Q1 2025 BrightView Holdings Inc Earnings Call
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Before trying to call over to Dale, I would like to highlight our upcoming investor day that we were hosting in New York City on February 19th.
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Standing by. Good morning and thank you for joining. Hughes first quarter earning my pleasure to the oversight and executive president of Finance and Brett Urban Investor in chief financialations officer, please go ahead on the call.
Oh now we're good for you to slide into 2 and 3. Thank you for joining the presentation, Bright Houston, 1st quarter, which can also be earnings call we found on our website L Asplin and contains bright pieces are safe hard president and for disclaimer chief executive.
Officer, our pre and presentation urban, she puts forward looking financial office statements are are on the subject call to risks and uncertainty. I'll refer you to slides to in addition, 3 of the present during the patient. The call it can all refer to to be found or non-gamer website financial banking measures contains our safe harbor disclaim see our pre.
released and RPK issued presentation yesterday for includes former reconciliation looking statements and these measures subject to risks and uncertainties.
In addition, during the call we will refer to certain non-GAAP financial measures.
stronger connections across the organization.
This is highly encouraging and proof the one bright new strategy is working and gaining traction.
The teams are working together to tackle the many initiatives underway and collectively sharing best practices.
Turning to slide 5.
All while building
I will provide a brief business update as well as hit on our 2025 priorities.
We delivered double digit growth on a year over year basis and expanded even down margins by 120 basis points with positive contributions from both segments.
We are on track to deliver on our previously provided 2025 financial guidance, which will result in another record Ibida year as our transformation continues.
Our outlook is underpinned by multiple initiatives underway.
This is driving improved employee turnover and higher customer retention rates.
Reconfirming our conviction in delivering land growth in the back half of this year.
This will ultimately improve our status as the employer and service provider of choice.
As we outlined in the bottom half of this slide, our objectives remain clear.
Continue to embrace a unified one bright Vie culture.
Prioritize our employees and customers to be the clear employer and service provider of choice.
And
Leverage our size and scale to further differentiate ourselves from the competition.
Moving on to slide 6. This highlights the success we are having in continuing to improve our employee turnover.
As we have previously discussed.
We are aggressively refreshing our fleet, including trucks, trailers, and mowers.
As an avenue to prioritize our employees.
This is not only resulted in further improvement in our employee turnover but it's also also resulting in fewer unplanned equipment failures and work stoppages and most importantly, these investments improve the quality of service we provide our customers.
In addition to our fleet strategy, we're also pivoting in certain markets to 4 10 hour days versus 58 hour days.
This benefit is very attractive to our front line as it provides more flexibility consistency and a reliable paycheck.
For instance, in the case of Are rain out day.
There is a possibility of working on the 5th day, so our frontline employees maintain a full week's worth of pay.
This is being well received by our customers as well.
As it provides added flexibility to stay on track with the service schedule and avoid the weekend work, which is discouraged by many of our customers.
We are also working towards offering more affordable health care benefits amongst other perks that we expect will continue to improve our employee turnover.
With that said
I believe the takeaway is clear and that is.
We are very well positioned to continue to improve our employee turnover trends.
Which in turn improves our quality of and consistency of service and ultimately solidifies our position in the marketplace as the service provider of choice.
Moving on to slide 7.
You can see the improved employee turnover trends are directly translating into higher customer retention rates as a result of improved communication.
Providing best in class service while delivering efficient collaborative and unified service as the one Bright View culture becomes further entrenched into our daily routines.
From a broader perspective.
We've come a long way in our journey of transforming Bright View.
But I wanna be crystal clear.
We are still in the early stages of the transformation.
As we continue down this path.
The benefits will be increasingly impaired in our financial results and we'll highlight the power of operating as a unified one bright view.
Turning to slide 8.
This is a high level recap but many of the key one breakthrough initiatives we have underway.
Well, there's a lot more to do.
We have made significant strides in my 1st 15 months and remain committed to continuing to deliver on our targets and initiatives.
This is positioned us to deliver a 2nd consecutive record year Ibida.
And return our land business to grow in the second half of 2025.
As we look ahead,
Significant opportunities remain with our focus on continuing to improve our employee turnover and customer retention.
While also leveraging our size and scale.
We will go into much greater details on many of these topics during our investor day.
But it is clear.
There is much more to achieve which will result in sustainable profitable growth and shareholder value creation.
With that said, I will now turn the call over to Brett.
Right
Thank you, Dale and good morning to everyone.
Before I start with my prepared remarks, I share Dale's conviction in our transformation and could it be more enthusiastic about the energy and momentum that continues to build.
This passion coupled with clear internal and external communication.
Will further drive success in our broad-based and strategic transformation.
I'll start on slide 10.
Total revenue for the 1st quarter was $599 million which is a modest increase when adjusting for the unwinding of the BES business and the sale of US lawns in the prior year.
In maintenance, we are increasingly encouraged by the underlying trends in our land business, notably improved employee turnover and customer retention.
And our continued focus on cross selling as well as route density.
Which will further contribute to our long term profitable growth strategy.
Now in the quarter was relatively flat to the prior year in our core maintenance business.
Switching to the development business.
Revenue increased 3.5% as a result of the ongoing conversion of our high quality backlog.
As we continue to further align our one bright view culture.
We are seeing a growing number of cross selling opportunities to convert development work into recurring maintenance contracts.
This serves as one of the many levers that will contribute to sustainable top line growth.
Moving on to slide 11, we highlight a variety of factors that are driving the path to court land growth.
As you can see on the right of the slide.
We are achieving consistent improvement and the momentum continues to build.
With progress in multiple initiatives on the left hand side of the slide, including improvement in front line turnover and in customer retention.
We remain highly confident this trend will continue.
Turning down a profitability on slide 12.
