we are going to return to land growth in this business in 2025, yes, Greg I would just add.
Speaker Change: You can sense the excitement on the side of the table here I mean, we are we are better positioned than ever to.
Speaker Change: To get back into our land growth and leverage our operating structure, we have today.
Speaker Change: We reduced SG&A in 2024 by almost $40 million, which in turn we're reinvesting back into the business back into our frontline employees back into new equipment with mowers and trucks and if you think about where our position as a company. We have a balance sheet now that can support all the initiatives, we're looking to do to drive growth.
Speaker Change: Including investing in our sales force and sales technology, So we're better positioned to ever been to execute these strategies and I think we've got a balance sheet that is absolutely can support that and just you think about this year at one more point on this you know we spent the most capital.
Ever spent as a company in 2020 for almost $130 million of gross capital and if you look at our guide for 2025, we're going to do it again. So we have to continue to stay focused on the right priorities, taking care of our employees, giving them the right safety given them the right equipment to service our customers we continue to do that.
Speaker Change: Dou mentioned around customer retention driving ancillary debottleneck conversions et cetera that will all come to fruition. So we're better positioned than ever to do that and I think that's just an important point to note. That's why you get such excitement on our side of the table.
Speaker Change: Yeah makes sense I appreciate that color and I, just kind of all on the growth outlook.
Speaker Change: Outlook, how does M&A fold into that I'm, just curious if your sense around timeline has changed at all in the last few months and maybe give us a little bit of a flavor of kind of what type of acquisitions Youre looking at whats kind of at the top of the list in terms of priorities.
Speaker Change: Yeah. So we don't have anything built into the guide for M&A.
So any M&A, we do will be accretive to the guidance that we've placed out last night.
Speaker Change: So where we're focused and this is the exciting part we paused M&A 12 months ago when I joined.
Speaker Change: But we're ready we've got a balance sheet. That's ready we have teams of people in the field that are ready and they're starting to earn the right in many markets to ask for us to help supplement their business and you heard me say, our new playbook is gonna be drastically different than some of the M&A. We did in the past we're gonna integral.
Speaker Change: Fast, we're going to get them to be part of one bright view, we're going to make them part of this business and we're going to help those businesses to grow.
Speaker Change: So short term, where do I think Greg we're going to focus on I love specialty businesses I love to make sure. We can do things like tree care like irrigation like fertilization, even some type of aquatics and some markets, where we do we can do PON maintenance for large HOS those businesses I feel we could.
Speaker Change: By a smaller business and help grow it through our existing maintenance business. The other opportunity we will look at it as if we have markets. We don't operate in today with with maintenance land will look at buying businesses in those markets and figure out a way that we can grow our business and grow to support customers that are national.
But we probably won't be buying right now and you saw our guide we reduced snow Guy because we want to go off realistic snow numbers and not count on 30 year average. So we wont be focused on businesses that primarily focus in snow maintenance or probably short term with the great success, we're having and getting maintenance too.
Speaker Change: Work with development buying new development businesses, because if we feed those guys with capital Theyre growing that business, great, but Brett you want to add anything I think we're all set.
Speaker Change: We're better positioned than we've ever been we're ready we have operators that already with our balance sheet that can support so we're in a great position when the right opportunity comes up we.
Speaker Change: We'll be ready to execute.
Alright, Thanks, guys I'll leave it there.
Speaker Change: Okay Thats right Greg.
Speaker Change: Thank you. Our next question will come from George Tong with Goldman Sachs. Please go ahead.
George Tong: Alright, thanks, good morning.
Speaker Change: Youre, assuming $160 million to $200 million of snow revenue in fiscal 2025, you just mentioned you're not assuming a return to long term averages, but can you elaborate more on the assumptions underlying your snow forecasts.
Speaker Change: Yes, great Great question George.
Speaker Change: So when I joined the company a year ago, there's always the opportunity to estimate how much snow youre going to get its tough because if you look at the 30 year averages and you look at what we forecasted last year, we had anticipated snow coming in between 210 and $270 million or at 240 million.