To adjusted Eberta for the 1st quarter was $52.1 million an increase of $5.4 million or 12% higher first the prior year period.
Adjusted he bit down margins, expanded by 120 basis points, which marks the 7th consecutive quarter of year over year margin expansion on a company-wide basis.
The adjusted margin and the maintenance segment expanded 140 basis points.
As we continue to structurally improve this business.
Through ongoing cost and efficiency initiatives.
The benefits of the stronger operating leverage will be exponentially compounded.
When we return land to revenue growth.
In the development segment, adjusted Eberta for the first quarter was $17.5 million.
This represents another record 1st quarter for this segment.
You adjusted even down margin, expanded 80 basis points which was driven by continued success in converting our high quality backlog and further cost efficiencies.
Now let's turn to slide 13 to review our capital expenditures, adjusted free cash flow and leverage.
As expected, we continue to execute our capital allocation and fleet strategy.
Which resulted in a significant increase in capital expenditures.
The highest level in a single quarter since we've been public.
As we continue to diligently reinvest in our employees and our customers.
Adjusted free cash flow results for the quarter we're extremely strong when considering the timing of capital expenditures.
These investments will be better position us for future sustainable growth.
Net leverage at the end of the 1st quarter came in at 2.3 times.
Which compares the 2.9 times in the prior year period.
This was driven by lower debt levels, improved profitability and improved liquidity.
The improved leverage dynamics provides significant financial flexibility for continued investment in our employees.
Our fleet strategy.
And future opportunities to deliver profitable growth in the business.
On slide 14, we further elaborate on our strategic actions we have taken to fortify the balance sheet.
We recently completed another repricing of our $738 million term loan, which isn't due until 2029.
The repricing reduces the interest rate by another 50 basis points.
Coupled with the reprice for May 2024.
Our interest rate is favorable by 100 basis points.
Which will result in cash interest savings of approximately $7.5 million annually.
And $35 million of savings through maturity.
This ongoing proactive management of our balance sheet further demonstrates we are well positioned to continue to reinvest in the business and drive long term shareholder value.
Moving to slide 15.
We are reiterating our fiscal 25 revenue Ibida and adjust it free cash flow guidance, which all remain unchanged.
On this side
We outline our guidance, which translates to another record breaking year in Ibida and continued margin expansion.
Additionally, our free cash flow guidance, coupled with ample liquidity.
Provide significant financial flexibility to continue to reinvest in the business.
Before turning the call back over to Dale, I wanna thank every one of my 20,000 teammates who are quickly embracing the one bright view strategy.
Which is integral to our continued success.
Taking into consideration the wide scope of strategic initiatives underway.
Coupled with our lien capital structure and significant adjusted free cash flow generation.
We are very well positioned to return to land growth and deliver a second consecutive EBA record in 2025.
With this said, I'm highly confident in saying the financial benefits have only just begun.
With that, let me now turn the call back to Dale to wrap up on slide 16.
Thanks Brett
Before we open the call for questions, I also want to say how proud I am of all of our employees.
I have said from day one.
As we continue to prioritize our employees.
Put our customers first.
Leverage our size and scale.
And be diligent with our capital allocations.
This will result in sustainable profitable growth.
And deliver significant long term shareholder value.
Lastly, I encourage our existing and potential shareholders to join us for our investor day on February 19th.
We will be sharing a lot of new details that will provide further clarity regarding our path to long term profitable growth.
Operator, you can now open the call for questions.
Thank you, we will now open the line for questions if you would like to ask a question at this time, please press star one on your telephone keypad.
Again, you may remove yourself at any time by pressing 2.
Once again, if you would like to ask a question, please press star one at this time.
And we'll pause just a moment to allow questions to queue.
Thank you and we'll take our first question from Tim Mulroney with William Blair. Please go ahead.
Dale Brett, good morning.
Good morning Tim.
Uh, I just want a level set on your expectations for maintenance land organic growth this year, I think.
I think last time we spoke you expected core growth to infect into positive territory.
Um, and that sometime at the in the second half of this year if I'm not mistaken, is that, is that still your expectation? Can you just talk a little bit about.
Uh, your expectation for the, the trajectory of the, the core land organic growth.
Yeah,
Uh, I would start and I'll let Brett add but you can see the momentum that we showed every quarter we're getting closer and closer to a break even point obviously Q2 is our lowest land revenue quarter and it can be the most impacted by weather. So what we've said is exactly right what we're still committing to our focus is to make sure just like we've been growing development in the back half of this year, we move our land business to that more
normalized growth to fuel our future profitable growth, so we are committed to him to hitting that as our target and it is our key to our future, growing our land business just like we've grown development all while being diligent on our overheads and cost structure, but Brad, do you wanna add anything? Yeah, Tim, I would reiterate Dale's confidence. I mean, you look at page 11 of the presentation we're doing all the right things in the last 15 months and salesman on board to take care of our employees.
care of our customers we're continuing continuing to see momentum building and customer retention improvement, so that's been great and we're investing in our fleet in other areas to drive that land growth back into the positive territory and every quarter that goes by, you start to see the momentum building of that kicking up now to that positive trajectory so we feel great sitting here today that the second half of the year we will return land to growth.
OK, that's very helpful, thank you, and I also noticed.
slide 7 for the presentation there um.
On customer
Which also continues to build in the right direction, I guess I'm curious how how far along.
The journey uh for better customer attention do you think you are at this point? Is there?
Is there still more room to run here or are you kind of the low hanging fruit's been picked if you, you know, if you, I guess, uh, one way to do it would be like looking at the company average versus your higher performing branches, but however you wanna talk about it, um, just looking to have a conversation about that. Thank you.
He had some great questions. What we've been preaching now for several quarters is the importance of customer retention.
There's no metric more important than us taking care of our existing customers.
And we are gonna unpack why this metric is so critical as we get to our investor day on February 19th because this is the metric that drives our ability to grow and you said it to him when we see.
Customer retention at a certain level.
We can absolutely grow this business organically.
Now, if they're below a certain level, it creates significant headwind to grow and we're gonna unpack that at the meeting just to remind you, every quarter we see positive momentum as you noted.
When I joined 15 months ago and we'll get details on February 19th, our customer retention was at all time low levels.
We are now showing positive momentum for my 5 quarters. So do I think we're anywhere near where the possibility is, heck no, the company went public, we were around 85% we said we dropped roughly 500 basis points ish over the 1st 5 years of being public, I would just say that can't be our goal. We got to drive that retention above that 85% and there's still a lot of room to go, so this.
is our opportunity to take better care of our customers, year one you saw in the previous slide employee retention has come a long way. That's gonna drive this metric for years to come, so we're far if you want to put it in an analogy of baseball, we're still in the early innings from where we can be on this metric so we look at it every month we're excited we're building momentum and that's gonna keep going, but Bret, you wanna add for Tim anything? No, I would agree. I mean.
Continuous Momentum 5 quarters in a row since they all started of of continuing customer retention improvement and is the most important metric in the business for long term sustainable growth.
And now that that metric is trending in the right direction, you're gonna start to see us ramp up our, our sales force as we get to the back half of this year that really put the gas pedal down on land growth so we had to make sure that customer retention is trending in the right direction and that foundation of taking care of our customers has been fortified before we start to invest heavily in sales but you're gonna start to see us repurpose some of our dollars towards our sales team in the back half of this year.
Hello.
Hey, thanks, Tim.
Thank you. Our next question will come from Bob Blavick with CGS CGS Securities, please go ahead.
Congrats on a nice start to the fiscal year.
Thanks Bob.
Morning. Yeah, um, so obviously you've been showing very strong uh Ebita margin growth, I think you said 7 straight quarters. I think it's 120 basis points here.
Um
Looking ahead, what are the biggest components to future.
You know, margin lift.
And can you quantify, you know, maybe where margins can go over the next, I don't know 35 years, medium term, uh, outlook.
Yeah.
Good question. I don't wanna steal all the thunder that we have coming up for investor day, but on the 19th we're gonna share a lot of details on the levers we can pull, we are just getting started this business should operate with margins well in the mid teens and we'll give you that half Bob, but they are the basic things that we should be able to leverage with the size and scale of the business, simple things like procurement initiatives with better labor management tools to.
Service our customers more effectively.
Uh, fleet management, which Brett's gonna talk about or has talked about on his opening script just how much we've invested in capital and the improvement that keeps showing and the quality of service we give our customers and then the ability to leverage our size and scales by centralizing the non-customer facing activities, so our branches can focus on growth, so we have, we have so many levers to pull, Bob, that's what's exciting. We are just getting started.
15 months in and if I really look at the margin expansion opportunity we're probably only more like 3 quarters in.
So the 1st 6 months took me to get some visibility and listen to our team in the field, but the last several quarters we're gaining momentum and you said it 120 basis point improvement, 140 basis points improvement in our maintenance business and still expand our development business by 80 basis points in what is one of our lowest quarters.
It's just a great, great story and it just shows the momentum as we build and I, I hate to even say this, Bob, but Brett and I talk about it all the time. I hate to even guess a number because we're gonna be wrong. Our ability to keep driving that is a dependency on how well we can use technology, how well as a team we can work together and then inevitably how much growth we can do internally because that flow through should produce even more margin expansion, but.
I'll let you add anything you wanna add. No, but I think they'll hit all the high points. I mean we have such opportunity to leverage our size and scale if you look at our development business in the quarter they grew the revenue just over $6.5 million and they grew their Ibida by 2 million. That's the operating leverage we plan to see in the land business when we return to growth we feel like our cost structure is in a great place. The full your guide margin improvements 40 to 80 basis points we just put up 120 in Q1. Keep in mind it's
lowest but the quarter out of all four quarters, but we feel great about where this business is trending from a margin expansion standpoint.
All right, super. I don't wanna steal too much more from the 19th, but um just in general, um, is this margin expansion over the next, you know, 35 years, medium term, is it mostly gonna come for maintenance? Is it coming from development as well? Are there, you know, equal opportunities or where do you see, you know, the lion's share of the margin expansion coming from.
I think all the initiatives that I mentioned earlier, Bob, will benefit both segments of our business.
We do not want to have walls and that's one of the big keys to one bright view breaking down those former silos so we support the whole business, anything we can centralize to take advantage of our size and scale we'll hope our maintenance business as much as our development business.
Any procurement we can do to benefit could really help the development side while helping us on the maintenance side.
I mean we've got all these levers that we talked about fleet improvement, all those things we used to spend money on maintenance, it's gonna fall on both sides of of our segments, both maintenance and development so I it's so exciting, Bob, when you start laying out what that future path can look like because it's not just one level of our business, it's both segments that we can help improve and drive long term benefit on both Ebado and Ebada margin as we continue to work forward.
Anything? No, I would agree. I mean, there's so many opportunities ahead of us if you think about.
You know, what's, what's, what's the path forward? I don't wanna steal too much thunder from investor day in 2 weeks. We're gonna share a lot of this and, and the plan to, you know, the plan to get a margin expansion, revenue growth and how we're gonna unlock these levers, but we have such opportunity ahead I think what you saw in in Q1 with over 100 basis points and margin expansion and you hear in my script, I think the financial benefits have only just begun.
All right, super. Well I'm looking forward to seeing everyone in a couple weeks. Thanks.
Are you then Bob. Thank you.