Speaker Change: <unk> mid point based on the book of business. We had unfortunately snow came in at $221 million of revenue for the year.
Speaker Change: The good news is the previous year. It came in at 209 to instead of using a 30 year average we've said we're going to use them much more realistic two years' average to come up with the number now we had talked in the past about unwinding RBS aggregator business. They had some snow that we were also looking at eliminating.
Speaker Change: So roughly about $25 million of the reduction is to eliminate that <unk> business. So if you think about it George take like $2 15 minus $25 million that gets you to the high end or the just above the midpoint of that range and then the other focus we have is we want to make sure we provide our.
Customers, who use us for land all year round care cut.
Speaker Change: Customers come to us they don't want to use us for land and their request is just to have us do time and material or a per occurrence type billing, we don't want to take those risks.
Speaker Change: Snow is roughly 6% to 7% of our overall revenue it cannot be the reason why we disappoint our investors on an annual basis. So the guide today George is much much more realistic to what we feel is the low end of snow and then if we do more snow than that for some reason we.
Speaker Change: Get back to those 30 year averages.
Speaker Change: Be upside for all of our investors Brad do you want to add anything yes, I'll just add George gone are the days, where we use snow as an excuse you saw that in 2024.
Speaker Change: <unk> came in at the very low end of our original guidance range and we still held and deliver the midpoint of our guide every step of the way throughout the year and I think so I mentioned earlier on the call just doing what we said we were going to do we are we are not using snow as an excuse and I think you saw that in 'twenty four.
Speaker Change: 25 is again much more realistic on a two year average you take the two year average of $215 million, you stepped down $25 million or so for <unk> and then you look at how we're trying to move customers or more of a variable rate contract to a fixed rate contract. So you take all those things into account you land right at the midpoint of our guidance, but we feel really.
Speaker Change: Good about the strategy in this business and if it snows a little more like they all said, we should have a little bit of upside, but we're not going to go back to some.
Speaker Change: $19 95 average on how much it snowed were saying much more relevant and realistic.
Speaker Change: Got it that's helpful. And then you had strong deposit growth of six 7% in fiscal 2024, and you're guiding to development growth of three 6% in fiscal 2025 can you talk about the puts and takes behind your assumption of growth deceleration in your development business in the year ahead.
Speaker Change: Yeah.
George Tong: Just say at a high level George.
Speaker Change: This huge demand our backlog for our development business right now most of our branches are sold out into 2026. So we feel great about the backlog I'm not sure our growth was about six 7% last year and at the top end of our range were 6% and obviously, we don't want anybody anchor in on them.
Speaker Change: Mid point when we go through this process and just thinking that we're not going to grow at the top end, we feel great about the development business, we have huge demand and the more we take care of those customers from the start of the project in development to ongoing maintenance the more of those customers are going to see a value using breakthrough, but Brad I'll, let you.
Speaker Change: To add a big Georgia Dock development had a fantastic year, you talk about some of the changes that Dallas implemented under one bright view breaking down silos operating together working as one I would say development benefited by far the most in 2024 from moving to a one brightness strides and kudos to the <unk>.
Speaker Change: I mean, they had a fantastic year development in 2024, essentially from a margin perspective is right back to pre pandemic pre hyperinflation margin levels, all time high margins in development, So kudos to that team just a fantastic year.
Speaker Change: 2025, setting up to have another year of growth a lot of factors go into development, whether it's timing weather pushes pulled etcetera, but they will grow in development for sure and the beauty of it is now with that business just operating so so well we can be a little bit more selective as we really look for those projects were developments.
Speaker Change: Spending their time on that will convert to long term maintenance opportunities. So we are in this virtuous cycle.
Speaker Change: We think here today and you know we have a lot of credit for the development in 2020 for results and we expect a lot to come in 2025.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you our next question Thanks George.
Thank you. Our next question will come from Stephanie more with Jefferies. Please go ahead.
Speaker Change: Hello. This is harold on so on for Stephen anymore.
Speaker Change: Yes, just.
Speaker Change: Given the.
Speaker Change: Capex in the $50.
Capex.