Thank you. Our next question will come from Greg Tom with Craig Hallam Capital Group. Please go ahead.
Yeah, thanks, uh, more than everybody. Congrats on the uh continued progress here. I wanted to maybe dig into the labor uh a bit more to start because that just seems to be a topic on everyone's minds lately you're a large employer, so I'm, I'm curious, what are you seeing in terms of availability, any inflationary concerns you're worried about and you know I seems like you're putting a huge emphasis on, you know, a bunch of items that can maybe you know help continue to reduce turnover so you know just help us understand how all these things.
you're doing might not end up being a competitive advantage.
Yeah, yeah. Good question. It's a topic that we keep getting from many of our investors right now, Greg, so I think it's worth spending a minute on this.
First, I think we should step back instead of just talking about labor, let's talk about all the changes happening and like everyone we are closely following any developments with the new administration.
We think
Challenges and some of the things that are occurring can be right now with the uh like tariffs that we're gonna come on and we pulled them back, we are positioned very well and there is substantial benefit from things like bonus depreciation, uh, tax regulation and goodwill, so we are positioned very well now probably the one that we get asked the most is exactly what you said about our labor and our labor force, so we put early in our presentation, the trend.
seeing on our front line workforce. Let me just share with you some things that we're seeing.
Our average frontline employee has over 5 years of tenure with the with the company so we have a very solid group of frontline employees.
We already verified. We have great long term employees we are very well positioned if there is some type of challenge in the end market labor. Now on top of that, what's driving our customer or our employee turnover to continue to decline our simple things we've done to take better care of those employees. I've said from day one they are the key to taking better care of our customers.
We've talked about the boots program that we made sure they had proper foot attire to help them do their jobs. We talk about how we're focused on taking care of them safely.
In my script I talked about where we can we've leveraged different work schedules so they can make sure they get a reliable paycheck every week.
We talked about our benefit cost reductions. All these things are frontline employees are realizing the importance they have in our business, so we are very, very well positioned. We're not done. We're gonna keep pushing on many levers that we can do, but I just wanna say if you think about that tenure, our biggest turnover challenge in the past wasn't our overall front line labor group. It was that bottom 10 or 15% of our employees that we were constantly turning.
over. We continue to see that turn shrink as our new employees that come in feel better about the the company they work for. In fact,
I'll give one more touch point we're gonna unpack all this at investor day.
We recently did an employee engagement survey for the first time in 2 years and we look back at the results from this year versus 2 years ago, the biggest improvement we saw in engaged employees came from our hourly workforce on the front line.
For the first time they feel like we are looking out for their better behalf. We have set it from day one we have to be the employer of choice. We want people that want to be in the landscape industry to want to work for bright view and we've come so far in that journey and we're in a great spot, but Brett, you wanna add? Yes, no, I think that's right on. I think 2 years ago, Greg, if you would have asked us this question around potential immigration reform or changes coming in the labor market.
Would have been a little bit more nervous to answer it, but we feel more confident than ever that given how we're taking care of our employees that turnover coming down significantly our average tenure of our employee in the front line being above 5 years, the more we can just do the right things by our employees, take care of them, the less reliant everything else becomes for us and we feel extremely confident to be able to service our customers just as you would any other season regardless of what happens in the labor market.
Yeah, makes sense appreciate that that color and then my, my second question surrounds ancillary revenue and I'm just kind of curious what your what you're seeing there if you know you're seeing any improvement yet how much of that is is tied to customer retention just trying to get a better sense of, you know, how big of a lever this could be in in terms of you know accelerating or at least you know ramping up in in in line with that expectation of.
Uh, returning the core land organic growth.
Yeah, let me start at the highest level with a simple theme. Happy customers trust you to do more discretionary work.
So, the longer you can drive customer retention, the happier your customers are, the more they wanna talk to you about additional projects on their property, so and we're gonna share a lot of that data at investor day. It is directly correlated, Greg.
I would tell you we saw in our first quarter, everybody saw what there was a couple of storms that hit from a hurricanes that hit across Florida. A little bit of a challenge we saw was the first storm hit September 26th and then quickly there was another storm that developed, which hit October 9th. So while we saw some clean up after the October 9th, there wasn't much work happening as people prepared and didn't clean up from the first storm as they got ready for the.
2nd 1 to come in.
So we had a de minimis effect basically from the storm, but I would tell you this, Greg, we've seen in the majority of our markets well over 50% in fact 2/3, we've actually returned to a more stable year over year ancillary level and we only have two markets right now that we're actually showing some headwinds on ancillary so keep driving customer retention, it's gonna keep fueling that discretionary spend they have, but we feel great we.
feel even the markets while this mark while this quarter is our lowest land quarter and it can be the most impacted by weather. We feel like we're positioned well for the back half of the year to see all of our markets return to more positive nature on ancillary revenue, but Greg, any or Brad anything, no, I would, I would, I would, uh, go to Dale's highest comment the, the longer customers stay with us, the happier they are, which generally translates to them trusting us more to do additional work.
There's a direct correlation between our.
Momentum building in land growth and the momentum we've seen in customer retention, so a lot more to come on investor day. We'll share a lot more about that correlation, but we're excited on the momentum and the path that the business is taken forward.
Yeah, well, look forward to digging into this and seeing all you guys in a couple weeks. Thanks.
Hey thank you Greg see you Greg.
Thank you. Our next question will come from Jeffrey Stevenson with Loop Capital. Please go ahead.
Hey, thanks for taking my questions and congrats on a nice quarter.
I wanted to ask what were the primary drivers of the outsized maintenance margin expansion during the quarter compared with your annual guidance and you know how we should think about the cadence of maintenance margin expansion as we move through fiscal 25.