Speaker Change: And to be paid I guess, how should we think about the cadence of cash flow free cash flow throughout the year.
Speaker Change: So yeah, Harold first of all send our congratulations to Stephanie and her baby and we hope everything's going there and thanks for joining the call. So first I want to comment I'll, let Brad talk about the cadence.
Speaker Change: Want to make sure everybody realizes.
Speaker Change: We spent more gross capital when you add in that $51 million that we didn't pay for that we will be paying for here in Q1 to 2024 than any year in the history of the company.
Speaker Change: I've said from day, one I believe Theres a fleet strategy and we are implementing that we brought in a new head of fleet. We are working with our branches were making sure. We are upgrading that fleet that is critical to making sure. It represents our brand. So we made great progress last year and I know, there's some noise in <unk>.
Speaker Change: <unk>, So let me, let Brent Brent comment on that but I am so proud of the team for how much fleet, we were able to get as we went through 2024.
Speaker Change: Great question look I think there is that there is a timing difference here in our financials and hopefully related out pretty clear in the slide deck, but if you look at really free cash flow. This year at $145 million, we benefited from favorable negotiations with our fleet vendor, where we received fleet in 2024, but will pay for that fleet in 2025. This.
Speaker Change: Happens pretty much every year, but given the enhanced fleet strategy, we felt important to call out a number of this size since it was very significant. So if you think about our free cash flow Harald $145 million. This year normalized for the 50 of timing its right around $95 million and if you take our midpoint of our guide next year at 50.
Speaker Change: Again add back the timing that's going to happen in 'twenty five that's about 100. So the last two years of free cash flow, we're right around $95 million to $100 million. Great News is great news as the last three years of free cash flow conversion is right around 30%. When you think about our conversion, which is leaps and bounds ahead of where we were in 2022.
Speaker Change: When we have free cash flow conversion of almost zero. So fantastic progress on the balance sheet, we feel great about cash flow and we're going to continue like Dallas had to invest in our fleet and our equipment in and take care of our employees, who in turn take care of our customers our balance sheet. Harold is in the best shape, it's ever been as a company.
Speaker Change: Our debt is almost 50% of where it was in 2020% to 50% lower.
Our leverage is greater than 50% level, we've more than halved our leverage ratio our capex all while doing those two things is double right. We're spending more in our fleet more than our equipment to refresh refresh that strategy.
Speaker Change: Still have over $600 million of liquidity to reinvest back in the business. So we feel fantastic about where cash flow came in this year again normalizing for that timing difference, we feel great about where it is going to come in next year and still investing and executing on our fleet strategy.
Speaker Change: Thanks, guys. That's all from me.
Speaker Change: Hey, Thank you Harold.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question will come from Jeffrey Stevenson with loop capital. Please go ahead.
Jeffrey Stevenson: Hey, Thanks for taking my questions today and congrats on the strong results this year.
Speaker Change: So thanks, Jesse Yes expect another 60 to 100 basis points of maintenance margin expansion in fiscal 'twenty five and is this being largely driven by unexpected returned to positive revenue growth related to your one bright piece strategy or is there anything else that you would call out driving the stronger margin performance.
Jeffrey Stevenson: Next year.
Jeffrey Stevenson: Look I think I think it's a combination of multiple things growth organically is always the biggest lever Jeff if we can push more volume through our existing branches with our existing team members, that's always going to be the best business for us to grow as you know route density is something we are very focused on with.
Our branches, making sure we're optimizing our ability to service customers effectively.
So I think growth is a big part of it.
Jeffrey Stevenson: Don't underestimate that ancillary revenue when that customer retention the more we continue to improve customer retention the better our relationships are with customers the more they're going to be willing to spend on additional services, we've got to get away from having customers asking us questions.
<unk> service engaging on us on how to beautify their properties. So the more we spend servicing customers the more customer retention goes up the better off we're going to be but Brett you want to add anything yes, Jeff I think a lot is underpinned by growth.
Jeffrey Stevenson: What better positioned today than we've ever been from an operating leverage perspective, our SG&A on a TTM basis is down almost 100 basis points. So if you think about the size and scale advantage.