Yeah, so good question Jeff, obviously if you think about that maintenance margin expansion 140 basis points in the quarter year over year, it's great results. Now many people on the call that followed the story for the last 15 months, you're in one quarter saw last year we restructured our go to market by putting our sales reps in our branch by changing the overhead structure to make sure our regional teams were over both maintenance and development.
and just get everybody working better together that created some significant SGNA save overall on the business that carried through into the first quarter, which really drove that margin impact for this quarter now roughly that's about $10 million of SGNA save that we got in the quarter and we invested a lot of that back into different areas like our front line labor. I've said it from day one.
Some of the problems we had on customer service was trying to squeeze that front line workforce too hard to do the work and not giving them enough time to service our customers. We are now investing that money, servicing our customers better and it's gonna continue to go in uh in our customer retention as we will move forward. The one thing I would say if you talk about just cadence at a high level as we lap that by the time we get to the end of Q2, we'll have that no longer is a huge.
Benefit, but Brett said it earlier, as we start growing this business and we get flow through above our margins we see the opportunity to continue to show expansion. Great quarter. We're gonna keep focused. We're gonna keep pushing and we think we're gonna continue to drive margin expansion through the year. Yeah, I'd agree with that, uh, Jeff. This is Brett, you know, our guide for the year is to improve maintenance margins to 12 6 to 13% so we're in that range which is.
60 to 100 basis points.
Obviously the 1st quarter blew through that from a from an expectation standpoint, but then again we're gonna start, you know, investing in our sellers, making sure our sales force is ramped up and get ready for that land growth in the back half of the year, but I will say we feel extremely confident on that maintenance margin expansion guide for for the year.
Oh, that's great to hear, Brett. No, thanks for that and um you know it's been a cold start to the year and most seasonal markets which should help your snow removal business and you know just wondered if you've had any initial success increasing your fixed contract concentration in your snow business or whether it'll take a winner with elevated snow levels to result in a meaningful shift, um, you know, toward Bics from, uh, uh, variable on the following year.
Yeah, Jeff, great.
Point, I think the year after you get a lot of volume is usually the best time where customers want to be more uh willing to spread those costs through the season with a fixed type rate over the variable that they might get hit with 1 or 2 months and like you said some of the markets that we've actually seen snow, the traditionally, we don't get snow, but we saw snow in the panhandle of Florida this year. Uh, I didn't stay long and it melted pretty quick, but you get snow across Georgia, across the Carolinas.
to Virginia DC some of those markets are ones where customers wanna try to set up on more of a fixed schedule so we made progress last year in some markets, but I will tell you this year we'll just further give us the ability as we work with our customers on land and snow going into 2026 to continue that shift to make sure we're positioned well we're happy with where we finished snow, obviously we had the unwind of the BES business, but our core business was actually.
up 2 million on snow revenue, so it was a great story for us and we'll continue to do it. Our focus.
It's simple. We're gonna share this set investor today.
We want to take care of our customers all year round, we wanna make sure if they use us for land, we take care of them in the seasonal time when they need snow removal.
we got a partner with them because there is a fixed cost for keeping people to make sure we can do it and when the problems come with weather, they need us to be there and make sure that their properties are safe for their employees, so we're, we're probably making his progress as I expected, but this is gonna position us Jeff for next year to take it to the next step.
Hope that answers your question.
No, it does. No, thank you and uh I look forward to seeing everyone in a few weeks.
We'll see you in New York.
Thank you. Our next question will come from George Tong with Goldman Sachs. Please go ahead.
Hi, thanks, good morning, uh, you talked about uh ancillary.
Hi Bill, um, you talked about ancillary revenue, uh, headwinds in your landscape maintenance business and two of your regions can you talk more about characteristics in these two markets that contributed to lower ancillary demand. Uh, in other words, what separates these two markets from other markets that you have.
Look, I, I, I've got many markets obviously I would tell you a couple of them have a little more tree revenue that we saw some headwind George, but there's so much opportunity across the country to try to drive future ancillary revenue like I said earlier, ancillary is simple.
Where you have happy customers, they spend discretionary costs money if you ask me what could be a correlation? Maybe some of those markets, our retention is not as high as some of the markets that are growing ancillary so it's a direct correlation we know what we can do to fix it. We're preaching to every branch manager, every team we have in this company.
It all starts with customer retention and making sure you communicate with your customers and they're happy, so I would, I would tell you we're gonna show it in a couple weeks you're gonna see that correlation and that's why we are so focused on customer retention, customer retention, customer retention, and George, I just had, I mean, we don't provide quarterly guidance, but you know if you think about Q1 from a revenue standpoint, it's exactly where we expected it to be from a noncore perspective and from a core perspective we.
mentioned we have some things to step over in the first two quarters of the year. A lot of our transformational team strategy happened in the back half of last year, so still taking some time to, you know, to get adopted out there in the field, but it's exactly where we expected it to be and when we we return land to growth in the back half of the year, that's when you're really gonna start to see these benefits exponentially compound in the financial statements.
Got it. That makes sense. I'm, I'm related to that with your expectations of uh improving core landscape maintenance revenue growth in the second half of the year. How much of that is dependent on ancillary revenues improving versus other internal initiatives you may have like increase cross selling.
Yeah, look, I think it's all gonna contribute we're gonna unpack how we plan to be able to to grow land we're not, but there's so many moving pieces, George, we're not committed on any one magic that the development and maintenance conversion we continue to see momentum there and where we continue to see momentum contract revenue we continue to see momentum we're not relying on only one metric. Every one of these things are gonna add value for our ability to grow in the second half. Look, we want
service our customers happier customers wanna do more discretionary work with you, that just shows me we have happy customers and I feel like that'll translate to even higher retention, so these are just, they're all levers that we've got to watch and pull as often as we can. There's not one more important than the other. Getting a customer that we do development and turning them into a happy maintenance customer is just as critical as getting ancillary work, making sure our customer retention grows is just as critical as.
Get the development work so we're pulling all the levers that are cheap commercial officer Michael Dozier works on this every week, so he's focused his focus can be with his teams.
Very helpful, thank you.
Thanks George.
Thank you. Our next question will come from Andy Whitman with Baird. Please go ahead.
Great, uh thanks for taking my questions and uh I guess my, my first question here is related to the guidance which at a high level is unchanged but it looks like some of the assumptions in the footnotes have changed a little bit, so I wanted to have you guys just talk and explain this a little bit but last quarter, uh, you were estimating that the non-core impact from BES and US law and uh runoff was gonna be $20 million but this quarter it's up to $28 million yet your revenue guidance is unchanged, so I guess kind of a two part question.
First part being uh how what was the difference in that? How did that increase from 20 to 28 like I would have thought you had, you would have had pretty good insight as to what that number was going to be and then second of all, like your, your headline revenue guidance isn't changed, so I was just wondering if there if the quarter.
If, if something changed in your outlook that offsets that or if that's just normal $8 million and it's a wide range, so we don't care. I suspect it's the latter, but, but just thought I'd give you a chance to address that.
Yeah, yeah, great question. I'll let the BES unwind and the final sale of US lawns which occurred in the mid January last year and that'll all be lapped here in Q2. I'll let, I'll let Brett walk you through the math. I think you had said it, Andy, we have 2 buckets for that first was what we had said on the land side Bret will walk you through that, but then there's also the impact of snow. We saw BES snow be 9 million in the quarter and then we said it's gonna be 33.
million, so 24 million more in Q2, but let me let Brett add in his bridge of where he was and where we are for the unwind of those two things going from our estimated 20 to the new 28 and a good clarification question. I, I'd say first and foremost the decisions we made a year ago to unwind our BES business and to sell our franchise business is absolutely the right decisions. I think Dale and I, you know, will be extremely happy when we get to the end of Q2. We don't have to talk about non-core versus core anymore.
I think that's the, that's the big takeaway, but, but from last guy to this guy, we said 15 and 5 for BES landline 15 million step over in Q15 million step over in Q2 from a land perspective, the one piece we really should have clarified and and we can now as the US lawns business US lawns business produces about $5 million of revenue in Q1 last year, so that's the bridge between the 15 plus the 5 gets to the 20, and then last year we did have it for one month before we execute that.
They also had a few million dollars US laws. That's really the difference in the land bridge and the footnote on on the guide, but look, I think they're absolutely proven to be the right decisions to exit the BES business and to sell the franchise business in US lawns and we'll be very excited when we get to Q3 and this non-core core description is behind us.
Yeah, OK.
Um, all right, I just wanna talk next a little bit about the development uh backlog maybe I missed it, maybe you didn't say it. Can you just tell us on a year over year basis, um.
How that's trending is that if quantification would be great, uh, if you have it and then just uh wanted to compare that against your revenue guidance and and any discrepancies between the the difference in the the backlog growth and the and the difference in the expected revenue growth that you're seeing this year in development. I mean, development's obviously good, but uh I think your backlog, if I'm not mistaken, is up a lot more than even the high end of that revenue development range, so I just thought I'd have your comments on why there might be a difference there.
Yeah, I'll, I'll let Bret walk you through the financial part of it, Andy, but let me just say this, we're coming up to great growth years for our development group, our development team is feeding our maintenance team as we talked about with that development to maintenance conversion we feel great about the business, we're not gonna say we're gonna come in at the 3% level or the 6% level obviously we gave a pretty broad range, but any growth in that business to fuel the company to continue to grow and give us more
Foremost, the growth in that business the last two years sequentially has been 8% and 7% growth, so we feel fantastic for coming up to 2 banner years the backlog is right around $900 million in that business, which keep in mind is this year and next year, right? We're selling into next year at this point our backlog for this year is essentially full we're selling in the 2026 revenues at this point, you know, generally, and you could think about backlog you up about 6 to 7%.
If you look at kind of the financials specifically in the queue are more than one year backlog is up about 6%, so just keep in mind we are selling out beyond that 12 month period, but we feel great about the growth in the backlog. timing will always have a little bit of an issue in development, you know, if we have a heavier winter could be a, a lighter, you know, growth rates and development we have some GCs or projects that push or pull into months or quarters, but generally between that 3 and 6% guide we feel really, really strong that that business will.
be growing again in fiscal 25.
OK
If you'll afford me a third question here. I, I guess I wanted to go back to the margins just one more time because I think it's a really important part of this quarter you've addressed some of this already, but you know.
You know, the quarter 120 basis points year over year is very good. The guidance is looking for less than that on an annual basis.
So, and you're talking about, you know, once you get back to growth, I think you said that the margin improvement story will be exponentially better, so all of the so it was there something in the in the comp year on the margin that that made, you know, this level of 120 like too high.
It, it just feels like the indications and and this is like you guys are doing great work. This is a lot of margin, so I'm not saying that it just feels like.
As I hear the comments here, it kind of feels like there should be more so maybe this is a what am I missing question? Maybe it's something in the comp or or something else, uh, and I just thought maybe I'd give you a chance to address this 111 more time and maybe in a little bit different way thanks. Yeah, let me start at eye level. Don't anchor on the midpoint. I know that if you anchor on the midpoint on revenue and Ebida you probably see margin that doesn't look as aggressive in the back half of the year.
We have a wide range, 335 to 355 and that's gonna drive a pretty big range on the margin. I would say, Andy, if there is anything beneficial this quarter that won't be as beneficial come Q3 and Q4. It's a lot of those structural changes we made in Q2.