Jeffrey Stevenson: <unk> has a bright view and being able to use that operating leverage as an advantage as we grow dropping significant margin and the bottom line I think that's a big piece of it but there's a lot of factors that go into we're going to reinvest in the business where to make sure. We're taking care of our frontline employees were going to reinvest in the sales force. We've got some investments we're going to make this year too, but all that's incorporated into our <unk>.
Jeffrey Stevenson: And yes, we're getting back to where we went public you know it was 2018, we went public at about 12, 5% margins down.
Speaker Change: <unk> said I think his first first month in the chair two or three years will be back there while it's two years and if we hit this guy will essentially be back there at the end of 'twenty five so we feel great about the progress the company's making.
Speaker Change: Huge excitement in 2025.
Oh, that's great to hear and then have you seen.
Speaker Change: Sequential improvement in seller it maintenance demand as we move through the back half of the year from the increased customer retention rates and then benefits from commodity based depletion as well was previously delayed projects moving forward and then also as we look into next year are you expecting any benefit from a clean.
It's related to the recent hurricanes and would that be incremental to your guidance.
Speaker Change: Yes, yes, great question first of all first and foremost our employees are safe and our hearts are all for all the people affected by the named storms that occurred almost back to back across the state of Florida in the first one obviously all the way up into the Carolinas. So.
Speaker Change: We didn't build much into our guide we had got some early indication with the first storm of some opportunities, but I would tell you Jeff as soon as we started quoting work all of a sudden that second storm came in and it caused even more damage, which created even more clean up for us to do so a lot of our <unk>.
Speaker Change: Customers asked us to come out and re quote so we do see an opportunity for us to continue to see upside in that and I think Brad can comment on the trend that we've seen because it ties to what we're seeing in that core business shrinkage, but we are seeing as we improve retention customers requesting more and more.
Jeffrey Stevenson: More ancillary work, but Brad I'll, let you comment Hey, Jeff I'll comment again on this I mean, I think it's important just to.
Speaker Change: To drive home this point that the trend in the underlying core organic land business is really starting to turn the corner Q1 of last year, we shrunk 4% Q.
Speaker Change: Q2, Q3, shrunk, 3% and thank Tim mentioned earlier Q4 shrunk about 1%. So four went to three went to one and you look at kind of Q1 Q2, we've got the noise to step over in BFS in lawns, but we expect that one to shrink in Q1 in the quarter and get something closer to flat closer to flat in Q2 keep in mind, there's only.
Speaker Change: A third of our land business happens in the first half of the year, but at the time, we get to Q3 Q4 really the bulk of our land business. That's when we expect that trend that turned the corner and just continue to focus on taking care of our employees, who take care of our customers driving that customer attention.
Speaker Change: Investing in our sales force focused on the development conversions, but well we know the levers as Dale mentioned earlier, we do that we feel very confident that come Q3, Q4, we will see that that land growth engine starting to starting to take off.
Speaker Change: Great. Thank you.
Jeffrey Stevenson: Thank you thanks, Jeff again.
Speaker Change: Okay.
Speaker Change: For a final reminder, if you would like to ask a question at this time, Please press star one.
Speaker Change: And we'll pause just a moment to allow any additional questions to queue.
Speaker Change: Okay.
Speaker Change: And at this time I'm showing no further questions I'd like to turn the call back over to Mr. <unk> for closing remarks.
Speaker Change: Thank you operator.
Speaker Change: I'll close by reiterating that we have a growing level of confidence regarding the initiatives, we have in place and the impact they will have on revenue growth and the broader transformation of breakthrough.
Speaker Change: On February 19th we will share additional details during an investor day in New York City to elaborate on this as well as look at some long term outlooks.
Speaker Change: In closing.
Speaker Change: Our objectives are clear.
And we remain committed to becoming one bright view growing profitably and creating meaningful shareholder value.
Speaker Change: Thank you operator, and with that said you can now end the call.
Speaker Change: Thank you. This does conclude the bright view fourth quarter and full year 2024 earnings call. Please disconnect. Your line at this time and have a wonderful day.
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