If we were able to get a benefit now we have other changes that were well under way right now to continue to drive margin expansion and as we get through Q2 we see what the weather does and we see where we're at, we'll update everybody going into Q3 of where we're at, but we feel great we're not saying, you know, that we're not gonna hit our previously stated multiple year goal of getting 100 basis points improvement every year and I know at the midpoint basically saying we're gonna get 80 bis.
this year, our goal is to continue to improve. We had 110 last year. We're gonna push for you guys every quarter all year long to make sure we get everything that's available and try to get all those levers pulled as we go but yeah, we feel great about the opportunity and margins, Andy appreciate the the opportunity to add a little bit more clarity, you know, we finished last year at 11.7% margins for the company on a TTM basis including Q1 we have $330 million of TTME but da.
Which is fantastic that continues to grow and be a record TTM for the company from a margin perspective we're now north of 12% from a TTM perspective, so you know, plus 30 to 40 basis points is coming out of Q1. We are gonna make some investments in the business and sellers and things like that, but we feel great about the margin opportunity this year in the business and we're gonna continue to look at the guide and andunities there, but we feel great about the margin expansion opportunity.
Thanks guys talk to you in a couple weeks.
Alright Andy thank you talk soon.
Thank you, we'll take our next question from Harold Antor with Jeffrey. Please go ahead.
Hello, this is Harold onto on for Stephanie Moore, so I know you guys have talked about um wrapping up your sales force and I know you've been making investments there, so could you just help us, you know, um, how many sales people, uh, do you have now? how many have you hired? Uh, how many do you plan to hire during the year and then um what's the time frame that it takes for these people, uh, to wrap up uh become productive.
Yeah, so let's talk about our customer interfacing employees so we have two types of buckets here. We have our new sales sales people that go out and get us new business and then we had the people selling ancillary and servicing our customers every month our account managers, our goal is to grow both those groups, Harold, and continue to invest in it now without giving a numerical number, here's what I'm gonna tell you.
We had to fix our customer retention and get it moving in the right direction before we worry about bringing in more customers just to turn it. This is a service business we have to serve our customers and be the best in the industry.
As we do that, we are gonna invest and as we see those investments create value, we'll invest more. I think we have huge opportunity to make sure we have more feet on the street to go out and get us new customers. Our reputation as those people are going around, has to be working with Bright View is working with the best landscape company in the industry, so I, I, without sharing it just the number, I'll tell you we're gonna add significant resources. The timing on it is yet to be determined.
We've added some here and 1 and Q2, but we're gonna significantly ramp up as our branches continue to get stable and we continue to grow right? Howard I'll just add to it the beauty of what we're doing now is we absolutely have the leverage and the operating leverage to afford to to invest now back into the business.
Our TTM SGNA from a from a CTM standpoint is down over 100 basis points from last year, so you think about that SGNA savings we have we're gonna continue to centralize, create size and scale advantages for the GNA portion of that and we're gonna turn around and take some of those dollars and reinvest them back into S to grow our sales force not only can we do that through a P&L standpoint but from a balance sheet standpoint we have ample.
as you can see in some of the slides we provided over $550 million to invest in our sellers into technology to help them sell into equipment to help them perform service for our customers in a more efficient way so we're not only best positioned from a P&L standpoint and the GNA savings we have to make this investment, but we're the best position we've ever been from a balance sheet to support that investment and support the equipment needed to service our customers.
Yeah, and I think, um, I guess, um, just on that equipment point I know, you know, uh, you, uh, invested considerable resources, um, in your fleet mode in your fleet which is trucks, motors, etc. so just I guess help us understand how many trucks and mowers, uh, have you purchased and plan to purchase during during the year, uh, how do you expect that to, um, impact, you know, I guess, uh, repair maintenance costs and improvement of service level.
Technician cost, etc. and if you could discuss, you know, how else you think about capital allocation.
Um, in the box, uh, and, and the for the rest of the year given um leverages.
Trending, um, um, pretty attractive right now. Thank you.
Yeah, I'll let Brett do the math for you, Harold, but here's what I can tell you. I enjoy spending a big portion of my time out with our teams in the field and visiting branches.
The improvement in the equipment that they have to service our customers.
Is enormous over the last 15 months.
And
The attitude of our employees to realize if they grow we're gonna give them equipment to fund that growth is a big change from where they were a year ago when they couldn't even keep their current fleet at the levels they need. So let's just.
Keep it at cultural in my comment, I feel like we have come so far, we're yet to finish. We got some work for different products like trailers and trucks, but Brett will give you the math culturally, people are seeing a significant difference. Both internally and our customers in the image that we're showing up on their job sites, but Brett, you can, yeah, we'll, we'll, uh, we'll leave some meat in the bone here, Harold for Investor Day on February 19th to talk about kind of all the strategies in place, but I'll give you a.
Just one, you know, I'll talk about our core mower fleet for a second. You go back 2 years ago we've had mowers in our fleet that were 456 years old, constantly breaking down, how to get repairs and maintenance's been a rent mowers where things broke down. That's not only cost.
To the company that's poor employee satisfaction and it's poor customer satisfaction, right? Happy to report we have 7500 core mowers in our fleet for Bright View. By the time we get to the end of this spring, we would have replaced every single one of those 7500 core mowers and we won't have one mower in the fleet that's older than 15 months old, so that's what a virtuous cycle looks like when we get to next year and we start.
flipping those mowers and keeping the age about 12 to 15 months, we're gonna start selling them at 40 to 50 cents on the dollar, where this year you can look at our cash flow statement we're selling for pennies on the dollar now we look at residual so we're gonna create that virtuous cycle. I gave you one, example here for mowers, but we'll provide a whole lot more on February 19th at our investor day.
Thanks for all the color guys and good job on the quarter.
Thanks Harold, thanks Harold.
Thank you. Our next question will come from Andrew Steinerman with JP Morgan. Please go ahead.
Hi guys, this is Alex Hess on for Andrew. I hope you're all well, um, wanna start with maybe drilling down to another level of precision on the chart on slide 11.
Uh, by my mask.
You saw in the core.
something like a 10.
Basis point quarter on quarter improvement in that core decline.
So, so just confirming that that was 1.5% decline year on year.
Core in Fork you land.
And then 1.4% last quarter and then I have some follow ups on this but just it's important.
Yeah, let's just make sure your models are right. We're in a fiscal quarter, so Q1 would be your math, not Q4, just make sure we're we're aligned there, but you know we're, we're on.
Yeah, you're doing your math right. Look, we continue to see sequential improvement if you wanna break it down to the decimal, it was smaller than what's on the chart, but look, we continue to see sequential improvement and as I mentioned earlier on the call if we provided to one guidance, it would be exactly where we expect it to be. We tried to give some bread crumbs on last call around when we expect land to return to growth, which we've clearly said would be the second half of the year, so we feel just as confident as we did 90 days ago and reiterating that.
guidance that we feel confident that land will return to growth in the second half of this year and all that non-core stuff, Alex, as you are very very well aware of what we behind us once we get past Q2 this year.
Great and then just staying on the subject.
You know, it, you did laugh a a
Notably easier year ago compare.
In one queue then then in the prior quarter.
Um
I'm just trying to understand was there any aspect of the core where performance for whatever reason, you know, it was tougher in, in this most recent quarter than in the prior quarter.
Yeah, it's I'll just comment here for a second mathematically. I mean, you adjust for the non-core businesses and snow US lawns and land impact we grew the business in Q1. I know that gets muddied in in the conversation here but development grew we had a small core growth in our snow and then as expected, you know, we're still ramping up that land business with fixing customer retention employee turnover, etc. so as expected and you adjust for those non non core businesses we saw a growth in Q1.
So we feel really good about the company continuing to grow when you take out some of the stuff that again was the right decision to divest the US lawns business and unwind the BES business so we feel great about the momentum in the company and great about the guidance for the rest of this year.
And, and, and guys, I hope you don't mind. I, I, I'd like to just get in a 3rd while I have you the snow guide was altered as well, including a raised BES I expect the unwind expectation.
Can you comment on what's changed in your your snow guide versus I'll I'll.
Yeah, no problem, just to be clear, look our snow guy was 160 to 200 90 days ago. It's 160 to 200 today, so we have not changed that snow guide at all. What we have done, which I think you're seeing now, it, in fairness is we're trying to provide the exact impact of BES which we saw 9 million step over in Q1, right, we'll see another call at 24 million in Q2 so that was included in our snow guidance originally we just weren't as descriptive in the exact BES.
Intact of that year over year we just try to provide a little bit of more of that description now that we're in fiscal 25, but from a snow perspective like Dao mentioned earlier in the call, most of our snow businesses in Q2, about 80% plus in Q2, but Q1 we saw very similar to last year and we feel great about being in that range of the guide for snow.
Appreciate all your time today, but thank you so much.
Thank you. Our next question will come from Carl Reinert with BTIG. Please go ahead.
Hey guys, thanks for the time appreciate it. I wanna go back to development for a second Bratterdale, can you, can you talk about the conversion rate uh that you're seeing now from development contracts to maintenance contracts and just remind us of sort of your long term target is, is that changing or shifting and then within that context cyclically speaking, where does the development business sit? I mean, we know the business has been growing, it's been growing a lot. We know commercials soft right now in terms of new development, so I'm just sort of interested.
in in what you think the potential to grow in a in a more positive cyclical environment for development might be and then just that conversion how you're working that conversion to maintenance contract.
We feel great about the team that we have for our development group we think we can expand in almost any market, Carl, because there's markets we're not servicing today and we have the best people in the industry when it comes to putting in new development work so we can, we can move resources and we can call start markets we think we can grow in any environment, so we feel great about our development opportunities for many years to come as we go forward now on the development conversion, it was something that.
early when I joined the company I saw as a challenge with the silos we had and we mentioned we were under 10% or roughly 5 million in 2023 with the team's not working together. We saw great progress as we went through last year getting to somewhere around the mid teens, I would tell you, Carl, it's tough to say where we're at this year we saw momentum in Q4, but you got to look at it over the full year. It can be timing as the job gets converted and what gets moved.
tell you this is front and center with every one of my regional leaders to make sure every job we're calling on combined the the sales team from our development group that created the relationship and the maintenance person to make sure we're transitioning it if we're gonna do the install customers should see Bright view as the benefits of do the maintenance long term so it's come so far development should be the tip of the spear for our maintenance group. We didn't do it well.
in the past, but we continue to make momentum so without giving them without giving a financial number, I would just tell you it's higher than it was last year when we said it was mid teens last year, but that's just one quarter. Let's get into our busy summer and then we'll share some more details with you.
I appreciate that. I'll stop there because I know we're at time. Thanks though.
Hey, thanks Carl Carl.
Yes, at this time we have no further questions, I'd now like to turn the call back over to Mr. Asplin for closing remarks.
Thank you operator.
I'll close by reiterating that we are making great strides in transforming Brightview.
The enthusiasm and passion, we've talked about is contagious and continues to spread through our our organization.
When paired with the multiple initiatives underway. This will continue to drive long term revenue and EBA growth.
This passion will as well transition Bright view from being the largest player in our industry to the biggest and best with that said, we still have a lot of work to do, but I look forward to seeing everybody at Investor Day in New York City on February 19th, and be safe and we'll talk to you again.
This does conclude today's call. Thank you for your participation. Please disconnect your line at this time and have a wonderful day.
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